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Crackdown on intellectual property rights infringement

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CorralRosales’ in close collaboration with the authorities, conducted a significant operation, resulting in the seizure of more than 18,000 counterfeit shoes.

Distributing these infringing products nationwide infringed upon registered and widely recognized intellectual property rights. Following the due legal process, penalties may include fines and destruction of the infringing goods.

Such illegal activities aim to mislead consumers and profit from the reputation of established trademarks.

By reinforcing enforcement efforts, we help ensure a safer and more transparent market and keep counterfeits out.

This milestone reaffirms our unwavering commitment to combat intellectual property infringements and protect the market from illegal and deceptive practices. It also highlights the importance of ongoing vigilance and strong action to disrupt the supply chain of infringing goods.

#IntellectualProperty #IPR #Enforcement #AntiCounterfeiting #Quito #BrandProtection #LegalAction #MarketIntegrity

Andean Community: Non-commercial use of well-known marks and infringement actions – new jurisprudential precedents

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The Andean Community law states that the registration of a trademark confers on its owner two rights: (i) a positive right, which consists in the use, assignment, or licensing of the trademark, and (ii) a negative right, which gives the right to prevent third parties from registering identical or similar trademarks and from using it in the market without authorization. According to Article 155 of Decision 486 of the Andean Community Commission, the owner can take legal action against anyone who infringes these rights, provided that specified requirements are met.

In Prejudicial Interpretation No. 243-IP-2022, the Court of Justice of the Andean Community clarified the concept of negative rights. It stated that non-commercial trademark use cannot be used as grounds for infringement actions. The Court provided examples of non-commercial use, such as when a consumer, who is not a business or competitor of the owner, expresses disagreement with purchased products or services as an exercise of the freedom of expression.

The court also stated that well-known trademarks have special protection against unauthorized use by third parties, even for non-commercial purposes on an exceptional basis. It confirmed that, under certain circumstances, an action may be filed for unauthorized use.

On July 17, 2024, Prejudicial Interpretation 237-IP-2021 expanded the interpretation of the use of well-known trademarks by third parties for non-commercial purposes. The following special conditions for owners of well-known trademarks to prohibit their public use for non-commercial purposes were set:

  • Performing acts of public use of the notorious mark which are unrelated to the commercial use of the well-known mark.
  • Public use must cause damage to the well-known mark, which has materialized in the dilution of its distinctiveness and commercial or advertising value. This use must affect the distinctiveness or notoriety and not only its image.
  • The damage must be accurate, objective, and concrete, not a subjective perception or presumption. It must be proven; without damage, there is no infringement.
  • The damage must be unfair, i.e., the public use of the notorious trademark must be contrary to the Law.

Regarding this last requirement, the Court states that if the use of the notorious trademark implies exercising a right, there would not be unfair damage. However, it would dilute its distinctive force, commercial, or advertising value.

A consumer could file a formal complaint before the pertinent authorities or informally before his family, work, or social environment concerning the products or services identified under a registered trademark without this being considered an infringement of trademark rights. In the same way, if the trademark owner believes that this claim affects its prestige, actions could be brought if appropriate.

On the other hand, the Court firmly states that there is no trademark infringement or use of a trademark when individuals refer to a trademark or trade name in exercising their freedom of
expression petition, protest (peaceful), or complaint right.

Through this interpretation, the Court corroborates that the negative right (ius prohibendi) of the trademark owner is not unlimited, even for well-known trademarks, so that the use by third parties for non-commercial or industrial purposes cannot be considered an infringement of industrial property rights.

 

 

Andrea Miño
Associated in CorralRosales
andrea@corralrosales.com 

American Privacy Rights Act: a bill that promises a radical change for privacy in the United States

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Respect for the privacy of personal data has become particularly important in the digital era. Companies and governments collect and process information about our daily activities, which makes it essential to have rules that adequately protect the privacy of citizens.

A step towards data protection in the United States.

Although the United States does not have a specific federal law on data protection, an important step was taken on April 7, 2024[1], Republican Congress Cathy McMorris Rodgers and Democratic Senator Maria Cantwell, both from the state of Washington, introduced a federal privacy bill called the American Privacy Rights Act (APRA).

