ECUADOR Law and Practice Contributed by: Sebastian Corral Guevara, Miguel Pizarro Páez, María Fernanda Mencías Pérez, José Cisneros Pazmiño, Roque Bustamante Espinosa and Jorge Pizarro Páez, Flor Bustamante Pizarro & Hurtado
2. Restrictions on Foreign Investments 2.1 Approval of Foreign Investments As a general rule, foreign investments do not require prior governmental approval in Ecuador. Foreign investors enjoy equal treatment and may invest in most economic sectors under the same conditions applicable to Ecuadorian nationals, subject to com - pliance with generally applicable legal and regulatory requirements. The Ecuadorian Constitution recognises foreign investment as complementary to domestic investment and guarantees equal rights and obligations for for - eign individuals within Ecuadorian territory. Likewise, the Organic Code of Production, Trade and Invest - ment ( Código Orgánico de la Producción , Comercio e Inversiones – COPCI) grants foreign investors the same legal treatment, rights and protections afforded to domestic investors. Notwithstanding the foregoing, certain sectors and activities remain subject to constitutional or statutory restrictions. Restricted Border and National Security Areas Foreign individuals and foreign legal entities may not acquire ownership rights or concessions over land located within national security zones, nor over pro - tected natural areas, except in the cases expressly authorised by law. These restrictions also apply to Ecuadorian companies with foreign shareholders, unless one of the statutory exceptions applies, such as where the foreign individual or shareholder has been legally domiciled in Ecuador for at least five con - secutive years or in the case of certain family relation - ships with Ecuadorian nationals. These restrictions do not constitute an investment approval regime. Rather, they establish statutory pro - hibitions subject to limited legal exceptions. Strategic Sectors Investments in strategic sectors are not prohibited for foreign investors. However, activities involving sectors reserved under the Constitution – such as energy in all its forms, telecommunications, non-renewable natural resources, hydrocarbon transportation and refining,
biodiversity and genetic heritage, the radio spectrum and water resources – may only be carried out pur - suant to the legal framework governing each sector and, where applicable, following the corresponding governmental authorisation, delegation or contractual arrangement. The Constitution permits the state, on an exceptional basis and whenever the national interest so requires, to delegate participation in strategic sectors to mixed- economy companies or private operators under the conditions established by law. Accordingly, while Ecuador does not maintain a gen - eral foreign investment screening or approval regime, foreign investors must comply with the sector-specif - ic authorisations, licences, permits and contractual requirements applicable to regulated activities before commencing operations. Ecuadorian law also allows domestic and foreign investors to enter into investment contracts with the Ecuadorian state under the Organic Code of Produc - tion, Trade and Investment. These agreements may provide legal stability regarding certain tax and regu - latory conditions, subject to the requirements estab - lished by law. 2.2 Procedure to Obtain Approval and Sanctions for Non-Compliance Ecuador does not maintain a general foreign invest - ment approval regime. Accordingly, foreign investors are not required to obtain governmental approval sole - ly because they are foreign or because they intend to acquire an interest in an Ecuadorian company. Where a foreign investor acquires shares or equity interests in an Ecuadorian company, no prior govern - mental approval is required. The Ecuadorian company must, however, comply with the applicable corporate reporting obligations before the Superintendence of Companies, Securities and Insurance ( Superintenden- cia de Compañías , Valores y Seguros – SCVS), includ - ing reporting the foreign shareholder, its ownership chain up to the ultimate beneficial owner, the foreign shareholder’s certificate of legal existence, and the appointment of an attorney-in-fact or representative in Ecuador for corporate transparency and regulatory
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