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

DEFINITION OF INVESTMENT

The term “investment” means any kind of asset owned or controlled either directly, or indirectly through an investor of a third State, by an investor of one Contracting Party in the territory of the other Contracting Party in accordance with the latter’s laws. This general definition is illustrated by a non exhaustive list of groups of specific rights, including:

• traditional property rights;
• rights in companies;
• goodwill;
• money, claims to money, and claims to performance under contract having a financial value;
• intellectual property rights; and
• rights, conferred by law or under contract, to undertake any economic and commercial activity, including any rights to search for, cultivate, extract or exploit natural resources.

An “investment” does not include real estate or other property, tangible or intangible, not acquired in the expectation or used for the purpose of economic benefit or other business purposes. (Article I (g)).

DEFINITION OF INVESTOR

Nationals

The term “investor” means:

• in the case of Canada, any natural person possessing the citizenship of or permanently residing in Canada in accordance with its laws, and who makes the investment in the territory of Ecuador;

• in the case of Ecuador, any natural person who is a national of Ecuador pursuant to its legislation, and who makes the investment in the territory of Canada and who does not possess the citizenship of Canada. (Article I (h)).

Companies

The term “investor” means:

• in the case of Canada, any enterprise incorporated or duly constituted in accordance with applicable laws of Canada and who makes the investment in the territory of Ecuador, and

• in the case of Ecuador, any enterprise organized in accordance with the laws and regulations of Ecuador, with domicile in the territory of Ecuador, who makes the investment in the territory of Canada and who does not possess the citizenship of Canada. (Article I (h)).

The term "enterprise" means

1. any entity constituted or organized under applicable law, whether or not for profit, whether privately-owned or governmentally-owned, including any corporation, trust, partnership, sole proprietorship, joint venture or other association; and

2. a branch of any such entity. (Article I (b)).

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

Date of signature: April 29, 1996
Entry into force: June 6, 1997
Duration: This Agreement shall remain in force unless either Contracting Party notifies the other Contracting Party in writing of its intention to terminate it. The termination of this Agreement shall become effective one year after notice of termination has been received by the other Contracting Party. In respect of investments or commitments to invest made prior to the date when the termination of this Agreement becomes effective, the provisions of Articles I to XVII inclusive of this Agreement shall remain in force for a period of fifteen years.

Admission [Return to the top of the page]

Each contracting party shall permit establishment of a new business enterprise or acquisition of an existing business enterprise or a share of such enterprise by investors or prospective investors of the other Contracting Party on a basis no less favourable than that which, in like circumstances, it permits such acquisition or establishment by:

1. Its own investors or prospective investors; or
2. Investors or prospective investors of any third state. (Article II (3)).

Decisions by either Contracting Party, pursuant to measures not inconsistent with this Agreement, as to whether or not to permit an acquisition shall not be subject to the provisions of Articles XIII or XV of this Agreement. ( Article II (4) (a)).

Decisions by either Contracting Party not to permit establishment of a new business enterprise or acquisition of an existing business enterprise or a share of such enterprise by investor or prospective investors shall not be subject to the provisions of Article XIII of this Agreement. ( Article II (4)(b)).

Neither Contracting Party may impose any of the following requirements in connection with permitting the establishment or acquisition of an investment or enforce any of the following requirements in connection with the subsequent regulation of that investment:

1. To export a given level or percentage of goods;
2. To achieve a given level or percentage of domestic content;
3. To purchase, use or accord a preference to goods produced or services provided in its territory, or to purchase goods or services from persons in its territory;
4. To relate in any way the volume or value of imports to the volume or value of exports or to the amount of foreign exchange inflows associated with such investment; or
5. To transfer technology, a production process or other proprietary knowledge to a person in its territory unaffiliated with the transferor, except when the requirement is imposed or the commitment or undertaking is enforced by a court, administrative tribunal or competition authority, either to remedy an alleged violation of competition laws or acting in a manner not inconsistent with other provisions of this Agreement. (Article V (2)).

The provisions of Articles II [Establishment, Acquisition and Protection of Investments], III [Most-Favoured-Nation (MFN Treatment after Establishment and Exception to MFN], IV [National Treatment after Establishment and Exceptions to National Treatment], and V [Other Measures] of this Agreement do not apply to:

1. Procurement by a government or state enterprise;
2. Subsidies or grants provided by a government or a state enterprise, including government-supported loans, guarantees and insurance;
3. Any measure denying investors of the other Contracting Party and their investments any rights or preferences provided to the aboriginal peoples of Canada; or
4. Any current or future foreign aid program to promote economic development, whether under a bilateral agreement, or pursuant to a multilateral arrangement or agreement, such as the OECD Agreement on Export Credits. ( Article VI (2)).

