Ecuador Welcomes Arbitration (Back)

• Published date: 05 January 2022
• Subject Matter: Litigation, Mediation & Arbitration, Arbitration & Dispute Resolution
• Law Firm: Proskauer Rose LLP
• Author: Ms Sophie C. Matamoros

2021 marked a new chapter for arbitration in Ecuador: after re-joining the International Centre for Settlement of Investment Disputes Convention in June, Ecuadorian Executive Decree No. 165 in August introduced Regulations to add to and improve the existing legal framework for arbitration as it results from the Ecuadorian Arbitration and Mediation Law ("AML"). The AML, which was enacted in 1997 and amended in 2015, had been criticised for its lack of clarity.

Of the 15 new Regulations introduced to improve the existing arbitration law, the following are particularly noteworthy:

• Arbitration involving the State and State entities: Under the AML, State entities may agree to both domestic or international arbitration - before or after a dispute arises, and when it is permitted by law or an international treaty. It was not clear, however, in which instances the public entity had to seek the Attorney General's prior approval. The Regulations clarify that, pursuant to Article 190 of the Ecuadorian Constitution, for international or domestic arbitration arbitration agreements concluded after a dispute has arisen are subject to approval by the State Attorney General Approval is always required, however, if the state entity agrees to international arbitration with a foreign seat.
• Scope of the arbitration agreement: the Regulations innovate by explicitly binding certain non-signatory parties. The arbitration agreement is now binding on (i) those whose consent to arbitration derives, according to good faith principles, from their active and decisive participation in the negotiation, performance, execution or termination of the legal business that includes either the arbitration agreement or to which the agreement is related; (ii) those who intend to claim rights or benefits from the legal business, such as successors, assignees among others.
• Arbitrators and arbitration institutions' responsibility: in an unusual move, the Regulations explicitly address potential liability of arbitrators and arbitration institutions. They provide that arbitrators must comply with their obligations as stipulated in the arbitration agreement and will be liable for damages caused by gross negligence or wilful misconduct. The parties and the arbitrators may agree (directly or by reference to a regulation of an Arbitration and Mediation Center) that any claim related to arbitrators' liability will be resolved through arbitration. The Regulations also specify that arbitration...