[Senate Treaty Document 110-23]
[From the U.S. Government Publishing Office]



110th Congress 
 2d Session                      SENATE                     Treaty Doc.
                                                                 110-23
_______________________________________________________________________

                                     

 
                     INVESTMENT TREATY WITH RWANDA

                               __________

                                MESSAGE

                                  from

                  THE PRESIDENT OF THE UNITED STATES

                              transmitting

 TREATY BETWEEN THE GOVERNMENT OF THE UNITED STATES OF AMERICA AND THE 
 GOVERNMENT OF THE REPUBLIC OF RWANDA CONCERNING THE ENCOURAGEMENT AND 
 RECIPROCAL PROTECTION OF INVESTMENT, SIGNED AT KIGALI ON FEBRUARY 19, 
                                  2008




 November 20, 2008.--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 Senate


                         LETTER OF TRANSMITTAL

                              ----------                              

                                The White House, November 20, 2008.
To the Senate of the United States:
    I transmit herewith, with a view to receiving the advice 
and consent of the Senate to ratification, the Treaty between 
the Government of the United States of America and the 
Government of the Republic of Rwanda Concerning the 
Encouragement and Reciprocal Protection of Investment, signed 
at Kigali on February 19, 2008. I transmit also, for the 
information of the Senate, the report prepared by the 
Department of State with respect to the Treaty.
    This is the first bilateral investment treaty (BIT) 
concluded between the United States and a sub-Saharan African 
country since 1998. The Treaty will help to promote cross-
border investment by providing legal protections for investors 
of each country for their investments in the other country. The 
Treaty underscores the shared commitment of both countries to 
open investment and trade policies.
    Rwanda has opened its economy, improved its business 
climate, and embraced trade and investment as a means to boost 
economic development and help alleviate poverty. The U.S.-
Rwanda BIT will reinforce these efforts.
    The Treaty is fully consistent with U.S. policy to secure 
protections for U.S. investment abroad and to welcome foreign 
investment in the United States. Under this Treaty, the Parties 
agree to accord national treatment and most-favored-nation 
treatment to investments. They also agree to customary 
international law standards for expropriation and for the 
minimum standard of treatment. The Treaty includes detailed 
provisions regarding the payment of prompt, adequate, and 
effective compensation in the event of expropriation; free 
transfer of funds related to investment; freedom of investment 
from specified performance requirements; prohibitions on 
nationality based restrictions for the hiring of senior 
managers; and the opportunity for investors to resolve disputes 
with a host government through international arbitration. The 
Treaty also includes extensive transparency obligations with 
respect to national laws and regulations and commitments to 
transparency in dispute settlement. The Parties also recognize 
that it is inappropriate to encourage investment by weakening 
or reducing the protections afforded in domestic environmental 
and labor laws.
    I recommend that the Senate give early and favorable 
consideration to the Treaty and give its advice and consent to 
ratification.

                                                    George W. Bush.
                          LETTER OF SUBMITTAL

                              ----------                              

                                       Department of State,
                                      Washington, October 31, 2008.
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 Rwanda Concerning the 
Encouragement and Reciprocal Protection of Investment, signed 
at Kigali on February 19, 2008. I recommend that this Treaty, 
with Annexes, be transmitted to the Senate for its advice and 
consent to ratification.
    This is the first bilateral investment treaty (BIT) 
concluded between the United States and a sub-Saharan African 
country since 1998 (when a BIT was signed with Mozambique). The 
Treaty will provide legal protections for investors that 
underscore the shared commitment of both countries to open 
investment and trade policies.
    Rwanda has opened its economy, improved its business 
climate, and embraced trade and investment as a means to boost 
economic development and help alleviate poverty. The U.S.-
Rwanda BIT will reinforce these efforts.
    The protections afforded by the Treaty include 
nondiscriminatory treatment; the free transfer of investment-
related funds; prompt, adequate, and effective compensation in 
the event of an expropriation; a minimum standard of treatment 
grounded in customary international law; freedom of investment 
from specified performance requirements; prohibitions on 
nationality-based restrictions for the hiring of senior 
managers; and transparency in governance. The BIT also provides 
investors the opportunity to resolve investment disputes with a 
host government through international arbitration. Although 
there are 40 BITs in force to which the United States is a 
party, this Treaty with Rwanda is only the second concluded on 
the basis of the 2004 U.S. model BIT.
    An overview of key provisions of the U.S.-Rwanda BIT is 
enclosed.
    The Department of State and the Office of the U.S. Trade 
Representative jointly led the negotiation of this BIT, with 
the participation of the Departments of Commerce and the 
Treasury. These agencies join me in recommending that it be 
transmitted to the Senate at an early date.
    Respectfully submitted.
                                                  Condoleezza Rice.
    Enclosure: As stated.

