52025PC0427

EUROPEAN COMMISSION

Brussels, 29.7.2025

COM(2025) 427 final

Recommendation for a

COUNCIL DECISION

authorising the opening of negotiations of a Sustainable Investment Facilitation Agreement between the European Union and the Republic of Ecuador

EXPLANATORY MEMORANDUM

1.CONTEXT OF THE PROPOSAL

•Reasons for and objectives of the proposal

The Competitiveness Compass of 29 January 2025 highlighted the need for the EU to “[seek] new ways of deepening partnerships and [create] benefits for our businesses”, including through Sustainable Investment Facilitation Agreements (hereinafter, “SIFAs”). 1 The EU’s first SIFA with Angola entered into force on 1 September 2024. 2 On 12 June 2025, the Council of the European Union adopted a Decision authorising the opening of SIFA negotiations with Côte d'Ivoire. 3

At the 8th meeting of the Mechanism for Bilateral Political Consultations between the EU and Ecuador on 13 June 2024, Ecuador expressed its interest in negotiating a SIFA with the EU. Then, on 16 December 2024, the Minister of Foreign Affairs of Ecuador, Gabriela Sommerfield, addressed letters to the European Commissioner for Trade and Economic Security, Maroš Šefčovič, and to the High Representative of the Union for Foreign Affairs and Security Policy and Vice-President of the European Commission, Kaja Kallas, reiterating her country’s interest in negotiating a SIFA with the EU.

In 2023, the stock of EU foreign direct investment in Ecuador amounted to EUR 8.2 billion, up from EUR 7.1 billion in 2022. The EU has concluded a Multiparty Trade Agreement with Andean countries to which Ecuador is Party. This Trade Agreement includes provisions on services and investment, including commitments on market access and national treatment for EU investors. In this context, the SIFA would be an opportunity to deepen the investment relationship between the EU and Ecuador, and support EU investors in taking further advantage of opportunities created by the Trade Agreement by improving the regulatory framework and procedures for investments. This Agreement would seek to do so through commitments on investment facilitation, such as increased transparency and predictability for investment-related laws and regulations, simplification of investment authorisation procedures, and improving public-private dialogue through investor focal points and stakeholder involvement. The ultimate objective would be to foster a more transparent, efficient and predictable investment climate, and therefore support Ecuador in attracting foreign direct investment whilst upholding standards concerning the environment, labour rights, and climate. In doing so, this Agreement would promote sustainable development, economic growth, and job creation. In light of the above, the Commission recommends opening negotiations for a SIFA with Ecuador.

•Consistency with existing policy provisions in the policy area

The objectives of this Agreement are consistent with the Treaty on European Union (TEU), which provides that the EU should “encourage the integration of all countries into the world economy, including through the progressive abolition of restrictions on international trade.” 4

This Agreement advances the objectives of the Competitiveness Compass of 29 January 2025, which mentioned the need for the EU to “[seek] new ways of deepening partnerships and [create] benefits for our businesses”, including through SIFAs. 5 It also follows-up on the Trade and Sustainable Development review Communication of 2022. 6

This Agreement would be in line with the Communication on “A New Agenda for Relations between the EU and Latin America and the Caribbean”, 7 which stated that “[t]he EU will continue to work with LAC partners to help create the conditions for sustainable investment, including through Global Gateway and the support of open, stable, and predictable legal frameworks, the removal of discriminatory barriers, and the implementation of investment facilitation.” This Agreement would therefore also complement the EU-LAC Global Gateway Investment Agenda, through which “the EU can leverage quality investments to help address LAC’s infrastructure needs, support the development of human capital, including empowerment of people, especially women, youth and the most vulnerable, and strengthen the enabling business and regulatory environment, with the aim of creating local added value, growth and quality jobs.” 8

The envisaged SIFA would be fully consistent with, and complementary to the future Investment Facilitation for Development Agreement which has been negotiated within the World Trade Organization. 9

•Consistency with other Union policies

The objectives are consistent with other EU policies, notably the EU’s development policy.