This bill creates a comprehensive regulatory framework for the protection of personal data in the United States. It is a significant step forward towards greater privacy protection for U.S. citizens.

Key aspects of APRA and its relationship with Ecuador.

APRA[2] addresses various aspects contained in most of the laws on the subject, including that of Ecuador, among them:

  1. Data Minimization: Limits the collection of personal data to the minimum necessary for the intended purpose.
  2. Transparency in privacy policies: Requires companies and suppliers to provide clear and accessible information about their data collection, use, and disclosure practices.
  3. Rights management: Grants individuals the right to access, rectify, and delete their personal data. In addition, the right to opt out of receiving targeted advertising.
  4. Designation of a Privacy or Data Security Officer: Establishes the obligation to designate an officer responsible for data security, who must be qualified and have the experience to perform the position effectively.

APRA news.

The APRA federal bill incorporates aspects related to artificial intelligence (AI) and data. These include:

  • Restricting the volume of data used in AI development: Applies the minimization principle to limit the amount of personal data used in the training and operation of AI systems.
  • Concept of “covered algorithms”[3]: Defines “covered algorithms” as any computational process that decides or facilitates human decision-making using data. This definition covers a wide range of AI systems, from the simplest to the most complex.
  • Obligations for entities using covered algorithms: Entities using covered algorithms will have multiple obligations, among which the most important are:
  1. Design evaluation: Evaluate the design of the algorithm to identify and reduce the risk of potential damage.
  2. Impact assessment: Evaluate the impact of the possible effects of the algorithm on individuals and society.
  3. Notice and opportunity to opt out: Provide the ability to opt out of the use of a covered algorithm if it is used to make “consequential decisions” (decisions that significantly affect an individual’s access to or enjoyment of essential goods or services).

Implications for Ecuador.

The enactment of APRA would have a significant impact in Ecuador, especially in the following aspects:

  1. Transborder data flow: It will facilitate the transfer of data between the United States and countries with equivalent data protection standards, such as Ecuador. This translates into:
  • Simplification of processes: Administrative and legal burdens are reduced for companies transferring data between the two countries.
  • Cost reduction: Costs associated with data transfer, such as implementing additional security measures, are minimized.
  1. International cooperation: It will allow international cooperation on data protection between the United States and other countries, including Ecuador. This will allow Ecuadorian authorities to:
  • Safer information sharing: Collaborate on investigations and data protection cases involving U.S. companies.

In conclusion, once approved, the APRA bill will represent a significant advance towards data protection in the United States and will have clear impacts in other countries, including Ecuador, as expressed in previous paragraphs.

[1]  https://energycommerce.house.gov/posts/committee-chairs-rodgers-cantwell-unveil-historic-draft-comprehensive-data-privacy-legislation

[2]https://d1dth6e84htgma.cloudfront.net/American_Privacy_Rights_Act_of_2024_Discussion_Draft_0ec8168a66.pdf

[3]  https://www.whitecase.com/insight-alert/proposed-american-privacy-rights-act-seeks-establish-comprehensive-national-framework

 

Thalía Ordoñez
Associate at CorralRosales
tordonez@corralrosales.com

Bitter victory: Delayed justice in the patent system in Ecuador

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Delayed Justice…

The Administrative Litigation Court ruled in our favor in a patent proceeding, correcting a mistake made by the local IP Office; we achieved protection, a victory, no doubt, but a bittersweet one.

This patent application was filed on January 23, 2006, under a political regime acting against patentability.

In the first instance, and within the absurdly long period it takes for the local IP Office to resolve a patent, patent protection was denied on February 9, 2012, to which we filed an administrative appeal with a new set of claims.

Contrary to the law and ignoring jurisprudential provisions, the IP Office considered that a new claim set could not be submitted in this instance and again denied protection using the same previous arguments, taking almost seven additional years.

We appealed judicially, trusting that the existing illegalities would be sufficient to correct the error and grant protection. This happened because we were fortunate enough to have competent Judges in the Court.

Unfortunately, the favorable ruling was issued when only three days of protection remained for the invention sought to be patented.

The question then arises: Is the justice obtained fair? Obviously not.

