Court confirms 70/30 rule for oil exports

Economic Criminal Court No. 4 of the City of Buenos Aires in re “Grimaldi, Carlos Alfredo José; Medanito S.A. (ex Gas Medanito S.A.) s/ Inf. Ley 19.369”, on May 14, 2010 resolved to absolve Medanito S.A. and its President of the violation of the Foreign Exchange Criminal Law.

This is one of the numerous cases where the Central Bank of the Republic of Argentina (“Central Bank”) initiated proceedings against an oil company and their Board of Directors based on the lack of repatriation and negotiation of revenues of crude oil exports made during 2002 in violation of the Foreign Exchange Criminal Law (Law 19,359, as restated by Decree 480/1995).

The case refers to five crude oil export operations made during 2002 in which the Central Bank considered that the company should have repatriated 100% of the revenues of such exports.  Instead, the company had repatriated 30% or more of the revenues, but not 100% of these.  Upon completion of the Central Bank summary proceedings, the file was sent to the economic criminal courts to be resolved.

Decree 2703/2002 issued on December 27, 2002 provides that “The producers of crude oil, natural gas and liquefied gas shall repatriate (…), at least, thirty percent (30%) of the revenues from exports of freely disposable crude oil or its derivates, and may freely dispose of the remainder”.

The Judge applied the principle of retroactivity of the most favorable criminal law and considered that the provisions of Decree No. 2703/2002 are applicable to the case since such decree was issued after the facts discussed and applies to oil exports.  

Moreover, the court made an analysis of the “Cristalux” case and the recently passed “Docuprint” case, both passed by the Argentine Supreme Court. In such cases, the Argentine Supreme Court applied the principle of retroactivity of the most favorable criminal law to foreign exchange violation cases stating that such principle is expressly included in international treaties and agreements with constitutional rank. Furthermore, the Argentine Supreme Court stated that a particular law and its restated decree shall not exclude the applicability of the referred principle.

In the above mentioned precedents, the Argentine Supreme Court considered that Article 1° and 2° of Law 19,359 provide that the scope of certain criminal actions will be defined by other laws or regulations.  This is known as a “blank” criminal law, as it needs to be supplemented by other legislation.  

In the “Girmaldi” case, the Judge considered that if the law is modified in such a way that the previously criminal actions are no longer criminal actions given a modification of the scope of the law, then by application of the principle of retroactivity of the most favorable criminal law the case must be dismissed.

This case confirms the free disposition of up to 70% of the revenues of hydrocarbons exportation made during 2002 prior to the enactment of Decree 2703/2002.

Please see “Economic Criminal Court confirms free disposition of 70% of revenues from oil and gas exports”  published in Marval News # 67 dated November 30, 2007 for additional information regarding application of the 70/30 Rule.