[Senate Treaty Document 106-42]
[From the U.S. Government Publishing Office]
106th Congress Treaty Doc.
SENATE
2d Session 106-42
_______________________________________________________________________
INVESTMENT TREATY WITH LITHUANIA
__________
MESSAGE
from
THE PRESIDENT OF THE UNITED STATES
transmitting
TREATY BETWEEN THE GOVERNMENT OF THE UNITED STATES OF AMERICA AND THE
GOVERNMENT OF THE REPUBLIC OF LITHUANIA FOR THE ENCOURAGEMENT AND
RECIPROCAL PROTECTION OF INVESTMENT, WITH ANNEX AND PROTOCOL, SIGNED AT
WASHINGTON ON JANUARY 14, 1998
September 5, 2000.--Treaty 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
79-188 WASHINGTON : 2000
LETTER OF TRANSMITTAL
----------
The White House, September 5, 2000.
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 Lithuania for the encouragement
and Reciprocal Protection of Investment, with Annex and
Protocol, signed at Washington on January 14, 1998. 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 Lithuania was
the third such treaty signed between the United States and
Baltic region country. The Treaty will protect U.S. investment
and assist Lithuania in its efforts to develop its economy by
creating conditions more favorable for U.S. private investment
and thereby strengthening the development of its private
sector.
The Treaty furthers the objectives of 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 customary international law standards for
expropriation. The Treaty includes detailed provisions
regarding the computation and payment of prompt, adequate, and
effective compensation for expropriation; free transfer of
funds related to investments; freedom of investments from
specified performance requirements; fair, equitable, and most-
favored-nation treatment; and the investor'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 at an early date.
William J. Clinton.
LETTER OF SUBMITTAL
----------
Department of State,
Washington, August 9, 2000.
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 Lithuania for the Encouragement
and Reciprocal Protection of Investment, with Annex and
Protocol, signed at Washington on January 14, 1998. 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 Lithuania was
the third such treaty signed between the United States and a
Baltic Region country. The Treaty is based on the view that an
open investment policy contributes to economic growth. This
Treaty will assist Lithuania in its efforts to develop its
economy by creating conditions more favorable for U.S. private
investment and thereby strengthening the development of its
private sector. It is U.S. policy, however, to advise potential
treaty partners during BIT negotiations that conclusion of such
a treaty does not necessarily result in increases in private
U.S. investment flows.
To date, 31 BITs are in force for the United States--with
Albania, Argentina, Armenia, Bangladesh, Bulgaria, Cameroon,
the Republic of the Congo, the Democratic Republic of the Congo
(formerly Zaire), the Czech Republic, Ecuador, Egypt, Estonia,
Georgia, Grenada, Jamaica, Kazakhstan, Kyrgyzstan, Latvia,
Moldova, Mongolia, Morocco, Panama, Poland, Romania, Senegal,
Slovakia, Sri Lanka, Trinidad & Tobago, Tunisia, Turkey, and
Ukraine. In addition to the Treaty with Lithuania, the United
States has signed, but not yet brought into force, BITs with
Azerbaijan, Bahrain, Belarus, Bolivia, Croatia, El Salvador,
Honduras, Jordan, Mozambique, Nicaragua, Russia, 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.
the u.s.-lithuania treaty
The Treaty with Lithuania is based on the 1992 U.S.
prototype BIT and satisfies the U.S. principal objectives in
bilateral investment treaty negotiations:
--All forms of U.S. investment in the territory of Lithuania
are covered.
--Investments receive the better of national treatment or
most-favored-nation (MFN) treatment both while they are
being established and thereafter, subject to certain
specified exceptions.
--Specified performance requirements may not be imposed upon
or enforced against investments.
--Expropriation is permitted only in accordance with
customary international law standards.
--Parties are obligated to permit the transfer, in a freely
usable currency, of all funds related to an investment,
subject to exceptions for specified purposes.
--Investment disputes with the host government may be brought
by investors, or by their investments, to binding
international arbitration as an alternative to domestic
courts.
The U.S.-Lithuania Treaty differs from the 1992 prototype
in some respects. It eliminates Article VIII of the 1992
prototype text, which had excluded from the dispute settlement
provision of the BIT those disputes arising under the export
credit, guarantee or insurance programs of the Export-Import
Bank, the Overseas Private Investment Corporation, and other
relevant government agencies. Those agencies indicated prior to
this negotiation that they saw no need to maintain such a
provision.