2.LEGAL BASIS, SUBSIDIARITY AND PROPORTIONALITY

•Procedural legal basis

The procedural legal basis for the proposed decision to authorise the opening of negotiations of the envisaged agreement is Article 218(3) and (4) of the Treaty on the Functioning of the European Union (TFEU).

Article 218(3) TFEU provides that, where the agreement envisaged does not relate exclusively or principally to the common foreign and security policy, the Commission shall submit recommendations to the Council. The Council shall adopt a decision authorising the opening of the negotiations and nominating the Union negotiator or the head of the Union’s negotiating team.

Article 218(4) TFEU provides that the Council may address negotiating directives to the negotiator and designate a special committee in consultation with which the negotiations must be conducted.

The Commission recommends to open negotiations between the European Union and the Republic of Ecuador for an international agreement relating to investment facilitation. The Commission is to be nominated as negotiator.

•Substantive legal basis

This act falls within the Common Commercial Policy and hence the substantive legal basis is 207(4) TFEU.

•The choice of negotiator

Given that the agreement envisaged exclusively covers maters other than the common foreign and security policy, the Commission must be designated as the negotiator pursuant to Article 218(3) TFEU.

•Union competence

This act falls within the Common Commercial Policy under Article 207 TFEU. It therefore falls within the exclusive competence of the Union in accordance with Article 3(1) TFEU.

•Subsidiarity (for non-exclusive competence)

The subject matter of the envisaged negotiations relate to the common commercial policy. According to Article 5(3) of the TEU, the subsidiarity principle does not apply in areas of exclusive EU competence. The common commercial policy is listed among the areas of exclusive competence of the Union in Article 3(1) of the TFEU. This policy includes the negotiation of trade and investment agreements pursuant to, inter alia, Article 207 TFEU.

•Proportionality

The recommendation of the Commission is in line with the principle of proportionality, as the conclusion of an international agreement is the main instrument for assuming reciprocal rights and obligations with a subject of international law, such as a foreign country.

•Choice of the instrument

This recommendation for a Council decision is submitted in accordance with paragraphs 3 and 4 of Article 218 TFEU, which envisage the adoption by the Council of a decision authorising the opening of negotiations and nominating the Union negotiator. The Council may also address negotiating directives to the negotiator. There exists no other legal instrument that could be used in order to achieve the objective expressed in this recommendation.

3.RESULTS OF EX-POST EVALUATIONS, STAKEHOLDER CONSULTATIONS AND IMPACT ASSESSMENTS

•Ex-post evaluations/fitness checks of existing legislation

Not applicable.

•Stakeholder consultations

The Commission carried out a public consultation in 2021 as part of the ex post evaluation of the Multiparty Andean Community-EU Trade Agreement, which included stakeholders’ views on investment in the covered countries, including Ecuador. Moreover, the Commission regularly consults stakeholders inter alia in the Expert Group on Trade Agreements 10 and the Civil Society Dialogue. 11

•Collection and use of expertise

This proposal relies on external expertise gathered in the context of a project carried out by the World Bank and commissioned by the European Commission. The report notably identified that investors 12 put forward, as critical factors affecting their investment decisions in developing countries, the lack of transparency and predictability in dealing with public agencies, the sudden change in the laws and regulations, and the delays in obtaining government permits and approvals. Those are the areas that would be covered by the proposed SIFA.

•Impact assessment

Investment facilitation commitments in the SIFA focus on the application of good governance principles and good regulatory practices, including transparency, predictability, and administrative efficiency, in a partner country’s investment framework (investment laws, regulations, and procedures). The impact of these investment facilitation measures relates largely to the implementation of the Agreement by a partner country and the long-term improvement in its investment environment. The overall impact is also affected by individual investments that such an improved investment framework may attract. The SIFA codifies practices that are already well-established within the EU.

