Author Archives: Jorge Cadena

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New regulation to distributed generation systems for self-sufficiency

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On September 25, 2024, the Electricity Regulation and Control Agency (“ARCONEL”) issued Regulation No. ARCONEL-005/24 (the “Regulation”), which establishes the new regulatory framework applicable to distributed generation systems for self-sufficiency (“SGDA”). The Regulation came into effect immediately upon issuance.

An SGDA refers to a system of equipment designed to generate electricity for self-supply by individuals or entities that hold supply contracts with an electricity distribution company (“Regulated Consumers”).

The key points of the Regulation are summarized below:

  1. Permits. Applications to install and operate an SGDA must be submitted to the electricity distribution company (the “Distributor”) in whose service area the Regulated Consumer is located.
  2. Resource. The SGDA must use a non-conventional renewable energy resource (e.g., small-scale hydropower, solar, wind, biomass, and biogas).
  3. Ownership. The SGDA may be owned by the Regulated Consumer or a third party. In the latter case, the lease agreement for the SGDA must be provided to the Distributor.
  4. Services. The Regulated Consumer can engage third-party services for installation, operation, maintenance, dismantling, and other SGDA-related activities.
  5. Connection. The SGDA may be connected in synchronization with the distribution network or to the internal networks of the Regulated Consumer.
  6. Nominal power. If the SGDA injects energy into the distribution network, its nominal power will be limited to the network’s capacity at the connection point approved by the Distributor. If it does not inject energy, its nominal power will be limited by both the maximum power demand registered by the Regulated Consumer and the approved connection capacity by the Distributor.
  7. Modes. The SGDA may supply one or several Regulated Consumers. The SGDA and the Regulated Consumer(s) may be located on the same or different properties.
  8. Storage. The SGDA may incorporate energy storage equipment.
  9. Term. The authorized operational term of an SGDA is determined by the useful life of the generation technology utilized, as outlined below:
Technology Useful life (years) Photovoltaic 25 Wind 25 Biomass 20 Biogas 20 Hydraulic 30

 

  1. Excess energy. If the SGDA produces excess energy, a credit will be generated in favor of the Regulated Consumer, which can be offset against its consumptions from the distribution network. This compensation does not apply to SGDAs that do not inject energy into the distribution network.

If the SGDA is not synchronized with the distribution network, it is exempt from the Regulation. However, the SGDA’s location, nominal power, and generation technology must still be reported to ARCONEL for statistical purposes.

Regulated Consumers who began the process of obtaining permits under Regulation No. ARCERNNR-001/2021 or Regulation No. ARCERNNR-008/23, prior to September 25, 2024, may either continue under those regulations or start a new process under the new Regulation.

We believe this new regulation will facilitate the installation of SGDAs by Regulated Consumers.

 

carlos-torres

Carlos Torres, Senior Associate at CorralRosales
ctorres@corralrosales.com
+593 2 2544144

 

Mario Fernández, Associate at CorralRosales
mfernandez@corralrosales.com
+593 2 2544144

© CORRALROSALES 2024
NOTE: The above text has been prepared for informational purposes. CorralRosales is not responsible for any loss or damage caused by actions taken or not taken based on the information contained in this document. Any specific situation requires the specific opinion and advice of the firm.

CORRALROSALES

Beneficial Owners and Corporate Structure Report “REBEFICS”

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Through Resolution No. NAC-DGERCGC24-00000033, the Internal Revenue Service established the conditions for submitting the Beneficial Owners and Corporate Structure Report (REBEFICS). This report replaces the Shareholders Annex (APS Annex). Below is a summary of the key points:

  1. Obligated entities

The entities required to submit the REBEFICS Report are:

  • Entities detailed in Article 98 of the Internal Tax Regime Law.
  • Branches of foreign entities with residence in Ecuador.
  • Permanent establishments of non-resident foreign companies.
  • Trusts or similar entities established abroad, when the trustee, administrator, settlor, or beneficiaries are tax residents in Ecuador.
  1. Corporate Structure Report

Obligated entities must report each level of its corporate structure until reaching the individuals who are the beneficial owners.

