Investment Arbitration in Latin America: Elections, Trade Agreements, and the ICSID

by Jones Day

Jones Day

In November 2017, S&P Global Ratings declared Venezuela in default after it failed to make a $200 million coupon payment on its sovereign bonds. Many saw this coming. Since 2014, the country has been mired in a recession that significantly worsened in 2017. With no signs of legitimate economic or policy change in the country, Venezuela will likely continue to default, which will propel litigation between the country and its bondholders in 2018.

Venezuela, however, is not the only country that foreign investors should be watching this year. In 2018, seven Latin American countries are voting for a president, and others are holding legislative elections. Observers believe that 2018 could be a transformative year in the region because the rise of "outside" and unestablished candidates could create a riskier environment for investors, who for decades, have relied upon the International Centre for Settlement of Investment Disputes ("ICSID") to resolve investment disputes. However, with general hostility from LatAm countries over the past decade and impending elections, investors are questioning whether ICSID remains the preferred option.

Impact of Key 2018 Elections   

The presidential elections in Brazil, Mexico, and Colombia could influence the region's political landscape. Candidates that would have been unsuccessful or quickly dismissed in previous elections are leading in the polls. Many of these leading candidates hold nationalist, populist, and protectionist attitudes. As other countries have seen, LatAm voters appear to have grown tired of entrenched politicos and corruption scandals that have plagued their governments.

Over the past decade, corruption scandals have affected Brazil more than any other LatAm country, and 2018 looks to be no different. Luiz Inacio Lula de Silva, known as "Lula," is barred from running in the October presidential election because of a corruption conviction from when he previously served as president. Lula has appealed the ruling but so far has been unsuccessful. In spite of his scandal, Lula remains the most popular candidate, according to polls. If Lula cannot run, however, then no candidate will be able to garner enough votes without building political coalitions with other parties. Candidates could tweak their policy positions by comprising on government regulation issues to build coalitions.

In Mexico, the region's second largest economy, nationalist Andrés Manuel López Obrador is the front-runner for the July election. Bolstered by President Trump's comments toward Mexico, López Obrador is promoting a "Mexico First" agenda as he promises to implement more protectionist policies. He also plans to increase poverty reduction spending. These regulatory policies could lead to more "de facto" expropriations of foreign investments. His social welfare spending could also increase Mexico's debt, which should cause potential concern for bondholders.

In Colombia, which holds presidential and legislative elections in 2018, the FARC is participating in elections for the first time as a result of the Peace Agreement reached with current president Juan Manuel Santos. The FARC plans to run for several legislative positions. Now a legitimate political party, the FARC receives much of its backing from rural, indigenous communities, and supports anti-imperialist policies that could be worrying for investors if the FARC increased its legislative influence.

ICSID: The Preferred Avenue for Investors

Historically, LatAm investors have favored investor-state arbitrations before ICSID. An ICSID award is valuable because (i) it is enforceable in over 150 countries and (ii) each contracting ICSID state must recognize an award as if it were a final judgment from that state's court. ICSID arbitrations are so popular among foreign investors in LatAm that nearly one out of three ICSID cases involve a LatAm government respondent.

By being forced to defend against many ICSID claims, LatAm governments have generally not viewed ICSID favorably. Many governments believe that ICSID has a pro-investor bias and unfairly encroaches on sovereignty as any regulation that affects foreign investments could be considered a "de facto" expropriation. The elections of nationalist candidates in 2018 could bolster these feelings.

Since 2007, Bolivia, Ecuador, and Venezuela withdrew from the ICSID Convention, and over the past decade, the Union of Southern American Nations ("UNASUR") has worked to establish a regional arbitration center. In 2016, the UNASUR members proposed a final draft of the procedures; however, they have yet to adopt them.

