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104th Congress Exec. Rept.
2d Session 104-11
TREATY BETWEEN THE UNITED STATES OF AMERICA AND JAMAICA CONCERNING THE
RECIPROCAL ENCOURAGEMENT AND PROTECTION OF INVESTMENT
June 20, 1996.--Ordered to be printed
Mr. Helms, from the Committee on Foreign Relations, submitted the
R E P O R T
[To accompany Treaty Doc. 103-35]
The Committee on Foreign Relations to which was referred
The Treaty Between the United States of America and Jamaica
Concerning the Reciprocal Encouragement and Protection of
Investment, with Annex and Protocol, signed at Washington on
February 4, 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.
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.
The proposed treaty together with the proposed annex and
protocol, was signed on February 4, 1994. No bilateral
investment treaty is currently in force between the United
States and Jamaica.
The proposed treaty, annex, and protocol were transmitted
to the Senate for advice and consent to ratification on
September 27, 1994 (see Treaty Doc. 103-35). The Committee on
Foreign Relations held a public hearing on the proposed treaty
together with the proposed annex and protocol on November 30,
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
investors have the right to transfer funds into and
out of the country without delay using a market rate of
inefficient and trade distorting practices such as
performance requirements are prohibited;
investment disputes may be submitted to international
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 enters into an IPR
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 Jamaica
Concerning the Encouragement and Reciprocal Protection of
Investment, with Annex (Treaty Doc. 103-35) (BIT), is based on
the United States 1990 and 1991 Model Bilateral Investment
Treaties. The following analysis compares the treaty with
Jamaica to the 1994 Model BIT. The BIT and the 1994 Model
contain the same general obligations as to coverage, treatment,
prohibitions on performance requirement, and dispute
settlement. As shown below, the 1994 Model reorganizes some of
these obligations and amplifies others.
Preamble.--The Preamble of the BIT establishes the goals of
the treaty to include: greater economic cooperation, the
stimulation of the flow of private capital and economic
development, maximization of effective utilization of economic
resources and the improvement of living standards, respect for
internationally recognized worker rights, and the 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
The preamble of the BIT does not contain language added by
the 1994 Model regarding health and environmental standards.
The 1994 Model adds to earlier Models the caption, ``Agreeing
that these [treaty] objectives can be achieved without relaxing
health, safety and environmental measures of general
Article I (general provisions).--Article I contains a
separate paragraph containing definitions; a second, reserving
the right to deny treaty benefits to companies owned or
controlled by third country nationals or companies having no
substantial business interests in the territory of the Treaty
partner or controlled by nationals with which the denying Party
does not maintain normal economic relations; and a third,
providing that any alteration of the form in which assets are
invested or reinvested will not change the character of the
The 1994 Model places the denial of benefits in a separate
article (Article XII) and does not contain a provision
containing the language of the third paragraph. State
Department officials have informed Committee staff that the
1994 Model removed this provision because it was implicit in
the definition of investment and therefore unnecessary.
Definitions in the BIT and the 1994 Model are generally
similar. Some differences are as follows:
(1) The BIT provides that an investment means every
kind of investment in the territory of one Party owned
or controlled by nationals or companies of the other
Party, while the Model defines investments in terms of
control by a national or company and contains a
separate definition for ``covered investment,'' as an
investment of a national or company of a Party in the
territory of the other Party. The State Department has
informed Committee staff that by inserting the terms
``national treatment'' and ``most favored nation''
after the descriptions of the obligations in paragraph
one of Article II, the Treaty defines these terms.
(2) The BIT includes governmentally-owned enterprises
in the definition of company, while the Model contains
a separate definition for ``state enterprise.'' The
Model makes certain obligations specifically applicable
to ``state enterprises.''
(3) Specific intellectual property rights are
slightly reformulated in the Model, which also adds a
listing for ``rights in plant varieties.''
(4) The 1994 Model adds definitions for ``investment
authorization,'' (meaning an authorization by a foreign
investment authority), ``investment agreement''
(relating to agreements with a Party regrading natural
resources or other assets controlled by the National
authorities); ICSID Convention, Centre (meaning
``International Centre for the Settlement of Investment
Disputes established by the ICSID Convention''), and
UNCITRAL Arbitration Rules.