The U.S.-Lithuania Treaty also differs from the 1992
prototype in that it includes provisions in Article I(1)(f) and
(g) and Article II(2) that clarify and extend the requirements
of the Treaty with respect to state enterprises, and in Article
II(11) that clarify that investors should receive the better of
national or MFN treatment with respect to activities associated
with their investment.
These elements are further described in the following
article-by-article analysis of the provisions of the Treaty:
Title and Preamble
The Title and Preamble state the goals of the Treaty.
Foremost is the encouragement and protection of investment.
Other goals include economic cooperation on investment issues;
stimulation of economic development; maximum effective
utilization of economic resources; promotion of respect for
internationally-recognized worker rights; and development of
bilateral trade and investment relations. While the Preamble
does not impose binding obligations, its statement of goals may
assist in interpreting the Treaty and in defining the scope of
Party-to-Party consultations pursuant to Article V.
Article I (Definitions)
Article I defines terms used throughout the Treaty.
Investment
The Treaty's definition of ``investment'' is broad,
recognizing that investment can take a wide variety of forms.
Every kind of investment is specifically incorporated in the
definition, which applies to investment in the territory of one
Party owned or controlled directly or indirectly by nationals
or companies of the other Party. Indirect ownership or control
could be through other, intermediate companies or persons,
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, or by other arrangements.
The Treaty provides an illustrative list of the forms an
investment may take. These include both tangible and intangible
property; interests in a company or its assets; ``a claim to
money or a claim to performance having economic value, and
associated with an investment''; intellectual property rights;
any right conferred by law or contract; and any licenses and
permits pursuant to law. The requirement that a ``claim to
money'' be associated with an investment excludes claims
arising solely from trade transactions, such as a transaction
involving a sale of goods across a border, from being
investments covered by the Treaty.
Paragraph 3 makes explicit that any alteration in the form
in which an asset is invested or reinvested will 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 Treaty.
Company
The definition of ``company'' of a Party is broad, covering
all types of entities legally constituted or organized under
applicable laws and regulations of a Party, and includes a
corporation, company, association, partnership, or other
organization. The definition explicitly covers not-for-profit
entities, as well as entities that are owned or controlled by
the state.
The broad nature of the definitions of ``investment'' and
``company'' of a Party means that investments can be covered by
the Treaty even if ultimate control lies with non-Party
nationals. A Party may, however, deny the benefits of the
Treaty in certain limited circumstances. Article I(2) preserves
the right of each Party to deny the benefits of the Treaty to a
company controlled by nationals of a third country with which
the denying Party does not have normal economic relations,
e.g., a country to which it is applying economic sanctions. For
example, at this time the United States does not maintain
normal economic relations with, among other countries, Cuba and
Libya.
Paragraph 2 also permits each Party to deny the benefits of
the Treaty to a company of the other Party if the company is
controlled by nationals of any third country and if the company
has no substantial business activities in the territory of the
other Party. Thus, the United States could deny benefits to a
company that is a subsidiary of a shell company organized under
the laws of Lithuania if controlled by nationals of a third
country. However, this provision would not generally permit the
United States to deny benefits to a company of Lithuania that
maintains its central administration or principal place of
business in the territory of, or has a real and continuous link
with, Lithuania.
National
The Treaty defines ``national'' of a Party as a natural
person who is a national of the United States under its laws,
or a citizen of Lithuania under itslaws. 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.
Associated Activities
The Treaty recognizes that the operation of an investment
requires protections extending beyond the investment to
numerous related activities. The Treaty defines ``associated
activities'' to include an illustrative list of such
activities, including: operating a business facility; borrowing
money; acquiring, using, and disposing of property; issuing
stock; and purchasing foreign exchange for imports. Article
II(11) lists additional activities included in the term
``associated activities'', all of which are covered by the
obligation in Article II(1) to provide the better of national
or MFN treatment.
State Enterprise and Delegation
``State enterprise'' is defined as an enterprise owned, or
controlled through ownership interests, by a Party. Purely
regulatory control over a company does not qualify it as a
state enterprise.
