A proposed new arbitration law is circulating among legal circles in Colombia, and has reached me thanks to Daniel Peña of Peña Mancero Abogados.
There is good news. Recognition and enforcement of foreign arbitral awards has not followed the New York Convention, and can take up to two years (see my article on arbitration here and others here.)
All that is changing. The proposed law very closely tracks the he Convention on the Recognition and Enforcement of Foreign Arbitral Awards, also known as the “New York Arbitration Convention” or the New York Convention, Daniel says in his blog. You can see that for yourself with my translation, below – just compare Articles 111 and 112 to Articles V and VI of the New York Convention.
Colombia seeks to be the seat of more international arbitrations and these changes were needed. Any international arbitral award granted by a tribunal sitting in Colombia is treated as a national award and does not require recognition for enforcement, under the new proposal. An international award from a tribunal seated outside Colombia would require a simple application to the Civil Appeals section of the Supreme Court of Justice, but the grounds to oppose recognition are limited to those in the New York Convention.
Much more important, the time to decide recognition will be cut from two years (you read that right – see my earlier post on arbitration) to 30 days — ten for the opposing party to challenge recognition, and twenty after that for the Court to decide. There is no appeal of or challenge to its decision, under the proposed procedure.
I have translated Chapter IX on recognition and enforcement, below. Compare it to the New York Convention and you see that Daniel is right.
| CAPÍTULO IXRECONOCIMIENTO Y EJECUCIÓN DE LOS LAUDOS
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CHAPTER IX RECOGNITION AND ENFORCEMENT OF AWARDS |
| Artículo 111. Reconocimiento y ejecución. Los laudos arbitrales se reconocerán y ejecutarán así:
1. Un laudo arbitral, cualquiera que sea el país en que se haya proferido, será ejecutable ante la autoridad judicial competente, a solicitud de parte interesada. 2. La parte que invoque un laudo o pida su ejecución deberá presentar el laudo original o copia de él. Si el laudo no estuviere redactado en idioma español, la autoridad judicial competente podrá solicitar a la parte que presente una traducción del laudo a este idioma. 3. Los laudos dictados en arbitrajes internacionales cuya sede sea Colombia se considerarán laudos nacionales y, por ende, no estarán sujetos al procedimiento de reconocimiento y podrán ser ejecutados directamente sin necesidad de este, salvo cuando se haya renunciado al recurso de anulación, caso en el cual será necesario su reconocimiento. 4. Para la ejecución de laudos extranjeros, esto es de aquellos proferidos por un tribunal arbitral cuya sede se encuentre fuera de Colombia, será necesario su reconocimiento previo por la autoridad judicial competente.
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Article 111. Recognition and enforcement. Arbitral awards are recognized and enforced as follows:
1. An arbitral award, irrespective of the country in which it was rendered, will be enforceable before the competent judicial authority, at the request of an interested party. 2. The party seeking an award or applying for its enforcement shall present the original award or a copy of it. If the award is not in written in Spanish, the competent judicial authority may request the party to submit a translation of the award in that language. 3. Awards granted in international arbitrations with their seat in Colombia shall be considered national awards and, therefore, not subject to the recognition procedure and can be executed directly without it, except when recourse to cancellation has been abandoned, in which case recognition shall be required. 4. For the execution of foreign awards, that is, those rendered by an arbitral tribunal with its seat outside of Colombia, prior recognition by the competent judicial authority is required.
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| Artículo 112. Motivos para denegar el reconocimiento. Solo se podrá denegar el reconocimiento de un laudo arbitral, cualquiera que sea el país en que se haya dictado, en los casos y por las causales que taxativamente se indican a continuación:a) A instancia de la parte contra la cual se invoca, cuando ella pruebe ante la autoridad judicial competente del país en que se pide el reconocimiento o la ejecución:
i. Que para el momento del acuerdo de arbitraje estaba afectada por alguna incapacidad; o que dicho acuerdo no es válido en virtud de la ley a que las partes lo han sometido, o si nada se hubiera indicado a este respecto, en virtud de la ley del país en que se haya dictado el laudo; o ii. Que la parte contra la cual se invoca el laudo no fue debidamente notificada de la designación de un árbitro o de la iniciación de la actuación arbitral o no pudo, por cualquiera otra razón, hacer valer sus derechos; o iii. Que el laudo versa sobre una controversia no prevista en el acuerdo de arbitraje o contiene decisiones que exceden los términos del acuerdo de arbitraje. No obstante, si las disposiciones del laudo que se refieren a las cuestiones sometidas al arbitraje pueden separarse de las que no lo están, se podrá dar reconocimiento y ejecución a las primeras; o iv. Que la composición del tribunal arbitral o el procedimiento arbitral no se ajustaron al acuerdo celebrado entre las partes o, en defecto de tal acuerdo, a la ley del país donde se adelantó o tramitó el arbitraje; o v. Que el laudo no es aún obligatorio para las partes o fue anulado o suspendido por una autoridad judicial del país sede del arbitraje; o |
Article 112. Grounds for refusing recognition. Recognition of an arbitral award, irrespective of the country from which issued, can be refused exclusively on the following grounds:
a) At the request of the party against whom it is invoked, if it proves to the competent national judicial authority where recognition or enforcement is sought: i. That at the time the arbitration agreement was affected by some disability, or that the agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law of the country where the award was made, or ii. That the party against whom the award is invoked was not given proper notice of the appointment of an arbitrator or the initiation of arbitration proceedings or could not, any other reason, to assert their rights, or iii. The award deals with a dispute not contemplated by the arbitration agreement or contains decisions on matters beyond the terms of thearbitration greement. However, if the provisions of the award relating to the matters submitted to arbitration can be separated from those that are not so submitted, the award may be recognized and enforced, or iv. The composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement between the parties or, failing such agreement, the law of the country where the arbitration occurred, or v. The award has not yet become binding on the parties or was revoked or suspended by
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| b) Cuando la autoridad judicial competente compruebe:i. Que, según la ley colombiana, el objeto de la controversia no era susceptible de arbitraje; o
ii. Que el reconocimiento o la ejecución del laudo serían contrarios al orden público internacional de Colombia. Si se hubiere pedido la anulación o la suspensión del laudo ante una autoridad judicial del país sede del arbitraje, la autoridad judicial colombiana, si lo considera procedente, podrá aplazar su decisión sobre el reconocimiento del laudo y, a instancia de la parte que pida aquello, esta podrá también ordenar a la otra parte que otorgue caución apropiada. |
b) Where the competent judicial authority finds: i. That, under Colombian law, the subject of the dispute was not subject to arbitration, or ii. The recognition or enforcement of the award would be contrary to public policy If any request for cancellation or suspension of the award has been made before a |
| Artículo 113. Competencia. Para conocer del trámite de reconocimiento de los laudos que conforme a la presente sección demanden del mismo será competente la Sala de Casación Civil de la Corte Suprema de Justicia, en única instancia y sin lugar a recurso o acción alguna contra su decisión.
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Article 113. Competence. Only the Civil Chamber of the Supreme Court of Justice shall have the power to hear a claim for recognition of awards under this section, in one instance and without remedy or action against its decision. |
| Artículo 114. Normatividad aplicable al reconocimiento. Al reconocimiento del laudo arbitral se aplicarán exclusivamente las disposiciones de la presente sección y las contenidas en los tratados, convenciones, protocolos y demás actos de derecho internacional suscritos y ratificados por Colombia. En consecuencia, no serán aplicables las disposiciones establecidas en el Código de Procedimiento Civil, sobre motivos, requisitos y trámites para denegar dicho reconocimiento, disposiciones que se aplicarán únicamente a las sentencias judiciales proferidas en el exterior. | Article 114. Regulations applicable to recognition.Recognition of arbitral award shall be subject only to the provisions of this section and those contained in treaties, conventions, protocols and other legal acts signed and ratified by Colombia. Consequently, the provisions of the Code of Civil Procedure, on reasons, requirements and procedures to deny such recognition, provisions that apply only to judgments handed down abroad, shall not apply. |
| Artículo 115. Trámite del reconocimiento. La parte que pida el reconocimiento presentara la solicitud ante la autoridad judicial competente acompañada de los documentos a que se refiere el artículo 111.En caso de encontrar completa la documentación, la Corte Suprema de Justicia admitirá la solicitud y dará traslado por diez días (10) a la otra u otras partes.
Vencido el término del traslado y sin trámite adicional, la Corte Suprema de Justicia decidirá dentro de los veinte (20) días siguientes. |
Article 115. Recognition process. A party seeking recognition shall submit an application to the competent judicial authority accompanied by the documents referred to in Article 111. When documentation is complete, the Supreme Court shall accept the request and give a period of ten days (10) to the other party or parties to respond. At the end of the ten-day period, without further procedures, the Supreme Court shall
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Ed. Note: This article appeared in April 2011 Latin American Law & Business Report published by Thomson Reuters/WorldTrade Executive. See http://www.wtexecutive.com
A familiar debate is raging in Colombian intellectual property circles — copyright holders versus consumers of information — over whether copyright laws prevent piracy or creativity.
The debate arises in the context of a proposed law “to regulate infringement of copyright and related rights on the Internet.” submitted to the Colombian Congress by the Minister of Justice and the Interior, German Vargas Lleras.[1] For that reason, many call it the “Ley Lleras” or “Lleras Law,” it is in reality Colombia’s attempt to catch up to the United States, the European Union, and much of the rest of the world’s economies in striking a balance between rights holders and information consumers. This is a familiar debate because in the United States, it was resolved — as a legislative matter, anyway — by Title II of the Digital Millennium Copyright Act of 1998, which Title is sometimes referred to as the Online Copyright Infringement Liability Limitation Act (OCILLA).
The Lleras Law would create a safe harbor for online service providers — Internet service providers, storage providers, and search services, among others – who, upon notice from a rights holder demonstrating its copyrights as set forth in the law, must block access to or remove an allegedly infringing work in order to avoid damages liability. A counter-notification procedure protects those accused of posting infringing material who make a demonstration that the material is not protected.
The law would also establish procedures for protective measures pending the outcome of legal proceedings over the alleged infringement, and imposes criminal liability for posting protected works in a digital format online for commercial purposes. This is often referred to as piracy, though many also consider it piracy when it is not for commercial purposes.
There are opponents, and the major press has included a lively presentation of their views, but they rely on several myths that have to be busted. One myth is that the Lleras Law somehow changes the balance of rights protected copyright laws, and in a bad way. The plain fact is that the proposed law does not create or change the rights protected by copyright laws, such as the length of copyright protection, what constitutes fair use, or what is in the public domain. It only deals with online intermediaries, excusing them from the obligation to patrol their services to prevent infringement, imposing the policing burden instead on rights owners.
In one key respect this myth is true, because the Lleras Law criminalizes piracy. Article 17 of the Lleras Law will make it criminal to: “Make available through a computer network accessible to the public, for commercial purposes, a work of literary or artistic character or selection protected by related rights, cinematic works, sound recordings, video, computer software, photographic works, among others, who sells or offers reproductions of them in digital format via the networks mentioned.” Pardon the pun, but this could be music to the music industry’s ears, and for Colombian consumers too. After all, Colombia has a 55% piracy rate according to the Business Software Alliance, which alleges this costs industry $244 million.[2] Anything that reduces that risk increases the probability that rights owners will sell their works in Colombia in digital form. Bring on the protection, and iTunes and Netflix should follow.
Another myth says the Lleras Law will stymie content innovation, citing such innovations as remixes, mashups, and cutups. The safe harbor/take-down approach enshrined in the law, however, is not new, and it has not killed these “innovations” that, nevertheless, admittedly make use of an author’s work in many cases without the author’s permission. Consumers who want free access to all information, irrespective of the wishes of the author or his publisher, will complain this law prevents innovation by the free and unrestricted use of other authors’ content, but it does not restrict use of content with authorization. Critics may be right that the copyright laws should facilitate transactions with rights owners, such as getting permission for mashups, but they ignore organizations like ASCAP and others that facilitate royalty payments on a uniform model and scale. The real problem is that nothing in life is free.
It is true that the Lleras Law will likely stymie one form of innovation, and that is the creation of online intermediaries that are dedicated to circumventing authors’ rights in the digital space. Online intermediaries whose model was based upon and profited from illegal file sharing, like Napster, have gone the way of the (North, not South, American) condor, but models that protect author’s rights actually abound in markets that respect those rights.
The Lleras Law proposal has the full support of a highly popular President whose national coalition party dominates the Congress. An innovative Ministry of Technologies, Information and Communications supports the bill, and a rapidly expanding middle class in Colombia thirsts for internationally available content. Like sophisticated users everywhere, they will happily sign up for an use content provided in the digital space and accept along with it the restriction against unauthorized use of others’ creations.
The smart money is counting on passage of the Lleras Law. It demonstrates that Colombia takes seriously its impending obligations under the intellectual property chapter of the US-Colombia Trade Promotion Agreement and that Colombia’s government wants its citizens to have access to sites like iTunes and Netflix that are unavailable in Colombia now because it is on the “IP Blacklist” due to persistent problems with intellectual piracy that cause many major rights owners to shun the country.
[2] Colombia Reports, “ Piracy Levels in Colombia Remain at 55%,” available at http://goo.gl/fb/NBo8X , last viewed April 26, 2011 4:24 PM.
Preventing Piracy or Creativity? The “Ley Lleras” Translated – Colombia’s Version of the Digital Millennium Copyright Act
A familiar debate is raging in Colombian intellectual property circles — copyright holders versus consumers of information — over whether copyright laws prevent piracy or creativity.
The debate arises in the context of a proposed law submitted to the Colombian Congress [English translation] by the Minister of Justice and the Interior, German Vargas Lleras. For that reason, many call it the “Ley Lleras” or “Lleras Law,” it is in reality Colombia’s attempt to catch up to the United States, the European Union, and much of the rest of the world’s economies in striking a balance between rights holders and information consumers. This is a familiar debate because in the United States, it was resolved — as a legislative matter, anyway — by Title II of the Digital Millennium Copyright Act of 1998, which Title is sometimes referred to as the Online Copyright Infringement Liability Limitation Act (OCILLA).
The Lleras Law would create a safe harbor for online service providers — Internet service providers, storage providers, and search services, among others – who, upon notice from a rights holder demonstrating its copyrights as set forth in the law, must block access to or remove an allegedly infringing work in order to avoid damages liability. A counter-notification procedure protects those accused of posting infringing material who make a demonstration that the material is not protected.
The law would also establish procedures for protective measures pending the outcome of legal proceedings over the alleged infringement, and imposes criminal liability for posting protected works in a digital format online for commercial purposes. This is often referred to as piracy, though many also consider it piracy when it is not for commercial purposes.
