What is the prevailing attitude towards foreign investment?
Colombia openly markets itself as a country that provides investors with an attractive business environment that promotes foreign investment. Over the past years, the Colombian congress has enacted a series of laws aimed at promoting investment through investment incentives in the film, audio-visual, tourism, research, technology development and innovation sectors. Furthermore, Colombia has entered into a series of bilateral investment agreements (as described in question 5) that place the promotion of foreign investment and protection under international standards.
In recent years, several investors have brought claims against Colombia under various investment protection treaties. To date, the Colombian government is facing 11 international arbitration proceedings initiated by major companies and investors seeking compensation for damages under bilateral or multilateral investment treaties. Claimants form some of the most significant sectors of the Colombian economy (such as hydrocarbons, mining and telecommunications).
Although Colombia remains largely dependent on extractive industries, the fall of oil prices brought about the diversification of business opportunities. The Central Bank reported that at the close of 2018, out of US$11.2 billion that entered the country through foreign direct investment, approximately US$4.2 billion was invested in the oil and mining sectors, representing about 70 per cent of foreign direct investment. Other significant sectors include the water, gas and electricity, business and financial services, transportation, manufacturing, communications and storage sectors. A noteworthy increase in the food, hotel and leisure sector was reported with a total foreign direct investment of US$1.1 billion, which represents a 12 per cent increase compared to 2017.
What are the main sectors for foreign investment in the state?
The Central Bank recently reported that, as of 2018, the main sectors attracting foreign investment, with a total of US$11.2 billion, are:
- oil (US$2.5 billion);
- mining (US$1.7 billion);
- trade and logistics services (US$1.5 billion);
- tourism (US$1.1 billion);
- manufacturing (US$1.1 billion);
- agriculture (US$0.2 billion);
- gas, water and electricity (US$0.1 billion);
- construction (US$0.5 billion);
- financial services (US$2.2 billion); and
- other services (US$0.3 billion).
For the first quarter of 2019, foreign investment increased slightly with a total of US$3.4 billion, compared with US$2.0 billion during the same period in 2018.
According to the Central Bank, the following countries were Colombia’s main foreign investors during 2018:
- United States (US$2.5 billion);
- Spain (US$1.4 billion);
- United Kingdom (US$1.3 billion); and
- Panama (US$1.2 billion).
Is there a net inflow or outflow of foreign direct investment?
Foreign direct investment in Colombia showed a 20.4 per cent decrease in 2018 compared with 2017, with a net inflow of US$11.2 billion in 2018, positioning the country as the third host economy in the region. Nevertheless, in contrast to 2017 when the inflow of foreign direct investment decreased by 18.3. per cent, its outflow of foreign direct investment in 2018 exceeded that of 2017 by 38.8 per cent, increasing from US$3.7 billion in 2017 to US$5.1 billion in 2018.Investment agreement legislation
Describe domestic legislation governing investment agreements with the state or state-owned entities.
There is no legislation governing investment agreements between foreign investors and the state or state-owned entities.
International legal obligationsInvestment treaties
Identify and give brief details of the bilateral or multilateral investment treaties to which the state is a party, also indicating whether they are in force.
To date, Colombia is a party to eight BITs and eight free trade agreements (FTAs that include investment chapters), for a total of 16 international investment agreements (IIAs) currently in force.
Entry into force
Chapter XVII of the FTA G2 (Mexico and Colombia)
Law No. 172 of 1994
Decision of constitutionality C-178 of 1995.
Law No. 279 of 1996 (Modifying Protocol Law No. 801 of 2003)
Decisions of constitutionality C-008 of 1997 and C-961 of 2003.
Chapter IX of the Chile FTA
Law No. 1,189 of 2008
Decision of constitutionality C-031 of 2009.
Law No. 1,069 of 2006
Decision of constitutionality C-309 of 2007.
Chapter XII of the Northern Triangle FTA (Guatemala, El Salvador and Honduras)
Guatemala: 2009 El Salvador: 2010 Honduras: 2010
Law No. 1,241 of 2008
Decision of constitutionality C-446 of 2009.
