Energy sector policies

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

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

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

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


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


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

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


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

4.    Identify projects to delegate to private investment.

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

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

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

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


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

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


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

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

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

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

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

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

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

  1. Beneficiaries:


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

  1. Application:


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

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

 

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

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

  1. Reimbursement

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

Andrea Moya - CorralRosales - Lawyer Ecuador

Specialist in Tax matter

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

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Suspension of workday on November 3rd

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

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

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

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

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

Edmundo Ramos

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

Marta Villagómez

Specialist in Labor Law

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

Presidential Decree No. 165

Presidential Decree No. 165 - CorralRosales - Lawyers Ecuador

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

1.- Responsibility of Arbitrators

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

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

2.- Arbitrations and Public Contracts

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

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

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

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

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

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

4.- Preliminary Measures

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

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

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

5. Nullity Proceedings

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

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

6. Responsibility of the Public Official

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

7. Mediation for Administrative Disputes

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

8. Scope of the Arbitration Agreement

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

9. Promotion of Arbitration

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

10. Party Autonomy

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

11. Confidentiality

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

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

12.- Mediation and Deadlines

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

Edgar Bustamante

Specialist in Arbitration

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

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Non-Intrusive inspection for customs matters

Non-intrusive inspection for customs matters - CorralRosales - Tax Bulletin - Abogados Ecuador

The President issued the Executive Decree 227 on October 19, 2021, by which the customs regulations were amended to allow non-intrusive inspections. Below a summary of the mos important matters:

1.    Definitions:

The following 3 definitions were added:

•    Non-intrusive equipment: Equipment, machines or devices that have a source of X-ray emission, which allow through tunnels and arches to obtain images from different angles, which have an interface or computer system with a series of tools that allow the discrimination of densities by color, size increase, mobilization, management of brightness, contrast, measurement, among other tools.

•    Physical inspection: Action carried out by the competent authorities, which may be performed simultaneously, in order to verify the nature, origin, condition, quantity, value, tariff classification and regulatory treatment of the goods.

•    Non-intrusive inspection: Action carried out by the competent authorities, which may be performed simultaneously, in order to verify the nature of the goods, through the use of non-intrusive equipment that allows scanning the merchandise inside a container, cargo unit, packaging, package or any other object, without having to unload it, in order to compare with the information in the customs declaration and verify compliance with the applicable regulations.

2.    Non-intrusive physical inspection

The non-intrusive physical inspection was included. Through this type of inspection, the nature and other characteristics of the goods will be verified by means of the exclusive use of non-intrusive equipment and applying risk profiles established by the Customs Authority.

3.    Control with non-intrusive equipment

In the case of imports, the Customs Authority will establish which customs warehouses must have the necessary equipment for non-intrusive inspections to be made to goods, cargo units and means of transport that have been risk profiled.

In the case of exports, all goods, cargo units and means of transport will be subject to controls with non-intrusive equipment by the Customs Authority.

The Customs Authority will have a term of 60 days to establish the minimum requirements to be met by the non-intrusive equipment. Once these requirements are established, the Customs Authority must establish which warehouses, ports, airports, and border crossings require the implementation of such equipment, which must operate within 12 months from the publication of the decree in the Official Gazette.

4.    Concurrent control

The Customs Authority may request documents different from the supporting and accompanying customs documents in order to establish the accuracy and veracity of the data included in the customs declarations.

Andrea Moya - CorralRosales - Lawyer Ecuador

Specialist in Tax matter

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

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New regulations for employment termination with cause procedures known as “visto bueno”

New regulations for employment termination with cause procedures known as "visto bueno" - CorralRosales - Lawyers Ecuador - Latam

On August 13th, 2021, the Ministry of Employment, through Ministerial Agreement MDT-2021-219, issued new regulations governing the procedure to be followed for the approval of Employment Termination with Cause (known as and hereinafter, “Visto Bueno”). The new process will be effective as of September 24, 2021.

The main features of the new procedure are as follows:

1.    Jurisdiction: The competent employment inspector to handle requests for Visto Bueno is that of the territorial circumscriptions of the place where the employment agreement was executed or that of the place of the employees’ domicile.

2.    Appearance: The parties may appear in person or by proxy, accompanied by a defense attorney, who may act by legal proxy or by simple written authorization.

3.    Notifications:  The Visto Bueno request must be notified to the employee by ballot delivered to his/her workplace or domicile. The latter may be received by an employee’s relative or be posted on the door of the domicile in case there is no one to receive it, or if the employee refuses to do so.

If it is impossible to locate the employee, he/she may be notified by e-mail, provided that there is a document whereby the employee states its clear and express acceptance to be notified by such mean.

