Angel Samuel Seda and others v The Republic of Colombia - ICSID Case No. ARB/19/6 - Request for Arbitration - 25 January 2019
Reproduced from www.worldbank.org/icsid with permission of ICSID.
ANGEL SAMUEL SEDA, JTE INTERNATIONAL INVESTMENTS, LLC, JONATHAN MICHAEL FOLEY, STEPHEN JOHN BOBECK, BRIAN HASS, MONTE GLENN ADCOCK, JUSTIN TIMOTHY ENBODY, JUSTIN TATE CARUSO, AND THE BOSTON ENTERPRISES TRUST
REQUEST FOR ARBITRATION UNDER CHAPTER TEN OF THE UNITED STATES-COLOMBIA TRADE PROMOTION AGREEMENT
1. This arbitration concerns the pioneering efforts of United States' investors to feed the new Colombian boom and the inexplicable invalidation of their investments by sections within the Colombian government that threaten to mire Colombia in the corruption of the past. The Republic of Colombia, specifically the city of Medellín, has recently enjoyed a new wave of international investment and development. Medellín is no longer the city that was once dubbed "the most dangerous city in the world," marred by gang warfare, international drug trade, perilous city streets and large swaths of undeveloped mountainous land. Medellín has sought to put its past behind it and is now considered one of the "up and coming" cities in the world, boasting one of the fastest growing economies in Latin America.1 Contributing to this positive momentum, Claimants invested in Colombia's revitalization by funding mixed-use luxury developments that featured the country's stunning natural beauty paired with cutting-edge design.
2. Instead of supporting stable foreign investment, the acts of the Government in this case promise to pull Medellín backwards, by making the ownership of any property precarious, at best, through the abusive application of an important Colombian law - a law that was designed to help rid Colombia's economy of narcotraffickers. Colombia's abuse of this law has resulted in an unlawful, uncompensated taking in violation of international law and has undermined Colombia's promise to afford foreign investors a stable and fair environment under international law in the United States-Colombia Trade Promotion Agreement ("TPA").
3. The legal backdrop to the investors' claims under the TPA is the gross misapplication of Colombia's Asset Forfeiture Law ("Código de Extinción de Dominio" or "asset forfeiture law"). On January 20, 2014, the Colombian Congress passed Law No. 1708, which redesigned the constitutional extinción de dominio regime that was established in the Constitution of 1991.2 Aimed at debilitating criminal networks, this law permits Colombian authorities to extinguish ownership rights to assets connected with illegal activity. Law No. 1708 sought to separate extinción de dominio from any criminal liability, and to harmonize its constitutional nature with the need to preserve due process under Colombian law as well as international law.3 Unlike its prior versions, Law No. 1708 established that an asset forfeiture claim could not be presented if and until all legal elements to bring the claim were met; chief among these being the protection of good faith purchasers, a higher burden of proof before confiscating property, and rights guaranteed under the Colombian constitution and its international obligations.4
4. While the Colombian Constitution has long protected just title to property, Law No. 1708 provides an independent right of action for the Government to root out criminal activity by taking assets connected to illicit activities or persons. Critically, in carrying out this mission, the Government must judiciously uphold the protections guaranteed by the Colombian Constitution and enshrined in the law, such as protection of fundamental rights,5 due process,6 a presumption of good faith,7 and the right to be heard.8 The Office of the Attorney General of Colombia (Fiscalía General de la Nación) possesses sole authority to bring and prosecute an asset forfeiture case in accordance with the law's autonomous rules and procedure.9 Article 116 of the Colombian Constitution requires that the Fiscalía administer justice, as it does of the Constitutional Court, the Supreme Court of Justice, Courts and judges.10
5. The facts in this case, however, demonstrate that the Fiscalía ignored Claimants' constitutional, procedural, and substantive rights and applied the asset forfeiture law in a grossly unjust, arbitrary, discriminatory, and confiscatory manner resulting in extensive damages to Claimants and their investments in Colombia, in violation of international law. The Government's specific target was the Meritage, a large, high-end, residential, and commercial real estate project situated on a beautiful highland bordering Medellín, Colombia, which was under development by Mr. Angel Seda and other investors through companies Mr. Seda founded and controlled.11
6. The unlawful application of the asset forfeiture law automatically resulted in an unlawful confiscation of property rights and interests, in breach of the protections against unfair treatment and unlawful expropriation set forth in Articles 10.5 and 10.7 of the TPA.12 The swift and severe damage to Claimants' business and reputation resulting from the Government's actions impacted not just the Meritage project, but all of Claimants' property developments in Colombia: Luxé By The Charlee, Prado Tolima, Santa Fe de Antioquia, Cartagena Tierra Bomba and 450 Heights. What is more, Colombian authorities stand to be unjustly enriched from their bad acts by hastily selling Claimants' investments through opaque maneuvers that are in violation of the TPA.
7. Law No. 1708 protects an "Affected Person," defined as "[a] person who states to be the titleholder of the asset that is covered by the asset forfeiture proceeding, with legal standing to participate in the process."13 Articles 1 to 14 of Law No. 1708 contain the fundamental guarantees under the law that limit the Government's ability to extinguish property rights. One such guarantee is that the law cannot be applied to property purchasers of good faith without fault:
Article 3. Right to ownership. Asset forfeiture shall have as its limit the right to ownership legally obtained in good faith without fault and exercised in accordance with the social and ecological function inherent therein.14
Paired with that express limitation, the law also affords an initial presumption of good faith:
Article 7. Presumption of good faith. Good faith is presumed in all legal action or transaction related to the acquisition or use of the assets, as long as the titleholder proceeds in a diligent and prudent manner, without any fault.15
8. Among the fundamental guarantees, Colombia was purposeful in setting forth protections under international law, including Colombia's obligations under international treaties. This is set out in particular in Article 4, as well as Article 5 and 6:
Article 4. Guarantees and integration. In the application of this present law, the rights recognized in the Political Constitution as well as in the international treaties and conventions regarding human rights ratified by Colombia which are compatible with the nature of the action of asset forfeiture shall be guaranteed and protected. Article 5. Due process. In the exercise and processing of the asset forfeiture action, the right to due process enshrined in the Political Constitution and this Law shall be guaranteed.
