[Senate Executive Report 104-16]
[From the U.S. Government Publishing Office]
104th Congress Exec. Rept.
SENATE
2d Session 104-16
_______________________________________________________________________
TREATY BETWEEN THE GOVERNMENT OF THE UNITED STATES OF AMERICA AND THE
GOVERNMENT OF THE REPUBLIC OF LATVIA CONCERNING THE ENCOURAGEMENT AND
RECIPROCAL PROTECTION OF INVESTMENT, WITH ANNEX AND PROTOCOL
_______
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. 104-12]
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 Latvia Concerning
the Encouragement and Reciprocal Protection of Investment, with
Annex and Protocol, signed at Washington on January 13, 1995,
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 proposed annex and
protocol, was signed on January 13, 1995. No bilateral
investment treaty is currently in force between the United
States and Latvia.
The proposed treaty, annex and protocol were transmitted to
the Senate for advice and consent to ratification on July 10,
1995 (see Treaty Doc. 104-12). 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 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 ratifty, and with 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 Treaty Between the United States of America and the
Republic of Latvia Concerning the Encouragement and Reciprocal
Protection of Investment, with Annex and Protocol (Treaty Doc.
104-12) (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.
Preamble.--The preamble of the BIT is identical to that of
the Model, except for adding separate paragraphs regarding
earlier bilateral trade, investment, and intellectual property
rights agreements between Latvia and the United States. One
paragraph notes the Parties' 1926 MFN agreement and 1928
friendship, commerce, and navigation (FCN) treaty; a second
refers to the furthering of Article Three of the Parties' 1992
Agreement concerning the Development of Trade and Investment
Relations; and a third notes the Parties' 1994 Agreement on
Trade Relations and Intellectual Property Rights Protection.
The State Department has informed Committee staff that these
references were intended to underscore the long history of U.S.
recognition of Latvia'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 the 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 has informed Committee staff that these definitions
were added because of the dominant role of state enterprises in
the Latvian economy. 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 rules 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).
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); clarifies 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 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). The State Department has
informed Committee staff that this provision was added to
clarify and extend the requirements of the treaty with respect
to state enterprises given the dominant role of state
enterprises in the Latvian economy.
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 has informed Committee staff that this
provision 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. According to
U.S. negotiators, 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,
Kyrgyzstan, Moldova, and Poland.
Article III (expropriation).--The BIT is identical to the
Model's expropriation article, except for defining what is
meant by ``freely usable currency'' and deleting language
qualifying an obligation 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 a minimum level of compensation based on the
currency in which the fair market value of the expropriated
investment is denominated (Art. III:1).
Where the Model requires that compensation ``be calculated
in a freely usable currency on the basis of the prevailing
market rate of exchange'' immediately before the expropriatory
action was taken or became known, whichever is earlier, the BIT
adds that the definition of ``freely usable currency'' is that
found in Article 30 of the Articles of Agreement of the
International Monetary Fund (Art. III:1). At this time, these
currencies include the United States dollar, Japanese yen,
German mark, French franc, and the British pound sterling.
Further, 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). State Department
officials informed Committee staff that this addition was added
in order to clarify the term and does not change the meaning of
the Model.
Article IV (transfers).--Article IV of the BIT is identical
to the Model regarding transfers into and out of the territory
of a Party, except that, like the preceding Article, it
specifies that the term ``freely usable currency'' has the same
meaning that it has in Article 30 of the Articles of Agreement
of the International Monetary Fund (Art. IV:2). Article IV,
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 BIT 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 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. Latvia 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 Convention's scope. As
of January 1, 1995, Latvia had not joined 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.
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 channels.
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
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.
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 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 any
termination date. As in the Model, the BIT's 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, 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 Latvia may make or maintain limited exceptions from
its national treatment obligation (no exceptions from MFN are
provided). These are: control of defense industries;
manufacturing and sale of narcotics, weapons and explosives;
control of newspapers, television and radio broadcasting
stations, or news agencies; recovery of all renewable and non-
renewable natural resources, including resources found on the
continental shelf; fishing; hunting; port management; banking;
ownership and control of land; brokerage or real property; and
gambling (Annex, paragraph 3).
Protocol (land ownership in Latvia). Unlike the Model, the
BIT contains a protocol addressing foreign land ownership, in
which the Parties make clear that current Latvian legislation
permits foreign investors to own or control land in urban
areas, as defined under the laws of the Republic of Latvia,
even though the ownership and control of land is listed as a
possible sectoral exemption. State Department officials have
informed Committee staff that this protocol was included to
make this sector's inclusion in the national treatment annex
entry more transparent.
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 and protocol with Latvia on November
30, 1995. The hearing was chaired by Senator Thompson. The
Committee considered the proposed treaty, annex and protocol
with Latvia 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.
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 consideration of this 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........................ 55 11
1993.................................. 0........................ 0........................ 90 26
1994.................................. D........................ D........................ 101 48
1995.................................. no data.................. no data.................. 89 96
----------------------------------------------------------------------------------------------------------------
United States direct investment flows to Latvia
The chart above reflects the amounts of direct investment
which flowed from the United States to Albania 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 Latvia
The chart above reflects the total amount of U.S. direct
investment accumulated 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 Latvia
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 $1.2 billion and overall
exports totaled $1 billion in 1993.
Latvia is fast becoming a stable and dynamic market
economy. Already, the private sector makes up 55 percent of
Gross Domestic Product. Latvia aspires to membership in the
European Union and has signed a free trade agreement with the
E.U. The Committee applauds the rapid progress in political and
economic reform made by Latvia since its independence. The
Committee realizes, however, that the people of Latvia have
borne the burden of the economic recovery with declining living
standards as wages and pensions failed to keep pace with
inflation.
The Committee believes that the Republic of Latvia is well
poised to attract foreign investment from the United States and
other western countries. The Committee encourages the further
development of economic ties with Latvia and believes that the
protections afforded in this treaty will be helpful to ensuring
a positive investment climate for United States companies
wishing to do business in Latvia.
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 United States 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,
the 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 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. 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, and protocol, see
the analysis contained in the transmittal documents included in
Treaty Doc. 104-12.
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 Latvia
Concerning the Encouragement and Reciprocal Protection of
Investment, with Annex and Protocol, signed at Washington on
January 13, 1995 (Treaty Doc. 104-12).