Bloomberg – Ecuador: Should You Register as a Nonresident Digital Service Provider?

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DATE: 28-08-2020

CORRALROSALES IN THE NEWS:

-Andrea Moya

MEDIA: Bloomberg

Our partner specialized in Tax, Andrea Moya, published an article in Bloomberg where she explains that starting September 16, 2020, digital services will be subject to 12% VAT due to an amendment made to the Internal Tax Regime Law. Additionally, she analyses some of the matters to be considered by the nonresident digital service providers.

Our partner explains “If the entity registers in Ecuador as a nonresident digital service provider, the entity will be required to collect the VAT from the consumer and pay the VAT to the tax authority. If the entity does not register in Ecuador as a nonresident digital service provider, and the payment is made through an intermediary, for example through a credit or debit card, the credit card issuer will be required to withhold the VAT from the consumer and pay the VAT to the tax authority. If the payment is not made through an intermediary, the consumer will be required to liquidate and pay the VAT to the tax authority.”

Moya point out that, in the case of sharing economy business models, the VAT taxable base is equal to the commission charged by the platform, however, in general, the VAT taxable base is equal to the price of the service.

Our partner explains “The process for registering as a nonresident digital service provider and to file the VAT returns must be regulated by the tax authority. Therefore, one of the challenges of the authority when issuing the regulations will be to establish a simplified process that enables the nonresident provider to comply with its obligations, whether directly or through third-party service providers”.

If you want to read the complete article, click here

El Universo – How to protect from data thieves?

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DATE: 26-08-2020

CORRALROSALES IN THE NEWS:

-Rafael Serrano

MEDIA: El Universo

The Ecuadorian newspaper “El Universo”  has published  in its magazine an article by Rafael Serrano Barona who is an associate of CorralRosales. He participates as an interviewee on how to protect from data theft, which is becoming increasingly common on the internet. It is not difficult to find someone -or even yourself- who has suffered a virtual attack called phishing, a term used to refer to one of the most used methods in the digital age to scam internet users to obtain confidential information, such as a password or something even more serious like bank information.

The Ecuadorian newspaper “El Universo”  has published  in its magazine an article by Rafael Serrano Barona who is an associate of CorralRosales. He participates as an interviewee on how to protect from data theft, which is becoming increasingly common on the internet. It is not difficult to find someone -or even yourself- who has suffered a virtual attack called phishing, a term used to refer to one of the most used methods in the digital age to scam internet users to obtain confidential information, such as a password or something even more serious like bank information.

Another issue to monitor is the domain to which the web page we are going to access belongs. If it is made up of numbers, it has a greater chance of being a hoax and we should not access it under any circumstances. The same happens with links that do not contain words related to the information that is going to be found in it.

Special care must also be taken with the attached files. Mostly directly executable file formats such as “ .exe ” , ” .bat ” or ” .cmd ” are especially dangerous. You should also be careful with Office format files (.docx, .xlsx or .pptx), which may contain macros.

Our associate Rafael Serrano, who is also the Vice President of the Ecuadorian Association for Data Protection, explains in this article what happens with data protection in Ecuador, since in this country there is no Data Protection Law that regulates these activities; this makes things easier for data thieves to act.

“Currently a bill is being discussed in the National Assembly that is being analyzed by the Commission for Sovereignty, Integration, International Relations and Integral Security. The Bill was presented by the President of the Republic Lenín Moreno. The Bill is quite complete. It follows the guidelines of the European General Data Protection Regulation, which in turn is the most important regulation on the matter ”, Rafael adds.

When asking Serrano about the need for a law of these characteristics, he details the importance of having such legislation since recent cases of data leaks by Ecuadorians have demonstrated the lack of control and regulation in this matter. Additionally, the Constitution approved in 2008 recognizes the autonomous right to data protection (art. 66 # 19). To date, we do not have a regulation that adequately regulates and develops the exercise of said right.

For now, we just have to wait.

If you want to read the full article, click here 

LexLatin – It is now possible to cancel commercial names due to lack of use in Ecuador

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DATE: 20-08-2020

CORRALROSALES IN THE NEWS: 

-Katherine González

MEDIA: Lex Latin

The LexLatin communication medium publishes an article by our associate Katherine González detailing the modification regarding the possibility of canceling commercial names due to lack of use in Ecuador. Previously, the National Service for Intellectual Rights (also known as SENADI) did not process this type of cancellation request since “the authority considered that the rights were acquired with their use.”

