Valeria Arroyo
I. Introduction
The world is advancing by leaps and bounds, and with it, more complex disputes between parties are arising. Currently, disputes involving technology, intellectual property, competition and new contractual forms are gaining momentum. Parties with disputes about these subjects, as well as other disputes that by their nature are arbitrable, have chosen to opt for international arbitration because of its flexibility and efficiency.
In this sense, the necessity arises to simplify arbitration processes, eliminate unnecessary ritualism, and optimize time and resources. Pretending to remain static in the face of change leads to the obsolescence of those who practice it. Being able to embrace modernity while maintaining the principles of the arbitration process without denaturalizing it means becoming a jurisdiction that supports the arbitration process and, therefore, a successful jurisdiction.
The Ecuadorian case is no exception. Despite a period of absence from the international arbitration sphere, Ecuador has made its best efforts to keep up to date in this field. Its 2021decision to rejoin the ICSID Convention has been nothing more than an impetus to further develop arbitration in the country. Consequently, this article will briefly analyze the current status of arbitration in Ecuador and the pending challenges that still face both national and international arbitration today.
II. Ecuador and Arbitration
In Ecuador, arbitration is primarily governed by the Arbitration and Mediation Law and the Regulations to the Arbitration and Mediation Law. Arbitration is also constitutionally recognized as an alternative dispute resolution method in Article 190 of the Constitution of Ecuador.
Several contemporary arbitration institutions operate under this legal framework. They include:
- Private-to-private arbitration;
- Private-to-State arbitration;
- Emergency arbitration;
- Fast-track arbitration; and,
- Arbitration without privity
These institutions have been incorporated in the Law of Arbitration and Mediation, its Regulation, and the rules established by the arbitration centers over the years, respectively. Therefore, nationwide, arbitration is at the forefront with procedural tools or institutions available for parties in domestic procedures. Nevertheless, no system or arbitration center is perfect, and continuous improvements are always necessary.
III. What is still missing in domestic arbitrations?
In accordance with the previous section and the rules of international centers, two concepts have not been implemented into the Ecuadorian Arbitration Law, and therefore, are absent from both its rules and in local arbitration centers. The first concept is the “Early Dismissal of Claims and Defenses.” The second is the implementation of Artificial Intelligence (“ A.I.”), for the management of arbitrations.
Professor Esplugues Mota defines Early Dismissal of Claims and Defenses as an attribution to the arbitrator of the capacity to dismiss the claim raised at an early stage of the procedure. This concept was incorporated in the Arbitration Rules of the International Centre for Settlement of Investment Disputes (ICSID) for the first time in 2006. Subsequently, other arbitration centers have also incorporated early dismissal into their rules.
Taking the Singapore International Arbitration Centre (SIAC) rules as an example, early dismissal allows the parties to request the arbitral tribunal to dismiss a claim or, failing that, a defense when: i) the documents submitted manifestly lack legal merit; or, ii) they are outside the manifest jurisdiction of the arbitrators. Hence, this procedural tool represents an alternative that saves significant time and costs in arbitration.
The second concept, A.I., compromises the use of new technologies in arbitration and has emerged as a means of adapting to the new status quo. With the intention of promoting speed and transparency in arbitration, A.I. has emerged as: i) a support for the automation of procedural actions; ii) a mechanism for consultation or contractual interpretation; and iii) an independent entity with the capacity to administer justice. Similarly, a recent International Chamber of Commerce report on technology in arbitration, titled “Leveraging Technology for Fair, Effective and Efficient International Arbitration Proceedings”, considers the application of A.I. in the arbitration process by means of predictive coding. Through such coding, an algorithm can identify relevant documents or annexes related to a request for documents, thereby saving considerable time and costs during the arbitration process.
On that account, both Early Dismissal and A.I. represent tools that will allow parties to adopt more efficient arbitration procedures. Article 190 of the Constitution of Ecuador recognizes arbitration as autonomous and independent. Therefore, a pathway to include both procedural tools to improve arbitration is evident, and their inclusion in the Ecuadorian Arbitration Law is imminent.
IV. The elephant in the room in international arbitration for Ecuador: The lack of Bilateral Investment Treaties
Ecuador is a unique country divided into four regions: the coast, highlands, amazon, and insular regions (Galapagos Islands). Each region is characterized by a great diversity of natural, cultural, and human resources. This diversity offers investment opportunities in various economic sectors. In addition, because Ecuador is recognized for having the world’s highest biodiversity per square kilometer and being a dollarized country, it maintains one of the most stable economies in Latin America.
Despite persistent challenges over time, such as political instability, a weak institutional framework, and constant changes in the legal framework, Ecuador is still considered an attractive destination for foreign investors. Therefore, public-private partnerships and other contractual forms that allow the exploitation or development of strategic sectors with foreign direct investment (“FDI”) are common in the country. Consequently, implementing arbitration as the preferred alternative dispute resolution method is unavoidable.
Throughout its history, Ecuador has always promoted and advocated for arbitration, except during the “correísmo” period when Ecuador withdrew from ICSID, among other socialist measures taken by former President Rafael Correa related to arbitration. One of the many consequences of this period that persists today is Ecuador’s lack of Bilateral Investment Treaties (“BITs”), which were denounced by former President Correa. Ecuador currently maintains only a few treaties which persist due to ongoing arbitral cases. This situation creates an unattractive climate for foreign investors, who logically prioritize countries with BITs that provide legal certainty.
However, since the end of President Correa’s term, subsequent presidents have made constant efforts to bring Ecuador back into the field of international arbitration, seeking to attract FDI in Ecuador. For that reason—as mentioned above—the country returned to ICSID. Since Ecuador’s re-ratification of the ICSID convention, arbitration has been promoted as a method of dispute resolution in public procurement matters. However, additional challenges still remain. The Constitutional Court recently issued a controversial ruling declaring the unconstitutionality of Article 15.20 of the Trade Association Agreement with Costa Rica, stating that Ecuador cannot submit to international jurisdiction because such submission would be incompatible with Article 422 of the Constitution. This results in a prohibition of arbitration without privity.
To overcome this issue, the new government of President Daniel Noboa is currently making its best efforts to include arbitration as the preferred method to resolve disputes between parties. To achieve this, recent laws such as the “Organic Law for Economic Efficiency and Employment Generation” have sought to establish arbitration as the mandatory method of conflict resolution. In addition, it is also worth mentioning that one of the questions in Ecuador’s April referendum asks whether Ecuador should recognize international arbitration as a method to resolve investment disputes in order to offer foreign investors an appropriate environment of legal assurance.
Despite the substantial challenges in Ecuador’s international arbitration landscape, significant decisions are being made progressively in favor of international arbitration and its enforcement.
V. Conclusions
Ecuador is a small country with a vast amount of natural, cultural and human resources. In the legal field, constant efforts have been made to evolve and improve over time, incorporating new provisions related to both domestic and international arbitration.
Concerning local arbitration, it is evident that challenges persist in the efforts to introduce early dismissal of claims and defenses and integrate A.I. for process management. However, the environment for their eventual incorporation is favorable. In other words, the solid foundation, underpinned by the constitutional recognition of the autonomy and individuality of arbitration, makes both concepts likely candidates for future inclusion.
Turning to international arbitration, the current pro-arbitri trend has grown in recent Ecuadorian governments. Consequently, it is necessary to reinforce the achievements to date, resolve pending issues, and include pieces that are still missing in the legal framework. A successful jurisdiction is a jurisdiction that promotes the arbitral process.