              Overview of the United States-Rwanda Treaty

    The Bilateral Investment Treaty (BIT) with Rwanda was 
signed by the United States and Rwanda on February 19, 2008. 
The following overview summarizes key provisions of the Treaty, 
and identifies provisions that vary materially from the 2004 
U.S. Model BIT (Model).


                     SECTION A--GENERAL PROVISIONS


Definitions, Scope and Coverage (Articles 1, 2)
    The Treaty defines an ``investment'' in broad terms as an 
asset that is directly or indirectly controlled by an investor 
and has characteristics such as the expectation of profit, the 
assumption of risk by the investor, or the commitment of 
capital. The definition of investment provides an illustrative 
list of different types of investments. In addition, in a 
footnote to the definition of ``investment'' not present in the 
Model, the United States and Rwanda agreed to clarify that, 
where an enterprise does not have the characteristics of an 
investment, that enterprise is not an investment regardless of 
the form it may take. The Treaty applies generally to measures 
of either the United States or Rwanda, hereinafter referred to 
as the ``Parties'' or, individually, as a ``Party,'' relating 
to investors of one Party and to their investments in the 
territory of the other Party (defined as ``covered 
investments''). A ``covered investment'' includes investments 
that exist on the date the Treaty enters into force and those 
that are established, acquired, or expanded thereafter.
National and Most-Favored-Nation Treatment (Articles 3, 4)
    The Treaty protects investors of a Party and their covered 
investments from discriminatory measures by the other Party 
during the full life-cycle of an investment, including the 
establishment phase, when investors are attempting to make an 
investment. Each Party commits to provide to investors of the 
other Party and to their covered investments treatment no less 
favorable than that which it provides, in like circumstances, 
to its own investors or to investors from any third country and 
their investments.

Minimum Standard of Treatment (Article 5, Annex A)
    Article 5 of the Treaty establishes a minimum standard of 
treatment that each Party owes to covered investments. The 
minimum standard of treatment is defined as ``treatment in 
accordance with customary international law, including fair and 
equitable treatment and full protection and security.'' ``Fair 
and equitable treatment'' includes the obligation not to deny 
justice in criminal, civil, or administrative adjudicatory 
proceedings in accordance with the principle of due process 
embodied in the principal legal systems of the world. The 
obligation to provide ``full protection and security'' requires 
a host country to provide the level of police protection 
required under customary international law. Article 5 also 
states that a determination that there has been a breach of 
another provision of the Treaty or of a separate international 
agreement does not establish that there has been a breach of 
the Treaty's minimum standard of treatment obligation. The 
Article further requires that each Party must accord to covered 
investments and to investors of the other Party non-
discriminatory treatment with respect to measures adopted in 
relation to losses suffered by investments due to armed 
conflict or civil strife. Finally, in the event that an 
investor suffers losses as a result of a Party's requisition or 
unnecessary destruction of its covered investment, restitution 
and/or compensation must be paid. Annex A sets forth the shared 
understanding of the Parties regarding the meaning of 
``customary international law'' in Article 5 (and in Annex B on 
Expropriation) and clarifies that the customary international 
law minimum standard of treatment of aliens owed under Article 
5 refers to all customary international law principles that 
protect the economic rights and interests of aliens.

