Chile has a stable government, open economy, strong legal system, and a network of free trade agreements which make it appealing market for inward investment and international business.
It is an attractive jurisdiction for foreign lawyers to do business; Chile offers a sophisticated local legal services market which is involved in a fair amount of international work.
There are no regulatory restrictions on foreign lawyers working on ‘fly in/fly out’ transactions in Chile. It is however, difficult for a foreign lawyer to requalify as a Chilean abogado.
Chile has an open economy with a network of free trade agreements that cover over 80% of imports and exports. Key sectors include mining, agriculture, forestry and wine. The government encourages inward investment and promotes Chile to first-time investors in Latin America as a ‘springboard’ for investment into the rest of the region.
Most of the top local law firms are involved in international work and are keen to develop networks with English law firms. Domestic clients offer opportunities for international legal business with recent deals in aviation, insurance, project finance and general corporate law.
Regulation of foreign lawyers
Foreign lawyers are not subject to regulation by a bar association or the courts unless they requalify as a Chilean abogado.
Foreign lawyers can only provide legal advice on public international law. Only lawyers licensed by the Supreme Court as a Chilean abogado can appear in court and provide advice on Chilean law.
Registration by foreign lawyers
Foreign lawyers do not need to register their presence or their intention to provide legal services for occasional or ‘fly in, fly out’ services.
Foreign lawyers based in Chile can only provide legal advice on public international law.
To requalify as a Chilean abogado, a foreign lawyer must undertake a five year law degree at a Chilean university and obtain a licence from the Supreme Court; the previous requirement for Chilean nationality was removed in 2007. Only a limited number of foreign lawyers have requalified in Chile; most have found work with local firms as consultants or translators.
Issues when working with local law firms
Chilean lawyers rarely have malpractice insurance. It is not compulsory and is only occasionally drafted into contracts. In the case of a complaint against or dispute with a local lawyer the Colegio de Abogados can only get involved if the lawyer is a member, otherwise clients must take their case to the Supreme Court.
Local law firms
By Chilean standards, a large full service firm consists of 60 – 90 lawyers and there are only a handful of these. The mid-range of firms with 20-30 lawyers and smaller firms make up the majority of the market. There are also a number of boutique firms for areas including IP and finance, plus firms catering to Chile’s key economic sectors including natural resources and the environment.
The Law Society has put together a list of local firms based on a scoping visit to Santiago in 2008, see below to download, and the Asociación de Abogados de Chile provides a searchable database of its members by practice area.
International law firms
Whilst there is a significant market for international legal work, few foreign firms have established a presence on the ground in Chile due to the quality and variety of the local market. American firm Baker and McKenzie has a Santiago office and Spanish firms Uria Menendez and Garrigues have associated offices with local firms. There are no English firms with a Chilean office although many have formal or informal arrangements with local firms.
Only one Chilean firm, FerradaNehme, has established an office in London.
Market opportunities in Chile
Chile is an attractive market for foreign business; it has one of the most stable political and economic systems in the region and a government keen to create a favourable regulatory framework for business. It consistently scores well in international surveys and is the highest ranked South American country in the in the World Bank’s Doing Business report, the World Economic Forum’s Global Competitiveness report and Transparency International’s anti corruption report.
The economic outlook for 2009 suggests a slowdown in growth inline with global events which have seen commodity prices, the value of the peso and investment drop. However, the Economist predicts that Chile is well placed to mitigate the full effects of the global financial crisis due to sound public finances and a comfortable cushion of reserves. The country is due to go to the polls for a presidential election in December.
Key economic sectors
The main industries in Chile are mining, agriculture, forestry, fish and wine. It is rich in natural resources with copper, timber, iron ore, nitrates and precious metals. Sector opportunities include:
Mining: mining is of one Chile’s leading industries, it is the number one producer of a number of metals and minerals including 1/3 of the world’s copper output. Mining is the largest recipient of foreign investment thanks not only to its size but also the investment friendly mining laws in place; the UK is the third largest investor in the mining industry (19.4%) behind Canada (31.2%) and the US (25.9%). The mining industry has set up a fund to stimulate opportunities for SMEs to invest in new innovations in mining and its by products.
