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International Arbitration Forum

The Lopez-Goyne Family Trust and others v. Republic of Nicaragua

Case summary

At a glance

Parties
The Lopez-Goyne Family Trust, the Goyne Family Trust, the Bochnowski Family Trust, the Barish Family Trust of 2008, Hills Exploration Corporation, LG Hawaii Oil & Gas, Inc., LG Hawaii Development Corporation and 17 US individuals (shareholders of Industria Oklahoma Nicaragua S.A.) v. the Republic of Nicaragua
Case no.
ICSID Case No. ARB/17/44; enforcement: US District Court, N.D. Cal., Case No. 24-cv-03104-MMC
Forum and rules
ICSID Convention arbitration; ICSID Arbitration Rules 2006 as modified by CAFTA-DR; place of proceeding Washington, D.C.
Treaty
Dominican Republic-Central America-United States Free Trade Agreement (CAFTA-DR), Chapter 10
Tribunal
Prof. Luca G. Radicati di Brozolo (President), Mr. José A. Martínez de Hoz, Prof. Brigitte Stern
Sector
Onshore oil and gas exploration concession
Outcome
Jurisdiction upheld, but no breach of CAFTA-DR Articles 10.5 or 10.7; Nicaragua's environmental counterclaim dismissed for lack of jurisdiction (1 March 2023). Martínez de Hoz filed a separate concurring opinion. A US court later confirmed the costs award against six claimants, jointly and severally.
Amount
Claimed: between US$ 35.8 million and US$ 198 million. Awarded: nothing. Claimants bear their own costs and pay US$ 1,500,000.00 towards Nicaragua's costs (Nicaragua claimed US$ 8,010,198.32). Total costs of the arbitration: US$ 952,416.81.
Court
US District Court for the Northern District of California (Judge Maxine M. Chesney)
Underlying award(s)
Award of 1 March 2023, ICSID Case No. ARB/17/44

The dispute

The claimants are US individuals, trusts and companies who say they hold shares in Industria Oklahoma Nicaragua S.A. (ION). ION held a concession contract of 23 April 2004 to explore for and exploit oil in a block of about 845,779 acres in Nicaragua's onshore Pacific region. ION announced a discovery at the very end of the extended exploration phase in November 2012 but never carried out the required Evaluation Program or made a declaration of commercial discovery. The Ministry of Energy and Mines (MEM) terminated the contract in October 2013, reinstated it in December 2013, and terminated it again by letter of 3 December 2014; Presidential Decree 191 (28 October 2015) and the Attorney General's Termination Decision (24 May 2016) followed. The claimants alleged unlawful expropriation (Article 10.7) and breach of the minimum standard of treatment (Article 10.5). Nicaragua objected to jurisdiction (no protected investment; no standing under Article 10.16.1(a) for indirect loss), argued that it had lawfully exercised a contractual right under Article 70(b) of Law 286, and brought a counterclaim for ION's alleged environmental breaches.

Key holdings

  1. The Tribunal has jurisdiction over the claim. Nicaragua's two jurisdictional objections failed. Award ¶¶ 616, 618(i)
  2. No breach of the minimum standard of treatment (Article 10.5). A declaration of commercial discovery, preceded by an evaluation program, was an inescapable condition for moving to exploitation, and failing it was a ground for termination under Article 70(b) of Law 286. Nicaragua had given ION repeated extensions totalling 39 months. The procedural irregularities in the termination were minor, did not shock a sense of judicial propriety, and were cured by Decree 191 and the Termination Decision. Award ¶¶ 518–539
  3. No expropriation (Article 10.7). A State that terminates a contract as a contracting party, in conformity with the contract's rules, does not expropriate. Nicaragua acted iure gestionis, on contractual grounds, and not for ulterior motives. Award ¶¶ 556–564
  4. Damages dismissed. Even if there had been a breach, the claimants did not prove the nature of their loss or causation. There was no commercial discovery, and the tests showed no commercial flow of hydrocarbons. Award ¶¶ 569–570
  5. No jurisdiction over the environmental counterclaim. CAFTA-DR Chapter 10 can in principle accommodate counterclaims. But a counterclaim must rest on a breach of Section A, and Articles 10.9.3(c) and 10.11 are safeguard clauses for States that impose no environmental obligations on investors. Breaches of the contract, the permit or Nicaraguan law cannot be raised to treaty breaches. Award ¶¶ 595–606
  6. Costs: although Nicaragua prevailed on the merits, it lost on jurisdiction and on its counterclaim, and its costs were more than twice the claimants'. The claimants bear their own costs and pay US$ 1,500,000.00 towards Nicaragua's costs. Award ¶¶ 616–618
  7. Concurring opinion: Martínez de Hoz agreed with the Award but found that the MEM's 'intermediate phase' theory had no legal basis. In his view, the inconsistent and irregular termination process created uncertainty and needlessly prolonged the contract, though it did not breach Article 10.5. Concurring Opinion ¶¶ 4, 10, 19–25
  8. Enforcement: the US court found the award unambiguous in imposing joint and several liability for the single sum of US$ 1,500,000, so no Article 50 interpretation was needed. It earlier held that it had personal jurisdiction over award debtors through their California property. Order of 5 May 2025, pp. 4–5

Procedural history

  1. 30 November 2017Request for arbitration filed; ICSID registers it on 19 December 2017.
  2. 19 June 2019Tribunal constituted. The President was chosen through a strike-and-rank list procedure agreed by the parties.
  3. 15–20 November 2021Virtual hearing on jurisdiction, merits, counterclaim and quantum. The United States filed a non-disputing party submission on 28 September 2021.
  4. 1 March 2023Award dispatched: claims and counterclaim dismissed; the claimants are to pay US$ 1,500,000.00 in costs. Separate concurring opinion of Martínez de Hoz.
  5. July–September 2023According to Nicaragua's petition, ICSID registered the claimants' application for annulment on 14 July 2023. The claimants requested discontinuance on 18 September 2023, and the Secretary-General took note of it on 20 September 2023.
  6. 22 May 2024Nicaragua petitions the US District Court for the Northern District of California to recognize and enforce the award.
  7. 16 October 2024Court denies the Barish respondents' motion to dismiss for lack of personal jurisdiction and venue.
  8. 31 January 2025Court denies, without prejudice, Nicaragua's motion to serve three Goyne respondents by email and WhatsApp.
  9. 5 May 2025Court grants Nicaragua partial summary judgment: the claimants are jointly and severally liable for the amount awarded.
  10. 4 September 2025Judgment confirming the award of US$ 1,500,000, owed jointly and severally, against six appearing respondents under 22 U.S.C. § 1650a.

Tribunal, counsel and experts

Decided by
For the claimant
Dechamps International Law · 3 Verulam Buildings · Munguía Vidaurre Law
For the respondent
Foley Hoag LLP · Shults Law Firm LLP · Ministerio de Fomento, Industria y Comercio, Dirección de Integración y Administración de Tratados · Baker & Hostetler LLP
Experts
Carla Chavich (claimant) · Michael Seelhof (claimant) · Allen Barron (claimant) · Nicolás Gwyther (claimant) · Alejandro De Jesús (claimant) · Doug MacNair (claimant) · Guale Ramirez (respondent) · Dan Olds (respondent) · Miles Palke (respondent) · Stephen Phillips (respondent) · Daniel Flores (respondent) · Ana Teresa Rizo (respondent) · Scott MacDonald (respondent) · Pieter N. Booth (respondent)

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Keywords

Summary generated with AI from the published documents — refer to the award for the authoritative text.

Case ID
ICSID Case No. ARB/17/44
Country
Treaty
Documents
Section