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This piece was originally published on EJIL: Talk!
On 30 March 2026, Ecuador’s Constitutional Court issued Dictamen 19-25-TI/26A, conditionally approving the Agreement for the Promotion and Protection of Investments between Ecuador and the United Arab Emirates (the “UAE BIT”), including the investor-State dispute settlement (“ISDS”) mechanism established in Article 20. The ruling concludes a two-stage constitutional review: on 5 March 2026, the Court determined that the UAE BIT required full constitutional review under Article 419 of Ecuador’s 2008 Constitution; the 30 March ruling delivered that review. Legislative approval by the National Assembly remains a condition of ratification—expected to follow, given the ruling party’s majority—after the amended text is re-submitted to the Court for verification.
The central question put to the Court was narrow: does Article 422 of Ecuador’s Constitution prohibit investment treaties containing international arbitration or ISDS clauses? Article 422 provides, in its relevant part, that Ecuador “shall not conclude treaties or international instruments in which the State cedes sovereign jurisdiction to international arbitral bodies in disputes of a contractual or commercial nature between the State and natural or legal persons.” By seven votes to two, the Court held that Article 422 does not prohibit treaty-based international arbitration of investment disputes, provided that Article 20 of the UAE BIT be amended to expressly exclude from such arbitration any disputes of a contractual or commercial nature between Ecuador and private persons, and that the amended text be verified by the Court before ratification.
In substance, the ruling opens the constitutional door to investment treaty-based ISDS for the first time since 2008, reversing the position of Ecuador’s Constituent Assembly, the Court’s own 2023 jurisprudence, and two recent referendums rejecting constitutional change to that effect. This post argues that the holding is analytically unsound on the terms of the ruling itself, and that its implications reach well beyond Ecuador.
Article 422 was written by Ecuador’s 2007–2008 Constituent Assembly in response to the country’s experience as a serial ISDS respondent. By 2008, Ecuador faced at least 13 such claims. In Occidental v. Ecuador (LCIA, 2004), a contractual VAT dispute was transmuted into a treaty claim; Ecuador’s defence that the matter belonged before domestic courts was rejected by the tribunal, and the country paid USD 71.5 million in damages. EnCana v. Ecuador (LCIA, 2006) arose from the same VAT scheme and reached the opposite result—confirming that the boundary between a contractual and treaty dispute was set not by treaty text but by tribunal discretion. By the time the Constituent Assembly convened, Occidental v. Ecuador (II)—initiated in 2006 by the same claimant seeking billions after Ecuador terminated an oil concession—was already pending.
Article 422 was a direct constitutional response to this experience. The drafters’ aim was to prohibit treaties that “transfer jurisdiction in disputes arising from contractual or commercial relationships with transnational corporations to supranational arbitral bodies” (see para 167 of Dictamen 2-23-TI/23). Ecuador subsequently terminated its BIT network, and in 2023 the Court reaffirmed the prohibition, striking down ISDS provisions in a proposed agreement with Costa Rica.
The majority holds that disputes under Article 20 of the UAE BIT do not fall within Article 422’s prohibition on submitting ‘controversias contractuales o de índole comercial’ to international arbitration because, once characterised as investment‑treaty claims, they are no longer treated as contractual or commercial disputes covered by the clause. It invokes the ‘treaty/contract distinction’—the idea that a claim grounded in a treaty’s investment protections is legally separate from a contractual claim, even when both arise from the same facts—citing Christoph Schreuer’s commentary and the Vivendi v. Argentina annulment committee (2002), and treats this distinction as settled investment arbitration law that the Constituent Assembly must have had in mind.
This characterisation is historically inaccurate. At the time of the Constituent Assembly’s deliberations, the treaty/contract distinction was among the most contested questions in ISDS jurisprudence. Vivendi v. Argentina (ICSID Annulment, 2002) and the SGS v. Pakistan (ICSID, 2003) and SGS v. Philippines (ICSID, 2004) decisions produced contradictory results on materially similar facts, precisely on whether a contractual dispute could also constitute a treaty violation. As Schreuer himself later acknowledged in a 2014 article, tribunals with broadly-worded clauses are “authorised” to consider claims beyond the treaty—a choice open to tribunals, not a fixed rule. Reading that unsettled debate back into a 2008 text drafted in response to ISDS practice, not doctrinal taxonomy, is anachronistic. The Assembly records draw no such distinction.
There is a further difficulty. The UAE BIT’s Article 1 defines “investment” to include “rights arising from a contract, including turnkey, construction and management contracts” and “concessions … conferred by law or under contracts.” For the subset of investments expressly defined as contract-derived rights or concessions, the treaty/contract distinction collapses under the treaty’s own definition: the same contractual arrangement is simultaneously a controversia contractual for Article 422 purposes and an “investment” for Article 20’s jurisdiction over “any dispute relating to an investment.” The majority constrains Article 422 to contractual disputes while approving jurisdiction over investment disputes—without engaging with the fact that the treaty itself re-characterises certain contractual rights as investments.
