The RDC v. Guatemala ICSID hearing can be viewed online here for the next couple days.
Luke Peterson explains the facts:
In 1997 RDC won a tender to operate Guatemala’s newly-privatized national railway. A concession agreement concluded with RDC’s local affiliate, Ferrovias Guatemala (FVG), required FVG to rehabilitate and operate various sections of the seriously dilapidated railway system.
In its pleading, FVG contends that it was required to rehabilitate the various sections of the railway system in tranches – with the first tranch to be repaired promptly, and subsequent sections repaired as, and when, it was commercially viable. Under the terms of its deal with Guatemala, FVG was required to pay the state a portion of the revenues earned as railway traffic increased.
For its part, Guatemala – through its State-owned enterprise Ferrocariles de Guatemala (FEGUA) – was required to keep the railways clear of squatters. FEGUA was also required to make payments into a trust fund to finance further rehabilitation of the railways. RDC claims that FEGUA failed to abide by these obligations.
In 2005, FVG initiated local arbitrations against FEGUA. (Indeed, the ongoing nature of these local arbitrations led Guatemala to object that RDC had not waived its local claims when pursuing CAFTA arbitration. For full details on those objections and their disposition by the tribunal, see our previous reporting.)**
RDC claims that over the course of the concession agreement it was subjected to persistent attempts by a powerful Guatemalan oligarch to coerce it into divesting its interests in the concession agreement to him. RDC consistently refused to do so and claims that this incited the oligarch to leverage his political influence with the Guatemalan government to take care of his interests for him.
In August 2006, the President of Guatemala effectively nullified the concession agreement with FVG under Guatemalan law by declaring a separate equipment contract to be “injurious to the interests of the State”.
RDC claims that this Lesivo declaration provided a strong signal to FEGUA and the market that FVG was in dire straits, thereby placing an enormous strain on its business. RDC claims that as a result FVG was forced to cease its operations in September 2007.
