Estonia Bilateral Investment Treaty
April 19, 1994; Entered into Force February 16, 1997
103D Congress 2D Session
Senate Treaty Doc.
TREATY BETWEEN THE GOVERNMENT OF THE UNITED
STATES OF AMERICA AND THE GOVERNMENT OF THE REPUBLIC OF ESTONIA
CONCERNING THE ENCOURAGEMENT AND RECIPROCAL PROTECTION OF INVESTMENT,
WITH ANNEX, DONE AT WASHINGTON ON APRIL 19, 1994
THE PRESIDENT OF THE UNITED STATES
TREATY BETWEEN THE GOVERNMENT OF THE UNITED
STATES OF AMERICA AND THE GOVERNMENT OF THE REPUBLIC OF ESTONIA
CONCERNING THE ENCOURAGEMENT AND RECIPROCAL PROTECTION OF INVESTMENT,
WITH ANNEX DONE AT WASHINGTON ON APRIL 19, 1994
September 27, 1994.-Convention 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
U.S. GOVERNMENT PRINTING OFFICE
79-118 WASHINGTON: 1994
THE WHITE HOUSE, September 27, 1994
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 Treaty Between
the Government of the United States Of America and the Government of
the Republic of Estonia for the Encouragement and Reciprocal
Protection of Investment, with Annex, done at Washington on April 19,
1994. Also transmitted for the information of the Senate is the report
of the Department of State with respect to this Treaty.
This bilateral investment Treaty with Estonia is
the first such Treaty between the United States and a Baltic state.
This Treaty will protect U.S. investors and assist the Republic of
Estonia in its efforts to develop its economy by creating conditions
more favorable for U.S. private investment and thus strengthening the
development of the private sector.
The Treaty is fully consistent with U.S. policy
toward international and domestic investment. A specific tenet of U.S.
policy, reflected in this Treaty, is that U.S. investment abroad and
foreign investment in the United States should receive national
treatment. Under this Treaty, the Parties also agree to international
law standards for expropriation and compensation for expropriation;
free transfer of funds associated with investments; freedom of
investments from performance requirements; fair, equitable and
most-favored-nation treatment; and the investor or investment's
freedom to choose to resolve disputes with the host government through
I recommend that the Senate consider this Treaty
as soon as possible, and give ita advice and consent to ratification
of the Treaty, with Annex, at an early date.
WILLIAM J. CLINTON.
DEPARTMENT OF STATE,
Washington, September 7,1994.
The White House.
THE PRESIDENT: I have the honor to submit to you
the Treaty between the Government of the United States of America and
the Government of the Republic of Estonia Concerning the Encouragement
and Reciprocal Protection of Investment signed at Washington on April
19, 1994. I recommend that this Treaty be transmitted to the Senate
for its advice and consent to ratification.
The bilateral investment treaty (BIT) with
Estonia was the first such treaty between the United States and a
Baltic state. The Treaty is based on the view that an open investment
policy contributes to economic growth. This Treaty will assist the
Republic of Estonia in its efforts to develop its economy by creating
conditions more favorable for U.S. private investment and thus
strengthening the development of the private sector. It is U.S.
policy, however, to advise potential treaty partners during BIT
negotiations that conclusion of a BIT does not necessarily result in
immediate increases in private U.S. investment flows.
To date, nineteen BITs are in force for the
United States--with Bangladesh, Bulgaria, Cameroon, the Congo, the
Czech Republic, Egypt, Grenada, Kazakhstan, Kyrgyzstan, Morocco,
Panama, Poland, Romania, Senegal, Slovakia, Sri Lanka, Tunisia,
Turkey, and Zaire. In addition to the Treaty with the Republic of
Estonia, the United States has signed, but not yet brought into force,
BITs with Argentina, Armenia Belarus, Ecuador, Georgia, Haiti,
Jamaica, Moldova, Russia, and Ukraine.
The Office of the United States Trade
Representative and the Department of State jointly led this BIT
negotiation, with assistance from the Departments of Commerce and
Treasury and the Overseas Private Investment Corporation.
THE U.S.-ESTONIA TREATY
The Treaty with the Republic of Estonia is based
on the 1992 U.S. prototype BIT, and achieves all of the prototype's
objectives, which are:
--All forms of U.S. investment in the territory
of Ukraine are covered.
--Investments receive the better of national
treatment or most-favored-nation (MFN) treatment both on establishment
and thereafter, subject to certain specified exceptions.
--Performance requirements may not be imposed
upon or enforced against investments.
--Expropriation can occur only in accordance
with international law standards; that is, for a public purpose; in a
nondiscriminatory manner; in accordance with due process of law; and
upon payment of prompt, adequate, and effective compensation.
--The unrestricted transfer, in a freely usable
currency, of funds related to an investment is guaranteed.
-Investment disputes with the host government
may be brought by investors, or by their subsidiaries, to binding
international arbitration as an alternative to domestic courts.
The U.S.-Estonia Treaty differs from the
prototype in some respects. It eliminates Article VIII of the 1992
prototype text which had excluded from the dispute settlement
provisions of the BIT those disputes arising under the export credit,
guarantee or insurance programs of the Export-Import Bank of the
United States, as well as those arising under any other such official
programs pursuant to which the Parties agreed to other means of
settling disputes. The Export-Import Bank, the Overseas Private
Investment Corporation and other relevant government agencies
indicated prior to this negotiation that they saw no need to maintain
such a provision.
