Treaty Doc. 99-19
TREATY WITH TURKEY
PRESIDENT OF THE UNITED STATES
THE TREATY BETWEEN THE UNITED STATES OF AMERICA AND THE REPUBLIC OF
TURKEY CONCERNING THE RECIPROCAL ENCOURAGEMENT AND PROTECTION OF
INVESTMENTS, WITH PROTOCOL, SIGNED AT WASHINGTON ON DECEMBER 3 ,1985
March 25, 1986.-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
GOVERNMENT PRINTING OFFICE
THE WHITE HOUSE, March 25, 1986.
To the Senate of the United States:
With a view to receiving the advice and consent of the Senate to
ratification, I transmit herewith the Treaty Between the United States
of America and the Republic of Turkey Concerning the Encouragement and
Reciprocal Protection of Investment, with Protocol and related exchange
of letters, signed at Washington on December 3, 1985. I transmit also,
for the information of the Senate, the report of the Department of State
with respect to this Treaty.
This treaty is among the first six treaties to be transmitted to the
Senate under the Bilateral Investment Treaty (BIT) program which I
initiated in 1981. The BIT program is designated to encourage and
protect U.S. investment in developing countries. This Treaty is an
integral part of U.S. efforts to encourage Turkey and other governments
to adopt macroeconomic and structural policies that will promote
economic growth. It is also fully consistent with U.S. policy toward
international investment. That policy holds that an open international
investment system in which participants respond to market forces
provides the best and most efficient mechanism to promote global
economic development. A specific tenet, reflected in this treaty, is
that U.S. direct investment abroad and foreign investment in the United
States should receive fair, equitable, and non-discriminatory treatment.
Under this treaty, the parties also agree to international law
standards for expropriation and compensation; free financial transfers;
and procedures, including international arbitration, for the settlement
of investment disputes.
I recommend that the Senate consider this Treaty as soon as possible,
and give its advice and consent to ratification of the Treaty, with
protocol and related exchange of letters, at an early date.
DEPARTMENT OF STATE,
Washington, February 19, 1986.
The White House.
THE PRESIDENT: I have the honor to submit to you the Treaty Between the
United States of America and the Republic of Turkey Concerning the
Reciprocal Encouragement and Protection of Investment, with Protocol and
a related exchange of letters, signed at Washington on December 3, 1986.
This treaty is among the first six treaties to be negotiated under the
bilateral investment treaty (BIT) program which you initiated in 1981.
Development of the BIT program and the negotiation of the individual
treaties have been pursued by the Office of the United States Trade
Representative and the Department of State with the active participation
of the Department of Commerce and the U.S. Treasury, in conjunction with
other interested U.S. Government agencies. I recommend that this treaty,
as well as the others concluded with the Kingdom of Morocco, the
Republic of Haiti, the Republic of Panama, the Republic of Senegal, and
the Republic of Zaire, be submitted to the Senate for its advice and
consent to ratification.
In 1981 you initiated the global bilateral investment treaty (BIT)
program to encourage and protect U.S. investment in developing
countries. By providing certain mutual guarantees and protections, a BIT
creates a more stable and predictable legal framework for foreign
investors in the territory of each of the treaty Parties. The
negotiation of a series of bilateral treaties with interested countries
establishes greater international discipline in the investment area.
The six treaties which have been signed as well as others under
negotiation are an integral part of U.S. efforts to encourage other
governments to adopt macroeconomic and structural policies that will
promote economic growth. They are also fully consistent with your policy
statement on international investment of September 9, 1983, which states
that international direct investment flows should be determined by
private market forces and should receive fair, equitable and
Our experience to date has shown that interested countries are willing
to provide U.S. investors with significant investment guarantees and
assurances as a way of inducing additional foreign investment. It is our
policy to advise potential treaty partners that conclusion of a BIT with
the United States is an important and favorable factor in the investment
relationship, but does not in of itself result in immediate increases in
U.S. investment flows.
Congressional support for the BIT program is reflected in Section 601(a)
and (b) of the Foreign Assistance Act, as amended, in particular at
Section 601(b) which provides:
In order to encourage and facilitate participation by private enterprise
to the maximum extent practicable in achieving any of the purposes of
this Act, the President shall...(3) accelerate a program of negotiating
treaties for commerce and trade, including tax treaties, which shall
include provisions to encourage and facilitate the flow of private
investment to, and its equitable investment in, friendly countries and
areas participating in programs under this Act.
