International investor lawsuits hinder Honduras human rights & environment protections

International investors in Honduras trip “unparalleled privileges” that hinder the chief’s capability to put into effect reforms that would merit human rights and the environment, a report has found. These advantages enable companies to sue the Central American country for protection adjustments that allegedly wound their investments the exercise of controversial investor-speak dispute settlement (ISDS) mechanisms, ensuing in a surge of lawsuits amounting to billions of bucks.

The report from the Institute for Policy Examine, the Transnational Institute, TerraJusta and the Honduras Team spirit Network finds that the impact of these lawful disputes creates a “chilling maintain,” in every other case identified as a “deterrent maintain,” whereby the speak is liable to be sad from enacting public passion legislation attributable to the costly risk of liability under investment agreements.

“The lawsuits without prolong undermine the chief’s capability to listen to to local communities and develop sovereign selections about retaining their land and sources,” Karen Spring, coordinator for the Honduras Team spirit Network and co-creator of the report, steered Mongabay.

The ISDS provision permits non-public sector lawyers to search out out whether or now not international locations are treating international investors comparatively. The report says that many lawsuits in Honduras stem from companies that made questionable investments after the 2009 coup d’état, with spherical a third of the investments facing fundamental resistance from affected communities.

ISDS is a controversial mechanism that companies internationally are an increasing number of the exercise of to sue governments for insurance policies that would possibly possibly impact their profits, in overall with outrageous consequences for environmental protection and human rights. In a 2023 report, U.N. human rights rapporteur David Boyd described ISDS as “a fundamental obstacle to the pressing actions wanted to address the planetary environmental and human rights crises,” noting that such cases contribute to a “regulatory kick again,” discouraging governments from enacting stricter rules.

“These [lawsuits] are a pleasant quantity of money that would fully erode what Honduras has available for health, education, infrastructure and totally different public investments,” Jen Moore, affiliate fellow at the Institute for Policy Examine and co-creator of the report, steered Mongabay.

A $10.8 billion lawsuit

The island of Roatán is at the center of the finest pending lawsuit in opposition to Honduras, sparked by executive reforms to the employment and economic zones (ZEDEs) that threaten the U.S.-essentially based Honduras Próspera’s “startup metropolis” project. Established in 2013 to device international investment, ZEDEs operate under the Honduran Constitution nonetheless trip in depth lawful, tax and administrative autonomy, a wretchedness that has fueled fundamental controversy.

In the course of President Xiomara Castro’s electoral advertising and marketing and marketing campaign sooner than she turned into elected and took office in January 2022, she vowed to derive rid of ZEDEs. Her promise led to their repeal in 2022 and a Supreme Court docket ruling in September that declared them unconstitutional, a call acceptable retroactively succor to 2013.

“Justice for the Honduran folk,” Castro wrote on X in gentle of the Supreme Court docket’s decision, “methodology now not promoting off objects of our territory nor privatizing our sovereignty.”

Próspera ZEDE is an economic constructing zone in Honduras created to device investment and enhance job growth. It features as a free alternate zone with executive oversight nonetheless is managed by the non-public company Honduras Próspera Inc. thru a U.S.-essentially based machine. The setup encourages both local and international companies, with more than $120 million in U.S. non-public investment reportedly drawn so some distance, in step with a Próspera observation sent to Mongabay.

The project has turn into a source of division. Some contributors of Crawfish Rock, a neighborhood of about a hundred folk in Roatán, were ignorant of what a ZEDE turned into sooner than constructing and own in solutions it a dispossession of land, in step with the report. Social tensions own risen between supporters of the initiatives and these targeted on retaining the environment, Spring said. Meanwhile, Honduras Próspera said in an announcement sent to Mongabay that enhance for the ZEDE outweighs opposition 4-to-1, claiming opposition comes from a “little, politically connected elite” inside of the neighborhood.

