[Senate Treaty Document 106-25]
[From the U.S. Government Publishing Office]
106th Congress Treaty Doc.
SENATE
2d Session 106-25
_______________________________________________________________________
INVESTMENT TREATY WITH BAHRAIN
__________
MESSAGE
from
THE PRESIDENT OF THE UNITED STATES
transmitting
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
May 23, 2000.--Treaty was read the first time, and together with the
accompanying papers, referred to the Committee on Foreign Relations and
ordered to be printed for the use of Senate
__________
U.S. GOVERNMENT PRINTING OFFICE
79-118 WASHINGTON : 2000
LETTER OF TRANSMITTAL
----------
The White House, May 23, 2000.
To the Senate of the United States:
With a view to receiving the advice and consent of the
Senate to ratification, I transmit herewith the Treaty Between
the Government of the United States of America and the
Government of the State of Bahrain Concerning the Encouragement
and Reciprocal Protection of Investment, with Annex, signed at
Washington on September 29, 1999. I transmit also, for the
information of the Senate, the report of the Department of
State with respect to this Treaty.
The bilateral investment treaty (BIT) with Bahrain is the
third such treaty between the United States and a Middle
Eastern country. The Treaty will protect U.S. investment and
assist Bahrain in its efforts to develop its economy by
creating conditions more favorable for U.S. private investment
and thus strengthen the development of its private sector.
The Treaty is fully consistent with U.S. policy toward
international and domestic investment. A specific tenet of U.S.
policy, reflected in this Treaty, is that U.S. investment
abroad and foreign investment in the United States should
receive national treatment. Under this Treaty, the Parties also
agree to customary international law standards for
expropriation. The Treaty includes detailed provisions
regarding the computation and payment of prompt, adequate, and
effective compensation for expropriation; free transfer of
funds related to investments; freedom of investments from
specified performance requirements; fair, equitable, and most-
favored-nation treatment; and the investor's freedom to choose
to resolve disputes with the host government through
international arbitration.
I recommend that the Senate consider this Treaty as soon as
possible, and give its advice and consent to ratification of
the Treaty at an early date.
William J. Clinton.
LETTER OF SUBMITTAL
----------
Department of State,
Washington, April 24, 2000.
The President,
The White House.
The President: I have the honor to submit to you the Treaty
Between the Government of the United States of America and the
Government of the State of Bahrain Concerning the Encouragement
and Reciprocal Protection of Investment, with Annex, signed at
Washington on September 29, 1999. I recommend that this Treaty
with Annex, be transmitted to the Senate for its advice and
consent to ratification.
The bilateral investment treaty (BIT) with Bahrain is the
first such treaty signed between the United States and a member
of the Cooperation Council for the Arab States of the Gulf. The
Treaty is based on the view that an open investment policy
contributes to economic growth. This Treaty will assist Bahrain
in its efforts to develop its economy by creating conditions
more favorable for U.S. private investment and thereby
strengthening the development of its private sector. It is U.S.
policy, however, to advise potential treaty partners during BIT
negotiations that conclusion of such a treaty does not
necessarily result in increases in private U.S. investment
flows.
To date, 31 BITs are in force for the United States--with
Albania, Argentina, Armenia, Bangladesh, Bulgaria, Cameroon,
the Republic of the Congo, the Democratic Republic of the Congo
(formerly Zaire), the Czech Republic, Ecuador, Egypt, Estonia,
Georgia, Grenada, Jamaica, Kazakhstan, Kyrgyzstan, Latvia,
Moldova, Mongolia, Morocco, Panama, Poland, Romania, Senegal,
Slovakia, Sri Lanka, Trinidad & Tobago, Tunisia, Turkey, and
Ukraine. In addition to the Treaty with Bahrain, the United
States has signed, but not yet brought into force, BITS with
Azerbaijan, Belarus, Bolivia, Croatia, El Salvador, Honduras,
Jordan, Lithuania, Mozambique, Nicaragua, Russia, and
Uzbekistan.
