Jordanian-American InvestmentTreaty
The Jordanian-American InvestmentTreaty
of 1997
On 22 July 1997 the Government
of Jordan approved the "Treaty between the
Government of the Hashemite Kingdom of Jordan
and the Government of the United States of America
Concerning the Encouragement and Reciprocal Protection
of Investment " which was signed on 2 July
1997 (The Treaty). After issuing it by his Majesty
the King in the form of a Royal Decree, the Treaty
was published in the Official Gazette in 1997
(p. 3964). The Treaty consists of a preamble
and 16 articles in addition to an annex containing
some exceptions from the scope of its application,
and an explanatory protocol concerning articles
I (d) and III (2) of the Treaty. One of the main
issues provided for in the Treaty is that it
obliges each contracting party to accord the
investments in its territory belonging to the
nationals and companies of the other party (the
Covered Investment) a treatment no less favorable
than it accords, in like situations, to its own
nationals and companies or to investments in
its territory of nationals or companies of a
third country, whichever is most favorable. It
also forbids each party from expropriating or
nationalizing such investments except for a public
purpose; in a non-discriminatory manner; and
upon payment of prompt, adequate and effective
compensation. Also, the Treaty provides that
each party shall permit all transfers relating
to a Covered Investment to be made freely and
without delay into and out of its territory.
The
Treaty also deals with the situation in which
nationals of a third country own or control the
company of a contracting party, having the Covered
Investment. The question that may arise here
is whether such investment falls within the scope
of the Treaty or not. For example, an American
company (A), which is officially registered under
the laws of the United States, may be owned or
controlled by Japanese citizens. The company's
investments in Jordan is covered by the Treaty
if: 1- Jordan maintains normal economic relations
with Japan; and 2 – The Company has substantial
business in the United States, which is a matter
of circumstances and interpretation. The converse
is also true in the sense that the Treaty does
not cover the investment if neither of these
two conditions is met. This may apply, for instance,
to a Jordanian company owned by Iraqis in respect
of its investments in the United States.
As to
the settlement of disputes, the Treaty makes
distinction between two situations:
First: Disputes
between one contracting party and a national
or company of the other as, for example, between
an American company
(A) and the Government of
Jordan relating to the investments of (A) in
Jordan. If the conditions provided for under
article 9.3 (a) are met, then (A) may submit
the dispute for settlement by binding arbitration:
1- to the International Centre
for Settlement of Disputes established by the
ICSID Convention
(the Centre); or
2- to the Additional Facility
of the Centre if the Centre is not available;
or
3- in accordance with the UNCITRAL Arbitration
Rules; or
4- if agreed by (A) and the Government
of Jordan, to any other arbitration institution
(like ICC) or in accordance with any other
arbitration rules.
Such a company or national
may, at its
/ his own discretion, choose any of the first
three situations while the fourth requires,
as clear, both parties' agreement. The arbitration
award shall be final and binding on the parties
to the dispute. Each contracting party shall
carry out without delay the provisions of
any such award and provide in its territory for
the
enforcement of the award.
Second: Dispute
between
the two Governments concerning the interpretation
or application of the Treaty. If it is not
possible to resolve the dispute through consultations
or other diplomatic channels, it shall be
submitted to an arbitral tribunal in accordance
with
the
applicable rules of international law and,
as a general rule, the UNCITRAL Arbitration
Rules shall govern the process of arbitration.
The
Appointing Authority provided for under these
Rules shall be the Secretary General of the
Centre.
The dispute shall be referred to three arbitrators;
each contracting party shall appoint an-arbitrator;
and the two arbitrators thus appointed shall
select the third arbitrator as Chairman who
shall be a national of a third country.
The
annex to
the Treaty gives each contracting party the
right to adopt or maintain exceptions to the
obligation
to accord national treatment to Covered Investments
in some sectors as designated in the annex.
As far as Jordan is concerned, this includes,
inter
alia, air transport, ownership of bus transport
companies, ownership of construction contracting
companies, small scale commerce with total
invested capital of no more than US $ 50,000
(or its equivalent
in Jordan currency), ownership of banks,
insurance companies, agriculture land and of
land for
non-business related purposes.
Any way, the
Treaty and its
annex give rise to some notable observations
such as:
1- According to article 33 (ii)
of the Constitution of Jordan any treaty affecting
the
public or private rights of Jordanians
shall not be valid unless the National Assembly
approves
it. In fact, the Treaty was not referred
to the National Assembly and this may raise
the
question
whether the Treaty violates the Constitution.
2-
Without ignoring the exceptions provided
for
in the annex, the companies and nationals
of each contracting party have been given a
free right to invest in the other contracting
party
as if it/he were one of its nationals,
and
this includes commercial investments in real-estates
and the trade in services. In these situations,
the investor is being given investing circumstances
like those given to nationals or any other
foreigner,
whichever is favorable.
3- The Treaty violates,
in some aspects, local rules applicable
in Jordan in respect of investments belonging
to non-Jordanians.
For example, the Regulation of Encouraging
Non-Jordanians' Investments No. 39/1997
does not allow the non-Jordanians
to own more than 50% of the capital or
ownership
of any commercial sector or service while
the Treaty, as mentioned above, gives
the American
nationals and companies to own any commercial
project in Jordan as long as the capital
of such project exceeds US $ 50,000.4-
As to the
settlement
of disputes between one contracting party
and a national or company of the other
contracting party, the arbitral award,
as stated above,
is final and binding. Each party must
execute it
without delay. The question which may
arise here is whether it is permissible
to Jordan,
e.g.,
to refuse executing the award in accordance
with the local law of arbitration no18/953
or pursuant
to article 5 of New York Convention of
1958 to which Jordan and the United States
are
parties,
on the assumption that the conditions
for applying either and, also, for the
non-execution
have
been met.
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