THE AUTHORS:<\/strong> Whilst 2021 saw several milestones in the arbitration field in Ecuador<\/a>, such as rejoining the Convention on the Settlement of Investment Disputes Between States and Nationals of Other States (\u201cICSID Convention<\/strong><\/a>\u201d <\/strong>or \u201cICSID<\/strong><\/a>\u201d<\/strong>) after the State\u2019s withdrawal in 2008, or enacting the Regulation to the Arbitration and Mediation Law, which clarified its practical application in a pro-arbitration manner (Decree No. 165), 2022 has also proved to be an eventful year for arbitration in Ecuador. This note will address such events by explaining recent developments in case law, treaties, and regulations and summarizing the current stage of the investor-state dispute settlement (\u201cISDS\u201d<\/strong>) cases initiated against the Republic of Ecuador.<\/p>\n\n\n\n After upholding the constitutionality of Ecuador\u2019s ratification to the ICSID Convention<\/a> in 2021, the Constitutional Court of Ecuador dismissed a request for interpretation filed in 2018 challenging the current interpretation of Article 422 of the Constitution, which prohibits the conclusion of investment treaties providing for investor-State international arbitration seated outside of the region. In decision No. 2-18-IC\/22<\/a>, the Constitutional Court declared the request\u2019s inadmissibility as it did not encompass a general interpretation of the provision (the main admissibility requirement for a request for the interpretation of a Constitutional rule) and was intended to consult the Court on the application of the norm to a specific scenario \u2013 the conclusion of a Bilateral Investment Treaty (\u201cBIT\u201d<\/strong>). The Court, however, left the discussion open. It could be dealt with during the internal process to ratify an eventual BIT providing for ISDS. Although there is no information on whether the parties included an ISDS provision in its text, Ecuador and Spain completed a draft BIT on 5 December 2022<\/a>, pending internal ratification in both states. This may be the opportunity for the Constitutional Court to review the previous interpretation of Article 422 of the Constitution.<\/p>\n\n\n\n In addition to the negotiations to conclude new BITs and to promote international arbitration, Ecuador concluded a Host Country Agreement with the Permanent Court of Arbitration (\u201cPCA\u201d<\/strong>) on 25 October 2022<\/a>, granting privileges and immunities to PCA<\/a> officials and arbitrators, and participants in PCA-administered cases. This also paves the way to set a framework for the institution\u2019s use of facilities located in Ecuador.<\/p>\n\n\n\n First, in February 2022, the Executive sent a draft law to the National Assembly titled Organic Law for the Attraction of Investments, Strengthening of the Stock Market and Digital Transformation<\/a>.[1]<\/a> This draft includes a provision stating that delegated management contracts and public-private partnerships concluded with the State must include a multi-tier dispute resolution clause\u2013 negotiation between the parties, mediation, and arbitration. The draft law also provides for the conclusion of arbitration agreements in investment contracts exceeding US $15,000,000, ensuring the benefit of recourse to arbitration for investors investing in Ecuador.<\/p>\n\n\n\n Second, the Ministry of Economy and Finance issued a Regulation for recognizing and paying arbitral awards rendered against Ecuador and its entities<\/a>,[2]<\/a> creating a program to include a financial provision in the State\u2019s yearly budget for the payment of awards and decisions which are foreseen to be due during the year in which the budget is operational. This provision will apply to all the awards due against the State with an amount equal or superior to US $ 1,000,000. The National Treasurer of Ecuador will assign the funds using the information of the awards that the General Attorney\u2019s office will provide for such effect.<\/p>\n\n\n\n Third, the Arbitration Centers of the Ecuadorian-American Chamber of Commerce (\u201cAMCHAM\u201d<\/strong>)<\/a> and the Chamber of Commerce of Guayaquil (\u201cCCG\u201d<\/strong>)<\/a> updated their arbitration rules, the validity of which started in 2022, to meet international standards while instrumenting Decree No. 165. The update includes rules on emergency arbitration, electronic notification of a claim, and a calendar for payment of arbitral costs.<\/p>\n\n\n\n 2022 has had newly instituted investor-State arbitration proceedings against Ecuador, updates on ongoing proceedings, and concluded arbitrations.<\/p>\n\n\n\n Regarding arbitrations initiated in 2022:<\/p>\n\n\n\n Regarding ongoing and concluded arbitrations:<\/p>\n\n\n\n Looking ahead, 2023 may bring a new ISDS claim against Ecuador. Petrolia, a Canadian company, has declared that it will seek recourse to international arbitration for Ecuador\u2019s decision not to extend the period of its contracts to operate blocks 16 and 67, due by the end of 2022. The investor has anticipated that its claim will be on the scale of US $260,000,000<\/a>.<\/p>\n\n\n\n The Constitutional interpretation prohibiting the Ecuadorian government from concluding investment treaties providing for investor-state arbitration proceedings seated outside of the region is still in force in 2022. However, the issue is likely to be revised during the ratification process of newly concluded BITs providing for an investor-State dispute resolution mechanism. In any case, Ecuador continues to develop its approach to ISDS proceedings; there have been efforts to equate Ecuador\u2019s arbitral practice to international standards; the government has decided to allocate funds from the State\u2019s budget to pay its obligations arising from arbitral awards; Ecuadorian law recognizes the right of investors and private parties concluding contracts with the State to seek recourse to arbitration; and the country has become one of the Host Countries of the PCA. Overall, 2022 was a favourable year for international arbitration in Ecuador.<\/p>\n\n\n\n ABOUT THE AUTHORS:<\/strong><\/p>\n\n\n\n Haly Tran Guevara <\/strong>is a law student at the Universidad San Francisco in Quito and a junior member of ECUVYAP. She participated in the XI National Arbitration Competition (Best memorial for the Plaintiff and the Respondent) and the XV International Commercial Arbitration Competition, jointly organized by the Universidad del Rosario and the Universidad de Buenos Aires.<\/p>\n\n\n\n Daniela Endara Bastidas<\/strong> is a trainee at ECIJA Integrum<\/strong> (Guatemala) and a junior member of ECUVYAP. During her legal studies, she participated in the XIV (Best memorial for the Respondent) and XV International Commercial Arbitration Competitions, jointly organized by the Universidad del Rosario in Colombia and the Universidad de Buenos Aires.<\/p>\n\n\n\n David Molina Coello<\/strong> is an international arbitration intern at the London office of Three Crowns LLP<\/strong><\/a>. He earned MIDS LLM (First Hons. Equivalent) and LLB at Universidad Hemisferios (Summa Cum Laude), having been admitted to practice in Ecuador since 2020. David is a member of the Executive Committee of ECUVYAP and a member of the Ecuadorian Arbitration Institute.<\/p>\n\n\n\n
Haly Tran Guevara<\/strong>, law student at the Universidad San Francisco in Quito
Daniela Endara Bastidas<\/strong> is a trainee at ECIJA Integrum<\/strong>
David Molina Coello<\/strong>, international arbitration intern at the London office of Three Crowns LLP<\/strong><\/a>.<\/p>\n\n\n\n
\n\n\n\nCase law<\/strong><\/h2>\n\n\n\n
Treaties<\/strong><\/h2>\n\n\n\n
Laws, Regulations, and Arbitral Rules<\/strong><\/h2>\n\n\n\n
ISDS Cases <\/strong><\/h2>\n\n\n\n
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Conclusion<\/strong><\/h2>\n\n\n\n
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