In 1991, Chile became a signatory of the Washington Convention of 1965 that created the International Center for Settlement of Investment Disputes (ICSID). Since then, the country began to negotiate Bilateral Investment Treaties (BITs), a mechanism through which Chile provides additional protection both to inward and outward foreign investment flows. As of November 2005, Chile had signed 52 BITs, 38 of which were in force at that time.
In these agreements, each Contracting State commits itself to provide fair and equitable treatment to investments legally materialized in its territory by investors of the other Contracting State. They also guarantee the principles of National Treatment and Most Favored Nation status.
Moreover, BITs protect private property rights through the establishment of basic principles and minimum standards in case of expropriations. Likewise, they guarantee that any expropriation or measure with similar effect will be adopted in accordance with a law based on public good or national interest, in a non-discriminatory manner. They state that expropriatory measures must be accompanied by the provisions of prompt, adequate and effective compensation.
Through BITs, the Contracting States guarantee the free transfer of capital, of profits or interest generated by foreign investments, and, in general any transfer of funds related to investments. Some restrictions may apply, in accordance with national laws.
Additionally, these agreements establish a dispute settlement mechanism in case of controversies that might arise between an investor of a Contracting State and the other Contracting State. Basically, this mechanism assures that controversies will be settled through friendly consultations. If no agreement is reached, the investor will be entitled to submit, at his own decision, the case before the domestic jurisdiction of the host State of the investment or to international arbitration. In most BITs, this jurisdictional option is definitive.
The principle of subrogation is also included in BITs. This means that if one Contracting State -or an agency authorized by it- grants any kind of insurance against non-commercial risks to an investment in the territory of the other Contracting State, the latter shall recognize the rights of the former to subrogate for the rights of the investor in case it has paid the insurance.
The protection provided by these agreements applies both to investments made after the agreement comes into force as well as to those made before that date. These BITs, however, do not apply to disputes which arise prior to their entry into force or to disputes directly related to events which occurred prior to their entry into force.
Signed treaties need to be ratified by Congress before they can be in force. Treaties are in force in Chile once they are published in the Official Gazette (the Government’s Official Registry of laws and decrees).
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