The U.S.-Estonia Treaty also differs from the
prototype in that it includes provisions at Article I, paragraph 1 (f)
and (g), and Article II, paragraph 2, which clarify and extend the
requirements of the Treaty with respect to state enterprises, and
Article II, paragraph 11, which clarifies that investors should
receive the better of national or MFN treatment with respect to
activities associated with their investment This new language is
discussed in further detail in the article-by-article analysis of the
The following is an article-by-article analysis
of the provisions of the Treaty:
The Preamble states the goals of the Treaty. The
Treaty is premised on the view that an open investment policy leads to
economic growth. These goals include economic cooperation, increased
flow of capital, a stable framework for investment, development of
respect for internationally-recognized worker rights, and maximum
efficiency in the use of economic resources. The U.S.-Estonia preamble
also refers to two agreements with Estonia dating from 1925--the
bilateral Most-Favored-Nation Agreement, and the Treaty of Friendship,
Commerce and Consular Relations--as well as the 1992 Bilateral
Agreement Concerning the Development of Trade and Investment
Relations. While the Preamble does not impose binding obligations, its
statement of goals may serve to assist in the interpretation of the
Article I (Definitions)
Article I sets out definitions for terms used
throughout the Treaty. As a general matter, they are designed to be
broad and inclusive in nature.
The Treaty's definition of investment is broad,
recognizing that investment can take a wide variety of forms. It
covers investments that are owned or controlled by nationals or
companies of one of the Treaty partners in the territory of the other.
Investments can be made either directly or indirectly through one or
more subsidiaries, including those of third countries. Control is not
specifically defined in the Treaty. Ownership of over 50 percent of
the voting stock of a company would normally convey control, but in
many cases the requirement could be satisfied by less than that
The definition provides a non-exclusive list of
assets, claims and rights that constitute investment. These include
both tangible and intangible property, interests in a company or its
assets, "a claim to money or performance having economic value,
and associated with an investment," intellectual property rights,
and any rights conferred by law or contract (such as government-issued
licenses and permits). The requirement that a "claim to money,"
be associated with an investment excludes claims arising solely from
trade transactions, such as a transaction involving only a
cross-border sale of goods, from being considered investments covered
by the Treaty.
Under paragraph 2 of Article I, either country
may deny the benefits of the Treaty to investments by companies
established in the other that are owned or controlled by nationals of
a third country if 1) the company is a mere shell, without substantial
business activities in the home country, or 2) the third country is
one with which the denying Party does not maintain normal economic
relations. For example, at this time the United States does not
maintain normal economic relations with, inter alia, Cuba or Libya
Paragraph 3 confirms that any alternation in the
form in which an asset is invested or reinvested shall not affect its
character as an investment. For example, a change in the corporate
form of an investment will not deprive it of protection under the
The definition of "company" is broad
in order to cover virtually any type of legal entity, including any
corporation, company, association, or other entity that is organized
under the laws and regulations of a Party. The definition also ensures
that companies of a Party that establish investments in the territory
of the other Party have their investments covered by the Treaty, even
if the parent company is ultimately owned by non-Party nationals,
although the other Party may deny the benefits of the Treaty in the
limited circumstances set forth in Article I, paragraph 2. Likewise, a
company of a third country that is owned or controlled by nationals or
companies of a Party will also be covered. The definition also covers
charitable and non-profit entities, as well as entities that are owned
or controlled by the state.
The Treaty defines "national" as a
natural person who is a national of a Party under its own laws. Under
U.S. law, the term "national" is broader than the term "citizen;"
for example, a native of American Samoa is a national of the United
States, but not a citizen.
"Return" is defined as "an amount
derived from or associated with an investment." The Treaty
provides a non-exclusive list of examples, including: profits;
dividends; interest; capital gains; royalty payments; management,
technical assistance or other fees; and returns in kind. The scope of
this definition provides breadth to the Treaty's transfer provisions
in Article IV.
The Treaty recognizes that the operation of an
investment requires protections extending beyond the investment to
numerous related activities. This definition provides an illustrative
list of such investor activities, including operating a business
facility, borrowing money, disposing of property, issuing stock and
purchasing foreign exchange for imports. These activities are covered
by Article II, paragraph 1, which guarantees the better of national or
MFN treatment for investments and associated activities.
"State enterprise" is defined as an
enterprise owned, or controlled through ownership interests, by a
"Delegation" is defined to include a
legislative grant, government order, directive or other act winch
transfers governmental authority to a state enterprise or authorizes a
state enterprise to exercise such authority.
The definitions of "state enterprise"
and "delegation" are included to clarify the scope of the
obligations of Article II, paragraph 2, which provides that any
governmental authority delegated to a state enterprise by a Party must
be exercised in a manner consistent with the Party's obligations under
Article II (Treatment)
Article II contains the Treaty's major
obligations with respect to the treatment of investment.
Paragraph I generally
ensures the better of MFN or national treatment in both the entry and
post-entry phases of investment. It thus prohibits both the screening
of proposed foreign investment on the basis of nationality and
discriminatory measures once the investment has been made, subject to
specific exceptions provided for in a separate Annex. The United
States and the Republic of Estonia have both reserved certain
exceptions in the Annex to the Treaty, the provisions of which are
discussed in the section entitled "Annex."
