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104th Congress                                              Exec. Rept.
                                 SENATE

 2d Session                                                      104-16
_______________________________________________________________________


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

                 June 20, 1996.--Ordered to be printed

_______________________________________________________________________


   Mr. Helms, from the Committee on Foreign Relations, submitted the 
                               following

                              R E P O R T

                   [To accompany Treaty Doc. 104-12]

    The Committee on Foreign Relations to which was referred 
the Treaty Between the Government of the United States of 
America and the Government of the Republic of Latvia Concerning 
the Encouragement and Reciprocal Protection of Investment, with 
Annex and Protocol, signed at Washington on January 13, 1995, 
having considered the same, reports favorably thereon without 
amendment and recommends that the Senate give its advice and 
consent to ratification thereof as set forth in this report and 
the accompanying resolution of ratification.

                               I. Purpose

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

                             II. Background

    The proposed treaty together with the proposed annex and 
protocol, was signed on January 13, 1995. No bilateral 
investment treaty is currently in force between the United 
States and Latvia.
    The proposed treaty, annex and protocol were transmitted to 
the Senate for advice and consent to ratification on July 10, 
1995 (see Treaty Doc. 104-12). The Committee on Foreign 
Relations held a public hearing on the proposed treaty together 
with the proposed annex and protocol on November 30, 1995.

                              III. Summary

                               a. general

    Bilateral investment treaties (BITs) are the result of a 
treaty program begun in 1982 as a successor to the Friendship, 
Commerce, and Navigation Treaties that formerly set the 
framework for U.S. trade and investment with foreign countries. 
The BIT is based on a U.S. model treaty.
    All parties must agree to the basic guarantees of the model 
before the United States will enter into negotiations on a 
treaty. The six basic guaranties contained in the model are:
          investors receive the better of national or most 
        favored nation status;
          expropriation of private property is limited and a 
        remedy exists;
          investors have the right to transfer funds into and 
        out of the country without delay using a market rate of 
        exchange;
          inefficient and trade distorting practices such as 
        performance requirements are prohibited;
          investment disputes may be submitted to international 
        arbitration; and
          top managerial personnel of an investor's choice may 
        be engaged regardless of nationality.
    Since 1982, the United States has signed 37 BITs, and the 
Senate has given its advice and consent to the ratification of 
24 BITs. Twenty-two BITs are currently in force. The Senate has 
ratified two treaties that have not entered into force with 
Russia, where the Duma has failed to ratifty, and with Ecuador, 
which was ratified by both countries, but the United States is 
delaying the exchange of instruments until Ecuador has fully 
implemented its obligations under the United States-Ecuador 
intellectual property rights agreement. There are currently 12 
on-going negotiations for BITs with other countries.

