[Senate Executive Report 106-23]
[From the U.S. Government Publishing Office]
106th Congress Exec. Rept.
SENATE
2d Session 106-23
======================================================================
BILATERAL INVESTMENT TREATIES WITH AZERBAIJAN, BAHRAIN, BOLIVIA,
CROATIA, EL SALVADOR, HONDURAS, JORDAN, LITHUANIA, MOZAMBIQUE,
UZBEKISTAN AND A PROTOCOL AMENDING THE BILATERAL INVESTMENT TREATY WITH
PANAMA
_______
October 4 (legislative day, September 22), 2000.--Ordered to be printed
_______
Mr. Helms, from the Committee on Foreign Relations,
submitted the following
R E P O R T
[To accompany Treaty Docs. 106-47; 106-25; 106-26; 106-29; 106-28; 106-
27; 106-30; 106-42; 106-31; 104-25; and 106-46]
The Committee on Foreign Relations, to which were referred
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, (Treaty Doc. 106-47), the Treaty Between the
Government of the United States of America and the Government
of the the State of Bahrain Concerning the Encouragement and
Reciprocal Protection of Investment, with Annex, signed at
Washington on September 29, 1999 (Treaty Doc. 106-25), 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, Chile, on April 17,
1998 (Treaty Doc. 106-26), 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 (Treaty Doc. 106-29), the Treaty
Between the Government of the United States of America and the
Government of the Republic of El Salvador Concerning the
Encouragement and Reciprocal Protection of Investment, with
Annex and Protocol, signed at San Salvador on March 10, 1999
(Treaty Doc. 106-28), 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 (Treaty Doc. 106-27), 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 (Treaty Doc. 106-30),
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
(Treaty Doc. 106-42), the Treaty Between the Government of the
United States of America and the Government of Mozambique
Concerning the Encouragement and Reciprocal Protection of
Investment, with Annex and Protocol, signed at Washington on
December 1, 1998 (Treaty Doc. 106-31), the Treaty Between the
Government of the United States of America and the Government
of the Republic of Uzbekistan Concerning the Encouragement and
Reciprocal Protection of Investment, with Annex, signed at
Washington on December 16, 1994 (Treaty Doc. 104-25) and the
Protocol Between the Government of the United States of America
and the Government of the Republic of Panama Amending the
Treaty Concerning the Treatment and Protection of Investments
of October 27, 1982, signed at Panama City on June 1, 2000,
(Treaty Doc. 106-46), having considered the same, reports
favorably thereon with the understandings, declarations and
provisos noted below, and recommends that the Senate give its
advice and consent to the ratification thereof as set forth in
this report and the accompanying resolutions of ratification.
CONTENTS
Page
I. Purpose..........................................................2
II. Background.......................................................3
III. Summary..........................................................3
IV. Entry Into Force and Termination................................20
V. Committee Action................................................20
VI. Committee Recommendation and Comments...........................20
VII. Text of the Resolutions of Ratification.........................22
I. Purpose
These proposed treaties are part of a series of bilateral
investment treaties being negotiated by the United States. The
principal purposes of bilateral investment treaties are to
promote the free flow of international investment, and to
encourage and protect United States investment in developing
countries.
The purpose of the protocol of amendment to the existing
bilateral investment Treaty with Panama is to allow investors
to use binding investor-state arbitration under the Treaty, a
key protection sought in U.S. bilateral investment treaties. As
explained below, this option was lost when Panama became a
party to the International Convention on the Settlement of
Investment Disputes.
II. Background
Ten bilateral investment treaties (BITs) were ordered
reported by the Committee. Those concluded with Uzbekistan,
Honduras, Croatia, Jordan, Bolivia, Mozambique, El Salvador,
Bahrain and Azerbaijan are all based on the 1994 model BIT
developed by the State Department. The treaty with Lithuania is
based on the 1992 prototype model BIT, and is discussed
separately below. A protocol of amendment to improve the
existing BIT with Panama was also ordered reported.
The BITs before the Senate represent a continuation of the
BIT program begun by the United States in the early 1980's.
These are based on the State Department's model BIT, which has
been revised and updated a number of times over the last two
decades. The current model, dated 1994, incorporates the
principles established earlier, but makes changes in language
and format in order to capture best practices, reflect the
legal and regulatory changes, and improve readability.
III. Summary
A. GENERAL
The United States has concluded 45 BITs around the world.
Thirty-one are in force. Overall, BIT program objectives are to
protect U.S. investment abroad, to encourage the adoption of
market-oriented economic policies and to support the
development of international law standards.
BITs entitle U.S. companies to operate under the best
conditions available to other foreign and domestic investors.
They also establish clear limits on the expropriation of
investments, and provide U.S. investors the right to transfer
funds into and out of the treaty partner's territory using a
market rate of exchange.
BITs also limit the treaty partner's ability to require
U.S. investors to adopt inefficient and trade distorting
practices. They give U.S. investors the right to engage the top
managerial personnel of their choice regardless of nationality,
and the right to submit disputes with the treaty partner's
government to international arbitration. Disputes with treaty
partners may also be raised by the U.S. Government, both
through consultations and through arbitration.
All of these advantages supplement existing U.S. Government
mechanisms and procedures for resolution of business disputes,
such as dispute settlement at the World Trade Organization
(WTO), consultations with foreign governments, and actions
under Section 301 of the Trade Act of 1974.
The ``model'' BIT format has retained its fundamental
appearance over time, but it has been reviewed and revised
periodically in order to take account of operational experience
and to make sure it is kept current with other agreements,
customary international law, and the needs of investors. The
last review was undertaken in 1994. Another review is planned
for 2001.
BITs serve important U.S. general economic interests by
bringing countries into the world trading system as
comprehensively as possible. They are one element within a
network of trade and investment obligations sought by the
United States with other countries. Most important among these
relationships is WTO membership.
The investment and trade regimes of aspiring WTO members
are reviewed for compatibility with the WTO framework. BITs
pave the way for WTO commitments and foreclose opportunities to
circumvent WTO rules. Jordan joined the WTO in 1999, and
Croatia has been approved for membership. Lithuania, Azerbaijan
and Uzbekistan are in varying stages of negotiation for WTO
membership. Overall, BITs supplement the broader WTO trade and
investment framework.
B. KEY PROVISIONS
The following discussion refers mainly to the proposed BITs
with Azerbaijan, Bahrain, Bolivia, Croatia, El Salvador,
Honduras, Jordan, Mozambique and Uzbekistan. Lithuania and the
Protocol to the existing BIT with Panama are discussed
separately below.
Definitions (Article I). The BITs under consideration
generally define investment to include all forms of investment
activity. BIT obligations apply to a ``covered investment,''
defined as ``an investment of a national or company of a Party
in the territory of the other Party.'' A company is defined to
include, inter alia, non-profit as well as commercial entities
and both private and governmentally owned or controlled firms.
A ``company of a Party'' is defined as a ``company constituted
or organized under the laws of that Party.'' Because the
definition does not require that the company be owned or
controlled by nationals of a Party, the term ``covered
investment'' may include firms that are owned or controlled by
nationals or companies of countries that are not Party to the
BIT. While these investments would appear generally to be
entitled to the protections of the BIT, a BIT Party may,
however, deny the company of the other Party to the treaty if
third country nationals own or control the company and either
(1) the denying Party does not maintain normal economic
relations with the third country or (2) the company has no
substantial business activities in the country in which it is
organized or established (or in other words, is a shell
company) (see Article XII of the BITs). The term ``normal
economic relations'' is not defined in the BIT, but would
appear to exclude at least those countries with which an
embargo is maintained.
