Ex. Rept. 104-19 - TREATY BETWEEN THE GOVERNMENT OF THE UNITED STATES OF AMERICA AND THE GOVERNMENT OF THE REPUBLIC OF ALBANIA CONCERNING THE ENCOURAGEMENT AND RECIPROCAL PROTECTION OF INVESTMENT, WITH ANNEX AND PROTOCOL104th Congress (1995-1996)

104th Congress                                              Exec. Rept.
                                 SENATE

 2d Session                                                      104-19
_______________________________________________________________________


 
 TREATY BETWEEN THE GOVERNMENT OF THE UNITED STATES OF AMERICA AND THE 
GOVERNMENT OF THE REPUBLIC OF ALBANIA 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. 104-19]

    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 Albania 
Concerning the Encouragement and Reciprocal Protection of 
Investment, with Annex and Protocol, signed at Washington on 
January 11, 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 nondiscriminatory treatment.

                             II. Background

    The proposed treaty together with the proposed annex and 
protocol was signed on January 11, 1995. No bilateral 
investment treaty is currently in force between the United 
States and Albania.
    The proposed treaty, annex and protocol were transmitted to 
the Senate for advice and consent to ratification on September 
6, 1995 (see Treaty Doc. 104-19). 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 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 following is an analysis of the major provisions of the 
treaty and a comparison with the 1994 model prototype, which 
served as the foundation for the negotiation of the treaty.
    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 
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 is identical to that of the Model. 
The 1994 Model adds to the 1992 Model BIT the caption, 
``Agreeing that these [treaty] objectives can be achieved 
without relaxing health, safety and environmental measures of 
general application.''
    Article I (definitions).--The BIT is identical to the 
Model, containing definitions for the following terms: company, 
company of a party, national, investment, covered investment 
(defined as ``an investment of a national or a company of a 
Party in the territory of the other Party''), state enterprise, 
investment authorization, investment agreement, ICSID 
Convention, Centre (meaning ``International Centre for the 
Settlement of Investment Disputes established by the ICSID 
Convention''), and UNCITRAL Arbitration Rules. The State 
Department analysis accompanying the treaty states that 
definitions are intended to be broad and inclusive in nature.
    Article II (treatment of investment).--Article II 
establishes the obligations of the Parties with regard to the 
treatment of investment covered by the treaty. The Albanian BIT 
is identical to the Model, requiring Parties to grant the 
better of most-favored-nation or national treatment to covered 
investments and to ensure that state enterprises do the same 
(Art. III:1). (Most-favored-nation or ``MFN treatment'' for 
purposes of this treaty means treatment no less favorable than 
that which a Party accords, in like situations, to investments 
in its territory of nationals or companies of a third country. 
``National and MFN treatment'' for purposes of the treaty means 
whichever of national treatment or MFN treatment is the most 
favorable.)
    The BIT allows Parties to adopt or maintain exceptions to 
these obligations for sectors enumerated in the BIT Annex and 
prohibits Parties from requiring divestment of a covered 
investment at the time an exception becomes effective (Art. 
III:2(a)).
    The BIT exempts from the treatment obligation in paragraph 
one procedures adopted in multilateral agreements concluded 
under the auspices of the World Intellectual Property 
Organization (WIPO) (Art. III:2(b)).
    The BIT requires Parties to accord covered investments 
certain minimum treatment and prohibiting Parties from 
impairing investments through unreasonable or discriminatory 
measures (Art. III:3).
    The BIT requires Parties to provide effective means of 
asserting claims and enforcing rights with respect to covered 
investments (Art. II:4).
    The BIT requires that Parties ensure that all laws, 
regulations, administrative processes of general application, 
and adjudicatory decisions pertaining to or affecting 
investments are promptly published or otherwise made publicly 
available (Art. II:5).
    Article III (expropriation).--This article is identical to 
the Model: it 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 compensation based on the 
currency in which the fair market value of the expropriated 
investment is denominated, and operates to protect the investor 
from exchange rate risk (Arts. III:3, III:4).
    Separate standards are set for freely usable currency and 
for currency that is not freely usable. The term ``freely 
usable'' is not defined, although the State Department's Letter 
of Submittal indicates that the term refers to the 
International Monetary Fund standard, which currently includes 
the United States dollar, Japanese yen, German mark, French 
franc and British pound sterling.
    Article IV (compensation for damages due to war and similar 
events).--The BIT is identical to the Model, requiring 
protection of investments during war or other civil conflicts. 
Parties must 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 (Art. IV:2) and 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 V (transfers).--The BIT generally follows the 
Model, requiring Parties to allow all transfers relating to a 
covered investment to be made freely and without delay into and 
out of its territory and listing activities that constitute 
transfers (Art. V:1). Where the Model lists ``contributions to 
capital,'' the BIT contains the longer formulation, ``initial 
and additional contributions to capital relating to the 
investment'' (Art. V:1 (a)). U.S. negotiators have informed 
staff that this change was made to confirm the Parties' 
understanding of the intent of the Treaty.
    Investment-related transfers also include: profits, 
dividends, capital gains, and proceeds from the sale of all or 
any part of the investment or from the partial or complete 
liquidation of the investments; interest, royalty payments, 
management fees, and technical assistance, and other fees; 
payments made under a contract, including a loan agreement; and 
compensation pursuant to Articles III and IV and payments 
arising out of an investment dispute (Art. V:1).
    Transfers must be permitted in a freely usable currency at 
the market rate of exchange prevailing on the date of transfer 
(Art. V:2).
    There is a discrepancy in language between the Model and 
the BIT in use of the term ``return in kind'' and ``transfer in 
kind.'' Where the Model states that ``returns in kind'' must be 
permitted as authorized or specified in an investment 
authorization, investment agreement or other written agreement 
between the Party and a covered investment or a national or 
company of the other Party, the BIT applies this obligation to 
``transfers in kind'' (Art. V:3). The State Department Letter 
of Transmittal refers to this provision as allowing ``returns 
in kind.'' While the 1994 Model does not define ``return,'' the 
1992 Model defines the term as ``as amount derived from or 
