ABC Settlement Agreement in El Salvador: A Comprehensive Guide

If you`re interested in the legal system in El Salvador, you may have heard of the ABC Settlement Agreement. This agreement was signed back in 2009, between the government of El Salvador and the US multinational Alba Petróleos. It aimed to settle a dispute over a nationalized oil refinery that had been seized by the government a year earlier.

In this article, we`ll delve deeper into the details of the ABC Settlement Agreement and discuss its impact on El Salvador`s legal system.

The Background of the ABC Settlement Agreement

The ABC Settlement Agreement was the result of a long-standing dispute that began in 2006 when Alba Petróleos and the Salvadoran government entered into a partnership to operate a nationalized oil refinery in the country. However, the relationship between the two parties began to sour, and in March 2008, the government seized control of the plant.

Following the seizure, Alba Petróleos took legal action against the government in both the Salvadoran courts and the International Centre for Settlement of Investment Disputes (ICSID), arguing that the nationalization of the plant was illegal and in violation of its rights under a bilateral investment treaty between El Salvador and Venezuela.

In 2009, the parties reached a settlement agreement, which resulted in Alba Petróleos withdrawing its legal claims against the Salvadoran government. The agreement also included a provision for the government to pay $1.3 million to the company as compensation for the nationalization of the plant.

Impact of the ABC Settlement Agreement

The settlement agreement was widely regarded as a victory for Alba Petróleos, as it allowed the company to move on from the legal dispute and focus on its operations in the country. It also prevented the case from going to trial, which would have dragged on for many more years.

However, the settlement also drew criticism from some sections of Salvadoran society, as it was seen as a capitulation to a multinational corporation. Critics argued that the government should have stood firm and defended its decision to nationalize the plant, which was done in the interests of the country`s citizens.

Moreover, the settlement agreement set a precedent for how disputes between foreign investors and the Salvadoran government should be resolved. It was seen as a signal to other multinationals that the Salvadoran government was willing to negotiate and settle claims outside the court system.


The ABC Settlement Agreement was a significant moment in the legal history of El Salvador and highlighted the ongoing challenges the country faces in balancing the interests of foreign investors and its citizens. While the agreement may have been seen as a capitulation to a multinational corporation by some, it was also a pragmatic solution that allowed both parties to move on from a protracted legal dispute.

Furthermore, the agreement set an important precedent for how foreign investors and the Salvadoran government can resolve disputes without resorting to litigation. Ultimately, this helps to create a more predictable and stable investment climate in the country.