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Risks for Property Rights in Latin America: Obtaining Protection under International Law - WAMR 2006 Vol. 17, No. 8

Author(s): 
Omar E. Garcia-Bolivar
Page Count: 
4 pages
Media Description: 
PDF from World Arbitration and Mediation Report (WAMR) 2006 Vol. 17, No. 8
Published: 
August, 2006
Jurisdictions: 
Central America,
South America
Practice Areas: 
Investment Disputes,
International and Transnational Law,
Arbitral Decisions,
BITS
Author Detail: 
Omar E. Garcia-Bolivar, Chairman, Inter-American Legal Affairs Committee, BG Consulting, Inc., Washington D.C. The author consults investors about legal, business and political issues of doing business in Latin America. He is admitted to practice in Venezuela, New York, Washington, D.C. and the U.S. Court of International Trade. He is also an arbitrator with the ICSID, WIPO, AAA, and ICC. President, BG Consulting, Inc.

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Commentary
Risks for Property Rights in Latin America: Obtaining Protection under
International Law
By Omar E. Garcia-Bolivar *
Today Latin America is reviving concepts and policies that were prominent
decades ago, such as expropriation, nationalization, and a backlash against excessive
corporate profits. At the heart of those concepts lies a conflict between national
sovereignty and the property rights of foreign investors.
Recent cases in Bolivia, Venezuela, and Ecuador show that the era of property
dispossession is not over and that foreign investors are not immune from measures that
directly or indirectly impact their property rights. In Latin America, apart from direct
expropriatory measures, quite frequently investors face abusive regulations that are
tantamount to property deprivations. Under the form of extraordinary licensing
requirements, costly environmental measures, excessive taxes, unplanned land re-zoning,
and other types of regulations, governments usually impose additional burdens on the
investors’ property rights that might deprive or heavily limit owners from using or
disposing of the assets in question.
Likewise, investors might be exposed to unpredictable changes in the law,
repudiation of contracts, re-negotiation under duress, unfair labor obligations, or even
weak bankruptcy laws that grant little protection to creditors. In all of those cases, when
the governmental measures affect the property rights of investors in a way that the
property is rendered useless under international law, there may be grounds to claim
compensation from the host government for an indirect expropriation or other
infringement of property rights that has occurred.
Utilizing Preemptive Protection Mechanisms Prior to Investing in Foreign Markets
Foreign investors can take either reactive or proactive steps against such
illegitimate measures. To proactively avoid expropriation or related problems, investors
should plan their investments, taking into account protections available under
international law, before problems have a chance to materialize. A comprehensive due
diligence that not only looks at the business to be acquired or to be established, but also
looks at macro aspects of the relevant country from a legal, economic, political, and
cultural standpoint is paramount. After the due diligence is done, if the investor finds
that there is a risk of property deprivation of some kind, either directly or indirectly due
to certain regulations or sudden changes in the law or in policies, two courses of action
may be taken.