Fighting for Silver: The Legal Consequences of Nationalization in Bolivia

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Seven years ago this week, one of the most significant chapters in Bolivian history began. With one stroke of the pen on May 1, 2006, then-newly-elected president Evo Morales issued a decree nationalizing all of Bolivia's oil and gas reserves. This was shortly followed by efforts to nationalize many other natural resources in the country, including precious minerals and other elements. The nationalization of many industries has had significant legal consequences, most of which are still felt today.

On May 1, 2013, one of the subsidiaries of South American Silver, a Canadian company, filed an arbitration demand at UNCITRAL against the Bolivian government. The root of this dispute is a decree in August of 2012 that revoked mining concessions held by Compañía Minera Mallku Khota, a fully owned subsidiary of SAS. The claimant alleges that Bolivia is in violation of a treaty with the United Kingdom for the Promotion and Protection of Investments, namely that "Bolivia has breached the Treaty's requirement to provide full protection and security to foreign investors and their investments, as well as the Treaty's protections against, among other things, expropriation without just and effective compensation, unfair and inequitable treatment, and less favorable treatment than afforded to Bolivian nationals or nationals of third states," according to the press release. Bolivia's Mining Corporation, the Bolivian governmental entity that acquired the rights to the silver mine following the expropriation, has claimed at this time that it is not aware of the demand.

Demands like these raise countless questions of international law, including some of the thornier ones like sovereign immunity and the ability to enforce an arbitral award against a government actor. Governments that have nationalized their industries have tended to skirt these legal challenges by agreeing on a settlement with the expropriated companies. That said, negotiations do not always work. Because of the sensitive nature of the dispute, the instant conflict is worth watching as its developments could have a substantial impact on both international trade and governmental efforts to nationalize their industries, particularly in Latin America.

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