associated with an investment, including profit; dividend; 
interest; capital gain; royalty payment; management, technical 
assistance or other fee; or returns in kind'' (1992 Model Art. 
I:(d)). It would appear, however, that the activities defined 
in ``return'' would generally be covered in the list of 
transfers set forth in Article V:1.
    The BIT is identical to the Model in providing that 
notwithstanding the above-described obligations, 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 judgements (Art. 
V:4).
    Article VI (performance requirements).--The BIT follows the 
Model in prohibiting specified performance requirements from 
being imposed as conditions for the establishment, acquisition, 
expansion, management, conduct or operation of a covered 
investment. Specific requirements prohibited by this article 
include the use of local goods, the export of goods or 
services, the ``balancing'' of imports and exports, the 
transfer of technology, or the conduct of research in the host 
country. ``Requirement'' is defined to include any commitment 
or undertaking in connection with the receipt of a governmental 
permission or authorization. Like the model, requirements that 
serve as conditions for the receipt or continued receipt of an 
advantage are not prohibited requirements as parties may impose 
conditions for benefits and incentives.
    Article VII (entry and employment of aliens).--The BIT is 
identical to the Model as to entry of and sojourn of aliens for 
investment purposes (Art. VII:1). Each Party may allow, subject 
to its laws and regulations, the entry into its territory of 
the other Party's nationals for certain purposes related to a 
covered investment and involving the commitment of a 
``substantial amount of capital.'' The article permits the 
engaging of top managerial personnel of choice regardless of 
nationality (Art. VII:2).
    Article VIII (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 IX (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 (Art. IX:4). Albania is a 
Party to a Convention on the Settlement of Investment Disputes 
between States and Nationals of Other States. As of January 1, 
1995, Albania had not joined the New York Convention on the 
Recognition and Enforcement of Foreign Arbitral Awards.
    Article X (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 XI (preservation of rights).--The BIT is identical 
to the Model in allowing each Party to provide covered 
investments 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 XII (denial of benefits).--The BIT follows the 
Model as to the right to deny treaty benefits to companies 
controlled by nationals or firms of third countries where (1) 
the denying party does not maintain normal economic relations 
with the third country or (2) the company has no substantial 
business activities in the territory of the Party in which it 
is legally constituted or organized.
    Article XIII (taxation).--Tax matters are excluded from the 
coverage of the BIT in order to be dealt with in bilateral tax 
treaties. However, the BIT is identical to the Model in that 
investors may institute dispute proceedings with respect to tax 
provisions of an investment agreement or authorization or with 
respect to tax matters that result in expropriations. Before 
requesting arbitration, claimants must refer the question of 
whether the tax matter involves an expropriation to the 
competent tax authorities of both Parties. Arbitration may not 
be pursued if both Parties determine within nine months of the 
referral that the matter does not involve an expropriation. 
According to transmittal documents, the ``competent tax 
authority'' of the United States is the Assistant Secretary of 
the Treasury for International Tax Policy, who will make this 
determination only after consultation with the Inter-Agency 
Staff Coordinating Group on Expropriations.
    Article XIV (measures not precluded).--The BIT is identical 
to the Model in its provision for exceptions for measures 
necessary for public order, the fulfillment of certain 
international obligations, and the protection of 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. According to transmittal 
documents, such formalities could include reporting 
requirements for covered investments or for transfers of funds, 
or incorporation requirements.
    Article XV (extent of application).--Like the Model, the 
BIT clarifies that the treaty applies to the political 
subdivisions of the Parties and clarifies the national 
treatment obligation on states, territories and possessions of 
the United States--that is, they must provide covered 
investment treatment no less favorable than that accorded 
investments of United States nationals and companies from other 
U.S. states (Art. XV:1). This provision would not affect a 
state's ability to treat an out-of-state resident or 
corporation differently than an in-state resident or 
corporation. As in the Model, a Party's BIT obligations apply 
to state enterprises in exercising any governmental authority 
delegated it by the Party (Art. XV:2).
    Article XVI (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 
the Republic of Albania have exempted listed sectors and 
matters from their MFN and national treatment obligations.
     United States. The United States may adopt or maintain 
national treatment exceptions (but must accord MFN treatment) 
in the following sectors and matters: atomic energy, 
customhouse brokers, licenses for broadcast, common carrier, or 
aeronautical radio station; COMSAT; subsidies or grants, 
including government-sponsored loans, guarantees and insurance; 
state and local measures exempt from Article 1102 of the NAFTA; 
and landing of submarine cables (Annex, paragraph 1). Both 
national treatment and MFN exceptions may be made with respect 
to fisheries, air and maritime transport and related 
activities; and banking, insurance, securities, and other 
financial services (Annex, paragraph 2).
    In addition, the United States may adopt or maintain MFN 
and national treatment exceptions with respect to insurance, 
provided that the exceptions do not result in treatment of 
covered investments that is less favorable than the treatment 
that it has agreed to accord to NAFTA parties (Annex, paragraph 
3).
    Albania. The Republic of Albania may adopt or maintain 
national treatment exceptions (but must accord MFN treatment) 
as to the following: ownership of land; banking; government 
subsidies (Annex, paragraph 4).
    Other. The Annex also contains a reciprocal national 
treatment obligation with respect to covered investments in the 
leasing of minerals or pipeline rights-of-way on government 
land (Annex, paragraph 5).
    Protocol.--The BIT contains a Protocol to the treaty 
addressing treatment of confidential information and 
obligations as to taxation. The Parties clarify that in 
entering into Article VIII consultations on matters arising 
under the Treaty, each is obliged to treat any confidential or 
proprietary information exchanged in the course of 
consultations on the same basis as the Party providing the 
information (Protocol, paragraph 1).
    The Parties also confirm that Article XIII does not 
obligate Parties to accord national treatment as to tax matters 
except as otherwise provided in an investment authorization or 
an investment agreement (Protocol, paragraph 2).

