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HONDURAS - UNITED STATES
Bilateral Investment Treaty


Scope of Application [Return to the top of the page]

DEFINITION OF INVESTMENT

The term “investment” of a national or company means every kind of investment owned or controlled by said national or company. This general definition is illustrated by a non exhaustive list of six groups of specific rights, including:

  • a company;

  • equity participation and debt interests in a company;

  • contractual rights;

  • tangible and intangible property;

  • intellectual property; and,

  • rights conferred pursuant to law. (Article I (d)).

DEFINITION OF INVESTOR

Nationals

“National” of a Party means a natural person who is a national of a Party under its applicable law. (Article I (c)).

Companies

“Company” means any entity constituted or organized under applicable law, whether or not for profit, and whether privately or governmentally owned or controlled, and includes a corporation, trust, partnership, sole proprietorship, branch, joint venture, association, or other organization. “Company of a Party” means a company constituted or organized under the laws of that Party. ((Article I (a)(b)).

Application in Time (Entry into Force and Duration: Applicability to Investments made Prior to Entry into Force)

Date of signature: July 1, 1995
Entry into force: Thirty days after the date of exchange of instruments of ratification.
Duration: 10 years.
Thereafter it shall remain in force until either Party notifies the other Party, a year in advance, of its decision to terminate the Treaty.
The Treaty shall apply to investments existing at the time of entry into force, as well as to investments made or acquired thereafter.

Admission [Return to the top of the page]

There is no separate clause on admission. The issue is dealt with in the treatment provisions. See Section on Treatment.

Treatment [Return to the top of the page]

STANDARDS

Fair and Equitable Treatment

Yes. Each Party shall at all times accord to covered investments fair and equitable treatment, ... and shall in no cases accord treatment less favorable than that required by international law. (Article II (3) (a)).

Full Protection and Security

Yes. Each Party shall at all times accord to covered investments full protection and security. (Article II (3) (a)).

Non-Discrimination

Yes. Neither Party shall in any way impair by unreasonable and discriminatory measures the management, conduct, operation, and sale or other disposition of covered investments. (Article II (3) (b)).

National Treatment

Yes. Article II on treatment requires the better of either national treatment or most-favored nation treatment with respect to both pre-establishment and post-establishment investments.

With respect to the establishment, acquisition, expansion, management, conduct, operation and sale or other disposition of covered investments, each Party shall accord treatment no less favorable than it accords, in like situations, to investments in its territory of its own nationals or companies (national treatment) or to investments in its territory of nationals or companies of a third country (most-favored-nation treatment), whichever is most favorable (national and most-favored-nation treatment). Each Party shall ensure that its state enterprises, in the provision of their goods or services, accord national treatment and most-favored-nation treatment to covered investments. (Article II (1)).

With respect to the treatment accorded by a State, Territory or possession of the United States, national treatment means treatment no less favorable than the treatment accorded thereby, in like situations, to investments of nationals of the United States resident in, and companies legally constituted under the laws and regulations of, other States, Territories or possessions of the United States. (Article XV (1) (b)).

Each Party agrees to accord national treatment to covered investments in the following sectors: leasing of minerals or pipeline rights-of-way on government lands. (Article 5 of the Annex).

Most-Favored Nation Treatment

Yes. Article II on treatment requires the better of either national treatment or most-favored nation treatment with respect to both pre-establishment and post-establishment investments.

With respect to the establishment, acquisition, expansion, management, conduct, operation and sale or other disposition of covered investments, each Party shall accord treatment no less favorable than it accords, in like situations, to investments in its territory of its own nationals or companies (national treatment) or to investments in its territory of nationals or companies of a third country (most-favored-nation treatment), whichever is most favorable (national and most-favored-nation treatment). Each Party shall ensure that its state enterprises, in the provision of their goods or services, accord national treatment and most-favored-nation treatment to covered investments. (Article II (1)).

EXCEPTIONS

The United States may adopt or maintain exceptions to the obligation to accord national treatment to covered investments in the sectors or with respect to the following matters: atomic energy; custom house brokers; licenses for broadcast, common carrier, or aeronautical radio stations; COMSAT; subsidies or grants, including government supported loans, guarantees and insurance; state and local measures to exempt from Article 1102 of the North American Free Trade Agreement pursuant to Article 1108 thereof; and landing of submarine cables.

