Elsamex, S.A. v. Republic of Honduras
ICSID · Investment (ICSID and treaty) · Honduras · 16 Nov 2012
Why it matters
This case is significant for its detailed analysis of jurisdictional objections in ICSID arbitration, particularly regarding the requirement of prior conciliation. The tribunal's decision that a party cannot rely on a procedural precondition that it itself prevented from being fulfilled reinforces the principle of good faith in international arbitration. It also clarifies the scope of arbitration clauses in state contracts and the interplay between domestic law and international obligations under the ICSID Convention.
Summary
Elsamex, a Spanish construction company, entered into contracts with Honduras to rehabilitate a highway. Disputes arose over design flaws, insufficient funding, and the quality of the road. The contract included a dispute resolution clause requiring conciliation before arbitration. When the conciliation failed because the designated conciliator institution declined to act, Elsamex initiated ICSID arbitration. Honduras objected to jurisdiction, arguing that conciliation was a mandatory precondition and that the dispute fell outside the arbitration clause. The Sole Arbitrator rejected these objections, finding that Honduras' own conduct had made conciliation impossible, and that the arbitration clause was broad enough to cover the claims. The tribunal also held that the ICSID Convention and international law were part of Honduran law and applicable. The decision on jurisdiction was issued as a preliminary award, with the merits to be decided later.
The detail
Parties: Elsamex, S.A. v. Republic of Honduras
Case number: ICSID Case No. ARB/09/4
Outcome: The Sole Arbitrator upheld jurisdiction over Elsamex's claims and rejected Honduras' jurisdictional objections. The proceeding was ordered to continue on the merits.
Applicable law: Honduran law, ICSID Convention, and the arbitration clause in the contract between the parties, which referenced a credit agreement between Honduras and Spain.
Issues in play: The dispute involved the interpretation of the arbitration clause in the construction contract, which required conciliation before arbitration. Honduras argued that the failure to appoint a conciliator barred arbitration, while Elsamex contended that Honduras' own conduct prevented conciliation. The tribunal applied Honduran civil code principles and international arbitration practice to find that the condition for conciliation was impossible to fulfill due to Honduras' actions, thus allowing arbitration to proceed.
Read the full decision at italaw ↗
Locus Standi links to the source decision and publishes its own plain-language summary. It does not reproduce the text of the award.