JUSTIFICATION FOR THE USE OF A DNU

The DNU (Decree of Necessity and Urgency No 70/2023) contains in its recitals an extensive justification regarding the circumstances that enable its issuance. In summary, it states (i) the Republic is facing an economic situation of “terminal crisis” as a result of the policies of the outgoing administration, and (ii) that the annualized monthly inflation would imply an inflation rate of 300% per year, an inflation rate of between 20% and 40% per month for the months between December and February, and a threat of a possible inflation rate of 15,000% per year, which, together with other indicators, constitutes “a genuine emergency situation that imposes on the State the duty to protect the vital interests of the community” (in accordance with the citation therein contained from the Supreme Court of Justice of the Nation in case “Consumidores Argentinos c/ EN – PEN – Dto. 558/02-SS – ley 20.091 s/ amparo ley 16.986” of Fallos 333:633 on DNUs).

GENERAL ISSUES

The DNU encompasses numerous and diverse subjects. It is important to point out that Law No. 26,122, which regulates the Congressional approval procedure for such decrees, establishes that the Houses of the Congress “cannot introduce amendments, additions, or deletions to the text of the Executive Branch, and must limit themselves to the acceptance or rejection of the Decree by a majority vote of the members present.” In other words, the DNU must be accepted or rejected in its entirety.

It is worth noting to remember that in the case of other DNUs of general deregulatory scope, covering various subjects, political opposition to their approval by Congress has led to negotiations in which most of the reforms intended by a general DNU had to be negotiated and approved by separate laws (as was the case with DNU No. 27/2018 issued by then-President Macri).

JUSTIFICATION OF SPECIFIC MEASURES ADOPTED

Linked to the above, in many cases, the DNU does not clearly state the relationship between the situation of necessity and urgency and the emergency it declares with each of the norms it repeals or replaces (for example, in relation to the Rural Lands Law No. 26,737, it merely states in its recitals that “it is necessary to repeal Law No. 26,737, which limits the right of property over rural land and investments in the sector”), and how the measure taken specifically contributes to solving the general situation referred to in the DNU.

This is important to the extent that the review standard established by the SCJN in the case “Consumidores Argentinos” invoked in the recitals of the DNU is applied, which sets that norms approved by a DNU that do not translate into a decision of a transient nature aimed at alleviating a supposed exceptional situation in the sector are not constitutionally admissible.

DATE OF APLICABILITY

The DNU does not contain a provision declaring its entry into force . Therefore, given its publication date, its provisions shall be understood to take effect on the eighth day following publication, which is December 29, 2023, in accordance with the general rules on the entry into force of norms contained in Section 5 of the Civil and Commercial Code of the Nation.

Notwithstanding the above, the DNU contains a provision with immediate effect (the 180-day period “from the issuance of this” of Section 51 of the DNU to make effective transformations in joint-stock companies of companies or enterprises with state participation, regardless of the type or corporate form adopted).

Decrees of Necessity and Urgency (DNUs) take effect from their entry into force. In the event of rejection by a resolution of both chambers of the National Congress, they are repealed, “while preserving acquired rights during their duration,” in accordance with Section 24 of Law No. 26,122.

SPECIFIC ISSUES OF PUBLIC LAW

DECLARATION OF EMERGENCY – DEREGULATION – INTEGRATION INTO WORLD TRADE

The DNU declares in its Section 1 a state of public emergency “in economic, financial, fiscal, administrative, pension, tariff, health, and social matters until December 31, 2025.”

In relation to the above, the DNU is innovative in that the declaration of “emergency” has traditionally been made through a formal law issued by the National Congress, establishing the scope of the powers derived from such a situation, particularly the legislative delegations mentioned by Section 76 of the National Constitution and their requirements. The Executive Branch appears to interpret that the “necessity and urgency” existing for the issuance of the DNU also implies a necessary declaration of emergency by the Executive Branch with the indicated scope. This would imply that by virtue of the emergency declared by the DNU, the Executive Branch will have additional “self-delegated” legislative powers.

