Reinhard Unglaube v. Republic of Costa Rica
ICSID · Investment (ICSID and treaty) · Costa Rica · 16 May 2012
Why it matters
This case is a notable example of an investment treaty tribunal finding that environmental regulations, even if non-discriminatory and for a public purpose, can constitute indirect expropriation requiring compensation. It illustrates the tension between a state's sovereign right to protect the environment and its obligations under bilateral investment treaties. The award also addressed the calculation of compensation for partial expropriation and the applicable interest rate.
Summary
The Unglaubes, German nationals, invested in land in Costa Rica's Guanacaste province to develop an ecotourism project. Costa Rica created Las Baulas National Marine Park to protect leatherback turtle nesting sites, which affected the Unglaubes' properties. The claimants alleged that Costa Rica's actions, including a Constitutional Court decision ordering a buffer zone study and suspension of permits, amounted to expropriation and violated fair and equitable treatment under the Germany-Costa Rica BIT. The tribunal found that Costa Rica's measures, particularly the creation of the park and the buffer zone restrictions, had the effect of expropriating a 75-meter strip of Marion Unglaube's property (Phase II property) without compensation, breaching Article 4(2) of the BIT. However, the tribunal dismissed claims regarding other properties and Reinhard Unglaube's claims, finding no expropriation or unfair treatment. The tribunal awarded Marion Unglaube US$ 3.1 million for the expropriated strip plus interest, totaling US$ 4,065,900.33. Each party bore its own costs. The case highlights that environmental regulations, even if legitimate, may require compensation if they deprive an investor of property rights.
The detail
Parties: Reinhard Unglaube v. Republic of Costa Rica
Case number: ICSID Case No. ARB/09/20
Outcome: Costa Rica ordered to pay Marion Unglaube US$ 4,065,900.33 (including interest) for expropriation of a 75-meter strip of her property; all other claims dismissed.
Quantum: US$ 4,065,900.33
Applicable law: Germany-Costa Rica BIT (1994); ICSID Convention; Costa Rican law; international law
Issues in play: The case involved the balance between environmental protection (creation of a national park for leatherback turtles) and investor rights under the BIT, specifically expropriation and fair and equitable treatment.
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