Self-sufficiency of Regulated Consumers through Renewable Energy Sources

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, /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, /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.

[3] Veronika Henze, “Corporate Clean Energy Buying Grew 18% in 2020, Despite Mountain of Adversity” BloomberNEF, January 26, 2021, 

[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:

[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

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

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

The extraordinary appeal for review provided for in the Organic Administrative Code, against the decisions issued by the National Service of Intellectual Rights

The extraordinary appeal for review provided for in the Organic Administrative Code, against the decisions issued by the National Service of Intellectual Rights - CorralRosales - Lawyers Ecuador

The Organic Administrative Code (“COA”) provides that, against the decisions issued by the public administration, there are two kinds of appeals: ordinary appeal and extraordinary appeal for review. The first seeks to have the authority re-analyze the merits of the case with a view on modifying its decision. The extraordinary appeal for review, on the other hand, is possible only when any of the specific grounds provided for in the COA are met – it does not constitute a third instance – hence its extraordinary nature. In recent years, a common practice has been to file an extraordinary appeal for review against final decisions denying or granting the registration of a trademark, against which the ordinary appeal has already been lodged -or it was not filed in due course- in order for the National Service for Intellectual Rights (“SENADI”) to change its criteria regarding the risk of confusion or association between the conflicting marks. Although the SENADI prima facie gives way to this type of procedure, it has stated that “The extraordinary appeal for review constitutes a legal remedy aimed at correcting an error in the formation of the administrative will, or any illegality in the issuance of the decision, with the interested party having the ordinary remedies to disagree with the criteria of the judge, in this case, with the comparative analysis of the confronted marks.[1]

In this regard, Article 232 of the COA provides that “The interested individual may file an extraordinary appeal for review of the final administrative act when any of the following circumstances are verified:

1. That when issuing them, an obvious and manifest factual error has been incurred in, which affects the merits of the case, provided that the factual error results from the documents incorporated into the file.

2. That when issuing them, an obvious and manifest error of law has been incurred in, which affects the merits of the case. (…) The extraordinary appeal for review shall be filed, in the case of cause 1, within a period of one year following the date of notification of the contested decision (…)”.

It derives from the aforementioned provision that, unlike the ordinary appeal, the extraordinary appeal for review is not intended to review the legal arguments relied on by the authority in its decision but is aimed at reviewing and remedying, if necessary, defects in the processing of the administrative proceeding.

Unfortunately, nowadays, many users have chosen to file extraordinary appeals for review when what they are really requesting is to review the existence or not of the risk of confusion between two trademarks. And this is usually done as a way of demonstrating dissatisfaction with the decision issued through second instance decisions. An example of this can be found in case No. SENADI-2016-92900, in which SENADI admitted to process an extraordinary appeal for review against a decision denying an appeal in which the opposition filed was accepted, and the registration of a trademark was rejected. Within the aforementioned extraordinary appeal for review, the arguments used to request the revocation of the decision were:

  • Comparison between the confronted trademarks and the supposed absence of risk of confusion.
  • Absence of spelling and phonetic similarities between the conflicting marks.
  • Lack of competitive connection between the protected goods.

It is evident that the grounds for the aforementioned extraordinary appeal for review are not related to those provided for in Article 232 of the COA and what the applicant is seeking is to review again a decision that has already exhausted all administrative instances.

We will have to wait for the final decision of SENADI to have a clearer vision of its criteria in this matter. However, it is to be expected that the authority will reiterate the aforementioned criterion, rejecting the extraordinary appeal for review at the time of issuing the final decision (although it should have done it at the admissibility stage), thus putting an end to this practice. If so, with this precedent, SENADI should not admit to process these kinds of appeals in the future, since it is extremely important that the extraordinary nature of the appeal for review is respected in order to safeguard legal certainty and avoid its use as a kind of third instance by the interested parties.

[1] Decision OCDI-2021-230 from March 30, 2021. Proceeding 15-1516-RV-2S-RR-2018.

Katherine González H.
Asocciate at CorralRosales

The right to effective judicial protection

The right to effective judicial protection - CorralRosales - Lawyers Ecuador - Latam - Ramón Paz y Miño

The concept of guarantee of rights has undergone fundamental transformations in the last century, which have contributed to the development of the protection and safeguarding of rights in the Constitutions. To all this, the abandonment of “the romantic pretension, derived from the French Revolution, whereby it was sufficient to enshrine human rights in the political constitution, for them to be respected by authorities and citizens” also contributed to this regard (Jimenez, 2000, pg.549).

The current constitutional text, in force since 2008, broadens and strengthens the complex and concept of guarantees and rights, increasing the instruments of defense and developing the content of the guarantees already existing in the previous Constitution (Storini, 2010, pg. 287).

In order to understand the right to effective judicial protection, it is important to highlight the purpose of legal proceedings.

The progress of society compels to restrict the private defense of rights in case of conflict, to the extent of reaching the current conception of jurisdiction, as the exclusive power of the State, to intervene in any conflict that actually or eventually disturbs social peace. (Becerra, 1977, pg. 22).

In this context, each citizen – paraphrasing Rousseau – surrendered part of its freedom to the State, so that the latter exclusively provides the tools to enforce rights through the judiciary branch, which is shielded with autonomy in the application of the Constitution and the law. Therefore, “the final purpose of procedural law is the regulation of the process, currently carried out by the jurisdictional organ exclusively”. (Becerra, 1977, pg. 23).

