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COLOMBIA--Law Firm of Lewin & Wills

CONSUMER PROTECTION SYSTEM

Colombian legislation has not regulated consumer protection in any special way as far as Internet transactions are concerned. As a result, we have to refer to general consumer protection regulations.

The governing principle in contractual relationships in Colombia is one of autonomous will. Under this principle, agreements between parties are law for them. Despite this, however, there are certain restrictions on this principle, and these include consumer protection regulations, which seek to protect the weak party in the contractual relationship with a view to maintaining the contractual balance which makes the commercial relationship fair and just.

To achieve this, the State adopts an interventionist position by putting up artificial market barriers to protect those involved and cover any deficiencies that might otherwise exist.

The National Constitution thus states that "the law shall regulate quality control with respect to goods and services offered and rendered to the community, and also the information that the public should be provided with during the selling process".

The law has established a voluntary public quality and suitability record for goods and services, whereby "every producer and importer may register the features which accurately determine the quality and suitability of those [goods and services] with the Superintendency of Industry and Commerce". This record will enable the responsibility of the producer for the quality and suitability of the goods or services to be established. It will also enable the presumed minimum guarantee for the goods to be determined, and the scope and extent of the wording and commercial advertising used by the marketer or seller.

Should a producer opt not to register its goods or services, it should anyway provide the consumer with all and sufficient information about the quality and suitability of the goods and services it offers.

With goods, the information should be provided "on the body of the goods themselves, or on the respective labels, containers or packaging, or on an attachment contained inside the same, or it should be handed to the consumer at the time the goods in question are acquired, used or enjoyed. If the contract is in writing, the said reference must of necessity be made therein".

In the case of services, the information should be provided "in writing and handed over at the time the services are contracted; similarly, the respective wording must of necessity be included in contracts when these are put in writing".

The above requirement seeks to ensure that the consumer is given as much information as possible so that he or she may make a free and conscious choice. Furthermore, the consumer is given a tool that he or she can use to enforce compliance, if the goods or services fail to have the features contracted. It will likewise be a tool for the producer, who will be able to show that the goods or services supplied do in fact meet the requirements established by it.

Despite the above, even when the producer has not informed the consumer of the quality and suitability features of the goods, every good or service has a presumed minimum guarantee. This guarantee will be enforceable against sellers and suppliers, who may in turn bring action until the actual producer is finally reached.

On the basis of the above, it can be said that Colombian consumer protection regulations go beyond the frontiers. Or rather, that they apply to suppliers, sellers and producers who sell products within the Colombian community, with this being understood as referring to Colombian nationals or foreigners who are resident in the country. Selling via the Internet therefore does not exempt sellers from their responsibilities and liability. Quite the contrary, for they should be alert to the fact that whenever they sell goods or render a service in Colombia, they become subject to Colombian consumer protection regulations.

DATA PROTECTION

Before a start is made on this chapter, it is important to point out that, as with all of this study, we will only refer to the gathering and use of personal information by individual consumers for commercial purposes and effects14.

The Political Constitution states that everybody "is entitled to know of, update and rectify information gathered about them in data banks and files in public and private entities" and that "when data is being gathered, treated and circulated, freedom and other guarantees which are enshrined in the Constitution shall be respected"15.

The Constitutional Court has expanded on this subject greatly. Nevertheless, its pronouncements apply only within the national context, which means data on any national or foreign person that is supplied within Colombia. This is based on Article 100 in the Political Constitution, which states that "foreigners in Colombia shall enjoy the same civil rights as Colombian citizens".

Even though nothing has been said in Colombia about the protection of data supplied via the Internet, we believe that existing pronouncements on this matter are perfectly applicable, since they are not restricted to data obtained by any specific means. Given below are some very important extracts from pronouncements made by the Colombian Constitutional Court on the question of protecting data about individual persons or the right to habeas data, as it has been called by Colombian jurisprudence.

* The right to habeas data seeks to protect people’s privacy from the increasing use of personal information by all kinds of entities and to ensure that people do not lose control over the information itself or the use to which this is put16.

* "The right to habeas data is a fundamental right which has been conceived in order to counteract the dangers inherent in developments in the fields of computers, electronics and telecommunications which make possible the unrestricted broadcasting of information about people. Its main purpose consists of keeping individual information safe from uncontrolled use. This right makes it legally possible for a person to prevent third parties from using false, incorrect or confidential information and thereby discrediting him or her or abusing the right to information"17.

Despite the above, however, nothing has yet been said in legislation or jurisprudence on the question of protecting information about Colombian persons outside the country.

JURISDICTION

Colombia is a "(...) unitary, decentralised Republic (...)"1. Congress of the Republic is the collective body which has the power to pass laws of a general nature which will be in force throughout the country2. Laws passed by Congress of the Republic govern and are binding on all Colombian nationals and foreigners on Colombian territory3 4.

It is equally important to stress that the Colombian Political Constitution is the highest-ranking set of regulations, and in the event of any discrepancy between the Constitution and any other regulation, the constitutional provision will therefore prevail5.

