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The Evolution of the System of Foreign Investment Protection in Ecuador

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Handbook of International Investment Law and Policy

Abstract

This article describes the evolution of the system of foreign investment protection in Ecuador. The high exposure to investment disputes and the unprecedented proposals to react to such regime make Ecuador a representative case study regarding the articulation, deployment, enforcement, and interpretation of international investment law both from international and domestic perspectives taking place in the Global South. It also unfolds the multiple legal mechanisms through which the quest for protecting foreign capital engages and influences key policies, regulations, and rulings. Additionally, it approaches the influence of such interaction defined by the interests of both internal and external stakeholders. This article concludes that the opportunistic use of constitutional, treaty, regulatory, and contract-based tools to accommodate particular interests has been detrimental to settle the boundaries between policy space and private sphere, thus, aggravating the State’s exposure to international responsibility.

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Notes

  1. 1.

    Historian Enrique Ayala Mora underscores that the average duration of a constitution in Ecuador ranges from 7 to 8 years, being the constitutions approved from 1830 to 2008 as follows:

    1. 1.

      Constitución Política del Ecuador de 1830, Decreto Legislativo 0, Diario de la Convención Nacional 1830, 14 de junio de 1830

    2. 2.

      Constitución Política del Ecuador de 1835, Decreto Legislativo 0, Diario de la Convención Nacional 1835, 13 de agosto de 1835

    3. 3.

      Constitución Política del Ecuador 1843, Diario de la Convención Nacional 1843, 1 de abril de 1843

    4. 4.

      Constitución Política del Ecuador de 1845, Decreto Legislativo 0, Diario de la Convención Nacional 1845, 3 de diciembre de 1845

    5. 5.

      Constitución Política del Ecuador de 1851, Decreto Legislativo 0, Diario de la Convención Nacional 1851, 25 de febrero de 1851

    6. 6.

      6. Constitución Política del Ecuador de 1852, Decreto Legislativo 0, Diario de la Convención Nacional 1852, 6 de septiembre de 1852

    7. 7.

      Constitución Política del Ecuador de 1861, Decreto Legislativo 0, Diario de la Convención Nacional 1861, 2 de mayo de 1861

    8. 8.

      Constitución Política del Ecuador de 1869, Decreto Legislativo 0, Diario de la Convención Nacional 1869, 28 de julio de 1869

    9. 9.

      Constitución Política del Ecuador de 1878, Decreto Legislativo 0, Diario de la Convención Nacional 1878, 31 de marzo de 1878

    10. 10.

      Constitución Política del Ecuador de 1884, Decreto Legislativo 0, Diario de la Convención Nacional 1884, 4 de febrero de 1884

    11. 11.

      Constitución Política del Ecuador de 1897, Decreto Legislativo 0, Registro Oficial Suplemento 272 de 14 de enero de 1897

    12. 12.

      Constitución Política del Ecuador de 1906, Decreto Legislativo 0, Registro Oficial 262 de 24 de diciembre de 1906

    13. 13.

      Constitución Política del Ecuador de 1929, Ley 0, Registro Oficial 138 de 26 de marzo de 1929

    14. 14.

      Constitución de 1938

    15. 15.

      Constitución Política del Ecuador de 1945, Decreto Legislativo 0, Registro Oficial 228 de 6 de marzo de 1945

    16. 16.

      Constitución Política del Ecuador de 1946, Decreto Legislativo 0, Registro Oficial 773 de 31 de diciembre de 1946

    17. 17.

      Constitución Política del Ecuador de 1967, Decreto Legislativo 0, Registro Oficial 133 de 25 de mayo de 1967

    18. 18.

      Constitución Política del Ecuador de 1979, Decreto Supremo 0, Registro Oficial 800, 27 de marzo de 1979

    19. 19.

      Constitución Política de la República del Ecuador de 1998, Decreto Legislativo 0, Registro Oficial 1 de 11 de agosto de 1998

    20. 20.

      Constitución de la República del Ecuador 2008, Decreto Legislativo 0, Registro Oficial 449 de 20 de octubre de 2008.

  2. 2.

    Constitución de la República del Ecuador, Decreto Legislativo 0, Registro Oficial 449, 20 de octubre de 2008

    See Ayala Mora E (2014) Historia Constitucional: Estudios comparativos, Biblioteca de Historia, vol 36. Universidad Andina Simón Bolívar, Quito, 15 p

  3. 3.

    The Constitution of 1897 prescribed that any contract signed between a foreigner and the government, or an individual, contains implicitly the condition of resignation to seek diplomatic protection (Art 38). Later on, the Constitution of 1929 added the prohibition of stipulating a waiver of jurisdiction in any contract signed between the State, public entities, and individuals with foreigners in Ecuador (Art. 153, Constitution 1929).

  4. 4.

    The prohibition was confined to contracts signed within Ecuadorian territory. Until the issuance of the Supreme Decree No. 797 B (October 15, 1976), the prohibition was straightforward: “the promise to submit Ecuador to a jurisdiction not recognized by Ecuadorian legislation has illicit object and is null due to illicit object.” With the interpretation of the Civil Code through this Supreme Decree, it was determined that agreeing to alien jurisdiction does only proceed when the contracts are signed outside the national territory.

    Although it is debatable whether the limitation of territory served the purpose of circumscribing the effects of the contract to its signature’s place, it is clear that this restriction has been limited to contractual obligations. Evidently, the scope of application of international investment law overrides these boundaries.

    The relevant domestic provisions stated:

    Código Civil: “Art. 1515.- Hay objeto ilícito en todo lo que contraviene al Derecho Público Ecuatoriano. Así, la promesa de someterse en el Ecuador a una jurisdicción no reconocida por las leyes ecuatorianas, es nula por vicio del objeto.”