The State “in the legal field, not only complies with the creation and establishment of legal norms, but legal protection implies integrating the regulatory role with another, complementary, second-degree role. To the task of dictating norms this other role is added with the objective of conserving the legal order when it is unknown and the individual claims protection, which is the jurisdictional function”. (Véscovi, 1984, pg.7)

This leads us to conclude that procedural law “regulates this complex of acts in order to obtain jurisdictional protection” (Becerra, 1977, pg. 23).

The right to effective judicial protection is a complex right that “acts as an umbrella that reinforces the protection of other guarantees of a procedural nature, in case they do not have constitutional coverage”. (Aguirre, 2010, pg.12). Therefore, it constitutes a paramount cornerstone in the conception and development of a process, which is complex and is related to several elements that compose it.

For several decades, several international instruments[1] have established effective judicial protection as a right of utmost importance; however, our legal system remained silent until the enactment of the 1998 Constitution.

Currently, the Constitutional Court (hereinafter, the “Court”) has established that effective judicial protection constitutes the right of every individual to resort to the courts to obtain a well-founded judgment[2], which also involves the duty of the judge to adapt the proceedings to the specific case to be resolved, as follows:

“(…) specifies that the right to effective judicial protection does not exclusively entail the right of citizens to have access to the courts, but also involves the duty of the jurisdictional authorities to adapt their actions to the nature of the case brought before them in accordance with the provisions of the legal system”. (Constitutional Court of Ecuador, Judgment 133-17-SEP-CC, Case 0288-12-EP)[3]

The Court established three aspects in the content of this right: (i) access to justice, (ii) development of the proceedings in compliance with the Constitution and the law, in a reasonable time, and (iii) enforcement of the judgement[4].

Additionally, the Court established important cornerstones to distinguish effective judicial protection as an autonomous right in its content and nature, and determined that the right to judicial, impartial, and expeditious protection consists of the right to resort to the jurisdictional bodies in order to obtain a resolution regarding any legal conflict. Such resolution shall be based on law and must have been dictated after the process has been substantiated, observing and respecting the procedural guarantees established in the Constitution. (Constitutional Court of Ecuador, Ruling 254-18-SEP-C, Case 0952-EP) [5]

The foregoing is a clear definition of what is meant by effective protection, which can be summarized as the right of every individual to access a jurisdictional body, so that it may hear his or her claim through a proceeding in which the judge and the parties respect the basic guarantees, as well as the right to obtain decisions by the courts which are in accordance with the Constitution and the law and enforced.

Subsequently, the Court established the three instances of effective judicial protection, as follows:

  1. Access to justice.- (…) implies that the State as a whole, and more specifically, the justice administrative bodies in the country, allow people to access the justice system with their petitions, without establishing overbearing obstacles that make it impossible for them to do so (…) in order to obtain from the administration of justice the recognition of their rights before the State and before individuals (…)
  2. The development of the process in strict observance of the principle of due diligence – refers to the prompt and diligent performance by the jurisdictional authorities; that is, within a reasonable time and processing the case in accordance with the constitutional and legal regulations, in order to effectively protect the rights and interests of the parties (…)
  3. Enforcement of the decision. (Constitutional Court of Ecuador, Judgment 254-18-SEP-C, Case 0952-EP)

It was positive to introduce the principles of responsibility enshrined in Article 11 of the Constitution, Article 15 of the Organic Code of the Judicial Function and the principle of due diligence contained in Article 172 of the Constitution; due diligence implies the fulfillment of the duty of care in the substantiation of the proceedings, observing the constitutional and legal provisions provided for resolution of disputes in the law brought to the attention of the courts. The latter further broadened the spectrum of the protection of the right to effective protection, including the implications and connotations that its non-observance would bring to the judges themselves and to the State.

It has been discussed whether or not arbitrators should ensure the right to effective judicial protection, since according to some criteria, this would be reserved only for judges and ordinary courts. If we call the right “effective judicial protection”, does this mean that arbitrators must protect this right? The obvious answer is yes, and if we want to call it effective arbitral protection, as a type, there is no difficulty. However, for the avoidance of doubt or contrary criteria, it is appropriate to refer to the right to the effective protection of justice (Martín Diz, 2014) [6] as the evolution of effective judicial protection, since it encompasses the rest of the mechanisms, including extra procedural or extrajudicial mechanisms recognized in legal systems. And, in Ecuador, arbitration is constitutionally recognized as a mean of dispute resolution.

In conclusion, effective protection has had an important and very positive development since the 2008 Constitution came into force, as the Court has worked to clarify and expand its elements. However, the system and understanding of complex law is not as expected, since there are important gaps to be solved, such as preparing judges, training them to issue better judgments and at the same time freeing them from “models”, “formulas”, “formats”, “evaluations by quantity” that prevent a true legal development and make it impossible to effectively apply the effective protection of justice.


Aguirre, V. (2010). El derecho a la tutela judicial efectiva: una aproximación a su aplicación a los tribunales ecuatorianos. Foro. Revista de Derecho No 14, 5-43.

Becerra , J. (1977). Introducción al Estudio del Derecho Procesal Civil. México: Cárdenas Editor y Distribuidor.

Jiménez, E. (2000). Derecho Constitucional Argentino, Tomo II, Sociedad Anónima editora, comercial, industrial y financiera. Ediar.

