LatinNews Daily - 23 September 2024

*Honduras’ supreme court (CSJ) has issued a ruling declaring unconstitutional the law establishing employment and economic development zones (Zedes). Approved in 2013 under the right-wing Partido Nacional (PN) government led by former president Porfirio Lobo (2010-2014), these were administrative entities with the power to autonomously implement their own administrative, judicial, security, and tax systems, and attracted controversy amid concerns that they violate national sovereignty and promoted tax evasion. By a majority vote, the 15-member CSJ ruled that the legislation setting out the conditions for establishing the Zedes, along with associated constitutional reforms, were in breach of the constitution’s artículos pétreos (articles cast in stone). In 2022 the leftist Partido Libertad y Refundación (Libre) government led by President Xiomara Castro repealed the legislation but the constitutional basis for the Zedes remained in force and the small number of Zedes established (of which Próspera [Bay Islands] is the most well-known) have continued to operate amid legal uncertainty. In December 2022, Próspera, whose CEO is Venezuela-born US entrepreneur Erick Brimen, brought a US$10.8bn claim under the US, Central America, and the Dominican Republic free trade agreement (Cafta-DR) at the World Bank’s International Centre for Settlement of Investment Disputes (Icsid) alleging that the government’s actions, including the repeal of the Zede law, were in breach of obligations under the FTA and other instruments. The claim is pending although the Castro government has since withdrawn from the Icsid.