Safeguarding Against Expropriation of Assets in Latin America: The Bolivian Water Decision, Distilled - WAMR 2007 Vol. 1, No. 4
Marco E. Schnabl and Timothy G. Nelson are, respectively, a Partner and Counsel in the New York office of Skadden, Arps, Slate, Meagher & Flom LLP (SASMF). The authors are members of SASMF's International Litigation and Arbitration Group, which has extensive experience in advising on and pursuing investment claims against sovereign States, including in the expropriation context. Both have represented investors in proceedings before ICSID arbitration tribunals.
Originally from World Arbitration And Mediation Review (WAMR)
SAFEGUARDING AGAINST EXPROPRIATION
OF ASSETS IN LATIN AMERICA: THE
BOLIVIAN WATER DECISION, DISTILLED
By Timothy G. Nelson & Marco E. Schnabl*
This article explores the valuable guidance offered by the ICSID
jurisdictional decision in Aguas del Tunari S.A. v. Bolivia (2005) for
corporate planners who are seeking to structure their acquisition vehicles
so as to maximize investment treaty protection for their foreign investments.
This issue should be of particular interest to international investors in the
wake of a rash of expropriations recently threatened by a number of
sovereign governments in Latin America.
The International Center for Settlement of Investment Disputes
(“ICSID”), an arbitration center established by multilateral treaty, has
become the preeminent forum in which foreign investors may seek
compensation from sovereign States that have improperly expropriated their
investments. In many cases, ICSID rules permit companies incorporated in
the host State to be deemed to be “foreign nationals.” The Aguas del Tunari
case, which was decided under the bilateral investment treaty (“BIT”)
between the Netherlands and Bolivia, creates a simple rule that deems any
company that is 50% owned, directly or indirectly, by a foreign corporation
to be under “foreign control” — thereby enabling those companies to pursue
arbitration claims before ICSID.
Recent political instability in Latin America has led many investors to
review their options under BITs to which States of that region are a party.