Apr 2023

Ecuador

Law Over Borders Comparative Guide:

Arbitration

Top

1 . Key considerations in deciding whether to arbitrate in this jurisdiction

Top

1.1. Advantages

Arbitration is constitutionally recognized as an alternative method for dispute resolution (Article 190), with arbitral awards being final and directly enforceable. Ecuador recognizes the following principles in arbitration: 

  • freedom of contract (Article 38, of the Arbitration and Mediation Law (AM Law)); 
  • separability of the arbitration agreement (Article 5, AM Law); 
  • kompetenz-kompetenz (Article 22, AM Law); and 
  • minimum intervention of courts (Article 30, AM Law; Article 13(1), Regulation for the Application of the AM Law (AM Regulation)). 
Top

1.2. Disadvantages and common pitfalls

Enforcement of an award may be burdensome and time consuming due to the congestion of local courts. 

While the Constitutional Court has ratified that the annulment of an award can only take place in very specific circumstances (Article 31, AM Law), it has also affirmed that said court may directly review awards in circumstances different from those established in the AM Law, such as the lack of proper reasoning (Constitutional Court, case No. 31.14.EP/14, decision, 19 November 2019). 

Top

1.3. Other distinctive features

Arbitration is mandatory for investment contracts entered into with the State. For contracts exceeding USD 10 million, if the State has agreed to international arbitration, then claimant may elect arbitration under one of the following rules: 

  • UNCITRAL, administered by the Permanent Court of Arbitration; 
  • ICC Arbitration; or 
  • Inter-American Commission on Commercial Arbitration (CIAC) Arbitration. 
Top

2 . Principal laws and institutions relating to international arbitration in this jurisdiction

Top

2.1. Legal framework

Ecuador is a party to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention). Ecuador has also ratified the following multilateral conventions relating to international commercial and investment arbitration:

  • the 1966 International Convention on Settlement of Investment Disputes between States and Nationals of Other States (ICSID Convention) (Ecuador re-joined ICSID in 2021);
  • the 1975 Inter-American Convention on International Commercial Arbitration;
  • the 1979 Inter-American Convention on Extraterritorial Validity of Foreign Judgments and Arbitral Awards;
  • bilateral investment treaties (BITs) with Spain and the Netherlands; and
  • other BITs with Italy, Bolivia, Chile, China, Peru, Switzerland, United Kingdom, United States of America, Venezuela, Argentina, Canada, France, Germany, and Sweden (these BITs were terminated but remain effective by virtue of a sunset clause).

The main domestic sources of law related to international arbitration as well as the enforcement of arbitration awards are:

  • the Constitution of Ecuador (Constitution);
  • the AM Law; and 
  • the AM Regulation.

Per Article 37 of the AM Law, the Organic Code of General Procedure (COGEP) may be applied subsidiarily.

Top

2.2. What qualifies as international arbitration?

According to Article 41 of the AM Law, an arbitration is considered international if:

  • the parties, when entering into the arbitration agreement, are domiciled in different jurisdictions;
  • the place of fulfilment of a substantial part of obligations is located outside the domicile of one of the parties;
  • the place where the subject matter of the dispute has the closest connection is different from the domicile of one of the parties; or
  • the subject matter of the dispute refers to an international trade operation.

These requirements are applicable only when the seat of the international arbitration is Ecuador 

Top

2.3. Main local international arbitration institutions

In August 2021, Ecuador ratified the ICSID Convention. In October 2022, the Arbitration Centre of the Quito Chamber of Commerce signed an agreement with ICSID, providing for ICSID hearings to be conducted at its headquarters.

Also in October 2022, Ecuador entered into a Host Country Agreement with the Permanent Court of Arbitration (PCA). According to the PCA, this agreement grants privileges and immunities to PCA officials, arbitrators and participants in cases administered by the PCA. It also allows the PCA to request the use of facilitates for arbitrations administered by this institution.

Local arbitral institutions may administer arbitrations under international arbitration rules. For example, the rules of the Arbitration Centre of the American-Ecuadorian Chamber of Commerce (AMCHAM) (adopted as of 1 January 2022) establishes the resolution of local and international disputes as one of its goals. AMCHAM currently does not have a set of rules for international arbitration, and international arbitration administered by AMCHAM may be conducted under any set of international arbitration rules chosen by the parties. In general, local institutions seek to eventually develop their own set of rules for international arbitration. 