``Delegation'' is defined to include a legislative grant
and a government order, directive, or other act that transfers
governmental authority to a state enterprise or monopoly or
authorizes a state enterprise or monopoly to exercise such
authority.
The definitions of ``state enterprise'' and ``delegation''
are included to clarify the scope of the obligations of Article
II(2)(b), 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 major obligations with
respect to the treatment of investment.
Paragraph 1 generally ensures the better of national of MFN
treatment in both the entry and post-entry phases of investment
(national and MFN treatment). It thus prohibits, outside of
exceptions listed in the Annex, ``screening'' on the basis of
nationality during the investment process, as well as
nationality-based post-establishment measures. National
treatment means treatment no less favorable than that which a
Party accords, in like situations, to investments or associated
activities in its territory of its own nationals or companies.
MFN treatment means treatment no less favorable than that which
a Party accords, in like situations, to investments or
associated activities in its territory of nationals or
companies of a third country.
Paragraph 1 also states that each Party may adopt or
maintain exceptions to the national and MFN treatment standard
with respect to the sectors or matters specified in the Annex.
Further restrictive measures are permitted in each such sector
or matter but are to be kept to a minimum. (The specific
exceptions are discussed in the section entitled ``Annex''
below.) In the Annex, Parties may take exceptions only to the
obligation to provide national and MFN treatment; there are no
sectoral exceptions to the rest of the Treaty's obligations.
Finally, any future exception adopted under this provision does
not apply to investment existing in that sector or matter at
the time the exception becomes effective.
Paragraph 2 requires each Party to ensure that any state
enterprise that it maintains or establishes acts in a manner
that is not inconsistent with the party's obligations under the
Treaty wherever the 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. Paragraph 2 also supports competitive
equality for investments by requiring that a Party ensure that
its state enterprises accord national and MFN treatment in the
sale of their goods or services in the Party's territory.
Paragraph 3 sets out a minimum standard of treatment based
on standards found in customary international law. The
obligations to accord ``fair and equitable treatment'' and
``full protection and security'' are explicitly cited. The
general reference to international law also implicitly
incorporates otherfundamental rules of customary international
law regarding the treatment of foreign investment. However, this
provision does not incorporate obligations based on other international
agreements.
In paragraph 3(b), the Parties agree not to in any way
impair by arbitrary or discriminatory measures the management,
operation, maintenance, use, enjoyment, acquisition, expansion,
or disposal of investments.
In paragraph 3(c), each Party pledges to observe any
obligation it may have entered into with regard 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 requires each Party to allow, subject to its
laws relating to the entry and sojourn of aliens, the entry
into its territory of the other Party's nationals for certain
purposes related to an investment and involving the commitment
of a ``substantial amount of capital or other resources.'' This
paragraph serves to render nationals of Lithuania eligible for
treaty-investor visas under U.S. immigration law. It also
affords similar treatment for U.S. nationals entering
Lithuania. The requirement to commit a ``substantial amount of
capital or other resources'' is intended to prevent abuse of
treaty-investor status; it parallels the requirements of U.S.
immigration law.
Paragraph 5 requires that each Party allow companies that
are investments to engage top managerial personnel of their
choice, regardless of nationality. This provision does not
require that such personnel be granted entry into a Party's
territory. Such persons must independently qualify for an
appropriate visa for entry into the territory of the other
Party. Nor does this provision create an exception to U.S.
equal employment opportunity laws.
Paragraph 6 prohibits either Party from imposing specified
performance requirements as a condition for the establishment,
expansion, or maintenance of investments. Prohibited
performance requirements are those 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 similar requirements. Such performance requirements
are major burdens on investors and impair their
competitiveness.
Paragraph 7 requires that each Party provide effective
means of asserting claims and enforcing rights with respect to
investments, investment agreements, and investment
authorizations.
Paragraph 8 ensures the transparency of each Party's
regulation of 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 by a State to U.S. out-of-State residents and
corporations. Article XI makes clear that the obligations of
the Treaty are applicable to all political and administrative
subdivisions of the Parties, such as provincial, State, and
local governments.
Paragraph 10 limits the Article's MFN obligation by
providing that it will not apply to advantages accorded by
either Party to nationals or companies of third countries by
virtue of a Party's membership in a free trade area or customs
union or a future (i.e., after the Treaty was signed)
multilateral agreement under the framework of the General
Agreement on Tariffs and Trade (GATT).