Wine: the UK is the largest export market for Chilean wine and a target for future expansion; London is home to the only international office of the Chilean wine promotion agency and the European base for one of Chile’s largest wineries Concha y Toro. There are opportunities for law firms to advise Chilean vineyards expanding into the European/UK markets.
Energy: there are very few national energy reserves so Chile has sought to diversify its energy supply through the development of LNG (liquid natural gas), hydro, coal and wind. There are opportunities for consultancy and technical expertise as the government develops new sustainable projects to tackle the energy shortage.
Gaming: the gaming sector looks set to develop as Chile positions itself as the gaming capital of Latin America. New legislation was introduced in 2005 to regulate casinos and offer 17 new licenses. These were recently awarded to both domestic and international firms.
Retail: the Chilean retail sector market leader in South America pioneered use of credit through store cards in the region. It is unregulated to date though there are increasing concerns about the lack of regulation of store credit particularly in light of recent global economic events.
The British Chilean Chamber of Commerce publishes the Chilean Economic Report every quarter (in January, April, July and October) with data on economic trends in key sectors. It is available for purchase on the Chamber’s website.
The financial and banking sector is regulated by the Superintendencia de Bancos e Instituciones Financieras.
Chile has three tax categories: First Category, Second Category and Additional Tax. First Category taxes apply to businesses and independent or freelance professionals. It is usually around 15 percent, but varies according to income bracket. Second Category taxes apply to employees of companies. The percentage rate also varies according to income bracket. Additional Taxes are levied to non-resident independent businesses and employees. See the Servicio de Impuestos Internos for more information on taxes for foreign investors.
The UK and Chile signed a double taxation agreement in 2003.
Alternative Dispute Resolution
Arbitration is an increasingly popular option for domestic commercial disputes with a high level of court support. The Santiago Centre of Arbitration and Mediation (CAM) offers domestic arbitration, mediation and international arbitration (based on the UNCITRAL model).
Foreign companies can establish in Chile as a branch of a foreign organisation, a corporation or a limited liability company with few restrictions on the form of establishment; however, banks, insurance companies, pension funds and other financial services are subject to additional regulatory requirements. It is usually recommended that foreigners to set up limited liability companies with at least one local partner.
The World Bank Doing Business Report provides a useful guide to the administrative procedures involved in setting up a business, their complexity and the time which it takes to complete each step of the process. This covers such matters as setting up a company, obtaining planning permission and enforcing a contract.
Foreign investment in Chile is regulated by the Foreign Investment Statute (DL 600). Investors may sign a contract with the Chilean State represented by the Chilean Foreign Investment Committee. The general regulations, terms, interest, and other modalities of foreign credit contracts, as well as surcharges related to total debtor costs (including commissions, taxes, and expenses) must be authorised by the Central Bank of Chile.
The UK is the fourth largest foreign investor in Chile, behind the US, Spain and Canada, with investments in the mining, services and water sectors. British companies active in the market include British Gas, ED&F Man, Royal Sun Alliance, and water services company Cascal.
Free trade agreements
Chile has signed free trade agreements with Canada, China, Costa Rica, El Salvador, the European Free Trade Association, the European Union, Japan, Mexico, New Zealand, Panama, South Korea, and the United States. It is an associate member of Mercosur, the regional trade agreement among Argentina, Brazil, Paraguay and Uruguay.
This network of international agreements gives Chile access to a market of almost 1.2 billion consumers world-wide.
Enforcement of judgements
Decisions by foreign courts may be recognised if:
(a) there is a treaty in effect between Chile and the country where judgment was rendered;
(b) if no treaty exists, the “principle of reciprocity,” allows the Supreme Court to recognise a foreign judgment, provided that the Chilean courts’ decisions have been similarly treated by the courts where the judgment was rendered;
(c) if these rules do not apply, the decisions of foreign courts shall have the same authority as if issued by Chilean courts, provided they contain nothing contrary to the laws of Chile, they are not contrary to Chilean jurisdiction, the party against whom the decision intends to apply was duly notified of the complaint (due process of law) and in the country of issuance, there is no pending appeal of any sort against the decision.