Activities Carried Out by Nicaragua in the Border Area (Costa Rica v. Nicaragua), Compensation owed by the Republic of Nicaragua to the Republic of Costa Rica, ICJ Gen. List No. 150, 2018
This case before the International Court of Justice (ICJ) determines the level of compensation for cross-border environmental damages owed to Costa Rica by Nicaragua. It follows a 2015 judgment in favor of Costa Rica in which the ICJ declared that Nicaragua had violated Costa Rica’s territorial sovereignty and was liable to pay reparations for material damage caused, including environmental harm.
This case is preceded by the 2015 ICJ decision which found that disputed territory between Costa Rica and Nicaragua belonged to Costa Rica, and that, by excavating three caños (channels) and establishing a military presence, Nicaragua violated Costa Rica’s territorial sovereignty. This finding rendered Nicaragua’s activities unlawful under international law, which gave rise to an obligation of reparation by Nicaragua. Drawing on its past jurisprudence, the Court reaffirmed that compensation may be an appropriate form of reparation.
The Court ruled that Nicaragua must compensate Costa Rica for material damage, including environmental harm, caused by Nicaragua’s unlawful activities carried out in Costa Rica’s territory. This case was brought to the ICJ after an unsuccessful attempt by the parties to determine an acceptable level of compensation. The main issue in contention by the parties in this case was the appropriate method for determining compensation for environmental harm.
Costa Rica adopted the “ecosystem services approach” (or “environmental services framework”), which considers goods and services taken from the environment that may be traded on the market and have a “direct use value” and those that may not be traded, such as flood prevention or gas regulation, which have an “indirect use value.” As per this approach, the valuation of environmental damage must account for both the direct and indirect use values of environmental goods and services in order to provide an accurate reflection of the value of the environment. Costa Rica claimed that this framework is well recognized internationally, and appropriate under the Ramsar Convention on Wetlands of International Importance.
In contrast, Nicaragua argued that Costa Rica was entitled to “replacement costs,” meaning that Costa Rica “is entitled to compensation to replace the environmental services that have been or may be lost prior to recovery of the impacted area.” The method of calculation refers to the cost necessary to preserve an equivalent area until the impacted area has recovered. In support of its methodology, Nicaragua stated that the United Nations Compensation Commission uses this approach as opposed to Costa Rica’s proposed approach.
Using the “ecosystem approach” Costa Rica claimed that it would take approximately 50 years for the affected area to recover, and therefore, Nicaragua owed Costa Rica USD$ 6.711 million in damages, with pre-judgment interest of approximately USD$ 500,000. Conversely, using the “replacement costs” theory, Nicaragua claimed the recovery period would be between 20-30 years and damages to Costa Rica were no more than USD$188,504.
In adjudicating appropriate compensation, the ICJ decided not to adopt either approach, but rather, to adopt certain methods of each approach when they provided a reasonable basis for valuation. The Court stated that in cases of environmental damage, particular issues “may arise with respect to the existence of damage and causation.” In this respect, the Court determined that in order to receive compensation, there must be a “sufficient causal nexus between the wrongful act and the injury suffered.” In terms of what constitutes compensation for environmental damage, the Court clarified that this includes indemnification for the impairment or loss of environmental goods and services in the period prior to recovery and payment for the restoration of the damaged environment. With regard to methodological approach, the Court noted that it would approach “the valuation of environmental damage from the perspective of the ecosystem as a whole, by adopting an overall assessment of the impairment or loss of environmental goods and services prior to recovery.”
In applying this approach, the Court looked at the removal of trees for the excavation of the caños, the damage to the Northeast Caribbean Wetland that is protected under the Ramsar Convention, and finally, the capacity of the affected area for natural regeneration. Keeping these factors in mind, the Court reviewed every claim brought by Costa Rica and determined whether there was a sufficient “direct and certain causal link” between the damage Costa Rica claimed and Nicaragua’s activities. Ultimately, the Court awarded Costa Rica USD$ 378,890.59 in damages and pre-judgment interest to be paid by 2 April 2018.
In terms of enforcement, by letter dated 22 March 2018, Nicaragua informed the Court that it had transferred the total amount of compensation of US$378,890.59 to Costa Rica on 8 March 2018.
In this landmark case, for the first time the International Court of Justice has determined the level of compensation for cross-border environmental damage. In doing so, the Court also articulated its methodology for arriving at an appropriate level of compensation.
The International Union for Conservation of Nature (IUCN) has noted that this case, “…(m)arks a clear affirmation that environmental damage includes ecosystem services. The Court has recognized the important value of biological diversity and its services. Unfortunately, while the Court rejected the narrower and more traditional valuation method claimed by Nicaragua, it remains unclear as to how the Court arrived at its final compensation award….The case is nonetheless an important precedent for recognizing conservation interests and ecosystem services.”
While this case does not reference human rights, it is a key jurisprudential development in legal protections against environmental harm and provides tools for human rights advocates to advance litigation and advocacy to protect the environment. Other recent cases, including one from the Inter-American Court of Human Rights and one decided by the Colombian Supreme Court, further strengthen progressive environmental rights jurisprudence.
For their contributions, special thanks to ESCR-Net member: the Program on Human Rights and the Global Economy (PHRGE) at Northeastern University.
Last updated on: 8 January 2019