Transparency of the Regulatory System
The Macri Administration has taken measures to improve public dialogue and government transparency.
President Macri created the Ministry of Modernization, tasked with conducting quantitative and qualitative studies of government procedures, and finding solutions to streamline bureaucratic processes and improve transparency.
In June 2016, the Argentine government published the first “The state of the State” report that provided an analysis of the budget, employment, inventory, procurement contracts and deficiencies of all national ministries and agencies. The national Tax Agency, Anti-corruption Office, and other governmental agencies continue to conduct ongoing audits of government operations. The full report can be viewed at http://www.casarosada.gob.ar/elestadodelestado/ .
In September 2016 Argentina enacted a Right to Access Public Information Law (No. 27,275) that mandates all three governmental branches (legislative, judicial and executive), political parties, universities, and unions that receive public funding to provide non-classified information at the request of any citizen. The Law also created the Agency for the Right to Access Public Information to oversee compliance.
In the bilateral Commercial Dialogue, Argentina and the United States are sharing best practices to improve the incorporation of public consultation in the regulatory process as well as regulatory coherence. Similarly, through the bilateral Digital Economy Working Group, Argentina and the United States are sharing best practices for establishing a multi-stakeholder approach towards rulemaking in the telecommunications sector.
Legislation can be drafted and proposed by any citizen and is subjected to Congressional and Executive approval and constitutional compliance before being passed into law. Argentine government authorities and a number of quasi-independent regulatory entities can issue regulations and norms within their mandates. There are no informal regulatory processes managed by non-governmental organizations or private sector associations. Rulemaking has traditionally been a top-down process in Argentina, unlike in the United States where industry organizations often lead in the development of standards and technical regulations.
Ministries, regulatory agencies, and Congress are not obligated to provide a list of anticipated regulatory changes or proposals nor share draft regulations with the public nor establish a timeline for public comment. They are also not required to conduct impact assessments of the proposed legislations and regulations.
Since 2016, the Office of the President and various ministries sought to increase public consultation in the rulemaking process; however, public consultation is non-binding and has been done in an ad-hoc fashion. Some ministries and agencies have developed their own processes for public consultation, such as publishing the draft on their websites, directly distributing the draft to interested stakeholders for feedback, or holding public hearings.
Once the draft of a bill is introduced into the Argentine Congress, the text can be viewed online at the websites of the chamber where the bill was introduced. The lower chamber’s website is located at http://www.diputados.gov.ar/ , and the senate’s website is at http://www.senado.gov.ar/ .
All final texts of laws, regulations, resolutions, dispositions and administrative decisions must be published in the Official Gazette (https://www.boletinoficial.gob.ar ), as well as in newspapers and the websites of the Ministries and agencies. These texts can also be accessed through Infoleg (http://www.infoleg.gob.ar/ ), overseen by the Ministry of Justice. Interested stakeholders can pursue judicial review of regulatory decisions.
Argentina requires public companies to adhere to International Financial Reporting Standards (IFRS).
Argentina is a member of UNCTAD’s international network of transparent investment procedures. The municipalities of Lomas de Zamora, Berazategui, and Chubut participate in the UNCTAD’s Business Facilitation Program and provide detailed information on administrative procedures applicable to income generating operations, including the number of steps, name and contact details of the entities and persons in charge of procedures, required documents and conditions, costs, processing time, and legal bases justifying the procedures. More information can be found here: http://ldz.eregulations.org/ , http://berazategui.eregulations.org/ , and http://chubut.eregulations.org/ .
Argentina subjects imports to automatic or non-automatic licenses that are managed through the Comprehensive Import Monitoring System (SIMI or Sistema Integral de Monitoreo de Importaciones), established in December 2015 by the National Tax Agency (AFIP) through Resolutions 5/2015 and 3823/2015. The private sector has complained of delays in getting some products that are subjected to non-automatic licenses into the country. Companies note that engaging the government on individual cases tends to resolve the delays. The United States has significant questions about whether the adoption of the SIMI brings Argentina’s import licensing measures into compliance with its WTO obligations, and the United States is working with Argentina to address these concerns.
