Investment Treaty News | December 6, 2009
(Note: a correction has been made to this article. An explanation is posted below)
German investor launches ICSID case against Costa Rica over alleged expropriation of land near endangered turtle habitat
By Fernando Cabrera Diaz
German investor Reinhard Unglaube, a resident of Costa Rica, has commenced arbitration against his host country over the latter’s refusal to grant the appropriate permits to extend his eco-tourist hotel complex in Playa Grande, Costa Rica. Costa Rican authorities have refused to issue the permits citing the project’s proximity to the Las Baulas de Guanacaste National Marine Park, home to the nesting site of the leatherback turtle, currently in critical danger of extinction.
ITN spoke to Mr. Unglaube from Costa Rica, who explained that beginning in the late 80s he and his wife sought to enlarge his hotel complex in Playa Grande by about 70%.
Playa Grande is one of three adjoining beaches which make up the main Pacific nesting site of the leatherback. By 1988 the Unglaubes had secured all of the required permits from the government of Costa Rica, including those from the Ministry of Energy and the Environment (MINAE), he said.
In 1992 Mr. Unglaube says he finalized a contract with the government, which declared the project ‘nature friendly.’ In order to avoid disturbing the leatherback turtles, “we made sure there were no lights on the beach, in fact we donated 10 hectares of our own property to the government to create a green zone between the property and the ocean, so from the beach you only see forest and not the property,” says Mr. Unglaube.
Lights near beaches where female turtles nest, have been shown to confuse baby hatchlings and lead them away from the ocean after they emerge from their underground nests.
In June 1995 partly due to mounting pressure from environmental groups to protect the leatherback turtle, the Costa Rican Legislative Assembly, passed a law creating the Las Baulas marine park on a 75-meter strip beyond the maritime zone at Playa Grande, Ventanas, and Carbón beaches.
That same year the Government of Costa Rica created a new department under MINAE, the Technical Secretariat of the Environment of Costa Rica (SETENA). SETENA immediately imposed a new permit requirement on the Unglaubes in order for them to proceed with their project, says Mr. Unglaube.
That permit has been refused due to an interpretation by the Attorney General that the 1995 law creating the park intended to create a 75 meter strip measured inland from the maritime zone, according to Costa Rican newspaper the Beach Times. Landowners in the area argue that the 75 meters is to be measured offshore from the maritime zone, says the paper.
Furthermore, in 2003 and again in 2004 MINAE tried to expropriate sections of the Unglaubes’ property along other beach property in the area in order to extend the Las Baulas marine park, but upon appeal, the country’s Attorney General turned down both attempts, says Mr. Unglaube.
Mr. Unglaube is alleging breaches of the expropriation, fair and equitable treatment, full protection and security, and most-favored nation clauses of the Costa Rica-Germany Bilateral Investment Treaty. Damages sought are yet to be determined.
As reported previously by ITN, a year ago Mr. Unglaube’s wife filed a similar arbitration against Costa Rica, which is also pending at ICSID. The two own 50% shares in the company Uni Rana which owns the hotel complex at Playa Grande. Mrs. Unglaube’s arbitration alleges similar breaches of the Costa Rica-Germany Bilateral Investment Treaty, in relation to property she owns in the area including her 50% share in the hotel complex.
Last year, counsel for Mrs. Unglaube told ITN that she was not the only investor to have been affected by restrictions on property development in the area around the marine park. More than 50 other properties are alleged to have been affected; however it is unknown how many of these are foreign owned.
Mr. Unglaube’s request for arbitration was filed October 28th, and registered by ICSID on November 3, 2009.
“International Arbitration To Begin On Grande,” by Zoraida Diaz, The Beach Times, July 04, 2008
“Blocked eco-tourism project in Costa Rica parkland leads to BIT arbitration,” By Damon Vis-Dunbar and Luke Eric Peterson, Investment Treaty News, 21 February 2008, available here: http://www.iisd.org/pdf/2008/itn_feb21_2008.pdf
Correction: December 6, 2009: The original version of this article posted on December 6, 2009 stated that “SETENA immediately [i.e. in 1995] imposed a new permit requirement on the Unglaubes in order for them to proceed with their project”, however that new permit requirement was imposed in 2003.