ICSID Tribunal Endorses Prof. Spiller’s Valuation of Railroad and Real Estate Assets in Guatemala to Limit Compensation

A Compass Lexecon team led by Professor Pablo T. Spiller and managed by Miguel Nakhle, with support from Andres Casserly, Ariel Medvedeff and Marcelo Schoeters, assisted the Republic of Guatemala’s outside counsel resulting in significantly reducing a US$104 million CAFTA claim raised by Railroad Development Corporation (RDC). RDC alleged unlawful expropriation of its railway and real estate businesses. Claimants’ experts (Mr. Louis Thompson, Mr. Robert MacSwain and Mr. Shannon Pratt) computed damages arguing that both the value of past investments and the fair market value of the businesses prior to the alleged expropriation should be considered. Spiller showed that most past investments had been used to cover operating losses, that the FMV valuation of the real estate business was unsubstantiated, and that adding both together implied double counting. An ICSID Tribunal found Guatemala to have breached CAFTA minimum standards and granted damages to Claimant. The Tribunal, however, following Spiller’s work, granted compensation for past improvements to the railroad assets only, with no consideration for lost profits on this business. It also sided with Spiller and dismissed as speculative most of the forecasted real estate cash flows, limiting compensation to existing contracts. Damages were set at approximately US$12 million, subject to Claimants returning their real estate and railroad operations to the State. Guatemala was represented by Arnold & Porter, and the arbitration took place in Washington, DC.