ADR Journal
Arbitration

Ecuador's Constitutional Court Requires Exclusion of International Arbitration in UAE Investment Treaty

Published 2026-04-08 Arbitration Constitutional Law Ecuador Foreign Investment Investment Treaty Uae

TL;DR

  • Ecuador's Constitutional Court validated a trade agreement with the UAE, but conditioned approval on excluding international arbitration.
  • Article 20 of the treaty must be revised to remove provisions for arbitration of investment disputes.
  • The Court's ruling is based on Ecuador's constitution, which limits the state's ability to submit to international commercial arbitration.
  • This decision could impact the country's attractiveness for foreign investment.

Overview

On April 7, 2026, Ecuador's Constitutional Court approved a trade and investment protection agreement with the United Arab Emirates (UAE), provided that the treaty's arbitration clause is excluded. The move is rooted in constitutional restrictions and reflects ongoing debate in Ecuador regarding mechanisms to attract and secure foreign investment.

What Happened

The Constitutional Court reviewed the recently signed agreement for the promotion and protection of reciprocal investments between Ecuador and the UAE. The treaty's Article 20 provided for international arbitration to resolve disputes not settled within six months by negotiation.

The Court ruled that Ecuador must exclude provisions for settling contractual or commercial disputes through international arbitration, citing Article 422 of the Ecuadorian Constitution. This article prohibits the state from ceding sovereign jurisdiction in such disputes.

The Ministry of Production stated that negotiations with the UAE are ongoing to adjust the treaty in compliance with the Court's decision.

Despite political and social challenges, countries like Colombia and Peru reportedly attract higher levels of foreign direct investment, in part due to their openness to international arbitration mechanisms.

Context

Ecuador has constitutionally limited the use of international arbitration in state contracts since 2008. This has been a point of discussion as the country seeks to attract more foreign investment and address unemployment and economic growth.

The editorial notes that countries which permit international arbitration for investment disputes, like Colombia and Peru, tend to draw higher levels of foreign investment compared to Ecuador.

Why It Matters

  • The exclusion of international arbitration may deter some foreign investors who consider neutral dispute resolution mechanisms essential for protecting their interests.
  • Adhering to constitutional limits could affect Ecuador's competitiveness relative to regional peers that permit arbitration.
  • Future investment treaty negotiations will likely be influenced by the need to reconcile constitutional requirements with the expectations of international investors.

Sources

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