Bilateral Investment Treaties

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Bilateral Investment Treaties

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Albania Bilateral Investment Treaty

Signed January 11, 1995; Entered into Force January 4, 1998

104th Congress SENATE Treaty Doc.

1st Session 104-19

INVESTMENT TREATY WITH ALBANIA

MESSAGE

FROM

THE PRESIDENT OF THE UNITED STATES

TRANSMITTING

THE TREATY BETWEEN THE UNITED STATES OF AMERICA AND THE GOVERNMENT OF THE REPUBLIC OF ALBANIA CONCERNING THE ENCOURAGEMENT AND RECIPROCAL PROTECTION OF INVESTMENT, WITH ANNEX AND PROTOCOL, SIGNED AT WASHINGTON ON JANUARY 11, 1995.

SEPTEMBER - 6, 1995 -Treaty was read the first time and, together with the accompanying papers, referred to the Committee on Foreign Relations and ordered to be printed for the use of the Senate

U.S. GOVERNMENT PRINTING OFFICE

99-118 WASHINGTON: 1995

LETTER OF TRANSMITTAL

THE WHITE HOUSE,

September 6, 1995

To the Senate of the United States:

With a view of receiving the advice and consent of the Senate to ratification, I transmit herewith the Treaty Between the Government of the United States of America and the Government of the Republic of Albania Concerning the Encouragement and Reciprocal Protection of Investment, with Annex and Protocol, signed at Washington on January 11, 1995. I transmit also, for the information of the Senate, the report of the Department of State with respect to this Treaty.

The bilateral investment Treaty (BIT) with Albania will protect U.S. investment and assist the Republic of Albania in its efforts to develop its economy by creating conditions more favorable for U.S. private investment and thus strengthen the development of its private sector. The Treaty is fully consistent with U.S. policy toward international and domestic investment. A specific tenet of U.S. policy, reflected in this Treaty, is that U.S. investment abroad and foreign investment in the United States should receive national treatment. Under this Treaty, the Parties also agree to international law standards for expropriation and compensation for expropriation and compensation for expropriation; free transfer of funds related to investments; freedom of investments from performance requirements; fair, equitable, and most-favored-nation treatment; and the investor’s or investment’s freedom to choose to resolve disputes with the host government through international arbitration.

I recommend that the Senate consider this Treaty as soon as possible, and give its advice and consent to ratification of the Treaty, with Annex and Protocol, at an early date.

WILLIAM J. CLINTON.

LETTER OF SUBMITTAL

DEPARTMENT OF STATE,

Washington, August 3, 1995.

The PRESIDENT,

The White House.

THE PRESIDENT: I have the honor to submit to you the Treaty Between the Government of the United States of America and the Government of the Republic of Albania Concerning the Encouragement and Reciprocal Protection of Investment, with Annex and Protocol, signed at Washington on January 11, 1995. I recommend that this Treaty, with Annex and Protocol, be transmitted to the Senate for its advice and consent to ratification.

The bilateral investment treaty (BIT) with Albania is based on the view that an open investment policy contributes to economic growth. This Treaty will assist Albania in its efforts to develop its economy by creating conditions more favorable for U.S. private investment and thus strengthen the development of its private sector. It is U.S. policy, however, to advise potential treaty partners during BIT negotiations that conclusion of such a treaty does not necessarily result in immediate increases in private U.S. investment flows.

To date, twenty-one BITs are in force for the United States—with Argentina, Bangladesh, Bulgaria, Cameroon, the Congo, the Czech Republic, Egypt, Grenada, Kazakhstan, Kyrgyzstan, Moldova, Morocco, Panama, Poland, Romania, Senegal, Slovakia, Sri Lanka, Tunisia, Turkey, and Zaire. In addition to the Treaty with Albania, the United States has signed, but not yet brought into force, BITs with Armenia, Belarus, Ecuador, Estonia, Georgia, Haiti, Jamaica, Latvia, Mongolia, Russia, Trinidad and Tobago, Ukraine, and Uzbekistan.

The Office of the United States Trade Representative and the Department of State jointly led this BIT negotiation, with assistance from the Departments of Commerce and Treasury.

THE U.S.-ALBANIA TREATY

The Treaty with Albania is based on the 1994 U.S. prototype BIT and satisfies the United States’ principal objectives in bilateral investment treaty negotiations:

-All forms of U.S. investment in the territory of Albania are covered.

-Covered investments receive the better of national treatment or most-favored-nation (MFN) treatment both on establishment and thereafter, subject to certain specified exceptions.

-Performance requirements may not be imposed upon or enforced against covered investments.

-Expropriation can occur only in accordance with international law standards, that is, for a public purpose; in a nondiscriminatory manner; in accordance with due process of law; and upon payment of prompt, adequate, and effective compensation.

-The unrestricted transfer, in a freely usable currency, of funds related to a covered investment is guaranteed.

-Investment disputes with the host government may be brought by investors, or by their subsidiaries, to binding international arbitration as an alternative to domestic courts.

The U.S.-Albania Treaty does not differ in any significant way from the 1994 prototype. It does, however, contain an additional Protocol clarifying the Parties’ understanding on safeguarding the exchange of proprietary information during government-to-government consultations and clarifying that the Treaty does not obligate either Party to accord national treatment in taxation matters. The, following is an article-by-article analysis of the provisions and of the Treaty:

Title and Preamble

The Title and Preamble state the goals of the Treaty. Foremost is the encouragement and protection of investment. Other goals include economic cooperation on investment issues; the stimulation of economic development; higher living standards; promotion of respect for internationally-recognized worker rights; and maintenance of health, safety, and environmental measures. While the Preamble does not impose binding obligations, its statement of goals may assist in interpreting the Treaty and in defining the scope of Party-to-Party consultation procedures pursuant to Article Vill. Similarly article titles have been added to the Treaty. These do not change the Treaty in any way but were added to facilitate its reading.

Article I (Definitions)

Article I defines terms used throughout the Treaty. In general, the definitions are designed to be broad and inclusive in nature.

Company, Company of a Party

The definition of “company” is broad, covering all types of legal entities constituted or organized under applicable law, and includes corporations, trusts, partnerships, sole proprietorships, branches, joint ventures, and associations. The definition explicitly covers charitable and not-for-profit entities, as well as entities that are owned or controlled by the state. “Company of a Party” is defined as a company constituted or organized under the laws of that Party.

National

The Treaty defines “national” as a natural person who is a national of a Party under its own laws. Under U.S. law, the term “national” is broader than the term “citizen.” For example, a native of America Samoa is a national of the United States, but not a citizen.

Investment, Covered Investment

The Treaty’s definition of investment is broad, recognizing that investment can take a wide variety of forms. Every kind of investment is specifically incorporated in the definition; moreover it is explicitly noted that investment may consist or take the form of any of a number of interests, claims, and rights. Establishing a subsidiary is a common way of making an investment. Other forms that an investment might take include equity and debt interests in a company; contractual rights; tangible, intangible, and intellectual property; and rights conferred pursuant to law. Investment as defined by the Treaty generally excludes claims arising solely from trade transactions, such as a sale of good across a border that does not otherwise involve an investment.

The Treaty defines “covered investment” as an investment of a national or company of a Party in the territory of the other Party. An investment of a national or company is one that the national or company owns or controls, either directly or indirectly. Indirect ownership or control could be through other, intermediate companies or persons, including those of third countries. Control is not specifically defined in the Treaty; ownership of over fifty percent of the voting stock of a company would normally convey control, but in many cases the requirement could be satisfied by less than that proportion, or by other arrangements.

The board nature of the definitions of “covered investment,” combined with the definitions of “investment,” “company,” and “company of a Party” means that investments can be covered by the Treaty even if ultimate control lies with non-Party nationals. A Party may, however, deny the benefits of the Treaty in the limited circumstances described in Article XII.

State Enterprise, Investment Authorization, Investment Agreement

The Treaty defines an “investment authorization” as an authorization granted by the foreign investment authority of a Party to a covered investment or a national or company of the other Party.

The Treaty defines an “investment agreement” as a written agreement between the national authorities of a Party and a covered investment or a national or company of the other Party that (1) grants rights with respect to natural resources or other assets controlled by the national authorities; and (2) the investment, national, or company relies upon in establishing or acquiring a covered investment. This definition thus excludes agreements with subnational authorities (including U.S. States) as well as agreements arising from various types of regulatory activities of the national government, including, in the tax area, rulings, closing agreements, and advance pricing agreements.

ICSID Convention, Centre, UNCITRAL Arbitration Rules

The “ICSID Convention,” “Centre,” and “UNCITRAL Arbitration Rules” are explicitly defined to make the text brief and clear.

Article II (Treatment of Investment)

Article II contains the Treaty’s major obligations with respect to the treatment of covered investments.

Paragraph I generally ensures the better of national or MFN treatment in both the entry and post-entry phases of investment. It thus prohibits, outside of exceptions listed in the Annex, “screening” on the basis of nationality during the investment process, as well as nationality-based post-establishment measures. For purposes of the Treaty, “national treatment” means treatment no less favorable than that which a Party accords, in like situations, to investments in its territory of its own nationals or companies. For purposes of the Treaty, “MFN treatment ” means treatment no less favorable than that which a Party accords, in like situations, to investments in its territory of nationals or companies of a third country. “National and MFN treatment” is defined as whichever of national treatment or MFN treatment is the most favorable. Paragraph I explicitly states that the national and MFN treatment obligation will extend to state enterprises in their sale of goods and services.

Paragraph 2 states that the Parties may adopt or maintain exceptions to the national and MFN treatment standard with respect to the sectors or matters specified in the Annex. In principle, further restrictive measures are permitted in each sector. The careful phrasing and narrow drafting of these exceptions is therefore important. (The specific exceptions are discussed in the section entitled “Annex” below.) In the Annex, Parties may take exceptions only to the obligation to provide national and MFN treatment; there are no sectoral exceptions to the rest of the Treaty’s obligations. Finally, in adopting any exception under this provision, a Party may not require the divestment of a preexisting covered investment.

Paragraph 2 also states that a Party is not required to extend to covered investments national or MFN treatment with respect to procedures provided for in multilateral agreements concluded under the auspices of the World Intellectual Property Organization relating to the acquisition or maintenance of intellectual property rights. This provision clarifies that certain procedural preferences granted under existing conventions such as the Patent Cooperation Treaty, fall outside the BIT. This exception parallels one in the Uruguay Round’s Trade-Related Aspects of Intellectual Property Rights (TRIPS) agreement and the North American Free Trade Agreement (NAFTA). This provision complements the more specific IPR-related provisions contained in the U.S.-Albania Bilateral Trade Agreement.

Paragraph 3 sets out a minimum standard of treatment based on standards found in customary international law. The obligations to accord “fair and equitable treatment” and “full protection and security” are explicitly cited, as is the Parties’ obligation not to impair, through unreasonable and discriminatory means, the management, conduct, operation, and sale or other disposition of covered investments. The general reference to international law also implicitly incorporates other fundamental rules of interrnational law: for example, that sovereignty may not be grounds for unilateral revocation or amendment of a Party’s obligations to investors and investments (especially contracts), and that an investor is entitled to have any expropriation done in accordance with previous undertakings of a Party.

Paragraph 4 requires that each Party provide effective means of asserting claims and enforcing rights with respect to covered investments.

Paragraph 5 ensures the transparency of each Party’s regulation of covered investments.

Article III (Expropriation)

Article III incorporates into the Treaty international law standards for expropriation and compensation.

Paragraph I describes the general rights of investors and obligations of the Parties with respect to expropriation and nationalization. These rights and obligations also apply to direct or indirect meas ures “tantamount to expropriation or nationalization” and thus apply to “creeping expropriations”—a series of measures which effectively amount to an expropriation of a covered investment without taking title.

Paragraphs 2, 3, and 4 more fully describe the meaning of “prompt, adequate, and effective compensation.” The guiding principle is that the investor should be made whole.

Article IV (Compensation for Damages Due to War and Similar Events)

Paragraph 1 entitles investments covered by the Treaty to the better of national or MFN treatment with respect to any measure relating to losses suffered in a Party’s territory owing to war or other armed conflict, civil disturbances, or similar events. The unconditional obligation to pay compensation for such losses only arises when the losses result from requisitioning or from destruction not required by the necessity of the situation.

Article V (Transfers)

Article V protects investors from certain government exchange controls that limit current and capital account transfers, as well as limits on inward transfers made by screening authorities and limits on returns in kind.

In paragraph 1, each Party agrees to permit “transfers relating a covered investment to be made freely and without delay into and out of its territory.” Paragraph 1 also provides a list of transfers that must be allowed. The list is non-exclusive, and is intended to protect flows to both affiliated and non-affiliated entities.

Paragraph 2 provides that each Party must permit transfers to be made in a “freely usable currency” at the market rate of exchange prevailing on the date of transfer. “Freely usable” is a term used by the International Monetary Fund; at present there are five such “freely usable” currencies: the U.S. dollar, Japanese yen, German mark, French franc and British pound sterling.

In paragraph 3, each Party agrees to permit returns in kind to be made where such returns have been authorized by an investment authorization or written agreement between a Party and a covered investment.

Paragraph 4 recognizes that, notwithstanding the guarantees of paragraphs 1 through 3, a party may prevent a transfer through the equitable, non-discriminatory and good faith enforcement of judicial orders and judgments, or application of laws relating to such matters as bankruptcy, securities, or criminal or penal offenses.

Article VI (Performance Requirements)

Article VI prohibits either Party from mandating or enforcing performance requirements in connection with a covered *investment. The list of prohibited requirements includes the use of local goods, the export of goods or services, the “balancing” of imports and exports, the transfer of technology, or the conduct of research in the host country. Such requirements are major burdens on investors and impair their competitiveness.

A Party may, however, impose conditions for benefits and incentives e.g., eligibilitK for programs maintained by the U.S. Export-Import Bank and other similar institutions.

Article VII (Entry, Sojourn and Employment of Aliens)

Paragraph 1 requires each Party to allow, subject to its immigration and employment laws and regulations, the entry into its territory of the other Party’s nationals for certain purposes related to a covered investment and involving the commitment of a “substantial amount of capital.” This paragraph serves to render nationals of Albania eligible for treaty-investor visas under U.S. immigration law. It also guarantees similar treatment for U.S. nationals entering the Republic of Albania. The requirement to commit a “substantial amount of capital” is intended to prevent abuse of treaty investor status; it parallels the requirements of U.S. immigration law.

In addition, paragraph 1(b) prohibits labor certification requirements and numerical restrictions on investor-visas.

Paragraph 2 requires that each Party allow covered investments to engage top managerial personnel of their choice, regardless of nationality.

Article VIII (State-State Consultations)

Article VIII provides for prompt consultation between the Parties, at either Party’s request, on any matter relating to the interpretation of the Treaty or to the realization of the Treaty’s objectives. A Party may thus request consultations for any matter reasonably related to the encouragement or protection of covered investment, whether or not a Party is alleging a violation of the Treaty.

Article IX (Settlement of Disputes Between One Party and a National or Company of the Other Party)

Article IX sets forth several means by which disputes between an investor and a Party may be settled.

Article IX procedures apply to an “investment dispute,” which covers any dispute arising out of or relating to an investment authorization, an investment agreement, or an alleged breach of rights granted or recognized by the Treaty with respect to a covered investment. In the event that an investment dispute cannot be settled amicably, Paragraph 2 gives a national or company an exclusive (with the exception in paragraph 3(b) concerning injunctive relief, explained below) choice among three options to settle the dispute. Those three options are: (1) submitting thedispute to the courts or administrative tribunals of the Party that is a party to dispute; 1(2) invoking dispute-relation procedures previously agreed upon by the National or company and the host country government; or (3) invoking the dispute-resolution mechanism provided for in paragraph 3 of Article IX.

Under paragraph 3(a), the investor can submit an investment dispute to binding arbitration three months after the dispute arises, provided that the investor has not submitted the claim to a court or administrative tribunal of the Party or invoked a dispute resolution procedure previously agreed upon in an investment agreement. The investor may choose among the International Centre for Settlement of Investment Disputes (ICSID) (Convention Arbitration), the Additional Facility of ICSID (if the Convention Arbitration is not available), ad hoc arbitration using the Arbitration Rules of the United Nations Commission on International Trade Law (UNCITRAL), or any other arbitration institution or rules agreed upon by both parties to the dispute.

Before or during such arbitral proceedings, however, paragraph 3(b) provides that a national or company may seek, without affecting its right to pursue arbitration under this Treaty, interim injunctive relief not involving the payment of damages from local courts or administrative tribunals for the preservation of its rights and interests. This paragraph does not alter the power of the arbitral tribunals to recommend or order interim measures they may deem appropriate.

Paragraph 4 constitutes each Party’s consent to the submission of investment disputes to binding arbitration in accordance with the choice of the national or company.

Paragraph 5 provides that any non-ICSID arbitration shall take place in a country that is a party to the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards. This provision expands the ability of investors to obtain enforcement of arbitral awards.

Like the treaties of Friendship, Commerce and Navigation (FCN), which preceded them (the BIT program is a successor to the FCN program), BITs provide a basis for nationals and companies of the other Party to allege Treaty violations in actions in courts of the United States.

The Convention on the Settlement of Investment Disputes Act of 1966 (22 U.S.C. 1650, 1650a) provides for the enforcement of ICSID awards.

Paragraph 7 ensures that a Party may not assert as a defense, or for any other reason, that the company or national involved in the investment dispute has received or will receive reimbursement for the same damages under an insurance or guarantee contract.

Paragraph 8 ensures that for any arbitration, including ICSID Convention Arbitration, the nationality of a company in the host country will be determined by ownership or control, rather than by place of incorporation. This ensures that a claim may be brought by an investor’s subsidiary in the host country.

Article X (Settlement of Disputes Between the Parties)

Article X provides for binding arbitration of disputes between the United States and the Republic of Albania concerning the interpretation or application of the Treaty that are not resolved through consultations or other diplomatic channels, with time periods agreed to during these negotiations. The article constitutes each Party’s prior consent to arbitration.

Article XI (Preservation of Rights)

Article XI clarifies that the Treaty does not derogate from any obligation a Party might have to provide better treatment to the covered investment than is specified in the Treaty. Thus, the Treaty establishes a floor for the treatment of covered investments. An investor may be entitled to more favorable treatment through domestic legislation, other international legal obligations, or a specific obligation (e.g., to provide a tax holiday) assumed by a Party with respect to that investor.

Article XII (Denial of Benefits)

Article XII(a) preserves the right of each Party to deny the benefits of the Treaty to firms owned or controlled by nationals of a non-Party country with which the denying Party does not have normal economic relations; e.g., a country to which it is applying economic sanctions. For example, at this time the United States does not maintain normal economic relations with, among other countries, Cuba or Libya.

Article XII(b) permits each Party to deny the benefits of the Treaty to a company of the other Party if the company is owned or controlled by non-Party nationals and if the company has no substantial business activities in the Party where it is established. Thus the United States could deny benefits to a company which is a subsidiary of a shell company organized under the laws of the Republic of Albania if controlled by nationals of a third country. However, this provision would not generally permit the United States to deny benefits to a company of the Republic of Albania that maintains its central administration or principal place of business in the territory of, or has a real and continuous link with, the Republic of Albania.

Article XIII (Taxation)

Article XIII excludes tax matters generally from the coverage of the BIT, on the basis that tax matters should be dealt with in bilateral tax treaties. However, Article XIII does not preclude a national or company from bringing claims under Article IX that taxation provisions in an investment agreement or authorization have been violated, or that tax matters resulted in, or constituted, an expropriation of a covered investment.

Under paragraph 2, a national or company that asserts in a dispute that a tax matter involves expropriation may submit that dispute to arbitration pursuant to Article IX(3) only if (1) the investor has first referred to the competent tax authorities of both Parties the issue of whether the tax matter involves an expropriation, and (2) the tax authorities have not both determined, within nine months from the time of referral, that the matter does not involve expropriation. The “competent tax authority” of the United States is the Assistant Secretary of the Treasury for International Tax Policy, who will make this determination only after consultation with the Inter-Agency Staff Coordinating Group on Expropriations.

Article XIV (Measures Not Precluded)

The first paragraph of Article XIV reserves the right of a Party to take measures for the fulfillment of its international obligations with respect to international peace and security, as well as those measures it regards as necessary for the protection of its own essential security interests.

International obligations with respect to peace and security would include, for example, obligations arising out of Chapter VII of the United Nations Charter. Measures permitted by the provision on the protection of a Party’s essential security interests would include security-related actions taken in time of war or national emergency. Actions not arising from a state of war or national emergency must have a dear and direct relationship to the essential security interest of the Party involved. Measures to protect a Party’s essential security interests are self-judging in nature, although each Party would expect the provisions to be applied by the other in good faith. These provisions are common in international investment agreements.

The second paragraph permits a Party to prescribe special formalities in connection with covered investments, provided that these formalities do not impair the substance of any Treaty rights. Such formalities could include reporting requirements for covered investments or for transfers of funds, or incorporation requirements.

Article XV (Application to Political Subdivisions and State Enterprises of the Parties)

Paragraph 1(a) makes clear that the obligations of the Treaty are applicable to all political subdivisions of the Parties, such as provincial, State and local governments.

Paragraph 1(b) recognizes that under the U.S. federal system, States of the United States may, in some instances, treat out-of-State residents and corporations in a different manner than they treat in-State residents and corporations. The Treaty provides that the national treatment commitment, with respect to the States, means treatment no less favorable than that provided by a State to U.S. out-of-State residents and corporations.

Paragraph 2 extends a Party’s obligations under the Treaty to its state enterprises in the exercise of any delegated authority. This paragraph is designed to clarify that the exercise of governmental authority by a state enterprise must be consistent with a Party’s obligations under the Treaty.

Article XVI (Entry Into Force, Duration, and Termination)

Paragraph 1 stipulates that the Treaty enters into force thirty days after exchange of instruments of ratification and continues in force for a period of ten years. From the date of its entry into force, the Treaty applies to all activities of both Parties with respect to preexisting and newly established investments alike. After this ten-year term, the Treaty will continue in force unless terminated in accordance with paragraph 2.

Paragraph 3 provides that, if the Treaty is terminated, all investments that qualified as covered investments on the date of termination (i.e., one year after written notice) continue to be protected under the Treaty for ten years from that date as long as these investments qualify as covered investments. Such coverage would continue to extend fully to such an investment as it grew—whether by reinvestment, expansion, or merger.

A Party’s obligations to accord the right to establish or acquire investments would lapse immediately upon the date of termination of the Treaty.

Paragraph 4 stipulates that the Annex and Protocol shall form an integral part of the Treaty.

Annex

U.S. bilateral investment treaties allow for exceptions to national and MFN treatment, because the Parties’ domestic regimes may provide for derogations from national and MFN treatment, and because treatment in certain sectors and matters is negotiated in and governed by other agreements. Future derogations from the national treatment obligations of the Treaty are generally permitted only in the sectors or matters listed in the Annex, pursuant to Article II, paragraph 2, and must be made on an MFN basis unless otherwise specified therein.

Under a number of statutes, many of which have a long historical background, the U.S. federal government or States may not necessarily treat investments of nationals or companies of Albania as they do U.S. investments or investments from a third country. Paragraphs I through 3 of the Annex list the sectors or matters affected by such statutes.

The U.S. exceptions from its national treatment commitments are: atomic energy; custom house brokers; licenses for broadcast, common carrier, or aeronautical radio stations; COMSAT; subsidies or grants, including government-supported loans, guarantees, and insurance; State and local measures exempt from Article 1102 of the North American Free Trade Agreement pursuant to Article 1108 thereof, and landing of submarine cables.

The U.S. exceptions from its most-favored-nation and national treatment commitment are: fisheries; air and maritime transport, and related activities; and banking, securities and other financial services.

During negotiations, the United States informed Albania that if Albania undertook acceptable commitments with respect to all or certain financial services, the United States would consider limiting its exceptions with respect to national and most-favored-nation treatment in financial services.

Albania offered to take no exce tions to the treaty’s national or most-favored-nation treatment obligations with respect to insurance. Therefore, in Paragraph 3 of the Annex, the United States has limited its exceptions with respect to insurance to afford treatment no less favorable than that accorded with respect to Canada and Mexico in the North American Free Trade Agreement.

Paragraph 4 lists Albania’s exceptions to national treatment, which are: ownership of land; banking and government subsidies. These exceptions were based on provisions of investment measures currently in force or which the Government of Albania reserved for other reasons.

The Government of Albania has taken no exceptions to its obligation to provide most-favored-nation treatment.

Paragraph 5 of the Annex ensures that reciprocal national treatment is granted in leasing of minerals or pipeline rights-of-way on Government lands. In creating this positive right to reciprocal national treatment, this provision affects the implementation of the Mineral Lands Leasing Act (MLLA) and 10 U.S.C. 7435, with respect to nationals and companies of the Republic of Albania. The Treaty provides for resort to binding international arbitration to resolve disputes, rather than denial of mineral rights and rights to naval petroleum shares to investors of the other Party, as is the current process under the statute. U.S. domestic remedies would, however, remain available for use in conjunction with the Treaty’s provisions.

The MLLA and 10 U.S.C. 7435 direct that if a foreign country does not grant national treatment to U.S. investors in leases for minerals on on-shore federal lands, leases of land within the Naval Petroleum and Oil Shale Reserves, and rights-of-way for oil or gas pipelines across on-shore federal lands, investors from that country may not be granted national treatment.

Albania’s extension of national treatment in these sectors will fully meet the objectives of the MLLA and 10 U.S.C. 7435. Albania was informed during negotiations that, were it to include this sector in its list of treatment exemptions, the United States would (consistent with the MLLA and 10 U.S.C. 7435) exclude the leasing of minerals or pipeline rights-of-way on Government lands from the national and MFN treatment obligations of this Treaty.

The listing of a sector does not necessarily signify that domestic laws have entirely reserved it for nationals. And, pursuant to Article II(2)(a) of the Treaty, any additional restrictions or limitations which a Party may adopt with respect to listed sectors or matters may not compel the divestiture of existing covered investments.

Finally, listing a sector or matter in the Annex exempts a Party only from the obligation to accord national or MFN treatment. Both

Parties are obligated to accord to covered investments in all sectors—even those listed in the Annex—all the other rights conferred by the Treaty.

Protocol

In paragraph 1 of the Protocol, the Parties confirm their unde standing regarding the treatment of proprietary or confidential information exchanged in the course of consultations pursuant to Article VIII. Both Parties agree to treat the information on the same basis as the Party providing the information.

In paragraph 2, the Parties confirm that, pursuant to Article XIII, neither Party has an obligation to accord national treatment in tax matters, except as otherwise provided for in an investment authorization or investment agreement.

The other U.S. Government agencies which negotiated the Treaty join me in recommending that it be transmitted to the Senate at an early date.

Respectfully submitted,

PETER TARNOFF.

TREATY BETWEEN

THE GOVERNMENT OF THE UNITED STATES OF AMERICA AND

THE GOVERNMENT OF THE REPUBLIC OF ALBANIA

CONCERNING THE ENCOURAGEMENT

AND RECIPROCAL PROTECTION OF INVESTMENT

The Government of the United States of America and the Government of the Republic of Albania (hereinafter the “Parties”);

Desiring to promote greater economic cooperation between them, with respect to investment by nationals and companies of one Party in the territory of the other Party;

Recognizing that agreement upon the treatment to be accorded such investment will stimulate the flow of private capital and the economic development of the Parties;

Agreeing that a stable framework for investment will maximize effective utilization of economic resources and improve living standards;

Recognizing that the development of economic and business ties can promote respect for internationally recognized worker rights;

Agreeing that these objectives can be achieved without relaxing health, safety and environmental measures of general application; and

Having resolved to conclude a treaty concerning the encouragement and reciprocal protection of investment;

Have agreed as follows:

ARTICLE I

DEFINITIONS

1. For the purposes of this Treaty,

(a) “company” means any entity constituted or organized under applicable law, whether or not for profit, and whether privately or governmentally owned or controlled, and includes a corporation, trust, partnership, sole proprietorship, branch, joint venture, association, or other organization;

(b) “company of a Party” means a company constituted or organized under the laws of that Party;

(d) “investment” of a national or company means every kind of investment owned or controlled directly or indirectly by that national or company, and includes investment consisting or taking the form of:

(i) a company;

(ii) shares, stock, partnership interests, and other forms of equity participation, and bonds, debentures, and other forms of debt interests, in a company;

(iii) contractual rights, such as under turnkey, construction or management contracts, production or revenue-sharing contracts, concessions, or other similar contracts;

(iv) tangible property, including real property; and intangible property, including rights, such as leases, mortgages, liens and pledges;

(v) intellectual property, including:

copyrights and related rights,

patents,

rights in plant varieties,

industrial designs,

rights in semiconductor layout designs,

trade secrets, including know-how and confidential business information,

trade and service marks, and

trade names; and

(vi) rights conferred pursuant to law, such as licenses and permits;

(e) “covered investment” means an investment of a national or company of a Party in the territory of the other Party;

(f) “state enterprise” means a company owned, or controlled through ownership interests, by a Party;

(g) “investment authorization” means an authorization granted by the foreign investment authority of a Party to a covered investment or a national or company of the other Party;

(h) “investment agreement” means a written agreement between the national authorities of a Party and a covered investment or a national or company of the other Party that (i) grants rights with respect to natural resources or other assets controlled by the national authorities and (ii) the investment, national or company relies upon in establishing or acquiring a covered investment.

(i) “ICSID Convention” means the Convention on the Settlement of Investment Disputes between States and Nationals of Other States, done at Washington, March 18, 1965;

(j) “Centre” means the International Centre for Settlement of Investment Disputes established by the ICSID Convention; and

(k) “UNCITRAL Arbitration Rules” means the arbitration rules of the United Nations Commission on International Trade Law.

ARTICLE II

TREATMENT OF INVESTMENT

1. With respect to the establishment, acquisition, expansion, management, conduct, operation and sale or other disposition of covered investments, each Party shall accord treatment no less favorable than that it accords, in like situations, to investments in its territory of its own nationals or companies (hereinafter “national treatment”) or to investments in its territory of nationals or companies of a third country (hereinafter “most favored nation treatment”), whichever is most favorable (hereinafter “national and most favored nation treatment”). Each Party shall ensure that its state enterprises, in the provision of their goods or services, accord national and most favored nation treatment to covered investments.

2. (a) A Party may adopt or maintain exceptions to the obligations of paragraph 1 in the sectors or with respect to the matters specified in the Annex to this Treaty. In adopting such an exception, a Party may not require the divestment, in whole or in part, of covered investments existing at the time the exception becomes effective.

(b) The obligations of paragraph 1 do not apply to procedures provided in multilateral agreements concluded under the auspices of the World Intellectual Property Organization relating to the acquisition or maintenance of intellectual property rights.

3. (a) Each Party shall at all times accord to covered investments fair and equitable treatment and full protection and security, and shall in no case accord treatment less favorable than that required by international law.

(b) Neither Party shall in any way impair by unreasonable and discriminatory measures the management, conduct, operation, and sale or other disposition of covered investments.

4. Each Party shall provide effective means of asserting claims and enforcing rights with respect to covered investments.

5. Each Party shall ensure that its laws, regulations, administrative practices and procedures of general application, and adjudicatory decisions, that pertain to or affect covered investments are promptly published or otherwise made publicly available.

ARTICLE III

EXPROPRIATION

1. Neither Party shall expropriate or nationalize a covered investment either directly or indirectly through measures tantamount to expropriation or nationalization (“expropriation”) except for a public purpose; in a non-discriminatory manner; upon payment of prompt, adequate and effective compensation; and in accordance with due process of law and the general principles of treatment provided for in Article II(3).

2. Compensation shall be paid without delay; be equivalent to the fair market value of the expropriated investment immediately before the expropriatory action was taken (“the date of expropriation”); and be fully realizable and freely transferable. The fair market value shall not reflect any change in value occurring because the expropriatory action had become known before the date of expropriation.

3. If the fair market value is denominated in a freely usable currency, the compensation paid shall be no less than the fair market value on the date of expropriation, plus interest at a commercially reasonable rate for that currency, accrued from the date of expropriation until the date of payment.

4. If the fair market value is denominated in a currency that is not freely usable, the compensation paid — converted into the currency of payment at the market rate of exchange prevailing on the date of payment — shall be no less than:

(a) the fair market value on the date of expropriation, converted into a freely usable currency at the market rate of exchange prevailing on that date, plus

(b) interest, at a commercially reasonable rate for that freely usable currency, accrued from the date of expropriation until the date of payment.

ARTICLE IV

COMPENSATION FOR DAMAGES DUE TO WAR AND SIMILAR EVENTS

1. Each Party shall accord national and most favored nation treatment to covered investments as regards any measure relating to losses that investments suffer in its territory owing to war or other armed conflict, revolution, state of national emergency, insurrection, civil disturbance, or similar events.

2. Each Party shall accord restitution, or pay compensation in accordance with paragraphs 2 through 4 of Article III, in the event that covered investments suffer losses in its territory, owing to war or other armed conflict, revolution, state of national emergency, insurrection, civil disturbance, or similar events, that result from:

(a) requisitioning of all or part of such investments by the Party’s forces or authorities, or

(b) destruction of all or part of such investments by the Party’s forces or authorities that was not required by the necessity of the situation.

ARTICLE V

TRANSFERS

1. Each Party shall permit all transfers relating to a covered investment to be made freely and without delay into and out of its territory. Such transfers include:

(a) initial and additional contributions to capital relating to the investment;

(b) profits, dividends, capital gains, and proceeds from the sale of all or any part of the investment or from the partial or complete liquidation of the investment,

(d) payments made under a contract, including a loan agreement and

(e) compensation pursuant to Articles III and IV, and payments arising out of an investment dispute

2. Each Party shall permit transfers to be made in a freely usable currency at the market rate of exchange prevailing on the date of transfer.

3. Each Party shall permit transfers in kind to be made as authorized or specified in an investment authorization, investment agreement, or other written agreement between the Party and a covered investment or a national or company of the other Party.

4. Notwithstanding paragraphs 1 through 3, a Party may prevent a transfer through the equitable, non-discriminatory and good faith application of its laws relating to:

(a) bankruptcy, insolvency or the protection of the rights of creditors;

(b) issuing, trading or dealing in securities;

(d) ensuring compliance with orders or judgments in adjudicatory proceedings.

ARTICLE VI

PERFORMANCE REQUIREMENTS

Neither Party shall mandate or enforce, as a condition for the establishment, acquisition, expansion, management, conduct or operation of a covered investment, any requirement (including any commitment or undertaking in connection with the receipt of a governmental permission or authorization) :

(a) to achieve a particular level or percentage of local content, or to purchase, use or otherwise give a preference to products or services of domestic origin or from any domestic source;

(b) to limit imports by the investment of products or services in relation to a particular volume or value of production, exports or foreign exchange earnings;

(c) to export a particular type, level or percentage of products or services, either generally or to a specific market region;

(d) to limit sales by the investment of products or services in the Party’s territory in relation to a particular volume or value of production, exports or foreign exchange earnings;

(e) to transfer technology, a production process or other proprietary knowledge to a national or company in the Party’s territory, except pursuant to an order, commitment or undertaking that is enforced by a court, administrative tribunal or competition authority to remedy an alleged or adjudicated violation of competition laws; or

(f) to carry out a particular type, level or percentage of research and development in the Party’s territory.

Such requirements do not include conditions for the receipt or continued receipt of an advantage.

ARTICLE VII

ENTRY, SOJOURN AND EMPLOYMENT OF ALIENS

1. (a) Subject to its laws relating to the entry and sojourn of aliens, each Party shall permit to enter and to remain in its territory nationals of the other Party for the purpose of establishing, developing, administering or advising on the operation of an investment to which they, or a company of the other Party that employs them, have committed or are in the process of committing a substantial amount of capital or other resources.

(b) Neither Party shall, in granting entry under paragraph l(a), require a labor certification test or other procedures of similar effect, or apply any numerical restriction.

2. Each Party shall permit covered investments to engage top managerial personnel of their choice, regardless of nationality.

ARTICLE VIII

CONSULTATIONS

The Parties agree to consult promptly, on the request of either, to resolve any disputes in connection with the Treaty, or to discuss any matter relating to the interpretation or application of the Treaty or to the realization of the objectives of the Treaty.

ARTICLE IX

SETTLEMENT OF DISPUTES BETWEEN ONE PARTY AND A NATIONAL OR COMPANY OF THE OTHER PARTY

1. For purposes of this Treaty, an investment dispute is a dispute between a Party and a national or company of the other Party arising out of or relating to an investment authorization, an investment agreement or an alleged breach of any right conferred, created or recognized by this Treaty with respect to a covered investment.

2. A national or company that is a party to an investment dispute may submit the dispute for resolution under one of the following alternatives:

(a) to the courts or administrative tribunals of the Party that is a party to the dispute; or

(b) in accordance with any applicable, previously agreed dispute-settlement procedures; or

3. (a) Provided that the national or company concerned has not submitted the dispute for resolution under paragraph 2(a) or (b), and that three months have elapsed from the date on which the dispute arose, the national or company concerned may submit the dispute for settlement by binding arbitration:

(i) to the Centre, if the Centre is available; or

(ii) to the Additional Facility of the Centre, if the Centre is not available; or

(iii) in accordance with the UNCITRAL Arbitration Rules; or

(iv) if agreed by both parties to the dispute, to any other arbitration institution or in accordance with any other arbitration rules.

(b) A national or company, notwithstanding that it may have submitted a dispute to binding arbitration under paragraph 3(a), may seek interim injunctive relief, not involving the payment of damages, before the judicial or administrative tribunals of the Party that is a party to the dispute, prior to the institution of the arbitral proceeding or during the proceeding, for the preservation of its rights and interests.

4. Each Party hereby consents to the submission of any investment dispute for settlement by binding arbitration in accordance with the choice of the national or company under paragraph 3(a)(1), (ii), and (iii) or the mutual agreement of both parties to the dispute under paragraph 3(a)(iv). This consent and the submission of the dispute by a national or company under paragraph 3(a) shall satisfy the requirement of:

(a) Chapter II of the ICSID Convention (Jurisdiction of the Centre) and the Additional Facility Rules for written consent of the parties to the dispute; and

(b) Article II of the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards, done at New York, June 10, 1958, for an “agreement in writing”.

5. Any arbitration under paragraph 3(a)(ii), (iii) or (iv) shall be held in a state that is a party to the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards, done at New York, June 10, 1958.

6. Any arbitral award rendered pursuant to this Article shall be final and binding on the parties to the dispute. Each Party shall carry out without delay the provisions of any such award and provide in its territory for the enforcement of such award.

7. In any proceeding involving an investment dispute, a Party shall not assert, as a defense, counterclaim, right of set-off or for any other reason, that indemnification or other compensation for all or part of the alleged damages has been received or will be received pursuant to an insurance or guarantee contract.

8. For purposes of Article 25(2)(b) of the ICSID Convention and this Article, a company of a Party that, immediately before the occurrence of the event.or events giving rise to an investment dispute, was a covered investment, shall be treated as a company of the other Party.

ARTICLE X

SETTLEMENT OF DISPUTES BETWEEN THE PARTIES

1. Any dispute between the Parties concerning the interpretation or application of the Treaty, that is not resolved through consultations or other diplomatic channels, shall be submitted upon the request of either Party to an arbitral tribunal for binding decision in accordance with the applicable rules of international law. In the absence of an agreement by the Parties to the contrary, the UNCITRAL Arbitration Rules shall govern, except to the extent these rules are (a) modified by the Parties or (b) modified by the arbitrators unless either Party objects to the proposed modification.

2. Within two months of receipt of a request, each Party shall appoint an arbitrator. The two arbitrators shall select a third arbitrator as Chairman, who shall be a national of a third State. The UNCITRAL Arbitration Rules applicable to appointing members of three member panels shall apply mutatis mutandis to the appointment of the arbitral panel except that the appointing authority referenced in those rules shall be the Secretary General of the Centre.

3. Unless otherwise agreed, all submissions shall be made and all hearings shall be completed within six months of the date of selection of the third arbitrator, and the arbitral panel shall render its decisions within two months of the date of the final submissions or the date of the closing of the hearings, whichever is later.

4. Expenses incurred by the Chairman and other arbitrators, and other costs of the proceedings, shall be paid for equally by the Parties. However, the arbitral panel may, at its discretion, direct that a higher proportion of the costs be paid by one of the Parties.

ARTICLE XI

PRESERVATION OF RIGHTS

This Treaty shall not derogate from any of the following that entitle covered investments to treatment more favorable than that accorded by this Treaty:

(a) laws and regulations, administrative practices or procedures, or administrative or adjudicatory decisions of a Party;

(b) international legal obligations; or

ARTICLE XII

DENIAL OF BENEFITS

Each Party reserves the right to deny to a company of the other Party the benefits of this Treaty if nationals of a third country own or control the company and

(a) the denying Party does not maintain normal economic relations with the third country; or

(b) the company has no substantial business activities in the territory of the Party under whose laws it is constituted or organized.

ARTICLE XIII

TAXATION

1. No provision of this Treaty shall impose obligations with respect to tax matters, except that:

(a) Articles III, IX and X will apply with respect to expropriation; and

(b) Article IX will apply with respect to an investment agreement or an investment authorization.

2. A national or company, that asserts in an investment dispute that a tax matter involves an expropriation, may submit that dispute to arbitration pursuant to Article IX(3) only if:

(a) the national or company concerned has first referred to the competent tax authorities of both Parties the issue of whether the tax matter involves an expropriation; and

(b) the competent tax authorities have not both determined, within nine months from the time the national or company referred the issue, that the matter does not involve an expropriation.

ARTICLE XIV

MEASURES NOT PRECLUDED BY THIS TREATY

1. This Treaty shall not preclude a Party from applying measures necessary for the fulfillment of its obligations with respect to the maintenance or restoration of international peace or security, or the protection of its own essential security interests.

2. This Treaty shall not preclude a Party from prescribing special formalities in connection with covered investments, such as a requirement that such investments be legally constituted under the laws and regulations of that Party, or a requirement that transfers of currency or other monetary instruments be reported, provided that such formalities shall not impair the substance of any of the rights set forth in this Treaty.

ARTICLE XV

APPLICATION OF THIS TREATY TO POLITICAL SUBDIVISIONS

AND STATE ENTERPRISES OF THE PARTIES

1. (a) The obligations of this Treaty shall apply to the political subdivisions of the Parties.

(b) With respect to the treatment accorded by a State, Territory or possession of the United States of America, national treatment means treatment no less favorable than the treatment accorded thereby, in like situations, to investments of nationals of the United States of America resident in, and companies legally constituted under the laws and regulations of, other States, Territories or possessions of the United States of America.

2. A Party’s obligations under this Treaty shall apply to a state enterprise in the exercise of any regulatory, administrative or other governmental authority delegated to it by that Party.

ARTICLE XVI

ENTRY INTO FORCE, DURATION AND TERMINATION

2. A Party may terminate this Treaty at the end of the initial ten year period or at any time thereafter by giving one year’s written notice to the other Party.

3. For ten years from the date of termination , all other Articles shall continue to apply to covered investments established or acquired prior to the date of termination, except insofar as those Articles extend to the establishment or acquisition of covered investments.

4. The Annex and Protocol shall form an integral part of the Treaty.

IN WITNESS WHEREOF, the respective plenipotentiaries have signed this Treaty.

DONE in duplicate at Washington this eleventh day of January, 1995, in the English language. An Albanian language text shall be prepared and shall be considered equally authentic upon an exchange of diplomatic notes confirming its conformity with the English language text.

FOR THE GOVERNMENT OF THE UNITED STATES OF AMERICA:

FOR THE GOVERNMENT OF THE REPUBLIC OF ALBANIA

[signature] [signature]

ANNEX

1. The Government of the United States of America may adopt or maintain exceptions to the obligation to accord national treatment to covered investments in the sectors or with respect to the matters specified below:

atomic energy; custom house brokers; licenses for broadcast, common carrier, or aeronautical radio stations; COMSAT; subsidies or grants, including government-supported loans, guarantees and insurance; state and local measures exempt from Article 1102 of the North American Free Trade Agreement pursuant to Article 1108 thereof; landing of submarine cables.

Most favored nation treatment shall be accorded if the sectors and matters indicated above.

2. The Government of the United States of America may adopt or maintain exceptions to the obligation to accord national and most favored nation treatment to covered investments in the sectors or with respect to the matters specified below:

fisheries; air and maritime transport, and related activities; banking, securities, and other financial services.

3. The Government of the United States of America say adopt or maintain exceptions to the obligation to accord national and most favored nation treatment to covered investments, provided that the exceptions do not result in treatment under this Treaty less favorable than the treatment that the Government of the United States of America has undertaken to accord in the North American Free Trade Agreement with respect to another party to that Agreement, in the sectors or with respect to the matters specified below:

insurance.

4. The Government of the Republic of Albania may adopt or maintain exceptions to the obligation to accord national treatment to covered investments in the sectors or with respect to the matters specified below:

ownership or land; banking; government subsidies.

Most favored nation treatment shall be accorded in the sectors and matters indicated above.

5. Each Party agrees to accord national treatment to covered investments in the following sectors:

leasing of minerals of pipeline rights-of-way on Government lands.

PROTOCOL

1. With respect to Article VIII, the Parties confirm their mutual understanding that each Party shall treat any confidential or proprietary information exchanged in the course of consultations on the same basis as the Party providing the information.

2. With respect to Article XIII, the Parties confirm their mutual understanding that neither Party has an obligation to accord national treatment with respect to tax matters, except as otherwise provided in an investment authorization or an investment agreement.

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Argentina Bilateral Investment Treaty

Signed November 14, 1991; Entered into Force October 20, 1994

103rd Congress 1st Session 103-2

SENATE Treaty Doc.

TREATY WITH ARGENTINA CONCERNING THE RECIPROCAL ENCOURAGEMENT AND PROTECTION OF INVESTMENT

MESSAGE FROM THE PRESIDENT OF THE UNITED STATES

TRANSMITTING

THE TREATY BETWEEN THE UNITED STATES OF AMERICA AND THE ARGENTINE REPUBLIC CONCERNING THE RECIPROCAL ENCOURAGEMENT AND PROTECTION OF INVESTMENT, WITH PROTOCOL, SIGNED AT WASHINGTON ON NOVEMBER 14, 1991; AND AN AMENDMENT TO THE PROTOCOL EFFECTED BY EXCHANGE OF NOTES AT BUENOS AIRES ON AUGUST 24 AND NOVEMBER 6, 1992

JANUARY- 21, 1993 -Treaty was read the first time and, together with the accompanying papers, referred to the Committee on Foreign Relations and ordered to be printed for the use of the Senate

U.S. GOVERNMENT PRINTING OFFICE

69-118 WASHINGTON: 1993

LETTER OF TRANSMITTAL

The White House, January 19,1993.

To the Senate of the United States:

With a view to receiving the advice and consent of the Senate to ratification, I transmit herewith the Treaty Between the United States of America and the Argentine Republic Concerning the Reciprocal Encouragement and Protection of Investment, with Protocol, signed at Washington on November 14, 1991; and an amendment to the Protocol effected exchange of notes at Buenos Aires on August 24 and November 6, 1992. I transmit also, for the information of the Senate, the report of the Department of State with respect this treaty.

This is the first bilateral investment treaty with a Latin American country to be transmitted to the Senate since the announcement of my Enterprise for the Americas Initiative in June 1990. The treaty is designed to protect U.S. investment and encourage private sector development in Argentina and to support the economic reforms taking place there. The treaty’s standstill and rollback of Argentina’s trade-distorting performance requirements are precedent setting steps in opening markets for U.S. exports. In this regard, as well as in its approach to dispute settlement, the treaty will serve as a model for our negotiations with other South America countries.

The treaty is fully consistent with U.S. policy toward international investment. A specific tenet, reflected in this treaty, is that U.S. investment abroad and foreign investment in the United States should receive fair, equitable, and nondiscriminatory treatment. Under this treaty, the Parties agree to international law standards for expropriation and expropriation compensation; free transfers of funds associated with investment; and the option of the investor to resolve disputes with the host government through international arbitration.

I recommend that the Senate consider this treaty as soon as possible and give its advice and consent to ratification of the treaty, with protocol, as amended, at an early date.

George Bush

LETTER OF SUBMITTAL

Department of State,

Washington, January 13, 1993

9300570

The President

The White House.

The President: I have the honor to submit to you the Treaty between the United States of America and the Argentine Republic concerning the Reciprocal Encouragement and Protection of Investment, with Protocol, signed at Washington on November 14, 1991; and an amendment to the Protocol effected by exchange of notes at Buenos Aires on August 24 and November 6, 1992. I recommend that this treaty, with protocol, as amended, be transmitted to the Senate for its advise and consent to ratification.

The bilateral investment treaty (BIT) with Argentina represents an important milestone in the BIT program. It is the first BIT concluded with a Latin American country since the announcement of your Enterprise for the Americas Initiative in June 1990. Argentina, like many Latin American countries, has long subscribed to the Calvo Doctrine, which requires that aliens submit disputes arising in a country to that country’s local courts. The conclusion of this treaty, which contains an absolute right to international arbitration of investment disputes, removes U.S. investors from the restrictions of the Calvo Doctrine and should help pave the way for similar agreements with other Latin American states.

By providing important protections to investors and creating more stable and predictable legal framework for investment, the BIT helps to encourage U.S. investment in the economies of its treaty partners. It is U.S. policy to advise potential treaty partners that conclusion of a BIT with the United States is an important and favorable factor for U.S. investors, but does not in and of itself result in immediate increases in private U.S. investment flows.

Argentina has signed BITs with several European countries, including France, as well as with Canada and Chile. The U.S. treaty, however, is more comprehensive than these other BITs.

The Office of the United States Trade Representative and the Department of State jointly lead BIT negotiations, with assistance from the Department of Commerce and Treasury. The United States has signed nineteen other BITs — with Armenia, Bangladesh, Bulgaria, Cameroon, the Congo, the Czech and Slovak Federal Republic, Egypt, Grenada, Haiti, Kazakhstan, Morocco, Panama, Romania, the Russian Federation, Senegal, Sri Lanka, Tunisia, Turkey, and Zaire — and a business and economic relations treaty with Poland, which contains the BIT elements.

THE UNITED STATES-ARGENTINA TREATY

The Argentina treaty satisfies the main BIT objectives, which are:

Investment or nationals and companies of one Party is the territory of the other Party (investments) receive the better of the treatment accorded to domestic investments in like circumstances (national treatment), or the treatment accorded to third country investments in like circumstances (most-favored nation (MFN) treatment), both on establishment and thereafter, subject to certain specified exceptions; Investments are guaranteed freedom from performance requirements, such as obligations to use local products or to export goods; Companies which are investments may hire top managers of their choice, regardless of nationality; Expropriation can occur only in accordance with international law standards: in a non-discriminatory manner, for a public purpose; and upon payment of prompt, adequate, and effective compensation; Investment-related funds are guaranteed unrestricted transfer in a freely usable currency; and; Nationals and companies of either Party, and their investments have access to binding international arbitration in investment disputes with the host government, without first resorting to domestic courts.

As does the model BIT, the Argentina treaty allows sectoral exceptions to national and MFN treatment, as set forth in protocol to the treaty. The U.S. exceptions are designed to protect governmental regulatory interests and to accommodate the derogations from national treatment and, in some cases, MFN treatment in existing state or federal law.

Sectors and matters which the U.S. excepts from national treatment are air transportation; ocean and coastal shipping; banking; insurance; energy and power production; custom house brokers; ownership and operation of broadcast or common carrier radio and television stations; ownership of real property; ownership of shares in the Communications Satellite Corporation; the provision of common carrier telephone and telegraph services; the provision of submarine cable services; and use of land and natural resources. The United States also reserves the right to make or maintain limited exceptions to national treatment with respect to certain programs involving government grants, loans and insurance.

U.S. exceptions from both national and MFN treatment which are based on reciprocity and mining on the public domain; maritime services and maritime-related services; and primary dealership in United States government securities.

The Argentine exceptions to national treatment are real estate in the Border Areas; air transportation; shipbuilding; nuclear energy centers; uranium mining; insurance; and fishing. “Mining” was included in Argentina’s list of national treatment exceptions at the time the treaty was signed but was deleted by an amendment effected by exchange of notes August 24 and November 6, 1992. This will ensure that treaty protections will be extended to an additional sector of significant commercial interest of U.S. investors. In no sectors of the Argentine economy are these restrictions on MFN treatment to be accorded to U.S. investments.

Regarding the obligation not to impose performance requirements, the Argentine treaty contains a protocol provision which recognizes that Argentina currently maintains performance requirements in the automotive industry. These performance requirements may not be intensified, and Argentina undertakes to exert its best efforts to eliminate them within the shortest possible period, and will ensure their elimination no later than eight years from the entry into force of the treaty. Pending such elimination, Argentina undertakes that these performance requirements shall not be applied in a manner that places existing investments at a competitive disadvantage to any new entrants in this industry.

Achieving such a roll-back of existing performance requirements is a landmark accomplishment and should serve as a model for agreements with other countries which maintain analogous requirements.

The treaty with Argentina addresses, for the first time in the U.S. BIT program, debt-equity conversion programs, under which an investor purchases debt of a country at a discount and receives local currency in an amount equivalent to the debt’s face value. These programs normally require that the investor postpone repatriating the local currency obtained in the conversion. Investors may choose to enter into such programs because they obtain more local currency than they than they otherwise would receive for a given amount of foreign exchange. The treaty’s protocol provides that any deferral of transfers agreed to under debt-equity conversion programs would not be superseded by the treaty’s guarantee of transfers without delay. This provision in the protocol was added at the suggestion of the United States. The United States ha been generally supportive of debt-equity conversion programs as part of the overall solution to the debt problem and has considered them to be an important element in commercial bank financing programs which reduce debt and debt service.

The treaty’s protocol also provides that, to the extent of any inconsistency between this treaty and the 1854 friendship, commerce, and navigation treaty between the Parties, which is still in force, the BIT shall prevail. This provision was added at the behest of the United States in order to override Article IX of the 1854 treaty, which gives Argentine citizens national treatment with respect to real estate ownership in the United States. The BIT will place Argentine citizens on the same plane as other foreign nationals in this regard.

The BIT with Argentina provides that an investment dispute between a Party and a national or company of the other Party, including a dispute involving an investment authorization or the interpretation of an investment agreement, may be submitted to international arbitration six months after the dispute arose. Exhaustion of local remedies is not required. The treaty identifies several different procedures for arbitration, at the investor’s option: the International Centre for the Settlement of Investment Disputes (“ICSID:), upon Argentina’s adherence to the ICSID Convention; the ICSID Additional Facility, if ICSID is not available, or ad hoc arbitration under the Arbitration Rules of the United Nations Commission on International Trade Law (UNCITRAL).

The other U.S. Government agencies which negotiated the treaty concur in my recommendations that it be transmitted to the Senate at an early date.

Respectfully submitted,

Arnold Kantor

Acting Secretary

TREATY BETWEEN

UNITED STATES OF AMERICA AND

THE ARGENTINE REPUBLIC

CONCERNING THE RECIPROCAL ENCOURAGEMENT

AND PROTECTION OF INVESTMENT

The United States of America and the Argentine Republic, hereinafter referred to as the Parties;

Desiring to promote greater economic cooperation between them, with respect to investment by nationals and companies of one Party in the territory of the other Party;

Recognizing that agreement upon the treatment to be accorded such investment will stimulate the flow of private capital and the economic development of the Parties;

Agreeing that fair and equitable treatment of investment is desirable in order to maintain a stable framework for investment and maximum effective use of economic resources;

Recognizing that the development of economic and business ties can contribute to the well-being of workers in both Parties and promote respect for internationally recognized worker rights; and

having resolved to conclude a Treaty concerning the encouragement and reciprocal protection of investment;

Have agreed as follows:

ARTICLE I

1. For the purposes of this Treaty,

a) “investment” means every kind of investment in the territory of one Party owned or controlled directly or indirectly by nationals or companies of the other Party, such as equity, debt, and service and investment contracts; and includes without limitation:

(i) tangible and intangible property, including rights, such as mortgages, liens and pledges;

(ii) a company or shares of stock or other interests in a company or interests in the assets thereof;

(iii) a claim to money or a claim to performance having economic value and directly related to an investment;

(iv) intellectual property which includes, inter alia, rights relating to: literary and artistic works, including sound recordings, inventions in all fields of human endeavor, industrial designs, semiconductor mask works, trade secrets, know-how, and confidential business information, and trademarks, service marks, and trade names; and

(v) any right conferred by law or contract, and any licenses and permits pursuant to law;

b) “company” of a Party means any kind of corporation, company, association, state enterprise, or other organization, legally constituted under the laws and regulations of a Party or a political subdivision thereof whether or not organized for pecuniary gain, and whether privately or governmentally owned;

c) “national” of a Party means a natural person who is a national of a Party under its applicable law;

d) “return” means an amount derived from or associated with an investment, including profit; dividend; interest; capita gain; royalty payment; management, technical assistance or other fee; or returns in kind;

e) “associated activities” include the organization, control, operation, maintenance and disposition of companies, branches, agencies, offices, factories or other facilities for the conduct of business; the making, performance and enforcement of contracts; the acquisition, use, protection and disposition of property of all kinds including intellectual and industrial property rights; and the borrowing of funds, the purchase, issuance, and sale of equity shares and other securities, and the purchase of foreign exchange for imports.

f) “territory” means the territory of the United States or the Argentine Republic, including the territorial sea established in accordance with international law as reflected in the 1982 United Nations Convention on the Law of the Sea. This Treaty also applies in the seas and seabed adjacent to the territorial sea in which the United States or the Argentine Republic has sovereign rights or jurisdiction in accordance with international law as reflected in the 1982 United Nations Convention on the Law of the Sea.

2. Each Party reserves the right to deny to any company of the other Party the advantages of this Treaty if (a) nationals of any third country, or nationals of such Party, control such company and the company has no substantial business activities in the territory of the other Party, or (b) the company is controlled by nationals of a third country with which the denying Party does not maintain normal economic relations.

3. Any alteration of the form in which assets are invested or reinvested shall not affect their character as investment.

ARTICLE II

1. Each Party shall permit and treat investment, and activities associated therewith, on a basis no less favorable than that accorded in like situations to investment or associated activities of its own nationals or companies, or of nationals or companies of any third country, whichever is the more favorable, subject to the right of each Party to make or maintain exceptions falling within one of the sectors or matters listed in the Protocol to this Treaty. Each Party agrees to notify the other Party before or on the date of entry into force of this Treaty of all such laws and regulations of which it is aware concerning the sectors or matters listed in the Protocol. Moreover, each Party agrees to notify the other of any future exception with respect to the sectors or matters listed in the Protocol, and to limit such exceptions to a minimum. Any future exception by either Party shall not apply to investment existing in that sector or matter at the time the exception becomes effective. The treatment accorded pursuant to any exceptions shall, unless specified otherwise in the Protocol, be not less favorable than that accorded in like situations to investments and associated activities of nationals or companies of any third country.

2. a) Investment shall at all times be accorded fair and equitable treatment, shall enjoy full protection and security and shall in no case be accorded treatment less than that required by international law.

b) Neither Party shall in any way impair by arbitrary or discriminatory measures the management, operation, maintenance, use, enjoyment, acquisition, expansion, or disposal of investments. For the purposes of dispute resolution under Articles VII and VIII, a measure may be arbitrary or discriminatory notwithstanding the opportunity to review such measure in the courts or administrative tribunals of a Party.

c) Each Party shall observe any obligation it may have entered into with regard to investments.

3. Subject to the laws relating to the entry and sojourn of aliens, nationals of either Party shall be permitted to enter and to remain in the territory of the other Party for the purpose of establishing, developing, administering or advising on the operation of an investment to which they, or a company of the first Party that employs them, have committed or are in the process of committing a substantial amount of capital or other resources.

4. Companies which are legally constituted under the applicable laws or regulations of one Party, and which are investments, shall be permitted to engage top managerial personnel of their choice, regardless of nationality.

6. Each Party shall provide effective means of asserting claims and enforcing rights with respect to investments, investment agreements, and investment authorizations.

7. Each Party shall make public all laws, regulations, administrative practices and procedures, and adjudicatory decisions that pertain to or affect investments.

8. The treatment accorded by the United States of America to investments and associated activities of nationals and companies of the Argentine Republic under the provisions of this Article shall in any State, Territory or possession of the United States of America be no less favorable than the treatment accorded therein to investments and associated activities of nationals of the United States of America resident in, and companies legally constituted under the laws and regulations of, other States, Territories or possessions of the United States of America.

9. The most favored nation provisions of this Article shall not apply to advantages accorded by either Party to nationals or companies of any third country by virtue of that Party’s binding obligations that derive from full membership in a regional customs union or free trade area, whether such an arrangement is designated as a customs union, free trade area, common market or otherwise.

ARTICLE III

This Treaty shall not preclude either Party from prescribing laws and regulations in connection with the admission of investments made in its territory by nationals or companies of the other Party or with the conduct of associated activities, provided, however, that such laws and regulations shall not impair the substance of any of the rights set forth in this Treaty.

ARTICLE IV

1. Investments shall not be expropriated or nationalized either directly or indirectly through measures tantamount to expropriation or nationalization (‘expropriation-) except for a public purpose; in a non-discriminatory manner; upon payment of prompt, adequate and effective compensation; and in accordance with due process of law and the general principles of treatment provided for in Article II (2) Compensation shall be equivalent to the fair market value of the expropriated investment immediately before the expropriatory action was taken or became known, whichever is earlier; be paid without delay; include interest at a commercially reasonable rate from the date of expropriation; be fully realizable; and be freely transferable at the prevailing market rate of exchange on the date of expropriation.

2. A national or company of either Party that asserts that all or part of its investment has been expropriated shall have a right to prompt review by the appropriate judicial or administrative authorities of the other Party to determine whether any such expropriation has occurred and, if so, whether such expropriation, and any compensation therefore, conforms to the provisions of this Treaty and the principles of international law.

3. Nationals or companies of either Party whose investments suffer losses in the territory of the other Party owing to war or other armed conflict, revolution, state of national emergency, insurrection, civil disturbance or other similar events shall be accorded treatment by such other Party no less favorable than that accorded to its own nationals or companies or to nationals or companies of any third country, whichever is the more favorable treatment, as regards any measures it adopts in relation to such losses.

ARTICLE V

1. Each Party shall permit all transfers related to an investment to be made freely and without delay into and out of its territory. Such transfers include: (a) returns; (b) compensation pursuant to Article IV; (c) payments arising out of an investment dispute; (d) payments made under a contract, including amortization of principal and accrued interest payments made pursuant to a loan agreement directly related to an investment; (e) proceeds from the sale or liquidation of all or any part of an investment; and (f) additional contributions to capital for the maintenance or development of an investment.

2. Except as provided in Article IV paragraph 1, transfers shall be made in a freely usable currency at the prevailing market rate of exchange on the date of transfer with respect to spot transactions in the currency to be transferred. The free transfer shall take place in accordance with the procedures established by each Party; such procedures shall not impair the rights set forth in this Treaty.

3. Notwithstanding the provisions of paragraphs 1 and 2, either Party may maintain laws and regulations (a) requiring reports of currency transfer; and (b) imposing income taxes by such means as a withholding tax applicable to dividends or other transfers. Furthermore, either Party may protect the rights of creditors, or ensure the satisfaction of judgments in adjudicatory proceedings, through the equitable, nondiscriminatory and good faith application of its law.

ARTICLE VI

ARTICLE VII

1. For purposes of this Article, an investment dispute is a dispute between a Party and a national or company of the other Party arising out of or relating to (a) an investment agreement between that Party and such national or company; (b) an investment authorization granted by that Party’s foreign investment authority (if any such authorization exists) to such national or company; or (c) an alleged breach of any right conferred or created by this Treaty with respect to an investment.

2. In the event of an investment dispute, the parties to the dispute should initially seek a resolution through consultation and negotiation. If the dispute cannot be settled amicably, the national or company concerned may choose to submit the dispute for resolution:

(a) to the courts or administrative tribunals of the Party that is a party to the dispute; or

(b) in accordance with any applicable, previously agreed dispute-settlement procedures; or

3. (a) Provided that the national or company concerned has not submitted the dispute for resolution under paragraph 2 (a) or (b) and that six months have elapsed from the date on which the dispute arose, the national or company concerned may choose to consent in writing to the submission of the dispute for settlement by binding arbitration:

(i) to the International Centre for the Settlement of Investment Disputes (“Centre”) established by the Convention on the Settlement of Investment Disputes between States and Nationals of other States, done at Washington, March 18, 1965 (“ICSID Convention”), provided that the Party is a party to such convention: or

(ii) to the Additional Facility of the Centre, if the Centre is not available; or

(iii) in accordance with the Arbitration Rules of the United Nations Commission on International Trade Law (UNICTRAL): or

(iv) to any other arbitration institution, or in accordance with any other arbitration rules, as may be mutually agreed between the parties to the dispute.

(b) Once the national or company concerned has so consented, either party to the dispute may initiate arbitration in accordance with the choice so specified in the consent.

4. Each Party hereby consents to the submission of any investment dispute for settlement by binding arbitration in accordance with the choice specified in the written consent of the national or company under paragraph 3. Such consent, together with the written consent of the national or company when given under paragraph 3 shall satisfy the requirement for:

(a) written consent of the parties to the dispute for purposes of Chapter II of the ICSID Convention (Jurisdiction of the Centre) and for purposes of the Additional Facility Rules; and

(b) an “agreement in writing” for purposes of Article II of the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards, done at New York, June 10, 1958 (“New York Convention”).

5. Any arbitration under paragraph 3(a)(ii), (iii) or (iv) of this Article shall be held in a state that is a party to the New York Convention.

6. Any arbitral award rendered pursuant to this Article shall be final and binding on the parties to the dispute. Each Party undertakes to carry out without delay the provisions of any such award and to provide in its territory for its enforcement.

7. In any proceeding involving an investment dispute, a Party shall not assert, as a defense, counterclaim, right of set-off or otherwise, that the national or company concerned has received or will receive, pursuant to an insurance or guarantee contract, indemnification or other compensation for all or part of its alleged damages.

8. For purposes of an arbitration held under paragraph 3 of this Article, any company legally constituted under the applicable laws and regulations of a Party or a political subdivision thereof but that, immediately before the occurrence of the event or events giving rise to the dispute, was an investment of nationals or companies of the other Party, shall be treated as a national or company of such other Party in accordance with Article 25(2)(b) of the ICSID Convention.

ARTICLE VIII

1. Any dispute between the Parties concerning the interpretation or application of the Treaty which is not resolved through consultations or other diplomatic channels, shall be submitted, upon the request of either Party, to an arbitral tribunal for binding decision in accordance with the applicable rules of international law. In the absence of an agreement by the Parties to the contrary, the arbitration rules of the United Nations Commission on International Trade Law (UNCITRAL), except to the extent modified by the Parties or by the arbitrators, shall govern.

2. Within two months of receipt of a request, each Party shall appoint an arbitrator. The two arbitrators shall select a third arbitrator as Chairman, who is a national of a third State. The UNCITRAL Rules for appointing members of three member panels shall apply mutatis mutandis to the appointment of the arbitral panel except that the appointing authority referenced in those rules shall be the Secretary General of the Permanent Court of Arbitration.

3. Unless otherwise agreed, all submissions shall be made and all hearings shall be completed within six months of the date of selection of the third arbitrator, and the Tribunal shall render its decisions within two months of the date of the final submissions or the date of the closing of the hearings, whichever is later.

4. Expenses incurred by the Chairman, the other arbitrators, and other costs of the proceedings shall be paid for equally by the Parties.

ARTICLE IX

The provisions of Article VII and VIII shall not apply to a dispute arising (a) under the export credit, guarantee or insurance programs of the Export-Import Bank of the United States or (b) under other official credit, guarantee or insurance arrangements pursuant to which the Parties have agreed to other means of settling disputes.

ARTICLE X

This Treaty shall not derogate from:

(a) laws and regulations, administrative practices or procedures, or administrative or adjudicatory decisions of either Party;

(b) international legal obligations; or

(c) obligations assumed by either Party, including those contained in an investment agreement or an investment authorization,

that entitle investments or associated activities to treatment more favorable than that accorded by this Treaty in like situations.

ARTICLE XI

This Treaty shall not preclude the application by either Party of measures necessary for the maintenance of public order, the fulfillment of its obligations with respect to the maintenance or restoration of international peace or security, or the Protection of its own essential security interests.

ARTICLE XII

1. With respect to its tax policies, each Party should strive to accord fairness and equity in the treatment of investment of nationals and companies of the other Party.

2. Nevertheless, the provisions of this Treaty, and in particular Article VII and VIII, shall apply to matters of taxation only with respect to the following:

(a) expropriation, pursuant to Article IV;

(b) transfers, pursuant to Article V; or

(c) the observance and enforcement of terms of an investment agreement or authorization as referred to in Article VII(l)(a) or (b), to the extent they are not subject to the dispute settlement provisions of a Convention for the avoidance of double taxation between the two Parties, or have been raised under such settlement provisions and are not resolved within a reasonable period of time.

ARTICLE XIII

This Treaty shall apply to the political subdivisions of the Parties.

ARTICLE XIV

2. Either Party may, by giving one year’s written notice to the other Party, terminate this Treaty at the end of the initial ten year period or at any time thereafter.

3. With respect to investments made or acquired prior to the date of termination of this Treaty and to which this Treaty otherwise applies, the provisions of all of the other Articles of this Treaty shall thereafter continue to be effective for a further period of ten years from such date of termination.

4. The Protocol shall form an integral part of the Treaty.

IN WITNESS WHEREOF, the respective plenipotentiaries have signed this Treaty.

DONE in duplicate at Washington on the fourteenth day of November, 1991, in the English and Spanish languages, both texts being equally authentic.

FOR THE UNITED STATES OF AMERICA:

FOR THE ARGENTINE REPUBLIC:

PROTOCOL

1. During dispute settlement proceedings pursuant to Article VII, a party may be required to produce evidence of ownership or control consistent with Article I(l)(a).

2. With reference to Article II, paragraph 1, the United States reserves the right to make or maintain limited exceptions to national treatment in the following sectors:

air transportation; ocean and coastal shipping; banking; insurance; energy and power production; custom house brokers; ownership and operation of broadcast or common carrier radio and television stations; ownership of real property; ownership of shares in the Communications Satellite Corporation; the provision of common carrier telephone and telegraph services; the provision of submarine cable services; use of land and natural resources

3. With reference to Article II, paragraph 1, the United States reserves the right to make or maintain limited exceptions to national treatment with respect to certain programs involving government grants, loans, and insurance.

4. With reference to Article II, paragraph 1, the United States reserves the right to make or maintain limited exceptions to national and most favored nation treatment in the following sectors, with respect to which treatment will be based on reciprocity:

mining on the public domain; maritime services and maritime-related services; primary dealership in United States government securities.

5. With reference to Article II, paragraph 1, the Argentine Republic reserves the right to make or maintain limited exceptions to national treatment in the following sectors:

real estate in the Border Areas; air transportation; shipbuilding; nuclear energy centers; uranium mining; insurance; mining; fishing.

6. The Parties understand that, with respect to rights reserved in Article XI of the Treaty, “obligations with respect to the maintenance or restoration of international peace or security” means obligations under the Charter of the United Nations.

7. The Parties acknowledge and agree that, to the extent of any conflict or inconsistency between the terms of this Treaty, and the terms of the Treaty of Friendship, Commerce, and Navigation between the Parties, entered into force December 20, 1854 (the “FCN Treaty-), the terms of this Treaty shall supersede the terms of the FCN Treaty, and shall control the resolution of such conflict.

8. The Parties confirm their mutual understanding that the provisions of this Treaty do not bind either Party in relation to any act or fact which took place or any situation which ceased to exist before the date of the entry into force of this Treaty.

9. Notwithstanding Article II(5) and in accordance with the terms of this paragraph, the Government of the Argentine Republic may maintain, but not intensify, existing performance requirements in the automotive industry. The Government of the Argentine Republic shall exert best efforts to eliminate all such requirements within the shortest possible period, and shall ensure their elimination within eight years of the date of the entry into force of this Treaty. The Government of the Argentine Republic shall further ensure that such performance requirements are applied in a manner which does not place existing investments at a competitive disadvantage against new entrants in this industry. The Parties shall consult at the request of either on any matter concerning the implementation of these undertakings. For the purposes of this paragraph, “existing” means extant at the time of signature of this Treaty.

10. The Parties note that the Argentine Republic has had and may have in the future a debt-equity conversion program under which nationals or companies of the United States may choose to invest in the Argentine Republic through the purchase of debt at a discount.

The Parties agree that the rights provided in Article V, paragraph 1, with respect to the transfer of returns and of proceeds from the sale or liquidation of all or any part of an investment, remain or may be, as such rights would apply to that part of an investment financed through a debt-equity conversion, modified by the terms of any debt-equity conversion agreement between a national or company of the United States and the Government of the Argentine Republic, or any agency or instrumentality thereof.

The transfer of returns and of proceeds from the sale or liquidation of all or any part of an investment shall in no case be on terms less favorable than those accorded, in like circumstances, to nationals or companies of the Argentine Republic or any third country, whichever is more favorable.

11. The Parties note with satisfaction that the Argentine Republic is engaged in a process of privatization of various industries, including public utilities. They agree that they will undertake their best efforts, including through consultations, to avoid any misinterpretation regarding the scope of Article II(5) that would adversely affect this privatization process.

Embassy of the United States of America

Buenos Aires, August 24, 1992

No. 453

Mr. Minister:

I have the honor to refer to the Treaty between the United States of America and the Argentine Republic concerning the reciprocal encouragement and protection of investment, with Protocol signed at Washington, November 14, 1991 (“The Treaty”).

During the negotiation of the Treaty, the Government of the United States of America and the Government of the Argentine Republic discussed the inclusion in Section 5 of the Protocol to the Treaty of the Argentine Mining Sector. Based on those discussions and subsequent discussions regarding this matter, I wish to propose the deletion of the term “Mining” from the list of sectors in Section 5 of the Protocol.

If the foregoing is acceptable to your Government, I have the honor to propose that this note, together with your reply to that effect shall constitute an agreement between the two Governments amending the Treaty, which shall be subject to ratification.

Accept, Mr. Minister, the renewed assurances of my highest consideration.

Dr. Guido Di Tella,

Minister of Foreign Affairs and Worship,

Buenos Aires.

DEPARTMENT OF STATE

OFFICE OF LANGUAGE SERVICES

Translating Division

LS No. 140114

SPA/ENG

Minister of Foreign Relations and Worship

Buenos Aires, November 6, 1992

Mr. Ambassador:

I have the honor to address you with regard to your note dated August 24, 1992, which reads as follows:

[The Spanish translation of Ambassador Todman’s note of August 24, 1992, agrees in all substantive respects with the original English text.]

In that regard I wish to state that my Government agrees with the terms of the transcribed note and, therefore, I have the honor to inform you that the aforesaid note and this reply constitute an agreement between out two Governments that will enter into force open the exchange of instruments of ratification.

Accept, Sir, the assurances of my highest consideration.

[Signature]

His Excellency

Terence Todman,

Ambassador of the United States of America,

Buenos Aires, Argentina

End of tab panel

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Armenia Bilateral Investment Treaty

Signed September 23, 1992; Entered into Force March 29, 1996

103D CONGRESS Treaty Doc.

1st Session 103-11

INVESTMENT TREATY WITH THE REPUBLIC OF ARMENIA

MESSAGE

FROM

THE PRESIDENT OF THE UNITED STATES

Transmitting

THE TREATY BETWEEN THE UNITED STATES OF AMERICA AND THE REPUBLIC OF ARMENIA CONCERNING THE RECIPROCAL ENCOURAGEMENT AND PROTECTION OF INVESTMENT, SIGNED AT WASHINGTON ON SEPTEMBER 23,1992

SEPTEMBER 8, 1993.-Treaty was read the first time and, together with the accompanying papers, referred to the Committee on Foreign Relations and ordered to be printed for the use of the Senate

U.S. GOVERNMENT PRINTING OFFICE

WASHINGTON : 1993

69-118

LETTER OF TRANSMITTAL

THE WHITE HOUSE, September 7, 1993.

To the Senate of the United States:

With a view to receiving the advice and consent of the Senate to ratification, I transmit herewith the Treaty Between the United States of America and the Republic of Armenia Concerning the Encouragement and Reciprocal Protection of Investment, with Protocol and related exchange of letters, signed at Washington on September 23, 1992. Also transmitted for the information of the Senate is the report of the Department of State with respect to this Treaty.

The Treaty will establish an agreed-upon legal basis for the protection and encouragement of investment. This Treaty thus forms an integral part of the framework for expanding trade and investment relations between the United States and the countries of the former Soviet Union. It is designed to encourage economic opportunity-for investment, trade, and growth-in both countries. It will assist Armenia in its transition to a market economy by strengthening the role of the private sector and by encouraging appropriate macroeconomic and structural policies.

The Treaty is fully consistent with U.S. policy toward international and domestic investment. A specific tenet, reflected in this Treaty, is that U.S. investment abroad and foreign investment in the United States should receive fair, equitable, and nondiscriminatory treatment. Under this Treaty, the Parties also agree to international law standards for expropriation and compensation for expropriation, free transfers of funds associated with investments, freedom of investments from performance requirements, and the investor’s freedom to choose to resolve disputes with the host government through international arbitration.

I recommend that the Senate consider this Treaty as soon as possible, and give its advice and consent to ratification of the Treaty, with Protocol and related exchange of letters, at an early date.

WILLIAM J. CLINTON.

LETTER OF SUBMITTAL

DEPARTMENT OF STATE,

Washington, August 27, 1993.

The PRESIDENT,

The White House.

THE PRESIDENT: I have the honor to submit to you the Treaty Between the United States of America and the Republic of Armenia Concerning the Encouragement and Reciprocal Protection of Investment, signed at Washington on September 23, 1992. I recommend that this Treaty be transmitted to the Senate for its advice and consent to ratification.

This is the third of five bilateral investment treaties (BITs) that the United States has signed with a newly independent state of the former Soviet Union. (BITs have already been signed with Kazakhstan, Kyrgyzstan, Moldova and Russia.) This Treaty will assist Armenia in its transition to a market economy by creating favorable conditions for U.S. private investment, helping to attract such investment and, thus, strengthening the development of the private sector. It is U.S. policy, however, to advise potential treaty partners during BIT negotiations that conclusion of a BIT does not necessarily result in immediate increases in private U.S. investment flows.

To date, 13 BITs are in force for the United States-with Bangladesh, Cameroon, the Czech Republic, Egypt, Grenada, Morocco, Panama, Senegal, Slovakia, Sri Lanka, Tunisia, Turkey, and Zaire. In addition to the Armenia Treaty, the United States has signed, but not yet brought into force, BITs with Argentina, Bulgaria, the Congo, Haiti, Kazakhstan, Kyrgyzstan, Moldova, Romania, and Russia-and a business and economic relations treaty with Poland, which contains the BIT elements.

The Office of the United States Trade Representative and the Department of State jointly lead BIT negotiations, with assistance from the Departments of Commerce and Treasury.

THE U.S.-ARMENIA TREATY

The Treaty with Armenia satisfies the principal BIT objectives, which are:

-Investments are guaranteed freedom from performance requirements, including requirements to use local products or to export local goods;

-Expropriation can occur only in accordance with international law standards; for a public purpose; in a nondiscriminatory manner; under due process of law; and upon payment of prompt, adequate, and effective compensation;

-Investments are guaranteed the unrestricted transfer of funds in a freely usable currency; and

-Nationals and companies of either Party, in investment disputes with the host government, have access to binding international arbitration, without first resorting to domestic courts.

The U.S.-Armenia Treaty adopts the U.S. prototype BIT text verbatim, with only the addition of Armenia’s exceptions to national treatment in the Annex.

The following is an article-by-article analysis of the provisions of the U.S.-Armenian Treaty

Preamble

The preamble states the goals of the Treaty. The Treaty is premised on the view that an open investment policy leads to economic growth. These goals include economic cooperation, increased flow of capital, a stable framework for investment, development of respect for internationally recognized worker rights, and maximum efficiency in the use of economic resources. While the Preamble does not impose binding obligations, its statement of goals may serve to assist in the interpretation of the Treaty.

ARTICLE I (DEFINITIONS)

ARTICLE I sets out definitions for terms used throughout the Treaty. As a general matter, they are designed to be broad and inclusive in nature.

Investment

The Treaty’s definition of investment is broad, recognizing that current investments take a wide variety of forms. It covers investments that are owned or controlled by nationals or companies of one of the Treaty partners made in the territory of the other. Investments can be made either directly or indirectly through one or more subsidiaries, including those of third countries. Control is not specifically defined in the Treaty. Ownership of over 50 percent of the voting stock of a company would normally convey control but in many cases the requirement could be satisfied by less than that proportion.

Under paragraph 2 of Article I, either country may deny the benefits of the Treaty to investments by companies established in the other that are owned or controlled by nationals of a third country if (1) the company is a mere shell, without substantial business activities in the home country, or (2) the third country is one with which the denying Party does not maintain normal economic relations. For example, at this time the United States does not maintain normal economic relations with, inter alia, Cuba or Libya.

Paragraph 3 confirms that “any alteration in the form in which an asset is invested or reinvested shall not affect its character as “investment.” For example, a change in the corporate form of an investment will not deprive it of protection under the Treaty.

Company

The definition of “company” is broad in order to cover virtually any type of legal entity, including any corporation, company, association, or other entity that is organized under the laws and regulations of a Party. It also ensures that companies of a Party that establish investments in the territory of the other Party have their investments covered by the Treaty, even if the parent company is ultimately owned by non-Party nationals, although the other Party may deny the benefits of the Treaty in the limited circumstances set forth in Article I paragraph 2. Likewise, a company of a third Party that is owned or controlled by nationals or companies of a Party will also be covered. The definition also covers charitable and non-profit entities, as well as entities that are owned or controlled by the state.

National

The Treaty defines “national” as a natural person who is a national of a Party under its own laws. Under U.S. law, the term “national” is broader than the term “citizen;” for example, a native of American Samoa is a national of the United States, but not a citizen.

Return

“Return” is defined as an amount derived from or associated with an investment, and the Treaty provides a non-exclusive list of examples, including: profits; dividends; interest; capital gains; royalty payments; management, technical assistance or other fees; and returns in kind. The scope of this definition provides breadth to the Treaty’s transfer provisions in Article IV.

Associated Activities

The Treaty recognizes that the operation of an investment requires protections extending beyond the investment to numerous related activities. This definition provides an illustrative list of such investor activities including operating a business facility, borrowing money, disposing of property, issuing stock and purchasing foreign exchange for imports. These activities are covered by Article II, paragraph 1 which guarantees the better of national or MFN treatment for investments and associated activities. (Article II, paragraph 10, discussed below, provides an extended, detailed list of the “associated activities” protected by the Treaty.)

ARTICLE II (TREATMENT)

Article II contains the Treaty’s major obligations with respect to the treatment of investment.

Paragraph 1 generally ensures the better of MFN or national treatment in both the entry and post-entry phases of investment. It thus prohibits both the screening of proposed foreign investmentand discriminatory measures once the investment has been made, subject to specific exceptions provided for in a separate Annex. The U.S. and Armenia both reserved certain exceptions in the Annex to the Treaty, the provisions of which are discussed in the section entitled “Annex.”

Paragraph 2 further guarantees that investment shall be granted “fair and equitable” treatment in accordance with international law. It also prohibits Parties from impairing, throughout arbitrary or discriminatory means, the management, operation, maintenance, use, enjoyment, acquisition, expansion or disposal of investment. This paragraph sets out a minimum standard of treatment based on customary international law.

In paragraph 2(c), each Party pledges to respect any obligations it may have entered into with respect to investments. Thus, in dispute settlement under Articles VI or VII, a Party would be foreclosed from arguing, on the basis of sovereignty, that it may unilaterally ignore its obligations to such investments.

Paragraph 3 allows, subject to each Party’s immigration laws and regulations, the entry of each Party’s nationals into the territory of the other for purposes linked to investment and involving the commitment of a “substantial amount of capital.” This Paragraph serves to render nationals of a BIT partner eligible for treaty-investor visas under U.S. immigration law and guarantees similar treatment for U.S. investors.

Paragraph 4 guarantees companies the right to engage top managerial personnel of their choice, regardless of nationality.

Under paragraph 5, neither Party may impose performance requirements such as those conditioning investment on the export of goods produced or the local purchase of goods or services. Such requirements are major burdens on investors.

Paragraph 6, provides that each Party must provide effective means of asserting rights and claims with respect to investment, investment agreements and any investment authorizations. Under paragraph 7, each Party must make publicly available all laws, administrative practices and adjudicatory procedures pertaining to or affecting investments.

Paragraph 8 recognizes that under the U.S. federal system, States of The United States may, in some instances, treat out-of-State residents and corporations in a different manner than they treat in-State residents and corporations. The Treaty provides that the national treatment commitment, with respect to the States, means treatment no less favorable than that provided to U.S. out of-State residents and corporations.

Paragraph 9 limits the Article’s MFN obligation by providing that it will not apply to advantages (i.e., future preferences) accorded by either Party to third countries by virtue of a Party’s membership in a free trade area or customs union or a future multilateral agreement on Tariffs and Trade (GATT). The free trade area exception in this treaty is analogous to the exception provided for with respect to trade in the GATT.

Article II, paragraph 10 of the BIT with Armenia is designed to avoid problems that U.S. businesses may face in emerging market economies. This provision clarifies that nationals and companies of either Party receive the better of national or MFN treatment with respect to a detailed list of activities associated with their investments. These include: access to registrations, licenses, and permits; access to financial institutions and credit markets; access to their funds held in financial institutions; the importation and installation of business equipment; advertising and the conduct of market studies; the appointment of commercial representatives; direct marketing; access to public utilities; and, access to raw materials. The right to the better of national or MFN treatment in these activities requires that Armenia grant U.S. nationals and companies treatment no less favorable than that granted to its own or third country nationals and companies.

ARTICLE III (EXPROPRIATION)

Article III incorporates into the Treaty the international law standards for expropriation and compensation.

Five requirements are listed. Expropriation must be for a public purpose; be carried out in a non-discriminatory manner; be subject to “prompt, adequate, and effective compensation”; be subject to due process; and be accorded the treatment provided in the standards of Article II (2). (These standards guarantee fair and equitable treatment and prohibit the arbitrary and discriminatory impairment of investment in its broadest sense.)

The second sentence of paragraph 1 clarifies the meaning of “prompt, adequate, and effective compensation.” Compensation must be equivalent to the fair market value of the expropriated investment immediately before the expropriatory action was taken or became known (whichever is earlier); be paid without delay; include interest at a commercially reasonable rate from the date of expropriation; be fully realizable; be freely transferable; and be calculated in a freely usable currency on the basis of the prevailing market rate of exchange.

Paragraph 3 entitles investors to the better of national or MFN treatment with respect to losses related to war or civil disturbances, but, unlike paragraph 1, does not specify an absolute standard for determining compensation for such losses.

ARTICLE IV (TRANSFERS)

Article IV protects investors from certain government exchange controls limiting current account and capital account transfers.

In paragraph 1, the Parties agree to permit “all inward and outward transfers related to an investment to be made freely and without delay.” Paragraph 1 also provides a non-exclusive list of transfers that must be allowed, including returns (as defined in Article I); payments made in compensation for expropriation (as defined in Article III); payments arising out of an investment dispute; payments made under a contract, including the amortization of principal and interest payments on a loan; proceeds from the liquidation or sale of all or part of an investment; and additional contributions to capital for the maintenance or development of an investment.

Paragraph 2 provides that transfers are to be made in a “freely usable currency” at the prevailing market rate of exchange on the date of transfer with respect to spot transactions in the currency to be transferred. “Freely usable” is a standard of the International Monetary Fund; at present there are five such “freely usable” currencies: the U.S. dollar, Japanese yen, German mark, French franc and British pound sterling.

Paragraph 3 recognizes that notwithstanding these guarantees, parties may maintain certain laws or obligations that could affect transfers with respect to investments. It provides that the Parties may require reports of currency transfers and impose income taxes by such means as a withholding tax on dividends. It also recognizes that Parties may protect the rights of creditors and ensure the satisfaction of judgments in adjudicatory proceedings through their laws, even if such measures interfere with transfers. Such laws must be applied in an equitable, nondiscriminatory and good faith manner.

ARTICLE V (STATE-STATE CONSULTATIONS)

Article V provides for prompt consultation between the Parties, at either Party’s request, on any matter relating to the interpretation or application of the Treaty.

ARTICLE VI (STATE- INVESTOR DISPUTE RESOLUTION)

Article VI sets forth several means by which disputes between an investor and the host country may be settled.

Article VI procedures apply to an “investment dispute” a term which covers any dispute arising out of or relating to rights granted by the Treaty with respect to an investment, an investment authorization, or an agreement between the investor and the host government.

When a dispute arises, Article VI provides that the disputants should initially seek to resolve the dispute by consultation and negotiation. which may include non-binding third Party procedures. Should such consultations fail, paragraphs 2 and 3 set forth the investor’s range of choices of, dispute settlement. The investor may make an exclusive and irrevocable choice to: (1) employ one of the several arbitration procedures outlined in the Treaty; (2) submit the dispute to procedures previously agreed upon by the investor and the host country government in an investment agreement or otherwise; or (3) submit the dispute to the local courts or administrative tribunals of the host country.

Under the Treaty, the investor can take an investment dispute to binding arbitration after six months from the date that the dispute arises. The investor may choose between the International Centre for the Settlement of Investment Disputes (ICSID) (if the host country has joined the Centre-otherwise the Additional Facility is available) and ad hoc arbitration using the Arbitration Rules of the United Nations Commission on International Trade Law (UNCITRAL). The Treaty also recognizes that, by mutual agreement, the parties to the dispute may choose another arbitral institution or set of arbitral rules.

Paragraph 4 contains the consent of the United States and Armenia to the submission of investment disputes to binding arbitration in accordance with the choice of the investor.

Paragraph 5 provides that a non-ICSID arbitration shall take place in a country that is a Party to the United Nations Convention on the Recognition and Enforcement of Arbitral Awards. This requirement enhances the ability of investors to enforce their arbitral awards. In addition, paragraph 6 includes a separate commitment by each Party to enforce arbitral awards, rendered pursuant to Article VI Procedures.

Paragraph 7 provides that in any dispute settlement procedure, a Party may not invoke as a defense, counterclaim, set-off or in any other manner the fact that the company or national has received or will be reimbursed for the same damages under an insurance or guarantee contract.

Paragraph 8 is included in the Treaty to ensure that ICSID arbitration will be available for investors making investments in the form of companies created under the laws of the Party with which there is a dispute.

ARTICLE VII (STATE-STATE ARBITRATION)

Article VII Provides for binding arbitration of disputes between the United States and Armenia that are not resolved through consultations or other diplomatic channels. The article constitutes each Party’s prior consent to arbitration.

ARTICLE VIII (EXCLUSIONS FROM DISPUTE SETTLEMENT)

Article VIII excludes from the coverage of Article VI and VII any disputes arising under the export credit, guarantee or insurance programs of the Export-Import Bank of the United States, as well as those of any other such official programs pursuant to which the Parties have agreed to other means of settling disputes.

ARTICLE IX (PRESERVATION OF RIGHTS)

Article IX clarifies that the Treaty is meant only to establish a floor for the treatment of foreign investment. An investor may be entitled to more favorable treatment through domestic legislation, or other international legal obligations, or a specific obligation assumed by a Party with respect to that investor. This provision ensures that the Treaty will not be interpreted to derogate from any entitlement to such more favorable treatment.

ARTICLE X (MEASURES NOT PRECLUDED)

The first paragraph of Article X reserves the right of a Party to take measures it regards as necessary for the maintenance of public order, the fulfillment of its international obligations with respect to international peace and security, or the protection of its own essential security interests. These provisions are common in international investment reservations.

The maintenance of public order would include measures taken pursuant to a Party’s police powers to ensure public health and safety. International obligations with respect to peace and security would include, for example, obligations arising out of Chapter VII of the United Nations Charter. Measures permitted by the provision on the protection of a Party’s essential security interests would include security-related actions taken in time of war or national emergency; actions not arising from a state of war or national emergency must have a clear and direct relationship to the essential security interest of the Party involved.

The second paragraph allows a Party to promulgate special formalities in connection with the establishment of investment, provided that the formalities do not impair the substance of any Treaty rights. Such formalities would include, for example, U.S. reporting requirements for certain inward investment.

ARTICLE XI (TAX POLICIES)

The Treaty exhorts both countries to provide fair and equitable treatment to investors with respect to tax policies. However, tax matters are generally excluded from the coverage of the prototype BIT, based on-the assumption that tax matters are properly covered in bilateral tax treaties.

The Treaty, and particularly the dispute settlement provisions, do apply to tax matters in three areas, to the extent they are not subject to the dispute settlement provisions of a tax treaty, or, if so subject, have been raised under a tax treaty’s dispute settlement procedures and are not resolved in a reasonable period of time.

The three areas where the Treaty could apply to tax matters are expropriation (Article III), transfers (Article IV) and the observance and enforcement of terms of an investment agreement or authorization (Article VI (1) (a) or (b)). These three areas are important for investors, and two of the three—expropriatory taxation and tax provisions contained in an investment agreement or authorization—are not typically addressed in tax treaties.

ARTICLE XII (APPLICATION TO POLITICAL SUBDIVISIONS)

Article XII makes clear that the obligations of the Treaty are applicable to all political subdivisions of the Parties, such as State and local governments.

ARTICLE XIII (ENTRY INTO FORCE, DURATION AND TERMINATION)

The Treaty enters into force thirty days after exchange of instruments of ratification and continues in force for a period of ten years. From the date of its entry into force, the Treaty applies to existing and future investments. After the ten-year term, the Treaty will continue in force unless terminated by either Party upon one year’s notice. If terminated, all existing investments would continue to be protected under the Treaty for ten years thereafter.

Annex

The U.S. portion of the Annex contains a list of sectors and matters in which, for various legal and historical reasons, the federal government or the States may not necessarily treat investments of nationals or companies of the other Party as they do U.S. investments or investments from a third country. The U.S. exceptions from national treatment are: air transportation; ocean and coastal shipping; banking; insurance; government grants; government insurance and loan programs; energy and power production; customs house brokers; ownership of real property; ownership and operation of broadcast or common carrier radio and television stations; ownership of shares in the Communications Satellite Corporation; the provision of common carrier telephone or telegraph services; the provision of submarine cable services; use of land and natural resources; mining on the public domain; maritime and maritime related services; and, primary dealership in U.S. government securities.

Ownership of real property, mining on the public domain, and maritime-related services, and primary dealers in U.S. government securities are also excluded from the MFN treatment commitments. The last three of the sectors in the Annex are exempted by the United States from MFN treatment obligations because of U.S. laws that require reciprocity. Enforcement of reciprocity provisions would deny both national and MFN treatment.

Because the U.S. exceptions to national treatment and MFN treatment are based on existing U.S. law, they are not altered during negotiations.

The Armenian exceptions to national treatment are government grants; government insurance and loan programs; customs house brokers; ownership and operation of broadcast or common carrier radio and television stations; extraction of natural resources; and mining on the public domain. These exceptions were based on provisions of investment laws currently in force or under active consideration in Armenia. Armenia has not reserved any exceptions to MFN treatment in the Annex.

The other U.S. Government agencies which negotiated the Treaty join me in recommending that it be transmitted to the Senate at an early date.

Respectfully submitted,

C.R. Wharton, Jr.

TREATY BETWEEN THE UNITED STATES OF AMERICA AND THE REPUBLIC OF ARMENIA CONCERNING THE ENCOURAGEMENT AND RECIPROCAL PROTECTION OF INVESTMENT

The United States of America and the Republic of Armenia (hereinafter the “Parties”);

Desiring to promote greater economic cooperation between them, with respect to investment by nationals and companies of one Party in the territory of the other Party;

Recognizing that agreement upon the treatment to be accorded such investment will stimulate the flow of private capital and the economic development of the Parties;

Agreeing that fair and equitable treatment of investment is desirable in order to maintain a stable framework for investment and maximum effective utilization of economic resources;

Recognizing that the development of economic and business ties can contribute to the well-being of workers in both Parties and promote respect for internationally recognized worker rights; and

Having resolved to conclude a Treaty concerning the encouragement and reciprocal protection of investment;

Have agreed as follows:

ARTICLE I

1. For the purposes of this Treaty,

(a) “investment” means every kind of investment in the territory of one Party owned or controlled directly or indirectly by nationals or companies of the other Party, such as equity, debt, and service and investment contracts; and includes:

(i) tangible and intangible property, including movable and immovable property, as well as rights, such as mortgages, liens and pledges;

(ii) a company or shares of stock or other interests in a company or interests in the assets thereof;

(iii) a claim to money or a claim to performance having economic value, and associated with an investment;

(iv) intellectual property which includes, inter alia, rights relating to: literary and artistic works, including sound recordings; inventions in all fields of human endeavor; industrial designs; semiconductor mask works; trade secrets, know-how, and confidential business information; and trademarks, service marks, and trade names; and

(v) any right conferred by law or contract, and any licenses and permits pursuant to law;

(b) “company” of a Party means any kind of corporation, company, association, partnership, or other organization, legally constituted under the laws and regulations of a Party or a political subdivision thereof whether or not organized for pecuniary gain, or privately or governmentally owned or controlled;

(d) “return” means an amount derived from or associated with an investment, including profit; dividend; interest; capital gain; royalty payment; management, technical assistance or other fee; or returns in kind;

(e) “associated activities” include the organization, control, operation, maintenance and disposition of companies, branches, agencies, offices, factories or other facilities for the conduct of business; the making, performance and enforcement of contracts; the acquisition, use, protection and disposition of property of all kinds including intellectual property rights; the borrowing of funds; the purchase, issuance, and sale of equity shares and other securities; and the purchase of foreign exchange for imports;

2. Each Party reserves the right to deny to any company the advantages of this Treaty if nationals of any third country control such company and, in the case of a company of the other Party, that company has no substantial business activities in the territory of the other Party or is controlled by nationals of a third country with which the denying Party does not maintain normal economic relations.

3. Any alteration of the form in which assets are invested or reinvested shall not affect their character as investment.

ARTICLE II

1. Each Party shall permit and treat investment, and activities associated therewith, on a basis no less favorable than that accorded in like situations to investment or associated activities of its own nationals or companies, or of nationals or companies of any third country, whichever is the most favorable, subject to the right of each Party to make or maintain exceptions falling within one of the sectors or matters listed in the Annex to this Treaty. Each Party agrees to notify the other Party before or on the date of entry into force of this Treaty of all such laws and regulations of which it is aware concerning the sectors or matters listed in the Annex. Moreover, each Party agrees to notify the other of any future exception with respect to the sectors or matters listed in the Annex, and to limit such exceptions to a minimum. Any future exception by either Party shall not apply to investment existing in that sector or matter at the time the exception becomes effective. The treatment accorded pursuant to any exceptions shall, unless specified otherwise in the Annex, be not less favorable than that accorded in like situations to investments and associated activities of nationals or companies of any third country.

2. (a) Investment shall at all times be accorded fair and equitable treatment, shall enjoy full protection and security and shall in no case be accorded treatment less than that required by international law.

(b) Neither Party shall in any way impair by arbitrary or discriminatory measures the management, operation, maintenance, use, enjoyment, acquisition, expansion, or disposal of investments. For purposes of dispute resolution under Articles VI and VII, a measure may be arbitrary or discriminatory notwithstanding the fact that a Party has had or has exercised the opportunity to review such measure in the courts or administrative tribunals of a Party.

3. Subject to the laws relating to the entry and sojourn of aliens, nationals of either Party shall be permitted to enter and to remain in the territory of the other Party for the purpose of establishing, developing, administering or advising on the operation of an investment to which they, or a company of the first Party that, employs them, have committed or are in the process of committing a substantial amount of capital or other resources.

5. Neither Party shall impose performance requirements as condition of, establishment, expansion or maintenance of investments, which require or enforce commitments to export goods produced, or which specify that goods or services must purchased locally, or which impose any other similar requirements.

6. Each Party shall provide effective means of asserting claims and enforcing rights with respect to investment, investment agreements, and investment authorizations.

7. Each Party shall make public all laws, regulations, administrative practices and procedures, and adjudicatory decisions that pertain to or affect investments.

8. The treatment accorded by the United States of America to investments and associated activities of nationals and companies of the Republic of Armenia under the provisions of this Article shall in any State, Territory or possession of the United States of America be no less favorable than the treatment accorded therein to investments and associated activities of nationals of the United States of America resident in, and companies legally constituted under the laws and regulations of other States, Territories or possessions of the United States of America.

9. The most favored nation provisions of this Article shall not apply to advantages accorded by either Party to nationals or companies of any third country by virtue of:

(a) that Party’s binding obligations that derive from full membership in a free trade area or customs union; or

(b) that Party’s binding obligations under any multilateral international agreement under the framework of the General Agreement on Tariffs and Trade that enters into force subsequent to the signature of this Treaty.

10. The Parties acknowledge and agree that “associated” activities, include without limitation, such activities as:

(a) the granting of franchises or rights under licenses;

(b) access to registrations, licenses, permits and other approvals (which shall in any event be issued expeditiously);

(d) access to their funds held in financial institutions;

(e) the importation and installation of equipment necessary for the normal conduct of business affairs, including, but not limited to, office equipment and automobiles, and the export of any equipment and automobiles so imported;

(f) the dissemination of commercial information;

(g) the conduct of market studies;

(h) the appointment of commercial representatives, including agents, consultants and distributors and their participation in trade fairs and promotion events;

(i) the marketing of goods and services, including through internal distribution and marketing systems, as well as by advertising and direct contact with individuals and companies;

(j) access to public utilities, public services and commercial rental space at nondiscriminatory prices, if the prices are set or controlled by the government; and

(k) access to raw materials, inputs-and services of all types at nondiscriminatory prices, if the prices are set or controlled by the government.

ARTICLE III

1. Investments shall not be expropriated or nationalized either directly or indirectly through measures tantamount to expropriation or nationalization (“expropriation”) except: for public purpose; in a nondiscriminatory manner; upon payment of prompt, adequate and effective compensation; and in accordance with due process of law and the general principles of treatment provided for in Article II(2). Compensation shall be equivalent to the fair market value of the expropriated investment immediately before the expropriatory action was taken or became known, whichever is earlier; be calculated in a freely usable currency on the basis of the prevailing market rate of exchange at that time; be paid without delay; include interest at a commercially reasonable rate from the date of expropriation; be fully realizable; and be freely transferable.

2. A national, or company of either Party that asserts that all or part of its investment has been expropriated shall have a right to prompt review by the appropriate judicial or administrative authorities of the other Party to determine whether any such expropriation has occurred and, if so, whether such expropriation, and any associated compensation, conforms to the principles of international law.

3. Nationals or companies of either Party whose investments suffer losses in the territory of the other Party owing to war or other armed conflict, revolution, state of national emergency, insurrection, civil disturbance or other similar events shall be accorded treatment by such other Party no less favorable than that accorded to its own nationals or companies or to nationals or companies of any third country, whichever is the most favorable treatment, as regards any measures it adopts in relation to such losses.

ARTICLE IV

1. Each Party shall permit all transfers related to an investment to be made freely and without delay into and out of its territory. Such transfers include: (a) returns; (b) compensation pursuant to Article III; (c) payments arising out of an investment dispute; (d) payments made under a contract, including amortization of principal and accrued interest payments made pursuant to a loan agreement; (e) proceeds from the sale or liquidation of all or any part of an investment; and (f) additional contributions to capital for the maintenance or development of an investment.

2. Transfers shall be made in a freely usable currency at the prevailing market rate of exchange on the date of transfer with respect to spot transactions in the currency to be transferred.

ARTICLE V

ARTICLE VI

1. For purposes of this Article, an investment dispute is a dispute between a Party and a national or company of the other Party arising out of or relating to (a) an investment agreement between that Party and such national or company; (b) an investment authorization granted by that Party’s foreign investment authority to such national or company; or (c) an alleged breach of any right conferred or created by this Treaty with respect to an investment.

(a) to the courts or administrative tribunals of the Party that in a Party to the dispute; or

(b) in accordance with any applicable, previously agreed dispute-settlement procedures; or

(ii) to the Additional Facility of the Center, if the Center is not available; or

(iii) in accordance with the Arbitration Rules of the United Nations Commission on International Trade Law (UNCITRAL); or

(iv) to any other arbitration institution, or in accordance with any other arbitration rules, as may be mutually agreed between the parties to the dispute.

(b) once the national or company concerned has so consented, either Party to the dispute may initiate arbitration in accordance with the choice so specified in the consent.

(a) written consent of the parties to the dispute for purposes of Chapter II of the ICSID Convention (Jurisdiction of the Centre) and for purposes of the Additional Facility Rules; and

5. Any arbitration under paragraph 3(a)(ii), (iii) or (iv) of this Article shall be held in a state that is a Party to the New York Convention.

7. In any proceeding involving an investment dispute, a Party shall not assert, as a defense, counterclaim, right of set-off or otherwise, that the national or company concern ad has received or will receive, pursuant to an insurance or guarantee contract, indemnification or other compensation for all or part of its alleged damages.

ARTICLE VII

4. Expenses incurred by the Chairman, the other arbitrators, and other costs of the proceedings shall be paid for equally by the Parties. The Tribunal may, however, at its discretion, direct that a higher proportion of the costs be paid by one of the Parties.

ARTICLE VIII

The provisions of Article VI and VII shall not apply to a dispute arising (a) under the export credit, guarantee or insurance programs of the Export-Import Bank of the United States or (b) under other official credit, guarantee or insurance arrangements pursuant to which the Parties have agreed to other means of settling disputes.

ARTICLE IX

This Treaty shall not derogate from:

(a) laws and regulations, administrative practices or procedures, or administrative or adjudicatory decisions of either Party;

(b) international legal obligations; or

(c) obligations assumed by either Party, including those contained in an investment agreement or an investment authorization,

that entitle investments or associated activities to treatment more favorable than that accorded by this Treaty in like situations.

ARTICLE X

1. This Treaty shall not preclude the application by either Party of measures necessary for the maintenance of public order, the fulfillment of its obligations with respect to the maintenance or restoration of international peace or security, or the protection of its own essential security interests.

2. This Treaty shall not preclude either Party from prescribing special formalities in connection with the establishment of investments, but such formalities shall not impair the substance of any of the rights set forth in this Treaty.

ARTICLE XI

1. With respect to its tax policies, each Party should strive to accord fairness and equity in the treatment of investment of nationals and companies of the other Party.

2. Nevertheless, the provisions of this Treaty, and in particular Article VI and VII, shall apply to matters of taxation only with respect to the following:

(a) expropriation, pursuant to Article III;

(b) transfers, pursuant to Article IV; or

(c) the observance and enforcement of terms of an investment agreement or authorization as referred to in Article VI (1) (a) or (b),

to the extent they are not subject to the dispute settlement provisions of a Convention for the avoidance of double taxation between the two Parties, or have been raised under such settlement provisions and are not resolved within a reasonable period of time.

ARTICLE XII

This Treaty shall apply to the political subdivisions of the Parties.

ARTICLE XIII

2. Either Party may, by giving one year’s written notice to the other Party, terminate this Treaty at the end of the initial ten year period or at any time thereafter.

4. The Annex shall form an integral part of the Treaty.

IN WITNESS WHEREOF, the respective plenipotentiaries have signed this Treaty.

DONE in duplicate at Washington, this twenty-third day of September, 1992, in the English language. An Armenian language text shall be prepared which shall be considered equally authentic upon an exchange of diplomatic notes confirming its conformity with the English language text.

FOR THE UNITED STATES OF AMERICA:

FOR THE REPUBLIC OF ARMENIA:

ANNEX

1. The United States reserves the right to make or maintain limited exceptions to national treatment, as provided in Article II, paragraph 1, in the sectors or matters it has indicated below:

air transportation; ocean and coastal shipping; banking; insurance; government-grants; government insurance and loan programs; energy and power production; custom house brokers; ownership of real property; ownership and operation of broadcast or common carrier radio and television stations; ownership of shares in the Communications Satellite Corporation; the provision of common carrier telephone and telegraph services; the provision of submarine cable services; use of land and natural resources; mining on the public domain; maritime services and maritime-related services; and primary dealership in United States government securities.

ownership of real property; mining on the public domain; maritime services and maritime-related services; and primary dealership in United States government securities.

3. The Republic of Armenia reserves the right to make or maintain limited exceptions to national treatment, as provided in Article II, paragraph 1, in the sectors or matters it has indicated below:

government grants; government insurance and loan programs; customs house brokers; ownership and operation of broadcast or common carrier radio and television stations; extraction of natural resources; mining on the public domain.

End of tab panel

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Azerbaijan Bilateral Investment Treaty

Signed August 1, 1997; Entered into Force August 2, 2001

106th Congress

2d Session

SENATE

Treaty Doc.

106-47

_______________________________________________________________________

INVESTMENT TREATY WITH AZERBAIJAN

MESSAGE

FROM

THE PRESIDENT OF THE UNITED STATES

TRANSMITTING

THE TREATY BETWEEN THE GOVERNMENT OF THE UNITED STATES OF AMERICA AND THE GOVERNMENT OF THE REPUBLIC OF AZERBAIJAN CONCERNING THE ENCOURAGEMENT AND RECIPROCAL PROTECTION OF INVESTMENT, WITH ANNEX, SIGNED, AT WASHINGTON ON AUGUST 1, 1997, TOGETHER WITH AN AMENDMENT TO THE TREATY SET FORTH IN AN EXCHANGE OF DIPLOMATIC NOTES DATED AUGUST 8, 2000, AND AUGUST 25, 2000

SEPTEMBER 12, 2000.-Treaty was read the first time and, together with the accompanying papers, referred to the Committee on Foreign Relations and ordered to be printed for the use of the Senate

U.S. GOVERNMENT PRINTING OFFICE

79-118 WASHINGTON : 2000

LETTER OF TRANSMITTAL

–––-

The White House, September 12, 2000.

To the Senate of the United States:

With a view to receiving the advice and consent of the Senate to ratification, I transmit herewith the Treaty Between the Government of the United States of America and the Government of the Republic of Azerbaijan Concerning the Encouragement and Reciprocal Protection of Investment, with Annex, signed at Washington on August 1, 1997, together with an amendment to the Treaty set forth in an exchange of diplomatic notes dated August 8, 2000, and August 25, 2000. I transmit also, for the information of the Senate, the report of the Department of State with respect to this Treaty.

The Bilateral Investment Treaty (BIT) with Azerbaijan is the fourth such treaty signed between the United States and a Transcaucasian or Central Asian country. The Treaty will protect U.S. investment and assist Azerbaijan in its efforts to develop its economy by creating conditions more favorable for U.S. private investment and thereby strengthening the development of its private sector.

The Treaty furthers the objectives of U.S. policy toward international and domestic investment. A specific tenet of U.S. policy, reflected in this Treaty, is that U.S. investment abroad and foreign investment in the United States should receive national treatment. Under the Treaty, the Parties also agree to customary international law standards for expropriation. The Treaty includes detailed provisions regarding the computation and payment of prompt, adequate, and effective compensation for expropriation; free transfer of funds related to investments; freedom of investments from specified performance requirements; fair, equitable, and most-favored-nation treatment; and the investor’s freedom to choose to resolve disputes with the host government through international arbitration.

I recommend that the Senate consider this Treaty as soon as possible, and give its advice and consent to ratification of the Treaty at an early date.

WILLIAM J. CLINTON

LETTER OF SUBMITTAL

–––-

Department of State,

Washington, September 8, 2000.

The President,

The White House.

THE PRESIDENT: I have the honor to submit to you the Treaty Between the Government of the United States of America and the Government of the Republic of Azerbaijan Concerning the Encouragement and Reciprocal Protection of Investment, with Annex, signed at Washington on August 1, 1997, together with an amendment to the Treaty set forth in an exchange of diplomatic notes dated August 8, 2000 and August 25, 2000. I recommend that this Treaty, with Annex and the related diplomatic notes, be transmitted to the Senate for its advice and consent to ratification.

The bilateral investment treaty (BIT) with Azerbaijan is the fourth such treaty signed between the United States and a Transcaucasian or Central Asian country. The Treaty is based on the view that an open investment policy contributes to economic growth. This Treaty will assist Azerbaijan in its efforts to develop its economy by creating conditions more favorable for U.S. private investment and thereby strengthening the development of its private sector. It is U.S. policy, however, to advise potential treaty partners during BIT negotiations that conclusion of such treaty does not necessarily result in increases in private U.S. investment flows.

To date, 31 BITs are in force for the United States—with Albania, Argentina, Armenia, Bangladesh, Bulgaria, Cameroon, the Republic of the Congo, the Democratic Republic of the Congo (formerly Zaire), the Czech Republic, Ecuador, Egypt, Estonia, Georgia, Grenada, Jamaica, Kazakhstan, Kyrgyzstan, Latvia, Moldova, Mongolia, Morocco, Panama, Poland, Romania, Senegal, Slovakia, Sri Lanka, Trinidad & Tobago, Tunisia, Turkey, and Ukraine. In addition to the Treaty with Azerbaijan, the United States has signed, but not yet brought into force, BITs with Bahrain, Belarus, Bolivia, Croatia, El Salvador, Honduras, Jordan, Lithuania, Mozambique, Nicaragua, Russia, and Uzbekistan.

The Office of the United States Trade Representative and the Department of State jointly led this BIT negotiation, with assistance from the Departments of Commerce, Treasury, and Energy.

The U.S.-Azerbaijan Treaty

The Treaty with Azerbaijan is based on the 1994 U.S. prototype BIT and satisfies the U.S. principal objectives in bilateral investment treaty negotiations:

—All forms of U.S. investment in the territory of Azerbaijan are covered.

—Covered investments receive the better of national treatment or most-favored-nation (MFN) treatment both while they are being established and thereafter, subject to certain specified exceptions.

—Specified performance requirements may not be imposed upon or enforced against covered investments.

—Expropriation is permitted only in accordance with customary international law standards.

—Parties are obligated to permit the transfer, in a freely usable currency, of all funds related to a covered investment, subject to exceptions for specified purposes.

—Investment disputes with the host government may be brought by investors, or by their covered investments, to binding international arbitration as an alternative to domestic courts.

These elements are further described in the following article-by-article analysis of the provisions of the Treaty:

Title and Preamble

Article I (Definitions)

Article I defines terms used throughout the Treaty.

Company, Company of a Party

The definition of “company” is broad, covering all types of legal entities constituted or organized under applicable law, and includes corporations, trusts, partnerships, sole proprietorships, branches, joint ventures, and associations. The definition explicitly covers not-for-profit entities, as well as entities that are owned or controlled by the state. “Company of a Party” is defined as a company constituted or organized under the laws of that Party.

National

The Treaty defines “national” as a natural person who is a national of a Party under its own laws. Under U.S. law, the term “national” is broader than the term “citizen.” For example, a native of American Samoa is a national of the United States, but not a citizen.

Investment, Covered Investment

The Treaty provides an illustrative list of the forms an investment may take. Establishing a subsidiary is a common way of making an investment. Other forms that an investment might take include equity and debt interests in a company; contractual rights; tangible, intangible, and intellectual property; and rights conferred pursuant to law, such as licenses and permits. Investment as defined by the Treaty generally excludes claims arising solely from trade transactions, such as a sale of goods across a border that does not otherwise involve an investment.

The Treaty defines “covered investment” as an investment of a national or company of a Party in the territory of the other Party. An investment of a national or company is one that the national or company owns or controls, either directly or indirectly. Indirect ownership or control could be through other, intermediate companies or persons, including those of third countries. Control is not specifically defined in the Treaty; ownership of over 50 percent of the voting stock of a company would normally convey control, but in many cases the requirement could be satisfied by less than that proportion, or by other arrangements.

The broad nature of the definitions of “investment,” “company,” and “company of a Party” means that investments can be covered by the Treaty even if ultimate control lies with non-Party nationals. A Party may, however, deny the benefits of the Treaty in the limited circumstances described in Article XII.

State Enterprise, Investment Authorization, Investment Agreement

The Treaty defines an “investment authorization” as an authorization granted by the foreign investment authority of a Party to a covered investment or a national or company of the other Party.

