[Senate Executive Report 104-12]
[From the U.S. Government Publishing Office]
104th Congress Exec. Rept.
SENATE
2d Session 104-12
_______________________________________________________________________
TREATY BETWEEN THE UNITED STATES OF AMERICA AND THE REPUBLIC OF BELARUS
CONCERNING THE ENCOURAGEMENT AND RECIPROCAL PROTECTION OF INVESTMENT,
WITH ANNEX, PROTOCOL AND RELATED EXCHANGE OF LETTERS
_______
June 20, 1996.--Ordered to be printed
_______________________________________________________________________
Mr. Helms, from the Committee on Foreign Relations, submitted the
following
R E P O R T
[To accompany Treaty Doc. 103-36]
The Committee on Foreign Relations to which was referred
the Treaty Between the United States of America and the
Republic of Belarus Concerning the Encouragement and Reciprocal
Protection of Investment, with Annex, Protocol, and Related
Exchange of Letters, signed at Minsk on January 15, 1994,
having considered the same, reports favorably thereon with one
declaration, and recommends that the Senate give its advice and
consent to ratification thereof subject to the one declaration
as set forth in this report and the accompanying resolution of
ratification.
I. Purpose
The principal purposes for entering into a bilateral
investment treaty (BIT) are to: protect U.S. investment abroad
where U.S. investors do not have other agreements on which to
rely for protection, encourage adoption of market-oriented
domestic policies that treat private investment fairly, and
support the development of legal standards consistent with the
objectives of U.S. investors. The BIT, therefore, is intended
to ensure that United States direct investment abroad and
foreign investment in the United States receive fair, equitable
and nondiscriminatory treatment.
II. Background
The proposed treaty together with the proposed annex,
protocol, and related exchange of letters was signed on January
15, 1994. No bilateral investment treaty is currently in force
between the United States and Belarus.
The proposed treaty and protocol were transmitted to the
Senate for advice and consent to ratification on September 6,
1994 (see Treaty Doc. 103-36). The Committee on Foreign
Relations held a public hearing on the proposed treaty together
with the proposed annex and protocol on November 30, 1995.
III. Summary
a. general
Bilateral investment treaties (BITs) are the result of a
treaty program begun in 1982 as a successor to the Friendship,
Commerce, and Navigation Treaties that formerly set the
framework for U.S. trade and investment with foreign countries.
The BIT is based on a U.S. model treaty.
All parties must agree to the basic guarantees of the model
before the United States will enter into negotiations on a
treaty. The six basic guarantees contained in the model are:
investors receive the better of national or most
favored nation status;
expropriation of private property is limited and a
remedy exists;
investors have the right to transfer funds into and
out of the country without delay using a market rate of
exchange;
inefficient and trade distorting practices such as
performance requirements are prohibited;
investment disputes may be submitted to international
arbitration; and
top managerial personnel of an investor's choice may
be engaged regardless of nationality.
Since 1982, the United States has signed 37 BITs, and the
Senate has given its advice and consent to the ratification of
24 BITs. Twenty-two BITs are currently in force. The Senate has
ratified two treaties that have not entered into force with
Russia, where the Duma has failed to ratify, and with Ecuador,
which was ratified by both countries, but the U.S. is delaying
the exchange of instruments until Ecuador has fully implemented
its obligations under the U.S.-Ecuador intellectual property
rights agreement. There are currently 12 on-going negotiations
for BITs with other countries.
b. comparison to the model
The Treaty Between the United States of America and the
Republic of Belarus Concerning the Encouragement and Reciprocal
Protection of Investment, with Annex, Protocol, and Related
Exchange of Letters (Treaty Doc. 103-36) (BIT), is based on the
United States 1992 Model Bilateral Investment Treaty (Model).
The following is an analysis of the major provisions of the
treaty and a comparison with the 1992 model, which served as
the foundation for the negotiation of the treaty.