    Código Civil, Registro Oficial Suplemento 1202 de 20 de agosto de 1960)

    Decreto Supremo No.797 B: “Art. 1.- Interprétese el art. 1505 del Código Civil de acuerdo con lo dispuesto en el inciso segundo del art. 153 de la Constitución Política4 en el sentido de que el convenio de sujetarse a una jurisdicción extraña procede únicamente cuando los correspondientes contratos se celebren fuera del territorio nacional.”

    Decreto Supremo No. 797 B, Registro Oficial 193, 15 de octubre de 1976.

  5. 5.

    The Constitutional Codification of 1996 reformed the wording related to Calvo Doctrine. In this line, it exempted the prohibition of jurisdiction waiver regarding contractual disputes in cases where a treaty provided for such submission.

    Constitución Política de la República del Ecuador, Codificación 1996:

    Art. 16.- Los contratos celebrados por el Gobierno o por entidades públicas con personas naturales o jurídicas extranjeras llevarán implícita la renuncia a toda reclamación diplomática. Si tales contratos fueren celebrados en el territorio del Ecuador, no se podrá convenir la sujeción a una jurisdicción extraña, salvo el caso de convenios internacionales.

    Ley 0, Registro Oficial 969 de 18 de junio de 1996

  6. 6.

    Constitución Política de la República del Ecuador de 1998, Decreto Legislativo 0, Registro Oifical de 11 de agosto de 1998

  7. 7.

    During the 1960s, Ecuador signed two BITs, with the Federal Republic of Germany (June 28, 1965) and Switzerland (May 2, 1968). See generally Chaisse J and Bellak C (2015) “Navigating the expanding universe of investment treaties – Creation and use of critical index,” J Int Econ Law 18(1):79–115.

  8. 8.

    In the investment arbitration, Perenco Ecuador Limited vs. the Republic of Ecuador since the Respondent had little in possession for showing the negotiating story of the BIT, the Tribunal instructed the parties to approach the French authorities in order to gather such information.

    See Perenco Ecuador Limited vs. The Republic of Ecuador, ICSID Case No. Arb/08/6, Decision On Remaining Issues Of Jurisdiction And Liability, September 12, 2014, parr. 494.

  9. 9.

    In May 2013, former President Rafael Correa established the Commission for a Comprehensive Audit of Investment Protection Treaties and of the International Arbitration System on Investments (CAITISA) (Decreto Ejecutivo 1506 Registro Oficial 958 de 21 de mayo de 2013).

    This Commission consists of highly renowned international experts and ministers, finally handed over its final report in May 2017.

    See Comisión de auditoría intergral ciudadana de los tratados de protección recíproca de inversiones y del sistema de arbitraje en materia de inversiones en Ecuador (2017) Informe Ejecutivo. Quito. http://www.caitisa.org/images/auditoria_integral_ciudadana_2015.PDF

  10. 10.

    Convenio entre el Gobierno de la República del Ecuador y el Gobierno de la República de Cuba para la promoción y protección recíproca de inversiones (1997); Artículo IX. “Solución de controversias entre un Inversionista y la Parte Contratante receptora de la inversión”; Registro Oficial Suplemento 153, 25 de noviembre de 2005

  11. 11.

    Convenio entre el Gobierno de la República del Ecuador y el Gobierno de la República Popular de China para el fomento y protección recíprocos de inversiones (1994); Artículo 9; Registro Oficial Suplemento 153, 25 de noviembre de 2005

  12. 12.

    Serena H. Clarke, Deputy Secretary of the World Bank, depositary of the Washington Convention, sent the following letter to Edgar Terán Terán, Minister of Foreign Affairs of Ecuador:

    I wish to confirm that on January 15, 1986, the Instrument dated January 15, 1986 and signed by you, ratifying and accepting the Convention on the Settlement of Investment Disputes between States and Nationals of Other States on behalf of Ecuador, was deposited with the Bank pursuant to Article 73 of said Convention. Pursuant to Article 68 (2), the Convention enters into force for your Government 30 days after the date of such deposit, that is to say, on February 14, 1986.

    Clarke SH (1986) Deputy Secretary, The World Bank – International Bank for Reconstruction and Development, February 19, 1986

  13. 13.

    At the time, the Constitution allowed the President to ratify treaties prior Congress’s approval (Art. 78, parragraph f). See Constitución Política de la República del Ecuador, Codificación 1984, Registro Oficial 763 de 12 de junio de 1984.

  14. 14.

    Ley Reformatoria a la Ley de Hidrocarburos (1993), Registro Oficial 326 de 29 de noviembre de 1993

  15. 15.

    Íbidem, Comisión de auditoría intergral ciudadana de los tratados de protección recíproca de inversiones y del sistema de arbitraje en materia de inversiones en Ecuador (2017), footnote 9

  16. 16.

    Íbidem, Comisión de auditoría intergral ciudadana de los tratados de protección recíproca de inversiones y del sistema de arbitraje en materia de inversiones en Ecuador (2017)

  17. 17.

    Apparently, the process of internal approval and second ratification of ICSID Convention was triggered due to the attempt to regularize consent to ICSID arbitration within the process of negotiation of petroleum contracts. On April 13, 1999, PETROECUADOR submitted a consultation to the Ministry of Foreign Affairs asking whether the ICSID Convention was “ratified” by the National Congress and in consequence whether this treaty was in force (Empresa Estatal PETROECUADOR-Oficio No. 085-UCP-99). On May 3, 1999, the General Director of Treaties confirmed ICSID Convention was in force (Nota N. 7882-15/DGT). Nevertheless, the President of the Republic requested the Constitutional Tribunal to issue the corresponding prior ruling, kicking off this way, the process of internal approval of the ICSID Convention (Presidencia de la República, Oficio No. 00-550-DAJ.T.332 de 5 de junio de 2000).