If the direct or indirect shareholder of the obligated entity is a non-tax resident company in Ecuador, that company will be considered the final level to report, provided that individuals at the end of the ownership structure hold—individually or together with their related parties—less than 10% of the obligated entity’s capital.

However, if at the end of the ownership structure there are individuals who are tax residents in Ecuador, those individuals must be reported, regardless of their percentage of participation in the obligated entity.

  1. Special Cases

When the obligated party is a private non-profit institution, it must report information on its board members, administrators, participants, founding partners and individuals with decision-making or control.

When the obligated party is an investment fund, it must report information on the fund administrator, individuals with decision-making or control, and participants whose accumulated contributions exceed 5 basic exempt fractions.

When the obligated party is a trust, it must report information about its participants, board members, founders or settlers, beneficiaries or trustees.

If the obligated entity lists its shares on stock exchanges in Ecuador, it must report any shareholder who directly or indirectly holds 2% or more of its corporate composition.

If the obligated entity has as a shareholder—directly or indirectly—a company listed on recognized foreign stock markets, it must report the portion of capital that is not publicly traded or is reserved for a limited group of investors, for any shareholder who directly or indirectly holds 2% of the capital. However, if these shareholders are tax residents in Ecuador, they must be reported regardless of their percentage of participation.

  1. Information to Report

For companies and individuals at each level of the corporate structure, the following information must be reported:

  • Individual name or company name.
  • Tax identification number or individual identification number.
  • Type of entity or legal structure.
  • Country of tax residence.
  • Tax regime: general, preferential tax jurisdiction, tax haven, or low-tax jurisdiction.
  • Percentage of participation.
  • In the case of entities, the administrators and board members, and whether the companies or such individuals are related parties to the obligated entity.

Additionally, the obligated entity must report the following information about its beneficial owners:

  • Type and identification number.
  • Names and surnames.
  • Nationality and country of tax residence.
  • Date of birth.
  • Residential address.
  • Criteria for determining ultimate beneficial ownership.
  • Percentage of effective participation.
  1. Filing Deadlines

The information must be submitted in February of each fiscal year, according to the ninth digit of the obligated entity’s tax identification number (RUC).

If the obligated entity experiences changes in its corporate structure or in the information regarding its beneficial owners, the report must be submitted by the 28th of the second month following the change.

 


Andrea-Moya-abogados-ecuadorAndrea Moya, Partner at CorralRosales
amoya@corralrosales.com
+593 2 2544144

© CORRALROSALES 2024
NOTE: The above text has been prepared for informational purposes. CorralRosales is not responsible for any loss or damage caused by actions taken or not taken based on the information contained in this document. Any specific situation requires the specific opinion and advice of the firm.

CORRALROSALES

Regulation for the implementation, adaptation and use of breastfeeding support rooms in public and private workspace

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The Ministry of Labor and the Ministry of Public Health issued the Interministerial Agreement No. MDT-MSP-2024-002, on September 12, 2024, which regulates the implementation, adequacy, and use of breastfeeding support rooms in workplaces, hereinafter the “Regulation”. We highlight the following:

  • Employers must grant permission for the extraction of breast milk for 20 minutes every 2 hours, to women who having finished their breastfeeding period have decided to extend the practice until their children reach 24 months of age.
  • Employers who have 50 or more female employees of childbearing age or breastfeeding and who are working on-site, must implement a permanent breastfeeding support room.
  • Employers who do not comply with the above, and who have at least one breastfeeding woman, must implement temporary breastfeeding support rooms.
  • Women fertile age goes from 15 to 49 years old.
  • Employers must register the implementation, adequacy, and use of breastfeeding support rooms in the Unified Labor System (“SUT” by its Spanish acronym).
  • Permanent breastfeeding support rooms must provide at least: a bathroom next to the breastfeeding room, a refrigerator, a sink, a minimum space of two square meters per user, and periodic cleaning of the room.
  • Temporary lactation rooms may be in spaces for other uses, such as offices, if they have the minimum infrastructure necessary for the adequate extraction of milk or for breastfeeding.
  • The Regulation overturns Ministerial Agreements No. 00000183 of March 11, 2011, and No. 003-2019 of April 8, 2019, that contained the applicable rules for the implementation and operation of breastfeeding support rooms in the public and private sectors.