In addition, all of the BITs contain six basic commitments
that the United States has viewed as critical to ensuring a
favorable climate for its investors:
Treatment (Article II). Each treaty ensures covered
investments the better of national or most-favored-nation (MFN)
treatment. This obligation applies to the establishment,
acquisition, expansion, management, conduct, operation, and
sale or other disposition of covered investments. By covering
the establishment of an investment, it prevents a Party from
limiting entry on the basis of nationality. ``National
treatment'' is defined as ``treatment no less favorable than
that it accords, in like situations, to investments in its
territory of its own nationals or companies.'' MFN treatment is
defined as ``treatment no less favorable than that it accords,
in like situations, to investments in its territory of
nationals or companies of a third country.'' Parties may,
however, enter exceptions to these obligation in sectors or
with regard to matters listed in the treaty Annex. In addition,
the national and MFN treatment obligations do not apply to
procedures provided for in multilateral agreements concluded
under the auspices of the World Intellectual Property
Organization (WIPO), with respect to the acquisition or
maintenance of intellectual property rights.
The Parties also agree to accord covered investments ``fair
and equitable treatment and full protection and security'' and
no less than the minimum treatment required by international
law. In addition, Parties may not ``impair in any way by
unreasonable and discriminatory measures the management,
conduct, operation, and sale or other disposition of covered
investments.''
Expropriation (Article III). Each BIT provides that Parties
may not nationalize or expropriate a covered investment, either
directly or through measures ``tantamount'' to an expropriation
or nationalization, 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 the
BIT's treatment article (described above). The BIT thus
provides that a taking includes both an expropriation and a
nationalization and, by referring to actions that are
``tantamount'' to an expropriation or nationalization, covers
not only transfers of title to the state but also so-called
``creeping'' expropriations--that is, taxation or regulatory
action that effectively amounts to an expropriation of a
covered investment without taking title. Standards for
compensation are also set out, under which payment is to be
made without delay, must be equivalent to the fair market value
of the investment immediately before the expropriatory action
was taken, and be fully realizable and fully transferable.
Transfers (Article V). The BIT requires each Party to
permit all transfers relating to a covered investment to be
made freely and without delay into and out of its territory,
thus ensuring that an investor may repatriate funds associated
with investment activities. Transfers are expressly deemed to
include contributions to capital; profits, dividends, capital
gains, and proceeds from the sale or liquidation (or any
partial sale or liquidation) of the investment; interest,
royalty payments, and various fees; contract payments;
compensation from expropriations; restitution for losses
resulting from war or armed conflict, states of emergency, or
other such political events; and payments arising out of an
investment dispute. Transfers must be allowed to be made in a
freely usable currency at the market rate of exchange
prevailing on the date of transfer. According to the State
Department, the term ``freely usable currency'' refers to
International Monetary Fund terminology and currently includes
the U.S. dollar, Japanese yen, German mark, French franc, and
British pound sterling. Returns in kind must also be allowed as
authorized in a written investment agreement or authorization
between the BIT Party and a covered investment or national or
company of the other Party. A Party may limit transfers,
however, through the ``equitable, nondiscriminatory and good
faith application'' of laws relating to bankruptcy, securities,
criminal or penal offenses, or ensuring compliance with orders
or judgments in adjudicatory proceedings.
Performance requirements (Article VI). The BITs prohibit
Parties from imposing requirements on the establishment,
acquisition, expansion, management, conduct, or operation of a
covered investment that may impair the profitability and
competitiveness of an investment. BIT Parties may not require a
covered investment: (1) to achieve a particular level or
percentage of local content, or to purchase, use or grant a
preference to domestic products or services; (2) to limit
imports of products or services in relation to a particular
volume or value of production, exports, or foreign exchange
earnings; (3) to export a particular type, level or percentage
of products or services; (4) to limit sales of products or
services in the host country territory to a particular volume
or value of production, exports, or foreign exchange earnings;
(5) to transfer technology, a production process, or other
proprietary knowledge to a national or company in the host
country except as an officially enforced remedy for a violation
of competition laws; and (6) to carry out a particular type,
level or percentage of research and development in the host
country's territory. A Party may, however, impose conditions
for the receipt or continued receipt of an advantage in its
territory.
Entry, sojourn, and employment of aliens (Article VII).
Each Party is required, subject to its laws relating to the
entry and sojourn of aliens, to permit nationals of the other
Party to enter and remain in order to establish, develop,
administer, or advise on the operation of an investment to
which they or their company has committed (or is about to
commit) a substantial amount of capital or other resources.
With regard to U.S. law, this provision allows foreign
investors to obtain so-called ``treaty investor'' visas (see 8
U.S.C. Sec. 1101(a)(15)(E)), which requires an applicant to
have invested, or to be ``actively in the process of investing,
a substantial amount of capital'' to the U.S. enterprise that
he or she intends to develop or direct. In addition, the BIT
expressly requires covered investments to be allowed to engage
top management personnel of their choice, regardless of
nationality. This provision does not, however, exempt a Party
national or third country national from host country
immigration laws; nor does it provide for treatment of
nationals of a third country that are so chosen.
Dispute settlement (Articles IX and X). In order to enforce
treaty obligations, each BIT provides for both investor-state
and state-state dispute settlement through binding third-party
arbitration. Since such third-party dispute settlement may not
take place without the consent of the state involved, the BIT
Parties grant such consent before the fact in the treaty. With
regard to investor-state dispute settlement, the consent
granted in the BIT will satisfy the requirement for an
agreement in writing under the Convention on the Settlement of
Investment Disputes (ICSID Convention); the ICSID Additional
Facility Rules, and the U.N. Convention on the Recognition and
Enforcement of Foreign Arbitral Awards (New York Convention).
Investor-state dispute settlement (Article IX). Under each
BIT, a national or a party to an investment dispute with the
host state may submit the dispute for resolution under one of
three options: (1) to a local court or administrative tribunal;
(2) in accordance with any applicable, previously-agreed
dispute settlement procedure; or (3) in accordance with the
binding arbitral process provided for in the BIT. The investor
thus is not required to exhaust local remedies before
submitting a request to binding arbitration, but may not choose
this option if he or she has submitted a dispute for resolution
under either of the other two alternatives. An ``investment
dispute'' is defined as ``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.''
Once three months have elapsed from the date the dispute
arose, the disputing national or company may submit the dispute
for settlement by binding arbitration to the International
Center for the Settlement of Investment Disputes (ICSID); the
ICSID Additional Facility, if ICSID itself is unavailable; in
accordance with the UNCITRAL Arbitration Rules; or if both
parties agree, to any other arbitration institution or in
accordance with any other arbitration rules. Even though a
national or company may have submitted the dispute for binding
arbitration, it may nonetheless seek interim injunctive relief,
not involving the payment of damages, before a host country
judicial or administrative tribunal, before or during arbitral
proceedings, to preserve its rights and interests. Two of the
BITs (Croatia and Jordan) exhort the disputing parties
initially to seek to resolve their dispute through
consultations and negotiations.
Binding arbitration under any of these options is to be
held in a country that is a party to the New York Convention
(21 U.S.T 2517). An arbitral award is final and binding on the
disputing parties, and the BIT Party involved must, without
delay, carry out the provisions of the awards and provide for
enforcement of the award in its territory.
In any investment proceeding, a BIT Party may not assert as
a defense, counterclaim, right of set-off, or for any other
reason, that indemnification has or will be received under an
insurance or guarantee contract.
