National and International Arbitration in Ecuador

Development of arbitration in Ecuador

The existence of alternative methods for dispute resolution is not new in Ecuador. Traditionally, they have existed as valid means to resolve controversies, even in judicial proceedings. Nowadays, all civil litigations, according to the law, must submit to a conciliation board seeking an amicable solution to the conflict. In practice, nonetheless, a solution is reached in very few cases in judicial proceedings. This fact brought about the need to include alternative mechanisms for dispute resolution in our legislation.1

The Arbitration and Mediation Law (AML) follows the UNCITRAL Model Law and was enacted on 4 September 1997.2 The AML repealed the former Commercial Arbitration Law that had been in force since 28 October 1963 and other provisions in the body of laws that contradicted it or made its application difficult, such as article 1505 of the Civil Code construed by the Supreme Court of Justice in the sense that submission to international arbitration constituted illicit object.3

More than 10 years after the enforcement of the AML, it is possible to infer that dispute resolution mechanisms - arbitration in particular - provide certainty, independence and impartiality to users. Subsequent statistics show that very few conflicts are submitted to the resolution of arbitration tribunals and that most of them continue being heard by the ordinary courts.

Several amendments to the original text of the Arbitration and Mediation Law were introduced on 25 February 2005, in an effort to lessen concerns and demands generated during the first few years after those provisions were applied.

The most important changes embodied in the 2005 amendment made reference to the following issues:

  • it is clear that the mechanism for challenging the validity of an arbitral award is an action, and not a recourse;
  • 30 days are allowed for the president of the Provincial Court of Justice to resolve annulment actions filed against arbitral awards; and
  • an ordinary judge is obligated to resolve - previously - a plea of existence of an arbitration agreement submitted during the course of an ordinary lawsuit.

One of the major drawbacks in developing and propagating arbitration is lack of experience in drafting and preparing effective arbitration clauses. This gives rise to frequent problems of jurisdiction due to pathological clauses. Likewise, there is a certain degree of ignorance among users and lawyers concerning the differences between the arbitration system and the ordinary justice system.

Statistics show that although there is an increasing trend in the number of cases being heard at the major arbitration centres in Ecuador, it is still far lower than the number of cases arriving at the ordinary courts, which may well amount to 1,500 per courthouse every year on average.4

The arbitration regime in the new 2008 constitution

The new constitution, approved in a referendum on 28 September 2008, was prepared by the National Constituent Assembly (NCA) and contemplates the existence of arbitration and includes provisions relating to its treatment and regulation. Likewise, it comprises specific rules addressing international arbitration and international treaties.

Recognition of the validity of arbitration and other alternative methods for dispute resolution

First of all, it is important to mention that the new constitution recognises arbitration as a method for dispute resolution, though in a different manner to the recognition set forth in the constitution approved in 19985, as will be explained below:

The new constitution includes the following text with respect to arbitration:

Section VIII - Alternative methods for dispute resolution

Article 190 - Arbitration, mediation and other alternative methods for dispute resolution are recognised. These proceedings shall be applied in accordance with the law on matters where, by reason of their nature, it is possible to compromise Arbitration at law shall apply on public contracting upon a prior favourable opinion from the Attorney General of the State pursuant to conditions set forth in the law.

The following conclusions are drawn from an analysis of the above provisions:

  • The condition that arbitration only applies to matters where it is possible to compromise, a principle already included in the AML that does not affect arbitration per se, has now been raised to a constitutional principle.
  • In matters involving contracts with the state, the prior authorisation of the attorney general of the state will be a condition for arbitration to proceed. This condition applies to national and to international arbitration and makes no distinction with respect to state institutions, whether or not with juridical capacity of their own.6 It ought to be understood that such authorisation must be given before the arbitration clause is executed, but not before the arbitration proceeding commences because, if so, the attorney general of the atate would be entitled to veto the very commencement of the arbitration, thus resulting in arbitration being an innocuous proceeding.