Top

3 . Arbitration agreements

Top

3.1. Requirements as to content and form

Article 5 and Article 6 of the AM Law provide that the arbitration agreement must be in writing. Pursuant to Article 6, the requirement to “be in writing” is met by the exchange of letters or any other means of written communication recording the parties’ will to submit the dispute to arbitration. 

Top

3.2. Validity of arbitration agreements

An arbitration agreement is valid if it is entered into by a person with the capacity to contract, it is in writing, and it complies with the general requirements for the validity of contracts under Ecuadorian law (Articles 4-6, AM Law). 

Top

3.3. Special formalities

According to Article 190 of the Constitution, Article 4 of the AM Law, Article 11 of the Organic Law of the Attorney General Office, and Articles 3 and 4 of the AM Regulation, a government entity is subject to the following rules and formalities to be able to enter into an arbitration agreement:

  • the merits of the arbitration must be resolved under the rules of law (as opposed to ex aequo et bono arbitration);
  • the dispute must be of a contractual nature;
  • the form of selection of the arbitrators must be included in the arbitration agreement;
  • the arbitration agreement must be signed by the government official that has sufficient power for contracting on behalf of the government entity; and
  • if the agreement is to be executed after the dispute has arisen, or if it concerns international arbitration, the government entity must obtain prior approval from the Ecuadorian Attorney General.
Top

3.4. Governing law

Parties can freely decide the law applicable to the merits of the dispute pursuant to the principle of freedom of contract. In the absence of any agreement, the tribunal will determine the governing law of the dispute in accordance with the Ecuadorian provisions concerning conflicts of laws. 

Top

4 . Arbitrability

Top

4.1. Applicable restrictions

Parties can submit disputes to arbitration when the subject matter of the dispute is capable of being resolved by way of settlement (Article 190 of the Constitution and Article 1 of the AM Law). Rights that cannot be waived are not capable of being settled (Article 11 Civil Code). 

Top

5 . Enforcing arbitration agreements

Top

5.1. Stay of proceedings

Ecuador does not provide for stay of proceedings, meaning that a Court does not have an obligation to suspend proceedings until the dispute is adjudicated in arbitration or vice versa. However, Courts have an obligation to decline jurisdiction when parties have agreed to submit their disputes to arbitration (Article 7, AM Law). In case of doubt, courts shall decide in favour of arbitration (in dubio pro arbitri). A jurisdictional objection shall be heard as a preliminary matter by a local court (Article 153, COGEP) before deciding on the merits. The judge can only analyse prima facie the existence of the arbitration agreement and is not allowed to analyse its validity or applicability. 

Article 8 of the AM Law expressly includes two circumstances where an arbitration agreement would cease to be enforceable. The first is by the agreement of the parties, in writing, to waive the arbitration agreement. The second is when one of the parties has sued the other before the ordinary courts and the counterpart does not present an objection to the jurisdiction on the grounds of the existence of an arbitration agreement. 

Top

5.2. Anti-suit injunctions

There is no legal provision authorizing antisuit injunctions to restrain a party from commencing or continuing legal proceedings abroad in breach of an arbitration agreement.

Top

6 . Arbitral Tribunal

Top

6.1. Restrictions on the parties’ freedom to choose arbitrators

The parties have no restrictions to choose arbitrators. The common practice is to select arbitrators from the official list of each arbitration institution. 

Top

6.2. Requirement of arbitrator independence and impartiality

Arbitrators shall remain impartial and independent throughout the entire arbitration and have a duty of disclosure. This principle is typically incorporated into the rules of arbitration institutions. 

Top

6.3. Mandatory rules applicable to the appointment process

The default rule under the AM Law is that arbitrators are to be appointed from an arbitral institution’s list. However, parties can depart from this rule by mutual agreement (AM Law, Article 16). 

Top

6.4. Appointment mechanism in the absence of party agreement or applicable institutional rules

In cases of lack of agreement in the appointment of arbitrators, the chosen arbitral institution will run a lottery to select a tribunal from the official list of the arbitral institution (AM Law, Article 16). Courts are not involved in the selection of arbitrators.

Top

6.5. Mandatory rules applicable to the replacement process

Arbitrators can be replaced in the event of death or because of a ‘justified reason’ impeding their participation on a permanent basis (e.g., sickness) (Article 20, AM Law), or after they were successfully challenged.