The impact of executive reforms on present ZEDEs is gentle unclear, nonetheless they’ve already faced a costly backlash. Honduras Próspera, which has invested fundamental sums into the project and has a 50-year lawful stability guarantee, is searching for to sue the chief for unfair therapy, claiming $10.8 billion, plus charges, which quantity to as a minimal $5 million per lawsuit.

In an emailed observation to Mongabay, Slash Dranias, the conventional counsel of Honduras Próspera, predicted hundreds of human rights complaints is liable to be filed to area the ruling, alongside with a huge series of alternate treaty arbitration claims.

“Honduras remains the master of its fate,” he wrote. “If Honduras proceeds with what clearly constitutes indirect expropriation of investments, and the violation of the human rights of hundreds of Honduran workers and international investors, appropriate compensation is what will seemingly be due.”

A procession of lawsuits

In the previous twenty years, companies own filed 19 ISDS cases in Honduras, with the massive majority of them in the closing two years. In 2023 alone, Honduras faced nine claims, and by August 2024, one other five cases had been added, coinciding with Castro’s administration. This made Honduras the 2nd most sued country in Latin The US over that length (after Mexico). The 15 pending lawsuits total nearly $14 billion — about 40% of Honduras’ 2023 GDP — posing a fundamental risk to one among the poorest international locations in Latin The US.

Claimants, essentially from the U.S. (four), Europe (six) and Latin The US (nine), including Panama, Guatemala, Mexico and Colombia, are mostly in the finance, trusty property, energy and transportation sectors.

The report describes these lawsuits in Honduras as “mafia-vogue” and links them to the theorem that of “odious debt,” which holds that debts got from prior problematic regimes shouldn’t burden the folk.

“It’s unfair that Hondurans could gentle ought to pay for these imperfect deals and imperfect insurance policies that were struck under such irregular and depraved and repressive circumstances after the militia [regime] succor in 2009,” Moore said.

Fresh energy sector reforms

In 2022, Honduras passed a brand novel energy legislation that aims to expand speak alter over the electricity sector that has been dominated by political-entrepreneurial groups since the Nineties and lend a hand cut hovering energy prices, among the many best likely in Latin The US.

These reforms, on the opposite hand, generated uncertainty among non-public energy mills over future energy manufacturing, prompting Norwegian investors Scatec, Norfund and KLP to file two lawsuits in opposition to Honduras linked to the Agua Fria Solar Strength Park in Valle and Los Prados Solar Strength Park in Choluteca, totaling together $400 million plus charges.

The report states that the Los Prados project turned into rejected by the local population, and neighborhood leaders own faced persecution and criminalization for years for his or her opposition to the solar park. Furthermore, locals whinge of environmental break and restricted derive admission to to their land and vegetation attributable to hostility in the region.

One local girl turned into cited in the report as announcing that the solar companies Scatec and Norfund “buried the water sources. That’s been the toughest section for us — there’s now not enough water to bathe, especially with the total warmth here.”

Denia Castillo, a attorney with the Network of Girls folks Human Rights Protection Lawyers (RADDH), who’s working with communities impacted by the solar initiatives, steered Mongabay that negotiations between the companies and the chief focal point on reducing tariffs moreover canceling the contracts altogether. Up to now, RADDH and native communities own filed 33 complaints in opposition to public officials, citing alleged irregularities in the approval course of for these contracts.

In conserving with Castillo, the communities demand cancellation of the contracts and oppose the project. “The oldsters essentially feel entirely let down by the chief since it has now not wanted to listen to to them, nonetheless [instead] it’s miles negotiating with the company,” she said.

Scatec, KLP and Norfund didn’t respond to a requirement for comment for this fable.

A delayed ban on starting up-pit mining

As section of Castro’s green agenda, she announced in early 2022 that no novel permits for starting up-pit mines would possibly possibly be issued. This customary mining formulation involves digging enormous holes and can devastate ecosystems by clearing vegetation and displacing soil. A month later, the Secretariat of Strength, Pure Belongings, Ambiance and Mines (SERNA) declared all of Honduras free of starting up-pit mining and pledged to examine, suspend and extinguish linked permits.