(5) The BIT contains definitions for ``return'' and
``associated activities'' which are not contained in
the Model. The Model makes the treatment article
applicable to the establishment, acquisition,
expansion, management, conduct, operation and sale or
other disposition of covered investments, where the BIT
specifies ``investments and associated activities.''
(6) The word ``employment'' was inserted into the
Treaty in Art. II(3). According to the State
Department, this change was made for the purpose of
clarification at the request of the Jamaican
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.
The BIT also contains provisions identical to the Model as
to the minimum treatment to be accorded investments;
prohibiting arbitrary and discriminatory impairment of
investments; and requiring each Party to observe any obligation
it may have entered into with respect to an investment (Art.
The BIT also follows the Model as a to entry of nationals
for investment purposes (Art. II:3); engaging top managerial
personnel of choice (Art. II:4); prohibiting performance
requirements (Art. II:5); providing effective means of
asserting claims and enforcing rights (Art. II:6); making
public all laws, regulations, administrative processes, and
adjudicatory decisions pertaining to or affecting investments
(Art. II:7); clarifying the application of the BIT on a
national treatment basis in states, territories, and
possessions of the United States (Art. II:8); 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 of the signature of the BIT (Art. II:9).
Article III (expropriation).--The BIT follows the Model's
expropriation article as to the fundamental obligation placed
on Parties with respect to expropriatory activity
(expropriations must be 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.
The BIT and the Model differ in that the BIT provides that
compensation is to be equivalent to the fair market value (FMV)
of the expropriated investments immediately before the
expropriatory action was taken or was made known by the
authorities, whichever is earlier, where the Model provides it
should be equivalent to the fair market value of the
expropriated investments immediately before the expropriator
action was taken. While the Model qualifies this provision
stating that the FMV may not reflect any change in value
occurring because the expropriatory action had become known
before the date of expropriation (Art. III:2), the BIT also
adds a proviso in this regard, stating that the determination
of FMV may not reflect any change in the value of the
investment attributable to the expropriation or to public
knowledge of the expropriatory action before it was taken or
made known by the authorities (Art. III:1). The State
Department informs staff that this addition confirms the
Parties' understanding of the meaning of the provision
contained in the prototype and increases the level of
protection afforded to investors by this Article. A similar
sentence was added to the 1994 prototype.
The BIT provides that compensation must be calculated at a
commercially reasonable rate from the date of expropriation and
be freely transferable at the prevailing market rate of
exchange on the date of expropriation. Unlike the Model, it
does not contain separate standards for calculation based on
freely usable currency and currency that is not freely usable.
While Article III compensation is considered a transfer, the
transfer article exempts inconsistent provisions of Article
III:1 from the requirement that transfers be made in freely
usable currency at market exchange rates with respect to spot
transactions on the date of transfer (see Art. IV:2).
Losses due to civil conflicts.--The BIT provides that
investors whose investments suffer loses due to war or other
civil conflicts are to receive the better of national or MFN
treatment, with respect to any measures it adopts in relation
to such losses (Art. III:3). The 1994 Model creates a separate
article which specifies the international requirement for
obligations as to these types of loses and providing an
obligation to compensate for losses in certain circumstances
While the Model continues to require that parties accord
covered investments national and MFN treatment regarding any
measures relating to losses that investments suffer due to war
or other civil conflict or disturbance, it specifies that
Parties must accord restitution, or pay compensation in accord
with the standards set forth in the expropriation article, in
the event that covered investments suffer losses due to such
events, where the losses result from requisitioning or
unnecessary destruction of the investment (Art. IV:2).
Article IV (transfers).--The BIT is identical to the Model
in that each requires Parties to permit investment-related
transfers to be made freely into and out of their territory.
Transfer problems that may result from a lack of sufficient
currency reserves in Jamaica are addressed in the Treaty's
Protocol (discussed below).
Both the BIT and the Model cover roughly the same
transactions in their non-inclusive lists of what constitute
transfers, specifying compensation from expropriations and
losses from civil strife, payments arising out of investment
disputes, payments made under a contract, proceeds from the
sale or liquidation of an investment. While the BIT
specifically lists returns (which are defined earlier in the
Treaty and specifically include returns in kind), the Model
specifies transactions constituting returns and specifically
requires that Parties allow returns in kind to be made pursuant
to investment authorizations, investment agreements, or other
written agreements between the party and a covered investment
or a national or company of the other Party. In general,
returns would appear to have the same meaning in both.
