Ecuador’s Constitutional Court reopens the door to investment arbitration
2026 International Arbitration Outlook Uría Menéndez, n.º 16
For over a decade, Ecuador's relationship with investor-State dispute settlement (“ISDS") has been defined by resistance. Following the adoption of the 2008 Constitution, the country denounced the ICSID Convention, dismantled its network of bilateral investment treaties (“BITs"), and saw its Constitutional Court repeatedly strike down BIT arbitration clauses as incompatible with Article 422 of the Constitution, which prohibits Ecuador from entering into '[t]reaties or international instruments where the Ecuadorian State yields its sovereign jurisdiction to international arbitration entities in disputes involving contracts or trade between the State and individuals or legal entities'.[1]
That trajectory now seems to have shifted. In its ruling No 19-25-TI/26A (“Ruling"), the Constitutional Court of Ecuador (“Court") examined the investor-State arbitration mechanism in Article 20 of the Ecuador-United Arab Emirates BIT (“Ecuador-UAE BIT") held it to be constitutional provided that contractual or commercial disputes.
The Ruling departs from the approach previously adopted by the Court in ruling No 2-23-TI/23 on the Ecuador-Costa Rica BIT (“Ecuador-Costa Rica BIT"), in which investor-State arbitration was found to be incompatible with Article 422. By distinguishing between claims arising from treaty obligations governed by public international law and contractual or commercial disputes, the Court has recalibrated Ecuador's approach to ISDS, reopening the door to arbitration under future BITs.
Background
As previously reported in the International Arbitration Outlook,[2] Ecuador's position on ISDS has shifted multiple times. Between 1986 and 2008, Ecuador maintained a broadly favourable approach. Following the first investment arbitration claim brought against it in 2001, numerous investors followed suit. By 2008, Ecuador had been named respondent in 11 investment arbitration proceedings contributing to growing domestic support for withdrawing from treaty-based arbitration.[3]
Ecuador adopted a new Constitution in 2008 that radically changed its position on ISDS. Article 422 of the Constitution expressly prohibits Ecuador from entering into treaties or other international agreements that yield the State's sovereign jurisdiction to international arbitration bodies in contractual or commercial disputes with natural or legal persons. As a result, the Ecuadorian Government formally denounced the ICSID Convention in 2009,[4] the Court declared at least 17 BITs incompatible with the Constitution, and the Government terminated a further nine BITs.[5]
However, Ecuador rejoined the ICSID Convention in 2021 and the Court found that accession to the ICSID Convention did not affect the rights and guarantees enshrined in the Constitution.[6] In 2023, the Government sought to conclude the approval of the Ecuador–Costa Rica BIT, which contained an investor-State arbitration clause. Upon review, the Court found that the arbitration mechanism was incompatible with Article 422, reasoning that investment disputes are contractual in nature and that submitting them to arbitration would entail the yielding of sovereign jurisdiction. This decision therefore reaffirmed Ecuador's scepticism towards ISDS.
The Court's analysis of the Ecuador-UAE BIT's constitutionality
The Ecuador-UAE BIT was signed on 6 December 2025.[7] Article 20 of the treaty establishes an ISDS mechanism under which an investor may submit to arbitration any dispute arising from an alleged breach of the BIT, provided that the dispute has not been resolved through consultations and negotiations within six months (“ISDS Arbitration Clause").
In the Ruling, the Court assessed the constitutionality of the treaty as a whole, including the ISDS Arbitration Clause. To do so, it analysed the ISDS Arbitration Clause against the four constituent elements of the constitutional prohibition: (i) the existence of an international treaty or instrument; (ii) the yielding of sovereign jurisdiction to international arbitration; (iii) contractual or commercial disputes; and (iv) disputes between the State and natural or legal persons.[8] The Court's analysis focused primarily on the second and third elements, as set out below.
As regards the second element (the yielding of sovereignty), the Court reasoned that the ISDS Arbitration Clause may only be invoked in relation to claims alleging breaches of obligations assumed by the State under the Ecuador-UAE BIT, namely in relation to obligations which are of public international law nature.[9]
In particular, the Court noted that provisions such as the minimum standard of treatment (Article 5), national treatment (Article 6) and most-favoured-nation treatment (Article 7) establish 'standards of investment protection of a conventional and public international law nature'.[10] On that basis, the Court reasoned that an investor bringing a claim under the Ecuador-UAE BIT does not seek a review of the legality of State conduct under Ecuadorian law, but rather invokes the international responsibility of the State for an alleged breach of its treaty obligations.[11]
In light of the above, the Court concluded that the ISDS Arbitration Clause of the Ecuador-UAE BIT does not entail a yielding of sovereign jurisdiction: since the obligations at issue are of a public international law nature, the State appears before the arbitral tribunal in the full exercise of its sovereignty and retains its rights of defence under both the BIT and public international law.[12]
This marks a clear departure from the Court's earlier ruling on the constitutionality of the Ecuador-Costa Rica BIT. In that case, the Court held that the ISDS mechanism under that treaty would entail a yielding of Ecuador's sovereign jurisdiction on the basis that an international tribunal would decide disputes that would otherwise fall within the jurisdiction of domestic courts, and an investor could access an external adjudicatory body that was not part of the Ecuadorian State without first exhausting domestic judicial remedies. The Court had also found that under the Ecuador-Costa Rica BIT, Ecuador could be held liable under a legal system distinct from its own, which is only possible if there has been a prior cession of sovereign adjudicatory power.
