International Dispute Resolution Team Secures Major Arbitration Win for the Republic of Costa Rica

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An international arbitration tribunal presided by Alexis Mourre handed Squire Patton Boggs’ new client, the Republic of Costa Rica, a monumental investment treaty arbitration victory by fully dismissing a US$100 million claim brought by a Spanish/Venezuelan investor under the Costa Rica-Spain Bilateral Investment Treaty (ICSID Case No. ARB/19/3). The Tribunal “unanimously reject[ed] the totality of” the claimant’s claims and denied him any relief. The tribunal’s decision concludes a three-year effort involving lawyers from four different Squire Patton Boggs offices.

The claim was brought by Mr. Alejandro Díaz Gaspar, who owned a poultry processing plant in Costa Rica. The plant was authorized to process 25,000 chickens per week and to daily treat 90m3 of water in its sewage treatment system. Over the years, the plant increased its production fivefold above the permitted limits, without implementing the requisite upgrades and improvements and without securing the required approvals and authorizations. After numerous inspections, in February 2016, the Costa Rican authorities suspended production at the plant over environmental and public health concerns. The claimant secured a preliminary injunction from the local courts, allowing the plant to remain in operation. Several months later, the plant ceased operation.

Mr. Díaz alleged that the order to suspend production had a cascade effect on the plant’s operation and financial structuring, which directly led to its closure. He claimed the order to suspend production was in breach of the FET and national treatment standards and that it amounted to an expropriation of his investment. He sought US$100 million in damages.

The Tribunal held a full merits hearing virtually in September 2021. In its award, the Tribunal rejected the claimant’s allegations on the merits. It agreed with Costa Rica that Mr. Díaz operated his plant in serial violation of Costa Rica law and that Costa Rica acted lawfully to address those repeated violations. The Tribunal thus concluded that Mr. Díaz had no legitimate expectation he could continue to operate the plant outside of the law and applicable regulations. The Tribunal also rejected as unfounded the claimant’s theory that he was the subject of a discrimination and harassment campaign led by government officials.

The cross-office team was led by partners Rostislav Pekař (Paris and Prague), Raúl B. Mañón (Miami), and José Feris (Paris), as well as associates Francisco J. Batlle (Santo Domingo) and Aline Ramos (Paris). Law clerks Carmen Haché and Juan Alorda (Santo Domingo) provided key support.

This is Squire Patton Boggs’ first investment treaty arbitration for the Republic of Costa Rica, and denotes the IDR Team’s growing presence in Latin America.

Squire Patton Boggs was named “International Arbitration Practice of the Year” by Law360 in 2020. The firm is also recognized as a GAR 30 firm in Global Arbitration Review’s prestigious annual ranking of the top 30 international arbitration practices in the world.

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