[DOCID: f:er013.104]
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104th Congress                                              Exec. Rept.
                                 SENATE

 2d Session                                                      104-13
_______________________________________________________________________


 
TREATY BETWEEN THE UNITED STATES OF AMERICA AND UKRAINE CONCERNING THE 
ENCOURAGEMENT AND RECIPROCAL PROTECTION OF INVESTMENT, WITH ANNEX, AND 
                      RELATED EXCHANGE OF LETTERS

                                _______
                                

                 June 20, 1996.--Ordered to be printed

_______________________________________________________________________


   Mr. Helms, from the Committee on Foreign Relations, submitted the 
                               following

                              R E P O R T

                   [To accompany Treaty Doc. 103-37]

    The Committee on Foreign Relations, to which was referred 
The Treaty Between the United States of America and Ukraine 
Concerning the Encouragement and Reciprocal Protection of 
Investment, with Annex, and Related Exchange of Letters, done 
at Washington on March 4, 1994, having considered the same, 
reports favorably thereon without amendment and recommends that 
the Senate give its advice and consent to ratification thereof 
as set forth in this report and the accompanying resolution of 
ratification.

                               I. Purpose

    The principal purposes for entering into a bilateral 
investment treaty (BIT) are to: protect U.S. investment abroad 
where U.S. investors do not have other agreements on which to 
rely for protection, encourage adoption of market-oriented 
domestic policies that treat private investment fairly, and 
support the development of legal standards consistent with the 
objectives of U.S. investors. The BIT, therefore, is intended 
to ensure that United States direct investment abroad and 
foreign investment in the United States receive fair, equitable 
and non-discriminatory treatment.

                             II. Background

    The proposed treaty together with the proposed annex and 
protocol, was signed on January 13, 1995. No bilateral 
investment treaty is currently in force between the United 
States and Ukraine.
    The proposed treaty, annex and related exchange of letters 
were transmitted to the Senate for advice and consent to 
ratification on July 10, 1995 (see Treaty Doc. 103-37). The 
Committee on Foreign Relations held a public hearing on the 
proposed treaty together with the proposed annex and related 
exchange of letters on November 30, 1995.

                              III. Summary

                               A. GENERAL

    Bilateral investment treaties (BITs) are the result of a 
treaty program begun in 1982 as a successor to the Friendship, 
Commerce, and Navigation Treaties that formerly set the 
framework for U.S. trade and investment with foreign countries. 
The BIT is based on a U.S. model treaty.
    All parties must agree to the basic guarantees of the model 
before the United States will enter into negotiations on a 
treaty. The six basic guarantees contained in the model are:
          investors receive the better of national or most 
        favored nation status;
          expropriation of private property is limited and a 
        remedy exists;
          investors have the right to transfer funds into and 
        out of the country without delay using a market rate of 
        exchange;
          inefficient and trade distorting practices such as 
        performance requirements are prohibited;
          investment disputes may be submitted to international 
        arbitration; and
          top managerial personnel of an investor's choice may 
        be engaged regardless of nationality.
    Since 1982, the United States has signed 37 BITs, and the 
Senate has given its advice and consent to the ratification of 
24 BITs. Twenty-two BITs are currently in force. The Senate has 
ratified two treaties that have not entered into force with 
Russia, where the Duma has failed to ratify, and with Ecuador, 
which was ratified by both countries, but the U.S. is delaying 
the exchange of instruments until Ecuador has fully implemented 
its obligations under the U.S.-Ecuador intellectual property 
rights agreement. There are currently 12 on-going negotiations 
for BITs with other countries.