Notification by the press: If it is not possible to notify the employee by any of the means described above, it may be done through a single publication in one of the newspapers with the largest circulation in the place where the Visto Bueno process is carried out. For this purpose, the employer must carry out a statement before a Public Notary that he/she does not know the employee’s domicile. After 20 days since the publication, the employment inspector shall set a date and time for an investigation hearing.

4.    Suspension of the employment relationship: Before or after  filing  the Visto Bueno the employer may request the suspension of the employment relationship. To this end, a certified copy of the employee’s payroll corresponding to the last full monthly remuneration must be attached and the relevant amount must be deposited in the account designated by the Ministry of Employment to this effect.

5.    Response to the Visto Bueno request: The employee shall answer to the Visto Bueno request within 2 working days of being notified with the procedure. Failure to do so will result in the inspector continuing with the proceedings in absentia.

6.    Investigation hearing: Once the term to submit the response to the Visto Bueno´s request has lapsed, the inspector shall, within the following 3 working days, set a date and time for the investigation hearing.

The investigation hearing may be held at the inspector’s office or, if necessary, at the place where the facts leading to the Visto Bueno occurred.

The inspector may, exceptionally, and for the purpose of clarifying the facts of the dispute, suspend the investigation for up to 3 days. The inspector may not formally require public or private entities in order to obtain evidence.

Once the investigation hearing has concluded, the inspector will have 3 working days to issue a resolution.

Specialist in Labor Law

Marta Villagómez, associate at CorralRosales
mvillagomez@corralrosales.com
+593 2 2544144

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Outflow tax (ISD) applicable to foreign airlines

Outflow tax (ISD) applicable to foreign airlines - CorralRosales - Abogados Ecuador - Latam

Executive Decree 182 issued by the President on September 2, 2021, establishes that transfers of money abroad made by foreign airlines authorized to operate in Ecuador will be subject to 0% rate of Outflow Tax (ISD).

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

This Decree will enter into force from the date it is published in the Official Gazette. The Internal Revenue Service shall issue the necessary regulations to implement the Decree within 15 workings days from its publication.

Especialista en Tributario y Aduanero
Andrea Moya, socia de CorralRosales
amoya@corralrosales.com
+593 2 2544144

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Ecuador´s action plan for the mining sector

Ecuador´s action plan for the mining sector - CorralRosales - Lawyers Ecuador
Through Executive Decree 151, signed on August 5, 2021, the President of Ecuador issued an Action Plan for Ecuador’s Mining Sector (from now on “Action Plan”) that seeks promoting development through the positioning of mining as a relevant industry of the country’s economy.

The main objective of this Action Plan is to articulate the development of efficient and responsible mining and promoting national and foreign investment to achieve the exploitation of Ecuadorian mineral resources through the best practices in the industry.

In turn, through this Action Plan, Ecuador also seeks to reaffirm its commitment to guarantee legal security by complying with existing regulations and respecting pre-existing rights.

With this in mind it is important to highlight the guidelines, included in the Action Plan, that the Ministry of Energy and Natural Resources (after this “the Ministry”) must follow. On this sense, the Ministry must:

1. Communicate clear and transparent information regarding the amount and destination of benefits and taxes received from the mining industry, and regarding public policy in this matter.

2. Design a comprehensive plan for the prevention, combat, and application of sanctions to the illicit exploitation of minerals.
3. Work with the Ministry of the Environment, Water and Ecological Transition so that the appropriate measures are adopted for environmental permits related to the mining industry to be resolved in a timely manner, so they do not interfere with investment commitments.

4. Instruct the National Mining Company ENAMI EP to facilitate associative agreements to attract and allow the participation of private investors.

5. Promote the adoption and compliance with international codes, protocols, agreements, declarations and instruments in each of the phases of the mining activity.

6. Encourage the adoption of socially and environmentally responsible practices and respect for labor rights and access to complaint mechanisms.

7. Develop a technological tool that facilitates and guarantees the correct exercise of current and future mining rights.

The Action Plan also instructs the Agency for the Regulation and Control of Energy and Non-Renewable Natural Resources to prepare a detailed report about mining rights conceded under the regimes of large mining, medium mining, small mining and artisanal mining that have been granted and are in force.

Finally, the Action Plan provides that the Ministry presents a project to create a Public-Private Mining Advisory Council that will promote civil society participation in the construction of public mining governance.

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Regulations for the return to in person work activities in the private sector

Regulations for the return to in person work activities in the private sector - CorralRosales - Lawyers in Ecuador

The Ministry of Labor issued Ministerial Agreement MDT-2021-214, published in the Official Register No. 507 of August 02, 2021, that contains the “Guidelines to Return to In Person Work Activities”. Hereafter their main features:

With the exceptions detailed below, it is up to employers to determine if employees return to in person work, whether they are immunized or not.

