THECOLOMBIAN BIT MODEL
1st Annual Forum of Developing Country Investment
Negotiators
Ministry of Trade, Industry
and Tourism
Republic of Colombia
Pilar V. Cerón
FOREIGN INVESTMENT AND SERVICES DIRECTORATE
Singapore, October 2007
Ministry of Trade, Industry and Tourism
Republic of Colombia
THE COLOMBIAN BIT MODEL
Ministry of Trade, Industry and
Tourism
Republic of Colombia
ESTRATEGIC DEFENCES TO
ARBITRATION
¿What sorts of provisions are there in current
International Investment Agreements that
would allow states an appropriate defence?
THE COLOMBIAN BIT MODEL
Ministry of Trade, Industry and
Tourism
Republic of Colombia
I. SUBSTANTIVE PROVISIONS OF MUTUAL
COMMITMENT
Greater precision of certain substantive clauses enhance the legal certainty of the
investor – State dispute settlement mechanism. Such provisions may include:
Definition of investment
Fair and equitable treatment & full protection and security
Most Favoured Nation Treatment & National Treatment
Free Transfers
Expropriation and Compensation
Investment & Environment
SUBSTANTIVE PROVISIONS
Ministry of Trade, Industry and
Tourism
Republic of Colombia
Article 2 : Investment
2.3.
In accordance with paragraph 1 of this Article, the minimum characteristics of an
investment shall be:
a.
The commitment of capital or other resources;
b.
The expectation of gain or profit;
c.
The assumption of risk for the investor.
Article 3: Fair and Equitable Treatment & Full Protection and Security
3. (…) Each Party shall accord fair and equitable treatment in accordance with customary
international law, and full protection and security in its territory to investments of investors of the
other Contracting Party. (…)
Article 4 : Most Favoured Nation Treatment and National Treatment
1.
Each Contracting Party shall grant to the investments of investors of the other
Contracting Party made in its territory, a not less favourable treatment than that accorded, in like
circumstances, to investments of its own investors or to investors of any other third State,
whichever is more favourable to the investor.
SUBSTANTIVE PROVISIONS
Ministry of Trade, Industry and
Tourism
Republic of Colombia
Article 5:Transfers
1. Each Contracting Party, prior fulfillment of the requirements under its law and without
unjustified delay, shall allow investors of the other Contracting Party to effect, in a freely
convertible currency, transfers of: (…) # 4 and # 5
Article 7: Expropriation and Compensation
1. Investments of investors of a Contracting Party in the territory of the other Contracting Party
will not be subject of nationalization, direct or indirect expropriation, or any measures having
similar effects (hereinafter “expropriation”) except for reasons of public purpose or social interest,
in accordance with due process of law, in a non-discriminatory manner, in good faith and
accompanied by a prompt, adequate and effective compensation
Investment
Art. II # 2.3
Ministry of Trade, Industry and
Tourism
Republic of Colombia
Article 25 of ICSID Convention sets forth specific elements
concerning the Jurisdiction of the Center:
• Existence of an investment
• The Parties
• Existence of a dispute
• The consent of the Parties
Consequently,
theN.V
Colombia's
BITParagraph
Model has
ICSID case Fedax
v. Venezuela.
43:listed minimum
characteristics
of anof Investment
giving
objective
criteria toasestablish
“The
basic features
an investment
have
been described
involving a
whether
there isa certain
an investment
is keyassumption
to determine
certain
duration,
regularitydispute,
of profit which
and return,
of risk, a
jurisdictioncommitment
– see Articles
and 36 of for
thethe
ICSID
substantial
and a25significance
host Convention.
State’s development.”
