Blockchain and E-Invoicing in Colombia
After several decades, the billing system has achieved stability as a tool of efficiency in the control and collection of taxes by the state, as a business tool regarding factoring, and there is even a better understanding of the Colombian Courts of how to collect debts. based on electronic invoices that have not been paid. The invoices in physical format will disappear soon from the Colombian economy and this is a very important factor that can encourage the formalization of many businesses and the popular economy, that is, the economy of traditionally marginalized sectors, whether in large cities or in regions far from economic centers. To the extent that electronic invoicing has become mandatory for companies in Colombia, cybersecurity risks have increased. It is evident that many companies have the duty to adopt the digital billing system but for that reason they do not adopt information security policies nor do they acquire tools or advice to improve the cybersecurity of information systems.
The challenges to come now have to do with issues such as cybersecurity in electronic invoicing, the link to invoicing to transport and international trade documents and the massification of electronic factoring. One of the routes to explore in the short term is the use of blockchain platforms for the creation and exchange of electronic invoices.
Electronic invoices (e-invoices) and blockchain are two technologies that can be integrated to enhance the efficiency, security, and transparency of financial transactions. Blockchain is a decentralized and distributed ledger that records transactions across a network of computers. Once a (information) block is added to the chain, it cannot be altered, ensuring the integrity of the data. The transparency of the blockchain allows all participants to view the transaction history.
Digital transformation of a company and e-invoicing
Implementing e-invoicing can serve as a foundational element for the digital transformation of a company, offering numerous benefits that go beyond just the finance and accounting departments.
E-invoicing automates the invoicing process, reducing manual efforts, minimizing errors, and accelerating the entire invoicing lifecycle. The automation of invoicing workflows can lead to faster approvals, quicker payment cycles, and improved overall operational efficiency. By eliminating paper-based processes, companies can save costs related to printing, postage, and storage, contributing to a more sustainable and cost-effective approach.
Automation reduces the likelihood of errors in invoicing, helping avoid costly mistakes and the need for manual corrections. E-invoicing provides real-time visibility into the status of invoices, allowing better tracking and management of cash flows. Centralized electronic records facilitate better control and management of financial data, enabling improved decision-making.
E-invoicing systems often come with features that help companies comply with local and international invoicing regulations, reducing the risk of non-compliance penalties. The digital nature of e-invoices allows for detailed audit trails, making it easier for companies to demonstrate compliance during audits. E-invoicing systems generate structured and easily accessible data. This data can be leveraged for analytics, providing insights into spending patterns, vendor relationships, and financial performance. Integration with Enterprise Resource Planning (ERP) systems allows for seamless data flow, enabling more comprehensive analytics and reporting capabilities.
E-invoicing often leads to faster payment cycles, improving relationships with suppliers. Digital communication channels associated with e-invoicing can foster better collaboration and communication between a company and its partners. E-invoicing systems typically employ robust security measures, reducing the risk of data breaches and ensuring the confidentiality of financial information. Electronic and digital signatures and encryption technologies can be employed to enhance the security of e-invoices, mitigating the risk of fraud. E-invoicing solutions can easily scale to accommodate the growth of a company, making them suitable for businesses of various sizes. E-invoicing can serve as a foundation for integrating with other emerging technologies, such as blockchain or artificial intelligence, in the future.
For instance, AI technologies, such as optical character recognition (OCR) and natural language processing (NLP), can be applied to automatically extract relevant information from invoices. This eliminates the need for manual data entry, reducing errors and speeding up the processing time. AI algorithms can also be employed to match invoice details with purchase orders and delivery receipts, ensuring accuracy and automating the reconciliation process.
To sum up, e-invoicing forms a critical component of a company’s digital transformation journey, contributing to operational efficiency, cost savings, compliance, and improved decision-making capabilities. It aligns with broader efforts to embrace digital technologies and positions the organization for further innovations in the digital era.
Blockchain and e-invoicing in transport and logistics
Blockchain can enhance transparency by providing a tamper-proof and immutable ledger for supply chain transactions. Different stakeholders in the transport and logistics industry may use diverse data formats and systems. Implementing standardized data structures compatible with blockchain is an ongoing challenge. The Internet of Things (IoT) plays a crucial role in tracking and monitoring goods in transit. Integrating IoT data with blockchain for real-time visibility poses technical challenges but is essential for comprehensive supply chain solutions.
Adhering to existing regulations while implementing blockchain solutions can be complex. Regulatory bodies may need to develop guidelines that address the unique aspects of blockchain in transport. The initial costs of implementing blockchain solutions and ensuring the necessary infrastructure can be substantial. Companies need to weigh the potential benefits against these costs.
The Bolero platform, for instance, provides solutions for the digitization of trade documentation and the management of trade finance processes, particularly in the realm of international trade and shipping. Bolero facilitates the electronic issuance, presentation, and transfer of key trade documents, such as bills of lading, invoices, and letters of credit.
This platform aims to streamline the traditional paper-intensive processes associated with international trade. Digitalizing documents can reduce errors, enhance efficiency, and provide a more secure and transparent environment. Bolero enables secure communication and collaboration among different parties involved in a trade transaction, including exporters, importers, banks, shipping companies, and other intermediaries.
One significant aspect is the electronic management of bills of lading, which are crucial documents in international trade. Electronic bills of lading can expedite the transfer of goods and reduce the time and costs associated with physical document handling. Bolero’s platform often integrates with trade finance systems, allowing for more efficient processing of letters of credit and other financial instruments used in international trade.
Bolero provides a global network that connects various participants in the trade ecosystem, fostering collaboration and communication across borders. The digitalization of trade documents on the Bolero platform can contribute to risk mitigation by reducing the potential for fraud and errors associated with paper-based documentation.
Blockchain technology enhances cybersecurity in documents used in transport and logistics primarily through its inherent features of immutability, decentralization, and cryptographic security. Once data is recorded on a blockchain, it becomes extremely difficult to alter or delete it. Each block in a blockchain contains a cryptographic hash of the previous block, creating a chain of blocks that are inherently linked. Any attempt to alter data in a block would require altering all subsequent blocks, which is computationally infeasible due to the decentralized and distributed nature of blockchain networks. This immutability ensures that once a document is recorded on the blockchain, its integrity is preserved, making it highly resistant to tampering. Traditional document management systems typically rely on centralized servers, making them vulnerable to single points of failure and hacking attacks. In contrast, blockchain operates on a decentralized network of nodes, where each node stores a copy of the entire blockchain. This decentralized nature eliminates the reliance on a single central authority, reducing the risk of data breaches and unauthorized access. Even if some nodes are compromised, the integrity of the overall network remains intact, enhancing the security of documents stored on the blockchain.
Blockchain employs advanced cryptographic techniques to secure transactions and data. Each transaction or document update is cryptographically signed, ensuring that only authorized parties can make changes to the data. Public-key cryptography is commonly used to authenticate users and validate transactions, ensuring that only users with the correct private keys can access and modify the documents. This cryptographic security adds an additional layer of protection against unauthorized access and tampering. Blockchain provides transparency by maintaining a complete and transparent record of all transactions or document updates on the network. Every change made to a document is recorded on the blockchain, along with a timestamp and cryptographic signature, enabling easy traceability and auditability. This transparency helps to detect any unauthorized changes or malicious activities, enhancing the overall security of documents stored on the blockchain.
Overall, blockchain technology offers significant improvements in cybersecurity for documents by providing immutability, decentralization, cryptographic security, transparency, and automation. These features help mitigate the risks associated with traditional document management systems and enhance the integrity, confidentiality, and availability of sensitive information.
Integration of e-Invoices and Blockchain:
Blockchain platforms often support smart contracts, which are self-executing contracts with the terms of the agreement directly written into code. Smart contracts can automate various processes in e-invoicing. Storing e-invoices on a blockchain provides an immutable record of all transactions. This helps prevent fraud and ensures the integrity of the invoicing process. Participants in the network can trace the entire history of transactions, providing transparency and accountability in the invoicing process.
The immutability of blockchain ensures that once an invoice is created and agreed upon, it cannot be altered. This reduces the risk of fraudulent activities. Smart contracts can automate various aspects of the invoicing process, such as payment verification, triggering automatic payments when conditions are met, and updating records across the network.
Blockchain provides a transparent and auditable trail of transactions, making it easier for auditors to verify the accuracy and legitimacy of financial records. Automation, reduced fraud, and improved efficiency can lead to cost savings for businesses involved in the invoicing process. Achieving widespread adoption and standardization of blockchain-based e-invoicing systems may require collaboration among businesses and regulatory bodies.
Ensuring that the blockchain network can handle a large volume of transactions is crucial for the scalability of the system. Businesses may face challenges when integrating blockchain-based e-invoicing with their existing systems.
In summary, integrating e-invoices with blockchain technology can enhance the security, transparency, and efficiency of the invoicing process. It requires careful consideration of technical, regulatory, and business challenges to realize its full potential. In the case of Colombia’s regulation on electronic invoices, progress must be made in incorporating, for now in the sandbox planned by DIAN (Colombian Tax Authority), standards that allow the use of artificial intelligence and blockchain in the management and handling of electronic invoices.
Legal liability issues of artificial intelligence and corporate decision making
Artificial intelligence (AI) is now mainstream, in particular, in particular the most popular applications of generative AI. Companies have realized that it is a tool, in its different modalities and versions, that allows making processes more efficient and agile or reconsidering the allocation of the workforce for certain tasks. The decision to acquire or develop AI tools depends on the type of industry and specific needs.
