Deloitte certifies the validity of Employment and Economic Development Zones (ZEDE) in Honduras

A Deloitte Legal analysis concludes that the non-retroactivity of the law, DR-CAFTA and bilateral investment treaties shield residents and investors in the Roatan special economic zone from any attempt to annul their acquired rights.

Próspera is a project of Honduras Próspera Inc, located in the special economic zone (ZEDE, of the same name) of Roatán. Since its founding, it has operated under a legal framework that the Honduran State established and guaranteed to attract long-term investment. The ruling of unconstitutionality issued in September 2024 by the Constitutional Chamber of the Supreme Court of Justice has raised questions in the media and international audiences about the legal future of the ZEDE and the security of those who invested in it. An analysis published in December 2024 by Deloitte Legal Guatemala offers a clear technical answer based on international law: acquired rights are inviolable.

“Rulings of unconstitutionality cannot affect acquired rights and consolidated legal situations.” - Deloitte Legal, December 2024

1. The facts: what happened and what did not happen

The legislative history of the ZEDE has three key moments that should be clearly distinguished.

At 2012, The National Congress approved through Decree 236-2012 the constitutional reforms to articles 294, 303, 304 and 329 that gave legal life to the ZEDE regime. These reforms were duly ratified by the corresponding legislature. In 2013, Decree 120-2013 established the ZEDE Organic Law, completing the regulatory scaffolding.

In April 2022, As a result, the Congress approved Decree 32-2022, which provided for the repeal of the constitutional reforms, and Decree 33-2022, which sought to repeal the Organic Law. However, to become effective, Decree 32-2022 required ratification by the subsequent ordinary legislature. That legislature closed on October 31, 2023 without the necessary ratification. The attempted repeal, therefore, never had full legal effect.

On September 20, 2009 2024, The Constitutional Chamber issued a ruling in case SCO-0738-2021 declaring the unconstitutionality of Decree 236-2012 and Decree 120-2013, with effects denominated as follows ex tunc -that is to say, retroactive from the origin-, arguing the violation of articles of the Constitution.

2. Why the effects ex tunc cannot nullify acquired rights

The technical focus of Deloitte Legal's analysis is as follows: the principle of non-retroactivity of the law is a constitutional guarantee in Honduras, enshrined in Article 96 of the Constitution of the Republic.. To attempt to apply retroactive annulment effects to legal situations already consolidated -investments made, contracts signed, residences established- would contradict the same constitutional principle that the judgment invokes as a basis.

Moreover, Article 94 of the Law on Constitutional Justice is explicit: the declaration of unconstitutionality of a norm cannot affect legal situations that have been definitively resolved and executed., except in criminal matters when it favors the defendant. Therefore, when the judgment is rendered with effect ex tunc, the Supreme Court would have incurred in an error of law. violation of Article 94, The first paragraph of the same law.

“By not recognizing the rights acquired during the validity of the norms declared unconstitutional, the fair and equitable treatment recognized by international law is being violated.” - Deloitte Legal

3. The International Shield: DR-CAFTA and the BIT with Kuwait

Beyond Honduran domestic law, investors in the ZEDEs have an additional layer of protection International investment treaties subscribed and in force for Honduras.

The DR-CAFTA (Dominican Republic - Central America - United States Free Trade Agreement) remains fully in force and establishes standards of fair and equitable treatment, protection against expropriation without compensation and access to international arbitration. Similarly, the Bilateral Investment Treaty (BIT) between Honduras and Kuwait protects investors who made their economic decisions under the legal framework in force at the time of the investment.

The international jurisprudence in the field of investment arbitration has repeatedly recognized the principle of legitimate expectations: when a State establishes a specific regulatory framework to attract investment and investors act in good faith based on that framework, derogation or annulment of this framework without adequate compensation constitutes a violation of the treaties.. The absence of compensatory measures strengthens, according to Deloitte's own analysis, the case for investors.

Three pillars of protection:

• Constitution of Honduras - Art. 96, non-retroactivity of the law
• Constitutional Justice Act - Art. 94, untouchable vested rights
• DR-CAFTA and BIT Kuwait - Fair, equitable treatment and international arbitration

4. International arbitration: the active path

Honduras Próspera Inc. has not remained passive in the face of this situation. The management company went to the International Centre for Settlement of Investment Disputes (ICSID), The World Bank, in order to defend its rights and those of the investment community, and to ensure that Honduras' legal security would not be called into question, with the impact in terms of reputation in the eyes of future investors. This international arbitration mechanism, to which Honduras was linked through the DR-CAFTA until its exit ordered by the government of Xiomara Castro, is precisely the one that the treaties contemplate to resolve disputes of this type. On March 6, the new president of Honduras, Nasry Asfura, signed the country's return to this international organization.

The existence of an active arbitration process underscores the seriousness with which Honduras Próspera Inc. defends the legal security framework that makes private investment possible in the ZEDE of Roatán, The company sends an unmistakable signal to the international investment community: vested rights are defended by all means available under the law.

Honduras Próspera Inc. was forced to go to ICSID to defend not only its rights, but the opportunity to continue investing on a large scale in Honduras and to attract more capital to industries that require solid long-term infrastructure.

5. What this means for residents and investors of Próspera

For residents with active e-Residency, for investors with ongoing projects - from real estate to manufacturing to financial services - and for companies incorporated under the ZEDE regime, the message of the legal analysis is clear:

Your rights do not derive solely from ordinary Honduran law. which was the subject of the judgment. They also derive from international treaties superior to domestic law, of the constitutional principle of non-retroactivity and the protection of consolidated legal situations that the Honduran legislation on constitutional justice itself guarantees.

Próspera ZEDE and Honduras Próspera Inc, as developer of the project and manager of the governance platform, continues to operate., Its institutions are functioning normally and the ongoing international arbitration process reinforces Prospera Global's commitment to the community that has chosen Roatán as the site for its life and business projects.