Top

6.6. Mandatory disclosure obligations

There is no rule expressly stating that arbitrators are subject to mandatory disclosure obligations. However, these obligations are inherent to the obligation to remain independent and impartial. In practice, the arbitral community agrees that arbitrators have a permanent duty of disclosure. 

Top

6.7. Grounds for challenge

By reference to the Organic Code of General Procedure (COGEP) (governing challenges of judges within the judiciary), an arbitrator can be challenged (under AM Law, Article 21 and COGEP, Article 22) for:

  • being one of the parties in the arbitration;
  • being the spouse of one of the parties or counsel;
  • being a close relative to one of the parties, or their representatives or counsel;
  • having previously heard or adjudicated the disputed matter or matters closely connected to the dispute;
  • having unjustifiably delayed resolving matters under the arbitrator’s jurisdiction;
  • being the legal representative or attorney in fact of any of the parties in the arbitration or having previously intervened as mediator in the dispute;
  • having previously manifested an opinion or advised about the subject matter of the arbitration;
  • having previously been in a dispute with any of the parties, which extends to the arbitrator’s spouse and close relatives;
  • having previously received any rights, payment, goods, securities or services from any of the parties;
  • having a pending obligation with any of the parties;
  • having an intimate friendship or manifested enmity with one of the parties or with counsel; or
  • having a personal interest in the outcome of the arbitration based on business reasons, which extends to the arbitrator’s spouse and close relatives.
Top

6.8. Mandatory rules governing the challenge of arbitrators

Courts do not hear challenges to arbitrators. Challenges are instead resolved by the arbitral tribunal, or ultimately by arbitral institutions, according to the Article 21 of the AM Law:

  • Administered arbitration: in the case of a three-arbitrator tribunal, the challenge will be resolved by the arbitrator or arbitrators that have not been challenged. If the entire tribunal has been challenged, then the director of the arbitral institution will decide on the challenge. 
  • Ad-hoc arbitration: the director of the arbitration institution closest to the claimant’s domicile will resolve the challenge if there is a sole arbitrator. The same applies if all arbitrators in a three-arbitrator tribunal have been challenged. If that is not the case, then the non-challenged arbitrators will resolve the challenge.
Top

6.9. Removal

There are no specific rules other than those contemplated for replacement and challenge of arbitrators. 

Top

6.10. Liability and immunity of arbitrators

Article 18 of the AM Law expressly establishes that arbitrators have the obligation to ‘comply with the duties imposed by Law’ and that they are liable in case of damages resulting from ‘non-compliance of their duties’. Applying the liability rule, Article 12 of the AM Regulation establishes that arbitrators are liable for any delay in issuing an award within the statutory time limit if the delay is due to the arbitrators’ gross negligence. 

Top

7 . Assistance by the State courts

Top

7.1. Interim measures

Before tribunal has been constituted, a party may seek interim measures from a local court. Courts will generally grant interim relief if the existence of a credit and the need to protect it are proven.

Once the arbitral tribunal has been constituted, it has the exclusive right to order interim measures (Article 9, AM Law). Arbitrators need to seek assistance to enforce interim measures from Ecuadorian courts only if the parties have not agreed upon the tribunal’s enforcement powers in the arbitration agreement.

Top

7.2. Taking of evidence

A party may request assistance in the taking of evidence from a court only before the initiation of the arbitration (COGEP, Article 120). This may apply when there is a risk of the evidence being destroyed or lost. 

Top

7.3. Appointment or challenge of arbitrators

Courts do not hear appointment or challenges of arbitrators. Hence, a party to the arbitration agreement cannot apply to court to appoint or remove an arbitration. 

Top

7.4. Other available assistance

No other types of assistance to arbitrations are commonly available.

Top

8 . General procedural (minimum) requirements

Arbitration proceedings are initiated by directly filing a written memorial. This is followed by the filing of a written submission by the respondent within ten days (Article 10, AM Law). Then a compulsory mediation shall take place (Article 15-16, AM Law). If the parties do not reach an agreement, the arbitration proceedings continue. 

Two types of hearings are held: 

  • a preliminary hearing, called a “substantiation hearing”; and 
  • the final hearing. 

In the substantiation hearing the tribunal rules on its own jurisdiction and orders the production and taking of evidence, and the parties briefly present a summary of the facts and present their request of relief (Article 22, AM Law).

