In South America, investment chapters have been used by some governments, notably in Chile, Colombia and Peru, to replace outdated bilateral investment treaties and extend countries’ investment protection commitments. In other countries, such as Brazil, investment chapters are a means to rethink the governance of foreign investment altogether. This chapter traces the evolution of South America’s PTA investment chapters from 2001 to 2022, focusing on the types of reforms adopted and the domestic factors that shape the reforms governments are willing to accept. It finds that PTA investment chapters exhibit an increasing diversity of reforms over time, although the vast majority of agreements are designed to maintain traditional investment protection standards. This variation is partly driven by the legitimacy crisis of international investment law. Arguably, this crisis has created more political space for South American preferences in investment treaty lawmaking. However, who dominates reform debates is just as important for countries’ reform preferences as their experience with investor-state arbitration. Regardless of reform preferences, the main outcome of PTA investment chapters has been further fragmentation in an already complex and incomplete area of international economic law. This fragmentation, if allowed to continue, may exacerbate the very challenges that governments are seeking to address through their reform efforts in order to promote sustainable and inclusive development.

This chapter focuses on the first stage in which some level of convergence between the adjudication of trade and investment disputes might be observed: treaty design. After an analysis of 144 PTAs the authors conclude that there is a rising trend of including investment chapters with ISDS mechanisms into PTAs. However, this trend is not uniform around the world. Therefore, if structural convergence is to occur between the two adjudicatory mechanisms, such convergence will not be global, but regional or local. The chapter then continues with a discussion of the potential implications of this phenomenon and argues that some level of convergence can be expected in two areas. First, the broader context and objectives of PTAs with investment chapters can have an influence on the reasoning of investment tribunals. Second, some level of converge might occur due to the interpretive functions of treaty committees. Nonetheless, convergence might be minimal due to: different epistemic communities; investment chapters often look like stand-alone BITs within a trade agreement; and the recent PTIAs require different qualifications for trade and investment dispute settlement decision makers.