Local communities, extractivism and international investment law: the case of five Colombian communities

ABSTRACT

This article investigates the relationship between the investment treaty regime and the social fabric of extractivist projects. Investment treaties are central to the political economy and narratives of extractivism. This international regime tilts the balance in favour of extractive projects by strengthening foreign investor rights and facilitating alliances between foreign investors and national elites. If states give in to environmentalist or local pressures, ISDS becomes foreign investors’ weapon of last resort: Investors can enforce their expectations in a forum where local communities have neither rights nor legal standing. This way, the investment treaty regime makes local communities invisible, contributing to the ontological occupation of territories. I illustrate these claims by examining the experiences of five Colombian local communities. The article also serves as an introduction to a Special Issue that continues discussing the case of Colombia, brings additional insights from Peru, and examines how local communities can speak more effectively.

KEYWORDS:

• Foreign investment
• extractivism
• local communities
• international investment law
• natural resources
• human rights

Most foreign investment in extractives is large-scale projects that have significant economic, political and social consequences. They comprise several resources, notably capital and land, and involve, at least, foreign investors, states and local communities. Law is constitutive of these investments too. International economic laws, domestic mining regulations and concession contracts define the scope of rights and obligations of foreign investors, providing mechanisms to resolve disputes and enforce entitlements. These rules also signal a policy stance to markets and anchor narratives associated with the use of land and the ‘development’ importance of extractivism. Altogether, these laws constitute the rules of the ‘political games’ associated with foreign investment, and relevant actors bargain or resist in their shadow (Ehrnström-Fuentes & Kröger, 2018, pp. 197–198).

International and domestic laws are not always consistent, however, and there is space for incoherence and tension within and between each of them. Most prominently, mining regulations are often in tension with local rights and environmental protection. Investment treaties and investor-state dispute settlement (ISDS) stand out as critically significant in this context, as ISDS arbitrators decide cases that typically deal with the potential inconsistency between domestic law, international law and investment treaties. Hereinafter, I will refer to these treaties and ISDS as the investment treaty regime.

When foreign investors and their investments are protected by this international regime, ISDS arbitrators have jurisdiction to resolve almost any dispute an investor may bring against the host state (states can rarely sue foreign investors under this regime). According to treaty language, arbitrators’ role is limited to deciding whether or not a state violated the standards of protection – such as expropriation or fair and equitable treatment, settling the dispute peacefully without recourse to diplomatic intervention. But in practice, arbitrators do more than this. They interpret rights, attribute meaning to facts, and reinforce (or weaken) narratives associated with the use of land, extractivism and development. In addition to resolving a dispute, which for states may result in large damages awards, these decisions have systemic effects for all the actors involved in these projects (Cotula & Schröder, 2017, p. 6; Schneiderman, 2013, p. 5). Crucially, however, local communities play no significant role in the investment treaty regime and are not parties in ISDS disputes. For this regime, foreign investment relations only concern foreign investors and host states: The local dimension is silenced (Perrone, 2019, pp. 16–18).

Investment treaty regime’s binary structure is analytically and normatively flawed. Foreign investment relations are multi-actor – involving the global, national and local levels – and silencing local communities can contribute to violating their human rights or to redescribing public authority without due regard to local preferences (Broad, 2014, pp. 873–874; Perrone, 2016, pp. 393–395). Ignoring the local has not only distributive but also recognition implications; the identity and way of life of these communities are also at stake in ISDS cases.

The significant mismatch between the investment treaty regime and the social fabric of foreign investment projects inspired a workshop held in Bogotá, in August 2018. Its aim was not only to contrast a more fine-grained view of investment relations with the investment treaty regime but also to learn directly from local communities how they relate to foreign investors, states and law in the context of extractive projects. The literature on extractivism finds that most projects are possible because of an alliance between global corporations and national elites, but the role of the investment treaty regime in these relations has not received sufficient attention yet (see Broad & Cavanagh, 2015; Ehrnström-Fuentes & Kröger, 2018; Kröger, 2013; Merino, 2020). This international regime can be regarded as an external imposition, an instrument of transnational elites, or as a constitutive part of extractivism shaping global-national alliances as well as mining laws and regulations. Analytically, the question is whether the investment treaty regime should be placed outside or within the foreign investment and development imperatives.

Representatives from five Colombian local communities participated in the 2018 workshop. They came from (1) Colombia’s North East region of La Guajira, where the Wayuu people have been seriously affected by the Cerrejón open-pit mine. Frictions between this community, the investor and the state have led to domestic litigation and two ISDS cases.¹ (2) The city of Bucaramanga, where water supply is threatened by a gold mining project in the Páramo de Santurbán. The tension between water activists and the project lies at the core of domestic and three ISDS cases.² (3) The town of Marmato, where artisanal local miners face pressures from a large-scale project. This conflict is a key aspect of domestic litigation and ISDS arbitration.³ (4) The area of Alto San Jorge, where the Zenú people suffer from the consequences of the Cerro Matoso project, one of the largest open-pit ferronickel mines in the world. Again, the dispute has prompted domestic litigation and an ISDS case.⁴ (5) The town of Cumaral, where rural residents organized a referendum to ban oil production in the area. A significant majority (97%) voted against oil production, but this result triggered a dispute that was ultimately resolved by the Colombian Constitutional Court.

