Honduras Investment Protections

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1. INTERNATIONAL LAW INVESTMENT PROTECTION FRAMEWORK

The Convention on the Settlement of Investment Disputes between States and Nationals of Other States (“ICSID Convention”)[1] has been in effect in Honduras since March 16, 1989.[2] Honduran cases arising under the ICSID Convention are discussed later in this section.

Honduras has Bilateral Investment Treaties (BITs) with the following countries, which have been ratified and in force: United States of America[3], Chile[4], United Kingdom[5], Germany[6], Switzerland[7], Spain[8], the Netherlands[9], Korea[10], and France[11]. These BITs recognize investors from the other signatory States the following rights, among others: fair and equitable treatment, national treatment and most favored nation treatment, conditions for expropriation, and terms for losses due to wars, rebellions, states of emergency or similar events. Additionally, the exchange of instruments of ratification with the BIT signed with the Republic of China (Taiwan) is pending. Honduras also executed a BIT with Ecuador, but the instrument was denounced by Ecuador in 2008.[12]

The following free trade agreements (FTAs) are in effect for Honduras: the United States, Central America and the Dominican Republic FTA ("DR-CAFTA")[13]; the Central American and Dominican Republic FTA[14]; the Mexico and the Northern Central American Triangle (El Salvador, Guatemala and Honduras) FTA ("NCATFTA")[15]; the Taiwan, El Salvador and Honduras FTA[16]; and the Chile and Central America FTA, for which its Honduras-Chile bilateral protocol has entered into force for both countries[17].

Each FTA has a chapter specifically dedicated to investment, in which they accord the same rights listed on the BITs cited earlier, and also include prohibitions on the host State imposing performance requirements. They also have more elaborate dispute resolution provisions, often providing far greater operational and procedural details for resolving disputes. Of the FTA’s mentioned the DR-CAFTA is of particular importance to Honduras given its regional impact. Chapter 10 of the DR-CAFTA is specifically dedicated to Investment.

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2. INVESTMENT DISPUTES

Regarding investment disputes, [examples of Honduran investment treaty arbitrations include:] claims brought by investors at the International Centre for Investment Dispute Settlement (ICSID). There have been three such cases.

1. Astaldi S.p.A. & Columbus Latinoamericana de Construcciones S.A. v. Republic of Honduras (ICSID Case No. ARB/99/8)

The first was ARB/99/8 brought by Astaldi S.p.A.v and Columbus Latinoamericana de Construcciones, S.A., an Italian company and its business partner, against the State of Honduras (“Astaldi”).[18] The claim was registered December 29, 1999, at ICSID and was based on contract modifications for the construction of a highway. The claim was settled by the parties and an award incorporating the settlement agreement was issued on October 19, 2000.

2. Astaldi S.p.A. v. Republic of Honduras (ICSID Case No. ARB/07/32)

The second case, ARB/07/32, was also initiated by Astaldi S.p.A.v. against the State of Honduras and was registered December 19, 2007 (“Astaldi II”).[19] The claim stemmed from a contract for the construction of a highway. The case was decided in favor of the claimant with an award for nearly US$8 million, including interest, plus approximately US$1 million in costs. . . .

3. Elsamex S.A. v. Republic of Honduras (ICSID Case No. ARB/09/4)

The third case, ARB/09/05, was initiated by Elsamex, S.A., a Spanish company, against the State of Honduras (“Elsamex”). The claim was registered April 15, 2009, and is based on alleged breaches of obligations arising under a highway repair contract. The claim was brought under the contract’s dispute resolution clause, rather than the Honduras-Spain BIT.[20]

[1] Convention on the Settlement of Investment Disputes Between States and Nationals of Other States (Washington, D.C., 18 Mar. 1965), entered into force 14 Oct. 1966 ("ICSID Convention").

[2] Decree No. 41-88 (Honduras), Art. 1 (16 Mar. 1989).