The Office of the United States Trade Representative and
the Department of State jointly led this BIT negotiation, with
assistance from the Departments of Commerce, Treasury, and
Energy.
the u.s.-bahrain treaty
The Treaty with Bahrain is based on the 1994 U.S. prototype
BIT and satisfies the U.S. principal objectives in bilateral
investment treaty negotiations:
--All forms of U.S. investment in the territory of Bahrain
are covered.
--Covered investments receive the better of national
treatment or most-favored-nation (MFN) treatment both
while they are being established and thereafter,
subject to certain specified exceptions.
--Specified performance requirements may not be imposed upon
or enforced against covered investments.
--Expropriation is permitted only in accordance with
customary international law standards.
--Parties are obligated to permit the transfer, in a freely
usable currency, of all funds related to a covered
investment, subject to exceptions for specified
purposes.
--Investment disputes with the host government may be brought
by investors, or by their covered investments, to
binding international arbitration as an alternative to
domestic courts.
These elements are further described in the following article-
by-article analysis of the provisions of the Treaty:
Title and Preamble
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 consultations pursuant to Article 8.
Article 1 (Definitions)
Article 1 defines terms used throughout the Treaty.
Company, Company of a Party
The definition of ``company'' is broad, covering all types
of legal entities constituted or organized under applicable
law, and includes corporations, trusts, partnerships, sole
proprietorships, branches, joint ventures, and associations.
The definition explicitly covers not-for-profit entities, as
well as entities that are owned or controlled by the state.
``Company of a Party'' is defined as a company constituted or
organized under the laws of that Party.
National
The Treaty defines ``national'' as a natural person who is
a national of a Party under its own laws. Under U.S. law, the
term ``national'' is broader than the term ``citizen.'' For
example, a native of American Samoa is a national of the United
States, but not a citizen.
Investment, Covered Investment
The Treaty'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.
The Treaty provides an illustrative list of the forms an
investment may take. Establishing a subsidiary is a common way
of making an investment. Other forms that an investment might
take include equity and debt interests in a company;
contractual rights; movable, immovable, intangible, and
intellectual property; and rights conferred pursuant to law,
such as licenses and permits. Investment as defined by the
Treaty generally excludes claims arising solely from trade
transactions, such as a sale of goods across a border that does
not otherwise involve an investment.
The Treaty defines ``covered investment'' as an investment
of a national or company of a Party in the territory of the
other Party. An investment of a national or company is one that
the national or company owns or controls, either directly or
indirectly. Indirect ownership or control could be through
other, intermediate companies or persons, including those of
third countries. Control is not specifically defined in the
Treaty; ownership of over 50 percent of the voting stock of a
company would normally convey control, but in many cases the
requirement could be satisfied by less than that proportion, or
by other arrangements.
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
12.
State Enterprise, Investment Authorization, Investment
Agreement
The Treaty defines ``state enterprise'' as a company owned,
or controlled through ownership interests, by a Party. Purely
regulatory control over a company does not qualify it as a
state enterprise.
The Treaty defines an ``investment authorization'' as an
authorization granted by the foreign investment authority of a
Party to a covered investment or a national or company of the
other Party.
The Treaty defines an ``investment agreement'' as a written
agreement between the national authorities of a Party and a
covered investment or a national or company of the other Party
that (1) grants rights with respect to natural resources or
other assets controlled by the national authorities and (2) the
investment, national, or company relies upon in establishing or
acquiring a covered investment. this definition thus excludes
agreements with subnational authorities (including U.S. States)
as well as agreements arising from various types of regulatory
activities of the national government, including, in the tax
area, rulings, closing agreements, and advance pricing
agreements.
ICSID Convention, Centre, UNCITRAL Arbitration Rules
The ``ICSID Convention,'' ``Centre,'' and ``UNCITRAL
Arbitration Rules'' are explicitly defined to make the text
brief and clear.
Article 2 (Treatment of Investment)
Article 2 contains the Treaty's major obligations with
respect to the treatment of covered investments.
