Hard Knock to the Legal Certainty in Guatemala - Electric Sector in Crisis 

May, 2020 - Maria Solis, Gabriela Roca - Partner Energy and Natural Resources Practice

Guatemala dawns today with the validity of a law, contained in the Decree 15-2020, extremely harmful for the country, the economy, the industry and legal certainty, and in violation of the Constitution.

This law allows for the possibility of not paying certain basic services (water, cable, telephony, power [sic] (electric power) and internet) by the users, and imposes the obligation to public and private supplier companies not to suspend, under any circumstances, their provision. Furthermore, the law compels these companies to fund without any surcharge, cost, fine, default, interests, charge or any other penalty, during a term of up to 12 months, the intake of any of these services.

In the electric sector, private companies that provide the service of final distribution, collect approximately Q.900,000,000.00 per month, an amount that is in big measure used for the payment of the generation of power. Almost 2,000 megawatts of power and energy, produced by several sources of generation that have allowed Guatemala to consolidate a solid and efficient electricity grid over the past 20 years with competitive tariffs and a safe and high quality service, are delivered to the Interconnected National System every month.

This direct intervention in the industrial sectors that provide basic services, including the electric sector, will alter the entire productive, industrial, commercial, financial and economic chain of the country, therefore tremendously affecting its performance, which will, in its turn, impact the population this law pretends to protect. One does not have to be a great economist to know that the economical effects will be disastrous and the consequences of the application of this law will be harmful for the country.

The Decree 15-2020 contains several inaccuracies, mistakes and illegalities, by not defining the scope of application within the population and establishing provisions that not only are contradictory but also unequal between the different basic services.This law seeks to give a retroactive effect to legal provisions, does not respect the principle of autonomy of the parties nor the freedom of contract, it is expropriatory, it violates acquired rights and the principle of protection of the investment, among other aspects that violate and undermine the Political Constitution of the Republic of Guatemala.

It is precisely because of said unconstitutionalities that the President of the Republic of Guatemala vetoed this law a couple of weeks ago. However, the Congress insisted on its publication without obtaining the opinion of the Constitutional Court on its lawfulness, as mandated by the Constitution.

QIL+4 is currently advising different agents of the electric sector and supporting the industry in general with the legal measures that allow for the defense of acquired rights and the prevail of the legal certainty. We will continue to inform on the development of this situation.



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