Between the substantiation hearing and the final hearing, Article 24 of the AM Law provides for a period for the taking of evidence. During this period, examination of witnesses and experts take place, as well as the production of documentary evidence. Once this period is over, the final hearing is held, where parties present their closing arguments (Article 24, AM Law). Then the award is rendered.

Top

9 . Confidentiality

The default rule is that arbitration proceedings are not confidential and parties may agree to confidentiality in the arbitration agreement (Article 34, AM Law). 

Top

10 . Awards

Top

10.1. Requirements as to content and form

Neither the AM Law nor the AM Regulation contain a specific provision on requirements as to form and content for awards. Nevertheless, the AM Law imposes an obligation on arbitrators to sign the award (Article 27), thus the award needs to be in writing. 

In addition, the COGEP is applicable on a subsidiary basis pursuant to Article 37 of the AM Law. Articles 90 and 95 of the COGEP establish that the content of a judicial decision shall include, among others: 

  • date and place of where the award is made;
  • name of the parties;
  • a summary of the facts of the case; 
  • arguments brought by the parties; 
  • a decision on the objections brought by the respondent; 
  • the reasoning of the decision; 
  • a decision on the merits; 
  • a decision on whether the claimant is entitled to receive compensation; and
  • signature of the award. 
Top

10.2. Time limit

The tribunal has 150 days to issue the award from the decision on its own competence (made in the preliminary hearing) (Article 25 of the AM Law). This term can be extended for up to 150 more days. The extension can be made by the tribunal on its own motion and under its sole discretion, or by mutual agreement of the parties. 

Top

10.3. Remedies

In the absence of limits imposed by the parties, a tribunal can award any remedy that would be available under contract and/or tort law, including:

  • the declaration of a breach of contract; 
  • the termination of a contract; 
  • the enforcement of an obligation; or
  • the obligation to compensate for damages. 
Top

11 . Post-award proceedings

Top

11.1. Interpretation and correction of awards

The arbitral tribunal has the power to clarify the award if requested by the parties within three working days (Article 30 of the AM Law). The tribunal must answer the request within ten working days. The tribunal has three working days to correct numerical and typographic errors in the award.

Top

11.2. Challenge of an award

The grounds for annulling award are limited to the following as enumerated in Article 31 of the AM Law:

  • whether the respondent was not legally summoned, and the arbitration was pursued in absentia;
  • whether a party was not notified with a procedural order and this impeded or limited said party’s right of defence;
  • whether evidence was not allowed to be presented; 
  • extra and ultra petita; and
  • whether provisions for designating arbitrators or constituting the arbitral tribunal were violated. 

A challenge must be brought within ten business days of the date of the award.

Top

11.3. Recognition and enforcement proceedings

Parties may enforce domestic arbitral awards before a local court of first instance by submitting a certified copy of the award (Article 32, AM Law, Article 14, AM Regulation). 

Domestic awards are equivalent to an enforceable judicial judgment with res judicata effect and shall be enforced as a final judicial judgment. There is no specific term for the enforcement of awards; therefore, the statute of limitations for civil actions of ten years is applicable.

Top

11.4. Cost of enforcement

As awards are enforced by local courts, there are no associated fees for such enforcement. However, the party applying for enforcement will usually incur lawyers’ fees and disbursements.

Top

11.5. Enforcement of orders of emergency arbitrators

Ecuadorian law lacks clarity in this area, as there are no specific rules relating to the enforcement of orders by emergency arbitrators. The AM Law does not provide for a specific rule allowing an emergency arbitrator to seek assistance from a court to enforce a decision. However, it may do so by reference to the rules applicable for the enforcement of interim measures. The rules of Arbitration Centre of the Guayaquil Chamber of Commerce, for example, clarify that the procedural order issued by the emergency arbitrator consists of “interim measures”.

Top

12 . Enforcement of foreign awards

Top

12.1. Process for enforcing New York Convention awards

Foreign awards have the same effects and shall be enforced in the same way as awards issued domestically (Article 42, AM Law). The enforcing party must apply to the local court of the first instance. Article 15 of the AM Regulation clarifies that, consistent with the New York Convention, no formalities or requirements are needed for the enforcement of an award, other than presenting a certified copy and a translation of the award. 

Top

12.2. Grounds for resisting enforcement of New York Convention awards

Grounds for resisting enforcement established in the New York Convention are directly applicable. Parties also typically resort to Article 363 of the COGEP for resisting enforcement, by arguing that only foreign awards that have been previously recognised by a local court are enforceable. This is an unsettled question which is currently being heard by the Constitutional Court.

