<html><head><meta http-equiv="Content-Type" content="text/html; charset=utf-8"></head><body style="word-wrap: break-word; -webkit-nbsp-mode: space; line-break: after-white-space;" class=""><a href="https://www.iisd.org/articles/statement/ecuador-referendum-rules-out-isds-return-underlining-public-support-sustainable" class="">https://www.iisd.org/articles/statement/ecuador-referendum-rules-out-isds-return-underlining-public-support-sustainable</a><div class=""><br class=""></div><div class=""><h1 class="c-single-header__heading" lang="en" style="font-size: 50px; margin: 16px 0px 0px; padding: 0px; border: 0px; font-family: Campton, Helvetica, Arial, sans-serif; font-style: inherit; font-variant-caps: inherit; font-weight: 500; font-stretch: inherit; line-height: 60px; vertical-align: baseline; letter-spacing: 0.3px; color: rgb(8, 50, 102);"><span class="field--name-title field--label-hidden field--type-string field" style="margin: 0px; padding: 0px; border: 0px; font-family: inherit; font-size: inherit; font-style: inherit; font-variant-caps: inherit; font-stretch: inherit; line-height: inherit; vertical-align: baseline;">Ecuador Referendum Rules Out ISDS Return, Underlining Public Support for a Sustainable Path</span></h1><div class="c-single-header__meta" style="margin: 32px 0px 0px; padding: 0px; border: 0px; font-family: inherit; font-size: inherit; font-style: inherit; font-variant-caps: inherit; font-stretch: inherit; line-height: inherit; vertical-align: baseline;"></div></div><div class=""><section class="o-section__content o-content-from-editor js-content-from-editor" lang="en" style="margin: 0px 0px 0px 38px; padding: 0px; border: 0px; font-family: inherit; font-size: 19px; font-style: inherit; font-variant-caps: inherit; font-stretch: inherit; line-height: 28px; vertical-align: baseline; letter-spacing: 0.45px; width: calc(66.6666666667% - 63.3333333333px); float: left;"><p style="margin: 0px 0px 24px; padding: 0px; border: 0px; font-family: inherit; font-style: inherit; font-variant-caps: inherit; font-stretch: inherit; line-height: 28px; vertical-align: baseline; letter-spacing: 0.45px; box-sizing: border-box;" class="">In a referendum on Sunday, April 21, the citizens of Ecuador emphatically voted to keep Article 422 of the country’s 2008 constitution, which prevents Ecuador from using international arbitration to settle disputes between Ecuador and foreign investors or private individuals in international treaties or instruments.</p><p style="margin: 0px 0px 24px; padding: 0px; border: 0px; font-family: inherit; font-style: inherit; font-variant-caps: inherit; font-stretch: inherit; line-height: 28px; vertical-align: baseline; letter-spacing: 0.45px; box-sizing: border-box;" class="">The result of the referendum underscores Ecuador’s strategy, which was developed in response to its negative experience with investment arbitration and investor–state dispute settlement (ISDS). This increasingly criticized mechanism, which allows foreign investors to sue states in international arbitration,<a href="https://www.ohchr.org/en/documents/thematic-reports/a78168-paying-polluters-catastrophic-consequences-investor-state-dispute" target="_blank" style="margin: 0px; padding: 0px; border-width: 0px 0px 1px; border-bottom-style: solid; border-bottom-color: rgb(8, 50, 102); font-family: inherit; font-size: inherit; font-style: inherit; font-variant-caps: inherit; font-stretch: inherit; line-height: inherit; vertical-align: baseline; color: rgb(8, 50, 102); text-decoration: none; cursor: pointer; box-sizing: border-box; transition: border-color 0.3s ease 0s; word-break: break-word;" class=""> has repeatedly been found to hinder states’ climate policies, social justice action, and right to regulate</a>.</p><p style="margin: 0px 0px 24px; padding: 0px; border: 0px; font-family: inherit; font-style: inherit; font-variant-caps: inherit; font-stretch: inherit; line-height: 28px; vertical-align: baseline; letter-spacing: 0.45px; box-sizing: border-box;" class="">Ecuador has been on the receiving end of several costly compensation awards by ISDS tribunals in favour of investors. For example, in 2012, a tribunal ordered Ecuador to pay the U.S. oil company Occidental over USD 1.5 billion, one of the largest amounts a state had ever been ordered to pay. Ecuador argued that <a href="https://www.italaw.com/sites/default/files/case-documents/italaw1603.pdf" target="_blank" style="margin: 0px; padding: 0px; border-width: 0px 0px 1px; border-bottom-style: solid; border-bottom-color: rgb(8, 50, 102); font-family: inherit; font-size: inherit; font-style: inherit; font-variant-caps: inherit; font-stretch: inherit; line-height: inherit; vertical-align: baseline; color: rgb(8, 50, 102); text-decoration: none; cursor: pointer; box-sizing: border-box; transition: border-color 0.3s ease 0s; word-break: break-word;" class="">the amount of the award represented almost 9% of Ecuador’s 2012 annual budget, 59% of its annual education budget, and 135% of the country’s annual healthcare budget</a>.