$1.2B order entered against Petroleos de Venezuela: Q&As for PDVSA and Citgo commodity commercial and trading counterparties

By DLA Piper on October 15, 2018

By:

Robert J. Gruendel, Mark A. Waite, Deanna R. Reitman

The United States District Court for the District of Delaware has issued an order and supporting lengthy opinion allowing a judgment creditor holding a $1.2 billion judgment against the Bolivarian Republic of Venezuela to attach common stock owned by Petróleos de Venezuela, S.A. (PDVSA), the national oil company of Venezuela. The stock attached by the order is the common stock of PDV Holdings, Inc., which in turn is the parent company of Citgo. The case is Crystallex International Corporation v. Bolivarian Republic of Venezuela, C.A. No. 17-mc-151-LPS.

The order arises from a 2016 arbitration award in favor of the creditor which claimed that Venezuela wrongfully expropriated gold mines in or about 2011. PDVSA was not a party to that arbitration and was not accused of any involvement in the underlying matters giving rise to it. The arbitration award against Venezuela was confirmed by the United States District Court for the District of Columbia, and Venezuela filed an appeal of that judgment, which remains pending. Venezuela was not successful in its efforts to stop post-judgment collection efforts while it appeals that judgment. This new attachment proceeding and the order now entered against the PDVSA shares are part of the creditor’s post-judgment collection efforts.

PDVSA filed a notice of appeal to the United States Third Circuit Court of Appeals on August 10, 2018, which remains pending.

After PDVSA filed its notice of appeal, CITGO Holding, Inc. and CITGO Petroleum Corporation jointly urged the district court to stay execution of the writ of attachment to allow them to propose how to best accomplish the execution of the attached shares. Soon thereafter, the court issued an order temporarily staying execution of the writ of attachment and invited parties and non-parties alike to submit motions within seven days of the service of the writ of attachment on how to best effectuate the execution of the writ of attachment. Moreover, the court specifically invited PDVSA to file a motion under Rule 62(d) of the Federal Rules of Civil Procedure and post a supersedeas bond to stay execution of the writ of attachment pending the outcome of PDVSA’s appeal, which PDVSA has not done to date.

Brazil: Rio de Janeiro state – new Tax Amnesty Program

By DLA Piper on October 1, 2018

By: Renato Lopes da Rocha

On September, 21, 2018, the State of Rio de Janeiro published Supplementary Law n° 182, by means of which the state has granted reductions of amounts due as penalties and interest related to debts of ICMS (Brazilian VAT), motor vehicle taxes (IPVA) owed by individuals, and penalties applied by the State Court of Auditors, assessed or not, enrolled or not as overdue tax liability debts, whose expiration dates occurred up to June 30, 2018.

Argentina introduces VAT on digital services

By DLA Piper on September 24, 2018

By: Augusto Nicolás Mancinelli

Argentina’s new Law 27,430 introduces a new taxable event: a Value Added Tax (hereinafter VAT) applicable to the importation of “digital services” rendered by a non-resident to a resident individual or entity when the effective use or exploitation of the service is carried out inside Argentina.

An earlier regulation, Decree 354/2018 of April 23, 2018, a deficient attempt to regulate the VAT applicable on digital services, was recently repealed.

According to the current wording of the VAT Law and its Regulatory Decree, VAT applicable to the importation of digital services has the characteristics that are detailed below.

Posted in Argentina International Trade Tax

Argentina: new export duties in force; peso devaluation may impact inflation

By DLA Piper on September 17, 2018

By: Augusto Nicolás Mancinelli

The Argentine executive branch has established new export duties applicable to goods and services. These new export duties were established by a Decree of the Executive Power (Decree No. 793/2018) issued on September 3, 2018 and published at the official Gazette on September 4, 2018, with immediate effect for the export of goods.

The effective date for the application of export duties on services is expected to be January 1, 2019, as the government would need Congress to enact a law providing for such export duties.