The proposed law does not create or change the copyright laws. It deals only with online intermediaries, excusing them from the obligation to patrol their services to prevent infringement, imposing the policing burden instead on rights owners. Consumers who want free access to all information, irrespective of the wishes of the author or his publisher, complain this law prevents innovation, but it only seems to prevent innovation in circumventing authors’ rights in the digital space. The proposal demonstrates that Colombia takes seriously its impending obligations under the US-Colombia Trade Promotion Agreement and that Colombia’s government wants its citizens to have access to sites like iTunes and Netflix that are unavailable in Colombia now because it is on the “IP Blacklist” due to persistent problems with intellectual piracy that cause many major rights owners to shun the country.
I will have more to say about the Lleras Law in the near future. This post is designed to provide readers who are interested in the debate to rely upon the actual proposed Lleras Law itself — and not hyperbolic editorial descriptions — through an English translation I have prepared:
Bill ____ of ___
A bill to regulate infringement of copyright and related rights on the Internet.
THE CONGRESS OF COLOMBIA
DECREES
CHAPTER I
Criteria for Responsibility
Article 1. Internet service providers.
For purposes of this Act, an Internet service providers shall be deemed to be a person who provides one or more of the following services:
a) Transmits, routes or provides connections for material without changes in content;
b) Stores data temporarily in an automated procedure (caching);
c) At the request of a user stores material on a system or network controlled or operated by or for the service, and
d) Refers or links users to an online location using information search tools, including hyperlinks and directories.
Article 2. Liability regime.
Internet service providers, content providers, and users are responsible for the use of contents, in accordance with the general rules on civil, criminal and administrative liability. Information used in computer systems or networks will be protected by legislation on copyright and related rights if it meets the conditions for such protection.
Article 3. No general obligation of monitoring.
Internet service providers shall not, for purposes of this law, have any obligation to monitor the data they transmit, store or refer, nor any obligation to make any active search for facts or circumstances indicating illegal activity. The provisions of the preceding paragraph shall be without prejudice to orders from competent authorities to Internet service providers to perform some activity for the purpose of investigating, detecting and prosecuting criminal offenses or any violation of copyright or related rights.
Article 4. Exemption from liability of internet service providers.
Without prejudice to the applicable general rules of civil liability, in the case of any infringement of copyright and related rights committed by third parties that take place through systems or networks controlled or operated by natural or legal persons providing certain services identified in the following Articles, providers of such services will not be obliged to pay compensation if they meet the conditions laid down in the following items for limiting such liability, according to the nature of the service. In these cases, Internet service providers may only be subject to judicial injunctions referred to in Articles 13, 14 and 16 of this Act
Article 5. Service for data transmission, routing or supply connections.
Service providers of data transmission, routing or offering connections will not be held responsible for data transmitted provided that the provider:
a) Does not modify or select the content of the transmission. For these purposes it is not considered an alteration of the content, to use material handling technology necessary to facilitate the transmission through the network, such as the division of data into packets;
b) Does not initiate the transmission;
c) Does not select the recipients of information;
d) Establishes general and public conditions under which the service provider can make use of the right to terminate the contracts of content providers who are repeat infringers of the rights protected by the copyright laws or related rights;
e) Does not interfere with technologies for the protection and management of rights to protected works;
f) Does not create or select the material or its recipients.
Paragraph. In cases that meet the requirements of this section, the competent judge may only grant as injunctive or final relief reasonable measures to block access to specific infringing or allegedly infringing content that is clearly identified by the applicant and that do not involve blocking other legitimate content.
Article 6. Providers of services of temporary storage through automated processes.
Providers of services of temporary storage through automated processes performed for the sole purpose of making onward transmission of information to other recipients of services more efficient will not be held responsible for the data stored, on the condition that the provider:
a) Complies with the conditions of user access and rules regarding updating stored material that are provided by the provider of the site of origin unless these rules are used by it to prevent or interfere unreasonably with the temporary storage referred to in this article;
b) Does not interfere with compatible and standardized technology used in the site of origin for information about online use of stored material, when use of these technologies is performed in accordance with the law and compatible with widely accepted industry standards;
c) Does not change the content in transmission to other users;
d) Removes or expeditiously disables access to stored material that has been removed or to which access has been disabled on the site of origin when it receives a withdrawal request in accordance with the procedure laid down in Articles 9, 10, 11 and 12 of this Act.
e) Establishes general and public conditions under which the service provider can make use of the right to terminate the contracts of content providers who are repeat infringers of the rights protected by copyright or connected rights;
f) Does not interfere with technological for the protection and management of rights to protected works;
g) Does not create or select the material or its recipients;
Paragraph. In cases that meet the requirements of this section, the competent judge may take as injunctive or final relief reasonable measures to block access to specific infringing or allegedly infringing content that is clearly identified and/or terminate accounts determined to be repeat offenders of the provider service, which are clearly identified by the applicant, whose owner is using the system or network for activity that infringes copyright or related rights.
Article 7. Providers of storage services at the request of users for material stored on a system or network controlled or operated by or for the service provider.
Providers of storage services who, at the request of a user, stores, for the user or a third-party, material on a system or network controlled or operated by or for the service provider, will not be responsible for content stored on condition that the provider:
a) Has no actual knowledge of the alleged illegal nature of the data;
b) Does not receive a financial benefit directly attributable to the infringing activity, in cases where it has the right and ability to control such activity;
c) Removes or expeditiously disables access to material stored accordance with the provisions of Articles 9, 10, 11 and 12;
d) Publicly designates an agent to receive service of process and appropriate means to receive applications for withdrawal or blocking of apparently infringing material;
e) Establishes general and public conditions under which the service provider can make use of the right to terminate the contracts of content providers who are repeat infringers of the rights protected by copyright or connected rights;
f) Does not interfere with technologies for the protection and management of rights to protected works;
g) Does not create or select the material or its recipients;
Paragraph. In cases that meet the requirements of this article, the competent judge may only take as injunctive or final relief reasonable measures to block access to specific infringing or allegedly infringing content that is clearly identified; and/or terminate accounts determined to be repeat offenders of the service provider, which are clearly identified by the applicant, whose owner is using the system or network for activity that infringes copyright or related rights.
Article 8. Providers of services consisting of referring or linking users to a site online through the use of information search tools, including hyperlinks and directories.
Providers of services that effect services for search, link, or referral to an online site using information search tools, including hyperlinks and directories, are not liable for any data stored or referenced provided that the provider:
a) Has no actual knowledge of the alleged illegal nature of the data;
b) Does not receive a financial benefit directly attributable to the infringing activity, in cases where it has the right and ability to control such activity;
c) Removes or expeditiously disables access to material stored accordance with the provisions of Articles 9, 10, 11 and 12;
d) Publicly designates a representative to receive service of process and appropriate means to receive applications for withdrawal or blocking of apparently infringing material;
Paragraph. In cases that meet the requirements of this section, the competent judge may take as injunctive or final relief reasonable measures to block access to specific infringing or allegedly infringing content that is clearly identified and / or termination of accounts determined to be repeat offenders of the provider service, which are clearly identified by the applicant, whose owner is using the system or network for activity that infringes copyright or related rights.
CHAPTER II
Procedures
Article 9. Procedure for detection and removal of contents.
Service providers, meeting the other requirements laid down in Articles 6, 7 and 8 acting in good faith, who remove or blocking access to material based on a claimed or apparent infringement, shall be exempt from liability for any resulting claims, provided that in relation to material that resides on their system or network, they take reasonable steps promptly to inform the alleged infringer who put the material on the system or network of the withdrawal or disabling of the information on the system or network.
Paragraph. If the alleged offender makes a request to restore the removed or disabled material and is subject to jurisdiction in an infringement suit, the service provider must restore the material, unless the person who made the request for withdrawal or disabling seeks an injunction order within a reasonable time.
Article 10. Requirements for applications for withdrawal or blocking.
Applications for withdrawal or blocking contents made under the previous article by the holders of copyright or related rights or their respective representatives must comply with the following requirements:
a) Be submitted in electronic form or other written form;
b) Include the identity, address, phone number, and email address of the owner of copyright or related rights or their respective representatives.
c) The rights holder or his representative must be domiciled or resident in Colombia and, where appropriate, be subject to being called at trial, in behalf of the owner;
d) Attach information reasonably sufficient to permit the provider to identify the work or selection protected by copyright or related rights that is allegedly being used without appropriate authorization;
e) Identify the infringed rights, clearly indicating the owner of them and the type of offense;
f) Attach the URL or any other information reasonably sufficient to allow the service provider to locate the allegedly infringing material that resides within a system or network controlled or operated by it or for it, which is claimed be infringing or to be the subject of infringing activity and that is to be removed or have access to it blocked;
g) The rights holder or his representative must make a declaration expressing that he believes in good faith that the material is being used in a manner without the permission of the holder or of the copyright or related rights or his representative who is entitled to grant such permission or under the law;
h) If possible, attach information containing data enabling the service provider to identify the user of the supposedly infringing material;
i) Make a declaration to the effect that the information contained in the request for withdrawal or blocking is correct;
j) The application must be signed by the person making the request for withdrawal or blocking. For this purpose a signature transmitted as part of an electronic communication satisfies the described requirements.
Paragraph. Whoever knowingly provides false information concerning alleged violations of the rights recognized in this law shall indemnify the damage caused to any interested party, where such damages are the result of actions the network service provider takes based on such information.
Article 11. Obligation to report the removal or blocking of the alleged infringer.
Upon receiving a withdrawal or blocking request and verifying compliance with the requirements established in the previous article, the Internet service provider shall, within 72 hours of receipt of the complaint, inform users in writing of the withdrawal request based on alleged violations, providing the background provided by the rights holder or his representative.
Article 12. Elements of the application for reinstatement.
For the application to restore the removed or disabled material, mentioned in the paragraph of Article 9 to be effective, it must be in writing or by electronic notice and include the following:
a) The identity, address, telephone number, and e-mail of the alleged offender;
b) Identification of the material that has been removed and to which access has been blocked;
c) The location of the site at which the material appeared before it was removed or before access to it was disabled;
d) A statement under penalty of perjury in which the alleged infringer states that he provided the material and has a good faith belief that it was removed or disabled in error or as a result of misidentification of material;
e) A statement in which the alleged infringer agrees to be subject to orders imposed by any judicial authority of his domicile, or if the home is outside the territory of the party, any other judicial authority with jurisdiction anywhere in the territory of the party where the provider service can be found, and in which a claim for the alleged violation of copyright or related rights may be filed;
f) A statement which the applicant agrees to accept notification of any such claims;
g) The signature of the person making the request for restoration of the removed or blocked material. For this purpose the signature transmitted as part of a electronic communication satisfies the requirement described.
Article 13. Precautionary Measures.
Article 245 of Act 23 of 1982 shall read as follows:
“Article 245 .- The same persons mentioned in the preceding paragraph of this article may ask the judge to prohibit or suspend presentation, performance, display of a play, music, film and the like, to be presented performed or shown in public without permission of the owner or owners of the Copyright. Also, for breaches of copyright or violations of related rights in or through systems or networks controlled or operated by or for service providers, operators may request the judge of the domicile of the service, even without being competent to hear the action and as a precautionary measure, to withdraw or block access to infringing material that is clearly identified by the applicant (and/or terminate certain accounts of the service provider determined to be repeat infringers) that are clearly identified by the applicant, whose owner is using the system or network to undertake activity that infringes on copyright and related rights. Also, any other interim measure aimed at protecting rights, preserving evidence, and preventing further damage as result of the alleged infringement. However, in the case of providers of services of data transmission, routing or providing connections, the judge may only take as interim measures the adoption of reasonable measures to block access to infringing content determined to be clearly identified by the applicant and that does not involve blocking other legitimate content. To this end, the application for precautionary measures should clearly indicate:
1. The rights allegedly infringed, including specific information on the ownership of them and the type of offense;
2. The infringing material,
3. The location of the infringing material on the networks and systems provider respective services.”
Article 14. Requirements for protective measures.
Article 247 of Law 23 of 1982 shall read as follows:
“Article 247 . The measures referred to in Articles 244 and 245 shall be ordered immediately by the judge, provided that the applicant provides sufficient security to ensure that any damage that may be caused to the organizer or promoter of a theatrical, cinematic, or musical show, or Internet service provider or its users or subscribers, and presents a proof under the applicable law. The measure can be ordered by the municipal or circuit court of the place of the performance, or the domicile of the Internet service provider, for prevention, even if it is not competent to hear the trial. In all other ways the protective measure must comply with the relevant rules.”
Article 15. Delivery of information on suspected infringers.
If rights holders have applied for an injunction or have brought demand for final order of removal or blocking access to infringing material and/or termination of accounts, the judge may order the delivery of information that enables identification of the alleged infringer by the service provider concerned, including confidential information. The data thus obtained will be subject to the protection and reservation of personal data in accordance with the law.
Article 16. Final order of removal or blocking access to infringing material and/or termination of accounts.
The measures covered by Article 13 will take final effect when so ordered by the competent judge so orders. These measures require due consideration of:
1. The relative burden on the provider of services, on users, and on subscribers;
2. The proportionality to the damage inflicted on the right holder;
3. The technical feasibility and effectiveness of the measure, and
4. The existence of other, less burdensome to means to ensure the cessation of the infringement and restoration of the right being claimed.
These measures will be applied in a limited manner to access to online communication services to the public. When such services are purchased pursuant to packaged commercial offers including other services such as telephone or television, these measures do not apply to those other services.
Article 17. To Article 271 of Law 599 of 2000 (Penal Code), a new numbered subsection shall be added, as follows:
“8) Make available through a computer network accessible to the public, for commercial purposes, a work of literary or artistic character or selection protected by related rights, cinematic works, sound recordings, video, computer software, photographic works, among others, who sells or offers reproductions of them in digital format via the networks mentioned.”
Article 18. Exceptions.
The provisions of this Act amend sections 245 and 247 Act 23 of 1982, add article 271 of Law 599 of 2000 (Penal Code), and repeal all other rules that are to the contrary.
Article 19. Effect.
This Act is effective as of its promulgation.
The Minister of Interior and Justice
Germán Vargas Lleras
What are people actually interested in learning about relating to Colombia law and business?
This site receives most of its visitors through Google searches. WordPress, which hosts this site, reports the actual search terms. I thought readers might find it interesting to see the searches, to reveal what is trending and what people are looking to learn about when they find articles on this site.
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Colombia’s Ambassador Silva Shows How Delaying the Trade Agreement Hurts US-Colombia Relations
Colombia’s Ambassador Gabriel Silva told a Washington, D.C. crowd at the NDN New Policy Institute that Colombia has been waiting a long time for the US-Colombian Trade Promotion Agreement (“TPA”) to be approved.
