Investment Treaty Arbitration: Ecuador

Argentina

(1 December 1995)

Yes

Yes

Yes

Yes

No

6 months

Yes

Yes

Bolivia

(15 August 1997)

Yes

Yes

Yes

Yes

No

6 months

Yes

Yes

Brazil (signed 25 September 2019)

Sort of

Yes

Yes

Yes

No

At least 75 days

No

Yes

Canada

(6 June 1997)

Yes

Yes

Yes

Yes

No

6 months

Yes³

Yes

Chile

(2 January 1996)

Yes

Yes

Yes

Yes

No

6 months

Yes

Yes

China

(1 July 1997)

Yes

Yes

Yes

Yes

No

6 months

Yes

Amount of compensation in case of expropriation

Costa Rica

(Not in force)

Yes

Yes

Yes

Yes

No

6 months

Yes

Yes

Cuba

(1 June 1998 /terminated)

Yes

Yes

No

Yes

No

6 months

Yes

Yes

Dominican Republic

(4 November 2006 /terminated)

Yes

Yes

Yes

Yes

No

6 months

No

Yes

El Salvador

(14 January 1995 /terminated)

Yes

Yes

Yes

Yes

No

6 months

Yes

Yes

Finland

(16 December 2001 /terminated)

Yes

Yes

Yes

Yes

No

6 months

Yes

Yes

France

(10 June 1996)

Yes

Yes

Yes

Yes

No

6 months

Yes

Yes

Germany

(12 February 1999)

Yes

Yes

Yes

Yes

Yes

6 months

Yes

Yes

Guatemala

(4 June 2005 /terminated)

BIT not available

Honduras

(24 December 2006 /terminated)

No

Yes

Yes

Yes

No

6 months

Yes

Yes

Italy

(26 May 2005)

Yes

Yes

Yes

Yes

Yes

6 months

Yes

Yes

Netherlands

(1 July 2001)

Yes

Yes

Yes

Yes

Yes

6 months

Yes

Yes

Nicaragua

(9 September 2002 /terminated)

Yes

Yes

Yes

Yes

No

6 months

Yes

Yes

Paraguay

(18 September 1995 /terminated)

Yes

Yes

Yes

Yes

Yes

6 months

Yes

Yes

Peru

(10 December 1999)

Yes

Yes

Yes

Yes

No

6 months

Yes

Yes

Romania

(18 July 1997 /terminated)

Yes

Yes

Yes

Yes

No

6 months

Yes

Yes

Russian

(not in force)

Yes

Yes

Yes

Yes

No

6 months

Yes

Yes

Spain

(18 June 1997)

Yes

Yes

Yes

Yes

No

6 months

No

Yes

Sweden

(1 March 2002)

Yes

Yes

Yes

Yes

Yes

6 months

No

Yes

Switzerland

(9 November 1969)

Yes

Yes

Yes

Yes

No

No

No

No

United Kingdom of Great Britain and Northern Ireland

(24 August 1995)⁴

Yes

Yes

Yes

Yes

Yes

6 months

Yes

Yes

United States

(11 May 1997)

Yes

Yes

Yes

Yes

Yes

6 months

Yes

Yes

Uruguay

(31 July 1985 /terminated)

BIT not available

Venezuela

(1 February 1995)

Yes

Yes

Yes

Yes

No

6 months

Yes

Yes

Seat of the investor / place of business

Most Ecuadorian investment instruments provide that a legal entity incorporated or duly organised under the laws of a contracting party qualify as an ‘investor.’ Some treaties require that such entities have their substantive business operations / real economic activities (Chile, El Salvador, Nicaragua, Dominican Republic, Romania) and/or their seat (Germany, Canada, Argentina, Bolivia, China, Chile, Cuba, El Salvador, Spain, Finland, France, Costa Rica, Honduras, Italy, Nicaragua, Peru, Dominican Republic, Romania, Sweden, Switzerland, Paraguay, Venezuela and United Kingdom) within the territory of a contracting party.

Types of entities included in the definition

Ecuadorian investment instruments protect entities with legal personality. Unincorporated entities will not, in general, enjoy legal protection, although a treaty may provide otherwise. For example, the Ecuador–Germany BIT and the Ecuador–Switzerland BIT explicitly specify that they cover entities without legal personality.

Legal entities controlled by nationals of the contracting party

Some of Ecuador’s investment instruments extend protection to juridical persons that are not constituted under laws and regulations of a contracting party but are controlled, directly or indirectly, by a national or a legal entity of that contracting party (France, Netherlands, Paraguay, Sweden, Switzerland, United States, Dominican Republic).

Denial of benefits

The BIT with the United States contains a denial of benefits clause under which the contracting parties reserve the right to deny the benefits of the treaty to a company that does not have an economic connection to the state on whose nationality it relies.

Three BITs (Argentina, Chile, and Venezuela) include a denial of benefits to investments made by individuals who are nationals of a contracting party in the territory of the other contracting party if such persons, at the time of the investment, have been domiciled for more than two years in the contracting party, unless it is proved that the investment was admitted into the territory from abroad.

Two BITs (El Salvador and Nicaragua) include a denial of benefits to investments made by individuals who are nationals of a contracting party in the territory of the other contracting party if such persons, at the time of investment, have been domiciled for more than five years in this contracting party, unless it is proved that the investment was admitted into the territory from abroad.

One BIT (Brazil) denies benefits to investments ultimately controlled by a national of the country where the investment was made.

Nationality of individuals

The law of the contracting party determines an individual’s nationality. ‘Investor’ is typically defined to include persons having the citizenship or nationality of a contracting party. In some cases (Canada) the definition includes any individual who has citizenship or status as a permanent resident (regardless of their nationality). In other cases (Cuba), this definition requires both standards: the investor must be a citizen of the contracting party and have a permanent residence in its territory.

Dual citizenship

The Canada BIT states that investors in Ecuador cannot hold Canadian citizenship (no mutual restriction for investors of Canada).