                       B. Comparison to the Model

    The Treaty Between the United States of America and Ukraine 
Concerning the Encouragement and Reciprocal Protection of 
Investment, with Annex, and Related Exchange of Letters (Treaty 
Doc. 103-37) (BIT), is based on the United States 1992 Model 
Bilateral Investment Treaty (Model). The following is an 
analysis of the major provisions of the treaty.
    Preamble.--The Preamble of the BIT establishes the goals of 
the treaty to include: greater economic cooperation, the 
stimulation of the flow of private capital and economic 
development, maximization of effective utilization of economic 
resources and the improvement of living standards, respect for 
internationally recognized worker rights, and the maintenance 
of health, safety and environmental measures of general 
application. The goals outlined are not legally binding but may 
be used to assist in interpreting the Treaty and in defining 
the scope of Party-to-Party consultation procedures pursuant to 
Article VIII.
    Article I (definitions and general provisions).--The BIT 
follows the Model with respect to definitions except that the 
BIT adds definitions for ``state enterprise'' and 
``delegation.'' A ``state enterprise'' is defined as ``an 
enterprise owned, or controlled through ownership interests, by 
a Party'' (Art. I:1(f)). A ``delegation'' is defined to include 
``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 (Art. I:1(g)). State Department 
negotiators informed Committee staff that these definitions 
were added to clarify and extend the the requirements of the 
treaty with respect to state enterprise because of the dominant 
role of state enterprises in the Ukrainian economy. Negotiators 
believe this addition gives the U.S. investors added 
protection. Similar language can be found in the NAFTA.
    The BIT follows the Model as to the right to deny treaty 
benefits to companies controlled by nationals or firms of third 
countries and the rule that any alteration of the form in which 
assets are invested or reinvested will not affect their 
character as investments (Arts. I:2, I:3).
    Article II (treatment).--The BIT contains a provision 
identical to that in the Model setting forth each Party's 
obligation to provide the better of national or MFN treatment 
to investment and associated activity of the other Party and 
its right to exempt certain sectors from this obligation (Art. 
II:1).
    The BIT also contains provisions identical to the Model as 
to the minimum treatment to be accorded investments; 
prohibiting arbitrary or discriminatory impairment of 
investments; and requiring each Party to observe any obligation 
it may have entered into with respect to an investment (Art. 
II:3).
    The BIT follows the Model as to entry of nationals for 
investment purposes (Art. II:4); engaging top managerial 
personnel of choice (Art. II:5); prohibiting performance 
requirements (Art. II:6); providing effective means of 
asserting claims and enforcing rights (Art. II:7); making 
public all laws, regulations, administrative processes, and 
adjudicatory decisions pertaining to or affecting investments 
(Art. II:8); clarifying the application of the BIT on a 
national treatment basis in states, territories, and 
possessions of the United States (Art. II:9), removing from the 
scope of MFN treatment a Party's binding obligations under free 
trade areas or customs union and under any multilateral 
international agreement entered into under the auspices of the 
GATT subsequent to the signature of the BIT (Art. II:10).
    The BIT adds a paragraph regarding state enterprises, 
stating that the BIT may not be construed to prohibit a Party 
from establishing or maintaining a state enterprise, that any 
such enterprise may not act inconsistently with Treaty 
obligations when exercising governmental authority delegated to 
it; and that the enterprise must accord the better of national 
or MFN treatment in its sale of goods or services in the 
Party's territory (Art. II:2). State Department negotiators 
have informed Committee staff that this paragraph was added 
with the intent of clarifying and extending the requirements of 
the treaty with respect to state enterprises and thereby give 
U.S. investors added protection.
    The BIT adds another paragraph further defining what are to 
be considered ``associated activities'' for purposes of the 
BIT. It lists ten additional activities, including franchises 
and other licenses; access to registrations, licenses, permits, 
and other approvals; access to financial institutions, credit 
markets, and other funds; the import and export of equipment 
and automobiles; dissemination of commercial information; 
conducting market studies; the appointment of commercial 
representatives and the participation of such individuals in 
trade fairs and promotional events; marketing goods and 
services; and access to public utilities, public services, 
commercial rental space, raw materials, inputs, and services of 
all types of nondiscriminatory prices, if the prices are set or 
controlled by the government (Art. II:11). According to State 
Department negotiators this provision is seen as a plus for 
U.S. investors as it is designed to avoid problems that U.S. 
businesses may face in emerging market economies. Similar 
language may be found in BITs with NIS and Eastern European 
countries, including the Czech Republic, Slovakia, Kazakstan, 
Kyrgystan, Moldova, and Poland, all of which were currently in 
force.
    Article III (expropriation).--The treaty prohibits 
expropriations of covered investments except if carried out for 
a public purpose, in a non-discriminatory manner, upon payment 
of prompt, adequate and effective compensation, and in 
accordance with due process of law and the minimum treatment 
standards set forth in Article II (generally requiring ``fair 
and equitable treatment'') (Art. III:1). The BIT is identical 
to the Model's expropriation article, except for one provision 
as to transferability. While the BIT contains the Model's 
obligation that compensation be freely transferable, it does 
not include the additional language contained in the Model that 
compensation be transferable ``at the prevailing market rate of 
exchange on the date of expropriation'' (Art. III:1).
    Paragraph 1 also contains language not found in the model 
which gives an indication of what could be considered a 
``commercially reasonable'' interest rate by elaborating that 
compensation include ``. . . interest at a commercially 
reasonable rate, such as LIBOR (London Interbank Offer Rate) 
plus an appropriate margin . . .'' Many countries have to pay 