He reminded the audience that Colombia is a major US export market for agriculture. It is also a major supplier of coal and petroleum. However, Colombia’s low-margin exporters (such as the cut flower industry) were seriously hurt by the US Congress’s failure to extend the Andean Trade Preferences Act. Coupled with the Administration’s delays in submitting the TPA for approval by Congress, he at one point volunteered that Washington should strive to be more loved than feared in its foreign policy.
He responded to labor and human rights concerns by pointing out that the TPA already has human rights provisions in it. He also noted that the Colombian Congress voted down a proposal to disband labor cooperatives, and has passed legislation and is considering more to guarantee land reforms.
Answering questions about the prospects for approval of, Ambassador Silva told the audience that its text is closed and will not be reopened. He is uncertain whether there will be any more meetings with US Trade Representative’s office.
Addressing prospects for passage on the Hill, Ambassador Silva pointed out that Colombia has many friends, both Republicans and Democrats. There is a convergence with both parties to finish the agreement.
With President Obama about to start a Latin American tour that does not include Colombia this year, Ambassador Silva told the press that President Santos has no plans to come to visit Washington, D.C. at this time. He does, however, have plans to go to China. And, he will come to New York for a UN session to show his country’s solidarity on Haiti.
Beyond The Headlines on Passing The TPA: What Senator Baucus and Amb. Kirk Actually Said
The Senate Finance Committee held an important hearing this week when it invited US Trade Representative Ron Kirk to explain whether and when the Administration will submit the US-COL Trade Promotion Agreement to Congress. The result was a still split Administration position, reflecting its internal conflicts between pro-trade and economic recovery elements, on the one hand, and elements watching the re-election process and needing full support from unions especially at a time when, as in Wisconsin, the labor union movement is under siege. This is a false choice. Pro-union is pro-jobs, at home. Siding with union leadership on a foreign workers issue is fine until US jobs suffer and foreign workers aren’t helped. US workers gain when their employers engage in robust exports to Colombia, and US workers are sidelined watching Colombian firms buy farm and manufactured and high-tech products and services from China, Canada, Europe, the Southern Cone, India, and soon Korea.
Hanging tough, President Santos, through Ambassador Silva, called for passage of the TPA “as negotiated.” This was a tough stand, coming in the middle of talks started last month on unspecified changes the US sees as necessary to satisfy labor union forces in the Administration. Colombia means, in effect, we’re not very interested in negotiating further changes and incurring further delay and are prepared to go elsewhere if there is no deal to be done.”
More senators including Finance Committee Chair Baucus to take up the Colombian, Panamanian, and Korean agreements in the order they were negotiated and signed (as is Congress’s tradition). This is another way of saying we will hold up consideration of the Korea agreement until Colombia’s has been voted on. That is just what Senator Hatch said.
As I see it, the Administration will let the US-COL TPA pass on time, either grudgingly and as part of a compromise, or taking credit at the last-minute for cosmetic changes to a good agreement that has already been negotiated. The Administration will get to keep some “street cred” with organized labor’s leadership. Forces more concerned with jobs and relations with a vital ally and strong friend will pass the TPA. I stand by my published projections.
First, see how Ambassador Kirk pivots from generalities about progress in negotiations to a blunt reminder that the labor unions’ unspecified demands must be satisfied:
With the same engagement and bipartisan cooperation as on the Korea agreement, we will address outstanding concerns relating to the Panama and Colombia agreements. We will not be left behind as others secure greater market share at the expense of American exporters. To compete, we must access the world`s fastest growing markets on a playing field that is both level and reflects our values as Americans….
There has also been important activity regarding the Colombia agreement since I testified before the House Ways and Means Committee last month. Soon after that hearing, officials from USTR led a mission to Bogotá with officials from the Departments of State and Labor and the White House. Over the last few weeks, we have met with this committee`s staff as well as stakeholders to consult and seek advice on the issues raised. Together, we are working without delay to assess what we can do on issues regarding laws and practices affecting the protection of internationally recognized labor rights, as well as issues concerning violence against labor leaders and the prosecution of the perpetrators. The Obama Administration and the Santos Administration have a shared commitment to protect labor rights and workers from violence. I am committed to working with you to address the concerns identified this year and to prepare the agreement for Congressional consideration immediately thereafter.
(ed. – But…)
As we look to the future, the President has made one thing abundantly clear: we will not sign agreements for agreements` sake. They must be enforceable and of the highest standard, in the interests of our workers, farmers, ranchers and businesses. They must not simply replicate the templates of the past, but build frameworks for the future.
Hearing that testimony, Colombian officials in the room should have been left wondering a couple of things. Why did Kirk not show a bit more praise for their work? Kirk and others have more robustly acknowledged Colombian successes in reducing general conditions of violence. In fact, unsolved labor leader murders are at much lower levels than other kinds of violence. And why was Kirk so blunt, yet vague, about not repeating “old templates” (does he mean signed agreements?) and “highest standards” (for example?).
Finance Committee Chair Senator Baucus (Democrat) returned from his lengthy meetings and visits to Colombia over the last couple of weeks convinced of the need to approve the TPA. His is the most powerful voice backing passage and much more powerful in the Senate than the President’s. He focused on jobs and competition from China.
First, it is time to quickly resolve the outstanding issues in our pending FTAs with Colombia, Panama, and Korea, and we must approve all three agreements this year.
Colombia has a strong and growing economy, it is among the largest markets in Latin America for U.S. exporters, and it is a strategic partner in our fight against drug trafficking and terrorism.
I traveled to Colombia two weeks ago. I met with President Santos, his ministers, Colombia`s top prosecutor and labor leaders. I was struck by the progress that Colombia has made in strengthening labor rights, reducing violence and stepping up prosecutions.
Colombia has enacted reforms to make it easier for workers to form unions and bargain collectively. It has reduced the homicide rate of union members by nearly 90 percent, and it is prosecuting labor violence cases identified by Colombian labor unions as top priorities.
But more steps are needed, and President Santos has begun to take them. I believe that he is willing to work with us to take more steps, but he needs to know what we want him to do. We must map a course, and we must act now.
American farmers lost $1 billion in sales to Colombia over the last two years. And while China has tripled its share of the Colombian market, ours has declined by 20 percent. American jobs are at stake.
Last month, Senator Hatch and I sent a letter asking you to come to the hearing today prepared to discuss the specific issues that Colombia and Panama need to address, and we asked you to come prepared to announce an expeditious timetable for moving these agreements through Congress. We look forward to discussing both issues this morning.
Senator Hatch (the top Finance Committee Republican) said despite the Administration’s promises and appearance of action, it is no closer to submitting the TPA and that he will act if they will not:
At the top of a pro-growth agenda is trade policy. Yet instead of leading the way, we are falling behind our trading partners. While we wait, other countries are writing the rules of trade. While we hesitate, other countries are opening up markets for their workers.
And if this sorry record is not corrected, U.S. workers will continue to lose out on the economic opportunities afforded by free and open trade.
A case in point: Colombia.
In 2008, the United States was the main supplier of corn, wheat and soybeans to Colombia, accounting for seventy-one percent of the market. Today, our market share is just twenty-seven percent.
It does not take a Ph.D. in economics to understand this collapse.
While our trade agreement with Colombia collected dust, other countries were surging ahead.
The same pattern holds in Panama, where we continue to lose out on lucrative government procurement projects.
Some suggest that the strong interest in quick approval of our trade agreements with Colombia and Panama is driven by partisanship.
I am not going to pull my punches here. That is false. There is strong bipartisan support for these agreements in this Committee and in the Senate.
Any further doubts can be laid to rest by a recent letter from a bipartisan group of former government officials — including USTRs, White House Envoys to the Americas, and Assistant Secretaries of State — all calling for prompt ratification of our pending trade agreements with Colombia and Panama.
Now, I appreciate the work that the Administration has done in regard to Korea.
Korea is a friend and ally of the United States.
And, while we need to see more progress on beef access, it remains a strong agreement.
I support it, and want to see it move as soon as possible.
But I don’t believe the President will ever act on the Colombia and Panama agreements unless these agreements move with Korea.
This skepticism is not unjustified.
In 2009, the Administration said they were developing a plan of action to address the pending trade agreements in consultation with Congress and pledged to address any issues promptly.
Later, at the Summit of the Americas President Obama directed Ambassador Kirk to lead a review of the Colombia Agreement to solve outstanding issues.
In 2010 the Administration laid out general concerns but vowed to move the agreements forward at the appropriate time. A little later, they pledged to strengthen relations with key partners…with the goal of moving forward with existing agreements in a way that upholds our values.
Then, in 2011, President Obama vowed to pursue agreements with Panama and Colombia.
Just a month ago, the President directed USTR to immediately intensify engagement with Colombia and Panama.
And just yesterday we received testimony that says you are on track to resolve outstanding issues with Panama and are committed to addressing issues related to Colombia, both sometime this year.
Now, some might call this progress. But are we really any closer to having these agreements before Congress today than in 2009?
I find it hard to believe that the problem is a lack of information. The problem is a lack of political will, and a lack of political courage.
So far, the administration has talked a big game on these trade agreements, but when game time rolls around, they shrink from action. At some point, despite all the words, it is the administration’s inaction that speaks volumes.
This failure to act raises strong doubts about whether the President is serious about moving these agreements at all. Given past rhetoric, the recent promises of intensified engagement, commitments to work, and being on track are all fine and good.
But these promises are woefully inadequate.
After two years, it is still an open question whether the President will ever see fit to submit the Colombia and Panama agreements to Congress anytime in the near future, if at all.
Let me be clear. If the President will not act, I will.
If the President ignores the will of Congress and sends the Korea agreement without Colombia and Panama I will do everything I can to make sure that those two agreements are considered at the same time as Korea.
Given the gap between promises made and promises kept, I don’t believe the President has given Congress much choice when it comes to the Colombia and Panama trade agreements.
If we are to serve the national interest and get these two agreements approved, Congress must act with — or without — Presidential leadership.
Action without Presidential leadership is exactly what is going to happen. That will work well politically both for the divided Administration, facing a re-election while the labor union movement is under siege, and a Congress whose constituents are more focused on jobs and exports than votes in 2014.
Truckers Striking, Washington Eyeing, China Vying, and Billionaires Buying – This Week In Colombia Law & Business
Ask anyone who lives in Bogotá, the biggest problem in daily life – leaving aside this year’s seasonal rains that came early, stayed late, and would not stop – is transportation. Visitors arriving at the expanding El Dorado Airport (did it expand enough?) have a long slow ride on the Avenida El Dorado due to construction. But work sites are without workers because funds disappeared in a scandal involving allegations of municipal corruption. Hopes hang on a new metro/subway system, already almost two decades behind the shining, rapid metro in Medellin, with its aerial gondola extension lines.
To make things worse, this week truckers jammed traffic everywhere striking for higher trucking fees. Vice President Angelino Garzón, himself a former labor leader chosen by President Santos for a national unity government dedicated to improved labor and employment conditions, was unable after days to broker a settlement, but the week ended with a deal to end to the truckers strike.
That brought good news to the economy that had mixed messages on trade. A deal to release about half of the delayed payments from Venezuela to Colombian exporters will give a US$365M boost to the Colombian economy. But exports to the US once again became subject to tariffs, when Congress allowed the Andean Trade Preferences Act to lapse the day before Valentine’s Day, when 80% of cut flowers sold in the US come from Colombia. Angry that Republicans allowed the Trade Adjustment Assistance Program to expire, Congressional Democrats refused to extend the Andean Trade Preferences, that allow Colombian exports into the US with tariffs just as if the US-Colombian Trade Promotion Agreement had been passed. The Congressional squabble embarassed the US and angered frustrated Colombians who are making plenty of other trade deals. The Administration and Congress, however, began making a show of getting back on track and I maintain my judgment that the Trade Promotion Agreement will go to Congress by mid-year and pass.
Vice President Garzón, freshly back from a week in Washington to help win passage of the US-Colombia Trade Promotion Agreement, hosted a three ambassador visit from Washington designed to get “fresh information” and to speed up negotiations. The talks are trying demonstrate that the Administration responded to American hesitation over persistent problems with impunity in the killing of labor and human rights leaders. The three visitors will see real dedication to change, not only in increased prosecutions and decreased killings but also in restoring land titles to people displaced by paramilitaries or guerillas – with US aid. Also this week, President Santos formally presented the Law of First of Employment, designed to increase formal employment. (See my post about the new law. It includes, somewhat strangely, needed reforms to the nation’s bankruptcy law.)
On Capitol Hill, there blame game was on. There were two Congressional hearings in Congress relating to the TPA, where Assistant Secretary for Western Hemisphere Affairs Arturo Valenzuela, at one point mentioning that the Colombian Ambassador was seated near him, tried to convince skeptical legislators of both houses that the Administration is serious about submitting the TPA for a vote this year. He also denied that Obama is snubbing Colombia on his Latin America trip this March, since the Summit of the Americas next year is scheduled for Colombia. (That nugget was golden news, but somehow didn’t find its way into any news story I saw.) Treasury Secretary Geithner robustly called for TPA passage this year to help the economy recover through exports. The State Department spokesman reiterated that increased US engagement on the TPA is designed to get it to Congress by mid-year. That will come after March meetings of the US-Colombia High-Level Partnership dialogue in March. (See my post “Why The Colombian Trade Agreement Will Go to Congress This Year.”) Even President Obama got into the trade show game, making a point of attending a meeting of a trade negotiation advisory committee this week (a committee that has never met before during this Administration).
Why so much attention? Because Colombians – especially exporters – feel slighted by the constant foot-dragging in Washington on trade and the resumption of tariffs on their flowers and other exports. At the beginning of the week, Luis Carlos Villegas, the head of the National Industrialists Association said , if there is going to be a further renegotiation of the TPA, “don’t count on me.” Ambassador Gabriel Silva told reporters the Colombians were losing patience and were looking to other markets. (See my June 15, 2010 post: “Canada’s New Trade Agreement Turns Up the Heat on the U.S.”) Shortly afterward, President Santos gave an interview in the leading news magazine Semana, echoing Ambassador Silva, that if the TPA does not pass the Congress this year, the Colombians will not insist on it and will look to other markets.
In an interview with the Financial Times, Santos cleverly drew attention to near-final negotiations with Chinese backers of a new rail system designed to bring coal from near the Caribbean coast to the Pacific coast for Chinese freighters. Bringing up China, the futuristic vision of a railway “dry canal” alternative to the Panama Canal, was smart politics in this context. China has risen from the twelfth to the second trading partner with Colombia just in the time since the TPA was signed. As the Americas’ Society explained this week, Colombia looks to China rather than the US for infrastructure investment. In addition to rails, hydro and energy projects see Chinese backing, which helps compensate for Colombia’s increasing loss of textile business to China.
