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Ecuador Evaluates Investment Treaty Framework

Brief Summary: FRANCISCO X. JIJÓN, WHITE & CASE. The Republic of Ecuador is taking steps to evaluate its investment treaties and arbitrations. This month, President Correa created a Citizen’s Audit Commission which will study and propose alternatives to investment treaties. Officials have stated that the National Assembly will proceed to vote on termination of Ecuador’s remaining BITs.

On May 6, 2013, Ecuadorian President Rafael Correa decreed the creation of a Citizen's Audit Commission (the "Commission") tasked with evaluating the Republic of Ecuador's bilateral investment treaties ("BITs") and other instruments consenting to international arbitration, as well as identifying deficiencies in investment arbitrations prejudicial to Ecuador.  The Decree purports to be premised on an urgent need to review BITs and the dissatisfaction with the awards against Ecuador in investment arbitrations.[1]  

Among other things, the Commission is to propose legal and political alternatives regarding the BITs and the international arbitration system, as well as analyzing potential civil and criminal liabilities.  It will consist of representatives from the Secretary of Planning and Development, the Secretary of Politics, the Ministry of Foreign Relations, Commerce and Integration, and the Presidency's Legal Secretary.  It will function for an initial period of eight months.

The creation of the Commission follows recent calls for termination of Ecuador's BITs.  Earlier this year, President Correa requested that the National Assembly vote on the termination of Ecuador's BITs during its new term, which began May 14, 2013.  Fernando Bustamante, President of the National Assembly's Commission on Sovereignty, indicated he anticipates that the Assembly will "vigorously" move towards terminating BITs in the coming months. 

Since 2008, Ecuador has taken various steps with regards to its BITs:

  • BITs terminated: Cuba, the Dominican Republic, El Salvador, Finland, Guatemala, Honduras, Nicaragua, Paraguay, Romania, and Uruguay[2]
  • BIT termination denied by National Assembly: Chile, China, the Netherlands and Venezuela
  • BIT termination approved by National Assembly: Finland, Sweden, France, Germany and the United Kingdom
  • BIT termination process pending: Argentina, Bolivia, Canada, Italy, Peru, Spain, Switzerland and the United States[3]

Pursuant to survival provisions in certain BITs, terminations by Ecuador may not be immediately effective as to investments made prior to termination.

Ecuador has previously taken other actions relevant to the legal framework for investment disputes; among them, the denunciation of the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (the "ICSID Convention") in 2009.[4]  Following Ecuador's notice of denunciation, the International Centre for Settlement of Investment Disputes ("ICSID") registered a single request for the institution of arbitration proceedings against Ecuador: Corporación Quiport S.A. and others v. Republic of Ecuador (ICSID Case No. ARB/09/23).  That case was subsequently discontinued further to a negotiated settlement between the parties.[5]


[1] See Decree No. 1506 of May 6, 2013 (creating the Commission for the Citizen's Audit of Reciprocal Investment Protection Treaties and the International Investment Arbitration - COTITSA) available at http://decretos.cege.gob.ec/decretos/.

[2] On October 23, 2008, Ecuador published denunciation letters sent to Cuba, the Dominican Republic, El Salvador, Guatemala, Honduras, Nicaragua, Paraguay, and Uruguay in the Official Gazette No. 452.  On December 21, 2010, Ecuador published an order issued by President Correa to send a notice of termination to Finland in the Official Gazette No. 576.  The Ministry of Foreign Affairs website confirmed that the BIT with Romania was also terminated. http://web.mmrree.gov.ec/sitrac/Consultas/Busqueda.aspx.

[3] Of these, Ecuador's Constitutional Court has held that the following BITs are unconstitutional: Argentina, Canada, Switzerland and the United States.

[4]  On July 6, 2009, the World Bank received a written notice of Ecuador denunciation of the ICSID Convention.  In accordance with Article 71 of the Convention, the denunciation took effect six months later, i.e., on January 7, 2010.  See List Of Contracting States And Other Signatories Of The ICSID Convention, May 20, 2013, available at https://icsid.worldbank.org/ICSID/FrontServlet?requestType=ICSIDDocRH&actionVal=ShowDocument&language=English.

[5] See "Anatomy of a Deal: Expropriation, Denunciation, Arbitration, Negotiation and the Resolution of the Quito International Airport Project" Jonathan C. Hamilton, May 15, 2012, available at http://latinarbitrationlaw.com/anatomy-of-a-deal-expropriation-denunciation-arbitration-negotiation-and-the-resolution-of-the-quito-international-airport-project/.

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