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The Jordanian-American InvestmentTreaty of 1997

On 22 July 2020 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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