Próspera ZEDE Settlement Dispute: Claims, Status, and ICSID Exit

The Próspera Honduras ICSID case is an investor-state arbitration filed in December 2022 in which Honduras Próspera Inc. and two affiliated American entities are seeking roughly $10.8 billion from the Republic of Honduras for repealing the law that authorized their semi-autonomous charter city on the island of Roatán. Registered as ICSID Case No. ARB/23/2, the claim is one of the largest ever brought against a Central American country, equivalent to about two-thirds of Honduras’s annual government budget.¹

What Próspera Was, and What It Lost

Próspera was the first Zone for Employment and Economic Development (ZEDE) authorized in Honduras, approved by the government’s oversight committee on December 29, 2017. Located on Roatán, the zone operated under its own legal system, its own courts, and its own tax structure: 1% on gross business income, 5% on wages, 2.5% on sales. Bitcoin was accepted as legal tender. Businesses in ten regulated industries could pick a regulatory code from various OECD countries or default to common law, and disputes went to the Próspera Arbitration Center rather than Honduran courts.²

The zone was built out by Honduras Próspera Inc., a Delaware-based corporation founded by Erick Brimen, with backing from NeWay Capital and Pronomos Capital, a fund supported by Silicon Valley investors including Peter Thiel, Marc Andreessen, Patri Friedman, and Balaji Srinivasan.³ Physical development included a Zaha Hadid-designed residential tower called Duna Residences, described as the tallest building on Roatán, and a Bitcoin center, across a footprint of more than 1,000 acres.²

In March 2021, Honduras Próspera signed a Legal Stability Agreement with the Honduran government, and the ZEDE statute itself included a sunset clause in Article 45 intended to preserve the framework for at least ten years after any repeal, for entities holding such agreements.⁴⁵ Those two instruments are the foundation of everything Próspera is now claiming.

Why the Case Was Filed

Opposition to ZEDEs was a central promise of Xiomara Castro’s 2021 presidential campaign. On April 21, 2022, the Honduran Congress voted unanimously to repeal the ZEDE law through Decree No. 32-2022. A proposal to preserve foreign investor rights was discussed during the debate but excluded from the final decree.⁵

Because the ZEDE framework rested on a constitutional amendment, full elimination required passage in two consecutive legislative sessions. Congress did not pass the repeal a second time, so the constitutional provisions technically remained intact after the statutory repeal.⁶ The Castro government then went to the courts. On September 20, 2024, the Honduran Supreme Court declared the entire ZEDE framework unconstitutional with retroactive effect, annulling the 2013 law, the associated constitutional amendments, and all guarantees granted to investors. All 15 magistrates signed the ruling, though critics noted the majority was built with “substitute justices” whose role had been created by 2023 legislation. The full text of the decision was not made public.⁷

Próspera did not wait for the court ruling. On September 16, 2022, the company filed a Notice of Intent to Submit Claims to Arbitration under CAFTA-DR. The formal Request for Arbitration followed on December 19, 2022, and ICSID registered the case as No. ARB/23/2.⁸

What Próspera Is Claiming

The three claimants are Honduras Próspera Inc., St. John’s Bay Development Company LLC, and Próspera Arbitration Center LLC. They are seeking approximately $10.775 billion.¹ The claim rests on two instruments: CAFTA-DR, the Central America-Dominican Republic-United States Free Trade Agreement, and the March 2021 Legal Stability Agreement.⁴

Under CAFTA-DR, Próspera alleges four violations:

Article 10.5, minimum standard of treatment. Próspera argues Honduras failed to provide fair and equitable treatment, describing the government’s conduct as “manifestly arbitrary, grossly unfair, unjust, idiosyncratic, and lacking in due process.”
Article 10.7, expropriation. The claimants contend the ZEDE repeal effectively expropriated their investments without compensation.
Article 10.4, most-favored-nation treatment. Próspera argues it was denied treatment equivalent to what Honduras extended to investors under other agreements, such as its bilateral investment treaty with Kuwait.
Article 10.8, free transfer of funds. The claimants allege interference with their ability to move funds freely.⁹

The tribunal is presided over by Prof. Juan Fernández-Armesto, with David W. Rivkin and Prof. Raúl E. Vinuesa as co-arbitrators. Honduras is represented by counsel including Foley Hoag LLP and Jana & Gil Dispute Resolution. In August 2024 Honduras filed a proposal to disqualify Rivkin, which was decided by the ICSID Chairman.⁸

According to Próspera’s Request for Arbitration, the investors made “repeated proposals for constructive dialogue and ICSID mediation” before filing, but Honduras refused. The claimants said they remained open to an amicable resolution provided “the necessary assurances” were met.¹⁰ No settlement has been reached or publicly proposed.

