Paraguay Investment Protections

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1. INVESTMENT PROTECTION FRAMEWORK UNDER INTERNATIONAL LAW

Law 944 of October 22, 1982 approved and ratified the Convention on the Settlement of Investment Disputes between States and Nationals of other States (“ICSID Convention”), which was opened for signature in Washington on March 18, 1965 and signed by Paraguay on July 27, 1981. The ICSID Convention went into force in Paraguay on February 6, 1983. The Republic of Paraguay did not make any reservation, or notify any class of dispute which it would not consider submitting to the jurisdiction of ICSID.

As of this writing, Paraguay has signed 28 Bilateral Investment Treaties (“BITs”), of which 26 are in force, one [the BIT with Italy] is pending ratification, and one was terminated unilaterally by Ecuador on January 18, 2008.[1] These 28 BITs are [as follows:[2] Argentina, Austria, Belgium and Luxemburg, Bolivia, Brazil, Chile, Costa Rica, Cuba, the Czech Republic, Ecuador, El Salvador, France, Germany, Hungary, Italy, the Republic of Korea, the Netherlands, Peru, Portugal, Romania, South Africa, Spain, Switzerland, the Taiwan Province of China, the United Kingdom, the United States of America, Uruguay, and Venezuela.

The dispute settlement mechanisms in these BITs vary, as illustrated by the following examples:

• Paraguay-France BIT: Stipulates that any conflict between a host state and an investor shall be referred to ICSID arbitration (Article 8).
• Paraguay-Netherlands BIT: Any legal dispute “arising between a Contracting Party and a national of the other Contracting Party concerning an investment of that national in the territory of the former Contracting Party may, at the request of one of the parties concerned, be submitted to the competent tribunal of that Contracting Party” (Article 9(1)). Notwithstanding this provision, the parties consent “to submit any legal dispute arising between that Contracting Party and a national of the other Contracting Party concerning an investment of that national in the territory of the former Contracting Party” to ICSID arbitration (Article 9(2)).
• Paraguay-South Korea BIT: “All kinds of disputes, with respect to investments between one Contracting Party and a national or company of the other Contracting Party, shall be settled through consultations. If such disputes cannot be settled under consultations” within six months from the date of request for settlement (Article 12(1) and (2)). If no resolution is achieved, “the disputes shall be submitted, upon request of the investor, either to: (a) the competent national court of justice of the Contracting Party for decision; or (b) the International Center for the Settlement of Investment Disputes (ICSID)…” (Article 12(2)).

In addition to these bilateral agreements, Paraguay is a founding member of the Common Market of the Southern Cone (“MERCOSUR”), a customs union that eliminated customs duties within the region on numerous items. MERCOSUR has a Common External Tariff of 10.8% on average. However, there exist several exceptions in sectors including capital goods, and computing and communication goods, in which Paraguayan tariffs remain lower. Paraguay also grants preferences, inter alia, to MERCOSUR’s associated states (i.e., Bolivia, Chile, Colombia, Ecuador, and Peru).[3] Disputes between and among the member states are addressed by the Protocol of Olivos, signed by the member states in 2002, and in force since January 2004. The Protocol gives freedom of choice in respect of the competent forum (MERCOSUR or WTO), allows for the possibility of mediation by the Common Market Group, and establishes a review procedure by the Permanent Review Court, which sits in Asunción, Paraguay.[4]

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2. INVESTMENT DISPUTES

[Examples of Paraguayan investment treaty arbitrations include:], three arbitrations [that] have been brought against Paraguay under the ICSID Convention:[5]

• Eudoro Armando Olguín v Republic of Paraguay, ICSID Case No. ARB/98/5 (Peru/Paraguay BIT). A Decision on Jurisdiction was issued on August 8, 2010 and a Final Award was issued on July 27, 2010, dismissing all claims.
• Bureau Veritas, Inspection, Valuation, Assessment and Control, BIVAC B.V. v. Republic of Paraguay, ICSID Case No. ARB/07/9 (Netherlands/Paraguay BIT). A Decision on Jurisdiction was issued on May 29, 2009. A hearing on the merits was held on July 2011. In December 2011 the Tribunal posed and the parties answered questions.
• SGS Société Générale de Surveillance S.A. v. Republic of Paraguay, ICSID Case No. ARB/07/29 (Switzerland/Paraguay BIT). A Decision on Jurisdiction was issued on February 19, 2010. On February 10, 2012 the Tribunal issued the decision on the merits in favor of the Claimant.

Outside the realm of ICSID, claims have been brought against the State or its instrumentalities before private institutions, such as the ICC, including, for example, the Grupanor case, and a large-scale construction dispute against the Argentina-Paraguay Yacyreta Hydroelectric Entity. The author’s research did not indicate any claims against the State under the UNCITRAL rules.

[1] Paraguay is also party to the World Bank’s Multilateral Agency for Investment Guarantees (MIGA). See Law No. 124/92, Approving and Ratifying the Convention that Creates the World Bank’s Multilateral Agency for Investment Guarantees (Paraguay) (1992).

[2] See Website of the Ministry of Foreign Relations, http://www.mre.gov.py.

[3] The membership of Venezuela as an associated state is pending final ratification.

[4] Paraguay also participates in the Latin American Integration Association (“LAIA”), and has signed partial-scope agreements with all of its members. Within LAIA, Paraguay has concluded economic agreements with Colombia, Ecuador, Mexico, Peru, and Venezuela.

[5] See, e.g., ICSID website, http://icsid.worldbank.org/ICSID/FrontServlet.