Top

12.3. Enforcing Non-Convention awards

Non-Convention awards should be enforced in the same manner as New York Convention awards. Both should be enforced as local awards pursuant to Article 42 of the AM Law. 

Top

13 . Professional and ethical rules

Top

13.1. Applicable to counsel

There are no specific ethical rules applicable to counsels in arbitration. However, domestic arbitral institutions have developed their own ethical rules (e.g., CCQ’s ethical rules). 

Top

13.2. Applicable to arbitrators

There is no specific set of ethical rules for arbitrators. However, the IBA Guidelines are generally used and followed. 

Top

14 . Third-party funding

Top

14.1. Applicable regulatory requirements

There are no regulatory requirements specifically addressing third-party funding. This matter is ruled by general rules of contract law. 

Top

14.2. Overview of the third-party funding market in this jurisdiction

Third-party funding is not yet a widespread reality in Ecuador. However, it is a fast-growing area, with local firms typically seeking third-party funding in favour of their clients. 

Top

15 . Trends and recent developments

Ecuador re-joined the ICSID Convention on 3 September 2021. As of today, there is at least one reported case being brought against the Republic of Ecuador after Ecuador re-joined the ICSID Convention (Corporación Nacional del Cobre de Chile, Exploraciones Mineras Andinas S.A. and Inversiones Copperfield SPA v. Republic of Ecuador (ICSID Case No. ARB/22/3)). 

Earlier in January 2021, AMCHAM adopted a new set of arbitration rules, providing for, among others: 

  • the application, by reference, of the IBA Guidelines on Conflicts of Interest in International Arbitration; 
  • unless the parties have otherwise agreed, the subsidiary application of the IBA Rules on the Taking of Evidence in International Arbitration; 
  • the ability to have party-appointed arbitrators as a default rule in AMCHAM processes (as opposed to the default rule in the AM Law, which provides for the arbitral institution to run a lottery to select a tribunal from the official list of the arbitral institution); 
  • emergency arbitration under AMCHAM rules; and
  • express provision allowing the consolidation of proceedings into a single arbitration. 

Finally, the arbitration centre of the Guayaquil Chamber of Commerce adopted a new set of rules in 2022. These rules are similar to those adopted by AMCHAM, adding an abbreviated procedure and third-party funding disclosing obligations. 

The Authors thank the participation of Steven Vásconez, law student at Universidad San Francisco de Quito and intern at TADIR Dispute Resolution, who contributed in the research and preparation of this chapter.

EXPERT ANALYSIS

Chapters

Australia

Cara North
Eleanor Clifford
Nastasja Suhadolnik
Samuel Kay

Brazil

Anna-Katharina Scheffer da Silveira
Paulo Macedo
Rafael Alves

Colombia

Juan Felipe Merizalde
Juan Pablo Gómez-Moreno

England and Wales

Gregory Fullelove
Katie Bewlock

France

Carl Szymura
Julie Spinelli

Hong Kong

Kim M. Rooney

India

Sanskriti Sidana
Shaneen Parikh
Tushar Karkaria

Italy

Gregorio Baldoli
Massimo Benedettelli

Nigeria

Igonikon Adekunle
Konyinsola Osipitan
Sesan Sulaiman

Saudi Arabia

Fahad N. AlArfaj

Singapore

Joel Quek
Koh Swee Yen SC
Wendy Lin

South Africa

Clement Mkiva
Jackie Lafleur
Jonathan Barnes
Tori Herholdt

South Korea

Brandon Bang
Hangil Lee
In Hyuk Hwang
Tony DongWook Kang

Switzerland

Noradèle Radjai

United States

Benjamin Guthrie
Carlos Hafemann
Daniela Páez
Emma McGrath
Lucila Marchini
Louis Thivierge

Powered by SimSage

Jobs from Nicholas Scott

3-6 PQE Corporate M&A Associate

Job location: London

Projects/Energy Associate

Job location: London

Popular Articles

Latest Articles

Skadden tops global Q3 M&A table as total deal value jumps by 16%

10h

Bowmans absorbs eight-partner A&O Shearman team in Johannesburg

12h

European patent law trends in the life sciences

15h

IBA endorses first international treaty on AI governance

19h

TLT adds eight-partner team from BDB Pitmans

1d