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COVID-19 Venezuela: Consequences Under The Venezuelan Legal System

  • Market Insight 31 March 2020 31 March 2020
  • Americas

  • Coronavirus

COVID-19, or Coronavirus as it is commonly known, has had a significant impact on a global scale. On March 13, 2020, the Government of Venezuela announced the existence of several infected patients, and took a series of measures directed to preventing the spread of the virus, including a collective quarantine in several States of the country.

COVID-19 Venezuela: Consequences Under The Venezuelan Legal System

This newsletter attempts to illustrate the legal consequences the virus will have in certain areas of the law – since its impact and the measures it entails generate de facto situations that differ from the ordinary regulation of the day-to-day dynamic of a society or country, as opposed to the current unprecedented events.

1. Declaration of National Alarm:

The Government has declared a situation of National Alarm, pursuant to the provision in article 338 of the
Constitution:

Article 338: A state of alarm can be declared when catastrophes, public calamities or other similar events take place that seriously endanger the security of the Nation, or its citizens. Said exceptional state will last thirty days, and can be extended for an additional thirty days…”.

2. Contracts in General:

The situation at hand has been argued to be one of force majeure, and as such, it may be raised in multiple contracts, including those that are common in the daily economic activity of individuals and corporations: sales, rent, construction work, services, etc. This is commonly included in standard clauses and under the provision in article 1272 of the Venezuelan Civil Code.

"Article 1272: The debtor is not under the obligation to pay damages, when as a consequence of force majeure or an act of God, it has stopped providing or performing that which it was under obligation of, or has performed that which was prohibited.”.

However, force majeure issues have to be reviewed on a case-to-case basis, since it is ultimately fact specific.

3. Labor Law:

The Venezuelan Government has declared the suspension of labor activities, with the exception of the health, food and services areas (the Excepted Areas).

The companies and corporations must abide this declaration and are subject of closure if these demand its workers to avoid it against the decreed prohibition.

All employees must be informed of the Coronavirus COVID-19, and the measures for prevention of its spread.

The employees of the Excepted Areas, must mandatorily comply with the duties and obligations contained in article 54 of the Law for Prevention, Condition and Work Environment (LOPCYMAT for its acronym in Spanish), to avoid being laid-off for cause pursuant to the provision in article 79 section (d) and (e) of the Labor Law (LOTTT for its acronym in Spanish). Similarly, the Employer is obligated to comply with the provisions regarding hygiene and workplace safety, or could be exposed to fines stated in article 130 LOPCYMAT.

The committees for Prevention of Risks in the Workplace, through its Prevention Delegates, and Human Resources departments of the Excepted Areas, must ensure compliance with the rules regarding hygiene and workplace safety and be alert of the symptoms that the employees may present, in order to prevent the virus from becoming an occupational disease.

The non-excepted companies, have the right to demand its employees the fulfillment of their work which can be done from home, without exposure to the inherent risks of the pandemic.

In case of clarifications please contact Damirca Prieto, our Labor Law specialist at damirca.prieto@clydeco.com.ve.

4. Tax Law:

Article 103, section (1) of the Tax Code (COT for its acronym in Spanish) states the consequences of failing to comply with the formal duty of timely presenting Income Tax statements/tax returns, and declaration of Value Added Tax (VAT), amongst others. Generally, Income Tax statement is presented in Venezuela every March 31st.

The sanction for failing to meet the formal duty above, carries with it the closure of the office or establishment for ten (10) calendar days, and a fine up to the equivalent of one hundred and fifty (150) times the official exchange rate of the currency of highest value published by the Venezuelan Central Bank, i.e.: the equivalent of the amount of Bs.11.112.280,50.

In case the taxpayer cannot comply with the formal duty of timely presenting the relevant tax statements, due to the restrictions that arose by the appearance of the COVID-19, and in case of being sanctioned, it is possible in appropriate circumstances that the force majeure exception under article 85 section (3) of the COT may apply.