The new export duties on goods and services are among the measures being applied by the Macri Administration with the goal of reducing Argentina’s fiscal deficit.

The new export duties, which amount to 12 percent of the value of the exported goods and/or services, include a cap of AR$3 or AR$4 for each US dollar of exports, depending on the kind of exported good or service. These new export duties apply in addition to any other export duties already in force.

The authority of the executive branch to create or impose taxes or import/export duties without Congressional approval is questionable. Although the Argentine Customs Code provides the executive branch with wide power to establish import/export duties, such delegation has been challenged before the federal courts on constitutional grounds.

The Argentine Federal Supreme Court, in its ruling in Camaronera Patagónica, dated April 15, 2014, established that the executive branch is not entitled to create or impose taxes or export duties, even when reasons of urgency, crisis or financial needs are invoked, claiming that, pursuant to the Argentine Constitution, taxes fall under the scope of the legislative branch’s authority, not the executive’s.

DLA Piper Argentina’s tax team has initiated a protective action (amparo) and requested an injunction before the federal courts, in order to challenge the constitutionality of Decree No. 793/2018.

Posted in Argentina

Positive signs for issuers and the marketplace: Argentina economic briefing

By DLA Piper on September 10, 2018

By: Marcelo Etchebarne

The financial press continues to portray Argentina as another emerging-market casualty. But, to the contrary, there are a number of positive financial signs, for investors, the country and the marketplace, in today’s Argentine economy.

In fact, President Mauricio Macri’s Administration has put in place a number of fiscal policies and governmental reforms that will have a positive long-term impact, and the country is already beginning to reap benefits from these changes.