INTRODUCTION
Corporate management in the age of AI is marked by significant changes in how businesses are organized, operate, and make decisions. Artificial Intelligence technologies are transforming the corporate landscape in various ways, leading to both opportunities and challenges for organizations.
Corporate management in the age of AI requires a strategic approach to leverage the potential of AI technologies while addressing the challenges and ethical considerations associated with their use. Companies that adapt and integrate AI effectively into their operations are more likely to thrive in the rapidly evolving business landscape. Generative AI offers numerous opportunities for businesses, notwithstanding, CEOs and organizations can make mistakes when implementing or utilizing these technologies. Underestimating the Technology: One of the most common mistakes is underestimating the capabilities and limitations of Generative AI.
ARTIFICIAL INTELLIGENCE AND CORPORATE DECISION-MAKING
Artificial Intelligence is useful in corporate decision-making across various industries. For instance in the following fields: (i) Data Analysis and Insights: AI can process and analyze large volumes of data to extract valuable insights. This helps businesses make data-driven decisions by identifying trends, patterns, and anomalies in their data; (ii) Predictive Analytics: AI algorithms can be used to predict future trends, customer behavior, market changes, and more. This assists in making proactive decisions and planning for the future; (iii) Customer Relationship Management (CRM); (iv) AI-powered CRM systems can analyze customer interactions, preferences, and feedback to improve customer service, personalize marketing campaigns, and enhance customer retention strategies; (v) Financial Forecasting: AI can analyze financial data and market indicators to assist in financial planning, budgeting, and investment decisions. It can also help detect financial fraud and reduce risks; (vi) Supply Chain Management: AI can optimize supply chain operations by predicting demand, managing inventory, improving logistics, and reducing costs. This leads to more efficient decision-making in supply chain management; (vii) Human Resources: AI can assist in talent acquisition by screening resumes, conducting initial interviews, and identifying top candidates. It can also help in workforce management and employee engagement; (viii) Marketing and Sales: AI-powered marketing tools can segment audiences, recommend product recommendations, and personalize marketing campaigns. AI can also analyze sales data to optimize pricing strategies and sales forecasts; (ix) Risk Management: AI can assess and predict various types of risks, including cybersecurity threats, credit risks, and market risks. This helps businesses make informed decisions to mitigate and manage risks effectively; (x) Process Automation: AI-driven automation can streamline repetitive tasks and decision-making processes. It improves efficiency and reduces human errors, allowing employees to focus on more strategic tasks; (xi) Natural Language Processing (NLP): NLP-based AI systems can analyze customer feedback, social media mentions, and other text data to gauge public sentiment and make marketing or reputation management decisions; (xii) Product Development: AI can assist in product design and development by analyzing market data, customer feedback, and competitor information to identify opportunities for innovation and improvement; (xiii) Compliance and Regulation: AI can help businesses stay compliant with industry regulations by monitoring and reporting on regulatory changes, ensuring adherence to data protection laws, and identifying potential compliance issues; (xiv) Strategic Planning: AI can provide insights into long-term strategic planning by analyzing market trends, competitive intelligence, and other factors that affect the company’s growth and direction; (xv) Personalized Customer Experiences: AI-driven personalization enhances customer experiences by tailoring product recommendations, content, and communication to individual preferences.
AI can be applied to corporate decision-making. The specific use cases and benefits of AI will vary depending on the industry and the organization’s goals and needs.
LIABILITY OF DIRECTORS AND CEO
The liability of directors in corporate decision-making can vary depending on the legal and regulatory framework of the jurisdiction in which the corporation operates. Directors have a fiduciary duty to act in the best interests of the company and its shareholders. Here are some key aspects of liability for directors in relation to corporate decisions:
- Duty of Care: Directors are generally expected to exercise due care, skill, and diligence when making corporate decisions. This means they should make informed decisions, be well-informed about the company’s affairs, and act in a manner that a reasonably prudent person would under similar circumstances. If a director fails to meet this duty, they may be held liable for negligence.
- Business Judgment Rule: Many jurisdictions have a business judgment rule that protects directors from personal liability if they make decisions in good faith and in what they believe to be the best interests of the company. As long as directors are not self-dealing, conflicts of interest are properly managed, and they act within their authority, they are generally protected by this rule.
- Conflicts of Interest: Directors must disclose any conflicts of interest they may have in a particular corporate decision. Failure to do so can lead to legal liability. If a director stands to benefit personally from a decision at the expense of the company or its shareholders, it can be considered a breach of fiduciary duty.
- Corporate Governance and Compliance: Directors are responsible for ensuring that the company complies with all applicable laws and regulations. Failure to do so can lead to legal consequences not only for the corporation but also for individual directors who may be held personally liable for regulatory violations.
- Insider Trading: Directors must also be cautious about insider trading laws. Using non-public information for personal gain or sharing such information with others who may use it for personal gain can lead to serious legal consequences.
- Environmental and Social Responsibility: In some jurisdictions, there is an increasing focus on environmental and social responsibility. Directors may be held liable if they fail to address significant environmental or social issues that could impact the company’s long-term viability.
- Bankruptcy and Insolvency: In situations where a company becomes insolvent or enters bankruptcy proceedings, directors may face increased scrutiny. If it’s found that their decisions or actions contributed to the company’s financial distress, they could be held personally liable for some of the company’s debts.
- Legal Proceedings and Shareholder Actions: Shareholders or other stakeholders can bring legal actions against directors if they believe the directors have breached their duties or acted improperly. These actions can result in financial penalties or removal from the board.
Directors can often mitigate their liability by seeking legal counsel, following best corporate governance practices, and maintaining accurate records of board meetings and decisions. It’s essential for directors to understand the specific legal requirements and standards of care in their jurisdiction and industry to minimize their exposure to liability in corporate decision-making. Additionally, many corporations provide directors and officers (D&O) liability insurance to protect directors from personal financial loss in the event of legal actions.
In Colombia, Law 222 of 1995 introduced a special liability regime to the local legal system. In this sense, civil law evaluates fault in relation to the higher standard of diligence and places the burden on the plaintiff to prove the negligence or carelessness of the person deemed responsible. According to article 22 of Law 222, the following may be responsible in this context: the legal representative, the liquidator, the factor, the members of the board of directors and those who, in accordance with the statutes, exercise administrative functions.
It is the law itself that defines what the duties and obligations of the administrators are, which, if breached, may give rise to their liability. Thus, article 23 of Law 222 of 1995 establishes good faith, loyalty and diligence of a fair businessman as guiding principles in the actions of administrators.
In relation to the duty of diligence, this corporation believes that the standard or abstract model of conduct that should guide the management of the administrator is that of a good businessman, that is, diligence superior to that of an average man, worth noting, that of a professional in the management of the company’s affairs, since the legislator did not limit himself to demanding the actions that any businessman has in the performance of his responsibilities, but rather that which is characteristic of “fair businessmen”
For the high court, the incorporation of the criterion of the fair businessman implies the express exclusion of the tripartite classification of fault in article 63 of the Civil Code, and even more so that of very slight fault and not only that: it also implies that the standard of conduct to which you have referred is understood to be met when the decisions have been made in good faith, without personal interest in the matter, with sufficient information and in accordance with an appropriate procedure,
The liability scheme that concerns directors responds to a model of subjective liability or fault with these requirements (a) the action or omission of a director, contrary to legal, statutory or contractual duties, attributable to fraud or negligence ; (b) damage and (c) the causal link between that and this.
The liability of the administrator may be demanded, either through an individual action (when the damage is suffered by the assets of a partner or a third party) or through a social liability action, which aims to compensate for the damage caused. to the assets of the company.
AI ASSISTANCE IN DECISION-MAKING AND CEO LIABILITITY
CEOs who make decisions with the help of Artificial Intelligence (AI) can still be subject to various sources of liability, depending on the specific circumstances, legal framework, and ethical considerations. Here are some potential sources of liability for a CEO using AI in decision-making:
- Fiduciary Duty: CEOs have a fiduciary duty to act in the best interests of the company and its shareholders. If a decision made with the assistance of AI is found to be contrary to the best interests of the company or if the CEO fails to exercise reasonable care in utilizing AI tools, they could be held liable for breaching their fiduciary duty.
- Ethical Concerns: Using AI in decision-making may raise ethical concerns, such as bias in AI algorithms or the ethical implications of certain decisions. If a CEO fails to address or consider these ethical concerns, it can lead to reputational damage and potential legal repercussions.
- Regulatory Compliance: Depending on the industry and jurisdiction, there may be regulations that govern the use of AI, especially in sectors like healthcare, finance, and data privacy. CEOs need to ensure that their use of AI complies with relevant laws and regulations. Non-compliance can result in legal penalties.
- Data Privacy: If the AI system uses personal or sensitive data to make decisions, CEOs must ensure that the data is handled in compliance with data protection laws (e.g., GDPR in Europe or Law 1581 in Colombia). Mishandling or data breaches can lead to legal liabilities.
- Transparency and Accountability: Lack of transparency in AI decision-making processes can be a source of liability. CEOs should be able to explain how AI decisions are reached and be accountable for them. If AI is used opaquely, it can lead to legal and regulatory challenges.
- Security: CEOs are responsible for ensuring the security of the AI systems and data used in decision-making. A data breach or cyberattack can result in legal and financial consequences, especially if it is determined that the CEO did not take adequate measures to protect the AI systems and data.
- Bias and Discrimination: If AI algorithms used by the CEO’s organization exhibit bias or discrimination, it can lead to legal challenges, especially in cases involving employment decisions, lending, or other areas where discrimination is prohibited by law.
