U.S. GOVERNMENT
PRINTING OFFICE
99-118 WASHINGTON :
1995
LETTER OF TRANSMITTAL
THE WHITE HOUSE, July 10, 1995.
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 Latvia Concerning the Encouragement and Reciprocal
Protection of Investment, with Annex and Protocol, signed at
Washington on January 13, 1995. I transmit also, for the information
of the Senate, the report of the Department of State with respect to
this Treaty.
The bilateral investment Treaty (BIT) with
Latvia will protect U.S. investors and assist Latvia 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's or investment's
freedom to choose to resolve disputes with the host government through
international arbitration.
I recommend that the Senate consider this Treaty
as soon as possible, and give its advice and consent to ratification
of the Treaty, with Annex and Protocol, at an early date.
WILLIAM J. CLINTON.
LETTER OF SUBMITTAL
DEPARTMENT OF STATE,
Washington, June 16,1995.
The PRESIDENT,
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 Latvia for the Encouragement, and
Reciprocal Protection of Investment, with Annex and Protocol, signed
at Washington on January 13, 1995. I recommend that this Treaty, with
Annex and Protocol, be transmitted to the Senate for its advice and
consent to ratification.
The bilateral investment treaty (BIT) with
Latvia is based on the view that an open investment policy contributes
to economic growth. This Treaty will assist Latvia 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, twenty-one BITs are in force for the
United States-with Argentina, Bangladesh, Bulgaria, Cameroon, the
Congo, the Czech Republic, Egypt, Grenada, Kazakhstan, Kyrgyzstan,
Moldova, Morocco, Panama, Poland, Romania, Senegal, Slovakia, Sri
Lanka, Tunisia, Turkey, and Zaire. In addition to the Treaty with
Latvia, the United States has signed, but not yet brought into force,
BITs with Albania, Armenia, Belarus, Ecuador, Estonia, Georgia, Haiti,
Jamaica, Mongolia, Russia, Trinidad and Tobago, Ukraine and
Uzbekistan.
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.-LATVIA TREATY
The Treaty with the Republic of Latvia 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 the Republic of Latvia 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.-Latvia Treaty differs from the 1992
prototype in some minor 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.-Latvia Treaty also differs from the
prototype in that it includes provisions in Article 1, 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 additional language
is discussed in further detail in the article-by-article analysis of
the Treaty below.
In addition, a Protocol clarifies that despite
Latvia's inclusion of ownership of land in its exceptions to the
Treaty's national treatment obligations in the Annex, foreign
investors in Latvia can purchase land in urban areas.
The following is an article-by-article analysis
of the provisions of the Treaty:
Preamble
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. While the Preamble does
not impose binding obligations, its statement of goals may serve to
assist in the interpretation of the Treaty.
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.
Investment
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
proportion.
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 right 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 1, 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 alteration in the
form in which an asset is invested or reinvested shall not affect its
character as investment. For example, a change in the corporate form
of an investment will not deprive it of protection under the Treaty.
Company
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. In connection with the
definition of investment, this 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.
National
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
"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.
Associated activities
The Treaty recognizes that the operation of an
investment requires protections extending beyond the investment to
numerous 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
"State enterprise" is defined as an
enterprise owned, or controlled through ownership interests, by a
Party.
Delegation
"Delegation" is defined to include a
legislative grant, government order, directive or other act which
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
the Treaty.
Article II (Treatment)
Article II contains the Treaty's obligations
with respect to the treatment of investment.
Paragraph 1 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 the separate Annex. The United States and Latvia 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 investments. This paragraph sets out a
minimum standard of treatment based on customary international law.
In paragraph 3(c), each Party pledges to respect
any obligations 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 9f a "substantial amount of capital or
other resources." 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
nationality.
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,
regulations, administrative practices and adjudicatory procedures
pertaining to or affecting investments.
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
makes clear 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 1 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 expropriations" 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 II, paragraph 3.
(These standards guarantee fair and equitable treatment and prohibit
the arbitrary and discriminatory impairment of investment in its
broadest sense.)
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
international law.
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
account transfers.
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 for expropriation (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 taxes by such means as a withholding tax on dividends. It also
recognizes that Parties may protect the rights of creditors and ensure
the satisfaction of judgments in adjudicatory proceedings through
their 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 investment agreement, 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, paragraphs 2
and 3 set forth the investor's range of choices of dispute settlement.
Paragraph 2 permits the investor 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
choose among the International Centre for the Settlement of Investment
Disputes (ICSID) Convention arbitration, or the ICSID Additional
Facility (if Convention arbitration is not 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 Latvia to the submission of investment
disputes to binding arbitration in accordance with the choice of the
investor.
