Author Archives: SOPORTE PUBLITEK

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In view of new Omicrom variant – Guidelines to enter the country by air

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Ante nueva variante Omicrom - Lineamientos para ingresar al país por vía aérea - CorralRosales - Abogados Ecuador

To prevent contagion of the new South African variant of Covid-19, we inform you of the protocols established by the epidemiological surveillance unit of the Ecuadorian Ministry of Public Health (MSP) for the entry of travelers arriving by air: 

1.- Travelers shall their health declaration digitally when boarding, by completing it at the following link: https://declaracionsalud-viajero.msp.gob.ec/. Once completed, they must take a screenshot of the form or download the QR code to present it at Immigration upon arrival. 
(In case of lacking electronic means, the form may be presented in paper format and travelers must go to the MSP checkpoint at the airport of entry).

2.- Passengers over the age of 16 must show the vaccination card demonstrating that they completed the vaccination program at least 14 days prior to entry into Ecuador and the negative result of a PCR test performed up to 72 hours prior to boarding. (Airline crew members are exempt from this requirement).


3.- Children between the ages of 2 and 16 must present a negative PCR test performed up to 72 hours prior to boarding.

4.- Passengers who upon arrival in Ecuador have symptoms related to COVID-19 will be evaluated by MSP personnel.  If they are classified as a suspect case, a rapid antigen test will be performed and if positive, they will have to spend 14 days in isolation at home or in any lodging place at the passenger’s expense.


5.- The same requirements will be observed for those wishing to visit the Galapagos Islands, and, additionally, the transit control card issued by the Governing Council of the Special Regime of Galapagos will be requested.

6.- All persons whose point of origin, stopover or transit is South Africa, Namibia, Lesotho, Zimbabwe, Botswana and Eswatini, Mozambique, Egypt, Mozambique, and Egypt are prohibited from entering the Ecuadorian territory. 

These provisions are effective as of December 1, 2021, at 00:00 hours. Those traveling before December 1 who were unable to take the PCR test must justify it, and a qualitative PCR test will be taken upon arrival to Ecuador at their own expense. This will be allowed only on December 1 and 2.

Verónica Olivo - CorralRosales - Derecho Aeronáutico

Aviation Law Specialist

Verónica Olivo, associate at CorralRosales
volivo@corralrosales.com
+593 2 2544144

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NOTE: The above text has been prepared for informational purposes. CorralRosales is not liable for any loss or damage incurred as a result of acting or failing to act on the basis of the information contained in this document. Any additional determined situation requires the specific opinion and concept of the firm in Quito / Guayaquil, Ecuador.

CORRALROSALES

Wealth Tax – Law for economic development and fiscal sustainability after the COVID-19 pandemic

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Wealth Tax - Law for economic development and fiscal sustainability after the covid-19 pandemic - CorralRosales - Lawyers Ecuador

Below, we analyze the wealth taxes created by the Law for Economic Development and Fiscal Sustainability after the Covid-19 Pandemic, published on the Official Gazette 587, Third Supplement, of November 29, 2021:

1.    Wealth tax for individuals:

Taxpayers: Individuals who, as of January 1, 2021, have an individual net worth equal to or greater than US$1,000,000.00; or, marital partnership, with a net worth equal to or greater than US$2,000,000.00, in accordance with the following: 

–    In the case of individuals with tax residence in Ecuador, the contribution will be calculated over the assets located inside and outside the country. 
–    In the case of non-residents individuals, the contribution will be calculated over the assets located in the country.

Substitute taxpayer: Companies located in Ecuador whose shareholders are non-residents will act as substitute taxpayers.

Taxable base: The net worth is equal to the value of the assets (including rights) minus liabilities that are directly or indirectly owned by the taxpayer through any means, as of January 1, 2021. The following must be considered for the calculation of the net worth:


–    The proportional equity value of the shares held in companies that, in turn, are required to pay the corporate wealth tax, and that have made such payment, must be excluded.