After having studied the possibility of carrying it out, the Court of Justice of the Andean Community has determined that trade names may be canceled if they have ceased to be used at a certain time and provided that a series of requirements are met.

Before this new ruling was published, if you applied for a trademark similar to a registered trade name but in disuse, the owner of said trademark had to oppose this fact. Likewise, having filed an opposition or not, the refusal of the trademark was considered due to the similarity to one already registered and, therefore, there was no option to register this new trademark.

As our associate explains, before taking any action it is necessary to bear in mind “that trade names are independent of the business name or determination of the companies and may be the same or different”.

“One of the solutions provided by the users to counteract this type of inconvenience was the presentation of cancellation actions for lack of use against registered trade names. For these matters, SENADI had no maintained a uniform criterion, in most cases these actions were inadmissible because it considered that the registration of a commercial name loses its validity and effectiveness as soon as use ceases, therefore, the cancellation was not legally appropriate, ”González points out.

Now, the criteria have changed and trade names may be canceled due to lack of use in Ecuador.

Ahora, los criterios han cambiado y se podrán cancelar nombres comerciales por falta de uso en Ecuador.

If you want to read the full article, click here

TAG Alliances – Ecuador: Guidelines for the Application of the Law on Humanitarian Support

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DATE: 21-07-2020

MEDIA: TAG Alliances

“The alliance of professional services firms TAG Alliances, of which CorralRosales is a member, has echoed our labor bulletin on the guidelines to apply the new labor regulations contemplated in the “Organic Law of humanitarian support to combat the health crisis arising from COVID-19”, issued last July 15 through ministerial agreements.

According to the agreement to preserve labor sources, the employer must update in the SUT – Humanitarian Law module – the employee’s data in accordance with the agreement signed, including its term. The agreements may be registered as of July 31, 2020. Employers who have signed agreements with their employees prior to the issuance of Agreement 132, will have 15 business days to register the information.

Another agreement reached is in the emerging special employment agreement. The employer must register in the SUT the information about the employee and the agreement, within 15 days from the beginning of the labor relationship. As in the previous case, they shall be able to register as of July 31 and will have 15 working days to register the information if the employers signed agreements with their employees prior to the issuance of Agreement 132.

Regarding the working-day reduction, it may be implemented when faced with situations of unforeseen circumstances or force majeure in the terms provided for within the Civil Code. The conditions and characteristics regulated to be able to take advantage of this reduction include the time of reduction, the term, the remuneration, the contributions to the IESS, the labor benefits, the compensations, the exceptions, the registration in the SUT and the notification. To read the news about our bulletin, click hereSi quiere leer la noticia sobre nuestro boletín, pulse aquí

In CorralRosales we publish a portal in which we inform you about all the legislative updates approved due to the health crisis caused by the Covid-19, such as the Law of Humanitarian Support. Click here to view it.

Teleamazonas – The Ministry of Labor issued the agreements on labor related matters

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DATE: 16-07-2020

CORRALROSALES IN THE NEWS: 

-Edmundo Ramos

MEDIA: Teleamazonas

Television network Teleamazonas conducted an interview with our partner Edmundo Ramos as an expert on labor practices to find out his opinion on the labor changes that began to take place since last March, following the arrival of the health crisis caused by Covid-19. These changes shall be implemented, after the Ministry of Labor issued the agreements with the guidelines for the application of the registration of the types of work and the emerging working-day reduction.

“These agreements specify the procedure to be followed and the deadlines in those cases where employers have already implemented these alternatives,” explained our Partner.

Regarding compensations, within the interview it was clarified that in the event of layoff during the emerging working-day reduction, these compensations, payments and other legal benefits will be calculated based on the salary received by the employee before the reduction.

These guidelines are based on what is stated in the Humanitarian Support Law approved by the National Assembly. In an example given in the interview, it is explained that the emerging contract duly signed shall be registered by the employer in the “Single Work System” (SUT) within fifteen days from the date of execution.

“In the case of emerging working-day reduction, it is established that this reduction shall not be applied if another of the reduction formulas contemplated by law is in force at the time,” adds Ramos.