In addition, the initiative benefits from several existing assessments carried out over the years, including a Sustainability Impact Assessment that covered EU-Andean Community trade (2009), a report assessing the economic impact of the Trade Agreement between the European Union and Ecuador (2016), and the ex post evaluation report of the EU-Andean Community Trade Agreement (2021).

•Regulatory fitness and simplification

This proposal seeks to recommend the adoption by the Council of a decision authorising the opening of negotiations for a SIFA with Ecuador. The proposal does not entail exchange of data, automation of processes, use of digital systems or the provision of public services. Consequently, the “digital by default” principle does not apply, as it does not introduce specific digital requirements.

•Fundamental rights

The initiative fully respects the Charter of Fundamental Rights of the European Union.

4.BUDGETARY IMPLICATIONS

The initiative does not have budgetary implications.

5.OTHER ELEMENTS

•Implementation plans and monitoring, evaluation and reporting arrangements

The negotiations of the SIFA are expected to be concluded in 2026.

•Explanatory documents (for directives)

Not applicable.

•Detailed explanation of the specific provisions of the proposal

The provisions aim to recommend the adoption by the Council of a decision authorising the opening of negotiations and nominating the Union negotiator. The Council may address directives to the negotiator.

Recommendation for a

COUNCIL DECISION

authorising the opening of negotiations of a Sustainable Investment Facilitation Agreement between the European Union and the Republic of Ecuador

THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty on the Functioning of the European Union, and in particular the first subparagraph of Article 207(4), in conjunction with Article 218(3) and (4) thereof,

Having regard to the recommendation from the European Commission,

Whereas:

Negotiations should be opened with a view to concluding a Sustainable Investment Facilitation Agreement with the Republic of Ecuador,

HAS ADOPTED THIS DECISION:

Article 1

1.The Commission is hereby authorised to negotiate, on behalf of the Union, a Sustainable Investment Facilitation Agreement with the Republic of Ecuador.

2.The Commission is hereby nominated as the Union negotiator.

Article 2

The negotiations shall be conducted on the basis of the negotiating directives of the Council set out in the Annex to this Decision.

Article 3

The negotiations shall be conducted in consultation with the [special committee provided for in the third subparagraph of Article 207(3) TFEU].

Article 4

This Decision and its Annex will be made public immediately after their adoption.

Article 5

This Decision is addressed to the Commission.

Done at Brussels,

For the Council

The President

(1) Communication from the Commission on a Competitiveness Compass for the EU, COM(2025) 30 final.

(2) See Council Decision (EU) 2024/829 of 4 March 2024 on the conclusion, on behalf of the Union, of the Sustainable Investment Facilitation Agreement between the European Union and the Republic of Angola, OJ L, 2024/829, 8.3.2024.

(3) Council Decision (EU) 2025/1209 of 12 June 2025 authorising the opening of negotiations with the Republic of Côte d’Ivoire for a sustainable investment facilitation agreement, OJ L, 2025/1209, 17.6.2025, ELI: http://data.europa.eu/eli/dec/2025/1209/oj.

(4) Article 21(2)(e) TEU.

(5) Communication from the Commission on a Competitiveness Compass for the EU, COM(2025) 30 final.

(6) Communication from the Commission to the European Parliament, the Council and the Economic and Social Committee: “The power of trade partnerships: together for green and just economic growth”, COM(2022) 409 final.

(7) Joint Communication to the European Parliament and Council on A New Agenda for Relations between the EU and Latin America and the Caribbean, JOIN(2023) 17 final.

(8) Ibid.

