Taking out insurance outside Argentina is still prohibited

1. Prohibition to take out insurance outside Argentina

Law No 12,988 was passed on June 24, 1947 and was amended by Decree No 10,307/53. According to Section 2 of this Law, as amended, persons, goods and any insurable interest of Argentine jurisdiction may not be insured outside Argentina. Violations of this provision shall be sanctioned with a fine.

2. Is this prohibition in effect?

Since Decree No 2,284/91 of Deregulation of the Economy was enacted, it has been questioned whether Law No 12,988 is still in force or whether it has been abrogated. Section 1 of Decree No 2,284/91 provided that restrictions to the supply of goods and services within the Argentine territory were eliminated. As Section 2 of Law No 12,988 restricted the offer of insurance, it was considered that the restrictions to the offer of insurance had been abrogated by Decree No 2,284/91.

Decree No 2,284/91 provided that the Ministry of Economy would interpret its scope. On the basis of these powers, the Ministry of Economy enacted Resolution No 589/94. This Resolution states that part of another section of Law No 12,988 has been abrogated by Decree No 2,284/91, but it makes no reference to Section 2 of Law No 12,988.

The Under-secretary of Deregulation and Organisation of the Economy sent a note to the tax authority (the “DGI”) advising them that Section 2 of Law No 12,988 had been abrogated by Decree No 2284/91. The DGI is the authority that must prosecute the cases of alleged violations of Law No 12,988.

On the contrary, the Superintendent of Insurance considered that Section 2 of Law No 12,988 was in force. In accordance with this opinion, the Superintendent reported violations of this rule to the tax authority. The case was dismissed on the basis of the note of the Under-secretary.

The Superintendent requested the Deregulation of the Economy Office’s opinion on whether Section 2 of Law No 12,988 was in force. The Deregulation of the Economy Office considered that Section 2 of Law No 12,988 was in force and that only another part of Law No 12,988 had been abrogated.

Although the DGI is the authority that prosecutes cases of alleged violations of Law No 12,988, its sanctions are imposed by the President. Therefore it was the President who had to decide whether to sanction the violations, thus ratifying that Section 2 of Law No 12,988 was in force.

In the cases that lead to the enactment of the decrees that provide for sanctions to violations of Law No 12,988, the insureds argued that Section 2 of Law No 12,988 had been abrogated by Decree No 2284/91.

The President did not agree with the insureds and therefore sanctioned them with a fine. These decrees, albeit not in an express manner, ratified that Section 2 of Law No 12,988 is in force. The insureds may appeal the President’s decision before a Court of Justice. Therefore, the Courts will finally determine if Section 2 of Law No 12,988 is in force or not.

It is not clear what the fine may amount to. The text of Law No 12,988, as published in the Official Gazette, provides a fine not higher than 25 times the amount of the premium, but in the decrees of 23 April the President considered that the fine may not be higher than 25 times the tax on the premium. It remains to be seen what the maximum fine may amount to.

3. Conclusions

The President fined insureds that had taken out life insurance policies with a foreign company that was not authorised by the Superintendent of Insurance to sell insurance products in Argentina.

This decision ratifies that in spite of Decree No 2284/91 the prohibition to insure persons, goods or any insurable interest outside Argentina is in force. The courts must finally settle the controversy.

The President, who is the authority that must sanction violations to Law No 12,988, considered that fines may not exceed a sum equal to 25 times the tax on the premium.