[Senate Treaty Document 104-13]
[From the U.S. Government Publishing Office]
104th Congress 1st SENATE Treaty Doc.
Session
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 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
LETTER OF TRANSMITTAL
----------
The White House, July 10, 1995.
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 Georgia Concerning the
Encouragement and Reciprocal Protection of Investment, with
Annex, signed at Washington on March 7, 1994. 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 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 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; 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. I 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 Tabago, 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 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.-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
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 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.
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 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. 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 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 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 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
expropriations''--a 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)
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 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 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 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
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.
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 rendered 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 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 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(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 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 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 his
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 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.
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)
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 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 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(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. Sec. 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. Sec. 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.
Sec. 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 MLLA and 10 U.S.C.
Sec. 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.
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.
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.