Investments in cultural industries are exempt from the provisions of this Agreement. (Article VI (3)). For the purpose of this Agreement “Cultural industries” means natural persons or enterprises engaged in any of the following activities:

1. The publication, distribution, or sale of books, magazines, periodicals, or newspapers in print or machine readable form but not including the sole activity of printing or typesetting any of the foregoing;
2. The production, distribution, sale or exhibition of film or video recordings;
3. The production, distribution, sale or exhibition of audio or video music recordings;
4. The publication, distribution, sale or exhibition of music in print or machine readable form; or
5. Radiocommunications in which the transmission are intended for direct reception by the general public, and all radio, television, or cable broadcasting undertakings and all satellite programming and broadcast network services. (Article 1(a)).

Treatment [Return to the top of the page]

STANDARDS

Fair and Equitable Treatment

Yes. Each Contracting Party shall accord investments or returns of investors of the other Contracting Party: fair and equitable treatment in accordance with principles of international law. (Article II (2) (a)).

Full Protection and Security

Yes. Each Contracting Party shall accord investments or returns of investors of the other Contracting Party: full protection and security. (Article II (2) (b)).  

Non-Discrimination

---

National Treatment

Yes. Each Contracting Party shall permit establishment of a new business enterprise or acquisition of an existing business enterprise or a share of such enterprise by investors or prospective investors of the other Contracting Party on a basis no less favourable than that which, in like circumstances, it permits such acquisition or establishment by:

1. its own investors or prospective investors; or (Article II (3)).

Each Contracting Party shall grant to investments or returns of investors of the other Contracting Party treatment no less favourable than that which, in like circumstances, it grants to investments or returns of its own investors with respect to the expansion, management, conduct, operation and sale or disposition of investments. (Article IV (1)).

Most-Favored Nation Treatment

Yes. Each Contracting Party shall permit establishment of a new business enterprise or acquisition of an existing business enterprise or a share of such enterprise by investors or prospective investors of the other Contracting Party on a basis no less favourable than that which, in like circumstances, it permits such acquisition or establishment by:

2. investors or prospective investors of any third state. (Article II (3)).

Each Contracting Party shall grant to investments, or returns of investors of the other Contracting Party, treatment no less favourable than that which, in like circumstances, it grants to investments or returns of investors of any third State. (Article III (1)).

Each Contracting Party shall grant investors of the other Contracting Party, as regards their management, use, enjoyment or disposal of their investments or returns, treatment no less favourable than that which, in like circumstances, it grants to investors of any third State. (Article III (2)).

EXCEPTIONS

Subparagraph (3)(b) of Article H and paragraphs (1) and (2) of this Article do not apply to treatment by a Contracting Party pursuant to any existing or future bilateral or multilateral agreement:

1. establishing, strengthening or expanding a free trade area or customs union;
2. negotiated within the framework of the GATT or its successor organization and liberalizing trade in services; or
3. relating to:
   1. aviation;
   2. telecommunications transport networks and telecommunications transport services;
   3. fisheries;
   4. maritime matters, including salvage; or
   5. financial services. (Article III (3)).

Subparagraph (3)(a) of Article III, paragraph (1) of this Article, and paragraphs (1) and (2) of Article V do not apply to:

1.  
   1. any existing non-conforming measures maintained within the territory of a Contracting Party; and
   2. any measure maintained or adopted after the date of entry into force of this Agreement that, at the time of sale or other disposition of a government's equity interests in, or the assets of, an existing state enterprise or an existing governmental entity, prohibits or imposes limitations on the ownership of equity interests or assets or imposes nationality requirements relating to senior management or members of the board of directors;
2. the continuation or prompt renewal of any non-conforming measure referred to in subparagraph (a);
3. an amendment to any non-conforming measure referred to in subparagraph (a), to the extent that the amendment does not decrease the conformity of the measure, as it existed immediately before the amendment, with those obligations;
4. the right of each Contracting Party to make or maintain exceptions within the sectors or matters listed in the Annex to this Agreement. (Art. IV (2)).