their foreign creditors at LIBOR plus a certain margin. State 
Department negotiators have informed Committee staff that this 
addition will enable Ukraine to explain to its legislators what 
is meant by the phrase ``commercially reasonable.'' According 
to State Department negotiators, the reference to LIBOR does 
not change the meaning of the sentence.
    This provision also provides for prompt judicial or 
administrative review of the claim in the host country (Art. 
III:2); and entitles investors to the better or 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).--The BIT is identical to the Model 
regarding transfers into and out of the territory of a Party. 
This obligation, which defines transfers to include 
compensation paid under Article III, requires, inter alia, that 
transfers be made in a freely usable currency at the current 
market rate of exchange on the date of transfer with respect to 
spot transactions in the currency to be transferred.
    Article V (consultations).--The BIT is identical to the 
Model regarding the obligation of Parties to consult with 
respect to disputes and other matters arising under the Treaty.
    Article VI (investor/state disputes).--The BIT is identical 
to the Model regarding provisions for consultation and 
arbitration in investor-State disputes. As in the Model, each 
Party consents to the submission of any investment dispute to 
binding international arbitration in the event that the Parties 
have failed to resolve the dispute amicably. Ukraine is a Party 
to the New York Convention on the Recognition and Enforcement 
of Foreign Arbitral Awards. It has entered into the Convention 
reciprocally--that is, with the declaration that it will apply 
the Convention to the recognition and enforcement of awards 
made only in the territory of another contracting state. As of 
January 1, 1995, Ukraine had not joined the Convention on the 
Settlement of Investment Disputes between States and Nationals 
of Other States.
    Unlike the Model, the BIT does not exempt from its 
investor/state dispute procedures those disputes arising under 
the export credit, guarantee, or insurance programs of the 
Export-Import Bank of the United States or under other official 
credit, guarantee or insurance arrangements pursuant to which 
the Parties have agreed to other means of settling disputes. 
State Department negotiators informed Committee staff that this 
exemption was eliminated because EXIM, OPIC and other relevant 
agencies indicated prior to negotiations that they saw no need 
to maintain such a provision.
    Article VII (interstate disputes).--The BIT is identical to 
the Model in providing for binding arbitration for interstate 
disputes in the event such a dispute has not been resolved 
through consultations or other diplomatic means.
    Unlike the Model, the BIT does not exempt from its 
interstate dispute procedures those disputes arising under the 
export credit, guarantee, or insurance programs of the Export-
Import Bank of the United States or under other official 
credit, guarantee or insurance arrangements pursuant to which 
the Parties have agreed to other means of settling disputes. 
State Department negotiators informed Committee staff that this 
exemption was eliminated because EXIM, OPIC and other relevant 
agencies indicated prior to negotiations that they saw no need 
to maintain such a provision.
    Article VIII (preservation of rights).--The BIT is 
identical to the Model in allowing each Party to provide 
investments of the other Party treatment that is more favorable 
than that minimally required under the BIT, as a result of 
national laws, regulations, administrative procedures, or 
adjudications, international legal obligations, or other 
obligations assumed by either Party.
    Article IX (exceptions).--The BIT is identical to the Model 
as to exceptions for measures necessary for public order, the 
fulfillment of certain international obligations, and 
protecting essential security interests. Like the Model, the 
BIT also allows Parties to prescribe special formalities for 
investments so long as the substance of treaty rights is not 
impaired. State Department officials have informed Committee 
staff that during negotiation of the BIT Parties agreed that 
this provision is self-judging.
    Article X (taxation).--The BIT is identical to the Model 
with respect to each Party's tax policies as applicable to 
investments of the other Party and the application of the 
treaty to tax matters in limited areas.
    Article XI (extent of application).--Like the Model, the 
BIT clarifies that it fully applies to all political 
subdivisions. The BIT, however, specifies that it applies to 
administrative as well as political subdivisions.
    Article XII (final provisions).--The BIT is identical to 
the Model as to its entry into force, its application to 
current and future investments, termination, and continued 
temporary application to investments made or acquired prior to 
any termination date. The BIT adds that the Side Letter, as 
well as the Annex, form an integral part of the Treaty.
    Annex (sectoral exemptions).--The BIT is identical to the 
Model as to the sectors and matters in which the United States 
may make or maintain limited exceptions from its national 
treatment and MFN obligations (Annex, paragraphs 1, 2). The 
Annex contains an additional paragraph listing the sectors in 
which Ukraine may make or maintain limited exceptions from its 
national treatment obligation (no MFN exceptions are listed). 
These are: production of equipment used exclusively for nuclear 
power plants; maritime transportation including ocean and 
coastal shipping; air transportation; nuclear electric energy 
generation; privatization of those educational, sports, medical 
and scientific facilities financed by the national budget; 
mining of salt; mining and processing of rare earth, and of 
uranium and other radioactive elements; ownership and operation 
of television and radio broadcasting stations; and ownership of 
land.
    Exchange of letters (investor assistance).--Following the 
protocol is an exchange of letters between the Deputy United 
States Trade Representative and the Minister of Economy of 
Ukraine in which the Parties confirm that the Ukraine has 
agreed to designate an office to assist United States investors 
in deriving the full benefits of the BIT in connection with 
their investment-related activities. The letters set forth the 
types of assistance that will be provided and state that the 
Administration of Foreign Economic Relations of Ukraine and the 
Department of Foreign Investments and Credits of the Ministry 
of the Economy of Ukraine are designated to perform this 
function.

