U.S. GOVERNMENT PRINTING OFFICE

WASHINGTON : 

1

29–118

" SENATE ! 108TH CONGRESS

2d Session 

TREATY DOC. 

2004

108–17

INVESTMENT PROTOCOL WITH ESTONIA

MESSAGE

FROM

THE PRESIDENT OF THE UNITED STATES

TRANSMITTING

PROTOCOL BETWEEN THE GOVERNMENT OF THE UNITED STATES 

OF AMERICA AND THE GOVERNMENT OF THE REPUBLIC OF ESTONIA TO THE TREATY FOR THE ENCOURAGEMENT AND RECIPROCAL PROTECTION OF INVESTMENT OF APRIL 19, 1994, SIGNED 

AT BRUSSELS ON OCTOBER 24, 2003

MARCH 12, 2004.—The Protocol 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


E:\Seals\Congress.#13
(III)

LETTER OF TRANSMITTAL 

THE WHITE HOUSE, March 12, 2004. 

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 Protocol Between the Government of the United States of America and the Government of the 

Republic of Estonia to the Treaty for the Encouragement and Reciprocal Protection of Investment of April 19, 1994, signed at Brussels on October 24, 2003. I transmit also, for the information of the 

Senate, the report of the Department of State with respect to this 

Protocol. 

I have already forwarded to the Senate similar Protocols for Romania and Bulgaria and now forward simultaneously to the Senate 

Protocols for the Czech Republic, Estonia, Latvia, Lithuania, Poland, and the Slovak Republic. Each of these Protocols is the result 

of an understanding the United States reached with the European 

Commission and these six countries that will join the European 

Union (EU) on May 1, 2004, as well as with Bulgaria and Romania, 

which are expected to join the EU in 2007. 

The understanding is designed to preserve U.S. bilateral investment treaties (BITs) with each of these countries after their accession to the EU by establishing a framework acceptable to the European Commission for avoiding or remedying present and possible 

future incompatibilities between their BIT obligations and their future obligations of EU membership. It expresses the U.S. intent to 

amend the U.S. BITs, including the BIT with Estonia, in order to 

eliminate incompatibilities between certain BIT obligations and EU 

law. It also establishes a framework for addressing any future incompatibilities that may arise as EU authority in the area of investment expands in the future, and endorses the principle of protecting existing U.S. investments from any future EU measures 

that may restrict foreign investment in the EU. 

The United States has long championed the benefits of an open 

investment climate, both at home and abroad. It is the policy of the 

United States to welcome market-driven foreign investment and to 

permit capital to flow freely to seek its highest return. This Protocol preserves the U.S. BIT with Estonia, with which the United 

States has an expanding relationship, and the protections it affords 

U.S. investors even after Estonia joins the EU. Without it, the European Commission would likely require Estonia to terminate its 

U.S. BIT upon accession because of existing and possible future incompatibilities between our current BIT and EU law. 

IV

I recommend that the Senate consider this Protocol as soon as 

possible, and give its advice and consent to ratification at an early 

date. 

GEORGE W. BUSH.

(V)

LETTER OF SUBMITTAL 

DEPARTMENT OF STATE, November 26, 2003. 

The PRESIDENT, The White House. 

THE PRESIDENT: I have the honor to submit to you the Protocol 

Between the Government of the United States of America and the 

Government of the Republic of Estonia amending the Treaty Between the Government of the United States of America and the 

Government of the Republic of Estonia for the Encouragement and 

Reciprocal Protection of Investment of April 19, 1994, signed at 

Brussels on October 24, 2003. I recommend that this protocol be 

transmitted to the Senate for its advice and consent to ratification. 

This protocol is the result of an understanding that the United 

States reached with the European Commission and six countries 

that will join the European Union (‘‘EU’’) on May 1, 2004 (the 

Czech Republic, Estonia, Latvia, Lithuania, Poland and the Slovak 

Republic), as well as with Bulgaria and Romania, which are expected to join the EU in 2007. 

The understanding is designed to preserve our bilateral investment treaties (‘‘BITs’’) with these countries after their accession to 

the EU by establishing a framework for avoiding or remedying 

present and possible future incompatibilities between our BITs 

with these eight countries and their future obligations of EU membership. In this regard, the understanding expresses the U.S. intent to conclude substantively identical amendments and formal interpretations of the BITs with each of these eight countries. 

In addition, the understanding establishes a framework for addressing any future incompatibilities that may arise as European 

Union authority in the area of investment expands and evolves in 

the future. It endorses the principle of protecting existing U.S. investments in these countries from any future EU measures that 

may restrict foreign investment in the EU, and also clarifies certain protections afforded to U.S. investments in individual member 

states of the EU under the Treaty Establishing the European Community (‘‘EC Treaty’’). 