Paragraph 2 is designed to ensure that a Party
cannot utilize state owned or controlled enterprises to circumvent its
obligations under the Treaty. To this end, it requires each Party to
observe its treaty obligations even when it chooses, for
administrative or other reasons, to assign some portion of its
authority to a state enterprise, such as the power to expropriate,
grant licenses, approve commercial transactions, or impose quotas,
fees or other charges. Paragraph 2 also supports competitive equality
for investments by requiring that a Party ensure that state
enterprises accord the better of national or MFN treatment in the sale
of its goods or services in the Party's territory.
Paragraph 3 guarantees that investment shall be
granted "fair and equitable" treatment. It also prohibits
Parties from impairing, through arbitrary or discriminatory means, the
management, operation, maintenance, use, enjoyment, acquisition,
expansion or disposal of investment. This paragraph sets out a minimum
standard of treatment based on customary international law.
In paragraph 3(c), each Party pledges to respect
any obligation it may have entered into with respect to investments.
Thus, in dispute settlement under Articles VI or VII, a Party would be
foreclosed from arguing, on the basis of sovereignty, that it may
unilaterally ignore its obligations to such investments.
Paragraph 4 allows, subject to each Party's
immigration laws and regulations, the entry of each Party's nationals
into the territory of the other for purposes linked to investment and
involving the commitment of a "substantial amount of capital."
This paragraph serves to render nationals of a BIT partner eligible
for treaty-investor visas under U.S. immigration law and guarantees
similar treatment for U.S. investors.
Paragraph 5 guarantees companies the right to
engage top managerial personnel of their choice, regardless of
Under paragraph 6, neither Party may impose
performance requirements such as those conditioning investment on the
export of goods produced or the local purchase of goods or services.
Such requirements are major burdens on investors.
Paragraph 7 provides that each Party must
provide effective means of asserting rights and claims with respect to
investment, investment agreements and any investment authorizations.
Under paragraph 8, each Party must make publicly available all laws,
administrative practices and adjudicatory procedures pertaining to or
Paragraph 9 recognizes that under the U.S.
federal system, States of the United States may, in some instances,
treat out-of-State residents and corporations in a different manner
than they treat in-State residents and corporations. The Treaty
provides that the national treatment commitment, with respect to the
States, means treatment no less favorable than that provided to U.S.
out-of-State residents and corporations.
Paragraph 10 limits the Article's MFN obligation
by providing that it will not apply to advantages accorded by either
Party to third countries by virtue of a Party's membership in a free
trade area or customs union or a future multilateral agreement under
the auspices of the General Agreement on Tariffs and Trade (GATT). The
free trade area exception in this Treaty is analogous to the exception
provided for with respect to trade in the GATT.
Paragraph 11 is designed to avoid problems that
U.S. businesses may face in emerging market economies. This provision
spells out that nationals and companies of either Party receive the
better of national or MFN treatment with respect to a detailed list of
activities associated with their investments.
Article III (Expropriation)
Article III incorporates into the Treaty the
international law standards for expropriation and compensation.
Paragraph I describes the general rights of
investors and obligations of the Parties with respect to expropriation
and nationalization. These rights also apply to direct or indirect
state measures "tantamount to expropriation or nationalization,"
and thus apply to "creeping expropriation" that result in a
substantial deprivation of the benefit of an investment without taking
of the title to the investment.
Paragraph 1 further bars all expropriations or
nationalizations except those that are for a public purpose; carried
out in a non-discriminatory manner, subject to "prompt, adequate,
and effective compensation"; subject to due process; and accorded
the treatment provided in the standards of Article Il (3). (These
standards guarantee fair and equitable treatment and prohibit the
arbitrary and discriminatory impairment of investment in its broadest
The second sentence of paragraph 1 clarifies the
meaning of "prompt, adequate, and effective compensation."
Compensation must be equivalent to the fair market value of the
expropriated investment immediately before the expropriatory action
was taken or became known (whichever is earlier); be paid without
delay, include interest at a commercially reasonable rate from the
date of expropriation; be fully realizable; be freely transferable;
and be calculated in a freely usable currency on the basis of the
prevailing market rate of exchange.
Paragraph 2 entitles an investor claiming that
an expropriation has occurred to prompt judicial or administrative
review of the claim in the host country, including a determination of
whether the expropriation and any compensation conform to
Paragraph 3 entitles investors to the better of
national or MFN treatment with respect to losses related to war or
civil disturbances, but, unlike paragraph 1, does not specify an
absolute obligation to pay compensation for such losses.
Article IV (Transfers)
Article IV protects investors from certain
government exchange controls limiting current account and capital
In paragraph 1, the Parties agree to permit "transfers
related to an investment to be made freely and without delay into and
out of its territory." Paragraph 1 also provides a non-exclusive
list of transfers that must be allowed, including returns (as defined
in Article I); payments made in compensation (as defined in Article
III); payments arising out of an investment dispute; payments made
under a contract, including the amortization of principal and interest
payments on a loan; proceeds from the liquidation or sale of all or
part of an investment; and additional contributions to capital for the
maintenance or development of an investment.
Paragraph 2 provides that transfers are to be
made in a "freely usable currency" at the prevailing market
rate of exchange on the date of transfer with respect to spot
transactions in the currency to be transferred. "Freely usable"
is a standard of the International Monetary Fund; at present there are
five such "freely usable" currencies: the U.S. dollar,
Japanese yen, German mark, French franc and British pound sterling.