Martín Diz, F. (2014). Del derecho a la tutela judicial efectiva hacia el derecho a una tutela efectiva de la justicia. Revista Europea de Derechos Fundamentales, 161-176.

Narváez Aguirre, L. (abril de 2014). Tesis de grado: Facultades de los árbitros de suspender los efectos de los actos. Quito.

Storini, C. (2010). Las Garantías Constitucionales de los Derechos Fundamentales en la Constitución Ecuatoriana de 2008. Quito: Corporación Editora Nacional.

Véscovi, E. (1984). Teoría General del Proceso. Bogotá: TEMIS .

[1] The International Declaration of Human Rights (art. 10), the International Covenant on Civil and Political Rights (art. 14), the American Convention on Human Rights (art. 8), the Declaration of Basic Principles of Justice for Victims of Crime and Abuse of Power.

[2] Constitutional Court of Ecuador, Judgment 364-16- SEP-CC, Case 1470-14-EP

[3] Constitutional Court Ecuador, Judgment 133-17-SEP-CC, Case 0288-12-EP, 10/05/17.

[4] The Plenary of the Body in judgment No. 050-15-SEP-CC issued in case No. 1887-12-EP, the existence of three aspects in the essential content of the right to legal protection, which cannot be overlooked, as follows ‘(…) the first related to access to justice; the second with the development of the proceedings in strict compliance with the Constitution and the law and in a reasonable time, and the third in relation to the enforcement of the decision. (Constitutional Court of Ecuador, Judgment 133-17-SEP-CC, Case 0288-12-EP

[5] Constitutional Court of Ecuador, Judgment 254-18-SEP-C, Case 0952-EP, 11/07/18, p 10


Ramón Paz y Miño
Asocciate at CorralRosales

Joint Ventures in Ecuador

Joint Ventures in Ecuador - CorralRosales - Lawyers in Ecuador

The term Joint Venture appeared in the United States of America and has been widely accepted worldwide. It is a concept with a very broad meaning, which, in essence refers to agreements executed between individuals or companies in order to undertake a joint project, in which the rules that will be applied to its operation are determined.

The main characteristic of the Joint Venture is its contractual nature. This figure is used to designate different forms of cooperation between individuals or legal entities in order to achieve a common objective through the contribution of resources, without the parties losing their legal autonomy. The application of this type of contract is wide; contracts for marketing, manufacturing, supply, sales, technology, exploitation of natural resources, among others.

The doctrine mainly distinguishes between two types of Joint Ventures: i) Joint Venture Corporation and ii) Joint Venture Agreement. The difference between these figures is that the former has the purpose of incorporating a company different from its members, while the latter excludes any type of corporate relationship.

Notwithstanding the type of Joint Venture chosen, an essential element is its duration. This means that it must necessarily be a contract of a consecutive nature – not of instantaneous enforcement – since this duration is the one that allows the parties to venture jointly.

In Ecuador, the Joint Venture is regulated by the “EIGHTH TITLE of BUSINESS COLLABORATION” of the new Commercial Code (“Cc”) that came into force in 2019. It provides for two figures: the “Joint Venture” (Articles 585 to 600) and the “Commercial Consortium” (Articles 601 to 607).

Article 585 of the Cc defines the Joint Venture as:

A contract of associative nature, by means of which two or more persons, whether natural or legal, agree to operate a business in common for a specified period of time, agreeing to participate in the profits resulting from it, as well as to be liable for the obligations undertaken and for the losses incurred.”

 The following elements are worth highlighting:

  1. Contractual nature
  2. Associative nature
  3. Two or more individuals or legal entities
  4. Common business
  5. Determined period of time
  6. The parties participate in the profits and are liable for the obligations and losses.

It should be noted that the Cc only regulates the Joint Venture Agreement and does not refer to the Joint Venture Corporation or other types of Joint Venture. According to the provisions of the Cc the contract must be executed in writing, without the need for a public deed. Its termination must be carried out in the same way its constitution was executed. The instrument evidencing the termination decision shall detail the outstanding obligations and pending credits and the way in which the parties will be liable for them.

The contract must mainly establish:

  1. The business purpose and the term of duration.
  2. The internal rules regarding control and management, establishing the way in which the members will manage their interests.
  3. The form of profit sharing.
  4. The rules concerning the representation of the Joint Venture (i.e. whether a special attorney-in-fact will be appointed or whether the associates will represent it directly).
  5. The way in which the parties will respond vis-à-vis third parties, for example, if the liability is joint and several or proportional to the contributions, or certain quotas.
  6. How relationships between participants will be managed.
  7. The rules concerning dispute resolution.

If the parties do not provide for or do not agree on any of the elements mentioned above, the contract will be governed by the provisions established in Cc. For example, in the event of failure to indicate the party’s liability vis-à-vis- third parties, they will be jointly and severally liable or, as the case may be, will act as joint and several co-creditors.

The specific difference between a company and a Joint Venture is that the latter is not a legal person. Since it is not a company with limited liability, but an association, the liability  towards third parties is not limited to their capital contributions, but depends on what its members agree. In addition, the completion of the Joint Venture occurs with the consent of the parties in a written document and is not subject to any additional formality, nor to the control of the Superintendence of Companies.