In this economic briefing, we review the most notable of these developments

Under President Mauricio Macri’s Administration, Argentina completely opened the FX and financial markets in December 2015 without creating any disruption in the economy. Although this was perceived as a very positive and well implemented measure, it significantly appreciated the value of the peso. This was unprecedented in Argentina and allowed a significant amount of dollar inflows over the last 38 months (US$116 billion), but was not mirrored by a proportional Central Bank reserves increase (US$35 billion). The measure also augmented the current account deficit (estimated at more than US$30 billion earlier this year, or approximately 50 percent of Central Bank reserves).
While most emerging markets suffered pressure over their local currencies during Q2 2018, Argentina had a higher exposure to a currency devaluation, in part due to the gradual elimination of the deficit (which is projected to be fully eliminated in 2019) and in part due to the complete elimination of limits or controls to foreign currency outflows (many emerging markets still have many restrictions regarding foreign currency outflows).
Approximately US$11 billion in Central Bank notes denominated in pesos are due on September 19, 2018 (LEBACS). The market expects that around US$7 billion will be refinanced by local financial institutions. Dollar-denominated treasury notes (LETES) for around US$15 billion are also due within the next six months. Under the prior financial program of the Republic, the Secretary of Finance had assumed a 100 percent rollover of these instruments. Under the current scenario, however, the most conservative approach for the government is to be ready to refinance a significant portion of these notes. We imagine that part of the ongoing negotiations with the IMF includes a financing package to cover those payments.
Dollar outflows may or may not continue, but local economists estimate that the Central Bank has sufficient reserves at this peso value. Many local analysts consider that the peso at current levels (40-45 per US dollar) makes the Argentine economy competitive again and should help to materially reduce the commercial deficit. The peso should probably continue to devalue to match inflation. For the first time since 2002, Argentines traveled more within Argentina that overseas.
The Macri Administration acted decisively against corruption. This is perceived as a key element of Argentina’s new transparency policies, but will have a material impact on short-term growth (a 2 percent to 3 percent contraction is expected for 2018) and explains to a large extent the peso crisis of last week. On the positive side, this creates a unique opportunity for foreign construction companies, which will face much lower local competition.
Many hedge funds with whom we talk believe that Argentina had an FX crisis but not a solvency crisis. Argentina will not have material pressure to make debt service payments until 2023. Argentina needs very little funding to complete the financial program for 2018 and 2019; thus, higher interest rates won’t have a material impact on meeting debt service payments in a timely fashion. (DLA Piper Argentina represented UBS during the 2002-2005 debt restructuring and Barclays Capital as Global Coordinator during the 2008-2010 reopening, and Puente Hnos. in the amicus briefs filed in favor of Argentina before the US Second Circuit and the United States Supreme Court).
Almost all Argentine provinces enjoy surpluses and do not need access to foreign capital, which at yields between 12 percent and 15 percent would be unwise. High yields will have an impact on the financing of new projects (such as pending renewable energy projects that are associated with Argentine risk, as most PPAs are in dollars and payable by the administration in addition to facing completion risk). (DLA Piper Argentina has advised most Argentine provinces that have been tapping the markets since the late 1990s.)
As a result, it is not expected that Argentine issuers will be tapping the market (the sovereign was placing massive amounts of debt over the last two years) and most appetite for Argentine credit will be satisfied in the secondary market, which is expected to help materially compress spreads by year end.
Argentine banks are very solvent. Unlike in similar crises over the last three decades, the 2018 FX crisis, there was no bank run on deposits. High local interest rates (60 percent to 65 percent in pesos) will have an impact on local credit and consumption, but the Argentine economy has not relied on credit to grow over the last 12 years in which bank lending over GDP has fluctuated between 11 percent and 15 percent. Monetary policy was also significantly tightened over the last few months by imposing higher reserves on local banks plus a material reduction in money printing (M2 was reduced from an annual increase of around 40 percent to 15 percent).
Argentina may still face some turmoil and volatility that continues to impact global markets, in addition to effects associated with a material devaluation, and political pressure related to the 2019 presidential election, but we remain optimistic regarding the medium to long term.
Last, but not least, the Macri Administration initiated a number of reforms that will have long-term impact, among them a 3P program for the six largest road corridors (DLA Piper is involved in three of these projects, two as sponsor counsel and one representing the equity investor); overhauling the railroad system to reduce the cost to export grain; material reductions on energy production which would make Argentina a net exporter of oil and gas in the near future; material investments in renewable energy (DLA Piper is highly experienced in this field in Argentina); an open skies program that will quadruple internal flights to boast tourism; as well as efforts to build closer relations with OECD countries, improve transparency, reduce red tape, put in place more effective sanctions against corruption and materially improve the fight against organize crime, particularly related to drug dealing.

Find out more about the current state of the marketplace in Argentina and the implications of these developments by contacting the author.

Posted in chile

Getting the Deal Through: Public Procurement (Chile)

By DLA Piper on August 8, 2018

By: Felipe Bahamondez and Paulina Farias
Published by: Getting the Deal Through

What is the relevant legislation regulating the award of public contracts?

Act No. 19,886of 30July2003about the Administrative Contracts Bases for Supply and Provision of Services (Act No. 19,886/2003) (the Act), and its regulation, Decree No. 250of 24September2004, set the basic rules for the procurement of goods and services by public entities.

The Act establishes, as a general procurement rule, the public bidding system, but in exceptional cases a public entity may contract through a private bidding process or through a direct deal.

Is there any sector-specific procurement legislation supplementing the general regime?

In the construction field, Decree No. 75dated 1December 2004 (Decree No. 75/2004) and Decree No. 48dated 9September 1994 (Decree No. 48/1994), both issued by the Ministry of Public Works, establish special procurement rules that apply to the construction of public works and public works advisories.

The energy supply services executed by the public distribution service’s concession companies are also governed by a specific statute, regulated in the General Act for Electric Services (Force of Law Decree No. 4, dated 5February 2007) and its regulation, approved through Supreme Decree No. 106of 2005.