With the withdrawal of certain countries and potential for others to follow in the coming years, some have questioned whether ICSID remains the optimal choice for investors in LatAm, especially for investors in countries where the country has withdrawn. Article 72 of the ICSID Convention provides a rationale for still subjecting withdrawing states to ICSID. Article 72 provides:

Notice by a Contracting State pursuant to Articles 70 or 71 (i.e., denunciation of the Convention) shall not affect the rights or obligations under this Convention of that State (…) arising out of consent to the jurisdiction of the Centre given by one of them before such notice was received by the depositary.

Thus, one could argue that a withdrawing state is still subject to ICSID if it has previously given its unilateral consent in another form, such as in a bilateral investment treaty ("BIT") or contract. Investors have been somewhat successful in making similar arguments.

In 2010, two years after Bolivia withdrew, a U.S. company filed an ICSID claim against Bolivia arguing that jurisdiction was proper from an underlying BIT. The tribunal never issued a final ruling on the jurisdictional issue, as the case settled for $357 million, but the result should encourage investors that states can still be forced to defend or negotiate ICSID-filed claims after withdrawing.

Additionally, Venezuela is a party to over 20 BITs that reference ICSID. An investor in Venezuela could argue that ICSID still has jurisdiction because the BIT provides for it, and Venezuela has yet to denounce that specific BIT that consents to ICSID. Notably, Venezuelan bond noteholders would also need to argue that a bond purchase classifies as an "investment." However, previous aggrieved bond noteholders recouped their losses by bringing ICSID claims so they should not be immediately discouraged. For example, in 2016, Italian bondholders of Argentinian defaulted bonds received cash payments equivalent to 150 percent of the original principal amount in a settlement adopted by ICSID.

There has also been an uptick in claims against LatAm countries that previously had not been common respondents, indicating that regional investors continue to feel optimistic about ICSID. Within the past three years, Panama has defended against six ICSID cases. Before 2014, Panama only had two claims brought against it. Similarly, in 2016, investors filed three ICSID claims against Colombia. Peru also saw three new ICSID claims since 2016.

Lastly, Mexico signed the ICSID Convention in January 2018, signaling that, in spite of some negative news surrounding ICSID, the second largest LatAm country puts its faith in the ICSID system, which should ease investor worries. These are all positive signs that in spite of 2018's increase in nationalist, protectionist candidates, ICSID still is a solid option.

Alternative Options to ICSID Awards  

ICSID arbitrations are usually not the only option for investors, and non-ICSID arbitrations might make more sense in certain cases. An investor should look at the underlying BIT or the investment protection chapter of a trade agreement.

BITs. Many LatAm BITs provide for ad hoc investor-state arbitration under UNCITRAL or the Additional Facility ICSID Rules. Although neither option would render an ICSID award, it is a viable option for investors that seek a quicker resolution of their dispute, or for investors with claims against a withdrawing state that do not want to face potential jurisdictional challenges from the host country.

In Venezuela, 18 of its 20 BITs provide for alternative (i.e., non-ICSID) arbitrations under UNCITRAL Rules or Additional Facility ICSID Rules. These arbitrations would render an award that could still be enforced under the New York Convention. These awards could be subjected to more robust national court review and challenged in the courts of the "seat" of the arbitration. The award would also not receive automatic execution status; however, it should be more easily enforceable than enforcing a domestic court judgment abroad.         

Even for the countries that have denounced a significant number of BITs, including Bolivia and Ecuador, most BITs contain survival clauses adding extended protections for investors even after the denunciation. Bolivia's BITs with the UK and France had 20-year survival clauses, and its BITs with Argentina, Netherlands, and Peru had 15-year survival clauses.

Trade Agreements. Since the 1990s, trade agreements have become the primary treaty method for investor protection. The investment chapter of a trade agreement usually references ad hoc investor-state arbitration. Over the past decade, LatAm countries have signed dozens of trade agreements providing such procedures.

For example, in 2013 alone, Colombia signed free trade agreements with investor protections with the European Union and four other countries, and the Dominican Republic-Central America-U.S. Free Trade Agreement ("CAFTA") allows parties to initiate ICSID arbitration.

