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T.Doc.104-13 INVESTMENT TREATY WITH GEORGIA ...


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   104th Congress 1st            SENATE              Treaty Doc.
         Session
                                                        104-12
_______________________________________________________________________



                                     



  
                     INVESTMENT TREATY WITH LATVIA

                               __________

                                MESSAGE

                                  from

                   THE PRESIDENT OF THE UNITED STATES

                              transmitting

 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


<GRAPHIC NOT AVAILABLE IN TIFF FORMAT>

 July 10, 1995.--Treaty was read the first time and, together with the 
accompanying papers, referred to the Committee on Foreign Relations and 
            ordered to be printed for the use of the Senate
 
                         LETTER OF TRANSMITTAL

                              ----------                              

                                    The White House, July 10, 1995.
To the Senate of the United States:
    With a view to receiving the advice and consent of the 
Senate to ratification, I transmit herewith the Treaty Between 
the Government of the United States of America and the 
Government of the Republic of Latvia Concerning the 
Encouragement and Reciprocal Protection of Investment, with 
Annex and Protocol, signed at Washington on January 13, 1995. I 
transmit also, for the information of the Senate, the report of 
the Department of State with respect to this Treaty.
    The bilateral investment Treaty (BIT) with Latvia will 
protect U.S. investors and assist Latvia in its efforts to 
develop its economy by creating conditions more favorable for 
U.S. private investment and thus strengthening the development 
of the private sector.
    The Treaty is fully consistent with U.S. policy toward 
international and domestic investment. A specific tenet of U.S. 
policy, reflected in this Treaty, is that U.S. investment 
abroad and foreign investment in the United States should 
receive national treatment. Under this Treaty, the Parties also 
agree to international law standards for expropriation and 
compensation for expropriation; free transfer of funds 
associated with investments; freedom of investments from 
performance requirements; fair, equitable, and most-favored-
nation treatment; and the investor's or investment's freedom to 
choose to resolve disputes with the host government through 
international arbitration.
    I recommend that the Senate consider this Treaty as soon as 
possible, and give its advice and consent to ratification of 
the Treaty, with Annex and Protocol, at an early date.

                                                William J. Clinton.
  
                          LETTER OF SUBMITTAL

                              ----------                              

                                       Department of State,
                                         Washington, June 16, 1995.
The President,
The White House.
    The President: I have the honor to submit to you the Treaty 
Between the Government of the United States of America and the 
Government of the Republic of Latvia for the Encouragement and 
Reciprocal Protection of Investment, with Annex and Protocol, 
signed at Washington on January 13, 1995. I recommend that this 
Treaty, with Annex and Protocol, be transmitted to the Senate 
for its advice and consent to ratification.
    The bilateral investment treaty (BIT) with Latvia is based 
on the view that an open investment policy contributes to 
economic growth. This Treaty will assist Latvia in its efforts 
to develop its economy by creating conditions more favorable 
for U.S. private investment and thus strengthening the 
development of the private sector. It is U.S. policy, however, 
to advise potential treaty partners during BIT negotiations 
that conclusion of a BIT does not necessarily result in 
immediate increases in private U.S. investment flows.
    To date, twenty-one BITs are in force for the United 
States--with Argentina, Bangladesh, Bulgaria, Cameroon, the 
Congo, the Czech Republic, Egypt, Grenada, Kazakhstan, 
Kyrgyzstan, Moldova, Morocco, Panama, Poland, Romania, Senegal, 
Slovakia, Sri Lanka, Tunisia, Turkey, and Zaire. In addition to 
the Treaty with Latvia, the United States has signed, but not 
yet brought into force, BITs with Albania, Armenia, Belarus, 
Ecuador, Estonia, Georgia, Haiti, Jamaica, Mongolia, Russia, 
Trinidad and Tobago, Ukraine and Uzbekistan.
    The Office of the United States Trade Representative and 
the Department of State jointly led this BIT negotiation, with 
assistance from the Departments of Commerce and Treasury and 
the Overseas Private Investment Corporation.

