“Law Master’s Publication”

“Multinational Agreement” Prof. Santosh D. Bhosale 117

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MULTI-NATIONAL AGREEMENT

QUESTION BANK

Q. 1. Write a detailed note on ‘multinational agreements’

SHORT NOTES

1. Multi-National Agreement

SYNOPSIS

Multinational Corporations-

Meaning.

Characteristics.

Disadvantages.

“Law Master’s Publication”

“Multinational Agreement” Prof. Santosh D. Bhosale 118

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^thcentury 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 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.

“Law Master’s Publication”

“Multinational Agreement” Prof. Santosh D. Bhosale 119

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-

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.

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.

“Law Master’s Publication”

“Multinational Agreement” Prof. Santosh D. Bhosale 120

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 India¹

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^thApr

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^thFeb. 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”.

*****

AIR 1987 SC 965.