4 mar 2024
Honduras Denounces ICSID Convention: Impact on Investment Disputes
The International Centre for Settlement of Investment Disputes has announced that Honduras has decided to denounce the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (ICSID Convention).
The withdrawal, which has been expected for several months, will come into effect in August of next year, as communicated on its website.
On February 24, 2024, the World Bank received a written notification of the denunciation of the ICSID Convention by Honduras. This measure will take effect six months after the notification, that is, on August 25, 2024, in accordance with Article 71 of the convention. From that date, Honduras will no longer be subject to the provisions of ICSID regarding the resolution of investment disputes.
As the depositary of the ICSID Convention, the World Bank has notified all signatory states of Honduras' denunciation, in accordance with Article 75 of the convention.
In the case report for the calendar year 2023 published by ICSID, Honduras was one of the most sued states. The uncertainty lies in the fate of these ongoing processes. However, it is expected that during the mentioned six-month period, ICSID will continue to handle and resolve pending investment disputes in accordance with the procedures established in the convention, even after Honduras has notified its withdrawal or if the parties establish new mechanisms for resolution.
The denunciation of the ICSID Convention by Honduras may create uncertainty and concern among foreign investors about the protection of their investments and the resolution of potential investment disputes. In this context, investors interested in establishing investments in Honduras will need to consider alternatives to protect their interests in case of a dispute. A viable option is to resort to bilateral investment treaties (BITs) or free trade agreements (FTAs) that Honduras may have concluded with other countries, as these agreements often include provisions on investment protection and mechanisms for dispute resolution that could offer foreign investors a viable alternative in the absence of ICSID.