                  IV. Entry Into Force and Termination

                          a. entry into force

    The proposed treaty will enter into force 30 days after the 
date of the exchange of instruments of ratification. From the 
date of its entry into force, the BIT applies to existing and 
future investments.

                             b. termination

    The proposed treaty will continue in force for ten years 
after ratification without termination. A Party may terminate 
the proposed treaty ten years after entry into force if the 
Party gives one year's written notice of termination to the 
other Party. If terminated, all existing investments would 
continue to be protected under the BIT for ten years 
thereafter.

                          V. Committee Action

    The Committee on Foreign Relations held a public hearing on 
the proposed treaty, annex and related exchange of letters with 
Ukraine on November 30, 1995. The hearing was chaired by 
Senator Thompson. The Committee considered the proposed treaty, 
annex and related exchange of letters with Ukraine on March 27, 
1996, and ordered the proposed treaty, annex and related 
exchange of letters favorably reported by voice vote, with the 
recommendation that the Senate give its advice and consent to 
the ratification of the proposed treaty, annex and related 
exchange of letters.

                         VI. Committee Comments

    The Committee on Foreign Relations recommended favorably 
the proposed treaty and, on balance, the Committee believes 
that the proposed treaty is in the interest of the United 
States and urges the Senate to act promptly to give its advice 
and consent to ratification. Several issues did arise in the 
course of the Committee's consideration of the BIT, and the 
Committee believes that the following comments may be useful to 
Senate consideration of this treaty and to the State Department 
and the Office of the United States Trade Representative, which 
share jurisdiction over this treaty.

                    a. current investment statistics

----------------------------------------------------------------------------------------------------------------
                                                                 Direct                                         
                                                               investment     Stock       Exports      Imports  
----------------------------------------------------------------------------------------------------------------
1992........................................................            0            0          305          109
1993........................................................            0            0          312          205
1994........................................................      ( \1\ )      ( \1\ )          180          372
1995........................................................      ( \2\ )      ( \2\ )          223         472 
----------------------------------------------------------------------------------------------------------------
\1\ Data suppressed to avoid disclosure of data on individual firms.                                            
\2\ No data.                                                                                                    

United States direct investment flows to Ukraine

    The chart above reflects the amounts of direct investment 
which flowed from the United States to Ukraine in the indicated 
calendar year, as published in the Commerce Department's 
``Survey of Current Business''. Data for 1995 have not yet been 
released.

