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2003-02-23 14:07:00
Embassy Amman
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This record is a partial extract of the original cable. The full text of the original cable is not available.
						UNCLAS SECTION 01 OF 03 AMMAN 001157 




E.O. 12958: N/A



1. (SBU) SUMMARY: FM Muasher told the Ambassador that he
wants a three month delay in the Exchange of Instruments of
Ratification that would bring the Bilateral Investment Treaty
(BIT) into force in order to allow the government time to
assess the Treaty's impact on a pending investment dispute
with an Italian firm. Further delay in the Exchange will
send a bad message to investors at a critical time for
Jordan, particularly given the role FDI could play in
mitigating the long-term economic impact of a military
conflict with Iraq. Following up on his discussions in
Jordan in October, we recommend U/S Larson raise this concern
with the Jordanian Trade and Foreign Ministers. END SUMMARY




2. (SBU) In a meeting with the Ambassador January 19, FM
Muasher said Jordan would like a three month delay in the
Exchange of Instruments of Ratification that would bring the
BIT into force. Muasher said MFA and outside lawyers advised
him to postpone the Exchange pending resolution of an
International Center for Settlement of Investment Disputes
(ICSID) case brought against Jordan by two Italian companies
due to fears that the companies could take advantage of Most
Favored Nation (MFN) status under the Jordan-Italy BIT once
the U.S. BIT enters into force. Muasher suggested that
Jordanian and U.S. lawyers get together to resolve the
question of the U.S. BIT's applicability.

3. (SBU) MFA Legal Affairs Director Naber called Econoff
February 20 to elaborate on the reasons for the Minister's
delay. He said the counsel for the GOJ, Imam Odeh of the
Sheif Ali Zoubi law firm, sent a letter to Minister of Water
and Irrigation (MWI) Nasser suggesting that he request, via
the MFA, a three month delay in the entry into force of the
BIT. He suggested that this could enhance the Ministry's
legal position regarding an ICSID complaint filed by the two
Italian companies against the MWI. Odeh argued that the
delay was desirable because the companies were currently
submitting the facts of the case to ICSID under the Italian
BIT, which permits ICSID intervention only as a method of
last resort. He said he was concerned that an entry into
force of the American BIT at this time would enable them to
use MFN status to more readily access the ICSID mechanism via
the American BIT. Once the facts of the case are presented,
the case is "locked", according to Odeh, and the companies
would be unable to invoke the American BIT.

4. (SBU) Naber was at pains to stress that this was not an
open-ended matter, and that the MFA fully expected the issue

to be resolved soon and the entry into force to proceed. He
said, "It is not our intention to delay putting into place
the last big piece of the jigsaw we have put together," but
added that "for a small economy like ours, $28 million (the
amount claimed by the Italians) is a lot of money." Naber
added that he and other MFA advisors met with Odeh to "see if
there might be another way" and avoid this problem, but could
find none. He said that he, and Odeh, were open to
discussing their concerns with lawyers from the Department.




5. (SBU) The dispute with the MWI was brought to ICSID by
Italian construction companies Salini Construtorri and
Italstrade against the Jordanian government in November, 2002
under the terms of the Jordan-Italy BIT. However, in a
discussion with Italian Embassy Econoff Nicola Lener, we
learned the Italian companies plan to use most favored nation
treatment accorded to it by the Italian BIT to gain access to
the ICSID mechanism once our BIT is in force. (ICSID is a
measure of last resort in the Italian BIT, but available to
investors at any point under the U.S. treaty.) Lener
confirmed that the company is strictly Italian, with no
American connection or investors. He said the complaint
centers on cost overruns allegedly incurred by the companies
in the construction of the Karameh dam project in the mid-90s
for which they have not been reimbursed.

6. (SBU) Naber had brought the Italian case to our attention
in mid-January, upon receiving our diplomatic note proposing
minor technical changes to the Jordanian-Arabic text of the
BIT (changes that were agreed to by both parties in direct
discussions in December in Washington). Post then consulted
with L and EB (REFTELCON) and were advised that BIT
provisions only apply after entry into force, thirty days
after the Exchange of Instruments of Ratification. We passed
this information along to Naber late January, who expressed
appreciation, and assured us an MFA response to the Dip Note
would soon be forthcoming and that we could soon proceed on
setting up a ceremony for the Exchange. As recently as
February 17, a Jordan Investment Board (JIB) official told us
she was expecting the draft copy of the response to our Dip
Note from the MFA.




7. (SBU) We expect that regime change in Iraq will
considerably improve Jordan's attractiveness as a destination
for foreign investment. The combination of greater regional
stability and the preferential access Jordan enjoys to the
U.S. and European markets would put Jordan in a unique
position to stand out in the region as an FDI recipient.
Indeed, an increase in FDI flows could well be an important
factor in helping Jordan adjust over time to the loss of its
special oil relationship with Iraq and otherwise offset the
negative economic impact on Jordan of a military conflict.

8. (SBU) Given the role FDI could play, the idea that
Jordan would not allow an investment treaty to enter into
force because there is a chance its provisions might actually
be used in a particular case is shortsighted. In addition to
a BIT being an important asset in attracting foreign
investment, potential foreign investors are likely to look
especially poorly on legalistic maneuvers like the one
proposed by Muasher in order to avoid obligations to
investors. (In fact, the GOJ has already argued that a case
brought to ICSID by the U.S.-U.K. company Jacobs Engineering
under the UK BIT is not valid because the UK BIT was not
properly ratified. This assertion was quickly disproved by
the UK embassy.) Furthermore, we note that an investment
chapter was not included in the U.S.-Jordan FTA on the
expectation that the BIT would provide sufficient protections.

10. (SBU) Post will vigorously pursue this issue with
Muasher and senior ministers responsible for economic
matters. Even though the question of the BIT's applicability
to the Italian case should not bear on the GOJ's policy
making, we would also be happy to facilitate contacts between
USG and Jordanian lawyers if the Department thinks it would
be useful. In addition, we think it could be helpful for U/S
Larson to include this issue in his discussions with
Jordanian officials on the impact on Jordan of a conflict.
Letters from U/S Larson to Muasher and to Industry and Trade
Minister Salah al-Bashir along the lines of the text
suggested below would reinforce the high-level USG economic
interest in seeing this treaty in force without further

11. (SBU) Begin text of proposed draft letter.

Dear Mr. Minister:

A theme of my meetings with you and other Jordanian officials
and the business sector in Amman last October was the
economic potential Jordan enjoys given its outstanding record
of economic reform and the preferential access it enjoys to
the U.S., EU and other markets. Jordan's attractiveness as a
destination for foreign direct investment will be a key
ingredient of its capacity to mitigate the economic impact of
disruptions in the region and to achieve its full economic

Because of the central role foreign direct investment plays
in economic growth and development, I am concerned that the
United States and Jordan have not been able to bring into
force the Bilateral Investment Treaty that was signed in 1997
and ratified by the Jordanian Parliament in 1998 and the U.S.
Senate in 2000. Since U.S. and foreign investors look to the
assurances provided by such treaties when making investment
decisions, I hope that we can bring this agreement into
effect without further delay. I understand that once a few
technical adjustments have been made to the Arabic text,
Ambassador Gnehm is prepared to exchange instruments of
ratification with Jordan's designated official.
I look forward to hearing from you about this important
issue. With this key complement to our Free Trade Agreement
in place, I believe that we will have created a legal
structure that will allow the economic relationship between
the United States and Jordan to continue to grow and flourish.

End Text