States acting alone. Consequently, we are continuing our efforts to secure an international agreement which will establish a mutually acceptable framework for international cooperation in eliminating improper business practices.

H. Doc. 94-572, 94th Cong., 2d Sess. The 94th Cong. did not act on the President's proposed legislation.

Section 604 (b) of the International Security Assistance and Arms Export Control Act of 1976 (P.L. 94-329; 90 Stat. 767), approved June 30, 1976, added a new section 39 to the Arms Export Control Act, to require reporting on political contributions and fees or commissions in connection with the sale of defense articles or services. See post, Ch. 14, § 9, pp. 777-778.

Section 1065 of the Tax Reform Act of 1976 (P.L. 94-455; 90 Stat. 1653; 26 U.S.C. 952, 964, 995), approved October 4, 1976, denies certain tax benefits attributable to bribe-produced income. It provides that the amount of any illegal bribe, kickback, or similar payment to a foreign government official by a foreign subsidiary or a Domestic International Sales Corporation (DISC) of a U.S. company is subject to current taxation as a deemed distribution to the U.S. parent corporation. In addition, the foreign earnings and profits of any corporation paying a foreign bribe are not to be reduced by the amount paid. The provision is effective for illegal payments made 30 or more days after the date of enactment of the Act.

See H. Rept. 94-1515 (Committee of Conference).

The Intergovernmental Working Group established by the U.N. Economic and Social Council (ECOSOC) on August 5, 1976, to prepare an accord on corrupt practices held its first meeting at New York on November 15, 1976. U.S. Representative Mark B. Feldman, Deputy Legal Adviser of the Department of State, made a statement summarizing U.S. actions to control illicit foreign payments by American enterprises and reaffirming the U.S. proposal made at Lima on March 5, 1976, for a treaty on a comprehensive system of disclosure of a defined class of payments to be enforced by all contracting parties. See ante, p. 505. Excerpts from Mr. Feldman's statement follow:

There can be no doubt that these corrupt practices-bribery, extortion, and influence peddling-undermine the integrity and stability of governments and distort international trade and investment. They raise the cost of goods and services in all countries, particularly in the developing countries, which can least afford this additional burden on their balance of payments.

Moreover, corrupt practices involving major corporate enterprises and public officials undermine public confidence in the basic institutions of our society.

The U.N. General Assembly recognized the seriousness of this problem when it adopted Resolution 3514 by consensus last December. That resolution condemned all corrupt practices. including bribery by transnational and other corporations, intermediaries, and others involved, and called upon both home and host governments to take all necessary and appropriate measures to prevent such practices. [See the 1975 Digest, pp. 610-611.]

In August the Economic and Social Council took the decision to establish this working group to examine the problem of corrupt practices, in particular bribery, in international commercial transactions and to elaborate in detail the scope and contents of an international agreement to prevent and eliminate illicit payments. in whatever form, in connection with international commercial transactions as defined by the working group.

[F]rom the outset the United States determined that it must cooperate with other governments who wish to eradicate corrupt practices in their countries. Accordingly, the United States has concluded bilateral agreements for the exchange of information with the law enforcement authorities of 12 countries. [See ante, Ch. 6, § 6, pp. 313-315.] In addition, we have cooperated with other governments who have established new requirements for the disclosure or regulation of agents' fees paid in connection with sales to or contracts with government agencies.

Our experience has brought the conviction that the illicit payments problem can only be solved by collective international action based on a multilateral treaty to be implemented by national legislation. We have also come to believe that the traditional criminal laws cannot solve the problem by themselves. A survey of national legislation shows that nearly every country of the world has legislation prohibiting bribery of its officials. However, this legislation can be difficult to enforce and has not proved to be a meaningful deterrent. Thus, a new approach is required.

The basic concept of a new approach, as outlined by the U.S. delegation to the Lima meeting of the United Nations Commission on Transnational Corporations last March, would be a comprehensive system of disclosure of a defined class of payments to be agreed upon in a treaty and to be enforced by all the contracting parties. The theory of disclosure, which has been demonstrated by long experience in the United States, is that public scrutiny is an effective deterrent to improper activities by private enterprise or by public officials.

For the full text of Mr. Feldman's statement, see Dept. of State Bulletin, Vol. LXXV, No. 1954, Dec. 6, 1976, pp. 696-699.

Protection of Rights of Foreign Individuals

On December 29, 1976, Monroe Leigh, Legal Adviser of the Department of State, wrote a letter to Assistant Attorney General

Rex E. Lee, requesting that a suggestion of interest of the United States be made to the U.S. Court of Appeals for the District of Columbia Circuit in The Boeing Company v. Securities and Exchange Commission, Miscellaneous No. 76-2112, a case concerning allegations of bribery involving agents of American companies and foreign officials. The Court had issued an order on December 14, 1976, requiring that the District Court order temporarily sealing the attachment to the Securities and Exchange Commission's subpoena duces tecum remain in effect until further order of the Court of Appeals. Mr. Leigh's letter stated:

We understand that the Court of Appeals will soon determine whether the seal shall remain in effect. After full consideration of this matter we have concluded, for the following reasons, that the attachment to the subpoena should remain under seal until such time as law enforcement considerations actually require that the seal be removed:

(1) Some of the names listed in the attachment are those of officials of foreign governments, or of persons closely associated with them. While ordinarily the listing of names in a subpoena would not raise foreign policy considerations, it is our conclusion that in the context of this subpoena and at this stage of the investigation into allegations of bribery involving agents of American companies and foreign officials, the disclosure of such names is likely to give rise abroad to adverse and uncorroborated charges, prejudicial to the rights of the individuals concerned, which could reasonably be expected to cause damage to the foreign relations of the United States. Therefore, premature disclosure of such names should be avoided for foreign policy reasons if law enforcement objectives can be met without such a disclosure.

