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 burdens.
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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