Ecuador has taken a series of actions attempting to limit the State’s obligations to foreign investors under investment treaties and reduce its exposure to international arbitration.
Starting in the 1990s, the Republic of Ecuador ratified numerous Bilateral Investment Treaties (”BITs”) and it previously ratified the 1965 Convention on the Settlement of Investment Disputes Between States and Nationals of Other States (the ”ICSID Convention”). By 2002, Ecuador had signed 28 BITs with arbitration provisions, of which 25 had entered into force by 2005.
In 2007, however, Ecuador announced that it sought to withdraw its consent to the jurisdiction of ICSID for disputes involving activities related to the exploitation of natural resources such as oil, gas, minerals and others.33 More recently, in May 2009, Ecuador signalled a likely intention to denounce the ICSID Convention.
On January 30, 2008, Ecuador denounced its BITs with Cuba, the Dominican Republic, El Salvador, Guatemala, Honduras, Nicaragua, Paraguay and Uruguay. Each letter stated that Ecuador was “in the process of reviewing its legal system and its national and international policies in investment matters” and that after evaluating the impacts of the BITs on its economy, Ecuador had “concluded that [these BITs] had not achieved their fundamental objective, that is, to encourage the attraction of capital for productive bilateral investment.”34
The BITs typically contained survival provisions that guarantee that investors who made investments before the denunciation will enjoy certain rights established in the BITs during a survival period. Under the relevant BITs, for instance, investors from El Salvador, Guatemala, Honduras, Nicaragua, and Paraguay may be protected for ten years from the date of denunciation.
On a related note, in 2008, contracts with Petroproducción, a subsidiary of State-owned Petroecuador, tended to include one or more clauses explicitly declaring null and void all suits brought outside the territorial jurisdiction and/or jurisdiction of the ordinary Ecuadorian court specified in the Contract.35
Additionally, the new Ecuadorian Constitution, which entered into force on October 20, 2008, attempts to increase state control over foreign investment. The Constitution places certain limits on international arbitration, such as prohibiting the State from entering into treaties or international instruments providing for international arbitration in contractual or commercial disputes between the State and private parties. One exception to this provision is for treaties or international instruments that provide for dispute resolution between the State and Latin American citizens before regional arbitral entities or judicial bodies.36