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

DEFINITION OF INVESTMENT

The term “investment” means every kind of investment in the territory of one Party owned or controlled by nationals or companies of the other Party, such as equity, debt, and service and investment contracts. 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 associated with an investment;
• intellectual property rights; and,
• any right conferred by law or contract, and any licenses and permits pursuant to law. (Article I (1) (a)).

DEFINITION OF INVESTOR

Nationals

“National” of a Party means a natural person who is a national of a Party under its applicable law. (Article I (1) (c)).

Companies

“Company” of a Party means any kind of corporation, company, association, partnership, or other organization, legally constituted under the laws and regulations of a Party or a political subdivision thereof, whether or not organized for pecuniary gain, or privately or governmentally owned or controlled. (Article I (1) (b)).

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

Date of signature: August 27, 1993
Entry into force: May 11, 1997
Thirty days after the date of exchange of instruments of ratification.
Duration: 10 years.
Thereafter it shall remain in force until either Party notifies the other Party, a year in advance, of its decision to terminate the Treaty.
The Treaty shall apply to investments existing at the time of entry into force, as well as to investments made or acquired thereafter.

Admission [Return to the top of the page]

There is no separate clause on admission. The issue is dealt with in the treatment provisions. See Section on Treatment.

Treatment [Return to the top of the page]

STANDARDS

Fair and Equitable Treatment

Yes. Investment shall at all times be accorded fair and equitable treatment, ... and shall in no case be accorded treatment less than that required by international law. (Article II (3) (a)).

Full Protection and Security

Yes. Investment shall enjoy full protection and security. (Article II (3) (a)).

Non-Discrimination

Yes. Neither Party shall in any way impair by arbitrary or discriminatory measures the management, operation, maintenance, use, enjoyment, acquisition, expansion, or disposal of investments. For purposes of dispute resolution under Articles VI and VII, a measure may be arbitrary or discriminatory notwithstanding the fact that a party has had or has exercised the opportunity to review such measure in the courts or administrative tribunals of a Party. (Article II (3) (b)).

National Treatment

Yes. Article II on treatment requires the better of national treatment or most-favored-nation treatment with respect to both pre-establishment and post-establishment investments.

Each Party shall permit and treat investment, and activities associated therewith, on a basis no less favorable than that accorded in like situations to investment or associated activities of its own nationals or companies, or of nationals or companies of any third country, whichever is the most favorable, subject to the right of each Party to make or maintain exceptions falling within one of the sectors or matters listed in the Protocol of this Treaty.

Each Party agrees to notify the other Party before or on the date of entry into force of this Treaty of all such laws and regulations of which it is aware concerning the sectors or matters listed in the Protocol.

Moreover, each Party agrees to notify the other of any future exception with respect to the sectors or matters listed in the Protocol, and to limit such exceptions to a minimum. Any future exception by either Party shall not apply to investment existing in that sector or matter at the time the exception becomes effective.

The treatment accorded pursuant to any exceptions shall, unless specified otherwise in the Protocol, be not less favorable than that accorded in like situations to investments and associated activities of nationals or companies of any third country. (Article II (1)).

Nothing in this Treaty shall be construed to prevent a Party from maintaining or establishing a state enterprise. (Article II (2) (a)).

Each Party shall ensure that any state enterprise that it maintains or establishes accords the better of national or most-favored-nation treatment in the sale of its goods or services in the Party's territory. (Article II (2) (c)).

The treatment accorded by the United States to investments and associated activities of nationals and companies of Ecuador under the provisions of Article II shall in any State, Territory or possession of the United States be no less favorable than the treatment accorded therein to investments and associated activities of nationals of the United States resident in, and companies legally constituted under the laws and regulations of other States, Territories or possessions of the United States. (Article II (9)).

Most-Favored Nation Treatment

Yes. Article II on treatment requires the better of national treatment or most-favored-nation treatment with respect to both pre-establishment and post-establishment investments.

