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Yesterday, Railroad Development Corp. (RDC) filed a notice of intent for international arbitration against the Republic of Guatemala on behalf of subsidiary Ferrovias Guatemala. RDC submitted the filing under Chapter 10 of the Central America-Dominican Republic-United States Free Trade Agreement.

In August 2006, the Guatemalan government issued a presidential decree declaring the lease of the national railway rolling stock — a key component of a 1998 privatization agreement — was against the interests of the state, RDC said.

Since then, Ferrovias Guatemala has “suffered increased losses due to inability to obtain credit; reluctance of freight transportation customers to do business with a private entity under attack by the government of Guatemala; and inability to generate lease revenue from railway-related businesses, such as lease of station facilities in urban areas,” the company claims.

“Recent actions by the government of Guatemala have amounted to an indirect expropriation of our company’s assets and direct interference with its contractual rights,” said RDC and Ferrovias Guatemala Chairman Henry Posner III in a prepared statement. “We believe that these actions were taken on behalf of private Guatemalan companies interested in selected assets contained in the [50-year concession] we won through a bid process in 1997. This has left us no choice but to seek remedies to the conflict at the international level.”

The filing triggers an arbitration process that will allow RDC to present its claims at the end of a three-month waiting period.

“By taking this action, we have made it clear that we are willing to commit substantial financial resources to this dispute resolution process,” said Posner.

A private railway management and investment firm, RDC owns railroads or is part of railway ownership joint ventures in the United States, Argentina, Guatemala, Peru, Malawi and Mozambique.