BITs are consistent in purpose with the network of treaties of
Friendship, Commerce and Navigation (FCNs) which the United States
negotiated from the early years of the Republic until the last
successful negotiations with Thailand and Togo in the late 1960s. They
continue the U.S. policy of securing by agreement standards of equitable
treatment and protection of U.S. citizens carrying on business abroad,
and institutionalizing processes for the settlement of disputes between
investors and host countries, and between governments. We expect that a
series of bilateral treaties with interested countries will establish
greater international discipline in the investment area.
The BIT was designed to protect investment not only by treaty but also
by reinforcing traditional international legal principles and practice
regarding foreign direct private investment. In pursuit of this
objective, the model BIT adopts FCN language and concepts. Traditional
FCN provisions granting rights which are not important to the typical
U.S. investor were eliminated and replaced with more specific language
concerning investment protection. Perhaps most significantly, the BIT
goes beyond the traditional FCN to provide investor-host country
arbitration in instances where an investment dispute arises.
Our BIT approach followed similar programs that had been undertaken with
considerable success by a number of European counties, including the
Federal Republic of Germany and the United Kingdom, since the early
1960s. Indeed, our industrialized partners already have nearly two
hundred BITs in force, primarily with developing countries. Our
treaties, which draw upon language used in the U.S. FCN treaties as well
as European counterparts, are more comprehensive and far-reaching than
UNITED STATES-TURKISH TREATY
The Treaty with Turkey was negotiated by an inter-agency team led by
officials from the Office of the United States Trade Representative and
the Department of State. The Treaty satisfies all four main BIT
-foreign investors are to be accorded treatment in accordance with
international law and are to be treated no less favorable than investors
of the host country or no less favorably than investors of third
countries, whichever is the most favorable treatment ("national"
or "most-favored-nation" treatment) subject to certain
-international law standards shall apply to the expropriation of
investments and to the payment of compensation for expropriation;
-free transfers shall be afforded to funds associated with an investment
into and out of the host country; and
-procedures are to be established which allow an investor to take a
dispute with a Party directly to binding third-party arbitration.
The provisions on treatment of foreign investment and arbitration, and
in particular Turkey's acceptance of international law as the governing
law, mark an important achievement for the BIT program and our
investment and international arbitration policies.
A technical memorandum explaining in detail the provisions of this
treaty will be transmitted separately to the Senate Committee on Foreign
Relations. That technical memorandum explains, clause by clause, the
provisions of the treaty with Turkey.
Some provisions of the treaty with Turkey differ in minor respects from
the U.S. model text. In general, however, the treaty closely follows the
language contained in the U.S. model text, the most significant
provisions of which are as follows.
The model BIT's definition section clarified terms such as "company
of a Party" and "investment." The BIT concept of "investment"
is broad and designed to be flexible; although numerous types of
economic interests are enumerated, the intent is to include all
legitimate interests in the territory of either Party, whether directly
or indirectly controlled by nationals of the other, having economic
value or "associated" with an investment. Protected "companies
of a Party" are those incorporated or otherwise organized under the
laws of a Party in which nationals of that Party have a substantial
The model BIT accords the better of national or most-favored-nation
(MFN) treatment of foreign investment, subject to each Party's
exceptions which are listed in a separate Annex. The exceptions are
designed to protect state regulatory interests and for the United States
to accommodate the derogations from national treatment in state or
federal law relating to such areas as air transport, shipping, banking,
telecommunications, energy and power production, insurance, and from
national and MFN treatment in the case of ownership of real property.
Any additional restrictions or limitations which a Party may adopt with
respect to those matters or sectors excepted from the standards are not
to affect existing investments. The BIT also includes general treatment
protections designed to be a guide to interpretation and application of
the treaty. Thus, the Parties agree to accord investments "fair and
equitable treatment" and "full protection and security"
in no case "less than that required by international law." It
specifically grants nationals of a Party the right to establish
investments in the territory of the other Party, restricts the right to
impose performance requirements, and obliges Parties to observe their
contractual obligations with investors. The U.S. model also provides
that companies legally constituted under the laws of the other Party
(i.e., subsidiaries of companies of a Party) with investments in that
country shall be permitted to engage top managerial personnel of their
choice, regardless of nationality.
