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 2015, the ongoing recessions in Brazil and Argentina and the economic and political upheaval in Venezuela exacerbated the stagnant economic growth in Latin America, and also dragged down some of this decade’s better performing regional economies, including Colombia and Chile. The ongoing low commodity prices for precious metals and raw materials and the downward trend of crude oil prices that started in July 2014 have had a similar effect on capital received from foreign direct investment. Despite these continuing economic challenges, the region may bounce back in light of political changes which have seen the ouster of some left-leaning governments and their anti-privatization policies and the pursuit by newer, right-leaning administrations of more public/private ventures in an effort to increase foreign direct investment during this economic slowdown. The number of new ICSID investment arbitrations in Latin America in 2015 dropped from the previous year with only four newly registered disputes for the calendar year, down from seven in 2014 and matching the 2013 total, a far cry from the annual double digit levels registered from 2010-2012. This represents the lowest number of new disputes registered in Latin America over a two year period since the turn of the century, when only four ICSID claims were filed in 2000 and six in 2001. Further underscoring the region-wide reduction in new claims, two of last year’s four new ICSID arbitrations relate to the same Argentinean highway system construction project. The two claimants, hailing from Spain and Italy, have filed separate claims under each of their home countries’ bilateral investment treaties with Argentina. The oil, gas, and mining industry disputes that dominated last year’s tally have dropped off entirely, from five requests for arbitration in 2014 to zero in 2015. 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). Notably, 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. International Investment Arbitration in Latin America: Year in Review 2015 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 PAGE 2 bryancave.com | A Global Law Firm BRYAN CAVE INTERNATIONAL ARBITRATION TEAM Investment Arbitration in the Region1 Just as the number of newly registered disputes has dropped in recent years, there has been a corresponding reduction in pending ICSID proceedings, as cases filed during the early part of the decade conclude their proceedings either by settlement or award. Guatemala and Honduras each saw their sole remaining pending dispute (in the form of annulment proceedings) end in 2015. A number of other respondent States (Bolivia, Dominican Republic, and El Salvador) currently have only one pending dispute. 1 This publication considers only investment arbitrations brought under the auspices of ICSID (a member of the World Bank Group), which are the significant majority of investment arbitrations in the region. Aside from its availability as an arbitral forum in investment treaties among the 152 Contracting States that are signatories to the Convention (as of November 2015), claimants tend to choose ICSID arbitrations for reasons related to finality and enforceability of the award and the institutional support of the Centre. But parties can, and do, engage in non-ICSID investment arbitrations, and because many investment treaties allow for fully confidential arbitration, the actual number of non-ICSID cases is difficult to determine. Latin American Countries Facing Investment Claims 0 10 20 30 40 50 60 ARGENTINA VENEZUELA MEXICO ECUADOR PERU COSTA RICA BOLIVIA CHILE EL SALVADOR PANAMA GRENADA GUATEMALA HONDURAS PARAGUAY TRINIDAD & TOBAGO URUGUAY DOMINICAN REPUBLIC NICARAGUA Total Cases Pending Cases PAGE 3 bryancave.com | A Global Law Firm BRYAN CAVE INTERNATIONAL ARBITRATION TEAM Investors from the United States have historically filed the most claims against Latin American countries, although nationals from Spain and the Netherlands have emerged in recent years as regular ICSID claimants in this region, with 12 and 10 pending disputes respectively. Top Nationalities of Investors with ICSID Arbitrations in Latin America 0 10 20 30 40 50 60 UNITED STATES SPAIN NETHERLANDS ARGENTINA FRANCE CANADA CHILE UNITED KINGDOM PANAMA ITALY SWITZERLAND GERMANY LUXEMBOURG PERU BARBADOS VENEZUELA BAHAMAS BOLIVIA COSTA RICA ECUADOR PORTUGAL URUGUAY AUSTRIA CHINA GRENADA MALAYSIA MEXICO NICARAGUA Total Cases Pending Cases The ongoing slump in new disputes in 2015, after the slight uptick in 2014, could signal ICSID’s declining influence in Latin America, especially when considered in light of the denunciations of the ICSID Convention by Bolivia, Ecuador, and Venezuela, and the possible emergence of UNASUR as an alternative dispute resolution regime. PAGE 4 bryancave.com | A Global Law Firm BRYAN CAVE INTERNATIONAL ARBITRATION TEAM Of the four cases registered in 2015 against Latin American respondents, two were disputes in the transportation industry, one in construction, and one in the tourism industry. The oil, gas, and mining industry maintains its position as the leading industry in Latin American investment disputes, accounting for nearly 38 percent of all pending ICSID claims. 