Where the Case Stands

Honduras raised a preliminary objection arguing that Próspera had to exhaust local remedies before bringing an ICSID claim. The argument rested on Decree No. 41-88, the 1988 legislation through which Honduras ratified the ICSID Convention, which contained an exhaustion requirement that Honduras had never previously communicated to ICSID or invoked in four earlier ICSID arbitrations.¹¹

On February 26, 2025, the tribunal issued its Decision on Preliminary Objections. It accepted that the 1988 legislation did establish an exhaustion requirement but ruled that Honduras had effectively waived it. The reasoning: CAFTA-DR’s “no-U-turn” clause requires investors to give up domestic proceedings in order to access international arbitration, which is fundamentally incompatible with a rule requiring them to exhaust those proceedings first. As a fallback, the tribunal also found that pursuing local remedies would have been futile given the Supreme Court’s 2024 ruling upholding the ZEDE repeal.¹¹ The case proceeded.

In March 2026, the tribunal issued Procedural Order No. 6 declining to bifurcate, meaning jurisdictional and merits questions will be heard together rather than in separate phases.¹² Timing for merits hearings and a final award has not been publicly disclosed.

On the ground, Próspera continues to operate and expand on Roatán despite the 2024 ruling that declared ZEDEs unconstitutional from their inception. The company maintains that its operations are protected by the original ZEDE law’s sunset clause, constitutional provisions, and international treaty obligations. Jorge Colindres, the zone’s “technical secretary,” continues to manage and promote the project.²

Honduras Has Left ICSID, but Not This Case

On February 24, 2024, Honduras formally notified the World Bank of its denunciation of the ICSID Convention. Under Article 71 of the Convention, the withdrawal took effect six months later, on August 25, 2024. Honduras became the fourth country to leave ICSID, after Bolivia (2007), Ecuador (2009), and Venezuela (2012). Ecuador rejoined in 2021.¹³¹⁴

The withdrawal does not affect Próspera’s arbitration. Article 72 of the ICSID Convention preserves rights and obligations that arose from consent to arbitration given before the denunciation notice was received, and the Próspera case had already been registered. What the withdrawal cuts off is ICSID as a forum for new claims by investors who had not yet filed, though other forums under CAFTA-DR and other trade agreements, such as UNCITRAL arbitration, remain available.¹⁴

The Wider Wave of Claims Against Honduras

Próspera is the largest but not the only investor-state case against Honduras. As of mid-2025, the country faced approximately $19.4 billion in total ISDS claims across roughly 15 to 21 active proceedings, an amount equivalent to more than half of Honduras’s 2024 GDP. Most were filed between 2023 and 2025.¹⁵¹⁶

The second ZEDE case is already in motion. Overseas Real Estate LLC, tied to the Ciudad Morazán zone near San Pedro Sula, filed in May 2025 under ICSID Additional Facility rules for at least $100 million, citing CAFTA-DR breaches related to the ZEDE repeal.¹⁷¹⁵¹⁸

Honduras’s solicitor general, Manuel Díaz-Galeas, has said the government is “ready and prepared to meet the challenge.”¹⁹ The track record of prior ICSID exits suggests withdrawal alone does not stem the tide: since 2012, Venezuela has faced at least 37 international arbitration proceedings, Bolivia at least 20, and Ecuador at least 16.¹⁴

1
Transnational Dispute Management. Honduras Próspera Inc. v. Republic of Honduras
2
Mises Institute. Visiting Free City Próspera
3
VC Info Docs. Próspera the Network State in Honduras
4
ICSID. Honduras Próspera Inc. v. Republic of Honduras, Decision on Preliminary Objections
5
Clifford Chance. Congress of Honduras Approves Repeal of Special Economic Zones
6
Center for Strategic and International Studies. The Xiomara Castro Administration Begins to Weaponize Honduran State
7
Contra Corriente. Honduran Government Praises Repeal of the ZEDE Law as Investors Denounce Lies and Abuse
8
Italaw. Honduras Próspera Inc. v. Republic of Honduras
9
Jus Mundi. Honduras Próspera Inc. v. Republic of Honduras, Notice of Intent
10
ICSID. Honduras Próspera Inc. v. Republic of Honduras, Request for Arbitration
11
Wolters Kluwer Arbitration Blog. Key Takeaways From Honduras Próspera Inc. v. Honduras
12
Investment Arbitration Reporter. ICSID Tribunal Declines to Bifurcate Próspera v. Honduras Arbitration
13
ICSID. Honduras Denounces ICSID Convention
14
White & Case. Honduras ICSID Denunciation and Implications for Foreign Investors
15
Institute for Policy Studies. Corporate Assault on Honduras: New Data Reveals Gravity of ISDS Claims
16
Mongabay. Mounting Corporate Pressure on Honduras Threatens Community Rights
17
UNCTAD. Overseas Real Estate v. Honduras
18
Jus Mundi. Palmerola International Airport v. Republic of Honduras, Discontinuance
19
Inside Climate News. Honduras Faces $20 Billion in ISDS Claims