In what is being reported as the first investment claim under CAFTA Chapter 10 (the claimant's press release says it is "believed to be the first notice of intent" under this provision), Pittsburgh-based Railroad Development Corporation (RDC) filed a claim alleging that actions by the Government of Guatemala have amounted to an indirect expropriation of assets and direct interference with contractual rights. RDC's version of the facts is as follows:
In August of 2006, following the effective date of CAFTA, the Government of Guatemala issued a Presidential Decree declaring the privatization of the national railway rolling stock "lesivo," or against the interests of the State. Since then, Ferrovias Guatemala has suffered increased losses due to inability to obtain credit; reluctance of freight transportation customers to do business with a private entity under attack by the Government of Guatemala; and inability to generate lease revenue from railway-related businesses such as lease of station facilities in urban areas and the railway's right-of-way between urban centers for businesses such as electricity distribution. RDC President Robert A. Pietrandrea commented, "As the first example of the restoration of a completely abandoned national railway by the private sector, the usufruct agreement was structured in such a way as to use revenue from businesses such as leases in order to fund the basic railway infrastructure. The Government of Guatemala's failure to treat Ferrovias Guatemala and its investors fairly as required under CAFTA has so undermined our ability to operate and meet our investment objectives that it constitutes an indirect expropriation of the company's assets and right to earn revenue."
I first read about the case in the IISD's Investment Treaty News email. I don't see the latest newsletter on the IISD site yet, but the RDC news release, where the information above comes from, is here: http://www.sys-con.com/read/348643.htm
This could be the first of many!
