The Próspera Honduras arbitration is a roughly $10.775 billion investor-state claim filed at the World Bank’s International Centre for Settlement of Investment Disputes (ICSID) by the operators of a private city on Roatán after Honduras repealed the law that let the city exist. Honduras Próspera Inc. and two affiliated companies filed the case on December 19, 2022, invoking the investment protections of the Dominican Republic–Central America–United States Free Trade Agreement (CAFTA-DR). The demand equals roughly 29 percent of Honduras’s GDP. The tribunal has already rejected Honduras’s early attempt to dismiss the case, declined to split jurisdictional and merits questions into separate phases, and opened the door to amicus filings. The dispute is pending.
What Próspera Was
Próspera was the most ambitious of three Zonas de Empleo y Desarrollo Económico, or ZEDEs, that Honduras authorized after a 2013 constitutional amendment and the enabling Decree No. 120-2013. Under that framework, private zones could set their own tax codes, civil and commercial laws, police forces, and dispute-resolution mechanisms; criminal law stayed with the Honduran state.1CSIS. Engines of Prosperity: The Promise of Zones for Employment and Economic Development in Honduras
Erick Brimen, founder of the investment firm NeWay Capital, discovered the ZEDE law in 2016 and secured a charter approved in late 2017. Ground was broken in 2020.2Pulse2. Prospera Profile: Erick Brimen Interview The project spanned roughly 1,000 acres, about two-thirds on Roatán and one-third near La Ceiba on the mainland. Residents signed an “Agreement of Coexistence” and paid a 7.5 percent platform fee on income or business revenue in exchange for privately administered services. The zone accepted cryptocurrency for fees and taxes and did not tax crypto capital gains.1CSIS. Engines of Prosperity: The Promise of Zones for Employment and Economic Development in Honduras Próspera says it raised approximately $200 million and by mid-2025 had reached 2,000 e-residents with physical housing at capacity, well short of a stated goal of 10,000 residents.
The Repeal That Triggered the Case
President Xiomara Castro took office in January 2022. Her government treated the ZEDEs as violations of Honduran sovereignty. On April 21, 2022, Congress voted unanimously to repeal the ZEDE law through Decree No. 32-2022.3Latin America Working Group. The ZEDEs Law in Honduras: Sanctuary for Exploitation, Corruption and Organized Crime
Two complications matter for the arbitration. First, the repeal was legally incomplete: the underlying 2013 constitutional amendments require a second congressional vote to be fully undone, and that vote has not occurred.4Clifford Chance. Congress of Honduras Approves Repeal of Special Economic Zones Second, Article 45 of the original ZEDE law contained a sunset clause purporting to protect investors’ legal stability agreements for at least ten years after any repeal. Its enforceability is contested.3Latin America Working Group. The ZEDEs Law in Honduras: Sanctuary for Exploitation, Corruption and Organized Crime
On September 20, 2024, the Honduran Supreme Court ruled unanimously (all 15 magistrates) that the ZEDE framework was unconstitutional from its inception, holding that the 2013 amendments were illegitimate because they had not been submitted to a national referendum. The ruling was retroactive, effectively voiding actions taken under the framework.5Contracorriente. Honduran Government Praises Repeal of the ZEDE Law as Investors Denounce Lies and Abuse
The Claim
The claimants are Honduras Próspera Inc., St. John’s Bay Development Company LLC (formerly Próspera Land SPV 1 LLC), and Próspera Arbitration Center LLC. The case is docketed as ICSID Case No. ARB/23/2.6Investment Arbitration Reporter (italaw). Honduras Próspera Inc. v. Honduras
Their legal theory rests on Chapter 10 of CAFTA-DR, which entitles covered investors to fair and equitable treatment, full protection and security, and protection against expropriation without prompt and adequate compensation at fair market value.7Office of the United States Trade Representative. CAFTA-DR Chapter 10: Investment The claimants argue Honduras’s repeal amounted to expropriation and a breach of the minimum standard of treatment. The $10.775 billion demand is built primarily on lost profits over the 50-year stability guarantee period in their contracts.8Due Process of Law Foundation. International Arbitration, Rule of Law and Human Rights: A Litmus Test in the Case of the ZEDEs in Honduras Honduras’s 2024 GDP was approximately $37 billion.9World Bank. Honduras Country Data