–    The value of properties that preserve primary forests and areas of ecological diversity that have limitations for their exploitation should be excluded. 


–    Accounts payable to related parties should be excluded from the liabilities unless the loans were granted under market conditions and were used for productive purposes.


–    The value of the net worth may be reduced in up to US$200,000.00 if the individual owns a first home and/or unproductive agricultural land. 

Tax rate: The applicable tax rate shall be calculated in accordance with the following chart:

 

Tax Return: The tax return and payment of the wealth tax must be made until March 31, 2022. Payment facilities may be requested for a term of 6 months and without any initial installment. 

2.    Corporate Wealth Tax:

Taxpayer: Entities that carry out economic activities and have a net worth equal to or greater than US$5,000,000.00 as of December 31, 2020.

Taxable Base: The taxable base will be equal to the value of the net worth of the entity in the fiscal year 2020 as stated in the income tax return filed for such year.

Tax Rate: The applicable tax rate shall be calculated in accordance with the following chart:

 

Tax return: The tax return and payment of the first wealth tax must be made until March 31, 2022, and of the second until March 31, 2023. Payment facilities may be requested for a term of 6 months and without any initial installment. The law does not establish whether entities that had losses in the fiscal years 2020 and 2021 are excluded from paying the tax.

Sanctions: The following penalties shall apply: 

–    Failure to file the return will be sanctioned with a surcharge equal to 50% of the tax.
–    Inaccurate returns (i.e. those in which the total value of the net worth is concealed) will be sanctioned with a surcharge equal to 20% of the value of the difference.

Andrea Moya - CorralRosales - Lawyer Ecuador

Specialist in Tax
Andrea Moya, partner at CorralRosales
amoya@corralrosales.com
+593 2 2544144

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NOTE: The above text has been prepared for informational purposes. CorralRosales is not liable for any loss or damage incurred as a result of acting or failing to act on the basis of the information contained in this document. Any additional determined situation requires the specific opinion and concept of the firm in Quito / Guayaquil, Ecuador.

CORRALROSALES

Law for economic development and fiscal sustainability after the COVID-19 pandemic

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Law for economic development and fiscal sustainability after the covid-19 pandemic - CorralRosales - Lawyers Ecuador

Below, we analyze the wealth taxes created by the Law for Economic Development and Fiscal Sustainability after the Covid-19 Pandemic, published on the Official Gazette 587, Third Supplement, of November 29, 2021:

1.    Wealth tax for individuals:

Taxpayers: Individuals who, as of January 1, 2021, have an individual net worth equal to or greater than US$1,000,000.00; or, marital partnership, with a net worth equal to or greater than US$2,000,000.00, in accordance with the following: 

–    In the case of individuals with tax residence in Ecuador, the contribution will be calculated over the assets located inside and outside the country. 
–    In the case of non-residents individuals, the contribution will be calculated over the assets located in the country.

Substitute taxpayer: Companies located in Ecuador whose shareholders are non-residents will act as substitute taxpayers.

Taxable base: The net worth is equal to the value of the assets (including rights) minus liabilities that are directly or indirectly owned by the taxpayer through any means, as of January 1, 2021. The following must be considered for the calculation of the net worth:


–    The proportional equity value of the shares held in companies that, in turn, are required to pay the corporate wealth tax, and that have made such payment, must be excluded.


–    The value of properties that preserve primary forests and areas of ecological diversity that have limitations for their exploitation should be excluded. 


–    Accounts payable to related parties should be excluded from the liabilities unless the loans were granted under market conditions and were used for productive purposes.


–    The value of the net worth may be reduced in up to US$200,000.00 if the individual owns a first home and/or unproductive agricultural land. 

Tax rate: The applicable tax rate shall be calculated in accordance with the following chart:

 

Tax Return: The tax return and payment of the wealth tax must be made until March 31, 2022. Payment facilities may be requested for a term of 6 months and without any initial installment. 