  18. 18.

    The Congress’s Foreign Affairs Commission concluded that Washington Convention had to pass through legislative approval in accordance to Article 161, paragraphs 2 and 4 (Constitution 1998), that required such procedure when the treaty attributed the exercise of the competences derived from the Constitution or the law to a supranational or international organization, and include the commitment to enact, modify, or derogate a law, respectively. Article 419, paragraph 7, of the Constitution in force (2008) enshrines an identical provision.

    See Tribunal Constitucional del Ecuador, Resolución Nro. 171-2000-TP, 26 de septiembre de 2000, Registro Oficial 180 de 10 de octubre de 2000.

  19. 19.

    Overall, the Constitutional Tribunal disregarded seminal notions of State responsibility when interpreting ICSID Convention from the prism of domestic law (commercial and arbitration legislation) and contractual obligations. For instance, the Tribunal asserted that the relevant treaty provisions were in conformity with the Constitution, because “in order to resort to the entity created by this Convention it is indispensable that -in this case- the Ecuadorian State, through the Executive Branch, consents at the time of the contract’s signature.”

    See Tribunal Constitucional del Ecuador, Resolución Nro. 171-2000-TP, 26 de septiembre de 2000, Registro Oficial 180 de 10 de octubre de 2000.

  20. 20.

    Repsol YPF Ecuador, S.A. and others v. Republic of Ecuador and Empresa Estatal Petróleos del Ecuador (PetroEcuador), ICSID Case No. ARB/08/10, October 5, 2001

  21. 21.

    Schill S (2017) The impact of investment law on public contracts. ACIL Research Paper 2017-07, pp 1–3

  22. 22.

    Notably, the Constitution of 1998 enshrined a hybrid formula authorizing the State to establish special guarantees within contracts signed with investors with the aim of avoiding that the corresponding stipulations may not be modified or even affected by laws and any further decisions of any class (Art. 271). Within the contracts referred to, the State used the double-hat of sovereign and contractor subordinating the exercise of extra-contractual prerogatives to the terms actually stipulated in the contract.

    See Constitución Política del República de 1998.

  23. 23.

    Under this contract model, which was published through a ministerial regulation, the following investment contracts were signed between the State and foreign and domestic investors: (1) Oleoducto de Crudos Pesados; (2) Machala Power Cia. Ltda.; (3) Termoriente Cia. Ltda.; (4) Termoriente, Modificación de Contrato; (5) Quiport S.A.; (6) Grunenthal Ecuatoriana Cia. Ltda.; (7) General Motors S.A.; (8) IPAC S.A.; (9) Hidroabanico S.A.; and (10) San Carlos S.A.

    See Ministerio de Comercio Exterior, Formato básico común para el Contrato de Inversión, Acuerdo No. 2001-024, Registro Oficial Suplemento 255, 30 de enero de 2001.

  24. 24.

    The relevant investment contract’s clause “Specific Legal Stability” (3.1.2) extends legal stability to all kind of sovereign actions attributed to any State’s branch.

    Contrato de Inversión que celebran el Estado ecuatoriano representado por el Ministerio de Comercio Exterior, Industrialización, Pesca y Competitividad; Samedan Oil Corporation y la Compañía MACHALAPOWER Cía. Ltda, 15 de octubre de 2001

  25. 25.

    See Ministerio de Comercio Exterior, Industrialización y Pesca, Formato básico común para el Contrato de Inversión, Acuerdo No. 2001-024, Registro Oficial Suplemento 255, 30 de enero de 2001.

  26. 26.

    Contrato de Inversión entre el Estado ecuatoriano representado por el Ministerio de Comercio, Industrialización y Pesca a favo de las Compañías de Oleoducto de Crudos Pesados y Oleoducto de Crudos Pesados (OCP) Ecuador S.A.

    February 15, 2001, Quito-Ecuador

  27. 27.

    Contrato de Participación para la Exploración y Explotación de Hidrocarburos (Petróleo C) entre el Estado Ecuatoriano-PETROECUADOR y las compañías City Oriente Ltd., y Consolidated Ramrod Gold Corporation,” Cláusula 20.3, March 29, 1995

  28. 28.

    Íbidem, Comisión de auditoría intergral ciudadana de los tratados de protección recíproca de inversiones y del sistema de arbitraje en materia de inversiones en Ecuador (2017), 61 p.

  29. 29.

    Íbidem, Comisión de auditoría intergral ciudadana de los tratados de protección recíproca de inversiones y del sistema de arbitraje en materia de inversiones en Ecuador (2017), 61 p.

  30. 30.

    Procuraduría General del Estado (2016) A critical view of investment arbitration based on Ecuadorian experience. In: García Carrión D, Gómez de la Torre B, Gaybor C (eds). pp 18–19. http://www.pge.gob.ec/images/publicaciones/2016/libroArbitraje/Ingles_low.pdf.

  31. 31.

    Íbidem, Comisión de auditoría intergral ciudadana de los tratados de protección recíproca de inversiones y del sistema de arbitraje en materia de inversiones en Ecuador (2017), 31 p.

  32. 32.

    Mancero P (2016) Results of an audit to treaties mutual investment protection and arbitration system on investment. In: Investment chapters in trade agreements, Submitted at the World Social Forum by Invitation of Friedrich-Ebert-Stiftung, Berlin, 13 Sept 2016.

  33. 33.

    These figures correspond to the State’s General Budget of 2016 and the breakdown is the following:

    1. 1.

      General Prosecutor’s Office: USD 140,314,015.13

    2. 2.

      Public Defender’s Office: USD 36,357,337.94

    3. 3.

      Constitutional Court: USD. 10,116,916.70

  34. 34.

    Chevron Corporation and Texaco Petroleum Company vs The Republic of Ecuador, PCA Case No. 2009-23

  35. 35.