Reaction to the China card on Capitol Hill was swift. Proponents of the TPA frequently mentioned China during hearings this week. President Santos repeated Henry Kissinger’s famous quip that being America’s enemy is bad, but being its friend is fatal, but all signs point now to seeing the TPA concluded this year.
Not just the Chinese have their eyes on Colombia – three billionaires made news this week because they are investing in Colombia. Brazil’s Eike Battista bought Ventana Gold for $US1.43Bn. Carlos Slim was reported to be investing in oilfield services in Colombia as news broke that oil production was up another 13% in January year-over-year. And Sam Zell’s Equity International was said to be readying a big move on Colombia. Delta Airlines is paying attention, too, adding a daily non-stop from JFK to Bogotá.
From Billionaires to Millionaires – the Milionarios: football team (sorry, “soccer”) has its own rags to riches recovery story to match its Colombia’s. The “Blue Commandos” of the El Campín Stadium in central Bogotá were, at one time, famed for rolling out a huge portrait of a narco-partner of Pablo Escobar. The team’s dubious finances resulted in forfeiture and the team became a ward of the national anti-narcotics directorate. But all that is behind them now, because this week the Financial Superintendency approved the Milionarios to be listed on the BVC stock exchange (soon to be the MILA when it completes its merger with the Peruvian and Chilean exchanges). The action offers cheering fans the chance to become one of the team’s 3000 new shareholders. Just in time: this week, the Council of State ruled against sole-shareholder entities. Billionaires beware!
President Santos Formally Presents Proposed Law of First Employment
President Santos formally presented Congress with his proposed “Law of Formal Employment,” which is a bold attempt to increase employment in the formal economy. As I explained in my post on the new “Law of First Employment,” the bill will create incentives (tax breaks, financing options, and the like) to encourage creation of small businesses by, and first time employment (including “telework”) of: youths under age 28; certain technical professions, the agricultural industry; women under 40; and in three specific states. The law also aims to cut red tape and simplify labor-related procedures.
To simplify business procedures, the bill offers major revisions to simplify corporate insolvency law (Law 1116 of 2006) and speed up bankruptcy resolution (see my post on the bankruptcy law reforms and see my translation of the bankruptcy law reform proposal.)
Why The Colombian Trade Agreement Will Go To Congress This Year
During his crucial five-day trip to Washington, D.C. recently, Colombia’s Vice President Angelino Garzon, a former organized labor leader, had to struggle for attention. The week was dominated by the State of the Union address and by other international news – the fall of the Tunisian government, and mass demonstrations threatening the Mubarak government in Egypt. There was also a devastating mine explosion in Colombia that killed 21 miners. Garzon persevered, however. He met a wide array of officials as well as students and human rights groups. The outlook for the US-Colombia Trade Promotion Agreement has improved, and a vote in Congress this year looks like it will happen.
In the Constitutionally mandated annual State of the Union address, President Obama pushed hard for immediate passage of the US-Korean trade agreement, but his mention of the Colombian and Panamanian agreements was anemic and cryptic by comparison. Obama’s cryptic promise? He would pursue the Colombian trade agreement — IF it “keeps faith with American workers and promotes American jobs.” It was anemic, with no timeline and no clarity on where the President stands.
The beltway debate on trade is whether to hold out for more improvements in Colombia or to reward and reinforce progress. No one questions Colombia’s security improvements, dramatically reduced violence, regional leadership against drug trafficking, and rapidly improving economy. Everyone expressed sympathy for the hundreds of victims of recent flooding and the dozens killed in a coal mine blast this week. Those factors strengthen the relationship.
The trade debate rages within the Obama administration as well as outside it. This week, GE Chairman and CEO Jeffrey Immelt agreed to chair Obama’s Council on Competitiveness and promptly called for trade agreement approvals, saying “Those who advocate increasing domestic manufacturing jobs by erecting trade barriers have it exactly wrong.” Less than fully enthusiastic, Secretary Clinton said that Colombia “knows what it needs to do” for passage of the trade agreement.
After meeting with Garzon, Vice President Biden backed sending the trade deal to Congress this year. Secretary Clinton too said there would be a vote this year, but only barely elaborated on the conditions needed for approval in her press conference with Garzon (excerpted below, omitting the Egypt talking points and Q&A). This is her strongest statement yet that Congress would get to vote this year on the agreement, which has deep Republican support and support from moderates such as Rep. Steny Hoyer, the no. 2 Democrat in the House.
Outside the Administration, the US Chamber of Commerce updated its list of who in Congress supports the US-Colombian agreement. Senate Finance Committee Chairman Max Baucus of Montana was in Colombia this week. Baucus called for a prompt vote on the deal. Even Michigan Democratic Congressman Sander Levin, ranking member of the House Ways & Means committee and an opponent, softened his position this week. Levin now sees “a real opportunity” to pass the agreement.
Human Rights Watch Americas softened its opposition somewhat, in an open letter to Garzon and in its annual report chapter on Colombia. While noting the persistent problems it also praised the significant shift in government attitudes and policies in Bogotá. HRW pointed out Santos’ rapid accomplishments such as new laws providing land to the displaced, compensation to victims of state violence, and respect for an independent judiciary, but said that “‘concrete results remain to be seen.” The Washington Office on Latin America, however, emphasized that Obama is skipping Colombia on his Latin America tour this spring, which says everything about its view of the prospects for the trade agreement.
These and other human rights groups hold back praise for their own credibility — and for leverage, but leverage for what? These groups now have unprecedented high-level access and cooperation. Results will only be measured over time (how much time?), but the policy and personnel changes are real. If they are not rewarded and reinforced, then they are weakened. It’s time to shift to a pro-trade agreement position in order to continue to better the lives of all Colombians and instill the democratic and middle-class values that help crowd out those who would commit atrocities.
Colombia’s domestic economy is “roaring” with “strong” industrial production and “stunning” retail sales, according to Bulltick Capital. America’s Quarterly called the merger of Colombia’s stock exchange merger with Chile’s and Peru’s a “milestone for hemisphere finance, economic confidence.“ The Heritage Foundation’s Economic Freedom Report this week cited Colombia as the most-improved country in Latin America, and tenth most improved in the world.
America’s Quarterly also reported this week that the Colombian trade deal is “inching” forward. My judgment is that is correct, but weak. The fundamentals are all there for passage this year, and businesses should launch a full-throated push for approval now.
On the US side, the emphasis is all about jobs; trade and exports are overwhelmingly important. Personnel and attitudes in the Obama administration have shifted remarkably to the center just since November. Colombia’s trade agreement opponents in the Administration have lost ammunition because President Santos’s election and numerous quick achievements convincingly demonstrate concrete progress. Santos’s designation of the labor leader Garzon as his Vice President and Washington point-man was a savvy move to put these issues in the past and catapult Colombia forward. Garzon did pretty well in Washington this week against enormous challenges just for time and attention. Garzon smartly engaged a wide selection of the constituencies with whom dialogue and trust are essential — he did not just rally supporters. All of this bodes well for finding a way to finalize the agreement package and send it to Congress this year. The “High Level Partnership Dialogue” in Bogotá this March presents the opportunity to cement the agreement.
Prompt action is needed, too. This week, peaceful Switzerland approved a Colombia trade agreement, joining the EU, Canada, and the Southern Cone countries that are now displacing US exports to Colombia.
* * *
Here are the Clinton-Garzon press conference excerpts with my commentary:
January 28, 2011
SECRETARY CLINTON: Good morning. I am very pleased to be here with Vice President Garzon of Colombia on his first visit to Washington as vice president. Before discussing the important matters that were part of our meeting, I would like to say something about the unfolding events in Egypt….
Now there is a great deal of concern also in our government, Mr. Vice President, about the mining disaster that killed 21 miners in Colombia. And we will have our translator translate these remarks about Colombia as we go along.
I know that President Santos cut short his stay at the World Economic Forum to join the families of these victims. And I would like the people of Colombia to know they are in the thoughts and prayers of all Americans not just for the mining tragedy, but for the terrible flooding that in the past two months has claimed more than 300 lives, affected more than 2 million people and incurred billions of dollars in reconstruction and clean-up costs.
The Vice President and I had a very productive, wide-ranging discussion on many important issues, and we reaffirmed the resilient, enduring partnership and friendship between our peoples. We share common values and a respect for democratic governance, the rule of law, and self-determination. And the United States has stood with Colombia for more than a decade as they take on security challenges. We’ve made considerable progress together, but we have more work to do on security and other issues. That is why we are hosting the second round of the U.S.-Colombia High Level Partnership Dialogue in March, where we will cover so many of these issues. We are committed to a very broad discussion of issues, from sustainable energy to human rights. And as President Obama said in his State of the Union address, we are committed to a successful conclusion and ratification of the U.S.-Colombia Trade Agreement. And I look forward to working with the vice president and members of the Colombian Government to bring that result about.
I also commended the vice president and the Santos administration for the progress that is being made on resolving long-term disputes having to do with displaced people in the country and reaching out to civil society to add their voices to a national conversation about human rights and labor rights. And I want to thank Colombia for their assistance to other countries in the fight against drug traffickers and criminal organizations, their assistance to the people of Haiti and of Afghanistan and in so many ways the leadership that Colombia is showing in helping to solve difficult issues.
We look forward to continuing and close cooperation, Mr. Vice President.
VICE PRESIDENT GARZON: (Via interpreter) Thank you so much Mrs. Hillary Clinton, Secretary of State of the United States. I want to say on behalf of the Government of Colombia and very especially on behalf of President Santos, I would like to express our thanks to you, Mrs. Clinton, and to President Obama for the solidarity of your government and your people to the people of Colombia on the occasion of the recent floods and in particular the recent mining tragedy, which has cost 21 lives, has left several injured in the area of Santander in our country.
And in our broad-ranging discussions today, we have agreed, among other things, to work together to defend fundamental rights of humankind, the human rights that affect all of us, in particular, labor groups, indigenous groups, women’s groups, and others. And we have also agreed to continue to work and cooperate with all countries to combat organized crime, in particular, transnational crime, which includes drug trafficking, which is – which attacks our democracies.
In our dialogue, we have expressed our gratefulness for the political will of the United States Government and, in particular, President Obama and Secretary Clinton to find all paths necessary to achieve ratification of the free trade agreement between Colombia and the United States. It is an agreement that helps the people and the Government of Colombia, and it also helps the people and Government of the United States. And we also greatly appreciate the willingness of the U.S. Government and the U.S. Congress to extend the Andean Trade Preferences Act, not just to the region, but to Colombia in particular, this is a sign of great solidarity at a time when we are busy with the reconstruction of our country after the devastating floods.
And we also agreed to redouble our joint efforts along with Secretary Clinton and President Santos Calderon regarding Haiti, to support the people of Haiti in their quest to elect, freely and fairly, their own leaders. And we will consolidate our high-level dialogue, a dialogue that we began last year between the United States and Colombia. This has been headed by Secretary Clinton.
We will be strengthening our programs, our – to discuss issues ranging from all kinds of progress in democracy, human rights, new technologies, energy, and also one that we have added after our dialogue today – the environment. And on behalf of the Government of Colombia, President Santos, and the people of Colombia, I want to thank you very much for recognizing the progress that Colombia has made as a developing country to consolidate itself as a modern state in combating corruption, violence and impunity, and upholding human rights.
MR. CROWLEY: First question, the Associated Press.
QUESTION: Yes, Madam Secretary. Excuse me, I have two rather direct questions to ask you about Egypt….
MR. CROWLEY: (Off-mike.)
QUESTION: Madam Secretary, two points. The first one is: (inaudible) Vice President Garzon asked two days ago the Obama Administration to send this year to Congress the Free Trade Agreement. With all due respect, is the – you – Obama Administration going to do that, yes or no?
SECRETARY CLINTON: Yes.
QUESTION: This year?
SECRETARY CLINTON: Yes.
QUESTION: Okay.
QUESTION: When?
SECRETARY CLINTON: When we have an agreement. There are still negotiations[i] that are taking place. And as the vice president and I discussed, when we have an agreed-upon text, we will, as quickly as possible, send it to the Congress.
QUESTION: (Inaudible) time (inaudible)?
SECRETARY CLINTON: It is not yet in the form of agreement that we have been discussing with our Colombian counterparts. They know what we need to do in order to get a successful outcome. We don’t want to send an agreement just for the sake of sending an agreement. We want to send an agreement and get it passed.
QUESTION: What –
QUESTION: So you want to change the agreement” I mean, to –
SECRETARY CLINTON: We are discussing about some clarifications and some concerns that we know will have to be addressed in the Congress. I mean, I’m just being very clear with you. We want to pass the agreement. In order to pass the agreement, we have to be able to make the case to the Congress, and that is what I am intent upon doing.
QUESTION: (Inaudible) –
SECRETARY CLINTON: Excuse me, this gentleman has the microphone.
QUESTION: No, I have a second question. In Colombia, a sector of the public opinion –
QUESTION: (Inaudible.)
QUESTION: Yes.
(Pause during interpretation.)
VICE PRESIDENT GARZON: (Via interpreter) I want to stress what’s really important and basic here. I want to point out the great political will of President Obama, the Secretary of State, and of the U.S. Government and members of Congress from both sides of the aisle to move as soon as possible to achieve ratification of this agreement. I think that’s the most important thing.
SECRETARY CLINTON: And we agree, and that’s why we want to proceed as quickly and effectively to guarantee success as possible.
MR. CROWLEY: Thank you very much.
SECRETARY CLINTON: Thank you.
The Antitrust Review of the Americas 2011, by Brigard & Urrutia
The Antitrust Review of the Americas 2011
Published by Global Competition Review in association with Brigard & Urrutia, Bogotá
In a very careful and detailed piece, the lawyers of Brigard & Urrutia published near the end of last year an excellent overview of the evolving law of competition in Colombia, which was significantly reformed in mid-2009 (see my review of the new law from September 2009). Here is a start – follow the link to read the entire report.
Colombian antitrust laws and regulations have been enacted and issued in furtherance of article 333 of the political constitution. Pursuant to said article, the government is required to intervene in the Colombian economy in order to prevent unfair competition and anti-competitive conduct, and to ensure free and fair competition in all the local markets.
The legal framework governing antitrust matters in Colombia has two main sets of rules, ie,
• Law 155/59 sets forth the basic principles governing the Colombian antitrust and competition regime; and
• Decree 2153/92 determines the basic structure, scope of authority and powers of the competition authority and sets specific
rules governing anti-competitive conducts.Law 155/59 and Decree 2153/92 have been recently amended by Law 1340/09, which was enacted with the purpose of updating certain aspects of the existing framework and improving the Superintendence of Industry and Commerce’s (SIC) ability to enforce the existing laws and regulations.
