Ecuador: International Arbitration (4th edition)

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This country-specific Q&A provides an overview of the legal framework and key issues surrounding international arbitration law in Ecuador.

This Q&A is part of the global guide to International Arbitration.

For a full list of jurisdictional Q&As visit http://www.inhouselawyer.co.uk/index.php/practice-areas/international-arbitration-4th-edition/

  1. What legislation applies to arbitration in your country? Are there any mandatory laws?

    In Ecuador, arbitration is regulated by the Arbitration and Mediation Law (“LAM”), in force since 1997, which was partially modified in 2005, and afterwards modified by the General Organic Process Code (“COGEP”), and the Productive Development Law in 2015 and 2017, respectively, regarding the execution of foreign awards. The LAM regulates local and international arbitration. Moreover, we have to mention that arbitration has constitutional recognition since its inclusion in the Political Constitution of Ecuador from 1998, and later, in the Constitution of the Republic of Ecuador of 2008 (“Constitution”).

    The only law that regulates arbitration, and therefore is mandatory, is the LAM. However, the COGEP regulates the award execution process, which it can also be applied to the arbitration process in a supplementary manner to the LAM.

  2. Is your country a signatory to the New York Convention? Are there any reservations to the general obligations of the Convention?

    Yes, Ecuador is a party to the New York Convention (“NYC”) which is in force in Ecuador since 1962.

    The reservations Ecuador made to the NYC are the following: a) application only to the recognition and enforcement of awards issued by countries subscribed to the NYC; and, b) application to awards derived from legal relations, contractual or not, considered as commercial, according to the local legislation.

  3. What other arbitration-related treaties and conventions is your country a party to?

    Besides the NYC, Ecuador is a party to the Inter-American Convention of International Commercial Arbitration of Panama of 1975, in force since 1991.

  4. Is the law governing international arbitration in your country based on the UNCITRAL Model Law? Are there significant differences between the two?

    As mentioned, international arbitration is also regulated by the LAM, which regulated national and international arbitration.

    The LAM was originally inspired in the UNCITRAL Model Law; however, several changes were introduced in the version that came into force, which is the reason why the LAM considerably differs from the Model Law. In relation to international arbitration, the LAM has significant differences to the Model Law, since the LAM only has two articles regulating international arbitration, which provide that any person, and the State, can submit themselves to international arbitration if the conditions in Art. 41 are complied with, and the arbitration proceedings could be regulated by international treaties, international instruments or by the laws of the site of the arbitration, including Ecuador.

    Notwithstanding these favorable rules, the Constitution introduced a prohibition to the State to agree on international arbitration in case of “execution of international treaties or instruments in which the Ecuadorian State gives up sovereign jurisdiction in favor of international arbitration, in contractual or commercial controversies between the State and private persons or companies”, except in the case of those international instruments “that establish the solution of disputes between States and citizens in Latin America by regional arbitration instances”.

  5. Are there any impending plans to reform the arbitration laws in your country?

    There are none. Since many years ago there has been initiatives to reform the LAM, however none of those have been taken seriously by Ecuadorian legislators, leaving these only in the academic discussion forums.

  6. What arbitral institutions (if any) exist in your country? When were their rules last amended? Are any amendments being considered?

    Ecuador has several arbitration centers with great reputation and experience, such as the Arbitration and Mediation Center of the Chamber of Commerce of Quito, Arbitration and Mediation Center of the Ecuadorian-American Chamber of Commerce in Quito and the Arbitration and Mediation Center of the Chamber of Commerce of Guayaquil.

    Regulations of these centers have been constantly updated with the latest arbitration trends. For example, the inclusion of the mission record in the Regulations of the Arbitration and Mediation Center of the Chamber of Commerce of Guayaquil, among others. However, issues like non-signatory parties, third party funding or soft law application are not regulated yet. We know the arbitration centers are discussing and willing to introduce these reforms, for that reason it is possible that some changes are announced in the near future.