State-state dispute settlement (Article X). Any dispute
concerning the interpretation or application of the BIT, that
is not resolved through consultations or other diplomatic
channels, is to be submitted, if either Party so requests, to a
third-party arbitral panel for a binding decision in accordance
with applicable rules of international law. Unless the Parties
agree otherwise, the dispute is to be conducted according to
United Nations Commission for International Trade Law
(UNCITRAL) Arbitration Rules, except where modified by the
Parties or by the arbitrator, without objection of the Parties.
Each Party is to appoint an arbitrator within two months of the
request; the two arbitrators then select a third arbitrator,
who must be a third country national, as chairman. Submissions
and hearings are generally to be completed within six months
and the decision rendered within two months of the date of the
final submission or close of hearings, whichever is later.
Other provisions. Covered investments are entitled to any
treatment that is more favorable than that provided by the
treaty if it is based on laws and regulations or administrative
measures of a Party; international legal obligations; or
obligations assumed by a Party, including those in an
investment agreement (Article XI). Generally, the BIT does not
apply to tax matters (Article XIII). Treaty obligations apply
to political subdivisions of a Party and to a state enterprise
of a Party in the exercise of any regulatory, administrative or
other governmental authority delegated to it by the Party
(Article XV).
Measures not precluded (Article XIV). The 1994 model
provides, at Article XVI:1, that the BIT ``shall not preclude a
Party from applying measures necessary for the fulfilment of
its obligations with respect to the maintenance or restoration
of international peace or security, or the protection of its
own essential security interests.'' Some BITs, namely those
with El Salvador, Mozambique, and Bahrain contain a variation
of this language, stating that the BIT ``shall not preclude a
Party applying measures that it considers necessary'' to
achieve these objectives. The United States views language
regarding ``essential security interests'' as requiring that
``[a]ctions not arising from a state of war or national
emergency * * * have a clear and direct relationship to the
essential security interests of the Party involved.'' At the
same time, the United States considers this language to be
self-judging, though, in the words of the State Department,
``each Party would expect the provisions to be applied by the
other in good faith.'' Where the alternative language is used,
the Department has stated that the BIT ``makes explicit the
implicit understanding'' that the provision is self-judging.
In addition, at Article XIV:2, Parties may prescribe
special formalities applicable to covered investments, for
example, a requirement investments be legally constituted under
the Party's laws and regulations or that transfers or currency
or other monetary instruments be reported. Such formalities may
not, however, impair the substance of other treaty rights.
Duration (Article XVI). The BITs will remain in force for
10 years and will continue after that period unless a Party
terminates it at the end of the 10-year period, or any time
thereafter upon one year's written notice. The BITs apply to
covered investments existing at the time the BIT enters into
force as well as to those established or acquired after that
time. As indicated below, however, the BITs do not apply to
actions taken by the States prior to entry into force. Some of
the Protocols state this expressly; even where they do not, the
customary international law rule is that they do not apply
retroactively. If the BIT is terminated, all other BIT articles
will continue to apply to covered investments established or
acquired before termination for 10 years after termination,
except as those Articles apply to establishing or acquiring
covered investments.
Annexes and Protocols. Each BIT contains an Annex listing
exceptions that Parties may take to MFN and national treatment
obligations and, in some cases, a Protocol with provisions
clarifying or otherwise amplifying BIT provisions. These are
considered integral parts of the BIT (see Article XVI:4 of the
BITs).
U.S. exceptions. Exceptions taken by the United States
generally reflect U.S. legislative requirements, some of them
long-standing. Each BIT Annex contains a standard provision
allowing the U.S. to adopt or maintain exceptions to its
national treatment obligation toward covered investments in the
following sectors or regarding the following matters: 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 the national
treatment obligation in the NAFTA investment chapter; and
landing of submarine cables. The Annex also states that MFN
treatment will be accorded in these areas.
Each BIT Annex also contains a provision allowing the U.S.
to adopt or maintain exceptions to its MFN and national
treatment obligations toward covered investments in certain
sectors or regarding listed matters. Each BIT contains a U.S.
exception for fisheries and air and maritime transport, and
related activities. Financial services are also included, but
coverage varies from treaty to treaty; in some cases the United
States has reserved the right to adopt or maintain exceptions
to its national treatment/MFN obligations with regard to
specific financial services sectors, provided that the
exceptions do not result in treatment under the BIT that is
less favorable that the treatment that the United States
accords under the NAFTA to other NAFTA Parties. The full NAFTA
financial services exception applies with regard to Honduras,
Nicaragua, Croatia, and Uzbekistan; an insurance-related NAFTA
exception applies to Azerbaijan, Bolivia. The standard
financial services exception applies to El Salvador, Jordan,
Bahrain, Mozambique and, except for insurance, to Bolivia. The
United States has also taken MFN exceptions with regard to one-
way satellite transmissions of DTH (direct-to-home) and DBS
(direct broadcast satellite) television services and of digital
audio services in its BIT with Azerbaijan, Bolivia, El
Salvador, Bahrain, and Mozambique. These financial services
exceptions (along with recent insurance sector developments
involving the BIT with Azerbaijan) and telecommunications
exceptions will also be identified below.
Most of the treaties also include a specific provision in
the Annex under which each Party agrees to grant national
treatment to covered investment or investments with regard to
leasing of minerals and pipeline rights-of-way on government
lands. Variations with regard to this provision are contained
in the treaties with Jordan and Uzbekistan and will be
discussed below. The BIT with Croatia adds a national treatment
obligation with regard to concession rights for exploration and
exploitation of mineral resources on government lands. The BIT
with Azerbaijan does not contain an explicit grant of national
treatment in its Annex related to such rights-of-way on
government lands; nor have the parties taken an exception from
their national treatment obligations.
Comments on Individual BITs
The following list discusses individual treaties, matters
that are not identified above, the particulars of each treaty
partner's exceptions, and attached Protocols.
Azerbaijan
This BIT follows the 1994 model treaty in Articles I
through XVI.
Annex. As in the BIT with Bolivia (below), the United
States had originally taken exceptions to its national
treatment and MFN obligations with regard to banking,
securities, and non-insurance financial services; and for one-
way satellite transmission of direct-to-home (DTH) and direct
broadcast satellite (DBS) television services and of digital
audio services. It had also taken the earlier-described NAFTA-
related exception for the insurance sector.
Azerbaijan has taken a national treatment exception for the
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. It will accord MFN treatment to covered
investments in these sectors.
Azerbaijan has also taken a national treatment/MFN
exception with regard to banking, securities, and other
financial services.
Subsequent to negotiation of the Annex, the Parties
considered that there was ambiguity in Annex language regarding
the application of the national treatment and MFN obligations
of each Party to the insurance sector, particularly whether
Azerbaijan had taken an exception for insurance services.
Pursuant to an exchange of letters between the Parties, the
above-described U.S. exception has been changed to include
``insurance and other financial services'' and the NAFTA-
related exception has been removed. In addition, Azerbaijan's
financial services exception has been revised to read
``banking, securities, insurance, and other financial
services.''
Bahrain
This BIT follows the 1994 model in Articles I through XVI.
Annex. The United States has taken exceptions to its
national treatment and MFN obligations with regard to banking,
insurance, securities, and other financial services; and for
one-way satellite transmission of direct-to-home (DTH) and
direct broadcast satellite (DBS) television services and of
digital audio services.
Bahrain has taken a national treatment exception with
respect to the ownership or control of television and radio
broadcasting and other forms of mass media: fisheries; and the
initial privatization of exploration or drilling for crude oil.
