Eudoro Armando Olguín v. Republic of Paraguay
ICSID · Investment (ICSID and treaty) · Paraguay · 26 Jul 2001
Why it matters
Olguín v. Paraguay is a landmark ICSID case that clarified the limits of indirect expropriation under bilateral investment treaties. The tribunal rejected the argument that regulatory omissions by a state could amount to expropriation, emphasizing that expropriation requires intentional acts that transfer ownership or benefits. This decision reinforced the principle that BITs are not insurance policies against poor business decisions and set a high bar for establishing state liability based on omissions.
Summary
Eudoro Armando Olguín, a dual Peruvian and US national, invested in a food manufacturing company (Super Snacks) in Paraguay. He claimed that the Central Bank of Paraguay and other authorities failed to properly supervise La Mercantil, a financial institution where he had deposited funds, leading to losses when La Mercantil collapsed. Olguín alleged that these omissions constituted indirect expropriation under the Peru-Paraguay Bilateral Investment Treaty (BIT). The ICSID tribunal, after rejecting Paraguay's jurisdictional objections, examined the merits. It found that while there were some irregularities and conflicts of interest involving a Central Bank official, the state's omissions did not meet the threshold for expropriation. The tribunal held that expropriation requires active, purposeful acts that result in the deprivation of property, not mere negligence or failure to supervise. It also noted that BITs are not insurance against bad business decisions. Consequently, all claims were dismissed, and the tribunal ordered each party to bear half the costs and its own legal fees.
The detail
Parties: Eudoro Armando Olguín v. Republic of Paraguay
Case number: ICSID Case No. ARB/98/5
Outcome: All claims dismissed; each party to bear half of the costs and its own legal representation.
Applicable law: Convenio entre la República del Perú y la República del Paraguay sobre Promoción y Protección Recíproca de Inversiones (CBI), ICSID Convention
Issues in play: The case involved the definition of expropriation under the bilateral investment treaty, specifically whether omissions by state authorities could constitute indirect expropriation. The tribunal held that expropriation requires active acts aimed at depriving the owner of property, not mere omissions.
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