Ministerio de Comercio,
Industria y Turismo
República de Colombia
THE COLOMBIAN BIT MODEL:
A Balanced Treaty with NAFTA, OECD and Colombian
Constitutional Elements
Twelfth Investment Treaty Forum Public Conference
Investment Treaties at 50: Host State Perspectives
JOSE ANTONIO RIVAS
Director of Foreign Investment and Services
London, May 2009
INDEX
Ministerio de Comercio,
Industria y Turismo
República de Colombia
1. Colombian Model BIT: Provisions to prevent i-S disputes
a) Substantive provisions
b) State Defense Clauses
2. Government Strengthening for i-S Disputes.
PROVISIONS TO PREVENT i-S DISPUTES:
The Colombian BIT Model
Ministerio de Comercio,
Industria y Turismo
República de Colombia
ESTRATEGIC DEFENCES TO
ARBITRATION
What sorts of provisions are there in
current
International
Investment
Agreements that would allow states an
appropriate defence?
PROVISIONS TO PREVENT I-S DISPUTES:
The Colombian BIT Model
Ministerio de Comercio,
Industria y Turismo
República de Colombia
I. SUBSTANTIVE PROVISIONS OF MUTUAL
COMMITMENT
Greater precision of certain substantive clauses enhances 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 Favored Nation Treatment & National Treatment
Free Transfers
Expropriation and Compensation
Investment & Environment
PROVISIONS TO PREVENT I-S DISPUTES:
The Colombian BIT Model
Ministerio de Comercio,
Industria y Turismo
República de Colombia
II. PROVISIONS ALLOWING STATES AN
APPROPRIATE DEFENCE:
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:
 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
Ministerio de Comercio,
Industria y Turismo
República de Colombia
2. GOVERNMENT STRENGTHENING
IN INVESTOR – STATE DISPUTES
GENERAL CONSIDERATIONS
Ministerio de Comercio,
Industria y Turismo
República de Colombia
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 ?
Criterion: The model of defense should lead to an institutional strengthening of its
defense 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.
GOVERNMENT STRENGHTNING FOR IRD
ADMINISTRATION
The Colombian Strategy
República de Colombia
Lead Agency
INVESTOR
I
Ministerio de Comercio,
Industria y Turismo
MCIT
Notification of a dispute –NoD-
Involved Agency
NoD
There must be a Lead Agency
centralizing notifications and
coordinating any response.
NoD
Inter-agency Committee
Involved Agency
II
III
CONSULTATIONS INVESTOR – STATE:
Investment related
Agency
Investment related
Agency
INVESTOR
MCIT
Coordination
Other Relevant
Agency
Claimant’s
submissions
Lead Agency must be in charge of
coordinating the rest of
governmental agencies involved in
the Dispute.
Lead
Agency
Investment related
Agency
INVESTOR
KNOWING THE INVESTMENT
RELATED DISPUTE (IRD) :
Consultations
ARBITRAL PROCEEDINGS
Dialogue
ARBITRATION
FORUM
It also must be the front desk for
contacts between the investor and
the administration.
LEAD
AGENCY
MCIT
State’s submissions
INTER-AGENCY
COMMITEE
Coordination
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
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.
Ministerio de Comercio,
Industria y Turismo
República de Colombia
INVESTOR – STATE
ARBITRAL PROCEEDINGS
CONSULTATIONS :
Even during the
arbitration, the above
stated roles of the
Leading Agency must
be maintained.
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.
Any non-judicial
solution must be
approved by an interagency committee.
The LA coordinates the
State’s defense strategy.
PROVISIONS TO PREVENT I-S DISPUTES:
The Colombian BIT Model
Ministerio de Comercio,
Industria y Turismo
República de Colombia
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.
Ministerio de Comercio,
Industria y Turismo
República de Colombia
THANK YOU!
Ministry of Trade, Industry and Tourism
www.mincomercio.gov.co
SUBSTANTIVE PROVISIONS
Ministerio de Comercio,
Industria y Turismo
República de 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
25case
of ICSID
sets forth
specific elements
 ICSID
FedaxConvention
N.V v. Venezuela.