    Chevron Corporation and Texaco Petroleum Company v. The Republic of Ecuador (I), (PCA Case No. 2007-02/AA277)

  36. 36.

    Merck Sharpe & Dohme (I.A.) Corporation v. The Republic of Ecuador, (PCA Case No. 2012-10)

  37. 37.

    According to the State’s General Budget of 2016, Judiciary Branch’s budget was USD. 445,931,216.17.

  38. 38.

    See Articles 4 and 5, Draft Articles on Responsibility of States for Internationally Wrongful Acts, with commentaries, 2001, International Law Commission, http://legal.un.org/ilc/texts/instruments/english/commentaries/9_6_2001.pdf.

  39. 39.

    Nowrot K (2010) International investment law and the Republic of Ecuador: from arbitral multilateralism to judicial regionalism. Institute of Economic Law Transnational Economic Law Research Center (TELC) School of Law Martin Luther University Halle-Wittenberg, Heft 96, May 2010, 6 p

  40. 40.

    Falconí Benítez F (2007), Canciller de la República del Ecuador, Notice of December 4, 2007

  41. 41.

    (1) Cuba, (2) Dominican Republic, (3) El Salvador, (4) Guatemala, (5) Honduras, (6) Nicaragua, (7) Paraguay, (8) Romania, and (9) Uruguay

  42. 42.

    See Falconí Benítez F (2008), Minister of Foreign Affairs of Ecuador, Notice submitted to the Minister of Foreign Affairs of Paraguay regarding the denunciation of the BIT; Nota N. 5084/GVM/DGPEI/DGT08, Quito 30 de enero de 2008.

  43. 43.

    The President requested to the Legislative and Fiscalization Commission (National Constituent Assembly) to approve the denunciation of ICSID Convention (Oficio No. T. 4484-SGJ-09-1431).

  44. 44.

    Through the Executive Decree 1823 of July 2, 2009, former President Rafael Correa denounced the ICSID Convention and derogated the Decree No. 1471-B of April 6, 2001, through which this convention was ratified.

  45. 45.

    Note No. 7078/GM -2009 of July 3, 2009, submitted by the Minister of Foreign Affairs, Fander Falconí Benítez, to the President of the World Bank, Robert Zoelleck.

  46. 46.

    Article 422 of the Constitution of 2008 translates as follows:

    Article 422- It shall not be possible to enter into international treaties or instruments in which the Ecuadorian State waives sovereign jurisdiction to international arbitration venues in contractual or commercial disputes between the State and private individuals or corporations.

    Excepted from the foregoing are international treaties and instruments providing for dispute resolution between States and citizens of Latin America by regional arbitral venues or by jurisdictional organizations designated by the signatory countries. Judges from the states that as such or as nationals of those states are parties of the dispute cannot participate.

    In the case of disputes relating to the foreign debt, the Ecuadorian State shall promote arbitral solutions in terms of the origin of the debt, subject to principles of transparency, equity and international justice.

  47. 47.

    Art. 438 of the Constitution of Ecuador entrusts the Constitutional Court to issue prior binding rulings concerning the constitutionality of international treaties before the National Assembly’s approval for their ratification or denunciation. In such capacity, the Court issue the rulings related to BITs with the following countries: (1) Argentina, (2) Bolivia, (3) Canada, (4) Chile, (5) Finland, (6) France, (7) Germany, (8) Great Britain, (9) Italy, (10) Kingdom of the Netherlands, (11) Kingdom of Spain, (12) Peru, (13) People’s Republic of China, (14) Sweden, (15) Swiss Confederation, (16) the United States, and (17) Venezuela

  48. 48.

    On May 16, 2017, former President Rafael Correa issued 16 decrees terminating the BITs with the following countries: (1) People’s Republic of China, (2) Chile, (3) Venezuela, (4) Kingdom of the Netherlands, (5) Swiss Confederation, (6) Canada, (7) Argentina, (8) the United States, (9) Kingdom of Spain, (10) Peru, (11) Bolivia, (12) Italy, (13) Sweden, (14) Germany, (15) Great Britain, and (16) France.

  49. 49.

    See Corte Constitucional del Ecuador, Resolución Convenio Internacional 26, Convenio entre el Gobierno de la República del Ecuador y el Gobierno de la República de Finlandia sobre la Promoción y Protección de Inversiones, Registro Oficial Suplemento 248 de 17 de agosto de 2010.

  50. 50.

    See Corte Constitucional del Ecuador, Resolución Convenio Internacional 27, Convenio entre el Gobierno de la República del Ecuador y el Gobierno de la República Popular de China para el Fomento y Protección Recíprocos de Inversiones, Registro Oficial Suplemento 248 de 17 de agosto de 2010.

  51. 51.

    See Corte Constitucional del Ecuador, Resolución Convenio Internacional 35, Convenio entre el Gobierno de la República del Ecuador y el Gobierno de Canadá para el Fomento y Protección Recíproca de Inversiones, Registro Oficial Suplemento 313 de 4 de noviembre de 2010.

  52. 52.

    See Corte Constitucional del Ecuador, Resolución Convenio Internacional 33, Tratado entre la República del Ecuador y la Repúbica Federal de Alemania sobre Fomento y Recíproca Protección de Inversiones de Capital,” Registro Oficial Suplemento 249 de 3 de agosto de 2010.

  53. 53.