The resolutions require that importers submit electronically to SIMI detailed information about goods to be imported into Argentina. Once the information is submitted, the relevant Argentine government agencies can review the application through a “Single Window System for Foreign Trade” and make any observations or request additional information. The number of products subjected to non-automatic licenses has been modified several times, resulting in a net increase since the beginning of the SIMI system. As of April 2017, Argentina maintains non-automatic import license requirements on about 12,000 12-digit tariff lines as defined by the Mercosur common nomenclature, including sectors and products the government deemed import-sensitive such as automobiles, paper and cardboard, iron and steel, nuclear reactors, toys, textiles, apparel, and footwear. The resolutions do not provide a maximum time period for the Argentine authorities to issue a decision on import license applications. Automatic import licenses are valid for 180 days from the date of approval, while non-automatic licenses are valid for 90 days. The full text of Resolution 5/2015 with the affected tariff lines can be accessed at: http://www.infoleg.gob.ar/infolegInternet/anexos/255000-259999/257251/norma.htm .
International Regulatory Considerations
Argentina is a member of the Southern Common Market, MERCOSUR, which was formed in 1991 and includes Brazil, Paraguay, Uruguay and Venezuela (currently suspended). As pro-tempore president of MERCOSUR for the first half of 2017, Argentina is seeking to increase regulatory cooperation and trade facilitation with Brazil and the rest of the MERCOSUR bloc.
Argentina has been a member of the Latin American Integration Association (ALADI for Asociacion Latinoamericana de Integracion) since 1980.
Argentina has been a member of the WTO since 1995, and voiced its intention to deepen its engagement with the OECD. Argentina submitted Category B Trade Facilitation Agreement commitments to the WTO in March 2017, but ratification of the TFA is pending Congressional approval. Argentina notifies technical regulations, but not proposed drafts, to the WTO Committee on Technical Barriers to Trade.
Legal System and Judicial Independence
According to the Argentine constitution, the judiciary is a separate and equal branch of government. In practice, there have been instances of interference by previous administrations in the judicial process. Companies have complained about lack of transparency and reliability in courts, and that past Argentine administrations used the judiciary system to pressure the private sector. The Macri administration has publicly expressed its intent to improve transparency and rule of law in the judicial system, and the Justice Minister announced in March 2016 the “Justicia 2020” initiative to reform the judiciary.
Argentina follows a Civil Law system. The Civil and Commercial Code provides regulations for civil and commercial liability, including ownership of property and intellectual property claims.
Domestic investment dispute adjudication is available through local courts or administrative procedures. The current judicial process is lengthy and suffers from significant backlogs. Many foreign investors prefer to rely on private or international arbitration when those options are available. Claims regarding labor practices are processed through a labor court, regulated by Decree No. 106/98. Contracts often include clauses designating specific judicial or arbitral recourse for dispute settlement. In 2014, Argentine government passed a new Civil and Commercial Code that has been in effect since August 2015.
The requirements for the enforcement of foreign judgments are set out in section 517 of the National Procedural Code, which provides that a judgment issued by a foreign court can be enforceable in Argentina if all the of the following apply:
The judgment is final in the jurisdiction in which it was issued and is issued by a competent court or tribunal in accordance with the Argentine rules of international jurisdiction, as a consequence of the filing of either a:
- personal action (that is, an action seeking to enforce a personal right derived from a contract, quasi-contract or tort); or
- legal action in rem (accion real) related to a personal property moved to Argentine territory during or after the trial carried out in the foreign country.
The defendant was duly summoned and given the chance to defend.
The judgment is eligible for recognition under the laws of the country where it was issued and complies with the authenticity conditions required by national laws.
The judgment does not affect Argentine principles of public policy.
The judgment is not incompatible with a judgment given before or simultaneously by an Argentine court or tribunal.
Laws and Regulations on Foreign Direct Investment
According to the Foreign Direct Investment Law No. 21,382, foreign investors may invest in Argentina without prior governmental approval, under the same conditions as investors domiciled within the country. Foreign investors are free to enter into mergers, acquisitions, green-field investments, or joint ventures. Foreign firms may also participate in publicly-financed research and development programs on a national treatment basis. Incoming foreign currency destined for investment must be registered with the Central Bank of Argentina (www.bcra.gov.ar ). There is no official executive or other interference in the court that could affect foreign investors.
All foreign and domestic commercial entities in Argentina are regulated by the Commercial Partnerships Law (Law No. 19,550) and the rules issued by the commercial regulatory agencies. All other laws and norms concerning commercial entities are established in the Argentina Civil and Commercial Code.
