Article 58, Expropriation and Article 365, Nationalization.

Law 9 of 1991, Article 15, General framework for foreign investment.

National Economic and Social Policy Council (CONPES) Resolutions 51 and 52 of 1991, 53, 55, 56, and 57 of 1992, and 60 of 1993; Decrees 2348 of 1993 and 98, 2012 and 2764 of 1994, and 517 of 1995: Foreign Investment Statute; Resolution 21 of 1993 of the Board of Directors of the Bank of the Republic: Foreign Exchange Regime.

Yes, Article 2 of Resolution 51 of 1991 establishes that international investments shall be deemed to be investments of capital from abroad, meaning investments in Colombian territory by Colombian nonresidents and foreigners, and investments by Colombians resident abroad or in the Colombian free zone. Also, Article 4 ib. defines the different types of investment: direct, indirect, portfolio.

Yes, in accordance with Article 15 (Article 37, Resolution 21 of 1993), the foreign exchange used for capital investment in Colombia must be channeled through the exchange market and registered with the Bank of the Republic in accordance with the general regulations issued by that entity. Documents must be submitted attesting to the existence of the investment. Investments requiring the authorization or prior consent of the National Planning Department, the Banking Superintendency, Ministry of Mines and Energy, or Superintendency of Securities, must state in the relevant foreign exchange declaration the number, date, and conditions of authorization or consent, (superseded by Article I of CONPES Resolution 57 of 1992, Article 1 of Decree 1812 of 1994, and Article 4 of Decree 2012 of 1994). All foreign capital investment, including additional investment activity, capitalization, reinvestment of profits eligible for transfer, profit remittances, and capital reimbursements must be registered with the Bank of the Republic.

Yes, in accordance with Article 2 of Resolution 51 of 1991, both individuals and corporations are considered to be investors.

Yes, provided that the person is not resident in Colombia and makes the investment with funding from outside the country (Article 5, paragraph).

In the Colombian legal system, enterprises may be national, mixed, or foreign, depending on the proportional composition of their capital. Foreign enterprises may resort to the investment regime, whereas only that part of national and mixed enterprises deemed to be foreign is covered by this regime.

No, foreign investors keep that status for as long as they meet the requirements of Resolution 51 of 1991.

In accordance with Article 20 of the Labor Code, any employer with more than 10 employees must hire Colombians in at least 80% of the positions for trained or specialized personnel or managerial and trust positions. This proportion may be reduced with the approval of the Ministry of Labor in the case of strictly technical and indispensable personnel, and only for the time it takes to train Colombian staff.

Nationals as well as foreigners are given the same treatment concerning the remittance of wages abroad. Under Article 6, paragraph, of Law 9 of 1991, there is no requirement to transfer or trade on the exchange market the inflows of foreign exchange for services provided by Colombian residents.

Pursuant to the Policy Letter, Article 333, the economic activity and the private initiative are viable within the boundaries of public welfare. The article, in addition, foresees that the State will by law, prevent the obstruction or restriction of economic freedom, and will avoid or control any abuse of individuals or enterprises based on a privileged status in the national market.

In accordance with Article 3 of Resolution 51 of 1991 and subject to Article 100 of the Political Constitution of Colombia and other rules, except in matters related to the transfer of resources abroad, foreign investment in Colombia is, in all respects, given the same treatment as that meted out to resident nationals. Consequently, and without prejudice to the stipulations of special regimes, no conditions or discriminatory treatment may be granted to foreign investors vis-à-vis national investors, nor may foreign investors be granted any treatment more favorable than that afforded to resident national private investors.

Public and private enterprises compete on equal terms. Article 333, paragraph 3 of the Constitution, gives a general description of an enterprise, as the basis of development.