    See Corte Constitucional del Ecuador: Resolución Convenio Internacional 33, “Tratado entre la República del Ecuador y la Repúbica Federal de Alemania sobre Fomento y Recíproca Protección de Inversiones de Capital,” Registro Oficial Suplemento 249 de 3 de agosto de 2010; Resolución Convenio Internacional 29, “Acuerdo entre el Gobierno del Reino de Suecia y el Gobierno de la República del Ecuador para la Promoción y Protección Recíproca de Inversiones,” Registro Oficial Suplemento 294 de 6 de octubre de 2010; Resolución Convenio Internacional 31, “Convenio entre el Gobierno de la República del Ecuador y el Gobierno de la República Francesa para la Promoción y Protección Recíprocas de Inversiones,” Registro Oficial Suplemento 294, 6 de octubre de 2010; Resolución Convenio Internacional 41, “Convenio entre el Gobierno del Ecuador y el Gobierno de la República de Venezuela para la Promoción y Protección Recíproca de Inversiones,” Registro Oficial Suplemento 342 de 16 de diciembre de 2010; Resolución Convenio Internacional 43, “Tratado entre la República del Ecuador y los Estados Unidos de América sobre Promoción y Protección Recíproca de Inversiones,” Registro Oficial Suplemento 359 de 10 de enero de 2011.

  54. 54.

    See Corte Constitucional del Ecuador, Resolución Convenio Internacional 40, “Tratado entre la República del Ecuador y la Confederación Suiza sobre Protección y Fomento de las Inversiones,” Registro Oficial Suplemento 331 de 30 de noviembre de 2010.

  55. 55.

    See Ley Orgánica de Garantías Jurisdiccionales y Control Constitucional, Art. 112, Registro Oficial Suplemento 52, 22 de octubre de 2009.

  56. 56.

    See Corte Constitucional del Ecuador: Resolución Convenio Internacional 33, “Tratado entre la República del Ecuador y la Repúbica Federal de Alemania sobre Fomento y Recíproca Protección de Inversiones de Capital,” Registro Oficial Suplemento 249 de 3 de agosto de 2010; Resolución Convenio Internacional 29, “Acuerdo entre el Gobierno del Reino de Suecia y el Gobierno de la República del Ecuador para la Promoción y Protección Recíproca de Inversiones,” Registro Oficial Suplemento 294 de 6 de octubre de 2010; Resolución Convenio Internacional 41, “Convenio entre el Gobierno del Ecuador y el Gobierno de la República de Venezuela para la Promoción y Protección Recíproca de Inversiones,” Registro Oficial Suplemento 342 de 16 de diciembre de 2010; Resolución Convenio Internacional 31, “Convenio entre el Gobierno de la República del Ecuador y el Gobierno de la República Francesa para la Promoción y Protección Recíprocas de Inversiones,” Registro Oficial Suplemento 294, 6 de octubre de 2010; Resolución Convenio Internacional 30; “Convenio para la Promoción y Protección Recíproca de Inversiones entre la República del Ecuador y el Reino de los Países Bajos,” Registro Oficial Suplemento 294, 6 de octubre de 2010; Resolución Convenio Internacional 43, “Tratado entre la República del Ecuador y los Estados Unidos de América sobre Promoción y Protección Recíproca de Inversiones,” Registro Oficial Suplemento 359 de 10 de enero de 2011; Resolución Convenio Internacional 3, “Convenio entre el Gobierno de la República del Ecuador y el Gobierno de la República Argentina para la Promoción y Protección Recíproca de Inversiones,” Registro Oficial Suplemento 887 de 6 de febrero de 2013.

  57. 57.

    Mendez M (2017) Constitutional Review of treaties: lessons for comparative constitutional design and practice. Int J Const Law 15(1), Oxford University Press and New York University School of Law, 100 p

  58. 58.

    The Code of Planning and Public Finances contains a general provision whereby the Attorney General’s prior authorization is required to conclude an arbitration agreement subject to foreign legislation or foreign jurisdiction to settle contractual disputes between the State and any foreign entity public or private.

    Notably, before the promulgation of this Code, the General Attorney stated that Art. 422 of the Constitution does not extend to contracts under which the State acts in “his private capacity.”

    See Código Orgánico de Planificación y Finanzas Públicas, Registro Oficial Suplemento 306 de 22 de octubre de 2010. See also Statement of the Attorney General of the State, Dr. Diego García Carrión. “Diario Hoy,” published on October 20, 2010.

  59. 59.

    On tax exceptions and, more generally, on the linkages and interactions between tax law and investment treaties, see Chaisse J (2015) Investor-state arbitration in international tax dispute resolution – a cut above dedicated tax dispute resolution? VA Tax Rev 41(2):149–222.

  60. 60.

    Pursuant to Ecuadorian domestic legislation, the President is exclusively entitled to deliver urgent economic bills of law to the National Assembly. In his original bill, the President did not include reforms concerning to arbitration and recognition and enforcement of awards, which were partially incorporated in the bill approved by the National Assembly before the presidential veto (Art. 134-140, Constitución de la República del Ecuador 2008).

    The “Act on Productive Promotion, Investment Attraction, Employment Creation and Fiscal Balance and Stability” (2018) included an open offer to international arbitration in all kinds of disputes with investors reads as follows:

    Art. (...) Arbitration.- For investment contracts exceeding ten million dollars of the United States of America, the State must accord national or international arbitration in law, in accordance with the law.

    In the case in which the State accords international arbitration in law, the investment contract will make reference to the fact that any controversy resulting from the investment or the contract, its non-compliance, rescission or nullity, will be resolved, at the claimant’s choice, through arbitration, among others, in accordance to the following rules in force at the time of the promulgation of this Law: (i) UNCITRAL - United Nations Arbitration Rules administered by the Permanent Court of Arbitration of The Hague (CPA); (ii) Arbitration Rules of the International Court of Arbitration of the International Chamber of Commerce based in Paris (CCI); or, (iii) Inter-American Commercial Arbitration Commission (IACAC). The rules of emergency arbitration will not apply in any case.