Paragraph 3 recognizes that notwithstanding
these guarantees, Parties may maintain certain laws or obligations
that could affect transfers with respect to investments. It provides
that the Parties may require reports of currency transfers and impose
income tax by such means as a withholding tax an dividends. It also
recognizes that Parties may protect the rights of creditors and ensure
the satisfaction of judgments in adjudicatory proceedings through the
laws, even if such measures interfere with transfers. Such laws must
be applied in an equitable, nondiscriminatory and good faith manner.
Article V (State-State consultations)
Article V provides for prompt consultation
between the Parties, at either Party's request, on any matter relating
to the interpretation or application of the Treaty.
Article VI (State-investor dispute resolution)
Article VI sets forth several means by which
disputes between an investor and the host country may be settled.
Article VI procedures apply to an "Investment
dispute," a term which covers any dispute arising out of or
relating to an investment authorization, an agreement between the
investor and the host government, or to rights granted by the Treaty
with respect to an investment.
When a dispute arises, Article VI, paragraph 2,
provides that the disputants should initially seek to resolve the
dispute by consultation and negotiation, which may include non-binding
third party procedures. Should such consultations fail, paragraph 2
and 3 set forth the investor's range of choices of dispute settlement.
Paragraph 2 permits the investor to make an exclusive and irrevocable
choice to: (1) employ one of the several arbitration procedures
outlined in the Treaty; (2) submit the dispute to procedures
previously agreed upon by the investor and the host country government
in an investment agreement or otherwise; or (3) submit the dispute to
the local courts or administrative tribunals of the host country.
Under paragraph 3, if the investor has not
submitted the dispute under the procedures in paragraph 2 and six
months have elapsed from the date the dispute arose, the investor may
consent to submission of the dispute for binding arbitration by either
the International Centre for the Settlement of Investment Disputes
(ICSID) (if the host country has joined the Centre--otherwise the
ICSID Additional Facility is available) or ad hoc arbitration using
the Arbitration Rules of the United Nations Commission on
International Trade Law (UNCITRAL). Paragraph 3 also recognizes that,
by mutual agreement, the parties to the dispute may choose another
arbitral institution or set of arbitral rules.
Paragraph 4 contains the consent of the United
States and the Republic of Estonia to the submission of investment
disputes to binding arbitration in accordance with the choice of the
Paragraph 5 provides that a non-ICSID
arbitration shall take place in a country that is a party to the
United Nations Convention on the Recognition and Enforcement of
Foreign Arbitral Awards. This requirement enhances the ability of
investors to enforce their arbitral awards. In addition, paragraph 6
includes a separate commitment by each Party to enforce arbitral
awards rendered pursuant to Article VI procedures.
Paragraph 7 provides that in any dispute
settlement procedure, a Party may not invoke as a defense,
counterclaim, set-off or in any other manner the fact that the company
or national has received or will be reimbursed for the same damages
under an insurance or guarantee contract.
Paragraph 8 is included in the Treaty to ensure
that ICSID arbitration will be available for investors making
investments in the form of companies, created under the laws of the
Party with which there is a dispute.
Article VII (State-State arbitration)
Article VII provides for binding arbitration of
disputes between the United States and the Republic of Estonia that
are not resolved through consultations or other diplomatic channels.
The article constitutes each Party's prior consent to arbitration. It
provides for the selection of arbitrators, establishes time limits for
submissions, and requires the Parties to bear the costs equally unless
otherwise directed by the Tribunal.
Article VIII (Preservation of rights)
Article VIII clarifies that the Treaty is meant
only to establish a floor for the treatment of foreign investment. An
investor may be entitled to more favorable treatment through domestic
legislation, other international legal obligations, or a specific
obligation assumed by a Party with respect to that investor. This
provision ensures that the Treaty will not be interpreted to derogate
from any entitlement to such more favorable treatment.
Article IX (Measures not precluded)
Paragraph 1 of Article IX reserves the right of
a Party to take measures for the maintenance of public order and the
fulfillment of its obligations with respect to international peace and
security, as well as those measures it regards as necessary for the
protection of its own essential security interests. These provisions
are common in international investment agreements.
The maintenance of public order would include
measures taken pursuant to a Party's police powers to ensure public
health and safety. International obligations with respect to peace and
security would include, for example obligations arising out of Chapter
VII of the United Nations Charter. Measures permitted by the provision
on the protection of a Party's essential security interests would
include security-related actions taken in time of war or national
emergency; actions not arising from a state of war or national
emergency must have a clear and direct relationship to the essential
security interest of the Party involved.
The second paragraph allows a Party to
promulgate special formalities in connection with the establishment of
investment, provided that the formalities do not impair the substance
of any Treaty rights. Such formalities would include, for example,
U.S. reporting requirements for certain inward investment.
Article X (Tax policies)
Paragraph 1 exhorts both countries to provide
fair and equitable treatment to investors with respect to tax
policies. However, tax matters are generally excluded from the
coverage of the Treaty based on the assumption that tax matters are
properly covered by bilateral tax treaties.
The Treaty, and particularly the dispute
settlement provisions do apply to tax matters in three areas, 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.