The model BIT also confers protection from unlawful interference with
property interests and assures compensation in accordance with
international law standards. It provides that any direct or indirect
taking must be: for a public purpose; nondiscriminatory; accompanied by
the payment of prompt, adequate and effective compensation; and in
accordance with due process of law and the general standards of
treatment discussed above. The BIT's definition of "expropriation"
is broad and flexible; essentially "any measure" regardless of
form, which has the effect of depriving an investor of his management,
control or economic value in a project may constitute an expropriation
requiring compensation equal to the "fair market value." Such
compensation, which "shall not reflect any reduction in such fair
market value due to... the expropriatory action," must be "without
delay," "effectively realizable," "freely
transferable" and "bear current interest from the date of the
expropriation at a rate equal to current international rates." The
BIT grants the right to "prompt review" by the relevant
judicial or administrative authorities in order to determine whether the
compensation offered is consistent with these principles. It also
extends national and MFN treatment to investors in cases of loss due to
war or other civil disturbance. The BIT does not provide, however, a
specific valuation method for compensating such losses.
The model BIT provides for free transfers "related to an
investment," specifically of returns, compensation for
expropriation, contract payments, proceeds from sale, and contributions
to capital for maintenance or development of an investment. Such
transfers are to be made in a "freely convertible currency at the
prevailing market rate of exchange on the date of transfer with respect
to spot transactions in the currency to be transferred." The model
text recognizes that notwithstanding this guarantee, Parties can
maintain certain laws and regulations regarding transfers provided these
are applied in a non-discriminatory fashion. In particular, the model
text provides that Parties can require reports of currency transfers and
impose income taxes by such means as a withholding tax on dividends.
The model BIT provides that where certain defined investment disputes
arise between a Party and a national or company of the other party,
including disputes as to the interpretation of an investment agreement,
and the dispute cannot be solved through negotiation, it may be
submitted to arbitration in accordance with any dispute-settlement
procedures to which the national or company and the host country have
previously agreed. Unless the national or company has submitted the
dispute to previously agreed dispute settlement procedures or to
adjudication by domestic courts or other tribunals of the host country,
the national or company may submit the dispute to the International
Centre for the Settlement of Investment Disputes ("ICSID").
Exhaustion of local remedies is not required. In a separate provision,
the BIT Parties also agree to grant nationals and companies of the other
Party access to their domestic courts in order to assert claims and
enforce rights with respect to investment.
The model BIT provides for state-to-state arbitration between the
Parties in case of a dispute regarding the interpretation or application
of the treaty. In the absence of an agreement that other rules apply,
the BIT refers the Parties to specific procedural rules which must
govern the arbitration. The BIT also outlines the procedures for the
creation of the arbitral panel.
The model BIT exhorts Parties to apply their tax policies fairly and
equitably, Because the United States specifically addresses tax matters
in tax treaties, the BIT generally excludes such matters. It also
specifically limits the arbitration provisions to only certain taxation
matters. Another BIT provision exempts disputes arising under
Export-Import Bank programs, or other credit guarantee or insurance
arrangements providing for alternative dispute settlement arrangements,
from the standard BIT arbitration clauses. The model BIT also states
that the treaty shall not derogate from any obligations that require
more favorable treatment of investments and declares that the treaty
shall not preclude measures necessary for public order or essential
security interests. The model BIT enters into force 30 days after
exchange of ratifications and continues in force for at least ten years.
Thereafter, either Party may terminate the treaty, subject to one
year's written notice.
Each of these model provisions was developed after lengthy and extensive
consultations within the U.S. Government and with the private sector.
Nonetheless, in negotiating a particular treaty, the U.S. Government
retains, of course, some flexibility to adopt modifications as necessary
and in light of experience. While the U.S. model text has recently been
simplified, the provisions summarized above have all been retained.
Some of the provisions of the U.S.-Turkey treaty differ in minor
respects from the U.S. negotiating text, although none of the changes
represent substantive departures from U.S. objectives. The more
significant modifications are as follows:
(1) General treatment language. The model BIT calls for national and MFN
treatment on establishment. Article II, paragraph 1 of the Turkey BIT
requires MFN treatment on entry for the other Party's investors as a
minimum standard. National treatment related to new investment is
required "within the framework of [national] laws and regulations."