    The aforementioned Act derogated the General Organic Code of Processes’ provisions (2015) regulating the internal process for recognition of foreign judgments and arbitration awards. The same Act did also bring back to life a paragraph of the Act on Arbitration and Mediation (Art. 42) affording foreign arbitration awards the same effect as domestic arbitration awards. By this fashion, foreign arbitration awards like judgments of national courts bear res judicata effect.

    See Artículos 104 a 107 del Código Orgánico General de Procesos, Registro Oficial Suplemento 506, 22 de mayo de 2015; Artículo 42 de la Ley de Arbitraje y Mediación, Registro Oficial 417 de 14 de diciembre de 2006; Ley Orgánica para el Fomento Productivo, Atracción de Inversiones, Generación de Empleo, y Estabilidad y Equilibrio Fiscal, Ley 0, Registro Oficial Suplemento 309, 21 de agosto de 2018.

  61. 61.

    Ecuador made the mentioned reservation, when it ratified the Convention:

    Ecuador on the basis of reciprocity, will apply the Convention to the recognition and enforcement of arbitral awards made in the territory of another contracting State only if such awards have been made with respect to differences arising out of legal relationships, which are regulated as commercial under Ecuadorian law.

    See Galindo A and Endara F (2014) “Ecuador” in García Bolívar O and Otero H (Editors) Recognition and Enforcement of International Commercial Arbitral Awards in Latin America: Law, Practice and Leading Sases, Koninklijke Brill nV, 122 p

  62. 62.

    Between 2008 and 2017, the General Attorney issued 854 authorizations to submit disputes to international arbitration. Information was provided by the General Attorney’s office at request of the author, November 20, 2018.

  63. 63.

    Noteworthy, this openness did not replicate regarding national arbitration involving the State. In the Executive Branch, the former Secretary of Legal Affairs of the Presidency of the Republic prohibited submitting disputes to arbitration.

    See Mera Giler A (2012), National Secretary of Legal Affairs, “Presidencia de la República del Ecuador.” Oficio No. T.1.-C.1-SMJ-12-1134, 5 Oct 2012

  64. 64.

    The procedure for the formation of the law requires two debates by the National Assembly for its approval. At the National Assembly, the bill is assigned to a permanent specialized commission which is entrusted to draft and vote the projects of bill which will be finally considered by the National Assembly’s plenary in the first and second debates.

    In this context, the Permanent Specialized Commission of Justice and State Structure of the National Assembly delivered the project of bill for the second and final debate, incorporating the cause of action for review referred:

    Capítulo VI, Recurso de Revisión, Artculo innmuerado.- Causales.- El recurso de revisión se podrá proponer exclusivamente sobre cualquiera de las siguientes causas:

    (3). Por existir sentencia o laudo de una corteo tribunal internacional en el que se haya declarado la responsabilidad internacional del Estado como consecuencia de la sentencia ejecutoriada.

    See Aguiñaga Vallejo (Marcela), Presidenta de la Comisión de Justicia del Estado-Asamblea Nacional del Ecuador, Oficio N0. 257-CEPJEEP-2018, 7 de agosto de 2018, “Informe no Vinculante para Segundo Debate de la Ley Orgánica Reformatoria al Código Orgánico General de Procesos aprobado por la Comisión Especializada Permanente de Justicia y Estructura del Estado”: http://ppless.asambleanacional.gob.ec/alfresco/d/d/workspace/SpacesStore/6d24b016-0c37-4341-8b08-1f19053fa17d/Informe%20Segundo%20Debate%20Tr.%20337114.pdf.

  65. 65.

    Chevron Corporation and Texaco Petroleum Company vs The Republic of Ecuador, PCA Case No. 2009-23

  66. 66.

    Ehsassi A (2010) Cain and Abel: Congruence and conflict in the application of the Denial of Justice principle. In: Schill W (ed) International investment law and comparative public law. Oxford University Press, 239 p

  67. 67.

    In this context, the Permanent Specialized Commission of Economic and Productive Development and Microenterprise of the National Assembly delivered the project of bill for the second and final debate, incorporating the provision domestically recognizing international investment agreements and their standards:

    “1. Agréguese a continuación del Art. 16 del Libro II del Código Orgánico de la Producción, Comercio e Inversiones, el siguiente articulo innumerado:

    “Art. (…) Tratados bilaterales de inversión.- Se reconoce la legalidad y aplicabilidad de los tratados o convenios de protección de inversiones como un medio indispensable para el fomento y protección de las inversiones extranjeras. Por lo tanto, se reconocen y garantizan en el derecho local los estándares absolutos y relativos internacionales de protección de inversiones, los cuales serán protegidos y aplicados de conformidad con las leyes y a los tratados bilaterales de inversión debidamente suscritos por la República del Ecuador.”

    Albornoz Vintimilla (Esteban), Presidente de la Comisión Especializada Permanente de Desarrollo Económico, Productivo y Microempresa, “Informe para Segundo Debate del Proyecto de Ley Orgánica para el Fomento Productivo, Atracción de Inversiones, Generación de Empleo, y Estabilidad y Equilibrio Fiscal,” Oficio No. 121-AN-PCEPDEPM-2018, 16 de junio de 2018: http://ppless.asambleanacional.gob.ec/alfresco/d/d/workspace/SpacesStore/38c78c6e-47b6-4621-959c-139f81989ea4/Informe%20Segundo%20Debate%20Tr.%20330930.pdf

  68. 68.

    Ecuador released a model of bilateral investment agreement which was not made public and does not contemplate a definitive mechanism for the settlement of disputes. This model was presented to the ambassadors of the countries, which formerly maintained bilateral investment treaties with Ecuador. It has been affirmed that this new draft develops standards of protection in conformity with the Constitution of 2008 and includes features of the new generation of investment treaties attaining a balance between the rights of the investors and the exercise of regulatory powers by the State. Although it was announced procedural novelties, like the State’s standing to sue investors and an appeal stage, it is still unresolved whether ad hoc arbitration is contemplated in this proposal.

