BOLIVIA Trends and Developments Contributed by: Jorge Inchauste and Rosario Echeverría, Dentons Guevara & Gutiérrez S.C.
Of course, the answer to this question involves a series of economic, political and social factors, which could vary in each case in which negotia - tions between private investors and the Bolivian State have failed. However, from a legal point of view, it is possible to establish some issues that hinder investments in lithium projects, such as: • overarching governmental participation through YLB and few options for private investment in lithium; • approval by the Indigenous Communities and the Bolivian National Assembly for the exploi - tation of the resource and lithium agreements; and • citizen participation and social control. This article aims to provide a brief description and analysis of these challenges facing direct investment in the lithium sector in Bolivia. Overarching governmental participation through YLB and few options for private investment The approval of the Bolivian Constitution marked a fundamental milestone in the foreign direct investment (FDI) regime in Bolivia. This new leg - islative policy gives a leading role to the State in the regulation of investments and in the creation of economic policies, and declares that strate - gic natural resources, including lithium, are the property of the Bolivian people. In this sense, the Bolivian State must assume control of the exploration, exploitation, industri - alisation, transportation and commercialisation of strategic natural resources through public entities, which may enter into agreements with national or foreign private companies. The Constitution provides the following general rules that could be considered as limits to FDI.
• The Bolivian Constitution establishes a “bor - der security zone” of 50 km into Bolivian ter - ritory from the border. No foreign entity may acquire property in this territory, except in the case of state necessity and when approved by a qualified majority of the legislature. Failure to comply results in the property or possession passing to the State, without compensation. • FDI must submit to the sovereignty and laws of the State. No foreign court case or jurisdic - tion will be recognised, and foreign investors may not invoke any exceptional situation for international arbitration, nor appeal to diplo - matic claims. • The State has full control over Bolivia’s natural resources, including lithium. FDI may obtain temporary rights over natural resourc - es, but these rights cannot transfer ownership of the resources. • Any FDI must be supervised by the compe - tent Ministry for a specific sector. As a result of this new vision of the Bolivian State, Bolivia was the first country to withdraw from the World Bank’s International Centre for Settlement of Investment Disputes (ICSID Convention), in October 2007. Similarly, the 22 Bilateral Invest - ment Treaties (BITs) signed between 1985 and 2005 were denounced and subsequently abro - gated. Thus, on 4 April 2014, the Bolivian State enact - ed Law No 516, the Investment Promotion Law (Investment Law), to regulate: • investment mechanisms; • investment contributions; • conditions for investment; • the registration of foreign investments; • the transfer of technology; • the transfer of foreign currency abroad; and
83
CHAMBERS.COM
Powered by FlippingBook