Shifting Sands: How New Interpretations Could Reshape U.S.-Colombian Investments
15 min read
U.S.-Colombian relations are currently experiencing a period of heightened tension, as evidenced by recent trade measures and diplomatic exchanges. Moreover, in the last weeks the Free Trade Commission (the "Commission") of the United States-Colombia Trade Promotion Agreement (the "TPA") issued Decision No. 9, interpreting investment protection provisions under Chapter Ten of the TPA (hereinafter the "Decision"). Chapter Ten of the TPA (on investment) provides key substantive protections for U.S. investors in Colombia (and Colombian investors in the U.S.), including fair and equitable treatment, full protection and security, and protection against expropriation, together with the right to bring claims against Colombia through investor-state arbitration for damages stemming from Colombia’s breaches of those obligations. U.S. investors with existing or planned investments in Colombia, as well as Colombian investors with existing or planned investments in the U.S., should consider proactive measures to protect their investments.
A Powerful Framework
The TPA was enacted in 2006 and entered into force on May 15, 2012. It seeks to "ensure a predictable legal and commercial framework for business and investment" while guaranteeing that "foreigners and nationals are protected under the general principle of equality of treatment."1 Pursuant to the TPA, investors may file international arbitration against the host State (i.e., Colombia or the U.S.) if the State has violated its substantive obligations to protect that investor and its investment. This means that instead of having to rely on local courts, investors can have their cases heard by independent international arbitrators either before ICSID (the World Bank's specialized tribunal for investment disputes) or under UNCITRAL rules (the United Nations' international arbitration framework). In 2012, U.S. Foreign Direct Investment in Colombia was about $16 billion.2 By 2021, that number had risen to over $22 billion, with significant investments in sectors like oil and gas, mining, infrastructure, and manufacturing. U.S. companies are some of the largest investors in Colombia, benefiting from the TPA's protections.3
The TPA's investment protections are valuable for qualifying investors. Under Article 10.5, the minimum standard of treatment requires the States to provide investors of the other State "fair and equitable treatment" and "full protection and security," which specifically encompasses protection against denial of justice in legal proceedings and the level of police protection required under customary international law.4 Significantly, tribunals analyzing treaties with similar provisions have interpreted this standard to include "an obligation not to frustrate the investor's legitimate expectations, provided they are reasonable and objective in light of the circumstances and the State's conduct."5 The TPA also explicitly provides for monetary damages, applicable interest, and restitution of property.6
Since entering into force, U.S. investors have brought five international arbitration cases against Colombia, while Colombian investors have not brought claims against the U.S.7 Notably, while Colombia has successfully defended several of these cases, all of which involved State conduct prior to the current administration of President Gustavo Petro, the U.S. has never faced an investor-State dispute under the TPA.
Precarious Timing
The timing of the Commission's interpretation is particularly significant as it purports to relate to the scope of these substantive investment protections during a period of volatility in Colombia. President Petro's administration has implemented a series of structural reforms that raise significant concerns for U.S. investments across Colombia's key economic sectors. These include unilaterally banning new oil and gas exploration, despite oil accounting for approximately one-third of Colombia's export revenue.8 The administration has also granted sweeping ministerial powers to suspend mining projects through Decree 044, allowing broad discretion to establish temporary natural reserves with limited procedural safeguards.9 In the healthcare sector, the government has forcibly seized control of private providers through administrative intervention after failed legislative reforms.10 Similarly, it attempted to assert control over energy regulation through executive action, though this was temporarily blocked by judicial intervention.11 While States commonly justify such investment-affecting measures on public policy grounds, these actions raise significant concerns for U.S. investments across Colombia's key economic sectors. Regarding the U.S. position on the Decision, U.S. Ambassador Tai stated: "Like President Biden, I oppose the ability of private corporations to attack labor, health, and environmental policies through ISDS. This decision with Colombia demonstrates our willingness to use tools under existing agreements to ensure arbitrators adhere to the U.S. understanding of its commitments and seek to address concerns about ISDS."12
U.S. investors have historically pursued claims worth billions against Colombia in sectors like infrastructure, mining, and real estate.13 Moving forward, Colombia may argue in any investor-State arbitration under the TPA filed against it that the Decision narrows the scope of investment protections that it is required to afford to U.S. investors, to their detriment. The current environment warrants heightened scrutiny, given Colombia's role as the U.S.'s largest South American trading partner and bilateral trade reaching $53.5 billion in 2022.14
Summary of the Decision
Following consultations between the U.S. and Colombia, the Commission's interpretation addresses several key provisions under the investment chapter of the TPA, including the minimum standard of treatment, expropriation, investment and environment, submission of claims, governing law, and definitional matters. Given these developments, investors must understand their key protections under the TPA and consider securing additional layers of protection.
