The The fifth general provision of the Decree on the reform organic law for attracting and promoting investments for productive development creates rejection in two trade unions of the production sector: Anecacao and Chamber of Aquaculture. A few hours after the start of the debate in which the Constitutional Court will deal with the mentioned legal regulation, the opposition of these two production sectors to the mentioned provision is known. The discrepancies were exposed in two amicus curiae.

The thing is This Thursday, June 8, the Constitutional Court will discuss the Regulation on the reform organic law for attracting and promoting investments for productive development, which seeks to optimize the creation of free zones, creating incentives for investment, which will lead to the creation of new companies and greater employment.

How the legal figure of amicus curiae works

As happened with the tax reform ordinance, which was dealt with by both state and federal governments last Tuesday also to citizens, representatives of political, academic and production organizations, who presented positions for and against the regulation. However, it is astonishing that these two guilds matched in qualifications as “violation of legal certainty” and “arbitrariness” of the fifth general provision.

The stated provision reads: “Except for a fortuitous event or force majeure duly confirmed in accordance with the applicable legislation and declared by the Strategic Committee for the Promotion and Attraction of Investments, the request for reform to extend the investment execution schedule will not be processed, nor will the increase in the amount of investment provided for in the contracts on investment signed according to the provisions of the Organic Law on stimulating production, attracting investment, creating jobs and fiscal stability and balance. Addenda to investment contracts that were presented before the entry into force of this decree law will be processed in accordance with the provisions of the legislation that was in force on the day of submission.

Merlyn Casanova, from Anecacao, signatory a amicus curiae, pointed out that the mentioned provision violates the right to legal certainty domestic and foreign investors who have signed investment contracts with the state of Ecuador, because it is intended to unilaterally change previously agreed contractual provisions. This would deprive them of the right to tax benefits that are due to them by law and contract.

For Anecacao, the provision does not maintain unity with the substance and affects legal certainty.

In the meantime, José Antonio Camposano Cedeño, as executive president of the National Chamber of Aquaculture, said in amicus presented on June 4, that the union was “concerned about the arbitrariness intended to be introduced into the fifth general provision”. For Camposano, this legal mandate changes the rules of the game of the legal regime of the Development Law, when it was precisely defined by Lodes in 2021. “The President changes the stability of the treatment of investments covered by the Development Law, this one unconstitutional due to form and content,” he said.

Ecuador is in the last positions in the ranking of free zones and investments, a reality that is intended to be reversed by the second decree of the law

About the topic, The Ministry of Production and Foreign Trade says with regret that “due to ignorance and lack of information, two unions filed amicus curiae”. According to the Ministry, the decree-law strengthens legal certainty and retains all the benefits of the companies that signed it. “There is no violation of rights,” the Ministry announced. He explained that he wanted to avoid possible cases in which a company can obtain tax benefits without a time limit by adding an investment contract. He also commented that the scope of the decree-law was explained to the unions at a large meeting. They believe that there was a wrong interpretation. The Ministry explained it On June 8, he will defend the decree-law at the Constitutional Court and provide the necessary clarifications To the court and the trade unions that presented amicus curiae.

In the meantime, dr amicus curiae that they preferred to concentrate on the urgency of the economic issues of the regulation, as well as on certain risks of violation of workers’ rights. They were also introduced amicus curiae that support the decree, among them that of Vicente Albornoz, an economic expert, a text from the legal clinics of the University of San Francisco de Quito; the other Francisco Briones, as director of SRI and Bolívar Martínez.

June 6

Presents: Marcela Arellano Villa, president of the Ecuadorian Confederation of Free Trade Union Organizations (Ceosl) and Sylvia Bonilla, from the Center for Research and Defense of Labor Rights CIDDT.

Arguments: The trade union organization believes that the Constitutional Court, as the highest constitutional and legal body, is responsible for previously deciding not only formally on the principle of the unity of things, but also materially (the content of the decree-law); but, in the content which, according to what they indicate, is connected with the basics of economic urgency. They also ensure that the employment problem is structural. They also say that there was a statement from the ILO in the sense that the zones tend to weaken the rights of workers.