- Product Liability: If the AI is used in a product or service offered by the corporation, the CEO may be liable for product defects or issues related to AI functionality, particularly if these defects result in harm to consumers.
- Third-Party Agreements: CEOs need to consider contractual agreements with AI providers. Failure to fulfill contractual obligations or violations of intellectual property rights can result in legal disputes.
- Shareholder Actions: Shareholders may bring legal actions against CEOs if they believe that decisions made with AI have negatively impacted the company’s performance or shareholder value. This can include claims of mismanagement or breaches of fiduciary duty.
To mitigate these potential sources of liability, CEOs should exercise due diligence in overseeing the use of AI, ensure compliance with relevant laws and regulations, and actively manage ethical and reputational risks associated with AI decision-making. Consulting legal counsel and establishing clear corporate governance and ethical guidelines for AI use can also help reduce liability exposure.
COMMON MISTAKES CEOS MIGHT MAKE WITH GENERATIVE AI
While Generative AI offers numerous opportunities for businesses, CEOs and organizations can make mistakes when implementing or utilizing these technologies. Underestimating the Technology: One of the most common mistakes is underestimating the capabilities and limitations of Generative AI. CEOs may expect too much from the technology, leading to unrealistic expectations and disappointment when it doesn’t perform as anticipated.
- Lack of Clear Objectives: Implementing Generative AI without a clear understanding of the business objectives it’s meant to address can lead to wasted resources and efforts. It’s important to have a well-defined purpose and strategy for using Generative AI.
- Insufficient Data Quality: Generative AI relies heavily on data. CEOs may overlook the importance of high-quality, clean, and relevant data, leading to inaccurate or biased outcomes. It is crucial to invest in data quality and governance.
- Ignoring Ethical Considerations: Failing to address ethical considerations such as bias, fairness, and privacy in AI-generated content can result in public backlash, legal issues, and damage to the organization’s reputation.
- Not Involving Legal and Compliance Teams: Generative AI can produce content that might infringe on copyright, violate regulations, or raise legal issues. CEOs should involve legal and compliance teams early in the AI deployment process to mitigate these risks.
- Overlooking Cybersecurity: Generative AI systems can become vulnerable to cyberattacks if not properly secured. CEOs should prioritize cybersecurity measures to protect AI models and data from unauthorized access and breaches.
- Lack of Human Oversight: Relying too heavily on AI-generated content without human oversight can lead to content that lacks context, coherence, or quality. It’s essential to strike a balance between automation and human involvement.
- Ignoring User Feedback: Not actively seeking and incorporating user feedback can result in AI-generated content that doesn’t meet customer expectations or needs. Continuous improvement based on user input is critical.
- Overreliance on AI for Creativity: Generative AI can assist in creative processes, but it should not replace human creativity entirely. CEOs should recognize the value of human creativity and judgment in content creation.
- Ignoring Employee Concerns: Implementing AI can lead to concerns among employees about job security or the ethical implications of AI. CEOs should address these concerns through transparent communication and training opportunities.
- Neglecting Scalability and Integration: Failing to plan for the scalability and integration of AI solutions into existing systems can hinder their effectiveness and create technical challenges.
- Inadequate Testing and Validation: Not thoroughly testing AI models for various scenarios and edge cases can result in unexpected errors or biases. Rigorous testing and validation are essential before deploying AI in production.
- Overlooking ROI Analysis: Implementing Generative AI without a clear understanding of the return on investment (ROI) can lead to wasted resources. CEOs should assess the cost-benefit analysis before embarking on AI projects.
CEOs need to approach Generative AI with a clear understanding of its capabilities, ethical considerations, and potential risks. By avoiding these common mistakes and adopting a well-informed, strategic approach, organizations can harness the power of Generative AI effectively to achieve their business objectives while mitigating potential pitfalls.
SOME PROBLEMS ASSOCIATED WITH THE PROOF AND EVIDENCE IN CASES OF LIABILITY DERIVED OF MISUSE OF ARTIFICIAL INTELIGENCE SYSTEMS
The misuse of artificial intelligence can lead to various problems and challenges, particularly when it comes to establishing evidence of liability. AI systems are often complex and can involve intricate algorithms and neural networks. Understanding and explaining these systems to establish liability can be challenging, especially for non-experts. Many AI systems operate as “black boxes,” meaning their internal workings are not transparent or easily explainable. This lack of transparency can hinder efforts to trace the causes of misuse and attribute liability.
The misuse of AI may involve the unauthorized access or processing of sensitive data. Proving liability might require demonstrating how data was mishandled, which can be complicated by privacy regulations and the difficulty of obtaining evidence related to data breaches. Determining who is responsible for the misuse of AI can be difficult, especially in cases where multiple parties are involved, such as developers, users, or organizations deploying the AI system. AI systems may exhibit unintended behaviors or consequences that were not explicitly programmed. Proving liability in such cases requires establishing a connection between the AI’s actions and the misuse, which can be challenging. Machine learning models, especially those employing reinforcement learning, can adapt and evolve over time. Pinpointing the exact moment or reason for a specific behavior becomes more challenging as the system continuously learns from new data.
The legal and ethical frameworks for AI are still evolving. Establishing liability often requires navigating a complex landscape of laws and regulations that may not have caught up with the rapid advancements in AI technology. Determining whether the misuse was intentional or a result of automated processes can be challenging. Establishing liability may require proving not just the actions taken by the AI but also the intentions behind those actions. If an AI system exhibits biased or discriminatory behavior, proving liability may involve demonstrating the existence of bias, its impact, and the failure of developers or operators to address or mitigate these issues.
Changes in the field of evidence as a consequence of the use of artificial intelligence systems in daily life may warrant reviewing the scope, relevance, use of evidentiary means and interpretation criteria established in the Código General del Proceso y CPACA, among others.
CONCLUDING REMARKS
The challenges that decision makers face in companies due to the use of artificial intelligence do not only refer to their practical skills and abilities but to the legal limits.
Although the uses of Artificial Intelligence are still in a very initial stage, it is important that the law begins to define rules that allow its adoption for decision making, risk assessment and management competencies.
Everything indicates that artificial intelligence is not just another tool nor a type of software, but its effects in the corporate sphere can even become a fundamental support in the strategic management function of companies and, therefore, in decision-making. crucial managerial decisions.
Legal protection for innovation strategies
INTRODUCTION
Innovation is crucial for the long-term success and competitiveness of companies in the rapidly evolving business landscape. To foster innovation, companies employ various strategies and approaches. To protect your innovation, you can utilize various forms of intellectual property (IP) rights. The choice of which IP protection to pursue depends on the nature of your innovation and your business goals.
Before pursuing any form of IP protection, the following steps are recommended:
- Conduct a Prior Art Search: To ensure your innovation is truly novel and eligible for protection, conduct a thorough search to identify prior art (previous similar inventions or creations) that might impact your ability to obtain protection.
- Consult Legal Experts: Intellectual property laws can be complex and vary by jurisdiction. Consult with intellectual property attorneys who specialize in the relevant field to guide you through the process and help you make informed decisions.
- Strategize: Develop an IP strategy aligned with your business goals. Some innovations may benefit from a combination of protections, while others may require choosing the most suitable single form of protection.
Obtaining IP protection is just one step; enforcing and maintaining these rights require ongoing attention and legal vigilance.
COMMON INNOVATION STRATEGIES THAT COMPANIES OFTEN USE:
- Open Innovation: This approach involves collaborating with external partners such as customers, suppliers, universities, and even competitors to bring in fresh ideas, technologies, and expertise. Companies share and exchange knowledge to accelerate the innovation process.
- Research and Development (R&D): Companies allocate resources to research and develop new products, services, or technologies. This can involve creating dedicated R&D departments or innovation labs to focus solely on generating novel ideas and solutions.
- Design Thinking: Design thinking is a human-centered approach that emphasizes empathy, collaboration, and iteration. Companies using this strategy involve cross-functional teams to deeply understand user needs, brainstorm solutions, prototype, and test ideas before implementation.
- Disruptive Innovation: This strategy involves introducing new products or services that create a significant shift in the market and often target underserved or overlooked customer segments. Disruptive innovations can reshape industries and change consumer behaviors.
- Incremental Innovation: Companies continuously improve existing products, services, or processes to enhance efficiency, performance, and user experience. This strategy involves making small, incremental changes over time.
- Blue Ocean Strategy: This approach focuses on creating entirely new market spaces where competition is limited or nonexistent. Companies aim to offer unique value propositions, differentiating themselves from competitors and attracting new customers.
- Acquisitions and Mergers: Some companies acquire or merge with other firms to gain access to their technologies, products, or intellectual property, thereby accelerating their own innovation efforts.
- Lean Startup Methodology: Popularized by Eric Ries, this strategy involves quickly building and testing minimal viable products (MVPs) to gather user feedback and iterate rapidly based on that feedback. This approach minimizes waste and reduces the risk of launching products that don’t meet customer needs.
- Crowdsourcing: Companies solicit ideas and solutions from a large group of people, often through online platforms, competitions, or challenges. This approach leverages the collective intelligence of a diverse group to solve problems and generate new ideas.
- Corporate Venture Capital: Companies invest in startups or innovative ventures that align with their strategic goals. This approach provides the company with insights into emerging trends and technologies while supporting external innovation.
- Technology Scouting: Companies actively search for emerging technologies, ideas, and trends outside their industry and then adapt or integrate them into their own operations or products.