 

María Victoria Beltrán, Senior Associate at CorralRosales
mbeltran@corralrosales.com
+593 2 2544144

© CORRALROSALES 2024
NOTE: The above text has been prepared for informational purposes. CorralRosales is not responsible for any loss or damage caused by actions taken or not taken based on the information contained in this document. Any specific situation requires the specific opinion and advice of the firm.

CORRALROSALES

Operation of emergency generating sets

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On September 8, 2024, the Electricity Regulation and Control Agency (“ARCONEL”) issued Regulation No. ARCONEL-003/24 titled “Technical-Commercial Operation of Emergency Generating Sets under Conditions of Generation Deficit and Electricity Rationing in the National Interconnected System (S.N.I)” (hereinafter referred to as the “Regulation”).

The Regulation sets out the technical and commercial conditions that regulated and non-regulated consumers who own generating sets must meet if they wish to participate in the supply of electricity during periods of generation deficit or rationing declared by the National Electricity Operator (“CENACE”).

The key aspects of the Regulation are detailed below:

  • Requirements

The emergency generating set (“GEE”) must have a minimum nominal power of 100 kW. The maximum capacity will be determined by the respective electricity distribution and commercialization company (“Distributor”). Additionally, it must be equipped with an hour meter to record operating hours.

The Regulation prohibits the use of subsidized diesel for the operation of the GEE. Therefore, the owner of the GEE must purchase fuel as provided in Resolution No. ARCERNNR-020/2020 or any resolution that replaces it.

  • Qualification Process

To implement this scheme, the owner of the GEE must qualify as an emergency generator (“Emergency Generator”) by following this procedure:

  1. Submit the qualification application to the Distributor in their service area.
  2. The Distributor will conduct a physical inspection of the applicant’s facilities.
  3. If the inspection is favorable, the Distributor will issue a report and grant the Emergency Generator Qualification Certificate (“Qualification Certificate”).

Upon completion of this process, the Emergency Generator may operate the GEE during periods of generation deficit or rationing declared by CENACE.

  • Benefits for Emergency Generators

Emergency Generators will receive financial compensation for the energy generated by the GEE, which will be determined monthly by ARCONEL.

If the Emergency Generator is a regulated consumer, the compensation will be applied to the amount on the invoice issued by the Distributor for the public electricity service. If the GEE produces more energy than consumed from the distribution grid, credit notes will be issued in favor of the Emergency Generator.

If the Emergency Generator is a non-regulated consumer (for self-consumption or large consumers), the energy generated by the GEE will be allocated to the Distributors and credited in favor of the respective self-generator or generator. Subsequently, the self-generator or generator must invoice this energy to the Emergency Generator at the same price as agreed in the private power purchase agreement (“PPA”) between the parties.

Lastly, it is established that electricity distribution companies must conduct quarterly informational campaigns through various media channels for private individuals or entities that own generating sets, encouraging them to qualify as Emergency Generators. Additionally, they must keep the information updated in the Strategic Information Management System (“SISDAT”), for which they are required to maintain a registry of the institutions and GEE.

carlos-torres

Carlos Torres, Senior Associate at CorralRosales
ctorres@corralrosales.com
+593 2 2544144

 

Mario Fernández, Associate at CorralRosales
mfernandez@corralrosales.com
+593 2 2544144

© CORRALROSALES 2024
NOTE: The above text has been prepared for informational purposes. CorralRosales is not responsible for any loss or damage caused by actions taken or not taken based on the information contained in this document. Any specific situation requires the specific opinion and advice of the firm.

CORRALROSALES

Resolution No. SPDP-SPDP-2024-0002-R

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Resolution No. SPDP-SPDP-2024-0002-R (“Resolution”), published in the Official Gazette No. 640 on September 10, 2024, the Data Protection Authority (“SPDP” or “Authority”) issued the “Mandatory Technical Guide for the Registration of the Attorney-in-fact designated by Controllers, whether acting individually or jointly, and Processors that engage in Data Processing Activities in the Republic of Ecuador” (“Guide”).