The two-day discussion in Bogotá followed a focus group methodology, in which participants shared their knowledge and experience with other community leaders and a selected number of academics. The workshop was guided through open-ended questionnaires distributed in advance. The group was heterogeneous, including indigenous, rural and urban communities. Some participants did not share a social identity but were united by the geographical proximity and the impact of an investment project (see Cotula & Schröder, 2017, p. 11). Each community selected representatives according to its own governance rules; there was gender parity in the representation of communities and academics (except for one community). The workshop was held closed doors, but a public event was organized at the end of the second day, giving community leaders the opportunity to present their views to a wide audience. This introductory article is inspired and grounded in these discussions, which are also the subject of three of the essays that make this Special Issue.

The argument of this article – in itself and as an introduction to the Special Issue – is that the investment treaty regime is central to the political economy and narratives of extractivism. This international regime tilts the balance in favour of extractivism by promoting a foreign investment imperative, strengthening foreign investor rights, and making local communities invisible. When the laws of extractivism enter into tension with environmental protection or local rights, and states give in to the pressure of activists or local communities, ISDS becomes foreign investors’ weapon of last resort. This way the investment treaty regime facilitates alliances between foreign investors and national elites, as ISDS represents the facts of disputes and reviews public measures through vocabularies and legal standards that have proven to be somewhat sensitive to environmental demands but unresponsive to local rights or preferences (Perrone 2021, p. 172). Ultimately, the issue is not only that ISDS overlooks local rights; the situation is more complex as the investment treaty regime contributes to the ontological occupation of the territories (see Escobar, 2016).

The first section of this article analyses how domestic and international law have been historically and structurally implicated in extractivism in Latin America and the Andes region. It shows that the investment treaty regime was designed to promote foreign investment in extractives, and it has operated in tandem with domestic mining laws and regulations. The second section locates the situation of the five Colombian communities within these rules of the game, expanding later on how the investment treaty regime affects their relations with the state and foreign investors. The final section offers some reflections and introduces the five essays that make this Special Issue.

1. Law and extractivism in Latin America

In Latin America extractivism has developed into a social and political system of ‘accumulation by dispossession’ or ‘coloniality’ (Harvey, 2003; Quijano, 2000). The political structures and national elites of many Latin America countries have been shaped by extractivism and the international division of labour (Orihuela & Thorp, 2012, pp. 27, 38–41). When extractivism is not an elite project closely associated with the interests of foreign investors and Global North countries, it is part of nationalist or progressive projects for economic sovereignty. Nationalists justify extractivism as means for other purposes such as industrialization (Bielschowsky, 1998, p. 45) or redistribution (Gudynas, 2015, pp. 426–432; Svampa, 2015). What these competing political projects often disregard, or actively silence, is that extractivism has large implications for local communities. Their way of life is radically affected by extractivist investments or otherwise transformed as a result of their resistance to these projects (Burchardt & Dietz, 2014, pp. 478–480). The tensions in the Andes region since the 2000s illustrate these consequences (Bebbington, 2012, pp. 16–20).

The relations between the global, national and local levels occur in the shadow of legal institutions that contribute to creating and reproducing – or resisting – extractivism (Broad, 2014; Rodríguez-Garavito, 2011). While in some circumstances, the law appears to play a minor role, in other historical junctures, it can make a major difference. The legal order may block the reconsideration of extractivism, promote sustainable forms of resource extraction, or may turn local successes into pyrrhic victories. Mapping how extractivism and laws relate to each other is therefore fundamental.

1.1. A historical account of investment laws and extractivism

A detailed historical account of extractivism in Latin America escapes this article; for the purposes here it suffices to highlight the role of law in the promotion and reproduction of extractivism. In the ‘New’ World, colonial policies promoted extractivism as a way to supply the European demand of land-intensive resources related to industrialization (Pomeranz, 2000, pp. 166–174, 267–268). Those who promoted independence in the nineteenth century – essentially the national extractivist elites that colonial laws contributed to creating – revolted against these laws because of trade restrictions. They did not oppose the extractivist model, which continued and thrived in the 1800s in the newly independent states (Halperín Donghi, 1993, p. 118). Mining had become part of the identity and culture of many Latin American regions, such as Marmato and Santurbán in Colombia, where this activity even predates colonial conquest (West, 1972, pp. 34–35, 46–47).

Part of the debate between Latin American newly independent countries and European powers centred on the rules governing foreign investment. Latin American governments favoured co-modification and natural resource exports, accepted the free navigation of their rivers, and promoted the construction of key infrastructure for extractivism, such as railroads. Some of these domestic policies were turned into international obligations through peace, commerce and navigation treaties that Latin American states signed with European nations and the United States (Becker, 1984, p. 251). At the same time, Latin America claimed for itself the right to resolve disputes with foreign investors. The last interpreter of property rights would be national judges, and foreigners would receive national treatment: not less, but not more. This position – known as the Calvo Doctrine – was expressed in the concession contracts that Latin American countries signed with foreign investors. In the case of Colombia, the first two oil concession contracts, Concesión Barco y de Mares (1905), included a Calvo Clause (Article 145, Law 188, 1888).

European powers and the United States had a different view. They argued that international law includes a minimum international standard that every state should respect as a member of the international community of civilized nations. In the nineteenth century, Europeans considered that non-compliance authorized intervention and the use of force. They also highlighted that natural resources were not only a nation’s wealth, and individual states could not oppose to their exploitation for the benefit of mankind (Anghie, 2005, p. 160; Schrijver, 1997, p. 4).