Prohibition to enter into future treaties

Additionally, the new constitution includes an express prohibition for Ecuador to enter into international treaties or instruments waiving jurisdiction with a view towards international arbitration involving contractual and commercial issues, according to the following terms:

Article 422 - It shall not be possible to enter into international treaties or instruments in which the Ecuadorean 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 organisations 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 Ecuadorean State shall promote arbitral solutions in terms of the origin of the debt, subject to principles of transparency, equity and international justice.

The approval of the constitutional text with the above provision weakens international arbitration and, specifically, investor-state arbitration. However, the limitation mentioned in article 422 above does not affect the international treaties currently in force7.

Article 422 seeks to shield the Ecuadorean state from international arbitration and is a sort of re-issue of the Calvo clause, which is confirmed by the minutes of the NCA that read as follows:

Article 8 [now 422] takes up an aspiration having had much national support as a consequence of the abuses that have impaired Ecuador’s juridical sovereignty. That provision expressly states that it will not be possible to enter into international conventions or treaties compelling the Ecuadorean State to waive jurisdiction to international arbitration venues involving contractual or commercial matters. Historically, Ecuador has executed treaties that have been considered detrimental for the country’s interests because they transfer jurisdiction and venue in cases of disputes originating from contractual or commercial relations with transnational companies to supranational arbitration venues where, it seems, the states are placed at the same level as a commercial company.8

Article 422 leads us to the following conclusions:

  • the execution of treaties allowing arbitration in investment cases has not been prohibited, that is, not for contractual or commercial reasons, and under the standards of international public law on investment;
  • the prohibition refers to contractual or commercial matters where the state is the counterparty of private persons;
  • Ecuador is allowed to enter into treaties to resolve disputes:
    • between states and individuals (that is, not companies);
    • in Latin America;
    • by regional venues or by regional jurisdictional bodies9; and
    • relating to the foreign debt;
  • the international treaties of which Ecuador has been a party before the new constitution became effective, and that comprise arbitration matters, will continue in full effect. That is, the constitutional prohibition is limited to the execution of new treaties; and
  • the constitutional provision does not prohibit the state - upon a prior opinion from the attorney general - from executing arbitration clauses in international arbitration.

Another important and positive aspect of how international arbitration is treated in the new constitution is that it eliminates the concept or the prohibition of submitting to an extraneous jurisdiction - that is, to international arbitration - in contracts executed between the state and juridical persons that had been included in article 14 of the 1998 constitution.10 This provision has not been included in the new constitution, thus definitively eliminating the concept of extraneous jurisdiction in relation to arbitration, although there are judicial decisions clearly stating that the term ‘extraneous jurisdiction’ does not include international arbitration.11

Local statistics: arbitration in the principal centres in Ecuador (2007 and 2008)12

Below is the most important information regarding the use of arbitration locally:

Quito Chamber of Commerce6661
Ecuadorean-American Chamber of Commerce54
Quito Construction Chamber107
Azuay Production Chambers71
Manta Chamber of Commerce1510

International arbitration as a guarantee for foreign investment

For the purposes of promoting, attracting and protecting foreign investment, Ecuador signed the International Convention on Settlement of Investment Disputes between States and Nationals of other States (the ICSID Convention) on 3 March 1986, which became fully in effect on 19 April 2001.13 Likewise, Ecuador has executed 28 bilateral investment treaties (BITs) that include ICSID or UNCITRAL14 arbitration clauses. At present, 20 BITs are in effect.15 Ecuador is a party to the World Trade Organization16 and more than once it has applied state-to-state arbitration as set forth in WTO treaties.17

Furthermore, article 32 of the Investment Promotion and Guarantee Law18 reads as follows:

Article 32 - The State and the foreign investors may submit any disputes arising from the application of this Law to arbitration tribunals constituted by virtue of international treaties of which Ecuador is a party, or to procedures specifically agreed upon or stipulated in bilateral or multilateral agreements signed and ratified by our country.19

The above provision is in keeping with the spirit of opening up to foreign investment that was very much alive in Ecuador during the 1990s and in the first years of the 21st century.