Additionally, the assignment of concessions by public bodies is subject to special statutes, regulated among others by the following acts:

concession for use of exclusive ways to perform public transport (Act No. 18,696,dated 31March 1988);
public works concession (Decree No. 900,dated 18December 1996and Decree No. 956,dated 20March 1999); and
concession for the use of municipal property (Force of law Decree No. 1,dated 26July 2006).

E-commerce companies: Tax recent developments in Uruguay

By jtopper on July 26, 2018

Guest post from our friends at Bergstein Abogados

Uruguay requires online companies incorporated abroad, with no presence in Uruguay, to pay taxes in Uruguay whenever their clients are located within Uruguayan territory. Online services providers (such as Netflix and Spotify) are subject to VAT at the rate of 22 percent, plus Non-Residents Income Tax (so-called IRNR) at the rate of 12 percent, both assessed over the sales price. Online services intermediaries (such as Airbnb) are subject to the same taxes, except that IRNR is assessed only over 50 percent of their sales where one of the parties of the ultimate transaction (the supplier or end-user) is based abroad.

In May this year, Uruguay’s Executive Branch issued a regulatory decree, summarized below, clarifying aspects of the tax law; and a few days ago, the Tax Office issued a special resolution spelling out certain implementation details. Continue Reading

Posted in Brazil Data Privacy Intellectual Property IP

Brazil enacts its first law to protect Brazilians’ personal data: top points

By DLA Piper on July 26, 2018

Brazil has taken a significant step to protect the personal data of Brazilians with the enactment of the first specific law on the subject. Bill of Law 53/2018, approved by the Senate on July 10, 2018, will be sent to the President for signing into law. The President will have 15 business days to sign it, but it is not yet clear whether whether any particular items in the law will be vetoed. After presidential signing, the law will take effect 18 months after its official publication.

Here are the main points of the law in the form approved by the Senate:

Application: The law will apply to any transaction or operation involving treatment of data that (i) is performed in Brazil; (ii) has the objective of offering or supplying goods and/or services to people located in Brazil; or (iii) is carried out with personal data collected in Brazil.
Exceptions: The law will not apply to the

treatment of personal data (i) carried out by individuals for private purposes; (ii) performed for journalistic, artistic or academic purposes; (iii) carried out for purposes of public safety, national security and defense or activities for investigation and deterrence of crimes (which will be the subject of a specific law); or (iv) with foreign provenance and that are not the target of communication, shares use with Brazilian data treatment agents or the object of transfer of data with another country that other than the country of provenance, provided such country provides a degree of protection adequate to the Brazilian Law.

Definition of data: The expression “personal

data” is defined as any data or information related to an identified or identifiable individual (called the “owner”), with “sensitive personal data” being data about racial or ethnic background, religious belief, political opinion, membership labor unions or religious, philosophical or political organizations, as well as referring to health or sexual life, genetic or biometric data.

Data treatment: “Treatment” is considered to

be all operations carried out with personal data,

such as collection, production, reception,

classification, utilization, access, reproduction,

transmission, distribution, processing, filing,

storage, elimination, evaluation, control,

modification, communication, transfer, diffusion or extraction of data or information.

Treatment agents: Agents fall into two categories: “controller,” defined as any individual or public or private legal entity responsible for the decisions related to the treatment of personal data, and “operator,” defined as the individual or legal entity that carries out the treatment of personal data at the behest of the controller.

Competent bodies: The law establishes the

creation of a National Data Protection Authority, a body of the indirect federal public administration, subject to a special independence regime and linked to the Ministry of Justice and the National Council for Protection of Personal Data and Privacy; among its responsibilities are to propose strategic guidelines; provide support for the formulation of the National Policy on Protection of Personal Data and Privacy; suggest actions and propose studies.