The significance of this debate increased in the twentieth century. The revolution in Mexico was followed by the nationalization of oilfields and an agricultural reform that redistributed land among peasants. The United States opposed this economic transformation and demanded the recognition of their investors’ rights or the payment of prompt, adequate and effective compensation. The controversy only ended with the creation of the US-Mexico Claims Commission, which was in charge of resolving individual disputes between US investors and Mexico (Lipson, 1985, pp. 76–81). But similar reforms failed. In the 1950s, the United Fruits company controlled large territories and enjoyed numerous privileges in Central America, which prompted the Guatemalan government to pursue an agrarian reform (Schlesinger & Kinzer, 1999, p. 38; Soluri, 2005, p. 4). The company, however, convinced the United States to invade Guatemala using the Communist threat as an excuse. The law was involved in this case too, as the law firm Sullivan and Cromwell LLP lobbied for the interests of United Fruits in Washington (Schlesinger & Kinzer, 1999, p. 106).⁵

Nonetheless, the consensus for the national control of natural resources in Latin America consolidated. Keynesianism and nationalism gave shape to the thinking associated with the UN Economic Commission for Latin America and the Caribbean, which favoured state economic intervention to promote industrialization (Bielschowsky, 1998, p. 18). The dominant view was that this project required the involvement of the state in the natural resource sector. Agrarian reforms were an important part of this policy, including technification, redistribution of land to peasants, as well as increasing state control over oil, gas and minerals. The benefits were to fund the industrialization plans (Bielschowsky, 1998, pp. 31–33).

In the 1960s and 1970s, most Latin American countries imposed controls on the admission and operation of foreign investment. One of the most important regulations was Decision 24/1970 of the Andean Pact, which implementation began in 1971. Latin American countries also created state-owned corporations in the natural resource sector, particularly oil (Sánchez, 1998, pp. 165, 173). In Colombia, this vision reflected in the adoption of association contracts in the oil industry in 1970, whereby firms were forced to form joint ventures with the state-owned company, Ecopetrol – created in 1951 after the reversion of the Mares Concession. Some foreign investors, however, allied with part of the national elite to resist this policy (De la Pedraja, 1993, p. 118).

Equally important was to reflect this nationalist model in international law. At the initiative of Uruguay, in the early 1950s, the United Nations began considering the issue of natural resources and development. The initiative aimed to ensure that Global South countries could nationalize their natural resources paying just compensation only, something capital-exporting countries – and their multinational corporations (MNCs) – resisted, demanding instead the observance of contractual terms and, in case of nationalization, the payment of full compensation. The negotiations took 10 years until the UN adopted the Declaration on Permanent Sovereignty over Natural Resources (PSNR) in 1962, which ensures the right to expropriate but leaves the controversy over the amount of compensation unresolved (Schrijver, 1997, pp. 70–76). The Global South later advanced a more comprehensive New International Economic Order (NIEO) proposal and, at the initiative of Mexico, the United Nations approved the Charter of Economic Rights and Duties of States (CERDS) in 1974. However, this resolution was opposed by most capital-exporting countries, and its relevance under international law has been limited (Anghie, 2005, pp. 222–223; Schrijver, 1997, pp. 111–113).

A salient aspect of the PSNR and the CERDS was that the extraction and use of natural resources were described not only as the sovereign prerogative of the state but also as an economic activity that should be done in accordance with, and for the benefit of, the people (PSNR, paragraphs 1 and 2; CERDS, Chapter I, Article 1). Most Latin American governments actually continued privileging technification and assimilation over local preferences and identity (Boanada Fuchs, 2013, p. 14). Yet, the NIEO rules recognized the complexity of foreign investment in natural resources and the role of local communities in these projects, as opposed to the standards advanced by foreign investors and capital-exporting countries (Linarelli et al., 2018, pp. 108, 244–245).

Things changed in the 1980s and 1990s with the rise of neoliberalism and the decay of the industrialization project. Low economic growth and sovereign debt problems prompted most Latin American countries to favour a new wave of foreign-led extractivism (Orihuela & Thorp, 2012, p. 27). The alliance between national elites and transnational capital gained momentum and states offered strong incentives to attract foreign investment, limiting their role to regulators. In the case of Colombia, a new mining code was adopted in 2001, concession contracts replaced the joint-venture model in 2004, and the government implemented stabilization agreements in 2005 (Sierra Camargo, 2018, pp. 161–177; 232–304). Meanwhile, except for Brazil, Latin American countries ratified investment treaties and accepted ISDS, ending more than a century of resistance against these international standards and arbitration. The 1991 Colombian Constitution was reformed in 1999 so the country could ratify these treaties.⁶

But these were not the only legal changes. Pro-extractive reforms were implemented while Latin American countries recognized significant rights to the environment and local communities. As Valencia explains in her contribution to this Special Issue, several states in the region reformed their constitutions and ratified human rights treaties recognizing important rights to local communities, including the need to carry out consultations and obtain free, prior and informed consent (FPIC). The ratification of the International Labour Organization Convention 169 (which replaced Convention 107) was also a central step in this regard (Boanada Fuchs, 2013, p. 14). Latin American countries also implemented higher environmental standards even if their enforcement has been sometimes ineffective (Orihuela & Thorp, 2012, pp. 40–41).

