Ecuador’s Constitutional Court and the UAE BIT: From Conditional Acceptance to a Structural Test of ISDS

Ecuador’s signing of the Ecuador‑UAE BIT has placed the Constitutional Court once again at the center of the country’s attempt to foster international investments. On March 30, the Constitutional Court approved the treaty and its ISDS mechanism, but imposed a significant condition: the exclusion of contractual and commercial disputes from the scope of the ISDS mechanism in the treaty. While this approach signals a partial evolution from the Court’s earlier and more restrictive stance in the Costa Rica case, it also reflects a missed opportunity to uphold the ISDS provision as originally drafted—an approach that would have more accurately reflected the modern understanding of international arbitration as a mechanism of international responsibility rather than a transfer of domestic jurisdiction.

A Three-Stage Constitutional Control and the Status of the Ecuador-UAE BIT

Under the Ecuadorian Constitution, international treaties undergo a three-stage constitutional review.

First, the Constitutional Court conducts a formal review to determine whether the treaty requires legislative approval under Article 419 of the Constitution. Second, the Court conducts a substantive constitutional review by assessing whether the treaty’s provisions are compatible with the Constitution. Third, if the Constitutional Court opines favorably on the first two steps, the treaty is then submitted to the National Assembly to approve or reject it by an absolute majority. Following legislative approval, the treaty is eligible for ratification.

The Ecuador-UAE BIT completed the formal review on 5 March 2026 (Dictamen 19-25-TI/26) and the substantive on 30 March 2026 (Dictamen 19-25-TI/26A). In the substantive review, however, the Constitutional Court imposed a significant condition: in order to be compatible with the Constitution, the ISDS mechanism in Article 20 of the treaty must be amended to expressly exclude contractual or commercial disputes. The treaty now returns to the Ecuadorian government to be amended in accordance with the Court’s specifications, after which it will be resubmitted for substantive constitutional review.

The Constitutional Fault Line: Article 422 and the Departure From the Costa Rica Precedent

Article 422 of the Constitution provides that no international treaties or instruments may be entered into whereby the Ecuadorian State cedes sovereign jurisdiction to international arbitration tribunals in contractual or commercial disputes between the State and private individuals or legal entities. This restriction was included in the Constitution in the aftermath of Ecuador’s withdrawal from several investment treaties, including the ICSID Convention, to which Ecuador returned in 2021.

Historically, Article 422 represented a significant constitutional constraint to Ecuador’s efforts to adopt an ISDS mechanism as a means to attract foreign investments. In 2023, in reviewing the Trade Association Agreement between Ecuador and Costa Rica, the Constitutional Court expressly held that ISDS provisions were incompatible with Article 422 of the Constitution because they cede Ecuador’s sovereign jurisdiction to international arbitration tribunals. Rather than invalidating the treaty in its entirety, the Court adopted a surgical approach: it declared the ISDS provisions unconstitutional and severed them from the treaty, allowing the remainder of the agreement to stand (Dictamen 2-23-TI/23).

This ruling was not unanimous. In a dissenting opinion, Justices Teresa Nuques Martínez, Karla Andrade Quevedo, Carmen Corral Ponce, and Daniela Salazar Marín held that not all forms of investor-State arbitration fall under the constitutional prohibition of Article 422. According to the dissent, treaty-based arbitration does not necessarily constitute a transfer of domestic jurisdiction, but rather operates within the sphere of international law and State responsibility.

Overall, as discussed in prior commentary on the Kluwer Arbitration Blog, the decision signaled a restrictive constitutional stance toward treaty-based ISDS, raising broader questions about Ecuador’s ability to re-engage with the international investment regime.

The Constitutional Court’s new Dictamen in the Ecuador-UAE BIT departs from this position by adopting a more nuanced approach. One the one hand, it effectively accepts treaty-based ISDS insofar as disputes do not arise from commercial or contractual relationships. On the other hand, however, it maintains a restrictive reading of Article 422 by concluding that, through ISDS mechanisms, Ecuador would be ceding “sovereign jurisdiction” to international arbitration tribunals in contractual or commercial disputes.

Issues With the Constitutional Court Interpretation of the Ecuador-UAE BIT

Presiding Justice Claudia Salgado faced several challenges in this case. Even though the Court ultimately upheld the treaty and the ISDS mechanism with conditions, the analysis should not have ended there. Article 422 should have been interpreted in light of the evolving landscape of international law by explicitly rejecting the notion that arbitration replaces national courts and entails a transfer of sovereign jurisdiction to an external body. The Court went so far as explicitly recognizing that arbitral tribunals do not supplant state jurisdiction with respect to the State’s international obligations, yet it concluded that this reasoning does not apply with regard to contractual and commercial disputes submitted to arbitration.

As stated in the dissenting opinion in the Ecuador-Costa Rica case (Dictamen 2-23-TI/23), the Organic Code on Production, Trade and Investment provides for mandatory arbitration in investment disputes—arguably including commercial or contractual ones—under specific rules or institutions, namely the UNCITRAL Arbitration Rules (administered by the Permanent Court of Arbitration in The Hague), the ICC International Court of Arbitration in Paris, and the Inter-American Commercial Arbitration Commission (CIAC). These are binding arbitration agreements which have not been deemed unconstitutional. Further, at the constitutional level, arbitration is expressly recognized as a valid mechanism for dispute resolution. The existence of an international arbitral forum does not necessarily entail a relinquishment of sovereignty; rather, it may constitute an exercise of sovereign will.

The decision also reflects an unresolved tension between constitutional sovereignty and international legal interdependence. The Constitution not only protects State sovereignty but also recognizes the importance of international integration and cooperation. The Court did not articulate a clear framework to reconcile these two dimensions, nor did it develop the idea that submission to international dispute resolution mechanisms is not a loss of control, but an exercise of sovereign decision-making power.

Separately, the Court did not fully clarify whether the revised ISDS mechanism in the Ecuador-UAE BIT will exclude only contractual disputes in the strict sense and/or also exclude contractual claims for breaches of autonomous international obligations. This uncertainty was highlighted by Judge Ali Lozada Prado in his dissenting opinion, where he stated that there is not always a clear distinction between contract and treaty claims as disputes may involve both contract and treaty obligations. This adds to the uncertainty of whether those claims can be brought to an international arbitral tribunal under the treaty.

All in all, while the Constitutional Court’s position has significantly evolved since the Costa Rica case, the Court missed an opportunity to reduce legal uncertainty. The Court could have defined clearer constitutional limits on international arbitration without resorting to anachronistic interpretations of ISDS and to the amendment of the treaty’s ISDS provisions as a means of constitutional accommodation.

Conclusion

The Ecuador-UAE BIT placed the Constitutional Court at a critical juncture. While the Court upheld the treaty and partially confirmed the ISDS mechanism, it stopped short of fully moving beyond a rigid understanding of ISDS, leaving unresolved tensions between constitutional sovereignty, the State’s international legal obligations, and the overlap between States’ treaty and contractual obligations.

An integral approach would have required recognizing that being sovereign also entails international responsibility, compliance with obligations, and a meaningful commitment to international dispute resolution mechanisms—including through contractual and commercial disputes. By approving the ISDS mechanism with restrictions, the Court creates an obstacle to Ecuador’s efforts to use the ISDS mechanism as a means to attract foreign investment.