The Turkish negotiators insisted on qualifying national treatment on
entry because of ownership provisions in the Turkish investment law. The
effect of this qualification is to provide for MFN treatment for
establishing new investments, but the better of national or MFN
treatment for all investments once established. This formulation was
also used in the BIT with Morocco.
Like the other BITs being submitted together with this treaty, this
treaty specifically requires the more favorable of national or MFN
treatment for established investments of the other party (Article II,
paragraph 2). This conforms to the U.S. Model text. As with the other
BITs, the treaty with Turkey permits limited exceptions to the national
treatment standard on an MFN basis for specified economic sectors and
activities. These exceptions are set out in paragraph 1 of the Protocol
and include those for which U.S. law will not permit the extension of
national treatment to foreign investors in the United States. Although
analogous to the Annex in the model text, the Turkish Protocol has no
provision for subsequent modifications to the exceptions list. (This is
similar to the text). Under the U.S. model BIT, each party may
unilaterally add future exceptions under sectors and matters identified
in the annex but each agrees to keep such exceptions to a minimum and to
notify the other Party of these exceptions. In contrast to this
approach, any changes in the exceptions listed in the Turkish BIT would
have to be made through amendment to the treaty under Article XII,
(2) Performance requirements.-The U.S. model text prohibits the
imposition of performance requirements as a condition for establishment.
The Turkish BIT has a hortatory standard, stating that each Party "shall
seek to avoid performance requirements as a condition of establishment."
(Article II, paragraph 7.) Our BITs with Haiti, Morocco, and Senegal
have similar hortatory language. These countries either have or wish to
retain the right to use some limited local content/export incentives or
requirements as part of their national economic development policies.
(3) Expropriation.-Although this treaty is substantively identical to
the U.S. model text on this issue, the Turkish negotiators could not
accept model treaty language providing for the payment of interest "at
a commercially reasonable rate" in the event of delayed
compensation after an expropriation. The Turkish constitution requires
that such interest be paid at the "government borrowing rate."
To ensure that the value of compensation is not reduced over time by
interest payments which do not preserve real value, Article III,
paragraph 2 provides that "in the event that payment of
compensation is delayed, such compensation shall be paid in an amount
which would put the investor in a position no less favorable than the
position in which he would have been, had the compensation been paid
immediately on the date of expropriation."
(4) Transfers.-The U.S. model text permitting transfers to be made "freely
and without delay" has been retained but was qualified in the
Protocol due to Turkish concerns about foreign exchange shortages.
Paragraph 2(a) of the Protocol states that "without delay"
means that transfers shall be completed as rapidly as possible in
accordance with normal transaction procedures and will never take longer
than two months. Paragraph 2(b) states that "in exceptional
financial or economic circumstances relating to foreign exchange,"
Turkey may temporarily delay the transfer of proceeds from the sale or
liquidation of an investment until foreign exchange reserves have been
raised "to a minimally acceptable level," but that the delay
must not exceed three years. The companies attempting to transfer such
funds must also have the opportunity to invest these funds in a way
which will preserve their value until the transfer occurs.
Submission of this treaty, together with the other five noted above,
makes a significant development in our international investment policy.
I join with the United States Trade Representative and other U.S.
Government agencies in supporting the treaty and favor its transmission
to the Senate at an early date.
GEORGE P. SHULTZ.
BETWEEN THE UNITED STATES OF AMERICA AND THE REPUBLIC OF TURKEY
CONCERNING THE RECIPROCAL ENCOURAGEMENT AND PROTECTION OF INVESTMENTS
United States of America and the Republic of Turkey (each a "Party";
to promote greater economic cooperation between them, particularly with
respect to investment by nationals and companies of one Party in the
territory of the other Party,
that agreement upon the treatment to be accorded such investment will
stimulate the flow of private capital and the economic development of
that fair and equitable treatment of investment is desirable in order to
maintain a stable framework for investment and maximum effective
utilization of economic resources, and
resolved to conclude a treaty concerning the Encouragement and
Reciprocal Protection of investments,
AGREED AS FOLLOWS:
THE PURPOSES OF THIS TREATY,
(a) "company" means any kind of juridical entity, including
any corporation, company association, or other organization, that is
duly incorporated, constituted, or otherwise duly organized, regardless
of whether or not the entity is organized for pecuniary gain, privately
or governmentally owned, or organized with limited or unlimited
(b) "Company of a Party" means a company duly incorporated,
constituted or otherwise duly organized under the applicable laws and
regulations of a Party or a political subdivision thereof in which
(i) natural persons who are nationals of such Party, or
(ii) such Party or a political subdivision thereof or their agencies or
instrumentalities have a substantial interest as determined by such
Party. The juridical status of a company of a Party shall be recognized
by the other Party and its political subdivisions.
