On November 18-19, 2021, the Republic of Ecuador is hosting "Ecuador, Open for Business 2021", a two day global investment forum with the participation of the President, Ministers, and Representatives of the Inter American Development Bank and investors "to discuss the most innovative issues regarding investments and public-private partnerships". Issues to be discussed include investment opportunities in Ecuador, the new model of public-private partnership in Ecuador, as well as discussions on particular investment sectors, among other things.1 The event is part of a broader push by Ecuador over recent months to attract investment including, among other things, returning to ICSID, pursuing new treaties, and strengthening its domestic investment protection framework.
During 2021, Ecuador has continued to give signs of a possible return to a more robust investment protection framework following years of turbulence. As the authors have discussed in diverse publications over time, Ecuador's steps at the international and national level may represent the latest swing of the pendulum for investment protection in Latin America.
Return to ICSID
On June 21, 2021, the Republic of Ecuador signed the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (the "ICSID Convention"), over a decade after the Andean nation first denounced the treaty in 2009. Ecuador deposited its ratification with the World Bank on August 4, 2021. The ICSID Convention re-entered into force as to Ecuador on September 3, 2021 in accordance with Article 68(2) of the ICSID Convention.2
Pursuit of New Treaties
Ecuador has continued to underscore its objective of entering into free trade agreements ("FTAs") with the world's largest economies and join the Pacific Alliance.3 Among other things, Ecuador's Minister of Production and Foreign Trade has highlighted Ecuador's plans to have the treaties in place within four years.4 These new treaties, along with Ecuador's ratification of the ICSID Convention, would provide foreign investors substantive protections that Ecuador previously had sought to eliminate.
Arbitration Regulations
In parallel to its international efforts, Ecuador is also taking steps with regard to its arbitration legislation that may strengthen the investment protection framework. On August 18, 2021, pursuant to Executive Decree No. 165-2021 (the "Regulation"), Ecuador issued new Regulations for the Arbitration and Mediation Law. Among other things, the Regulation set forth various principles, including that the Arbitration and Mediation Law should be interpreted taking into account the transactional and flexible nature of arbitration "as well as its principles, uses and practices" (Art. 1.3).
Potentially of relevance to investors in Ecuador, the Regulation expressly addressed the availability of international arbitration in Ecuador, and the Arbitration and Mediation Law's requirement that parties entering into an arbitration agreement be domiciled in different states. According to the Regulation, investment vehicles constituted in Ecuador shall be deemed to be domiciled outside of Ecuador in the event that effective control over it is exercised by an investor domiciled in a different state (Art. 2).
The Regulation likewise addressed the possibility of entering into arbitration agreements with public sector entities. Among other things, the Regulation confirms that public sector entities may submit to domestic or international arbitration before or after a dispute arises or in accordance with law or treaties (Art. 4.1). With regard to the consent to international arbitration, the Regulation provides that prior approval by the State Attorney General is required if a dispute already has arisen or if the seat is outside Ecuador (Art. 4.2).
A Course Correction
Ecuador was one of the first States in Latin America to develop a framework for the promotion of investments including the use of international arbitration as a forum for resolution of disputes between States and investors. Beginning in the 1960s, Ecuador entered into 29 bilateral investment treaties (BITs); in 1986, Ecuador ratified the ICSID Convention for the first time; in 1997, Ecuador enacted the Arbitration and Mediation Law, among other things.
During the presidency of Rafael Correa (2007-2017), the pendulum shifted when Ecuador took steps that prompted numerous investment arbitration claims against Ecuador and steps to deconstruct the legal framework for investment protections. Among other things, Ecuador rejected ICSID, first notifying the Centre that it would no longer consent to ICSID arbitration in relation to energy and mining disputes5, and then notified its denunciation of the ICSID Convention on July 6, 2009 (effective on January 7, 2010).6 Meanwhile, between 2008 and 2017, Ecuador sought to terminate its BITs (certain terminations were not immediately effective as to pre-existing investments pursuant to applicable survival provisions).
Through its investment forum and efforts to strengthen the legal framework for investment protections, Ecuador seeks to assure investors that the door is open. It remains to be seen whether Ecuador can put the legacy of the recent years to rest and implement a return to more investor-friendly policies to attract new and lasting investments.
1 See Ecuador Open for Business 2021
2 ICSID, Ecuador Ratifies the ICSID Convention, August 4, 2021.
3 Ecuador's Lasso wants free trade agreements with world's top 10 economies, La Prensa Latina, September 9, 2021; Canciller Mauricio Montalvo: 'Ecuador se va a transformar en un imán de atracción a la inversión extranjera', El Universo, September 5, 2021.
4 Ecuador targets free trade deals with top 20 world economies in four years, Reuters, September 21, 2021; Tratados de Libre Comercio: la solución que propone Guillermo Lasso al problema de empleo en Ecuador, Metro Ecuador, September 21, 2021.
5 ICSID, Ecuador's Notification under Article 25(4) of the ICSID Convention, December 5, 2007.
6 ICSID, Denunciation of the ICSID Convention by Ecuador, July 9, 2009.
7 The authors have written extensively on Ecuador and investment protections over the past fifteen years.
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