Failure to transfer to Argentina and sell for pesos the foreign currency proceeds of certain exports

In re: “Hijos de Pedro Vincenti S.A. s/ infracción a la Ley 19.359” Tribunal A of the Court of Appeals for Criminal Economic Matters --in the recently published decision dated February 25, 2008-- revoked the decision of the lower court that had imposed a fine of A$ 1,000,000 to the company Hijos de Pedro Vincenti S.A. and the president of its Board of Directors for infringing the Foreign Exchange Criminal Regime of Law No 19,359 by failing to transfer to Argentina and sell for pesos the foreign currency proceeds of certain exports within the time required by the applicable implementing regulations. This court decision is particularly important because it is based on certain principles which validity had been questioned by the Central Bank in the case of this type of foreign exchange claims.

Since the end of last year, the Central Bank has begun hundreds of administrative proceedings against Argentine companies for alleged criminal foreign exchange infractions committed during the worst stage of the economic crisis unleashed in December 2001 and which led to the reestablishment of foreign exchange controls. The reason for the sudden interest of the Central Bank in bringing these claims is the avoidance of the statute of limitations, which would prevent them after six years from the date of the alleged infraction. Most proceedings started to this date involve the omission and/or delay beyond the required deadline of the transfer to Argentina and sale for pesos of the foreign currency proceeds of exports of goods and services.

The following are the three principles recognized by the Court of Appeals in a decision that favored the defendants although the transfer of the foreign currency to Argentina and its sale for pesos took place after expiration of the term applicable at that time:

(i)           The obligation of the exporter to transfer the foreign currency to Argentina is not absolute, but rather is conditioned on the receipt of the price of the merchandise sold abroad (the Court of Appeals expressly rejected the argument of the lower court that the representative of the exporter should have adopted precautionary measures to ensure the timely transfer of the foreign currency).

(ii)           The payment of obligations through set-off is established by the Civil Code and is applicable in foreign exchange matters such as this one.

(iii)          The economic crisis that affected Argentina at the time justified a delay of “something more than a month” in the transfer of the foreign currency.