Ecuador Investment Protections

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1. INTERNATIONAL LAW INVESTMENT PROTECTION FRAMEWORK

Ecuador is no longer a State Party to the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (the “ICSID Convention” or the “Convention”). Ecuador signed the ICSID Convention on 15 January 1986, and deposited its instrument of ratification on the same date. The Convention entered into force on 14 February 1986. Over the course of its term as a Contracting Party to the Convention, Ecuador made two designations under Article 25(1): one for the State Oil Enterprise (CEPE)[1] and the other for the National Council of Electricity (CONELEC).[2]

On 4 December 2007, the Centre received a notification under Article 25(4) of the Convention from Ecuador in which the State revoked its consent to ICSID jurisdiction in disputes arising from foreign investments related to the exploration and exploitation of natural resources such as oil, mining, and gas.[3] Then, on 6 July 2009, the Depositary of the Convention (the President of the World Bank) received a written notice of Ecuador’s denunciation of the ICSID Convention. Under Article 71 of the Convention, the denunciation took effect on 7 January 2010, six months after the notification was received.[4]

Ecuador is a signatory to numerous bilateral and multilateral investment treaties. The Republic has denounced 9 of the 26 bilateral investment treaties (“BITs”) to which it was previously a party. At the request of President Correa in early 2009, the National Assembly began the process of reviewing the provisions of thirteen of the seventeen remaining BITs to determine whether they contravene Article 422 of the Constitution.[5]

The Republic’s first round of treaty denunciations occurred in early 2008, with Cuba, the Dominican Republic, El Salvador, Guatemala, Honduras, Nicaragua, Paraguay, Uruguay, and Romania.[6] Ecuador’s denunciation of the BITs did not take effect immediately, but rather in accordance with the “termination period” established in each BIT, generally six months to a year from the date when the notification of termination was filed. Most of the BITs also contain a “survival period” of five to fifteen years, during which certain treaty provisions remain in force for investments made prior to the effective date of termination.[7] During the termination and survival periods provided in the abovementioned BITs, in accordance with one commentator, “an investor in Ecuador who was previously protected by a bilateral investment treaty would still have residual rights despite Ecuador’s threatened denunciation of these agreements.”[8]

Following the 2008 round of treaty denunciations, in January 2009, President Correa requested authorization from the National Assembly’s Commission on International Relations to denounce thirteen additional BITs that Ecuador signed with Finland, Sweden, Canada, China, the Netherlands, Germany, France, United Kingdom and Ireland, Argentina, Chile, Venezuela, Switzerland, and the United States.[9] Following seven sessions analyzing the issue, the legislative organ asked President Correa to require the Constitutional Court to issue an advisory opinion on the constitutionality of the thirteen BITs.[10] A two-step process is currently required to denounce Ecuador’s BITs: first, the Constitutional Court must issue an opinion indicating whether the treaty provisions are unconstitutional under Article 422, and second, the National Assembly must issue a resolution approving the denunciation.[11]

The Constitutional Court ruled on the constitutionality of Ecuador’s BITs signed with Germany, the United Kingdom and Ireland, Finland, China, France, the Netherlands, Sweden, Switzerland, Chile, Canada, United States, and Venezuela.[12] To date, the National Assembly approved the denunciation of the BITs with Germany and the United Kingdom and Ireland,[13] as well as Sweden, France,[14] and Finland. As of today, the BIT with Finland is the only one officially denounced in this second round of denunciations. Most recently, the Constitutional Court reviewed five more treaties: the BIT that Ecuador concluded with the Netherlands that the Executive seeks to denounce, and three agreements with Venezuela and one with Cuba that the Executive seeks to ratify.[15]