  7. What are the validity requirements for an arbitration agreement under the laws of your country?

    As a general comment, arbitration agreements are considered as contracts (Art. 1454 Civil Code), so that they must comply with the general requirements of contracts (consent, legal capacity, lawful purpose and cause) (Art. 1461 Civil Code)

    Specifically, according to Art. 1 of the LAM the first validity requirement of the arbitration agreement is that all controversies must be subject to transaction. The second requirement is that the arbitration agreement must be in writing (Art. 5) and it can be understood that an arbitration agreement exists not only if it is in a writing document signed by the parties, but when it is the result of an exchange of letters or any other writing communication means that record the will of the parties to submit themselves to arbitration (Art. 7), which could include emails or other writing document, even if they are not signed by the parties.

  8. Are arbitration clauses considered separable from the main contract?

    Yes, according with the third paragraph of Art. 5 the LAM, the annulment of the contract shall not affect the validity of the arbitration agreement.

  9. Is there anything particular to note in your jurisdiction with regard to multi-party or multi-contract arbitration?

    No, the LAM does not have any specific provision on this matter. However, we must mention that not because of this, multi-party or multi-contract arbitrations are impossible or forbidden, rather they would be treated according to the general rules of supplementary application.

  10. How is the law applicable to the substance determined? Is there a specific set of choice of law rules in your country?

    The applicable law to the controversy is determined by the parties in the arbitration agreement or the contract. In absence of this choice, and if it is a local contract, the Ecuadorian law will be applicable. If the controversy arises from an international business, the parties can agree that the arbitration have an international nature so the applicable law may also be agreed by them. If the contract does not provide this and there is no agreement between the parties, the arbitrators shall decide.

    Although there are no specific “choice of law” rules in Ecuador, Art. 7, numeral 18 of the Civil Code provides that all the rules that are in force at the time of the contract are understood incorporated to the contract, so that, if the contract was celebrated in Ecuador, it will be understood that all laws in force will be included to the contract so the governing law will be Ecuadorian. Additionally, the Private International Law Code also known as the “Sanchez Bustamante Code”, is in force in Ecuador since 1928.

  11. Are any types of dispute considered non-arbitrable? Has there been any evolution in this regard in recent years?

    Due to Art. 1 of the LAM that provides that the arbitration can take place in disputes arising in matters subject to transaction, it is understood that all all matters that are not subject to transaction cannot be submitted to arbitration. In Ecuador matters that are considered as not subject to transaction are: civil status, almost all criminal matters, tax and in general those that are considered as public order matters.

  12. In your country, are there any restrictions in the appointment of arbitrators?

    Art. 19 of the LAM provides as a restriction to be an arbitrator, individuals that have no capacity to appear by themselves in a trial. Also, it must be considered that, in accordance with Art. 3 of the LAM, in de jure arbitration, arbitrators must be lawyers.

  13. Are there any default requirements as to the selection of a tribunal?

    No. The LAM does not provide requirements for the selection of a tribunal. In accordance with Art. 16 of the LAM, the parties have absolute freedom to appoint arbitrators, who may be on the center’s arbitrators list or not.

  14. Can the local courts intervene in the selection of arbitrators? If so, how?

    No. Local courts cannot intervene in the selection of arbitrators. According with Art. 16 of the LAM, in the case where the parties have not agreed on the appointment of the arbitrators, the director of the arbitration center selected by the parties, or the director of the nearest arbitration center if the parties have not selected any, shall have to select the arbitrators.

  15. Can the appointment of an arbitrator be challenged? What are the grounds for such challenge? What is the procedure for such challenge?

    According with Art. 21 of the LAM, arbitrators can challenge themselves. The grounds for challenge an arbitrator are the same stated in the COGEP for the judges. Art. 22 of the COGEP provides the following grounds for challenge:

    1. To be a party in the process;

    2. To be spouse or have a common-law partner with one of the parties or their defenders;

    3. To be a relative up to the fourth degree of consanguinity or second of affinity of any of the parties, their legal representative, agent, attorney, defender, or of the judge who issued the challenged ruling;

    4. To have ruled in another instance in the same process the issue or another related with it;

    5. Unreasonably delay the dispatch of matters submitted to its jurisdiction. If it is the ruling of the matter, the provisions of the Organic Code of the Judicial Function will be followed.

    6. Having been a legal representative, agent, attorney, defender, agent of one of the parties in the process currently submitted to its knowledge or intervened as a mediator.

