Originally from American Review of International Arbitration - ARIA

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 I. INTRODUCTION

In September 2008, through a popular referendum on a new constitution,
Ecuador adopted a constitutional provision on investor-state arbitration that at first
glance appears to make sweeping changes to the way Ecuador will handle disputes
with foreign investors. Article 422 of the 2008 Constitution prohibits treaties that
provide jurisdiction to arbitral bodies to resolve specified types of disputes
between the state and foreign investors. However, the article provides a
significant exception to the rule: the state may ratify treaties that provide for
investor-state dispute resolution between states and citizens in Latin America in
regional arbitral fora.

The reasons the Asamblea Constituyente (Constituent Assembly) of Ecuador
drafted Article 422 and the background leading to its adoption are varied and
cover the course of a number of years. However, at its core, Article 422
represents the rejection of the International Centre for Settlement of Investment
Disputes (“ICSID”) at the World Bank and investor-state arbitration in the
Northern Hemisphere, and the affirmative vision of creating a Latin American
regional pole to counter the perceived dominance of the United States in the
economic and political affairs of the Western Hemisphere.

This article will address Ecuador's rejection of investor-state arbitration in
general and the new regional politico-economic model it is articulating by
permitting arbitration among Latin Americans in Latin America. In doing so, this
paper will explore the expansion of agreements providing for investor-state
arbitration and the criticisms of the practice that have arisen over time. It will
then address Ecuador's experience with investor-state arbitration by examining
most of the disputes decided on the merits and by tracking related political and
economic decisions made by the Ecuadorian government. These developments
are then placed in a broader regional context by examining arbitration
developments in other Latin American countries. Finally, the article will address
why Ecuador has rejected arbitration in the Northern Hemisphere, whether Article
422 represents a coherent affirmative vision (and if so, what it seeks to gain) or more
simply a rejection of the status quo, and what benefits and costs Article 422 might 
have for Ecuador.