Honduras moves to exit World Bank arbitration body

  • World
  • Friday, 01 Mar 2024

TEGUCIGALPA (Reuters) - Honduras on Thursday took steps to exit a World Bank settlement body that is assessing a dispute with an autonomous zone claiming close to $10.8 billion in compensation from the government for alleged damages.

The World Bank's International Centre for Settlement of Investment Disputes (ICSID) is assessing a complaint made by Honduras Prospera, an autonomous "free zone," or ZEDE, on the Central American nation's Caribbean coast.

Honduras' Zones for Employment and Economic Development (ZEDEs) are special economic zones exempt from some national laws and taxes that were established to encourage investment.

President Xiomara Castro says she does not recognize the ZEDEs and in 2022 backed an attempt to repeal the law that created them. The law has been only partially repealed, but further steps to do away with the ZEDEs could come in 2025.

The World Bank on Thursday said it had received a "written statement of denunciation" from Honduras against the ICSID over the dispute settlement process, and that the country could now leave the body in late August.

Honduras Prospera had appealed to the ICSID in late 2022 after congress partially approved the repeal bill, with executives from the ZEDE saying they had exhausted attempts to negotiate with the government.

The ZEDE, which remains autonomous, is claiming $10.8 billion in damages arguing that legal uncertainty over the zone and the partial repeal discouraged past investments and hindered its future prospects.

Honduras Prospera in 2013 received a 50-year concession to manage around 157 hectares (388 acres) in the coastal region of Le Ceiba and about 23 hectares in Roatan, where it has been given administrative, fiscal, justice and security autonomy.

"The agreement still stands," Jose Luis Moncada, former head of Honduras' financial watchdog CNBS, told a local radio station on Thursday.

Honduras "is obliged to respect the result of this arbitration and any others that are presented before the end of August," Moncada said.

(Reporting by Gustavo Palencia; Writing by Sarah Morland; Editing by Tom Hogue)

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