The Corporate Assault on Honduras
Introduction
Honduras is one of the most impoverished countries in Latin America. And it’s facing an onslaught of multi-million dollar corporate suits.
In 2009, the country plunged into over a decade of narco-dictatorship following a right-wing coup. Now, following the 2022 election of current president Xiomara Castro and the 2024 conviction of repressive former president Juan Orlando Hernandez on drug charges, the country is trying to emerge from a dark period.
But harsh, punitive lawsuits from multinational corporations — made possible by international trade and investment agreements — are threatening that progress.
Under the narco-dictatorship, corporations (often with links to criminal forces or with help from corrupt officials) forced through investments that were harmful to the public interest, opposed by local residents, or both. And now, as the new government tries to reform policies made during the country’s repressive period — and local communities try to regain control of their lives — those corporations are filing costly lawsuits not only to recoup their investments, but also to claim against projected future “profits” they claim to have missed out on.
Suits like these can be devastating for an impoverished country like Honduras. They are a blatant effort to undermine legislative reforms, stymie grassroots resistance, and create a “chilling effect” against future regulation — all for the sake of private profits.
These suits are made possible by special provisions in bilateral investment treaties, free trade agreements (including the Free Trade Agreement between the United States, Central America, and the Dominican Republic known as CAFTA-DR), a 2011 domestic law, and contracts signed during the coup period.
This report by the Institute for Policy Studies, the Transnational Institute, TerraJusta, and the Honduras Solidarity Network takes an in-depth look at how multinational and domestic companies have exploited these agreements to make “mafia-style” demands on the Honduran state and people. It then looks at different options for how Honduras can extricate itself from this system of global exploitation.
PDF versions are available for the full length version in English, a full length version in Spanish, a short summary in English, and a short summary in Spanish. An online summary follows below.
Key Findings
• Since 1999, Honduras has faced a total of 19 international arbitration claims, 15 of which are still pending. 14 of these came in 2023-2024, making Honduras the second most sued country in all of Latin America in 2023 (after Mexico).
○ Four were filed in August 2024 alone — the month Honduran President Xiomara Castro officially withdrew Honduras from the World Bank’s International Centre for the Settlement of Investment Disputes (ICSID).
• We call these suits “mafia-style” since most of them are based on investments made in an irregular manner under the narco-dictatorship.
○ In general, these projects were plagued by irregularities and corruption and imposed against the will of local populations. Almost all were carried out under the repressive government of former President Juan Orlando Hernandez, now imprisoned in the U.S. on drug trafficking and weapons charges. In many instances, investors have had direct or indirect links to criminal networks.
• The costliest claim has been filed in an attempt to contain the administration’s efforts to dismantle the coup-era Employment and Economic Development Zones (ZEDE), which allow investors to set their own rules and largely escape government oversight and taxation.
• The U.S.-based consortium Próspera is claiming $10.775 billion over the ZEDEs, equivalent to almost three times the approved Public Investment Plan for Honduras for 2024.
• Seven claims have been filed against the Honduran government’s efforts to renegotiate contracts on the cost of electricity and as part of efforts to rescue the National Electrical Energy Company (ENEE). Five of these investors alone are demanding nearly $1.3 billion from Honduras.
• More than a third of the claims filed since 2023 correspond to investments that have generated resistance from the most affected populations.
• The cost to the country is not only economic but also social and political, given that the suits aim to have a “deterrent effect” on regulations and public policies. These lawsuits also create an obstacle for the Honduran government in providing an effective response to the demands of affected communities who reject the energy and mining projects that threaten them.
Case Studies
• Six of the lawsuits have seen resistance from the populations impacted by investment projects. This began with the ZEDEs, which aroused opposition from the communities directly affected (such as Crawfish Rock on the island of Roatan), as well as at the national level due to their violation of national sovereignty, negative impacts, and sole benefit to foreign investors.
• Despite threats and the criminalization of activists, community resistance persists against the Los Prados solar energy project of Norwegian investors Scatec, Norfund, and KLP, because of the impacts it may have on local water resources, food sovereignty, and the environment. These investors have brought two claims against Honduras for a total of $400 million, and the communities fear this could influence renegotiations of these contracts to allow the expansion of the project against their will.
• The privatization of electricity distribution and the collection of payments by Empresa Energía Honduras (EEH) generated many complaints about arbitrary, irregular, and exorbitant electricity bills. This led to protests, including people placing locked metal boxes over their energy meters or painting them to avoid irregular charges. Now Colombian investors are suing the country for $500 million.