Minimum Standard of Treatment: Article 10.5 of the TPA establishes that Colombia and U.S. must accord the investments of the U.S. and Colombia, respectively, the "Minimum Standard of Treatment." The provision specifies that this standard includes "fair and equitable treatment" and "full protection and security," and further provides that these concepts "do not require treatment in addition to or beyond that which is required by [the customary international law minimum] standard [of treatment], and do not create additional substantive rights."15 "Fair and equitable treatment" includes protection against denial of justice, while "full protection and security" requires police protection at the level required by customary international law.16
Interpreting this provision, the Decision provides that, with respect to Article 10.5 claims, a claimant must demonstrate "first, the existence and applicability of a relevant rule of customary international law ... and second, that a Party has engaged in conduct that violates that rule." On establishing such rules, the Decision specifies that "decisions of international courts and arbitral tribunals interpreting 'fair and equitable treatment' ... are not themselves instances of State practice for purposes of evidencing customary international law." Regarding the investors’ expectations, the Decision notes that "the mere fact that a Party takes or fails to take an action that may be inconsistent with an investor's expectations does not constitute a breach of Article 10.5, even if there is loss or damage to the covered investment as a result; instead, something more is required." The Decision further addresses non-discrimination, stating it "is also not currently a component element of 'fair and equitable treatment' subject to Article 10.5 outside the context of discriminatory takings and discriminatory access to judicial remedies or treatment by the courts."
Denial of Justice under Minimum Standard of Treatment: In interpreting Article 10.5 on minimum standard of treatment, the Decision refers to circumstances that may constitute a denial of justice, including "corruption in judicial proceedings, discrimination or ill-will against an alien plaintiff or defendant, or executive or legislative interference with the freedom or impartiality of the judicial process." The Decision also states that neither "erroneous" domestic court decisions nor the evolution of judge-made law within common law systems constitute denial of justice in themselves.
Expropriation: Article 10.7 of the TPA prohibits expropriation or nationalization of covered investments except where conducted "(a) for a public purpose; (b) in a non-discriminatory manner; (c) on payment of prompt, adequate, and effective compensation; and (d) in accordance with due process of law and Article 10.5."17 The provision covers both direct expropriation through formal transfer of title and indirect expropriation through measures with "equivalent" effect. Under this provision, the Commission states that claimants should show the measure "destroyed all, or virtually all, of the economic value of its investment." The Decision also addresses investment-backed expectations, noting that these "depend, to the extent relevant, on factors such as whether the government provided the investor with binding written assurances and the nature and extent of governmental regulation."
Environmental Measures: Article 10.11 of the TPA, which addresses investment and environmental protection, provides: "[n]othing in this Chapter shall be construed to prevent a Party from adopting, maintaining, or enforcing any measure otherwise consistent with this Chapter that it considers appropriate to ensure that investment activity in its territory is undertaken in a manner sensitive to environmental concerns."18 The Decision states that Article 10.11 informs the interpretation of other Chapter Ten provisions, including the Minimum Standard of Treatment (Article 10.5) and Expropriation (Article 10.7). The Commission, moreover, affirmed that Parties retain authority to implement environmental measures affecting investment value, provided such measures remain consistent with Chapter Ten's requirements.19
Submission of Claims: Article 10.16 of the TPA sets out the conditions under which an investor may submit a claim to arbitration, including claims for breach of obligations under Section A, investment authorizations, or investment agreements, provided the claimant has incurred loss or damage.20 The Decision further states that "no claim based solely on speculation as to a future breach or future loss or damage may be submitted." It further notes the distinction between direct investor claims and those brought on behalf of enterprises, commenting that these "serve to address discrete and non-overlapping types of injury."