                       b. comparison to the model

    The Treaty Between the United States of America and the 
Republic of Latvia Concerning the Encouragement and Reciprocal 
Protection of Investment, with Annex and Protocol (Treaty Doc. 
104-12) (BIT), is based on the United States 1992 Model 
Bilateral Investment Treaty (Model). The following is an 
analysis of the major provisions of the treaty.
    Preamble.--The preamble of the BIT is identical to that of 
the Model, except for adding separate paragraphs regarding 
earlier bilateral trade, investment, and intellectual property 
rights agreements between Latvia and the United States. One 
paragraph notes the Parties' 1926 MFN agreement and 1928 
friendship, commerce, and navigation (FCN) treaty; a second 
refers to the furthering of Article Three of the Parties' 1992 
Agreement concerning the Development of Trade and Investment 
Relations; and a third notes the Parties' 1994 Agreement on 
Trade Relations and Intellectual Property Rights Protection. 
The State Department has informed Committee staff that these 
references were intended to underscore the long history of U.S. 
recognition of Latvia's independence from the Soviet Union.
    Article I (definitions and general provisions).--The BIT 
follows the Model with respect to definitions except that the 
BIT adds definitions for ``state enterprise'' and 
``delegation.'' A ``state enterprise'' is defined as ``an 
enterprise owned, or controlled through ownership interests, by 
a Party'' (Art. I: 1(f)). A ``delegation'' is defined to 
include ``a legislative grant, and a government order, 
directive, or the act transferring to a state enterprise or 
monopoly, or authorizing the exercise by a state enterprise or 
monopoly of, governmental authority (Art. I:1(g)). The State 
Department has informed Committee staff that these definitions 
were added because of the dominant role of state enterprises in 
the Latvian economy. The negotiating agencies believe that this 
addition gives U.S. investors added protection. Similar 
language can be found in NAFTA.
    The BIT follows the Model as to the right to deny treaty 
benefits to companies controlled by nationals or firms of third 
countries and the rules that any alteration of the form in 
which assets are invested or reinvested will not affect their 
character as investments (Arts. I:2, I:3).
    Article II (treatment).--The BIT contains a provision 
identical to that in the Model setting forth each Party's 
obligation to provide the better of national or MFN treatment 
to investment and associated activity of the other Party and 
its right to exempt certain sectors from this obligation (Art. 
II:1).
    The BIT also contains provisions identical to the Model as 
to the minimum treatment to be accorded investments; 
prohibiting arbitrary or discriminatory impairment of 
investments; and requiring each Party to observe any obligation 
it may have entered into with respect to an investment (Art. 
II:3).
    The BIT also follows the Model as to entry of nationals for 
investment purposes (Art. II:4); engaging top managerial 
personnel of choice (Art. II:5); prohibiting performance 
requirements (Art. II:6); providing effective means of 
asserting claims and enforcing rights (Art. II:7); making 
public all laws, regulations, administrative processes, and 
adjudicatory decisions pertaining to or affecting investments 
(Art. II:8); clarifies the application of the BIT on a national 
treatment basis in states, territories, and possessions of the 
United States (Art. II:9); removing from the scope of MFN 
treatment a Party's binding obligations under free trade areas 
or customs union and under any multilateral international 
agreement entered into under the auspices of GATT subsequent to 
the signature of the BIT (Art. II:10).
    The BIT adds a paragraph regarding state enterprises, 
stating that the BIT may not be construed to prohibit a Party 
from establishing or maintaining a state enterprise, that any 
such enterprise may not act inconsistently with Treaty 
obligations when exercising governmental authority delegated to 
it; and that the enterprise must accord the better of national 
or MFN treatment in its sale of goods or services in the 
Party's territory (Art. II:2). The State Department has 
informed Committee staff that this provision was added to 
clarify and extend the requirements of the treaty with respect 
to state enterprises given the dominant role of state 
enterprises in the Latvian economy.
    The BIT adds another paragraph further defining what are to 
be considered ``associated activities'' for purposes of the 
BIT. It lists ten additional activities, including franchises 
and other licenses,; access to registrations, licenses, 
permits, and other approvals; access to financial institutions, 
credit markets and other funds; the import and export of 
equipment and automobiles; dissemination of commercial 