                         THE U.S.-LATVIA TREATY

    The Treaty with the Republic of Latvia is based on the 1992 
U.S. prototype BIT, and achieves all of the prototype's 
objectives, which are:
  --All forms of U.S. investment in the territory of the 
        Republic of Latvia are covered.
  --Investments receive the better of national treatment or 
        most-favored-nation (MFN) treatment both on 
        establishment and thereafter, subject to certain 
        specified exceptions.
  --Performance requirements may not be imposed upon or 
        enforced against investments.
  --Expropriation can occur only in accordance with 
        international law standards, that is, for a public 
        purpose; in a nondis- criminatory manner; in accordance 
        with due process of law, and upon payment of prompt, 
        adequate, and effective compensation.
  --The unrestricted transfer, in a freely usable currency, of 
        funds related to an investment is guaranteed.
  --Investment disputes with the host government may be brought 
        by investors, or by their subsidiaries, to binding 
        international arbitration as an alternative to domestic 
        courts.
    The U.S.-Latvia Treaty differs from the 1992 prototype in 
some minor respects. It eliminates Article VIII of the 1992 
prototype text which had excluded from the dispute settlement 
provisions of the BIT those disputes arising under the export 
credit, guarantee or insurance programs of the Export-Import 
Bank of the United States, as well as those arising under any 
other such official programs pursuant to which the Parties 
agreed to other means of settling disputes. The Export-Import 
Bank, the Overseas Private Investment Corporation and other 
relevant government agencies indicated prior to this 
negotiation that they saw no need to maintain such a provision.
    The U.S.-Latvia Treaty also differs from the prototype in 
that it includes provisions in Article I, paragraph 1 (f) and 
(g), and Article II, paragraph 2, which clarify and extend the 
requirements of the Treaty with respect to state enterprises, 
and Article II, paragraph 11, which clarifies that investors 
should receive the better of national or MFN treatment with 
respect to activities associated with their investment. This 
additional language is discussed in further detail in the 
article-by-article analysis of the Treaty below.
    In addition, a Protocol clarifies that despite Latvia's 
inclusion of ownership of land in its exceptions to the 
Treaty's national treatment obligations in the Annex, foreign 
investors in Latvia can purchase land in urban areas.
    The following is an article-by-article analysis of the 
provisions of the Treaty:

Preamble

    The Preamble states the goals of the Treaty. The Treaty is 
premised on the view that an open investment policy leads to 
economic growth. These goals include economic cooperation, 
increased flow of capital, a stable framework for investment, 
development of respect for internationally-recognized worker 
rights, and maximum efficiency in the use of economic 
resources. While the Preamble does not impose binding 
obligations, its statement of goals may serve to assist in the 
interpretation of the Treaty.

Article I (Definitions)