Paragraph 1 generally ensures the better of national or MFN
treatment in both the entry and post-entry phases of
investment. It thus prohibits, outside of exceptions listed in
the Annex, ``screening'' on the basis of nationality during the
investment process, as well as nationality-based post-
establishment measures. For purposes of the Treaty, ``national
treatment'' means treatment no less favorable than that which a
Party accords, in like situations, to investments in its
territory of its own nationals or companies. For purposes of
the Treaty, ``MFN treatment'' means treatment no less favorable
than that which a Party accords, in like situations, to
investments in its territory of nationals or companies of a
third country. The Treaty obliges each Party to provide
whichever of national treatment or MFN treatment is the most
favorable. This is defined by the Treaty as ``national and MFN
treatment.'' Paragraph 1 explicitly states that the national
and MFN treatment obligation will extend to state enterprises
in their provision of goods and services to covered
investments.
Paragraph 2 states that each Party may adopt or maintain
exceptions to the national and MFN treatment standard with
respect to the sectors or matters specified in the Annex.
Further restrictive measures are permitted in each sector. (The
specific exceptions are discussed in the section entitled
``Annex'' below.) In the Annex, Parties may take exceptions
only to the obligation to provide national and MFN treatment;
there are no sectoral exceptions to the rest of the Treaty's
obligations. Finally, in adopting any exception under this
provision, a Party may not require the divestment of a
preexisting covered investment.
Paragraph 2 also states that a Party is not required to
extend to covered investments national and MFN treatment with
respect to procedures provided for in multilateral agreements
concluded under the auspices of the World Intellectual Property
Organization relating to the acquisition or maintenance of
intellectual property rights. This provision clarifies that
certain procedural preferences granted under intellectual
property conventions, such as the Patent Cooperation Treaty,
fall outside the BIT. This exception parallels those in the
Uruguay Round's Agreement on Trade-Related Aspects of
Intellectual Property Rights (TRIPS) and the North American
Free Trade Agreement (NAFTA).
Paragraph 3 sets out a minimum standard of treatment based
on standards found in customary international law. The
obligations to accord ``fair and equitable treatment'' and
``full protection and security'' are explicitly cited, as is
each Party's obligation not to impair, through unreasonable and
discriminatory means, the management, conduct, operation, and
sale or other disposition of covered investments. The general
reference to international law also implicitly incorporates
other fundamental rules of customary international law
regarding the treatment of foreign investment. However, this
provision does not incorporate obligations based on other
international agreements.
Paragraph 4 requires that each Party provide effective
means of asserting claims and enforcing rights with respect to
covered investments.
Paragraph 5 ensures that transparency of each Party's
regulation of covered investments.
Article 3 (Expropriation)
Article 3 incorporates into the Treaty customary
international law standards for expropriation. Article 3 also
includes detailed provisions regarding the computation and
payment of prompt, adequate, and effective compensation.
Paragraph 1 describes the obligations of the Parties with
respect to expropriation and nationalization of a covered
investment. These obligations apply to both direct
expropriation and indirect expropriation through measures
``tantamount to expropriation or nationalization'' and thus
apply to ``creeping expropriations''--a series of measures that
effectively amounts to an expropriation of a covered investment
without taking title.
Paragraph 1 further bars all expropriations or
nationalizations 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 3(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 4 (Compensation for Damages Due to War and Similar Events)
Paragraph 1 entitles investments covered by the Treaty to
national and MFN treatment with respect to any measure relating
to losses suffered to a party's territory owing to war or other
armed conflict, civil disturbances, or similar events.
Paragraph 2, by contrast, creates an unconditional obligation
to pay compensation for such losses when the losses result from
requisitioning or from destruction not required by the
necessity of the situation.
Article 5 (Transfers)
Article 5 protects investors from certain government
exchange controls that limit current and capital account
transfers, as well as limits on inward transfers made by
screening authorities and, in certain circumstances, limits on
returns in kind.
