Ecuador ratifies 2008 ban on investor-state dispute settlement mechanism

3 July 2024

On 21 April, Ecuador’s citizens voted in a referendum to keep its ban on investor-state dispute settlement (ISDS) – the mechanism that resolves disputes between foreign corporations and states.

Ecuador’s ISDS ban came into force after a constitutional popular vote in 2008. It took 8 years for the country to completely abandon ISDS, first exiting the World Bank’s International Center for the Settlement of Investment Disputes (ICSID) – the main forum for investor-state dispute resolution (see Inside the Institutions, What is the World Bank’s ICSID?; Update 58).

The vote was a victory for a civil society campaign, which included a global declaration by over 150 organisations and a 12 April open letter supported by 100 groups globally, highlighting ISDS was “created by and for investors, giving them access to a private, parallel and privileged judicial channel, bypassing national justice.”

ISDS’s opaque and biased nature has long been criticised. A July 2023 report by the UN Special Rapporteur on human rights and the environment, David R. Boyd, noted that ISDS “has become a major obstacle to the urgent actions needed to address the planetary environmental and human rights crises.”

“Ecuador has long been a global example on how states can face ISDS,” said Luciana Ghiotto of Netherlands-based Transnational Institute, “Not only did it include the ban on ISDS in the 2008 Constitution. It also called for an audit commission of all its investment treaties and ISDS cases in 2014 showing the capacities this system has given to corporations to go treaty-shopping and forum-shopping according to their needs.”

Ecuador joins several countries either renegotiating or rejecting investment treaties that include ISDS mechanisms, including South Africa, Indonesia and India.