The Venezuela–Colombia BIT Will Enter Into Force: A New Shield for Bilateral Investment

In the coming weeks, the Agreement on the Promotion and Reciprocal Protection of Investments between Venezuela and Colombia ("BIT") will complete the domestic formalities and officially enter into force (see Gonzalo Capriles Baena, "El APPRI entre Colombia y Venezuela entra en vigor: una oportunidad y una lección de historia"). Signed on February 3, 2023, in Caracas and approved by both countries following parliamentary and constitutional review, the agreement marks a milestone in bilateral economic relations — and a concrete tool for those who invest or plan to invest in either country.

For context on how we advise investors on treaty protection and arbitration strategy, see our Investment Arbitration practice.

What is a BIT and why does it matter?

A BIT is a bilateral treaty that serves a dual essential purpose:

• It establishes clear standards of state conduct and grants investors substantive protections against mistreatment of investment by the host State: non-discrimination, fair and equitable treatment, protection against expropriation without adequate compensation, and free transfer of capital.
• It provides investors with a real enforcement mechanism when those standards are breached, including access to independent international arbitration.

For the investor, the existence of a BIT measurably reduces country risk: investor rights are not solely dependent on the host State's domestic courts but are backed by an international treaty.

A long road to entry into force

The history of this BIT is illustrative of the complexity of the process:

• Signature: The BIT was signed on February 3, 2023, in Caracas.
• Venezuelan approval: Venezuela's National Assembly approved it through a law published in Official Gazette N° 6,738 Ext. of March 10, 2023.
• Colombian approval: Colombia's Congress approved it through Law 2370 of July 12, 2024, with 110 votes in favor.
• Constitutional review: Colombia's Constitutional Court declared the BIT constitutional (exequible) through Decision C-338/25 of August 13, 2025.
• Entry into force: The BIT will enter into force 60 days after Colombia notifies Venezuela of the completion of its domestic procedures — a notification expected in the coming weeks.

The protections the BIT provides

Once in force, the BIT offers Venezuelan investors in Colombia and Colombian investors in Venezuela the following key protections:

• Non-discrimination and national treatment: Each State undertakes not to treat investors of the other Party less favorably than its own nationals or investors from third countries.
• Protection against expropriation: Investments may only be expropriated or nationalized for reasons of public interest, in accordance with due process and against compensation equivalent to the fair market value of the investment immediately before the expropriation measure becomes publicly known.
• Free transfer of capital: Investors may freely transfer their returns, the proceeds from the sale of the investment, payments arising from arbitral awards, and other investment-related flows, in freely convertible currency at the prevailing exchange rate.
• Compensation for extraordinary losses: If an investor suffers losses due to war, insurrection, civil disturbances, or national emergencies, the host State must provide treatment no less favorable than that granted to its own nationals.

The dispute settlement mechanism

When an investor believes a State has breached the BIT, two options are available:

• Domestic courts: Submit the dispute to the competent court of the host State where the investment was made.
• International arbitration: Submit the dispute to an ad hoc arbitral tribunal under the UNCITRAL Arbitration Rules. Venezuela and Colombia may also agree that disputes be administered by a binational Arbitration Centre.

The choice is final (fork in the road): Once an investor selects a forum, it may not resort to the other. The deadline for bringing a claim is three years from the date the investor first knew or should have known of the alleged breach. Arbitral awards are final and binding and must be enforced in accordance with Venezuela's or Colombia's national law.

For a broader overview of arbitration as a dispute-resolution tool in Venezuela, see our analysis of commercial arbitration in Venezuela.

What the BIT does not cover: important limitations

Notwithstanding the important protections it provides, the BIT has limits that investors should be aware of:

• No retroactivity for past disputes: The BIT does not apply to disputes arising from measures adopted before it enters into force, even if their effects persist afterward. Colombian investors affected by past Venezuelan expropriations will not find in this BIT a mechanism to recover those losses.
• Exclusion of passive portfolio investments: Portfolio investments that do not confer a significant degree of influence over the management of the enterprise are not covered.
• Exclusion of tax measures: The BIT does not apply to tax and other fiscal measures.
• Denial of benefits: Venezuela or Colombia may deny the BIT's benefits to investors controlled by nationals of third countries without substantial business activity, or to those found to have engaged in corruption related to the investment.

The missing complement: a Double Taxation Treaty

The entry into force of the BIT is a significant step forward, but this instrument should be viewed in comparative perspective. Venezuela has double taxation treaties ("DTTs") in force with a number of countries, including Spain, France, Portugal, the United Kingdom, and Germany. It is no coincidence that many of those countries also have BITs in force with Venezuela. Both instruments are complementary: while the BIT protects investments against political and regulatory risk, a DTT eliminates or mitigates double taxation on the income that those investments generate.

The Venezuela–Colombia BIT itself acknowledges this by expressly excluding tax and other fiscal measures from its scope. This is not a technical defect: investment protection treaties are not designed to resolve fiscal jurisdiction conflicts. That function belongs to DTTs.

The absence of a DTT between Venezuela and Colombia has concrete consequences for investors:

• Dividends, interest, and royalties paid from Venezuela to a Colombian investor — or vice versa — as well as capital gains derived from the disposition of the investment, may be subject to withholding tax in the source country and to additional taxation in the beneficiary's country of residence, with no bilateral relief mechanism.
• A Colombian investor operating in Venezuela through a permanent establishment may see its profits taxed in Venezuela and, potentially, again in Colombia, with no agreed imputation or exemption method.
• Uncertainty over tax treatment reduces the expected return on investment and, consequently, its attractiveness.

By contrast, investors from countries that do have a DTT with Venezuela operate in a more predictable and competitive tax environment. That gap cannot be bridged through unilateral tax planning alone. Our Tax practice advises on cross-border structures where treaty protection and fiscal planning must work together.

The Venezuela–Colombia BIT is, in sum, a valuable but incomplete instrument. A DTT between both countries would complete the legal framework and substantially enhance the attractiveness of bilateral investment. Its negotiation should be a priority on both governments' economic agenda.

What does this mean in practice?

The entry into force of the BIT opens a concrete window of opportunity for investors from both countries. But as Capriles Baena notes, investment treaties are not merely diplomatic documents: they are instruments of stability and predictability (loc. cit.). Their effectiveness depends, to a significant degree, on the investor having structured its investment correctly from the outset — before any dispute arises.

In particular, it is essential to: (i) verify that the investment qualifies as an "investment" under the BIT's definitions; (ii) properly document the ownership chain and the investor's nationality; (iii) assess whether an existing investment may benefit from the BIT going forward; (iv) evaluate whether the timeframe and conditions of the dispute settlement mechanism are compatible with the specific situation; and (v) harmonize the foregoing topics with the tax aspects and the other legal and operating aspects of the investment structure (see José P. Barnola Jr., "Principles of Investment Arbitration Planning in Latin America", in World Arbitration and Mediation Review (WAMR+2020), Vol. 14 N° 1, JurisNet, LLC, Huntington, NY, 2023, passim).

Because in investment matters, anticipating legal risk is as important as identifying the opportunity.