The enforcement of arbitral awards in Colombia in investment matters

Foreign investment is one of the main engines of the economy of developing nations and one of the most attractive scenarios for multinational companies when expanding their activities and capital to other markets. Due to some conflicts between the economic and legislative sovereignty of the recipient State of the investment and the investor´s intention to protect its invested capital, in 1996 the ICSID Convention, Regulations and Rules (“ICSID Convention”) came into force at the initiative of the World Bank.   

With the entry into force of the ICSID Convention, ICSID was constituted as an administrative entity to facilitate arbitration proceedings and to provide standard rules and procedures to solve the dispute related to investments. 

Colombia approved the ICSID Convention through Law 267 of 1995 and ratified it on 15th July of 1997, constituting itself as one of the Contracting States, and therefore must comply and observe the regulations and follow the procedures set forth in the ICSID Convention. 

The ICSID arbitration proceeding begins with the filing in of the request of arbitration before the Secretariat and several stages must be carried out, such as: (i) Questions of procedure and (ii) Substantive stages (or merits of dispute stage.) The completion of these stages leads to the deliberation period by the Court of Arbitration that will end the proceeding by issuing its decision throughout an arbitral award. This arbitral award is the main form of termination of the arbitration proceeding and its purpose is to be the tribunal's final decision on the dispute. 

The arbitration award is mandatory and binding on the parties, and in accordance with international arbitration practices, is not subject to appeal, however, the parties may seek for the interpretation, clarification, revision, or annulment of the award according to the specific requirements of the ICSID Convention. 

The binding nature of awards is based on the principle of pacta sunt servanda, applicable to ICSID awards as a development of the ICSID Convention, which in turn is an international treaty. Consequently, the binding nature of the award for the parties emanates from the clause of the Treaty or Contract in which the parties undertake to bring any dispute before the ICSID. The ICSID Convention sets forth in its article 53 an express mention of the mandatory nature which evidences the prohibition for the courts of the receiving State to modify the arbitral award or decide on the effectiveness and merits of the matter. 

In that order, as established in Article 54 of the ICSID Convention, all the contracting States including Colombia, are obligated to recognize the awards and have them as if it were a decision issued by their own courts, renouncing to their immunity from jurisdiction. In this way, an award issued under the ICSID Convention does not need to fulfill the exequatur process, its execution will be carried out as if it were a decision issued directly by a Colombian judge or court.

On the other hand, there are other international treaties and conventions that grant the possibility of appealing to other international entities and/or ad hoc arbitral tribunals other than ICSID. In Colombia, Law 1563 of 2012 (“Arbitration Statute”) in its article 111 numeral 3, sets forth that all awards issued by an arbitral tribunal that takes place outside Colombia are foreign and therefore their prior recognition will be necessary through exequatur. The foregoing implies that the party interested in the execution of the award in Colombia must initiate a process of recognition of the award before the competent Judge (which, in Colombia will be the Supreme Court of Justice), which must be transferred to the passive party for a term of ten days. Once this stage is completed, the Judge will have a term of twenty days to decide on the request and only then the corresponding award will be enforceable.

In investment arbitration, “fork on the road” or “procedural exclusivity” provisions have gained great importance, which implies a limitation for the investor to only be able to choose one dispute resolution method. In other words, if it is stipulated, the investor is obligated to definitively choose a single type of arbitration and thus avoid additional procedures at the time of execution.

Based on the foregoing, it can be concluded that the investor, when choosing the type of arbitration to which it wishes to submit a possible dispute, should consider that: (i) When the dispute is submitted to arbitration in accordance with the ICSID Convention, the award is mandatory for the parties and can be executed without the need to file a procedure before the Colombian jurisdiction in accordance with Articles 53 and 54 of the ICSID Convention and (ii) When the dispute is submitted to an ad hoc arbitration procedure and an award is rendered abroad, in order for it to be enforceable in Colombia, an additional procedure called exequatur must be completed, through which it is the competent Judge who will decide on the recognition of this award in the Colombian jurisdiction.