Each Party shall permit and treat investment, and activities associated therewith, on a basis no less favorable than that accorded in like situations to investment or associated activities of its own nationals or companies, or of nationals or companies of any third country, whichever is the most favorable, subject to the right of each Party to make or maintain exceptions falling within one of the sectors or matters listed in the Protocol of this Treaty.

Each Party agrees to notify the other Party before or on the date of entry into force of this Treaty of all such laws and regulations of which it is aware concerning the sectors or matters listed in the Protocol.

Moreover, each Party agrees to notify the other of any future exception with respect to the sectors or matters listed in the Protocol, and to limit such exceptions to a minimum. Any future exception by either Party shall not apply to investment existing in that sector or matter at the time the exception becomes effective.

The treatment accorded pursuant to any exceptions shall, unless specified otherwise in the Protocol, be not less favorable than that accorded in like situations to investments and associated activities of nationals or companies of any third country. (Article II (1)).

Nothing in this Treaty shall be construed to prevent a Party from maintaining or establishing a state enterprise. (Article II (2) (a)).

Each Party shall ensure that any state enterprise that it maintains or establishes accords the better of national or most-favored-nation treatment in the sale of its goods or services in the Party's territory. (Article II (2) (c)).

EXCEPTIONS

The United States reserves the right to make or maintain limited exceptions to national treatment, as provided in Article II (1), in the following sectors or matters: air transportation; ocean and coastal shipping; banking; insurance; government grants; government insurance and loan programs; energy and power production; custom house brokers; ownership of real property; ownership and operation of broadcast or common carrier radio and television stations; ownership of shares in the Communications Satellite Corporation; the provision of common carrier telephone and telegraph services; the provision of submarine cable services; use of land and natural resources; mining on the public domain; maritime services and maritime-related services; and primary dealership in United States government securities. The treatment accorded pursuant to these exceptions shall, unless specified in paragraph 3 of this Protocol, be not less favorable than that accorded in like situations to investments and associated activities of nationals and companies of any third country. (Paragraph 2 of the Protocol).

The United States reserves the right to make or maintain limited exceptions to most-favored-nation treatment, as provided in Article II (1), in the following sectors or matters: ownership of real property; mining on the public domain; maritime services and maritime-related services; and primary dealership in United States government securities. (Paragraph 3 of the Protocol).

The Republic of Ecuador reserves the right to make or maintain limited exceptions to national treatment, as provided in Article II (1), in the following sectors or matters: traditional fishing (which does not include fish processing and aquaculture); ownership and operation of broadcast radio and television stations.

The treatment accorded pursuant to these exceptions shall be not less favorable than that accorded in like situations to investments and associated activities of nationals or companies of third country. (Paragraph 4 of the Protocol).

The Treaty states that the MFN provisions of the treaty shall not apply to advantages accorded by either Party to nationals or companies of any third country by virtue of:

1. that Party's binding obligations that derive from full membership in a free trade area or customs union; or
2. that Party's binding obligations under any multilateral international agreement under the framework of the General Agreement on Tariffs and Trade that enters into force subsequent to the signature of this Treaty. (Article II (10)).

This Treaty shall not preclude the application by either Party of measures necessary for the maintenance of public order, the fulfillment of its obligations with respect to the maintenance or restoration of international peace or security, or the protection of its own essential security interests. (Article IX (1)).

OTHER ASPECTS

Performance Requirements

Neither Party shall impose performance requirements as a condition of establishment, expansion or maintenance of investments, which require or enforce commitments to export goods produced, or which specify that goods or services must be purchased locally, or which impose any other similar requirements. (Article II (6)).

Others

Subject to the laws relating to the entry and sojourn of aliens, nationals of either Party shall be permitted to enter and to remain in the territory of the other Party for the purpose of establishing, developing, administering or advising on the operation of an investment to which they, or a company of the first Party that employs them, have committed or are in the process of committing a substantial amount of capital or other resources. (Article II (4)).

Companies which are legally constituted under the applicable laws or regulations of one Party, and which are investments, shall be permitted to engage top managerial personnel of their choice, regardless of nationality. (Article II (5)).

