Colombia: isn’t it a bit dicey? Lawyers in Latin America’s fourth-largest economy and deepest-rooted democracy could be forgiven for showing irritation at the inevitable question. Invariably, the reply is ‘things have changed’.

‘Ten years ago it was different, there was a high risk of kidnappings, Colombia was considered a very risky country,’ says Maria Cristina Piñeros, general counsel at consultancy Deloitte’s Bogotá office. She recalls working for a business that was plagued by truck hijackings. ‘In the last five years, that hasn’t happened at all.’ Robert Stewart, a consultant at Bogotá oil and gas specialist firm Sanclemente Fernández Abogados, agrees. ‘The security situation has changed considerably,’ he says. A decade ago, guerilla attacks on oil pipelines were a barometer of unrest - he recalls 280 in a year. ‘Last year there were not more than two.’

Colombia, a country twice the size of France, still has trouble spots. Remnants of the FARC guerilla movement, which last month announced it was ending its long-standing practice of kidnappings, are still active near the Venezuelan border. Meanwhile, in the south-west city of Cali, three lawyers were assassinated in January and February, contributing to a total of 334 murders over six years. And Colombia is second only to Sudan in the total of displaced people within its borders.

Amid the skyscrapers and traffic jams of downtown Bogotá, however, the story is one of economic boom. Oil and mineral-rich Colombia is the first of the fast growing emerging economies known as ‘Civets’ (the others are Indonesia, Vietnam, Egypt, Turkey and South Africa). The UK government scents opportunities from a like-minded and investment-friendly Anglophile administration (president Juan Manuel Santos studied at the London School of Economics). For historic and geographical reasons UK companies largely missed out on the Brazilian market. The fear is that, without prompt action, UK plc will miss the Colombian boat, too.

For international law firms, the opportunities are huge. Natasha Gunney, senior associate at City firm Hogan Lovells, and a specialist in insurance, says of Colombia: ‘It’s a hugely sophisticated market with intelligent staff and sophisticated people who want to do business, and are putting all the right procedures in place.’ An area of particular interest is UK expertise in PFI-style public-private partnerships (PPPs). The Colombian government has a plan to invest 3% of GDP in upgrading infrastructure, starting with the road network. At the Departamento Nacional de Planeación (DNP) - a central government ministry roughly equivalent to the UK Cabinet Office - officials enthuse about the potential of PPPs to transform everything from Bogotá’s ‘Whitehall’ district to health centres to prisons.

There is even a plan for a giant complex housing notaries and judicial offices. The 52,000 sq m development is expected to cost $100m - the bidding is to open this year. However, like its UK counterpart the Colombian government is finding that its ideas for efficiencies do not always square with the judiciary’s: a proposal to include courts in the complex has apparently foundered. ‘The judicial entity can’t decide whether it’s going to be in or not,’ says Luis Eduardo Niño, head of the private infrastructure group. The new wave of PPPs will be enabled under a law passed last year - modelled on English legislation - and the UK is seen as a world leader in structuring PPP deals and managing the risk. ‘In the new law we pay when the infrastructure is available and we’re going to check on service levels,’ says Niño. The law covers projects of a minimum size of $1.7m, with a maximum term of 30 years.

The contracts are to be procured centrally, by the National Infrastructure Agency (Agencia Nacional de Infraestructura) which was set up largely in response to corruption scandals involving locally procured projects, such as the second phase of Bogotá’s rapid-transit bus service. Chief executive Luis Fernando Andrade, an alumnus of the McKinsey consulting firm, says with central procurement and near-standardised contract terms ‘we think the space for wrongdoing in the bidding will be zero, and in the administration of the contracts will be close to zero. We’re making sure that payment occurs on delivery of the asset. We’re going to be more strict on insurance coverage’.