Investment Definitions & Interpretations: With respect to investment definitions under Article 10.28 of the TPA, the Commission specifies that references to "applicable" and "domestic" law "affirm that the protections in Chapter Ten [of the TPA] only apply to investments made in compliance with that Party's domestic law." The Decision states that "as a general matter, trivial violations of the applicable law will not put an investment outside the scope of Chapter Ten." The Decision also explains that an investor "'attempts through concrete action to make' an investment when that investor has channelled resources or capital in order to set up a business or applied for a permit or license."
Under Article 10.22.3 of the TPA, interpretations issued by the Free Trade Commission are binding on tribunals, and any decision or award must be consistent with them. While this binding interpretation mechanism exists alongside Article 10.20.2, which permits non-disputing Party ("NDP") submissions on treaty interpretation - a right the U.S. frequently exercises - these NDP submissions have a distinct and less binding effect when tribunals consider questions of interpretation.21
Takeaways
Given these developments, U.S. Investors with current or potential investments in Colombia, as well as Colombian investors with current or potential investments in the U.S., should carefully evaluate how recent events may impact their investments and future recourse should issues arise. Moreover, they should assess how the Decision may impact their protections under the TPA. Proactive measures, including comprehensive investment structuring and treaty planning strategies, can help safeguard investor interests in this evolving landscape.
White & Case's International Arbitration practice has extensive experience advising on investment protections related to these jurisdictions.
1 United States-Colombia Trade Promotion Agreement, U.S.-Colom., Nov. 22, 2006, Pub. L. No. 112-42, 125 Stat. 462 (2011) (entered into force May 15, 2012), Preamble 5-6.
2 World Bank, Foreign Direct Investment, Net Inflows (BoP, Current US$). World Bank (2025); UNCTAD. World Investment Report 2024. United Nations Conference on Trade and Development, 2024).
3 World Bank, Foreign Direct Investment, Net Inflows (BoP, Current US$). World Bank (2025); UNCTAD. World Investment Report 2024. United Nations Conference on Trade and Development, 2024).
4 United States-Colombia Trade Promotion Agreement, U.S.-Colom., Nov. 22, 2006, Pub. L. No. 112-42, 125 Stat. 462 (2011) (entered into force May 15, 2012), Article 10.5.2(a)-(b)
5 See e.g., Mondev International Ltd. v. United States of America, ICSID Case No. ARB(AF)/99/2, Award, 116 (11 October, 2002); International Thunderbird Gaming Corporation v. The United Mexican States, UNCITRAL (NAFTA), Award (26 January 2006) 192-201.
6 United States-Colombia TPA, U.S.-Colom., Nov. 22, 2006, Pub. L. No. 112-42, 125 Stat. 462 (2011) (entered into force May 15, 2012), Article 10.26.1 (providing that tribunals may award "monetary damages and any applicable interest" and "restitution of property").
7 See e.g., Amec Foster Wheeler and others v. Colombia, ICSID Case No. ARB/19/34 (2019); Sea Search-Armada v. Colombia, ICSID Case No. ARB/22 (2022); Seda and others v. Colombia, ICSID Case No. ARB/19/6 (2019); Cosigo Resources, Ltd., Cosigo Resources Sucursal Colombia, Tobie Mining and Energy, Inc. v. Republic of Colombia, UNCITRAL (2016); Neustar, Inc. v. Republic of Colombia, ICSID Case No. ARB/20/34 (2020).
8 See San Juan, Estefanía, Marchili, Silvia & Nyer, Damien, "On Colombia's Threatening Rhetoric against ICSID Arbitration and Implications for Foreign Investors," White & Case LLP Alert (December 12, 2024); see also John Otis, 'Oil-Exporting Colombia Says No to Oil Exploration,' The Wall Street Journal, 28 January 2023 (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.").