Open-ended definition

Ecuador’s investment instruments adopt an open-ended approach by referring to ‘every kind of asset’ and by including an illustrative list of categories of investment, eg:  ‘Investment’ means every kind of asset […] including, in particular, though not exclusively…’.

Eligible assets

Ecuador’s investment instruments list different categories of assets, which typically include:

• movable and immoveable property as well as any other rights in rem, such as mortgages, liens and pledges;
• shares of companies and other kinds of company interests;
• claims to money or to any performance having an economic value;
• intellectual property rights; and
• business concessions, including concessions to search for, extract and exploit natural resources.

The investment instruments can also include returns and/or their reinvestment under their scope of protection (Bolivia and Costa Rica).

The BIT with Italy lists a number of specific activities that qualify as investments. 

The BIT with Canada specifically includes financial services as investments protected under the treaty.

Many BITs protect the guarantees or payments given by a contracting party to their national (natural or legal person) with respect to an investment in the territory of the other contracting party. Under this subrogation the contracting party recognises the rights over the transfer of any title of such an investor to the former contracting party (Argentina, Bolivia, Chile, China, Costa Rica, Cuba, Canada, El Salvador, Spain, Finland, Honduras, Italy, Nicaragua, Netherlands, Peru, United Kingdom, Dominican Republic, Sweden, Venezuela, Netherlands, Paraguay, Romania and Germany). BITs – such as the one with France – determine that the recognition of subrogation shall be applied on a case-by-case basis pursuant to the contracting party’s criteria.

Directly or indirectly controlled by the investor

Some BITs provide that the investment may be owned or controlled by the investor directly or indirectly (Canada, United States, France, Honduras, Peru, Brazil and Sweden).

Commencement of coverage

Ecuador’s investment instruments generally protect all existing investments, including those made before the entry into force of the treaty.

Some protect only those investments not involved in a dispute that arose before the treaty entered into force (Argentina, Chile, Costa Rica, Cuba and Paraguay).

The BIT with El Salvador only protects investments made after it came into force.

Territorial coverage

Most of Ecuador’s investment instruments expressly state that they cover the entire territory under each State’s sovereignty as well as the maritime zones where a State exercises sovereign rights in accordance with international law (Argentina, Bolivia, Brazil, Canada, Chile, Costa Rica, Cuba, Dominican Republic, El Salvador, Germany Honduras, Italy, Nicaragua, Peru, Romania and Venezuela).

Other BITs (France and Finland) simply state that they cover investments of those contracting parties’ nationals or companies in Ecuador and investments of Ecuadorian nationals and companies made in such states, without particularising each contracting party’s territorial coverage. There has been a discussion regarding the application of the United Kingdom treaty to overseas territories; however, the BIT just refers to nationals of the United Kingdom.

The BIT with the United States explicitly provides that the treaty applies to the political subdivisions of the contracting parties.

Accordance with local laws

Ecuador’s investment instruments generally provide that an investment must be made in accordance with the national and international laws and regulations of the host State (Germany, Argentina, Bolivia, Brazil, Canada, Chile, China, Costa Rica, Cuba, El Salvador, Spain, France, Honduras, Italy, Nicaragua, Paraguay, Peru, United Kingdom, Dominican Republic, Romania, Sweden, Switzerland, Venezuela, United States).

Change in the form of an investment

Many of Ecuador’s investment instruments explicitly clarify that changes in the form of an investment does not affect its status under the treaty, so long as it still satisfies the corresponding definition (Germany, Argentina, Bolivia, Canada, Chile, Costa Rica, El Salvador, United States, Finland, France, Honduras, Italy, Nicaragua, Netherlands, Peru, United Kingdom, Dominican Republic, Romania, Sweden, Venezuela).

Exclusion of certain assets or transaction from the definition

The Canada BIT explicitly excludes ‘[r]eal estate or other property, tangible or intangible, not acquired in the expectation or used for the purpose of economic benefit or other business purposes’.

The Canada BIT also excludes investments in cultural industries, government procurements, government-provided subsidies, rights accorded to the aboriginal peoples of Canada, and foreign aid programmes that aim to promote economic development.

Illustration of the FET standard

Ecuador’s investment instruments (except Brazil, Honduras and Dominican Republic) simply provide that each contracting party shall accord fair and equitable treatment to investments.

The BIT with Brazil guarantees that any ‘measures affecting investment will be administered in a reasonable, objective, and impartial manner.’

The BITs with Honduras and the Dominican Republic refer to ‘fair, equitable and favourable conditions’ and ‘fair and equitable treatment’ in their preamble only.

Principles of international law

Some of Ecuador’s investment instruments provide that fair and equitable treatment must be ensured in accordance with ‘principles of international law’ (Canada, France, Venezuela and United States).

Non-impairment

Ecuador’s investment instruments impose upon the contracting party an obligation not to impair the management, maintenance, use, enjoyment or disposal of investments through ‘unreasonable or discriminatory treatment’ / ‘arbitrary and discriminatory measures’, ‘unreasonable or discriminatory measures’ (Germany, Argentina, Bolivia, Chile, Costa Rica, Cuba, El Salvador, Finland, Honduras, Italy, Nicaragua, Netherlands, Paraguay, Peru, United Kingdom, Romania, Sweden, Switzerland, Venezuela, Spain, Dominican Republic and United States).

The French BIT provides that the right to enjoy fair and equitable treatment must not be hindered in fact or law.6

Indirect expropriation

Most of Ecuador’s investment instruments cover indirect expropriations by prohibiting measures ‘tantamount to expropriation’ (Germany, Argentina, Bolivia, Canada, Chile, China, Costa Rica, Cuba, El Salvador, Spain, Finland, Honduras, Italy, Nicaragua, Paraguay, Peru, United Kingdom, Dominican Republic, Romania and Venezuela).

