U.S. GOVERNMENT PRINTING OFFICE

WASHINGTON : 

1

99–118

" SENATE ! 104TH CONGRESS

1st Session

TREATY DOC.

1995

104–19

INVESTMENT TREATY WITH ALBANIA

MESSAGE

FROM

THE PRESIDENT OF THE UNITED STATES

TRANSMITTING

THE TREATY BETWEEN THE GOVERNMENT OF THE UNITED

STATES OF AMERICA AND THE GOVERNMENT OF THE REPUBLIC

OF ALBANIA CONCERNING THE ENCOURAGEMENT AND RECIPROCAL PROTECTION OF INVESTMENT, WITH ANNEX AND PROTOCOL, SIGNED AT WASHINGTON ON JANUARY 11, 1995.

SEPTEMBER 6, 1995.—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.

(III)

LETTER OF TRANSMITTAL

THE WHITE HOUSE, September 6, 1995.

To the Senate of the United States:

With a view of 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 Albania Concerning the Encouragement and Reciprocal

Protection of Investment, with Annex and Protocol, signed at

Washington on January 11, 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 Albania will protect

U.S. investment and assist the Republic of Albania in its efforts to

develop its economy by creating conditions more favorable for U.S.

private investment and thus strengthen the development of its 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 related to 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.

(V)

LETTER OF SUBMITTAL

DEPARTMENT OF STATE,

Washington, August 3, 1995.

The PRESIDENT, The White House.

THE PRESIDENT: I have the honor to submit to you the Treaty Be- tween the Government of the United States of America and the

Government of the Republic of Albania Concerning the Encouragement and Reciprocal Protection of Investment, with Annex and

Protocol, signed at Washington on January 11, 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 Albania is based on the view that an open investment policy contributes to economic

growth. This Treaty will assist Albania in its efforts to develop its

economy by creating conditions more favorable for U.S. private investment and thus strengthen 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 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 Albania, the United States has signed, but not yet brought

into force, BITs with Armenia, Belarus, Ecuador, Estonia, Georgia,

Haiti, Jamaica, Latvia, 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.

THE U.S.-ALBANIA TREATY

The Treaty with Albania is based on the 1994 U.S. prototype BIT and satisfies the United States’ principal objectives in bilateral investment treaty negotiations: —All forms of U.S. investment in the territory of Albania are covered.

—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 covered investments.
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—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 a covered 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.-Albania Treaty does not differ in any significant way

from the 1994 prototype. It does, however, contain an additional

Protocol clarifying the Parties’ understanding on safeguarding the

exchange of proprietary information during government-to-government consultations and clarifying that the Treaty does not obligate

either Party to accord national treatment in taxation matters. The

following is an article-by-article analysis of the provisions and 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; the stimulation of

economic development; higher living standards; promotion of respect for internationally-recognized worker rights; and maintenance of health, safety, and environmental measures. 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 consultation procedures pursuant to Article

VIII. Similarly article titles have been added to the Treaty. These

do not change the Treaty in any way but were added to facilitate

its reading.

Article I (Definitions)

Article I defines terms used throughout the Treaty. In general,

the definitions are designed to be broad and inclusive in nature.

Company, Company of a Party

The definition of ‘‘company’’ is broad, covering all types of legal

entities constituted or organized under applicable law, and includes

corporations, trusts, partnerships, sole proprietorships, branches,

joint ventures, and associations. The definition explicitly covers

charitable and not-for-profit entities, as well as entities that are

owned or controlled by the state. ‘‘Company of a Party’’ is defined

as a company constituted or organized under the laws of that

Party.

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

America Samoa is a national of the United States, but not a citizen.
VII

Investment, Covered 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; moreover it is explicitly noted that investment may consist or take the form of any

of a number of interests, claims, and rights. Establishing a subsidiary is a common way of making an investment. Other forms that

an investment might take include equity and debt interests in a

company; contractual rights; tangible, intangible, and intellectual

property; and rights conferred pursuant to law. Investment as defined by the Treaty generally excludes claims arising solely from

trade transactions, such as a sale of good across a border that does

not otherwise involve an investment.

The Treaty defines ‘‘covered investment’’ as an investment of a

national or company of a Party in the territory of the other Party.

An investment of a national or company is one that the national

or company owns or controls, either directly or indirectly. 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 fifty 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 board nature of the definitions of ‘‘covered investment,’’ combined with the definitions of ‘‘investment,’’ ‘‘company,’’ 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 the limited

circumstances described in Article XII.

