A view from the Chilean legal market

Bofill Escobar Silva Abogados is a law firm with a decade-long history, comprised of attorneys renowned for their track record in resolving high-complexity domestic and international disputes. The firm is involved in several of the country’s most significant cases and holds a persistent presence across nearly every industry and sector of the economy.

Our focus lies in adding value when addressing challenging disputes. We are distinguished by our comprehensive and sophisticated approach to matters that span multiple legal domains; entail various and diverse conflicts requiring a coherent strategy; involve multiple legal entities on one or more sides of the issue; encompass laws from different countries; and present not only legal aspects but also economic, financial, and other questions necessitating integration of other areas of expertise into the strategy.

The firm’s work is founded on collaboration and assembling the optimal team for each case. The diverse experiences and expertise of the attorneys at Bofill Escobar Silva Abogados enable us to attain an integrated and innovative perspective on conflicts, thereby identifying the best means to address clients’ true challenges.

We don’t only handle litigation. Resolving conflicts means understanding their origins and finding ways to prevent them, so we can advise clients on improving their abilities to anticipate and address issues before they escalate. When a dispute arises, we analyse the best approach to resolve it, whether through negotiation or more assertive long-term strategies.

We stand out as a leading firm in the white-collar crime practice, participating in the most relevant cases of the last decade. We are a national reference in resolving tax disputes, with great effectiveness in highly complex tax conflicts for international groups and high-net-worth individuals. We are experienced in handling commercial disputes before international tribunals, including the International Chamber of Commerce, and other institutions. Our practice is also well-established in regulated markets, antitrust, and public works concessions, serving clients from various international industries.

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Legal conflicts disrupt normal business operations, distracting individuals and companies from their core activities and hindering negotiations and profitable commercial transactions. We aim to be trusted allies to our clients, supporting them in resolving their legal problems so they can focus on their core activities with the assurance that their interests will be well safeguarded.

We are a firm willing to take on cases involving significant stakes and relevant actors. Our team dares to tackle conflicts others might shy away from, and we adeptly navigate high-pressure environments and media exposure, often in collaboration with our clients’ media experts.

Additionally, we are known for establishing an effective and close relationship with our clients, maintaining clear and timely communication. All of this is guided by the principle that we strive to put ourselves in our clients’ shoes.

Our services are tailored to each client, accompanying them throughout the entire process of resolving their issue, remaining attentive to their feedback, and any changes that may require an adjustment of the strategy. Moreover, our advisory services adhere to the highest standards of quality and technical precision.

Competition Law gains increasing importance in everyday business practices. How does your firm advise clients to stay updated and comply with new regulations and trends in this area?

A recent development in Chilean competition law is the criminalisation of agreements between competitors. This means that board members and senior executives of companies may face in collusion cases potential fines, subsequent criminal prosecution, and even imprisonment. Another recent source of exposure for companies and their corporate governance is the inclusion of interlocking as a form of antitrust violation. The first cases involving these new rules are expected to be resolved in 2024.

In the context of increased risk and exposure for corporate governance, board members and executives, we help companies assess their current compliance status, identify gaps, and build strategies to enhance compliance effectiveness by providing tailored compliance consulting and risk management solutions. We have developed solid expertise in conducting internal investigations within companies, either pre-emptively or in the context of a conflict or prosecution. This activity involves detailed reviewing of emails and other communications, interviewing senior executives, and analysing compliance programmes, their awareness, and adherence within the organisation.

Digital platforms and new technologies have significantly influenced the development of new businesses and innovations. What institutional and private actions need to be considered in Chile in response to this impact?

Law firms need to not only embrace technological advancements for their internal processes, but also integrate them into their client advisory services. This is essential as markets are rapidly evolving due to innovations. In the case of Latin America, Chile stands out for its proactive approach towards both private and public technology initiatives. For example, in 2021, the country introduced the National Policy on Artificial Intelligence which outlines strategic AI priorities for the next decade along with a new regulatory framework focusing on ethics and governance. Additionally, the Chilean Congress is expected to pass a new data protection bill promptly aimed at positioning Chile as a leading nation in this area within the region.

Competition authorities have also played an active role in this area. The Chilean Competition Agency (FNE) is analysing a complaint against digital platforms for excessive pricing and lack of transparency. Additionally, it is in the final phase of its digital platform’s accommodation market study. The FNE also reached out-of-court settlement agreements with three food delivery apps, that were approved by the Chilean Competition Court. This Court will also judge a recent lawsuit filed by a digital newspaper against Google for abuse of dominance in the digital advertising market.

Chile has an important portfolio of infrastructure projects. What are the biggest challenges companies face when developing projects and activities in your country?

Given our firm’s experience in project management, one key factor of every infrastructure project is navigating the complex process of obtaining the necessary permits to develop the works (sectoral, environmental, etc). Obtaining these permits is important as it directly impacts project financing, time, and risks, which are crucial factors for project execution.

Addressing this challenge is particularly pertinent given the introduction of a new bill for the Framework Law on Sectoral Authorisations. This bill seeks to simplify procedures and response times for permits to develop projects and activities, thus promoting investments and improving the country’s productivity.

Bofill Escobar Silva Abogados focuses on understanding the entire project lifecycle, offering comprehensive planning, and effectively balancing and managing contract risks. If discrepancies arise with government agencies during the project’s lifetime, such as with additional works, our firm has the necessary experience to address disputes through negotiations or in judicial or arbitral proceedings.