Certain instruments include an explicit reference to ‘measures depriving indirectly’ or ‘expropriated directly or indirectly’ (United States, France, Italy, Netherlands, Sweden, Switzerland and Paraguay).

The BIT with Brazil explicitly only protects direct expropriation.

Conditions for expropriation

Ecuador’s investment instruments generally offer protection against expropriation unless the measures are taken in the public interest on a non-discriminatory basis and under due process of law (Argentina, Bolivia, Brazil, Canada, Costa Rica, Cuba, El Salvador, Chile, Spain, Finland, United States, France, Honduras, Italy, Nicaragua, Netherlands, Paraguay, Dominican Republic, Romania, Venezuela, Sweden and Peru). The BITs with Switzerland, Germany, and the United Kingdom refer to the public interest condition but do not explicitly refer to the other two standards of non-discriminatory basis and due process.

The BIT with China provides that a legal expropriation requires the following: (i) declaration of public interest, (ii) pursuant to an internal legal process, (iii) without discrimination, and (iv) in exchange of fair compensation.

The BIT with United States specifies that expropriation and compensation should follow the international law standards.

Valuation date

Ecuador’s investment instruments generally require that the investor be provided with compensation equivalent to the value of the expropriated asset immediately before the expropriation effectively took place or the time in which it was publicly known (whatever is earlier). Only three BITs refer solely to the moment when expropriation took place and omit the time when the expropriation was publicly known (China, Brazil and Switzerland).

Calculation of compensation

Ecuador’s investment instruments require that such compensation shall represent fair market value (Finland, United States, Sweden), market value (Honduras, Germany, Argentina, Bolivia, Chile, Cuba, El Salvador, Italy, Nicaragua, United Kingdom, Dominican Republic, Romania, Venezuela), genuine value (Netherlands and Canada), real value (France), fair value (Costa Rica, Peru), commercial value (Paraguay), or value (China, Brazil) of the investment affected.

Prompt, adequate and effective compensation

Ecuador’s investment instruments require that the compensation should be prompt, adequate, and effective (Argentina, Bolivia, Canada, Chile, Costa Rica, Cuba, El Salvador, Finland, Honduras, United States, Italy, Nicaragua, Peru, United Kingdom, Dominican Republic, Romania, Sweden, Switzerland, Venezuela), ‘fair and adequate’ (France), ‘effective and adequate’ (Switzerland), ‘just compensation’ (Netherlands and Paraguay), ‘immediate, complete and effective’ (Italy), ‘adequate’ (Spain), or fair (China). The BIT with Brazil does not contain a provision regarding the timing and adequacy of compensation.

The BIT with Switzerland determines that such compensation should be consistent with the jus gentium.

The BIT with China also establishes that the compensation should be paid ‘without undue delay’. The Italian BIT adds ‘without undue delay and in any case within two months’.

Payment shall be transferable and made without delay in a freely convertible currency (China, Brazil, Spain, United States, France, Netherlands, Paraguay, United Kingdom, Romania, Switzerland, Venezuela, Germany, Argentina, Bolivia, Cuba and Honduras).

Interest and applicable period

Such compensation shall include interest depending on the applicable law. If Ecuadorian law is applicable, the interest rates are determined by the Ecuadorian Central Bank, and there is a legal prohibition to apply compound interest.

Other BITs determine interest based on the commercial banking rate (Honduras, Germany, and Paraguay), the commercial market rate (Finland, Bolivia, France, Brazil, Peru, Sweden, Argentina, Canada, Chile, Cuba, El Salvador, United States, Nicaragua, United Kingdom, Romania, Venezuela, Netherlands), or the EURIBOR rate at six months from the date of expropriation until the date of payment (Italy).

The BIT with Costa Rica determines interest based on the passive commercial rate, but provides that Ecuador will pay interest for the period between the date of expropriation until the effective date of payment, while Costa Rica will pay interest for the period between the date of dispossession and the effective date of payment.

The BIT with the Dominican Republic contains no explicit provision on interest.

Review by judicial and administrative authorities

A number of BITs recognise the right to a review by judicial or administrative authority of the legality of expropriation and/or the amount of compensation (Germany, Argentina, Bolivia, Chile, Costa Rica, Canada, El Salvador, Finland, United States, France, Honduras, Italy, Nicaragua, Peru, Dominican Republic, Venezuela, United Kingdom, Romania).

Links with other protections

The BIT with Germany determines that the most-favoured-nation treatment shall apply to the section of expropriation.

The BIT with Italy provides that if the investor and the responsible authority fail to reach an agreement on the amount of compensation, such amount will be determined pursuant to the procedures for the resolution of disputes between the contracting party and investors provided by the treaty.

Indirect expropriation

Most of Ecuador’s investment instruments cover indirect expropriations by prohibiting measures ‘tantamount to expropriation’ (Germany, Argentina, Bolivia, Canada, Chile, China, Costa Rica, Cuba, El Salvador, Spain, Finland, Honduras, Italy, Nicaragua, Paraguay, Peru, United Kingdom, Dominican Republic, Romania and Venezuela).

Certain instruments include an explicit reference to ‘measures depriving indirectly’ or ‘expropriated directly or indirectly’ (United States, France, Italy, Netherlands, Sweden, Switzerland and Paraguay).

The BIT with Brazil explicitly only protects direct expropriation.

Conditions for expropriation

Ecuador’s investment instruments generally offer protection against expropriation unless the measures are taken in the public interest on a non-discriminatory basis and under due process of law (Argentina, Bolivia, Brazil, Canada, Costa Rica, Cuba, El Salvador, Chile, Spain, Finland, United States, France, Honduras, Italy, Nicaragua, Netherlands, Paraguay, Dominican Republic, Romania, Venezuela, Sweden and Peru). The BITs with Switzerland, Germany, and the United Kingdom refer to the public interest condition but do not explicitly refer to the other two standards of non-discriminatory basis and due process.

