A BRIEF PANORAMA OF FOREIGN INVESTMENT IN COLOMBIA AND

ARBITRATION CLAIMS DERIVED FROM INVESTMENT.

Sergio Andrés Acevedo Lian
The attitude of Colombia towards foreign investment
In the decades before the 1990’s, Colombian economics were subject of a prevailing
protectionism by the government by imposing controls and restrictions. It wasn´t until the
early years of the reviewed decade, that the country witnessed economical transformations
that helped to provide a better climate for investing such as national treatment for foreign
investors, lifted some hard wall barriers on the remittance of capitals and profits, and
allowing some overseas investment in some areas. Furthermore the 1991 Constitution, laid
the basis to promote this type of investment by allowing some regulatory changes,
including the Constitution itself, and conceding some agreements focused on promoting
and protecting this kind of investment, resulting in a significant increase in foreign capital
in Colombia.
One of the most relevant changes that derived from these reforms, was the Law 9 of 1991
that endowed the National Economic and Social Policy Council, known in Colombia as
CONPES, which serves as a government consulting agency that issues regulations in
foreign investment matters. This agency issued Resolution 51 which provided the
framework for foreign investment in the country. Foreign investment, now has stable
regulations that have been developed by a series of laws and decrees, and specific
resolutions that provide protection and establishes guarantees not only for the investment
operation but also its origin and the destination that the foreign capital is due to be directed.
Now these legal instruments have created a set of principles of equality in treatment,
universality, automaticity and stability, which result in a friendly and favorable
environment for the investors.

The main difficulties for foreign investment and how the government has
mitigated this issue
According to Santander Trade Portal the weak points that are detrimental to foreign
investment in Colombia are the following:

1. Relatively indiscriminate application of intellectual property rights

2. Corruption characterized by a lack of transparency in many calls for tenders
3. A large scale informal sector
4. An subversive economy and security problems (guerrillas and the long fight against
drug trafficking)

It also adds, that violence still remains the main obstacle in the country’s development,
however a peace accord that was signed with the FARC rebel group, should help
progressively to improve this situation. Other factor that undermines the investment is the
Colombian economy, which is not very varied on one hand because it depends highly on
the commodity prices and in the other hand it is very sensitive on the United States
economic situation, this because the US is the country’s main trading partner.

There is another factor despite the protection that the investor is given as we saw before,
Colombia faces according to Getting The Deal is that about 12 international arbitration
proceedings have been initiated by major companies and investors that are seeking
compensations under the bilateral and multilateral investment treaties signed by Colombia.
These claimants form a part of a significant sector of Colombian economy such as
telecommunications, mining and hydrocarbons.

This forced the government to establish a state policy, which was the CONPES Document
3684 that aimed to the "Strengthening of the State's strategy for the prevention and
attention of international investment disputes”. This created the framework to strengthen
the State in its defense capacity to provide an early prevention and attention of the
controversies between the foreign investor and the Colombian state under the BIT. The
main goal of this policy is to adapt the existing institutional scheme in order to propose
some adjustments to the prevention and attention of the possible international investment
controversies.

Brief panorama of arbitration claims derived from foreign investment

As we saw in the preceding considerations, Colombia did not had a strong policy in
arbitration claims before the CONPES 3684, mostly because it wasn’t prepared to prevent
and solve efficiently the controversies derived from treaties, or the compromises that were
established in the investment contracts. This document integrated prevention measures to
public servants about the scope of the obligations created via BIT’s and the creation of a
central institution designed to conduit communications between investors and the State,
which in turn manages international investment disputes, this because the ignorance of the
same state employees of the obligations contained in the BIT’s and how omitting one of
these may create a controversy by breaking an international obligation, forcing the
government to capacitate their employees on international treaties and how to identify risks
in order prevent disputes and decrease the risk of claims for the actions of any State body.
Most of the arbitration claims share a common denominator and it’s that Colombia has
breached obligations that were in a treaty or in an accord with the foreign investors, and
those claims if they are awarded, they are very high in monetary terms and Colombia’s
finances can’t afford to pay high amounts of money as compensation for breaching an
obligation.
To ease this problem, in my opinion it is important to subscribe treaties and accords with
other nations or foreign investors, but we have to be very careful of what obligations are
consigned in those agreements in order to be prepared if a claim is presented and settle not
with leonine burdens in case of an arbitral award but in a formula that benefits not only the
country but also the investor in an amicable way that may alleviate that load.