On Colombia’s Threatening Rhetoric against ICSID Arbitration and Implications for Foreign Investors

Since the election of President Gustavo Petro, Colombia’s executive has repeatedly proposed structural reforms that undermine foreign investment across sectors, reflecting a worrisome trend across Latin America. Despite legislative opposition and judicial decisions hindering many of these reforms, his administration has nonetheless sought to circumvent these setbacks and enact structural change through sweeping executive action.

The President’s focus has centered on industries that are critical to investment and economic development. Early in his tenure, he followed through on a key campaign promise by announcing a ban on new oil and gas exploration projects, despite concerns over the potential economic loss from oil, which accounts for about one-third of Colombia’s export revenue.¹ His government has also sought to assert control over Colombia’s power generation sector in various ways, including issuing a decree to assume the functions of the Energy and Gas Regulator (CREG).² Although the decree was enjoined by the judiciary, Petro sought to assert State control by appointing temporary ‘acting’ officials to the regulator, effectively gaining indirect control and stalling its normal functions, thereby threatening Colombia’s long-standing market-based electricity pricing system.³ Moreover, after his ambitious healthcare reform package was defeated in the legislature, his administration “intervened” the two largest Health Promotion Entities (Entidades Promotoras de la Salud, or “EPSs”) in Colombia, essentially taking over their management and seizing their assets, goods, and business.⁴

With respect to mining, among other measures, Colombia enacted Decree 044, which grants Colombia’s Ministry of Environmental and Sustainable Development broad discretion to intervene in or suspend mining projects by establishing temporary natural reserves.⁵ Although the decree is presented as environmentally motivated, the executive’s broad use of environmental authorities to disrupt foreign investment centralizes power and lacks clear guidelines, all while threatening adjacent sectors such as oil, gas, and renewable energy.

Now, following a recent international arbitration award, Petro is targeting international arbitration, the reliable dispute resolution process investors have historically used to address the actions of similarly volatile Latin American governments.

Specifically, an international arbitration tribunal established under the auspices of the World Bank’s International Centre for Settlement of Investment Disputes (ICSID) issued a decision in Telefónica v. Colombia, which orders the Colombian government to pay US$ 380 million to a telecommunications company for breaching Colombia’s bilateral investment treaty with Spain.⁶ The decision has spurred a series of reactionary statements from the current administration with potentially drastic consequences. They have advocated for renegotiating arbitration clauses in various free trade agreements and overhauling the international dispute settlement framework, presenting these reforms as measures to protect the autonomy of domestic judicial systems in developing countries like Colombia.⁷ This rhetoric is not new for Latin America. In the past, populist regimes in Bolivia, Ecuador, and Honduras have taken similar steps to curtail private investment and avoid international liability, all under the guise of defending domestic sovereignty. Notably, only four States have withdrawn from the ICSID Convention, with Honduras doing so last year.⁸

Given Petro’s proven propensity for anti-private investment politics, the President’s ominous instructions to “begin to [re]-negotiate this article that is harmful to national sovereignty, both in the free trade agreement with the United States like in the free trade agreement with Europe”⁹ should not be taken lightly. The possibility remains that Colombia may even take further steps and withdraw from the ICSID Convention. Accordingly, this is a critical time for investors to assess their international investment protections available under current international investment treaties.

Implications of Renegotiation

President Petro’s plan to renegotiate treaties’ arbitration provisions and distance Colombia from ICSID arbitration challenges private investment and would have significant domestic and international repercussions.

• International Investment Treaties. International investment treaties are agreements made between States that provide protections regarding a State’s treatment of investments made by investors from the other State. Chief among these protections is the investors’ right to file for international arbitration against the State to seek damages for the harm such State has caused to their investment. Colombia has entered into Bilateral Investment Treaties (“BITs”) with Spain, France, the United Kingdom, and China, among many other nations.¹⁰ Colombia is also a party to several Free Trade Agreements (“FTAs”), including the United States-Colombia Trade Promotion Agreement, the Canada-Colombia FTA, and the Colombia-Ecuador-EU-Peru Trade Agreement.¹¹ Under these treaties, as presently written, Colombia has committed to guarantee substantive protections to foreign investors, including fair and equitable treatment (often meaning national treatment or most favored national treatment) and protection from unlawful expropriation, among others. These treaties remain in force notwithstanding Colombia’s renegotiation of arbitration clauses within them and will continue providing alternative forums for international dispute resolution.
• Foreign Relations. Renegotiations of free trade agreements are inherently bilateral or multilateral undertakings, oftentimes necessitating legislative approval from all parties involved. For example, a significant amendment to the United States-Colombia Trade Promotion Agreement – specifically targeted for renegotiation by Petro¹² – would require ratification by the United States Congress. This process is lengthy and could become politically contentious, potentially resulting in further modifications to the renegotiated terms. Consequently, the President may secure his desired adjustments to the arbitration clauses only by compromising on other provisions within these agreements.
• Increase in Disputes Related to Foreign Investments. Altering current treaty provisions, such as “fair and equitable treatment guarantees” or other basic investor protections found in free trade agreements between developing countries and large investor states, could negatively affect the perception of Colombia as an attractive investment destination. Indeed, the elimination of these guarantees has notably diminished investor confidence and led to an increase in international arbitration proceedings for countries like Bolivia, Ecuador, and Venezuela. To illustrate, since denouncing the ICSID Convention, Venezuela has been named as Respondent State in at least 37 arbitration proceedings,¹³ Bolivia in at least 20,¹⁴ Ecuador in at least 16,¹⁵ and Honduras in at least 5.¹⁶