information; conducting market studies; the appointment of 
commercial representatives and the participation of such 
individuals in trade fairs and promotional events; marketing 
goods and services; and access to public utilities, public 
services, commercial rental space, raw materials, inputs, and 
services of all types at nondiscriminatory prices, if the 
prices are set or controlled by the government (Art. II:11). 
The State Department has informed Committee staff that this 
provision was added to provide additional concrete examples of 
the types of associated activities for which investors should 
receive the better of national or MFN treatment. According to 
U.S. negotiators, this language was designed to avoid problems 
that U.S. businesses may face in emerging market economies, and 
its addition is seen as a plus for U.S. investors. Similar 
language can be found in BITs with NIS and Eastern European 
countries, including the Czech Republic, Slovakia, Kazakstan, 
Kyrgyzstan, Moldova, and Poland.
    Article III (expropriation).--The BIT is identical to the 
Model's expropriation article, except for defining what is 
meant by ``freely usable currency'' and deleting language 
qualifying an obligation as to transferability. This article 
prohibits expropriations of covered investments except if 
carried out for a public purpose, in a non-discriminatory 
manner, upon payment of prompt, adequate and effective 
compensation, and in accordance with due process of law and the 
minimum treatment standards set forth in Article II (generally 
requiring ``fair and equitable treatment'') (Art. III:1); sets 
forth specific requirements as to compensation (Art. III:2); 
and establishes a minimum level of compensation based on the 
currency in which the fair market value of the expropriated 
investment is denominated (Art. III:1).
    Where the Model requires that compensation ``be calculated 
in a freely usable currency on the basis of the prevailing 
market rate of exchange'' immediately before the expropriatory 
action was taken or became known, whichever is earlier, the BIT 
adds that the definition of ``freely usable currency'' is that 
found in Article 30 of the Articles of Agreement of the 
International Monetary Fund (Art. III:1). At this time, these 
currencies include the United States dollar, Japanese yen, 
German mark, French franc, and the British pound sterling. 
Further, while the BIT contains Model's obligation that 
compensation be freely transferable, it does not include the 
additional language contained in the Model that compensation be 
transferable ``at the prevailing market rate of exchange on the 
date of expropriation'' (Art. III:1). State Department 
officials informed Committee staff that this addition was added 
in order to clarify the term and does not change the meaning of 
the Model.
    Article IV (transfers).--Article IV of the BIT is identical 
to the Model regarding transfers into and out of the territory 
of a Party, except that, like the preceding Article, it 
specifies that the term ``freely usable currency'' has the same 
meaning that it has in Article 30 of the Articles of Agreement 
of the International Monetary Fund (Art. IV:2). Article IV, 
which defines transfers to include, among other things, 
compensation paid under Article III, requires in part that 
transfers be made in a freely usable currency at the current 
market rate of exchange on the date of transfer with respect to 
spot transactions in the currency to be transferred.
    Article V (consultations).--The BIT is identical to the 
Model regarding the obligation of Parties to consult with 
respect to disputes and other matters arising under the Treaty.
    Article VI (investor/state disputes).--The BIT is identical 
to the Model regarding provisions for consultation and 
arbitration in investor-State disputes. As in the Model, each 
Party consents to the submission of any investment dispute to 
binding international arbitration in the event that the dispute 
cannot be resolved amicably. Latvia is a Party to the New York 
Convention on the Recognition and Enforcement of Foreign 
Arbitral Awards. It appears not to have entered into the 
Convention reciprocally--that is, with the declaration that it 
will apply the Convention to the recognition and enforcement of 
awards made only in the territory of another contracting 
state--and thus would presumably recognize and enforce any 
foreign arbitral award that falls within Convention's scope. As 
of January 1, 1995, Latvia had not joined the Convention on the 
Settlement of Investment Disputes Between States and Nationals 
of Other States.
    Unlike the Model, the BIT does not exempt from its 
investor/state dispute procedures those disputes arising under 
the export credit, guarantee, or insurance programs of the 
Export-Import Bank of the United States or under other official 
credit, guarantee or insurance arrangements pursuant to which 
