by international organisations | April 2024
100 organizations from around the world call on Ecuador to defend its sovereignty against international arbitration: No to ISDS!
Ecuador must defend its right to say NO to international investment tribunals and to the privileges afforded to foreign investors
On April 21st, the Ecuadorian government of Daniel Noboa will hold a referendum on, among other questions, one of the central axes for the agenda of neoliberal governments in Latin America: the protection of foreign investors and investments, in particular in sectors and activities that are highly responsible for climate change, biodiversity loss and pollution, and which require to be either regulated or phased out. Camouflaged amidst a series of questions related to security policy, the referendum asks if the country should permit foreign investors to settle disputes with the State via international arbitration. This will once again give rise to Ecuador being part of the infamous Investor State Dispute Settlement (ISDS) mechanism of secret tribunals.
To allow ISDS again is a direct threat to Article 422 of the 2008 Ecuadorian Constitution. Since former president Rafael Correa ended all investment agreements which contained ISDS in 2017, the economic right has systematically attacked this article, arguing that it restricts the country’s ability to receive foreign investments. However, a Comprehensive Audit Commission of Investment Treaties and the Arbitration System (CAITISA) showed in 2017 that Ecuador does not need investment treaties that include ISDS to attract investments. In fact, much of the inward investment comes from countries with which Ecuador has not signed any investment treaty, such as Brazil, Mexico and Panama.
The country’s treaties with ISDS are not bringing investments to Ecuador, but they have had enormous negative impacts on the State’s ability to regulate foreign corporations. A recent report shows that foreign investors have filed 29 ISDS claims against Ecuador so far, half of them linked to activities in the extractive sectors (hydrocarbons and mining). In two-thirds of concluded cases (14 out of 21) Ecuador lost. As a result of these cases, Ecuador has been ordered to pay foreign investors 2,9 billion dollars. On top of this are legal costs (expenses associated with the defense of the case) and arbitration costs (payments made to the arbitration facility and staff), which add up to millions of dollars more. Some of the lost cases have shown the irrationality of this system, such as the Chevron claims, which have moved forward despite ample evidence provided by the Ecuadorian national justice system demonstrating the environmental and health damage caused by the company in the Ecuadorian Amazon.
The ISDS arbitration mechanism has generated numerous criticisms from the academic, professional, government and civil society spheres around the world. The lack of transparency in the arbitration procedures, the absence of impartiality and independence of the arbitrators, the interference with the rights of sovereign States to regulate in the public interest, and the eye-wateringly high costs are only some of the many shortcomings of the system. In addition there is the ‘chilling effect’ when States hold back from introducing necessary policies and legislation for fear of being sued under ISDS treaties. In fact, it is an asymmetric system, where only the investor is allowed to initiate a claim against the host State, and not the other way around. The host State can only defend itself. In short, it is a mechanism created by and for investors, giving them access to a private, parallel and privileged judicial channel, bypassing national justice.
Ecuador is not the only country that has rejected the ISDS mechanism. Brazil, which does not have any investment protection treaties, is the main recipient of foreign investment in the region. India has exited all of its investment treaties, and currently signs treaties that do not include the traditional ISDS mechanism. Still, India is the fifth largest recipient of investment in the world. In the last 10 years, we have seen many governments move away from this mechanism. Countries, such as South Africa, Indonesia, Australia, New Zealand and Bolivia, have exited or renegotiated their investment treaties and no longer negotiate ones that include the ISDS mechanism. In fact, many European countries and the EU itself have recently announced their intention to withdraw from an ISDS treaty called the Energy Charter Treaty (ECT) or have already left it. The ISDS mechanism included in the ECT protects investors in the energy sector, and is being used by fossil fuel corporations to slow down the energy transition. Even the United States under President Donald Trump forced the renegotiation of the North American Free Trade Agreement (NAFTA) and the new version of the agreement does not include ISDS between the United States and Canada.
If Article 422 of the Constitution is amended, the government will be in a position to sign new treaties that include the ISDS mechanism. Already the government has tried to include ISDS in new treaties, like with Costa Rica, but was stopped by a Constitutional Court decision that this would be unconstitutional. Other treaties awaiting the outcome of Article 422 include an FTA with Canada and another one with the United States. In the Canadian case, government officials have been clear that ISDS is mainly a means to protect controversial large-scale extractive projects facing local opposition.