Preamble.--The Preamble of the BIT establishes the goals of
the treaty to include: greater economic cooperation,
stimulation of the flow of private capital and economic
development, maximization of effective utilization of economic
resources and the improvement of living standards, promoting
respect for internationally recognized worker rights, and
maintenance of health, safety and environmental measures of
general application. The goals outlined are not legally binding
but may be used to assist in interpreting the Treaty and in
defining the scope of Party-to-Party consultation procedures
pursuant to Article VIII.
Article I (definitions and general provisions.)--The BIT
follows the Model with respect to definitions except that the
BIT adds definitions for ``state enterprise'' and
``delegation.'' A ``state enterprise'' is defined as ``an
enterprise owned, or controlled through ownership interests, by
a Party'' (Art. I:1(f)). A ``delegation'' is defined to include
``a legislative grant, and a government order, directive, or
other act transferring to a state enterprise or monopoly, or
authorizing the exercise by a state enterprise or monopoly of,
governmental authority (Art. I:1(g)). The Administration
informs staff these provisions were added in order to clarify
and extend the requirements of the treaty with respect to state
enterprises because of the dominant role of state enterprises
in the Belarusian economy. The negotiating agencies have
informed staff that they believe this addition gives U.S.
investors added protection. Similar language is contained in
the NAFTA.
Also, the BIT adds ``partnership interests'' to the
illustrative list of forms of equity participation explicitly
mentioned in the model (Art. I:1(d)(ii)).
The BIT follows the Model as to the right to deny treaty
benefits to companies controlled by nationals or firms of third
countries and the rule that any alteration of the form in which
assets are invested or reinvested will not affect their
character as investments (Arts. I:2, I:3).
Article II (treatment).--The BIT contains a provision
identical to that in the Model setting forth each Party's
obligation to provide the better of national or MFN treatment
to investment and associated activity of the other Party and
its right to exempt certain sectors from this obligation (Art.
II:1). (Most-favored-nation or ``MFN treatment'' for purposes
of this treaty 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'' for purposes of the treaty means
whichever of national treatment or MFN treatment is the most
favorable.)
The BIT also contains provisions identical to the Model as
to the minimum treatment to be accorded investments;
prohibiting arbitrary or discriminatory impairment of
investments; and requiring each Party to observe any obligation
it may have entered into with respect to an investment (Art.
II:3).
The BIT also follows the Model as to entry of nationals for
investment purposes (Art. II:4); engaging top managerial
personnel of choice (Art. II:5); prohibiting performance
requirements (Art. II:6); providing effective means of
asserting claims and enforcing rights (Art. II:7); making
public all laws, regulations, administrative processes, and
adjudicatory decisions pertaining to or affecting investments
(Art. II:8); clarifying the application of the BIT on a
national treatment basis in states, territories, and
possessions of the United States (Art. II:9); removing from the
scope of MFN treatment a Party's binding obligations under free
trade areas or customs union and under any multilateral
international agreement entered into under the auspices of the
GATT subsequent to the signature of the BIT (Art. II:10).
The BIT adds a paragraph regarding state enterprises,
stating that the BIT may not be construed to prohibit a Party
from establishing or maintaining a state enterprise, that any
such enterprise may not act inconsistently with Treaty
obligations when exercising governmental authority delegated to
it; and that the enterprise must accord the better of national
or MFN treatment in its sale of goods or services in the
Party's territory (Art. II:2). Administration officials have
informed staff that the paragraph was added with the intent of
clarifying and extending the requirements of the treaty with
respect to state enterprises.
The BIT adds another paragraph further defining what are to
be considered ``associated activities'' for purposes of the
BIT. It lists ten additional activities, including franchises
and other licenses; access to registrations, licenses, permits,
and other approvals; access to financial institutions, credit
markets, and other funds; the import and export of equipment
and automobiles; dissemination of commercial information;
conducting market studies; the appointment of commercial
representatives and the participation of such individuals in
trade fairs and promotional events; marketing goods and
services; and access to public utilities, public services,
commercial rental space, raw materials, inputs, and services of
all types at nondiscriminatory prices, if the prices are set or
controlled by the government (Art. II:11). Administration
officials have informed staff that the paragraph was added to
the prototype text in order to provide additional concrete
examples of the types of associated activities for which
investors should receive the better of national or MFN
treatment. According to the Administration this language was
designed to avoid problems that U.S. businesses may face in
emerging market economies, and its addition is seen as a plus
for U.S. investors. The same provision can also be found in
BITs with NIS and Eastern European countries including the
Czech Republic, Slovakia, Kazakstan, Kyrgyzstan, Moldova, and
Poland, all of which are currently in force.