The need to press for the application of the accelerated patent system is now becoming imperative. Without patents, there is no development or investment. Once and for all, it is necessary to adopt the solutions already in the Law or compensate with additional protection time patents that, as in this case, have obtained protection three days before their expiration due to the absolute irresponsibility of the State. State that has also charged annuities for a non-existent right and the highest fees in Latin America for examination.

I consider this ruling a professional achievement. Reversing patent decisions in courts is not easy, but it is a failure of our country’s patent system. If we do not take these types of facts seriously and seek a correction that solves these problems at the root, we will continue, at best, obtaining unfair justice.

 

Eduardo Ríos
Partner at CorralRosales
eduardo@corralrosales.com

The National Intellectual Property Rights Service (SENADI) has nullified the registration of a trademark requested in bad faith

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Good faith, as a fundamental principle of the legal system, governs all areas of law, including trademark law. Under this precept, the actions of individuals are presumed to be carried out with the conviction of not harming third parties and within the framework of the law.

The registration of the trademark SAVOY TORONTO in class 30 (edible decorations for pastry and bakery products, cocoa-based beverages, chocolate-based beverages, chocolate bonbons, peanut (confectionery products based on), peanuts (confectionery products based on), cocoa, cocoa (beverages based on), cocoa (products based on), chocolate, chocolate (beverages based on), sweets, milk (cocoa with), milk (chocolate with) [drink]), was granted in 2021 under the presumption of being a good faith application, in favor of a natural person in Ecuador engaged in the marketing of food products.

The trademark was registered having fulfilled all necessary steps until the issuance of the registration certificate. However, it was not analyzed in a timely manner by the intellectual property authority, as the SAVOY TORONTO brand is one of the emblematic brands of Societé des Produits Nestlé in some countries of the region. At the time the trademark was requested, Nestlé did not have its trademark registration in Ecuador and therefore did not oppose it.

In 2022, Nestlé filed a nullity action against the SAVOY TORONTO trademark, claiming to be the legitimate creator and owner of the trademark rights, so the registration obtained by the applicant in Ecuador was made to perpetrate an act of bad faith and unfair competition, as the applicant was fully aware that it was a third party’s trademark and sought to take advantage of its fame and level of recognition among consumers.

In the nullity action, Nestlé demonstrated with convincing evidence that the request was made in bad faith, as it was practically impossible for the coincidence in the name of the trademark and the confronted products to occur as a mere coincidence, especially considering: (i) the high level of recognition of Nestlé’s brands; and (ii) that the applicant marketed products under the conflicting brands before applying for their registration in Ecuador.

Based on these grounds, by resolution No. OCDI-2024-202 of March 26, 2024, the National Intellectual Property Rights Service established that “It seems highly improbable that two different persons would have devised a distinctive sign with exactly the same terms to protect the same products, and whose registration in the Andean territory dates back to the year 2005.” and nullified the registration of the SAVOY TORONTO trademark. This resolution constitutes progress in the comprehensive protection of intellectual property rights, as the applicant’s intention in the trademark registration request was considered, not only the objective elements. The competent authority has made a correct assessment of the specific circumstances of this particular case.

 

Katherine González
Senior Associate at CorralRosales
katherine@corralrosales.com

The resolution adopted in Ordinary Session No. 062 – 2024 of the Judiciary Council on May 30, 2024, does not modify the expiration of terms

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The Judiciary Council, in the resolution adopted in Ordinary Session No. 062 – 2024 on May 30, 2024, extended the hours of service for the submission of requests and documents through the Electronic Judicial Management Office, to seven days a week, 24 hours a day.

While the resolution modified the hours of operation of the Electronic Judicial Management Office, it does not change the moment when judicial terms expire, as explained below: Article 77 of the General Organic Code of Processes provides:

Art. 77.-Beginning and expiration of the term. The term begins to run in a common manner, with respect to all parties, from the working day following the last summons or notification. Its expiration occurs at the last working moment of the workday.

That is, terms expire at the last working moment of the workday, which is consistent with Article 78 of the same legal body, which states that working hours are those established by the Judiciary Council.

