A. LEGISLATION AND RULES
International arbitration in Colombia continues to be governed by Law 1563 of 2012 (“Law 1563“), which entered into force in October 2012. Section 3 of Law 1563 governs international arbitration and is based on UNCITRAL Model Law with certain amendments (“International Arbitration Statute“).
Currently, Congress is debating Bill No. 009/21, authored by the Ministry of Justice and Law, which proposes to introduce a few amendments to the International Arbitration Statute. The first amendment is related to its scope of application. The second amendment is related to the procedure to be followed by Colombian courts if one of the parties requests precautionary measures.
With respect to the scope of application of the International Arbitration Statute, the proposed new provisions clarify the definition of “international arbitration”. Under section 62 of the International Arbitration Statute an arbitration is deemed to be international when any of the following apply:
- The parties to an arbitration agreement have, at the time of the conclusion of that agreement, their domiciles in different States.
- The place where a substantial part of the obligations of the commercial relationship is to be performed, or the place with which the subject matter of the dispute is most closely connected, is different from the parties’ domiciles.
- The dispute affects the interests of international trade.
There has been debate around the interpretation of the first and third criteria.
The first criterion has generated doubts in cases where one of the parties is a branch of a foreign company and that branch is located in Colombia and undertakes businesses in Colombia. Under Colombian law, a branch is not an independent legal entity and as such, there is a debate on whether the branch that is located in Colombia has its domicile in Colombia for purposes of the application of the International Arbitration Statute, or if the domicile to be considered should be the domicile of the parent foreign company. The proposed amendment aims at settling this debate by clarifying that under the International Arbitration Statute the domicile of a foreign company’s branch is the domicile of the parent company.
The third criterion has also raised doubts because it is not clear when a dispute can affect the interests of international trade. The bill proposes to complement this criterion to specify that the interests of international trade are affected when the contractual relationship or the economic operation involves the transfer of goods, services or funds across an international border.
As to the second proposed amendment, the bill proposes to regulate the proceeding that should be followed by Colombian courts if one of the parties requests precautionary measures before initiating an arbitration proceeding. Under this proposal, all the following requirements must be met:
- The applicant shall prove that the precautionary measure is effective, relevant, reasonable and timely.
- The applicant shall provide, with its request, a simple copy of the arbitration agreement.
- If requirements (i) and (ii) are satisfied, the court shall immediately notify the other party and the notified party has three days to oppose the request.
- After the three-day term has expired, the court shall decide, within the following 10 days, whether to grant or not the precautionary measure.
The Arbitral Tribunal may, later on, lift, suspend or modify the precautionary measure granted by the court. The party to which the precautionary measure is granted shall file an arbitration request within 20 days following the notification of the order that granted it. If this deadline is not met, the court may revoke the precautionary measure at the request of the party affected by it.
Some of these proposals are similar to the amendments proposed in Bill No. 006/19, which was reported in this same publication, last year. However, Bill No. 006/19 did not pass because it was not put on the calendar for debate. Currently, Bill No. 009/21 has not been scheduled for debate in the plenary of the Senate.
A.2 Institutions, rules and infrastructure
A.2.1. Center for Arbitration and Conciliation of the Bogotá Chamber of Commerce
Since January 2022, the Center for Arbitration and Conciliation of the Bogotá Chamber of Commerce is administering expedited arbitration proceedings. This institution is the first in South America to administer these proceedings under the 2021 UNCITRAL Expedited Arbitration Rules. The expedited proceeding is a cost-effective proceeding for claims under USD 2 million. These rules encourage, among others, a more efficient procedural calendar but, at the same time, aim at preserving the procedural rights of the parties, who at any stage of the proceedings may agree to return to the traditional UNCITRAL Arbitration Rules.
A.2.2. Center for Arbitration and Conciliation of the Medellín Chamber of Commerce
In 2021, the Center for Arbitration and Conciliation of the Medellín Chamber of Commerce experienced an increase in international arbitration cases that are conducted under the International Arbitration Rules of such institution. This growth shows greater confidence in this institution’s rules and its list of arbitrators. Reportedly, the rules have also contributed to the diversification of international arbitration users, which no longer include solely large multinationals companies.
A.2.3. Insolvency proceedings administered by Colombia’s Chambers of Commerce
In 2021, Decree 560/2020 (“Decree 560“) completed its first year of implementation. The Covid-19 pandemic led Colombia’s National Government, to issue Decree 560 which authorizes the use of arbitration in insolvency proceedings, for the first time. Under Decree 560, companies and their creditors can appoint a mediator that will assist them in reaching an agreement to reorganize the company’s business. All objections, controversies or observations to the reorganization agreement may be submitted to arbitration. Decree 560 was later supplemented by Decree 842/20 which also allows the participation of absent or dissenting creditors within the arbitration proceedings.