Paragraph 5 provides that a non-ICSID Convention
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 expands the ability of
investors to obtain enforcement of their arbitral awards aboard. 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 he 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 Latvia 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 incIude, 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 national 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 I 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 in 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
tax treaties.
Article XI (Application to political
subdivisions)
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
termination)
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
years thereafter.
Annex
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 or 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; custom house 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 United States 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.
Because the U.S. exceptions to national
treatment and MFN treatment are based on existing U.S. law, they are
not altered during negotiations.
The Republic of Latvia's exceptions to national
treatment are: control of defense industries; manufacturing and sales
of narcotics, weapons and explosives; control of newspapers,
television and radio broadcasting stations, or news agencies; recovery
of all renewable and non-renewable natural resources including
resources found on the continental shelf; fishing, hunting; port
management; banking; ownership and control of land; brokerage of real
property; and gambling. These exceptions were based on provisions of
investment measures in force or under active consideration by the
Government of the Republic of Latvia. The Republic of Latvia has not
reserved any second exceptions to MFN treatment in the Annex.
Protocol
In a Protocol to the Treaty, the two sides
clarify that despite Latvia's inclusion of "ownership and control
of land" in paragraph 3 of the Annex, current Latvian legislation
permits foreign investors to own or control land in "urban"
areas, as defined under Latvian laws.
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.
Respectfully submitted,
STROBE TALBOTT.
THE
GOVERNMENT OF THE UNITED STATES OF AMERICA AND
GOVERNMENT
OF THE REPUBLIC OF LATVIA
CONCERNING
THE ENCOURAGEMENT
AND
RECIPROCAL PROTECTION OF INVESTMENT
The
Government of the United States of America and the Republic of Latvia
(hereinafter the "Parties");
Desiring 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 to be accorded such
investment will stimulate the flow of private capital and the economic
development of the Parties;
Agreeing 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; and
Noting the bilateral Most-Favored-Nation Agreement on Customs Matters of
April 30, 1926 and the bilateral Treaty of Friendship, Commerce and
Consular Relations of July 25, 1928 between the Parties;
In furtherance of Article Three of the bilateral Agreement Concerning
the Development of Trade and Investment Relations of December 9, 1992
between the Parties;
Noting the bilateral agreement on Trade Relations and Intellectual
Property Rights Protection of July 6, 1994 between the Parties; and
Having resolved to conclude a Treaty concerning the encouragement and
reciprocal protection of investment;
Have agreed as follows:
ARTICLE
I
1.
For the purposes of this Treaty,
(a) "investment" 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 includes:
(i)
tangible and intangible property, including movable and immovable
property, as well as rights, such as mortgages, liens and pledges;
(ii)
a company or shares of stock or other interests in a company or
interests in the assets thereof;
(iii)
a claim to money or a claim to performance having economic value, and
associated with an investment;
(iv)
intellectual property which includes, inter alia, rights relating to:
_ literary
and artistic works, including sound recordings,
_inventions in all fields
of human endeavor,
_ industrial designs,
_semiconductor mask
works, trade secrets, know-how, and confidential business information,
and
_
trademarks, service marks, and trade names; and
(v) any right conferred by law or contract, and any licenses and permits
pursuant to law;
(b) "company" of a Party means any kind of corporation,
company, association, enterprise, partnership, 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 controlled;
(c) "national," of a Party means a natural person who is a
national of a Party under its applicable law;
(d) "return" 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;
(e) "associated activities" include the organization, control,
operation, maintenance and disposition of companies, branches, agencies,
offices, factories or other facilities for the conduct of business; the
making, performance and enforcement of contracts; the acquisition, use,
protection and disposition of property of all kinds including
intellectual property rights; the borrowing of funds; the purchase,
issuance, and sale of equity shares and other securities; and the
purchase of foreign exchange for imports;
(f) "state enterprise" means an enterprise owned, or
controlled through ownership interests, by a Party;
(g) "delegation" 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.
2.
Each 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 economic relations.
3.
Any alteration of the form in which assets are invested or reinvested
shall not affect their character as investment.
ARTICLE
II
1. Each
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 before or on Latviathe date of entry into force of this
Treaty of all such laws and regulations of which it is aware concerning
the sectors or matters listed in the Annex. Moreover, each Party agrees
to notify the other of any future exception with respect to the sectors
or matters listed in the Annex, and 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 third country.
2.
(a) Nothing in this treaty shall be construed to prevent a Party from
maintaining or establishing a state enterprise.
(b) Each 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
other charges.
(c) Each 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.
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