Empresa Eléctrica del Ecuador, Inc. v. Republic of Ecuador
ICSID · Investment (ICSID and treaty) · Ecuador · 2 Jun 2009
Why it matters
This case underscores the importance of proper authorization and legal capacity in investment arbitration. The Tribunal dismissed the claim because the purported trustee lacked standing, highlighting that procedural requirements for bringing a claim are strictly enforced. It also illustrates how complex trust structures can affect jurisdiction.
Summary
Empresa Eléctrica del Ecuador, Inc. (EMELEC), a US company, owned a concession to supply electricity in Guayaquil, Ecuador. In 2000, Ecuador expropriated EMELEC's assets, and EMELEC sought arbitration under the US-Ecuador BIT. However, a dispute arose over who had authority to represent EMELEC. The shares of EMELEC were held by NEPEC, a Bahamian company. In 2000, the Aspiazu family (owners of NEPEC) created the Progreso Depositors Trust (PDT), an irrevocable trust, to hold NEPEC shares for the benefit of depositors of Banco del Progreso. In 2003, a new trust (PRT II) was created, purporting to transfer NEPEC shares to Mr. Lluco as trustee. Mr. Lluco then initiated the arbitration. Ecuador objected to jurisdiction, arguing that Mr. Lluco lacked legal capacity because the PDT was valid and irrevocable, and PRT II was invalid. The Tribunal examined the trust documents and found that the PDT was validly created and irrevocable, and that PRT II did not effectively transfer ownership. Therefore, Mr. Lluco had no authority to represent EMELEC. The Tribunal upheld Ecuador's objection and dismissed the case for lack of jurisdiction. Each party bore its own costs.
The detail
Parties: Empresa Eléctrica del Ecuador, Inc. v. Republic of Ecuador
Case number: ICSID Case No. ARB/05/9
Outcome: The Tribunal upheld Ecuador's objection to jurisdiction, finding it lacked competence because the claimant's representative (Mr. Lluco) did not have legal capacity to act for EMELEC. The case was dismissed.
Applicable law: ICSID Convention; US-Ecuador BIT (1993); Ecuadorian law; Bahamian trust law
Issues in play: The dispute involved the validity of successive trusts (PRT I, PDT, PRT II) under Bahamian law and whether the trustee of PRT II had authority to bring the arbitration. The Tribunal had to determine if the claimant had properly authorized the proceedings.
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