[Senate Executive Report 104-14]
[From the U.S. Government Publishing Office]



104th Congress                                              Exec. Rept.
                                 SENATE

 2d Session                                                      104-14
_______________________________________________________________________


 
 TREATY BETWEEN THE GOVERNMENT OF THE UNITED STATES OF AMERICA AND THE 
GOVERNMENT OF THE REPUBLIC OF ESTONIA CONCERNING THE ENCOURAGEMENT AND 
            RECIPROCAL PROTECTION OF INVESTMENT, WITH ANNEX
                                _______
                                

                 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. 103-38]

    The Committee on Foreign Relations to which was referred 
the Treaty Between the Government of the United States of 
America and the Government of the Republic of Estonia 
Concerning the Encouragement and Reciprocal Protection of 
Investment, with Annex, done at Washington on April 19, 1994, 
having considered the same, reports favorably thereon without 
amendment and recommends that the Senate give its advice and 
consent to ratification thereof 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 non-discriminatory treatment.

                             II. Background

    The proposed treaty together with the annex, was signed on 
April 19, 1994. No bilateral investment treaty is currently in 
force between the United States and Estonia.
    The proposed treaty and annex were transmitted to the 
Senate for advice and consent to ratification on September 27, 
1994 (see Treaty Doc. 103-38). 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 guaranties 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 ratification of 24 
BITs. Twenty two BITs are currently in force. Treaties that 
have been ratified by the Senate, but have not entered into 
force, include treaties with: Russia, where the Duma has failed 
to ratify; and Ecuador, which was ratified by both countries, 
but the United States is delaying the exchange of instruments 
until Ecuador has fully implemented its obligations under the 
United States-Ecuador intellectual property rights agreement. 
There are currently 12 on-going negotiations for BITs with 
other countries.

                       b. comparison to the model

    The following is an analysis of the major provisions of the 
proposed treaty. The analysis compares the provisions of the 
Treaty Between the United States of America and the Republic of 
Estonia Concerning the Encouragement and Reciprocal Protection 
of Investment, with Annex (Treaty Doc. 103-38) (BIT), with 
those of the United States 1992 Model Bilateral Investment 
Treaty (Model), on which the former is based.
    Preamble.--The preamble of the BIT is identical to that of 
the Model, except for adding separate paragraphs regarding 
earlier bilateral trade and investment agreements between 
Estonia and the United States. One paragraph notes the Parties' 
1925 MFN agreement and 1925 friendship, commerce, and 
navigation (FCN) treaty; a second refers to the furthering of 
Article Three of the Parties' Bilateral Agreement Concerning 
the Development of Trade and Investment Relations of September 
17, 1992. The State Department informs Committee staff that 
these references were intended to underscore the long history 
of U.S. recognition of Estonia's independence from the Soviet 
Union.
    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 State Department 
informs Committee staff that the definitions were added in 
order to clarify and extend the requirements of the treaty 
because of the dominant role of state enterprises in the 
Estonian economy. According to State the negotiating agencies 
believe that this addition gives U.S. investors added 
protection. Similar language can be found in NAFTA.
    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 alternation 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 contained a provision 
almost 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). The BIT varies from the Model in that 
Parties agree to notify the other upon the latter's request of 
such laws and regulations. The State Department informs 
Committee staff that this language makes clear the point that a 
Party is free at any time to request information and can expect 
an answer.
    The BIT also contains provision 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). As with Article I, the State 
Department informs Committee staff that the definitions were 
added in order to clarify and extend the requirements of the 
treaty because of the dominant role of state enterprises in the 
Estonian economy. According to State the negotiating agencies 
believe that this addition gives U.S. investors added 
protection.
    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). The State Department 
informs staff that this paragraph was added to provide 
additional concrete examples of the types of associated 
activities for which investors should receive the better of 
national or MFN treatment. 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. Similar language can be found in BITs with NIS and 
Eastern European countries including the Czech Republic, 
Slovakia, Kazakstan, Kyrgystan, 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. This 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); sets forth specific requirements as 
to compensation (Art. III:2); and establishes compensation 
based on the currency in which the fair market value of the 
expropriated investment is denominated (Art. III:3).
    While the BIT contains the 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).
    Article IV (transfers).--The BLT is identical to the Model 
regarding transfers into and out of the territory of a Party. 
The 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.
    Article V (consultations).--The BLT is identical to the 
Model regarding the obligation of Parties to consult with 
respect to disputes and other matters arising under the Treaty.
    Article VI (investor/state disputes).--The BLT 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. Estonia is a Party to the New York 
Convention on the Recognition and Enforcement of Foreign 
Arbitral Awards. It appears not to have 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--and thus would presumably recognize and enforce any 
foreign arbitral award that falls within the Convention's 
scope. Estonia 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 setting 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 
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 channels.
    Unlike the Model, the BLT 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 
than 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.
    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 
the termination date. As the BIT does not contain a Protocol, 
it shortens the Model's language that ``[t]he Annex (and 
Protocol, if any) form an integral part of the Treaty,'' to 
state that the Annex has this status.
    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, except for its coverage of 
financial services in the national treatment paragraph. Where 
the Model separately exempts banking, insurance, and primary 
dealership in United States government securities, the BIT 
formulates these sectors in terms of ``banking, insurance, 
securities, and other financial services'' and eliminates the 
Model's separate listing for primary dealership in United 
States government securities (Annex, paragraph 1).
    The Annex contains a separate paragraph listing the sectors 
in which Estonia may make or maintain limited exceptions from 
its national treatment obligation (no exceptions from MFN are 
provided). These are: banking, including loan and saving 
institutions; government grants; government insurance and loan 
programs; ownership of real property; use of land and natural 
resources; and initial acquisition from the Republic of Estonia 
and its municipalities of state and municipal property in the 
course of denationalization privatization (Annex, paragraph 3).