In any case it is likely that during this emergency situation, the Executive may decree as follows:

  • An extension for the deadline of presenting and paying the Income Tax, which lapses on 31 March 2020.
  • Exonerate from payment of Income Tax, those individuals with affected income due to them being restricted from assisting their jobs.
  • Relax the deadlines for declaration and payment of VAT, as well as including exonerations of up to one (1) year, or reductions of taxes for the most affected areas, pursuant to article 74 et seq., of the COT.
  • Exonerate from payment of taxes for importation to certain goods that are necessary against the virus in Venezuela.
  • Relax tax sanctions for a reasonable period of time and until the circumstances guarantee the taxpayers the possibility of timely complying with their tax obligations.

In case of clarifications please contact Mariana Branz, our Tax Law specialist at mariana.branz@clydeco.com.ve.

5. Aviation Law:

All flights from Panama, Colombia, Dominican Republic and Europe have been restricted for a period of 30 days. This restriction includes both commercial and private flights. However, cargo and mail/post flights can continue operating.

This power of the State is based on article 57 of the Civil Aeronautics Law:

Article 57: The National Executive may set and publish the prohibited, restricted and dangerous areas for air navigation. The National Executive, for reasons of flight safety, public interest or security and defense may restrict, suspend or prohibit, in all or in part of the National Territory, air navigation…”.

This is also based on the principle of sovereignty over the airspace above its territory, as recognized in article I of the Convention of International Civil Aviation executed in Chicago in 1944 (Chicago Convention of 1944).

To this date, the declared measures do not affect flights from Costa Rica, Mexico (Mexico City and Cancun), Ecuador (Quito and Guayaquil), Chile (Santiago de Chile), Nicaragua (Managua) and Argentina (Buenos Aires).

Some airlines have informed to have relaxed their fee conditions for rescheduling of their flights, exonerating the payment of applicable fees.

The catalogue of the rights of passengers in the Civil Aeronautics Law and in the General Conditions of Air Transportation remains in full force.

Therefore, for example, under article 100 of the Civil Aeronautics Law the carrier is responsible for damages caused to passengers for the cancellation of the voyage. Similarly, pursuant to the provision in article 22 of the General Conditions of Air Transportation, the passenger has the right to an alternate transportation or the reimbursement of the amount paid in these cases.

The airline, on its part, has the right to a compensation equivalent to 20% of the value of the ticket, when the passenger, without prior notice, does not use the purchased seat, (article 30 of the General Conditions of Air Transportation).

Finally, the mandatory use of protective masks has been established in order to access the national and international terminals, as well as General Aviation (private), throughout the whole country.

In case of clarifications please contact Rodolfo Ruiz, our Aviation Law specialist at rodolfo.ruiz@clydeco.com.ve.

6. Maritime Law:

Internationally, all major cruise lines have cancelled their voyages. This does not directly affect Venezuela, since it is currently not a destination for cruise lines.

It is possible some Venezuelan nationals had reserved in cruises abroad. The lines are likely to seek to invoke contractual limitations such as force majeure to justify that the voyage could not be done. There are likely to be issues around how tickets paid for are to be dealt with (for example reimbursement v. deferral) and whether there is any right to compensation. These will depend on the law and regulation that governs the tickets, although cruise lines have a reputation to protect which is a dynamic over and above strict legal liability.

On the other hand, the carrier of goods has a right to demand that the port to which the vessel is instructed to navigate be one in which the vessel and the crew may enter and exit safely with the exercise of good ordinary seamanship. It is legally arguable that COVID-19 makes a port unsafe, but this must be studied on a case-to-case basis.

Consequently, there is a possibility, if the facts so determine, that the impact of the principle of a safe port generates a reduction of the maritime traffic to Venezuela in the next days, without recourse by the receivers or importers – including the National Government.

The Maritime Authority of Venezuela, Instituto Nacional de los Espacios Acu├íticos (INEA for its acronym in Spanish) has issued a Circular titled (in its translation into English) “Special Notice-02 COVID-19” dated 13 March 2020 that imposes the following measures:

  • The obligation that the Captain of the vessel informs of the last three (3) ports she called;
  • Sanitary surveys;
  • In case a crew member is infected, the vessel will be quarantined;
  • Control and restrict from disembarking crew members of foreign; and
  • The use of protection masks in vessels and ports.

In case of clarifications please contact our Maritime Law specialists: Juan J. Itriago and/or Cristina Mujica at juan.itriago@clydeco.com.ve and cristina.mujica@clydeco.com.ve.

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