Although the Cc does not regulate other types of Joint Venture, this does not imply that other types of Joint Venture are not allowed in Ecuador, such as:

  • Joint Venture Corporation through a new company: Two (or more) parties participate as shareholders with specific roles. In this case, with the creation of a new company, the liability via-a-vis third parties depends on the type of company adopted for this purpose, but in general the liability is limited to capital contributions.
  • Joint Venture Corporation through an existing company: The company of one of the parties is used to develop the business and internal accounting is kept per business unit for internal control. The liability to third parties follows the rules expressed in point i) above.
  • International Joint Venture: A figure characterized by individuals or companies from different countries. The legal figure that they adopt will depend on the agreements between the parties.

From a tax standpoint, even if the Joint Venture does not have a legal personality, it must comply with its tax obligations in accordance with the scope of its contract. Thus, article 98 of the Internal Tax Regime Law (Ley Orgánica de Régimen Tributario Interno) stipulates that -for tax purposes- the Joint Venture Agreement is considered as a company, so it must be registered in the Single Taxpayer Registry (Registro Único de Contribuyentes (RUC)). In the case of a Joint Venture Corporation, tax obligations go hand in hand with the type of company adopted.

In the antitrust field, it shall be noted that the Joint Venture is subject to antitrust legislation, since its creation may require prior authorization by the antitrust authority or be sanctioned pursuant to the provisions of the Organic Law for the Control of Market Power (Ley Orgánica de Control de Poder de Mercado) and its Regulation.

In conclusion, the Joint Venture should be conceived as a useful legal figure that can provide solutions at a time when it is necessary to be practical, dynamic, and creative with resources. Although its practicality is high, it is essential to carry out a legal analysis, case by case, in order to determine if it is the best legal instrument for the business. In any case, careful planning and communication, reflected in a contract that adequately captures the parties’ will, is key.

María Isabel Torres
Asocciate at CorralRosales

Changes in Border Measures and Criminalization of IP.

Intellectual Property regulatory corrections; border measures and penalization - CorralRosales - Lawyers Ecuador

The Congress gave way to the partial objection issued by the Executive Branch, thus approving the “Law that Reforms Various laws to Reinforce the Prevention and Combat of Illicit Commerce in order to Strengthen the National Industry and Promote Electronic Commerce.” In addition, the law foresees reforms in intellectual property matters.

In particular, this reform includes provisions regarding (i) intellectual property crimes, their punishment and handling, expanding the punishable acts, and (ii) the border measures proceedingds

I. Intellectual Property Crimes

The Executive Branch veto sought to correct certain inconsistencies and drafting errors in the text approved by the Assembly. As a result, it details criminal conducts in a much better way, the conditions that must be taken into account to assess the existence of the crime and how these crimes are to be treated and judged.

The reform of the criminal law establishes that, for these behaviors to be considered crimes, they must include several elements that would differentiate it from a “simple” infringement of intellectual property rights as it conditions its sanction to the infringement happening in knowledge, that it has a lucrative purpose, and that it is on a commercial scale.

These conditions include criminal offense and penalizing whoever manufactures, commercializes, or stores labels, stamps, or containers containing trademarks or denominations of origin registered in the country.

It also sanctions whoever separates, starts, replaces, or uses labels, stamps, or containers that contain registered trademarks in the country to use them in goods of different origin, fills containers identified with trademarks belonging to a third party with spurious goods; stores, manufactures, uses, offers for sale, sells, imports or exports goods covered by apatent, utility model, industrial design, a plant variety (including its material for reproduction, propagation or multiplication) or a layout design.

It also includes possible infringements -which from our experience, will make up the vast majority of intellectual property criminal actions- against whoever stores, manufactures, uses, offers for sale, sells, imports or exports a product or service that uses an unregistered trademark identical or similar to one registered in the country; the competitive connection between the infringing goods or services and those identified by the registered trademarks must be clear.

In addition, the law eliminates the condition of a minimum amount to constitute a crime, clarifying that to consider the offending conduct a crime (on a commercial scale), the magnitude, economic value, quantity, and impact on the market must be considered. It also specifies that in foreign trade cases, it is regarded as a crime when the goods are valued at more than 50 unified basic salaries (SBU) – US $ 20,000 to date – stating that the cost of the original product must be taken into account for this appraisal.

Regarding the sanctions, the law establishes an incarceration sentence of 6 months to 1 year, confiscation (of the seized goods), and a fine of 8 to 300 SBU (US $ 3,200 to US $ 120,000 to date). In addition, the following are reinstated as an aggravating factor for the criminal offense: (i) having received a warning of the offense; (ii) that health-related goods cause damage to health; and (iii) that the crime is committed concerning unpublished works.

Regarding copyright, the same conditions described before apply. In addition, the following actions are sanctioned with the penalty mentioned in the previous paragraph: alteration or mutilation of a piece of work; the registration, publication, distribution, communication, or reproduction of a foreign work as one’s own; unauthorized reproduction or in a number greater than the authorized number of the work, provided that the damage is greater than 50 SBU (US $ 20,000 to date); public communication of works or phonograms; introduction to the country, storage, offering for sale, sale, lease or circulation of illicit reproductions of works, by any means; unauthorized retransmission of radio broadcasting, television and in general any signal that is transmitted through the radioelectric spectrum; manufacture, import, export, sale or lease of devices, systems or software that allow deciphering an encrypted satellite signal carrying programs or telecommunications in general.

The reform makes an essential clarification about certain conditions on the crime, such as the precise meaning of the term “commercial scale” and how to assess the appraisal of the goods.