In accordance with Article IV, subparagraph 2(d), Canada reserves the right to make and maintain exceptions in the sectors or matters listed below:

• social services (i.e. public law enforcement; correctional services; income security or insurance; social security or insurance; social welfare; public education; public training; health and child care);
• services in any other sector;
• government securities - as described in SIC 8152;
• residency requirements for ownership of oceanfront land;
• measures implementing the Northwest Territories and the Yukon Oil and Gas Accords. (Article 1 of the Annex).

In accordance with Article IV, subparagraph 2(d), the Republic of Ecuador reserves the right to make and maintain exceptions in the sectors or matters listed below:

• ownership of real estate (direct or indirect) within 50 kilometres of the borders of Ecuador, and within territories designated as reserved areas such as national parks, as established by the competent authorities of the Government of the Republic of Ecuador. (Article 2 of the Annex).

In respect of intellectual property rights, a Contracting Party may derogate from Articles VIII and IV in a manner that is consistent with the agreement establishing the World Trade Organization done at Marrakesh, April 1994. (Article VI (1) (a)).

Subparagraph (3)(a) of Article III, paragraph (1) of this Article, and paragraphs (1) and (2) of Article V do not apply to:

1.  
   1. any existing non-conforming measures maintained within the territory of a Contracting Party; and
   2. any measure maintained or adopted after the date of entry into force of this Agreement that, at the time of sale or other disposition of a government's equity interests in, or the assets of, an existing state enterprise or an existing governmental entity, prohibits or imposes limitations on the ownership of equity interests or assets or imposes nationality requirements relating to senior management or members of the board of directors;
2. the continuation or prompt renewal of any non-conforming measure referred to in subparagraph (a);
3. an amendment to any non-conforming measure referred to in subparagraph (a), to the extent that the amendment does not decrease the conformity of the measure, as it existed immediately before the amendment, with those obligations;
4. the right of each Contracting Party to make or maintain exceptions within the sectors or matters listed in the Annex to this Agreement. (Art. IV (2)).

Investments in cultural industries are exempt from the provisions of this Agreement. (Article VI (3)).

"Cultural industries" means natural persons or enterprises engaged in any of the following activities:

1. the publication, distribution, or sale of books, magazines, periodicals or newspapers in print or machine readable form but not including the sole activity of printing or typesetting any of the foregoing;
2. the production, distribution, sale or exhibition of film or video recordings;
3. the production, distribution, sale or exhibition of audio or video music recordings;
4. the publication, distribution, sale or exhibition of music in print or machine readable form; or
5. radiocommunications in which the transmissions are intended for direct reception by the general public, and all radio, television or cable broadcasting undertakings and all satellite programming and broadcast network services. (Article 1 (a)).

Nothing in this Agreement shall be construed to prevent a Contracting Party from adopting, maintaining or enforcing any measure otherwise consistent with this Agreement that it considers appropriate to ensure that investment activity in its territory is undertaken in a manner sensitive to environmental concerns. (Article XVII (2)).

Provided that such measures are not applied in an arbitrary or unjustifiable manner, or do not constitute a disguised restriction on international trade or investment, nothing in this Agreement shall be construed to prevent a Contracting Party from adopting or maintaining measures, including environmental measures:

1. necessary to ensure compliance with laws and regulations that are not inconsistent with the provisions of this Agreement;
2. necessary to protect human, animal or plant life or health; or
3. relating to the conservation of living or non-living exhaustible natural resources. (Article XVII (3)).

Except as set out in this Article, nothing in this Agreement shall apply to taxation measures. (Article XII (1)).

OTHER ASPECTS

Performance Requirements

Neither Contracting Party may impose any of the following requirements in connection with permitting the establishment or acquisition of an investment or enforce any of the following requirements in connection with the subsequent regulation of that investment:

1. to export a given level or percentage of goods;
2. to achieve a given level or percentage of domestic content;
3. to purchase, use or accord a preference to goods produced or services provided in its territory, or to purchase goods or services from persons in its territory;
4. to relate in any way the volume or value of imports to the volume or value of exports or to the amount of foreign exchange inflows associated with such investment; or
5. to transfer technology, a production process or other proprietary knowledge to a person in its territory unaffiliated with the transferor, except when the requirement is imposed or the commitment or undertaking is enforced by a court, administrative tribunal or competition authority, either to remedy an alleged violation of competition laws or acting in a manner not inconsistent with other provisions of this Agreement. (Article V (2)).