The administration of President Rafael Correa has openly demonstrated its doubts about ICSID impartiality, alleging that the Centre only favours the interests of developed countries and of those countries’ companies coming to invest in Ecuador. This scepticism took on a definite form on 4 December 2007, when President Correa sent a letter to ICSID stating his intention of limiting Ecuador’s consent to submit to arbitration on issues pertaining to the utilisation of natural resources such as oil, gas and minerals.20 In June 2009, President Correa decided to withdraw Ecuador from the ICSID Convention, and requested the National Assembly’s approval to denunciate the Convention based on articles 419 and 422 of the new constitution. Furthermore, the request mentions article. 25(1) of the ICSID Convention and the letter to CSID notifying limitations on its jurisdiction.21 Neither President Correa nor the National Assembly considered the effects of articles 25(1) and 72 of the ICISID Convention. Both provisions recognise that the consent given by one contracting state cannot be unilaterally withdrawn. Furthermore, if the Convention is denunciated, the consent remains in effect. Therefore, the consent given by Ecuador in contracts and BITs remains effective despite the denunciation or any municipal construction of international law and the Constitution of Ecuador.22

Presently, as we have learned, Ecuador has 10 pending international arbitration cases pertaining to investment as set out below.

Pending cases against Ecuador:23

PlaintiffDefendantDate of registrationRulesSubject matter
Repsol/Murphy Oil/OPIC/CRSEcuador12 Jun 2008ICSIDLaw No. 42 setting forth a charge for increased oil price
BurlingtonEcuador and Petroecuador4 Jun 2008ICSIDLaw No. 42 setting forth a charge for increased oil price
PerencoEcuador and Petroecuador2 Jun 2008ICSIDLaw No. 42 setting forth a charge for increased oil price
MurphyEcuador15 Apr 2008ICSIDLaw No. 42 setting forth a charge for increased oil price
OccidentalEcuador13 Jul 2006ICSIDCancellation, petroleum contract
VatadurEcuadorn/aCIACBreach of contract
UlysseasEcuadorn/aUNCITRALBreach and violation of investment guarantees
GlobalnetEcuadorn/aUNCITRALBreach and violation of investment guarantees
CGCEcuadorn/an/aBreach of contract
ChevronEcuador6 Dec 2006UNCITRALAbuse of justice

It should be mentioned that cases such as City Oriente, Noble and MachalaPower and Oxy 124 were the subject of settlement or agreements between the state and the investors and, therefore, were withdrawn or terminated.

Enforcement of international arbitral awards in Ecuador

Aside from the rules of self-contrained arbitration systems (ie, ICSID), we will discuss the principal laws and treaties relating to the enforcement of international awards.

On 19 August 1961, Ecuador ratified the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, also known as the 1958 New York Convention (NYC).25 At the time of ratification, Ecuador submitted the reservation on reciprocity subject to arbitral awards deriving from litigations that arise from juridical commercial relationships pursuant to the national laws as allowed by article 1.3 of the NYC.26 We still do not have any cases in Ecuador relating to enforcement of awards issued under the NYC.27

The Inter-American Convention on International Commercial Arbitration, or Panama Convention (PC), which entered into force on 30 January 1975, and was ratified in 1978,28 is a second tool for enforcing foreign arbitral awards. The PC was executed by the Organization of American States (OAS) member countries and, therefore, its application is limited to arbitral awards pronounced in one of the OAS member countries that entered into the PC.29 The PC applies to arbitral decisions resulting from disputes of a commercial character.30 It is important to mention that Ecuador ratified the PC ‘with a declaration that the entities under Ecuadorean public law cannot submit to a foreign jurisdiction’.31 According to this reservation, it is inferred that the PC can only apply if the arbitrated dispute has had an Ecuadorean individual or corporation under private law as the counterparty.