    7. To have expressed opinion or advice that is demonstrable, about the process that comes to it knowledge.

    8. To have, or had have, he, his spouse, his common-law partner or any of his relatives until the fourth degree of consanguinity or second of affinity a process with any of the parties; when the process has been initiated by one of the parties, it must have been before the instance in which the challenge is attempted.

    9. To have received rights, contributions, goods or services from one of the parties;

    10. To have any pending obligations with any of the parties or their defenders;

    11. To have with one of the parties or their defenders, intimate friendship or manifest enmity;

    12. To have a personal interest in the process because it is their business or their spouse or common-law partner, or their relatives within the fourth degree of consanguinity or second of affinity.

    The LAM does not provide for a specific procedure for the challenge, so it is understood that it is governed by the rules of the arbitration center chosen by the parties. What the LAM does provide are the persons who have to resolve the challenge. Art. 21 of the LAM provides that the challenge must be resolved:

    a) In the case of a tribunal, it must be resolved by the arbitrators not challenged. If they disagree, the challenge must be resolved by the director of the center;

    b) In the case the challenge lies on the tribunal, it must be resolved by the director of the center;

    c) In the case of a sole arbitrator, it must be resolved by the director of the center;

    d) In the case of an independent tribunal, it must be resolved by the arbitrators not challenged; and,

    e) In the case of sole arbitrator or the challenge lies on the tribunal, it must be resolved by the director of the nearest arbitration center to the domicile of the claimant.

    Arbitrators appointed by parties’ agreement can only be challenged for unknown reasons at the time of the appointment or supervening at the appointment.

    Finally, we must point out that the number of challenges in Ecuador has historically been low, and thus has been maintained today without abrupt increase in challenge cases.

  16. What happens in the case of a truncated tribunal? Is the tribunal able to continue with the proceedings?

    Art. 16 of the LAM provides that an alternate arbitrator must always be appointed to replace any of the arbitrators who have impediment to continue being part of the arbitral tribunal. Additionally, the LAM provides the possibility of challenging or replacing arbitrators who are prevented from continuing to be part of the arbitral tribunal, for which a new selection must be carried out in accordance with the procedure provided in Art. 16 of the LAM.

    Therefore, in case of a truncated tribunal, it will be prevented from continuing until the arbitrator who caused it is legally removed and replaced by the alternate arbitrator or until the parties designate a new arbitrator. Arbitration Centers regulations have rules concerning the appointment of alternate arbitrators and their designation as principal is not complicated.

  17. Are arbitrators immune from liability?

    No, they are not immune from liability. According with Art. 18 of the LAM, once an arbitrator has accepted its designation, it has the obligation to comply with its obligations, being liable to the parties in cases of non-performance of their obligations for the damages and losses that their action or omission has caused, unless it is a justified impediment.

  18. Is the principle of competence-competence recognised in your country?

    Yes. Art. 22 of the LAM provides that, in the substantiation hearing, once the arbitral secretary has been appointed, the arbitration agreement must be read it and the tribunal must decide on its own jurisdiction. Although the LAM does not expressly state it, it is understood that this decision must be made ex officio, even if the parties have not challenged the competence of the arbitral tribunal.

  19. What is the approach of local courts towards a party commencing litigation in apparent breach of an arbitration agreement?

    According to Art, 7 of the LAM, when the parties have agreed to arbitration, the judges must be inhibited from knowing the lawsuit, except for the exceptions provided in the LAM. This article also provides that the principle in dubio pro arbitri, whereby, in cases of doubt, judges must be in favor of the dispute being resolved in arbitration.

    Art. 8 of the LAM provides that, (i) parties may give up in writing by mutual agreement to the arbitration agreement; (ii) if the claim is filed before the judges, and the defendant responds to the claim without alleging the existence of an arbitration agreement, it will be understood that the parties have given up to the arbitration agreement and the judges will now be competent to hear the dispute. These are the only exceptions referred to in Art. 7.

  20. How are arbitral proceedings commenced in your country? Are there any key provisions under the arbitration laws relating to limitation periods or time bars of which the parties should be aware?

    According to Art. 10 of the LAM, the arbitration begins with the presentation of the statement of claim before the arbitration center.

    There is no statute of limitations in the Ecuadorian legislation for commence an arbitration besides of the general statute of limitations provided in the Civil Code or in the law applicable to the merits of the dispute.

