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Maritime Law--Latin America and Legal Reform? Is it Possible?


A few reports have come out that question recent legal and litigation reform in Latin America. The first comes from Mexico, where 337 mostly foreign-owned sailboats and yachts at 11 marinas around Mexico were impounded. While nearly half of all vessels have been freed, as of earlier this year, over 100 remain impounded, tied up in red tape and confusion in raids that initially seemed aimed at rooting out tax cheats and boat thieves. Mexico's Tax Service Administration, the equivalent to the U.S. Internal Revenue Service, said in a statement that "the republic reiterates its commitment to promote legality and support tourism...for the benefit of Mexicans." Many foreigners had to scramble to prove that they were the rightful owners of their vessels, as well as the vessel's legal status in Mexico. In Mexico, boat owners are not required to pay tax or duty if they have a 10-year Temporary Import Permit, which costs around $50.
 
 
The second report relates to companies doing business in Latin America generally. The U.S. Chamber Institute for Legal Reform ("ILR") reports that companies doing business in Latin America face an enhanced risk of lawsuit abuse in the region under proposed changes to the countries' court systems. In "Following Each Other’s Lead: Law Reform in Latin America"  and "Class Action Evolution: Improving the Litigation Climate in Brazil,"  the ILR found that potential judicial reforms in Argentina, Brazil and other Latin American nations could leave businesses at a significant disadvantage as defendants, greatly tilting the courts in favor of local plaintiffs.

The first report states that countries in the region look to each other for guidance on their judicial processes and have adopted the view that a consumer is at a disadvantage when that individual challenges a business in court. The report further notes that the legislatures in Argentina, Brazil, Costa Rica, Ecuador and Mexico have pending bills to either alter their class action systems or replace them. The second report highlights the fact that Brazil is considering changing class action rules that would either increase the number of the class action lawsuits or weaken protections that ensure proceedings are predictable and unbiased.
 
These two reports serve as a warning to companies. Foreign companies should watch out for proposed changes to class action litigation in Latin America and the ripple effect this will have on business. In addition, if these current proposals are implemented, they could have costly, unintended economic consequences for many Latin American countries.
 

If you are interested in receiving either the report on Mexico's seized vessel policy or on the legal reforms planned for many Latin American countries or wish to contact me in general, please write to me at mov@chaloslaw.com.

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