2.    Corporate Wealth Tax:

Taxpayer: Entities that carry out economic activities and have a net worth equal to or greater than US$5,000,000.00 as of December 31, 2020.

Taxable Base: The taxable base will be equal to the value of the net worth of the entity in the fiscal year 2020 as stated in the income tax return filed for such year.

Tax Rate: The applicable tax rate shall be calculated in accordance with the following chart:

 

Tax return: The tax return and payment of the first wealth tax must be made until March 31, 2022, and of the second until March 31, 2023. Payment facilities may be requested for a term of 6 months and without any initial installment. The law does not establish whether entities that had losses in the fiscal years 2020 and 2021 are excluded from paying the tax.

Sanctions: The following penalties shall apply: 

–    Failure to file the return will be sanctioned with a surcharge equal to 50% of the tax.
–    Inaccurate returns (i.e. those in which the total value of the net worth is concealed) will be sanctioned with a surcharge equal to 20% of the value of the difference.

Andrea Moya - CorralRosales - Lawyer Ecuador

Specialist in Tax
Andrea Moya, partner at CorralRosales
amoya@corralrosales.com
+593 2 2544144

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NOTE: The above text has been prepared for informational purposes. CorralRosales is not liable for any loss or damage incurred as a result of acting or failing to act on the basis of the information contained in this document. Any additional determined situation requires the specific opinion and concept of the firm in Quito / Guayaquil, Ecuador.

CORRALROSALES

LexLatin – HIG Capital Becomes a Majority Shareholder in Ransa, from Grupo Romero

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LexLatin - HIG Capital Becomes a Majority Shareholder in Ransa, from Grupo Romero - CorralRosales - Lawyers Ecuador

DETAILS

DATE: 17-12-2021

CORRALROSALES IN THE NEWS:

– Xavier Rosales

– Andrea Moya

– Milton Carrera

– Ana Samudio

– Rafael Serrano

– Ramón Paz y Miño

– Marta Villagómez

– María Isabel Torres

– Darío Escobar

– Sofía Rosales

– Edgar Bustamante

MEDIA: LexLatin

CorralRosales represented HIG Capital, an American alternative investment company, to become a majority shareholder in Ransa, a company dedicated to logistics services with a large presence in the Andean region and Central America.

The following CarralRosales’s Lawyers took part in the purchase and sale process during “Operation 1”: Partners Xavier Rosales and Andrea Moya, along with associates Milton Carrera, Ana Samudio, Rafael Serrano, Ramón Paz and Miño, Marta Villagómez, María Isabel Torres, Darío Escobar, Sofía Rosales and Edgar Bustamante.

According to the LexLatin medium, “the terms of the negotiation, signed on September 21 and closed on October 29, were not disclosed.” Grupo Romero, owner of Ransa, “will remain a strategic partner of the company.”

“The acquired companies are: Inversiones Logicorp, Ransa Comercial, Agencias Ransa and Almacenera del Perú (Perú); Ransa Operador Logístico Bolivia (Ransabol – Bolivia) and Logistics Operators of Central America (OLCA – Panama)”, according to Ingrid Rojas, a LexLatin journalist.

If you want to read the complete news, click here.

Self-sufficiency of Regulated Consumers through Renewable Energy Sources

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Energy Sources

Renewable energy sources are increasingly important in tackling climate change[1]. They are also essential to achieve safe and environmentally friendly energy development[2]. As a result, companies have a growing tendency to assume environmental commitments in the international private sphere, including electricity consumption with clean energy[3].

Regarding this, Ecuadorian legislation, as an alternative to power purchase and sale schemes[4], contemplates the possibility of installing and operating non-conventional renewable energy systems for the self-sufficiency of electrical energy[5]. 

This article (i) contains the main characteristics of distributed generation systems and (ii) summarizes the procedure that must be followed before the respective electricity distribution company (hereinafter, the “Distributor”) for their installation and operation.