Expropriation and Compensation (Article 6, Annexes A and B)
    Article 6 incorporates into the Treaty the customary 
international law standard for lawful expropriation, providing 
that neither Party may expropriate property unless it does so 
for a public purpose, in a non-discriminatory manner, in 
accordance with due process of law, and accompanied by prompt, 
adequate, and effective compensation. Article 6 addresses both 
direct expropriation, when a government actually transfers 
title or seizes an investment, and indirect expropriation, when 
a governmental action or series of actions has an effect 
equivalent to direct expropriation.
    Annex B clarifies the shared understanding of the Parties 
with respect to Article 6 as to how to determine whether an 
expropriation has occurred. The Annex states that a Party's 
actions can only be considered an expropriation if they 
interfere with a tangible or intangible property interest or 
right in an investment. With respect to indirect expropriation, 
the Annex endorses a case-by-case, fact-based approach, and 
lists three factors, among others, that tribunals must consider 
in determining whether an indirect expropriation has occurred: 
(1) the adverse economic impact of the government action, (2) 
the extent of government interference with reasonable 
investment-backed expectations, and (3) the character of the 
government action. The analytical approach adopted in Annex B 
is adapted from the seminal U.S. Supreme Court case relating to 
regulatory taking, Penn Central Transportation Co. v. New York 
City, 438 U.S. 104 (1978), and is consistent with customary 
international law. Finally, Annex B observes that, except in 
rare circumstances, non-discriminatory regulatory actions 
designed and applied to protect legitimate public welfare 
objectives do not constitute indirect expropriations.

Transfers (Article 7)
    The Treaty's free transfers obligation requires that a 
Party permit capital and other transfers related to a covered 
investment to be made freely and without delay both into and 
out of its territory. Additionally, a Party must permit 
transfers to be made in a ``freely usable currency,'' as 
designated by the International Monetary Fund, at the market 
rate prevailing at the time of the transfer. Parties may 
prevent transfers through the equitable and non-discriminatory 
application of certain laws, including those relating to 
criminal offenses, the regulation of financial markets, and 
compliance with orders or judgments in judicial or 
administrative proceedings.

Performance Requirements (Article 8)
    Article 8 prohibits the imposition by Parties of several 
requirements relating to the performance of investments, 
including a requirement to achieve a given level of exports or 
domestic content or a requirement linking the value of imports 
or domestic sales by an investment to the level of its export 
or foreign exchange earnings. The Article also prohibits 
Parties from offering advantages, such as a tax holiday, in 
exchange for a more limited set of performance requirements. In 
addition, so as not to place U.S. and Rwandan investors at a 
competitive disadvantage, the disciplines that Article 8 
imposes upon performance requirements also apply to all 
investments in the territory of a Party, including those owned 
or controlled by host-country investors or by investors of a 
non-Party. The Article also clarifies that the prohibitions in 
paragraphs 1 and 2 only apply to the requirements specifically 
enumerated in those paragraphs.
    In addition, the Parties agreed to two footnotes not 
present in the Model. First, the Parties agreed to clarify that 
the enforcement of a commitment or undertaking to use a 
particular technology, a production process, or other 
proprietary knowledge is not, by itself, inconsistent with the 
performance requirement relating to transfers of technology, a 
production process, or other proprietary knowledge. Second, the 
Parties agreed to clarify that nothing in the paragraph 
disciplining performance requirements shall be construed to 
prevent a Party from imposing or enforcing a requirement or 
enforcing a commitment or undertaking to train workers in its 
territory, provided that such training does not require the 
transfer of a particular technology, a production process, or 
other proprietary knowledge to a person in its territory.

Senior Management and Boards of Directors (Article 9)
    The Treaty prohibits measures requiring that persons of any 
particular nationality be appointed to senior management 
positions in a covered investment. A country may require that a 
majority of the board of directors of a covered investment be 
of a particular nationality, however, or that a director be a 
resident of the host country, so long as such requirements do 
not materially impair an investor's control over its 
investment.

Publication of Laws and Decisions Respecting Investment (Article 10)
    Article 10 seeks to promote transparency in the legal 
framework governing investment. It requires the Parties to 
ensure that laws, regulations, procedures, administrative 
rulings of general application, and adjudicatory decisions that 
relate to any matter covered by the Treaty are promptly 
published or otherwise made publicly available.
Transparency in Lawmaking and Administrative Proceedings (Article 11)
    Under Article 11, each Party is obligated, to the extent 
possible, to publish in advance any laws, regulations, 
procedures, or administrative rulings of general application 
with respect to matters covered by the Treaty that the Party 
proposes to adopt, and to provide interested persons and the 
other Party a reasonable opportunity to comment on the proposed 
measures. Article 11 includes detailed provisions concerning 
the notification of information about government actions and 
the character of administrative proceedings, including review 
and appeal processes.