Employers must comply with the “Guide and General Plan for the Progressive and Safe Return to In Person Work Activities” approved on June 29, 2021, by the Emergency Operations Committee – COE National.

Employees with aggravating conditions or who have under their care a person with an aggravating condition, who have been vaccinated and necessary time for immunization has lapsed, shall return to in person work.

Even if employees with aggravating conditions are immunized -or the individual with aggravating conditions under their care is immunized- if the occupational physician or a center accredited by the Ministry of Public Health, certifies that the employees may not perform in person work, he or she will remain under telework modality.

Employer´s failure to comply with the Ministerial Agreement may be sanctioned by the Ministry of Labor with a fine up to one (1) minimum statutory wage (currently US$400).

Aggravating conditions are considered:

  • Individuals over 65 years old.
  • Individuals with chronic non-transmissible diseases.
  • Individuals with cardio-vascular diseases.
  • Individuals with cerebrovascular diseases.
  • Individuals whit disability of 50% or more.
  • Pregnant and breastfeeding women.
  • All types of congenital malformations of the heart and all types of heart valve diseases.
  • Oncological and oncohematological patients with recent diagnosis or active disease.
  • Individuals with brain tumor in any state and any type.
  • Chronic renal insufficiency.
  • Cirrhosis.
  • Individuals who have received an organ transplant or are waiting for a transplant.
  • Individuals with sequels of severe burns.
  • Individuals with Klippel Trenaunay syndrome.
  • Individuals with thoracic-abdominal aneurysm.
  • Individuals with HIV.

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Implementation of boards of directors of the port authorities of Guayaquil, Manta, Puerto Bolívar and Esmeraldas

Implementation of boards of directors of the port authorities of Guayaquil, Manta, Puerto Bolívar and Esmeraldas - CorralRosales - Lawyers Ecuador
By Executive Decree 78 of June 15, 2021, the President of the Republic implemented the boards of directors of the Port Authorities of Guayaquil, Manta, Puerto Bolivar and Esmeraldas.

The boards will be constituted as follows:

1. Members of the board of directors:

  1. A member appointed by the President of the Republic, who shall preside over the board of directors
  2. A member appointed by the General Commander of the Navy of Ecuador, who will replace the president of the board of directors in case of absence.
  3. A member appointed by the Ministry of Production, Foreign Trade, Investment and Fisheries.
  4. A member appointed by the Ministry of Transportation and Public Works; and
  5. A member appointed by the Customs Administration.

The Subsecretary of Ports and Maritime and River Transportation of the Ministry of Transportation and Public Works will act as secretary of the boards of directors. The members of the board of directors are freely appointed and removable officials.

The President of the Republic is responsible for appointing the managers of the Port Authorities of Guayaquil, Manta, Puerto Bolivar and Esmeraldas.

2. Functions of the board of directors (Article 8 of the National Port Administrative Regime Law):

  1. Submit an annual report to the Direction of the Merchant Marine and Littoral -currently Subsecretary of Ports and Maritime and Fluvial Transportation of the Ministry of Transportation and Public Works- on the activities carried out during the previous fiscal year.
  2. To appoint the Departmental Chiefs from among the candidates suggested by the Manager.
  3. To know and approve the Financial Statements, balance sheets, and other reports of the Entity.
  4. Approve the Port Services Regulations, organization manuals, personnel organization manuals and other pertinent regulations, based on the preliminary drafts submitted by the Manager; and formulate the regulations of uniform application to all the Port Entities, to be submitted for consideration of the Direction of the Merchant Marine and Littoral -currently the Subsecretary of Ports and Maritime and Fluvial Transportation of the Ministry of Transportation and Public Works.
  5. To authorize the Manager to sign contracts, investments, acquisitions, studies and other acts necessary for the fulfillment of the purposes of the Entity, the amount of which requires the Bidding Contest, subject to the Bidding Law -current public contracting regulations- and the approved Budget.
  6. To resolve in second instance the claims of the users, in all matters related to port services.
  7. The others determined in the General Ports Law and in the respective statutes.

3. Liability of the members of the board of directors (Article 11 of the National Port Administrative Regime Law):

They are civilly and criminally responsible, personally and jointly and severally, for all acts or resolutions that are detrimental to the interests of the Entity and that have been taken with their vote. They are especially liable for decisions that contravene Port policy and resolutions issued by higher authorities. The manager and officers of the Entity shall also be liable for their participation in such acts.

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