MFN treatment will be accorded to covered investments in these
sectors.
Bahrain has also taken a national treatment/MFN exception
with regard to air transportation; the purchase or ownership of
land; and until January 1, 2005, the purchase or ownership of
shares quoted on the Bahrain Stock Exchange.
Bolivia
This BIT follows the 1994 model.
Annex. As in the BIT with Azerbaijan, the United States has
taken exceptions to its national treatment and MFN obligations
with regard to banking, securities, and non-insurance financial
services; and for one-way satellite transmission of direct-to-
home (DTH) and direct broadcast satellite (DBS) television
services and of digital audio services. It has taken the above-
described NAFTA-related exception for insurance.
Bolivia has taken a national treatment exception in the
Annex regarding the acquisition and/or possession by foreigners
of land or subsoil within 50 kilometers of Bolivia's borders,
insofar as required under Article 25 of the Bolivian
Constitution; subsidies or grants; and the obligations of
foreign construction and consulting companies participating in
public sector tenders to associate with one or more Bolivian
companies. Bolivia agrees to accord MFN treatment in these
areas.
Bolivia has taken a national treatment/MFN exception with
regard to air transport; transportation on interior navigable
waterways; and limitations on foreign equity ownership of
international passenger and freight land transportation
companies to a maximum of 49 percent.
With regard to leasing of minerals and pipeline rights of
way on government lands, each Party agrees to accord covered
investments national treatment; for Bolivia, the obligation is
subject to Article 25 of its Constitution; for the United
States, the obligation is subject to the Mineral Lands Leasing
Act.
Protocol. The BIT Protocol contains provisions under which:
(1) the Parties confirm their understanding that advantages
given to national suppliers in government procurement programs
are not precluded by the prohibition on performance
requirements in Article VI; (2) Bolivia confirms that Article 3
of the Bolivian Labor Law does not apply to top managerial
personnel; (3) the Parties confirm that investor-state dispute
provisions do not apply to government contract disputes unless
they are investment-related; (4) the United States confirms the
protections against burdens on interstate commerce by states
under its federal system; and (5) Bolivia confirms that joint
ventures may be established in Bolivia, including in the 50-
mile perimeter described above, without any limitation on the
respective capital contributions or proportionate shares of the
joint venture partners.
Croatia
This BIT follows the 1994 model with at least four
modifications.
First, it adds to the definition of the term ``investment''
a sentence stating that ``any change in form of an investment
does not affect its character as an investment.'' Second, it
adds a definition for the term ``territory,'' which states that
the term means:
the territory of the United States 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 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 I(l)).
Third, it provides that in the event of an investment
dispute between a Party and a national or company of another
Party, the disputing parties should initially seek a resolution
through consultation and negotiation.
Fourth, and unique to this treaty, the BIT contains a
separate article dealing with subrogation (Article V).
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 must recognize
the assignment to the first Party or its designated agency of
any right or claim of the indemnified national or company. 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 the national or company (Article V:1).
Second, 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 designate agency will also
be entitled to any payments received in pursuit of those rights
or claims as the indemnified national or company was entitled
to receive by virtue of the BIT regarding concerned covered
investment (Article V:2). Provisions of this type are generally
included in separate OPIC agreements. The Committee understands
that Croatia requested such a provision so as to have a mutual
agreement in place were Croatia to establish its own investment
guarantee agency.
Annex. In the BIT Annex, the United States has taken the
North American Free Trade Agreement (NAFTA) related exception
for banking, insurance, securities, and other financial
services.
Croatia has taken a national treatment exception with
regard to the 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. It will accord MFN treatment in
these sectors.
Croatia has also taken a national treatment/MFN exception
with regard to fisheries, air and maritime transport, and
related activities (including maritime services).
Protocol. As in the BITs with El Salvador, Mozambique, and
Bahrain, the Protocol states that the BIT provisions ``do not
bind either party in relation to any act or fact which took
place or any situation which ceased to exist before'' the BIT
enters into force.
El Salvador
This BIT follows the 1994 model, with a variation in the
Article XIV security exception and another under Article VII,
regarding the appointment of top management personnel (Article
VII:2). Instead of model language, which requires Parties to
permit covered investments to engage to engage top management
personnel, regardless of nationality, the BIT with El Salvador
contains a negative formulation providing that ``[no] Party may
require that a covered investment appoint to senior management
positions individuals of any particular nationality.'' The
Committee understands that this provision, which follows
language contained in the investment chapter of the NAFTA, was
requested by El Salvador.
Annex. The United States has taken exceptions to its
national treatment and MFN obligations with regard to banking,
insurance, securities, and other financial services; and for
one-way satellite transmission of direct-to-home (DTH) and
direct broadcast satellite (DBS) television services and of
digital audio services.
El Salvador has taken national treatment exceptions for
small commerce, small industry, and small service providers, as
defined in its law; traditional (artisan) fishing; and
commercial fishing, and has stated that it will accord MFN
status in these areas. It has taken a national treatment/MFN
exception for notary public services.
Protocol. The Protocol contains: (1) an understanding
regarding what may constitute a ``commercially reasonable
rate'' for freely usable currency used to denominate fair
market value in compensation for an expropriation; and (2) an
understanding that the BIT provisions ``do not bind either
party in relation to any act or fact which took place or any
situation which ceased to exist before'' the BIT enters into
force. The State Department has stated that this provision,
which also appears in the treaties with Nicaragua, Croatian,
Mozambique, and Bahrain, ``explicitly states the standard under
customary international law that applies in the absence of the
Parties' express intent to apply the treaty retroactively.''
Honduras
This BIT follows the 1994 model in Articles I through XVI.
Annex. In the BIT Annex, the United States has taken the
NAFTA-related exception for banking, insurance, securities, and
other financial services.
Honduras has taken a national treatment exception regarding
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 $40,000;
ownership, operation, and editorial control of broadcast radio
and television; and ownership, operation, and editorial control
of general interest periodicals and newspapers published in
Honduras. It will grant MFN treatment in these areas.
Protocol. The Parties confirm their understanding that
parties may prevent transfers under Article V:4(a) through the
application of labor laws relating to the protection of
preferential creditors' rights. Honduras confirms that, with
regard to its Article II treatment obligations and the
exception noted above, it will not reject or unduly delay
decisions on applications on grounds of nationality with regard
to U.S. investor applications to possess or acquire real
property in urban zones or in the above-described 40 km
perimeter. Further, the Parties understand that with regard to
rights reserved in the BIT's Article XIV:1 security exception,
the phrase ``obligations with respect to the maintenance or
restoration of international peace or security'' means
obligations under the U.N. Charter. Finally, the Protocol
states that the understanding that nothing in the just-cited
paragraph authorizes or has the intention of authorizing either
Party to the BIT to take measures in the territory of the other
Party with regard to taking action under either prong of the
Article.
Jordan
The BIT with Jordan follows the 1994 model with two
changes. As in the BIT with Croatia, it adds to the definition
of investment the statement that ``any change in the form of an
investment does not affect its character as an investment'' and
provides that, in the event of an investment dispute between a
Party and a national or company of another Party, the disputing
parties should initially seek a resolution through consultation
and negotiation. Also, the BIT with Jordan uses the term
``Contracting Party'' instead of ``Party.''
Annex. The United States has taken the standard national
treatment/MFN exception for financial services and, unique to
this group of treaties, for mineral leases on government land.
Each Party agrees, however, to accord national treatment with
regard to leasing of pipeline rights-of-way on government land.
