Investors, States, and Local Communities: What We Learned From the Kappes Case About Relations Among Such Trio (Especially if ILO Convention 169 Applies)

On 23 December 2025, the ICSID Tribunal rendered its award in Kappes v. Guatemala, a dispute brought under the CAFTA-DR and the ICSID Convention by US national Daniel W. Kappes and his Nevada-based company, Kappes, Cassiday & Associates, through their Guatemalan subsidiary, Exploraciones Mineras de Guatemala, S.A. (“Exmingua”). The dispute arose after Guatemala suspended Exmingua's exploitation license for the Progreso VII Derivada gold project, following sustained protests, blockades, and legal challenges by local communities and non-governmental organisations (“NGOs”) (see here). These challenges culminated in rulings by the Guatemalan Supreme Court and Constitutional Court, which required prior consultations with indigenous peoples under the ILO Convention 169 (Indigenous and Tribal Peoples Convention, 1989) (the “Convention”) before mining activities could proceed. The case highlights the intersection of investor-State dispute settlement (“ISDS”), indigenous consultation rights, and constitutional remedies in Guatemala.

This post discusses the Kappes case, situating the award within the broader evolution of investor-State dispute settlement involving local communities and indigenous consultation rights. Then it examines the Tribunal’s treatment of ILO Convention 169 and the emerging jurisprudence on consultation, alongside the role of Guatemalan constitutional law and amparo in giving practical effect to those obligations. Amparo, which is at the heart of the dispute in the Kappes case, is a constitutional remedy aimed at protecting people against the threat of a violation of their rights or at restoring them when a violation has occurred (see art. 265 of the Guatemala Constitution). A non-governmental organization filed an amparo action against the Ministry of Energy and Mines, alleging that the mining license for the Progreso VII project was granted without the required prior consultation with indigenous communities under the ILO Convention 169. The discussion next turns to the award’s handling of procedural and substantive issues, including denial of justice and fair and equitable treatment, and concludes by considering the case’s broader implications for future disputes involving indigenous rights, resource projects, and the interaction between domestic remedies and international arbitration.

Local Communities and ISDS

The problem of local communities and their rights has become increasingly visible over the last few years. It has grasped the attention of academics referring to it directly (see Perrone, Odumosu-Ayanu, or Zenkiewicz/Guarin Duque) or in a broader sense (like Martin Jarrett, Sergio Puig, Steven Ratner), and it resurfaces also in the work of UNCITRAL Working Group III, under the broad title of third-party participation  (see par. 31-33 of WG III Report or CCSI/IIED report). Also, local communities and indigenous peoples' rights have finally become noticed and present in arbitral proceedings, as many investor-State arbitrations frequently arise from social conflict and community opposition to mining projects.

Various tribunals, such as in Bear Creek v. Peru and South American Silver v. Bolivia, have similarly recognized the centrality of ILO Convention 169 and the primacy of indigenous consultation rights, though they have also emphasized that expropriation without compensation remains unlawful under international law. The Inter-American Court of Human Rights in Agua Caliente v. Guatemala placed strong emphasis on the procedural and substantive rights of indigenous communities, holding that failure to consult constitutes a violation of human rights and ordering the suspension of the mining project until proper consultation is conducted. However, the Tribunal in Lupaka v. Peru rejected the argument that the status of rural or indigenous communities could shield the State from responsibility for actions affecting the investor, maintaining that State obligations under investment treaties cannot be displaced by internal law or community autonomy.

Obligations under the ILO Convention 169

As the Convention is a cornerstone international instrument recognizing the rights of indigenous and tribal peoples, particularly regarding consultation and participation in decisions affecting their lands and resources, its obligations have become increasingly relevant as a standard for State conduct and, indirectly, for assessing investor responsibilities and the legitimacy of projects affecting indigenous communities.

While, in previous cases, arbitral tribunals found that the Convention may be of interpretative importance, even if a State is not party to the Convention (see para. 763-768 of Abyei Arbitration), in the Kappes case, arbitrators were faced with a situation where Guatemala was a party to the Convention but had failed to implement it into its national legal system.

The Guatemalan Constitutional Court, in its various decisions (see, e.g., the 2007 Sipacapa Judgment or the 2007 Río Hondo I Judgment), has developed jurisprudence on the Convention and the obligation to consult while also urging the Guatemalan Congress to enact corresponding legislation, as both the Convention and domestic legislation are vague regarding implementation procedures for consultations. The Constitutional Court clarified that the right of peoples to be consulted is unquestionable, and representative institutions must fulfill that right, as the lack of domestic implementing legislation does not invalidate the right to consultations established by the Convention. Moreover, the Constitutional Court specifically dismissed the suggestion that the public participation requirement of the environmental impact assessment (“EIA”) process was sufficient to meet the requirements under the Convention.