0 2 4 6 8 10 12 14 16 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Total Cases Initiated Per Year Total Cases Initiated Per Year Investment Disputes by Industry 25 5 8 11 4 1 4 2 2 3 1 45 24 22 20 17 12 11 7 6 5 4 Oil, Gas & Mining Electric Power & Other Energy Transportation Other Industry Water, Sanitation & Flood Protection Finance Information & Communication Construction Tourism Agriculture, Fishing & Forestry Services & Trade Outer Circle - Total Cases Inner Circle - Pending Cases Total Cases Initiated Per Year PAGE 5 bryancave.com | A Global Law Firm BRYAN CAVE INTERNATIONAL ARBITRATION TEAM Investment Treaties Involving Latin American Countries Almost 20 percent of the just over 3,500 investment treaties currently in existence involve Latin American signatories. Chile has signed the most investment treaties, followed by Argentina and Peru. 0 10 20 30 40 50 60 70 80 90 CHILE ARGENTINA CUBA PERU URUGUAY MEXICO PARAGUAY COSTA RICA BRAZIL PANAMA COLOMBIA VENEZUELA EL SALVADOR GUATEMALA NICARAGUA BOLIVIA ECUADOR JAMAICA HONDURAS TRINIDAD & TOBAGO BARBADOS DOMINICAN REPUBLIC GUYANA BELIZE HAITI ANTIGUA AND BARBUDA GRENADA SAINT LUCIA SAINT VINCENT BAHAMAS MONTSERRAT SAINT KITTS AND NEVIS ARUBA BERMUDA BVI CAYMAN ISLANDS TURKS AND CAICOS Number of Treaties Of the 653 investment treaties signed by Latin American countries, 143 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 signed by the United States with each of Argentina, Bolivia, Ecuador, El Salvador, Grenada, Haiti, Honduras, Jamaica, Nicaragua, Panama, Trinidad and Tobago, and Uruguay). Bolivia terminated its treaty with the United States in June 2012, and the U.S. treaties with El Salvador, Haiti, and Nicaragua are pending domestic ratification or exchange of instruments of ratification by one or both parties. PAGE 6 bryancave.com | A Global Law Firm BRYAN CAVE INTERNATIONAL ARBITRATION TEAM Treaty-making activity in the region in 2015 was led by Brazil. As Latin America’s largest economy, Brazil has long resisted participation in the current investment treaty framework, relying instead on the attractiveness of its rich and diverse markets to attract foreign investment while avoiding consent to investor-State arbitration. Until 2015, it had been nearly 16 years since Brazil last signed a bilateral investment treaty, with Belgium-Luxembourg (which was never ratified). In 2015, however, Brazil signed six bilateral agreements, styled as Cooperation and Facilitation Investment Agreements (CFIAs). These treaties include guidelines on transparency and protection against expropriation, but do not contain investor-State dispute settlement provisions. Investment Treaties Signed by Latin American Countries in 2015 Countries Type of Treaty Date Signed Japan-Uruguay Bilateral Investment Treaty January 26, 2015 Brazil-Mozambique Cooperation and Facilitation Investment Agreement March 30, 2015 Brazil-Angola Cooperation and Facilitation Investment Agreement April 1, 2015 Haiti-Mexico Bilateral Investment Treaty May 7, 2015 Brazil-Mexico Cooperation and Facilitation Investment Agreement May 26, 2015 Honduras-Peru Free Trade Agreement May 29, 2015 Brazil-Malawi Cooperation and Facilitation Investment Agreement June 25, 2015 Brazil-Colombia Cooperation and Facilitation Investment Agreement October 9, 2015 Brazil-Chile Cooperation and Facilitation Investment Agreement November 24, 2015 Other Developments in 2015 f The United States continued through 2015 to negotiate with some Latin American countries – Chile, Mexico, and Peru – towards joining the proposed Trans-Pacific Partnership (TPP) to establish a regional trade and investment treaty regime with eight other countries scattered throughout the Asia-Pacific region (Australia, Brunei, Canada, Japan, Malaysia, New Zealand, Singapore, and Vietnam). Included among its provisions is the availability of investor-State arbitration under ICSID, UNCITRAL, or any other arbitral institution agreed by the parties, if a claimant investor and a respondent TPP host State cannot resolve their dispute within a six-month consultation/negotiation period. Following five years of