  1. Distributed Generation System

Through Regulation No. ARCERNNR-013/2021 of April 05, 2021 (hereinafter, the “Regulation”), the Agency for the Regulation and Control of Energy and Non-Renewable Natural Resources (hereinafter, “ARCERNNR”) regulated article 24 of the Regulation to the Law of the Public Electric Power Service (hereinafter, the “RGLOSPEE”), which empowers any natural or legal person to install and operate electric power generation systems for self-sufficiency, provided they maintain a supply contract with the Distributor and benefit from the provision of the public energy service (hereinafter, “regulated consumer“).

The systems must have the following main characteristics:

i. Its nominal power must be less than 1 MW[6].

ii. Its annual production must be equal to or less than the annual energy demand of the regulated consumer.

iii. It must be a distributed generation system[7]. That is, the energy has to be produced from small generation plants, close to consumption (within the same service area[8]where the regulated consumer is located), and connected to the power distribution network.

iv. It should be based on non-conventional renewable energy sources (e.g., wind, solar, etc.).

Distributed generation systems for self-sufficiency (hereinafter, “SGDA”) do not limit electrical energy consumption from the traditional distribution network. Therefore, if the SGDA does not cover the demand of the regulated consumer, they can additionally consume electricity from the grid. On the other hand, as provided in article 18 of the Regulation, if due to operating conditions of the SGDA or variation in consumption, there are surpluses of energy produced by the SGDA, these will be injected into the power distribution network. As a result, a credit will be generated in favor of the regulated consumer, who will be compensated with the consumptions made from said network.

Therefore, any company can install and operate, for example, solar panels connected to the distribution network, with a nominal power of less than 1MW, to generate clean energy and cover all or part of its demand.

2. Procedure

The following procedure must be followed to install and operate an SGDA:

i. The regulated consumer must request the Distributor to determine whether or not it is feasible to connect the SGDA to the power distribution network. In said request, the general data of the regulated consumer and the SGDA must be included (e.g., nominal power, an estimate of the annual energy to be generated, primary energy resource, connection point to the distribution network, among others).

ii. If the Distributor determines that the connection is feasible, it will accept the request and establish the connection scheme and operating conditions of the SGDA.

iii. Once the “feasibility of connection” is granted as defined by the standard, the regulated consumer must demonstrate to the Distributor that it complies with the requirements established in the Regulation to install and operate the SGDA. For which you must present the following fundamental information:

  • Location of the property or property where the SGDA will be installed; 
  • SGDA technical report;
  • Design of the works and/or necessary adjustments to the distribution network for the connection of the SGDA; and,
  • Project execution schedule.

iv. If the Distributor determines that the requirements are met, it will issue the Qualification Certificate, that is, the document that enables the regulated consumer to install and operate the SGDA under the conditions approved and established by the Distributor.

Those who want to benefit from this scheme should take the following into account:

  • The SGDA must be installed according to the execution schedule approved by the Distributor.
  • The regulated consumer must cover the costs of the works and/or adjustments necessary to connect the SGDA to the distribution network.
  • The necessary assistance must be provided to the Distributor to carry out the tests it deems pertinent to the equipment that will allow the connection of the SGDA to the distribution network.
  • The regulated consumer will be responsible for the SGDA’s quality and safe operation to the Distributor and competent authorities. Also, will be liable for any damages to third parties derived from such operation. 
  • The Qualification Certificate will be valid for the useful life of the SGDA:
TechnologyUseful Life(years)Photovoltaic25Wind25Biomass20Biogas20Hydraulic30
  • The Qualification Certificate may be terminated for various reasons[9], among them, due to: (i) increasing the nominal power of the SGDA without prior authorization from the Distributor, (ii) the expiration of its period of validity, or (iii) the decision of the regulated consumer. Upon the termination of the Qualification Certificated, the SGDA will be disconnected of the distribution network.    

