“Simple” electronic signature, certified electronic signature, and scanned signature in contracts

la-firma-electrónica-simple-firma-electronica-certificada-y-firma-escaneada-en-los-contratos-mario-fernandez-abogados-ecuador

The COVID-19 pandemic has forced companies to adapt to the digital age through the use of Information Technologies (TIC’s) to guarantee the continuity of their operations, such as contract signing. The electronic signature has gained particular importance as a useful tool to avoid the parties’  physical concurrence when entering a contract. Also, it streamlines the process and improves document management.

Some people may confuse the electronic signature with the handwritten signature scanned and embedded in an electronic document; also, the electronic signature certified by an accredited local entity should not be confused with one that does not have said certification. 

This article analyzes the “simple” electronic signature, the certified electronic signature, and the scanned signature to differentiate them and determine the contract’s legal effects.

For the analysis, we assume a  contract between private parties that is not subject to any solemnity.

  1. “Simple” electronic signature and certified electronic signature

The electronic signature is regulated by the Law of Electronic Commerce, Signatures and Data Messages (hereinafter, “LCE”). It defines it as: “[…] the data in electronic form consigned in a data message, attached or logically associated with it, and that can be used to identify the owner of the signature with the data message, and indicate that the owner of the signature approves and acknowledges the information contained in the data message. “[1]

According to article 15 of the LCE, the electronic signature must meet the following requirements for its validity:

” a) Be individual and be linked exclusively to its owner;

b) That allows to verify the authorship and identity of the signatory unequivocally, through technical verification devices established by this law and its regulations;

c) That its method of creation and verification is reliable, safe and unalterable for the purpose for which the message was generated or communicated;

d ) That at the time of the creation of the electronic signature, the data with which it is created is under the exclusive control of the signatory, and,

e) That the signature is controlled by the person to whom it belongs. “[2]

The electronic signature has the same validity and  legal effects recognized in a handwritten signature (or physical signature).

The LCE does not use the denomination digital signature and electronic signature like in other countries to differentiate the electronic signature certified by an accredited entity before the competent authority in Ecuador (hereinafter, “Certified Electronic Signature”) from that electronic signature that does not have said certification (hereinafter, “Simple Electronic Signature”). The LCE calls both “electronic signature ”.

The electronic signature certificate is not a requirement for the validity of the electronic signature. According to the LCE, said certificate simply consists of “ […] a message that certifies the link of an electronic signature with a specific person, through a verification process that confirms their identity.”[3] and it is used mainly to “[…] certify the identity of the owner of an electronic signature […]”[4]

Consequently, the Simple Electronic Signature and the Certified Electronic Signature are valid. The difference between one and the other is in the presumption of legitimacy that the law grants to the Certified Electronic Signature when it is presented as evidence in a legal process:

“Art. 53.- Presumption. – When an electronic signature certified by an accredited information certification entity is presented as evidence, it will be presumed that it meets the requirements determined by law, and that consequently, the electronic signature data has not been altered since its issuance and that it belongs to the signatory ”. [5] (highlighted out of text)

It should be noted that the parties can agree to the use of electronic signatures generated through tools such as DocuSign, AdobeSign, among others. They do not necessarily have a local certification but are useful; they are within reach of any person, national or foreign, and expedite business.

When electronic signatures have a certificate issued and accredited by a foreign entity, it is possible to revalidate it[6] before an accredited Ecuadorian entity[7], with the same value as a local certificate. Notwithstanding this, the parties may agree to the use of electronic signatures and certificates that are not accredited. That agreement will be legally valid[8].

In short, if the Simple Electronic Signature meets the requirements provided for in the law, and its use is agreed between the parties, it can be used to sign contracts and it cannot be deprived of legal effects because it does not have a local electronic signature certificate. However, it will not enjoy the presumption of legitimacy that the LCE grants to the Certified Electronic Signature.

  1. Scanned Signatures

The Scanned Signature is only a facsimile of an original handwritten signature (hereinafter “Scanned Signature”). All a person has to do is scan their handwritten signature or that of a third party contained in a physical document to generate it and incorporate it into an electronic document.

The Scanned Signature is not regulated in the LCE, but it can be valid as long as the parties acknowledge such validity and it is part of a data message [9](eg in a document attached to an email). This is due to the principle of autonomy of the will and in view of the fact that data messages and documents incorporated by reference have the same legal value as written documents, as provided by law. In order to guarantee the validity of the Scanned Signature, it is important to observe the provisions of the LCE when sending, receiving and keeping the data message that contains the signed contract.

In conclusion, the Scanned Signature produces binding effects, provided that: (i) the parties so agree; (ii) the signed document is part of a data message and (iii) it is possible to access said data message, for later consultation. However, since this type of signature is not generated through a system that guarantees its authenticity, authorship and integrity, it cannot be considered an electronic signature.