FPIC and other participatory mechanisms have emancipatory potential for local communities; however, they also remain controversial. These laws and processes sometimes operate only to legitimize extractivist policies (Valencia, 2016, p. 10); Merino observes that the extractive state has been ‘cynical’ (Merino, 2020, pp. 58–60). These mechanisms also have an ‘affinity’ with the procedural logic of neoliberal governance, ignoring the material conditions that are necessary for a genuine deliberation (Rodríguez-Garavito, 2011, p. 278). The obstacles are not just about lack of expertise or access to information. Laws and institutions contribute to determining how the land should be used and who should be the main beneficiaries. The investment treaty regime plays an important role in this regard.

1.2. The investment treaty regime and extractivism

There is nothing specific about extractivism in the text of investment treaties or the bulk of ISDS practice. The definition of investor and investment is quite broad and there have been cases involving most sectors, although the extractive industry accounts for the largest share of arbitrations (24% according to 2020 ICSID Statistics). Historically, on the other hand, this legal regime is deeply connected to extractivism, and locating it as part of the laws of natural resource extraction reveals the way it has shaped relations between foreign investors, states and local actors. As a representative from La Guajira put it, investment treaties – like oil and mining laws – all revolve around ‘la confianza del inversionista extractivo’ [extractive investors’ confidence].

In the Cold War, investment treaties and ISDS were a Western corporate response to the Global South’s ambition to control its natural resources. They emerged from the efforts of financiers and international lawyers, who organized and promoted the investment treaty regime while simultaneously resisting the NIEO. Oil and mining companies, such as Royal Dutch Shell, Standard Oil of New Jersey and Rio Tinto, had reasons to be concerned about nationalization and the plans to put natural resources to work for industrialization. Thus, they sponsored a legal regime whereby their rights would be interpreted and disputes resolved through international arbitration (Perrone 2021, p. 51). Their attempt to create a multilateral investment treaty failed, but their home states began signing investment treaties, while the World Bank promoted the creation of the International Centre for Settlement of Investment Disputes and the inclusion of ISDS clauses in the treaties (St. John, 2018, p. 183).

The investment treaty regime was justified on the premise that Global South countries needed large amounts of capital and could not industrialize as fast as their governments wanted. The financiers and lawyers in question warned states not to ask too much from investors, as they would lose the flows of capital and technology they so desperately needed. As development aid was insufficient, governments should create the conditions to receive more foreign private investment (Abs, 1958, pp. 19–21). From a macroeconomic perspective, the promoters of this regime added, this policy should not lead to imbalances: Global South countries had plenty of natural resources they could exploit to fund their needs (Perrone 2021, p. 63). In the case of Latin America, David Rockefeller noted that foreign investment could contribute to development by ‘expanding and diversifying agricultural production’ (Rockefeller, 1966, p. 407).

Foreign investors were expected to promote host state economies not only by their capital contributions but also through partnering with national elites (Abs, 1958, p. 24). Yet, this strategy had a problem: local communities were expected to lose out under this model. In the early 1970s, the United Nations already observed that foreign investment may create some jobs, but that these flows of capital would transform social structures and the ways of life (UN, 1974, p. 61). The Global South did not necessarily protect local communities during this period, but the NIEO did incorporate a vocabulary where local communities were recognized as a protagonist of foreign investment relations.

The ratification of thousands of investment treaties in the 1980s and 1990s significantly changed this attitude, reenergizing core–periphery relations (Miles, 2013, pp. 79, 119–121) and transnational capitalist alliances (Perrone 2021, pp. 34, 172). In Latin America, the investment treaty regime contributed to ‘birthing’ a new wave of extractivism (see Ehrnström-Fuentes & Kröger, 2018, pp. 198–199). Investment treaties and ISDS have served to enforce foreign investor rights and locked-in domestic pro-extractive laws, giving a strong signal to markets (Anderson et al., 2016, p. 229; UNCTAD, 1999, pp. 117–118, 326–328). This international regime occluded NIEO’s multi-actor approach, and investment treaties have evolved overlooking developments such as FPIC and other participatory mechanisms.

2. Local communities, extractivism and law

The brief historical and legal account of the previous section constitutes the context against which the five Colombian communities that participated in the 2018 workshop relate to extractivism, the state and foreign investors. The projects in La Guajira, Alto San Jorge, Marmato, Cumaral and Santurbán are embedded in the dynamics of global commodity markets, whereby most of the production is for export, but depend on the alliance between foreign investors, national elites and the state for their establishment and operation. This alliance bridges the global and the national levels, working out how much each actor adapts to the interests and normative preferences of the other (Heidenreich, 2012, p. 573). Foreign investors want to play by their own rules – minimizing their taxation and adaptation to the host country – and work together with groups within the state who are willing to advance these interests. A key strategy of this alliance is to ignore or silence local communities, and when this is no longer possible, they seek to delay their participation or weaken their bargaining power. As we will see later, the investment treaty regime supports these strategies by tilting the balance in favour of foreign investors if states give in to local pressures, conditioning or cancelling extractive projects.