(c) "Investment" means every kind of investment owned or
controlled directly or indirectly, including equity, debt; and service
and investment contracts; and includes;
(i) tangible and intangible property, including rights, such as
mortgages, liens and pledges;
(ii) a company or shares, stock, or other interests in a company or
interests in the assets thereof;
(iii) a claim to money or a claim to performance having economic value,
and associated with an investment;
(iv) intellectual property, including rights with respect copyrights and
related patents, trade marks and trade names, industrial designs, trade
secrets and know-how, and goodwill.
(v) any right conferred by law or contract, including rights to search
for or utilize natural resources, and rights to manufacture, use and
sell products; and
(vii) reinvestment of returns and of principal and interest payments
arising under load agreements
(d) "own or control" means ownership or control that is direct
of indirect, including ownership or control exercised through
subsidiaries or affiliates, wherever located.
(e) "national" or a Party means a natural person who is a
national of a party under its applicable law.
(f) "return" means an amount derived from or associated with
an investment, including profit; dividend; interest; capital gain;
royalty payment; management, technical assistance or other fee, and
payment in kind.
(g) "associated activities" include the organization, control,
operation, maintenance and disposition of companies, branches, agencies,
offices, factories or other facilities for the conduct of business; the
making, performance and enforcement of contracts; the acquisition, use,
protection and disposition of property of all kinds including
intellectual property rights; the borrowing of funds; the purchase,
issuance, and sale of equity shares and other securities; and the
purchase of foreign exchange for imports;
Each Party reserves the right to deny to any of its own companies or to
a company of the other Party company the advantages of this Treaty if
nationals of any third country control such company, provided that,
whenever one party concludes that the benefits of this Treaty should not
be extended to a company of the other Party for this reason, it shall promptly
consult with the other Party to seek a mutually satisfactory resolution of the matter.
This right shall not apply with respect to recognition of juridical status and access to courts.
Any alteration of the form in which assets are invested or reinvested
shall not affect their character as investment.
Each Party shall permit in its territory investments, and activities
associated therewith, on a basis no less favorable than that accorded in
like situations to investments of nationals or companies of any third
country, and within the framework of its laws and regulations, no less
favorable than that accorded in like situations to investments of its
own nationals and companies.
Each Party shall accord to these investments, once established, and
associated activities, treatment no less favorable than that accorded in
like situations to investments of its own nationals and companies or to
investments of nationals and companies of any third country, whichever
is most favorable.
Investments shall at all times be accorded fair and equitable treatment and
shall enjoy full protection and security in a manner consistent with
international law. Neither
Party shall in any way impair by arbitrary or discriminatory measures
the management, operation, maintenance, use, enjoyment, acquisition,
expansion, or disposal of investments. Each Party shall observe any
obligation it may have entered into with regard to investments.
Subject to the laws relating to the entry and sojourn of aliens,
nationals of either Party shall be permitted to enter and to remain in
the territory of the other Party for the purpose of establishing,
developing, administering or advising on the operation of an investment
to which they, or a company of the first Party that, employs them, have
committed or are in the process of committing a substantial amount of
capital or other resources.
Companies which are legally constituted under the applicable laws or
regulations of one Party, and which are investments of nationals or
companies of other Party, shall be permitted to engage top managerial
personnel of their choice, regardless of nationality.
The Parties recognize that, consistent with paragraphs 1 and 2 of this
Article, conditions of competitive equality should be maintained where
investments owned or controlled by a Party or its agencies or
instrumentalities are in competition, within the territory of such
Party, with privately owned or controlled investments of nationals or
companies of the other Party.