We, the undersigned organizations, strongly encourage the people of Ecuador to vote NO on April 21st! ISDS has been extremely detrimental to public policies that defend citizens, whether in matters of environmental protection, human rights or even tax justice. And while these treaties and the ISDS mechanism within them do not guarantee the receipt of new foreign investments, they do give many privileges to foreign investors, regardless of the quality of their investment. Investors around the world have used the system and activated these privileges, suing sovereign States for public policies that cut into their profits.
Let’s protect Ecuador from these corporate privileges.
Signatories
Acción Ecológica
ActionAid France
América Latina y el Caribe Mejor Sin TLC
Amigas da Terra Brasil
Amigos de la Tierra America Latina y el Caribe (ATALC)
Amis de la Terre France - Friends of the Earth France
APY Solidaridad en Acción
Asamblea Argentina mejor sin TLC
Asociación Cultural Brasileña Maloka
Asociación Cultural Iberoamericana Dresden
ATTAC Argentina
Attac Deutschland
Attac France
Australian Fair Trade and Investment Network
Berliner Wassertisch
Both ENDS (Paises Bajos)
Bristol Airport is Big Enough (BABE)
Canadian Centre for Policy Alternatives
CDES
Censat Agua Viva
Center for International Environmental Law (CIEL)
CESTA Amigos de la Tierra El Salvador
CGT - Confederación General del Trabajo
Chile Mejor sin TLC
CLATE - Confederación Latinamericana y del Caribe de Trabajadores Estatales
Climate Action Network Latin America (CANLA)
CNCD-11.11.11 (Belgium)
Colectivo Teatral ARTOS
Confederación Intersindical
Corporación Colectivo de Abogados y Abogadas José Alvear Restrepo CAJAR
Ecologistas en Acción
Entraide et Fraternité
European Trade Justice Coalition
FDCL-Centro de Investigación y Documentación Chile-América Latina (Alemania)
Fédération Artisans du Monde
Friends of the Earth England, Wales and Norther Ireland
Friends of the Earth Europe
Friends of the Earth International
Fundación Constituyente XXI Chile
Fundación Moneda y Sociedad
Global Justice Now (UK)
GMB
Grandmothers Advocacy Nework (GRAN)
Grupo Ecologista Andarax GEA-ECOLOGISTAS EN ACCIÓN
impACT International
Institute for Policy Studies - Global Economy Program
Justiça Ambiental JA! - Friends of the Earth Mozambique
Marino Mercante jubilado
Martínez Molina & Asociados
Mesa de la Ría de Huelva
Mining Injustice Solidarity Network (MISN)
Museo del Hambre
Naturefriends Greece
Netzwerk gerechter Welthandel
Observatoriodeladeudapublica
People’s Health Movement - Canada
Platform Aarde Boer Consument NL
PowerShift e.V.
Proyecto sobre Organización, Desarrollo, Educación e Investigación (PODER)
REDES-Amigos de la Tierra Uruguay
Regroupement pour la responsabilité sociale des entreprises
Semillero de Investigación -Pacha Paqta- Universidad Industrial de Santander, Colombia
Solidaridad Inernacional Andalucia
SOMO
TNI - Transnational Institute
Trade Justice Movement
Transform Trade
TROCA - Plataforma por um Comércio Internacional Justo
TROCA - Plataforma por um Comércio Internacional Justo
TROPA DE TODOS
Unión de Afectados por las Operaciones de Texaco UDAPT
War on Want
Workinggroup Food Justice NL
Zukunftsrat Hamburg
Notes:
(1)
https://www.tni.org/files/auditoria_integral_ciudadana_2015.pdf
(2)
https://isds-americalatina.org/perfiles-de-paises/ecuador/
(3)
https://www.primicias.ec/noticias/economia/acuerdo-ecuador-costa-rica-renegociar-corte/
(4)
Canada hopes the FTA will include: “rules regarding the promotion and protection of investment and investors subject to a negative list of reservations, enforced by the Agreement’s dispute settlement mechanism and a transparent investor-state dispute settlement mechanism.” Canada’s negotiating objectives clarify this will depend on the outcome of the April 21 referendum: “Notwithstanding the above negotiating objectives, in light of ongoing consideration in Ecuador of the legal compatibility between investment agreements and its domestic legal framework, it is possible that investment and services provisions may be set aside, in part or entirely, from an agreement if necessary during the negotiation process.”
https://www.international.gc.ca/trade-commerce/trade-agreements-accords-commerciaux/agr-acc/ecuador-fta-ale-equateur/objectives-negotiations-objectifs-negociations.aspx?lang=eng
(5)
https://monitormag.ca/articles/why-the-ecuador-trade-deal-canada-wants-hinges-on-a-misleading-referendum-question/