Latin America wins arbitration

To invest in a particular country, legal certainty is a key factor. The stability of the legal framework and the effectiveness of justice in enforcing the rules are issues that may encourage or inhibit the inflow of foreign capital. Although legal security has generally improved in Latin America , progress is still uneven between countries and, in some cases, insufficient. Therefore, it is not surprising that alternative dispute resolution mechanisms such as international arbitration have become more prominent.

According to José Guardo, a partner at Clifford Chance and a member of the firm’s Latin America team, the level of legal security is uneven in the region, but it does not have a fundamental impact in discouraging the arrival of foreign capital: “At the contractual level There are always formulas available such as the subjection to third country rules and the use of international arbitration to overcome these problems. ” He points out that “when it comes to contracting with local government in the framework of investments under public-private schemes or in regulated sectors, governments generally agree to submit to international arbitration to eliminate the natural misgivings of foreign investors.”

Many fans

In fact, many countries opt to sign bilateral investment protection treaties (TBIs). According to Marta Colomar-García, a partner in Diaz, Reus & Targ, a firm with offices in the United States and in many Latin American countries, “the clause that gives more peace of mind to foreign investment is the solution of differences between investors And states, which normally provides that in the event of a dispute between the investor and the country in which it is invested, it will be settled before an international tribunal or before an arbitral tribunal such as the International Center for Settlement of Investment Disputes (ICSID) , The International Court of Arbitration of the International Chamber of Commerce or the United Nations Commission on International Trade Law. “

MONEY FLOWS

Some figures show a decline in foreign investment in Latin America, but in the opinion of Garrigues’ partner Javier Ybáñez, it is due “mainly to the prices of raw materials that have a great influence on foreign investment and not to the lack of “Clifford Chance partner Javier Amantegui affirms that the investment prospects are volatile, but that it is not possible for the Spanish companies to remain confident in Latin America, especially in Mexico, Peru and the rest of the countries of the Pacific Alliance. The latest statistics published by the Economic Commission for Latin America and the Caribbean (ECLAC) show a 9.1% decline in the volume of FDI in the region in 2015, if not more than in the rest of the world. Brazil is excluded from the computation,The region recorded growth of 2%, with Mexico, Chile, Colombia and Argentina as the main recipients.

Of course, such agreements are not always well regarded by certain governments. The lawyer recalls that last May Ecuador terminated 16 BITs because, among other things, private companies had initiated arbitrations based on those treaties against the country that had cost them millions of dollars by decisions of an arbitration tribunal in the country. Which the country says do not trust. However, according to a survey by the consulting firm Attitude Consulting among lawyers at some of the main Latin American law firms, many believe that further progress will be made through bilateral treaties and that China – which is already the largest trading partner of many Latin America – will be one of the great winners.

In any case, Javier Ybáñez, responsible partner of Garrigues in Latin America, points out that “in some countries, progress should be made in consolidating confidence in the administration of justice, either through judicial reforms or by making it easier to resort to alternative mechanisms, Such as arbitration and, where applicable, respecting and enforcing arbitration awards issued abroad that may be unfavorable to important companies in the region. ” It also claims to move forward not to change the rules of the game halfway – an affirmation that extends to Spain -, guaranteeing a stable regulatory framework, not subject to political changes.

Along the same lines, attorney Carmen Araujo, who was responsible for General Motors’ legal counsel for Latin America, points out that “the investor’s expectation and aspiration is that the rules of the game be clear, respected and fulfilled.” In addition, it points out that “the promulgation of norms has to be accompanied by regulatory experts and judges who support the principles and objectives of the same and are consistent with legal guarantees.” Otherwise, he says, “business can be affected by uncertainty or slowing down investor initiatives.”

Expert lawyers in the region insist on pointing to Chile as the country with greater legal certainty and, therefore, more attractive for investments. The cases of Mexico, Colombia, Peru and even Uruguay are also highlighted, and they cite Argentina as a new focus of opportunities, after political change. In addition, Brazil, which has important labor and fiscal reforms pending, is also attracting great interest. Not surprisingly, Baker & McKenzie predicts that the latter country will have the largest growth in mergers and acquisitions in the world in 2018, according to Pablo Dorronsoro, a partner of the firm and member of its European-Latin American committee.

In general, the sectors with the best expectations are those related to road infrastructures, ports, renewable energies and, more recently, telecommunications, according to José Guardo. Meanwhile, Marta Colomar-García points out that although the trend has been investing in natural resources, companies are looking at new sectors such as electricity or food, without losing sight of oil, which remains a strong industry. Dorronsoro adds that the availability of assets in liquidation or troubled companies has also been a trend of investment in the region.