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Costa Rican Bar Association Challenges New Corporate Transparency Regulations

by rpetersen

In a significant development that underscores the intricate balance between regulatory compliance and legal frameworks, the Costa Rican Bar Association (Colegio de Abogados y Abogadas de Costa Rica – CAACR) has raised concerns over the new regulations introduced by the government. These regulations, part of the Transparency and Final Beneficiaries Registry (RTBF), have sparked a debate on their adherence to the country’s legal hierarchy and principles of legality.

At the heart of the controversy is the recent decree issued by the Ministry of Finance, which amends the RTBF regulations to mandate that only legal representatives with full power of Attorney (Poder Generalissimo)  of obligated corporate entities can submit the required annual declaration. This move has essentially eliminated the common practice of using a specialized power of attorney (Poder Especial)  for this purpose, a decision that the Bar Association argues violates civil and public administration law.

Understanding the Legal Quandary

Special powers of attorney are typically granted to represent individuals or entities in specific transactions, contrasting with general powers that cover a broad range of actions. The Bar Association argument hinges on the assertion that the new regulation contradicts Articles 1256 and subsequent ones of the Civil Code and Article 283 of the General Law of Public Administration. These articles delineate the scope of powers (mandates) that can be granted, a legal nuance that the Bar Association believes the new RTBF regulation overlooks.

Implications for Corporate Compliance

The RTBF, facilitated through the Central Direct platform of the Central Bank of Costa Rica, is designed to enhance corporate transparency by requiring entities to disclose their capital composition and identify their ultimate beneficiaries. This measure aligns with global efforts to combat fiscal fraud and ensure financial transparency. However, the Bar Association’s objections highlight the tensions between regulatory aims and existing legal frameworks.

The legal challenge posed by the Bar Association is not merely procedural but touches on broader issues of legal interpretation, the scope of regulatory authority, and the protection of rights under the Costa Rican legal system. The Bar Association has not ruled out seeking legal recourse should the government maintain the current regulation, signaling a potential legal battle ahead.

A Call for Reevaluation

The Bar Association’s stand against the new RTBF regulations is a call for a careful reevaluation of how legal reforms intersect with established legal principles and rights. It emphasizes the importance of ensuring that regulatory measures do not inadvertently contradict the foundational legal field  they are meant to operate within.

My perspective

From my perspective, I am pleased that the Bar Association is challenging the new regulations. Many of our clients who own businesses in Costa Rica lack the digital signature cards necessary to submit the form online by themselves. Consequently, we depend on a limited special power of attorney, allowing our clients to authorize us to submit the filings on their behalf. This type of power of attorney is specifically tailored to the action it authorizes, which is logical. The requirement for a more comprehensive General Power of Attorney, which must be registered in the National Registry to be legally valid, merely adds another layer of bureaucracy for us to navigate to comply with the law. The government should have heeded the old saying, “If it isn’t broken, don’t fix it.” The special powers of attorney were functioning effectively for this purpose, making their elimination completely unnecessary. I hope the Bar Association prevails in this matter.

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