The BIT with China provides that a legal expropriation requires the following: (i) declaration of public interest, (ii) pursuant to an internal legal process, (iii) without discrimination, and (iv) in exchange of fair compensation.

The BIT with United States specifies that expropriation and compensation should follow the international law standards.

Valuation date

Ecuador’s investment instruments generally require that the investor be provided with compensation equivalent to the value of the expropriated asset immediately before the expropriation effectively took place or the time in which it was publicly known (whatever is earlier). Only three BITs refer solely to the moment when expropriation took place and omit the time when the expropriation was publicly known (China, Brazil and Switzerland).

Calculation of compensation

Ecuador’s investment instruments require that such compensation shall represent fair market value (Finland, United States, Sweden), market value (Honduras, Germany, Argentina, Bolivia, Chile, Cuba, El Salvador, Italy, Nicaragua, United Kingdom, Dominican Republic, Romania, Venezuela), genuine value (Netherlands and Canada), real value (France), fair value (Costa Rica, Peru), commercial value (Paraguay), or value (China, Brazil) of the investment affected.

Prompt, adequate and effective compensation

Ecuador’s investment instruments require that the compensation should be prompt, adequate, and effective (Argentina, Bolivia, Canada, Chile, Costa Rica, Cuba, El Salvador, Finland, Honduras, United States, Italy, Nicaragua, Peru, United Kingdom, Dominican Republic, Romania, Sweden, Switzerland, Venezuela), ‘fair and adequate’ (France), ‘effective and adequate’ (Switzerland), ‘just compensation’ (Netherlands and Paraguay), ‘immediate, complete and effective’ (Italy), ‘adequate’ (Spain), or fair (China). The BIT with Brazil does not contain a provision regarding the timing and adequacy of compensation.

The BIT with Switzerland determines that such compensation should be consistent with the jus gentium.

The BIT with China also establishes that the compensation should be paid ‘without undue delay’. The Italian BIT adds ‘without undue delay and in any case within two months’.

Payment shall be transferable and made without delay in a freely convertible currency (China, Brazil, Spain, United States, France, Netherlands, Paraguay, United Kingdom, Romania, Switzerland, Venezuela, Germany, Argentina, Bolivia, Cuba and Honduras).

Interest and applicable period

Such compensation shall include interest depending on the applicable law. If Ecuadorian law is applicable, the interest rates are determined by the Ecuadorian Central Bank, and there is a legal prohibition to apply compound interest.

Other BITs determine interest based on the commercial banking rate (Honduras, Germany, and Paraguay), the commercial market rate (Finland, Bolivia, France, Brazil, Peru, Sweden, Argentina, Canada, Chile, Cuba, El Salvador, United States, Nicaragua, United Kingdom, Romania, Venezuela, Netherlands), or the EURIBOR rate at six months from the date of expropriation until the date of payment (Italy).

The BIT with Costa Rica determines interest based on the passive commercial rate, but provides that Ecuador will pay interest for the period between the date of expropriation until the effective date of payment, while Costa Rica will pay interest for the period between the date of dispossession and the effective date of payment.

The BIT with the Dominican Republic contains no explicit provision on interest.

Review by judicial and administrative authorities

A number of BITs recognise the right to a review by judicial or administrative authority of the legality of expropriation and/or the amount of compensation (Germany, Argentina, Bolivia, Chile, Costa Rica, Canada, El Salvador, Finland, United States, France, Honduras, Italy, Nicaragua, Peru, Dominican Republic, Venezuela, United Kingdom, Romania).

Links with other protections

The BIT with Germany determines that the most-favoured-nation treatment shall apply to the section of expropriation.

The BIT with Italy provides that if the investor and the responsible authority fail to reach an agreement on the amount of compensation, such amount will be determined pursuant to the procedures for the resolution of disputes between the contracting party and investors provided by the treaty.

Scope

The formulation of the standard varies in Ecuador’s investment instruments. Some provide for ‘full protection and security’ (Germany, Canada, Finland, United States, France, Netherlands, United Kingdom), ‘full legal protection’ (Argentina, Bolivia, Chile, Costa Rica, El Salvador, Nicaragua, Rumania, Venezuela), ‘full and constant protection and security’ (Finland), or ‘full protection’ (Sweden and Honduras). Others simply require a contracting party to ‘protect’ the investments (China, Spain, Paraguay, Dominican Republic and Switzerland).

Scope

A more limited number of Ecuador’s investment instruments provides an umbrella clause (Germany, United States, Italy, Netherlands, Paraguay, United Kingdom and Sweden).

Compensation in case of armed conflict/civil unrest

Ecuadorian investment instruments guarantee investors of contracting parties most favoured nation and national treatment with regard to compensation paid in the case of armed conflict or civil unrest (Germany, Argentina, Bolivia, Brazil, Canada, Chile, Costa Rica, Cuba, El Salvador, Finland, France, Honduras, Italy, Nicaragua, United States, United Kingdom, Dominican Republic, Sweden, Venezuela, Netherlands, Paraguay, Peru and Romania). The BITs with China and Spain only refer generally to the most-favoured-nation treatment, whereas the Peruvian BIT refers solely to national treatment.

Free transfer of payments

Most Ecuadorian investment instruments contain a provision that requires the contracting party to allow investors to transfer investments and investment returns freely (Germany, Argentina, Bolivia, Brazil, Canada, China, Chile, Costa Rica, El Salvador, Spain, Finland, France, Italy, Nicaragua, Netherlands, Peru, United Kingdom, Sweden, Venezuela and Switzerland).

Ecuador’s BITs with Bolivia, Cuba, Honduras, Dominican Republic, Spain and Romania allow free transfer of payments provided that the capital is registered and payment of applicable taxes has been duly made.

Some of Ecuador’s investment instruments further stipulate that the transfers shall be made ‘without delay’ (Germany, Argentina, Brazil, Canada, Chile, Costa Rica, El Salvador, Finland, France, Italy, Netherlands, Peru, United Kingdom, Sweden, Venezuela, Paraguay and Romania).

