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Understanding on U.S. Bilateral Investment Treaties with EU Accession States

September 4, 2003

We are pleased that on September 2 the European Commission endorsed a political Understanding preserving U.S. bilateral investment treaties (BITs) with eight countries that are acceding, or are candidates for accession, to the European Union (the Czech Republic, Estonia, Latvia, Lithuania, Poland, the Slovak Republic, Bulgaria and Romania).

The United States supports EU enlargement and is pleased that we have reached an Understanding that both maintains a positive investment environment in the accession states and furthers the objective of assuring compatibility between the obligations of U.S. BITs and the obligations of membership in the EU.

U.S. investment contributes positively to these countries’ economic development. Their membership in the EU, together with the continuation of their agreements with the United States, will only serve to reinforce the message that Europe in general, and these countries in particular, welcome foreign investment.

The Understanding expresses the intentions of the parties to amend the BITs in relation to a few areas where accession states’ BIT obligations might otherwise be found to conflict with their obligations of membership in the EU.

We hope to sign this political understanding and the amendments to our BITs later this month, after they have been approved by the accession states.

The amendments would accommodate EU measures in areas such as the audio–visual, agriculture, financial services, transportation, and fishery sectors.

In general, U.S. investors have not encountered major difficulties with the transition to EU law in areas covered by U.S. BITs. U.S. investors have urged us to preserve these agreements.

Although we do not expect these changes to create significant practical problems for U.S. firms, the amendments will provide that existing U.S. investors will be grand-fathered with respect to the BITs’ non-discrimination protections for a minimum of 10 years following the application of EU measures.

Preserving these agreements will ensure that U.S. investors continue to benefit from valuable protections, including the ability to take investment disputes to international arbitration.

The Understanding also provides for continuing consultations regarding the possibility that EU measures that may be adopted in the future could raise issues of compatibility with U.S. BITs.

In particular, it recognizes that the parties will need to discuss further the issue of the relationship between the BITs’ obligations concerning investment-related transfers and the EU’s authority to restrict capital movements in extraordinary circumstances.

Although the EU, like the United States, has a strong policy favoring the free movement of capital and, thus, conflict with the BITs in this area is largely theoretical, we look forward to consulting with the Commission and the other participants on how best to carry this discussion forward.