The following are highlighted:

  1. The Guide is mandatory for all controllers and processors who, although not domiciled in Ecuador, offer goods or services to residents of the country, are part of the personal data protection system, or control the behavior of data subjects to the extent that such control occurs within the territory (“Regulated Entities”).
  2. The Regulated Entities must designate an attorney-in-fact (“Attorney-in-fact”) on a permanent basis. The Attorney-in-fact must be vested with broad faculties to represent them before administrative and judicial bodies on data protection matters. In addition, the Attorney-in-fact must handle requests or complaints from data subjects without limitations that could affect their rights.
  3. The power of attorney must detail the commercial name and the brands identifying the foreign controller in the market. Foreign processors must also detail information regarding the controllers for whom they process data. Both controllers and processors must provide their addresses and telephone numbers for their offices and those of their Attorney-in-fact designated in Ecuador.
  4. In case of non-compliance with these obligations, the individuals or entities who, under certain circumstances, appear to act on behalf of the Regulated Entities may be held administratively liable. The Authority may impose and apply corrective measures established in the Data Protection Law and its Regulations.
  5. The Attorney-in-fact can be an individual or a legal entity domiciled in Ecuador. If the Attorney-in-fact is an individual, they must be Ecuadorian or, if foreign, a resident in the country with full political rights. When the Attorney-in-fact is an entity, its corporate purpose must allow it to act as Attorney-in-fact. The SPDP may verify with the Superintendence of Companies that the entity meets its obligations, and that the appointment of the legal representative is valid.
  6. Regulated entities must register their Attorney-in-fact with the SPDP by presenting the document granting the power of attorney. If the power of attorney is granted abroad, it must be apostilled or certified by an Ecuadorian diplomatic agent. Powers of attorney in a foreign language must be translated into Spanish.
  7. The SPDP will verify that the power of the Attorney-in-fact meets the Guide’s requirements and assess whether the power of attorney granted is adequate and sufficient. If it is approved, registration will proceed, and the Regulated Entity will be notified. The registration of the Attorney-in-fact, along with their contact details, will be published on the SPDP’s website and that of the Regulated Entities to facilitate the exercise of data subjects’ rights.
  8. The Regulated Entities must update their Attorney-in-fact registration in the following cases: a) death; b) resignation; c) expiration of the power of attorney, if applicable; d) change in the denomination, absorption, split, transformation, dissolution, or liquidation of the entity designated as the Attorney-in-fact. Except for the death of the Attorney-in-fact, the registered Attorney-in-fact will continue to be liable before the SPDP and the data subjects until the registration is updated.
  9. All controllers and processors performing data processing abroad must present the following to the Authority:
    • The co-responsibility or data processing agreement.
    • The Record of Processing Activities (ROPA).
    • Risk analysis for each processing activity.
    • Dataflow of personal data for each processing activity.
    • Security measures implemented for data transfers.
    • Self-regulation codes, if any, must be approved by the Authority.

Transitional provisions of the Resolution establish the following:

  1. Regulated Entities engaged in processing activities since September 6, 2024, are granted a six-month period from the issuance of the Guide to comply with the registration of their Attorney-in-fact.
  2. The Authority will initiate the corresponding administrative control processes if an Attorney-in-fact is not registered within the period.
  3. The application for registration of the Attorney-in-fact must be submitted in person at the Authority’s office.

 

Rafael-Serrano-abogados-ecuador

Rafael Serrano, Partner at CorralRosales
rserrano@corralrosales.com
+593 2 2544144

© CORRALROSALES 2024
NOTE: The above text has been prepared for informational purposes. CorralRosales is not responsible for any loss or damage caused by actions taken or not taken based on the information contained in this document. Any specific situation requires the specific opinion and advice of the firm.

CORRALROSALES

Resolution No. JPRM – 2024 – 018 – M

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Resolution No. JPRM-2024-018-M (“Resolution”), issued on September 4, 2024, by the Monetary Policy and Regulation Board (“JPRM”), enacted the “Regulation governing payment methods, systems and fintech activities in Ecuador.”