According to Article 100 of the Organic Code of the Judicial Function, it is the obligation of all judicial function servers to fulfill the forty-hour workweek in eight-hour daily shifts. Furthermore, the workday established by the Judiciary Council is from 08:00 to 17:00 from Monday to Friday, which is consistent with Article 78 of the General Organic Code of Processes.

In conclusion, the extension of the hours of service of the Electronic Judicial Management Office optimizes judicial management in the submission of documents and requests, but does not modify the expiration of terms, which will continue to be until 17:00 on the last day.

Arguing that the expiration of terms occurs at 24:00 on the last day lacks legal and factual support, as substantiated.

 

Mateo Zavala
Senior associate at  CorralRosales
mzavala@corralrosales.com

Risks and data protection impact assessments

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 Any processing of personal data involves risk. Processing is any activity performed with personal data, including collection, conversion, use and disposal. The risk arises from the likelihood of negative events occurring with personal data, such as theft, removal, alteration, or deletion.

Those who carry out the processing of personal data must clearly identify the risks they face, to mitigate, manage or assume them, through the adoption of different security measures. Risk identification can be done through risk analysis, which will help identify high-risk treatments. On the other hand, the data protection impact assessment (hereinafter the “DPIA“) will make it possible to evaluate possible violations of rights and the mechanisms to reduce them.

The Organic Law for the Protection of Personal Data (hereinafter the “LOPDP”)[1] established the obligation to have a risk methodology and to carry out a DPIA, the purpose of which is to foresee the impacts and risks to the privacy of data subjects. Therefore, the LOPDP requires the implementation of security and control measures to guarantee the rights and freedoms of individuals.[2]

I. What is a DPIA?

The Regulation to the LOPDP[3] (hereinafter the “Regulation”), in accordance with the Article 29 Working Party’s[4] statement on the DPIA, defines impact assessment as a “[…] preventive analysis, of a technical nature, whereby the controller assesses the actual impacts of data processing, in order to identify and mitigate potential risks […]”[5].

II. How do I know if a DPIA should be done?

According to the LOPDP, the DPIA is mandatory when the data processing “entails a high risk to the rights and freedoms of the data subject”. Article 42 of the LOPDP provides some examples of when data processing may generate high risks:

1. Systematic and comprehensive evaluation of personal aspects of natural persons, which is based on automated processing (such as profiling) and on the basis of which decisions are made that produce legal effects for such persons.

For example, a financial institution that researches its customers in a credit reference database; or a computer program that uses the behavioral history of persons deprived of liberty to automatically determine whether they will be granted parole[6].

2. Large-scale processing of the special categories of data referred to in Article 25 of the LOPDP, or of personal data relating to criminal convictions and offences.

Large-scale processing involves a large amount of data and many data subjects from a wide geographic diversity[7]. Article 4 of the Regulation provides some examples of large-scale treatments:

  • Patient data from hospitals and healthcare institutions.
  • Data on the movement of individuals using public transportation.
  • Real-time geolocation data.
  • Data from customers from insurance companies or financial institutions.
  • Data for behavioral advertising by a search engine.
  • Data of content, traffic, and location data by telecommunications or internet service providers.

3. Systematic monitoring of a publicly accessible area on a large scale

This type of observation[8] is a criterion for determining high risk, because personal data may be collected in circumstances where data subjects may not be aware of who is collecting their data and how it will be used. In addition, it may be impossible for individuals to avoid being subjected to this type of processing in public spaces (or publicly accessible spaces). As an example, a camera placed on a public road to record and monitor the behavior of drivers is noted.

From these examples, it must be assessed whether a processing of personal data is likely to generate a high risk. This is particularly important since failure to execute the DPIA when it is mandatory as determined by the LOPDP and the Regulation could constitute a serious infringement of the LOPDP and result in a fine of between 0.7% and 1% of the revenue for the financial year immediately preceding the financial year in which the fine is imposed.

