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Guatemala Investment Protections

Brief Summary: ALVARO R. CASTELLANOS HOWELL, UNIVERSIDAD RAFAEL LANDÍVAR. This is an excerpt of a chapter in the book Latin American Investment Protections: Comparative Perspectives on Laws, Treaties, and Disputes for Investors, States, and Counsel edited by Jonathan C. Hamilton, Omar E. García-Bolívar, and Hernando Otero and published by Martinus Nijhoff (Brill) in which the author discusses the domestic and international legal framework for foreign investment and investment disputes in Guatemala.

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1. INTERNATIONAL LAW INVESTMENT PROTECTION FRAMEWORK

Guatemala signed the ICSID Convention on November 9, 1995, ratified it on July 24, 2002. It entered into force on February 20, 2003. On January 16, 2003, Guatemala made two notifications to the International Centre for Settlement of Investment Disputes regarding the Convention, which provide that: (i) Guatemala will require exhaustion of local administrative remedies as a condition of its consent to arbitration under the Convention; and (ii) Guatemala will not accept ICSID jurisdiction over any dispute arising from a compensation claim against the state for damages due to armed conflicts or civil disturbances.[1]

[Guatemala is a party to 16 bilateral investment treaties, including with each of the following countries: Korea, Chile,[2] China, France, the Netherlands, Cuba, Spain, Switzerland, Sweden, Germany, Finland, Israel, Belgium-Luxemburg, the Czech Republic, Italy, and Cuba. In addition, Guatemala is a party to 7 free trade agreements, including each of the following:[3] the Central American Free Trade Agreement (CAFTA) between the Dominican Republic, the United States of America and Central America, which was ratified on 10 March 2005 and entered into force on 1 July 2006; the Free Trade Agreement between the United States of Mexico and the Republics of El Salvador, Guatemala and Honduras, which was ratified on 29 November 2000 and entered into force on 15 March 2001; the Free Trade Agreement between Central America and Panama, which was ratified on 10 March 2009[6] and entered into force on 20 June 2009; the Free Trade Agreement between Central America and Chile, which was ratified on 27 October 2009 and entered into force on 23 March 2010; the Free Trade Agreement between the Republic of Colombia and the Republics of El Salvador, Guatemala and Honduras, which was ratified on 23 September 2009[8] and entered into force on 12 November 2009; the Free Trade Agreement between the Republic of China (Taiwan) and Guatemala[9], which was ratified on 2 March 2006 and entered into force on 1 July 2006; and the Free Trade Agreement between Central America and the Dominican Republic, which was ratified on 26 April 2000[10] and entered into force on 4 October 2001.]

Chapter VIII of Arbitration Law governs the recognition and enforcement of arbitral awards.[11] Article 45 provides that foreign arbitral awards will be recognized and enforced in the country pursuant to the New York Convention,[12] the Panama Convention, or any other applicable treaties to which Guatemala is a party.

In the absence of any applicable treaties, the award is to be recognized and enforced in accordance with the Arbitration Law. Article 46 of Arbitration Law for provides that foreign arbitral awards shall be binding in the country. Article 47 for its part provides narrowly exceptions similar to those in the New York Convention.

2. INVESTMENT DISPUTES

[Examples of Guatemalan investment treaty arbitrations include three claims against it before ICSID.]

• Railroad Development Corp. v. Guatemala (ICSID Case No. ARB/07/23)

In the first investor-state dispute filed with CAFTA-DR, the claimant – a US company called Railroad Development Corporation (RDC) – alleges that Guatemala breached its obligations under CAFTA Chapter 10, including those related to expropriation, the minimum standard of treatment, and national treatment.[13] This dispute concerns a railroad concession contract. The claim was registered on August 20, 2007.[14] Among other decisions, the tribunal has issued two Decisions on Objections to Jurisdiction. The first on an expedited basis pursuant to DR-CAFTA article 10.20.5 by which the Tribunal ruled on the validity of the claimant’s waiver of the right to initiate or continue other dispute settlement procedures.[15] The second dismissing Guatemala’s jurisdictional objections that the investment was made illegally under Guatemalan law and that the dispute predated the DR-CAFTA’s entry into force.[16] 

