Additional Investment Protocol with the LatviaSenate Consideration of Treaty Document 108-20
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[Senate Treaty Document 108-20] [From the U.S. Government Printing Office] 108th Congress Treaty Doc. SENATE 2d Session 108-20 _______________________________________________________________________ ADDITIONAL INVESTMENT PROTOCOL WITH THE REPUBLIC OF LATVIA __________ MESSAGE from THE PRESIDENT OF THE UNITED STATES transmitting ADDITIONAL PROTOCOL BETWEEN THE GOVERNMENT OF THE UNITED STATES OF AMERICA AND THE GOVERNMENT OF THE REPUBLIC OF LATVIA TO THE TREATY FOR THE ENCOURAGEMENT AND RECIPROCAL PROTECTION OF INVESTMENT OF JANUARY 13, 1995, SIGNED AT BRUSSELS ON SEPTEMBER 22, 2003 March 12, 2004.--The Protocol was read the first time, and together with the accompanying papers, referred to the Committee on Foreign Relations and ordered to be printed for the use of the Senate LETTER OF TRANSMITTAL ---------- The White House, March 12, 2004. To the Senate of the United States: With a view to receiving the advice and consent of the Senate to ratification, I transmit herewith the Additional Protocol Between the Government of the United States of America and the Government of the Republic of Latvia to the Treaty for the Encouragement and Reciprocal Protection of Investment of January 13, 1995, signed at Brussels on September 22, 2003. I transmit also, for the information of the Senate, the report of the Department of State with respect to this Protocol. I have already forwarded to the Senate similar Protocols for Romania and Bulgaria and now forward simultaneously to the Senate Protocols for the Czech Republic, Estonia, Latvia, Lithuania, Poland, and the Slovak Republic. Each of these Protocols is the result of an understanding the United States reached with the European Commission and these six countries that will join the European Union (EU) on May 1, 2004, as well as with Bulgaria and Romania, which are expected to join the EU in 2007. The understanding is designed to preserve U.S. bilateral investment treaties (BITs) with each of these countries after their accession to the EU by establishing a framework acceptable to the European Commission for avoiding or remedying present and possible future incompatibilities between their BIT obligations and their future obligations of EU membership. It expresses the U.S. intent to amend the U.S. BITs, including the BIT with Latvia, in order to eliminate incompatibilities between certain BIT obligations and EU law. It also establishes a framework for addressing any future incompatibilities that may arise as EU authority in the area of investment expands in the future, and endorses the principle of protecting existing U.S. investments from any future EU measures that may restrict foreign investment in the EU. The United States has long championed the benefits of an open investment climate, both at home and abroad. It is the policy of the United States to welcome market-driven foreign investment and to permit capital to flow freely to seek its highest return. This Protocol preserves the U.S. BIT with Latvia, with which the United States has an expanding relationship, and the protections it affords U.S. investors even after Latvia joins the EU. Without it, the European Commission would likely require Latvia to terminate its U.S. BIT upon accession because of existing and possible future incompatibilities between our current BIT and EU law. I recommend that the Senate consider this Protocol as soon as possible, and give its advice and consent to ratification at an early date. George W. Bush. LETTER OF SUBMITTAL ---------- Department of State, January 2, 2004. The President, The White House. The President: I have the honor to submit to you the Additional Protocol Between the Government of the United States of America and the Government of the Republic of Latvia amending the Treaty Between the Government of the United States of America and the Government of the Republic of Latvia for the Encouragement and Reciprocal Protection of Investment of January 13, 1995, signed at Brussels on September 22, 2003. I recommend that this protocol be transmitted to the Senate for its advice and consent to ratification. This protocol is the result of an understanding that the United States reached with the European Commission and six countries that will join the European Union (``EU'') on May 1, 2004 (the Czech Republic, Estonnia, Latvia, Lithuania, Poland and the Slovak Republic), as well as with Bulgaria and Romania, which are expected to join the EU in 2007. The understanding is designed to preserve our bilateral investment treaties (``BITs'') with these countries after their accession to the EU by establishing a framework for avoiding or remedying present and possible future incompatibilities between our BITs with these eight countries and their future obligations of EU membership. In this regard, the understanding expresses the U.S. intent to conclude substantively identical amendments and formal interpretations of the BITs with each of these eight countries. In addition, the understanding establishes a framework for addressing any future incompatibilities that may arise as European Union authority in the area of investment expands and evolves in the future. It endorses the principle of protecting existing U.S. investments in these