State Enterprise, Investment Authorization, Investment

Agreement

The Treaty defines ‘‘state enterprise’’ as a company owned, or

controlled through ownership interests, by a Party. Purely regulatory control over a company does not qualify it as a state enterprise.

The Treaty defines an ‘‘investment authorization’’ as an authorization granted by the foreign investment authority of a Party to

a covered investment or a national or company of the other Party.

The Treaty defines an ‘‘investment agreement’’ as a written

agreement between the national authorities of a Party and a covered investment or a national or company of the other Party that

(1) grants rights with respect to natural resources or other assets

controlled by the national authorities; and (2) the investment, national, or company relies upon in establishing or acquiring a covered investment. This definition thus excludes agreements with

subnational authorities (including U.S. States) as well as agreements arising from various types of regulatory activities of the national government, including, in the tax area, rulings, closing

agreements, and advance pricing agreements.
VIII

ICSID Convention, Centre, UNCITRAL Arbitration Rules

The ‘‘ICSID Convention,’’ ‘‘Centre,’’ and ‘‘UNCITRAL Arbitration

Rules’’ are explicitly defined to make the text brief and clear.

Article II (Treatment of Investment)

Article II contains the Treaty’s major obligations with respect to the treatment of covered investments.

Paragraph 1 generally ensures the better of national or MFN treatment in both the entry and post-entry phases of investment.

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. For purposes of the Treaty, ‘‘national treatment’’ means treatment no less

favorable than that which a Party accords, in like situations, to investments in its territory of its own nationals or companies. For

purposes of the Treaty, ‘‘MFN treatment’’ means treatment no less

favorable than that which a Party accords, in like situations, to investments in its territory of nationals or companies of a third country. ‘‘National and MFN treatment’’ is defined as whichever of national treatment or MFN treatment is the most favorable. Paragraph 1 explicitly states that the national and MFN treatment obligation will extend to state enterprises in their sale of goods and

services.

Paragraph 2 states that the Parties may adopt or maintain ex- ceptions to the national and MFN treatment standard with respect

to the sectors or matters specified in the Annex. In principle, further restrictive measures are permitted in each sector. The careful

phrasing and narrow drafting of these exceptions is therefore important. (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, in adopting any exception under this provision, a

Party may not require the divestment of a preexisting covered investment.

Paragraph 2 also states that a Party is not required to extend to covered investments national or MFN treatment with respect to

procedures provided for in multilateral agreements concluded

under the auspices of the World Intellectual Property Organization

relating to the acquisition or maintenance of intellectual property

rights. This provision clarifies that certain procedural preferences

granted under existing conventions such as the Patent Cooperation

Treaty, fall outside the BIT. This exception parallels one in the

Uruguay Round’s Trade-Related Aspects of Intellectual Property

Rights (TRIPS) agreement and the North American Free Trade

Agreement (NAFTA). This provision complements the more specific

IPR-related provisions contained in the U.S.-Albania Bilateral

Trade Agreement.

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, as is the Parties’ obligation not to impair,

through unreasonable and discriminatory means, the management,

conduct, operation, and sale or other disposition of covered invest-
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ments. The general reference to international law also implicitly incorporates other fundamental rules of international law: for example, that sovereignty may not be grounds for unilateral revocation

or amendment of a Party’s obligations to investors and investments

(especially contracts), and that an investor is entitled to have any

expropriation done in accordance with previous undertakings of a

Party.

Paragraph 4 requires that each Party provide effective means of

asserting claims and enforcing rights with respect to covered investments.

Paragraph 5 ensures the transparency of each Party’s regulation

of covered investments.

Article III (Expropriation)

Article III incorporates into the Treaty 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 and obligations also apply to direct or indirect

measures ‘‘tantamount to expropriation or nationalization’’ and

thus apply to ‘‘creeping expropriations’’—a series of measures

which effectively amount to an expropriation of a covered 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.’’

Paragraphs 2, 3, and 4 more fully describe the meaning of

‘‘prompt, adequate, and effective compensation.’’ The guiding principle is that the investor should be made whole.

Article IV (Compensation for Damages Due to War and Similar

Events)

Paragraph 1 entitles investments covered by the Treaty to the

better of national or 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. The unconditional obligation to pay compensation for such losses only

arises when the losses result from requisitioning or from destruction not required by the necessity of the situation.

Article V (Transfers)

Article V protects investors from certain government exchange

controls that limit current and capital account transfers, as well as

limits on inward transfers made by screening authorities and limits

on returns in kind.

