Pakistan, Germany sign upgraded BIT

Wednesday, December 02, 2009
BERLIN: Pakistan and Germany on Tuesday signed a new Bilateral Investment Treaty (BIT) to safeguard and promote their business interests besides sending positive vibes to the international community to invest in the South Asian country.

The new BIT marks the golden jubilee of the world’s first ever such agreement signed between the two countries on November 25, 1959, after the Second World War.

Prime Minister Syed Yusuf Raza Gilani and German Chancellor Angela Merkel described the signing of the new “bilateral promotion and protection of the investment treaty” as a historical step.

“The Agreement of the Encouragement and Reciprocal Protection of Investments will boost economic cooperation and create favourable conditions for investment by the investors of two countries,” a senior official of the ministry of Investment told APP.

The agreement was signed by Waqar Ahmad, Pakistan Minister for Investment, and Rainer Brudesle, Federal Minister of Economics and Technology, and Peter Ammon, State Secretary in the Federal Foreign Office on behalf of the Government of the Federal Republic of Germany.

The German government that requested the signing of the new agreement, organised a mega-event to commemorate the anniversary that is being attended by important leaders, investors and other dignitaries.

Germany is the fourth-largest trading partner of Pakistan.

The two countries’ bilateral trade shrank slightly in 2008 as compared with the previous year, approximately to 1.527 billion euros. Pakistan’s principal exports to Germany are leather goods and textiles, medical equipment and basmati rice, while main imports include chemical products, machinery, electrical goods, vehicles and hardware.

Under the Bilateral Investment Treaty (BIT), the German government will provide insurance guarantees to investment of its companies in Pakistan and cover their political and security risks, besides giving them more independence.

The Pakistan-specific facility is reflective of Germany’s commitment to promote bilateral trade and investment with Pakistan.

Over 2,600 BITs have so far been signed since the signing of the first between the two countries.

Now over two dozen German companies are working in Pakistan and the agreement is likely to attract more companies to Pakistan for investment in oil and gas, energy, agriculture, textile and industrial units. German companies are keen to share their experience and expertise in energy and textile sector besides infrastructure and the agriculture sector.

According to Pakistan embassy officials, the BIT is a sophisticated agreement providing facility of international arbitration for smooth settlement of business disputes.

It will boost confidence of German investors in Pakistan and replace the outdated agreement signed in 1959 between the two countries.

Pakistani and German companies already have a Pakistan-German Business Forum (PGBF) since 1997 and has helped expand cooperation between their private sectors leading to an increase in the number of companies participating in industrial fairs in Germany over the past three years. It has also encouraged and promoted bilateral investments and helped increase trade.

Pakistan and Germany have already signed bilateral agreements on air transport, investment promotion, double taxation and technical cooperation. Development cooperation between Pakistan and Germany dates back to 1961.

According to the details released by the Pakistan embassy in Berlin, the salient features of the new agreement are listed below:

- The agreement provides for intensifying economic cooperation, creating favourable conditions for investments by investors of either state in the territory of other state and encouragement and reciprocal protection of investments with a view to stimulating private business initiatives.

- Both the countries shall promote investments by investors of each other states in their respective territory.

- Both countries shall accord fair and equitable treatment to the investment by investors of the other contracting state and shall provide full protection and security in accordance with customary international law.

- Returns on investment and re-investment shall enjoy the same protection as the investment.

- Both the countries shall facilitate the investors of each other countries with regard to their entry, sojourn and employment pertaining to their investments within the framework of their respective national legislation.

- Both the countries shall not impair in any way by arbitrary or discriminatory measures the management, maintenance, use, enjoyment, sale or other disposal of investments in their respective territory of investors of each other countries.

- Both the countries shall respect and protect intellectual property rights of the investors of each other in accordance with their national legislation, rules and regulations.

- Both the countries shall not accord less favourable treatment to the investors and the investments of each other countries than that they accord to their own investors and their investment or to investors and investments of any third state in their respective countries.

- Investors of both countries shall be free to choose international means of transport of persons or capital goods connected with their investments without prejudice to relevant bilateral or international agreements binding on either state.

- Investment by investors of either state shall not be expropriated, nationalised or subjected to any other measure tantamounting to expropriation or nationalisation in the territory of the other state except for the public benefit and against compensation.

- Investors of either state shall enjoy most-favoured-nation treatment in the territory of other state with regard to investment losses and compensation, indemnification and restitution thereof owing to war or other armed conflict, revolution, a state of national emergency or revolt.

- The investors of each other country shall also not be accorded treatment less favourable than the treatment to be accorded to the contracting state’s own investors as regards to restitution, indemnification, compensation or other valuable consideration in case of investment losses due to war, armed conflict, revolt, etc.

- Both the countries shall guarantee all transfers relating to an investment to be made freely and without delay into and out of its territory with applicable rate of exchange on the day of transfer.

- The agreement shall also apply to investments made prior to its entry into force by investors of either state but shall not apply to any dispute or any claim concerning an investment which was already under political or arbitral process.