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The International Centre for the Settlement of Investment Disputes (ICSID) recently began binding arbitration proceedings concerning Railroad Development Corp.'s (RDC) claims against the Guatemalan government. A three-member tribunal — the first ever under the Dominican Republic-Central America-United States Free Trade Agreement (CAFTA) — will rule on the claims.

RDC sought international arbitration in March 2007 in response to the government's August 2006 declaration of "lesivo" against its rail subsidiary Ferrovías Guatemala (FVG). The government declared the lease of the national railway rolling stock — a key component of a 1998 privatization agreement — was against the interests of the state.

The declaration constituted an "indirect expropriation of RDC's investment, a failure to provide the minimum standard of treatment and lack of national treatment," claims RDC, which believes the action was taken on behalf of Guatemalan private business interests. As a result of the decree, RDC was forced to suspend service in September 2007, "leaving the people of Guatemala once again without a functioning railway," RDC officials said in a prepared statement.

"With the constitution of the arbitration tribunal, the government of Guatemala — which has engaged in delay and denial in hopes that our claim would disappear — is required under its CAFTA obligations to begin the process of addressing RDC's claims," said RDC and FVG Chairman Henry Posner III. "While we are confident that justice will be the ultimate result, I personally regret that Guatemala has lost its railway; though I have no regrets about doing the very best we could under the circumstances."

RDC will be represented in the ICSID proceedings by U.S. international law firm Greenberg Traurig and Guatemalan law firm Díaz-Durán & Asociados-Central Law. A privately held railway management and investment company, RDC owns interests in railroads in the United States, Argentina, Guatemala, Peru, Malawi and Mozambique.