Colombia and the ICSID Convention: Denunciation or Reconciliation?

Soon after receiving an open letter dated March 19th, 2026, from over 220 economic and legal scholars, President Petro reaffirmed that Colombia would withdraw from the international arbitration system, following a broader trend among certain trend governments in the region. This development generated significant concern among both domestic and international economic sectors. Initially, Petro had orally expressed his intent to withdraw from the ISDS system in response to the USD $379.8 million award rendered against Colombia in the Telefónica v. Colombia ICSID Award. At that time, Petro had noted that the amounts sought in the potential ISDS claims were nearly equivalent to Colombia’s primary fiscal deficit.

The first part of this article examines the immediate legal effect of denouncing the ICSID Convention, including the complexities posed by sunset clauses, and the resulting loss of protection and opportunities for investors. Next, it analyzes Venezuela’s experience following its denunciation of the ICSID Convention, with particular references to cases such as Fábrica de Vidrios Los Andes, C.A. & Owens-Illinois de Venezuela and Smurfit Holdings B.V. v. Venezuela. It then considers the most recent Colombia-Venezuela BIT and evaluates why Colombia is not well positioned to replicate Brazil’s approach to ISDS. Lastly, it concludes by assessing whether Colombia’s proposed measures are likely to succeed in significantly mitigating the risk of claims and alleviating the pressure on public finances.

Background

1. Legal Effect of the Denunciation of the ICSID Convention

While Article 71 of the ICSID Convention provides that denunciation takes effect six months after receipt of the notice, there is debate over whether the wording of Article 72 creates interpretation challenges. Article 72 establishes that denunciation shall not affect any rights or obligations arising out of consent given prior to the notice.  In Colombia’s situation, with a broad interpretation, the State could continue to receive claims based on its original consent for an initial period of six months. However, depending on how Article 72 is interpreted, in conjunction with the language of the applicable investment treaties, that period could significantly extend longer.

2. The Particularity of Sunset Clauses

Sunset clauses in Colombia’s investment agreements make denunciation even more complex. For instance, Article 18.4 of the Colombia-France BIT, establishes a 15-year period to file claims after denunciation of the treaty. Moreover, the treaty provides for arbitration not only through ICSID arbitration, but also through UNCITRAL arbitration. Thus, even if Colombia’s denunciation of the ICSID Convention were to preclude jurisdiction before an ICSID tribunal, investors could still pursue claims through UNCITRAL arbitration. In practical terms, denunciation of the ICSID Convention would not necessarily eliminate Colombia’s exposure to investor-State disputes.

3. Protection of Investors

Colombia’s denunciation of the ICSID Convention also entails significant  detriment to the rights of Colombian investors in terms of the enforcement of arbitral awards. With respect to the enforcement and recognition of awards, numerous authors like Blackaby, Partasides, Redfern, Dolzer, Kriebaum and Schereuer have noted that under the ICSID Convention, each contracting State must recognize an award as a final judgment of its own national court and enforce the obligation imposed by it. Therefore, denouncing the ICSID Convention also results in the relinquishing of the unique enforcement advantages afforded by the ICSID system, requiring nationals of  the denouncing State to undertake additional procedural steps to secure recognition and enforcement of an arbitral award under the New York Convention. In practice, this may result in lengthier and costly enforcement proceedings.

Analysis

1. The Venezuelan experience

ICSID tribunals have addressed the legal consequences of denunciation of the ICSID Convention, albeit with very different outcomes.  For example, in Fábrica de Vidrios Los Andes, C.A. & Owens-Illinois de Venezuela v. Bolivarian Republic of Venezuela, a dispute under the Netherlands-Venezuela BIT, the tribunal declined jurisdiction over the claim. Venezuela had denounced the ICSID Convention on January 24, 2012, with the denunciation taking effect on July 25, 2012. However, the Request for Arbitration in this case was filed on August 10, 2012.

The tribunal found that the ICSID Convention envisioned a “division of labour” between Article 71 and 72. While Article 71 governed Venezuela’s status as a Contracting State; Article 72 concerned rights and obligations from consent to ICSID jurisdiction as a party or potential party to the arbitration. Taking all this into consideration, the tribunal concluded that consent to the jurisdiction of the Centre is only valid until the depository receives the notice of denunciation, while the other rights and obligations as Contracting State survive for the six-month period.