Environment and Labor (Articles 12, 13)
    In Articles 12 and 13, the Parties acknowledge that it 
would be inappropriate to encourage investment by weakening or 
reducing the protections afforded in domestic environmental and 
labor laws, respectively. Both Articles also provide that a 
Party may request consultations with the other Party if it 
considers that the other Party has offered such an 
encouragement. Article 12 provides that nothing in the Treaty 
shall be construed to prevent a Party from adopting, 
maintaining, or enforcing any measure otherwise consistent with 
the Treaty that it considers appropriate to ensure that 
investment activity in its territory is conducted in a manner 
sensitive to environmental concerns.

Non-Conforming Measures (Article 14, Annexes I, II and III)
    Article 14 establishes the framework for the Treaty's 
Annexes of non-conforming measures (NCMs). In these Annexes, 
each Party lists existing measures to which any or all of four 
key obligations of the Treaty do not apply, and sectors or 
activities in which each Party reserves the right to adopt 
future measures to which any or all of those obligations will 
not apply. The Article specifies that a Party may list measures 
that do not conform to the following four obligations: National 
Treatment (Article 3), Most-Favored-Nation Treatment (Article 
4), Performance Requirements (Article 8), and Senior Management 
and Boards of Directors (Article 9). The Parties list existing 
NCMs maintained at either the central or regional level of 
government in Annexes I and III. Annex III is reserved for 
existing financial services NCMs. The Parties list the sectors 
or activities in which they reserve the right to adopt future 
NCMs in Annex II. The Parties negotiated the content of the 
Annexes in conjunction with the negotiation of the Treaty text, 
and the Annexes are an integral part of the Treaty.
    Article 14 includes several other provisions. It makes 
clear that the four obligations noted above do not apply to 
existing NCMs maintained at local levels of government. The 
Article also prohibits a Party from adopting, in a sector or 
activity covered by Annex II, any future measure that requires 
an investor of the other Party, by reason of its nationality, 
to sell or otherwise dispose of an investment. It exempts 
application of the national treatment and most-favored nation 
treatment obligations to measures covered by an exception to, 
or derogation from, the obligations of the World Trade 
Organization Agreement on Trade-Related Aspects of Intellectual 
Property Rights. It also specifies that Articles 3 (National 
Treatment), 4 (Most-Favored-Nation Treatment), and 9 (Senior 
Management and Boards of Directors) do not apply to government 
procurement or to grants or subsidies provided by a Party.
    Because the Parties' NCMs are set out in detail in Annexes 
I, II and III, the following list merely identifies the 
sectors, subsectors or activities listed in each Party's Annex 
entries. The Annexes should be consulted for a complete 
description of each NCM.

Annex I
    Rwanda: Differential minimum capital requirements for 
investment registration; and registration requirements for non-
profit enterprises.
    United States: Atomic Energy; Mining; Air Transportation; 
Customs Brokers; Radiocommunications Licenses; and restrictions 
on securities registration and OPIC insurance eligibility.

Annex II
    Rwanda: Preferences for socially or economically 
disadvantaged communities and differential treatment pursuant 
to existing international treaties.
    United States: Radio/Satellite Communications, Cable 
Television, Social Services, Minority Affairs, measures 
relating to U.S.-flagged maritime vessels, and differential 
treatment pursuant to existing international treaties.

Annex III
    Rwanda: Insurance.
    United States: Financial Services/Banking, Insurance, and 
general Financial Services.

Special Formalities and Information Requirements (Article 15)
    Article 15 allows a Party to adopt or maintain measures 
that prescribe special formalities in connection with covered 
investments, such as investor residency or incorporation 
requirements, so long as such formalities do not materially 
impair the Treaty's protections. The Article also provides 
that, notwithstanding the Treaty's non-discrimination 
obligations (Articles 3 and 4), a Party may require an investor 
of the other Party, or its covered investment, to provide 
information relating to the investment solely for informational 
or statistical purposes, so long as the Party imposing the 
requirement protects confidential business information from 
disclosure.

Non-Derogation (Article 16)
    Article 16 stipulates that the Treaty does not derogate 
from other obligations or laws of a Party that entitle an 
investor to more favorable treatment than that accorded by the 
Treaty.

Denial of Benefits (Article 17)
    Article 17 establishes that a Party may deny the benefits 
of the Treaty to an investor of the other Party that is an 
enterprise of the other Party, and to its investments, if 
persons of a third country own or control the enterprise and 
the denying Party either (1) has no diplomatic relations with 
the third country; or (2) adopts or maintains measures, such as 
foreign policy sanctions, with respect to the third country or 
to a person of the third country that prohibit transactions 
with the enterprise or that would be violated or circumvented 
if the benefits of the Treaty were accorded to the enterprise 
or to its investments. Article 17 also establishes that a Party 
may deny the benefits of the Treaty to an investor of the other 
Party that is an enterprise of the other Party, and to its 
investments, if the enterprise has no substantial business 
activities in the territory of the other Party and persons of a 
third country, or of the denying Party, own or control the 
enterprise.

