When we consider the possibility of investing abroad, we are always faced with the same questions:
- Is the country I want to invest stable?
- Is its economy solvent?
- Does it have a sustainable growth?
- To what extent can the political changes taking place alter their economy?
The improvement in the world economic situation and the globalisation of the economy has meant that states in need of foreign investment have put in place instruments to guarantee public and private investment beyond the political and economic events that might occur.
Among these instruments are the Agreements for the Promotion and Reciprocal Protection of Investments, known as APPRIs.
What are APPRIs? They are bilateral international treaties signed between states in order to promote and protect the exchange of investments between natural or legal persons from different countries.
Spain has more than seventy APPRIs in force that provide substantive protections for foreign investment.
Among other issues, it is common for APPRIs to include protections against expropriation and, in the event of any substantial alteration, to pay the foreign investor the fair market value of the affected investment. For example, the Agreement for the Reciprocal Promotion and Protection of Investments between the Kingdom of Spain and the United Mexican States, of 10 October 2006, protects investments by Mexicans in Spain, whether natural or legal persons. Article V of that Treaty provides that Spain shall not “expropriate or nationalize an investment, directly or indirectly, through measures equivalent to expropriation or nationalization”. In that case, the Treaty provides that the State must pay compensation “equivalent to the fair market value of the expropriated investment immediately before the expropriation took place”.
Similarly, the Agreement for the Reciprocal Promotion and Protection of Investments between the Kingdom of Spain and the Republic of Panama, of 10 November 1997, protects investments of Panamanian individuals or legal entities in Spain, including “shares, securities, obligations and any other form of participation in companies”. It also protects ‘rights to money or to any other contractual benefit having economic value’. Article VI of the Treaty provides that investments by Panamanian investors “shall not be subject to nationalization, expropriation or any other measure having similar effects”. He adds that, in the event of expropriation, compensation must be paid to the investor ‘equivalent to the fair market value of the expropriated investment immediately before the expropriation measure is adopted’.
Other PPPRIs signed by Spain contain similar language such as those signed with Spain. Specifically, Spain has treaties in force in Latin America with Argentina, Colombia, Costa Rica, Ecuador, Mexico, Panama, Chile, El Salvador, Guatemala, Honduras, Nicaragua, Paraguay, Peru, the Dominican Republic, Uruguay and Venezuela, and has the treaty under negotiation with Bolivia.
This leads us to conclude that their investments are fully insured and that investors are protected by the bilateral agreements signed between their home countries and the Kingdom of Spain.