If you want to see the complete interview, click here

Click here if you want to see the guidelines for the application of the Humanitarian Support Law.

Click here for our information document on the Humanitarian Support Law.

El Comercio – Contractual unforeseeability resulting from the pandemic

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DATE: 12-06-2020

CORRALROSALES IN THE NEWS

-Ramón Paz y Miño
-Mateo Zavala

MEDIA: El Comercio

Novedades Jurídicas, the legal supplement of El Comercio, publishes an article by our Senior Associate Ramón Paz y Miño and our Associate Mateo Zavala in which they explain the contractual unforeseenness arising from the health crisis caused by Covid-19. In the “new normality”, the dispute resolution clauses incorporated in contracts will be triggered in the absence of agreements and, therefore, ordinary justice or arbitration will be used.

“In recent decades, the theory of unforeseeability – which is an ideal mechanism for facing adverse effects in the execution of contracts – has acquired greater importance and relevance in the legal world, with the exception of Ecuador, where little or nothing has been said on the matter,” our lawyers put into context in their article.

As they point out, contractual unforeseenness is incorporated in several legislations, such as in Argentina and Colombia, where the objective is to preserve the survival of a contract legally entered into by the parties and where compliance has been affected by external factors beyond their control, which could not be foreseen during the contract negotiation stage.

“In addition to ensuring the full force of the contract, the theory of unforeseeability seeks to ensure fairness in the contractual relationship and to avoid excessive costs for one of the parties, which could affect the performance of the obligations”, explain the authors of the article.

The current situation suggests that the theory of contractual unforeseeability will be used in more than one case in Ecuador. The absence of an express rule that regulates it does not prevent its application, which will make it possible to use reasonability criteria for contractual relations due to events that generate an imbalance between the contracting parties. “This does not mean that the validity of legal security is ignored, much less the reliability and effectiveness of the system, but seeking other solutions will ensure that the performance is fair,” add Paz y Miño y Zavala.

If you want to read the full article, click here

Aula Magna – The Ecuadorian Intellectual Property Office (or SENADI according to its Spanish acronym) rejected ex-officio the registration of a mark because it considered that it was applied for in order to perpetrate an act of bad faith

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DATE: 13-05-2020

CORRALROSALES IN THE NEWS: 

-Katherine González

MEDIA: Aula Magna

Through Resolution No. SENADI_2019_RS_19814, the Ecuadorian IP Office rejected the application to register the mark KRUSELINGS in Class 28, for being similar to a globally well-known mark. Therefore, it was considered that the registration was sought in bad faith so as to mislead consumers. 

A mark is any sign capable of identifying goods or services in the market. For the purposes of registration, the community and national legislation establish a series of grounds for irregistrability that must be reviewed by the intellectual property offices, in order to avoid the acceptance for registration of signs that do not comply with the minimum requirements of a mark or that affect the rights of third parties.

One of the most well-known grounds for refusal which tends to be the most common ground for denying a mark at the Ecuadorian IP Office and in general at the IP Offices around the world is when a mark is similar to a prior application or registered mark[1]. However, another of the grounds to deny a mark is when it has been applied for to mislead consumers or to perpetrate an act of unfair competition or in bad faith according to the articles 135 and 137 of the Decision 486 of the Andean Community and the article 362 of the National IP Law.

The KRUSELINGS Case:

An Ecuadorian natural person applied for the mark KRUSELINGS in March 2019, covering “games, toys; gymnastic and sporting articles not contained in other classes; decorations for Christmas trees” in Class 28.

The mentioned application was not opposed by third parties. However, when issuing its decision, the Ecuadorian IP Office considered that the applied-for mark was confusingly similar with a mark well-known globally, and therefore that the application fell within the grounds for refusal since consumers would be deceived, in addition to establishing that it was an application made in bad faith.

Within its decision, the authority made it clear that despite there not being a prior application or registration similar to KRUSELINGS in Ecuador, the relevant grounds are directed at protecting the general interest, particularly consumers.