[1] Ecuador, Law of Electronic Commerce, Signatures and Data Messages, Official Register Supplement 557, April 17, 2002, Art. 13.

[2] Ibidem, Art. 15.

[3] Ibidem, Art. 20.

[4] Ibidem, Art. 21.

[5] Ibidem, Art. 53.

[6] Ibidem, First General Provision.

[7] Ecuador, Regulation to the Electronic Commerce Law, Signatures and Data Messages, Official Registry 735, December 31, 2002, Art. 16.

[8] Ecuador, Electronic Commerce Law, Signatures and Data Messages, Official Registry Supplement 557, April 17, 2002, Art. 28.

[9] According to the Electronic Commerce Law, a data message “[…] It is all information created, generated, processed, sent, received, communicated or filed by electronic means, which can be exchanged by any medium. The following electronic documents, electronic records, electronic mail, web services, telegram, telex, fax and electronic data exchange will be considered as data messages, without this enumeration limiting its definition. “

Mario Fernández García
Asociado en CorralRosales
mfernadez@corralrosales.com

Regulatory improvement based on the identification, review, and elimination of market entry barriers

mejora-normativa-basada-en-la-identificacion-revision-y-eliminacion-de-barreras-de-entrada-al-mercado

The Superintendency of Market Power Control (SCPM) published the “Methodology for the identification, review, and elimination of regulatory barriers” on November 5, 2020. It will serve as a guide to remove regulatory barriers to promote the participation of various operators in the market.

The Constitution establishes the principle of the prevalence of public interest over private interest as a guide for state and social activity and recognizes the right of people to develop economic activities, individually or collectively, in accordance with the principles of solidarity, social and environmental responsibility and the power of State intervention in economic activities to promote forms of production that ensure the welfare of the population and discourage those that violate their rights or those of nature.

State intervention through the regulation of economic activities is legitimate as long as it achieves a balance of these guarantees and powers, in the sense that the regulatory restrictions imposed on the entry and permanence of economic operators in the different markets are useful, reasonable, proportionate, and sufficient to guarantee public interest but not constituting an entry barrier for the development of efficient markets.

The methodology developed by the SCPM is intended to promote free competition and market efficiency, by verifying the legitimacy of regulatory barriers and, based on this analysis, the subsequent proposal for regulatory improvements or their elimination.

The procedure comprises two phases: on the one hand, the test of legality, in which the authority’s faculties to issue the regulation under analysis are verified, and then the coherence of said regulation with the law in force, in consideration of the hierarchy of the norms determined in the Constitution. If it is determined that the regulation is illegal in the first phase, either because the authority did not have the faculty to issue it or because it contradicts a regulation of higher hierarchy, the SCPM must propose its elimination.

If the regulation passes the test of legality, in the second phase, the SCPM must weigh the reasonableness and proportionality of the restriction it imposes, against the protected legal good: the public interest. For this analysis, the SCPM must determine, in the following order:

  • The appropriateness of the measure imposed by the regulation to achieve the purpose it pursues. That is, if the means employed – the restriction imposed – is indeed useful to protect the public interest.
  • The need for the measure: At this point, it must be determined if there are less restrictive alternative measures useful to achieve the goal.
  • The proportionality of the measure in the strict sense: In other words, the weighting aimed at balancing the degree of restriction imposed by the regulation and the importance of the legal good that it seeks to protect.

If, after this analysis, the SCPM determines that the rule that imposes the entry barrier is not reasonable, it will propose improvements or elimination, as appropriate.

Several countries in the region have recently initiated regulatory review processes to implement improvements to eliminate regulatory entry barriers that imply illegitimate restrictions on competitiveness. Colombia issued the Anti-paperwork Law in 2019. In Peru, citizens can report regulatory barriers that they consider illegitimate to the antitrust authority and its decision regarding, for example the non-applicability of such regulation (with general or particular effect, depending on the case) is binding on the administrative authorities that issued such regulation.

In Ecuador, the review of regulatory barriers is carried out solely by order of the Superintendent of Market Power Control or the Technical General Intendant, either: (i) ex officio (ii) based on a request of a public administration entity, or  (iii) in application of a recommendation issued by the SCPM study divisions. However, in the introduction of the Methodology for the identification, revision, and elimination of regulatory barriers, the Superintendent of Control of Market Power expressly encourages the public to collaborate to identify regulations that fall under these parameters. Since there is no specific procedure for the public to request the review of regulatory barriers, the request would be based on the petition right guaranteed in the Constitution.

We will have to wait for the practical application of the “Methodology for the identification, review, and elimination of regulatory barriers” to determine if the recommendations made by the SCPM have a sufficient ground of legality and reasonableness so that the corresponding authorities are compelled to implement them.