BITs with Germany, Chile and Spain define ‘without delay’ as ‘two months, commencing on the date on which the relevant request has been forwarded to the competent authorities’.

The BIT with Germany further provides that the rate of exchange of currency should be in accordance with the regulation of the International Monetary Fund.  Other BITs provide for the application of the exchange rate of the contracting party in whose territory the investment is situated (Argentina, Bolivia, Chile, China, Costa Rica, Cuba, Honduras, Nicaragua, Dominican Republic and Sweden).

The BIT with Brazil contains situations when a party is explicitly allowed to block payment transfers.

Transparency

Certain of Ecuador’s BITs provide that parties shall seek to facilitate the provision and exchange of investment information and/or shall make public its laws, regulations, administrative practices and procedures, and adjudicatory decisions that affect investments (Bolivia, Brazil, Canada, Finland, Honduras, United States, Peru, Dominican Republic, Sweden, Romania).

Most favourable treatment

Certain of Ecuador’s BITs provide that if the provisions of law of a contracting party or obligations under international law entitle investments made by investors of the other contracting party to a treatment more favourable than the one provided by the BIT, such provisions shall, to the extent that they are more favourable to the investor, prevail over the treaty (Germany, Argentina, Bolivia, Brazil, China, Chile, Costa Rica, Cuba, Dominican Republic, El Salvador, France, Finland, Honduras, Italy, Nicaragua, Netherlands, United States).

Treaty application

The BITs with Canada and the United States determine that the treaties must be applied in accordance with the measures necessary for the maintenance of public order, international peace or security, and environmental concerns. The BIT with Brazil has a similar provision, which adds the protection of financial systems and institutions, human rights, health, and corporate social responsibility. The BIT with Paraguay determines that it must not impede the parties’ use of measures for public or international security.

Performance requirements

The BITs with Dominican Republic, Costa Rica, Finland, Canada, Honduras, and the United States determine that contracting parties may not impose obligations on investors to conduct their business in a prescribed manner.

The BIT with Paraguay explicitly allows parties to create ‘special formalities’ with regards to the establishment of investments as long as they do not impair the rights established in the BIT.

Taxation measures

Generally, Ecuador’s investment instruments do not apply to taxation measures.  Ecuador’s BITs provide that a contracting party may not be compelled to extend to investors of the other party any treatment or privilege resulting from an agreement on international taxation (Germany, Argentina, Brazil, Bolivia, Canada, Chile, China, Costa Rica, Cuba, Spain, United States, Finland, France, Honduras, Italy, Nicaragua, Paraguay, Peru, United Kingdom, Dominican Republic, Romania, Sweden, Venezuela).

Other BITs also determine that in the event of any inconsistency between the provisions of the investment agreement and any tax convention, the tax convention applies (Brazil, Canada, Dominican Republic, Netherlands, United States).

Finally, other investment instruments distinguish claims for breach of tax conventions from claims for breach of BITs in connection with a taxation measure (United States, Canada, Netherlands and Dominican Republic).

Subject matter exclusions 

Most Ecuadorian investment instruments exclude certain matters from its scope (Canada, Finland, Italy, Netherlands, United Kingdom, United States).  For example, the BIT with Canada excludes matters relating to aviation, telecommunications and transportation, fisheries, maritime matters and financial services.

Various investment instruments also include exclusions for environmental measures and other measures to protect human, animal or plant life or health.

Taxation measures

Most Ecuadorian investment instruments include a limited carve-out for taxation measures.  In many cases, this provides for a particular process to be followed before a claim relating to a tax measure can be brought under the treaty.

For example, in certain investment instruments, a claim cannot be brought under the treaty unless the tax authorities of the contracting States fail to reach a determination in respect of the impugned measures within a specified time (usually six months) (eg, Canada).

State-to-state arbitration

All Ecuadorian investment instruments contain arbitration clauses for the settlement of disputes arising from their application between the contracting parties. Such arbitration clauses determine that any dispute shall be settled by negotiations between the governments of the two contracting parties. If the parties are unable to reach a settlement within six months, following the date on which such negotiations were requested, they can submit the dispute to an arbitral tribunal (Germany, Argentina, Bolivia, Canada, China, Chile, Costa Rica, Cuba, El Salvador, Spain, Finland, Honduras, Italy, Nicaragua).

Fork-in-the-road and waiver of local remedies

Some Ecuadorian investment instruments include the ‘Fork in the Road’ clause, which provides that the investor must choose between the litigation of its claims in the hosts State’s domestic courts or international arbitration, and that the choice, once it has been made, is final (Argentina, Bolivia, Chile, China, Costa Rica, Cuba, El Salvador, Nicaragua, Peru, Venezuela and Romania).

The BIT with Germany provides that when the foreign investor has submitted the dispute to the courts of the other contracting state, the investor is entitled to refer the dispute to an arbitral tribunal (i) if the court has not decided on the merits in 18 months, and (ii) if the court’s decision violates the provisions contained in the BIT.

The BIT with China determines a specific procedure to solve conflict related to the amount of compensation in expropriation cases.

The BIT with Finland provides that an investor who has previously submitted the dispute to national jurisdiction may initiate a case before an arbitral tribunal if the investor renounces pursuing the case in the national courts before the arbitration award is rendered.

Cooling-off period. Notice period

The cooling-off period provided by Ecuadorian investment instruments is six months.

Local courts, ICSID or ad hoc arbitration

Some Ecuadorian investment instruments grant the investor the possibility to submit the dispute to local courts (Germany, Argentina, Bolivia, Chile, China, Costa Rica, Cuba, El Salvador, Finland, Honduras, Italy, Nicaragua, Paraguay, Peru, Romania, Venezuela, United States and Netherlands).