    See Ministerio de Relaciones Exteriores y Movilidad Humana, “Ecuador proposes new investment agreements that protect the country and defend human rights,” March 8, 2018: https://www.cancilleria.gob.ec/en/ecuador-proposes-new-investment-agreements-that-protect-the-country-and-defend-human-rights/.

  69. 69.

    Regional intergovernmental proposals like the establishment of the UNASUR Court for the Settlement of Investment Disputes gradually lost pace due to the change of the political forces in the region. They were definitely buried due to the denunciation of UNASUR Constitutive Treaty by countries like Argentina, Brazil, Chile, Colombia, Ecuador, Paraguay, and Perú. There remain as Contracting Parties, Bolivia, Guyana, Surinam, Uruguay, and Venezuela.

    Noteworthy, on April 3, 2018, the President from Ecuador, Lenin Moreno, issued an executive decree appointing the Ecuadorian delegate before UNASUR for the review and approval of the documents related to the creation of the Centre for the Settlement of Disputes and Legal Advisory Centre and the Code of Conduct of the Arbitral Tribunal’s Members (Executive Decree 357). One year and a half later, President Moreno decreed the denunciation of the UNASUR Constitutive Treaty.

    See Decreto Ejecutivo 357 de 3 abril de 2018 and Decreto Ejecutivo 915 de 29 de octubre de 2019.

    See Ministerio de Relaciones Exteriores de Brasil, “Denuncia del Tratado Constitutivo de la Unión de Naciones Suramericanas (UNASUR), 15 de abril de 2019: http://www.itamaraty.gov.br/es/notas-a-la-prensa/20297-denuncia-del-tratado-constitutivo-de-la-union-de-naciones-suramericanas-unasur.

    See Diario “El País,” “Ecuador se retira de Unasur y abre la Puerta a nuevas iniciativas de integración,” 14 de marzo de 2019: https://elpais.com/internacional/2019/03/14/america/1552524533_446745.html.

    See International Institute for Sustainable Development, “Centro de Arbitraje de UNASUR a un paso de ser establecido,” February 29, 2016: https://www.iisd.org/itn/es/2016/02/29/unasur-arbitration-centre-one-step-closer-to-being-established/.

  70. 70.

    See Netherlands model Investment Agreement, March 22, 2019: https://www.rijksoverheid.nl/ministeries/ministerie-van-buitenlandse-zaken/documenten/publicaties/2019/03/22/nieuwe-modeltekst-investeringsakkoorden.

    Regulation (EU) No. 1219/2012 of the European Parliament and of the Council of December 12, 2012 establishing transitional arrangements for bilateral investment agreements between member states and third countries: https://eur-lex.europa.eu/legal-content/en/txt/pdf/?uri=celex:32012r1219&from=en

  71. 71.

    See Vidigal G and Stevens B (2018) Brazil’s new model of dispute settlement for investment: return to the past or alternative for the future? J World Invest 475–512

  72. 72.

    See paragraphs 16 and 17, Corte Constitucional del Ecuador, Dictamen No. 34-19-TI/19, “Sobre la necesidad de aprobación legislativa “Acuerdo de Cooperación y Facilitación de Inversiones entre la República del Ecuador y la República Federativa de Brasil,” Quito, 4 de diciembre de 2019.

  73. 73.

    For instance, the former Constitutional Court determined that the BITs signed with Germany, France, and the United States fell within those treaties compromising the State in agreement of integration and trade (Constitution of Ecuador; Art. 419, 6).

    See “Tratado entre la República del Ecuador y la Repúbica Federal de Alemania sobre Fomento y Recíproca Protección de Inversiones de Capital”; “Convenio entre el Gobierno de la República del Ecuador y el Gobierno de la República Francesa para la Promoción y Protección Recíprocas de Inversiones”; and “Tratado entre la República del Ecuador y los Estados Unidos de América sobre Promoción y Protección Recíproca de Inversiones.”

  74. 74.

    See paragraph 16, Corte Constitucional del Ecuador, Dictamen No. 34-19-TI/19, “Sobre la necesidad de aprobación legislativa,” “Acuerdo de Cooperación y Facilitación de Inversiones entre la República del Ecuador y la República Federativa de Brasil,” Quito, 4 de diciembre de 2019.

    Noteworthy, under the proceeding of ICSID Convention Approval, it was found that this treaty attributed the exercise of the competences derived from the Constitution or the law to a supranational or international organization.

    See supra note 18.

  75. 75.

    See Cinelli Moreira N (2018) Cooperation and facilitation investment agreements in Brazil: the path for host state development. Kluwer Arbitration, Wolter Kluwer, 13 Sept 2018: http://arbitrationblog.kluwerarbitration.com/2018/09/13/cooperation-and-facilitation-investment-agreements-in-brazil-the-path-for-host-state-development/.

  76. 76.

    See Asamblea Nacional de la República del Ecuador, “Propuesta para brindar seguridad jurídica a inversión extranjera recibió respaldo de amplios sectores del país,” 12 de junio de 2018: https://www.asambleanacional.gob.ec/es/noticia/56079-propuesta-para-brindar-seguridad-juridica-inversion.

  77. 77.

    In addition to the 17 rulings related to the BITs found to be in contradiction with Art. 422 of the Constitution, the Constitutional Court interpreted the third paragraph of Article 422 in regard to disputes related with external debt.

    See Corte Constitucional del Ecuador, Resolución de la Corte Constitucional No. 1 publicada en el Registro Oficial Suplemento 549 de 16 de marzo de 2009.

  78. 78.