Lewin & Wills Announces Colombia Tax Flash® 2011, Comments on Colombia’s Latest Tax Reform for FY2011
The end of the year brought news of the 2011 Tax Reform Act in Colombia. Adrian Rodriguez sent this fast and thorough analysis in Lewin & Wills’ Colombian_Tax_Flash®.
By: Adrian F. Rodriguez, Partner – arodriguez@lewinywills.com
On December 29th, 2010 the 2011 Tax Reform Act No. 1430 was enacted, adopting material changes to the current Colombian tax framework. In addition to the national level income and VAT taxes, this act adopts many other important changes in the national net-worth and bank debits taxes, and in certain aspects of local (territorial) taxes, among other changes and measures to increase tax collections.
Please bear in mind that this document presents a selective summary of this tax reform for informational purposes only and it is not intended to be a detailed and comprehensive dissertation of all the topics found therein. Therefore, it is advisable that the readers do not exclusively rely on this document and thoroughly review the measures and changes that could affect them, seeking qualified advice from professional tax attorneys admitted to practice law in Colombia.
The topics of the 2011 Tax Reform Act No. 1430-2010 featured in this issue are: (1) the immediate elimination of the 30% FAID special income tax deduction (as defined in §1, P.2, herein below); (2) the adoption of a 14% withholding tax on certain cross-border financings; (3) the changes to the “one-time” net–worth tax assessable on January 1st, 2011; (4) the unexpected adoption of the 25% surcharge on this 2011 net-worth tax and the adoption of this tax for taxpayers with gross net-worth between USD $500k and USD $1.5m, among other related measures adopted in the year-end “Economic Emergency” decrees; (5) the adoption of an advanced collection “self-withholding tax” on hydrocarbons and minerals exports of up to 10%; (6) the elimination of the zero-rated VAT regime for “intermediate services in the production line” for hydrocarbons and mining export activities; (7) the elimination of the special transfer pricing regime for mining activities; (8) the reduction of penalties in transfer pricing compliance; (9) the amendments to the current statutory foreign tax credit regime for Colombian income tax taxpayers; (10) the changes introduced to the Bank Debits Tax and its progressive sunset scheduled for 2018; and (11) the temporary availability of penalties and lateness interest rebates in national level tax debts.
In matters of taxation the Colombian Congress had a prolific year-end and in addition to Tax Reform Act No. 1430-2010, many other changes were introduced in other pieces of legislation enacted last December, which are not featured in this issue of Colombian_Tax_Flash®.
part of this document is prohibited without the prior written consent of one of the partners of Lewin & Wills.
(1) Immediate Elimination of the 30% FAID Special Income Tax Deduction for all Taxpayers. –
The 2011 tax reform act adopts an immediate elimination of the “popular” 30% Fixed Assets Investments Income Tax Deduction (“FAID”), beginning January 1st, 2011.
Subject to eligibility, for FY2010 income taxpayers are entitled to deduct 30% of their investments in tangible fixed assets used in their income producing activity. Although the percentage varied from 25% to 40%, this deduction was available since FY2003 for both purchased and manufactured (or built) assets, and for both new and used (second-hand) assets. Leased assets were also eligible for this incentive, provided that the taxpayer exercises the irrevocable purchase option in the corresponding agreement. Certain rules and restrictions were applicable (For more information on the creation and evolution of the FAID, see: Colombian_Tax_Flash®: July 2004, yr. 1 – No. 2; November 2006, yr. 3 – No. 7, P.1 [unnumbered item 2]; January 2007, yr. 4 – No. 8, P.2 [unnumbered item 5]; April 2007, yr. 4 – No. 10, P.2 [unnumbered item 6]; October 2007, yr. 4 – No. 12, P.1 [unnumbered item 2]; August 2008, yr. 5 – No. 15, P.2 [unnumbered item 3]; September 2009, yr. 6 – No. 17, P.1, §§2(b) and 2(c); March 2010, yr. 7 – No. 18, P.2, §(b), all found in the Publications tab at: www.lewinywills.com).
Although the change originally proposed by the Colombian Government was the immediate elimination for the hydrocarbons and mining industries and a progressive elimination for all other sectors, the Colombian Congress opted for the immediate elimination of the FAID for all sectors.
Interestingly, the Lawmaker in the 2011 tax reform act provided that any income tax taxpayers that included the 30% FAID in a Legal Stability Agreement (hereinafter “LSA”) filed for before November 1st, 2010, will be entitled to benefit from the 30% FAID for up to three-years. The Lawmaker was silent with respect to those taxpayers with LSAs already executed (vis-à-vis those filed for) that also included the 30% FAID; will they continue to benefit from the 30% FAID for the term of the duration of the corresponding LSA or will this benefit also be limited to a 3-year term? This should be carefully analyzed on a case-by-case basis, as it is likely to be a controversial issue.
As a reminder, since their adoption on 2005, LSAs have become important tools for eligible investors and companies in Colombia seeking to prevent future changes in selected features of the Colombian legal and tax framework, that they consider key to their investments and business activities in the country (see: Colombian_Tax_Flash®, September 2009, yr. 6 – No. 17, P.3, §5, found in the Publications tab at www.lewinywills.com).
(2) 14% Withholding Tax on Certain Cross-border Financing Facilities. –
Pursuant to the 2011 tax reform act and unless otherwise provided for in the applicable regulations, interest payments on certain inbound cross-border “Qualified Credit Facilities” and “Qualified Leasing Transactions” (both as defined further below), shall be subject to a 14% withholding tax. If the 14% withholding tax is not applied, the Colombian payor cannot deduct the corresponding interest payment, without prejudice of its joint and several liability for the tax that was not withheld.
For over 25 years, the Colombian income tax regulations privileged interest payments on certain Qualified Credit Facilities and Qualified Leasing Transactions, by deeming such payments as income not from a Colombian source thus not subject to Colombian Withholding Tax. If the cross-border inbound financing was not qualified or otherwise exempted, the corresponding interest payments were subject to a 33% withholding tax.
Under the previous regime, the following cross-border inbound financings were deemed Qualified Credit Facilities and eligible for the withholding tax-free treatment:
(a) Short-term bank overdrafts and imports short-term financings (without any changes in the 2011 tax reform act).
(b) Exports financings or pre-financings (without any changes in the 2011 tax reform act).
(c) Financings contracted abroad by Colombian financial institutions (in the 2011 tax reform act, Congress adopted certain modifications to this item to include Bancoldex and other financial type entities).
(d) Financings for foreign trade operations contracted through Colombian financial institutions (in the 2011 tax reform act, Congress adopted certain modifications to this item to include Bancoldex and other financial type entities).
(e) Financings with foreign financial institutions, which funds were destined to a “Qualified Activity.” Qualified Activities were those that according to the directives of the Colombian Council for Social and Economic Development (CONPES), were deemed of public interest for Colombia’s social and economic development, which included all activities related to the primary, manufacturing and services sector, including transportation, engineering, lodging, tourism, health, trade, and housing construction.
Under the new regime, item (e) above has been revoked and no longer qualifies as a Qualified Credit Facility eligible for the withholding tax-free treatment, and any cross-border interest payments on such facilities made pursuant to agreements entered on or after January 1st, 2011, will be subject to a 14% withholding tax, provided that the facility’s term is equal or greater than 1-year. If the facility is not within items (a) through (d) and it’s term is less than 1-year, the applicable withholding tax rate on the interest payments should be 33%. For the avoidance of doubt, it is important to highlight that under the new regime, facilities within items (a) through (d) above with a term equal or greater than 1-year, will continue to be deemed as Qualified Credit Facilities eligible for the withholding tax-free treatment.
Under the previous regime, the following cross-border inbound leasing transactions were deemed Qualified Leasing Transactions eligible for the withholding tax-free treatment:
(f) Leasing transactions with foreign leasing providers to finance investments in a “Qualified Activity” (as defined above).
(g) Leasing transactions to finance M&E investments in Colombian export activities.
Pursuant to the changes introduced by the 2011 tax reform act, both items (f) and (g) above have been revoked and no longer qualify as Qualified Leasing Transactions eligible for the withholding tax-free treatment, and the interest component of any cross-border leasing payments on such transactions made pursuant to agreements entered on or after January 1st, 2011, except otherwise provided by applicable regulations, will be subject to a 14% withholding tax, and unless the equipment leased is a vessel, helicopter or airplane, case in which the reduced applicable withholding tax rate will be 1%.
Any interest payments on inbound cross-border Qualified Credit Facilities and Qualified Leasing Transactions under items (e), (f) and (g) above (and also items (a) through (d)), made pursuant to agreements entered on or before December 31st, 2010, shall continue to be eligible for the withholding tax-free treatment. This provision will likely be a source of controversy with the Colombian Tax Service, because of the conflicting measures in this regard adopted by the Colombian Government back on November 5, 2010, through Decree 4145-2010.
IMPORTANT: Under the new regime it is made clear that the offerings of notes, bonds and similar debt securities, are not deemed held in Colombia, provided that the offering is made by a Colombian issuer and that the securities are traded outside of Colombia. In our view, the importance of this provision is that despite the adoption of the new withholding tax regime on cross-border interest payments, cross-border interest payments made pursuant to this type of offerings should not be deemed income from a Colombian source and should not be subject to Colombian withholding tax, when the beneficiary is a non-resident. Nonetheless, please bear in mind that application of this rule should be carefully analyzed on a case-by-case basis.
Cross-border interest payments on inbound cross-border financings where the borrowers/debtors are Colombian governmental entities shall continue to be eligible for withholding tax-free treatment.
(3) 2011 Net–worth Tax Revenue Increase Measures. –
The previous 2010 tax reform act introduced a “one-time” net-worth tax assessable on January 1st, 2011 and payable in 8 semiannual installments through 2014 (Tax Reform Act No. 1370-2009. See: Colombian_Tax_Flash®, March 2010, yr. 7 – No. 18, P.1, §(a), found in the Publications tab at www.lewinywills.com). This tax is almost identical to its predecessor 1.2% net-worth tax in force through fiscal year 2010. In adopting this new “one-time” tax, the definition therein of “taxable base” allowed to construe that upon exclusion from the taxable base of certain non-taxable items, e.g., stock or quotas in Colombian companies, the taxpayer was not subject to this tax if the net taxable net-worth was below the taxable threshold of approximately USD $1.5m (COP $3,000,000,000). The 2011 tax reform act recently enacted by Congress adopts measures to correct this “imperfection” clarifying that the tax is applicable on the taxpayers’ gross net-worth, i.e., before excluding non taxable items, even if after excluding the non-taxable items the resulting net taxable net-worth drops below the lower bracket.
In addition to this clarification, the Colombian Congress adopted a series of measures to “tackle” tax avoidance strategies such as the creation of new SAS companies (simplified stock corporations) and statutory divisions of companies, popular amongst taxpayers as a net-worth partition strategy to avoid triggering the net-worth tax. Pursuant to the newly adopted measures, the net-worth of the target entity (whether resulting from the creation of a new SAS or a statutory division) shall be added to the net-worth of the “contributing” or “divided” taxpayer, in order to determine whether the Net-worth Tax is triggered.
As a reminder, taxpayers subject to the newly adopted net-worth tax would have to assess the tax on their net-worth as of January 1st, 2011. If the taxpayer’s net-worth as of January 1st, 2011 was approximately USD $1.5m (COP $3,000,000,000) without exceeding approximately USD $2.5m (COP $5,000,000,000), the applicable rate would be 2.4%. If the taxpayer’s net-worth exceeds USD $2.5m (COP $5,000,000,000), the applicable rate would be 4.8%.
For purposes of this tax, it is important to keep in mind the change adopted by the previous 2010 tax reform act regarding related party debt deemed as equity (Tax Reform Act No. 1370-2009. See: Colombian_Tax_Flash®, March 2010, yr. 7 – No. 18, P.2, §(d), found in the Publications tab at www.lewinywills.com). Pursuant to the amendment enacted therein, all related party debt would be deemed as equity for tax purposes (Colombian Tax Code, §287).
US dollars figures in this section are approximate values using a COP $2,000 exchange rate.
(4) Year-end “Economic Emergency” Measures Increasing the Reach of the 2011 Net-worth Tax to Taxpayers with a Gross Net-worth between USD $500k and USD $1.5m Tax, and the Adoption of a 25% Surcharge on the Net-worth Tax for Taxpayers with a Gross Net-worth greater than USD $1.5m. –
Motivated on the damages suffered by the victims of the rain-floods catastrophe, the Colombian Government declared the State of Emergency and through “Economic Emergency” Decree No. 4825, issued on December 29, 2010, adopted two new brackets of taxpayers subject to the “one-time” 2011 net-worth tax commented on §3 above. According to these measures, if the taxpayer’s gross net-worth as of January 1st, 2011 was approximately USD $500k (COP $1,000,000,000) without exceeding approximately USD $1m (COP $2,000,000,000), the applicable rate is 1%. If the taxpayer’s gross net-worth was between USD $1m (COP $2,000,000,000) and USD $1.5m (COP $3,000,000,000), the applicable rate is 1.4%. Taxpayers subject to the newly adopted net-worth tax would have to assess the tax on their net taxable net-worth as of January 1st, 2011, and the tax is payable in 8 semiannual installments through 2014. If the taxpayer’s gross net-worth did not exceed USD $500k (COP $1,000,000,000), the taxpayer is not subject to the 2011 net-worth tax.
Additionally, through the year-end “Economic Emergency” measures the Government adopted a 25% surcharge on the “one-time” 2011 net-worth tax for taxpayers with a gross net-worth greater than USD $1.5m (COP $3,000,000,000). Like the reference tax, the surcharge should be assessed on January 1st, 2011, and is payable in 8 semiannual installments through 2014. The adoption of this surcharge results in an effective economic burden (including both the reference tax and the surcharge) of 3% of their net taxable net-worth for taxpayers with a gross net-worth between USD $1.5m (COP $3,000,000,000) and USD $2.5m (COP $5,000,000,000), and of 6% of their net taxable net-worth for taxpayers with a gross net-worth greater than USD $2.5m (COP $5,000,000,000). For the avoidance of doubt, net-worth tax taxpayers in the gross net-worth brackets between USD $500k (COP $1,000,000,000) and USD $1.5m (COP $3,000,000,000) are not subject to the 25% net-worth tax surcharge affecting net-worth tax taxpayers in the gross net-worth brackets greater than USD $1.5m (COP $3,000,000,000).
