HSBC has started legal proceedings against El Salvador, saying the Central American country breached its investment treaty with the United Kingdom.
In a statement on 18 August, the bank said it “seeks to recover at least $49.3 million in damages that the Bank alleges were wrongly awarded against it by the Supreme Court of El Salvador”.
The case started when HSBC sought to recover $2m in unpaid loans to a local business. Two courts in El Salvador ruled on the case in HSBC’s favour, the bank’s statement said, the second time being when the borrower appealed.
However, the Supreme Court overturned the lower courts’ decision and ordered HSBC to pay the defendant $49.3m.
The bank claims that El Salvador’s Supreme Court breached the country’s obligations to UK investors under the two countries’ bilateral investment treaty, in which they “agree to give each other’s investors fair and equitable treatment, and to protect them against unreasonable or discriminatory measures”, the bank’s statement said.
“This case is effectively a judicially sanctioned denial of justice, and our decision to take it to an independent international tribunal is meant to protect both our financial interests and the rule of law in international investing,” the bank’s regional general counsel, Leopoldo Ortega said.
The case will be heard by the International Centre for Settlement of Investment Disputes, which is based in Washington DC and part of the World Bank.
Financial News attempted to contact El Salvador’s embassy for comment.
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