Uruguay Investment Protections

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1. INTERNATIONAL LAW INVESTMENT PROTECTION FRAMEWORK

Uruguay signed the ICSID Convention on May 28, 1992, and ratified the instrument under Law Nº 17,209 on September 24, 1999. The State deposited its ratification on August 9, 2000, and the Convention entered into force for Uruguay on September 8, 2000. Uruguay has not made any notifications, designations, or denunciations to date.

Uruguay has signed and ratified the following bilateral investment treaties (BITs), which have entered into force: [Belgium-Luxemburg, Canada, Chile, China, the Czech Republic, El Salvador, Finland, France, Germany, Hungary, Israel, Italy, Malaysia, Mexico (with amendments by mutual agreement), the Netherlands, Panama, Poland, Portugal, Romania, Spain, Sweden, Switzerland, the United Kingdom, the United States, and Venezuela. In addition, it has signed and ratified the following BITs: Armenia, Australia, and Saudi Arabia.

Further, as a member of MERCOSUR, Uruguay has signed the following MITs: three treaties among the countries of MERCOSUR (at Colonia on 17 January 1994, at Buenos Aires on 5 August 1994 (which it has also ratified), and at Belo Horizonte on 16 December 2004 (which it has also ratified and entered into force, with the exception of Paraguay, on 24 February 2007)); the MERCOSUR-Cooperation Council for Arab States of the Gulf (which it has also ratified); two MITs with Egypt (the first of which it has also ratified); MERCOSUR-European Union (which entered into force on 1 July 1999); two MITs with India (the first of which it has also ratified and the second of which entered into force on 1 June 2009); two MITs with Israel (the first of which it has also ratified and the second of which entered into force on 23 December 2009 but only between Israel and Uruguay); MERCOSUR-Jordan (which is has also ratified); MERCOSUR-Morocco (which it has also ratified and entered into force on 29 April 2010); MERCOSUR-Mexico (which entered into force on 5 January 2006); MERCOSUR-Palestinian Authority; MERCOSUR-Pakistan (which it has also ratified); two MITs with the Southern African Customs Union (SACU); MERCOSUR-Syria; and MERCOSUR-Turkey.]

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2. INVESTMENT DISPUTES

Uruguay is little-known for investment disputes, and is generally considered respectful of international law and awards. Indeed, few investors have filed arbitration proceedings against Uruguay. [An example of Uruguayan investment treaty arbitrations include an ICSID] … arbitration claim against Uruguay filed by Philip Morris International (PMI), the multinational tobacco company, on February 19, 2010.[1]

Beyond the scope of ICSID, [two other examples of investment treaty arbitration proceedings against Uruguay arise] from banking operations in the country. In the first case, Stéphane Benhamou, a French-Moroccan investor, initiated an arbitration against Uruguay before the Permanent Court of Arbitration (PCA) under UNCITRAL rules. In 2002, the arbitral tribunal rendered an award in favor of the State.[2] In the second case, Chemical Overseas Holdings, Inc., Credit Suisse First Boston, and Dresdner Bank Lateinamerika AG initiated arbitral proceedings against Uruguay under the ICC rules. These proceedings resulted in an award against Uruguay issued on December 31, 2004, which the country is expected to honor in the course of 2011 (to date Tribunal de Cuentas [control over government expenditures] is analyzing the legality of an agreement executed in 2010 among the parties which settled the final amount to be paid by Uruguay in the sum of US$ 120: approximately).[3]

It is also worth mentioning that since late 2009, Uruguay and the Belgium investment group, Katoen Natie, are joined in efforts to achieve an amicable settlement in a dispute regarding the establishment of a specialized second container depot on the premises of the Port of Montevideo. No arbitration procedure on this matter has been filed to date, and the facts on which the dispute was grounded are now baseless.[4]

Only two of the abovementioned arbitrations were brought under investment treaties, the “Banco Pan de Azúcar” Case (Stéphane Benhamou v. República Oriental del Uruguay), Permanent Court of Arbitration (PCA) (concluded), and FTR Holding S.A., Philip Morris Products S.A., and Abal Hermanos S.A. v. República Oriental del Uruguay, ICSID Case No. ARB/10/7.

[1] FTR Holding S.A., Philip Morris Products S.A. and Abal Hermanos S.A. v. Oriental Republic of Uruguay (“Philip Morris”), ICSID Case No. ARB/10/7.

[2] See Website – Presidencia de la República Oriental del Uruguay, available at http://www.presidencia.gub.uy/noticias/archivo/2002/diciembre/2002121904.htm (accessed 08 June 2011)

[3] Information about the case was obtained from press sources, see infra n. 41. This case was not based upon any investment treaty. Chemical Overseas Holdings, Inc., Credit Suisse First Boston and Dresdner Bank Lateinamerika AG were the shareholders of the local bank “Banco Comercial”. In the context of the financial crisis which affected the country in 2002 -- and in particular its banking market --, the Uruguayan Government entered into a confidential agreement on February 26, 2002 with the three shareholders of Banco Comercial for purposes of having additional funds injected into the bank to strengthen its solvency (U$S 100 million approx.). Under the terms of such an agreement, several warranties were negotiated and set forth in favor of the three shareholders; and in particular, the Uruguayan Government undertook to guarantee the solvency of the bank for one year counted as from the capitalization. However, in August 2002 the Central Bank of Uruguay suspended Banco Comercial’s activities due to certain irregularities found in its operations. When the bank was finally closed and liquidated by Central Bank authorities, the State responsibility -- based upon the warranties included in the agreement signed on February 26, 2002 -- was triggered. The arbitration proceeding was conducted under the ICC rules and the panel was comprised by Howard A. Levine (Chair), George A. Bermann (claimant´s nominee) and Abraham D. Sofaer (respondent´s nominee).

[4] The Belgium investment group Katoen Natie Group undertook the administration and operation of a specialized containers site within the Port of Montevideo in 2001, declaring to have invested the sum of U$S 200 million through the period 2001-2009 in such a project. When the Uruguayan Government announced in 2009 that it would call an international bid for the establishment of a second specialized container depot within the Port of Montevideo, Katoen Natie Group immediately anticipated that it would challenge such a resolution and seek for protection of its investments in the country under the BIT in effect between the BENELUX and Uruguay (BIT signed in Brussels on November 4, 1991, ratified by Uruguay as per Law Nº 16,856 of August 22, 1997 and in full force and effect since April 23, 1999). In such a context, the Executive Branch appointed a special three-member Commission by Resolution Nº 1,290/009 of November 23rd, 2009, for purposes of taking part in the efforts to achieve an amicable settlement with the Belgium investment group Katoen Natie Group. Though a public auction was indeed organized by the Uruguayan Government on March 17th, 2010, the process ended up with no offers submitted. After the auction, no further actions have been taken or announced either by the Uruguayan Government or Katoen Natie Group.