IMPORTANT: Through the year-end “Economic Emergency” measures the Government adopted additional complex regulations affecting all taxpayers of the 2011 net-worth tax, regardless of the bracket they are in, which are not commented herein and that require careful examination on a case-by-case basis. Among these, are worth noting both (i) the adoption of a measure for purposes of determining whether the net-worth tax is triggering, “disregarding” any net-worth partition strategies implemented by the taxpayer, and (ii) the carve out from LSAs entered pursuant to the Legal Stability Agreements Act No. 963-2005 (see: §1, ¶5, P.2 above), of both the 2011 net-worth tax for taxpayers in the brackets below USD $1.5m (COP $3,000,000,000) and the surcharge for taxpayers in the brackets above USD $1.5m (COP $3,000,000,000).
Through a recent revenue ruling the Colombian Tax Service adopted the “likely controversial and debatable” position that taxpayers subject to the 2011 net-worth tax in the brackets above USD $1.5m (COP $3,000,000,000), cannot benefit from a previous LSA they have entered on that covered previous predecessor net-worth taxes (“Dirección de Impuestos y Aduanas Nacionales” – DIAN, Revenue Ruling No. 098797 – 2010, issued on December 28, 2010).
US dollars figures in this section are approximate values using a COP $2,000 exchange rate.
(5) Advanced Collection Self-Withholding Tax on Hydrocarbons and Minerals Exports. –
Pursuant to the recently enacted 2011 tax reform act, hydrocarbons and mineral Colombian exporters shall assess, and pay within the next month, a “self-withholding” on the gross sales price of their exports. Such withheld amounts are creditable towards the corresponding fiscal year income tax liability of the Colombian exporter, which is assessable and payable on the immediately following year. The tax reform act invests the Colombian Government with the power to determine the withholding tax rate applicable on these exports, which cannot be greater than 10%.
Rather than a real withholding tax burden on the foreign purchaser, this “self-withholding” burden on the exporter constitutes an advanced collection mechanism of its Colombian income tax liability for the corresponding fiscal year.
(6) Elimination of the Zero-rated VAT Regime for “Intermediate Services in the Production Line” for Hydrocarbons and Mining Export Activities. –
Because hydrocarbons and mining exports were zero-rated for VAT purposes, prior to this reform certain “intermediate services in the production line” were also eligible for zero-rated treatment. This will no longer be the case beginning January 1st, 2011.
Provided compliance with statutory requirements, certain “intermediate services in the production line” are eligible for preferential VAT treatment, i.e., taxed at the same VAT rate to which the final product is subject (Colombian Tax Statute, §476, last paragraph). As of January 1st, 2011, this preferential treatment is no longer available for taxpayers in the hydrocarbons and mining industries. Thus, such services in such industries will be subject to the general VAT regime and rate. For the avoidance of doubt the above mentioned preferential VAT treatment continues to be available for other industries.
(7) Elimination of the Special Transfer Pricing Regime for Mining Activities. –
Through this tax reform act and beginning FY2011, the Colombian Congress eliminates the special fix-price transfer pricing regime currently in place for mining activities and adopted back in 2006 (Colombian Tax Reform Act No. 1111-2006. See: Colombian_Tax_Flash®, January 2007, yr. 4 – No. 8, P.2 [unnumbered item 6], found in the Publications tab at www.lewinywills.com). As a result of this change, as of January 1st, 2011, mining activities shall be subject to the ordinary transfer pricing “arm’s-length based” regime.
For Income tax purposes Colombia has a regular transfer pricing “arm’s-length based” regime, which mostly resembles international OECD guidelines (hereinafter the “Regular Regime”). When it comes to mining activities in the country, since 2006, certain Eligible Income Tax Payers (hereinafter “EIT”) were subject to a special transfer pricing “fix-price based” regime (hereinafter the “Special Regime”). Under the Special Regime, semiannually the Ministry of Mines and Energy fixed the deemed price for each exporter for that 6-month period, and that price multiplied by the number of exported tons was the deemed income tax base for mineral exporters.
Both the Regular and Special Regimes are applicable with respect to cross-border transactions between related parties. The Colombian catalog of foreign related party situations is complex and the income taxpayer must review it carefully.
EITs subject to the Special Regime were minerals producers/exporters that in the immediately preceding fiscal year had export sales over USD$ 100m.
(8) Reduction of Penalties in Transfer Pricing Compliance. –
Income tax payers subject to the Regular Regime (see: §7, ¶2, P.7 above) have to comply with certain documentation and transfer pricing returns filing obligations. Non-compliance of such obligations gives rise to penalties. These transfer pricing compliance penalties are being reduced in more than 40% by the 2011 tax reform act.
(9) Amendments to the Current Statutory Foreign Tax Credit (“FTC”). –
The current Colombian income tax regime provides for an FTC, provided compliance of certain statutory requirements and subject to certain limitations. Pursuant to these regulations Colombian companies with operations outside of Colombia are eligible for both a direct and an indirect statutory FTC for taxes levied by the source country on non-Colombian source income and dividends respectively.
The 2011 income tax reform act adopts a series of changes to the relevant regulations, including among others, (a) an additional remote FTC on taxes levied by a Third Country, for Colombian companies receiving distributions from foreign companies that have received a distribution subject to income tax in said Third Country, and (b) the introduction of a 15% minimum interest requirement to be entitled to the FTC.
The new regulations of the FTC are complex and should be carefully examined on a case-by-case basis.
(10) Bank Debits Tax Revenue Increase Measures, Sunset Scheduled for 2018, and Increase of the Corresponding Income Tax Deduction. –
The 2011 tax reform act adopts a series of changes and measures to “tackle” certain alternatives offered by financial institutions and other authorized agents, as planning tools to minimize the economic burden of this tax.
This national level tax has been in place since the year 2000 and currently taxes, among others, all funds withdrawn or transferred from checking or savings accounts in Colombia at a tax rate of 4 per thousand.
In addition to the abovementioned revenue increase measures, the Colombian Congress has approved the sunset of this tax through a phase-out tax rate scale that begins on 2014 with a reduction to 2 per thousand, followed by a further reduction in 2016 to 1 per thousand, and its final elimination beginning 2018.
In addition and subject to certain requirements, as of FY2013, the 2011 tax reform act authorizes an income tax deduction of 50% of the Bank Debits Tax paid by the income taxpayer during the corresponding fiscal year. The current authorized deduction in place through FY2012 is of 25%.
(11) Temporary Availability of Penalties and Lateness Interest Rebates for National Level Tax Debts. –
National level taxes taxpayers that agree to pay their outstanding tax debts corresponding to 2008 and prior taxable periods, are eligible to benefit from a 50% rebate of any outstanding penalties and lateness interest, authorized by the 2011 tax reform act, provided that the owed amounts are paid within the 6 months following the enactment of the 2011 tax reform act, i.e., December 29, 2010, and that the taxpayer continues to timely file and pay her taxes during the 2 years that follow the date in which the owed amounts were paid. If the taxpayer fails to comply with the latter condition, the benefit will be recaptured in full and the Colombian Tax Service is allowed to seek payment of the rebated amounts. Certain rules and restrictions apply.
The 2011 tax reform act authorizes local authorities to adopt measures granting a similar rebate for local (territorial) level tax debts.
(12) Other Important Changes Introduced. –
As mentioned in the introductory paragraphs of this issue, the 2011 tax reform act adopts other material changes not discussed herein that should be carefully studied, seeking qualified advice from professional tax attorneys admitted to practice law in Colombia. Some (not all) of these measures are: changes in the VAT withholding regime for providers of Foreign Trading Companies; changes in the terms and proceedings for VAT refunds; the progressive elimination of deductible expenses paid in cash; the extension of the early expiration term to audit income tax returns subject to the compliance of certain requirements; the VAT rate reduction for certain sports and recreation vessels from 35% to 20%; and the 3-year extension of the contributions for public works contracts, public works concessions and other concessions; among others.
In addition, Congress introduced many other changes in other pieces of legislation enacted last December, which are not featured in this issue of Colombian_Tax_Flash®.
Colombian_Tax_Flash® is being sent to clients, friends and colleagues of Lewin & Wills worldwide, and contains a legal alert and marketing information. If you do not wish to receive this briefing in the future, please e-mail us at Colombian_Tax_Flash@lewinywills.com writing the words “Stop Flash” in the subject.
NOTICE: ©2011 Lewin & Wills. All rights reserved. Colombian_Tax_Flash® is a periodical publication that discusses certain recent tax developments in Colombia. Please be advised that this summary is not intended to be a detailed and comprehensive description of the topics discussed herein. This publication is prepared by Lewin & Wills (Colombia) for informational purposes only and does not constitute legal advice. The statements contained herein reflect the author’s interpretation of current tax rules and may not be shared or accepted by the Colombian Tax Service or by the Colombian Courts or by other persons or authorities. The information contained herein is not intended to create, and receipt of it does not constitute, an attorney-client relationship. Readers should not act upon it without seeking qualified advice from professional tax attorneys admitted for the practice of law in Colombia. This publication was not intended or written to be used, and cannot be used, by any person for the purpose of avoiding any taxes or tax penalties that may be imposed on such person in Colombia or any other jurisdiction. Prior results do not guarantee a similar outcome. Colombian_Tax_Flash® is copyrighted material. The use, translation, reproduction or retransmission by any means in whole or in part of its contents is prohibited without the prior written consent of one of the partners of Lewin & Wills.
Posse Herrera & Ruiz Names Ernesto Cavelier Partner And Opens Intellectual Property Practice Area
Posse Herrera & Ruiz is very pleased to announce the entry of Ernesto Cavelier as partner of the firm and the opening of its Intellectual Property practice area headed by Mr. Cavelier and supported by Ms. Helena Camargo, patent engineer Julian Diaz, four associates and paralegals, and three litigation associates from the litigation group.
Mr. Cavelier will also be working in the Corporate Law practice area.
Ernesto Cavelier has almost 35 years of experience representing foreign and domestic clients in different sectors. Recent transactions led by Mr. Cavelier include privatizations for the energy sector, foreign investments in the oil service industry, acquisitions in the aeronautical, financial and insurance sectors, and complex technology license agreements.
His academic profile includes studies of Comparative Law at New York University, European Law at Amsterdam University, Business at Peter F. Drucker Management Center (EMBA) Claremont University in California, and Intellectual Assets Management at Licensing Executives Society USA and Canada.
Mr. Cavelier is a former Vice-president of Licensing Executives Society International, is a member of LES Comunidad Andina, American Bar Association (ABA), New York Bar Association (NYSBA), Asociación Interamericana de la Propiedad Intelectual (ASIPI), Mining and Oil Lawyer’s Association, and Colombian Academy of Law.
ERNESTO VILLAMIZAR JOINS POSSE HERRERA & RUIZ TO HEAD REAL ESTATE DEVELOPMENT PROJECTS AND TRUST PRACTICE AREA
POSSE HERRERA & RUIZ IS PLEASED TO ANNOUNCE ERNESTO VILLAMIZAR HAS JOINED THE FIRM AS PARTNER AND WILL HEAD THE REAL ESTATE DEVELOPMENT PROJECTS AND TRUST PRACTICE AREA
Ernesto Villamizar is a Universidad Javeriana lawyer and economist, has studies in Financial and Credit matters with the Chase Manhattan Bank – Banco del Comercio, and Graduate Management studies in the Universidad de los Andes.
He has been a college professor for several years, a domestic and international speaker in trust matters and has occupied important positions in the Financial Sector for more than 25 years, including President of Alianza Fiduciaria, CEO of Banco Union Colombiano and President of Fiduciaria Union.
His experience includes the structuring of trust vehicles for high net worth individuals, real estate developers and government contractors. He also has experience in the structuring and distribution of mutual and private funds.
In a bold attempt to generate greater employment in the formal economy, President Santos has proposed to the Colombian Congress the much-heralded “Law of First Employment.”
As I explained in my post on the proposal, the Government will create incentives (tax breaks, financing options, and the like) to encourage creation of small businesses by, and first time employment (including “telework”) of, youths under age 28, certain technical professions, the agricultural industry, women under 40, and in three specific states. A key part of the program is the progressive implementation of income taxes and “parafiscal” payments (like social security, health insurance, and the like) – initially at zero percent of the norm and phased in over 5 to seven years. These breaks apply to employers of vulnerable groups and low-income individuals. The National Government will also establish a technologically modern national employment search database to help connect workers and jobs.
The bill also aims to simplify labor-related procedures. It prohibits employer discounts from salary payments, provides uniform procedures for employee loans, vacation compensation, and housing support.
To simplify business procedures, there are substantial revisions to the corporate insolvency law, known as Law 1116 of 2006. Reform is needed.
In a post I wrote about dispute resolution procedures in Brazil, Mexico, and Colombia, I found that the World Bank’s 2010 Doing Business survey found, “Colombia compares favorably to Latin America and the Caribbean on closing businesses, with rankings that are fairly high. Colombia’s bankruptcy procedures for closing a business are considerably better-ranked than the LAVCA Scorecard ranks them.” True enough, but the World Bank survey, I also found, was subject to some methodological criticism. Therefore I also looked to the Latin America Venture Capital Association (LAVCA) Scorecard, which ranks Colombia lower. “When it comes to bankruptcy procedures,” I found, “LAVCA scores Brazil 3 out of 4 points, Colombia 2 out of 4 points, and Mexico 1 out of 4 points.”
LAVCA’s leadership knows Colombia quite well, and its criticism and calls for improvement merited a significant response.
What are the changes? Many deadlines have been shortened in the process to identify debts and assets, resolve objections, propose a voluntary agreement for reorganization, or adjudicate the case, if a voluntary plan cannot be agreed up, starting with an attempt to agree on a plan of liquidation.
Procedures have also been established to reverse decisions to liquidate companies, to clarify that companies in reorganization or dissolution may be the subject of mergers and divisions, to adjudicate assets that appear after liquidation, and to specify that debtors may serve as reorganization “promoters.” See translation of new bankruptcy procedures.
Corporate Insolvency Law Revisions – Translation
Here is my unofficial translation the revisions to the Corporate Insolvency Law, contained in the new Law of First Employment, for study purposes. DISCLAIMER: Do not rely upon this translation – consult your Colombian insolvency lawyers or check with me for a referral.
CHAPTER II
Simpler Trade Procedures
Article 24. Determining the Cause of Dissolution of a Company. When dissolution requires a declaration by the General Assembly of Shareholders or the Board of Directors, the requisite majority of members thereof established by statutes or by law must declare the company dissolved and the particular cause thereof, and record the declaration in the commercial register.