the Parties have agreed to other means of settling disputes. 
According to the State Department, EXIM, OPIC, and other 
relevant government agencies indicated prior to the negotiation 
of this Treaty that they saw no need to maintain such a 
provision.
    Article VII (interstate disputes).--The BIT is identical to 
the Model in providing for binding arbitration for interstate 
disputes in the event such a dispute has not been resolved 
through consultations or other diplomatic channels.
    Unlike the Model, the BIT does not exempt from its 
interstate dispute procedures those disputes arising under the 
export credit, guarantee, or insurance programs of the Export-
Import Bank of the United States or under other official 
credit, guarantee or insurance arrangements pursuant to which 
the Parties have agreed to other means of settling disputes. 
According to the State Department, EXIM, OPIC, and other 
relevant government agencies indicated prior to the negotiation 
of this Treaty that they saw no need to maintain such a 
provision.
    Article VIII (preservation of rights).--The BIT is 
identical to the Model in allowing each Party to provide 
investments of the other Party treatment that is more favorable 
than that minimally required under the BIT, as a result of 
national laws, regulations, administrative procedures, or 
adjudications, international legal obligations, or other 
obligations assumed by either Party.
    Article IX (exceptions).--The BIT is identical to the Model 
as to exceptions for measures necessary for public order, the 
fulfillment of certain international obligations, and 
protecting essential security interests. Like the Model, the 
BIT also allows Parties to prescribe special formalities for 
investments so long as the substance of treaty rights is not 
impaired.
    Article X (taxation).--The BIT is identical to the Model 
with respect to each Party's tax policies as applicable to 
investments of the other Party and the application of the 
treaty to tax matters in limited areas. The Treaty, and the 
dispute settlement provisions, apply to tax matters to the 
extent they are not subject to the dispute settlement 
provisions of a tax treaty, or, if so subject, have been raised 
under a tax treaty's dispute settlement procedures and are not 
resolved in a reasonable period of time. The Treaty could apply 
to tax matters in three areas: expropriation (Article III), 
transfers (Article IV), and the observance and enforcement of 
terms of an investment agreement or authorization (Article VI).
    Article XI (extent of application).--Like the Model, the 
BIT clarifies that it fully applies to all political 
subdivisions.
    Article XII (final provisions). The BIT is identical to the 
Model as to its entry into force, its application to current 
and future investments, termination, and continued temporary 
application to investments made or acquired prior to any 
termination date. As in the Model, the BIT's Annex and Protocol 
``form an integral part'' of the Treaty.
    Annex (sectoral exemptions). The BIT is identical to the 
Model as to the sectors and matters in which the United States 
may make or maintain limited exceptions from its national 
treatment and MFN obligations, except for its coverage of 
financial services in the national treatment paragraph. Where 
the Model separately exempts banking, insurance, and primary 
dealership in United States government securities, the BIT 
formulates these sectors in terms of ``banking, insurance, 
securities, and other financial services'' and eliminates the 
Model's separate listing for primary dealership in United 
States government securities (Annex, paragraph 1).
    The Annex contains a separate paragraph listing the sectors 
in which Latvia may make or maintain limited exceptions from 
its national treatment obligation (no exceptions from MFN are 
provided). These are: control of defense industries; 
manufacturing and sale of narcotics, weapons and explosives; 
control of newspapers, television and radio broadcasting 
stations, or news agencies; recovery of all renewable and non-
renewable natural resources, including resources found on the 
continental shelf; fishing; hunting; port management; banking; 
ownership and control of land; brokerage or real property; and 
gambling (Annex, paragraph 3).
    Protocol (land ownership in Latvia). Unlike the Model, the 
BIT contains a protocol addressing foreign land ownership, in 
which the Parties make clear that current Latvian legislation 
permits foreign investors to own or control land in urban 
areas, as defined under the laws of the Republic of Latvia, 
even though the ownership and control of land is listed as a 
possible sectoral exemption. State Department officials have 
informed Committee staff that this protocol was included to 
make this sector's inclusion in the national treatment annex 
entry more transparent.