White & Case LLP represents the claimants, with Ank Santens and Francisco X. Jijón leading. Honduras is represented by its Procuraduría General de la República alongside Foley Hoag LLP and Jana & Gil Dispute Resolution.6Investment Arbitration Reporter (italaw). Honduras Próspera Inc. v. Honduras The tribunal is chaired by Juan Fernández-Armesto, with David W. Rivkin as the claimants’ appointee. The U.S. Department of State’s Office of the Legal Adviser has participated as a non-disputing party, reflecting the United States’ interest as a CAFTA-DR signatory.10Jus Mundi. Honduras Próspera Inc. v. Honduras, Decision on Preliminary Objections
Honduras’s Exit From ICSID Does Not End the Case
Honduras filed formal notice of withdrawal from the ICSID Convention on February 24, 2024. Under Article 71, the denunciation took effect six months later, on August 25, 2024.11ICSID. ICSID Convention Denunciation Notification Withdrawal does not reach cases already filed. The U.S. State Department’s 2024 Investment Climate Statement confirmed that the exit “will not affect rights and obligations under or arising out of Honduras’s consent to jurisdiction before Honduras’ notice of denunciation.”12U.S. Department of State. 2024 Investment Climate Statement: Honduras Because Próspera filed in December 2022, the arbitration continues before ICSID.
Where the Case Stands
Honduras first tried to end the case on threshold grounds, arguing that a 1988 implementing law (Decreto 41-88) required investors to exhaust Honduran administrative and judicial channels before turning to ICSID. On February 26, 2025, the tribunal accepted that the 1988 law imposed an exhaustion requirement but held that Honduras had effectively waived it by signing CAFTA-DR: the treaty’s “no-U-turn” clause at Article 10.18.2 forces investors to abandon domestic proceedings as a condition of filing, which is incompatible with a prior-exhaustion demand. As an alternative ground, the tribunal held that pursuing local remedies would have been futile given the Supreme Court’s September 2024 ruling. The case survived.13Wolters Kluwer Arbitration Blog. Key Takeaways From Honduras Próspera Inc. v. Honduras
The claimants filed their Memorial on the Merits on October 15, 2025. Honduras filed a bifurcation request in January 2026 seeking to have jurisdictional questions decided before merits; the claimants filed observations in February. On March 19, 2026, the tribunal issued Procedural Order No. 6 on that request.14Jus Mundi. Honduras Próspera Inc. v. Honduras, Procedural Order No. 7 Reporting indicates the tribunal declined to bifurcate, meaning jurisdiction and merits will be heard together.15Investment Arbitration Reporter. ICSID Tribunal Declines to Bifurcate Prospera v. Honduras Arbitration
On May 6, 2026, the tribunal issued Procedural Order No. 7, inviting non-parties to submit applications to participate as amicus curiae by July 22, 2026.14Jus Mundi. Honduras Próspera Inc. v. Honduras, Procedural Order No. 7 The case remains pending.
What the Tribunal Must Decide
Three questions will drive the outcome. Was the repeal an expropriation or a denial of fair and equitable treatment under CAFTA-DR, or was it a legitimate exercise of sovereignty? Honduras is expected to argue that the ZEDEs themselves were the product of an illegitimate process, pointing to the 2012 replacement of constitutional judges who had struck down an earlier version of the framework.16U.S. House Committee on the Judiciary. Hearing Submission on ZEDEs in Honduras The claimants argue they relied on 50-year stability guarantees and invested accordingly.
Damages are the second question. The $10.775 billion figure projects lost profits across decades from a project that, on the claimants’ own figures, drew about $200 million in investment and a few thousand e-residents.8Due Process of Law Foundation. International Arbitration, Rule of Law and Human Rights: A Litmus Test in the Case of the ZEDEs in Honduras Whether the tribunal accepts that valuation, cuts it sharply, or rejects liability entirely will decide the case’s real financial weight on a country where nearly half the population lives below the poverty line.
The third is the effect of the Honduran Supreme Court’s September 2024 ruling voiding the ZEDE framework from its inception. Honduras will argue that a retroactive constitutional invalidation cannot leave the state liable under a treaty; the claimants will argue that a state cannot escape treaty obligations by having its own courts unwind the legal basis on which foreign investors relied.