Each Party shall seek to avoid performance requirements as condition of
establishment, expansion or maintenance of investments, which require or
enforce commitments to export goods produced, or which specify that
goods or services must purchased locally, or which impose any other
Each Party shall provide effective means of asserting claims and
enforcing rights with respect to investment, investment agreements, and
Each Party shall make public all laws, regulations, administrative
practices and procedures, and adjudicatory decisions that pertain to or
The treatment accorded by the United States of America to investments
and associated activities under the provisions of this Article shall in
any State, Territory or possession of the United States of America be
the treatment accorded therein to companies legally constituted under
the laws and regulations of other States, Territories or possessions of
the United States of America.
Investments shall not be expropriated or nationalized either directly or
indirectly through measures tantamount to expropriation or
nationalization ("expropriation") except for a public purpose;
in a nondiscriminatory manner; upon payment of prompt, adequate and
effective compensation; and in accordance with due process of law and
the general principles of treatment provided for in Article II(2).
Compensation shall be equivalent to the fair market value of the
expropriated investment immediately before the expropriatory action was
taken or became known. Compensation shall be paid without delay; be
fully realizable; and be freely transferable. In the event that payment
of compensation is delayed, such compensation shall be paid in an amount
which would put the investor in a position no less favorable than the
position in which he would have been, had the compensation been paid
immediately on the date of expropriation.
A national, or company of either Party that asserts that all or part of
its investment has been expropriated shall have a right to prompt review
by the appropriate judicial or administrative authorities of the other
Party to determine whether any such expropriation and any compensation therefore
conforms to the principles of this article.
Nationals or companies of either Party whose investments suffer losses
in the territory of the other Party owing to war or other armed
conflict, revolution, state of national emergency, insurrection, civil
disturbance or other similar events shall be accorded treatment by such
other Party no less favorable than that accorded to its own nationals or
companies or to nationals or companies of any third country, whichever
is the most favorable treatment, as regards any measures it adopts in
relation to such losses.
Each Party shall permit all transfers related to an investment to be
made freely and without delay into and out of its territory. Such
transfers include: (a) returns; (b) compensation pursuant to Article
III; (c) payments arising out of an investment dispute; (d) principal and interest
payments arising under loan agreements, and; (e) proceeds from
the sale or liquidation of all or any part of an investment.
Transfers shall be made in a freely convertible currency at the prevailing
market rate of exchange on the date of transfer with respect to spot
transactions in the currency or currencies to be transferred.
Notwithstanding the provisions of paragraphs 1 and 2, either Party may
maintain laws and regulations (a) prescribing procedures to be followed concerning
transfers permitted by this Article, provided that such procedures are completed
without delay by the party concerned and do not impair the substance of the rights set
forth in paragraphs 1 and 2 of this article; (b) requiring reports of currency
transfer; and (c) imposing income taxes by such means as a withholding
tax applicable to dividends or other transfers. Furthermore, either
Party may protect the rights of creditors, or ensure the satisfaction of
judgments in adjudicatory proceedings, through the equitable,
nondiscriminatory and good faith application of its law.
The Parties agree to consult promptly, on the request of either, to
resolve any disputes in connection with the Treaty, or to discuss any
matter relating to the interpretation or application of the Treaty.
If one Party requests in writing that the other Party supply information
in its possession concerning investments in its territory by nationals
or companies of the Party making the request, then the other Party
shall, consistent with its applicable laws and regulations and with due
regard for business confidentiality, endeavor to establish appropriate
procedures and arrangements for the provision of such information.
For purposes of this Article, an investment dispute is defined as a dispute involving
(a) the interpretation of application of an investment agreement between a Party and a
national or company of the other party; (b) the interpretation or application of any investment
authorization granted by a Party's foreign investment authority to such national or company; or (c)
an alleged breach of any right conferred or created by this Treaty with
respect to an investment.
In the event of an investment dispute between a Party and a national or company of the
other party, the parties to the dispute should
initially seek a resolution through consultations and negotiations in
good faith. If such consultations and negotiations are unsuccessful, the
dispute may be settled through the use of a non-binding third party
procedures upon which such national or company and the Party mutually
agree. If the dispute cannot be resolved through the foregoing
procedures, the dispute shall be submitted for settlement in accordance
with any previously agreed, applicable dispute settlement procedures.