Tribunal Deliberations on the ILO Convention 169 in the Kappes case

Direct Applicability and Binding Nature

The Tribunal confirmed that the Convention is directly binding on Guatemala as a party, even in the absence of comprehensive domestic implementing legislation (which is in line with the Guatemalan Constitutional Court jurisprudence). The Tribunal distinguished between general public participation required in EIA processes and the more robust, dialogue-based consultation mandated by the Convention.

Substantive and Procedural Consultation Requirements

The Tribunal clarified that the consultation process under the Convention must be meaningful and occur prior to the issuance of a license. Specifically, consultations must take place before the granting of a license, involve appropriate representatives of the indigenous population (not merely general community members), consist of genuine dialogue rather than one-way information sharing, and not confer a veto right to indigenous peoples but rather require good-faith engagement.

The Tribunal emphasized that the right to consultation is unquestionable and must be respected by the State, regardless of legislative gaps. If governmental agencies grant licenses without fulfilling the above steps, such licenses may be subject to challenge in national courts, posing risks for both the State and investors.

Denial of Justice and FET

The Tribunal confirmed that there was no denial of justice in the alleged judge-made indigenous population consultation rules, as such obligations are directly derived from the Convention, even in the absence of national legislation implementing them. Also, the Tribunal, while addressing the Claimants' claim that the courts had retroactively applied judge-made law on community consultations, noted that the jurisprudence of Guatemalan courts "reveals not a dramatic departure from prior interpretations, but rather a progressive development of certain core principles" (Award, par. 807).

Also, the Tribunal found no violation of the fair and equitable treatment (“FET”) standard by the Government's alleged failure to carry out community consultations in a prompt fashion both before and after the Supreme Court's decision on Amparo Definitivo, even though six years had elapsed since such decision. Due to the complexity of the case, it was not arbitrary or irrational for the Ministry of Energy and Mines primarily to focus on challenging the amparo order through the court system without forcing the relevant stakeholders to begin a consultation process they didn’t seem to want, so long as the very requirement of that process was being challenged in court.

Amparo Proceedings in ISDS

The Kappes case confirms the growing importance of constitutional remedies in various Latin American countries for both ISDS and commercial arbitration (as described here, here, and here). In line with previous cases (such as in TECO Guatemala Holdings v. Guatemala; Railroad Development Corporation v. Guatemala; or Iberdrola v. Guatemala), the Tribunal treated amparo as an effective constitutional remedy, requiring exhaustion unless exceptions apply. The Tribunal found no denial of justice or breach of fair and equitable treatment in the outcome of the amparo proceedings, even where an NGO challenged the mining license for lack of prior consultation.

The Tribunal found that, although the suspension of mining activity had a significant economic impact on the investor, the actions of the Guatemalan courts did not amount to a denial of justice or breach of FET under CAFTA-DR, provided the courts acted within the bounds of due process and reasoned decision-making.

The Tribunal also acknowledged that not only investors' substantive rights were at play, but that the local indigenous communities had a right under the Convention to meaningful consultation by the Government before the commencement of mining activity, and that it was these rights (and these beneficiaries) that the amparo petition sought to protect. The temporary suspension of mining activities in the interim was intended to protect these interests while the case was under consideration. Therefore, with these various substantive rights at issue, the Tribunal must also weigh the factors contributing to the delay in resolving the amparo proceedings, including the complexity of the issues involved and whether the courts sought to progress the proceedings in the interim. This allowed the majority of the Tribunal to conclude that the Claimants had not proved a denial of justice in the amparo proceedings based on what it termed "procedural due process”.

Practical Implications

The most important lesson from the Kappes case for investors is that, even in the absence of clear rules under domestic law, when the State is a party to the Convention, investors are not immune from obligations arising under the Convention. The Tribunal's reasoning in the Kappes case underscores the growing importance of indigenous consultation rights in investor-State arbitration, particularly in Latin America. Again, the ICSID Tribunal confirmed the direct applicability of the Convention, clarified the substantive and procedural requirements for consultation, and confirmed the gravity of indigenous consultation in resource development projects. The case stresses the need for meaningful consultation and participation of indigenous peoples in investment projects and highlights ongoing challenges and reform debates regarding indigenous agency in investor-State arbitration.

The Kappes case also strengthens the use of amparo. Amparo becomes one of the most effective remedies for NGOs/local activists or representatives of local communities when opposing investments, which may result in the suspension or, at least, the delay of investments. Although this constitutional remedy may play a crucial role, as in the Kappes case, to ensure the rights of actors, such as indigenous communities, practitioners should be aware that amparo can be used to interfere with the conduct of arbitration, increase the time and costs of dispute resolution, and even prevent the enforcement of arbitral awards. The practical effect is that, in Guatemala, the finality of an arbitral award may be contingent on the outcome of potential amparo proceedings, and parties should plan their conduct accordingly.