2.1. Five local communities in Colombia

The five Colombian communities that participated in the 2018 workshop observed that the state and the law are deeply involved in the materialization of large-scale extractive projects. They noted that foreign investors and states act in coordination, and they consider the state to be the main responsible not only for the investment projects but also for the violation of their rights (Alto San Jorge; Marmato; La Guajira). Only few governmental agencies, the community representatives highlighted, have looked after local interests (e.g. Defensoría del Pueblo de Colombia and, sometimes, the Constitutional Court).

In their view, extractive projects embed resources into the logics of global markets, while distributing most of the benefits between investors and the national state. Locals would only receive some jobs, some corporate social responsibility (CSR) projects, while domestic laws increasingly weaken local governments by reducing their share in the revenues (Cumaral; Santurbán; La Guajira). Most of the infrastructure, built either by the state or the investor, serves the investment (Marmato). Costs and risks, on the other hand, are shifted to the local communities, which do not participate in the discussions about the project or incentives. The costs that investors and states want to impose range from environmental degradation to a radical transformation of their way of life and livelihood. The representatives of the Zenú People (Alto San Jorge) and Marmato explained that their communities no longer produce food, which becomes a commodity to be obtained through the market. In La Guajira, the open-pit mine did not add anything to the regional economy; it simply replaced agriculture with extractivism. Social indicators in this region are amongst the worst in Colombia. The same happens in the municipalities with oil production, as explained by the two representatives from Cumaral.

In most cases, the communities only got to know about the projects in question – through official or unofficial channels – after investors and states had discussed the terms, and their options by then were reduced to either accept or resist the investment. When they decided to resist, states and investors deployed a series of strategies to make the communities vulnerable. The community representatives noted that the evidence was manipulated, downplaying the costs and risks of projects. The availability and quality of information, other research confirms, play a central role in the way communities react to projects (Broad & Cavanagh, 2015, p. 421). The community representatives added that another common strategy is for investors to divide the community (Marmato; Cumaral; La Guajira). Investors focus on gaining the support of part of the community, e.g. those actors who seem more interested in the project (as in the jobs) or who have less information. Sometimes there is a tension between jobs and values or jobs and the environment, although most people gradually turn against projects as they have more information about the real costs for the environment and their way of life (Alto San Jorge; Cumaral).

This divide and conquer strategy has other dimensions, including the fight for the public space where social mobilization clashes with demonstrations of corporate soft-power, as explained by the representatives from Cumaral. States may also rely on the use of force or threaten to label local communities as terrorists (Alto San Jorge; Marmato). The struggle is with the state, the community representatives observed, although they noted that investors offer significant support coordinating with governmental agencies. Firms also count with their own private security forces. Other research similarly suggests that foreign investors draw on the state and domestic law to justify allegedly controversial actions (Ehrnström-Fuentes & Kröger, 2018, p. 204. See also Bear Creek v. Peru, paragraphs 409–414).

The communities that participated in the workshop observed that laws and institutions are implicated in a process that makes local communities vulnerable. For the representatives of Marmato and the Zenú people, the most relevant laws in this regard relate to the organization of the territory, the underground, the distribution of competences, and the relation between indigenous and state law (also, Cotula, 2020). Sometimes the authorities or foreign investors challenge the legality of local land or mining rights; in certain circumstances, the national government may also displace the population to exploit the underground resources. This threat materialized in Tabaco, in La Guajira, as people had no choice but to leave as bulldozers started to demolish their houses.

Moreover, the community representatives explained that foreign investors may gain the control of large areas of land – normally to the detriment of part of the local community – and do nothing but wait (Alto San Jorge, Marmato, Santurbán, La Guajira). Locals are then not only excluded from the land, and cannot plant or mine, but also are not offered any alternative way of subsistence. This situation continues until communities cave into the extractive projects or their resistance efforts are successful. In the meantime, the state – particularly the national state – remains absent from the territories (Alto San Jorge; Marmato; Cumaral). The same goes for the directives of the foreign corporations, who would only meet local leaders – if they would meet them at all – in the regional or national capitals (Marmato).

Participatory mechanisms do not fix these problems. For the community representatives, consultation and FPIC are embedded in the extractivist model (Alto San Jorge; Marmato; La Guajira). Foreign investors and states can manipulate these mechanisms by turning them into bureaucratic tools (see also Merino, 2020, p. 60). Women face the most serious obstacles to voice their concerns, a question that Valencia addresses in her contribution to this Special Issue.

Even so, the five communities mentioned that FPIC and consultations oblige investors and states to disclose their plans and provide a space where local resistance can coalesce, get organized and make the conflict visible (La Guajira). Visibility and quick mobilization are fundamental to delay and eventually block extractive projects (Alto San Jorge; Marmato; Cumaral; La Guajira. Also, Broad & Cavanagh, 2015, pp. 420–421, 423–424). The success of resistance strategies depends on getting the attention from the regional and national capitals, as well as from translocal alliances of environmental or like-mind activists (see also Banerjee, 2018, pp. 809–810). The internet has played a key role in this regard, the representatives of Marmato and Cumaral noted. On the other hand, these actions rarely serve to obtain more benefits from states or investors, which limit themselves to promise a little more in terms of CSR or governmental assistance (Alto San Jorge).