Principles: Important principles must be observed in treatment activity, such as:

(i) purposes − the treatment must be carried out for specific and legitimate purposes, without the possibility of subsequent treatment in a form incompatible with these purposes

(ii) adequacy − compatibility of the treatment with the purposes reported to the owner

(iii) need − limitation of treatment only to the extent necessary to achieve expressed purposes

(iv) free access − guarantee that the owners can consult, easily and at no cost, on the form and time frame of the treatment, as well as the integrity of their data

(v) quality of the data − guarantee of the precision, clarity, relevance and currency of the data

(vi) transparency − guarantee of clear information that is easily accessible by the owners

(vii) security − utilization of technical and administrative measures to protect the data from access by unauthorized parties

(viii) prevention − adoption of measures to prevent the occurrence of damages due to treatment of personal data

(ix) nondiscrimination − impossibility of treatment for purposes of discrimination and

(x) accountability − demonstration of effective means to observe and prove compliance with the rules on protection of personal data.

Requirements for treatment: The treatment may only be carried out (i) with consent; (ii) to

comply with a legal or regulatory obligation of the

controller; (iii) by the public administration, for treatment of data necessary for public policy purposes; (iv) for the purposes of study by a research entity, with guarantee of anonymization; (v) when necessary to perform a contract; (vi) for regular exercise of rights in a judicial, administrative or arbitral proceeding; (vii) for protection of the life or physical integrity of the owner or third parties; (viii) for protectio n of health, through a procedure carried out by professionals in the area of public health of by sanitary authorities; (ix) in the legitimate interests of the controller or third parties; and (x) for protection of credit.

Consent: Consent must be expressed in

writing (in the case of a contract, highlighted with respect to the other clauses) or by other means that demonstrate the manifestation of the owner’s will, with the controller having the burden of proving consent was obtained pursuant to the law. Generic consent will be deemed null and void, and treatment in cases of defective consent is forbidden.

Revocation of consent: Consent can be revoked at any time, by the owner, with ratification of any treatment performed under the consent provided previously.

Access to data: The owner shall be provided access to the data subject to treatment, and that access must be provided clearly, with reference to the purpose, form and duration of the treatment, identification of the controller and the corresponding contact information, explanation of the shared use of data and the purpose, responsibilities of the treatment agents, as well as explicit mention of the rights of the owner specified in Article 18 of the law (see next section).
Rights of the owner (Art. 18): The owner has the following rights: (i) confirmation of the existence

of treatment; (ii) access to data; (iii) correction

of incomplete or inexact data; (iv) anonymization, blockage or elimination of unnecessary or excessive data; (v) portability of the data; (vi) elimination of personal data treated with consent; (vii) information about the public or private entities with which the controller has carried out shared used of the data; (viii) information about the possibility of not providing consent and the consequences of denial; and (ix) revocation of consent.

Treatment of sensitive data: The treatment can only occur when the owner consents, specifically t, for specific purposes, or without consent of the owner in cases of need to carry out public policies by the public administration set forth in law; studies by research entities (with anonymization of sensitive personal data); regular exercise of rights; protection of the life or physical integrity of the owner; protection of public health; prevention of fraud; and security of the owner.
Anonymization of data: This is defined as data by which the owner cannot be identified, and which therefore is not considered to be personal.
Children and adolescents: The treatment of data on children and adolescents must be performed with the specific consent of at least one of the parents or legal guardians.
End of the treatment: The treatment of data must end

when the purpose has been attained or the data cease being necessary or pertinent; at the end of the treatment period, by communication from the owner; or by determination of a national authority. The data must be deleted after the end of the treatment, other than in case of specific exceptions.

Treatment of data by the public authorities: The treatment must be performed only to serve the corresponding public purpose and with the objective of satisfying the legal attributions of the public service, with observation of the conditions determined in law.