The Treaty defines an “investment agreement” as a written agreement between the national authorities of a Party and a covered investment or a national or company of the other Party that (1) grants rights with respect to natural resources or other assets controlled by the national authorities and (2) the investment, national, or company relies upon in establishing or acquiring a covered investment. This definition thus excludes agreements with subnational authorities (including U.S. States) as well as agreements arising from various types of regulatory activities of the national government, including, in the tax area, rulings, closing agreements, and advance pricing agreements.

ICSID Convention, Centre, UNCITRAL Arbitration Rules

The “ICSID Convention,” “Centre,” and “UNCITRAL Arbitration Rules” are explicitly defined to make the text brief and clear.

Article II (Treatment of Investment)

Article II contains the Treaty’s major obligations with respect to the treatment of covered investments.

Paragraph 1 generally ensures the better of national or MFN treatment in both the entry and postentry phases of investment. It thus prohibits, outside of exceptions listed in the Annex, “screening” on the basis of nationality during the investment process, as well as nationality-based post-establishment measures. For purposes of the Treaty, “national treatment” means treatment no less favorable than that which a Party accords, in like situations, to investments in its territory of its own nationals or companies. For purposes of the Treaty, “MFN treatment” means treatment no less favorable than that which a Party accords, in like situations, to investments in its territory of nationals or companies of a third country. The Treaty obliges each Party to provide whichever of national treatment or MFN treatment is the most favorable. This is defined by the Treaty as “national and MFN treatment.” Paragraph 1 explicitly states that the national and MFN treatment obligation will extend to state enterprises in their provision of goods and services to covered investments.

Paragraph 2 states that each Party may adopt or maintain exceptions to the national and MFN treatment standard with respect to the sectors or matters specified in the Annex. Further restrictive measures are permitted in each sector. (The specific exceptions are discussed in the section entitled “Annex” below.) In the Annex, Parties may take exceptions only to the obligation to provide national and MFN treatment; there are no sectoral exceptions to the rest of the Treaty’s obligations. Finally, in adopting any exception under this provision, a Party may not require the divestment of a preexisting covered investment.

Paragraph 2 also states that a Party is not required to extend to covered investments national and MFN treatment with respect to procedures provided for in multilateral agreements concluded under the auspices of the World Intellectual Property Organization relating to the acquisition or maintenance of intellectual property rights. This provision clarifies that certain procedural preferences granted under intellectual property conventions, such as the Patent Cooperation Treaty, fall outside the BIT. This exception parallels those in the Uruguay Round’s Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) and the North American Free Trade Agreement (NAFTA).

Paragraph 3 sets out a minimum standard of treatment based on standards found in customary international law. The obligations to accord “fair and equitable treatment” and “full protection and security” are explicitly cited, as is each Party’s obligation not to impair, through unreasonable and discriminatory means, the management, conduct, operation, and sale or other disposition of covered investments. The general reference to international law also implicitly incorporates other fundamental rules of customary international law regarding the treatment of foreign investment. However, this provision does not incorporate obligations based on other international agreements.

Paragraph 4 requires that each Party provide effective means of asserting claims and enforcing rights with respect to covered investments.

Paragraph 5 ensures the transparency of each Party’s regulation of covered investments.

Article III (Expropriation)

Article III incorporates into the Treaty customary international law standards for expropriation. Article III also includes detailed provisions regarding the computation and payment, adequate, and effective compensation.

Paragraph 1 describes the obligations of the Parties with respect to expropriation and nationalization of a covered investment. These obligations apply to both direct expropriation and indirect expropriation through measures “tantamount to expropriation or nationalization” and thus apply to “creeping expropriations”—a series of measures that effectively amounts to an expropriation of a covered investment without taking title.

Paragraph 2, 3, and 4 more fully describe the meaning of “prompt, adequate, and effective compensation.” The guiding principle is that the investor should be made whole.

Article IV (Compensation for Damages Due to War and Similar Events)

Paragraph 1 entitles investments covered by the Treaty to national and MFN treatment with respect to any measure relating to losses suffered in a Party’s territory owning to war or to other armed conflict, civil disturbances, or similar events. Paragraph 2, by contrast, creates an unconditional obligation to pay compensation for such losses when the losses result from requisitioning or from destruction not required by the necessity of the situation.

Article V (Transfers)

Article V Protects investors from certain government exchange controls that limit current and capitol account transfers, as well as limits on inward transfers made by screening authorities and, in certain circumstances, limits on returns in kind.

In paragraph 1 each Party agrees to “permit all transfers relating to a covered investment to be made freely and without delay into and out of its territory.” Paragraph 1 also provides a list of transfers that must be allowed. The list is non-exclusive, and is intended to protect flows to both affiliated and non-affiliated entities.

Paragraph 2 provides that each Party must permit transfers to be made in a “freely usable currency” at the market rate of exchange prevailing on the date of transfer. “Freely usable” is a term used by the International Monetary Fund; at present there are five “freely usable” currencies; the U.S. dollar, Japanese yen, German mark, French franc, and British pound sterling.

Paragraph 4 recognizes that, notwithstanding the obligations of paragraphs 1 through 3, a Party may prevent a transfer through the equitable, non-discriminatory and good faith application of laws relating to bankruptcy, insolvency, or the protection of the rights of creditors; securities; criminal or penal offenses; or ensuring compliance with orders or judgments in adjudicatory proceedings.

Article VI (Performance Requirements)

Article VI prohibits either Party from mandating or enforcing specified performance requirements as a condition for the establishment, acquisition, expansion, management, conduct, or operation of a covered investment. The list of prohibited requirements is exhaustive and covers domestic content requirements and domestic purchase preferences, the “balancing” imports or sales in relation to exports or foreign exchange earnings, requirements to export products or services, technology transfer requirements, and requirements relating to the conduct of research and development in the host country. Such requirements are major burdens on investors and impair their competitiveness.

The last sentence of Article VI makes clear that a Party may, however, impose conditions for the receipt or continued receipt of benefits and incentives.

Article VII (Entry, Sojourn, and Employment of Aliens)

Paragraph 1 requires each Party to allow, subject to its laws relating to the entry and sojourn of aliens, the entry into its territory of the other Party’s nationals for certain purposes related to a covered investment and involving the commitment of a “substantial amount of capital.” This paragraph serves to render nationals of Azerbaijan eligible for treaty-investor visas under U.S. immigration law. It also affords similar treatment for U.S. nationals entering Azerbaijan. The requirement to commit a “substantial amount of capital” is intended to prevent abuse of treaty-investor status; it parallels the requirements of U.S. immigration law.

In addition, paragraph 1(b) prohibits labor certification requirements and numerical restrictions on the entry of treaty-investors.

Paragraph 2 requires that each Party allow covered investments to engage top managerial personal of their choice, regardless of nationality. This provision does not require that such personnel granted entry into a Party’s territory. Such persons must independently qualify for an appropriate visa for entry into the territory of the other party. Nor does this provision create an exception to U.S. equal employment opportunity laws.

Article VIII (State-State Consultations)

Article VIII provides for prompt consultation between the Parties, as either Party’s request, on any matter relating to the interpretation or application of the Treaty or to the realization of the Treaty’s objectives. A Party may thus request consultations for any matter reasonably related to the encouragement or protection of covered investment, whether or not a Party is alleging a violation of the Treaty.

Article IX (Settlement of Disputes Between One Party and a National or Company of the Other Party)

Article IX sets forth several means by which disputes brought against a Party by an investor (specifically, a national or company of the other Party) may be resolved.

In the event that an investment dispute cannot be settled amicably, paragraph 2 gives an investor an exclusive (with the exception in paragraph 3(b) concerning injunctive relief, explained below) choice among three options to settle the dispute. These three options are: (1) submitting the dispute to the courts or administrative tribunals of the Party that is a party to the dispute; (2) invoking dispute-resolution procedures previously agreed upon by the national or company and the host country government; or (3) invoking the dispute-resolution mechanisms identified in paragraph 3 of Article IX.

Under paragraph 3(a), the investor can submit an investment dispute to binding arbitration 3 months after the dispute arises; provided that the investor has not submitted the claim to a court or administrative tribunal of the Party or invoked a dispute resolution procedure previously agreed upon. The investor may choose among the International Centre for Settlement of Investment Disputes (ICSID) (Convention Arbitration), the Additional Facility of ICSID (if Convention Arbitration is not available), ad hoc arbitration using the Arbitration Rules of the United Nations Commission on International Trade Law (UNCITRAL), or any other arbitral institution or rules agreed upon by both parties to the dispute.

Before or during such arbitral proceedings, however, paragraph 3(b) provides that an investor may seek, without affecting its right to pursue arbitration under this Treaty, interim injunctive relief not involving the payment of damages from local courts for administrative tribunals of the Party that is a party to the dispute for the preservation of its rights and interests. This paragraph does not alter the power of the arbitral tribunals to recommend or order interim measures they may deem appropriate.

Paragraph 4 constitutes each Party’s consent to the submission of investment disputes to binding arbitration in accordance with the choice of the investor.

In addition, in paragraph 6, each Party commits to enforcing arbitral awards rendered pursuant to this Article. The Federal Arbitration Act (9 U.S.C. 1 et seq.) satisfies the requirement for the enforcement of non-ICSID Convention awards in the United States. The Convention on the Settlement of Investment Disputes Act of 1966 (22 U.S.C. 1650-1650a) provides for the enforcement of ICSID Convention awards.

Paragraph 8 provides that, for the purposes of this article, the nationality of a company in the host country will be determined by ownership or control, rather than by place of incorporation. This provision allows a company that is a covered investment to bring a claim in its own name.

Article X (Settlement of Disputes Between the Parties)

Article X provides for binding arbitration of disputes between the United States and Azerbaijan concerning the interpretation or application of the Treaty that are not resolved through consultations or other diplomatic channels. The article specifies various procedural aspects of such arbitration proceedings, including time periods, selection of arbitrators, and distribution of arbitration costs between the Parties. The article constitutes each Party’s prior consent to such arbitration.

Article XI (Preservation of Rights)

Article XI clarifies that the Treaty does not derogate from any obligation a Party might have to provide better treatment to the covered investment than is specified in the Treaty. Thus, the Treaty establishes a floor for the treatment of covered investments. A covered investment may be entitled to more favorable treatment through domestic legislation, other international legal obligations, or a specific obligation (e.g., to provide a tax holiday) assumed by a Party with respect to that covered investment.

Article XII (Denial of Benefits)

Article XII(a) preserves the right of each Party to deny the benefits of the Treaty to a company owned or controlled by nationals of a non-Party country with which the denying Party does not have normal economic relations, e.g., a country to which it is applying economic sanctions. For example, at this time the United States does not maintain normal economic relations with, among other countries, Cuba and Libya.

Article XII(b) permits each Party to deny the benefits of the Treaty to a company of the other Party if the company is owned or controlled by non-Party nationals and if the company has no substantial business activities in the Party where it is established. Thus, the United States could deny benefits to a company that is a subsidiary of a shell company organized under the laws of Azerbaijan if controlled by nationals of a third country. However, this provision would not generally permit the United States to deny benefits to a company of Azerbaijan that maintains its central administration or principal place of business in the territory of, or has a real and continuous link with, Azerbaijan.

Article XIII (Taxation)

Article XIII excludes tax matters generally from the coverage of the BIT, on the basis that tax matters should be dealt with in bilateral tax treaties. However, Article XIII does not preclude a national or company from bringing claims under Article IX that taxation provisions in an investment agreement or authorization have been violated. In addition, the dispute settlement provisions of Articles IX and X apply to tax matters in relation to alleged violations of the BIT’s expropriation article.

Under paragraph 2, a national or company that asserts in a dispute that a tax matter involves expropriation may submit that dispute to arbitration pursuant to Article IX(3) only if (1) the investor has first referred to the competent tax authorities of both Parties the issue of whether the tax matter involves an expropriation, and (2) the tax authorities have not both determined, within 9 months from time of referral, that the matter does not involve expropriation. The “competent tax authority” of the United States is the Assistant Secretary of the Treasury for Tax Policy, who will make such a determination only after consultation with the Inter-Agency Staff Coordinating Group on Expropriations.

Article XIV (Measures Not Precluded)

The first paragraph of Article XIV reserves the right of a Party to take measures for the fulfillment of its international obligations with respect to maintenance or restoration of international peace or security, as well as those measures it regards as necessary for the protectionof its own essential security interests.

International obligations with respect to maintenance or restoration of peace or security would include, for example, obligations arising out of Chapter VII of the United Nations Charter. Measures permitted by the provision on the protection of a Party’s essential security interests would include security-related actions taken in time of war or national emergency. Actions not arising from a state of war or national emergency must have a clear and direct relationship to the essential security interests of the Party involved. Measures to protect a Party’s essential security interests are self-judging in nature, although each Party would expect the provisions to be applied by the other in good faith.

Article XV (Application to Political Subdivisions and State Enterprises of the Parties)

Paragraph 1(a) makes clear that the obligations of the Treaty are applicable to all political subdivisions of the Parties, such as provincial, State, and local governments.

Paragraph 2 extends a Party’s obligations under the Treaty to its state enterprises in the exercise of any delegated governmental authority. This paragraph is designed to clarify that the exercise of governmental authority by a state enterprise must be consistent with a Party’s obligations under the Treaty.

Article XVI (Entry Into Force, Duration, and Termination)

Paragraph 2 permits a Party to terminate the Treaty at the end of the initial 10 year period, or at any later time, by giving 1 year’s written notice to the other Party. Paragraph 1 also provides that the Treaty applies to covered investments existing at the time of entry into force as well as to those established or acquired thereafter. The Treaty does not state an intention by the Parties to apply the Treaty’s provisions retroactively. Thus, under customary international law, the Treaty does not apply to disputes with respect to acts or facts which took place before the Treaty came into force or to any situation which ceased to exist before the date of entry into force of the Treaty.

Paragraph 3 provides that, if the Treaty is terminated, all investments that qualified as covered investments on the date of termination (i.e., 1 year after the date of written notice of termination) continue to be protected under the Treaty for 10 years from that date as long as these investments qualify as covered investments. A Party’s obligations with respect to the establishment and acquisition of investments would lapse immediately upon the date of termination of the Treaty.

Paragraph 4 stipulates that the Annex shall form an integral part of the Treaty.

Annex

U.S. bilateral investment treaties allow for exceptions to national and MFN treatment, where the Parties’ domestic regimes do not afford national and MFN treatment, or where treatment in certain sectors or matters is negotiated in and governed by other agreements. Future derogations from the national treatment obligations of the Treaty are generally permitted only in the sectors or matters listed in the Annex, pursuant to Article II(2), and must be made on an MFN basis unless otherwise specified therein.

During a review of the Treaty in preparation for its submittal to the Senate for advice and consent to ratification, the Parties determined that there was an ambiguity in the Annex. This ambiguity reflected a misunderstanding regarding whether Azerbaijan had taken an exception from its national and MFN treatment obligation for insurance services. To resolve this ambiguity, the Parties agreed in an exchange of notes to amend the Treaty. Specifically, as amended, the Annex now takes an explicit exception from the parties’ respective national and MFN treatment obligations for insurance services, and in so doing, removes a U.S. commitment to limit its exception for insurance services. The Annex, as amended, is further described below.

Under a number of statutes, many of which have a long historical background, the U.S. federal government or States may not necessarily treat investments of nationals or companies of Azerbaijan as they do U.S. investments or investments from a third country. Paragraphs 1 and 2 of the Annex list the sectors or matters subject to U.S. exceptions.

The U.S. exceptions from its national treatment obligation are: atomic energy; customhouse brokers; licenses for broadcast, common carrier, or aeronautical radio stations; COMSAT; subsidies or grants, including government-supported loans, guarantees, and insurance; State and local measures exempt from Article 1102 of the North American Free Trade Agreement pursuant to Article 1108 thereof; and landing of submarine cables.

The U.S. exceptions from its national and MFN treatment obligation are: fisheries; air and maritime transport, and related activities; banking, insurance, securities, and other financial services; and one-way satellite transmissions of Direct-to-Home (DTH) and Direct Broadcasting Satellite (DBS) television services and of digital audio services.

The Treaty is the first to include a U.S. exception from its national and MFN treatment obligation for one-way satellite transmission of DTH and DBS television services and of digital audio services. This exception was added to the prototype BIT following conclusion of the 1997 WTO Basic Telecommunications Services Agreement to be consistent with the U.S. position taken with respect to that agreement. The Treaty is the first BIT negotiated after conclusion of the 1997 WTO Basic Telecommunications Services Agreement.

Paragraph 3 of the Annex lists Azerbaijan’s exceptions from its national treatment obligation, which are: ownership of land, its subsoil, water, plant and animal life, and other natural resources; ownership of real estate (during the transition period to a market economy); ownership or control of television and radio broadcasting and other forms of mass media; air transportation; preparation of stocks and bond notes issued by Azerbaijan; fisheries; and construction of pipelines for transportation of hydrocarbons.

Paragraph 4 of the Annex lists Azerbaijan’s exceptions from its national and MFN treatment obligation, which are: banking, insurance,securities, and other financial services.

As described above, Article II states the general obligation of the Parties to accord national and MFN treatment to covered investments except in those sectors or with respect to the matters specified in the Annex. Neither the United States nor Azerbaijan took an exception in their respective Annex entries with respect to all leasing of minerals or pipeline rights-of-way on government lands. Accordingly, this Treaty affects the implementation of the Mineral Lands Leasing Act (MLLA) (30 U.S.C. 181 et seq.) and 10 U.S.C. 7435, regarding Naval Petroleum Reserves, with respect to nationals and companies of Azerbaijan. The Treaty provides for resort to binding international arbitration to resolve disputes, rather than denial of mineral rights or rights to naval petroleum shares to investors of the other Party, as is the current process under the statute. U.S. domestic remedies, would, however, remain available for use in conjunction with the Treaty’s provisions.

The MLLA and 10 U.S.C. 7435 direct that a foreign investor be denied access to leases for minerals on on-shore federal lands, leases of land within the Naval Petroleum and Oil Shale Reserves, and rights-of-way for oil or gas pipelines across on-shore federal lands, if U.S. investors are denied access to similar or like privileges in the foreign country.

Azerbaijan’s extension of national treatment in these sectors will fully meet the objectives of the MLLA and 10 U.S.C. 7435. Azerbaijan was informed during negotiations that, were it to include this sector in its list of treatment exemptions, the United States would (consistent with the MLLA and 10 U.S.C. 7435) exclude the leasing of minerals or pipeline rights-of-way on Government lands from the national and MFN treatment obligations of this Treaty.

The listing of a sector or matter in the Annex does not necessarily signify that domestic laws have entirely reserved it for nationals. And, pursuant to Article II(2), any additional restrictions or limitations that a Party may adopt with respect to listed sectors or matters may not compel the divestiture of existing covered investments.

Finally, listing a sector or matter in the Annex exempts a Party only from the obligation to accord national or MFN treatment. Both Parties are obligated to accord to covered investments in all sectors—even those listed in the Annex—all other rights conferred by the Treaty.

The other U.S. Government agencies that participated in negotiating the Treaty join me in recommending that it be transmitted to the Senate at an early date.

Respectfully submitted,

STROBE TALBOTT .

TREATY BETWEEN

THE GOVERNMENT OF THE UNITED STATES OF AMERICA AND

THE GOVERNMENT OF THE REPUBLIC OF AZERBAIJAN

CONCERNING THE ENCOURAGEMENT

AND RECIPROCAL PROTECTION OF INVESTMENT

The Government of the United States of America and the Government of the Republic of Azerbaijan (hereinafter the “Parties”);

Desiring to promote greater economic cooperation between them, with respect to investment by nationals and companies of one Party in the territory of the other Party;

Recognizing that agreement upon the treatment to be accorded such investment will stimulate the flow of private capital and the economic development of the Parties;

Agreeing that a stable framework for investment will maximize effective utilization of economic resources and improve living standards;

Recognizing that the development of economic and business ties can promote respect for internationally recognized worker rights;

Agreeing that these objectives can be achieved without relaxing health, safety and environmental measures of general application; and

Having resolved to conclude a Treaty concerning the encouragement and reciprocal protection of investment;

Have agreed as follows:

ARTICLE I

For the purposes of this Treaty,

(b) “company of a Party” means a company constituted or organized under the laws of that Party;

(i) a company;

(ii) shares, stock, and other forms of equity participation, and bonds, debentures, and other forms of debt interests, in a company;

(iii) contractual rights, such as under turnkey, construction or management contracts, production or revenue-sharing contracts, concessions, or other similar contracts;

(iv) tangible property, including real property; and intangible property, including rights, such as leases, mortgages, liens and pledges;

(v) intellectual property, including: copyrights and related rights, patents, rights in plant varieties, industrial designs, rights in semiconductor layout designs, trade secrets, including know-how and confidential business information, trade and service marks, and trade names; and

(vi) rights conferred pursuant to law, such as licenses and permits;

(e) “covered investment” means an investment of a national or company of a Party in the territory of the other Party;

(f) “state enterprise” means a company owned, or controlled through ownership interests, by a Party;

(g) “investment authorization” means an authorization granted by the foreign investment authority of a Party to a covered investment or a national or company of the other Party;

(i) “ICSID Convention” means the Convention on the Settlement of Investment Disputes between States and Nationals of Other States, done at Washington, March 18, 1965;

(j) “Centre” means the International Centre for Settlement of Investment Disputes Established by the ICSID Convention; and

(k) “UNCITRAL Arbitration Rules” means the arbitration rules of the United Nations Commission on International Trade Law.

ARTICLE II

(b) Neither Party shall in any way impair by unreasonable and discriminatory measures the management, conduct, operation, and sale or other disposition of covered investments.

4. Each Party shall provide effective means of asserting claims and enforcing rights with respect to covered investments.

ARTICLE III

(a) the fair market value on the date of expropriation, converted into a freely usable currency at the market rate of exchange prevailing on that date, plus

(b) interest, at a commercially reasonable rate for that freely usable currency, accrued from the date of expropriation until the date of payment.

ARTICLE IV

(a) requisitioning of all or part of such investments by the Party’s forces or authorities, or

(b) destruction of all or part of such investments by the Party’s forces or authorities that was not required by the necessity of the situation.

ARTICLE V

1. Each Party shall permit all transfers relating to a covered investment to be made freely and without delay into and out of its territory. Such transfers include:

(a) contributions to capital;

(b) profits, dividends, capital gains, and proceeds from the sale of all or any part of the investment or from the partial or complete liquidation of the investment;

(d) payments made under a contract, including a loan agreement; and

(e) compensation pursuant to Articles III and IV, and payments arising out of an investment dispute.

2. Each Party shall permit transfers to be made in a freely usable currency at the market rate of exchange prevailing on the date of transfer.

3. Each Party shall permit returns in kind to be made as authorized or specified in an investment authorization, investment agreement, or other written agreement between the Party and a covered investment or a national or company of the other Party.

4. Notwithstanding paragraphs 1 through 3, a Party may prevent a transfer through the equitable, non-discriminatory and good faith application of its laws relating to:

(a) bankruptcy, insolvency or the protection of the rights of creditors;

(b) issuing, trading or dealing in securities;

(d) ensuring compliance with orders or judgments in adjudicatory proceedings.

ARTICLE VI

(a) to achieve a particular level or percentage of local content, or to purchase, use or otherwise give a preference to products or services of domestic origin or from any domestic source;

(b) to limit imports by the investment of products or services in relation to a particular volume or value of production, exports or foreign exchange earnings;

(c) to export a particular type, level or percentage of products or services, either generally or to a specific market region;

(d) to limit sales by the investment of products or services in the Party’s territory in relation to a particular volume or value of production, exports or foreign exchange earnings;

(f) to carry out a particular type, level or percentage of research and development in the Party’s territory.

Such requirements do not include conditions for the receipt or continued receipt of an advantage.

ARTICLE VII

(b) Neither Party shall, in granting entry under paragraph 1(a), require a labor certification test or other procedures of similar effect, or apply any numerical restriction.

2. Each Party shall permit covered investments to engage top managerial personnel of their choice, regardless of nationality.

ARTICLE VIII

ARTICLE IX

2. A national or company that is a party to an investment dispute may submit the dispute for resolution under one of the following alternatives:

(a) to the courts or administrative tribunals of the Party that is a party to the dispute; or

(b) in accordance with any applicable, previously agreed dispute-settlement procedures; or

3. (a) Provided that the national or company concerned has not submitted the dispute for resolution under paragraph 2 (a) or (b), and that three months have elapsed from the date on which the dispute arose, the national or company concerned may submit the dispute for settlement by binding arbitration:

(i) to the Centre, if the Centre is available; or

(ii) to the Additional Facility of the Centre, if the Centre is not available; or

(iii) in accordance with the UNCITRAL Arbitration Rules; or

(iv) if agreed by both parties to the dispute, to any other arbitration institution or in accordance with any other arbitration rules.

(b) a national or company, notwithstanding that it may have submitted a dispute to binding arbitration under paragraph 3(a), may seek interim injunctive relief, not involving the payment of damages, before the judicial or administrative tribunals of the Party that is a party to the dispute, prior to the institution of the arbitral proceeding or during the proceeding, for the preservation of its rights and interests.

4. Each Party hereby consents to the submission of any investment dispute for settlement by binding arbitration in accordance with the choice of the national or company under paragraph 3(a)(i), (ii), and (iii) or the mutual agreement of both parties to the dispute under paragraph 3(a) (iv). This consent and the submission of the dispute by a national or company under paragraph 3(a) shall satisfy the requirement of:

(a) Chapter II of the ICSID Convention (Jurisdiction of the Centre) and the Additional Facility Rules for written consent of the parties to the dispute; and

(b) Article II of the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards, done at New York, June 10, 1958, for an “agreement in writing.”

5. Any arbitration under paragraph 3(a) (ii), (iii) or (iv) shall be held in a state that is a party to the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards, done at New York, June 10, 1958.

8. For purposes of Article 25(2)(b) of the ICSID Convention and this Article, a company of a Party that, immediately before the occurrence of the event or events giving rise to an investment dispute, was a covered investment, shall be treated as a company of the other Party.

ARTICLE X

2. Within two months of receipt of a request, each Party shall appoint an arbitrator. The two arbitrators shall select a third arbitrator as chairman, who shall be a national of a third state. The UNCITRAL Arbitration Rules applicable to appointing members of three-member panels shall apply mutatis mutandis to the appointment of the arbitral panel except that the appointing authority referenced in those rules shall be the Secretary General of the Centre.

ARTICLE XI

This Treaty shall not derogate from any of the following that entitle covered investments to treatment more favorable than that accorded by this Treaty:

(a) laws and regulations, administrative practices or procedures, or administrative or adjudicatory decisions of a Party;

(b) international legal obligations; or

ARTICLE XII

Each Party reserves the right to deny to a company of the other Party the benefits of this Treaty if nationals of a third country own or control the company and

(a) the denying Party does not maintain normal economic relations with the third country; or

(b) the company has no substantial business activities in the territory of the Party under whose laws it is constituted or organized.

ARTICLE XIII

1. No provision of this Treaty shall impose obligations with respect to tax matters, except that:

(a) Articles III, IX and X will applywith respect to expropriation; and

(b) Article IX will apply with respect to an investment agreement or an investment authorization.

2. With respect to the application of Article III, an investor that asserts that a tax measure involves an expropriation may submit that dispute to arbitration pursuant to Article IX, paragraph 3, provided that the investor concerned has first referred to the competent tax authorities of both Parties the issue of whether that tax measure involves an expropriation.

3. However, the investor cannot submit the dispute to arbitration if within nine months after the date of referral, the competent tax authorities of both Parties determine that the tax measure does not involve an expropriation.

ARTICLE XIV

ARTICLE XV

1. (a) The obligations of this Treaty shall apply to the political subdivisions of the Parties.

2. A Party’s obligations under this Treaty shall apply to a state enterprise in the exercise of any regulatory, administrative or other governmental authority delegated to it by that Party.

ARTICLE XVI

2. A Party may terminate this Treaty at the end of the initial ten year period or at any time thereafter by giving one year’s written notice to the other Party.

3. For ten years from the date of termination, all other Articles shall continue to apply to covered investments established or acquired prior to the date of termination, except insofar as those Articles extend to the establishment or acquisition of covered investments.

4. The Annex shall form an integral part of the Treaty.

DONE in duplicate at Washington this first day of August, 1997, in the English and Azerbaijani languages, each text being equally authentic.

FOR THE GOVERNMENT OF THE UNITED STATES OF AMERICA:

FOR THE GOVERNMENT OF THE REPUBLIC OF AZERBAIJAN:

[signature]

ANNEX

1. The Government of the United States of America may adopt or maintain exceptions to the obligation to accord national treatment tocovered investments in the sectors or with respect to the matters specified below:

atomic energy; customhouse brokers; licenses for broadcast, common carrier, or aeronautical radio stations; COMSAT; subsidies or grants, including government-supported loans, guarantees and insurance; state and local measures exempt from Article 1102 of the North American Free Trade Agreement pursuant to Article 1108 thereof; and landing of submarine cables.

Most favored nation treatment shall be accorded in the sectors and matters indicated above.

fisheries; air and maritime transport, and related activities; banking, securities, and other financial services; and one-way satellite transmissions of Direct-to-Home (DTH) and Direct Broadcast Satellite (DBS) television services and of digital audio services.

3. The Government of the United States of America may adopt or maintain exceptions to the obligation to accord national and most favored nation treatment to covered investments, provided that the exceptions do not result in treatment under this Treaty less favorable than the treatment that the Government of the United States of America has undertaken to accord in the North American Free Trade Agreement with respect to another party to that Agreement, in the sector or with respect to the matter specified below:

insurance.

4. The Government of the Republic of Azerbaijan may adopt or maintain exceptions to the obligation to accord national treatment to covered investments in the sectors or with respect to the matters specified below:

ownership of land, its subsoil, water, plant and animal life, and other natural resources; ownership of real estate (during the transition period to a market economy); ownership or control of television and radio broadcasting and other forms of mass media; air transportation; preparation of stocks and bond notes issued by the Government of the Republic of Azerbaijan; fisheries; and construction of pipelines for transportation of hydrocarbons.

Most favored nation treatment shall be accorded in the sectors and matters indicated above.

5. The Government of the Republic of Azerbaijan may adopt or maintain exceptions to the obligation to accord national and most favored nation treatment to covered investments in the sectors or with respect to the matters specified below:

banking, securities, and other financial services.

EMBASSY OF THE

UNITED STATES OF AMERICA

No. 222/2000

The Embassy of the United States of America presents its compliments to the Ministry of Foreign Affairs of the Azerbaijan Republic and refers to the previous correspondence between our Governments regarding the Bilateral Investment Treaty.

Text of U.S. Note:

Excellency:

I have the honor to refer to the Treaty between the Government of the United States of America and the Government of the Republic of Azerbaijan Concerning the Encouragement and Reciprocal Protection of Investment, With Annex, signed at Washington on August 1, 1997 (“the Treaty”).

In conjunction with the preparation of documents for submission of the Treaty to the U.S. Senate for its advice and consent to ratification, representatives of our two governments have discussed the intentions of the parties regarding the application of the national treatment and most-favored-nation obligations of the treaty to our respective insurance sectors.

Our representatives have concluded that an amendment to the Treaty would provide greater clarity regarding our respective undertakings. Based on those discussions, I have the honor to propose that the annex to the Treaty is amended as follows:

1. The phrase “… banking, securities, and other financial services; …” in Paragraph 2 of the annex shall read “… banking, securities, insurance, and other financial services; …

2. Paragraph 3 of the annex shall be deleted in its entirety and the subsequent paragraphs of the Annex shall be renumbered accordingly.

3. The phrase “… banking, securities, and other financial services” in Paragraph 4 (as renumbered) of the Annex shall read “… banking, securities, insurance, and other financial services.

If the foregoing is acceptable to your government, I have the further honor to propose that this note, together with your reply to that effect, shall constitute an agreement between the two governments amending the Treaty, which agreement shall be subject to ratification and shall enter into force upon entry into force of the Treaty.

Accept, excellency, the renewed assurances of my highest consideration.

Text of draft GOAJ response:

Excellency:

I have the honor to refer to your note of (date) regarding the Treaty between the Government of the Republic of Azerbaijan and the Government of the United States of America Concerning the Encouragement and Reciprocal Protection of Investment, With Annex, signed at Washington on August 1, 1997 (“the Treaty”), the substantive portions of which note read as follows:

“In conjunction with the preparation of documents for submission of the treaty to the U.S. Senate for its advice and consent to ratification, representatives of our two governments have discussed the intentions, of the parties regarding the application of the national treatment and most-favored-nation obligations of the treaty to our respective insurance sectors.

1. The phrase “… banking, securities, and other financial services; …” in Paragraph 2 of the Annex shall read “… banking, securities, insurance, and other financial services; …

2. Paragraph 3 of the Annex shall be deleted in its entirety and the subsequent paragraphs of the Annex shall be renumbered accordingly.

3. The phrase “… banking, securities, and other financial services” in Paragraph 4 (as renumbered) of the Annex shall read “… banking, securities, insurance, and other financial services.

If the foregoing is acceptable to your government, I have the further honor to propose that this note, together with your reply to that effect, shall constitute an agreement between the two governments amending the treaty, which agreement shall be subject to ratification and shall enter into force upon entry into force of the treaty.”

I have the further honor, on behalf of my government, to accept the aforesaid proposal and to confirm that your note and this reply constitute an agreement between the two governments that will enter into force upon entry into force of the treaty. Accept, excellency, the renewed assurances of my highest consideration.

The Embassy of the United States of America avails itself of this opportunity to renew to the Ministry of Foreign Affairs of the Azerbaijan Republic the assurances of its highest consideration.

[Embassy Baku Seal]

Embassy of the United States of America,

Baku, August 8, 2000

[Hand-written note states: “This is a certified copy of the original note.”]

DEPARTMENT OF STATE

OFFICE OF LANGUAGE SERVICES

(Translation)

LS No. 09-2000-0033

OKR/

Azeri

REPUBLIC OF AZERBAIJAN

MINISTRY OF FOREIGN AFFAIRS

TO: THE EMBASSY OF THE UNITED STATES OF AMERICA

BAKU

August 25, 2000

No.: 1356

The Republic of Azerbaijan Ministry of Foreign Affairs sends its best regards to the Embassy of the United States of America and would like to point out these comments regarding the Bilateral Investment Contract between the two countries:

Dear Sir:

We have the honor to refer to the Embassy’s note numbered 222/2000, and dated Angust 8, 2000. This note was related to the contract (“Contract”), and its amendment, which was signed on August 1, 2000, in Washington, between the Governments of the United States of America and the Republic of Azerbaijan, for the promotion and protection of investment. The main essence of the note was:

“The representatives of both Governments have discussed the intentions of the two sides regarding the application of national treatment and also our obligations for a better treatment in the area of insurance, and are preparing the documents related to the Contract, in order to present them to the United States Senate for advice and ratification. Our representatives have concluded that an amendment to the Contract would clarify the obligations on our part. Based on the subject under discussion, I propose the amendment to the Addition of the Contract to be changed as following:

1. In the second paragraph, the statement of “… bank procedures, securities, and the other financial services…” to be changed to “… bank procedures, securities, insurance, and the other financial services…”

2. The third paragraph of the amendment to be taken out and the other paragraphs to be numbered accordingly.

3. The fourth paragraph of the amendment, (after renumeration), to be changed as “… bank procedures, securities, insurance, and the other financial services…”

If these proposals are acceptable to your Government, I also propose that this note, along with your reply, shall serve as an agreement between the two Governments, related to the amendment to the Contract. This agreement shall enter into force after the ratification, and on the same date when the Contract takes effect.

I would like to inform you on behalf of my Government that we accept the abovementioned proposal. We also approve that your note, along with this reply, shall constitute the agreement between the two Governments, and it shall enter into force at the same time with the Contract.

Please accept my highest regards.

The Republic of Azerbaijan Ministry of Foreign Affairs, taking advantage of this opportunity, again sends its highest regards to the Embassy of the United States of America.

[Stamp of certification of correct translation, Office of Language Services of Department of State]

End of tab panel

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Bahrain Bilateral Investment Treaty

Signed September 29, 1999; Entered into Force May 31, 2001

106th Congress SENATE Treaty Doc.

2d Session 106-25

_______________________________________________________________________

INVESTMENT TREATY WITH BAHRAIN

MESSAGE

FROM

THE PRESIDENT OF THE UNITED STATES

TRANSMITTING

THE TREATY BETWEEN THE GOVERNMENT OF THE UNITED STATES OF AMERICA AND THE GOVERNMENT OF THE STATE OF BAHRAIN CONCERNING THE ENCOURAGEMENT AND RECIPROCAL PROTECTION OF INVESTMENT WITH ANNEX AND PROTOCOL, SIGNED, AT WASHINGTON ON SEPTEMBER 29, 1999

MAY 23, 2000.-Treaty was read the first time and, together with the accompanying papers, referred to the Committee on Foreign Relations and ordered to be printed for the use of the Senate

U.S. GOVERNMENT PRINTING OFFICE

79-118 WASHINGTON : 2000

LETTER OF TRANSMITTAL

–––-

The White House,

May 23, 2000.

To the Senate of the United States:

With a view to receiving the advice and consent of the Senate to ratification, I transmit herewith the Treaty Between the Government of the United States of America and the Government of the State of Bahrain Concerning the Encouragement and Reciprocal Protection of Investment, with Annex, signed at Washington on September 29, 1999. I transmit also, for the information of the Senate, the report of the Department of State with respect to this Treaty. The bilateral investment treaty (BIT) with Bahrain is the third such treaty between the United States and a Middle Eastern country. The Treaty will protect U.S. investment and assist Bahrain in its efforts to develop its economy by creating conditions more favorable for U.S. private investment and thus strengthen the development of its private sector.

The Treaty is fully consistent with U.S. policy toward international and domestic investment. A specific tenet of U.S. policy, reflected in this Treaty, is that U.S. investment abroad and foreign investment in the United States should receive national treatment. Under this Treaty, the Parties also agree to customary international law standards for expropriation. The Treaty includes detailed provisions regarding the computation and payment of prompt, adequate, and effective compensation for expropriation; free transfer of funds related to investments; freedom of investments from specified performance requirements; fair, equitable, and most- favored-nation treatment; and the investor’s freedom to choose to resolve disputes with the host government through international arbitration.

I recommend that the Senate consider this Treaty as soon as possible, and give its advice and consent to ratification of the Treaty at an early date.

WILLIAM J. CLINTON

LETTER OF SUBMITTAL

–––-

Department of State,

Washington,

April 24, 2000.

The President,

The White House.

The President: I have the honor to submit to you the Treaty Between the Government of the United States of America and the Government of the State of Bahrain Concerning the Encouragement and Reciprocal Protection of Investment, with Annex, signed at Washington on September 29, 1999. I recommend that this Treaty with Annex, be transmitted to the Senate for its advice and consent to ratification.

The bilateral investment treaty (BIT) with Bahrain is the first such treaty signed between the United States and a member of the Cooperation Council for the Arab States of the Gulf. The Treaty is based on the view that an open investment policy contributes to economic growth. This Treaty will assist Bahrain in its efforts to develop its economy by creating conditions more favorable for U.S. private investment and thereby strengthening the development of its private sector. It is U.S. policy, however, to advise potential treaty partners during BIT negotiations that conclusion of such a treaty does not necessarily result in increases in private U.S. investment flows.

To date, 31 BITs are in force for the United States—with Albania, Argentina, Armenia, Bangladesh, Bulgaria, Cameroon, the Republic of the Congo, the Democratic Republic of the Congo (formerly Zaire), the Czech Republic, Ecuador, Egypt, Estonia, Georgia, Grenada, Jamaica, Kazakhstan, Kyrgyzstan, Latvia, Moldova, Mongolia, Morocco, Panama, Poland, Romania, Senegal, Slovakia, Sri Lanka, Trinidad & Tobago, Tunisia, Turkey, and Ukraine. In addition to the Treaty with Bahrain, the United States has signed, but not yet brought into force, BITS with Azerbaijan, Belarus, Bolivia, Croatia, El Salvador, Honduras, Jordan, Lithuania, Mozambique, Nicaragua, Russia, and Uzbekistan.

The Office of the United States Trade Representative and the Department of State jointly led this BIT negotiation, with assistance from the Departments of Commerce, Treasury, and Energy.

The U.S.-Bahrain Treaty

The Treaty with Bahrain is based on the 1994 U.S. prototype BIT and satisfies the U.S. principal objectives in bilateral investment treaty negotiations:

—All forms of U.S. investment in the territory of Bahrain are covered.

—Covered investments receive the better of national treatment or most-favored-nation (MFN) treatment both while they are being established and thereafter, subject to certain specified exceptions.

—Specified performance requirements may not be imposed upon or enforced against covered investments.

—Expropriation is permitted only in accordance with customary international law standards.

—Parties are obligated to permit the transfer, in a freely usable currency, of all funds related to a covered investment, subject to exceptions for specified purposes.

—Investment disputes with the host government may be brought by investors, or by their covered investments, to binding international arbitration as an alternative to domestic courts.

These elements are further described in the following article- by-article analysis of the provisions of the Treaty:

Title and Preamble

Article 1 (Definitions)

Article 1 defines terms used throughout the Treaty.

Company, Company of a Party

The definition of “company” is broad, covering all types of legal entities constituted or organized under applicable law, and includes corporations, trusts, partnerships, sole proprietorships, branches, joint ventures, and associations. The definition explicitly covers not-for-profit entities, as well as entities that are owned or controlled by the state. “Company of a Party” is defined as a company constituted or organized under the laws of that Party.

National

The Treaty defines “national” as a natural person who is a national of a Party under its own laws. Under U.S. law, the term “national” is broader than the term “citizen.” For example, a native of American Samoa is a national of the United States, but not a citizen.

Investment, Covered Investment

The Treaty provides an illustrative list of the forms an investment may take. Establishing a subsidiary is a common way of making an investment. Other forms that an investment might take include equity and debt interests in a company; contractual rights; movable, immovable, intangible, and intellectual property; and rights conferred pursuant to law, such as licenses and permits. Investment as defined by the Treaty generally excludes claims arising solely from trade transactions, such as a sale of goods across a border that does not otherwise involve an investment.

The Treaty defines “covered investment” as an investment of a national or company of a Party in the territory of the other Party. An investment of a national or company is one that the national or company owns or controls, either directly or indirectly. Indirect ownership or control could be through other, intermediate companies or persons, including those of third countries. Control is not specifically defined in the Treaty; ownership of over 50 percent of the voting stock of a company would normally convey control, but in many cases the requirement could be satisfied by less than that proportion, or by other arrangements.

State Enterprise, Investment Authorization, Investment Agreement

The Treaty defines an “investment authorization” as an authorization granted by the foreign investment authority of a Party to a covered investment or a national or company of the other Party.

The Treaty defines an “investment agreement” as a written agreement between the national authorities of a Party and a covered investment or a national or company of the other Party that (1) grants rights with respect to natural resources or other assets controlled by the national authorities and (2) the investment, national, or company relies upon in establishing or acquiring a covered investment. this definition thus excludes agreements with subnational authorities (including U.S. States) as well as agreements arising from various types of regulatory activities of the national government, including, in the tax area, rulings, closing agreements, and advance pricing agreements.

ICSID Convention, Centre, UNCITRAL Arbitration Rules

The “ICSID Convention,” “Centre,” and `”UNCITRAL Arbitration Rules” are explicitly defined to make the text brief and clear.

Article 2 (Treatment of Investment)

Article 2 contains the Treaty’s major obligations with respect to the treatment of covered investments.

Paragraph 1 generally ensures the better of national or MFN treatment in both the entry and post-entry phases of investment. It thus prohibits, outside of exceptions listed in the Annex, “screening” on the basis of nationality during the investment process, as well as nationality-based post- establishment measures. For purposes of the Treaty, “national treatment” means treatment no less favorable than that which a Party accords, in like situations, to investments in its territory of its own nationals or companies. For purposes of the Treaty, “MFN treatment” means treatment no less favorable than that which a Party accords, in like situations, to investments in its territory of nationals or companies of a third country. The Treaty obliges each Party to provide whichever of national treatment or MFN treatment is the most favorable. This is defined by the Treaty as “national and MFN treatment.” Paragraph 1 explicitly states that the national and MFN treatment obligation will extend to state enterprises in their provision of goods and services to covered investments.

Paragraph 3 sets out a minimum standard of treatment based on standards found in customary international law. The obligations to accord “fair and equitable treatment” and “full protection and security” are explicitly cited, as is each Party’s obligation not to impair, through unreasonable and discriminatory means, the management, conduct, operation, and sale or other disposition of covered investments. The general reference to international law also implicitly incorporates other fundamental rules of customary international law regarding the treatment of foreign investment. However, this provision does not incorporate obligations based on other international agreements.

Paragraph 4 requires that each Party provide effective means of asserting claims and enforcing rights with respect to covered investments.

Paragraph 5 ensures that transparency of each Party’s regulation of covered investments.

Article 3 (Expropriation)

Article 3 incorporates into the Treaty customary international law standards for expropriation. Article 3 also includes detailed provisions regarding the computation and payment of prompt, adequate, and effective compensation. Paragraph 1 describes the obligations of the Parties with respect to expropriation and nationalization of a covered investment. These obligations apply to both direct expropriation and indirect expropriation through measures “tantamount to expropriation or nationalization” and thus apply to “creeping expropriations”—a series of measures that effectively amounts to an expropriation of a covered investment without taking title.

Paragraphs 2, 3, and 4 more fully describe the meaning of “prompt, adequate and effective compensation.” The guiding principle is that the investor should be made whole.

Article 4 (Compensation for Damages Due to War and Similar Events)

Paragraph 1 entitles investments covered by the Treaty to national and MFN treatment with respect to any measure relating to losses suffered to a party’s territory owing to war or other armed conflict, civil disturbances, or similar events. Paragraph 2, by contrast, creates an unconditional obligation to pay compensation for such losses when the losses result from requisitioning or from destruction not required by the necessity of the situation.

Article 5 (Transfers)

Article 5 protects investors from certain government exchange controls that limit current and capital account transfers, as well as limits on inward transfers made by screening authorities and, in certain circumstances, limits on returns in kind.

In paragraph 1, each Party agrees to permit all transfers relating to a covered investment to be made freely and without delay into and out of its territory.” Paragraph 1 also provides a list of transfers that must be allowed. The list is non-exclusive, and is intended to protect flows to both affiliated and non-affiliated entities.

Paragraph 2 provides that each Party must permit transfers to be made in a “freely usable currency” at the market rate of exchange prevailing on the date of transfer. “Freely usable” is a term used by the International Monetary Fund; at present there are five “freely usable” currencies: the U.S. dollar, Japanese yen, German mark, French franc, and British pound sterling.

Paragraph 4 recognizes that, notwithstanding the obligations of paragraphs 1 through 3, a Party may prevent a transfer through the equitable, non-discriminatory, and good faith application of laws relating to bankruptcy, insolvency, or the protection of the rights of creditors; securities; criminal or penal offenses; or ensuring compliance with orders or judgments in adjudicatory proceedings.

Article 6 (Performance Requirements)

Article 6 prohibits either Party from mandating or enforcing specified performance requirements as a condition for the establishment, acquisition, expansion, management, conduct, or operation of a covered investment. This prohibition includes, but is not limited to, imposition of any of the specified performance requirements by means of a commitment or undertaking in connection with the receipt of a governmental permission or authorization. The list of prohibited requirements is exhaustive and covers domestic content requirements and domestic purchase preferences, the “balancing” of imports or sales in relation to exports or foreign exchange earnings, requirements to export products or services, technology transfer requirements, and requirements relating to the conduct of research and development in the host country. Such requirements are major burdens on investors and impair their competitiveness.

The last sentence of Article 6 makes clear that a Party may, however, impose conditions for the receipt or continued receipt of benefits and incentives.

Article 7 (Entry, Sojourn, and Employment of Aliens)

Paragraph 1 requires each Party to allow, subject to its laws relating to the entry and sojourn of aliens, the entry into its territory of the other Party’s nationals for certain purposes related to a covered investment and involving the commitment of a “substantial amount of capital.” This paragraph serves to render nationals of Bahrain eligible for treaty-investor visas under U.S. immigration law. It also affords similar treatment for U.S. nationals entering Bahrain. The requirement to commit a “substantial amount of capital” is intended to prevent abuse of treaty-investor status; it parallels the requirements of U.S. immigration law.

In addition, paragraph 1(b) prohibits labor certification requirements and numerical restrictions on the entry of treaty- investors.

Paragraph 2 requires that each Party allow covered investments to engage top managerial personnel of their choice, regardless of nationality. This provision does not require that such personnel be granted entry into a Party’s territory. Such persons must independently qualify for an appropriate visa for entry into the territory of the other party. Nor does this provision create an exception to U.S. equal employment opportunity laws.

Article 8 (State-State Consultations)

Article 8 provides for prompt consultation between the Parties, at either Party’s request, on any matter relating to the interpretation or application of the Treaty or to the realization of the Treaty’s objectives. A Party may thus request consultations for any matter reasonably related to the encouragement or protection of covered investment, whether or not a Party is alleging a violation of the Treaty.

Article 9 (Settlement of Disputes Between One Party and a National or Company of the Other Party)

Article 9 sets forth several means by which disputes brought against a Party by an investor (specifically, a national or company of the other Party) may be resolved.

Article 9 procedures apply to an “investment dispute,” which is any dispute arising out of or relating to an investment authorization, an investment agreement, or an alleged breach of rights conferred, created, or recognized by the Treaty with respect to a covered investment.

In the event that an investment dispute cannot be settled amicably, paragraph 2 gives an investor an exclusive (with the exception in paragraph 3(b) concerning injunctive relief, explained below) choice among three options to settle the dispute. These three options are: (1) submitting the dispute or the courts or administrative tribunals of the Party that is a party to the dispute; (2) invoking dispute—resolution procedures previously agreed upon by the national or company and the host country government; or (3) invoking the dispute- resolution mechanisms identified in paragraph 3 of Article 9.

Under paragraph 3(a), the investor can submit an investment dispute to binding arbitration 90 days after the dispute arises, provided that the investor has not submitted the claim to a court or administrative tribunal of the Party or invoked a dispute resolution procedure previously agreed upon. The investor may choose among the International Centre for Settlement of Investment Disputes (ICSID) (Convention Arbitration), the Additional Facility of ICSID (if Convention Arbitration is not available), ad hoc arbitration using the Arbitration Rules of the United Nations Commission on International Trade Law (UNCITRAL), or any other arbitral institution or rules agreed upon by both parties to the dispute.

Before or during such arbitral proceedings, however, paragraph 3(b) provides that an investor may seek, without affecting its right to pursue arbitration under this Treaty, interim injunctive relief not involving the payment of damages from local courts or administrative tribunals of the Party that is a party to the dispute for the preservation of its rights and interests. This paragraph does not alter the power of the arbitral tribunals to recommend or order interim measures they may deem appropriate.

Paragraph 4 constitutes each Party’s consent to the submission of investment disputes to binding arbitration in accordance with the choice of the investor.

The Federal Arbitration Act (9 U.S.C. 1 et seq.) satisfies the requirement for the enforcement of non-ICSID Convention awards in the United States. The Convention on the Settlement of Investment Disputes Act of 1966 (22 U.S.C. 1650-1650a) provides for the enforcement of ICSID awards.

Article 10 (Settlement of Disputes Between the Parties)

Article 10 provides for binding arbitration of Disputes between the United States and Bahrain concerning the interpretation or application of the Treaty that are not resolved through consultations or other diplomatic channels. The article specifies various procedural aspects of such arbitration proceedings, including time periods, selection of arbitrators, and distribution of arbitration costs between the Parties. The article constitutes each Party’s prior consent to such arbitration.

Article 11 (Preservation of Rights)

Article 11 clarifies that the Treaty does not derogate from any obligation a Party might have to provide better treatment to the covered investment than is specified in the Treaty. Thus, the Treaty establishes a floor for the treatment of covered investments. A covered investment may be entitled to more favorable treatment through domestic legislation, other international legal obligations, or a specific obligation (e.g., to provide a tax holiday) assumed by a Party with respect to that covered investment.

Article 12 (Denial of Benefits)

Article 12(a) preserves the right of each Party to deny the benefits of the Treaty to a company owned or controlled by nationals of a non-Party country with which the denying Party does not have normal economic relations, e.g., a country to which it is applying economic sanctions. For example, at this time the United States does not maintain normal economic relations with, among other countries, Cuba and Libya.

Article 12(b) permits each Party to deny the benefits of the Treaty to a company of the other Party if the company is owned or controlled by non-Party nationals and if the company has no substantial business activities in the Party where it is established. Thus, the United States could deny benefits to a company that is a subsidiary of a shell company organized under the laws of Bahrain if controlled by nationals of a third country. However, this provision would not generally permit the United States to deny benefits to a company of Bahrain that maintains its central administration or principal place of business in the territory of, or has a real and continuous link with, Bahrain.

Article 13 (Taxation)

Article 13 excludes tax matters generally from the coverage of the BIT, on the basis that tax matters should be dealt with in bilateral tax treaties. However, Article 13 does not preclude a national or company from bringing claims under Article 9 that taxation provisions in an investment agreement or authorization have been violated. In addition, the dispute settlement provisions of Articles 9 and 10 apply to tax matters in relation to alleged violations of the BIT’s expropriation article.

Under paragraph 2, a national or company that asserts in a dispute that a tax matter involves expropriation may submit that dispute to arbitration pursuant to Article 9(3) only if (1) the investor has first referred to the competent tax authorities of both Parties the issue of whether the tax matter involves an expropriation, and (2) the tax authorities have not both determined, within 9 months from the time of referral, that the matter does not involve an expropriation. The “competent tax authority” of the United States is the Assistant Secretary of the Treasury for Tax Policy, who will make such a determination only after consultation with the Inter-Agency Staff Coordinating Group on Expropriations.

Article 14 (Measures Not Precluded)

The first paragraph of Article 14 reserves the right of a Party to take measures that it considers necessary for the fulfillment of its international obligations with respect to maintenance or restoration of international peace or security, as well as those measures it regards as necessary for the protection of its own essential security interests.

International obligations with respect to maintenance or restoration of peace or security would include, for example, obligations arising out of Chapter VII of the United Nations Charter. Measures permitted by the provision on the protection of a Party’s essential security interests would include security-related actions taken in time of war or national emergency. Actions not arising from a state of war or national emergency must have a clear and direct relationship to the essential security interests of the Party involved. This Treaty makes explicit the implicit understanding that measures to protect a Party’s essential security interests are self-judging in nature, although each Party would expect the provisions to be applied by the other in good faith.

Article 15 (Application to Political Subdivisions and State Enterprises of the Parties)

Paragraph 1(a) makes clear that the obligations of the Treaty are applicable to all political subdivisions of the Parties, such as provincial, State, and local governments.

Article 16 (Entry Into Force, Duration, and Termination)

Paragraph 1 stipulates that the Treaty enters into force 30 days after exchange of instruments of ratification. The Treaty remains in force for a period of 10 years and continues in force thereafter unless terminated by either Party as provided in paragraph 2. Paragraph 2 permits a Party to terminate the Treaty at the end of the initial 10 year period, or at any later time, by giving 1 year’s written notice to the other Party. Paragraph 1 also provides that the Treaty applies to covered investments existing at the time of entry into force as well as to those established or acquired thereafter. The Treaty does not state an intention by the Parties to apply the Treaty’s provisions retroactively. Thus, under customary international law, the Treaty does not apply to disputes with respect to acts or facts which took place before the Treaty came into force or to any situation which ceased to exist before the date of entry into force of the Treaty.

Paragraph 4 stipulates that the Annex shall form an integral part of the Treaty.

Paragraph 5 states that all dates and periods mentioned in the Treaty are reckoned according to the Gregorian calendar. The final clause of the Treaty provides that the English and Arabic language texts are each authentic; however, in the event of divergence, the English text will prevail. Bahrain requested that the English text prevail in the event of divergence, in recognition of the widespread use of the English language in international commercial transactions in Bahrain.

Annex

U.S. bilateral investment treaties allow for exceptions to national and MFN treatment, where the Parties’ domestic regimes do not afford national and MFN treatment, or where treatment in certain sectors or matters is negotiated in and governed by other agreements. Future derogations from the national treatment obligations of the Treaty are generally permitted only in the sectors or matters listed in the Annex, pursuant to Article 2(2), and must be made on an MFN basis unless otherwise specified therein.

Under a number of statutes, many of which have a long historical background, the U.S. federal government or States may not necessarily treat investments of nationals or companies of Bahrain as they do U.S. investments or investments from a third country. Paragraphs 1 and 2 of the Annex list the sectors or matters subject to U.S. exceptions.

The U.S. exceptions from its national treatment obligation are: atomic energy; customhouse brokers; licenses for broadcast, common carrier, or aeronautical radio stations; COMSAT; subsidies or grants, including but not limited to, government-supported loans, guarantees, and insurance; State and local measures exempt from Article 1102 of the North American Free Trade Agreement pursuant to Article 1108 thereof; and landing of submarine cables.

The U.S. exceptions from its national and MFN treatment obligations are: fisheries; air and maritime transport, and related activities; banking, insurance, securities, and other financial services; and one-way satellite transmissions of Direct-to-Home (DTH) and Direct Broadcasting Satellite (DBS) television services and of digital audio services.

Paragraph 3 of the Annex lists Bahrain’s exceptions from its national treatment obligation, which are: ownership or control of television and radio broadcasting and other forms of mass media; fisheries; and initial privatization of exploration or drilling for crude oil.

Paragraph 4 of the Annex lists Bahrain’s exceptions from its national and MFN treatment obligation, which are: air transportation; purchase or ownership of land; and until January 1, 2005, purchase or ownership of shares quoted on the Bahrain Stock Exchange.

Paragraph 5 of the Annex ensures that national treatment is granted by each Party in all leasing of minerals or pipeline rights-of-way on government lands. In so doing, this provision affects the implementation of the Minerals Lands Leasing Act (MLLA) (30 U.S.C. 181 et seq.) and 10 U.S.C. 7435, regarding Naval Petroleum Reserves, with respect to nationals and companies of Bahrain. The Treaty provides for resort to binding international arbitration to resolve disputes, rather than denial of mineral rights or rights to naval petroleum shares to investors of the other Party, as is the current process under the statute. U.S. domestic remedies, would, however, remain available for use in conjunction with the Treaty’s provisions.

The MLLA and 10 U.S.C. 7435 direct that a foreign investor be denied access to leases for minerals on on-shore federal lands, leases of land within the Naval Petroleum and Oil Shale Reserves, and rights-of-way for oil or gas pipelines across on- shore federal lands, if U.S. investors are denied access to similar or like privileges in the foreign country.

Bahrain’s extension of national treatment in these sectors will fully meet the objectives of the MLLA and 10 U.S.C. 7435. Bahrain was informed during negotiations that, were it to include this sector in its list of treatment exemptions, the United States would (consistent with the MLLA and 10 U.S.C. 7435) exclude the leasing of minerals or pipeline rights-of-way on Government lands from the national and MFN treatment obligations of this Treaty.

The listing of a sector or matter in the Annex does not necessarily signify that domestic laws have entirely reserved it for nationals. And, pursuant to Article 2(2), any additional restrictions or limitations that a Party may adopt with respect to listed sectors or matters may not compel the divestiture of existing covered investments.

Finally, listing a sector or matter in the Annex exempts a Party only from the obligation to accord national or MFN treatment. Both parties are obligated to accord to covered investments in all sectors—even those listed in the Annex—all other rights conferred by the Treaty.

The other U.S. Government agencies that participated in negotiating the Treaty join me in recommending that it be transmitted to the Senate at an early date.

Respectfully submitted,

MADELINE ALBRIGHT.

TREATY BETWEEN

THE GOVERNMENT OF THE UNITED STATES OF AMERICA AND

THE GOVERNMENT OF THE STATE OF BAHRAIN

CONCERNING THE ENCOURAGEMENT

AND RECIPROCAL PROTECTION OF INVESTMENT

The Government of the United States of America and the Government of the State of Bahrain (hereinafter the “Parties”);

Desiring to promote greater economic cooperation between them, with respect to investment by nationals and companies of one Party in the territory of the other Party;

Recognizing that agreement upon the treatment to be accorded such investment will stimulate the flow of private capital and the economic development of the Parties;

Agreeing that a stable framework for investment will maximize effective utilization of economic resources and improve living standards;

Recognizing that the development of economic and business ties can promote respect for internationally recognized worker rights;

Agreeing that these objectives can be achieved without relaxing health, safety and environmental measures of general application; and

Having resolved to conclude a Treaty concerning the encouragement and reciprocal protection of investment;

Have agreed as follows:

ARTICLE I

For the purposes of this Treaty,

(a) “company” means any entity constituted or organized under applicable law, whether or not for profit, and whether privately or governmentally owned or controlled, and includes, but is not limited to, a corporation, trust, partnership, sole proprietorship, branch, joint venture, association, or other organization;

(b) “company of a Party” means a company constituted or organized under the laws of that Party;

(d) “investment” of a national or company means every kind of investment owned or controlled directly or indirectly by that national or company, and includes, but is not limited to, investment consisting or taking the form of:

(1) a company;

(2) shares, stock, and other forms of equity participation, and bonds, debentures, and other forms of debt interests, in a company;

(3) contractual rights, such as under turnkey, construction or management contracts, production or revenue-sharing contracts, concessions, or other similar contracts;

(4) moveable and immovable property; and intangible property, including, but not limited to, rights, such as leases, mortgages, liens and pledges;

(5) intellectual property, including, but not limited to:

copyrights and related rights,

patents,

rights in plant varieties,

industrial designs,

rights in semiconductor layout designs,

trade secrets, including, but not limited to, know-how and confidential business information,

trade and service marks, and

trade names; and

(6) rights conferred pursuant to law, such as licenses and permits;

(e) “covered investment” means an investment of a national or company of a Party in the territory of the other Party;

(f) “state enterprise” means a company owned, or controlled through ownership interests, by a Party;

(g) “investment authorization” means an authorization granted by the foreign investment authority of a Party to a covered investment or a national or company of the other Party;

(h) “investment agreement” means a written agreement between the national authorities of a Party and a covered investment or a national or company of the other Party that (1) grants rights with respect to natural resources or other assets controlled by the national authorities and (2) the investment, national or company relies upon in establishing or acquiring a covered investment;

(i) “ICSID Convention” means the Convention on the Settlement of Investment Disputes between States and Nationals of Other States, done at Washington, March 18, 1965;

(j) “Centre” means the International Centre for Settlement of Investment Disputes Established by the ICSID Convention; and

(k) “UNCITRAL Arbitration Rules” means the arbitration rules of the United Nations Commission on International Trade Law.

ARTICLE 2

its territory of its own nationals or companies (hereinafter “national treatment”) or to investments in its territory of nationals or companies of a third country (hereinafter “most favored nation treatment”), whichever is most favorable (hereinafter “national and most favored nation treatment”). Each Party shall ensure that its state enterprises, in the provision of their goods or services, accord national and most favored nation treatment to covered investments.

(b) Neither Party shall in any way impair by unreasonable and discriminatory measures the management, conduct, operation, and sale or other disposition of covered investments.

4. Each Party shall provide effective means of asserting claims and enforcing rights with respect to covered investments.

ARTICLE 3

expropriation until the date of payment.

4. If the fair market value is denominated in a currency that is not freely usable, the compensation paid—converted into the currency of payment at the market rate of exchange prevailing on the date of payment—shall be no less than:

(a) the fair market value on the date of expropriation, converted into a freely usable currency at the market rate of exchange prevailing on that date, plus

(b) interest, at a commercially reasonable rate for that freely usable currency, accrued from the date of expropriation until the date of payment.

ARTICLE 4

2. Each Party shall accord restitution, or pay compensation in accordance with paragraphs 2 through 4 of Article 3, in the event that covered investments suffer losses in its territory, owing to war or other armed conflict, revolution, state of national

emergency, insurrection, civil disturbance, or similar events, that result from:

(a) requisitioning of all or part of such investments by the Party’s forces or authorities, or

(b) destruction of all or part of such investments by the Party’s forces or authorities that was not required by the necessity of the situation.

ARTICLE 5

1. Each Party shall permit all transfers relating to a covered investment to be made freely and without delay into and out of its territory. Such transfers include, but are not limited to:

(a) contributions to capital;

(b) profits, dividends, capital gains, and proceeds from the sale of all or any part of the investment or from the partial or complete liquidation of the investment;

(d) payments made under a contract, including, but not limited to, a loan agreement; and

(e) compensation pursuant to Articles 3 and 4, and payments arising out of an investment dispute.

2. Each Party shall permit transfers to be made in a freely usable currency at the market rate of exchange prevailing on the date of transfer.

4. Notwithstanding paragraphs 1 through 3, a Party may prevent a transfer through the equitable, non-discriminatory and good faith application of its laws relating to:

(a) bankruptcy, insolvency or the protection of the rights of creditors;

(b) issuing, trading or dealing in securities;

(d) ensuring compliance with orders or judgments in adjudicatory proceedings.

ARTICLE 6

Neither Party shall mandate or enforce, as a condition for the establishment, acquisition, expansion, management, conduct or operation of a covered investment, any requirement (including, but not limited to, any commitment or undertaking in connection with the receipt of a governmental permission or authorization):

(a) to achieve a particular level or percentage of local content, or to purchase, use or otherwise give a preference to products or services of domestic origin or from any domestic source;

(b) to limit imports by the investment of products or services in relation to a particular volume or value of production, exports or foreign exchange earnings;

(c) to export a particular type, level or percentage of products or services, either generally or to a specific market region;

(d) to limit sales by the investment of products or services in the Party’s territory in relation to a particular volume or value of production, exports or foreign exchange earnings;

(f) to carry out a particular type, level or percentage of research and development in the Party’s territory.

Such requirements do not include conditions for the receipt or continued receipt of an advantage.

ARTICLE 7

(b) Neither Party shall, in granting entry under paragraph 1 (a), require a labor certification test or other procedures of similar effect, or apply any numerical restriction.

2. Each Party shall permit covered investments to engage top managerial personnel of their choice, regardless of nationality.

ARTICLE 8

ARTICLE 9

2. A national or company that is a party to an investment dispute may submit the dispute for resolution under one of the following alternatives:

(a) to the courts or administrative tribunals of the Party that is a party to the dispute; or

(b) in accordance with any applicable, previously agreed dispute-settlement procedures; or

3. (a) Provided that the national or company concerned has not submitted the dispute for resolution under paragraph 2 (a) or (b), and that ninety days have elapsed from the date on which the dispute arose, the national or company concerned may submit the

dispute for settlement by binding arbitration:

(1) to the Centre, if the Centre is available; or

(2) to the Additional Facility of the Centre, if the Centre is not available; or

(3) in accordance with the UNCITRAL Arbitration Rules; or

(4) if agreed by both parties to the dispute, to any other arbitration institution or in accordance with any other arbitration rules.

(b) A national or company, notwithstanding that it may have submitted a dispute to binding arbitration under paragraph 3 (a), may seek interim injunctive relief, not involving the payment of damages, before the judicial or administrative tribunals of the Party that is a party to the dispute, prior to the institution of the arbitral proceeding or during the proceeding, for the preservation of its rights and interests.

4. Each Party hereby consents to the submission of any investment dispute for settlement by binding arbitration in accordance with the choice of the national or company under paragraph 3 (a) (1), (2), and (3) or the mutual agreement of both parties to the dispute under paragraph 3 (a) (4). This consent and the submission of the dispute by a national or company under paragraph 3 (a) shall satisfy the requirement of:

(a) Chapter II of the ICSID Convention (Jurisdiction of the Centre) and the Additional Facility Rules for written consent of the parties to the dispute; and

(b) Article II of the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards, done at New York, June 10, 1958, for an “agreement in writing.”

5. Any arbitration under paragraph 3 (a) (2), (3) or (4) shall be held in a state that is a party to the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards, done at New York, June 10, 1958.

8. For purposes of Article 25 (2) (b) of the ICSID Convention and this Article, a company of a Party that, immediately before the occurrence of the event or events giving rise to an investment dispute, was a covered investment, shall be treated as a company of the other Party.

ARTICLE 10

ARTICLE 11

This Treaty shall not derogate from any of the following that entitle covered investments to treatment more favorable than that accorded by this Treaty:

(a) laws and regulations, administrative practices or procedures, or administrative or adjudicatory decisions of a Party;

(b) international legal obligations; or

(c) obligations assumed by a Party, including, but not limited to, those contained in an investment authorization or an investment agreement.

ARTICLE 12

Each Party reserves the right to deny to a company of the other Party the benefits of this Treaty if nationals of a third country own or control the company and

(a) the denying Party does not maintain normal economic relations with the third country; or

(b) the company has no substantial business activities in the territory of the Party under whose laws it is constituted or organized.

ARTICLE 13

1. No provision of this Treaty shall impose obligations with respect to tax matters, except that:

(a) Articles 3, 9 and 10 will apply with respect to expropriation; and

(b) Article 9 will apply with respect to an investment agreement or an investment authorization.

2. With respect to the application of Article 3, an investor that asserts that a tax measure involves an expropriation may submit that dispute to arbitration pursuant to Article 9, paragraph 3, provided that the investor concerned has first referred to the competent tax authorities of both Parties the issue of whether that tax measure involves an expropriation.

3. However, the investor cannot submit the dispute to arbitration if, within nine months after the date of referral, the competent tax authorities of both Parties determine that the tax measure does not involve an expropriation.

ARTICLE 14

1. This Treaty shall not preclude a Party from applying measures which it considers necessary for the fulfillment of its obligations with respect to the maintenance or restoration of international peace or security, or the protection of its own essential security interests.

ARTICLE 15

1. (a) The obligations of this Treaty shall apply to the political subdivisions of the Parties.

2. A Party’s obligations under this Treaty shall apply to a state enterprise in the exercise of any regulatory, administrative or other governmental authority delegated to it by that Party.

ARTICLE 16

2. A Party may terminate this Treaty at the end of the initial ten year period or at any time thereafter by giving one year’s written notice to the other Party.

3. For ten years from the date of termination, all other Articles shall continue to apply to covered investments established or acquired prior to the date of termination, except insofar as those Articles extend to the establishment or acquisition of covered

investments.

4. The Annex shall form an integral part of the Treaty.

5. All dates and periods mentioned in this Treaty shall be reckoned according to the Gregorian calendar.

IN WITNESS WHEREOF, the respective plenipotentiaries have signed this Treaty.

DONE at Washington, this twenty-ninth day of September, 1999, in duplicate in the English and Arabic languages, each text being authentic; however, in the case of divergence, the English text shall prevail.

FOR THE GOVERNMENT OF FOR THE GOVERNMENT OF

THE UNITED STATES THE STATE OF BAHRAIN:

OF AMERICA:

[signature] [signature]

APPENDICES:

ANNEX

atomic energy; customhouse brokers; licenses for broadcast, common carrier, or aeronautical radio stations; COMSAT; subsidies or grants, including, but not limited to, government-supported loans, guarantees and insurance; state and local measures exempt from Article 1102 of the North American Free Trade Agreement pursuant to

Article 1108 thereof; and landing of submarine cables.

Most favored nation treatment shall be accorded in the sectors and matters indicated above.

fisheries; air and maritime transport, and related activities; banking, insurance, securities, and other financial services; and one-way satellite transmissions of direct-to-home (DTH) and direct broadcast satellite (DBS) television services and of digital audio services.

3. The Government of the State of Bahrain may adopt or maintain exceptions to the obligation to accord national treatment to covered investments in the sectors or with respect to the matters specified below:

ownership or control of television and radio broadcasting and other forms of mass media; fisheries; initial privatization of exploration or drilling for crude oil.

Most favored nation treatment shall be accorded in the sectors and matters indicated above.

4. The Government of the State of Bahrain may adopt or maintain exceptions to the obligation to accord national and most favored nation treatment to covered investments in the sectors or with respect to the matters specified below:

air transportation; purchase or ownership of land; and until 1 January 2005, purchase or ownership of shares quoted on the Bahrain Stock Exchange.

5. Each Party agrees to accord national treatment to covered investments in the following sectors:

leasing of minerals and pipeline rights-of-way on government lands.

End of tab panel

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Bangladesh Bilateral Investment Treaty

Signed March 12, 1986; Entered into Force July 25, 1989

99TH SENATE 1st Session

{Treaty Doc.99-23 Congress}

INVESTMENT TREATY WITH BANGLADESH

THE PRESIDENT OF THE UNITED STATES

Transmitting

THE TREATY BETWEEN THE UNITED STATES OF AMERICA AND THE PEOPLE’S REPUBLIC OF BANGLADESH CONCERNING THE RECIPROCAL ENCOURAGEMENT AND PROTECTION OF INVESTMENT, SIGNED AT WASHINGTON ON MARCH 12 ,1986

June 2, 1986.-Treaty was read the first time and, together with the accompanying papers, referred to the Committee on Foreign Relations and ordered to be printed for the use of the Senate

U.S. GOVERNMENT PRINTING OFFICE

WASHINGTON : 1986

LETTER OF TRANSMITTAL

THE WHITE HOUSE, May 30, 1986.

To the Senate of the United States:

With a view to receiving the advice and consent of the Senate to ratification, I transmit herewith the Treaty Between the United States of America and the People’s Republic of Bangladesh Concerning the Reciprocal Encouragement and Protection of Investment, with Protocol and related exchange of letters, signed at Washington on March 12, 1986. I transmit also, for the information of the Senate is the report of the Department of State with respect to this Treaty.

The Bilateral Investment Treaty (BIT) program; initiated in 1981, is designated to encourage and protect- U.S. investment in developing countries. This Treaty is an integral part to encourage Bangladesh and other governments to adopt macroeconomic and structural policies that will promote economic growth. It is also fully consistent with U.S. policy toward international investment. That policy holds that an open international investment system in which participants respond to market forces provides the best and most efficient mechanism to promote global economic development A specific tenet, reflected in this treaty, is that U.S. direct investment abroad and foreign investment in the United States should receive fair, equitable, and non-discriminatory treatment. Under this treaty, the parties also agree to international law standards for expropriation and compensation; free financial transfers; and procedures, including international arbitration, for the settlement of investment disputes.

I recommend that the Senate consider this Treaty as soon as possible, and give its advice and consent to ratification of the Treaty, with Protocol and related exchange of letters, at an early date.

RONALD REAGAN.

LETTER OF SUBMITTAL

DEPARTMENT OF STATE,

Washington, May 9, 1986.

The PRESIDENT,

The White House.

THE PRESIDENT: I have the honor to submit to you the Treaty Between the United States of America and the People’s Republic of Bangladesh Concerning the Reciprocal Encouragement and Protection of Investment, with Protocol and a related exchange of letters, signed at Washington on March 12, 1986. This treaty was negotiated under the bilateral investment treaty (BIT) program which you initiated in 1981. Development of the BIT program and the negotiation of the individual treaties have been pursued by the Office of the United States Trade Representative and the Department of State with the active participation of the Departments of Commerce and Treasury, in conjunction with other interested U.S. Government agencies. On March 25 this year, the first six BITs-with Haiti, Morocco, Panama, Senegal, Turkey, and Zaire-were submitted to the Senate for its advice and consent to ratification. Additional BITs with Cameroon and Egypt, are being prepared for submission to the Senate. I recommend that this treaty, with protocol and related exchange of letters, be transmitted to the Senate for its advice and consent to ratification.

In 1981 you initiated the global bilateral investment treaty (BIT) program to encourage and protect U.S. investment in developing countries. By providing certain mutual guarantees and protections, a BIT creates a more stable and predictable legal framework for foreign investors in the territory of each of the treaty Parties. The negotiation of a series of bilateral treaties with interested countries establishes greater international discipline in the investment area. The BIT’s which have been signed as well as others under negotiation are an integral part of U.S. efforts to encourage other governments to adopt macroeconomic and structural policies that will promote economic growth. They are also fully consistent with your policy statement on international investment of September 9, 1983, which states that international direct investment flows should be determined by private market forces and should receive fair, equitable and non-discriminatory treatment.

Our experience to date has shown that interested countries are willing to provide U.S. investors with significant investment guarantees and assurances as a way of inducing additional foreign investment. It is U.S. policy to advise potential treaty partners that conclusion of a BIT with the United States is an important and favorable factor in the investment relationship, but does not in of itself result in immediate increases in U.S. investment flows.

Congressional support for the BIT program is reflected in Section 601(a) and (b) of the Foreign Assistance Act, as amended, in particular at Section 601(b) which provides:

In order to encourage and facilitate participation by private enterprise to the maximum extent practicable in achieving any of the purposes of this Act, the President shall…(3) accelerate a program of negotiating treaties for commerce and trade, including tax treaties, which shall include provisions to encourage and facilitate the flow of private investment to, and its equitable investment in, friendly countries and areas participating in programs under this Act.

BIT’s are consistent in purpose with the network of treaties of Friendship, Commerce and Navigation (FCNs) which the United States negotiated from the early years of the Republic until the last successful negotiations with Thailand and Togo in the late 1960’s. They continue the U.S. policy of securing by agreement standards of equitable treatment and protection of U.S. citizens carrying on business abroad, and institutionalizing processes for the settlement of disputes between investors and host countries, and between governments. We expect that a series of bilateral treaties with interested countries will establish greater international discipline in the investment area.

The BIT was designed to protect investment not only by treaty but also by reinforcing traditional international legal principles and practice regarding foreign direct private investment. In pursuit of this objective, the model BIT adopts FCN language and concepts. Traditional FCN provisions granting rights which are not important to the typical U.S. investor were eliminated and replaced with more specific language concerning investment protection. Perhaps most significantly, the BIT goes beyond the traditional FCN to provide investor-host country arbitration in instances where an investment dispute arises.

Our BIT approach followed similar programs that had been undertaken with considerable success by a number of European counties, including the Federal Republic of Germany and the United Kingdom, since the early 1960s. Indeed, our industrialized partners already have nearly two hundred BITs in force, primarily with developing countries. Our treaties, which draw upon language used in the U.S. FCN treaties as well as European counterparts, are more comprehensive and far-reaching than European BITs.

THE U.S.-BANGLADESH TREATY

The Treaty with Bangladesh was negotiated by an inter-agency team led by officials from the Office of the United States Trade Representative and the Department of State. The Treaty satisfies all four main BIT objectives:

-foreign investors are to be accorded treatment in accordance with international law and are to be treated no less favorable than investors of the host country or no less favorably than investors of third countries, whichever is the most favorable treatment (“national” or “most-favored-nation” treatment) subject to certain specified exemptions;

-international law standards shall apply to the expropriation of investments and to the payment of compensation for expropriation;

-free transfers shall be afforded to funds associated with an investment into and out of the host country; and

-procedures are to be established which allow an investor to take a dispute with a Party directly to binding third-party arbitration.

The provisions on treatment of foreign investment and arbitration, and in particular Bangladesh’s acceptance of international law as the governing law, mark an important achievement for the BIT program and our investment and international arbitration policies.

A technical memorandum explaining in detail the provisions of this treaty will be transmitted separately to the Senate Committee on Foreign Relations. That technical memorandum explains, clause by clause, the provisions of the treaty with Bangladesh.

Some provisions of the treaty with Bangladesh differ in minor respects from the U.S. model text. In general, however, the treaty closely follows the language contained in the U.S. model text, the most significant provisions of which are as follows.

The model BIT’s definition section clarified terms such as “company of a Party” and ;”investment”; The BIT concept of “investment” is broad and designed to be flexible; although numerous types of economic interests are enumerated, the intent is to include all legitimate interests in the territory of either Party, whether directly or indirectly controlled by nationals of the other, having economic value or “associated” with an investment. Protected “companies of a Party” are those incorporated or otherwise organized under the laws of a Party in which nationals of that Party have a substantial interest.

The model BIT accords the better of national or most-favored-nation (MFN) treatment of foreign investment, subject to each Party’s exceptions which are listed in a separate Annex. The exceptions are designed to protect state regulatory interests and for the United States to accommodate the derogations from national treatment in state or federal law relating to such areas as air transport, shipping, banking, telecommunications, energy and power production, insurance, and from national and MFN treatment in the case of ownership of real property. Any additional restrictions or limitations which a Party may adopt with respect to those matters or sectors excepted from the standards are not to affect existing investments. The BIT also includes general treatment protections designed to be a guide to interpretation and application of the treaty. Thus, the Parties agree to accord investments “fair and equitable treatment” and “full protection and security” in no case “less than that required by international law.” It specifically grants nationals of a Party the right to establish investments in the territory of the other Party, restricts the right to impose performance requirements, and obliges Parties to observe their contractual obligations with investors. The U.S. model also provides that companies legally constituted under the laws of the other Party (i.e., subsidiaries of companies of a Party) with investments in that country shall be permitted to engage “top managerial personnel of their choice, regardless of nationality.”

The model BIT also confers protection from unlawful interference with property interests and assures compensation in accordance with international law standards. It provides that any direct or indirect taking must be: for a public purpose; nondiscriminatory; accompanied by the payment of prompt, adequate and effective compensation; and in accordance with due process of law and the general standards of treatment discussed above. The BIT’s definition of “expropriation” is broad and flexible; essentially “any measure” regardless of form, which has the effect of depriving an investor of his management, control or economic value in a project may constitute an expropriation requiring compensation equal to the “fair market value.” Such compensation, which shall not reflect any reduction in such fair market value due to… the expropriatory action,: must be “without delay,” “effectively realizable,” “freely transferable” and “bear current interest from the date of the expropriation …” The BIT grants the right to “prompt review” by the relevant judicial or administrative authorities in order to determine whether the compensation offered is consistent with these principles. It also extends national and MFN treatment to investors in cases of loss due to war or other civil disturbance. The BIT does not provide, however, a specific valuation method for compensating such losses.

The model BIT provides for free transfers “related to an investment”, specifically of returns, compensation for expropriation, contract payments, proceeds from sale, and contributions to capital for maintenance or development of an investment. Such transfers are to be made in a “freely convertible currency at the prevailing market rate of exchange on the date of transfer with respect to spot transactions in the currency to be transferred.” The model text recognizes that notwithstanding this guarantee, Parties can maintain certain laws and regulations regarding transfers provided these are applied in a non-discriminatory fashion. In particular, the model text provides that Parties can require reports of currency transfers and impose income taxes by such means as a withholding tax on dividends. The model text also recognizes that Parties retain the right to protect the rights of creditors and ensure the satisfaction of judgments in adjudicatory proceedings.

The model BIT provides that where certain defined investment disputes arise between a Party and a national or company of the other party, including disputes as to the interpretation of an investment agreement, and the dispute cannot be solved through negotiation, it may be submitted to arbitration in accordance with any dispute-settlement procedures to which the national or company and the host country have previously agreed. Unless the national or company has submitted the dispute to previously agreed dispute settlement procedures or to adjudication by domestic courts or other tribunals of the host country, the national or company may submit the dispute to the International Centre for the Settlement of Investment Disputes (“ICSID”) for binding arbitration. Exhaustion of local remedies is not required. In a separate provision, the BIT Parties also agree to grant nationals and companies of the other Party access to their domestic courts in order to assert claims and enforce rights with respect to investment.

The model BIT provides for state-to-state arbitration between the Parties in case of a dispute regarding the interpretation or application of the treaty. In the absence of an agreement that other rules apply, the BIT refers the Parties to specific procedural rules which must govern the arbitration. The BIT also outlines the procedures for the creation of the arbitral panel. The model BIT exhorts Parties to apply their tax policies fairly and equitably, Because the United States specifically addresses tax matters in tax treaties, the BIT generally excludes such matters. Another BIT provision exempts disputes arising under Export-Import Bank programs, or other credit guarantee or insurance arrangements providing for alternative dispute settlement arrangements, from the standard BIT arbitration clauses. The model BIT also states that the treaty shall not derogate from any obligations that require more favorable treatment of investments and declares that the treaty shall not preclude measures necessary for public order or essential security interests. The model BIT enters into force 30 days after exchange of ratifications and continues in force for at least ten years. Thereafter, either Party may terminate the treaty, subject to on year’s written notice.

Each of these model provisions was developed after lengthy and extensive consultations within the U.S. Government and with the private sector. Nonetheless, in negotiating a particular treaty, the U.S. Government retains, of course, some flexibility to adopt modifications as necessary and in light of experience. While the U.S. model text has recently been simplified, the provisions summarized above have all been retained. Some of the provisions of the U.S.-Bangladesh treaty differ in minor respects from the U.S. negotiating text, although none of the changes represent substantive departures from U.S. objectives. The more significant modifications are as follows:

Transfers (Article V): This treaty’s transfers provisions, consistent with the model text, generally provide an investor with the right to transfer freely funds associated with an investment in freely convertible currency, without delay, at prevailing market exchange rates.

However, Paragraph 4 of the Protocol accompanying this treaty allows Bangladesh to restrict transfers if “foreign exchange reserves [are] at a very low level.” In such case, the Government of Bangladesh may temporarily delay transfers of sales or liquidation proceeds, but only (i) in an manner not less favorable than that accorded to comparable transfers to investors of third countries; (ii) to the extent and for the time period necessary to restore its reserves to a minimally acceptable level, but in no case for a period of more than five years, during each year of which an amount of no less than 20% of the value of the proceeds shall be permitted to be transferred; and (iii) after providing the investor an opportunity to invest the sales or liquidation proceeds in a manner which will preserve its value until transfer occurs.

During negotiations, Bangladesh officials were particularly concerned with the effect that the liquidation of a substantial investment could have on the country’s foreign exchange reserves. Transfer provisions have been qualified in similar respects in the treaties with Egypt, Morocco, Turkey, and Zaire.

(2) State-to-State Arbitration (Article VIII): Like the model text, the treaty with Bangladesh provides for state-to-state arbitration between the parties in case of a dispute regarding the interpretation or application of the treaty. The model text requires that all hearing and submissions must be completed within six months of the formation of the tribunal, and a final decision must be rendered within two months of the date of final submissions or the closing of hearings, whichever is later. The treaty with Bangladesh requires that an arbitral tribunal for state-to-state arbitration must render a final decision within one year of the formation of the tribunal; no time limitations for hearings or submission of evidence are specified. This change resulted from the United States accepting, in the spirit of compromise, Bangladesh’s text on this provision, since it was essentially similar to the model text.

In addition, the treaty with Bangladesh does not include a reference to the United Nations International Law Commission’s Model Rules on Arbitral Procedure, to be used in the absence of an agreement between the Parties. In such instances, the United States and Bangladesh have agreed that the arbitral tribunal should determine its own rules of procedure.

(3) Customs Union Exemption (Protocol, Paragraph 2): Paragraph 2 of the Protocol exempts from MFN treatment advantages extended to other countries by virtue of membership in a regional customs union or free trade area. While the model text contains no similar provision, a “customs union exemption” has been included in U.S. BITs with Egypt, Haiti and Morocco.

(4) Employment (Article II (4)(b) of the treaty with Bangladesh gives investors the right to hire the top managerial personnel of their choice; and allows them to engage technical and professional personnel of their choice, subject to local employment laws. This provision, while similar to the model text, differs in two minor respects:

(a) The model text provides that the choice of employment may be made “regardless of nationality.” The intent of the qualification is to assure compliance with U.S. anti-discrimination laws. Although the treaty with Bangladesh does not contain this qualification, the parties have exchanged side letters which clarify that investors may choose employees “on the basis of nationality.” These letters were signed and exchanged at the time the treaty was signed in Washington on March 12, 1986. It is understood that the phrase “on the basis of nationality” serves the same function. The Bangladesh negotiators would not accept “regardless of nationality” since there are certain nationalities ineligible for entry into Bangladesh.

(b) The treaty’s employment provision is also limited by paragraph 3 of the Protocol. That paragraph: (1) subjects the right of nationals or companies to employ personnel to Article X, which provides that Parties are not precluded from, inter alia, adopting measures necessary to maintain public order, protecting essential security interests, or prescribing special formalities for the establishment of investments; and (2) recognizes that laws exist which require employment of local nationals, but the Parties agree to administer such laws flexibly, taking into account the nature of the investment, the requirements of the positions in question, and the availability of qualified nationals.

The first qualification was already implicit in the model text. The second was included because of strong Bangladesh insistence that one of the principal benefits of foreign investment is the development of local employee skills.

(5) Performance Requirements (Article II (6)): Unlike the model text, which states that “neither Party shall impose” performance requirements the treaty with Bangladesh uses the horatory language “shall seek to avoid.” This language was adopted because Bangladesh strongly holds the position that two of the main purposes of attractive foreign investment are to generate foreign exchange and to utilize local resources. Similar horatory language concerning performance requirements is found in U.S. BITs with Haiti, Morocco, Senegal and Turkey.

(6) Losses Concerning War Damage (Article IV): Paragraph 5 of the Protocol states that “the provisions of this treaty are not intended to apply to any claims concerning losses incurred prior to the entry into force of this treaty by nationals or companies of either Party.” The Bangladesh negotiators requested this provision to exclude claims for damage sustained by investors in the 1971 war leading to Bangladesh’s independence, and related civil disturbances.

Submission of this treaty makes a significant development in our international investment policy. I join with the United States Trade Representative and other U.S. Government agencies in supporting the treaty and favor its transmission to the Senate at an early date.

Respectfully submitted.

MICHAEL H. ARMACOST.

TREATY BETWEEN THE UNITED STATES OF AMERICA AND THE PEOPLE’S REPUBLIC OF BANGLADESH CONCERNING THE RECIPROCAL ENCOURAGEMENT AND PROTECTION OF INVESTMENT

The Government of the United States of America and the People’s Republic of Bangladesh (hereinafter referred to as a “Party”;

Desiring to promote greater economic cooperation between them, with respect to investment by nationals and companies of one Party in the territory of the other Party; and

Recognizing that agreement upon the treatment to be accorded such investment will stimulate the flow of private capital and the economic development of the Parties;

Agreeing that discrimination on the basis of nationality by either Party against investment in its territory by nationals or companies of the other Party is not consistent with either a stable framework for investment or a maximum effective utilization of economic resources,

Having resolved to conclude a treaty concerning the Encouragement and Reciprocal Protection of investment

HAVE AGREED AS FOLLOWS:

ARTICLE I

DEFINITIONS

FOR THE PURPOSES OF THIS TREATY,

(a) “Company” means any kind of juridical entity, including any corporation, company association, or other organization, that is duly incorporated, constituted, or otherwise duly organized, regardless of whether or not the entity is organized for pecuniary gain, privately or governmentally owned, or organized with limited or unlimited liability.

(b) “Company of a Party” means a company duly incorporated, constituted or otherwise duly organized under the applicable laws and regulations of a Party or a political subdivision thereof in which

(i) natural persons who are nationals of such Party, or

(ii) such Party or a political subdivision thereof or their agencies or instrumentalities have a substantial interest as determines by such Party.

Each Party reserves the right to deny to any of its own companies or to a company of the other Party the advantages of this Treaty, if nationals or any third country control such company, provided that whenever one Party concludes that the benefits of this Treaty should not be extended to a company of the other Party for this reason, it shall promptly consult with the other Party to seek a mutually satisfactory resolution to this matter.

In any event, the juridical status of a company of a Party shall be recognized by the other Party and its political subdivisions

(c) “Investment” means every kind of investment owned or controlled directly or indirectly, including equity, debt; and service and investment contracts; and includes;

(i) tangible and intangible property, including rights, such as mortgages, liens and pledges;

(ii) a company or shares, stock, or other interests in a company or interests in the assets thereof;

(iii) a claim to money or a claim to performance having economic value, and associated with an investment;

(iv) Intellectual property, including rights with respect copyrights and related patents, trade marks and trade names, industrial designs, trade secrets and know-how, and goodwill.

(v) Licenses and permits issued pursuant to law, including those issued for manufacture and sale of products.

(vi) any right conferred by law or contract, including rights to search for or utilize natural resources, and rights to manufacture, use and sell products; and

(vii) returns which are reinvested.

Any alteration of the form in which assets are invested or reinvested shall not affect their character as investment.

(d) “own or control” means ownership or control that is direct of indirect, including ownership or control exercised through subsidiaries or affiliates, wherever located.

(e) “national” or a Party means a natural person who is a national of a Party under its applicable law.

(f) “return” means an amount derived from or associated with an investment, including profit; dividend; interest; capital gain; royalty payment; management, technical assistance or other fee; and payment in kind.

ARTICLE II - TREATMENT OF INVESTMENT

2. (a) Notwithstanding the preceding provisions of this Article, each Party reserves the right to maintain limited exceptions to the standard of treatment otherwise required if such exceptions fall within one of the sectors or matters listed in the Annex to this Treaty. Each Party agrees to notify the other Party of all such exceptions at the time this Treaty enters into force. Moreover, each Party agrees to notify the other Party of any future exceptions falling within the sectors or matters listed in the Annex, and to maintain the number of such exceptions at a minimum. Other than with respect to ownership) of real property, the treatment accorded pursuant to this subparagraph shall not be less favorable than that accorded in like situations to investments and associated activities of nationals or companies of any third country. However, either Party may require that rights to engage in mining on the public domain shall be dependent on reciprocity.

(b) No exception introduced after the date of entry into force of this Treaty shall apply to investments of nationals or companies of the other Party existing in that sector at the time the exception becomes effective.

3. Investment of nationals and companies of either Party shall at all times be accorded fair and equitable treatment and shall enjoy full protection and security in the territory of the other Party. The treatment, protection and security of investment shall be in accordance with applicable. national laws, and shall in no case be less than that required by international law. Neither Party shall in any way impair by arbitrary and discriminatory measures the management, operation, maintenance, use, enjoyment, acquisition, expansion, or disposal of investment made by nationals or companies of the other Party. Each Party shall observe any obligation it may have entered into with regard to investment of nationals or companies of the other Party.

4. (a) Subject to the laws relating to the entry and sojourn of aliens, nationals of either Party shall be permitted to enter and to remain in the territory of the other Party for the purpose of establishing, developing, directing, administering or advising on the operation of an investment to which they, or a company of the first Party that employs them, have committed or are in the process of committing a substantial amount of capital or other resources.

(b) Nationals and companies of either Party, and companies which they own or control, shall be permitted to engage, within the territory of the other Party, top managerial personnel of their choice. Further, subject to laws and administrative regulations concerning the employment of foreign nationals, nationals and companies of either Party shall be permitted to engage, within the territory of the other Party, professional and technical personnel of their choice, for the particular purpose of rendering professional, technical and managerial assistance necessary for the planning and operation of their investment.

5. The Parties recognize that, consistent with paragraph I of this Article, conditions of competitive equality should be maintained where investments owned or controlled by a Party or its agencies or instrumentalities are in competition, within the territory of such Party, with privately owned or controlled investments of nationals or companies of the other Party. In such situations, the privately owned or controlled investments shall receive treatment which is equivalent with regard to any special economic advantage accorded the governmentally owned or controlled investments.

6. In the context of its national economic policies and objectives, each Party shall seek to avoid the imposition of performance requirements on the investments of nationals and companies of the other Party.

7. In order to maintain a favorable environment for investments in its territory by nationals or companies of the other Party, each Party shall provide effective means of asserting claims and enforcing rights With respect to investment agreements, investment authorizations and properties. Each Party shall grant to nationals or companies of the other Party, on terms and conditions no less favorable than those which it grants in like situations to its own nationals or companies or to nationals or companies of any third country, whichever is the most favorable treatment, the right of access to its courts of justice, administrative tribunals and agencies, and all other bodies exercising adjudicatory authority, and the right to employ persons of their choice, who otherwise qualify under applicable laws and regulations of the forum regardless of nationality, for the purpose of asserting claims, and enforcing rights, with respect to their investments.

8. Each Party shall make public all laws, regulations, administrative practices and procedures, and adjudicatory decisions that pertain to or affect investments in its territory of nationals or companies of the other Party.

9. The treatment accorded by a Party to nationals or companies of the other Party under the provisions of paragraph 1 of this Article shall in any State, Territory, possession, or political or administrative subdivision of the Party be the treatment accorded therein to companies incorporated, constituted or otherwise duly organized in other States, Territories, possessions, or political or administrative subdivisions of the Party.

ARTICLE III - COMPENSATION FOR EXPROPRIATION

1. No investment or any Part of an investment of a national or a company of either Party shall be expropriated or nationalized by the other Party or subjected to any other measure or series of measures, direct or indirect tantamount to expropriation (including the levying of taxation, the compulsory sale of all or part of an investment, or the impairment or deprivation of its management, control or economic value), all such actions hereinafter referred to as “expropriation”, unless the expropriation:

(a) is done for a public purpose;

(b) is accomplished under due process of law;

(d) does not violate any specific provision on contractual stability or expropriation contained in an investment agreement between the national or company concerned and the Party making the expropriation; and

(e) is accompanied by prompt, adequate and effective compensation.

Compensation shall be equivalent to the fair market value of the investment. The calculation of such compensation shall not reflect any reduction in such fair market value due to either prior public notice or announcement of the expropriatory action, or the occurrence of the events that constituted or resulted in the expropriatory action. Such compensation shall be paid promptly, shall be effectively realizable, shall bear current interest from the date of the expropriation at a rate equivalent to current international rates, and shall be freely transferable, in accordance with the provisions of Article V, at the prevailing market rate of exchange on the date of expropriation.

2. If either Party expropriates the investment of any company duly incorporated, constituted or otherwise duly organized in its territory, and if nationals or companies of the other Party, directly or indirectly own, hold or have other rights with respect to the equity of such company, then the Party within whose territory the expropriation occurs shall ensure that such nationals or companies of the other Party receive compensation in accordance with the provisions of the preceding paragraph.

3. Subject to the dispute settlement provisions of any applicable agreement, a national or company of either Party that asserts that all or part of its investment in the territory of the other Party has been expropriated shall have a right to prompt review by the appropriate judicial or administrative authorities of such other Party to determine whether any such expropriation has occurred and, so, whether such expropriation, and any compensation therefor, conforms to the principles of international law as set forth in this Article.

ARTICLE IV - COMPENSATION FOR DAMAGES DUE TO WAR AND SIMILAR EVENTS

1. Nationals or companies of either Party whose investments in the territory of the other Party suffer

(a) damages due to war or other armed conflict between such other Party and a third country, or

(b) damages due to revolution, state of national emergency, revolt, insurrection, riot or act of terrorism in the territory of such other Party, shall be accorded treatment no less favorable than that which such other Party accords to its own nationals or companies or to nationals or companies of any third country, whichever is the most favorable treatment, when making restitution, indemnification, compensation or other appropriate settlement with respect to such damages.

2. In the event that such damages result from:

(a) a requisitioning of property by the other Party’s forces or authorities, or

(b) destruction of property by the other Party’s forces or authorities which was not caused in combat action or was not required by the necessity of the situation, the national or company shall be accorded restitution or compensation consistent with Article III.

3. The payment of any indemnification, compensation or other appropriate settlement pursuant to this Article shall be freely transferable, in accordance with the provisions of Article V.

ARTICLE V-TRANSFERS

1. Each Party shall permit all transfers related to an investment in its territory of a national or company of the other Party to be made freely and without delay into and out of its territory. Such transfers include the following: returns; payments made arising out of a dispute concerning an investment; payments made under a contract, including amortization of principal and accrued interest payments made pursuant to a loan agreement; amounts to cover expenses relating to the management of the investment; royalties and other payments derived from licensed franchises or other grants of rights or from administrative or technical assistance agreements, including management fees; proceeds from the sale of all or part of an investment and from the partial or complete liquidation of the company concerned, including any incremental value; additional contributions to capital necessary or appropriate for the maintenance or development of an investment.

2. To the extent that a national or company of either Party has not made another arrangement with the appropriate authorities of the other Party in whose territory the investment of such national or company is situated, currency transfers made pursuant to Paragraph 1 of this Article shall be permitted in a currency or currencies to be selected by such national or company. Except as provided in Article III, such transfers shall be made at the prevailing market rate of exchange on the date of transfer with respect to spot transactions in the currency or currencies to be transferred.

3. Notwithstanding the preceding paragraphs, either Party may maintain laws and regulations: (a) requiring reports of currency transfer; and (b) imposing income taxes by such means as a withholding tax applicable to dividends or other transfers. Furthermore, either Party may protect the rights of creditors, or ensure the satisfaction of judgments in adjudicatory proceedings, through the equitable, nondiscriminatory and good faith application of its law.

ARTICLE VI - CONSULTATIONS AND EXCHANGE OF INFORMATION

1. The Parties agree to consult promptly, on the request of either, to resolve any disputes in connection with the Treaty, or to discuss any matter relating to the interpretation or application of the Treaty, including any matter relating to the laws, regulations, administrative practices, adjudicatory decisions, or policies of one Party that pertain or affect investments of the other Party.

2. If one Party requests in writing that the other Party supply information in its possession concerning investments in its territory by nationals or companies of the Party making the request, then the other Party shall, consistent with its applicable laws and regulations and with regard for business confidentiality, endeavor to establish appropriate procedures and arrangements for the provision of any such information.

ARTICLE VII - SETTLEMENT OF INVESTMENT DISPUTES BETWEEN ONE PARTY AND A NATIONAL OR COMPANY OF THE OTHER PARTY

1. For purposes of this Article, an investment dispute is defined as a dispute involving (a) the interpretation or application of an investment agreement between a Party and a national or company of the other Party; (b) the interpretation or application of any investment authorization granted by its foreign investment authority to such national or company; or (c) an alleged breach of any right conferred or created by this Treaty with respect to an investment.

2. In the event of an investment dispute between a Party and a national or company of the other Party with respect to an investment of such national or company in the territory of such Party, the parties to the dispute shall initially seek to resolve the dispute by consultation and negotiation. The parties may, upon the initiative of either of them and as a part of their consultation and negotiation, agree to rely upon non-binding, third-party procedures, such as the fact-finding facility available under the Rules of the “Additional Facility (“Facility”) of the International Centre for the Settlement of Investment Disputes (“Centre”). If the dispute cannot be resolved through consultation and negotiation, then the dispute shall be submitted for settlement in accordance with the applicable dispute-settlement procedures upon which they have previously agrees. With respect to expropriation by either Party, and dispute-settlement procedures specified in an investment agreement between such Party and such national or company shall remain binding and shall be enforceable in accordance with the terms of the investment agreement and relevant provisions of domestic laws of such Party and treaties and other international agreements regarding enforcement of arbitral awards to which such Party has subscribed.

3. (a) The national or company concerned may choose to consent in writing to the submission of the dispute to the Centre or the Additional Facility, for settlement by conciliation or binding arbitration, at any time after six months from the date upon which the dispute arose, provided:

(i) the dispute has not, for any reason, been submitted by the national or company for resolution in accordance with any applicable dispute settlement procedures previously agreed to by the Parties to the dispute; and

Once the national or company concerned has so consented, either party to the dispute may institute proceedings before the Centre or the Additional Facility. If the parties disagree over whether conciliation or binding arbitration is the more appropriate procedure to be employed, the opinion of the national or company concerned shall prevail.

(b) Each Party hereby consents to the submission of an investment dispute to the Centre for settlement by conciliation or binding arbitration.

(c) Conciliation or binding arbitration of such disputes shall be done in accordance with the provisions of the Convention on the Settlement of Investment Disputes Between States and Nationals of other States (“Convention”) and the Regulations and Rules of the Centre, or, if the Convention should, for any reason, be inapplicable, the Rules of the Additional Facility.

4. In any proceeding, judicial, arbitral or otherwise, concerning an investment dispute between it and a national or company of the other Party, a Party shall not assert, as a defense, counter-claim, right of set-off or otherwise, that the national or company concerned has received or will receive, pursuant to an insurance contract, indemnification or other compensation for all or part of its alleged damages from any source whatsoever, including such other Party and its political subdivisions, agencies and instrumentalities.

5. For the purposes of this Article, any company legally constituted under the applicable laws and regulations of either Party or political subdivision thereof but that, immediately before the occurrence of the event or events giving rise to the dispute, was an investment of nationals or companies of the other Party, shall, in accordance with Article 25 (2)(b) of the Convention, be treated as a national or company of such other Party. This Article shall not apply to an investment dispute between a Party and a national of that Party.

6. The provisions of this Article shall not apply to a dispute arising (a) under the export credit, guarantee or insurance programs of f the United States or (b) under other of insurance agreements pursuant to which the Parties have agreed to other means of settling disputes.

ARTICLE VIII - SETTLEMENT OF DISPUTES BETWEEN THE PARTIES CONCERNING INTERPRETATION OR APPLICATION OF THIS TREATY

1. Any dispute between the Parties arising out of or in connection with the interpretation or application of this Treaty should, if possible, be settled through diplomatic channels.

2. If a dispute between the Parties cannot thus be settled it shall upon, the request of either Party be submitted to an arbitral tribunal.

3. The-Tribunal shall be established for each case as follows: Within two months of receipt of a request for arbitration, each Party, shall appoint an arbitrator. The two arbitrators so appointed shall, select a third arbitrator as Chairman, who is a national of a third State. The Chairman shall be appointed within two months of the date of appointment of the other two arbitrators.

4. If within the periods specified in paragraph (3) of this Article the necessary appointments have not been made, either Party may, in the absence of any other agreement, invite the President of the International Court of Justice to make any necessary appointment. If the President is a national of either Party or he is unable to discharge the said function, the Vice-President shall be invited to make the necessary appointments. If the Vice-President is a national of either Party or if he too is unable to discharge the said function, the Member of the International Court of Justice next in seniority who is not a national of either Contracting Party shall be invited to make the necessary appointments.

5. In the event that an arbitrator resigns or is for any reason unable to perform his duties, a replacement shall be appointed within thirty days, utilizing the same method by which the arbitrator being replaced was appointed. If the replacement is not appointed within the time limit specified above, either Party may invite the President of the International Court of Justice to make the necessary appointment. If the President is a national of either of the Parties or is unable to act for any reason, either Party may invite the Vice-President, or if he is also a national of either of the Parties or is unable to act for any reason, the next most senior member of the International Court of Justice who is not a national of one of the Parties and is able to perform said duties, to make the appointment.

6. The arbitral tribunal shall reach its decision in accordance with international law by a majority of votes. Such decision shall be binding on both Parties. Each Party shall bear the cost of its representation in the arbitral proceedings; the cost of the arbitrator and the remaining costs shall be borne in equal parts by the Parties. The Tribunal may, however, in its decision direct that a higher proportion of costs shall be borne by one of the two Parties, and this award shall be binding on both Parties. The Tribunal shall determine its own procedure to the extent the Parties have been unable to agree upon applicable principles. The Tribunal shall arrange for submissions from the Parties, any necessary hearings, and a final decision on the dispute within one year from the date of the formation of the Tribunal.

7. The provisions of this article shall not apply to a dispute arising (a) under the export credit, guarantee or insurance programs of the United States, or (b) under other or insurance arrangements pursuant to other means of settling disputes.

ARTICLE IX - PRESERVATION OF RIGHTS

This Treaty shall not supersede, prejudice, or otherwise derogate from:

(a) laws and regulations, administrative practices or procedures, or administrative or adjudicatory decisions of either Party;

(b) international legal obligations; or

(c) obligations assumed by either Party, including those contained in an investment agreement or an investment authorization,

whether extant at the time of entry into force of this Treaty or thereafter, that entitle investments, or associated activities, of nationals or companies of the other Party to treatment more favorable than that accorded by this Treaty in like situations.

ARTICLE X - MEASURES NOT PRECLUDED BY THIS TREATY

1. This Treaty shall not preclude the application by either Party of any and all measures necessary for the maintenance of public order, the fulfillment of its obligations with respect to the maintenance or restoration of international peace or security, or the protection of its own essential security interests.

2. This Treaty shall not preclude either Party from prescribing special formalities in connection with the establishment of investments in its territory of nationals and companies of the other Party, but such formalities shall not impair the substance of any of the rights set forth in this Treaty.

ARTICLE XI-TAXATION

1. With respect to its tax policies, each Party should strive to accord fairness and equity in the treatment of investment of nationals and companies of the other Party.

2. Nevertheless, the provisions of this Treaty, and in particular Articles VII and VIII, shall apply to matters of taxation only with respect to the following:

(a) expropriation, pursuant to Article III;

(b) transfers, pursuant to Article V; or

(c) the observance and enforcement of terms of an investment agreement or authorization as referred to in Article VII (1)(a) or (b).

Matters covered by item 2(c) shall not be covered to the extent they are subject to the dispute settlement provisions of a convention for the avoidance of double taxation between the two Parties, unless such matters are raised under such settlement provisions and are not resolved within a reasonable period of time.

ARTICLE XII - APPLICATION OF THIS TREATY TO POLITICAL SUB-DIVISIONS OF THE PARTIES

This Treaty shall apply to Political subdivisions of the Parties

ARTICLE XIII - ENTRY INTO FORCE AND DURATION AND TERMINATION

1. This Treaty shall be ratified by each of the Parties and the ratifications thereof shall be exchanged as soon as possible.

2. This treaty shall enter into force thirty days after the date of exchange of ratifications. It shall remain in force for a period of ten years and shall continue in force unless terminated in accordance with Paragraph 3 of this Article. It shall apply to investments existing at the time of entry into force as well as to investments made or acquired thereafter.

3. Either Party may, by giving one year’s written notice to the other Party, terminate this Treaty at the end of the initial ten year period or at any time thereafter.

4. With respect to investments made or acquired prior to the date of termination of this Treaty and to which this Treaty otherwise applies, the provisions of all of the other Articles of this Treaty shall thereafter continue to be effective for a further period of ten years from such date of termination. In Witness Thereof, the respective plenipotentiaries have signed this Treaty.

Done in duplicate at Washington on the 12th day of March 1986 in the English and Bangla languages, both texts being equally authentic.

For the Government of the United States of America:

CLAYTON YEUTTER.

For the Government of the People’s Republic of Bangladesh:

KHORSHED ALAM.

Consistent with Article II paragraph 3, each Party reserves the right to maintain limited exceptions in the sectors or matters it has indicated below:

THE UNITED STATES OF AMERICA

Air transportation; ocean and coastal shipping; banking; insurance; government grants; government insurance and loan programs; energy and power production; custom house brokers; ownership of real estate; ownership and operation of broadcast or common earner radio and television stations; ownership of shares in the Communications Satellite Corporation; the provision of common carrier telephone and telegraph services; the provision of submarine cable services; use of land and natural resources.

THE PEOPLE’S REPUBLIC OF BANGLADESH

Arms and ammunition and allied defense equipment; atomic energy; air transport; telecommunication (common carrier services); generation (excluding stand-by generation) and distribution of electricity; forest extraction (mechanised); sea trawling, commercial trading; insurance; indenting; public utilities; shipping-, oil and gas (except for hydrocarbon exploration through production contract/joint venture); oil refining and products marketing (except under joint venture); communication satellite; housing and ownership of real estate.

PROTOCOL

The duly authorized Plenipotentiaries of the Parties have agreed upon the following provisions clarifying their intent in respect to certain Articles of the Treaty Concerning Treatment and Protection of Investment signed this date, which shall be considered integral parts of the Treaty:

1. Each Party shall accord, under its laws and regulations, to investments and associated activities in its territory of nationals or companies of the other Party, treatment no less favorable than that which it accords in like situations to investments and related activities of its own nationals or companies or of nationals or companies of any third country, whichever is the most favorable. Application of laws and regulations shall not impair the substance of rights guaranteed by this Treaty. Associated activities include:

(a) the establishment, control and maintenance of branches, agencies, offices, factories or other facilities for the conduct of business;

(b) the organization of companies under applicable laws and regulations; the acquisition of companies or interests in companies or in their property; and the management, control, maintenance, use, enjoyment and expansion, and time sale, liquidation, dissolution or other disposition, of companies organized or acquired.

(d) the acquisition (whether by purchase, lease or otherwise), ownership and disposition (whether by age, testament or otherwise), of personal property of all kinds, both tangible and intangible;

(e) the leasing of real property appropriate for the conduct of business;

(f) the acquisition, maintenance and protection of copyrights, patents, trademarks, trade secrets, trade names, licenses and other approvals of products and manufacturing processes, and other industrial property rights; and,

(g) the borrowing of funds, the purchase and issuance of equity shares, and the purchase of foreign exchange for imports.

2. The most favored nation provisions of Article II, paragraph 2, shall not apply to advantages accorded by either Party to nationals or companies of any third country by virtue of that Party’s binding obligations that derive from full membership in a regional customs union or free trade area.

3. The provisions of Article II, paragraph 4(b), concerning the right of nationals and companies to employ personnel of their choice, shall be subject to the provision of Article X. Furthermore, as for any laws concerning the employment of foreign nationals which require the employment of a Party’s own nationals in certain positions or the employment of a certain percentage of its own nationals in positions in connection with investment made in its territory by nationals or companies of the other Part, each Party agrees to administer such laws flexibly, taking into account inter alia, the nature of the investment, the requirements of the positions in question, and the availability of qualified nationals.

4. The parties recognize that restrictions on transfers abroad of sales or liquidation proceeds of an investment will adversely affect future, capital inflows, contrary to the spirit of this Treaty and the interests of the Party imposing those restrictions. Nevertheless, the Parties recognize that Bangladesh may find its foreign exchange reserves at a very low level. In these circumstances, the Government of Bangladesh may temporarily delay transfers of sales or liquidation proceeds, but only (i) in a manner not less favorable than that accorded to comparable transfers to investors of third countries, (ii) to the extent and for the time period necessary to restore its reserves to a minimally acceptable level, but in no case for a period of more than five years, during each year of which an amount of no less than 20% of the value of the proceeds shall be permitted to be transferred; and (iii) after providing the investor an opportunity to invest the sales or liquidation proceeds in a manner which will-preserve its value until transfer occurs.

5. The provisions of this Treaty are not intended to apply to any claims concerning losses incurred prior to the entry into force of this Treaty by nationals or companies of either Party.

U.S. TRADE REPRESENTATIVE,

Washington, March 12,1986.

His Excellency KHORSHED ALAM,

Secretary, Ministry of Industries, The People’s Republic of Bangladesh.

YOUR EXCELLENCY: I have the honor to refer to the Treaty between the United States of America and the People’s Republic of Bangladesh concerning the Reciprocal Encouragement and Protection of Investment, and wish to inform that as per discussions during the course of negotiations on the question of employment under Article II, paragraph 4(b), our intent is that with respect to the United States and Bangladesh this paragraph accords nationals and companies of either Contracting State the right to engage top managerial personnel of their choice on the basis of nationality and to engage professional and technical personnel of their choice subject to the employment laws and regulations of each Contracting State. I would appreciate confirmation that your Government shares this understanding.

With compliments of my highest esteem.

Sincerely,

CLAYTON YEUTTER,

For and on behalf of the Government

of the United States of America.

[Translation]

DEPARTMENT OF STATE,

DIVISION OF LANGUAGE SERVICES,

March 12, 1986.

His Excellency CLAYTON YEUTTER,

US- Trade Representative, Government of the United States of America.

EXCELLENCY: I have the honor to acknowledge receipt of your letter which reads as follows:

“I have the honor to refer to the Treaty between the United States of America and the People’s Republic of Bangladesh concerning the Reciprocal Encouragement and Protection of Investment, and wish to inform that as per discussions during the course of

negotiations on the question of employment under Article II, paragraph 4(b), our intent is that with respect to the United States and Bangladesh this paragraph accords nationals and companies of either Contracting State the right to engage top managerial personnel of their choice on the basis of nationality and to engage professional and technical personnel their choice subject to the employment laws and regulations of each Contracting State. I would appreciate confirmation that your Government shares this understanding.

I confirm the above understanding between the two parties.

With compliments of my highest esteem.

Yours sincerely,

(Signed) KHORSHED ALAM,

For and on behalf of the Government

of the People’s Republic of Bangladesh.

End of tab panel

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Bolivia Bilateral Investment Treaty

Bolivia Notice to United States

The Government of Bolivia delivered notice to the United States on June 10, 2011, that it was terminating the ‘‘Treaty Between the Government of the United States of America and the Government of the Republic of Bolivia Concerning the Encouragement and Reciprocal Protection of Investment’’ (‘‘the Treaty’’). As of June 10, 2012 (the date of termination), the treaty will cease to have effect, EXCEPT that it will continue to apply for another 10 years to covered investments existing at the time of termination. The United States Government is providing this notice so that existing or potential U.S. investors in Bolivia can factor the Treaty’s termination into their business planning, as appropriate.