Last year, a new law on economics and environmental offences was published, with its implementation currently underway. How do you think this will affect business operations in Chile?

The enactment of Law 21,595 on Economic and Environmental Crimes has been the most important legislative change in recent years and will result in a significant impact on the way business operates in Chile.

From a general point of view, the introduction of the category of ‘economic crimes’ and the establishment of a new and differentiated criminal statute for those cases, with implications in the determination of penalties, restriction of alternative penalties, among others, will imply greater surveillance and more rigorous sanctions directed toward legal entities and their executives. This will force companies to become involved in crime prevention from the highest levels, strengthening the figure of those in charge of compliance and adjusting crime prevention systems.

Regarding environmental matters, this Law establishes a unified catalogue of crimes against the environment, which are classified as second-category economic crimes, recognising the significantly greater social damage that can cause. This will probably lead to companies giving special importance to environmental compliance, focusing on the development of a robust crime prevention model, which fully identifies the activities and processes the risk behaviours defined, and investing in procedures to prevent criminal behaviour.

In terms of corporate governance, what are some best practices that businesses operating in Chile should prioritise, and how does your firm support them in implementing these practices?

In addition to the differentiated criminal statute already mentioned, Law 21,595 created the crime of ‘abuse of majority position’. This proscribes the adoption of abusive agreements by the board of a company, taking advantage of a majority position, when the agreement or action doesn’t report a benefit to the company but to the controller or the majority shareholders.

In this context, businesses operating in Chile should prioritise efforts to adapt their crime prevention models and their corporate governance policies to the new standards. This translates into the implementation of a cultural change in the company’s criminal risk management, as well as a periodic review and update of the compliance model according to the changes that the company’s reality may undergo.

We support the implementation of these practices through the advice that we continually provide to our clients, updating them and developing tailored strategies to face the problems that may arise because of non-compliance.

The Chilean government announced a tax reform programme across two separate bills looking at tax evasion and introducing tax changes aimed at increasing revenue. How will this affect foreign investment into Chile and what should businesses do to ensure compliance?

Within 2024 the Chilean government has announced two tax bills. The first one is called the Tax Compliance Bill, which is currently under discussion in the National Congress. This project is related to reforms that affect local taxpayers and the agencies related to tax administration as well as tax courts. It also contains changes to anti-avoidance rules. This bill does not contemplate specific changes aimed at or affecting foreign investors in Chile. However, they may be affected since the changes are of general reach.

The second bill is still in the pre-legislative stage; an official text proposed by the government has not yet been presented, although the key aspects on which it will be based have been made known. Several changes to the income tax law for individuals and companies will be considered, although nothing special for foreign investors has been announced. Some of the potential changes include the elimination of capital gains relief on stock trading (except for institutional investors), elimination of the corporate tax credit against personal taxes and increase of marginal rates of personal taxes.

In December last year, the US capital tax treaty with Chile came into effect. What implications does this have for businesses looking to expand into Chile?

The tax treaty generally intends to reduce tax-related barriers to cross-border investments and services between the US and Chile. This is done by either eliminating withholding taxes otherwise applicable by one of the two countries or by reducing the ordinary withholding tax rates on income such as dividends, interest and royalties.

This treaty’s entry into force will have multiple implications for businesses seeking to expand in Chile. However, the cap on tax withholding with respect to dividend income will not practically apply to dividend payments from Chilean corporations unless Chile modifies its integrated corporate tax system in the future, since it reduces dividend withholding tax from 35% to an effective 10.96% for treaty country residents.

The domestic rule providing for withholding tax at 4% on payments of interest made to a beneficial owner that is a financial institution resident in the US will not be affected. In all other cases, the maximum withholding rate on interest will be capped at 15% for the first five years after the treaty enters into force, after which it will decrease to 10%. Withholding on payments of royalties will be generally capped at 10%. Withholding on capital gains derived by a resident of a contracting state from the sale of shares or a company that is a resident of the other contracting state will generally be capped at a maximum rate of 16% provided certain ownership percentage thresholds are met. In addition, the tax treaty will generally exempt most US source service fees — normally taxed by Chile at 35% if paid from Chile — as business profits of US residents.

Looking ahead, what do you envision as the future challenges and opportunities for businesses operating in Chile, and how does your firm aim to address these dynamics in its legal counsel?

We anticipate both challenges and opportunities for businesses operating in Chile. One ongoing challenge is excessive bureaucracy, which has long existed in our country. For instance, a singular mining project requires approximately 219 sectoral and environmental permits, involving 28 public entities, and adherence to deadlines is often inconsistent.

However, there are significant opportunities. Chile has demonstrated legal stability in rules across different governments and committed political and economic support for investors. This provides a conducive environment for business operations and reduces investment risk. In recent years, however, some of that stable legal framework has been politically challenged, as it was with the case of the attempts to substitute our Political Constitution. Nonetheless the subjacent strength of our institutions has prevailed and in the environment towards foreign investment should continue being favourable.

At Bofill Escobar Silva Abogados, we are prepared to address these dynamics with our legal counsel. The diversity of experience and expertise of our partners and lawyers allows us to take a comprehensive and innovative look at conflicts and identify the best way to resolve the client’s real challenge, whether strictly legal, reputational, commercial or a combination of these.