XII
Paragraph 7 ensures that a Party may not assert as a defense, or for any other reason, that the investor involved in the invest- ment dispute has received or will receive reimbursement for the same damages under an insurance or guarantee contract. Paragraph 8 provides that, for the purposes of this article, the nationality of a company in the host country will be determined by ownership or control, rather than by place of incorporation. This provision allows a company that is a covered investment to bring a claim in its own name. Article X (Settlement of Disputes Between the Parties) Article X provides for binding arbitration of disputes between the United States and Honduras concerning the interpretation or appli- cation of the Treaty that are not resolved through consultations or other diplomatic channels. The article specifies various procedural aspects of such arbitration proceedings, including time periods, se- lection of arbitrators, and distribution of arbitration costs between the Parties. The article constitutes each Party’s prior consent to such arbitration. Article XI (Preservation of Rights) Article XI clarifies that the Treaty does not derogate from any obligation a Party might have to provide better treatment to the covered investment than is specified in the Treaty. Thus, the Trea- ty establishes a floor for the treatment of covered investments. A covered investment may be entitled to more favorable treatment through domestic legislation, other international legal obligations, or a specific obligation (e.g., to provide a tax holiday) assumed by a Party with respect to that covered investment. Article XII (Denial of Benefits) Article XII(a) preserves the right of each Party to deny the bene- fits of the Treaty to a company owned or controlled by nationals of a non-Party country with which the denying Party does not have normal economic relations, e.g., a country to which it is applying economic sanctions. For example, at this time the United States does not maintain normal economic relations with, among other countries, Cuba and Libya. Article XII(b) permits each Party to deny the benefits of the Treaty to a company of the other Party if the company is owned or controlled by non-party nationals and if the company has no substantial business activities in the Party where it is established. Thus, the United States could deny benefits to a company that is a subsidiary of a shell company organized under the laws of Hon- duras if controlled by nationals of a third country. However, this provision would not generally permit the United States to deny benefits to a company of Honduras that maintains its central ad- ministration or principal place of business in the territory of, or has a real and continuous link with, Honduras. Article XIII (Taxation) Article XIII excludes tax matters generally from the coverage of the BIT, on the basis that tax matters should be dealt with in bi- lateral tax treaties. However, Article XIII does not preclude a na-
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