Article 4 of the PC provides that recognition and enforcement of arbitral awards that meet the requirements and limitations of the Convention must be recognised in the same manner as national or foreign judgments are recognised and enforced.32

In May of 198233 the 1979 Inter-American Convention on Extraterritorial Validity of Foreign Judgments and Arbitral Awards, or the 1979 Montevideo Convention34 (MC) came into effect in Ecuador. In addition to the coverage provided by the MC to judgments and awards pertaining to other matters, it also applies to enforcement of foreign arbitral awards relating to commercial issues. An important limitation in the MC, just as in the PC, is that it only applies to judgments and awards issued in OAS member countries. The MC’s intention is to cover ‘judicial judgments and awards issued in civil, commercial or labour proceedings in one of the member states’.35

As far as local norms are concerned, the AML does not have a specific system for recognition and enforcement of foreign awards but, rather, it gives them the same treatment as the process for enforcing local judicial judgments in a last instance. Article 42 of the AML states that ‘[…] awards issued in an international arbitration proceeding shall have the same effects and shall be enforced in the same manner as awards issued in a national arbitration proceeding.’ According to article 32 of the AML, that proceeding will be applicable to local judgments passed at last instance, that is, through a judicial order. The AML sets forth the judge’s duty to recognise and enforce foreign awards through a judicial order, without the possibility of applying any other procedure.

The judicial order procedure is commenced by the judge who allows a very short period of time for the debtor to pay what is due or otherwise to designate property for attachment and subsequent auction. This proceeding does not admit any opposition from the debtor, while the NYC does.36 For this reason, the AML presents an alternative that could be more expeditious to enforce awards before the lex fori.

Currently, Ecuador is the country - after Argentina - with the most investment arbitrations and it can be predicted that this trend will not vary in the near future. These proceedings are still pending at ICSID and CIAC tribunals, in addition to tribunals created according to UNCITRAL rules. The ease or difficulty in enforcing potential arbitration awards against Ecuador will depend on the rules of these kinds of tribunals.

Although the enforcement of international arbitral awards in Ecuador has not been put to the test, there are contradictory opinions from local authors with respect to their immediate enforcement. Professor Santiago Andrade, on the one hand, believes that international awards do require a judicial revision as a prior requirement before their enforcement,37 while others, like Xavier Andrade, opine as follows:

In view of the foregoing, we reiterate that foreign arbitral awards are not enforced in the same fashion as foreign judgments. Alleging otherwise would, in our judgment, constitute disavowal and clear breach of the conventions signed and ratified by Ecuador, the constitutional principle of supremacy of international rules, and the clear provisions of the Arbitration and Mediation Law.38

According to the foregoing, it is inferred that there are sufficient bases to argue that the exequatur procedure for enforcement of international arbitral awards is not necessary in Ecuador.

When analysing the law applicable to enforcement of awards in Ecuador, a distinction should be drawn between awards rendered by ICSID tribunals as opposed to those rendered by UNCITRAL or ICC tribunals.

ICSID awards are binding and final for the contracting parties. Furthermore, the enforcement process provided for in the ICSID Convention remains effective for those cases and treaties in which Ecuador has given consent prior to the denunciation.39

ICSID awards do not require an exequatur, that is, a judgment by a local court that a decision issued by a foreign judicial tribunal or arbitration court should be executed before local tribunals in order to be enforced. In other words, domestic courts are not entitled to review the awards rendered by ICSID tribunals, but only to enforce them.

Hence, the enforcement of an ICSID award in Ecuador will be made as if it was a ‘final judgment of a court in that state’.40 Needless to say, an ICSID award entails crucial benefits for the investor: local courts are not empowered to revise the award, since no exequatur is required; consequently, enforcement of ICSID awards may be more expeditious than enforcement of other international awards, since there is no need to go through the revision process.

As regards the ICSID Convention, articles 53 and 54 have specific provisions that make it special and unique. Many practitioners choose ICSID based on these provisions, which are one of the most relevant improvements of the ICSID Convention vis-à-vis other arbitral organs. These provisions mandate that ICSID awards may only be reviewed under the rules of the ICSID Convention; the parties recognise the award, and any contracting state enforces the pecuniary obligations awarded as if they were res judicata from any domestic tribunal. Pursuant to a plain construction of the ICSID and Vienna Conventions, Ecuador courts may not review an ICSID award, but only allow its enforcement as if it were a domestic final judicial decision.