Where the other contracting party is a signatory to the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (ICSID Convention), Ecuadorian BITs routinely provide for ICSID arbitration (Germany, Argentina, Bolivia, Canada, Dominican Republic, Chile, Costa Rica, El Salvador, Spain, France, Finland, Honduras, Italy, Nicaragua, Paraguay, Peru, Romania, United Kingdom, Sweden, United States, Venezuela, and Netherlands). If the other contracting party is not a signatory to the ICSID Convention, some treaties provide for international arbitration according to the ICSID Additional Facility Rules (Romania, Costa Rica, Argentina, United States, Canada and Venezuela).

Many investment instruments provide for international ad hoc arbitration (Paraguay, United States, Germany, Netherlands, Finland and China).

Some investment instruments also allow investors to pursue an arbitration claim through ad hoc tribunals constituted in accordance with United Nations Commission On International Trade Law (UNCITRAL) Rules (Argentina, Bolivia, Canada, Costa Rica, Cuba, Spain, Finland, Honduras, Romania, Sweden, United States, Venezuela, Paraguay, Italy and Netherlands).

Applicable law

According to certain of Ecuador’s investment instruments, the tribunal shall decide the law of the contracting party, applying rules on conflict of laws and the terms of any specific agreement concluded in relation to investment and the principles of international law on the subject ( Bolivia, Chile, El Salvador, Spain, China, Cuba, Honduras and Nicaragua).

A notice of a dispute against Ecuador pursuant to an investment treaty’s arbitration clause should be sent to the office of the Attorney General of Ecuador. Currently, the Ecuadorian Attorney General is Mr Íñigo Salvador Crespo.⁷

The address of this entity is Av. Amazonas N39-123 y Arízaga, Quito Ecuador; and the phone number is +593 2 2941300.

Under Ecuadorian law, the Attorney General represents the state in disputes before arbitral tribunals.⁸ In addition, the Attorney General’s office has a National Department of International Affairs and Arbitration headed by a Director who supervises the representation of the State and Ecuadorian public entities.⁹

The Director of International Affairs manages the hiring of private attorneys when matters require specialist knowledge or experience.¹⁰ The Attorney General makes the final decision.¹¹

In 2019, the National Directorate of International Affairs and Arbitration reported that it adopted policies aimed at reducing the expenses generated by the international representation of the state, for which it assumed the responsibility of actively participating in the development of international arbitration processes.¹²

On 16 July 2021, Ecuador ratified the 1966 Convention on the Settlement of Investment Disputes between States and Nationals of Other States (ICSID Convention). The treaty entered into force with respect to Ecuador on 3 September 2021, one month after Ecuador deposited the instrument of ratification with the World Bank.

This is the second time that Ecuador has ratified the ICSID Convention, since it ratified it for the first time being in 1986. However, in 2009, Ecuador denounced such treaty and withdrew from it. As a result, it ceased to be a party to the International Centre for Settlement of Investment Disputes (ICSID) until it ratified and registered the treaty again, as explained in the paragraph above.¹³

Ecuador was an early signatory of the New York Convention, which entered into force for Ecuador on 3 April 1962. Ecuador ratified the New York Convention with reference to the reservations set out in article I(3), meaning that Ecuador 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 regarded as commercial under Ecuadorian law.¹⁴

The rules for recognising and enforcing international arbitration awards are set out in the Arbitration and Mediation Law (AML) and its new Regulations.¹⁵ Article 42 of AML provides that awards issued in an international arbitration proceeding shall have the same effect and shall be enforced in the same manner as awards issued in a domestic arbitration proceeding.¹⁶ Domestic arbitration awards can be enforced before the lower civil court with jurisdiction over the home of the respondent/losing party or any place where they have assets capable of being seized.¹⁷ This provision is in harmony with Article III of the New York Convention and confirms that the ‘exequatur’ process is no longer needed.¹⁸

Moreover, the party against whom an international award is being enforced may only challenge the enforcement action if it provides proof of payment or if they prove that the award has been suspended or set aside by a competent authority. Also, Ecuadorian judges will reject and sanction any attempt by a party looking to obstruct the enforcement process.¹⁹

Yes.  Ecuador’s AML and its new Regulations²⁰ are an evolving²¹ legal regime governing arbitral proceedings.²²

The Regulations provide that the State of Ecuador and public sector entities (as defined in the Ecuadorian Constitution)²³ may resort to domestic or international arbitration either by entering into an arbitration agreement (which can be done before or after a dispute arises) or when permitted to do so by law or treaty.²⁴ If the arbitration agreement is entered into after the dispute arises or international arbitration proceedings commence, the arbitration agreement needs to be approved by Ecuador’s Attorney General. The Regulations further clarify that when a dispute is referred to arbitration, the arbitral tribunal will have exclusive jurisdiction to resolve any disputes about the facts (including any legally operative acts) or administrative actions related to the dispute.²⁵

If an arbitration agreement has not been included in a contract entered into with a public entity, the other party may request that the entity agree to arbitrate. If the public entity does not respond, then the arbitration agreement will be deemed as accepted.²⁶

Ecuador has complied with all arbitral awards issued against it. The Attorney General’s Office has made public assurances that Ecuador respects the international legal system and honors its commitments, a fact demonstrated by the full compliance it has historically given to international judgments and awards.²⁷

By 2018, Ecuador had paid US$2.313 million to satisfy arbitral awards issued against it.²⁸

The Ecuadorian government has had an unstable and unpredictable relationship with investment treaties. The President serving from 2007 to 2017, Rafael Correa, was a fierce opponent of BITs.²⁹ However, Correa’s successor, Lenín Moreno, who came from the same party as Correa, commence new investment treaty negotiations.³⁰

Moreno’s government was replaced by conservative Guillermo Lasso, who has continued Moreno’s pro-BIT position.³¹ Lasso’s government has focused on reenergising the economy and implementing measures to encourage investment, including foreign investment. These efforts include: (i) resigned the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (ICSID Convention);³² (ii) pursuing significant new BITs;³³ (iii) issuing Executive Decree No. 165-2021, introducing the Regulations to the Arbitration and Mediation Law to improve the existing legal framework for arbitration; and (iv) seeking to issue further legislation to promote foreign investment.³⁴

However, there is political opposition to Lasso’s work on the matter,³⁵ and it is difficult to predict the political future of BITs concluded with Ecuador. A critical obstacle to Ecuador entering into new BITs is article 422 of the Ecuadorian Constitution which prohibits ‘treaties or international instruments where the Ecuadorian State yields its sovereign jurisdiction to international arbitration entities in disputes involving contracts or trade between the State and natural persons or legal entities.’³⁶ The Transitory Constitutional Court has ruled that the dispute resolution provisions of these BITs contravene this article.³⁷ The topic remains a live legal discussion in the country.