These types of decisions are aligned with global trends in the protection of intellectual property, most notably in trademarks. In particular, a Board Resolution of the International Trademark Association[2] (INTA) has established indicators to help trademark authorities determine whether a trademark application has been made in bad faith, from which we cite the two most relevant to the current case:

  • If the mark has been applied-for primarily to appropriate a trademark well-known in other jurisdictions or to disrupt the business of a competitor;
  • If the trademark was applied for with the intention of creating confusion regarding the source, sponsorship, affiliation or endorsement of the goods or services of the applicant;

In the mentioned resolution, INTA arrived at the conclusion that “the possibility of arguing and demonstrating bad faith should be used as a tool to defeat the piracy of trademarks and other clear cases of misappropriation of trademarks”.

The decision in the case of KRUSELINGS signals progress in the protection of intellectual property in Ecuador, since arguing bad faith previously, at least in opposition proceedings, was almost always rejected or ignored, leading in many cases to the acceptance of the registration of marks that infringed the rights of third parties, under the sole pretext that the mark was not registered or applied for in Ecuador.

If you want to read this article in Spanish, click here.


[1] Article 136 section a), Decision 486 of the Andean Community
[2] Board resolution: September 22, 2009

Aula Magna – Does Covid-19 pandemic constitute force majeure that justifies the termination of individual employment contract?

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DATE: 03-06-2020

CORRALROSALES IN THE NEWS: 

-Alisson Vera

MEDIA: Aula Magna

Coronavirus or Covid-19 pandemic shocked the world. All countries are reacting with various measures to mitigate the multiple consequences being generated in all scopes.

After health concerns, the economic impact is a great concern, since in addition to the closing of companies and the consequent fall in the economy, the loss of jobs will condemn a significant part of the workforce to unemployment.

The International Labor Organization ILO, in its publication “COVID-19 and the world of work: Implications and Responses[1]”, provided a preliminary assessment of the possible impact of Covid-19 on the world of work and proposed a set of measures to mitigate these repercussions. There is no doubt that this situation affects workers and employers worldwide, since there are sectors in which there is no production nor incomes, but they still have expenses (rent, suppliers, payroll, social security, etc.). Therefore, dialogue is the best tool to achieve an agreement.

On March 16, 2020, the State of Exception was decreed in Ecuador to mitigate the spread of Covid-19. Among other measures, the closing of certain sectors and social isolation were ordered. Priority and strategic industries such as health, food, basic services, telecommunications, among others are the only ones authorized to provide services in person.

Due to this situation, the Ministry of Labor, in order to comply with the restrictions ordered by the authority and maintain jobs in the country, has issued several agreements that encouraged companies to implement, to the extend possible: emergency teleworking, modifying workday, establishing vacation time, implementing the temporary suspension of work, and has even opened the possibility for employers and workers to reach agreements, taking into consideration the economic situation of the company, as long as their labor rights are not infringed.

Despite the efforts of the labor authorities, it is not possible to apply temporary measures to maintain employment contracts in all scenarios, and there are cases in which employers find it necessary to terminate employment contracts due to the effects of the Covid-19.

In this regard, section 6 of article 169 of the Labor Code, which contains the grounds for terminating the employment relationship, provides:

“Art. 169.- Causes for the termination of the individual contract.- The individual employment contract ends:… 6) By unforeseen circumstances or force majeure that makes the work impossible, such as fire, earthquake, storm, explosion, plagues of the field, war and, in general, any other extraordinary event that the contractors could not foresee or that they anticipated, they could not avoid;… (I did the underlining.) ”

Despite the fact that, on a doctrinal level, there is a difference between unforeseen circumstances and force majeure, since the term “unforeseen circumstances” should be reserved for the acts of nature, while “force majeure” refers to the events caused by man, most legal and treaty systems agree that the effects are the same. Ecuadorian regulations do not distinguish between those two[2]. Thus, the definition of force majeure is the same as that of unforeseen circumstances and is contemplated in article 30 of the Civil Code that establishes: “(…) It is called force majeure or unforeseen circumstances, the unforeseen event that it is not possible to resist.” Its effect is the exoneration of the debtor’s responsibilities[3].

Therefore, it is important to identify the fact that constitutes force majeure, since based on this, the analysis of the effects it may have on the employment relationship will be carried out. On the other hand, for force majeure to apply, as an exemption from labor responsibility, the doctrine and jurisprudence[4] establish that the following elements are necessary:

  1. Non-imputable: The constitutive act of force majeure cannot, nor should it be attributable to the party that alleges it; that is, for an event to be considered force majeure, the employer cannot have caused it, whether through fault, fraud or negligence.
  2. Unpredictability: that the fact could not have been foreseen within the ordinary calculations; and that, although it has been foreseen, it is inevitable.