Essential Security (Article 18)
    Article 18 states that nothing in the Treaty may be 
construed to preclude a Party from applying measures that it 
considers necessary either to protect its own essential 
security interests or to fulfill its obligations with respect 
to the maintenance or restoration of international peace and 
security. The Treaty makes explicit the implicit understanding 
that measures to protect a Party's essential security interests 
are self-judging in nature, although each Party would expect 
the provisions to be applied by the other in good faith. 
Article 18 also states that the Treaty does not require a Party 
to provide access to information if it determines that such 
disclosure would be contrary to its essential security 
interests.

Disclosure of Information (Article 19)
    Article 19 establishes that nothing in the Treaty may be 
construed to require a Party to provide access to confidential 
information, the disclosure of which would impede law 
enforcement, would otherwise be contrary to the public 
interest, or would prejudice the legitimate commercial 
interests of particular enterprises.

Financial Services (Article 20)
    Article 20 includes two provisions that relate to the 
regulation of financial markets. Paragraph 1, the prudential 
exception, specifies that the Treaty does not prohibit a Party 
from adopting or maintaining measures relating to financial 
services for prudential reasons, including for the protection 
of depositors, investors, policy holders, or persons to whom a 
fiduciary duty is owed by a financial services supplier, or to 
ensure the integrity and stability of the financial system. 
Paragraph 2, the monetary and exchange rate policy exception, 
establishes that no provision of the Treaty applies to non-
discriminatory measures of general application that may be 
taken by a Party's central bank or monetary authority pursuant 
to monetary and related credit policies or exchange rate 
policies.
    Article 20 modifies the standard investor-State dispute-
settlement provisions of the Treaty for disputes in which a 
Party invokes one of the exceptions in paragraphs 1 or 2 as a 
defense against an investor claim. In the event that a Party 
invokes one of the exceptions, it must within 120 days of the 
date the investor's claim is submitted to arbitration submit to 
the competent financial authorities of both Parties a written 
request for a joint determination on the issue of whether and 
to what extent one of the exceptions is a valid defense to the 
investor's claim. If the competent financial authorities agree 
that the defense is valid, the investor's claim will be barred 
from arbitration. If the competent financial authorities fail 
to reach a determination by the end of the 120-day period, the 
tribunal will decide the issue. Article 20 also includes 
special procedures for the selection of arbitrators with 
expertise on financial matters. The Article also provides that 
the Party that is not a party to the dispute may make oral or 
written submissions to the tribunal regarding the issue of 
whether and to what extent paragraph 1 or 2 is a valid defense 
to the claim. If it fails to make such a submission, the non-
disputing Party shall be presumed, for purposes of the 
arbitration, to take a position not inconsistent with that of 
the respondent.
    Paragraph 4 of Article 20 modifies the State-State dispute-
settlement provisions of Section C of the Treaty for disputes 
in which the competent financial authorities of one Party 
provide written notice to their counterparts in the other Party 
that the dispute involves financial services. In the event that 
such notice is provided, the competent financial authorities of 
both Parties must conduct consultations regarding the dispute, 
and report the result of their consultations to the Parties, 
which either Party may transmit to the tribunal.
    Article 20 also contains changes that reflect an evolution 
in U.S. practice regarding the Financial Services Article since 
the U.S. model was last updated in 2004. In paragraph 3, 
provisions on the financial services expertise of arbitrators 
have been modified to clarify that they refer to the particular 
sector of financial services in which the dispute arises. New 
subparagraph 3(c)(iii) clarifies that the tribunal shall draw 
no inference regarding the application of paragraph 1 or 2 from 
the fact that the competent financial authorities have not made 
a determination as described in subparagraph (a). New 
subparagraph 3(e) enables the respondent, within a specified 
period of time, to request that the tribunal ``address and 
decide the issue or issues left unresolved by the competent 
financial authorities as referred to in subparagraph (c) prior 
to deciding the merits of the claim for which paragraph 1 or 2 
has been invoked by the respondent as a defense.'' Further, it 
provides that failure to make such a request ``is without 
prejudice to the right of the respondent to invoke paragraph 1 
or 2 as a defense at any appropriate phase of the 
arbitration.'' New paragraph 8 clarifies that the Treaty does 
not prevent a Party from taking measures relating to financial 
institutions that are necessary to secure compliance with laws 
or regulations that are not inconsistent with the Treaty, such 
as measures relating to the prevention of deceptive and 
fraudulent practices.
    The Rwanda BIT provides significant added protection to the 
financial services industry when compared to the U.S.-Uruguay 
BIT by ensuring that financial services films, like all other 
films, can bring discrimination-based claims in investor-state 
arbitration.