In paragraph 1, each Party agrees to permit ‘‘transfers relating

to a covered 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.
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Paragraph 2 provides that each Party must permit transfers to

be made in a ‘‘freely usable currency’’ at the market rate of exchange prevailing on the date of transfer. ‘‘Freely usable’’ is a term

used by 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.

In paragraph 3, each Party agrees to permit returns in kind to

be made where such returns have been authorized by an investment authorization or written agreement between a Party and a

covered investment.

Paragraph 4 recognizes that, notwithstanding the guarantees of

paragraphs 1 through 3, a party may prevent a transfer through

the equitable, non-discriminatory and good faith enforcement of judicial orders and judgments, or application of laws relating to such

matters as bankruptcy, securities, or criminal or penal offenses.

Article VI (Performance Requirements)

Article VI prohibits either Party from mandating or enforcing

performance requirements in connection with a covered investment. The list of prohibited requirements includes the use of local

goods, the export of goods or services, the ‘‘balancing’’ of imports

and exports, the transfer of technology, or the conduct of research

in the host country. Such requirements are major burdens on investors and impair their competitiveness.

A Party may, however, impose conditions for benefits and incentives—e.g., eligibility for programs maintained by the U.S. ExportImport Bank and other similar institutions.

Article VII (Entry, Sojourn and Employment of Aliens)

Paragraph 1 requires each Party to allow, subject to its immigration and employment laws and regulations, the entry into its territory of the other Party’s nationals for certain purposes related to

a covered investment and involving the commitment of a ‘‘substantial amount of capital.’’ This paragraph serves to render nationals

of Albania eligible for treaty-investor visas under U.S. immigration

law. It also guarantees similar treatment for U.S. nationals entering the Republic of Albania. The requirement to commit a ‘‘substantial amount of capital’’ is intended to prevent abuse of treatyinvestor status; it parallels the requirements of U.S. immigration

law.

In addition, paragraph 1(b) prohibits labor certification requirements and numerical restrictions on investor-visas.

Paragraph 2 requires that each Party allow covered investments

to engage top managerial personnel of their choice, regardless of

nationality.

Article VIII (State-State Consultations)

Article VIII provides for prompt consultation between the Parties, at either Party’s request, on any matter relating to the interpretation of the Treaty or to the realization of the Treaty’s objectives. A Party may thus request consultations for any matter reasonably related to the encouragement or protection of covered investment, whether or not a Party is alleging a violation of the

Treaty.
XI

1Like the treaties of Friendship, Commerce and Navigation (FCN), which preceded them (the

BIT program is a successor to the FCN program), BITs provide a basis for nationals and companies of the other Party to allege Treaty violations in actions in courts of the United States.

Article IX (Settlement of Disputes Between One Party and a National or Company of the Other Party)

Article IX sets forth several means by which disputes between an

investor and a Party may be settled.

Article IX procedures apply to an ‘‘investment dispute,’’ which

covers any dispute arising out of or relating to an investment authorization, an investment agreement, or an alleged breach of

rights granted or recognized by the Treaty with respect to a covered investment.

In the event that an investment dispute cannot be settled amicably, Paragraph 2 gives a national or company an exclusive (with

the exception in paragraph 3(b) concerning injunctive relief, explained below) choice among three options to settle the dispute.

Those three options are: (1) submitting the dispute to the courts or

administrative tribunals of the Party that is a party to the dispute;1 (2) invoking dispute-relation procedures previously agreed

upon by the National or company and the host country government; or (3) invoking the dispute-resolution mechanism provided

for in paragraph 3 of Article IX. Under paragraph 3(a), the investor can submit an investment

dispute to binding arbitration three months after the dispute

arises, provided that the investor has not submitted the claim to

a court or administrative tribunal of the Party or invoked a dispute

resolution procedure previously agreed upon in an investment

agreement. The investor may choose among the International Centre for Settlement of Investment Disputes (ICSID) (Convention Arbitration), the Additional Facility of ICSID (if the 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 arbitration institution or rules

agreed upon by both parties to the dispute.

Before or during such arbitral proceedings, however, paragraph 3(b) provides that a national or company may seek, without affecting its right to pursue arbitration under this Treaty, interim injunctive relief not involving the payment of damages from local

courts or administrative tribunals for the preservation of its rights

and interests. This paragraph does not alter the power of the arbitral tribunals to recommend or order interim measures they may

deem appropriate.

Paragraph 4 constitutes each Party’s consent to the submission

of investment disputes to binding arbitration in accordance with

the choice of the national or company.

Paragraph 5 provides that any non-ICSID arbitration shall take

place in a country that is a party to the United Nations Convention

on the Recognition and Enforcement of Foreign Arbitral Awards.

