Presentaci

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THE COLOMBIAN BIT MODEL A Balanced Treaty with
NAFTA, OECD and Colombian Constitutional
Elements Twelfth Investment Treaty Forum
Public ConferenceInvestment Treaties at 50 Host
State Perspectives JOSE ANTONIO RIVAS
Director of Foreign Investment and
Services London, May 2009
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INDEX

• 1. Colombian Model BIT Provisions to prevent i-S
  disputes
• Substantive provisions
• State Defense Clauses
• 2. Government Strengthening for i-S Disputes.

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PROVISIONS TO PREVENT i-S DISPUTES The
Colombian BIT Model

• What sorts of provisions are there in current
  International Investment Agreements that would
  allow states an appropriate defence?

ESTRATEGIC DEFENCES TO ARBITRATION
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PROVISIONS TO PREVENT I-S DISPUTES The
Colombian BIT Model

• Greater precision of certain substantive clauses
  enhances legal certainty of the investor State
  dispute settlement mechanism. Such provisions
  may include

I. SUBSTANTIVE PROVISIONS OF MUTUAL COMMITMENT

• Definition of investment
• Fair and equitable treatment full protection
  and security
• Most Favored Nation Treatment National
  Treatment
• Free Transfers
• Expropriation and Compensation
• Investment Environment

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PROVISIONS TO PREVENT I-S DISPUTES The
Colombian BIT Model

• Procedural provisions of the Colombian BIT Model
  drafted with a view to encourage an appropriate
  defence by the State in case of an investor -
  State dispute

II. PROVISIONS ALLOWING STATES AN APPROPRIATE
DEFENCE

• Rejection of the Maffezzini Doctrine
• Obligation of exhausting local administrative
  remedies
• Fork in the road
• Reasonable time for the Government to respond to
  claims
• Frivolous Claims
• Umbrella Clause

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2. GOVERNMENT STRENGTHENING IN INVESTOR STATE
DISPUTES

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GENERAL CONSIDERATIONS
Issues to be thought of by developing States
Parties to BITs or FTAs concerning i-S
arbitration

• What model of defense should a developing country
  choose?
• i. Outsourcing legal services
• ii. In-house lawyers
• iii. Combined system ?
• Domestically, the agency involved, e.g. issuing
  the measure in question, should be liable if the
  Tribunal rules that the State is responsible.
• Training on treaty implications to public
  servants
• - who are directly involved in i-S defense and
• - whose normal course of work relates to
  foreign investment.

Criterion The model of defense should lead to an
institutional strengthening of its defense system
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GOVERNMENT STRENGHTNING FOR IRD ADMINISTRATION
The Colombian Strategy
Lead Agency MCIT
KNOWING THE INVESTMENT RELATED DISPUTE (IRD)
There must be a Lead Agency centralizing
notifications and coordinating any response.
INVESTOR
I
Notification of a dispute NoD-
Involved Agency
NoD
NoD
Involved Agency
CONSULTATIONS INVESTOR STATE Lead Agency must
be in charge of coordinating the rest of
governmental agencies involved in the Dispute.
It also must be the front desk for contacts
between the investor and the administration.
Investment related Agency
Investment related Agency
II
Lead Agency MCIT
Inter-agency Committee
INVESTOR
Investment related Agency
Consultations
Coordination
Other Relevant Agency
INVESTOR
ARBITRAL PROCEEDINGS Even during the arbitration
the above stated roles of the Lead Agency must be
maintained. Any non-judicial solution must be
approved by the Inter-Agency Committee
Dialogue
III
LEAD AGENCY MCIT
ARBITRATION FORUM
INTER-AGENCY COMMITEE
Claimants submissions
States submissions
Coordination
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GOVERNMENT STRENGHTNING FOR IRD ADMINISTRATION
The Colombian Strategy
KNOWING THE INVESTMENT RELATED DISPUTE (IRD)
There must be a Lead Agency (LA) centralizing
notifications and coordinating any response. The
Investor must submit any notification to the LA.
INVESTOR STATE CONSULTATIONS Lead Agency must
be in charge of coordinating the other
governmental agencies involved in the dispute in
order to conduct consultations. It also must be
the front desk for contacts between the investor
and the Government.
ARBITRAL PROCEEDINGS Even during the arbitration,
the above stated roles of the Leading Agency must
be maintained. Any non-judicial solution must be
approved by an inter-agency committee. The LA
coordinates the States defense strategy.
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PROVISIONS TO PREVENT I-S DISPUTES The
Colombian BIT Model
CONCLUSIONS