9 Id.; 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.
10 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; 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.
11 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; Olga Patricia Rendón Marulanda, 'Petro cannot take control of the CREG: Council of State suspends presidential decree,' El Colombiano, 2 March 2023 ("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 (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).
12 Press Release of the U.S. Trade Representative, The United States and Colombia Issue FTC Decision Interpreting Standards of Investment Protection Under the United States-Colombia TPA, 20 January 2025.
13 See, e.g., Amec Foster Wheeler and others v. Colombia, ICSID Case No. ARB/19/34 (2019); Sea Search-Armada v. Colombia, ICSID Case No. ARB/22 (2022); Seda and others v. Colombia, ICSID Case No. ARB/19/6 (2019); Cosigo Resources, Ltd., Cosigo Resources Sucursal Colombia, Tobie Mining and Energy, Inc. v. Republic of Colombia, UNCITRAL (2016); Neustar, Inc. v. Republic of Colombia, ICSID Case No. ARB/20/34 (2020).
14 Office of the United States Trade Representative, Colombia Trade & Investment Summary (2023).
15 United States-Colombia Trade Promotion Agreement, U.S.-Colom., Nov. 22, 2006, Pub. L. No. 112-42, 125 Stat. 462 (2011) (entered into force May 15, 2012), Article 10.5.
16 Id.
17 United States-Colombia TPA, U.S.-Colom., Nov. 22, 2006, Pub. L. No. 112-42, 125 Stat. 462 (2011) (entered into force May 15, 2012).
18 United States-Colombia TPA, U.S.-Colom., Nov. 22, 2006, Pub. L. No. 112-42, 125 Stat. 462 (2011) (entered into force May 15, 2012), Article 10.11.
19 Free Trade Commission Decision No. 9 of the United States-Colombia Trade Promotion Agreement, 5 (January 15, 2025) (“Article 10.11 informs the interpretation of other provisions of Chapter Ten, including Articles 10.5 and 10.7, and protects the right of either Party to adopt, maintain, or enforce any measure otherwise consistent with Chapter Ten to ensure that investment is undertaken in a manner sensitive to environmental concerns. Chapter Ten is not intended to undermine the ability of a Party to take measures that it considers appropriate to address environmental concerns, even when those measures may affect the value of an investment, if otherwise consistent with the Chapter.”)
20 United States-Colombia TPA, U.S.-Colom., Nov. 22, 2006, Pub. L. No. 112-42, 125 Stat. 462 (2011) (entered into force May 15, 2012), Article 10.16.21 See The Renco Group, Inc. v. Republic of Peru, ICSID Case No. UNCT/13/1, Partial Award on Jurisdiction, 15 July 2016 156 ("In its Decision on Scope, the Tribunal observed that it credits the views of both State Parties with the highest respect. However, the Tribunal is not bound by the views of either State Party. Although the Tribunal must “take into account” any subsequent agreement between the State Parties pursuant to Article 31(3)(a) of the VCLT, the proper interpretation of Article 10.18 and how it should be applied to the facts of this case are tasks which reside exclusively with this Tribunal.”); see also e.g., Sea Search-Armada, LLC v. Republic of Colombia, PCA Case No. 2023-37, Non-Disputing Party Submission of the United States of America (8 December 2023); Vercara, LLC (formerly Security Services, LLC, formerly Neustar, Inc.) v. Republic of Colombia (ICSID Case No. ARB/20/7), Submission of the United States (13 May 2022); Amec Foster Wheeler USA Corporation, Process Consultants, Inc., and Joint Venture Foster Wheeler USA Corporation and Process Consultants, Inc. v. Republic of Colombia, ICSID Case No. ARB/19/34, Non-Disputing Party Submission of the United States of America (4 April 2022); Monte Glenn Adcock, Stephen John Bobeck, Justin Tate Caruso and others v. Republic of Colombia
(ICSID Case No. ARB/19/6), U.S. Submission Pursuant to Article 10.20.2 of the U.S.-Colombia TPA (26 February 2021).
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