Under Decrees 560 and 842 the award must be issued within a term not exceeding three (3) months. The award has res judicata effects with respect to all the parties and matters resolved. The insolvency arbitration rules were issued by the Colombian Confederation of Chambers of Commerce and later approved by the Superintendence of Companies. These rules apply to all insolvency arbitration proceedings, no matter the administering institution.
In the last year, Colombia’s Supreme Court confirmed a tutela decision (i.e., a constitutional action for the protection of constitutional rights) issued by the Bogota’s Superior Tribunal in the course of an insolvency proceeding that rejected a request to order the competent insolvency court to recognize a credit originated in an international arbitration award. This is the only judicial decision we are aware of in Colombia that has had this approach, which does not reflect the understanding that many arbitration practitioners have traditionally given to article 111 of the International Arbitration Statute. Moreover, four investment arbitration disputes brought against Colombia have been decided, creating important precedents for the protection of foreign investments under the treaties signed by Colombia. Colombia prevailed in three of these cases. These cases involve foreign investment from a broad range of sectors (e.g., mining, public utilities and banking sectors).
B.1 AAL Group Ltda. v. the Insolvency Court of the Superintendence of Companies
A 2019 international award ordered the company Vertical de Aviación S.A.S. (“Vertical de Aviación“) to pay AAL Group Ltda (“AAL Group“) approximately USD 7 million. Subsequently, within the reorganization proceeding of Vertical de Aviación, AAL Group requested the Insolvency Court of the Superintendence of Companies to recognize the award as a credit to be paid to AAL Group by Vertical de Aviación. The Court, however, rejected this request alleging that the award had not been recognized as outlined in section 3 of article 111 of the International Arbitration Statute stating that the execution of foreign awards requires prior recognition of the award by a judicial competent authority. Against this decision, AAL Group filed a tutela action alleging a violation of due process, equal treatment and access to justice because article 111 referred to the collection of payments ordered by an international arbitral tribunal and not the mere recognition of credit within an insolvency proceeding. The Superior Court of Bogotá denied the tutela action alleging that the decision was made based on a reasonable interpretation of article 111 of the International Arbitration Statute. The Supreme Court of Justice confirmed this decision. Although the Superior Court of Bogotá in its decision held that its jurisdiction was limited to verifying whether the interpretation of the Insolvency Court was reasonable, without reviewing the merits of the decision, the Supreme Court of Justice went a little further indicating that the Court’s interpretation of article 111 of the International Arbitration Statute was correct.
B.2 Gas Natural Fenosa v. Colombia
In 2017 Naturgy (formerly Gas Natural Fenosa) filed a request for arbitration against Colombia before the International Centre for Settlement of Investment Disputes (“ICSID“) and under the Colombia-Spain Bilateral Investment Treaty (“Colombia-Spain BIT“). Naturgy claimed Colombia disregarded the standards of fair and equitable treatment, full protection and security, and the standard of expropriation after the Government’s intervention and liquidation of Electrificadora del Caribe S.A. E.S.P. (“Electricaribe“) because the company was not in a position to provide energy services with the quality and continuity required under Colombian law.
On one hand, Naturgy claimed that Electricaribe’s situation arose from the lack of a comprehensive regulatory framework and protection from the Colombian Government. Naturgy also claimed that the Colombian Government failed to financially support the company and claimed damages amounting to USD 1.3 billion. On the other hand, Colombia denied all claims brought by Naturgy and filed a counterclaim against Naturgy, requesting Naturgy to pay for the damages and costs the intervention had caused.
The tribunal rejected Naturgy’s claims regarding fair and equitable treatment and full protection and security, considering that Naturgy had failed to conduct a proper due diligence review of the conditions of the investment. The tribunal also found that there had been no expropriation of Naturgy’s investment in Electricaribe because the government’s intervention was legitimate and reasonably supported by evidence. It did, however, confirm Colombia’s obligation to pay Naturgy for the sale of Electricaribe. The tribunal rejected Colombia’s counterclaims arguing that the Colombia-Spain BIT did not grant jurisdiction to decide them.
B.3 The Carrizosa family v. Colombia
In 2018 brothers Alberto, Felipe and Enrique Carrizosa initiated an investment arbitration proceeding against Colombia under the US-Colombia Trade Promotion Agreement (“US TPA“) before the Permanent Court of Arbitration. On the same date, Astrida Benita Carrizosa also filed a request for arbitration against Colombia under the US TPA before ICSID.
Both claims arose out of the Government’s decision to place the Granahorrar Bank into public ownership in 1998. The Carrizosa family was the majority shareholder of the bank.
