Current political and economic scenario The last 12 years Last October’s elections The close (and...

Current political and economic scenario

• The last 12 years

• Last October’s elections

• The close (and not-so-close) future

Drafting the agreement

A written agreement is always desirable. When possible,

stay out of contracts of adhesion

Contracts of adhesion: contracts in which terms

and conditions are unilaterally set by one party –

take or leave it contracts (e.g. forms contract,

purchase order, etc.)

Try not to use them.

Many of its clauses may not be enforceable

(even if there is no consumer contract).

Securities (personal and real)• Personal vs. real / Efficiency vs. cost

• IOUs and ChecksCheap, fast and they are executive title (You will thank

me later if you have to file a judicial claim or bankruptcy!)

• Documentary credit• Surety bonds• The new “Garantías unilaterales” (unilateral

guarantees, like stand-by letters of credit).New type of guarantee (not quite developed).Banks may grant them (for a considerable fee).


The foreign exchange issue

• Current foreign exchange regulations make it extremely difficult to take funds out of Argentina.

• Many payments from Argentina are generally subject to prior (and burdensome) authorization by the Argentine Central Bank (DJAI and DJAS).

• Even if your debtor wants to comply, he might not be able to do so.

• Make sure that the agreement and delivery of goods are subject to obtaining such prior authorization.

• Shift the burden and risk to the Argentine debtor.


Jurisdiction and choice of law clauses• Choice of law: generally admitted, provided that:

The contract is international (as opposed to fully domestic). There should be a foreign component in it;

The foreign component should be real (not to avoid application of Argentine law);

Some reasonable connection or contact with the agreement.

• Choice of jurisdiction: generally admitted, provided that the matter:

Is international (as opposed to fully domestic);Involved should be financial or commercial (as Opposed to,

for instance, family matters); and, Must not be subject to the exclusive jurisdiction of the

Argentine courts.


No choice of jurisdiction when: Mortgages and pledges subject to Argentine courts’

exclusive jurisdiction. Watch out for the “necessity venue” rule. Argentine law

provides a general rule by means of which Argentine judges may exceptionally have jurisdiction (regardless of the actual conflicts of law provisions) for the purposes of preventing that a party is denied of access to courts, provided that • It is not reasonable to require the filing of the

complaint abroad, • The case has sufficient points of contact with

Argentina, • The defense rights are guaranteed, and • The convenience of achieving an efficient ruling is

taking into consideration.


• Arbitration: generally permitted (same requirements as choice

of jurisdiction clauses), with some particularities: No arbitration in contracts of adhesion No arbitration for matter where public policy is

involved. Parties cannot waiver a later judicial review when the

award goes “against the Law” (very broad) If not agreed otherwise, when arbitration has been

chosen, precautionary measures request have to be filed before the arbitration court, but after award on the issue, only a judge can enforce it.


• Watch out for consumer contracts! No choice of law

or jurisdiction is admitted for consumer contracts

Very broad definition: anyone who uses goods or

services for their own benefit. It may even be a

corporation!


Enforcing the agreement

Collection process in Argentina

• Letter of demand: letter of demand requesting prompt payment.

Good way to start a collection process, but it is also likely to be required under the agreement,

Needs to be done in a very formal language, and using official mail,

Watch out! Any acknowledgment may constitute an irrefutable presumption.

• Mediation:

Extrajudicial mediation hearing must be commenced once the deadline set in the letter of demand expires.

Although parties are not required to come to an agreement, this is a compulsory process that must be met before filing the judicial action or claim (except “executive title”).

• Judicial claim

If mediation proceeding fails (either because the debtor does not attend or because the debtor does not make an acceptable payment proposal), the creditor is able to file its formal complaint


Requirements:• Power of attorney• 3% Court tax (watch out with foreign exchange

regulations to nationalize the funds) // Not needed in case of bankruptcy’s “credit insinuation”• Arraigo motion to dismiss, if the foreign

country is not signatory to the Hague Convention on Civil Procedure• Accounting certification if collecting unpaid

invoices. In some cases, is possible to obtain a precautionary measure.


Executive vs. ordinary proceedings: judicial channels that may be used to enforce commercial receivables vary depending on the characteristics of the receivable (e.g. unpaid invoices, bank notes, promissory notes, among others).

Two types of judicial proceedings: (i) ordinary proceedings; and, (ii)

executive proceedings. Difference lies in the nature of the document backing the

receivable. • If the receivable is instrumented in a document is

regarded as authoritative by itself• Executive proceeding:

1. Faster procedure. 2. Only allows minimum defenses for the debtor. 3. No mandatory mediation procedure.


The foreign exchange issue

• “A bird in the hand is better than two in the bush” Choose quick settlements, over lengthy payment plans.

Always true, but “truer” in Argentina: you not only avoid devaluation volatility, but you may use the foreign exchange channel to wire the money (regulatory volatility).