- Intrapreneurship: This strategy involves encouraging employees to act as entrepreneurs within the company, empowering them to propose and develop new ideas and projects.
- Hackathons and Innovation Challenges: These events encourage employees or external participants to collaborate intensively over a short period to solve specific problems or develop innovative solutions.
- Agile Development: Agile methodologies, often used in software development, emphasize iterative development and collaboration, allowing companies to respond quickly to changing market demands.
- Successful innovation strategies are often tailored to a company’s industry, culture, and specific goals. The key is to create a conducive environment that encourages creativity, experimentation, and a willingness to embrace change.
KEY POINTS OF AN INNOVATION STRATEGY IN A COMPANY:
An effective innovation strategy in a company should encompass various key points to guide and support the organization’s efforts in creating and implementing innovative ideas. Here are some essential points to consider when developing an innovation strategy:
- Clear Objectives: Define specific innovation goals that align with the company’s overall mission and business strategy. These objectives should be measurable and time-bound, providing a clear sense of direction for the innovation initiatives.
- Alignment with Business Strategy: Ensure that the innovation strategy is closely aligned with the company’s core business strategy. Innovation efforts should contribute to the company’s competitive advantage and long-term growth.
- Leadership Support: Obtain commitment and active support from top leadership. Leaders should champion the importance of innovation and allocate necessary resources to foster a culture of creativity.
- Resource Allocation: Allocate dedicated resources, including funding, time, and personnel, to support innovation projects. Adequate resources are essential for experimentation and development of new ideas.
- Cross-Functional Collaboration: Encourage collaboration between different departments and teams. Innovative ideas often emerge at the intersection of different disciplines, so fostering a culture of collaboration can lead to breakthroughs.
- Open Communication: Establish channels for open communication that allow employees to share their ideas, feedback, and suggestions. Creating an environment where employees feel valued and heard fosters innovation.
- Risk Tolerance: Cultivate a culture that embraces calculated risk-taking. Innovation involves experimentation, and not all ideas will succeed. It’s important to learn from failures and iterate on ideas.
- Customer-Centric Approach: Focus on understanding customer needs and pain points. Innovations that directly address customer challenges are more likely to gain traction in the market.
- Continuous Learning: Encourage continuous learning and professional development. Provide opportunities for employees to acquire new skills and stay updated on industry trends and emerging technologies.
- Idea Generation and Management: Implement processes for generating, capturing, evaluating, and selecting innovative ideas. This might involve brainstorming sessions, idea submission platforms, and cross-functional evaluation teams.
- Innovation Metrics: Define key performance indicators (KPIs) to measure the effectiveness of innovation efforts. These metrics could include the number of new products launched, revenue from new products, or percentage of revenue from products developed in the last few years.
- Innovation Culture: Nurture a culture that values creativity, curiosity, and continuous improvement. Recognize and reward employees for their innovative contributions.
- Innovation Pathways: Develop a framework for moving innovative ideas from concept to implementation. This could include stages for idea validation, prototyping, testing, and scaling.
- External Partnerships: Explore opportunities for collaboration with external partners, such as startups, research institutions, and industry experts. These partnerships can bring fresh perspectives and accelerate innovation.
- Intellectual Property Protection: Establish procedures for protecting intellectual property generated through innovation. This could involve patent applications, copyrights, and trade secrets.
- Adaptability: Recognize that the innovation landscape is constantly evolving. Be prepared to adapt the strategy as new opportunities and challenges arise.
- Measurement and Feedback Loop: Regularly review and assess the progress of innovation projects against established objectives. Use feedback to refine and improve the strategy over time.
An innovation strategy should be tailored to your company’s unique circumstances, goals, and industry context. It’s important to create a strategy that resonates with your organization’s culture and capabilities.
KEY ELEMENTS OF A LEGAL PROTECTION FOR AN INNOVATION STRATEGY:
Protecting your innovation strategy involves a combination of legal measures to safeguard your intellectual property, proprietary information, and competitive advantage. The advisable steps to ensure comprehensive legal protection for an innovation strategy are the following:
- Intellectual Property (IP) Strategy:
- Patents: If your innovation involves a novel, non-obvious, and useful invention, consider filing for patents. Patents grant exclusive rights to your invention for a specific period, preventing others from making, using, selling, or importing it without your permission.
- Copyrights: If your innovation includes original creative works such as software code, artistic designs, or written content, consider obtaining copyrights to protect against unauthorized copying or distribution.
- Trademarks: Register trademarks for unique brand names, logos, and symbols associated with your innovation strategy. Trademarks protect your brand identity and prevent others from using similar marks that might cause confusion.
- Trade Secrets: Implement strict confidentiality measures to protect sensitive information that provides your company with a competitive advantage. This could include proprietary processes, customer lists, formulas, and more.
- Non-Disclosure Agreements (NDAs): When sharing confidential information with employees, partners, contractors, or potential collaborators, use NDAs to legally bind them to maintain confidentiality and prevent unauthorized disclosure.
- Employee and Contractor Agreements: Include clauses in employment and contractor agreements that specify that any innovations or intellectual property developed during their tenure belong to the company. This helps ensure the company’s ownership of innovations created by its workforce.
- Partnership and Collaboration Agreements: Clearly outline intellectual property ownership, usage rights, and profit-sharing arrangements in agreements when collaborating with external partners, vendors, or research institutions.
- Licensing Agreements: If you’re interested in monetizing your innovation by allowing others to use it, consider licensing agreements that define the terms under which others can use your intellectual property.
- Innovation Disclosure Policies: Develop internal policies and procedures for employees to disclose their innovative ideas and developments. This establishes a framework for capturing and evaluating new concepts.
- Regular IP Audits: Periodically assess your intellectual property portfolio to ensure that your patents, copyrights, trademarks, and trade secrets are up to date and aligned with your innovation strategy.
- Global Considerations: If your innovation strategy has an international component, be aware of intellectual property laws and regulations in various jurisdictions. File for protection in countries where you plan to operate or expand.
- Litigation Preparedness: While prevention is the primary goal, it’s wise to have a plan in place in case of IP infringement. Consult legal experts to understand your options for enforcing your rights and pursuing legal action if necessary.
- Legal Counsel: Consult with intellectual property attorneys who specialize in the relevant areas, such as patent law, copyright law, and trademark law. They can provide tailored guidance based on your specific innovation strategy.
MAIN CONTRACTUAL CLAUSES TO PROTECT INNOVATION MODELS AND PRODUCTS:
Some examples of clauses to be considered in contracts to protect innovation and intellectual property (IP):
- Confidentiality and Non-Disclosure Clause:
“Confidential Information” refers to all information disclosed by one party to the other that is not publicly available and is marked or communicated as confidential. The recipient agrees not to disclose or use the Confidential Information for any purpose other than the intended collaboration/project and to protect its confidentiality.
- Intellectual Property Ownership Clause:
“Any inventions, designs, works of authorship, developments, concepts, ideas, or other intellectual property created during the term of this Agreement shall be the exclusive property of [Company Name], regardless of which party contributed to their creation.”
- Assignment of Intellectual Property Rights Clause:
“Employee/Contractor hereby assigns and transfers to [Company Name] all rights, title, and interest in and to any and all intellectual property created in the course of employment/engagement, and agrees to execute any necessary documentation to effectuate such assignment.”
- Joint Ownership Clause (for collaborations):
“Any jointly developed intellectual property shall be owned jointly by the parties in proportion to their respective contributions. The parties agree to work together to secure appropriate protection and make commercialization decisions.”
- Non-Compete and Non-Solicitation Clause:
“During the term of this Agreement and for [X] years thereafter, the Employee/Contractor agrees not to engage in any business that competes with [Company Name] or solicit [Company Name]’s clients, customers, or employees.”
- Dispute Resolution Clause:
“Any dispute arising under or in connection with this Agreement, including disputes related to intellectual property rights, shall be resolved through mediation or arbitration, with [Arbitration/Mediation Provider] acting as the mediator/arbitrator.”
- Indemnification Clause:
“Employee/Contractor agrees to indemnify and hold harmless [Company Name] from any claims, damages, or liabilities arising from any breach of intellectual property rights or misuse of confidential information.”
- Termination and Return of Property Clause:
“Upon termination of this Agreement, Employee/Contractor shall promptly return to [Company Name] all confidential information, documents, and materials related to the project, including any prototypes, designs, and research.”
- Use of Company Resources Clause:
“Employee/Contractor shall not use [Company Name]’s resources, facilities, or equipment for any purposes other than the project specified in this Agreement, without prior written consent.”
- Governing Law and Jurisdiction Clause:
“This Agreement shall be governed by and construed in accordance with the laws of [Jurisdiction]. Any disputes arising under or in connection with this Agreement shall be subject to the exclusive jurisdiction of the courts of [Jurisdiction].”
CONCLUDING REMARKS:
Failing to seek IP protection in a timely manner can result in the loss of rights. It’s important to initiate the protection process as soon as your innovation is ready to be disclosed to others.
Not keeping thorough and organized records of the development process, dates of invention, and interactions with collaborators or partners can weaken your ability to prove the originality and ownership of your innovation. Neglecting to conduct a thorough search for existing patents, copyrights, trademarks, and other IP rights similar to your innovation can lead to conflicts, rejections, or invalidations of your claims.
Drafting incomplete or vague agreements, such as nondisclosure agreements (NDAs) or partnership contracts, can leave gaps in IP ownership and usage rights, leading to disputes later on. Not properly safeguarding trade secrets through contractual agreements and security measures can result in leaks of sensitive information, compromising your competitive advantage.
