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The relevance of taking into account established policies of the government in the countries where enterprises operate is clear when a decision is taken to close down a local subsidiary of a multinational enterprise. While not affecting the right of the enterprise to reach decisions with respect to cutting back or terminating operations in a given plant, a prudent company should seek clarification of government policies through advance consultations with the government concerned.2
On their part, governments should make sure that their aims and objectives are clear, stable and understandable to management. Although the right of each State to prescribe the operating conditions for multinational enterprises within its jurisdiction remains unchanged such laws and policies are subject to international law and international agreements and should respect contractual obligations. They should also be consistent with adhering countries' responsibilities to treat enterprises equitably.3
This chapter of the Guidelines also recommends that multinational enterprises co-operate closely with the local community and business interests (paragraph 3) and that they allow their various entities freedom to develop and exploit their potential, consistent with the need for specialisation and sound commercial practice (paragraph 3). This argues for a certain amount of integration of the various entities of a multinational enterprise into the economic context of the countries in which they operate. It does not mean that existing structures of multinational enterprises may not be changed, nor does it impinge on the freedom of such enterprises to divest as part of global strategies, if this is considered in the best interests of the firm as a whole. However, this freedom is circumscribed by national law and by a firm's contractual obligations.4
The question has been raised whether the Guidelines imply that special consideration be given in cases where an enterprise is considering the closing down of a subsidiary or the transfer of its activities abroad especially if the particular subsidiary is a profitable one. In practice the profitability of a particular entity may be difficult to evaluate due to the different accounting standards and practices used to determine value and future profitability. However, whenever there is clear evidence of the profitability of a particular subsidiary, the company should give special consideration to this fact when contemplating the closing down of that subsidiary. This does not restrict the company's right to make such a decision which may take account of other factors besides profitability.5
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