The law also includes provisions on the destination of the seized goods, which may be considered donations to cover social needs by the State or destroyed. An expert report issued by an expert duly accredited by the Judicial Council is needed. The expert has to establish whether the goods must be destroyed or render useless.

Finally, the law includes conciliation as a dispute resolution mechanism.

In conclusion, the reform is positive because it seeks greater agility in processing and prosecuting intellectual property crimes.

II. Border Measures

After almost five years of a legal vacuum in this matter, the Executive Branch veto, also corrected the inadequate text approved by the Legislature returning the “mixed” system to the country for the execution of border measures. It allows the National Customs Service of Ecuador (SENAE) to be the first filter of infringing goods entering or exiting the country, suspending the customs process provisionally, which has to be confirmed by the local intellectual property office.

The reform empowers SENAE to: (i) suspend the customs procedure for goods that, in any way, violate intellectual property rights, (ii) alert the holders of these rights, and (iii) provide adequate information to act in these cases.

The suspension of the customs process will initially be five days. During these five days, this suspension must be communicated to the importer, the right holder, and the local intellectual property office. After that, it will have three days to decide on a resolution.

The law maintains the obligation to provide sufficient information to the intellectual property authority about the infringing goods and the conditions of the infringement, and the possibility of inspecting the goods involved.

The authority may sanction the offender with a cash penalty ranging between 1.5 and 142 SBU (US $ 600 to 56,800 to date).

Per the regulations of the Andean Community, the reform provides that the right holder may bring either an administrative, civil, or criminal action when the adoption of the border measure has been confirmed. Although there is a contradiction with the Andean supranational norm regarding the term to bring it (10 days), the Andean Law prevails. The holders of intellectual property rights will have a predominant performance in these cases since they must participate actively, both in the criminal proceedings and in the cases of border measures, accompanying the authorities through all the steps.

The law maintains the possibility of requiring the person requesting the adoption of a border measure to provide a guarantee that will be proportional to the possible economic and commercial impact generated by the suspension to protect the importer or exporter from a possible case of abuse of rights.

This reform corrects elements that have caused a notable increase in intellectual property infringements in Ecuador and led to actions against retailers or small merchants. Unfortunately, these elements were leaving importers or wholesalers who are the primary beneficiaries of the illicit trade unpunished.

The reforms will come into force after its publication in the Official Registry.*

*This reform is in force since August 27, 2021.

Eduardo Ríos
Asocciate at CorralRosales

The acquisition of medicines through small amount

The acquisition of medicines through small amount - CorralRosales - Lawyers Ecuador

The small amount is a public procurement procedure regulated in the Organic Law of the National Public Procurement System (hereinafter, the “LOSNCP”), the Regulation to the LOSCNP (hereinafter, the “Regulation”), and the Codification and Updating of Resolutions issued by the National Public Procurement Service (hereinafter, the “Codification”).

Public entities[1] can make direct contracts with suppliers through the small amount as long as they meet the following requirements:

  • The object of the contract must be: (i) the acquisition of standardized goods or services[2], which do not appear in the electronic catalog[3]; (ii) the acquisition of non-standard goods or services; or (iii) the contracting of works, solely and exclusively for the repair, remodeling, adaptation, maintenance or improvement of an existing construction or infrastructure. In no case can consulting services be hired[4].
  • In the year, the amount of the contract must not exceed the value that results from multiplying the coefficient 0.0000002 by the Initial State Budget for the corresponding fiscal year. In 2021, this value is $ 6,416.07.

Article 332 of the Codification provides that, during the year, the contracting entities may consolidate their needs and carry out a single contract for a small amount or carry out several such amounts for the same good or service, but the amount of the consolidated contract or the total amount of individual contracts may not exceed the maximum value indicated. 

These contracts may or may not be part of the annual planning that public entities are obliged to carry out[5]. But, in any case, the “small amount” tool must be used within the COMPRAS PÚBLICAS Portal[6] ( to publish: the needs of goods, works or services, the information of the public servant responsible for the hiring, the email in which they will receive the offers of the interested suppliers, and the maximum delivery time of said offers.

To participate in a contract for a small amount, suppliers do not need to be registered in the RUP[7]. Suppliers will be selected under the following criteria[8]:

  1. In standardized goods and services, the supplier that offers the lowest price must be chosen.
  1. In non-standard works or goods and services, the supplier that offers the best technical, financial, and legal conditions must be chosen, without the lowest price being the only selection parameter.

Once the contracting has been carried out, the contracting entities must publish its relevant information on the COMPRASPUBLICAS Portal. This information and that which, at any time, is required by[9] the National Public Procurement Service (hereinafter, “SERCOP”), will serve for this body to identify if there are non-compliance with the requirements applicable to this figure or if it was used to circumvent[10] other hiring procedures. If there are non-compliances, SERCOP will inform the competent control bodies so that they can initiate the corresponding actions.  

There are special or exceptional cases[11]in relation to this type of contracting for a small amount, such as the acquisition of medicines.

The LOSCNP does not expressly foresee the acquisition of medicines for a small amount, however this is possible under numeral 2 of article 54.2. of the Law[12], since medicines can be classified as standard goods. 

The Regulation develops this figure as follows:

“Art. 85.4.- Application of small amounts.- In duly justified and exceptional cases, contracts for the acquisition of medicines and strategic goods, the amount of which is equal to or less than multiplying the coefficient 0.0000002 of the Initial State Budget, will be carried out for a very small amount , in accordance with the provisions issued by the SERCOP for this purpose, and provided that the good is not available in the virtual repertoire for direct purchases enabled in the PUBLIC SHOPPING Portal.

