ECUADOR Trends and Developments Contributed by: Roque Bernardo Bustamante and Claudia Bustamante, Flor Bustamante Pizarro & Hurtado
International arbitration The Mining Law allows the parties to agree on international arbitration in Latin America as a mechanism for resolving disputes arising from the mining exploitation contract. The option of international arbitration in Latin America is a favourable and practical choice, offering advan - tages such as familiarity with the legal environ - ment, cost savings and specialised expertise. Additionally, Latin America is home to several internationally recognised arbitration institutions, such as the International Chamber of Commerce (ICC). Correction factors The correction factor is a contractual mecha - nism that aims to restore the financial balance of a mining exploitation contract whenever specific unforeseen events disrupt the contract’s eco - nomic equilibrium for the mining concessionaire. Its primary purpose is to compensate for these imbalances and ensure the concessionaire’s financial sustainability under the contract while respecting the State’s share of benefits. The correction factor is triggered when defined events, create a financial burden for the con - cessionaire. These events generally include changes in tax rates, formulas, or the creation of new taxes. Such changes can impose unan - ticipated costs on the concessionaire, requiring a recalibration to preserve the contract’s original economic terms.
The measures to correct the economic imbal - ance can take various forms, including amend - ing the contract, revising or repealing specific regulations, or providing direct economic com - pensation. Regardless of the chosen method, any correction must ensure that the State’s mini - mum share of 50% of the sovereign adjustment remains intact, protecting its benefits from the exploitation of mineral resources. Conclusions The exploitation contract is a key legal instru - ment governing the activities of large-scale mining concessionaires during the exploitation phase. This agreement sets the terms, condi - tions, and timelines for various activities, includ - ing construction, assembly, mineral extraction, transportation and commercialisation. The process to execute this exploitation contract begins with the mining concessionaire submit - ting a formal request to negotiate the terms of the exploitation contract and a request to transi - tion to the exploitation phase. Upon approval by the relevant authority to pass to the exploitation phase, a six-month period is granted for the par - ties to sign the exploitation contract. The exploitation contract includes provisions that regulate the concessionaire’s and the State’s rights, benefits and obligations. The exploitation contract is designed to ensure clarity, predict - ability and a balance between the interests of the State and those of the mining concessionaire, while also adapting to potential economic or regulatory changes during the life of the project.
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