Pursuant to Paragraph 2, the three areas where
the Treaty could apply to tax matters are expropriation (Article III),
transfers (Article IV), and the observance and enforcement of terms of
an investment agreement or authorization (Article VI (1) (a) or (b)).
These three areas are important for investors, and two of the
three--expropriatory taxation and tax provisions contained in an
investment agreement or authorization--are not typically addressed in
Article XI (Application to political
Article XI makes clear that the obligations of
the Treaty are applicable to all political subdivisions of the
Parties, such as provincial, state and local governments.
Article XII (Entry into force, duration and
The Treaty enters into force thirty days after
exchange of instruments of ratification and continues in force for a
period of ten years. From the date of its entry into force, the Treaty
applies to existing and future investments. After the ten-year term,
the Treaty will continue in force unless terminated by either Party
upon one year's notice. If the Treaty is terminated, all existing
investments would continue to be protected under the Treaty for ten
U.S. bilateral investment treaties allow for
sectoral exceptions to national and MFN treatment. The U.S. exceptions
are designed to protect governmental regulatory interests and to
accommodate the derogations from national treatment and, in some
cases, MFN treatment in existing federal law.
The U.S. portion of the Annex contains a list of
sectors and matters in which, for various legal and historical
reasons, the federal government or the States may not necessarily
treat investments of nationals or companies of the other Party as they
do U.S. investments or investments from a third country. The U.S.
exceptions from national treatment are: air transportation; ocean and
coastal shipping, banking, insurance, securities, and other financial
services; government grants; government insurance and loan programs;
energy and power production; customhouse brokers; ownership of real
property; ownership and operation of broadcast or common carrier radio
and television stations; ownership of shares in the Communications
Satellite Corporation; the provision of common carrier telephone and
telegraph services; the provision of submarine cable services; use of
land and natural resources; mining on the public domain; and maritime
and maritime-related services.
Ownership of real property, mining on the public
domain, maritime and maritime-related services, and primary dealership
in U.S. government securities are excluded from MFN as well as
national treatment commitments. The last three sectors are exempted by
the United States from MFN treatment obligations because of U.S. laws
that require reciprocity. Enforcement of reciprocity provisions could
deny both national and MFN treatment.
The listing of a sector does not necessarily
signify that domestic laws have entirely reserved it for nationals.
Future restrictions or limitations on foreign investment are only
permitted in the sectors listed, must be made on an MFN basis, unless
otherwise specified in the Annex; and must be appropriately notified.
Any additional restrictions or limitations which a Party may adopt
with respect to listed sectors may not affect existing investments.
The Republic of Estonia exceptions to national
treatment are: banking, including loan and saving institutions;
government grants; government insurance and loan programs; ownership
of real property, use of land and natural resources; initial
acquisition from the Republic of Estonia and its municipalities of
state and municipal property in the course of denationalization and
privatization. These exceptions were based on provisions of investment
measures currently in force or under active consideration by the
Government of the Republic of Estonia. The Republic of Estonia has not
reserved any sectoral exceptions to MFN treatment in the Annex.
The other U.S. Government agencies which
negotiated the Treaty join me in recommending that it be transmitted
to the Senate at an early date.
GOVERNMENT 0F THE UNITED STATES OF AMERICA
GOVERNMENT OF THE REPUBLIC OF ESTONIA
ENCOURAGEMENT AND RECIPROCAL
Government of the United States of America and the Government of the
Republic of Estonia (hereinafter the "Parties");
to promote greater economic cooperation between them, with respect to
investment by nationals and companies of one Party in the Territory of
the other Party;
Recognizing that agreement
upon the treatment tobe
accorded such investment will stimulate the flow of private capital and
the economic development of the Parties;
that fair and equitable treatment of investment is desirable in order to
maintain a stable framework for investment and maximum effective
utilization of economic resources;
Recognizing that the development of economic and business ties can
contribute to the well-being of workers in both Parties and promote
respect for internationally recognized worker rights;
the bilateral Most-Favored-Nation Agreement of March 2, 1925 and the
bilateral Treaty of Friendship, Commerce and Consular Relations on
December 23, 1925 between the Parties;
furtherance of Article Three of the Bilateral Agreement Concerning the
Development of Trade and Investment Relations of September 17, 1992
between the Parties, and
resolved to conclude
a Treaty concerning the encouragement and reciprocal protection of
agreed as follows:
1. For the
purposes of this Treaty,
means every kind of investment in the territory of one Party owned or
controlled directly or indirectly by nationals or companies of the other
Party, such as equity, debt, and service and investment contracts; and
tangible and intangible property, including rights, such as mortgages,
liens and pledges;
company or shares of stock or other interests in a company or interests
in the assets thereof;
claim to money or a claim to performance having economic value, and
associated with an investment;
property which includes, interalia,
rights relating to:
and artistic works including sound recordings;
inventions in all fields of human endeavor;
semiconductor mask works;
secrets, know-how, and confidential business information; and
trademarks, service marks, and trade names; and
right conferred by law or contract, and any licenses and permits
pursuant to law;
oil a Party means any kind oil corporation, company, association,
ownership, or other organization, legally constituted under the laws and
regulations of a Party or a political subdivision thereof whether or not
organized for pecuniary gain, or privately or governmentally owned or
of a Party means a natural person who is national of a Party under its
means an 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;
activities" include the organization, control, operation,
maintenance and disposition of companies, branches, agencies, offices,
factories or other facilities for the conduct of business; "he
making, performance and enforcement of contracts; the acquisition, use,
protection and disposition of property of all kinds including
intellectual property rights; the purchase, issuance, and sale of equity
shares and other securities; and the purchase of foreign exchange for
enterprise" means an enterprise owned, or controlled through
ownership interests, by a Party;
includes a legislative grant, and a government order, directive or other
act transferring to a state enterprise or monopoly, or authorizing the
exercise by a state enterprise or monopoly of, governmental authority.
