A New Investment Corridor: Unpacking The UAE–Ecuador BIT

The UAE and Ecuador have recently taken a significant step towards deepening cross‑border investment through the signing of a bilateral investment treaty (BIT). For UAE investors, particularly sovereign wealth funds, infrastructure sponsors and energy and mining groups, the treaty has the potential to open a new corridor into Latin America.

That potential, however, comes with an important caveat. Ecuador’s Constitutional Court has required significant changes to the treaty before it can take effect.

In this blog post, we explain what the BIT offers, the investment opportunities it may enable, and what investors should monitor going forward.

What the BIT does in practice

The BIT forms part of a broader strategy by Ecuador to re‑engage with international investors after more than a decade without engagement in investment treaties and investor‑State arbitration. For the UAE, it sits alongside a Comprehensive Economic Partnership Agreement (CEPA) signed in March of this year during the Crown Prince of Abu Dhabi’s visit to Ecuador, making the State now the fourth Latin American country to establish a CEPA with the UAE.

For UAE investors deploying long‑term capital into emerging markets, the attraction is clear. A BIT typically provides:

• protection against unlawful expropriation;
• commitments to fair and equitable treatment;
• guarantees around non‑discrimination; and
• most importantly, a direct right for investors to bring claims against the host State through international arbitration (investor‑State dispute settlement, or ISDS).

The UAE–Ecuador BIT adopts a broad definition of “investment”, covering equity stakes, concessions, contractual rights and other forms of long‑term economic commitment. In parallel, the CEPA investment chapter includes:

• national treatment and most‑favoured‑nation protection;
• free transfer of capital;
• protection against expropriation subject to fair market value compensation; and
• a stabilisation commitment of up to 15 years for qualifying investments above USD 50 million.

For capital‑intensive sectors such as mining, renewables and digital infrastructure, all priority areas for UAE outbound investment, these protections can be decisive when assessing political and regulatory risk.

Constitutional challenges in the Ecuadorian Courts

While the UAE-Ecuador BIT promises to open new corridors for investment between the States, it has not been without controversy, facing significant constitutional headwinds in Ecuador. Under Article 422 of Ecuador's Constitution, the State is prohibited from relinquishing jurisdiction to international arbitration in disputes involving foreign private parties. Public support for this provision remains strong, with 65% of Ecuadorian voters rejecting a 2024 referendum proposal to amend Article 422 to open the door to international arbitration, and 62% rejecting a 2025 constituent assembly proposal that was considered a step towards the removal of these protections.

Against that backdrop, at the end of 2025 the Ecuadorian executive submitted the BIT to the Constitutional Court for review, requesting an accelerated decision on whether the treaty required National Assembly approval. However, the review was delayed after the court received several amicus curiae briefs from civil groups and academics within Ecuador arguing the BIT was unconstitutional. The review ultimately completed on 30 March 2026. While the Constitutional Court approved the treaty and its ISDS mechanism, it did so under the caveat that the ISDS clause is to be amended to expressly carve out contractual and commercial disputes from its scope. The treaty is now set to be sent back to the Ecuadorian government for amendment before it can be submitted for a further round of constitutional review.

What does the ISDS carve-out mean for investors?

For investors, the key issue is how narrowly or broadly the exclusion for “contractual and commercial disputes” is ultimately drafted.

If the carve‑out is limited, excluding only pure contractual claims while preserving treaty claims based on State conduct, the ISDS mechanism could still provide meaningful protection against regulatory change, discriminatory treatment or indirect expropriation.

If, however, the exclusion is drawn broadly, it may significantly limit recourse to arbitration in the types of disputes most likely to arise from major projects, concessions or public‑private partnerships.

The Constitutional Court did not resolve this ambiguity, and dissenting opinions flagged the risk of future litigation over the scope of the exclusion.. The interpretation of similar carve outs in other jurisdictions does little to settle the debate, with States adopting varied approaches, depending on their appetite for/acceptance of interstate enforcement. For instance:

• a number of states adopt a wide approach and therefore offer limited (if any) recourse to ISDS. For instance, in Brazil the approach taken in Cooperation and Facilitation Investment Agreements (an alternative to BITs) is extremely broad, with investment arbitration completely excluded.
• many states, including the UK and a large number of the EU Member States, commonly adopt a narrow interpretation of similar carve outs. The typical approach reflects the decision in ICSID Case No. ARB/97/3 (Compañía de Aguas del Aconquija S.A. and Vivendi Universal S.A. v. Argentine Republic) wherein the ICSID Annulment Committee held that the key question is whether the legal basis of a claim sits within a BIT or a commercial contract. For instance, a claim for repudiation would be contractual whereas a claim for expropriation would be actionable through ISDS.

The position is, therefore, far from settled and we would expect this carve out to generate significant jurisdictional disputes unless first clarified by the Constitutional Court or in the revised drafting to be proposed by Ecuador, For now, investors should assume that the final shape of ISDS protection between the UAE and Ecuador remains a live issue.

Bilateral Investment Opportunities

Notwithstanding the ongoing constitutional process, the commercial rationale underpinning the BIT is compelling. While the UAE is already Ecuador's largest trading partner across in the MENA region (non‑oil bilateral trade exceeded USD 370 million in 2025, largely comprising sea food and fruit from Ecuador into the UAE and machinery, electronics and refined petroleum products from the UAE into Ecuador), public statements indicate that the CEPA and BIT are projected to increase bilateral trade to US$600–800 million within three years, representing a rough estimate of 100% growth in trade activity between the States before 2030.

Key sectors for UAE investors include:

• mining and critical minerals: Ecuador holds significant copper and mineral reserves, with UAE sovereign wealth funds such as ADIA, Mubadala, and ADQ having already signalled interest;
• renewable energy: the CEPA contains commitments to expedite environmental permitting for solar, wind, energy storage and grid modernisation projects, creating a potentially attractive framework for utility-scale renewable energy projects; and
• digital infrastructure: public initiatives, including the USD 200 million "Digital Ecuador" initiative promising data centres, broadband expansion, and smart city pilots, align well with the UAE’s expertise and investment interest in the development of digital infrastructure, with companies such as G42 well placed to benefit from increased outbound investment opportunities in this space.

Next steps

There are several steps remaining before the BIT can enter into force:

1. the UAE and Ecuador must agree to the proposed amendments to the BIT’s ISDS provision;
2. the revised BIT must pass a further round of constitutional review in Ecuador; and
3. both the BIT and CEPA will require formal ratification by the UAE and Ecuador respectively.

The UAE–Ecuador BIT signals a clear political intent to attract UAE capital into Ecuador’s economy and to provide international‑standard investment protection. While the precise reach of arbitration rights remains to be ascertained in light of constitutional constraints in Ecuador, the direction of travel is positive.

For UAE investors evaluating opportunities in Ecuador, early structuring, careful treaty analysis and advance enforcement planning will be essential to unlocking the treaty’s full value.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.