Disclosing details about your innovation to the public before applying for IP protection can impact your ability to obtain patents or certain types of protection. Public disclosures can trigger statutory grace periods in some jurisdictions. Failing to include strong IP ownership and assignment clauses in employee agreements can lead to uncertainties about who owns the rights to innovations created by employees.
If you plan to operate globally, not considering international IP protection can leave your innovation vulnerable in jurisdictions where you haven’t secured rights.
Licensing your IP without clear terms, usage limitations, and enforcement mechanisms can lead to unauthorized use or disputes. Confusing the differences between patents, copyrights, trademarks, and trade secrets can result in pursuing the wrong type of protection for your innovation.
Assuming that you don’t need to take any legal steps to protect your innovation can leave you exposed to IP theft or infringement. Forgetting to renew trademarks, pay maintenance fees for patents, or keep documentation up to date can lead to the loss of your IP rights.
Not actively monitoring for IP infringement and taking appropriate legal action when needed can weaken your IP position and allow others to infringe on your innovation. Relying on inexperienced or uninformed legal advisors can result in inadequate protection or misguided strategies.
The Supreme Court of Justice unifies the requirements for electronic invoicing as a value title:
Decision STC11618 of the Civil Cassation Chamber of the Supreme Court of Justice (SCJ), issued on October 27, 2023, established unified criteria on the requirements necessary to consider an electronic invoice of sale (EIS) as a value title. These requirements are divided into two categories:
Formal requirements:
- The EIS must be generated in electronic format (XML) and include a description of the goods or services invoiced, as well as the name “electronic invoice” and the Unique Electronic Invoice Code (CUFE).
- The CUFE must be validated by the National Tax and Customs Directorate (Dian) and delivered to the purchaser. This requirement does not apply to physical invoices, or to situations where validation is not possible due to technological problems attributable to Dian.
It is important to note that, according to the Supreme Court of Justice, registration of the EIS in RADIAN is necessary for its circulation, but not for it to be considered a title.
Substantive requirements:
- The EIS must mention the right it represents, including the author’s signature and the expiration date.
- Acknowledgement of receipt of the EIS is required.
- Acknowledgement of receipt of goods or services is required.
- Express or tacit acceptance of invoice must be made within three days of receipt of goods.
With regard to acceptance, the Supreme Court of Justice has chosen to follow the position of Decree 1154 of 2020 and not to apply Law 1231 of 2008. The Decree erroneously stipulates that express acceptance must take place within three days of receipt of the goods or services, whereas Law 1231 of 2008 states that the period begins on receipt of the invoice. This SCJ decision is contested for several reasons:
- The hierarchy of norms establishes that the law prevails over the regulatory decree, despite its specific nature: the decree does not have the power to override the law, which remains in force and applies in full to both electronic and physical sales invoices. Where the rule makes no distinction, it is not for the interpreter to create one.
- The Supreme Court of Justice underlines the speed of e-commerce, which often leads to invoices being issued before goods or services are delivered. However, this is contrary to Article 1 of Law 1231 of 2008, which stipulates that all invoices must correspond to goods or services that have actually been delivered or provided. This applies to both electronic and physical sales invoices.
- Finally, acceptance of the invoice, whether express or tacit, serves as proof of delivery of the goods or service, as indicated by the SCJ in STC9542-2020. Acceptance implies that the purchaser of the goods or service has validated that the contents correspond to reality.
This recent position of the Supreme Court of Justice regarding acceptance is not only contrary to the law, but could also lead to practical difficulties when it comes to proving “receipt of the goods” by the party executing the action. Despite the existence of a certain flexibility in terms of evidence to support this fact, it is undeniable that some judicial operators tend to apply very strict criteria with regard to these requirements.
Crypto-asset regulation in colombia: recent trends
The regulation on crypto-assets is a relevant index to determine the digital business climate in a country. Like any emerging technology, its early adoption in a market and adequate regulation can be an important step in the digital transformation processes in companies, the government and support digital entrepreneurship. The efficiency and data decentralization of blockchain and cryptocurrencies generate disruptive effects in certain markets and may also create concern about eventual illegal activities deriving from the technology’s relative anonymity.
In Colombia, several public entities have issued regulation and opinions on crypto-assets. This is precisely the first trend that we want to highlight. In Colombia there is a diversity of public entities that have touched upon different legal issues related to crypto-assets, namely: financial, exchange, tax, commercial, compliance and contractual issues, among others.
The following is a list with the main existing regulation and opinions:
(a) Financial Superintendence, Chapter XVIII External Circular Letter No. 041 of 2015;
(b) Decree 2555 of 2010.
(c) Regulatory Decree 1068 of 2015 (article 2.17.2.4.1.1);
(d) External Resolution No. 8 of May 5, 2000;
(e) External Resolution No. 1 of May 25, 2018;
(f) External Circular Letter No. DODM-144 of September 14, 2018;
(g) External Circular Letter No. DECIP-83 of August 27, 2021;
(h) Central Bank Opinion No. JDS-03409 of February 16, 2011;
(i) Central Bank Opinion No. JDS-19704 of September 12, 2016;
(j) Central Bank Opinion No. C19-110904 of June 21, 2019;
(k) Central Bank Opinion No. C21-70969 Q21-4417 of December 9, 2021;
(l) Financial Superintendence Opinion No. 2020079520-001 of May 15, 2020.
This is an effect of the transversal use of crypto-assets in different economic sectors and for different activities. However, if greater legal certainty is sought, the government could adopt a public policy document defining the vision and direction of the relationship between the public and the private sectors in relation to these digital assets.
In general, the Colombian authorities agree on the following characteristics related to crypto-assets as a basis for their regulation in each legal field and to determine the risks of the crypto title-holders who trade these intangible assets:
- Crypto-assets are not currency, as the only monetary and account unit that constitutes a legal tender and means of payment with unlimited release power, is the Colombian peso issued by the Central Bank of Colombia (bills and coins);
- Crypto-assets are not money for legal purposes;
- Crypto-assets are not a currency, since it has not been recognized as a currency by any international monetary authority nor is it supported by central banks;
- Crypto-assets are not cash or cash equivalent;
- There is no obligation to receive crypto-assets as a means of payment;
- Crypto-assets are not financial assets or investment property in accounting terms;
- Crypto-assets are not securities, so their mention as such or assimilation should be avoided.
The above characteristics have been consistently upheld by different Colombian government documents and denote an interpretation of intangibles that is always based on traditional notions of assets.
Crypto-assets have been defined in Colombia as intangible assets and therefore are likely to be contributed to the capital of corporations, provided that (i) they comply with accounting laws and secondary rules and legal regulations; and (ii) that the partners approve their appraisal. Based on these arguments, the Colombian government expressly affirmed a change in its doctrine, confirming that shareholders can contribute crypto-assets in the form of a contribution in kind. The foregoing, subject to a series of requirements and recommendations, opens the possibility of incorporating crypto-assets as part of the incorporation of companies in Colombia.
Colombian residents who have crypto-assets as part of their assets must declare them in their annual income tax returns. The value for which they must be declared will be for their equity value, either as an intangible asset (investment) or inventory.
On the accounting side, it is recommended that a separate unit of account be created for the recognition, measurement and disclosure of transactions and other events or occurrences that are related to cryptocurrencies, which could well be called “crypto-assets” or “virtual assets”.
If the crypto-assets are traded in a foreign currency, the value of the assets in foreign currency is estimated in national currency at the time of their initial recognition at the official exchange rate, less credits or payments measured at the same official exchange rate of the initial recognition.
Colombian residents who have equipment, resources and work that are integrated into the crypto mining activity, allowing them to obtain virtual currencies in exchange for the services provided in the network and/or by way of commissions, receive taxable income in Colombia, by virtue of the aforementioned criteria. Likewise, it is clear that resident individuals and national companies are taxed not only on their income from a national source but also from a foreign source income and on their assets owned in the country and abroad. From the equity point of view, as long as these coins correspond to intangible assets, capable of being valued, they form part of the equity and can lead to the obtaining of (presumptive) income.
For instance, the purchase and sale of real estate with payment through crypto-assets is an exchange of an asset whose payment will be made through the delivery of an intangible asset. The tax obligations associated with income tax will be those derived from the execution of the exchange contract. Carrying out the exchange will affect the assets of the party delivering the crypto-asset; the payment of the price will generate an equity decrease due to its disposal. On the other hand, depending on the real estate valuation, seller may increase its assets by carrying out the respective exchange, or equate the equity value of the crypto-asset delivered. Consequently, the party delivering the crypto-asset must determine the equity value of said asset, and analyze whether, on the occasion of the exchange, an income for the difference between the tax cost of the asset and the value of its disposal was obtained. The payment of the property through crypto-assets may represent an increase in equity in the head of the property seller if the equity value of the crypto-asset is higher than that of the real estate. The capital increase must be reported in that party’s accounting and income tax return. To the same extent, the real estate seller must determine the equity value of said property, and verify if, on the occasion of the exchange, an income for the difference between the fiscal cost of the real estate and the value of the sale was obtained. The parties must comply with the provisions of the Colombian Tax Statute for the purpose of determining the minimum prices for the sale of the goods subject to the exchange.