Section 2 of the DNU establishes the broadest deregulation of trade, services, and industry throughout the national territory, and, therefore, all restrictions on the supply of goods and services, as well as any regulatory requirements that distort market prices, will be null and void. To achieve this purpose, it is established that the regulations will determine the deadlines and instruments through which the deregulation provided for in the previous paragraph will be implemented.

Furthermore, to fulfill the objective of increasing Argentina’s integration into world trade as outlined in Section 3 of the DNU, it is established that the National Executive Branch will draft or enact all necessary regulations to adopt international standards in the trade of goods and services, seeking to harmonize the domestic regime, to the extent possible, with other countries in the Mercosur or other international organizations (WTO and OECD).

It can be understood that in order to achieve these objectives of deregulation and integration, the Executive Branch may make use of the broad powers derived from the “emergency police power” as declared in Section 1 of the same DNU.

ECONOMIC DEREGULATION – REPEAL OF THE SUPPLY LAW AND BUY ARGENTINE AND SUPPLIER DEVELOPMENT REGULATIONS

In its Title II, initial part, it is important to note that the DNU, among other laws, repeals Law No. 20,680 on Supply of Goods and Services, which had been rightly questioned for its constitutionality for many years due to the excessive and clearly interventionist scope of its provisions (which allowed the imposition by the Secretary of Commerce as the implementing authority of maximum prices, obligations of production and supply at specified prices, etc.), accompanied by excessive repressive powers. This had led to significant arbitrariness and injustices against producers of goods and services.

The validity of this law had been almost entirely “suspended” by another general deregulatory regulation in 1991, Decree No. 2284/91, known as the “Economic Deregulation Decree,” and ratified by Congress through Law No. 24,307. However, there were certain doubts about this matter, particularly in light of Law No. 26,991, which seemingly restored its full validity.

The DNU also repeals the substantive regulations of Law No. 27,437 on “Buy Argentine” (a piece of legislation that contained specific privileges for locally manufactured goods), which, in principle, would facilitate and reduce the cost of procurement processes for goods by governamental agencies and individuals to whom the National Government had granted licenses, concessions, permits, or authorizations for the provision of public works and services.

ADMINISTRATIVE REFORM

In its Title III, the DNU repeals Decree Law No. 15,349/46 on Mixed Economy Companies, Law No. 13,653 on State Enterprises, and Law No. 20,705 on State-Owned Companies. Additionally, the DNU stipulates that all companies or enterprises with federal government participation, regardless of the type or corporate form adopted, will be transformed into Joint-Stock Companies (to the extent that they are not already such type of companies), within a period of 180 days from the issuance of the DNU. The resulting companies will be subject to the provisions of the General Law of Companies No. 19,550 (and its amendments) on equal terms and without any public prerogatives, advantages, or benefits in relation to companies of the same type that do not have state participation. In those companies in which the Federal State holds a majority shareholding, the provisions of the Financial Administration Law No. 24,156 (and its amendments) concerning the control of such participation shall apply.

The purpose of these provisions, as stated in the recitals of the DNU, is to “improve the transparency and corporate governance of these companies, while also facilitating the transfer of shares to their employees, in cases where progress in this direction is desired, in accordance with the prerogatives of Law No. 23,696.” The DNU adds the Bank of the Argentine Nation to the list of companies subject to privatization, originally exempted from this process in the original wording of Law No. 23,696.

To this end, modifications are also introduced to the provisions of Law No. 23,696 regarding the Employee Ownership Program to facilitate the transfer of shares from currently state-owned companies to their employees. However, the general provision of Law No. 23,696 is maintained, which determines that the declaration of a company as “subject to privatization” by a state-owned entity shall be made by the Executive Branch (PEN), but in all cases, it must be subsequently approved by a law of Congress; it is worht noting that the original procedure alternative for privatization provided in the mentioned law, which consisted of granting tax benefits to the privatized company, is eliminated.