Article III (expropriation).--The BIT is identical to the
Model's expropriation article (except for one provision as to
transferability). The Article prohibits expropriations of
covered investments except if carried out for a public purpose,
in a non-discriminatory manner, upon payment of prompt,
adequate and effective compensation, and in accordance with due
process of law and the minimum treatment standards set forth in
Article II (generally requiring ``fair and equitable
treatment'') (Art. III:1); it sets forth specific requirements
as to compensation (Art. III:2); and it establishes
compensation based on the currency in which the fair market
value of the expropriated investment is denominated and
operates to protect the investor from exchange rate risk (Arts.
III :3, III:4).
While the BIT contains Model's obligation that compensation
be freely transferable, it does not include the additional
language contained in the Model that compensation be
transferable ``at the prevailing market rate of exchange on the
date of expropriation'' (Art. III:1). Addition rights and
obligations as to the currency to be used in compensations and
set forth in the Protocol, discussed below.
Article IV (transfers)--The BIT is identical to the Model
regarding transfers into and out of the territory of a Party.
This obligation--which defines transfers to include, among
other things, compensation paid under Article III--requires in
part that transfers be made in a freely usable currency at the
current market rate of exchange on the date of transfer with
respect to spot transactions in the currency to be transferred.
In his transmittal documents, the Secretary of State defines
``freely usable'' as the standard of the International Monetary
Fund. At present there are five such ``freely usable''
currencies: the U.S. dollar, Japanese yen, German mark, French
franc, and British pound sterling.
Paragraph three of this article recognizes that
notwithstanding the guarantees, Parties may maintain certain
laws or obligations that could affect transfers with respect to
investments. It provides that the Parties may require reports
of currency transfers and impose income taxes by such means as
a withholding tax on dividends. It also recognizes that Parties
may protect the rights of creditors and ensure the satisfaction
of judgments in adjudicatory proceedings through their laws,
even if such measures interfere with transfers. Such laws must
be applied in an equitable, nondiscriminatory and good faith
manner.
Article V (consultations).--The BIT is identical to the
Model regarding the obligation of Parties to consult with one
another with respect to disputes and other matters arising
under the Treaty.
Article VI (investor/state disputes).--The BIT is identical
to the Model regarding provisions for consultation and
arbitration in investor-State disputes. As in the Model, each
Party consents to the submission of any investment dispute to
binding international arbitration in the event that the dispute
cannot be resolved amicably. Belarus is a party to the New York
Convention on the Recognition and Enforcement of Foreign
Arbitral Awards. It has entered into the Convention
reciprocally -- that is, with the declaration that it will
apply the Convention to the recognition and enforcement of
awards made only in the territory of another contracting state.
Belarus is also a party to the Convention on the Settlement of
Investment Disputes between States and Nationals of Other
States.
Unlike the Model, the BIT does not exempt from its
investor/state dispute procedures those disputes arising under
the export credit, guarantee, or insurance programs of the
Export-Import Bank of the United States or under other official
credit, guarantee or insurance arrangements pursuant to which
the Parties have agreed to other means of settling disputes
(see Model, Art. VIII). According to the State Department,
EXIM, OPIC, and other relevant government agencies indicated
prior to the negotiation of this Treaty that they saw no need
to maintain such a provision.
Article VII (interstate disputes).--The BIT is identical to
the Model in providing for binding arbitration for interstate
disputes in the event such a dispute has not been resolved
through consultations or other diplomatic means.