As in other jurisdictions, Colombia is no exception for crypto-assets being used in criminal activities. Cases of criminal use, fraud and the use of crypto-assets for payments related to computer attacks and ransomware as well as for payments related to extortion are becoming more frequent. Crypto-assets can also be used as instruments for money laundering, terrorist financing and other criminal activities, in view of which the administrators of the companies that participate in the crypto-asset market must deploy: i) the maximum due diligence in the knowledge of the ends of the operation (including associates, employees, clients, contractors and suppliers, and their final beneficiaries), in regards to the prevention of ML/TF; and, ii) the diligence that a businessman in good faith would take into account to prevent the phenomenon of asset laundering or money from the public being illegally collected or any other damage to the public or private interest being generated through such company. Those who carry out operations with crypto-assets decide in a responsible, conscious and autonomous manner, at their own expense and risk, to assume the possible losses that could be derived from this type of transaction.
The difficulty of clearly defining crypto-assets has been used by criminals to deceive investors and to carry out illegal collection of funds and Ponzi schemes with business models and strategies that can only be carried out by financial entities authorized by the Colombian government.
The growth of the crypto-asset market, in particular cryptocurrencies, depends on the ability of crypto-assets being used in many activities. So, while there is need for a clear regulatory framework that allows measuring risks, it is also important that absolute prohibitions or regulatory disincentives disappear.
In the past two years, a bill that regulates the relationship between wallets, exchanges and platforms in relation to crypto assets has advanced for approval in the Colombian Congress. In the first place, this proposed legislation proposes a series of definitions, among others, the following:
- Wallets: These are the virtual media in which the public and private encryption keys are stored.
- Crypto-assets Exchange Services: these are the following services: (i) Administration of crypto-assets exchange platforms. (ii). Provision of custody and/or storage services for crypto assets. (iii). Exchange or transfer between crypto-assets and fiat currency, or between one or more crypto-assets. (iv). The supplementary or analogous services related to sections i, ii and iii above.
- Crypto Asset Exchange Platform (PIC): These are computer applications or interfaces, internet pages or any other means of electronic or digital communication through which the Crypto-asset Exchange Services are provided.
- Crypto-asset Exchange Service Provider: It is a national business entity or a branch of a foreign company, in charge of operating, managing and guaranteeing the operation of the PIC, registering with the Chamber of Commerce of its main domicile and responsible for compliance with the obligations.
- Unique Registry of Crypto-asset Exchange Platforms (RUPIC): It is an electronic public registry managed by the Chambers of Commerce whose objective is to allow anyone to access the information published in said registry, and to verify that the Service Providers of Crypto-assets Exchange as holders are duly registered.
- PIC Operations Manual: Document that contains the requirements and internal parameters of the PIC for the provision of Crypto-asset Exchange Services.
As a principle of interpretation of the crypto-asset market, it is established in the draft bill that crypto-assets are negotiable directly by their owners. The operation of the different crypto assets, their rules belong to the private sphere of the users, who, based on the principles of free market and free competition, must seek to be informed about the risks inherent in trading with assets of any kind.
The Crypto-asset Exchange Service Providers, Colombian or foreigners, must comply with the following requirements:
- Be incorporated as a commercial company domiciled in Colombia or as a branch of a foreign company, and be duly registered in the Colombian mercantile registry.
- Include as the exclusive corporate purpose the performance of activities classified as Crypto-asset Exchange Services.
- Establish and maintain a computer security program that ensures the availability and functionality of its computer systems, protecting said systems and all information stored in them, from unauthorized access, use and manipulation, the foregoing in accordance with the instructions that for this purpose imparted by the Ministry of Information Technology and Communications.
- Adopt control measures aimed at detecting and preventing money laundering and terrorist financing.
- Register in the Special Register for Crypto-assets Service Providers before the Chamber of Commerce of the entity’s main address, indicating the web domain and the information determined by the Ministry of Information and Communication Technologies.
- Report to the Financial Information and Analysis Unit the information that is required in compliance with money laundering regulations.
- Comply with the Colombian personal data protection regulations.
- Implement KYC and customer Due Diligence measures.
- Have an Operations Manual for the operation of the PICs that it manages, approved by the Ministry of Information Technologies and Communications.
According to the proposed bill, the Crypto-assets Exchange Service Providers are prohibited from:
- Offering or paying consumers interests or any other return or monetary benefit for the balance that they accumulate over time or maintain or for any operation directly or indirectly related to the exchange that they carry out with crypto-assets.
- Transferring under any title, lend or encumber crypto-assets or any other resource owned by consumers, stored by the Crypto-asset Exchange Service Provider, without the express authorization of the consumer.
- Developing any kinds of commercial network or multi-level marketing activity with crypto-assets, as well as their financial intermediation. Likewise, the administrators or service providers of crypto-asset exchange platforms may not allow the commercial distribution of crypto-assets to be carried out on their platforms through network or multi-level marketing activities or similar.
- Refraining from carrying out any conduct that leads to the massive and regular collection of funds from the public that additionally implies the absence of consideration in present or future goods or services that justify it or, even if such consideration exists, does not have a reasonable financial explanation.
The model proposed in this draft bill does not comprehensively regulate the different legal aspects of crypto assets. The relationship between some of the agents in the ecosystem can set aside a holistic vision that is necessary to obtain the benefits of intelligent regulation. It is not clear if the Financial Regulation Unit of the Colombian government agrees with the content of this bill.
To sum up, in Colombia there is a regulatory trend that has been transforming from a prohibition on the use of crypto-assets towards a vision more associated with the risks inherent in the market for these digital assets. The regulation remains disperse since different Colombian public entities with market supervision and surveillance functions have issued rules and opinions related to accounting, tax, contractual, exchange and financial issues, among others. An effective coordination between the different public entities that regulate crypto-assets is necessary to achieve legal certainty and stimulate the use of these digital assets as well as to generate a business environment that allows attracting investment. It is necessary to wait and see if the draft bill that is in progress becomes law so that wallets, exchanges and crypto-asset offering platforms in particular, are regulated more specifically in terms of their registration and duties as well as their liability towards consumers and users of crypto-assets.
New regulation on electronic payroll In Colombia
By: María del Pilar Duplat M. – Peña Mancero Abogados
The Colombian tax authority (DIAN by its Spanish acronym) issued resolution 13 of February 11, 2021 regulating the implementation of the electronic payroll system (the “Electronic Payroll Resolution” or the “Resolution”).
Who must submit the electronic payroll to DIAN?
Income taxpayers that are employers or that make payments due to legal or regulatory relationships or that make pension payments, and require to support said costs and deductions in their tax returns.
On a monthly basis, the aforementioned subjects must submit to DIAN a payroll supporting document for its approval or correction.
What is the payroll supporting document?
The electronic payroll supporting document is the document that shows all labor-related payments made by the employer. This document must contain the following information for its creation, transmission and approval by DIAN:
- Expressly indicate that it is an electronic payroll supporting document.
- Employer complete name of the individual or entity, ID Number or tax id number.
- Complete name(s) and ID of the person who receives the payment.
- The Unique Code Number of the Supporting Document of the electronic Payroll (CUNE by its initials in Spanish).
- Internal consecutive number granted by the subject obliged to submit the electronic payroll.
- Contents and amounts of the accrued value of payroll pursuant to the Technical Appendix to the Electronic Payroll Resolution.
- Contents and amounts of the deducted sums from the payroll pursuant to the Technical Appendix to the Electronic Payroll Resolution.
- Total amount resulting from the difference between the total accrued payroll payments minus the total deducted sums from the payroll payments.
- The contents of the Technical Appendix as provided in article 20 of the Electronic Payroll Resolution, regarding the information and contents contained herein.
- The form of payment of the payroll per the Technical Appendix to the Payroll Resolution.
- Date and time of creation of the document.
- Digital signature of the Subject who pays the Payroll in accordance with the DIAN’s requirements of authenticity and integrity of the signature.
- Complete name and ID or tax id number of the software supplier and identification of the software.
When do I have to submit the electronic payroll to DIAN?
The electronic payroll supporting document must be issued and sent to DIAN on a monthly basis, ten (10) days after its creation or issuance.
As of when must the electronic payroll be implemented?
- Implementation Calendar for subjects per the number of employees
Group | Beginning date of the enabling of the electronic payroll data processing system | Maximum date to start the issuance and transmission of the electronic payroll payment support document and the electronic payroll payment support document adjustment notes. | Range in relation to the number of employees
|
|
From | Until | |||
1 | May 31st, 2021 | July 01, 2021 | More than 251 | |
2 | August 01, 2021 | 101 | 250 | |
3 | September 01, 2021 | 11 | 100 | |
4 | October 01, 2021 | 4 | 10 | |
5 | November 01, 2021 | 2 | 3 | |
6 | December 01, 2021 | 1 |
- Permanent Implementation Calendar
The obliged subjects will have a term of two (2) months from the date in which they make the payroll payments to carry out the enabling of the service and proceeding to transmit the supporting documents of the electronic payroll and its adjustment notes.
The remaining subjects must issue the supporting payroll document and their adjustment notes to request the costs and deductions of the income tax and the VAT deductible taxes, when applicable.
- Implementation calendar for subjects not obliged to issue electronic sales invoices
Subjects not obliged to issue electronic sales invoices must start the enabling of the electronic data payroll service on March 31, 2022; and they must issue and send the supporting document of the payment of the electronic payroll and their adjustment notes, no later than May 31, 2022.
How do I issue the electronic payroll documents?
The enabling procedure is the one that is developed within the electronic invoicing system which must have the function to issue the electronic payroll supporting document pursuant to DIAN’s requirements.
The enabling procedure must be carried out before the date when the subjects must start with the implementation and the term when they must submit the monthly electronic payroll.
If you have further inquiries regarding this new regulation, please do not hesitate to contact us at: info@pmabogados.co
Why a due diligence process may become a nightmare in Colombia?
