VZCZCXYZ0004
RR RUEHWEB

DE RUEHQT #0579 1941418
ZNR UUUUU ZZH
R 131418Z JUL 09
FM AMEMBASSY QUITO
TO RUEHC/SECSTATE WASHDC 0617
INFO RUEHBO/AMEMBASSY BOGOTA 8261
RUEHCV/AMEMBASSY CARACAS 3634
RUEHLP/AMEMBASSY LA PAZ JUL LIMA 3310
RUEHGL/AMCONSUL GUAYAQUIL 4477
RUEATRS/DEPT OF TREASURY WASHDC

UNCLAS QUITO 000579 
 
SENSITIVE 
SIPDIS 
 
REFTEL: QUITO 464 
 
E.O. 12958: N/A 
TAGS: ECON EFIN EC
SUBJECT:  ECUADOR WITHDRAWS FROM WORLD BANK'S ICSID 
 
¶1. (U) Following President Correa's earlier statements that Ecuador 
would withdraw from the World Bank's International Center for the 
Settlement of Investment Disputes (ICSID)(reftel), on July 2 Correa 
issued a decree declaring that the country was terminating its 
agreement with ICSID.  The decree denounces the ICSID convention 
based on Article 422 of Ecuador's new constitution, which prohibits 
the signing of international agreements in which Ecuador would have 
to cede jurisdiction to international arbitration courts in 
contractual or commercial matters.  It is unclear whether the GOE 
has submitted its notice to ICSID. 
 
¶2. (U) According to Article 71 of ICSID's convention, "any 
contracting state may denounce this convention by written notice to 
the depositary of this convention.  The denunciation shall take 
effect six months after receipt of such notice."  In other words, 
investors would still be able to bring arbitration cases under ICSID 
for six months following Ecuador's withdrawal.  Ecuador is currently 
facing more than $10 billion worth of arbitration demands before 
ICSID, many of them from foreign energy companies.  Correa has said 
that the withdrawal from ICSID would not affect ongoing cases under 
ICSID. 
 
¶3.  (SBU) ICSID is an arbitration option in many of Ecuador's 
Bilateral Investment Treaties (BITs), but most provide for other 
arbitral forums as well (as does the U.S.-Ecuador BIT).  Local 
analysts are concerned that Ecuador's withdrawal from ICSID will 
discourage foreign investment in Ecuador.  However, foreign 
companies have not expressed significant concern about the move, 
possibly because they already have arbitrations in process or are 
satisfied with the other arbitration options available under their 
BITs. 
 
HODGES