In paragraph 1, each Party agrees to ``permit all transfers
relating to a covered investment to be made freely and without
delay into and out of its territory.'' Paragraph 1 also
provides a list of transfers that must be allowed. The list is
non-exclusive, and is intended to protect flows to both
affiliated and non-affiliated entities.
Paragraph 2 provides that each Party must permit transfers
to be made in a ``freely usable currency'' at the market rate
of exchange prevailing on the date of transfer. ``Freely
usable'' is a term used by the International Monetary Fund; at
present there are five ``freely usable'' currencies: the U.S.
dollar, Japanese yen, German mark, French franc, and British
pound sterling.
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 or a national or company of the other
Party.
Paragraph 4 recognizes that, notwithstanding the
obligations of paragraphs 1 through 3, a Party may prevent a
transfer through the equitable, non-discriminatory, and good
faith application of laws relating to bankruptcy, insolvency,
or the protection of the rights of creditors; securities;
criminal or penal offenses; or ensuring compliance with orders
or judgments in adjudicatory proceedings.
Article 6 (Performance Requirements)
Article 6 prohibits either Party from mandating or
enforcing specified performance requirements as a condition for
the establishment, acquisition, expansion, management, conduct,
or operation of a covered investment. This prohibition
includes, but is not limited to, imposition of any of the
specified performance requirements by means of a commitment or
undertaking in connection with the receipt of a governmental
permission or authorization. The list of prohibited
requirements is exhaustive and covers domestic content
requirements and domestic purchase preferences, the
``balancing'' of imports or sales in relation to exports or
foreign exchange earnings, requirements to export products or
services, technology transfer requirements, and requirements
relating to the conduct of research and development in the host
country. Such requirements are major burdens on investors and
impair their competitiveness.
The last sentence of Article 6 makes clear that a Party
may, however, impose conditions for the receipt or continued
receipt of benefits and incentives.
Article 7 (Entry, Sojourn, and Employment of Aliens)
Paragraph 1 requires each Party to allow, subject to its
laws relating to the entry and sojourn of aliens, the entry
into its territory of the other Party's nationals for certain
purposes related to a covered investment and involving the
commitment of a ``substantial amount of capital.'' This
paragraph serves to render nationals of Bahrain eligible for
treaty-investor visas under U.S. immigration law. It also
affords similar treatment for U.S. nationals entering Bahrain.
The requirement to commit a ``substantial amount of capital''
is intended to prevent abuse of treaty-investor status; it
parallels the requirements of U.S. immigration law.
In addition, paragraph 1(b) prohibits labor certification
requirements and numerical restrictions on the entry of treaty-
investors.
Paragraph 2 requires that each Party allow covered
investments to engage top managerial personnel of their choice,
regardless of nationality. This provision does not require that
such personnel be granted entry into a Party's territory. Such
persons must independently qualify for an appropriate visa for
entry into the territory of the other party. Nor does this
provision create an exception to U.S. equal employment
opportunity laws.
Article 8 (State-State Consultations)
Article 8 provides for prompt consultation between the
Parties, at either Party's request, on any matter relating to
the interpretation or application of the Treaty or to the
realization of the Treaty's objectives. A Party may thus
request consultations for any matter reasonably related to the
encouragement or protection of covered investment, whether or
not a Party is alleging a violation of the Treaty.
Article 9 (Settlement of Disputes Between One Party and a National or
Company of the Other Party)
Article 9 sets forth several means by which disputes
brought against a Party by an investor (specifically, a
national or company of the other Party) may be resolved.
Article 9 procedures apply to an ``investment dispute,''
which is any dispute arising out of or relating to an
investment authorization, an investment agreement, or an
alleged breach of rights conferred, created, or recognized by
the Treaty with respect to a covered investment.