This result for mineral and pipeline leases was seemingly
dictated by reciprocity requirements in the Mineral Lands
Leasing Act and 10 U.S.C. Sec. 435 (regarding the Naval
Petroleum and Oil Shale Reserve).
Jordan has taken national treatment exceptions for what
would appear to be significant areas of investment: 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 not more than $50,000, as
annually adjusted according to treaty provisions; ownership of
banks and insurance companies; ownership of companies engaged
in telecommunications systems operations, but not including
telecommunications-related services; extraction concessions for
minerals, including oil, natural gas, and oil shale; farming
(not including animal husbandry) on large tracts of land;
ownership of agricultural land; ownership of land in the Jordan
valley; and ownership of land for non-business related
purposes. MFN treatment will be accorded in these sectors.
Protocol. The Parties confirm their mutual understanding
that, with regard to the language regarding change in form of
an investment, either Party may require approvals or impose
formal requirements in connection with such a change in form,
provided that such approvals or formal requirements are
otherwise consistent with the treaty. The Protocol also states
that the requirement in the expropriation article that
compensation be paid without delay (Article III:2) ``does not
necessarily mean instantaneous,'' but rather indicates an
intent that the Contracting Party ``diligently and
expeditiously carry out necessary formalities.''
Mozambique
This BIT generally follows the 1994 model, except for the
variation in the language of the Article XIV security exception
described above. Also, in an exchange of letters, as summarized
by the State Department (see Treaty Doc. 106-31), ``the Parties
confirmed their mutual understanding that Mozambique will
implement the provisions of its Law No. 19/97 of October 1
(Land Use and Development Law) and any other provision of law
that relates to the same or substantially the same subject
matter, in a manner that provides national treatment to covered
investments.''
Annex. In the BIT Annex, the United States has taken the
standard exception to its national treatment and MFN
obligations with regard to banking, securities, insurance, and
other financial services; and for one-way satellite
transmission of direct-to-home (DTH) and direct broadcast
satellite (DBS) television services and of digital audio
services. Mozambique has not taken any national treatment or
MFN exceptions.
Protocol. In the only provision in this group of treaties
that directly addresses environmental and public health issues,
the Parties confirm a mutual understanding that the prohibition
on performance requirements is not to be construed so as to
prohibit them from requiring environmental impact statements,
environmental management plans, or other such measures of
public health and safety, provided all such measures are
otherwise consistent with BIT provisions. With regard to the
Article VII provision on the appointment of top managers,
Mozambique confirms that the ``the Treaty shall serve to
satisfy the requirements for any and all authorizations
necessary under its laws for engagement of foreign nationals as
top managers.'' The State Department notes that this provision
was requested by the United States to satisfy requirements
under the employment laws of Mozambique. Finally, the Protocol
contains the provision regarding the non-retroactive
application of the Treaty contained in the treaties with
Croatia, El Salvador, and Bahrain, namely, that the that the
Treaty provisions ``do not bind either party in relation to any
act or fact which took place or any situation which ceased to
exist before'' the BIT enters into force.
Uzbekistan
This BIT follows the 1994 model in Articles I through VI.
Annex. Unique to this group of treaties, the United States
has taken a national treatment/MFN exemption for leasing of
pipeline rights-of-way. Each Party agrees, however, to accord
national treatment with regard to the leasing of minerals on
government lands. This outcome was apparently required because
of the reciprocity requirements of the Mineral Lands Leasing
Act and 10 U.S.C Sec. 7435, regarding Naval Petroleum and Oil
Shale Reserves.
In the BIT Annex, the United States has taken the NAFTA-
related exception for banking, insurance, securities, and other
financial services.
Uzbekistan has taken an national treatment exception for
production, processing, sale and storage of uranium and other
fissionable materials; air and railway transport, and related
activities; pipelines and related activities; customhouse
brokers; subsidies or grants; broadcasting, including radio and
television. It will accord MFN treatment in these sectors.
Uzbekistan has also taken a national treatment/MFN
exception for the production and sale of hardware, ammunition,
poisonous substances and toxic substances, for military use;
and for the planting, cultivation, processing, production and
sale of crops containing narcotic substances.
Lithuania
This BIT, which is the third signed between the United
State and a Baltic country, is based on the 1992 model BIT
developed by the State Department. The BITs with Estonia and
Latvia, each of which is currently in force, are also based on
the 1992 model.
The 1992 model contains broad definitions intended to
capture all forms of investment and incorporates the six basic
guarantees that have historically been key in the U.S. BIT
program: (1) the better of national or most-favored-nation
(MFN) treatment; (2) restrictions on and remedies for
expropriation; (3) free transfer of investment-related funds
into and out of the host country; (4) prohibitions on trade-
distorting performance requirements; (5) investor-state dispute
settlement, without a requirement that local remedies first be
exhausted; and (6) the right to engage top managerial personnel
of choice, regardless of nationality. All of these provisions
are contained in the BIT with Lithuania.
The U.S.-Lithuania BIT differs from the 1992 model in
several ways. First, it eliminates Article VIII of the model,
which had excluded from the investor-state and state-state
dispute settlement those disputes that arise under the export
credit, guarantee or insurance programs of the U.S. Export-
Import Bank, the Overseas Private Investment Corporation (OPIC)
and other official programs. This exception, which was
apparently intended to avoid potential duplication with respect
to programs that may have their own dispute settlement
mechanism, does not appear in the 1994 model. According to the
State Department, the agencies involved indicated prior to the
negotiation with Lithuania that the provision was not needed.
Second, the BIT with Lithuania includes definitions for the
terms ``state enterprise'' and ``delegation'' (Article I:1 (f)
and (g)), intended to clarify the scope of a provision in the
treatment article. The provision in question, Article II:2(b),
states that ``[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 whenever such enterprise exercises any regulatory,
administrative or other governmental authority that the Party
has delegated to it. . . .'' The term ``delegation'' is defined
as ``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.''
Third, the BIT includes a list of activities to be deemed
associated with an investment at Article II:11, in addition to
the model definition of ``associated activities'' contained in
Article I:1(e). This provision makes clear that the former are
entitled to the better of MFN or national treatment.
Unlike the 1994 model, the security/public policy exception
in the 1992 model and the BIT with Lithuania (Article IX)
includes among the rights reserved by the Parties the right to
take ``measures necessary for the maintenance of public
order.'' The State Department has noted that this language
would include ``measures taken taken pursuant to a Party's
police powers to ensure public health and safety.'' Unlike the
portion of the clause that reserves the right of each Party to
take ``those measures it regards as necessary for the
protection of its own essential security interests,'' the State
Department does not appear to consider the public order
exception to be self-judging.
The BIT applies to investments existing at the time the
treaty enters into force. As in various other BITs currently
before the Committee, the Protocol to the BIT confirms the
Parties' mutual understanding that BIT provisions ``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'' the BIT
enters into force--that is, that the BIT does not apply
retroactively.
Annex. The United States has taken broader national
treatment exceptions in the treaty Annex than it has with
regard to the other BITs currently before the Committee. This
exception applies to 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 COMSAT; the provision of common carrier
telephone and telegraph services; the provision of submarine
cable services; use of land or natural resources; mining on the
public domain; maritime services and maritime-related services;
and primary dealership in the U.S. government securities.
The United States has taken an MFN exception for mining on
the public domain; maritime services and maritime-related
services; one-way satellite transmission of direct-to-home
(DTH) and direct broadcast satellite (DBS) television services
and of digital audio services; and primary dealership in U.S.
government securities.
