ALAI, América Latina en Movimiento
Legal certainty to stop injustice
Our Constitution expressly recognizes legal certainty as a constitutional principle. In 2011, the people of Ecuador decided, via referendum, to transform the slow and inefficient judicial system, and move on to real legal certainty. Now, it is not necessary to privatize justice to arbitration panels that are full of conflicts of interest.
Starting in 2008, we began denouncing bilateral investment treaties (BITs) and the associated arbitration system. As part of this process, the Ecuadorean Constitutional Court declared all BITs unconstitutional. According to Article 96 of our Law for Jurisdictional Guarantees and Constitutional Control, no authority may apply the contents of a norm that has been declared unconstitutional.
After 2008, our country has been the target of dozens of arbitrations, and of the largest award against any state in the history of the world: the Occidental Petroleum Company v. Ecuador case.
We cannot avoid mentioning that according to article 52 (3) of the ICSID Convention, it is the President of the World Bank who appoints all of the arbitrators of ICSID’s “last resort” annulment recourse.
The Citizens’ Audit Commission, recently established by Ecuador’s President, will investigate these treaties and the investment arbitration cases, and we are sure it will have the same international success that the External Debt Auditing Commission had. For these reasons, and to give legal certainty to all parties (including the State), Ecuador must finish the process of withdrawing from all pending BITs, strictly complying with international laws, according to Article 56 of the Vienna Convention. This should be the result of a joint and fast effort between the Executive and the National Assembly.
Replacing BITs and honoring our principle that ‘human beings are above capital’, our country issued a national law of the highest hierarchy, just below the Constitution: the Organic Code of Production, Trade and Investment. This is a groundbreaking model of incentives and guarantees, but also of duties and responsibilities, for national and foreign investors who believe in our country.
In order to gain access to the benefits and guarantees of above mentioned Code, the investors must sign an investment contract with the State. Such a contract shall establish the performance requirements, the detailed incentives, and grant legal certainty up to 15 years. Performance requirements are related to the generation of national value chains, added value, employment and, of course, technology transfer. We have already signed contracts with more than ten firms, with a total of USD 2,504 million in committed direct investments.
The investment contract is a much better document than a BIT. Besides including performance requirements, it encourages and protects specific investments according to our development planning, it is not a blank check. We want to avoid cases like those of casinos that, affected by a popular vote decision to shut them down (2011 referendum), have sued the State, under the auspices of a BIT. Therefore, the alternative agreement that Ecuador will present to the international community is going to include this proposal: any investment protection must be conditioned to the fulfillment of business performance requirements detailed in specific investment contracts.
Ecuador also has taken forceful actions in order to advance on the transformation of the international investment and arbitration regime, starting in Latin America. During the first Summit of the Latin American and Caribbean Community (CELAC), the Chiefs of State ordered their nations’ Ministers to study the creation of an alternative venue for the resolution of investment disputes. At the Union of South American Nations (UNASUR), after hard work and under the leadership of Ecuador, the new regional center for resolution of investment disputes will be soon in place, far from the conflicts of interest of hegemonic countries. In April this year, at Guayaquil (Ecuador), the Ministerial Conference of Latin American States affected by Transnational Interests was established to coordinate joint legal and political actions. Finally, an International Observatory will be created to collect the experiences of other countries, such as Norway, South Africa, India, Bolivia, Venezuela, Argentina, and Australia; these countries have modified their policies on investment treaties.
Several South American nations suffer similar situations as ours, with more than 115 arbitrations against the region’s States, mainly because of sovereign policies on natural resource management and regulation of public utilities. However, the biggest challenge our countries face is to avoid the “race to the bottom”. Our region must come up with an international treaty to avoid internal competition and to cooperate against transnational capital: common minimum wages, common minimum environmental regulations, common minimum royalties and a common controversy resolution system, among others.
(Traducción: Edwin Hidalgo)
(May 13th 2013)
- Andrés Arauz, Secretariat of Planning and Development (SENPLADES), Ecuador.
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