countries from any future EU measures that may restrict foreign investment in the EU, and also clarifies certain protections afforded to U.S. investments in individual member states of the EU under the Treaty Establishing the European Community (``EC Treaty''). Finally, the understanding calls for the United States and each BIT partner to interpret, through an exchange of notes, two BIT provisions: (1) the right of each BIT Party to take measures necessary for the protection of its own essential security interests, and (2) the BIT prohibition on performance requirements. Both interpretations were undertaken at the request of the European Commission to confirm the mutual understanding of the United States and Latvia in the context of EU enlargement. For example, the interpretation of the BIT provision on essential security interests confirms that, for Latvia, these interests may include interests deriving from Latvia's membership in the EU. As concerns the BIT prohibition on performance requirements, many U.S. BITs include a provision explicitly stating that the prohibition on performance requirements does not extend to conditions for the receipt or continued receipt of an advantage. The interpretation relating to performance requirements makes this explicit with respect to the U.S.- Latvia BIT. The two interpretations are enclosed for the information of the Senate. Investment by the United States has played an important role in the economic transformation of these eight countries, and the U.S. BITs have afforded important protections to U.S. investors. Prior to acceding to the EU, however, the European Commission has required that these countries terminate any international treaty containing incompatibilities with EU law. Without the understanding and the steps contemplated therein, including the specificamendments in this protocol, these countries would be required to terminate their U.S. BITs and the great majority of protections these treaties afford U.S. investors. Therefore, the understanding, together with the interpretations and specific amendments in the protocol, will preserve the benefits of these treaties and provide important additional protections for U.S. investors as the EU continues to evolve. THE U.S.-LATVIA PROTOCOL The United States champions EU enlargement and, at the same time, intends that this BIT will continue to mutually benefit U.S. and Latvian investors. By undertaking these amendments of the BIT with Latvia, which would be brought into force just prior to its accession, incompatibilities between BIT protections and EU law are eliminated, and any future problems in this respect are addressed through a framework for consultations. This action preserves our BIT with Latvia after its accession to the EU, and is consistent with the policy of the United States to welcome market-driven foreign investment and to permit capital to flow freely to seek its highest return. Latvia is one of the newly democratized countries in Europe transitioning to a market economy, and foreign direct investment into Latvia is very much in both our countries' interests. Protection for investors facilitates investment activity, and thus directly supports U.S. policy objectives. The principal substantive articles of the protocol provide as follows. Article I: that the article of the BIT prohibiting performance requirements does not limit Latvia's ability to impose, as necessary under EU law, certain kinds of performance requirements in the agricultural and audio-visual sectors; Article II: that the terms of the free trade area/ customs union exception of the BIT shall apply, without limitation, to all of a Party's obligations stemming from its membership in an economic integration agreement that includes a free trade area or customs union, such as the EU; Article III: that the BIT Parties will consult promptly whenever either Party believes that steps are necessary to assure compatibility between the BIT and the EC Treaty; Article IV: that, in certain specified sectors or matters, Latvia may take a reservation against the national treatment and most-favored-nation treatment obligations of the BIT, provided such reservation is necessary to meet Latvia's obligations under EU law, and subject to the following exception; that, notwithstanding any such new reservation, existing U.S. investments in Latvia shall remain protected under the national treatment an most-favored-nation treatment obligations of the BIT for at least 10 years from the date of the relevant EU law necessitating the reservation; and finally, that the United States reserves the right to make or maintain limited exceptions to the national treatment obligation in two new sectors or writers, fisheries and subsidies, and to the most-favored-nation treatment obligation in one new sector, fisheries. With respect to future developments in EU law, the United States recognizes that the possibility exists that these amendments may not suffice to ensure compatibility, and that consultations would be necessary to avoid or eliminate any incompatibilities that may arise. As noted above, the United States and Latvia expressly agree to such consultations in the protocol. I support this protocol to the U.S. BIT with Latvia, and I favor its transmission to the Senate at an early date. Respectfully submitted. Colin L. Powell. Enclosures: As stated.