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SOVEREIGNTY ON TRIAL: ECUADOR, THE UAE, AND THE CURSE OF CORPORATE
COURTS  
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Mario Osorio, Pedro Labayen Herrera
January 23, 2026
Center for Economic and Policy Research
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_ Ecuador remains trapped in a geopolitical paradox, needing
investment in education, science, and technology to escape the
“middle-income trap.” Recent leaders have chosen maximizing short
term rents through the extraction of oil and minerals. _

Daniel Noboa Azín,

 

Ecuador is a nation that has weathered years of economic storms and
political upheaval. Its struggles are perhaps best illustrated by its
rapid descent
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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
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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
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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
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in legal fees and awards, they also produce “regulatory chill
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deterring governments from implementing necessary reforms, including
climate measures.

Few have experienced this scam as acutely as the Ecuadorian people.
After facing billions [[link removed]] 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
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in 2021 with Ecuador’s reentry into ICSID. However, after civil
society’s mobilization, the Constitutional Court thwarted
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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.”
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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
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that it has signed over 100 BITs and until recently, Dubai, its global
offshore financial hub, was “gray-listed
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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
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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
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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
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that is pending signature and constitutional review. Apart from its
inclusion of ISDS, this agreement is concerning
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due to conflicts of interest
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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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* Ecuador
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* UAE
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* free trade agreements
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* investor-state dispute settlement system
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* Sovereignty
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* Human Rights
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* neocolonialism
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