Lithuania has taken a national treatment exception with
regard to ownership of land and resources that, in light of the
other BITs currently before the Committee, is unique in its
scope and detail. The exception applies to 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 the operation of buildings
and facilities designated for economic activities which have
been provided for in approved planning documents; 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 national geographical 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 15 km wide strip of coastal land of the Baltic Sea
and the Curonian Lagoon; land assigned to the frontier; and
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.
Lithuania has also taken a national treatment exception
with regard to the production and sale of narcotic drugs and
psychotropic substances which are not used for legitimate
medicinal purposes; the growth, reproduction and sale of
cultures containing narcotic drugs or psychotropic substances
which are not used for legitimate medicinal purposes; and the
organization of lotteries. Lithuania has taken no MFN
exceptions.
Protocol of Amendment to Panama BIT
The International Center for the Settlement of Investment
Disputes (ICSID) was established in the 1965 Convention on the
Settlement of Investment Disputes Between States and Nationals
of Other States (the Convention). The United States is a party
to the Convention (17 U.S.T. 1270). ICSID provides a forum for
binding arbitration of disputes between private investors and
host governments, where the disputants consent in writing to
submit the dispute to ICSID.
ICSID's jurisdiction is restricted, however, to investment-
related disputes arising between Convention parties or their
nationals. To accommodate others, however, ICSID's
Administrative Council created a so-called ``Additional
Facility'' to deal with disputes where one or both disputants
are unable to overcome the Convention's restrictions on ICSID
jurisdiction.
The United States was a party to the ICSID Convention at
the time the U.S.-Panama BIT (entered into force May 30, 1991,
21 I.L.M. 127, 1982) was concluded, but Panama was not. This
state of affairs is reflected in the BIT, which provides for
submission of investor-state disputes only to the ICSID
Additional Facility.
When Panama became a party to the ICSID Convention in 1996,
however, at that point, both the U.S. and Panama enjoyed status
as ICSID Contracting States. Thus, the Additional Facility was
no longer available as a forum for investor-state disputes. The
BIT text, however, does not include the option of using ICSID
facilities available to Contracting States. The proposed
Protocol of amendment before the Committee is intended to
introduce that option into the Treaty.
Existing U.S.-Panama BIT Provisions
Article VII(3) of the U.S.-Panama BIT is the provision that
currently provides for the use of the ICSID Additional Facility
for investor-state disputes. Article VII(3)(a) of the BIT as
concluded generally provides that a national or company may
submit a dispute to the ICSID Additional Facility for
conciliation or arbitration once six months have passed since
the date the dispute arose. Under Article VII(3)(b), each Party
consents to submission of an investment dispute to the
Additional Facility for settlement by conciliation or binding
arbitration. Article VII(3)(c) provides that conciliation or
binding arbitration of such disputes is to be carried out in
accordance with the Regulations and Rules of the Additional
Facility. Article VII(3)(d) requires each Party to provide for
the enforcement within its territory of Additional Facility
arbitral awards.
Changes Proposed under the Protocol
Article I of the Protocol amends the text of Article VII(3)
to provide for the ICSID and other possible fora in investor-
state disputes arising under the BIT if the investor so
chooses, and makes other changes to the BIT related to the use
of ICSID and the enforcement of arbitral agreements and awards.
BIT Article VII(3)(a) is amended to provide that at any
time after six months from the date the dispute arose, the
national or company may choose to consent in writing to the
submission of the dispute to ICSID, for settlement either by
conciliation or binding arbitration; the Additional Facility,
if ICSID is not available, for settlement either by
conciliation or binding arbitration; or in accordance with the
UNCITRAL Rules, for settlement by binding arbitration.
Once the disputing national or company has so consented,
either disputing party may institute proceedings before ICSID,
the Additional Facility, or in accordance with UNCITRAL Rules,
provided that the dispute has not, for any reason, been
submitted for resolution in accordance with any applicable
dispute settlement procedure previously agreed to by the
parties to the disputes, and the disputing investor has not
brought the dispute before the courts, administrative tribunals
or agencies of the competent jurisdiction of either Party. This
language regarding previous submission of the dispute to
another forum parallels language in the BIT.
Article VII(3)(b) of the BIT is amended to provide that
each Party consents to the submission of an investment dispute
in accordance with the choice of fora (listed above) of the
company or national concerned. In addition, the amended
paragraph provides that: (1) submission of the dispute under
amended paragraph (3)(a) will satisfy the requirements of the
ICSID Convention and the Additional Facility rules for written
consent of the parties to the dispute; and (2) Article II of
the New York Convention for an agreement in writing.
Article VII(3)(c) is amended to add a requirement that the
Rules and Regulations of ICSID be used if the dispute is
submitted to the Center in accordance with paragraph (3)(a).
Article VII(3)(d) is expanded to require each Party to provide
for enforcement within its territory of arbitral awards
rendered under Article VII (as opposed to Additional Facility
awards only). Enforcement of international arbitral awards in
the United States is generally subject to federal law, namely,
the New York Convention, as implement by the Federal
Arbitration Act (FAA), 9 U.S.C. sections 201-210 (the Act). The
Act also generally applies to arbitral agreements and awards
involving interstate and foreign commerce.
A new Article VII(3)(e) provides that an arbitration
submitted under the Additional Facility or under UNCITRAL Rules
is to be held in a state that is a party to the New York
Convention. This provision would appear to facilitate the use
of Convention-based enforcement in the United States, since the
United States has agreed to implement the Convention on the
basis of reciprocity, that is, with respect to awards made only
in the territory of other Contracting States.
Article VII(5) is amended to account for an ICSID
Convention provision that allows the Parties to consider a
company organized under one Party's laws to be a national of
the other Party if it is controlled by nationals of the latter.
This provision would allow, for example, a U.S. subsidiary in
Panama controlled by U.S. nationals or a U.S. firm to bring an
investment dispute against Panama in its own name rather than
requiring it to rely on the U.S. parent to do so.
Finally, Article II of the Protocol provides that the
Protocol will form an integral part of the BIT, and will enter
into force upon an exchange of notes confirming that the
Parties have completed their domestic legal requirements for
entry into force of the Protocol. It also provides that the
Protocol will remain in force as long as the BIT is in force.
If the BIT is terminated, the Protocol will continue to be
effective for ten additional years, as provided in Article
XIII(4) of the BIT.
IV. Entry Into Force and Termination
A. ENTRY INTO FORCE
In general, the BITs enter into force thirty days after the
date of exchange of instruments of ratification. They remain in
force for a period of ten years, and continue in force
thereafter unless terminated. The Protocol to the BIT with
Panama would enter into force upon an exchange of notes
confirming that the Parties have completed their respective
domestic legal requirements, and remain in force as long as the
BIT is in force.
B. TERMINATION
In general, a BIT party may terminate the 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. For ten
years thereafter, treaty provisions shall continue to apply,
except insofar as the establishment or acquisition of covered
investments is concerned. The Protocol amending the BIT with
Panama contains similar provisions in the event of BIT
termination.
V. Committee Action
The Committee on Foreign Relations held a public hearing on
the Treaties on September 13, 2000 (a transcript of the hearing
and questions for the record may be found in Senate hearing
106-660 entitled, ``Consideration of Pending Treaties''). The
Committee considered the Treaties on September 27, 2000, and
ordered them favorably reported by voice vote, with the
recommendation that the Senate give its advice and consent to
the ratification of the proposed Treaties subject to the
declarations and provisos indicated below in the resolutions of
ratification.
