In 2022, Honduran President Xiomara Castro, with the unanimous support of the National Congress of Honduras, repealed the law that allowed foreign investors to establish Zonas de Empleo y Desarrollo Económico (ZEDE, or “Economic Development and Employment Zones”).

The ZEDEs are private cities that amount to a corporate paradise, granting investors the power to create their own governance systems, write their own regulations, and establish their own security forces and separate courts. 

Under the ZEDE law, land can be removed from the jurisdiction of municipal governments, providing no guarantee of representative democracy.

This controversial policy was originally approved under the leadership of corrupt officials of the post-coup government in Honduras, including former president Juan Orlando Hernández, who have since been indicted on drug trafficking and firearms charges.

Repeal of the unpopular law was supported by labor unions, small farmers, Indigenous organizations, and domestic business groups.

This should be the end of the story. But, instead of respecting the Honduran government’s right to carry out the will of the people, U.S. company Honduras Próspera, which created a ZEDE on the island of Roatán, is fighting back.

Próspera has launched a claim against Honduras using the Investor State Dispute Settlement (ISDS) powers in the Dominican Republic–Central America Free Trade Agreement (CAFTA-DR).

The company is seeking nearly $11 billion from Honduran taxpayers, which is nearly two-thirds of the country’s entire national budget.