Strong institutions with reliable databases available to the public are key when carrying out a due diligence process. In most cases, information provided by the target is insufficient and not always accurate. This means that attorneys must be creative in order to look for the right information in the right places.
Here are some examples of what can go wrong if a due diligence process is not properly handled:
- Real estate is tricky in Colombia, especially when you acquire assets or companies with rural real estate. Many attorneys focus on making sure that the “owner” of the land or property is duly recorded with the Real Estate Registry without realizing there is so much more! For instance: (i) determining whether the area has oil & gas or mining licenses that would create compulsory easements or eventually hinder its use; (ii) determining whether there are environmental restrictions such as being part of a national park, a protected wetland or a forest; (iii) verifying whether the land was formerly owned by communities or people who had to give it up because of armed groups’ pressure and are now subject to restitution proceedings; (iv) confirming that the land is not in fact a barren land that someone occupied as, regardless of time lapsed, it will continue to be State-owned and not subject to transfer.
- The Superintendence of Corporations recently issued a new regulation introducing stricter rules for anti-money laundering and terrorism financing. We cannot hide that Colombia has individuals and companies involved in such activities that do business in creative manners so as to disguise the true origin of their funds. A proper investigation during due diligence should include examining who the beneficial owners of the target are and searching not only the standard international OFAC and similar lists but also carrying out a full search of local media publications and other more informal sources of information.
- Latin American countries keep facing more and more corruption scandals. Colombia is not the exception. Doing business with relatives, partners and close friends of politically exposed parties can be risky. A proper due diligence should involve requesting full disclosure not only from all sellers but also from the target’s main stakeholders. Regulatory standards can be found in the Colombian anti-corruption statute.
- Unlike most Latin American countries, Colombia’s foreign exchange regulation imposes strict reporting obligations concerning foreign-currency-related operations such as foreign investment, receiving or granting loans from/to foreign residents, granting securities abroad, imports and exports. Non-compliance with such obligations may derive in huge fines to be imposed either by the Superintendence of Corporations or by the tax authority (DIAN). To avoid such liability, due diligence should include reviewing all the above foreign exchange transactions including: timely filing of reports to the Central Bank; correct reporting of each transaction; requesting an up-to-date report from the Central Bank to obtain information on all reported items.
- When searching for the history of land, corporations, litigation, property and any other asset that is subject to public record, one must be careful in Colombia. Government agencies are not always up-to-date and technology tends to be basic when it comes to search engines. There are entities and courts who simply do not provide such service to the public so not being able to complete an independent verification of the target’s records is common.
Being able to distinguish between what a “deal breaker” is and what not requires a thorough understanding of the risks involved and their eventual effects. For example, if a mining license does exist on the target’s land, a deal breaker would be not being able to use the land at all because of a compulsory easement that would prevent you from carrying out any activity whatsoever and that land being essential and of great value to the business you are acquiring. Otherwise, you may still negotiate such liability being properly disclosed in the “Disclosure Schedule” of the purchase agreement and establishing an escrow or taking any other measure to tackle loss if occurring. The same thing cannot be said when there are findings concerning money laundering or corruption charges. The risk involved in such situations would need to be measured in a very conservative manner as effects would not only involve economic consequences but eventual imprisonment.
Peña Mancero Abogados is publishing a series of high-level articles on M&A activity in Colombia. This article is for information purposes only and does not constitute legal advice. If you require further information, please contact Gabriela Mancero (info@pmabogados.co)
Guidelines for the treatment of personal data in artificial intelligence
By: María del Pilar Duplat – Peña Mancero Abogados
In June 2019, the Superintendence of Industry and Commerce (hereinafter “SIC”) issued its Guidelines for the treatment of personal data through Artificial Intelligence (AI).
- Purpose of the Guidelines
The guidelines seek to provide a series of suggestions to those who develop artificial intelligence projects based on the Standards for Data Protection for the Iberoamerican States of the Ibero-American Data Protection Network (RIPD, after its acronym in Spanish).
- Recommendations
- To comply with local regulation on the treatment of personal data
To avoid any legal objection over the AI products, it is important that your organization develop from the beginning a legal risk study of the local regulations to determine a strategy to:
- Mitigate legal risks.
- Earn and maintain the trust of the users of the AI technologies.
- Prevent any damage to the reputation of the organization.
- Avoid potential investigations from data protection or other authorities.
- To develop privacy impact studies
Before designing and developing AI products and to the extent possible, if there is a high risk of affecting the data protection rights of the owners of the data, it is necessary to develop a Privacy Impact Assessment (PIA) to put in place an effective system of risk management and internal controls to guarantee that the data is dully treated and in compliance with the current regulation.
Said PIA must contain at least the following:
- A detailed description of the operations of treatment of personal data involved in the development of the AI.
- An evaluation of the specific risks for the rights and liberties of the owners of the personal data.
- The measures foreseen to face the risks, including the guarantees, safety measures, software design, technologies and mechanisms that guarantee the protection of the personal data, taking into consideration the legitimate interests and rights of the owners of the data and other potentially affected third parties.
The results of the PIA with the risk mitigation measures are part of the principle of privacy by design and by default.
- To include the privacy, ethics and security from the design and by default
The privacy by design and by default is considered as a proactive measure towards the Principle of Accountability. By including the privacy from the design, the organization seeks to guarantee the adequate treatment of the personal data used in the AI procedures, even before the risks are materialized.
Thus, the privacy by design must be included in the design, the architecture of the software or the algorithm of the AI product. The following are the purposes that the technology must include:
- Avoid unauthorized access to the data.
- Avoid the manipulation of the data.
- Avoid the destruction of the information.
- Avoid unauthorized or improper uses of the information.
- Avoid the circulation or supply of the data to unauthorized people.
The safety measures must be adequate and must consider various risk factors, such as:
- The risk levels of the treatment of data for the exercise of the rights and freedoms of the owners of the data.
- The nature of the data.
- The potential consequences derived from a safety breach and the magnitude of the damage caused by said breach to the owner and, overall, to the society.
- The number of owners of the data and the amount of information.
- The size of the organization.
- The available resources.
- The monitoring and follow-up of the reliability of the algorithms.
- The status of the technique
- The reach, context and purposes of the treatment of the information.
- The cross-border circulation of the data.
- The uncertainty and complexity of each AI initiative.
- Every safety measure must be revised, evaluated and permanently improved.
The following are risk management aspects that have an impact on the algorithms:
- To materialize the principle of accountability
The designers and developers of AI products must adopt useful, appropriate and affective measures to comply with their legal obligations. They must also show the evidence of the correct compliance of their duties. Said tools must be subject to permanent revision and evaluation to determine their effectiveness regarding the compliance and degree of protection of the personal data.
For said purpose, and to comply with the principle of accountability, the organization should have, at least the following:
- Allocate resources to implement data protection programs and policies.
- Implement a risk management program for the treatment of data protection.
- Develop mandatory data protection programs and policies within the organization.
- Put in place training and updating programs for the personnel on the obligations of data protection.
- Review periodically the policies and programs for the safety of the data to determine the required amendments.
- Incorporate an internal and external surveillance system, including audits, to verify the compliance of the data protection programs and policies.
- Establish procedures to receive and answer questions and complaints of the owners of the data.
The accountability principle goes further than just creating a series or policies and programs, it requires that the organization responsible for the treatment of the data can show evidence of concrete results of the correct treatment of the personal data in the AI projects.
- To design adequate governance schemes over the treatment of personal data in the entities who develop AI products.
It is recommended that the organization defines a structure with clear functions and responsibilities that guarantee a proper corporate governance for the respectful treatment of the norms related to the personal data protection regime and the rights of the owners of the data.
The main functions and responsibilities that must be set within the organization are the following:
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- Develop risk management evaluations.
- Decide which decision-taking models will be used.
- Develop maintenance, monitoring and revision activities.
- Review the channels of communication with the users and consumers.
- To undertake measures to guarantee the principles of data protection in the AI Projects
Every person or organization responsible or in charge of the treatment of personal data must foresee adequate and efficient strategies to guarantee the compliance of the principles of treatment of personal data pursuant to the principles of the Standards for Data Protection for the Ibero-American States of the RIPD.
- To respect the rights of the owners and implement effective mechanisms so they can exercise them.
The organizations that create or use AI technologies must guarantee the following rights to the owners of the personal data:
It is specially important to talk about the right “not to be subject to automated individual decisions” when we talk about AI proyects. Thus, when talking about AI projects, it must be a possibility for the owners of the personal data to argue any decision related to the treatment of his/her personal data before a human being, and that it is not 100% in charge of algorithms or automated procedures.
Additionally, the RIPD’s Standards forbid that the automated decisions are discriminatory. Thus, developers of the AI proyects must foresee in their design all the mechanisms or options for the owners of the data to exercise their rights through simple, free, fast, and accesible means that allow them to access, rectify, cancell, opose or transfer their personal data.
- To ensure the quality of the data
One of the risks using AI is that the machine is biased due to the configuration of the algorithm and the quality of the information. To minimize the risk of bias and prevent the breach of the rights of the owners of the personal data, it is suggested that:
- The information used by the AI is true and precise.
- The organization carries a registration of the source of the data.
- The organization makes audits of the sets of data used in the creation of the algorithms used in the decision-making processes by the machine.
- Grant veracity scores to the sets of data used to train the machine during its creation.
- Regularly update the data.
- Have separate sets of data to train, prove, and validate the decision-making processes.
