Transparency of the Regulatory System
Transparent and streamlined procedures regulate local and foreign investment in Uruguay. Uruguay has state and national regulations. Supra-national regulations are not provided for in the Constitution. Most laws, except those having an impact on public finances, can either start in the executive branch or in the parliament. Decrees are issued by the President and one or more ministers. Resolutions are issued by the ministers. 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. Proposed laws and regulations are only occasionally published in draft form for public comment. Parliamentary commissions typically engage stakeholders while discussing a bill. There are no informal regulatory processes managed by non-governmental organizations or private sector associations. 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, either of these bloc’s decisions have to be ratified by the nation’s parliament.
Uruguay does not send notifications of draft technical regulations to the WTO Committee on Technical Barriers to Trade.
Legal System and Judicial Independence
Uruguay’s legal system is based on a civil law system derived from the Napoleonic Code with written commercial and civil laws consolidated into codes. There are specialized courts, run by judges who lead cases in areas such as organized crime and customs. These courts manage intellectual property claims.
The judiciary is transparent and remains independent of the executive branch. However, critics complain that the judiciary system can be slow. The executive branch rarely interferes directly in judiciary 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
Law 16,906 (passed in 1998) declares promotion and protection of investments made by national and foreign investors to be in the nation’s interest. The law states that: (1) foreign and national investments are treated alike; (2) investments are allowed without prior authorization or registration; (3) the government will not prevent the establishment of investment in the country; and (4) investors may freely transfer abroad their capital and profits from the investment. Decree 002/12 (passed in January 2012 superseding Decree 455/007 from 2007) regulates Law 16,906 and provides significant incentives to investors, which have contributed to a strong increase in foreign and local investment.
Uruguay’s Investment and Promotion agency’s website helps potential investors navigate the laws, rules and incentives available to both foreign and local investors http://www.uruguayxxi.gub.uy/en/ .
Competition and Anti-Trust Laws
Uruguay has transparent legislation and a special commission 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
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. While being debated, this bill remains pending and unenforced as of March 2017.
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 – neither from the United States nor from 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 10 years 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. The case is currently under arbitration.
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. The case was filed 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, which are recognized by local courts. Investors may choose between arbitration and the judicial system to settle disputes. Local courts recognize and enforce foreign courts’ arbitral awards.
Duration of Dispute Resolution
Uruguay’s judiciary is independent. The time to resolve a dispute, counted from the moment the plaintiff files the lawsuit in court until payment, is about two years. The courts’ decisions are enforced and international arbitration awards are respected.
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 rights of creditors are protected by law according to the nature of the credit, and workers have privileges over other creditors.
The World Bank’s 2017 Doing Business Report ranks Uruguay third out of 12 countries in South America for its ease of “resolving insolvency” (not to be confused with the previously referenced ranking of fourth out of 12 South American countries for “ease of doing business”).