Others

Investors of one Contracting Party who suffer losses because their investments or returns on the territory of the other Contracting Party are affected by an armed conflict, a national emergency or a natural disaster on that territory, shall be accorded by such latter Contracting Party, in respect of restitution, indemnification, compensation or other settlement, treatment no less favourable than that which it accords to its own investors or to investors of any third State. (Article VII).

A Contracting Party may not require that an enterprise of that Contracting Party, that is an investment under this Agreement, appoint to senior management positions individuals of any particular nationality. (Article V (1) (a)).

A Contracting Party may require that a majority of the board of directors, or any committee thereof, of an enterprise that is an investment under this Agreement be of a particular nationality, or resident in the territory of the Contracting Party, provided that the requirement does not materially impair the ability of the investor to exercise control over its investment. (Article V (1) (b)).

Subject to its laws, regulations and policies relating to the entry of aliens, each Contracting Party shall grant temporary entry to citizens of the other Contracting Party employed by an enterprise who seeks to render services to that enterprise or a subsidiary or affiliate thereof, in a capacity that is managerial or executive. (Art. V (3)).

Transfers [Return to the top of the page]

TYPES OF PAYMENT

Returns

Yes. Each Contracting Party shall guarantee to an investor of the other Contracting Party the unrestricted transfer of investments and returns. Without limiting the generality of the foregoing, each Contracting Party shall also guarantee to the investor the unrestricted transfer of:

1. funds in repayment of loans related to an investment;
2. the proceeds of the total or partial liquidation of any investment;
3. wages and other remuneration accruing to a citizen of the other Contracting Party who was permitted to work in connection with an investment in the territory of the other Contracting Party;
4. any compensation owed to an investor by virtue of Articles VII or VIII of the Agreement. (Article IX (1)).

Neither Contracting Party may require its investors to transfer, or penalize its investors that fail to transfer, the returns attributable to investments in the territory of the other Contracting Party. (Article IX (4)).

Repayment of Loans

Yes. (Article IX (1) (a)).

Proceeds of the Total or Partial Liquidation of an Investment

Yes. (Article IX (1) (b)).  

Licenses and Other Fees

---

Other Categories of Payment

Yes. (Article IX (1) (c ) (d)).

CONVERTIBILITY, EXCHANGE RATES, AND TIMES OF TRANSFER

Currency

Transfers shall be effected without delay in the convertible currency in which the capital was originally invested or in any other convertible currency agreed by the investor and the Contracting Party concerned. Unless otherwise agreed by the investor, transfers shall be made at the rate of exchange applicable on the date of transfer. (Article IX (2)).

Exchange Rates

Unless otherwise agreed by the investor, transfers shall be made at the rate of exchange applicable on the date of transfer. (Article IX (2)).

Time of Transfer

Transfers shall be effected without delay. (Article IX (2)).

Notwithstanding paragraphs I and 2, a Contracting Party may prevent a transfer through the equitable, non-discriminatory and good faith application of its laws relating to:

1. bankruptcy, insolvency or the protection of the rights of creditors;
2. issuing, trading or dealing in securities;
3. criminal or penal offenses;
4. reports of transfers of currency or other monetary instruments; or
5. ensuring the satisfaction of judgments in adjudicatory proceedings. (Art. IX (3)).

Paragraph 4 shall not be construed to prevent a Contracting Party from imposing any measure through the equitable, non-discriminatory and good faith application of its laws relating to the matters set out in subparagraphs (a) through (e) of paragraph 3. (Article IX (5)).

Notwithstanding paragraphs (1), (2) and (4) of Article IX, and without limiting the applicability of paragraph (3) of Article IX, a Contracting Party may prevent or limit transfers by a financial institution to, or for the benefit of, an affiliate of or person related to such institution or provider, through the equitable, non-discriminatory and good faith application of measures relating to maintenance of the safety, soundness, integrity or financial responsibility of financial institutions. (Art. XI (2)).

Expropriation [Return to the top of the page]

DEFINITION

Covered Expropriatory Measures

Expropriation, nationalization or measures having an effect equivalent to nationalization or expropriation. (Article VIII (1)).

CONDITIONS

Public Purpose and Non-Discrimination

Yes. (Article VIII (1)).

Due Process of Law and Judicial Review

Yes. (Article VIII (1) (2)).

Other

---

Compensation Standard; Form and Time of Payment

“Prompt, adequate and effective compensation”

Such compensation shall be based on the genuine value of the investment or returns expropriated immediately before the expropriation or at the time the proposed expropriation became public knowledge, whichever is the earlier, shall be payable from the date of expropriation at a normal commercial rate of interest, shall be paid without delay and shall be effectively realizable and freely transferable. (Article VIII (1)).

