The End of Investor-State Arbitration in Ecuador? An Analysis of Article 422 of the Constitution of 2008 – Vol. 19 No. 2

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Author: Eric Gillman*

Published: August 2009

Investment Disputes



In September 2008, through a popular referendum on a new constitution, Ecuador adopted a constitutional provision on investor-state arbitration that at first glance appears to make sweeping changes to the way Ecuador will handle disputes with foreign investors. Article 422 of the 2008 Constitution prohibits treaties that provide jurisdiction to arbitral bodies to resolve specified types of disputes between the state and foreign investors. However, the article provides a significant exception to the rule: the state may ratify treaties that provide for investor-state dispute resolution between states and citizens in Latin America in regional arbitral fora.

The reasons the Asamblea Constituyente (Constituent Assembly) of Ecuador drafted Article 422 and the background leading to its adoption are varied and cover the course of a number of years. However, at its core, Article 422 represents the rejection of the International Centre for Settlement of Investment Disputes (“ICSID”) at the World Bank and investor-state arbitration in the Northern Hemisphere, and the affirmative vision of creating a Latin American regional pole to counter the perceived dominance of the United States in the economic and political affairs of the Western Hemisphere.

This article will address Ecuador’s rejection of investor-state arbitration in general and the new regional politico-economic model it is articulating by permitting arbitration among Latin Americans in Latin America. In doing so, this paper will explore the expansion of agreements providing for investor-state arbitration and the criticisms of the practice that have arisen over time. It will then address Ecuador’s experience with investor-state arbitration by examining most of the disputes decided on the merits and by tracking related political and economic decisions made by the Ecuadorian government. These developments are then placed in a broader regional context by examining arbitration developments in other Latin American countries. Finally, the article will address why Ecuador has rejected arbitration in the Northern Hemisphere, whether Article 422 represents a coherent affirmative vision (and if so, what it seeks to gain) or…

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*M.A., 2005, Columbia University School of International and Public Affairs; J.D., 2008, N.Y.U. School of Law. The author has worked as a researcher in affiliation with Universidad Andina Simón Bolivar, Quito, Ecuador, and at the Legal Affairs Division of the World Trade Organization, Geneva, Switzerland. In the fall of 2009, he will enter private legal practice in Washington, D.C. The author wishes to thank Michel Levi of the Universidad Andina Simón Bolivar for his generous support in the preparation of this article.