Additionally, the DNU repeals the substantive obligations imposed by “Buy Argentine” Law No. 18,875 on the national public administration, its dependencies, agencies, and autonomous or decentralized entities, state-owned companies in general, and concessionaire companies of public services for the acquisition of goods and services of national origin.

Furthermore, Law No. 14,499 on the basis for the determination of pensions and retirement benefits is also repealed.

ENERGY

Title VIII contains various significant modifications in the field of energy.

A “simplification of Law No. 27,424 on distributed energy” was enacted, eliminating state aid and the control structure, which entails the removal of the FODIS Trust Fund, promotional benefits, and the regime for promoting domestic industry in this area contained in that law (this is consistent with the provisions regarding the repeal of other promotion regimes for the purchase of domestic goods and services established by other provisions of the DNU).

Law No. 25,822, which had established the “Federal Plan for Electric Transport” with funds from “SALEX” generated by “Surplus Capacity Restrictions,” was fully repealed.

Furthermore, Decree No. 1,060/00, which set maximum durations for exclusive fuel supply contracts between oil companies or fuel suppliers and service station operators and established percentages of participation of oil companies or fuel suppliers as owners or operators of the entire network of service stations selling their own brands, was also repealed.

Decree No. 1491/02 on certain aspects of Export Contracts for firm power and associated electrical energy, as well as Commercialization Agreements related to specific exports that had been exempted from the pesification regulations of Emergency Law No. 25,561, was also repealed.

Additionally, (i) Decree No. 634/03, which granted the Secretariat of Energy the authority to redetermine fees and prices under certain conditions regarding the execution of high-voltage electricity transmission expansions, and (ii) Decree No. 311/06, which allowed for repayable loans from the National Treasury to the “unified fund” created by Law No. 24,065 and intended for the payment of obligations due to that fund for the fulfillment of its specific functions and the maintenance of the price stabilization system in the Wholesale Electricity Market (MEM) without distortions, were both repealed.

Finally, and perhaps the most relevant decision in this area, the Secretariat of Energy is empowered to redefine the current tariffs subsidy structure to ensure that end-users have access to basic and essential electricity and natural gas consumption, primarily considering a percentage of household income, individually or jointly for electricity and natural gas, to be established by regulation.

COMMERCIAL AIR TRANSPORT

The DNU contains numerous provisions by which existing regulations in the field are repealed and replaced. In a brief summary, it can be stated that provisions repeal the Air Commercial Policy Law No. 19,030, whose fundamental principle was to ensure, domestically, “aerocommercial connections between points within the country through state, mixed, and private air transport services, exclusively national carriers” (Section 2) and internationally, principles of balance and reciprocity between national and foreign carriers.

In the same vein, multiple provisions of the Aeronautical Code that embodied reservations or benefits for national carriers are replaced, liberalizing the entry of new providers under the principles of competition, non-exclusivity, and tariff freedom. Provisions on aircraft registration and usage are introduced to simplify these activities, facilitate the dissemination of related information, and encourage the use of electronic formats for associated actions.

A significant provision of the DNU is one that, in addition to the provisions on reforms and potential privatization of public companies, amends Law No. 26,466 on the expropriation of Aerolíneas Argentinas S.A. (and Austral Líneas Aéreas S.A., now absorbed by the former) and raises the limit for transferring ownership of expropriated shares to employees of these companies in accordance with the Employee Ownership Program, allowing for partial or complete transfer. This allows for the potential transfer of full ownership of the company from the Federal Government to its employees.

COMMUNICATION

The reforms introduced by the DNU allow for the accumulation of licenses for satellite services with other licenses, as Section 46 of the Audiovisual Communication Services Law No. 26,522 is repealed, and the rules for license accumulation are modified by amending Section 45 of the referenced law.

Regarding Information and Communication Technologies (ICT) and Telecommunications, the provision of satellite communication system facilities is liberalized, and these services are subject to the general rules of ICT services, with necessary modifications made to Law No. 27,078.