This country-specific Q&A provides an overview to cartels laws and regulations that may occur in Ecuador.
This Q&A is part of the global guide to Litigation. For a full list of jurisdictional Q&As visit http://www.inhouselawyer.co.uk/practice-areas/litigation-second-edition/
What are the main methods of resolving commercial disputes in your jurisdiction?
In Ecuador, commercial disputes are resolved in judicial proceedings before the courts or in arbitration proceedings by Arbitration Centers authorized by the Council of the Judicature.
What are the main procedural rules governing commercial litigation?
The General Organic Code on Proceedings and the Arbitration and Mediation Act.
What is the structure and organisation of local courts dealing with commercial claims? What is the final court of appeal?
Courts in Ecuador are organized into three different levels. The first consists of single-person judges with cantonal jurisdiction. The second is that of the Specialized Civil and Mercantile Divisions of the Provincial Courts, each consisting of three judges, with provincial jurisdiction and competent to hear appeals. Finally, as the court of cassation, the Specialized Civil Division of the National Court of Justice, also a panel of three, headquartered in Quito, with jurisdiction over the entire country.
As an exception, and only in cases where the cassation judgment violated a constitutional guarantee, a special action for protection of constitutional rights can be brought; this is resolved by the Constitutional Court. Despite its exceptional nature, it is a frequently used appeal.
How long does it typically take from commencing proceedings to get to trial?
Proceedings may be summary and ordinary; they may take between 10 and 14 months, respectively, until a second-tier oral resolution is forthcoming. A resolution by the National Court of Justice may take an additional period of six months. Times increase when cases are complex.
If, in extraordinary circumstances, a case reaches the Constitutional Court, its final resolution could be delayed a further two years.
Are hearings held in public and are documents filed at court available to the public? Are there any exceptions?
Since the General Organic Code on Proceedings went into effect in 2014, proceedings have been oral in nature and the claims of the parties are resolved at trial. Judicial proceedings before the courts are governed by the principle of openness. Therefore, all procedural proceedings and documents in the case file are public. There is an online system known as SATJE where court orders and certain proceedings are published. In arbitration proceedings, it is possible to covenant confidentiality, and this constitutes an exception to the openness of the proceedings.
What, if any, are the relevant limitation periods in your jurisdiction?
The statutes of limitations on the most important civil and commercial actions that follow the ordinary procedure is ten years. For actions arising out of enforcement of titles or indebtedness, the statute of limitations is three years.
What, if any, are the pre-action conduct requirements in your jurisdiction and what, if any, are the consequences of non-compliance?
Doesn’t exist in our jurisdiction.
How are commercial proceedings commenced? Is service necessary and, if so, is this done by the court (or its agent) or by the parties?
Proceedings begin with the filing of the complaint with the Court or the Arbitration Center. The judge and the arbitrators are electronically designated at random. If the complaint is admitted, the defendant is summoned; this is done by personnel from the Court or the Arbitration Center. Service of process through agents or one of the parties lacks efficacy and is deemed not to have taken place.
How does the court determine whether it has jurisdiction over a claim?
In commercial litigation, the court’s jurisdiction is generally determined by the defendant’s domicile. However, concurring jurisdiction in addition of the defendant’s domicile, may have, i.e., at the plaintiff’s choice: (i) the judges where payment is to be made or the obligation is to be performed; (ii) the judges where the contract was executed; (iii) the judges to which the defendant expressly submitted under the contract; (iv) the judges where real estate subject of the complaint is located; and (v) the judges where the damages were caused, in complaints seeking indemnification or reparations.
How does the court determine what law will apply to the claims?
Applicable law in commercial litigations are chiefly the Commerce Code and the Civil Code. In addition, the Arbitration and Mediation Act is applied in arbitration proceedings. The covenant on the application of foreign law is respected by the Courts, but cases where jurisdiction lies in Ecuador and applicable law is foreign are rare.
In what circumstances, if any, can claims be disposed of without a full trial?