[3] Treaty between the Government of the United States of America and the Government of the Republic of Honduras concerning the Encouragement and Reciprocal Protection of Investment (Denver, 1 Jul. 1995) entered into force 11 Jul. 2001.

[4] Private Agreement between the Republic of Chile and the Republic of Honduras for the Promotion and Reciprocal Protection of Investments (Santiago, 11 Nov. 1996) entered into force 10 Jan 2000 ("Honduras-Chile BIT").

[5] Agreement between the Government of the United Kingdom of Great Britain and Northern Ireland and the Government of the Republic of Honduras for the Promotion and Protection of Investments (Tegucigalpa, 7 Dec. 1993) entered into force 8 Mar. 1995.

[6] Agreement between the Republic of Germany and the Republic of Honduras for the Promotion and Reciprocal Protection of Investments (Bohn, 21 Mar. 1995) entered into force 27 May 1998. See http://honduras.ahk.de/fileadmin/user_upload/Dokumente/Vertrag_Deutschland_Honduras_-_Tratado_Honduras_Alemana.pdf.

[7] Agreement for the Promotion and Reciprocal Protection of Investments between the Swiss Confederation and the Republic of Honduras (Tegucigalpa, 14 Oct. 1993) entered into force 31 Ago. 1998. See www.unctad.org/sections/dite/iia/docs/bits/swiss_honduras_fr.pdf.

[8] Agreement for the Promotion and Reciprocal Protection of Investments between the Kingdom of Spain and the Republic of Honduras (Tegucigalpa, 18 Mar. 1994) entered into force 23 May 1996 ("Honduras-Spain BIT").

[9] Agreement on the Encouragement and Reciprocal Protection of Investments between the Republic of Honduras and the Kingdom of the Netherlands (15 Jan. 2001) entered into force 1 Sep. 2002 ("Honduras-Netherlands BIT").

[10] Agreement between the Government of the Republic of Korea and the Government of the Republic of Honduras for the Promotion and Reciprocal Protection of Investments (Tegucigalpa, 24 Oct. 2000) entered into force 19 Jul. 2001.

[11] Agreement between the Republic of France and the Republic of France for the Promotion and Reciprocal Protection of Investments (Tegucigalpa, 28 Abr. 1998) entered into force 8 Mar. 2008. See http://www.minefe.gouv.fr/directions_services/dgtpe/international/investinter.php#b1.

[12] Agreement between the Republic of Honduras and the Republic of Ecuador for the Promotion and Reciprocal Protection of Investments (Tegucigalpa, 26 Jul. 2000) denounced by Ecuador October 2008.

[13] Dominican Republic-Central America-United States Free Trade Agreement (Washington, D.C., 5 Aug. 2004) entered into force 1 Jan. 2009 ("DR-CAFTA").

[14] Free Trade Agreement between Central America and the Dominican Republic (Santo Domingo, 16 Apr. 1998) entered into force 19 Dec. 2001.

[15] Free Trade Agreement between Mexico, El Salvador, Guatemala, and Honduras (Northern Triangle) (Mexico City, 29 Jun. 2000) entered into force between Honduras and Mexico 1 Jun. 2001.

[16] Free Trade Agreement between El Salvador, Honduras, and Taiwan (7 May 2007) entered into force 15 Jul 2008.

[17] Free Trade Agreement between the Governments of Central America and the Government of the Republic of Chile, Protocol between Chile and Honduras (8 Oct. 1999) entered into force 19 Jul. 2008.

[18] Astaldi S.p.A. & Columbus Latinoamericana de Construcciones S.A. v. Republic of Honduras (“Astaldi I”), ICSID Case No. ARB/99/8, Award embodying settlement agreement (19 Oct. 2000).

[19] Astaldi S.p.A. v. Republic of Honduras (“Astaldi II”), ICSID Case No. ARB/07/32, Award (17 Sep. 2010).

[20] Elsamex S.A. v. Republic of Honduras (“Elsamex”), ICSID Case No. ARB/09/4, Registered (15 April 2009).