The members may avoid the dissolution of the company by adopting measures correcting the declared cause that occurred, provided that the protocol containing the measures adopted is registered in the commercial register within eighteen months following the occurrence of the cause.
When the means provided by law or contract for the appointment of a liquidator are exhausted and the liquidator has not been appointed, any of the members may apply to the Superintendent of Companies to appoint the liquidator. The designation by the Superintendent shall proceed immediately, even where the bylaws contain an arbitration clause.
That appointment of the liquidator shall be in accordance with the regulations adopted for the purpose by the National Government.
Article 25. Private liquidation of companies with no external liabilities. In those cases in which, once an inventory of assets is made under the law, it is evident that the company has no external liabilities, the liquidator of the company will immediately convene a meeting of the General Assembly of Shareholders or Board Members, to submit for their consideration that inventory as the final account of the liquidation.
If it is found that, contrary to what was noted in the inventory, there are obligations to third parties, partners will be jointly and severally liable to creditors.
This responsibility shall extend up to a term of five years from registration in the commercial register of the document containing the inventory and final account settlement.
Article 26. Deposit of unclaimed credits. When a creditor fails to claim payment, the liquidator is entitled to make a judicial deposit in the name of the creditor in the amount of the obligation reflected in the inventory of assets.
Article 27. Additional Adjudications. If new assets of a company appear after the end of the process of voluntary liquidation, or after the liquidator has ceased to allocate inventory, there shall be an additional adjudication in accordance with the following rules:
1. The additional allocation will be the responsibility first of the liquidator that conducted the liquidation of the company, but if five (5) years have passed from the approval of the final account settlement or if the liquidator cannot reasonably advance the process, the Superintendency of Companies shall determine who will make the additional allocation.
2. Any creditors listed in the inventory of assets may submit a claim by a document that describes the new assets and provides such evidence as may be appropriate.
3. Once the liquidator has established the value of the new assets, he or she shall award them to the unpaid creditors in the order established in the inventory of assets. In the event there are no creditors, the liquidator shall award the property among those who appear as the final members [shareholders], according to the percentage of their rightful share in the capital of the company.
4. The document signed by the liquidator shall record the description of the assets adjudicated, the value thereof, and the identification of the person or persons to whom they were awarded.
5. Expenses incurred for the additional adjudication, shall be borne by those to whom assets are awarded.
Article 28. Actions against members and liquidators in voluntary liquidation. The Superintendency of Companies, exercising judicial functions shall hear actions for damages against members and receivers according to legal norms.
All of these actions will be brought under one single petition under the verbal summary procedure governed by the Code of Civil Procedure.
Article 29. Reactivation of Companies and Branches in Liquidation. The General Assembly of Shareholders, the Board of Directors, the sole shareholder or holder of foreign company branches in Colombia may at any time after the initiation of liquidation, agree to reactivate the company or branch of a foreign company, provided that external liabilities do not exceed 70% of corporate assets and that the distribution of the remaining assets to members [shareholders] has not commenced.
The revival may coincide with the transformation of the company, provided that the requirements of the law are satisfied.
In any case, to transform the company into a simplified stock company, the determination will requires the unanimous vote of all members.
To reactivate, the liquidator of the company shall submit for the consideration of the General Assembly of Shareholders or Board Directors a proposal containing the reasons for reactivation and the facts that satisfy the requirements of the preceding article [Ed. Note: sic – probably “this article”].
The liquidate should also prepare special financial statements in accordance with the provisions of existing rules, dated not more than thirty days before the date of the notice of the meeting of the highest corporate body.
The decision to reactivate shall be taken by the majority provided by law for transforming the company. Absent or dissenting partners may exercise the right of withdrawal under the terms of the law.
The document containing the determination to reactivate the company shall be entered in the commercial register at the headquarters of the Chamber of Commerce . The determination shall be reported to the creditors within fifteen days from the date of the decision by written notice addressed to each of them.
Creditors have the right of judicial opposition under the terms provided in Article 175 of the Code of Commerce. The action may be brought within thirty days after receipt of notice described in the previous paragraph. The action shall proceed before the Superintendency of Companies to be resolved through the verbal summary procedure.
Article 30. Article 10 of Law 1116 of 2006 is amended to read as follows:
Article 10. Other Costs of Admission. The request to initiate the process of reorganization must be filed, accompanied by documents evidencing, in addition to the costs of default or imminent inability to pay, the satisfaction of following requirements:
1. The time set by law shall not have expired to weaken the grounds for dissolution, unless measures have been adopted to address them.
2. Regular accounts of the business prepared in accordance with legal requirements.
3. If the debtor has a pension liabilities, the actuarial calculation must be approved and the company must be current its in payment of monthly pensions, bonds and pension requirements.
Obligations due to these concepts caused during the [reorganization] process and payments due arising prior to the commencement of the reorganization process shall be paid in preference, even over other administrative expenses.
Article 31. Common Provisions Relating to Private Liquidation. In private liquidation process, the liquidation documents provided in paragraph 3 of Article 247 of the Commercial Code shall not be required.
Any company in private liquidation may be part of a merger or division.
During the liquidation period, companies in private liquidation are not obligated to renew their commercial registration.
Article 32. Without prejudice to criminal or other purposes as may be appropriate, liabilities for mandatory deductions for tax authorities, deductions made to employees or to contribute to the social security system shall not prevent the debtor from accessing the reorganization process.
In any case, at the time of filing the debtor will inform the judge about the existence and present a plan to satisfy these liabilities, which must be fulfilled no later than the time of confirmation of the reorganization agreement. If by that date this condition is not satisfied, the judge may not confirm the agreement presented.
Such obligations which arise after the start of the process will be paid as administrative expenses.
Article 33. The first and third paragraphs of Article 13 of Law 1116 of 2006 shall be amended to read as follows:
1. The five (5) basic financial statements for the three (3) financial years and the reports, if any, signed by a Certified Public Accountant or Auditor, as applicable, unless the debtor has previously furnished the Superintendent such financial statements in the given conditions, in which case the Superintendent shall secure them for the relevant purposes.
3. An inventory of assets and liabilities at the same date as in the previous section, duly certified, signed by a public accountant or auditor, as appropriate.
Article 34. Two paragraphs shall be added to article 17 of Law 1116 of 2006, which shall read as follows:
Clause 3. From the time of the submission of the application for reorganization until the acceptance thereof, the debtor may only make payments in the ordinary course of business, such as labor, tax and suppliers.
Paragraph 4. In special cases, the bankruptcy judge may authorize the advance payment of small debts, i.e., those that collectively do not exceed five percent of external liabilities of the debtor.
Article 35. Role of the Promoter in the Reorganization Process. The functions of the Promoter provided under Law 1116 of 2006 shall be fulfilled by the legal representative of the corporate debtor or the individual natural person commercial debtor, as appropriate.
Exceptionally, the bankruptcy judge may appoint a Promoter when justified the judgment of the judge it is justified in light of the circumstances, for which the judge shall take into account such factors as the size of the enterprise, the amount of its liabilities, the number of creditors, the international character of the operation, the existence of accounting anomalies and breach of statutory duty by the debtor.
Any number of unrelated creditors representing at least thirty percent of the total external liabilities at any time may request the appointment of a Promoter, in which case the bankruptcy judge shall designate one immediately. The request may be made from the beginning of the process and the percentage of votes will be calculated based on information submitted by the debtor with the request [for admission to reorganization].
Similarly, the debtor may request the appointment of the Promoter from the beginning of the process, in which case the bankruptcy judge shall proceed with such appointment.
In cases where a Promoter is appointed, the Promoter shall comply with all functions under Law 1116 of 2006.
Article 36. Article 29 of Law 1116 of 2006 be amended to read as follows:
Article 29. Objections. The proposal submitted by the Promoter to recognize and prioritize liabilities owed and voting rights shall remain in the office of the bankruptcy judge for a term of five (5) days.
The debtor can not object to liabilities included in the list of liabilities filed by the debtor with the petition to start the reorganization process. For their part, managers may not object to the obligations of external creditors that are included within the debtor’s application.
Immediately preceding the expiration of the term above, the bankruptcy judge shall retain the objections for a term of three (3) days for the objected-to creditors to respond, providing documentary evidence as may be appropriate.
After that term has expired, there shall run a term of ten (10) days intended to bring about the settlement of the objections. The objections which are not settled shall be decided by the bankruptcy judge at the hearing provided for in the next article.
The only admissible evidence for the processing of objections will be documentary, which must be provided with a statement of objections or the response to them.
If there are no objections, the bankruptcy judge will recognize credits, establish the voting rights and set a deadline for agreement by ruling that will not appeal.
Article 37. Article 30 of Law 1116 of 2006 shall be amended to read as follows:
Article 30. Determination of Objections. If objections are filed, the judge shall proceed as follows:
1. Accept the documentary evidence submitted by the parties.
2. Sign a decree convening a hearing test to resolve the objections, which shall take place within five days.
3. In the event the judge decides the objections the court will recognize the liabilities, assign the rights to vote and set deadlines for concluding the agreement. Otherwise, only the remedy of reinstatement may be presented at the hearing.
In any case the hearing may not be suspended.
Article 38. Article 31 of Law 1116 of 2006 shall be amended to read as follows:
Article 31. Term to Conclude the Agreement of Reorganization. In the event that the credits are recognized, there will be four months to conclude the reorganization agreement, unless the parties agree to a shorter term. The term of four months may not be extended under any circumstances.
Within the time for concluding the agreement, the promoter, on the basis of the reorganization plan of the company and the cash flow available for the payment of obligations, shall file with the bankruptcy judge, as may be the case, a reorganization agreement duly approved by the favorable votes of a number of creditors representing at least an absolute majority of votes allowed. This majority must additionally comply in accordance with the following rules:
1. There shall be five (5) categories of creditors, consisting of :
a) The holders of labor claims;
b) Public entities
c) Financial institutions, national and other entities subject to inspection and supervision of the Financial Superintendency of Colombia, private, public or mixed, and foreign financial institutions;
d) internal creditors and
e) Any other external creditors.
2. There must be favorable votes from at least three (3) categories of creditors.
3. If there are only three (3) classes of creditors, the majority must comply with affirmative votes from creditors belonging to two (2) of them.
4. If there are only two (2) categories of creditors, the majority must comply with affirmative votes from both classes of creditors.
If a properly approved reorganization agreement is not presented in the period provided in this Article, then a term shall immediately commence to conclude an agreement to adjudicate the case.
The reorganization agreement approved by the affirmative vote of a plural number of creditors representing at least seventy-five percent (75%) of the votes will not require voting classes of creditors established in the rules contained in the preceding paragraphs.Paragraph 1. For the purposes specified in this law internal creditors are the partners or shareholders of the corporation, holders of shares or shares in a sole proprietorship, and holders of any other legal entity. In the case of commercial natural person, the debtor will have the this status.
For purposes of calculating the votes, each internal creditor is entitled to a number of votes equal to the value obtained by multiplying the percentage of equity by the number that results by netting from shareholders equity the profits in kind and amount of the shareholders capital account, having been recapitalized in accordance with the balances and information in court at the time of admission to the insolvency process. When the equity is negative each shareholder shall have one vote.
Amendment of the reorganization agreement must be adopted with the same percentage of votes required for approval and confirmation. To that end, the votes will be deducted from those debts originally selected which have been extinguished in implementing the reorganization agreement, keeping the votes of the internal creditors equal to those calculated for the first determination, based on the date of commencement of the process.
Paragraph 2. When internal or linked creditors hold a majority decision-making in the reorganization agreement, it may specify in the agreement or a term reforms to the attention of foreign liabilities unrelated creditors more than ten years from the date of the agreement except that most foreign creditors consent to the granting of a longer period.
Article 39. Article 37 of Law 1116 of 2006 shall be amended to read as follows:
Article 37. Term and Confirmation of the Adjudication Agreement. After the term for filing a reorganization agreement has expired, and it has not been confirmed it, the judge shall proffer a ruling taking the following decisions:
1. Appoint a liquidator, unless the reorganization process has proceeded with a Promoter, in which case the Promoter shall act as liquidator.
2. Set the deadline for submission of the value of the inventory, and
3.Order a current statement of the costs incurred during the reorganization process.
There shall be a period of three (3) days to object to the valuation of assets and the costs of reorganization. To present objections, the procedure provided for the reorganization process shall be applied. After resolving objections or no objections are present, there shall be a term of thirty (30) days to present the award agreement.
During the previous term only perishable goods of the debtor that are at imminent risk of deterioration may be disposed of, depositing the proceeds of the sale to the bankruptcy judge’s order. Other property may be sold if authorized by an absolute majority of creditors in any case authorization must be confirmed by a judge.
The award agreement will be agreed and will be awarded as the debtor’s assets, paying off the obligations due after the commencement of the insolvency process, then those contained in the approved classification and qualification. In any case the procurement rules set out in this law shall be followed.
The award agreement must be approved by the majority and in the manner provided in this Act for approval of the reorganization agreement, always respecting the priority of law and, in particular those relating to pension liabilities. To this end, the debtor shall credit the current statement of administrative expenses and the requirements for implementation of the agreement and form of payment, while respecting their priority.
If the settlement award is presented to the bankruptcy judge within the period specified in this law, the creditors accept the Superintendent or the judge awarded the debtor’s assets, according to the rules of procurement of goods covered in this law.
For confirmation of the award agreement, the same standards shall apply as for confirmation of the reorganization agreement, meaning that if there is no confirmation of the award, the bankruptcy judge shall proceed to adjudicate the debtor’s assets under the terms stated in the preceding paragraph.
The adjudication shall occur at the latest within fifteen (15) days of the confirmation hearing of the award agreement when the same has not been confirmed or the deadline has passed for submission within the parameters established in this law. There shall be no recourse against the act that decrees the award of the goods.
Paragraph 1. In any case, the bankruptcy judge shall order the payment of the taxes attach to foreclosed assets, including the most extensive.
Paragraph 2. For assets which are not part of the capital to be adjudicated, the disposition shall be determined under the provisions of this Act for goods excluded from the process of liquidation.
Clause 3. The effects of the settlement award will be, in addition to those mentioned in Article 38 of Law 1116 of 2006, those contained in Article 50 of the Act.
Article 40. Electronic Media. The use of electronic means in handling insolvency proceedings is permitted in accordance with the provisions of Act 527 of 1999 and for the formalities with the Commercial Register, nonprofit entities and to the National Register Bidders Delegates at the Chambers of Commerce.
In cases where personal appearance is required, such requirement is satisfied by the digital signature mechanism. Where the law requires the submission of an original value title, electronic means may not be used.