Ana Samudio
Associate en CorralRosales
asamudio@corralrosales.com

Arbitration in investment contracts

arbitraje-en-los-contratos-de-inversion-jimmy-rodriguez-abogados-ecuador

The economic crisis, worsened by the pandemic, has forced Ecuador to place greater emphasis on its interest in attracting national and foreign investment. Several measures and mechanisms have been designed to achieve this objective. Among these mechanisms, the investment contract draws the attention of several investors since it offers stability in tax incentives[1] and, tax stability for contracts that exceed US $ 100 million, and large-scale mining projects. Another feature of the investment contract, which attracts investors, is the possibility of using arbitration as a dispute resolution mechanism.

In August 2018, the Law for Productive Development, Attraction of Investments, Employment Generation, Stability and Fiscal Balance amended the Code of Production, Trade and Investment (COPCI) in order to force the State to agree to arbitration to resolve disputes generated in investment contracts[2] and also to agree to arbitration in investment contracts that exceed US $ 10 million[3].

The first unnumbered article included after article 16 of the COPCI provides: “Investment contracts.- The Ecuadorian Government shall agree to national or international arbitration to resolve disputes generated through investment contracts, in accordance with the Law.”

As a general rule, in order for two or more parties to be able to submit their disputes to the arbitration jurisdiction, the manifestation of that will is required. Unless stipulated in international instruments, article 42 of the Arbitration and Mediation Law requires the express authorization of the Office of the Attorney General for an entity of the Ecuadorian public sector to submit to international arbitration. In light of this, it is worth asking, could the Attorney General refuse to accept arbitration as a mechanism for the resolution of disputes in investment contracts? In an investment contract without an arbitration clause, is the State obliged to submit to arbitration a dispute arising from that contract?

In cases of disputes between investors and countries with legal provisions similar to those mentioned above, investment arbitration case-law favors arbitration. In the award of jurisdiction for the case of Tradex Hellas S.A. v. Republic of Albania, the arbitration tribunal considered that the consent of the State to submit disputes to arbitration jurisdiction was included in its legislation, when it stated:

“… although consent by written agreement is the usual method of submission to ICSID jurisdiction, it can now be considered as established and not requiring further reasoning that such consent can also be effected unilaterally by a Contracting State in its national laws the consent becoming effective at the latest if and when the foreign investor files its claim with ICSID making use of the respective national law. Therefore, the 1993 Law together with Tradex’s Request for Arbitration must be considered as sufficient consent (…).”[4]

In the case Zhinvali Development Ltd. v. the Republic of Georgia the court found that despite the absence of a written arbitration agreement between the parties, the Georgia Investment Law contained a written offer to submit the dispute – among others – to the jurisdiction of ICSID, and that this constitutes written consent:

“Here, at the time that the Claimant filed its Request for Arbitration on December 3, 1999, there was (a) no bilateral investment treaty in force between Ireland and Georgia and (b) no written agreement between the Parties that submitted disputes to ICSID jurisdiction. Accordingly, the question becomes whether Article 16(2) of the 1996 Georgia Investment Law, in spite of Article 19 of the earlier 1994 Georgia Concession Law, did constitute Georgia’s written offer to submit this dispute to ICSID, which offer was later accepted by the Claimant when it commenced this arbitration.”[5]

In the case of Southern Pacific Properties (Middle East) Limited v. the Arab Republic of Egypt[6], the arbitral tribunal concluded that the phrase “shall be resolved”, referring to disputes, is a mandatory provision.

In light of these arbitration awards, the provision contained in the first unnumbered article included after article 16 of COPCI has two characteristics. The first is a mandatory provision for the State and, the second is an offer to submit to arbitration, which can be made effective at the time of initiating an arbitration procedure.

In conclusion: there are solid legal grounds for determining that any dispute arising from an investment contract should be submitted to arbitration jurisdiction, even if the respective contract does not contain an express convention on that matter.

[1] Specifically, stability in the exoneration of the Tax on the Outflow of Foreign Currency for the distribution of dividends and importation of capital goods for the term of the contract

[2] First unnumbered after article 16 of the COPCI

[3] Second unnumbered after article 16 of the COPCI: “Arbitration.- For investment contracts that exceed ten million dollars of the United States of America, the State must agree to national or international arbitration in law, in accordance with the law. […] ”

[4] Decision on Jurisdiction Tradex Hellas SA v Republic of Albania, ICSID ARB /, 1996

[5] 94/2Zhinvali Development Ltd. v. Republic of Georgia ICSID Case No. ARB / 00/1, 2001

[6] Southern Pacific Properties (Middle East) Limited v. Arab Republic of Egypt, ICSID Case No. ARB / 84/3,

Jimmy Rodríguez
Associate at CorralRosales
jirodriguez@corralrosales.com

Protection of Test Data for Medicines and Agricultural Chemicals

prueba-protection-of-test-data-for-medicines-and-agricultural-chemicals

Test data is the necessary information required by the health Authority to approve the marketing of a medicine or agricultural chemical product in order to guarantee its safety and efficacy. This information is protected by intellectual property regulations to avoid possible unfair commercial use. Ecuador has signed several international instruments that impose the obligation to guarantee the protection of this data. Internal regulations have developed this protection.

