Investment arbitration on the rise in Latin America

Investment arbitration has become an increasingly important tool for investors to mitigate country risk and obtain funding in Latin America. The region has seen an increase in the number of investment arbitration cases in recent years, including those at the CIADI and any at the pre-arbitral stage, and many of the region’s countries have signed bilateral investment treaties and other agreements having an impact on this dispute resolution method.

The number of disputes now being aired in the region may be said to be on the rise. Colombia was notified of two new investment arbitration proceedings in 2023 resulting in it now having 15 cases against it and 12 notices of dispute at the pre-arbitral stage. Chile, which has historically had very few arbitration proceedings at the CIADI, with only two currently awaiting a decision, received notices of dispute in 2022 and 2023 bringing the number of cases at the pre-arbitral stage to 5, a high number for this country. Peru, for its part, received notice of two new investment arbitration proceedings in 2023, bringing its pending cases to 25. Lastly, Mexico was the Latin American country that received the largest number of new requests for arbitration against it in 2023, totaling 10 new cases, with which it currently has 18 pending proceedings at the CIADI, not including notices that have not been made public by the Mexican government.

Regardless of the number of disputes that have arisen in those jurisdictions in recent years, the truth is all these countries are expecting a rise in cases, related to a very diverse range of industries, which is a matter of concern to the countries that may be sued by investors.

In Colombia, although traditionally most of its disputes have related to the mining industry, a new trend is appearing consisting of infrastructure disputes, related to concessions, especially with investors from Spain and the United Kingdom, as may be seen in the InfraRed case. Disputes are also expected concerning renewable energy, particularly due to the difficulties investors are encountering for obtaining permits and licenses.

Although Chile has recently faced disputes related to telecommunications and private healthcare insurance, an important hotbed for investment arbitration is expected to arise from the steps taken in the country on natural resources, especially in relation to lithium. A “National Strategy for Lithium” was issued which has mobilized companies currently exploiting that natural resource to seek a pacific agreement, which could involve going to arbitration. Another focus of interest was the signing of the “Advanced Framework Agreement” between Chile and the European Union, seeking to replace 15 bilateral investment protection agreements and create a permanent tribunal replacing arbitration as a dispute resolution method.

Following a low level of private investment in the past year, Peru has had to implement policies and accept commitments to boost renewable energy sources and reduce emissions, under the COP 28 agreements. This suggests there will be a tightening of regulations on the extractive industry, which could be a source of disputes with investors.

Mexico has seen a trend in the electricity industry for investors to continue leaving arbitration as a last resort, after having searched for other avenues for retaining their operations in that country. In relation to its oil and gas industry, which is currently receiving new investments, especially from the U.S., the dispute resolution mechanism set out in Annex 14-E to the T-MEC shows signs of being a key factor for reducing risk and ensuring financing and protection for investments in the country.

This snapshot shows how investment arbitration is a complex and ever-changing field, and it is extremely important to keep up with the latest trends and developments to make informed decisions, especially in Latin America as a result of the new rules and regulations that are being fostered in that region.