Brazil and Investment Treaties
Foreign investors should be on notice as to one policy that is not likely to change following the reelection of the President in Brazil.
Brazil does not provide investors the protections of bilateral investment treaties (BITs) or the opportunity to submit investment disputes to arbitration before the International Center for Settlement of Investment Disputes (ICSID). Investors routinely structure investments in the Latin American energy sector based on investment treaties, but Brazil has not ratified BITs or the ICSID Convention. Fourteen BITs that Brazil had signed but not ratified were withdrawn from consideration in 2003.
Instead, Brazil increasingly has adopted legislation providing for the arbitration of disputes arising out of investor-state contracts, including in the energy sector, and last year a Brazilian court confirmed that state-owned entities are subject to arbitration when they consent to it by contract. This is a step in the right direction. But such arbitrations are subject to restrictions that they must be conducted in Brazil and in Portuguese.
They offer neither the same protections as BITs nor the neutrality of the ICSID. The lack of investment treaty protections thus remains a risk factor of note for inbound and outbound investment.
