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CHILE - ECUADOR
Bilateral Investment Treaty


Scope of Application [Return to the top of the page]

DEFINITION OF INVESTMENT

The term “investment” comprises every kind of asset or right linked to an investment made in accordance with the host country’s laws and regulations. This general definition is illustrated by a non exhaustive list of five groups of specific rights, including:

  • traditional property rights;
  • rights in companies;
  • monetary claims and titles to performance (loans directly linked to a specific investment);
  • intellectual property rights; and,
  • concessions and similar rights. (Article I (3)).

DEFINITION OF INVESTOR

Nationals

The term “investor” comprises any natural person who is a national of one of the Contracting Parties under its law. (Article I (2)(a)).

The treaty does not apply to investments made in the territory of one Contracting Party by natural persons who are nationals of the other Contracting Party if they have been domiciled in the host country for more than two years, unless it is proved that the investment was admitted from abroad. (Article I (3)).

Companies

The term “investor” comprises any legal person constituted under the laws and regulations of a Contracting Party, and having its seat and effective economic activities in the territory of said Party, irrespective of whether or not its activities are directed at profit. (Article I (2) (b)).

Application in Time (Entry into Force and Duration: Applicability to Investments made Prior to Entry into Force)

Date of signature: October 27, 1993
Entry into force: January 2, 1996
Duration: 10 years.
Thereafter it shall remain in force until the expiration of one year from the date that either Party notifies the other Party in writing of its decision to terminate the Agreement.

Admission [Return to the top of the page]

Subject to its general policy on foreign investment, each Contracting Party shall promote, in its territory, investments of investors of the other Contracting Party, and shall admit such investments in accordance with its legislation and regulations. (Article III).

Treatment [Return to the top of the page]

STANDARDS

Fair and Equitable Treatment

Yes. (Article IV (1)).

Full Protection and Security

Yes. Once admitted, investments of investors of the other Contracting Party shall be accorded full legal protection. (Article IV (2)).

Non-Discrimination

Yes. Each Contracting Party shall not impair the management, maintenance, use, enjoyment, usufruct, extension, liquidation or disposal of investments of investors of the other Contracting Party through unjustified or discriminatory measures. (Article IV (1)).

National Treatment

Yes. Each Contracting Party shall accord to investments of investors of the other Contracting Party treatment no less favorable than that it grants to its own investors or those of third States. (Article IV (2)).

Most-Favored Nation Treatment

Yes. Each Contracting Party shall accord to investments of investors of the other Contracting Party treatment no less favorable than that it grants to its own investors or those of third States. (Article IV (2)).

EXCEPTIONS

MFN provisions will not apply to the privileges that each Contracting Party accords to investors of third States as a result of its participation or association in a free trade area, customs union, common market or regional agreement. (Article IV (3)).

A Contracting Party is not obliged to extend the benefits of the national treatment and MFN provisions of Article IV (2) to investors of the other Contracting Party as a result of a taxation agreement. (Article IV (4)).

OTHER ASPECTS

Performance Requirements

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Others

If the provisions in the legislation of a Contracting Party, or if the existing or future obligations under international law between the two Contracting Parties, or if an agreement between an investor of a Contracting Party and the other Contracting Party include provisions granting to investments of investors of the first Contracting Party a more favorable treatment, these provisions shall prevail (if they are more favorable). (Art. VIII).

Investors of one Contracting Party, suffering losses due to war or armed conflict, revolution, national emergency, revolt, insurrection or uprising in the territory of the other Contracting Party, shall not be treated less favorably than investors of this Contracting Party or those of any third State with regard to restitution, compensation, indemnification or other settlement. These payments shall be transferable. (Article V (2)).

Transfers [Return to the top of the page]

TYPES OF PAYMENT

Returns

Yes. Each Contracting Party shall guarantee to investors of the other Contracting Party the transfer, without delay, of payments related to an investment and, in particular, but not exclusively:

  1. capital and additional sums necessary for the maintenance and development of investments;
  2. the benefits, profits, interests, dividends and other current incomes;
  3. funds in repayment of loans;
  4. bonuses;
  5. proceeds of the sale or the total or partial liquidation of an investment;
  6. compensations as provided in Article V; and
  7. payments that shall be effected by virtue of the subrogation (Article VII). (Article VI (1)).