Moreover, on 4 July 2018, Ecuador officially requested to be considered a Pacific Alliance Partner State,³⁸ which includes arbitration as a settlement mechanism for investor-state disputes. 

No cases seeking enforcement of an international award arising from investment treaty arbitration has been filed before Ecuadorean courts.

The Arbitration and Mediation Law establishes the principle of priority of arbitration over ordinary operation of the court system and the principle of in dubio pro arbitration.³⁹

The National Court of Justice has recognised in different resolutions that the cases in which arbitration derives from the judicial function are exceptions and must be expressly established in the law. It also confirmed that an action for nullifying an arbitration award is governed by restrictive rules, considering that one of the objectives of arbitration is increased speed in dispute resolution. Accordingly, it ruled that there is no appeal against the decision to nullify the award.⁴⁰

No41

Yes, it prohibits the confiscation of investors’ property. ⁴³

Prohibits arbitrary or discriminatory measures.

Guarantees national treatment.

Guarantees full protection and security.⁴⁴

Yes⁴⁵

Yes⁴⁶

No. Ecuador has not created any scheme to protect local investors when investing abroad.

IBM World Trade Corporation v Republic of Ecuador, ICSID Case No. ARB/02/10.

BIT Ecuador–United States.

Award embodying the Parties’ Settlement, 22 July 200.⁴⁷

Repsol YPF Ecuador SA v Empresa Estatal Petróleos del Ecuador (Petroecuador), ICSID Case No. ARB/01/10.

BIT Ecuador–Spain.

Award, 20 February 2004.⁴⁸

Decision on Annulment, 8 January 2007⁴⁹

M.C.I. Power Group LC and New Turbine, Inc. v Republic of Ecuador, ICSID Case No. ARB/03/6.

BIT Ecuador–United States.

Award, 31 July 2007⁵⁰

Decision on Annulment, 19 October 2009⁵¹

Duke Energy Electroquil Partners & Electroquil SA v Republic of Ecuador, ICSID Case No. ARB/04/19.

BIT Ecuador–United States.

Award, 18 August 2008⁵²

Empresa Eléctrica del Ecuador Inc. v Republic of Ecuador, ICSID Case No. ARB/05/9.

BIT Ecuador–United States.

Award, 2 June 2009⁵³

Noble Energy Inc. and Machalapower Cia Ltda v The Republic of Ecuador and Consejo Nacional de Electricidad, ICSID Case No. ARB/05/12.

BIT Ecuador–United States.

Decision on jurisdiction, 5 March 200.⁵⁴

Last decision: Order of the Tribunal taking note of the discontinuance of the proceedings, 20 May 2009.

Técnicas Reunidas, SA and Eurocontrol, SA v Republic of Ecuador, ICSID Case No. ARB/06/17.

BIT Ecuador–Spain.

Order issued by the Acting Secretary-General taking note of the discontinuance of the proceedings, 13 May 2008.

City Oriente Limited v Republic of Ecuador and Empresa Estatal Petróleos del Ecuador (Petroecuador), ICSID Case No.ARB/06/21.

Hydrocarbons production share contract containing an ICSID arbitration clause.

Order of the Arbitral Tribunal taking note of the discontinuance of the proceedings, 12 September 2008⁵⁵

Murphy Exploration and Production Company International v Republic of Ecuador, ICSID Case No. ARB/08/4.

BIT Ecuador–United States.

Award on jurisdiction, 15 December 2010⁵⁶

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

BIT Ecuador–Spain.

Order of the Arbitral Tribunal taking note of the discontinuance of the proceedings, 9 February 2011.⁵⁷

Corporación Quiport SA and others v Republic of Ecuador, ICSID Case No. ARB/09/23.

Various BITs.

Order of the Secretary-General taking note of the discontinuance of the proceedings, 11 November 2011⁵⁸

Ulysseas, Inc v The Republic of Ecuador, UNCITRAL(PCA).

BIT Ecuador–United States.

Award, 12 June 2012⁵⁹

Occidental Exploration and Production Company v The Republic of Ecuador, LCIA Case No. UN3467.

BIT Ecuador–United States.

Award, 1 July 2004⁶⁰

EnCana Corporation v Republic of Ecuador, LCIA Case No. UN3481, UNCITRAL (formerly EnCana Corporation v Government of the Republic of Ecuador).

BIT Ecuador–Canada

Award, 3 February 2006⁶¹

Chevron Corporation and Texaco Petroleum Company v The Republic of Ecuador, UNCITRAL (PCA Case No. 34877 2007-2).

BIT Ecuador–United States

Award, 31 August 2011⁶²

Únete Telecomunicaciones SA and Clay Pacific SRL. v the Republic of Ecuador, UNCITRAL.

BIT Ecuador–Bolivia

Order of the Arbitral Tribunal taking note of the discontinuance of the proceedings, 7 August 2013⁶³

Republic of Ecuador v United States of America (PCA Case No. 2012-5).

BIT Ecuador–United State

Award, 29 September 2012⁶⁴

Occidental Petroleum Corporation and Occidental Exploration and Production Company v The Republic of Ecuador, ICSID Case No. ARB/06/11.