In conclusion, the SGDA is an interesting option for regulated consumers who want to make environmental commitments, such as meeting their demand for electricity with clean energy. Furthermore, if the SGDA is appropriately structured, its installation and operation could be cheaper than the regular consumption cost of the power distribution network. In this case, the investment is profitable, and the consumer could install the SGDA in order to: (i) eliminate its consumption from the distribution network; or (ii) reduce it and, eventually, compensate it if the SGDA produces energy above its own needs. 

[1] Hugo Altomonte, ed., “Non-conventional renewable energies in the electricity generation matrix: three case studies”, ECLAC, accessed October 31, 2021, https://repositorio.cepal.org/bitstream/handle/11362 /40975/S1601254_es.pdf?sequence=1&isAllowed=y

[2] Susa Jiménez, “Non-Conventional Renewable Energy: Promotion Policies in Chile and the World”, Libertad y Desarrollo, ISSN: 0717 – 1536, accessed on November 21, 2021, https://archivos.lyd.org/other/files_mf /sie218energiarenovablenoconventcionalpoliticasdepromocionenchileyelmundosjimenezsetember2011.pdf

 Santiago Hoyos, Carlos Franco and Isaac Dyner, “Integration of non-conventional renewable energy sources to the electricity market and its impact on the price.”, Ingenieria y Ciencia, doi: 10.17230 / ingciencia.13.26.5, http: // www. scielo.org.co/pdf/ince/v13n26/1794-9165-ince-13-26-00115.pdf

[3] Veronika Henze, “Corporate Clean Energy Buying Grew 18% in 2020, Despite Mountain of Adversity” BloomberNEF, January 26, 2021, https://about.bnef.com/blog/corporate-clean-energy-buying-grew-18-in-2020-despite-mountain-of-adversity/ 

[4] The sale of electricity between private parties is possible under two schemes: (i) the buyer must qualify as a large consumer and buy all their demand for electricity from a generator or self-generator authorized as such before the competent authority; or (ii) the buyer must be a shareholder in a self-generator to buy electricity from the latter. 

[5] Paragraph 10 of article 3 of the LOSPEE states that “… Non-conventional renewable energies are considered to be sources: solar, wind, geothermal, biomass, tidal, hydroelectric of smaller capacities, under the terms and conditions established in the regulations, and others that will be defined in the respective regulation. “

[6] According to the ARCERNNR, the average consumption of regulated customers at the residential, commercial and industrial level is 141.42 kWh, 575.68kWh and 9,739.14 kWh, respectively. Available at: https://www.controlrecursosyenergia.gob.ec/wp-content/uploads/downloads/2021/09/Estadistica-2020-baja.pdf

[7] Article 3 of the RGLOSPEE defines distributed generation as: “(…) Small generation plants installed close to consumption and connected to the distribution company’s network.”.

[8] Article 3 of the RGLOSPEE defines the service area as “… the geographic area established by the Ministry of Energy and Non-Renewable Natural Resources in which an electricity company provides the public service of distribution and commercialization of electric power and the public lighting service….”

[9] Ecuador, Regulation No. ARCERNNR-013/2021, Official Registry 448, May 10, 2021, Art. 11.      

Mario Fernández García
Associate at CorralRosales
mfernandez@corralrosales.com

Energy sector policies

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Energy sector policies - CorralRosales Newsletter - Corporate Law - Public Procurement - Energy Sector - Ecuador

On October 26, 2021, the President of Ecuador issued the Executive Decree 238 (hereafter the “Executive Decree”), by which the Energy Sector Policies were established (hereafter the “Policies”).

The main objective of these Policies is to articulate an efficient, competitive, sustainable, environmentally responsible energy sector to guarantee legal certainty and promote private investment.

Through these Policies, Ecuador also seeks to promote the institutional and regulatory framework necessary to guarantee a sustained increase in installed electricity generation capacity to meet the demand of the Electricity Master Plan for the next 10 years.


Considering the above, the main guidelines of the Policies are highlighted below, which must be executed by the Ministry of Energy and Natural Resources until January 26, 2022:


1.    Propose public and institutional policies and reform the legal framework to encourage private investment in the different areas of the electric power public service, public lighting service, electric vehicle charging service, and energy storage.