Taxation (Article 21)
    Article 21 provides that nothing in the Treaty, other than 
what is provided in the Article, applies to taxation measures. 
In a departure from the Model, the Parties agreed that Articles 
3 (National Treatment) and 4 (Most-Favored-Nation Treatment) 
shall apply to all taxation measures, other than those relating 
to direct taxes (such as taxes on income, capital gains, and 
inheritances). This provision, which employs language used in 
U.S. Free Trade Agreements and the U.S.-Uruguay BIT, further 
restricts the coverage of Articles 3 and 4 with respect to 
several other taxation-related measures, including any non-
conforming aspects of existing taxation measures.
    Article 21 also provides that a claimant that asserts that 
a tax matter involves expropriation may submit that claim to 
arbitration under Section B only if (1) the claimant 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 180 
days from the time of referral, that the matter does not 
involve an expropriation. Furthermore, Article 21 specifies 
that the obligation in Article 8, not to condition the receipt 
of an advantage on certain performance requirements, will apply 
to the use of a taxation measure as an advantage. Finally, 
Article 21 establishes that nothing in the Treaty will affect 
the rights and obligations of either Party under a tax 
convention, and that in the event of any inconsistency between 
the Treaty and a tax convention, the convention shall prevail 
to the extent of the inconsistency.

Entry into Force, Duration, and Termination (Article 22)
    Article 22 specifies that the Treaty will remain in force 
for ten years after its entry into force and will continue in 
force unless terminated by a Party. A Party can terminate the 
Treaty anytime after ten years, so long as it provides one 
year's advance notice to the other Party. If the Treaty is 
terminated, all obligations will continue to apply for a period 
of ten years to covered investments established or acquired 
prior to the date of termination.
    Paragraph 4, a departure from the Model, provides that, on 
the request of either Party, the Parties shall consult promptly 
to discuss any matters relating to the interpretation or 
application of this Treaty or to the realization of the 
objectives of this Treaty. Paragraph 4 further clarifies that 
the Parties may agree, in writing, to amend this Treaty, and 
that any such amendment shall enter into force 30 days after 
the date the Parties exchange instruments of ratification, and 
shall remain in force so long as this Treaty remains in force.