The challenges that communities face when making their conflict visible and resisting projects are numerous. Local communities, such as the Zenú people from Alto San Jorge, have their own legal system and ecological indicators, such as whether the rice grows or the water flows. They observed that while they rely on this knowledge to assess an investment project, consultations depend instead on expertise and scientific assessments. States and investors contradict the views of indigenous groups, like the Zenú or the Wayuu peoples, relying on technical data that communities have problems to understand let alone challenge within the same scientific paradigm (see also Idrovo, 2018, p. 2320). Assessing the costs and risks of projects becomes a contentious terrain, where investors and states deploy their experts, consultants and academics to provide evidence in favour of extractive projects. The representatives from La Guajira observed that anthropologists sometimes go into their towns, disguised, and reach their own conclusions.⁷ The representatives of the local communities highlighted that they need help from academics or international actors to develop their own scientific assessments (Alto San Jorge; Marmato; La Guajira).

In this multi-level political economy, the five Colombian communities that participated in the 2018 workshop observed that the state remains the most problematic actor. The Zenú people explained that they could probably protect their values and interests if the state did not strongly support the investments. Similarly, the representatives of Marmato mentioned that they could strike better deals with foreign investors if they had more control over the consultation processes and were parties to the contracts. The representatives from La Guajira mentioned that a broad translocal alliance is key to make the conflict visible, but they also need to develop an alternative – their own development project – that they can oppose to the dominant extractivist model. The representatives of Cumaral and Marmato added that their situation would improve if there were less or no natural resources in the region; resisting a project only means to gain some extra time until the next one comes.

Overall, the five local communities observed that the law represents an obstacle to protect their interests and way of life. Using the law to defend their rights is expensive, and they are unaware of costs and risks. Lawyers are not always trustworthy and can be influenced by investors (Alto San Jorge; La Guajira). Increasingly, however, communities rely on different legal mechanisms to strengthen their resistance strategies, such as consultation, FPIC and the Inter-American Convention of Human Rights (Santurbán, Altos San Jorge, Marmato, La Guajira; Cumaral). The community representatives explained that it has been a difficult learning process, but they also have had some positive outcomes through the legal system. The problem is that convincing – or forcing – the state to delay or cancel an investment project is not only difficult in itself, but it can also prompt the foreign investors to file an ISDS case against the state, bringing about new challenges for local communities.

2.2. Local communities and the investment treaty regime

After an investment project passes through the prism of the investment treaty regime, the relations between investors, states and local communities are reconfigured. From a socio-legal perspective, investment treaties and ISDS undoubtedly shape the relations between all the actors involved in extractive projects. However, this international regime defines itself as a mechanism to resolve disputes between foreign investors and states only.

A common justification for the investment treaty regime is that foreign investors do not trust domestic judges or domestic courts are inadequate to resolve foreign investment disputes. The first line of argument suggests that judges may be biased for their own government. Governments make promises that they might decide later not to comply, tapping on their sovereign powers and a friendly jurisdiction to change the rules of the game unilaterally and escape liability (Bonnitcha et al., 2017, p. 128). The other line of argument focuses on the global character of the economy, highlighting that domestic law and judges – particularly in the Global South – are ill-equipped to deal with foreign investment projects (Tucker, 2018, pp. 80–81). The investment treaty regime is presented as a solution to these alleged problems.

The view that investment treaties and ISDS constitute a dispute settlement mechanism, and therefore we should focus on the resolution of cases only, has been challenged by the literature (Koskenniemi, 2017). The outcome of these arbitrations can shape the behaviour of those involved in investment relations beyond specific disputes. First, if states find that measures to protect the environment or local rights are challenged before ISDS, governments may think twice before adopting these measures. They are also interested in attracting foreign investment, so they may prefer their reputation as a good investment destination to the promotion of the environment or people’s well-being. If reputation is not a problem, moreover, the financial costs of a potential award may be one. Governments may fear the chances of losing an ISDS case. These factors, alone or combined, can give rise to regulatory chill (Bonnitcha et al., 2017, pp. 240–241; Tienhaara, 2011).

Secondly, investment treaties and ISDS may prompt foreign investors to disregard certain risks associated with their projects, as they consider the chance that governments may have to compensate them for regulatory changes under investment treaties (Bonnitcha, 2014, p. 74). The case of Bear Creek v. Peru illustrates the problem of moral hazard: This tribunal accepted that the investor could have done more to reassure the local community, although the majority insisted that the legal issue was circumscribed to whether or not Bear Creek had complied with Peruvian Law (paragraphs 409–414).

The literature on the investment treaty regime, moreover, has recently highlighted two other important aspects of the political economy of foreign investment in extractives. States often grant investors significant privileges and incentives, and these entitlements often come at the expense of local communities (Perrone 2021, p. 172). The investment treaty regime facilitates the bargaining process between foreign investors and states by treating the site of the investment as a sort of terra nullius. In the narrative of the investment treaty regime, investment relations involve a foreign investor willing to sink capital and a sovereign state granting entitlements over the natural resources. The local level is invisible here. If we focus on the communities, however, it is clear that there is a close relationship between the demands of foreign investors to establish the projects – or the benefits that states utilize to entice these firms – and local concerns about the environment and their way of life. These two concerns are often intertwined: the overlap between global biodiversity and indigenous peoples is estimated at 50–80% (Tauli-Corpuz et al., 2018, p. 6), although conservationism and indigenous rights should not be lumped together for the reasons Merino discusses in his contribution to this Special Issue.