</p><p style="margin: 0px 0px 24px; padding: 0px; border: 0px; font-family: inherit; font-style: inherit; font-variant-caps: inherit; font-stretch: inherit; line-height: 28px; vertical-align: baseline; letter-spacing: 0.45px; box-sizing: border-box;" class="">This settlement led Ecuador to exit the International Centre for Settlement of Investment Disputes Convention—the world’s primary institution managing disputes between states and foreign investors—and terminate its bilateral investment treaties with other states.</p><p style="margin: 0px 0px 24px; padding: 0px; border: 0px; font-family: inherit; font-style: inherit; font-variant-caps: inherit; font-stretch: inherit; line-height: 28px; vertical-align: baseline; letter-spacing: 0.45px; box-sizing: border-box;" class="">The risks that led Ecuador to turn away from ISDS over a decade ago have only become more acute, with damage awards reaching multiple billions of USD. These risks are especially acute in mining, oil, and gas, as these sectors have been frequent users of ISDS and involved in exorbitant awards. These sectors remain important sectors in Ecuador and receive significant foreign investment. The <a href="https://www.iisd.org/system/files/publications/compensation-treaties-best-practicies-en.pdf" target="_blank" style="margin: 0px; padding: 0px; border-width: 0px 0px 1px; border-bottom-style: solid; border-bottom-color: rgb(8, 50, 102); font-family: inherit; font-size: inherit; font-style: inherit; font-variant-caps: inherit; font-stretch: inherit; line-height: inherit; vertical-align: baseline; color: rgb(8, 50, 102); text-decoration: none; cursor: pointer; box-sizing: border-box; transition: border-color 0.3s ease 0s; word-break: break-word;" class="">issue of inflated compensation in ISDS tribunals</a> is yet to be solved—it is part of the ongoing discussions at the <a href="https://www.iisd.org/itn/en/2022/10/07/uncitral-working-group-iii-and-the-assessment-of-compensation-and-damages-thinning-scope-for-impactful-reform-or-an-opportunity-to-make-a-difference-nathalie-bernasconi-osterwalder_josef-ostransky/" target="_blank" style="margin: 0px; padding: 0px; border-width: 0px 0px 1px; border-bottom-style: solid; border-bottom-color: rgb(8, 50, 102); font-family: inherit; font-size: inherit; font-style: inherit; font-variant-caps: inherit; font-stretch: inherit; line-height: inherit; vertical-align: baseline; color: rgb(8, 50, 102); text-decoration: none; cursor: pointer; box-sizing: border-box; transition: border-color 0.3s ease 0s; word-break: break-word;" class="">United Nations Commission on International Trade Law on ISDS reform</a>.</p><p style="margin: 0px 0px 24px; padding: 0px; border: 0px; font-family: inherit; font-style: inherit; font-variant-caps: inherit; font-stretch: inherit; line-height: 28px; vertical-align: baseline; letter-spacing: 0.45px; box-sizing: border-box;" class="">The outcome of the referendum clearly demonstrates strong public support for Ecuador’s cautious and balanced approach to ISDS, grounded in its own painful history with this deeply flawed and outdated tool.</p><div style="margin: 0px; padding: 0px; border: 0px; font-family: inherit; font-style: inherit; font-variant-caps: inherit; font-stretch: inherit; line-height: 28px; vertical-align: baseline; letter-spacing: 0.45px; box-sizing: border-box;" class="">The citizens of Ecuador have signalled to policy-makers in the country and the region that ISDS is not a necessity and that if the country chooses to conclude bilateral investment treaties or investment chapters within free trade agreements, they will have to provide adequate protection for the environment, local communities, and climate action.</div></section></div><div class=""><br class=""></div><div class=""><div class=""><br class=""><br class="">
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