Ecuador is a nation that has weathered years of economic storms and political upheaval. Its struggles are perhaps best illustrated by its rapid descent from an “island of peace” in the 2010s to having the region’s second-highest homicide rate in 2025, behind only Haiti. Yet, for a time, Ecuador represented a successful social democratic project, prioritizing citizens’ welfare over foreign creditors. Today, like much of Latin America, it remains trapped in a geopolitical paradox, needing investment in education, science, and technology to escape the “middle-income trap.” Instead, a succession of myopic leaders has chosen the path of least resistance: maximizing short-term rents through the extraction of oil and minerals.
In a deeply misguided effort to facilitate this extraction, such leaders bind their countries to the obscure investor-state dispute settlement (ISDS) system, either through neocolonial agreements known as bilateral investment treaties (BITs) or through clauses hidden in “free trade” agreements (FTAs). We are told these treaties promote “reciprocal protection.” In reality, they are profoundly asymmetrical, granting transnational corporations privileges that no domestic company or citizen enjoys. Under ISDS, foreign corporations can sue sovereign states, while states have no comparable right to do the same. The result is a clear pattern: both investment flows and the legal claims they generate move overwhelmingly toward the benefit of corporations at the expense of sovereignty.
These lawsuits do not happen in national courts, but in opaque international tribunals generally under the auspices of the International Centre for Settlement of Investment Disputes (ICSID), an arm of the World Bank. The president of the United States always appoints the World Bank president, who also chairs ICSID’s Administrative Council, the governing body that appoints ICSID’s head. In this rigged casino, arbitrators (often corporate lawyers who cycle through a “revolving door,” acting as judges in one case and counsel in the next) decide the fate of public budgets. Corporations regularly invoke the bespoke construct of “indirect expropriation,” a legal fiction that rebrands legitimate public interest regulation — be it environmental protection or health laws — as a violation of a company’s expected future cash flow. Such lawsuits are not only extremely costly in legal fees and awards, they also produce “regulatory chill,” deterring governments from implementing necessary reforms, including climate measures.
Few have experienced this scam as acutely as the Ecuadorian people. After facing billions in lawsuits from oil giants like Occidental and Chevron, Ecuadorians voted to adopt Article 422 in the 2008 Constitution, explicitly banning the handover of jurisdiction to international arbitration bodies. In 2009, Ecuador withdrew from ICSID, and by 2017, it had terminated its BITs. Contrary to predictions, trade continued to thrive, with Ecuador signing agreements with the EU, European Free Trade Association, Korea, and China that excluded ISDS.
Nevertheless, vested interests lay in wait. Successive administrations acting as lackeys for foreign capital have desperately tried to reinstate this neocolonial system. They attempted to bypass the Constitution through clever “interpretations” and obscure legal maneuvers, leading to a partial regression in 2021 with Ecuador’s reentry into ICSID. However, after civil society’s mobilization, the Constitutional Court thwarted subsequent efforts, confirming the system’s prohibition under the Constitution in its review of the ISDS chapter of Ecuador’s FTA with Costa Rica. Undeterred, in April 2024 the Noboa administration took a more direct approach, asking Ecuadorians to reinstate ISDS via a national referendum.
The answer was a resounding “No.” Over 65 percent of voters rejected the proposal. Citizens understood that ISDS is a tool to shield mining and oil companies from accountability. They voted to protect their water, their land, and their treasury.
Yet, in a shocking display of contempt for the popular will, the government is now attempting to bypass voters entirely. In December 2025, the administration signed a BIT with the United Arab Emirates (UAE).
This pivot to the UAE is deeply troubling. The UAE boasts that it has signed over 100 BITs and until recently, Dubai, its global offshore financial hub, was “gray-listed” by the Financial Action Task Force for deficiencies in combating money laundering. For Ecuador, a country facing a grave security crisis fueled by illicit finance, deepening ties with a jurisdiction known for financial opacity is reckless.
We are witnessing a government ignoring its own Constitution and the will of its people to serve the interests of transnational capital. The strategy is clear: fast-track the UAE treaty, claiming it requires only executive ratification, thus avoiding the scrutiny of the Ecuadorian judiciary and legislature.
The fate of Ecuador’s democratic will vis-a-vis ISDS now rests with its Constitutional Court. In the coming hours, the Court must decide whether to allow this treaty to be fast-tracked or to subject it to full constitutional review and the parliamentary ratification processes it demands.
The Court has been inundated with amici curiae — legal briefs from experts and civil society — warning against this assault on Ecuadorian democracy. If the Court, already stacked by the Noboa administration with ISDS-friendly justices who have irreconcilable conflicts of interest with the system, allows this treaty to stand without scrutiny, it will not only violate Article 422 but will effectively nullify the democratic vote of millions of Ecuadorians.
This move would open the floodgates for reintroducing ISDS through other agreements, including an FTA with Canada that is pending signature and constitutional review. Apart from its inclusion of ISDS, this agreement is concerning due to conflicts of interest involving President Noboa and his family, who hold significant stakes in Canadian mining companies that could potentially sue Ecuador. The Canadian government, which often touts its respect for democracy and the rule of law, is likely waiting on the outcome of the UAE process before gambling on a deal that is clearly unconstitutional under Ecuadorian law, and the survival of which depends on successfully exploiting procedural loopholes to bypass the checks and balances that would normally apply.
Ecuador led the world in 2008 by prioritizing human rights over corporate power. The world is watching to see if its institutions have the strength to hold the line. The Constitutional Court must ensure that the “No” vote is respected and that the neocolonial mechanism of ISDS remains where it belongs: in the dustbin of history.
Mario Osorio is a research fellow (international program) at CEPR and an expert in economic policy and international law, with a focus on international economic institutions—encompassing trade, investment, taxation, and finance. He is a senior fellow at Georgetown University and has held academic positions at New York University and Universidad de los Andes (Colombia). His experience also spans the government sector, where he advised Colombia’s tax and customs administration, and the private sector, where he directed legal affairs for a trade association in the oil, gas, and energy sectors. Trained as both an economist and a lawyer, Mario holds a doctorate and master’s in law from Georgetown University.
Pedro Labayen Herrera is a Research Assistant at CEPR. His research centers on the Latin American region (with a particular focus on Ecuador), foreign policy, and the impact of economic sanctions.
Pedro holds a Master’s in International Governance and Diplomacy, with a concentration in human rights, from the Paris School of International Affairs, Sciences Po, and a BA in International and Global Studies from the University of Central Florida.
Prior to working at CEPR, Pedro was an intern at the UN High Commissioner for Refugees in Washington, DC, where he provided protection assistance to refugees and asylum seekers across the United States. He is fluent in English and Spanish.
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