In the event that an investment dispute cannot be settled
amicably, paragraph 2 gives an investor an exclusive (with the
exception in paragraph 3(b) concerning injunctive relief,
explained below) choice among three options to settle the
dispute. These three options are: (1) submitting the dispute or
the courts or administrative tribunals of the Party that is a
party to the dispute; (2) invoking dispute--resolution
procedures previously agreed upon by the national or company
and the host country government; or (3) invoking the dispute-
resolution mechanisms identified in paragraph 3 of Article 9.
Under paragraph 3(a), the investor can submit an investment
dispute to binding arbitration 90 days after the dispute
arises, provided that the investor has not submitted the claim
to a court or administrative tribunal of the Party or invoked a
dispute resolution procedure previously agreed upon. The
investor may choose among the International Centre for
Settlement of Investment Disputes (ICSID) (Convention
Arbitration), the Additional Facility of ICSID (if Convention
Arbitration is not available), ad hoc arbitration using the
Arbitration Rules of the United Nations Commission on
International Trade Law (UNCITRAL), or any other arbitral
institution or rules agreed upon by both parties to the
dispute.
Before or during such arbitral proceedings, however,
paragraph 3(b) provides that an investor may seek, without
affecting its right to pursue arbitration under this Treaty,
interim injunctive relief not involving the payment of damages
from local courts or administrative tribunals of the Party that
is a party to the dispute for the preservation of its rights
and interests. This paragraph does not alter the power of the
arbitral tribunals to recommend or order interim measures they
may deem appropriate.
Paragraph 4 constitutes each Party's consent to the
submission of investment disputes to binding arbitration in
accordance with the choice of the investor.
Paragraph 5 provides that any non-ICSID Convention
arbitration shall take place in a country that is a party to
the United Nations Convention on the Recognition and
Enforcement of Arbitral Awards. This provision facilitates
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
requirement for the enforcement of non-ICSID Convention awards
in the United States. The Convention on the Settlement of
Investment Disputes Act of 1966 (22 U.S.C. 1650-1650a) provides
for the enforcement of ICSID awards.
Paragraph 7 ensures that a Party may not assert as a
defense, or for any other reason, that the investor involved in
the investment dispute has received or will receive
reimbursement for the same damages under an insurance or
guarantee contract.
Paragraph 8 provides that, for the purposes of this
article, the nationality of a company in the host country will
be determined by ownership or control, rather than by place of
incorporation. This provision allows a company that is a
covered investment to bring a claim in its own name.
Article 10 (Settlement of Disputes Between the Parties)
Article 10 provides for binding arbitration of Disputes
between the United States and Bahrain concerning the
interpretation or application of the Treaty that are not
resolved through consultations or other diplomatic channels.
The article specifies various procedural aspects of such
arbitration proceedings, including time periods, selection of
arbitrators, and distribution of arbitration costs between the
Parties. The article constitutes each Party's prior consent to
such arbitration.
Article 11 (Preservation of Rights)
Article 11 clarifies that the Treaty does not derogate from
any obligation a Party might have to provide better treatment
to the covered investment than is specified in the Treaty.
Thus, the Treaty establishes a floor for the treatment of
covered investments. A covered investment may be entitled to
more favorable treatment through domestic legislation, other
international legal obligations, or a specific obligation
(e.g., to provide a tax holiday) assumed by a Party with
respect to that covered investment.
Article 12 (Denial of Benefits)
Article 12(a) preserves the right of each Party to deny the
benefits of the Treaty to a company owned or controlled by
nationals of a non-Party country with which the denying Party
does not have normal economic relations, e.g., a country to
which it is applying economic sanctions. For example, at this
time the United States does not maintain normal economic
relations with, among other countries, Cuba and Libya.
Article 12(b) permits each Party to deny the benefits of
the Treaty to a company of the other Party if the company is
owned or controlled by non-Party nationals and if the company
has no substantial business activities in the Party where it is
established. Thus, the United States could deny benefits to a
company that is a subsidiary of a shell company organized under
the laws of Bahrain if controlled by nationals of a third
country. However, this provision would not generally permit the
United States to deny benefits to a company of Bahrain that
maintains its central administration or principal place of
business in the territory of, or has a real and continuous link
with, Bahrain.