Article 1602 in the Colombian Civil Code establishes the general principle of private autonomy, and states that "every contract which is legally entered into is law for the contracting parties and may not be invalidated other than by mutual agreement between them or on legal grounds". The principle of autonomous will is nevertheless restricted by public order regulations and good customs. Public order regulations are deemed to be those which "seek to ensure that a society has the necessary organisation to enable it to operate normally and correctly, and the predominant feature of these is that they are of interest more to the community than to individual people and are inspired more by the general interest than that of individuals (....)"6.

Despite the autonomous will principle, it is thus not allowed for anyone to enter into a contract which has an illicit purpose7, or to contractually annul regulations of a public order nature, as established in Article 16 of the Civil Code.

There would be an illicit purpose in an act or contract when the provisions, taken in isolation or as a whole, break the law, especially binding regulations of a prohibitive nature. As far as jurisdiction is concerned, there would be an illicit purpose "(....) in everything that contravenes the public law of the nation. Thus, a promise to be subject within the Republic to a jurisdiction which is not recognised in the Republic is null and void on the grounds of defect in the object"8.

Individuals in Colombia may have recourse either to the Jurisdiction as such (the Courts) or, if specifically agreed between the parties, to an arbitration court for settling any controversies that might arise between them. In the first case (the Courts), the only jurisdiction that is recognised in Colombia is Colombian, and contracts which are effective in Colombia should accordingly be subject to Colombian jurisdiction, except for international arbitration courts where the parties are able to agree on a jurisdiction which is other than Colombian.

It is important to point out that jurisdictions other than Colombian are recognised in Colombia for international arbitration, since Colombia is a signatory to the 1958 New York Convention on recognising and executing foreign arbitration awards. This was subsequently ratified, and accordingly adopted as Colombian law by means of Law 315 of 1996. As a result, the parties to a contract are permitted under the New York Convention to agree upon a jurisdiction and applicable law that are not Colombian.

Verdicts given abroad, including arbitration awards made outside Colombia, may be effective in Colombia, provided that the party interested in ensuring that the said verdict is effective in Colombia files a suit with the Supreme Court of Justice ordering "exequatur" proceedings9 to be initiated with respect to the verdict it wishes to enforce. Exequatur is a procedure which is established in Colombian law for enforcing all kinds of foreign verdicts within Colombia. The procedure will vary, depending on the country of origin and agreements made.

Now, as far as the law which applies to contracts is concerned, we can say that the general principle in Colombia is that all contracts which are effective in the country are governed by Colombian law10.

PUBLIC SECURITIES MARKET

Colombia has not regulated the trading of securities via the Internet. It is therefore necessary to refer to general regulations governing the public securities market, and also to Law 527 of 1999, which regulated electronic trading.

1. The Colombian Securities Market

The public securities market was adopted in Colombia by means of Decree 653 of 1993. This market regulates activities connected with the issuing, subscribing, trading and mediation of documents issued in series.

Issue and subscription are subjects closely linked to the notion of "public offer". An offer is deemed to be public when it relates to securities which are registered in the National Register of Securities and Intermediaries (NRSI) and is addressed to unspecified persons or to a specific number of persons who total more than one hundred, irrespective of whether they are Colombian nationals or foreigners. To make a public offer, the offering party should draw up a prospectus and submit this to the Superintendency of Securities for approval. This prospectus should provide full information about the issuer and detail the features of the offer, and should also give financial information about the offering party. The information contained in the prospectus should also be certified by the issuer and its auditors, stating that the information is correct and complete and that no attempt is being made to divert the decision of investors.

It should be pointed out that under regulations which are currently in force in Colombia, issues are subject to Colombian legislation and jurisdiction, and that any foreigner who decides to acquire securities in Colombia is also subject to that legislation. Even more, a foreign investor is obliged to report foreign exchange income used to pay for the purchase of securities to the Colombian authorities, and if he fails to do so, he loses the foreign exchange rights to repatriate capital and transfer profits and is also liable to have pecuniary penalties imposed.

Meanwhile, we believe that securities transactions in Colombia may be carried out on the Internet, provided that they meet all the requirements stipulated in current legislation on the question. It should nevertheless be stressed that public securities market transactions should be carried out through intermediaries who are registered in the NRSI. As a result, information may be circulated on the Internet but the final transaction, which may also be via the Internet, requires the involvement of a registered intermediary. It is therefore highly probable that when the trading of Colombian securities starts on the Internet, the services will be required of a digital firm and certifying entity, as established in Law 527 of 1999, which has not yet been regulated in Colombia.

2. The foreign securities market

Colombian legislation has not specifically regulated what happens when a Colombian resident invests on the Internet in securities abroad which are offered via the Internet.

It is nevertheless worth pointing out that investments abroad by Colombians should be reported to the Colombian foreign exchange authorities.

 

BUYING AND SELLING GOODS AND SERVICES ON THE INTERNET

In order to be able to establish what the competent jurisdiction is as far as purchase and sale contracts are concerned for goods and services via the Internet, we have to establish where and how the contract is formalised.

There is no special regulation in Colombian legislation which regulates Internet contracts.

The purchase and sale contract is a consensus agreement, and it is therefore formalised at the time the contracting parties reach agreement with respect to the thing which is to be transferred and the price which the other party will pay for this.