Turning to the third element, namely whether the disputes subject to arbitration are contractual or commercial in nature, the Court relied on its reasoning regarding the second element. As the ISDS Arbitration Clause only covers disputes relating to public international law obligations, the Court inferred that the disputes were not of a contractual or commercial nature.[13] Consequently, the Court concluded that disputes concerning alleged breaches of treaty obligations fall outside the scope of Article 422.
The Court therefore moved away from its reasoning in the Ecuador-Costa Rica BIT ruling. While the Ruling characterised investment disputes as relating to Ecuador's international responsibility, in the Ecuador-Costa Rica BIT ruling, the Court characterised the investment disputes as being of a contractual nature, as they arose from contracts in which investors and the State undertook obligations towards each other.
However, the Court emphasised that the constitutionality of the ISDS Arbitration Clause depends on its strict limitation to claims arising from breaches of treaty obligations.[14] In this regard, the Court acknowledged that certain provisions commonly found in international investment agreements (such as umbrella clauses or broadly drafted jurisdictional clauses) can extend the jurisdiction of arbitral tribunals to contractual claims. Such extension, according to the Court, would be incompatible with the prohibition enshrined in Article 422 of the Constitution.[15]
In the Ecuador-UAE BIT, the Court acknowledged that disputes subject to the ISDS Arbitration Clause are limited to those involving alleged breaches of treaty obligations, but it considered the drafting insufficient to safeguard the effectiveness of the prohibition of Article 422 of the Constitution.[16] The Court therefore found that the ISDS Arbitration Clause must be amended to unequivocally exclude contractual or commercial disputes.[17]
The Court further reasoned that Article 422 was not intended to impose a blanket prohibition on international arbitration, but rather a specific limitation applicable to contractual and commercial disputes. In its view, international arbitration becomes constitutionally impermissible only where, in addition to displacing Ecuador's sovereign jurisdiction, it concerns contractual or commercial disputes between the State and private parties. By contrast, the prohibition does not extend to mechanisms strictly limited to determining the State's international responsibility for alleged breaches of treaty obligations arising under public international law.[18]
Following an in-depth analysis of the second and third elements of the constitutional prohibition, the Court ruled that the Ecuador-UAE BIT, as currently drafted, does not expressly exclude contractual and commercial disputes from the scope of arbitration. On that basis, it issued a declaration of conditional constitutionality, holding that the ISDS Arbitration Clause is constitutional only if it includes an unequivocal exclusion clarifying that arbitral tribunals may not hear contractual or commercial disputes within the meaning of Article 422 of the Constitution.[19] Accordingly, the Court requested the Ecuadorian Government to resubmit the Ecuador-UAE BIT for constitutional review once the ISDS Arbitration Clause is amended as set out above.
Dissenting opinions
Two dissenting opinions were issued alongside the Ruling (“Dissenting Opinions"). The minority argued that the Court should have adhered to its prior case law, particularly its ruling concerning the Ecuador-Costa Rica BIT – and should therefore have found the Ecuador-UAE BIT partially incompatible with Article 422 of the Constitution.[20]
For dissenting Justice Alí Lozada Prado, the central point of disagreement concerned the distinction drawn between disputes arising from a 'contract' and those arising from a 'treaty'. In his view, the strict separation drawn by the majority fails to account for areas of overlap between treaty breaches and commercial breaches, thereby creating an opportunity to circumvent the constitutional prohibition.[21]
Justice Lozada Prado further argued that the condition imposed by the majority would, in practice, confer upon international arbitral tribunals the authority to interpret the meaning of 'contractual and commercial disputes' under article 422 of the Constitution.[22]
Taken together, the Dissenting Opinions suggest that the Court's shift towards a less restrictive interpretation of the constitutional prohibition may not be definitive, and that future rulings could return to the approach adopted in the Ecuador-Costa Rica BIT decision.
Conclusion
The Ruling marks a significant turning point in the Court's interpretation of Article 422 of the Constitution. By distinguishing between claims arising from autonomous treaty obligations of a public international law nature and disputes of a contractual or commercial nature, the Court has departed from the restrictive approach adopted in the Ecuador–Costa Rica BIT decision and opened the door – albeit conditionally – to investor-State dispute settlement mechanisms in future bilateral investment treaties.
The framework of conditional constitutionality articulated by the Court requires that any such mechanism expressly and unequivocally excludes contractual and commercial disputes from the scope of arbitration, thereby preserving the constitutional prohibition enshrined in Article 422. Nevertheless, as the Dissenting Opinions point out, it is unclear whether this change in legal approach will last, and future rulings could return to a stricter interpretation. The Ruling nevertheless signals a cautious yet meaningful shift towards a slightly more open and balanced approach to international investment arbitration.
