US Council for International Business Model BIT letter

USCIB (US Council for International Business)


August 1, 2002

Appropriate Host Official

Riga, Latvia

Dear Sir/Madam:

We are very concerned over reports that the Latvian government is under growing pressure from the European Commission to terminate or substantially alter its Bilateral Investment Treaty (BIT) with the United States as a condition of EU membership.

Since the BIT with Latvia entered into force in 1996, US firms have become the largest source of non-EU foreign direct investment in the Latvian economy.[1] By incorporating provisions to ensure national treatment, access to international arbitration and protection against expropriation without compensation, the BIT paved the way for US firms to play a far greater role in the economic transformation of Latvia than would otherwise have been the case. Future US investment in Latvia will surely be one of the essential factors in the further development of the country and its integration into the global economy. Withdrawal from the treaty arrangements, or substantially altering their terms, could therefore have a significant impact on US investment decisions in the years ahead. US investors in Latvia arrived with these treaty provisions in place and no mechanism presently exists to ensure their replacement after accession. [The XYZ Corporation] is proud of its role in the strengthening of these economic ties between our two states and would like to see that the conditions which made this relationship possible remain firmly in place.

We know that the current accession timetable places additional pressure on your government. We urge you, however, to leave the treaty in place without substantial change. We also encourage you to press the European Commission to accept the BIT as it presently accepts first generation bilateral investment treaties between the US and 13 of the 15 present EU member states (the Friendship, Commerce and Navigation Treaties). The Latvian government is no doubt aware that in November 2001, the Council of the European Union authorized member states to maintain these long-standing agreements with the United States - once again affirming their fundamental compatibility with European law. We see no reason why Latvia and other candidates for EU membership should be denied that same right. Nor should US firms considering investments in Latvia face a discriminatory set of rules whereby competitors from EU member states and other third countries with bilateral investment treatiesenjoy more favorable terms of treatment and protection.

[The XYZ Corporation] supports the Latvian government in its efforts to join the European Union. We would be glad to answer any questions or discuss further our concerns about the future of our investments in Latvia. At the same time, we stand by our tangible commitment to helping secure the economic future of Latvian people. We would therefore like to see the Latvian government continue to stand by its strong commitment to ensuring the protection of US investment rights here as well.

Respectfully yours,


[XYZ Corporation (of Latvia)]

[1] (US firms are the largest source of non-EU FDI in all 10 first-round candidate countries (US Commerce). Then Czechoslovakia’s BIT entered into force in 1992 and was inherited by both successor states in 1993. The Bulgarian and Romanian BITs entered into force in 1994, with Estonia’s in 1998 and Lithuania in just 2001. Poland has a more extensive treaty with the US covering both investment and trade issues, a so-called Bilateral Economic Treaty (BET), which went into force in 1994. Hungary has no such agreement with the U.S.)