The BIT requires 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, but provides an exemption for inconsistent
requirements of Article III:1 (Art. IV:2). The Model simply
states that Parties must allow transfers to be made in a freely
usable currency at the market rate of exchange prevailing on
the date of transfer. The exception in the BIT would appear to
mean that where expropriations are concerned, the relevant date
for determining the market rate of exchange and thus
calculating the amount to be transferred is the date of
The BIT provides that notwithstanding the former, either
Party may maintain laws and regulations requiring reports of
currency transfer and imposing income taxes by such means as
withholding tax on dividends or other transfers (Art. IV:3). In
addition, each Party may protect the rights of creditors, or
ensure judicial satisfaction of judgments, or prevent
fraudulent transfers through the equitable, nondiscriminatory
and good faith application of its law (Art. IV:3). The Model
reformulates this obligation, which appears also in the 1992
Model, to provide that notwithstanding other obligations in the
transfer article, Parties may prevent a transfer through the
equitable, non-discriminatory and good faith application of law
relating to bankruptcy, issuing and trading in securities;
criminal offenses; or ensuring compliance with judicial orders
or judgments (Art. V:4).
Article V (consultations).--The BIT follows the Model
regarding the obligation of Parties to consult with respect to
disputes and other matters arising under the Treaty, except
that the Model provides for consultations as to matters related
to the realization of treaty objectives. This additional
language may apply to the addition of health and environmental
matters in the treaty preamble.
Article VI (investor/state disputes).--The BIT and the
Model are generally similar as to their provisions for
consultation and arbitration in investor-State disputes. The
BIT, however, exhorts parties to the dispute to first attempt
to resolve their dispute through consultation and negotiation
before an investor, at his discretion, seeks judicial relief,
invokes previously agreed-upon dispute settlement, or requests
binding international arbitration. The BIT adds that a Party to
a dispute elects one of the three dispute resolution procedures
contained in the paragraph to the exclusion of the others. The
State Department informs Committee staff that this sentence
confirms the Parties' understanding of this provision. The BIT
requires a party to wait for six months from the time the
dispute arises before he may request arbitration, while the
Model cuts this time to three months (The 1992 Model also has a
six month waiting period).
As in the 1994 Model, each Party consents to the submission
of any investment dispute to binding international arbitration
in the event that the Parties to the dispute have failed to
resolve it amicably and this consent satisfies the requirement
for an agreement in writing under the ICSID Convention (BIT)
and both the Convention on the Settlement of Investment
Disputes between States and Nationals of Other States (ICSID
Convention) and the New York Convention on the Recognition and
Enforcement of Foreign Arbitral Awards (Model). As of January
1, 1995, Jamaica was a party to the ICSID Convention, but was
not a party to the New York Convention. Jamaica has
nevertheless agreed to carry out without delay the provisions
of any arbitral award rendered under the BIT dispute article
and to provide in its territory for its enforcement (Art.
VI:5). A like obligation is contained in the Model.
Unlike the Model, the BIT contains a provision referring to
Parties' obligation under Article 27 of the ICSID Convention
that neither Party will be given diplomatic protection to or
bring an international claim with respect to such an investment
dispute unless the other Party has failed to abide by and
comply with the award. Application of Article 27 does not
limit, however, informal diplomatic contacts intended to
facilitate dispute settlement in a given case.
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.
Article VIII (exemption of dispute settlement arising under
official credit agreements).--Unlike the 1994 Model, the BIT
contains a provision contained in earlier models exempts 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.
Article IX (preservation of rights).--The BIT and the Model
each allow the Parties 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 X (measures not precluded).--The BIT is identical
to Model Article XIV as to exceptions for measures necessary
for public order, the fulfillment of certain international
obligations, and protecting essential security interests.
According to transmittal documents, measures to protect a
Party's essential security interests are self-judging in
nature, although each Party would expect the provisions to be
applied by the other in good faith.
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. Where the BIT provides for
special formalities in connection with the establishment of an
investment, the Model broadens this right, referring to special
formalities with respect to covered investments in general,
providing as examples, a requirement that investments be
legally constituted under a Party's laws or a requirement that
transfers of currency or monetary transactions be reported
(Art. XIV:2). As stated earlier, however, the BIT's transfer
article specifically allows laws and regulations requiring
reports of currency transfer.