Paragraph 11 provides an additional illustrative list of
``associated activities'' entitled to national and MFN
treatment under Article II(1).
Article III (Expropriation)
Article III incorporates into the Treaty customary
international law standards for expropriation. Article III also
includes detailed provisions regarding the computation and
payment of prompt, adequate, and effective compensation.
Paragraph 1 describes the obligations of the Parties with
respect to expropriation and nationalization of an investment.
These obligations apply to both direct expropriation and
indirect expropriation through measures ``tantamount to
expropriation or nationalization'' and thus apply to ``creeping
expropriations''--a series of measures thateffectively amounts
to an expropriation of an investment without taking title.
Paragraph 1 further bars all expropriations or
nationalizations except those that are for a public purpose;
carried out in a non-discriminatory manner; in accordance with
due process of law; in accordance with the general principles
of treatment provided in Article II(3); and subject to
``prompt, adequate, and effective compensation.''
The balance of paragraph 1 more fully describes the meaning
of ``prompt, adequate, and effective compensation.'' The
guiding principle is that the investor should be made whole.
Paragraph 2 entitles an investor claiming that an
expropriation has occurred to prompt judicial or administrative
review of the claim in the host Party, including a
determination of whether the expropriation and any compensation
conform to the principles of international law.
Paragraph 3 entitles investments covered by the Treaty to
national and MFN treatment with respect to any measure relating
to losses suffered in a Party's territory owing to war or other
armed conflict, civil disturbances, or similar events.
Article IV (Transfers)
Article IV protects investors from certain government
exchange controls that limit current and capital account
transfers, as well as limits on inward transfers such as those
imposed by screening authorities.
In paragraph 1, each Party agrees to ``permit all transfers
related to an investment to be made freely and without delay
into and out of its territory.'' Paragraph 1 also provides a
list of transfers that must be allowed. The list is non-
exclusive, and is intended to protect flows to both affiliated
and non-affiliated entities.
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 term used by the International Monetary Fund; at
present there are five ``freely usable'' currencies: the U.S.
dollar, Japanese yen, German mark, French franc, and British
pound sterling.
Paragraph 3 recognizes that, notwithstanding the
obligations of paragraphs 1 and 2, a Party 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 the
Parties may protect the rights of creditors and ensure the
satisfaction of judgments in adjudicatory proceedings through
the equitable, nondiscriminatory, and good faith application of
their laws.
Article V (State-to-State Consultations)
Article V provides for prompt consultation between the
Parties, at either Party's request, to resolve any disputes in
connection with the Treaty, or to discuss any matter relating
to the interpretation or application of the Treaty.
Article VI (Settlement of Disputes Between One Party and a National or
Company of the Other Party)
Article VI sets forth several means by which disputes
brought against a Party by an investor (specifically, a
national or company of the other Party) may be resolved.
Article VI procedures apply to an ``investment dispute,''
which is any dispute arising out of or relating to an
investment agreement, an investment authorization granted by
the Party's foreign investment authority, or an alleged breach
of rights conferred or created by the Treaty with respect to an
investment.
Article VI(2) provides that when a dispute arises the
disputants should initially seek to resolve the dispute by
consultation and negotiation. In the event that an investment
dispute cannot be settled amicably, paragraph 2 gives an
investor an exclusive choice among three options to settle the
dispute. These three options are: (1) submitting the dispute to
the courts or administrative tribunals of the Party that is a
party to the dispute; (2) invoking dispute-resolution
procedures previously agreed upon by the national or company
and the host country government; or (3) invoking the dispute-
resolution mechanisms identified in paragraph 3.
Under paragraph 3(a), if the investor has not submitted the
dispute to a court or administrative tribunal or invoked a
dispute resolution procedure previously agreed upon under the
procedures inparagraph 2, and 6 months have elapsed from the
date the dispute arose, the investor may chose to consent to binding
arbitration of the investment dispute. The investor may choose among
the International Centre for Settlement of Investment Disputes (ICSID)
(Convention Arbitration), the Additional Facility of ICSID (if
Convention arbitration is not available), ad hoc arbitration using the
Arbitration Rules of the United Nations Commission on International
Trade Law (UNCITRAL), or any other arbitral institution or rules agreed
upon by both parties to the dispute.
