Relishing the challenges

Ecuadorian law firm Heka Law incorporated Cristina Viteri as a partner and the new head of its litigation and arbitration practice in June, and who tells us about the use of arbitration in the country and the challenges posed by the economic fallout from the COVID-19 pandemic.

Cristina Viteri (pictured) brings a wealth of experience to the role, having previously held the position of legal director at Quito’s metro operator, Empresa Pública Metropolitana Metro de Quito, a company that faces the Herculean task of building an underground passenger train service in the country’s capital city, with its challenging topographical features. That role implied a series of legal challenges too, given that the company is currently engaged in a dispute with Metro de Madrid, the contractor engaged as adviser on the construction of the network’s first line, over the costs incurred, which were over and above the budget for the original contract.

In December 2019, the Ecuadorian government imposed a $1.4 million fine against Metro de Madrid, but which the Spanish company is contesting, and the subsequent litigation is expected to be a lengthy and complex process.

Ecuador has a long history of arbitration between the government and multinational companies, most notably against oil major Chevron over the environmental damage caused in the country as a result of its oil drilling. In another high-profile case, French oil company Perenco launched a complaint with the International Center for the Settlement of Investment Disputes (ICSID) in 2008 following the Ecuadorian government’s modification of its hydrocarbon laws and the decision to terminate existing production-sharing agreements and issue new contracts, and which the oil company saw as detrimental to its interests. Ecuador launched a counterclaim, alleging environmental damage caused by Perenco, and the resulting verdict awarded damages to both sides.

Prior to holding that position at the state-owned company, Viteri, who holds a master’s degree in conflict resolution from the University of Geneva, worked as a legal adviser to the country’s public prosecutor’s office, having also worked as an associate at law firm Winston & Strawn. Fresh into her new role at Quitobased Heka Law, Viteri took time out to talk to The Latin American Lawyer about the increased use of arbitration in Ecuador, and the challenges and opportunities of both leading an arbitration and litigation team and helping the firm’s clients navigate their way out of the economic crisis caused by the COVID-19 pandemic, and which has impacted Ecuador especially hard.

Q: Do you see the use of arbitration continuing to increase in Latin America?

A: Without a doubt, arbitration in Latin America will continue to be a rising trend. One of the effects of the pandemic is the impossibility of the two parties, including states, to comply with their obligations iny erms of investments. As a result, during these months, numerous arbitration processes will begin in diverse jurisdictions. In addition, arbitration tribunals have shown that they can more easily adapt than courts to the use of remote means for the carrying on of proceedings and holding hearings, making them a much more attractive and beneficial mechanism for dispute resolution under the current circumstances.

Q: Why is the use of arbitration on the increase in Ecuador?

A: In the case of Ecuador, since the promulgation of the Productivity Increase Law of 2018, the state has the obligation to include arbitration, either national or international, in investment contracts with an investment value above $10 million. As a result, the number of contracts between the state and private companies that contain arbitration clauses has increased as new investments have been made in the country. Heka Law has seen the opportunity to attend to the needs of its clients and the requirements of the market in these matters, as the number of arbitration processes has evidently increased.

Q: Are you also seeing other firms grow their arbitration and litigation practices?

A: A number of firms have incorporated specialized lawyers to strengthen their arbitration practices.

Q: Ecuador made its arbitration laws more flexible in 2018 in order to attract more foreign investment, has that had the desired effect?

A: In 2018 the Ecuadorian government launched a series of measures to increase foreign direct investment, and one of the main mechanisms to achieve that was the enactment of the Productive Promotion Law. Unfortunately the desired amount of investment has yet to be achieved. The flexibility implemented in arbitration matters was a positive move, but there are many additional factors at play to attract foreign investment into the country at the required percentage. Investors expect more structured reforms, such as, for example, those applying to the labour regime.

Q: Is the country currently working to modify its arbitration laws?