When we talk about intellectual property, we usually think exclusively about patents, trademarks and copyrights, however, there are some other modalities that are also part of intellectual property, such as, for example, test data. The importance of its protection lies in avoiding the use, by unauthorized third parties, of valuable information about the research and development process of a novel product, activities that demand a considerable economic and human effort on the part of its creators.

Test data is often associated with patents; however, these are figures that, although both are closely related to the development of drugs and agrochemicals, the test data has independent protection.

The Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) established a minimum standard of protection to prevent unfair commercial use of test data[1]. Similarly, Decision 486 of the Andean Community provides for this special protection “against any disclosure, except when necessary to protect the public, or unless measures are adopted to guarantee data protection, against any unfair commercial use.[2]

In the Trade Agreement between the European Union and its Members on one hand and Colombia, Peru and Ecuador on the other, the protection of undisclosed information is included within the intellectual property rights.[3]

In the aforementioned international instruments, although the protection of test data is established as an obligation for the Members, a specific period of time is not foreseen for its material protection, which is therefore regulated by each State. However, in the case of Ecuador, the Organic Code of the Social Economy of Knowledge, Creativity and Innovation establishes:

 “Article 508.- Test Data.- Test data or other undisclosed data on safety and efficacy of pharmaceutical products and agricultural chemical products, in accordance with the provisions of Article 27 number 7 of the Organic Law of Market Power Control, when the information contained in the data meets the following conditions:

  1. a) It is secret in the sense that it is not, as a body or in the precise configuration and assembly of its components, generally known or easily accessible to people introduced in the circles in which the type of information in question is normally used;
  2. b) It has a commercial value because it is secret; and
  3. c) Has been subject to reasonable measures, in the circumstances, to keep it secret, taken by the person who legitimately controls it.

 Article 509.- Exclusivity of test data.- When the competent authority requires as a condition to approve the commercialization of pharmaceutical or agricultural chemical products that contain new chemical entities, the presentation of test data or other undisclosed information on safety and efficacy, whose elaboration demands a considerable effort, will be granted an exclusivity period of five years from the date of marketing approval for pharmaceutical products, and ten years for agricultural chemical products. “

Thus, Ecuador has provided a period of five and ten years of exclusivity for the protection of test data on drugs and agricultural chemicals, respectively.

The National Service for Intellectual Rights -SENADI- has reiterated that, although the Agency for Regulation and Control of Phytosanitary and Zoosanitary and the Agency for Regulation, Control and Sanitary Surveillance are the entities in charge of defining the requirement to submit test data prior to granting a marketing authorization and to define its deposit and safeguard procedures, the test data protection system remains in force and that said protection is without a doubt a modality of Intellectual Property.[4]

On August 21, 2020, the State Attorney General’s Office issued a statement regarding agrochemical products expressly stating that, since the Agency for the Regulation and Control of Phytosanitary and Animal Health – AGROCALIDAD- is the competent Authority to approve the commercialization of agricultural chemical products, it is also responsible for granting the period of exclusivity when it has required the submission of test data on their safety and efficacy.[5]

This protection system and the corresponding establishment of a period of time for the exclusivity of the test data guarantees that, at least during that period, any interested party who intends to market a medicine or agrochemical product with a new chemical entity, must carry out their own studies and trials that prove its effectiveness and efficacy. Thus, avoiding the use of test data that have already been developed by a third party. Hence, it is vitally important that the public entities called upon to intervene in this protection system work in an integrated manner to ensure compliance with these international and national provisions.