                  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 writtennotice 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 Albania on 
November 30, 1995. The hearing was chaired by Senator Thompson. 
The Committee considered the proposed treaty, annex and 
protocol with Albania 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           36            6
1993........................................................            0            0           34            8
1994........................................................           17            5           16            7
1995........................................................        (\1\)        (\1\)           14           10
----------------------------------------------------------------------------------------------------------------
\1\ No data.                                                                                                    

United States direct investment flows to Albania

    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 Albania

    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 date 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 Albania

    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 $621 million and overall 
exports totaled $112 million in 1993.
    The Committee recognizes that Albania is an extremely poor 
country and that the transition to an open market economy will 
be slow and difficult. The Committee encourages the Government 
of Albania to make use of the proposed treaty to encourage 
United States foreign investment, thereby increasing the small 
gains it has made in United States foreign direct investment. 
The Committee believes that only through the development of an 
open and free market will Albania be able to attract 
substantial foreign investment that will both benefit the 
Albanian people and support United States exports.

                   b. unresolved investment disputes

    The Committee is pleased that agreement has been reached to 
compensate United States citizens whose property was 
appropriated by the former communist Government in Albania. The 
``Agreement on the Settlement of Certain Outstanding Claims'' 
provides that the Government of Albania will pay to the United 
States Government a lump sum of $2 million in settlement of all 
claims ``arising from any nationalization, expropriation, 
intervention, and other taking of, or measures affecting, 
property of nationals of the United States prior to the date of 
this agreement.'' State Department officials have informed 
Committee staff that they are in the process of negotiating 
payment and have every expectation of receiving the $2 million 
from gold reserves garnished during World War II.
    The Foreign Claims Settlement Commission of the Department 
of Justice is currently conducting a claims solicitation and 
adjudication program in order to make awards to eligible U.S. 
national claimants. To date, the Commissioners have acted on 
132 claims. Once all claims have been adjudicated and awards 
determined, those claimants will be paid pro rata from the 
settlement amount. As of April 30, 1996, 298 claims had been 
filed by U.S. citizens. The Committee understands that because 
of the age of some of the claims, which date back to the 1940s, 
and the lack of records in Albania, progress may be slow and 
some of the claims difficult to resolve. The Committee 
supports, however, fair and timely adjudication of these 
claims.

                             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 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, as 
examples of how the proposed treaty can be a useful tool both 
to business and United States embassies in protecting the 
interests of United States 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. 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 contracts 
        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 quite 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. 104-19.

              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 Albania 
Concerning the Encouragement and Reciprocal Protection of 
Investment, with Annex and Protocol, signed at Washington on 
January 11, 1995 (Treaty Doc. 104-19).