Originally from Dispute Resolution Journal

A previous draft of this article was presented at a conference on “International Commercial Arbitration in Latin America,” held in New York City on March 12, 2004, sponsored by the International Centre for Dispute Resolution, the Interamerican Commercial Arbitral Commission, and the Committee on International Commercial Dispute Resolution of the Association of the Bar of the City of New York.

A well-known international arbitrator comments on the potential effect of economic conditions in Latin America on the now-disfavored Calvo doctrine, which limits the rights of foreign investors to resort to international arbitration for investor-State disputes. He also discusses how investors have fared when there are conflicts between BITs and investor-State contracts that affect the investor’s right to arbitrate.

Privatized companies in Latin America, particularly utility and energy companies in Brazil and Argentina, have attracted considerable foreign direct investment. To encourage such investment, many developing countries have adopted a legal framework that complies with the standards demanded by capital-exporting States. These standards include the provision of a private right of action for investors against host States through international arbitration.

These standards are incorporated into many bilateral investment treaties (BITs) to which Latin American nations are a party, which generally provide for arbitration of investor-State disputes by the International Center for the Settlement of Investor Disputes (ICSID) in accordance with the 1965 Convention on the Settlement of Investment Disputes between States and Nationals of Other States (ICSID Convention).1 Indeed, at least 16 countries in Latin America have ratified the ICSID Convention. Thus, it seems fair to say that the region as a whole has overcome its traditional hostility towards arbitration, which had been embodied in the Calvo doctrine. But despite all appearances, is Calvo really dead or merely sleeping beneath a warm blanket of BITs? This article will discuss the Calvo Doctrine and intimations that it could be reawakening as a result of regional economic or political instability—a significant problem for developing nations. This development would have the potential to lead to demands for national courts in Latin America to take charge of disputes affecting their national interests. Should that occur, recent gains for the autonomy of arbitration would be lost.