Court Strikes Down City of Buenos Aires’ Public Registry Resolutions on Equal Gender Representation in Boards and Supervisory Committees

1. General PR Resolutions on equal gender representation in boards and supervisory committees

On August 5 and 13, 2020, the PR published General Resolutions No. 34/2020 and No. 35/2020 (the “Resolutions”), respectively, by virtue of which it established as a general principle that associations, foundations and certain corporations —among which are the plaintiffs— must have equal gender representation on boards and supervisory committees, appointing the same number of women and men.

2. The Argentine National Commercial Court of Appeals’ decision

In the case  “INSPECCION GENERAL DE JUSTICIA c/ LINEA EXPRESO LINIERS S.A.I.C. s/ ORGANISMOS EXTERNOS” (File No. 1651/2021/CA01), the appellants contended that by referring to the right to equality and the prohibition against gender-based discrimination, while making extensive considerations on international rules, treaties and conventions in the Resolutions, the PR imposed on them a gender representation requirement on the affected bodies that did not arise from statute. They also contended that administrative powers are not absolute or unlimited and should instead be reasonable and limited in scope by the legal system itself.

The appellants concluded that the PR lacked authority to impose on them a requirement that does not stem from the General Companies Law and, thus, their right to freely choose their directors, based on their professional experience, which is essential for the incorporation of a company and the development of business, had been curtailed. In this context, they stated that the imposition of this obligation, under penalty of being intervened by INADI and the Argentine Ministry of Women and Diversity, constituted a real subjugation of the rights of the shareholders.

Division C of the Argentine National Commercial Court of Appeals focused on the concept of constitutional equality, defined by reference to its backface, the prohibition to discriminate. Thus, the Court held that understanding “equality under the law” as a prohibition against arbitrary discrimination can, depending on the case, be insufficient to ensure equality as a constitutional guarantee. This guarantee may require aiming at a concrete objective grounded on reality (as opposed to implementing prohibitions in abstract); i.e., on a factual scenario that allows us to affirm that the law that is intended to be equal for all persons is truly equal.

The Court took into special consideration (i) the recognition of the affirmative action measures provided for in Article 75, paragraph 23 of the Argentine National Constitution; (ii) the provisions in Article 75, paragraph 19 of the Argentine National Constitution, which establishes that Congress must enact laws that consolidate equal opportunities without any discrimination; and (iii) the commitment to eliminate any obstacle that prevents equal opportunities between men and women, as provided for in the Convention on the Elimination of All Forms of Discrimination against Women (CEDAW).

Notwithstanding the foregoing, the Court held that this task exceeded the regulatory authority of the PR and that its decision to breathe specific meaning into those rights, which did not previously exist and which in turn restrict other rights contained in statutory law, necessarily requires legislative treatment by virtue of the republican democratic principle of separation of powers enshrined in articles 28, 76 and 99 of the Argentine National Constitution. Therefore, if in view of the nature and content of what is regulated, the “affirmative action” in question relates to substantive rights concerning subject matters under the authority of the legislative body —in this case the General Companies Law—, any modification can only result from a substantial law, thus precluding the Administration.

The Court also addressed whether the gender or sexual preference of members should matter for the bodies in question. Thus, it pointed out that the corporate regulatory framework is not aimed at protecting the rights of those who manage or supervise the company, but rather of the company they manage or supervise, its partners and third parties, adding that, to protect those rights, obligations known in the civil law tradition as “of means” are imposed on these individuals which, based on the trust and loyalty and diligence standards placed on them, must be considered intuito personae.

In light on all of the above, the Court upheld the appeal and struck down the Resolutions.

The PR appealed this decision and also filed other legal actions.

3. Ratification of the PR Resolutions

As a corollary to this decision and in addition to the legal claims it brought to the courts, on August 20, 2021, the PR issued General Resolution No. 12/2021 questioning the authority of the Court to strike down its Resolutions and:

1. Ratifying the Resolutions and all their terms;
2. Communicating the judgment to (a) the Argentine Ministry of Women, Gender and Diversity, (b) the Argentine Ministry of Foreign Affairs, International Trade and Worship, and (c) the Argentine National Institute against Discrimination, Xenophobia and Racism (INADI), so that they may intervene as they deem appropriate under their respective authorities; and
3. Instructing the Office of Judicial Affairs of the PR to motion the Argentine Council of the Judiciary to impeach the two judges of Division “C” of the Argentine National Commercial Court of Appeals who handed down and signed the judgment.

Click here to read the judgment in Spanish.