Finally, the understanding calls for the United States and each 

BIT partner to interpret, through an exchange of notes, two BIT 

provisions: (1) the right of each BIT Party to take measures necessary for the protection of its own essential security interests, and 

(2) the BIT prohibition on performance requirements. 

Both interpretations were undertaken at the request of the European Commission to confirm the mutual understanding of the 

United States and Estonia in the context of EU enlargement. For 

example, the interpretation of the BIT provision on essential secuVerDate jul 14 2003 07:17 Mar 13, 2004 Jkt 029118 PO 00000 Frm 00005 Fmt 7633 Sfmt 6602 E:\HR\OC\TD017.108 TD017
VI

rity interests confirms that, for Estonia, these interests may include interests deriving from Estonia’s membership in the EU. As 

concerns the BIT prohibition on performance requirements, many 

U.S. BITs include a provision explicitly stating that the prohibition 

on performance requirements does not extend to conditions for the 

receipt or continued receipt of an advantage. The interpretation relating to performance requirements makes this explicit with respect to the U.S.-Estonia BIT. The two interpretations are enclosed 

for the information of the Senate. 

Investment by the United States has played an important role in 

the economic transformation of these eight countries, and the U.S. 

BITs have afforded important protections to U.S. investors. Prior to 

acceding to the EU, however, the European Commission has required that these countries terminate any international treaty containing incompatibilities with EU law. Without the understanding 

and the steps contemplated therein, including the specific amendments in this protocol, these countries would be required to terminate their U.S. BITs and the great majority of protections these 

treaties afford U.S. investors. Therefore, the understanding, together with the interpretations and specific amendments in the 

protocol, will preserve the benefits of these treaties and provide important additional protections for U.S. investors as the EU continues to evolve. 

THE U.S.-ESTONIA PROTOCOL

The United States champions EU enlargement and, at the same 

time, intends that this BIT will continue to mutually benefit U.S. 

and Estonian investors. By undertaking these amendments of the 

BIT with Estonia, which would be brought into force just prior to 

its accession, incompatibilities between BIT protections and EU 

law are eliminated, and any future problems in this respect are addressed through a framework for consultations. This action preserves our BIT with Estonia after its accession to the EU, and is 

consistent with the policy of the United States to welcome marketdriven foreign investment and to permit capital to flow freely to 

seek its highest return. Estonia is one of the newly democratized 

countries in Europe transitioning to a market economy, and foreign 

direct investment into Estonia is very much in both our countries’

interests. Protection for investors facilitates investment activity, 

and thus directly supports U.S. policy objectives. 

The principal substantive articles of the protocol provide as follows. 

Article I: that the article of the BIT prohibiting performance 

requirements does not limit Estonia’s ability to impose, as necessary under EU law, certain kinds of performance requirements in the agricultural and audio-visual sectors; 

Article II: that the terms of the free trade area/customs 

union exception of the BIT shall apply, without limitation, to 

all of a Party’s obligations stemming from its membership in 

an economic integration agreement that includes a free trade 

area or customs union, such as the EU; 

Article III: that the BIT Parties will consult promptly whenever either Party believes that steps are necessary to assure 

compatibility between the BIT and the EC Treaty; 

VII

Article IV: that, in certain specified sectors or matters, Estonia may take a reservation against the national treatment and 

most-favored-nation treatment obligations of the BIT, provided 

such reservation is necessary to meet Estonia’s obligations 

under EU law, and subject to the following exception; 

that, notwithstanding any such new reservation, existing 

U.S. investments in Estonia shall remain protected under 

the national treatment and most-favored-nation treatment 

obligations of the BIT for at least 10 years from the date 

of the relevant EU law necessitating the reservation; and 

finally, 

that the United States reserves the right to make or 

maintain limited exceptions to the national treatment obligation in two new sectors or matters, fisheries and subsidies, and to the most-favored-nation treatment obligation 

in one new sector, fisheries.

With respect to future developments in EU law, the United 

States recognizes that the possibility exists that these amendments 

may not suffice to ensure compatibility, and that consultations 

would be necessary to avoid or eliminate any incompatibilities that 

may arise. As noted above, the United States and Estonia expressly 

agree to such consultations in the protocol. 

I support this protocol to the U.S. BIT with Estonia, and I favor 

its transmission to the Senate at an early date. 

Respectfully submitted. 

COLIN L. POWELL. 

Enclosures: As stated. 

(1)


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