Colombia claimed that both tribunals lacked jurisdiction on two grounds. First, Colombia argued that the claims were not covered by the US TPA which entered into force in 2012, many years after the alleged breach. Second, Colombia also claimed that the tribunal lacked jurisdiction as the Carrizosa brothers did not qualify as foreign investors despite their US-Colombian dual nationality. Both tribunals dismissed the Carrizosas’ claims on jurisdictional grounds. Regarding Astrida Carrizosa’s claims, the tribunal concluded that they concerned “pre-treaty conduct” and fell outside the scope of the US TPA. As to the Carrizosa brothers’ claim, the tribunal concluded that despite being dual citizens, their dominant and effective nationality was the Colombian, and therefore they did not qualify as foreign investors under the TPA.
B.4 América Móvil S.A.B. de C.V. v. Colombia
In 2016 América Móvil filed a request for ICSID arbitration against Colombia under the Colombia-Mexico Free Trade Agreement (“Colombia-Mexico FTA“). América Móvil’s claim arose out of the concession agreement signed between the parties in 1994 to provide mobile phone services. This agreement required the concessionaire to revert to the Colombian State all assets related to the concession, upon the concession’s termination. According to the claimant, this obligation to revert all concession-related assets was eliminated by Law No. 422/98 but in 2013, Colombia’s Constitutional Court stated that reversion clauses pre-dating Law No. 422/98 were still in force.
On one hand, América Móvil claimed that the decision by Colombia’s Constitutional Court breached the standard of fair and equitable treatment, as it contravened its legitimate expectations and the standard of expropriation. On the other hand, Colombia claimed that the tribunal lacked jurisdiction to hear América Móvil’s claim on the grounds that:
- The Colombia-Mexico FTA did not provide for the fair and equitable treatment standard.
- The claimant’s claim was contractual.
- The tribunal could not act as an appellate court to review local court’s decisions.
The tribunal rejected América Móvil’s claims. It concluded that Colombian Courts are the only authorized interpreters of Law 422/98 and as such, the decision to uphold the reversion of assets was within the State’s jurisdictional power.
B.4 Eco Oro Minerals Corp. v. Colombia
In 2016 Eco Oro Minerals Corp. (“Eco Oro“) filed an ICSID request for arbitration against Colombia under the Colombia-Canada Free Trade Agreement (“Colombia-Canada FTA“). Eco Oro’s claim arose out of Colombia’s decision to ban mining in the area of its Angostura gold-silver deposit, seeking to protect local high-mountain ecosystems known as páramos.
On one hand, Eco Oro claimed that Colombia destroyed the Company’s investment value by taking “arbitrary, non-transparent and inconsistent” measures that restricted mining activities in the Páramo de Santurbán area. In light of these measures, Eco Oro claimed that Colombia breached the standards of minimum standard of treatment and expropriation. On the other hand, Colombia challenged the tribunal’s jurisdiction, arguing that Eco Oro was not a protected investor under the Colombia-Canada FTA and that some of the measures alleged by Eco Oro took place after the submission of the Notice of Intent. Further Colombia argued that the general exception in article 2201(3) of the Colombia-Canada FTA excluded environmental measures from the scope of its consent to arbitrate.
The Tribunal upheld its jurisdiction and concluded that Colombia breached the minimum standard of treatment standard because Colombia was aware that Eco Oro’s mining rights overlapped with the protected zone of the Páramo de Santurbán and continued to encourage the Company’s investment therein. In addition, the tribunal found that Colombia frustrated Eco Oro’s legitimate expectations unjustly and arbitrarily by failing to delimit the Páramo de Santurbán. Finally, the tribunal concluded that there was no expropriation given that Colombia’s measures were a legitimate exercise of police powers seeking to protect the environment. An award for damages is still pending.
 See Senate’s Bill 009 of 20 July 2021, articles 33-35.
 Under Colombian Law a reorganization is an insolvency proceeding aimed at preserving the company which may, in any case, normalize its commercial relationships through the restructuring of its assets and liabilities.
 See Naturgy Energy Group, S.A. and Naturgy Electricidad Colombia S.L. (formerly Gas Natural SDG, S.A. and Gas Natural Fenosa Electricidad Colombia, S.L.) v. Colombia, ICSID Case No. UNCT/18/1, Award, March 12, 2021.
 See Alberto Carrizosa Gelzis, Enrique Carrizosa Gelzis, Felipe Carrizosa Gelzis v. Colombia, PCA Case No. 2018-56, Award, 7 May 2021.
 See América Móvil S.A.B. de C.V. v. Colombia, ICSID Case No. ARB(AF)/16/5, Award, 7 May 2021.
 See Eco Oro Minerals Corp. v. Colombia, ICSID Case No. ARB/16/41, Award, 9 September 2021.