• Colombia's BIT Model does not follow a single
  model, but includes elements from OECD, NAFTA and
  its own constitution.
• The BIT Model responds to the arbitration
  experience of other developing countries.
• Colombia's BIT model intends to accord
  protection to investors under international law
  standards, while enabling the State to perform an
  appropriate defense in case of investor-State
  arbitration.
• A balanced treaty is not enough. BITs require
  follow up and an implementation program.

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THANK YOU! Ministry of Trade, Industry and
Tourism www.mincomercio.gov.co
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SUBSTANTIVE PROVISIONS

• 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 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

• ICSID case Fedax N.V v. Venezuela. Paragraph
  43
• The basic features of an investment have been
  described as involving a certain duration, a
  certain regularity of profit and return,
  assumption of risk, a substantial commitment and
  a significance for the host States development.

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SUBSTANTIVE PROVISIONS

• 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. ()

Colombia's BIT Model follows

• On the Minimum Standard of Treatment of Aliens
• Concerning Fair and Equitable Treatment (FET) the
  applicable standard is Customary International
  Law -Due Process of Law-
• FET does not require treatment in addition to
  that required by Customary International Law. It
  does not impair the exercise of the States
  regulatory powers in accordance with due process
  of law.
• A breach of another provision of the agreement,
  does not establish a violation of FET standard.
• 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.

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SUBSTANTIVE PROVISIONS

• 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.

National Treatment in Colombia's BIT Model The
obligation to grant foreign investors and their
investments a treatment not less favourable than
that granted to domestic investors and their
investments is conditioned to the requirement
that both investors and their investments be in
like circumstances.
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
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SUBSTANTIVE PROVISIONS

• ARTICLE 5TRANSFERS
• 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

In Colombia the Central Bank has constitutional
powers to preserve the stability of Colombias
currency, the normal functioning of internal and
external payments. These powers are fully under
the Constitution (art. 371 and 372) and are taken
into account in all BIT negotiations.
The powers to impose safeguards on transfers for
macroeconomic and monetary stability included in
Colombias BIT Model and its concluded BITs (i.e.
Belgium Colombia BIT), are similar to those
recently referred to in the European Court of
Justices decision on Swedish and Austrian treaty
provisions. (Case C-249/06 decided by the Grand
Chamber on 3 March 2009)
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SUBSTANTIVE PROVISIONS

• ARTICLE 8 INVESTMENT AND ENVIRONMENT
• Nothing in this Agreement shall be construed to
  prevent a Contracting Party from adopting,
  maintaining, or enforcing any measure that it
  considers appropriate to ensure that an
  investment activity in its territory is
  undertaken in accordance with the environmental
  law of the Party, provided that such measures are
  proportional to the objectives sought.

This provision allows the State to ensure that
investment activities are consistent with
environmental concerns. The clause focuses on
permitting the implementation of measures when
the circumstances so require. However, the
provision may not be abused given the
proportionality test it contains.
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PROCEDURAL PROVISIONS

• 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-

• Rejection of the Maffezini Doctrine in the
  Colombian BIT Model
• The decision on jurisdiction in the Maffezini v.
  Spain controversy made it clear for States
  negotiating BITs that, if they do not intend
  extending the MFN clause to dispute settlement,
  for certainty, an express carve out is required.
• Colombia's BIT clarifies that the MFN clause ONLY
  covers substantive matters

-Maffezini v. Spain- As the Tribunal has
established, the BIT between the Argentine
Republic and the Kingdom of Spain, does not
specify the provisions for which the Most Favored
Nation Clause applies. For this reason, and
finding no fundamental question of public policy,
the Tribunal has decided to extend the MFN clause
to the procedural aspects of the Treaty
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SUBSTANTIVE PROVISIONS

• ARTICLE 6 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

Important Definitions

• ICSID case Feldman v. Mexico. Paragraph 112
• To paraphrase Azinian, not all government
  regulatory activity that makes it difficult or
  impossible for an investor to carry out a
  particular business, change in the law or change
  in the application of existing laws that makes it
  uneconomical to continue a particular business,
  is an expropriation.

