International Businesss Disputes Grow Dramatically In Latin America

by Glen Shapiro, LawAndTax-News.com, Washington

27 March 2003

US companies with operations in Latin America which run into legal problems with the governments of the countries in which they are located are increasingly turning to arbitration under the terms of bilateral investment treaties (BITs) to resolve their disputes.

In a special report, the National Law Journal revealed on Wednesday that although legal problems between US corporations and foreign governments are not unique to Latin America, the number of such disputes has grown most dramatically there.

The Journal cited the example of Costa Rica, which is facing a $57 billion arbitration claim from the Harken Energy Corp. for allegedly blocking the company's contractual right to drill for oil off the jurisdiction's Caribbean coast, and revealed that similar disputes over various issues are taking place in Bolivia, Ecuador, and Columbia.

Given that the Foreign Sovereign Immunities Act prevents the US companies from seeking legal redress in the United States, and the judicial systems in Latin America are often distrusted by the US corporations, the NLJ report revealed that American companies are now seeking to make greater use of the BITs currently in place throughout the region to protect their interests.

'There were very few BITs in Latin America before the 1990s. Now there are over 380 in the region. These BITs always had arbitration provisions in them, but no one paid attention to them until the mid-'90s,' David Lindsey, partner in Clifford Chance's New York office explained.

He went on to add that arbitration before the International Centre for Settlement of Investment Disputes (ICSID) is an especially powerful tool because the center is an arm of the World Bank:

'Once you have an award under ICSID against a foreign sovereign, it becomes very handy when that sovereign wants to get a loan from the World Bank. Basically, the country knows that if there is an ICSID award, it will eventually have to pay it,' Mr Lindsey told the NLJ.

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