• Inhabitants of San Pedro Sula, El Progreso, and surrounding areas rose up for 421 days against tolls on highways (originally built with their own taxes) that were privatized under a for-profit company.
Despite having completed only 10 percent of the works agreed in the contract, Honduran authorities allowed the company to go ahead collecting tolls in 2016. The company, Autopistas del Atlántico, and a group of financiers including JP Morgan Chase Bank and two Goldman Sachs funds are now suing the state for $180 million.
• Brothers Ernesto and Juan Carlos Argüello, of Miami, are suing Honduras for $100 million plus $2 million in “moral damages.” They built a gated community known as “Los Castaños de Choloma” that was sold to factory workers in the Sula Valley as a safe place for their families to live and an opportunity to become homeowners when they could not otherwise obtain bank loans.
But villagers complain that the housing was of poor quality and, after tropical storms Eta and Iota in 2020, filed for the cancellation of the Argüellos’ company’s environmental permits and reparations, citing serious deficiencies in their approval. The community is now struggling to take control of the management of their own lives and homes.
Recommendations
The foreign investment protection system is asymmetrical and one-sided. It is a tool exclusively available to transnational investors that allows them to bring claims against sovereign states, in spite of lawbreaking, abuse, corruption, and repression against impacted communities.
It provides an opportunity for companies and their representatives — in an obscure manner and behind closed doors — to influence the scope or implementation of government policies that are important for public welfare and environmental protection. Arbitrators in these tribunals are not obliged to consider the human rights of peoples affected by investments, but only to rule on violations of “investors’ rights.”
In Honduras, four legal avenues exist which allow foreign investors to sue the State:
- Eight bilateral investment treaties.
- Twelve free trade agreements, including the Dominican Republic-Central America-United States Free Trade Agreement (CAFTA-DR).
- The 2011 Law for the Promotion and Protection of Investments.
- Contracts entered into by the government with foreign and domestic investors.
Honduras has already left the World Bank’s ICSID — a good first step. But it’s not enough, considering that there are other tribunals where corporations can still bring suits against the country. All trade treaties, investment protection treaties, the 2011 Investment Law, and contracts that include arbitration must be revisited.
A non-partisan national coalition against the mafia-style investment protection system could be formed, in which social movements and other sectors of Honduran society can share information, organize, and defend their communities from current and future demands. This coalition could draw on global networks composed of international organizations that also seek to eliminate this unjust system.
Such a coalition could demand that current and future Honduran governments:
• Reject new free trade agreements, bilateral investment treaties, or any contracts with investment protection clauses. On the contrary, give primacy to international human rights, indigenous, environmental, and labor rights treaties.
• Terminate existing bilateral treaties that contain the ISDS mechanism.
• Begin the urgent process of reforming the 2011 National Investment Law.
• Ensure transparency about ongoing lawsuits against Honduras, which would enable the participation of affected populations and organizations.
• Make public all contracts with foreign and domestic investors, and cancel or renegotiate those signed under irregular circumstances.
• Strengthen national justice systems. That’s where investors should resolve their disputes with the State, not in international arbitration.
• Conduct a comprehensive citizen’s audit of all legal instruments containing investment protection and arbitration claims that takes into account their economic, social, and environmental impacts.
• Promote the active participation of the populations affected by projects involving foreign companies in such an audit, in accordance with their collective rights.
• Suspend the ability of investors to use ISDS for the duration of the audit, and follow its recommendations once it is concluded.
• Actively support the creation of a Binding Treaty on Transnational Corporations and Human Rights being discussed at the United Nations level, and combat the impunity of transnational and national corporations in regard to indigenous, economic, social, cultural, and environmental rights.
Finally, a demand for Washington:
• The U.S. government should end its support for any trade and investment agreements, current or future, that allow corporations to sue governments under the current rules, which privilege corporate interests against peoples’ self-determination, public welfare, and environmental protections.
Data on investor-state arbitration claims against Honduras
This data is current as of June 2025.
Investor-state arbitration claims against Honduras as of June 2025
Todas las demandas de inversionistas extranjeros contra Honduras hasta junio de 2025
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Further reading
The G20 at a Crossroads
2025 Rural Policy Action Report: A Roadmap for Rural Progress