In accordance with Article7, Resolution 51 of 1991, superseded by Article 2, Decree 2,012 of 1994, foreign capital investments in enterprises that have been or are being incorporated or established in the country may take the following forms:

a) Imports of machinery, equipment, or other physical or tangible goods contributed to the capital of an enterprise as nonrefundable imports;

b) Imports of freely convertible foreign currencies to make direct national currency investments in the capital of an enterprise or to acquire rights, shares, and securities discussed in Monetary Board Resolutions 70 of 1985, 14 of 1989, 70 of 1989, and 34 of 1990;

c) Contributions in kind to the capital of an enterprise, consisting of intangible assets, such as technological contributions, trademarks, and patents, under the terms of the Commercial Code;

d) Resources in national currency eligible for remittance abroad, such as principal and interest on foreign loans, amounts owed for payment of imports, profits eligible for transfer and royalties derived from duly approved and registered contracts for direct, indirect, or portfolio investments;

e) Maintain undistributed profits eligible for transfer in company assets;

f) Imports of freely convertible foreign currencies for the purpose of portfolio investments in local currency under Title III, Chapter III of this Statute;

g) Additional investment to the capital allocated to branches in hydrocarbon and coal projects under the terms of CONPES Resolution 17 of 1972 and investment in coal mining projects under CONPES Resolutions 23 and 24 of 1976 and 45 of 1989;

h) Imports of convertible foreign currencies for local currency investments in the purchase of housing for employees or offices of foreign corporations.

Colombian law makes a distinction between legal state monopolies and the reservation of public services for the government. The aim of state monopolies is purely one of revenue generation, but the aim of reserving public services is to ensure the population’s general welfare and improve its quality of life, or simply on grounds of sovereignty.

The Constitution provides for monopolies of games of luck and chance and liquor production.

The Constitution reserves the following areas for the state:

1) Provision of radio, television, and other services using the electromagnetic spectrum.

2) Article 81 of the Political Constitution prohibits the manufacture, import, possession, and use of chemical, biological, and nuclear weapons, reserving for the Government the introduction and manufacture of arms, war munitions, and explosives.

3) Exploration and exploitation of nonrenewable natural resources, such as hydrocarbons, for example, have been deemed to be the preserve of the State. In addition to oil, the State also reserves the exploitation and sale of salt in its natural state and the exploration and exploitation of coal, which are all owned by the State.

4) Provision of public postal service.

It should be noted that, though an activity is reserved for the State, this does not mean that it cannot be provided by the private sector, either through partnership contracts, as in the case of the hydrocarbon sector, or concession contracts.

The revenue objective of monopolies may be defined as a means whereby the State or its entities may obtain income under public law.

A monopoly may only be established on grounds of public or social interest, by law, and after full compensation of the individuals who may have been deprived of that economic activity.

The organization, administration, control, and exploitation of monopolies are subject to a special regime, determined by law.

There are two reasons for reserving certain activities for the State: public service and the exercise of a strategic activity, without said reservation implying the creation of a legal monopoly. The reservation of an activity for the State is subject to the following requirements: a) legal approval; b) social interest or sovereignty; and c) prior and full compensation of the persons affected.

Prohibitions:

a) Defense and national security activities (Article 223 of the Political Constitution): Only the Government can bring in and manufacture weapons, war munitions, and explosives. Article 336 of the Political Constitution, Law 10 of 1990, Article 42 and 43, Decree 1,222 of 1986: Games of luck and chance, such as lotteries, are a State monopoly and the income received therefrom is allocated exclusively to the health services. Article 336 of the Political Constitution, Law 14 of 1983, Article 61, Decree 1,222 of 1986: Liquor production is a State monopoly and the income obtained therefrom is allocated preferentially or exclusively to the health services. Wines, sparkling wines, aperitifs, and the like, are excluded (Regulatory Decree 1095 of 1984).

b) Processing, handling, and disposal of toxic, dangerous, or radioactive waste not produced in the country (Article 88 of the Political Constitution: The manufacture, import, possession, and use of chemical, biological, and nuclear weapons is prohibited, as is the introduction into the national territory of nuclear residue and toxic waste. The State regulates the entry into and exit from the country of genetic resources and their use, mindful of the national interest).

c) Enterprises whose main activity is the purchase, sale, or lease of real estate. Enterprises performing these activities with property of their own construction are exempted from this rule.

d) Documents issued as the outcome of a property title suit on property or construction projects or through the real estate funds described in Sections I-IV of Chapter IV of Resolution 1,394 of 1993 issued by the Superintendency of Securities, through either public or private tendering (Resolution 1,394 of 1993 was superseded by Resolution 400 of 1995, thus, for the purpose of Resolution 51 of 1991, the provisions of Title III, Chapters V and VI are applicable).