Party reserves the
right to deny to any company the advantages of this Treaty if nationals
of any third country control such company and, in the case of a company
of the other Party, that company has no substantial business activities
in the territory of the other Party or is controlled by nationals of a
third country with which the denying Party does not maintain normal
alteration of the form in which assets are invested or reinvested shall
not affect their character as investment.
Party shall permit and treat investment, and activities associated
therewith, on a basis no less favorable than that accorded in like
situations to investment or associated activities of its own nationals
or companies, or of nationals or companies of any third country,
whichever is the most favorable, subject to the right of each Party to
make or maintain exceptions falling within one of the sectors or matters
listed in the Annex to this Treaty. Each Party agrees to notify the
other Party on its request of all such laws and regulations concerning
the sectors or matters listed in the Annex. Moreover, each Party agrees
to limit such exceptions to a minimum. Any future exception by either
Party shall not apply to investment existing in that sector or matter at
the time the exception becomes effective. The treatment accorded
pursuant to any exceptions shall, unless specified otherwise in the
Annex, be not less favorable than that accorded in like situations to
investments and associated activities of nationals or companies of any
Nothing in this Treaty shall be construed to prevent a Party from
maintaining or establishing a state enterprise.
Party shall ensure that any state enterprise that it maintains or
establishes acts in a manner that is not inconsistent with the Party's
obligations under 'this Treaty wherever such enterprise exercises any
regulatory, administrative or other governmental authority that the
Party has delegated to it, such as the power to expropriate, grant
licenses, approve commercial transactions, or impose quotas, fees or
Party shall ensure that any state enterprise that it maintains or
establishes accords the better of national or most-favored-nation
treatment in the sale of its goods or services in the Party's territory.
Investment shall at all times be accorded fair and equitable treatment,
shall enjoy full Protection and security and shall in no case be
accorded treatment less than that required by international law.
Neither Party shall in any way impair by arbitrary or discriminatory
measures the management, operation, maintenance, use, enjoyment,
acquisition, expansion, or disposal of investments. For purposes of
dispute resolution under Articles VI and VII, a measure may be arbitrary
or discriminatory notwithstanding the fact that a party has had or has
exercised the opportunity to review such measure in the courts or
administrative tribunals of a Party.
Party shall observe any obligation it may have entered into with regard
Subject to the laws relating to the entry and sojourn of aliens,
nationals of either Party shall be permitted to enter and to remain in
the territory of the other Party for the purpose of establishing,
developing, administering or advising on the operation of an investment
to which they, or a company of the first Party that employs them, have
committed or are in the process of committing a substantial amount of
capital or other resources.
Companies which are legally constituted under the applicable laws or
regulations of one Party, and which are investments, shall be permitted
to engage top managerial personnel of their choice, regardless of
Neither Party shall impose performance requirements as a condition of
establishment, expansion or maintenance of investments, which require or
enforce commitments to export goods produced, or which specify that
goods or services must be purchased locally, or which impose any other
Party shall provide effective means of asserting claims and enforcing
rights with respect to investment, investment agreements, and investment
Party shall make public all laws, regulations, administrative practices
and procedures, and adjudicatory decisions that pertain to or affect
treatment accorded by the United States of America to investments and
associated activities of nationals and companies of the Republic of
Estonia under the provisions of this Article shall in any state,
territory or possession of the United States of America be no less
favorable than the treatment accorded "herein to investments and
associated activities of nationals of the United States of America
resident in, and companies legally constituted under the laws and
regulations of other states, territories or possessions of the United
States of America.
most-favored-nation provisions of this Treaty shall not apply to
advantages accorded by either Party to nationals or companies of any
third country by virtue of:
Party's binding obligations that derive from full membership in a free
trade area or customs union; or
Party's binding obligations under any multilateral international
agreement under the framework of the General Agreement on Tariff's and
Trade that enters into force subsequent to the signature of this Treaty.
Parties acknowledge and agree that "associated activities"
include without limitation, such activities as:
granting of franchises or rights under licenses;
access to registrations, licenses, permits and other approvals (which
shall in any event be issued expeditiously);
to financial institutions and credit markets, including borrowing of
access to their funds held in financial institutions;
importation and installation of equipment necessary for the normal
conduct of business affairs, including but not limited to, office
equipment and automobiles, and the export of any equipment and
automobiles so imported;
dissemination of commercial information;
conduct of market studies;
appointment of commercial representatives, including agents, consultants
and distributors and their participation in trade fairs and promotion
marketing of goods and services, including through internal distribution
and marketing systems, as well as by advertising and direct contact with
individuals and companies;
access to public utilities, public services and commercial rental space
at nondiscriminatory prices, if the prices are set or controlled by the
access to raw materials, inputs and services of all types at
nondiscriminatory prices, if the prices are set or controlled by the
Investments shall not be expropriated or nationalized either directly or
indirectly through measures tantamount to expropriation or
nationalization ("expropriation") except: for a public
purpose; in a nondiscriminatory manner; upon payment of prompt, adequate
and effective compensation; and in accordance with due process of law
and the general principles of treatment provided for in Article 11(3).