[1]Article 39 (…) 3. Members, when they require, as a condition for approving the marketing of pharmaceutical products or agricultural chemical products that use new chemical entities, the submission of undisclosed tests or other data, the preparation of which requires considerable effort , will protect that data against any unfair commercial use. In addition, Members shall protect such data against disclosure, except where necessary to protect the public, or unless steps are taken to ensure the protection of data against unfair commercial use. ”

[2] “Article 266.- The Member Countries, when they require, as a condition to approve the commercialization of pharmaceutical products or agricultural chemical products that use new chemical entities, the presentation of undisclosed test data or other, whose elaboration involves a considerable effort, will protect those data against any unfair commercial use. In addition, Member Countries will protect this data against any disclosure, except when necessary to protect the public, or unless measures are adopted to guarantee the protection of the data, against any unfair commercial use. The Member Countries may take the measures to guarantee the protection enshrined in this article. ”

[3] “5. For the purposes of this Agreement, intellectual property rights include: (…)

  1. j) protection of undisclosed information. “

[4] Official Letter No. SENADI-DG-2019-0402-OFLetter

[5] Official Letter No. OF-PGE-09818

Katherine González H.
Associate at CorralRosales
katherine@corralrosales.com

Advantages of Having an In-house Secondment Lawyer

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Why can having a secondment lawyer be advantageous for a company? The needs in the field of business have changed over time; having quality legal advice at the right time has become essential. Not all companies have an in-house legal team and, if they do, it is usually a small team that is very busy with the core business of their company; therefore, they usually look for one or more external firms to provide the necessary support when needed.

Sometimes unexpected needs arise, such as large projects or new lines of business that require specialized attention and special advice. It is then when a lawyer in secondment can be an excellent solution for the company.

This service consists of assigning the company a lawyer from a trusted firm to temporarily form part of the in-house legal team allowing said in-house team to focus on the core business and its internal client. Thus the qualified reinforcement, who also has all the usual support of the firm, can take on any special project; it could be M&A, a new line of business, any complex labor or intellectual property issues, among other options.

The decision to have an external lawyer within the team can result in great benefits for all types of companies, from start-ups, through medium-sized companies, or large multinationals that need quality legal solutions. In addition to having a full-time external lawyer dedicated to their matters, they will continue to have the support and experience of their own legal team.

In this way, the company receives a personalized, continuous service adapted to the specific situation and industry. The immediacy and development of the relationship with the lawyer from the trusted firm will redound to benefits for both parties.

What are the benefits of choosing an in-house service?

  • Integration: In every way: understanding the client’s needs first-hand and adapting to absolutely all aspects, such as, for example, reporting.
  • Immediacy: The fact that the lawyer works directly in the client company will speed up the advice and maintain a much more direct communication, which will also translate into very significant cost savings.
  • Experience: The client company will have a lawyer highly specialized in their sector, who will also benefit from an even more intensive knowledge of the company and its policies. In addition to this, our lawyer has the continuous support of the rest of the CorralRosales team.
  • Effectiveness: Starting from the very first day of the legal secondment, thanks to continuous collaboration and prior knowledge about the client and their industry.
  • Collaboration: The relationship between the law firm and the client company will be deepened allowing them to become true ‘partners’ focused on business.
  • Flexibility: There is a total adaptation to the specific needs that the company requires and all in real time.

In addition to being advantageous for the client company, this will provide greater tools to the lawyer who will become part of the in-house team temporarily. In this way, he will be at the center of the client’s business, deepening into the knowledge of the client’s day-to-day life and learning about their policies and ways of doing business. Once this period is over, the lawyer will get to know his client in depth and will bring this experience back to his usual team, generating benefits for all the parties involved.

Rafael Rosales
Partner at CorralRosales
rrosales@corralrosales.com

Notarial Acts and Contracts Through Electronic Means

notarial-acts-and-contracts-electronic-means-ramon-paz-mino-lawyers-ecuador

By legal provision, previously, acts and contracts had to be performed and granted before a Notary Public as a single act. Thus, all the deeds and some proceedings conclude with the famous phrase “before me, in my presence as a single act, to which I attest.-”

Ecuador had to wait for a pandemic that paralyzed a large part of the sectors to realize that technological-telematic means are useful and allied tools in all areas, which energize productive activities, including those who provide legal services.

Now, it is possible to hold mediation hearings by any technological means through the centers authorized by the Judiciary Council and to sign the corresponding minutes with electronic signatures. It is also allowed to hold judicial, arbitration and constitutional hearings by these means. However, certain regulations already did establish the appearance at proceedings and hearings through telematic means before confinement. Since the entry into force of the Organic Law of Humanitarian Support to Combat the Health Crisis Derived from Covid-19 on June 22, 2020, it is possible that certain acts, contracts and notarial proceedings be carried out by telematic, electronic or remote means . For this purpose, the Judiciary Council had to issue the corresponding regulations in which it determines the acts, contracts and proceedings that, because they require the physical intervention or the verification of the intervening parties, cannot be carried out with the appearance of the grantors or participants through the use of telematic, electronic or remote means.