The free trade agreement dominating headlines, however, is the North American Free Trade Agreement ("NAFTA"). NAFTA currently provides for investor-state dispute settlement. However, President Trump has threatened to withdraw from NAFTA unless the United States receives heavy concessions from Mexico. Negotiations are ongoing, and one of the contentious issues is investor protection. Surprisingly, intense aversion to investor protection is not coming from Mexico. Robert Lighizer, the U.S. Trade Representative, publicly opposes foreign investment protection. The current proposal is to have an "opt in" mechanism for investor protection; however, it is unclear how this will be resolved. Nonetheless, with Mexico's accession to ICSID, there is perhaps less of a concern over how this resolves, but it is still worth keeping an eye on in 2018.


In spite of heightened criticism, ICSID should be the preferred avenue for investors in Latin America. The main benefit to ICSID awards is that they are enforced as final judgments in courts of the contracting states. Although there is a risk that 2018 can lead to more protectionist LatAm policies and aversion to ICSID, Venezuela was the last country to denounce ICSID, over six years ago, and Mexico recently signed the treaty. And, even though Argentina has faced the most amount of ICSID claims, it has yet to withdraw, indicating that the governments are still confident in the institution.

Additionally, even if investors are worried about jurisdictional challenges with ICSID, they usually will have the option of ad hoc arbitration under a BIT or trade agreement. And although this arbitration would not render an ICSID award, the arbitral award would still likely be easier to enforce than a domestic court judgment and is the second best alternative for aggrieved investors in 2018.

Written by:

Jones Day

Jones Day on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
- hide

JD Supra Privacy Policy

Updated: May 25, 2018:

JD Supra is a legal publishing service that connects experts and their content with broader audiences of professionals, journalists and associations.

This Privacy Policy describes how JD Supra, LLC ("JD Supra" or "we," "us," or "our") collects, uses and shares personal data collected from visitors to our website (located at (our "Website") who view only publicly-available content as well as subscribers to our services (such as our email digests or author tools)(our "Services"). By using our Website and registering for one of our Services, you are agreeing to the terms of this Privacy Policy.

Please note that if you subscribe to one of our Services, you can make choices about how we collect, use and share your information through our Privacy Center under the "My Account" dashboard (available if you are logged into your JD Supra account).

Collection of Information

Registration Information. When you register with JD Supra for our Website and Services, either as an author or as a subscriber, you will be asked to provide identifying information to create your JD Supra account ("Registration Data"), such as your:

  • Email
  • First Name
  • Last Name
  • Company Name
  • Company Industry
  • Title
  • Country

Other Information: We also collect other information you may voluntarily provide. This may include content you provide for publication. We may also receive your communications with others through our Website and Services (such as contacting an author through our Website) or communications directly with us (such as through email, feedback or other forms or social media). If you are a subscribed user, we will also collect your user preferences, such as the types of articles you would like to read.

Information from third parties (such as, from your employer or LinkedIn): We may also receive information about you from third party sources. For example, your employer may provide your information to us, such as in connection with an article submitted by your employer for publication. If you choose to use LinkedIn to subscribe to our Website and Services, we also collect information related to your LinkedIn account and profile.

Your interactions with our Website and Services: As is true of most websites, we gather certain information automatically. This information includes IP addresses, browser type, Internet service provider (ISP), referring/exit pages, operating system, date/time stamp and clickstream data. We use this information to analyze trends, to administer the Website and our Services, to improve the content and performance of our Website and Services, and to track users' movements around the site. We may also link this automatically-collected data to personal information, for example, to inform authors about who has read their articles. Some of this data is collected through information sent by your web browser. We also use cookies and other tracking technologies to collect this information. To learn more about cookies and other tracking technologies that JD Supra may use on our Website and Services please see our "Cookies Guide" page.

How do we use this information?