                  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 ACTIONS

    V. The Committee on Foreign Relations held a public hearing 
on the proposed treaty and annex with Estonia on November 30, 
1995. The hearing was chaired by Senator Thompson. The 
Committee considered the proposed treaty and annex with Estonia 
on March 27, 1996, and ordered the proposed treaty and annex 
favorably reported by voice vote, with the recommendation that 
the Senate give its advice and consent to the ratification of 
the proposed treaty and annex.

                         VI. Committee Comments

    The Committee on Foreign Relations recommended favorably 
the proposed treaty and, on balance, the Committee believes 
that the proposed treaty is in the interest of the United 
States and urges the Senate to act promptly to give its advice 
and consent to ratification. Several issues did arise in the 
course of the Committee's consideration of the BIT, and the 
Committee believes that the following comments may be useful to 
Senate in its consideration of the proposed treaty and to the 
State Department and the Office of the United States Trade 
Representative, which share jurisdiction over this treaty.

                    a. current investment statistics

----------------------------------------------------------------------------------------------------------------
                                                                 Direct                                         
                                                               investment     Stock       Exports      Imports  
----------------------------------------------------------------------------------------------------------------
1992........................................................            0            0            0            0
1993........................................................            0            0           54           21
1994........................................................        (\1\)        (\1\)           33           33
1995........................................................        (\2\)        (\2\)          139           69
----------------------------------------------------------------------------------------------------------------
\1\ Data suppressed to avoid disclosure of data on individual firms.                                            
\2\ No data.                                                                                                    

United States direct investment flows to Estonia

    The chart above reflects the amounts of direct investment 
which flowed from the United States to Estonia in the indicated 
calendar year, as published in the Commerce Department's 
``Survey of Current Business.'' Data for 1995 have not yet been 
released.

United States year-end stocks of direct investment in Estonia

    The chart above reflects the total amount of U.S. direct 
investment acculumlated over time as of the end of each year 
cited, as published in the Commerce Department's ``Survey of 
Current Business.'' The data are available only through 1994 
and are valued at historical cost less depreciation and 
scrapping. They do not reflect the current market value of the 
businesses in which U.S. persons have invested.

United States trade with Estonia

    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 $1.65 billion in 1994 and 
overall exports totaled $1 billion during that same period.
    The Committee applauds the efforts of the people of Estonia 
to reintegrate into Western Europe. The ambitious program of 
market reforms and stabilization measures, which is reshaping 
the Estonian economy, is a clear indication of the will of the 
estonian people to create a private market-based economy. 
Although the austere measures of balanced budgets, flat tax, 
tight monetary policy and the establishment of a strong 
currency have meant a declining standard of living for many 
Estonians, the economic reforms are beginning to translate into 
economic growth for the country.
    The shift from East to West in Estonia's foreign trade is a 
visible sign of Estonia's receptiveness to U.S. investment. The 
improved trade statistics cited above are a clear indication of 
the growing U.S. presence in the Estonian markets. In addition, 
Estonia has made membership in the E.U. a foreign policy 
priority as it tries to integrate itself as much as possible 
into European institutions. The Committee expects that the 
protections offered by this treaty in addition to the overall 
reforms will encourage U.S. investors to play a greater role in 
the transformation of the Estonian economy.

                             b. 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 Argentina 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-county. 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 abroad

    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 responses 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 Posts' 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 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. The 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 and annex, see the 
analysis contained in the transmittal documents included in 
Treaty Doc. 103-38.

              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 Government of the United 
States of America and the Government of the Republic of Estonia 
Concerning the Encouragement and Reciprocal Protection of 
Investment, with Annex, done at Washington on April 19, 1994 
(Treaty Doc. 103-38).