Paragraph
43:
concerning
the Jurisdiction
of the Center:
“The basic features
of an investment
have been described as involving
•aExistence
of an investment
certain duration,
a certain regularity of profit and return, assumption
•ofThe
risk,Parties
a substantial commitment and a significance for the host State’s
•development.”
Existence of a dispute
• The consent of the Parties
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SUBSTANTIVE PROVISIONS
Ministerio de Comercio,
Industria y Turismo
República de Colombia
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:
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. It does not impair the exercise of the State’s regulatory powers in accordance with
due process of 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
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investors.
SUBSTANTIVE PROVISIONS
Ministerio de Comercio,
Industria y Turismo
República de Colombia
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
Ministerio de Comercio,
Industria y Turismo
República de 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
In Colombia the Central Bank has constitutional powers to preserve the stability of
Colombia´s 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 Colombia´s BIT Model and its concluded BITs (i.e. Belgium – Colombia BIT), are
similar to those recently referred to in the European Court of Justice’s 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
Ministerio de Comercio,
Industria y Turismo
República de Colombia
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
Ministerio de Comercio,
Industria y Turismo
República de 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-
Rejection
of the
Maffezini Doctrine in the Colombian BIT
-Maffezini
v. SpainModel:
… “As the Tribunal has established, the BIT between the
TheArgentine
decision Republic
on jurisdiction
in the
Maffeziniofv. Spain,
Spain controversy
and the
Kingdom
does not
made
it clearthe
forprovisions
States negotiating
BITs
if they
do not
intend
specify
for which
thethat,
Most
Favored
Nation
extending
MFN For
clause
disputeand
settlement,
certainty, an
Clause the
applies.
thistoreason,
finding noforfundamental
express
carveofout
is required.
question
public
policy, the Tribunal has decided to extend
the MFN clause to the procedural aspects of the Treaty”…
Colombia's BIT clarifies that the MFN clause ONLY covers
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substantive matters
SUBSTANTIVE PROVISIONS
Ministerio de Comercio,
Industria y Turismo
República de Colombia
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
case Feldman
v. Mexico.
Paragraph
112:
  ICSID
Non-discriminatory
measures
of a Party that
are designed
and applied for public purposes or social
do not constitute
(IE) regulatory
-such as public
health,that
and environment
protection-.
“To interest
paraphrase
Azinian, indirect
not allexpropriation
government
activity
makes it difficult
or

The determination of whether a measure of a Party constitute IE requires a case-by-case, fact-based
impossible
for an investor to carry out a particular business, change in the law or change in
inquiry considering:
i)
ii)
the The
application
existing
laws
that makes
it uneconomical
to expectations
continue concerning
a particular
scope of the of
measure
and their
interference
on the reasonable
and distinguishable
the
investment
and;expropriation….”
business,
is an
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
Ministerio de Comercio,
Industria y Turismo
República de Colombia
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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Ministerio de Comercio,
Industria y Turismo
PROCEDURAL PROVISIONS
República de Colombia
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-
3. INTERNATIONAL ARBITRATION
1. LOCAL COURTS
2. NATIONAL
ARBITRATION
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Reasonable time for the
Government to respond to claims
1
República de Colombia
Notice of
intent
Notice of
dispute
0
Ministerio de Comercio,
Industria y Turismo
2
3
4
5
6
7
8
Request of
arbitration
9
10
11
12
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 .
FRIVOLOUS CLAIMS
Ministerio de Comercio,
Industria y Turismo
República de Colombia
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.
PROCEDURAL PROVISIONS
Ministerio de Comercio,
Industria y Turismo
República de Colombia
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.
 ICSID case SGS v. Pakistan:
However,
nothing
its Agenciesbyto reference
include recourse
to international
arbitration
…”Article 11
would precludes
amount to incorporating
an unlimited
number of State
contracts,as
asan
well as other
appropriate
to settle
disputes
arise under
specific
contracts
they enter
with of the other
municipal lawmeans
instruments
setting
out Statethat
commitments
including
unilateral
commitments
to into
an investor
foreign
investors.
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 SGS’s claims that Pakistan
breached the PSI Agreement or over Pakistan’s claims that SGS breached the PSI Agreement.”