A group of economists sent a letter to the international court to “commend” Honduras’ decision to leave the case against the American corporation behind Próspera.
In a further development in the long-running conflict between Honduras and the irate crypto island-building company Próspera Inc., a coalition of 85 economists has supported the Honduran government’s choice to withdraw from the World Bank’s arbitration panel.
The Bitcoin-loving Próspera special economic zone on the Honduran island of Roatán—named after the American firm that built it—has been suing the government for $10.8 billion since a change in law in 2022 revoked the island’s special status.
Both sides have taken their cases to the ICSID (International Centre for Settlement of Investment Disputes).
Honduras’ departure from the international court in February constituted a “vital defense of Honduran democracy,” according to the economists’ March 19 open letter.
Claiming that Honduras owes it billions for violating a “50-year legal stability promise it made” after the repeal of regulations in April 2022 that affected the legal certainty of the crypto island’s special economic zone designation and investments, Próspera submitted its complaint before ICSID in late 2022.
The economists said in an open letter that the arbitration body does not seem to be beneficial to governments.
Economists from the left-wing group Progressive International sent a statement stating, “We find limited economic evidence that institutions like ICSID generate real foreign direct investment.”
“Over the last several decades, companies have been able to use international arbitration tribunals such as ICSID to challenge state regulations that protect consumers, workers, and the environment via lawsuits.”
Ten ICSID claims have been brought against Honduras since President Xiomara Castro took office in 2021. The biggest of them was the $11 billion claim by American firm Próspera, which represents around one-third of the country’s GDP.
In an effort to entice foreign investors and stimulate the Honduran economy, Castro revoked the regulations that established ZEDEs, which stood for Zones of Employment and Economic Development.
The UN voiced its disapproval of ZEDE’s legislative frameworks in June 2021, citing human rights issues, and demanded a new system.
A portion of Honduras designated for ZEDE usage was around 35% of the country, which included mostly indigenous and Afro-descendant communities that did not get “informed consultation” about the plan.
Roatán is an island off the northern coast of Honduras that Próspera carved out into a ZEDE. Under the rules of the period, Próspera practically had sovereignty over Roatán, with the power to establish its own laws, courts, police, and taxes.
By recognizing Bitcoin as legal cash, establishing a Bitcoin teaching center, and extending its internal structure to embrace blockchain technology and decentralized autonomous organizations (DAOs), the independent charter city attracted crypto fans.
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