Scope of Application [Return to the top of the page]

DEFINITION OF INVESTMENT

Foreign Direct Investment means:

1. Contributions originating abroad belonging to foreign individuals or companies to the capital of a company in freely convertible foreign exchange or in physical tangible goods, such as industrial plants, new and reconditioned machinery, new and reconditioned equipment, replacements, parts and pieces, raw materials and intermediate products.
2. Investments in national currency deriving from resources having the right to be remitted abroad and the reinvestments made in accordance with this Decision.
3. Intangible technological contributions, such as trademarks, industrial models, technical assistance and technical kow-how whether or not patented and that may take the form of physical goods, technical documentation, and instructions, as contributions to capital. (Article 1 of Decision 291).

DEFINITION OF INVESTOR

The term investor means:

1. National Investor
   The State, national individuals, and companies defined by the legislation of the Member Countries. Individuals with an uninterrupted residence of not less than one year and who renounce the right to repatriate capital and to transfer profits abroad. Investments belonging to subregional investors. (Article 1(a)).
2. Foreign Investor
   The owner of a direct foreign investment. (Article 1(b)).

Application in Time (Entry into Force and Duration: Applicability to Investments made Prior to Entry into Force)

The Decision 291 on the Treatment of Foreign Capital of the Cartagena Agreement was approved on March 21, 1991.

The Decision 291 has been duly implemented by all the Member Countries.

Admission [Return to the top of the page]

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Treatment [Return to the top of the page]

STANDARDS

Fair and Equitable Treatment

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Full Protection and Security

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Non-Discrimination

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National Treatment

Foreign investors shall have the same rights and obligations as national investors, except as otherwise provided in the legislation of each Member Country. (Article 2).

Most-Favored Nation Treatment

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Exceptions and Reservations

Foreign investors shall have the same rights and obligations as national investors, except as otherwise provided in the legislation of each Member Country. (Article 2).

1. Bolivia: Law No. 1182 (Sept. 11, 1990), No reservation.
2. Colombia: Law 9 (1991).
   Article 8 of the International Investment Statute provides that investments of foreign capital may be made in any percentage in all economic sectors, except the following: defense and national security; processing, disposal and toxic, dangerous or radioactive wastes not produced in the country. In any case, CONPES may reserve economic sectors and determine the participation of foreign capital in them.
   Article 9 establishes that the following investments shall require authorization from the National Planning Department: a) provision of such public services such as electricity; garbage disposal; water and sewage; postal services; public health; and all types of communication except cellular telephone services.
3. Ecuador: Decree No. 415 (Jan. 8, 1993). No reservation.
4. Peru:. Decree No. 622 (Aug. 29, 1991). No reservation.
5. Venezuela: Decree No. 2095 (Feb. 13, 1992).
   Article 26 establishes that the following economic sectors shall be reserved for national companies:

1. television and radio broadcasting; Spanish language newspapers; and
2. professional services whose exercise is regulated by national laws.

OTHER ASPECTS

Performance Requirements

Contracts for the license of technology, technical assistance, technical services, basic and detail engineering, and the other technological contracts referred to in the respective laws of the Member Countries shall be registered by the national competent entity of the respective Member Country, which shall evaluate the effective contribution of the imported technology by estimating the probable profitability thereof, the price of the goods incorporating the technology and other specific means of quantifying the effect of the imported technology. (Article 12).

Contracts for the importation of technology must contain, at least, provisions on the following matters:

1. identification of the parties, expressly referring to their nationality and domicile;
2. identification of the means by which the imported technology is to be transferred;
3. the contractual value of each of the elements involved in the technology transfer;
4. stipulation of the duration. (Article 13).

For the purposes of registering contracts on the transfer of foreign technology, trademarks or on patents the Member Countries may take into consideration that said contracts do not contain the following:

1. clauses that tie the supply of technology or the use of a trademark to the obligation for the country or the recipient company to acquire from a particular source capital goods, intermediate products, raw materials or other technologies, or to permanently utilize personnel indicated by the company providing the technology;
2. clauses by which the company selling the technology or granting the utilization of a mark reserves the right to set the sale or resale prices of the products produced on the basis of the respective technology;
3. clauses that contain restriction with respect to the volume and structure of production;
4. clauses that prohibit the utilization of competitive technologies;
5. clauses that establish a total or partial purchase option in favor of the supplier of the technology;
6. clauses that require the purchaser of the technology to transfer to the supplier the inventions or improvements deriving from the utilization of said technology;
7. clauses that require the payment or royalties to the owners of patents or trademarks in the cases of patents or trademarks not utilized or that have expired; and
8. other clauses of like effect.

Except in exceptional cases duly authorized by the national competent entity of the recipient country, clauses that prohibit or limit in any manner the exportation of products produced on the basis of the respective technology shall not be permitted. In no case shall clauses of this nature in relation to subregional trade or for the exportation of similar products to third countries be permitted. (Article 14).

Others

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Transfers [Return to the top of the page]

TYPES OF PAYMENT

The owners of a direct foreign investment, as well as subregional investors, shall have the right to transfer abroad, in freely convertible currency, as provided in the legislation of each Member Country, the proven net earnings deriving from their direct foreign investment. The national competent entity may likewise register in freely convertible currency the investment of distributed excess earnings. (Article 4).

Foreign investors and subregional investors shall have the right to repatriate the sums obtained when they sell, within the recipient country, their stock, participation or rights, or when the capital of the company is reduced or it is liquidated, upon the prior payment of any corresponding taxes. (Article 5).

CONVERTIBILITY, EXCHANGE RATES, AND TIMES OF TRANSFER

The owners of a direct foreign investment, as well as subregional investors, shall have the right to transfer abroad, in freely convertible currency, as provided in the legislation of each Member Country, the proven net earnings deriving from their direct foreign investment. (Article 4).

Expropriation [Return to the top of the page]

CONDITIONS

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COMPENSATION

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Settlement of Disputes between Contracting Parties
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Settlement of Disputes between a Contracting Party and an Investor [Return to the top of the page]

PREARBITRAL CONSULTATIONS

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ARBITRATION

Conditions

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Consent

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Forms of Arbitration

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ARBITRAL PROCEDURES

Constitution of the Tribunal

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Consolidation

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Applicable Law

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FINAL AWARD

Scope

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Finality and Enforcement

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