Unlike the Model, the BIT does not exempt from its
interstate dispute procedures those disputes arising under the
export credit, guarantee, or insurance programs of the Export-
Import Bank of the United States or under other official
credit, guarantee or insurance arrangements pursuant to which
the Parties have agreed to other means of settling disputes.
According to the State Department, EXIM, OPIC, and other
relevant government agencies indicated prior to the negotiation
of this Treaty that they saw no need to maintain such a
provision.
Article VIII (preservation of rights).--The BIT is
identical to the Model in allowing each Party to provide
investments of the other Party treatment that is more favorable
then that minimally required under the BIT, as a result of
national laws, regulations, administrative procedures, or
adjudications, international legal obligations, or other
obligations assumed by either Party.
Article IX (exceptions).--The BIT is identical to the Model
as to exceptions for measures necessary for public order, the
fulfillment of certain international obligations, and
protecting essential security interests. Like the Model, the
BIT also allows Parties to prescribe special formalities for
investments so long as the substance of treaty rights is not
impaired. State Department officials have informed Committee
staff that during negotiation of the BIT Parties agreed that
this provision is self-judging.
Article X (taxation).--The BIT is identical to the Model
with respect to each Party's tax policies as applicable to
investments of the other Party and the application of the
treaty to tax matters in limited areas. The Treaty, and the
dispute settlement provisions, apply to tax matters in three
areas, to the extent they are not subject to the dispute
settlement provisions of a tax treaty, or, if so subject have
been raised under a tax treaty's dispute settlement procedures
and are not resolved in a reasonable period of time. The Treaty
could apply to tax matters in three areas: expropriation
(Article III), transfers (Article IV), and the observance and
enforcement of terms of an investment agreement or
authorization (Article VI).
Article XI (extent of application).--Like the Model, the
BIT clarifies that it fully applies to all political
subdivisions. The BIT, however, specifies that it applies to
administrative as well as political subdivisions.
Article XII (final provisions).--The BIT is identical to
the Model as to its entry into force, its application to
current and future investments, termination, and continued
temporary application to investments made or acquired prior to
any termination date. The BIT adds that the Side Letter, as
well as the Annex and Protocol form an integral part of the
Treaty.
Annex (sectoral exemptions).--The BIT is identical to the
Model as to the sectors and matters in which the United States
may make or maintain limited exceptions from its national
treatment and MFN obligations (Annex, paragraphs 1, 2). The
Annex contains an additional paragraph listing the sectors in
which Belarus may make or maintain limited exceptions from its
national treatment obligation (no MFN exceptions are listed).
Among these are the ownership of land and real property; the
acquisition of state and municipal property in the course of
denationalization; and detective and security services. Also
included are: ownership of insurance companies, electric power
stations connected to the United Energy System; exploration and
exploitation of natural resources; dealership in Belarus
Government securities; provision of common carrier telephone
and telegraph network services; customhouse brokers; and
ownership and operation of broadcast or common carrier radio
and television stations.
Protocol (expropriation and privatization).--Unlike the
Model, the BIT contains a protocol addressing expropriation and
privatization issues. The Protocol provides that in the event
an investor is to be compensated for an expropriation, payment
may be made in a freely unsable currency or in the official
currency of Belarus, depending on the currency in which the
original investment was made, subject to the obligations in
Article IV regarding the transfers (paragraph 1).
The Parties also ``confirm(s) their mutual understanding''
as to the meaning of the term ``acquisition of state and
municipal property in the course of denationalization and
privatization'' and that the Republic of Belarus may treat its
nationals and companies more favorably than those of the United
States in acquiring such property (paragraph 2). Any such
treatment must be made public promptly, be applied by
governmental authorities on an MFN basis, and be carried out
without prejudice to the provisions of the Treaty (paragraph
2).
Exchange of letters (investor assistance).--Following the
protocol is an exchange of letters between the United States
Ambassador to the Republic of Belarus and the Deputy Chairman
of the State Committee of the Republic of Belarus for Foreign
Economic Relations in which the parties confirm that the
Republic of Belarus has agreed to designate an office to assist
United States investors in deriving the full benefits of the
BIT in connection with their investment-related activities. The
letters set forth the types of assistance that will be provided
and designate the State Committee of the Republic of Belarus
for Foreign Economic Relations to perform this function.