Contrary to the award in Favianca, the tribunal in Smurfit Holdings B.V. v. Venezuela found jurisdiction for a claim filed after the expiration of the six-month period under Article 71. In this case, the claimant filed the request for arbitration on December 28, 2018, having previously sent a letter to the respondent consenting to arbitration for future disputes in September 2011 (before the denunciation). The tribunal found it had jurisdiction on the basis that the Netherlands-Venezuela BIT contained an “unconditional consent” to international arbitration, that the letter manifested consent from the investor in writing, and that the claim remained timely pursuant to the treaty’s 15 years sunset clause.

The Favianca tribunal’s rationale is less likely to persuade newer tribunals facing the same issues for two main reasons. First, a claimant may argue that a respondent State is estopped from withdrawing its consent to arbitrate in light of prior signature and ratification of the Convention, through which it consented to the jurisdiction of the Center. In addition, from the very outset, the Convention has provided that the denunciation is only effective six months after notice is received by the depositary.

Second, the ICSID Convention makes clear that, even following  denunciation, rights and obligations arising under the Convention remain in force throughout the six-month period, reinforcing that legal effects of denunciation only take effect once that period has elapsed. Therefore, the distinction between the sovereign as a contracting State and the sovereign as a party and the effects this distinction has over the scope of consent, entails an approach that changes the initial rules that the States initially contracted for and an argument that investors may validly argue when facing similar circumstances.

Independently of the interpretation adopted by future tribunals, foreign investors seeking to arbitrate against Colombia under the ICSID Convention are likely to encounter issues similar to those examined in relation  to denunciation and sunset clauses in cases such as Favianca and Smurfit.

2. The Colombia-Venezuela BIT

On  February 3, 2023, Nicolás Maduro Moros (on behalf of Venezuela) and German Umaña (Colombia’s Minister of Commerce, Industry and Tourism) signed the Colombia-Venezuela BIT. While the treaty still has to enter into force, it is important to note that it provides for resolution of disputes either in national courts or by UNCITRAL arbitration. The language of the BIT reflects the Petro administration’s inclinations towards leaving the ISDS. However, the fork-in-the-road provision ends up producing a similar outcome to the one discussed above. If a dispute arises and an investor opts to pursue UNCITRAL arbitration, the underlying exposure for the State remains largely the same, albeit at a different forum with the nuance that the applicability of the sunset clause was reduced to 5 years.

3. Why the Brazilian Model Cannot Be Replicated in Colombia

The measures announced by the Colombian government point toward a broader effort to curtail, if not entirely eliminate, Colombia’s exposure to investor-State arbitration. However, even if Colombia intended to replicate the Brazilian model, it is not in the best position to do so. First, unlike Colombia, Brazil has historically rejected investor-State arbitration. It has never signed the ICSID convention, and has not ratified BIT’s, except for the recent Agreements on Cooperation and Facilitation of Investments signed with Angola, Mexico, India and the United Arab Emirates,  providing for State-to-State arbitration.

Second, Brazil’s population of 211.9 million people, compared to the 52.8 million habitants from Colombia, reflects an entirely different market cap. While both States encounter important challenges in terms of security, the Colombian situation is grave, considering internal conflict with new actors that either rejected or later abandoned the Habana peace treaty. These structural differences help explain the contrast between the two countries, supporting the conclusion that  Colombia would have greater difficulty replicating Brazil’s success in attracting Foreign Direct Investment without the direct protection and guarantees provided by investor-State arbitration. 

Conclusion

In conclusion, while the Petro Administration is taking steps to walk away from investor-State arbitration, potential liability for the State is not significantly mitigated. Colombia’s investment treaties provide for UNCITRAL arbitration, which only changes the rules applicable to the dispute. Additionally, sunset clauses can play a pivotal role in extending the period during which claims can be filed  after denunciation. This is why a reduction in the duration of the sunset clause (like the one in the Colombia-Venezuela investment agreement) does not eliminate the risk of claims. These considerations, in conjunction with systemic differences like market size and security concerns, demonstrate Colombia’s unsuitability to adopt the Brazilian investment model. They further demonstrate that the measures announced by Colombia’s President do little to meaningfully reduce exposure to claims or to safeguard sovereign public funds.