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COSTA RICA - PARAGUAY
Bilateral Investment Treaty


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

DEFINITION OF INVESTMENT

The term “investor” means every kind of goods or assets invested by an investor from a Contracting Party in the territory of the other Party. This general definition is illustrated by a non exhaustive list of specific rights, including:

  • traditional property rights;
  • rights in companies;
  • goodwill;
  • money, claims to money, and claims to performance under contract having a financial value;
  • intellectual property rights; and
  • rights, conferred by law or under contract, to undertake any economic and commercial activity, including any rights to search for, cultivate, extract or exploit natural resources. (Article 1 (1)).

DEFINITION OF INVESTOR

Nationals

The term “investor” means any natural person with the nationality of a Contracting Party in accordance with the laws of the Contracting Party, who has made an investment in the territory of the other Contracting Party. (Article 1(2)).

Companies

The term “investor” means any juridical person, including legal entities including companies, corporations, trade associations, affiliates and any other organization constituted according to the laws and regulations of a Contracting Party that has its seat in the territory of that Contracting Party, regardless of whether or not its activity is for profit, who has made an investment in the territory of the other Contracting Party. (Article 1 (2)).

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

Date of signature: January 29, 1998
Entry into force: The Contracting Parties shall notify each other of the fulfillment of the ir respective internal requirements for the entry into force of the Agreement. The Agreement shall enter into force when the last notification has been submitted.
Duration: 10 years
Thereafter the Agreement shall remain in force indefinitely, unless one of the Contracting Parties notifies the other Party in writing, with twelve months advance notice, of its intention to terminate the Agreement.
With respect to investments made prior to the date of termination of this Agreement, the provisions in the Articles of the Agreement shall be in force for an additional 10 years starting on the date of termination.

Admission [Return to the top of the page]

Each Contracting Party shall promote favorable conditions for the realization of investments in its territory by investors of the other Contracting Party and shall admit these investments in accordance with its legal provisions. (Article III (1)).

A Contracting Party that has admitted an investment in its territory shall grant in accordance with its laws and regulations the necessary permits with respect to such investment such as those required for the execution of licensing contracts and contracts for technical, commercial and administrative assistance. (Article III (2)).

Treatment [Return to the top of the page]

STANDARDS

Fair and Equitable Treatment

Yes. Investments made by investors of the other Contracting Party shall receive at all times fair and equitable treatment and enjoy full protection and security in accordance with international law. (Article IV (1)).

Full Protection and Security

Yes. Investments made by investors of the other Contracting Party shall receive at all times fair and equitable treatment and enjoy full protection and security in accordance with international law. (Article IV (1)).

Non-Discrimination

Yes. Each Contracting Party shall protect, in its territory, investments made in accordance with its laws and regulations by investors of the other Contracting Party, and shall not impair in any way through arbitrary or discriminatory measures the functioning, management, utilization, enjoyment, sale and, should this be the case, the liquidation of such investments. (Article IV (2)).

National Treatment

Yes. Each Contracting Party shall grant, in accordance with its national legislation, investments of investors of the other Contracting Party made in its territory treatment no less favorable than that it grants to investments of its own investors. (Article V (1)).

Between national treatment and most-favored-nation treatment, each Contracting Party shall apply treatment that is the most favorable to the investment of the investor. (Article V (3)).

Most-Favored Nation Treatment

Yes. Each Contracting Party shall grant, in accordance with its national legislation, investments of investors of the other Contracting Party made in its territory treatment no less favorable than that it grants to investments of investors of third State. (Article V (2)).

Between national treatment and most-favored-nation treatment, each Contracting Party shall apply treatment that is the most favorable to the investment of the investor. (Article V (3)).

EXCEPTIONS

This treatment (Article V) shall be not extended to the privileges that a Contracting Party grants to investors of any third State by virtue of its present or future association or participation in a free trade area, customs union, common market, economic and monetary unions, or other institutions of economic integration. (Article V (4)).

This treatment (Article V) shall not be extended to tax deductions, exemptions and to other privileges granted by either Contracting Party to investments of investors of any third State by virtue of a double taxation agreement or any other agreement on tax matters. (Article V (5)).

OTHER ASPECTS

Performance Requirements

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Others

Investors of either Contracting Party who suffer losses due to a war or any other armed conflict, revolution, state of national emergency, rebellion, insurrection, riot any other similar events of civil disturbance in the territory of the other Contracting Party shall be granted by this Contracting Party, in respect of restitution, indemnification, compensation or other settlement, a treatment no less favorable than that accorded to national investors or those of any third State, whichever is the most favorable. (Article VIII).

Each Contracting Party shall respect at all times the obligations contracted towards investments of the other Contracting Party. (Article XIII (1)).

If the provisions in the legislation of any Contracting Party or if the existing or future obligations under international law between the two Contracting Parties, or if an agreement between an investor of a Contracting Party and the other Contracting Party include provisions granting investments of investors of the first Contracting Party a more favorable treatment, these provisions shall prevail if they are more favorable. (Article XIII (2)).

Transfers [Return to the top of the page]

TYPES OF PAYMENT

Returns

Yes. Each Contracting Party shall permit to investors of the other Contracting Party, in accordance with its legislation, the free transfer of payments related to these investments, in particular but not exclusively:

  1. returns;
  2. amortizations of loans related to an investment;
  3. amounts covering administrative costs related to investments;
  4. initial capital and other additional amounts necessary for the maintenance or the development of investments;
  5. proceeds of the sale or the total or partial liquidation of the investment;
  6. compensations or indemnifications, as defined in Articles VII and VIII;
  7. payments arising out of an investment dispute. (Article VI (1)).

Repayment of Loans

Yes. (Article VI (b).