Iberdola Energía, S.A. v. Guatemala (ICSID Case No. ARB/09/5)

The second case . . . against Guatemala before ICSID was filed by a Spanish Company, Iberdola Energía S.A., pursuant to the bilateral investment treaty between Guatemala and Spain. The dispute involves Iberdola’s former shareholding in Empresa Electrica de Guatemala S.A. (EEGS) and concerns the Electric National Commission’s setting of electricity rates. . . .[17]

TECO Guatemala Holdings v. Guatemala (ICSID Csae No. ARB/10/23)

The third case was filed by a subsidiary of the US electric company, TECO, pursuant to the DR-CAFTA.[18] The dispute involves TECO’s own holdings in EEGS and again concerns the setting of rates by the sectoral regulator.

 

 


[1] International Center for Settlement of Investment Disputes, “Contracting States and Measures Taken by Them for Purposes of the Convention,” May 2011, available at http://icsid.worldbank.org/ICSID/Index.jsp (accessed 2 June 2011).

[2] In accordance with Annex 10.01 of the Central America-Chile FTA, the Guatemala-Chile BIT has been incorporated into it.

[3] Organization of American State’s Foreign Trade Information System – SICE, available at http://www.sice.oas.org (accessed 8 June 2011).

[4] Political Congress of the Republic of Guatemala, Decree No. 31–2005 (10 Mar. 2005).

[5] Political Congress of the Republic of Guatemala, Decree No. 86–2000 (29 Nov. 2000).

[6] Political Congress of the Republic of Guatemala, Decree No. 11–2009 (10 Mar. 2009).

[7] Political Congress of the Republic of Guatemala, Decree No. 37–2009 (27 Oct. 2009).

[8] Political Congress of the Republic of Guatemala, Decree No. 32–2009 (23 Sept. 2009).

[9] Political Congress of the Republic of Guatemala, Decree No. 05–2006 (2 Mar. 2006).

[10] Political Congress of the Republic of Guatemala, Decree No. 26–2006 (26 Apr. 2000).

[11] Political Congress of the Republic of Guatemala, Decree No. 67–95, Arbitration Law (Guatemala), Art. 46 (25 Nov. 1995).

[12] Upon its accession Guatemala made the following declaration: “On the basis of reciprocity, the Republic of Guatemala will apply the above Convention to the recognition and enforcement of arbitral awards made only in the territory of another contracting State; and will apply it only to differences arising out of legal relationships, whether contractual or not, which are considered as commercial under its national law.”

[13] Adam A. Kay & Luke Eric Peterson, “Investor in Guatemala Railway Dispute Outlines Details of CAFTA Clam,” Investment Arbitration Reporter, 17 July 2009, available at http://www.iareporter.com/articles/20090719_4 (accessed 2 June 2011).

[14] Railroad Development Corp. v. Guatemala (“RDC”), ICSID Case No. ARB/07/23.

[15] DR-CAFTA, Art. 10.18:2(b). See Decision to Objection to Jurisdiction, CAFTA Article 10.20.5 (17 Nov. 2008).

[16] See Second Decision on Objections to Jurisdiction (18 May 2010). Both decisions available at www.ita.law.uvic.ca (accessed 8 June 2010).

[17] Luke Eric Peterson, “US Electricity Company Requests Arbitration for Alleged Breaches of CAFTA by Guatemala,” Investment Arbitration Reporter, 25 Nov. 2010, available at http://www.iareporter.com/articles/20101126_7 (accessed 2 June 2011).

[18] TECO Guatemala Holdings LLC v. Guatemala (“TECO”), ICSID Case No. ARB/10/23; see also Luke Eric Peterson, “US Electricity Company Requests Arbitration for Alleged Breaches of CAFTA by Guatemala,” Investment Arbitration Reporter, 25 Nov. 2010, available at http://www.iareporter.com/articles/20101126_7 (accessed 2 June 2011).

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