Las Olas Ecosystem – Costa Rica

International Expert/Lead Scientist for the Republic of Costa Rica:

A team from Herbert Smith Freehills’ New York office, along with co-counsel from Costa Rica’s Ministry of Foreign Trade (“COMEX”), has secured a major victory for the Republic of Costa Rica (“Costa Rica”) in arbitration proceedings concerning an investment in a tourism project in Costa Rica’s Central Pacific Coast. Kevin Erwin lead a hand-picked team of Costa Rican scientists working on the Las Olas Ecosystem and provided expert testimony to the Tribunal.

The claim was commenced by a group of American investors against Costa Rica under the Dominican Republic-Central America Free Trade Agreement (“DR-CAFTA”), and the UNCITRAL Arbitration Rules, with ICSID acting as administering authority as agreed by the parties. On September 18, 2018, the arbitral tribunal, chaired by Eduardo Siqueiros, alongside with Mark Baker and Professor Pedro Nikken, issued unanimously an award dismissing all claimants’ claims and ordered the claimants to bear all the costs of the arbitration in the amount of US$ 1,090,905.10.

The dispute arose from an investment on parcels of land and a concession site in Costa Rica’s Central Pacific Coast – the “Las Olas Project.” Claimants alleged they had received all permits and approvals from Costa Rica in order to commence the development of the project, sales and marketing activities. However, after conducting inspections in the project site, the Costa Rican authorities identified wetlands and forest in the site, triggering administrative and judicial actions that led to the shut-down of the project. The claimants claimed that Costa Rica breached its obligations under the DR-CAFTA (minimum standard of treatment and expropriation and compensation) and requested damages in the amount of US$ 95,400,000. The tribunal concluded that there were wetlands and forests in the Las Olas Project which were adversely impacted by the claimants and that the reaction that Costa Rica took was merited according to its laws, which were consistent with international law. Therefore, it found that Costa Rica’s actions were not arbitrary or in breach of the obligations under the DR-CAFTA.