A process may be terminated early through settlement, waiver by the plaintiff, full admission by the defendant of the claims, or abandonment of process by one of the parties. In this latter case, abandonment occurs when eighty days elapse with no procedural activity by all parties. However, a process is also terminated if the defendant has raised previous defenses that are accepted by the judge at a hearing, similar to a summary judgment in common law jurisdictions.
What, if any, are the main types of interim remedies available in your jurisdiction?
In commercial matters there are no provisional remedies. There are measures intended to preserve the object of the litigation or ensure its results: a) Withholding funds or personal property; b) Prohibiting the alienation of real estate; c) Sequestration; and, as an exception, d) Barring aliens not owning real property in the country from leaving it.
In matters involving intellectual property, there are measures aimed prevent the violation of intellectual property rights: a) Immediate cessation of the activity that constitutes the alleged violation; b) Provisional closing of the establishment; and c) Removal from commerce of the merchandise, unlawful copies or objects that brought about the violation, which are to be deposited with the Court.
After a claim has been commenced, what written documents must (or can) the parties submit and what is the usual timetable?
A process commences with the filing of the complaint, to which all evidentiary means available to the plaintiff must be attached, together with a description of those that are not available and/or require a judicial order to obtain. Following service of process, the defendant has thirty days to answer and must also attach to his response all evidentiary means available to him, under same standards.
If new facts are set forth in either the answer to the complaint or the defendant’s counterclaim, the plaintiff has thirty days to answer them and introduce new evidentiary means, under same standards.
Summing up: at the trial level, the evidence will be submitted in any of the cases described up until notice of the preliminary hearing is given.
During the second (appellate) stage, the parties may announce new evidence of new facts or of the same known facts in support of their appeal, provided that they obtained such new evidence after judgment was issued.
What, if any, are the rules for disclosure of documents? Are there any exceptions (e.g. on grounds of privilege, confidentiality or public interest)?
In general, it is incumbent upon each party to present such evidentiary documents as it has available to support its claims. If a document is not in the possession of the party requiring it and assistance from the court is required, judge can order that whoever is in possession of the document surrenders it, even through enforced recovery.
The Constitution of Ecuador establishes an exception by guaranteeing professional secrecy. Likewise, the new Commerce Code issued on May 29, 2018, states that the advice from professionals assisting businessmen is subject to confidentiality.
The Commerce Code restricts the examination of a businessman’s accounting exclusively to accounting entries directly related to the litigation. There are exceptions to this rule in cases of bankruptcy, property held in common, corporate liquidations, and abuse of legal standing (corporate veil) to the detriment of third parties, where a general examination of the accounting may be ordered.
Confidential documents are classified as such in the case file to prevent their being freely reproduced by third parties. Private persons may object to the disclosure of information they deem confidential, and it is incumbent upon the judge whether or not to order them to do so.
There are rules governing the treatment of privileged and confidential information, especially information kept in banks or public institutions, the circulation of which is restricted under the law.
How is witness evidence dealt with in commercial litigation in your jurisdiction (and in particular, do witnesses give oral and/or written evidence and what, if any, are the rules on cross-examination)? Are depositions permitted?
Witness evidence may be declarations by the party or declarations by witnesses. This evidence must be requested by the parties when filing or answering a complaint. The parties shall identify its witnesses with their full name and address, the facts about which they will testify, and the requirements for the admissibility of the evidence. Witnesses shall answer the questions posed to them in examination and cross-examination in a clear and precise manner, and must be sworn as to the truthfulness of their testimony.
Declarations by the parties and the witnesses take place before the judge, orally, during trial. Testimony may be given in person or by video conference or other similar media. If the presence of a witness is necessary, travel expenses shall be borne by whomever requests it.
Witnesses are under obligation to answer the questions posed to them, except those that may generate criminal liability for themselves and their close relatives, as well as those which might cause a violation of their duty to observe professional confidentiality or secrecy.