Law No. 1,198 of 2008
Decision of constitutionality C-150 of 2009.
BIT Peru (broadened)
Law No. 1,342 of 2009
Decision of constitutionality C-377 of 2010.
Chapter V of the EFTA FTA
Switzerland and Liechtenstein since 1 July 2011. Norway since 1 September 2014. Iceland since 1 October 2014.
Law No. 1,372 of 2010
Decision of constitutionality C-941 of 2010.
Chapter VIII of the Canadian FTA
Law No. 1,363 of 2009
Decision of constitutionality C-608 of 2010.
Chapter X of the United States FTA
Law No. 1143 of 2007 (Protocol of amendment Law 1,166 of 2007)
Decision of constitutionality C-750 and 751 of 2008.
Law No. 1,462 of 2011
Decision of constitutionality C-199 of 2012.
Law No. 1,449 of 2011
Decision of constitutionality C-123 of 2012.
BIT United Kingdom
Law No. 1,464 of 2011
Decision of constitutionality C-169 of 2012.
Law No. 1,720 of 2014
Decision of Constitutionality C-286 of 2015.
FTA European Union (not including the countries that have ratified FTAs with Colombia)
Provisional application since July 2013. Currently stayed by an order of the Constitutional Court.
Law No. 1,669 of 2013
Decision of constitutionality C-335 of 2014.
Restricted application due to Constitutional Court decision.
Law No. 1,747 of 2014
Decision of constitutionality C-184 of 2016.
If applicable, indicate whether the bilateral or multilateral investment treaties to which the state is a party extend to overseas territories.
Has the state amended or entered into additional protocols affecting bilateral or multilateral investment treaties to which it is a party?
Has the state unilaterally terminated any bilateral or multilateral investment treaty to which it is a party?
Has the state entered into multiple bilateral or multilateral investment treaties with overlapping membership?
Is the state party to the ICSID Convention?
Yes. On 18 May 1993, Colombia signed the ICSID Convention, followed by its ratification on 15 July 1997 and entering into force on 14 August 1997.Mauritius Convention
Is the state a party to the UN Convention on Transparency in Treaty-based Investor-State Arbitration (Mauritius Convention)?
No.Investment treaty programme
Does the state have an investment treaty programme?
The Colombian investment treaty programme was first implemented in 2001 by way of National Council of Economic and Social Policy (CONPES) Document No. 3135, which established policy guidelines for the negotiation of IIAs.
Regulation of inbound foreign investmentGovernment investment promotion programmes
Does the state have a foreign investment promotion programme?
There is no foreign investment promotion programme. However, the Colombian government implements foreign investment promotion through its national development plans. One of the pillars of the current national development plan is that the promotion of foreign investment is particularly in sectors other than mining and energy. The current national development plan for 2019 was enacted Into Law No. 1955 of 2019.Applicable domestic laws
Identify the domestic laws that apply to foreign investors and foreign investment, including any requirements of admission or registration of investments.
To date, the main laws applicable to foreign investors and foreign investment are as follows:
- Law No. 9 of 1991 (on foreign exchange);
- Law No. 31 of 1991 (on the nature and functions of the Central Bank);
- Decree No. 1,735 of 1993 (on foreign exchange regulations);
- Decree No. 2,080 of 2000, Incorporated into Decree 1068 of 2015 and later amended by Decree 119 of 2017 (general regime of foreign investment in Colombia and of Colombian investment abroad);
- Decree No. 2245 of 2011 (on the penalty regime and exchange administrative proceeding applicable by the foreign exchange authority);
- Decree No. 1939 of 2013 (on how to address investment-related disputes);
- Resolution No. 305 of 2014 of the Ministry of Commerce, Industry and Tourism (establishing the proceedings to address international invested-related disputes);
- External Resolution No. 8 of 2000 of the Board of Directors of the Central Bank and its amendments (complements the Foreign Exchange Regime);
- Regulatory Circular DCIN-83 (Chapter 7) (updated on 25 May 2018); and
- Resolution No. 054 of 2018 of the National Tax and Customs Direction - DIAN (presentation of the Income Declaration for Change of the Ownership of the Foreign Investment).
