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MULTI-NATIONAL AGREEMENT[1]

Table of Contents

QUESTION BANK

1. Write a detailed note on ‘multinational agreements’

SHORT NOTES

Multi-National Agreement

SYNOPSIS

Introduction-

II, GATT

III. Multinational Corporations-

I. Introduction-

Economic and social instability disturbs peace. It is, therefore, necessary to ensure the free flow of natural resources, employment generation, improvement in the standard of living, etc. ( in other words, to solve the world’s economic and social problems). It is well known that poverty breeds insecurity. The latter half of the 20^th century marked the growth in international trade and the establishment of commercial enterprises. Economic development, supported by technological and political conditions, was accompanied by a series of multinational agreements on International trade and cooperation. One of the aims of the agreements was to create a stable and predictable environment for global market participants, in addition to securing the interests of developing countries. These agreements, specifically WTO, GATT, etc., aim to promote trade, production, employment and living standards in poor countries. The WTO agreements, including GATT, can be considered an important instrument for achieving the objective of a general improvement in welfare.

The treaties or international agreements to achieve the objectives (above mentioned) are mostly bilateral, and many of them are of a general character, e.g., the International Monetary Fund, GATT, Food and Agriculture Organisation (FAO), Multilateral Investment Guarantee Agency (MIGA), and the International Commodity Agreements regarding tin, sugar, dairy products, cocoa, meat, coffee, rubber, etc.

II. GATT-

General Agreement on Tariffs and Trade (GATT) was signed on Oct. 30, 1947, in Geneva and came into force on January 1^st, 1948. GATT was signed at that time by 22 States.

GATT has been metaphorically[2] described as furnishing highway rules for the free flow of world trade traffic. The GATT rules provide for non-discrimination, fair competition, the national settlement of international trade disputes, the liberation of trade and the use of tariffs rather than quotas or other non-tariff barriers on trade. It works as an International court of justice in matters of trade.

However, during the last few years, GATT has been hampered by an unprecedented combination of disastrous features of the global economy, including unstable exchange rates, massive debts incurred by developing countries, trade and budgetary imbalances, rising fuel prices and economic growth curtailment. It appears that GATT serves the interests of multinationals, i.e., those who own and control these Multi-Nationals, at the expense of poor countries’ economic and social interests and welfare. Many times, these profit-motivated and profit-oriented Multi-Nationals threaten human independence and freedom. The GATT agreement protects patent holders for 20 years and imposes strict enforcement criteria. Therefore, huge royalty payments are made to Multi-National Corporations.

III. Multinational Corporations[3]–

A) Meaning-

The words ‘Multi-National’ and ‘Transnational’ describe corporations that exist in many nations and are spread out across International boundaries and geographic regions. Multi-nationals may be described as large business corporations controlled predominantly by nationals of the country in which their headquarters are situated but with operating activities spread across many countries, employing tens of thousands of people. East India Company can be described as an example of a Multi-National. Many Multi-Nationals have grown in size and power, accounting for a large percentage of the world’s economic activities. The corporation becomes Multi-National in pursuit of capital. As many of the world living developing nations, globalisation provides these corporations access to cheap labour pools and vast resources.

B) Characteristics-

The sole objective of these Multinational companies is to earn profit. They make direct investments in foreign countries. Those companies export capital, technology, skill and management to other countries. Thousands of these Multi-Nationals operate from the USA, UK, Japan, Germany, Italy and Canada. Multi-nationals usually have their head office in their mother country. Multi-national corporations operate in other countries under treaties or agreements entered into by those countries at the International level. Multi-national ownership is private, state, or mixed. Established in different countries and so linked that one or more of these multinationals may be able to exercise a significant influence over the activities of others. These corporations are better equipped to bring together resources, expertise, capital and markets on a global basis in an efficient manner.

C) Disadvantages-

Multi-nationals are powerful companies that threaten even countries’ popular governments. These Companies use the Government for their profit-making; they give bribes to leaders (e.g. Bofors Gun Deal, etc.). They are so powerful that the amount of their annual budget exceeds the amount of budget of many countries. They use their economic might against developing countries in exploiting their natural, economic, and labour resources. These companies, many times, do not show social responsibility. The Bhopal Gas leak case is an example of a non-social attitude taken by the multinational and crippling the Indian Government before it.

M.C. Mehta V/s Union of India[4]

Facts:- This case is popularly known as the ‘Bhopal Gas Leak Case’ or ‘Oleum Gas Leak Case’. In 1989, the Dec. 3 mass disaster, the worst in recent times, was caused by the leakage of Methyl Isocyanate and other toxic gases from the company named ‘Union Carbide India Ltd at Bhopal.’ About 4000 people died, and 2 lac were seriously injured. The Union of India instituted a suit against Union Carbide Corporation (U.C.C.) on 8^th Apr 1985 in America. American court on 12 May 1986 held that the proper forum in filing the suit is India. Thereafter, the suit was filed in Bhopal District Court seeking an award of Rs. 3,900/- crores as compensation. The court passed an interim order of depositing Rs.-350/- Crores. Against this order, Union Carbide appealed to the High Court. High Court reduced this amount to Rs 250 crores. Union Carbide again appealed to the Supreme Court.

The Court held:- Supreme Court passed an order on 14^th Feb. 1989 directing the company to pay a sum of 470 million Dollars in full settlement of all claims, rights and liabilities arising out of the Bhopal Gas leak disaster. The court has not applied the rule of strict liability developed in M. C. Mehta v. Union of India’s case (1987).

But, before it could decide the matter, the Government of India finally settled with the Union Carbide Corporation on a meagre amount. The Supreme Court approved the settlement. This settlement was severely criticised in all corners of India. Mr P. N. Bhagwati C.J of the Supreme Court criticised the settlement, saying that “the Multi-National Corporation have own and the people of India have lost by this settlement”.

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[1] बहुराष्ट्रीय करार [बहुराष्ट्रीय समझौता]

[2] अलंकारिक भाषेत [लाक्षणिक भाषामे]

[3] बहुराष्ट्रीय कंपन्या

[4] AIR 1987 SC 965.