  21. In what circumstances is it possible for a state or state entity to invoke state immunity in connection with the commencement of arbitration proceedings?

    Under Ecuadorian legislation there is no possibility for the state or a state entity to allege state immunity. If the state or a state entity agreed to arbitration, then it must appear in the arbitration.

    Regarding enforcement of national or foreign awards against the state or state entities, there are certain legal provisions that would allow the state or state entity to invoke immunity, to safeguard public assets or to allow the proper functioning of the state.

  22. What happens when a respondent fails to participate in the arbitration? Can the local courts compel participation?

    If the defendant does not answer the claim, it will be considered as a refusal of the grounds of the claim (Art. 11 LAM). The absence of the defendant will not prevent the arbitration from continuing (Art. 14 LAM).

    There is no legal norm in Ecuador that empowers local courts to force the parties to compel to arbitration. However, Art. 7 of the LAM provides the pro arbitri principle by which judges must inhibit to accept claims subject to an arbitration agreement. Such rule also provides the in dubio pro arbitri principle in favor of the arbitration agreement, so the judges must order to arbitrate the dispute.

  23. What interim measures are available? Will local courts issue interim measures pending the constitution of the tribunal?

    According with Art. 9 of the LAM, arbitrators may issue precautionary measures in accordance with COGEP or those they deem necessary for each case in order to secure the assets subject to the process or to guarantee the result of the arbitration.

    For the execution of the precautionary measures, arbitrators, provided that the parties have stipulated it in the arbitration agreement, shall request the help of judicial, police and administrative officials without having to resort to judges. If this is not provided in the arbitration agreement, any of the parties may request the judges to order the execution of the precautionary measures issued by the arbitral tribunal, without being construed as waiving the arbitration agreement.

    However, as the case may be that these measures are needed before the tribunal is constituted or even before the arbitration claim is filed, ordinary judges can issue the measures until the tribunal is constituted. The LAM says nothing against such possibility.

  24. Are there particular rules governing evidentiary matters in arbitration? Will the local courts in your jurisdiction play any role in the obtaining of evidence? Can local courts compel witnesses to participate in arbitration proceedings?

    The LAM does not provide anything regarding the practice of the evidence, so the parties and tribunals have commonly been free to decide what rules will apply for the practice of evidence, within which there is the possibility of applying "softlaw" rules as IBA rules on practice of evidence in arbitration. As well as in other matters, judges have no power to intervene in the practice of the evidence in arbitration.

  25. What ethical codes and other professional standards, if any, apply to counsel and arbitrators conducting proceedings in your country?

    The regulations of the arbitration centers will be applicable in terms of ethical standards for arbitrators, since there is no regulatory body in Ecuador regarding professional ethical standards for arbitrators. As for the lawyers, the rules of conduct provided in the Organic Code of the Judicial Power (Código Orgánico de la Función Judicial) will apply. Art. 330 establishes the following:

    Duties of the lawyer in defending a case:

    1. Act in service of justice and for this purpose collaborate with judges and courts;

    2. Represent with loyalty, probity, truthfulness, honesty and good faith;

    3. Defend within the compounds of the law, regulations, and norms of the Conduct Code of Professional Practice that will be dictated by the Judicial Council;

    4. Instruct and encourage clients to comply with the instructions of the courts and judges, as well as keep respect to them and to the persons involved in the process

    5. Fulfill obligations assumed with their representation.

    6. Refrain from promoting the public dissemination of reserved aspects of the process in which it intervenes, not yet resolved;

    7. Submit all writings in a process with all the elements required;

    8. Report persons engaged in illegal practice of law;

    9. Proceed according to the laws and with due respect to judicial authorities; and,

    10. Any other determined by law.”

  26. Can pre- and post-award interest be included on the principal claim and costs incurred?

    In the cases in which the claimant has requested as part of his petition interests regarding his claims, as well as the costs of the arbitration, there is no doubt that said interests and costs can be ordered by the arbitral tribunal in its award. However, in the cases where the claimant has not expressly requested them, there has been an open debate as to whether or not the tribunal should order them in the award, since there have been cases in which their order has been considered as extra petita, by the judiciary and ultimately causing the annulment of the award.

  27. What legal requirements are there in your country for the recognition and enforcement of an award? Is there a requirement that the award be reasoned, i.e. substantiated and motivated?

