Honduras Próspera Inc., St. John’s Bay Development Company LLC, and Próspera Arbitration Center LLC v. Republic of Honduras

At a glance

Parties

Honduras Próspera Inc. and St. John's Bay Development Company LLC (both Delaware), and Próspera Arbitration Center LLC (Texas), v. the Republic of Honduras

Case no.

ICSID Case No. ARB/23/2

Forum and rules

ICSID Convention arbitration; ICSID Arbitration Rules in force as of 1 July 2022, as modified or supplemented by CAFTA-DR; place of proceeding Washington, DC

Treaty

CAFTA-DR (Chapter Ten, Investment); Agreement for Legal Stability and Investor Protection (LSA) of 9 March 2021, amended 18 November 2021

Tribunal

Prof. Dr. Juan Fernández-Armesto (President), Prof. Raúl E. Vinuesa, Mr. David W. Rivkin

Sector

Special economic zones (ZEDE); real estate development

Outcome

Pending. Honduras's challenge to Rivkin was rejected (7 August 2024), its exhaustion-of-local-remedies objection was rejected (26 February 2025) and its request for bifurcation was refused (19 March 2026). The published documents do not show a final award.

Amount

Claimed: restitution of property or, in the alternative, USD 1.63 billion in damages. Costs of the preliminary phase were reserved.

The dispute

The claimants are US companies that set up Próspera ZEDE on the island of Roatán. They relied on Honduras's 2013 legal framework for Zonas de Empleo y Desarrollo Económico (ZEDE) and on a Legal Stability Agreement signed with the ZEDE's Technical Secretary. After a change of government, the National Congress passed Decreto 32-2022, which sought to remove the ZEDE provisions from the Constitution; Honduras says it never came into effect. Congress also passed Decreto 33-2022, which repealed the ZEDE Law with immediate effect on 26 April 2022, and on 20 September 2024 the Supreme Court declared the whole ZEDE framework unconstitutional ex tunc. The claimants allege breaches of CAFTA-DR Chapter Ten, Section A, of the LSA and of the Próspera ZEDE Charter as an investment authorization, and seek restitution or USD 1.63 billion. Honduras challenged the claimants' US arbitrator and argued that the claimants had failed to exhaust local remedies. It then raised further jurisdictional objections: essential security, no investment made in accordance with Honduran law, the MFN claim, the LSA claims, the lack of an investment authorization, and the Tribunal's power to order restitution.

Key holdings

1. The proposal to disqualify Rivkin on the ground of nationality was rejected. The recommendation the Chairman relied on found that Article 10.19.4(a) CAFTA-DR is Honduras's advance agreement to set aside the nationality limit in Article 39 of the ICSID Convention. It also found that this agreement covers party-appointed arbitrators, not only those appointed by the ICSID Secretary-General. Chairman's Decision, p. 2; Dupuy recommendation ¶¶ 49–51
2. The exhaustion objection falls within Article 10.20.5 CAFTA-DR whether it is labelled an admissibility or a jurisdictional objection. The Tribunal said it tends to see exhaustion as a question of admissibility, but held that the label does not matter here. Decision on Preliminary Objections ¶¶ 97–99
3. The Tribunal was inclined to accept that the declaration Honduras inserted in Decreto 41-88, the decree approving the ICSID Convention, was a valid condition under Article 26 of the Convention. It treated the declaration as a condition precedent, not merely a direction to future treaty negotiators, despite its unusual placement and the fact that ICSID never registered it. Decision on Preliminary Objections ¶¶ 102–107
4. Honduras waived the exhaustion requirement for CAFTA-DR claims. The no-U-turn waiver in Article 10.18.2 forces investors to give up domestic proceedings before arbitrating, which cannot coexist with a duty to exhaust them. The treaty is later in time and prevails over statute under Article 18 of the Honduran Constitution, so Decreto 10-2005 repealed the requirement for the purposes of CAFTA-DR. The Tribunal did not accept the separate argument based on the fork-in-the-road provisions. Decision on Preliminary Objections ¶¶ 119–126, fn. 122
5. In any event, local remedies were futile, including for the LSA claims. The Supreme Court, whose decisions cannot be appealed, had already upheld Decreto 33 and declared the ZEDE framework unconstitutional ex tunc. Futility is assessed on the facts known when the tribunal decides. Even as of December 2022, a further challenge would have failed, because a constitutional challenge was already pending and such rulings have erga omnes effect. The objection was rejected and costs were reserved. Decision on Preliminary Objections ¶¶ 133–140, fn. 133
6. Bifurcation was refused. The essential security objection under Article 21.2(b) appears prima facie to be a merits issue and may not cover the LSA claims. The objection that the investment was not made in accordance with Honduran law is intertwined with the merits. Objections 3 to 6 would not dispose of the whole case. Further phases would also be inefficient, given that the case had already run for three years and Honduras reserved the right to raise new objections. Procedural Order No. 6 ¶¶ 25–38
7. For the merits phase, the Tribunal admitted the Cato Institute, Ladan Mehranvar, seven Crawfish Rock community leaders and OFRANEH as amici curiae, and denied the Costa Rican Young Arbitrators. Amici are limited to 15-page briefs, with no access to the record, no party status and no participation in the hearing. Procedural Order No. 8 ¶¶ 10–20

Procedural history

1. 16 September 2022Claimants deliver a Notice of Intent under Article 10.16 CAFTA-DR.
2. 19 December 2022Request for Arbitration filed, with the written waivers required by Article 10.18 (the Decision on Preliminary Objections also gives 20 December 2022). ICSID registers it on 3 February 2023.
3. 29 January 2024Tribunal constituted under Article 10.19 CAFTA-DR.
4. 7 August 2024The Chairman of the ICSID Administrative Council rejects Honduras's proposal of 19 February 2024 to disqualify Rivkin, and the proceeding resumes.
5. 30 August 2024Honduras files its preliminary objection under Article 10.20.5 CAFTA-DR, based on failure to exhaust local remedies; the merits are suspended on 4 September 2024.
6. 16 December 2024Remote hearing on the preliminary objection.
7. 26 February 2025Decision on Preliminary Objections: objection rejected, costs reserved, proceedings to continue.
8. 15 October 2025Claimants' Memorial on the Merits, seeking restitution or USD 1.63 billion.
9. 19 March 2026Procedural Order No. 6 rejects Honduras's request for bifurcation.
10. 9 September 2026Procedural Order No. 8 admits four amici curiae, with submissions due by 7 October 2026.

Tribunal, counsel and experts

Decided by

• Juan Fernández-Armesto President — appointed by the institution
• Raúl E. Vinuesa Co-arbitrator — appointed by the institution
• David W. Rivkin Co-arbitrator — appointed by the claimant (challenge rejected)
• Ajay Banga ICSID Administrative Council, ICSID Administrative Council (Chairman; decided the disqualification proposal)
• Pierre-Marie Dupuy ICSID Administrative Council, ICSID Administrative Council (gave the recommendation on the disqualification proposal)

For the claimant

White & Case LLP

For the respondent

Procuraduría General de la República · Foley Hoag LLP · Jana & Gil Dispute Resolution

For other participants

Cornell Law School

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Keywords

• Próspera
• ZEDE
• Roatán
• special economic zones
• CAFTA-DR
• exhaustion of local remedies
• futility
• Article 26 ICSID Convention
• no-U-turn clause
• waiver
• arbitrator disqualification
• nationality of arbitrators
• Article 39 ICSID Convention
• bifurcation
• essential security exception
• Legal Stability Agreement
• amicus curiae
• ICSID denunciation

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