United States year-end stocks of direct investment in Ukraine

    The chart above reflects the total amount to U.S. direct 
investment accumulated over time as of the end of each year 
cited, as published in the Commerce Department's ``Survey of 
Current Business''. The data are available only through 1994 
and are valued at historical cost less depreciation and 
scrapping. They do not reflect the current market value of the 
businesses in which U.S. persons have invested.

United States trade with Ukraine

    The trade data in the chart above for 1994 and 1995 comes 
from the U.S. Bureau of Census' December 1995 press release. 
Those through 1993 are taken from the International Monetary 
Fund's ``Directions of Trade''. The IMF received its trade data 
for this report from the Bureau of Census. The import data 
include the cost of the imported goods, shipping insurance and 
freight. Overall imports totaled $14.2 billion and overall 
exports totaled $11.8 billion in 1993.
    The Committee believes that the economic well-being of 
Ukraine is important, not only to the development of Central 
and Eastern Europe, but also to the European continent as a 
whole. It is in the interest of the United States, therefore, 
that Ukraine adhere to market principles and ensure that U.S. 
and other foreign investors in Ukraine are given a fair 
opportunity to sell their goods and services and expand their 
market presence in Ukraine.
    The Committee notes that the pace of privatization and 
economic reform has been slower than hoped for and believes 
that the Government of Ukraine should make an effort to 
increase the rate of market reform. For example, Ukraine's 
banking sector remains highly controlled by the government and 
the legal system in Ukraine does not sufficiently protect 
property from expropriation. The Committee notes that the 
Government of Ukraine has lagged in implementing laws 
permitting bank secrecy, resulting in further delay of 
ratification of a U.S.-Ukraine bilateral tax treaty, already 
approved by the U.S. Senate. The Committee supports the 
ratification and implementation of the proposed BIT and notes 
that the Congress approved $225 million in Freedom Support Act 
assistance to Ukraine for FY 1996 in order to advance reform in 
Ukraine.

                             b. enforcement

    Following the hearing on the bilateral investment treaties, 
Senator Helms requested information regarding the utility of 
the bilateral investment treaty with Argentina. Specifically, 
Senator Helms requested that the State Department identify 
outstanding investment disputes with U.S. corporations doing 
business in Argentina and actions taken by the U.S. to address 
the BIT violations. Since its entry into force on October 24, 
1994, two disputes have developed in Argentina. The following 
is excerpted from the State Department's response to Senator 
Helms:\1\
---------------------------------------------------------------------------
    \1\ Letter from Assistant Secretary for Legislative Affairs, Wendy 
R. Sherman, to Senator Helms, Committee on Foreign Relations, December 
18, 1995.

We are aware of two investment disputes that have developed in 
Argentina recently.
1. CDSI
    CDSI is a Maryland computer firm involved in a contract 
dispute with the Cordoba provincial government in Argentina. 
CDSI believes that Cordoba officials improperly reversed a 
contract award to a firm with which it had a subcontract, 
depriving it of the value of its investment.
    Department officials have discussed the case with CDSI 
representatives in Washington. Embassy officials are in regular 
contact with CDSI representatives in Buenos Aires.
    CDSI has informed us that, if the dispute is not resolved 
through ongoing negotiations, it may avail itself of the right 
to binding arbitration under the BIT. We will continue to work 
with company and officials in Argentina to resolve this case. 
[State Department officials have informed Committee staff that 
CDSI recently reached an agreement with the provincial 
government of Cordoba. According to State department officials 
the parties are satisfied with the agreement.]
2. Mi-Jack
    Mi-Jack, based in Illinois and Texas, owns about 30% of a 
company that purchased the right to operate one of five 
terminals at the Port of Buenos Aires. (The rest of the equity 
is not owned by Americans.) Mi-Jack is operating the dock in 
accordance with regulations, fees, and labor rules specified by 
the Government of Argentina in the tender.
    At some point after this tender process began, the 
Argentine federal government transferred adjacent dock property 
to the Buenos Aires provincial government. The provincial 
government leased the property to a company which began 
operating a sixth terminal, without the conditions imposed on 
other dock operators by the federal government. Mi-Jack 
maintains that this unequal treatment is a BIT violation, and 
has requested USG assistance.
    Department and other agency officials have discussed the 
case with Mi-Jack. Our Ambassador recently urged the Argentine 
Minister of Economy and the Governor of the Province of Buenos 
Aires to address the issues Mi-Jack has raised and resolve the 
dispute.