    Regarding local awards, Art. 32 of the LAM provides that they have the effect of a final enforceable sentence and with res judicata effect, which will be executed in the same way as the sentences of last resort, following the enforcement proceeding, without the execution judge allowed to accept any exception, except for those that may arise after the issuance of the award. Additionally, according to the LAM, Art. 363 of the COGEP, arbitration awards constitute executive titles, so their execution is direct without the need for a prior recognition process. Therefore, in Ecuador an arbitral award has the same enforcement power as a judicial sentence, it does not need any further recognition prior to its execution.

  28. What is the estimated timeframe for the recognition and enforcement of an award? May a party bring a motion for the recognition and enforcement of an award on an ex parte basis?

    As set forth in the following question, arbitration awards do not need any recognition prior to be enforced. Therefore, estimated duration of judicial enforcement is the same as if it was a domestic judicial sentence, which regularly speaking take from 2 to 6 months, depending on the complexities of each case among other factors

    Art. 32 provides that any of the parties may request to judges to execute the award, so it is considered that only the parties of the arbitration may request the execution of the award.

  29. Does the arbitration law of your country provide a different standard of review for recognition and enforcement of a foreign award compared with a domestic award?

    No. Regarding foreign awards, Art. 42 of the LAM provides that the awards issued in international arbitrations will have the same effects and will be executed in the same way as the awards issued in domestic arbitration, so that they do not need to go through a process of recognition prior to its execution. Although the use of the term “international arbitration” has raised certain concerns about which awards are considered “international”, in practice it has been unquestionably accepted that this term includes both, those made in international arbitrations, as well as those awards considered “foreign awards” although not issued within an international arbitration process, such as awards issued in foreign domestic arbitration processes (which in Ecuador would be considered “foreign awards”). Therefore, foreign or international awards can be executed just like national arbitration awards. In addition, it should be pointed out that Ecuador is a party to the NYC, so if someone wishes to request recognition of a foreign award, prior to its execution, the NYC will apply.

  30. Does the law impose limits on the available remedies? Are some remedies not enforceable by the local courts?

    No, Ecuadorian law does not provide for limitation on remedies that could be granted through an arbitration award. It could be said that the remedies considered as “injunctive relief remedies” may encounter some difficulty in being executed since Ecuadorian law does not expressly provide for all of which is considered as such in other jurisdictions.

  31. Can arbitration awards be appealed or challenged in local courts? What are the grounds and procedure?

    According to Art. 30 of the LAM, arbitration awards are final and are not subject to any appeal. Only clarification and extension (if the award lacks to refer to a particular petition of the claim) of the arbitration award may be requested. However, arbitral awards are subject to judicial control through a separate independent judicial action against it: the annulment action. According to Art. 31 of the LAM, the only grounds for annulment of an arbitration award are the following:

    a) It has not been legally summons with the statement of claim and the arbitration has proceed and ended in default. It will be necessary that the lack of summons has prevented the defendant from making its defense or enforcing its rights and, additionally, that the defendant claims for such omission at the time of intervening in the dispute;

    b) One of the parties has not been notified with the tribunal’s orders and this fact prevents or limits the right of defense of such party;

    c) When it has not been convened, the summons has not been notified, or after the summons evidence have not been practiced, despite the existence of facts that must be justified;

    d) The award refers to issues not submitted to arbitration or granted beyond what is claimed; or,

    e) When the procedures established by the LAM or agreed by the parties to designate arbitrators have been violated.

    The annulment action should be brought before the arbitral tribunal but will be try and resolved by the President of the Provincial Court of Justice (second level judge), within a period of ten days from the date the award was executed. Once the annulment action is filed, the arbitral tribunal, within three days, will send the process to the President of the Provincial Court of Justice, who will resolve the annulment action within thirty days from the date it knowledges the case. The annulment action filed outside the indicated term will be deemed not filed and will not be accepted. It should be mentioned that, in practice, the deadlines provided in this article of the LAM are not met and the annulment action process could take between 5 and 8 months.

