CMS Law-Now | 25 June 2025
Switzerland and Chile enter into new Bilateral Investment Treaty
On 3 June 2025, Switzerland and Chile signed a new bilateral investment treaty (2025 Switzerland-Chile BIT or BIT). Chile is one of the most important destinations for Swiss foreign investment in Latin America. In 2023, Swiss direct investment in Chile totaled approximately CHF 192 million, with around 180 Swiss companies operating in the country. As outlined in this article, the 2025 Switzerland-Chile BIT will establish modern rules for the promotion and protection of foreign investments made by Swiss nationals and companies in Chile.
Background
With over CHF 1,287 billion in direct investments abroad, Switzerland ranks among the ten largest capital exporters in the world. These investments are protected by key guarantees under international investment law, enshrined in more than 110 bilateral investment treaties (BITs) that Switzerland has concluded with countries around the globe. In terms of treaty volume, Switzerland is one of the leading countries worldwide – following China and Germany – in the number of BITs signed. Both as an individual country and a member of the European Free Trade Association (EFTA), Switzerland has been one of the most active states in investment treaty rule-making in recent years (see also our coverage here and here).
BITs incorporate rules of customary international law (CIL) concerning the minimum standard of treatment for foreign nationals and their property in host states. This includes investment protections related to (i) expropriation and compensation, and (ii) full protection and security. Under the expropriation clauses in BITs, the legality of a direct or indirect expropriation of a foreign investment depends on several criteria: it must be carried out in the public interest, be non-discriminatory, comply with due process of law, and be accompanied by compensation. BITs also provide legal protections that go beyond those under CIL. These include non-discrimination standards such as (iii) national treatment (NT), and (iv) most-favoured-nation (MFN) treatment. Additionally, BITs require host states to provide foreign investors with (v) fair and equitable treatment (FET), including protection against arbitrary measures and denial of justice, and (vi) to permit the free transfer of profits out of the host country.
The procedural enforcement of these investment protections is ensured through investor-state arbitration clauses included in BITs. These clauses grant foreign investors the right to bring claims against the host state for breaching protection standards set out in the BIT before an international arbitral tribunal. Investors may seek compensation for any damage or loss resulting from such breaches.
2025 Switzerland-Chile BIT
Negotiations for the 2025 Switzerland-Chile BIT were launched in 2023. This mew BIT will replace the existing bilateral investment treaty signed by the two countries in 1999 (1999 Switzerland-Chile BIT), which is still currently in force. The 1999 Switzerland-Chile BIT reflects an older generation of investment treaties, characterised by broadly worded provisions that lack specificity and do not address several issues now regarded as crucial by many states in modern investment treaty practice.
The text of the 2025 Switzerland-Chile BIT has not yet been made public. Press releases from the Swiss government, however, indicate that the new BIT adopts a modern approach, consistent with the bilateral investment treaty Switzerland concluded with Indonesia in 2022 (2022 Switzerland-Indonesia BIT).
As a result, the 2025 Switzerland-Chile BIT is expected to be more comprehensive than the 1999 Switzerland-Chile BIT. It is expected to include the key treaty rules of investment protection outlined above (e.g. provisions on the prohibition of unlawful expropriation, NT, MFN treatment, and FET) with these rules more precisely defined and designed to offer guidance to investment arbitration tribunals in their interpretation and application.
Similar to the 2022 Switzerland-Indonesia BIT, the 2025 Switzerland-Chile BIT will likely include provisions affirming the contracting parties' right to regulate in pursuit of legitimate policy objectives, such as public health, safety, and environmental protection. In addition, the new BIT may feature general exceptions for state measures necessary to protect human, animal, or plant life or health; rules on corporate social responsibility; provisions for investor-state mediation; regulations concerning third-party funding of investor claims; and mechanisms for security for costs applications in investment arbitration proceedings.
Comment
Following its ratification and entry into force, the 2025 Switzerland-Chile BIT will provide calibrated investment protections alongside modern provisions on regulatory autonomy and investment arbitration. Switzerland's signing of modernised investment treaties with Latin American countries such as Chile marks an important step in further supporting Swiss foreign investment in the region. This development is noteworthy in light of the EU's ongoing negotiations for a comprehensive free trade agreement with four MERCOSUR countries in South America, which could significantly reshape the regional economic landscape.
A detailed analysis of the key provisions of the 2025 Switzerland-Chile BIT will be provided once the treaty text is published by the contracting parties.