VI. Committee Recommendation and Comments
The Committee on Foreign Relations recommends favorably the
proposed Treaties. On balance, the Committee believes that the
proposed Treaties are in the interest of the United States and
urges the Senate to act promptly to give its advice and consent
to ratification.
A. SCOPE OF CONSENT TO ARBITRATION
Some members of the Committee have expressed concern over
the possibility that recent developments in international
trade, such as the North American Free Trade Agreement may make
it more difficult for the United States to protect itself from
exposure to unforeseen claims under investor-state dispute
resolution provisions.
Specifically, in the NAFTA context, claims have been made
which test the limits of United States consent to arbitration.
In three of the four NAFTA Chapter 11 arbitrations commenced
against the United States to date, the United States has
objected to the jurisdiction of the arbitration tribunal on
various grounds, including that the claims presented fall
outside the scope of the United States' consent to arbitration
as set forth in NAFTA Chapter 11, that the claims presented are
inadmissible, and that the claimant's allegations, even if
true, could not give rise to liability under the provisions of
NAFTA Chapter 11.
To defend itself from such claims in NAFTA Chapter 11
arbitration cases, the United States has the right under the
agreement to raise objections in accordance with the procedural
rules that govern the arbitration. Under NAFTA, claimants may
choose from among three sets of arbitration rules: the
Convention on the Settlement of Investment Disputes between
States and Nationals of Other States (the ICSID Convention);
the Additional Facility Rules of the International Centre for
Settlement of Investment Disputes (ICSID); and the UNCITRAL
Arbitration Rules. Each of these sets of rules allows for
objections to the jurisdiction or competence of the tribunal.
The Committee understands that, in the event that a claim
were brought against the United States pursuant to the dispute
settlement provisions of any of the Bilateral Investment
Treaties now under consideration, the United States would be
free to object to the tribunal's jurisdiction and competence in
the same manner as it is now able to do in arbitrations brought
under NAFTA Chapter 11. In addition, the same three sets of
arbitration rules which may be used in the NAFTA context would
also be available for arbitrations which may be brought under
investor-state dispute settlement provisions of the Bilateral
Investment Treaties now under consideration by the Committee.
The Committee understands that, unlike the situation with
NAFTA, to date no claim has been brought against the United
States under any Bilateral Investment Treaty. (The Committee
also has been informed that U.S. firms have brought at least 12
cases against foreign states under existing Bilateral
Investment Treaties).
Because the United States will have the right, pursuant to
its Bilateral Investment Treaties, to raise objections to
investor-state claims which are outside the scope of the United
States' consent to arbitration and to excessive claims of
jurisdiction or competence by arbitral tribunals which may be
asked to hear them, the Committee currently believes that, on
balance, United States interests are adequately protected by
these Treaties.
B. SITUATION IN CROATIA
The Committee expresses its concern over reports that more
than 30 United States citizens are encountering discrimination
in Croatia because of Croatian laws and regulations which bar
restitution or payment of compensation for wrongfully
expropriated properties to persons who are not Croatian
citizens or residents of Croatia. The Committee has been
assured by the Executive Branch that such cases will be
resolved both through revisions to domestic Croatian law
ordered by Croatia's Constitutional Court, and within the
context of Croatia's preparations to become a member state of
the European Union.
Even after taking due note of these assurances, the
Committee will remain concerned about and attentive to
developments with regard to this problem until it is resolved.
The Committee urges the Executive Branch to employ all
appropriate measures to ensure that the rights of United States
citizens in Croatia are safeguarded, and that the Croatian
Sabor acts by the end of 2000 to conform its Law on
Compensation for Property Taken During Yugoslav Communist Rule
to the requirements of the Croatian Constitutional Court.
VII. Text of the Resolutions of Ratification
Agreement with Azerbaijan
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 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 (Treaty Doc. 106-47), subject to the
declaration of subsection (a) and the proviso of subsection
(b).
(a) Declaration.--The Senate's advice and consent is
subject to the following declaration, which shall be binding
upon the President:
Treaty Interpretation.--The Senate affirms the
applicability to all treaties of the constitutionally
based principles of treaty interpretation set forth in
Condition (1) of the resolution of ratification of the
INF Treaty, approved by the Senate on May 27, 1988, and
Condition (8) of the resolution of ratification of the
Document Agreed Among the States Parties to the Treaty
on Conventional Armed Forces in Europe, approved by the
Senate on May 14, 1997.
(b) Proviso.--The resolution of ratification is subject
to the following proviso, which shall not be included in the
instrument of ratification:
Supremacy of the Constitution.--Nothing in this
Treaty requires or authorizes legislation or other
action by the United States of America that is
prohibited by the Constitution of the United States as
interpreted by the United States.
Agreement with Bahrain
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 State of Bahrain
Concerning the Encouragement and Reciprocal Protection of
Investment, with Annex, signed at Washington on September 29,
1999 (Treaty Doc. 106-25), subject to the declaration of
subsection (a) and the proviso of subsection (b).
(a) Declaration.--The Senate's advice and consent is
subject to the following declaration, which shall be binding
upon the President:
Treaty Interpretation.--The Senate affirms the
applicability to all treaties of the constitutionally
based principles of treaty interpretation set forth in
Condition (1) of the resolution of ratification of the
INF Treaty, approved by the Senate on May 27, 1988, and
Condition (8) of the resolution of ratification of the
Document Agreed Among the States Parties to the Treaty
on Conventional Armed Forces in Europe, approved by the
Senate on May 14, 1997.
(b) Proviso.--The resolution of ratification is subject
to the following proviso, which shall not be included in the
instrument of ratification:
Supremacy of the Constitution.--Nothing in this
Treaty requires or authorizes legislation or other
action by the United States of America that is
prohibited by the Constitution of the United States as
interpreted by the United States.
Agreement with Bolivia
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 Republic of Bolivia
Concerning the Encouragement and Reciprocal Protection of
Investment, with Annex and Protocol, signed at Santiago, Chile,
on April 17, 1998 (Treaty Doc. 106-26), subject to the
declaration of subsection (a) and the proviso of subsection
(b).
(a) Declaration.--The Senate's advice and consent is
subject to the following declaration, which shall be binding
upon the President:
Treaty Interpretation.--The Senate affirms the
applicability to all treaties of the constitutionally
based principles of treaty interpretation set forth in
Condition (1) of the resolution of ratification of the
INF Treaty, approved by the Senate on May 27, 1988, and
Condition (8) of the resolution of ratification of the
Document Agreed Among the States Parties to the Treaty
on Conventional Armed Forces in Europe, approved by the
Senate on May 14, 1997.
(b) Proviso.--The resolution of ratification is subject
to the following proviso, which shall not be included in the
instrument of ratification:
Supremacy of the Constitution.--Nothing in this
Treaty requires or authorizes legislation or other
action by the United States of America that is
prohibited by the Constitution of the United States as
interpreted by the United States.
Agreement with Croatia
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 Republic of Croatia
Concerning the Encouragement and Reciprocal Protection of
Investment, with Annex and Protocol, signed at Zagreb on July
13, 1996 (Treaty Doc. 106-29), subject to the declaration of
subsection (a) and the proviso of subsection (b).
(a) Declaration.--The Senate's advice and consent is
subject to the following declaration, which shall be binding
upon the President:
Treaty Interpretation.--The Senate affirms the
applicability to all treaties of the constitutionally
based principles of treaty interpretation set forth in
Condition (1) of the resolution of ratification of the
INF Treaty, approved by the Senate on May 27, 1988, and
Condition (8) of the resolution of ratification of the
Document Agreed Among the States Parties to the Treaty
on Conventional Armed Forces in Europe, approved by the
Senate on May 14, 1997.
