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4. Rational Dispute Resolution
4.1 Rule of Law
4.2 Enforcement of Contracts
4.3 Commercial Dispute Resolution
In-Country Assessment

4. Rational Dispute Resolution

Goal – An efficient institutional framework that balances the rights of the public, owners, lenders and borrowers in the event of a dispute or loan default

 

4.1 Rule of Law

Core Question: Do all market participants abide by the rule of law and have confidence in the courts and the ability of police to control crime? No, Venezuela has had difficulty, in recent years, implementing fair and impartial judges. “Individual judges may face reprisals if they rule against government interests,” (Human Rights Watch, 2012). Therefore, market participants have little confidence in the courts and police. Additionally, under Hugo Chavez the National Assembly granted the president unthinkable power to impose penalties for crime. “As of November 2011 Chavez had adopted over 20 legislative decrees, including one reinstating crimes previously derogated by the legislature. The Supreme Court upheld the constitutionality of this decree, which criminalized several banking practices, arguing that economic crimes are “crimes against humanity” and could not be decriminalized,” (Human Rights Watch, 2012).

Source: Human Rights Watch 2012, World Report Venezuela
http://www.hrw.org/world-report-2012/world-report-2012-venezuela

Impartiality

4.1.1   What is the confidence level of the strength and impartiality of the police, courts and contract enforcement? Very Weak, Venezuela has a percentile ranking of 0.95 (2012) out of 100, trending ↓ since 2011 (1.41). In recent years and months, the Venezuelan people have protested extreme conditions and have been met with a police force that use abusive and deadly tactics to subdue them. Confidence is therefore minimal.

Source: Worldwide Governance Indicators 2012, World Bank
http://info.worldbank.org/governance/wgi/index.aspx#reports

Source: Venezuela: Political spiral of violence a threat to rule of law 2014, Amnesty International
http://www.amnesty.org/en/news/venezuela-political-spiral-violence-threat-rule-law-2014-04-01

Judiciary

4.1.2   Can members of the judiciary be held accountable for their actions? Weak. Venezuela scored a 60 for Judicial Accountability. Courts, in the past, have made decisions based on political criteria and to protect the government.

Source: Global Integrity Report 2009 – https://www.globalintegrity.org/global/the-global-integrity-report-2009/venezuela/

Costs of Crime

4.1.3   What are the business costs of crime and violence?  High Costs of crime and violence and therefore very weak sub-indicator, Venezuela ranks  146 out of 148 with a value of 2.1 out of 5 (1 being the most problematic).

Source: The Global Competitiveness Report 2013-2014, World Economic Forum
http://reports.weforum.org/the-global-competitiveness-report-2013-2014/#section=countryeconomy-profiles-venezuela

 

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4.2 Enforcement of Contracts

Core Question:  Are systems in place for timely and efficient enforcement of contracts?
Systems are in place but take an extremely long time and are quite costly. Dispute resolution is extremely difficult when it comes to contracts in Venezuela.

Source: Doing Business 2014, Enforcing Contracts: Venezuela
http://doingbusiness.org/data/exploreeconomies/venezuela#enforcing-contracts

4.2.1 Judical Enforcement

Venezuela has a strong overall ranking for enforcing contracts, 92. Costs and length of time are quite high though. Trend ↓ from 2013 (84).

4.2.1.1 What is the number of procedures involved in resolving a commercial dispute? 30 different procedures are involved in resolving a commercial dispute.

4.2.1.2 What is the time between the filing of a lawsuit and resolution in judicial enforcements? 610 days is the time between filing a lawsuit and resolution in judicial enforcements.

4.2.1.3 What is the cost of judicial enforcements as a percentage of claim value? 43.7% is the cost of judicial enforcements as a percentage of debt value.

Source: Doing Business 2014
http://doingbusiness.org/data/exploreeconomies/venezuela#enforcing-contracts

4.2.2 – Summary Proceedings

SQ 10  Summary proceedings are alternative dispute resolution processes where creditors can apply for a direct court order in property disputes. What is the time between notice of intent to foreclose and loan collection in summary proceedings if available to lenders?  Judicial sales are available in Venezuela and are the most common type of foreclosure in the country. All parties related to case are notified and a trial will take place.

SQ 11  What is the cost of summary proceeding if available to lenders as a percentage of property value? Costs are unknown, but the results of the foreclosure process pay off the mortgage first and then other lien holders.

4.2.3 – Power-of-Sale

SQ 12  Power-of-sale agreements give creditors the power to sell properties after notice to the borrower without court intervention. What is the time between notice of intent to sell and loan collection for power-of-sale agreements if available to lenders? Weak. Power-of-sale is available in Venezuela but rarely used. It is not available everywhere in Venezuela, but is faster than a judicial sale.

SQ 13  What is the cost of power-of-sale agreements if available to lenders as a percentage of property value? Unknown.

Source: Venezuela Foreclosure Attorney, Lawyers Attorney Guide
http://www.lawyers-attorneys-guide.com/venezuela-foreclosure-attorney-venezuela-foreclosure-lawyer/

 

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4.3 Commercial Dispute Resolution

Core Question: Can commercial disputes be resolved efficiently and fairly without exorbitant expense and delay? No. Commercial disputes in Venezuela are often slow and inefficient. Delay’s are often and corruption is not unheard of.

Source: Investment Climate Statement-Venezuela, US Department of State
http://www.state.gov/e/eb/rls/othr/ics/2012/191262.htm

Survey Questions

4.3.1 Commercial Courts

SQ 14  Do specialized commercial courts exist for the handling of property disputes and foreclosures? Yes. Venezuela has a legal system in place to help resolve foreign investment issues. Unfortunately the system is slow and has been accused of corruption. However, non-international property disputes are private legal matters.

Source: Expropriations, What’s Next Venezuela?
https://www.whatsnextvenezuela.com/issues/expropriations/
Source: Investment Climate Statement-Venezuela, US Department of State
http://www.state.gov/e/eb/rls/othr/ics/2012/191262.htm
Source: Property Disputes, Embassy of the United States-Venezuela
http://caracas.usembassy.gov/faq_acs.html#k

4.3.2 Alternative Dispute Resolution

SQ 15  Are alternative dispute resolution mechanisms in place including commercial arbitration, private mediation and community based processes? Yes, arbitration can be provided and can be legally binding without judicial approval.

Source: Investment Climate Statement-Venezuela, US Department of State
http://www.state.gov/e/eb/rls/othr/ics/2012/191262.htm

4.3.3 Commercial Treaties

SQ 16  What bilateral, regional and international commercial treaties exist concerning business between countries? Venezuela is a member of the World Trade Organization and has been since 1995. Venezuela is a member of “groups in negotiations with G-20, G-33, NAMA-11. Venezuela has partial preferential agreements with 12 other countries. Overall, Venezuela is weak in terms of bilateral, regional and international commercial treaties.

Source: World Trade Organization 2014, Venezuela
http://stat.wto.org/CountryProfile/WSDBCountryPFView.aspx?Language=E&Country=VE

Source: MercaTrade 2011, Trade Agreements Venezuela
http://www.mercatrade.com/blog/trade-agreements-venezuela/

 

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In-Country Assessment

FQ 18.  To what extent do practitioners report the use of formal contracts and trust institutions to support contract enforcement?