IV. Entry Into Force and Termination
a. entry into force
The proposed treaty will enter into force 30 days after the
date of the exchange of instruments of ratification. From the
date of its entry into force, the BIT applies to existing and
future investments.
b. termination
The proposed treaty will continue in force for ten years
after ratification without termination. A Party may terminate
the proposed treaty ten years after entry into force if the
Party gives one year's written notice of termination to the
other Party. If terminated, all existing investments would
continue to be protected under the BIT for ten years
thereafter.
V. Committee Action
The Committee on Foreign Relations held a public hearing on
the proposed treaty, annex, protocol, and related exchange of
letters with Belarus on November 30, 1995. The hearing was
chaired by Senator Thompson. The Committee considered the
proposed treaty, annex and protocol with Belarus on March 27,
1996, and ordered the proposed treaty, annex and protocol
favorably reported by voice vote, with the recommendation that
the Senate give its advice and consent to the ratification of
the proposed treaty, annex and protocol subject to one
declaration.
VI. Committee Comments
a. declaration
The Committee approved a resolution of ratification for the
BIT with Belarus that includes a declaration supporting the
important role of the Belarusian Supreme Soviet in the
development of democratic government in Belarus. The
declaration should be interpreted as an expression of concern
by the Committee with the efforts of the President of Belarus
to weaken the cause of Belarusian sovereignty. The declaration
insists that steps taken in such a direction shall not reduce
the binding commitment of this treaty on Belarus.
Despite the active efforts of the Belarusian President to
prevent the election of a working parliament, on December 10,
1995, the Belarusian people voted in sufficient number to elect
a new Parliament. The development of the Belarusian Supreme
Soviet as an independent institution of government has already
proven to be an important counter-balance to those who would
have Belarus forfeit its sovereign status. The act of ratifying
this BIT is in and of itself a proper function of the
Belarusian parliament. In approving the resolution of
ratification for the BIT, the Committee on Foreign Relations of
the United States Senate expresses its approval not only of the
substance of the BIT, but of the process of parliamentary
democracy in Belarus.
b. current investment statistics
----------------------------------------------------------------------------------------------------------------
Direct investment Stock Exports Imports
----------------------------------------------------------------------------------------------------------------
1992.............................. no data.............. no data.............. 0................... 30
1993.............................. no data.............. no data.............. 92.................. 39
1994.............................. no data.............. no data.............. 46.................. 61
1995.............................. no data.............. no data.............. 48.................. 50
----------------------------------------------------------------------------------------------------------------
United States direct investment flows and stock in Belarus
The Commerce Department's ``Survey of Current Business''
does not include data on investment flows or year-end stocks of
direct investment in Belarus.
United States Trade with Belarus
The trade data in the chart above for 1994 and 1995 comes
from the U.S. Bureau of Census' December 1995 press release.
Those through 1993 are taken from the International Monetary
Fund's ``Directions of Trade.'' The IMF received its trade data
for this report from the Bureau of Census. The import data
include the cost of the imported goods, shipping insurance and
freight. Overall imports totaled $534 million and overall
exports totaled $968 million in 1993.
According to the 1996 National Trade Estimate Report on
Foreign Trade Barriers, produced by the Office of the United
States Trade Representative, in January 1996 the Government of
Belarus announced a series of export stimulation measures.
Under the new government plan, exporters will reportedly pay
ten percent less tax when they operate a barter regime between
enterprises. A Presidential decree sets different exchange
rates for local exporters purchasing raw materials abroad and
for importers of ``non-essential'' goods. In accordance with
the law on foreign investment, firms with at least 30 percent
foreign participation are exempted from the requirement. The
revenue from the higher exchange rate will go into a special
fund to support exporters.