Fair and Equitable Treatment
Art. III # 3 and 4
Ministry of Trade, Industry and
Tourism
Republic of Colombia
Colombia's BIT Model follows:
On the Minimum Standard of Treatment of Aliens:
i)
Concerning Fair and Equitable Treatment (FET) the applicable
standard is Customary International Law -Due Process of Lawii) FET does not require treatment in addition to that required by
Customary International Law
iii) A breach of another provision of the agreement, does not establish a
violation of FET standard
iv) Full Protection and Security, under the Model, applies a relative
standard, i.e. to accord investors a protection and security no less
favourable than that accorded to its own investors
National Treatment
Art. IV # 1
Ministry of Trade, Industry and
Tourism
Republic of Colombia
National Treatment in Colombia's BIT Model:
The obligation to grant to foreign investors and their
investments a treatment no less favourable than that
granted to domestic investors and their investments is
conditioned to the requirement that both investors and
investment must be in like circumstances* for the
obligation to apply
* It refers to the comparison to be made between the foreign investors and the domestic
investors operating in the same business or economic sector. Pope & Talbot v. Canada
Transfers
Art. V # 4,5
Ministry of Trade, Industry and
Tourism
Republic of Colombia
In Colombia the Central Bank has constitutional powers set out
among others, in articles 371 and 372 of the Colombian Constitution. Fully recognized by the Constitutional Court-. Those Constitutional
powers have to be reflected in all BIT negotiations.
IN ADDITION
 New mandatory reserve measures were recently imposed by the
Colombian Government to control short-term capital inflows and the
Colombian Peso appreciation, since foreign investment inflows have
dramatically increased in our country in the last 4 years
Expropriation & Compensation
Article VI
Ministry of Trade, Industry and
Tourism
Republic of Colombia
Important Definitions
 ICSID
Non-discriminatory
of a Party
that are designed and
case Feldman v. measures
Mexico. Paragraph
112:
applied forAzinian,
publicnot
purposes
or social
interest
do not
“To paraphrase
all government
regulatory
activity
that constitute
makes it difficult or
indirectforexpropriation
public health,
andchange
environment
impossible
an investor to (IE)
carry-such
out a as
particular
business,
in the law or
protection.
change
in the application
of existing laws that makes it uneconomical to continue a
is an expropriation….”
particular
The business,
determination
of whether a measure of a Party constitute IE
requires a case-by-case, fact-based inquiry considering:
i)
ii)
The scope of the measure and their interference on the reasonable and
distinguishable expectations concerning the investment and
The economic impact of the measure. The sole fact of a measure or series of
measures having adverse effects on the economic value of an investment does
not imply that an indirect expropriation has occurred
THE COLOMBIAN BIT MODEL
Ministry of Trade, Industry and
Tourism
Republic of Colombia
II. PROVISIONS ALLOWING STATES AN
APPROPRIATE DEFENCE:
Those procedural provisions of Colombia´s BIT model that give the State
the possibility of an appropriate defence in case of an Investor - State dispute:
 Maffezzini Clause
Possibility of exhausting local administrative remedies
Fork in the road
Reasonable time for the Government in order to respond claims
Frivolous Claimants
Umbrella Clause
PROCEDURAL PROVISIONS
Ministry of Trade, Industry and
Tourism
Republic of Colombia
Article 4 : Most Favoured Nation Treatment and National Treatment
2.
The most favourable treatment to be granted in like circumstances referred to in this
Agreement does not encompass mechanisms for the settlement of investment disputes,
such as those contained in Articles IX and X of this Agreement, which are provided for in treaties
or international investment agreements. – Maffezini Clause-
Article 10: Settlement of Disputes Between the Contracting Parties
# 1 –Possibility of exhausting administrative remedies# 7 –Fork in the Road# 4; 5; 10 –Reasonable time for the government in order to respond claimants# 13 –Frivolous Claimants-
Most Favored Nation
Art. IV # 2
MFN
in Colombian
-Maffezini
v. Spain- BIT Model:
Ministry of Trade, Industry and
Tourism
Republic of Colombia
Maffezini
it clear
States negotiating
BITs that,theif
…
“As the made
Tribunal
has for
established,
the BIT between
they
do not
intend and
extending
the MFNofclause
dispute
Argentine
Republic
the Kingdom
Spain, todoes
not
settlement,
certainty, for
an express
carve
out Favored
is required.