The acquisition of medicines by this procedure will be within the current National Basic Medications Table. “[13] (highlighted out of text)

Although the Regulation uses the name “virtual repertoire” and not “electronic catalog” as happens in small amounts for other standardized goods, the fundamental requirement is the same: the good must not be available on the COMPRASPUBLICAS Portal for direct purchases. Additionally, the Regulation clarifies that only the medicines that appear in the current National Basic Medicines Table may be purchased.

Therefore, the small amount of medicines comes when the good: (i) is not available in the virtual repertoire enabled in the COMPRASPUBLICAS Portal (hereinafter, the “Directory”); (ii) is included in the current National Basic Medicine Chart; and (iii) the amount of the contract does not exceed the established limit.   

Reforms[14] to the Regulation and Codification provide that the contracting entities of the Integrated Public Health Network[15] (hereinafter, “RPIS”) have the obligation to contract storage and distribution and delivery or dispensing services of medicines, prior to their acquisition (hereinafter, the “Services”).  

So far, the Services have not been contracted by the RPIS. However, when this happens and the SERCOP communicates it[16] on the COMPRASPUBLICAS Portal,  Chapter II of Section III of Chapter II of Title VIII of the Codification will come into force. It contemplates specific regulations that all public entities must comply with to acquire medicines for a small amount. Among the new provisions, the following stand out: 

  1. The circumstances are established for the small amount to proceed, according to the contracting entity: 
  1. For RPIS entities, it proceeds when the medicines are not available in the Directory. In this case, the contracting of the Services is not mandatory, so the cost of the delivery-receipt of the medicines must be included in the acquisition.
  • For other public entities, it is appropriate if the medicine has not been contemplated in the annual planning or, if it has been included, it does not constitute a constant and recurring requirement during the year, that can be consolidated in a contract whose amount exceeds the maximum allowed.
  1. The contracting entities, through electronic means, may invite various suppliers, whether natural or legal persons, national or foreign, as well as their associations or consortiums. In the invitation, the entities must include the technical specifications of the medicine and the delivery conditions.
  1. The entities must have at least three offers, prior to selecting the supplier. If this is not possible, the entity must justify that it carried out all the actions and requirements necessary for this purpose.
  1. Invited providers, who do not necessarily have to be registered in the RUP, must necessarily present the medicine’s marketing authorization.

Until these regulations come into force, the provisions developed at the beginning of this article must be applied. Notwithstanding this, the SERCOP has established that, during this transition period, the contracting entities of the RPIS may carry out various small amounts of medicines in the year and their total amount may exceed the maximum value, provided that“… due to external factors, outside of the contracting entity duly justified, the contracting cannot be consolidated to use a contracting procedure under a common or special regime, other than the Small Amount. “[17]

Additionally, as of August 10, 2021, according to the fifth[18]  and tenth[19] reformed provisions of the Organic Law Reform of the Organic Criminal Code on Anti-Corruption, all public entities must obtain a prior report of relevance and favorability from the State Comptroller General to celebrate the small amount and any other contract under the LOSCNP.  

In conclusion, the acquisition of medicines for a small amount is exceptional and is subject to specific requirements. However, the dispersion of the applicable norms and their constant reforms generate confusion and an inappropriate use of this figure. For this reason, suppliers must be duly informed to avoid risks in the conclusion or execution of contracts, as well as in subsequent controls by the competent bodies.

[1] When speaking of “public entities”, reference will be made to those provided for in article 1 of the LOSCNP.

[2] According to Article 42 of the Regulation, standardized goods and services are “… those whose characteristics or technical specifications… are homogeneous and comparable under equal conditions”.

[3] In accordance with numeral 3 of article 6 of the LOSNCP, the electronic catalog is the registry of standardized goods and services published on the COMPRASPUBLICAS Portal for direct contracting.

[4] Codification and Updating of Resolutions issued by the National Public Procurement Service, Official Registry 245, January 29, 2018, Art. 330, no. 4.

[5] Organic Law of the National Public Procurement System, Official Registry 395, August 4, 2008, Art. 22.

[6] The COMPRASPUBLICAS Portal is the Official Computer System of Public Procurement of the Ecuadorian State, as provided in numeral 25 of article 6 of the LOSCNP.

[7] Numeral 29 of article 6 of the LOSCNP, defines the Unique Registry of Suppliers or RUP as “… the Database of the suppliers of works, goods and services, including consulting services, authorized to participate in the procedures established in this Law . “

[8] Codification and Updating of the Resolutions issued by the National Public Procurement Service, Official Registry 245, January 29, 2018, Art. 336.

[9] Regulation to the Organic Law of the National Public Procurement System, Official Registry 588, May 12, 2009, Art. 60.

[10] Numeral 2 of article 330 of the Codification provides that “Contracts for Small Amounts must not be used as a means of circumventing pre-contractual procedures.”.

[11] For example: leasing of goods, acquisition of fuels in operations of the entity, purchase of air tickets, contracting of travel agencies, acquisition of spare parts or accessories, among others.

[12]Art. 52.1.-Contracts of a small amount.- It may be contracted under this system in any of the following cases: […] 2.-Contracts for the acquisition of goods or provision of standardized services, except consulting, which do not appear in the electronic catalog and whose amount is less than multiplying the coefficient 0.0000002 of the initial budget of the State of the corresponding fiscal year… ”

[13] Regulation to the Organic Law of the National Public Procurement System, Official Registry 588, May 12, 2009, Art. 85.4.