Most-favored-nation treatment shall be accorded to these sectors and matters. (Article 1 of the Annex).

The United States may adopt or maintain exceptions to the obligation to accord national and most-favored-nation treatment to covered investments in the following sectors or matters: fisheries; air and maritime transport, and related activities. (Article 2 of the Annex).

The United States may adopt or maintain exceptions to the obligation to accord national and most-favored-nation treatment to covered investments, provided that the exceptions do not result in treatment under this Treaty less favorable than the treatment that the United States has undertaken to accord in the North American Free Trade Agreement with respect to another Party to that Agreement, in the following sectors and matters: banking, insurance, securities, and other financial services. (Article 3 of the Annex).

Honduras may adopt or maintain exceptions to the obligation to accord national treatment to covered investments in the following sectors or matters: properties on keys, reefs, rocks, shoals or sandbanks or on islands or on any property located within 40 km of the coastline or land borders of Honduras; small scale industry and commerce with total invested capital of no more than US$40,000 or its equivalent in national currency; ownership, operation and editorial control of broadcast radio and television; ownership, operation and editorial control of general interest periodicals and newspapers published in Honduras. Most-favored-nation treatment shall be accorded in the sectors and matters indicated above. (Article 4 of the Annex).

A Party may adopt or maintain exceptions to the obligations of Article II (1) in the sectors or with respect to the matters specified in the Annex to this Treaty. In adopting such an exception, a Party may not require the divestment, in whole or in part, of covered investments existing at the time the exception becomes effective. (Article II (2) (a)).

The obligations of Article II (1) do not apply to procedures provided in multilateral agreements concluded under the auspices of the World Intellectual Property Organization relating to the acquisition or maintenance of intellectual property rights. (Article II (2) (b)).

This Treaty shall not preclude a Party from applying measures necessary for the fulfillment of its obligations with respect to the maintenance or restoration of international peace or security, or the protection of its own essential security interests. (Article XIV (1)).

The Parties understand that, with respect to rights reserved in Article XIV (1), "obligations with respect to the maintenance or restoration of international peace or security" means obligations under the Charter of the United Nations. (Paragraph 3 of the Protocol).

It is understood that nothing in Article XIV (1) of the Treaty between the Government of the United States and the Government of Honduras Concerning the Encouragement and Reciprocal Protection of Investment authorizes or has the intention of authorizing either Party to that Treaty to take measures in the territory of the other Party to fulfill its obligations with respect to the maintenance or restoration of international peace or security, or the protection of its own essential security interests. (Paragraph 4 of the Protocol).

Each Party reserves the right to deny to a company of the other Party the benefits of this Treaty if nationals of a third country own or control the company and:

  1. the denying Party does not maintain normal economic relations with the third country; or
  2. the company has no substantial business activities in the territory of the Party under whose laws it is constituted or organized. (Article XII).

OTHER ASPECTS

Performance Requirements

Neither Party shall mandate or enforce, as a condition for the establishment, acquisition, expansion, management, conduct or operation of a covered investment, any requirement (including any commitment or undertaking in connection with the receipt of a governmental permission or authorization):

  1. to achieve a particular level or percentage of local content, or to purchase, use or otherwise give a preference to products or services of domestic origin or from any domestic source;
  2. to limit imports by the investment of products or services in relation to a particular volume or value of production, exports or foreign exchange earnings;
  3. to export a particular type, level or percentage of products or services, either generally or to a specific market region;
  4. to limit sales by the investment of products or services in the Party's territory in relation to a particular volume or value of production, exports or foreign exchange earnings;
  5. to transfer technology, a production process or other proprietary knowledge to a national or company in the Party's territory, except pursuant to an order, commitment or undertaking that is enforced by a court, administrative tribunal or competition authority to remedy an alleged or adjudicated violation of competition laws; or
  6. to carry out a particular type, level or percentage of research and development in the Party's territory.

Such requirements do not include conditions for the receipt or continued receipt of an advantage. (Article VI).

Others

Subject to its laws relating to the entry and sojourn of aliens, each Party shall permit to enter and to remain in its territory nationals of the other Party for the purpose of establishing, developing, administering or advising on the operation of an investment to which they, or a company of the other Party that employs them, have committed or are in the process of committing a substantial amount of capital or other resources. (Article VII (1) (a)).

