In 1989, Honduras ratified the Convention on the Settlement of Investment Disputes between States and Nationals of Other States, better known as the ICSID Convention. In doing so, our country joined an international community of nations that understood that attracting foreign investment required more than tax incentives or macroeconomic stability: it required trust.
I- ICSID: a neutral forum for investment
ICSID was created under the auspices of the World Bank with the purpose of establishing a neutral, specialized, and reliable forum to resolve disputes between investors and States. The logic was simple. Anyone who decides to invest millions of dollars in a foreign jurisdiction needs to know that, if a dispute arises with the host State, they will have an independent mechanism to enforce their rights. In turn, States also benefit from a system that allows differences to be resolved through legal rules rather than through political or diplomatic pressure.
For many years, Honduras’s participation in the ICSID system went virtually unnoticed. The country was not a significant player in international investment arbitration. Claims were scarce and, generally speaking, the investor community perceived Honduras as a jurisdiction that, with its strengths and weaknesses, reasonably honored the commitments it had assumed toward foreign investors.
II- An arbitration culture built in Honduras
In parallel, Honduras gradually built a significant domestic arbitration culture. The enactment of the Conciliation and Arbitration Law in 2000 represented one of the most successful legal reforms of recent decades. Thanks to it, hundreds of commercial disputes ceased to depend exclusively on the ordinary courts and came to be resolved by specialized arbitrators, through more agile, efficient, and technically sophisticated procedures.
What was initially viewed with some skepticism by certain legal sectors ultimately became an undeniable reality. Today it is difficult to imagine sectors such as construction, banking, energy, telecommunications, or large infrastructure projects without arbitration mechanisms.
The Honduran experience shows that arbitration does not weaken institutions. On the contrary, it strengthens them. It builds trust, promotes compliance with contractual obligations, and reduces the legal uncertainty that inevitably affects economic activity.
III- The turn of the last decade
However, reality began to change over the past decade. Honduras started to experience a sustained increase in the number and complexity of international claims. Some originated in regulatory conflicts; others in disputes arising from State contracts; and still others in administrative and judicial decisions that foreign investors deemed incompatible with the protection standards established in international treaties.
The situation reached particularly sensitive levels following the conflicts arising from the repeal of the ZEDE regime, the disputes related to energy projects, and various claims alleging the improper use of State institutions —especially the Judiciary— to harm the rights of investors protected under international treaties.
IV- The Próspera case and the exit from ICSID
Within this scenario, the claim brought by the developers of Próspera stands out; its announced amount generated enormous national concern, not only because of the sum involved but because of the message it sent to the international financial community regarding legal certainty in Honduras.
Faced with this reality, the Government of the Republic, at that time, opted for a strategy that had already been seen in other Latin American jurisdictions. Instead of strengthening the institutional mechanisms for dispute resolution and addressing the structural causes generating the claims, it decided to denounce the ICSID Convention and abandon the leading international forum for investment arbitration.
The premise seemed simple: if Honduras left ICSID, international claims would decrease. However, comparative experience shows exactly the opposite.
V- Leaving ICSID does not reduce claims
Denouncing the Convention does not eliminate international investment treaties, does not extinguish the rights already acquired by investors, and does not prevent future disputes from being submitted to other international arbitration mechanisms. The only thing it truly produces is a message of uncertainty that tends to be interpreted negatively by markets and by potential investors.
The recent history of Bolivia, Ecuador, and Venezuela shows that abandoning the ICSID system does not eliminate the State’s international responsibility, nor does it prevent multimillion-dollar claims from continuing to be filed. What it does generate is a perception of hostility toward investment that ends up increasing the financial and reputational cost for the countries that make such decisions.
Today, when Honduras needs more private investment, greater economic growth, better infrastructure, and more job creation, it is worth asking whether the withdrawal from ICSID actually helped achieve those goals or whether, on the contrary, it deepened the perception of legal risk the country faces.
VI- The return to ICSID: a bet on legal certainty
For this reason, Honduras’s return to ICSID should not be understood as a surrender of national sovereignty, nor as a subordination to foreign interests. It should be seen as an expression of confidence in the rule of law, in the capacity of our institutions to act in accordance with the law, and in the country’s willingness to honor the international commitments it has freely chosen to assume.
After more than two decades of experience with the Conciliation and Arbitration Law, Hondurans have confirmed that arbitration is not a threat. It is a tool for development. And if we have accepted that reality in the domestic commercial sphere, it is difficult to justify rejecting the same principles when it comes to protecting the international investment our economy so badly needs.
The debate over the return to ICSID is not a debate about ideologies. It is a debate about trust, legal certainty, and development. And in that debate, the experience Honduras has accumulated over the past thirty years seems to offer an increasingly clear answer.