Investors may have Protections under International Investment Treaties

In light of the circumstances, it is advisable for investors to assess and preserve their international rights.

• Prepare to Act Quickly. Colombia’s anti-arbitration rhetoric may not stop at attempting to renegotiate arbitration clauses in investment treaties. Other Latin American countries that withdrew from the ICSID Convention expressed similar sentiments before ultimately denouncing the Convention.¹⁷ However, denunciation does not immediately insulate a Contracting State from ICSID arbitration jurisdiction. Instead, it takes effect six months after receipt of such notice, allowing investors who submit notices of dispute within this short window to potentially retain ICSID jurisdiction.¹⁸ Therefore, investors with potential disputes against Colombia should consult legal counsel promptly to ensure they are prepared to act quickly and preserve their protections.
• Manage Local Proceedings. Should local administrative or judicial remedies be considered, investors should account for Treaty requirements to preserve their international rights. Some Treaties, for example, bar international arbitration under Treaties if local proceedings have been previously filed or are ongoing.
• Consider Communications with Stakeholders. Investors may be served by referencing their international rights in communications. Moreover, should a dispute arise, contemporaneous communications, including letters, e-mails, and others, are evidence that tribunals carefully review.

We routinely assist investors with creating and executing integrated strategies that preserve and leverage international investment protections.

Christopher Ozomgi (Law Clerk, Miami) contributed to the development of this publication.