Ecuador is also a signatory to several multinational investment treaties, including the Foreign Multilateral Investment Protection Agreement,[16] the Agreement for Cooperation with the European Economic Community,[17] the Agreement for Cooperation between the European Community, the Andean Pact,[18] and the Andean Integration Agreement.[19] Ecuador is also a member of the World Trade Organization (“WTO”),[20] and is therefore a contracting party to the Agreement on Trade-Related Investment Measures (“TRIMs Agreement”)[21] – a multilateral agreement that prohibits trade-related investment measures inconsistent with basic General Agreement on Tariffs and Trade (“GATT”) provisions – and the General Agreement on Trade in Services (“GATS”), which addresses foreign investment in services.[22] Finally, Ecuador is a Member Country of the Multilateral Investment Guarantee Agency (“MIGA”), an organization that is part of the World Bank Group that promotes foreign direct investment in the developing world by insuring investments.[23]

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2. INVESTMENT DISPUTES

[Examples of Ecuadorian investment treaty arbitrations include:] [f]ourteen proceedings … brought by foreign investors under the ICSID Convention . . . . [Of these fourteen, nine arbitral proceedings were … [conducted pursuant to a] different set of rules[, including]: [eight] international arbitrations … before ad/hoc Tribunals under the UNCITRAL rules[, and] [o]ne State-to-State arbitration proceeding … before an ad/hoc Tribunal under the UNCITRAL Rules and Ecuador is the claimant. [Of the eight international arbitrations before ad/hoc Tribunals under the UNCITRAL rules,] two of these cases were administered by the London Court of International Arbitration.[24]

[1] Designation made according to Article 25(1) (19 Apr. 1988).

[2] Designation made according to Article 25(1) (21 Aug. 2002).

[3] “Ecuador’s Notification Under Article 25(4) of the ICSID Convention,” ICSID News Release, 5 Dec. 2007, available at http://icsid.worldbank.org/ICSID/FrontServlet?requestType=CasesRH&actionVal=OpenPage&PageType=AnnouncementsFrame&FromPage=Announcements&pageName=Announcement9 (accessed 13 Jan. 2011).

[4] “Ecuador Submits a Notice Under Article 71 of the ICSID Convention,” ICSID News Release, 9 July 2009, available at http://icsid.worldbank.org/ICSID/FrontServlet?requestType=CasesRH&actionVal=OpenPage&PageType=AnnouncementsFrame&FromPage=NewsReleases&pageName=Announcement20 (accessed 13 Jan. 2011).

[5] See “Corte Constitucional Analiza Tratados de Inversiones,” La Hora, 17 Sept. 2010, available at http://www.lahora.com.ec/index.php/noticias/show/1101019327 (accessed 13 Jan. 2011). Since 2009, the International Relations Commission of the National Assembly has been reviewing the BITs concluded with Finland, Sweden, Canada, China, Netherlands, Germany, France, United Kingdom and Ireland, Argentina, Chile, Venezuela, Switzerland, and the United States at the request of the President. The Constitutional Court has declared a number of the provisions in these BITs to be unconstitutional and continues to review them. “Corte Constitucional Analiza Tratados de Inversiones.” See, e.g., Constitutional Court [(“CC”)], Dictamen 012-10-DTI-CC (3 Aug. 2010), available at http://www.derechoecuador.com/index.php?option=com_content&task=view&id=5679&Itemid=596 (accessed 13 Jan. 2011).

[6] “Boletín de Prensa 2079 - Comisión de Relaciones Internacionales Analiza Tratados de Protección Recíproca de Inversión,” Asamblea Nacional, 29 Oct. 2009, available at http://www.asambleanacional.gov.ec/200910291330/noticias/boletines/comision-de-relaciones-internacionales-analiza-tratados-de-proteccion-reciproca-de-inversion.html (accessed 13 Jan. 2011).

[7] See, e.g., Convenio Entre el Gobierno de la República del Ecuador y el Gobierno de la República de El Salvador para la Promoción y Protección Recíprocas de Inversiones, (16 May 1994), no longer in force, Art. XI. Article XI provides a termination period of 12 months and a survival period of 10 years.

[8] See Michael Nolan, Frédéric Sourgens & Erin Culbertson, “The Erosion BIT by BIT of Investment Protection in Ecuador,” Milbank Litigation Client Alert, 3 Nov. 2009, available at http://www.milbank.com/NR/rdonlyres/2FDD8233-4902-4CD6-A401-E5D84DE90653/0/110309_Ecuador_Investment_Protection.pdf (accessed 13 Jan. 2011).