Article XI (taxation).--Unlike the Model, the BIT contains
a provision exhorting Parties to provide fair and equitable tax
treatment of investments of the other Party. Although the Model
uses somewhat stronger language as to the exemption of tax
matters from the scope of the treaty, both provide that certain
tax matters may be addressed in dispute settlements involving
expropriation and investment agreements or authorizations. The
BIT also provides such coverage for disputes involving Article
At the same time, it provides that such disputes may be
brought only if the tax matter is not subject to the dispute
settlement provisions of a tax treaty or has been raised under
such dispute settlement provisions and is not resolved within a
reasonable period of time. The Model requires that a disputant
claiming that a tax matter is involved in an expropriation must
first refer the issue to the Parties' tax authorities and seek
a determination from each of these authorities that the matter
involves an expropriation.
Article XII (extent of application).--Like the Model (Art.
XII), the BIT clarifies that it fully applies to all political
subdivisions. The Model also specifies that the treaty
obligation extends to state enterprise in the exercise of
governmental authority delegated to it by the Party.
Article XIII (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 Annex and
Protocol form an integral part of the Treaty.
Annex (sectoral exemptions).--Both the United States and
Jamaica have exempted listed sectors and matters from their MFN
and national treatment obligations. The United States
exemptions are identical to those in the 1992 Model.
Jamaica may adopt or maintain national treatment exceptions
as to the following: civil aviation; real estate; banking;
shipping; communications (including postal and telegraph
services, and broadcasting; mining and natural resources;
government grants and other assistance to small-scale
enterprises with total assets of U.S. $50,000 or less; customs
brokerages; car rental; real estate agencies; travel agencies;
gaming, betting and lotteries (Annex paragraph 3). Jamaica has
made an MFN exception for shipping.
Protocol.--The BIT contains a protocol addressing the scope
of the term ``regulation,'' requirements as to the employment
of managerial personnel, and procedures to be followed in the
event Jamaica encounters limited currency reserves.
Parties state their understanding that ``regulations''
affecting sectoral matters, as the term is used in Article
II:1(b), include the provisions of treaties to which a Party
has adhered (Protocol, paragraph 1).
As for Article II:4, regarding employment, Parties agree
that neither will apply its laws and regulations to require
that its nationals be engaged as top managerial personnel by
investments (Protocol, paragraph 2).
Under Protocol, paragraph 3, if Jamaica's foreign exchange
reserves do not permit the transfer of the proceeds of the sale
or the liquidation of all or part of an investment as provided
for in Article IV:1(e), Jamaica has agreed to allow the
transfer to take place over a period not to exceed 3 years from
the date of the transfer is requested and to make available at
least one-third to the proceeds during the first 2 years of
that period. It has further agreed to provide MFN treatment to
United States investment in this regard. Further, it must
ensure that the investor has the opportunity to invest the
proceeds in a manner to preserve its value in the interim.
Parties agree to consult under Article V as to the
implementation of the transfer article, without prejudice to
the possibility of Article VI or Article VII dispute settlement
on the matter. Similar or more extensive exceptions to transfer
provisions exist in other BITs already in force including
Poland, Egypt, Sri Lanka, Tunisia, Turkey, Zaire, and
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
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
V. Committee Action
The Committee on Foreign Relations held a public hearing on
the proposed treaty, annex and protocol with Jamaica on
November 30, 1995. The hearing was chaired by Senator Thompson.
The Committee considered the proposed treaty and annex with
Jamaica 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, 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
investment Stock Exports Imports
1992............................................ 137 892 938 644
1993............................................ 172 1053 1113 766
1994............................................ 231 1272 1066 790
1995............................................ (\1\) (\1\) 1421 895
\1\ No data.
United States direct investment flows to Jamaica
The chart above reflects the amounts of direct investment
which flowed from the United States to Jamaica in the indicated
calendar year, as published in the Commerce Department's
``Survey of Current Business.'' Data for 1995 have not yet been
United States year-end stocks of direct investment in Jamaica
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 Jamaica
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 $2.2 billion and overall
exports totaled $1.2 billion in 1994.