The Colombian Commercial Code deals with distance contracts or contracts between absent parties, and in our opinion this could apply to contracts which are entered into on the Internet.

As far as the drawing up of distance contracts is concerned, the procedure is as follows. An offer will be deemed to have been made when any suitable means is used to make the addressee aware thereof1. The offer should contain the essential elements of the contract, and in the case of a purchase and sale agreement, these will be the price and details of the thing. The Code also establishes that traders may express their willingness to contract or be bound either verbally, in writing, or by any unequivocal means2. Finally, under Colombian commercial law, a contract will be deemed to have been entered into in the place of residence of the offering party, unless otherwise stipulated. As far as the time at which the contract is deemed to have been entered into is concerned, the law states that it will be deemed to have been entered into at the time the offering party receives acceptance of the proposal3.

It is important to point out that according to the law, the offering party is presumed to have received acceptance of the offer when the recipient thereof proves that he or she sent his or her acceptance within the period of time established therefor in the offer, or if no such period was stipulated, then within legal terms4. In the case of contracts which are entered into via the Internet, it would be assumed that this would be known at the time the acceptance reaches the e-mail address of the offering party.

On the question of services which are rendered via the Internet, we believe that the aforementioned regulations also apply here, and the contract for the rendering of services will therefore be deemed formalised at the time the offering party receives acceptance of the offer from the recipient.

As a result, Colombian jurisdiction will apply to these contracts, if the offering party is resident in Colombia. Similarly, the contract will have to be governed by Colombian law if it is to be executed in Colombia.

GAMES OF CHANCE ON THE INTERNET

Regulations governing games of chance on the Internet are still at the very early stages in Colombia. However, there are higher regulations governing games of chance in general which need to be taken into account when this subject is being analysed. In our opinion, these regulations also apply to games of chance on the Internet, in that they contain basic principles for games of chance in Colombia that cannot be ignored. We will therefore first of all briefly analyse general regulations which apply to games of chance in Colombia.

The Political Constitution1 states that the nation will hold monopolies in games of chance. In furtherance of this principle, the law2 created Ecosalud, which is a company made up of the nation and regional entities which hold the monopoly for all kinds of games of chance, so that Ecosalud may exploit this monopoly either directly or indirectly and invest all its profits in different areas involved in the health sector.

In its almost ten years of existence, Ecosalud has established regulations which apply to each individual game of chance, for example, roulette, blackjack, horse racing and one-armed bandits. All operators of these games should have an operating permit or a contract with Ecosalud and should pay this entity a percentage of their income.

As far as games of chance on the Internet are concerned, Ecosalud recently issued a resolution3 regulating the exploitation of games of chance using the telecommunications platform. This resolution specifically states that the operation of games of chance using a telecommunications platform may be by Internet or e-mail4.

Games of chance using the Internet have been strictly regulated by Ecosalud. Some of the more important provisions on this question are detailed below.

* In order to use the communications platform in the form of data messages as a means of placing bets on events held in Colombia or abroad, licences should be submitted from national and international authorities which authorise the event to be broadcast and the corresponding game of chance to be played with respect thereto5.

* Ecosalud has the power to control games of chance on the Internet at autonomous on-line terminals6. Operators of games are likewise obliged to simplify payment consultations and reports through an Ecosalud entrance line or password7.

* When the operational nature of the game so warrants, the operator should submit an application for the game of chance with respect to both national and international events, for the event to be broadcast and the corresponding game of chance played8.

* Operators of games on the Internet are obliged to have all licences and permits from the Ministry of Communications to operate the telecommunications platform that is to be used9.

* Operators of games of chance on the Internet should have an Internet access page with the corresponding software which will be responsible for taking information on bets being placed using this method10.

* The method used for placing the bet should not have any interference11.

* The operator should have a central server which enables transactions made to be consulted and controlled by Ecosalud, and guarantees that this will be possible12.

* The operator should guarantee the corresponding prizes plan for the games or draws, and this should be authorised by Ecosalud beforehand13.

The above are the most important points established in the said resolution with respect to games of chance on the Internet, although important issues such as applicable law and jurisdiction when a foreign element is involved have been left out. Nothing is said in the regulations about what happens when bets and games of chance are offered in Colombia by operators outside the country. There is also no regulation whatever governing what happens when games are offered abroad on the Internet from Colombia. However, we are of the opinion that the above provisions apply to all Colombian operators.

TAXATION COLOMBIA

Colombia has not adopted any specific rules on the taxation of e-commerce, even though there are some pronouncements of tax authorities that interpret existing regulations for these purposes. Therefore, existing regulations on taxation shall be applied on the transactions that take place on the Internet involving individuals or entities subject to Colombian tax jurisdiction.

Goods imported and exported to and from Colombia that have been ordered through the Internet will have the same tax and customs treatments as goods imported and exported through in accordance with traditional transactions. There are no specific tax and customs barriers imposed in Colombia to e-commerce related property, goods, services or information.

The same problems that rise in other jurisdictions related to the place where services are rendered and the acquisition of intangible property via Internet occur in Colombia.

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