(a) The national or company concerned may choose to consent in writing
to the submission of the dispute to the International Center for the
Settlement of Investment Disputes ("Centre") for settlement by
arbitration, at any time after one year from the date upon which the
dispute arose, provided:
(i) the dispute has not, for any reason, bee submitted by the national
or company for resolution in accordance with the applicable dispute
settlement procedures previously agreed to by the parties to the
(ii) the national or company concerned has not brought the dispute
before the courts of justice or administrative tribunals or agencies of
competent jurisdiction of the Party that is a party to the dispute.
(b) Each Party hereby consents to the submission of an investment
dispute to the Centre for settlement of arbitration.
(c) Arbitration of such disputes shall be done in accordance with the
provisions of the Convention on the Settlement of Investment Disputes
Between States and Nationals of other States and the "Arbitration
Rules" of the Centre.
Any dispute settlement procedures regarding expropriation and specified
in the investment agreement shall remain binding and shall be
enforceable in accordance with the terms of the investment agreement,
relevant provisions of domestic laws, and applicable international
agreements regarding enforcement of arbitral awards.
In any proceeding involving an investment dispute, a Party shall not
assert, as a defense, counter-claim, right or set-off or otherwise, that
the national or company concerned has received or will recieve, pursuant
to an insurance or guarantee contract, indemnification or other
compensation for all or part of its alleged damages.
For the purposes of this Article, any company legally constituted under
the applicable laws and regulations of either Party or a political subdivision thereof
but that, immediately before the occurence of
the event or events giving rise to the dispute, was an investment of
nationals or companies of the other Party, shall be treated as a
national or company of such other Party.
The Parties shall seek in good faith and in the spirit of cooperation a
rapid and equitable solution to any disputes between them concerning the
interpretation or application of this treaty. In this regard, the
Parties agree to engage in direct and meaningful negotiations to arrive
at such solutions. If such negotiations are unsuccessful, the dispute
may be submitted, upon the request of either Party, to an arbitral
tribunal for binding decision in accordance with the applicable rules of
Within two months of receipt of a request, each Party shall appoint an
arbitrator. The two arbitrators shall select a third arbitrator as
Chairman, who is a national of a third State. In the event either Party
fails to appoint an arbitrator within the specified time, the other
Party may request the President of the International Court of Justice to
make the appointment.
The Tribunal shall have three months from the date of the selection of
the Chairman in which to agree upon rules of procedure consistent with
the other provisions of this Treaty. In the absence of such agreement,
the Tribunal shall request the President of the International Court of
Justice to designate rules of procedure, taking into account generally
recognized rules of international arbitral procedure.
Upon a determination that the Party requesting arbitration has attempted
to resolve the dispute through direct and meaningful negotiation, the
Tribunal shall proceed to arbitrate the merits of the dispute.
Unless otherwise agreed, all submissions shall be made and all hearings
shall be completed within eight months of the date of selection of the
third arbitrator, and the Tribunal shall render its decision within two
months of the date of the final submissions or the date of the closing
of the hearings, whichever is later.
Expenses incurred by the Chairman, the other arbitrators, and other
costs of the proceedings shall be paid for equally by the Parties. The
Tribunal may, however, at its discretion, direct that a higher
proportion of the costs be paid by one of the Parties.
This Article shall not be applicable to a dispute which has been submitted to and
is still before the Centre pursuant to Article VI.
provisions of Article VI and VII shall not apply to a dispute arising
(a) under the export credit, guarantee or insurance programs of the
Export-Import Bank of the United States or (b) under other official
credit, guarantee or insurance arrangements pursuant to which the
Parties have agreed to other means of settling disputes.
Treaty shall not derogate from:
(a) laws and regulations, administrative practices or procedures, or
administrative or adjudicatory decisions of either Party;
(b) international legal obligations; or
(c) obligations assumed by either Party, including those contained in an
investment agreement or an investment authorization,
that entitle investments or associated activities to treatment more
favorable than that accorded by this Treaty in like situations.
This Treaty shall not preclude the application by either Party of
measures necessary for the maintenance of public order, the fulfillment
of its obligations with respect to the maintenance or restoration of
international peace or security, or the protection of its own essential
This Treaty shall not preclude either Party from prescribing special
formalities in connection with the establishment of investments, but
such formalities shall not impair the substance of any of the rights set
forth in this Treaty.
