Transparency of the Regulatory System
Transparent and streamlined procedures regulate local and foreign investment in Uruguay. Uruguay has state and national regulations. The Constitution does not provide for supra-national regulations. Most laws, except those having an impact on public finances, can start either in the executive branch or in the parliament. The President and one or more ministers may issue decrees. Ministers may also issue resolutions. All regulatory actions –including bills, laws, decrees and resolutions– are publicly available at https://www.presidencia.gub.uy/normativa.
Accounting, legal, and regulatory procedures are transparent and consistent with international norms. The government only occasionally proposes laws and regulations in draft form for public comment. Parliamentary commissions typically engage stakeholders while discussing a bill. Non-governmental organizations or private sector associations do not manage any informal regulatory processes.
Article 10 of the U.S.-Uruguay BIT mandates that both countries publish promptly or make public any law, regulation, procedure or adjudicatory decision related to investments. Article 11 sets transparency procedures that govern the accord.
International Regulatory Considerations
Uruguay is a member of several regional economic blocs, including Mercosur and the Latin American Integration Association (ALADI), neither of which have supranational legislation. In order to become local law Uruguay’s parliament must ratify either of these bloc’s decisions.
Uruguay does not send notifications of draft technical regulations to the WTO Committee on Technical Barriers to Trade.
Legal System and Judicial Independence
The legal system in Uruguay follows a civil law based on the Spanish civil code. The highest court in Uruguay is the Supreme Court of Uruguay, which has five judges. The executive branch nominates judges and the General Assembly appoints them. Judges serve a ten-year term and reelection happens after a lapse of five years following the lapse of the previous term. Other subordinate courts include the court of appeal, district courts, peace courts, and rural courts.
In 2017, Uruguay enacted a new criminal procedural code, expressed in Law No. 19.293. The law passed in December 2014, but because the changes it made were so significant it took three years for the authorities to bring it into force. The process for criminal cases is now accusatory instead of inquisitorial. Uruguay is implementing changes to improve judiciary independence. Judges will not be involved at the start of an investigation or arrest, and prosecutors will take on a much more prominent role to lead the investigation. Other fundamental changes include the right to bail, instead of the courts remanding individuals into custody to await trial, and opening up hearings to the public, among others.
The judiciary is transparent and remains independent of the executive branch. Critics complain that the judicial system can be slow. The executive branch rarely interferes directly in judicial matters, but at times voices its dissatisfaction with court rulings. Investors can appeal regulations, enforcement actions, and legislation. Investors may choose between arbitration and the judicial system to settle disputes.
Laws and Regulations on Foreign Direct Investment
Uruguayan law treats foreign and domestic investment alike. Law 16,906 (passed in 1998) declares promotion and protection of investments made by both national and foreign investors to be in the nation’s interest, and allows investments without prior authorization or registration. The law also provides that investors can freely transfer their capital and profits abroad and that the government will not prevent the establishment of investments in the country.
As of March 2018, Decree 002/12 regulates incentives to foreign and local investors and contributes to an increase in foreign and local investment in 2005-2014. Prompted by a fall in domestic and foreign investment in 2015-2017, the GoU announced in February 2018 that it planned to amend Decree 002/12 to strengthen incentives for investment further and advance a number of the GoU´s strategic goals, such as creating jobs, fostering research and development, and developing clean production.
Uruguay's export and investment promotion agency, Uruguay XXI, website helps potential investors navigate Uruguayan laws and rules http://www.uruguayxxi.gub.uy/en/.
Competition and Anti-Trust Laws
Uruguay has transparent legislation established the Commission for the Promotion and Defense of Competition at the Ministry of Economy to foster competition. The main legal pillars (Law No. 18,159 and decree 404, both passed in 2007) are available at the commission's website: https://www.mef.gub.uy/578/5/areas/defensa-de-la-%20competencia---uruguay.html.
A 2017 Peer Review of Uruguay´s Competition Law and Policy is available at http://unctad.org/en/Pages/DITC/CompetitionLaw/Voluntary-Peer-Review-of-Competition-Law-and-Policy.aspx.
The GoU created the regulatory agencies URSEC (Unidad Reguladora de Servicios de Comunicaciones) for telecommunications and URSEA (Unidad Reguladora de Servicios de Energía y Agua) for water and energy in 2001 to regulate and control their respective markets. In 2010, the executive branch transferred URSEC’s policy-design capacity to the National Telecommunications Directorate (DINATEL), leaving it only with regulatory control attributes.
The GoU passed an Audiovisual Communications Law (No 19,307) in December 2014. Also known as the media law, it includes provisions on market caps for cable TV providers that could limit competition. In April 2016, Uruguay’s Supreme Court ruled that these market caps and some local content requirements were unconstitutional. In late 2017, the Executive Branch presented a draft regulation that was pending approval as of April 2018.
Expropriation and Compensation
Uruguay's constitution declares property rights an "inviolable right" subject to legal determinations that may be taken for general interest purposes and states that no individuals can be deprived of this right – except in case of public need and with fair compensation.
Article 6 of the U.S.-Uruguay BIT rules out direct and indirect expropriation or nationalization of private property except under specific circumstances. The article also contains detailed provisions on how to compensate investors, should expropriation take place. There have been no cases of expropriation of investment from the United States or other countries in the past five years.
ICSID Convention and New York Convention
Uruguay became a member of the International Center for the Settlement of Investment Disputes (ICSID) in September 2000, and is a signatory of the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards.
Investor-State Dispute Settlement
Local courts recognize and enforce foreign arbitral awards issued against the government. The U.S.-Uruguay BIT devotes over ten pages to establishing detailed and expedited dispute settlement procedures.
Over the past decade, two investment disputes have arisen. There is currently only one active investment dispute between a U.S. person and the GoU. In 2016, a U.S. telecommunications enterprise filed a complaint before ICSID under the BIT, which remained pending as of April 2018.
In 2010, the tobacco company Philip Morris International sued the Government of Uruguay, arguing that new health measures involving cigarette packaging amounted to unfair treatment of the firm. They filed the case under the Uruguay-Switzerland Bilateral Investment Treaty. This case closed in 2016 with the ICSID ruling in the GoU’s favor.
International Commercial Arbitration and Foreign Courts
Commercial contracts frequently contain mediation and arbitration clauses and local courts recognize them. Investors may choose between arbitration and the judicial system to settle disputes. Local courts recognize and enforce foreign courts’ arbitral awards.
The Bankruptcy Law passed in 2008 (No. 18,387) expedites bankruptcy procedures, encourages arrangements with creditors before a firm may go bankrupt, and provides the possibility of selling the firm as a single unit. Bankruptcy has criminal and civil implications with intentional or deliberate bankruptcy deemed a crime. The law protects the rights of creditors according to the nature of the credit, and workers have privileges over other creditors.
The World Bank’s 2018 Doing Business report ranks Uruguay third out of 12 countries in South America and 66th globally for its ease of “resolving insolvency.”