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Alejandro Ponce Martínez
Quevedo & Ponce, Quito
alejandro.ponce@quevedo-ponce.cm

The Procedural Code of Ecuador, enacted on the 22 May 2015, established the steps and the formal requirements for the recognition and homologation of foreign sentences, awards and mediation decisions, by the competent chamber of the provincial court where such international decisions were to be enforced. This homologation process was eliminated specifically for foreign awards by the Organic Law for productive development, attraction of investments, generation of employment, stability and fiscal equilibrium, issued on 21 August 2018, which re-established the original provision of the Arbitration Act (that had been abrogated by the 2015 Procedural Code). This change confirmed that awards issued in international arbitration proceedings should be enforced in Ecuador in the same way as domestic awards.

Under the Procedural Code, execution of all enforceable titles (títulos de ejecución) starts with an order of enforcement issued by a trial judge against which the only defences that can be raised are those that are ways of extinguishing the obligations, with the exception of prescription or a statute of limitations. In contrast to this, under the Arbitration Act, all defences generated after the issuance of awards may be brought.

The Procedural Code continues to uphold the principle that homologated foreign awards are one of the enforceable titles available for execution in Ecuador, a provision that was confirmed by a new law, amending the Procedural Code promulgated on 26 June 2019 and that added other enforceable titles. Based on this legal provision, and invoking the principle that Ecuadorian courts should confirm that such foreign awards have the effect of res judicata and do not violate the Ecuadorian public order, the Court of Appeals of Quito confirmed a decision of a trial judge that rejected the enforcement of a non-homologated award1.

The defendant in that case argued that the award issued under the ICC rules violated the public order of Ecuador because it had granted penalties amounting to $32 million that were not requested by the plaintiff, that had claimed only $45,000 in damages, which the award stated that had not been proven. It was also alleged by the defendant that the award directly and intentionally violated the jurisprudence of the Supreme Court of Ecuador, that had consistently stated that in bilateral contracts, only the judges have the power to declare that one of the parties has not fulfilled the contractual obligations and that, therefore, no contracting party to a bilateral contract (a contract containing obligations to both parties) is entitled to terminate the contract on the basis of a unilateral declaration of non-compliance of its obligations by the other party.

Neither the trial nor the appeal Court analysed the mentioned defences and others that relied on alleged violations of the public policy of Ecuador. Instead, they refused enforcement, on the basis of lack of homologation and lack of a certificate stating that under the laws of France, the seat of the arbitration, the award had the effect of res judicata.

This highlights an important practice point that when seeking to enforce an international award in Ecuador, before requesting the enforcement, an action in ordinary proceedings should be brought to have it recognised and homologated. In such an action, the Court should be asked to declare that the award does not violate the public order of Ecuador, as permitted by the New York Convention, if the defendant presents such defence. Therefore, an adequate avenue to ensure that the recognition of an award does not violate the Ecuadorian public order, has been identified indirectly under these rulings.

1 CW Travel Holdings NV v Seitur Cia Ltda, 30 September 2019

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