Complex infrastructure projects in Latin America have high potential for disputes

Not all risks are foreseen by investors, such as the impact of infrastructure projects on local indigenous communities – failure to address such issues can result in projects being cancelled

With highly complex infrastructure projects underway in Latin America, the potential for legal disputes is significant, especially in countries where there are bodies with little experience of such schemes, attendees at a recent event in Madrid organised by The Latin American Lawyer heard. Including well-constructed arbitration clauses in contracts helps to make investors more comfortable about financing such projects, participants in the event – which was organised with the support of advisory firm Accuracy and law firms BLP Abogados and Roca Junyent – were told.
Attendees heard there remains a high demand for new infrastructure in Latin America and consequently, there are projects of great complexity that have the potential to generate conflicts. The probability of disputes is greater in countries where there is little or no experience of handling such complex projects or in markets with a lesser degree of “institutional maturity”.

More confidence in arbitrators
Panellists quoted figures from the International Chamber of Commerce showing a 15 per cent increase in arbitration cases in Latin America in 2016, the latest figures available. Some attendees claimed that this is a positive sign in that it will make investors more comfortable doing business in the region knowing there is a possibility of recourse to arbitration in the event major projects lead to disputes. Some participants also argued that the figures demonstrate greater confidence in local courts and arbitrators. However, there were also warnings that circumstances differ country to country. Spanish investors were also advised to assess the situation in each country and conduct their business under the guidance of Spanish lawyers, a local law firm and other advisory firms that are able to navigate the intricacies of each market.

Giving confidence to investors
Attendees also heard that including “well-crafted arbitration clauses” in contracts will help to give more confidence to international investors, who face a wide range of potential risks when investing in Latin America. Some such risks are foreseen and planned for, however, there are others that are often overlooked initially, such as the potential impact of large projects on local indigenous communities as well as the response of such communities, which could slow down projects or even lead to them being cancelled.
Spain is not only the second-biggest investor in Latin America after the US, but also the country that has filed the second-largest amount of lawsuits against nations in the region. Attendees remarked that this gives Spanish companies the advantage of having considerable experience of dealing with certain risks and conflicts in a number of Latin American countries.

Event: Milestones and myths of investment in Latin America – The success of foreign investment in an attractive and complex context
Location: Madrid
In collaboration with: Accuracy, BLP Abogados and Roca Junyent