For local communities, a significant problem is that states may provide investors with representations and assurances that can later give rise to foreign investors’ legitimate expectations – i.e. foreign investors’ reliance – under the investment treaty regime. According to the fair and equitable standard of treatment, included in most investment treaties, states are later required to act in accordance with these expectations even if the organ granting the representations acted ultra vires or the communities were never informed or consulted (Perrone, 2016, p. 404). The fact that these expectations affect local rights or values does not change this outcome. Crucially, this means that investors could have expectations regardless of any procedure to protect local communities, including consultation or FPIC.

Further, the experience of the five Colombian communities, as well as several ISDS cases, challenge the main assumptions that justify the investment treaty regime. In the last two decades, when states have delayed or blocked an extractive project, the primary reason was rarely that those who favoured the investment in the host government suddenly decided to take advantage of foreign investors. Instead, what occurred is that the local communities managed to make their interests nationally and transnationally visible, putting governments and extractive elites in a difficult position in which continuing with the project was socially or politically difficult, if not impossible. The problem was not that states suddenly changed their minds, but that local communities were not part of the investment processes from the start, and domestic and international law were ill-equipped to protect local rights, let along to ensure a genuine dialogue amongst the relevant parties. In his contribution to this Special Issue, Suárez-Ricaurte delves into the case of La Guajira to expose the asymmetry between foreign investor rights under investment treaties and local rights under domestic and international human rights law.

The timing and scale of state decisions to delay or block extractive projects, some of which eventually led to ISDS cases, vary from country to country. In cases involving Costa Rica, El Salvador and Colombia, the state acted before the conflict escalated and turned violent. Broad and Cavanagh suggest that this intervention was possible in Costa Rica and El Salvador because national elites were somewhat indifferent to extractive projects, supporting the demands of local communities and the termination or ban on mining projects with their silence. The ISDS threat did not stop these governments – there was no regulatory chill (Broad & Cavanagh, 2015, p. 425). Neither ISDS stopped the Colombian Constitutional Court in the cases relating to Santurbán and Marmato, although part of the Colombian government remained committed to making large-scale extractivism work for these regions (Sentencia C 35/2016, Sentencia T-361 2017; Sentencia T-438/2015, Sentencia SU 133/2017, respectively).

Things were different in cases involving Bolivia, Peru and Ecuador, where governments continued to support the projects despite increasing social unrest. The cases of Copper Mesa v. Ecuador, Bear Creek v. Peru and South American Silver v. Bolivia illustrate some of the strategies described by the five Colombian communities: division of the community, misinformation, absent state, police and private security repression. The level of violence – including dead people and allegations of rape – left the authorities with no other option but to terminate these investments. The ISDS tribunals in these cases conceded that states had no option but to act; however, compensation was still required under the applicable treaties. As in the case of Colombia, these governments did not give up their extractivist aspirations for the areas in question (Perrone 2021, p. 172).

This multi-actor and multi-level dimension is lost once the disputes reach ISDS. The proceedings before these tribunals recognize neither local communities nor their rights. In terms of representation, local communities have no role in investment treaties and no standing in ISDS (Coleman et al., 2019, pp. 4–5). Under the assumption that states can represent the different and often competing local interests in international law, the dispute is between the foreign investor and the state. As discussed above, this is controversial. The investment treaty regime does nothing to remedy this representation problem. In fact, it exacerbates it. This dispute settlement mechanism is organized as a one-way procedure where foreign investors sue states, and the latter can only counterclaim in limited circumstances (Perrone, 2019, pp. 20–21).

Local communities can only submit amicus curiae briefings to ISDS tribunals, which arbitrators may or may not accept (see more in Coleman et al., 2019, pp. 4–5). These proceedings occur in a different country and are embedded in a particular language and culture that escapes most communities. In this respect, ISDS cases are not different from scientific assessments and, therefore, no genuine inter-onto epistemic dialogue is possible within these institutions. Communities have to rely on the support of international think tanks and NGOs to intervene in ISDS; local lawyers are not enough. Despite these problems, some submissions have had an impact and provided a more pluralistic account of the facts. In Bear Creek v. Peru, the minority arbitrator relied on the amicus briefing to conclude that the investor could and should have done more to reach an understanding with the Aymara people. However, in the Eco Oro v. Colombia case, involving the dispute over Santurbán, the amicus submission was rejected. In his contribution to this Special Issue, Schneiderman examines this dispute, discussing the limitations of local community participation in ISDS.

The merit phase of ISDS disputes also comes with problems for local communities. These cases are about foreign investors’ substantive and procedural rights, including whether the state affected their legitimate expectations. Foreign investors have no or few obligations pursuant to investment treaties. They may have made numerous promises to the host state and the local community, involving jobs and outreach projects (Ehrnström-Fuentes & Kröger, 2018, p. 205; Jiménez & Campanini, 2012, p. 32), but these promises as well as other international obligations are unlikely to be enforceable under ISDS (Perrone, 2019, p. 20). Moreover, the bulk of ISDS awards involving communities shows that arbitrators favour a global view of investor rights. Foreign investors are described as politically disenfranchised (Schneiderman, 2013, p. 123), and technical and scientific knowledge tends to prevail over ‘core community values’ (Bilcon v. Canada, paragraphs 507–547). Arbitrators do not challenge states’ right to regulate but review public measures according to internationally accepted practices (Kurtz, 2016, pp. 157–167). For ISDS tribunals, state actions in response to local demands – particularly when investors have been granted a right or received an expectation – constitute an arbitrary conduct unless they can be justified according to global standards.