Further information about Argentina’s investment policies can be found at the following websites:
Argentina is also a party to several bilateral and multilateral treaties and conventions for the enforcement and recognition of foreign judgments, which provide requirements for the enforcement of foreign judgments in Argentina, including:
- UN Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 (New York Convention), ratified by law No. 23,619 (1988).
- Treaty of International Procedural Law, approved in the South-American Congress of Private International Law held in Montevideo in 1898, ratified by Argentina by law No. 3,192.
- Treaty of International Procedural Law, approved in the South-American Congress of Private International Law held in Montevideo in 1939-1940, ratified by Dec. Ley 7771/56 (1956).
- Panamá Convention of 1975, CIDIP I: Inter-American Convention on International Commercial Arbitration, adopted within the Private International Law Conferences – Organization of American States, ratified by law No. 24,322 (1995).
- Montevideo Convention of 1979, CIDIP II: Inter-American Convention on Extraterritorial Validity of Foreign Judgments and Arbitral Awards, adopted within the Private International Law Conferences – Organization of American States, ratified by law No. 22,921 (1983).
- International Center for Settlement Investment Disputes (ICSID) Convention, ratified by Argentina in 1994.
Competition and Anti-Trust Laws
The National Commission for the Defense of Competition and the Secretary of Commerce, both within the Ministry of Production, have enforcement authority of competition law (Law 25,156). The law is aimed at ensuring the general economic interest and promotes a culture of competition in all sectors of the national economy.
Expropriation and Compensation
Section 17 of the Argentine Constitution affirms the right of private property and states that any expropriation must be authorized by law and compensation must be provided. The United States-Argentina BIT states that investments shall not be expropriated or nationalized except for public purposes upon prompt payment of the fair-market value in compensation.
Argentina has a history of expropriations under previous administrations. The most recent occurred in March 2015 when the Argentine Congress approved the nationalization of the train and railway system. In a high-profile case in 2012, Argentina expropriated 51 percent of oil and gas company YPF from Spanish-owned Repsol. The state takeover of the company was widely criticized by the European Union, and increased investor caution. The government settled with Repsol approximately two years later in 2014, which the Argentine Congress approved on April 23, 2014.
In December 2008, the Argentine parliament also passed legislation nationalizing the Spanish-owned flag air carrier Aerolineas Argentinas. At the time, the airline was in financial distress and the then-owner, Grupo Marsans S.A., reached a settlement to transfer full ownership of the company to the Argentine government. A number of companies that were privatized during the 1990s under the Menem Administration were renationalized under the Kirchner Administrations, including the postal service (Correo Argentino), Thales Spectrum, a water utility (Aguas Argentinas), and an energy transportation company (Transener).
In October 2008, Argentina nationalized Argentina’s private pension funds, which amounted to approximately one-third of total GDP, and transferred the funds to the government social security agency.
ICSID Convention and New York Convention
Argentina is signatory to the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, which the country ratified in 1989. Argentina is also a party to the International Center for Settlement Investment Disputes (ICSID) Convention since 1994.
There is no specific domestic legislation providing for enforcement under the 1958 New York Convention and for the enforcement of awards under the ICSID Convention. Companies that seek recourse through Argentine courts may not simultaneously pursue recourse through international arbitration.
Investor-State Dispute Settlement
The Argentine government officially accepts the principle of international arbitration. Argentina has a Bilateral Investment Treaty with the United States that entered into force in 1994, this bit has a chapter on Investor-State Dispute Settlement.
Argentina is a member of the ICSID, the United Nations Commission on International Trade Law (UNCITRAL), and the World Bank’s Multilateral Investment Guarantee Agency (MIGA).
Argentina defaulted on USD 82 million in 2002 following its 2001 financial crisis. The government restructured 92 percent of its sovereign debt in 2005 and 2010 for a mix of new bonds with a substantial loss in net present value. Some bondholders did not participate in the 2005 and 2010 swaps and sought to settle its outstanding debt for the actual amount owed plus interest through U.S. courts. The Macri Administration re-engaged in negotiations with the holdout creditors, and by the end of February 2016, had reached preliminary agreements with most of its creditors, which the Argentine Congress approved on March 31, 2016. This allowed the Argentine government to finalize its settlement with the holdouts and fulfill the requirements for Federal Court of the Southern District of New York to lift the injunction against Argentina, paving the way for Argentina to regain access to international capital markets.