BIT Ecuador–United States

Award, 5 October 2012⁶⁵

Decision on Annulment, 2 November 2015⁶⁶

Murphy Exploration & Production Company –International v The Republic of Ecuador, UNCITRAL, PCA Case No. AA434.

BIT Ecuador–United States

Award, 10 February 2017⁶⁷

Perenco Ecuador Ltd v The Republic of Ecuador and Empresa Estatal Petróleos del Ecuador (Petroecuador), ICSID Case No. ARB/08/6.

BIT Ecuador–France.

Award, 27 September 2019⁶⁸

Chevron Corporation and Texaco petroleum Corporation v Republic of Ecuador (UNCITRAL) (PCA Case No. 2009-23).

BIT Ecuador–United States.

First Partial Award, 17 September 2013⁶⁹

Merck Sharpe & Dohme (IA) Corporation v The Republic of Ecuador, UNCITRAL, PCA.

BIT Ecuador–United States.

Pending⁷⁰

Copper Mesa v Republic of Ecuador, PCA Case No.2012-02.

BIT Ecuador–Canada.

Pending⁷¹

Burlington Resources Inc v Republic of Ecuador,

ICSID Case No. ARB/08/5

(formerly Burlington Resources Inc and others v The Republic of Ecuador and Empresa Estatal Petróleos del Ecuador (PetroEcuador)).

BIT Ecuador–United States.

Decision on liability, 14 December 2012.

Pending: the Tribunal will move to the damages phase⁷²

Worley Parsons International, Inc. v. Republic of Ecuador.

BIT Ecuador–United States.

Pending⁷³

Andrés Larrea, Enforcing International Arbitral Awards in Ecuador After Recent Legal Reforms: Is This the End of the Exequatur Process?, Kluwer Arb. Blog (17 May 2020), http://arbitrationblog.kluwerarbitration.com/2020/05/17/enforcing-international-arbitral-awards-in-ecuador-after-recent-legal-reforms-is-this-the-end-of-the-exequatur-process/#:~:text=In%202015%2C%20Ecuador%20changed%20its,in%202018%20repealed%20this%20requirement.

Andrés Larrea, The Wait is Over: Ecuador Enacts Regulations to its Arbitration and Mediation Law, Kluwer Arb. Blog (1 September 2021), .

Andrés Larrea, Ecuador’s Constitutional Court Rules in Favor of Ratification of the ICSID Convention, Kluwer Arb. Blog (30 July 2021), http://arbitrationblog.kluwerarbitration.com/2021/07/30/ecuadors-constitutional-court-rules-in-favor-of-ratification-of-the-icsid-convention/.

Ari MacKinnon et al., Ecuador Re-Ratifies The ICSID Convention: Impact Of The Ratification In Ecuador And In The Region, Cleary Gottlieb (9 August 2021), https://www.clearygottlieb.com/-/media/files/alert-memos-2021/ecuador-re-ratifies-the-icsid-convention.pdf.

Ecuador begins talks over new BITs, Glob Arb Rev (23 February 2018), https://globalarbitrationreview.com/article/ecuador-begins-talks-over-new-bits.

Daniel Finn & Guillaume Long, Lenín Moreno Has Betrayed Ecuador. Now the Country Is in Revolt., Jacobin  (17 October 2019), https://jacobin.com/2019/10/ecuador-protests-lenin-moreno-correa-imf.

Daniela Páez-Salgado & Emily Westphalen, Ecuador Signs the ICSID Convention: Next Steps for Entry Into Force, Kluwer Arb. Blog

 (30 June 2021), http://arbitrationblog.kluwerarbitration.com/2021/06/30/ecuador-signs-the-icsid-convention-next-steps-for-entry-into-force/.

Fernando Carbrera Diaz, Ecuador continues exit from ICSID, IISD Inv. Treaty News

 (8 June 2009), https://www.iisd.org/itn/fr/2009/06/05/ecuador-continues-exit-from-icsid/.

Guillaume Long & Andrés Arauz, New Ecuadorian Government Teams Up with Powerful International Lobbies to Rejoin Investment Treaties Prohibited by the Constitution, Institute for New Econ Thinking (14 July  2021), https://www.ineteconomics.org/perspectives/blog/new-ecuadorian-government-teams-up-with-powerful-international-lobbies-to-rejoin-investment-treaties-prohibited-by-the-constitution.

Juan Carlos Herrera-Quenguan, Explaining Ecuador’s shifting position on FDI, investment treaties, and arbitration, Inv. Treaty News (5 October 2020), https://www.iisd.org/itn/en/2020/10/05/explaining-ecuadors-shifting-position-on-fdi-investment-treaties-and-arbitration-juan-carlos-herrera-quenguan/#_ftnref27.

Rodrigo Jijón-Letort et al., Ecuador, Glob, Arbit Rev. (12 August 2021), https://globalarbitrationreview.com/review/the-arbitration-review-of-the-americas/2022/article/ecuador#footnote-011-backlink.

Termination of Bilateral Investment Treaties Has Not Negatively Affected Countries’ Foreign Direct Investment Inflows, Public Citizen (16 April 2018), https://www.citizen.org/article/termination-of-bilateral-investment-treaties-has-not-negatively-affected-countries-foreign-direct-investment-inflows/.

Tillmann Rudolf Braun, Globalization: The Driving Force in International Investment Law', in The Backlash against Investment Arbitration, 491–505 (Michael Waibel et al. eds., Kluwer Law Int’l 2010), https://www.kluwerarbitration.com/document/kli-ka-201011023-n?q=investment%20treaty%20ecuador.

Trade agreements key to resolving the crisis in Ecuador, AP News (13 July 2021), https://apnews.com/article/868aab69f4ed98f5526642cc217ec683.

Cecilia Olivet, Why did Ecuador terminate all its Bilateral investment treaties?, TNI (25 May 2017), https://www.tni.org/en/article/why-did-ecuador-terminate-all-its-bilateral-investment-treaties.