Article 6. Principle of objectivity and transparency. In the exercise of the asset forfeiture action, public officials shall act in an objective and transparent manner, assuring that their decisions legally comply with the Political Constitution and the law.16
9. In addition to fundamental substantive protections, Law No. 1708 codifies the procedure of an asset forfeiture action. The protection for purchasers of good faith without fault imposes an absolute limitation on the asset forfeiture proceeding, as expressly recognized in several articles under the law. Article 22 provides that title to property is void ab initio if found to have an illicit origin, unless the title is held by a bona fide purchaser without fault - consequently, any finding of illicit origin is "without prejudice to the rights of bona fide third parties without fault."17
10. Importantly, Law No. 1708 makes clear that Colombian authorities must presume the good faith of a property purchaser. Precautionary measures therefore may not be applied if they would contravene the protections owed to bona fide purchasers: Article 87. Purposes of the precautionary measures. At the time the prosecutor renders its provisional determination to proceed with the asset forfeiture claim, the Prosecutor shall order, by way of an independent and reasoned order, the precautionary measures which it deems applicable in order to avoid that the assets in question can be hidden, negotiated, encumbered, removed, transferred or may suffer any deterioration, misdirection, or destruction; or for the purpose of stopping their illicit use or destination. In any case, the rights of bona fide third parties without fault must be safeguarded.18
11. The Colombian authorities flouted all of these rights, protections and guarantees. In misapplying and recklessly disregarding law and procedures when it confiscated the Claimants' investments, Colombia violated international law, its own Constitution and Colombia's asset forfeiture law. The Government denied Claimants their due process rights and their right to a presumption of good faith, and entirely ignored their status as bona fide purchasers of the asset that became the Fiscalía's target of the extinción de dominio proceeding.
12. It bears emphasis that, at this point in time, whether the Colombian courts are capable of eventually correcting the mistakes of the Fiscalía's reckless disregard for due process and the presumption of good faith is irrelevant. The damage resulting from the failure of due process and violations of international law was immediate, irreparable and uncompensated.
13. Colombia's actions have resulted in an unlawful expropriation and breach of fair and equitable treatment in violation of the TPA, which has caused extensive damage to Claimants. Moreover, Colombia has undertaken measures to further harm the investments, to endanger the physical safety of one of the Claimants, and to jeopardize one of the Claimants' reputation and ability to pursue a living. These tactics have increased and expanded to other potential witnesses since the filing of the Notice of Intent. For these reasons Claimants' request for relief includes restitution, compensation and appropriate provisional measures in light of Colombia's conduct which threatens the integrity of the proceedings.
 See, e.g., C-1, A. Sánchez-Jabba, "La Reinvención de Medellín," in L. Galvis (ed.), Economía de las grandes ciudades en Colombia: seis estudios de caso (2014), p. 223; C-2, OECD, Promoting the Development of Local Innovation Systems: The Case of Medellin Colombia (2015), p. 11.
 C-3, Law No. 1708, 20 January 2014.
 C-4, U.N. Office on Drugs and Crime, La Extinción Del Derecho de Dominio en Colombia: Especial referencia al Nuevo Código (2015), available at https://www.unodc.org/documents/colombia/2017/Marzo/La extincion del derecho de dominio en Colombia.pdf (last viewed 8 January 2019) ("U.N. Manual"), pp. 51-52.
 C-3, Law No 1708, art. 117. See also C-4, U.N. Manual, pp. 57-59.
 C-3, Law No. 1708, art. 3.
 C-3, Law No. 1708, art. 5.
 C-3, Law No. 1708, art. 7.
 C-3, Law No. 1708, art. 8.
 C-4, U.N. Manual, pp. 27-28.
 C-5, Colombian Political Constitution (1991) ("Political Constitution"), art. 116 ("La Corte Constitucional, La Corte Suprema de Justicia, El Consejo de Estado, Comisión Nacional de Disciplina, La Fiscalía General de La Nación, los Tribunales y los Jueces, administran justicia.").
 See C-6, Meritage Sales Brochure.
 C-7, Agreement Between the Government of the United States and the Government of the Republic of Colombia Trade Promotion Agreement, signed November 22, 2006, Ch. 10. The US-Colombia FTA entered into force on May 15, 2012.
 C-3, Law No. 1708, art. 1.1.
 C-3, Law No. 1708, art. 3.
 C-3, Law No. 1708, art. 7.
 C-3, Law No1708, arts. 4-6.
 C-3, Law No. 1708, art. 22. "Article 22. Nullity ab initio. Once the illicit origin of the assets covered by the asset forfeiture proceeding has been demonstrated it shall be understood that the object of the legal transactions that resulted in their acquisition is contrary to the constitutional and legal regime regarding property and as such the acts and contracts concerning such assets in no case constitute fair title and they shall be considered void ab initio. The foregoing, without prejudice to the rights of bona fide third parties without fault." Id.