[14] In this regard, Executive Decree No. 1033, published in Official Registry No. 208 of May 21, 2020, Section II of Chapter VII of Title III of the Regulations was amended; Resolution No. RE-SERCOP-2020-0111, published in the Official Registry Special Edition No. 1078 of September 28, 2020; and Resolution No. RE-SERCOP-2021-0114 published in Official Registry No. 432 of April 15, 2021.

[15] “… Made up of the set of public institutions that provide health services and which are known as << health subsystems >>, made up of the MSP, the IESS, the Social Security Institute of the National Police (ISSPOL) , ISSFA and the Complementary Health Network ”. Ecuador Constitutional Court of Ecuador, “Sentence No.: 679-18-JP / 20 and accumulated”, in Judgment No.: 679-18-JP and accumulated, August 5, 2020, 17.

[16] Codification and Updating of the Resolutions issued by the National Public Procurement Service, Official Registry 245, January 29, 2018, Twenty-fifth Transitory Provision.

[17] Codification and Updating of Resolutions issued by the National Public Procurement Service, Official Registry 245, January 29, 2018, Twenty-eighth Transitory Provision, no. 3.

[18] “… In the event of determining the relevance and favorability … the rest of the procedure established for this purpose in the law may be continued on a regular basis …”

[19] “… The Office of the Comptroller General of the State will issue a report of relevance, as a prerequisite for the signing of the public procurement processes determined in the law on the matter, by public sector entities and agencies …”

Mario Fernández García
Asocciate at CorralRosales

ASIPI Seminar | Beyond a year of change

ASIPI Seminar | Beyond a Year of Change - CorralRosales - Lawyer Ecuador

CorralRosales will participate in the next seminar organized by the Inter-American Association of Intellectual Property (ASIPI), titled “Beyond a year of change“, which will take place from May 23 to 25, 2021.

The most important Intellectual Property association in Latin America is organizing this event, which will be held online through an innovative platform, in which all members will be able to participate free of charge.  

The academic program will address current topics, as well as networking activities, which will involve a high level of participation.

Academic Program

Sunday, May 23 2021

  • 09:00h. – 12:00h. EST-USA: Administrative Council Meeting (for ASIPI members only)

Monday, May 24 2021

  • 08:00h. – 09:00h. EST-USA: ASIPIfit
  • 10:00h. – 10:20h.  EST-USA: Opening
  • 10:20h. – 10:50h. EST-USA: Opening Keynote Speaker – How Will AI shape the future of the IP system?
  • 11:00h. – 12:15h. EST-USA: Key Note Panel: Social platforms and freedom of speech, what is the right balance and should social platforms be entitled to censor speech?
  • 14:30h. – 16:00h. EST-USA: New road ahead for patentability of a new wave of technologies
  • 14:30h. – 16:00h. EST-USA: Trademarks as a living organism
  • 16:30h. – 17:30h. EST-USA: ASIPI CLUB: Brainstorm IP
  • 16:30h. – 17:30h. EST-USA: ASIPI CLUB: Regions and Gastronomy
  • 16:30h. – 17:30h. EST-USA: ASIPI CLUB: Books
  • 17:30h. – 18:30h. EST-USA ASIPI CLUB: Movies/series
  • 17:30h. – 18:30h. EST-USA: ASIPI CLUB: Wine
  • 17:30h. – 18:30h. EST-USA: ASIPI CLUB: E-sports and videogames
  • 19:00h. – 20h. EST-USA: Bingo

Tuesday, May 25 2021

  • 08:30h. – 09:00h. EST-USA: ASIPIfit
  • 10:00h. – 11:00h. EST-USA: CEJ Meeting/ Working Committee Presidents and Secretaries and Special Commissions
  • 11:30h. – 12:30h. EST – USA: Key Note Panel: New Intellectual Property Issues for Tech Startups in Latin America
  • 14:15h. – 15:45h. EST-USA: The new reality of the justice system
  • 14:15h. – 15:45h. EST-USA: Compulsory Patent Licenses in the Context of the COVID 19 Pandemic
  • 16:00h. – 17:30h. EST-USA: The new music industry
  • 16:00h. – 17:30h. EST-USA: The new vision for law firm management, what’s next?
  • 17:45h. – 18:30h. EST-USA: Non-Fungible Token’s – The New Crypto Storm
  • 18:30h. – 18:30h. EST-USA: DJ Closing

CorralRosales Will participate as a golden sponsor, register and don´t miss it! You can do so by clicking here.

Terms and conditions of the productive employment agreement

Terms and conditions of the productive employment agreement - CorralRosales - Lawyers Ecuador

In 2015 the fixed-term employment agreement, which allowed the hiring of employees for one-or two-years, was repealed from the Labor Code. As a result, the open-term agreement became the most widespread agreement for employment relationships covered by the Labor Code.

The open-term employment agreement grants the employee a high degree of stability, since it protects him/her in the event of unilateral termination and grants him/her the right to the payment of significant severance packages.

The pandemic caused by Covid-19, and its strong impact on the Ecuadorian labor market, made it necessary for the government to regulate new contractual mechanisms that make the hiring of employees more flexible, that adjust to the reality of each company and guarantee employment rights.