3. Conclusions and the Special Issue

This article has presented the investment treaty regime as an essential part of the extractivist model that has dominated Latin America since the 1990s. It relied on the Colombian case and the experience and knowledge of five local communities to illustrate the argument. The investment treaty regime has contributed to a new wave of extractivism in the region, giving shape to a governance model that privileges foreign investors’ expectations and shapes the relations between foreign investors, states and local communities. This regime is more than an external force that affects national sovereignty or which consequences are expressed through ISDS cases only. Investment treaties and ISDS make local communities invisible and contributes to the ontological occupation of the territories. These problems cannot be resolved just with consultation or community participation in ISDS.

The five essays that make this Special Issue continue discussing the situation in La Guajira and Cumaral (Suárez-Ricaurte and Sierra-Camargo), provide insights from Perú (Valencia and Merino) and examine what options local communities have concerning the investment treaty regime (Schneiderman). Suárez-Ricaurte contrasts the costs, risks and benefits of the Cerrejón project with the way the law, including the investment treaty regime, treats their distribution between the relevant actors. Sierra-Camargo examines the case of Cumaral to illustrate the limitations of another participatory mechanism, consultas populares. She claims that these consultas remain embedded within the capitalocene. Valencia looks at the case of Perú to discuss how participatory mechanisms may exacerbate gender issues within local communities. Women can also be subject of abuses by foreign investors’ employees, as the ISDS case of South American Silver v. Bolivia shows (para. 126, 370). Merino explores how local communities can be trapped in global discourses, such as conservationism or large-scale mining, neither of which appropriately represent their views and aspirations. Lastly, Schneiderman concludes this Special Issue analysing the limitations of ISDS as a fertile space for local community participation. He is rather sceptical and suggests, instead, that communities should focus their efforts on states not only to enforce their rights but also to reimagine the investment treaty regime.

Acknowledgements

This Special Issue would not have been possible without the generous funding of Durham University’s Global Challenges Research Fund and Universidad Externado de Colombia’s support to organize the workshop with local communities in Bogota in August 2018. Jimena Sierra-Camargo and Federico Suárez-Ricaurte were pivotal in organizing the workshop, and María Camila Camargo Moncayo provided administrative assistance. The author is thankful to the representatives of the five local communities who participated in the workshop in Bogotá: Jerson Jair López Cárdenas, Laura Isabel Buitrago Betancourt, Yasmín Romero Epijau, Felipe Santiago Rodríguez, Jhon Fredy Muñoz Gil, Adriana Leticia Palomino, Israel Manuel Aguilar Solano, Rafael Antonio Quintero and Erwing Rodríguez-Salah. The author is also grateful to three anonymous reviewers for their insightful comments and suggestions. All errors that remain are solely the author’s responsibility.

Disclosure statement

No potential conflict of interest was reported by the author(s).

Additional information

Funding

This work was supported by Durham University through a GCRF Grant.

Notes on contributors

Nicolás M. Perrone

Nicolás M. Perrone is Professor of Economic Law, Escuela de Derecho, Universidad de Valparaíso, Chile. His main research interests are in international economic law, particularly in international investment law and policy. He has previously taught at Durham University, the Institute for Global Law and Policy (Harvard Law School) and Universidad Externado de Colombia. Nicolás has been a Visiting Professor at the Universidad Nacional de San Martín, the International University College of Turin and the University of Eastern Piedmont, and a visiting lecturer at Xi'an Jiaotong School of law. He holds a PhD and an LLM from the London School of Economics. Nicolás has worked or consulted for the governments of Argentina, Ecuador, the OECD, UNCTAD, the International Institute for Sustainable Development, the International Institute for Environment and Development, Friedrich Ebert Stiftung and the Fairtrade Foundation. His research has appeared in the Indiana Journal of Global Legal Studies, Transnational Legal Theory, Journal of International Dispute Settlement, the Journal of World Investment & Trade and Leiden Journal of International Law. His first monograph Investment Treaties and the Legal Imagination: How foreign investors play by their own rules was published by Oxford University Press.

Notes

1 Glencore International v. Colombia (ICSID Case No. ARB/21/30) pending; Anglo American v. Colombia (ICSID Case No. ARB/21/31) pending.

2 Eco Oro Minerals v. Colombia (ICSID Case No. ARB/16/41) Decision on Jurisdiction, Liability and Directions on Quantum, 9 September 2021; Red Eagle v. Colombia (ICSID Case No. ARB/18/12) pending; Galway Gold Inc. v. Colombia (ICSID Case No. ARB/18/13) pending.

3 Gran Colombia Gold v. Colombia (ICSID Case No. ARB/18/23) pending.

4 Lisa Bohmer, ‘South 32 makes good on earlier threat to initiate ICSID arbitration against Colombia’ IAReporter, 27 March 2020.

5 Sullivan and Cromwell LLP was a member of the transnational business coalition that championed the cause of investment treaties and ISDS in the 1960s. See Perrone (2021).

6 In certain circumstances, the 1991 Constitution allowed the state to expropriate without paying compensation.

7 The same allegation was made by the Aymara and Quechua communities. South American Silver v. Bolivia, paragraphs 155–160. Also, Jiménez and Campanini (2012, p. 27).