Signed April 17, 1998; Entered into Force June 6, 2001

106th Congress SENATE Treaty Doc.

2d Session 106-25

___________

INVESTMENT TREATY WITH BOLIVIA

MESSAGE

FROM

THE PRESIDENT OF THE UNITED STATES

TRANSMITTING

TREATY BETWEEN THE GOVERNMENT OF THE UNITED STATES OF AMERICA AND THE GOVERNMENT OF THE REPUBLIC OF BOLIVIA CONCERNING THE ENCOURAGEMENT AND RECIPROCAL PROTECTION OF INVESTMENT, WITH ANNEX AND PROTOCOL, SIGNED AT SANTIAGO, CHILE, ON APRIL 17, 1998

MAY 23, 2000.-Treaty was read the first time and, together with the accompanying papers, referred to the Committee on Foreign Relations and ordered to be printed for the use of the Senate

U.S. GOVERNMENT PRINTING OFFICE

79-118 WASHINGTON : 2000

LETTER OF TRANSMITTAL

–––-

The White House, May 23, 2000.

To the Senate of the United States:

The bilateral investment treaty (BIT) with Bolivia is the sixth such treaty between the United States and a Central or South American country. The Treaty will protect U.S. investment and assist Bolivia in its efforts to develop its economy by creating conditions more favorable for U.S. private investment and thus strengthen the development of its private sector.

The Treaty is fully consistent with U.S. policy towards international and domestic investment. A specific tenet of U.S. policy, reflected in this Treaty, is that U.S. investment abroad and foreign investment in the United States should receive national treatment. Under this Treaty, the Parties also agree to customary international law standards for expropriation. The Treaty includes detailed provisions regarding the computation and payment of prompt, adequate, and effective compensation for expropriation; free transfer of funds related to investments; freedom of investments from specified performance requirements; fair, equitable, and most- favored-nation treatment; and the investor’s freedom to choose to resolve disputes with the host government through international arbitration.

I recommend that the Senate consider this Treaty as soon as possible, and give its advice and consent to ratification of the Treaty at an early date.

WILLIAM J. CLINTON.

LETTER OF SUBMITTAL

–––-

Department of State,

Washington, April 24, 2000.

The President,

The White House.

The President: I have the honor to submit to you the Treaty Between the Government of the United States of America and the Government of the Republic of Bolivia Concerning the Encouragement and Reciprocal Protection of Investment, with Annex and Protocol, signed at Santiago on April 17, 1998. I recommend that this Treaty, with Annex and Protocol, be transmitted to the Senate for its advice and consent to ratification.

The bilateral investment treaty (BIT) with Bolivia is the sixth such treaty signed between the United States and a Central or South American country. The Treaty is based on the view that an open investment policy contributes to economic growth. This Treaty will assist Bolivia in its efforts to develop its economy by creating conditions more favorable for U.S. private investment and thereby strengthening the development of its private sector. It is U.S. policy, however, to advise potential treaty partners during BIT negotiations that conclusion of such a treaty does not necessarily result in increases in private U.S. investment flows.

To date, 31 BITs are in force for the United States—with Albania, Argentina, Armenia, Bangladesh, Bulgaria, Cameroon, the Republic of the Congo, the Democratic Republic of the Congo (formerly Zaire), the Czech Republic, Ecuador, Egypt, Estonia, Georgia, Grenada, Jamaica, Kazakhstan, Kyrgyzstan, Latvia, Moldova, Mongolia, Morocco, Panama, Poland, Romania, Senegal, Slovakia, Sri Lanka, Trinidad & Tobago, Tunisia, Turkey, and Ukraine. In addition to the Treaty with Bolivia, the United States has signed, but not yet brought into force, BITs with Azerbaijan, Bahrain, Belarus, Croatia, El Salvador, Honduras, Jordan, Lithuania, Mozambique, Nicaragua, Russia, and Uzbekistan.

The Office of the United States Trade Representative and the Department of State jointly led this BIT negotiation, with assistance from the Departments of Commerce, Treasury, and Energy.

The U.S.-Bolivia Treaty

The Treaty with Bolivia is based on the 1994 U.S. prototype BIT and satisfies the U.S. principal objectives in bilateral investment treaty negotiations:

—All forms of U.S. investment in the territory of Bolivia are covered.

—Covered investments receive the better of national treatment or most-favored-nation (MFN) treatment both while they are being established and thereafter, subject to certain specified exceptions.

—Specified performance requirements may not be imposed upon or enforced against covered investments.

—Expropriation is permitted only in accordance with customary international law standards.

—Parties are obligated to permit the transfer, in a freely usable currency, of all funds related to a covered investment, subject to exceptions for specified purposes.

—Investment disputes with the host government may be brought by investors, or by their covered investments, to binding international arbitration as a alternative

to domestic courts.

These elements are further described in the following article-by-article analysis of the provisions of the Treaty:

Title and Preamble

Article I (Definitions)

Article I defines terms used throughout the Treaty.

Company, Company of a Party

The definition of “company” is broad, covering all types of legal entities constituted or organized under applicable law, and includes corporations, trusts, partnerships, sole proprietorships, branches, joint ventures, and associations. The definition explicitly covers not-for-profit entities, as well as entities that are owned or controlled by the state. “Company of a Party” is defined as a company constituted or organized under the laws of that Party.

National

The Treaty defines “national” as a natural person who is a national of a Party under its own laws. Under U.S. law, the term “national” is broader than the term “citizen.” For example, a native of American Samoa is a national of the United States, but not a citizen.

Investment, Covered Investment

The Treaty defines “covered investment” as an investment of a national or company of a Party in the territory of the other Party. An investment of a national or company is one that the national or company owns or controls, either directly or indirectly. Indirect ownership or control could be through other, intermediate companies or persons, including those of third countries. Control is not specifically defined in the Treaty; ownership of over 50 percent of the voting stock of a company would normally convey control, but in many cases the requirement could be satisfied by less than that proportion, or by other arrangements.

The broad nature of the definitions of “investment,” “company, and “company of a Party” means that investments can be covered by the Treaty even if ultimate control lies with non-Party nationals. A Party may, however, deny the benefits of the Treaty in the limited circumstances described in Article XII.

State Enterprise, Investment Authorization, Investment Agreement

The Treaty defines “state enterprise” as a company owned, or controlled through ownership interests, by a Party. Purely regulatory control over a company does not qualify it as a state enterprise. The Treaty defines an “investment authorization” as an authorization granted by the foreign investment authority of a Party to a covered investment or a national or company of the other Party.

The Treaty defined an “investment agreement” as a written agreement between the national authorities of a Party and a covered investment or a national or company of the other Party that (1) grants rights with respect to natural resources or other assets controlled by the national authorities and (2) the investment, national, or company relies upon in establishing or acquiring a covered investment. This definition thus excludes agreements with subnational authorities (including U.S. States) as well as agreements arising from various types of regulatory activities of the national government, including, in the tax area, rulings, closing agreements, and advance pricing agreements.

ICSID Convention, Centre, UNCITRAL Arbitration Rules

The “ICSID CONVENTION,” “Centre,” and “UNCITRAL Arbitration Rules” are explicitly defined to make the text brief and clear.

Article II (Treatment of Investment)

Article II contains the Treaty’s major obligations with respect to the treatment of covered investments.

Paragraph 1 generally ensures the better of national or MFN treatment in both the entry and post-entry phases of investment. It thus prohibits, outside of exceptions listed in the Annex, “screening” on thebasis of nationality during the investment process, as well as nationality-based post-establishment measures. For purposes of the Treaty, “national treatment” means treatment no less favorable than that which a Party accords, in like situations, to investments in its territory of its own nationals or companies. For purposes of the Treaty, “MFN treatment” means treatment no less favorable than that which a Party accords, in like situations, to investments in its territory of nationals or companies of a third country. The Treaty obliges each Party to provide whichever of national treatment or MFN treatment is the most favorable. This is defined by the Treaty as “national and MFN treatment.” Paragraph 1 explicitly states that the national and MFN treatment obligation will extend to state enterprises in their provision of goods and services to covered investments.

Paragraph 2 states that each Party may adopt or maintain exceptions to the national and MFN treatment standard with respect to the sectors of matters specified in the Annex. Further restrictive measures are permitted in each sector. (The specific exceptions are discussed in the section entitled “Annex” below.) In the Annex, Parties may take exceptions only to the obligation to provide national and MFN treatment; there are no sectoral exceptions to the rest of the Treaty’s obligations. Finally, in adopting any exception under this provision, a Party may not require the divestment of a preexisting covered investment.

Paragraph 2 also states that a Party is not required to extend to covered investments national and MFN treatment with respect to procedures provided for in multilateral agreements concluded under the auspices of the World Intellectual Property Organization relating to the acquisition of maintenance of intellectual property rights. This provision clarifies that certain procedural preferences granted under intellectual property conventions, such as the Patent Cooperation Treaty, fall outside the BIT. This exception parallels those in the Uruguay Round’s Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) and the North American Free Trade Agreement (NAFTA).

Paragraph 3 sets out a minimum standard of treatment based on standards found in customary international law. The obligations to accord “fair and equitable treatment” and “full protection and security” are explicitly cited, as is each Party’s obligation not to impair, through unreasonable and discriminatory means, the management, conduct, operation, and sale or other disposition of covered investments. The general reference to international law also implicitly incorporates other fundamental rules of customary international law regarding the treatment of foreign investment. However, this provision does not incorporate obligations based on other international agreements.

Paragraph 4 requires that each Party provide effective means of asserting claims and enforcing rights with respect to covered investments.

Paragraph 5 ensures the transparency of each Party’s regulation of covered investments.

Article III (Expropriation)

Paragraphs 2, 3, and 4 more fully describe the meaning of “prompt, adequate and effective compensation.” The guiding principle is that the investor should be made whole.

Article IV (Compensation for Damages Due to War and Similar Events)

Paragraph 1 entitles investments covered by the Treaty to national and MFN treatment with respect to any measure relating to losses suffered in a Party’s territory owing to war or other armed conflict, civil disturbances, or similar events. Paragraph 2, by contrast, creates an unconditional obligation to pay compensation for such losses when the losses result from requisitioning or from destruction not required by the necessity of the situation.

Article V (Transfers)

In Paragraph 1, each Party agrees to “permit all transfers relating to a covered investment to be made freely and without delay into and out of its territory.” Paragraph 1 also provides a list of transfers that must be allowed. The list is non-exclusive, and is intended to protect flows to both affiliated and non-affiliated entities.

Paragraph 2 provides that each Party must permit transfers to be made in a “freely usable currency” at the market rate of exchange prevailing on the date of transfer. “Freely usable” is a term used by the International Monetary Fund; at present there are five “freely usable” currencies: the U.S. dollar, Japanese yen, German mark, French franc, and British pound sterling.

In Paragraph 3, each Party agrees to permit returns in kind to be made where such returns have been authorized by an investment authorization or writtenagreement between a Party and a covered investment or a national or company of the other Party.

Article VI (Performance Requirements)

Article VI prohibits either Party from mandating or enforcing specified performance requirements as a condition for the establishment, acquisition, expansion, management, conduct, or operation of a covered investment. The list of prohibited requirements is exhaustive and covers domestic content requirements and domestic purchase preferences, the “balancing” of imports or sales in relation to exports or foreign exchange earnings, requirements to export products or services, technology transfer requirements, and requirements relating to the conduct of research and development in the host country. Such requirements are major burdens on investors and impair their competitiveness.

The last sentence of Article VI makes clear that a Party may, however, impose conditions for the receipt or continued receipt of benefits and incentives.

Article VII (Entry, Sojourn, and Employment of Aliens)

Paragraph 1 requires each Party to allow, subject to its laws relating to the entry and sojourn of aliens, the entry into its territory of the other Party’s nationals for certain purposes related to a covered investment and involving the commitment of a “substantial amount of capital.” This paragraph serves to render nationals of Bolivia eligible for treaty-investor visas under U.S. immigration law. It also affords similar treatment for U.S. nationals entering Bolivia. The requirement to commit a “substantial amount of capital” is intended to prevent abuse of treaty-investor status; it parallels the requirements of U.S. immigration law.

In addition, paragraph 1(b) prohibits labor certification and numerical restrictions on the entry of treaty-investors.

Article VIII (State-State Consultations)

Article VIII provides for prompt consultation between the Parties, at either Party’s request, on any matter relating to the interpretation or application of the Treaty or to the realization of the Treaty’s objectives. A Party may thus request consultations for any matter reasonably related to the encouragement or protection of covered investment, whether or not a Party is alleging a violation of the Treaty.

Article IX (Settlement of Disputes Between One Party and a National or Company of the Other Party)

Article IX sets forth several means by which disputes brought against a Party by an investor (specifically, a national or company of the other Party) may be resolved.

Under paragraph 3(a), the investor can submit an investment dispute to binding arbitration 3 months after the dispute arises, provided that the investor has not submitted the claim to a court or administrative tribunal of the Party or invoked a dispute resolution procedure previously agreed upon. The investor may choose among the International Centre for Settlement of Investment Disputes (ICSID) (Convention Arbitration), the Additional Facility of ICSID (if Convention Arbitration is not available), ad hoc arbitration using the Arbitration Rules of the United Nations Commission on International Trade Law (UNCITRAL), or any other arbitral institution or rules agreed upon by both parties to the dispute.

Before or during such arbitral proceedings, however, paragraph 3(b) provides that an investor may seek, without affecting its right to pursue arbitration under this Treaty, interim injunctive relief not involving the payment of damage from local courts or administrative tribunals of the Party that is a party to the dispute for the preservation of its rights and interests. This paragraph does not alter the power of the arbitral tribunals to recommend or order interim measures they may deem appropriate.

Paragraph 4 constitutes each Party’s consent to the submission of investment disputes to binding arbitration in accordance with the choice of the investor.

Article X (Settlement of Disputes Between the Parties)

Article X provides for being arbitration of disputes between the United States and Bolivia concerning the interpretation or application of the Treaty that are not resolved through consultations or other diplomatic channels. The article specifies various procedural aspects of such arbitration proceedings, including time periods, selection of arbitrators, and distribution of arbitration costs between the Parties. The article constitutes each Party’s prior consent to such arbitration.

Article XI (Preservation of Rights)

Article XI clarifies that the Treaty does not derogate from any obligation a Party might have to provide better treatment to the covered investment than is specified in the Treaty. Thus, the Treaty establishes a floor for the treatment of covered investments. A covered investment may be entitled to more favorable treatment through domestic legislation, other international legal obligations, or a specific obligation (e.g., to provide a tax holiday) assumed by a Party with respect to that covered investment.

Article XII (Denial of Benefits)

Article XII(b) permits each Party to deny the benefits of the Treaty to a company of the other Party if the company is owned or controlled by non-Party nationals and if the company has no substantial business activities in the Party where it is established. Thus, the United States could deny benefits to a company that is a subsidiary of a shell company organized under the laws of Bolivia if controlled by nationals of a third country. However, this provision would not generally permit the United States to deny benefits to a company of Bolivia that maintains its central administration or principal place of business in the territory of, or has a real and continuous link with, Bolivia.

Article XIII (Taxation)

Article XIII excludes tax matters generally from the coverage of the BIT, on the basis that tax matters should be dealt with in bilateral tax treaties. However, Article XIII does not preclude a national or company from bringing claims under Article IX that taxation provisions in an investment agreement or authorization have been violated. In addition, the dispute settlement provisions of Articles IX and X apply to tax matters in relation to alleged violations of the BIT’s expropriation article.

Under paragraph 2, a national or company that asserts in a dispute that a tax matter involves expropriation may submit that dispute to arbitration pursuant to Article IX(3) only if (1) the investor has first referred to the competent tax authorities of both Parties the issue of whether the tax matter involves an expropriation, and (2) the tax authorities have not both determined, within 9 months from the time of referral, that the matter does not involve an expropriation. The “competent tax authority” of the United States is the Assistant Secretary of the Treasury for Tax Policy, who will make such a determination only after consultation with the Inter-Agency Staff Coordinating Group on Expropriations.

Article XIV (Measures Not Precluded)

The first paragraph of Article XIV reserves the right to a Party to take measures for the fulfillment of its international obligations with respect to maintenance or restoration of international peace or security, as well as those measures it regards as necessary for the protection of its own essential security interests.

International obligations with respect to maintenance or restoration of peace or security would include, for example, obligations arising out of Chapter VII of the United Nations Charter. Measures permitted by the provision on the protection of a Party’s essential security interests would include security-related actions taken, in time of war or national emergency. Actions not arising from a state of war or national emergency must have a clear and direct relationship to the essential security interests of the Party involved. Measures to protect a Party’s essential security interests are self-judging in nature, although each Party would expect the provisions to be applied by the other in good faith.

Article XV (Application to Political Subdivisions and State Enterprises of the Parties)

Paragraph 1(a) makes clear that the obligations of the Treaty are applicable to all political subdivisions of the Parties, such as provincial, State, and local governments.

Article XVI (Entry Into Force, Duration, and Termination)

Paragraph 1 stipulates that the Treaty enters into force 30 days after exchange of instruments of ratification. The Treaty remains in force for a period of 10 years and continues in force thereafter Unless terminated by either Party as provided in paragraph 2. Paragraph 2 permits a Party to terminate the Treaty at the end of the initial 10-year period, or at any later time, by giving 1 year’s written notice to the other Party. Paragraph 1 also provides that the Treaty applies to covered investments existing at the time of entry into force as well as to those established or acquired thereafter. The Treaty does not state an intention by the Parties to apply the Treaty’s provisions retroactively. Thus, under customary international law, the Treaty does not apply to disputes with respect to acts or facts which took place before the Treaty came into force or to any situation which ceased to exist before the date of entry into force of the Treaty.

Paragraph 4 stipulates that the Annex and Protocol shall form an integral part of the Treaty.

Annex

U.S. bilateral investment treaties allow for exceptions to national and MFN treatment, where the Parties’ domestic regimes do not afford national and MFN treatment, or where treatment in certain sectors or matters is negotiated in and governed by other agreements. Future derogations from the nationaltreatment obligations of the Treaty are generally permitted only in the sectors or matters listed in the Annex, pursuant to Article II(2), and must be made on an MFN basis unless otherwise specified therein.

Under a number of statutes, many of which have a long historical background, the U.S. federal government or States may not necessarily treat investments of nationals or companies of Bolivia as they do U.S. investments or investments from a third country. Paragraphs 1 through 3 of the Annex list the sectors or matters subject to U.S. exceptions.

The U.S. exceptions from its national and MFN treatment obligation are: fisheries; air and maritime transport, and related activities; banking, securities, and other non- insurance financial services; and one-way satellite transmissions of Direct-to-Home (DTH) and Direct Broadcasting Satellite (DBS) television services and of digital audio services.

During negotiations, the United States informed Bolivia that if Bolivia undertook acceptable commitments with respect to all or certain financial services, the United States would consider limiting its exceptions with respect to its national and MFN treatment obligation in financial services.

Bolivia offered to take no exceptions to the treaty’s national or MFN treatment obligations with respect to the insurance. Therefore, in Paragraph 3 of the Annex, the United States limited its exceptions with respect to insurance to afford treatment no less favorable than that accorded with respect to Canada and Mexico in the North American Free Trade Agreement.

Paragraph 4 of the Annex lists Bolivia’s exceptions from its national treatment obligation, which are: the acquisition and/or possession by foreigners, directly or indirectly, through any type of title, of land or subsoil within 50 kilometers of Bolivia’s borders, in so far as required by Article 25 of the Constitution; subsidies or grants, including government-supported loans, guarantees, and insurance; and the obligation of foreign construction and consulting companies participating in public sector tenders to associate with one or more Bolivian companies.

Paragraph 5 of the Annex lists Bolivia’s exceptions from its national and MFN treatment obligation, which are: air transport; transportation on interior navigable waterways; and limitation on foreign equity ownership of international passenger and freight land transportation companies to a maximum of 49 percent.

Paragraph 6 refers to the leasing to minerals and pipeline rights-of-way on government lands. Bolivia agrees to accord national treatment to covered investments, subject to limitations set forth in Article 25 of the Constitution of Bolivia. Article 25 of the Constitution of Bolivia provides that foreigners may not, within fifty kilometers of the frontiers, acquire or possess, under any title, soil or subsoil, directly or indirectly, individually or as a company, under penalty of forfeiture to Bolivia of the property acquired, except in case of national necessity so declared by special law. In Paragraph 5 of the Protocol, as described below, Bolivia confirmed that foreigners can form joint ventures, without any limitation, for the purpose of investing in these border zones.

The U.S. agrees in Paragraph 6(b) of the Annex to accord national treatment to covered investments, subject to the Mineral Lands Leasing Act (MLLA) (30 U.S.C. 181 et seq.). In so doing, Paragraph 6(b) affects the implementation of the MLLA and 10 U.S.C. 7435, regarding Naval Petroleum Reserves, with respect to nationals and companies of Bolivia. The Treaty provides for resort to binding international arbitration to resolve disputes, rather than denial of mineral rights and rights to naval petroleum shares to investors of the other Party, as is the current process under the statute. U.S. domestic remedies, would, however, remain available for use in conjunction with the Treaty’s provisions.

Bolivia’s extension of national treatment in these sectors will fully meet the objectives of the MLLA and 10 U.S.C. 7435. Bolivia was informed during negotiations that, were it to include this sector in its list of treatment exemptions, the United States would (consistent with the MLLA and 10 U.S.C. 7435) exclude the leasing of minerals or pipeline rights-of-way on Government lands from the national and MFN treatment obligations of this Treaty.

Protocol

Paragraph 1 of the Protocol clarifies that a preference system for government procurements is not precluded by obligations in Article VI. (The United States and Bolivia both give preferential treatment incertain government procurements to certain domestic and foreign goods and services.) This paragraph simply makes explicit what is implicit under the provisions of the Treaty.

Article 3 of the Bolivian Labor Law states that the foreign workforce of a foreign firm in Bolivia cannot be greater than 20 percent of the overall workforce. In paragraph 2 of the Protocol, Bolivia confirmed its Article VII commitments to permit covered investments to engage the top managerial personnel of their choice, regardless of nationality. Protocol Language was included to underscore that the commitment meant Article 3 of the Bolivian Labor Law would not apply to top managerial personnel.

In paragraph 3, the Parties confirm their mutual understanding that the investor-state dispute settlement article (Article IX) does not apply to government contracts, except where the specific circumstances set forth in the Protocol apply.

Paragraph 4 responds to Bolivia’s request for a clarification of Article XV, paragraph 1(b). Bolivian officials acknowledged the roles of the States and the federal government in the U.S. federal system, as well as the overall open investment climate in the United States. However, Bolivia was concerned that, during other investment treaty negotiations that it might conduct in the future, other governments with federal systems might seek a treaty provision such as Article XV, paragraph 1(b), in order to maintain a more discriminatory investment regime. Bolivia therefore requested, and received from the United States, language in the Protocol that underscores the protections against discrimination in interstate commerce that are contained in the U.S. Constitution.

In Paragraph 5, Bolivia confirmed that, consistent with its Annex entry, although foreigners cannot own title to property within 50 kilometers of the borders, foreigners can form joint ventures, without any limitation on the respective capital contributions or proportionate shares of the joint venture partners, for the purpose of investing in these border zones.

The other U.S. Government agencies that participated in negotiating the Treaty join me in recommending that it be transmitted to the Senate at an early date.

Respectfully submitted.

MADELINE ALBRIGHT .

TREATY BETWEEN

THE GOVERNMENT OF THE UNITED STATES OF AMERICA AND

THE GOVERNMENT OF THE REPUBLIC OF BOLIVIA

CONCERNING THE ENCOURAGEMENT

AND RECIPROCAL PROTECTION OF INVESTMENT

The Government of the United States of America and the Government of the Republic of Bolivia (hereinafter the “Parties”);

Desiring to promote greater economic cooperation between them, with respect to investment by nationals and companies of one Party in the territory of the other Party;

Recognizing that agreement upon the treatment to be accorded such investment will stimulate the flow of private capital and the economic development of the Parties;

Agreeing that a stable framework for investment will maximize effective utilization of economic resources and improve living standards;

Recognizing that the development of economic and business ties can promote respect for internationally recognized worker rights;

Agreeing that these objectives can be achieved without relaxing health, safety and environmental measures of general application; and

Having resolved to conclude a Treaty concerning the encouragement and reciprocal protection of investment;

Have agreed as follows:

ARTICLE I

For the purposes of this Treaty,

(b) “company of a Party” means a company constituted or organized under the laws of that Party;

(i) a company;

(ii) shares, stock, and other forms of equity participation, and bonds, debentures, and other forms of debt interests, in a company;

(iii) contractual rights, such as under turnkey, construction or management contracts, production or revenue-sharing contracts, concessions, or other similar contracts;

(iv) tangible property, including real property; and intangible property, including rights, such as leases, mortgages, liens and pledges;

(v) intellectual property, including:

copyrights and related rights,

patents,

rights in plant varieties,

industrial designs,

rights in semiconductor layout designs,

trade secrets, including know-how and confidential business information,

trade and service marks, and

trade names; and

(vi) rights conferred pursuant to law, such as licenses and permits;

(The list of items in (i) through (vi) above is illustrative and not exhaustive.)

(e) “covered investment” means an investment of a national or company of a Party in the territory of the other Party;

(f) “state enterprise” means a company owned, or controlled through ownership interests, by a Party;

(g) “investment authorization” means an authorization granted by the foreign investment authority of a Party to a covered investment or a national or company of the other Party;

(i) “ICSID Convention” means the Convention on the Settlement of Investment Disputes between States and Nationals of Other States, done at Washington, March 18, 1965;

(j) “Centre” means the International Centre for Settlement of Investment Disputes Established by the ICSID Convention; and

(k) “UNCITRAL Arbitration Rules” means the arbitration rules of the United Nations Commission on International Trade Law.

ARTICLE II

(b) Neither Party shall in any way impair by unreasonable and discriminatory measures the management, conduct, operation, and sale or other disposition of covered investments.

4. Each Party shall provide effective means of asserting claims and enforcing rights with respect to covered investments.

ARTICLE III

4. If the fair market value is denominated in a currency that is not freely usable, the compensation paid—converted into the currency of payment at the market rate of exchange prevailing on the date of payment—shall be no less than:

(a) the fair market value on the date of expropriation, converted into a freely usable currency at the market rate of exchange prevailing on that date, plus

(b) interest, at a commercially reasonable rate for that freely usable currency, accrued from the date of expropriation until the date of payment.

ARTICLE IV

(a) requisitioning of all or part of such investments by the Party’s forces or authorities, or

(b) destruction of all or part of such investments by the Party’s forces or authorities that was not required by the necessity of the situation.

ARTICLE V

1. Each Party shall permit all transfers relating to a covered investment to be made freely and without delay into and out of its territory. Such transfers include:

(a) contributions to capital;

(b) profits, dividends, capital gains, and proceeds from the sale of all or any part of the investment or from the partial or complete liquidation of the investment;

(d) payments made under a contract, including a loan agreement; and

(e) compensation pursuant to Articles III and IV, and payments arising out of an investment dispute.

2. Each Party shall permit transfers to be made in a freely usable currency at the market rate of exchange prevailing on the date of transfer.

4. Notwithstanding paragraphs 1 through 3, a Party may prevent a transfer through the equitable, non-discriminatory and good faith application of its laws relating to:

(a) bankruptcy, insolvency or the protection of the rights of creditors;

(b) issuing, trading or dealing in securities;

(d) ensuring compliance with orders or judgments in adjudicatory proceedings.

ARTICLE VI

(a) to achieve a particular level or percentage of local content, or to purchase, use or otherwise give a preference to products or services of domestic origin or from any domestic source;

(b) to restrict imports by the investment of products or services in relation to a particular volume or value of production, exports or foreign exchange earnings;

(c) to export a particular type, level or percentage of products or services, either generally or to a specific market region;

(d) to restrict sales by the investment of products or services in the Party’s territory in relation to a particular volume or value of production, exports or foreign exchange earnings;

(f) to carry out a particular type, level or percentage of research and development in the Party’s territory.

Such requirements do not include conditions for the receipt or continued receipt of an advantage.

ARTICLE VII

(b) Neither Party shall, in granting entry under paragraph 1(a), require a labor certification test or other procedures of similar effect, or apply any numerical restriction.

2. Each Party shall permit covered investments to engage top managerial personnel of their choice, regardless of nationality.

ARTICLE VIII

ARTICLE IX

2. A national or company that is a party to an investment dispute may submit the dispute for resolution under one of the following alternatives:

(a) to the courts or administrative tribunals of the Party that is a party to the dispute; or

(b) in accordance with any applicable, previously agreed dispute-settlement procedures; or

3. (a) Provided that the national or company concerned has not submitted the dispute for resolution under paragraph 2 (a) or (b), and that three months have elapsed from the date on which the dispute arose, the national or company concerned may submit the dispute for settlement by binding arbitration:

(i) to the Centre, if the Centre is available; or

(ii) to the Additional Facility of the Centre, if the Centre is not available; or

(iii) in accordance with the UNCITRAL Arbitration Rules; or

(iv) if agreed by both parties to the dispute, to any other arbitration institution or in accordance with any other arbitration rules.

(b) A national or company, notwithstanding that it may have submitted a dispute to binding arbitration under paragraph 3 (a), may seek interim injunctive relief, not involving the payment of damages, before the judicial or administrative tribunals of the Party that is a party to the dispute, prior to the institution of the arbitral proceeding or during the proceeding, for the preservation of its rights and interests.

4. Each Party hereby consents to the submission of any investment dispute for settlement by binding arbitration in accordance with the choice of the national or company under paragraph 3 (a)(i), (ii), and (iii) or the mutual agreement of both parties to the dispute under paragraph 3 (a)(iv). This consent and the submission of the dispute by a national or company under paragraph 3 (a) shall satisfy the requirement of:

(a) Chapter II of the ICSID Convention (Jurisdiction of the Centre) and the Additional Facility Rules for written consent of the parties to the dispute; and

(b) Article II of the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards, done at New York, June 10, 1958, for an “agreement in writing.”

5. Any arbitration under paragraph 3 (a)(ii), (iii) or (iv) shall be held in a state that is a party to the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards, done at New York, June 10, 1958.

8. For purposes of Article 25 (2) (b) of the ICSID Convention and this Article, a company of a Party that, immediately before the occurrence of the event or events giving rise to an investment dispute, was a covered investment, shall be treated as a company of the other Party.

ARTICLE X

ARTICLE XI

This Treaty shall not derogate from any of the following that entitle covered investments to treatment more favorable than that accorded by this Treaty:

(a) laws and regulations, administrative practices or procedures, or administrative or adjudicatory decisions of a Party;

(b) international legal obligations; or

ARTICLE XII

Each Party reserves the right to deny to a company of the other Party the benefits of this Treaty if nationals of a third country own or control the company and:

(a) the denying Party does not maintain normal economic relations with the third country; or

(b) the company has no substantial business activities in the territory of the Party under whose laws it is constituted or organized.

ARTICLE XIII

1. No provision of this Treaty shall impose obligations with respect to tax matters, except that:

(a) Articles III, IX and X will apply with respect to expropriation; and

(b) Article IX will apply with respect to an investment agreement or an investment authorization.

ARTICLE XIV

ARTICLE XV

1. (a) The obligations of this Treaty shall apply to the political subdivisions of the Parties.

2. A Party’s obligations under this Treaty shall apply to a state enterprise in the exercise of any regulatory, administrative or other governmental authority delegated to it by that Party.

ARTICLE XVI

2. A Party may terminate this Treaty at the end of the initial ten year period or at any time thereafter by giving one year’s written notice to the other Party.

3. For ten years from the date of termination, all other Articles shall continue to apply to covered investments established or acquired prior to the date of termination, except insofar as those Articles extend to the establishment or acquisition of covered investments.

4. The Annex and Protocol shall form an integral part of the Treaty.

IN WITNESS WHEREOF, the respective plenipotentiaries have signed this Treaty.

DONE in duplicate at Santiago Chile this 17th day of April, 1998, in the English and Spanish languages, each text being equally authentic.

FOR THE GOVERNMENT FOR THE GOVERNMENT

OF THE UNITED STATES OF THE REPUBLIC OF

OF AMERICA: BOLIVIA

[signature] [signature]

ANNEX

atomic energy; customhouse brokers; licenses for broadcast, common carrier, or aeronautical radio stations; COMSAT; subsidies or grants, including government-supported loans, guarantees and insurance; state and local measures exempt from Article 1102 of the North American Free Trade Agreement pursuant to Article 1108 thereof; and landing of submarine cables.

Most favored nation treatment shall be accorded in the sectors and matters indicated above.

fisheries; air and maritime transport, and related activities; banking, securities, and other non-insurance financial services; and one-way satellite transmissions of direct-to-home (DTH) and direct broadcast satellite (DBS) television services and of digital audio services.

insurance.

4. The Government of the Republic of Bolivia may adopt or maintain exceptions to the obligation to accord national treatment to covered investments in the sectors or with respect to the matters specified below:

the acquisition and/or possession by foreigners, directly or indirectly, through any type of title, of land or subsoil within 50 kilometers of Bolivia’s borders, in so far as required by Article 25 of the Constitution; subsidies or grants, including government-supported loans, guarantees and insurance; and the obligation of foreign construction and consulting companies participating in public sector tenders to associate with one or more Bolivian companies.

Most favored nation treatment shall be accorded in the sectors and matters indicated above.

5. The Government of the Republic of Bolivia may adopt or maintain exceptions to the obligation to accord national and most favored nation treatment to covered investments in the sectors or with respect to the matters specified below:

air transport; transportation on interior navigable waterways; and limitation on foreign equity ownership of international passenger and freight land transportation companies to a maximum of 49 percent.

6. With respect to the leasing of minerals and pipeline rights of way on government lands:

(a) The Government of the Republic of Bolivia agrees to accord national treatment to covered investments, subject to limitations set forth in Article 25 of the Constitution of the Republic of Bolivia;

(b) The Government of the United States of America agrees to accord national treatmen to covered investments, subject to the Mineral Lands Leasing Act.

PROTOCOL

1. The Parties confirm their mutual understanding that advantages given to national suppliers in government procurement programs are not precluded by Article VI.

2. The Government of the Republic of Bolivia confirms that pursuant to the Treaty, Article 3 of the Bolivian Labor Law shall not apply to top managerial personnel.

3. The Parties confirm their mutual understanding that the provisions of Article IX do not apply to government contract disputes, except where (i) such contracts contain investment authorizations, (ii) such contracts constitute investment agreements, or (iii) such disputes arise out of or relate to an alleged breach of any right conferred, created or recognized by this Treaty with respect to a covered investment.

4. With respect to Article XV, paragraph 1(b), the Government of the United States confirms that its federal system of government contains substantial protections against burdens on commerce, including investment by a State of the United States with respect to investors of other States of the United States.

5. The Government of the Republic of Bolivia confirms that joint ventures may be established in Bolivia, including in the areas within 50 kilometers of its borders, without any limitation on the respective capital contributions or proportionate shares of the joint venture partners.

End of tab panel

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Bulgaria Bilateral Investment Treaty

Signed September 23, 1992; Entered into Force June 2, 1994

Prior to the accession of Bulgaria to the European Union, this treaty was amended to reduce the possibility of conflict with the laws of the European Union.
[View Amending Protocol ]

103rd Congress

1st Session

SENATE Treaty Doc.

103-3

TREATY WITH BULGARIA CONCERNING THE ENCOURAGEMENT AND RECIPROCAL PROTECTION OF INVESTMENT

MESSAGE

FROM THE PRESIDENT OF THE UNITED STATES

TRANSMITTING

THE TREATY BETWEEN THE UNITED STATES OF AMERICA AND THE REPUBLIC OF BULGARIA CONCERNING THE ENCOURAGEMENT AND RECIPROCAL PROTECTION OF INVESTMENT, WITH PROTOCOL AND RELATED EXCHANGE OF LETTERS, SIGNED AT WASHINGTON ON SEPTEMBER 23, 1992

JANUARY- 21, 1993 -Treaty was read the first time and, together with the accompanying papers, referred to the Committee on Foreign Relations and ordered to be printed for the use of the Senate

LETTER OF TRANSMITTAL

___________

THE WHITE HOUSE January 19, 1993

To the Senate of the United States

With a view to receiving the advice and consent of the Senate to ratification, I transmit herewith the Treaty Between the United States of America and the Republic of Bulgaria Concerning the Encouragement and Reciprocal Protection of Investment, wiih Protocol and related exchange of letters, signed at Washington on September 23, 1992. I transmit also, for the information of the Senate, the report of the Department of State with respect to this Treaty.

The Treaty will help to encourage U.S. private sector involvement in the Bulgarian economy by establishing a favorable legal framework for U.S. investment in Bulgaria. The Treaty is fully consistent with U.S. policy toward international investment. A specific tenet, reflected in this Treaty, is that U.S. investment abroad and foreign investment in the United States should receive fair, equitable, and nondiscriminatory treatment. Under this Treaty, the Parties also agree to international law standards for expropriation and expropriation compensation; free transfers of funds associated with investments; and the option of the investor to resolve disputes with the host government through international arbitration.

I recommend that the Senate consider this Treaty as soon as possible, and give its advice and consent to ratification of the Treaty, with Protocol and related exchange of letters, at an early date.

GEORGE BUSH.

LETTER OF SUBMITTAL

DEPARTMENT OF STATE

Washington, January 12, 1993.

9300320

The President,

The White House

THE PRESIDENT: I have the honor to submit to you the Treaty Between the United States of America and the Republic of Bulgaria Concerning the Encouragement and Reciprocal Protection of Investment, with Protocol and related exchange of letters, signed at Washington on September 23, 1992. I recommend that this Treaty, with Protocol and related exchange of letters, be transmitted to the Senate for its advice and. consent to ratification.

This marks the fourth bilateral investment treaty (BIT) or business and economic relations treaty that the United States has signed with an Eastern European partner. This Treaty will assist Bulgaria in its transition to a market economy by creating favorable conditions for U.S. private investment, helping to attract such investment and thus strengthening the development of the private sector. It is U.S. policy, however, to advise potential treaty partners that conclusion of a BIT does not necessarily result in immediate increases in private U.S. investment flows.

The United States has also signed BITs with Argentina, Armenia, Bangladesh, Cameroon, the Congo, the Czech and Slovak Federal Republic, Egypt, Grenada, Haiti, Kazakhstan, Morocco, Panama, Romania, Russia, Senegal, Sri Lanka, Tunisia, Turkey and Zaire—and a business and economic relations treaty with Poland, which contains the BIT elements. The Office of the United States Trade Representative and the Department of State jointly lead BIT negotiations, with assistance froni the Departments of Commerce and Treasury.

THE UNITED STATES-BULGARIA TREATY

The Treaty with Bulgaria satisfies the principal BIT objectives, which are:

Investments of nationals and companies of either Party in the territory of the other Party (Investments) receive the better of national treatment or most-favored-nation (MFN) treatment, subject to certain specified exceptions, both on establishment and thereafter;

Investments are guaranteed freedom from performance requirements, including requirements to use local products or to export local goods;

Companies which are investments may hire top managers of their choice, regardless of nationality,

Expropriation can occur only in accordance with international al law standards: in a nondiscriminatory manner, for a public purpose; and upon payment of prompt, adequate, and effective compensation;

Investments are guaranteed the unrestricted transfer of funds in a freely usable currency, and nationals and companies of either Party, in investment disputes with the host government, have access to binding international arbitration, without first resorting to domestic courts.

Described below are significant provisions in the U.S.-Bulgaria Treaty which either differ from some of our past BITs or warrant special mention.

U.S. bilateral investment treaties allow for sectoral exceptions to national and MFN treatment. The U.S. exceptions are designed to protect governmental regulatory interests and to accommodate the derogations from national treatment and, in some cases, MFN treatment in existing federal law. The U.S. exceptions from national treatment are air transportation; ocean and coastal shipping, banking, insurance; government grants; government insurance and loan programs; energy and power production; custom house brokers; ownership of real property, ownership and operation of broadcast or common carrier radio and television stations; ownership of shares in the Communications Satellite Corporation; the provision of common carrier telephone and telegraph services; the provision of submarine cable services; use of land and natural resources; mining on the public domain maritime services and maritime-related services; and primary dealership in United States government securities.

The U.S. exceptions from both national and MFN treatment are ownership of real property, mining on the public domain, maritime services and maritime-related services and primary dealership in U.S. government securities. Except for ownership of real property, MFN exceptions are based on reciprocity provisions in existing federal laws.

The Bulgarian exceptions to national treatment are banking, insurance; ownership of real estate; leases of farm land and forest land, air; rail, and maritime transportation; governmental subsidies; government insurance and loan programs; energy and power production; customs house brokers; provision of telephone and telegraph services; use of land, natural resources, and mining, ownership and operation of broadcast or common carrier radio and television stations; and dealership in securities. Bulgaria has not reserved any sectoral exceptions to MFN treatment.

At the request of Bulgaria, the Treaty includes a Protocol which excludes from consideration as investments certain loans that were extended prior to January 1, 1992 to the Government of Bulgaria for trade finance or balance of payments reasons, and that are subsequently rescheduled in the London Club.

This Treaty, consistent with the model BIT, does not oblige a Party to extend to the other Party’s investments the advantages accorded to third-country investments by virtue of binding obligations that derive from full membership in a free trade area of customs union. This provision ensures MFN treatment for U.S. investments in all cases, where Bulgaria’s relationship with the third country falls short of constituting a free trade area or customs union.

The BIT with Bulgaria contains several provisions designed to resolve problems that U.S. business traditionally has faced in the centrally-controlled, non-market economies of Central and East Europe, and which may continue to impede U.S. investments during the transition to a market economy.

One such provision (Article II (10)) clarifies that nationals and companies of either Party receive the better of national or MFN treatment with respect to an expanded and detailed list of activities associated with their investments. These include: access to registrations, licenses, and permits; access to financial institutions and credit markets; access to their funds held in financial institutions; the importation and installation of business equipment; advertising and the conduct of market studies; the appointment of commercial representatives; direct marketing; access to public utilities; and access to raw materials. The right to the better of national or MFN treatment in these activities requires that Bulgaria grant U.S. nationals and companies treatment no less favorable than that granted to local enterprises, including those that remain under state ownership or control.

The Treaty also provides, in a related exchange of letters, that the Bulgarian Government will designate an entity to assist U.S. nationals and companies overcome problems relating to bureaucracy and lack of knowledge. The entity’s task will include providing up-to-date information on business and investment regulations, collecting and disseminating information regarding investment projects and financing, and coordinating with Bulgarian agencies, at all levels, to facilitate U.S. investment.

The other U.S. Government agencies which negotiated the Treaty join me in recommending that it be transmitted to the Senate at an early date.

Respectfully submitted,

ARNOLD KANTER,

Acting Secretary

TREATY BETWEEN

THE UNITED STATES OF AMERICA AND THE

REPUBLIC OF BULGARIA

CONCERNING THE ENCOURAGEMENT

AND RECIPROCAL PROTECTION OF INVESTMENT

The United States of America and the Republic of Bulgaria (hereinafter the “Parties”);

Desiring to promote greater economic cooperation between them with respect to investment by nationals and companies of one Party in the territory of the other Party;

Recognizing that agreement upon the treatment to be accorded such investment will stimulate the flow of private capital and the economic development of the Parties;

Agreeing that fair and equitable treatment of investment is desirable in order to maintain a stable framework for investment and maximum effective utilization of economic resources;

Recognizing that the development of economic and business ties can contribute to the well-being of workers in both Parties and promote respect for internationally recognized worker rights;

Convinced that a free and open market for investment offers the best opportunity for raising living standards and the quality of life for the inhabitants of the Parties; and

Having resolved to conclude a Treaty concerning the encouragement and reciprocal protection of investment;

Have agreed as follows:

ARTICLE I

1. For the purposes of this Treaty,

(i) tangible and intangible property, including rights such as mortgages, liens and pledges;

(ii) a company or shares of stock or other interests in a company or interests in the assets thereof;

(iii) a claim to money or a claim to performance having economic value, and associated with an investment;

(iv) intellectual property which includes, inter alia, rights relating to:

literary and artistic works, including sound recordings;

inventions in all fields of human endeavor;

industrial designs;

semiconductor mask works;

trade secrets, know-how, and confidential business information;

trademarks, service marks, and trade names; and

(v) any right conferred by law or contract, and any licenses and permits pursuant to law;

(b) “company” of a Party means any kind of corporation, company, association, partnership, state enterprise, or other organization, legally constituted under the laws and regulations of a Party or a political subdivision thereof whether or not organized for pecuniary gain, or privately or governmentally owned or controlled;

(e) “associated activities” include the organization, control, operation, maintenance and disposition of companies, branches, agencies, offices, factories or other facilities for the conduct of business; the making, performance and enforcement of contracts; the acquisition, use, protection and disposition of property of all kinds including intellectual and industrial property rights; the borrowing of funds; the purchase, issuance, and sale of equity shares and other securities; and the purchase of foreign exchange for imports.

(f) “nondiscriminatory” treatment means treatment that is at least as favorable as the better of national treatment or most-favored-nation treatment;

(g) “national treatment” means treatment that is at least as favorable as the most favorable treatment accorded by a Party to companies or nationals of that Party in like circumstances; and

(h) “most-favored-nation treatment” means treatment that is at least as favorable as that accorded by a Party to companies or nationals of third Parties in like circumstances.

3. Any alteration of the form in which assets are invested or reinvested shall not affect their character as an investment.

ARTICLE II

1. Each Party shall permit and treat investment, and activities associated therewith, on a nondiscriminatory basis, subject to the right of each Party to make or maintain exceptions falling within one of the sectors or matters listed in the Annex to this Treaty. Each Party agrees to notify the other Party before or on the date of entry into force of this Treaty of all such laws and regulations of which it is aware concerning the sectors or matters listed in the Annex. Moreover, each Party agrees to notify the other of any future exception with respect to the sectors or matters listed in the Annex, and to limit such exceptions to a minimum. Any future exception by either Party shall not apply to investment existing in that sector or matter at the time the exception becomes effective. The treatment accorded pursuant to any exceptions shall unless specified otherwise in the Annex, be not less favorable than that accorded in like situations to investments and associated activities of nationals or companies of any third country.

(b) Neither Party shall in any way impair by arbitrary or discriminatory measures the management, operation, maintenance, use, enjoyment, acquisition, expansion, or disposal of investments. For purposes of dispute resolution under Article VI and VII, a measure may be arbitrary or discriminatory notwithstanding the fact that a party has had or has exercised the opportunity to review such measure in the courts or administrative tribunals of a Party.

6. Each Party shall provide effective means of asserting claims and enforcing rights with respect to investments, investment agreements, and investment authorizations.

7. Each Party shall make public all laws, regulations, administrative practices and procedures, and adjudicatory decisions that pertain to or affect investments.

8. The treatment accorded by the United States of America to investments and associated activities of nationals and companies of the Republic of Bulgaria under the provisions of this Article shall in any State, Territory or possession of the United States of America be no less favorable than the treatment accorded therein to investments and associated activities of nationals of the United States of America resident in, and companies legally constituted under the laws and regulations of, other States, Territories or possessions of the United States of America.

9. The most-favored-nation provisions of this Treaty shall not apply to advantages accorded by either Party to nationals or companies of any third country by virtue of:

(a) that Party’s binding obligations that derive from full membership in a free trade area or customs union; or

10. The Parties acknowledge and agree that “associated activities” include without limitation, such activities as:

(a) the granting of franchises or rights under licenses;

(b) access to registrations, licenses, permits and other approvals (which shall in any event be issued expeditiously);

(d) access to their funds held in financial institutions;

(f) the dissemination of commercial information;

(g) the conduct of market studies;

(h) the appointment of commercial representatives, including agents, consultants and distributors and their participation in trade fairs and promotion events;

(i) the marketing of goods and services, including through internal distribution and marketing systems, as well as by advertising and direct contact with individuals and companies;

(j) access to public utilities, public services and commercial rental space at nondiscriminatory prices, if the prices are set or controlled by the government; and

(k) access to raw materials, inputs and services of all types at nondiscriminatory prices, if the prices are set or controlled by the government.

ARTICLE III

1. Investments shall not be expropriated or nationalized either directly or indirectly through measures tantamount in their consequences to expropriation or nationalization (“expropriation”) except: for a public purpose; in a nondiscriminatory manner; upon payment of prompt, adequate and effective compensation; and in accordance with due process of law and the general principles of treatment provided for in Article II (2). Compensation shall be equivalent to the fair market value of the expropriated investment immediately before the expropriatory action was taken or became known, whichever is earlier; be paid without delay; include interest at a commercially reasonable rate from the date of expropriation; be fully realizable; and be freely transferable at the prevailing market rate of exchange on the date of expropriation.

3. Nationals or companies of either Party whose investments suffer losses in the territory of the other Party owing to war or other armed conflict, revolution, state of national emergency, insurrection, civil disturbance or other similar events shall be accorded nondiscriminatory treatment by such other Party as regards any measures it adopts in relation to such losses.

ARTICLE IV

1. Each Party shall permit all transfers related to an investment to be made freely and without delay into and out of its territory. Such transfers include: (a) returns; (b) compensation pursuant to Article III; (c) payments arising out of an investment dispute; (d) payments made under a contract, including amortization of principal and accrued interest payments made pursuant to a loan agreement; (e) proceeds from the sale or liquidation of all or any part of an investment; and (f) additional contributions to capital for the maintenance or development of an investment.

2. Except as provided in Article III (1), transfers shall be made in a freely usable currency at the prevailing market rate of exchange on the date of transfer with respect to spot transactions in the currency to be transferred.

ARTICLE V

ARTICLE VI

1. For the purposes of this Article, an investment dispute is defined as a dispute involving (a) the interpretation or application of an investment agreement between a Party and a national or company of the other Party; (b) an alleged breach of any right conferred or created by this Treaty with respect to an investment; or (c) the interpretation or application of any investment authorization granted by a Party’s foreign investment authority to such national or company, provided that the denial of an investment authorization shall not in itself constitute an investment dispute unless such denial involves an alleged breach of any right conferred or created by the Treaty.

2. In the event of an investment dispute between a Party and a national or company of the other Party, the parties to the dispute shall initially seek to resolve the dispute by consultation and negotiation, which may include the use of nonbinding, third party procedures. Subject to paragraph 3 of this Article, if the dispute cannot be resolved through consultation and negotiation, the dispute shall be submitted for settlement in accordance with previously agreed, applicable disputesettlement procedures; any disputeent procedures including those relating to expropriation and specified in the investment agreement shall remain binding and shall be enforceable in accordance with the terms of the investment agreement, relevant provisions of domestic laws, and applicable international agreements regarding enforcement of arbitral awards.

3. (a) At any time after six months from the date on which the dispute arose, the national or company concerned may choose to consent in writing to the submission of the dispute for settlement by conciliation or binding arbitration to the International Centre for the Settlement of Investment Disputes (“Centre”) or to the Additional Facility of the Centre or pursuant to the Arbitration Rules of the United Nations Commission on International Trade Law (“UNCITRAL”) or pursuant to the arbitration rules of any arbitral institution mutually agreed between the parties to the dispute. Once the national or company concerned has so consented, either party to the dispute may institute such proceeding provided:

(i) the dispute has not been submitted by the national or company for resolution in accordance with any applicable previously agreed disputesettlement procedures; and

If the parties disagree over whether conciliation or binding arbitration is the more appropriate procedure to be employed, the opinion of the national or company concerned shall prevail.

(b) Each Party hereby consents to the submission of an investment dispute for settlement by conciliation or binding arbitration:

(i) to the Centre, in the event that the Republic of Bulgaria becomes a party to the Convention on the Settlement of Investment Disputes Between States and Nationals of Other States done at Washington, March 18, 1965 (“Convention”) and the Regulations and Rules of the Centre;

(ii) to the Additional Facility of the Centre; and

(iii) to an arbitral tribunal established under the UNCITRAL Rules, the appointing authority referenced therein to be the Secretary General of the Centre.

(c) Conciliation or arbitration of disputes under (b)(i) or (b)(ii) shall be done applying the provisions of the Convention and the Regulations and Rules of the Centre, or of the Additional Facility as the case may be.

(d) The place of any arbitration conducted under this Article shall be a country which is, at the time of the arbitration, a party to the 1958 United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards.

4. In any proceeding involving an investment dispute, a Party shall not assert, as a defense, counterright of setf or otherwise, that the national or company concerned has received or will receive, pursuant to an insurance or guarantee contract, indemnification or other compensation for all or part of its alleged damages.

5. For the purposes of this Article, any company legally constituted under the applicable laws and regulations of either Party or a political subdivision thereof but that, immediately before the occurrence of the event or events giving rise to the dispute, was an investment of nationals or companies of the other Party, shall, in accordance with Article 25(2)(b) of the Convention, be treated as a national or company of such other Party.

ARTICLE VII

4. Expenses incurred by the Chairman, the other arbitrators, and other costs of the proceedings shall be paid for equally by the Parties. Each Party shall bear the costs of its legal representation.

ARTICLE VIII

The provisions of Article VI and VII shall not apply to a dispute arising (a) under the export credit, guarantee or insurance programs of the Export-Import Bank of the United States or, (b) under other official credit, guarantee or insurance arrangements pursuant to which the Parties have agreed to other means of settling disputes.

ARTICLE IX

This Treaty shall not derogate from:

(a) laws and regulations, administrative practices or procedures, or administrative or adjudicatory decisions of either Party;

(b) international legal obligations; or

(c) obligations assumed by either Party, including those contained in an investment agreement or an investment authorization, that entitle investments or associated activities to treatment more favorable than that accorded by this Treaty in like situations.

ARTICLE X

ARTICLE XI

1. With respect to its tax policies, each Party should strive to accord fairness and equity in the treatment of investment of nationals and companies of the other Party.

2. Nevertheless, the provisions of this Treaty, and in particular Article VI and VII, shall apply to matters of taxation only with respect to the following:

(a) expropriation, pursuant to Article III;

(b) transfers, pursuant to Article IV; or

(c) the observance and enforcement of terms of an investment agreement or authorization as referred to in Article VI(l)(a) or (b), to the extent they are not subject to the dispute settlement provisions of a Convention for the avoidance of double taxation between the two Parties, or have been raised under such settlement provisions and are not resolved within a reasonable period of time.

ARTICLE XII

This Treaty shall apply to the political subdivisions of the Parties.

ARTICLE XIII

2. Either Party may, by giving one year’s written notice to the other Party, terminate this Treaty at the end of the initial ten year period or at any time thereafter.

4. The Annex and Protocol shall form an integral part of the Treaty.

IN WITNESS WHEREOF, the respective plenipotentiaries have signed this Treaty.

DONE in duplicate at Washington on the twenty-third day of September, 1992, in the English and Bulgarian languages, both texts being equally authentic.

FOR THE UNITED STATES

OF AMERICA:

[signature]

FOR THE REPUBLIC OF

BULGARIA:

[signature]

ANNEX

1. The United States reserves the right to make or maintain limited exceptions to national treatment, as provided in Article II, paragraph 1, in the sectors or matters it has indicated below:

air transportation; ocean and coastal shipping; banking; insurance; government grants; government insurance and loan programs; energy and power production; custom house brokers; ownership of real property; ownership and operation of broadcast or common carrier radio and television stations; ownership of shares in the Communications Satellite Corporation; the provision of common carrier telephone and telegraph services; the provision of submarine cable services; use of land and natural resources; mining on the public domain; maritime services and maritime-related services; and primary dealership in United States government securities.

ownership of real property; mining on the public domain; maritime services; maritime-related services; and primary dealership in United States government securities.

3. Bulgaria reserves the right to make or maintain limited exceptions to national treatment, as provided in Article 11, paragraph 1, in the sectors or matters it has indicated below:

banking; insurance; ownership of real estate; leases of farm land and forest land; air, rail, and maritime transportation; governmental subsidies; government insurance and loan programs; energy and power production; customs house brokers; provision of telephone and telegraph services; use of land, natural resources, and mining; ownership and operation of broadcast or common carrier radio and television stations; and dealership in government securities.

PROTOCOL

With respect to Article 1, paragraph l(a), the Parties confirm their mutual understanding that investments covered by this Treaty will not include loans that were extended prior to January 1, 1992 to the Government of the Republic of Bulgaria, or to banks owned or controlled by the Government of Bulgaria, including, inter alia, the Foreign Trade Bank, for trade finance or balance of payments purposes, and that are subsequently rescheduled in the London Club.

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Cameroon Bilateral Investment Treaty

Signed February 26, 1986; Entered into Force April 6, 1989

99th CONGRESS 2nd Session

SENATE TREATY DOC. 99-22

INVESTMENT TREATY WITH CAMEROON

MESSAGE

FROM

THE PRESIDENT OF THE UNITED STATES

TRANSMITTING

THE TREATY BETWEEN THE UNITED STATES OF AMERICA AND THE REPUBLIC OF CAMEROON CONCERNING THE RECIPROCAL ENCOURAGEMENT AND PROTECTION OF INVESTMENT, SIGNED AT WASHINGTON ON FEBRUARY 26, 1985

JUNE 2, 1986. Treaty was read the first time, and together with the accompanying papers, referred to the Committee on Foreign Relations and ordered to be printed for use of the Senate

U.S. GOVERNMENT PRINTING OFFICE

WASHINGTON : 1986

LETTER OF TRANSMITTAL

THE WHITE HOUSE, May 22,1986.

To the Senate of the United States.

With a view to receiving the advice and consent of the Senate to ratification, I transmit herewith the Treaty between the United States of America and the Republic of Cameroon concerning the Reciprocal Encouragement and Protection of Investment, signed at Washington on February 26, 1986. I transmit also, for the information of the Senate, the report of the Department of State with respect to this treaty.

The Bilateral Investment Treaty (BIT) program, initiated in 1981, is designed to encourage and protect U.S. investment in developing countries. The treaty is an integral part of U.S. efforts to encourage Cameroon and other governments to adopt macroeconomic and structural policies that will promote economic growth. It is also fully consistent with U.S. policy toward international investment. That policy holds that an open international investment system in which participants respond to market forces provides the best and most efficient mechanism to promote global economic development. A specific tenet, reflected in this treaty, is that U.S. direct investment abroad and foreign investment in the United States should receive fair, equitable, and nondiscriminatory treatment. Under this treaty, the parties also agree to international law standards for expropriation and compensation; free financial transfers; and procedures, including international arbitration, for the settlement of investment disputes.

I recommend that the Senate consider this treaty as soon as possible, and give its advice and consent to ratification of the treaty at an early date.

RONALD REAGAN.

LETTER OF SUBMITTAL

DEPARTMENT OF STATE

Washington, May 6, 1986 .

The PRESIDENT,

The White House.

THE PRESIDENT: I have the honor to submit to you the Treaty between the United States of America and the Republic of Cameroon concerning the Reciprocal Encouragement and Protection of Investment, signed at Washington, February 26, 1986. I recommend that this treaty be transmitted to the Senate for its advice and consent to ratification.

Also enclosed for information only is a related exchange of letters between the parties, the first an inquiry by the United States dated November 27, 1984 and the second a response, from Cameroon, signed in Yaounde and dated April 7, 1986.

This treaty was negotiated under the bilateral investment treaty (BIT) program which you initiated in 1981. Development of the BIT program and the negotiation of the individual treaties have been pursued by the Office of the United States Trade Representative and the Department of State with the active participation of the Departments of Commerce and Treasury, in conjunction with other interested U.S. Government agencies. On March 25 this year, the first six BITs—with Haiti, Morocco, Panama, Senegal, Turkey, and Zaire—were submitted to the Senate for its advice and consent to .ratification. Additional BITs, with Bangladesh and Egypt, are being prepared for submission to the Senate.

The BITs which have been signed as well as others under negotiation are an integral part of U.S. efforts to encourage other governments to adopt macroeconomic and structural policies that will promote economic growth. They are also fully consistent with your policy statement on international investment of September 9, 1983, which states that international direct investment flows should be determined by private market forces and should receive fair, equitable and nondiscriminatory treatment.

Our experience to date has shown that interested countries are willing to provide U.S. investors with significant investment guarantees and assurances as a way of inducing additional investment. It is U.S. policy to advise potential treaty partners that conclusion of a BIT with the United States is an important and favorable factor in the investment relationship, but does not in and of itself result in immediate increase in U.S. investment flows.

Congressional support for the BIT program is reflected in Section 601(a) and (b) of the Foreign Assistance Act, as amended, in particular at Section 601(b) which provides:

In order to encourage and facilitate participation by private enterprise to the maximum extent practicable in achieving any of the purposes of this Act, the President shall … (3) accelerate a program of negotiating treaties for commerce and trade, including tax treaties, which shall include provisions to encourage and facilitate the flow of private investment to, and its equitable investment in, friendly countries and participating in programs under this Act.

BITS are consistent in purpose with the network of treaties of Friendship, Commerce and Navigation (FCNA) which the United States, negotiated from the early years of the Republic until the last successful negotiations with Thailand and Togo in the late 1960s. They continue the U.S. policy of securing by agreement standards of equitable treatment and protection of U.S. citizens carrying on business abroad, and institutionalizing processes for the settlement of disputes between investors and host countries, and between governments. We expect that a series of bilateral treaties with interested countries will establish greater international discipline in the investment area.

Our BIT approach followed similar programs that had been undertaken with considerable success by a number of European countries, including the Federal Republic of Germany and the United Kingdom, since the early 1960s. Indeed, our industrialized partners already have nearly two hundred BITs in force, primarily with developing countries. Our treaties, which draw upon language as well as European counterparts, are more comprehensive and far-reaching than European BITS.

The U..S-Cameroon Treaty

The treaty with Cameroon was negotiated by an inter-agency team led by officials from the Office of the United States Trade Representative and the Department of State. The treaty satisfies all four main BIT objectives:

-foreign investors are to be accorded treatment in accordance with international law and are to be treated no less favorably than investors of the host country or no less favorably than investors of third countries, whichever is the most favorable treatment (“national” or “most-favored-nation” treatment) subject to certain specified exceptions;

-international law standards shall apply to the expropriation of investments and to the payment of compensation for expropriation;

-free transfers shall be afforded to funds associated with an investment into and out of the host country; and procedures are to be established which allow an investor to a dispute with a Party directly to binding third-party arbitration.

The provisions on treatment of foreign investment and arbitration, and in particular Cameroon’s acceptance of international law as the governing law, mark an important achievement for the BIT program and our investment and international arbitration policies.

Some provisions of the treaty with Cameroon differ in minor respects from the U.S. model text. In general, however, the treaty closely follows the language contained in the U.S. model text, the most significant provisions of which are as follows.

The model BIT’s definition section clarifies terms such as “company of a Party” and “investment.” The BIT concept of “investment” is broad and designed to be flexible; although numerous types of economic interests are enumerated, the intent is to include all legitimate interests in the territory of either Party whether directly, or indirectly controlled by nationals of the other, having economic value or “associated” with an investment. Protected “companies of a Party” are those incorporated or otherwise organized under the laws of a Party in which nationals of that party have a substantial interest.

The model BIT accords the better of national or most-favored-nation (MFN) treatment to foreign investment, subject to each Party’s exceptions which are listed in a separate Annex. The exceptions are designed to protect state regulatory interests and for the United States to accommodate the derogations from national treatment in state or federal law relating to such areas as air transport, shipping, banking, telecommunications, energy and power production, insurance, and from national and MFN treatment in the case of ownership of real property. Any additional restrictions or limitations which a Party may adopt with respect to those matters or sectors excepted from the standards are not to affect existing investments. The BIT also includes general treatment protections designed to be a guide to interpretation and application of the treaty. Thus, the Parties agree to accord investments “fair and equitable treatment” and “full protection and security” in no case “less than that required by international law.” It specifically grants nationals of a Party the right to establish investments in the territory of the other Party, restricts the right to impose performance requirements, and obliges Parties to observe their contractual obligations with investors. The U.S. model also provides that companies legally constituted under the laws of the other Party (i.e. subsidiaries of companies of a Party) with investments in that country shall be permitted to engage “top managerial personnel of their choice, regardless of nationality.”

The model BIT also confers protection from unlawful interference with property interests and assures compensation in accordance with international law standards. It provides that any direct or indirect taking must be: for a public purpose, nondiscriminatory; accompanied by the payment of prompt, adequate and effective compensation; and in accordance with due process of law and the general standards of treatment discussed above. The BIT’s definition of “expropriation” is broad and flexible; essentially “any measure” regardless of form, which the effect of depriving an investor of his management, control or economic value in a project may constitute an expropriation requiring compensation equal to the “fair market value.” Such compensation, which “shall not reflect any reduction in such fair market value due to the expropriatory action,” must be “without delay,” “effectively realizable, freely transferable and bear current interest from the date of the expropriation … ” The BIT grants the right to “prompt review” by the relevant judicial or administrative authorities in order to determine whether the compensation offered is consistent with these principles. It also extends national and MFN treatment to investors in cases of loss due to war or other civil disturbance. The BIT does not provide, however, a specific valuation method for compensating such losses.

The model BIT provides for free transfers “related to an investment,” specifically of returns, compensation for expropriation, contract payments, proceeds from sale, and contributions to capital for maintenance or development of an investment. Such transfers are to be made in a “freely convertible currency at the prevailing market rate of exchange on the date of transfer with respect to spot transactions in the currency to be transferred.” The model text recognizes that notwithstanding this guarantee Parties can maintain certain laws, regulations, or court-imposed obligations which could affect the disposition of investment assets. In particular, the model text provides that Parties can require reports of currency transfers and impose income taxes by such means as a withholding tax on dividends. The model text also recognizes that Parties retain the right to protect the rights of creditors and ensure the satisfaction of judgments in adjudicatory proceedings.

The model BIT provides that where certain defined investment disputes arise between a Party and a national or company of the other Party, including disputes as to the interpretation of an investment agreement, and the dispute cannot be solved through negotiation, it may be submitted to arbitration in accordance with any dispute settlement procedures to which the national or company and the host country have previously agreed. Unless the national or company has submitted the dispute to previously agreed dispute settlement procedures or to adjudication by domestic courts or other tribunals of the host country, the national or company may submit the dispute to the International Centre for the Settlement of Investment Disputes (“ICSID”) for binding arbitration. Exhaustion of local remedies is not required. In a separate provision, the BIT Parties also agree to grant nationals and companies of the other Party access to their domestic courts in order to assert claims and enforce rights with respect to investments.

The model BIT exhorts Parties to apply their tax policies fairly and equitably. Because the United States specifically addresses tax matters in tax treaties, the BIT generally excludes such matters. Another BIT provision exempts disputes arising under Export-Import Bank programs, or other credit guarantee or insurance arrangements providing for alternative dispute settlement arrangements, from the standard BIT arbitration clauses. The model BIT also states that the treaty shall not derogate from any obligations that require more favorable treatment of investments and declares that the treaty shall not preclude measures necessary for public order or essential security interests. The model BIT enters into force 30 days after exchange of ratifications and continues in force for at least ten years. Thereafter, either Party may terminate the treaty, subject to one year’s written notice.

Some of the provisions of the U.S.-Cameroon treaty differ in minor respects from the U.S. negotiating text, although none of the changes represent substantive departures from U.S. objectives. The more significant modifications are as follows:

(1) Expropriation (Article III): The treaty with Cameroon is substantively identical to the model text with respect to what constitutes an expropriation and the compensation due under international law in such cases. This treaty provides, however, for payment of interest in such cases at a rate equivalent to “current international rates,” instead of the “commercially reasonable rate” provided for in the model text. In addition, this treaty provides that compensation for expropriation shall be freely transferable at the “rate of exchange generally used by the IMF” on the date of expropriation. The model text provides for such payments at the “prevailing market rate of exchange on the date of expropriations.” Both of these changes were made in response to concerns by the Cameroonians and neither is intended to be substantive.

(2) Transfers (Article V): The treaty’s transfers provisions are generally similar in substance to the model text and provide for free transfer of funds associated with an investment in freely convertible currency, without delay, at prevailing market exchange rates. There are two minor deviations in the Cameroonian text:

(a) The model text provides that transfers shall be permitted at “the prevailing market rate of exchange,” while the treaty with Cameroon refers to “the prevailing exchange rate generally used by the IMF;” and

(b) The treaty with Cameroon provides that in the case of investments in Cameroon, if the free currency of the investor’s choice is unavailable, transfers will be permitted in the currency or currencies in which the investment was constituted or in any other freely convertible currency.

(3) Dispute settlement/Arbitration (Article VII). Dispute settlement provisions closely follow those in the model text. In the absence of other dispute settlement procedures specified in an investment agreement between a Party and an investor, investors covered under the treaty have recourse to binding arbitration—through the International Centre for the Settlement of Investment Disputes (ICSID).

The treaty with Cameroon contains a provision, not contained in the model text, which states that investors will not be entitled to compensation “for more than the value of its affected investment …” This reponds to Cameroonian concerns that investors not be compensated, through insurance or otherwise, in excess of actual losses incurred.

(4) Compensation for Damages (Article IV): Unlike the model text, the treaty with Cameroon specifically states that in the case of damages caused by war or similar events, “both Parties agree” that no compensation is owed to nationals or companies responsible for damage to their own investment.” The model treaty implicitly denies compensation for damages in such cases.

(5) Consultations (Article VI): Unlike the model text, the treaty with Cameroon provides that consultations shall be held to resolve any disputes related to the treaty at the request of either Party. The treaty goes beyond the model text provision by:

(a) allowing Parties to request consultations on the ground that their international interests are or are likely to be affected by investment related laws, practices, or policies of the other Party; and

(b) including a provision that in order to assess the effectiveness of the treaty in encouraging and protecting investments, consultations “could” take place periodically between the two Parties. This provision, which does not represent a firm obligation, was included in response to Cameroon’s desire to include a formal joint economic commission as an element of the treaty, a proposal which the United States did not accept.

(6) Employment Rights (Article 11 5(b)): In the model text, investors have the right to engage top managerial personnel “regardless of nationality.” In this treaty, the phrase “regardless of nationality” is qualified by a cross-reference to each Party’s laws relating to the entry and sojourn of aliens. The Cameroonians insisted on this clarification to insure that “regardless of nationality” would not permit entry into Cameroon of South Africans or certain other nationalities which the Cameroonian Government wishes to exclude. The “regardless of nationality” phrase has been included in the model text to insure that companies of a Party investing in the United States comply with U.S. anti-discrimination employment laws in their hiring practices. Although this phrase has not been included in the provision of Article II 5(b) which permits investors to hire technical, professional and managerial personnel of their choice, it is understood that the right to hire such personnel nevertheless remains subject to U.S. anti-discrimination employment laws.

(7) Entry into Force (Article XIII): Paragraph two of Article XIII of the treaty with Cameroon provides that the treaty will enter into force 30 days after the Parties have notified each other that “the constitutional procedures required for ratification in their respective countries have been completed.” The U.S. will seek assurances that this means that entry into force will take place 30 days after exchange of instruments of ratification, as is provided in the model text.

(8) Taxation (Article XI): The model text provides that the disdispute settlement provisions of the BIT apply only to certain matters of taxation expressly mentioned in the treaty. This clause was deemed unnecessary and was omitted at the request of the Cameroonian negotiators. Instead, the treaty with Cameroon expressly provides that the provisions on treatment of investment and consultation between the Parties do not apply to taxation matters. This clause responds to U.S. concerns that neither Party be deemed to be under obligations either to grant national treatment or to engage in consultations with respect to matters of taxation. Under U.S. law and policy, such issues are negotiated in the context of bilateral income tax treaties.

At the request of U.S. negotiators, Cameroon has confirmed in a letter signed in Yaounde and dated April 7, 1986, that PECTEN, a Cameroonian subsidiary of Shell Oil Company, is considered to be a U.S. firm covered under the Treaty. This exchange of letters is enclosed with this report for information only.

Submission of this treaty marks a significant development in our international investment policy. I join with the United States Trade Representative and other U.S. Government agencies in supporting this treaty and favor its transmission to the Senate at an early date.

Respectfully submitted,

Enclosure: As stated.

TREATY BETWEEN THE UNITED STATES OF AMERICA AND THE REPUBLIC OF CAMEROON CONCERNING THE RECIPROCAL ENCOURAGEMENT AND PROTECTION OF INVESTMENT

The United States of America and the Republic of Cameroon (each hereinafter referred to as a “Party”),

Desiring to promote greater mutual economic cooperation between them, particularly with respect to investments by nationals and companies of one Party in the territory of the other Party; and

Recognizing that agreement upon the treatment to be accorded such investments will stimulate the flow of private capital and the economic development of both Parties,

Aware that fair and equitable treatment would contribute to maintaining a stable framework for investment in order to facilitate the maximum effective utilization of economic resources,

Have resolved to conclude a treaty concerning the encouragement and reciprocal protection of investments, and

Have agreed as follows:

ARTICLE I

Definitions

1. For the purpose of this Treaty,

(a) “Company of a Party means any kind of juridical entity including any corporation, company, association, or other organization, legally constituted under the laws and regulations of a Party or a political subdivision thereof whether or not organized for pecuniary gain, or privately or governmentally owned;

(b) “Investment” means every kind of asset in the territory of either Party, owned or controlled directly or indirectly by nationals or companies of either party, including equity, debt, service and investment contracts; and includes:

(i) tangible and intangible property, including rights, such as mortgages, liens and pledges;

(ii) all or part of the shares of stock or other interests in a company or interests in the assets thereof;

(iii) a claim to money or a claim to performance having economic value, and associated with an investment;

(iv) intellectual and industrial property rights, including rights with respect to copyrights, patents, trademarks, trade names, industrial designs, trade secrets and know-how, and goodwill; and

(v) any right conferred by law or contract and all permits and licenses such as those required for the exploitation of natural resources;

(c) “Return” means any amount derived directly or indirectly from an investment, including profits; dividends; interest; capital gains; royalty payment; management, technical assistance or other fee; and payments in kind;

(d) “National” of a Party means a natural person who is a national of a Party under its laws and regulations;

(e) “Own or control” means ownership or control that is direct or indirect, including ownership or control exercised through subsidiaries of, affiliates, wherever located;

(f) “Territory” means all the territory of country recognized by international law.

2. Any assets or returns invested or reinvested are also considered as investment.

3. Each Party reserves the right to deny to any of its own companies or to a company of the other Party the advantages of this Treaty; if nationals of any third country own or control such company. However, if one Party believes that the benefits of this Treaty should not be extended to a company of the other Party for this reason, it shall promptly consult with the other Party to seek a mutually satisfactory resolution.

ARTICLE II

Encouragement and Treatment of Investment

1. Each Party shall endeavor to maintain a favorable environment for existing or new investments in its territory by nationals and companies of the other Party and shall permit such investments be acquired and established on terms and conditions that accord treatment no less favorable than the treatment it accords in like situations to investment of its own nationals or companies or to nationals and companies of any third country, whichever is most favorable.

2. Each Party shall accord existing or new investments in its territory, and associated activities related to these investments, of nationals or companies of the other Party treatment no less favorable than that which it accords in like situations to investments and associated activities of its own nationals or companies, or nationals or companies of any third country, whichever is the most favorable. Associated activities related to an investment include, but are not limited to:

(i) the establishment, control and maintenance of branches, agencies, offices, factories or other facilities for the conduct of business;

(ii) the organization of companies under applicable laws and regulations; the acquisition of companies or interests in companies or in their property; and the management, control, maintenance, use, enjoyment and expansion and the sale, liquidation, dissolution or other disposition, of companies organized or acquired

(iii) the making, performance and enforcement of contracts related to investment;

(iv) the acquisition (whether by purchase, lease or any other legal means), ownership and disposition (whether by sale, testament or any other legal means) of personal property of all kinds, both tangible and intangible.

3. (a) Notwithstanding the preceding provisions of this Article, each Party reserves the right to maintain limited exceptions to the standard of treatment otherwise required if such exceptions fall within one of the sectors or matters listed in the Annex to this Treaty. Each Party agrees to notify the other Party of any future exceptions falling within the sectors or matters listed in the Annex, and to limit as much as possible the number of exceptions. It is understood the treatment accorded pursuant to this subparagraph shall not be less favorable than that accorded in like situations to investments and associated activities of nationals or companies of any third country, except with respect to ownership of real property. Rights to engage in mining on the public domain shall dependent on reciprocity.

(b) No exception introduced after the date of entry into force of this treaty shall apply to investments of nationals or companies of the other Party existing in that sector at the time the exception becomes effective.

4. Investment of nationals and companies of either Party shall at all Arial be accorded fair and equitable treatment and shall enjoy full protection and security in the territory of the other Party. The treatment, protection and security of investment shall be in accordance with applicable national laws and international law. Neither Party shall in any way impair by arbitrary and discriminatory measures the management, operation, maintenance, use, enjoyment, acquisition, expansion, or disposal of investment made by nationals or companies of the other Party. Each Party shall observe any obligation it may have entered into with regard to investment of nationals or companies of the other Party.

5. (a) Subject to the laws relating to the entry and sojourn of aliens, nationals of either Party shall be permitted to enter and to remain in the territory of the other Party for the purpose of establishing, developing, directing, administering or advising on the operation of an investment to which they, or a company of the first Party that employs them, have committed or are in the process of committing a substantial amount of capital or other resources.

(b) Nationals and companies of either Party shall be permitted to engage, within the territory of the other Party, professional, technical and managerial personnel of their choice, for the particular purpose of rendering professional, technical and managerial assistance necessary for the planning and operation of investments. Companies which are incorporated, constituted, or otherwise organized under the applicable laws or regulations of one Party, and which are owned or controlled by nationals or companies of the other Party, shall be permitted to engage, within the territory of the first Party, top managerial personnel of their choice, regardless of nationality, subject to the provisions of paragraph 5(a) above.

6. Neither Party shall impose performance requirements as a condition of establishment, expansion or maintenance of investments owned by nationals or companies of the other Party, which require or enforce commitments to export goods produced locally, or which specify that goods or services must be purchased locally, or which impose any other similar requirements.

7. Each Party recognizes that in order to maintain a favorable environment for investments in its territory by nationals or companies of the other Party, it shall provide effective means of asserting claims and enforcing rights with respect to investment agreements, investment authorizations and properties. Each Party shall grant to nationals or companies of the other Party, on terms and conditions no less favorable than those which it grants in like situations to its own nationals or companies or to nationals and companies of any third country, whichever is the most favorable treatment, the right of access to its courts of justice, administrative tribunals and agencies, and all other bodies exercising adjudicatory authority, and the right to employ persons of their choice, who otherwise qualify under applicable laws and regulations of the forum for the purpose of asserting claims, and enforcing rights, with respect to their investments.

8. Each Party and its political or administrative subdivisions shall make public all laws, regulations, administrative practices and procedures, and adjudicatory decisions that pertain to or affect investments in its territory of nationals or companies of the other Party.

9. The treatment accorded by a Party to nationals or companies of the other Party under the provisions of paragraphs 1 and 2 of this article shall in any State, Territory, possession, or political or administrative subdivision of the Party be the treatment accorded therein to companies incorporated, constituted or otherwise duly organized in other States, Territories, possessions, or political or administrative subdivisions of the said Party.

ARTICLE III

Compensation for Expropriation

1. Investments shall not be expropriated or nationalized either directly or indirectly except for a public purpose and in accordance with due process of law and the principles enunciated in paragraph 4 of Article II. Such expropriations or nationalizations give right to prompt, adequate and effective compensation corresponding to the fair market value of the investments as of the day before the measures were taken, or, as the case may be, as of the day before the measures contemplated were made public. Such compensation shall include interest at a rate equivalent to current international rates from the date of expropriation or nationalization; it shall be paid without delay and be freely transferable at the rate of exchange generally used by the IMF on that date.

2. A national or company of either Party that asserts that all or part of its investment has been expropriated shall have a right to prompt review by the appropriate administrative or judicial authorities of the other Party to determine whether any such expropriation has occurred and, if so, whether such expropriation, and compensation therefor, conforms to the provisions of the preceding paragraph.

ARTICLE IV

Compensation for Damages Due to War and Similar Events

1. Nationals or companies of one Party whose investments in the territory of the other Party suffer

(a) damages due to war or other armed conflict between such other Party and a third country or

(b) damages due to revolution, state of national emergency, revolt, insurrection, riot or act of terrorism in the territory of such other Party,

shall be accorded treatment no less favorable than that which the other Party accords to its own nationals or companies or to nationals or companies of any third country, whichever is the most favorable treatment, when making restitution, indemnification, compensation or other appropriate settlement with respect to such damages. Both Parties agree that no compensation is owed to nationals or companies responsible for damage to their own investments.

2. In the event that such damages result from:

(a) a requisitioning of property by the other Party’s forces or authorities, or

(b) destruction of property by the other Party’s forces or authorities which was not caused in combat action or was not required by the necessity of the situation,

the national or company shall be accorded restitution or adequate compensation consistent with Article III.

3. The payment of any indemnification, compensation or other appropriate settlement pursuant to this Article shall be freely transferable.

ARTICLE V

Transfers

1. Each Party shall permit all transfers related to an investment in its territory of a national or company of the other Party to be made freely and without delay into and out of its Territory. Such transfers include, among others, the following: returns; compensation; payments made arising out of a dispute concerning an investment; payments made under a contract, including amortization of principal and accrued interest payments made pursuant to a loan agreement; amounts to cover expenses relating to the management of the investment; royalties and other payments derived from licenses; franchises or other grants of rights or from administrative or technical assistance agreements, including management fees; proceeds from the sale of all or any part of an investment and from the partial or complete liquidation of the company concerned, including any incremental value; additional contributions to capital necessary or appropriate for the maintenance or development of an investment.

2. Except as provided in Article III paragraph 1, transfers shall be at the prevailing rate of exchange generally used by the IMF on the date of transfer in the currency or currencies to be transferred.

(a) The Republic of Cameroon assures that such transfers shall be permitted in the currency or currencies, in which the investment was constituted, or in the absence of such currency or currencies in any other freely convertible currency.

(b) The United States assures that such transfers shall be permitted in any freely convertible currency.

3. Notwithstanding the preceding paragraphs, either Party may maintain laws and regulations: (a) prescribing transfers procedures provided such procedures are carried out expeditiously and do not derogate from the provisions in paragraphs 1 and 2; (b) requiring reports of currency transfer; and (c) imposing income taxes by such means as a withholding tax applicable to dividends or other transfers. Furthermore, either Party may protect the rights of creditors, or ensure the satisfaction of judgments in adjudicatory proceedings, through the equitable and nondiscriminatory application of its law.

ARTICLE VI

Consultations and Exchange of Information

1. The Parties, upon the written request of one of them, shall promptly hold consultations for the purpose of discussing the interpretation of application of the Treaty or to resolve any disputes in connection therewith. Consultations shall be held should one Party request consultations on grounds that its international interests are or are likely to be adversely affected by laws, regulations, administrative practices or procedures, adjudicatory decisions, or policies of the other Party that pertain to or affect investments of its nationals or companies in the territory of such other Party, including conditions imposed on establishment.

2. If one Party requests in writing that the other Party supply information in its possession concerning investments in its territory by nationals or companies of the Party making the request, then the other Party shall, consistent with its applicable laws and regulations and with due regard for business confidentiality, endeavor to establish appropriate procedures and arrangements for the provision of any such information.

3. Furthermore, in order to assess the effectiveness of this Treaty in encouraging and protecting investments, consultations could take place periodically between the two parties.

ARTICLE VII

Settlement of Investment Disputes Between One Party and a National or Company of the Other Party

1. For purposes of this Article, an investment dispute is defined as a dispute involving:

(i) the interpretation or application of an investment agreement between one Party and a national or company of the other Party;

(ii) the interpretation or application of any investment authorization granted by the foreign investment authorities of one Party to the national or company of the other Party;

(iii) an alleged breach of any right conferred or created by this Treaty with respect to an investment.

2. In the event of an investment dispute between a Party and a national or company of the other Party, the parties shall first seek to resolve the dispute by consultation and negotiation.

The parties may, upon the initiative of either of them and during the course of their consultation and negotiation, agree to rely upon non-binding, third party procedures.

If the dispute cannot be resolved through consultation and negotiation, the dispute settlement procedures agreed upon in advance shall be used.

With respect to expropriation by either Party, any dispute settlement procedures specified in the investment agreement between such Party and the national or company of the other Party shall remain binding and shall be enforceable in accordance with the terms of the investment agreement and the relevant provisions of the domestic laws of such Party and treaties and other international agreements regarding enforcement of arbital awards to which such Party has subscribed.

3. If the dispute has not been resolved in accordance with the aforementioned procedures, the national or company concerned has the option to submit the dispute in writing to the International Centre for the Settlement of Investment Disputes (ICSID) for settlement by conciliation or binding arbitration at any time, provided that within six months from the date on which the dispute arose, the dispute has not, for any reason, been submitted by the national or company for resolution in accordance with any Applicable dispute-settlement procedure previously agreed to by the parties to the dispute, or, the national or company concerned has not brought the dispute before the administrative agencies or competent courts of the Party concerned.

Each Party hereby consents to the submission of an investment dispute to ICSID for settlement by conciliation or binding arbitration.

Conciliation or binding arbitration of such disputes shall be done in accordance with the provisions of the Convention of the Settlement of Investment Disputes Between States and nationals of other States and the Regulations and Rules of ICSID.

4. In any proceeding, judicial, arbitral, or otherwise, concerning an investment dispute between it and a national or company of the other Party, a Party shall not assert, as a defense, counterclaim, right of set-off or any other right, that the national or company concerned has received or will receive, pursuant to an insurance contract, indemnification or other compensation for all or part of the alleged damages from any third party whatsoever, including such other Party and its political subdivision, agencies, or instrumentalities. Nevertheless, a national or company of the said Party shall not be entitled to compensation for more than the value of its affected investments, taking into account all sources of compensation within the territory of the other Party liable for compensation.

5. For the purpose of any proceedings initiated before ICSID in accordance with this Article, any company of either Party that, before the occurrence of the event or events giving rise to the dispute, was owned or controlled by nationals or companies of the other Party, shall be treated as a national or company of such other Party.

The provisions of this Article shall not apply to a dispute arising (a) under the export credit, guarantee or insurance programs of the Export-Import Bank of the United States or (b) under other official credit, guarantee or insurance arrangements pursuant to which the Parties have agreed to other means of settling disputes.

ARTICLE VIII

Settlement of Disputes Between the Parties Concerning the Interpretation or Application of This Treaty

1. Any dispute between the Parties concerning the interpretation or application of this treaty shall be resolved through consultations between the representatives of the two Parties and, if this should fail, through other diplomatic channels.

2. If the dispute between the Parties cannot be resolved through the aforesaid means, and unless there is agreement between the Parties to submit the dispute to the International Court of Justice, both Parties hereby agree to submit it upon the request of either Party to an arbitral tribunal for binding decision in accordance with the applicable rules and principles of international law.

3. The tribunal shall be established for each case as follows: within two months of receipt of a request for arbitration, each Party shall appoint an arbitrator; the two arbitrators so appointed shall select a third arbitrator as chairman, who is a national of a third state; the chairman shall be appointed within two months of the date of appointment of the other two arbitrators.

4. If the required appointments have not been made within the time specified in paragraph 3 of this Article, either of the Parties may, in the absence of any other agreement, request that the President of the International Court of Justice make the required appointments. If the President is a national of one of the Parties or if he is unable to act, the Vice President shall be asked to make the required appointments. If the Vice President is unable to act, the next most senior member of the International Court of Justice who is not a national of one of the Parties and is able to act shall be asked to make the required appointments.

5. In the event that an arbitrator resigns or is for any reason unable to perform his duties, a replacement shall be appointed within thirty days, utilizing the same method as described above.

6. Unless otherwise agreed to by the Parties, all submissions shall be made and all hearings shall be held within six months of the date of the selection of the third arbitrator, and the tribunal shall render its decision within two months of the date of the final submissions or the date of the closing of the hearings, whichever is later.

7. The tribunal shall decide in all matters by majority vote. All decisions shall be binding on both Parties. Each Party shall bear the extent of its own representation in the arbitration proceedings. The costs of the proceeding shall be paid for equally by the Parties. The tribunal may, however, decide that a higher proportion of the costs be paid by the losing Party. Such a decision shall be binding.

8. The Parties may agree to specific arbitral procedures. In the absence of such agreement, the Model Rules on Arbitral Procedures adopted by the United Nations International Law Commission in 1958 and commended to member states by the United Nations General Assembly in Resolution 1262 (XII) shall govern.

9. This Article shall not be applicable to a dispute submitted to ICSID pursuant to Article VII(3). Recourse to the procedures set forth in this Article is not precluded, however, in the event an award rendered in such dispute is not honored by a Party, or an issue exists related to a dispute submitted to the Center but not argued or decided.

10. The provisions of this Article shall not apply to a dispute arising (a) under the export credit, guarantee or insurance programs of the Export-Import Bank of the United States or (b) under other official credit, guarantee or insurance arrangements pursuant to which the Parties have agreed to other means of settling disputes.

ARTICLE IX

Preservation of Rights

This Treaty shall not supersede, prejudice or otherwise derogate from

(a) laws, regulations, administrative practices or procedures, or administrative or adjudicatory decisions of either Party,

(b) international legal obligations, or

(c) obligations assumed by either Party, including those contained in an investment agreement or an investment authorization, whether extant at the time of entry into force of the Treaty or thereafter, that entitle investments or associated activities of nationals or companies of the other Party to treatment more favorable than that accorded by this Treaty in like situation.

ARTICLE X

Measures Not Precluded by This Treaty

1. This Treaty shall not preclude the application by either Party or any political subdivision thereof of any and all measures necessary in its territory for the maintenance of public order and morals, the fulfillment of its obligations with respect to the maintenance or restoration of international peace or security, or the protection of its own essential security interests.

ARTICLE XI

Taxation

1. With respect to its tax policies, each Party should strive to accord fairness and equity in the treatment of investment of nationals and companies of the other Party.

2. The provisions of Articles II and VI of this treaty do not apply to taxation matters.

ARTICLE XII

Application of This Treaty to Political Subdivisions of the Parties

This treaty shall apply to political subdivisions of the Parties.

ARTICLE XIII

Entry into Force, Duration, and Termination

1. This Treaty shall be subject to ratification by each of the Parties, and the instruments of ratification shall be exchanged as soon as possible.

2. This treaty shall enter into force thirty days following the date on which the Parties have notified each other that the constitutional procedures required for ratification in their respective countries have been completed. It shall remain in force for a period of ten years and shall continue in force, unless otherwise terminated in accordance with the provisions of paragraph 3 of this Article. It shall apply to investment existing at the time of entry into force as well as to investments made or acquired thereafter.

3. This Treaty shall be renewed by tacit agreement for another ten-year period unless one of the Parties notifies the other Party in writing of its intention to terminate it, one year prior to the expiration of the initial ten year period.

If the Treaty is not renewed, its termination shall become effective one year after the other Party receives notification thereof.

4. With respect to investments made prior to the effective date of termination, the provisions of this Treaty shall remain in effect for a further period of ten years from such date of termination.

5. The Annex to this Treaty shall be an integral part thereof.

6. IN WITNESS THEREOF, the undersigned representatives, duly authorized by their respective governments, have signed this Treaty in duplicate in French and English, both texts being equally authentic. DONE in Washington, February 26, 1986.

For the Government of the United States of America:

CLAYTON YEUTTER.

For the Government of the Republic of Cameroon:

WILLIAM ETEKI MBOUMOUA.

ANNEX

In accordance with Article II, paragraph 3, each Party reserves the right to maintain limited exceptions in the sectors it has indicated below:

THE UNITED STATES OF AMERICA

Air transportation; ocean and coastal shipping; banking; insurance; government procurement, government insurance and loan programs; energy and power production; custom house brokers; ownership of real estate; ownership and operation of broadcast or common carrier radio and television stations; ownership of shares in the Communications Satellite Corporation; the provision of common carrier telephone and telegraph services; the provision of submarine cable services; use of land and natural resources.

THE REPUBLIC OF CAMEROON

Air transportation, ocean shipping, public markets, radio and television, ownership of shares in INTELCAM, provision of common carrier telephone and telegraph service, provision of submarine cable services, consultants on taxation matters.

_______________

119356-B

REPUBLIC OF CAMEROON,

MINISTRY OF FOREIGN AFFAIRS,

Yaounde, April 7,1986.

The MINISTER,

His Excellency CLAYTON YEUTTER

U.S. Trade Representative, Washington, D.C.

MR. AMBASSADOR:

I hereby acknowledge receipt of the letter that reads as follows:

“As part of our understanding regarding the Treaty between the United States of America and the Republic of Cameroon concerning the Reciprocal Encouragement and Protection of Investment, our two governments have discussed the subject of investments entitled to coverage under this Treaty.

“We would appreciate confirmation that your Government agrees to extend Pecten International Company the benefits of this Treaty.”

I have the honor to confirm that our Government has decided to extend the benefits of this Treaty to Pecten International Company.

Accept, Excellency, the assurances of my high consideration.

WILLIAM ETEKI MBOUMOUA,

Minister of Foreign Affairs

OFFICE OF THE UNITED STATES TRADE REPRESENTATIVE,

EXECUTIVE OFFICE OF THE PRESIDENT

Washington, November 27, 1984.

Ambassador PAUL PONDI,

Embassy of the Republic of Cameroon

2349 Massachusetts Avenue

NW., Washington, DC.

DEAR MR. AMBASSADOR:

As part of our understanding regarding the Treaty between the United States of America and the Republic of Cameroon concerning the Reciprocal Encouragement and Protection of Investment, our two governments have discussed the subject of investments entitled to coverage under this Treaty.

We would appreciate confirmation that your Government agrees to extend Pecten International Company the benefits of this Treaty.

Respectfully,

EDWARD M. ROZYNSKI

Director, Bilateral Investment

Treaty Program

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Congo, Democratic Republic Of (Kinshasa) Bilateral Investment Treaty

Signed August 3, 1984; Entered into Force July 28, 1989

The Democratic Republic of the Congo (formerly Zaire) was established in May of 1997 following a successful rebellion.

INVESTMENT TREATY WITH ZAIRE

MESSAGE

FROM

THE PRESIDENT OF THE UNITED STATES

TRANSMITTING

THE TREATY BETWEEN THE UNITED STATES OF AMERICA AND

THE REPUBLIC OF ZAIRE CONCERNING THE RECIPROCAL ENCOURAGEMENT AND PROTECTION OF INVESTMENT, WITH PROTOCOL, SIGNED AT WASHINGTON,

AUGUST 3, 1984

MARCH 25, 1986 was read the first time and together with the accompanying papers, referred to the Committee on Foreign Relations and ordered to be printed for use of the Senate

LETTER OF TRANSMITTAL

THE,WHITE House, March 25,1986.

To the Senate of the United States:

With a view of receiving the advice and consent of the Senate to ratification, I transmit herewith the Treaty between the United States of America and the Republic of Zaire concerning the Reciprocal Encouragement and Protection of Investment, with Protocol, signed August 3, 1984, at Washington. I transmit also, for the information of the Senate, the report of the Department of State with respect to this treaty.

This treaty is among the first six treaties to be transmitted to the Senate under the Bilateral Investment Treaty (BIT) program that I initiated in 1981. The BIT program is designed to encourage and protect U.S. investment in developing countries. The treaty is an integral part of U.S. efforts to encourage Zaire and other governments to adopt macroeconomic and structural policies that will promote economic growth. It is also fully consistent with U.S. policy toward international investment. That policy holds that an open international investment system in which participants respond to market forces provides the beat and moot efficient mechanism to promote global economic development. A specific tenet reflected in this treaty, is that U.S direct investment abroad and foreign investment in the United States should receive fair, equitable, and nondiscriminatory treatment. Under this treaty, the parties also agree international law standards for expropriation and compensation; free financial transfers; and procedure including international arbitration, for the settlement of investment disputes.

I recommend that the Senate consider this treaty as soon as possible, and give its advice and consent to ratification of the treaty, with protocol, at an early date.

RONALD REAGAN

LETTER OF SUBMITTAL

DEPARTMENT OF STATE,

Washington, February 26,1986.

The PRESIDENT, The White House.

The PRESIDENT: I have the honor to submit to you the Treaty between the United States and the Republic of Zaire concerning the Reciprocal Encouragement and Protection of Investment, with Protocol, signed at Washington, August 3, 1984. This treaty is among the first six treaties to be negotiated under the bilateral investment treaty (BIT) program which you initiated in 1981. Development of the BIT program and the negotiation of the individual treaties have been pursued by the 0ffice of the United States Trade Representative and the Department of State with the active participation of the Department of Commerce and the U.S. Treasury, in conjunction with other interested U.S. Government agencies. I recommend that this treaty, as well as the others concluded with the Kingdom of Morocco, the Republic of Haiti, the Republic of Panama, the Republic of Senegal, and the Republic of Turkey, be transmitted to the Senate for its advice and consent to ratification.

The six treaties which have been signed as well as other under negotiation are an integral part of U.S. efforts to encourage other governments to adopt macroeconomic and structural policies that will promote economic growth. They are also fully consistent with your policy statement on international investment of September 9, 1983, which states that international direct investment flows should be determined by private market forces and should receive fair, equitable and non-discriminatory treatment.

Our experience to date has shown that interested countries are willing to provide U.S. investors with significant investment guarantees and assurances as a way of inducing additional foreign investment. It is our policy to advise potential treaty partners that conclusion of a BIT with the United States is an important and favorable factor in the investment relationship, but does not in and of itself result in immediate increases in U.S. investment flows.

Congressional support for the BIT program is reflected in Section 601(a) and (b) of the Foreign Assistance Act, as amended, in particular at Section 601(b) which provides:

In order to encourage, and facilitate participation by private enterprise to the maximum extent practicable in achieving any of the purposes of this Act, the President shall…(3) accelerate a program of negotiating treaties, for commerce and trade, including tax treaties, which shall include provisions to encourage and facilitate the flow of private investment to, and its equitable investment in, friendly countries and areas participating in programs under this Act.

BITs are consistent in purpose with the network of treaties of Friendship, Commerce and Navigation (FCNs) which the United States negotiated from the early years of the Republic until the last successful negotiations with Thailand and Togo in the late 1960s. They continue the U.S. policy of securing by agreement standards of equitable treatment and protection of U.S. citizens carrying on business abroad, and institutionalizing processes for the settlement of disputes between investors and host countries and between governments. We expect that a series of bilateral treaties with interested countries will establish greater international discipline the investment area.

The BIT, was designed to protect investment not only by treaty but also by reinforcing traditional international legal principles and practice regarding foreign direct private investment. In pursuit of this objective, the model BIT adopts FCN language and concepts. Traditional FCN provisions granting rights which are not important to the typical U.S. investor were eliminated and replaced with more specific language concerning investment protection. Perhaps most significantly the BIT goes beyond the traditional FCN to provide investor-country arbitration in instances where an investment dispute arises.

Our BIT approach followed similar programs that had been undertaken with considerable success by a number of European countries, including the Federal Republic of Germany and the United Kingdom, since the early 1960s. Indeed, our industrialized partners already have nearly two hundred Bits in force, primarily with developing countries. Our treaties, which draw upon language used in the U.S. FCN treaties as well as European counterparts, are more comprehensive and far-reaching than European Bits

The U.S. Zairian Treaty

The treaty with Zaire was negotiated by an interagency team led by officials from the Office of the United States Trade Representative and the Department of State. The treaty satisfies all four main BIT objectives:

-foreign investors are to be accorded treatment in accorded treatment in accordance with international law and are to be treated no less favorably than investors of the host country and no less favorably than investors of third countries whichever is the most favorable treatment, (“national” and “most-favored-nation treatment”) subject to certain specified exceptions.

-international law standards shall apply to the expropriation of investment and and to the payment of compensation for expropriation;

-free transfers shall be afforded to funds associated with an investment into and out of the host country; and

-procedures are to be established which allow an investor to take a dispute with a Party directly to binding third-party arbitration.

The provisions on treatment of foreign investment and arbitration, and in particular Zaire’s acceptance of international law as the governing law, mark an important achievement for the BIT program and our investment and international arbitration policies.

Some provisions of the treaty with Zaire differ in minor respects from the U.S. model text. In general, however, the treaty closely follows the language contained in the U.S. model text, the most significant provisions of which are as follows.

The model BIT’s definition section clarifies terms such as “company of a Party” and “investment.” The BIT concept of “investment” is broad and designed to be flexible; although numerous types of economic interests are enumerated, the intent is to include all legitimate interests in the territory of either Party, whether directly or indirectly controlled by nationals of the other, having economic value or “associated” with an investment. Protected “companies of a Party” are those incorporated or otherwise organized under the laws of a Party in which nationals of that Party have a substantial interest.

The model BIT accords the better of national or most (MFN) treatment to foreign investment, subject to each Party’s exceptions which are listed in a separate Annex. The exceptions are designed to protect state regulatory interests and for the United States to accommodate the derogations from national treatment in state or federal law relating to such areas as air transport shipping, banking, telecommunications, energy and power production, insurance, and from national and. MFN treatment in the case of ownership of real property. Any future exception to these standards which a Party adopts are not to affect existing investments. The BIT also includes general treatment protection designed to a guide to interpretation and application of the treaty. Thus, the Parties agree to accord investments “fair and equitable treatment” and “full protection and security” in no case “less than that required by international law.” It specifically grants nationals of a Party the right to establish investments in the territory of the other Party, restricts the right to impose performance requirements, and obliges Parties to observe their contractual obligations with investors. The U.S. model also provides that nationals and companies of either Party shall in the territory of the other Party be permitted to employ professional, technical and managerial personnel of their choice regardless of nationality.

The model BIT also confers protection from unlawful interference of property interests and assures compensation in accordance with international law standards. It provides that any direct or in direct taking must be: for a public purpose; nondiscriminatory; accompanied by the payment of prompt, adequate and effective compensation and in accordance with due process of law and the general standards of treatment discussed above. The BIT’s definition of “expropriation” is broad and flexible; essentially “any measure” regardless of form, which has the effect of depriving an investor of his management, control or economic value in a project can constitute expropriation requiring compensation equal to the fair market value.” Such compensation, which “shall not reflect any reduction in such fair market value due to … the expropriatory action,” must be “without delay,” “effectively realizable,” “freely transferable” and “bear current interest from the date of the expropriation at a rate equal to current international rates.” The BIT grants the right to “prompt review” by the relevant judicial or administrative authorities in order to determine whether the compensation offered is consistent with these principles. It also extends national and MFN treatment to investors in cases of loss due to war or other civil disturbance. The BIT does not provide, however, a specific valuation method for compensating such losses.

The model BIT provides for free transfers “related to an investment,” specifically of returns, compensation for expropriation, contract payments, proceeds from sale, and contributions to capital for maintenance or development of an investment. Such transfers are to be made in a “freely convertible currency at the prevailing market rate of exchange on the date of transfer with respect to spot transactions in the currency to be transferred.” The model text recognizes that notwithstanding this guarantee Parties can maintain certain laws and regulations regarding transfers provided these are applied in a non-discriminatory fashion. In particular, the model BIT provides that Parties can require reports of currency transfers and inpose income taxes by such means as a withholding tax on dividends.

The model BIT provides that where certain defined investment disputes arise between a Party and a national or company of the other Party, including disputes as to the interpretation of an investment agreement and the dispute cannot be solved through negotiation it may be submitted to arbitration in accordance with any dispute settlement procedures to which the national or company and the host country have previously agreed. Unless the national or company has submitted the dispute to previously agreed dispute settlement procedures or to adjudication by domestic courts or other tribunals of the host country, the national or company may submit the dispute to the International Centre for the Settlement of Investment Disputes (“ICSID”). Exhaustion of local remedies is not required. In a separate provision, the BIT Parties also agree to grant nationals and companies of the other Party access to their domestic courts in order to assert claims and enforce rights with respect to investments.

The model BIT exhorts Parties to apply their tax policies fairly and equitably. Because the United States specifically addresses tax matters in tax treaties, the BIT generally excludes such matters. It also specifically limits the arbitration provisions to only certain taxation matters. Another BIT provision exempts disputes arising under Export-Import Bank programs, or other credit guarantee insurance arrangements providing for alternative dispute settlement arrangements, from the standard BIT arbitration clauses. The model BIT also states that the treaty shall not derogate from any obligations that require more favorable treatment of investments and declares that the treaty shall not preclude measures necessary for public order or essential security interests. The model BIT enters into force 30 days after exchange of ratifications and continues in force for at least ten years. Thereafter, either Party may terminate the treaty, subject to one year’s written notice.

Each of these models was developed after lengthy and extensive consultations within the U.S. Government and with the private sector. Nonetheless, in negotiating a particular treaty, the U.S. Government retains, of course, some flexibility to adopt modifications as necessary and in light of experience. While the U.S. model text has recently been simplified, the provisions summarized above have all been retained.

Some provisions of the Zaire text differ in some respects from the U.S. model text. Except for transfers, we do not consider that any of these modifications represent substantive departures from U.S. objectives. The more significant of these are as follows:

(1) Definition of “own or control”.-The definition, which is included in the U.S. model text, was omitted from the Zaire text. The reason for including such a definition was to highlight the fact that investments which the treaty was meant to cover included those made through subsidiaries of companies of a Party “wherever located,” that is, even in third countries. The Zaire text satisfies this objective by defining investment in, Article 1, paragraph (c) as “every kind of investment, owned. or controlled directly or indirectly and we have obtained for the record a statement from Zaire’s negotiators that they understand this definition to cover investments made through subsidiaries in third countries.

(2) Definition of “territory”. -U.S. model text does not define this term. At the insistence of Zaire, however, we have agreed to a definition in the present treaty. This definition consists of two parts, as follows:

(a) Article 1, pargraph (f) (Definitions) contains parallel statements noting tha the territory of each Party is defined as “all the territory of’ the Party; and.

(b) Paragraph 7 of the Protocol specifies that these definitions encompass “All Zairian territory within its geographical and political boundaries where its sovereignty is exercised;” and, for the United States, “the separate States, the District of Columbia, and Guam, Puerto Rico, American Samoa, and the Virgin Islands.”

The formulation for the United States avoids a general definition of territory, which we consider to be problematic, while spelling out the specific entities to be encompassed in the treaty references to the territory of* the United States as a party.

(3) Competitive equality- Article II, paragraph six addresses the issue of treatment of foreign investment in those sectors in which the host government invests but does not keep out private investors. It was not possible to obtain a Zairian commitment to language which stipulates that privately owned or controlled investment “shall” receive treatment which is equivalatent with respect to any special economic advantages accorded governmentally owned or controlled investment. The Zairians did concur with the general exhortation that competitive equality “should” be maintained.

(4)Performance requirements. -It was not possible to obtain Zaire’s commitment not to impose performance requirements as:conditions for investment, as called for by our model text. Zaire is one of many developing countries which imposes requirements on foreign investors to obtain certain development objectives. Therefore, we accepted hortatory language (Article ll,.paragraph 7) to the effect that each Party shall ‘endeavor” within “the context of its national economic policies and goals” to“ ‘avoid” the imposition of export or local purchase requirements. The last sentence of the paragraph notes that this provision is not meant to preclude the right of Parties to impose import restrictions. This sentence was included at the request of Zaire.

5) Transfers -The most significant departure from the model text is in respect to transfers. The treaty text itself (Article V) calls for free transfers and incorporates all the essential provisions of the prototype. However, in view of the current difficult economic situation of Zaire, paragraph 1 of the Protocol was negotiated which (a) allows Zaire to delay the full application of Article V, subject to certain conditions, for up to three years from the date of ratification of the treaty; (b) permits Zaire, if necessary, to delay transfers of the proceeds of sale or liquidation of an investment for up to three years from the date the transfer is requested; and (c) permits Zaire some leeway in providing specific currencies for transfers by acknowledging that all freely convertible currencies are always available. (The United States is presently seeking clarification from the Government of Zaire that for purposes of paragraph I of the Protocol “the date of ratification” means the date of entry into force.) The Protocol does not apply to transfer of compensation in the event of expropriation, on the ground that an expropriation is a discretionary act which should not be taken by a government unless compensation can be paid. The Protocol also provides for consultations between the two governments concerning the implementation of Article V of the Protocol.

(6) Application of the treaty to existing investment. -As the model text anticipates, this treaty applies to investments which already exist at the time the treaty enters into force. At the request of Zaire, Article XIII, paragraph 2 specifies that such application shall be “in accordance with the provisions of Article IX ofTreaty.” Article IX, in turn, specifies that treatment of investment required inter alia by national law, international legal obligations, or, obligations assumed by a Party in an investment agreement or authorization, which is more favorable than treatment accorded by the treaty, shall prevail over the provisions of the treaty.

(7) Exceptions from coverage.- In the Annex to the treaty, Zaire exempts from national treatment and the right of establishment transportation infrastructure projects; railways; aviation and airports; health and educational infrastructuture projects; energy and water projects; telecommunications and other communications; soil and sub-soil; banking; social security; and insurance.

None of these modifications from the U.S. model text represent substantive departures from U.S. objectives.

Submission of this treaty, together with the other five noted above, marks a significant development in our international investment policy. I join with the United States Trade Representative and other U.S. Government agencies in supporting these treaties and favor their approval by the Senate at an early date.

Respectfully submitted,

GEORGE P. SHULTZ.

TREATY BETWEEN THE UNITED STATES OF AMERICA AND THE REPUBLIC OF ZAIRE CONCERNING THE RECIPROCAL ENCOURAGEMENT AND PROTECTION OF INVESTMENT

The United States of America and the Republic of Zaire,

Desiring to promote greater economic cooperation between the two states, particularly with respect to investment by nationals and companies of each Party in the territory of the other Party;

Recognizing that agreement upon the treatment to be accorded such investment will stimulate the flow of private capital and the economic development of both Parties;

Recognizing that discrimination on the basis of nationality by either Party against investment in its territory by nationals or companies of the other Party is contrary to a stable framework for investment; and

Having resolved to conclude a treaty concerning the reciprocal encouragement and protection of investment,

Have agreed as follows:

ARTICLE I

DEFINITIONS

For the purposes of this Treaty:

(a) “Company” means any kind of juridical entity, including any corporation, company, association, or other organization, that is duly incorporated, constituted, or otherwise duly organized, regardless of whether or not the entity is organized for pecuniary gain, privately or governmentally owned, or organized with limited or unlimited liability.

(i) natural persons who are nationals of such Party, or

(ii) such Party or a political subdivision thereof or their agencies or instrumentalities have a substantial interest as determined by such Party.

The juridical status of a company of a Party shall be recognized by the other Party and its political subdivisions.

Each Party reserves the right to deny to any of its own companies or to a company of the other Party the advantages of this Treaty, except with respect to recognition of juridical status and access to courts, if nationals of any third country control such company, provided that whenever one Party concludes that the benefits of this Treaty should not be extended to a company of the other Party for this reason, it shall promptly consult with the other Party to seek a mutually satisfactory resolution to this matter.

(c) “Investment” means every kind of investment, owned or controlled directly or indirectly, including equity, debt, and service and investment contracts; and includes:

(i) tangible and intangible property, including all property rights, such as liens, mortgages pledges, and real security;

(ii) a company or shares of stock or other interests in a company or interests in the assets thereof;

(iii) a claim to money or a claim to performance having economic value, and associated with an investment;

(iv) intellectual and industrial property rights, including rights with respect to copyrights, patents, trademarks, trade names, industrial designs, trade secrets and know how, and goodwill;

(v) licenses and permits issued pursuant to law, including those issued for manufacture and sale of products;

(vi) any right conferred by law or contract, including rights to search for or utilize natural resources, and rights to manufacture, use and sell products; and

(vii) returns which are reinvested.

Any alteration of the form in which assets are invested or reinvested shall not affect their character as investment.

(d) “National” of a Party means any natural person who is a national of that Party in conformity with its laws.

(e) “Return” means an amount derived from or associated with an investment, including profit; dividend; interest; capital gain; royalty payment; management, technical assistance or other fee; or returns in kind.

(f) “Territory” means:

(i) For the Republic of Zaire: all the territory of the Republic of Zaire;

(ii) For the United States of America: all the territory of the United States.

ARTICLE II

TREATMENT OF INVESTMENT

1. Each Party shall undertake to maintain a favorable environment for investments in its territory by nationals and companies of the other Party under its laws, regulations, and administrative practices and procedures, and shall permit such investments to be established on terms and conditions that accord treatment no less favorable than the treatment it accords in like situations to investments of its own nationals or companies or to nationals or companies of any third country, whichever is the most favorable.

2. Each Party shall accord existing or new investments in its territory of nationals or companies of the other Party, and associated activities, treatment no less favorable than that which it accords to investments and associated activities of its own nationals or companies or of nationals or companies of any third country, whichever is the most favorable. Associated activities include:

(a) the establishment, control and maintenance of branches, agencies, offices, factories or other facilities for the conduct of business;

(b) the organization of companies under applicable national laws and regulations; the acquisition of companies or interests in companies; the management, control, maintenance, use, and expansion, and the sale, liquidation, and dissolution of companies organized or acquired;

(d) the acquisition, (whether by purchase, lease or otherwise), possession with rights of ownership, and disposition (whether by sale, testament or otherwise), of property, both tangible and intangible;

(e) the leasing of real property required for the conduct of business;

(f) the acquisition, maintenance, and protection of intellectual property rights, patents, trademarks, trade secrets, trade names, licenses and other approvals of products and manufacturing processes, and other industrial property rights; and

(g) the borrowing of funds, the purchase and issuance of equity shares, and the purchase of foreign exchange for imports.

3. (a) Notwithstanding the preceding provisions of this Article, each Party reserves the right to introduce exceptions relating to one of the sectors or matters listed in the Annex to this treaty. Each Party agrees to notify the other Party of all sectors or matters of possible exception at the time this Treaty enters into force, as well as of all specific exceptions of which it is aware which are in effect on that date. Moreover, each Party agrees to notify the other Party of any future exceptions falling within the sectors or matters listed in the Annex, and to maintain the number of such exceptions at a minimum. Other than with respect to ownership of real property, the treatment accorded pursuant to this subparagraph shall not be less favorable than that accorded in like situations to investments and associated activities of nationals or companies of any third country. However, either Party may require that rights to engage in mining on the public domain shall be dependent on reciprocity.

4. Investments of nationals and companies of either Party shall at all times be accorded fair and equitable treatment and shall enjoy protection and security in the territory of the other Party. The treatment, protection and security of investment shall be in accordance with applicable national laws, and may not be less than that recognized by international law. Neither Party shall in any way impair by arbitrary and discriminatory measures the management, operation, maintenance, use, enjoyment, acquisition, expansion, or disposal of investment made by nationals or companies of the other Party. Each Party shall observe any obligation it may have entered into with regard to investment of nationals or companies of the other Party.

5. (a) Subject to the laws relating to the entry and sojourn of aliens, nationals of either Party shall be permitted to enter and to remain in the territory of the other Party for the purpose of establishing or directing an investment or advising on the operation of an investment to which they, or the aforesaid companies of the first Party that employ them, have committed or are in the process of committing a substantial amount of capital or other resources.

(b) Nationals and companies of either Party, and companies which they own or control, shall be permitted to engage, within the territory of the other Party, top managerial personnel of their choice, regardless of nationality, for the planning and operation of their investments. This provision shall not be construed to confer rights with respect to the entry and sojourn of persons in the territory of either Party, except as provided by national law.

6. The Parties recognize that, consistent with paragraphs 1 and 2 of this Article, conditions of competitive equality should be maintained where investments owned or controlled by a Party or its agencies or instrumentalities are in competition, within the territory of such Party, with privately owed or controlled investments of nationals or companies of the other Party.

7. Within the context of its national economic policies and goals, each Party shall endeavor to avoid imposing on the investments of nationals or companies of the other Party conditions which require the export of goods produced or the purchase of goods or services locally. This provision shall not preclude the right of either Party to impose restrictions on the importation of goods into their respective territories.

8. In order to maintain a favorable environment for investments in its territory by nationals or companies of the other Party, each Party shall provide all necessary means to nationals or companies of the other Party to permit them to assert their rights with respect to investment agreements, investment authorizations, and properties, in particular the right of access to its courts, tribunals and administrative agencies, and the right to employ persons of their choice, who otherwise qualify under applicable laws and regulations, regardless of nationality, for the purpose of enforcing their rights.

9. Each Party shall make public all laws, regulations, and administrative practices and procedures that pertain to or affect investments in its territory of nationals or companies of the other Party.