specify the for
provisions
which the
Most
Nation
Clause applies. For this reason, and finding no fundamental
question
of public
policy, the
decided
to covers
extend
Colombia´s
BIT clarifies
thatTribunal
the MFNhas
clause
ONLY
the
MFN clause
to the procedural aspects of the Treaty”…
substantive
matters
Local Administrative Remedies
Art. 10 # 1
Ministry of Trade, Industry and
Tourism
Republic of Colombia
With regard to acts of a governmental authority, in order to
submit a claim to arbitration under this article or to a local
court or administrative tribunal, local administrative
remedies shall be exhausted, should it be required by the
law of the Contracting Party.
Fork in the road
Art. 10 # 7
Ministry of Trade, Industry and
Tourism
Republic of Colombia
Disputes arising between the Parties shall be settled, at first, amicably or
by means of negotiation or mediation
However, if an agreement is not reached, investors may make an exclusive
choice of forum among 3 possibilities:
Contentious Procedure
-In any case the decision is final3. INTERNATIONAL
ARBITRATION
1. LOCAL COURTS
2. NATIONAL
ARBITRATION
Reasonable time for the Government
in order to respond claims
1
Republic of Colombia
Notice of
intent
Notice of
dispute
0
Ministry of Trade, Industry and
Tourism
2
3
4
5
Local
Adm. Remedies
6
7
Request of
arbitration
8
9
10
11
12
Umbrella Clause
Ministry of Trade, Industry and
Tourism
Republic of Colombia
Colombia's BIT model does not include
an umbrella clause…
 ICSID case SGS v. Pakistan:
…”Article 11 would amountto incorporating by reference an unlimited number of State
Given
thatasa wellas
BIT should
preciselylawdetermine
treatyoutprovision
where
contracts,
other municipal
instrumentsthe
setting
State commitments
the
Estate
is committing
itselftotoanas
opposed
including
a general
including
unilateral
commitments
investor
of theto
other
Contracting
Party. Any
provision
for contract
notother
defined
in BITs
alleged violation
of those breaches
contracts and
instruments
would be treated as
a breach of the BIT… however, since the Claimants did not show how the alleged
facts could constitute not only a breach of the contract, but also a breach of the BIT,
this Tribunal does not have jurisdiction over SGS’s claims that Pakistan breached the
PSI Agreement or over Pakistan’s claims that SGS breached the PSI Agreement.”
Ministry of Trade, Industry and
Tourism
FINAL REMARKS
Republic of Colombia
CONCLUSIONS
• Colombia's BIT Model does not follow a particular model.
• Instead, it has built a BIT model attentive to arbitration experience
of other developing countries, and following its particular
constitutional needs.
• It intends balancing out according international protection
standards to investors and provisions enabling the State to perform
an appropriate defense if it is ever brought to international
arbitration.
THE COLOMBIAN BIT MODEL
Ministry of Trade, Industry and
Tourism
Republic of Colombia
Main Sources / bibliography:





ECHANDI, Roberto. A new Generation of International Investment
Agreements in the Americas: Impact of Investor-state dispute
settlement over investment rule –making. ELSNIT. 2007.
Investor-State Dispute Settlement and Impact on Investment
Rulemaking: The Asia-Pacific Perspective. UNCTAD-APEC-SE.
2006
RIPINSKY, Sergey. Expropriation. British Institute of International
and Comparative Law. London, UK. 2006
www.worldbank.org/icsid/
www.unctad.org
THE COLOMBIAN BIT MODEL
Ministry of Trade, Industry and
Tourism
Republic of Colombia
THANK YOU!!
Ministry of Trade, Industry and Tourism
www.mincomercio.gov.co
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Colombian BIT Model