Scope of a Bilateral Investment Treaty

Ecuador: the facts

On 27 August 1993 the US and Ecuador entered into a Bilateral Investment Treaty (BIT). The purpose, as with other BITs, was to encourage investment between the contracting states by conferring, without discrimination, rights upon private persons who are nationals of one of the parties wishing to invest in the other. The BIT provided that any dispute between either of the contracting states and an investor from the other contracting state was to be referred to arbitration. Article X of the BIT excluded from its ambit ‘matters of taxation’, although various matters including those with respect to ‘the observance and enforcement of terms of an investment agreement’ were outside the exclusion in art X.