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9/4/2007



Rail News: Rail Industry Trends

International investment settlement agency accepts Railroad Development Corp.'s arbitration claim against Guatemalan government



Despite the Guatemalan government’s objection, the International Center for the Settlement for Investment Disputes (ICSID) recently accepted Railroad Development Corp.’s (RDC) arbitration claim. RDC filed the claim under Chapter 10 of the Central American Free Trade Agreement.

In 1997, RDC obtained a 50-year concession to operate Ferrovías Guatemala (FVG), but the Guatemalan government last year issued a presidential decree declaring that the lease of the national railway rolling stock — a key component of the 1998 privatization agreement — was against the interests of the state, according to RDC. In March, RDC filed a notice of intent for international arbitration against the government.

After the ICSID’s ruling last week, the Guatemalan government appointed James Crawford of Australia as its arbitrator. RDC previously named Stuart Eizenstat the company’s arbitrator.

In July, RDC announced plans to suspend operation of FVG by Oct. 1 because of declining business and mounting operating challenges “driven largely by Guatemalan government interference,” the company said.

“The tragedy of this case is that a cavalier ‘business as usual’ attempt to confiscate a business on behalf of selected private sector interests will cost the Guatemalan people in three ways: first, the amount of the $65 million claim; second, the permanent loss to GNP that rail service could have provided, not only in reduced transportation costs but also in reduced pollution and unnecessary deaths on the congested and dangerous highway system; and third, the increase in the country’s cost of capital that will accompany reduced investor confidence in Guatemala’s business environment,” said RDC and FVG Chairman Henry Posner III in a prepared statement.


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