Hopes fade for EU-US accord on investment

Date: 18/09/1997

By Mark Turner

HOPES that the EU and the US could end their long-running dispute over European investment in Cuba and Iran next month are fading.

Following a series of difficult meetings over recent months, including an encounter between Trade Commissioner Leon Brittan and US Under-Secretary for Trade Stuart Eizenstat, the chances of avoiding a World Trade Organisation-level dispute are looking increasingly slim.

But given that transatlantic trade talks are notorious for going to the very brink, diplomats have not given up hope.

At the centre of the controversy lie two US laws which penalise foreign companies investing in Cuba, Iran or Libya.

The infamous Helms-Burton Act in theory allows former American owners of property expropriated by Fidel Castro to prosecute any company which invests in it (Title III), and enables the US to refuse entry to business leaders involved in that investment (Title IV).

The similar D'Amato Act, or Iran Libya Sanctions Act (ILSA), penalises firms which invest in the countries' energy sectors, as both Tehran and Tripoli stand accused of sponsoring terrorism.

Both laws have been slammed by the EU, Canada, Mexico and others as blatant and unacceptable bullying by Washington. But following an April deal - an 'understanding' which included a six-month waiver on Title III of Helms-Burton and practical assurances that business leaders would not be excluded from the US - the Union agreed to hold off WTO procedures until October.

The key to the impasse now lies in talks within the Organisation for Economic Cooperation and Development (OECD) on multilateral investment rules.

Under a bilateral compromise, Washington and Brussels are looking to agree that, on the one hand, no OECD state should support investment in expropriated property, and on the other, there should be tough restrictions on extra-territorial legislation (known as secondary embargoes).

The agreement would eventually apply to all signatories to the Multilateral Agreement on Investment (MAI), which the OECD hopes will be ready by next April.

The exact weighting and strength of each side of the coin, however, remain contentious. The US has so far proved extremely unwilling to accept any curbs on its legislative reach, while the Union is seeking to weaken rules on confiscated property.

As part of the deal, the EU is also urging Washington to put pressure on Congress to allow waivers on Title IV as well as III of Helms-Burton, and President Bill Clinton to recommend a waiver on the D'Amato Act.

According to the terms of ILSA, which actually poses a greater threat to EU industry than Helms-Burton, the US can give a waiver to countries which are deemed to have constructive policies towards Iran.

But current Union moves to return ambassadors to the country are undermining transatlantic solidarity over Iran, despite a temporary truce after the high-level conflict between the EU and Tehran this spring.

The issue is currently being debated by negotiators in Paris and is expected to feature prominently when Brittan visits the US next week. If there is no substantial progress by 15 October, however, Commission sources say that they will not hesitate to call for a WTO dispute panel.