Repayment of Loans

Yes. (Article VI (1) (c)).

Proceeds of the Total or Partial Liquidation of an Investment

Yes. (Article VI (1) (e)).

Licenses and Other Fees

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Other Categories of Payment

Yes. (Article VI (1) (a), (d), (f), (g)).

CONVERTIBILITY, EXCHANGE RATES, AND TIMES OF TRANSFER

Currency

Transfers shall be effected in freely convertible currency. (Article VI (3)).

Exchange Rates

Transfers shall be effected at the market exchange rate applicable on the date of transfer. (Article VI (3)).

Time of Transfer

Each Contracting Party shall guarantee to investors of the other Contracting Party the transfer without delay. (Article VI (1)).

The expression "without delay" means the normal period of time necessary to fulfill the formalities for the transfer. This period of time shall begin the day when the request accompanied by the necessary documents, has been presented but shall, in no case, exceed 60 days. (Article VI (2)).

The capital invested shall be allowed to be transferred only one year after the date of entry, unless the legislation of the Contracting Party accords a more favorable treatment. (Protocol. 20 December, 1994).

Expropriation [Return to the top of the page]

DEFINITION

Covered Expropriatory Measures

Expropriation, nationalization or measures which have a similar effect. (Article V (1)).

CONDITIONS

Public Purpose and Non-Discrimination

Yes. (Article V (1)).

Due Process of Law and Judicial Review

Yes. (Article V (1)).

Other

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Compensation Standard; Form and Time of Payment

“Prompt, adequate and effective compensation”

Compensation shall:

  • amount to the market value of the investment immediately before the date of expropriation or before the impending expropriation became publicly known;
  • include interests at a normal commercial rate from the date of expropriation; (Article V (1)).

Settlement of Disputes between Contracting Parties
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PRE-ARBITRATION NEGOTIATIONS

Any dispute between the Contracting Parties concerning the interpretation or application of the Agreement shall, whenever possible, be settled through diplomatic channels. (Article IX(1)).

If it cannot be settled within six months, the dispute shall, at the request of either Contracting Party, be submitted to an arbitral tribunal for decision. (Article IX (2)).

ARBITRATION

Constitution of the Tribunal

An arbitral tribunal shall be constituted for each dispute.

  • Within two months of the request of arbitration, each Party shall appoint an arbitrator.
  • The two arbitrators are required to select, within the next two months, a national of a third State who serves as Chairman of the tribunal. When agreement cannot be reached, the President of the International Court of Justice might be entrusted by either Contracting Party with the responsibility of making the appointments. There are also additional provisions to cover cases when the President is a national of either Party or is otherwise prevented from fulfilling this function.
  • Regarding costs, each Party is required to bear the expenses of its own member of the tribunal and of its representation in the proceedings, while the costs related to the Chairman are to be paid for equally by the Parties. The Tribunal may, however, direct that a higher proportion of the costs be paid by one of the Parties. (Article IX (3) (4) (5)).

Procedural Rules of the Tribunal

The arbitral tribunal shall determine its own procedure.

Decisions of the tribunal shall be taken by a majority of votes and shall be binding on both Parties. (Article IX (5)).

Applicable Law

No reference.

Settlement of Disputes between a Contracting Party and an Investor [Return to the top of the page]

DEFINITION

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PREARBITRAL CONSULTATIONS AND DISPUTE SETTLEMENT MECHANISMS

Any dispute relating to the Agreement between an investor of one Contracting Party and the other Contracting Party will, to the extent possible, be settled through amicable consultations. (Art. X (1)).

If it was not possible to settle the dispute within a period of six months, it may be submitted, at the request of the investor:

  1. to the competent tribunals of the host party; or
  2. to international arbitration.

Election by the investor of either one of these procedures shall be definitive. (Article X (2)).

ARBITRAL SETTLEMENT OF DISPUTES

Conditions

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Consent

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Forms of Arbitration

In case of international arbitration, the dispute shall be submitted to ICSID. (Article X (3)).

Applicable Law

The arbitral tribunal shall decide the dispute in accordance with the provisions of the Agreement; with reference to the laws of the Contracting Party involved in the dispute; terms of any specific agreement concluded in relation to such an investment; and, principles of international law. (Article X (4)).


 
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