The Constitutional Court recently annulled an arbitral award based on grounds that are not listed in the Arbitration Law as causes for such action. To reach that outcome, the court made an expansive application of certain constitutional guarantees dealing with due process. The ruling has created troubling uncertainty regarding the enforcement of arbitral awards.
After the National Assembly passed a law regulating agreements for public-private partnerships involving foreign investors, the executive branch promulgated a decree establishing regulations to facilitate the law's implementation. Some of the new regulations deal with arbitration in the context of public-private partnerships with foreign corporations. Although this is a positive step in the recognition of arbitration as an efficient dispute resolution mechanism, the regulations contain some shortcomings.
A UNCITRAL tribunal has found Ecuador to be in breach of the 1996 Canada-Ecuador Bilateral Investment Treaty for the unlawful expropriation of the investment of a Vancouver-based company. The expropriation was the result of a resolution passed by the 2008 constituent assembly. According to Ecuadorian jurisprudence, the powers of constituent assemblies are considered unlimited and are therefore not subject to judicial review.
The Constitutional Court recently annulled a National Court of Justice ruling that had denied a petition to review a sentence issued by the president of the Guayaquil Court on a nullity action against an arbitral award. According to the Constitutional Court, the National Court's decision was unconstitutional because it deprived the plaintiff of his right to appeal.
In order to attract private investment, Ecuador recently adopted a new law that regulates the establishment and operation of public-private partnerships. One of its features is that parties to these partnerships may submit their disputes to international arbitration. This is a positive step, but certain conditions may dissuade companies from entering into this type of partnership.
The Constitutional Court has ruled that sentences on nullity action against arbitral awards are subject to review by the highest court through the cassation recourse. The ruling clarifies an issue that has been the source of much debate. While this is a positive step, the decision may open new opportunities for defeated parties to delay the enforcement of unfavourable arbitral awards.
Ecuador's new code of judicial procedures has abandoned the speedy system for the enforcement of international awards that existed under the Arbitration and Mediation Law and replaced it with a cumbersome two-tier procedure. The winning party must initiate a process to obtain a favourable ruling by a court of appeal declaring the homologation and recognition of the award.
A provincial court recently upheld the validity of an award dealing with a divorce dispute. The court dismissed a nullity action filed by the losing party in arbitration. The ruling is a significant step in supporting arbitration, since the traditional view has been that such cases fall within the exclusive competence of ordinary judges.
A Lago Agrio court recently ordered the government not to comply with a $96 million international arbitral award issued in favour of Chevron by a United Nations Commission on International Trade Law panel. According to the court, the government should pay funds to the Lago Agrio plaintiffs which were awarded $9 billion by Ecuador's highest court – a ruling with which Chevron has refused to comply on grounds of fraud and corruption.
The Quito Provincial Court has annulled a lower court decision (where the defendant was ordered to pay overdue bills of exchange) because the parties had inserted an arbitration clause into the underlying agreement. Although the ruling may be considered a positive step in favour of arbitration, it has left unanswered questions regarding the feasibility of arbitration for the collection of financial instruments.
The National Court of Justice has denied a petition to review a lower tribunal ruling which had annulled an arbitral award. The decision was based on a strict reading of the cassation law by the court. While the national court's ruling follows some of its previous decisions on this matter, the sentence contains important views on arbitration. It remains to be seen whether the lower courts will follow these views.
The Constitutional Court of Ecuador revoked a decision of a first-instance judge who had issued a precautionary constitutional measure ordering an arbitration institution to halt an ongoing arbitration. The court found no merit in the judge's anti-injunction decision and ruled for the continuation of the arbitration. The court's opinion is welcome, but it has left questions open about the use of the writ of amparo against arbitration.
A Guayaquil court has annulled a proceeding because the underlying contract provided for arbitration in case of disputes between the parties. The first-instance court was reprimanded for not giving full effect to the consumer contract and inviting the claimant to file for arbitration before the chamber of commerce arbitration centre. This is a welcome development in the conflicting area of arbitration in consumer contracts.
The latest petroleum round launched by Ecuador to attract fresh investment recently ended. Under the new arbitration clause proposed by Ecuador for oil contracts, among other things, the arbitration will be in Spanish and the applicable law will be Ecuadorian law. It remains to be seen whether the clause will replicate the language proposed by Ecuador or whether the parties will negotiate a refined version.
The International Centre for Settlement of Investment Disputes (ICSID) arbitral tribunal recently found that Ecuador was in breach of the US-Ecuador Bilateral Investment Treaty when it terminated without compensation the product-sharing contract that the parties had signed. Ecuador filed an application for the annulment of the award, which was provisionally stayed by the ICSID secretary general.
Ecuador's highest court has ruled that it will not hear cassation recourses against decisions of provincial courts on nullity actions against arbitral awards. The opinion may help to shorten the period of uncertainty regarding the enforcement of arbitral awards. However, the court's restrictive position effectively leaves it without a say on how provincial courts handle such an important aspect of arbitration.
The government has established a high-level commission with a wide range of powers to audit the process of ratification of its bilateral investment treaties, as well as the various arbitration proceedings initiated under these treaties. The most relevant of the commission's powers is that dealing with current arbitral proceedings and their impact on Ecuador's people.
Recent government decisions and several Constitutional Court rulings have seriously impeded the enforcement of awards issued by international arbitral tribunals established in accordance with bilateral investment treaties. In such cases it seems that the prevailing party should try to enforce the award elsewhere. This shift in public policy must be taken into consideration by international legal counsel.
In the protected dispute between Chevron Corporation and Ecuador on one side, and the US multinational and a group of Ecuadorean citizens on the other, an international arbitral tribunal has found Ecuador liable for breaching two interim awards on provisional measures. The tribunal may take several months to issue its ruling and the failure of Ecuador to comply with the interim awards may cost it dearly.
A United Nations Commission on International Trade Law arbitration tribunal recently ruled on a dispute arising within the framework of a licence for the generation of power granted to a US venture by the National Council for Electricity. The tribunal found that the agency's actions were not attributable to the state under international law because they lacked "governmental nature".