Alasdair Ross Anderson and others v. Republic of Costa Rica
ICSID · Investment (ICSID and treaty) · Costa Rica · 19 May 2010
Why it matters
This case is a landmark for the 'in accordance with host state law' requirement in investment treaties. The Tribunal held that investments must comply with the host state's legal framework to qualify for treaty protection. It also clarified that deposits in a Ponzi-like scheme, structured as personal loans, do not constitute an 'investment' under the BIT, reinforcing the importance of due diligence by investors.
Summary
The case involved 137 Canadian nationals who deposited funds with the Villalobos brothers in Costa Rica, who operated a currency exchange and a separate deposit scheme promising high interest rates. The deposits were structured as personal loans to Luis Enrique Villalobos, evidenced by undated checks. The scheme collapsed in 2002, and the claimants alleged Costa Rica failed to regulate the financial system, violating the BIT's protections. Costa Rica objected to jurisdiction, arguing the deposits were not 'investments' under the BIT and were illegal under Costa Rican law. The Tribunal agreed, finding that the deposits did not meet the BIT's definition of investment because they were not made in accordance with Costa Rican law, the scheme was an illegal deposit-taking operation. The Tribunal emphasized that investors must exercise due diligence to ensure compliance with host state law. Consequently, the Tribunal lacked jurisdiction ratione materiae and dismissed all claims. The decision underscores that treaty protection only extends to lawful investments.
The detail
Parties: Alasdair Ross Anderson and others v. Republic of Costa Rica
Case number: ICSID Case No. ARB(AF)/07/3
Outcome: The Tribunal upheld Costa Rica's objection to jurisdiction ratione materiae, finding that the deposits did not constitute an 'investment' under the Canada-Costa Rica BIT, and dismissed the claims in their entirety. Each party bore its own costs and shared tribunal costs equally.
Applicable law: Agreement between the Government of the Republic of Costa Rica and the Government of Canada for the Protection and Promotion of Investment (BIT), ICSID Additional Facility Rules
Issues in play: The definition of 'investment' under the BIT versus the nature of the deposits as personal loans. The Tribunal applied the BIT's requirement that investments be made in accordance with host state law, finding the deposits were illegal under Costa Rican law.
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