International investment arbitration – also known as investment treaty arbitration or investorState arbitration – is a procedure whereby foreign investors may seek a binding adjudication of claims against host States that have either violated investment protection treaty obligations or, in some circumstances, breached their contractual commitments or their national foreign investment law. The countries of Latin America are party to numerous bilateral and multilateral investment treaties which are intended to promote investment by ensuring fair treatment of foreign investors and which permit arbitration of investor claims before the International Centre for Settlement of Investment Disputes (ICSID) or similar fora. In 2014, ongoing recessions in Argentina, Brazil and Venezuela have contributed to sluggish economic growth in Latin America, due in part to weak local currencies and persistently low commodity prices – in particular, the downward trend of crude oil prices that started in July 2014. This trend was somewhat mitigated by the continued moderate growth of economic activity in Mexico, Colombia and Chile. Despite economic challenges, the region enjoys a steadily rising middle class, favorable demographics and stronger public and private institutions that are prepared to pursue growth strategies during this period of tepid economic performance. The number of new investment arbitrations in Latin America in 2014 rebounded slightly from a five-year low in 2013, though it did not reach the annual double-digit levels seen from 2010-2012. The new disputes filed in 2014 were overwhelmingly concentrated in the oil, gas and mining industry, with disputes in the gaming industry and manufacturing making up the balance. Reflecting trade and investment patterns, countries in the region have concluded at least 644 investment treaties (including bilateral investment treaties, free trade agreements and other treaties containing investment-related provisions). Approximately 21 percent of the region’s investment treaties are intraregional (i.e., concluded between only Latin American countries). For purposes of this review, Latin America includes the Spanish and Portuguese-speaking countries of the Americas, as well as Caribbean countries. Investment Arbitration in the Region1 A total of 172 ICSID cases have involved Latin American parties as claimant investors, respondent States or both, with the first arbitration brought against a Latin American Elevator Speeches International Investment Arbitration in Latin America: Year in Review 2014 INTERNATIONAL ARBITRATION TEAM For questions about international investment arbitration, please contact a member of our International Arbitration Team, or the authors of this review: Authors: Emma Lindsay Counsel, New York +1 212 541 2121 firstname.lastname@example.org Giovanni Angles Associate, Miami +1 786 322 7374 email@example.com 1 This review considers only investment arbitrations brought under the auspices of ICSID, which constitute the majority of investment arbitrations in the region. PAGE 2 bryancave.com | A Global Law Firm BRYAN CAVE INTERNATIONAL ARBITRATION TEAM country – by a United States investor against Trinidad and Tobago – filed in 1983, and the first arbitration brought by a Latin American investor – by a Costa Rican investor against Costa Rica under a contract – filed in 1996. Of the 172 cases, three involve Latin American investors (from Argentina, the Bahamas and Barbados) filing claims against States from outside the region (Spain, Niger and Bangladesh respectively). Sixty-seven cases were pending in 2014. Of the investment arbitrations against Latin American countries pending in 2014, investors from the United States have brought the greatest number of claims, followed by investors from Spain, France, the Netherlands and the United Kingdom. Historically, Argentina and Chile are also among the home countries of investors with the most claims filed. Top Nationalities of Investors with ICSID Arbitrations in Latin America PAGE 3 bryancave.com | A Global Law Firm BRYAN CAVE INTERNATIONAL ARBITRATION TEAM Argentina and Venezuela have faced more investment claims than the rest of Latin America combined. The Dominican Republic faced its first investment claim at ICSID in 2014. Latin American Countries Facing Investment Claims PAGE 4 bryancave.com | A Global Law Firm BRYAN CAVE INTERNATIONAL ARBITRATION TEAM The basis for arbitral jurisdiction in most cases has been an investment treaty (either a bilateral investment treaty or a multilateral free trade agreement such as NAFTA or CAFTA-DR), although claims also have been made pursuant to contracts and, less frequently, national investment laws. In some cases, investors have claimed more than one basis for arbitral jurisdiction. The number of investment arbitrations initiated in 2014 increased from a five-year low in 2013, but has not rebounded to the double-digit totals of 2010-2012. Historically, investment disputes in the region have arisen most frequently in the oil, gas and mining industry, with the electric power, other energy and transportation industries also giving rise to a significant number of disputes. Of the disputes pending in 2014, more than a third involved oil, gas and mining, including 71 percent of all new disputes filed in 2014. 14 12 10 8 6 4 2 0 2010 2011 2012 2013 2014 Total Cases Initiated Per Year Cases Initiated Per Year Instrument Invoked to Establish ICSID Jurisdiction Inner Circle = Pending Cases Outer Circle = Total Cases Investment Cases by Industry Inner Circle = Pending Cases Outer Circle = Total Cases Finance Tourism PAGE 5 bryancave.com | A Global Law Firm BRYAN CAVE INTERNATIONAL ARBITRATION TEAM Investment Treaties Involving Latin American Countries Almost 20 percent of the nearly 3,300 investment treaties currently in existence involve Latin American signatories. Chile has signed the most investment treaties, followed by Argentina and Peru. Of the 644 investment treaties signed by Latin American countries, 138 are treaties signed between or among only Latin American countries. The United States has signed 22 investment treaties with Latin American countries, 12 of which are bilateral investment treaties that permit investor-State arbitration (the treaties