              SECTION B--INVESTOR-STATE DISPUTE SETTLEMENT


Submitting Investor Claims to Arbitration (Articles 23-27)
    Article 24 provides a mechanism for investors to submit to 
arbitration a claim that a Party has breached an obligation 
under Articles 3 through 10 of the Treaty, an investment 
agreement, or an investment authorization. An ``investment 
agreement'' is defined in the Treaty as a written agreement 
between a national authority of a Party and a covered 
investment or an investor of the other Party, on which the 
investment or the investor relies in establishing or acquiring 
a covered investment other than the written agreement itself 
that grants rights to the investment or the investor with 
respect to natural resources, the supply of public services, or 
infrastructure projects. The Treaty defines an ``investment 
authorization'' as an authorization that the foreign investment 
authority of a Party grants to a covered investment or to an 
investor of the other Party.
    Article 24 specifies that an investor of a Party may submit 
two types of claims: a claim on behalf of itself and a claim on 
behalf of an enterprise of the other Party that the investor 
owns or controls directly or indirectly. In both cases, the 
claimant must prove a breach of an obligation under Articles 3 
through 10 of Section A, of an investment agreement, or of an 
investment authorization and that the claimant or the 
enterprise, as the case may be, has incurred loss or damage as 
a result of the breach.
    Under paragraph 3 of Article 24, an investor may seek 
arbitration of a claim under several potential mechanisms, 
including the Convention on the Settlement of Investment 
Disputes Between States and Nationals of Other States (known as 
the ``ICSID Convention,'' after the International Centre for 
Settlement of Investment Disputes), the Additional Facility of 
ICSID, the arbitration rules of the United Nations Commission 
on International Trade Law (UNCITRAL), or any other mutually 
agreed arbitral institution or rules. The rules of the chosen 
arbitral mechanism will govern the arbitration except to the 
extent modified by the Treaty. Article 24 also establishes that 
a claim may not be submitted to arbitration until six months 
have elapsed since the events giving rise to the claim. In 
addition, a claimant must deliver to the respondent Party a 
written notice of its intent to submit the claim at least 90 
days before submitting a claim to arbitration. The notice of 
intent must identify the provision or provisions of the Treaty 
or investment agreement or investment authorization alleged to 
have been breached and the approximate amount of damages 
claimed.
    To ensure that a Party cannot block arbitration by 
withholding its consent, Article 25 expressly states that the 
Parties consent to the submission of a claim to arbitration and 
that this consent will satisfy the consent requirements of the 
principal conventions relating to the arbitration of investment 
disputes.
    Article 26 establishes a statute of limitations on arbitral 
claims by requiring that they be submitted no more than three 
years after the date that a claimant first acquired, or should 
have acquired, knowledge of an alleged breach and knowledge 
that the claimant has incurred loss or damage. Article 26 also 
specifies that no claim may be submitted to arbitration under 
Section B unless the claimant or, in the event a claimant makes 
a claim on behalf of an enterprise that it owns or controls, 
the enterprise waives in writing the right to initiate or 
continue any proceedings relating to the disputed measure in a 
court or administrative tribunal of either Party or in other 
dispute-settlement mechanisms. This Article thus generally 
permits investors to pursue other legal remedies during the 
three-year limitations period. After arbitration is initiated 
under Section B of the Treaty, however, all other legal action 
must be discontinued (except for actions for interim injunctive 
relief that do not involve monetary damages and that are 
brought for the sole purpose of preserving a claimant's rights 
during arbitration).
    Article 27 provides for the establishment of three-member 
arbitral tribunals, with one member appointed by each disputing 
party and a presiding arbitrator appointed by agreement between 
them. If, within 75 days of the submission of a claim to 
arbitration, one of the disputing parties has failed to appoint 
an arbitrator, or the two disputing parties have failed to 
agree on a presiding arbitrator, arbitrators may be named by 
the ICSID Secretary-General.

