José Alejandro Hernández Contreras v. Republic of Costa Rica

Case summary

At a glance

Parties: José Alejandro Hernández Contreras v. Republic of Costa Rica
Case no.: ICSID Case No. ARB(AF)/22/5
Forum and rules: ICSID Additional Facility Arbitration Rules (in force 1 July 2022); seat Washington, D.C.; language Spanish
Treaty: Costa Rica–Venezuela BIT, signed 17 March 1997
Tribunal: Dr. Claus von Wobeser (President), Mr. Alexander A. Yanos, Mr. Luis Alberto González García
Outcome: Proceeding discontinued by majority under Rule 63(6) on 17 March 2025 because the claimant did not post security for costs on the terms ordered; Alexander Yanos dissented.
Amount: Security for costs requested: USD 4,000,000. Ordered: USD 1,200,000. Costs of the arbitration shared equally; each party bears its own legal and expert costs.

The dispute

José Alejandro Hernández Contreras brought claims against Costa Rica under the Costa Rica–Venezuela BIT of 17 March 1997. The published documents are procedural orders and do not describe the investment, the measures challenged or the legal claims. They do record that the claimant owns V-NET Comunicaciones S.A., that a Costa Rican court declared V-NET and the claimant bankrupt on 25 May 2021, and that the claimant says Costa Rica's acts destabilised his finances. His claim was funded by Longford Capital Fund III, LP. An earlier ICSID arbitration between the same parties (Case No. ARB(AF)/20/2) was terminated in 2022, and the claimant was ordered to pay costs in it.

Key holdings

Rule 63 of the 2022 Additional Facility Rules sets its own framework for security for costs. The 2006 interim-measures standard on which the claimant relied does not apply. The factors in Rules 63(3) and 63(4) are weighed together; no single factor is decisive. PO2 ¶¶ 40–44
By majority, the Tribunal found that the claimant could not meet an adverse costs order. He was declared bankrupt on 25 May 2021, his assets were attached, and he offered no evidence of solvency. He also did not disclose whether his funding by Longford would cover adverse costs. The Tribunal did not question his willingness to pay and found his conduct in the first arbitration honourable. PO2 ¶¶ 46–51, 57, 62
Costa Rica had not shown that USD 4 million was reasonable: it had not disclosed its fee arrangement with counsel, and its costs in Infinito and Díaz Gaspar were lower. The majority ordered a bond of USD 1,200,000, issued by a solvent bank or insurer in Costa Rica and payable to Costa Rica, within 30 days. Failing that, the proceeding would be suspended. PO2 ¶¶ 53, 66–67
The claimant showed that Costa Rican insurers and banks would not issue such a bond. The Tribunal unanimously modified the security order under Rule 63(8). It allowed the security to be issued by a financial entity in the United States on the terms of Annex 4 to the claimant's declaration, to be posted within 15 days. PO3 ¶¶ 36–41
By majority, the Tribunal held that the after-the-event (ATE) insurance policy did not comply with PO3. Only Solfin Corp., not the claimant, was the insured. The policy's validity depended on Solfin meeting its obligations, with no duty to notify Costa Rica of cancellation. The policy was issued in the United Kingdom and governed by English law, and it was posted late. PO4 ¶¶ 49–79
The proceeding had been suspended since 10 June 2024, a total of 281 days. The majority ordered discontinuance under Rule 63(6), leaving the parties' substantive rights intact. The costs of the arbitration are shared equally and each party bears its own costs. PO4 ¶¶ 80–84
Alexander Yanos dissented. In his view the ATE policy with an anti-avoidance endorsement removed the reason for the security order. He considered the majority's approach hyper-formalist, and said any concerns about notification could have been met by a further order rather than discontinuance. PO4, Dissenting Opinion ¶¶ 1–16