Since March 2020, the following types of agreements have been regulated: (i) agreement for work or services within the core business; (ii) emerging employment agreement; (iii) employment agreement for productive sectors, among others.

This article analyzes the employment agreement for productive sectors, also known as “productive employment agreement”, regulated by the Labor Ministry on October 30, 2020, through Ministerial Agreement MDT-2020-220. The regulation seeks to promote job creation in these sectors through a mechanism that allows them to cover the different needs of their activity.

Pursuant to Article 2 of the Organic Code of Production, Commerce and Investment (“COPCI”): “Productive activity shall be considered as the process by which human activity transforms inputs into lawful, socially necessary and environmentally sustainable goods and services, including commercial and other activities that generate added value.

As a consequence, this agreement may be implemented by companies whose purpose or activity is (i) to transform inputs into lawful goods and services; (ii) to generate commercial activities; and/or (iii) to generate added value.

The productive employment agreement subjects employment relationships to the following conditions:

  • Term: The term will be equivalent to the duration of the work, service or activity to be performed, up to one year, renewable once for the same term.

The employment relationship will be terminated upon completion of the work, the service or the established term, without the need of any other formality. The employer must pay the employee the proportional amounts corresponding to the thirteenth and fourteenth remunerations and vacations, without the payment of a resignation bonus or severance payment for unfair dismissal.

If at the end of the agreed term the employment relationship continues, the agreement becomes an open-termeagreement.

  • Trial period: It may provide for a trial period of up to 90 days.
  • Special working hours:
  • The 40 hours per week may be distributed in up to 6 days per week.
  • The parties may agree to increase the hours of the daily workday in exchange for additional rest days. In no case the workday shall exceed 12 hours per day.
  • If the activities performed require uninterrupted services, the parties may agree on consecutive working days, which may not exceed 20 consecutive working days.
  • Night shift: If more than 50% of the workday is performed between 6:00 a.m. and 7:00 p.m., the entire workday will be considered a day shift, i.e., night shift surcharge is not applicable.
  • Living expenses: When geographical characteristics limit the employee´s free mobility to their place of residence, the employer must provide employees with housing, food and transportation.
  • SUT registration: The employer has 15 days to register the employment agreement in the Labor Ministry online system “SUT”.
  • Severance: In the event of early termination by unilateral decision of the employer -before the culmination of the service or the expiration of the term- employees are entitled to the payment of a severance package for unfair dismissal.

In conclusion, the productive employment agreement is a flexible employment mechanism, since it allows to dynamize the labor market and with it the country´s economy. In turn, employers can hire employees in compliance with employment obligations, adjusting to their needs and without generating additional costs upon termination of the employment relationship.

Marta Gisela Villagómez
Associate at CorralRosales

How to create effective Non-Disclosure Agreements?

How to create effective Non-Disclosure Agreements?

Competition among companies and the business opportunities, ventures, technologies and constant expansion into new international markets mean that companies must protect that which allows them to stand out and differentiate themselves from their competitors, meaning their information, their “singularities”.

This information and singularities can be of various kinds, for example: financial statements, data, processes, know-how, a specific material, recipes, a product, a strategy, a skill, some knowledge, a supplier, or a formula. In general, any business information that is confidential, sensitive, private and that they wish to keep secret because of the importance it represents for the viability of the business.

Non-Disclosure Agreements (“NDAs”) are documents that allow the protection of company information. An NDA gives those who sign it the security of being able to share information in the different stages of the commercial relationship (pre-contractual, contractual and post-contractual). That is to say, in the event that in the pre-contractual stage, it is decided not to continue with the commercial relationship, the information that has been provided will be protected. The same applies when the contractual relationship ends.

The following are some of the elements that must be included in the NDA for it to be effective:

  • Ownership of the information. It must clearly identify who is the owner of the confidential information that will be shared with the other party and how it is protected.
  • Detail, limitation and scope of the information to be shared. Within the agreement it is important to state what type of information will be shared between the parties so that it can be properly identified and individualized, thus providing certainty for the parties. The scope of the confidentiality obligation refers to the information that will be covered by this agreement, its characteristics, the areas involved that handle it and know it, identification, the level of care of the information, its treatment once the NDA is terminated.
  • The recipient party must be clear about the scenarios under which it is authorized and may disclose confidential information. This may occur, for example, in the case of its own employees, its suppliers or in response to a requirement made by a competent authority.
  • The term during which the agreement will be in force must be specified, which means, the time that the confidential information will be shared and the period during which the obligation to maintain the confidentiality of the information will be in force. The term of the obligation to maintain the confidentiality of the information is usually agreed for several years and may even exceed the commercial relationship between the parties or be indefinite. The term will depend on the nature of the information.
  • The penalty, fine or sanction to be imposed on the parties in case of breach of their obligation to maintain in reserve and confidentiality the information they have come to know must be quantified and respond mainly to the importance and sensitivity of the information that has been shared and to the damages caused against one of the parties.
  • Non-confidential information. All information that will not be considered confidential and therefore is not protected by the NDA should be noted. An example of this type of information is the one that can be found in public records of free access.
  • Conflict resolution. Adequate mechanisms should be established to provide a prompt remedy in the event of a possible breach by any of the parties. It is advisable to establish a contractual domicile. Arbitration is considered to be more agile than the ordinary administration of justice.

It is necessary to take into account that each case has its peculiarities and therefore the NDA must be designed for specific situations.

Darío Escobar
Associate at CorralRosales