Ecuador’s audit on investment treaties: CAITISA reports leaked

Three reports by CAITISA, Ecuador’s citizen audit commission on bilateral investment treaties (BITs), were leaked by online newspaper Diagonal on January 24, 2016. CAITISA, formed by experts in foreign investment and international law, was created in 2013 by President Rafael Correa to examine the legitimacy and legality of Ecuador’s BITs and the impact of their application. The commission concluded its work in December 2015.

In the report on Final Recommendations, CAITISA recommends that Ecuador denounce its BITs and negotiate new instruments, whether specific contracts with foreign investors or investment treaties. These new instruments should not include any of the old-style exception protection clauses except for clauses on direct expropriation. In addition, they should include state rights and investor obligations.

In its observations on international investment arbitration, CAITISA recommends excluding the clause on investor–state dispute settlement (ISDS) from existing and future BITs, and prioritizing adjudication by domestic courts. It also advances proposals for a transition period, which include: prohibiting compound interest in damages awards, providing for exhaustion of local remedies, enhancing transparency in proceedings, limiting arbitrator fees, issuing interpretive statements, creating an appellate mechanism, and establishing a permanent international or regional investment court, with permanent judges.

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