In this regard, the Supreme Court of Justice – today the National Court of Justice – has said:

 “There is no doubt that the background of the closing of the company’s activities was due to the fault of the employer, for the lack of payment to the treasury. Therefore, there is no logical and legal basis for the closing of the company due to force majeure, since the situation of force majeure defined in Article 30 of the Civil Code is not presented in the case, because the closing situation of the company was foreseeable by virtue of the delay of the payments before the State. Judicial Gazette. CIII year. Series XVII. No. 8. Page 2533; Quito, May 29, 2001. ((I did the underlining.)”

In this case, the elements detailed above are not configured, since the supposed fact of force majeure; that is, the closing of the establishment was attributable to the employer for not complying with a legal obligation. Likewise, the employer could foresee the closing of the establishment, since it was one of the sanctions provided by law as a consequence of its acts.

  1. Irresistibility: “that could not have been avoided” as expressed by Coustasse[5], refers to the conduct of those who invoke the force majeure in the face of the event itself, and consists of the mechanisms used to mitigate the unforeseen event tending to avoid its harmful effects.
  2. Causation: that the damages caused are a consequence of the unforeseen event that is constituted as a unforeseen circumstance and not of another factor.
  3. Impossibility to work. – For Alberto G Spota[6]: “The unforeseen circumstance means the legal or physical impossibility of executing the due provision (…)”. This element must be configured with irresistibility, since the impossibility of rendering the service must be linked to the impossibility to overcome the harmful effects of force majeure or unforeseen circumstance alleged.

For this analysis, it is necessary to consider that, to mitigate the effects of Covid-19 on industries, the Labor Code contemplates figures such as the temporary suspension of work activities – maintaining the payment of workers’ compensation – and cease of activities by the employer. Therefore, the impossibility to work as a cause to end the employment relation should not be temporary, since, if it were temporary, it could be facing a suspension of activities or possible cease of activities by the employer and not to a termination of the employment relation.

The termination of the employment relation, under this cause, does not constitute untimely dismissal, since the dismissal is the termination of the employment relation by unilateral decision of the employer. In this  case, the breakdown of the relation occurs due to the damaging effects of force majeure – events beyond the control of the employer. In this sense, Dr. Marcucci[7] states that the effect of the unforeseen circumstance and force majeure “(…) when they are actually proven in the labor field cause the contract to cease due to the absolute impossibility of continuing to provide the service and without any of the parties taking responsibility for it. Both are victims of force majeure (…) But neither of the two contractors is guilty of the misfortune of their former counterpart, nor therefore is forced to compensate (…) ”

Therefore, although the Covid-19 pandemic, by its nature meets the requirements of being non-imputable and unpredictable, its application as a cause for termination of the employment relation, and therefore, the exemption from the payment of compensation, cannot be applied in a generalized way based on the sole existence of the pandemic (Covid-19), because despite the fact that many industries reflect losses and liquidity problems, as a consequence of Covid-19, this does not necessarily mean that work is permanently impossible or that the effects have the necessary weight for the termination of the employment relation. It is imperative to carefully analyze the harmful effects of each case, to verify if the other three elements – irresistibility, causation and impossibility to work– are configured to justify the Termination of the employment relation for this cause: “force majeure or unforeseen circumstances make impossible to work”.

If you want to read this article in Spanish, click here


[1] Published March 18, 2020 .- https://www.ilo.org/wcmsp5/groups/public/—dgreports/—dcomm/documents/briefingnote/wcms_739158.pdf
[3] This effect has been contextualized by the Supreme Court of Justice, today the National Court of Justice: Judicial Gazette. CVIII year. Series XVIII, No. 4. Page 1434. (Quito, February 22, 2007); Judicial Gazette. CIV year. Series XVII. No. 11. Page 3395. (Quito, November 12, 2002); Trial N ° 228-2007-Ex Third Civil, Mercantile and Family Division. (Quito, November 5, 2009.
[4] National Court of Justice, Specialized Labor Division, Trial No. 0027-2018. (Quito, May 14, 2019); National Court of Justice, Specialized Labor Division, Trial No. 0026-2018. (Quito, February 4, 2019); National Court of Justice, Specialized Labor Chamber, Trial No. 1948-2015. (Quito, June 22, 2017)
[5] El Caso Fortuito ante el Derecho Civil, 1958  p. 114
[6] Instituciones del Derecho Civil, Contratos, volumen III, 1975, p. 538
[7] Panorama Contextualizado del Derecho Laboral Sustancial Colombiano, Marcucci Cesar, 2005, p.120

