The new interpretative note on the investment chapter of the FTA seeks to avoid legal abuses and protect the sovereignty of both countries without affecting incentives for foreign investment.

The Free Trade Agreement (FTA) between Colombia and the United States, in force since 2012, reaches a new stage with the signing of an interpretative note on the investment chapter.

This advance, formalized today, Thursday, January 16, redefines the terms in which both countries handle disputes between investors and States, seeking a balance between investment incentives and the defense of public interests.

At a bilateral meeting in Bogotá, Luis Carlos Reyes Hernández, Minister of Commerce, Industry and Tourism of Colombia, and Katherine Tai, United States Trade Representative, agreed on Decision 9 of the Free Trade Commission.

This instrument clarifies crucial aspects of Chapter 10 of the FTA, related to investments, without modifying the original text of the treaty.

Key points of the agreement

• Protection of judicial sovereignty : international investment tribunals may not act as appeal bodies for decisions by national judges and authorities. This point seeks to avoid cases such as that of Telefónica, in which Colombia's internal authority was questioned under another international agreement.
• Clear criteria for claims : Investors must demonstrate with concrete evidence the actual damage caused, ruling out claims based on hypothetical or future expectations.
• Exclusion of illicit investments : investments that do not comply with the internal regulations of the host country will not be able to benefit from the protections of the FTA.
• No discrimination balance : While fair treatment for foreign investors is ensured, the note clarifies that justified differences in regulations will not be considered discriminatory.

A model aligned with international standards

The interpretative note reflects recent trends in global debates on investor-state disputes, such as those led by the Organisation for Economic Co-operation and Development (OECD) and the United Nations. Colombia has been a key player in these forums, which seek, first, to reduce legal abuses by investors and, second, to ensure that investments respect national regulations and public interests.

The document also responds to rulings by the Colombian Constitutional Court that require investment agreements to conform to the country's constitutional framework. At the same time, it satisfies a recurring request from the US Congress to balance investment protection instruments with the sovereign policies of the signatory countries.

The Minister of Commerce, Luis Carlos Reyes, stressed that this declaration not only clarifies the rules of the game, but also strengthens legal security for genuine investors, without jeopardizing Colombia's ability to implement public policies, including those related to environmental protection.

“Investors cannot argue against hypothetical expectations or possible future damages, as has already happened, but rather it must be about concrete damages,” said the head of the portfolio.

A debate from last year

Since November 2024, the debate on changes to the FTA has been raised following President Gustavo Petro's proposal to renegotiate Chapter 10, in principle, because he considered it necessary to align them with national priorities.

However, at the time, the Colombian-American Chamber (Amcham) responded that the treaty allows for consensual modifications without risks for foreign investment, and, in the event of opening the complete renegotiation, the economy and bilateral relations could be negatively impacted.

“Modifying a treaty of this magnitude is not a unilateral act. Both countries must be willing to discuss and accept changes, which could include sensitive issues such as investment protection, national security or dispute resolution mechanisms,” AmCham said.

Among the implications, according to the entity, it could have repercussions in several aspects:

• Foreign investments: Changing current provisions, such as “fair and equitable” treatment or protection guarantees, could affect the perception of Colombia as an investment destination.
• Legislative approval in the United States : Any substantial modification to the FTA would need to go through the US Congress, a process that could include lengthy debates and possible additional adjustments to the renegotiated text.

With the new interpretative note, Reyes pointed out that the FTA "will be interpreted in a way more favorable to the interests of the Colombian State," since "sometimes" it "excessively" protected companies that sued the State before international courts.

Impact on trade relations between Colombia and the United States

The United States is a strategic trading partner for Colombia, representing 29% of total exports and 31.6% of non-mining-energy exports.

In addition, the North American country is the main source of foreign direct investment in Colombia. By the third quarter of 2024, this amounted to US$4.163 billion, equivalent to 42% of the total.

By signing this interpretative note, both governments seek to strengthen mutual trust, avoiding costly litigation that could destabilize public finances. The document, according to the parties, establishes a clearer and fairer framework, which could stimulate new foreign investments, provided that they respect domestic regulations and contribute to sustainable development.

A future of cooperation

The agreement also reflects a continuity in diplomatic and commercial relations between the two countries. According to Reyes, this progress is the result of “productive, transparent and constant” communication, and lays the foundations for further deepening bilateral ties.

Although the path to implementing and monitoring these rules may present challenges, the interpretative note represents a significant step towards a more balanced trade model. Ultimately, it seeks a mutual benefit: more responsible investments and a more robust legal framework for both countries.