Bolivia Investment Protections

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1. ICSID CONVENTION

Bolivia is not currently a party to the ICSID Convention, although Bolivia did initially adhere to the ICSID Convention (effective July 23, 1995). On May 2, 2007, Bolivia filed a notice of denunciation in accordance with Article 71 of the ICSID Convention, which took effect six months later.[1] Bolivia cited six reasons for its denunciation of the ICSID Convention, namely: (1) unbalanced tribunals favoring transnational companies; (2) non-democratic proceedings due to the tribunals’ closed-door deliberations and decisions which could not be appealed; (3) high arbitration costs for countries like Bolivia; (4) unfair and costly compensation benefiting transnational companies; (5) the World Bank’s role as party and judge; and (6) Bolivia’s ratification of the ICSID Convention violated Bolivia’s Constitution which provided that foreign companies are subject to Bolivian law.[2]

Opinions on the exact effects of denunciation vary. A number of pending ICSID claims have been filed in this regard. There is little doubt that the country’s international investment agreements providing foreign investors with the ability to submit claims to international arbitration remain largely unaffected but for the availability of arbitration under the ICSID Convention. This is particularly true for those agreements that provide for other arbitral forums, including the ICSID Additional Facility for the Administration of Conciliation, Arbitration and Fact-Finding Procedures. In addition, foreign investors who validly consented to ICSID arbitration, and who thus obtained “standing offers” under applicable international agreements before the notice of denunciation or within 6 months thereafter, also remain unaffected. On the contrary, opinions as to the continued availability of ICSID arbitration after the denunciation took effect are less certain.

2. INVESTMENT TREATIES

[Bolivia is a party to 22 bilateral investment treaties with each of the following countries: Germany, Switzerland, UK & Northern Ireland,[3] France, Belgium-Luxemburg, Italy, Sweden, the Netherlands, the People’s Republic of China, Peru, Argentina, Chile, Denmark, Cuba, Ecuador, Romania, Korea, Austria, the United States of America, Paraguay, Spain, and Costa Rica.]

Following the enactment of the new Constitution, and in accordance with Transitional Provision No. 9 of the 2009 Constitution, the Government has notified its state counterparts of its intent to renegotiate the above BITs.[4]

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3. BOLIVIAN INVESTMENT TREATY DISPUTES

[Examples of Bolivian investment treaty arbitrations include:] [f]our . . . claims brought by foreign investors under the ICSID Convention [and] five arbitral proceedings . . . submitted to ad hoc procedures, namely under UNCITRAL rules.

The 2009 Constitution could lead to other foreign investment disputes. For instance, the Constitution requires that all concessions over natural resources, electricity, telecommunications and basic services must conform to the Constitution’s new legal framework within a specified period of time, which elapsed on December 6, 2010. Similarly, mining concessions granted to national and foreign companies prior to the enactment of the new Constitution were also required to “migrate” to a yet undefined system of mining contracts within the same period of time. Under the Constitution, however, such adjustments are supposed to respect acquired rights.[5] Because these changes require prior implementing laws, and because such laws were not enacted by the deadline (and have yet to be enacted), the Government passed a very general Decree providing that all concessions are automatically “adjusted” to the new Constitutional framework pending the enactment of implementing laws, with acquired rights to be guaranteed. Nonetheless, it remains unclear how investors’ “acquired rights” will be respected once the implementing legislation is enacted.[6]

[1] ICSID List of Contracting States and Other Signatories of the Convention, updated Dec. 27, 2010, available at http://icsid.worldbank.org.

[2] Bernardo Wayar Caballero, Paper at Primeras Jornadas Internacionales de Arbitraje, Colegio de Abogados de La Paz, May 2010.

[3] Through an exchange of notes with the United Kingdom, the effects of the Bolivia-U.K. BIT have been extended to the Isle of Man, the Turks and Caicos Islands, Bermuda and the Bailiwicks of Guernsey and Jersey.

[4] At the beginning of 2010, Bolivia denounced the Free Trade Agreement it had signed with Mexico in 1994, whose Chapter XV contained a similar provision to BITs with respect to investment treaty protection. This FTA has been substituted by an Economic Complementation Agreement signed on June 7, 2010. The Mexican Government issued a Decree eliminating the effects of the FTA as of that same date. See http://www.cnnexpansion.com Friday (accessed June 4, 2010).

[5] 2009 Constitution, Transitional Provision No. 8.

[6] Supreme Decree 0726 (Bolivia ) (Dec. 6, 2010).