The Treaty shall not derogate from:

1. laws and regulations, administrative practices or procedures, or administrative or adjudicatory decisions of either Party;
2. international legal obligations; or
3. obligations assumed by either Party, including those contained in an investment agreement or an investment authorization, that entitle investments or associated activities to treatment more favorable than that accorded by the Treaty in like situations. (Article VIII).

Each Party shall observe any obligation it may have entered into with regard to investments. (Article II (3)).

The Treaty shall not preclude either Party from prescribing special formalities in connection with the establishment of investments, but such formalities shall not impair the substance of any of the rights set forth in this Treaty. (Article IX (2)).

Nationals or companies of either Party whose investments suffer losses in the territory of the other Party owing to war or other armed conflict, revolution, state of national emergency, insurrection, civil disturbance or other similar events shall be accorded treatment by such other Party no less favorable than that accorded to its own nationals or companies or to nationals or companies of any third country, whichever is the most favorable treatment, as regard any measures it adopts in relation to such losses. (Article III (3)).

Each Party shall provide effective means of asserting claims and enforcing rights with respect to investment, investment agreements, and investment authorizations. (Article II (7)).

Each Party shall ensure that any state enterprise that it maintains or establishes acts in a manner that is not inconsistent with the Party's obligations under this Treaty wherever such enterprise exercises any regulatory, administrative or other governmental authority that the Party has delegated to it, such as the power to expropriate, grant licenses, approve commercial transactions, or impose quotas, fees or other charges. (Article II (2) (b)).

Transfers [Return to the top of the page]

TYPES OF PAYMENT

Returns

Yes. Each Contracting Party shall permit all transfers related to an investment to be made freely and without delay into and out of its territory. Such transfers include:

1. returns;
2. compensation pursuant to Article III;
3. payments arising out of an investment dispute;
4. payments made under a contract, including amortization of principal and accrued interest payments made pursuant to a loan agreement;
5. proceeds from the sale or liquidation of all or any part of an investment; and
6. additional contributions to capital for the maintenance or development of an investment.

The Parties note that Ecuador may establish a debt-equity conversion program under which nationals or companies of the United States may choose to invest in Ecuador through the purchase of debt at a discount. The Parties agree the rights provided in Article IV (1), with respect to the transfer of returns and of proceeds from the sale or liquidation of all or any part of an investment, may, as such rights would apply to that part of an investment financed through a debt-equity conversion, be modified by the terms of a debt-equity conversion agreement between a national or company of the United States and Ecuador or any agency or instrumentality thereof. The transfer of returns and/or proceeds from the sale or liquidation of all or any part of an investment shall in no case be on terms less favorable than those accorded, in like circumstances, to nationals or companies of Ecuador or any third country, whichever is more favorable. (Paragraph 1 of the Protocol).

Repayment of Loans

Yes. (Article IV (1) (d)).

Proceeds of the Total or Partial Liquidation of an Investment

Yes. (Article IV (1) (e), Paragraph 1 of the Protocol).

Licenses and Other Fees

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Other Categories of Payment

Yes. (Article IV (1) (b), (c), (f))

CONVERTIBILITY, EXCHANGE RATES, AND TIMES OF TRANSFER

Currency

Transfers shall be made in a freely usable currency at the prevailing market rate of exchange on the date of transfer with respect to spot transactions in the currency to be transferred. (Article IV (2)).

Exchange Rates

Transfers shall be made in a freely usable currency at the prevailing market rate of exchange on the date of transfer with respect to spot transactions in the currency to be transferred. (Article IV (2)).

Time of Transfer

Each Contracting Party shall permit all transfers related to an investment to be made freely and without delay into and out of its territory. (Article IV (1)). Notwithstanding the provisions of paragraphs 1 and 2 of Article IV, either Party may maintain laws and regulations

1. requiring reports of currency transfer; and
2. imposing income taxes by such means as a withholding tax applicable to dividends or other transfers.

Furthermore, either Party may protect the rights of creditors, or ensure the satisfaction of judgments in adjudicatory proceedings, through the equitable, nondiscriminatory and good faith application of its law. (Article IV (3)).

