In Ecuador, franchises are not governed by specific laws on franchising. Rather, the obligations of franchisors and franchisees and the contracts between them are regulated by the Civil Code, the Trade Code, foreign investment rules, and Decision 291 of the Andean Community. Industrial property rights are further regulated by foreign investment legislation, intellectual property law, the Consumer Defence Law, technology transfer contracts and Decision 486 of the Andean Community. Additionally, if a franchise is conditional on the grant of a health registration certificate, the Health Code and Health Registration Regulations apply.
A franchise for the production of any of the following items in Ecuador must be registered with the Ministry of Public Health:
- processed foods and additives;
- medicine and surgical devices;
- cosmetics and perfume;
- sanitary products; and
In order to be registered, an application must be made to the Ministry of Public Health for each product requiring registration. There are very detailed and specific rules governing the documentation that must be submitted with the application depending on whether the franchise is for (i) food products or (ii) medicine, surgical devices, cosmetics and sanitary products. Also, in the latter case, the Leopoldo Izquieta Pérez National Hygiene and Tropical Medicine Institute must approve the franchise. Once granted, a health registration is valid for 10 years and may be renewed for further periods of 10 years.
Generally, if the Ministry of Public Health refuses to register a franchise without giving reasons for its decision, then the application is automatically approved within 30 days of the application filing date. An exception to this rule applies in the case of franchises that involve the construction of industrial food processing plants and pharmaceutical and biological laboratories for cosmetics and pesticides. In these cases the ministry must actually approve the registration; the applicant cannot obtain registration by default.
The Ministry of Public Health may cancel a franchise's health registration if it is established that the franchisee has failed to fulfil its legal obligations (including the payment of registration fees), or if the franchise product causes damage to the health of consumers. In addition, the franchisee must compensate consumers for any damages caused, and pay any applicable civil or criminal penalties.
For further information on this topic please contact Maria Cecilia Romoleroux at Bustamante & Bustamante by telephone (+593 2 562 680) or by fax (+593 2 564 628) or by e-mail ([email protected]).
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