    See Corte Constitucional del Ecuador, Sala de Admisión, Caso N. 002-18-IC, acción de interpretación, 16 de agosto de 2019 presentada por Cabezas Guerrero (Elizabeth Enriqueta), Presidenta de la Asamblea Nacional del Ecuador, Acción de interpretación constitucional del Art. 422 de la Constitución de la República del Ecuador, 16 de agosto de 2018.

  79. 79.

    Valencia J, Minister of Foreign Affairs, Parreño Y, Minister of Trade, Investment and Fisheries, Joint amicus curiae, Nota Nro. MREH-MREH-2019-29463-N, June 10, 2019.

  80. 80.

    See Olmos (Alejandro), former Member of CAITISA, March 6, 2020: https://dolarizacion.ec/2020/03/06/amicus-curiae-de-alejandro-olmos/.

    See Acosta (Alberto), Former President of the National Constituent Assembly of Ecuador, March 9, 2020: https://dolarizacion.ec/2020/03/09/amicus-curiae-de-alberto-acosta/.

    See Calle (María Augusta), Former Member of the National Constituent Assembly of Ecuador and former Member of the National Constituent Assembly, March 9, 2020: https://dolarizacion.ec/2020/03/09/amicus-curiae-de-maria-augusta-calle/.

    See Cuesta (Esther), Member of the National Assembly of Ecuador; Amicus curiae regarding the action of interpretation of Art. 422 of the Constitution of Ecuador, March 9, 2020: https://dolarizacion.ec/2020/03/09/amicus-curiae-de-la-asambleista-esther-cuesta/.

  81. 81.

    See Pistor K, Edwin B. Parker, Professor of Comparative Law, Columbia University in the City of New York, Amicus Curiae submitted to the Constitutional Court of Ecuador regarding the interpretation of Art. 422 of the Constitution of Ecuador, February 5, 2020.

  82. 82.

    Ibídem, Pistor (Katarina)

  83. 83.

    See Sornarajah M, Emeritus Professor of Law, National University of Singapore, Amicus curiae regarding the action of interpretation of Art. 422 of the Constitution of Ecuador, March 2, 2020; https://twitter.com/dolarizacionEc/status/1234612694608539654.

  84. 84.

    Relevant constitutional provisions: Art. 276 (objectives of the development regime, including guaranteeing national sovereignty, Latin-American integration and the strategic insertion in foreign relations); Art. 339 (regulation and promotion of foreign and domestic investments); Art. 416 (principles of foreign relations); Art. 403 (prohibition to enter into cooperation agreements including clauses diminishing the sustainable management and preservation of biodiversity, human health and nature; Art. 421 (the mandate that the application of trade/commercial international instruments shall not diminish the right to health, access to medicine, goods, supplies and technological and scientific progresses)

  85. 85.

    Van Harten G, Loughlin M (2006) Investment treaty arbitration as a species of global administrative law. Eur J Int Law 17(1):142 p

  86. 86.

    Íbidem; Van Harten G, Loughlin M, 143 p.

  87. 87.

    Íbidem, Sornarajah M

  88. 88.

    Íbidem, Van Harten G and Loughlin M, 143 p.

  89. 89.

    SGS Société Générale de Surveillance S.A. v. Islamic Republic of Pakistan, ICSID Case No. ARB/01/13, paragraph 441

  90. 90.

    This interpretation is in harmony with well-grounded critics to the system of international arbitration, revealed as “a unique form of public law adjudication” that “uses rules and structures of international law and private arbitration to make governmental choices regarding the regulatory relationship between individuals and the state” (Van Harten: p. 10). Van Harten categorically tackles the flaws of investment arbitration:

    (…) Rather, the target of criticism is the particular way in which states have used a private method of international adjudication to resolve claims that should be finally determined by courts, whether domestic or international. Consensual arbitration is broadly suitable as a means to settle disputes between companies or between states, but it is fundamentally inadequate as a substitute for the public courts in the regulatory domain. As I shall argue, the courts and only the courts should have the final authority to interpret the law that binds sovereign power and to stipulate the appropriate remedies for sovereign wrongs that lead to business loss.

    Van Harten G (2007) Investment treaty arbitration and public law. Oxford University Press, pp 10–11

  91. 91.

    Žižek S (2016) La nueva lucha de clases. Los refugiados y el terror (ARGUMENTOS) (Spanish Edition). Editorial Anagrama. Kindle Edition

  92. 92.

    Ibídem, Pistor K

  93. 93.

    See Carmigniani E (2008), “Quería niño salió niña,” Instituto Ecuatoriano de Arbitraje, 27 de junio de 2008. http://institutoecuatorianodearbitraje.blogspot.com/2008/06/queran-nio-y-sali-nia.html

    See also Prieto Muñoz G (2017) Ecuador’s 2017 termination of treaties: how not to exit the international investment regime. Braz J Int Law – Revista de Direito Internacional 14(2)

  94. 94.

    See Espinosa Velasco SX (2019) Ecuador and international investment law and policy: between constitutional sovereignty and state responsibility. Boekenplan Maastricht. https://doi.org/10.26481/dis.20190329se

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Authors and Affiliations

  1. Secretariat for Legal Affairs, Presidency of the Republic, Ecuador, Quito, Ecuador

    Sebastian Espinosa

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  1. School of Law, City University of Hong Kong, Kowloon, Hong Kong

    Julien Chaisse

  2. School of Business and Law, University of Portsmouth, Portsmouth, UK

    Leïla Choukroune

  3. Institute of Malaysia and International Studies, National University of Malaysia, Bangi, Selangor, Malaysia

    Sufian Jusoh

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Espinosa, S. (2020). The Evolution of the System of Foreign Investment Protection in Ecuador. In: Chaisse, J., Choukroune, L., Jusoh, S. (eds) Handbook of International Investment Law and Policy. Springer, Singapore. https://doi.org/10.1007/978-981-13-5744-2_85-1

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