The majority’s treatment of the de índole comercial limb of Article 422 of the Constitution is equally deficient. That phrase—“of a commercial character”—points to the substance of a dispute, not its formal label. This reading tracks both the ordinary meaning of the Spanish (índole denotes nature or character) and the purpose of Article 422, which was drafted precisely to foreclose the kind of tribunal-led re-characterisation on display in Occidental and EnCana. Ecuador’s Commercial Code defines commercial acts as habitual activities of production, exchange of goods, or provision of services carried out with an economic objective. The argument is this: regardless of how the treaty labels the dispute, any activity protected under the UAE BIT will qualify as “commercial activity” under Ecuadorian law—because “investment” under the BIT presupposes an economic contribution, a commercial presence, or habitual economic activity of the kind the Commercial Code describes. It follows that every dispute arising from an Article 20 investment is, in its substance, a dispute “of a commercial character” for Article 422 purposes, whatever its formal pleading.
The majority’s own reasoning confirms this. Addressing the UAE BIT’s denial-of-benefits clause, the majority notes that the treaty may deny protection to enterprises lacking “substantive commercial activities” in a Party’s territory (at para 131). That by itself does not determine the legal character of the cause of action—pleaded as a treaty breach—but Article 422 speaks to the nature of the controversy, not its formal pleading. A dispute whose entire factual and economic predicate is the operation of a commercial enterprise, whose damages measure harm to that enterprise, and whose admissibility turns on the claimant’s commercial activity, is substantively commercial—precisely the controversias de índole comercial that Article 422 was designed to keep out. The majority does not address this contradiction.
The majority’s interpretation also founders on the text of Article 422 of the Constitution itself. The provision opens by prohibiting Ecuador from concluding “treaties or international instruments” that cede sovereign jurisdiction in disputes of a contractual or commercial nature. Article 422 is, by its own terms, a prohibition on what treaties may do. On the majority’s reading—that any dispute arising from a treaty is “treaty-based” and therefore outside the prohibition of Article 422—the provision empties itself: every instrument it regulates (a treaty) would, on that logic, be excluded from its reach. The drafters cannot have intended a prohibition that prohibits nothing.
One might defend the majority’s reading more narrowly—limiting Article 422 to treaties that directly submit contractual disputes to arbitration. But modern BITs, including this one, do not submit “contractual disputes” to arbitration as such; they submit “investment disputes,” into which contractual rights are definitionally absorbed. On that narrower reading, Article 422 would prohibit a treaty form that does not exist in practice. Finally, “international instruments,” as used alongside “treaties,” refers to agreements between States governed by international law, not contractual arrangements with private persons—a reading confirmed by Article 422’s placement under the constitutional heading “International Relations.”
The 2023 Court resolved the equivalent question in the opposite direction. In Dictamen 2-23-TI/23—authored by Judge Herrería Bonnet, now Legal Secretary to President Noboa—the Court reviewed the Constituent Assembly record in detail, rejected the treaty/contract distinction as inapplicable, and declared the ISDS provisions of the Costa Rica agreement unconstitutional. The 2026 majority’s departure is effected in a single sentence: its analysis “expressly departs from” the prior ruling because the 2023 Court “did not consider the distinction, recognised in international investment law, between contractual claims and treaty-based claims.” But the 2023 Court did consider that distinction and rejected it.
The majority’s own conditional approval reinforces the point. Having held that treaty-based investment disputes fall outside Article 422’s prohibition, the Court nonetheless required—as a condition of constitutionality—that Article 20 of the UAE BIT be amended to expressly exclude from international arbitration any disputes of a contractual or commercial nature between Ecuador and private persons. One might defend the carve-out as a supplementary textual safeguard, ensuring the treaty mirrors a distinction the Constitution already draws. But the majority’s own reasoning forecloses that defense: it treats the treaty/contract distinction as inherent and automatic, not as a distinction requiring textual reinforcement. If the distinction is self-operative, the carve-out is redundant; if it is not, the majority’s reasoning collapses. Either way, the carve-out concedes what the analysis denies: the boundary between treaty claims and contractual or commercial claims is not self-executing. As Justice Lozada Prado notes in dissent, it will ultimately fall to the arbitral tribunal to determine whether a given dispute falls inside or outside the carve-out—giving rise to exactly the Kompetenz-Kompetenz problem Article 422 was designed to foreclose.
The majority’s second ground holds that investment arbitration does not “cede sovereign jurisdiction” because the tribunal’s mandate is limited to determining Ecuador’s international responsibility—a function performed on the plane of international law rather than domestic law. This drains Article 422’s operative term of practical content. The relevant constitutional question is a functional one: is a domestic court displaced as the primary adjudicator of disputes to which the State is a party? On the terms of Article 20 itself, the answer is clearly yes. Under Article 20, a foreign investor may initiate binding arbitration without exhausting domestic remedies, obtain an award enforceable against Ecuador’s sovereign assets, and permanently foreclose Ecuador’s courts from the same dispute—a point the majority itself acknowledges, noting that “the choice of forum is final.”
