In January of 2010 the denunciation made by Ecuador to the
International Center for the International Centre for Settlement of
Investment Disputes became effective (ICSID). This denunciation
arises from the Ecuadorian government's rejection of neoliberal
globalization. The ICSID is a provider for arbitration located in
Washington DC that investors may approach to defend themselves
against measures taken by the receptor countries. The ICSID is a
part of the World Bank. Today more than 150 countries are part of
ICSID, but Ecuador is no longer one of them.
The ICSID has been a polemical entity for many reasons, two of
which we highlight here. In the first place, the ICSID is
understood as an entity that undermines the sovereignty of the
state. The ICSID represents the negation of the Calvo Doctrine.
According to the Calvo Doctrine, disputes arising from foreign
investment must be solved in the domestic courts of the receptor
country, under standards of equal treatment between nationals and
foreigners. In contrast, the ICSID permits a foreign investor to go
directly to international arbitration, skipping local justice. This
is perceived by countries that take a nationalist stance as an
affront against the sovereignty of the state.
Second, it is said that he ICSID has a bias in favor of
investors. There is a much extended opinion that it is rare for
investors to lose their disputes at ICSID. This seem so be false.
According to a statistical study, states win 57.69% of their cases
at ICSID (see Franck, S. D. (2011). The ICSID Effect? Considering
Potential Variations in Arbitration Awards. Virginia Journal of
International Law, 51,4). From a juridical perspective, this number
is not very significant, if we don't take into account the
validity of the positions of the litigants. For states that
consider that the ICSID has rules that are too favorable to
investors, a 57.69% win rate might still seem too low.
And from a juridical perspective, the idea there is bias is
understandable. For this it is enough to note that ICSID has
adopted a wide definition of expropriation (see for example
Metalclad Corporation v. United Mexican States (ICSID Case No.
ARB(AF)/97/1), arbitral award, paragraph 103 and subsequent), and
insists that full compensation is owed to the investor even if the
expropriation tracks a public purpose (on compensation standards
see LG&E Energy Corp., LG&E Capital Corp. and LG&E
International Inc. v. Argentine Republic (ICSID Case No. ARB/02/1),
arbitral award, paragraph 31 and subsequent). Naturally, the state
might still raise defenses that exculpate it from having breached
investment law, but in this case, the burden of proof and
argumentation falls on the state, whereas defenders of the
nationalist paradigm would prefer an inversion of these
When Ecuador denounced ICSID, this action was considered a
merely symbolic protest by the community of international lawyers.
The reason for this is that Ecuador is party to many investment
treaties that establish arbitral mechanisms for the solution of
controversies that had not at that time been denounced.
Nonetheless, Ecuador took steps to denounce other investment
treaties such as the Treaty between the United States of America
and the Republic of Ecuador concerning the encouragement and
reciprocal protection of investment; and it has started to sign
treaties with countries that apparently share Ecuador's
alternative vision of how international commerce should be. So we
see that in the recent Commercial Agreement between the Republic of
Ecuador and the Islamic Republic of Iran it is made clear that
there is no possibility of international arbitration, but access to
national judicial authorities is granted (Articles 17 and 18). The
same can be seen in the Commercial Agreement between the Republic
of Ecuador and the Republic of Lebanon (once more, Articles 17 and
18). (All these points make reference to ongoing procedures for the
approval and denunciation of international treaties in the National
Assembly of Ecuador).
Maybe the most notable exception to the nationalist model that
Ecuador has adopted is nascent the free trade agreement between the
Andean Countries and the European Union. This treaty does contain
an arbitral clause, but this clause authorizes states to have
recourse to arbitration, not private investors. It is yet to be
seen if this sort of arbitral arrangement will be acceptable from
the nationalist perspective adopted by Ecuador.
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