    Whoever files the annulment action, may request the arbitral tribunal to suspend the execution of the award, rendering sufficient warranty about the estimated damages that the delay in the execution of the award may cause to the other party. The arbitral tribunal, within three days, must set the amount of the bond. The bond must be presented within the next three days. Additionally, since the enter in force of the Constitution in 2008, it would be possible to file an extraordinary protection action for the violation of constitutional rights that could occur through the award, which is brought before the Court Constitutional of Ecuador.

  32. Can the parties waive any rights of appeal or challenge to an award by agreement before the dispute arises (such as in the arbitration clause)?

    No. In Ecuador the right to double instance or appeal is a constitutional right, which is inalienable. In the case of arbitration since there is no right of appeal, the annulment action is considered as the double instance right, so any agreement waiving the right of requesting the annulment of the award will be considered null and void.

  33. To what extent might a state or state entity successfully raise a defence of state or sovereign immunity at the enforcement stage?

    In national arbitration there is no possibility of successfully claiming sovereign immunity, since, as established in Article 32 of the LAM, the execution judge cannot accept any exception against the award execution.

    In international arbitration, because international awards are executed in the same way as national awards, there would also be no exception against the execution of said international award. However Ecuadorian constitution has a peculiar provision according to which the state may not conclude treaties or international instruments whereby the Ecuadorian government cedes sovereign jurisdiction to international arbitration bodies (other than regional Latinamerican, or party-designated jurisdictional bodies) to settle contractual or commercial-nature disputes between the state and private individuals or entities.

  34. In what instances can third parties or non-signatories be bound by an award? To what extent might a third party challenge the recognition of an award?

    In Ecuador there are no legal or regulatory norms related to non-signatory parties. However, several tribunals, using the non-signatory parties doctrine, have allowed the participation as actors or defendants of non-signatory parties; likewise, tribunals have allowed the participation of third parties not linked to the arbitration agreement to participate in said processes.

    There is no legal norm in Ecuador that empowers local courts to force third parties to appear in arbitration. Notwithstanding the foregoing, arbitrators have the power to directly issue and execute precautionary measures, without the assistance of local courts, whereby they may enforce a third party to appear in arbitration, as witness to render statement.

    Art. 30 (referring to the right of clarification and extension of the award), Art. 31 (referring to the annulment action against the award) and Art. 32 (referring to the execution of the award) of the LAM refer exclusively to the parties, so it is widely accepted that only the parties could ask for the annulment of the award. As we said before, there is no award recognition process prior to its execution.

  35. Have courts in your jurisdiction considered third party funding in connection with arbitration proceedings recently?

    No. Within local or national arbitration, there has been no significant legal or regulatory progress on this issue. However, we must mention that the Civil Code includes the figure of the transfer of litigious rights under which it would be possible to assign rights subject to arbitration to third parties outside the contractual relationship subject to the dispute.

  36. Is emergency arbitrator relief available in your country? Is this frequently used?

    No. Within the local or national arbitration there is no emergency arbitrator provisions. In international arbitration subject to arbitration regulations that provide this figure, it has been applied with relative frequency.

  37. Are there arbitral laws or arbitration institutional rules in your country providing for simplified or expedited procedures for claims under a certain value? Are they often used?

    No. In Ecuador there are no arbitration laws or regulations that contemplate this possibility. Notwithstanding, through arbitration agreements, it has been proven that several parties, including the Ecuadorian State, have agreed to arbitration agreements that establish a certain set of rules for disputes up to a certain amount and other set arbitration rules for disputes that exceed that amount.

  38. Have measures been taken by arbitral institutions in your country to promote transparency in arbitration?

    Yes. Several national arbitral centers have promoted the application of rules or measures to promote transparency in arbitration. Additionally, we must mention that the LAM by default establishes non-confidentiality of arbitration, so confidentiality must be expressly agreed by the parties to the arbitration agreement.

  39. Is diversity in the choice of arbitrators and counsel (e.g. gender, age, origin) actively promoted in your country? If so, how?

    Not through concrete actions to reform laws or arbitral regulations, however, there has been a great activity to promote equality at the academic and doctrinal level.

  40. Have there been any recent court decisions in your country considering the setting aside of an award that has been enforced in another jurisdiction or vice versa?

    Not to the best of our knowledge.

  41. Is corruption an issue that is regularly raised in your jurisdiction? What standard do local courts apply for proving of corruption?

    No. Fortunately corruption does not reach arbitration in Ecuador.