In 2017, one of the last measures of the outgoing Ecuadorian government was the renunciation of all bilateral investment treaties (BITs). The government of Lenin Moreno has announced that in the coming days, they will remit a proposal for a new BIT model to various embassies in Quito.

Former members of the Commission for the Citizens’ Integral Audit of Reciprocal Investment Protection Treaties and the Investment Arbitration System (CAITISA), created by the government of Rafael Correa, have addressed the following letter[1] to Ecuadorian President Lenin Moreno, expressing concern with this proposal.

March 7, 2018

Your Excellency

Mr. Lenín Moreno Garcés

President of the Republic of Ecuador

Ref: Open Letter regarding the Insistence on Bilateral Investment Treaties

Dear Mr. President,

As former members of the Commission for the Citizens’ Integral Audit of Reciprocal Investment Protection Treaties and the Investment Arbitration System (CAITISA), and as members of civil society that support the Binding Treaty on Transnational Corporations and Human Rights, we are deeply concerned with regards to the announcement that the Government of Ecuador will present a new model bilateral investment treaty (BIT) to 16 countries.

Government’s spokespeople have justified the renegotiation of these treaties basically pointing out that these treaties would be the determining factor in attracting foreign direct investment and that the incompatibility of these treaties with the Ecuadorean Constitution would be resolved limiting the investor-state dispute settlement to regional or Latin American fora. These arguments do not consider, and thus contradict, the results of the Citizens’ Audit, included in the executive report published by CAITISA.

Even though the new model BIT includes small changes – basically with relation to procedural details Ecuador confronted in its million-dollar awards – transnational corporations retain exorbitant rights and international investor-state arbitration is still included as the mechanism through which dispute resolution can take place.

The CAITISA audit concluded, with due clarity, that these treaties have not been determining in attracting direct foreign investment (FDI) to Ecuador, that such FDI that did arrive did so in high yield sectors, that their contribution to job creation and capital goods was low, and that in many cases it left serious social and environmental impacts.

CAITISA examined all the BITs signed by Ecuador, their negotiating processes and their termination processes. It found that there were serious irregularities in the negotiation and ratification processes and that there were major incompatibilities with the Constitution’s principles such as equality under law, national sovereignty, and the national development model.

Likewise, the audit demonstrated the serious negative consequences of international arbitration on the State’s resources, particularly with regard to key cases (Chevron and Occidental). These cases additionally showed the lack of objectivity, due process and transparency of international arbitration.

We are concerned that new BITs will be negotiated with 16 countries, including some that (unlike in the 1990s) have publicly questioned investor-State dispute settlement, and, in the case of European countries, they do not even have the legal competence to negotiate these treaties individually and its highest court of justice rejected investor-State arbitration.

We deeply regret that Ecuador is starting to negotiate new treaties before the efforts it is leading for a Binding Treaty on Transnational Corporations and Human Rights have concluded, and it thus legitimizes international arbitration, considering that it has been one of the instruments used by big corporations to blackmail governments to obtain impunity in violations against human rights and the environment, in Ecuador and around the world. While all this occurs, the world awaits Ecuador’s voice with expectation, in the framework of the multilateral negotiations to reform the international investment arbitration system, taking place at UNCITRAL.

After a thorough study, and fully aware of the need to attract foreign capital, in the case of future investors in a specific project of strategic interest for Ecuador, the audit recommended that the investor renounce any dispute settlement rights under the auspices of any BIT and that, in its replacement, the investor accept ad hoc tribunals with applicable national law. This practice has already been applied by the Ecuadorean Government in various investment contracts.

We call upon your government to reconsider the start of negotiations and that it not ignore the recommendations of the Citizens’ Audit. On the basis of the CAITISA results and the new model BIT, we are willing to engage in a constructive dialogue in defense of human rights, Ecuador’s sovereignty and the interests of peoples around the world.

Sincerely,

Cecilia Olivet

Piedad Mancero

Javier Echaide

Alberto Arroyo

Hugo Ruiz Díaz

M. Sornarajah

Alejandro Olmos

Andrés Arauz

Christian Pino G