Aula Magna – Termination of employment contract due to work harassment

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DATE: 08-05-2020

CORRALROSALES IN THE NEWS: 

-Edmundo Ramos

MEDIO: Aula Magna

In November 2017, the concept of “workplace harassment” was incorporated into the Labor Code as a cause for “Visto Bueno” (termination with fair cause) for employer and the worker.

The Labor Code defines workplace harassment as “all behavior that violates the dignity of the person, repeatedly and potentially harmful, committed in the workplace or at any time against one of the parties in the employment relationship or among workers, which may result in the person affected being impaired, mistreated, humiliated, or that threatens or damages their employment situation. ”

Two elements of the definition stand out: (i) the law aims to regulate this type of action even outside the company’s facilities and outside working hours; and, (ii) regarding events that occur between workers, without necessarily one of them being the employer’s representative.

The law reform is inconsistent, since it forces employer to take responsibility for events beyond his control and outside his scope, allowing the employment relationship to be terminated – prior authorities approval´s – due to interpersonal relationships between workers that could happened in their free time.

Based on this, below an analysis of a “Visto Bueno” process when it is requested by the employer against a workers.

Article 172.8 of the Labor Code transcribed below includes workplace harassment among the grounds for the employer to terminate the employment contract, prior approval of “Visto Bueno”:

“For committing workplace harassment, either individually or in coordination with other individuals, towards a colleague, the employer or towards a subordinate in the company.

Prior to the request for approval of “Visto Bueno”, a conciliation chaired by the competent authority will be opened, in which besides the interested party, the representatives of the workers and the employer or whoever represents him will be heard.”

According to this, workplace harassment can occur: (i) when one or more workers harass the employer or workers who represent the employer (e.g. managers, chief, directors, etc.); or, (ii) when one or more workers harass any of their coworkers.

In the first scenario, the employer knows the harassment event directly, since it is the victim of the harassment. In the second scenario, the harassment occurs without the employer necessarily being aware of the event or only knowing about it when the harassed worker (s) communicates it, either directly to the employer or by filing a complaint to the labor authority (Ministry of Labor).

According to the transcribed article, the approval process could only be initiated, prior a conciliation proceeding between the parties, which implies that it will only be possible to initiate the “Visto Bueno” proceeding when it has not been possible for the parties to reach a conciliation or that the harassment persists despite the conciliation.

Consequently, the “Visto Bueno” could only be filed once the conciliation proceeding is finished, either in the workplace itself or before the labor authority (prior employee´s complaint).

In any “Visto Bueno” proceeding, the employer has a period of 30 days, from the moment the harassment event occurred, until the worker is legally notified with the “Visto Bueno” request, except for those violations considered as a “lack of probity” (honesty), in which case that period begins when the employer becomes aware of the workplace harassment event.

The foregoing implies that the employer has approximately 22 days to initiate a “Visto Bueno” proceeding, considering that notice to worker takes approximately 5 business days from the day the request is filed.

Additionally, as the law requires prior conciliation before filing the “Visto Bueno” request, it is very likely that this will take more than 30 days between the harassment event and the notification of the request, in which case the action would have expired.

In conclusion, the chances of obtaining a “Visto Bueno” against a worker for workplace harassment are very low. For the termination of an employment contract due to workplace harassment to be applicable in practice, a legal reform or a National Court ruling with mandatory effect will be necessary. It must determine that the 30 days to filed the “Visto Bueno” request should begin when the employer becomes aware of the workplace harassment event.

