The Arbitration and Mediation Act (“Act”) of Ecuador was first enacted in 1997. However, even after amendments adopted in 2015, the legislation contained regulatory gaps and vague terms, which did not allow arbitrators and judges to build a steady body of interpretation. The fact that the country denounced the ICSID Convention in 2009 added further constraints to the appeal of international arbitration in Ecuador.
Then, two months after Ecuador rejoined the ICSID Convention in June 2021, Executive Decree No. 165-2021 was issued by the President containing the Regulations to the Arbitration and Mediation Act. The aim of the Regulations was to clarify previous ambiguities and fill in the gaps contained in the law regarding arbitration in Ecuador. The country’s rejoining the ICSID Convention, in turn, facilitates the resolution of international investment disputes.
Definition of Arbitration in Ecuador under the Arbitration and Mediation Law
According to Article 1 of the Act, the arbitration system is an alternative dispute resolution mechanism to which the parties may submit, by mutual agreement, existing or future disputes capable of resolution. In such cases, the dispute is to be resolved by an administered arbitration tribunal or by independent arbitrators.
Article 2 clarifies that arbitration is administered when it is subject to the Act and the rules and procedures of an arbitration centre, and it is independent when it is conducted pursuant to the Act but in accordance with the agreement of the parties.
According to Article 5, an arbitration agreement is:
the written agreement by virtue of which the parties agree to submit to arbitration all or certain disputes that have arisen or may arise between them in respect of a particular legal relationship, whether contractual or non-contractual.
Article 6 adds, however, that the arbitration agreement does not have to be contained in one single document signed by the parties, but it can also figure from other written communications which serve as a documentary record of the will of the parties to submit themselves to arbitration.
Request for Arbitration
Importantly, Article 10 details the requirements that a valid request for arbitration in Ecuador must fulfil. The request must be submitted to the director of the arbitration centre or to the arbitrator or arbitrators appointed in the arbitration agreement. It must also contain:
- The designation of the centre or the arbitrator to which it is submitted;
- The identification of the Claimant and the Respondent;
- The basic facts and legal arguments, outlined with clarity and precision;
- The thing, amount or fact that is requested;
- The determination of the amount in dispute;
- The designation of the place where the respondent is to be served, and of the place where the respondent is to be notified.
- Other requirements established by law in each case.
The prerequisites contained in Article 72 of the Civil Procedure Code must also be respected.
One specificity of the Act is that a mediation hearing is held in order for the parties to be able to settle their dispute (Article 15). The mediator is appointed by the director of the arbitration centre. If the parties manage to reach an agreement, the act signed after the mediation hearing has the effect of an enforceable judgement and is res judicata.
Constitution of the Arbitral Tribunal
In accordance with Article 16, the parties have a chance to agree on the arbitrators during the mediation hearing. Absent an agreement, the director of the arbitration centre sends a list of arbitrators to the parties from which they can elect their arbitrators. By common agreement, the parties may also appoint arbitrators that are not on the list. Once each of the parties has selected an arbitrator, the two appointed arbitrators proceed to designate the president of the tribunal.
In every arbitration in Ecuador, apart from the sole arbitrator or the three arbitrators constituting the tribunal, a so-called “alternate arbitrator” must be designated as well. The alternate arbitrator can intervene in the proceedings in case of the absence or definitive impediment of one of the arbitrators (Article 17).
Decisions of the Arbitral Tribunal
The parties must immediately execute the decisions of the arbitral tribunal (Article 32). Arbitration awards have the effect of an enforceable judgment and res judicata and shall be enforced in the same way as final judgments, following the enforcement procedure. The judge deciding on enforcement cannot accept any objection except those arising after the decision is issued.
Recognition of Foreign Arbitral Awards in Ecuador
Ecuador is a party to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, which regulates the enforcement of foreign arbitral awards in Ecuador. However, when acceding to the Convention, Ecuador made a reservation limiting its application to arbitral awards on commercial matters.
Investment Arbitration in Ecuador
Although investment protection and investment arbitration in Ecuador is not governed by a separate act, the country rejoined the ICSID Convention in 2021.
To date, Ecuador has been involved in a total of 28 reported investment arbitration cases, including in the mining and energy sectors. The most notable cases against Ecuador were:
- Cases in relation to mining:
- RSM v. Ecuador
- Zamora Gold v. Ecuador
- Copper Mesa v. Ecuador
- Junefield v. Ecuador
- Codelco and others v. Ecuador
- Cases in the energy sector:
- Occidental v. Ecuador I and II (Hydrocarbons)
- MCI v. Ecuador (Electricity)
- Encana v. Ecuador (Oil and Gas)
- Duke Energy v. Ecuador (Power Generation)
- Chevron and TexPet v. Ecuador I and II (Oil Exploration)
- Perenco v. Ecuador (Oil Extraction)
- Burlington v. Ecuador (Oil Exploration)
In conclusion, the Arbitration and Mediation Act of Ecuador, though initially fraught with ambiguities and regulatory gaps, has undergone significant revisions, notably with the introduction of Executive Decree No. 165-2021 which aimed to clarify and enhance its provisions. The country’s renewed affiliation with the ICSID Convention further accentuates Ecuador’s commitment to refining its approach towards international investment disputes.