Ecuador’s Rapid Change Requires Preventative Lawyering
Ecuador, where many Americans retire, has an often inefficient court system so arbitration clauses, negotiation and creative lawyering are necessary, the audience learned at a live conference between my Philadelphia office and Quito with Pablo E. Bermeo, Bermeo & Bermeo, (admitted in Argentina, NY and Ecuador) and Jaime Vintimilla, Professor, San Francisco University of Quito. There have been17 tax reforms in the last year. With little judicial independence, courts favor the government. The system is not open. Procedure changes in May 2016 result in claims being rejected for “bogus reasons.”Bermeo, a Penn LL.M. advised avoiding the courts, using preventative lawyering and consulting with legal counsel first in business matters. A judge may lose his job if he rules against the government. Arbitration clauses must be considered and is usually necessary in contracts. Ecuador honors them, but “things get tricky if the government is a party.” Arbitration expert Vintimilla, said selecting the right panel is as important as negotiations during arbitration or litigation, to avoid a less desirable outcome.
Quantity,who is paying, price, type of shipping, and ICC Incoterms–the time and place of delivery, defining when risk of loss shifts from the seller to the buyer, and who pays for freight and insurance—should be in contracts. Under the notarial system, most documents must be notarized to have legal effect. Letters of credit are advisable in dealing with a new party to be sure to get paid or that goods meet quality or quantity requirements Getting approvals can be a challenge as Bermeo experienced in a situation with corporate clients from Mexico.Development of relationships with officials is important.Invoices must be signed by the recipient to have legal effect. That Ecuador uses the US dollar lowers currency risks.
Ecuador has no jury trials. Results, as in the U.S. vary based on the presiding judge and can be arbitrary. There is a National Court.
No U.S. firms have offices in Ecuador, but US attorneys work there, including Bermeo and Bermeo, Bruce Horowitz and the Susquilanda Law Firm, whose counsel specializing in US clients is not admitted in Ecuador.
US retirees, increasingly moving to Ecuador, may own property there. A visa is available for US citizens who invest $30,000 or have $800/month income. Health care is not at US levels but high quality care is available if you can pay.
Censorship of Journalists in the Correa administration resulted in a journalist being imprisoned for expression and a youth detained for “giving the finger” to the President’s caravana.. Whistleblower laws are unenforced. Newspapers and the internet are government-controlled as are most of the internet and newspapers and social media to a lesser extent. The government “bombarded” anti-government websites. The populist President has increased his power but opposition to him is growing. People no longer fear him. In February 2017 elections the opposition has a real chance, for the first time in 10 years. Ecuador provided asylum for Wikileaks founder Julian Assange at its London embassy after he was charged with sexual assault in Sweden but then cut off his internet access.
Bermeo and Vintimilla will not pay bribes but Constitutional court judges have asked for them. Despite written laws, unwritten law can be reality.
The bar association is weak. Vintimilla says there is little disciplinary control of the lawyers. I visited in July, was met at the airport by staff of the Susquilanda law firm and spoke at two universities. I helped people in a village with a stunning snow volcano, Cayambe, whose people spoke Quechua and women wore distinctive derby hats. Roses grown under a huge canopy at 10,000 feet are shipped to the airport for worldwide sale. The nationalized oil industry is open to investment. The 2nd Circuit enjoined Ecuador’s enforcement of its judgment against Chevron in August. Investment opportunities abound in agribusiness (coffee, bananas, rice, cocoa, timber, flowers), technology, financial services, mining (gold, silver and cobalt), and tourism. There is a new free trade agreement with Europe. Qatar invested in a port in Posorja, for a 50 year concession in a private-public alliance.
J. Michael Considine, Jr. chairs the International Business Initiative.