On May 14, 2016, the Argentine government announced the settlement of an outstanding arbitration award for a U.S. company that had been granted by ICSID in 2014. Argentina currently has four pending arbitral cases filed against it in by U.S. investors in the ICSID. For more information on the cases brought by U.S. claimants against Argentina, go to: https://icsid.worldbank.org/en/Pages/cases/AdvancedSearch.aspx#
In May 2014, Argentina reached agreements with the Paris Club group of creditors to repay USD 9.7 billion in arrears over the next five years, including USD 642 million owed to the United States.
In 2014, Argentina’s Federal Supreme Court of Justice denied the recognition and enforcement of a judgment of a New York court (which ordered Argentina to pay a certain amount of money) on the grounds of public policy violation, as the Argentina court concluded that the foreign decision did not take into consideration the specific restructuring process of public debt required under local rules and in accordance with the Argentine Constitution.
Local courts cannot enforce arbitral awards issued against the government based on the public policy clause. There is no history of extrajudicial action against foreign investors.
International Commercial Arbitration and Foreign Courts
Alternative dispute resolution (ADR) mechanisms can be stipulated in contracts. Argentina also has ADR mechanisms available such as the Center for Mediation and Arbitrage (CEMARC) of the Argentine Chamber of Trade. More information can be found at: http://www.intracen.org/Centro-de-Mediacion-y-Arbitraje-Comercial-de-la-Camara-Argentina-de-Comercio—CEMARC–/#sthash.RagZdv0l.dpuf
Argentina does not have a specific law governing arbitration, but it has adopted a mediation law (Law No. 24.573/1995), which makes mediation mandatory prior to litigation. Some arbitration provisions are scattered throughout the Civil Code, the National Code of Civil and Commercial Procedure, the Commercial Code, and three other laws. None of these laws contain definitions of domestic or international arbitration, nor do they regulate the severability of the arbitration agreement from the main contract nor require the confidentiality of arbitration or the impartiality of arbitrators. The Code of Civil and Commercial Procedure states that when parties have not agreed on the applicable procedural rules, the arbitration must be conducted under the same procedural rules as those that govern cases litigated in court. The following methods of concluding an arbitration agreement are non-binding under Argentine law: electronic communication, fax, oral agreement, and conduct on the part of one party. Generally, all commercial matters are subject to arbitration. There are no legal restrictions on the identity and professional qualifications of arbitrators. Parties must be represented in arbitration proceedings in Argentina by attorneys who are licensed to practice locally. The grounds for annulment of arbitration awards are limited to substantial procedural violations, an ultra petita award (award outside the scope of the arbitration agreement), an award rendered after the agreed-upon time limit, and a public order violation that is not yet settled by jurisprudence when related to the merits of the award. On average, it takes around 21 weeks to enforce an arbitration award rendered in Argentina, from filing an application to a writ of execution attaching assets (assuming there is no appeal). It takes roughly 18 weeks to enforce a foreign award.
The requirements for the enforcement of foreign judgments are set out in section 517 of the National Procedural Code.
No information is available as to whether the domestic courts frequently rule cases in favor of state-owned enterprises (SOE) when SOEs are party to a dispute.
Argentina’s bankruptcy law was codified in 1995 in Law 24,522. The full text can be found at: http://www.infoleg.gov.ar/infolegInternet/anexos/25000-29999/25379/texact.htm . Under the law, debtors are generally able to begin insolvency proceedings when they are no longer able to pay their debts as they mature. Debtors may file for both liquidation and reorganization. Creditors may file for insolvency of the debtor for liquidation only. The insolvency framework does not require approval by the creditors for the selection or appointment of the insolvency representative or for the sale of substantial assets of the debtor. The insolvency framework does not provide rights to the creditor to request information from the insolvency representative but the creditor has the right to object to decisions by the debtor to accept or reject creditors’ claims. Bankruptcy is not criminalized; however, convictions for fraudulent bankruptcy can carry two to six years of prison time.
The World Bank’s 2017 Doing Business Report ranked Argentina 116 among 189 countries for the effectiveness of its insolvency law. This is a drop of 21 places from its ranking of 95 in 2016.