                  IV. Entry Into Force and Termination

                          a. entry into force

    The proposed treaty will enter into force 30 days after the 
date of the exchange of instruments of ratification. From the 
date of its entry into force, the BIT applies to existing and 
future investments.

                             b. termination

    The proposed treaty will continue in force for ten years 
after ratification without termination. A Party may terminate 
the proposed treaty ten years after entry into force if the 
Party gives one year's written notice of termination to the 
other Party. If terminated, all existing investments would 
continue to be protected under the BIT for ten years 
thereafter.

                          V. Committee Action

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

                         VI. Committee Comments

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

                    a. current investment statistics

----------------------------------------------------------------------------------------------------------------
                                            Direct investment                Stock             Exports   Imports
----------------------------------------------------------------------------------------------------------------
1992..................................  0........................  0........................        55        11
1993..................................  0........................  0........................        90        26
1994..................................  D........................  D........................       101        48
1995..................................  no data..................  no data..................        89        96
----------------------------------------------------------------------------------------------------------------

United States direct investment flows to Latvia

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

United States year-end stocks of direct investment in Latvia

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

United States trade with Latvia

    The trade data in the chart above for 1994 and 1995 comes 
from the U.S. Bureau of Census' December 1995 press release. 
Those through 1993 are taken from the International Monetary 
Fund's ``Directions of Trade.'' The IMF received its trade data 
for this report from the Bureau of Census. The import data 
include the cost of the imported goods, shipping insurance and 
freight. Overall imports totaled $1.2 billion and overall 
exports totaled $1 billion in 1993.
    Latvia is fast becoming a stable and dynamic market 
economy. Already, the private sector makes up 55 percent of 
Gross Domestic Product. Latvia aspires to membership in the 
European Union and has signed a free trade agreement with the 
E.U. The Committee applauds the rapid progress in political and 
economic reform made by Latvia since its independence. The 
Committee realizes, however, that the people of Latvia have 
borne the burden of the economic recovery with declining living 
standards as wages and pensions failed to keep pace with 
inflation.
    The Committee believes that the Republic of Latvia is well 
poised to attract foreign investment from the United States and 
other western countries. The Committee encourages the further 
development of economic ties with Latvia and believes that the 
protections afforded in this treaty will be helpful to ensuring 
a positive investment climate for United States companies 
wishing to do business in Latvia.

                             B. Enforcement

    Following the hearing on the bilateral investment treaties, 
Senator Helms requested information regarding the utility of 
the bilateral investment treaty with Argentina. Specifically, 
Senator Helms requested that the State Department identify 
outstanding investment disputes with United States corporations 
doing business in Argentina and actions taken by the U.S. to 
address the BIT violations. Since its entry into force on 
October 24, 1994, two disputes have developed in Argentina. The 
following is excerpted from the State Department's response to 
Senator Helms: \1\
---------------------------------------------------------------------------
    \1\ Letter from Assistant Secretary for Legislative Affairs, Wendy 
R. Sherman, to Senator Helms, Committee on Foreign Relations, December 
18, 1995.

    We are aware of two investment disputes that have developed 
in Argentina recently.
1. CDSI
    CDSI is a Maryland computer firm involved in a contract 
dispute with the Cordoba provincial government in Argentina. 
CDSI believes that Cordoba officials improperly reversed a 
contract award to a firm with which it had a subcontract, 
depriving it of the value of its investment.
    Department officials have discussed the case with CDSI 
representatives in Washington. Embassy officials are in regular 
contact with CDSI representatives in Buenos Aires.
    CDSI has informed us that, if the dispute is not resolved 
through ongoing negotiations, it may avail itself of the right 
to binding arbitration under the BIT. We will continue to work 
with company and officials in Argentina to resolve this case. 
[State Department officials have informed Committee staff that 
CDSI recently reached an agreement with the provincial 
government of Cordoba. According to State Department officials 
the parties are satisfied with the agreement.]
2. Mi-Jack
    Mi-Jack, based in Illinois and Texas, owns about 30% of a 
company that purchased the right to operate one of five 
terminals at the Port of Buenos Aires. (The rest of the equity 
is not owned by Americans.) Mi-Jack is operating the dock in 
accordance with regulations, fees, and labor rules specified by 
the Government of Argentina in the tender.
    At some point after this tender process began, the 
Argentine federal government transferred adjacent dock property 
to the Buenos Aires provincial government. The provincial 
government leased the property to a company which began 
operating a sixth terminal, without the conditions imposed on 
other dock operators by the federal government. Mi-Jack 
maintains that this unequal treatment is a BIT violation, and 
has requested USG assistance.
    Department and other agency officials have discussed the 
case with Mi-Jack. Our Ambassador recently urged the Argentine 
Minister of Economy and the Governor of the Province of Buenos 
Aires to address the issues Mi-Jack has raised and resolve the 
dispute.

    The Committee believes that the value of the proposed 
treaty depends upon the extent to which it is enforced. The 
Committee refers to the two cases in Argentina, cited above, 
the examples of how the proposed treaty can be a useful tool 
both to business and U.S. embassies in protecting the interests 
of U.S. business directly investing in-country. The Committee 
believes that the treaty should serve as more than a diplomatic 
tool. The Committee notes that local remedies and domestic 
enforcement of arbitral awards are essential steps in enforcing 
the guarantees provided in the proposed treaty and believes 
that the President should communicate, at the time of the 
exchange of the instruments of ratification, the importance of 
a domestic enforcement regime to the ultimate success of the 
proposed treaty. Such an indication would add credence to the 
U.S. position that BITs provide genuine protections to 
investors, and are not merely rhetorical endorsements of market 
economies.