If you want to read this article in Spanish, click here

LexLatin – BASIC ASPECTS OF CANNABIS IN ECUADOR: CONSIDERATIONS FROM AN INTELLECTUAL PROPERTY AND REGULATORY PERSPECTIVE

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DATE: 19-05-2020

CORRALROSALES IN THE NEWS: 

-Francisco Gallegos

MEDIA: LexLatin

In Ecuador, the use of cannabis is punishable, except in the case of personal consumption of quantities less than those established by the relevant law. At the end of last year, non-psychoactive and hemp cannabis were excluded from substances classed as subject to control, as will be explained further on, decriminalizing their use for medical or therapeutic ends (the exclusion thereby not extending to cannabis for recreational use).

Among the permitted uses are the possession of products that contain or are derived from cannabis for therapeutic, palliative or medicinal use, or whose use has medicinal objectives. In the same way, the law provides for the investigation, production, cultivation, distribution and sale of the substance, provided that the relevant government permits and approval are obtained and in accordance with the relevant requirements.

The reform will enter into force from June 21, 2020 and has as its overriding aim the elimination of punishments, excluding from control the possession of products for medicinal or therapeutic use that contain a non-psychoactive active ingredient or hemp (CBD), understood as the cannabis plant or any part thereof whose dry weight delta-9-tetrahydrocannabinol (THC) content is less than 1%, provided that there is a diagnosis of suffering from an illness or pain that merits its use. In relation to THC, the ingredient in marijuana that produces the psychotropic effect, this continues to be a controlled substance, if not found within the aforementioned parameters.

From a regulatory point of view, the National Agrarian Authority must issue the regulations relating to the importation, cultivation, planting, harvesting, selling, industrialisation and even exportation of non-psychoactive cannabis or hemp, within 120 days of the law entering into force. The regulation and control of the planting, cultivation and harvest will be the responsibility of the National Health Authority. To date there is no specific detail as to the relevant powers.

At this moment in time, according to the relevant decisions handed down by the Andean Community on the matter, the only CBD products eligible for marketing authorizations are cosmetic products for topical use, provided that they are contained within the international lists of ingredients that may be used within cosmetics and complying with the corresponding restrictions and conditions of use. Human consumption goods are not permitted. One must await the issuance of regulations from the competent authorities.

Moreover, it will be necessary to consider the final text of the Health Law that will also contain provisions as to the regulation of medical and therapeutic use cannabis and its derivatives. The draft law is currently awaiting its second reading.

From an intellectual property perspective, it is worth remembering that the relevant law does not specifically consider use of the word cannabis in the registration of a trademark; however, it is very important to keep in mind that Article 134 of Decision 486 of the Andean Community in its final section provides that the nature of the good or service to which a mark relates, will in no circumstances be an obstacle to registration.

This might mean that granting or refusal of an application for a trademark that includes the term “cannabis”, any derivative of or expression that refers to cannabis in the mark itself or within its coverage comes down simply to the individual criteria of the responsible IP Office examiner, given that, being a restricted product, it could lead to objections. To date there are differing opinions, without any clear position on the matter. In any event, the number of accepted cannabis trademark applications is much higher than those which have received official objections or oppositions from third parties.

Nevertheless, there are both cases of granted cannabis trademark applications, as well as applications which have received official objections. Therefore, it is very important to take care with the wording of the applied-for goods or services, with the aim of reducing the possibility of receiving an official objection. In the same way, it will be very important to consider the mark’s word elements as well as the elements making up the graphical part of the label, keeping in mind the absolute grounds for refusal as provided for by Article 135 section p) of Decision 486, corresponding to Article 360 section 18 of the Knowledge, Creativity and Innovation Law, also known as the Ingenuity Law, which provides for the refusal of marks contrary to law, morals, public order or decency.

At the start of this year, the Ecuadorian IP Office or SENADI as it is known locally according to its Spanish acronym, had processed a limited number of trademark applications and even fewer patent applications. It is reckoned, since there are no exact official figures, that a high proportion of such trademark applications have been accepted, in contrast with the patent applications whose application process is significantly longer.

It is important to point out that various associations of producers of hemp and its derivatives have been formed, as well as groups that lobby for the therapeutic use of cannabis in Ecuador, even some that have the support of the Public Defender’s Office, as an alternative means for those that suffer from catastrophic or chronic illnesses, such as palliative care against pain, epilepsy and other oncological or brain impairment problems.

CorralRosales has actively participated in various international forums about the different opportunities and challenges brought about by the use of cannabis for therapeutic and medicinal aims. The firm has also provided legal and regulatory advice for what is a nascent industry in Latin America.

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