    Article I sets out definitions for terms used throughout 
the Treaty. As a general matter, they are designed to be broad 
and inclusive in nature.
            Investment
    The Treaty's definition of investment is broad, recognizing 
that investment can take a wide variety of forms. It covers 
investments that are owned or controlled by nationals or 
companies of one of the Treaty partners in the territory of the 
other. Investments can be made either directly or indirectly 
through one or more subsidiaries, including those of third 
countries. Control is not specifically defined in the Treaty. 
Ownership of over 50 percent of the voting stock of a company 
would normally convey control, but in many cases the 
requirement could be satisfied by less than that proportion.
    The definition provides a non-exclusive list of assets, 
claims and rights that constitute investment. These include 
both tangible and intangible property, interests in a company 
or its assets, ``a claim to money or performance having 
economic value, and associated with an investment,'' 
intellectual property rights, and any right conferred by law or 
contract (such as government-issued licenses and permits). The 
requirement that a ``claim to money'' be associated with an 
investment excludes claims arising solely from trade 
transactions, such as a transaction involving only a cross-
border sale of goods, from being considered investments covered 
by the Treaty.
    Under paragraph 2 of Article I, either country may deny the 
benefits of the Treaty to investments by companies established 
in the other that are owned or controlled by nationals of a 
third country if (1) the company is a mere shell, without 
substantial business activities in the home country, or (2) the 
third country is one with which the denying Party does not 
maintain normal economic relations. For example, at this time 
the United States does not maintain normal economic relations 
with, inter alia, Cuba or Libya.
    Paragraph 3 confirms that any alteration in the form in 
which an asset is invested or reinvested shall not affect its 
character as investment. For example, a change in the corporate 
form of an investment will not deprive it of protection under 
the Treaty.
            Company
    The definition of ``company'' is broad in order to cover 
virtually any type of legal entity, including any corporation, 
company, association, or other entity that is organized under 
the laws and regulations of a Party. In connection with the 
definition of investment, this definition also ensures that 
companies of a Party that establish investments in the 
territory of the other Party have their investments covered by 
the Treaty, even if the parent company is ultimately owned by 
non-Party nationals, although the other Party may deny the 
benefits of the Treaty in the limited circumstances set forth 
in Article I, paragraph 2. Likewise, a company of a third 
country that is owned or controlled by nationals or companies 
of a Party will also be covered. The definition also covers 
charitable and non-profit entities, as well as entities that 
are owned or controlled by the state.
            National
    The Treaty defines ``national'' as a natural person who is 
a national of a Party under its own laws. Under U.S. law, the 
term ``national'' is broader than the term ``citizen''; for 
example, a native of American Samoa is a national of the United 
States, but not a citizen.
            Return
    ``Return'' is defined as ``an amount derived from or 
associated with an investment.'' The Treaty provides a non-
exclusive list of examples, including: profits; dividends; 
interest; capital gains; royalty payments; management, 
technical assistance or other fees; and returns in kind. The 
scope of this definition provides breadth to the Treaty's 
transfer provisions in Article IV.
            Associated activities
    The Treaty recognizes that the operation of an investment 
requires protections extending beyond the investment to 
numerous related activities. This definition provides an 
illustrative list of such investor activities, including 
operating a business facility, borrowing money, disposing of 
property, issuing stock and purchasing foreign exchange for 
imports. These activities are covered by Article II, paragraph 
1, which guarantees the better of national or MFN treatment for 
investments and associated activities.
            State enterprise
    ``State enterprise'' is defined as an enterprise owned, or 
controlled through ownership interests, by a Party.
            Delegation
    ``Delegation'' is defined to include a legislative grant, 
government order, directive or other act which transfers 
governmental authority to a state enterprise or authorizes a 
state enterprise to exercise such authority.
    The definitions of ``state enterprise'' and ``delegation'' 
are included to clarify the scope of the obligations of Article 
II, paragraph 2, which provides that any governmental authority 
delegated to a state enterprise by a Party must be exercised in 
a manner consistent with the Party's obligations under the 
Treaty.

Article II (Treatment)

    Article II contains the Treaty's major obligations with 
respect to the treatment of investment.
    Paragraph 1 generally ensures the better of MFN or national 
treatment in both the entry and post-entry phases of 
investment. It thus prohibits both the screening of proposed 
foreign investment on the basis of nationality and 
discriminatory measures once the investment has been made, 
subject to specific exceptions provided for in a separate 
Annex. The United States and Latvia have both reserved certain 
exceptions in the Annex to the Treaty, the provisions of which 
are discussed in the section entitled ``Annex.''
    Paragraph 2 is designed to ensure that a Party cannot 
utilize state owned or controlled enterprises to circumvent its 
obligations under the Treaty. To this end, it requires each 
Party to observe its treaty obligations even when it chooses, 
for administrative or other reasons, to assign some portion of 
its authority to a state enterprise, such as the power to 
expropriate, grant licenses, approve commercial transactions, 
or impose quotas, fees or other charges. Paragraph 2 also 
supports competitive equality for investments by requiring that 
a Party ensure that state enterprises accord the better of 
national or MFN treatment in the sale of its goods or services 
in the Party's territory.

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