Compañia del Desarrollo de Santa Elena S.A. v. Republic of Costa Rica
ICSID · Investment (ICSID and treaty) · Costa Rica · 17 Feb 2000
Why it matters
This landmark ICSID award is one of the first to explicitly award compound interest in an expropriation case, establishing that compound interest may be necessary to ensure full compensation when payment is delayed. It also confirmed that environmental expropriations require compensation under international law, rejecting the notion that conservation purposes justify lower compensation. The case set a precedent for valuing expropriated property at its highest and best use, including potential tourist development, rather than just current use.
Summary
In 1978, Costa Rica expropriated a 15,210-hectare property called Santa Elena from CDSE, a Costa Rican company majority-owned by U.S. citizens, to expand a national park for environmental conservation. CDSE did not object to the expropriation but disputed the compensation offered (about US$1.9 million). For over 20 years, the parties litigated in Costa Rican courts without resolving the amount. In 1995, after U.S. legislation (Helms Amendment) blocked a loan to Costa Rica, Costa Rica consented to ICSID arbitration. The tribunal had to determine the compensation owed. CDSE claimed US$41.2 million based on the property's fair market value for tourist development. Costa Rica argued for a lower value based on its current use. The tribunal applied international law, holding that the expropriation was lawful but compensation must be 'prompt, adequate and effective.' It valued the property at US$4.15 million as of the 1978 taking date, but then added compound interest to account for the long delay, resulting in a total award of US$16 million. The tribunal reasoned that simple interest would not fully compensate CDSE for being deprived of the property's value for 22 years. The award is notable for its detailed analysis of compound interest in international law, citing precedents from the Iran-U.S. Claims Tribunal and scholarly writings. The tribunal also ordered CDSE to transfer title upon payment. The case is a leading authority on compensation for expropriation and the use of compound interest.
The detail
Parties: Compañia del Desarrollo de Santa Elena S.A. v. Republic of Costa Rica
Case number: ICSID Case No. ARB/96/1
Outcome: Costa Rica ordered to pay CDSE US$16,000,000 as compensation for expropriation, with post-award simple interest at 6% per annum if not paid within 21 days.
Quantum: US$16,000,000
Applicable law: ICSID Convention; Costa Rican law; international law principles on expropriation
Issues in play: The case involved the standard of compensation for lawful expropriation under international law (prompt, adequate, effective) versus Costa Rican domestic law, and whether compound interest should be awarded to ensure full compensation.
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