Restrictions:

a) Television: (Law 182 of 1995, Article 34). Foreign investment in corporations holding concessions for television air time or programs or zonal channels is authorized. However, it is subject to a maximum of 15% of the equity in the company holding the concession and to the possibility of investment by Colombian enterprises in the investor’s country of origin on reciprocal terms. This investment must come from enterprises of companies engaged in the television industry in the country of origin of the investment. Foreign investment may not be channeled through companies with unregistered stock but only through those with registered stock. For approval, the investor must submit the required operating license to the National Television Commission at the time of the investment, along with a list of the partners duly certified by the Chamber of Commerce, or equivalent entity in the country of origin, legalized in accordance with current rules. Investment in companies whose partners are companies with unregistered stock is not accepted.

b) Ships’ brokers: (Commercial Code, Article 1,490) Ships’ brokers are persons who represent the shipowner on land in all matters related to the ship. When the ship’s broker is a corporation, at least 60% of its equity must belong to Colombian individuals.

c) National airline or shipping companies: (Commercial Code, Article 1,426). In national commercial airline and shipping companies, direct or indirect participation in the capital by foreigners may not exceed 40% of the total capital of those companies.

d) Ownership of commercial ships: (Commercial Code, Article 1,458). Only Colombian nationals may be owners of commercial ships licensed in Colombia.

The principle of reciprocity in state contracting is required under Article 20 of Law 80, which establishes that, in state procurement procedures, providers of goods and services of foreign origin shall be afforded the same treatment under the same terms, with the same requirements, procedures, and auction criteria as that granted to nationals, by exclusive application of the principle of reciprocity. A similar provision is provided in Article 34 of Law 182 of 1995, regarding television program concessions.

No.

In principle, yes. However, Article 60 of the Political Constitution establishes that, when the State transfers its equity in an enterprise, it will take measures to democratize the ownership of its shares and will offer to its employees, to solidarity and employee organizations, special conditions for acquiring ownership of those shares. This is not actually a form of discrimination against foreigners because it excludes from these conditions all persons who do not meet the above-mentioned requirements. This is noted for reasons of transparency.

In accordance with Article 3 of Resolution 51 of 1991, subject to Article 100 of the Political Constitution of Colombia and Article 15 of Law 9 of 1991 (Article 15 of 1991: The regime for foreign capital investment in the country and Colombian investment abroad will be established by the National Government. In discharging this function, it will indicate the modalities, destination, method of approval, and general terms of investment. After investing foreign capital in the country following the due procedure, the investor has the right to remit the profits from this investment abroad and to repay the capital invested and capital gains, subject to the limits and conditions indicated by the National Government through the establishment of systems of exceptions, according to the destination of the investment, e.g. the exception regimes for the financial, hydrocarbon, and mining sectors. Except for matters related to the transfer of resources abroad, foreign investment in Colombia will be treated like any other Colombian national investment. The terms for repayment of the investment and legal remittance of profits in force on the date of registration of the foreign investment may not be changed in such a way that the changes unfavorably affect foreign investors, except temporarily, when international reserves are too low to cover three months of imports. Par: The rules issued on the basis of this Article may not grant conditions or afford discriminatory treatment to foreign investors vis-à-vis national investors), and with the exception of those matters related to the transfer of funds abroad, foreign capital investment in Colombia is, for all purposes, treated the same as investment by resident nationals. Consequently, and without prejudice to the provisions established in special regimes, no conditions may be conceded nor discriminatory treatment afforded to foreign capital investors vis-à-vis resident national private investors, neither may any more favorable treatment be granted to foreign investors than that afforded to resident national private investors.

In accordance with Article 58 of the Political Constitution, on grounds of public utility or social interest, defined by the legislature, expropriation may be imposed by court order and with prior compensation. That notwithstanding, in the interest of equity, the lawmaker may determine which cases do not warrant the payment of compensation, by an affirmative vote of the absolute majority of the members of both houses. Also, in the interest of sovereignty or in the national interest, the State, by a law approved by the majority of the members of both houses, initiated by the Government, may reserve for itself certain strategic activities or public services, providing prior compensation to those persons who are deprived of the exercise of a lawful activity by virtue of that law (Article 365 of the Political Constitution)

In the case of expropriation under Article 58, the Article establishes that compensation shall be set taking into account the interests of the community and the affected party. However, the Constitutional Court (Judgment C-153 of 03/24/1994) has stipulated that such compensation must fully repair the damage, as it must cover consequential damage and the loss of potential earnings incurred by the owner of the expropriated property. In the case of nationalization of a sector, Article 365 provides for full compensation.

