Honduras , September 16, 2020
The most effective way to protect your investments in Honduras, and its recent nuances
Arbitration as a conflict resolution system has been rapidly evolving in Honduras. Amidst political uncertainty, investors are looking for safer and more effective ways to protect their investments. As a response to this the Honduran Government is aware of this and, being consistent with its business and investment policies, has signed "The United Nations Convention on International Settlement Agreements Resulting from Mediation," also known as the Singapore Convention on Mediation, which demonstrates Honduras’s commitment to becoming a friendly state for ADR methods, which in turn assures investors that solutions are in place. The Singapore Convention seeks to emulate the NY Convention by giving tools for cross-border enforcement of agreements which result from mediation, in the same matter the NY Conventions does with arbitration awards.
In the International field Honduras is part and signatory in various free trade agreements, most notably with the United States, a country with which the DR-CAFTA has been signed. This agreement sponsors commercial and investment relations. Honduras also has other free trade agreements with Central America, Mexico, the Dominican Republic, Colombia, Chile, Taiwan, Canada and with the European Union. Likewise, and with the objective of expanding the competitive advantages, other treaties are being negotiated with the countries of Ecuador and Cuba.
In all of the aforementioned free trade agreements Honduras, includes Investor state dispute settlement provisions. ISDS provisions are intended to avoid state-to-state conflict, protect citizens abroad, and signal to potential investors that the rule of law will be respected. Without ISDS provisions, to enforce its rights, an investor would normally need to seek the intervention of the government of its home state. In most of the treaties the institution of choice is the International Center for Settlement of Investment Disputes (ICSID) which is funded and part of the World Bank Group, headquartered in Washington.
The principal basis for arbitration in Honduras resides in the Constitution of the Republic of Honduras in its Article 110, which states, "No natural person, who has the free administration of their property, may be deprived of the right to terminate their civil matters by transaction or arbitration." Furthermore, Honduras has ratified several international treaties such as the "Convention on the Recognition and Enforcement of Foreign Arbitral Awards" (the New York Convention) and the "Inter-American Convention on International Commercial Arbitration" (the Panama Convention).
Because arbitration is a quick process when compared to ordinary processes, new laws such as "The Law of promotion of the Private Public Alliance" (Decree No. 143-2010) and the "Law for the promotion and protection of investments" (Decree No. 51-2011) mandate arbitration for all conflicts arising from private public alliances and investment contracts made in the country.
Most international commercial contracts we handle in Honduras contain arbitration clauses in case disputes arise in connection or relation to said contracts. The applicable law is the "Conciliation and Arbitration Law" (Decree No. 161-2000), which is solely based on the UNCITRAL model law.
As for procedure: if it’s ad-hoc, it would be chosen by the parties; and if it’s institutional, it would go by the "Rules of the Center for Conciliation and Arbitration of the Chamber of Commerce and Industry of Tegucigalpa or Cortes," depending on the claimant’s place of business and the specific clause (most arbitrations take place in the capital Tegucigalpa).
A new arbitration center has been contracted in the Próspera ZEDE (Zone of Employment and Economic Development) said Zone possess a high degree of administrative and functional autonomy, it allows for the creation of a special jurisdiction. The ZEDE legislation allows for different labor law, environmental law, business registration, dispute resolution, the Próspera Arbitration Center (PAC) is the default arbitration services provider for the Próspera ZEDE, this center is still novel and hasn’t administered any cases to this date.
Concerning the amparo action in Honduras it can only be filed against resolutions issued by public officials or state authorities. To avoid obstructions in arbitral proceedings, annulments may only be brought before another Arbitral Tribunal installed within the same Center where the award was rendered, the aforementioned will need to be previously agreed upon by the parties. This would in turn immunize the process from the amparo’s action since it is not rendered by public officials or state authorities. Domestic courts are familiar with the arbitration process in Honduras, and they respect the decisions rendered by arbitral tribunals. In conclusion Honduras has the effective framework in place to aid in the protection of foreign investments.
Emilio Ruiz Pineda
CENTRAL LAW in Honduras