In addition, the Constitution protects private ownership (article 58) and expressly indicates that investment in Colombia receives the same treatment as an investment made by Colombian nationals (article 100).Relevant regulatory agency
Identify the state agency that regulates and promotes inbound foreign investment.
Although not a government agency per se, Procolombia is the government entity that promotes international tourism, foreign investment and non-traditional exports in Colombia. Procolombia assists foreign companies and investors that want to participate in the Colombian market and addresses specific needs, such as identifying contacts in the public and private sectors, organising visit agendas, and accompanying companies during visits to Colombia. All services are free of charge and confidential.Relevant dispute agency
Identify the state agency that must be served with process in a dispute with a foreign investor.
The Directorate of Foreign Investment and Services at the Ministry of Commerce, Industry and Tourism is the entity that is usually designated in Colombian IIAs as the entity to be served in foreign investment disputes.
Investment treaty practiceModel BIT
Does the state have a model BIT?
Colombia has adopted three model BITs in the past 17 years, which were published in 2003, 2006 and 2008. The latest model BIT was published in 2018.
The current BIT (2017) can be found at: www.mincit.gov.co/temas-interes/documentos/aai-modelo-2017.aspx.
The main advantages are:
- a more detailed definition of investment, excluding procedural matters from the most favoured nation clause;
- it includes a narrower definition of protected investment;
- it confers binding force to the interpretative declarations issued by the treaty parties;
- it includes a group of clauses that reaffirm the right of the state to regulate in matters of public policy and general interest; and
- it includes clauses advocating greater guarantees of regulatory powers.
Does the state have a central repository of treaty preparatory materials? Are such materials publicly available?
The Colombian Ministry of Foreign Affairs has a centralised database in which all treaties concluded by Colombia are stored and publicly available. The Ministry’s library in relation to international treaties provides information such as the date the treaty was concluded, the place where the treaty was adopted, ratification and date of entry into force (see apw.cancilleria.gov.co/tratados/SitePages/Menu.aspx). In relation to BITs and FTAs, the Ministry of Commerce, Industry and Tourism has established a website containing information in relation to all preparatory materials of each treaty (see: www.tlc.gov.co/).Scope and coverage
What is the typical scope of coverage of investment treaties?
Colombia’s model BIT intends to accord protection to investors under the standards of international law, while enabling the state to perform an appropriate defence in case of investor-state arbitration.
Colombia’s foreign investment system comprises direct and portfolio investments from individuals, legal entities or trusts.
Colombia’s BITs and FTAs usually employ an inclusive broad and comprehensive definition for investment, which typically refers and covers ‘every type of asset’ with the generally accepted characteristics of investments such as commitment of capital or other resources, expectation of gain or profit and investor’s assumption of risk.Protections
What substantive protections are typically available?
Pursuant to the Constitution, foreign investment is subject to the same treatment and benefits of national investment. The substantive protection that is typically included in investment treaties to which Colombia is a party are as follows:
- most favoured nation treatment;
- national treatment;
- fair and equitable treatment;
- full protection and security;
- prohibition of expropriation without compensation;
- guarantee of free transfers related to investments; and
- compensation for losses.
What are the most commonly used dispute resolution options for investment disputes between foreign investors and your state?
The most common dispute resolution options for investment disputes are ICSID, United Nations Commission on International Trade Law and ICSID’s additional facility rules.Confidentiality
Does the state have an established practice of requiring confidentiality in investment arbitration?
Does the state have an investment insurance agency or programme?
Investment arbitration historyNumber of arbitrations
How many known investment treaty arbitrations has the state been involved in?
Colombia is currently involved in 11 investment treaty arbitrations, all of which are still pending.
The latest request for arbitration was notified by Glencore International AG, C I Prodeco SA, and Sociedad Portuaria Puerto Nuevo SA on 9 July 2019.