III. What should be included in a DPIA?

The DPIA should be carried out prior to the start of personal data processing activities. Therefore, companies, as data controllers, should prepare their DPIA before and during the initial planning of their new projects. In Article 32 of the Regulation, in line with international experience[9], it is determined that the DPIA must be submitted to the data protection authority and that it must contain the following points:

1. Description of the operations and purposes of processing.

2. Reasoning for the necessity to carry out the processing.

3. Risk assessment to the rights of the data subjects; and,

4. Security measures to address the risks.

The DPIA must be a systematic process that applies objective, repeatable, and comparable methodologies and methods of execution; consequently, a DPIA must be structured in different phases. The LOPDP determines as one of the obligations of those responsible for the processing of personal data to use appropriate methodologies for the analysis and management of risks.

In summary, the LOPDP and the Regulation establish certain examples and criteria to determine in which cases a DPIA must be carried out on a mandatory basis. However, we will have to wait for the actions of the Data Protection Superintendency, whose head is not yet named, to know the interpretation and development of the concepts in the practical application of the LOPDP and the Regulation.

 

[1] The LOPDP entered into force on May 26, 2021, and its sanctioning regime is fully applicable as of May 26, 2023.

[2] The DPIA process is not new in Comparative Law, in the EU it is established in the General Data Protection Regulation. It is also contemplated in the legal systems of Australia, Mexico, Canada, Japan, South Africa, South Korea, the United States and New Zealand, among others.

[3] Issued by Executive Decree 904 of November 6, 2023.

[4] Article 29 Working Party. (2017). Guidelines on data protection impact assessment. https://www.aepd.es/sites/default/files/2019-09/wp248rev01-es.pdf

[5] Article 29 of the Regulation.

[6] Spanish Data Protection Agency (2021). Risk management and impact assessment in personal data processing. https://www.aepd.es/es/documento/gestion-riesgo-y-evaluacion-impacto-en-tratamientos-datos-personales.pdf

[7] Article 29 of the Regulation.

[8] The Regulations interpret “systematic” to mean one or more of the following:

  • pre-established, organized or methodical;
  • taking place as part of an overall data collection plan;
  • carried out as part of a strategy.

[9] Guidelines on Data Protection Impact Assessment of the Article 29 Working Group, Data Protection Impact Assessment Guide of the Argentine Data Protection Authority, and, Guide for the Preparation of Privacy Impact Assessments of the National Institute of Transparency, Access to Information and Protection of Personal Data.

 

Christian Razza
Associate at  CorralRosales
crazza@corralrosales.com

Rafael Serrano
Partner at CorralRosales
rserrano@corralrosales.com

Does Mickey Mouse belong to everyone? NO

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On January 1st, Mickey Mouse, the most famous mouse in the world, made headlines worldwide, mentioning he entered the public domain as the copyright protection term on STEAMBOAT WILLIE expired. Many people believed anyone could use the iconic character without authorization from its owner, Disney.

First, we must define the term “public domain”. The World Intellectual Property Organization, WIPO, has defined it as:

“As far as intellectual property (IP) law is concerned, “public domain” is generally understood as any intangible asset that is not subject to exclusive IP rights and can therefore be freely used or exploited by anyone.”[1].

This means that all intangible assets that do not have a holder of rights entitled to prevent their exploitation or to demand the payment of compensation are in the public domain.

Does this open the door for anyone to use the Mickey Mouse figure? No, not at all.

It is important to clarify that the most famous work that entered the public domain is STEAMBOAT WILLIE, which many of us will not identify by its name, but by its iconic scene: Mickey Mouse captaining a boat while whistling. This scene is included at the beginning of many Disney productions. Other less famous scenes, henceforth, can also be reproduced and exploited by anyone[2].

Are there people taking advantage of this opportunity? Of course, we can already find on YouTube uploads of the scene which, because of what we have just explained, cannot be removed from this platform based on copyright infringement. On the contrary, they would be able to benefit commercially from the number of views, which are not few, largely due to the publicity given to this event.

One example is a video uploaded to this platform on January 1st by CORRIDOR, which in less than 48 hours was close to reaching one million views.

https://www.youtube.com/watch?v=hmzO–ox7X0

To sum up, can STEAMBOAT WILLIE be used freely, without any authorization, or without having to pay or retribute in any way to Disney? The answer is YES.

Can Mickey or Minnie Mouse be used freely? The answer is NO. Their protection extends far beyond this short scene. All works created subsequently are still protected and maintain rights around the world.