The 2023 ruling was explicit: under ISDS, “the State would not have the power to judge or enforce judgments,” while the investor could “without exhausting domestic remedies” go directly “to an international arbitration institution.” Accordingly, this would “imply that the State submits to being judged by these institutions, … thus transferring their jurisdiction” (para 176). The 2026 majority does not engage with that analysis; it relabels the same institutional displacement to deny that it occurs.
The inconsistency reaches beyond Ecuador’s domestic constitutional order. In the ISDS case, Merck v. Ecuador (PCA Case No. 2012-10), Ecuador’s own counsel argued before an arbitral tribunal that “the right of a foreign investor to invoke international arbitration directly against a sovereign State is an extraordinary concession of sovereignty and an exception to the general unavailability of compulsory dispute resolution procedures at the international level” (para 83). That characterisation reflects a position many States and scholars share: ISDS as a departure from the default rules of sovereign immunity and jurisdiction. The 2026 majority does not explain why Ecuador’s prior characterisation of ISDS—advanced before an international forum—should be disregarded when interpreting a constitutional provision whose drafters shared the same understanding.
The ruling is also in tension with direct democratic expressions of constitutional preference. In April 2024, following a petition by President Noboa, voters were asked whether Ecuador should amend Article 422 to permit international arbitration as a means of resolving investment, contractual, and commercial disputes. 65% voted no. In November 2025, 62% rejected a constituent assembly process understood as a further vehicle for the same objective. If Article 422 already permitted treaty-based international arbitration to resolve foreign investment disputes, no referendum would have been needed. The Executive’s pursuit of a constitutional amendment (and presumably, the Court’s acceptance of the proposition) is the most direct available evidence that Article 422 was understood, even by its most motivated opponents, as an operative constraint.
These democratic rejections did not occur in isolation. In August 2025, the UN Special Rapporteur on the Independence of Judges and Lawyers issued an urgent appeal expressing deep concern over “threats, intimidation and political pressure by high-level public officials” against the Court. On 31 March 2026—the day after the ruling—the Court itself warned publicly that it was operating under “sustained institutional pressures.” Enrique Herrería Bonnet—author of the 2023 ruling this majority reverses, now Legal Secretary to President Noboa—publicly criticised the Court’s initial handling of the UAE BIT review and acknowledged communicating with sitting justices while the case was pending. Subsequently, the Prosecutor’s Office opened an investigation into Justice Lozada Prado (one of the two dissenters)—and eight days after the ruling, Justice Raúl Llasag (the other dissenter) resigned from the Court. These facts do not, by themselves, establish improper influence. But they bear on whether this ruling can be read as an independent, principled act of constitutional interpretation—as opposed to an institutional output shaped by the pressure its authors themselves have publicly described.
Ecuador’s ruling does not arise in a vacuum in international law. As I have argued in an earlier post for EJIL:Talk!, ISDS is at a moment of accelerating contestation: the European Union and the majority of its Member States have withdrawn from the Energy Charter Treaty; Bolivia, India, Indonesia, and South Africa have denounced most of their investment treaties; and Canada and the United States removed ISDS from the renegotiated NAFTA. Meanwhile, ISDS reform negotiations continue at UNCITRAL Working Group III and under the OECD programme on Modernising Investment Treaties. More recently, Colombia has emerged as among the most vocal critics, with civil society and government voices pushing to exit the system—a trajectory sharpened by the Santa Marta Transitioning Away from Fossil Fuel Conference, which has placed State regulatory obligations and the chilling effect of ISDS exposure on those obligations at the centre of its agenda.
Against this backdrop, Ecuador’s ruling represents a step in the opposite direction, through a process whose institutional integrity has been publicly questioned. Its holdings are framed as general interpretations of Article 422—not UAE BIT-specific rulings—and will accordingly govern constitutional review of any future ISDS-containing treaty submitted to the Court. The prospective reach is considerable: the pending Canada–Ecuador FTA, which includes an ISDS mechanism, now has a clear constitutional pathway.
The ruling illustrates a pattern visible beyond Ecuador: where democratic majorities and constitutional courts once closed the door to ISDS, executive pressure and judicial reconfiguration can and are reopening it. In Ecuador’s case, the result reverses more than a decade of jurisprudence, two referendums, and the country’s own prior legal positions—without the quality of reasoning those prior commitments demanded. The question is not only whether the majority was right on the law; it is what it means for the reform agenda when a constitutional prohibition, built by democratic mandate and confirmed by popular vote, can be reversed by a reconfigured court under executive pressure—and what mechanisms of international and comparative scrutiny remain available when it does.