We use the information and data we collect principally in order to provide our Website and Services. More specifically, we may use your personal information to:

  • Operate our Website and Services and publish content;
  • Distribute content to you in accordance with your preferences as well as to provide other notifications to you (for example, updates about our policies and terms);
  • Measure readership and usage of the Website and Services;
  • Communicate with you regarding your questions and requests;
  • Authenticate users and to provide for the safety and security of our Website and Services;
  • Conduct research and similar activities to improve our Website and Services; and
  • Comply with our legal and regulatory responsibilities and to enforce our rights.

How is your information shared?

  • Content and other public information (such as an author profile) is shared on our Website and Services, including via email digests and social media feeds, and is accessible to the general public.
  • If you choose to use our Website and Services to communicate directly with a company or individual, such communication may be shared accordingly.
  • Readership information is provided to publishing law firms and authors of content to give them insight into their readership and to help them to improve their content.
  • Our Website may offer you the opportunity to share information through our Website, such as through Facebook's "Like" or Twitter's "Tweet" button. We offer this functionality to help generate interest in our Website and content and to permit you to recommend content to your contacts. You should be aware that sharing through such functionality may result in information being collected by the applicable social media network and possibly being made publicly available (for example, through a search engine). Any such information collection would be subject to such third party social media network's privacy policy.
  • Your information may also be shared to parties who support our business, such as professional advisors as well as web-hosting providers, analytics providers and other information technology providers.
  • Any court, governmental authority, law enforcement agency or other third party where we believe disclosure is necessary to comply with a legal or regulatory obligation, or otherwise to protect our rights, the rights of any third party or individuals' personal safety, or to detect, prevent, or otherwise address fraud, security or safety issues.
  • To our affiliated entities and in connection with the sale, assignment or other transfer of our company or our business.

How We Protect Your Information

JD Supra takes reasonable and appropriate precautions to insure that user information is protected from loss, misuse and unauthorized access, disclosure, alteration and destruction. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. You should keep in mind that no Internet transmission is ever 100% secure or error-free. Where you use log-in credentials (usernames, passwords) on our Website, please remember that it is your responsibility to safeguard them. If you believe that your log-in credentials have been compromised, please contact us at

Children's Information

Our Website and Services are not directed at children under the age of 16 and we do not knowingly collect personal information from children under the age of 16 through our Website and/or Services. If you have reason to believe that a child under the age of 16 has provided personal information to us, please contact us, and we will endeavor to delete that information from our databases.

Links to Other Websites

Our Website and Services may contain links to other websites. The operators of such other websites may collect information about you, including through cookies or other technologies. If you are using our Website or Services and click a link to another site, you will leave our Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We are not responsible for the data collection and use practices of such other sites. This Policy applies solely to the information collected in connection with your use of our Website and Services and does not apply to any practices conducted offline or in connection with any other websites.

Information for EU and Swiss Residents

JD Supra's principal place of business is in the United States. By subscribing to our website, you expressly consent to your information being processed in the United States.

  • Our Legal Basis for Processing: Generally, we rely on our legitimate interests in order to process your personal information. For example, we rely on this legal ground if we use your personal information to manage your Registration Data and administer our relationship with you; to deliver our Website and Services; understand and improve our Website and Services; report reader analytics to our authors; to personalize your experience on our Website and Services; and where necessary to protect or defend our or another's rights or property, or to detect, prevent, or otherwise address fraud, security, safety or privacy issues. Please see Article 6(1)(f) of the E.U. General Data Protection Regulation ("GDPR") In addition, there may be other situations where other grounds for processing may exist, such as where processing is a result of legal requirements (GDPR Article 6(1)(c)) or for reasons of public interest (GDPR Article 6(1)(e)). Please see the "Your Rights" section of this Privacy Policy immediately below for more information about how you may request that we limit or refrain from processing your personal information.
  • Your Rights
    • Right of Access/Portability: You can ask to review details about the information we hold about you and how that information has been used and disclosed. Note that we may request to verify your identification before fulfilling your request. You can also request that your personal information is provided to you in a commonly used electronic format so that you can share it with other organizations.
    • Right to Correct Information: You may ask that we make corrections to any information we hold, if you believe such correction to be necessary.
    • Right to Restrict Our Processing or Erasure of Information: You also have the right in certain circumstances to ask us to restrict processing of your personal information or to erase your personal information. Where you have consented to our use of your personal information, you can withdraw your consent at any time.

