Conditional Constitutionality of the BIT signed between Colombia and France

Autor : Jairo Morales Vecino

The Decision at a Glance

On July 10th, Colombia and France signed the Agreement for the reciprocal promotion and protection of their investments (hereafter the “Treaty”) that incorporated a set of bilateral features aiming at protecting both States´ economic interests.  In general terms, the Treaty compiled different international standards to be applied to both nations in a reciprocal manner, such as non-discrimination among investors, free currency transfers, the prohibition of expropriation, among others.

Through Ruling C-252/2019 of June 6th of 2019 and exercising its constitutional competencies, the Constitutional Court of Colombia studied the constitutionality of the Treaty and Law 1840/2017 through which the Treaty was adopted nationally. 

By using a rather curious line of thought, the Colombian Constitutional Court declared the Treaty to be “conditionally constitutional” as long as it is understood in the sense expressed in the concluding remarks of its decision, and, particularly, as long as such understanding is adopted through a joint interpretative note of both countries. This means that for the Treaty to be compatible with the Colombian Constitution, Colombia and France would need to issue such joint interpretative declaration clarifying the meaning and reach of the words used in several substantive standards of treatment contained in the Treaty.

Conditioned Clauses of the Treaty 

After scrutinizing each one of the Treaty´s articles, the Court finds that due to the language used in certain clauses, it may be possible for those provisions to be interpreted or understood in different ways, at least one of which may be irreconcilable with the Colombian Constitution. This is the reason why the Court goes beyond studying the Treaty´s as it is written, and opts for prescribing the “proper” way in which such clauses should be conceived. 

1. Article 4 of the Treaty was declared conditionally constitutional in three aspects (underlined):

“Article 4. Fair and Equitable Treatment:

Each Contracting Party shall accord fair and equitable treatment in accordance with applicable international law to investors of the other Contracting Party and its investments in its territory. For greater certainty the obligation to accord fair and equitable treatment includes, inter alia:

1. a) the obligation not to deny justice in civil, criminal or administrative proceedings in accordance with due process;
2. b) the obligation to act in a transparent, non-arbitrary and discriminatory manner as regards investors from the other contracting Party and its investments”. This treatment is consistent with the principles of foreseeability and legitimate expectations (…)”

The Court finds that the language used in article 4 of the Treaty is rather vague and indeterminate, and as such, contradicts the postulates of legal certainty and good faith. Therefore, for it to be in compliance with  the Constitution, the provision must be defined by contracting Parties to clarify whether “international law” refers to treaty law, customary international law, or both, and if it refers to the latter, to which “instruments” of customary international law. 

Additionally, the Court understood that the expression “inter alia” must be interpreted in a restrictive manner, in an analogical and not additive way. This means that such expression needs to be interpreted restrictively so that contracting Parties can have certainty on what their obligations are under the standard of Fair and Equitable Treatment.

Finally, the Court concluded that the expression “legitimate expectations” (also included in article 6 of the Treaty) is adjusted to the Colombian Constitution as long as: a) such expectations are brought by specific and repeated acts carried out by the contracting Party, in such way that the other Party (investor) is induced, in good faith, to make or maintain investments in its territory, and; b) such expectations are breached as a result of abrupt and unexpected changes introduced by public authorities that end up affecting the investment.

1. Article 5 of the Treaty was declared conditionally constitutional in three aspects (underlined):

“Article 5. National Treatment and Most Favored Nation – MFN:

1. Each Contracting Party shall apply in its territory to the Investors of the other Contracting Party, with respect to its Investments and activities related to its Investments, a treatment no less favorable than that granted in similar circumstances to its Investors or the treatment granted to investors of the most favored nation if the latter is more favorable.

2. This treatment does not include the privileges granted by a Contracting Party to investors of the third State by virtue of their participation or association in a free trade zone, customs union, common market, or any other form of regional economic organization or any similar agreement, existing now or in the future.

3. The obligation of a Contracting Party to grant Investors of the other Contracting Party a treatment no less favorable than that granted to its own Investors, shall not prevent the Contracting Party from adopting or maintaining mandatory measures to guarantee public order in case of threats against the fundamental interests of the State. These measures shall not be arbitrary and shall be justified, necessary and proportional to the objective sought.

4. For greater clarity, the most favored nation treatment, which is granted in similar circumstances, and referred to in this Agreement does not extend to article 1 or to dispute settlement mechanisms, such as those contained in articles 15 and 17 of this Agreement, which are provided for in treaties or international investment agreements”. (Sic) 

First, the Colombian Constitutional Court considered that the expressions “similar circumstances” and “necessary and proportional” are uncertain and equivocal. According to the Court´s reasoning, the term “necessary and proportional” should be understood in such way that it respects the autonomy and independency of Colombian authorities to guarantee public order and defend public policy purposes. 

On the other hand, regarding the expression “similar circumstances”, the Court asserted that the comparison pattern is rather ambiguous and as such it threatens legal certainty. That is the reason why the Court declared the constitutionality of the expression as long as contracting Parties define its content in a way that results compatible with the principle of legal certainty.

Finally, the Court declared that through the MFN clause, some international investment tribunals have started to import clause provisions from other treaties entered into by the host State of the investment, and this jeopardizes the competences of the President of Colombia to manage international relations and negotiate treaties. Therefore, the Court decided the expression “treatment” to be constitutional insofar as it is interpreted to preserve the presidential constitutional competences.

Commentary 

There is no doubt that ruling C-252/2019 has radically altered the Constitutional Court´s established precedent regarding international investment agreements. Naturally, this causes several effects, some of which might not be realized in the near future. For instance, the interpretations that the Court made regarding provisions such as “legitimate expectations” or “similar circumstances” might have an impact on on-going and future investment arbitrations brought against Colombia.

Futher  negotiations are necessary ratify and implement the Treaty

On the other hand, what appears to be the natural effect of the Court´s decision is that if Parties wish to ratify the Treaty, representatives from both France and Colombia will need to meet and negotiate once again some Treaty provisions, either through a joint interpretative declaration or through a modification of its substantive language. It remains to be seen, of course, whether France is willing to obey the Court´s mandate.

Additionally, the Court´s decision suggests that Colombia has adopted an immovable position regarding the way international investment agreements are to be negotiated. So much so that if Court´s understandings are not included in future bilateral agreements, unconstitutionality seems imminent, or at least it means that the Court will not approve similar clauses as the ones contained in the Treaty without a conditional analysis. This, of course, risks having a judicial authority imposing to the executive branch – the Presidency itself – the Court´s interpretations and views as to the substantive content of future international investment agreements. Not to mention the possibility that some of the interpretations demanded by the Court might be impossible to address through a joint interpretative declaration, and require, instead, a formal amendment to the Treaty.

1. Articles 4, 5 and 6 of the Treaty.

2. Article 189.2, Colombian Constitution.