Paragraph 4 constitutes each Party's consent to the
submission of investment disputes to binding arbitration in
accordance with the choice of the investor from among those
permitted under the Treaty.
Paragraph 5 provides that any 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 Arbitral Awards. This provision facilitates
enforcement of arbitral awards.
In addition, in paragraph 6, each Party commits to
enforcing arbitral awards rendered pursuant to this Article.
The Federal Arbitration Act (9 U.S.C. 1 et seq.) satisfies the
requirement for the enforcement of non-ICSID Convention awards
in the United States. The Convention on the Settlement of
Investment Disputes Act of 1966 (22 U.S.C. 1650-1650a) provides
for the enforcement of ICSID Convention awards.
Paragraph 7 ensures that a Party may not assert as a
defense, or for any other reason, that the investor involved in
the investment dispute has received or will receive
reimbursement 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 (Settlement of Disputes Between the Parties)
Article VII provides for binding arbitration of disputes
between the United States and Lithuania concerning the
interpretation or application of the Treaty that are not
resolved through consultations or other diplomatic channels.
The article specifies various procedural aspects of such
arbitration proceedings, including time periods, selection of
arbitrators, and distribution of arbitration costs between the
parties. The article constitutes each Party's prior consent to
such arbitration.
Article VIII (Preservation of Rights)
Article VIII clarifies that the Treaty does not derogate
from any obligation a Party might have to provide better
treatment to the investment than is specified in the Treaty.
Thus, the Treaty establishes a floor for the treatment of
investments. An investment may be entitled to more favorable
treatment through domestic legislation, other international
legal obligations, or a specific obligation (e.g., to provide a
tax holiday) assumed by a Party with respect to that
investment.
Article IX (Measures Not Precluded)
The first paragraph 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 the
maintenance or restoration of international peace or security,
as well as those measures it regards as necessary for the
protection of its own essential security interests.
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
maintenance or restoration of peace or security would include,
for example, obligations arising out of Chapter VII of the
United Nations Charter. Measures permitted by the provision the
protection of a Party's essential security interests would
include security-related actions taken in time of war of
national emergency; actions not arising from a state of war or
national emergency must have a clear and direct relationship to
the essential security interests of the Party involved.
Measures to protect a Party's essential security interests are
self-judging in nature, although each Party would expect the
provisions to be applied by the other in good faith.
The second paragraph permits a Party to prescribe special
formalities in connection with investments, provided that these
formalities do not impair the substance of any Treaty rights.
Such formalities could include reporting requirements for
investments or for transfers of funds, or incorporation
requirements.
Article X (Tax Policies)
Article X, excludes tax matters generally from the coverage
of the BIT, on the basis that tax matters should be dealt with
in bilateral tax treaties.
Paragraph 1 exhorts both countries to provide fair and
equitable treatment to investors with respect to tax policies.
In matters of taxation, paragraph 3 expressly applies the
provisions of the Treaty, in particular its dispute settlement
provisions, only to tax matters concerning expropriation
(Article III), transfers (Article IV), or the observance and
enforcement of terms of an investment agreement or
authorization under Article VI(1)(a) or (b). Paragraph 2
further provides that the Treaty applies to such tax matters
only to the extent that 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.
Article XI (Application to Political Subdivisions)
Article XI makes clear that the obligations of the Treaty
are applicable to all political and administrative subdivisions
of the Parties, such as provincial, State, and local
governments.
Article XII (Entry into Force, Duration and Termination)
Paragraph 1 stipulates that the Treaty enters into force 30
days after exchange of instruments of ratification. The Treaty
remains in force for a period of 10 years and continues in
force thereafter unless terminated by either Party as provided
in paragraph 2. Paragraph 2 permits a Party to terminate the
Treaty at the end of the initial 10 year period, or at any
later time, by giving 1 year's written notice to the other
Party. Paragraph 1 also provides that the Treaty applies to
investments existing at the time of entry into force as well as
to those established or acquired thereafter. The Protocol to
the Treaty confirms the Parties' mutual understanding that the
provisions of the Treaty do not bind either Party in relation
to any act or fact which took place before the Treaty came into
force or to any situation which ceased to exist before the date
of entry into force of the Treaty. This provision thus
explicitly states the standard under customary international
law that applies in the absence of the Parties' express intent
to apply the treaty retroactively.