Compensation shall be equivalent to the fair market value of the
expropriated investment immediately before the expropriatory action was
taken or became known, whichever is earlier; be calculated in a freely
usable currency on the basis of the prevailing market rate of exchange
at that time; be paid without delay; include interest at a commercially
reasonable rate from the date of expropriation; be fully realizable; and
be freely transferable.
national or company of either Party that asserts that all or part of its
investment has been expropriated shall have a right to prompt review by
the appropriate judicial or administrative authorities of the other
Party to determine whether any such expropriation has occurred and, if
so, whether such expropriation, and any associated compensation,
conforms to the principles of international law.
Nationals or companies of either Party whose investments suffer losses
in the territory of the other Party owing to war or other armed
conflict, revolution, state of national emergency insurrection, civil
disturbance or other similar events shall be accorded treatment by such
other Party no less favorable than that accorded to its own nationals or
companies or to nationals or companies of any third country, whichever
is the most favorable treatment, as regards any measures it adopts in
relation to such losses.
Party shall permit all transfers related to an investment to be made
freely and without delay into and out of its territory. Such transfers
include: (a) returns; (b) compensation pursuant to Article III; (c)
payments arising out of an investment dispute; (d) payments made under a
contracts, including amortization of principal and accrued interest
payments made pursuant to a loan agreement; (e) proceeds from the sale
or liquidation of all or any part of an investment; and (f) additional
contributions to capital for the maintenance or development of an
Transfers shall be made in a freely usable currency at the prevailing
market rate of exchange on the date of transfer with respect to spot
transactions in the currency to be transferred.
Notwithstanding the provisions of paragraphs 1 and 2, either Party may
maintain laws and regulations (a) requiring reports of currency
transfer; and (b) imposing income taxes by such means as a withholding
tax applicable to dividends or other transfers. Furthermore, either
Party may protect the rights of creditors, or ensure the satisfaction of
judgments in adjudicatory proceedings, through the equitable,
nondiscriminatory and good faith application of its law.
Parties agree to consult promptly, on the request of either, to resolve
any disputes in connection with the Treaty, or to discuss any matter
relating to the interpretation or application of the Treaty.
purposes of this Article, an investment dispute is a dispute between a
Party and a national or company of the other Party arising out of or
relating to: (a) an investment agreement between that Party and such
national or company; (b) an investment authorization granted by that
Party's foreign investment authority to such national or company; or (c)
an alleged breach of any right conferred or created by this Treaty with
respect to an investment.
2. In the
event of an investment dispute, the parties to the dispute should
initially seek a resolution through consultation and negotiation. If the
dispute cannot be settled amicably, the national or company concerned
may choose to submit the dispute for resolution:
the courts or administrative tribunals of the Party that is a party to
the dispute; or
accordance with any applicable, previously agreed dispute-settlement
accordance with the terms of paragraph 3.
Provided that the national or company concerned has not submitted the
dispute for resolution under paragraph 2 (a) or (b) and that six months
have elapsed from the date on which the dispute arose, the national or
company concerned may choose to consent in writing to the submission of
the dispute for settlement by binding arbitration:
the International Centre for the Settlement of Investment Disputes ("Centre")
established by the Convention on the Settlement of Investment Disputes
between States and Nationals of Other States, done at Washington, March
18, 1965 ("ICSID convention"), provided that the Party is a
party to such Convention; or
the Additional Facility of the Centre, if the Centre is not available;
accordance with the arbitration rules of the United Nations Commission
on International Trade Law (UNCITRAL); or
any other arbitration institution, or in accordance with any other
arbitration rules, as may be mutually agreed between the parties to the
the national or company concerned has so consented, either party to the
dispute may initiate arbitration in accordance with the choice so
specified in the consent.
Party hereby consents to the submission of any investment dispute for
settlement by binding arbitration in accordance with the choice
specified in the written consent of the national or company under
paragraph 3. Such consent, together with the written consent of the
national or company when given under paragraph 3 shall satisfy the
written consent of the parties to the dispute for purposes of Chapter II
of the ICSID Convention (jurisdiction of the Centre) and for purposes of
the Additional Facility Rules; and
(b) an "agreement
in writing" for purposes of Article II of the United Nations
Convention on the Recognition and Enforcement of Foreign Arbitral
Awards, done at New York, June 10, 1958 ("New York
arbitration under paragraph 3(a)(ii), (iii) or (iv) of this Article
shall be held in a state that is a party to the New York Convention. I
arbitral award rendered pursuant to this Article shall be final and
binding on the parties to the dispute. Each Party undertakes to carry
out without delay the provisions of any such award and to provide in its
territory for its enforcement.
