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The Andean Agreements

The investment chapters of the US-Peru and US-Columbia agreements follow the model of the investment chapters in the U.S. Free Trade Agreements with Chile and Singapore--as does the Central American Free Trade Agreement, and indeed all other post-2002 agreements except the US-Australia FTA.

Again, the Peru and Columbia agreements go beyond the NAFTA Chapter 11 model to make international investment arbitration available to investors who claim breaches of individual “investment authorizations” and individual “investment agreements.”  This second category of “investment agreements” covers contracts and concessions between private investors and the governments of Peru and Columbia that relate to:

  • Extraction of natural resources, such as oil, gas, and minerals;
  • Infrastructure projects such as roads, ports, dams, and pipelines; and
  • Public utilities, such as drinking water, wastewater, electricity, and other public services.

The U.S. - Peru FTA investment chapter follows the model of the investment chapters in the Chile and Singapore agreements, with the exception of new language at article 10.18.(4).  This language might give the impression of protecting the finality of domestic courts judgments more than it actually does. 

Only limited categories of domestic court judgments related to individual investment authorizations and individual agreements--i.e. contracts and concessions--would be exempted from review by international investment tribunals, and only then if the plaintiff had taken ‘the fork in the road’ and pursued domestic court relief first.

Individual “investment agreements” between foreign investors and governments in these three areas have been highly controversial in the Andean region--and nowhere more so than Bolivia and Ecuador.

These two countries have been involved in a series of acrimonious investor-state arbitrations under bilateral investment treaties, including:

  • Occidental Petroleum’s investment claim against Ecuador, which inflamed a populist backlash that contributed to that country’s partial denunciation (withdrawal) from World Bank-sponsored investment arbitration;
  • Bechtel’s investment claim (later settled) against Bolivia related to a water utility privatization agreement in Cochabamba that led to widespread civil disturbances when water rates skyrocketed; and
  • Telecom Italia’s (ETI) investment complaint against Bolivia over a disputed privatization of the country's telecommunications assets.
Following the Cochabamba conflict but prior to ETI's filing of a case at the World Bank's ICSID facility, Bolivia formally denounced and consequently withdrew from ICSID.  Other disputes about pipeline infrastructure, natural gas contracts, and public utilities privatizations (not all of which led in the end to investor claims) caused the current government in Bolivia to undertake a review of all its international investor obligations. 

It is not coincidental, then, that Ecuador and Bolivia withdrew from trade negotiations with the United States.  The investment chapters presented to Ecuadoran and Bolivian negotiators was framed around the Chile/Singapore model--a model rejected by both countries. 

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