between the United States and Argentina, Bolivia, Ecuador, El Salvador, Grenada, Haiti, Honduras, Jamaica, Nicaragua, Panama, Trinidad and Tobago and Uruguay). Four investment treaties involving Latin American countries were signed in 2014. They include two bilateral investment treaties signed by Colombia with Turkey and France respectively, a free trade agreement between Mexico and Panama, and the Protocol Pacific Alliance among Chile, Colombia, Mexico and Peru. Investor-State arbitration will be available under all four treaties following their entry into force. PAGE 6 bryancave.com | A Global Law Firm BRYAN CAVE INTERNATIONAL ARBITRATION TEAM Other Developments in 2014 u In February 2014, the Spanish energy company Repsol announced a US$5 billion settlement with Argentina of a two-year dispute over the nationalization of the oil and gas operator YPF. The settlement, comprising the issuance of Argentine sovereign bonds to Repsol, continues a trend following Paraguay’s settlement of a long-running ICSID claim by issuing approximately US$21 million in treasury bonds to French investors in 2013. u Two new free trade agreements involving countries in the region entered into force in October 2014, the agreement between Canada and Honduras (on October 1, 2014) and the agreement between Chile and Hong Kong (on October 9, 2014). The Canada-Honduras agreement permits investor-State arbitration. Chile and Hong Kong have agreed to negotiate a further, more comprehensive agreement on investment promotion and protection to enhance investment flows between the two economies. u Following the denunciation of the ICSID Convention by Bolivia, Ecuador and Venezuela, they and other Latin American countries dissatisfied with certain ICSID awards and with the framework of the system itself, continued to discuss the establishment of a regional investment dispute resolution system under the auspices of the Union of South American Nations (UNASUR) as an alternative to ICSID. u Brazil continued its work on a new model bilateral investment treaty. The country signed 14 bilateral investment treaties in the 1990s but did not ratify them due to concerns regarding investor-State arbitration. u Negotiations for the Trans-Pacific Partnership (involving Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States and Vietnam) continued through 2014 and beyond. Critical Times to Consult Counsel INVESTORS: u At the outset – when structuring an investment and negotiating project contracts u As soon as difficulties arise – when facing operational, regulatory or other issues in the host country u In discussions with the host country – when trying to resolve difficulties amicably u Before commencing a claim – when deciding whether and how to make a claim against the host country u In post-award proceedings – when seeking to collect on an award or reach a settlement with the host country u In getting the business relationship back on track – when moving forward in the wake of a dispute STATES: u At the outset – when negotiating and drafting investment treaties and national investment laws u In the pre-investment process – when inviting and accepting foreign investment u In the investment phase – when negotiating project contracts u As soon as notice of a dispute is given – when consulting with an investor about a potential investment arbitration claim u Upon receipt of a claim – when formulating an arbitral strategy in the initial stages of a dispute u In implementing or challenging an award – when considering next steps after the arbitration concludes PAGE 7 bryancave.com | A Global Law Firm BRYAN CAVE INTERNATIONAL ARBITRATION TEAM Authors Emma Lindsay Counsel, New York +1 212 541 2121 firstname.lastname@example.org Giovanni Angles Associate, Miami +1 786 322 7374 email@example.com Additional Contacts Pedro Martinez-Fraga Partner, Miami +1 786 322 7373 firstname.lastname@example.org Co-Leader of the International Arbitration Team Rodney Page Partner, Washington, D.C. +1 202 508 6002 email@example.com Co-Leader of the International Arbitration Team Constantin Achillas Partner, Paris +33 1 44 17 77 34 firstname.lastname@example.org Nigel Binnersley Partner, Hong Kong +852 3588 9110 email@example.com Mathew Rea Partner, London +44 (0)20 3207 1203 firstname.lastname@example.org About Our Team Bryan Cave’s International Arbitration Team provides a comprehensive service to clients around the world embracing all aspects of international dispute resolution. We handle a broad range of matters, including international commercial and investment arbitration, public international law and complex commercial litigation, for a wide variety of business, financial, institutional and individual clients, including publicly-held multinational corporations, large and mid-sized privately-held companies, partnerships and emerging enterprises. We also advise sovereign clients with regard to their particular complex legal, regulatory and commercial challenges. Our team features many practitioners who serve as both counsel and arbitrator and draws on the full range of subject-matter and industry experience across the firm, including in construction, energy, finance, manufacturing, mining and natural resources, pharmaceuticals, technology, telecommunications, tourism, transportation and many other sectors. Combining the common law and civil law traditions, members of our team are admitted to practice in many jurisdictions across the globe and speak a variety of languages. In addition, we work with an established network of law firm “friends” and colleagues in places where we do not have a direct presence, ensuring our strong market knowledge and quality of service on matters worldwide. This review is published for the clients and friends of Bryan Cave LLP. The statements made in this publication are for general educational purposes only. Information contained herein is not to be considered as legal advice or a legal opinion on any specific facts or circumstances. You are urged to seek the advice of your legal counsel if you have any specific questions as to the application of the law. The receipt of this publication does not create an attorney-client relationship between you and Bryan Cave LLP. © 2015 Bryan Cave LLP. All Rights Reserved.