In support of this agreement, the Committee recognizes that
ratification of the BIT is an important step toward
establishing transparent and predictable procedures for U.S.
investors in Belarus. Furthermore, the Treaty provides a legal
basis from which U.S. investors, and the United States
Government, can challenge capricious or harmful actions by the
Government of Belarus. In general, U.S. investment in Belarus
can reinforce broader U.S. policy goals toward Belarus by
demonstrating the benefits of economic reform and offering an
opportunity for increased, private U.S.-Belarus contacts.
At the same time, the Committee is reluctant to provide any
guarantees to U.S. investors that the protections listed in the
BIT will ultimately be viewed as binding by the Government of
Belarus. The political turmoil, slow pace of economic reform,
and general disregard for rule-of-law in Belarus continue to
serve as daunting obstacles to successful and profitable
investment in Belarus. The U.S. business community should fully
recognize that in approving this Treaty the Senate Foreign
Relations Committee in no way pronouncing there to be a
favorable investment climate in Belarus today.
c. enforcement
Following the hearing on the bilateral investment treaties,
Senator Helms requested information regarding the utility of
the bilateral investment treaty with Argentina. Specifically,
Senator Helms requested that the State Department identify
outstanding investment disputes with U.S. corporations doing
business in Argentina and actions taken by the U.S. to address
the BIT violations. Since its entry into force on October 24,
1994, two disputes have developed in Argentina. The following
is excerpted from the State Department's response to Senator
Helms: \1\
---------------------------------------------------------------------------
\1\ Letter from Assistant Secretary for Legislative Affairs, Wendy
R. Sherman, to Senator Helms, Committee on Foreign Relations, December
18, 1995.
We are aware of two investment disputes that have developed
in Agrentina recently.
1. CDSI
CDSI is a Maryland computer firm involved in a contract
dispute with the Cordoba provincial government in Argentina.
CDSI believes that Cordoba officials improperly reversed a
contract award to a firm with which it had a subcontract,
depriving it of the value of its investment.
Department officials have discussed the case with CDSI
representatives in Washington. Embassy officials are in regular
contact with CDSI representatives in Buenos Aires.
CDSI has informed us that, if the dispute is not resolved
through ongoing negotiations, it may avail itself of the right
to binding arbitration under the BIT. We will continue to work
with company and officials in Argentina to resolve this case.
[State Department officials have informed Committee staff
that CDSI recently reached an agreement with the provincial
government of Cordoba. According to State Department officials
the parties are satisfied with the agreement.]
2. Mi-Jack
Mi-Jack, based in Illinois and Texas, owns about 30% of a
company that purchased the right to operate one of five
terminals at the Port of Buenos Aires. (The rest of the equity
is not owned by Americans.) Mi-Jack is operating the dock in
accordance with regulations, fees, and labor rules specified by
the Government of Argentina in the tender.
At some point after this tender process began, the
Argentine federal government transferred adjacent dock property
to the Buenos Aires provincial government. The provincial
government leased the property to a company which began
operating a sixth terminal, without the conditions imposed on
other dock operators by the federal government. Mi-Jack
maintains that this unequal treatment is a BIT violation, and
has requested USG assistance.
Department and other agency officials have discussed the
case with Mi-Jack. Our Ambassador recently urged the Argentine
Minister of Economy and the Governor of the Province of Buenos
Aires to address the issues Mi-Jack has raised and resolve the
dispute.
The Committee believes that the value of the proposed
treaty depends upon the extent to which it is enforced. The
Committee refers to the two cases in Argentina, cited above, as
examples of how the proposed treaty can be a useful tool both
to business and U.S. embassies in protecting the interests of
U.S. business directly investing in-country. The Committee
believes that the treaty should serve as more than a diplomatic
tool. The Committee notes that local remedies and domestic
enforcement of arbitral awards are essential steps in enforcing
the guarantees provided in the proposed treaty and believes
that the President should communicate, at the time of the
exchange of the instruments of ratification, the importance of
a domestic enforcement regime to the ultimate success of the
proposed treaty. Such an indication would add credence to the
U.S. position that BITs provide genuine protections to
investors, and are not merely rhetorical endorsements of market
economies.
c. protecting u.s. businesses investing aboard
Although a BIT provides certain legal protections designed
to give investors recourse in the case of unfair treatment, the
role of the U.S. State Department and other government agencies
such as USTR remains essential to the protection of U.S.
citizens doing business abroad.