(b) Proviso.--The resolution of ratification is subject
to the following proviso, which shall not be included in the
instrument of ratification:
Supremacy of the Constitution.--Nothing in this
Treaty requires or authorizes legislation or other
action by the United States of America that is
prohibited by the Constitution of the United States as
interpreted by the United States.
Agreement with El Salvador
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 Republic of El
Salvador Concerning the Encouragement and Reciprocal Protection
of Investment, with Annex and Protocol, signed at San Salvador
on March 10, 1999 (Treaty Doc. 106-28), subject to the
declaration of subsection (a) and the proviso of subsection
(b).
(a) Declaration.--The Senate's advice and consent is
subject to the following declaration, which shall be binding
upon the President:
Treaty Interpretation.--The Senate affirms the
applicability to all treaties of the constitutionally
based principles of treaty interpretation set forth in
Condition (1) of the resolution of ratification of the
INF Treaty, approved by the Senate on May 27, 1988, and
Condition (8) of the resolution of ratification of the
Document Agreed Among the States Parties to the Treaty
on Conventional Armed Forces in Europe, approved by the
Senate on May 14, 1997.
(b) Proviso.--The resolution of ratification is subject
to the following proviso, which shall not be included in the
instrument of ratification:
Supremacy of the Constitution.--Nothing in this
Treaty requires or authorizes legislation or other
action by the United States of America that is
prohibited by the Constitution of the United States as
interpreted by the United States.
Agreement with Honduras
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 Republic of
Honduras Concerning the Encouragement and Reciprocal Protection
of Investment, with Annex and Protocol, signed at Denver on
July 1, 1995 (Treaty Doc. 106-27), subject to the declaration
of subsection (a) and the proviso of subsection (b).
(a) Declaration.--The Senate's advice and consent is
subject to the following declaration, which shall be binding
upon the President:
Treaty Interpretation.--The Senate affirms the
applicability to all treaties of the constitutionally
based principles of treaty interpretation set forth in
Condition (1) of the resolution of ratification of the
INF Treaty, approved by the Senate on May 27, 1988, and
Condition (8) of the resolution of ratification of the
Document Agreed Among the States Parties to the Treaty
on Conventional Armed Forces in Europe, approved by the
Senate on May 14, 1997.
(b) Proviso.--The resolution of ratification is subject
to the following proviso, which shall not be included in the
instrument of ratification:
Supremacy of the Constitution.--Nothing in this
Treaty requires or authorizes legislation or other
action by the United States of America that is
prohibited by the Constitution of the United States as
interpreted by the United States.
Agreement with Jordan
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 Hashemite Kingdom
of Jordan Concerning the Encouragement and Reciprocal
Protection of Investment, with Annex and Protocol, signed at
Amman on July 2, 1997 (Treaty Doc. 106-30), subject to the
declaration of subsection (a) and the proviso of subsection
(b).
(a) Declaration.--The Senate's advice and consent is
subject to the following declaration, which shall be binding
upon the President:
Treaty Interpretation.--The Senate affirms the
applicability to all treaties of the constitutionally
based principles of treaty interpretation set forth in
Condition (1) of the resolution of ratification of the
INF Treaty, approved by the Senate on May 27, 1988, and
Condition (8) of the resolution of ratification of the
Document Agreed Among the States Parties to the Treaty
on Conventional Armed Forces in Europe, approved by the
Senate on May 14, 1997.
(b) Proviso.--The resolution of ratification is subject
to the following proviso, which shall not be included in the
instrument of ratification:
Supremacy of the Constitution.--Nothing in this
Treaty requires or authorizes legislation or other
action by the United States of America that is
prohibited by the Constitution of the United States as
interpreted by the United States.
Agreement with Lithuania
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 Republic of
Lithuania for the Encouragement and Reciprocal Protection of
Investment, with Annex and Protocol, signed at Washington on
January 14, 1998 (Treaty Doc. 106-42), subject to the
declaration of subsection (a) and the proviso of subsection
(b).
(a) Declaration.--The Senate's advice and consent is
subject to the following declaration, which shall be binding
upon the President:
Treaty Interpretation.--The Senate affirms the
applicability to all treaties of the constitutionally
based principles of treaty interpretation set forth in
Condition (1) of the resolution of ratification of the
INF Treaty, approved by the Senate on May 27, 1988, and
Condition (8) of the resolution of ratification of the
Document Agreed Among the States Parties to the Treaty
on Conventional Armed Forces in Europe, approved by the
Senate on May 14, 1997.
(b) Proviso.--The resolution of ratification is subject
to the following proviso, which shall not be included in the
instrument of ratification:
Supremacy of the Constitution.--Nothing in this
Treaty requires or authorizes legislation or other
action by the United States of America that is
prohibited by the Constitution of the United States as
interpreted by the United States.
Agreement with Mozambique
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 Mozambique Concerning
the Encouragement and Reciprocal Protection of Investment, with
Annex, and a related exchange of letters, and Protocol, signed
at Washington on December 1, 1998 (Treaty Doc. 106-31), subject
to the declaration of subsection (a) and the proviso of
subsection (b).
(a) Declaration.--The Senate's advice and consent is
subject to the following declaration, which shall be binding
upon the President:
Treaty Interpretation.--The Senate affirms the
applicability to all treaties of the constitutionally
based principles of treaty interpretation set forth in
Condition (1) of the resolution of ratification of the
INF Treaty, approved by the Senate on May 27, 1988, and
Condition (8) of the resolution of ratification of the
Document Agreed Among the States Parties to the Treaty
on Conventional Armed Forces in Europe, approved by the
Senate on May 14, 1997.
(b) Proviso.--The resolution of ratification is subject
to the following proviso, which shall not be included in the
instrument of ratification:
Supremacy of the Constitution.--Nothing in this
Treaty requires or authorizes legislation or other
action by the United States of America that is
prohibited by the Constitution of the United States as
interpreted by the United States.
Agreement with Uzbekistan
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 Republic of
Uzbekistan Concerning the Encouragement and Reciprocal
Protection of Investment, with Annex, signed at Washington on
December 16, 1994 (Treaty Doc. 104-25), subject to the
declaration of subsection (a) and the proviso of subsection
(b).
(a) Declaration.--The Senate's advice and consent is
subject to the following declaration, which shall be binding
upon the President:
Treaty Interpretation.--The Senate affirms the
applicability to all treaties of the constitutionally
based principles of treaty interpretation set forth in
Condition (1) of the resolution of ratification of the
INF Treaty, approved by the Senate on May 27, 1988, and
Condition (8) of the resolution of ratification of the
Document Agreed Among the States Parties to the Treaty
on Conventional Armed Forces in Europe, approved by the
Senate on May 14, 1997.
(b) Proviso.--The resolution of ratification is subject
to the following proviso, which shall not be included in the
instrument of ratification:
Supremacy of the Constitution.--Nothing in this
Treaty requires or authorizes legislation or other
action by the United States of America that is
prohibited by the Constitution of the United States as
interpreted by the United States.
Protocol Amending Agreement with Panama
Resolved (two-thirds of the Senators present concurring
therein), That the Senate advise and consent to the
ratification of the Protocol Between the Government of the
United States of America and the Government of the Republic of
Panama Amending the Treaty Concerning the Treatment and
Protection of Investments of October 27, 1982, signed at Panama
City on June 1, 2000, (Treaty Doc. 106-46).