If that is not the case and a domestic court (for public or constitutional reasons) allows a revision, the award may be enforced in any other contracting state of the ICSID Convention, and such enforcement may not be opposed by Argentina. In other words, the fact that there is a domestic procedure aimed at reviewing the award does not preempt any other contracting state or its judiciary to grant the enforcement.41

Therefore, in Ecuador, an international award that is not protected by a specific treaty providing for its own enforcement mechanism (ie, the ICSID Convention) has to be enforced by applying the LAM and thus, by filing the proper petition to the judiciary in an enforcement process,42 in which the merits of the arbitration cannot be discussed or revised unless they contravene public policy and due process, as set forth in the Code of Civi Procedure43 and the New York and Panama Conventions.44 Once the international award has gone through the enforcement process without going through a review on the merits of the case, it is fully enforceable.



See articles 5 and 18, Code of Civil Procedure.
The AML was codified in Official Register No. 417 dated 14 December 2006. Previously, the original text of the AML had been amended by the Amendatory AML Law published in Official Register No. 532 dated 25 February 2005.
Article 1505 of the Civil Code stated that: ‘Thus, the promise to submit in Ecuador to a jurisdiction not recognised by Ecuadorean law is null and void due to defect in the object.’
This has been the average number of cases arriving every year. See
Political Constitution (1998), article 191.
See: Organic Law of the Office of the Attorney General of the State, article 11. See also AML article 4. According to the AML, public institutions need no authorisation from the attorney general of the state if arbitration has been agreed in the contract.
Vienna Convention on the Law of Treaties (VCLT), articles 26 and 27. Ecuador ratified the VCLT on 18 July 2003.
Taken from the report from the majority in Working Group 9, NCA, 14 April 2008.
So far, no regional venues or tribunals have been created that could make this section applicable.
Political Constitution (1998). Article 14: ‘Contracts executed by State institutions with foreign individuals or corporations shall implicitly include a waiver to all diplomatic claims. If such contracts are executed in Ecuadorean territory, submission to an extraneous jurisdiction shall not be agreed, except in the case of international conventions.’
See EMELEC v Ministry of Energy and Mines, Supreme Court of Justice, Constitutional Chamber. Award dated 7 February 1994.
Statistics for 2009 are not yet available.
Executive Decree No. 1417-B, published in Official Register No. 309 dated 19 April 2001.
Ecuador has executed BITs with ICSID or UNCITRAL arbitration clauses, or both, with Argentina, Bolivia, Chile, Costa Rica, Cuba, El Salvador, Finland, Honduras, Italy, Paraguay, Peru, Romania, Spain, Sweden, The Netherlands, the United States and Venezuela.
El Comercio newspaper. See: Nine investment treaties do not generate any impact, published on 29 January 2009. See also
The Protocol of Adhesion to the WTO was published in Official Register No. 852 dated 29 December 1995.
Ecuador has participated 15 times in the WTO Dispute Resolution System, three times as claimant, three times as defendant, and nine times as a third party. See
Investment Promotion and Guarantee Law. Official Register No. 219. 19 December 1997.
See: See also, LatinLawyer: Ecuador partially withdraws from ICSID, December 2007. The pertinent portion of the communication reads as follows: ‘The Republic of Ecuador will not consent to submit to the jurisdiction of the International Center on Settlement of Investment Disputes (ICSID) the differences arising on matters pertaining to treatment of investments deriving from economic activities relating to the utilisation of natural resources such as oil, gas, minerals or others. All instruments containing the willingness previously expressed by the Republic of Ecuador of submitting those disputes to the jurisdiction of the Center and not yet perfected by means of the express and explicit consent of the other party before the date of presentation of this notice are withdrawn by the Republic of Ecuador, effective immediately as of this date.’
See Letter No. T.4484-SGJ-09-1431, dated 3 June 2009, sent by President Rafael Correa to Mr Fernando Cordero, president of the Legislative Committee from the National Assembly of Ecuador, requesting congressional approval to denunciate the ICSID Convention. The request is based on articles 419 and 422 of the Constitution of Ecuador, Official Register No. 449, 20 October 2008 (also know as the 2008 Constitution). See footnote 102, infra. See (last visited in June 2009). See (last visited in June 2009). See The author has also seen the non-official transcript of the congressional debate held on Friday, 13 June 2009, which does not provide substantive legal arguments but contains several nationalistic statements. See also (last visited in June 2008).