The Committee is encouraged by the improved climate of
openness in the Jamaican economy to foreign investment, as well
as the reduction in taxes, and believes it will have a positive
impact on the volume of U.S. business transactions in Jamaica.
Since the Jamaican economy was characterized by high
protectionism and government intervention until recently, the
Committee is encouraged that there are efforts underway to
reverse these trends. The Committee expects that ratification
of this treaty will solidify protections for U.S. citizens
doing business in Jamaica. In particular, the Committee
believes that this treaty will help bring an end to trade
distorting measures, which have proven to be deterrents to
American investment in Jamaica. The Committee is concerned,
especially urges, about black market activities in the area of
pirated video and music. However, this Convention does provide
some protections for intellectual property and the Committee
urges that this treaty be used to curb black market activities.
B. Transfer Provision
The Committee notes that the transfers provisions of the
Jamaican BIT provide for free and prompt transfer of all
payments related to an investment, with one exception. In the
case of the Jamaican BIT, transfer of the proceeds from the
sale and liquidation of an investment may be spread out over
three years with no less than one-third of the transfer of the
total being made in each of the first two years.
State Department officials have cited balance of payments
shortages in Jamaica as a reason for the modified provision. In
the 1980s, Jamaica experienced severe balance of payments
problems. Jamaican officials informed U.S. negotiators that
they wanted to conclude a U.S. BIT to improve the balance of
payments situation by attracting foreign investment, but were
concerned about maintaining adequate foreign exchange reserves.
There are many large-scale, U.S.-owned projects in Jamaica,
such as resorts and mining operations. According to State
Department officials, Jamaican officials feared that if one of
these projects were sold or liquidated, the demand for foreign
exchange could exceed their foreign exchange reserves.
State Department officials have informed Committee staff
that this was the last major outstanding issue in the
negotiation of this BIT. Jamaican officials argued that this
exception was necessary to insure that their cabinet and
parliament would accept the United States-Jamaican BIT. After
interagency review, U.S. officials concluded that securing the
benefits of a BIT for the U.S. investment community justified
agreeing to a limited restriction on transfers if Jamaica
agreed to certain safeguards.
These safeguards include:
Jamaica can only restrict the transfer of the
proceeds of the sale or liquidation of an investment if
the country has insufficient reserves to permit the
U.S. investors must receive at least the same
treatment as Jamaican nationals and the investors of
other countries, i.e., the U.S. investor cannot be
As noted earlier, Jamaica must permit at least one-
third of the transfer each year for up to three years.
Jamaica must permit the investor to make investments
which preserve the value of the remaining transfer so
that any delay in the transfer does not amount to an
interest free loan to Jamaica.
Jamaica is to consult with the U.S. on implementing
this balance of payments exception.
Both the U.S. and individual investors may resolve
disputes over this provision through international
Similar exceptions to the transfer provision exist in other
BITs already in force including those with Poland, Egypt, Sri
Lanka, Tunisia, Turkey and Zaire.
The Committee believes that, given that direct U.S.
investment to Jamaica totaled more than $400 million in 1993
and 1994 combined, there is sufficient basis for accepting this
exception to the standard provision contained in the model BIT.
However, given the importance of preserving the ability of U.S.
businesses to transfer the proceeds of sale or liquidation out
of a foreign country, the Committee does not believe that the
Jamaican variation on the transfer provision should become a
standard negotiating position and cautions against the
inclusion of such a modified provision in future BITs.
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
\1\ Letter from Assistant Secretary for Legislative Affairs, Wendy
R. Sherman, to Senator Helms, Committee on Foreign Relations, December
We are aware of two investment disputes that have developed
in Argentina recently.
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.]
Mi-Jack, based in Illinois and Texas, owns about 30 percent
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
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
d. 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. Senate 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 the 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
\2\ Letter from Assistant Secretary for Legislative Affairs, Wendy
R. Sherman, to Senator Helms, Committee on Foreign Relations, December
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
(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
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
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
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
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
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
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
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
In a country undergoing civil strife, investors are
pursuing arbitration through an international financial
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
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. 103-35.
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 Jamaica Concerning the Reciprocal Encouragement and
Protection of Investment, with Annex and Protocol, signed at
Washington on February 4, 1994 (Treaty Doc. 103-35).