ARTICLE III

COMPENSATION FOR EXPROPRIATION

(a) is done for a public purpose;

(b) is accomplished under due process of law;

(e) is accompanied by prompt, adequate and effectively realizable compensation.

Compensation shall be equivalent to the fair market value of the expropriated investment. The calculation of such compensation shall not result in any reduction in such fair market value due to either prior public notice or announcement of the expropriatory action, or the occurrence of the events that constituted or resulted in the expropriatory action. Such compensation shall include interest at a rate equivalent to current international rates from the date of expropriation, and be freely transferable at the prevailing market rate of exchange on the date of expropriation.

2. If either Party expropriates, the investment of any company duly constituted in its territory, and if nationals or companies of the other Party hold shares or any recognized right in the expropriated company, then the expropriating Party shall ensure that such nationals or companies of the other Party receive compensation in accordance with the provisions of the preceding paragraph.

3. Subject to the dispute settlement provisions set forth in this Treaty, a national or company of either Party asserting that its investment was expropriated by the other Party shall have the right to prompt review by the appropriate judicial or administrative authorities of such other Party to determine whether any such expropriation has occurred and, if so, whether such expropriation and any compensation therefor conform to the principles of international law.

ARTICLE IV

COMPENSATION FOR DAMAGES DUE TO WAR AND SIMILAR EVENTS

1. Nationals or companies of either Party whose investments in the territory of the other Party suffer:

(a) damages due to war or other armed conflict between such other Party and a third country, or

(b) damages due to revolution, state of national emergency, revolt, insurrection, riot or act of violence in the territory of such other Party, shall be accorded treatment no less favorable than that which such other Party accords to its own nationals or companies or to nationals or companies of any third country, whichever is the most favorable treatment, when making restitution, indemnification, compensation or any other settlement with respect to such damages.

2. In the event that such damages result from:

(a) a requisitioning of property by the other Party’s forces or authorities, or

(b) destruction of property by the other Party’s forces or authorities which was not caused in combat action,

the national or company shall be accorded restitution or compensation in accordance with Article III.

3. The payment of any indemnification, compensation or any other settlement granted pursuant to this Article shall be freely transferable in accordance with the provisions of Article V.

ARTICLE V

TRANSFERS

1. Each Party shall, with respect to investment by nationals or companies of the other Party, grant such nationals and companies the free transfer of:

(a) returns;

(b) royalties and other payments derived from patents, licenses, and other similar grants or rights;

(d) amounts expended for the management of the investment in the territory of the other Party or of a third country, (including expenses associated with management or technical assistance contracts);

(e) funds required for importation of capital equipment necessary to the maintenance, the expansion or the modernization of the investment;

(f) proceeds from the sale of all or part of the investment or the liquidation, thereof, including liquidation arising from a circumstance described in Article IV; and

(g) compensation payments made pursuant to Article III.

3. Notwithstanding the preceding paragraphs, either Party may maintain laws and regulations: (a) prescribing procedures to be followed with respect to the transfers permitted under this Article, provided such procedures are carried out expeditiously and do not impair the substance of the rights set forth above in paragraphs 1 and 2; (b) requiring reports of currency transfer; and (e) imposing income taxes by such means as a withholding tax applicable to dividends or other transfers. Furthermore, either Party may protect the rights of creditors, or ensure the satisfaction of judgments in adjudicatory proceedings, through the equitable, nondiscriminatory and good faith application of its law.

ARTICLE VI

CONSULTATIONS AND EXCHANGE OF INFORMATION

2. If one Party requests in writing that the other Party supply information in its possession concerning investments in its territory by nationals or companies of the Party making the request, then the other Party shall, consistent with its applicable laws and regulations and with due regard for business confidentiality, endeavor to establish appropriate procedures and arrangements for the provision of any such information.

ARTICLE VII

SETTLEMENT OF INVESTMENT DISPUTES BETWEEN ONE PARTY AND A NATIONAL OR COMPANY OF THE OTHER PARTY

1. For purposes of this Article, an investment dispute is defined as a dispute involving (a) the interpretation or application of an investment agreement between a Party and a national or company of the other Party; (b) the interpretation or application of any investment authorization granted by the competent foreign investment authorities; or (c) an alleged breach of any right confirmed or created by this Treaty with respect to an investment.

2. (a) Each Party hereby consents to submit investment disputes to the International Centre for the Settlement of Investment Disputes (“Centre”) for settlement by conciliation or binding arbitration.

(b) Conciliation or binding arbitration of such disputes shall be done in accordance with the provisions of the Convention on the Settlement of Investment Disputes between the States and Nationals of other States (“Convention”) and the Regulations and Rules of the Centre, or, if the Convention should, for any reason, be inapplicable, the Rules of the Additional Facility of the International Centre for the Settlement of Investment Disputes (“Additional Facility”).

3. In the event of an investment dispute between a Party and a national or company of the other Party with respect to an investment of such national or company in the territory of such Party, the parties to the dispute shall initially seek to resolve the dispute by consultation and negotiation. The Parties to the dispute may, upon the initiative of either of them and as a part of their consultation and negotiation agree to rely upon non-binding, third party procedures, such as the fact-finding facility available under the rules of the Additional Facility. If the dispute cannot be resolved through consultation and negotiation, then the dispute shall be submitted for settlement in accordance with the applicable dispute-settlement procedures upon which the Parties to the dispute may have previously agreed.

4. (a) The national or company concerned may consent in writing to submit the dispute to the Centre or the Additional Facility for settlement by conciliation or binding arbitration.

(b) Once the national or company concerned has so consented, either party to the dispute may institute proceedings before the Centre or Additional Facility at any time after six months from the date upon which the dispute arose, provided,

(i) the dispute has not, for any reason, been submitted by the national or company for resolution in accordance with any applicable dispute settlement procedures previously approved by the parties to the dispute; and

(ii) the national or company concerned has not brought the dispute before the courts of justice or administrative tribunals or agencies. of competent jurisdiction of the Party that is a party to the dispute.

If the parties to the dispute disagree over whether conciliation or binding arbitration is the more appropriate procedure to be employed, the procedure desired by the national or company concerned shall be followed.

5. In any proceeding, judicial, arbitral or otherwise, concerning an investment dispute between a Party (“the first Party”) and a nation or company of the other Party (“the second Party”), the first Party shall not assert as a means of defense, that the national or company concerned has received or will receive, pursuant to an insurance. contract, indemnification or other compensation for all or part of its alleged damages from any third party whatsoever, including the second Party.

6. For the purpose of any proceedings initiated before the Centre or the Additional Facility in accordance with this Article, any company duly constituted under the applicable laws and regulations of either Party but that, before the occurrence of the event or events giving rise to the dispute, was owned or controlled by nationals or a company of the other Party shall be treated as a national or company of such other Party.

ARTICLE VIII

SETTLEMENT OF DISPUTES BETWEEN THE PARTIES CONCERNING INTERPRETATION OR APPLICATION OF THIS TREATY

1. Any dispute between the Parties concerning the interpretation or application of this Treaty should, if possible, be resolved through consultations between representatives of the two Parties, and if this should fail, through other diplomatic channels.

2. If the dispute between the Parties cannot be resolved through the aforessaid means, and unless there is agreement between the Parties to submit the dispute to the International Court of Justice, both Parties hereby agree to submit it upon the request of either Party to an arbitral tribunal for binding decision in accordance with the applicable rules and principles of international law.

3. The tribunal shall be established for each case as follows. Within two months of receipt of a request for arbitration, each Party shall appoint an arbitrator. The two arbitrators so appointed shall select a third arbitrator as Chairman, who is a national of a third State. The Chairman shall be appointed within two months of the date of appointment of the other two arbitrators.

4. If the required appointments have not been made within the time specified in paragraph 3 of this Article, either of the Parties may, in the absence of any other agreement, request that the President of the International Court of Justice. make the required appointments. If the President is a national of one of the Parties or if he is unable to act, the Vice President shall be asked to make the required appointments. If the Vice President is a national of one of the Parties or if he is otherwise unable to act, the next most senior member of the International Court of Justice who is not a national of one of the Parties and is able to act shall be asked to make the required appointments.

6. Unless otherwise agreed to by the Parties, all requests shall be introduced and all hearings shall be held within six months of the date of the appointment of the third arbitrator, and the Tribunal shall render its decision within two months of the date of the final introduction of the requests or the date of the closing of the hearings, whichever is later.

7. The Tribunal shall decide in all matters by majority vote. Any such decision shall be binding on both Parties. Each Party shall bear the expenses of its own representation in the arbitration proceedings. Expenses incurred by the Chairman, the other arbitrators, and other costs associated with the proceedings shall be borne equally by both Parties. The Tribunal may, however, at its discretion, decide that a higher proportion of the costs be borne by one of the Parties. Such a decision shall be binding.

8. The Parties may agree to special procedures that the arbitral tribunal shall follow. In the absence of such agreement, the Model Rules on Arbitral Procedure adopted by the United Nations International Law Commission in 1958 (“Model Rules”) and commended to Member States by the United Nations General Assembly in Resolution 1262 (XIII) shall govern.

9. This Article shall not be applicable to a dispute which has been submitted to the Centre or Additional Facility pursuant to Article VII (3). Recourse to the procedures set forth in this Article is not precluded, however, in the event an award rendered in such dispute is not honored by a Party; or an issue exists related to a dispute submitted to the Centre or Additional Facility but not argued or decided in that Facility.

ARTICLE IX

PRESERVATION OF RIGHTS

This Treaty shall not supersede, prejudice, or otherwise derogate from:

(a) laws and regulations, administrative practices or procedures, or adjudicatory decisions of either Party;

(b) international legal obligations; or

(c) obligations assumed by either Party, including those contained in an investment agreement or an investment authorization, whether extant at the time of entry into force of this Treaty or thereafter, that entitle investments, or associated activities, of nationals or companies of the other Party to treatment more favorable than that accorded by this Treaty in like situations.

ARTICLE X

MEASURES NOT PRECLUDED BY THIS TREATY

1. This Treaty shall not preclude the application by either Party of measures necessary in its territory for the maintenance of public order and morality, the fulfillment of its obligations with respect to the maintenance and restoration of international peace and security, or the, protection of its own essential security interests.

2. This Treaty shall, not prevent either Party from prescribing special formalities. in connection with the establishment of investments in its territory of nationals and companies of the other Party, but such formalities may not impair the essential rights set forth in this Party.

ARTICLE XI

TAXATION

1. With respect to its tax policies, each Party should strive to accord fairness, and equity in the treatment of the investments of nationals companies of the other Party.

2. Nevertheless, the provisions of this Treaty, and in particular Articles VII and VIII, shall apply to matters of taxation only with respect to the following:

(a) expropriation, pursuant to Article III:

(b) transfers, pursuant to Article V; or

(c) the observance and enforcement of terms of an investment agreement or authorization as referred to in Article (1) (a) or (b).

Matters covered by item 2(c) shall not be covered to the extent they are subject to the dispute settlement provisions of a convention for the avoidance of double taxation that may subsequently be concluded between the two Parties, unless such matters are raised under such settlement procedures but are not resolved within a reasonable period of time.

ARTICLE XII

APPLICATION OF THIS TREATY TO POLITICAL SUBDIVISIONS OF THE PARTIES

This Treaty shall apply to political subdivisions of the Parties.

ARTICLE XIII

ENTRY INTO FORCE AND DURATION AND DENUNCIATION

This Treaty shall be subject to ratification by each of the Parties, and the instruments of ratification shall be exchanged as soon as possible.

2. This Treaty shall enter into force thirty days after the date of exchange of the instruments of ratification. It shall remain in force for a period of ten years and shall continue in force unless denounced in accordance with paragraph 3 of this Article. It shall apply to investments existing at the time of entry into force in accordance with the provisions of Article IX of this Treaty, as well as to investments made or acquired thereafter.

3. Either Party may, by giving one year’s written notice to the other Party, denounce this Treaty at the end of the initial ten-year period or at any time thereafter.

4. With respect to investments made or acquired prior to the date of denunciation of this Treaty and to which this Treaty otherwise applies, the provisions of all of the other Articles of this Treaty shall continue to be effective for a further period of ten years from such date of denunciation.

IN WITNESS WHEREOF, the respective plenipotentiaries have signed this Treaty.

DONE in duplicate at Washington on the third day of August 1984 in the English and French languages, both texts being equally authentic.

FOR THE UNITED STATES OF AMERICA:

WILLIAM E. BROCK.

FOR THE REPUBLIC OF ZAIRE:

Annex UMBA-DI-LUTETE.

Annex

In accordance with Article II, paragraph 3, each Party reserves the right to maintain limited exceptions in the sectors it has indicated below:

The United States of America

Air transportation; ocean and coastal shipping; banking; insurance; government procurement; government grants; government insurance and loan programs; energy and power production; custom house brokers; ownership of real estate; ownership and operation of broadcast or common carrier radio and television stations; ownership of shares in the Communications Satellite Corporation; the provision of common carrier telephone and telegraph services; the provision of submarine cable services; use of land and natural resources.

The Republic of Zaire

Transportation infrastructure projects (roads, ports, waterways (ocean, river, and lake); railways; aviation and airports); health infrastructure projects (hospitals, health centers); educational infrastructure projects (construction of educational facilities in general); energy and water projects (water production, generation of electricity, production and use of hydrocarbons); radio, television, postal, telephone, and telecommunications projects (use of ultra-short, short, and medium waves, and various frequencies; telegraph systems, telegrams, money orders, stamps, and postal checks); soil and sub-soil; establishment and operation of banks; social security and insurance services.

Protocol

The Parties recognize that general formalities imposed on transfers abroad may, as far as investments are concerned, adversely affect inflows of capital if such formalities are restrictive. Therefore, in order to promote capital inflows the Parties undertake to ensure that such formalities do not constitute an obstacle to the making of investments. Therefore, the Parties, recognizing the current external economic circumstances, agree as follows:

(a) The Republic of Zaire may delay the application of paragraphs 1 and 2 of Article V for a period not to exceed three years from the date of ratification of the present Treaty. During that period, the following provisions will be applicable:

(i) With respect to all transfers relating to investments, the Republic of Zaire shall treat nationals or companies of the United States no less favorably than it treats nationals and companies of Zaire, and no less favorably than it treats nationals or companies of any third country.

(ii) The Republic of Zaire shall make available to nationals and companies of the United States for the purposes specified in Article V(1), reasonable amounts of foreign exchange. With respect to any investment of a national or company of the United States, the amounts of foreign exchange made available each year for such purposes shall be no less than one third of the amount of profits attributable to the investment since its establishment or acquisition, that have not previously been transferred.

(iii) The Republic of Zaire shall ensure that the national or company concerned has an opportunity to invest any unconverted currency intended to be transferred in a manner that will preserve its value until the transfer occurs.

(iv) All such transfers shall be made at the market rate of exchange prevailing on the date on which application for transfer is made.

(b) If the foreign exchange reserves of the Republic of Zaire do not permit the transfer of the proceeds of the sale or of the liquidation of all or part of an investment, the Republic of Zaire shall allow the transfer of such proceeds to take place over a period not to exceed three years from the date the transfer is requested.

(i) With respect to such transfers, the Republic of Zaire shall treat nationals and companies of the United States no less favorably than it treats nationals or companies of any third country.

(ii) The Republic of Zaire shall ensure that the national or company has an opportunity to invest the proceeds of sale or liquidation in a manner that will preserve its value until the transfer occurs.

(c) Notwithstanding any of the provisions of this paragraph, payments of compensation for expropriation pursuant to Article III shall in all cases be paid without delay in a form that is effectively realizable and freely and promptly transferable at the prevailing rate of exchange on the date of the expropriation. Moreover, consistent with Article II(4), nothing in this paragraph shall relieve either Party of its obligations resulting from international law from its own national laws or from any investment agreement, authorization, or license.

(d) Regarding the currency or currencies in which a transfer authorized under Article V may be made, the Parties acknowledge that not all freely convertible currencies are always available to the Republic of Zaire. The Republic of Zaire shall respect to the extent possible the choice of the investor, provided that the currency chosen is available.

(e) Pursuant to Article VI(l) of this Treaty, and without prejudice to the procedures set forth in Articles VII and VIII, the two Governments agree to consult at the request of either one of them concerning the implementation of Article V and of this paragraph.

2. In accordance with Article XI(l), each Party shall strive to accord treatment in the tax area that is fair and equitable. “Fair and equitable treatment” within the meaning of Article XI(l) shall not necessarily be construed to mean the same treatment that is accorded in similar situations to a Party’s own nationals or companies.

3. The provisions of Articles VII and VIII shall not apply to any dispute arising (a) under programs of the Export-Import Bank of the United States regarding export credit, guaranties, or insurance, or (b) under other official credit, guaranty, or insurance arrangements pursuant to which the Parties have agreed to other means of settling disputes.

4. The treatment accorded by the United States of America to nationals or companies of the Republic of Zaire under the provisions of Article II(l) and (2) shall be that accorded in any state, territory or possession of the United States of America to companies constituted, incorporated, or otherwise duly organized in other states, territories or possessions of the United States of America.

5. “Direct or indirect measures tantamount to expropriation” as used in Article III(l) may include the levying of taxes equivalent to indirect expropriation, the compulsory sale of all or part of an investment, or the impairment or deprivation of the management, control, or economic value of an investment.

6. The term “top managerial personnel” within the meaning of Article II(5)(b), shall include executive personnel who are responsible, singly or jointly, for making major decisions concerning the establishment or operation of an investment.

7. “Territory” within the meaning of Article I(f)(ii) encompasses:

(a) For the Republic of Zaire: All Zairian territory within its geographical and political boundaries where its sovereignty is exercised.

(b) For the United States of America: the separate States, the District of Columbia, and Guam, Puerto Rico, American Samoa and the Virgin Islands.

8. The definition of company used in Article I paragraph (a) is limited to the purposes of this Treaty, and is without prejudice to the distinction among juridical entities under the laws of the United States and Zaire.

IN WITNESS WHEREOF, the respective plenipotentiaries have signed this Protocol

DONE in duplicate at Washington on the third day of August 1984 in the English and French languages, both texts being equally authentic.

FOR THE UNITED STATES OF AMERICA:

WILLIAM E. BROCK.

FOR THE REPUBLIC OF ZAIRE:

UMBA-DI-LUTETE.

End of tab panel

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Congo, Republic Of (Brazzaville) Bilateral Investment Treaty

Signed February 12, 1990; Entered into Force August 13, 1994

102d CONGRESS 1st Session

SENATE TREATY Doc. 102-1

TREATY WITH THE PEOPLE’S REPUBLIC OF THE CONGO CONCERNING THE RECIPROCAL ENCOURAGEMENT AND PROTECTION OF INVESTMENT

MESSAGE

FROM

THE PRESIDENT OF THE UNITED STATES

TRANSMITTING

TREATY BEEN THE GOVERNMENT OF THE UNITED STATES OF AMERICA AND THE GOVERNMENT OF THE PEOPLE’S REPUBLIC OF THE CONGO CONCERNING THE RECIPROCAL ENCOURAGEMENT AND PROTECTION OF INVESTMENT, SIGNED AT WASHINGTON, FEBRUARY 12,1990

MARCH 19, 1991.-Treaty was read for the first time, and together with the accompanying papers, referred to the Committee on Foreign Relations and ordered to be printed for the use of the Senate.

______________

U.S. GOVERNMENT PRINTING OFFICE

WASHINGTON : 1991

LETTER OF TRANSMITTAL

__________________

THE WHITE HOUSE, March 19, 1991.

To the Senate of the United States:

With a view to receiving the advice and consent of the Senate to ratification, I transmit herewith the Treaty Between the United States of America and the People’s Republic of the Congo concerning the Reciprocal Encouragement and Protection of Investment, signed at Washington on February 12, 1990. I transmit also, for the information of the Senate, the report of the Department of State with respect to this treaty.

The Bilateral Investment Treaty (BIT) program, initiated in 1981, is designed to encourage and protect U.S. investment. The treaty is an integral part of U.S. efforts to encourage the Congo and other governments to adopt macroeconomic and structural policies that will promote economic growth. It is also fully consistent with U.S. policy toward international investment. That policy holds that an open international investment system in which participants respond to market forces provides the best and most efficient mechanism to promote global economic development. A specific tenet, reflected in this treaty, is that U.S. direct investment abroad and foreign investment in the United States should receive fair, equitable, and nondiscriminatory treatment. Under this treaty, the Parties also agree to international law standards for expropriation and compensation; to free financial transfers; and to procedures, including international arbitration, for the settlement of investment disputes.

I recommend that the Senate consider this treaty as soon as possible and give its advice and consent to ratification of the treaty at an early date.

GEORGE BUSH

LETTER OF SUBMITTAL

DEPARTMENT OF STATE,

Washington, March 11, 1991.

The PRESIDENT,

The White House,

THE PRESIDENT: I have the honor to submit to you the Treaty Between the United States of America and the People’s Republic of the Congo concerning the Reciprocal Encouragement and Protection of Investment, signed at Washington, February 12, 1990. I recommend that this treaty be transmitted to the Senate for its advice and consent to ratification.

This treaty constitutes a continuation of the bilateral investment treaty (BIT) program initiated in 1981. Negotiation of these treaties has been pursued by the Office of the United States Trade Representative and the Department of State with active participation of the Departments of Commerce and Treasury, in conjunction with other U.S. Government agencies. BITs with Bangladesh, Cameroon, Grenada, Senegal, Turkey, and Zaire have entered into force.

The global BIT program is intended to encourage and protect U.S. investment in developing countries. By providing certain mutual guarantees and protections, a BIT creates a more stable and predictable legal framework for foreign investors in the territory of each of the treaty Parties. The negotiation of a series of bilateral treaties with interested countries establishes greater international discipline in the investment area.

The BITs which have been concluded, as well as others under negotiation, are an integral part of U.S. efforts to encourage other governments to adopt macroeconomic and structural policies that will promote economic growth. Experience to date has shown that interested countries are willing to provide U.S. investors with significant investment guarantees and assurances as a way of inducing additional foreign investment. It is U.S. policy to advise potential treaty partners that conclusion of a BIT with the United States is an important and favorable factor in the investment relationship, but does not in and of itself result in immediate increases in U.S. investment flows.

The BIT approach is similar to programs that have been undertaken with considerable success by a number of European countries, including the Federal Republic of Germany and the United Kingdom, since the early 1960s. Indeed, our industrialized partners already have over 200 BITs in force, primarily with developing countries. U.S. treaties, which draw upon language used in its Treaties of Friendship, Commerce, and Navigation (FCNS) as well European counterparts, are more comprehensive and far-reaching than European BITS.

THE U.S.-CONGO TREATY

The treaty with the Congo satisfies all four main BIT objectives:

— foreign investors are to be accorded treatment in accordance with international law and are to be treated no less favorably than investors of the host country or no less favorably than investors of third countries, whichever is the most favorable treatment (“national” or “most-favored-nation” treatment) subject certain specified exceptions;

— international law standards shall apply to the expropriation of investments and to the payment of compensation for expropriation;

— free transfers shall be afforded to funds associated with an investment into and out of the host country; and

— procedures shall allow an investor to take a dispute with a Party directly to binding third-party arbitration.

The provisions of the treaty with the Congo do not differ in any from the U.S. model text used at the time of negotiation. A description of the most significant provisions of the treaty follows.

The Congo BIT’s definition section clarifies terms such as “company of a Party” and “investment.” The BIT concept of “investment is broad and designed to be flexible; although numerous types of economic interests are enumerated, the intent is to include all legitimate interests in the territory of either Party, whether directly or indirectly controlled by nationals of the other, having economic value or “associated” with an investment. “Companies of Party are those legally constituted under the laws of a Party.

The Congo BIT accords the better of national or most-favored nation (MFN) treatment to foreign investment, subject to each Party’s exceptions which are set forth in the treaty or its annex, which forms an integral part of the treaty. The exceptions are designed to protect state regulatory interests and, for the United States, to accommodate the derogations from national treatment in state or federal law relating to such areas as air transport, shipping, banking, telecommunications, energy and power production, insurance; and from national and MFN treatment in the case of ownership of real property. The Congo has listed the following sectors or matters as exceptions: the insurance sector, government lending and insurance programs, energy production, certified customs agents, real estate, radio and television broadcasts, telephone and telegraph services, drinking water supply, rail transportation, and air transport. Any additional restrictions or limitations which Party may adopt with respect to those matters or sectors are not to affect existing investments.

The BIT also includes general treatment protections designed to be a guide to interpretation and application of the treaty. Thus, the parties agree to accord investments “fair and equitable treatment”. Thus, the Parties agree to accord investments “fair and equitable treatment” and “full protection and security” in no case “less than that required by international law.” The BIT specifically grants nationals of a Party the right to establish investments on a basis no less favorable than the better of national or MFN treatment in the territory of the other Party, restricts the right to impose performance requirements, and obliges Parties to observe their contractual obligations with investors. The BIT also provides that companies legally constituted under the laws of a Party which are investments shall be permitted to engage “top managerial personnel of their choice, regardless of nationality.”

The BIT also confers protection from unlawful interference with property interests and assures compensation in accordance with international law standards. It provides that any direct or indirect taking must be: for a public purpose; nondiscriminatory; accompanied by the payment of prompt, adequate and effective compensation; and in accordance with due process of law and the general standards of treatment discussed above. The meaning of “expropriation” as used in the BIT is broad and flexible; it includes any measure which is “tantamount to expropriation or nationalization.” Such compensation, which “shall be equivalent to the fair market value of the expropriated investment immediately before the expropriatory action was taken or became known,” must be “without delay,” “fully realizable,” “freely transferable” and “include interest at a commercially reasonable rate from the date of expropriation …” The BIT grants the right to “prompt review” by the relevant judicial or administrative authorities in order to determine whether the compensation offered is consistent with these principles. It also extends national and MFN treatment to investors in cases of loss due to war or other civil disturbance. The BIT does not provide, however, a specific valuation method for compensating such losses.

The Congo BIT provides for free transfers “related to an investment,” specifically including returns, compensation for expropriation, payments, arising out of an investment dispute, contract payments, proceeds from the sale of an investment, and contributions to capital for maintenance or development of an investment. Such transfers are to be made in a “freely usable currency at the prevailing market rate of exchange on the date of transfer with respect to spot transactions in the currency to be transferred.” The text recognizes that notwithstanding this guarantee Parties can maintain certain laws and regulations regarding transfers provided these are applied in a non-discriminatory fashion. In particular, the text provides that Parties can require reports of currency transfers and impose income taxes by such means as a withholding tax on dividends. The article also recognizes that Parties retain the right to protect the rights of creditors and ensure the satisfaction of judgments in adjudicatory proceedings.

The BIT provides that where a defined investment dispute arises between a Party and a national or company of the other Party, including a dispute as to the interpretation of an investment agreement, and the dispute cannot be solved through negotiation, it may be submitted to arbitration in accordance with any dispute-settlement procedures to which the national or company and the host country have previously agreed. Unless the national or company has submitted the dispute to previously agreed dispute settlement procedures or to adjudication by domestic courts or other tribunals of the host country, the national or company may submit the dispute to the International Centre for the Settlement of Investment Disputes (“ICSID”) for conciliation or binding arbitration. Exhaustion of local remedies is not required. In a separate provision, the Parties also agree to provide effective means of asserting claims and enforcing rights with respect to investments.

The BIT provides for state-to-state arbitration between the Parties in case of a dispute regarding the interpretation or application of the treaty. In the absence of an agreement that other rules apply, the BIT refers the Parties to the arbitration rules of the United Nations Commission on International Trade Law. The BIT also outlines the procedures for the creation of the arbitral panel. Another BIT provision exempts disputes arising under Export-Import Bank programs, or other credit guarantee or insurance arrangements providing for alternative dispute settlement arrangements, from the standard BIT arbitration clauses.

The BIT exhorts Parties to apply their tax policies fairly and equitably. Because the United States specifically addresses tax matters in tax treaties, the BIT for the most part excludes such matters. The BIT also states that the treaty shall not derogate from any obligations that require more favorable treatment of investments. The treaty further provides that measures necessary for public order or essential security interests are not precluded.

The BIT enters into force 30 days after exchange of ratifications and continues in force for at least ten years. Thereafter, either Party may terminate the treaty, subject to one year’s written notice.

I join with the U.S. Trade Representative and other U.S. Government agencies in supporting the treaty and favor its transmission to the Senate at an early date.

Respectfully submitted,

LAWRENCE EAGLEBURGER.

TREATY BETWEEN THE GOVERNMENT OF THE UNITED STATES OF AMERICA AND THE GOVERNMENT OF THE PEOPLE’S REPUBLIC OF THE CONGO CONCERNING THE RECIPROCAL ENCOURAGEMENT AND PROTECTION OF INVESTMENT

The Government of the United States of America and the Government of the People’s Republic of the Congo, desiring to promote greater economic cooperation between them, with respect to investment by nationals and companies of one Party in the territory of the other Party; and

Recognizing that agreement upon the treatment to be accorded such investment will stimulate the flow of private capital and the economic development of the Parties,

Agreeing that fair and equitable treatment of investment is desirable in order to maintain a stable framework for investment and maximum effective utilization of economic resources, and

Having resolved to conclude a Treaty concerning the encouragement and reciprocal protection of investment,

Have agreed as follows:

ARTICLE I

1. For the purpose of this Treaty,

(a) “company of a Party” means any kind of corporation, company, association, or other organization, legally constituted under the laws and regulations of a Party or a political subdivision thereof whether or not organized for pecuniary gain, or privately or governmentally owned;

(b) “investment” means every kind of investment, in the territory of one Party owned or controlled directly or indirectly by nationals or companies of the other Party, such as equity, debt, and service and investment contracts; and includes:

(i) tangible and intangible property, including rights, such as mortgages, liens and pledges;

(ii) a company or shares of stock or other interests in a company or interests in the assets thereof,

(iii) a claim to money or a claim to performance having economic value, and associated with an investment;

(iv) intellectual and industrial property rights, including rights with respect to copyrights, patents, trademarks, trade names, industrial designs, trade secrets and know-how, and goodwill; and

(v) any right conferred by law or contract, and any licenses and permits pursuant to law;

(e) “associated activities” include the organization, control, operation, maintenance and disposition of companies, branches, agencies, offices, factories or other facilities for the conduct of business; the making, performance and enforcement of contracts; the acquisition, use, protection and disposition of property of all kinds including intellectual and industrial property rights; and the borrowing of funds, the purchase and issuance of equity shares, and the purchase of foreign exchange for imports.

3. Any alteration of the form in which assets are invested or reinvested shall not affect their character as investment.

ARTICLE II

1. Each Party shall permit and treat investment, and activities associated therewith, on a basis no less favorable than that accorded in like situations to investment or associated activities of its own nationals or companies, or of nationals or companies of any third country, whichever is the most favorable, subject to the right of each Party to make or maintain exceptions falling within one of the sectors or matters listed in the Annex to this Treaty. Each Party agrees to notify the other Party before or on the date of entry into force of this Treaty of all such laws and regulations of which it is aware concerning the sectors or matters listed in the Annex. Moreover, each Party agrees to notify the other of any future exception with respect to the sectors or matters listed in the Annex, and to limit such exceptions to a minimum. Any future exception by either Party shall not apply to investment existing in that sector or matter at the time the exception becomes effective. The treatment accorded pursuant to any exceptions shall not be less favorable than that accorded in like situations to investments and associated activities of nationals or companies of any third country, except with respect to ownership of real property. Rights to engage in mining on the public domain shall be dependent on reciprocity.

2. Investment shall at all times be accorded fair and equitable treatment, shall enjoy full protection and security and shall in no case be accorded treatment less than that required by international law. Neither Party shall in any way impair by arbitrary and discriminatory measures the management, operation, maintenance, use, enjoyment, acquisition, expansion, or disposal of investments. Each Party shall observe any obligation it may have entered into with regard to investments.

3. Subject to the laws relating to the entry and sojourn of aliens, nationals of either Party shall be permitted to enter and to remain in the territory of the other Party for the purpose of establishing, developing, administering or advising on the operation of an investment to which they, or a company of the first Party, that employs them, have committed or are in the process of committing a substantial amount of capital or other resources.

6. Each Party shall provide effective means of asserting claims and enforcing rights with respect to investment agreements, investment authorizations and properties.

7. Each Party shall make public all laws, regulations, administrative practices and procedures, and adjudicatory decisions that pertain to or affect investments.

8. The treatment accorded by the United States of America to investments and associated activities under the provisions of this Article shall in any State, Territory or possession of the United States of America be the treatment accorded therein to companies legally constituted under the laws and regulations of other States, Territories or possessions of the United States of America.

ARTICLE III

1. Investments shall not be expropriated or nationalized either directly or indirectly through measures tantamount to expropriation or nationalization (“expropriation”) except for a public purpose; in a non-discriminatory manner; upon payment of prompt, adequate and effective compensation; and in accordance with due process of law and the general principles of treatment provided for in Article 11(2). Compensation shall be equivalent to the fair market value of the expropriated investment immediately before the expropriatory action was taken or became known; be paid without delay; include interest at a commercially reasonable rate from the date of expropriation; be fully realizable; and be freely transferable at the prevailing market rate of exchange on the date of expropriation.

3. Nationals or companies of either Party whose investments are losses in the territory of the other Party owing to war or armed conflict, revolution, state or national emergency, insurrection, civil disturbance or other similar events shall be accorded treatment by such other Party no less favorable than that accorded to its own nationals or companies or to nationals or company of any third country, whichever is the most favorable treatment, as regards any measures it adopts in relation to such losses.

ARTICLE IV

1. Each Party shall permit all transfers related to an investment be made freely and without delay into and out of its territory. Such transfers include: (a) returns; (b) compensation pursuant to article III; (c) payments arising out of an investment dispute; (d) agreements made under a contract, including amortization of principle and accrued interest payments made pursuant to a loan agreement; (e) proceeds from the sale or liquidation of all or any part of investment; and (f) additional contributions to capital for the maintenance or development of an investment.

2. Except as provided in Article III paragraph 1, transfers shall made in a freely convertible currency at the prevailing market of exchange on the date of transfer with respect to spot transactions in the currency to be transferred.

3. Notwithstanding the provisions of paragraphs 1 and 2, either may maintain laws and regulations (a) requiring reports of currency transfer; and (b) imposing income taxes by such means as withholding tax applicable to dividends or other transfers. Furthermore, either Party may protect the rights of creditors, or re the satisfaction of judgments in adjudicatory proceedings, rough the equitable, nondiscriminatory and good faith application of its law.

ARTICLE V

The Parties agree to consult promptly, on the request of either, resolve any disputes in connection with the Treaty, or to discuss matters relating to the interpretation or application of the treaty.

ARTICLE VI

1. For the purposes of this Article, an investment dispute is deed as a dispute involving (a) the interpretation or application of investment agreement between a Party and a national or company of the other Party; (b) the interpretation or application of a investment authorization granted by a Party’s foreign investment authority to such national or company; or (c) an alleged breach of any right conferred or created by this Treaty with respect to an investment.

2. In the event of an investment dispute between a Party and a national or company of the other Party, the parties to the dispute shall initially seek to resolve the dispute by consultation and negotiation, which may include the use of non-binding, third party procedures. Subject to Paragraph 3 of this Article, if the dispute cannot be resolved through consultation and negotiation, the dispute shall be submitted for settlement in accordance with previously agreed, applicable dispute-settlement procedures; any dispute-settlement procedures including those relating to expropriation and specified in the investment agreement shall remain binding and shall be enforceable in accordance with the terms of the investment agreement, relevant provisions of domestic laws, and applicable international agreements regarding enforcement of arbitral awards.

3. (a) The national or company concerned may choose to consent in writing to the submission of the dispute to the International Settlement of Investment Disputes (“Centre”) or to plying the rules of the Centre, for the settlement or binding arbitration, at any time after six upon which the dispute arose. Once the national or company concerned has so consented, either party to the dispute may institute such proceedings provided:

(i) the dispute has not been submitted by the national or company for resolution in accordance with any applicable previously agreed dispute settlement procedures; and

(ii) the national or company concerned has not brought the dispute before the courts of justice or administrative tribunals or agencies of competent jurisdiction of the Party that is a party to the dispute. If the parties disagree over whether conciliation or binding arbitration is the more appropriate procedure to be employed, the opinion of the national or company concerned shall prevail.

(b) Each Party hereby consents to the submission of an investment dispute to the Centre for settlement by conciliation or binding arbitration, or, in the event the Centre is not available, to the submission of the dispute to ad hoc arbitration applying the rules of the Centre.

(c) Conciliation or binding arbitration of such disputes shall be done applying the provisions of the Convention of the Settlement of Investment Disputes Between States and Nationals of Other States done at Washington, March 18, 1965 (“Convention”) and the Regulations and Rules or the Centre.

4. In any proceeding involving an investment dispute, a Party shall not assert, as a defense, counter-claim, right of set-off or otherwise, that the national or company concerned has received or will receive, pursuant to an insurance or guarantee contract, indemnification or other compensation for all or part of its. alleged damages.

5. For the purposes of this Article, any company legally constituted under the applicable laws and regulations of either Party or a political subdivision thereof but that, immediately before the occurrence of the event or events giving rise to the dispute, was an investment of nationals or companies of the other Party, shall, in accordance with Article 25 (2) (b) of the Convention, be treated as a national or company of such other Party.

ARTICLE VII

1. Any dispute between the Parties concerning the interpretation or application of the Treaty which is not resolved through consultations other diplomatic channels, shall be submitted, upon the request of either Party, to an arbitral tribunal for binding decision in accordance with the applicable rules of international law. In the absence of an agreement by the Parties to the contrary, the arbitration rules of the United Nations Commission on International Trade Law (UNCITRAL), except to the extent modified by the Party or by the arbitrators, shall govern.

2. Within two months of receipt of a request, each Party shall appoint an arbitrator. The two arbitrators shall select a third arbitral as Chairman, who is a national of a third State. The UNCITRAL Rules for appointing members of three member panels shall apply mutatis mutandis to the appointment of the arbitral panel except that the appointing authority referenced in those rules shall be the Secretary General of the Centre.

3. Unless otherwise agreed, all submissions shall be made and all hearings shall be completed within six months of the date of selection of the third arbitrator, and the Tribunal shall render its decision within two months of the date of the final submissions or the of the closing of the hearings, whichever is later.

4. Expenses incurred by the Chairman, the other arbitrators, an other costs of the proceedings shall be paid for equally by the Parties. The Tribunal may, however, at its discretion, direct that a higher proportion of the costs be paid by one of the Parties.

ARTICLE VIII

ARTICLE IX

This Treaty shall not derogate from:

(a) laws and regulations, administrative practices or procedures, or administrative or adjudicators decisions of either Party;

(b) international legal obligations; or

ARTICLE X

ARTICLE XI

1. With respect to its tax policies, each Party should strive to accord fairness and equity in the treatment of investment of nationals and companies of the other Party.

2. Nevertheless, the provisions of this Treaty, and in particular Article VI and VII, shall apply to matters of taxation only with respect to the following:

(a) expropriation, pursuant to Article III;

(b) transfers, pursuant to Article IV; or

(c) the observance and enforcement of terms of an investment agreement or authorization as referred to in Article VI (1) (a) or (b), to the extent they are not subject to the dispute settlement provisions of a Convention for the avoidance of double taxation between the two Parties, or have been raised under such settlement provisions and are not resolved within a reasonable period of time.

ARTICLE XII

This Treaty shall apply, mutatis mutandis, to the political subdivisions of the parties.

ARTICLE XIII

2. Either Party may, by giving one year’s written notice to the other Party, terminate this Treaty at the end of the initial ten year period or at any time thereafter.

4. The Annex shall form an integral part of the Treaty.

IN WITNESS WHEREOF, the respective plenipotentiaries have signed this Treaty.

DONE in duplicate at Washington on the twelfth day of February, 1990, in the English and French languages, both texts being equally authentic.

For the Government People’s Republic of the Congo

ANTOINE NDINGA-OBA.

For the Government of the United States of America

CARLA HILLS

ANNEX

Consistent with Article II paragraph 1, each Party reserves the right to maintain limited exceptions in the sectors or matters it has indicated below:

The United States of America

Air transportation; ocean and coastal shipping; banking; insurance; government grants; government insurance and loan programs; energy and power production; custom house brokers; ownership of real estate; ownership and operation of broadcast or common carrier radio and television stations; ownership of shares in the Communications Satellite Corporation; the provisions common carrier telephone and telegraph services; the provision of submarine cable services; use of land and natural resources; primary dealerships in government securities; land-based maritime transport facilities.

The People’s Republic of the Congo

The insurance sector; government lending and insurance programs; energy production; certified customs agents; real estate, radio and television broadcasts; telephone and telegraph services drinking water supply; rail transportation; air transport.

TREATY WITH THE PEOPLE’S REPUBLIC OF THE CONGO CONCERNING THE RECIPROCAL ENCOURAGEMENT AND PROTECTION OF INVESTMENT

____________________________

AUGUST 6 (legislative day, August 5) 1992 - Ordered to be printed

____________________________

Mr. PELL, from the Committee on Foreign Relations, submitted the following

REPORT

[To accompany Treaty Doc. 102-1]

The Committee on Foreign Relations to which was referred the Treaty Between the Government of the United States of America and the Government of the People’s Republic of the Congo Government, signed at Washington, February 12, 1990, having considered the same, reports favorably thereon without amendment and recommends that the Senate gave its advise and consent to ratification thereof.

PURPOSE

The Treaty Between the Government of the United States of America and the Government of the People’s Republic of the Congo Concerning the Reciprocal Encouragement and Protection of Investment, signed at Washington on February 12, 1990 was transmitted by President Bush on March 19, 1991 (Treaty Doc. 102-1).

The Treaty is part of a series of bilateral investment treaties being negotiated by the United States. The principal purpose of the bilateral investment treaties is to promote the free flow of international investment and to encourage and protest United States investment in developing countries.

MAJOR PROVISIONS

Before entering into negotiations, the United States developed a model treaty which sought to incorporate provisions which would facilitate the free flow of investment, prohibit practices which have emerged in various countries which inhibit that free flow, and generally codify rules on investment and dispute settlement, which the United States views as well as established international law and precedent. Specifically, the model treaty seeks to achieve the following objectives:

— the better of either national or most-favored nation treatment, for each party to the treaty, thereby providing in the case of United States companies a “level playing field” in competing with national and third country investors, subject to specified exceptions set forth in the annex to each treaty;

— Application of international law standards to the expropriation of investments, permitting expropriation only for a public purpose and requiring the payment of prompt and fair compensation;

— The free transfer of funds associated with an investment into and out of the host country;

— Access to binding international arbitration for settlement of investment disputes;

— A prohibition on the imposition of performance requirement, which have become important as countries have increasingly imposed requirement to use domestically produced goods; and imposed requirements to use domestically produced goods; and

— The right of companies to hire top managers of their choice; regardless of nationality.

In each of the bilateral investment treaties, including this treaty, the United States has reserved the right to make of maintain limited exceptions to national or most-favored nation treatment in specific sectors or matters set forth in the annex to the treaty.

INVESTMENT BARRIERS

The Administration submitted the following response to the committee’s inquiry regarding investment barriers identified in the process of negotiating this treaty.

As noted above, the USF (United States Government) participates in BIT discussions with countries whose investment regimes are roughly consistent with the BIT principles. In every BIT, countries agree to provide the better of national or most-favored nation treatment to investments subject to each Party’s exceptions. These exceptions are designed to accommodate the derogations from national treatment in state and national laws which may constitute investment barriers …

Concern was raised over government screening of foreign investment. While some Congolese laws are at present inconsistent with the elements of the treaty, the treaty will supersede domestic law in the Congo. As a result, United States investments will be granted at least the better of national treatment of MFN on entry and post establishment.

BILATERAL INVESTMENT TREATY PROGRAM

The earliest formal economic treaties that the United States negotiated with other countries were a series of Friendship, Commerce, and Navigation (FCN) treaties. These treaties set the framework for U.S. trade and investment relations with foreign countries.

With the advent of the General Agreement on Tariffs and Trade (GATT), U.S. trade relations began to be set with foreign countries through multilateral trade agreements and the use of FCN treaties faded; the last two FCNs were negotiated in the late 1960s. This multilateral approach left a gap in relations with foreign countries involving U.S. investment issue of performance requirements in the Trade Related Investment Measures (TRIMS) of the current Uruguay trade negotiations. The North American Free Trade Agreement also has investment provisions similar to a bilateral investment treaty.

In an attempt to promote the free flow of investment internationally, in the absence of multilaterally agreed to rules, the United States began, in 1981, to negotiate a new series of treaties called the Bilateral Investment Treaties (BITs). The BIT program is designed to provide certain mutual guarantees and protections and to created a more stable and predictable legal framework for foreign investors with each of the treaty partners. A special tenet of the program is to ensure that United States direct investment abroad and foreign investment in the United States receive fair, equitable and non-discriminatory treatment. The BITs are, therefore, the modern successor on the Investment side to the Friendship, Commerce, and Navigation Treaty series. In comparison to its predecessor, the BIT is far more detailed and provides greater protection for the foreign investor, including an investor-to-state disputes mechanism that generates to United States investors the right to binding arbitration against the host state without the involvement of the United States government.

The Senate gave its advise and consent to ratification of BIT’s with Senegal, Zaire, Morocco, Turkey, Cameroon, Bangladesh, Egypt and Grenada in 1988, and in 1990 a BIT with Panama and a business and economic relations treaty with Poland was the first extension of this program to facilitate the continuation of economic and political changes which have taken place in Eastern Europe over the last four years. All of these treaties have entered into force except the one with Poland. The treaty with Poland has not been brought into force because Polish law on intellectual property rights has not yet been revised in conformity with the terms of the treaty.

The negotiation of BITs has accelerated dramatically since 1990. The administration has signed a BIT with Kazakhstan, Argentina and Romania. These treaties should be submitted to the Senate later this year. Negotiations are currently ongoing with Uruguay, Bolivia, Nigeria, Hungary, Jamaica, Armenia, Costa Rica, Hong Kong, Venezuela, Colombia, Pakistan, Peru, Mongolia, Kyrgyzsatan, Barbados and Bulgaria. In addition, there are 14 other countries with which the Administration hopes to initiate negotiations in the near future.

EXPERIENCE OF TREATIES IN FORCE

The administration has informed the committee that there have been no major problems involving a U.S. investment, with the exception of Zaire, in countries with which bilateral investment treaties are in force. They have also stated there have been no cases in which the bilateral investment treaty dispute settlement mechanism for international arbitration has been invoked.

Our experience to date with the United States bilateral investment treaties in force is that they are a valuable tool, both for the United States investor and the United States government, to insure that our bilateral investment treaty partners protect United States investment. In two cases (Panama and Zaire), the United States government has been notified by the United States investors of potential bilateral investment treaty violations, and in both cases the United States Embassy in the host country made demarches to the host government. In one case, the host government stopped the offending practice and in the other Zaire -discussed infra) consultations are continuing.***

Recently disputes have arisen between United States companies and the Government of Zaire regarding the taking of petroleum product installations, and compensation for the destruction of property during the civil disturbances of September and October 1991. The United States has informed the Government of Zaire that we expect Zaire to fulfill its obligations under the bilateral investment treaty with respect to both these problems, and to return the petroleum installations to their United States owners. We have also advised the United States companies involved of their rights under the bilateral investment treaty. If negotiated settlement cannot be reached after six months, they have the right directly to seek remedy in the courts of Zaire or through international arbitration. We will continue to remain fully engaged with the Government of Zaire in seeking resolution of these issues. (Answer to questions submitted by Chairman Pell to the administration.)

The administration has indicated that in a number of the countries with BITs in effect, U.S. investment has increased since the BIT went into force. However, the administration has pointed out that the existence of a BIT will not guarantee increased U.S. investment. Because investment decisions are based on a variety of factors and the BITs have only been in force for a short period of time, the administration says it would be difficult to draw a relationship between increased investment and the BITs.

TREATY PROVISIONS

The Congo treaty is virtually identical to the model bilateral investment treaty used by the administration and meets all of its objectives set forth above.

The Congo reserved the right to maintain limited exceptions to national or MFN treatment in the following sectors or matters set forth in the Annex to the treaty:

The insurance sector; government lending and insurance programs; energy production; certified customs agents; real estate; radio and television broadcasts; telephone and telegraph services; drinking water supply; rail transportation; and air transport.

ENTRY INTO FORCE

The treaty enters into force 30 days after exchange of ratification and continues in force for at least ten years. Thereafter, either party may terminate the treaty, subject to one year’s written notice.

The treaty text and the administration’s summary analysis of the treaty is set forth in Treaty Doc. 102-1. The administration’s responses to committee questions regarding the interpretation of treaty provisions is available for review as part of the committee’s hearing record on this treaty.

COMMITTEE ACTION

On August 4, 1992, the committee held a hearing on this treaty. Testimony was received by the Hon. Eugene J. McAllister, Assistant Secretary for Economic and Business Affairs Bureau, Department of State.

The committee also received answers from the administration to numerous questions regarding the operation of the bilateral investment treaty program and the provisions of this treaty. This material, together with the administration’s “Description of the U.S. Model Bilateral Investment Treaty (BIT) of February 1992”, has been made a part of the official record of these hearings.

In addition, the committee received statements in support of the treaty from the National Association of Manufacturers, the United States Council for International Business and Kenneth J. Vandevelde, Associate Professor of Law, Western State University College of Law, San Diego, California.

The committee voted to report favorably the treaty, and recommends that the Senate give its advice and consent to ratification thereof by a voice vote, with a quorum being present, at a meeting on August 6, 1992.

TEXT OF RESOLUTION OF RATIFICATION

Resolved, (two-thirds of the Senators present concurring therein), That the Senate advise and consent to the ratification of the Treaty Between the Government of the United States of America and the Government of the People’s Republic of the Congo Concerning the Reciprocal Encouragement and Protection of Investment, signed at Washington, February 12, 1990.

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Croatia Bilateral Investment Treaty

Signed July 13, 1996; Entered into Force June 20, 2001

106th Congress SENATE Treaty Doc.

2d Session 106-29

_______________________________________________________________________

INVESTMENT TREATY WITH CROATIA

MESSAGE

FROM

THE PRESIDENT OF THE UNITED STATES

TRANSMITTING

TREATY BETWEEN THE GOVERNMENT OF THE UNITED STATES OF AMERICA AND THE GOVERNMENT OF THE REPUBLIC OF CROATIA CONCERNING THE ENCOURAGEMENT AND RECIPROCAL PROTECTION OF INVESTMENT, WITH ANNEX AND PROTOCOL, SIGNED AT ZAGREB ON JULY 13, 1996

MAY 23, 2000.-Treaty was read the first time and, together with the accompanying papers, referred to the Committee on Foreign Relations and ordered to be printed for the use of the Senate

U.S. GOVERNMENT PRINTING OFFICE

79-118 WASHINGTON : 2000

LETTER OF TRANSMITTAL

–––-

The White House, May 23, 2000.

To the Senate of the United States:

The bilateral investment treaty (BIT) with Croatia was the fourth such treaty between the United States and a Southeastern European country. The Treaty will protect U.S. investment and assist Croatia in its efforts to develop its economy by creating conditions more favorable for U.S. private investment and thus strengthen the development of its private sector.

The Treaty is fully consistent with U.S. policy toward international and domestic investment. A specific tenet of U.S. policy, reflected in this Treaty, is that U.S. investment abroad and foreign investment in the United States should receive national treatment. Under this Treaty, the Parties also agree to customary international law standards for expropriation. The Treaty includes detailed provisions regarding the computation and payment of prompt, adequate, and effective compensation for expropriation; free transfer of funds related to investments; freedom of investments from specified performance requirements; fair, equitable, and most-favored-nation treatment; and the investor’s freedom to choose to resolve disputes with the host government through international arbitration.

I recommend that the Senate consider this Treaty as soon as possible, and give its advice and consent to ratification of the Treaty at an early date.

WILLIAM J. CLINTON.

LETTER OF SUBMITTAL

–––-

Department of State,

Washington, May 3, 2000.

The President: I have the honor to submit to you the Treaty Between the Government of the United States of America and the Government of the Republic of Croatia Concerning the Encouragement and Reciprocal Protection of Investment, with Annex and Protocol, signed at Zagreb on July 13, 1996. I recommend that this Treaty, with Annex and Protocol, be transmitted to the Senate for its advice and consent to ratification.

The bilateral investment treaty (BIT) with Croatia was the fifteenth such treaty signed between the United States and a country of Central or Eastern Europe. The Treaty is based on the view that an open investment policy contributes to economic growth. This Treaty will assist Croatia in its efforts to develop its economy by creating conditions more favorable for U.S. private investment and thereby strengthening the development of its private sector. It is U.S. policy, however, to advise potential treaty partners during BIT negotiations that conclusion of such a treaty does not necessarily result in increases in private U.S. investment flows.

To date, 31 BITs are in force for the United States—with Albania, Argentina, Armenia, Bangladesh, Bulgaria, Cameroon, the Republic of the Congo, the Democratic Republic of the Congo (formerly Zaire), the Czech Republic, Ecuador, Egypt, Estonia, Georgia, Grenada, Jamaica, Kazakhstan, Kyrgyzstan, Latvia, Moldova, Mongolia, Morocco, Panama, Poland, Romania, Senegal, Slovakia, Sri Lanka, Trinidad & Tobago, Tunisia, Turkey, and Ukraine. In addition to the Treaty with Croatia, the United States has signed, but not yet brought into force, BITs with Azerbaijan, Bahrain, Belarus, Bolivia, El Salvador, Honduras, Jordan, Lithuania, Mozambique, Nicaragua, Russia, and Uzbekistan.

The Office of the United States Trade Representative and the Department of State jointly led this BIT negotiation, with assistance from the Departments of Commerce and Treasury.

The U.S.-Croatia Treaty

The Treaty with Croatia is based on the 1994 U.S. prototype BIT and satisfies the U.S. principal objectives in bilateral investment treaty negotiations:

—All forms of U.S. investment in the territory of Croatia are covered.

—Covered investments receive the better of national treatment or most-favored-nation (MFN) treatment both while they are being established and thereafter, subject to certain specified exceptions.

—Specified performance requirements may not be imposed upon or enforced against covered investments.

—Expropriation is permitted only in accordance with customary international law standards.

—Parties are obligated to permit the transfer, in a freely usable currency, of all funds related to a covered investment, subject to exceptions for specified purposes.

—Investment disputes with the host government may be brought by investors, or by their covered investments, to binding international arbitration as an alternative to domestic courts.

These elements are further described in the following article-by-article analysis of the provisions of the Treaty:

Title and Preamble

Article I (Definitions)

Article I defines terms used throughout the Treaty.

Company, Company of a Party

The definition of “company” is broad, covering all types of legal entities constituted or organized under applicable law, and includes corporations, trusts, partnerships, sole proprietorships, branches, joint ventures, and associations. The definition explicitly covers not-for-profit entities, as well as entities that are owned or controlled by the state. “Company of a Party” is defined as a company constituted or organized under the laws of that Party.

National

The Treaty defines “national of a Party” (hereinafter “national”) as a natural person who is a national of a Party under its own laws. Under U.S. law, the term “national” is broader than the term “citizen.” For example, a native of American Samoa is a national of the United States, but not a citizen.

Investment, Covered Investment

The Treaty defines “covered investment” as an investment of a national or company of a Party in the territory of the other Party. An investment of a national or company is one that the national or company owns or controls, either directly or indirectly. Indirect ownership or control could be through other, intermediate companies or persons, including those of third countries. Control is not specifically defined in the Treaty; ownership of over 50 percent of the voting stock of a company would normally convey control, but in many cases the requirement could be satisfied by less than that proportion, or by other arrangements.

State Enterprise, Investment Authorization, Investment Agreement

The Treaty defines “State enterprise” as a company owned, or controlled through ownership interests, by a Party. Purely regulatory control over a company does not qualify it as a state enterprise.

The Treaty defines an “investment authorization” as an authorization granted by the foreign investment authority of a Party to a covered investment or a national or company of the other Party.

The Treaty defines an “investment agreement” as a written agreement between the national authorities of a Party and a covered investment or a national or company of the other Party that (1) grants rights with respect to natural resources or other assets controlled by the national authorities and (2) the investment, national, or company relies upon in establishing or acquiring a covered investment. This definition thus excludes agreements with subnational authorities (including U.S. States) as well as agreements arising from various types of regulatory activities of the national government, including, in the tax area, rulings, closing agreements, and advance pricing agreements.

ICSID Convention, Centre, UNCITRAL Arbitration Rules

The “ICSID Convention,” “Centre,” and “UNCITRAL Arbitration Rules” are explicitly defined to make the text brief and clear.

Territory

A definition of “territory” was included at the request of Croatia. The Treaty defines “territory” as the territory of the United States or Croatia. including the territorial sea established in accordance with international law as reflected in the 1982 United Nations Convention on the Law of the Sea. The definition also applies, in accordance with international law as reflected in that convention, to the seas, subsoil, and seabed adjacent to the territorial sea in which either the United States or Croatia has sovereign rights or jurisdiction.

Article II (Treatment of Investment)

Article II contains the Treaty’s major obligations with respect to the treatment of covered investments.

Paragraph 1 generally ensures the better of national or MFN treatment in both the entry and post-entry phases of investment. It thus prohibits, outside of exceptions listed in the Annex, “screening” on the basis of nationality during the investment process, as well as nationally-based post-establishment measures. For purposes of the Treaty, “national treatment” means treatment no less favorable than that which a Party accords, in like situation, to investments in its territory of its own nationals or companies. For purposes of the Treaty, “MFN treatment” means treatment no less favorable than that which a Party accords, in like situations, to investments in its territory of nationals or companies of a third country. The Treaty obliges each Party to provide whichever of national treatment or MFN treatment is the most favorable. This is defined by the Treaty as “national and MFN treatment.” Paragraph 1 explicitly states that the national and MFN treatment obligation will extend to state enterprises in their provision of goods and services to covered investments.

Paragraph 3 sets out a minimum standard of treatment based on standards found in customary international law. The obligations to accord “fair and equitable treatment” and “full protection and security” are explicitly cited, as is each Party’s obligation not to impair, through unreasonable and discriminatory means, the management, conduct, operation, and sale or other disposition of covered investments. The general reference to international law also implicitly incorporates other fundamental rules of customary international law regarding the treatment of foreign investment. However, this provision does not incorporate obligations based on other international agreements.

Paragraph 4 requires that each Party provide effective means of asserting claims and enforcing rights with respect to covered investments.

Paragraph 5 ensures the transparency of each Party’s regulations of covered investments.

Article III (Expropriation)

Paragraphs 2, 3, and 4 more fully describe the meaning of “prompt, adequate and effective compensation.” The guiding principle is that the investor should be made whole.

Article IV (Compensation for Damages Due to War and Similar Events)

Article V (Subrogation)

Article V of the Treaty protects a Party or designated agency’s rights and claims under any indemnity, guarantee, or contract of insurance given by that Party (or designated agency) for a covered investment by requiring the other Party to recognize the assignment to the Party or its designated agency of any right or claim of an indemnified national or company. The Party (or designated agency) is entitled to the same treatment with respect to those rights and claims acquired by it through assignment. The Party (or its designated agency) is also entitled to any payments received in pursuance of those rights or claims.

Provisions of this type are generally included in separate bilateral OPIC agreements. Croatia requested the addition to the Treaty of an article on subrogation so as to have a mutual agreement in place should Croatia create an agency equivalent to OPIC in the future. The terms of Article V were drafted by the United States, based on its standard OPIC agreements.

Article VI (Transfers)

Article VI protects investors from certain government exchange controls that limit current and capital account transfers, as well as limits on inward transfers made by screening authorities and, in certain circumstances, limits on returns in kind.

In paragraph 1, each Party agrees to “permit all transfers relating to a covered investment to be made freely and without delay into and out of its territory.” Paragraph 1 also provides a list of transfers that must be allowed. The list is non-exclusive, and is intended to protect flows to both affiliated and non-affiliated entities.

Paragraph 2 provides that each Party must permit transfers to be made in a “freely usable currency” at the market rate of exchange prevailing on the date of transfer. “Freely usable” is a term used by the International Monetary Fund; at present there are five “freely usable” currencies: the U.S. dollar, Japanese yen, German mark, French franc, and British pound sterling.

Article VII (Performance Requirements)

Article VII prohibits either Party from mandating or enforcing specified performance requirements as a condition for the establishment, acquisition, expansion, management, conduct, or operation of a covered investment. The list of prohibited requirements is exhaustive and covers domestic content requirements and domestic purchase preferences, the “balancing” of imports or sales in relation to exports or foreign exchange earnings, requirements to export products or services, technology transfer requirements, and requirements relating to the conduct of research and development in the host country. Such requirements are major burdens on investors and impair their competitiveness.

The last sentence of Article VII makes clear that a Party may, however, impose conditions for the receipt or continued receipt of benefits and incentives.

Article VIII (Entry, Sojourn, and Employment of Aliens)

Paragraph 1 requires each Party to allow, subject to its laws relating to the entry and sojourn of aliens, the entry into its territory of the other Party’s nationals for certain purposes related to a covered investment and involving the commitment of a “substantial amount of capital.” This paragraph serves to render nationals of Croatia eligible for treaty-investor visas under U.S. immigration law. It also affords similar treatment for U.S. nationals entering Croatia. The requirement to commit a “substantial amount of capital” is intended to prevent abuse of treaty-investor status; it parallels the requirements of U.S. immigration law.

In addition, paragraph 1(b) prohibits labor certification requirements and numerical restrictions on the entry of treaty-investors.

Article IX (State-State Consultations)

Article IX provides for prompt consultation between the Parties, at either Party’s request, on any matter relating to the interpretation or application of the Treaty or to the realization of the Treaty’s objectives. A Party may thus request consultations for any matter reasonably related to the encouragement or protection of covered investment, whether or not a Party is alleging a violation of the Treaty.

Article X (Settlement of Disputes Between One Party and a National or Company of the Other Party)

Article X sets forth several means by which disputes brought against a Party by an investor (specifically, a national or company of the other Party) may be resolved.

Article X procedures apply to an “investment dispute,” which is any dispute arising out of or relating to an investment authorization, an investment agreement, or an alleged breach of rights conferred, created, or recognized by the Treaty with respect to a covered investment. The Treaty provides that the parties to the dispute should initially seek a resolution through consultation and negotiation.

Before or during such arbitral proceedings, however, paragraph 3(b) provides that an investor may seek, without affecting its right to pursue arbitration under this Treaty, interim injunctive relief not involving the payment of damages from local courts or administrative tribunals of the Party that is a party to the dispute for the preservation of its rights and interests. This paragraph does not alter the power of the arbitral tribunals to recommend or order interim measures they may deem appropriate.

Paragraph 4 constitutes each Party’s consent to the submission of investment disputes to binding arbitration in accordance with the choice of the investor.

In addition, in paragraph 6, each Party commits to enforcing arbitral awards rendered pursuant to this Article. The Treaty also provides that each Party’s enforcement of an arbitral award in its territory will be governed by its national law. This additional provision merely confirms that since each Party must fully enforce all arbitral awards as provided in the Treaty, the means of doing so is through each Party’s domestic law. The Federal Arbitration Act (9 U.S.C. 1 et seq.) satisfies the requirement for the enforcement of non-ICSID Convention awards in the United States. The Convention on the Settlement of Investment Disputes Act of 1966 (22 U.S.C. 1650-1650a) provides for the enforcement of ICSID Convention awards in the United States.

Article XI (Settlement of Disputes Between the Parties)

Article XI provides for binding arbitration of disputes between the United States and Croatia concerning the interpretation or application of the Treaty that are not resolved through consultations or other diplomatic channels. The article specifies various procedural aspects of such arbitration proceedings, including time periods, selection of arbitrators, and distribution of arbitration costs between the Parties. The article constitutes each Party’s prior consent to such arbitration.

Article XII (Preservation of Rights)

Article XII clarifies that the Treaty does not derogate from any obligation a Party might have to provide better treatment to the covered investment than is specified in the Treaty. Thus, the Treaty establishes a floor for the treatment of covered investments. A covered investment may be entitled to more favorable treatment through domestic legislation, other international legal obligations, or a specific obligation (e.g., to provide a tax holiday) assumed by a Party with respect to that covered investment.

Article XIII (Denial of Benefits)

Article XIII(a) preserves the right of each Party to deny the benefits of the Treaty to a company owned or controlled by nationals of a non-Party country with which the denying Party does not have normal economic or diplomatic relations, e.g., a country to which it is applying economic sanctions. For example, at this time the United States does not maintain normal economic relations with, among other countries, Cuba and Libya.

Article XIII(b) permits each Party to deny the benefits of the Treaty to a company of the other Party if the company is owned or controlled by non-Party nationals and if the company has no substantial business activities in the Party where it is established. Thus, the United States could deny benefits to a company that is a subsidiary of a shell company organized under the laws of Croatia if controlled by nationals of a third country. However, this provision would not generally permit the United States to deny benefits to a company of Croatia that maintains its central administration or principal place of business in the territory of, or has a real and continuous link with, Croatia.

Article XIV (Taxation)

Article XIV excludes tax matters generally from the coverage of the BIT, on the basis that tax matters should be dealt with in bilateral tax treaties. However, Article XIV does not preclude a national or company from bringing claims under article X that taxation provisions in a investment agreement or authorization have been violated. In addition, the dispute settlement provisions of Article X and XI apply to tax matters in relation to alleged violations of the BIT’s expropriation article.

Under paragraph 2, a national or company that asserts in a dispute that a tax matter involves expropriation may submit that dispute to arbitration pursuant to Article X(3) only if (1) the investor has first referred to the competent tax authorities of both Parties the issue of whether the tax matter involves an expropriation, and (2) the tax authorities have not both determined, within 9 months from the time of referral, that the matter does not involve an expropriation. The “competent tax authority” of the United States is the Assistant Secretary of the Treasury for Tax Policy, who will make such a determination only after consultation with the Inter-Agency Staff Coordinating Group on Expropriations.

Article XV (Measures Not Precluded)

The first paragraph of Article XV reserves the right of a Party to take measures for the fulfillment of its international obligations with respect to maintenance or restoration of international peace or security, as well as those measures it regards as necessary for the protection of its own essential security interests.

Article XVI (Application to Political Subdivisions and State Enterprises of the Parties)

Paragraph 1(a) makes clear that the obligations of the Treaty are applicable to all political subdivisions of the Parties, such as provincial, State, and local governments.

Article XVII (Entry Into Force, Duration, and Termination)

Paragraph 1 stipulates that the Treaty enters into force 30 days after exchange of instruments of ratification through diplomatic channels. The Treaty remains in force for a period of 10 years and continues in force thereafter unless terminated by either Party as provided in paragraph 2. Paragraph 2 permits a Party to terminate the Treaty at the end of the initial 10 year period, or at any later time, by giving 1 year’s written notice through diplomatic channels to the other Party. Paragraph 1 also provides that the Treaty applies to covered investments existing at the time of entry into force as well as to those established or acquired thereafter. The Protocol to the Treaty confirms the Parties’ mutual understanding that the provisions of the Treaty do not bind either Party in relation to any act or fact that took place or any situation that ceased to exist before entry into force of the Treaty. This provision thus explicitly states the standard under customary international law that applies in the absence of the Parties’ express intent to apply the treaty retroactively.

Paragraph 4 stipulates that the Annex and Protocol shall form an integral part of the Treaty.

Annex

Under a number of statutes, many of which have a long historical background, the U.S. federal government or States may not necessarily treat investments of nationals or companies of Croatia as they do U.S. investments or investments from a third country. Paragraph 1 through 3 of the Annex list the sectors or matters subject to U.S. exceptions.

The U.S. exceptions from its national and MFN treatment obligation are: fisheries; air and maritime transport, and related activities.

During negotiations, the United States informed Croatia that if Croatia undertook acceptable commitments with respect to all or certain financial services, the United States would consider limiting its exceptions with respect to its national and MFN treatment obligation in financial services.

Croatia offered to take no exceptions to the treaty’s national or MFN treatment obligations with respect to banking, insurance, securities, and other financial services. Therefore in paragraph 3 of the Annex, the United States has limited its exceptions with respect to banking, insurance, securities, and other financial services to afford treatment no less favorable than that accorded with respect to Canada and Mexico in the North American Free Trade Agreement.

Paragraphs 4 of the Annex lists Croatia’s exceptions to its national treatment obligation, which are: ownership and operation of broadcast or common carrier radio and television stations; the provision of common carrier telephone and telegraph services; the provision of submarine cable services; and subsidies or grants, including government supported loans;

Paragraph 5 of the Annex lists Croatia’s exceptions to its national and MFN treatment obligation, which are: fisheries; and air and maritime transport, and related activities (including maritime services).

Paragraph 6 of the Annex ensures that national treatment is granted by each Party in all leasing of minerals; concession rights for exploration and exploitation of mineral resources (reflecting the form of mineral leases under Croation law); and pipeline rights-of-way on government lands. In so doing, this provision affects the implementation of the Mineral Lands Leasing Act (MLLA) (30 U.S.C. 181 et seq.) and 10 U.S.C. 7435, regarding Naval Petroleum Reserves, with respect to nationals and companies of Croatia. The Treaty provides for resort to binding international arbitration to resolve disputes, rather than denial of mineral rights or rights to naval petroleum shares to investors of the other Party, as is the current process under the statute. U.S. domestic remedies, would, however, remain available for use in conjunction with the Treaty’s provisions.

Croatia’s extension of national treatment in these sectors will fully meet the objectives of the MLLA and 10 U.S.C. 7435. Croatia was informed during negotiations that, were it to include this sector in its list of treatment exemptions, the United States would (consist with the MLLA and 10 U.S.C. 7435) exclude the leasing of minerals or pipeline rights-of-way on Government lands from the national and MFN treatment obligations of this Treaty.

Protocol

As described under Article XVII(1), the Protocol states that the Treaty does not apply retroactively. This clarification was added to the Treaty at the request of Croatia.

The other U.S. Government agencies that participated in negotiating the Treaty join me in recommending that it be transmitted to the Senate at an early date.

Respectfully submitted,

MADELINE ALBRIGHT .

TREATY BETWEEN

THE GOVERNMENT OF THE UNITED STATES OF AMERICA AND

THE GOVERNMENT OF THE REPUBLIC OF CROATIA

CONCERNING THE ENCOURAGEMENT

AND RECIPROCAL PROTECTION OF INVESTMENT

The Government of the United States of America and the Government of the Republic of Croatia (hereinafter the “Parties”);

Desiring to promote greater economic cooperation between them, with respect to investment by nationals and companies of one Party in the territory of the other Party;

Recognizing that agreement upon the treatment to be accorded such investment will stimulate the flow of private capital and the economic development of the Parties;

Agreeing that a stable framework for investment will maximize effective utilization of economic resources and improve living standards;

Recognizing that the development of economic and business ties can promote respect for internationally recognized worker rights;

Agreeing that these objectives can be achieved without relaxing health, safety and environmental measures of general application; and

Having resolved to conclude a Treaty concerning the encouragement and reciprocal protection of investment;

Have agreed as follows:

ARTICLE I

For the purposes of this Treaty,

(b) “company of a Party” means a company constituted or organized under the laws of that Party;

(i) a company;

(ii) shares, stock, and other forms of equity participation, and bonds, debentures, and other forms of debt interests, in a company;

(iii) contractual rights, such as under turnkey, construction or management contracts, production or revenue-sharing contracts, concessions, or other similar contracts;

(iv) tangible property, including real property; and intangible property, including rights, such as leases, mortgages, liens and pledges;

(v) intellectual property, including:

copyrights and related rights,

patents,

rights in plant varieties,

industrial designs,

rights in semiconductor layout designs,

trade secrets, including know-how and

confidential business information,

trade and service marks, and

trade names; and

(vi) rights conferred pursuant to law, such as licenses and permits;

Any change in the form of an investment does not affect its character as an investment.

(e) “covered investment” means an investment of a national or company of a Party in the territory of the other Party;

(f) “state enterprise” means a company owned, or controlled through ownership interests, by a Party;

(g) “investment authorization” means an authorization granted by the foreign investment authority of a Party to a covered investment or a national or company of the other Party;

(h) “investment agreement” means a written agreement between the national authorities of a Party and ] a covered investment or a national or company of the other Party that (i) grants rights with respect to natural resources or other assets controlled by the national authorities and (ii) the investment, national or company relies upon in establishing or acquiring a covered investment.

(i) “ICSID Convention” means the Convention on the Settlement of Investment Disputes between States and Nationals of Other States, done at Washington, March 18, 1965;

(j) “Centre” means the International Centre for Settlement of Investment Disputes Established by the ICSID Convention;

(k) “UNCITRAL Arbitration Rules” means the arbitration rules of the United Nations Commission on International Trade Law; and

(l) “territory” means the territory of the United States of America or the Republic of Croatia, including the territorial sea established in accordance with international law as reflected in the 1982 United Nations Convention on the Law of the Sea. This Treaty also applies in the seas, subsoil and seabed adjacent to the territorial sea in which the United States of America or the Republic of Croatia has sovereign rights or jurisdiction, in accordance with international law as reflected in the 1982 United Nations Convention on the Law of the Sea.

ARTICLE II

3. (a) Each Party shall at all times accord to covered investments fair and equitable treatment and full prctection and security, and shall in no case accord treatment less favorable than that required by international law.

(b) Neither Party shall in any way impair by unreasonable and discriminatory measures the management, conduct, operation, and sale or other disposition of covered investments.

4. Each Party shall provide effective means of asserting claims and enforcing rights with respect to covered investments.

ARTICLE III

2. Compensation shall be paid without delay; be equivalent to the fair market value of the expropriated covered investment immediately before the expropriatory action was taken (“the date of expropriation”); and be fully realizable and freely transferable. The fair market value shall not reflect any change in value occurring because the expropriatory action had become known before the date of expropriation.

4. If the fair market value is denominated in a currency that is not freely usable, the compensation paid—converted into the currency of payment at the market rate of exchange prevailing on the date of payment—shall be no less than:

(a) the fair market value on the date of expropriation, converted into a freely usable currency at the market rate of exchange prevailing on that date, plus

(b) interest, at a commercially reasonable rate for that freely usable currency, accrued from the date of expropriation until the date of payment.

ARTICLE IV

(a) requisitioning of all or part of such investments by the Party’s forces or authorities, or

(b) destruction of all or part of such investments by the Party’s forces or authorities that was not required by the necessity of the situation.

ARTICLE V

1. If a Party or its designated agency makes a payment under an indemnity, guarantee or contract of insurance given in respect of a covered investment, the other Party shall recognize the assignment to the first Party or its designated agency of any right or claim of the indemnified national or company, and the first Party or its designated agency is entitled to exercise such rights and enforce such claims by virtue of subrogation, to the same extent as that national or company.

2. The first Party or its designated agency shall be entitled in all circumstances to the same treatment in respect of the rights or claims acquired by it by virtue of the assignment. The first Party or its designated agency shall also be entitled to any payments received in pursuance of those rights or claims as the indemnified national or company was entitled to receive by virtue of this Treaty in respect of the covered investment concerned.

ARTICLE VI

1. Each Party shall permit all transfers relating to a covered investment to be made freely and without delay into and out of its territory. Such transfers include:

(a) contributions to capital;

(b) profits, dividends, capital gains, and proceeds from the sale of all or any part of the investment or from the partial or complete liquidation of the investment;

(d) payments made under a contract, including a loan agreement; and

(e) compensation pursuant to Articles III and IV, and payments arising out of an investment dispute.

2. Each Party shall permit transfers to be made in a freely usable currency at the market rate of exchange prevailing on the date of transfer.

4. Notwithstanding paragraphs 1 through 3, a Party may prevent a transfer through the equitable, non-discriminatory and good faith application of its laws relating to:

(a) bankruptcy, insolvency or the protection of the rights of creditors;

(b) issuing, trading or dealing in securities;

(d) ensuring compliance with orders or judgments in adjudicatory proceedings.

ARTICLE VII

(a) to achieve a particular level or percentage of local content, or to purchase, use or otherwise give a preference to products or services of domestic origin or from any domestic source;

(b) to limit imports by the investment of products or services in relation to a particular volume or value of production, exports or foreign exchange earnings;

(c) to export a particular type, level or percentage of products or services, either generally or to a specific market region;

(d) to limit sales by the investment of products or services in the Party’s territory in relation to a particular volume or value of production, exports or foreign exchange earnings;

(f) to carry out a particular type, level or percentage of research and development in the Party’s territory. Such requirements do not include conditions for the receipt or continued receipt of an advantage.

ARTICLE VIII

(b) Neither Party shall, in granting entry under paragraph 1(a), require a labor certification test or other procedures of similar effect, or apply any numerical restriction.

2. Each Party shall permit covered investments to engage top managerial personnel of their choice, regardless of nationality.

ARTICLE IX

ARTICLE X

2. A national or company that is a party to an investment dispute may submit the dispute for resolution under one of the following alternatives:

(a) to the courts or administrative tribunals of the Party that is a party to the dispute; or

(b) in accordance with any applicable, previously agreed dispute-settlement procedures; or

3. (a) Provided that the national or company concerned has not submitted the dispute for resolution under paragraph 2 (a) or (b), and that three months have elapsed from the date on which the dispute arose, the national or company concerned may submit the dispute for settlement by binding arbitration:

(i) to the Centre, if the Centre is available; or

(ii) to the Additional Facility of the Centre, if the Centre is not available; or

(iii) in accordance with the UNCITRAL Arbitration Rules; or

(iv) if agreed by both parties to the dispute, to any other arbitration institution or in accordance with any other arbitration rules.

4. Each Party hereby consents to the submission of any investment dispute for settlement by binding arbitration in accordance with the choice of the national or company under paragraph 3(a)(i), (ii), and (iii) or the mutual agreement of both parties to the dispute under paragraph 3(a)(iv). This consent and the submission of the dispute by a national or company under paragraph 3(a) shall satisfy the requirement of:

(a) Chapter II of the ICSID Convention (Jurisdiction of the Centre) and the Additional Facility Rules for written consent of the parties to the dispute; and

(b) Article II of the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards, done at New York, June 10, 1958, for an “agreement in writing”.

ARTICLE XI

2. Within two months of receipt of a request, each Party shall appoint an arbitrator. The two arbitrators shall select a third arbitrator as chairman, who shall be a national of a third state which maintains diplomatic relations with both Parties. The UNCITRAL Arbitration Rules applicable to appointing members of three-member panels shall apply mutatis mutandis to the appointment of the arbitral panel except that the appointing authority referenced in those rules shall be the Secretary General of the Centre.

4. Expenses incurred by the Chairman and other arbitrators, and other costs of the proceedings, shall be paid for equally by the Parties. However, the arbitral panel may, as its discretion, direct that a higher proportion of the costs be paid by one of the Parties.

ARTICLE XII

This Treaty shall not derogate from any of the following that entitle covered investments to treatment more favorable than that accorded by this Treaty:

(a) laws and regulations, administrative practices or procedures, or administrative or adjudicatory decisions of a Party;

(b) international legal obligations; or

ARTICLE XIII

Each Party reserves the right to deny to a company of the other Party the benefits of this Treaty if nationals of a third country own or control the company and

(a) the denying Party does not maintain normal economic or diplomatic relations with the third country; or

(b) the company has no substantial business activities in the territory of the Party under whose laws it is constituted or organized.

ARTICLE XIV

1. No provision of this Treaty shall impose obligations with respect to tax matters, except that:

(a) Articles III, X and XI will apply with respect to expropriation; and

(b) Article X will apply with respect to an investment agreement or an investment authorization.

2. A national or company, that asserts in an investment dispute that a tax matter involves an expropriation, may submit that dispute to arbitration pursuant to Article X(3) only if:

(a) the national or company concerned has first referred to the competent tax authorities of both Parties the issue of whether the tax matter involves an expropriation; and

(b) the competent tax authorities have not both determined, within nine months from the time the national or company referred the issue, that the matter does not involve an expropriation.

ARTICLE XV

ARTICLE XVI

1. (a) The obligations of this Treaty shall apply to the political subdivisions of the Parties.

2. A Party’s obligations under this Treaty shall apply to a state enterprise in the exercise of any regulatory, administrative or other governmental authority delegated to it by that Party.

ARTICLE XVII

1. This Treaty shall enter into force thirty days after the date of exchange of instruments of ratification through diplomatic channels. It shall remain in force for a period of ten years and shall continue in force unless terminated in accordance with paragraph 2. It shall apply to covered investments existing at the time of entry into force as well as to those established or acquired thereafter.

2. A Party may terminate this treaty at the end of the initial ten year period or at any time thereafter by giving one year’s written notice through diplomatic channels to the other Party.

3. For ten years from the date of termination, all other Articles shall continue to apply to covered investments established or acquired prior to the date of termination, except insofar as those Articles extend to the establishment or acquisition of covered investments.

4. The Annex and Protocol shall form an integral part of the Treaty.

IN WITNESS WHEREOF, the respective plenipotentiaries have signed this Treaty.

DONE in duplicate at Zagreb this 13th day of July, 1996, in the English and Croatian languages, each text being equally authentic.

FOR THE GOVERNMENT OF FOR THE GOVERNMENT OF THE

THE UNITED STATES OF AMERICA: REPUBLIC OF CROATIA

[signature] [signature]

Mickey Kantor Davor Stern

ANNEX

atomic energy; customhouse brokers; licenses for broadcast, common carrier, or aeronautical radio stations; COMSAT; subsidies or grants, including government-supported loans, guarantees and insurance; state and local measures exempt from Article 1102 of the North American Free Trade Agreement pursuant to Article 1108 thereof; and landing of submarine cables.

Most favored nation treatment shall be accorded in the sectors and matters indicated above.

fisheries; air and maritime transport, and related activities.

3. The Government of the United States of American may adopt or maintain exceptions to the obligation to accord national and most favored nation treatment to covered investments, provided that the exceptions do not result in treatment under this Treaty less favorable than the treatment that the Government of the United States of America has undertaken to accord in the North American Free Trade Agreement with respect to another party to that Agreement, in the sectors or with respect to the matters specified below:

banking, insurance, securities and other financial services.

4. The Government of the Republic of Croatia may adopt or maintain exceptions to the obligation to accord national treatment to covered investments in the sectors or with respect to the matters specified below:

ownership and operation of broadcast or common carrier radio and television stations; the provision of common carrier telephone and telegraph services; the provision of submarine cable services; and subsidies or grants, including government supported loans.

Most favored nation treatment shall be accorded in the sectors and matters indicated above.

5. The Government of the Republic of Croatia may adopt or maintain exceptions to the obligation to accord national and most favored nation treatment to covered investments in the sectors or with respect to the matters specified below:

fisheries; air and maritime transport, and related activities (including maritime services).

6. Each Party agrees to accord national treatment to covered investments in the following sectors:

leasing of minerals; concession rights for exploration and exploitation of mineral resources; and pipeline rights-of-way on government lands.

PROTOCOL

The Parties confirm their mutual understanding that the provisions of this Treaty do not bind either Party in relation to any act or fact which took place or any situation which ceased to exist before the date of entry into force of this Treaty.

PROTOCOL

of Exchange of Instruments of Ratification of the Treaty between the

Government of the United States of America and the Government of the

Republic of Croatia concerning the Encouragement and Reciprocal Protection of

Investment

The undersigned

Mr. Lawrence G. Rossin

and

Mrs. Vesna Cvjetkovic Kurelec

being duly authorized by their respective governments, have met for the purpose of

exchanging instruments of ratification of the

Treaty between the Government of the United States of America and the Government

of the Republic of Croatia concerning the Encouragement and Reciprocal Protection

of Investment, signed at Zagreb, on July 13, 1996

and having examined the respective instruments of ratification, found them to be in

due form, and exchanged them.

In witness whereof, the respective plenipotentiaries have signed the present Protocol of Exchange of Instruments of Ratification.

The undersigned have agreed that, in accordance with its Paragraph 1, Article 17, the

aforementioned Agreement shall enter into force on 20 June 2001.

Done at Zagreb on 21 May 2001, in duplicate, in English and Croatian languages.

Mr. Lawrence G. Rossin Mrs. Vesna Cvjetkovic Kurelec

[signature] [signature]

End of tab panel

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Czechia Bilateral Investment Treaty

After the breakup of Czechoslovakia in 1993, this treaty continued in effect for the successor states, the Czech Republic and Slovakia.

Signed October 22, 1991; Entered into Force December 19, 1992; Amended May 1, 2004

Prior to the accession of the Czech Republic to the European Union, this treaty was amended to reduce the possibility of conflict with the laws of the European Union.[View Amending Protocol]

2nd Session

TREATY WITH THE CZECH AND SLOVAK FEDERAL REPUBLIC

CONCERNING THE RECIPROCAL ENCOURAGEMENT

AND PROTECTION OF INVESTMENT

MESSAGE FROM

THE PRESIDENT OF THE UNITED STATES

Transmitting

THE TREATY BETWEEN THE UNITED STATES OF AMERICA AND THE CZECH AND SLOVAK FEDERAL REPUBLIC CONCERNING THE RECIPROCAL ENCOURAGEMENT AND PROTECTION OF INVESTMENTS, WITH PROTOCOL AND THREE RELATED EXCHANGES OF LETTERS, SIGNED AT WASHINGTON ON OCTOBER 22 ,1991

June 2, 1992.-Treaty was read the first time and, together with the accompanying papers, referred to the Committee on Foreign Relations and ordered to be printed for the use of the Senate

U.S. GOVERNMENT PRINTING OFFICE

WASHINGTON : 1992

LETTER OF TRANSMITTAL

THE WHITE HOUSE, June 2, 1992.

To the Senate of the United States:

With a view to receiving the advice and consent of the Senate to ratification, I transmit herewith the Treaty Between the United States of America and the Czech and Slovak Federal Republic Concerning the Encouragement and Reciprocal Protection of Investment, with Protocol and three related exchanges of letters, signed at Washington on October 22. 1991. I transmit also, for the information of the Senate, the report of the Department of State with respect to this Treaty.

The Treaty is an integral part my initiative to strengthen economic relations with Central and East European countries. The treaty is designed to aid the growth of the private sector in the Czech and Slovak Federal Republic by protecting and thereby encouraging U.S. private investment. The treaty is also fully consistent with U.S. policy toward international investment. A specific tenet, reflected in this treaty, is that U.S. direct investment abroad and foreign investment in the United States should receive fair, equitable, and non-discriminatory treatment. Under this treaty, the parties also agree to international law standards for expropriation and compensation; free transfers of funds associated with investments and the option of the investor to resolve disputes with the host government through international arbitration.

I recommend that the Senate consider this Treaty as soon as possible, and give its advice and consent to ratification of the Treaty, with Protocol and related exchange of letters, at an early date.

GEORGE BUSH.

LETTER OF SUBMITTAL

DEPARTMENT OF STATE,

Washington, DC, May 12, 1992.

The PRESIDENT, The White House.

THE PRESIDENT: I have the honor to submit to you the Treaty Between the United States of America and the Czech and Slovak Federal Republic Concerning the Encouragement and Reciprocal Protection of Investment, with Protocol and three related exchange of letters, signed at Washington on October 22, 1991. I recommend that this Treaty with Protocol, and exchange of letters, be transmitted to the Senate for its advice and consent to ratification.

This is the second U.S. treaty containing investment protections with a former Communist country of Central or East Europe, following the U.S.-Poland treaty concerning business and economic relations signed March 21, 1990. This Treaty will assist the Czech and Slovak Federal Republic (CSFR) in its transition to a market economy by creating favorable conditions for U.S. private investment, helping to attract such investment and, thus, strengthening the development of the private sector.

The Bilateral Investment Treaty (BIT) helps to encourage U.S. investment in the economies of its BIT partners. It is U.S. policy, however, to advise potential treaty partners during BIT negotiations that conclusion of a BIT does not necessarily result in immediate increases in private U.S. investment flows.

A number of West European countries, including Switzerland and Germany, have entered into BITs with the CSFR. The U.S. treaty, however, is more comprehensive than the European BITs.

The United States has also signed BITs with Argentina, Bangladesh, Cameroon, the Congo, Egypt, Grenada, Haiti, Morocco, Panama, Senegal, Sri Lanka, Tunisia, Turkey, and Zaire; and a treaty containing the BIT elements with Poland. The Office of the United States Trade Representative and the Department of State jointly lead BIT negotiations, with assistance from the Departments of Commerce and Treasury.

THE U.S.-CSFR TREATY

The CSFR Treaty satisfies the main BIT objectives, which are:

-Investments are guaranteed freedom from performance requirements, including requirements to use local products or to export local goods;

-Nationals and companies of either Party, in investment disputes with the host government, have access to binding international arbitration, without first resorting to domestic courts.

As does the model BIT, the treaty with the CSFR allows sectoral exceptions to national and most-favored-nation (MFN) treatment, as set forth in the annex and a related exchange of letters to the treaty. The U.S. exceptions are designed to protect state regulatory interests and to accommodate the derogations from national treatment and, in some cases, MFN treatment in existing state or federal law. The U.S. exceptions from national treatment include among other sectors, air transportation; ocean and coastal shipping; banking; insurance; government-grants; government insurance and loan programs; energy and power production; custom house brokers; ownership of real property; ownership and operation of broadcast or common carrier radio and television stations; ownership of shares in the Communications Satellite Corporation; the provision of common carrier telephone and telegraph services; the provision of submarine cable services; use of land and natural resources; mining on the public domain; maritime services and maritime-related services. Except for ownership of property, MFN exceptions are based on reciprocity provisions in government laws and regulations.

The CSFR sectoral exceptions to national treatment are ownership of real property and insurance. The CSFR does not reserve any sectors from the obligation to accord MFN treatment to U.S. investment.

The CSFR is privatizing many of its state-owned companies and decided that it could not ensure national treatment with respect to the privatization process. Therefore, in a related exchange of letters to the treaty, the CSFR states that prior approvals may be required when (i) U.S. nationals or companies acquire majority ownership of state companies, or (ii) U.S. nationals or companies acquire the equity interest of the CSFR in companies. The CSFR further undertakes to apply the approval process in a way not discourage or prohibit U.S. investment, to accord U.S. investment MFN treatment in this process, and to consult with the U.S. within two years of the treaty’s entry into force with a view to phasing out this approval requirement.

This treaty, consistent with the model BIT, does not oblige a Party to extend to the other Party’s investments the advantages accorded to third country investments by virtue of binding obligations that derive from full membership in a free trade area or customs union. The Protocol confirms that such investment-related obligations may arise from economic relationships that include free trade areas and customs unions, notwithstanding that these relationships include trade obligations as well.

The BIT with the CSFR provides that an investment dispute between a Party and a national or company, including a dispute involving an investment authorization or the interpretation of an investment agreement, may be submitted to international arbitration six months after the dispute arose. Exhaustion of local remedies is not required. The treaty identifies several procedures for arbitration, at the investor’s option: the International Centre for the Settlement of Investment Disputes (“ICSID”), upon CSFR adherence to the ICSID Convention; the ICSID Additional Facility: or ad hoc arbitration under the Arbitration Rules of the United Nations Commission on International Trade Law (UNCITRAL).

The BIT with the CSFR, as does the U.S.-Poland treaty, contains several provisions designed to resolve problems that U.S. business traditionally has faced in the centrally-controlled, non-market economies of Central and East Europe, and which may continue to impede U.S. investments during the transition to a market economy.

One such provision is a guarantee that nationals and companies of either Party receive non-discriminatory treatment with respect to an expanded and detailed list of activities associated with their investments. These include: access to registrations, licenses, and permits; access to financial institutions and credit markets; access to their funds held in financial institutions; the importation and installation of business equipment; advertising and the conduct of market studies; the appointment of commercial representatives; direct marketing; access to public utilities; and access to raw materials. The right to non-discriminatory treatment in these activities requires that the CSFR grant U.S. nationals and companies treatment no less favorable than that granted to enterprises that remain under state ownership or control.

The treaty also provides, in a related exchange of letters, that the CSFR will designate an entity to assist U.S. nationals and companies overcome problems relating to bureaucracy and lack of knowledge. The entity’s tasks will include providing up-to-date information on business and investment regulations, collecting and disseminating information regarding investment projects and financing, and coordinating with the CSFR agencies, at all levels, to facilitate U.S. investment.

The other Government agencies which negotiated the treaty join with me in recommending that it be transmitted to the Senate at an early date.

Respectfully submitted.

JAMES A. BAKER III.

TREATY WITH THE CZECH AND SLOVAK FEDERAL REPUBLIC

CONCERNING THE RECIPROCAL ENCOURAGEMENT

AND PROTECTION OF INVESTMENT

The United States of America and the Czech and Slovak Federal Republic (hereinafter the “Parties”);

Desiring to promote greater economic cooperation between them, with respect to investment by nationals and companies of one Party in the territory of the other Party;

Recognizing that agreement upon the treatment to be accorded such investment will stimulate the flow of private capital and the economic development of the Parties;

Agreeing that fair and equitable treatment of investment is desirable in order to maintain a stable framework for investment and maximum effective utilization of economic resources;

Reaffirming their desire to develop economic cooperation in accordance with the principles and provisions of the Final Act signed in Helsinki on the lst of August 1975, and other documents of the Conference on Security and Cooperation in Europe;

Convinced that private enterprise operating within free and open markets offers the best opportunities for raising living standards and the quality of life for the inhabitants of the Parties, improving the well-being of workers, and promoting overall respect for internationally recognized worker rights; and

Having resolved to conclude a Treaty concerning the encouragement and reciprocal protection of investment;

Have agreed as follows:

ARTICLE I

1. For the purposes of this Treaty,

(i) tangible and intangible property, including movable and immovable property, as well as rights, such as mortgages, liens and pledges;

(ii) a company or shares of stock or other interests in a company or interests in the assets thereof;

(iii) a claim to money or a claim to performance having economic value, and associated with an investment;

and

(v) any right conferred by law or contract, and any licenses and permits pursuant to law;

(b) “company of a Party” means any kind of corporation, company, association, enterprise, partnership, or other organization, legally constituted under the laws and regulations of a Party or a political subdivision thereof whether or not organized for pecuniary gain, or privately or governmentally owned;

(f) “nondiscriminatory” means treatment that is at least as favorable as the better of national treatment or most-favored nation treatment;

(g) “national treatment” means treatment that is at least as favorable as the most favorable treatment accorded by a Party to companies or nationals of third Parties in like circumstances; and

(h) “most favored nation treatment” means treatment that is at least as favorable as that accorded by a Party to companies and nationals of third Parties in like circumstances.

3. Any alteration of the form in which assets are invested or reinvested shall not affect their character as investment.

ARTICLE II

1. Each Party shall permit and treat investment, and activities associated therewith, on a basis no less favorable than that accorded in like situations to investment or associated activities of its own nationals or companies, or of nationals or companies of any third country, whichever is the most favorable, subject to the right of each Party to make or maintain exceptions falling within one of the sectors or matters listed in the Annex to this Treaty. Each Party agrees to notify the other Party before or on the date of entry into force of this Treaty of all such laws and regulations of which it is aware concerning the sectors or matters listed in the Annex. Moreover, each Party agrees to notify the other of any future exception with respect to the sectors or matters listed in the Annex, and to limit such exceptions to a minimum. Any future exception by either Party shall not apply to investment existing in that sector or matter at the time the exception becomes effective. The treatment accorded pursuant to any exceptions shall, unless specified otherwise in the Annex, be not less favorable than that accorded in like situations to investments and associated activities of nationals or companies of any third country.

(b) Neither Party shall in any way impair by arbitrary or discriminatory measures the management, operation, maintenance, use, enjoyment, acquisition, expansion, or disposal of investments. For purposes of dispute resolution under Article 3 VI and VII, a measure may be arbitrary or discriminatory notwithstanding the fact that a Party has had or has exercised the opportunity to review such measure in the courts or administrative tribunals of a Party.

3. Subject to the laws relating to the entry and sojourn of aliens, nationals of either Party shall be permitted to enter and to remain in the territory of the other Party for the purpose of establishing, developing, administering or advising on the operation of an investment to which they, or a company of the first Party that, employs them, have committed or are in the process of committing a substantial amount of capital or other resources.

6. Each Party shall provide effective means of asserting claims and enforcing rights with respect to investment, investment agreements, and investment authorizations.

7. Each Party shall make public all laws, regulations, administrative practices and procedures, and adjudicatory decisions that pertain to or affect investments.

8. The treatment accorded by the United States of America to investments and associated activities of nationals and companies of the Republic of CSFR under the provisions of this Article shall in any State, Territory or possession of the United States of America be no less favorable than the treatment accorded therein to investments and associated activities of nationals of the United States of America resident in, and companies legally constituted under the laws and regulations of other States, Territories or possessions of the United States of America.

9. The nondiscrimination and most favored nation provisions of this Treaty shall not apply to advantages accorded by either Party to nationals or companies of any third country by virtue of:

(a) that Party’s binding obligations that derive from full membership in a free trade area or customs union; or

10. The Parties acknowledge and agree that “associated” activities, include without limitation, such activities as:

(a) the granting of franchises or rights under licenses;

(b) access to registrations, licenses, permits and other approvals (which shall in any event be issued expeditiously);

(d) access to their funds held in financial institutions;

(e) the importation and installation of equipment necessary for the normal conduct of business affairs, including but not limited to, office equipment and automobiles, and the export of any equipment and automobiles so imported;

(f) the dissemination of commercial information;

(g) the conduct of market studies;

(h) the appointment of commercial representatives, including agents, consultants and distributors and their participation in trade fairs and promotion events;

(i) the marketing of goods and services, including through internal distribution and marketing systems, as well as by advertising and direct contact with individuals and companies;

(j) access to public utilities, public services and commercial rental space at nondiscriminatory prices, if the prices are set or controlled by the government; and

(k) access to raw materials, inputs-and services of all types at nondiscriminatory prices, if the prices are set or controlled by the government.

ARTICLE III

ARTICLE IV

Nationals or companies of either Party whose investments suffer losses in the territory of the other Party owing to war or other armed conflict, revolution, state of national emergency, insurrection, civil disturbance or other similar events shall be accorded treatment by such other Party no less favorable than that accorded to its own nationals or companies or to nationals or companies of any third country, whichever is the most favorable treatment, as regards any measures it adopts in relation to such losses.

ARTICLE V

1. Each Party shall permit all transfers related to an investment to be made freely and without delay into and out of its territory. Such transfers include: (a) returns; (b) compensation pursuant to Article III; (c) payments arising out of an investment dispute; (d) payments made under a contract, including amortization of principal and accrued interest payments made pursuant to a loan agreement; (e) proceeds from the sale or liquidation of all or any part of an investment; and (f) additional contributions to capital for the maintenance or development of an investment.

2. Except as provided in Article III, paragraph 1, transfers shall be made in a freely usable currency at the prevailing market rate of exchange on the date of transfer with respect to spot transactions in the currency to be transferred.

ARTICLE VI

1. For purposes of this Article, an investment dispute is a dispute between a Party and a national or company of the other Party arising out of or relating to (a) an investment agreement between that Party and such national or company; (b) an investment authorization granted by that Party’s foreign investment authority to such national or company; or (c) an alleged breach of any right conferred or created by this Treaty with respect to an investment.

2. In the event of an investment dispute between a Party and a national or company of the other Party, the parties to the dispute shall initially seek to resolve the dispute by consultation and negotiation, which may include the use of non-binding, third party procedures. Subject to paragraph 3 of this Article, if the dispute cannot be resolved through consultation and negotiation, the dispute shall be submitted for settlement in accordance with previously agreed, applicable dispute-settlement procedures; any dispute-settlement procedures, including those relating to expropriation, specified in the investment agreement shall remain binding and shall be enforceable in accordance with the terms of the investment agreement, relevant provisions of domestic laws and applicable international agreements regarding enforcement of arbitral awards.

3. (a) At any time after six months from the date on which the dispute arose, the national or company concerned may choose to consent in writing to the submission of the dispute for settlement by conciliation or binding arbitration to the International Centre for the Settlement of Investment Disputes (“Centre”) or to the Additional Facility of the Centre of pursuant to the Arbitration Rules of the United Nationals Commission on International Trade Law (“UNICTRAL”) or pursuant to the arbitration rules of any arbitral institution mutually agreed between the parties to the dispute. Once the national or company concerned has so consented, either party to the dispute may institute such proceeding provided:

(i) the dispute has not bee submitted by the national or company for resolution in accordance with any applicable previously agreed dispute-settlement procedures; and

(b) Each Party hereby consents to the submission of an investment dispute for settlement by conciliation or binding arbitration.

(i) to the Centre, in the event that the Government of the Czech and Slovak Federal Republic becomes a party to the Convention on the Settlement of Investment Disputes Between States and Nationals of Other States done at Washington, March 18, 1965 (“Convention”) and the Regulations and Rules of the Centre, and to the Additional Facility of the Centre, and

(ii) to an arbitral tribunal established under the UNCITRAL Rules, as those Rules may be modified by mutual agreement of the parties to the dispute (the Appointing Authority referenced therein to be the Secretary-General of the Centre).

(c) Conciliation or arbitration of disputes under (b)(i) shall be done applying the provisions of the Convention and the Regulations and Rules of the Centre, or of the Additional Facility as the case may be.

(d) The place of any arbitration conducted under this Article shall be a country which is a party to the 1958 United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards signed at New York in 1958.

(e) Each Party undertakes to carry out without delay the provisions of any award resulting from an arbitration held in accordance with this Article VI. Further, each Party shall provide for the enforcement in its territory of such arbitral awards. 4. In any proceeding involving an investment dispute, a Party shall not assert, as defense, counter-claim or otherwise, that the naitonal or company concerned has received or will receive, pursuant to an insurance of guarantee contract, indemnification or other compensation for all or part of its alleged damages. 5. In the event of an arbitration, for the purposes of this Article any company legally constituted under the applicable laws and regulations of either Party of a political subdivision thereof but that, immediately before the occurance of the event or events giving rise to the dispute, was an investment of nationals or companies of the other Party, shall be treated as a national or company of such other Party (in accordance with Article 25 (20)(b) of the Convention).

ARTICLE VII

4. (a) Each Party shall bear the costs of its own representation in the arbitral proceedings.

(b) Expenses incurred by the Chairman, the other arbitrators, and other costs of the proceedings shall be paid for equally by the Parties. The Tribunal may, however, at its discretion, direct that a higher proportion of the costs be paid by one of the Parties.

ARTICLE VIII

The provisions of Article VI and VII shall not apply to a dispute arising:

(a) under the export credit, guarantee or insurance programs of the Export-Import Bank of the United States

(b) under other official credit, guarantee or insurance arrangements pursuant to which the Parties have agreed to other means of settling disputes.

ARTICLE IX

This Treaty shall not derogate from:

(a) laws and regulations, administrative practices or procedures, or administrative or adjudicatory decisions of either Party;

(b) international legal obligations; or

ARTICLE X

ARTICLE XI

1. With respect to its tax policies, each Party should strive to accord fairness and equity in the treatment of investment of nationals and companies of the other Party.

2. Nevertheless, the provisions of this Treaty, and in particular Article VI and VII, shall apply to matters of taxation only with respect to the following:

(a) expropriation, pursuant to Article III;

(b) transfers, pursuant to Article IV; or

ARTICLE XII

ARTICLE XIII

This Treaty shall apply to the political subdivisions of the Parties.

ARTICLE XIV

2. Either Party may, by giving one year’s written notice to the other Party, terminate this Treaty at the end of the initial ten year period or at any time thereafter.

4. The Annex, Protocol, and Side Letters shall form an integral part of the Treaty.

IN WITNESS WHEREOF, the respective plenipotentiaries have signed this Treaty.

DONE in duplicate at Washington, this twenty-second day of October, 1991 in the English anc Czech languages, both texts being equally authentic.

FOR THE UNITED STATES OF AMERICA:

FOR THE CZECH AND SLOVAK FEDERAL REPUBLIC:

ANNEX

1. Consistent with Article II Paragraph 1 the United States reserves the right to make or maintain limited exceptions to national treatment in the sectors or matters it has indicated below: air transportation; ocean and coastal shipping; banking; insurance; government-grants; government insurance and loan programs; energy and power production; custom house brokers; ownership of real property; ownership and operation of broadcast or common carrier radio and television stations; ownership of shares in the Communications Satellite Corporation; the provision of common carrier telephone and telegraph services; the provision of submarine cable services; use of land and natural resources; mining on the public domain; maritime services and maritime-related services.

2. Consistent with Article II paragraph 1, the United States reserves the right to make or maintain limited exceptions to most favored nation treatment in the sectors or matters it has indicated below:

ownership of real property; mining on the public domain; maritime services and maritime-related services; and primary dealership in United States government securities.

3. Consistent with Article II paragraph 1, the Czech and Slovak Federal Republic reserves the right to make or maintain limited exceptions to national treatment in the sectors or matters it has indicated below: ownership of real property; and insurance.

4. The Annex shall form an integral part of the Treaty.

PROTOCOL

1. The Parties agree that nothing in this Treaty shall be construed as pertaining to entities which are accredited as part of a diplomatic mission or consular post of a Party.

2. The Parties interpret the term “political subdivision” in Article I, paragraph (1)(b), Article VI, paragraph 5, and Article XIII of the Treaty to include: in respect of the Czech and Slovak Federal Republic, the Czech Republic and the Slovak Republic; and in respect of the United States of America, the states of the United States of America. 3. The Parties acknowledge that the terms of Article II, paragraph (9)(a) are satisfied if an economic relationship between a Party and a third country includes a free trade area or customs union.

4. The Protocol shall forma an integral part of the Treaty.

DEPUTY UNITED STATES TRADE REPRESENTATIVE EXECUTIVE OFFICE OF THE PRESIDENT WASHINGTON, DC 20506

October 22, 1991

His Excellency Vaclav Klaus Deputy Prime Minister and Minister of Finance Czech and Slovak Federal Republic

Dear Mr. Deputy Prime Minister:

In connection with the signing this day of the Treaty between the United States of America and the Czech and Slovak Federal Republic (“CSFR”) concerning the Reciprocal Encouragement and Protection of Investment (the “Treaty”), I have the honor to confirm the following understanding reached by our governments relating to the Annex of the Treaty:

With respect to paragraphs 1 and 2 of the Annex to the Treaty, the United States confirms that the extent to exceptions to national treatment or most-favored nation treatment in each sector or matter listed is reflected in U.S. federal or state laws and regulations. Any exceptions to national treatment or by such laws and regulations as may now or hereafter be in force. Any future exceptions shall be limited to those sectors or matters listed in the annex and shall not apply to investments existing a the time the exception becomes effective.

With respect to paragraph 2 of the Annex, the United States confirms that exceptions to most-favored nation treatment in the following sectors result from the use of reciprocity criteria in governing laws and regulations: mining on the public domain; primary dealership in United States government securities; and maritime-related services.

I have the honor to confirm that this understanding shall be treated as an integral part of this Treaty.

Sincerely

Julius L. Katz

[TRANSLATION]

Deputy Prime Minister and Minister of Finance of the CSFR Vaclav Klaus

Washington, October 22, 1991

Dear Ms. Ambassador,

I have the honor to confirm receipt of your letter of October 22, 1991 which reads as follows:

[See text of Ambassador Katz’s letter immediately preceding.]

I have the honor to confirm that the Government of the Czech and Slovak Federal Republic agrees that this understanding be considered an integral part of the Treaty.

Respectfully, [s] Vaclav Klaus

Ms. Carla Hills Ambassador and Trade Representative of the United States of America

[TRANSLATION]

Deputy Prime Minister and Minister of Finance of the CSFR Vaclav Klaus

Washington, October 22, 1991

Dear Ms. Ambassador,

[The text of the understanding is contained in Ambassador Katz’s letter which follows.]

I would be grateful if you could confirm that your government agrees with this understanding.

Respectfully, [s] Vaclav Klaus

Ms. Carla Hills Ambassador and Trade Representative of the United States of America

DEPUTY UNITED STATES TRADE REPRESENTATIVE EXECUTIVE OFFICE OF THE PRESIDENT WASHINGTON, DC 20506

October 22, 1991

His Excellency Vaclav Klaus Deputy Prime Minister and Minister of Finance Czech and Slovak Federal Republic

Dear Mr. Deputy Prime Minister:

1. In the implementation of the provisions of Article II, paragraph 1, relating to the entry of investments, the CSFR may require approval for (a) investments of nationals or companies of the United States in or with companies the majority of the assets or ownership interests of which are owned by the CSFR, and (b) investments of nationals or companies of the United States through which such nationals or companies acquire, directly or indirectly, the equity interests of the CSFR in companies.

2. Any requisite approvals under paragraph 1 shall not be denied for the purpose of with the effect of limiting competition or discouraging or prohibiting investment by nationals or companies of the United States in particular sectors (except as set forth in the Annex). Further, the CSFR shall accord no less than most favored nation treatment to nationals and companies of the United States in determining whether to grant or deny such approval.

3. Within two years of the entry into force of the Treaty, the Parties shall consult with a view to narrowing the scope of investments subject to paragraph 1 and subsequently phasing out the requirement for such approval.

The CSFR will initiate ratification of this treaty immediately after a new commercial code, which is consistent with the provisions of this letter regarding the liberalization of government approval procedures, has been approved by parliament.

I have the honor to confirm that this understanding shall be treated as integral part of the Treaty.

Sincerely

Julius L. Katz.

DEPUTY UNITED STATES TRADE REPRESENTATIVE EXECUTIVE OFFICE OF THE PRESIDENT

WASHINGTON, DC 20506

October 22, 1991

His Excellency Vaclav Klaus Deputy Prime Minister and Minister of Finance Czech and Slovak Federal Republic

Dear Mr. Deputy Prime Minister:

During the course of negotiations of the Treaty between the United States of America and the Czech and Slovak Federal Republic (“CSFR”) concerning the Reciprocal Encouragement and Protection of Investment (the “Treaty”), the delegations took note of the economic transformations in the CSFR. In view of these rapid changes, we discussed the desirability of ensuring that nationals and companies of the United States receive timely information on these changes and other assistance so that they may derive the full benefits of the Treaty with respect to their investments and associated activities.

In this connection, the Government of the CSFR intends to accomplish this objective by designating an entity which would:

- provide up to date information regarding current national and local business and investment regulations, including authorization and registration procedures, taxation, labor regulation, accounting standards and access to credit;

- provide up to date and readily available information regarding proposed changes in the laws and regulations concerning investors;

- coordinate with CSFR government agencies on the national, regional and local levels to facilitate investment;

- assist investors who experience difficulties with registration, authorization, access to public services, regulatory and other matters which concern establishment and operation of investments; and

- collect and disseminate information regarding investment projects and sources of their financing. I have the honor to confirm that this understanding shall be treated as an integral part of this Treaty.

Sincerely,

Julius L. Katz

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Ecuador Bilateral Investment Treaty

The Government of Ecuador delivered notice to the United States on May 18, 2017, that it was terminating the “Treaty Between the United States of America and the Republic of Ecuador Concerning the Encouragement and Reciprocal Protection of Investment” (‘‘the Treaty’’). As of May 18, 2018 (the “date of termination”), the Treaty will cease to have effect, EXCEPT that it will continue to apply for another 10 years to covered investments existing on the date of termination. The United States Government is providing this notice so that existing or potential U.S. investors in Ecuador can factor the Treaty’s termination into their business planning, as appropriate.

Signed August 27, 1993; Entered into Force May 11, 1997

103D CONGRESS 1st Session

SENATE TREATY Doc. 103-15

INVESTMENT TREATY WITH THE REPUBLIC OF

ECUADOR

MESSAGE

FROM

THE PRESIDENT OF THE UNITED STATES

TRANSMITTING

THE TREATY BETWEEN THE UNITED STATES OF AMERICA AND THE REPUBLIC OF ECUADOR CONCERNING THE ENCOURAGEMENT AND REECIPROCAL PROTECTION OF INVESTMENT, WITH PROTOCOL AND A RELATED EXCHANGE OF LETTERS, SIGNED AT WASHINGTON ON AUGUST 27,1993

September 10, 1993.—Treaty was read the first time and, together with the accompanying papers, referred to the Committee on Foreign Relations and ordered to be printed for the use of the Senate

U.S. GOVERNMENT PRINTING OFFICE

WASHINGTON : 1993

69-118

THE WHITE HOUSE, September 10, 1993.

To the Senate of the United States:

With a view to receiving the advice and consent of the Senate to ratification, I transmit herewith the Treaty Between the United States of America and the Republic of Ecuador Concerning the Encouragement and Reciprocal Protection of Investment, with Protocol and related exchange of letters, signed at Washington on August 27, 1993. Also transmitted for the information of the Senate is the report of the Department of State with respect to this Treaty.

This is the first bilateral investment treaty with an Andean Pact country, and the second such Treaty signed with a South American country. The Treaty is designed to protect U.S. investment and en-courage private sector development in Ecuador, and support the economic reforms taking place there. The Treaty’s approach to dispute settlement will serve as a model for negotiations with other Andean Pact countries.

The Treaty is fully consistent with U.S. policy toward inter-national and domestic investment. A specific tenet, reflected in this Treaty, is that U.S. investment abroad and foreign investment in the United States should receive fair, equitable, and nondiscriminatory treatment. Under this Treaty, the Parties also agree to international law standards for expropriation and compensation for expropriation, free transfers of funds associated with investments, freedom of investments from performance requirements, and the investors freedom to choose to resolve disputes with the host government through international arbitration.

I recommend that the Senate consider this Treaty as soon as possible, and give its advice and consent to ratification of the Treaty, with Protocol and related exchange of letters, at an early date.

WILLIAM J. CLINTON.

LETTER OF SUBMITTAL

S/S 9320385

DEPARTMENT OF STATE,

Washington, DC, September 7, 1993.

The PRESIDENT

The White House.

THE PRESIDENT: I have the honor to submit to you the Treaty Between the United States of America and the Republic of Ecuador Concerning the Encouragement and Reciprocal Protection of In-vestment, with Protocol and a related exchange of letters, signed at Washington on August 27, 1993. Irecommend this Treaty, with Protocol and exchange of letters, be transmitted to the Senate for its advice and consent to ratification.

The bilateral investment treaty (BIT) with Ecuador represents an important milestone in the BIT program. It is the first bilateral investment treaty signed with a member of the Andean Pact, and the second BIT signed with a South American country. (A BIT was signed with Argentina in 1991.) This Treaty will assist Ecuador in its efforts to develop its economy by creating conditions more favorable for U.S. private investment, helping to attract such investment and, thus, strengthening the development of the private sector. It is U.S. policy, however, to advise potential treaty partners during BIT negotiations that conclusion of a BIT does not necessarily result in immediate increases in private U.S. investment flows.

To date, 13 BITs are in force for the United States—with Bangladesh, Cameroon, the Czech Republic, Egypt, Grenada, Morocco, Panama, Senegal, Slovakia, Sri Lanka, Tunisia, Turkey, and Zaire. In addition to the Ecuador Treaty, the United States has signed, but not yet brought into force, BITs with Argentina, Armenia, Bulgaria, the Congo, Haiti, Kazakhstan, the Kyrgyz Republic, Moldova, Romania, and Russia—and a business and economic relations treaty with Poland, which contains the BIT elements.

The Office of the United States Trade Representative and the Department of State jointly led this BIT negotiation, with assistance from the Department of Commerce, Treasury, and OPIC.

THE U.S.-ECUADOR TREATY

The Treaty with Ecuador satisfies the principal BIT objectives, which are:

— Investments of nationals and companies of either Party in the territory of the other Party (investments) receive the better of national treatment or most-favored-nation (MFN) treatment both on establishment and thereafter, subject to certain specified exceptions;

— Investments are guaranteed freedom from performance requirements, including requirements to use local products or to export goods;

— Expropriation can occur only in accordance with international law standards: for a public purpose; in a nondiscriminatory manner; under due process of law; and upon payment of prompt, adequate, and effective compensation;

— Investments are guaranteed the unrestricted transfer of funds in a freely usable currency; and

— Nationals and companies of either Party, in investment disputes with the host government, have access to binding international arbitration, without first resorting to domestic courts.

The U.S.-Ecuador Treaty eliminates Article VIII of the prototype text. This language had excluded from the dispute settlement provisions of the BIT those disputes arising under the export credit, guarantee or insurance programs of the Export-Import Bank of the United States, as well as those arising under any other such official programs pursuant to which the Parties agreed to other means of settling disputes. The Export-Import Bank, the Overseas Private Investment Corporation and other relevant government agencies indicated prior to this negotiation that they saw no need to maintain such a provision.