A: For the moment no regulatory body of any relevance has been established. However, the Task Force created by the Arbitration Commission and ADR of ICC Ecuador is developing a project for a reform of the Arbitration and Mediation Law. I have the pleasure of working with various renowned jurists in the drawing up of that proposal as a secretary of the Task Force. 

Q: There have been some big arbitration cases in Ecuador already, such as the state versus Chevron, and versus French company Perenco. Have those cases set a precedent for more to come?

A: Ecuador has faced various battles in arbitration, real battles between David and Goliath, which are very important and have set important precedents in arbitration matters. Among those are the Chevron II and Chevron III, the Burlington, Perenco, Oxy and Copper Mesa cases, and the arbitration planned by the government of Ecuador against the United States over the interpretation of the TBI, among others. Those that you mention were arbitration cases that were very drawn out, and extremely costly for both parties. Both the Chevron and Perenco cases have had an environmental focus, as, in both cases, the state presented arguments relating to the damage caused in the east of Ecuador during the time that those companies were operating in the country. Without a doubt it was a challenge for the state to defend itself against the alleged violations committed against the protection standards contained in the TBI, and at the same time present the environmental case. In this sense, the precedent that has been set for the state’s defence teams is to be more proactive, and act not only in defence but also identify the noncompliance attributable to the other party.

Q: And with regards to the conflict between the Ecuadorian government and Metro de Madrid, concerning the construction of the Quito metro, is that arbitration case likely to proceed, and can you perceive a possible winner at this stage?

A: The state comptroller general established responsibilities for an amount of more than $1 million, against Metro Madrid, for indirect costs relating to the design of the Quito Metro network’s Line 1. It appears that Metro Madrid will fight the decision. In this case it is difficult to know if there will be litigation, and which side has the greatest possibility of winning.

Q: Amid the economic crisis caused by the COVID-19 pandemic, the Ecuadorian government announced the closure of several stateowned companies. Are those attractive assets for foreign investors to acquire?

A: The economic crisis and the losses reported during several years by companies such as Ecuadorian airline TAME have led the government to take the decision to begin insolvency processes. Several state-owned companies are affected by the measure, which aims to monetise their assets and put their delegate their activities to the private sector. We hope that in the following months there will be expressions of interest from the private sector.

Q: As the country seeks to reopen and reactivate its economy, what are the challenges and opportunities for Heka in this process?

A: Due to the effects of the pandemic and the need for countries to reactivate their economies, law firms face the challenge of offering legal solutions to the problems that are arising. Without a doubt the pandemic has had serious repercussions on the economy, but at the same time, in the legal sphere, it has created many opportunities. Heka faces the challenge of facilitating effective solutions to the problems faced by its clients. As a result we find ourselves working constantly in the search for opportunities and options so that they can improve their current situation.

Q: Has the pandemic changed the way the firm works, and has it caused an increase in the firm’s workload?

A: Due to the confinement, the firm’s day-to-day work is carried out remotely. The adaptation to a new way of working has been simple for those of us at the firm. We could even say we have had unexpected results, as our performance as lawyers has improved. The current focus is to attend to clients, in the most effective way and as quickly as possible. In general, the requirements of our clients demand quick solutions. During this time of the pandemic the work of the firm’s litigation practice has shown promising figures, especially in the search for out-of-court settlements. At the same time, we’ve seen a decrease in contractual, labour and telecommunications work.

Q: And finally, what are the personal challenges of joining and leading a new team?

A: The challenges are huge. Being the head of a litigation team is a complex job. From my experience working in the State Prosecutors Office, I was able to learn that defending a case, either in local or international courts, requires a good leader who is able to draw up a strategy and lead a team to achieve the desired results. I want to deserve the post that I occupy, and be at the level of my partners. For me it is very exciting to work with a team of young lawyers and be able to manage my own portfolio. I am passionate about law and in this new era I see the possibility of leaving a mark with my name on it in the area of litigation