This iconic character’s presence in the market makes its isolated and indiscriminate use impossible without proper authorization from Disney. Its notoriety is evident and will be protected by the legislation of each country for a very long time.

Mickey is the boss in the Disney world and will continue to be for many years to come.

 

[1] Comité Intergubernamental sobre Propiedad Intelectual y Recursos Genéticos, Conocimientos Tradicionales y Folclore – WIPO/GRTKF/IC/17/INF/8 (24/11/2010) https://www.wipo.int/edocs/mdocs/tk/es/wipo_grtkf_ic_17/wipo_grtkf_ic_17_inf_8.pdf

[2] Plane Crazy, The Gallopin Gaucho

 

 

Eduardo Rios
Partner at CorralRosales
eduardo@corralrosales.com

Are the plans for the mining sector to be fulfilled, or not?

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Throughout our lives, especially within the professional and corporate sphere, we are constantly making plans. These plans, in theory, should be related to the different challenges and opportunities we have or plan to have. However, the most important aspect of these plans is that we can execute them. Doing so signifies an achievement of objectives, beyond the results.

In October 2020, the Ministry of Energy and Non-Renewable Natural Resources (now the Ministry of Energy and Mines) developed and enacted the Mining Sector Development Plan 2020-2030. According to Minister René Ortiz Durán, the goal of this plan was to contribute to the fulfillment of both national and global objectives. It also represents a strategic vision for the development of the mining sector through the implementation of harmonious, efficient, transparent, and sustainable industry management.

On the other hand, in August 2021, through Presidential Decree No. 151, the Action Plan for the Ecuadorian Mining Sector was issued, which determined public policies to promote the sector’s development. These policies have been fundamental for certain decisions and actions of the government of Guillermo Lasso.

Now that the electoral campaign has ended, and Daniel Noboa has been elected, it is advisable to look back and review the plans proposed for the mining industry.

The “Multi-year Work Plan for the President and Vice President of the National Democratic Action Alliance” consists of 76 pages, and it emphasizes that investment in strategic sectors is a priority for national economic growth. It will promote the development of activities in hydrocarbons, mining, energy, electricity, telecommunications, water resources, and the environment. Regarding the topic we are analyzing, the ADN movement established three actions: i) promoting national mining production through delegation to private initiatives, cooperatives, and associations of popular and solidarity economy; ii) regularizing artisanal activities so that participants can affiliate with the IESS (Social Security Institute) and have access to healthcare and loans to improve their living conditions; and iii) conducting controls against illegal mining, coordinated by the armed forces and national police, to dismantle the involved mafias and gangs.

Apart from the legal nuances that the industry is currently facing, especially before the Constitutional Court, President-elect Noboa has the legal resources to carry out his Work Plan. However, it will be crucial for him to have a qualified team that, along with his political will, can implement what has been planned. We don’t know if they will plan something new, but it is essential that there is a clear work plan for the 18 months of his term to provide some certainty to one of the few sectors that can truly inject foreign direct investment into the country.

 

Carlos Torres Salinas
Senior associate at CorralRosales
ctorres@corralrosales.com

The self-generation regime as an alternative to “regular” electricity consumption

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Articles 261.7, 261.11 and 313 of the Constitution of Ecuador provide that the State has exclusive jurisdiction over natural and energy resources, and is responsible for administering, regulating, controlling and managing strategic sectors, including energy in all its forms.

In line with the above, Article 7 of the Organic Law of the Public Service of Electric Energy (“LOSPEE”) provides that it is the duty of the State to satisfy the need of the public service of electric energy of the country, through electric companies[1] authorized for such purpose.

Within this regulatory framework, private sector companies usually satisfy their demand for electric energy with that supplied by the electric company, under an adhesion contract[2], which establishes the conditions under which the service will be provided.  Under this scheme, the electric company issues a monthly invoice with the amount to be paid for the service, which is calculated based on a tariff[3] set by the competent authority and the consumption of electric energy during the month.

