4. Rational Dispute Resolution
4.1 Rule of Law
4.2 Enforcement of Contracts
4.3 Commercial Dispute Resolution
In-Country Assessment

4. Rational Dispute Resolution

Goal – An efficient institutional framework that balances the rights of the public, owners, lenders and borrowers in the event of a dispute or loan default


4.1 Rule of Law (Very Weak)

Core Question: Do all market participants abide by the rule of law and have confidence in the courts and the ability of police to control crime?

The Honduran government is strongly influenced by business interests, traditional political elites, and national and international organized crime, often colluded with both the police and the military.

Source: National Integrity System Assessment, Transparency International

Impartiality (Very Weak)

4.1.1   What is the confidence level of the strength and impartiality of the police, courts and contract enforcement?

Percentile Ranking: 11.37; Trend 


Source: Governance Matters 2010, World Bank

Judiciary (Unknown)

4.1.2   Can members of the judiciary be held accountable for their actions?

No Data available from Global Integrity Report, however a new Council of the Judiciary and Judicial Career was created, and has been responsible for judicial appointments and dismissals since June 2012.

Source: National Integrity System Assessment, Transparency International

Costs of Crime (Very Weak)

4.1.3   What are the business costs of crime and violence?

Ranked 148 out of 148; Score 1.9 out of 7.

Source: The Global Competitiveness Report 2013-2014, World Economic Forum


back to top

4.2 Enforcement of Contracts (Very Weak)

Core Question:  Are systems in place for timely and efficient enforcement of contracts?
The Honduran legal system is extremely inefficient at enforcing commercial disputes, and makes the process costly. Creditors and investors do not have any other path to resolutions, such as summary proceedings or power of sale. Weak institutions and corruption limit the country’s economic potential.

4.2.1 Judical Enforcement (Very Weak)

Ranked 182 out of 188; Trend = What is the number of procedures involved in resolving a commercial dispute?

47 What is the time between the filing of a lawsuit and resolution in judicial enforcements?

920 days What is the cost of judicial enforcements as a percentage of claim value?


Source: Doing Business 2014 –

4.2.2 – Summary Proceedings (Very Weak)

SQ 10  Summary proceedings are alternative dispute resolution processes where creditors can apply for a direct court order in property disputes. What is the time between notice of intent to foreclose and loan collection in summary proceedings if available to lenders?   

Not available

SQ 11  What is the cost of summary proceeding if available to lenders as a percentage of property value?  

Not available

4.2.3 – Power-of-Sale (Very Weak)

SQ 12  Power-of-sale agreements give creditors the power to sell properties after notice to the borrower without court intervention. What is the time between notice of intent to sell and loan collection for power-of-sale agreements if available to lenders?

Not available

SQ 13  What is the cost of power-of-sale agreements if available to lenders as a percentage of property value?  

Not available


back to top

4.3 Commercial Dispute Resolution (Strong)

Core Question: Can commercial disputes be resolved efficiently and fairly without exorbitant expense and delay?

Arbitration and conciliation are generally considered swifter and more cost-effective means of resolving disputes between commercial entities. Commercial entities generally believe arbitrators and mediators may have specialized expertise in technical areas involved in disputes.

Survey Questions

4.3.1 Commercial Courts (Very Weak)

SQ 14  Do specialized commercial courts exist for the handling of property disputes and foreclosures?

Honduras has yet to establish a separate commercial court system that allows for the handling of property disputes.


4.3.2 Alternative Dispute Resolution (Strong)

SQ 15  Are alternative dispute resolution mechanisms in place including commercial arbitration, private mediation and community based processes?

The Property Law (2004) regularized the land dispute resolution process. Under the law, land disputes may be settled through: (1) conciliation, (2) arbitration, and (3) abbreviated court proceedings. The 2011 Investment Law permits investors to request arbitration directly, eliminating the previous requirement to include an arbitration clause in investment contracts.

Source: Property Rights and Resource Governance – Honduras, USAID

Source: 2013 Investment Climate Statement – Honduras, U.S. Department of State.

4.3.3 Commercial Treaties (Strong)

SQ 16  What bilateral, regional and international commercial treaties exist concerning business between countries?

Honduras is a member of WTO and a Bilateral Investment Treaty (BIT) between the United States and Honduras entered into force in 2001. The U.S.-Honduras Treaty of Friendship, Commerce and Consular Rights (1928) provides for Most Favored Nation treatment for investors of either country. Honduras has basic international trade conventions in place, as well as a regional integration commitment and several free trade agreements. Provisions for investment are included in bilateral commercial treaties between Honduras and Costa Rica, El Salvador, Guatemala, Panama, the Dominican Republic, Canada, and the European Union. Honduras also has bilateral investment agreements with the United Kingdom and Spain.

Source: Military coups are good for Canadian business: The Canada-Honduras free trade agreement – Todd Gordon

Source: 2013 Investment Climate Statement – Honduras, U.S. Department of State.


back to top