ECUADOR MAY (OR MAY NOT) SEEK TO EXCLUDE OIL AND

C O N F I D E N T I A L QUITO 002382 SIPDIS SIPDIS E.O. 12958: DECL: 10/25/2017 TAGS: EINV ECON EC SUBJECT: ECUADOR MAY (OR MAY NOT) SEEK TO EXCLUDE OIL AND MINING CASES FROM ICSID ARBITRATION Classified By: Classified by DCM Jefferson Brown. Reason: 1.4 b and d . ¶1. (C) Summary. President Correa, through his legal secretary, instructed the Foreign Ministry to inform ICSID, SIPDIS an arbitration center, that Ecuador would not accept ICSID jurisdiction for oil and mining cases. The Foreign Ministry informed Correa that the notification would not protect Ecuador from oil and mining arbitration cases because its bilateral investment treaties would prevail. The MFA has not yet conveyed Correa's request to ICSID, but will do so if Correa so instructs. End summary. ¶2. (U) On October 9 a local newspaper published a story that President Correa's legal secretary sent instructions to Foreign Minister Espinosa instructing the Foreign Ministry to inform the International Centre for Settlement of Investment Disputes (ICSID) that Ecuador would not accept ICSID jurisdiction for arbitration cases involving natural resources, notably oil and mining. The article was accompanied by a copy of the letter to Espinosa, dated October 3. Per the letter, Ecuador should claim an exemption under Article 25(4) of the ICSID Convention. ¶3. (C) On October 23, Mentor Villagomez, Under Secretary for Economic and Trade Affairs at the Foreign Ministry, informed EconCouns that the MFA has not yet conveyed Correa's request to ICSID. He said that the MFA's own analysis is that given Ecuador's bilateral investment treaties, notifying ICSID that it intends to exempt itself from arbitration cases for the oil and mining sector would not have the intended results (in other words, the MFA believes that Ecuador would still be subject to ICSID jurisdiction for these cases). ¶4. (C) Villagomez continued that the MFA's view is that there is no point of notifying ICSID per the legal secretary's instructions, since that would not accomplish SIPDIS President Correa's objectives and would only reduce Ecuador's international standing. The only way to remove Ecuador from potential ICSID cases would be to terminate Ecuador's bilateral investment treaties, which, according to Villagomez, Ecuador does not want to do. Furthermore, he stated that BIT termination would be a slow process, given that some of Ecuador's BITs could not be terminated for several years and have continued protection for a number of years after the BITs are terminated. ¶5. (C) Villagomez said that MFA has conveyed its views to President Correa, and that is where the matter stands for the time being. However, he said that if Correa instructs the Foreign Ministry to notify ICSID, it will do so. ¶6. (C) Comment. Given his strong nationalist tendencies, Correa clearly resents that oil investment disputes (which he sees an internal Ecuadorian matter) can be subject to international arbitration. For reasons that are not clear, he also seems to have particular animus with respect to ICSID among the various major international arbitration venues. It appears that in this instance, he or his legal advisor thought that they had found an out for Ecuador, and without consulting with the experts instructed his Foreign Ministry to act. It remains to be seen whether the Foreign Ministry, now that it has been brought into the matter, will be able to persuade Correa to drop this idea. JEWELL