(2) We understand that the documents sought to be obtained by this subpoena are being made available to the SEC, and that the sealing of the attachment in question does not now in any way frustrate the conduct of the SEC's investigation or the performance of its enforcement function.

Accordingly, we request that the Department of Justice call the foregoing views to the attention of the Court.

On January 5, 1977, the Department of Justice, pursuant to 28 U.S.C. 517, filed the suggestion of interest of the United States, requesting the Court to take into account the views of the Department of State.

Foreign Investment

OECD Declaration

The Council of the Organization for Economic Cooperation and Development (OECD) met at the ministerial level at Paris on June 21, 1976, and adopted a Declaration on International Investment and

Multinational Enterprises, with an annex on Guidelines for Multinational Enterprises. It also adopted decisions on InterGovernmental Consultation Procedures on the Guidelines, on National Treatment, and on International Investment Incentives and Disincentives.

The declaration extended into the area of investment the type of OECD cooperation which had previously been limited to trade and monetary relations. It included: recommended guidelines for the activities of multinational corporations; an agreed statement of the basic responsibilities of governments with respect to transnational investment; provision for strengthened cooperation on the questions of incentives and disincentives to foreign direct investment; and provision for increased consultations between governments on all these matters.

Secretary of State Henry A. Kissinger, in a statement before the Council, expressed strong endorsement by the United States of the declaration and urged its widest possible adoption. In addition, he stated that the United States urged the following policies for OECD nations.

-First, we should support the work of the U.N. Commission on Transnational Corporations and the related U.N. Information and Research Center within its Secretariat, which will develop a comprehensive information system on issues relating to transnational corporations. This will contribute to a fuller understanding of investment issues among all nations.

-Second, we should review the proposal of the International Resources Bank which the United States put forward at UNCTAD [U.N. Conference on Trade and Development] at Nairobi last month. While the Bank will focus on energy and raw materials, its principal features as a multilateral guarantor against noncommercial risk and as a facilitator of production sharing and technology transfer-have important implications for development generally.

-Third, we should take strong collective measures to eliminate corrupt payments. Bribery and extortion are a burden on international trade and investment. We reiterate our proposal that negotiation of a binding international agreement on corrupt practices begin at next month's session of the U.N. Economic and Social Council.

-Fourth, we should cooperate to restrain anticompetitive practices of firms which undermine the benefits of our open economic system. The United States proposes a dual effort to reduce international procedural obstacles to the enforcement of laws against international restrictive business practices and to pursue bilateral and multilateral agreements for international antitrust cooperation similar to that about to be concluded between the United States and the Federal Republic of Germany. [See ante, p. 479.]

-Fifth, we should strengthen the work of specialized OECD committees which deal with investment problems such as har

monizing statistical systems, cataloguing restrictive business practices, improving the exchange of tax information, dealing with tax haven problems, as well as their work now underway on the general topics of technology transfer and short term capital movements.

The text of the declaration, with annex, and the decisions of the OECD Council follow:

DECLARATION ON INTERNATIONAL INVESTMENT
AND MULTINATIONAL ENTERPRISES

THE GOVERNMENTS OF OECD MEMBER COUNTRIES
CONSIDERING

that international investment has assumed increased importance in the world economy and has considerably contributed to the development of their countries; that multinational enterprises play an important role in this investment process; that cooperation by member countries can improve the foreign investment climate, encourage the positive contribution which multinational enterprises can make to economic and social progress, and minimize and resolve difficulties which may arise from their various operations;

that, while continuing endeavors within the OECD may lead to further international arrangements and agreements in this field, it seems appropriate at this stage to intensify their cooperation and consultation on issues relating to international investment and multinational enterprises through interrelated instruments each of which deals with a different aspect of the matter and together constitute a framework within which the OECD will consider these issues:

DECLARE:

I. Guidelines for MNE's

that they jointly recommend to multinational enterprises operating in their territories the observance of the Guidelines as set forth in the annex hereto having regard to the considerations and understandings which introduce the Guidelines and are an integral part of them.

II. National Treatment

1. that member countries should, consistent with their needs to maintain public order, to protect their essential security interests and to fulfill commitments relating to international peace and security, accord to enterprises operating in their territories and owned or controlled directly or indirectly by nationals of another member country (hereinafter referred to as "Foreign-Controlled Enterprises") treatment under their laws, regulations and administrative practices, consistent with international law and no less favorable than that accorded in like situations to domestic enterprises (hereinafter referred to as "National Treatment").

2. that member countries will consider applying "National Treatment" in respect of countries other than member countries.

3. that member countries will endeavor to ensure that their territorial subdivisions apply "National Treatment."

4. that this Declaration does not deal with the right of member countries to regulate the entry of foreign investment or the conditions of establishment of foreign enterprises.

III. International Investment Incentives

and Disincentives

1. that they recognize the need to strengthen their cooperation in the field of international direct investment.