ISLAMABAD, Nov 21: Pakistan and the United States both have softened their stand over their proposed Bilateral Investment Treaty (BIT) for early signing of the much delayed pact.

Official sources told Dawn on Tuesday that the United States has eventually accepted that the "judicial and legislative actions" of Pakistan should not be allowed to be challenged in any international court of law.

The US side, they said, have conceded to differentiate between the "bad faith and the error of judgment" and that the decisions announced by superior courts of Pakistan will not be challenged without any legitimate justification.

In return, Pakistan has accepted that the treaty will be applied with retrospective effect, meaning that any thing pertaining to the existing American investment could also be challenged.Pakistan, in this regard, has assured the US government that it will be obligatory for Pakistan to give compensation to the US investors in case of their dispute, which has not been settled. One of the cases in point was the dispute that erupted few years ago over the opening of a US restaurant chain--McDonald in Lahore.

Sources said that Pakistan has also subdued to American pressure to accept additional forums other than International Centre for Settlement of Disputes (ICSD) to deal with arbitration clauses. The US side maintained that since a number of rules of ICSD were needed to be upgraded, other centres for dispute resolution should also be considered.

The US side was insisting to have more than one international forum to settle investors’ disputes, while Pakistan wanted only the ICSD. Also, Pakistan wanted the US investors to exhaust the local remedy in Pakistani courts before opting for any international forum in case of any dispute.

Pakistan had also argued that there will be a wastage of time and money to approach other dispute resolution centres and that let the ICSD alone be approached in case of any dispute. "But we have now given up this stance and all these issues could pave the way for early signing of the treaty", a concerned official said.

However, he said he was not in a position to give any tentative date for the signing of the much delayed BIT.

He said a decision has also been taken that all the rounds of talk--that have so far held between the two sides--will be made part of the treaty while interpreting any dispute in any international court of law.

"This will be termed as the negotiations history at the time of any dispute before any court of law", the official said claiming that a "major hurdle" in the way of signing the treaty has been removed.

But the US Assistant Secretary of State for South Asian and Central Asia Mr Boucher when visited Pakistan earlier this month had said that there were some "serious technical problems" which were blocking the signing of the treaty.

Another source said that Pakistan had succeeded in convincing the US officials to change their draft law on BIT for signing of the proposed treaty. "In many previous rounds of talks, the US side used to say that since this draft on BIT has been approved by the American Congress, there could be no change in it. But eventually they (Americans) had accepted our point of point on it," he said.

"We had told the Americans that if they were coming with a prepared mind to continue insisting on the acceptance of draft law approved by their Congress, then we are afraid it would not be possible to sign this treaty," he said.

Both sides, he said, have conceded to remove their differences over BIT and that one should now hope that it will be signed in the near future. Nevertheless, he too did not like to give any timeframe for the signing of the treaty.

Earlier, the United States and Pakistan exchanged their "Non Papers" as was proposed by US Ambassador to Pakistan Ryan C. Crocker before holding a final round of talks to conclude the treaty.Mr Crocker believed that there was a need for holding "informal talks" in which non papers should be exchanged in order to work out differences over the draft of the treaty, earlier approved by the Bush administration.

Sources said Prime Minister Shaukat Aziz, while presiding over a high level meeting recently had expressed his concern over the delay in signing the treaty. He said that both sides should hold their final round of talks to decide the issue. Foreign Secretary Riaz Mohammad Khan had also proposed holding of the final round of talks during the meeting.

The US side had also linked the signing of BIT with the inking of a Free Trade Agreement (FTA), which was being sought by Pakistan more vehemently in order to have new concessions for the country's products into the United States.

It is believed that the proposed BIT would largely benefit the American investors wishing to invest in Pakistan, while FTA would be more helpful to Pakistan.