Paragraph 3 provides that, if the Treaty is terminated, all
investments covered by the Treaty on the date of termination
(i.e., 1 year after written notice) continue to be protected
under the Treaty for 10 years from that date.
Paragraph 4 stipulates that the Annex and Protocol shall
form an integral part of the Treaty.
Annex
U.S. bilateral investment treaties allow for exceptions to
national and MFN treatment, where the Parties' domestic regimes
do not afford national and MFN treatment, or where treatment in
certain sectors or matters is negotiated in and governed by
other agreements. Future derogations from the national
treatment obligations of the Treaty and generally permitted
only in the sectors or matters listed in the Annex, pursuant to
Article II(1), and must be made on an MFN basis unless
otherwise specified therein.
Under a number of statutes, many of which have a long
historical background, the U.S. federal government or States
may not necessarily treat investments of nationals or companies
of Lithuania as they do U.S. investments or investments from a
third country. Paragraphs 1 and 2 of the Annex list the sectors
or matters subject to U.S. exceptions.
The U.S. exceptions from its national treatment obligation
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
COMSAT; 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;
maritime services and maritime-related services; and primary
dealership in United States government securities.
The U.S. exceptions from its MFN treatment obligation are:
mining on the public domain; maritime services and maritime-
related services; one-way satellite transmissions of Direct-to-
Home (DTH) andDirect Broadcasting Satellites (DBS) television
services and of digital audio services; and primary dealership in
United States government securities.
Paragraph 3 of the Annex lists Lithuania's exceptions from
its national treatment obligation, which are: ownership of:
land under the objects belonging to Lithuania by the right of
exclusive ownership; land of national parks, national
reservations, reserves, protective areas of the territory of
biosphere monitoring; agricultural land; forestry land, with
the exception of plots necessary for operation of buildings and
facilities designated for economic activities which have been
provided for in approved planning documents; land of
recreational forests and forest shelter belts, rivers and other
water bodies exceeding one hectare in size as well as their
protective bank area; land of resorts and communal recreational
territories, separate communal recreational areas and objects;
land of state-protected natural carcass (geographic
formations); monuments of nature, history, archaeology, and
culture as well as the surrounding protective areas; land of
territories reserved, according to design projects, under
communal roads and engineering service lines; objects of
infrastructure of communal use in towns or other localities,
and for other common needs of the community; land under public
roads, railway lines, airports, sea and river ports, main
pipelines and other engineering service lines of communal use
as well as land necessary for their operation; land allotted,
in accordance with the procedure established by law, under the
free trade (economic) zones territory; land of protected
territories where deposits of mineral resources and other
natural resources have been found, with the exception of land
which, according to planning documents, has been directly
allotted for the construction of buildings and facilities
required for the mining or use of said mineral resources; land
of the Curonian Spit, the fifteen-kilometer wide strip of
coastal land of the Baltic Sea and the Curonian Lagoon, with
the exception of towns that are not resorts; land assigned to
the frontier; land of the territories assigned or reserved for
the needs of the national defense as well as territories where
land acquisition restrictions are established by laws or
Government decrees for safety reasons; production and sale of
narcotic drugs and psychotropic substances that are not used
for legitimate medicinal purposes; growing, reproduction, and
sale of cultures containing narcotic drugs or psychotropic
substances that are not used for legitimate medicinal purposes;
and organization of lotteries.
Lithuania did not take any exceptions from its MFN
treatment obligation.
The listing of a sector or matter in the Annex does not
necessarily signify that domestic laws have entirely reserved
it for nationals. And, pursuant to Article II(1), any
additional restrictions or limitations that a Party may adopt
with respect to a listed sector or matter do not apply to
investment existing in that sector or matter at the time the
exception becomes effective.
Finally, listing a sector or matter in the Annex exempts a
Party only from the obligation to accord national or MFN
treatment. Both Parties are obligated to accord to investments
in all sectors--even those listed in the Annex--all other
rights conferred by the Treaty.
Protocol
As described under Article XII(1), the Protocol states that
the Treaty does not apply retroactively. This clarification was
added to the Treaty at the request of Lithuania.
The other U.S. Government agencies that participated in
negotiating the Treaty join me in recommending that it be
transmitted to the Senate at an early date.
Respectfully submitted,
Madeleine Albright.