Ecuador’s 2017 Termination of Treaties: How Not to Exit the International Investment Regime

José Gustavo Prieto Muñoz

doi:10.5102/rdi/bjil.v14i2.4720

What is it about?

International Investment arbitration has been the target of substantial criticism in recent years, and many people around the world, from civil society, to NGOs, academics, (even Donald Trump) have been expressing concern. Many have asked the question, why don’t we just get rid of the system? Well, one country —Ecuador— tried to do just that. Ecuador not only exited the ICSID convention, and terminated all its Investment Treaties, it also introduced a constitutional prohibition to prevent future governments from re-entering the regime. However, this process was not as smooth as expected. It took more than a decade after the decision to exit the regime before Ecuador had effectively denounced all its treaties and now Ecuador is one of the last destinations for investment flows in Latin America.

Why is it important?

Ecuador’s decision and the long road taken to terminate the totality of its BITs constitutes a unique case for studying the legitimacy of the international investment regime because Ecuador is one of the few developing countries that has taken the radical decision to terminate all of its connections with the international investment regime. In addition, Ecuador was one of the first countries to introduce an express constitutional clause to forbid the state from entering into such agreements. In this light, this process is a key case study for those studying the interplay between constitutional law and international investment law on the one hand and the alleged constitutionalization of international investment law on the other. I further claim that specific principles of investment should be used rather than prohibitions on constitutional texts.

Perspectives

I further argue that the use of the constitutional sphere to effect reform might benefit a country more if it aimed to establish principles to apply in investment rather than instituting prohibitions. In any case, whether a country is considering terminating its existing Investment Agreements including BITs, or is more generally investigating the transformation of the in¬ternational investment regime, the Ecuadorian experience constitutes one of the few experiments in termination and deserves study in all its complexity.
Gustavo Prieto
Universita degli Studi di Verona

This page is a summary of: Ecuador’s 2017 Termination of Treaties: How Not to Exit the International Investment Regime, Revista de Direito Internacional, October 2017, Programa de Mestrado e Doutorado em Direito do Uniceub,
DOI: 10.5102/rdi/bjil.v14i2.4720.
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Open Access version
ECUADOR’S 2017 TERMINATION OF TREATIES: HOW NOT TO EXIT THE INTERNATIONAL INVESTMENT REGIME
On 16 May 2017, Ecuador terminated all of the 16 Ecuadorian Bilateral Investment Treaties (BITs) still remaining in force. This decision was the end of a longer process that aimed to disengage the South American state from the international investment regime, a process begun nearly a decade earlier, with the drafting of a new constitution in 2008, one that contained an article prohibiting the state from giving consent to investment arbitration. The article argues that it was not the 2017 decision itself, but the different erratic legal steps, including the poor drafting of the constitutional provision, the confusing reasons given for a series of constitutional judgements, the timing involved in re-evaluating the constitutional decision so many years later, and in general the lack of a pre-established course of action during this process that led to Ecuador’s poor performance in terms of its FDI policy. In this light, the article further claims that an analysis of the Ecuadorian experience can contribute to a better understanding of how the constitutional sphere can best interact with international investment law, potentially by applying specific principles of investment rather than prohibitions on constitutional texts.

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Gustavo Prieto
Universita degli Studi di Verona

Ecuador’s 2017 Termination of Treaties: How Not to Exit the International Investment Regime

What is it about?

Why is it important?

Perspectives

Resources