7. In any
proceeding involving an investment dispute, a Party shall not assert, as
a defense, counterclaim, right of set-off or otherwise, that the
national or company concerned has received or will receive, pursuant to
an insurance or guarantee contract, indemnification or other
compensation for all or part of its alleged damages.
purposes of an arbitration held under paragraph 3 of this Article, any
company legally constituted under the applicable laws and regulations of
a Party or a political subdivision thereof but that, immediately before
the occurrence of the event or events giving rise to the dispute, was an
investment of nationals or companies of the other Party, shall be
treated as a national or company of such other Party in accordance with
Article 25(2)(b) of the ICSID Convention.
dispute between the Parties concerning the interpretation or application
of the Treaty which is not resolved through consultations or other
diplomatic channels, shall be submitted, upon the request of either
Party, to an arbitral tribunal for binding decision in accordance with
the applicable rules of international law. In the absence of an
agreement by the Parties to the contrary, the arbitration rules of the
United Nations Commission on International Trade Law (UNCITRAL), except
to the extent modified by the Parties or by the arbitrators, shall
two months of receipt of a request, each Party shall appoint an
arbitrator. The two arbitrators shall select a third arbitrator as
Chairman, who is a national of a third state. The UNCITRAL Rules for
appointing members of three member panels shall apply mutatis
mutandis to the
appointment of the arbitral panel except that the appointing authority
referenced in those rules shall be the Secretary General of the Centre.
otherwise agreed, all submissions shall be made and all hearings shall
be completed within six months of the date of selection of the third
arbitrator, and the tribunal shall render its decisions within two
months of 'the date of the final submissions or the date of the closing
of the hearings, whichever is later.
Expenses incurred by the Chairman, the other arbitrators, and other
costs of the proceedings shall be paid for equally by the Parties. The
Tribunal may, however, at its discretion, direct that a higher
proportion of the costs be paid by one of the Parties.
Treaty shall not derogate from:
and regulations, administrative practices or Procedures, or
administrative or adjudicatory decisions of either Party;
international legal obligations; or
obligations assumed by either Party, including those contained in an
investment agreement or an investment authorization, that entitle
investments or associated activities to treatment more favorable than
that accorded by this Treaty in like situations.
Treaty shall not preclude the application by either Party of measures
necessary for the maintenance of public order, the fulfillment of its
obligations with respect to the maintenance or restoration of
international peace or security, or the protection of its own essential
Treaty shall not preclude either Party from prescribing special
formalities in connection with the establishment of investments, but
such formalities shall not impair the substance of any of the rights set
forth in this Treaty.
respect to its tax policies, each Party should strive to accord fairness
and equity in the treatment of investment of nationals and companies of
the other Party.
Nevertheless, the provisions of this Treaty, and in particular Articles
VI and VII, shall apply to matters of taxation only with respect to the
expropriation, pursuant to Article III;
transfers, pursuant to Article IV; or
observance and enforcement of terms of an investment agreement or
authorization as referred to in Article VI (1) (a) or (b), to the extent
they are not subject to the dispute settlement provisions of a
Convention for the avoidance of double taxation between the two Parties,
or have been raised under such settlement provisions and are not
resolved within a reasonable period of time.
Treaty shall apply to the political subdivisions of the Parties.
Treaty shall enter into force thirty days after the date of exchange of
instruments of ratification. It shall remain in force for a period of
ten years and shall continue in force unless terminated in accordance
with paragraph 2 of this Article. It shall apply '6o investments
existing at the time of entry into force as well as to investments made
or acquired thereafter.
Party may, by giving one year's written notice to the other Party,
terminate this Treaty at the end of the initial ten year period or at
any time thereafter.
respect to investments made or acquired prior to the date of termination
of this Treaty and to which this Treaty otherwise applies, the
provisions of all of the other Articles of this Treaty shall thereafter
continue to be effective for a further period of ten years from such
date of termination.
Annex shall form an integral part of the Treaty.
WITNESS WHEREOF, the respective plenipotentiaries have signed this
duplicate at Washington on this nineteenth day of April, 1994, in the
English and Estonian languages, both texts being equally authentic.
GOVERNMENT OF THE UNITED STATES OF AMERICA:
FOR THE GOVERNMENT OF THE REPUBLIC OF ESTONIA:
Government of the United States of America reserves the right to make or
maintain limited exceptions to national treatment, as provided in
Article I, paragraph 1, in the sectors or matters it has indicated
transportation; ocean and coastal shipping; banking, securities,
insurance, and other financial services; government grants; government
insurance and loan programs; energy and power production; customhouse
brokers; ownership of real property; ownership and operation of
broadcast or common carrier radio and television stations; ownership of
shares in the Communications Satellite Corporation; the provision of
common carrier telephone and telegraph services; the provision of
submarine cable services; use of land and natural resources; mining on
the public domain; and maritime services and maritime-related services.
Government of the United States of America reserves the right to make or
maintain limited exceptions to most-favored nation-treatment, as
provided in Article II, paragraph 1, in the sectors or matters it has
of real property; mining on the public domain; maritime services and
maritime-related services; and primary dealership in United States
Government of the Republic of Estonia reserves the right to make or
maintain limited exceptions to national treatment, as provided in
Article II, paragraph 1, in the sectors or matters it has indicated
including loan and saving institutions; government grants; government
insurance and loan programs; ownership of real property; use of land and
natural resources; and initial acquisition from the Republic of Estonia
and its municipalities of state and municipal property in the course of
denationalization and privatization.
offers these agreements electronically as a public service for general
reference. Every effort has been made to ensure that the text presented
is complete and accurate. However, copies needed for legal purposes
should be obtained from official archives maintained by the appropriate