Settlement of Disputes between Contracting Parties
[Return to the top of the page]

PRE-ARBITRATION NEGOTIATIONS

Any dispute between the Contracting Parties concerning the interpretation or application of this Agreement shall, whenever possible, be settled amicably through consultations. (Article XV (1))

If a dispute cannot be settled through consultations, it shall, at the request of either Contracting Party, be submitted to an arbitral panel for decision. (Article XV (2)).

ARBITRATION

Constitution of the Tribunal

An arbitral panel shall be constituted for each dispute. Within two months after receipt through diplomatic channels of the request for arbitration, each Contracting Party shall appoint one member to the arbitral panel. The two members shall then select a national of a third State who, upon approval by the two Contracting Parties, shall be appointed Chairman of the arbitral panel. The Chairman shall be appointed within two months from the date of appointment of the other two members of the arbitral panel. (Article XV (3)).

If within the periods specified in paragraph (3) Of this Article the necessary appointments have not been made, either Contracting Party may, in the absence of any other agreement, invite the President of the International Court of Justice to make the necessary appointments. (There are also additional provisions to cover cases when the President is a national of either Contracting Party or is otherwise prevented from fulfilling this function). (Article XV (4)).

Each Contracting Party shall bear the costs of its own member of the panel and of its representation in the arbitral proceedings; the costs related to the Chairman and any remaining costs shall be borne equally by the Contracting Parties. The arbitral panel may, however, in its decision direct that a higher proportion of costs shall be borne by one of the two Contracting Parties, and this award shall be binding on both Contracting Parties. (Article XV (6)).

Procedural Rules of the Tribunal

The arbitral panel shall determine its own procedure. The arbitral panel shall reach its decision by a majority of votes. Such decision shall be binding on both Contracting Parties. Unless otherwise agreed, the decision of the arbitral panel shall be rendered within six months of the appointment of the Chairman in accordance with paragraphs (3) or (4) of this Article. (Article XV (5)).

The Contracting Parties shall, within 60 days of the decision of a panel, reach agreement on the manner in which to resolve their dispute. Such agreement shall normally implement the decision of the panel. If the Contracting Parties fail to reach agreement, the Contracting Party bringing the dispute shall be entitled to compensation or to suspend benefits of equivalent value to those awarded by the panel. (Article XV (7)).

Applicable Law

No reference.

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

DEFINITION

---

PREARBITRAL CONSULTATIONS AND DISPUTE SETTLEMENT MECHANISMS

Any dispute between one Contracting Party and an investor of the other Contracting Party, relating to a claim by the investor that a measure taken or not taken by the former Contracting Party is in breach of this Agreement, and that the investor has incurred loss or damage by reason of, or arising out of, that breach, shall to the extent possible, be settled amicably between them. (Article XIII (1)).

If a dispute has not been settled amicably within a period of six months from the date on which it was initiated, it may be submitted by the investor to arbitration (see paragraph 4). (Article XIII (2)).

ARBITRAL SETTLEMENT OF DISPUTES

Conditions

An investor may submit a dispute to arbitration only if:

1. the investor has consented in writing thereto;
2. the investor has waived its right to initiate or continue any other proceedings in relation to the measure that is alleged to be in breach of this Agreement before the courts or tribunals of the Contracting Party concerned or in a dispute settlement procedure of any kind;
3. if the matter involves taxation, the conditions specified in Art. XII (5) have been fulfilled; and
4. not more than three years have elapsed from the date on which the investor first acquired, or should have first acquired, knowledge of the alleged breach and knowledge that the investor has incurred loss or damage. (Article XIII (3)).

Consent

Consent set out explicitly in Article XIII (5).

Forms of Arbitration

The dispute may, at the election of the investor concerned, be submitted to arbitration under:

1. ICSID, provided that both the dispute Contracting Party and the Contracting Party of the investor are parties to the ICSID Convention; or
2. the Additional Facility Rules of ICSID, provided that either the disputing Contracting Party or the Contracting Party of the investor, but not both, is a party to the ICSID Convention; or
3. an international arbitrator or ad hoc arbitration tribunal established under the Arbitration Rules of UNCITRAL. (Article XIII (4)).

Applicable Law

A tribunal established under this Article shall decide the issues in dispute in accordance with this Agreement and applicable rules of international law. (Article XIII (7)).