2.    Promote efficient and competitive schemes for the participation of the private sector in the stages of generation, transmission, distribution, commercialization, and storage of energy, public lighting service, and electric vehicle charging service. These schemes must adopt globally successful practices and standards.


3.    Regulate the incentives and preferential conditions to promote non-conventional renewable energy generation and self-generation projects.

4.    Identify projects to delegate to private investment.

5.    Propose a plan with pricing schemes and preferential conditions for the private sector to increase the participation of self-generators in the Ecuadorian energy market by at least 250 MW until 2025 using renewable energy sources.

6.    Cooperate with the Ministry of the Environment to avoid duplication of procedures in environmental licensing processes and authorizations for the use and exploitation of water.

7.    Convene public selection processes for the concession of the 500 MW Block of renewable energy, Termo Gas Machala Combined Cycle, Northeastern Transmission System, 400 MW Natural Gas Combined Cycle Block, and delegated management of the Blower Power Plant.

8.    Prepare a report with the photovoltaic capacity installed in Ecuador to establish policies and structure the regulatory and institutional framework necessary to encourage the adoption of renewable sources of energy provision at a residential, industrial, and commercial level.


Additionally, through the Executive Decree, it is provided that:

a.    Until November 26, 2021, the Ministries of Economy and Finance and Energy and Natural Resources must present a proposal to adopt the Regulation for Public-Private Associations to the particularities of the energy sector.


b.    Until December 26, 2021, the Ministry of the Environment must review the pending processes of the energy sector (public and private) and establish an immediate action plan to dispatch them within no more than 3 months.

Mario Fernández - Boletín CorralRosales - Derecho Corporativo - Contratación Pública - Sector Eléctrico - Ecuador

Specialist in Corporate and Goverment procurement
Mario Fernández, associate at CorralRosales
mfernandez@corralrosales.com
+593 2 2544144

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NOTE: The above text has been prepared for informational purposes. CorralRosales is not liable for any loss or damage incurred as a result of acting or failing to act on the basis of the information contained in this document. Any additional determined situation requires the specific opinion and concept of the firm in Quito / Guayaquil, Ecuador.

CORRALROSALES

Regulations for applying the 0% outflow tax rate on transfers of money abroad made by foreign airlines

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Regulations for applying the 0% outflow tax rate transfers of money abroad made by foreign airlines - CorralRosales - Lawyers Ecuador

Regulation NAC-DGERCGC21-00000040 issued by the General Director of the Internal Revenue Service and published in the Second Supplement of the Official Registry 550 of October 1, 2021, establishes the requirements to apply the 0% rate of Outflow Tax (ISD) on transfers of money abroad made by foreign airlines.

  1. Beneficiaries:


In order to apply the 0% rate, airlines must be designated by the authority of their country to develop in Ecuador activities of international transportation of passengers, cargo, a combination of them or cargo only.

  1. Application:


Prior to the transfer of money, the beneficiaries must submit to the financial institution or courier company the following:

  • The “Informative Declaration Form of Transactions Exempted or Not Subject to Outflow Tax “, using for this purpose box 819.

 

  • The documents that certify its quality of beneficiary, this is the designation by the authority of its country to develop in Ecuador activities of international transport.

Withholding certificates should not be issued for transfers of money abroad that are subject to 0% Outflow Tax rate.

  1. Reimbursement

If beneficiaries have made transfers of money abroad from October 1, 2021, and have been subject to 5% Outflow Tax, this tax must be reimbursed by the financial institutions or courier companies that made the withholding.