- To use anonymization tools
It is important to determine if it is strictly necessary that the information that will be used by the AI must be used or linked to a person. If it is not necessary it is recommended that the information is used anonymously, so the owner of the data is not identified. In this way, the anonymization will help in the mitigation of the risks of massive treatment of personal data in the AI projects and procedures.
- To increase the trust and transparency with the owners of the personal data
A transparent organization may increase the trust of the owners of the Data in it through:
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- Keeping open communication channels with Data owners and disclosing its policy for the treatment of the personal data in AI procedures or products. It is important to use a simple language that a non-expert in AI may understand.
- Carrying out pilot tests to evaluate the decision-making model and correct any problem that may exist.
- Giving the option to the data owner, in certain cases, that its information is excluded from the data provided and studied by the machine in the development of the algorithms and patterns in the cases allowed by law.
- Implementing revision channels so the decisions taken by the machine may be revised by humans to ratify them or correct them.
CAUSE FOR DISOLUTION OF COMPANIES DUE TO NON-COMPLIANCE WITH THE HYPOTHESIS OF CONTINUING BUSINESS
By: Daniel Salazar López
The current political, social and economic crisis as a result of COVID-19 outbreak, led many companies and branches of foreign companies to enter into a cause for dissolution for losses or accumulated losses, some of them overcame the cause for dissolution while others had to be liquidated.
Until recently, in Colombia a company entered into a cause for dissolution when it had losses or accumulated losses which resulted in a decrease in equity below 50% of its subscribed capital. If this cause for dissolution was not solved within a 2 year period, the company had to be liquidated. Nevertheless, Law 2069 of 2021 (Entrepreneurship Law) eliminated this cause for dissolution and liquidation of companies in Colombia, and introduced a new cause for dissolution, the non-compliance with the hypothesis of continuing business. This is a step forward in corporate matters, since the cause of losses caused confusion, firstly taking into account that companies at the beginning of their economic activity generated high costs that prevented them from having profits at the end of the fiscal year, and therefore entering into grounds for dissolution; previously, at the closing of each fiscal year, the cause for dissolution was warned of and could be enervated within the established term, now it is imperative that the administrators of a company intervene more thoroughly on the hypothesis of continuing business.
The hypothesis of continuing business provides that provides that at the end of the fiscal year, a company must evaluate its financial statements to determine whether it has the capacity to continue operating. Therefore, when the highest corporate body analyses and evaluates the financial statements prepared under the hypothesis of continuing business, and it is observed that there is a detriment to the company’s assets and that this casts doubt on the continuity of the company’s continuing business[1], the company will be subject to dissolution.
If your company has an International Financial Reporting Standard (IFRS) accounting framework, the management under IFRS will assess the entity’s ability to continue with its businesses, which underlines the importance of preparing financial statements for the fiscal year 2020 in the current business environment. On the other hand, the companies that were subject to dissolution due to losses before the entry into force of Law 2069, such cause was suspended by virtue of Decrees 560 and 772 of 2020, while the companies are recovering in the midst of the crisis generated by COVID-19. It is worth mentioning that such suspension is extended to Law 2069 until the end of the term of such decrees, i.e., until April 2022.
In view of the foregoing, when the administrator notices in the financial statements of the fiscal year that the hypothesis of continuing business is not complied with, the administrator must summon the highest corporate body to inform in a documented manner such situation, so that the highest corporate organ of the company declares that the company has entered into dissolution grounds and therefore measures must be taken to continue with the business or to liquidate the company. It is important to highlight that when the company enters into a cause for dissolution, the administrators must abstain from carrying out new operations different from the ordinary course of business of the company. In case of non-compliance with the duty to inform the respective highest body by the administrator, the administrator shall be jointly and severally liable for the damages caused to the members of the Company or third parties. In assessing whether continuing business situation is appropriate, the management shall consider all available facts about the future, which shall cover at least, but not be limited to, the next twelve (12) months from the reporting date.
The following situations are considered as non-compliance with the continuing business hypothesis:
- Liquidity risk
- Legal claims of significant contingencies.
- Low quality condition of the company’s products or services.
- Termination of contracts with significant customer and suppliers.
- High consecutive borrowing to invest in long-term business.
- Financial losses due to failure to meet contractual payment obligations.
- Labor strikes that have a significant impact on the company´s result.
- If there are delay in the payment of liabilities with banks, payroll or dividends.
Thus, if the company has a history of profitable operations and it´s positive cash flow projections indicate appropriate access to financial resources, it can be concluded that the use of the hypothesis of continuing business is appropriate. Now, it is imperative to prepare the financial statements for the fiscal year, including the trial or periodic financial statements, and the concept issued by the accountant will become more relevant since the highest corporate body will determine the viability in the short and medium term (12 months), avoiding deterioration in the common pledge of the creditors and in the equity of the associates. If, on the contrary, there is an uncertainty in the operations of the ordinary course of business of the company, and it isn´t possible to cover it within the following twelve months, the cause of non-compliance with the hypothesis of continuing business is configured and the company must proceed with its dissolution and liquidation. The proposal of this new cause seeks to protect the contingencies derived from the state of emergency due to COVID-19.
[1] Consejo Técnico de la Contaduría Pública Radicado 2018-095, del 2 de febrero de 2018
Data Protection & Privacy
Autor: Daniel Peña Valenzuela
Editorial: European Lawyer
Categoría: Data Protection, European & EU Law
Año de Edición: 08 Nov 2016
Formato: Libro Impreso
Número de páginas: 1124
ISBN: 9780414057821
The number of jurisdictions with laws on data protection and privacy is still on the rise and the interest in the area of data protection and privacy has never been greater. The book aims to create a single starting point of reference for businesses, data protection officers, advisers and legal professionals involved in data protection and privacy. This third edition of Data Protection & Privacy – Jurisdictional Comparisons serves as an indispensable reference guide on the data protection and privacy laws in over 40 countries from six continents.
Written by expert local practitioners, with deep experience in the field of data protection and privacy, every chapter contains an overview of the key elements and principles of the data protection and privacy law framework in the relevant jurisdiction as well as the latest developments and trends. Because each chapter follows the same Q&A structure, readers can conduct quick comparisons between the various legal regimes.
Contents
1. Legislation
2. Data protection authority
3. Legal basis for data processing
4. Special rules
5. Data quality requirements
6. Outsourcing and due diligence
7. International data transfers
8. Information obligations
9. Rights of individuals
10. Security of data processing
11. Data protection impact assessments, audits and seals
12. Registration obligations
13. Data protection officer
14. Enforcement and sanctions
15. Remedies and liability
Jurisdictional coverage
1. Argentina – Marval, O’farrell & Mairal
2. Australia – Gilbert + Tobin
3. Austria – Preslmayr Rechtsanwälte Og
4. Belgium – Covington & Burling Llp
5. Brazil – Felsberg Advogados
6. Bulgaria – Djingov, Gouginski, Kyutchukov & Velichkov
7. Canada – Osler
8. Chile – Palma & Palma Abogados
9. Colombia – Peña Mancero Abogados
10. Costa Rica – Thompson Abogados
11. Czech Republic – Havel, Holásek & Partners S.R.O.
12. Denmark – Beck – Bruun
13. EU – Covington & Burling Llp
14. EU Institutions & Bodies – European Commission
15. Germany – Covington & Burling Llp
16. Hong Kong – Deacons
17. Hungary – Oppenheim Law Firm
18. India – Vaish Associates Advocates
19. Ireland – Mason Hayes Curran
20. Israel – Vigal Arnon & Co
21. Italy – NCTM
22. Japan – Atsumi & Sakai
23. Lithuania – Valiunas Ellex
24. Luxembourg – Arendt & Medernach SA
25. Malaysia – Christopher Lee Ong
26. Malta – GVTH Advocates
27. Mexico – Laurant Abogados
28. Morocco – Hajji & Associes
29. Netherlands – Vondst Advocaten
30. Poland – Soltysinski Kawecki & Szlezak
31. Portugal – Coelho Ribeiro E Associados
32. Romania – Nestor Nestor Diculescu Kingston Petersen
33. Singapore – Wongpartnership Llp
34. Slovakia – Havel, Holásek & Partners S.R.O
35. Slovenia – Rojs, Peljhan, Prelesnik & Partnerji
36. South Africa –Adams & Adams
37. South Africa – Lee & Ko
38. Spain – Garrigues
39. Sweden – Mannheimer Swartling Advokatbyrå Ab
40. Switzerland – Lenz & Staehelin
41. Taiwan – Lee And Li, Attorneys-At-Law
42. Turkey – Elig
43. Uae – Al Tamimi & Company
44. Uk – Covington & Burling Llp
45. Usa – Covington & Burling Llp
International Joint Ventures (2013)
GABRIELA MANCERO,
JOINT VENTURE IN COLOMBIA, PAGS 91-102,
OBRA: INTERNATIONAL JOINT VENTURES, A GUIDE OR U.S. LAWYERS (INTERNATIONAL JOINT VENTURES/MERGERS AND ACQUISITIONS COMMITTEE)
CHICAGO, AMERICAN BAR ASSOCIATION,
AÑO: 2013.
This publication is part of a series of works published by the international Mergers & Acquisitions Subcommittee to assist business lawyers in advising clients in international transactions. The focus of this publication is on bilateral joint ventures between US and overseas coventurers.
In providing a framework for considering issues particular to a jurisdiction’s legal system and culture, the Task Force has crafted a flexible but relatively uniform method of how to think about issues particular to international joint venture. The result is a reference work that is intended to serve as a starting point from which to map out effective agreements.