Ecuador holds the line on ISDS No to Corporate Colonialism!

April 21st was an historic day. The Ecuadorian people resoundingly rejected an attempt to return Ecuador to international arbitration. Nearly 65% of citizens voted against “Question D”, to the disappointment of the Noboa government. Ecuador thus remains outside this investor-state dispute settlement mechanism (ISDS), seven years after having terminated all international treaties that included arbitration. 


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Protestors in Ecuador

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Ecuador votes NO against ISDS

 Ecuador was not just any country; this was not just any referendum. Ecuador has a long history of resistance to arbitration, so much so that the issue was expressly prohibited in the country’s 2008 Constitution. Question D of the referendum: “Do you agree that the Ecuadorian State recognizes international arbitration as a method to resolve disputes in terms of investment, contractual or commercial?” would have necessitated the modification of article 422 of that Constitution. Since 2017, when Ecuador ended all its investment protection treaties containing arbitration, the economic right has systematically attacked this article, arguing that it restricts the country's ability to receive foreign investment.

This rejection has been a giant victory for Ecuador’s social movements, which mounted a citizen campaign on a national scale, all  in the record time of a month and a half. It turned out to be strategic to place the arbitration question  at the centre of  the campaign against the entire referendum. This question was hidden within a series of questions related to the country’s  security agenda, especially the use of the armed forces in internal security, where the majority voted Yes. However, the No victory was overwhelming in two of the questions that linked to neoliberal policies:  Question D on arbitration and  Question E on the possibility of allowing labor contracts with hourly work.

The rejection was not a given, and the victory cannot be taken for granted. There was a real fear that the Yes vote would prevail. Such an outcome would have once again allowed foreign investors in Ecuador to bypass the country’s justice system and to sue the State in international arbitration courts whenever they felt that public policy had hindered their profits in any way.

Ecuador already knew of the privileges that foreign investors had in the country. Recently,  the Transnational Institute published a report that shows that Ecuador, where foreign investors filed 29 arbitration claims, is 5th in the list of countries with the largest number of investor claims in Latin America.. The most notable fact is that half of these claims are linked to activities in the extractives sector (hydrocarbons and mining). In a country that has been organizing against the extraction of minerals and oil, particularly in protected areas valued for their biodiversity, there is plenty of experience to talk about the privileges of investors, which  explains the quick response from social organizations, and undoubtedly also explains  why Question D was rejected so resoundingly. 

A victory for the local and global fight against arbitration

What happens next? Article 422 remains as it is, as it was drafted in 2008 by the Constituent Assembly. Ecuador remains out of arbitration. This means that the free trade agreement that the Lasso government signed with Costa Rica, which the Ecuadorian Constitutional Court had already declared unconstitutional for including ISDS, is paralyzed.. Additionally,  a treaty with Canada, which would be negotiated this year, is also frozen. Foreign investors will have to file lawsuits in Ecuadorian national courts, not international arbitration tribunals, just like  any Ecuadorian citizen, any small or large national company, and any community affected by extractivism. Without arbitration there is national justice, as was always the case  in the era of modern nation-states, until the neoliberal decade of the nineties.

We celebrate because the campaign was a success, and  it managed to bring friends and political adversaries together in the same objective. On the one hand, sectors of the indigenous and peasant movement, with CONAIE at the forefront; the Yasunidos movement, victorious in the popular consultation of August 2023 where the people voted to keep Yasuní free from oil exploitation. It included UDAPT, the Union of People Affected by Texaco-Chevron, which quickly organized a toxic-tour to the province of Sucumbíos to show young influencers, who were not even born in the nineties, the impacts of oil pollution in the jungle. Acción Ecológica, part of Ecuador Decide better without FTAs, a group with years of experience in explaining the legal system that gives privileges to foreign investors, was also part of the effort.

Dozens of others from all over the country joined these movements to explain what arbitration is on local and community radio stations, regional television channels, and on social networks. They spoke at every possible opportunity, showing the impacts of arbitration in Ecuador, explaining how the mechanism works, debating journalists who were not so convinced, all backed by solid numbers. New media entered the scene, especially those watched by young people: Instagram, Tik Tok, Twitter, Whatsapp. Every medium was valid, tweets forwarded and shared, every message amplified. The campaign was accelerated, but accurate: the central message was to vote No on question D, within a larger campaign for No on the 11 questions of the referendum, on which not everyone agreed.

The teams of the political party Revolución Ciudadana, led by former officials of Rafael Correa's government,worked alongside the movements. This group of economists and lawyers had promoted the Comprehensive Audit Commission of Investment Treaties and the Arbitration System (CAITISA) in 2013 and today occupy important places within the party.  Even Andrés Arauz himself, who was a candidate for the presidency, chipped in. This group knew perfectly well the negative impacts of arbitration, because in their years in government they turned this issue into their hobbyhorse. 

That fight bore fruit, since the results of CAITISA supported the government's decision to end all treaties that included the protection of foreign investments, leaving a political bomb in the hands of successor Lenin Moreno. This president, along with those who came after, tried  all possible means to overthrow article 422 of the Constitution, but they could not. Here Correa's government team, and the constituents who drafted and incorporated this article in the 2008 Constitution, deserve credit, since they managed to build a padlock, a legal wall that maintained the prohibition of arbitration even in the face of the desperate attempts of the economic right.

We must also mention the international support that buttressed the work of local groups. The rejection of arbitration is not a national or even regional issue: it is global. ISDS has generated much criticism from academia, professionals, government and civil society around the world. A global declaration,  with the support of more than 150 social organizations, was quickly articulated. The coalitions included the European Trade Justice Coalition, a coalition that brings together more than 50 organizations and networks throughout Europe, and that has vast experience of resistance against arbitration, including the recent victory when several European countries announced their withdrawal from the Energy Charter Treaty (a mega-treaty with arbitration that benefits investors especially in the fossil energy sector). The Platform ‘Latin America better without FTAs’, which coordinates an important part of the organizations that have been fighting against free trade and arbitration since the campaign against the FTAA (ALCA) more than two decades ago, also joined,

There is no attempt here to devalue the work of Ecuadorian organizations in the No victory, but it is important to highlight that every movement that fights against arbitration anywhere in the world does so with  international solidarity and support. The fight against arbitration and investment treaties is part of a global network of struggles that has been going on for twenty years and that  has shown that it can be  quickly activated when required. Because it is understood that the fight for a fairer globalization is global, the battles take place in international forums, but also on a local, national scale. And in Ecuador, this fight ended yesterday in a victory, having enormous resonance in the fights against arbitration around the world. 

We say again,  thank you, Ecuador, may you continue to show us that it is possible to say no to economic power and its legal acolytes. The struggle continues!

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