Implementation of Certain Aspects of the New Supply Law

On February 12, 2015, Decree No. 203/2015 (the “Decree”) was published in the Official Gazette, thereby implementing several aspects of the controversial Supply Law No. 20,680 (the “Supply Law”), after its amendment by Law No. 26,991.

The Decree (i) appoints the Enforcement Authority on the federal level; (ii) fixes the parameters necessary to establish the “fair and timely compensation” mentioned in section 2, subsection c) of the Supply Law; and (iii) creates the National Registry of Infringements to the Supply Law.

1. Enforcement Authority

Section 1 of the Decree establishes that the Trade Secretariat, dependent on the Ministry of Economy and Public Finance, will be the Supply Law’s Enforcement Authority at a federal level, with the authority to enact the complementary rules necessary for its implementation.

The Supply Law grants the Enforcement Authority broad regulatory and control powers. Among others, the power to establish profit margins, pricing references, maximum and minimum price levels; and the power to order for private individuals to continue the production, manufacturing, marketing, or supply of goods or services. See “The New Supply Law is in Force” in Marval News #143 dated September 30, 2014.

2. “Fair compensation”

Section 2 of the Supply Law establishes that, in the event that the Enforcement Authority orders the continuation of production, manufacturing, marketing, or supply of goods or services where these activities would not otherwise be economically viable, it must grant “fair and timely compensation”.

To this end, section 2 of the Decree provides that in order to establish said compensation, the parameters applicable will be those determined regarding State liability for legitimate acts, as regulated in section 5 of Law No. 26,944 (the “New State Liability Law”).

The New State Liability Law provides that the State’s liability for legitimate acts is only of exceptional nature.

Likewise, it establishes that the compensation for damages caused due to the legitimate activity of the State comprises: (i) the objective value of the goods, and (ii) damages occurring as an immediate direct consequence of the activity carried out by the public authority. In no case will the compensation cover loss of profits. See “Bill on State Liability Moves Forward in the Senate” in Marval News #140 of June 30, 2014.

3. National Registry of Infringements to the Supply Law

Section 3 of the Decree provides for the creation of the “National Registry of Infractions” (the “Registry”), within the jurisdiction of the Trade Secretariat, for the “registration of sanctioned acts” according to the Supply Law.

This Registry shall be uploaded to the Trade Secretariat’s website and kept permanently up to date.

Inclusion on the Registry expires after five years.

4. Final Considerations

Several months after the enactment of the amendment introduced by Law No. 26,991, the Decree comes to implement several aspects of the controversial Supply Law and thus to facilitate its application.

Considering the broadness of the powers granted by the Supply Law and the impact which may be derived from its effective use by the Government in relation to different economic sectors, the evolution of this process should be followed closely in order to adopt any pertinent courses of action.