Neither Party, shall, in granting entry under paragraph 1(a), require a labor certification test or other procedures of similar effect, or apply any numerical restriction. (Article VII (1) (b)).

Each Party shall permit covered investments to engage top managerial personnel of their choice, regardless of nationality. (Article VII (2)).

Each Party shall accord national and most-favored-nation treatment to covered investments as regards any measure relating to losses that investments suffer in its territory owing to war or other armed conflict, revolution, state of national emergency, insurrection, civil disturbance, or similar events. (Article IV (1)).

This Treaty shall not derogate from any of the following that entitle covered investments to treatment more favorable than that accorded by this Treaty:

  1. laws and regulations, administrative practices or procedures, or administrative or adjudicatory decisions of a Party;
  2. international legal obligations; or
  3. obligations assumed by a Party, including those contained in an investment authorization or an investment agreement. (Article XI).

This Treaty shall not preclude a Party from prescribing special formalities in connection with covered investments, such as a requirement that such investments be legally constituted under the laws and regulations of that Party, or a requirement that transfers of currency or other monetary instruments be reported, provided that such formalities shall not impair the substance of any of the rights set forth in this Treaty. (Article XIV (2)).

Each Party shall provide effective means of asserting claims and enforcing rights with respect to covered investments. (Article II (4)).

A Party's obligations under this Treaty shall apply to a state enterprise in the exercise of any regulatory, administrative or other governmental authority delegated to it by that Party. (Article XV (2))

Transfers [Return to the top of the page]

TYPES OF PAYMENT

Returns

Yes. Each Party shall permit all transfers relating to a covered investment to be made freely and without delay into and out of its territory. Such transfers include:

  1. contributions to capital;
  2. profits, dividends, capital gains, and proceeds from the sale of all or any part of the investment or from the partial or complete liquidation of the investment;
  3. interest, royalty payments, management fees, and technical assistance and other fees;
  4. payments made under a contract, including a loan agreement; and
  5. compensation pursuant to Articles III and IV, and payments arising out of an investment dispute. (Article V (1)).

Each Party shall permit returns in kind to be made as authorized or specified in an investment authorization, investment agreement, or other written agreement between the Party and a covered investment or a national or company of the other Party. (Article V (3)).

Repayment of Loans

Yes. (Article V (1) (d)).

Proceeds of the Total or Partial Liquidation of an Investment

Yes. (Article V (1) (b)).

Licenses and Other Fees

Yes. (Article V (1) (c)).

Other Categories of Payment

Yes. (Article V (1) (a), (d), (e)).

CONVERTIBILITY, EXCHANGE RATES, AND TIMES OF TRANSFER

Currency

Each Party shall permit transfers to be made in a freely usable currency at the market rate of exchange prevailing on the date of transfer. (Article V (2)).

Exchange Rates

Each Party shall permit transfers to be made in a freely usable currency at the market rate of exchange prevailing on the date of transfer. (Article V (2)).

Time of Transfer

Each Party shall permit all transfers relating to a covered investment to be made freely and without delay into and out of its territory. (Article V (1)).

Notwithstanding paragraphs 1 through 3 of Article V, a Party may prevent a transfer through the equitable, non-discriminatory and good faith application of its laws relating to:

  1. bankruptcy, insolvency or the protection of the rights of creditors;
  2. issuing, trading or dealing in securities;
  3. criminal or penal offenses; or
  4. ensuring compliance with orders or judgments in adjudicatory proceedings. (Article V (4)).

The Parties confirm their mutual understanding that Article V (4) (a) includes the equitable, non-discriminatory and good faith application by Honduras of its labor laws relating to the protection of preferential creditors' rights. (Paragraph 1 of the Protocol).

Expropriation [Return to the top of the page]

DEFINITION

Covered Expropriatory Measures

Expropriation or nationalization (directly or indirectly through measures tantamount to expropriation or nationalization). (Article III (1)).

CONDITIONS

Public Purpose and Non-Discrimination

Yes. (Article III (1)).