Conduct of Investor-State Arbitration (Articles 28-33)
    Article 28 includes a number of important provisions 
relating to the conduct of arbitral proceedings. To ensure the 
enforceability of arbitral awards, Article 28 provides that, 
unless otherwise agreed, arbitrations must take place in a 
country that is a party to the United Nations Convention on the 
Recognition and Enforcement of Foreign Arbitral Awards, known 
as the ``New York Convention.'' The Article authorizes a Party 
that is not involved in a dispute to make oral or written 
submissions to the tribunal on questions of interpretation of 
the Treaty, and authorizes tribunals to accept amicus curiae 
submissions from persons or entities that are not involved in 
the dispute. Article 28 also includes provisions that permit a 
tribunal to decide as a preliminary question whether an 
investor has made a claim that, as a matter of law, falls 
within the scope of the Treaty and whether the tribunal has 
jurisdiction. Upon written request of the respondent Party, the 
Tribunal shall answer these questions on an expedited basis 
within 150 days or, if a hearing is requested, within 180 days 
of receipt of the request. Tribunals are also authorized to 
award costs and attorneys' fees in connection with the 
submission of a frivolous claim or objection.
    In addition, Article 28 authorizes tribunals to order 
interim measures of protection to preserve the rights of a 
disputing party or to ensure that the tribunal's jurisdiction 
is made fully effective. Such measures may include an order to 
preserve evidence in the control of a disputing party. A 
tribunal cannot, however, order attachment of assets or enjoin 
a Party from applying any measure that is the subject of a 
dispute.
    Finally, Article 28 requires a tribunal, at the request of 
a disputing party, to issue an interim decision or award to the 
disputing parties and to the non-disputing Party, after which 
the disputing parties will have 60 days within which they may 
submit to the tribunal written comments on the interim decision 
or award. The tribunal must issue a final decision or award no 
later than 45 days after the expiration of the 60-day comment 
period. The Parties also agreed in Article 28 that, if a 
separate multilateral agreement enters into force between the 
Parties that establishes an appellate body for purposes of 
reviewing awards by investor-State arbitral tribunals, the 
Parties will seek to reach an agreement under which that 
appellate body would review awards rendered under Section B of 
the Treaty. In Annex D, the Parties have agreed to consider 
within three years after the Treaty's entry into force the 
possibility of establishing a bilateral appellate body or 
similar mechanism to review arbitral awards rendered under the 
Treaty.
    Article 29 specifies that all substantive documents 
submitted to or issued by a tribunal, with the exception of 
certain proprietary or other confidential information, shall be 
made available to the public. This Article also requires that 
arbitral proceedings be open to the public, subject to 
logistical arrangements agreed to by a tribunal in consultation 
with the disputing parties, and sets out detailed procedures 
for the protection from disclosure of any protected information 
that is submitted to a tribunal. Article 29 also provides that 
nothing in Section B of the Treaty requires a respondent Party 
to withhold from the public information required to be 
disclosed by its laws.
    Article 30 provides that, in the case of a claim of a 
breach of an obligation of Section A of the Treaty, an arbitral 
tribunal must decide the dispute in accordance with the Treaty 
and applicable rules of international law. In the case of an 
alleged breach of an investment agreement or investment 
authorization, the tribunal must apply the rules of law 
specified in the agreement or authorization or other rules to 
which the disputing parties have otherwise agreed. If no rules 
of law have been specified or agreed to in the investment 
agreement or investment authorization, the tribunal is 
instructed to apply the domestic law of the respondent Party 
and applicable rules of international law. Article 30 further 
provides that a joint declaration by the Parties concerning the 
interpretation of a provision of the Treaty will be binding on 
a tribunal, and any decision or award issued by a tribunal must 
be consistent with the joint declaration. Under Article 31, a 
respondent Party's defense that an alleged breach falls within 
the scope of a reservation set forth in one of its Annexes of 
non-conforming measures must, at the Party's request, be 
referred to the Parties for their consideration. Any decision 
the Parties make on the issue will be binding on a tribunal. If 
the Parties fail to issue such a decision within 60 days, the 
question is referred back to the tribunal.
    Article 32 permits tribunals, on their own initiative or at 
the request of a disputing party, to seek advice from experts 
on environmental, health, safety, or other scientific matters 
at issue in a dispute. Article 33 sets out detailed procedures 
for the consolidation of investor claims that have a question 
of law or fact in common and arise out of the same events or 
circumstances. The Article provides for the establishment of a 
special three-member tribunal to consider whether it may assume 
jurisdiction over, or refer to a previously constituted 
tribunal, all or part of one or more such claims.

Awards (Article 34)
    Article 34 authorizes a tribunal, when it makes a final 
award against a respondent Party, to award money damages, 
restitution of property, or a combination of the two. Awards of 
restitution must offer a respondent the alternative of paying 
damages. No punitive damages may be awarded. In the event of an 
award in response to a claim submitted by an investor on behalf 
of an enterprise that it owns or controls, restitution of 
property or monetary damages must be provided to the enterprise 
and the award must specify that it is made without prejudice to 
any right that a person may have in the award under applicable 
domestic law. Article 34 also stipulates that a tribunal award 
will have no binding force except between the disputing parties 
and in respect of the particular case.
    Article 34 also addresses the enforcement of arbitral 
awards. It requires disputing parties to comply with awards 
without delay. Enforcement proceedings may be delayed in the 
event that a disputing party initiates revision or annulment 
proceedings under the ICSID Convention or revision, set aside, 
or annulment proceedings under ICSID Additional Facility Rules 
or UNCITRAL Arbitration Rules. If a respondent fails to comply 
with a final award, the non-disputing Party may ask a State-
State arbitral panel to determine whether the respondent's 
failure to comply with the award is inconsistent with the 
Treaty and to recommend that the respondent comply. Such a 
State-State proceeding would be without prejudice to other 
available remedies.


               SECTION C--STATE-STATE DISPUTE SETTLEMENT


    Article 37 provides that any dispute between the Parties 
concerning the interpretation or application of the Treaty not 
resolved through consultations or other diplomatic channels 
shall be submitted on the request of either Party to binding 
arbitration. Unless the Parties otherwise agree, the 
arbitration shall be governed by UNCITRAL Arbitration Rules. 
State-State arbitration cannot be established for matters 
arising under Articles 12 (Environment) and 13 (Labor).



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