Resolution 075-2020 of the Plenary of the Judiciary Council, issued on July 7, 2020, contains the Regulation for the Progressive Implementation of Acts, Contracts and Notarial Proceedings through the Use of Electronic Means and Reduction of Fees (hereinafter the “ Regulation ”). It established two phases. In the first one, article 3 of the aforementioned Regulation provides the following acts, contracts and proceedings that may be   carried out electronically:

  1. Protocolization of public or private instruments by court order or at the request of an interested party.
  2. Electronic certification of a dematerialized document.
  3. Electronic certification of original electronic document.
  4. Certification of the document materialized from the website or from any electronic support.
  5. Registration of lease contracts with the request electronically signed by the applicant.
  6. Electronic petitions to establish reasons and notes on the margin.
  7. Subscription of minutes of requirements for the constitution in arrears to the debtor party.
  8. Subscription of minutes for the fulfillment of the contract promise, as well as for the delivery of what is owed and the execution of obligations.
  9. Incorporation of companies, provided that the grantors have expressed their express will to grant the deed electronically and they have electronic signatures; and,
  10. Constitution of associations or consortia in matters of public procurement, provided that the grantors have expressed their express will to grant the deed electronically and they have electronic signatures.

All requests for voluntary jurisdiction that are presented before a notary public by grantors who have an electronic signature may be sent electronically. Likewise, notaries may receive the corresponding minutes submitted by the attorneys who require the service, provided they have an electronic signature.

In the second phase, it was established that the Council of the Judiciary will decide on the inclusion of new acts, contracts and notarial proceedings, once the corresponding budgetary allocations are in place. It should be noted that the Judiciary Council, aware of the technological difficulties, did not provide that these acts, contracts and proceedings be compulsorily executed by these means, which implies that it will be optional for users of the notarial system.

Resolution 083-2020 of the Plenary of the Judiciary Council dated July 28, 2020, approved the Operational Instructions for the Progressive Implementation of Acts, Contracts and Notarial Proceedings through the Use of Electronic Means. which made the operational scope of the acts, contracts and proceedings feasible by electronic means, as referred to above. However, so far phase two foreseen in the Regulation has not initiated.

In conclusion, the use of electronic means for notarizations is not a novelty, but the inclusion of other acts and contracts has been a significant advance in favor of the speed of business and in judicial and arbitration activity that have been seriously affected by the pandemic. However, the legislators and the Judiciary Council remain in debt. The former because it gave the Council the power to limit the acts, contracts and proceedings that could be entered by electronic means; and, the latter, because it limited them too much. Let us hope that the Judiciary Council includes other acts, contracts and necessary procedures in the execution of the planned phase two.

Ramón Paz y Miño
Senior Associate at CorralRosales
rpazymino@corralrosales.com

The exhaustion of Instances by the State: A Problem in Intellectual Property

The administrative authority and one or more private parties intervene in the vast majority of administrative procedures regarding Intellectual Property. Once this stage has been exhausted, resolutions issued by the National Intellectual Rights Service (SENADI) can be judicially challenged before the competent Administrative Contentious Court. The processes culminate with the sentence that agrees with one of the parties. With its execution, the mission of imparting justice is considered accomplished. However, the experience in intellectual property matters is different.

Once the client obtains a favorable ruling from the Contentious Administrative Court, SENADI usually files a cassation extraordinary appeal to prevent the execution of the Court’s ruling. This attitude is not justified because it is a dispute between private parties, in which the resources of the State are not compromised.

The competence of the aforementioned institution to appeal adverse decisions is not questioned, since we understand that it wants its criteria to prevail, however, it is necessary to consider that the filing of these appeals by SENADI is not always motivated to protect public interests.

In terms of intellectual property, there is no justification for SENADI in all cases to try to nullify the sentence so that its legal criteria prevail. With this attitude, state resources are wasted because the Supreme Court must allocate time to address these challenges. Worse still, in cases in which SENADI files an extraordinary protection action before the Constitutional Court.

It is very difficult for Intellectual Property clients to accept this behavior from the administrative authority, which seems to be destined to hinder the timely exercise of the corresponding rights. This reality is even worse in the case of patents, whose validity is 20 years from the filing of the application, since the administrative and judicial procedures can consume half of that time and in some cases the full term.

The justice system is saturated in Ecuador; responsibility, effective judicial protection and legal security do not go hand in hand with the principle of opportunity. The exhaustion of resources and actions by SENADI should not become the rule, since this causes the processes to be delayed, the execution of the sentences postponed and greater public and private resources spent.