The U.S.-Ecuador Treaty also differs from the prototype in that it includes provisions at Article 1, paragraph 1 (f) and (g), and Article II, paragraph 2, which clarify and extend the requirements of the Treaty with respect to state enterprises. This new language is discussed in further detail in the, article-by-article analysis of the Treaty below.

In addition, the Treaty also includes minor clarifying changes to the text of Article VI, paragraph 2; a provision to preserve contractual arrangements made as part of any debt-equity conversion program in Ecuador, in the Protocol; Ecuador’s exceptions to the obligation to provide national treatment, in the Protocol; and a related exchange of letters. These elements are further described below.

The following is an article-by-article analysis of the provisions of the Treaty:

Preamble

Article I (Definitions)

Article I sets out definitions for terms used throughout the Treaty. As a general matter, they are designed to be broad and inclusive in nature.

Investment

The Treaty’s definition of investment is broad, recognizing that investment can take a wide variety of forms. It covers investments that are owned or controlled by nationals or companies of one of the Treaty partners in the territory of the other. Investments can be made either directly or indirectly through one or more subsidiaries, including those of third countries. Control is not specifically defined in the Treaty. Ownership of over 50 percent of the voting stock of a company would normally convey control, but in many cases the requirement could be satisfied by less than that proportion.

Under paragraph 2 of Article I, either country may deny the benefits of the Treaty to investments by companies established in the other that are owned or controlled by nationals of a third country if 1) the company is a mere shell, without substantial business activities in the home country, or 2) the third country is one with which the denying Party does not maintain normal economic relations. For example, at this time the United States does not maintain normal economic relations with, inter alia, Cuba or Libya.

Paragraph 3 confirms that any alternation in the form in which as asset is invested or reinvested shall not affect its character as investment. For example, a change in the corporate form of an investment will not deprive it of protection under the Treaty.

Company

The definition of “company” is broad in order to cover virtually any type of legal entity, including any corporation, company, association, or other entity that is organized under the laws and regulations of a Party. The definition also ensures that companies of a Party that establish investments in the territory of the other Party have their investments covered by the Treaty, even if the parent company is ultimately owned by non-Party nationals, although the other Party may deny the benefits of the Treaty in the limited circumstances set forth in Article 1, paragraph 2. Likewise, a company of a third country that is owned or controlled by nationals or companies of a Party. will also be covered. The definition also covers charitable and non-profit entities, as well as entities that are owned or controlled by the state.

National

The Treaty defines “national” as a natural person who is a national of a Party under its own laws. Under U.S. law, the term “national” is broader than the term “citizen;” for example, a native of America Samoa is a national of the United States, but not a citizen.

Return

“Return” is defined as “an amount derived from or associated with an investment,” and the Treaty provides a non-exclusive list capital gains; or other fees; provides breadth to the Treaty’s transfer provisions in Article IV.

Associated Activities

The Treaty recognizes that the operation of an investment requires protections extending beyond the investment to numerous related activities. This definition provides an illustrative list of such investor activities, including operating a business facility, borrowing money, disposing of property, issuing stock and purchasing . These activities are covered by Article II, paragraph 1, which guarantees the better of national or MFN treatment for investments and associated activities.

State Enterprise

“State enterprise” is defined as an enterprise owned, or controlled through ownership interests, by a Party.

Delegation

“Delegation” is defined to include a legislative grant, government order, directive or other act which transfers governmental authority to a state enterprise or authorizes a state enterprise to exercise such authority.

The definitions of “state enterprise” and “delegation” are included to clarify the scope of the obligations of Article II, paragraph 2, which provides that any governmental authority delegated to a must be exercised in a manner consistent with the Party obligations under the Treaty.

Article II (Treatment)

Article II contains the Treaty’s major obligations with respect to the treatment of investment.

Paragraph 1 generally ensures the better of MFN or national treatment in both the entry and post-entry phases of investment. It thus prohibits both the screening of proposed foreign investment on the basis of nationality and non-discriminatory measures once the investment has been made, subject to specific exceptions provided for in a separate Protocol. The United-States and Ecuador have both reserved certain exceptions in the Protocol to the Treaty, the provisions of which are discussed in the section entitled “Protocol.”

Paragraph 2 is designed to ensure that a Party cannot utilize state owned or controlled enterprises to circumvent its obligations under the Treaty. To this end, it requires each Party to observe its treaty obligations even when it chooses, for administrative or other reasons, to assign some portion of its authority to a state enterprise, such as the power to expropriate, grant licenses, approve commercial transactions, or impose quotas, fees or other charges. Paragraph 2 also supports competitive equality for investments by requiring that a Party ensure that state enterprises accord the better of national or MFN treatment in the sale of its goods or services in the Party’s territory.

Paragraph 3 guarantees that investment shall be granted “fair and equitable” treatment. It also prohibits Parties from impairing, through arbitrary or discriminatory means, the management, operation, maintenance, use, enjoyment, acquisition, expansion or disposal of investment. This paragraph also sets out a minimum standard of treatment based on customary international law.

In paragraph 3(c), each Party pledges to respect any obligations it may have entered into with respect to investments. Thus, in dispute settlement under Articles VI or VII, a Party would be foreclosed from arguing, on the basis of sovereignty, that it may unilaterally ignore obligations to such investments.

Paragraph 4 allows, subject to each Party’s immigration laws and the entry of each Party’s nationals into the territory of the other for purposes linked to investment and involving the commitment of a “substantial amount of capital.” This paragraph serves to render nationals of a BIT partner eligible for treaty investor visas under U.S. immigration law and guarantees similar treatment for U.S. investors.

Paragraph 5 guarantees companies the right to engage top managerial personnel of their choice, regardless of nationality.

Under paragraph 6, neither Party may impose performance requirements such as those conditioning investment on the export of goods produced or the local purchase of goods or services. Such requirements are major burdens on investors.

Paragraph 7 provides that each Party must provide effective means of asserting rights and claims with respect to investment, investment agreements and any investment authorizations. Under paragraph 8, each Party must make publicly available all laws, administrative practices. and adjudicatory procedures pertaining to or affecting investments.

Paragraph 10 limits the Article’s MFN obligation by providing that it will not apply to advantages accorded by either Party to third countries by virtue of a Party’s membership in a free trade area or customs union or a future multilateral agreement under the auspices of the General Agreement on Tariffs and Trade (GATT). The free trade area exception in this Treaty is analogous to the exception provided for with respect to trade in the GATT.

Article III (Expropriation)

Article III incorporates into the Treaty the international law standards for expropriation and compensation.

Paragraph 1 describes the general rights of investors and nationalization. These rights also apply standards to direct or indirect state measures “tantamount to expropriation or nationalization,” and thus apply to “creeping expropriations” that result in a substantial deprivation of the benefit of investment without taking of the title to the investment.

Five requirements are listed. Expropriation must be for a public purpose; be carried out in a non-discriminatory manner; be subject to prompt, adequate, and effective compensation; be subject to due process; and be accorded the treatment provided in the standards of Article 11 (3). (These standards guarantee fair and equitable treatment and prohibit the arbitrary and discriminatory impairment of investment in its broadest sense.)

Paragraph 2 entitles an investor claiming that an expropriation has occurred to prompt judicial or administrative review of the claim in the host country, including a determination of whether they conform to international law. to the better of national or MFN losses related to war or civil disturb, does not specify an absolute obligations to pay compensation for such losses.

Article IV (Transfers)

Article IV protects investors from certain government exchange controls limiting current account and capital account transfers.

In Paragraph 1, the Parties agree to permit “transfers related to an investment to be made freely and without delay into and out of its territory.” Paragraph 1 also provides a non-exclusive, list of transfers that must be allowed, including returns (as defined in Article 1); payments made in compensation for expropriation (as defined in Article III); payments arising out of an investment dispute; payments made under a contract, “including the amortization of principle and interest payments on a loan; proceeds from the liquidation of all or part of an investment; and additional contributions to capital for the maintenance or development of an investment.

Paragraph 3 recognizes that notwithstanding these guarantees, Parties may maintain certain laws or obligations that could affect transfers with respect to investments. It provides that the Parties may require reports of currency transfers and impose income taxes by such means as a withholding tax on dividends. It also recognizes that Parties may protect the rights of creditors and ensure the satisfaction of judgments in adjudicatory proceedings through their laws, even if such measures interfere with transfers. Such laws must be applied in an equitable, nondiscriminatory and good faith manner.

Article V (State-State, Consultations)

Article V provides for prompt consultation between the Parties, at either Party’s request, on any matter relating to the interpretation or application of the Treaty.

Article VI (State-Investor Dispute Resolution)

Article VI sets forth several means by which disputes between an investor and the host country may be settled.

Article VI procedures apply to an “investment dispute,” a term which covers any dispute arising out of or relating to an investment authorization, or an agreement between the investor and the host government or to rights granted by the Treaty with respect to an investment.

When a dispute arises, Article VI provides that the disputants should initially seek to resolve the dispute by consultation and negotiation, which may include non-binding third party procedures. Should such consultations fail, paragraphs 2 and 3 set forth the investor’s range of choices of dispute settlement. The investor may make an exclusive and irrevocable choice to: (1) employ one of the several arbitration procedures outlined in the Treaty; (2) submit the dispute to procedures previously agreed upon by the investment and the host country government in an investment agreement or otherwise; or (3) submits the dispute to the local courts or administrative tribunals of the host country. Paragraph 2 of Article VI of the Ecuador BIT adds to the prototype BIT language a phrase reiterating that the investor may choose among these three alternatives. This addition does not alter the operation of this provision. Under the Treaty, the investor can take an investment dispute to binding arbitration after six months from the date that the dispute arises. The investor may choose between the International Center for the Settlement of Investment Disputes (ICSID) (if the host country has joined the Centre—otherwise the ICSID Additional Facility is available) and ad hoc arbitration using the Arbitration Rules of the United Nations Commission on International Trade Law (UNCITRAL). The Treaty also recognizes that, by mutual agreement, the parties to the dispute may choose another arbitral institution or set of arbitral rules.

Paragraph 4 contains the consent of the United States and Ecuador to the submission of investment disputes to binding arbitration in accordance with the choice of investor.

Paragraph 5 provides that a non-ICSID arbitration shall take place in a country that is a party to the United Nations Convention the Recognition and Enforcement of Arbitral Awards. This requirement enhances the ability of investors to enforce their arbitral awards. In addition, paragraph 6 includes a separate commitment by each Party to enforce arbitral awards rendered pursuant to Article VI procedures.

Article VII (State-State Arbitration)

Article VII provides for binding arbitration of disputes between the United States and Ecuador that are not resolved through consultations or other diplomatic channels. The article constitutes each Party’s prior consent to arbitration.

Article VIII (Preservation of Rights)

Article VIII clarifies that the Treaty is meant only to establish a floor for the treatment of foreign investment. An investor may be entitled to more favorable treatment through domestic legislation, other international legal obligations, or a specific obligation assumed by a Party with respect to that investor. this provision ensures that the Treaty will not be interpreted to derogate from any entitlement to such more favorable treatment.

Article IX (Measures Not Precluded)

The first paragraph of Article IX reserves the right of a Party to take measures for the maintenance of public order and the fulfillment of its international obligations with respect to international peace and security, as well as those measures it regards as necessary for the protection of its own essential security interests. These provisions are common in international investment agreements.

The maintenance of public order would include measures taken pursuant to a Party’s policy powers to ensure public health and safety. International obligations with respect to peace and security would include, for example, obligations for rising out of Chapter VII of the United National Charter. Measures permitted by the provision on the protection of a Party’s essential security interests would include security-related actions taken in time of war or national emergency; actions not an arising from a state of war or national emergency must have a clear and direct relationship to the essential security interest of the Party involved.

Article X (Tax Policies)

The Treaty exhorts both countries to provide fair and equitable treatment to investors with respect to tax policies. However, tax matters are generally excluded from the coverage of the prototype BIT, based on the assumption that tax matter are properly covered in bilateral tax treaties.

The three areas where the Treaty could apply to tax matters are expropriation (Article III), transfers (Article IV) and the observance and enforcement of terms of an investment agreement or authorization (Article VI (1) (a) or (b)). These three areas are important for investors, and two of the three expropriatory taxation and tax provisions contained in an investment agreement or authorization are not typically addressed in tax treaties.

Article XI (Application to Political Subdivisions)

Article XI makes clear that the obligations of the Treaty are applicable to all political subdivisions of the Parties, such as provincial, state and local governments.

Article XII (Entry into Force, Duration and Termination)

The Treaty enters into force thirty days after exchange of instruments of ratification and continues in force for a period of ten years. From the date of its entry into force, the Treaty applies to existing and future investments. After the ten-year term, the Treaty will continue in force unless terminated by either Party upon one year’s notice. If terminated, all existing investments would continue to be protected under the Treaty for ten years thereafter.

Protocol

The Treaty addresses debt-equity programs, under which an investor purchases debt of a country at a discount and receives local currency in an amount equivalent to the debt’s face value. These programs normally require that the investor postpone repatriating the investment made with the local currency obtained in the conversion. Investors may choose to enter into such programs because they obtain more local currency than they otherwise would receive for a given amount of foreign exchange. The treaty’s Protocol provides that any deferral of transfers agreed to under debt-equity conversion programs would not be superseded by the treaty’s guarantee of transfers without delay. This provision in the Protocol was added at the suggestion of the United States. The United States has been generally supportive of debt-equity conversion programs as part of the overall solution to the debt problem and has considered them to be an important element in commercial bank financing programs which reduce debt and debt service.

The U.S. portion of the Protocol contains a list of sectors and matters in which, for various legal and historical reasons, the federal government or the states may not necessarily treat investments of nationals or companies of the other Party as they do U.S. investments or investments from a third country. The U.S. exceptions from national treatment are: air transportation; ocean and coastal shipping; banking; insurance; government grants; government insurance and loan programs; energy and power production; local customhouse brokers; owners of real property; ownership and operation of broadcast stations; ownership of shares in the Communications Satellite Corporation; the provision of common carrier telephone and telegraph services; the provision of submarine cable services; use of land and natural resources; mining on the public domain; maritime and maritime-related services; and, primary dealership in U.S. government securities.

Ownership of real property, mining on the public domain, maritime and maritime-related services, and primary dealership in U.S. government securities are excluded from MFN as well as national treatment commitments. The last three sectors are exempted by the United States from MFN treatment obligations because of U.S. laws that require reciprocity. Enforcement of reciprocity provisions would deny both national and MFN treatment.

The listing of a sector does not necessarily signify that domestic laws have entirely reserved it for nationals. Future restrictions or limitations on foreign investment are only permitted in the sectors listed; must be made on an MFN basis„ unless otherwise specified in the Protocol; and must be appropriately notified. Any additional restrictions or limitations which a Party may adopt with respect to listed sectors may not affect existing investments. The Ecuador Treaty adds language to the prototype BIT reiterating that listing an exception to national treatment does not relieve the Parties from their obligations to accord national and most-favored-nation treatment.

Because the U.S. exceptions to national treatment and MFN treatment are based on existing U.S. law, they are not altered during negotiations.

Ecuador’s exceptions to national treatment are: traditional fishing (which does not include fish processing or aquaculture); and broadcast radio and television stations. These exceptions were based on provisions of investment measures consideration by the Government of Ecuador. Ecuador has not received any sectoral exceptions to MFN treatment in the Protocol.

Exchange of Letters

In an exchange of letters at the time the Treaty was signed, Ecuador explicitly confirmed that the Treaty shall serve to satisfy a variety of substantive and procedural requirements imposed on U.S. investors and investments by Ecuadorian law. This understanding reflects the desire of the Government of Ecuador that the Treaty should operate in and of itself to reduce or eliminate certain bureaucratic practices identified as impediments to investment.

The exchange of letters clarifies, for example, that certain local training nationality requirements for employment will be waived for U.S. investors. The letters confirm that the Treaty shall satisfy any and all authorizations necessary for issuing Ecuadorian visas for certain executives and key personnel. Except where itemized in paragraph four of the Protocol, investment is permitted in areas and enterprises that would otherwise require special administrative or other foreign investment authorizations. The Government of Ecuador state that this would make automatic its discretion to permit foreign investment, inter alia, along the border, on the coast, and in “non-traditional” fisheries. The letters constitute an understanding between the governments and are an integral part of the Treaty.

The other U.S. Government agencies which negotiated the Treaty join me in recommending that it be transmitted to the Senate at an early date.

Respectfully submitted,

Warren Christopher

TREATY BETWEEN

THE UNITED STATES OF AMERICA AND

THE REPUBLIC OF ECUADOR

CONCERNING THE ENCOURAGEMENT

AN RECIPROCAL PROTECTION OF INVESTMENT

The United States of America and the Republic of Ecuador hereinafter the “Parties”);

Desiring to promote greater economic cooperation between them, with respect reinvestment by nationals and companies of one Party in the territory of the other Party;

Recognizing that agreement upon the treatment to be accorded such investment will stimulate the flow of private capital and the economic development of the Parties;

Agreeing that fair and equitable treatment of investment is desirable in order to maintain a stable framework for investment and maxim effective utilization of economic resources;

Recognizing that the development of economic and business ties can contribute to the well-being of workers in both Parties and promote respect for internationally recognized worker rights; and

Having resolved to conclude a Treaty concerning the encouragement and reciprocal protection of investment;

Have agreed as follows:

ARTICLE I

1. For the purposes of this Treaty,

(i) tangible and intangible property, including rights, such as mortgages, lions and pledges;

(ii) a company or shares of stock or other interests in a company or interests in the assets thereof;

(iii) a claim to money or a claim to performance having economic value, and associated with an investment;

(iv) intellectual property which includes, inter alia, rights relating to:

literary and artistic works, including sound recordings;

inventions in all fields of human endeavor;

industrial designs;

semiconductor mask works;

trade secrets, know-how, and confidential business information; and

trademarks, service marks, and trade names; and

(v) any right conferred by law or contract, and any license and permits pursuant to law;

(f) “state enterprise” means an enterprise owned, or controlled through ownership interests, by a Party.

(g) “delegation” includes a legislative grant, and a government order, directive or other act transferring to a state enterprise or monopoly, or authorizing the exercise by a state enterprise or monopoly, of governmental authority.

3. Any alteration of the form in which assets are invested or reinvested shall not affect their character as investment.

ARTICLE II

1. Each Party shall permit and treat investment, and activities associated therewith, on a basis no less favorable than that accorded in like situations to investment or associated activities of its own nationals or companies, or of nationals or companies of any third country, whichever is the most favorable, subject to the right of each Party to make or maintain exceptions falling within one of the sectors or matters listed in the Protocol to this Treaty. Each Party agrees to notify the other Party before or on the date of entry into force of this Treaty of all such laws and regulations of which it is aware concerning the sectors or matters listed in the Protocol. Moreover, each Party agrees to notify the other of any future exception with respect to the sectors or matters listed in the Protocol, and to limit such exceptions to a minimum. Any future exception by either Party shall not apply to investment existing in that sector or matter at the time the exception becomes effective. The treatment accorded pursuant to any exceptions shall, unless specified otherwise in the Protocol, be not less favorable than that accorded in like situations to investments and associated activities of nationals or companies of any third country.

2. (a) Nothing in this Treaty shall be construed to prevent a Party from maintaining or establishing a state enterprise.

(b) Each Party shall ensure that any state enterprise that it maintains or establishes acts in a manner that is not inconsistent with the Party’s obligations under this Treaty wherever such enterprise exercises any regulatory, administrative or other governmental authority that the Party has delegated to it, such as the power to expropriate, grant licenses, approve commercial transactions, or impose quotas, fees or other charges.

(c) Each Party shall ensure that any state enterprise that it maintains or establishes accords the better of national or most favored nation treatment in the sale of its goods or services in the Party’s territory.

3. (a) Investment shall at all times be accorded fair and equitable treatment, shall enjoy full protection and security and shall in no case be accorded treatment less than that required by international law.

(b) Neither Party shall in any way impair by arbitrary or discriminatory measures the management, operation, maintenance, use, enjoyment, acquisition, expansion, or disposal of investments. For purposes of dispute resolution under Articles VI and VII, a measure may be arbitrary or discriminatory notwithstanding the fact that a party has had or has exercised the opportunity to review such measure in the courts or administrative tribunals of a Party.

4. Subject to the laws relating to the entry and sojourn of aliens, nationals of either Party shall be permitted to enter and to remain in the territory of the other Party for the purpose of establishing, developing, administering or advising on the operation of an investment to which they, or a company of the first Party that employs them, have committed or are in the process of committing a substantial amount of capital or other resources.

5. Companies which are legally constituted under the applicable laws or regulations of one Party, and which are investments, shall be permitted to engage top managerial personnel of their choice, regardless of nationality.

6. Neither Party shall impose performance requirements as a condition of establishment, expansion or maintenance of investments, which require or enforce commitments to export goods produced, or which specify that goods or services must be purchased locally, or which impose any other similar requirements.

7. Each Party shall provide effective means of asserting claims and enforcing rights with respect to investment, investment agreements, and investment authorizations.

8. Each Party shall make public all laws, regulations, administrative practices and procedures, and adjudicatory decisions that pertain to or affect investments.

9. The treatment accorded by the United States of America to investments and associated activities of nationals and companies of the Republic of Ecuador under the provisions of this Article shall in any State, Territory or possession of the United States of America be no less favorable than the treatment accorded therein to investments and associated activities of nationals of the United States of America resident in, and companies legally constituted under the laws and regulations of other States, Territories or possessions of the United States of America.

10. The most favored nation provisions of this Treaty shall not apply to advantages accorded by either Party to nationals or companies of any third country by virtue of:

(a) that Party’s binding obligations that derive from full membership in a free trade area or customs union; or

ARTICLE III

1. Investments shall not be expropriated or nationalized either directly or indirectly through measures tantamount to expropriation or nationalization (“expropriation”) except: for a public purpose; in a nondiscriminatory manner; upon payment of prompt, adequate and effective compensation; and in accordance with due process of law and the general principles of treatment provided for in Article II(3). Compensation shall be equivalent to the fair market value of the expropriated investment immediately before the expropriatory action was taken or became known, whichever is earlier; be calculated in a freely usable currency an the basis of the prevailing market rate of exchange at that time; be paid without delay; include interest at a commercially reasonable rate from the date of expropriation; be fully realizable; and be fully transferable.

2. A national or company of either Party that asserts that all or part of its investment has been expropriated shall have a right to prompt review by the appropriate judicial or administrative authorities of the other Party to determine whether any such expropriation has occurred and, If so, whether such expropriation, and any associated compensation, conforms to the principles of international law.

3. Nationals or companies of either Party whose investments suffer losses in the territory of the other Party owing to war or other armed conflict, revolution, state of national emergency, insurrection, civil disturbance or other similar events shall be accorded treatment by such other Party no less favorable than that accorded tb its own nationals or companies or to nationals or companies of any third country, whichever is the most favorable treatment, as regards any measures it adopts in rotation to such losses.

ARTICLE IV

1. Each Party shall permit all transfers related to an investment, to be made freely and without delay into and out of its territory. Such transfers include: (a) returns; (b) compensation pursuant to Article III; (c) payments arising out of an investment dispute; (d) payments made under a contract, including amortization of principal and accrued interest payments made pursuant to a loan agreement; (e) proceeds from the sale or liquidation of all or any part of an investment; and (f) additional contributions to capital for the maintenance or development of an investment.

2. Transfers shall be made in a freely usable currency at the prevailing market rate of exchange on the date of transfer with respect to spot transactions in the currency to be transferred.

3. Notwithstanding the provisions of paragraphs 1 and 2, either Party may maintain laws and regulations (a) requiring reports of currency transfer; and (b) imposing income taxes by such means as a withholding tax applicable to dividends or other transfers. Furthermore, either Party may protect the rights of creditors, or ensure the satisfaction of judgments in adjudicatory proceedings, throuqh the equitable, nondiscriminatory and good faith application of its law.

ARTICLE V

ARTICLE VI

1. For purposes of this Article, an investment dispute is a dispute between a Party and a national or company of the other Party arising out of or relating to (a) an investment agreement between that Party and such national or company; (b) an investment authorization granted by that Party’s foreign investment authority to such national or company; or (c) an alleged broach of any right conferred or created by this Treaty with respect to an investment.

(a) to the courts or administrative tribunals of the Party that is a party to the dispute; or

(b) in accordance with any applicable, previously agreed dispute-settlement procedures; or

(i) to the International Centre for the Settlement of Investment Disputes (“Centre”) established by the Convention on the Settlement of Investment Disputes between States and Nationals of other States, done at Washington, March 18, 1965 (IICSID convention”), provided that the Party is a party to such Convention; or

(ii) to the Additional Facility of the Centre, if the Centre is not available; or

(iii) in accordance with the Arbitration Rules of the United Nations Commission on International Trade Law (UNCITRAL), or

(iv) to any other arbitration institution, or in accordance with any other arbitration rules, as may be mutually agreed between the parties to the dispute.

(b) Once the national or company concerned has so consented, either party to the dispute may initiate arbitration in accordance with the choice so specified in the consent.

(a) written consent of the parties to the dispute for purposes of Chapter II of the ICSID Convention (jurisdiction of the Centre) and for purposes of the Additional Facility Rules; and

5. Any arbitration under paragraph 3(a)(ii), (iii) or (iv) of this Article shall be held in a state that is a party to the New York Convention.

8. For purposes of an arbitration held under paragraph 3 of this Article, any company legally constituted under the applicable laws and regulations of a Party or a political subdivision thereof that, immediately before the occurrence of the event or events giving rise to the dispute, was an investment of nationals or companies of the other Party, shall be treated as a national or company of such other Party in accordance with Article 25(2)(b) of the ICSID Convention.

ARTICLE VII

1. Any dispute between the Parties concerning the interpretation or application of the Treaty which is not resolved through consultations or other diplomatic channels, shall be submitted, upon the request of either Party, to an arbitral tribunal for binding decision in accordance with the applicable rules of international law. In the absence of an agreement by the Parties to the contrary, the arbitration rules of the United Nations commission on international Trade Law (UNCITRAL), except to the extent modified by the Parties or by the arbitrators, shall govern.

2. Within two months of receipt of a request, each Party shall appoint an arbitrator. The two arbitrators shall select a third arbitrator as chairman, who is a national of a third State. The UNCITRAL Rules for appointing members of three member panels shall apply mutatis mutandis to the appointment of the arbitral panel except that the appointing authority referenced in those rules shall be the Secretary General of the Centre.

ARTICLE VIII

This Treaty shall not derogate from:

(a) laws and regulations, administrative practices or procedures, or administrative or adjudicatory decisions of either Party;

(b) international legal obligations; or

(c) obligations assumed by either Party, including those contained in an investment agreement or an investment authorization,

that entitle investments or associated activities to treatment more favorable than that accorded by this Treaty in like situations.

ARTICLE IX

ARTICLE X

1. With respect to its tax policies, each Party should strive to accord fairness and equity in the treatment of investment of nationals and companies of the other Party.

2. Nevertheless, the provisions of this Treaty, and in particular Article VI and VII, shall apply to matters of taxation only with respect to the following:

(a) expropriation, pursuant to Article III;

(b) transfers, pursuant to Article IV; or

ARTICLE XI

This Treaty shall apply to the political subdivisions of the Parties.

ARTICLE XII

1. This Treaty shall enter into force thirty days after the data of exchange of instruments of ratification. It shall remain in force for a period of ten years and shall continue in force unless terminated in accordance with paragraph 2 of this Article. It shall apply to investments existing at the time of entry into force as well as to investments made or acquired thereafter.

2. Either Party may, by giving one year’s written notice to the other Party, terminate this Treaty at the end of the initial ten year period or at any time thereafter.

4. The Protocol and Side Letter shall form an integral part of the Treaty.

IN WITNESS WHEREOF, the respective plenipotentiaries have signed this Treaty.

DONE in duplicate at Washington on the twenty-seventh day of August, 1993, in the English and Spanish languages, both texts being equally authentic.

FOR THE UNITED STATES OF AMERICA:

FOR THE REPUBLIC OF ECUADOR:

PROTOCOL

l. The Parties note that the Republic of Ecuador may establish a debt-equity conversion program under which nationals or companies of the United States may choose to invest in the Republic of Ecuador through the purchase of debt at a discount.

The Parties agree that the rights provided in Article IV, paragraph 1, with respect to the transfer of returns and of proceeds from the sale or liquidation of all or any part of an investment, may, as such rights would apply to that part of an investment financed through a debt-equity conversion, be modified by the terms of a debt-equity conversion agreement between a national or company of the United States and the Government of the Republic of Ecuador or any agency or instrumentality thereof.

The transfer of returns and/or proceeds from the sale or liquidation of all or any part of an investment shall in no case be on terms less favorable than those accorded, in like circumstances, to nationals or companies of the Republic of Ecuador or any third country, whichever is more favorable.

2. The United States reserves the right to make or maintain limited exceptions to national treatment, as provided in Article 11, paragraph 1, in the sectors or matters it has indicated below:

air transportation; ocean and coastal shipping; banking; insurance; government grants; government insurance and loan programs; energy and power production; customhouse brokers; ownership of real property; ownership and operation of broadcast or common carrier radio and television stations; ownership of shares in the Communications Satellite Corporation; the provision of common carrier telephone and telegraph services; the provision of submarine cable services; use of land and natural resources; mining on the public domain; maritime services and maritime-related services; and primary dealership in United States government securities.

The treatment accorded pursuant to these exceptions shall, unless specified in paragraph 3 of this Protocol, be not less favorable than that accorded in like situations to investments and associated activities of nationals or companies of any third country.

3. The United States reserves the right to make or maintain limited exceptions to most favored nation treatment, as provided in Article II, paragraph 1, in the sectors or matters it has indicated below:

ownership of real property; mining on the public domain; maritime services and maritime-related services; and primary dealership in United States government securities.

4. The Republic of Ecuador reserves the right to make or maintain limited exceptions to national treatment, as provided in Article II, paragraph 1, in the sectors or matters it has indicated below:

traditional fishing (which does not include fish processing or aquaculture); ownership and operation of broadcast radio and television stations.

The treatment accorded pursuant to these exceptions shall be not less favorable than that accorded in like situations to investment and associated activities of nationals or companies of any third country.

THE UNITED STATES TRADE REPRESENTATIVE

Executive Office of the President

Washington. D.C. 20506

27 August 1993

Dear Mr. Minister:

I have the honor to confirm receipt of your letter which reads as follows:

“I have the honor to confirm the following understanding which was reached between the Government of the Republic of Ecuador and the Government of the United States of America in the course of negotiations of the Treaty Concerning the Encouragement and Reciprocal Protection of Investment (the “Treaty”):

With respect to Article 11, paragraph 4, the Government of the Republic of Ecuador confirms that the Treaty shall serve to satisfy the requirements for any and all authorizations necessary under its laws for nationals of the United States to enter and to remain in the territory of the Republic of Ecuador or the purpose of establishing, developing, administering or advising on the operation of an investment to which they, or a company of the United States that employs them, have committed or are in the process of committing a substantial amount of capital or other resources. Such authorizations include those granted by the Labor Ministry, such as to waive local training requirements established as a condition to the entry of highly trained and specially qualified employees that are essential to the company’s operations. Nationals of the United States, however, can be required to fulfill limited formalities in connection with entry and sojourn in the Republic of Ecuador, including the presentation of a visa application and relevant documentation.

With respect to Article II, paragraph 5, the Government of the Republic of Ecuador confirms that the Treaty shall serve to satisfy the requirements for any and all authorizations necessary under its laws for the engagement of foreign nationals as top managers.

In addition, the Government of the Republic of Ecuador indicates that under the Ecuadorian Constitution, including Article 18, and the laws of the Republic of Ecuador, foreign nationals and companies may need special administrative or other authorizations that are specific to the investments of foreign persons. The Government of the Republic of Ecuador confirms that the Treaty shall serve to satisfy the requirements for any and all such authorizations, except for those sectors or matters in which the Republic of Ecuador may make or maintain limited exceptions to national treatment, as provided in Article II, paragraph 1 and listed in paragraph 4 of the Protocol.

I have the honor to propose that this understanding be treated as an integral part of the Treaty.

I would be grateful if you would confirm that this understanding is shared by your government.

His Excellency

Diego Paredes,

Minister of Foreign Relations of the

Republic of Ecuador,

Quito.”

I have the further honor to confirm that this understanding is shared by my Government and constitutes an integral part of the Treaty.

Sincerely,

Rufus H. Yerxa

Acting United States Trade Representative

[TRANSLATION]

Washington, D.C., August 27, 1993

His Excellency

Ambassador Rufus Yerxa

Acting United States Trade Representative

Washington, D.C.

Mr. Ambassador:

I have the honor to confirm the following Understanding, which was reached between the Government of Ecuador and the Government of the United States of America in the course of negotiations of the Treaty Concerning the Encouragement and Reciprocal Protection of Investment (the “Treaty)”:

[For the text of the understanding, see Ambassador Yerxa’s letter immediately preceding.]

I have the honor to propose that this understanding by treated as an integral part of the Treaty.

I would be grateful if you would confirm that this understanding is shared by your Government.

Accept, Excellency, the assurances of highest consideration.

[s] Diego Paredes

End of tab panel

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Egypt Bilateral Investment Treaty
Signed March 11, 1986 (modified); Entered into Force June 27, 1992

99TH Congress 2d Session

SENATE Treaty Doc. 99-24

INVESTMENT TREATY WITH EGYPT

MESSAGE

FROM

THE PRESIDENT OF THE UNITED STATES

Transmitting

THE TREATY BETWEEN THE UNITED STATES OF AMERICA AND THE ARAB REPUBLIC OF EGYPT CONCERNING THE RECIPROCAL ENCOURAGEMENT AND PROTECTION OF INVESTMENTS, SIGNED AT WASHINGTON ON SEPTEMBER 29 ,1982; WITH A RELATED EXCHANGE OF LETTERS SIGNED MARCH 11, 1985; AND A SUPPLEMENTARY PROTOCOL, SIGNED MARCH 11 ,1986

June 2, 1986.-Treaty was read the first time and, together with the accompanying papers, referred to the Committee on Foreign Relations and ordered to be printed for the use of the Senate

U.S. GOVERNMENT PRINTING OFFICE

WASHINGTON : 1986

LETTER OF TRANSMITTAL

THE WHITE HOUSE, June 2, 1986.

To the Senate of the United States:

With a view to receiving the advice and consent of the Senate to ratification, I transmit herewith the Treaty Between the United States of America and the Arab Republic of Egypt concerning the Reciprocal Encouragement and Protection of Investments, signed at Washington September 29, 1982; with a related exchange of letters signed March 11, 1985; and a supplementary protocol, signed March 11, 1986. I transmit also, for the information of the Senate, the report of the Department of State with respect to this Treaty.

The Bilateral Investment Treaty (BIT) program initiated in 1981, is designed to encourage and protect U.S. investment in developing countries. The Treaty is an integral part of U.S. efforts to encourage Egypt and other governments to adopt macroeconomic and structural policies that will promote economic growth. It is also fully consistent with U.S. policy toward international investment. That policy holds that an open international investment system in which participants respond to market forces provides the best and most efficient mechanism to promote global economic development. A specific tenet, reflected in this treaty, is that U.S. direct investment abroad and foreign investment in the United States should receive fair, equitable, and non-discriminatory treatment. Under this treaty, the parties also agree to international law standards for expropriation and compensation; free financial transfers; and procedures, including international arbitration, for the settlement of investment disputes.

I recommend that the Senate consider this Treaty as soon as possible, and give its advice and consent to ratification of the treaty, with related exchange of letters and supplementary protocol, at an early date.

RONALD REAGAN.

LETTER OF SUBMITTAL

DEPARTMENT OF STATE,

Washington, May 20, 1986.

The PRESIDENT,

The White House.

THE PRESIDENT: I have the honor to submit to you the Treaty Between the United States of America and the Arab Republic of Egypt Concerning the Reciprocal Encouragement and Protection of Investments, signed at Washington, September 29, 1982; with a related exchange of letters signed March 11, 1985; and a supplemental protocol, signed March 11, 1986. I recommend that this treaty, with related exchange of letters and supplementary protocol, be transmitted to the Senate for its advice and consent to ratification.

In accordance with the terms of the supplementary protocol, revisions made to the treaty and contained in that supplementary protocol will be integrated into a single unified text which will be published as the official treaty text after entry into force. For the information of the Senate, a copy of that consolidated text is attached to this report to facilitate reviewing the treaty. The consolidated text should be considered an unofficial text prior to ratification of the treaty, with related documents, by both Parties. As used herein, references to the treaty with Egypt should be considered as references to the consolidated text, as amended.

The Bilateral Investment Treaty (BIT) with Egypt was the first treaty signed under the BIT program which you initiated in 1981. Shortly after the signing, the Egyptian Government indicated a need to renegotiate a number of the treaty’s provisions. The parties agreed to certain changes, now contained in the supplementary protocol. In particular, the supplementary protocol replaces entirely the original protocol of September 29, 1982. Accordingly, the Department considers the first protocol to be an unperfected instrument which should not be submitted to the Senate for advice and consent to ratification.

Development of the BIT program and the negotiation of the individual treaties have been pursued by the Office of the United States Trade Representative and the Department of State with the active participation of the Departments of Commerce and Treasury, in conjunction with other interested U.S. Government agencies. On March 25 this year, BITs with six countries-Haiti, Morocco, Panama, Senegal, Turkey, and Zaire-were submitted to the Senate for its advice and consent to ratification. Additional BITs with Bangladesh, Cameroon and Grenada have also been signed and are being prepared for submission to the Senate.

In 1981 you initiated the global BIT program to encourage and protect U.S. investment in developing countries. By providing certain mutual guarantees and protections, a BIT creates a more stable and predictable legal framework for foreign investors in the territory of each of the treaty Parties. The negotiation of a series of bilateral treaties with interested countries establishes greater international discipline in the investment area.

Congressional support for the BIT program is reflected in Section 601(a) and (b) of the Foreign Assistance Act, as amended, in particular at Section 601(b) which provides:

BITs are consistent in purpose with the network of treaties of Friendship, Commerce and Navigation (FCNs) which the United States negotiated from the early years of the Republic until the last successful negotiations with Thailand and Togo in the late 1960s. They continue the U.S. policy of securing by agreement standards of equitable treatment and protection of U.S. citizens carrying on business abroad, and institutionalizing processes for the settlement of disputes between investors and host countries, and between governments. We expect that a series of bilateral treaties with interested countries will establish greater international discipline in the investment area.

The U.S. BIT approach followed similar programs that had been undertaken with considerable success by a number of European counties, including the Federal Republic of Germany and the United Kingdom, since the early 1960s. Indeed, our industrialized partners already have nearly two hundred BITs in force, primarily with developing countries. U.S. treaties, which draw upon language used in the U.S. FCN treaties as well as European counterparts, are more comprehensive and far-reaching than European BITs.

THE U.S.-EGYPT TREATY

The Treaty with Egypt was negotiated by an inter-agency team led by officials from the Office of the United States Trade Representative and the Department of State. The Treaty satisfies all four main BIT objectives:

-international law standards shall apply to the expropriation of investments and to the payment of compensation for expropriation;

-free transfers shall be afforded to funds associated with an investment into and out of the host country; and

-procedures are to be established which allow an investor to take a dispute with a Party directly to binding third-party arbitration.

The provisions on treatment of foreign investment and arbitration, and in particular Egypt’s acceptance of international law as the governing law, mark an important achievement for the BIT program and U.S. investment and international arbitration policies.

The treaty with Egypt was the result of the first BIT negotiation undertaken by the United States. Those negotiations were conducted from an early model text which in light of experience has undergone some modification. In general, however, the treaty closely follows the objectives contained in current U.S. model text, the most significant provisions of which are as follows.

The model BIT’s definition section clarified terms such as “company of a Party” and “investment.” The BIT concept of “investment” is broad and designed to be flexible; although numerous types of economic interests are enumerated, the intent is to include all legitimate interests in the territory of either Party, whether directly or indirectly controlled by nationals of the other, having economic value or “associated” with an investment. Protected “companies of a Party” are those incorporated or otherwise organized under the laws of a Party in which nationals of that Party have a substantial interest.

The model BIT accords the better of national or most-favored-nation (MFN) treatment to foreign investment, subject to each Party’s exceptions which are listed in a separate Annex. The exceptions are designed to protect state regulatory interests and for the United States to accommodate the derogations from national treatment in state or federal law relating to such areas as air transport, shipping, banking, telecommunications, energy and power production, insurance, and from national and MFN treatment in the case of ownership of real property. Any additional restrictions or limitations which a Party may adopt with respect to those matters or sectors excepted from the standards are not to affect existing investments. The model BIT also includes general treatment protections designed to be a guide to interpretation and application of the treaty. Thus, the Parties agree to accord investments “fair and equitable treatment” and “full protection and security” in no case “less than that required by international law.” It specifically grants nationals of a Party the right to establish investments in the territory of the other Party, restricts the right to impose performance requirements, and obliges Parties to observe their contractual obligations with investors. The U.S. model also provides that companies legally constituted under the laws of the other Party (i.e., subsidiaries of companies of a Party) with investments in that country shall be permitted to engage “top managerial personnel of their choice, regardless of nationality.”

The model BIT also confers protection from unlawful interference with property interests and assures compensation in accordance with international laws standards. It provides that any direct or indirect taking must be: for a public purpose; nondiscriminatory; accompanied by the payment of prompt, adequate and effective compensation; and in accordance with due process of law and the general standards of treatment discussed above. The meaning of “expropriation” as used in the model BIT is broad and flexible; it includes any measure which is “tantamount to exportation or nationalization.” Such compensation, which “shall be equivalent to the fair market value of the expropriated investment immediately before the expropriaty action was taken or became known,” must be “without delay,” “fully realizable,” “freely transferable” and “include interest at a commercially reasonable rate from the date of expropriation….” The BIT grants the right to “prompt review” by the relevant judicial or administrative authorities in order to determine whether the compensation offered is consistent with these principles. It also extends national and MFN treatment to investors in cases of loss due to war or other civil disturbance. The BIT does not provide, however, a specific valuation method for compensating such losses.

The model BIT provides for free transfers “related to an investment,” specifically of returns, compensation for expropriation, payments arising out of an investment dispute, contract payments, proceeds from sale, and contributions to capital for maintenance or development of an investment. Such transfers are to be made in a “freely convertible currency at the prevailing market rate of exchange on the date of transfer with respect to spot transactions in the currency to be transferred.” The model text recognizes that notwithstanding this guarantee Parties can maintain certain laws, regulations or court-imposed obligations which could affect the disposition of investment assets. In particular, the model text provides that Parties can require reports of currency transfers and impose income taxes by such means as a withholding tax on dividends. The model text also recognizes that Parties retain the right to protect the rights of creditors and ensure the satisfaction of judgments in adjudicatory proceedings.

The model BIT provides that where certain defined investment disputes arise between a Party and a national or company of the other party, including disputes as to the interpretation of an investment agreement, and the dispute cannot be solved through negotiation, it may be submitted to arbitration in accordance with any dispute-settlement procedures to which the national or company and the host country have previously agreed. Unless the national or company has submitted the dispute to previously agreed dispute settlement procedures or to adjudication by domestic courts or other tribunals of the host country, the national or company may submit the dispute to the International Centre for the Settlement of Investment Disputes (“ICSID”) for conciliation or binding arbitration. Exhaustion of local remedies is not required. In a separate provision, the BIT Parties also agree to provide effective means of asserting claims and enforcing rights with respect to investments.

Some of the provisions of the U.S.-Egypt treaty differ from the model text. With the exception of the transfers provisions, none of the changes represent substantive departures from U.S. objectives. The more significant modifications are as follows:

(1). Definition of Investment (Article I): Although the treaty with Egypt, like the current model text, defines investment so as to include “every kind of asset, owned or controlled,” paragraph 2 of the Protocol defines “control” as having “a substantial share of ownership rights and the ability to exercise decisive influence.” While the United States would have preferred to omit this clause, paragraph 2 also states that differences as the existence of control “shall be resolved” in accordance with the binding dispute settlement provisions contained in the treaty. Also this treaty, unlike the current model text, does not specify that investments may be controlled “directly or indirectly.” Since Article I(1)(d) of the treaty specifies that “own or control’ includes ownership or control exercised through subsidiaries or affiliates,” this omission is not significant.

(2). Existing Investments (Article II (2)(b)): Like the current model text, the treaty with Egypt specifically applies to pre-existing investments. This treaty provides, however, that pre-existing investments receive treaty protection if “accepted in accordance with the respective prevailing legislation of either party.” U.S. investments established in Egypt after 1974 are covered by Egypt’s Law 43 on Arab and Foreign Capital Investment and Free Zones (later amended by Law 32 of 1977)(Law 43). Law 43 and regulations thereunder contain application procedures, provisions on the assessment of assets, and registration of invested capital. The foreign investor’s application, together with Egyptian government assessments, approvals, or certifications, entitle the investor to certain benefits and could be construed to constitute a contractual arrangement between the Egyptian government and the foreign investor, insofar as these arrangements are binding on both parties. While is it conceivable that such arrangements may in some respects be inconsistent with the present treaty and that U.S. investments established in Egypt under legislation in force prior to Law 43 may contain arrangements inconsistent with the treaty, U.S. negotiators are unaware of any such inconsistencies. Egypt has also agreed, in Article II (3)(a), that any additional limitations which a party may adopt with respect to those sectors excepted from the standards are not to affect existing investments.

(3). Right of establishment (Article II): The treaty with Egypt contains the same rights with respect to establishment of an investment as are contained in the model text subject to one minor qualification. Although the treaty contains model language which permits investments to be established on MFN and national treatment basis (the latter subject to exceptions listed in the annex), Article II(3)(b) states that consistent with these rights each Party “retains the discretion to approve investments according to national plans and priorities on a non-discriminatory basis.”

(4). Excepted sectors (Annex; Protocol): Egypt’s list of sectors to be excluded from national treatment, found in the Annex, is extensive and includes commercial activity such as distribution, wholesaling, retailing, import and export activities.” Paragraph 12 of the Protocol limits this exception by stating that “commercial activity” does not include integrated operations which combine production and sales activities for their products. In addition, in paragraph 13 of the Protocol each Party agrees to accord investments in investment banks, merchant banks and reinsurance companies whose activities are confined to foreign currency transactions “treatment no less favorable than that accorded under existing laws and regulations to investments by its own nationals and companies or to investments by nationals or companies of any third country, whichever is the more favorable.” The Parties also agree to hold further discussions concerning the expansion of investment possibilities in the banking and insurance sectors. Finally, under paragraph 3(b) of the Protocol, United States investors may have a restricted right of establishment in “limited sensitive geographic area designated for exclusive Egyptian investment.” This responds to Egypt’s public order and national security concerns about foreign investment in certain sensitive border regions. In these areas, United States investors’ right of establishment will be on an MFN basis. Egypt reserves the right to modify these areas, provided such areas are kept to a minimum and “will not substantially impair the investment opportunities” of the United States nationals.

(5). Customs Union Exemption (Paragraph 4 of Protocol): Under Paragraph 4 of the Protocol the Parties are not required to extend MFN treatment in excepted sectors if those advantages are derived from a special security or regional arrangement, including regional customs unions or free trade areas. Egypt requested this exception because it is a member of the Arab League. While the current model text does not contain a similar provision, similar customs union exceptions to MFN treatment are contained in United States BITs with Bangladesh, Haiti and Morocco.

(6). Treatment of Investment (Article II): This treaty deviates from the current model text on the treatment of investment in two respects:

(a) Although the treaty, like the current model text, grants national or MFN treatment to activities “associated” with an investment and includes the purchase of foreign exchange among these activities, Article II (2)(a) states that the purchase of foreign exchange for the operation of enterprises must be made “in accordance with national regulations and practices.” This provision would essentially protect Egypt’s foreign exchange reserves during periods of stringency. It was understood that such national laws and practices would not be discriminatory against the nationals and companies of the other Party.

(b) Article II (4) states that the “treatment, protection and security of investments shall never be less than that required by international law and national legislation.” This clause is intended to place a floor under and reinforce the national/MFN treatment standard. It corresponds to a clause contained in the U.S. model BIT at the time the Egypt treaty was originally negotiated which includes additional language, not contained in the Egypt treaty and derived from European BITS, which is intended to supplement national or MFN treatment, such as “fair and equitable treatment” and “full protection and security.”

(7). Employment (Article II (5)): Although this treaty, like the current model text, permits nationals of either party to enter and to reside in the territory of the other Party “for the purpose of establishing, developing, directing, administering or advising on the operations of an investment * * *,” it deviates from the current model text concerning investors’ rights to hire personnel of their choice in two minor respects. While the current model text permits investors to engage “top managerial personnel of their choice, regardless of nationality” this treaty grants this right with respect to “the managing director or their choice.” In addition, the “regardless of nationality” phrase, included in the current model text to insure that companies of a Party investing in the United States otherwise comply with U.S. anti-discrimination employment laws in their hiring practices, was not included in this treaty. It is understood that the right to hire top managerial personnel remains nevertheless subject to U.S. anti-discrimination laws. (The “regardless of nationality” phrase was omitted in a similar provision in the U.S. BIT with Cameroon.) In addition, although Paragraph 5 of the Protocol states that the treaty does not derogate from each Party’s right to establish qualifications for the exercise of a profession, this paragraph also states that it does not derogate from investors’ rights to engage professional and technical personnel of their choice.

(8). Performance Requirements (Article II(6)): While the current model text prohibits performance requirements, Article II(6) of this treaty employs only a hortatory standard (“seek to avoid”). Similar hortatory language concerning performance requirements is found in Unites States BITs with Bangladesh, Haiti, Morocco, Senegal and Turkey. In addition, while the current model text takes a broad approach to performance requirements (and includes “commitments to export goods produced, or which specify that goods or services must be purchased locally, or which impose any other similar requirements”), Paragraph 7 of the Protocol limits the definition of performance requirements to “conditions imposed which would require an investor to export a minimum percentage of final product or to source some inputs locally.”

(9). Transfers (Article V; Paragraph 10 of the Protocol): The most significant departure from the current model text is in respect to transfers. Egypt has agreed to a transfers provision-Article V- which is substantially similar to that in the current model text. The current model text specifically states that “transfers related to an investment” shall be made “freely and without delay into and out of its territory * * *,” and lists examples of types of funds subject to free transfer. This treaty by contrast simply states that each Party “shall in respect to investments by nationals or companies of the other Party grant to those nationals or companies the free transfer of,” enumerated specific types of funds subject to free transfer. The types of funds listed are identical in substance to those in the current model text except that two categories identified in the current model text are not explicitly listed in the Egypt text: additional funds for the development (not merely the maintenance) of an investment and compensation payments arising from an investment dispute other than an expropriation.

In addition, under paragraph 10 of the Protocol, Egypt may temporarily delay transfers abroad of funds from liquidated investments if foreign exchange reserves are at a “very low level.” In such cases, Egypt may delay transfers:

(i) in a manner not less favorable than that accorded to comparable transfers to investors of third countries; (ii) to the extent and for the time period necessary to restore its reserves to a minimally acceptable level, but in no case for period [s] of time longer than that permitted by the provisions of Law 43 in force on the date of signature of this Treaty; and (iii) after providing the investor an opportunity to invest the sales or liquidation proceeds in a manner which will preserve their real value free of exchange risk until transfer occurs.

Under Article 21 of Law 43, an investor may not, except in “exceptional circumstances,” repatriate or dispose of his invested capital in less than five years after the importation of the capital into Egypt. (Within the statutory five year period, he may transfer the capital out of the country “at the highest rate prevailing and declared for freely convertible foreign currency in five equal annual installments.”) Similar delays on the right to free transfers of liquidated capital on the basis of foreign exchange shortages where also accepted in United States BITs with Bangladesh, Turkey and Zaire.

(10) Expropriation (Article III): This treaty departs from the current model text expropriation provisions in several minor respects:

(a) Paragraph 8 of the Protocol states that “prompt” payment in the event of an expropriation “does not necessarily mean instantaneous * * *(the intent is that the Party diligently and expeditiously carry out any necessary formalities.” This merely makes express what the United States has long regarded to be required under international law.

(b) While the treaty with Egypt omits specific use of the term “effective” compensation, the substance of that concept-assurance that once compensation has been paid the investor is able to withdraw his assets in usable form from the expropriating country-is retained. Thus, the treaty with Egypt provides that compensation shall be “freely realizable” and “freely transferable at the prevailing rate of exchange for current transactions on the date of the expropriatory action.”

(c) Article III (1) provides that compensation “include payments for delay as may be considered appropriate under international law.” The current model text is more specific about the international law standard, stating that payments for delay “bear current interest from the date of expropriation.”

(d) While both the current model text and the treaty with Egypt provide that compensation shall not reflect any reduction in value due to “the occurrence of the events that constituted or resulted in the expropriatory action,” paragraph 9 of the Protocol clarifies that this refers to conduct attributable to the expropriatory Party and not to the conduct of the investor.

(e) Paragraph 9 of the Protocol also clarifies that the Article III (1) requirement that an expropriation not violate “a specific contractual engagement” is without prejudice to the measure of compensation due in the event of an expropriation.

(f) The March 11, 1985 exchange of letters between the Parties states that compensation for purposes of Article III (1) “shall be determined in a manner consistent with international legal norms and standards rather than norms and standards that are particular to a specific domestic legal system.” This assurance, made at Egypt’s insistence, is implicit in the current model text reference to international law standards.

(11) Consultations Between Parties (Article VI): Like the current model text, this treaty provides that consultations between the Parities be held promptly upon the request of either Party to discuss the interpretation or application of the treaty or resolve related disputes. At the request of Egypt, this treaty goes beyond the current model text and also provides for biennial consultations to review the operation of the treaty in encouraging investments.

(12) Dispute Settlement Between a Party and an Investor (Article VII): This treaty modified the dispute settlement provisions of the current model text in two respects:

(a) While the current model text specifically defines the types of “investment dispute” which are subject to arbitration to include “the interpretation or application of any investment authorization granted by a party’s foreign investment authority,” no such clause appears in this treaty. Nonetheless, since this treaty, like the current model text, defines such arbitrable disputes to include both the interpretation of an investment agreement as well as “any right conferred or created” by this treaty “with respect to an investment,” the failure to mention specifically this third type of dispute is of doubtful significance.

(b) Article VII (4) of this treaty states that investors “shall not be entitled to compensation for more than the value of the affected assets, taking into account all sources of compensation within the territory of the Party liable for the compensation.” The intent of this language, inserted at the insistence of Egypt, is to protect the Parties against “double indemnity.” Egyptian negotiators were concerned that U.S. investors not receive payment for the value of a single claim from both a local Egyptian insurance company (which is likely to be publicly owned) and the Egyptian Government. The language would not limit a U.S. investor from collecting payment on the same claim from a third party (non-Egyptian) insurance company.

Submission of this treaty marks a significant development in our international investment policy. I join with the United States Trade Representative and other U.S. Government agencies in supporting this treaty, with related exchange of letters and supplemental protocol, and favor its transmittal to the Senate at an early date.

Respectfully submitted.

GEORGE P. SHULTZ.

Attachment: Consolidated text prepared by the Office of the U.S. Trade Representative and Department of State.

TREATY BETWEEN THE UNITED STATES OF AMERICA AND THE ARAB REPUBLIC OF EGYPT CONCERNING THE RECIPROCAL ENCOURAGEMENT AND PROTECTION OF INVESTMENTS

Whereas, the United States of America and the Arab Republic of Egypt (each hereinafter referred to as a “Party”), both recognize the importance of providing mutually beneficial support for the major efforts that each has contributed in fostering international peace both within and beyond their respective regions, and

Whereas, each Party recognizes that economic expansion and development are basic elements in the process of strengthening the efforts for and the bonds of international peace and friendship within an atmosphere of stability and security, and

Whereas, each agrees that economic cooperation through the pursuit of policies an practices which foster bilateral trade and investment, will contribute substantially to the long-term benefit and welfare of the peoples of each Party, and

Recognizing that agreement on a general framework for the encouragement and nondiscriminatory treatment of investments will stimulate the flow of productive capital and technology and thereby provide for a more effective use of capital and technical resources for development needs, further promoting economic stability and durable peace,

Both have resolved to conclude a bilateral Treaty pertaining to the reciprocal encouragement and protection of investments, and

Have agreed as follows:

ARTICLE I

DEFINITIONS

1.1 For the purposes of this Treaty,

(1 The original text contains a paragraph 1, but no paragraph 2.)

(a) “Company” means any kind of juridical entity, including any corporation, company, association, or other juridical entity, that is duly incorporated, constituted, or otherwise duly organized, regardless of whether or not the entity is duly organized for pecuniary gain, privately or publicly owned, or organized with limited or unlimited liability.

(b) “company of a Party” means a company duly incorporated, constituted or otherwise duly organized under the applicable laws and regulations of a Party or its subdivisions in which

(i) natural persons who are nationals of such Party, or

(ii) such Party or its subdivision or its agencies or instrumentalities have a substantial interest.

The juridical status of a company of a Party shall be recognized by the other Party and its subdivisions.

(i) tangible and intangible property, including rights, such as mortgages, liens and pledges;

(ii) a company or shares, stock in a company or interests in the assets thereof;

(iii) a claim to money or a claim to performance having economic value due under an investment agreement;

(iv) valid intellectual and industrial property rights, including, but not limited to rights with respect to copyrights and related patents, trademarks and trade names, industrial designs, trade secrets and know-how, and goodwill.

(v) licenses and permits issued pursuant to law, including those issued for manufacture and sale of products.

(vi) any right conferred by law or contract, but not limited rights, within the confines of law, to search for or utilize natural resources, and rights to manufacture, use and sell products;

(vii) returns which are reinvested.

(d) “own or control” includes ownership or control exercised through subsidiaries or affiliates.

(e) “national” of a Party means a natural person who is a national of a party under its applicable law.

(f) “return” means an amount derived from an investment, including but not limited to, profit; dividend; interest; royalty payment; management, technical assistance or other fee; and payment in kind.

ARTICLE II

ENCOURAGEMENT AND PROMOTION OF INVESTMENTS

1. Each Party undertakes to provide an maintain a favorable environment for investments in its territory by nationals and companies of the other Party and shall, in applying its laws, regulations, administrative practices and procedures, permit such investments to be established and acquired on terms and conditions that accord treatment no less favorable than the treatment it accords to investments of its own nationals and companies of any third country, whichever is the most favorable.

2. (a) Each Party shall accord investments in its territory, and associated activities in connection with these investments of nationals or companies of the other Party, treatment no less favorable than that accorded in like situations to investments and associated activities of its own nationals and companies, or nationals and companies of any third country, whichever is the most favorable. Associated activities in connection with an investment include, but are not limited to:

(i) the establishment, control and maintenance of branches, agencies, offices, factories or other facilities for the conduct of business;

(ii) the organization of companies under applicable laws and regulations; the acquisition of companies or interests in companies or in the property; and the management, control, maintenance, use, enjoyment and expansion, and the sale, liquidation, dissolution or other disposition, of companies organized or acquired;

(iii) the making, performance and enforcement of contracts related to investment;

(v) the leasing of real property appropriate for the conduct of business;

(vi) acquisition, maintenance and protection of copyrights, patents, trademarks, trade secrets, trade names, licenses and other approvals of products and manufacturing processes, and other industrial property rights; and

(vii) the borrowing of funds at market terms and conditions from local financial institutions, as well as the purchase and issuance of equity shares in the local financial markets, and, in accordance with national regulations and practices, the purchase of foreign exchange for the operation of the enterprise.

(b) This Treaty shall also apply to investments by nationals or companies of either Party, made prior to the entering into force of this Treaty and accepted in accordance with the respective prevailing legislation of either party.

3. (a) Notwithstanding the preceding provisions of this Article, each Party reserves the right to maintain limited exceptions to the standard of national treatment otherwise required concerning investments or associated activities if exceptions fall within one of the sectors listed in the Annex to this Treaty. Both Parties hereby agree to maintain the number of such exceptions to a minimum. In addition, each Party shall notify the other Party of any specific measures which constitute exceptions to the standard of national treatment provided herein. In no event, however, shall the treatment to be accorded pursuant to any exception be less favorable than that accorded in like situations to investments and associated activities of nationals or companies of any third country. Moreover, no exception, within the sectors contained in the Annex, introduced after the date of entry into force of this Treaty shall apply to investments of nationals or companies of the other Party existing in that sector at the time the exception becomes effective.

(b) Each Party retains the discretion to approve investments according to national plans and priorities on a nondiscriminatory basis consistent with paragraphs (1) and (3)(a) of this Article.

4. The treatment, protection and security of investments shall never be less than that required by international law and national legislation.

5. (a) Subject to the laws relating to the entry and sojourn of aliens, nationals of either Party shall be permitted to enter and to reside in the territory of the other Party for the purpose of establishing, developing, directing, administering or advising on the operations of an investment to which they or the companies that employ them have committed or are in the process of committing a substantial amount of capital or other resources.

(b) Nationals and companies of either Party, and their companies which they own or control in the territory of the other Party, shall be able to engage the managing director of their choice. Further, subject to employment laws of each Party, nationals and companies of either Party shall be permitted to engage, within the territory of the other Party, professional and technical personnel of their choice, for the particular purpose of rendering professional, technical and managerial assistance necessary for the planning and operation of investments.

6. In the context of its national economic policies and objectives, each Party shall seek to avoid the imposition of performance requirements of the investments of nationals and companies of the other Party.

7. Each Party recognizes that in order to maintain a favorable environment for investments in its territory by nationals or companies of the other Party, it should provide effective means of asserting claims and enforcing rights with respect to investment agreements, investment authorizations and properties. Each Party shall grant to nationals or companies of the other Party, on terms and conditions no less favorable than those which it grants in like situations to its own nationals or companies or to nationals or companies of any third country, whichever is the most favorable treatment, the right of access to its courts of justice, administrative tribunals and agencies, and all other bodies exercising adjudicatory authority, and the right to employ persons of their choice, who otherwise qualify under applicable laws and regulations of the forum for the purpose of asserting claims, and enforcing rights, with respect to their investments.

8. Each Party and its subdivisions shall make public all laws, regulations, administrative practices and procedures, and adjudicatory decisions that pertain to [or] affect investments in its territory of nationals or companies of the other Party.

ARTICLE III

COMPENSATION FOR EXPROPRIATION

1. No investment or any part of an investment of a national or company of either Party shall be expropriated or nationalized by the other Party or by a subdivision thereof-or subjected to any other measure, direct or indirect, if the effect of such other measure, or a series of such other measures, would be tantamount to expropriation or nationalization (all expropriations, all nationalizations and all such other measures hereinafter referred to as “expropriation”)-unless the expropriation

(a) is done for a public purpose;

(b) is accomplished under due process of law;

(d) is accompanied by prompt and adequate compensation, freely realizable; and

(e) does not violate any specific contractual engagement.

Compensation shall be equivalent to the fair market value of the expropriated investment on the date of expropriation. The calculation of such compensation shall not reflect any reduction in such fair market value due to either prior public notice or announcement of the expropriatory action, or the occurrence of the events that constituted or resulted in the expropriatory action. Such compensation shall include payments for delay as may be considered appropriate under international law, and shall be freely transferable at the prevailing rate of exchange for current transactions on the date of the expropriatory action.

2. If either Party or a subdivision thereof expropriates the investment of any company duly incorporated, constituted or otherwise duly organized in its territory, and if nationals or companies of the other Party, directly or indirectly, own, hold or have other rights with respect to the equity of such company, then the Party within whose territory the expropriation occurs shall ensure that such nationals or companies of the other Party receive compensation in accordance with the provisions of the preceding paragraph.

3. Except as otherwise provided in an agreement between the Parties, or between a Party and a national or company of the other Party, a national or company of either Party that asserts that all or part of its investment in the territory of the other Party has been expropriated shall have a right to prompt review by the appropriate judicial or administrative authorities of such other Party to determine whether any such expropriation has occurred and, if so, whether such expropriation, and any compensation thereof, conforms to the principals of international law.

ARTICLE IV

COMPENSATION FOR DAMAGES DUE TO WAR AND SIMILAR EVENTS

Nationals or companies of either Party whose investments or returns in the territory of either Party suffer

(a) damages due to war or other armed conflict between such other Party and a third country or

(b) damages due to any kind of civil disturbance or insurrection in the territory of such other Party,

shall be accorded treatment no less favorable than that which such other Party accords to its own nationals or companies or to nationals or companies of any third country, whichever is the most favorable treatment, when making restitution, indemnification, compensation or other appropriate settlement with respect to such damages.

ARTICLE V

TRANSFERS

1. Either Party shall in respect to investments by nationals or companies of the other Party grant to those nationals or companies the free transfer of:

(a) returns;

(b) royalties and other payments deriving from licenses, franchises and other similar grants or rights;

(d) amounts spent for the management of the investment in the territory of the other Party or a third country;

(e) additional funds necessary for the maintenance of the investment;

(f) the proceeds of partial or total sale or liquidation of the investment, including a liquidation effected as a result of any event mentioned in Article IV; and

(g) compensation payments pursuant to Article III.

2. To the extent a national or company of either Party has not made another arrangement with the appropriate authorities of the other Party in whose territory the investment of such national or company is situated, currency transfers made pursuant to Paragraph 1 of this Article shall be permitted in the currency of the original investment or in any other freely convertible currency. Such transfers shall be made at the prevailing rate of exchange on the date of transfer with respect to current transactions in the currency to be transferred.

ARTICLE VI

CONSULTATIONS AND EXCHANGE OF INFORMATION

2. Further, for the purpose of reviewing the operation of this Treaty in encouraging investments, consultations should be held biennially between the two Parties. Those consultations should aim at exchanging information and views on the progress regarding investments.

3. If one Party requests in writing that the other Party supply information in its possession concerning investments in its territory by nationals or companies of the Party making the request, then the other Party shall, consistent with its applicable laws and regulations and with due regard for business confidentiality, endeavor to establish appropriate procedures and arrangements for the provision of any such information.

ARTICLE VII

SETTLEMENT OF LEGAL INVESTMENT DISPUTES BETWEEN ONE PARTY AND A NATIONAL OR COMPANY OF THE OTHER PARTY

1. For purposes of this Article, a legal investment dispute is defined as a dispute involving (i) the interpretation or application of an investment agreement between a Party and a national or company of the other Party; or (ii) an alleged breach of any right conferred or created by this Treaty with respect to an investment.

2. In the event of a legal investment dispute between a Party and a national or company of the other Party with respect to an investment of such national or company in the territory of such Party, the parties shall initially seek to resolve the dispute by consultation and negotiation. The Parties may, upon the initiative of either of them and as a part of their consultation and negotiation, agree to rely upon non-binding, third-party procedures. If the dispute cannot be resolved through consultation and negotiation, then the dispute shall be submitted for settlement in accordance with the applicable dispute-settlement procedures upon which a Party and national or company of other Party have previously agreed. With respect to expropriation by either Party, any dispute-settlement procedures specified in an investment agreement between such Party and such national or company shall remain binding and shall be enforceable in accordance with the terms of the investment agreement and relevant provisions of domestic laws of such Party and treaties and other international agreements regarding enforcement of arbitral awards to which such Party has subscribed.

3. (a) In the event that the legal investment dispute is not resolved under procedures specified above, the national or company concerned may choose to submit the dispute to the International Centre for the Settlement of Investment Disputes (“Centre”) for settlement by conciliation or binding arbitration, if, within six (6) months of the date upon which it arose: (i) the dispute has not been settled through consultation and negotiation; or (ii) the dispute has not, for any good faith reason, been submitted for resolution in accordance with any applicable dispute-settlement procedures previously agreed to by the Parties to dispute: or (iii) the national or company concerned has not brought the dispute before the courts of justice or administrative tribunals or agencies of competent jurisdiction of the Party that is a Party to the dispute.

(b) Each Party hereby consents to the submission of an investment dispute to the Centre for settlement by conciliation or binding arbitration.

4. In any proceeding , judicial, arbitral or otherwise, concerning a legal investment dispute between it and a national or company of the other Party, A Party Shall not assert, as a defense, counterclaim, right of set-off or otherwise, that the national or company concerned has received or Will receive, pursuant to an insurance contract, indemnification or other compensation for all or part of its alleged damages from any third Party whatsoever, whether public or private, including such other Party and its subdivisions, agencies and instrumentalities. Notwithstanding the foregoing, a national or company of the other Party shall not be entitled to compensation for more than the value of its affected assets, taking into account all sources of compensation within the territory of the Party liable for the compensation.

5. For the purpose of any proceedings initiated before the Centre in accordance with this Article, any company that, immediately prior to the occurrence of the event or events giving rise to the dispute was a company of the other Party, shall be treated as a national or company of such other Party.

6. The provisions of this Article shall not apply to a dispute arising under an official export credit, guarantee, or insurance arrangement, pursuant to which the Parties have agreed to other means of settling disputes.

ARTICLE VIII

SETTLEMENT OF DISPUTES BETWEEN THE PARTIES CONCERNING INTERPRETATION OR APPLICATION OF THIS TREATY

1. Any dispute between the Parties concerning the interpretation or application of this Treaty should, if possible, be resolved through diplomatic channels.

2. If the dispute cannot be resolved through diplomatic channels, it shall, upon the agreement of the Parties, be submitted to the International Court of Justice.

3. (a) In the absence of such agreement, the dispute shall, upon the written request of either Party, be submitted to an arbitral tribunal for binding decision in accordance with the applicable rules and principles of international law.

(b) The Tribunal shall consist of three arbitrators, one appointed by each Party, and a Chairman appointed by agreement of the other two arbitrators. The Chairman shall not be a national of either Party. Each Party shall appoint an arbitrator within 60 days, and the Chairman shall be appointed within 90 days, after a Party has requested arbitration of a dispute.

(c) If the period set forth in (b) above are not met, and in the absence of some other arrangement between the Parties, either Party may invite the President of the International Court of Justice to make the necessary appointment. If the President is a national of either of the Parties or is unable to act for any reason, either Party may invite the Vice President, or if he is also a national of either Party or otherwise unable to act, the next most senior member of the International Court of Justice, to make the appointment.

(d) In the event that an arbitrator is for any reason unable to perform his duties, a replacement shall be appointed within thirty (30) days of determination thereof, utilizing the same method by which the arbitrator being replaced was appointed. If a replacement is not appointed within the time limit specified above, either Party may invite the President of the International Court of Justice to make the necessary appointment. If the President is a national of either of the Parties or is unable to act for any reason, either Party may invite the Vice President, or if he is also a national of either Party or otherwise unable to act, the next most senior member of the International Court of Justice, to make the appointment.

(e) Unless otherwise agreed to by the Parties to the dispute, all submissions shall be made. and all hearings shall be completed within one hundred and twenty (120) days of the date of the selection of the third arbitrator, and the Tribunal shall render its decision within thirty (30) days of the date of the final submissions or the date of the closing of the hearings, whichever is later, and such decision shall be binding on each Party.

(f) Except as otherwise agreed to by the Parties, arbitration proceedings shall be governed by the Model Rules on Arbitral Procedure adopted by the United Nations International Law Commission in 1958 (“Model Rules”) and commended to Member States by the United Nations General Assembly in Resolution 1262 (XIII). To the extent that procedural questions are not resolved by this Article or the Model Rules they shall be resolved by the Tribunal. Notwithstanding any other provision of this Treaty or the Model Rules, the Tribunal shall in all cases act by majority vote.

(g) Each Party shall bear the costs of its own arbitrator and counsel in the arbitral proceeding. Expenses incurred by the Chairman and other costs of the proceedings shall be paid for equally by the Parties. The Tribunal may, however, at its discretion, direct that a higher proportion of the costs be paid by one of the Parties. Such a decision shall be binding.

4. The provisions of this Article shall not apply to a dispute arising under an official export credit, guarantee or insurance arrangement, pursuant to which the Parties have agreed to other means of settling disputes.

ARTICLE IX

PRESERVATION OF RIGHTS

1. This Treaty shall not supersede, prejudice, or otherwise derogate from (a) laws, regulations, administrative practices or procedures, or adjudicatory decisions of either Party, (b) international legal obligations, or (c) obligations assumed by either Party, including those contained in an investment agreement or an investment authorization, whether extant at the time of entry into force of this Treaty or thereafter, that entitle investments or associated activities of nationals or companies of the other Party to treatment more favorable than that accorded by this Treaty in like situations.

2. This Treaty shall not derogate from or terminate any other agreement entered into by the two Parties and in force as between the two Parties on the date on which this Treaty enters into force.

ARTICLE X

MEASURES NOT PRECLUDED BY TREATY

1. This Treaty shall not preclude the application by either Party or any subdivision thereof of any and all measures necessary for the maintenance of public order and morals, the fulfillment of its existing international obligations, the protection of its own security interests, or such measures deemed appropriate by the Parties to fulfill future international obligations.

ARTICLE XI

TAXATION

With respect to its tax policies, each Party should strive to accord fairness and equity in the treatment of investments of nationals or companies of the other Party. Nevertheless, all matters relating to the taxation of nationals or companies of a Party, or their investments in the territories of the other Party or a subdivision thereof shall be excluded from this Treaty, except with regard to measures covered by Article III and the specific provisions of Article V.

ARTICLE XII

APPLICATION OF TREATY TO POLITICAL OR ADMINISTRATIVE SUBDIVISIONS OF THE PARTIES

This Treaty shall apply to the political and/or administrative subdivisions of each Party.

ARTICLE XIII

ENTRY INTO FORCE AND DURATION AND TERMINATION

1. This Treaty shall be ratified by each of the Parties, and the instruments of ratification thereof shall be exchanged as soon as possible.

2. This Treaty shall enter into force thirty (30) days after the date of exchange of the instruments of ratification. It shall remain in force for a period of ten (10) years and shall continue in force unless terminated in accordance with Paragraph 3 of this Article.

3. Either Party may, by giving one (1) year’s written notice to the other Party, terminate this Treaty at the end of the initial ten (10) year period or at any time thereafter.

4. With respect to investments made or acquired prior to the date of termination of this Treaty and to which this Treaty otherwise applies, the provisions of all of the other Articles of this Treaty shall continue to be effective for a further period of ten (10) years from such date of termination.

5. The attached Annex and Protocol are integral parts of this Treaty.

DONE in duplicate at Washington this twenty-ninth day of September 1982* in the English and Arabic languages, both texts being equally authentic.

For the United States of America:

WILLIAM E. BROCK, Jr.

For the Arab Republic of Egypt:

WAJIH SHINDI.

* As modified by the Supplementary Protocol, signed at Cairo, March 11, 1986,

ANNEX

Consistent with Article II paragraph 3, each Party reserves the right to maintain limited exceptions in the sectors it has indicated below

THE UNITED STATES OF AMERICA

Air transportation, ocean and coastal shipping; banking; insurance; government grants; government insurance and loan programs; energy and power production; use of land and natural resources; custom house brokers; ownership of real estate; radio and television broadcasting; telephone and telegraph services; submarine cable services; satellite communications.

THE REPUBLIC OF EGYPT

Air and sea transportation; maritime agencies; land transportation other than that of tourism; mail, telecommunication, telegraph services and other public services which are state monopolies; banking and insurance; commercial activity such as distribution, wholesaling, retailing, import and export activities; commercial agency and broker activities; ownership of real estate; use of land; natural resources; national loans; radio, television, and the issuance of newspapers and magazines.

PROTOCOL*

On signing the Treaty concerning the Reciprocal Encouragement and Protection of Investments, the Arab Republic of Egypt and the United States of America have, in addition, agreed on the following provisions which should be regarded as an integral part of the Treaty:

1. Each Party reserves the right to deny the benefits of this Treaty to any company of either Party, or its affiliates or subsidiaries, if nationals of any third country control such company, affiliate or subsidiary; provided that, whenever one Party concludes that the benefits of this Treaty should not be extended for this reason, it shall promptly consult with the other Party to seek a mutually satisfactory resolution of this matter.

2. “Control” means to have a substantial share of ownership rights and the ability to exercise decisive influence. Differences as to the existence of control shall be resolved according to the provisions of Article VIII.

3. (a) The treatment accorded by the United States to nationals or companies of Egypt under the provisions of Article II (1) and (2) shall in any State of the United States or other territory, possession, or political or administrative subdivision of the United States be the treatment accorded therein to residents of or companies incorporated, constituted or otherwise duly organized in other States of the United States or territories, possessions, or political or administrative subdivisions of the United States.

(b) The treatment accorded by Egypt to nationals and companies of the United States with respect to the establishment and acquisition of investments in limited sensitive geographic areas designated for exclusive Egyptian investment shall be no less favorable than the treatment it accords to investments of nationals and companies of any third country. Egypt reserves the right to modify the areas covered, provided that such areas will be kept to a minimum and will not substantially impair the investment opportunities of United States nationals and companies.

4. The provisions of Article II, paragraph 3, relating to most favored nation treatment, shall not apply to advantages accorded by either Party to nationals or companies of a third country by virtue of a special security or regional arrangement, including regional customs unions or free trade areas. Further, these provisions do not apply to the ownership of real estate. The provisions of Article II paragraph 1, relating to most favored nation treatment, shall not be construed to oblige one Party to extend to nationals or companies of the other the benefit of any treatment, preference or privilege which may be extended by the former Party by virtue of a customs union or in the field of housing. Moreover, with regard to rights to engage in mining on the public domain, each Party retains the right to accord to nationals or companies of the other Party treatment which is like or similar to that accorded by the other Party to nationals or companies of the first Party.

5. It is understood that this Treaty does not derogate from the rights of either Party regarding the establishment of qualifications as for the practice of professions, including law and accountancy. These qualifications may confine the practice of such professions to nationals or companies of a Party, provided that they are applied on a nondiscriminatory basis; and provided, further, that such nationality requirements do not derogate from the right of nationals and companies of either Party, pursuant to Article II (5)(b) to engage professional and technical personnel of their choice to render professional and technical services necessary for the internal planning and operation of the investment.

6. This Treaty, and in particular, the provisions of Article II, paragraph 5 (b) shall be subjected to the provisions of Article X.

7. With respect to Article II (6), performance requirements are conditions imposed which would require an investor to export a minimum percentage of final product or to source some inputs locally.

8. With regard to Article III, Paragraph 1(d) the term “prompt” does not necessarily mean instantaneous. The intent is that the Party diligently and expeditiously carry out any necessary formalities.

9. With regard to Article III, paragraph 1, the phrase “events that constituted or resulted in the expropriatory action” refers to conduct attributable to the expropriatory Party and not to conduct of the national or company, The inclusion of subparagraph (e) in Article III, paragraph 1, is without prejudice to the measure of compensation due in the event of expropriation.

10. The Parties recognize that restrictions on transfers abroad of sales or liquidation proceeds of an investment will adversely affect future capital inflows, contrary to the spirit of this Treaty and the interests of the Party imposing those restrictions. Nevertheless, the Parties recognize that it is possible that the Arab Republic of Egypt may find its foreign exchange reserves at a very low level. In these circumstances, the Arab Republic of Egypt may temporarily delay transfers required under Article V, Paragraph 1(f), but only: (i) in a manner not less favorable that accorded to comparable transfers to investors of third countries; (ii) to the extent and for the time period necessary to restore its reserves to a minimally acceptable level, but in no case for period of time longer than that permitted by the provisions of Law 43 in force on the date of signature of this Treaty; and (iii) after providing the investor an opportunity to invest the sales or liquidation proceeds in a manner which will preserve their real value free of exchange risk until transfer occurs.

11. Concerning Article VII (3)(a)(ii), it is understood that the Parties to the dispute may previously agree to submission of the dispute to the jurisdiction of domestic courts and tribunals. The Parties will maintain a nondiscriminatory policy regarding the inclusion and implementation of such provisions in any investment contract.

12. With regard to the Annex, the exceptions noted by the Arab Republic of Egypt under “commercial activity” do not include integrated operations which combine production and sales activities for their products.

13. Recognizing that international financial markets and institutions further stimulate the process of economic development through the international transmission of investment and associated technology, each Party undertakes to maintain a favorable environment for investment by nationals or companies of the other Party in the insurance and banking sectors. Therefore, each Party accords to investments by nationals or companies of the other Party in investment banks, merchant-banks and reinsurance companies whose activities are confined to transactions in foreign currencies treatment no less favorable than that accorded under existing laws and regulations to investments by its own nationals and companies or to investments by nationals or companies of any third country, whichever is the more favorable. Both Parties agree to hold future discussions concerning the expansion of investment possibilities in these sectors by nationals or companies of either Party in the territory of the other Party.

DONE in duplicate at Cairo this 11th day of March 1986 in the English and Arabic languages, both texts being equally authentic.

For the Government of the United States of America:

NICHOLAS A. VELIOTES,

Ambassador.

For the Government of the Arab Republic of Egypt:

Sultan ABOU ALI,

Minister of Economy and Trade.

* Text as agreed in Supplementary Protocol, signed at Cairo. March 11, 1986. This replaces the protocol of September 29, 1982

THE TREATY BETWEEN THE UNITED STATES OF AMERICA AND THE ARAB REPUBLIC OF EGYPT CONCERNING THE RECIPROCAL ENCOURAGEMENT AND PROTECTION OF INVESTMENTS

Whereas, the United States of America and the Arab Republic of EGYPT (each herein referred to as a “Party”), both recognize the importance of providing mutually beneficial support for the major efforts that has contributed in fostering international peace both within and beyond their respective regions, and

Whereas, each agrees that economic cooperation through the pursuit of policies and practices which foster bilateral trade and investment, will contribute substantially to the long-term benefit and welfare of the peoples of each Party, and

Both have resolved to conclude a bilateral Treaty pertaining to the reciprocal encouragement and protection of investments, and Have agreed as follows:

ARTICLE I

DEFINITIONS

1. (a) “Company” means any kind of juridical entity, including any corporation, company association, or other organization, that is duly incorporated, constituted, or otherwise duly organized, regardless of whether or not the entity is organized for pecuniary gain, privately or governmentally owned, or organized with limited or unlimited liability.

(b) “company of a Party” means a company duly incorporated, constituted or otherwise duly organized under the applicable laws and regulations of a Party or its political subdivisions in which

(i) natural persons who are nationals of such Party, or

(ii) such Party or its subdivision or its agencies or instrumentalities

have a substantial interest.

Each Party reserves the right to deny to any of its own companies or to a company of the other Party the advantages of this Treaty, if nationals of any third country own or control such company; provided that whenever one Party believes that the benefits of this Treaty should not be extended to a company of the other Party for this reason, it shall first consult with the other Party to seek a mutually satisfactory resolution of this matter.

The juridical status of a company of a Party shall be recognized by the other Party and its subdivisions.

(i) tangible and intangible property, including rights, such as mortgages, liens and pledges;

(ii) a company or shares, stock, or other interests in a company or interests in the assets thereof;

(iii) a claim to money or a claim to performance having economic value, and associated with an investment;

(iv) intellectual property, including rights with respect copyrights and related patents, trade marks and trade names, industrial designs, trade secrets and know-how, and goodwill.

(v) licenses and permits issued pursuant to law, including those issued for manufacture and sale of products.

(vi) any right conferred by law or contract, including rights to search for or utilize natural resources, and rights to manufacture, use and sell products;

(vii) returns which are reinvested.

(d) “own or control” means ownership or control that is direct of indirect, including ownership or control exercised through subsidiaries or affiliates.

(e) ‘national’ or a Party means a natural person who is a national of a party under its applicable law.

ARTICLE II

ENCOURAGEMENT AND PROMOTION OF INVESTMENTS

1. Each Party undertakes to provide and maintain a favorable environment for investments in its territory by nationals and companies of the other Party and shall, in applying its laws, regulations, administrative practices and procedures, permit such investments to be established and acquired on terms and conditions that accord treatment no less favorable than the treatment it accords to investments of its own nationals or companies or to nationals and companies of any third country, whichever is the most favorable.

2. (a) Each Party shall accord investments in its territory, and associated activities related to these investments, of nationals or companies of the other Party treatment no less favorable than that which it accords in like situations to investments and associated activities of its own nationals or companies, or nationals or companies of any third country, whichever is the most favorable. Associated activities related to an investment include, but are not limited to:

(i) the establishment, control and maintenance of branches, agencies, offices, factories or other facilities for the conduct of business;

(ii) the organization of companies under applicable laws and regulations; the acquisition of companies or interests in companies or in their property; and the management, control, maintenance, use, enjoyment and expansion, and the sale, liquidation, dissolution or other disposition, of companies organized or acquired;

(iii) the making, performance and enforcement of contracts related to investment;

(v) the leasing of real property appropriate for the conduct of business;

(vi) the acquisition, maintenance and protection of copyrights, patents, trademarks, trade secrets, trade names, licenses and other approvals of products and manufacturing processes, and other industrial property rights; and,

(vii) the borrowing of funds at market terms and conditions from local, financial institutions, as well as the purchase and issuance of equity shares in the local financial markets, and, in accordance with national regulations and practices, the purchase of foreign exchange for the operation of the enterprise.

2. (b) Consistent with paragraph 4 to this Article, each Party shall apply the present Treaty to investments in its territory by nationals or companies of the other Party made prior to the entry into force of this Treaty provided such application is not inconsistent with agreements, contractual arrangements, investment authorizations and licenses made under legislation existing at the time the concerned investments were made.

3. Notwithstanding the preceding provisions of this Article, each Party reserves the right to maintain limited exceptions to the standard of national treatment otherwise required concerning investments or associated activities if such exceptions fall within one of the sectors listed in the Annex to this Treaty. Both parties hereby agree to maintain the number of such exceptions to a minimum. In addition, each Party shall notify the other Party of any specific measures which constitute exceptions to the standard of national treatment provided herein. In no event, however, shall the treatment to be accorded pursuant to any exception be less favorable than that accorded in like situations to investments and associated activities of nationals or companies of any third country. Moreover, no exception, within the sectors contained in the Annex, introduced after the date of entry into force of this Treaty shall apply to investments of nationals or companies of the other Party existing in that sector at the time the exception becomes effective.

4. The treatment, protection and security of investments shall never be less than that required by international law and national legislation.

5. (a) Subject to the laws relating to the entry and sojourn of aliens, nationals of either Party shall be permitted to enter and to remain in the territory of the other Party for the purpose of establishing, developing, directing, administering or advising on the operations of an investment to which they or the companies that employ them have committed or are in the process of committing a substantial amount of capital or other resources.

6. In the context of national economic policies and the desire to promote investment of all types, both private an public, the Parties recognize that conditions of competitive equality be should be maintained where investments owned or controlled within the territory of such Party, are in competition under similar conditions with privately owned or controlled investments of nationals and companies of the other Party.

7. In the context of its national economic policies and objectives, each Party shall seek to avoid the imposition of performance requirements on the investments of nationals and companies of the other Party.

8. Each Party recognizes that in order to maintain a favorable environment for investments in its territory by nationals or companies of the other Party, it should provide effective means of asserting claims and enforcing rights with respect to investment agreements, investment authorizations and properties. Each Party shall grant to nationals or companies of the other Party, on terms and conditions no less favorable than those which it grants in like situations to its own nationals or companies or to nationals or companies of any third country, whichever is the most favorable treatment, the right of access to its courts of justice, administrative tribunals and agencies, and all other bodies exercising adjudicatory authority, and the right to employ persons of their choice, who otherwise qualify under applicable laws and regulations of the forum for the purpose of asserting claims, and enforcing rights, with respect to their investments.

9. Each Party and its political or administrative subdivisions shall make public all laws, regulations, administrative practices and procedures, and adjudicatory decisions that pertain to or affect investments in its territory of nationals or companies of the other Party.

ARTICLE III

COMPENSATION FOR EXPROPRIATION

1. No investment or any party of an investment of a national or a company of either Party shall be expropriated or nationalized by the other Party or a political or administrative subdivision thereof or subjected to any other measure, direct or indirect (including, for example, the levying of taxation, the compulsory sale of all or part of such an investment, or impairment or deprivation of management, control or economic value of such an investment by the national or company concerned), if the effect of such other measure, or a series of such other measures, would be tantamount to expropriation or nationalization (all expropriations, all nationalizations and all such other measures hereinafter referred to as “expropriation”) unless the expropriation

(a) is done for a public purpose;

(b) is accomplished under due process of law;

(d) is accompanied by prompt and adequate compensation, freely realizable; and

(e) does not violate any specific provision on contractual stability or expropriation contained in an investment agreement between the national or company concerned and the Party making the expropriation.

2. If either Party or a political or administrative subdivision thereof expropriates the investment of any company duly incorporated, constituted or otherwise duly organized in its territory, and if nationals or companies of the other Party, directly or indirectly, own, hold or have other rights with respect to the equity of such company, then the Party within whose territory the expropriation occurs shall ensure that such nationals or companies of the other Party receive compensation in accordance with the provisions of the preceding paragraph.

ARTICLE IV

COMPENSATION FOR DAMAGES DUE TO WAR AND SIMILAR EVENTS

Nationals or companies of either Party whose investments or returns in the territory of either Party suffer

(a) damages due to war or other armed conflict between such other Party and a third country or

(b) damages due to any kind of civil disturbance or insurrection in the territory of such other party, shall be accorded treatment no less favorable than that which such other Party accords to its own nationals or companies or to nationals or companies of any third country, whichever is the most favorable treatment, when making restitution, indemnification, compensation or other appropriate settlement with respect to such damages.

ARTICLE V

TRANSFERS

1. Either Party shall in respect to investments by nationals or companies of the other Party grant to those nationals or companies the free transfer of:

a. returns.

b. royalties and other payments deriving from licenses, franchises and other similar grants or rights.

c. installments in repayment of loans.

d. amounts spent for the management of the investment in the territory of the other Party or a third country.

e. Additional funds necessary for the maintenance of the investment.

f. the proceeds of partial or total sale or liquidation of the investment, including a liquidation effected as a result of any event mentioned in Article IV; and

g. compensation payments pursuant to Article III.

ARTICLE VI

CONSULTATIONS AND EXCHANGE OF INFORMATION

1. The Parties shall, upon the written request of either of them, promptly hold consultations to discuss the interpretation or application of this Treaty or to resolve any disputes in connection therewith. Consultations shall be held should one Party request consultations to discuss the effects on its national interests of laws, regulations, decisions, administrative practices or procedures, or that pertain to or affect investments of in the territory of such other Party, including conditions imposed on establishment of investments. The consultations will seek to avoid or ameliorate the adverse effects .that these laws, regulations, decisions, administrative practices or procedures, or policies may have on the Party requesting the consultations.

ARTICLE VII

SETTLEMENT OF LEGAL INVESTMENT DISPUTES BETWEEN ONE PARTY AND A NATIONAL OR COMPANY OF THE OTHER PARTY

1. For purposes of this Article, a legal investment dispute is defined as a dispute involving (i) the interpretation or application of an investment agreement between a Party and a national or company of the other Party; or (ii) an alleged-breach of any right conferred or created by this Treaty with respect to an investment.

2. In the event of a legal investment dispute between a Party and a national or company of the other Party with respect to an investment of such national or company m the territory of such Party, the parties shall initially seek to resolve the dispute by consultation and negotiation. The Parties may, upon the initiative of either of them and as part of their consultation and negotiation, agree to rely upon non-binding, third-Party procedures. If the dispute cannot be resolved through consultation and negotiation, then the dispute shall be submitted for settlement in accordance with the applicable dispute-settlement procedures upon which a Party and national or company of the other Party have previously agreed. With respect to expropriation by either Party, any dispute-settlement procedures specified in an investment agreement between such Party and such national or company shall remain binding and shall be enforceable in accordance with the terms of the investment agreement and relevant provisions of domestic laws of such Party and treaties and other international agreements regarding enforcement of arbitral awards to which such Party has subscribed.

3. (a) In the event that the legal investment dispute is not resolved under procedures specified above, the national or company concerned may choose to submit the dispute to the International Centre for the Settlement of Investment Disputes (“Centre”) for settlement by conciliation or binding arbitration, if, within six (6) months of the date upon which it arose: (i) the dispute has not been settled through consultation and negotiation; or (ii) the dispute has not, for any good faith reason, been submitted for resolution in accordance with any applicable dispute-settlement procedures previously agreed to by the Parties to the dispute; or (iii) the national or company concerned has not brought the dispute before the courts of justice or administrative tribunals or agencies of competent jurisdiction of the Party that is a Party to the dispute.

(b) Each Party hereby consents to the submission of an investment dispute to the Centre for settlement by conciliation or binding arbitration.

4. In any proceeding, judicial, arbitral or otherwise, concerning a legal investment dispute between it and a national or company of the other Party, a Party shall not assert, as a defense, counterclaim right of set-off or otherwise, that the national or company concerned has received or will receive, pursuant to an insurance contract, indemnification or other compensation for all or part of its alleged damages from any third Party whatsoever, whether public or private, including such other Party and its political or administrative subdivisions, agencies and instrumentalities. Notwithstanding the foregoing, a national or company of the other Party shall not be entitled to compensation for more than the value of its affected assets, taking into account all sources of compensation within the territory of the Party liable for the compensation.

5. For the purpose of any proceedings initiated before the Centre in accordance with this Article, any company that, immediately prior to the occurrence of the event or events giving rise to the dispute, was a company of the other Party, shall be treated as a national or company of such other Party.

ARTICLE VIII

SETTLEMENT OF DISPUTES BETWEEN THE PARTIES CONCERNING INTERPRETATION OR APPLICATION OF THIS TREATY

1. Any dispute between the Parties concerning the interpretation or application of this Treaty should, if possible, be resolved through diplomatic channels.

2. If the dispute cannot be resolved through diplomatic channels, it shall, upon the agreement of the Parties, be submitted to the International Court of Justice.

(c) If the periods set forth in (b) above are not met, and in the absence of some other arrangement between the Parties, either Party may invite the President of the International Court of Justice to make the necessary appointment. If the President is a national of either of the Parties or is unable to act for any reason, either Party may invite the Vice President, or if he is a national of either Party or otherwise unable to act, the next most senior member of the International Court of Justice, to make the appointment.

(e) Unless otherwise agreed to by the Parties to the dispute, all submissions shall be made and all hearings shall be completed within one hundred and twenty (120) days of the date of the selection of the third arbitrator, and the Tribunal shall render its decision within thirty (30) days of the date of the final submissions or the date of the closing of the hearings, whichever is later, and such decisions shall be binding on each Party.

(f) Except as otherwise agreed to by the Parties, arbitration proceedings shall be governed by the Model Rules on Arbitral Procedure adopted by the United Nations International Law Commission in 1958 (“Model Rules”), and commended to Member States by the United Nations General Assembly in Resolution 1262 (XIII). To the extent that procedural questions are not resolved by this Article or the Model Rules they shall be resolved by the Tribunal. Notwithstanding any other provisions of this Treaty or the Model Rules, the Tribunal shall in all cases act by majority vote.

(g) Each Party shall bear the costs of its own arbitrator and counsel in the arbitral proceeding. The cost of the Chairman and remaining expenses shall be borne in equal parts by the Parties.

4. The provisions of this Article shall not apply to a dispute arising under an official export credit, guarantee, or insurance arrangement, pursuant to which the Parties have agreed to other means of settling disputes.

ARTICLE IX

PRESERVATION OF RIGHTS

2. This Treaty shall not derogate from or terminate any other agreement entered into by the two Parties and in force as between the two Parties on the date on which this Treaty enters into force.

ARTICLE X

MEASURES NOT PRECLUDED BY TREATY

2. This Treaty shall not preclude either Party from prescribing special formalities in connection with the establishment of investments in its territories of nationals and companies of the other Party, but such formalities shall not impair the substance of any of the rights set forth in this Treaty.

ARTICLE XI

TAXATION

With respect to its tax policies, each Party should strive to accord fairness and equity in the treatment of investments of nationals or companies of the other Party. Nevertheless, all matters relating to the taxation of nationals or companies of a Party, or their investments in the territories of the other Party or a subdivision thereof shall be excluded from this Treaty, subject, except with regard to measures covered by Article III and the specific provisions of Article V.

ARTICLE XII

APPLICATION OF TREATY TO POLITICAL OR ADMINISTRATIVE SUBDIVISIONS OF THE PARTIES

This Treaty shall apply to the political and/or administrative subdivisions of each Party.

ARTICLE XIII

ENTRY INTO FORCE AND DURATION AND TERMINATION

1. This Treaty shall be ratified by each of the Parties, and the instruments of ratification thereof shall be exchanged as soon as possible.

3. Either Party may, by giving one (1) year’s written notice to the other Party, terminate this Treaty at the end of the initial ten (10) year period or at any time thereafter.

4. With respect to investments made or acquired prior to the date of termination of this Treaty and to which this Treaty otherwise applies, the provisions of all of the other Articles of this Treaty shall continue to be effective for a further period of ten (10) years from such date of termination.

5. The attached Annex and Protocol are integral parts of this Treaty.

DONE in duplicate at Washington this twenty-ninth day of September 19822 in the English and Arabic languages, both texts being equally authentic.

For the United States of America:

WILLIAM E. BROCK, Jr.

For the Arab Republic of Egypt:

WAJIH SHINDY.

2 As modified by the Supplementary Protocol, signed at Cairo, March 11, 1986.

ANNEX

Consistent with Article II Paragraph 3, each Party reserves the right to maintain limited exceptions in the sectors it has indicated below:

THE UNITED STATES OF AMERICA

Air transportation, ocean and coastal shipping; banking; insurance; government grants; government insurance and loan programs; energy and power production; use of land and natural resources; custom house brokers; ownership of real estate; radio and television broadcasting, telephone and telegraph services; submarine cable services; satellite communications.

THE ARAB REPUBLIC OF EGYPT

PROTOCOL3

3 Text as agreed in Supplementary Protocol, signed at Cairo, March 11, 1986. This replaces the protocol of September 29, 1982.

2. “Control” means to have a substantial share or ownership rights and the ability to exercise decisive influence. Differences as to the existence of control shall be resolved according to the provisions of Article VIII.

3. (a) The treatment accorded by the United States to nationals or companies of Egypt under the provisions of Article II (1) and (2) shall in any state of the United States of other territory, possession, or political or administrative subdivision of the United States be the treatment accorded therein to residents of or companies incorporated, constituted or otherwise duly organized in other States of the United States or territories, possessions, or political or administrative subdivisions of the United States.

5. It is understood that this Treaty does not derogate from the rights of either Party regarding the establishment of qualifications as for the practice of professions, including law and accountancy. These qualifications may confine the practice of such professions to nationals or companies of a Party, provided that they are applied on a nondiscriminatory basis; and provided, further, that such nationality requirements do not derogate from the right of nationals and companies. of either Party, pursuant to Article II (5)(b) to engage professional and technical personnel of their choice to render professional and technical services necessary for the internal planning and operation of the investment.

6. This Treaty, and in particular, the provisions of Article II, paragraph 5(b) shall be subject to the provisions of Article X.

7. With respect to Article II (6), performance requirements are conditions imposed which would require an investor to export a minimum percentage of final product or to source some inputs locally.

9. With regard to Article III, paragraph 1, the phrase “events that constituted or resulted in the expropriatory action” refers to conduct attributable to the expropriatory Party and not to conduct of the national or company. The inclusion of subparagraph (e) in Article III, paragraph 1, is without prejudice to the measure of compensation due in the event of expropriation.

10. The Parties recognize that restrictions on transfers abroad of sales or liquidation proceeds of an investment will adversely affect future capital inflows, contrary to the spirit of this Treaty and the interests of the Party imposing those restrictions. Nevertheless, the Parties recognize that it is possible that the Arab Republic of Egypt may find its foreign exchange reserves at a very low level. In these circumstances, the Arab Republic of Egypt may temporarily delay transfers required under Article V, Paragraph 1(t), but only: (i) in a manner not less favorable that that accorded to comparable transfers to investors of third countries; (ii) to the extent and for the time period necessary to restore its reserves to a minimally acceptable level, but in no case for period of time longer than that permitted by the provisions of Law 43 in force on the date of signature of this Treaty; and (ill) after providing the investor an opportunity to invest the sales or liquidation proceeds in a manner which will preserve their real value free of exchange risk until transfer occurs.

DONE in duplicate at Cairo this 11th day of March 1986 in the English and Arabic languages, both texts being equally authentic.

For the Government of the United States of America:

NICHOLAS A. VELIOTES,

Ambassador.

For the Government of the Arab Republic of Egypt:

Sultan Abou Ali,

Minister of Economy and Trade.

TREATY BETWEEN THE UNITED STATES OF AMERICA AND THE ARAB REPUBLIC OF EGYPT CONCERNING THE RECIPROCAL ENCOURAGEMENT AND PROTECTION OF INVESTMENTS

Recognizing that agreement on a general framework for the encouragement and nondiscriminatory treatment of investments will stimulate the flow of productive capital and technology and there by provide for a more effective use of capital and technical resources for development needs, further promoting economic stability and durable peace,

Both have resolved to conclude a bilateral Treaty pertaining to the reciprocal encouragement and protection of investments, and

Have agreed as follows:

ARTICLE I

DEFINITIONS

1. For the purposes of this Treaty, (a) “company” means any kind of juridical entity; including any corporation, company, association, or other organization, that is duly incorporated, constituted, or otherwise duly organized, regardless of whether or not the entity is duly organized for pecuniary gain, privately or publicly owned, or organized with limited or unlimited liability.

(b) “company of a Party” means a company duly incorporated, constituted, or otherwise duly organized under the applicable laws and regulations of a Party or a political or administrative subdivision thereof in which

(i) natural persons who are nationals of such Party, or

(ii) such Party or a; political or administrative subdivision thereof or their agencies or instrumentalities have a substantial interest.

The juridical status of a company of a Party shall be recognized by the other Party and its political or administrative subdivisions.

(c) “investment” means every kind of investment, owned or controlled, including equity, debt, service and investment contracts; and includes, but is not limited to:

(i) tangible and intangible property, including rights, such as mortgages, liens and pledges;

(ii) a company or shares of stock in a company or interests in the assets thereof;

(iii) a claim to money or a claim to performance having economic value due under an investment agreement;

(iv) valid intellectual and industrial property rights, including, but not limited to, rights with respect to copyrights, patents, trademarks, trade names, industrial designs, trade secrets and know-how, and goodwill;

(v) licenses and permits issued pursuant to law, including those issued for manufacture and sale of products;

(vi) any right conferred by law or contract including, but not limited to, rights, within the confines of law, to search for or utilize natural resources, and rights to manufacture, use and sell products;

(vii) returns which are reinvested.

(d) “own or control” means ownership or control that is direct or indirect, including ownership or control exercised through subsidiaries or affiliates, wherever located.

(e) “national” of a Party means a natural person who is a national of a Party under its applicable law.

ARTICLE II

ENCOURAGEMENT AND PROMOTION OF INVESTMENTS

(i) the establishment, control and maintenance of branches, agencies, offices, factories or other facilities for the conduct of business;

(ii) the organization of companies under applicable laws and regulations; the acquisition of companies or interests in companies or in their property; and the management, control, maintenance, use, enjoyment and expansion, and the sale, liquidation, dissolution or other disposition, of companies organized or acquired;

(iii) the making, performance and enforcement of contracts related to investment;

(iv) the acquisition (whether by purchase, lease or any other, legal means), ownership and disposition (whether by sale, testament or any other legal means) of personal property of all kinds, both tangible and intangible.

(v) the leasing of real property appropriate for the conduct of business;

(vi) the acquisition, maintenance and protection of copyrights, patents, trademarks; trade secrets, trade names, licenses and other approvals of products and manufacturing processes, and other industrial property rights; and,

2. (b) Consistent with paragraph 4 of this Article, each Party shall apply the present Treaty to investments in its territory by nationals or companies of the other Party made prior to the entry into force of this Treaty provided such application is not inconsistent with agreements, contractual arrangements, investment authorizations and licenses made under legislation existing at the time the concerned investments were made.

3. Notwithstanding the preceding provisions of this Article, each Party reserves the right to maintain limited exceptions to the standard of national treatment otherwise required concerning investments or associated activities if such exceptions fall within one of the sectors listed in the Annex to this Treaty, Both parties hereby agree to maintain the number of such exceptions to a minimum. In addition, each Party shall notify the other Party of any specific measures which constitute exceptions to the standard of national treatment provided herein. In no event, however, shall the treatment to be accorded pursuant to any exception be less favorable than that accorded in like situations to investments and associated activities of nationals or companies of any third country. Moreover, no exception, within the sectors contained in the Annex, introduced after the date of entry into force of this Treaty shall apply to investments of nationals or companies of the other Party existing in that sector at the time the exception becomes effective.

4. The treatment, protection and security of investments shall never be less than that required by international law and national legislation.

5. (a) Subject to the laws relating to the entry and sojourn of aliens, nationals of either Party shall be permitted to enter and to remain in the territory of the other Party for the purpose of establishing, developing, directing, administering or advising on the operations of an investment to which they or the companies that employ them have committed or are in the process of committing a substantial amount of capital or other resources.

b) Nationals and companies of either Party, and their companies which they own or control in the territory of the other Party, shall be able to engage the managing director of their choice. Further, subject to employment laws of each Party, nationals and companies of either Party shall be permitted to engage, within the territory of the other Party, professional and technical personnel of their choice, for the particular purpose of rendering professional, technical and managerial assistance necessary for the planning and operation of investments.

6. In the context of national economic policies and the desire to promote investment of all types, both private and public, the Parties recognize that conditions of competitive equality should be maintained where investments owned or controlled by a Party or its agencies or instrumentalities, within the territory of such Party, are in competition under similar conditions and situations with privately owned or controlled investments of nationals or companies of the other Party.

ARTICLE III

COMPENSATION FOR EXPROPRIATION

No investment or any party of an investment of a national or a company of either Party shall be expropriated or nationalized by the other Party or a political or administrative subdivision thereof or subjected to any other measure, direct or indirect (including, for example, the levying of taxation, the compulsory sale of all or part of such an investment, or impairment or deprivation of management, control or economic value of such an investment by the national or company concerned), if the effect of such other measure, or a series of such other measures, would be tantamount to expropriation or nationalization (all expropriations, all nationalizations and all such other measures hereinafter referred to as “expropriation”) unless the expropriation

(a) is done for a public purpose;

(b) is accomplished under due process of law;

(d) is accompanied by prompt and adequate compensation, freely realizable; and

2. If either Party or a political or administrative subdivision thereof expropriates -the investment of any company duly incorporated, constituted or otherwise duly organized in its territory, and if nationals or companies of the other Party, directly or indirectly, own, hold or have other rights with respect to the equity of such company, then the Party within whose territory the expropriation occurs shall ensure that such nationals or companies of the other Party receive compensation in accordance with the provisions of the preceding paragraph.

ARTICLE IV

COMPENSATION FOR DAMAGES DUE TO WAR AND SIMILAR EVENTS

Nationals or companies of either Party whose investments or returns in the territory of either Party suffer

(a) damages due to war or other armed conflict between such other Party and a third country or

ARTICLE V

1. Either Party shall in respect to investments by nationals or companies of the other Party grant to those nationals or companies the free transfer of:

a. returns.

b. royalties and other payments deriving from licenses, franchises and other similar grants or rights.

c. installments in repayment of loans.

d. amounts spent for the management of the investment in the territory of the other Party or a third country.

e. Additional funds necessary for the maintenance of the investment.

f. the proceeds of partial or total sale or liquidation of the investment, including a liquidation effected as a result of any event mentioned in Article IV; and

g. compensation payments pursuant to Article III.

ARTICLE VI

CONSULTATIONS AND EXCHANGE OF INFORMATION

1. The Parties shall, upon the written request of either of them, promptly hold consultations to discuss the interpretation or application of this Treaty or to resolve any disputes in connection therewith. Consultations shall be held should one Party request consultations to discuss the effects on its national interests of laws, regulations, decisions, administrative practices ,or procedures, or policies of the other Party that pertain to or affect investments of its nationals or companies in the territory of such other Party, including conditions imposed on establishment of investments. The consultations, will seek to avoid or ameliorate the adverse effects that these laws, regulations, decisions, administrative practices procedures, or policies may have on the Party requesting the consultations.

3. If one Party requests in writing that the other Party supply information in its possession concerning’ ” investments. in its territory by nationals or companies of the Party making the request, then the other Party shall, consistent with its applicable laws and regulations and with due regard for business confidentiality, endeavor to establish appropriate procedures and arrangements for the provision of any such information.

ARTICLE VII

SETTLEMENT OF LEGAL INVESTMENT DISPUTES BETWEEN ONE PARTY AND A NATIONAL OR COMPANY OF THE OTHER PARTY

1. For purposes of this Article, a legal investment dispute is de fined as a dispute involving (i) the interpretation or application of an investment agreement between a Party and a national or company of the other Party; or (ii) an alleged breach of any right conferred or created by this Treaty with respect to an investment.

2. In the event of a legal investment dispute between a Party and a national or company of the other Party with respect to an investment of such national or company-in the territory of such Party, the parties shall initially seek to resolve the dispute by consultation and negotiation. The Parties may, upon the initiative of either of them and as part of their consultation and negotiation, agree to rely upon non-binding, third-Party procedures. If the dispute cannot be resolved through consultation and negotiation, then the dispute shall be submitted for settlement in accordance with the applicable dispute-settlement procedures upon which a Party and national or company of the other Party have previously agreed. With respect to expropriation by either Party, any dispute-settlement procedures specified in an investment agreement between such Party and such national or company shall remain binding and shall be enforceable in accordance with the terms of the investment agreement and relevant provisions of domestic laws of such Party and treaties and other international agreements regarding enforcement of arbitral awards to which such Party has subscribed.

3. (a) In the event that the legal investment dispute is not ref solved under procedures’ specified above, the national or company concerned may choose to submit the dispute to the International Centre for the Settlement of Investment Disputes (“Centre”) for settlement by conciliation or binding arbitration, if, within six (6) months of the date upon which it arose: (i) the dispute has not been settled through consultation and negotiation; or (ii) the dispute has not, for any good faith reason, been submitted for resolution in accordance with any applicable dispute settlement procedures previously agreed to by the Parties. to. the dispute; or (iii) the national or company concerned has not brought the dispute before the courts of justice or administrative tribunals or agencies of competent jurisdiction of the Party that is a Party to the dispute.

(b) Each Party hereby consents to the submission of an investment dispute to the Centre for settlement by conciliation or binding arbitration.

4. In any proceeding, judicial, arbitral or otherwise, concerning a legal investment dispute between it and a national or company of the other Party, a Party shall not assert, as a defense, counter claim right of set-off or otherwise, that the national or company concerned has received or will receive, pursuant to an insurance contract, indemnification or other compensation for all or part of its alleged damages from any third Party whatsoever, whether public or private, including such other Party and its political or administrative subdivisions, agencies and instrumentalities. Notwithstanding the foregoing, a national or company of the other Party shall not be entitled to compensation for more than the value of its affected assets, taking into account all sources of compensation within the territory of the Party liable for the compensation.

5. For the purpose of any proceedings initiated before the Centre in accordance with this Article, any company that, immediately prior to the occurrence of the event or events giving rise to the dispute, was a company of the other Party, shall be treated as a national or company of such other Party.

ARTICLE VIII

SETTLEMENT OF DISPUTES BETWEEN THE PARTIES CONCERNING INTERPRETATION OR APPLICATION OF THIS TREATY

1. Any dispute between the Parties concerning the interpretation or application of this Treaty should, if possible, be resolved through diplomatic channels.

2. If the dispute cannot be resolved through diplomatic channels, shall, upon the agreement of the Parties, be submitted to the international Court of Justice.

3.(a) In the absence of such agreement, the dispute shall, upon the written request of either Party, be submitted to an arbitral tribunal for binding decision in accordance with the applicable rules and principles of international law.

(c) If the periods set forth in (b) above are not met, and in the absence of some other arrangement between the Parties, either Party may invite the President of the International Court of Justice to make the necessary appointment. If the President is a national of either of the Parties or is unable to act for any reason, either Party may invite the Vice President, or if he is also a national of either Party or otherwise unable to act, the next most senior member of the International Court of Justice, to make the appointment.

(e) Unless otherwise agreed to by the Parties to the dispute, all submissions shall be made and all hearings shall be, completed within one hundred and twenty (120) days of the date of the selection of the third arbitrator, and the Tribunal shall render its decision within thirty (30) days of the date of the final submissions or the date of the closing of the hearings, whichever is later, and such decisions shall be binding on each Party.

(f) Except as otherwise agreed to by the Parties, arbitration proceedings shall be governed by the Model Rules on Arbitral Procedure adopted by the United Nations International Law Commission in 1958 (“Model Rules”), and commended to Member States by the United Nations General Assembly in Resolution 1262 (XITI). To the extent that procedural questions are not resolved by this Article or the Model Rules they shall be resolved by the Tribunal. Notwithstanding any other provisions of this Treaty.. or the Model Rules, the Tribunal shall in all cases act by majority vote.

(g) Each Party shall bear the costs of its own arbitrator and counsel in the arbitral proceeding. The cost of the Chairman and remaining expenses shall be borne in equal parts by the Parties.

4. The provisions of this Article shall not apply to a dispute arising under an official export credit; guarantee, or insurance arrangement, pursuant to which the Parties have agreed to other means of settling disputes.

ARTICLE IX

PRESERVATION OF RIGHTS

2. This Treaty shall not derogate from or terminate any other agreement entered into by the two Parties and in force as between the two Parties on the date on which this Treaty enters into force.

ARTICLE X

MEASURES NOT PRECLUDED BY TREATY

1. This Treaty shall not preclude the application by either Party or any political or administrative subdivision thereof of any and all measures necessary for the maintenance of public order and morals, the fulfillment of its existing international obligations, the protection of its own security interests, or such measures deemed appropriate by the Parties to fulfill future international obligations.

ARTICLE XI

Taxation

With respect to its tax policies, each Party should strive to accord fairness and equity in the treatment of investments of nationals or companies of the other Party. Nevertheless, all matters relating to the taxation of nationals or companies of a Party, or their investments in the territories of the other Party or a political or administrative subdivision thereof shall be excluded from this Treaty, subject, however, to specific provisions of Articles III and V.

ARTICLE XII

APPLICATION OF TREATY TO POLITICAL OR ADMINISTRATIVE SUBDIVISIONS OF THE PARTIES

This Treaty shall apply to the political and/or administrative subdivisions of each Party.

ARTICLE XIII

ENTRY INTO FORCE AND DURATION AND TERMINATION

1. This Treaty shall be ratified by each of the Parties, and the instruments of ratification thereof shall be exchanged as soon as possible.

3. Either Party may, by giving one (1) year’s written notice to the other Party, terminate this Treaty at the end of the initial ten (10) year period or at any time thereafter.

4. With respect to investments made or acquired prior to the date of termination of this Treaty and to which this Treaty other wise applies, the provisions of all of the other Articles of this Treaty shall continue to be effective for a further period of ten (10) years from such date of termination.

5. The attached Annex and Protocol are integral parts of this Treaty.

DONE in duplicate at Washington this twenty-ninth day of September 1982 in the English and Arabic languages, both texts being equally authentic.

For the United States of America:

WILLIAM E. BROCK, Jr.

For the Arab Republic of Egypt:

WAJIH SHINDY.

ANNEX

Consistent with Article II paragraph 3, each Party reserves the right to maintain limited exceptions in the sectors it has indicated below:

THE UNITED STATES OF AMERICA

THE ARAB REPUBLIC OF EGYPT

Air and sea transportation; maritime agencies; land transportation other than that of tourism; mail, telecommunication, telegraph services and other public services which are state monopolies; banking and insurance; commercial activity such as distribution of wholesaling, retailing, import and export activities; commercial agency and broker activities; ownership of real estate; use of land; natural resources; national loans; radio, television, and the issuance of newspapers and magazines.

SUPPLEMENTARY PROTOCOL

The duly authorized Plenipotentiaries of the Parties have agreed upon the following provisions regarding the Treaty between the United States of America and the Arab Republic of Egypt concerning the Reciprocal Encouragement and Protection of Investments, signed in Washington, D.C. on September 29, 1982. The following changes will form an integral part of the Treaty. Upon the completion of the Parties’ respective constitutional procedures for approval, these changes will be integrated into a single unified text of the Treaty which will, as modified, be published as the official Treaty text.

