The Role of Bilateral Investment Treaties in Mitigating Project Finance's Risks: The Case of Colombia

Bilateral Investment Treaties (BITs) have been widely used as a warranty against political risks in developing countries. A justification for entering into those agreements, besides the desire to encourage bilateral investments, is the absence of a multilateral legal framework regulating investments; thus, a substantial portion of the relationship between host states and international investors has been developed through bilateral agreements, such as BITs and investment chapters in FTAs. This paper analyzes the most substantive provisions of the Colombian signed BITs and the investment chapter of the United States – Colombian FTA (as this is one of the most important and recent agreements entered into by Colombia) in order to determine, from a project finance perspective, the scope of the protections given by these instruments to foreign investors and their impact on risk mitigation.