No, both Article 58 and Article 365 provide for prior compensation.

In this regard, there are two concepts: intellectual property, also known as copyright; and industrial property, rights over inventions with industrial applications, that is, that can be produced or used for any type of industrial purpose, industry meaning any productive activity, including services.

Industrial property is also regulated by commercial law, in particular Andean Decision 344 of 1993, which is incorporated in domestic law and provides for invention patents, utility models, industrial designs, industrial secrets, trademarks, brand names, and appellations of origin.

Intellectual property or copyright are regulated mainly by Law 23 of 1982, Law 44 of 1993, and Andean Decision 351 of 1993. In accordance with these rules, copyright covers scientific, literary, and artistic works, which include all creations of the mind in these fields, irrespective of the means of expression or destination. This type of rights protects software under Article 23 of Andean Decision 351 of 1993.

Foreign capital investments in the country, through any of the modalities envisaged in the Foreign Investment Statute (Article 7, Resolution 51 of 1991), must be channeled through the exchange market (Article 7, Resolution 21 of 1993), and registered with the Bank of the Republic (Article 37, Resolution 21 of 1993).

It is important to note that, in Colombia, loans are not included in the definition of foreign investment (paragraph, Article 4, Resolution 51 of 1991), and therefore have a special regime.

There are no restrictions on transfers of the capital and profits of foreign investment, the only requirement being registration with the Bank of the Republic.

There is a single exchange market in Colombia, which can be accessed through different intermediaries or through the clearing mechanism. This general rule is applicable to foreign investors under Resolution 21 of 1993, Article 37.

Foreign investment is affected by five taxes: income tax and supplementary taxes, sales tax - VAT, stamp tax, industry and business tax, and land tax.

Income tax and supplementary taxes include the following:

* Special rates are applied to the hydrocarbon sector.

No, except as concerns the supplementary tax on remittances, which is levied on transfers of foreign exchange.

Argentina (air and sea navigation); Brazil (air and sea navigation); Colombia (air and sea navigation); Chile (air and sea navigation); the United States (air and sea navigation); Venezuela (transportation); Andean Pact (Decree 1551 of 1978, Convention to avoid double taxation between member countries).

There is a free zone regime, which grants absolute tax exemption. Article 100 of Resolution 51 of 1991 establishes that foreign capital investments in enterprises located in free zones will be governed by Decree 2131 of 1991 and the rules superseding, amending, and regulating said Decree. There are no other special tax incentives for access to credit, industrial land, or staff training. Regarding insurance: OPIC and MIGA.

In accordance with Article 23, Resolution 51 of 1991, unless otherwise stated in the provisions of the prevailing international treaties or conventions, for the settlement of disputes or conflicts arising from the application of the foreign capital investment regime, the provisions of Colombian legislation apply, meaning that, the procedures envisaged in the respective procedural standards are applicable and suits are to be filed before the Colombian courts. However, this does not exclude filing suits in foreign courts in some cases.

International arbitration will be governed by the provisions of Decree 2279 of 1989 (Article 8, Executive Decision 2279 of 1989 - Article 100, Law 23 of 1991: Arbitrators are to be Colombian citizens, without prejudice to the provisions of the treaties in effect on international arbitration. The Pan American Treaty on International Commercial Arbitration of 01/30/1975, Law 44 of 1986, ratified on 12/24/1986) and the rules amending or added to it. In addition, unless otherwise provided in international treaties or conventions, and without prejudice to the suits that could be filed in a foreign jurisdiction, all matters concerning foreign capital investment shall also be subject to the jurisdiction of Colombian courts and Colombian arbitration rules.

No, ICSID is pending approval by the Congress.

1) Treaties signed

2) Treaties before Congress

3) Treaties being negotiated

4) Treaties pending negotiation

Colombia applies the dualism theory in international affairs; international treaties become valid once they are approved by law, their enforceability declared by the Constitutional Court, and the respective exchange of notes occurs.

Once they are incorporated in the domestic legislation, treaties are a direct source of law.

The competent entity for handling foreign investment is the National Planning Department, which is ranked as a ministry. This Department has a division responsible for all matters related to foreign investment.

The Foreign Investment Division’s functions include mainly: conceptual planning on foreign investment-related matters; authorization of capital investment, as necessary, and participation in negotiations on investment agreements.