(9) https://www.wto.org/english/tratop_e/invfac_public_e/invfac_e.htm

(10) http://ec.europa.eu/trade/trade-policy-and-you/expert-groups/

(11) http://trade.ec.europa.eu/civilsoc/meetdetails.cfm?meet=11531

(12) See World Bank, Retention and Expansion of Foreign Direct Investment, Political Risk and Policy Responses, http://documents1.worldbank.org/curated/en/387801576142339003/pdf/Political-Risk-and-Policy-Responses.pdf

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EUROPEAN COMMISSION

Brussels, 29.7.2025

COM(2025) 427 final

ANNEX

to the

Recommendation for a Council Decision

authorising the opening of negotiations of a Sustainable Investment Facilitation Agreement between the European Union and the Republic of Ecuador

ANNEX

Negotiating directives for the negotiations of a Sustainable Investment Facilitation Agreement between the European Union and the Republic of Ecuador

I.OBJECTIVES, SCOPE, AND KEY PRINCIPLES

1.The aim of a Sustainable Investment Facilitation Agreement (hereinafter “Agreement”) with the Republic of Ecuador should be to create a more attractive, transparent, and predictable investment climate in order to facilitate, enhance, and stimulate mutually beneficial sustainable investments.

2.The overall objective of this Agreement should be to improve the mobilisation, attraction, expansion and retention of foreign direct investment between the European Union and the Republic of Ecuador, especially for micro-, small-, and medium-sized enterprises, on the basis of modern and simplified rules, measures and procedures based on principles of impartiality, openness, transparency, and stability.

3.This Agreement should be comprehensive and ambitious, take into account the outcome of the WTO negotiations on the Investment Facilitation for Development Agreement, and the specific development challenges faced by the Republic of Ecuador. This Agreement should, in principle, apply to all economic sectors and encompass the whole life cycle of investments, including activities before, during, and following establishment.

4.This Agreement should aim to ensure the right conditions for foreign direct investment to be conducive to sustainable development, while preserving the ability of the Parties to regulate the activity of investors in their respective territories.

5.This Agreement should focus on foreign direct investment to the exclusion of other forms of investment, such as short-term capital movements or portfolio investments. This Agreement should not create new, or modify existing obligations, on the protection of investments, investor-state dispute settlement or preferential market access conditions, and should not cover procedural requirements for the temporary entry and stay of natural persons for business purposes.

II. PROPOSED CONTENT OF THE RULES AND COMMITMENTS

6.This Agreement should include specific provisions on matters such as:

–Improving the transparency, predictability and coherence of investment-related measures (including, inter alia, electronic publication and availability of measures of general application and the legal framework applicable to investment; opportunity to comment on draft regulatory measures, information on investment incentives);

–Streamlining and speeding up administrative procedures and requirements, as well as ensuring good governance in authorisation procedures (including, inter alia, administrative procedures and documentation requirements; use of applications in electronic format; timeframes and periods for the submission and administration of applications; good governance standards in the processing of applications; transparency on the payment of fees; one-stop shop/single window types of mechanisms for applications for authorisation);

–Enhancing the participation of stakeholders (including, inter alia, focal points to serve as first points of contact for investors’ inquiries; relations with stakeholders; dispute prevention and problem-solving mechanisms; impact assessments; domestic inter-agency coordination; linkages between foreign investors and the host economy);

–Contributing to sustainable development and responsible investment (including, inter alia, promotion and enforcement of relevant internationally agreed standards, rules, and commitments on labour, environment, and climate; commitment to relevant internationally recognised instruments on responsible business conduct; dialogue and cooperation on investment-related labour, environmental, and climate issues of mutual interest; implementation of key international conventions and principles to prevent and combat money laundering, terrorism financing, tax fraud and tax evasion);

–Facilitating the sustainability of investments in value chains and sectors of mutual interest;

–Reinforcing bilateral cooperation on ways to facilitate investment and ensure the implementation of this Agreement (including, inter alia, capacity building aimed at improving the investment climate and assisting in the implementation of this Agreement, including the sustainable development provisions; institutional arrangements to oversee implementation and share information and best practices; mediation and State-to-State dispute settlement mechanisms).

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