Panel considers Colombia’s “illicit use of regulatory authority” in seizure of bank

Arbitrators from Australia and Argentina will decide whether the Colombian government overstepped in seizing, then selling for a profit, a leading bank in the country during the banking crisis of the late 1990’s.

The case of whether Colombian government officials used expropriation as a political weapon now sits before the United Nations Commission for International Commercial Law (UNCITRAL) in The Hague, Netherlands.

UNCITRAL arbitrators will decide whether the government’s actions violated international trade treaties, which require nations like Colombia to respect property rights and offer due process in legal disputes.

US citizen Astrida Carrizosa and her sons allege that in 1998, the country’s then-president Andres Pastrana targeted their savings and loan for seizure amidst a country-wide banking crisis.

The Carrizosas were the majority shareholders of Granahorrar bank when Colombian regulators had allegedly told them, on a Friday night, they had only 13 hours to raise capital or their bank would be taken by the government. This action was only notified to the shareholders almost 2 years later after the event.

The government assisted 57 banks that year, but only seized Granahorrar.

$423 million profit

The Carrizozas contend that their bank, at the time one of the country’s three principal savings and loans, was, in fact, among the strongest in the banking system. 

They claim Pastrana, a member of the conservative Party, singled out Granahorrar because of Julio Carrizosa’s political donations to the opposition Liberal party.

The family sued two years after the seizure, in 2000 when they were finally notified of the actions. A few years later the government turned a profit on the sale of their bank to Banco Bilbao Vizcaya Argentaria (BBVA) for $423 million.

A Colombian court ordered the government to compensate the Carrizosas, but it has resisted paying, claiming it doesn’t have “several hundred million dollars” to do so.

After regulators convinced a competing Colombian court to overturn the Carrizosa’s verdict, the family turned to international arbitrators.

“This case is about the inordinate abuse of regulatory sovereignty,” Carrizosa wrote in his complaint. “These abuses breached fundamental foreign investment protection standards that purported to ensure that non-Colombian investors and investments within that jurisdiction's national territory would be safeguarded from regulatory breach of public international law.”

In June, Zachary Douglas of Australia and Diego P. Fernandez Arroyo of Argentina were appointed as arbitrators in the case.

Counsel for Carrizosa is Bryan Cave of Miami. Counsel for the Republic of Colombia is Arnold & Porter Kaye Scholer of Washington, D.C.

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