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Procedural Posture
This document is a Decision on Bifurcated Jurisdictional Objections issued by an ICSID Tribunal in an arbitration brought by Guatemalan nationals against the Republic of Honduras under the Dominican Republic-Central America-United States Free Trade Agreement (CAFTA-DR) and the ICSID Convention. The Tribunal addressed five preliminary objections raised by the Respondent following a prior procedural order granting bifurcation.
Jurisdictional Objections and Tribunal's Analysis
The Respondent first objected that the Claimants failed to exhaust local remedies, relying on a declaration made by Honduras upon ratifying the ICSID Convention. The Tribunal dismissed this objection, finding that while the declaration was a valid expression of Honduras's intent, it was superseded by the uniform consent regime established under CAFTA-DR Article 10.17, which grants access to ICSID arbitration without requiring the prior exhaustion of local remedies.
Second, the Respondent argued that the Claimants lacked ownership and control over the alleged investment because the shares and assets of the local enterprise, Pacific Solar, had been placed in trust to secure project finance loans. The Tribunal partially upheld and partially dismissed this objection. A majority found that the Claimants retained beneficial ownership, granting them standing to bring claims on behalf of the local enterprise pursuant to CAFTA-DR Article 10.16.1(b). However, the majority concluded that the Claimants lacked standing to claim reparation on their own behalf under Article 10.16.1(a), as their right to recoup the assets was contingent upon the full repayment of the loans.
Third, the Respondent objected to the Tribunal's jurisdiction ratione voluntatis over claims alleging the breach of contractual obligations, arguing that the Claimants could not use the CAFTA-DR Most-Favored-Nation (MFN) clause to import an umbrella clause from third-party bilateral investment treaties. The Tribunal upheld this objection, ruling that the ordinary meaning, context, and object and purpose of CAFTA-DR Article 10.4 do not permit the importation of abstract substantive protection standards from other treaties.
Finally, the Respondent contended that the Power Purchase Agreement (PPA), State Guarantee, and Operations Agreement did not constitute an "investment agreement" under CAFTA-DR Article 10.28. The Tribunal dismissed this objection, determining that the three interrelated instruments collectively satisfied the treaty's requirements, including execution by a national authority and the conferral of rights over natural resources.
Decision
The Tribunal upheld the Respondent's objections regarding the Claimants' standing to claim reparation on their own behalf and the importation of an umbrella clause via the MFN provision. All other jurisdictional objections were dismissed. The Tribunal ordered the proceeding to continue to the merits phase and reserved its decision on the allocation of costs.