Issues regarding the role of the State Department and U.S.
posts abroad in assisting U.S. investors were raised during the
Committee's consideration of the BIT. After the November 30,
1995 hearing, Senator Helms requested a description of the
general procedure at U.S. Embassies, and in Washington, for
assisting U.S. investors when potential BIT violations, or
investment disputes, including expropriated property claims, in
countries not a Party to a BIT, are brought to the attention of
the Embassy by the investors. State Department's response to
this inquiry, in a letter dated December 18, 1995,\2\ is
reproduced below:
---------------------------------------------------------------------------
\2\ Letter from Assistant Secretary for Legislative Affairs, Wendy
R. Sherman, to Senator Helms, Committee on Foreign Relations, December
18, 1995.
---------------------------------------------------------------------------
An important responsibility of all U.S. diplomatic posts
abroad is to assist U.S. investors and property owners in the
resolution of disputes with the host government. Where disputes
arise, U.S. posts and the Department provide a range of
services to the U.S. claimant.
These services include:
(1) advising the U.S. claimant of local legal counsel
which may be available to handle similar disputes;
(2) assisting the U.S claimant in contacting host
government officials which may be in a position to
facilitate a resolution of his claim;
(3) directly encouraging host government officials to
negotiate a resolution of the claim; (such contacts may
be on behalf of a single claimant or multiple claimants
where there are a number of outstanding claims);
(4) occasionally, where the circumstances warrant,
the U.S. may decide to directly espouse a claim or
claims; and
(5) in addition, where a BIT is in force, other
options (e.g. binding investor-state arbitration) may
be brought to the attention of the investor and/or
local officials.
Given the wide variety of circumstances associated with
investment disputes around the globe, the range of resources
available at individual diplomatic posts, the variety of
assistance being requested by individual investors, and the
diversity of host country investment regimes, a good deal of
discretion is necessary to tailor individual response to the
particular circumstances of the case.
For example, the approach taken in the case of a country
which has a well functioning judicial system and demonstrated
effectiveness in adjudicating disputes may be quite different
from that taken with respect to cases where some or all of
these conditions do not prevail. The investor's preferences
also guide our response. The current approach to providing
assistance to U.S. claimants in investment disputes permits us
the flexibility needed to tailor a response that reflects both
the conditions prevalent in the host country and the investor's
own strategy.
Action on investment disputes is coordinated through
constant routine communication among Embassy and Washington
offices. This is supplemented by periodic formal requests from
the Department for information on investment disputes and by
the Post's preparation of the Investment Climate Statements for
each country. In addition, the Department chairs the
Interagency Staff Coordinating Group on Expropriations
(``Expropriation Group''), which is comprised of
representatives from the Office of the United States Trade
Representative, the Overseas Private Investment Corporation,
the Department of Commerce, and the Department of the Treasury.
This group meets periodically to discuss expropriation and
related issues.
In addition to assisting individual U.S. investors when
they have an investment dispute, we engage in activities that
could help prevent investment disputes. Officials in Washington
and in our Embassies also examine investment practices in other
nations and work to discourage other governments from passing
legislation that might disadvantage U.S. investors and lead to
investment disputes. The results of these examinations are
included in the annual Investment Climate Statement, a report
which is widely used by both U.S. officials and investors. We
also engage in negotiations with other governments on BITS and
multilateral disciplines that help protect the interests of
U.S. investors.
In the past year or two, we have reached a point where a
significant number of BITs have entered into force and, thus,
apply to U.S. investment. At this time, we are reviewing ways
to even better inform our posts about the obligations contained
in these BITs, in order to assist U.S. investors and monitor
compliance with these obligations by our BIT treaty partners.
The Committee supports the efforts of the State Department
and U.S. foreign posts to educate businesses and ensure that
the investment climate in these countries remains open and fair
for U.S. businesses. The Committee supports the BIT as a tool
for both businesses and U.S. diplomats to ensure fair
investment environments where U.S. companies are doing
business.