Ruth Holguín
Associate at CorralRosales
ruth@corralrosales.com

Employee Leave of Absence in Ecuador

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According to Ecuadorian law employees are entitle to 8 legal leaves of absence, as detailed below:

LEAVE OF ABSENCE REASON DURATION
Maternity Birth of a child (general rule) 12 weeks
Multiple birth 10 additional days
Child with disability or serious congenital diseases. 3 additional months
Paternity Birth of a child 10 days
Multiple birth or cesarean section 15 days
Premature children or in conditions of special care 8days additional
Birth of a child with a disease: degenerative, terminal, irreversible or with severe disability (75% or more) 25 days
In the event of the mother’s death during childbirth or while on maternity leave, the father is entitled to enjoy all, or as appropriate, the remaining part of the period of leave corresponding to the mother Up to 12 weeks
Unpaid leave for childcare After maternity or paternity leave employee may request a unpaid leave to care for the newborn 9 months in addition to maternity or paternity leave
Adoption Adoptive parents are entitled to a leave from the date the child is legally delivered to them. 15 days
Illness Medical rest for common or occupational illness Indeterminate
Child Illness Care for  hospitalized child or with  degenerative disease 25 days (annually)
Family leave for death Death of the spouse, common-law partner, relatives up to 2nd degree of consanguinity or affinity to the worker 3 days
Education Employees with more than 5 years in the company that obtain a scholarship for studies abroad, in fields related to work activity, will be entitle to a leave of absence.

* Applies to employers with 15 or more employees and the number of scholarship holders does not exceed 2%.

Up to 1 year, entitled to payment for 6 months.

Maternity and sick leave are subsidized by IESS, under the following conditions:

  • In case of maternity leave, IESS requires that the affiliate maintain at least 12 continuous contributions prior to childbirth and that the employer has not registered arrears during the mentioned period. In these cases,  IESS will pay the employee a cash allowance of 75% of the average remuneration the last 3 contributions paid to IESS, for the period of 12 weeks (the remaining 25% must be covered by the employer).
  • To access sickness allowance, according to the rest ordered by the physician, the affiliate must maintain at least 6 continuous contributions prior to the month in which the disability occurred and the employer must not register arrears during that period. If these conditions are met, as of the 4th day of disability, IESS will pay the employee a cash allowance for a period of up to 6 months, in the following proportions: (i) the first 70 days, employee will receive 75% of the average of the 3 last contributions; and, (ii) in the remaining period, 66% of the same average. The employer is only obliged to pay 50% of the remuneration during the first 3 days of disability.

The Labor Code also provides leave for domestic calamity or force majeure. Although the norm is not clear in which situations these types of leave should be granted, it gives the employer the power to qualify and authorize them. In this case, the worker maintains the right to receive his/her remuneration – or a percentage of it – for the duration of the leave.

Upon agreement of the parties, the employer may grant unpaid leave to cover different needs of the employee (e.g. studies abroad).

The main characteristic of this kind of leave is that the employment relationship continues and the employee does not lose his seniority in the company. Since the employee will not be receiving income during the leave, the obligation to make contributions to  IESS is not generated. Therefore, an exit notice must be filed in the Institution’s platform.

 

Marta Villagómez
Senior Associate at CorralRosales
mvillagomez@corralrosales.com

Auxiliary Services to Air Transport: What is behind a flight operation?

flight-operation-auxiliary-services-aviation-veronica-olivo

If we ask any passenger about their next trip, we find that most of them think that during the flight they are in the hands of the pilot and we tend to think the same way. Well, the truth lies in the fact that no flight crew can operate without a large team of people doing their groundwork.

Behind the operation of a flight there are providers of “Auxiliary Services to Air Transport” that are technical services specialized in supporting air transport operations. Ground handling addresses many services required for the aircraft; from the time it arrives at the terminal to the time it departs on its next flight. Speed, efficiency and precision are important in ground-handling services to minimize response time. This is the time during which the aircraft must remain parked in the terminal; these services include the following activities:

1. Operational Flight Dispatch

There is a team in the operations center of each airline, which monitors every minute of the flight.  They are called the eyes and ears of the crew. So much so that, when the pilot announces a change of route due to weather conditions, for example, it is likely that this decision was not made by the pilot in the cabin of the plane, but by the flight dispatcher in the center of ground operations that could even be hundreds of kilometers away from where the aircraft is located.

Dispatchers not only plan the flight, they monitor it and are ready to provide any information pilots require, at any time.

2 Ramp Service

These are services that are provided on the airport platform or runway and are directly related to all the activities that are carried out with the aircraft to execute the flight. Among the main ones we find:

  • Guide the aircraft in and out of the parking position, both at landing when it is routed to the passenger sleeves to disembark, and at takeoff when the aircraft is driven to the runway.
  • Load water for the toilets in the aircraft and drain.
  • Supply engine-starting units.
  • Handle the loading and unloading of luggage, generally by means of belt loaders and luggage carts.
  • Handle air cargo, generally through loading platforms and loaders.
  • Refueling, which can be done with a refueling tank truck or refueling pump.
  • Provide power on the ground (so that the engines do not need to be running to provide power to the aircraft on the ground).
  • Provide passenger stairs (used in place of a bridge or aerial stairs. Some airlines on a budget use both to improve response speed).
  • Provide wheelchair lifts, if passengers require them.
  • Supply hydraulic mules (units that provide hydraulic energy to an aircraft externally).
  • Provide de-icing equipment, which is the process of removing snow, ice or frost from the surface of the aircraft using chemicals that not only defrost, but also protect the surface and help delay the formation of ice during a certain period of time, or avoid ice adhesion to facilitate mechanical removal.