Questions during examination and cross-examination may be objected to by the parties on grounds of unconstitutionality or being unlawful, leading, misleading, irrelevant, confusing or hypothetical or intended to elicit an opinion.
Should a declarant or witness fail to appear, the party who requested his appearance may move for a suspension of the proceeding, alleging that this is an essential piece of evidence and asking that the witness be constrained to appear by the authorities. Testimony may be taken in advance when there are fears the witness may die or be absent for an extended period.
Procedural law does not require a set number of witnesses to establish a fact. However, the new Commerce Code provides, for instance, that to prove mercantile or business practice the testimony of no less than five witnesses is required.
Is expert evidence permitted and how is it dealt with? Is the expert appointed by the court or the parties and what duties do they owe?
Expert evidence is allowed; it is regulated by Ecuadorian procedural law. Experts are physical or legal persons and must be accredited by the Council of the Judicature, which is the judiciary’s administrative body. Expert fees are paid by the party that requested the expert testimony.
Expert reports are filed together with the complaint, the answer, the counterclaim, and its answer. They must be supported by the expert at trial so that each party may examine and cross-examine the expert, who must answer under oath questions about his suitability, impartiality, and the contents of his report.
If, in the judge’s opinion, the expert report is incomplete or insufficient, he may designate a new expert.
Can final and interim decisions be appealed? If so, to which court(s) and within what timescale?
Both preliminary and final decisions may be appealed to the Provincial Court of Justice when the case was heard within the justice system. No appeal in arbitration.
Appeals are filed orally at the same hearing at which the decision is made. When the decisions have to do with procedural validity, admissibility of evidence, and previous defenses, appeal is to be filed at the preliminary hearing.
As an exception, appeals from final judgment may be filed in writing within the ten days following notice thereof in the following cases: a) failure to appear at trial due to acts of God or force majeure, which must be determined by the appellate court; and b) when the written judgment or order contains matters not resolved at the hearing, or when they differ from those set forth in the judgment.
What are the rules governing enforcement of foreign judgments in your jurisdiction?
Foreign judgments or awards are enforceable instruments. They must be filed with the first-tier judge of the domicile of the person who must comply with the judgment. If the person in question has no domicile, the judgment must then be filed with the judge of the location where the property is located.
The following requirements must be met for the nationalization of judgments issued abroad:
a) That they meet the external formalities necessary to be considered authentic in the State of origin;
b) That the judgment was issued with the force of res iudicata, in accordance with the laws of the country where it was issued, and that any necessary documentation attached to it be duly legalized;
c) That, if appropriate, it be translated into Spanish;
d) That it be established that the defendant was legally notified and that the due defense of the parties was ensured;
e) That the application for nationalization state the place where process may be served upon the person who must comply with the foreign judgment.
The nationalization process.
a) Filing of the application by the person interested in executing the judgment.
b) Verification by the judge of the requirements set forth in the previous paragraph.
c) Issuance of a subpoena to the person who must comply with the judgment, giving him five days to object to nationalization.
d) The Court will decide whether nationalization is appropriate within a term of thirty days reckoned as of the date of the subpoena.
If the objection to nationalization is grounded and justified, and if the cause warrants it, a hearing will be set within a maximum term of twenty days from the filing of the objection to nationalization at which the parties will be heard; discovery will take place and the objection will be ruled on. The court’s decision is not subject to appeal; it may only be enhanced and clarified. Once the judgment has been nationalized, it is executed in the same manner as domestic judgments.
Can the costs of litigation (e.g. court costs, as well as the parties’ costs of instructing lawyers, experts and other professionals) be recovered from the other side?
The costs of the proceedings may be claimed from the party that did not prevail at trial. All judgments on the matter at issue must decide whether the payment of damages, interests, and court costs are appropriate.
An order to pay court costs is appropriate against a person who litigated in an abusive, malicious, reckless or unfair manner, as the judge finds it in his judgment.
Costs contemplate payment of the expenses incurred during the litigation not only by the prevailing party but also by the State. These costs include reasonable attorney’s fees.
