Bilateral Investment Treaty Between Colombia And Spain

Law 437 of 1998 issued on February 17, 1998 by the Colombian Congress approved the bilateral investment treaty executed on June 9, 1995 between the Republic of Colombia and the Kingdom of Spain for the reciprocal protection and promotion of foreign investment. One of the most important provisions of this treaty is article V in which a protection for foreign investors against expropriation and nationalization practices has been established by granting the investor the right of adequate compensation.

Now this law must be presented by the Government to the Constitutional Court in order to obtain its constitutional approval. The constitutional review is a very sensitive issue in this case since the court has recently overruled the clauses of expropriation and nationalization contained in bilateral treaties executed with Great Britain and Cuba.

In those occasions, the Court held that those clauses were in violation of the equal rights provision (national treatment) contained in the National Constitution, since article 58 of the same establishes the possibility of administrative expropriation without right of adequate compensation for nationals and foreigners, when the social interest and the public use requires the expropriation.

In order for the expropriation without adequate compensation to proceed it would be necessary for the Congress to prove equity reasons and to have the favorable vote of the absolute majority of the members of the two chambers of the Congress.

Taking into account the foreign investment of Spanish companies during last year in Colombia, the approval of this BIT is very important. Spain not only consolidated its financial presence in Colombia through its banks Santander and BBV, but also Caja de Madrid announced in December its intention of looking into investment opportunities in the Colombian banking sector as part of an expansion plan throughout Latin America. Spanish foreign investment was also present in the privatization processes carried out in the Railroad Concessions (Fepaz), and in the Electricity and Natural Gas sectors with Endesa in the "Empresa de Energia de Bogota" and Gas Natural de Espana in "Gas Natural ESP".

Prepared by Monica Restrepo from Gomez Pinzon & Asociados, Bogota, Colombia.

The content of this article is intended to provide a general guide but specialist advice should be sought about your specific circumstances.

GOMEZ PINZON & ASOCIADOS
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Santafe de Bogota, Colombia

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