Article 41. Article 123 of Law 1116 of 2006 shall be amended to read as follows:
Article 123. Advertising of commercial trust agreements for security purposes consisting of a private document. Commercial trust contracts for security purposes consisting of a private document must be entered in the Register of the Chamber of Commerce have jurisdiction in the domicile of the settlor, subject to the registration or registration, according to the kind of act or with the nature of the goods, must be in accordance with the law.
Article 42. Exclusion of personal presentation of the powers to further proceedings before the Superintendency of Industry and Commerce. The powers to be conferred to further proceedings before the Superintendency of Industry and Commerce and Chamber of Commerce. The powers granted to further proceedings before the Superintendency of Industry and Commerce, relating to registration of distinctive signs and new creations will not require personal appearance.
The minutes of the governing bodies and management of companies and nonprofit entities, and their extracts and copies authorized by the Secretary or by the Representative the respective legal person, who must register with the Chambers of Commerce, are presumed authentic until proven otherwise by competent authority statement. Therefore personal appearance is not required for these papers with the secretary of the Chamber of Commerce in question, judge or notary.
Article 43. The numbers 4 and 7 of Article 85 of Law 222 of 1995 shall be as follows:
4. Order the removal of directors, Auditor and staff, as necessary, for breach of the orders of the Superintendency of Companies, or the duties prescribed by law or bylaws, ex officio or upon request by Providence reasoned that appoint a replacement to the lists drawn up by the Superintendency of Companies. The removal ordered by the Superintendency of Companies will involve an inability to engage in trade, up to ten (10) years from the date of the administrative act accordingly.
From submission to control, prohibiting managers and employees the provision of securities that fall on the company’s own assets, disposals of assets or operations not related to the ordinary course of business without prior authorization from the Superintendency of Companies. Concluded or executed any act in contravention of the provisions of this Article shall be ineffective and void.
The recognition of the budgets of inefficiency under this Article shall be the responsibility of the Superintendency of trade companies in the exercise of administrative functions. Likewise, the parties may apply to the Superintendent recognition through verbal summary of the process.
7. call on society to the processing of an insolvency process, whether it is caught by a situation of default.
Article 44. Article 121 of Act 1116 of 2006 shall read as follows:
Article 121. Contributions. The resources needed to cover operating costs and investment required by the Superintendency of Companies will come from the contribution payable by the Company under its supervision or control, as well as rates referred to in this article.
The contribution will consist of a rate to be calculated on the total amount of assets, including adjustments for inflation, to register the company at 31 December of the previous year. This contribution will be settled according to the following rules:
1. The total contributions shall be the amount of investment and operating budget that requires the Superintendent in the respective annual term, net surplus from contributions and fees from the prior year.
2. Based on total assets of the companies monitored and controlled at the end of the previous annual period, the Superintendency of Companies, by order, establish the rate of contribution receivable, which may be different depending on whether the companies active in period preoperative, in the concordat, the reorganization or liquidation.
3. The rate that is fixed may not exceed one per thousand of the total assets of the companies monitored or controlled.
4. In any case, the contribution to charge each company may exceed one percent of total contributions, or less than one (1) current monthly minimum wage.
5. When society taxpayer does not monitor or control remain throughout the term, its contribution is proportional to the period under supervision or control. However, if the fact that one or more companies do not remain under the supervision or control during the entire period, it generates a defect remedied required budget, the superintendent may require liquidation and other contributors the corresponding amount at any time during the corresponding effect.
6. The contributions will be settled for each company annually based on total assets, multiplied by the rate set by the Superintendency of Companies for the corresponding fiscal period.
7. Where a company fails to provide timely cut balances at 31 December of the previous year, the Superintendent will make the corresponding settlement based on the assets recorded in the balance last stand in the archives of the entity. However, after receiving financial statements for the prior year shall be based on the reassessment of the contribution.
8. Where a company this product balances for the reassessment, they may be applied first to outstanding obligations to the institution and, secondly, to be deducted from payment of the fiscal year in progress.
The Superintendence of Companies may charge to non-monitored or controlled or other entities or persons, fees for services they provide, depending on the costs that each service involving the entity, determined based on the remuneration of personnel engaged in activity, in proportion to the time required and the cost of their displacement in terms of travel and land and air transportation, when necessary any place, and administrative expenses such as postage, photocopies, certified and experts.
The amounts for taxes or fees for services that are not canceled within the deadlines set by the Superintendency, cause the same penalty interest applicable to tax and supplementary income.
The Bolsa de Valores de Colombia (BVC) is Colombia’s stock exchange, but since November it has joined forces with the Chilean and Peruvian exchanges, creating a platform for trading in all three countries of issues registered in any of the three countries. In a separate new development, 21 issues of international securities can now be traded on the “Global Market of Colombia.”
Three brokerage houses – Correval, Interbolsa and Valores Bancolombia – will publish information who are obliged to publish relevant information of each of those registered. The sponsoring broker (or international custodians) will provide access to the financial, economic, accounting, legal and administrative disclosures of the issuers.
The Global Market will operate differently than the current foreign exchange trading of issues like Canada’s Pacific Rubiales and Canacol Energy. They will be traded, cleared and settled through systems administered by the BVC using a wheel or separate session. Deceval will administer these securities through accounts with an international custodian, and Deutsche Bank has been contracted for this new market segment.
The brokers and their respective issuers are:
Valores Bancolombia
Apple Inc.
Bank of America Co.
Caterpillar Inc.
Chevron Co.
Exxon Mobil Co.
The Goldman Sachs Group Inc.
Johnson & Johnson
JPMorgan Chase & Co.
The Procter and Gamble Co.
Interbolsa
Amazon.com Inc.
Barrick Gold Co.
Citgroup Inc.
General Electric Co.
Google Inc.
Gran Tierra Energy Inc.
Pfizer Inc.
Research In Motion Ltd.
Schlumberger N.V.
Walmart Stores Inc.
Correval
Anadarko Petroleum Co.
Murphy Oil Co.
The Proposed “Law of First Employment” – Towards Formalization, Through Incentives, A National Database, and Regulatory Reforms
One of the great challenges facing the modernizing Colombia is the formalization of employment. Proponents of the US-Colombia Trade Promotion Agreement and other free trade deals have argued they will bring about more and better employment, boosting trade and development. Informal employment has cost the health care financing system in Colombia dearly, while formal employment brings not only needed payment into the system, but modern worker benefits and protections. Increased formal employment is needed on a massive scale to reduce income inequality and cement gains is social stability.
President Santos has formally proposed to the Colombian Congress a major piece of legislation designed to bring about more formal employment, called the Law of First Employment. It is a very serious effort to rise to this enormous challenge.
The proposed law has four parts. Chapter I deals with stimulating first employment, focusing on young people under the age of 28 and in the agricultural sector as well as three specific states. The law directs the creation of incentives for businesses to formalize employment through micro credit and credit oriented programs (both in urban and rural sectors) for youths under age 28, professionals, technicians, leading to formalization and generation of business, employment and telecommuting, using tools such as tax breaks, capital assistance, grace periods, training programs, technical assistance and expert advice. The bill directs special programs to be established in the agricultural sector, and in the states of Amazonas, Guainia, and Vaupes.
The bill eases new small businesses into the tax system on a gradual basis, with no income tax payable during the first two years, only 25% of the tax due in the third year, 50% in the fourth, 75% in the fifth, and normal taxation in the sixth and subsequent years (and more favorable rates of progression in the states of Amazonas, Guainia, and Vaupes. Comparable discounts will apply to the “parafiscal” payments – health insurance, social security, and the like. Discounts also apply for the generation of new employment of persons under age 28.
Changes made to the nation’s labor laws by the bill are intended to speed and reduce the complexity of procedures for the posting of new jobs and improved salaries and to reduce red tape.
Chapter II focuses on the insolvency laws, and purports to simplify and reduce expense in procedures for the liquidation of enterprises, making a large number of changes to Law 1116 of 2006, the Corporate Insolvency Regime. A translation and explanation of these changes can be found here.
Chapter III purports to cut red tape and simplify bureaucratic procedures in a number of other areas of the law, primarily relating to employee benefits. Chapter IV will establish a national employment database.
Overall, the ambitious legislation will be best understood as the incentives for hiring, and the national employment database, are implemented in the near future. Presumably, they will be very positive overall for business in building a climate of legalization and formalization. The legislation is undoubtedly another very positive, pro-business sign that Colombia’s political leaders are doing the hard work of modernizing their economy to continue to reap the benefits of, and to lock in, the gradual end of the civil and narco-trafficking wars.
A tip of my hat to Clayton Steele and her enterprising colleagues at Posse Herrera & Ruiz abogados, who brought to my attention the following announcement of measures to ease upward pressure on the USD:COP.
From the National Planning Department
Translation by iGoogle/Hunter Carter
Bulletin 122
GOVERNMENT PACKAGE TO RELIEVE CURRENCY EXCHANGE
PRESSURES AND DEFEND EMPLOYMENT
Bogotá, October 29, 2010 .- (GIS). The following is a summary of the package of measures adopted Friday by the National Government to relieve pressure and protect employment exchange:1. The Government has decided not to monetize US$1,500 million projected to flow to the country in 2010. This represents a substantial relief in the supply of dollars of foreign exchange and therefore less pressure for currency revaluation. These funds will be frozen in accounts outside at least during the first months of 2011.
2. It also amended the 2011 financial plan to balance external funding sources and debt service, thereby reducing the flow of monetization of the national government by US$384 million for 2011. The Ministry will implement a hedging strategy for the payments of external debt service the following year, through the purchase of currency in the forward market, provided that the exchange rate future to which these transactions are listed can be conducted at a reasonable cost to the nation. This coverage can be made up of 3,700 million dollars.
3. Tariff reform approved by the National Tariff Board, to continue to be discussed, reducing production costs of enterprises, encouraging imports and thus the demand for currency.
4. The Agriculture Ministry will establish, through Finagro, a facility whose value may be up to 50 billion pesos, to support the implementation of hedges by agricultural sector exporters.
5. The income tax exemption will be eliminated for interest on loans contracted with foreign entities, except those obtained by Colombian credit institutions, short-term, arising from bank overdrafts, and those for foreign trade activity. Collection is to be done through withholding at source. This will equalize the tax treatment for internal and external credit and discourage external debt operations, easing exchange market pressures.
Decree 2105 of 1996 from the Ministry of Finance and Public Credit is amended, with a view
to limit the activities considered relevant to the economic and social development of the country, which exclude debt currently generating sources of income. The amendment will provide that this exclusion applies only to debt for foreign trade activities. This becomes more expensive, by way of withholding, the foreign debt.
6. Will support the bill that transfers control of the payment of royalties to the DIAN, with a view to a further increase collection. These measures are aimed at reducing the fiscal deficit of the nation and the pressure they can generate for external borrowing requirements.
UPDATED Election Analysis — The Midterm Elections and US Trade
The midterm elections of 2010 and the widely anticipated shift toward a more Republican Congress will bring significant changes to domestic and foreign policy which will have a major effect on our clients’ business both here and abroad. A lot of people are asking me what the election means for the US-Colombia Trade Promotion Agreement (in Spanish, the “TLC”). My colleagues in the Government Relations Practice Group of Arent Fox have prepared a special analysis and commentary on the proposed US-Colombia Trade Promotion Agreement as a result of the mid-term election results.
Read Former Congressman Phil English’s assessment here.
Bogota Hotels Development Update
By Maria Gladys Escobar in La Republica
Translated by iGoogle/Hunter Carter
Work Begins on Two Hotels In The Capital
Bogotá. The development of new hotels continues and it shows. The work of two complexes already started located in exclusive neighborhoods such as Santa Barbara and Business Center in Ciudad Salitre to invest about $ 150,000 million.
These hotels are characterized by the fact that they will be attached to business complexes, as their services are aimed at businessmen.
The firm Aldea Proyectos will invest over 216 billion pesos for the Edificio Tierra Firme which is next to Santa Barbara Business Center, which is part of a 5-star hotel that will have 11 floors and 176 rooms.
It is estimated that the hotel alone will cost about COP$100,000 million, due to its luxury finishes.
The Project Manager of the firm, Julian Nieto Bonilla said the company decided to begin construction after completing negotiations with the company that will manage the hotel, but for now there is an agreement not to disclose the brand.
”Much of the building is for offices and we have achieved a good level of pre-sales and 48 percent of the spaces are already sold,” said Bonilla.
Edificio Tierra Firme will be a 28-story project comprising 66,805 square meters distributed on 23 floors for offices. The rest of the project will include audience space, the main restaurant, cultural center, concert hall, pool, spa area, gym, medical center, terraces, shops. Part of this project is a 5-star hotel that has 11 floors and 176 rooms.
The goal of Aldea Proyectos is that the building, located at 9th Avenue and 114th Street, will begin operations in April 2014. Bonilla explained that this is a work of modern architecture that will use cutting edge technology and apply sustainable design concepts and to allow saving energy and water.
In general, the building will save between 20% and 30% of energy, which achieved with windows that allow natural light into energy avoiding. Additionally, the glass will control the entry of sunlight, making sure the office environment is not warm and thus optimize the use of air conditioners.
It expects similar savings in water by collecting rainwater to be used in medical offices and treated gray water from showers and sinks out for reuse in toilets.
Holiday Inn
A Holiday Inn hotel located in Ciudad Salitre, is expected to have a total investment US$22 million (about COP$50,000 million).
”The hotel services take into account the needs of businessmen, who are our target customers,” said Felipe Galeano, manager of Metro Hotels and of the Project.
During a recent visit to Colombia of a large delegation of American executives from Holiday Inn, was seen to be making good progress.
The Hotel will feature 191 rooms, 8 meeting rooms for events and automated Convention Center, all meeting the highest standards of quality, design, construction and technology. Notably, the hotel will be part of the Centro Empresarial Arrecife [Reef Business Centre], which is located between Avenues El Dorado and the Constitution.
The building is notable for having high safety standards as there are stairs with pressurized injection and extraction of smoke and total substitution of light in case of an emergency. According to Alvaro Diago, vice president, Latin America and the Caribbean for IHG, “the Bogota Airport Holiday Inn chain icon will be in Latin America because of the importance of Bogota in the regional economy and proximity to the El Dorado airport.” This Hotel is key part of the expansion strategy of the Holiday Inn brand in Colombia.
It is noteworthy that construction is performed by the firms of Metro Operación Inmobiliaria and Construcciones Arrecife,
Remodeling of the Hotel Estelar La Fontana
Also notable in the development of the hotel sector is the Hotel Estelar La Fontana, which recently completed renovations that have been proceeding on its premises for a year. Among the renovations and repairs, representing an investment of COP$3,000 million, were technological renovations, furniture, electrical fittings, air conditioning and wood finishes. Starting this month, visitors to the hotel can enjoy their new design.
