If you are a foreign investor looking to resolve a business dispute with a local partner in Ecuador, then you can expect a favorable outcome much more than three years ago. The Ecuadorian authorities have made a significant breakthrough in attracting FDI into the country, as any restrictions on foreign investment were lifted.
An increasing number of investors are increasingly choosing international arbitration in Ecuador as an effective dispute resolution mechanism. The arbitration legislation of the jurisdiction has been significantly modernized.
Outdated provisions regarding the procedure for the execution of international arbitral awards in Ecuador were removed. A small state in the western part of South America is a member of NYC and a signatory to the Inter-American Convention on International Commercial Arbitration, which provides foreign entrepreneurs with additional guarantees.
Judicial system of Ecuador
The judicial authorities include: a local (aboriginal) court, which has the power to resolve internal conflicts of indigenous peoples in accordance with local customs that do not contradict the provisions of the constitution and international human rights instruments; National Court of Justice, Provincial Courts, Statutory Courts, Magistrates' Courts; administrative bodies (Council for the Administration of Justice), subsidiary bodies (notary, auction and other services).
The functions of the Council for the Administration of Justice include the development and implementation of policies for the development of the judicial system, management of the process of attestation and appointment of judges, and the development of the legal education system.
The Council consists of nine members and an equal number of alternates, appointed for six years by alternative elections by the Council for Civil Participation and Public Oversight and empowered by the National Assembly.
The National Court of Justice is composed of twenty-one judges appointed by the Council for the Administration of Justice for a term of nine years, without the right to reappointment. A third of the composition of the National Court of Justice is renewed every three years.
A special place is given to the Constitutional Court - the supreme body exercising control over the observance of the constitution, interpretation of the constitution and administration of justice.
In Ecuador, judicial interference with other branches of power and arbitration is generally negligible.
Settlement of disputes in Ecuador between investor and government
If you want to resolve an investment dispute in Ecuador using arbitration, you should take into account that negotiations are currently underway to conclude bilateral investment agreements with a number of countries, primarily the EU. Also, an investment agreement has already been signed with the European Trade Association.
It is a good sign that to date, the country has fully complied with previous arbitration awards in foreign investment disputes, without the need for enforcement procedures.
Appeals against decisions
Arbitral awards in Ecuador are final and not subject to appeal. Only clarifications of the verdict may be requested if their reasoning is not clear enough for the parties. However, decisions are subject to judicial review through a separate, independent legal action - annulment action.
The grounds for setting aside an arbitral award are as follows:
- A subpoena was not filed by law and the arbitration in Ecuador ended in default.
- One of the parties was not informed of the decisions of the tribunal, and this fact impeded or limited its right to defense.
- The decision concerns issues that have not been referred to arbitration or provided in excess of what is stated.
- When the procedures for the appointment of arbitrators have been violated.
Enforcement of Awards
Arbitration in Ecuador is not divided into domestic and international - both are regulated in the same way in light of the latest legislative changes.
A party to a dispute seeking enforcement of an international judgment must apply for recognition to the local lower court.
If you are planning to initiate arbitration proceedings in Ecuador, it is worth considering that such a claim must meet the following requirements:
- the decision must be considered res judicata in the jurisdiction in which it was issued;
- the decision was executed in compliance with all formalities for its validity;
- the request for execution must indicate the place where the procedure was carried out;
- all documentation must be in Spanish.
The claim must be supported by documentary evidence that the defendant was duly served with the claim and that the legal procedure was not violated.
Under the updated legislation, decisions made in the framework of the settlement of an international arbitration dispute in Ecuador are enforced in the same way as domestic orders. Interim measures under the procedural code, according to which the settlement of international investment arbitration disputes in Ecuador must be carried out by judges of first instance, were overturned by authorized representatives of the Constitutional Court.
The award annulment lawsuit is reviewed by a second-level judge. It should be noted that in practice, the cancellation process can take more than half a year.
Need more information and/or assistance in resolving a dispute by arbitration in Ecuador? Sign up for an individual consultation on international arbitration law from the specialists of IQ Decision UK.