June 5

Presents: Universidad San Francisco Law Clinics and signed by Rossana Lizeth Torres Rivera, Bárbara Brenda Terán Picconi (teachers and supervisors of the Universidad San Francisco de Quito Law Clinics) and Gabriela Anahí Jácome Aguirre, Karen Paola Moreira Pinargote and Carolina Elizabeth Borja Ortega, law students from the University of San Francisco de Quito.

Arguments: They believe that the quality of economic urgency must be qualified by the executive power and after analyzing the articles, they conclude that it is in accordance with the constitutional requirements.

June 5

Presents: Bolivar Figueroa Martinez.

Arguments: He believes that the Regulation-Law on Investments meets the urgent needs of economic and fiscal policy. He explains that the situation is complex, for example, in 2019, the World Economic Forum ranked Ecuador 90th out of 141 countries in the Competitiveness Index. This index measures how the country uses its resources and capacities to ensure a high level of well-being for its residents. Ecuador received 55.74 points, a worse score compared to the 2018 report, in which it received 55.85 points.

It also indicates that the Investment Decree-Law innovates the Ecuadorian legal system to favor Ecuador’s economic policy, as well as to give preferential attention to the country’s border areas. Keep in mind that Ecuador has been facing problems in recent years that have affected economic stability, generating less domestic and foreign investment, increased unemployment, increased country risk, lack of competitiveness. In this sense, he considers it clear that there is an urgent situation and the need to create an attractive and optimal investment environment.

June 5

Presents: Jorge Sosa Meza, lawyer

Arguments: He believes that the proposal that the free zone initiative should come from the private sector could affect the reservation of rights in tax matters. This is because the authority to decide on exemption from income tax could be transferred to a private initiative in the same way. He also requests that it be rejected because it is not urgent in economic matters and that it can wait until the next convocation of the Assembly deals with it.

“If the Constitutional Court accepts it, in July there could be less withholding income tax and the net salary will immediately increase”

June 5

Presents: Francisco Briones, director of SRI.

Arguments: The decree-law is of economic urgency, insofar as it has the following elements: 1) it is an initiative of the President of the Republic in the context of the dissolution of the National Assembly. 2) refers to economic issues, to the extent that the Organic Code of Production, Trade and Investments, the Law on the Internal Tax Regime and the Reformed Law on Tax Fairness are reformed; and, 3) the classification of economic urgency was qualified by the President of the Republic. Regarding economic urgency, it should be noted that since the publication of the Organic Regulation on Economic Development and Fiscal Sustainability after the COVID-19 Pandemic (hereinafter: LODE), some of the tax incentives that were planned for Special Economic Development Zones (Zedeo) have been implemented. The executive branch presented the project of the Organic Law for attracting investments to the National Assembly, but the legislative branch started with its submission. There are currently insufficient tax incentives to encourage these new investments.

June 5

Presents: Vincent dressing gown.

Arguments: In the current situation, the only thing that can pull the country out of economic stagnation is private investment. “It’s not a matter of taste or dogma, it’s a matter of the absence of an alternative: either the private sector invests or we won’t grow.” Therefore, the legal decree proposed by the president is urgent because it is one of the few legal reforms that can help to restart this economy, which is facing a decade of decline. He reminded that between 2014 and 2022, the accumulated growth of Ecuador’s population was 12%. In the same period, the economy grew by 2%. That is, GDP per capita fell by 10% between 2014 and 2022. In other words, at the end of 2022, Ecuadorians were on average 10 percent poorer than in 2014.

June 2

Virgil Hernandez:

Arguments: The regulation-law does not retain these characteristics of economic urgency. It indicates that the fund is unconstitutional, that the benefits established for companies that are in the free zone regime create market distortions that put them at an advantage over domestic companies, for example, with “tax incentives”. In addition, he says, if we add to this that the benefits are constant, we get a monopoly. requests that The executive order is declared unconstitutional.

May 29

Presents: Grace Azucena Russo Chauvín, from the Fundación de Juristas en Acción y Victoria, presented the letter under the image of the right to petition. In doing so, he requests that the Court reject the decree on free zones. He explains that in his opinion it is not urgent, it is not widespread or socialized. He believes that a thorough and conscientious analysis is needed.