The Resolution, which replaces Resolution No. JPRM-2023-014-M (“Repealed Resolution””) introduces necessary reforms to ensure the application of the Law for the Development, Regulation, and Control of Technological Financial Services – Fintech Law.

The Resolution generally maintains the content of the Repealed Resolution; however, it introduces the following reforms:

  1. It modifies the concept of electronic wallets, establishing that these are payment methods that, through a technological application or online service on an electronic device, allow users to make payments, collections, and transfers and send and receive financial remittances in real-time.
  2. It defines the processing of electronic payment methods as the service provided by auxiliary service entities to banks, credit unions, and mutual savings and loan associations to process payment methods that allow their clients or members to make payments, collections, and transfers.
  3. It establishes that auxiliary financial service entities specifically authorized to provide electronic payment methods may operate electronic wallets.
  4. It establishes that fintech entities providing digital credits may also participate in the Auxiliary Payment Systems. Thus, the following are recognized as participants of the Auxiliary Payment Systems (“Participants”): financial entities, auxiliary service entities of the financial system (transactional, payment, network, and ATM services, and card administrators), fintech entities (neobanks and digital credit providers), specialized electronic deposit and payment companies (“SEDPES”), and Auxiliary Payment System Administrators (“ASAP”).
  5. It establishes that Clients shall be considered those natural or legal persons who enter a contractual relationship to use services offered by a Participant, whereas Users shall be those who utilize the services without having a contractual relationship with the Participant.
  6. It introduces the obligation for the Central Bank of Ecuador (“BCE”) to keep the registry of Participants updated and published, which will include details of the services each Participant provides.
  7. It establishes that Participants must allow Users to customize their maximum transaction amounts and implement due diligence controls and policies related to the frequency of daily payments they can execute.
  8. It introduces the obligation for Participants to inform Users about existing security measures and the available channels for resolving claims related to such events. Participants must ensure the privacy and security of the information provided by Users.
  9. The services that Participants may provide have been reformed and are now categorized according to the following: payment aggregation, payment gateway, electronic payment processing, transactional switch for payment services, money remittances, collection of public resources, and clearing.
  10. The Central Bank of Ecuador (BCE) must respond to Participants’ requests for operational authorization within 30 days. Furthermore, the process for terminating the administrative act by which the operational authorization is granted is established.
  11. The services that SEDPES may offer are expanded to include sending remittances and services established for Participants, which they can provide exclusively to their clients.
  12. The Superintendence of Banks is no longer required to issue a license or authorization for SEDPES activities.

General provisions of the Resolution establish the following:

  1. The reserve requirements for SEDPES must be met within three months of the operational authorization’s issuance.
  2. The BCE will notify the Office of the Attorney General of individuals or entities engaging in activities regulated by the Resolution without the corresponding authorization.
  3. All individuals or legal entities with a Tax Identification Number must offer their customers at least one electronic payment channel.
  4. The operational authorizations issued by the BCE to SEDPES or ASAP will be notified to the Superintendence of Banks and the Superintendence of Popular and Solidarity Economy for their knowledge.
  5. In-person transactions with credit, debit, prepaid cards, or electronic wallets must be conducted in the customer’s presence. To this end, establishments must ensure that the point-of-sale (POS) device is in a position that allows the customer to observe the insertion, swipe, or tap of the card.
  6. A license from the Superintendence of Banks will only be required in cases determined by the JPRM.

Within two months, the BCE will have to adjust existing regulations to incorporate provisions of the Resolution.

Within six months, the BCE will review the services provided by qualified Participants and classify them by the provisions of the Resolution.

 

Juan Fernando Riera, Associate at CorralRosales
jriera@corralrosales.com
+593 2 2544144

© CORRALROSALES 2024
NOTE: The above text has been prepared for informational purposes. CorralRosales is not responsible for any loss or damage caused by actions taken or not taken based on the information contained in this document. Any specific situation requires the specific opinion and advice of the firm.