[9] See “Boletín de Prensa 2079 - Comisión de Relaciones Internacionales Analiza Tratados de Protección Recíproca de Inversión,” Asamblea Nacional, 29 Oct. 2009, available at http://www.asambleanacional.gov.ec/200910291330/noticias/boletines/comision-de-relaciones-internacionales-analiza-tratados-de-proteccion-reciproca-de-inversion.html (accessed 13 Jan. 2011).

[10] See “Boletín de Prensa 1845 - Corte Constitucional Deberá Emitir Dictamen Sobre Denuncia de Tratados,” Asamblea Nacional, 7 Dec. 2009, available at http://www.asambleanacional.gov.ec/200912071770/noticias/boletines/corte-constitucional-debera-emitir-dictamen-sobre-denuncia-de-tratados.html (accessed 13 Jan. 2011).

[11] See generally “Ecuador Emprende Retirada de los TBI’s,” Poderes, 16 Sept. 2010, available at http://www.poderes.com.ec/internacional/item/328-ecuador-emprende-retirada-de-los-tbi%E2%80%99s.html (accessed 13 Jan. 2011).

[12] CC, Dictamen 026-10-DTI-CC (17 Aug. 2010) (Finland); CC, Dictamen 027-10-DTI-CC (17 Aug. 2010) (China), available at http://www.derechoecuador.com/index.php?option=com_content&task=view&id=5703&Itemid=596 (accessed 13 Jan. 2011); CC, Dictamen 012-10-DTA-CC (3 Aug. 2010) (United Kingdom); CC, Dictamen 023-10-DTI-CC (3 Aug. 2010) (Germany); available at http://www.derechoecuador.com/index.php?option=com_content&task=view&id=5679&Itemid=596 (accessed 13 Jan. 2011). Additional information was obtained by the author from the Office of the Attorney General of Ecuador.

[13] See “Ecuador Emprende Retirada de los TBI’s,” Poderes, 16 Sept. 2010, available at http://www.poderes.com.ec/internacional/item/328-ecuador-emprende-retirada-de-los-tbi%E2%80%99s.html (accessed 13 Jan. 2011).

[14] Boletín de Prensa - Aprobada la denuncia de los convenios para la Promoción Reciproca de Inversiones con el Reino de Suecia y la República Francesa, 15 March 2011, available at http://www.asambleanacional.gov.ec/201103155430/noticias/boletines/aprobada-la-denuncia-de-los-convenios-para-la-promocion-reciproca-de-inversiones-con-el-reino-de-suecia-y-la-republica-francesa.html (accessed 1 June 2011).

[15] See “Boletín de Prensa 2079 - Comisión de Relaciones Internacionales Analiza Tratados de Protección Recíproca de Inversión,” Asamblea Nacional, 29 Oct. 2009, available at http://www.asambleanacional.gov.ec/200910291330/noticias/boletines/comision-de-relaciones-internacionales-analiza-tratados-de-proteccion-reciproca-de-inversion.html (accessed 13 Jan. 2011).

[16] Multilateral Investment Agreement [Convenio Organismo Multilateral Garantía Inversiones Extranjeras] (6 Mar. 1986).

[17] Decision No. 239 of the Cartagena Agreement - Framework Cooperation Agreement with the European Economic Community (20 Nov. 1992).

[18] Framework Cooperation Agreement Between the Andean Pact and the European Union (11 July 1997).

[19] Decision No. 563 of the Cartagena Agreement - Subregional Andean Integration Agreement (5 Sept. 2003).

[20] Accession Protocol to the World Trade Organization (2 Jan. 1996).

[21] Scope of Protocol of Accession to the World Trade Organization (28 June 1996).

[22] World Trade Organization Website, http://www.wto.org/english/tratop_e/invest_e/invest_e.htm.

[23] Mulilateral International Guarantee Agency Website – Membership and Subscriptions, http://www.miga.org/news/index_sv.cfm?stid=1506&aid=1358#sch_a.

[24] See Latin Arbitration Law Website – Ecuador, /ecuador.