Yet without reference to the chief’s announcement, Canadian mining company Air of secrecy Minerals, with controversial operations in Honduras, well-known in an announcement that SERNA’s minister later clarified that the chief would focal point on unregulated mining, allowing companies with accurate operating permits to continue their activities. In accordance with Mongabay’s demand for comment, the company answered, “Air of secrecy Minerals states that its Minosa [a subsidiary of the company] operation in Honduras holds the total a truly grand licenses and permits to characteristic and maintains its activities are in compliance with newest legislation.” The extent of the mining ban remains risky.

Consultants in the report imply that the shift from an outright ban to allowing exceptions is liable to be attributable to weakening commitments to lead certain of doable lawsuits. Up to now, the mining industrial has now not made any arbitration claims at the World Financial institution’s World Center for Settlement of Investment Disputes (ICDID) in opposition to Honduras when it comes to the country’s  insurance policies on starting up-pit mining.

“A risk is often as effective as an trusty arbitration swimsuit,” Moore said. “It makes public officials own twice about whether or now not or now not they would follow thru on a [reform] decision.”

In conserving with the report, that is liable to be in the succor of the prolong in halting the starting up-pit iron oxide mine and linked installations linked to the Inversiones Los Pinares mining company (previously identified as EMCO Mining and owned by EMCO Holdings) with operations in Tocoa in the department of Colón.

The Los Pinares mining operations in Carlos Escaleras National Park were accused of inflicting water shortages and pollution in the Guapinol and San Pedro rivers, fundamental for 42,000 folk, and endangering local ecosystems, in step with the humanitarian organization Trócaire. Trócaire also links the project to human rights abuses, including the killing, criminalization, and imprisonment of neighborhood contributors defending their water sources. This involves the latest killing of local environmental defender Juan López, who turned into shot dull in September. Following his death, U.N. consultants called for an self sustaining investigation into doable involvement by companies and politicians.

López turned into but every other sufferer in a string of killings of activists in the map. There own also been as a minimal 32 folk criminalized by Inversiones Los Pinares for defending Carlos Escaleras National Park, in step with an Amnesty World report.

“It’s … fully outrageous that asymmetry between corporate energy and what folk own derive admission to to, to defend their very traditional rights,” Moore said. “It’s appropriate so starkly on disguise in this case and with this slew of arbitration cases since 2023.”

EMCO Community (to which Los Pinares belongs in the iron and metal division) didn’t respond to Mongabay’s demand for comment for this fable.

Subsequent steps

In February, Honduras started its exit from the World Financial institution’s World Center for Settlement of Investment Disputes (ICSID), which handles the suits in opposition to the country — a pass praised by researchers who argue ICSID membership isn’t a truly grand to device international investment.

Consultants argue it’s now not enough. The report calls on Honduras to revoke investor privileges in treaties, rules and contracts and entirely repeal the 2013 constitutional reforms that enabled ZEDEs. The authors also contend it’s unjust for the Honduran folk to own the price of compensating transnational companies amid well-liked local resistance.

“[The ISDS mechanism] is a machine that desires to be abolished,” Moore said. “It is catastrophic for insurance policies and selections in the general public passion, in the fervour of affected communities, and that time and as soon as more is serving very narrow earnings-essentially based pursuits of investors at the expense of oldsters.”

Banner image: The Carlos Escaleras National Park has prolonged been at the center of neighborhood efforts to provide protection to it from mining activities, which has reportedly precipitated environmental break and led to social conflicts and violence. Image by device of the Comité Municipal para la Defensa de los Bienes Comunes y Públicos de Tocoa (Municipal Committee for the Protection of the Traditional and Public Goods of Tocoa).