             C. PROTECTING U.S. BUSINESSES INVESTING ABROAD

    Although a BIT provides certain legal protections designed 
to give investors recourse in the case of unfair treatment, the 
role of the U.S. State Department and other government agencies 
such as USTR remains essential to the protection of U.S. 
citizens doing business abroad.
    Issues regarding the role of the State Department and U.S. 
posts abroad in assisting U.S. investors were raised during the 
Committee's consideration of the BIT. After the November 30, 
1995 hearing, Senator Helms requested a description of the 
general procedure at U.S. Embassies, and in Washington, for 
assisting U.S. investors when potential BIT violations, or 
investment disputes, including expropriated property claims, in 
countries not a Party to a BIT, are brought to the attention of 
the Embassy by the investors. State Department's response to 
this inquiry, in a letter dated December 18, 1995,\2\ is 
reproduced below:
---------------------------------------------------------------------------
    \2\ Letter from Assistant Secretary for Legislative Affairs, Wendy 
R. Sherman, to Senator Helms, Committee on Foreign Relations, December 
18, 1995.

    An important responsibility of all U.S. diplomatic posts 
abroad is to assist U.S. investors and property owners in the 
resolution of disputes with the host government. Where disputes 
arise, U.S. posts and the Department provide a range of 
services to the U.S. claimant.
    These services include:
          (1) advising the U.S. claimant of local legal counsel 
        which may be available to handle similar disputes;
          (2) assisting the U.S. claimant in contacting host 
        government officials which may be in a position to 
        facilitate a resolution of his claim;
          (3) directly encouraging host government officials to 
        negotiate a resolution of the claim; (such contacts may 
        be on behalf of a single claimant or multiple claimants 
        where there are a number of outstanding claims);
          (4) occasionally, where the circumstances warrant, 
        the U.S. may decide to directly espouse a claim or 
        claims; and
          (5) in addition, where a BIT is in force, other 
        options (e.g. binding investor-state arbitration) may 
        be brought to the attention of the investor and/or 
        local officials.
    Given the wide variety of circumstances associated with 
investment disputes around the globe, the range of resources 
available at individual diplomatic posts, the variety of 
assistance being requested by individual investors, and the 
diversity of host country investment regimes, a good deal of 
discretion is necessary to tailor individual responses to the 
particular circumstances of the case.
    For example, the approach taken in the case of a country 
which has a well functioning judicial system and demonstrated 
effectiveness in adjudicating disputes may be quite different 
from that taken with respect to cases where some or all of 
these conditions do not prevail. The investor's preferences 
also guide our response. The current approach to providing 
assistance to U.S. claimants in investment disputes permits us 
the flexibility needed to tailor a response that reflects both 
the conditions prevalent in the host country and the investor's 
own strategy.
    Action on investment disputes is coordinated through 
constant routine communication among Embassy and Washington 
offices. This is supplemented by periodic formal requests from 
the Department for information on investment disputes and by 
the Posts' preparation of the Investment Climate Statements for 
each country. In addition, the Department chairs the 
Interagency Staff Coordinating Group on Expropriations 
(``Expropriation Group''), which is comprised of 
representatives from the Office of the United States Trade 
Representative, the Overseas Private Investment Corporation, 
the Department of Commerce, and the Department of Treasury. 
This group meets periodically to discuss expropriation and 
related issues.
    In addition to assisting individual U.S. investors when 
they have an investment dispute, we engage in activities that 
could help prevent investment disputes. Officials in Washington 
and in our Embassies also examine investment practices in other 
nations and work to discourage other governments from passing 
legislation that might disadvantage U.S. investors and lead to 
investment disputes. The results of these examinations are 
included in the annual Investment Climate Statement, a report 
which is widely used by both U.S. officials and investors. We 
also engage in negotiations with other governments on BITs and 
multilateral disciplines that help protect the interests of 
U.S. investors.
    In the past year or two, we have reached a point where a 
significant number of BITs have entered into force and, thus, 
apply to U.S. investment. At this time, we are reviewing ways 
to even better inform our posts about the obligations contained 
in these BITs, in order to assist U.S. investors and monitor 
compliance with these obligations by our BIT treaty partners.