In addition, Senator Helms requested an assessment of the
utility of developing procedures at the State Department to
ensure consistently timely response when investors bring
foreign investment problems to the attention of U.S. Posts and
the Department. State Department's response to this inquiry,
was also included in the dated December 18, 1995 letter, as
reproduced below:
It is current State Department policy and practice to
respond in a timely manner when investors bring investment
problems to the attention of embassies. Any lapse in such
practice can and should be brought to the attention of the
Office of Investment Affairs in Washington, which will ensure
that a response is forthcoming.
While a timely response should be a constant, we believe
that the nature of that response should vary from case to case.
Investors benefit from the freedom our diplomats enjoy to
pursue solutions tailored to the investor's problems. In some
countries, a quiet call from an Embassy officer to a government
official can help an investor. Elsewhere, if the government has
not been responsive, we may directly approach senior government
officials.
The following examples illustrate the variety and
complexity of individual circumstances.
A company informed us of an investment dispute, but
specifically requested that we not take any action as
negotiations continued.
In a country undergoing civil strife, investors are
pursuing arbitration through an international financial
institution.
In one country, we have had to develop specialized
procedures and increase Embassy staffing to deal with a very
large number of claims.
Supplanting our existing flexible process for assisting
U.S. claimants with a ``one size fits all'' policy would not
likely work to the benefit of investors. Investors gain when we
are free to fashion a response that takes into consideration
the facts unique to that dispute, the investor's strategy for
obtaining resolution to the dispute, the resources available to
the USG to promote a quick resolution to the dispute, and the
broader economic and political context within which we and the
investor must work to achieve the desired outcome.
As described in the previous question, American diplomats
and Department employees use a wide variety of strategies to
assist U.S. citizens in investment disputes abroad. Required
procedures could have significant resource implications without
increasing the effectiveness of these strategies. Furthermore,
we do not believe that a procedure developed in Washington
which may not reflect either the unique conditions existing in
a particular country or the experiences of our diplomats or
businessmen is in the interests of either U.S. investors or the
United States.
The Committee agrees that a ``one size fits all'' approach
to addressing how best to protect U.S. investors faced with
disputes with foreign governments would not be useful. However,
the Committee supports the development by State and USTR of
flexible procedures that ensure that all U.S. investors, large
and small, will be given timely assistance when they raise
investment issues with the U.S. State Department, both at the
missions and in Washington. The Committee expects that such
procedures would ensure appropriate coordination between U.S.
missions and the State Department and the Office of the U.S.
Trade Representative in Washington.
VII. Explanation of Proposed Treaty and Protocol
For a detailed article-by-article explanation of the
proposed bilateral investment treaty, annex, protocol, and
related exchange of notes, see the analysis contained in the
transmittal documents included in Treaty Doc. 103-36.
VIII. Text of the Resolution of Ratification
Resolved, (two-thirds of the Senators present concurring
therein), That the Senate advise and consent to the
ratification of The Treaty Between the United States of America
and the Republic of Belarus Concerning the Encouragement and
Reciprocal Protection of Investment, with Annex, Protocol, and
Related Exchange of Letters, signed at Minsk on January 15,
1994 (Treaty Doc. 103-36). The Senate's advice and consent is
subject to the following declaration, which the President,
using existing authority, shall communicate to the Republic of
Belarus, in connection with the exchange of the instruments of
ratification of the Treaty:
It is the Sense of the Senate that the United States:
(a) supports the Belarusian Parliament and its
essential role in the ratification process of this
Treaty;
(b) recognizes the progress made by the Belarusian
Parliament toward democracy during the past year;
(c) fully expects that the Republic of Belarus will
remain an independent state committed to democratic and
economic reform; and
(d) believes that, in the event that the Republic of
Belarus should unite with any other state, the rights
and obligations established under this agreement will
remain binding on that part of the Successor State that
formed the Republic of Belarus prior to the union.