On 27 August 2019, an Arbitration Tribunal under ICSID rules rendered an award whereby it ordered Colombia to repay a US$19 million fine it levied on Glencore’s coal mining subsidiary Prodeco (ARB/16/6) as a result of a breach to the Colombia-Swiss Federation BIT. This is the first award rendered by an international investment arbitration tribunal against the Republic of Colombia.Industries and sectors
Do the investment arbitrations involving the state usually concern specific industries or investment sectors?
Mining, oil and gas, and telecommunications are the prevalent sectors in investor claims. Other sectors include a regulatory step in intervention to an electric company and a bank. The most recent investment arbitration that was notified to the Colombian state concerns a construction company and a construction project in Medellin Angel Samuel Seda and others v Republic of Colombia (ICSID Case No. ARB/19/6).Selecting arbitrator
Does the state have a history of using default mechanisms for appointment of arbitral tribunals or does the state have a history of appointing specific arbitrators?
To date Colombia has appointed its arbitrators to the extent permitted by applicable rules.Defence
Does the state typically defend itself against investment claims? Give details of the state’s internal counsel for investment disputes.
In accordance with Colombian law, the defence of the state’s interests in investment-related disputes corresponds to the Ministry of Commerce, Industry and Tourism. The National Legal Agency for the Defence of the State assists in defending the state. Colombia has retained external counsel for its representation before different investment-related disputes.
Enforcement of awards against the stateEnforcement agreements
Is the state party to any international agreements regarding enforcement, such as the 1958 UN Convention on the Recognition and Enforcement of Foreign Arbitral Awards?
Colombia is a party to the following international agreements:
- the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 (New York Convention);
- the Inter-American Convention on International Commercial Arbitration 1975 (Panama Convention); and
- the Inter-American Convention on Extraterritorial Validity of Foreign Judgments and Arbitral Awards 1979 (Montevideo Convention).
Does the state usually comply voluntarily with investment treaty awards rendered against it?
To date, Colombia’s only adverse award has not yet become due.Unfavourable awards
If not, does the state appeal to its domestic courts or the courts where the arbitration was seated against unfavourable awards?
Not applicable.Provisions hindering enforcement
Give details of any domestic legal provisions that may hinder the enforcement of awards against the state within its territory.
There are no domestic legal provisions in Colombia that contain enforcement rules that are stricter than those contained in applicable international treaties.
Update and trendsKey developments of the past year
Are there any emerging trends or hot topics in your jurisdiction?Key developments of the past year32 Are there any emerging trends or hot topics in your jurisdiction?
In June 2019, Colombia’s Constitutional Court issued a decision regarding the BIT between Colombia and France, which was concluded on 10 July 2014. The court’s decision, which makes part of the constitutional control that the court exerts over laws enacted for treaties entered into by the Colombian state, decided that the BIT complied with the Constitution. However, the court considered that some of the provisions were contrary to the Constitution and therefore conditioned their ratification upon the adoption of a joint interpretative declaration by the parties to the treaty.
The court’s Decision C-252 of 2019 released on 6 June 2019 indicated that for this specific BIT, there was a need for a joint interpretative declaration by the state regarding several provisions including: national treatment, most favoured nation, fair and equitable treatment and expropriation.
Also on 6 June 2019, Colombia’s Constitutional Court issued a decision regarding the BIT between Colombia and Israel, which was concluded on 13 November 2015. The court’s Decision C-254 of 2019 released on 6 June 2019 outlined the court’s analysis of the treaty, which included among others, the definition of ‘territory’ included in the BIT. As indicated in C-254, the court analysed the scope of the BIT’s definition of ‘territory’ and the consequences of such definition. The court concluded that a BIT as a commercial and trade instrument could not be interpreted to have effect on territorial boundaries.
Although Decision C-254 of 2019 considered that the BIT generally complied with the Constitution, the court also considered that some of the provisions were contrary to the Constitution and therefore conditioned their ratification upon the adoption of a joint interpretative declaration by the parties regarding expropriation and most-favoured nation clauses.