At a time of apparent disruption to prevailing pro-globalization macroeconomic policies in major countries in the Americas, it is, interestingly, Ecuador that continues to cycle away from the state-centric model that has prevailed for over a decade, and toward greater embrace and encouragement of foreign investment. The return of investment protections1 is a clear symbol of this shift.
Specifically, in a major course change, the Republic of Ecuador signed the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (the "ICSID Convention") on June 21, 2021, over a decade after the Andean nation first denounced the treaty in 2009 leading to its withdrawal as of early 2010. The move was hailed by David Malpass, President of the World Bank Group and Chair of the ICSID Administrative Council, who congratulated Ecuador on "its renewed focus on private sector investment." Ecuador will next have to ratify its signature of the ICSID Convention in accordance with its respective constitutional procedures for it to come into force again as to Ecuador.
A Turbulent History
This is not the first time Ecuador signs the ICISD Convention. 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. It first entered into bilateral investment treaties (with Germany and Switzerland) in the 1960s, and first ratified the ICSID Convention in 1986. By 2002, Ecuador had entered into 29 investment treaties.
During the presidency of Rafael Correa (2007-2017), Ecuador took steps that prompted numerous investment arbitration claims against Ecuador and steps to deconstruct the legal framework for investment protections. Among other things, on December 4, 2007, Ecuador notified ICSID that it would no longer consent to ICSID arbitration in relation to energy and mining disputes.2 On July 6, 2009, Ecuador notified its denunciation of the ICSID Convention, which became effective on January 7, 2010.3 In so doing, Ecuador followed Bolivia and anticipated Venezuela, which withdrew from ICSID in 2007 and 2012, respectively. 4
Ecuador took additional steps to deconstruct the legal framework for investment protections. Beginning in 2008, Ecuador began terminating bilateral investment treaties (BITs). In 2017, following a report released by a Citizen's Audit Commission concluding that Ecuador's BITs had not contributed to increased foreign direct investment, one of the final acts of the Correa administration was to order the termination of Ecuador's 16 remaining BITs. Pursuant to survival provisions in certain BITs, terminations by Ecuador were not to be immediately effective as to investments made prior to the termination.
Changing Course
Ecuador's signature of the ICSID Convention comes less than a month into the presidency of Guillermo Lasso, whose new government has sought to promote "more Ecuador in the world and more of the world in Ecuador." Ecuador described the move as a "firm step for the attraction of investments and international trust."5
This step follows the path set out in the government's Work Plan for 2021-2025, which seeks for Ecuador to become a magnet for investment, and states that new BITs and free trade agreements are needed, as well as the ratification, adhesion and respect for international dispute resolution mechanisms.6 The new President likewise has set the goal of joining the Pacific Alliance in the shortest time possible and entering into free trade agreements with Ecuador's allies.7
Announcing the signature of the ICSID Convention, Ecuador added that the move "will strengthen [Ecuador's] agenda of integration with other nations and organisms," including because it is a condition to a commercial agreement with Mexico and Ecuador's eventual entry into the Pacific Alliance.8
Ecuador's return to the ICSID Convention marks a significant step in a possible return to a more robust investment protection framework.
Ecuador may also seek to promote investment in particular sectors. For example, with regards to the mining, oil & gas, and energy sectors, the Work Plan notes that Ecuador has significant potential and underscores the role of private investment in making resources drive development (among other things, it notes Ecuador has to develop previously unexplored deposits, and estimates that the south-eastern Amazon region of Ecuador could contain oil reserves of several billion barrels).
1 The authors have written extensively on Ecuador and investment protections over the past fifteen years.
2 ICSID, Ecuador's Notification under Article 25(4) of the ICSID Convention, December 5, 2007.
3 ICSID, Denunciation of the ICSID Convention by Ecuador, July 9, 2009.
4 ICSID, Denunciation of ICSID Convention, May 16, 2007; ICSID, Venezuela Submits a Notice under Article 71 of the ICSID Convention, January 26, 2012.
5 Official Bulletin No. 079, General Secretary of Communications of the Presidency, June 21, 2021.
6 CREO, Work Plan for 2021-2025.
7 Presidency of the Republic, Inauguration Speech to the National Assembly, May 24, 2021.
8 Official Bulletin No. 079, General Secretary of Communications of the Presidency, June 21, 2021.
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