Hogan Lovells secures precedent-setting win for the Republic of Panama in investment arbitration dispute

Miami, 15 October 2018 – An international Hogan Lovells team from the firm’s Miami and Madrid offices achieved a complete victory on behalf of the Republic of Panama in an investment arbitration pending before the International Centre for the Settlement of Investment Disputes (ICSID). The arbitration was initiated over three years ago by investors from Costa Rica, including Álvarez y Marín Corporación S.A. and the Kingdom of the Netherlands.

Claimants alleged that Panama breached its Free Trade Agreement with Central America and the Agreement on Encouragement and Reciprocal Protection of Investments with the Kingdom of the Netherlands. Specifically, Claimants’ alleged that Panama expropriated and did not accord fair and equitable treatment to Claimants and their investment in a multimillion dollar ecotourism hotel and residential project located on a remote beachfront in a Panamanian indigenous reserve. Claimants sought damages in excess of US$100 million, including moral damages, fees, and costs. Panama argued that the Tribunal lacked jurisdiction because claimants acquired their investments through a series of fraudulent transactions, in violation of Panamanian and international law, and did not conduct appropriate investment due diligence.  

The Tribunal agreed with Panama that it lacked jurisdiction and dismissed all claims against the country. In its decision, the Tribunal noted that all investment treaties have an implicit requirement for an investor to comply with domestic law. Specifically, the Tribunal found that the Claimants violated Panamanian law and the special protections afforded to the indigenous communities in Panama.  The violation of law was deemed grave preventing Claimants from obtaining protection under the applicable treaties. The Tribunal also found that the Claimants did not conduct the necessary due diligence and ignored multiple “red flags” regarding the illegality of the investment.

The Hogan Lovells international arbitration team included partners Daniel E. González, Richard C. Lorenzo, and María E. Ramirez, counsel Juan C. García, senior associate Javier Peral, and Juliana de Valdenebro and Yine Rodríguez in Miami, and senior associate Silvia Martínez in Madrid.

Speaking about the case and the final award, González commented:

“This is a major, precedent-setting decision in investment treaty arbitration. Our team, and our client, put an incredible amount of work into the defense against these false claims over a long period of time and to secure such a great outcome, completely exonerating our client, is incredibly satisfying. To say we are pleased is an understatement, and we are grateful that the Tribunal gave our client such a fair hearing.”

The successful outcome is an important decision in international arbitration terms, and an important result for Panama.

About Hogan Lovells

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“Hogan Lovells” or the “firm” is an international legal practice that includes Hogan Lovells US LLP and Hogan Lovells International LLP. For more information, see www.hoganlovells.com.

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