Free Trade Zones

Honduras sees DR-CAFTA disputes looming

A U.S. investor has officially notified Honduras of plans to file a lawsuit potentially worth nearly $11 billion U.S. over plans to repeal special economic zones, while the U.S. state plant was also reportedly threatened by several energy companies.

Delaware-registered Honduras Próspera and two subsidiaries served a notice of intent on September 16 under the Dominican Republic-Central America Free Trade Agreement, triggering a 90-day cooling-off period. days.

Investors are represented by White & Case partners Ank Santens and Francisco Jijon in Washington, DC.

The group previously filed a request for consultation and negotiation in June, following letters in April and May. He says Honduras has not answered any of these questions.

Próspera is the promoter and organizer of a special zone of employment and economic development (ZEDE) based in the departments of Bay Islands and Atlántida in Honduras.

Honduras introduced ZEDEs in 2013 through amendments to its constitution. Próspera says its ZEDE offers an innovative regulatory environment and a minimum wage that is higher than the national minimum wage, and can help Hondurans start a business more easily than elsewhere in the country.

The group says it has acquired or optioned rights to more than 1,000 acres for the area and invested in real estate and infrastructure. According to the notice, he planned to invest US$500 million in Honduras by 2025.

Próspera asserts that these investments were made on the basis of the stability of the ZEDE legal framework for at least half a century.

However, a new leftist government led by President Xiomara Castro took power in Honduras earlier this year. A few months later, the National Congress of Honduras began the process of amending its constitution to remove the ZEDE legislative framework and repeal the original ZEDE laws, without any provision on the status of existing ZEDEs.

Próspera argues that Honduras violated DR-CAFTA by granting more favorable treatment to Kuwaiti investors; fail to provide fair and equitable treatment, including with respect to expectations of legal stability; expropriate its investment; and interfere with the group’s ability to transfer funds.

Investors say they will also claim breaches of their ZEDE’s charter and a legal stability agreement the group reached with Honduras in 2021.

They estimate the value of the claim at several billion US dollars and say it could be as high as US$10.8 billion.

Energy companies warn against claims for unpaid bills

Meanwhile, Honduras has been notified by several foreign energy companies under various treaties for allegedly unpaid energy purchase debts of hundreds of millions of dollars and other alleged violations. GAR understands that investors are represented by White & Case’s Silvia Marchili, Francisco de Rosenzweig and Estefania San Juan in Houston, Mexico City and Miami.

On November 1, the local newspaper Having dinner Honduran Energy Minister Erick Tejada reported that two companies, including one with Panamanian capital, had notified their intention to arbitrate under DR-CAFTA due to unpaid bills. He did not name the companies.

Tejada said the payment would be made within two to three months and priority would be given to the 14 companies that signed a memorandum of understanding with state energy company ENEE last month to reduce tariffs for 16 energy contracts. .

The memorandum of understanding follows legislation passed in May that allows the government to renegotiate electricity rates with renewable energy producers.

Having dinner says two of the companies that signed the MOU have since submitted DR-CAFTA notices.

According Having dinnerthe companies that signed the memorandum of understanding last month were Enersa, Sersa, Fotersa, Tres Valles, Escatec, Empresa Eólica Honduras, Total Erén, Chumbagua, Comercial Laeisz and Energys.