Andrea Moya - CorralRosales - Lawyer Ecuador

Specialist in Tax matter

Andrea Moya, associate at CorralRosales
amoya@corralrosales.com
+593 2 2544144

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DISCLAIMER: The previous text has been prepared for informational purposes. CorralRosales is not responsible for any loss or damage caused as a result 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

Suspension of workday on November 3rd

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Suspensión de la jornada de trabajo el 03 de noviembre - CorralRosales - Abogados Ecuador

On October 15th, 2021, the President of the Republic issued the Executive Decree 222, by which the following was established:

1.    To suspend of working day corresponding to November 03, 2021.

2.    The recovery of the working day for the private sector will be made by mutual agreement between employers and workers.

3.    During November 01, 02 and 03, 2021, the entities and agencies of the public sector shall guarantee the provision of public services.

Edmundo Ramos

Specialist in Labor Law
Edmundo Ramos, socio de CorralRosales
eramos@corralrosales.com
+593 2 2544144

Marta Villagómez

Specialist in Labor Law

Marta Villagómez, asociada de CorralRosales
mvillagomez@corralrosales.com
+593 2 2544144

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Presidential Decree No. 165

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Presidential Decree No. 165 - CorralRosales - Lawyers Ecuador

On August 18, 2021, President Guillermo Lasso issued a Regulation to the Arbitration and Mediation Law, through Presidential Decree No. 165 (henceforth “the Regulation”. It is worth mentioning that, until its promulgation, Ecuador did not have a similar regulation, and therefore, innumerable contradictory interpretations were generated that distorted the nature of our arbitration process. The Regulation mainly deals with arbitration and public contracts, preliminary measures, annulment actions, among others. The most relevant aspects are detailed below:

1.- Responsibility of Arbitrators

Under this new regulation, arbitrators are subject to liability for damages caused by intent or gross negligence. In addition, the parties involved may agree to arbitrate any action related to the responsibility of the arbitrators.

The arbitration institutions, their directors and employees are subject to an equal responsibility.

2.- Arbitrations and Public Contracts

The Regulation allows arbitration in public contracts with the State and public entities through the following ways:

– By celebrating an arbitration agreement prior to the emergence of the dispute.
– By celebrating an arbitration agreement post-dispute.
– By application of a law or international treaty that allows it.

The arbitrators may decide on the facts, acts or administrative actions referenced in the case, including acts of termination, expiration or penalties.

Furthermore, the Regulation allows a contractor to request an arbitration agreement for a contracting entity. Said agreement will be considered accepted if not replied within 30 days from its reception.

3.- Approval of the State Attorney General (SAG)

The Regulation establishes the need for prior approval by the SAG only for cases where international arbitration is agreed and when the dispute has arisen previously. In addition, the mediation acts which contain an agreement that exceeds twenty thousand dollars, must be approved by the SAG.

4.- Preliminary Measures

The Regulation allows the Court and emergency arbitrators to issue preliminary measures to:

– Maintain the status quo until the dispute is resolved.
– Prevent the continuation of any current damage or the materialization of imminent damage.
– Preserve assets pertaining to the process.
– Preserve evidence.
– Guarantee compliance with obligations related to the arbitration process.
– Preserve the jurisdiction of the court.

Further, it is possible to request measures to ordinary judges prior to the constitution of an arbitration tribunal, without implying the waiver of the agreement. The Court may modify, suspend, or revoke any preliminary measures, either at the request of the parties or ex officio, after notifying the parties

5. Nullity Proceedings

The nullity proceeding of an arbitration award must be resolved within 30 days from its presentation to the Provincial Court of Justice. The abuse of the right in the exercise of the nullity action will be sanctioned in accordance with Ecuadorian law.

To resolve the nullity action, the principles of minimal judicial intervention, specificity, estoppel, validation, and alternation will be observed.

6. Responsibility of the Public Official

Civil or administrative liability shall be incurred by the official who, having refused to sign a mediation agreement, would have caused a resolution against to the public entity, when it was reasonably foreseeable that, through mediation, a beneficial agreement could have been reached for said entity.

7. Mediation for Administrative Disputes

The State or public entities may resolve any administrative dispute by mediation, which may address issues such as: nullifying or modifying acts of termination, expiration, penalties, or fines, regardless of the body that issues them.