See articles 39 and 54 of the Vienna Convention.
Taken from LatinLawyer, Vol. 7, No. 6, p 46.
Caso ARB/06/21 City Oriente Limited v República del Ecuador y Empresa Estatal de Petróleos del Ecuador (Petroecuador), Caso ARB/05/12; Noble Energy Inc y Machala Power Cia Ltda v República del Ecuador; República del Ecuador y Consejo Nacional de Electricidad; Occidental Exploration and Production Company v Republica del Ecuador, London Court of International Administered Case No. UN 3467.
Legislative Resolution, published in Official Register No. 293 dated 19 August 1961.
‘Ratifies the execution of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, taking into account that Ecuador, on the basis of reciprocity, will apply such Convention to recognition and enforcement of arbitral awards pronounced in the territory of another contracting state only when such awards involve litigations arising from juridical relations deemed to be commercial by Ecuadorean law.’ Legislative Resolution 000 published in Official Register No. 293 of 19 August 1961.
The case of Occidental Exploration and Production Company v Ecuador was processed according to UNCITRAL rules and its enforcement was submitted to the NYC in London (lex arbitri). However, it was not examined under Ecuadorean law because the parties reached a compromise.
Supreme Decree No. 3019 published in Official Register No. 729 dated 12 December 1978.
PC, articles 7 and 9.
PC ‘Article 1 - an agreement between the parties whereby they undertake to submit to arbitral decision the differences arising or having arisen between them with relation to a commercial business is valid. The respective agreement shall be included in a written document signed by the parties or in an exchange of letters, telegrams or telex communications.’
This declaration is included in the ratification instrument (6 August 1991).
PC ‘Article 4 - arbitral judgments or awards that cannot be challenged according to the law or applicable procedural rules shall have the force of res judicata. Their enforcement or recognition may be demanded in the same manner as judgments pronounced by national or foreign ordinary courts according to the procedural rules of the country where they are enforced and to what is established by international treaties in this respect.’
Executive Decree No. 853 published in the Official Register No. 240 of 11 May 1982.
This convention was executed in Montevideo, Uruguay, on 8 May 1979.
MC: ‘Article 1 - this Convention shall apply to judicial judgments and arbitral awards issued in civil, commercial or labor proceedings in one of the member states unless at the time of ratification one of them has made an express reservation to limit it to judgments pertaining to convictions on equity matters. Likewise, any of them may declare, at the time of ratification, that it also applies to resolutions culminating the proceeding, those issued by authorities that exercise some jurisdictional function, and to criminal sentences as regards indemnities of damages deriving from the offense. The rules of this Convention shall apply as regards arbitral awards on everything not set forth in the Inter-American Convention on International Commercial Arbitration executed in Panama on January 30, 1975.’
Article 5 of the NYC establishes criteria whereby a local judge may not recognise and enforce a foreign arbitral award.
Santiago Andrade UBIDIA, En torno al tema del reconocimiento y ejecución de sentencias extranjeras y laudos internacionales, Foro revista de Derecho No. 6, Universidad Andina Simón Bolivar, Ecuador. Quito (2006) at 69.
Xavier Andrade, Reconocimiento y Ejecución de Laudos Extranjeros en el Ecuador: Un Camino Inexplorado, unpublished material, cited with express permission from the author.
See articles 25 (1) and 72 of the ICISID Convention. See also supra note 23.
See article 32 LAM. The Codified Code of Civil Procedure, Law No. 2005-010, Official Gazette No. 46, 24 June 2005, article 414 states: ‘Foreign judgments shall be enforced if not contrary to Ecuadorean public law or any local law and if in keeping with international treaties and conventions as in force. In the absence of international treaties and conventions, in order for foreign judgments to be enforced not only shall they not contravene public law or Ecuador’s local laws, but also the following shall be stated in the pertinent letters rogatory: a) that the judgment was passed as res judicata in accordance with the laws of the country where it was issued; and b) that judgment was passed in relation to a personal action.’
See Michael Reisman et al, International Commercial Arbitration, University Casebook Series, New York, 1997, at 691.

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