With respect to its tax policies, each Party should strive to accord
fairness and equity in the treatment of investment of nationals and
companies of the other Party.
The provisions of Articles II and V of this Treaty do not apply to
This Treaty shall enter into force thirty days after the date on which the
exchange of instruments of ratification has been completed. It shall remain in force for a
period of ten years and shall continue in force unless terminated in
accordance with paragraph 2 of this Article. It shall apply to
investments existing at the time of entry into force as well as to
investments made or acquired thereafter.
Either Party may, by giving one year's written notice to the other
Party, terminate this Treaty at the end of the initial ten year period
or at any time thereafter.
This Treaty may be amended by written agreement between the Parties. Any
amendment shall enter into force when each Party has notified the other
that it has completed all internal requirements for entry into force of
With respect to investments made or acquired prior to the date of
termination of this Treaty and to which this Treaty otherwise applies,
the provisions of all of the other Articles of this Treaty shall
thereafter continue to be effective for a further period of ten years
from such date of termination.
This treaty shall apply to political subdivisions of the parties.
IN WITNESS WHEREOF, the respective plenipotentiaries have signed this
DONE in duplicate at Washington, on the day of December 3, 1985 in the
English and Turkish languages, both texts being equally authentic.
FOR THE GOVERNMENT OF THE UNITED STATES OF AMERICA: Clayton Yeutter
THE GOVERNMENT OF TURKEY: Sukru Elekdag
1. (a) With respect to Article II(1) and (2), the United States reserves
the right to limit the extent to which nationals or companies of Turkey
or their investments may establish, acquire interests in, or carry on
investments within U.S. territory in air transportation; ocean and
coastal shipping; banking; insurance; energy and power production; use
of land and natural resources; ownership in real estate; radio and
television broadcasting; telephone and telegraph services; the provision
of submarine cable services and satellite communications.
The United States reserves the right to limit the extent to which
nationals or companies of Turkey or their investments may be eligible
for government grants, insurance or loan programs. Other than with
respect to ownership of real estate, the treatment accorded by the
United States to investments of nationals or companies of Turkey shall
be no less favorable than that accorded in like situations to
investments of nationals or companies of any third country. Rights to
engage in mining on the U.S. public domain shall be dependent on
reciprocal rights being granted to investments of U.S. nationals or
companies within the territory of Turkey.
(b) With respect to Article II(1) and (2), Turkey reserves the right to
limit the extent to which nationals or companies of the United States or
their investments may establish, acquire interests in, or carry on
investments within Turkish territory with respect to tobacco; spirits
and alcoholic beverages (except for wine and beer); the establishment,
operation and broadcasting of radio and television programs; railways;
ports and domestic maritime transportation; postal, telephone,
telegraph, and telecommunications services; lotteries and football
pools; armaments, explosives, and gun powder; public utilities (except
the production of electricity); ownership of real estate by natural
persons outside of municipal boundaries; insurance; banking; airports
and domestic air transportation; and unincorporated retailing and
(c) Each Party agrees to notify the other Party before or on the date of
entry into force of this Treaty of any laws, regulations and policies
limiting the extent to which investment of nationals or companies of the
other Party may within its territory establish, acquire interests in or
carry on investments.
(a) Concerning Article IV, paragraph 1, "without delay" means
that transfers shall be completed as rapidly as possible in accordance
with the normal commercial transaction procedures and in no case shall
be delayed beyond two months from the date of application.
(b) In the exceptional financial or economic circumstances relating to
foreign exchange, the Republic of Turkey may temporarily delay transfers
of the type specified in Article IV (1)(e) but only (i) in a manner
consistent with Article II; (ii) for the time period necessary to
restore its reserves of foreign exchange to a minimally acceptable
level, but not to exceed three years from the date when the transfer is
requested; and (iii) provided that the national or company has an
opportunity to invest the proceeds in a manner which will preserve their
value until transfer occurs.
The Parties agree that this Protocol forms an integral part of the
offers these agreements electronically as a public service for general
reference. Every effort has been made to ensure that the text presented
is complete and accurate. However, copies needed for legal purposes
should be obtained from official archives maintained by the appropriate