Proceeds of the Total or Partial Liquidation of an Investment

Yes. (Article VI (e).

Licenses and Other Fees

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Other Categories of Payment

Yes. (Article VI (c), (d), (f), (g)).

CONVERTIBILITY, EXCHANGE RATES, AND TIMES OF TRANSFER

Currency

Transfers shall be effected in accordance with the national legislation, without delay, in a freely convertible currency at the rate of exchange applicable on the date of transfer. In particular, it shall not take more than three months between the date of the application for the transfer and the date when the transfer is made. (Article VI (2)).

Exchange Rates

Transfers shall be effected at the rate of exchange applicable on the date of transfer. (Article VI).

Time of Transfer

Transfers shall be effected in accordance with the national legislation, without delay, in a freely convertible currency at the rate of exchange applicable on the date of transfer. In particular, it shall not take more than three months between the date of the application for the transfer and the date when the transfer is made. (Article VI (2)).

Notwithstanding the provisions of this Article, Parties can take measures that are equitative, non-discriminatory and of good faith, in accordance with its legislation so as to avoid fraudulent actions and ensure the compliance regarding fiscal obligations. (Article VI (3)).

Notwithstanding the provision of Article VI (1), each Contracting Party shall have the right when experiencing exceptional or serious balance of payments difficulties to limit temporarily transfers in an equitable and non-discriminatory manner, in accordance with internationally accepted criteria. Limits adopted or maintained by one Contracting Party, in accordance with this paragraph, as well as its elimination, shall be notified promptly to the other Contracting Party. (Article VI (4)).

Expropriation [Return to the top of the page]

DEFINITION

Covered Expropriatory Measures

Expropriating or nationalizing measures, direct or indirect, or any other measures of the same nature or having the same effect. (Article VII).

CONDITIONS

Public Purpose and Non-Discrimination

Yes. “Public use or public interest, including social interest”. (Article VII) (1).

Due Process of Law and Judicial Review

Yes. (Article VII).

Other

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Compensation Standard; Form and Time of Payment

“Prompt, adequate and effective compensation”

Compensation shall:

  • amount to the genuine value of the investment immediately before the expropriating measure took effect (“date of expropriation”) or before the impending expropriation became publicly known; include, where appropriate, interest calculated from the date of divestiture. Interest shall be calculated on the basis of the average commercial rate of the banking system of the expropriating Party ;
  • be paid out without delay;
  • be paid out in convertible currency;
  • be effectively realizable and freely transferable. (Article VII) (2)).

Settlement of Disputes between Contracting Parties
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PRE-ARBITRATION NEGOTIATIONS

Any dispute between the Contracting Parties concerning the interpretation or application of the Agreement shall, to the extent possible, be settled through diplomatic channels. (Article XI (1)).

If the dispute cannot be settled within six months from the start of negotiations, it shall, at the request of either Contracting Party, be submitted to an arbitral tribunal. (Article XI (2))).

ARBITRATION

Constitution of the Tribunal

The arbitral tribunal shall be constituted as follows:

  • Each Contracting Party shall appoint an arbitrator and these arbitrators shall select the national of a third State to serve as Chairman. The two arbitrators shall be selected within three months, and the Chairman within five months from the date when either one of the Contracting Parties has communicated its intention to submit the dispute to an arbitral tribunal. (Article XI (3)).

If within the time frames established in paragraph 3 of this Article, the Contracting Parties have not made the nominations, the President of the International Court of Justice might be entrusted by either Contracting Party with the responsibility of making the appointments. (There are also additional provisions to cover cases when the President is a national of either Contracting Party or is otherwise prevented from fulfilling this function). (Article XI (4)).

Regarding costs, each Contracting Party is required to bear the honoraria and expenses of its own member of the tribunal and of its representation in the proceedings, while the costs related to the Chairman are to be paid for equally by the Contracting Parties. (Article XI (8)).

Procedural Rules of the Tribunal

Unless otherwise agreed, the arbitral tribunal shall determine its own procedure. (Article XI (7)).

Decisions of the tribunal shall be taken by a majority of votes and shall be final and binding on both Contracting Parties. (Article XI (6)).

Applicable Law

The tribunal shall decide on the basis of the provisions of the Agreement or in other agreement sin force between the Contracting Parties, and on the general principles universally recognized of international law. (Article XI).

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

DEFINITION

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PREARBITRAL CONSULTATIONS AND DISPUTE SETTLEMENT MECHANISMS

Disputes relating to this Agreement between one Contracting Party and one investor of the other Contracting Party shall be notified in writing , including detailed information, by the investor of the host Contracting Party. To the extent possible, disputes shall be settled amicably. (Article X (1)).

If after consultations it has not been possible to settle the dispute within a period of six months from the date on which it was initiated, the investor may send the dispute to:

  1. to the competent tribunals of the Contracting Party, in which territory the investment was made; or
  2. to international arbitration under ICSID. (Article X (2)).

Election by the investor of either one of these procedures shall be definitive. (Article X (3)).

ARBITRAL SETTLEMENT OF DISPUTES

Conditions

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Consent

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Forms of Arbitration

In the case of international arbitration, the investor has the following options:

  1. ICSID, when each Party is a party to the Convention (or to the Additional Facility Rules of ICSID when one Contracting Party is not a party to ICSID);
  2. ad hoc tribunal established under the rules of UNCITRAL, when none of the Parties is a party to the ICSID Convention. (Article X (2)).

Applicable Law

The arbitral tribunal may decide the dispute in accordance with: the provisions of the Agreement and other Agreements between Contracting Parties; with terms of any specific agreement concluded in relation with this investment; the law of the Contracting Party that is a party in the dispute, including rules its with respect to conflicts between laws; and, universally accepted rules and principles of international law. (Article X (4)).


 
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