ARTICLE I

Paragraph 1(a) is changed to read as follows:

(a) “company” means any kind of juridical entity; including any corporation, company, association, or other juridical entity, that is duly incorporated, constituted, or otherwise duly organized, regardless of whether or not the entity is duly organized for pecuniary gain, privately or publicly owned or organized with limited or unlimited liability.

Paragraph 1(b) is changed to read as follows:

(b) “company of a Party” means a company duly incorporated, constituted, or otherwise duly organized under the applicable laws and regulations of a Party or its subdivisions in which

(i) natural persons who are nationals of such Party, or

(ii) such Party or its subdivisions or their agencies or instrumentalities have a substantial interest. The Juridical status of a company of a Party shall be recognized by the other Party and its subdivisions.

Paragraph 1(c) is changed to read as follows:

(i) tangible and intangible property, including rights, such as mortgages, liens and pledges;

(ii) a company or shares of stock in a company or interests in the assets thereof,

(iii) a claim to money or a claim to performance having economic value due under an investment agreement;

(v) licenses and permits issued pursuant to law, including those issued for manufacture and sale of products;

(vii) returns which are reinvested.

Paragraph 1(d) is changed to read as follows:

(d) “own or control” includes ownership or control exercised through subsidiaries or affiliates.

ARTICLE II

Paragraph 2 is changed to read as follows:

2. (a) Each Party shall accord investments in its territory, and associated activities in connection with these investments, of nationals or companies of the other Party treatment no less favorable than that which it accords in like situations to investments and associated activities of its own nationals or companies, or nationals or companies of any third country, whichever is the most favorable. Associated activities in connection with an investment include, but are not limited to:

(i) the establishment, control and maintenance of branches, agencies, offices, factories or other facilities for the conduct of business;

(ii) the organization of companies under applicable laws and regulations; the acquisition of companies or interests in companies or in their property; and the management, control, maintenance, use, enjoyment and expansion, and the sale, liquidation, dissolution or other disposition, of companies organized or acquired;

(iii) the making, performance and enforcement of contracts related to investment;

(iv) the acquisition (whether by purchase, lease or any other legal means), ownerships and disposition (whether by sale, testament or any other legal means) of personal property of all kinds, both tangible and intangible.

(v) the leasing of real property appropriate for the conduct of business;

Paragraph 3 is renumbered as paragraphs 3(a) and 3(b) and changed to read as follows:

3. (a) Notwithstanding the preceding provisions of this Article, each Party reserves the right to maintain limited exceptions to the standard of national treatment otherwise required concerning investments or associated activities if exceptions fall within one of the sectors listed in the Annex to this Treaty. Both Parties hereby agree to maintain the number of such exceptions to a minimum. In addition, each Party shall notify the other Party of any specific measures which constitute exceptions to the standard of national treatment provided herein. In no event, however, shall the treatment to be accorded pursuant to any exception-be less favorable than that accorded in like situations to investments and associated activities of nationals or companies of any third country. Moreover, no exception, within the sectors contained in the Annex, introduced after the date of entry into force of this Treaty shall apply to investments of nationals or companies of the other Party existing in that sector at the time the exception becomes effective.

(b) Each Party retains the discretion to approve investments according to national plans and priorities on a nondiscriminatory basis consistent with paragraphs (1) and (3)(a) of this Article.

Paragraph 5(a) is changed to read as follows:

5. (a) Subject to the laws relating to the entry and sojourn of aliens, nationals of either Party shall be permitted to enter and reside in the territory of the other Party for the purpose of establishing, developing, directing, administering or advising on the operations of an investment to which they or the companies that employ them have committed or are in the process of committing a substantial amount of capital or other resources. Paragraph 6 is deleted and paragraphs 7, 8, and 9 are renumbered as paragraphs 6, 7, and 8, respectively.

Paragraph 8 (formerly paragraph 9) is changed to read as follows:

8. Each Party and its subdivisions shall make public all laws, regulations, administrative practices and procedures, and adjudicatory decisions that pertain to affect investments in its territory of the other Party.

ARTICLE III

Paragraph 1 is changed to read as follows:

(a) is done for a public purpose;

(b) is accomplished under due process of law;

(d) is accompanied by prompt and adequate compensation, freely realizable; and

(e) does not violate any specific contractual engagement. Compensation shall be equivalent to the fair market value of the expropriated investment on the date of expropriation. The calculation of such compensation shall not reflect any reduction in such fair market value due to either prior public notice or announcement of the expropriatory action, or the occurrence of the events that constituted or resulted in the expropriatory action. Such compensation shall include payments for delay as may be considered appropriate under international law, and shall be freely transferable at the prevailing rate of exchange for current transactions on the date of the expropriatory action.

Paragraph 2 is changed to read as follows:

2. If either Party or a subdivision thereof expropriates the investment duly incorporated, constituted or otherwise duly organized in its territory, and if nationals or companies of the other Party, directly or indirectly, own, hold or have other rights with respect to the equity of such company, then the Party within whose territory the expropriation occurs shall ensure that such nationals or companies of the other Party receive compensation in accordance with the provisions of the preceding paragraph.

Paragraph 3 is changed to read as follows:

3. Except as otherwise provided in an agreement between the Parties, or between a Party and a national or company of the other Party, a national or company of either Party that asserts that all or part of its investment in the territory of the other Party has been expropriated shall have a right to prompt review by the appropriate judicial or administrative authorities of such other party to determine whether any such expropriation has occurred and, if so, whether any such expropriation, and any compensation thereof, conforms to the principles of international law.

ARTICLE VI

Paragraph 1 is changed to read as follows:

ARTICLE VII

Paragraph 4 is changed to read as follows:

4. In any proceeding, judicial, arbitral or otherwise, concerning a legal investment dispute between it and a national or company of the other Party, a Party shall not assert, as a defense, counterclaim, right of set-off or otherwise, that the national or company concerned has received or will receive, pursuant to an insurance contract, indemnification or other compensation for all or part of its alleged damages from any third party whatsoever, whether public or private, including such other Party and its subdivisions, agencies and instrumentalities. Notwithstanding the foregoing, a national or company of the other Party shall not be entitled to compensation for more than the value of its affected assets, taking into account all sources of compensation within the territory of the Party liable for the compensation.

ARTICLE VIII

Paragraph 3(g) is changed to read as follows:

(9) Each Party shall bear the costs of its own arbitrator and counsel in the arbitral proceeding. Expenses, incurred by the Chairman and other costs of the proceedings shall be paid for equally by the Parties. The Tribunal may, however, at its discretion, direct that a higher proportion of the costs be paid by one of the Parties. Such a decision shall be binding.

ARTICLE X

Paragraph 1 is changed to read as follows:

ARTICLE XI

The paragraph is changed to read as follows:

With respect to its tax policies, each Party should strive to accord fairness and equity in the treatment of investments of nationals or companies of the Party. Nevertheless, all matters relating to the taxation of nationals or companies of a Party, or their investments in the territories of the other Party or a subdivision thereof shall be excluded from this Treaty, except with regard to measures covered by Article III and the specific provisions of Article V.

PROTOCOL

The Protocol is changed to read as follows:

On signing the Treaty concerning the Reciprocal Encouragement and Protection of Investments, the Arab Republic of Egypt and the United States of America, have, in addition, agreed on the following provisions which should be regarded as an integral part of this Treaty:

3. (a) The treatment accorded by the United States to nationals or companies of Egypt under the provisions of Article II(l) and (2) shall in any State of the United States or other territory, possession, or political or administrative subdivision of the United States be the treatment accorded therein to residents of or companies incorporated, constituted or otherwise duly organized in other States of the United States or territories, possessions, or political or administrative subdivisions of the United States.

(b) The treatment accorded by Egypt to nationals and companies of the United States with respect to the establishment and acquisition of investments in limited sensitive geographic areas designated for exclusive Egyptian investment shall be no less favorable then the treatment it accords to investments of nationals and companies of any third country. Egypt reserves the right to modify the areas covered, provided that such areas will be kept to a minimum and will not substantially impair the investment opportunities of United States nationals and companies.

4. The provisions of Article II, paragraph 3, relating to most favored nation treatment, shall not apply to advantages accorded by either Party to nationals or companies of a third country by virtue of a specific security or regional arrangement, including regional customs unions or free trade areas. Further, these provisions do not apply to the ownership of real estate. The provisions of Article II paragraph 1, relating to most favored nation treatment, shall not be construed to oblige one Party to extend to nationals or companies of the other the benefit of any treatment, preference or privilege which may be extended by the former Party by virtue of a customs union or in the field of housing. Moreover, with regard to rights to engage in mining on the public domain, each Party retains the right to accord to nationals or companies of the other Party treatment which is like or similar to that accorded by the other Party to nationals or companies of the first Party.

5. It is understood that this Treaty does not derogate from the rights of either Party regarding the establishment of qualifications as for the practice of professions, including law and accountancy. These qualifications may confine the practice of such professions to nationals or companies of. a Party, provided that they are applied on a nondiscriminatory basis; and provided, further, that such nationality requirements do not derogate from the right of nationals and companies of either Party, pursuant to Article II (5)(b) to engage professional and technical personnel of their choice to render professional and technical services necessary for the internal planning and operation of the investment.

6 This Treaty, and in particular, the provisions of Article II, paragraph 5(b) shall be subject to the provisions of Article X.

7. With respect to Article II (6), performance requirements are conditions imposed which would require an investor to export a minimum percentage of final product or to source some inputs locally.

9. With regard to Article III, paragraph 1, the phrase “events that constituted or resulted in the expropriatory action” refers to conduct attributable to the expropriatory Party and not to conduct of the national or company. The inclusion of paragraph (e) in Article III, paragraph 1, is without prejudice to the measure of compensation due in the event of expropriation.

10. The Parties recognize that restrictions on transfers abroad of sales or liquidation proceeds of an investment will adversely affect future capital inflows, contrary to the spirit of this Treaty and the interests of the Party imposing those restrictions. Nevertheless, the Parties recognize that it is possible that the Arab Republic of Egypt may find its foreign exchange reserves at a very low level. In these circumstances, the Arab Republic of Egypt may temporarily delay transfers required under Article V, Paragraph 1(f), but only: (i) in a manner not less favorable than that accorded to comparable transfers to investors of third countries; (ii) to the extent and for the time period n to restore its reserves to a minimally acceptable level, but in no case for period of time longer than that permitted by the provisions of Law 43 in force on the date of signature of this Treaty; and (iii) after providing the investor an opportunity to invest the sales or liquidation proceeds in a manner which will preserve their real value free of exchange risk until transfer occurs.

11. Concerning Article VII (3)(a)(ii), it is understood that the Parties to the dispute may Previously agree to submission of the dispute to the jurisdiction of domestic courts and tribunals. The Parties will maintain a nondiscriminatory policy regarding the inclusion and implementation of such provisions in any investment contract.

DONE in duplicate at Cairo this 11th day of March 1986 in the English and Arabic languages, both texts being equally authentic.

For the Government of the United States of America:

NICHOLAS A. VELIOTES

Ambassador.

For the Government of the Arab Republic of Egypt:

Sultan ABOU ALI,

Minister of Economy and Trade.

ARAB REPUBLIC OF EGYPT,

MINISTER OF PLANNING AND INTERNATIONAL COOPERATION,

March 11, 1985.

Hon. WILLIAM E. BROCK,

US. Trade Representative,

Washington, D.C.

DEAR MR. AMBASSADOR,

As part of the review of the signed Bilateral Investment Treaty prior to its submission for ratification, our two Governments have discussed the question of compensation for expropriation, under Article III. With regard to the issue of compensation, the Government of Egypt understands that in conformity with contemporary international law, compensation pursuant to Article III paragraph 1 shall be determined in a manner consistent with international legal norms and standards rather than norms and standards that are particular to a specific domestic legal system. I would appreciate confirmation that your government shares this understanding.

Sincerely,

Dr. KAMAL AHMED EL GANZOURI,

Minister of Planning and

International Cooperation.

THE UNITED STATES TRADE REPRESENTATIVE

Washington, March 11, 1985.

Dr. KAMAL AHMED EL GANZOURI,

Minister of Planning and International Cooperation.

DEAR MR. MINISTER: I have the honor to refer to your letter of March 11, 1985, in which you state that: “With regard to the issue of compensation, the Government of Egypt understands that in conformity with contemporary international law, compensation pursuant to Article II paragraph 1 shall be determined in a manner consistent with international legal norms and standards rather than norms and standards that are particular to a specific domestic legal system.” The understanding you express conforms to the understanding of the Government of the United States regarding the determination of the amount of compensation due to an investor pursuant to Article III of the Bilateral Investment Treaty.

Very truly yours,

WILLIAM E. BROCK.

I certify this to be a true copy of the original.

EDWARD ROZYNSKI.

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Estonia Bilateral Investment Treaty

Signed April 19, 1994; Entered into Force February 16, 1997; Amended May 1, 2004

Prior to the accession of Estonia to the European Union, this treaty was amended to reduce the possibility of conflict with the laws of the European Union. [View Amending Protocol ]

103D Congress 2D Session

Senate Treaty Doc. 103-38

TREATY BETWEEN THE GOVERNMENT OF THE UNITED STATES OF AMERICA AND THE GOVERNMENT OF THE REPUBLIC OF ESTONIA CONCERNING THE ENCOURAGEMENT AND RECIPROCAL PROTECTION OF INVESTMENT, WITH ANNEX, DONE AT WASHINGTON ON APRIL 19, 1994

MESSAGE

FROM

THE PRESIDENT OF THE UNITED STATES

TRANSMITTING

September 27, 1994.-Convention was read the first time and, together with the accompanying papers, referred to the Committee on Foreign Relations and ordered to be printed for the use of the Senate

U.S. GOVERNMENT PRINTING OFFICE

79-118 WASHINGTON: 1994

LETTER OF TRANSMITTAL

THE WHITE HOUSE, September 27, 1994

To the Senate of the United States:

With a view to receiving the advice and consent of the senate to ratification, I transmit herewith the Treaty Between the Government of the United States Of America and the Government of the Republic of Estonia for the Encouragement and Reciprocal Protection of Investment, with Annex, done at Washington on April 19, 1994. Also transmitted for the information of the Senate is the report of the Department of State with respect to this Treaty.

This bilateral investment Treaty with Estonia is the first such Treaty between the United States and a Baltic state. This Treaty will protect U.S. investors and assist the Republic of Estonia in its efforts to develop its economy by creating conditions more favorable for U.S. private investment and thus strengthening the development of the private sector.

The Treaty is fully consistent with U.S. policy toward international and domestic investment. A specific tenet of U.S. policy, reflected in this Treaty, is that U.S. investment abroad and foreign investment in the United States should receive national treatment. Under this Treaty, the Parties also agree to international law standards for expropriation and compensation for expropriation; free transfer of funds associated with investments; freedom of investments from performance requirements; fair, equitable and most-favored-nation treatment; and the investor or investment’s freedom to choose to resolve disputes with the host government through international arbitration.

I recommend that the Senate consider this Treaty as soon as possible, and give ita advice and consent to ratification of the Treaty, with Annex, at an early date.

WILLIAM J. CLINTON.

LETTER OF SUBMITTAL

DEPARTMENT OF STATE,

Washington, September 7,1994.

THE PRESIDENT,

The White House.

THE PRESIDENT: I have the honor to submit to you the Treaty between the Government of the United States of America and the Government of the Republic of Estonia Concerning the Encouragement and Reciprocal Protection of Investment signed at Washington on April 19, 1994. I recommend that this Treaty be transmitted to the Senate for its advice and consent to ratification.

The bilateral investment treaty (BIT) with Estonia was the first such treaty between the United States and a Baltic state. The Treaty is based on the view that an open investment policy contributes to economic growth. This Treaty will assist the Republic of Estonia in its efforts to develop its economy by creating conditions more favorable for U.S. private investment and thus strengthening the development of the private sector. It is U.S. policy, however, to advise potential treaty partners during BIT negotiations that conclusion of a BIT does not necessarily result in immediate increases in private U.S. investment flows.

To date, nineteen BITs are in force for the United States—with Bangladesh, Bulgaria, Cameroon, the Congo, the Czech Republic, Egypt, Grenada, Kazakhstan, Kyrgyzstan, Morocco, Panama, Poland, Romania, Senegal, Slovakia, Sri Lanka, Tunisia, Turkey, and Zaire. In addition to the Treaty with the Republic of Estonia, the United States has signed, but not yet brought into force, BITs with Argentina, Armenia Belarus, Ecuador, Georgia, Haiti, Jamaica, Moldova, Russia, and Ukraine.

The Office of the United States Trade Representative and the Department of State jointly led this BIT negotiation, with assistance from the Departments of Commerce and Treasury and the Overseas Private Investment Corporation.

THE U.S.-ESTONIA TREATY

The Treaty with the Republic of Estonia is based on the 1992 U.S. prototype BIT, and achieves all of the prototype’s objectives, which are:

—All forms of U.S. investment in the territory of Ukraine are covered.

—Investments receive the better of national treatment or most-favored-nation (MFN) treatment both on establishment and thereafter, subject to certain specified exceptions.

—Performance requirements may not be imposed upon or enforced against investments.

—Expropriation can occur only in accordance with international law standards; that is, for a public purpose; in a nondiscriminatory manner; in accordance with due process of law; and upon payment of prompt, adequate, and effective compensation.

—The unrestricted transfer, in a freely usable currency, of funds related to an investment is guaranteed.

-Investment disputes with the host government may be brought by investors, or by their subsidiaries, to binding international arbitration as an alternative to domestic courts.

The U.S.-Estonia Treaty differs from the prototype in some respects. It eliminates Article VIII of the 1992 prototype text which had excluded from the dispute settlement provisions of the BIT those disputes arising under the export credit, guarantee or insurance programs of the Export-Import Bank of the United States, as well as those arising under any other such official programs pursuant to which the Parties agreed to other means of settling disputes. The Export-Import Bank, the Overseas Private Investment Corporation and other relevant government agencies indicated prior to this negotiation that they saw no need to maintain such a provision.

The U.S.-Estonia Treaty also differs from the prototype in that it includes provisions at Article I, paragraph 1 (f) and (g), and Article II, paragraph 2, which clarify and extend the requirements of the Treaty with respect to state enterprises, and Article II, paragraph 11, which clarifies that investors should receive the better of national or MFN treatment with respect to activities associated with their investment This new language is discussed in further detail in the article-by-article analysis of the Treaty below.

The following is an article-by-article analysis of the provisions of the Treaty:

Preamble

The Preamble states the goals of the Treaty. The Treaty is premised on the view that an open investment policy leads to economic growth. These goals include economic cooperation, increased flow of capital, a stable framework for investment, development of respect for internationally-recognized worker rights, and maximum efficiency in the use of economic resources. The U.S.-Estonia preamble also refers to two agreements with Estonia dating from 1925—the bilateral Most-Favored-Nation Agreement, and the Treaty of Friendship, Commerce and Consular Relations—as well as the 1992 Bilateral Agreement Concerning the Development of Trade and Investment Relations. While the Preamble does not impose binding obligations, its statement of goals may serve to assist in the interpretation of the Treaty.

Article I (Definitions)

Article I sets out definitions for terms used throughout the Treaty. As a general matter, they are designed to be broad and inclusive in nature.

Investment

Under paragraph 2 of Article I, either country may deny the benefits of the Treaty to investments by companies established in the other that are owned or controlled by nationals of a third country if 1) the company is a mere shell, without substantial business activities in the home country, or 2) the third country is one with which the denying Party does not maintain normal economic relations. For example, at this time the United States does not maintain normal economic relations with, inter alia, Cuba or Libya

Paragraph 3 confirms that any alternation in the form in which an asset is invested or reinvested shall not affect its character as an investment. For example, a change in the corporate form of an investment will not deprive it of protection under the Treaty.

Company

The definition of “company” is broad in order to cover virtually any type of legal entity, including any corporation, company, association, or other entity that is organized under the laws and regulations of a Party. The definition also ensures that companies of a Party that establish investments in the territory of the other Party have their investments covered by the Treaty, even if the parent company is ultimately owned by non-Party nationals, although the other Party may deny the benefits of the Treaty in the limited circumstances set forth in Article I, paragraph 2. Likewise, a company of a third country that is owned or controlled by nationals or companies of a Party will also be covered. The definition also covers charitable and non-profit entities, as well as entities that are owned or controlled by the state.

National

Return

“Return” is defined as “an amount derived from or associated with an investment.” The Treaty provides a non-exclusive list of examples, including: profits; dividends; interest; capital gains; royalty payments; management, technical assistance or other fees; and returns in kind. The scope of this definition provides breadth to the Treaty’s transfer provisions in Article IV.

Associated activities

The Treaty recognizes that the operation of an investment requires protections extending beyond the investment to numerous related activities. This definition provides an illustrative list of such investor activities, including operating a business facility, borrowing money, disposing of property, issuing stock and purchasing foreign exchange for imports. These activities are covered by Article II, paragraph 1, which guarantees the better of national or MFN treatment for investments and associated activities.

State enterprise

“State enterprise” is defined as an enterprise owned, or controlled through ownership interests, by a Party.

Delegation

“Delegation” is defined to include a legislative grant, government order, directive or other act winch transfers governmental authority to a state enterprise or authorizes a state enterprise to exercise such authority.

The definitions of “state enterprise” and “delegation” are included to clarify the scope of the obligations of Article II, paragraph 2, which provides that any governmental authority delegated to a state enterprise by a Party must be exercised in a manner consistent with the Party’s obligations under the Treaty.

Article II (Treatment)

Article II contains the Treaty’s major obligations with respect to the treatment of investment.

Paragraph I generally ensures the better of MFN or national treatment in both the entry and post-entry phases of investment. It thus prohibits both the screening of proposed foreign investment on the basis of nationality and discriminatory measures once the investment has been made, subject to specific exceptions provided for in a separate Annex. The United States and the Republic of Estonia have both reserved certain exceptions in the Annex to the Treaty, the provisions of which are discussed in the section entitled “Annex.”

Paragraph 3 guarantees that investment shall be granted “fair and equitable” treatment. It also prohibits Parties from impairing, through arbitrary or discriminatory means, the management, operation, maintenance, use, enjoyment, acquisition, expansion or disposal of investment. This paragraph sets out a minimum standard of treatment based on customary international law.

In paragraph 3(c), each Party pledges to respect any obligation it may have entered into with respect to investments. Thus, in dispute settlement under Articles VI or VII, a Party would be foreclosed from arguing, on the basis of sovereignty, that it may unilaterally ignore its obligations to such investments.

Paragraph 4 allows, subject to each Party’s immigration laws and regulations, the entry of each Party’s nationals into the territory of the other for purposes linked to investment and involving the commitment of a “substantial amount of capital.” This paragraph serves to render nationals of a BIT partner eligible for treaty-investor visas under U.S. immigration law and guarantees similar treatment for U.S. investors.

Paragraph 5 guarantees companies the right to engage top managerial personnel of their choice, regardless of nationality.

Paragraph 7 provides that each Party must provide effective means of asserting rights and claims with respect to investment, investment agreements and any investment authorizations. Under paragraph 8, each Party must make publicly available all laws, administrative practices and adjudicatory procedures pertaining to or affecting investments.

Paragraph 11 is designed to avoid problems that U.S. businesses may face in emerging market economies. This provision spells out that nationals and companies of either Party receive the better of national or MFN treatment with respect to a detailed list of activities associated with their investments.

Article III (Expropriation)

Article III incorporates into the Treaty the international law standards for expropriation and compensation.

Paragraph I describes the general rights of investors and obligations of the Parties with respect to expropriation and nationalization. These rights also apply to direct or indirect state measures “tantamount to expropriation or nationalization,” and thus apply to “creeping expropriation” that result in a substantial deprivation of the benefit of an investment without taking of the title to the investment.

Paragraph 1 further bars all expropriations or nationalizations except those that are for a public purpose; carried out in a non-discriminatory manner, subject to “prompt, adequate, and effective compensation”; subject to due process; and accorded the treatment provided in the standards of Article Il (3). (These standards guarantee fair and equitable treatment and prohibit the arbitrary and discriminatory impairment of investment in its broadest sense.)

The second sentence of paragraph 1 clarifies the meaning of “prompt, adequate, and effective compensation.” Compensation must be equivalent to the fair market value of the expropriated investment immediately before the expropriatory action was taken or became known (whichever is earlier); be paid without delay, include interest at a commercially reasonable rate from the date of expropriation; be fully realizable; be freely transferable; and be calculated in a freely usable currency on the basis of the prevailing market rate of exchange.

Article IV (Transfers)

Article IV protects investors from certain government exchange controls limiting current account and capital account transfers.

In paragraph 1, the Parties agree to permit “transfers related to an investment to be made freely and without delay into and out of its territory.” Paragraph 1 also provides a non-exclusive list of transfers that must be allowed, including returns (as defined in Article I); payments made in compensation (as defined in Article III); payments arising out of an investment dispute; payments made under a contract, including the amortization of principal and interest payments on a loan; proceeds from the liquidation or sale of all or part of an investment; and additional contributions to capital for the maintenance or development of an investment.

Paragraph 3 recognizes that notwithstanding these guarantees, Parties may maintain certain laws or obligations that could affect transfers with respect to investments. It provides that the Parties may require reports of currency transfers and impose income tax by such means as a withholding tax an dividends. It also recognizes that Parties may protect the rights of creditors and ensure the satisfaction of judgments in adjudicatory proceedings through the laws, even if such measures interfere with transfers. Such laws must be applied in an equitable, nondiscriminatory and good faith manner.

Article V (State-State consultations)

Article V provides for prompt consultation between the Parties, at either Party’s request, on any matter relating to the interpretation or application of the Treaty.

Article VI (State-investor dispute resolution)

Article VI sets forth several means by which disputes between an investor and the host country may be settled.

Article VI procedures apply to an “Investment dispute,” a term which covers any dispute arising out of or relating to an investment authorization, an agreement between the investor and the host government, or to rights granted by the Treaty with respect to an investment.

When a dispute arises, Article VI, paragraph 2, provides that the disputants should initially seek to resolve the dispute by consultation and negotiation, which may include non-binding third party procedures. Should such consultations fail, paragraph 2 and 3 set forth the investor’s range of choices of dispute settlement. Paragraph 2 permits the investor to make an exclusive and irrevocable choice to: (1) employ one of the several arbitration procedures outlined in the Treaty; (2) submit the dispute to procedures previously agreed upon by the investor and the host country government in an investment agreement or otherwise; or (3) submit the dispute to the local courts or administrative tribunals of the host country.

Under paragraph 3, if the investor has not submitted the dispute under the procedures in paragraph 2 and six months have elapsed from the date the dispute arose, the investor may consent to submission of the dispute for binding arbitration by either the International Centre for the Settlement of Investment Disputes (ICSID) (if the host country has joined the Centre—otherwise the ICSID Additional Facility is available) or ad hoc arbitration using the Arbitration Rules of the United Nations Commission on International Trade Law (UNCITRAL). Paragraph 3 also recognizes that, by mutual agreement, the parties to the dispute may choose another arbitral institution or set of arbitral rules.

Paragraph 4 contains the consent of the United States and the Republic of Estonia to the submission of investment disputes to binding arbitration in accordance with the choice of the investor.

Paragraph 5 provides that a non-ICSID arbitration shall take place in a country that is a party to the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards. This requirement enhances the ability of investors to enforce their arbitral awards. In addition, paragraph 6 includes a separate commitment by each Party to enforce arbitral awards rendered pursuant to Article VI procedures.

Paragraph 8 is included in the Treaty to ensure that ICSID arbitration will be available for investors making investments in the form of companies, created under the laws of the Party with which there is a dispute.

Article VII (State-State arbitration)

Article VII provides for binding arbitration of disputes between the United States and the Republic of Estonia that are not resolved through consultations or other diplomatic channels. The article constitutes each Party’s prior consent to arbitration. It provides for the selection of arbitrators, establishes time limits for submissions, and requires the Parties to bear the costs equally unless otherwise directed by the Tribunal.

Article VIII (Preservation of rights)

Article VIII clarifies that the Treaty is meant only to establish a floor for the treatment of foreign investment. An investor may be entitled to more favorable treatment through domestic legislation, other international legal obligations, or a specific obligation assumed by a Party with respect to that investor. This provision ensures that the Treaty will not be interpreted to derogate from any entitlement to such more favorable treatment.

Article IX (Measures not precluded)

Paragraph 1 of Article IX reserves the right of a Party to take measures for the maintenance of public order and the fulfillment of its obligations with respect to international peace and security, as well as those measures it regards as necessary for the protection of its own essential security interests. These provisions are common in international investment agreements.

The maintenance of public order would include measures taken pursuant to a Party’s police powers to ensure public health and safety. International obligations with respect to peace and security would include, for example obligations arising out of Chapter VII of the United Nations Charter. Measures permitted by the provision on the protection of a Party’s essential security interests would include security-related actions taken in time of war or national emergency; actions not arising from a state of war or national emergency must have a clear and direct relationship to the essential security interest of the Party involved.

Article X (Tax policies)

Paragraph 1 exhorts both countries to provide fair and equitable treatment to investors with respect to tax policies. However, tax matters are generally excluded from the coverage of the Treaty based on the assumption that tax matters are properly covered by bilateral tax treaties.

The Treaty, and particularly the dispute settlement provisions do apply to tax matters in three areas, to the extent they are not subject to the dispute settlement provisions of a tax treaty, or, if so subject have been raised under a tax treaty’s dispute settlement procedures and are not resolved in a reasonable period of time.

Pursuant to Paragraph 2, the three areas where the Treaty could apply to tax matters are expropriation (Article III), transfers (Article IV), and the observance and enforcement of terms of an investment agreement or authorization (Article VI (1) (a) or (b)). These three areas are important for investors, and two of the three—expropriatory taxation and tax provisions contained in an investment agreement or authorization—are not typically addressed in tax treaties.

Article XI (Application to political subdivisions)

Article XI makes clear that the obligations of the Treaty are applicable to all political subdivisions of the Parties, such as provincial, state and local governments.

Article XII (Entry into force, duration and termination)

The Treaty enters into force thirty days after exchange of instruments of ratification and continues in force for a period of ten years. From the date of its entry into force, the Treaty applies to existing and future investments. After the ten-year term, the Treaty will continue in force unless terminated by either Party upon one year’s notice. If the Treaty is terminated, all existing investments would continue to be protected under the Treaty for ten years thereafter.

Annex

The U.S. portion of the Annex contains a list of sectors and matters in which, for various legal and historical reasons, the federal government or the States may not necessarily treat investments of nationals or companies of the other Party as they do U.S. investments or investments from a third country. The U.S. exceptions from national treatment are: air transportation; ocean and coastal shipping, banking, insurance, securities, and other financial services; government grants; government insurance and loan programs; energy and power production; customhouse brokers; ownership of real property; ownership and operation of broadcast or common carrier radio and television stations; ownership of shares in the Communications Satellite Corporation; the provision of common carrier telephone and telegraph services; the provision of submarine cable services; use of land and natural resources; mining on the public domain; and maritime and maritime-related services.

The Republic of Estonia exceptions to national treatment are: banking, including loan and saving institutions; government grants; government insurance and loan programs; ownership of real property, use of land and natural resources; initial acquisition from the Republic of Estonia and its municipalities of state and municipal property in the course of denationalization and privatization. These exceptions were based on provisions of investment measures currently in force or under active consideration by the Government of the Republic of Estonia. The Republic of Estonia has not reserved any sectoral exceptions to MFN treatment in the Annex.

The other U.S. Government agencies which negotiated the Treaty join me in recommending that it be transmitted to the Senate at an early date.

Respectfully submitted.

WARREN CHRISTOPHER.

TREATY BETWEEN

THE GOVERNMENT 0F THE UNITED STATES OF AMERICA

AND THE GOVERNMENT OF THE REPUBLIC OF ESTONIA

FOR THE ENCOURAGEMENT AND RECIPROCAL

PROTECTION OF INVESTMENT

The Government of the United States of America and the Government of the Republic of Estonia (hereinafter the “Parties”);

Desiring to promote greater economic cooperation between them, with respect to investment by nationals and companies of one Party in the Territory of the other Party;

Recognizing that agreement upon the treatment tobe accorded such investment will stimulate the flow of private capital and the economic development of the Parties;

Agreeing that fair and equitable treatment of investment is desirable in order to maintain a stable framework for investment and maximum effective utilization of economic resources;

Recognizing that the development of economic and business ties can contribute to the well-being of workers in both Parties and promote respect for internationally recognized worker rights;

Noting the bilateral Most-Favored-Nation Agreement of March 2, 1925 and the bilateral Treaty of Friendship, Commerce and Consular Relations on December 23, 1925 between the Parties;

In furtherance of Article Three of the Bilateral Agreement Concerning the Development of Trade and Investment Relations of September 17, 1992 between the Parties, and

Having resolved to conclude a Treaty concerning the encouragement and reciprocal protection of investment;

Have agreed as follows:

ARTICLE I

1. For the purposes of this Treaty,

(i) tangible and intangible property, including rights, such as mortgages, liens and pledges;

(ii) a company or shares of stock or other interests in a company or interests in the assets thereof;

(iii) a claim to money or a claim to performance having economic value, and associated with an investment;

(iv) intellectual property which includes, interalia, rights relating to:

literary and artistic works including sound recordings;

inventions in all fields of human endeavor;

industrial designs;

semiconductor mask works;

trade secrets, know-how, and confidential business information; and

trademarks, service marks, and trade names; and

(v) any right conferred by law or contract, and any licenses and permits pursuant to law;

(b) “company” of a Party means any kind of corporation, company, association, ownership, or other organization, legally constituted under the laws and regulations of a Party or a political subdivision thereof whether or not organized for pecuniary gain, or privately or governmentally owned or controlled;

(e) “associated activities” include the organization, control, operation, maintenance and disposition of companies, branches, agencies, offices, factories or other facilities for the conduct of business; “he making, performance and enforcement of contracts; the acquisition, use, protection and disposition of property of all kinds including intellectual property rights; the purchase, issuance, and sale of equity shares and other securities; and the purchase of foreign exchange for imports;

(f) “state enterprise” means an enterprise owned, or controlled through ownership interests, by a Party;

3. Any alteration of the form in which assets are invested or reinvested shall not affect their character as investment.

ARTICLE II

1. Each Party shall permit and treat investment, and activities associated therewith, on a basis no less favorable than that accorded in like situations to investment or associated activities of its own nationals or companies, or of nationals or companies of any third country, whichever is the most favorable, subject to the right of each Party to make or maintain exceptions falling within one of the sectors or matters listed in the Annex to this Treaty. Each Party agrees to notify the other Party on its request of all such laws and regulations concerning the sectors or matters listed in the Annex. Moreover, each Party agrees to limit such exceptions to a minimum. Any future exception by either Party shall not apply to investment existing in that sector or matter at the time the exception becomes effective. The treatment accorded pursuant to any exceptions shall, unless specified otherwise in the Annex, be not less favorable than that accorded in like situations to investments and associated activities of nationals or companies of any third country.

2. (a) Nothing in this Treaty shall be construed to prevent a Party from maintaining or establishing a state enterprise.

(b) Each Party shall ensure that any state enterprise that it maintains or establishes acts in a manner that is not inconsistent with the Party’s obligations under ‘this Treaty wherever such enterprise exercises any regulatory, administrative or other governmental authority that the Party has delegated to it, such as the power to expropriate, grant licenses, approve commercial transactions, or impose quotas, fees or other charges.

(c) Each Party shall ensure that any state enterprise that it maintains or establishes accords the better of national or most-favored-nation treatment in the sale of its goods or services in the Party’s territory.

3. (a) Investment shall at all times be accorded fair and equitable treatment, shall enjoy full Protection and security and shall in no case be accorded treatment less than that required by international law.

(b) Neither Party shall in any way impair by arbitrary or discriminatory measures the management, operation, maintenance, use, enjoyment, acquisition, expansion, or disposal of investments. For purposes of dispute resolution under Articles VI and VII, a measure may be arbitrary or discriminatory notwithstanding the fact that a party has had or has exercised the opportunity to review such measure in the courts or administrative tribunals of a Party.

7. Each Party shall provide effective means of asserting claims and enforcing rights with respect to investment, investment agreements, and investment authorizations.

8. Each Party shall make public all laws, regulations, administrative practices and procedures, and adjudicatory decisions that pertain to or affect investments.

9. The treatment accorded by the United States of America to investments and associated activities of nationals and companies of the Republic of Estonia under the provisions of this Article shall in any state, territory or possession of the United States of America be no less favorable than the treatment accorded “herein to investments and associated activities of nationals of the United States of America resident in, and companies legally constituted under the laws and regulations of other states, territories or possessions of the United States of America.

10. The most-favored-nation provisions of this Treaty shall not apply to advantages accorded by either Party to nationals or companies of any third country by virtue of:

(a) that Party’s binding obligations that derive from full membership in a free trade area or customs union; or

(b) that Party’s binding obligations under any multilateral international agreement under the framework of the General Agreement on Tariff’s and Trade that enters into force subsequent to the signature of this Treaty.

11. The Parties acknowledge and agree that “associated activities” include without limitation, such activities as:

(a) the granting of franchises or rights under licenses;

(b) access to registrations, licenses, permits and other approvals (which shall in any event be issued expeditiously);

(c)access to financial institutions and credit markets, including borrowing of funds;

(d) access to their funds held in financial institutions;

(f) the dissemination of commercial information;

(g) the conduct of market studies;

(h) the appointment of commercial representatives, including agents, consultants and distributors and their participation in trade fairs and promotion events;

(i) the marketing of goods and services, including through internal distribution and marketing systems, as well as by advertising and direct contact with individuals and companies;

(j) access to public utilities, public services and commercial rental space at nondiscriminatory prices, if the prices are set or controlled by the government; and

(k) access to raw materials, inputs and services of all types at nondiscriminatory prices, if the prices are set or controlled by the government.

ARTICLE III

1. Investments shall not be expropriated or nationalized either directly or indirectly through measures tantamount to expropriation or nationalization (“expropriation”) except: for a public purpose; in a nondiscriminatory manner; upon payment of prompt, adequate and effective compensation; and in accordance with due process of law and the general principles of treatment provided for in Article 11(3). Compensation shall be equivalent to the fair market value of the expropriated investment immediately before the expropriatory action was taken or became known, whichever is earlier; be calculated in a freely usable currency on the basis of the prevailing market rate of exchange at that time; be paid without delay; include interest at a commercially reasonable rate from the date of expropriation; be fully realizable; and be freely transferable.

2. A national or company of either Party that asserts that all or part of its investment has been expropriated shall have a right to prompt review by the appropriate judicial or administrative authorities of the other Party to determine whether any such expropriation has occurred and, if so, whether such expropriation, and any associated compensation, conforms to the principles of international law.

3. Nationals or companies of either Party whose investments suffer losses in the territory of the other Party owing to war or other armed conflict, revolution, state of national emergency insurrection, civil disturbance or other similar events shall be accorded treatment by such other Party no less favorable than that accorded to its own nationals or companies or to nationals or companies of any third country, whichever is the most favorable treatment, as regards any measures it adopts in relation to such losses.

ARTICLE IV

1. Each Party shall permit all transfers related to an investment to be made freely and without delay into and out of its territory. Such transfers include: (a) returns; (b) compensation pursuant to Article III; (c) payments arising out of an investment dispute; (d) payments made under a contracts, including amortization of principal and accrued interest payments made pursuant to a loan agreement; (e) proceeds from the sale or liquidation of all or any part of an investment; and (f) additional contributions to capital for the maintenance or development of an investment.

2. Transfers shall be made in a freely usable currency at the prevailing market rate of exchange on the date of transfer with respect to spot transactions in the currency to be transferred.

ARTICLE V

ARTICLE VI

1. For purposes of this Article, an investment dispute is a dispute between a Party and a national or company of the other Party arising out of or relating to: (a) an investment agreement between that Party and such national or company; (b) an investment authorization granted by that Party’s foreign investment authority to such national or company; or (c) an alleged breach of any right conferred or created by this Treaty with respect to an investment.

(a) to the courts or administrative tribunals of the Party that is a party to the dispute; or

(b) in accordance with any applicable, previously agreed dispute-settlement procedures; or

(i) to the International Centre for the Settlement of Investment Disputes (“Centre”) established by the Convention on the Settlement of Investment Disputes between States and Nationals of Other States, done at Washington, March 18, 1965 (“ICSID convention”), provided that the Party is a party to such Convention; or

(ii) to the Additional Facility of the Centre, if the Centre is not available; or

(iii) in accordance with the arbitration rules of the United Nations Commission on International Trade Law (UNCITRAL); or

(iv) to any other arbitration institution, or in accordance with any other arbitration rules, as may be mutually agreed between the parties to the dispute.

(b) Once the national or company concerned has so consented, either party to the dispute may initiate arbitration in accordance with the choice so specified in the consent.

(a) written consent of the parties to the dispute for purposes of Chapter II of the ICSID Convention (jurisdiction of the Centre) and for purposes of the Additional Facility Rules; and

5. Any arbitration under paragraph 3(a)(ii), (iii) or (iv) of this Article shall be held in a state that is a party to the New York Convention. I

ARTICLE VII

2. Within two months of receipt of a request, each Party shall appoint an arbitrator. The two arbitrators shall select a third arbitrator as Chairman, who is a national of a third state. The UNCITRAL Rules for appointing members of three member panels shall apply mutatis mutandis to the appointment of the arbitral panel except that the appointing authority referenced in those rules shall be the Secretary General of the Centre.

3. Unless otherwise agreed, all submissions shall be made and all hearings shall be completed within six months of the date of selection of the third arbitrator, and the tribunal shall render its decisions within two months of ‘the date of the final submissions or the date of the closing of the hearings, whichever is later.

ARTICLE VIII

This Treaty shall not derogate from:

(a) laws and regulations, administrative practices or Procedures, or administrative or adjudicatory decisions of either Party;

(b) international legal obligations; or

ARTICLE IX

ARTICLE X

1. with respect to its tax policies, each Party should strive to accord fairness and equity in the treatment of investment of nationals and companies of the other Party.

2. Nevertheless, the provisions of this Treaty, and in particular Articles VI and VII, shall apply to matters of taxation only with respect to the following:

(a) expropriation, pursuant to Article III;

(b) transfers, pursuant to Article IV; or

ARTICLE XI

This Treaty shall apply to the political subdivisions of the Parties.

ARTICLE XII

2. Either Party may, by giving one year’s written notice to the other Party, terminate this Treaty at the end of the initial ten year period or at any time thereafter.

3. with respect to investments made or acquired prior to the date of termination of this Treaty and to which this Treaty otherwise applies, the provisions of all of the other Articles of this Treaty shall thereafter continue to be effective for a further period of ten years from such date of termination.

4. The Annex shall form an integral part of the Treaty.

IN WITNESS WHEREOF, the respective plenipotentiaries have signed this Treaty.

DONE in duplicate at Washington on this nineteenth day of April, 1994, in the English and Estonian languages, both texts being equally authentic.

FOR THE GOVERNMENT OF THE UNITED STATES OF AMERICA:

FOR THE GOVERNMENT OF THE REPUBLIC OF ESTONIA:

ANNEX

1. The Government of the United States of America reserves the right to make or maintain limited exceptions to national treatment, as provided in Article I, paragraph 1, in the sectors or matters it has indicated below:

air transportation; ocean and coastal shipping; banking, securities, insurance, and other financial services; government grants; government insurance and loan programs; energy and power production; customhouse brokers; ownership of real property; ownership and operation of broadcast or common carrier radio and television stations; ownership of shares in the Communications Satellite Corporation; the provision of common carrier telephone and telegraph services; the provision of submarine cable services; use of land and natural resources; mining on the public domain; and maritime services and maritime-related services.

2. The Government of the United States of America reserves the right to make or maintain limited exceptions to most-favored nation-treatment, as provided in Article II, paragraph 1, in the sectors or matters it has indicated below:

ownership of real property; mining on the public domain; maritime services and maritime-related services; and primary dealership in United States Government securities.

3. The Government of the Republic of Estonia reserves the right to make or maintain limited exceptions to national treatment, as provided in Article II, paragraph 1, in the sectors or matters it has indicated below:

banking, including loan and saving institutions; government grants; government insurance and loan programs; ownership of real property; use of land and natural resources; and initial acquisition from the Republic of Estonia and its municipalities of state and municipal property in the course of denationalization and privatization.

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Georgia Bilateral Investment Treaty

Signed March 7, 1994; Entered into Force August 17, 1997

104th Congress 1st Session

SENATE Treaty Doc. 104-13

INVESTMENT TREATY WITH GEORGIA

MESSAGE

FROM

THE PRESIDENT OF THE UNITED STATES

TRANSMITTING

THE TREATY BETWEEN THE GOVERNMENT OF THE UNITED STATES OF AMERICA AND THE GOVERNMENT OF THE REPUBLIC OF GEORGIA CONCERNING THE ENCOURAGEMENT AND RECIPROCAL PROTECTION OF INVESTMENT, WITH ANNEX SIGNED AT WASHINGTON ON MARCH 7, 1994

July 10, 1995 -Treaty was read the first time and, together with the accompanying papers, referred to the Committee on Foreign Affairs and ordered to be printed for the use of the Senate

U.S. GOVERNMENT PRINTING OFFICE

99-118 WASHINGTON: 1995

LETTER OF TRANSMITTAL

THE WHITE HOUSE, July 10, 1995.

To the Senate of the United States:

The bilateral investment Treaty (BIT) with Georgia was the eighth such treaty between the United States and a newly independent state of the former Soviet Union. The Treaty is designed to protect U.S. investment and assist the Republic of Georgia in its efforts to develop its economy by creating conditions more favorable for U.S. private investment and thus strengthen the development of sector.

The Treaty is fully consistent with U.S. policy toward international and domestic investment. A specific tenet of U.S. policy, reflected in this Treaty, is that U.S. investment abroad and foreign investment in the United States should receive national treatment. Under this Treaty, the Parties also agree to international law standards for expropriation and compensation for expropriation; free transfer of funds related to investments; freedom of investments from performance requirements; fair, equitable, and most-favored-nation treatment; and the investor of investment’s freedom to choose to resolve disputes with the host government through international arbitration.

I recommend that the Senate consider this Treaty as soon as possible, and give its advice and consent to ratification of the Treaty, with Annex, at an early date.

WILLIAM J. CLINTON

LETTER OF SUBMITTAL

DEPARTMENT OF STATE,

Washington, June 22, 1995.

The President,

The White House.

THE PRESIDENT: I have the honor to submit to you the Treaty Between the Government of the United States of America and the Government of the Republic of Georgia Concerning the Encouragement and Reciprocal Protection of Investment signed at Washington on March 7, 1994. recommend that this Treaty be transmitted to the Senate for its advice and consent to ratification.

The bilateral investment treaty (BIT) with Georgia was the eighth such treaty between the United States and a newly independent state of the former Soviet Union. The United States had previously concluded BITs with Russia, Armenia, Belarus, Kazakhstan, Kyrgyzstan, Moldova and Ukraine; and has subsequently signed a treaty with Uzbekistan. The Treaty is based on the view that an open investment policy contributes to economic growth. This Treaty will assist the Republic of Georgia in its efforts to develop its economy by creating conditions more favorable for U.S. private investment and thus strengthen the development of its private sector. It is U.S. policy, however, to advise potential treaty partners during BIT negotiations that conclusion of such a treaty doe not necessarily result in immediate increases in private U.S. investment flows.

To date, twenty-one BITs are in force for the United States-with Argentina, Bangladesh, Bulgaria, Cameroon, the Congo, the Czech Republic, Egypt, Grenada, Kazakhstan, Kyrgyzstan, Moldova, Morocco, Panama, Poland, Romania, Senegal, Slovakia, Sri Lanka, Tunisia, Turkey, and Zaire. In addition to the Treaty with Georgia, the United States has signed, but not yet brought into force, BITs with Albania, Armenia, Belarus, Ecuador, Estonia, Haiti, Jamaica, Latvia, Mongolia, Russia, Trinidad and Tobago, Ukraine, and Uzbekistan.

The Office of the United States Trade Representative and the Department. of State jointly led this BIT negotiation, with assistance from the Departments of Commerce and Treasury.

THE - U.S.GEORGIA TREATY

The Treaty with the Government of the Republic of Georgia is based on the 1994 U.S. prototype BIT and satisfies the United States principal objectives in bilateral investment treaty negotiations:

-All forms of U.S. investment in the territory of the Republic of Georgia are covered;

-Covered investments receive the better of national treatment or most-favored-nation (MFN) treatment both on establishment and thereafter, subject to certain specified exceptions.

-Performance requirements may not be imposed upon or enforced against covered investments.

- Expropriation can occur only in accordance with international law standards: that is, for a public purpose; in a non-discriminatory manner; in accordance with due process of law; and upon payment of prompt, adequate, and effective compensation.

-The unrestricted transfer, in a freely usable currency, of funds related to a covered investment is guaranteed.

-Investment disputes with the host government may be brought by investors, or by their subsidiaries, to binding international arbitration as an alternative to domestic courts.

The U.S. Georgia Treaty does not differ in any significant way from the 1994 prototype. The following is an article-by-article analysis of the provisions of the Treaty:

Title and Preamble

The Title and Preamble, state the goals of the Treaty. Foremost is the encouragement and protection of investment. Other goals include economic cooperation on investment issues; the stimulation of economic development; higher living standards; promotion of respect for internationally-recognized worker rights; and maintenance of health, safety, and environmental measures. While the Preamble does not impose binding obligations, its statement of goals may assist in interpreting the Treaty and in defining the scope of Party-to-Party consultation procedures pursuant to Article VIII

Article I (Definitions)

Article I defines terms used throughout the Treaty. In general, the definitions are designed to be broad and inclusive in nature.

Company, Company of a Party

National

The Treaty defines “national” as a natural person who is a national of a Party under its own laws. Under U.S. law, the term “national” is broader than the term “citizen.” For example, a native of American Samoa is a national of the United States, but not a citizen.

Investment, Covered Investment

The Treaty’s definition of investment is broad, recognizing that investment can take a wide variety of forms. Every kind of investment is specifically incorporated in the definition; moreover, it is explicitly noted that investment may consist or take the form of any of a number of interests, claims, and rights. Establishing a subsidiary is a common way of making an investment. Other forms that an investment might take include equity and debt interests in a company; contractual rights; tangible, intangible, and intellectual property; and rights conferred pursuant to law. Investment as defined by the Treaty generally excludes claims arising solely from trade transactions, such as a sale of goods across a border that does not otherwise involve an investment.

State Enterprise, Investment Authorization, Investment Agreement

The Treaty defines an “investment authorization” as an authorization granted by the foreign investment authority of a Party to a covered investment or a national or company of the other Party. There is currently no such foreign investment authority in the Republic of Georgia.

The Treaty defines an “investment agreement” as a written agreement between the national authorities of a Party and a covered investment or a national or company of the other Party that (1) grants rights with respect to natural resources or other assets controlled by the national authorities and (2) the investment, national, or company relies upon in establishing or acquiring a covered investment. This definition thus excludes agreements with subnational authorities (including U.S. States) as well as agreements arising from various types of regulatory activities of the national government, including, in the tax area, rulings, closing agreements, and advance pricing agreements.

ICSID Convention, Centre, UNCITRAL Arbitration Rules

The “ICSID Convention, “Centre, ” and “UNCITRAL Arbitration Rules” are explicitly defined to make the text brief and clear.

Article II (Treatment of Investment)

Article II contains the Treaty’s major obligations with respect to the treatment of covered investments.

Paragraph 1 generally ensures the better of national I or MFN treatment in both the entry and post-entry phases of investment. It thus prohibits, outside of exceptions listed in the Annex, “screening” on the basis of nationally during the investment process, as well as nationality-based post-establishment measures. For purposes of the Treaty, “national treatment” means treatment no less favorable than that which a Party accords, in like situations, to investments in its territory of its own nationals or companies. For purposes of the Treaty, MFN treatment” means treatment no less favorable than that which a Party accords, in like situations, to investments in its territory of nationals or companies of a third country. “National and MFN treatment” is defined as whichever of national treatment or MFN treatment is the most favorable. Paragraph 1 explicitly states that the national and MFN treatment obligation will extend to state enterprises in their sale of goods and services.

Paragraph 2 also states that a Party is not required to extend to covered investments national or MFN treatment with respect to procedures provided for in multilateral agreements concluded under the auspices of the World Intellectual Property Organization relating to the acquisition or maintenance of intellectual property rights. This provision clarifies that certain procedural preferences granted under existing conventions, such as the Patent Cooperation Treaty, fall outside the BIT. This exception parallels the Uruguay Round’s Trade-Related Aspects of Intellectual Property Rights (TRIPS) agreement and the North American Free Trade Agreement (NAFTA). This provision complements the more specific IPR-related provisions contained in the U.S.-Georgia Bilateral Trade Agreement.

Paragraph 3 sets out a minimum standard of treatment based on standards found in customary international law. The obligations to accord “fair and equitable treatment” and “full protection and security” are explicitly cited, as in the Parties obligation not to impair, through unreasonable and discriminatory means, the management, conduct, operation, and sale or other disposition of covered investments. The general reference to international law also implicitly incorporates other fundamental, rules, of international law: for example, that sovereignty may not be grounds for unilateral revocation or amendment of a Party’s obligations to investors and investments (especially contracts), and that an investor is entitled to have any expropriation done in accordance with previous undertakings of a Party.

Paragraph 4 requires that each. Party provide effective means of asserting claims and enforcing rights with respect to covered investments.

Paragraph 5 ensures the transparency of each Party’s regulation of covered investments.

Article III (Expropriation)

Article III incorporates into the Treaty international law standards for expropriation and compensation.

Paragraph 1 describes the general rights of investors and obligations of the Parties with respect to expropriation and nationalization. These rights and obligations also apply to direct or indirect measures “tantamount to expropriation or nationalization” and thus apply to “creeping expropriation series of measures which effectively amount to an expropriation of a covered investment without taking title.

Paragraph 1 further bars all expropriations or nationalization except those that are for a public purpose; carried out in a non-discriminatory manner; in accordance with due process of law; in accordance with the general principles of treatment provided in Article II(3); and subject to “prompt, adequate, and effective compensation.”

Paragraphs 2, 3, and 4 more fully describe the meaning of “prompt, adequate, and effective compensation.” The guiding principle is that the investor should be made whole.

Article IV (Compensation for Damages Due to War and Similar Events)

Paragraph 1 entitles investments covered by the Treaty to the better of national or MFN treatment with respect to any measure relating. to losses suffered in a Party’s territory owing to war or other armed conflict, civil disturbances, or similar events. The unconditional obligation to pay compensation for such losses only arises when the losses result from requisitioning or from destruction not required by the necessity of the situation.

Article V (Transfers)

In paragraph 1, each Party agrees to permit “transfers relating to a covered investment to be made freely and without delay into and out of its territory.” Paragraph 1 also provides a list of transfers that must be allowed. The list is non-exclusive, and is intended to protect flows to both affiliated and non-affiliated entities.

Paragraph 2 provides that each Party must permit transfers to be made in a “freely usable currency” at the market rate, of exchange prevailing on the date of transfer. “Freely usable” is a term used by International Monetary Fund; at present there are five such “freely usable” currencies: the U.S. dollar, Japanese yen, Germany mark, French franc and British pound sterling.

In paragraph 3, each Party agrees to permit returns in kind to be made where such returns have been authorized an investment authorization or written agreement between a Party and a covered investment.

Paragraph 4 recognizes that, notwithstanding the guarantees of paragraphs 1 through 3, a Party may prevent a transfer through the equitable, non-discriminatory and good faith enforcement of judicial orders and judgments, or application of laws relating to such matters as bankruptcy, securities, or criminal or penal offenses.

Article VI (Performance Requirements)

Article VI prohibits either Party from mandating or enforcing performance requirements in connection with a covered investment. The list of prohibited requirements includes the use of local goods, the export of goods or services, the “balancing” of imports and exports, the transfer of technology, or the conduct of research in the host country. Such requirements are major burdens on investors and impair their competitiveness.

A Party may, however, impose conditions for receipt, or continued receipt, of an advantage e.g., eligibility for programs maintained by the U.S. Export-Import Bank and other similar institutions.

Article VII (Entry, Sojourn and Employment of Aliens)

Paragraph 1 requires each Party to allow, subject to its immigration laws and regulations, the entry into its territory of the other Party’s nationals for certain purposes related to a covered investment and involving the commitment of a “Substantial amount of capital.” This paragraph serves to render nationals of Georgia eligible for treaty investor visas under U.S. immigration law. It also guarantees similar treatment for U.S. nationals entering the Republic of Georgia. The requirement to commit a “substantial amount of capital” is intended to prevent abuse of treaty-investor status; it parallels the requirements of U.S. immigration law.

In addition, paragraph 1(b) prohibits labor certification requirements and numerical restrictions on investor-visas.

Paragraph 2 requires that each Party allow covered investments to engage top managerial personnel of their choice, regardless of nationality.

Article VIII (State-State Consultations)

Article VIII provides for prompt consultation between the Par-ties, at either Party’s request, on any matter relating to the interpretation of the Treaty or to the realization of the Treaty’s objectives. A Party may thus request consultations for any matter reasonably related to the encouragement or protection of covered investment, whether or not a Party is alleging a violation of the Treaty.

Article IX ( Settlement of Disputes Between One Party and a National or Company of the other Party)

Article IX sets forth several means by which disputes between an investor and a Party may be settled.

Paragraph 2 gives a national or company an exclusive (with the exception in paragraph 3(b) concerning injunctive relief, explained below) choice among three options to settle the dispute. These three options are: (1) submitting the dispute to the courts or administrative tribunals of the Party that is a party to the dispute; 1 (2) invoking dispute-resolution procedures previously agreed upon by the national or company and the host country government; or (3) invoking the dispute-resolution mechanisms provided for in paragraph 3 of Article IX.

Under paragraph 3(a), the investor can submit an investment dispute to binding arbitration three months after the dispute arises, provided that the investor has not submitted the claim to a court or administrative tribunal of the Party or invoked a dispute resolution procedure previously agreed upon in an investment agreement. The investor may choose among the International Centre for Settlement of Investment Disputes (ICSID) (Convention Arbitration), the Additional Facility of ICSID (if Convention Arbitration is not available), ad hoc arbitration using the Arbitration Rules of the United Nations Commission on International Trade Law (UNCITRAL), or any other arbitration institution or rules agreed upon by both parties to the dispute.

Before or during such arbitral proceedings, however, paragraph 3(b) provides that a national or company many seek, without affecting its right to pursue arbitration under this Treaty, interim injunctive relief not involving the payment of damages from local courts or administrative tribunals for the preservation of its rights and interests. This paragraph does not alter the power of the arbitral tribunals to recommend or order interim measures they may deem appropriate.

Paragraph 4 constitutes each Party’s consent to the submission of investment disputes to binding arbitration in accordance with the choice of the national or company.

Paragraph 5 provides that any non-ICSID arbitration shall take place in a country that is a party to the United Nations Convention on the Recognition and Enforcement of Arbitral Awards. This provision expands the ability of investors to obtain enforcement of arbitral awards.

In addition, in paragraph 6, each Party commits to enforcing arbitral awards render eg pursuant to this Article. The Federal Arbitration Act (9 U.S.C. 1 et seq.) satisfies the retirement for the enforcement of non-ICSID awards in the United States. The Convention on the Settlement of Investment Disputes Act of 1966 (22 U.S.C. 1650, 1650a) provides for the enforcement of ICSID awards.

Paragraph 8 ensures that for any arbitration, including ICSID Convention Arbitration, the nationality of a company in the host country will be determined by ownership or control, rather than by place of incorporation. This ensures that a claim may be brought, by an investor’s subsidiary in the, host country.

Article X (Settlement of Disputes Between the Parties)

Article X provides for binding arbitration of disputes between the United States and the Republic of Georgia that are not resolved through consultations or other diplomatic channels. The article constitutes each Party’s prior consent to arbitration.

Article XI (Preservation of Rights)

Article XI clarifies that the Treaty does not derogate form any obligation a Party might have to provide better treatment to the covered investment than is specified in the Treaty. Thus, the Treaty establishes a floor for the treatment of covered. investments. An investor may be entitled to more favorable treatment through domestic legislation, other international legal obligations, or a specific obligation (e.g., to provide a tax holiday) assumed by a Party with respect to that investor.

Article XII (Denial of Benefits)

Article XII(b) permits each Party to deny the benefits of the Treaty to a company of the other Party if the company is owned or controlled by non-Party nationals and if the company has no substantial business activities in the Party where it is established. Thus the United States could deny benefits to a company which is a subsidiary of a shell company organized under the laws of the Republic of Georgia but controlled by nationals of a third country. However, this provision would not generally permit the United States to deny benefits to an investment of the Republic of Georgia that maintains its central administration or principal place of business in the territory of, or has a real and continuous link with, the Republic of Georgia.

Article XIII (Taxation)

Article XIII excludes tax matters generally from the coverage of the BIT, on the basis that tax matters should be dealt with in bi-tax treaties. However, Article XIII does not preclude a national or company from bringing claims under Article IX that taxation provisions in an investment agreement or authorization have been violated, or that tax matters resulted in, or constituted, an expropriation of a covered investment.

Under paragraph 2, a national or company that asserts in a dispute that a tax matter involves expropriation may submit that dispute to arbitration pursuant to Article IX(3) only if (1) the investor has first referred to the competent tax authorities of both Parties the issue of whether the tax matter involves an expropriation, and (2) the tax authorities have not both determined, within nine months from the time of referral, that the matter does not involve expropriation. The “competent tax authority” of the United States is the Assistant Secretary of the Treasury for International Tax Policy, who will make his determination only after consultation with the Inter-Agency Staff Coordinating Group on Expropriations.

Article XIV (Measures Not Precluded)

International obligations with respect to peace and security would include, for example, obligations arising out of Chapter VII of the United Nations Charter. Measures permitted by the provision on the protection of a Party’s essential security interests would include security-related actions taken in time of war or national emergency. Actions not arising from a state of war or national emergency must have a clear and direct relationship to the essential security interests of the Party involved. Measures to protect a Party’s essential security interests are self-judging in nature, although each party would expect the provisions to be applied by the other in good faith. These provisions are common in international investment agreements.

Article XV (Application to Political Subdivisions and State Enterprises of the Parties)

Paragraph 1(a) makes clear that the obligations of the Treaty are applicable to all political subdivisions of the Parties, such as provincial, State and local governments.

Article XVI (Entry Into Force, Duration, and Termination)

The Treaty enters into force thirty days after exchange of instruments of ratification and continues in force for a period of ten years. From the date of its entry into force, the Treaty applies to all activities of both Parties with respect to preexisting and newly established investments alike. After this ten-year term, the Treaty will continue in force unless terminated. If the Treaty is terminated, all investments that qualified as covered investments on the date of termination (i.e., one year after written notice) continue to be protected under the Treaty for ten years from that date as long as these investments qualify as covered investments. Such coverage would continue to extend fully to such an investment as it grew whether be reinvestment, expansion, or merger.

A Party’s obligations to accord the right to establish or acquire investments would lapse immediately upon the date of termination of the Treaty.

Paragraph 4 stipulates that the Annex shall form an integral part of the Treaty.

Annex

U.S. bilateral investment treaties allow for exceptions to national and MFN treatment because the Parties’ domestic regimes may provide for derogations from national and MFN treatment, and because treatment in certain sectors and matters is negotiated in and governed by other agreements. Future derogations from the national treatment obligations of the Treaty are generally permitted only in the sectors or matters listed in the Annex pursuant to Article 11(2), and must be made on an MFN basis unless otherwise specified therein.

Under a number of statutes, many of which have a long historical background, the U.S. federal government or States may not necessarily treat investments of nationals or companies of Georgia as they do U.S. investments or investments from a third country. Paragraph 1 through 3 of the Annex list the sectors or matters affected by such statutes.

The U.S. exceptions from its national treatment commitments are: atomic energy; customhouse brokers; licenses for broadcast, common carrier, or aeronautical radio stations; COMSAT; subsidies or grants, including government supported loans, guarantees, and insurance; state and local measures exempt from Article 1102, of the North American Free Trade Agreement pursuant to Article 1108 thereof; and landing of submarine cables.

The United States excludes fisheries; air and maritime transport, and related activities; and banking, insurance, securities, and other financial services from its most-favored-nation and national treatment commitments.

Paragraph 3 of the Annex lists Georgia’s exceptions to national treatment, which are: fisheries; air and maritime transport, and related activities; ownership of broadcast, common carrier, or aeronautical radio stations; communications satellites; government-supported loans, guarantees, and insurance; landing of submarine cables; and for three years from the date of entry into force of this Treaty, banking, insurance, securities, and other financial services. While Georgia has, and will maintain for up to three years after the Treaty enters into force, national treatment exceptions in financial services, it has undertaken in the BIT to remove such barriers to U.S. investment after that time. These exceptions are based on current Georgian law or regulations. The Republic of Georgia has not reserved any sectoral exceptions to MFN treatment in the Annex.

Paragraph 4 of the Annex ensures that reciprocal national treatment is granted in all leasing of minerals or pipeline rights-of-way on Government lands. In creating this positive right to reciprocal national treatment, this provision affects the implementation of the Mineral Lands Leasing Act (MLLA) and 10 U.S.C. § 7435, with respect to nationals and companies of the Republic of Georgia. The Treaty provides for resort to binding international arbitration to resolve disputes, rather than denial of mineral rights and rights to naval petroleum shares to investors of the other Party, as is the current process under the statute. U.S. domestic remedies, would, however, remain available for use in conjunction with the Treaty’s provisions.

The MLLA and 10 U.S.C. § 7435 direct that if a foreign country does not grant national treatment to U.S. investors in leases for minerals on on-share federal lands, leases of land within the Naval Petroleum and Oil Shale Reserves, and rights-of-way for oil or gas pipelines across on-shore federal lands, investors from that country may not be granted national treatment.

Georgia’s extension of national treatment in these sectors will fully meet the objectives of the MLLA and 10 U.S.C. § 7435. Georgia was informed during negotiations that, were it to include this sector in its list of treatment exemptions, the United States would (consistent with the MLIA and 10 U.S.C. § 7435) exclude the leasing of minerals or pipeline rights-of-way on Government lands from the national and MFN treatment obligations of this Treaty.

The listing of a sector does not necessarily signify that domestic laws have entirely reserved it for nationals. And, pursuant to Article II(2)(c), any additional restrictions or limitations which a Party May adopt with respect to listed sectors or matters may not compel the divestiture of existing covered investments.

The other U.S. Government agencies which negotiated the Treaty join me in recommending that it be transmitted to the Senate at an early date.

Respectfully submitted,

WARREN CHRISTOPHER.

TREATY BETWEEN

THE GOVERNMENT OF THE UNITED STATES OF AMERICA AND

THE GOVERNMENT OF THE REPUBLIC OF GEORGIA

CONCERNING THE ENCOURAGEMENT

AND RECIPROCAL PROTECTION OF INVESTMENT

The Government of the United States of America and the Government of the Republic of Georgia (hereinafter the “Parties”);

Desiring to promote greater economic cooperation between them, with respect to investment by nationals and companies of one Party in the territory of the other Party;

Recognizing that agreement upon the treatment to be accorded such investment will stimulate the flow of private capital and the economic development of the Parties;

Agreeing that a stable framework for investment will maximize effective utilization of economic resources and improve living standards;

Recognizing that the development of economic and business ties can promote respect for internationally recognized worker rights;

Agreeing that these objectives can be achieved without relaxing health, safety and environmental measures of general application; and

Having resolved to conclude a Treaty concerning the encouragement and reciprocal protection of investment;

Have agreed as follows:

ARTICLE l

For the purposes of this Treaty,

(b) “company of a Party” means a company constituted or organized under the laws of that Party;

(i) a company;

(ii) shares, stock, and other forms of equity participation, and bonds, debentures, and other forms of debt interests, in a company;

(iii) contractual rights, such as under turnkey, construction or management contracts, production or revenue-sharing contracts, concessions, or other similar contracts;

(iv) tangible property, including real property; and intangible property, including rights, such as leases, mortgages, liens and pledges;

(v) intellectual property, including: copyrights and related rights, patents, rights in plant varieties, industrial design, right in semiconductor layout design, trade secrets, including know-how and confidential business information, trade and service marks, and trade names; and

(vi) rights conferred pursuant to law, such as licenses and permits;

(e) “covered investment” means an investment of a national or company of a Party in the territory of the other Party;

(f) “state enterprise” means a company owned, or controlled through ownership interests, by a Party;

(g) “investment authorization” means an authorization granted by the foreign investment authority of a Party to a covered investment or a national or company of the other Party;

(i) “ICSID Convention” means the Convention on the Settlement of Investment Disputes between States and Nationals of Other States, done at Washington, March 18, 1965;

(j) “Centre” means the International Centre for Settlement of Investment Disputes Established by the ICSID Convention; and

(k) “UNCITRAL Arbitration Rules” means the arbitration rules of the United Nations Commission on International Trade Law.

ARTICLE II

1. With respect to the establishment, acquisition, expansion, management, conduct, operation and sale or other disposition of covered investments, each Party shall accord treatment no less favorable than that it accords, in like situations, to investments in its territory of its own nationals or companies (hereinafter “national treatment”) or to investments in its territory of nationals or companies of a third country (hereinafter “most favored nation treatment), whichever is most favorable (hereinafter “national and most, favored nation treatment”). Each Party shall ensure that its state enterprises, in the provision of their goods or services, accord national and most favored nation treatment to covered investments.

2. (a) A Party may adopt or maintain exceptions to the obligations of paragraph 1 in the sectors or with respect to the matters specified in the Annex to this Treaty. In adoption such an exception, a Party may not require the divestment, in whole or in part, of covered investments existing at the time the exception becomes effective.

(b) Neither Party shall in any way impair by unreasonable and discriminatory measures the management, conduct, operation, and sale or other disposition of covered investments.

4. Each Party shall provide effective means of asserting claims and enforcing rights with respect to covered investments.

ARTICLE III

3. If the fair market value is denominated in a freely usable currency, the compensation paid shall be no less than the fair market value on the date of expropriation, plus, interest at a commercially reasonable rate for that currency, accrued from the date of expropriation until the date of payment.

(a) the fair market value on the date of expropriation, converted into a freely usable currency at the market rate of exchange prevailing on that date, plus

(b) interest, at a commercially reasonable rate for that freely usable currency, accrued from the date of expropriation until the date of payment.

ARTICLE IV

1. Each Party shall accord national and most favored nation treatment to covered investments as regards any measure relating to losses that such investments suffer in its territory owing to war or other armed conflict, revolution, state of national emergency, insurrection, civil disturbance, or similar events.

(a) requisitioning of all or part of such investments by the Party’s forces or authorities, or

(b) destruction of all or part of such investments by the Party’s forces or authorities that was not required by the necessity of the situation.

ARTICLE V

1. Each Party shall permit all transfers relating to a covered investment to be made freely and without delay into and out of its territory. Such transfers include:

(a) contributions to capital;

(b) profits, dividends, capital gains, and proceeds from the sale of all or any part of the investment or from the partial or complete liquidation of the investment;

(d) payments, made under a contract, including a loan agreement; and

(e) compensation pursuant to Articles III and IV, and payments arising out of an investment dispute.

2. Each Party shall permit transfers to be made in a freely usable currency at the market rate of exchange prevailing on the date of transfer.

4. Notwithstanding paragraphs 1 through 3, a Party may prevent a transfer through the equitable, non-discriminatory and good faith application of its laws relating to:

(a) bankruptcy, insolvency or the protection of the rights of creditors;

(b) issuing, trading or dealing in securities;

(d) ensuring compliance with orders or judgments in adjudicatory proceedings.

ARTICLE VI

(a) to achieve a particular level or percentage of local content, or to purchase, use or otherwise give a preference to products or services of domestic origin or from any domestic source;

(b) to limit imports by the investment of products or services in relation to a particular volume or value of production, exports or foreign exchange earnings;

(c) to export a particular type, level or percentage of products or services, either generally or to a specific market region;

(d) to limit sales by the investment of products or Services in the Party’s territory in relation to a particular volume or value of production, exports or foreign exchange earnings;

(f) to carry out a particular type, level or percentage of research and development in the Party’s territory.

Such requirements do not include conditions for the receipt or continued receipt of an advantage.

ARTICLE VII

1. (a) Subject to its law relating to the entry and sojourn of aliens, each Party shall permit to enter and to remain in its territory nationals of the other Party for the purpose of establishing, developing, administering or advising on the operation of an investment to which they, or a company of the other Party that employs them, have committed or are in the process of committing a substantial amount of capital or other resources.

(b) Neither Party shall, in granting entry under paragraph 1(a), require a labor certification test or other procedure of a similar effect, or apply any numerical restriction.

2. Each Party shall permit covered investments to engage top managerial personnel of their choice, regardless of nationality.

ARTICLE VIII

The Parties agree to consult promptly, on the request of either to resolve any disputes in connection with the Treaty, or to discuss any matter relating to the interpretation or application of the Treaty or to the realization of the objectives of the Treaty.

ARTICLE IX

2. A national or company that is a party to an investment dispute may submit the dispute for resolution under one of the following alternatives:

(a) to the courts or administrative tribunals of the Party that is a party to the dispute; or

(b) in accordance with any applicable, previously agreed dispute-settlement procedures; or

3. (a) Provided that the national or company concerned has not submitted the dispute for resolution under paragraph 2 (a) or (b), and that three months have elapsed from the date on which the dispute arose, the national or company concerned may submit the dispute for settlement by binding arbitration:

(i) to the Centre, if the Centre is available; or

(ii) to the Additional Facility of the Centre, if the Centre is not available; or

(iii) in accordance with the UNCITRAL Arbitration Rules; or

(iv) if agreed by both parties to the dispute, to any other arbitration institution or in accordance with any other arbitration rules.

4. Each Party hereby consents to the submission of any investment dispute for settlement by binding arbitration in accordance with the choice of the national or company under paragraph 3(a)(i), (ii), and (iii) or the mutual agreement of both parties to the dispute under paragraph 3(a)(iv). This consent and the submission of the dispute by a national or company under paragraph 3(a) shall satisfy the requirement of:

(a) Chapter II of the ICSID Convention (Jurisdiction of the Centre) and the Additional Facility Rules for written consent of the parties to the dispute; and

(b) Article Il of the United Nations Convention on the ‘Recognition and Enforcement of Foreign Arbitral Awards, done at New York, June 10, 1958, for an “agreement in writing”.

8. For purposes of Article 25(2)(b) of the ICSID convention and this Article, a company of a Party that, immediately before the occurrence of the event or events giving rise to an investment dispute, was a covered investment, shall be treated as a company of such other Party.

ARTICLE X

ARTICLE XI

This Treaty shall not derogate from any of the following that entitle covered investments to treatment more favorable than that accorded by this Treaty:

(a) laws and regulations, administrative practices or procedures, or administrative or adjudicatory decisions of a Party;

(b) international legal obligations; or

ARTICLE XII

Each Party reserves the right to deny to a company of the other Party the benefits of this Treaty if nationals of a third country own or control the company and

(a) the denying Party does not maintain normal economic relations with the third country; or

(b) the company has no substantial business activities in the territory of the Party under whose laws it is constituted or organized.

ARTICLE XIII

1. No provision of this Treaty shall impose obligations with respect to tax matters, except that:

(a) Articles III, IX and X will apply with respect to expropriation; and

(b) Article IX will apply with respect to an investment agreement or an investment authorization.

2. A national or company, that asserts in an investment dispute that a tax matter involves an expropriation, may submit that dispute to arbitration pursuant to Article IX(3) only if:

(a) the national or company concerned has first referred to the competent tax authorities of both Parties the issue of whether the tax matter involves an expropriation; and

(b) the competent tax authorities have not both determined, within nine months from the time the national or company referred the issue, that the matter does not involve an expropriation.

ARTICLE XIV

ARTICLE XV

1. (a) The obligations of this Treaty shall apply to the political subdivisions of the Parties.

2. A Party’s obligations under this Treaty shall apply to a state enterprise in the exercise of any regulatory, administrative or other governmental authority delegated to it by that Party.

ARTICLE XVI

2. A Party may terminate this Treaty at the and of the initial ten year period or at any time thereafter by giving one year’s written notice to the other Party.

3. For ten years from the date of termination, all other Articles shall continue to apply to covered investments established or acquired prior to the date of termination, except insofar as those Articles extend to the establishment or acquisition of covered investments.

4. The Annex shall form an integral part of the Treaty.

DONE in duplicate at Washington this seventh day of March, 1994, in the English language. A Georgian language text shall be prepared which shall be considered equally authentic upon an exchange of diplomatic notes confirming its conformity with the English language text.

FOR THE GOVERNMENT OF THE UNITED STATES OF AMERICA:

FOR THE GOVERNMENT OF THE THE REPUBLIC OF GEORGIA:

ANNEX

atomic energy; customhouse brokers; licenses for broadcast, common carrier, or aeronautical radio stations; COMSAT; subsidies or grants, including government-supported loans, guarantees and insurance; state and local measures exempt from Article 1102 of the North American Free Trade Agreement pursuant to Article 1108 thereof; and landing of submarine cables.

Most favored nation treatment shall be accorded in the sectors and matters indicated above.

fisheries; air and maritime transport, and related activities; banking, insurance, securities, and other financial services.

3. The Government of the Republic of Georgia may adopt or maintain exceptions to the obligation to accord national treatment to covered investments in the sectors or with respect to the matters specified below:

fisheries; air and maritime transport, and related activities; ownership of broadcast, common carrier, or aeronautical radio stations; communications satellites; government-supported loans, guarantees, and insurance; landing of submarine cables; and for three years from the date of entry into force of this Treaty, banking, insurance securities, and other financial services.

Most favored nation treatment shall be accorded in the sectors and matters indicated above.

4. Each Party agrees to accord national treatment to covered investments in the following sectors:

leasing of minerals or pipeline rights-of-way on government lands.

End of tab panel

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Grenada Bilateral Investment Treaty

Signed May 2, 1986; Entered into Force March 3, 1989

MESSAGE

FROM

THE PRESIDENT OF THE UNITED STATES

TRANSMITTING

THE TREATY BETWEEN THE UNITED STATES OF AMERICA AND GRENADA CONCERNING THE RECIPROCAL ENCOURAGEMENT AND PROTECTION OF INVESTMENT, SIGNED AT WASHINGTON ON MAY 2, 1986

June 3, 1986.-Treaty was read the first time, and together with the accompanying papers, referred to the Committee on Foreign Relations and ordered to be printed for use of the Senate

U.S. GOVERNMENT PRINTING OFFICE

71-318 WASHINGTON:1986

LETTER OF TRANSMITTAL

THE WHITE HOUSE, June 3, 1986.

To the Senate of the United States:

With a view to receiving the advice and consent of the Senate to ratification, I transmit herewith the Treaty between the United States of America and Grenada concerning the Reciprocal Encouragement and Protection of Investment, signed at Washington on May 2, 1986. I transmit also, for the information of the Senate, the report of the Department of State with respect to this treaty.

The Bilateral Investment Treaty (BIT) program, initiated in 1981, is designed to encourage and protect US investment in developing countries. The treaty is an integral part of US efforts to encourage Grenada and other governments to adopt macroeconomic and structural policies that will promote economic growth. It is also fully consistent with US policy toward international investment. That policy holds that an open international investment system in which participants respond to market forces provides the beat and most efficient mechanism to promote global economic development. A specific tenet, reflected in this treaty, is that US direct investment abroad and foreign investment in the United States should receive fair, equitable, and nondiscriminatory treatment. Under this treaty, the parties also agree to international law standards for expropriation and compensation; free financial transfers; and procedures, including international arbitration, for the settlement of investment disputes.

I recommend that the Senate consider this treaty as soon as possible and give its advice and consent to ratification of the treaty at an early date.

RONALD REAGAN.

LETTER OF SUBMITTAL

DEPARTMENT OF STATE,

Washington, May 20, 1986.

THE PRESIDENT,

The White House

THE PRESIDENT: I have the honor to submit to you the treaty between the United States of America and Grenada concerning the Reciprocal Encouragement and Protection of Investment, signed at Washington, May 2, 1986. Agreement on this treaty was reached under the bilateral investment treaty (BIT) program which you initiated in 1981. Development of the BIT program and the negotiations of the individual treaties have been pursued by the Office of the United States Trade Representative and the Department of State with active participation of the Departments of Commerce and Treasury, in conjunction with other interested US Government agencies. On March 25 of this year, the first six BITs - with Haiti, Morocco, Panama, Senegal, Turkey, and Zaire - were submitted to the Senate for its advice and consent to ratification. Additional BITS, with Bangladesh, Cameroon and Egypt, have been signed. I recommend that this treaty be transmitted to the Senate for its advice and consent to ratification.

In 1981 you initiated the global BIT program to encourage and protect US investment in developing countries. By providing certain mutual guarantees and protections, a BIT creates a more stable and predictable legal framework for foreign investors in the territory of each of the treaty Parties. The negotiation of a series of bilateral treaties with interested countries establishes greater, international discipline in the investment area.

The BITS which have been signed as well as others under negotiation are an integral part of US efforts to encourage other governments to adopt macroeconomic and structural policies that will promote economic growth. They are also fully consistent with your Policy statement on international investment of September 9, 1983, which states that international direct investment flows should be determined by private market forces and should receive fair, equitable and non-discriminatory treatment.

Our experience to date-has shown that interested countries are willing to provide US investors with significant investment guarantees and assurances as a way of including additional foreign investment. It is US policy to advise potential treaty partners that conclusion of a BIT with the United States is an important and favorable factor in the investment relationship, but does not in and of itself result in immediate increases in US investment flows.

Congressional support for the BIT program is reflected in Section A 601(a) and (b) of the Foreign Assistance Act, as amended, in particular, at Section 601(b) which provides:

In order to encourage and facilitate participation by private enterprise to the maximum extent practicable in achieving any of the purposes of this Act, the President shall … (3) accelerate a program of negotiating treaties for commerce and trade, including tax treaties, which shall include provisions to encourage and facilitate the flow of private investment to, and its equitable investment in, friendly countries and areas participating in programs under this Act.

Bits are consistent in purpose with the network of treaties of Friendship, Commerce and Navigation (FCNs) which the United States negotiated from the early years of the Republic until the last successful negotiations with Thailand and Togo in the late 1960s. They continue the US policy of securing by agreement standards of equitable treatment and protection of US citizens carrying on business abroad, and institutionalizing processes for the settlement of disputes between investors and host countries, and between governments. We expect that a series of bilateral treaties with interested countries will establish greater international discipline in the investment area.

The BIT was designed to protect investment not only by treaty also by reinforcing traditional international legal principles and practice regarding foreign direct private investment. In pursuit of is objective, the model BIT adopts FCN language and concepts. Traditional FCN provisions granting rights which are not important to the typical US investor were eliminated and replaced with more specific language concerning investment protection. Perhaps most significantly, the BIT goes beyond the traditional FCN to provide investor-host country arbitration in instances where an investment dispute arises.

Our BIT approach followed similar programs that had been undertaken with considerable success by a number of European countries, including the Federal Republic of Germany and the United Kingdom, since the early 1960s. Indeed, our industrialized partners already have nearly two hundred Bits in force, primarily with developing countries. Our treaties, which draw upon language used in the US FCN treaties as well as European counterparts, are more comprehensive and far-reaching than European Bits

THE U.S.-GRENADA TREATY

The treaty with Grenada satisfies all four main BIT objectives:

- foreign investors are to be accorded treatment in accordance with international law and are to be treated no less favorably than investors of the host country or no less favorably than investors of third countries, whichever is the most favorable treatment (“national” or “most-favored-nation” treatment) subject to certain specified exceptions;

-international law standards shall apply to the expropriation of investments and to the payment of compensation for expropriation;

-free transfers shall be afforded to funds associated with an investment into and out of the host country; and

-procedures are to be established which allow an investor to take a dispute with a Party directly to binding third-party arbitration.

The provisions on treatment of foreign investment and arbitration, and in particular Grenada’s acceptance of international Iaw as the governing law, mark an important achievement for the BIT program and our investment and international arbitration policies.

The provisions of the treaty with Grenada do not differ in any respect from the US model text. The language adopted is identical to that contained in the current US model text, the most significant provisions of which are as follows.

The model Bits definition section clarifies terms such as “company of a Party” and “investment.” The BIT concept of “investment” is broad and designed to be flexible; although numerous types of economic interests are enumerated, the intent is to include all legitimate interests in the territory of either Party, whether directly or indirectly controlled by nationals of the other, having economic value or “associated” with an investment. Protected “companies of a Party” are those incorporated or otherwise organized under the laws of a Party in which nationals of that Party have a substantial interest.

The model BIT accords the better of national or most/favored-nation (MFN) treatment to foreign investment, subject to each Party’s exceptions which are listed in a separate Annex. The exceptions are designed to protect state regulatory interests and for the United States to accommodate the derogations from national treatment in state or federal law relating to such areas as air transport, shipping, banking, telecommunications, energy and power production, insurance, and from national and MFN treatment in the case of ownership of real property. Grenada has listed the following sectors or matters as exceptions: air transportation, government grants, government insurance and loan programs, ownership of real property. Grenada has listed the following sectors or matters as exceptions: air transportation, government grants, government insurance and loan programs, ownership of real estate, use of land and natural resources. Any additional restrictions or limitations which a Party may adopt with respect to those matters or sectors excepted from the standards are not to affect existing investments. The BIT also includes general treatment protections designed to be a guide to interpretation and application of the treaty. Thus, the Parties agree to accord investments “fair and equitable treatment” and “full protection and security” in no case “less than that required by international law.” It specifically grants nationals of a Party the right to establish investments in the territory of the other Party, restricts the right to impose performance requirements, and obliges Parties to observe their contractual obligations with investors. The US model also provides that companies legally constituted under the laws of the other Parties (i.e., subsidiaries of companies of a Party) with investments in that country shall be permitted “top managerial personnel of their choice, regardless of nationality.”

The model BIT also confers pro unlawful interference with property interests and assures compensation in accordance with international law standards. It provides that any direct or indirect taking must be: for a public purpose; nondiscriminatory; accompanied by the payment of prompt, adequate and effective compensation; and in accordance with due process of law and the general standards of treatment discussed above. The meaning of ‘expropriation” as used in the model BIT is broad and flexible; it includes any measure which is “tantamount to expropriation or nationalization.” Such compensation, which “shall be equivalent to the fair market value of the expropriated investment immediately before the expropriatory action was taken or became known,” must be “without delay,” fully realizable,” “freely transferable” and “include interest at a commercially reasonable rate from the date of expropriation ….” The BIT grants the right to “prompt review” by the relevant judicial or administrative authorities in order to determine whether the compensation offered is consistent with these principles. It also extends national and MFN treatment to investors in cases of loss due to war or other civil disturbance. The BIT does not provide, however, a specific valuation method for compensating such losses.

The model BIT provides for free transfers “related to an investment,” specifically of returns, compensation for expropriation, payments arising out of an investment dispute, contract payments, proceeds from sale, and contributions to capital for maintenance or development of an investment. Such transfers are to be made in a “freely convertible currency at the prevailing market rate of exchange on the date of transfer with respect to spot transactions in the currency to be transferred.” The model text recognizes that notwithstanding this guarantee Parties can maintain certain laws and regulations regarding transfers provided these are applied in a nondiscriminatory fashion. In particular, the model text provides that Parties can require reports of currency transfers and impose income taxes by such means as a withholding tax on dividends. The model text also recognizes that Parties retain the right to protect the rights of creditors and ensure the satisfaction of judgments in adjudicatory proceedings.

The model BIT provides that where certain defined investment disputes arise between a Party and a national or company of the other Party, including disputes to the interpretation of an investment agreement, and the dispute cannot be solved through negotiation, it may be submitted to arbitration in accordance with any dispute-settlement procedures to which the national or company, and the host country have previously agreed. Unless the national or company has submitted the dispute to previously agreed dispute settlement procedures or to adjudication by domestic courts or other tribunals of the host country, the national or company may submit the dispute to the International Centre for the Settlement of Investment Disputes (“ICSID”) for conciliation or binding arbitration. If ICSID is unavailable, the dispute may be submitted under the rules of ICSID’s additional facility. Exhaustion of local remedies is not required. In a separate provision, the BIT Parties also agree to provide effective means of asserting claims and enforcing rights with respect to investments.

Each of these model provisions was developed after lengthy and extensive consultations within the US Government and with the private sector: While the US model text has recently been simplified, the provisions summarized above have all been retained. The text of the treaty with Grenada is identical to that contained in the current model text.

Submission of this treaty marks a significant development in our international investment policy. I join with the United States Trade Representative and other US Government agencies in supporting the treaty and favor its transmission to the Senate at an early date.

Respectfully submitted.

GEORGE P. SCHULTZ

TREATY BETWEEN THE UNITED STATES OF AMERICA AND GRENADA CONCERNING THE RECIPROCAL ENCOURAGEMENT AND PROTECTION OF INVESTMENT

The United States of America and Grenada,

Desiring to promote greater economic cooperations between them, particularly with respect to investment by nationals and companies of one Party in the territory of the other Party; and

Recognizing that agreement upon the treatment to be accorded such investment will stimulate the flow of private capital and the economic development of the Parties,

Agreeing that fair and equitable treatment of investment is desirable in order to maintain a stable framework for investment and maximum effective utilization of economic resources, and

Having resolved to conclude a treaty concerning the encouragement and reciprocal protection of investment,

Have agreed as follows:

ARTICLE I

1. For the purposes of this treaty,

(b) “investment” means every kind of investment in the territory of one Party owned or controlled, directly or indirectly by nationals of companies of the other Party, such as equity, debt, and service and investment contracts; and includes:

(i) tangible and intangible property, including rights, such as mortgages, liens and pledges;

(ii) a company or shares of stock or other interests in a company or interests in the assets thereof;

(iii) a claim to money or a claim to performance having economic value, and associated with an investment;

(iv) intellectual and industrial property rights, including rights with respect to copyrights, patents, trademarks, trade names, industrial designs, trade secrets and know-how, goodwill; and

(v) any right conferred by law or contract, and any licenses and permits pursuant to law;

(e) “associated activities” include the organization, control, operation, maintenance and disposition of companies, branches, agencies, offices, factories or other facilities for the conduct of business; the making, performance and enforcement of contracts; the acquisition, use, protection and disposition of property of all kinds including intellectual and industrial property rights; and the borrowing of funds, the purchase and issuance of equity shares, and the purchase of foreign exchange for imports.

3. Any alteration of the form in which assets are invested or reinvested shall not affect their character as investment.

ARTICLE II

1. Each Party shall permit and treat investment, and activities associated therewith, on a basis no less favorable than that accorded in like situations to investment or associated activities of its own nationals or companies, or of nationals or companies of any third country, whichever is the most favorable, subject to the right of each Party to make or maintain exceptions falling within one of the sectors or matters listed in the Annex to this Treaty. Each Party agrees to notify the other Party before or on the date of entry into force of this Treaty of all such laws and regulations of which it is aware concerning the sectors or matters listed in the Annex. Moreover, each Party agrees to notify the other of any future exception with respect to the sectors or matters listed in the Annex, and to limit such exceptions to a minimum. Any future exception by either Party shall not apply to investment existing in that sector or matter at the time the exception becomes effective. The treatment accorded pursuant to any exceptions shall not be less favorable than that accorded in like situations to investments and associated activities of nationals or companies of any third country, except with respect to ownership of real property. Rights to engage in mining on the public domain shall be dependent on reciprocity.

2. Investments shall at all times be accorded fair and equitable treatment, shall enjoy full protection and security and shall in no case be accorded treatment less than that required by international law. Neither Party shall in any way impair by arbitrary and discriminatory measures the management, operation, maintenance, use, enjoyment, acquisition, expansion, or disposal of investments. Each Party shall observe any obligation it may have entered into with regard to investments

3. Subject to the laws relating to the entry and sojourn of aliens, nationals of either Party shall be permitted to enter and to remain in the territory of the other Party for the purpose of establishing, developing, administering or advising on the operation of an investment to which they, or a company of the first Party, that employs them, have committed or are in the process of committing a substantial amount of capital or other resources.

4. Companies which are legally constituted under the applicable laws or regulations of one Party, and which are investments, shall be permitted to engage top managerial personal of their choice, regardless of nationality.

6. Each Party shall provide effective means of asserting claims and enforcing rights with respect to investment agreements, investment authorizations and properties.

7. Each Party shall make public all laws, regulations, administrative practices and procedures, and adjudicatory decisions that pertain to or affect investments.

ARTICLE III

1. Investments shall not be expropriated or nationalized either directly or indirectly through measures tantamount to expropriation or nationalization (“expropriation”) except for a public purpose; in a non-discriminatory manner; upon payment of prompt, adequate and effective compensation; and in accordance with due process of law and the general principles of treatment provided for in Article II (2). Compensation shall be equivalent to the fair market value of the expropriated investment immediately before the expropriatory action was taken or became known; include interest at a commercially reasonable rate from the date of expropriation; be paid without delay; be fully realizable; and be freely transferable at the prevailing market rate of exchange on the date of expropriation.

3. Nationals or companies of either Party whose investments suffer losses in the territory of the other Party owing to war or other armed conflict, revolution, state of national emergency, insurrection, civil disturbance or other similar events shall be accorded treatment by such other Party no less favorable than that accorded to its own nationals or companies or to nationals or companies of any third country, whichever is the most favorable treatment, as regards any measures it adopts in relation to such losses.

ARTICLE IV

1. Each Party shall permit all transfers related to an investment to be made freely and without delay into and out of its territory. Such transfers include: (a) returns; (b) compensation pursuant to Article III; (c) payments arising out of an investment dispute; (d) payments made under a contract, including amortization of principal and accrued interest payments made pursuant to a loan agreement; (e) proceeds from the sale or liquidation of all or any part of an investment; and (f) additional contributions to capital for the maintenance or development of an investment.

2. Except as provided in Article III paragraph 1, transfers shall be made in a freely convertible currency at the prevailing market rate of exchange on the date of transfer with respect to spot transactions in the currency to be transferred.

3. Notwithstanding the provisions of paragraphs 1 and 2, either Party may maintain laws and regulations; (a) requiring reports of currency transfer; and (b) imposing income taxes by such means as a withholding tax applicable to dividends or other transfers. Furthermore, either Party may protect the rights of creditors, or ensure the satisfaction of judgments in adjudicatory proceedings, through the equitable, nondiscriminatory and good faith application of its law.

ARTICLE V

ARTICLE VI

1. For purposes of this Article, an investment dispute is defined as a dispute involving (a) the interpretation or application of an investment agreement between a Party and a national or company of the other Party; (b) the interpretation or application of any investment authorization granted by a Party’s foreign investment authority to such national or company; or (c) an alleged breach of any right conferred or created by this Treaty with respect to an investment.

2. In the event of an investment dispute between a Party and a national or company of the other Party, the parties to the dispute shall initially seek to resolve the dispute by consultation and negotiation, which may include the use of non-binding, third-party procedures. If the dispute cannot be resolved through consultation and negotiation, the dispute shall be submitted for settlement in accordance with previously agreed, applicable dispute-settlement procedures. Any dispute-settlement procedures regarding expropriation and specified in the investment agreement shall remain binding and shall be enforceable in accordance with the terms of the investment agreement, relevant provisions of domestic laws, and applicable international agreements regarding enforcement of arbitral awards.

3. (a) The national or company concerned may choose to consent in writing to the submission of the dispute to the International Centre for the Settlement of Investment Disputes (“Centre”) or under the rules of the Additional Facility of the Centre (“Additional Facility”), for settlement by conciliation or binding arbitration, at any time after six months from the date upon which the dispute arose. Once the national or company concerned has so consented, either party to the dispute may institute proceedings before the Centre or the Additional Facility provided:

(i) the dispute has not been submitted by the national or company for resolution in accordance with any applicable previously agreed dispute settlement procedures; and

If the parties disagree over whether conciliation or binding arbitration is the more appropriate procedure to be employed, the opinion of the national or company concerned shall prevail.

(c) Conciliation or binding arbitration of such disputes shall be done in accordance with the provisions of the Convention on the Settlement of Investment Disputes Between States and Nationals of other States done at Washington March 18, 1965 (“Convention”) and the Regulations and Rules of the Centre or, if the Convention should for any reason be inapplicable the Rules of the Additional Facility shall govern.

5. For the purposes of this Article, any company legally constituted under the applicable laws and regulations of either Party or a political subdivision thereof but that, immediately before the occurrence of the event or events giving rise to the dispute, was an investment of nationals or companies of the other Party, shall, in accordance with Article 25 (2)(b) of the Convention, be treated as a national or company of such other Party.

ARTICLE VII

1. Any dispute between the Parties concerning the interpretation or application of this Treaty which is not resolved through consultations or other diplomatic channels, shall be submitted, upon the request of either Party, to an arbitral tribunal for binding decision in accordance with the applicable rules of international law. In the absence of an agreement by the Parties to the contrary, the Model Rules on Arbitral Procedure adopted by the United Nations International Law Commission in 1958 as referred to in U.N. General Assembly Resolution 1262 (XIII) shall govern.

2. Within two months of receipt of a request, each Party shall appoint an arbitrator. The two arbitrators shall select a third arbitrator as Chairman, who is a national of a third State.

3. Unless otherwise agreed, all submissions shall be made and all hearings shall be completed within six months of the date of selection of the third arbitrator, and the Tribunal shall render its decision within two months of the date of the final submissions or the date of the closing of the hearings, whichever is later.

4. Expenses incurred by the Chairman, the other arbitrators, and other costs of the proceeding shall be paid for equally by the Parties. The Tribunal may, however, at its discretion, direct that a higher proportion of the costs be paid by one of the Parties.

ARTICLE VIII

ARTICLE IX

This Treaty shall not derogate from:

(a) laws and regulations, administrative practices or procedures, or administrative or adjudicatory decisions of either Party;

b) international legal obligations; or

(c) obligations assumed by either Party, including those contained in an investment agreement or an investment authorization,that entitle investments or associated activities to treatment more favorable than that accorded by this Treaty in like situations.

ARTICLE X

1. This Treaty shall not preclude the application by either Party of measures necessary in its jurisdiction for the maintenance of public order, the fulfillment of its obligations with respect to the maintenance or restoration of international peace or security, or the protection of its own essential security interests.

ARTICLE XI

1. With respect to its tax policies, each Party should strive to accord fairness and equity in the treatment of investment of nationals and companies of the other Party.

2. Nevertheless, the provisions of this Treaty, and in particular Article VI and VII, shall apply to matters of taxation only with respect to the following:

(a) expropriation, pursuant to Article III;

(b) transfers, pursuant to Article IV; or

(c) the observance and enforcement of terms of an investment agreement or authorization as referred to in Article VI (1)(a) or (b),to the extent they are not subject to the dispute settlement provisions of a convention for the avoidance of double taxation between the two Parties, or have been raised under such settlement provisions and are not resolved within a reasonable period of time.

ARTICLE XII

2. Either party may, by giving one year’s written notice to the other Party, terminate this Treaty at the end of the initial ten year period or at any time thereafter.

3. With respect to investments made or acquired prior to the date of termination of this Treaty and to which this Treaty otherwise applies, , the provisions of all of the other Articles of this Treaty shall thereafter continue to be effective for a further period of ten years from such a date of termination.

IN WITNESS WHEREOF, the respective plenipotentiaries have signed this Treaty.

DONE in duplicate at Washington on the Second day of May 1986 in the English language.

For the Government of the United States of America:

Clayton Yeutter.

For the Government of Grenada:

Herbert Blaize.

ANNEX

Consistent with Article II paragraph 1, each Party reserves the right to maintain limited exceptions in the sectors or matters it has indicated below:

THE UNITED STATES OF AMERICA

Air transportation; ocean and coastal shipping; banking; insurance; government grants;government insurance and loan programs; energy and power production;custom housebrokers; ownership of real estate; ownership and operation of broadcast or common carrier radio and television stations; ownership of shares in the Communications Satellite Corporation; the provision of common carrier telephone and telegraph services; the provision of submarine cable services; use of land and natural resources.

GRENADA

Air transportation; government grants; government insurance and loan programs;ownership of real estate; use of land and natural resources.

End of tab panel

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Honduras Bilateral Investment Treaty

Signed July 1, 1995; Entered into Force July 11, 2001

106th Congress SENATE Treaty Doc.

2d Session 106-27

_______________________________________________________________________

INVESTMENT TREATY WITH HONDURAS

MESSAGE

FROM

THE PRESIDENT OF THE UNITED STATES

TRANSMITTING

TREATY BETWEEN THE GOVERNMENT OF THE UNITED STATES OF AMERICA AND THE GOVERNMENT OF THE REPUBLIC OF HONDURAS CONCERNING THE ENCOURAGEMENT AND RECIPROCAL PROTECTION OF INVESTMENT, WITH ANNEX AND PROTOCOL, SIGNED AT DENVER ON JULY 1, 1995

MAY 23, 2000.-Treaty was read the first time and, together with the accompanying papers, referred to the Committee on Foreign Relations and ordered to be printed for the use of the Senate

U.S. GOVERNMENT PRINTING OFFICE

79-118 WASHINGTON : 2000

LETTER OF TRANSMITTAL

–––-

The White House, May 23, 2000.

To the Senate of the United States:

The bilateral investment treaty (BIT) with Honduras is the fourth such Treaty with a Central or South American country. The Treaty will protect U.S. investment and assist Honduras in its efforts to develop its economy by creating conditions more favorable for U.S. private investment and thus strengthen the development of its private sector.

The Treaty is fully consistent with U.S. policy toward international and domestic investment. A specific tenet of U.S. policy, reflected in this Treaty, is that U.S. investment abroad and foreign investment in the United States should receive national treatment. Under this Treaty, the Parties also agree to international law standards for expropriation. The Treaty includes detailed provisions regarding the computation and payment of prompt, adequate, and effective compensation for expropriation; free transfer of funds related to investments; freedom of investments from specified performance requirements; fair, equitable, and most-favored-nation treatment; and the investor’s freedom to choose to resolve disputes with the host government through international arbitration.

I recommend that the Senate consider this Treaty as soon as possible, and give its advice and consent to ratification of the Treaty, with Annex and Protocol, at an early date.

WILLIAM J. CLINTON.

LETTER OF SUBMITTAL

–––-

Department of State,

Washington, May 1, 2000.

THE PRESIDENT: I have the honor to submit to you the Treaty Between the Government of the United States of America and the Government of the Republic of Honduras Concerning the Encouragement and Reciprocal Protection of Investment, with Annex and Protocol, signed at Denver on July 1, 1995. I recommend that this Treaty, with Annex and Protocol, be transmitted to the Senate for its advice and consent to ratification.

The bilateral investment treaty (BIT) with Honduras is the fourth such treaty signed between the United States and a Central or South American Country. The Treaty is based on the view that an open investment policy contributes to economic growth. This Treaty will assist Honduras in its efforts to develop its economy by creating conditions more favorable for U.S. private investment and thereby strengthening the development of its private sector. It is U.S. policy, however, to advise potential treaty partners during BIT negotiations that conclusion of such a treaty does not necessarily result in increases in private U.S. investment flows.

To date, 31 BITs are in force for the United States—with Albania, Argentina; Armenia, Bangladesh, Bulgaria, Cameroon, the Republic of the Congo, the Democratic Republic of the Congo (formerly Zaire), the Czech Republic, Ecuador, Egypt, Estonia, Georgia, Grenada, Jamaica, Kazakhstan, Kyrgyzstan, Latvia, Moldova, Mongolia, Morroco, Panama, Poland, Romania, Senegal, Slovakia, Sri Lanka, Trinidad & Tobago, Tunisia, Turkey, and Ukraine. In addition to the Treaty with Honduras, the United States has signed, but not yet brought into force, BITs with Azerbaijan, Bahrain, Belarus, Bolivia, Croatia, El Salvador, Jordan, Lithuania, Mozambique, Nicaragua, Russia, and Uzbekistan.

The Office of the United States Trade Representative and the Department of State jointly led this BIT negotiation, with assistance from the Departments of Commerce and Treasury.

The U.S.-Honduras Treaty

The Treaty with Honduras is based on the 1994 U.S. prototype BIT and satisfies the U.S. principal objectives in bilateral investment treaty negotiations:

—All forms of U.S. investment in the territory of Honduras are covered.

—Covered investments receive the better of national treatment or most-favored-nation (MFN) treatment both while they are being established and thereafter, subject to certain specified exceptions.

—Specified performance requirements may not be imposed upon or enforced against covered investments.

—Expropriation is permitted only in accordance with customary international law standards.

—Parties are obligated to permit the transfer, in a freely usable currency, of all funds related to a covered investment, subject to exceptions for specified purposes.

—Investment disputes with the host government may be brought by investors, or by their covered investments, to binding international arbitration as an alternative to domestic courts.

These elements are further described in the following article-by-article analysis of the provisions of the Treaty:

Title and Preamble

Article I (Definitions)

Article I defines terms used throughout the Treaty.

Company, Company of a Party

The definition of “company” is broad, covering all types of legal entities constituted or organized under applicable law, and includes corporations, trusts, partnerships, sole proprietorships, branches, joint ventures, and associations. The definition explicitly cover not-for-profit entities, as well as entities that are owned or controlled by the state. “Company of a Party” is defined as a company constituted or organized under the laws of that Party.

National

The Treaty defines “national” as a natural person who is a national of a Party under its own laws. Under U.S. law, the term “national” is broader than the term “citizen.” For example, a native of American Samoa is a national of the United States, but not a citizen.

Investment, Covered Investment

The Treaty’s definition of investment if broad, recognizing that investment can take a wide variety of forms. Every kind of investment is specifically incorporated in the definition; moreover, it is explicitly noted that investment may consist or take the form of any of a number of interests, claims, and rights.

The Treaty defines “covered investment” as an investment of a national or company of a Party in the territory of the other Party. An investment of a national or company is one that the national or company owns or controls, either directly or indirectly. Indirect ownership or control could be through other, intermediate companies or persons, including those of third countries. Control is not specifically defined in the Treaty; ownership of over 50 percent of the voting stock of a company would normally convey control, but in many cases the requirement could be satisfied by less than that proportion, or by other arrangements.

State Enterprise, Investment Authorization, Investment Agreement

The Treaty defines an “investment authorization” as an authorization granted by the foreign investment authority of a Party to be covered investment or a national or company of the other Party.

The Treaty defines an “investment agreement” as a written agreement between the national authorities of a Party and a covered investment or a national or company of the other Party that (1) grants rights with respect to natural resources or other assets controlled by the national authorities and (2) the investment, national, or company relies upon in establishing or acquiring a covered investment. This definition thus excludes agreements with subnatural authorities (including U.S. States) as well as agreements arising from various types of regulatory activities of the national government, including, in the tax area, rulings, closing agreements, and advance pricing agreements.

ICSID Convention, Centre, UNCITRAL Arbitration Rules

The “ICSID Convention,” “Centre,” and “UNCITRAL Arbitration Rules” are explicitly defined to make the text brief and clear.

Article II (Treatment of Investment)

Article II contains the Treaty’s major obligations with respect to the treatment of covered instruments.

Paragraph 1 generally ensure the better of national or MFN treatment in both the entry and post-entry phases of investment. It thus prohibits, outside of exceptions listed in the Annex, “screening” on the basis of nationality during the investment process, as well as nationality-based post-establishment measures. For purposes of the Treaty, “national treatment” means treatment no less favorable than that which a Party accords, in like situations, to investments in its territory of its own nationals or companies. For purposes of the Treaty, “MFN treatment” means treatment no less favorable than that which a Party accords, in like situations, to investments in its territory of nationals or companies of a third country. The Treaty obliges each Party to provide whichever of national treatment or MFN treatment is the most favorable. This is defined by the Treaty as “national and MFN treatment.” Paragraph 1 explicitly states that the national and MFN treatment obligation will extend to state enterprises in their provision of goods and services to covered investment.

Paragraph 2 states that each Party may adopt or maintain exceptions to the national and MFN treatment standard with respect to the sectors or matters specified in the Annex. Further restrictive measures are permitted in each sector. (The specific exceptions are discussed in the section entitled “Annex” below.) In the Annex, Parties may take exceptions only to the obligation to provide national and MFN treatment; there are not sectoral exceptions to the rest of the Treaty’s obligations. Finally, in adopting any exception under this provision, a Party may not require the divestment of a preexisting covered investment.

Paragraph 3 sets out a minimum standard of treatment based on standards found in customary international law. The obligations to accord “fair and equitable treatment” and “full protection and security” are explicitly cited, as is each Party’s obligation not to impair, through unreasonable and discriminatory means, the management, conduct, operation, and sale or other disposition of covered investments. The general reference to international law also implicitly incorporates other fundamental rules of customary international law regarding the treatment of foreign investment. However, this provision does not incorporate obligations based on other international agreements.

Paragraph 4 requires that each Party provide effective means of asserting claims and enforcing rights with respect to covered investments.

Paragraph 5 ensures the transparency of each Party’s regulation of covered investments.

Article III (Expropriation)

Paragraphs 2, 3, and 4 more fully describe the meaning of “prompt, adequate and effective compensation.” The guiding principle is that the investor should be made whole.

Article IV (Compensation for Damage Due to War and Similar Events)

Article V (Transfers)

Paragraph 2 provides that each Party must permit transfers to be made in a “freely usable currency” at the market rate of exchange prevailing on the date of transfer. “Freely usable” is a term used by the International Monetary Fund; at present there are five “freely usable” currencies: the U.S. dollar, Japanese yen, German mark, French franc, and British pound sterling.

Article VI (Performance Requirements)

Article VI prohibits either Party from mandating or enforcing specified performance requirements as a condition for the establishment, acquisition, expansion, management, conduct, or operation of a covered investment. The list of prohibited requirements is exhaustive and covers domestic content requirements and domestic purchase preferences, the “balancing” of imports or sales in relation to exports or foreign exchange earnings, requirements to export products or services, technology transfer requirements, and requirements relating to the conduct of research and development in the host country. Such requirements are major burdens on investors and impair their competitiveness.

The last sentence of Article VI makes clear that a Party may, however, impose conditions for the receipt or continued receipt of benefits and incentives.

Article VII (Entry, Sojourn, and Employment of Aliens)

Paragraph 1 requires each Party to allow, subject to its laws relating to the entry and sojourn of aliens, the entry into its territory of the other Party’s nationals for certain purposes related to a covered investment and involving the commitment of a “substantial amount of capital.” This paragraph serves to render nationals of Honduras eligible for treaty-investor visas under U.S. immigration law. It also affords similar treatment for U.S. nationals entering Honduras. The requirement to commit a “substantial amount of capital” is intended to prevent abuse of treaty-investor status; it parallels the requirements of U.S. immigration law.

In addition, paragraph 1(b) prohibits labor certification requirements and numerical restrictions on the entry of treaty-investors.

Article VIII (State-State Consultations)

Article IX (Settlement of Disputes Between One Party and a National or Company of the Other Party)

Article IX sets forth several means by which disputes brought against a Party by an investor (specifically, a national or company of the other Party) may be resolved.

Before or during such arbitral proceedings, however, paragraph 3(b) provides that an investor may seek, without affecting its right to pursue arbitration under this Treaty, interim injunctive relief not involving the payment of damages from local courts or administrative tribunals of the Party that is a party to the dispute for the preservation of its rights and interests. This paragraph does not alter the power of the arbitral tribunals to recommend or order interim measures they may deem appropriate.

Paragraph 4 constitutes each Party’s consent to the submission of investment disputes to binding arbitration in accordance with the choice of the investor.

Article X (Settlement of Disputes Between the Parties)

Article X provides for binding arbitration of disputes between the United States and Honduras concerning the interpretation or application of the Treaty that are not resolved through consultations or other diplomatic channels. The article specifies various procedural aspects of such arbitration proceedings, including time periods, selection of arbitrators, and distribution of arbitration costs between the Parties. The article constitutes each Party’s prior consent to such arbitration.

Article XI (Preservation of Rights)

Article XI clarifies that the Treaty does not derogate from any obligation a Party might have to provide better treatment to the covered investment than is specified in the Treaty. Thus, the Treaty establishes a floor for the treatment of covered investments. A covered investment may be entitled to more favorable treatment through domestic legislation, other international legal obligations, or a specific obligation (e.g., to provide a tax holiday) assumed by a Party with respect to that covered investment.

Article XII (Denial of Benefits)

Article XII(b) permits each Party to deny the benefits of the Treaty to a company of the other Party if the company is owned or controlled by non-party nationals and if the company has no substantial business activities in the Party where it is established. Thus, the United States could deny benefits to a company that is a subsidiary of a shell company organized under the laws of Honduras if controlled by nationals of a third country. However, this provision would not generally permit the United States to deny benefits to a company of Honduras that maintains its central administration or principal place of business in the territory of, or has a real and continuous link with, Honduras.

Article XIII (Taxation)

Article XIII excludes tax matters generally from the coverage of the BIT, on the basis that tax matters should be dealt with in bilateral tax treaties. However, Article XIII does not preclude a national or company from bringing claims under Article IX that taxation provisions in an investment agreement or authorization have been violated. In addition, the dispute settlement provisions of Article IX and X apply to tax matters in relation to alleged violations of the BIT’s expropriation article.

Under paragraph 2, a national or company that asserts in a dispute that a tax matter involves expropriation may submit that dispute to arbitration pursuant to Article IX(3) only if (1) the investor has first referred to the competent tax authorities of both Parties the issue of whether the tax matter involves an expropriation, and (2) the tax authorities have not both determined, within 9 months from the time of referral, that the matter does not involve an expropriation. The “competent tax authority” of the United States is the Assistant Secretary of the Treasury for Tax Policy, who will make such a determination only after consultation with the Inter-Agency Staff Coordinating Group on Expropriations.

Article XIV (Measures Not Precluded)

Under paragraph 3 of the Protocol to the Treaty, the parties expressed their understanding that international obligations with respect to maintenance or restoration of peace or security means obligations under the United Nations Charter. The pertinent portion of the Charter is Chapter VII “Action with Respect to Threats to the Peace, Breaches of the Peace, and Acts of Aggression.” Measures permitted by the provision on the protection of a Party’s essential security interests would include security-related actions taken in time of war or national emergency. Actions not arising from a state of war or national emergency must have a clear and direct relationship to the essential security interests of the Party involved. Measures to protect a Party’s essential security interests are self-judging in nature, although each Party would expect the provisions to be applied by the other in good faith.

Article XV (Application to Political Subdivisions and State Enterprises of the Parties)

Paragraph 1(a) makes clear that the obligations of the Treaty are applicable to all political subdivisions of the Parties, such as provincial, State, and local governments.

Paragraph 1(b) recognizes that under the U.S. federal system, States of the United States may, in some instance, treat out-of-State residents and corporations in a difference manner than they treat in-State residents and corporations. The Treaty provides that the national treatment committee, with respect to the States, means treatment no less favorable than that provided by a State to U.S. out-of-State residents and corporations.

Article XVI (Entry Into Force, Duration, and Termination)

Paragraph 3 provides that, if the Treaty is terminated, all investments that qualified as covered investments on the date of termination (i.e., 1 year after the date of written notice of termination) continue to be protected under the Treaty for 10 years from that date as long as these investment qualify as covered investments. A Party’s obligations with respect to the establishment and acquisition of investments would lapse immediately upon the date of termination of the Treaty.

Paragraph 4 stipulates that Annex and Protocol shall form an integral part of the Treaty.

Annex

Under a number of statutes, many of which have a long historical background, the U.S. federal government or States may not necessarily treat investments of nationals or companies of Honduras as they do U.S. investments or investments from a third country. Paragraphs 1 through 3 of the Annex list the sectors or matters subject to U.S. exceptions.

The U.S. exceptions from its national and MFN treatment obligation are: fisheries; and air and maritime transport, and related activities.

During negotiations, the United States informed Honduras that if Honduras undertook acceptable commitments with respect to all or certain financial services, the United States would consider limiting its exceptions with respect to its national and MFN treatment obligations in financial services.

Honduras offered to take no exceptions to the treaty’s national or MFN treatment obligations with respect to banking, insurance, securities, and other financial services. Therefore in paragraph 3 of the Annex, the United States limited its exceptions with respect to banking, insurance, securities, and other financial services to afford treatment no less favorable than that accorded with respect to Canada and Mexico in the North American Free Trade Agreement.