Due Process of Law and Judicial Review

Yes. (Article III (1)).
The BIT does not include an independent requirement that expropriations be subject to judicial review. However, it has been argued that the international standard of due process includes such a requirement.

Other

Expropriation has to be made in accordance with the general principles of treatment provided for in Article II (3). (Article III (1)). See supra.

Compensation Standard; Form and Time of Payment

“Prompt, adequate and effective compensation”

Compensation shall:

  • be equivalent to the fair market value of the investment, determined according to different methods of calculation as appropriate in each specific case. The calculation of compensation shall not reflect any change in value occurring because the expropriatory action had become known before the date of expropriation. There are additional norms for the determination of the fair market value when this value is denominated in a currency that is freely usable and when it is not.
  • be made without delay;
  • be fully realizable and freely transferable;
  • include commercially reasonable interests from the date of expropriation until the date of payment. (Article III (1) (2) (3) (4)).

Settlement of Disputes between Contracting Parties
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PRE-ARBITRATION NEGOTIATIONS

Parties agree to consult promptly, on the request of either, to resolve any disputes in connection with the Treaty, or to discuss any matter relating to the interpretation or application of the Treaty or to the realization of the objectives of the Treaty. (Article VIII).

Any dispute which is not resolved through consultation or other diplomatic channels, shall be submitted, upon request of either Party, to an arbitral tribunal. (Article X (1)).

ARBITRATION

Constitution of the Tribunal

  • Within two months of receipt of a request, each Party shall appoint an arbitrator. The two arbitrators shall select a third arbitrator as Chairman, who is a national of a third State.
  • The UNCITRAL Rules for appointing members of three member panels shall apply mutatis mutandis to the appointment of the arbitral panel except that the appointing authority shall be the Secretary General of the Center.
  • Expenses incurred by the Chairman, the other arbitrators, and other costs of the proceedings shall be paid for equally by the Parties. However, the arbitral panel may, at its discretion, direct that a higher proportion of the costs be paid by one of the Parties. (Article X (2) (4)).

Procedural Rules of the Tribunal

Decisions of the tribunal shall be binding on both Parties. In the absence of agreement by the Parties to the contrary, the arbitration rules of the UNCITRAL, except to the extent modified by the Parties or by the arbitrators, shall govern. Unless otherwise agreed, all submissions shall be made and all hearings shall be completed within six months of the date of selection of the third arbitrator, and the arbitral panel shall render its decisions within two months of the date of the final submissions or the date of the closing of the hearings, whichever is later. (Article X (1) (3)).

Applicable Law

Disputes shall be decided “in accordance with the applicable rules of international law.” (Article X (1)).

Settlement of Disputes between a Contracting Party and an Investor [Return to the top of the page]

DEFINITION

An investment dispute is a dispute between a Party and a national or company of the other Party arising out of or relating to:

  • an investment authorization;
  • an investment agreement; or
  • an alleged breach of any right conferred, created or recognized by the Treaty with respect to a covered investment. (Article IX(1)).

PREARBITRAL CONSULTATIONS AND DISPUTE SETTLEMENT MECHANISMS

Although the Agreement includes a general consultation provision (Article VIII) there is no specific requirement, in the provisions relating to investment disputes, to seek the settlement of the dispute amicably before submitting it to for resolution under other procedures. A national or company may submit the dispute for resolution:

  1. to the courts or administrative tribunals of the Party that is a party to the dispute; or
  2. in accordance with any applicable, previously agreed dispute settlement procedures; or
  3. to binding arbitration in accordance with Article IX(3). (Article IX(2)).

ARBITRAL SETTLEMENT OF DISPUTES

Conditions

Provided that the national or company has not submitted the dispute for resolution under Article IX(2) a) or b) and three months have elapsed from the date on which the dispute arose, the national or company may submit the dispute for settlement by binding arbitration. (Article IX(3)).

Consent

Consent set out explicitly in Article IX(4).

Forms of Arbitration

The submission of the dispute for settlement by binding arbitration may be made:

  1. to ICSID; or
  2. to the Additional Facility of the Centre, if the Centre is not available; or
  3. in accordance with UNCITRAL Arbitration Rules; or
  4. if agreed by both parties to the dispute, to any other arbitration institution or in accordance with other arbitration rules. (Article IX(3)).

Applicable Law

No reference.


 
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