3. Passenger services

These services are carried out at the airport terminal and range from the passenger’s arrival at the airport to boarding the aircraft or leaving the terminal. Among the main tasks we find:

  • Provide counter services for the registration and billing (check-in) of each passenger prior to boarding the flight.
  • Provide assistance to passengers on arrival and departure at the boarding gate.
  • Staff the transfer and customer service desks.

4. Catering Service

It consists of loading and unloading food and beverages that will be served during the flight for both passengers and crew. The service is not limited to preparing food, but it must comply with sanitation standards, adequate forms of packaging, as well as waste management. This service should ensure, as far as possible, minimal preparation activities in the air, limiting them to heating the food when necessary.

5. Cleaning and disinfection of aircraft

The first step is cleaning the exterior of the aircraft, the fuselage. Care is taken in areas such as propellers, brakes and the surroundings of electric chargers to ensure that there are no elements that cause static. While the exterior cleaning is carried out, so is the cabin work, both cleaning and disinfection. For these activities, there are international standards that must be followed and are constantly updated.

It must be taken into account that the majority of airlines subcontract these auxiliary services and that their providers are generally the same airports, and assistance agents that are duly qualified by the aeronautical authority of each country or even another airline. According to the International Air Transport Association (IATA), it is estimated that airlines outsource more than 50% of ground-handling services to fulfill their operations at airports around the world.

Therefore, compliance with local regulations and excellence in the provision of these services make airlines opt to subcontract them, allowing operations to be carried out quickly and effectively. All this translates this efficiency into greater safety of operations and of course optimization and better profits.

 

Verónica Olivo
Associate at CorralRosales
volivo@corralrosales.com

Advantages of the simplified joint-stock company

simplified-joint-stock-company-corporate-milton-carrera-lawyers-ecuador

The main advantage of the Simplified Joint-Stock Company is its flexibility to adapt to the particularities of each business. Its formation process is very agile and its shareholders have ample freedom to establish the rules of its operation in the bylaws. Therefore, entrepreneurs can count on a legal figure that allows them to develop formal businesses that are entirely adapted to the will of the partners and the peculiarities of the businesses.

Small and medium-sized companies will be the most benefited by this new type of corporate association. Its main advantages are the following:

  1. Incorporation of the company: The creation of this company does not require a public deed, it is constituted by a private document, with the exception of those cases in which real estate property is contributed.
  2. It can be a single-member company: The company can be incorporated and exist with a single shareholder, natural or legal person.
  3. Flexible capital structure: There is no minimum capital and there is no percentage that must be paid at the time the company is incorporated. However, the term for the payment of the capital will not exceed 24 months.
  4. Multiple corporate purpose: The corporate purpose can be broad, that is, it can include many activities without being related to each other. If the corporate purpose is not specified in the act of constitution, it is understood that the company may carry out any lawful activity.
  5. Indefinite term: It is not mandatory to establish a term for the company. Failure to do so implies that it is indefinite.
  6. Principle of existence of the company: The existence of the company occurs with the registration of the contract or unilateral act of creation before the Registry of Companies of the Superintendence of Companies, Securities and Insurance. It is not required the registration before the Mercantile Registry, which simplifies the procedure and reduces costs.
  7. Free negotiation of the shares: The shares are freely negotiable unless the bylaws states the prohibition to do so. This prohibition may not last for more than 10 years.
  8. Change of control in the shareholder company: The bylaws can establish the obligation of shareholder companies to inform the Simplified Joint-Stock Company about any operation involving a change of control. In the event of a change of control, the general meeting of shareholders of the Simplified Joint-Stock Company may exclude shareholder companies in which such event has occurred.
  9. Shareholder agreements with binding force: Shareholder agreements on the transfer of shares, preference and restrictions to transfer them or to increase share capital, exercise of the right to vote, share´s representative at the meeting and any other lawful matter are mandatory for this type of company. To comply with this, such agreements must be kept in the offices where the administration of the company works. Otherwise, without affecting the force and effect between the parties, such agreements do not bind the Simplified Joint-Stock Company.
  10. Auditis optional: The existence of an audit body is not mandatory, but the bylaws may foresee its creation.

Milton Carrera
Senior Associate at CorralRosales
mcarrera@corralrosales.com