You can make a request to exercise any of these rights by emailing us at or by writing to us at:

Privacy Officer
JD Supra, LLC
10 Liberty Ship Way, Suite 300
Sausalito, California 94965

You can also manage your profile and subscriptions through our Privacy Center under the "My Account" dashboard.

We will make all practical efforts to respect your wishes. There may be times, however, where we are not able to fulfill your request, for example, if applicable law prohibits our compliance. Please note that JD Supra does not use "automatic decision making" or "profiling" as those terms are defined in the GDPR.

  • Timeframe for retaining your personal information: We will retain your personal information in a form that identifies you only for as long as it serves the purpose(s) for which it was initially collected as stated in this Privacy Policy, or subsequently authorized. We may continue processing your personal information for longer periods, but only for the time and to the extent such processing reasonably serves the purposes of archiving in the public interest, journalism, literature and art, scientific or historical research and statistical analysis, and subject to the protection of this Privacy Policy. For example, if you are an author, your personal information may continue to be published in connection with your article indefinitely. When we have no ongoing legitimate business need to process your personal information, we will either delete or anonymize it, or, if this is not possible (for example, because your personal information has been stored in backup archives), then we will securely store your personal information and isolate it from any further processing until deletion is possible.
  • Onward Transfer to Third Parties: As noted in the "How We Share Your Data" Section above, JD Supra may share your information with third parties. When JD Supra discloses your personal information to third parties, we have ensured that such third parties have either certified under the EU-U.S. or Swiss Privacy Shield Framework and will process all personal data received from EU member states/Switzerland in reliance on the applicable Privacy Shield Framework or that they have been subjected to strict contractual provisions in their contract with us to guarantee an adequate level of data protection for your data.

California Privacy Rights

Pursuant to Section 1798.83 of the California Civil Code, our customers who are California residents have the right to request certain information regarding our disclosure of personal information to third parties for their direct marketing purposes.

You can make a request for this information by emailing us at or by writing to us at:

Privacy Officer
JD Supra, LLC
10 Liberty Ship Way, Suite 300
Sausalito, California 94965

Some browsers have incorporated a Do Not Track (DNT) feature. These features, when turned on, send a signal that you prefer that the website you are visiting not collect and use data regarding your online searching and browsing activities. As there is not yet a common understanding on how to interpret the DNT signal, we currently do not respond to DNT signals on our site.

Access/Correct/Update/Delete Personal Information

For non-EU/Swiss residents, if you would like to know what personal information we have about you, you can send an e-mail to We will be in contact with you (by mail or otherwise) to verify your identity and provide you the information you request. We will respond within 30 days to your request for access to your personal information. In some cases, we may not be able to remove your personal information, in which case we will let you know if we are unable to do so and why. If you would like to correct or update your personal information, you can manage your profile and subscriptions through our Privacy Center under the "My Account" dashboard. If you would like to delete your account or remove your information from our Website and Services, send an e-mail to

Changes in Our Privacy Policy

We reserve the right to change this Privacy Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our Privacy Policy will become effective upon posting of the revised policy on the Website. By continuing to use our Website and Services following such changes, you will be deemed to have agreed to such changes.