8. Scope of the Arbitration Agreement

The Regulation establishes that the arbitration agreement also applies to those whose consent to submit to arbitration is derived, according to the precepts of good faith, from their active and decisive participation in the negotiation, celebration, execution, or termination of the legal business that comprises the agreement. And, to those who intend to derive rights or benefits from the legal business (successors, assignees), and to the administrative bodies who started the actions.

9. Promotion of Arbitration

The Regulation indicates that arbitration will be preferred and promoted in disputes arising out of contracting processes that bind public administrations.

10. Party Autonomy

The parties may freely agree and determine the procedural rules to which the arbitration process will be subject. In the absence of this agreement, the Arbitral Tribunal will adopt the rules that it deems most appropriate for each specific case.

11. Confidentiality

The arbitration centers may include information related to the arbitration in their publications, provided that such information does not identify the parties. Similarly, arbitrators’ resolutions may be published solely for academic purposes.

During nullity proceedings, the parties may request the President of the Provincial Court to adopt measures to guarantee the confidentiality of the process (for example the non-identification of the parties).

12.- Mediation and Deadlines

The presentation of the request for mediation will interrupt the statute of limitations and expiration; These terms will begin to run once the mediation is over.

Edgar Bustamante

Specialist in Arbitration

Edgar Bustamante, associate at CorralRosales
ebustamante@corralrosales.com
+593 4 263 0441

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DISCLAIMER: The previous text has been prepared for informational purposes. CorralRosales is not responsible for any loss or damage caused as a result 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

The benefits of the ICSID Convention vis-à-vis foreign investors

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The benefits of the ICSID Convention vis-à-vis foreign investors - CorralRosales - Sofía Rosales - Lawyers Ecuador

During this past month, Ecuador’s ratification of the ICSID Convention and its direct influence on the attraction of foreign investment has been the subject of many comments.

Why is it key to attracting foreign investment? Dispute resolution under the ICSID Convention has many advantages, and particularly regarding arbitration, there are 3 main characteristics that make it so attractive to investors: (i) it is an institution specialized in international investments; (ii) it provides for the automatic recognition of awards; and (iii) it has its own procedure for annulment of awards. Below an analysis of these characteristics:

  1. Specialized institution in international investments:

Having an arbitration administered by ICSID gives the investor the security of having a global and independent institution specifically dedicated to the settlement of international investment disputes. It is often difficult for a foreign investor to invest in a country if, in the event a dispute arises, it would be resolved by the country’s own courts. This generates a disadvantage for the investor and a feeling of lack of protection, especially considering that local courts often do not have the necessary experience in this field.

In an arbitration administered by ICSID, an impartial arbitral tribunal, which is expert in the subject matter, and has an in-depth knowledge of international investment disputes- which are often the cause of disputes- is constituted.

  • Automatic recognition of awards:

The Contracting States – currently numbering 156 (including Ecuador) – are compelled to automatically recognize the award rendered under the ICSID Convention, as if it were a decision issued by the courts of that country, i.e., without the need to carry out the formal recognition procedure known as exequatur. This facilitates, simplifies, and significantly shortens the time in which the award is enforced, which means less time and costs for both the investor and the State.

  • Procedure for annulment of awards:

As a general rule in international arbitration, an action for annulment of an award is brought before the ordinary courts of the country of the seat of arbitration. On the contrary, in the case of an arbitration administered by ICSID, such action is brought before the Center itself, in such a way that that no local courts of any State are involved, but an ad hoc commission composed of 3 individuals selected from the list of arbitrators of the Center (other than the members of the tribunal that rendered the award, and of different nationalities from any of the members of such tribunal and the parties) is appointed.

In conclusion, the protection derived from the arbitration procedure under the ICSID Convention enhances the foreign investor’s environment, which, undoubtedly, added to other measures adopted by the government, could turn Ecuador into a sort of investment hub in Latin America.

Sofía Rosales
Asocciate at CorralRosales
srosales@corralrosales.com

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