Article 13 (Taxation)
Article 13 excludes tax matters generally from the coverage
of the BIT, on the basis that tax matters should be dealt with
in bilateral tax treaties. However, Article 13 does not
preclude a national or company from bringing claims under
Article 9 that taxation provisions in an investment agreement
or authorization have been violated. In addition, the dispute
settlement provisions of Articles 9 and 10 apply to tax matters
in relation to alleged violations of the BIT's expropriation
article.
Under paragraph 2, a national or company that asserts in a
dispute that a tax matter involves expropriation may submit
that dispute to arbitration pursuant to Article 9(3) only if
(1) the investor has first referred to the competent tax
authorities of both Parties the issue of whether the tax matter
involves an expropriation, and (2) the tax authorities have not
both determined, within 9 months from the time of referral,
that the matter does not involve an expropriation. The
``competent tax authority'' of the United States is the
Assistant Secretary of the Treasury for Tax Policy, who will
make such a determination only after consultation with the
Inter-Agency Staff Coordinating Group on Expropriations.
Article 14 (Measures Not Precluded)
The first paragraph of Article 14 reserves the right of a
Party to take measures that it considers necessary for the
fulfillment of its international obligations with respect to
maintenance or restoration of international peace or security,
as well as those measures it regards as necessary for the
protection of its own essential security interests.
International obligations with respect to maintenance or
restoration of peace or security would include, for example,
obligations arising out of Chapter VII of the United Nations
Charter. Measures permitted by the provision on the protection
of a Party's essential security interests would include
security-related actions taken in time of war or national
emergency. Actions not arising from a state of war or national
emergency must have a clear and direct relationship to the
essential security interests of the Party involved. This Treaty
makes explicit the implicit understanding that measures to
protect a Party's essential security interests are self-judging
in nature, although each Party would expect the provisions to
be applied by the other in good faith.
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 15 (Application to Political Subdivisions and State Enterprises
of the Parties)
Paragraph 1(a) makes clear that the obligations of the
Treaty are applicable to all political subdivisions of the
Parties, such as provincial, State, and local governments.
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
governmental authority. This paragraph is designed to clarify
that the exercise of governmental authority by a state
enterprise must be consistent with a Party's obligations under
the Treaty.
Article 16 (Entry Into Force, Duration, and Termination)
Paragraph 1 stipulates that the Treaty enters into force 30
days after exchange of instruments of ratification. The Treaty
remains in force for a period of 10 years and continues in
force thereafter unless terminated by either Party as provided
in paragraph 2. Paragraph 2 permits a Party to terminate the
Treaty at the end of the initial 10 year period, or at any
later time, by giving 1 year's written notice to the other
Party. Paragraph 1 also provides that the Treaty applies to
covered investments existing at the time of entry into force as
well as to those established or acquired thereafter. The Treaty
does not state an intention by the Parties to apply the
Treaty's provisions retroactively. Thus, under customary
international law, the Treaty does not apply to disputes with
respect to acts or facts which took place before the Treaty
came into force or to any situation which ceased to exist
before the date of entry into force of the Treaty.
Paragraph 3 provides that, if the Treaty is terminated, all
investments that qualified as covered investments on the date
of termination (i.e., 1 year after the date of written notice
of termination) continue to be protected under the Treaty for
10 years from that date as long as these investments qualify as
covered investments. A Party's obligations with respect to the
establishment and acquisition of investments would lapse
immediately upon the date of termination of the Treaty.
Paragraph 4 stipulates that the Annex shall form an
integral part of the Treaty.
Paragraph 5 states that all dates and periods mentioned in
the Treaty are reckoned according to the Gregorian calendar.
The final clause of the Treaty provides that the English
and Arabic language texts are each authentic; however, in the
event of divergence, the English text will prevail. Bahrain
requested that the English text prevail in the event of
divergence, in recognition of the widespread use of the English
language in international commercial transactions in Bahrain.