International transfer of data: The transfer of

personal data to other jurisdictions will be allowed only in cases set forth in law, such as (i) with the specific consent of the owner; (ii) to satisfy a legal or regulatory obligation, when necessary to perform contracts or for regular exercise of rights in a judicial, administrative or arbitral proceeding; (iii) to countries or international organizations that provide an adequate degree of protection of personal data as specified in law or determined by the competent entity; (iv) when the controller of the data proves it has guarantees of compliance with

the principles, rights of the owner and data

protection regime set forth in Brazilian law; (v) for protection of the life of physical integrity of the owner or a third party, among other situations.

Records of operations for treatment of personal data: The controller and operator must keep records of the operations they carry out for treatment of personal data, mainly when the treatment is based on their legitimate interest.
Report of the impact of protection of personal data: In relation with operations to treat data, the competent body can request the preparation of a “Report of the Impact of Protection of Personal Data,” which must state the types of data collected, the method used for their collection and the guarantee of their security, as well as analysis of the controller of the measures, safeguards and mechanisms for risk mitigation adopted.

Chief of treatment: the Chief of Data Treatment is the person responsible for accepting complaints and other communications from the data owner and competent authorities and for training employees about best practices, among others attributions. The Chief must be appointed by the controller and his/her identity and contact information must be disclosed clearly and objectively.

Joint and several liability: Other than in

exceptional cases identified in law, the operator and controller are deemed to be jointly and severally liable for the data with respect to pecuniary or moral damages, either individual or collective, caused by the date treatment.

Security measures: It is mandatory to adopt

technical and administrative security measures to protect the personal data from unauthorized access and accidental or illicit situations of destruction, loss, alteration, disclosure or any other form of inadequate or illicit treatment. The minimum technical standards must be disclosed by the competent body in a timely way, considering the specificities of the personal data and their treatment.

Communication in cases of cybersecurity incidents: The controller must report to the competent body and the owners when any cybersecurity incidents occur that can cause a relevant risk or damage to the owners of the personal data.
Administrative penalties: Infractions of the Law can subject the treatment agents to the

applicable administrative penalties by the

competent body, after an administrative proceeding that affords rebuttal and ample defense. Among the penalties are official warning, publicity of the infraction, partial or total suspension of use of the use of the database, single or daily fine (up to 2 percent of the gross revenue of a private company, business group or conglomerate in Brazil in the preceding year, excluding taxes, capped at R$50 million per infraction), or partial or total suspension of the activities related to the data treatment.

We will be monitoring this area of law to keep you informed about coming developments.

FOR MORE INFORMATION PLEASE CONTACT THE AUTHOR

Paula Mena Barreto

Partner

Rio de Janeiro

T: +55 21 3262 3028F: +55 21 3262 3011

Posted in Brazil Tax

Administrative proceeding in State of Rio de Janeiro will allow the compliance of tax discrepancies

By DLA Piper on July 26, 2018

The State of Rio de Janeiro enacted the Resolution n° 265 on June 19, 2018, in order to allow taxpayers to regularize their tax debts before starting an official tax audit and to reduce the amount of credits in dispute before the administrative court.

The proceeding is called a “friendly warning” and encompasses tax debts not yet declared in ancillary obligations and also ancillary obligations not yet presented to tax authority by the taxpayers. Tax authority identifies possible outstanding tax debts and ancillary obligations not yet fulfilled by crossing electronic data available in its systems. Continue Reading

Posted in Brazil Tax Trade

Brazil introduces US-Brazil Agreement on Social Security

By DLA Piper on July 26, 2018

The Brazilian Government has enacted Decree No. 9,422/2018, which introduced into Brazilian law the Agreement on Social Security between the United States and the Federative Republic of Brazil, originally signed on June 30, 2015.

The Agreement was enacted in late June 2018; its enforceability shall commence on October 1, 2018 and shall be applicable to (i) individuals currently or previously covered under US or Brazilian laws, and/or (ii) individuals who, under the laws of either contracting state, may derive rights by virtue of their relationship to an individual subject to the laws of the US or Brazil. Continue Reading