Expropriation [Return to the top of the page]

DEFINITION

Covered Expropriatory Measures

Expropriation or nationalization (directly or indirectly through measures tantamount to expropriation or nationalization). (Article III (1)).

CONDITIONS

Public Purpose and Non-Discrimination

Yes. (Article III (1)).

Due Process of Law and Judicial Review

Yes. (Article III (1) (2)).
Review can be made by the appropriate judicial or administrative authorities of the expropriating host Party.

Other

Expropriation has to be made in accordance with the general principles of treatment provided for in Article II (3). (Article III (1)). See supra.

Compensation Standard; Form and Time of Payment

“Prompt, adequate and effective compensation”

Compensation shall:

• be equivalent to the fair market value of the expropriated investment immediately before the expropriatory action was taken or became known, whichever is earlier;
• be calculated in a freely usable currency on the basis of the prevailing market rate of exchange at that time;
• include interests at a commercially reasonable rate from the date of expropriation;
• be made without delay;
• be fully realizable and freely transferable. (Article III (1)).

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

PRE-ARBITRATION NEGOTIATIONS

Parties agree to consult promptly, on the request of either, to resolve any disputes in connection with the Treaty, or to discuss any matter relating to the interpretation or application of the Treaty. (Article V).

Any dispute which is not resolved through consultation or other diplomatic channels, shall be submitted, upon request of either Party, to an arbitral tribunal. (Article VII (1)).

ARBITRATION

Constitution of the Tribunal

• Within two months of receipt of a request, each Party shall appoint an arbitrator. The two arbitrators shall select a third arbitrator as Chairman, who is a national of a third State.
• The UNCITRAL Rules for appointing members of three member panels shall apply mutatis mutandis to the appointment of the arbitral panel except that the appointing authority shall be the Secretary General of the Permanent Court of Arbitration.
• Expenses incurred by the Chairman, the other arbitrators, and other costs of the proceedings shall 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 VII (2) (4)).

Procedural Rules of the Tribunal

Decisions of the tribunal shall be binding on both Parties.
In the absence of agreement by the Parties to the contrary, the arbitration rules of the UNCITRAL, except to the extent modified by the Parties or by the arbitrators, shall govern.
Unless otherwise agreed, all submissions shall be made and all hearings shall be completed within six months of the date of selection of the third arbitrator, and the Tribunal shall render its decisions within two months of the date of the final submissions or the date of the closing of the hearings, whichever is later. (Article VII (1) (3)).

Applicable Law

Disputes shall be decided “in accordance with the applicable rules of international law.” (Article VII (1)).

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

An investment dispute is a dispute between a Party and a national or company of the other Party arising out of or relating to:

1. an investment agreement between that Party and such national or company;
2. an investment authorization granted by that Party’s foreign investment authority to such national or company; or,
3. an alleged breach of any right conferred or created by the Treaty with respect to an investment. (Article VI).

ARBITRAL SETTLEMENT OF DISPUTES

Conditions

Parties to the dispute should initially seek resolution through consultation and negotiation.

If the dispute cannot be settled amicably, the national or company may choose to submit the dispute for resolution:

1. to the courts or administrative tribunals of the Party that is a party to the dispute; or
2. in accordance with any applicable, previously agreed dispute settlement procedures; or
3. to binding arbitration in accordance with Article VII (3). (Article VI(2)).

Consent

Provided that the national or company has not submitted the dispute for resolution under Article VII (2) a) b) and six months have elapsed from the date on which the dispute arose, the national or company may choose to consent in writing to the submission of the dispute for settlement by binding arbitration. (Article VI(3)).

Forms of Arbitration

Consent set out explicitly in Article VI(4).

The submission of the dispute for settlement by binding arbitration may be made:

1. to ICSID, provided that the Party is a party to the ICSID Convention; or
2. to the Additional Facility of the Centre, if the Centre is not available; or
3. in accordance with UNCITRAL Arbitration Rules; or
4. to any other arbitration institution, or in accordance with other arbitration rules, as may be mutually agreed between the parties to the dispute. (Article VI(3)).

Applicable Law

No reference.