## Facts

- In 1894, Guatemala granted U.S. national Chester B. Shufeldt a concession in the Polochic Valley to establish and operate a pineapple enterprise for export under agreed terms and a multi‑year duration.
- The concession contract was approved through Guatemala’s governmental processes, including legislative approval, giving the agreement binding effect under Guatemalan law at the time.
- Shufeldt undertook preparatory and operational steps and incurred expenditures aimed at making the project productive, while also seeking the governmental cooperation contemplated by the agreement.
- Disputes arose over performance and delays. Shufeldt attributed impediments to actions and omissions of Guatemalan authorities, while Guatemala asserted grounds to treat the concession as forfeited.
- In 1906, Guatemala issued a decree rescinding/annulling the concession on the basis of alleged nonperformance, without paying compensation.
- The United States espoused Shufeldt’s claim through diplomatic channels after efforts to resolve the matter failed.
- By a Special Agreement dated September 20, 1928, the United States and Guatemala submitted the dispute to an arbitral tribunal/sole arbitrator procedure, resulting in written pleadings, documentary evidence, and argument.
- The tribunal (Sir Herbert Sisnett) rendered its final decision on July 24, 1930.

## Issues

1. Whether Guatemala incurred international responsibility by rescinding the 1894 concession in 1906 on the asserted ground of Shufeldt’s nonperformance.
2. If Guatemala was responsible, what monetary compensation (including any allowance for expected profits and interest) was owed to the United States for Shufeldt’s account.

## Decision

- The tribunal held that the concession was validly concluded and duly approved, and Guatemala could not lawfully terminate it on the record presented.
- The tribunal found that the asserted forfeiture was not justified because the evidence showed Shufeldt had not failed in a manner warranting rescission, and that delays and nonfulfillment were materially connected to Guatemala’s own conduct and obstruction.
- The tribunal determined that Guatemala was internationally liable for the unlawful annulment and resulting injury to Shufeldt.
- Applying a restoration-by-money approach, the tribunal awarded compensation intended to place Shufeldt in the position he would have occupied had the concession been carried out.
- The tribunal awarded US$2,097,871.56, and granted interest at 6% per year from January 1, 1906, with directions addressing currency/value in gold-dollar terms as stated in the award.

## Legal Principles

- When a state grants and approves a concession contract through its competent organs, it may not later annul the vested contractual rights by decree without incurring responsibility if the annulment is not justified under the contract and the facts.
- A state cannot rely on its own obstructive acts, or delays attributable to its authorities, as the basis to declare a foreign concessionaire in default and to forfeit the concession.
- Reparation for an unlawful rescission of a concession may include reimbursable investment and expenditures and net profits that are shown with sufficient certainty for the remaining term, rather than being treated as automatically too speculative.
- Compensation should aim to place the injured party, as far as money can do so, in the situation that would have existed if the agreement had been performed.
- Interest may be awarded as part of full compensation in concession-annulment cases, running from the date the wrongful act caused the loss, and valuation may require attention to currency equivalence as specified in the award.

## Conclusion

In Shufeldt Claim, the arbitral tribunal held Guatemala responsible for wrongfully rescinding Chester B. Shufeldt’s legislatively approved 1894 pineapple concession by a 1906 decree that was not supported by the facts and was tied to Guatemala’s own interference. The tribunal ordered Guatemala to compensate the United States for Shufeldt’s account in the amount of US$2,097,871.56 plus 6% interest from January 1, 1906, reflecting both recoverable expenditures and demonstrable lost profits measured over the unexpired concession term.


Shufeldt Claim (U.S. v. Guat.), 2 R.I.A.A. 1079 (Arb. Trib. 1930)