    The Committee believes that the value of the proposed 
treaty depends upon the extent to which it is enforced. The 
Committee refers to the two cases in Argentina, cited above, as 
examples of how the proposed treaty can be a useful tool both 
to business and U.S. embassies in protecting the interests of 
U.S. business directly investing in-country. The Committee 
believes that the treaty should serve as more than a diplomatic 
tool. The Committee notes that local remedies and domestic 
enforcement of arbitral awards are essential steps in enforcing 
the guarantees provided in the proposed treaty and believes 
that the President should communicate, at the time of the 
exchange of the instruments of ratification, the importance of 
a domestic enforcement regime to the ultimate success of the 
proposed treaty. Such an indication would add credence to the 
U.S. position that BITs provide genuine protections to 
investors, and are not merely rhetorical endorsements of market 
economies.

             c. protecting u.s. businesses investing abroad

    Although a BIT provides certain legal protections designed 
to give investors recourse in the case of unfair treatment, the 
role of the U.S. State Department and other government agencies 
such as USTR remains essential to the protection of U.S. 
citizens doing business abroad.
    Issues regarding the role of the State Department and U.S. 
posts abroad in assisting U.S. investors were raised during the 
Committee's consideration of the BIT. After the November 30, 
1995 hearing, Senator Helms requested a description of the 
general procedures at U.S. Embassies, and in Washington, for 
assisting U.S. investors when potential BIT violations, or 
investment disputes, including expropriated property claims, in 
countries not a Party to a BIT, are brought to the attention of 
the Embassy by the investors. The State Department's response 
to this inquiry, in a letter dated December 18, 1995,\2\ is 
reproduced below:
---------------------------------------------------------------------------
    \2\ Letter from Assistant Secretary for Legislative Affairs, Wendy 
R. Sherman, to Senator Helms, Committee on Foreign Relations, December 
18, 1995.

    An important responsibility of all U.S. diplomatic posts 
abroad is to assist U.S. investors and property owners in the 
resolution of disputes with the host government. Where disputes 
arise, U.S. posts and the Department provide a range of 
services to the U.S. claimant.
    These services include:
          (1) advising the U.S. claimant of local legal counsel 
        which may be available to handle similar disputes;
          (2) assisting the U.S. claimant in contacting host 
        government officials which may be in a position to 
        facilitate a resolution of his claim;
          (3) directly encouraging host government officials to 
        negotiate a resolution of the claim (such contacts may 
        be on behalf of a single claimant or multiple claimants 
        where there are a number of outstanding claims);
          (4) occasionally, where the circumstances warrant, 
        the U.S. may decide to directly espouse a claim or 
        claims; and
          (5) in addition, where a BIT is in force, other 
        options (e.g. binding investor-state arbitration) may 
        be brought to the attention of the investor and/or 
        local officials.
    Given the wide variety of circumstances associated with 
investment disputes around the globe, the range of resources 
available at individual diplomatic posts, the variety of 
assistance being requested by individual investors, and the 
diversity of host country investment regimes, a good deal of 
discretion is necessary to tailor individual responses to the 
particular circumstances of the case.
    For example, the approach taken in the case of a country 
which has a well functioning judicial system and demonstrated 
effectiveness in adjudicating disputes may be quite different 
from that taken with respect to cases where some or all of 
these conditions do not prevail. The investor's preferences 
also guide our response. The current approach to providing 
assistance to U.S. claimants in investment disputes permits us 
the flexibility needed to tailor a response that reflects both 
the conditions prevalent in the host country and the investor's 
own strategy.
    Action on investment disputes is coordinated through 
constant routine communication among Embassy and Washington 
offices. This is supplemented by periodic formal requests from 
the Department for information on investment disputes and by 
the Posts' preparation of the Investment Climate Statements for 
each country. In addition, the Department chairs the 
Interagency Staff Coordinating Group on Expropriations 
(``Expropriation Group''), which is comprised of 
representatives from the Office of the United States Trade 
Representative, the Overseas Private Investment Corporation, 
the Department of Commerce, and the Department of Treasury. 
This group meets periodically to discuss expropriation and 
related issues.
    In addition to assisting individual U.S. investors when 
they have an investment dispute, we engage in activities that 
could help prevent investment disputes. Officials in Washington 
and in our Embassies also examine investment practices in other 
nations and work to discourage other governments from passing 
legislation that might disadvantage U.S. investors and lead to 
investment disputes. The results of these examinations are 
included in the annual Investment Climate Statement, a report 
which is widely used by both U.S. officials and investors. We 
also engage in negotiations with other governments on BITs and 
multilateral disciplines that help protect the interests of 
U.S. investors.
    In the past year or two, we have reached a point where a 
significant number of BITs have entered into force and, thus, 
apply to U.S. investment. At this time, we are reviewing ways 
to even better inform our posts about the obligations contained 
in these BITs, in order to assist U.S. investors and monitor 
compliance with these obligations by our BIT treaty partners.

