Alejandro Diego Díaz Gaspar v. Republic of Costa Rica

Case summary

At a glance

Parties: Alejandro Diego Díaz Gaspar (Spain) v. Republic of Costa Rica
Case no.: ICSID Case No. ARB/19/13
Forum and rules: ICSID Convention; ICSID Arbitration Rules in force from 10 April 2006; place of proceeding Washington, D.C.; language Spanish
Treaty: Spain–Costa Rica BIT, signed 8 July 1997, in force 9 June 1999
Tribunal: Alexis Mourre (President), Adolfo Jiménez, Luis González García (signed subject to a separate opinion)
Sector: Poultry processing; environmental and sanitary regulation
Outcome: All claims dismissed unanimously (award sent to the parties on 29 June 2022). By majority, the Tribunal found arbitrary closure measures and improper ministerial press statements, but held that a court had promptly corrected the measures and that the statements caused no proven damage.
Amount: Claimed: USD 80,683,646 to USD 86,205,526 with interest, plus USD 1 million in moral damages. Awarded: nothing. Each party bears its own legal costs and the costs of the arbitration are split equally (total costs 712.228,03 per the cost table).

The dispute

Mr Díaz Gaspar, a Spanish national, owned Ibérico, S.A., a Costa Rican company. In September 2013 Ibérico bought a chicken-processing plant in Grecia, Alajuela, from Pollos Kodu, S.A. for USD 1.35 million. The plant's environmental licence (Viabilidad Ambiental) allowed 4,000 birds a day, but Ibérico raised output to 20,000–28,000 birds a day and enlarged the wastewater treatment system (STAR) without prior approval. Neighbours in the Montezuma condominium complained about odours. In January and February 2016 the Ministry of Health issued Sanitary Order DARSG-002-2016, which gave Ibérico one day to comply, then ordered the technical closure of the STAR; SENASA suspended the plant's veterinary operating certificate (CVO); and ministers made statements to the press. The claimant alleged indirect expropriation and breaches of fair and equitable treatment, the promotion and admission clause, non-discrimination and national treatment. Costa Rica objected to jurisdiction for lack of a detailed notice of dispute and argued that it had lawfully exercised its regulatory and police powers against an operation that breached its permits.

Key holdings

Jurisdiction upheld. Article XI(1) requires information detailed enough for the State to understand the conduct complained of, not exhaustive information. The notice of dispute covered the sausage business and the El Coyol land, and also the 2015 events; the objection on the 2015 events was raised late in any case. ¶¶ 222–224, 235–237
Article III(1) of the BIT refers to the customary international law minimum standard. That standard bars conduct that is arbitrary, grossly unfair, unlawful, idiosyncratic or discriminatory, and conduct lacking basic transparency or administrative due process. A mere breach of domestic law is not enough. ¶¶ 356–364
By majority, replacing Order DARSG-001-2016 (two months to regularise) without explanation with Order DARSG-002-2016 (a one-day deadline that could not be met) was arbitrary and breached transparency and due process. The same applied to the closure orders that followed: DARSG-012-2016, SENASA-DRCOC-033-2016 and DARSG-017-2016. ¶¶ 413, 421
No breach of the Treaty resulted, because the San José Contentious-Administrative Court suspended the measures on 19 February 2016, the day the compliance deadline expired. Ibérico's closure of the plant from 19 to 23 February is not attributable to the State: Ibérico prepared the closure before the deadline and was notified of the suspension at 18:15 on 19 February. Its later financial collapse was not shown to have been caused by these events. ¶¶ 439–463
By majority, the Health Minister's repeated false statements to the press that a closure order existed breached the duties of prudence and neutrality and were inconsistent with fair and equitable treatment. However, no harm to the claimant was proven, and the claim for USD 1 million in moral damages was rejected. ¶¶ 471, 477–485
Article II (promotion and admission) applies only before and at admission of the investment. The discrimination and national treatment claims failed because the treatment later given to the lessee Cariblanco took place in a different context. There was no expropriation, because the loss of use was not attributable to the State. ¶¶ 495, 508–510, 533–540
Costs: each party bears its own legal costs, and the costs of the arbitration are shared equally. ¶ 548

Procedural history

17 February 2017Notice of dispute served on Costa Rica.
19 April 2019ICSID receives the Request for Arbitration dated 17 April 2019; it is registered on 1 May 2019.
28 August 2019Tribunal constituted.
25 May 2020Procedural Order No. 2 decides Costa Rica's request for security for costs (cautio judicatum solvi).
4 October 2020Costa Rica withdraws its ratione temporis objection.
6–11 September 2021Hearing on jurisdiction and merits held by videoconference.
24 June 2022Partial separate opinion of Luis González García.
29 June 2022Award sent to the parties: all claims dismissed.