Paragraph 4 of the Annex lists Honduras’ exceptions from its national treatment obligation, which are: properties on cays, reefs, rocks, shoals or sandbanks or on islands or on any property located within 40 km of the coastline of land borders of Honduras; small scale industry and commerce with total invested capital of no more than US $ 40,000 or its equivalent in national currency; ownership, operation and editorial control of broadcast radio and television; ownership, operation and editorial control of general interest periodicals and newspapers published in Honduras.

Honduras has taken no exception to its MFN treatment obligation.

Paragraph 5 of the Annex ensures that national treatment is granted by each Party in all leasing of minerals or pipeline rights-of-way on government lands. In so doing, this provision affects the implementation of the Mineral Lands Leasing Act (MLLA) (30 U.S.C. 181 et seq.) and 10 U.S.C. 7435, regarding Naval Petroleum Reserves, with respect to nationals and companies of Honduras. The Treaty provides for resort to binding international arbitration to resolve disputes, rather than denial of mineral rights or rights to naval petroleum shares to investors of the other Party, as is the current process under the statute, U.S. domestic remedies, would, however, remain available for use in conjunction with the Treaty’s provisions.

Honduras’ extension of national treatment in these sectors will fully meet the objectives of the MLLA and 10 U.S.C. 7435. Honduras was informed during negotiations that, were it to include this sector in its list of treatment exemptions, the United States would (consistent with the MLLA and 10 U.S.C. 7435) exclude the leasing of minerals or pipeline rights-of-way on Government lands from the national and MFN treatment obligations of this Treaty.

Protocol

Paragraph 1 of the Protocol clarifies that Honduras may restrict transfers under Article V(4)(a) through the application of portions of its labor laws designed to protect the rights of creditors so long as those laws are applied in an equitable, non-discriminatory, and good faith manner.

In paragraph 2, Honduras clarified that, notwithstanding its exception to its national treatment obligation with respect to “properties on cays, reefs, rocks, shoals or sandbanks or on islands or on any property located within 40 km of the coastline or land borders of Honduras,” in considering applications by U.S. nationals or companies to possess or acquire real property within urban zones of these areas, Honduras will not reject or unduly delay such decisions on the basis of nationality.

As described under Article XIV, paragraph 3 states that, with respect to Article XIV, “obligations with respect to the maintenance or restoration of international peace or security” means obligations under the Charter of the United Nations.

Paragraph 4 clarifies that nothing in Article XIV(1) authorizes either Party to take measures in the territory of the other Party with respect to the maintenance or restoration of international peace or security, or the protection of its own essential security interests.

The other U.S. Government agencies that participated in negotiating the Treaty join me in recommending that it be transmitted to the Senate at an early date.

Respectfully submitted.

MADELINE ALBRIGHT .

TREATY BETWEEN

THE GOVERNMENT OF THE UNITED STATES OF AMERICA AND

THE GOVERNMENT OF THE REPUBLIC OF HONDURAS

CONCERNING THE ENCOURAGEMENT

AND RECIPROCAL PROTECTION OF INVESTMENT

The Government of the United States of America and the Government of the Republic of Honduras (hereinafter the “Parties”);

Desiring to promote greater economic cooperation between them, with respect to investment by nationals and companies of one Party in the territory of the other Party;

Recognizing that agreement upon the treatment to be accorded such investment will stimulate the flow of private capital and the economic development of the Parties;

Agreeing that a stable framework for investment will maximize effective utilization of economic resources and improve living standards;

Recognizing that the development of economic and business ties can promote respect for internationally recognized worker rights;

Agreeing that these objectives can be achieved without relaxing health, safety and environmental measures of general application; and

Having resolved to conclude a Treaty concerning the encouragement and reciprocal protection of investment;

Have agreed as follows:

ARTICLE I

For the purposes of this Treaty,

(b) “company of a Party” means a company constituted or organized under the laws of that Party;

(i) a company;

(ii) shares, stock, and other forms of equity participation, and bonds, debentures, and other forms of debt interests, in a company;

(iii) contractual rights, such as under turnkey, construction or management contracts, production or revenue-sharing contracts, concessions, or other similar contracts;

(iv) tangible property, including real property; and intangible property, including rights, such as leases, mortgages, liens and pledges;

(v) intellectual property, including:

copyrights and related rights,

patents,

rights in plant varieties,

industrial designs,

rights in semiconductor layout designs,

trade secrets, including know-how and confidential business information,

trade and service marks, and

trade names; and

(vi) rights conferred pursuant to law, such as licenses and permits;

(e) “covered investment” means an investment of a national or company of a Party in the territory of the other Party;

(f) “state enterprise” means a company owned, or controlled through ownership interests, by a Party;

(g) “investment authorization” means an authorization granted by the foreign investment authority of a Party to a covered investment or a national or company of the other Party;

(i) “ICSID Convention” means the Convention on the Settlement of Investment Disputes between States and Nationals of Other States, done at Washington, March 18, 1965;

(j) “Centre” means the International Centre for Settlement of Investment Disputes Established by the ICSID Convention; and

(k) “UNCITRAL Arbitration Rules” means the arbitration rules of the United Nations Commission on International Trade Law.

ARTICLE II

(b) Neither Party shall in any way impair by unreasonable and discriminatory measures the management, conduct, operation, and sale or other disposition of covered investments.

4. Each Party shall provide effective means of asserting claims and enforcing rights with respect to covered investments.

ARTICLE III

4. If the fair market value is denominated in a currency that is not freely usable, the compensation paid—converted into the currency of payment at the market rate of exchange prevailing on the date of payment—shall be no less than:

(a) the fair market value on the date of expropriation, converted into a freely usable currency at the market rate of exchange prevailing on that date, plus

(b) interest, at a commercially reasonable rate for that freely usable currency, accrued from the date of expropriation until the date of payment.

ARTICLE IV

(a) requisitioning of all or part of such investments by the Party’s forces or authorities, or

(b) destruction of all or part of such investments by the Party’s forces or authorities that was not required by the necessity of the situation.

ARTICLE V

1. Each Party shall permit all transfers relating to a covered investment to be made freely and without delay into and out of its territory. Such transfers include:

(a) contributions to capital;

(b) profits, dividends, capital gains, and proceeds from the sale of all or any part of the investment or from the partial or complete liquidation of the investment;

(d) payments made under a contract, including a loan agreement; and

(e) compensation pursuant to Articles III and IV, and payments arising out of an investment dispute.

2. Each Party shall permit transfers to be made in a freely usable currency at the market rate of exchange prevailing on the date of transfer.

4. Notwithstanding paragraphs 1 through 3, a Party may prevent a transfer through the equitable, non-discriminatory and good faith application of its laws relating to:

(a) bankruptcy, insolvency or the protection of the rights of creditors;

(b) issuing, trading or dealing in securities;

(d) ensuring compliance with orders or judgments in adjudicatory proceedings.

ARTICLE VI

(a) to achieve a particular level or percentage of local content, or to purchase, use or otherwise give a preference to products or services of domestic origin or from any domestic source;

(b) to limit imports by the investment of products or services in relation to a particular volume or value of production, exports or foreign exchange earnings;

(c) to export a particular type, level or percentage of products or services, either generally or to a specific market region;

(d) to limit sales by the investment of products or services in the Party’s territory in relation to a particular volume or value of production, exports or foreign exchange earnings;

(f) to carry out a particular type, level or percentage of research and development in the Party’s territory.

Such requirements do not include conditions for the receipt or continued receipt of an advantage.

ARTICLE VII

(b) Neither Party shall, in granting entry under paragraph 1(a), require a labor certification test or other procedures of similar effect, or apply any numerical restriction.

2. Each Party shall permit covered investments to engage top managerial personnel of their choice, regardless of nationality.

ARTICLE VIII

ARTICLE IX

2. A national or company that is a party to an investment dispute may submit the dispute for resolution under one of the following alternatives:

(a) to the courts or administrative tribunals of the Party that is a party to the dispute; or

(b) in accordance with any applicable, previously agreed dispute-settlement procedures; or

3. (a) Provided that the national or company concerned has not submitted the dispute for resolution under paragraph 2 (a) or (b), and that three months have elapsed from the date on which the dispute arose, the national or company concerned may submit the dispute for settlement by binding arbitration:

(i) to the Centre, if the Centre is available; or

(ii) to the Additional Facility of the Centre, if the Centre is not available; or

(iii) in accordance with the UNCITRAL Arbitration Rules; or

(iv) if agreed by both parties to the dispute, to any other arbitration institution or in accordance with any other arbitration rules.

4. Each Party hereby consents to the submission of any investment dispute for settlement by binding arbitration in accordance with the choice of the national or company under paragraph 3(a)(i), (ii), and (iii) or the mutual agreement of both parties to the dispute under paragraph 3(a)(iv). This consent and the submission of the dispute by a national or company under paragraph 3(a) shall satisfy the requirement of:

(a) Chapter II of the ICSID Convention (Jurisdiction of the Centre) and the Additional Facility Rules for written consent of the parties to the dispute; and

(b) Article II of the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards, done at New York, June 10, 1958, for an “agreement in writing”.5

ARTICLE X

ARTICLE XI

This Treaty shall not derogate from any of the following that entitle covered investments to treatment more favorable than that accorded by this Treaty:

(a) laws and regulations, administrative practices or procedures, or administrative or adjudicatory decisions of a Party;

(b) international legal obligations; or

ARTICLE XII

Each Party reserves the right to deny to a company of the other Party the benefits of this Treaty if nationals of a third country own or control the company and

(a) the denying Party does not maintain normal economic relations with the third country; or

(b) the company has no substantial business activities in the territory of the Party under whose laws it is constituted or organized.

ARTICLE XIII

1. No provision of this Treaty shall impose obligations with respect to tax matters, except that:

(a) Articles III, IX and X will apply with respect to expropriation; and

(b) Article IX will apply with respect to an investment agreement or an investment authorization.

2. A national or company, that asserts in an investment dispute that a tax matter involves an expropriation, may submit that dispute to arbitration pursuant to Article IX(3) only if:

(a) the national or company concerned has first referred to the competent tax authorities of both Parties the issue of whether the tax matter involves an expropriation; and

(b) the competent tax authorities have not both determined, within nine months from the time the national or company referred the issue, that the matter does not involve an expropriation.

ARTICLE XIV

ARTICLE XV

1. (a) The obligations of this Treaty shall apply to the political subdivisions of the Parties.

2. A Party’s obligations under this Treaty shall apply to a state enterprise in the exercise of any regulatory, administrative or other governmental authority delegated to it by that Party.

ARTICLE XVI

2. A Party may terminate this treaty at the end of the initial ten year period or at any time thereafter by giving one year’s written notice to the other Party.

3. For ten years from the date of termination, all other Articles shall continue to apply to covered investments established or acquired prior to the date of termination, except insofar as those Articles extend to the establishment or acquisition of covered investments.

4. The Annex and Protocol shall form an integral part of the Treaty.

IN WITNESS WHEREOF, the respective plenipotentiaries have signed this Treaty.

DONE in duplicate at Denver this first day of July, 1995, in the English and Spanish languages, each text being equally authentic.

FOR THE GOVERNMENT OF FOR THE GOVERNMENT OF THE

THE UNITED STATES OF AMERICA: REPUBLIC OF HONDURAS

[signature] [signature]

ANNEX

atomic energy; customhouse brokers; licenses for broadcast, common carrier, or aeronautical radio stations; COMSAT; subsidies or grants, including government-supported loans, guarantees and insurance; state and local measures exempt from Article 1102 of the North American Free Trade Agreement pursuant to Article 1108 thereof; and landing of submarine cables.

Most favored nation treatment shall be accorded in the sectors and matters indicated above.

fisheries; air and maritime transport, and related activities.

banking, insurance, securities, and other financial services.

4. The Government of Honduras may adopt or maintain exceptions to the obligation to accord national treatment to covered investments in the sectors or with respect to the matters specified below:

properties on cays, reefs, rocks, shoals or sandbanks or on islands or on any property located within 40 km of the coastline or land borders of Honduras; small scale industry and commerce with total invested capital of no more than US $ 40,000 or its equivalents in national currency; ownership, operation and editorial control of broadcast radio and television; ownership, operation and editorial control of general interest periodicals and newspapers published in Honduras.

Most favored nation treatment shall be accorded in the sectors and matters indicated above.

5. Each Party agrees to accord national treatment to covered investments in the following sectors:

leasing of minerals or pipeline rights-of-way on government lands.

PROTOCOL

1. The Parties confirm their mutual understanding that Article V, paragraph 4(a) includes the equitable, non-discriminatory and good faith application by the Government of Honduras of its labor laws relating to the protection of preferential creditors’ rights.

2. With respect to Article II(1) and paragraph (4) of the Annex, in considering applications by nationals or companies of the United States to possess or acquire real property within urban zones in or on cays, reefs, rocks, shoals or sandbanks or on islands or on any property located within 40 km of the coastline or land borders of Honduras, the Government of Honduras confirms that such applications will not be rejected, nor will decisions on applications be unduly delayed, on grounds of nationality.

3. The Parties understand that, with respect to rights reserved in paragraph 1 of Article XIV of the Treaty, “obligations with respect to the maintenance or restoration of international peace or security” means obligations under the Charter of the United Nations.

4. It is understood that nothing in paragraph 1 of Article XIV of the Treaty between the Government of the United States and the Government of Honduras Concerning the Encouragement and Reciprocal Protection of Investment, authorizes or has the intention of authorizing either Party to that Treaty to take measures in the territory of the other Party to fulfill its obligations with respect to the maintenance or restoration of international peace or security, or the protection of its own essential security interests.

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Jamaica Bilateral Investment Treaty

Signed February 4, 1994; Entered into Force March 7, 1997

103rd CONGRESS 2nd Session

SENATE TREATY Doc. 103-35

TREATY BETWEEN THE UNITED STATES OF AMERICA AND JAMAICA CONCERNING THE RECIPROCAL ENCOURAGEMENT AND PROTECTION OF INVESTMENT, WITH ANNEX AND PROTOCOL

MESSAGE

FROM

THE PRESIDENT OF THE UNITED STATES

TRANSMITTING

TREATY BETWEEN THE UNITED STATES OF AMERICA AND JAMAICA CONCERNING THE RECIPROCAL ENCOURAGEMENT AND PROTECTION OF INVESTMENT, WITH ANNEX AND PROTOCOL, SIGNED AT WASHINGTON ON FEBRUARY 4, 1994

September 21, 1994.-Convention was read the first time and, together with the accompanying papers, referred to the Committee on Foreign Relations and ordered to be printed for the use of the Senate

U.S. GOVERNMENT PRINTING OFFICE

79-118 WASHINGTON : 1994

LETTER OF TRANSMITTAL

THE WHITE HOUSE, September 21, 1994.

To the Senate of the United States:

With a view to receiving the advice and consent of the Senate to ratification, I transmit herewith the Treaty Between the United States of America and Jamaica Concerning the Reciprocal Encouragement and Protection of Investment, with Annex and Protocol, signed at Washington on February 4, 1994. Also transmitted for the information of the Senate is the report of the Department of State with respect to this Treaty.

This bilateral investment Treaty with Jamaica is the second such Treaty between the United States and a member of the Caribbean Community (CARICOM). This Treaty will protect U.S. investors and assist Jamaica in its efforts to develop its economy by creating conditions more favorable for U.S. private investment and thus strengthening the development of the private sector.

The Treaty is fully consistent with U.S. policy toward international and domestic investment. a specific tenet of U.S policy, reflected in this Treaty, is that U.S. investment abroad and foreign investment in the United States should receive national treatment. Under this Treaty, the Parties also agree to international law standards for expropriation and compensation for expropriation; free transfer of funds associated with investments; freedom of investments from performance requirements; fair, equitable and most-favored-nation treatment; and the investor or investment’s freedom to choose to resolve disputes with the host government through international arbitration.

I recommend that the Senate consider this Treaty as own as possible, and give its advice and consent to ratification of the Treaty, with Annex and Protocol, at an early date.

WILLIAM J. CLINTON.

LETTER OF SUBMITTAL

DEPARTMENT OF STATE,

Washington, September 7, 1994.

THE PRESIDENT,

The White House.

THE PRESIDENT: I have the honor to submit to you the Treaty Between the United States of America and Jamaica Concerning the Reciprocal Encouragement and Protection of Investment, with Protocol, signed at Washington on February 4, 1994. I recommend that this Treaty, with Protocol, be transmitted to the Senate for its advice and consent to ratification.

The bilateral investment treaty (BIT) with Jamaica is the second such treaty between the United States and a member of the Caribbean Community (CARICOM). The Treaty is based on the view that an open investment policy contributes to economic growth. This Treaty will assist Jamaica in its efforts to further develop its economy by creating conditions more favorable for U.S. private investment and thus strengthening the development of the private sector. It is U.S. policy, however, to advise potential treaty partners during BIT negotiations that conclusion of a BIT does not necessarily result in immediate increases in private U.S. investment flows.

To date, nineteen BITs are in force for the United States—with Bangladesh, Bulgaria, Cameroon, the Congo, the Czech Republic, Egypt, Grenada, Kazakhstan, Kyrgyzstan, Morocco, Panama, Poland, Romania, Senegal, Slovakia, Sri Lanka, Tunisia, Turkey, and Zaire. In addition to the Treaty with Jamaica, the United States has signed, but not yet brought into force, BITs with Argentina, Armenia, Belarus, Ecuador, Estonia, Haiti, Jamaica, Moldova, Russia, and Ukraine.

The Office of the United States Trade Representative and the Department of State jointly led this BIT negotiation, with assistance from the Departments of Commerce and Treasury.

THE U.S.-JAMAICA TREATY

The Treaty with Jamaica is based on the 1990 and 1991 U.S. prototype BITs. The Treaty contains in substance the protections and obligations that are contained in other U.S. BITs and achieves all of the prototype’s objectives, which are:

-All forms of U.S. investment in the territory of the Jamaica are covered.

-Investments receive the better of national treatment or most favored-nation DUN) treatment both on establishment and thereafter, subject to certain specific exceptions.

-Performance requirements may not be imposed upon or enforced against investments.

-Expropriation can occur only in accordance with international law standards; that is, for a public purpose; in a nondiscriminatory manner, in accordance with due process of law; and upon payment of prompt, adequate, and effective compensation.

-The unrestricted transfer, in a freely usable currency, of funds related to an investment is guaranteed.

-Investment disputes with the host government may be brought by investors, or by their subsidiaries, to binding arbitration as an alternative to domestic courts.

These elements, and noteworthy variations in the body of the text, are further described below.

The following is an article-by-article analysis of the provisions of the Treaty:

Preamble

Article I (Definitions)

Article I sets out definitions for terms used throughout the Treaty. As a general matter, they are designed to be broad and inclusive in nature.

Investment

The definition provides a non-exclusive list of assets, claims and rights that constitute investment. These include both tangible and intangible property, interests in a company or its assets, “a claim to money or performance having economic value, and associated with an investment,” intellectual property rights, and any right conferred by law or contract (such as government-issued licenses and permits). The Jamaica BIT varies from the prototype by using “patentable inventions” and deleting “know-how” in the illustrative list. The requirement that a “claim to money” be associated with an investment excludes claims arising solely from trade transactions, such as a transaction involving only a cross-border sale of goods, from being considered investments covered by the Treaty.

Under paragraph 2 of Article 1, either country may deny the benefits of the Treaty to investments by companies established in the other that are owned or controlled by nationals of a third country if (1) the company is a mere shell, without substantial business activities in the home country, or (2) the third country is one with which the denying Party does not maintain normal economic relations. For example, at this time the United States does not maintain normal economic relations with, inter alia, Cuba or Libya.

Paragraph 3 confirms that any alteration in the form in which an asset is invested or reinvested shall not affect its character as investment. For example, a change in the corporate form of an investment will not deprive it of protection under the Treaty.

Company

The definition of “company” is broad in order to cover virtually any type of legal entity, including any corporation, company, association, or other entity that is organized under the laws and regulations of a Party. The definition also ensures that companies of a Party that establish investments in the territory of the other Party have their investments covered by the Treaty, even if the parent company is ultimately owned by non-Party nationals, although the other Party may deny the benefits of the Treaty in the limited circumstances set forth in Article 1, paragraph 2. Likewise, a company of a third country that is owned or controlled by nationals or companies of a Party will also be covered. The definition also covers charitable and non-profit entities, as well as entities that are owned or controlled by the state.

National

Return

“Return” is defined as “an amount derived from or associated with an investment,” and the Treaty provides a non-exclusive list of examples, including: profits; dividends; interest; capital gains; royalty payments; management, technical assistance or other fees; and returns in kind. The scope of this definition provides breadth to the Treaty’s transfer provisions in Article IV.

Associated Activities

The Treaty recognizes that the operation of an investment requires protections extending beyond the investment to numerous related activities. This definition provides a list of such investor activities, including operating a business facility, borrowing money, disposing of property, issuing stock and purchasing foreign exchange for imports. These activities are covered by Article II, paragraph 1, which guarantees the better of national or MFN treatment for investments and associated activities. While the wording of the Jamaica BIT varies slightly from that of the prototype, the use of “and other similar activities” ensures that this list is illustrative.

Article II (Treatment)

Article II contains the Treaty’s major obligations with respect to the treatment of investment. Article II of the Jamaica Treaty rearranges the text of the prototype but contains all of its elements and obligations. By inserting the terms “national treatment” and “most favored nation treatment!” after the descriptions of these obligations in the text, the Jamaica Treaty makes these defined terms.

Article II, paragraph 1, was reorganized, without substantive effect, for greater clarity. This paragraph generally ensures the better of MFN or national treatment in both the entry and post-entry phases of investment. It thus prohibits both the screening of proposed foreign investment on the basis of nationality and discriminatory measures once the investment has been made, subject to specific exceptions provided for in a separate Annex. The United States and Jamaica have both reserved certain exceptions in the Annex to the Treaty, the provisions of which are discussed in the section entitled “Annex.”

Paragraph 2 guarantees that investment shall be granted “fair and equitable” treatment. It prohibits Parties from impairing, through unreasonable or discriminatory means, the management, operation, maintenance, use, enjoyment, acquisition, expansion or disposal of investment. Rather than adding a sentence to clarify the mean of “arbitrary,” the phrase “arbitrary and discriminatory” was replace by “unreasonable or discriminatory.” This paragraph sets out a minimum standard of treatment based on customary international law.

Paragraph 3 allows, subject to each Party’s immigration and employment laws and regulations, the entry of each Party’s nationals into the territory of the other for purposes linked to investment and involving the commitment of a “substantial amount of capital.” This paragraph serves to render nationals of a BIT partner eligible for treaty-investor visas under U.S. immigration law and guarantees similar treatment for U.S. investors. The reference to employment laws was called for, as Jamaica currently regulates the entry of aliens through such laws (rather than only through laws on immigration).

Paragraph 4 allows companies the right to engage top managerial personnel of their choice, regardless of nationality. The Jamaica BIT varies from the prototype in that this right is made subject to each Party’s immigration and employment laws and regulations.

Under paragraph 5, neither Party may impose performance requirements such as those conditioning investment on the export of good produced or the local purchase of goods or services. Such requirements are major burdens on investors. The Jamaica BIT adds a provision to the BIT prototype clarifying what is implicit in this paragraph—that this agreement does not preclude such measures as a condition for receipt of an advantage.

Paragraph 6 provides that each Party must provide effective means of asserting rights and claims with respect to investment, investment agreements and any investment authorizations. The Jamaica BIT adds to the prototype language the clarification that “investment authorizations” refer to those granted by a Party’s foreign investment authority. Under paragraph 7, each Party must make publicly available all laws, regulations, administrative practices and procedures and adjudicatory decisions pertaining to or affecting investments.

Paragraph 8 recognizes that under the U.S. federal system, States of the United States may, in some instances, treat out-of-State residents and corporations in a different manner than they treat in-State residents and corporations. The Treaty provides that the national treatment commitment, with respect to the States, means treatment no less favorable than that provided to U.S. out-of-State residents and corporations.

Paragraph 9 limits the Article’s MFN obligation by providing that it will not apply to advantages accorded by either Party to third countries by virtue of a Party’s membership in a free trade area or customs union or a multilateral agreement under the auspices of the General Agreement on Tariffs and Trade (GATT).

Article III (Expropriation)

Article III incorporates into the Treaty the international law standards for expropriation and compensation.

Paragraph 1 describes the general rights of investors and obligations of the Parties with respect to expropriation and nationalization. These rights also apply to direct or indirect state measures “tantamount to expropriation or nationalization,” and thus apply to “creeping expropriations” that result in a substantial deprivation of the benefit of an investment without taking of the title to the investment. The Jamaica Treaty adds a sentence to the prototype language stating that the determination of fair market value should not reflect any change in the value of the investment attributable to the expropriation itself.

Paragraph 1 further bars all expropriations or nationalizations, except those that are for a public purpose; carried out in a non-discriminatory manner, subject to “prompt, adequate, and effective compensation”; subject to due process; and accorded the treatment provided in the standards of Article II (2). (These standards guarantee fair and equitable treatment and prohibit the arbitrary and discriminatory impairment of investment in its broadest sense.)

The second sentence of paragraph 1 clarifies the meaning of “prompt, adequate, and effective compensation.” Compensation must be equivalent to the fair market value of the expropriated investment immediately before the expropriatory action was taken or became known (whichever is earlier); be paid without delay, include interest at a commercially reasonable rate from the date of expropriation; be fully realizable; be freely transferable; and be calculated in a freely usable currency on the basis of the prevailing market rate of exchange.

Paragraph 2 entitles an investor claiming that an expropriation has occurred to prompt judicial or administrative review of the claim in the host country, including a determination of whether the expropriation and any compensation conform to the provisions of the Treaty.

Article IV (Transfers)

Article IV protects investors from certain government exchange controls limiting current account and capital account transfers.

In paragraph 1, the Parties agree to permit “transfers related to an investment to be made freely and without delay into and out of its territory. Paragraph 1 also provides a non-exclusive list of transfers that must be allowed, including returns (as defined in Article I); payments made in compensation for expropriation (as defined in Article III); payments arising out of an investment dispute; payments made under a contract, including the amortization of principal and interest payments on a loan; proceeds from the liquidation or sale of all or part of an investment; and additional contributions to capital for the maintenance or development of an investment.

Paragraph 2 provides that transfers are to be paid in a “freely usable currency” at the prevailing market rate of exchange on the date of transfer with respect to spot transactions in the currency to be transferred. “Freely usable is a standard of the International Monetary Fund; at present there are five such “freely usable” currencies: the U.S. doIlar, Japanese yen, German mark, French franc and British pound sterling.

Paragraph 3 recognizes that notwithstanding these guarantees, Parties may maintain certain laws or obligations that could affect transfers with respect to investments. It provides that the Parties may require reports of currency transfers and impose income taxes by such means an a withholding tax on dividends. It also recognizes that Parties may protect the rights of creditors, ensure the satisfaction of judgments, transfers in adjudicatory proceedings through their laws, even if such measures interfere with transfers. Such laws must be applied in an equitable, nondiscriminatory and good faith manner.

Article V (State-State Consultations)

Article V provides for prompt consultation between the Parties, at either Party’s request, on any matter relating to the interpretation or application of the Treaty.

Article VI (State-Investor Dispute Resolution)

Article VI, combining elements of the 1990 and 1992 prototypes, sets forth several means by which disputes between an investor and the host country may be settled.

When a dispute arises, Article VI, paragraph 2, provides that the disputants should initially seek to resolve the dispute by consultation and negotiation, which may include non binding third party procedures. Should such consultations fail, paragraphs 2 and 3 set forth the investor’s range of choices of dispute settlement. Paragraph 2 permits the investor to make an exclusive and irrevocable choice to: (1) employ one of the several arbitration procedures outlined in the Treaty; (2) submit the dispute to procedures previously agreed upon by the investor and the host country government in an investment agreement or otherwise; or (3) submit the dispute to the local courts or administrative tribunals of the host country.

Under paragraph 3, if the investor has not submitted the dispute under the procedures in paragraph 2 and six months have elapsed from the date the dispute arose, the investor may consent to submission of the dispute for binding arbitration by either the International Centre for the Settlement of Investment Disputes (ICSID) or ad hoc arbitration using the Arbitration Rules of the United Nations Commission on International Trade Law (UNCITRAL). Following the 1990 prototype, the Jamaica BIT does not refer to the Additional Facility of the Center. Paragraph 3 also recognizes that, by mutual agreement, the parties to the dispute may choose another arbitral institution or set of arbitral rules.

Paragraph 4 contains the consent of the United States and Jamaica to the submission of investment disputes to binding arbitration in accordance with the choice of the investor.

Paragraph 5 includes a separate commitment by each Party to enforce arbitral awards rendered pursuant to Article VI procedures.

Paragraph 6 provides that in any dispute settlement proceeding, a Party may not invoke as a defense, counterclaim, set-off or in any other manner the fact that the company or national concerned has received or will be reimbursed for the same damages under an insurance or guarantee contract.

Paragraph 7 is included in the Treaty to ensure that ICSID arbitration will be available for investors making investments in the form of companies created under the laws of the Party with which there is a dispute.

Paragraph 8, not found in the prototype, explicitly incorporates language pursuant to Article 27 of the ICSID Convention, preventing a Party from giving diplomatic protection or bringing an international claim for a dispute already submitted to arbitration under the Convention, (unless the other Party has failed to abide by or comply with the award rendered in that dispute). The article also makes clear, however, that informal diplomatic exchanges to facilitate settlement of a dispute are not limited by paragraph 8.

Article VII (State-State Arbitration)

Article VII provides for binding arbitration of disputes between the United States and Jamaica that are not resolved through consultations or other diplomatic channels. The article constitutes each Party’s prior consent to arbitration.

Article VIII (Exclusions from Dispute Settlement)

Article VIII excludes from the dispute settlement provisions of the BIT those disputes arising under the export credit, guarantee or insurance programs of the Export-Import Bank of the United States, as well as those arising under any other such official programs pursuant to which the Parties agreed to other means of settling disputes.

Article IX (Preservation of Rights)

Article IX clarifies that the Treaty is meant only to establish a floor for the treatment of foreign investment. An investor may be entitled to more favorable treatment through domestic legislation, other international legal obligations, or a specific obligation assumed by a Party with respect to that investor. This provision ensures that the Treaty will not be interpreted to derogate from any entitlement to such more favorable treatment.

Article X (Measures Not Precluded)

The first paragraph of Article X reserves the right of a Party to take measures for the maintenance of public order, the fulfillment of its international obligations with respect to international peace and security, or those measures it regards as necessary for protection and security, or those measures it regards as necessary for the protection of its own essential security interests. These provisions are common in international investment agreements.

The maintenance of public order would include measures taken pursuant to a Party’s police powers to ensure public health and safety. International obligations with respect to peace and security would include, for example, obligations arising out of Chapter VII of the United Nations Charter. The Jamaica BIT differs from the prototype in its explicit reference to the U.N. Charter. Measures permitted by the provision on the protection of a Party’s essential security interests would include security-related actions taken in time of war or national emergency, actions not arising from a state of war or national emergency must have a clear and direct relationship to the essential security interest of the Party involved.

Article XI (Tax Policies)

The Treaty exhorts both countries to provide fair and equitable treatment to investors with respect to tax policies. However, tax matters an generally excluded from the coverage of the prototype BIT, based on the assumption that tax matters are properly covered in bilateral tax treaties.

Article XII (Application to Political Subdivisions)

Article XII makes clear that the obligations of the Treaty are applicable to all Political subdivisions of the Parties, such as provincial, state and local governments.

Article XIII (Entry into Force, Duration and Termination)

The Treaty enters into force thirty days after exchange of instruments of ratification and continues in force for a period of ten years. From the date of its entry into force, the Treaty applies to existing and future investments. After the ten-year term, the Treaty will continue in force unless terminated by either Party upon one year’s notice. If the Treaty is terminated, all existing investments would continue to be protected under the Treaty for ten years thereafter.

Annex

The U.S. portion of the Annex contains a list of sectors and matters in which, for various legal and historical reasons, the federal government or the States may not necessarily treat investments of nationals or companies of the other Party as they do U.S. investments or investments from a third country. The U.S. exceptions from national treatment are: air transportation; ocean and coastal shipping; banking; insurance; government grants; government insurance and loan programs; energy and power production; custom-house brokers; ownership of real property; ownership and operation of broadcast or common carrier radio and television stations; ownership of shares in the Communications Satellite Corporation; the provision of common carrier telephone and telegraph services; the provision of submarine cable services; use of land and natural resources; mining on the public domain; maritime and maritime-related services; and primary dealership in U.S. government securities.

Jamaica’s exceptions to national treatment are: civil aviation; real estate; banking; shipping; communications (including postal and telegraph services and broadcasting); mining and natural resources; government grants and other assistance to small-scale enterprises with total assets of U.S. $50,000 or less; customs brokerages; car rental; real estate agencies; travel agencies; and gaming, betting and lotteries. Jamaica has reserved the right to make or maintain limited exceptions to MFN treatment in shipping.

Protocol

In a Protocol specific to the Jamaica Treaty, the two sides confirm their Understanding that the term “regulations” in Article II (1)(b) includes, where appropriate, the provisions of a treaty to which one of the Parties has adhered. The two sides also confirm that neither Party shall use its laws or regulations to require that its nationals be employed as top managerial personnel by an “investment” (as defined by the Treaty). Finally, with respect to transfers, the Protocol confirms that if Jamaica’s foreign exchange reserves do not permit the transfer of proceeds of the sale or liquidation of an investment as provided for in Article IV(1)(e), Jamaica shall allow the transfer of such proceeds to take place over a period not to exceed three years.

The other U.S. Government agencies which negotiated the Treaty join me in recommending that it be transmitted to the Senate at an early date.

Respectfully submitted.

WARREN CHRISTOPHER.

TREATY BETWEEN THE UNITED STATES OF AMERICA AND JAMAICA CONCERNING THE RECIPROCAL ENCOURAGEMENT AND PROTECTION OF INVESTMENT

The United States of America and Jamaica (hereinafter “the Parties”);

Desiring to promote greater economic cooperation between them, with respect to investment by nationals and companies of one Party in the territory of the other Party;

Recognizing that agreement upon the treatment to be accorded such investment will stimulate the flow of private capital and the economic development of the Parties;

Agreeing that fair and equitable treatment of investment is desirable in order to maintain a stable framework for investment and maximum effective utilization of economic resources;

Recognizing that the development of economic and business ties can contribute to the well-being of workers in both Parties and promote respect for worker rights; and Having resolved to conclude a Treaty concerning the reciprocal encouragement and protection of investment;

Have agreed as follows:

ARTICLE I:

1. For the purposes of this Treaty,

(i) tangible and intangible property, including rights such as mortgages, liens and pledges;

(ii) a company or shares of stock or other interests in a company assets thereof;

(iii) a claim to money or a claim to performance having economic value, and associated with an investment;

(iv) intellectual property which includes, inter alia, rights relating to:

literary and artistic works, including sound recordings, patentable inventions, industrial designs, semiconductor mask works, trade secrets and confidential business information, and trademarks, service marks, and trade names;

(v) any right conferred by law or contract, and any licenses and permits pursuant to law;

(b) “company” of a Party means any kind of corporation, company, association, partnership, or other organization, legally constituted under laws and regulations of a Party or a political subdivision thereof whether or not organized for pecuniary gain, or privately or governmentally owned or controlled;

(e) “associated activities” means the organization, control, operation, maintenance and disposition of companies, branches, agencies, offices, factories or other facilities for the conduct of business; the making, performance and enforcement of contracts; the acquisition, use, protection and disposition of property of all kinds including intellectual property rights; the borrowing of funds; the purchase, issuance, and sale of equity shares and other securities; the purchase of foreign exchange for imports; and other similar activities.

3. Any alteration of the form in which assets are invested or reinvested shall not affect their character as an investment.

ARTICLE II:

1. (a) Each Party shall permit and treat investments, and activities associated therewith, on a basis no less favorable than that accorded in like situations to investments or associated activities of its own nationals or companies (“national treatment”), or of nationals or companies of any third country (“most favored nation treatment”), whichever is the most favorable, subject to the right of each Party to make or maintain exceptions falling within one of the sectors or matters listed in the Annex to this Treaty. The treatment accorded investments and activities associated therewith pursuant to any exceptions to national treatment shall be that of most favored nation treatment, unless specified otherwise in the Annex.

(b) Each Party agrees to notify the other Party before or on the date of entry into force of this Treaty of all such laws and regulations of which it is aware concerning the sectors or matters listed in the Annex. Moreover, each Party agrees to notify the other of any future exception with respect to the sectors or matters listed in the Annex, and to limit such exceptions to a minimum. Any future exception by either Party shall not apply to investments existing in that sector or matter at the time the exception becomes effective.

2. (a) Investments shall at all times be accorded fair and equitable treatment, shall enjoy full protection and security and shall in no case be accorded treatment less than that required by international law.

(b) Neither Party shall in any way impair, by unreasonable or discriminatory measures the management, operation, maintenance, use, enjoyment, acquisition, expansion, or disposal of investments.

3. Subject to the laws of each Party relating to the entry, sojourn and employment of aliens, nationals of either Party shall be permitted to enter and to remain in the territory of the other Party for the purpose of establishing, developing, administering or advising on the operation of an investment to which they, or a company of the first Party that employs them, have committed or are in the process of committing a substantial amount of capital or other resources.

4. Subject to the laws of each Party relating to entry, sojourn and employment of aliens, companies which are legally constituted under the applicable laws or regulations or one Party, and which are investments, shall be permitted to engage top managerial personnel of their choice, regardless of nationality.

5. Neither Party shall impose performance requirements as a condition of establishment, expansion or maintenance of investments, which require or enforce commitments to export goods produced, or which specify that goods or services must be purchased locally, or which impose any other similar requirements, provided, however, that nothing in this paragraph shall preclude a Party from providing benefits and incentives to investments which export a proportion of the goods produced.

6. Each Party shall provide effective means of asserting claims and enforcing rights with respect to investments, investment agreements, and investment authorizations granted by a Party’s foreign investment authority.

7. Each Party shall make publicly available all laws, regulations, administrative practices and procedures, and adjudicatory decisions that pertain to or affect investments.

8. The treatment accorded by the United States of America to investments and associated activities of nationals and companies of Jamaica under the provisions of this Article shall in any State, Territory or possession of the United States of America be no less favorable than the treatment accorded therein to investments and associated activities of nationals of the United States of America resident in, and companies legally constituted under the laws and regulations of, other States, Territories or possessions of the United States of America.

9. The most favored nation provisions of this Agreement shall not apply to advantages accorded by either Party to nationals or companies of any third country by virtue of:

(a) that Party’s binding obligations that derive from full membership in a free trade area or customs union, or from some other relationship which satisfies the requirements for a free trade area or customs union as set forth in Article XXIV of the General Agreement on Tariffs and Trade; or

(b) that Party’s binding obligations under any multilateral international agreement under the framework of the General Agreement on Tariffs and Trade.

ARTICLE III:

1. Investments shall not be expropriated or nationalized either directly or indirectly through measures tantamount to expropriation or nationalization (“expropriation”) except for a public purpose; in a nondiscriminatory manner; upon payment of prompt, adequate and effective compensation; and in accordance with due process of law and the general principles of treatment provided for in Article II(2) Compensation shall be equivalent to the fair market value of the expropriated investment immediately before the expropriatory action was taken or was made known by the authorities, whichever is earlier; be paid without delay; include interest at a commercially reasonable rate from the date of expropriation; be fully realizable; and be freely transferable at the prevailing market rate of exchange on the date of expropriation. The determination of fair market value shall no reflect any change in the value of the investment attributable to the expropriatory or to public knowledge of the expropriatory action before it was taken or made known by the authorities.

2. A national or company of either Party that asserts that all or part of its investment has been expropriated shall have a right to prompt review by the appropriate judicial or administrative authorities of the other Party to determine whether any such expropriation, and any compensation therefor, conforms to the provisions of this Treaty.

3. Nationals or companies of either Party whose investments suffer losses in the territory of the other Party owing to war or other armed conflict, revolution, state of national emergency, insurrection, civil disturbance or other similar events shall be accorded treatment by such other Party no less favorable than that accorded to its own nationals or companies or to nationals or companies of any third country, whichever is the most favorable treatment, as regards any measures it adopts in relation to such losses.

ARTICLE IV:

1. Each Party shall permit all transfers related to an investment to be made freely and without delay into and out of its territory. Such transfers include (a) returns; (b) compensation pursuant to Article III; (c) payments arising out of an investment dispute; (d) payments made under a contract, including amortization of principal and accrued interest payments made pursuant to a loan agreement; (e) proceeds from the sale or liquidation of all or any part of an investment; and (f) additional contributions to capital for the maintenance or development of an investment.

2. Except as provided in Article III paragraph 1, transfers shall be made in a freely usable currency at the prevailing market rate of exchange on the date of transfer with respect to spot transactions in the currency to be transferred.

3. Notwithstanding the provisions of paragraphs 1 and 2, either Party may maintain laws and regulations (a) requiring reports of currency transfer; and (b) imposing income taxes by such means as a withholding tax applicable to dividends or other transfers. Furthermore, either Party may protect the rights of creditors, or ensure the satisfaction of judgments in adjudicatory proceedings, or prevent fraudulent transfers, through the equitable, nondiscriminatory and good faith application of its law.

ARTICLE V:

ARTICLE VI:

1. For purposes of this Article, an investment dispute is a dispute between a Party and a national or company of the other Party arising out of or relating to (a) an investment agreement between that Party and such national or company; (b) an investment authorization granted by that Party’s foreign investment authority to such national or company; or (c) an alleged breach of any right conferred or created by this Treaty with respect to an investment.

a) to the courts or administrative tribunals of the Party that is a party to the dispute; or

b) in accordance with any applicable previously agreed dispute settlement procedures; or

c) in accordance with the terms of paragraph 3. A party which elects one of the three procedures mentioned in this paragraph does so to the exclusion of the others.

3. a) Provided that the national or company concerned has not submitted the dispute for resolution under paragraph 2 (a) or (b) and that six months have elapsed from the date on which the dispute arose, the national or company concerned may choose to consent in writing to the submission of the dispute for settlement by binding arbitration:

(i) to the International Centre for the Settlement of Investment Disputes (“Centre”) established by the Convention on the Settlement of Investment Disputes between States and Nationals of Other States, done at Washington, March 18, 1965 (“ICSID Convention”), provided that the Party is a party to such Convention; or

(ii) in accordance with the Arbitration Rules of the United Nations Commission on International Trade Law; or

(iii) to any other arbitration institution, or in accordance with any other arbitration rules, as may be mutually agreed between the parties to the dispute.

b) Once the national or company concerned has so consented, either party to the dispute may initiate arbitration in accordance with the choice so specified in the consent.

5. Any arbitral award rendered pursuant to this Article shall be final and binding on the parties to the dispute. Each Party undertakes to carry out without delay the provisions of any such award and to provide in its territory for its enforcement.

6. In any proceeding involving an investment dispute, a Party shall not assert, as a defense, counterclaim, right of setoff or otherwise, that the national or company concerned has received or will receive, pursuant to an insurance or guarantee contract, indemnification or other compensation for all or part of its alleged damages.

7. For purposes of an arbitration held under paragraph 3 of this Article, any company legally constituted under the applicable laws and regulations of either Party or a political subdivision hereof but that, immediately before the occurrence of the event or events giving rise to the dispute, was an investment of nationals or companies of the other Party, shall be treated as a national or company of such other Party in accordance with Article 25(2)(b) of the ICSID Convention.

8. As provided for in Article 27 of the Convention, neither Party shall give diplomatic protection, or bring an international claim, in respect of a dispute which one of its nationals or companies has consented to submit to arbitration under the Convention, unless the other Party which is party to the dispute shall have failed to abide by and comply with the award rendered in such dispute. Diplomatic protection, for the purposes of this paragraph, shall not include informal diplomatic exchanges for the sole purpose of facilitating a settlement of the dispute.

ARTICLE VII:

2. Within two months of receipt of a request, each Party shall appoint an arbitrator. The two arbitrators shall select a third arbitrator as Chairman, who is a national of a third State. The UNCITRAL Rules for appointing members of three member panels shall apply mutatis mutandis to the appointment of the arbitral panel except that the appointing authority referenced in those rules shall be he Secretary General of the International Centre for the Settlement of Investment Disputes.

4. Expenses incurred by the Chairman, the other arbitrators, and other costs of the proceedings shall be paid for equally by the Parties.

ARTICLE VIII:

The provisions of Article VI and VII shall not apply to a dispute arising (a) under the export credit, guarantee or, insurance programs of the Export-Import Bank of the United States, or (b) under other official credit, guarantee or insurance arrangements pursuant to which the Parties have agreed to other means of settling disputes.

ARTICLE IX:

This Treaty shall not derogate from:

a) laws and regulations, administrative practices or procedures, or administrative or adjudicatory decisions of either Party;

b) international legal obligations; or

c) obligations assumed by either Party, including those contained in an investment agreement or an investment authorization granted by a Party’s foreign investment authority, that entitle investments or associated activities to treatment more favorable than that accorded by this Treaty in like situations.

ARTICLE X:

1. This Treaty shall not preclude the application by either Party of measures necessary for the maintenance of public order, the fulfillment of its obligations under the Chapter of the United Nations with respect to the maintenance or restoration of international peace or security, or the protection of its own essential security interests.

ARTICLE XI:

1. With respect to its tax policies, each Party shall strive to accord fairness and equity in the treatment of investments of nationals and companies of the other Party.

2. Nevertheless, the provisions of this Treaty, and in particular Articles VI and VII, shall apply to matters of taxation only with respect to the following:

a) expropriation, pursuant to Article III;

b) transfers, pursuant to article IV; or

c) the observance and enforcement of terms of an investment agreement or authorization as referred to in Article VI (1) (a) or (b),

ARTICLE XII:

This Treaty shall apply to the political subdivisions of the Parties.

ARTICLE XIII:

2. Either Party may, by giving one year’s written notice to the other Party, terminate this Treaty at the end of the initial ten year period or at any time thereafter.

4. The Annex and Protocol shall form an integral part of the Treaty.

IN WITNESS WHEREOF, the respective plenipotentiaries have signed this Treaty.

DONE in duplicate at Washington on the fourth day of February, 1994, in the English language.

ANNEX

1. The United States reserves the right to make or maintain limited exceptions to national treatment, as provided in Article II, paragraph 1, in the sectors or matters it has indicated below:

air transportation; ocean and coastal shipping; banking; insurance; government grants; government insurance and loan programs; energy and power production; customhouse brokers; ownership of real property; ownership and operation of broadcast or common carrier radio and television stations; ownership of shares in the Communications Satellite Corporation; the provision of common carrier telephone and telegraph services; the provision of submarine cable services; use of land and natural resources; mining on the public domain; maritime services and maritime related services; and primary dealership in United Stales government securities.

ownership of real property; mining on the public domain; maritime services and maritime related services; and primary dealership in United States government: securities.

3. Jamaica reserves the right to make or maintain limited exceptions to national treatment, as provided in Article II, paragraph 1 in the sectors or matters it has indicated below:

civil aviation; real estate; banking; shipping; communications (including postal and telegraph services, and broadcasting); mining and natural resources; government grants and other assistance to small-scale enterprises with total assets of U.S. $50,000 or less; customs brokerages; car rental; real estate agencies; travel agencies; gaming; betting and lotteries.

4. Jamaica reserves the right to make or maintain limited exceptions to most favored nation treatment, as provided in Article II, paragraph 1, in the sectors or matters it has indicated below:

shipping.

PROTOCOL

1. The Parties understand that the term “regulations” in Article II(l)(b) includes, where appropriate, the provisions of a treaty to which one of the Parties has adhered.

2. With respect to Article II(4), neither Party shall apply its laws and regulations to require that its nationals be engaged as top managerial personnel by investments.

3. If the foreign exchange reserves of Jamaica do not permit the transfer of the proceeds of the sale or of the liquidation of all or part of an investment as provided for in Article IV(l)(e), Jamaica shall allow the transfer of such proceeds to take place over a period not to exceed three years from the date the transfer is requested and shall guarantee the availability of at least one-third of the necessary freely usable currency during each of the first two years of the three year period. With respect to such transfers, Jamaica shall treat nationals and companies of the United States no less favorably than it treats nationals or companies of any third country. Jamaica shall ensure that the national or company has an opportunity to invest the proceeds of sale or liquidation in a manner designed to preserve its value until the transfer occurs. Pursuant to Article V of this Treaty, and without prejudice to the procedures set forth in Article VI and VII, the two Parties agree to consult at the request of either one of them concerning the implementation of Article IV and of this paragraph.

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Jordan Bilateral Investment Treaty

Signed July 2, 1997; Entered into Force June 13, 2003

106TH CONGRESS 2d Session

SENATE

TREATY DOC. 106-30

INVESTMENT TREATY WITH JORDAN

MESSAGE FROM

THE PRESIDENT OF THE UNITED STATES

TRANSMITTING

TREATY BETWEEN THE GOVERNMENT OF THE UNITED STATES OF AMERICA AND THE GOVERNMENT OF THE HASHEMITE KINGDOM OF JORDAN CONCERNING THE ENCOURAGEMENT AND RECIPROCAL PROTECTION OF INVESTMENT, WITH ANNEX AND PROTOCOL, SIGNED AT AMMAN ON JULY 2, 1997

MAY 23, 2000 - Treaty was read the first time, and together with the accompanying papers, referred to the Committee on Foreign Relations and ordered to be printed for the use of the Senate

U. S. GOVERNMENT PRINTING OFFICE WASHINGTON : 2000

(III) LETTER OF TRANSMITTAL

THE WHITE HOUSE,

May 23, 2000.

To the Senate of the United States:

The bilateral investment treaty (BIT) with Jordan was the second such treaty between the United States and a country in the Middle East. The Treaty will protect U. S. investment and assist Jordan in its efforts to develop its economy by creating conditions more favorable for U. S. private investment and thus strengthen the development of its private sector.

The Treaty is fully consistent with U. S. policy toward international and domestic investment. A specific tenet of U. S. policy, reflected in this Treaty, is that U. S. investment abroad and foreign investment in the United States should receive national treatment. Under this Treaty, the Parties also agree to customary international law standards for expropriation. The Treaty includes detailed provisions regarding the computation and payment of prompt, adequate, and effective compensation for expropriation; free transfer of funds related to investments; freedom of investments from specified performance requirements; fair, equitable, and most-favored-nation treatment; and the investor’s freedom to choose to resolve disputes with the host government through international arbitration.

In recommend that the Senate consider this Treaty as soon as possible, and give its advice and consent to ratification of the Treaty at an early date.

WILLIAM J. CLINTON.

LETTER OF SUBMITTAL

DEPARTMENT OF STATE,

Washington, May 1, 2000.

THE PRESIDENT: I have the honor to submit to you the Treaty Between the Government of the United States of America and the Government of the Hashemite Kingdom of Jordan Concerning the Encouragement and Reciprocal Protection of Investment, with Annex and Protocol, signed at Amman on July 2, 1997. I recommend that this Treaty, with Annex and Protocol, be transmitted to the Senate for its advice and consent to ratification.

The bilateral investment treaty (BIT) with Jordan is the second such treaty signed between the United States and a country in the Middle East. The Treaty is based on the view that an open investment policy contributes to economic growth. This Treaty will assist Jordan in its efforts to develop its economy by creating conditions more favorable for U. S. private investment and thereby strengthening the development of its private sector. It is U. S. policy, however, to advise potential treaty partners during BIT negotiations that conclusion of such a treaty does not necessarily result in increases in private U. S. investment flows.

To date, 31 BITs are in force for the United States - with Albania, Argentina, Armenia, Bangladesh, Bulgaria, Cameroon, the Republic of the Congo, the Democratic Republic of the Congo (formerly Zaire), the Czech Republic, Ecuador, Egypt, Estonia, Georgia, Grenada, Jamaica, Kazakhstan, Kyrgyzstan, Latvia, Moldova, Mongolia, Morocco, Panama, Poland, Romania, Senegal, Slovakia, Sri Lanka, Trinidad & Tobago, Tunisia, Turkey, and Ukraine. In addition to the Treaty with Jordan, the United States has signed, but not yet brought into force, BITs with Azerbaijan, Bahrain, Belarus, Bolivia, Croatia, El Salvador, Honduras, Lithuania, Mozambique, Nicaragua, Russia, and Uzbekistan. The Office of the United States Trade Representative and the Department of State jointly led this BIT negotiation, with assistance from the Departments of Commerce, Treasury, and Energy.

THE U. S.-JORDAN TREATY

The Treaty with Jordan is based on the 1994 U. S. prototype BIT and satisfies the U. S. principal objectives in bilateral investment treaty negotiations:

- All forms of U. S. investment in the territory of Jordan are covered.

- Covered investments receive the better of national treatment or most-favored-nation (MFN) treatment both while they are being established and thereafter, subject to certain specified exceptions.

- Specified performance requirements may not be imposed upon or enforced against covered investments.

- Expropriation is permitted only in accordance with customary international law standards.

- Parties are obligated to permit the transfer, in a freely usable currency, of all funds related to a covered investment, subject to exceptions for specified purposes.

- Investment disputes with the host government may be brought by investors, or by their covered investments, to binding international arbitration as an alternative to domestic courts.

These elements are further described in the following article-by-article analysis of the provisions of the Treaty:

Title and Preamble

The Title and Preamble state the goals of the Treaty. Foremost in the encouragement and protection of investment. Other goals include economic cooperation on investment issues; the stimulation of economic development; higher living standards; promotion of respect for internationally-recognized worker rights; and maintenance of health, safety, and environmental measures. While the Preamble does not impose binding obligations, its statement of goals may assist in interpreting the Treaty and in defining the scope of Party-to-Party consultations pursuant to Article VIII.

Article I (Definitions)

Article I defines terms used throughout the Treaty.

Company, Company of a Contracting Party

The definition of “company” is broad, covering all types of legal entities constituted or organized under applicable law, and includes corporations, trusts, partnerships, sole proprietorships, branches, joint ventures, and associations. The definition explicitly covers not-for-profit entities, as well as entities that are owned or controlled by the state. ” Company of a Contracting Party” is defined as a company constituted or organized under the laws of that Contracting party (hereinafter, ” Party.”)

National

The Treaty defines “national” as a natural person who is a national of a Party under its own laws. Under U. S. law, the term ” national” is broader than the term “citizen.” For example, a native of American Samoa is a national of the United States, but not a citizen.

Investment, Covered Investment

The Treaty provides an illustrative list of the forms an investment may take. Establishing a subsidiary is a common way of making an investment. Other forms that an investment might take include equity and debt interests in a company; contractual rights; tangible, intangible, and intellectual property; and rights conferred pursuant to law, such as licenses and permits. Investments as defined by the Treaty generally excludes claims arising solely from trade transactions, such as a sale of goods across a border that does not otherwise involve an investment.

The Treaty defines “covered investment” as an investment of a national or company of a Party in the territory of the other Party. An investment of a national or company is one that the national or company owns or controls, either directly or indirectly. Indirect ownership or control could be through other, intermediate companies or persons, including those of third countries. Control is not specifically defined in the Treaty; ownership of over 50 percent of the voting stock of a company would normally convey control, but in many cases the requirement could be satisfied by less than that proportion, or by other arrangements.

The broad nature of the definitions of “investment,” “company,” and “company of a Contracting Party” means that investments can be covered by the Treaty even if ultimate control lies with non-Party nationals. A Party may, however, deny the benefits of the Treaty in the limited circumstances described in Article XII.

State Enterprise, Investment Authorization, Investment Agreement

The Treaty defines an “investment authorization” as an authorization granted by the foreign investment authority of a Party to a covered investment or a national or company of the other Party.

The Treaty defines an “investment agreement” as a written agreement between the national authorities of a Party and a covered investment or a national or company of the other Party that (1) grants rights with respect to natural resources or other assets controlled by the national authorities and (2) the investment, national, or company relies upon in establishing or acquiring a covered investment. This definition thus excludes agreements with subnational authorities (including U. S. States) as well as agreements arising from various types of regulatory activities of the national government, including, in the tax area, rulings, closing agreements, and advance pricing agreements.

ICSID Convention, Centre, UNCITRAL Arbitration Rules

The “ICSID Convention,” “Centre,” and “UNCITRAL Arbitration Rules” are explicitly defined to make the text brief and clear.

Article II (Treatment and Protection of Investment)

Article II contains the Treaty’s major obligations with respect to the treatment of covered investments.

Pargraph 1 generally ensures the better of national or MFN treatment in both the entry and post-entry phases of investment. It thus prohibits, outside of exceptions listed in the Annex, “screening” on the basis of nationality during the investment process, as well as nationality-based post-establishment measures. For purposes of the Treaty, ” national treatment” means treatment no less favorable than that which a Party accords, in like situations, to investments in its territory of its own nationals or companies. For purposes of the Treaty, “MFN treatment” means treatment no less favorable than that which a Party accords, in like situations, to investments in its territory of nationals or companies of a third country. The Treaty obliges each Party to provide whichever of national treatment or MFN treatment is the most favorable. This is defined by the Treaty as “national and MFN treatment.” Paragraph 1 explicitly states that the national and MFN treatment obligation will extend to state enterprises in their provision of goods and services to covered investments.

Paragraph 2 also states that a Party is not required to extend to covered investments national and MFN treatment with respect to procedures provided for in multilateral agreements concluded under the auspices of the World Intellectual Property Organization relating to the acquisition or maintenance of intellectual property rights. This provision clarifies that certain procedural preferences granted under intellectual property conventions, such as the Patent Cooperation Treaty, fall outside the BIT. This exception parallels those in the Uruguay Round’s Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS) and the north American Free Trade Agreement (NAFTA).

Pargraph 3 sets out a minimum standard of treatment based on standards found in customary international law. The obligations to accord ” fair and equitable treatment” and ” full protection and security” are explicitly cited, as is each Party’s obligation not to impair, through unreasonable and discriminatory means, the management, conduct, operation, and sale or other disposition of covered investments. The general reference to international law also implicitly incorporates other fundamental rules of customary international law regarding the treatment of foreign investment. However, this provision does not incorporate obligations based on other international agreements.

Paragraph 4 requires that each Party provide effective means of asserting claims and enforcing rights with respect to covered investments.

Pargraph 5 ensures the transparency of each Party’s regulation of covered investments.

Article III (Expropriation and Compensation Therefor)

Paragraph 1 describes the obligations of the Parties with respect to expropriation and nationalization of a covered investment. These obligations apply to both direct expropriation and indirect expropriation through measures “tantamount to expropriation or nationalization” and thus apply to “creeping expropriations” - a series of measures that effectively amounts to an expropriation of a covered investment without taking title.

Paragraph 1 further bars all expropriations or rationalizations except those that are for a public purposes; carried out in a non-discriminatory manner; in accordance with due process of law; in accordance with the general principles of treatment provided in Article II( 3); and subject to “prompt, adequate and effective compensation.”

Paragraphs 2, 3, and 4 more fully describe the meaning of ” prompt, adequate and effective compensation. ” The guiding principle is that the investor should be made whole.

Article IV (Compensation for Damages Due to War and Similar Events)

Paragraph 1 entitles investments covered by the Treaty to national and MFN treatment with respect to any measure relating to losses suffered in a Party’s territory owing to war or other armed conflict, civil disturbances, or similar events. Paragraph 2, by contract, creates an unconditional obligation to pay compensation for such losses when the losses result from requisitioning or from destruction not required by the necessary of the situation.

Article V (Transfers)

Paragraph 2 provides that each Party must permit transfers to be made in a ‘freely unsable currency” at the market rate of exchange prevailing on the date of transfer. ” Freely usable” is a term by the International Monetary Fund; at present there are five ” freely usable” currencies: the U. S. dollar, Japanese yen, German mark, French franc, and British pound sterling.

Article VI (Performance Requirements)

Article VI prohibits either Party from mandating or enforcing specified performance requirements as a condition for the establishment, acquisition, expansion, management, conduct, or operation of a covered investment. The list of prohibited requirements is exhaustive and covers domestic content requirements and domestic purchase preferences, the ” balancing” of imports or sales in relation to exports or foreign exchange earnings, requirements to export products or services, technology transfer requirements, and requirements relating to the conduct of research and development in the host country. Such requirements are major burdens on investors and impair their competitiveness.

The last sentence of Article VI makes clear that a Party may, however, impose conditions for the receipt or continued receipt of benefits and incentives.

Article VII (Entry, Sojourn, and Employment of Aliens)

Paragraph 1 requires each Party to allow, subject to its laws relating to the entry, sojourn, and employment of aliens, the entry into its territory of the other Party’s nationals for certain purposes related to a covered investment and involving the commitment of a “substantial amount of capital.” This paragraph serves to render nationals of Jordan eligible for treaty-investor visas under U. S. immigration law. It also affords similar treatment for U. S. nationals entering Jordan. The requirement to commit a “substantial amount of capital” is intended to prevent abuse of treaty-investor status; it parallels the requirements of U. S. immigration law.

The reference to employment laws in paragraph 1( a) was added at the request of Jordan to confirm the Parties understanding that employment laws of general applicability are not inherently inconsistent with the Treaty. This change does not modify the Parties obligations under paragraph 1( b), which prohibits labor certification requirements and numerical restrictions on the entry of treaty-investors.

Article VIII (Consultations)

Article IX (Settlement of Disputes Between One Contracting Party and a National or Company of the Other Contracting Party)

Article IX sets for the several means by which disputes brought against a Party by an investor (specifically, a national or company of the other Party) may be resolved.

Article IX procedures apply to an “investment dispute, ” which is any dispute arising out of or relating to an investment authorization, an investment agreement, or an alleged breach of rights conferred, created, or recognized by the Treaty with respect to a covered investment. The Treaty provides that the parties to the dispute should initially seek a resolution through consultation and negotiation.

In the event that an investment dispute cannot be settled amicably, paragraph 2 gives an investor an exclusive (with the exception in paragraph 3( b) concerning injunctive relief, explained below) choice among three options to settle the dispute. These three options are: (1) submitting the dispute to the courts or administrative tribunals of the Party that is a party to the dispute; (2) invoking dispute-resolution procedures previously agreed upon by the national or company and the host country government; or (3) invoking the dispute-resolution mechanisms identified in paragraph 3 of Article IX.

Under paragraph 3( a), the investor can submit an investment dispute to binding arbitration 3 months after the dispute arises, provided that the investor has not submitted the claim to a court or administrative tribunal of the Party or invoked a dispute resolution procedure previously agreed upon. The investor may choose among the International Centre for Settlement of Investment Disputes (ICSID) (Convention Arbitration), the Additional Facility of ICSID (if Convention Arbitration is not available), ad hoc arbitration using the Arbitration Rules of the United Nations Commission on International Trade Law (UNCITRAL), or any other arbitral institution or rules agreed upon by both parties to the dispute.

Before or during such arbitral proceedings, however, paragraph 3( b) provides that an investor may seek, without affecting its right to pursue arbitration under this Treaty, interim injunctive relief not involving the payment of damages from local courts or administrative tribunals of the Party that is a party to the dispute for the preservation of its rights and interests. This paragraph does not alter the power of the arbitral tribunals to recommend or order interim measures they may deem appropriate.

Paragraph 4 constitutes each Party’s consent to the submission of investment disputes to binding arbitration in accordance with the choice of the investor.

In addition, in paragraph 6, each Party commits to enforcing arbitral awards rendered pursuant to this Article. The Federal Arbitration Act (9 U. S. C. 1 et seq.) satisfies the requirement for the enforcement of non-ICSID Convention awards in the United States. The Convention on the Settlement of Investment Disputes Act of 1966 (22 U. S. C. 1650-1650a) provides for the enforcement of ICSID Convention awards.

Article X (Settlement of Disputes Between the Contracting Parties)

Article X provides for binding arbitration of disputes between the United States and Jordan concerning the interpretation or application of the Treaty that are not resolved through consultations or other diplomatic channels. The article specifies various procedural aspects of such arbitration proceedings, including time periods, selection of arbitrators, and distribution of arbitration costs between the Parties. The article constitutes each Party’s prior consent to such arbitration.

Article XI (Preservation of Legal Rights)

Article XI clarifies that the Treaty does not derogate from any obligation a Party might have to provide better treatment to the covered investment than is specified in the Treaty. Thus, the treaty establishes a floor for the treatment of covered investments. A covered investment may be entitled to more favorable treatment through domestic legislation, other international legal obligations, or a specific obligation (e. g., to provide a tax holiday) assumed by a Party with respect to that covered investment.

Article XII (Denial of Benefits)

Article XII( a) preserves the right of each Party to deny the benefits of the Treaty to a company owned or controlled by nationals of a non-Party country with which the denying Party does not have normal economic relations, e. g., a country to which it is applying economic sanctions. For example, at this time the United States does not maintain normal economic relations with, among other countries, Cuba and Libya.

Article XII( b) permits each Party to deny the benefits of the Treaty to a company of the other Party if the company is owned or controlled by non-Party nationals and if the company has no substantial business activities in the Party where it is established. thus, the United States could deny benefits to a company that is a subsidiary of a shell company organized under the laws of Jordan if controlled by nationals of a third country. However, this provision would not generally permit the United States to deny benefits to a company of Jordan that maintains its central administration or principal place of business in the territory of, or has a real and continuous link with, Jordan.

Article XIII (Taxation)

Article XIII excludes tax matters generally from the coverage of the BIT, on the basis that tax matters should be dealt with in bilateral tax treaties. However, Article XIII does not preclude a national or company from bringing claims under Article IX that taxation provisions in an investment agreement or authorization have been violated. In addition, the dispute settlement provisions of Article IX and X apply to tax matters in relation to alleged violations of the BIT’s expropriation article.

Under paragraph 2, a national or company that asserts in a dispute that a tax matter involves expropriation may submit that dispute to arbitration pursuant to Article IX( 3) only if (1) the investor has first referred to the competent tax authorities of both Parties the issue of whether the tax matter involves an expropriation, and (2) the tax authorities have not both determined, within 9 months from the time of referral, that the matter does not involve an expropriation. The ” component tax authority” of the United States is the Assistant Secretary of the Treasury for Tax Policy, who will make such a determination only after consultation with the Inter-Agency Staff Coordinating Group on Expropriations.

Article XIV (Measures Not Precluded by the Treaty)

Article XV (Application of the Treaty to Political Subdivisions and State Enterprises of the Contracting Parties)

Paragraph 1( a) makes clear that the obligation of the Treaty are applicable to all political subdivisions of the Parties, such as provincial, State, and local governments.

Paragraph 1( b) recognizes that under the U. S. federal system, States of the United States may, in some instances, treat out-of-State residents and corporations in a different manner than they treat in-State residents and corporations. The Treaty provides that the national treatment commitment, with respect to the States, means treatment no less favorable than that provided by a State to U. S. out-of-State residents and corporations.

Article XVI (Entry Into Force, Duration, and Termination)

Paragraph 3 provides that, if the Treaty is terminated, all investments that qualified as covered investments on the date of termination (i. e., 1 year after the date of written notice of termination) continue to be protected under the Treaty for 10 years from that date as long as these investments qualify as covered investments. A Party’s obligations with respect to the establishment and acquisition of investments would lapse immediately upon the date of termination of the Treaty.

Paragraph 4 stipulates that the Annex and Protocol shall form an integral part of the Treaty.

Annex

U. S. bilateral investment treaties allow for exceptions to national and MFN treatment, where the Parties’ domestic regimes do not afford national and MFN treatment, or where treatment in certain sectors or matters is negotiated in and governed by other agreements. Future derogations from the national treatment obligations of the Treaty are generally permitted only in the sectors or matters listed in the Annex, pursuant to Article II( 2), and must be made on an MFS basis unless otherwise specified therein.

Under a number of statutes, many of which have a long historical background, the U. S. federal government or States may not necessarily treat investments of nationals or companies of Jordan as they do U. S. investments or investments from a third country. Paragraphs 1 and 2 of the Annex list the sectors or matters subject to U. S. exceptions.

The U. S. exceptions from its national treatment obligation are: atomic energy; customhouse brokers; licenses for broadcast, common carrier, or aeronautical radio stations; COMSAT; subsidies or grants, including government-supported loans, guarantees, and insurance; State and local measures exempt from Article 1102 of the North American Free Trade Agreement pursuant to Article 1108 thereof; and landing of submarine cables.

Paragraph 3 of the Annex lists Jordan’s exceptions from its national treatment obligation, which are: air transport; ownership of bus transport companies; ownership of construction contracting companies, but not including cross-border provision of construction services; small scale commerce with total invested capital of no more than US $50,000 (or its equivalent in national currency), as adjusted annually for the first five years that the treaty is in force by the annual percentage change in the GDP deflator of the United States of America; ownership of banks and insurance companies; ownership of companies engaged in telecommunications systems operations; but not including activities such as maintenance, equipment production, equipment and spare parts sales, or other telecommunications related services; extraction concessions for minerals, including oil, natural gas, and oil shale; farming (not including animal husbandry) on large tracts of land (greater than 500 acres or its equivalent in dunums); ownership of agricultural land; ownership of land in the Jordan valley; and ownership of land for non-business related purposes.

Paragraph 3 also provides that Jordan will accord MFN treatment in the sectors and matters listed in Paragraph 3 of the Annex. Jordan takes no other exceptions from its national and MFN treatment obligation.

Paragraph 4 of the Annex ensures that national treatment is granted by each Party in all leasing of pipeline rights-of-way on government lands. In so doing, this provision partially affects the implementation of the Mineral Lands Leasing Act (MLLA) (30 U. S. C. 181 et seq.) and 10 U. S. C. 7435, regarding Naval Petroleum Reserves, with respect to nationals and companies of Jordan. The Treaty provides for resort to binding international arbitration to resolve disputes, rather than denial of pipeline rights-of-way to investors of the other Party, as is the current process under the statute. U. S. domestic remedies, would, however, remains available for use in conjunction with the Treaty’s provisions.

The MLLA and 10 U. S. C. 7435 direct that a foreign investor be denied access to leases for minerals on on-shore federal lands, leases of land within the Naval Petroleum and Oil Shale Reserves, and rights-of-way for oil or gas pipelines across on-shore federal lands, if U. S. investors are denied access to similar or like privileges in the foreign country.

Jordan’s extension of national treatment in pipeline rights-of-way will meet the objectives of the MLLA and 10 U. S. C. 7435 concerning such rights-of-way. Jordan was informed during negotiations that, were it to include either the leasing of minerals or pipeline rights-of-way on Government lands in its list of treatment exemptions, the United States would (consistent with the MLLA and 10 U. S. C. 7435) exclude the corresponding sector from the national and MFN treatment obligations of this Treaty. Accordingly, Jordan’s inclusion in its national treatment exceptions of mineral leases led the U. S. to exclude mineral leases from its national and MFN treatment obligations, while Jordan’s decision not to include pipeline rights-of-way led to the Parties’ agreement to accord national treatment to covered investments in that sector.

The listing of a sector or matter in the Annex does not necessarily signify that domestic laws have entirely reserved it for nationals. And, pursuant to Article II( 2), any additional restrictions or limitations that a Party may adopt with respect to listed sectors or matters may not compel the divestiture of existing covered investments.

Finally, listing a sector or matter in the Annex exempts a Party only from the obligation to accord national or MFN treatment. Both Parties are obligated to accord to covered investments in all sectors even those listed in the Annex all other rights conferred by the Treaty.

Protocol

Paragraph 1 of the Protocol confirms the Parties mutual understanding that either Party may require approvals or impose formal requirements in connection with a change in the form of an investment, as contemplated by Article 1( d), provided that such approvals or formal requirements are otherwise consistent with the Treaty. A Party may, for example, require the filing of Articles of Incorporation as a condition of a change of an investment to a corporate form.

Paragraph 2 of the Protocol clarifies that the term ” without delay” as used in Article III( 2) does not necessarily mean instantaneous. The intent is that the Party diligently and expeditiously carry out necessary formalities.

The other U. S. Government agencies that participated in negotiating the Treaty join me in recommending that it be transmitted to the Senate at an early date. Respectfully submitted.

MADELEINE ALBRIGHT.

TREATY BETWEEN THE GOVERNMENT OF THE UNITED STATES OF AMERICA AND THE GOVERNMENT OF THE HASHEMITE KINGDOM OF JORDAN CONCERNING THE ENCOURAGEMENT AND RECIPROCAL PROTECTION OF INVESTMENT

The Government of the United States of America and the Government of the Hashemite Kingdom of Jordan (hereinafter the Contracting “Parties”);

Desiring to promote greater economic cooperation between them, with respect to investment b nationals and companies of one Contracting Party in the territory of the other Contracting Party;

Recognizing that agreement upon the treatment to be accorded such investment will stimulate the flow of private capital and the economic development of the Contracting Parties;

Agreeing that a stable framework for investment will maximize effective utilization of economic resources and improve living standards;

Recognizing that the development of economic and business ties can promote respect for internationally recognized worker rights;

Agreeing that these objectives can be achieved without relaxing health, safety and environmental measures of general application; and

Having resolved to conclude a Treaty concerning the encouragement and reciprocal protection of investment;

Have agreed as follows:

ARTICLE I

DEFINITIONS

For the purpose of this Treaty,

(b) “company of a Contracting Party” means that a company constituted or organized under the laws of that Contracting Party;

(c) “national” of a Contracting Party means a natural person who is a national of that Contracting Party under its applicable law;

(i) a company;

(ii) shares, stock, and other forms of equity participation and bonds, debentures, and other forms of debt interests, in a company;

(iii) contractual rights, such as under turnkey, construction or management contracts, production or revenue-sharing contracts, concessions, or other similar contracts;

(iv) tangible property, including real property; and intangible property, including rights, such as leases, mortgages, liens and pledges;

(v) intellectual property, including;

copyrights and related rights,

industrial property rights,

patents,

rights in plant varieties,

utility models,

industrial designs or models,

rights in semiconductor layout design,

indications of origin,

trade secrets, including know-how,

confidential business information,

trade and service marks, and

trade names; and

(vi) rights conferred pursuant to law, such as licenses and permits;

any change in the form of an investment does not affect its character as an investment;

(e) “covered investment” means an investment of a national or company of a Contracting Party in the territory of the other Contracting Party;

(f) “state enterprise” means an investment of a national or company of a Contracting Party in the territory of the other Contracting Party;

(g) “investment authorization” means an authorization granted by the foreign investment authority of a Contracting Party to a covered investment or a national or company of the other Contracting Party;

(h) “investment agreement” means a written agreement between the national authorities of a Contracting Party and a covered investment or a national or company of the other Contracting Party that (i) grants rights with respect to natural resources or other assets controlled by the national authorities and (ii) the investment, national or company relies upon in establishing or acquiring a covered investment;

(i) “ICSID Convention” means the convention on the Settlement of Investment Disputes between States and Nationals of Other States, done at Washington, March 18, 1965;

(j) “Centre” means the International Centre for Settlement of Investment Disputes Established by the ICSID Convention; and

(k) “UNCITRAL Arbitration Rules” means the arbitration rules of the United Nations Commission on International Trade Law.

ARTICLE II

TREATMENT AND PROTECTION OF INVESTMENT

1. With respect to the establishment, acquisition, expansion, management, conduct, operation and sale or other disposition of covered investments, each Contracting Party shall accord treatment no less favorable than that it accords, in like situations, to investments in its territory of its own nationals or companies (hereinafter “national treatment”) or to investments in its territory of nationals or companies of a third country (hereinafter “most favored nation treatment”), whichever is most favorable (hereinafter “national and most favored nation treatment”). Each Contracting Party shall ensure that its state enterprises, in the provision of their goods or services, accord national and most favored nation treatment to covered investments.

2. (a) A Contracting Party may adopt or maintain exceptions to the obligations of paragraph 1 in the sectors or with respect to the matters specified in the Annex to this Treaty. In adopting such an exception, a Contracting Party may not require the divestment, in whole or in part, of covered investments existing at the time the exception becomes effective.

3. (a) Each Contracting Party shall at all times accord to covered investments fair and equitable treatment and full protection and security, and shall in no case accord treatment less favorable than that required by international law.

(b) Neither Contracting Party shall in any way impair by unreasonable and discriminatory measures the management, conduct, operation, and sale or other disposition of covered investments.

4. Each Contracting Party shall provide effective means of asserting claims and enforcing rights with respect to covered investments.

5. Each Contracting Party shall ensure that its laws, regulations, administrative practices and procedures of general application, and adjudicatory decisions, that pertain to or affect covered investments are promptly published or otherwise made publicly available.

ARTICLE III

EXPROPRIATION AND COMPENSATION THEREFORE

1. Neither Contracting Party shall expropriate or nationalize a covered investment either directly or indirectly through measures tantamount to expropriation or nationalization (“expropriation”) except for a public purpose; in a non-discriminatory manner; upon payment of prompt, adequate and effective compensation; and in accordance with due process of law and the general principles of treatment provided for in Article II (3).

2. Compensation shall be paid without delay; be equivalent to the fair market value of the expropriated investment immediately before the expropriatory action was taken (“the date of expropriation”); and e fully realizable and freely transferable. The fair market value shall not reflect any change in value occurring because the expropriatory action had become known before the date of expropriation.

(a) the fair market value on the date of expropriation, converted into a freely usable currency at the market rate of exchange prevailing on that date, plus

(b) interest, at a commercially reasonable rate for that freely usable currency, accrued from the date of expropriation until the date of payment.

ARTICLE IV

COMPENSATION FOR DAMAGES DUE TO WAR AND SIMILAR EVENTS

1. Each Contracting Party shall accord national and most favored nation treatment to covered investments as regards any measure relating to losses that investments suffer in its territory owing to war or other armed conflict, revolution, state of national emergency, insurrection, civil disturbance, or similar events.

2. Each Contracting Party shall accord restitution, or pay compensation in accordance with paragraphs 2 through 4 of Article III, in the event that covered investments suffer losses in its territory, owing to war or other armed conflict, revolution, state of national emergency, insurrection, civil disturbance, or similar events, that result from:

(a) requisitioning of all or part of such investments by the Contracting Party’s forces or authorities, or

(b) destruction of all or part of such investments by the Contracting Party’s forces or authorities that was not required by the necessity of the situation.

ARTICLE V

TRANSFERS

1. Each Contracting Party shall permit all transfers relating to a covered investment to be made feely and without delay into and out of its territory. Such transfers include:

(a) contributions to capital;

(b) profits, dividends, capital gains, and proceeds from the sale of all or any part of the investment or from the partial or complete liquidation of the investment;

(d) payments made under a contract, including a loan agreement;

(e) compensation pursuant to Articles III and IV, and payments arising out of an investment dispute;

(f) earnings of a national of one Contracting Party earned in the territory of the other Contracting Party in earned in the territory of the other Contracting Party in connection with a covered investment of that national; and

(g) other forms of income.

2. Each Contracting Party shall permit returns in kind to be made as authorized or specified in an investment authorization, investment agreement, or other written agreement between the Contracting Party and a covered investment or a national or company of the other Contracting Party.

3. Each Contracting Party shall permit returns in kind to be made as authorized or specified in an investment authorization, investment agreement, or other written agreement between the Contracting Party and a covered investment or a national or company of the other Contracting Party.

4. Notwithstanding paragraphs 1 through 3, a Contracting Party may prevent a transfer through the equitable, non-discriminatory and good faith application of its laws relating to:

(a) bankruptcy, insolvency or the protection of the rights of creditors;

(b) issuing, trading or dealing in securities;

(d) ensuring compliance with orders or judgments in adjudicatory proceedings.

ARTICLE VI

PERFORMANCE REQUIREMENTS

Neither Contracting Party shall mandate or enforce, as a condition for the establishment, acquisition, expansion, management, conduct or operation of a covered investment, any requirement (including any commitment or undertaking in connection with the receipt of a governmental permission or authorization):

(a) to achieve a particular level or percentage of local content, or to purchase, use or otherwise give a preference to products or services of domestic origin or from any domestic source;

(b) to limit imports by the investment of products or services in relation to a particular volume or value of production, exports or foreign exchange earnings;

(c) to export a particular type, level or percentage of products or services, either generally or to a specific market region;

(d) to limit sales by the investment of products or services in the Contracting Party’s territory in relation to a particular value or value of production, exports or foreign exchange earnings;

(e) to transfer technology, a production process or other proprietary knowledge to a national or company in the Contracting Party’s territory, except pursuant to an order, commitment or undertaking that is enforced by a court, administrative tribunal or competition authority to remedy an alleged or adjudicated violation of competition laws; or

(f) to carry out a particular type, level or percentage of research and development in the Contracting Party’s territory.

Such requirements do not include conditions for the receipt or continued receipt of an advantage.

ARTICLE VII

ENTRY, SOJOURN AND EMPLOYMENT OF ALIENS

1. (a) Subject to its laws relating to the entry, sojourn and employment of aliens, each Contracting Party shall permit to enter and to remain in its territory nationals of the other Contracting Party for the purpose of establishing, developing, administering or advising on the operation of an investment to which they, or a company of the other Contracting Party that employs them, have committed or are in the process of committing a substantial amount of capital or other resources.

(b) Neither Contracting Party shall, in granting entry under paragraph 1(a), require a labor certification test or other procedures of similar effect, or apply any numerical restriction.

2. Each Contracting Party shall permit covered investments to engage top managerial personnel of their choice regardless of nationality.

ARTICLE VIII

CONSULTATIONS

The Contracting Parties agree to consult promptly, on the request of either, to resolve any disputes in connection with the Treaty, or to discuss any matter relating to the interpretation or application of the Treaty or to the realization of the objectives of the Treaty.

ARTICLE IX

SETTLEMENT OF DISPUTES BETWEEN ONE CONTRACTING PARTY AND A NATIONAL OR COMPANY OF THE OTHER CONTRACTING PARTY

1. For purposes of this Treaty, an investment dispute is a dispute between a Contracting Party and a national or company of the other Contracting Party arising out of or relating to an investment authorization, an investment agreement or an alleged breach of any right conferred, created or recognized by this Treaty with respect to a covered investment. In the event of an investment dispute, the parties to the dispute should initially seek a resolution through consultation and negotiation.

2. A national or company that is a party to an investment dispute may submit the dispute of resolution under one of the following alternatives:

(a) to the courts or administrative tribunals of the Party that is a party to the dispute; or

(b) in accordance with any applicable, previously agreed dispute-settlement procedures; or

3. (a) Provided that the national or company concerned has not submitted the dispute for resolution under paragraph 2 (a) or (b), and that three months have elapsed from the date on which the dispute arouse, the national or company concerned may submit the dispute for settlement by binding arbitration:

(i) to the Centre, if the Centre is available; or

(ii) to the Additional Facility of the Centre, if the Centre is not available; or

(iii) in accordance with the UNCITRAL Arbitration Rules; or

(iv) if agreed by both parties to the dispute, to any other arbitration institution or in accordance with any other arbitration rules.

(b) a national or company, notwithstanding that it may have submitted a dispute to binding arbitration under paragraph 3 (a), may seek interim injunctive relief, not involving the payment of damages, before the judicial or administrative tribunals of the Contracting Party that is a party to the dispute, prior to the institution of the arbitral proceeding or during the proceeding, for the preservation of its rights and interests.

4. Each Contracting Party hereby consents to the submission of any investment dispute for settlement by binding arbitration in accordance with the choice of the national or company under paragraph 3 (a) (i), (ii), and (iii) or the mutual agreement of both parties to the dispute under paragraph 3 (a) (iv). This consent and the submission of the dispute by a national or company under paragraph 3 (a) shall satisfy the requirements of:

(a) Chapter II of the ICSID Convention (Jurisdiction of the Centre) and the Additional Facility Rules for written consent of the parties to the dispute; and

(b) Article II of the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards, done at New York, June 10, 1958, for an “agreement in writing.”

5. Any arbitration under paragraph 3 (a) (ii), (iii) or (iv) shall be held in a state that is a party to the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards, done at New York, June 10, 1958.

6. Any arbitral award rendered pursuant to this Article shall be final and binding on the parties to the dispute. Each Contracting Party shall carry out without delay the provisions of any such award and provide in its territory for the enforcement of such award.

7. In any proceeding involving an investment dispute, a Contracting Party shall not assert, as a defense, counterclaim, right of set-off or for any other reason, that indemnification or other compensation for all or part of the alleged damages has been received or will be received pursuant to an insurance or guarantee contract.

8. For purposes of Article 2(2) (b) of the ICSID Convention and this Article, a company of a Contracting Party that, immediately before the occurrence of the event or events giving rise to an investment dispute, was a covered investment, shall be treated as a company of the other Contracting Party.

ARTICLE X

SETTLEMENT OF DISPUTES BETWEEN THE CONTRACTING PARTIES

1. Any dispute between the Contracting Parties concerning the interpretation or application of the Treaty, that is not resolved through consultations or other diplomatic channels, shall be submitted upon the request of either Contracting Party to an arbitral tribunal for binding decision in accordance with the applicable rules of international law. In the absence of an agreement by the Contracting Parties to the contrary, the UNCITRAL Arbitration Rules shall govern, except to the extent these rules are (a) modified by the Contracting Parties or (b) modified by the arbitrators unless either Contracting Party objects to the proposed modification.

2. Within two months of receipt of a request, each Contracting Party shall appoint an arbitrator. The two arbitrators shall select a third arbitrator as chairman, who shall be a national of a third state. The UNCITRAL Arbitration Rules applicable to appointing members of three-member panels shall apply mutatis mutandis to the appointment of the arbitral panel except that the appointing authority referenced in those rules shall be the Secretary General of the Centre.

4. Expenses incurred by the Chairman and other arbitrators, and other costs of the proceedings, shall be paid for equally by the Contracting Parties. However, the arbitral panel may, at its discretion, direct that a higher proportion of the costs be paid by one of the Contracting Parties.

ARTICLE XI

PRESERVATION OF LEGAL RIGHTS

This Treaty shall not derogate from any of the following that entitle covered investments to treatment more favorable than that accorded by this Treaty:

(a) laws and regulations, administrative practices or procedures, or administrative or adjudicatory decisions of a Contracting Parties;

(b) international legal obligations or

(c) obligations assumed by a Contracting Party, including those contained in an investment authorization or an investment agreement.

ARTICLE XII

DENIAL OF BENEFITS

Each Contracting Party reserves the right to deny to a company of the other Contracting Party the benefits of this Treaty if nationals of a third country own or control the company and:

(a) the denying Contracting Party does not maintain normal economic relations with the third country; or

(b) the company has no substantial business activities in the territory of the Contracting Party under whose laws it is constituted or organized.

ARTICLE XIII

TAXATION

1. No provision of this Treaty shall impose obligations with respect to tax matters, except that:

(a) Articles III, IX and X will apply with respect to expropriation; and

(b) Article IX will apply with respect to an investment agreement or an investment authorization.

2. A national or company, that asserts in an investment dispute that a tax matter involves an expropriation, may submit that dispute to arbitration pursuant to Article IX(3) only if:

(a) the national or company concerned has first referred to the competent tax authorities of both Contracting Parties the issue of whether the tax matter involves an expropriation; and

(b) the competent tax authorities have not both determined within nine months from the time the national or company referred the issue, that the matter does not involve an expropriation.

ARTICLE XIV

MEASURES NOT PRECLUDED BY THIS TREATY

1. This Treaty shall not preclude a Contracting Party from applying measures necessary for the fulfillment of its obligations with respect to the maintenance or restoration of international peace or security, or the protection of its own essential security interests.

2. This Treaty shall not preclude a Contracting Party from prescribing special formalities in connection with covered investments, such as a requirement that such investments be legally constituted under the laws and regulations of that Contracting Party, or a requirement that transfers of currency or other monetary instruments be reported, proved that such formalities shall not impair the substance of any of the rights set forth in this Treaty.

ARTICLE XV

APPLICATION OF THIS TREATY TO POLITICAL SUBDIVISIONS AND STATE ENTERPRISES OF THE CONTRACTING PARTIES

1. (a) The obligations of this Treaty shall apply to the political subdivisions of the Contracting Parties.

2. A Contracting Party’s obligations under this Treaty shall apply to a stat enterprise in the exercise of any regulatory, administrative or other governmental authority delegated to it by that Contracting Party.

ARTICLE XVI

ENTRY INTO FORCE, DURATION AND TERMINATION

1. This Treaty shall enter into forces thirty days after the date of exchange of instruments of ratification. It shall remain in force for a period of then years and shall continue in force unless terminated in accordance with paragraph 2. It shall apply to covered investments existing at the time of entry into force as well as to those established or acquired thereafter.

2. A Contracting Party may terminate this Treaty at the end of the initial ten year period or at any time thereafter by giving one year’s written notice to the other Contracting Party.

3. For ten years from the date of termination, all other Articles shall continue to apply to covered investments established or acquired prior to the date of termination, except insofar as those Articles extend to the establishment or acquisition of covered investments.

4. The Annex and Protocol shall form an integral part of the Treaty.

IN WITNESS WHEREOF, the respective plenipotentiaries have signed this Treaty.

DONE in duplicate at _____ this _____, 1997, in the English and Arabic languages, each text being equally authentic.

FOR THE GOVERNMENT OF THE UNITED STATES OF AMERICA:

Wesley W. Egan, Jr.

[signature]

FOR THE GOVERNMENT OF THE HASHEMITE KINGDOM OF JORDAN:

Hani al-Mulki

[signature]

ANNEX

1. The Government of the United States of America may adopt or maintain exceptions to the obligation to accord national treatment to covered investment in the sectors or with respect to the matters specified below:

atomic energy; customhouse brokers; licenses for broadcast, common carrier, or aeronautical radio stations; COMSAT; subsidies or grants, including governments-supported loans, guarantees and insurance; state and local measures exempt from Article 1102 of the North American Free Trade Agreement pursuant to Article 1108 thereof; and landing of submarine cables.

Most favored nation treatment shall be accorded in the sectors and matters indicated above.

2. The Government of the United States of America may adopt or maintain exceptions to the obligations to accord national treatment to covered investments in the sectors or with respect to the matters specified below:

fisheries; air and maritime transport, and related activities; banking, insurance, securities, and other financial services; and minerals leases on government land.

3. The Government of the Hashemite Kingdom of Jordan may adopt or maintain exception to the obligations to accord national treatment to covered investments in the sectors and with respect to the matters specified below:

air transport; ownership of bus transport companies; ownership of construction contracting companies, but not including cross-border provision of construction services; small scale commerce with total invested capital of no more than US $50,000 (or its equivalent in national currency), as adjusted annually for the first five years that the treaty is in force by the annual percentage change in the GDP deflator of the United States of America; ownership of banks and insurance companies; ownership of companies engaged in telecommunications systems operations, but not including activities such as maintenance, equipment production, equipment and spare parts sales, or other telecommunications related services; extraction concessions for minerals, including oil, natural gas and oil shale; farming (not including animal husbandry) on large tracts of land (greater than 500 acres or its equivalent in dunums); ownership of agricultural land; ownership of land in the Jordan valley and ownership of land for non-business related purposes.

Most favored nation treatment shall be accorded in the sectors and matters indicated above.

4. Notwithstanding paragraphs 1 and 3, each Party agrees to accord national treatment to covered investment in the following sectors:

leasing of pipeline rights-of-way on government land.

PROTOCOL

1. With respect to Article I (d), the Contracting Parties confirm with their mutual understanding that either Contracting Party may require approvals or impose format requirements in connection with a change in the form of an investment, provided that such approvals or formal requirements are otherwise consistent with this Treaty.

2. With regard to Article III (2), the term “without delay” does not necessarily mean instantaneous. The intent is that the Contracting Party diligently and expeditiously carry out necessary formalities.

End of tab panel

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Kazakhstan Bilateral Investment Treaty

Signed May 19, 1992; Entered into Force January 12, 1994

INVESTMENT TREATY WITH THE REPUBLIC OF KAZAKHSTAN

MESSAGE

FROM

THE PRESIDENT OF THE UNITED STATES

Transmitting

THE TREATY BETWEEN THE UNITED STATES OF AMERICA AND THE REPUBLIC OF KAZAKHSTAN CONCERNING THE RECIPROCAL ENCOURAGEMENT AND PROTECTION OF INVESTMENT, SIGNED AT WASHINGTON ON MAY 19, 1992

SEPTEMBER 8, 1993.-Treaty was read the first time and, together with the accompanying papers, referred to the Committee on Foreign Relations and ordered to be printed for the use of the Senate

U.S. GOVERNMENT PRINTING OFFICE

WASHINGTON : 1993

69-118

LETTER OF TRANSMITTAL

THE WHITE HOUSE, September 7, 1993.

To the Senate of the United States:

With a view to receiving the advice and consent of the Senate to ratification, I transmit herewith the Treaty Between the United States of America and the Republic of Kazakhstan Concerning the Reciprocal Encouragement and Protection of Investment, signed at Washington on May 19, 1992. Also transmitted for the information of the Senate is the report of the Department of State with respect to this Treaty.

The Treaty will establish an agreed-upon legal basis for the protection and encouragement of investment. This Treaty thus forms an integral part of the framework for expanding trade and investment relations between the United States and the countries of the former Soviet Union. It is designed to encourage economic opportunity—including investment, trade, and growth—in both countries. It will assist Kazakhstan in its transition to a market economy by strengthening the role of the private sector and by encouraging appropriate macroeconomic and structural policies.

I recommend that the Senate consider this Treaty as soon as possible, and give its advice and consent to ratification of the Treaty, with Protocol and related exchange of letters, at an early date.

WILLIAM J. CLINTON.

LETTER OF TRANSMITTAL

DEPARTMENT OF STATE,

Washington, September 4, 1993.

The PRESIDENT,

The White House.

THE PRESIDENT: I have the honor to submit to you the Treaty Between the United States of America and the Republic of Kazakhstan Concerning the Reciprocal Encouragement and Protection of Investment, signed at Washington on May 19, 1992. I recommend that this Treaty, with Protocol and exchange of letters, be transmitted to the Senate for its advice and consent to ratification.

This was the first bilateral investment treaty (BIT) that the United States has signed with a newly independent state of the former Soviet Union. (subsequently BITs have already been signed with Russia, Armenia, Kyrgyzstan, and Moldova.) This Treaty will assist Kazakhstan in its transition to a market economy by creating favorable conditions for U.S. private investment, helping to attract such investment and, thus, strengthening the development of the private sector. It is U.S. policy, however, to advise potential treaty partners during BIT negotiations that conclusion of a BIT does not necessarily result in immediate increases in private U.S. investment flows.

To date, 13 BITs are in force for the United States—with Bangladesh, Cameroon, the Czech Republic, Egypt, Grenada, Morocco, Panama, Senegal, Slovakia, Sri Lanka, Tunisia, Turkey, and Zaire. In addition to the Kazakhstan Treaty, the United States has signed, but not yet brought into force, BITs with Argentina, Armenia, Bulgaria, the Congo, Haiti, Kyrgyzstan, Moldova, Romania, and Russia and a business and economic relations treaty with Poland, which contains the BIT elements.

The Office of the United States Trade Representative and the Department of State jointly lead BIT negotiations, with assistance from the Departments of Commerce and Treasury.

THE U.S.-KAZAKHSTAN TREATY

The Treaty with Kazakhstan satisfies the principal BIT objectives, which are:

-Investments of nationals and companies of either Party in the territory of the other Party (investments) receive the better of national treatment or most-favored-nation (MFN) treatment, both on establishment and thereafter, subject to certain specified exceptions;

-Investments are guaranteed freedom from performance requirements, including requirements to use local products or to export local goods;

-Investments are guaranteed the unrestricted transfer of funds in a freely usable currency; and

-Nationals and companies of either Party, in investment disputes with the host government, have access to binding inter-national arbitration, without first resorting to domestic courts.

The U.S.-Kazakhstan Treaty adopts the U.S. prototype BIT text verbatim, with the addition of Kazakhstan’s exceptions to national treatment in the annex.

The following is an article-by-article analysis of the provisions of the Treaty:

Preamble

ARTICLE I (DEFINITIONS)

ARTICLE I sets out definitions for terms used throughout the Treaty. As a general matter, they are designed to be broad and inclusive in nature.

Investment

The Treaty’ s definition of investment is broad, recognizing that investment can take a wide variety of forms. It covers investments that are owned or controlled by nationals or companies of one of the Treaty partners made in the territory of the other. Investments can be made either directly or indirectly through one or more subsidiaries, including those of third countries. Control is not specifically defined in the Treaty. Ownership of over 50 percent of the voting stock, of a company would normally convey control but in many cases the requirement could be satisfied by less than that proportion.

Under paragraph 2 of Article I, either country may deny the benefits of the Treaty to investments by companies established in the other that are owned or controlled by nationals of a third country if 1) the company is a mere shell, without substantial business activities in the home country, or 2) the third country is one with which the denying Party does not maintain normal economic relations. For example, at this time the United States does not maintain normal economic relations with, inter alia, Cuba or Libya.

Paragraph 3 confirms that “any alteration m the form in which an asset is invested or reinvested shall not affect its character as ;investment.” For example, a decision to alter the corporate form of an investment will not deprive it of protection under the Treaty.

Company

The definition of “company” is broad in order to cover virtually any type of legal entity, including any corporation, company, association, or other entity that is organized under the laws and regulations of a Party. It ensures that companies of a Party that establish investments in the territory of the other Party have their investments covered by the Treaty, even if the parent company is ultimately owned by non-Party nationals, although the other Party may deny the benefits of the Treaty in the limited circumstances set forth in Article I paragraph 2. Likewise, a company of a third country that is controlled by nationals or companies of a Party will also be covered. The definition also covers charitable and non-profit entities, as well as entities that are owned or controlled by the state.

National

The Treaty defines “national” as a natural person who is a national of a Party under its own laws. Under U.S. law, the term “national” is more inclusive than the term “citizen;” for example, a native of American Samoa is a national of the United States, but not a citizen.

Return

“Return” is defined as “an amount derived from or associated with an investment,” and the Treaty provides a non-exclusive list of examples. Including: profits; dividends; interest; capital gains; royalty payments; management, technical assistance or other fees; and returns in kind. The scope of this definition provides breadth to the Treaty’s transfer provisions in Article IV.

Associated Activities

The Treaty recognizes that the operation of an investment requires protections extending beyond the investment to numerous related activities. This definition provides an illustrative list of such investor activities including operating a business facility, borrowing money, disposing of property, issuing stock and purchasing foreign exchange for imports. These activities are covered by Article II, paragraph 1 which guarantees the better of national or MFN treatment for investments and associated activities. (Article II, paragraph 10, discussed below, provides an expanded, detailed list of the “associated activities” protected by the Treaty.)

ARTICLE II (Treatment)

Article II contains the Treaty’s major obligations with respect to the treatment of investment.

Paragraph 1 generally ensures the better of MFN or national treatment in both the entry and post-entry phases of investment. It thus prohibits both the screening of proposed foreign investment on the basis of nationality and discriminatory measures once the investment has been made, subject to specific exceptions provided for in a separate Annex. The U.S. and Kazakhstan both reserved certain exceptions in the Annex to the Treaty, the provisions of which are discussed in the section entitled “Annex.”

Paragraph 2 further guarantees that investment shall be granted “fair and equitable” treatment. It also prohibits Parties from impairing, throughout arbitrary or discriminatory means, the management, operation, maintenance, use, enjoyment, acquisition, expansion or disposal of investment. This paragraph sets out a minimum standard of treatment based on customary international law.

Paragraph 3 allows, subject to each Party’s immigration laws and regulations, the entry of each Party’s nationals into the terri-tory of the other for purposes linked to investment and involving the commitment of a “substantial amount of capital.” This Paragraph serves to render nationals of a BIT partner eligible for trea-ty-investor visas under U.S. immigration law and guarantees simi-lar treatment for U.S. investors.

Paragraph 4 guarantees companies the right to engage top managerial personnel of their choice, regardless of nationality.

Paragraph 6 provides that each Party must provide effective means of asserting rights and claims with respect to investment, investment agreements and any investment authorizations. Under paragraph 7, each Party must make publicly available all laws, administrative practices and adjudicatory procedures pertaining to or affecting investments.

Article II, paragraph 10 of the BIT with Kazakhstan is designed to avoid problems that U.S. businesses may face in emerging market economies. This provision clarifies that nationals and companies of either Party receive the better of national or MFN treatment with respect to a detailed list of activities associated with their investments. These include: access to registrations, licenses, and permits; access to financial institutions and credit markets; access to their funds held in financial institutions; the importation and installation of business equipment; advertising and the conduct of market studies; the appointment of commercial representatives; direct marketing; access to public utilities; and, access to raw materials; and, payment for goods and services in local and foreign currency. The right to the better of national or MFN treatment in these activities requires that Kazakhstan grant U.S. nationals and companies treatment no less favorable than that granted to its own or third country nationals and companies.

ARTICLE III (EXPROPRIATION)

Article III incorporates into the Treaty the international law standards for expropriation and compensation.

ARTICLE IV (TRANSFERS)

Article IV protects investors from certain government exchange controls limiting current account and capital account transfers.

In paragraph 1, the Parties agree to permit “all inward and outward transfers related to an investment to be made freely and without delay.” Paragraph 1 also provides a non-exclusive list of transfers that must be allowed, including returns (as defined in Article I); payments made in compensation for expropriation (as defined in Article III); payments arising out of an investment dispute; payments made under a contract, including the amortization of principal and interest payments on a loan; proceeds from the liq-uidation or sale of all or part of an investment; and additional contributions to capital for the maintenance or development of an investment.

Paragraph 2 provides that transfers are to be made in a “freely usable currency” at the prevailing market rate of exchange on the date of transfer with respect to spot transactions in the currency to be transferred. “Freely usable” is a standard of the International Monetary Fund; at present there are five such “Freely usable” is a standard of the International Monetary Fund; at present there are five such “freely usable” currencies: the U.S. dollar, Japanese yen, German mark, French franc and British pound sterling.

ARTICLE V (STATE-STATE CONSULTATIONS)

Article V provides for prompt consultation between the Parties, at either Party’s request, on any matter relating to the interpretation or application of the Treaty.

ARTICLE VI (STATE-INVESTOR DISPUTE RESOLUTION)

Article VI sets forth several means by which disputes between an investor and the host country may be settled.

Article VI procedures apply to an “investment dispute,” a term which covers any dispute arising out of or relating to an investment, an investment authorization, or an agreement between the investor and the host government; or rights granted by the Treaty with respect to an investment.

The investor may make an exclusive and irrevocable choice to: (1) employ one of the several arbitration procedures outlined in the Treaty; (2) submit the dispute to procedures previously agreed upon by the investor and the host country government in an investment agreement or otherwise; or (3) submit the dispute to the local courts or administrative tribunals of the host country.

Under the Treaty, the investor can take an investment dispute to binding arbitration after six months from the date that the dispute arises. The investor may choose between the International Centre for the Settlement of Investment Disputes (ICSID) (if the host country has joined the Centre otherwise the Additional Facility is available) and ad hoc arbitration using the Arbitration Rules of the United Nations Commission on International Trade Law (UNCITRAL). The Treaty also recognizes that, by mutual agreement, the parties to the dispute may choose another arbitral institution or set of arbitral rules.

Paragraph 4 contains the consent of the United States and Kazakhstan to the submission of investment disputes to binding arbitration in accordance with the choice of the investor.

ARTICLE VII (STATE-STATE ARBITRATION)

Article VII provides for binding arbitration of disputes between the United States and Kazakhstan that are not resolved through consultations or other diplomatic channels. The article constitutes each Party’s prior consent to arbitration.

ARTICLE VIII (Exclusions for Dispute Settlement)

ARTICLE IX (PRESERVATION OF RIGHTS)

Article VIII clarifies that the Treaty is meant only to establish a floor for the treatment of foreign investment. An investor may be entitled to more favorable treatment through domestic legislation, or other international legal obligations, or a specific obligation assumed by a Party with respect to that investor. This provision ensures that the Treaty will not be interpreted to derogate from any entitlement to such more favorable treatment.

ARTICLE X (MEASURES NOT PRECLUDED)

The first paragraph of Article IX reserves the right of a Party to take measures it regards as necessary for the maintenance of public order, the fulfillment of its international obligations with respect to international peace and security, or measures which it regards as necessary for the protection of its own essential security interests. These provisions are common in international investment agreements.

ARTICLE XI (TAX POLICIES)

The Treaty exhorts both countries to provide fair and equitable treatment to investors with respect to tax policies. However, tax matters are generally excluded from the coverage of the prototype BIT, based on the assumption that tax matters are properly covered in bilateral tax treaties.

ARTICLE XII (APPLICATION TO POLITICAL SUBDIVISIONS)

Article XII makes clear that the obligations of the Treaty are applicable to all political subdivisions of the Parties, such as State and local governments.

ARTICLE XIII (ENTRY INTO FORCE, DURATION AND TERMINATION)

The Treaty enters into force thirty days after exchange of instruments of ratification and continues in force for a period of ten years. From the date of its entry into force, the Treaty applies to existing and future investments. After the ten-year term, the Treaty will continue in force unless terminated by either Party upon one year’s notice. If terminated, all existing investments would continue to be protected under the Treaty for ten years thereafter.

ANNEX

The U.S. portion of the Annex contains a list of sectors and matters in which, for various legal and historical reasons, the federal government or the States may not necessarily treat investments of nationals or companies of the other Party as they do U.S. investments or investments from a third country. The U.S. exceptions from national treatment are: air transportation; ocean and coastal shipping; banking; insurance; government grants; government insurance and loan programs energy and power production; customs house brokers; ownership of real property; ownership and operation of broadcast or common carrier radio and television stations; ownership of shares in the Communications Satellite Corporation; the provision of common carrier telephone or telegraph services; the provision of submarine cable services; use of land and natural resources; mining on the public domain; maritime and maritime related services; and, primary dealership in U.S. government securities.

Ownership of real property, mining on the public domain, and maritime-related services, and primary dealership in U.S. government securities are also excluded from the MFN treatment commitments. The last three of the sectors in the Annex are exempted by the United States from MFN treatment obligations because of U.S. laws that require reciprocity. Enforcement of reciprocity provisions would deny both national and MFN treatment.

Because the U.S. exceptions to national and MFN treatment are based on existing U.S. law, they are not altered during negotiations.

The Kazakhstani exceptions to national treatment are ownership of land, its subsoil, water, plant and animal life, and other natural resources; ownership of real estate (during the transition period to a market economy); ownership or control of television and radio broadcasting; air transportation; and, preparation of stocks and bond notes issued by the Government of Kazakhstan. These exceptions were based on provisions of investment laws currently in force or under active consideration in Kazakhstan. Kazakhstan has not received any sectoral exceptions to MFN treatment in the Annex.

The other U.S. Government agencies which negotiated the Treaty join me in recommending that it be transmitted to the Senate at an early date.

Respectfully submitted,

WARREN CHRISTOPHER

TREATY BETWEEN

THE UNITED STATES OF AMERICA AND

THE REPUBLIC OF KAZAKHSTAN

CONCERNING THE ENCOURAGEMENT

AND RECIPROCAL PROTECTION OF INVESTMENT

The United States of America and the Republic of Kazakhstan (hereinafter the “Parties”);

Desiring to promote greater economic cooperation between them, with respect to investment by nationals and companies of one Party in the territory of the other Party;

Recognizing that agreement upon the treatment to be. accorded such investment will stimulate the flow of private capital and the economic development of the Parties;

Agreeing that fair and equitable treatment of investment is desirable in order to maintain a stable framework for investment and maximum effective utilization of economic resources;

Recognizing that the development of economic and business ties can contribute to the well-being of workers in both Parties and promote respect for internationally recognized worker rights; and

Having resolved to conclude a Treaty concerning the encouragement and reciprocal protection of investment;

Have agreed as follows:

ARTICLE I

1. For the purposes of this Treaty,

(i) tangible and intangible property, including movable and immovable property, as well as rights, such as mortgages, liens and pledges;

(ii) a company or shares of stock or other interests in a company or interests in the assets thereof;

(iii) a claim to money or a claim to performance having economic value, and associated with an investment;

(iv) intellectual property which includes, inter alia, rights relating to:

literary and artistic works, including sound recordings, inventions in all fields of human endeavor, industrial designs, semiconductor mask works, trade secrets, know-how, and confidential business information, and trademarks, service marks, and trade names; and

(v) any right conferred by law or contract, and any licenses and permits pursuant to law;

(b) “company” of a Party means any kind of corporation, company, association, enterprise, partnership, or other organization, legally constituted under the laws and regulations of a Party or a political subdivision thereof whether or not organized for pecuniary gain, or privately or governmentally owned or controlled;

3. Any alteration of the form in which assets are invested or reinvested shall not affect their character as investment.

ARTICLE II

1. Each Party shall permit and treat investment, and activities associated therewith, on a basis no less favorable than that accorded in like situations to investment or associated activities of its own nationals or companies, or of nationals or companies of any third country, whichever is the most favorable, subject to the right of each Party to make or maintain exceptions falling within one of the sectors or matters listed in the Annex to this Treaty. Each Party agrees to notify the other Party before or on the date of entry into force of this Treaty of all such laws and regulations of which it is aware concerning the sectors or matters listed in the Annex. Moreover, each Party agrees to notify the other of any future exception with respect to the sectors or matters listed in the Annex, and to limit such exceptions to a minimum. Any future exception by either Party shall not apply to investment existing in that sector or matter at the time the exception becomes effective. The treatment accorded pursuant to any exceptions shall, unless specified otherwise in the Annex, be not less favorable than that accorded in like situations to investments and associated activities of nationals or companies of any third country.

3. Subject to the laws relating to the entry and sojourn of aliens, nationals of either Party shall be permitted to enter and to remain in the territory of the other Party for the purpose of establishing, developing, administering or advising on the operation of an investment to which they, or a company of the first Party that, employs them, have committed or are in the process of committing a substantial amount of capital or other resources.

6. Each Party shall provide effective means of asserting claims and enforcing rights with respect to investment, investment agreements, and investment authorizations.

7. Each Party shall make public all laws, regulations, administrative practices and procedures, and adjudicatory decisions that pertain to or affect investments.

8. The treatment accorded by the United States of America to investments and associated activities of nationals and companies of the Republic of Kazakhstan under the provisions of this Article shall in any State, Territory or possession of the United States of America be no less favorable than the treatment accorded therein to investments and associated activities of nationals of the United States of America resident in, and companies legally constituted under the laws and regulations of other States, Territories or possessions of the United States of America.

9. The most favored nation provisions of this Treaty shall not apply to advantages accorded by either Party to nationals or companies of any third country by virtue of:

(a) that Party’s binding obligations that derive from full membership in a free trade area or customs union; or

10. The Parties acknowledge and agree that “associated” activities, include without limitation, such activities as:

(a) the granting of franchises or rights under licenses;

(b) access to registrations, licenses, permits and other approvals (which shall in any event be issued expeditiously);

(d) access to their funds held in financial institutions;

(f) the dissemination of commercial information;

(g) the conduct of market studies;

(h) the appointment of commercial representatives, including agents, consultants and distributors and their participation in trade fairs and promotion events;

(i) the marketing of goods and services, including through internal distribution and marketing systems, as well as by advertising and direct contact with individuals and companies;

(j) access to public utilities, public services and commercial rental space at nondiscriminatory prices, if the prices are set or controlled by the government; and

(k) access to raw materials, inputs and services of all types at nondiscriminatory prices, if the prices are set or controlled by the government.

(l) payment for goods and services in local foreign currency.

ARTICLE III

3. Nationals or companies of either Party whose investments suffer losses in the territory of the other Party owing to war or other armed conflict, revolution, state of national emergency, insurrection, civil disturbance or other similar events shall be accorded treatment by such other Party no less favorable than that accorded to its own nationals or companies or to nationals or companies of any third country, whichever is the most favorable treatment, as regards any measures it adopts in relation to such losses.

ARTICLE IV

1. Each Party shall permit all transfers related to an investment to be made freely and without delay into and out of its territory. Such transfers include: (a) returns; (b) compensation pursuant to Article III; (c) payments arising out of an investment dispute; (d) payments made under a contract, including amortization of principal and accrued interest payments made pursuant to a loan agreement; (e) proceeds from the sale or liquidation of all or any part of an investment; and (f) additional contributions to capital for the maintenance or development of an investment.

2. Transfers shall be made in a freely usable currency at the prevailing market rate of exchange on the date of transfer with respect to spot transactions in the currency to be transferred.

ARTICLE V

ARTICLE VI

1. For purposes of this Article, an investment dispute is a dispute between a Party and a national or company of the other Party arising out of or relating to (a) an investment agreement between that Party and such national or company; (b) an investment authorization granted by that Party’s foreign investment authority to such national or company; or (c) an alleged breach of any right conferred or created by this Treaty with respect to an investment.

(a) to the courts or administrative tribunals of the Party that in a Party to the dispute; or

(b) in accordance with any applicable, previously agreed dispute-settlement procedures; or

3. (a) Provided that the national or company concerned has not . submitted the dispute for resolution under paragraph 2 (a) or (b) and that six months have elapsed from the date on which the dispute arose, the national or company concerned may choose to consent in writing to the submission of the dispute for settlement by binding arbitration:

(ii) to the Additional Facility of the Centre, if the Centre is not available; or

(iii) in accordance with the Arbitration Rules of the United Nations Commission on International Trade Law (UNCITRAL); or

(iv) to any other arbitration institution, or in accordance with any other arbitration rules, as may be mutually agreed between the parties to the dispute.

(b) Once the national or company concerned has so consented, either Party to the dispute may initiate arbitration in accordance with the choice so specified in the consent.

(a) written consent of the parties to the dispute for purposes of Chapter II of the ICSID Convention (Jurisdiction of the Centre) and for purposes of the Additional Facility Rules; and

(b) an “agreement in writing,” for purposes of Article II of the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards, done at New York, June 10, 1958 (“New York Convention”).

5. Any arbitration under paragraph 3(a)(ii), (iii) or (iv) of this Article shall be held in a state that is a Party to the New York Convention.

ARTICLE VII

ARTICLE VIII

The provisions of Articles VI and VII shall not apply to a dispute arising (a) under the export credit, guarantee or insurance programs of the Export-Import Bank of the United States or (b) under other official credit, guarantee or insurance arrangements pursuant to which the Parties have agreed to other means of settling disputes.

ARTICLE IX

This Treaty shall not derogate from:

(a) laws and regulations, administrative practices or procedures, or administrative or adjudicatory decisions of either Party;

(b) international legal obligations; or

(c) obligations assumed by either Party, including those contained in an investment agreement or an investment authorization,

that entitle investments or associated activities to treatment more favorable than that accorded by this Treaty in like situations.

ARTICLE X

ARTICLE XI

1. With respect to its tax policies, each Party should strive to accord fairness and equity in the treatment of investment of nationals and companies of the other Party.

2. Nevertheless, the provisions of this Treaty, and in particular Article VI and VII, shall apply to matters of taxation only with respect to the following:

(a) expropriation, pursuant to Article III;

(b) transfers, pursuant to Article IV; or

ARTICLE XII

This Treaty shall apply to the political subdivisions of the Parties.

ARTICLE XIII

2. Either Party may, by giving one year’s written notice to the other Party, terminate this Treaty at the end of the initial ten year period or at any time thereafter.

4. The Annex shall form an integral part of the Treaty.

IN WITNESS WHEREOF, the respective plenipotentiaries have signed this Treaty.

DONE in duplicate at Washington, this nineteenth day of May, 1992 in the English and Russian languages, both texts being equally authentic. A Kazakh language text shall be prepared which shall be considered equally authentic upon an exchange of diplomatic notes confirming its conformity with the English language text.

FOR THE UNITED STATES OF AMERICA:

FOR THE REPUBLIC OF KAZAKHSTAN:

ANNEX

1. The United States reserves the right to make or maintain limited exceptions to national treatment, as provided in Article II, paragraph 1, in the sectors or matters it has indicated below:

ownership of real property; mining on the public domain; maritime-related services; and primary dealership in United States government securities.

3. The Republic of Kazakhstan reserves the right to make or maintain limited exceptions to national treatment, as provided in Article II, paragraph 1, in the sectors or matters it has indicated below:

ownership of land, its subsoil, water, plant and animal life, and other natural resources; ownership of real estate (during the transition period to a market economy); ownership of control of television and radio broadcasting; air transportation; and, preparation of stocks and bond notes issued by the Govenment of Kazakhstan.