_{1 John Otis, 'Oil-Exporting Colombia Says No to Oil Exploration,' The Wall Street Journal, 28 January 2023 (available here) (Petro's "government has suspended fracking operations, and he says there is no need for new oil exploration . . . Oil-industry analysts and economists, however, say Mr. Petro's leftist government has failed to explain how it will wean Colombia off oil—which makes up about one-third of the nation's export earnings—and provide the energy needed for this developing country to grow. They predict that by moving too fast, his policies will make the country poorer.").
2 Decree 227 of 2023, 'By which some of the presidential regulatory functions regarding public utility services are resumed, and other provisions are enacted,' 16 February 2023 (available here).
3 Olga Patricia Rendón Marulanda, 'Petro cannot take control of the CREG: Council of State suspends presidential decree,' El Colombiano, 2 March 2023 (available here) ("For now, President Gustavo Petro will not be able to make decisions on energy tariffs, as he intended, since the Council of State has just issued urgent precautionary measures, temporarily suspending the legal effects of Decree 227 of February 16, 2023."); Licsa Gómez, 'The Council of State overturned the appointment of another of the commissioners nominated by Gustavo Petro to the CREG,' Infobae, 25 October 2024 (available here) (The Council of State of Colombia issues a ruling which "states in its resolution: 'TO DECLARE THE NULLITY of Decree 2004 of November 21, 2023, through which the President of the Republic appointed Mr. José Medardo Prieto Suárez as an expert commissioner, code 0090, of the personnel of the Energy and Gas Regulatory Commission (CREG).' In the same vein, the Council of State emphasizes that the appointment as 'acting' in an entity such as the CREG is not appropriate, as these positions are exclusive, prohibiting temporary or acting appointments by the Ministry or sector entities.") (emphasis added).
4 Health Superintendency, Resolution 2024160000003002 – 6, 'By which it is ordered the immediate seizure of goods, assets, and business, as well as the forced administrative intervention to manage EPS SANITAS S.A.S., identified with NIT. 800.251.440-6,' 2 April 2024 (available here); See Juan Diego Quesada, 'Petro intervenes the largest EPS in the country in response to Congress, which has overturned his reform,' El Pais, 3 Abril 2024 (available here).
5 Decree 044 of 2024, 'By which criteria are established to declare and delimit temporary natural resource reserves within the framework of mining-environmental planning, and other provisions are issued,' 30 January 2024 (available here); See Camilo Sanchez, 'The new natural reserves decree intensifies the divide between Petro's government and the mining unions,' El Pais, 15 February 2024 (available here).
6 Press Release, White & Case LLP, 'White & Case Secures US$380 Million ICSID Arbitration Award for Telefónica S.A.,' 13 November 2024 (available here).
7 Press release, Presidency of the Republic of Colombia, 'Government initiatives to adjust arbitration clauses in international treaties,' 25 November 2024 (available here) ("It is necessary for countries like Colombia to explore new formulas in which the competent judge to settle such disputes is defined, among which it is not ruled out that these disputes may be resolved by national courts.").
8 On 2 May 2007, the Plurinational State of Bolivia denounced the ICSID Convention; on 6 July 2009, the Republic of Ecuador denounced the ICSID Convention; and on 24 February 2024, Honduras denounced the ICSID Convention. Ecuador subsequently re-joined the ICSID Convention on June 21, 2021 after the political climate in the country swung back in favor of foreign investment with the election of a new President. See Insight Alert, White & Case LLP, 'Honduras ICSID Denunciation and Implications for Foreign Investors,' 15 March 2024 (available here). 
9 Press release, Presidency of the Republic of Colombia, 'Government initiatives to adjust arbitration clauses in international treaties,' 25 November 2024 (available here) ("In compliance with the instruction given by the President of the Republic, Gustavo Petro Urrego, to begin as soon as possible the renegotiation of an article 'damaging to national sovereignty in the free trade agreements with both the United States and the European Union,' regarding the clauses related to arbitration.").
10 See Colombia - Spain BIT (2005); Colombia - France BIT (2014); Colombia - United Kingdom BIT (2010); China - Colombia BIT (2008). Colombia is also a party to the Colombia - Spain BIT (2021) (signed, not in force).
11 See Colombia - United States TPA (2006); Canada - Colombia FTA (2008); Colombia - Ecuador - EU - Peru Trade Agreement (2012).
12 Press release, Presidency of the Republic of Colombia, 'Government initiatives to adjust arbitration clauses in international treaties', 25 November 2024 (available here) ("In compliance with the instruction given by the President of the Republic, Gustavo Petro Urrego, to begin as soon as possible the renegotiation of an article 'damaging to national sovereignty in the free trade agreements with both the United States and the European Union,' regarding the clauses related to arbitration.").
13 Of those arbitration cases, 15 were before ICSID, while the remaining cases were under the United Nations Commission on International Trade Law ("UNCITRAL") Rules before the Permanent Court of Arbitration ("PCA") or under the ICSID Additional Facility Rules, which provides for arbitration of certain disputes that fall outside the scope of the ICSID Convention. See Venezuela, cases as Respondent State (available here).
14 Of those, five were before ICSID, while the remaining cases were before the PCA under the UNCITRAL Rules or before the Arbitration Institute of the Stockholm Chamber of Commerce ("SCC"). See Bolivia cases as Respondent State (available here).
15 Of those, two were before ICSID, while the remaining cases were before the PCA under the UNCITRAL Rules. See Ecuador, cases as Respondent State (available here).
16 Of those, 4 were before ICSID. See Honduras, ICSID Cases Database (available here).
17 Fernando Cabrera Diaz, 'Ecuador threatens cancellation of oil contracts unless ICSID nixed as arbitration forum,' Investment Treaty News, 29 August 2008 (available here) (One year prior to denouncing the ICSID Convention, Ecuador seeks to "either modify its BITs or convince potential claimants to keep arbitrations in Latin America," so as to avoid ICSID arbitration); 'If Honduras Decides to Withdraw from ICSID, It Would Send a Terrible Message to Investors,' Proceso Digital, 16 November 2023 (available here) ("Honduras threatens to withdraw from the Washington-based investment dispute arbitration center in protest over the claim made by Prospera for US$ 11 billion."). 
18 Insight Alert, White & Case LLP, 'Honduras ICSID Denunciation and Implications for Foreign Investors,' 15 March 2024 (available here) ("When Bolivia, Ecuador and Venezuela denounced the ICSID Convention, numerous investors filed ICSID cases against the States during the six-month window before the denunciation became effective."); see, e,g, Venoklim Holding B.V. v. Bolivarian Republic of Venezuela, ICSID Case No. ARB/12/22; Blue Bank International & Trust (Barbados) Ltd. v. Bolivarian Republic of Venezuela, ICSID Case No. ARB 12/20 (interpreting Article 72 in conjunction with Article 71 of the ICSID Convention and holding that consent could be perfected by an investor at any time before the expiry of the six-month period following notice of denunciation. Observing that precluding any claims filed after receiving the notice of denunciation would give immediate effect to Venezuela's denunciation, which would be contrary to the six-month limitation in Article 71, as well as to the principle of legal certainty).}

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