Contacting JD Supra

If you have any questions about this Privacy Policy, the practices of this site, your dealings with our Website or Services, or if you would like to change any of the information you have provided to us, please contact us at:

JD Supra Cookie Guide

As with many websites, JD Supra's website (located at (our "Website") and our services (such as our email article digests)(our "Services") use a standard technology called a "cookie" and other similar technologies (such as, pixels and web beacons), which are small data files that are transferred to your computer when you use our Website and Services. These technologies automatically identify your browser whenever you interact with our Website and Services.

How We Use Cookies and Other Tracking Technologies

We use cookies and other tracking technologies to:

  1. Improve the user experience on our Website and Services;
  2. Store the authorization token that users receive when they login to the private areas of our Website. This token is specific to a user's login session and requires a valid username and password to obtain. It is required to access the user's profile information, subscriptions, and analytics;
  3. Track anonymous site usage; and
  4. Permit connectivity with social media networks to permit content sharing.

There are different types of cookies and other technologies used our Website, notably:

  • "Session cookies" - These cookies only last as long as your online session, and disappear from your computer or device when you close your browser (like Internet Explorer, Google Chrome or Safari).
  • "Persistent cookies" - These cookies stay on your computer or device after your browser has been closed and last for a time specified in the cookie. We use persistent cookies when we need to know who you are for more than one browsing session. For example, we use them to remember your preferences for the next time you visit.
  • "Web Beacons/Pixels" - Some of our web pages and emails may also contain small electronic images known as web beacons, clear GIFs or single-pixel GIFs. These images are placed on a web page or email and typically work in conjunction with cookies to collect data. We use these images to identify our users and user behavior, such as counting the number of users who have visited a web page or acted upon one of our email digests.

JD Supra Cookies. We place our own cookies on your computer to track certain information about you while you are using our Website and Services. For example, we place a session cookie on your computer each time you visit our Website. We use these cookies to allow you to log-in to your subscriber account. In addition, through these cookies we are able to collect information about how you use the Website, including what browser you may be using, your IP address, and the URL address you came from upon visiting our Website and the URL you next visit (even if those URLs are not on our Website). We also utilize email web beacons to monitor whether our emails are being delivered and read. We also use these tools to help deliver reader analytics to our authors to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

Analytics/Performance Cookies. JD Supra also uses the following analytic tools to help us analyze the performance of our Website and Services as well as how visitors use our Website and Services:

  • HubSpot - For more information about HubSpot cookies, please visit
  • New Relic - For more information on New Relic cookies, please visit
  • Google Analytics - For more information on Google Analytics cookies, visit To opt-out of being tracked by Google Analytics across all websites visit This will allow you to download and install a Google Analytics cookie-free web browser.

Facebook, Twitter and other Social Network Cookies. Our content pages allow you to share content appearing on our Website and Services to your social media accounts through the "Like," "Tweet," or similar buttons displayed on such pages. To accomplish this Service, we embed code that such third party social networks provide and that we do not control. These buttons know that you are logged in to your social network account and therefore such social networks could also know that you are viewing the JD Supra Website.

Controlling and Deleting Cookies

If you would like to change how a browser uses cookies, including blocking or deleting cookies from the JD Supra Website and Services you can do so by changing the settings in your web browser. To control cookies, most browsers allow you to either accept or reject all cookies, only accept certain types of cookies, or prompt you every time a site wishes to save a cookie. It's also easy to delete cookies that are already saved on your device by a browser.

The processes for controlling and deleting cookies vary depending on which browser you use. To find out how to do so with a particular browser, you can use your browser's "Help" function or alternatively, you can visit which explains, step-by-step, how to control and delete cookies in most browsers.

Updates to This Policy

We may update this cookie policy and our Privacy Policy from time-to-time, particularly as technology changes. You can always check this page for the latest version. We may also notify you of changes to our privacy policy by email.

Contacting JD Supra

If you have any questions about how we use cookies and other tracking technologies, please contact us at:

- hide

This website uses cookies to improve user experience, track anonymous site usage, store authorization tokens and permit sharing on social media networks. By continuing to browse this website you accept the use of cookies. Click here to read more about how we use cookies.