Glenns' quote:
A system declaration must meet the same syntax requirements
as an SGML declaration with respect to the concrete syntax used,
data characters allowed, etc.
Also, in Goldfarb p452:
NOTE--It is recognized that the recipient of a document must be able
to translate it to his system character set before the document can
be processed by machine. There are two basic approaches to
communicating this information.
. . .
As the last not implies, the document character set parameter is
ignored by the SGML parser because the document is already in the
document character set. The parameter is intended for a human to
read in printed form, in order to determine how to translate an
incoming document to the local system character set.
The actual translation process from a document character set to the
system character set is not defined, so we have 2 ways to interpret
these notes:
1) That all characters in the document must also be available to the
system, and a simple one-to-one translation is performed.
2) That the translation process can perform arbitrary translations.
Also, the system representation is undefined, providing another grey
area.