CORRALROSALES

Ecuadorian Government Launches Tender for Electrical Interconnection with Peru

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Through Press Bulletin No. 70 dated September 2, 2024, the Ecuadorian government, through the Ministry of Energy and Mines (“MEM”) and the Ecuadorian Electricity Corporation (“CELEC EP”), announced an international public tender for the development of several projects involving the construction of civil works, supply of materials, equipment, electromechanical assembly, testing, and commissioning of the 500-kilovolt (kV) Electric Interconnection System between Peru and Ecuador (the “Project”).

The tender is divided into two blocks:

  • Lot 1: The Pasaje Substation at 500/230 Kv and the expansion of the Chorrillos Substation at 500 Kv, with a reference value of approximately USD 80 million.
  • Lot 2: The Chorrillos – Pasaje Transmission Line at 500 Kv (206.97 km), the Pasaje – Border Transmission Line (500 Kv) spanning 77.88 km, and the sectioning of the Minas San Francisco – San Ildefonso Transmission Line at 230 Kv, with a reference value of USD 184 million.

All civil works, material supply, equipment, electromechanical assembly, testing, and commissioning of the Electric Interconnection System are expected to be completed by April 2026.

According to the schedule established by MEM, all bids must be submitted by Friday, September 22, and will be evaluated by December 2024. Contract signing will take place between January and March 2025. Finally, the Project is expected to begin operations between June and August 2026.

The Project will be financed by international banks and the Ecuadorian state. The Inter-American Development Bank (“IDB”) will finance 43%, and the European Investment Bank (“EIB”) will cover another 43%. The remaining 14% will be financed by CELEC EP. The Project already has the Environmental License, granted by the Ministry of the Environment, Water, and Ecological Transition (“MAATE”), a document necessary for obtaining financing and executing the required works.

This Project is part of the Master Electricity Plan, which considers international interconnection as a mechanism for energy exchange based on commercial agreements and regulatory frameworks for regional integration.

carlos-torres

Carlos Torres, Senior Associate at CorralRosales
ctorres@corralrosales.com
+593 2 2544144

© CORRALROSALES 2024
NOTE: The above text has been prepared for informational purposes. CorralRosales is not responsible for any loss or damage caused by actions taken or not taken based on the information contained in this document. Any specific situation requires the specific opinion and advice of the firm.

CORRALROSALES

Protection and processing of sensitive and confidential data in medical-occupational contexts

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On July 11, 2024, the Constitutional Court issued Ruling 59-19-IN/24 (the “Ruling”), declaring Ministerial Agreement 0341-2019, titled “Application of Occupational Medical Records” (the “Agreement”), unconstitutional. The Court found that the Agreement and its related forms violated privacy and personal data protection rights.

From the Ruling, we highlight the following:

  • The Constitutional Court reviewed whether the State’s actions had a legitimate aim and whether the Agreement met the requirements of proportionality, suitability, and necessity when limiting workers’ rights to privacy and data protection.
  • The Ruling determined that there is no proportionality between the constitutionally valid aim and the challenged regulation, as it is contradictory and inappropriate to require workers to provide sensitive data (such as sexual orientation, gender identity, and religion).
  • Based on these grounds, considering that the Agreement creates an illegitimate limitation on workers’ rights, and given that this information is not directly related to the performance of the worker’s duties or the specific needs of the job, the Constitutional Court declared the Agreement unconstitutional.
  • From the publication of the Ruling in the Official Gazette (which has not occurred as of the date of this bulletin) and until the adoption of new regulations on the application and management of Occupational Medical Records, occupational physicians, public or private entities, as well as the national health authority, will not be able to request workers to provide data related to sexual orientation and gender identity. Data concerning religious beliefs will be optional.

 

Rafael-Serrano-abogados-ecuador

Rafael Serrano, Partner at CorralRosales
rserrano@corralrosales.com
+593 2 2544144

María Victoria Beltrán, Senior Associate at CorralRosales
mbeltran@corralrosales.com
+593 2 2544144

© CORRALROSALES 2024
DISCLAIMER: The previous text has been prepared for informational purposes. CorralRosales is not responsible for any loss or damage caused because of having acted or stopped acting based on the information contained in this document. Any additional determined situation requires the specific opinion and concept of the firm.

CORRALROSALES