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Kyrgyzstan Bilateral Investment Treaty

Signed January 19, 1993; Entered into Force January 12, 1994

103RD Congress 1st Session

SENATE Treaty Doc. 103-13

INVESTMENT TREATY WITH THE REPUBLIC OF KYRGYZSTAN

MESSAGE

FROM

THE PRESIDENT OF THE UNITED STATES

Transmitting

THE TREATY BETWEEN THE UNITED STATES OF AMERICA AND THE REPUBLIC OF KYRGYZSTAN CONCERNING THEENCOURAGEMENT AND RECIPROCAL PROTECTION OF INVESTMENT, SIGNED AT WASHINGTON ON JANUARY 19, 1993

SEPTEMBER 8, 1993.-Treaty was read the first time and, together with the accompanying papers, referred to the Committee on Foreign Relations and ordered to be printed for the use of the Senate

U.S. GOVERNMENT PRINTING OFFICE

WASHINGTON : 1993

LETTER OF TRANSMITTAL

THE WHITE HOUSE

September 7, 1993.

To the Senate of the United States:

With a view to receiving the advice and consent of the Senate to ratification, I transmit herewith the Treaty Between the United States of America and the Kyrgyz Republic Concerning the Encouragement and Reciprocal Protection of Investment, with Protocol and related exchange of letters, signed at Washington on January 19, 1993. Also transmitted for the information of the Senate is the report of the Department of State with respect to this Treaty.

The Treaty will establish an agreed-upon legal basis for the protection and encouragement of investment. This Treaty thus forms an integral part of the framework for expanding trade and investment relations between the United States and the countries of the former Soviet Union. It is designed to encourage economic opportunity-including investment, trade, and growth-in both countries. It will assist Kyrgyzstan in its transition to a market economy by strengthening the role of the private sector and by encouraging appropriate macroeconomic and structural policies.

I recommend that the Senate consider this Treaty as soon as possible, and give its advice and consent to ratification of the Treaty, with Protocol and related exchange of letters, at an early date.

WILLIAM J. CLINTON.

LETTER OF SUBMITTAL

DEPARTMENT OF STATE,

Washington, September 7, 1993.

The PRESIDENT, The White House.

THE PRESIDENT: I have the honor to submit to you the Treaty Between the United States of America and the Republic of Kyrgyzstan Concerning the Encouragement and Reciprocal Protection of Investment, with Protocol and a related exchange of letters, signed at Washington on January 19, 1993. I recommend that this Treaty, with Protocol and exchange of letters, be transmitted to the Senate for its advice and consent to ratification.

This is the fourth of five bilateral investment treaty (BIT) that the United States has signed with a newly independent state of the former Soviet Union. (BITs have already been signed with Armenia, Kazakhstan, Moldova and Russia.) This Treaty will assist Kyrgyzstan in its transition to a market economy by creating favorable conditions for U.S. private investment, helping to attract such investment and, thus, strengthening the development of the private sector. It is U.S. policy, however, to advise potential treaty partners during BIT negotiations that conclusion of a BIT does not necessarily result in immediate increases in private U.S. investment flows.

To date, 13 BITs are in force for the United States-with Bangladesh, Cameroon, the Czech Republic, Egypt, Grenada, Morocco, Panama, Senegal, Slovakia, Sri Lanka, Tunisia, Turkey, and Zaire. In addition to the Kyrgyzstan Treaty, the United States has signed, but not yet brought into force, BITs with Argentina, Armenia, Bulgaria, the Congo, Haiti, Kazakhstan, Moldova, Romania, and Russia-and a business and economic relations treaty with Poland, which contains the BIT elements.

The Office of the United States Trade Representative and the Department of State jointly lead BIT negotiations, with assistance from the Departments of Commerce and Treasury.

THE U.S.-KYRGYZSTAN TREATY

The U.S.-Kyrgyzstan Treaty adopts the U.S. prototype BIT text without modification. The Treaty with Kyrgyzstan thus satisfies the principal BIT objectives, which are:

-Investments are guaranteed freedom from performance requirements, including requirements to use local products or to export local goods;

-Investments are guaranteed the unrestricted transfer of funds in a freely usable currency; and

-Nationals and companies of either Party, in investment disputes with the host government, have access to binding international arbitration, without first restoring to domestic courts.

The following is an article-by-article analysis of the provisions of the Treaty:

Preamble

ARTICLE I (DEFINITIONS)

ARTICLE I sets out definitions for terms used throughout the Treaty. As a general matter, they are designed to be broad and inclusive in nature.

Investment

The treaty’s definition of investment is broad, recognizing that investment can take a wide variety of forms. It covers investments that are owned or controlled by nationals or companies of one of the Treaty partners made in the territory of the other. Investments can be made either directly or indirectly through one or more subsidiaries, including those of third countries. Control is not specifically defined in the Treaty. Ownership of over 50 percent of the voting stock, of a company would normally convey control but in many cases the requirement could be satisfied by less than that proportion.

Under paragraph 2 of Article I, either country may deny the benefits of the Treaty to investments by companies established in the other that are owned or controlled by nationals of a third country if 1) the company is a mere shell, without substantial business activities in the home country, or 2) the third country is one with which the denying party does not maintain normal economic relations. For example, at this time the United States does not maintain normal economic relations with, inter alia, Cuba or Libya.

Paragraph 3 confirms that “any alteration m the form in which an asset is invested or reinvested shall not affect its character as investment.” For example, a decision to alter the corporate form of an investment will not deprive it of protection under the Treaty.

Company

The definition of “company” is broad in order to cover virtually any type of legal entity, including any corporation, company, association, or other entity that is organized under the laws and regulations of a Party. It ensures that companies of a Party that establish investments in the territory of the other Party have their investments covered by the Treaty, even if the parent company is ultimately owned by non-Party nationals, although the other Party may deny the benefits of the Treaty in the limited circumstances set forth in Article I paragraph 2. Likewise, a company of a third Party will also be covered. The definition also covers charitable and non-profit entities, as well as entities that are owned or controlled by the state.

National

The Treaty defines “national” as a natural person who is a national of a Party under its own laws. Under U.S. law, the term “national” is broader than the term “citizen; for example, a native of American Samoa is a national of the United States, but not a citizen.

Return

“Return” is defined as “any amount derived from or associated with an investment,” and the Treaty provides a non-exclusive list of examples, including: profits; dividends; interest; capital gains; royalty payments; management, technical assistance or other fees; and returns in kind. The scope of this definition provides breadth to the Treaty’s transfer provisions in Article IV.

Associated Activities

The Treaty recognizes that the operation of an investment requires protections extending beyond the investment to numerous related activities. This definition provides an illustrative list of such investor activities including operating a business facility, borrowing money, disposing of property, issuing stock and purchasing foreign exchange for imports. These activities are covered by Article II, paragraph 1 which guarantees the better of national or MFN treatment for investments and associated activities. (Article II, paragraph 10, discussed below, provides an expanded, detailed list of the “associated activities” protected by the Treaty.)

ARTICLE II (Treatment)

Article II contains the Treaty’s major obligations with respect to the treatment of investment.

Paragraph 1 generally ensures the better of MFN or national treatment in both the entry and post-entry phases of investment. It thus prohibits both the screening of proposed foreign investment on the basis of nationality and discriminatory measures once the investment has been made, subject to specific exceptions provided for in a separate Annex. As previously noted, the Government of Kyrgyzstan decided not to include any such exceptions to national or most-favored-nation treatment. The U.S. exceptions are discussed in the section entitled “Annex.”

Paragraph 4 guarantees companies the right to engage top managerial personnel of their choice, regardless of nationality.

Paragraph 6 provides that each Party must provide effective means of asserting rights and claims with respect to investment, investment agreements and any investment authorizations. Under paragraph 7, each Party must make publicly available all laws, administrative practices and adjudicatory procedures pertaining to or affecting investments.

Article II, paragraph 10 of the BIT with Kyrgyzstan is designed to resolve problems that U.S. businesses may face in emerging market economies. This provision spells out that nationals and companies of either Party receive the better of national or MFN treatment with respect to a detailed list of activities associated with their investments. These include: access to registrations, licenses, and permits; access to financial institutions and credit markets; access to their funds held in financial institutions; the importation and installation of business equipment; advertising and the conduct of market studies; the appointment of commercial representatives; direct marketing; access to public utilities; and, access to raw materials. The right to the better of national or MFN treatment in these activities requires that Kyrgyzstan grant U.S. nationals and companies treatment no less favorable than that granted to its own or third country nationals and companies.

ARTICLE III (EXPROPRIATION)

Article III incorporates into the Treaty the international law standards for expropriation and compensation.

ARTICLE IV (TRANSFERS)

Article IV protects investors from certain government exchange controls limiting current account and capital account transfers.

Paragraph 2 provides that transfers are to be made in a “freely usable currency” at the prevailing market rate of exchange on the date of transfer with respect to spot transactions in the currency to be transferred. “Freely usable” is a standard of the International Monetary Fund; at present there are five such “Freely usable” is a standard of the International Monetary Fund; at present there are five such “freely usable” currencies: the U.S. dollar, Japanese yen, German mark, French franc and British pound sterling.

Paragraph 3 recognizes that notwithstanding these guarantees, Parties may maintain certain laws or obligations that could affect transfers with respect to investments. It provides that the Parties may require reports of currency transfers and impose income taxes by such means as a withholding tax on dividends. It also recognizes that Parties may take measures to protect the rights of creditors and ensure the satisfaction of judgments in adjudicatory proceedings through their laws, even if such measures interfere with transfers. Such laws must be applied in an equitable, nondiscriminatory and good faith manner.

ARTICLE V (STATE-STATE CONSULTATIONS)

Article V provides for prompt consultation between the Parties, at either Party’s request, on any matter relating to the interpretation or application of the Treaty.

ARTICLE VI (STATE- INVESTOR DISPUTE RESOLUTION)

Article VI sets forth several means by which disputes between an investor and the host country may be settled.

Article VI procedures apply to an “investment dispute.” a term which covers any dispute arising out of or relating to rights granted by the Treaty with respect to an investment, an investment authorization, or an agreement between the investor and the host government.

When a dispute arises, Article VI contemplates that the disputants will initially seek to resolve the dispute by consultation and negotiation, which may include non-binding third party procedures. Should such consultations fail, paragraphs 2 and 3 set forth the investor’s range of choices of, dispute settlement. The investor may make an exclusive and irrevocable choice to: (1) employ one of the several arbitration procedures outlined in the Treaty; (2) submit the dispute to procedures previously agreed upon by the investor and the host country government in an investment agreement or otherwise; or (3) submit the dispute to the local courts or administrative tribunals of the host country.

Paragraph 4 contains the consent of the United States and Kyrgyzstan to the submission of investment disputes to binding arbitration in accordance with the choice of the investor.

ARTICLE VII (STATE-STATE ARBITRATION)

Article VII Provides for binding arbitration of disputes between the United States and Kyrgyzstan that are not resolved through consultations or other diplomatic channels. The article constitutes each Party’s prior consent to arbitration.

ARTICLE VIII (Exclusions for Dispute Settlement)

Article VIII excludes from the coverage of Article VI and VII any disputeds arising under the export credit, guarantee or insurance programs of the Export-Import Bank of the United States, as well as those of any other such official programs pursuant to which the Parties have agreed to other means of settling disputes.

ARTICLE IX (PRESERVATION OF RIGHTS)

Article IX clarifies that the Treaty is meant only to establish a floor for the treatment of foreign investment. An investor may be entitled to more favorable treatment through domestic legislation, other international legal obligations, or a specific obligation assumed by a Party with respect to that investor. This provision ensures that the Treaty will not be interpreted to derogate from any entitlement to such more favorable treatment.

ARTICLE X (MEASURES NOT PRECLUDED)

The first paragraph of Article X reserves the right of a Party to take measures as necessary for the maintenance of public order, the fulfillment of its international obligations with respect to international peace and security, or the protection of its own essential security interests. These provisions are common in international investment agreements.

ARTICLE XI (TAX POLICIES)

The Treaty exhorts both countries to provide fair and equitable treatment to investors with respect to tax policies. However, tax matters are generally excluded from the coverage of the prototype BIT, based on the assumption that tax matters are properly covered in bilateral tax treaties.

The three areas where the Treaty could apply to tax matters are expropriation (Article III), transfers (Article IV) and the observance and enforcement of terms of an investment agreement or authorization (Article VI (1) (a) or (b)). These three areas are important for investors, and two of the three-expropriatory taxation and tax provisions contained in an investment agreement or authorization are not typically addressed in tax treaties.

ARTICLE XII (APPLICATION TO POLITICAL SUBDIVISIONS)

Article XII makes clear that the obligations of the Treaty are applicable to all political subdivisions of the Parties, such as State and local governments.

ARTICLE XII (ENTRY INTO FORCE, DURATION AND TERMINATION)

The Treaty enters into force thirty days after exchange of instruments of ratification and continues in force for a period of ten years. From the date of its entry into force, the Treaty applies to existing and future investments. After the ten-year term, the Treaty will continue in force unless terminated by either Party upon one year’s notice. If terminated, all existing investments would continue to be protected under the Treaty for ten years thereafter.

Annex

The U.S. portion of the Annex contains a list of sectors and matters in which, for various legal and historical reasons, the federal government or the States may not necessarily treat investments of nationals or companies of the other Party as they do U.S. investments or investments from a third country. The U.S. exceptions from national treatment are: air transportation; ocean and coastal shipping; banking; insurance; government grants; government insurance and loan programs energy and power production; customs house brokers; ownership of real property; ownership and operation of broadcast or common carrier radio and television stations; ownership of shares in the Communications Satellite Corporation; the provision of common carrier telephone or telegraph services; the provision of submarine cable services; use of land and natural resources; mining on the public domain; maritime ans maritime related services; and, primary dealership in U.S. government securities.

Ownership of real property, mining on the public domain, maritime-related services, and primary dealers in U.S. government securities are also excluded from the MFN treatment commitments. The last three of the sectors in the Annex are exempted by the United States from MFN treatment obligations because of U.S. laws that require reciprocity. Enforcement of reciprocity provisions would deny both national and MFN treatment.

Because the U.S. exceptions to national and MFN treatment are based on existing U.S. law, they are not altered during negotiations.

Kyrgyzstan reserved no sectoral exceptions to national or MFN treatment.

The other U.S. Government agencies which negotiated the Treaty join me in recommending that it be transmitted to the Senate at an early date.

Respectfully submitted,

WARREN CHRISTOPHER

TREATY BETWEEN UNITED STATES OF AMERICA AND THE REPUBLIC OF KYRGYZSTAN CONCERNING THE ENCOURAGEMENT AND RECIPROCAL PROTECTION OF INVESTMENT

The United States of America and the Republic of Kyrgyzstan (hereinafter the “Parties”);

Desiring to promote greater economic cooperation between them, with respect to investment by nationals and companies of one Party in the territory of the other Party;

Recognizing that agreement upon the treatment to be accorded such investment will stimulate the flow of private capital and the economic development of the Parties;

Agreeing that fair and equitable treatment of investment is desirable in order to maintain a stable framework for investment and maximum effective utilization of economic resources;

Recognizing that the development of economic and business ties can contribute to the well-being of workers in both Parties and promote respect for internationally recognized worker rights; and

Having resolved to conclude a Treaty concerning the encouragement and reciprocal protection of investment;

Have agreed as follows:

ARTICLE I

1. For the purposes of this Treaty,

(i) tangible and intangible property, including movable and immovable property, as well as rights, such as mortgages, liens and pledges;

(ii) a company or shares of stock or other interests in a company or interests in the assets thereof;

(iii) a claim to money or a claim to performance having economic value, and associated with an investment;

(iv) intellectual property which includes, inter alia, rights relating to:

(v) any right conferred by law or contract, and any licenses and permits pursuant to law;

3. Any alteration of the form in which assets are invested or reinvested shall not affect their character as investment.

ARTICLE II

1. Each Party shall permit and treat investment, and activities associated therewith, on a basis no less favorable than that accorded in like situations to investment or associated activities of its own nationals or companies, or of nationals or companies of any third country, whichever is the most favorable, subject to the right of each Party to make or maintain exceptions falling within one of the sectors or matters listed in the Annex to this Treaty. Each Party agrees to notify the other Party before or on the date of entry into force of this Treaty of all such laws and regulations of which it is aware concerning the sectors or matters listed in the Annex. Moreover, each Party agrees to notify the other of any future exception with respect to the sectors or matters listed in the Annex, and to limit such exceptions to a minimum. Any future exception by either Party shall not apply to investment existing in that sector or matter at the time the exception becomes effective. The treatment accorded pursuant to any exceptions shall, unless specified otherwise in the Annex, be not less favorable than that accorded in like situations to investments and associated activities of nationals or companies of any third country.

3. Subject to the laws relating to the entry and sojourn of aliens, nationals of either Party shall be permitted to enter and to remain in the territory of the other Party for the purpose of establishing, developing, administering or advising on the operation of an investment to which they, or a company of the first Party that, employs them, have committed or are in the process of committing a substantial amount of capital or other resources.

6. Each Party shall provide effective means of asserting claims and enforcing rights with respect to investment, investment agreements, and investment authorizations.

7. Each Party shall make public all laws, regulations, administrative practices and procedures, and adjudicatory decisions that pertain to or affect investments.

8. The treatment accorded by the United States of America to investments and associated activities of nationals and companies of the Republic of Kyrgyzstan under the provisions of this Article shall in any State, Territory or possession of the United States of America be no less favorable than the treatment accorded therein to investments and associated activities of nationals of the United States of America resident in, and companies legally constituted under the laws and regulations of other States, Territories or possessions of the United States of America.

9. The most favored nation provisions of this Article shall not apply to advantages accorded by either Party to nationals or companies of any third country by virtue of:

(a) that Party’s binding obligations that derive from full membership in a free trade area or customs union; or (b) that Party’s binding obligations under any multilateral international agreement under the framework of the General Agreement on Tariffs and Trade that enters into force subsequent to the signature of this Treaty.

10. The Parties acknowledge and agree that “associated” activities, include without limitation, such activities as:

(a) the granting of franchises or rights under licenses;

(b) access to registrations, licenses, permits and other approvals (which shall in any event be issued expeditiously);

(d) access to their funds held in financial institutions;

(f) the dissemination of commercial information;

(g) the conduct of market studies;

(h) the appointment of commercial representatives, including agents, consultants and distributors and their participation in trade fairs and promotion events;

(i) the marketing of goods and services, including through internal distribution and marketing systems, as well as by advertising and direct contact with individuals and companies;

(j) access to public utilities, public services and commercial rental space at nondiscriminatory prices, if the prices are set or controlled by the government; and

(k) access to raw materials, inputs and services of all types at nondiscriminatory prices, if the prices are set or controlled by the government.

ARTICLE III

1. Investments shall not be expropriated or nationalized either directly or indirectly through measures tantamount to expropriation or nationalization (“expropriation”) except: for a public purpose; in a nondiscriminatory manner; upon payment of prompt, adequate and effective compensation; and in accordance with due process of law and the general principles of treatment provided for in Article II(2). Compensation shall be equivalent to the fair market value of the expropriated investment immediately before the expropriatory action was taken or became known, whichever is earlier; be calculated in a freely usable currency on the basis of the prevailing market rate of exchange at that time; be paid without delay; include interest at a commercially reasonable rate from the date of expropriation; be fully realizable; and be freely transferable.

3. Nationals or companies of either Party whose investments suffer losses in the territory of the other Party owing to war or other armed conflict, revolution, state of national emergency, insurrection, civil disturbance or other similar events shall be accorded treatment by such other Party no less favorable than that accorded to its own nationals or companies or to nationals or companies of any third country, whichever is the most favorable treatment, as regards any measures it adopts in relation to such losses.

ARTICLE IV

1. Each Party shall permit all transfers related to an investment to be made freely and without delay into and out of its territory. Such transfers include: (a) returns; (b) compensation pursuant to Article III; (c) payments arising out of an investment dispute; (d) payments made under a contract, including amortization of principal and accrued interest payments made pursuant to a loan agreement; (e) proceeds from the sale or liquidation of all or any part of an investment; and (f) additional contributions to capital for the maintenance or development of an investment.

2. Transfers shall be made in a freely usable currency at the prevailing market rate of exchange on the date of transfer with respect to spot transactions in the currency to be transferred.

3. Notwithstanding the provisions of paragraphs I and 2, either Party may maintain laws and regulations (a) requiring reports of currency transfer; and (b) imposing income taxes by such means as a withholding tax applicable to dividends or other transfers. Furthermore, either Party may protect the rights of creditors, or ensure the satisfaction of judgments in adjudicatory proceedings, through the equitable, nondiscriminatory and good faith application of its law.

ARTICLE V

ARTICLE VI

1. For purposes of this Article, an investment dispute is a dispute between a Party and a national or company of the other Party arising out of or relating to (a) an investment agreement between that Party and such national or company; (b) an investment authorization granted by that Party’s foreign investment authority to such national or company; or (c) an alleged breach of any right conferred or created by this Treaty with respect to an investment.

(a) to the courts or administrative tribunals of the Party that in a Party to the dispute; or

(b) in accordance with any applicable, previously agreed dispute-settlement procedures; or

(ii) to the Additional Facility of the Centre, if the Centre is not available; or

(iii) in accordance with the Arbitration Rules of the United Nations Commission on International Trade Law (UNCITRAL); or

(iv) to any other arbitration institution, or in accordance with any other arbitration rules, as may be mutually agreed between the parties to the dispute.

(b) Once the national or company concerned has so consented, either Party to the dispute may initiate arbitration in accordance with the choice so specified in the consent.

(a) written consent of the parties to the dispute for purposes of Chapter II of the ICSID Convention (Jurisdiction of the Center) and for purposes of the Additional Facility Rules; and

5. Any arbitration under paragraph 3(a)(ii), (iii) or (iv) of this Article shall be held in a state that is a Party to the New York Convention.

ARTICLE VII

ARTICLE VIII

The provisions of Articles VI and VII shall not apply to a dispute arising (a) under the export credit, guarantee or insurance programs of the Export-Import Bank of the United States or (b) under other offical credit, guarantee or insurance arrangements pursuant to which the Parties have agreed to other means of settling disputes.

ARTICLE IX

This Treaty shall not derogate from:

(a) laws and regulations, administrative practices or procedures, or administrative or adjudicatory decisions of either Party;

(b) international legal obligations; or

ARTICLE X

ARTICLE XI

1. With respect to its tax policies, each Party should strive to accord fairness and equity in the treatment of investment of nationals and companies of the other Party.

2. Nevertheless, the provisions of this Treaty, and in particular Article VI and VII, shall apply to matters of taxation only with respect to the following:

(a) expropriation, pursuant to Article III;

(b) transfers, pursuant to Article IV; or

ARTICLE XII

This Treaty shall apply to the political subdivisions of the Parties.

ARTICLE XIII

2. Either Party may, by giving one year’s written notice to the other Party, terminate this Treaty at the end of the initial ten year period or at any time thereafter.

4. The Annex, Protocol, and Side Letter shall form an integral part of the Treaty.

IN WITNESS WHEREOF, the respective plenipotentiaries have signed this Treaty.

DONE in duplicate at Washington, this ninteenth day of January, 1993 in the English and Russian languages, both texts being equally authentic. A Kyrgyz language text shall be prepared which shall be considered equally authentic upon an exchange of diplomatic notes confirming its conformity with the English language text.

FOR THE UNITED STATES AMERICA:

FOR THE REPUBLIC OF OF KYRGYZSTAN:

ANNEX

1. The United States reserves the right to make or maintain limited exceptions to national treatment, as provided in Article II, paragraph 1, in the sectors or matters it has indicated below:

ownership of real property; mining on the public domain; maritime services and maritime-related services; and primary dealership in United States government securities.

3. The Republic of Kyrgyzstan does not reserve the right to make or maintain limited exceptions to national treatment, as provided in Article II, paragraph 1.

End of tab panel

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Latvia Bilateral Investment Treaty

Signed January 13, 1995; Entered into Force November 26, 1996; Amended May 1, 2004

Prior to the accession of Latvia to the European Union, this treaty was amended to reduce the possibility of conflict with the laws of the European Union. [View Amending Protocol]

104th CONGRESS 1st Session

SENATE TREATY Doc. 104-12

INVESTMENT TREATY WITH LATVIA

MESSAGE

FROM

THE PRESIDENT OF THE UNITED STATES

TRANSMITTING

THE TREATY BETWEEN THE GOVERNMENT OF THE UNITED STATES OF AMERICA AND THE GOVERNMENT OF THE REPUBLIC OF LATVIA CONCERNING THE ENCOURAGEMENT AND RECIPROCAL PROTECTION OF INVESTMENT WITH ANNEX AND PROTOCOL, SIGNED, AT WASHINGTON ON JANUARY 13, 1995

JULY 10, 1995.-Treaty was read the first time and, together with the accompanying papers, referred to the Committee on Foreign Relations and ordered to be printed for the use of the Senate

U.S. GOVERNMENT PRINTING OFFICE

99-118 WASHINGTON : 1995

LETTER OF TRANSMITTAL

THE WHITE HOUSE, July 10, 1995.

To the Senate of the United States:

The bilateral investment Treaty (BIT) with Latvia will protect U.S. investors and assist Latvia in its efforts to develop its economy by creating conditions more favorable for U.S. private investment and thus strengthening the development of the private sector.

The Treaty is fully consistent with U.S. policy toward international and domestic investment. A specific tenet of U.S. policy, reflected in this Treaty, is that U.S. investment abroad and foreign investment in the United States should receive national treatment. Under this Treaty, the Parties also agree to international law standards for expropriation and compensation for expropriation; free transfer of funds associated with investments; freedom of investments from performance requirements; fair, equitable, and most-favored-nation treatment; and the investor’s or investment’s freedom to choose to resolve disputes with the host government through international arbitration.

I recommend that the Senate consider this Treaty as soon as possible, and give its advice and consent to ratification of the Treaty, with Annex and Protocol, at an early date.

WILLIAM J. CLINTON.

LETTER OF SUBMITTAL

DEPARTMENT OF STATE,

Washington, June 16,1995.

The PRESIDENT,

The White House.

THE PRESIDENT: I have the honor to submit to you the Treaty Between the Government of the United States of America and the Government of the Republic of Latvia for the Encouragement, and Reciprocal Protection of Investment, with Annex and Protocol, signed at Washington on January 13, 1995. I recommend that this Treaty, with Annex and Protocol, be transmitted to the Senate for its advice and consent to ratification.

The bilateral investment treaty (BIT) with Latvia is based on the view that an open investment policy contributes to economic growth. This Treaty will assist Latvia in its efforts to develop its economy by creating conditions more favorable for U.S. private investment and thus strengthening the development of the private sector. It is U.S. policy, however, to advise potential treaty partners during BIT negotiations that conclusion of a BIT does not necessarily result in immediate increases in private U.S. investment flows.

To date, twenty-one BITs are in force for the United States-with Argentina, Bangladesh, Bulgaria, Cameroon, the Congo, the Czech Republic, Egypt, Grenada, Kazakhstan, Kyrgyzstan, Moldova, Morocco, Panama, Poland, Romania, Senegal, Slovakia, Sri Lanka, Tunisia, Turkey, and Zaire. In addition to the Treaty with Latvia, the United States has signed, but not yet brought into force, BITs with Albania, Armenia, Belarus, Ecuador, Estonia, Georgia, Haiti, Jamaica, Mongolia, Russia, Trinidad and Tobago, Ukraine and Uzbekistan.

THE U.S.-LATVIA TREATY

The Treaty with the Republic of Latvia is based on the 1992 U.S. prototype BIT, and achieves all of the prototype’s objectives, which are:

-All forms of U.S. investment in the territory of the Republic of Latvia are covered.

-Investments receive the better of national treatment or most-favored-nation (MFN) treatment both on establishment and thereafter, subject to certain specified exceptions.

-Performance requirements may not be imposed upon or enforced against investments.

-Expropriation can occur only in accordance with international law standards, that is, for a public purpose; in a nondiscriminatory manner; in accordance with due process of law, and upon payment of prompt, adequate, and effective compensation.

-The unrestricted transfer, in a freely usable currency, of funds related to an investment is guaranteed.

-Investment disputes with the host government may be brought by investors, or by their subsidiaries, to binding international arbitration as an alternative to domestic courts.

The U.S.-Latvia Treaty differs from the 1992 prototype in some minor respects. It eliminates Article VIII of the 1992 prototype text which had excluded from the dispute settlement provisions of the BIT those disputes arising under the export credit, guarantee or insurance programs of the Export-Import Bank of the United States, as well as those arising under any other such official programs pursuant to which the Parties agreed to other means of settling disputes. The Export-Import Bank, the Overseas Private Investment Corporation and other relevant government agencies indicated prior to this negotiation that they saw no need to maintain such a provision.

The U.S.-Latvia Treaty also differs from the prototype in that it includes provisions in Article 1, paragraph 1 (f) and (g), and Article II, paragraph 2, which clarify and extend the requirements of the Treaty with respect to state enterprises, and Article II, paragraph 11, which clarifies that investors should receive the better of national or MFN treatment with respect to activities associated with their investment. This additional language is discussed in further detail in the article-by-article analysis of the Treaty below.

In addition, a Protocol clarifies that despite Latvia’s inclusion of ownership of land in its exceptions to the Treaty’s national treatment obligations in the Annex, foreign investors in Latvia can purchase land in urban areas.

The following is an article-by-article analysis of the provisions of the Treaty:

Preamble

Article I (Definitions)

Article I sets out definitions for terms used throughout the Treaty. As a general matter, they are designed to be broad and inclusive in nature.

Investment

Company

The definition of “company” is broad in order to cover virtually any type of legal entity, including any corporation, company, association, or other entity that is organized under the laws and regulations of a Party. In connection with the definition of investment, this definition also ensures that companies of a Party that establish investments in the territory of the other Party have their investments covered by the Treaty, even if the parent company is ultimately owned by non-Party nationals, although the other Party may deny the benefits of the Treaty in the limited circumstances set forth in Article I, paragraph 2. Likewise, a company of a third country that is owned or controlled by nationals or companies of a Party will also be covered. The definition also covers charitable and non-profit entities, as well as entities that are owned or controlled by the state.

National

The Treaty defines “national” as a natural person who is a national of a Party under its own laws. Under U.S. law, the term “national”, is broader than the term “citizen”; for example, a native of American Samoa is a national of the United States, but not a citizen.

Return

“Return” is defined as “an amount derived from or associated with an investment.” The Treaty provides a non-exclusive list of examples, including profits; dividends; interest; capital gains; royalty payments; management, technical assistance or other fees; and returns in kind. The scope of this definition provides breadth to the Treaty’s transfer provisions in Article IV.

Associated activities

The Treaty recognizes that the operation of an investment requires protections extending beyond the investment to numerous activities. This definition provides an illustrative list of such investor activities, including operating a business facility borrowing money, disposing of property, issuing stock and purchasing foreign exchange for imports. These activities are covered by Article II, paragraph 1, which guarantees the better of national or MFN treatment for investments and associated activities.

State enterprise

“State enterprise” is defined as an enterprise owned, or controlled through ownership interests, by a Party.

Delegation

The definitions of “state enterprise” and “delegation” are included to clarify the scope of the obligations of Article II, paragraph 2, which provides that any governmental authority delegated to a state enterprise by a Party must be exercised in a manner consistent with the Party’s obligations under the Treaty.

Article II (Treatment)

Article II contains the Treaty’s obligations with respect to the treatment of investment.

Paragraph 1 generally ensures the better of MFN or national treatment in both the entry and post-entry phases of investment. It thus prohibits both the screening of proposed foreign investment on the basis of nationality and discriminatory measures once the investment has been made, subject to specific exceptions provided for in the separate Annex. The United States and Latvia have both reserved certain exceptions in the Annex to the Treaty, the provisions of which are discussed in the section entitled “Annex.”

Paragraph 3 guarantees that investment shall be granted “fair and equitable” treatment. It also prohibits Parties from impairing, through arbitrary or discriminatory means, the management, operation, maintenance, use, enjoyment, acquisition, expansion or disposal of investments. This paragraph sets out a minimum standard of treatment based on customary international law.

Paragraph 4 allows, subject to each Party’s immigration laws and regulations, the entry of each Party’s nationals into the territory of the other for purposes linked to investment and involving the commitment of a “substantial amount of capital or other resources.” This paragraph serves to render nationals of a BIT partner eligible for treaty-investor visas under U.S. immigration law and guarantees similar treatment for U.S. investors.

Paragraph 5 guarantees companies the right to engage top managerial personnel of their choice, regardless of nationality.

Paragraph 7 provides that each Party must provide effective means of asserting rights and claims with respect to investment, investment agreements and any investment authorizations. Under paragraph 8, each Party must make publicly available all laws, regulations, administrative practices and adjudicatory procedures pertaining to or affecting investments.

Paragraph 11 is designed to avoid problems that U.S. businesses may face in emerging market economies. This provision makes clear that nationals and companies of either Party receive the better of national or MFN treatment with respect to a detailed list of activities associated with their investments.

Article III (Expropriation)

Article III incorporates into the Treaty the international law standards for expropriation and compensation.

Paragraph 1 further bars all expropriations or nationalizations except those that are for a public purpose; carried out in a non-discriminatory manner, subject to “prompt, adequate, and effective compensation”; subject to due process; and accorded the treatment provided in the standards of Article II, paragraph 3. (These standards guarantee fair and equitable treatment and prohibit the arbitrary and discriminatory impairment of investment in its broadest sense.)

Article IV (Transfers)

Article IV protects investors from certain government exchange controls limiting current account and capital account transfers.

In paragraph 1, the Parties agree to permit “transfers related to an investment to be made freely and without delay into and out of its territory.” Paragraph 1 also provides a non-exclusive list of transfers that must be allowed, including returns (as defined in Article I); payments made in compensation for expropriation (as defined in Article III); payments arising out of an investment dispute; payments made under a contract, including the amortization of principal and interest payments on a loan; proceeds from the liquidation or sale of all or part of an investment; and additional contributions to capital for the maintenance or development of an investment.

Article V (State-State consultations)

Article V provides for prompt consultation between the Parties, at either Party’s request, on any matter relating to the interpretation or application of the Treaty.

Article VI (State-investor dispute resolution)

Article VI sets forth several means by which disputes between an investor and the host country may be settled.

Article VI procedures apply to an “investment dispute,” a term which covers any dispute arising out of or relating to an investment authorization, an investment agreement, or to rights granted by the Treaty with respect to an investment.

When a dispute arises, Article VI, paragraph 2, provides that the disputants should initially seek to resolve the dispute by consultation and negotiation, which may include non-binding third-party procedures. Should such consultations fail, paragraphs 2 and 3 set forth the investor’s range of choices of dispute settlement. Paragraph 2 permits the investor to: (1) employ one of the several arbitration procedures outlined in the Treaty; (2) submit the dispute to procedures previously agreed upon by the investor and the host country government in an investment agreement or otherwise; or (3) submit the dispute to the local courts or administrative tribunals of the host country.

Under paragraph 3, if the investor has not submitted the dispute under the procedures in paragraph 2 and six months have elapsed from the date the dispute arose, the investor may choose among the International Centre for the Settlement of Investment Disputes (ICSID) Convention arbitration, or the ICSID Additional Facility (if Convention arbitration is not available), or ad hoc arbitration using the Arbitration Rules of the United Nations Commission on International Trade Law (UNCITRAL). Paragraph 3 also recognizes that, by mutual agreement, the parties to the dispute may choose another arbitral institution or set of arbitral rules.

Paragraph 4 contains the consent of the United States and the Republic of Latvia to the submission of investment disputes to binding arbitration in accordance with the choice of the investor.

Paragraph 5 provides that a non-ICSID Convention arbitration shall take place in a country that is a party to the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards. This requirement expands the ability of investors to obtain enforcement of their arbitral awards aboard. In addition, paragraph 6 includes a separate commitment by each Party to enforce arbitral awards rendered pursuant to Article VI procedures.

Paragraph 7 provides that in any dispute settlement procedure, a Party may not invoke as a defense, counterclaim, set-off or in any other manner the fact that the company or national has received or will be reimbursed for he same damages under an insurance or guarantee contract.

Article VII (State-State arbitration)

Article VII provides for binding arbitration of disputes between the United States and the Republic of Latvia that are not resolved through consultations or other diplomatic channels. The article constitutes each Party’s prior consent to arbitration. It provides for the selection of arbitrators, establishes time limits for submissions, and requires the Parties to bear the costs equally, unless otherwise directed by the Tribunal.

Article VIII (Preservation of rights)

Article VIII clarifies that the Treaty is meant only to establish a floor for the treatment of foreign investment. An investor may be entitled to more favorable treatment through domestic legislation, other international legal obligations, or a specific obligation assumed by a Party with respect to that investor. This provision ensures that the Treaty will not be interpreted to derogate from any entitlement to such more favorable treatment.

Article IX (Measures not precluded)

The maintenance of public order would include measures taken pursuant to a Party’s police powers to ensure public health and safety. International obligations with respect to peace and security would incIude, for example, obligations arising out of Chapter VII of the United Nations Charter. Measures permitted by the provision on the protection of a Party’s essential security interests would include security-related actions taken in time of war or national emergency; actions not arising from a state of war or national emergency must have a clear and direct relationship to the essential national security interest of the Party involved.

Article X (Tax policies)

Paragraph I exhorts both countries to provide fair and equitable treatment to investors with respect to tax policies. However, tax matters are generally excluded from the coverage of the Treaty, based on the assumption that tax matters are properly covered in bilateral tax treaties.

The Treaty, and particularly the dispute settlement provisions, do apply to tax matters in three areas, to the extent they are not subject to the dispute settlement provisions of a tax treaty, or if so subject, have been raised under a tax treaty’s dispute settlement procedures and are not resolved in a reasonable period of time.

Pursuant to paragraph 2, the three areas where the Treaty could apply to tax matters are expropriation (Article III), transfers (Article IV) and the observance and enforcement of terms of an investment agreement or authorization (Article VI (1) (a) or (b)). These three areas are important for investors, and two of the three—expropriatory taxation and tax provisions contained in an investment agreement or authorization—are not typically addressed in tax treaties.

Article XI (Application to political subdivisions)

Article XI makes clear that the obligations of the Treaty are applicable to all political subdivisions of the Parties, such as provincial, State and local governments.

Article XII (Entry into force, duration and termination)

The Treaty enters into force thirty days after exchange of instruments of ratification and continues in force for a period of ten years. From the date of its entry into force, the Treaty applies to existing and future investments. After the ten-year term, the Treaty will continue in force unless terminated by either Party upon one year’s notice. If the Treaty is terminated, all existing investments would continue to be protected under the Treaty for ten years thereafter.

Annex

The U.S. portion of the Annex contains a list of sectors and matters in which, for various legal and historical reasons, the federal government or the States may not necessarily treat investments or nationals or companies of the other Party as they do U.S. investments or investments from a third country. The U.S. exceptions from national treatment are: air transportation; ocean and coastal shipping, banking, insurance, securities, and other financial services; government grants; government insurance and loan programs; energy and power production; custom house brokers, ownership of real property; ownership and operation of broadcast or common carrier radio and television stations; ownership of shares in the Communications Satellite Corporation; the provision of common carrier telephone and telegraph services; the provision of submarine cable services; use of land and natural resources; mining on the public domain; and maritime and maritime-related services.

The United States listing of a sector does not necessarily signify that domestic laws have entirely reserved it for nationals. Future restrictions or limitations on foreign investment are only permitted in the sectors listed; must be made on an MFN basis, unless otherwise specified in the Annex; and must be appropriately notified. Any additional restrictions or limitations which a Party may adopt with respect to listed sectors may not affect existing investments.

Because the U.S. exceptions to national treatment and MFN treatment are based on existing U.S. law, they are not altered during negotiations.

The Republic of Latvia’s exceptions to national treatment are: control of defense industries; manufacturing and sales of narcotics, weapons and explosives; control of newspapers, television and radio broadcasting stations, or news agencies; recovery of all renewable and non-renewable natural resources including resources found on the continental shelf; fishing, hunting; port management; banking; ownership and control of land; brokerage of real property; and gambling. These exceptions were based on provisions of investment measures in force or under active consideration by the Government of the Republic of Latvia. The Republic of Latvia has not reserved any second exceptions to MFN treatment in the Annex.

Protocol

In a Protocol to the Treaty, the two sides clarify that despite Latvia’s inclusion of “ownership and control of land” in paragraph 3 of the Annex, current Latvian legislation permits foreign investors to own or control land in “urban” areas, as defined under Latvian laws.

The other U.S. Government agencies which negotiated the Treaty join me in recommending that it be transmitted to the Senate at an early date.

Respectfully submitted,

STROBE TALBOTT.

TREATY BETWEEN

THE GOVERNMENT OF THE UNITED STATES OF AMERICA AND

GOVERNMENT OF THE REPUBLIC OF LATVIA

CONCERNING THE ENCOURAGEMENT

AND RECIPROCAL PROTECTION OF INVESTMENT

The Government of the United States of America and the Republic of Latvia (hereinafter the “Parties”);

Desiring to promote greater economic cooperation between them, with respect to investment by nationals and companies of one Party in the territory of the other Party;

Recognizing that agreement upon the treatment to be accorded such investment will stimulate the flow of private capital and the economic development of the Parties;

Agreeing that fair and equitable treatment of investment is desirable in order to maintain a stable framework for investment and maximum effective utilization of economic resources;

Recognizing that the development of economic and business ties can contribute to the well-being of workers in both Parties and promote respect for internationally recognized worker rights; and

Noting the bilateral Most-Favored-Nation Agreement on Customs Matters of April 30, 1926 and the bilateral Treaty of Friendship, Commerce and Consular Relations of July 25, 1928 between the Parties;

In furtherance of Article Three of the bilateral Agreement Concerning the Development of Trade and Investment Relations of December 9, 1992 between the Parties;

Noting the bilateral agreement on Trade Relations and Intellectual Property Rights Protection of July 6, 1994 between the Parties; and

Having resolved to conclude a Treaty concerning the encouragement and reciprocal protection of investment;

Have agreed as follows:

ARTICLE I

1. For the purposes of this Treaty,

(i) tangible and intangible property, including movable and immovable property, as well as rights, such as mortgages, liens and pledges;

(ii) a company or shares of stock or other interests in a company or interests in the assets thereof;

(iii) a claim to money or a claim to performance having economic value, and associated with an investment;

(iv) intellectual property which includes, inter alia, rights relating to:

_ literary and artistic works, including sound recordings,

_inventions in all fields of human endeavor,

_ industrial designs,

_semiconductor mask works, trade secrets, know-how, and confidential business information, and

_ trademarks, service marks, and trade names; and

(v) any right conferred by law or contract, and any licenses and permits pursuant to law;

(f) “state enterprise” means an enterprise owned, or controlled through ownership interests, by a Party;

3. Any alteration of the form in which assets are invested or reinvested shall not affect their character as investment.

ARTICLE II

1. Each Party shall permit and treat investment, and activities associated therewith, on a basis no less favorable than that accorded in like situations to investment or associated activities of its own nationals or companies, or of nationals or companies of any third country, whichever is the most favorable, subject to the right of each Party to make or maintain exceptions falling within one of the sectors or matters listed in the Annex to this Treaty. Each Party agrees to notify the other Party before or on the date of entry into force of this Treaty of all such laws and regulations of which it is aware concerning the sectors or matters listed in the Annex. Moreover, each Party agrees to notify the other of any future exception with respect to the sectors or matters listed in the Annex, and to limit such exceptions to a minimum. Any future exception by either Party shall not apply to investment existing in that sector or matter at the time the exception becomes effective. The treatment accorded pursuant to any exceptions shall, unless specified otherwise in the Annex, be not less favorable than that accorded in like situations to investments and associated activities of nationals or companies of any third country.

2. (a) Nothing in this treaty shall be construed to prevent a Party from maintaining or establishing a state enterprise.

(b) Neither Party shall in any way impair by arbitrary or discriminatory measures the management, operation, maintenance, use, enjoyment, acquisition, expansion, or disposal of investments. For purposes of dispute resolution under Article 3 VI and VII, a measure may be arbitrary or discriminatory notwithstanding the fact that a Party has had or has exercised the opportunity to review such measure in the courts or administrative tribunals of a Party.

4. Subject to the laws relating to the entry and sojourn of aliens, nationals of either Party shall be permitted to enter and to remain in the territory of the other Party for the purpose of establishing, developing, administering or advising on the operation of an investment to which they, or a company of the first Party that, employs them, have committed or are in the process of committing a substantial amount of capital or other resources.

6. Neither Party shall impose performance requirements as condition of, establishment, expansion or maintenance of investments, which require or enforce commitments to export goods produced, or which specify that goods or services must purchased locally, or which impose any other similar requirements.

7. Each Party shall provide effective means of asserting claims and enforcing rights with respect to investment, investment agreements, and investment authorizations.

8. Each Party shall make public all laws, regulations, administrative practices and procedures, and adjudicatory decisions that pertain to or affect investments.

9. The treatment accorded by the United States of America to investments and associated activities of nationals and companies of the Republic of Latvia under the provisions of this Article shall in any State, Territory or possession of the United States of America be no less favorable than the treatment accorded therein to investments and associated activities of nationals of the United States of America resident in, and companies legally constituted under the laws and regulations of other States, Territories or possessions of the United States of America.

10. The most favored nation provisions of this Treaty shall not apply to advantages accorded by either Party to nationals or companies of any third country by virtue of:

(a) that Party’s binding obligations that derive from full membership in a free trade area or customs union; or

11. The Parties acknowledge and agree that “associated” activities, include without limitation, such activities as:

(a) the granting of franchises or rights under licenses;

(b) access to registrations, licenses, permits and other approvals (which shall in any event be issued expeditiously);

(d) access to their funds held in financial institutions;

(f) the dissemination of commercial information;

(g) the conduct of market studies;

(h) the appointment of commercial representatives, including agents, consultants and distributors and their participation in trade fairs and promotion events;

(i) the marketing of goods and services, including through internal distribution and marketing systems, as well as by advertising and direct contact with individuals and companies;

(j) access to public utilities, public services and commercial rental space at nondiscriminatory prices, if the prices are set or controlled by the government; and

(k) access to raw materials, inputs-and services of all types at nondiscriminatory prices, if the prices are set or controlled by the government.

ARTICLE III

and the general principles of treatment provided for in Article II (3). Compensation shall be equivalent to the fair market value of the expropriated investment immediately before the expropriatory action was taken or became known, whichever is earlier; be calculated in a freely usable currency on the basis of the prevailing market rate of exchange at that time; be paid without delay; include interest at a commercially reasonable rate from the date of expropriation; be fully realizable; and be freely transferable.

3. Nationals or companies of either Party whose investments suffer losses in the territory of the other Party owing to war or other armed conflict, revolution, state of national emergency, insurrection, civil disturbance or other similar events shall be accorded treatment by such other Party no less favorable than that accorded to its own nationals or companies or to nationals or companies of any third country, whichever is the most favorable treatment, as regards any measures it adopts in relation to such losses.

ARTICLE IV

1. Each Party shall permit all transfers related to an investment to be made freely and without delay into and out of its territory. Such transfers include:

(a) returns;

(b) compensation pursuant to Article III;

(d) payments made under a contract, including amortization of principal and accrued interest payments made pursuant to a loan agreement;

(e) proceeds from the sale or liquidation of all or any part of an investment; and

(f) additional contributions to capital for the maintenance or development of an investment.

2. Transfers shall be made in a freely usable currency at the prevailing market rate of exchange on the date of transfer with respect to spot transactions in the currency to be transferred.

ARTICLE V

ARTICLE VI

1. For purposes of this Article, an investment dispute is a dispute between a Party and a national or company of the other Party arising out of or relating to:

(a) an investment agreement between that Party and such national or company;

(b) an investment authorization granted by that Party”s foreign investment authority to such national or company; or

(a) to the courts or administrative tribunals of the Party that in a Party to the dispute; or

(b) in accordance with any applicable, previously agreed dispute-settlement procedures; or

(i) to the International Center for the Settlement of Investment Disputes (“Center”) established by the Convention on the Settlement of Investment Disputes between States and Nationals of other States, done at Washington, March 18, 1965 (“ICSID Convention”), provided that the Party is a Party to such Convention; or

(ii) to the Additional Facility of the Center, if the Center is not available; or

(iii) in accordance with the Arbitration Rules of the United Nations Commission on International Trade Law (UNCITRAL); or

(iv) to any other arbitration institution, or in accordance with any other arbitration rules, as may be mutually agreed between the parties to the dispute.

(b) once the national or company concerned has so consented, either Party to the dispute may initiate arbitration in accordance with the choice so specified in the consent.

(a) written consent of the parties to the dispute for purposes of Chapter II of the ICSID Convention (Jurisdiction of the Center) and for purposes of the Additional Facility Rules; and

5. Any arbitration under paragraph 3(a)(ii), (iii) or (iv) of this Article shall be held in a state that is a Party to the New York Convention.

ARTICLE VII

1. Any dispute between the Parties concerning the interpretation or application of the Treaty which is not resolved through consultations

or other diplomatic channels, shall be submitted, upon the request of either Party, to an arbitral tribunal for binding decision in accordance with the applicable rules of international law. In the absence of an agreement by the Parties to the contrary, the arbitration rules of the United Nations Commission on International Trade Law (UNCITRAL), except to the extent modified by the Parties or by the arbitrators, shall govern.

ARTICLE VIII

This Treaty shall not derogate from:

(a) laws and regulations, administrative practices or procedures, or administrative or adjudicatory decisions of either Party;

(b) international legal obligations; or

ARTICLE IX

ARTICLE X

1. With respect to its tax policies, each Party should strive to accord fairness and equity in the treatment of investment of nationals and companies of the other Party.

2. Nevertheless, the provisions of this Treaty, and in particular Article VI and VII, shall apply to matters of taxation only with respect to the following:

(a) expropriation, pursuant to Article III;

(b) transfers, pursuant to Article IV; or

ARTICLE XI

This Treaty shall apply to the political subdivisions of the Parties.

ARTICLE XII

2. Either Party may, by giving one year’s written notice to the other Party, terminate this Treaty at the end of the initial ten year period or at any time thereafter.

4. The Annex, Protocol, and Side Letter shall form an integral part of the Treaty.

IN WITNESS WHEREOF, the respective plenipotentiaries have signed this Treaty.

DONE in duplicate at Washington, this thirtheenth day of January, 1995 in English and Latvian languages, both text being equally authentic.

thirteenth

FOR THE GOVERNMENT OF THE UNITED STATES OF AMERICA:

/S/

FOR THE GOVERNMENT OF THE REPUBLIC OF LATVIA:

/S/

ANNEX

1. The Government of the United States reserves the right to make or maintain limited exceptions to national treatment, as provided in Article II, paragraph 1, in the sectors or matters it has indicated below:

2. The United States reserves the right to make or maintain limited exceptions to most favored nation treatment, as provided in Article II, paragraph 1, in the sectors or matters it has indicated below: ownership of real property; mining on the public domain; maritime services and maritime-related services; and primary dealership in United States government securities.

3. The Republic of Latvia reserves the right to make or maintain limited exceptions to national treatment, as provided in Article II, paragraph 1 in the sectors or matters it has indication below:

control of defense industries; manufacturing and sale of narcotics, weapons and explosives; control of newspaper, television and radio broadcasting stations, or news agencies; recovery of all renewable and non-renewable natural resources including resources found on the continental shelf; fishing; hunting; port management; banking; ownership and control of land; brokerage or real property; and gambling.

PROTOCOL

The Parties confirm their mutual understanding that with respect to the listing of “ownership and control of land” in paragraph 3 of the Annex, current Latvian legislation permits foreign investors to own or control land in urban areas, as defined under the laws of the Republic of Latvia.

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Lithuania Bilateral Investment Treaty

Signed January 14, 1998; Entered into Force November 11, 2001; Amended May 1, 2004

Prior to the accession of Lithuania to the European Union, this treaty was amended to reduce the possibility of conflict with the laws of the European Union. [View Amending Protocol]

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MESSAGE

FROM

THE PRESIDENT OF THE UNITED STATES

TRANSMITTING

TREATY BETWEEN THE GOVERNMENT OF THE UNITED STATES

OF AMERICA AND THE GOVERNMENT OF THE REPUBLIC OF

LITHUANIA FOR THE ENCOURAGEMENT AND RECIPROCAL

PROTECTION OF INVESTMENT, WITH ANNEX AND PROTOCOL,

SIGNED AT WASHINGTON ON JANUARY 14, 1998

LETTER OF TRANSMITTAL

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THE WHITE HOUSE, September 5, 2000.

To The Senate of the United States:

The bilateral investment treaty (BIT) with Lithuania was the third such treaty signed between the United States and Baltic region country. The Treaty will protect U.S. investment and assist Lithuania in its efforts to develop its economy by creating conditions more favorable for U.S. private investment and thereby strengthening the development of its private sector.

The Treaty furthers the objectives of U.S. policy toward international and domestic investment. A specific tenet of U.S. policy, reflected in this Treaty, is that U.S. investment abroad and foreign investment in the United States should receive national treatment. Under this Treaty, the Parties also agree to customary international law standards for expropriation. The Treaty includes detailed provisions regarding the computation and payment of prompt, adequate, and effective compensation for expropriation; free transfer of funds related to investments; freedom of investments from specified performance requirements; fair, equitable, and most-favored-nation treatment; and the investor’s freedom to choose to resolve disputes with the host government through international arbitration.

I recommend that the Senate consider this Treaty as soon as possible, and give its advice and consent to ratification of the Treaty at an early date.

WILLIAM J. CLINTON.

LETTER OF SUBMITTAL

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DEPARTMENT OF STATE,

Washington, August 9, 2000.

The PRESIDENT,

The White House.

THE PRESIDENT: I have the honor to submit to you the Treaty Between the Government of the United States of America and the Government of the Republic of Lithuania for the Encouragement and Reciprocal Protection of Investment, with Annex and Protocol, signed at Washington on January 14, 1998. I recommend that this Treaty, with Annex and Protocol, be transmitted to the Senate for its advice and consent to ratification.

The bilateral investment treaty (BIT) with Lithuania was the third such treaty signed between the United States and a Baltic Region country. The Treaty is based on the view that an open investment policy contributes to economic growth. This Treaty will assist Lithuania in its efforts to develop its economy by creating conditions more favorable for U.S. private investment and thereby strengthening the development of its private sector. It is U.S. policy, however, to advise potential treaty partners during BIT negotiations that conclusion of such a treaty does not necessarily result in increases in private U.S. investment flows.

To date, 31 BITs are in force for the United States - with Albania, Argentina, Armenia, Bangladesh, Bulgaria, Cameroon, the Republic of the Congo, the Democratic Republic of the Congo (formerly Zaire), the Czech Republic, Ecuador, Egypt, Estonia, Georgia, Grenada, Jamaica, Kazakhstan, Kyrgyzstan, Latvia, Moldova, Mongolia, Morocco, Panama, Poland, Romania, Senegal, Slovakia, Sri Lanka, Trinidad & Tobago, Tunisia, Turkey, and Ukraine. In addition to the Treaty with Lithuania, the United States has signed, but not yet brought into force, BITs with Azerbaijan, Bahrain, Belarus, Bolivia, Croatia, El Salvador, Honduras, Jordan, Mozambique, Nicaragua, Russia, and Uzbekistan.

The Office of the United States Trade Representative and the Department of State jointly led this BIT negotiation, with assistance from the Departments of Commerce and Treasury.

THE U.S.-LITHUANIA TREATY

The Treaty with Lithuania is based on the 1992 U.S. prototype BIT and satisfies the U.S. principal objectives in bilateral investment treaty negotiations:

- All forms of U.S. investment in the territory of Lithuania are covered.

- Investments receive the better of national treatment or most-favored- nation (MFN) treatment both while they are being established and thereafter, subject to certain specified exceptions.

- Specified performance requirements may not be imposed upon or enforced against investments.

- Expropriation is permitted only in accordance with customary international law standards.

- Parties are obligated to permit the transfer, in a freely usable currency, of all funds related to an investment, subject to exceptions for specified purposes.

- Investment disputes with the host government may be brought by investors, or by their investments, to binding international arbitration as an alternative to domestic courts.

The U.S.-Lithuania Treaty differs from the 1992 prototype in some respects. It eliminates Article VIII of the 1992 prototype text, which had excluded from the dispute settlement provision of the BIT those disputes arising under the export credit, guarantee or insurance programs of the Export-Import Bank, the Overseas Private Investment Corporation, and other relevant government agencies. Those agencies indicated prior to this negotiation that they saw no need to maintain such a provision.

The U.S.-Lithuania Treaty also differs from the 1992 prototype in that it includes provisions in Article I(1)(f) and (g) and Article II(2) that clarify and extend the requirements of the Treaty with respect to state enterprises, and in Article II(11) that clarify that investors should receive the better of national or MFN treatment with respect to activities associated with their investment. These elements are further described in the following article-by-article analysis of the provisions of the Treaty:

Title and Preamble

The Title and Preamble state the goals of the Treaty. Foremost is the encouragement and protection of investment. Other goals include economic cooperation on investment issues; stimulation of economic development; maximum effective utilization of economic resources; promotion of respect for internationally-recognized worker rights; and development of bilateral trade and investment relations. While the Preamble does not impose binding obligations, its statement of goals may assist in interpreting the Treaty and in defining the scope of Party-to-Party consultations pursuant to Article V.

Article I (Definitions)

Article I defines terms used throughout the Treaty.

Investment

The Treaty’s definition of “investment” is broad, recognizing that investment can take a wide variety of forms. Every kind of investment is specifically incorporated in the definition, which applies to investment in the territory of one Party owned or controlled directly or indirectly by nationals or companies of the other Party. Indirect ownership or control could be through other, intermediate companies or persons, including those of third countries. Control is not specifically defined in the Treaty; ownership of over 50 percent of the voting stock of a company would normally convey control, but in many cases the requirement could be satisfied by less than that proportion, or by other arrangements.

The Treaty provides an illustrative list of the forms an investment may take. These include both tangible and intangible property; interests in a company or its assets; “a claim to money or a claim to performance having economic value, and associated with an investment”; intellectual property rights; any right conferred by law or contract; and any licenses and permits pursuant to law. The requirement that a “claim to money” be associated with an investment excludes claims arising solely from trade transactions, such as a transaction involving a sale of goods across a border, from being investments covered by the Treaty.

Paragraph 3 makes explicit that any alteration in the form in which an asset is invested or reinvested will not affect its character as an investment. For example, a change in the corporate form of an investment will not deprive it of protection under the Treaty.

Company

The definition of “company” of a Party is broad, covering all types of entities legally constituted or organized under applicable laws and regulations of a Party, and includes a corporation, company, association, partnership, or other organization. The definition explicitly covers not-for-profit entities, as well as entities that are owned or controlled by the state.

The broad nature of the definitions of “investment” and “company” of a Party means that investments can be covered by the Treaty even if ultimate control lies with non-Party nationals. A Party may, however, deny the benefits of the Treaty in certain limited circumstances. Article I(2) preserves the right of each Party to deny the benefits of the Treaty to a company controlled by nationals of a third country with which the denying Party does not have normal economic relations, e.g., a country to which it is applying economic sanctions. For example, at this time the United States does not maintain normal economic relations with, among other countries, Cuba and Libya.

Paragraph 2 also permits each Party to deny the benefits of the Treaty to a company of the other Party if the company is controlled by nationals of any third country and if the company has no substantial business activities in the territory of the other Party. Thus, the United States could deny benefits to a company that is a subsidiary of a shell company organized under the laws of Lithuania if controlled by nationals of a third country. However, this provision would not generally permit the United States to deny benefits to a company of Lithuania that maintains its central administration or principal place of business in the territory of, or has a real and continuous link with, Lithuania.

National

The Treaty defines “national” of a Party as a natural person who is a national of the United States under its laws, or a citizen of Lithuania under its laws. Under U.S. law, the term “national” is broader than the term “citizen.” For example, a native of American Samoa is a national of the United States, but not a citizen.

Return

Associated Activities

The Treaty recognizes that the operation of an investment requires protections extending beyond the investment to numerous related activities. The Treaty defines “associated activities” to include an illustrative list of such activities, including: operating a business facility; borrowing money; acquiring, using, and disposing of property; issuing stock; and purchasing foreign exchange for imports. Article II(11) lists additional activities included in the term “associated activities”, all of which are covered by the obligation in Article II(1) to provide the better of national or MFN treatment.

State Enterprise and Delegation

“State enterprise” is defined as an enterprise owned, or controlled through ownership interests, by a Party. Purely regulatory control over a company does not qualify it as a state enterprise.

“Delegation” is defined to include a legislative grant and a government order, directive, or other act that transfers governmental authority to a state enterprise or monopoly or authorizes a state enterprise or monopoly to exercise such authority.

The definitions of “state enterprise” and “delegation” are included to clarify the scope of the obligations of Article II(2)(b), which provides that any governmental authority delegated to a state enterprise by a Party must be exercised in a manner consistent with the Party’s obligations under the Treaty.

Article II (Treatment)

Article II contains the Treaty’s major obligations with respect to the treatment of investment.

Paragraph 1 generally ensures the better of national or MFN treatment in both the entry and post-entry phases of investment (national and MFN treatment). It thus prohibits, outside of exceptions listed in the Annex, “screening” on the basis of nationality during the investment process, as well as nationality-based post-establishment measures. National treatment means treatment no less favorable than that which a Party accords, in like situations, to investments or associated activities in its territory of its own nationals or companies. MFN treatment means treatment no less favorable than that which a Party accords, in like situations, to investments or associated activities in its territory of nationals or companies of a third country.

Paragraph 1 also states that each Party may adopt or maintain exceptions to the national and MFN treatment standard with respect to the sectors or matters specified in the Annex. Further restrictive measures are permitted in each such sector or matter but are to be kept to a minimum. (The specific exceptions are discussed in the section entitled “Annex” below.) In the Annex, Parties may take exceptions only to the obligation to provide national and MFN treatment; there are no sectoral exceptions to the rest of the Treaty’s obligations. Finally, any future exception adopted under this provision does not apply to investment existing in that sector or matter at the time the exception becomes effective.

Paragraph 2 requires each Party to ensure that any state enterprise that it maintains or establishes acts in a manner that is not inconsistent with the party’s obligations under the Treaty wherever the enterprise exercises any regulatory, administrative, or other governmental authority that the Party has delegated to it, such as the power to expropriate, grant licenses, approve commercial transactions, or impose quotas, fees, or other charges. Paragraph 2 also supports competitive equality for investments by requiring that a Party ensure that its state enterprises accord national and MFN treatment in the sale of their goods or services in the Party’s territory.

Paragraph 3 sets out a minimum standard of treatment based on standards found in customary international law. The obligations to accord “fair and equitable treatment” and “full protection and security” are explicitly cited. The general reference to international law also implicitly incorporates other fundamental rules of customary international law regarding the treatment of foreign investment. However, this provision does not incorporate obligations based on other international agreements.

In paragraph 3(b), the Parties agree not to in any way impair by arbitrary or discriminatory measures the management, operation, maintenance, use, enjoyment, acquisition, expansion, or disposal of investments.

In paragraph 3(c), each Party pledges to observe any obligation it may have entered into with regard to investments. Thus, in dispute settlement under Articles VI or VII, a Party would be foreclosed from arguing, on the basis of sovereignty, that it may unilaterally ignore its obligations to such investments.

Paragraph 4 requires each Party to allow, subject to its laws relating to the entry and sojourn of aliens, the entry into its territory of the other Party’s nationals for certain purposes related to an investment and involving the commitment of a “substantial amount of capital or other resources.” This paragraph serves to render nationals of Lithuania eligible for treaty-investor visas under U.S. immigration law. It also affords similar treatment for U.S. nationals entering Lithuania. The requirement to commit a “substantial amount of capital or other resources” is intended to prevent abuse of treaty-investor status; it parallels the requirements of U.S. immigration law.

Paragraph 5 requires that each Party allow companies that are investments to engage top managerial personnel of their choice, regardless of nationality. This provision does not require that such personnel be granted entry into a Party’s territory. Such persons must independently qualify for an appropriate visa for entry into the territory of the other Party. Nor does this provision create an exception to U.S. equal employment opportunity laws.

Paragraph 6 prohibits either Party from imposing specified performance requirements as a condition for the establishment, expansion, or maintenance of investments. Prohibited performance requirements are those which require or enforce commitments to export goods produced, or which specify that goods or services must be purchased locally, or which impose any other similar requirements. Such performance requirements are major burdens on investors and impair their competitiveness.

Paragraph 7 requires that each Party provide effective means of asserting claims and enforcing rights with respect to investments, investment agreements, and investment authorizations.

Paragraph 8 ensures the transparency of each Party’s regulation of investments.

Paragraph 9 recognizes that under the U.S. federal system, States of the United States may, in some instances, treat out-of-State residents and corporations in a different manner than they treat in-State residents and corporations. The Treaty provides that the national treatment commitment, with respect to the States, means treatment no less favorable than that provided by a State to U.S. out-of-State residents and corporations. Article XI makes clear that the obligations of the Treaty are applicable to all political and administrative subdivisions of the Parties, such as provincial, State, and local governments.

Paragraph 10 limits the Article’s MFN obligation by providing that it will not apply to advantages accorded by either Party to nationals or companies of third countries by virtue of a Party’s membership in a free trade area or customs union or a future (i.e., after the Treaty was signed) multilateral agreement under the frame work of the General Agreement on Tariffs and Trade (GATT).

Paragraph 11 provides an additional illustrative list of “associated activities” entitled to national and MFN treatment under Article II(1).

Article III (Expropriation)

Paragraph 1 describes the obligations of the Parties with respect to expropriation and nationalization of an investment. These obligations apply to both direct expropriation and indirect expropriation through measures “tantamount to expropriation or nationalization” and thus apply to “creeping expropriations” - a series of measures that effectively amounts to an expropriation of an investment without taking title.

The balance of paragraph 1 more fully describes the meaning of “prompt, adequate, and effective compensation.” The guiding principle is that the investor should be made whole.

Paragraph 2 entitles an investor claiming that an expropriation has occurred to prompt judicial or administrative review of the claim in the host Party, including a determination of whether the expropriation and any compensation conform to the principles of international law.

Paragraph 3 entitles investments covered by the Treaty to national and MFN treatment with respect to any measure relating to losses suffered in a Party’s territory owing to war or other armed conflict, civil disturbances, or similar events.

Article IV (Transfers)

Article IV protects investors from certain government exchange controls that limit current and capital account transfers, as well as limits on inward transfers such as those imposed by screening authorities.

In paragraph 1, each Party agrees to “permit all transfers related to an investment to be made freely and without delay into and out of its territory.” Paragraph 1 also provides a list of transfers that must be allowed. The list is non-exclusive, and is intended to protect flows to both affiliated and non-affiliated entities.

Paragraph 2 provides that transfers are to be made in a “freely usable currency” at the prevailing market rate of exchange on the date of transfer with respect to spot transactions in the currency to be transferred. “Freely usable” is a term used by the International Monetary Fund; at present there are five “freely usable” currencies: the U.S. dollar, Japanese yen, German mark, French franc, and British pound sterling.

Paragraph 3 recognizes that, notwithstanding the obligations of paragraphs 1 and 2, a Party may maintain certain laws or obligations that could affect transfers with respect to investments. It provides that the Parties may require reports of currency transfers and impose income taxes by such means as a withholding tax on dividends. It also recognizes that the Parties may protect the rights of creditors and ensure the satisfaction of judgments in adjudicatory proceedings through the equitable, nondiscriminatory, and good faith application of their laws.

Article V (State-to-State Consultations)

Article V provides for prompt consultation between the Parties, at either Party’s request, to resolve any disputes in connection with the Treaty, or to discuss any matter relating to the interpretation or application of the Treaty.

Article VI (Settlement of Disputes Between One Party and a National or Company of the Other Party)

Article VI sets forth several means by which disputes brought against a Party by an investor (specifically, a national or company of the other Party) may be resolved.

Article VI procedures apply to an “investment dispute,” which is any dispute arising out of or relating to an investment agreement, an investment authorization granted by the Party’s foreign investment authority, or an alleged breach of rights conferred or created by the Treaty with respect to an investment.

Article VI(2) provides that when a dispute arises the disputants should initially seek to resolve the dispute by consultation and negotiation. In the event that an investment dispute cannot be settled amicably, paragraph 2 gives an investor an exclusive choice among three options to settle the dispute. These three options are: (1) submitting the dispute to the courts or administrative tribunals of the Party that is a party to the dispute; (2) invoking dispute-resolution procedures previously agreed upon by the national or company and the host country government; or (3) invoking the dispute-resolution mechanisms identified in paragraph 3.

Under paragraph 3(a), if the investor has not submitted the dispute to a court or administrative tribunal or invoked a dispute resolution procedure previously agreed upon under the procedures in paragraph 2, and 6 months have elapsed from the date the dispute arose, the investor may choose to consent to binding arbitration of the investment dispute. The investor may choose among the International Centre for Settlement of Investment Disputes (ICSID) (Convention Arbitration), the Additional Facility of ICSID (if Convention arbitration is not available), ad hoc arbitration using the Arbitration Rules of the United Nations Commission on International Trade Law (UNCITRAL), or any other arbitral institution or rules agreed upon by both parties to the dispute.

Paragraph 4 constitutes each Party’s consent to the submission of investment disputes to binding arbitration in accordance with the choice of the investor from among those permitted under the Treaty.

Paragraph 7 ensures that a Party may not assert as a defense, or for any other reason, that the investor involved in the investment dispute has received or will receive reimbursement for the same damages under an insurance or guarantee contract. Paragraph 8 is included in the Treaty to ensure that ICSID arbitration will be available for investors making investments in the form of companies created under the laws of the Party with which there is a dispute.

Article VII (Settlement of Disputes Between the Parties)

Article VII provides for binding arbitration of disputes between the United States and Lithuania concerning the interpretation or application of the Treaty that are not resolved through consultations or other diplomatic channels. The article specifies various procedural aspects of such arbitration proceedings, including time periods, selection of arbitrators, and distribution of arbitration costs between the parties. The article constitutes each Party’s prior consent to such arbitration.

Article VIII (Preservation of Rights)

Article VIII clarifies that the Treaty does not derogate from any obligation a Party might have to provide better treatment to the investment than is specified in the Treaty. Thus, the Treaty establishes a floor for the treatment of investments. An investment may be entitled to more favorable treatment through domestic legislation, other international legal obligations, or a specific obligation (e.g., to provide a tax holiday) assumed by a Party with respect to that investment.

Article IX (Measures Not Precluded)

The first paragraph of Article IX reserves the right of a Party to take measures for the maintenance of public order and the fulfillment of its obligations with respect to the maintenance or restoration of international peace or security, as well as those measures it regards as necessary for the protection of its own essential security interests.

The maintenance of public order would include measures taken pursuant to a Party’s police powers to ensure public health and safety. International obligations with respect to maintenance or restoration of peace or security would include, for example, obligations arising out of Chapter VII of the United Nations Charter. Measures permitted by the provision the protection of a Party’s essential security interests would include security-related actions taken in time of war of national emergency; actions not arising from a state of war or national emergency must have a clear and direct relationship to the essential security interests of the Party involved. Measures to protect a Party’s essential security interests are self-judging in nature, although each Party would expect the provisions to be applied by the other in good faith.

The second paragraph permits a Party to prescribe special formalities in connection with investments, provided that these formalities do not impair the substance of any Treaty rights. Such formalities could include reporting requirements for investments or for transfers of funds, or incorporation requirements.

Article X (Tax Policies)

Article X, excludes tax matters generally from the coverage of the BIT, on the basis that tax matters should be dealt with in bilateral tax treaties.

Paragraph 1 exhorts both countries to provide fair and equitable treatment to investors with respect to tax policies.

In matters of taxation, paragraph 3 expressly applies the provisions of the Treaty, in particular its dispute settlement provisions, only to tax matters concerning expropriation (Article III), transfers (Article IV), or the observance and enforcement of terms of an investment agreement or authorization under Article VI(1)(a) or (b). Paragraph 2 further provides that the Treaty applies to such tax matters only to the extent that they are not subject to the dispute settlement provisions of a convention for the avoidance of double taxation between the two Parties, or have been raised under such settlement provisions and are not resolved within a reasonable period of time.

Article XI (Application to Political Subdivisions)

Article XI makes clear that the obligations of the Treaty are applicable to all political and administrative subdivisions of the Parties, such as provincial, State, and local governments.

Article XII (Entry into Force, Duration and Termination)

Paragraph 1 stipulates that the Treaty enters into force 30 days after exchange of instruments of ratification. The Treaty remains in force for a period of 10 years and continues in force thereafter unless terminated by either Party as provided in paragraph 2. Paragraph 2 permits a Party to terminate the Treaty at the end of the initial 10 year period, or at any later time, by giving 1 year’s written notice to the other Party. Paragraph 1 also provides that the Treaty applies to investments existing at the time of entry into force as well as to those established or acquired thereafter. The Protocol to the Treaty confirms the Parties’ mutual understanding that the provisions of the Treaty do not bind either Party in relation to any act or fact which took place before the Treaty came into force or to any situation which ceased to exist before the date of entry into force of the Treaty. This provision thus explicitly states the standard under customary international law that applies in the absence of the Parties’ express intent to apply the treaty retroactively.

Paragraph 3 provides that, if the Treaty is terminated, all investments covered by the Treaty on the date of termination (i.e., 1 year after written notice) continue to be protected under the Treaty for 10 years from that date.

Paragraph 4 stipulates that the Annex and Protocol shall form an integral part of the Treaty.

Annex

U.S. bilateral investment treaties allow for exceptions to national and MFN treatment, where the Parties’ domestic regimes do not afford national and MFN treatment, or where treatment in certain sectors or matters is negotiated in and governed by other agreements. Future derogations from the national treatment obligations of the Treaty and generally permitted only in the sectors or matters listed in the Annex, pursuant to Article II(1), and must be made on an MFN basis unless otherwise specified therein.

Under a number of statutes, many of which have a long historical background, the U.S. federal government or States may not necessarily treat investments of nationals or companies of Lithuania as they do U.S. investments or investments from a third country. Paragraphs 1 and 2 of the Annex list the sectors or matters subject to U.S. exceptions.

The U.S. exceptions from its national treatment obligation are: air transportation; ocean and coastal shipping; banking, insurance, securities, and other financial services; government grants; government insurance and loan programs; energy and power production; custom house brokers; ownership of real property; ownership and operation of broadcast or common carrier radio and television stations; ownership of shares in COMSAT; the provision of common carrier telephone and telegraph services; the provision of submarine cable services; use of land and natural resources; mining on the public domain; maritime services and maritime-related services; and primary dealership in United States government securities.

The U.S. exceptions from its MFN treatment obligation are: mining on the public domain; maritime services and maritime-related services; one-way satellite transmissions of Direct-to-Home (DTH) and Direct Broadcasting Satellites (DBS) television services and of digital audio services; and primary dealership in United States government securities.

Paragraph 3 of the Annex lists Lithuania’s exceptions from its national treatment obligation, which are: ownership of: land under the objects belonging to Lithuania by the right of exclusive ownership; land of national parks, national reservations, reserves, protective areas of the territory of biosphere monitoring; agricultural land; forestry land, with the exception of plots necessary for operation of buildings and facilities designated for economic activities which have been provided for in approved planning documents; land of recreational forests and forest shelter belts, rivers and other water bodies exceeding one hectare in size as well as their protective bank area; land of resorts and communal recreational territories, separate communal recreational areas and objects; land of state-protected natural carcass (geographic formations); monuments of nature, history, archaeology, and culture as well as the surrounding protective areas; land of territories reserved, according to design projects, under communal roads and engineering service lines; objects of infrastructure of communal use in towns or other localities, and for other common needs of the community; land under public roads, railway lines, airports, sea and river ports, main pipelines and other engineering service lines of communal use as well as land necessary for their operation; land allotted, in accordance with the procedure established by law, under the free trade (economic) zones territory; land of protected territories where deposits of mineral resources and other natural resources have been found, with the exception of land which, according to planning documents, has been directly allotted for the construction of buildings and facilities required for the mining or use of said mineral resources; land of the Curonian Spit, the fifteen-kilometer wide strip of coastal land of the Baltic Sea and the Curonian Lagoon, with the exception of towns that are not resorts; land assigned to the frontier; land of the territories assigned or reserved for the needs of the national defense as well as territories where land acquisition restrictions are established by laws or Government decrees for safety reasons; production and sale of narcotic drugs and psychotropic substances that are not used for legitimate medicinal purposes; growing, reproduction, and sale of cultures containing narcotic drugs or psychotropic substances that are not used for legitimate medicinal purposes; and organization of lotteries.

Lithuania did not take any exceptions from its MFN treatment obligation.

The listing of a sector or matter in the Annex does not necessarily signify that domestic laws have entirely reserved it for nationals. And, pursuant to Article II(1), any additional restrictions or limitations that a Party may adopt with respect to a listed sector or matter do not apply to investment existing in that sector or matter at the time the exception becomes effective.

Finally, listing a sector or matter in the Annex exempts a Party only from the obligation to accord national or MFN treatment. Both Parties are obligated to accord to investments in all sectors - even those listed in the Annex - all other rights conferred by the Treaty.

Protocol

As described under Article XII(1), the Protocol states that the Treaty does not apply retroactively. This clarification was added to the Treaty at the request of Lithuania.

The other U.S. Government agencies that participated in negotiating the Treaty join me in recommending that it be transmitted to the Senate at an early date.

Respectfully submitted,

MADELEINE ALBRIGHT

TEXT OF THE AGREEMENT

TREATY BETWEEN

THE GOVERNMENT OF THE UNITED STATES OF AMERICA

AND THE GOVERNMENT OF THE REPUBLIC OF LITHUANIA

FOR THE ENCOURAGEMENT AND RECIPROCAL

PROTECTION OF INVESTMENT

The Government of the United States of America and the Government of the Republic of Lithuania (hereinafter the “Parties”);

Desiring to promote greater economic cooperation between them, with respect to investment by nationals and companies of one Party in the territory of the other Party;

Recognizing that agreement upon the treatment to be according such investment will stimulate the flow of private capital and the economic development of the Parties;

Agreeing that fair and equitable treatment of the investment is desirable in order to maintain a stable framework for investment and maximum effective utilization of economic resources;

Recognizing that the development of economic and business ties can contribute to the well-being of workers in both Parties and promote respect for internationally recognized worker rights;

Noting the bilateral most favored nation trade agreement of December 23, 1925, between the Parties;

In furtherance of Article three of the bilateral agreement concerning the development of trade and investment relations of 1992 between the Parties and;

Having resolved to conclude a Treaty concerning the encouragement and reciprocal protection of investment;

Have agreed as follows:

ARTICLE I

1. For the purpose of this Treaty

(a) “Investment” means every kind of investment in the territory of one Party owned or controlled directly or indirectly by nationals or companies of the other Party, such as equity, debt, and service and investment contracts; and includes:

(i) tangible and intangible property, including rights, such as mortgages, liens and pledges;

(ii) a company or shares of stock or other interests in a company or interests in the assets thereof;

(iii) a claim to money or a claim to performance having economic value, and associated with an investment;

(iv) intellectual property which includes, inter alia, rights relating to:

literary and artistic work, including sound recordings,

inventions in all fields of human endeavor,

industrial designs,

semiconductor mask works,

trade secrets, know how, and confidential business information,

and trademarks, service marks, and trade names; and

(v) any right conferred by law or contract, and any licenses and permits pursuant to law.

(b) “Company” of a Party means any kind of corporation, company, association, partnership, or other organization, legally constituted under applicable laws and regulations of a Party whether or not organized for pecuniary gain, or privately or governmentally owned or controlled.

(c) “National” of a Party means a natural person who, for the United States of America, is a national of the United States under its applicable laws, and for Lithuania, is a citizen of the Republic of Lithuania under its applicable laws.

(d) “Return” means an amount derived from or associated with an investment, including profit; dividend; interest; capital gain; royalty payment; management, technical assistance or other fee; or returns in kind;

(e) “Associated Activities” include the organization, control, operation, maintenance and disposition of companies, branches, agencies, offices, factories or other facilities for the conduct of business; the making, performance and enforcement of contracts; the acquisition, use, protection and disposition of property of all kinds including intellectual property; the borrowing of funds; the purchase, issuance and sale of equity shares and other securities; and the purchase of foreign exchange for imports.

(f) “State enterprise” means an enterprise owned, or controlled through ownership interests, by a Party.

(g) “Delegation” includes a legislative grant and a government order, directive or other act transferring to a state enterprise or monopoly, or authorizing the exercise by a state enterprise or monopoly of, governmental authority.

3. Any alteration of the form in which assets are invested or reinvested shall not affect their character as investment.

ARTICLE II

1. Each Party shall permit and treat investment, and activities associated therewith, on a basis no less favorable than that accorded in like situations to investment or associated activities of its own nationals or companies, or of nationals or companies of any third country, whichever is most favorable, subject to the right of each Party to make or maintain exceptions falling within one of the sectors or matters listed in the Annex to this Treaty. Each Party agrees to notify the other Party before or on the date of entry into force of this Treaty of all such laws and regulations of which it is aware concerning the sectors or matters listed in the Annex. Moreover, each Party agrees to notify the other of any future exception with respect to sectors or matters listed in the Annex, and to limit such exceptions to a minimum. Any future exception by either Party shall not apply to investment existing in that sector or matter at the time the exception became effective. The treatment accorded pursuant to any exceptions shall unless specified otherwise in the Annex, be not less favorable than that accorded in like situations to investment and associated activities of nationals or companies of any third country.

2. (a) Nothing in this Treaty shall be construed to prevent a Party from maintaining or establishing a state enterprise.

3. (a) Investment shall at all times be accorded fair and equitable treatment, shall enjoy full protection and security and shall in no case be accorded treatment less favorable than required by international law.

(b) Neither Party shall in any way impair by arbitrary or discriminatory measures the management, operation, maintenance, use, enjoyment, acquisition, expansion, or disposal of investments. For purpose of dispute resolution under Articles VI and VII, a measure may be arbitrary or discriminatory notwithstanding the fact that a Party has had or has exercised the opportunity to review such measure in the courts or administrative tribunals of a Party.

4. Subject to the laws relating to the entry and sojourn of aliens, nationals of either Party shall be permitted to enter and to remain in the territory of the other Party for the purpose of establishing, developing, administering or advising on the obligation of an investment to which they, or a company of the first Party that employs them, have committed or are in the process of committing a substantial amount of capital or other resources.

7. Each Party shall provide the effective means of asserting claims and enforcing rights with respect to investment, investment agreements, and investment authorizations.

8. Each Party shall make public all laws, regulations, administrative practices and procedures, and adjudicatory decisions that pertain to or affect investments.

9. The treatment accorded by the United States of America to investment and associated activities of nationals and companies of the Republic of Lithuania under the provisions of this Article shall in any State, Territory or possession of the United States of America be no less favorable than the treatment accorded therein to investments and associated activities of nationals of the United States of America resident in, and companies legally constituted under the law and regulations of other States, Territories or possessions of the United States of America.

10. The most favored nation provisions of this Treaty shall not apply to advantages accorded by either Party to nationals or companies of any third country by virtue of:

(a) that Party’s binding obligations that derive from full membership in a free trade area or customs union; or

11. The Parties acknowledge and agree that “associated activities” include, without limitation, such activities as:

(a) the granting of franchises or rights under licenses;

(b) access to registrations, licenses, permits and other approvals (which shall in any event be issued expeditiously);

(d) access to their funds held in financial institutions;

(e) the importation and installation of equipment necessary for the normal conduct of business affairs, including but not limited to, office equipment and automobiles and the export of any equipment and automobiles so imported;

(f) the dissemination of commercial information;

(g) the conduct of market studies;

(h) the appointment of commercial representatives, including agents, consultants, and distributors and their participation in trade fairs and promotion events;

(i) the marketing of goods and services, including through internal distribution and marketing systems, as well as by advertising and direct contact with individuals and companies;

(j) access to public utilities, public services and commercial rental space at non-discriminatory prices, if the prices are set or controlled by the government; and

(k) access to raw materials, inputs and services of all types at nondiscriminatory prices, if the prices are set or controlled by the government.

ARTICLE III

1. Investments shall not be expropriated or nationalized either directly or indirectly through measures tantamount to expropriation or nationalization (“expropriation”) except: for a public purpose; in a nondiscriminatory manner; upon payment of prompt, adequate and effective compensation; and in accordance with due process of law and the general principles of treatment provided for in Article II(3). Compensation shall be equivalent to the fair market value of the expropriated investment immediately before the expropriatory action was taken or became known, whichever is earlier; be calculated in a freely usable currency on the basis of the prevailing market rate of exchange at that time; be paid without delay; include interest at a commercially reasonable rate, such as LIBOR plus an appropriate margin from the date of expropriation; be fully realizable; and be freely transferable.

2. A national or company of either Party that asserts that or all or part of its investment has been expropriated shall have a rights to prompt review by the appropriate judicial or administrative authorities of the other Party to determine whether such expropriation has occurred and, if so, whether any such appropriation, and associated compensation, conforms to the principles of international law.

3. Nationals or companies of either Party whose investments suffer losses in the territory of the other Party owing to war or other armed conflict, revolution, state of national emergency, insurrection, civil disturbance or other similar events shall be accorded treatment by such other Party no less favorable than that accorded to its own nationals or companies or to nationals or companies of any third country, whichever is the most favorable treatment, as regards any measures it adopts in relation to such losses.

ARTICLE IV

1. Each Party shall permit all transfers related to an investment to be made freely and without delay into and out of its territory. Such transfers include:

(a) returns;

(b) compensation pursuant to Article III;

(d) payments made under contract, including amortization of principal and accrued interest payments made pursuant to a loan agreement;

(e) proceeds from the sale or liquidation of all or any part of an investment; and

(f) additional contributions to capital for the maintenance of development of an investment.

2. Transfers shall be made in a freely usable currency at the prevailing market rate of exchange on the date of transfer with respect to spot transactions in the currency to be transferred.

ARTICLE V

ARTICLE VI

1. For the purpose of this Article, an investment dispute is a dispute between a Party and a national or company of the other Party arising out of or relating to:

(a) an investment agreement between that Party and such national or company;

(b) an investment authorization granted by that Party’s foreign investment authority to such national or company: or

(a) to the courts or administrative tribunals of the Party that is a Party to the dispute; or

(b) in accordance with any applicable, previously agreed dispute-settlement procedures; or

(ii) to the Additional Facility of the Centre, if the Centre is not available; or

(iii) in accordance with the Arbitration Rules of the United Nations Commission on International Trade Law (UNCITRAL); or

(iv) to any other arbitration institution, or in accordance with any other arbitration rules, as may be mutually agreed between the parties to the dispute.

(b) Once the national or company concerned has so consented, either Party to the dispute may initiate arbitration in accordance with the choice so specified in the consent.

4. Each Party hereby consents to the submission of any investment dispute for the settlement by binding arbitration in accordance with the choice specified in the written consent of the national or company under paragraph 3. Such consent, together with the written consent of the nationals or company when given under paragraph 3, shall satisfy the requirement for:

(a) written consent of the parties to the dispute for the purposes of chapter II of the ICSID Convention (Jurisdiction of the Centre) and for purposes of the Additional Facility Rules; and

5. Any arbitration under paragraph 3 (a) (ii), (iii) or (iv) of this Article shall be held in a state that is a party to the New York Convention.

8. For purposes of an arbitration held under Paragraph 3 of this Article, any company legally constituted under the applicable laws and regulations of a Party or a political subdivision thereof but that, immediately before the occurrence of the event or events giving rise to the dispute, was an investment of nationals or companies of the other Party, shall be treated as a national or company of such other Party in accordance with Article 25 (2) (b) of the ICSID Convention.

ARTICLE VII

1. Any dispute between the Parties concerning the interpretation or application of the Treaty which is not resolved through consultations or other diplomatic channels, shall be submitted, upon the request of either Party, to an arbitral tribunal for binding decision in accordance with the applicable rules of international law. In the absence of an agreement by the Parties to the contrary, the arbitration rules of the United Nations Commission on International Trade Law ( UNCITRAL), except to the extent modified by the Parties or by the arbitrators, shall govern.

2. Within two months of receipt of a request, each Party shall appoint an arbitrator. The two arbitrators shall select a third arbitrator as Chairman, who is a national of a third state. The UNCITRAL Rules for appointing members of three-member panels shall apply mutatis mutandis to the appointment of the arbitral panel except that the appointing authority referenced in those rules shall be the Secretary General of the Centre.

4. Each Party shall pay the costs of its representation in the arbitral proceedings. Expenses incurred by the Chairman, the other arbitrators, and other costs of the proceedings shall be paid for equally by the Parties: The Tribunal may, however, at its discretion, direct that a higher proportion of the costs be paid by one of the Parties.

ARTICLE VIII

This Treaty shall not derogate from:

(a) laws and regulations, administrative practices or procedures, or administrative or adjudicatory decisions of either Party:

(b) international legal obligations; or

ARTICLE IX

ARTICLE X

1. With respect to its tax policies, each Party should strive to accord fairness and equity in the treatment of investment of nationals and companies of the other Party.

2. Nevertheless, the provisions of this Treaty, and in particular Article VI and VII, shall apply to matters of taxation only with respect to the following:

(a) expropriation, pursuant to Article III:

(b) transfers, pursuant to Article IV: or

(c) the observance and enforcement of term of an investment agreement or authorization as referred to in Article VI (1) (a) or (b), to the extent they are not subject to the dispute settlement provisions of a Convention for the avoidance of double taxation between the two Parties, or have been raised under such settlement provisions and are not resolved within a reasonable period of time.

ARTICLE XI

This Treaty shall apply to the political and administrative subdivisions of the Parties.

ARTICLE XII

2. Either Party may, by giving one year’s written notice to the other Party, terminate this Treaty at the end of the initial ten year period or at any time thereafter.

3. With respect to investments made or acquired prior to the date of termination of this Treaty to which this Treaty otherwise applies, the provisions of all of the other Articles of this Treaty shall thereafter continue to be effective for a further period of ten years from such date of termination.

4. The Annex and Protocol shall form an integral part of the Treaty.

IN WITNESS WHEREOF, the respective plenipotentiaries have signed the Treaty.

Done in duplicate at Washington on the fourteenth day of January, 1998, in the English and Lithuanian languages, both texts being equally authentic.

FOR THE GOVERNMENT OF THE

UNITED STATUS OF AMERICA:

Charlene Barshefsky

FOR THE GOVERNMENT OF THE

REPUBLIC OF LITHUANIA:

Algirdas Saudargas

ANNEX

1. The Government of the Unites States of America reserves the right to make or maintain limited exceptions to national treatment, as provided in Article II, paragraph 1, in the sectors or matters it has indicated below:

air transportation, ocean and coastal shipping banking, insurance, securities and other financial services; government grants; government insurance and loan programs; energy and power production; customer house brokers; ownership of real property; ownership and operation of broadcast or common carrier radio and television stations; ownership of shares in COMSAT; the provision of common carrier telephone and telegraph services; the provisions of submarine cable services; use of land and natural resources; mining on the public domain; maritime services and maritime-related services, and primary dealership in United States government securities.

2. The Government of the United States of America reserves the right to make or maintain limited exceptions to most favored nation treatment, as provided in Article II, paragraph 1, in the sectors or matters it has indicated below:

mining on the public domain, maritime services and maritime-related services; one-way satellite transmissions of DTH and DBS television services and of digital audio services; and primary dealership in United States government securities.

3. The Government of the Republic of Lithuania reserves the right to make or maintain limited exceptions to national treatment, as provided in Article II, paragraph 1, in the sectors or matters it has indicated below:

ownership of: land under the objects belonging to the Republic of Lithuania by the right of exclusive ownership; land of national parks, national reservations, reserves, protective areas of the territory of biosphere monitoring; agricultural land; forestry land, with the exception of plots necessary for operation of buildings and facilities designated for economic activities which have been provided for in approved planning documents; land or recreational forests and forest shelter-belts, rivers and other water bodies exceeding one hectare in size as well as their protective bank area; land of resorts and communal recreational territories, separate communal recreational areas and objects, land of state- protected natural carcass (geographic formations); monuments of nature, history, archaeology and culture as well as the surrounding protective areas; land of territories reserved, according to design projects, under communal roads and engineering service lines; objects of infrastructure of communal use in towns or other localities, and for other common needs of the community; land under public roads, railway lines, airports, sea and river ports, main pipelines and other engineering service lines of communal use as well as land necessary for their operation; land allotted, in accordance with the procedure established by law, under the free trade (economic) zones territory; land of protected territories where deposits of mineral resources and other natural resources have been found, with the exception of land which, according to planning documents, has been directly allotted for the construction of buildings and facilities required for the mining or use of said mineral resources; land of the Curonian Spit, the fifteen-kilometer wide strip of coastal land of the Baltic Sea and the Curonian Lagoon, with the exception of towns that are not resorts; land assigned to the frontier; land of the territories assigned or reserved for the needs of the national defense as well as territories where land acquisition restrictions are established by laws or Government decrees for safety reason; production and sale of narcotic drugs and psychotropic substances which are not used for legitimate medicinal purposes; growing, reproduction and sale of cultures containing narcotic drugs or psychotropic substances which are not used for legitimate purposes, organization of lotteries.

PROTOCOL

The Parties confirm their mutual understanding that the provisions of this Treaty do not bind either party in relation to any act or fact which took place or any situation which ceased to exist before the date of the entry into force of this Treaty.

SEPTEMBER 5, 2000.-Treaty was read the first time, and together with the accompanying papers, referred to the Committee on Foreign Relations and ordered to be printed for the use of the Senate

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Moldova Bilateral Investment Treaty

Signed April 21, 1993; Entered into Force November 25, 1994

MESSAGE

FROM

THE PRESIDENT OF THE UNITED STATES

TRANSMITTING

THE TREATY BETWEEN THE UNITED STATES OF AMERICA AND THE REPUBLIC OF MOLDOVA CONCERNING THE ENCOURAGEMENT AND RECIPROCAL PROTECTION OF INVESTMENT, WITH PROTOCOL AND RELATED EXCHANGE OF LETTERS, SIGNED AT WASHINGTON ON APRIL 21,1993

SEPTEMBER 8, 1993 -Treaty was read the first time and, together with the accompanying papers, referred to the Committee on Foreign Relations and ordered to be printed for the use of the Senate

U.S. GOVERNMENT PRINTING OFFICE

WASHINGTON, DC

69-118

LETTER OF TRANSMITTAL

THE WHITE HOUSE, September 7, 1993.

To the Senate of the United States:

With a view to receiving the advice and consent of the Senate to ratification, I transmit herewith the Treaty Between the United States of America and the Republic of Moldova Concerning the Encouragement and Reciprocal Protection of Investment, with Protocol and related exchange of letters, signed at Washington on April 21, 1993. Also transmitted for the information of the Senate is the report of the Department of State with respect to this Treaty.

The Treaty will establish an agreed-upon legal basis for the protection and encouragement of investment. This Treaty thus forms an integral part of the framework for expanding trade and investment relations between the United States and the countries of the former Soviet Union. It is designed to encourage economic opportunity-including investment, trade, and growth-in both countries. It will assist Moldova in its transition to a market economy by strengthening the role of the private sector and by encouraging appropriate macroeconomic and structural policies.

I recommend that the Senate consider this Treaty as soon as possible, and give its advice and consent to ratification of the Treaty, with Protocol and related exchange of letters, at an early date.

WILLIAM J. CLINTON.

LETTER OF SUBMITTAL

DEPARTMENT OF STATE,

Washington, August 25, 1993

The PRESIDENT,

The White House,

THE PRESIDENT: I have the honor to submit to you the Treaty Between the United States of America and the Republic of Moldova Concerning the Encouragement and Reciprocal Protection of Investment, with Protocol and a related exchange of letters, signed at Washington on April 21, 1993. I recommend that this Treaty, with Protocol and exchange of letters, be transmitted to the Senate for its advice and consent to ratification.

This is the fifth bilateral investment treaty (BIT) that the United States has signed with a newly independent state of the former Soviet Union. (BITs have already been signed with Armenia, Kazakhstan, Kyrgyzstan and Russia.) This Treaty will assist Moldova in its transition to a market economy by creating favorable conditions for U.S. private investment, helping to attract such investment and, thus, strengthening the development of the private sector. It is U.S. policy, however, to advise potential treaty partners during BIT negotiations that conclusion of a BIT does not necessarily result in immediate increases in private U.S. investment flows.

To date, 13 BITs are in force for the United States-with Bangladesh, Cameroon, the Czech Republic, Egypt, Grenada, Morocco, Panama, Senegal, Slovakia, Sri Lanka, Tunisia, Turkey, and Zaire. In addition to the Moldova Treaty, the United States has signed, but not yet brought into force, BITs with Argentina, Armenia, Bulgaria, the Congo, Haiti, Kazakhstan, Kyrgyzstan, Romania, and Russia-and a business and economic relations treaty with Poland, which contains the BIT elements.

The Office of the United States Trade Representative and the Department of State jointly lead BIT negotiations, with assistance from the Departments of Commerce and Treasury.

THE U.S.-MOLDOVA TREATY

The Treaty with Moldova satisfies the principal BIT objectives, which are:

-Investments are guaranteed freedom from performance requirements, including requirements to use local products or to export local goods;

-Investments are guaranteed the unrestricted transfer of funds in a freely usable currency; and

-Nationals and companies of either Party, in investment disputes with the host government, have access to binding international arbitration, without first resorting to domestic courts.

The U.S.-Moldova Treaty eliminates the language appearing at Article VIII of the prototype text. This language had excluded from the dispute settlement provisions of their BIT disputes arising under the export credit, guarantee or insurance programs of the Export-Import Bank of the United States, as well as those of any other such official program pursuant to which the Parties have agreed to other means of settling disputes. The Export-Import Bank, the Overseas Private Investment Corporation and other relevant government agencies had indicated prior to this negotiation that they see no need to maintain such a provision.

The U.S.-Moldova Treaty also differs from the prototype in that it includes provisions at Article I paragraph 1 (f) and (g), and Article II, paragraph 2, which clarify and extend the requirements of the Treaty with respect to state enterprises. This new language is discussed further in the article-by-article analysis of the Treaty below.

In addition, the Treaty also includes minor clarifying changes to the definitions (Article I) of “investment” and “company”; Moldova’s exceptions, to national and MFN treatment, in the Annex; a Protocol; and a related exchange of letters. These elements are also described below.

The following is an article-by-article analysis of the provisions of the Treaty:

Preamble

ARTICLE I (DEFINITIONS)

ARTICLE I sets out definitions for terms used throughout the Treaty. As a general matter, they are designed to be broad and inclusive in nature.

Investment

The Treaty’ s definition of investment is broad, recognizing that investment can take a wide variety of forms. It covers investments that are owned or controlled by nationals or companies of one of the Treaty partners made in the territory of the other. Investments can be made either directly or indirectly through one or more subsidiaries, including those of third countries. Control is not specifically defined in the Treaty. Ownership of over 50 percent of the voting stock, of a company would normally convey control but in many cases the requirement could be satisfied by less than that proportion.

The definition provides a non-exclusive list of assets, claims and rights that constitute investment. These include both tangible and intangible property, interests in a company or its assets, “a claim to money or performance having economic value, and associated with an investment, intellectual property rights, and any right conferred by law or contract (such as government-issued licenses and permits). The requirement that a “claim to money” be associated with an investment excludes claims arising solely from trade transactions, such as a simple movement of goods across a border, from being considered investments covered by the Treaty. The Moldova Treaty varies from the prototype BIT in explicitly including “movable and immovable property,” in the definition of investment. This language, which was sought by Moldova to supplement the phrase “tangible and intangible property,” does not broaden the coverage of the term “investment” in the Treaty.

Company

The definition of “company” is broad in order to cover virtually any type of legal entity, including any corporation, company, association, or other entity that is organized under the laws and regulations of a Party. The Moldova Treaty varies from the prototype BIT in that it specifically lists “enterprise” in the non-exhaustive list of legal entities covered by the definition. This variance does not alter the scope of the definition, which is designed to be broad and non-exclusive. The definition also ensures that companies of a Party that establish investments in the territory of the other Party have their-investments covered by the Treaty, even if the parent company is ultimately owned by non-Party nationals, although the other Party may deny the benefits of the Treaty in the limited circumstances set forth in Article I paragraph 2. Likewise, a company of a third Party will also be covered. The definition also covers charitable and non-profit entities, as well as entities that are owned or controlled by the state.

National

Return

Associated Activities

The Treaty recognizes that the operation of an investment requires protections extending beyond the investment to numerous related activities. This definition provides an illustrative list of such investor activities including operating a business facility, borrowing money, disposing of property, issuing stock and purchasing foreign exchange for imports. These activities are covered by Article II, paragraph 1 which guarantees the better of national or MFN treatment for investments and associated activities. (Article II, paragraph 11, discussed below, provides an extended, detailed list of the “associated activities” protected by the Treaty.)

State Enterprises

“State enterprise” is defined as an enterprise owned , or controlled through ownership interests, by a Party.

Delegation

Delegation is defined, to include a legislative grant, government order, directive or other act which transfers governmental authority to a state enterprise or authorizes a state enterprise to exercise such authority

The definitions of “state enterprise” and “delegation” are included to clarify the scope of the obligations of Article II, paragraph 2, which provides that any governmental authority delegated to a state enterprise by a Party must be exercised in a manner consistent with the Party’s obligations under the Treaty.

ARTICLE II (Treatment)

Article II contains the Treaty’s major obligations with respect to the treatment of investment.

Paragraph 1 generally ensures the better of MFN or national treatment in both the entry and post-entry phases of investment. It thus prohibits both the screening of proposed foreign investment on the basis of nationality and discriminatory measures once the investment has been made, subject to specific exceptions provided for in a separate Annex. The U.S. and Moldova both reserved certain exceptions in the Annex to the Treaty, the provisions of which are discussed in the section entitled “Annex.”

Paragraph 3 guarantees that investment shall be granted “fair and equitable” treatment in accordance with international law. It also prohibits Parties from impairing, throughout arbitrary or discriminatory means, the management, operation, maintenance, use, enjoyment, acquisition, expansion or disposal of investment. This paragraph sets out a minimum standard of treatment based on customary international law.

Paragraph 4 allows, subject to each Party’s immigration laws and regulations, the entry of each Party’s nationals into the territory of the other for purposes linked to investment and involving the commitment of a “substantial amount of capital.” This Paragraph serves to render nationals of a BIT partner eligible for treaty-investor visas under U.S. immigration law and guarantees similar treatment for U.S. investors.

Paragraph 5 guarantees companies the right to engage top managerial personnel of their choice, regardless of nationality.

Under paragraph 6, neither Party must provide effective means of asserting rights and claims with respect to investment, investment agreements and any investment authorizations. Under paragraph 8, each Party must make publicly available all laws, administrative practices and adjudicatory procedures pertaining to or affecting investments.

Paragraph 7 provides that each Party must provide effective means of asserting rights and claims with respect to investment, investment agreements and any investment authorizations. Under paragraph 8, each Party must make publicly available all laws, administrative practices and adjudicatory procedures pertaining to or affecting investments.

Paragraph 9 recognizes that under the U.S. federal system, States of The United States may, in some instances, treat out-of-State residents and corporations in a different manner than they treat in-State residents and corporations. The Treaty provides that the national treatment commitment, with respect to the States, means treatment no less favorable than that provided to U.S. out of-State residents and corporations.

Paragraph 10 limits the Article’s MFN obligation by providing that it will not apply to advantages (i.e., future preferences) accorded by either Party to third countries by virtue of a Party’s membership in a free trade area or customs union or a future multilateral agreement on Tariffs and Trade (GATT). The free trade area exception in this treaty is analogous to the exception provided for with respect to trade in the GATT.

Article II, paragraph 11 of the BIT with Moldova is designed to avoid problems that U.S. businesses may face in emerging market economies. This provision spells out that nationals and companies of either Party receive the better of national or MFN treatment with respect to a detailed list of activities associated with their investments. These include: access to registrations, licenses, and permits; access to financial institutions and credit markets; access to their funds held in financial institutions; the importation and installation of business equipment; advertising and the conduct of market studies; the appointment of commercial representatives; direct marketing; access to public utilities; and, access to raw materials. The right to the better of national or MFN treatment in these activities requires that Moldova grant U.S. nationals and companies treatment no less favorable than that granted to its own or third country nationals and companies.

ARTICLE III (EXPROPRIATION)

Article III incorporates into the Treaty the international law standards for expropriation and compensation.

Five requirements are listed. Expropriation must be for a public purpose; be carried out in a non-discriminatory manner; be subject to “prompt, adequate, and effective compensation”; be subject to due process; and be accorded the treatment provided in the standards of Article II (3). (These standards guarantee fair and equitable treatment and prohibit the arbitrary and discriminatory impairment of investment in its broadest sense.)

ARTICLE IV (TRANSFERS)

Article IV protects investors from certain government exchange controls limiting current account and capital account transfers.

ARTICLE V (STATE-STATE CONSULTATIONS)

Article V provides for prompt consultation between the Parties, at either Party’s request, on any matter relating to the interpretation or application of the Treaty.

ARTICLE VI (STATE- INVESTOR DISPUTE RESOLUTION)

Article VI sets forth several means by which disputes between an investor and the host country may be settled.

Article VI procedures apply to an “investment dispute,” a term which covers any dispute arising out of or relating to rights granted by the Treaty with respect to an investment, an investment authorization, or an agreement between the investor and the host government.

When a dispute arises, Article VI provides that the disputants should initially seek to resolve the dispute by consultation and negotiation. which may include non-binding third Party procedures. Should such consultations fail, paragraphs 2 and 3 set forth the investor’s range of choices of dispute settlement. The investor may make an exclusive and irrevocable choice to: (1) employ one of the several arbitration procedures outlined in the Treaty; (2) submit the dispute to procedures previously agreed upon by the investor and the host country government in an investment agreement or otherwise; or (3) submit the dispute to the local courts or administrative tribunals of the host country.

Under the Treaty, the investor can take an investment dispute to binding arbitration after six months from the date that the dispute arises. The investor may choose between the International Center for the Settlement of Investment Disputes (ICSID) (if the host country has joined the Center-otherwise the Additional Facility is available) and ad hoc arbitration using the Arbitration Rules of the United Nations Commission on International Trade Law (UNCITRAL). The Treaty also recognizes that, by mutual agreement, the parties to the dispute may choose another arbitral institution or set of arbitral rules.

Paragraph 4 contains the consent of the United States and Moldova to the submission of investment disputes to binding arbitration in accordance with the choice of the investor.

ARTICLE VII (STATE-STATE ARBITRATION)

Article VII Provides for binding arbitration of disputes between the United States and Moldova that are not resolved through consultations or other diplomatic channels. The article constitutes each Party’s prior consent to arbitration.

ARTICLE VIII (PRESERVATION OF RIGHTS)

Article VIII clarifies that the Treaty is meant only to establish a floor for the treatment of foreign investment. An investor may be entitled to more favorable treatment through domestic legislation, or other international legal obligations, or a specific obligation assumed by a Party with respect to that investor. This provision ensures that the Treaty will not be interpreted to derogate from any entitlement to such more favorable treatment.

ARTICLE IX (MEASURES NOT PRECLUDED)

The first paragraph of Article IX reserves the right of a Party to take measures it regards as necessary for the maintenance of public order, the fulfillment of its international obligations with respect to international peace and security, or the protection of its own essential security interests. These provisions are common in international investment agreements.

ARTICLE X (TAX POLICIES)

The Treaty exhorts both countries to provide fair and equitable treatment to investors with respect to tax policies. However, tax matters are generally excluded from the coverage of the prototype BIT, based on the assumption that tax matters are properly covered in bilateral tax treaties.

The three areas where the Treaty could apply to tax matters are expropriation (Article III), transfers (Article IV) and the observance and enforcement of terms of an investment agreement or authorization (Article VI (1) (a) or (b)). These three areas are important for investors, and two of the three-expropriatory taxation and tax provisions contained in an investment agreement or authorization are not typically addressed in tax treaties.

ARTICLE XI (APPLICATION TO POLITICAL SUBDIVISIONS)

Article XI makes clear that the obligations of the Treaty are applicable to all political subdivisions of the Parties, such as State and local governments.

ARTICLE XII (ENTRY INTO FORCE, DURATION AND TERMINATION)

The Treaty enters into force thirty days after exchange of instruments of ratification and continues in force for a period of ten years. From the date of its entry into force, the Treaty applies to existing and future investments. After the ten-year term, the Treaty will continue in force unless terminated by either Party upon one year’s notice. If terminated, all existing investments would continue to be protected under the Treaty for ten years thereafter.

Annex

The U.S. portion of the Annex contains a list of sectors and matters in which, for various legal and historical reasons, the federal government or the States may not necessarily treat investments of nationals or companies of the other Party as they do U.S. investments or investments from a third country. The U.S. exceptions from national treatment are: air transportation; ocean and coastal shipping; banking; insurance; government grants; government insurance and loan programs energy and power production; customs house brokers; ownership of real property; ownership and operation of broadcast or common carrier radio and television stations; ownership of shares in the Communications Satellite Corporation; the provision of common carrier telephone or telegraph services; the provision of submarine cable services; use of land and natural resources; mining on the public domain; maritime and maritime related services; and, primary dealership in U.S. government securities.

Because the U.S. exceptions to national treatment and MFN treatment are based on existing U.S. law, they are not altered during negotiations.

The Moldovan exceptions to national treatment are: formation of joint-venture banks; acquisition of government securities and bearer shares in joint-stock companies; ownership of land; acquisition and use of vouchers representing equity interests of the Republic of Moldova in its privatization process; and, lotteries and games of chance. These exceptions were based on provisions of investment laws currently in force or under active consideration by the Government of Moldova. Moldova has not reserved any sectoral exceptions to MFN treatment in the Annex.

Protocol

In a Protocol to the Treaty, Moldova agrees that it will use its best efforts during the period before full convertibility of its currency is achieved to improve the efficiency and timeliness of procedures for the conversion and transfer of payments related to an investment. Moreover, Moldova agrees that it will not adopt measures inconsistent with the free transferability requirements of the Treaty during this period. The Parties also acknowledge that, not-withstanding the national treatment requirements of the Treaty, incorporation in the territory of Moldova may be required for participation in its privatization process.

Exchange of Letters

In an exchange of letters at the time the Treaty was signed, Moldova designated an office to assist U.S. nationals and companies in obtaining the full benefits of the Treaty. The Government of Moldova designated the Agency for Promotion of Foreign Investments and Coordination of Technical Assistance for this purpose. That office comes under the direct authority of the Prime Minister. The office’s role will include serving as a problem solver for investors experiencing difficulties in registration, licensing and other regulatory matters; providing up-to-date information on business and investment regulations; collecting and disseminating information regarding investment projects and financing; and coordinating with Moldovan agencies, at all levels, to facilitate U.S. investment. The exchange of letters constitutes an understanding between the Governments and forms an integral part of the Treaty.

The other U.S. Government agencies which negotiated the Treaty join me in recommending that it be transmitted to the Senate at an early date.

Respectfully Submitted,

C.R. Wharton, Jr.

TREATY BETWEEN

THE UNITED STATES OF AMERICA AND THE REPUBLIC OF MOLDOVA

CONCERNING THE ENCOURAGEMENT

AND RECIPROCAL PROTECTION OF INVESTMENT

The United States of America and the Republic of Moldova (hereinafter the “Parties”);

Desiring to promote greater economic cooperation between them, with respect to investment by nationals and companies of one Party in the territory of the other Party;

Recognizing that agreement upon the treatment to be accorded such investment will stimulate the flow of private capital and the economic development of the Parties;

Agreeing that fair and equitable treatment of investment is desirable in order to maintain a stable framework for investment and maximum effective utilization of economic resources;

Recognizing that the development of economic and business ties can contribute to the well-being of workers in both Parties and promote respect for internationally recognized worker rights; and

Having resolved to conclude a Treaty concerning the encouragement and reciprocal protection of investment;

Have agreed as follows:

ARTICLE I

1. For the purposes of this Treaty,

i) tangible and intangible property, including movable and immovable property, as well as rights, such as mortgages, liens and pledges;

(ii) a company or shares of stock or other interests in a company or interests in the assets thereof;

(iii)a claim to money or a claim to performance having economic value, and associated with an investment;

(iv) intellectual property which includes, inter alia, rights relating to:

literary and artistic works, including sound recordings,

inventions in all fields of human endeavor,

industrial designs,

semiconductor mask works,

trade secrets, know-how, and confidential business information, and

trademarks, service marks, and trade names; and

(v) any right conferred by law or contract, and any licenses and permits pursuant to law;

(f) “state enterprise” means an enterprise owned, or controlled through ownership interests, by a Party;

3. Any alteration of the form in which assets are invested or reinvested shall not affect their character as investment.

ARTICLE II

1. Each Party shall permit and treat investment, and activities associated therewith, on a basis no less favorable than that accorded in like situations to investment or associated activities of its own nationals or companies, or of nationals or companies of any third country, whichever is the most favorable, subject to the right of each Party to make or maintain exceptions falling within one of the sectors or matters listed in the Annex to this Treaty. Each Party agrees to notify the other Party before or on the date of entry into force of this Treaty of all such laws and regulations of which it is aware concerning the sectors or matters listed in the Annex. Moreover, each Party agrees to notify the other of any future exception with respect to the sectors or matters listed in the Annex, and to limit such exceptions to a minimum. Any future exception by either Party shall not apply to investment existing in that sector or matter at the time the exception becomes effective. The treatment accorded pursuant to any exceptions shall, unless specified otherwise in the Annex, be not less favorable than that accorded in like situations to investments and associated activities of nationals or companies of any third country.

2. (a) Nothing in this treaty shall be construed to prevent a Party from maintaining or establishing a state enterprise.

4. Subject to the laws relating to the entry and sojourn of aliens, nationals of either Party shall be permitted to enter and to remain in the territory of the other Party for the purpose of establishing, developing, administering or advising on the operation of an investment to which they, or a company of the first Party that, employs them, have committed or are in the process of committing a substantial amount of capital or other resources.

6. Neither Party shall impose performance requirements as a condition of, establishment, expansion or maintenance of investments, which require or enforce commitments to export goods produced, or which specify that goods or services must purchased locally, or which impose any other similar requirements.

7. Each Party shall provide effective means of asserting claims and enforcing rights with respect to investment, investment agreements, and investment authorizations.

8. Each Party shall make public all laws, regulations, administrative practices and procedures, and adjudicatory decisions that pertain to or affect investments.

9. The treatment accorded by the United States of America to investments and associated activities of nationals and companies of the Republic of Moldova under the provisions of this Article shall in any State, Territory or possession of the United States of America be no less favorable than the treatment accorded therein to investments and associated activities of nationals of the United States of America resident in, and companies legally constituted under the laws and regulations of other States, Territories or possessions of the United States of America.

10. The most favored nation provisions of this Treaty shall not apply to advantages accorded by either Party to nationals or companies of any third country by virtue of:

(a) that Party’s binding obligations that derive from full membership in a free trade area or customs union; or

11. The Parties acknowledge and agree that “associated” activities, include without limitation, such activities as:

(a) the granting of franchises or rights under licenses;

(b) access to registrations, licenses, permits and other approvals (which shall in any event be issued expeditiously);

(d) access to their funds held in financial institutions;

(f) the dissemination of commercial information;

(g) the conduct of market studies;

(h) the appointment of commercial representatives, including agents, consultants and distributors and their participation in trade fairs and promotion events;

(i) the marketing of goods and services, including through internal distribution and marketing systems, as well as by advertising and direct contact with individuals and companies;

(j) access to public utilities, public services and commercial rental space at nondiscriminatory prices, if the prices are set or controlled by the government; and

(k) access to raw materials, inputs-and services of all types at nondiscriminatory prices, if the prices are set or controlled by the government.

ARTICLE III

1. Investments shall not be expropriated or nationalized either directly or indirectly through measures tantamount to expropriation or nationalization (“expropriation”) except: for public purpose; in a nondiscriminatory manner; upon payment of prompt, adequate and effective compensation; and in accordance with due process of law and the general principles of treatment provided for in Article II(3). Compensation shall be equivalent to the fair market value of the expropriated investment immediately before the expropriatory action was taken or became known, whichever is earlier; be calculated in a freely usable currency on the basis of the prevailing market rate of exchange at that time; be paid without delay; include interest at a commercially reasonable rate from the date of expropriation; be fully realizable; and be freely transferable.