What, if any, are the collective redress (e.g. class action) mechanisms in your jurisdiction?
Ecuadorian law does not establish so-called “class actions” as separate or special actions. Nevertheless, it is possible for various people to pursue the same right or make the same claim against one or more persons. To this effect, they must designate a court agent from among themselves or the judge will select one of the plaintiffs to act as such. This is the person who will be dealt with in the proceedings, without prejudice of resolving the claim of all.
What, if any, are the mechanism for joining third parties to ongoing proceedings and/or consolidating two sets of proceedings in your jurisdiction?
As a general rule, a third party damaged by court orders may intervene in all proceedings, including enforcements. The motion to join the proceedings will be heard and ruled on by the judge presiding the case. Third-party motions to join may be filed during the trial phase and/or enforcement.
When filing his motion to join, a third party must state all evidentiary means he will use to justify his intervention in the proceedings.
In Ecuador, joinders are possible in the following cases:
a) When the judgment to be issued in one process may give rise to a res iudicata defense in another;
b) When there is a pending process on the same matter that is the subject of another process subsequently filed;
c) When processes filed separately have identical persons, things, and actions.
For proceedings to be joined, the following requirements must be met:
a) That the judge seeking to join the different proceedings have jurisdiction to hear all of them;
b) That all proceedings be subject to the same procedure or that the parties agree to be bound by the same procedure;
c) That the proceedings to be joined not be pending before different-level courts.
The motion to join cases is ruled upon at the preliminary hearing.
Are third parties allowed to fund litigation? If so, are there any restrictions on this and can third party funders be made liable for the costs incurred by the other side?
There are no regulations pertaining to the financing of judicial proceedings by third parties unrelated to the litigation. Therefore, under the principle that no one may be barred from engaging in any act not prohibited by law, the financing of judicial proceedings is possible. Ultimately, the relationship between the plaintiff and the financing party is reflected in a private contract that establishes the conditions and agreements between them. A judge may not order a financing third party to pay costs inasmuch as the latter is not a party to the proceedings and, therefore, cannot be liable to the opposing party for costs. This is without prejudice of the party ordered to pay costs being able to recover those costs under the financing contract.
Our legal system does contemplate, however, the assignment of litigation rights. In this case, the third party does not finance the cause but rather acquires it, thus becoming the holder of the right being claimed, as often occurs in cases involving the payment of insured losses.
What is the main advantage and the main disadvantage of litigating international commercial disputes in your jurisdiction?
An advantage of litigating in Ecuador is that, as compared to other countries, there are no filing fees.
The main disadvantage, we feel, is to be found in arbitration proceedings. In our country, an arbitral award can be the subject of an appeal for annulment that is heard by the chief judge of the Provincial Court. His decision can, in turn, be the subject of a special action for protection of constitutional rights that falls within the jurisdiction of the Constitutional Court.
Thus, while many users opt for resolving their conflicts at arbitration centers in order to skirt the defects of the common justice system, the matters at issue eventually wind up being heard by the regular courts of justice and even by the Constitutional Court.
What is the most likely growth area for disputes in your jurisdiction for the next 5 years?
Commercial litigation has grown in our country over the last few years. At the present time, with the promulgation of a new Commerce Code (on May 29, 2019), it is anticipated that this type of proceedings will be of a shorter duration as the consequence of greater clarity in aspects that as the result of technological advances had not been regulated.
On the other hand, the recent opening of our country to new markets and the inclusion of arbitration clauses in investment contracts seem to point that investment law and conflict resolution in that field will be the area that will experience the most growth in Ecuador.
Will be the impact of technology on commercial litigation in your jurisdiction in the next 5 years?
We expect technology to allow basic changes in litigation. For instance: the electronic filing of petitions, obviating the need for lawyers to go to court; the mandatory exchange of digital pleadings and documents between the parties, or the deposition of witnesses by video conferences, and the use of stenographers.