Additionally, the legislation contemplates the self-generation regime. Article 3 of the LOSPEE defines the self-generator as the “Legal entity, producer of electric energy, whose production is intended to supply its own consumption points, being able to produce generation surpluses that can be made available to the demand”; and self-consumption as “…the energy demand of the installation or facilities of a legal entity engaged in a productive or commercial activity, which in turn is the owner, shareholder or has shares in a self-generating company”.

In other words, the self-generation regime consists of a company (self-generator) that is authorized to produce electric energy for its own consumption points (i.e., the consumption of its shareholders or partners), and that can sell surplus energy to large consumers[4] and electric companies[5]. Therefore, the fundamental requirement for a company (regardless of its line of business) to benefit from the self-generation regime is to be a shareholder or partner of a self-generator.

Once this requirement is fulfilled, the self-generator must request from the Agency for Regulation and Control of Energy and Non-Renewable Natural Resources or Regulatory Body (“ARCERNNR”) the authorization of the shareholder company for its own consumption, according to the procedure established in the sixth general provision of Regulation No. ARCERNNR 001/23.

Once the above has been complied with, the self-generator may start supplying electricity to its partners or shareholders under the terms and conditions agreed upon by the parties. According to Regulation No. ARCERNNR 001/23, the company must remain at least one year as its own consumption of the self-generator with which it was qualified, except that, due to its characteristics of operational seasonality, it must periodically make changes of condition.

Once the minimum time of permanence has elapsed, the company may: (i) remain under the self-generation regime with the same self-generator with which it was qualified or with another self-generator; (ii) return to its original status as a regulated consumer[6]; or (iii) switch to a large consumer scheme. 

The main advantage of the self-generation scheme is the possibility of negotiating the conditions of the electricity to be supplied by the self-generator, unlike what happens in the “regular” scheme where the price is subject to the tariff set by the authority. Another advantage is that consumers in this scheme can choose self-generators from renewable sources, with which companies could meet environmental goals through electricity consumption with clean energy.

In summary, the self-generation scheme is attractive for companies seeking to reduce their electricity costs, in addition to using electricity generation in an environmentally friendly way.

[1] Article 3.7 of the LOSPEE defines an electric company as the “…legal entity of public or private law, whose enabling title entitles it to carry out activities of generation, transmission, distribution and commercialization, import or export of electric energy and the general public lighting service”.

[2] The LOSPEE identifies it as a “Supply Contract”. In this regard, paragraph 12 of Regulation No. ARCONEL 001/2020 states: “As a requirement for the energization of the new supply of the public electric power service, the applicant must sign a contract called “Supply Contract” with the distributor. This contract shall contain the rights and obligations of the distributor and the consumer, as well as the conditions under which the service will be provided. For the application of this numeral, the provisions of Regulation No. ARCONEL 002/18 “Electricity supply contract model” or the one that replaces or substitutes it shall be observed.”

[3] Article 54 of the LOSPEE provides that the competent authority “… within the first semester of each year, will determine the costs of generation, transmission, distribution and commercialization, and public lighting – general, to be applied in the electric transactions, which will serve as the basis for the determination of the tariffs to the consumer or end user for the immediately subsequent year.” Additionally, Article 55 of the LOSPEE provides that the authority “…shall approve the tariff schedules, which, for the knowledge of the users of the system, shall be informed through the media in the country and published in the Official Gazette.”

[4] It is the consumer that meets the requirements established in Regulation ARCERNNR – 003/21 and has qualified as a “large consumer” before the competent authority. Once qualified under this regime, the large consumer must purchase all its electricity demand from qualified generators or self-generators.

[5] The regulation also refers to them as distributors. Article 4 of Regulation No. ARCONEL 001/2020 defines it as follows: “Distribution and commercialization electric company or distributor: Legal entity whose Enabling Title entitles it to carry out the activity of distribution and commercialization of electric energy and the service of general public lighting, within its service area.”

[6]  “Regulated consumer” is the denomination given to consumers who satisfy their demand for electric energy than that delivered to them by the electric company under a Supply Contract. Article 4 of Regulation No. ARCONEL 001/2020 defines it as follows: “Regulated consumer: Natural or legal person who maintains a supply contract with the electric distribution company and who benefits from the provision of the public electric energy service.”

Mario Fernández
Associate at CorralRosales
mfernandez@corralrosales.com

 

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