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[1]. CRE, Art. 422, translation by the Center for Latin American Studies, Georgetown University, 31 January 2011,
[2]. J. Freile Franco and M. Salvador Mora, The Constitutional Court of Ecuador deems investor-State arbitration clauses in trade agreement with Costa Rica unconstitutional (2023), International Arbitration Outlook No. 12.
[3]. See Repsol YPF Ecuador S.A. v Empresa Estatal Petróleos del Ecuador (Petroecuador), ICSID Case No ARB/01/10; Occidental Exploration and Production Company v. The Republic of Ecuador, LCIA Case No UN3467; IBM World Trade Corporation v. República del Ecuador, ICSID Case No ARB/02/10; M.C.I. Power Group L.C. and New Turbine, Inc. v. Republic of Ecuador, ICSID Case No ARB/03/6; EnCana Corporation v. Republic of Ecuador, LCIA Case No UN3481, UNCITRAL (formerly EnCana Corporation v. Government of the Republic of Ecuador); Empresa Eléctrica del Ecuador, Inc. v. Republic of Ecuador, ICSID Case No ARB/05/9; Noble Energy, Inc. and Machalapower Cia. Ltda. v. The Republic of Ecuador and Consejo Nacional de Electricidad, ICSID Case No ARB/05/12; Chevron Corporation and Texaco Petroleum Company v. Republic of Ecuador (I), PCA Case No 2007-02/AA277; Occidental Petroleum Corporation and Occidental Exploration and Production Company v. The Republic of Ecuador, ICSID Case No ARB/06/11; Murphy Exploration and Production Company International v. Republic of Ecuador, ICSID Case No ARB/08/4; Burlington Resources Inc. v. Republic of Ecuador, ICSID Case No ARB/08/5 (formerly Burlington Resources Inc. and others v. Republic of Ecuador and Empresa Estatal Petróleos del Ecuador (PetroEcuador)); Perenco Ecuador Ltd. v. Republic of Ecuador and Empresa Estatal Petróleos del Ecuador (Petroecuador), ICSID Case No ARB/08/6.
[4]. See Decreto Ejecutivo n.º 1.823, Registro Oficial n. º 632, 13 July 2009. The denunciation took effect on 7 January 2010.
[5]. The Court struck down the BITs with: Argentina (Case n.º 9-10-TI); Bolivia (Case n.º 14-13-TI); Canada (Case n.º 3-10-TI); Chile (Case n.º 10-10-TI); China (Case n.º 4-10-TI); Finland (Case n.º 1-10-TI); France (Case n.º 7-10-TI);Germany (Case n.º 6-10-TI); Italy (Case n.º 15-13-TI); the Netherlands (Case n.º 5-10-TI); Peru (Case n.º 16-13-TI); Spain (Case n.º 10-11-TI); Switzerland (Case n.º 12-10-TI); Sweden (Case n.º 2-10-TI); Venezuela (Case n.º 11-10-TI), the United States of America (Case n.º 13-10-TI) and the United Kingdom (Case n.º 8-10-TI).
[6]. Dictamen n.º 5-21-TI/21 (Dictamen de la corte Constitucional del Ecuador sobre la necesidad de aprobación legislativa del Convenio sobre arreglo de diferencias relativas a inversiones entre Estados y Nacionales de otros Estados), 30 June 2021, ¶¶ 23-24.
[7]. Full text available at: https://investmentpolicy.unctad.org/international-investment-agreements/treaties/bilateral-investment-treaties/5244/ecuador---united-arab-emirates-bit-2025-.
[8]. Dictamen n.º 19-25 TI/26A, ¶ 85.
[9]. Dictamen n.º 19-25 TI/26A, ¶ 88.
[10]. Dictamen n.º 19-25 TI/26A, ¶¶ 90-91.
[11]. Dictamen n.º 19-25 TI/26A, ¶ 93.
[12]. Dictamen n.º 19-25 TI/26A, ¶¶ 95-96.
[13]. Dictamen n.º 19-25 TI/26A, ¶ 98.
[14]. Dictamen n.º 19-25 TI/26A, ¶ 100.
[15]. Dictamen n.º 19-25 TI/26A, ¶¶ 101 and 102.
[16]. Dictamen n.º 19-25 TI/26A, ¶ 103.
[17]. Dictamen n.º 19-25 TI/26A, ¶ 105.
[18]. Dictamen n.º 19-25 TI/26A, ¶ 109.
[19]. Dictamen n.º 19-25 TI/26A, ¶ 110 and section 4 “Dictamen".
[20]. Dictamen n.º 19-25-TI/26A, Voto Salvado Alejandra Cárdenas Reyes, 30 March 2026, para 3; Dictamen n.º 19-25-TI/26A, Voto Salvado Alí Lozada Prado, 31 March 2026, ¶ 3.
[21]. Dictamen n.º 19-25-TI/26A, Voto Salvado Alí Lozada Prado, 31 March 2026, ¶ 9.
[22]. Dictamen n.º 19-25-TI/26A, Voto Salvado Alí Lozada Prado, 31 March 2026, ¶ 11.