The first priority, Andrade says, is roads. The network, always under-invested and in many parts of the country unsafe during the guerilla war, was devastated by last year’s floods. Some of the projects are breathtaking in scale - the Autopista de la Montaña will run from Bogotá to Medellin to the western coast, crossing two Andean mountain ranges and a region with the highest rainfall on the planet. New airports and ports are also on the list together with a million new homes. However, a long-standing dream of creating a ‘dry Panama canal’ - a freight railway connecting container ports on Colombia’s Caribbean and Pacific coasts - is unlikely to happen.

A more immediate opportunity is in oil and gas. At Sanclemente Fernández, Stewart says production is on the verge of reaching a million barrels a day, making Colombia the continent’s third-biggest producer after Venezuela and Brazil. He says the investment climate compares favourably with that of its neighbours. ‘Compared with Venezuela we have been responsible. We have never had expropriation without compensation, we’ve never had runaway inflation - we have honoured our contracts.’ Business possibilities include two refinery upgrades - involving contracts likely to add up to well over $10bn - as well as offshore exploration and downstream developments. (Incredibly, at least one major field still relies on road tankers to transport production to the coast.)

Firms doing business in Colombia will almost certainly need to work with a local partner. Colombia is a country of lawyers - it has 200,000, in a population of 44 million. The Roman-law system is based on a constitution that was revised in 1991, which introduced new administrative procedures as well as the office of attorney general - a perilous post when the incumbent had to take on drug lords and their friends in power.

'New airports and ports are also on the list together with a million new homes'

The second holder of that job, Alfonso Valdivieso Sarmiento, is now a director of the UK professional services firm Baker Tilly, which has been in Colombia since 1994. Valdivieso reels off a list of legislative measures which he says makes the country a safer place legally, as well as physically. One is anti-money laundering legislation - Colombia was the first country in the region to establish proper controls, which he says have been updated to create a new crime of financing terrorism, one of 35 crimes in the penal code connected with money laundering. Baker Tilly is now offering its expertise to authorities elsewhere on the continent, which he says is still in denial about the problem.

A new anti-corruption law, similar in scope to the UK’s 2010 Bribery Act, was enacted in mid-2011. A former mayor of Bogotá and three members of a family of construction moguls were last year jailed under its provisions. Meanwhile, a new law, to come fully into effect in 2014, requires international standards of accounting and auditing. Commercial disputes are settled in a three-tier system, with cases filed to a judge, who can refer them to a tribunal, and then if necessary to the supreme court.

No one pretends that the Colombian legal system is ideal. The administration is embroiled in a dispute over judicial independence and the courts can be creakingly slow.

‘They are trying to reform it, but it is still a question of how many years’, says Carlos Castilla Murillo, a sole practitioner tax lawyer in Bogotá with experience in the public sector. Until recently an eight-year lag from filing to judgment was typical, he says. Attempts to speed up the process by setting timelimits have limited effect in practice because of the sheer volume of cases.

More controversially, reforms last year attempted to cut back at what the government sees as the abuse of class action suits, by banning success fees for lawyers in popular class actions. One reason for the government’s action was a suspicion that officials were being bribed to neglect certain bureaucratic procedures in return for a cut in compensation that would be paid out to settle a subsequent lawsuit.

Alternative dispute resolution is in its infancy, says Murillo. ‘We have arbitration but that only applies in contracts where both parties agree.’ However, a conciliation stage is mandatory in civil disputes, he adds. Assuming the current trend towards normality continues (the government says it is cooperating with the Colombia Caravana charity, which is to report on the rule of law later this year) and the economy continues to grow, Colombia seems set to become a standard business as well as tourist destination.

However, two barriers remain to Colombia becoming a major partner for UK firms. One is the lack of direct flights from London to Bogotá - a casualty of the lack of slots at Heathrow. Another is that, while the English legal system is widely admired, it has an accompanying reputation. Stewart says the UK is often mentioned as a venue for dispute resolution: ‘The legal system has a lot of credibility but the cost is prohibitive.’

  • Michael Cross visited Colombia last month as a guest of the Foreign and Commonwealth Office. Get more information about the Law Society’s activities in the Americas