Republic of Ecuador v. United States of America (
PCA · Investment (ICSID and treaty) · Netherlands · 29 Sep 2012
Why it matters
This is a rare State-to-State arbitration under a BIT, where Ecuador sought a binding interpretation of Article II(7) to influence pending investor-State cases. The Tribunal's ruling clarifies that a State's silence does not automatically create a dispute, and that Article VII does not allow a State to unilaterally obtain an interpretation without a concrete disagreement. It underscores the limits of State-to-State arbitration in investment treaties and the importance of actual controversy.
Summary
Ecuador initiated arbitration against the United States under Article VII of the US-Ecuador BIT, seeking a binding interpretation of Article II(7) (fair and equitable treatment). Ecuador argued that the US's failure to respond to its diplomatic note requesting a joint interpretation constituted a dispute. The US objected to jurisdiction, arguing no dispute existed because it had not taken a position. The Tribunal (majority) agreed with the US, finding that Ecuador failed to establish a 'dispute' under Article VII. The Tribunal held that a dispute requires 'positive opposition', a clear disagreement, and that silence, especially when explained by a principled stance (here, non-interference with investor-State tribunals), does not suffice. The Tribunal also noted that Ecuador's claim effectively sought an advisory opinion, which Article VII does not provide. The case was dismissed, with each party bearing its own costs. The dissenting arbitrator argued that a dispute existed based on the US's conduct.
The detail
Parties: Republic of Ecuador v. United States of America (
Case number: PCA Case No. 2012-5
Outcome: The Tribunal dismissed the case for lack of jurisdiction, finding no dispute within Article VII of the US-Ecuador BIT. Each party bears its own costs and divides arbitration costs equally.
Applicable law: Treaty between the United States of America and the Republic of Ecuador concerning the Encouragement and Reciprocal Protection of Investment (1993), UNCITRAL Arbitration Rules 1976, Vienna Convention on the Law of Treaties
Issues in play: Interpretation of Article VII (State-to-State dispute resolution) and Article II(7) (fair and equitable treatment) of the BIT; whether Ecuador's request for a joint interpretation created a 'dispute' under Article VII; the requirement of 'positive opposition' to infer a dispute from silence.
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