José Alejandro Hernández Contreras v. Republic of Costa Rica (ICSID Case No. ARB(AF)/25/3)

At a glance

Parties

José Alejandro Hernández Contreras v. Republic of Costa Rica

Case no.

ICSID Case No. ARB(AF)/25/3 (called "Hernández III" in the documents)

Forum and rules

ICSID Additional Facility Arbitration Rules in force from 1 July 2022; seat Washington, D.C.; language Spanish

Treaty

Costa Rica–Venezuela BIT signed 17 March 1997

Tribunal

Mélanie Riofrio Piché (President), José Carlos Fernández Rozas, Luis Alberto González García

Sector

Telecommunications; distribution of ICE products and services

Outcome

Pending. The published orders deal only with procedure and security for costs. The Tribunal unanimously ordered the bankrupt claimant to post USD 1.2 million as security for costs, finally by deposit with the PCA.

Amount

Security for costs requested: not less than USD 4,000,000. Ordered: USD 1.2 million (deposit of USD 1,200,000 with the PCA due by 7 September 2026). The amount of the claim is not stated in the published documents.

The dispute

In 2015 Mr Hernández, a private investor, set up V-NET Comunicaciones S.A. to distribute the products and services of the State telecommunications brand of the Instituto Costarricense de Electricidad (ICE) in Costa Rica. He alleges that arbitrary and discriminatory actions by ICE harmed his investment, and he relies on the Costa Rica–Venezuela BIT. This is his third arbitration against Costa Rica on the same dispute. The first (ARB(AF)/20/2) ended in March 2022 when he could not pay the advance on costs. The second (ARB(AF)/22/5) was discontinued after he failed to post a USD 1.2 million security for costs in the required form. Since May 2021 he has been in bankruptcy proceedings, opened at the request of the creditor Fivenca S.A. over a USD 500,000 guarantee. Costa Rica asked for security for costs of at least USD 4 million. The published documents do not yet set out the merits pleadings.

Key holdings

1. Under Rule 63 of the 2022 Additional Facility Rules, security for costs is an autonomous measure with its own criteria. It is no longer assessed under the standard for provisional measures. Exceptional circumstances, urgency or irreparable harm need not be shown. The test is whether there is a real risk that an adverse costs award will not be paid. PO No. 3 ¶¶ 32–34
2. There is a real risk that the claimant cannot pay an adverse costs award. He is in active bankruptcy proceedings, and he has no registered movable or immovable property. His accountant's certification and letter lack supporting evidence. The bank statements and the credit offer he relied on belong to separate companies (Solfin entities and CrediSolfin S.A.). The Tribunal refused, at this stage, to decide whether Costa Rica's measures caused his insolvency, because that is the merits. It rejected his estoppel argument based on ICE's earlier assessment of his finances in the tender. PO No. 3 ¶¶ 44–59
3. The claimant's record raises reasonable doubts about his willingness to pay. In Hernández II he posted a non-compliant guarantee, which led to a 281-day suspension. In his Request for Arbitration he promised to cure that guarantee's deficiencies but proposed no concrete step. His conduct across the three proceedings reinforces the case for security. Costa Rica was not found to have acted in bad faith. PO No. 3 ¶¶ 63–66, 83–85
4. The request was granted in part: security of USD 1.2 million instead of the USD 4 million sought. The figure was calibrated on Hernández II, which used costs awarded to Costa Rica in Infinito Gold (USD 1.8 million) and Díaz Gaspar (USD 800,000). This amount does not bar access to justice, especially since the claimant said he owes his lawyers nothing outside any recovery. The argument that Costa Rica had no present "right to be preserved" was rejected as belonging to the old provisional-measures regime. The decision was unanimous, and the proceeding would be suspended if the security was not posted. PO No. 3 ¶¶ 74–79, 93–102
5. Neither party breached the duty in PO No. 3 to negotiate the guarantee terms; that duty required effort, not an agreed result. The Tribunal then settled the terms of a letter of credit from CIBC (Chicago), payable on demand against a copy of the award. It refused to require a breakdown of costs, a waiver of the benefit of excussion, a non-annulment clause or a clause making the bank bear enforcement costs. It required that the letter of credit not be transferable without Costa Rica's consent and that the bank notify Costa Rica directly of events affecting the instrument. The claimant must file a written waiver of any action to frustrate payment. PO No. 4 ¶¶ 7–9, 22–48
6. No bank would issue the instrument, and ICSID declined to act as depositary. The parties then agreed that the PCA would hold a cash deposit of USD 1,200,000 in an account at ABN Amro Bank N.V. The claimant must make the deposit by 7 September 2026, failing which the proceeding is suspended. Costs are reserved. PO No. 5 ¶¶ 3–10, Annex 1

Procedural history

1. April 2025The claimant files his third Request for Arbitration against Costa Rica.
2. 9 October 2025Tribunal constituted.
3. 24 November 2025First session held by videoconference.
4. 27 November 2025Procedural Order No. 1 sets the rules and timetable: seat Washington, D.C., Spanish language, hearing scheduled for 11–15 October 2027.
5. 27 November 2025Procedural Order No. 2 sets the rules on document production (IBA Rules 2020, at most 30 requests per party).
6. 11 February 2026Costa Rica applies for security for costs of not less than USD 4 million.
7. 1 May 2026Procedural Order No. 3: security for costs of USD 1.2 million ordered, unanimously.
8. 25 June 2026Procedural Order No. 4 fixes the terms of the CIBC letter of credit.
9. 30 July 2026The Tribunal rejects Costa Rica's request to suspend the proceeding; the parties agree on 31 July 2026 to use the PCA as depositary.
10. 11 August 2026Procedural Order No. 5: deposit of USD 1,200,000 with the PCA due by 7 September 2026, failing which the proceeding is suspended.

Tribunal, counsel and experts

Decided by

• Mélanie Riofrio Piché President
• José Carlos Fernández Rozas Co-arbitrator
• Luis Alberto González García Co-arbitrator

For the claimant

Reed Smith LLP

For the respondent

Ministerio de Comercio Exterior (COMEX) · Arnold & Porter Kaye Scholer LLP · Lindsay Argüijo · Carol Pérez

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Keywords

• security for costs
• Rule 63 ICSID Additional Facility Rules 2022
• bankruptcy
• insolvency of claimant
• letter of credit
• CIBC
• PCA depositary
• escrow deposit
• access to justice
• third-party funding
• Costa Rica–Venezuela BIT
• telecommunications
• ICE
• V-NET
• Fivenca
• successive arbitrations
• discontinuance
• document production

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