    The Committee supports the efforts of the State Department 
and U.S. foreign posts to educate businesses and ensure that 
the investment climate in these countries remains open and fair 
for U.S. businesses. The Committee supports the BIT as a tool 
for both businesses and U.S. diplomats to ensure fair 
investment environments where U.S. companies are doing 
business.
    In addition, Senator Helms requested an assessment of the 
utility of developing procedures at the State Department to 
ensure consistently timely response when investors bring 
foreign investment problems to the attention of U.S. Posts and 
the Department. State Department's response to this inquiry, 
was also included in the dated December 18, 1995 letter, as 
reproduced below:

    It is current State Department policy and practice to 
respond in a timely manner when investors bring investment 
problems to the attention of embassies. Any lapse in such 
practice can and should be brought to the attention of the 
Office of Investment Affairs in Washington, which will ensure 
that a response is forthcoming.
    While a timely response should be a constant, we believe 
that the nature of that response should vary from case to case. 
Investors benefit from the freedom our diplomats enjoy to 
pursue solutions tailored to the investor's problems. In some 
countries, a quiet call from an Embassy officer to a government 
official can help an investor. Elsewhere, if the government has 
not been responsive, we may directly approach senior government 
officials.
    The following examples illustrate the variety and 
complexity of individual circumstances.
          A company informed us of an investment dispute, but 
        specifically requested that we not take any action as 
        negotiations continued.
          In a country undergoing civil strife, investors are 
        pursuing arbitration through an international financial 
        institution.
          In one country, we have had to develop specialized 
        procedures and increase Embassy staffing to deal with a 
        very large number of claims.
    Supplanting our existing flexible process for assisting 
U.S. claimants with a ``one size fits all'' policy would not 
likely work to the benefit of investors. Investors gain when we 
are free to fashion a response that takes into consideration 
the facts unique to that dispute, the investor's strategy for 
obtaining resolution to the dispute, the resources available to 
the USG to promote a quick resolution to the dispute, and the 
broader economic and political context within which we and the 
investor must work to achieve the desired outcome.
    As described in the previous question, American diplomats 
and Department employees use a wide variety of strategies to 
assist U.S. citizens in investment disputes abroad. Required 
procedures could have significant resource implications without 
increasing the effectiveness of these strategies. Furthermore, 
we do not believe that a procedure developed in Washington 
which may not reflect either the unique conditions existing in 
a particular country or the experiences of our diplomats or 
businessmen is in the interests of either U.S. investors or the 
United States.

    The Committee agrees that a ``one size fits all'' approach 
to addressing how best to protect U.S. investors faced with 
disputes with foreign governments would not be useful. However, 
the Committee supports the development by State and USTR of 
flexible procedures that ensure that all U.S. investors, large 
and small, will be given timely assistance when they raise 
investment issues with the U.S. State Department, both at the 
missions and in Washington. The Committee expects that such 
procedures would ensure appropriate coordination between U.S. 
missions and the State Department and the Office of the U.S. 
Trade Representative in Washington.

            VII. Explanation of Proposed Treaty and Protocol

    For a detailed article-by-article explanation of the 
proposed bilateral investment treaty, annex, and protocol, see 
the analysis contained in the transmittal documents included in 
Treaty Doc. 104-12.

              VIII. Text of the Resolution of Ratification

    Resolved, (two-thirds of the Senators present concurring 
therein), That the Senate advise and consent to the 
ratification of The Treaty Between the Government of the United 
States of America and the Government of the Republic of Latvia 
Concerning the Encouragement and Reciprocal Protection of 
Investment, with Annex and Protocol, signed at Washington on 
January 13, 1995 (Treaty Doc. 104-12).