negotiation, the TPP was signed in Auckland on February 4, 2016. The TPP will now undergo a two-year ratification period in which at least six countries that account for 85 percent of the combined gross domestic production of the 12 TPP nations must approve the final text for the treaty to enter into force. Given their size, both the United States and Japan would need to ratify the treaty. PAGE 7 bryancave.com | A Global Law Firm BRYAN CAVE INTERNATIONAL ARBITRATION TEAM f Criticism and dissatisfaction of the current ICSID framework has led a handful of Latin American countries (including former ICSID Contracting States Bolivia, Ecuador, and Venezuela) to continue to discuss the establishment of a Latin American-centered dispute resolution system as an alternative to ICSID, under the auspices of the 12-member South American intergovernmental group UNASUR. Early leaks of the draft document suggest a significant departure from the current procedural and substantive regime, including increased respect for States’ sovereign privileges and a possible appellate procedure, along with a system of precedent. The establishment of a UNASUR arbitration center could further diminish ICSID’s influence in the region, although claimants could still be expected to opt for ICSID proceedings so long as treaties granting consent to ICSID jurisdiction remain in force. f The gradual thawing in 2015 of the diplomatic and trade restrictions between the United States and Cuba has led to increased interest in possible investment flows between the two countries. Despite the opening of embassies, the loosening of export restrictions on the supply of telecommunications, agricultural, and construction equipment, and the re-establishment of regular commercial flights between the two countries, major obstacles remain before Cuba can begin to challenge the Dominican Republic’s supremacy in the Caribbean in attracting foreign direct investment from the United States. Chief among these concerns is Cuba’s lack of meaningful procedural protections for foreign investors – while Cuba has signed investment treaties with other nations, these treaties tend to forgo investor-State dispute settlement provisions in favor of Stateto-State proceedings. Moreover, the outstanding claims (totaling 5,913) for property expropriated by the Cuban Government and certified by the U.S. Foreign Claims Settlement Commission likely would need to be settled before the two nations could work towards a potential bilateral investment treaty or free trade agreement. Critical Times to Consult Counsel INVESTORS: f At the outset – when structuring an investment and negotiating project contracts f As soon as difficulties arise – when facing operational, regulatory or other issues in the host country f In discussions with the host country – when trying to resolve difficulties amicably f Before commencing a claim – when deciding whether and how to make a claim against the host country f In post-award proceedings – when seeking to collect on an award or reach a settlement with the host country f In getting the business relationship back on track – when moving forward in the wake of a dispute STATES: f At the outset – when negotiating and drafting investment treaties and national investment laws f In the pre-investment process – when inviting and accepting foreign investment f In the investment phase – when negotiating project contracts f As soon as notice of a dispute is given – when consulting with an investor about a potential investment arbitration claim f Upon receipt of a claim – when formulating an arbitral strategy in the initial stages of a dispute f In implementing or challenging an award – when considering next steps after the arbitration concludes PAGE 8 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 J. Martinez-Fraga Partner, Miami +1 786 322 7373 firstname.lastname@example.org Co-Leader of the International Arbitration Team Mathew Rea Partner, London +44 (0)20 3207 1203 email@example.com Co-Leader of the International Arbitration Team Constantin Achillas Partner, Paris +33 (0) 1 44 17 77 34 firstname.lastname@example.org Nigel Binnersley Partner, Hong Kong +852 3588 9110 email@example.com Rodney Page Partner, Washington, D.C. +1 202 508 6002 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. 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Recognized by Global Arbitration Review in its GAR 100, 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 local counsel 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 for informational purposes only and to provide a general understanding of the laws in different jurisdictions. 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