• We got the money in a settlement! Now what? You

may (probably) have troubles sending the money abroad.


If the debtor has a foreign exchange channel available,

make them use it!

e.g. if he owes you invoices and he has the proper

DJAI/DJAS to wire the money, he might still be able

to use it.

If he has not, it will be difficult to wire the money.

Alternative method: blue chip swap

I. Is not illegal, but is not cheap.

II. Compliance department do not usually like it.

III. It may be the only way.


• We got a ruling and we even got the money! Now what?

No specific foreign exchange channel for wiring the money

abroad.

The judge may (or may not) order the bank to proceed with the

transfer anyway.

The bank will probably notify the Argentine Central Bank, which

will not allow the transfer.

The judge will subpoena the Argentine Central Bank, and may

(or may not) order the Argentine Central Bank to comply.

If the judge does not, blue chip swap (it may be the only way).


• Enforcing a foreign ruling (and arbitration award). The

exequatur

A foreign final and conclusive judgment of foreign courts

can be recognized and enforced in Argentina.

There’s a caveat: you must first comply with a local

judicial procedure called “exequatur”.


Requirements:• it is recognized by a foreign judge as final and conclusive

in the jurisdiction where rendered, • debtor against whom the proceeding took place was

personally served and was given an opportunity to defend against the foreign action,

• the proceeding must be valid in the jurisdiction where rendered and its authenticity must be established in accordance with the requirements of Argentine law,

• the proceeding does not violate Argentine law’s principles of public policy, and

• not contrary to a prior or simultaneous judgment of an Argentine court.

Practical tip: exequatur only necessary when the debtor does not have enough assets abroad.


Bankruptcy in Argentina

Argentine territoriality rule (also known as “pluralidad de

concursos” – “bankruptcies plurality” –).

Argentine Bankruptcy regulations should not apply

• to credits not enforceable in Argentina; and

• in relation to assets located outside the Argentine

territory.

There may be as many bankruptcies as places where

debts are enforceable or debtor’s assets are located.

Bankruptcy reorganization (similar to US Chapter 11) • seeks a solution to the debtor's insolvency that

avoids bankruptcy liquidation, and • enables the debtor to restore its assets by agreeing

on a payment plan with creditors.

May only be requested by the debtor, Most of the ongoing lawsuits against the debtor are

stayed, Creditors are forced to file a proof of claim (subject

to review by the debtor, the court receiver, and the remaining creditors),

If claim is admitted, creditor is considered creditor of the bankrupt estate, and allowed to vote the repayment plan.


Bankruptcy liquidation (similar to US Chapter 7): purpose is the sale of a debtor's nonexempt property and the distribution of the proceeds to creditors.• Debtor’s business being closed down • May be directly requested by debtor, or forced by creditors. • Creditor needs to evidence that the debtor has fallen in what is called

“cesación de pagos” (payments’ interruption status). Failure to comply with documents that grant “executive title,”

usually allow filing for debtor’s bankruptcy. Invoices (by themselves) do not grant the ability to do so.

Lesson: always get an executive title! (e.g. checks, promissory notes, etc.)

• Creditors are forced to file a proof of claim to be admitted into the bankruptcy process.

• Bankruptcy accelerates all credits against debtor.


Reciprocity rule: a foreign bankruptcy is not effective against creditors with credits enforceable in Argentina.

Foreign creditors will not be able to diminish the rights of the Argentine creditors on the assets located in Argentina, or to declare void acts which have been executed by the insolvent debtor on those Argentine assets.

Contrario sensu, an Argentine bankruptcy could not be effective

against creditors with credits enforceable abroad and the rights of them in relation with assets located abroad.

In an Argentine bankruptcy, a credit payable abroad is subject to evidence that an Argentine creditor with credit payable in Argentina may claim its credit – under equal conditions – in the country where the credit is payable’s bankruptcy proceeding.


Sell the problem: Assignment of rights

No need for debtor’s acceptance, but you

must notify them

Watch out for the DJAIs/DJAS! NOT

TRANSFERABLE! [TBC]

Little big advices Know your counterpart before signing the contract

Credit reports: cheap, fast and reliable. A wise reader knows the kind of

debtor that it will be.

Ask the AmCham

Just Google it!

Keep your accounting well documented

Do not forget to “present” your invoices• Invoices presented and not challenged create a presumption

(rebuttable) in sale of goods’ contracts• It is not an executive title, but it sure helps

No cheating!

• Companies may be tempted (many times by its local counterpart) to under-declare the value of the goods being sold. Do not fall for that!

THANK YOU!

Maximiliano N. D’[email protected]

+54 11 4379 6829

Estudio Beccar Varela Edificio República, Tucumán 1, Piso 4 (C1049AAA) Buenos Aires, Argentina www.ebv.com.ar

Current political and economic scenario The last 12 years Last October’s elections The close (and...

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