• Non-discriminatory measures of a Party that are
  designed and applied for public purposes or
  social interest do not constitute indirect
  expropriation (IE) -such as public health, and
  environment protection-.
• The determination of whether a measure of a Party
  constitute IE requires a case-by-case, fact-based
  inquiry considering
• 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

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PROCEDURAL PROVISIONS

• ARTICLE 10 SETTLEMENT OF DISPUTES BETWEEN ONE
  CONTRACTING PARTY AND AN INVESTOR OF THE OTHER
  CONTRACTING PARTY.
• 1 Obligation of exhausting local
  administrative remedies-
• 7 Fork in the Road-
• 4 5 10 Reasonable time for the government in
  order to respond claimants-
• 13 Frivolous Claimants-

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.
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PROCEDURAL PROVISIONS

• ARTICLE 10 SETTLEMENT OF DISPUTES BETWEEN ONE
  CONTRACTING PARTY AND AN INVESTOR OF THE OTHER
  CONTRACTING PARTY.
• 1 Obligation 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-

Once the investor has submitted the dispute to
either competent tribunal of the Contracting
Party in whose territory the investment has been
admitted or any of the arbitration mechanisms
stated above, the choice of the procedure shall
be final.

Contentious Procedure -In any case the decision
is final-
1. LOCAL COURTS
3. INTERNATIONAL ARBITRATION
2. NATIONAL ARBITRATION
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Reasonable time for the Government to respond to
claims
Notice of intent
Request of arbitration
Notice of dispute
Según la vista fiscal,
el sometimiento al CIADI no contraría en modo
alguno la Constitución colombiana. Opina el
Procurador que el concepto de soberanía, en el
ámbito de las relaciones internacionales, ha
evolucionado en el sentido de entender que, en la
actualidad, éste se manifiesta en "la capacidad
de los Estados para ejercer su actividad
internacional por su propio poder (...) en la
capacidad de aceptar que existen reglas
superiores a las que deben someterse todos los
Estados para lograr la 'igualdad soberana' de los
mismos". Es así como, hoy por hoy, el derecho
internacional no se interpreta en función del
Estado soberano sino de la comunidad
internacional. "Los órdenes internos de las
Naciones ya no son absolutos, todos miran a
lograr el bien común al seno de sus propios
Estados". El sometimiento de los Estados a
tribunales internacionales se enmarca dentro de
la "praxis" internacional antes descrita y, por
ello, no presenta tacha alguna de
constitucionalidad.
                         

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Local Adm. Remedies

• The State requires at least 12 months to avail
  itself the necessary information and coordinate
  with all agencies involved
• a mutually satisfactory solution with the
  investor, or
• prepare its defense strategy .

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FRIVOLOUS CLAIMS
The Tribunal shall consider whether the claim is
frivolous, and shall provide the disputing
parties a reasonable opportunity for comments. In
the event of a frivolous claim the Tribunal shall
award costs against the claimant.
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PROCEDURAL PROVISIONS
Colombia's BIT model does not include an umbrella
clause
As a matter of policy, in its BITs Colombia
negotiates treaty provisions and not contractual
provisions. However, nothing precludes its
Agencies to include recourse to international
arbitration as an appropriate means to settle
disputes that arise under specific contracts they
enter into with foreign investors.

• ICSID case SGS v. Pakistan
• Article 11 would amount to incorporating by
  reference an unlimited number of State contracts,
  as well as other municipal law instruments
  setting out State commitments including
  unilateral commitments to an investor of the
  other Contracting Party. Any
• alleged violation of those contracts and other
  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 SGSs claims that Pakistan
  breached the PSI Agreement or over Pakistans
  claims that SGS breached the PSI Agreement.

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