This provision expands the ability of investors to obtain 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 en-
XII

forcement of non-ICSID 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 awards.

Paragraph 7 ensures that a Party may not assert as a defense,

or for any other reason, that the company or national involved in

the investment dispute has received or will receive reimbursement

for the same damages under an insurance or guarantee contract.

Paragraph 8 ensures that for any arbitration, including ICSID

Convention Arbitration, the nationality of a company in the host

country will be determined by ownership or control, rather than by

place of incorporation. This ensures that a claim may be brought

by an investor’s subsidiary in the host country.

Article X (Settlement of Disputes Between the Parties)

Article X provides for binding arbitration of disputes between the

United States and the Republic of Albania concerning the interpretation or application of the Treaty that are not resolved through

consultations or other diplomatic channels, with time periods

agreed to during these negotiations. The article constitutes each

Party’s prior consent to arbitration.

Article XI (Preservation of Rights)

Article XI clarifies that the Treaty does not derogate from any

obligation a Party might have to provide better treatment to the

covered investment than is specified in the Treaty. Thus, the Treaty establishes a floor for the treatment of covered investments. An

investor 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 investor.

Article XII (Denial of Benefits)

Article XII(a) preserves the right of each Party to deny the benefits of the Treaty to firms owned or controlled by nationals of a

non-Party 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 or Libya.

Article XII(b) permits each Party to deny the benefits of the

Treaty to a company of the other Party if the company is owned

or controlled by non-Party nationals and if the company has no

substantial business activities in the Party where it is established.

Thus the United States could deny benefits to a company which is

a subsidiary of a shell company organized under the laws of the

Republic of Albania 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 the Republic of Albania

that maintains its central administration or principal place of business in the territory of, or has a real and continuous link with, the

Republic of Albania.
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Article XIII (Taxation)

Article XIII excludes tax matters generally from the coverage of the BIT, on the basis that tax matters should be dealt with in bilateral tax treaties. However, Article XIII does not preclude a national or company from bringing claims under Article IX that taxation provisions in an investment agreement or authorization have

been violated, or that tax matters resulted in, or constituted, an expropriation of a covered investment.

Under paragraph 2, a national or company that asserts in a dis- pute that a tax matter involves expropriation may submit that dispute to arbitration pursuant to Article IX(3) only if (1) the investor

has first referred to the competent tax authorities of both Parties

the issue of whether the tax matter involves an expropriation, and

(2) the tax authorities have not both determined, within nine

months from the time of referral, that the matter does not involve

expropriation. The ‘‘competent tax authority’’ of the United States

is the Assistant Secretary of the Treasury for International Tax

Policy, who will make this determination only after consultation

with the Inter-Agency Staff Coordinating Group on Expropriations.

Article XIV (Measures Not Precluded)

The first paragraph of Article XIV reserves the right of a Party to take measures for the fulfillment of its international 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. International obligations with respect to peace and security would include, for example, obligations arising out of Chapter VII

of the United Nations Charter. Measures permitted by the provision on the protection of a Party’s essential security interests would

include security-related actions taken in time of war or national

emergency. Actions not arising from a state of war or national

emergency must have a clear and direct relationship to the essential security interest of the Party involved. 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. These provisions are common in international

investment agreements. The second paragraph permits a Party to prescribe special for- malities in connection with covered investments, provided that

these formalities do not impair the substance of any Treaty rights.

Such formalities could include reporting requirements for covered

investments or for transfers of funds, or incorporation requirements.

Article XV (Application to Political Subdivisions and State Enterprises of the Parties)

Paragraph 1(a) makes clear that the obligations of the Treaty are

applicable to all political subdivisions of the Parties, such as provincial, State and local governments.

Paragraph 1(b) recognizes that under the U.S. federal system,

States of the United States may, in some instances, treat out-ofState residents and corporations in a different manner than they

treat in-State residents and corporations. The Treaty provides that
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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.

Paragraph 2 extends a Party’s obligations under the Treaty to its

state enterprises in the exercise of any delegated authority. This

paragraph is designed to clarify that the exercise of governmental

authority by a state enterprise must be consistent with a Party’s

obligations under the Treaty.

Article XVI (Entry Into Force, Duration, and Termination)

Paragraph 1 stipulates that 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 all activities of both Parties with respect to

preexisting and newly established investments alike. After this tenyear term, the Treaty will continue in force unless terminated in

accordance with paragraph 2.

