ISLAMABAD, Aug 10: The United States has agreed to update its investment procedures in order to help sign the much-delayed bilateral investment treaty (BIT) between Pakistan and the US preferably by September this year.

Sources told Dawn on Thursday that a visiting US delegation would hold talks with Pakistani officials on Friday to discuss the early signing of BIT in line with the directive of US President George W. Bush.

The US government is unprepared to sign the free trade agreement (FTA) with Pakistan unless the BIT is inked, which would largely protect the US investors and their investment in Pakistan.

The sources said the Bush administration now looked considerate to drop some of the "harsh clauses" from the proposed draft that in case of litigation largely favoured the US investors.

“But from our point of view the signing of FTA will greatly help Pakistan in terms of getting more market access and other benefits," a source said.

During the Friday meeting, the sources said, the US side was expected to offer a revised text of the BIT duly approved by the US Congress, which could pave the way for the signing of the treaty between the two countries. Earlier, Pakistan was told that it was a final text and Pakistan should accept it as was accepted by Singapore, Uruguay and many other countries.

The sources pointed out that the government had made it clear that Islamabad would not accept a "confidentiality agreement" in the proposed BIT text which needed to be changed and made open so that the investors should not have apprehensions about it.

There was a clause introduced in the final text by the US government that talked about "pre-establishment phase of investment" which Pakistan wanted to be excluded.

According to the proposed clause, if any problem arises for a US investor even when he is in the process of establishing his business in Pakistan, he should be compensated through a court of law. Pakistan pleaded when the business had not been set up, how could any US investor be allowed to seek any compensation and that it was an unjust provision which should be deleted from the final text.

Over and above Pakistan was being asked to accept additional 20-page procedure for dispute resolution other than the one to be brought into the notice of the Washington-based International Centre for Settlement of Disputes (ICSID) to deal with arbitration clause in case of a dispute between the US investor, any Pakistani government agency, any individual company or a businessman. Pakistan maintained that it would not accept any additional measure being forced by the Americans.

"The Bush government is applying Nafta standards to sign the BIT with Pakistan and this does not favour us," a source said, adding that Canada and Mexico were heavily suffering by signing their BITs with the United States because of a number of harsh clauses.

These harsh clauses, he said, were now likely to be removed from the proposed BIT text. "Due to these clauses, the United States had won all the cases against Canada and Mexico and as a result both the countries are facing huge financial losses," the source said, adding that the United States generally carved the BIT with any country in such a manner that in case of an arbitration, interest of the US investors were always well protected.

Pakistan also wanted the United States to sign the proposed BIT by dropping its demand that in case of arbitration only ICSID should be approached for a decision.

Pakistan, the sources said, was reluctant to accept the US demand regarding dispute resolution mechanism and said some other international forums, other than ICSID, should also be considered.

Islamabad wants the proposed treaty be made flexible and that unilateral clauses being proposed should be avoided to have some workable bilateral investment treaty.

The negotiations previously held remained inconclusive due to the persistent US demand that in case of any arbitration the US investors should be allowed to approach the ICSID.

But Pakistan, while agreeing to have an arbitration clause, called for a dispute resolution also in the United Nations Commission on International Trade Law, Vienna (Austria).

The signing of BIT and FTA would help Pakistan to seek additional billion market access from the United States. Pakistan was looking for additional market access for further export of its textiles, garments, leather and many other value-added products with a view to increasing its exports.

The sources claimed that the government had eventually succeeded in convincing the Bush administration to hold talks on offering more market access to Pakistan.