May 4, 2004
The Honorable Richard Lugar
Chairman
Senate Foreign Relations Committee
306 Hart Senate Office Building
Washington DC 20510
Dear Mr. Chairman:Chairman
I am writing in support of the understanding reached by the United States, the European Union, five countries acceding to the European Union—the Czech Republic, Estonia, Latvia, Slovakia and Poland — and two candidate countries for accession—Bulgaria and Romania—regarding the Bilateral Investment Treaties between the United States and the five acceding countries and two potential EU members.
Bilateral Investment Treaties are extremely important to protect existing foreign investment from a variety of measures that the host government may take that destroy or severely impair the value and viability of the investment. These treaties protect U.S. investors from uncompensated expropriation, unfair and inequitable treatment, discrimination, restrictions on the investors ability to transfer profits and capital, and performance requirements such as buying from local sources, and provide for resolution of disputes between the investor and the host state by binding arbitration. The provisions of these treaties strengthen the rule of law and allow U.S. investors to compete on equal terms with other investors.
In entering the European Union, the acceding and candidate countries are required to accept and conform to community law (the so-called Acquis Communitaire), which in some aspects may come into conflict with our Bilateral Investment Treaties with those countries. To avoid this potential conflict, the acceding and candidate countries might have chosen to cancel the treaties altogether. The understanding now reached by the United States, the European Union and the affected countries resolves the potential conflict by means of modest changes to the treaties —involving transfers, performance requirements and sensitive sectors—which preserve the core protections that the treaties currently provide.
We take comfort in the fact that, under the understanding, existing U.S. investment in acceding countries will still be protected for a period of ten years from any new discriminatory measures otherwise permitted by the exceptions to the non-discrimination commitments of the acceding country.
We consulted closely with the Department of State in this process, and we are pleased that the Department worked out an arrangement that, under the circumstances, protects our foreign investment in the best manner possible.
Sincerely,
Thomas Niles
cc: Ambassador Zoellick
Undersecretary of State Larson