Paragraph 3 provides that, if the Treaty is terminated, all investments that qualified as covered investments on the date of termination (i.e., one year after written notice) continue to be protected

under the Treaty for ten years from that date as long as these investments qualify as covered investments. Such coverage would

continue to extend fully to such an investment as it grew—whether

by reinvestment, expansion, or merger.

A Party’s obligations to accord the right to establish or acquire

investments would lapse immediately upon the date of termination

of the Treaty.

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, because the Parties’ domestic regimes may

provide for derogations from national and MFN treatment, and because treatment in certain sectors and matters is negotiated in and

governed by other agreements. Future derogations from the national treatment obligations of the Treaty are generally permitted

only in the sectors or matters listed in the Annex, pursuant to Article II, paragraph 2, 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 Albania as

they do U.S. investments or investments from a third country.

Paragraphs 1 through 3 of the Annex list the sectors or matters affected by such statutes.

The U.S. exceptions from its national treatment commitments

are: atomic energy; custom house brokers; licenses for broadcast,

common carrier, or aeronautical radio stations; COMSAT; subsidies

or grants, including government supported loans, guarantees, and

insurance; State and local measures exempt from Article 1102 of

the North American Free Trade Agreement pursuant to Article

1108 thereof; and landing of submarine cables.
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The U.S. exceptions from its most-favored-nation and national

treatment commitment are: fisheries; air and maritime transport,

and related activities; and banking, securities and other financial

services.

During negotiations, the United States informed Albania that if

Albania undertook acceptable commitments with respect to all or

certain financial services, the United States would consider limiting its exceptions with respect to national and most-favored-nation

treatment in financial services.

Albania offered to take no exceptions to the treaty’s national or

most-favored-nation treatment obligations with respect to insurance. Therefore, in Paragraph 3 of the Annex, the United States

has limited its exceptions with respect to insurance to afford treatment no less favorable than that accorded with respect to Canada

and Mexico in the North American Free Trade Agreement.

Paragraph 4 lists Albania’s exceptions to national treatment,

which are: ownership of land; banking and government subsidies.

These exceptions were based on provisions of investment measures

currently in force or which the Government of Albania reserved for

other reasons.

The Government of Albania has taken no exceptions to its obligation to provide most-favored-nation treatment.

Paragraph 5 of the Annex ensures that reciprocal national treatment is granted in leasing of minerals or pipeline rights-of-way on

Government lands. In creating this positive right to reciprocal national treatment, this provision affects the implementation of the

Mineral Lands Leasing Act (MLLA) and 10 U.S.C. 7435, with respect to nationals and companies of the Republic of Albania. The

Treaty provides for resort to binding international arbitration to resolve disputes, rather than denial of mineral rights and rights to

naval petroleum shares to investors of the other Party, as is the

current process under the statute. U.S. domestic remedies would,

however, remain available for use in conjunction with the Treaty’s

provisions.

The MLLA and 10 U.S.C. 7435 direct that if a foreign country

does not grant national treatment to U.S. investors in leases for

minerals on on-shore federal lands, leases of land within the Naval

Petroleum and Oil Shale Reserves, and rights-of-way for oil or gas

pipelines across on-shore federal lands, investors from that country

may not be granted national treatment.

Albania’s extension of national treatment in these sectors will

fully meet the objectives of the MLLA and 10 U.S.C. 7435. Albania

was informed during negotiations that, were it to include this sector in its list of treatment exemptions, the United States would

(consistent with the MLLA and 10 U.S.C. 7435) exclude the leasing

of minerals or pipeline rights-of-way on Government lands from the

national and MFN treatment obligations of this Treaty.

The listing of a sector does not necessarily signify that domestic

laws have entirely reserved it for nationals. And, pursuant to Article II(2)(a) of the Treaty, any additional restrictions or limitations

which a Party may adopt with respect to listed sectors or matters

may not compel the divestiture of existing covered investments.

Finally, listing a sector or matter in the Annex exempts a Party

only from the obligation to accord national or MFN treatment. Both
XVI

Parties are obligated to accord to covered investments in all sectors—even those listed in the Annex—all the other rights conferred

by the Treaty.

Protocol

In paragraph 1 of the Protocol, the Parties confirm their understanding regarding the treatment of proprietary or confidential information exchanged in the course of consultations pursuant to Article VIII. Both Parties agree to treat the information on the same

basis as the Party providing the information.

In paragraph 2, the Parties confirm that, pursuant to Article

XIII, neither Party has an obligation to accord national treatment

in tax matters, except as otherwise provided for in an investment

authorization or investment agreement.

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,

PETER TARNOFF.
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