Procedural Posture

This document is Procedural Order No. 3 issued by the Tribunal in an ICSID Additional Facility arbitration between José Alejandro Hernández Contreras and the Republic of Costa Rica. The Order addresses the Respondent's application for security for costs pursuant to Rule 63 of the 2022 ICSID Additional Facility Rules, seeking an order for the Claimant to post a guarantee of no less than USD 4 million.

Principal Legal Issues and Parties' Positions

The core issue before the Tribunal was whether the circumstances warranted an order for security for costs, requiring an assessment of the Claimant's financial capacity, his willingness to comply with an adverse costs award, the potential effect of the security on his ability to pursue the claim, and the parties' conduct. The Respondent argued that the Claimant's formal declaration of bankruptcy, lack of assets, and history of non-compliance in two prior related arbitrations (Hernández I and Hernández II) demonstrated a real risk of non-payment. Conversely, the Claimant contended that he possessed sufficient financial capacity, that the bankruptcy proceedings were abusive, and that a USD 4 million security order would be disproportionate and effectively stifle his access to justice.

Tribunal's Analysis and Findings

Applying the autonomous standard under Rule 63 of the 2022 ICSID AF Rules, the Tribunal concluded that there was a real risk the Claimant would be unable to satisfy an adverse costs award. The Tribunal emphasized that the Claimant was subject to an active bankruptcy proceeding, lacked registered assets, and failed to provide reliable independent evidence of sufficient financial capacity. Furthermore, the Tribunal found that the Claimant's procedural history—specifically his failure to timely pay advances and comply with a previous security for costs order in Hernández II—raised reasonable doubts regarding his willingness to comply with future cost obligations.

However, the Tribunal also weighed the potential impact of the requested security on the Claimant's ability to continue the arbitration. Rejecting the Respondent's USD 4 million request as potentially prohibitive, the Tribunal determined that a reduced security of USD 1.2 million struck the appropriate balance. The Tribunal noted that this amount was consistent with the security ordered in Hernández II and other recent arbitrations involving Costa Rica, providing adequate protection for the Respondent without imposing an insurmountable barrier to the Claimant's pursuit of his claims.

Operative Directions

The Tribunal partially granted the Respondent's application, ordering the Claimant to provide and maintain security for costs in the amount of USD 1.2 million in the form of a bank guarantee or equivalent financial instrument. The Claimant was directed to constitute the security within 60 days, subject to the suspension of the proceedings in the event of non-compliance.