Compañía del Desarrollo de Santa Elena, S.A. v The Republic of Costa Rica

Year of the award: 2000
Forum: ICSID
Applicable law: Costa Rican law, international law

Arbitrators:
Mr L. Yves Fortier, President
Prof Sir Elihu Lauterpacht
Prof Prosper Weil

Executive summary

CDSE, a company established in Costa Rica by US nationals, purchased in 1970 for tourism development the property known as "Santa Elena", consisting over 30 kilometres of Pacific coastline. In 1978, Costa Rica issued a decree ordering expropriation of this property from CDSE, in order to use Santa Elena for environmental purposes, and proposed to pay CDSE US$ 1,900,000 in compensation.

CDSE disagreed with the offered amount (under its own assessment done also in 1978, the value of the property was US$ 6,400,000). The subsequent court proceedings before Costa Rican national courts that dragged for 20 years did not lead to any definite result. In 1995, under the political pressure from the US, Costa Rica agreed to submit the dispute to ICSID arbitration. In the arbitral proceedings CDSE claimed US$ 40,000,000 including the current value of the property and interest.

The task before the arbitral tribunal was to determine the amount of compensation to be paid to CDSE by Costa Rica (the fact of expropriation as such was not in dispute). The Tribunal first determined the date on which the valuation had to be made. Despite the fact that after the 1978 Decree, CDSE remained in possession of the property, the Tribunal decided that the property was expropriated in 1978, as CDSE was deprived of the opportunity to make economic use of the property. It did not agree with the Claimant that it should be paid the current value of Santa Elena.

The Tribunal then determined the value of the property in 1978 - by performing an "approximation" of two alternative assessments carried out in 1978 by parties. In doing so, the Tribunal took into account the circumstances of the case that it considered relevant, in particular - property's potential for tourism development. The Tribunal arrived at the figure of US$ 4,150,000 (without any explanation as to how this figure was calculated but the exact midpoint between the two competing evaluations).

The Tribunal also discussed the issue of simple/compound interest in international jurisprudence and decided that in cases of property takings, award of compound interest was fair, if warranted by the circumstances of a particular case. The Tribunal thus awarded US$ 11,850,000 interest.