Ex. Rept. 104-11 - TREATY BETWEEN THE UNITED STATES OF AMERICA AND JAMAICA CONCERNING THE RECIPROCAL ENCOURAGEMENT AND PROTECTION OF INVESTMENT104th Congress (1995-1996)

104th Congress                                              Exec. Rept.
                                 SENATE

 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 
                               following

                              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.

                               I. Purpose

    The principal purposes for entering into a bilateral 
investment treaty (BIT) are to: protect U.S. investment abroad 
where U.S. investors do not have other agreements on which to 
rely for protection, encourage adoption of market-oriented 
domestic policies that treat private investment fairly, and 
support the development of legal standards consistent with the 
objectives of U.S. investors. The BIT, therefore, is intended 
to ensure that United States direct investment abroad and 
foreign investment in the United States receive fair, equitable 
and nondiscriminatory treatment.

                             II. Background

    The proposed treaty together with the proposed annex 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, 
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 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 
Article VIII.
    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 
application.''
    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 
investment.
    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 
        Government.
    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 and discriminatory impairment of 
investments; and requiring each Party to observe any obligation 
it may have entered into with respect to an investment (Art. 
II:2).
    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. 
III:1).
    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 
(Article IV).
    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 
expropriation.
    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 
IV transfers.
    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 
Argentina.

                  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 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

----------------------------------------------------------------------------------------------------------------
                                                      Direct                                                    
                                                    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 
released.

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 
        transfer.
          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 
        discriminated against.
          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 
        arbitration.
    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.

                             c. enforcement

    Following the hearing on the bilateral investment treaties, 
Senator Helms requested information regarding the utility of 
the bilateral investment treaty with Argentina. Specifically, 
Senator Helms requested that the State Department identify 
outstanding investment disputes with U.S. corporations doing 
business in Argentina and actions taken by the U.S. to address 
the BIT violations. Since its entry into force on October 24, 
1994, two disputes have developed in Argentina. The following 
is excerpted from the State Department's response to Senator 
Helms: \1\
---------------------------------------------------------------------------
    \1\ Letter from Assistant Secretary for Legislative Affairs, Wendy 
R. Sherman, to Senator Helms, Committee on Foreign Relations, December 
18, 1995.
---------------------------------------------------------------------------
    We are aware of two investment disputes that have developed 
in 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 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 
dispute.
    The Committee believes that the value of the proposed 
treaty depends upon the extent to which it is enforced. The 
Committee refers to the two cases in Argentina, cited above, as 
examples of how the proposed treaty can be a useful tool both 
to business and U.S. embassies in protecting the interests of 
U.S. business directly investing in-country. The Committee 
believes that the treaty should serve as more than a diplomatic 
tool. The Committee notes that local remedies and domestic 
enforcement of arbitral awards are essential steps in enforcing 
the guarantees provided in the proposed treaty and believes 
that the President should communicate, at the time of the 
exchange of the instruments of ratification, the importance of 
a domestic enforcement regime to the ultimate success of the 
proposed treaty. Such an indication would add credence to the 
U.S. position that BITs provide genuine protections to 
investors, and are not merely rhetorical endorsements of market 
economies.

             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 
reproduced below:
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    \2\ Letter from Assistant Secretary for Legislative Affairs, Wendy 
R. Sherman, to Senator Helms, Committee on Foreign Relations, December 
18, 1995.
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    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. 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).