Originally from World Arbitration and Mediation Review

I.  INTRODUCTION

Say a layperson were to ask her or his close legal advisers for a brief and off-the-cuff comment as to what “investment arbitration” stands for, they would likely reply along the lines of “it’s a dispute resolution mechanism designed to protect transnational corporations against unfair treatment by developing countries.  It works as a shield against, you know, bad things like expropriations, unexpected taxation, targeted harassment and any other measures employed by greedy autocrats.”  When pressed for a quick answer, then, the response will almost inevitably fit the general assumption,  which, in some instances is not far from the truth.

However, as in everyday life, general assumptions are not always reliable ways of explaining legal issues. Legal science needs to be more multi-disciplinary and empirically-based to corroborate assumptions when it comes to explaining legal phenomena—and investment treaty arbitration is certainly no exception. I still hear people today from both sides of the ideological spectrum (left- and right-leaning thinkers) repeating flawed arbitration dogmas that regard “foreign direct investment (“FDI”) as a product of investment-arbitration availability,”  that consider “treaty-based arbitration as a neo-colonization” tool,  or that advocate for the position that developing nations should be treated with deference as underdogs in the context of international litigation given their vulnerable condition. 

By analyzing Ecuador’s record, this article intends to dispute the conventional assumptions that developing countries are neither efficient in dealing with investment arbitration claims nor equipped to handle them, and that they prepare their defense on a case-by-case basis.  I would argue that Ecuador, and Venezuela,  have adopted long-term strategies to overcome those assumptions, and deployed most of the characteristics commonly attributed to “repeat players” in complex, lengthy, and expensive litigation; coupled with a multi-claim scenario comparable to the scheme thoroughly analyzed by the socio-legal tradition  for private and domestic litigation in the United States.

In parallel, Ecuador’s anti-arbitration stances (taken during the last decade) portrayed this South American nation—together with Argentina, Bolivia and Venezuela—as one of the most visible examples of the so-called “backlash against investment arbitration.”  However, amid a new wave of economic and political reforms led by the administration of the recent-elected President Moreno, it seems that Ecuador is now leaning towards a friendlier “pro-business” and “pro-foreign investment”  legal framework, and, just as in the biblical parable, after a period of behaving badly, it has returned a “better person.”