    The Committee supports the efforts of the State Department 
and U.S. foreign posts to educate businesses and ensure that 
the investment climate in these countries remains open and fair 
for U.S. businesses. The Committee supports the BIT as a tool 
for both businesses and U.S. diplomats to ensure fair 
investment environments where U.S. companies are doing 
business.
    In addition, Senator Helms requested an assessment of the 
utility of developing procedures at the State Department to 
ensure consistently timely response when investors bring 
foreign investment problems to the attention of U.S. Posts and 
the Department. The State Department's response to this 
inquiry, was also included in the dated December 18, 1995 
letter, as reproduced below:

    It is current State Department policy and practice to 
respond in a timely manner when investors bring investment 
problems to the attention of embassies. Any lapse in such 
practice can and should be brought to the attention of the 
Office of Investment Affairs in Washington, which will ensure 
that a response is forthcoming.
    While a timely response should be a constant, we believe 
that the nature of that response should vary from case to case. 
Investors benefit from the freedom our diplomats enjoy to 
pursue solutions tailored to the investor's problems. In some 
countries, a quiet call from an Embassy officer to a government 
official can help an investor. Elsewhere, if the government has 
not been responsive, we may directly approach senior government 
officials.
    The following examples illustrate the variety and 
complexity of individual circumstances:
          A company informed us of an investment dispute, but 
        specifically requested that we not take any action as 
        negotiations continued.
          In a country undergoing civil strife, investors are 
        pursuing arbitration through an international financial 
        institution.
          In one country, we have had to develop specialized 
        procedures and increase Embassy staffing to deal with a 
        very large number of claims.
    Supplanting our existing flexible process for assisting 
U.S. claimants with a ``one size fits all'' policy would not 
likely work to the benefit of investors. Investors gain when we 
are free to fashion a response that takes into consideration 
the facts unique to that dispute, the investor's strategy for 
obtaining resolution to the dispute, the resources available to 
the USG to promote a quick resolution to the dispute, and the 
broader economic and political context within which we and the 
investor must work to achieve the desired outcome.
    As described in the previous question, American diplomats 
and Department employees use a wide variety of strategies to 
assist U.S. citizens in investment disputes abroad. Required 
procedures could have significant resource implications without 
increasing the effectiveness of these strategies. Furthermore, 
we do not believe that a procedure developed in Washington 
which may not reflect either the unique conditions existing in 
a particular country or the experiences of our diplomats or 
businessmen is in the interests of either U.S. investors or the 
United States.

    The Committee agrees that a ``one size fits all'' approach 
to addressing how best to protect U.S. investors faced with 
disputes with foreign governments would not be useful. However, 
the Committee supports the development by State and USTR of 
flexible procedures that ensure that all U.S. investors, large 
and small, will be given timely assistance when they raise 
investment issues with the U.S. State Department, both at the 
missions and in Washington. The Committee expects that such 
procedures would ensure appropriate coordination between U.S. 
missions and the State Department and the Office of the U.S. 
Trade Representative in Washington.

            VII. Explanation of Proposed Treaty and Protocol

    For a detailed article-by-article explanation of the 
proposed bilateral investment treaty, annex, and related 
exchange of letters, see the analysis contained in the 
transmittal documents included in Treaty Doc. 103-37.

              VIII. Text of the Resolution of Ratification

    Resolved, (two-thirds of the Senators present concurring 
therein), That the Senate advise and consent to the 
ratification of The Treaty Between the United States of America 
and Ukraine Concerning the Encouragement and Reciprocal 
Protection of Investment, with Annex and Related Exchange of 
Letters, done at Washington on March 4, 1994 (Treaty Doc. 103-
37).

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