Annex
U.S. bilateral investment treaties allow for exceptions to
national and MFN treatment, where the Parties' domestic regimes
do not afford national and MFN treatment, or where treatment in
certain sectors or matters is negotiated in and governed by
other agreements. Future derogations from the national
treatment obligations of the Treaty are generally permitted
only in the sectors or matters listed in the Annex, pursuant to
Article 2(2), and must be made on an MFN basis unless otherwise
specified therein.
Under a number of statutes, many of which have a long
historical background, the U.S. federal government or States
may not necessarily treat investments of nationals or companies
of Bahrain as they do U.S. investments or investments from a
third country. Paragraphs 1 and 2 of the Annex list the sectors
or matters subject to U.S. exceptions.
The U.S. exceptions from its national treatment obligation
are: atomic energy; customhouse brokers; licenses for
broadcast, common carrier, or aeronautical radio stations;
COMSAT; subsidies or grants, including but not limited to,
government-supported loans, guarantees, and insurance; State
and local measures exempt from Article 1102 of the North
American Free Trade Agreement pursuant to Article 1108 thereof;
and landing of submarine cables.
The U.S. exceptions from its national and MFN treatment
obligations are: fisheries; air and maritime transport, and
related activities; banking, insurance, securities, and other
financial services; and one-way satellite transmissions of
Direct-to-Home (DTH) and Direct Broadcasting Satellite (DBS)
television services and of digital audio services.
Paragraph 3 of the Annex lists Bahrain's exceptions from
its national treatment obligation, which are: ownership or
control of television and radio broadcasting and other forms of
mass media; fisheries; and initial privatization of exploration
or drilling for crude oil.
Paragraph 4 of the Annex lists Bahrain's exceptions from
its national and MFN treatment obligation, which are: air
transportation; purchase or ownership of land; and until
January 1, 2005, purchase or ownership of shares quoted on the
Bahrain Stock Exchange.
Paragraph 5 of the Annex ensures that national treatment is
granted by each Party in all leasing of minerals or pipeline
rights-of-way on government lands. In so doing, this provision
affects the implementation of the Minerals Lands Leasing Act
(MLLA) (30 U.S.C. 181 et seq.) and 10 U.S.C. 7435, regarding
Naval Petroleum Reserves, with respect to nationals and
companies of Bahrain. The Treaty provides for resort to binding
international arbitration to resolve disputes, rather than
denial of mineral rights or rights to naval petroleum shares to
investors of the other Party, as is the current process under
the statute. U.S. domestic remedies, would, however, remain
available for use in conjunction with the Treaty's provisions.
The MLLA and 10 U.S.C. 7435 direct that a foreign investor
be denied access to leases for minerals on on-shore federal
lands, leases of land within the Naval Petroleum and Oil Shale
Reserves, and rights-of-way for oil or gas pipelines across on-
shore federal lands, if U.S. investors are denied access to
similar or like privileges in the foreign country.
Bahrain's extension of national treatment in these sectors
will fully meet the objectives of the MLLA and 10 U.S.C. 7435.
Bahrain was informed during negotiations that, were it to
include this sector in its list of treatment exemptions, the
United States would (consistent with the MLLA and 10 U.S.C.
7435) exclude the leasing of minerals or pipeline rights-of-way
on Government lands from the national and MFN treatment
obligations of this Treaty.
The listing of a sector or matter in the Annex does not
necessarily signify that domestic laws have entirely reserved
it for nationals. And, pursuant to Article 2(2), any additional
restrictions or limitations that a Party may adopt with respect
to listed sectors or matters may not compel the divestiture of
existing covered investments.
Finally, listing a sector or matter in the Annex exempts a
Party only from the obligation to accord national or MFN
treatment. Both parties are obligated to accord to covered
investments in all sectors--even those listed in the Annex--all
other rights conferred by the Treaty.
The other U.S. Government agencies that participated in
negotiating the Treaty join me in recommending that it be
transmitted to the Senate at an early date.
Respectfully submitted,
Madeleine Albright.