What the government is asking for in question 7 of the second public consultation questionnaire is that the Ecuadorian state recognizes international arbitration as a method for settling investment, contractual or commercial disputes.

In order to achieve the proposed goal, it is proposed to replace Article 422 of the Constitution, as it indicates that “it is an obstacle to foreign investment because it prevents investors from offering an environment of legal certainty as done by other countries that have bilateral agreements for the protection of investments and rules on submission to international arbitrations. “

Question 7 of the second public consultation questionnaire proposed by Daniel Noboa is about international arbitrations: see its annex

Question 7: Do you agree that the State of Ecuador promotes foreign investment and recognizes international arbitration as a method to resolve investment, contractual or commercial disputes, so that foreign investors are offered an adequate environment of legal security that creates greater employment opportunities and strengthens dollarization?

And in the appendix, it requests that article 422 be replaced with the following: “The State of Ecuador may honor treaties or sign international instruments that provide rules for the settlement of disputes by international arbitration, whether in investment disputes or of a contractual or commercial nature.” between the state and private natural or legal persons; or in matters relating to external debt.”

The current article states: “No international agreements or instruments may be concluded in which the State of Ecuador cedes sovereign jurisdiction to international arbitration bodies, in contractual or commercial disputes, between the State and private natural or legal persons…” .

Opinions on the issue are divided

For experts, the question helps the Government to give a positive message to the world about investment protection; and, if the Constitutional Court (CC) implements an “interpretation in favor of the law, it could lead to international arbitration that does not mean ceding space in sovereignty.” However, they also have reservations, and one of them is that this is an issue that could be discussed in the National Assembly, and not at a national consultation, in addition to the fact that the Constitution already knows how to resolve conflicts between companies.

For constitutional lawyer Jaime Celi, the question is “very interesting” because it aims, first, to resolve the debate that developed during the promulgation of the 2008 Constitution, since the analysis of Article 422 did not have an answer. an accurate and clear description of the state’s behavior regarding the signing of international treaties and conventions.

He wants to point out that the Constitutional Court, in the moments in which it was supposed to resolve, did not determine exactly what a contract or an international agreement entails, for example, or what it has to do with the question of assignment of jurisdiction as such. And he believes that this is an opportunity to determine exactly whether Ecuador can actually try to conclude bilateral trade agreements, that is, between private individuals and the state for the purpose of guaranteeing foreign investment.

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Export and Investment Promotion Corporation (Corpei) investment specialist consultant, Eric Vinueza, comments that there is currently a possibility of involving international arbitration for projects that sign an investment contract whose amount is more than 10 million dollars.

The director of the master’s degree in finance at the Private Technical University of Loja, Diego Cueva, has a similar criterion, who indicates that the Constitution already recognizes part of the way in which conflicts between companies can be resolved, and what the question refers to is the expansion of the possibilities that companies have to implement arbitration due to the creation problems or controversies that may arise in relation to international companies.

Ecuador, attractive for investments

Celi comments that basically what the question envisages is international participation and investment by multinational entities; In other words, Ecuador becomes an attractive country for international investments, thus creating jobs and stimulating the economy. However, as stated in Article 422, with this ban on resolving conflicts through international arbitration, Ecuador is not attractive for foreign investment.

The fact that a foreign company can opt for this instrument of international arbitration – says Vinueza – strengthens the state’s mission to promote foreign investments, which for several years were “tiny” compared to the attraction created by our neighbors in the region. “The question asked helps the Government to send a positive message to the world about its vision in the framework of investment protection. It must be remembered that Ecuador does not issue currency and needs foreign currency (dollars) in order for the economy to develop. There is an investment portfolio, only in public-private alliances, that exceeds 10,000 million dollars, and without clear public policies that give a strong and resounding message to foreign investors, these currencies will still not come to the country.

Celi comments that, if the CC “performs a legal interpretation, this could lead to international arbitration. This does not mean the ceding of space in sovereignty as such, but a guarantee, because if the state has the will to resolve conflicts through international arbitration, it has this ability to decide and does so, clearly does not mean the loss or surrender of its jurisdiction as such or its sovereignty.”

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Other priorities for foreign investments

For his part, Cueva indicates that “unfortunately” it is not an issue that changes the aspect of managing international relations that exists with foreign investors, but perhaps in the appendices there are a little more details of minimal changes that could easily be resolved within the Assembly, and not necessarily through the national consulting, and in this sense he believes that “it is as if the issue is being violated, which could be approached from another aspect in order to give greater stability to foreign investments”.

For foreign investors, says Cueva, tax and fiscal security is important because this is what has the greatest influence in international relations and needs to be worked on.

Vinueza points out that another important element to consider is that, once this reform is approved in the Constitution, the initial push could be given to resume the possible signing of bilateral investment treaties (BITs) that were canceled in previous administrations.