The Santa Elena Case: Two Steps Forward, Three Steps Back – Vol. 10 No. 3

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AuthorKenneth I. Juster*

Published: September 1999

Costa Rica
Categories of Disputes
Investment Disputes
Applicable Law
International and Transnational Law
Arbitral Awards
Interest and Costs

Description: The case Compañia del Desarrollo de Santa Elena, S.A. v. Republic of Costa Rica marked the culmination of a 22‑year dispute involving the expropriation by the Government of Costa Rica of a property known as “Santa Elena” and the determination of the compensation due the owners of that Property as a result of the expropriation. The Santa Elena Property, owned by Compañia del Desarrollo de Santa Elena, S.A. (“CDSE”), comprised more than 15,000 hectares of land, including 30 kilometers of Pacific Ocean coastline, a tropical dry forest, and numerous rivers, springs, mountains, and valleys. CDSE purchased the Property in 1970 to develop portions of the tract as a tourist resort and residential community. On May 5, 1978, Costa Rica issued an expropriation decree for Santa Elena to convert the Property into a national park. However, Costa Rica did not compensate CDSE for the expropriation and neither took permanent possession of the Property nor received title to the Property until the Tribunal’s recent Award, some 22 years after the 1978 Decree. Although the parties presented several issues for consideration by the Tribunal, the fundamental task for the arbitrators was to determine the amount of compensation to be paid by Costa Rica to CDSE for the expropriation.

The Santa Elena case appears to break new ground regarding two far-reaching legal principles for international investment disputes decided under the Rules of the International Centre for Settlement of Investment Disputes (“ICSID”). First is the decision that international law may be applied exclusively as the governing law in deciding such a dispute even where there is no conflict between the applicable national law and the rules and principles of international law. Second is the decision that an award of compound interest is justified when calculating the payment due a party whose property has been expropriated without having received prompt, adequate and effective compensation.

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*Kenneth I. Juster is a senior partner in the Washington, D.C. office of the law firm of Arnold & Porter. He served as counsel to the Claimant in the case discussed in this article. The views expressed herein are solely those of the author.