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NEWS

Constitutional Court rules that ICSID ratification does not require prior legislative approval

On June 30, 2021, the Constitutional Court put an end to the discussion on weather ICSID required prior legislative approval pursuant to article 419 of the Constitution. The Court concluded that ICSID does not require such an approval.

On January 21, 2021, Ecuador signed ICSID and now the next step is ratification. In the past days, an internal discussion took place on whether ICSID required prior legislative approval. Pursuant to article 419, the ratification of international treaties will require the approval of the National Assembly in the following cases: 1) They refer to territorial or boundaries matters; ii) They establish political or military alliances; iii) They contain the commitment to enact, modify or repeal a law; iv) they refer to rights guaranteed in the Constitution; v) They compromise the State´s economic policy to international financial institutions or international companies; vi) compromise the country to integration and trade agreements; vii) They confer competences of internal legal order to an international or supranational organization and; viii)  They compromise the country´s natural resources, water, biodiversity, etc.

The President´s position was that the ratification of ICSID did not require legislative approval. On June 21, 2021, President Lasso´s General Legal Secretary sent a communication to the Constitutional Court asking them to clarify on whether ICSID needs the prior approval by the National Assembly.

The Constitutional Court explained that ICSID does not refer to territorial or boundary matters, it does not establish political or military alliances, it does not enact, modify or repeal a law, it does not refer to rights guaranteed in the Constitution, comprise the State´s economic policy or its natural heritage.

Perhaps two of the most controversial aspects were deciding on whether ICSID compromises the country to integration and trade agreements or confers competences of internal legal order to an international or supranational organization. Regarding the first aspect, the Court mentioned that although ICSID´s preamble talks about the “necessity of international cooperation for economic development” this does not imply that an obligation of commerce or integration is being acquired. The Court went on and said that the sole mention of commerce or integration does not mean that this treaty requires legislative approval.

Regarding the conferring of competences of internal legal order to an international or supranational organization, the Court explained that ICSID offers the possibility, not the obligation, for its member States to arbitrate. Arbitration is consensual; thus Ecuador would have to consent to arbitrate an investment dispute on a separate instrument such as a BIT, bilateral investment contract or investment protection law. In other words, signing ICSID does not mean acquiring an obligation to arbitrate all investment disputes. The Court also mentioned that in case 34-19-IT they concluded that “the resolution of disputes between States is not a competence of internal order”, hence resorting to ICSID does not imply conferring competence of internal legal order to international organizations. 

It is worth mentioning that it was not a unanimous vote: 6 votes in favor (Judges Salazar, Andrade, Nuques, Corral, Salgado, Lozada) two dissenting votes (Judges Herrería y Ávila) and one against (Judge Grijalva). On their dissenting opinions, Judges Herrería y Ávila explained that the National Assembly should have been participated in the dialogue process of such an important topic. They also mentioned that there is a constitutional prohibition to submit disputes to international arbitral tribunals (art. 422). This is not true, because article 422 refers to commercial or contractual disputes and investment arbitration is a whole different creature. Hence ICSID is not incompatible with the constitution.

Conclusion

 The Court´s decision is positive as ICSID did not require prior legislative approval for its ratification. Returning to ICSID will bring many benefits for the county and will attract foreign investment, which is one of the key aspects for the new government.


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