Recently, during a period of just 18 months, investors and corporations brought 14 arbitration claims against Honduras to the International Centre for the Settlement of Investment Disputes (ICSID), part of the World Bank. The claims included a 15th ongoing suit begun in 2018. Honduras now faces at least US$14 billion in claims, with United States law firm White & Case defending nine of them.
These figures come from a report released today about Honduras, but the country isn't alone. The trend of corporations, usually multinational ones headquartered in the US or Europe, making claims against whole countries to protect their profits at the expense of locals and the environment, applies across Latin America. In Honduras' case, US$11.5 billion or 80% of the claims are being made by European investors, and the total of the claims against the country amounts to roughly 40% of the country's 2023 gross domestic product.
The report, The Corporate Assault on Honduras, was written by the Institute for Policy Studies, the Honduras Solidarity Network, the Transnational Institute and Terra Justa, with participation from various movements and organisations, including the Civic Council of Popular and Indigenous Organizations of Honduras (COPINH) and the Common Front against ZEDEs (Economic Development and Employment Zones).
The 14 claims against Honduras were filed last year and this year, through to August. They were filed through the Investor State Dispute Settlement (ISDS) system that enables companies to effectively sue whole countries when those countries' laws or policies affect their profits, or could affect them in the future.
The process is facilitated by clauses in free trade agreements, bilateral treaties and other investment laws and contracts, and companies are able to use these to ignore national laws and sue governments through international investment arbitration tribunals.
In Honduras specifically, the report notes that there are eight bilateral investment treaties, 12 free trade agreements, a 2011 Law for the Promotion and Protection of Investments and contracts between the government and foreign and domestic investors that facilitate such corporate privilege.
There has been a spate of claims recently in Honduras as the newer, left-leaning government of Xiomara Castro confronts some of the neoliberal policies made by the US-backed coup government from 2009. Businesses that benefited from the Porfirio Lobo Sosa presidency (2010‒14) and the Juan Hernández presidency (2014‒22) "opening Honduras up for business" are now fighting back against losing some of that privilege.
"Most of the lawsuits now holding the country hostage stem from investments made during the narco-state period after 2009. Seven lawsuits have been filed against the current Honduran government’s attempts to renegotiate electricity cost contracts and its efforts to rescue the ENEE [the national electricity company]," the report notes. The Lobo and Hernández governments awarded massive contracts to energy companies and monthly electricity bills rose enormously
Corporate tantrums: Suing the Global South for blocking business abuses
Of course, the situation extends beyond Honduras. In Mexico, in July, Canadian mining company Almaden Minerals announced that it would demand damages of at least US$200 million for “financial losses” after its mining concessions were cancelled. Indigenous and local people near the mines had protested for years against the environmental damage and illegalities committed by the company.
Almaden is seeking arbitration via a free trade agreement, and other free tree agreements like the USMCA (the new NAFTA) have also been regularly used to force Mexico to allow transnationals to pollute, land grab, or mine at their leisure.
Odyssey Marine Exploration, a US deep-sea mining company, took Mexico to arbitration through an ISDS for violating NAFTA and rejecting its permits, and won $37.1 million last month.
As the US's "backyard" — as then-Secretary of State John Kerry called Latin America— it’s no surprise that 85% of land defenders murdered last year were from this region. Corporate entitlement, backed by free trade and bilateral agreements made under duress from the powerful US, is at odds with the needs of farmers, Indigenous communities, the environment and other residents, and resisting activists are often repressed, criminalised and killed.
In total, more than US$100 billion of public money globally has been awarded to private investors in ISDS courts. Of that, US$80.2 billion has gone to fossil fuel companies, since 1998.
“The injustice is glaringly obvious: countries in the global south are the main victims of ISDS, while corporations from Europe and North America benefit. It transfers public money into the hands of a few corporations and their shareholders," Fabian Flues, of the PowerShift NGO told the Guardian.
Long term consequences of corporate privilege
The Corporate Assault on Honduras report notes that the most expensive claim against Honduras was filed in an attempt to contain the current government's efforts to peel back laws that enabled corporate towns, or ZEDEs, after the coup. The ZEDEs are self-contained areas within Honduras that are run by corporations, for corporations, and can mostly go by their own laws and regulations, in violation of national sovereignty. US investors represented by Honduras Prospera Inc and others, are demanding US$10.8 billion.
Another case involves two investors who have brought US$190 million in claims regarding public-private partnerships that were plagued with irregularities and protests. A highway maintenance deal involving JP Morgan Chase Bank and two Goldman Sachs funds saw affected residents camped out on the highway for 421 days to protest having to pay tolls for a road that was built with public money — that is, with their taxes.
The impact of lawsuits like these goes beyond their initial monetary value. Ultimately, they limit the scope of local authorities' decisions and policies. They generate fear and put movements, communities and authorities off from challenging corporate projects. They give more power to corporations than to whole countries, overruling sovereignty and self determination, and are thereby very undemocratic.
In Honduras, the report notes, such lawsuits function to slow down efforts to dismantle the ZEDE framework, to rescue the public electricity company, and to retake control of airport infrastructure.
"It is unfair that the Honduran people must now pay more money to “compensate” transnational corporations for their relentless need for profit. These investors are the ones who really owe a debt to the people, not the other way around," the report stated, concluding that should the lawsuits succeed, "the economic burden will only deepen the displacement crisis driving Hondurans to migrate."
It's time to "end extreme corporate privileges in US trade agreements," said Jen Moore, associate fellow of the Trade and Mining Program at the Institute for Policy Studies and a lead author of the report.
But as the US holds presidential elections in a month, both candidates are poised to continue protecting corporate interests and US hegemony. Democratic Party candidate Kamala Harris has claimed she would have voted against the USMCA free trade agreement that Republican Party candidate Donald Trump negotiated when he was president. However, she has also avidly promoted foreign direct investment in Central America as a way to somehow prevent the causes of migration.