Ministry of the Environment and Water (Ecuador)

Ministerio del Ambiente y Agua del Ecuador

Country

Location

Regulated area

Ecuador

Quito, Guayaquil

Environment

Useful pages on the regulator website

Key individuals

  • Paulo Arturo Proaño Andrade (Interim): Minister of the Environment and Water
  • Steven Augusto Petersen Rojas: Vice Minister of the Environment
  • Oscar Arnaldo Zapata Olmedo: Undersecretary of Environmental Quality
  • Humberto David Re Carrera: Undersecretary of Climate Change
  • Laura Alexandra de los Ángeles Altamirano Luna: Undersecretary of Natural Patrimony
  • Juan Pablo Carvajal Quintero: Undersecretary of Marine and Coastal Management

Regulatory oversight

The Ecuadorian Ministry of the Environment and Water supervises compliance with the adopted environmental measures that guarantee a sustainable model of environmentally balanced development while also being respectful of cultural diversity, as well as to conserve biodiversity and the natural regenerative capacity of ecosystems. It aims to ensure the needs of present and future generations. Likewise, it is responsible for verifying that there is a relationship between the economic, social and environmental axes that guarantee the sustainable management of strategic natural resources.

The legislative framework includes the following, among others:

  • Ecuadorian Constitution;
  • Environmental Organic Code;
  • Regulations to the Environmental Organic Code;
  • Unified Text of Secondary Environmental Legislation (TULSMA);
  • Hydrocarbons Law;
  • Mining Law;
  • Environmental Regulation of Hydrocarbon Operations; and
  • Organic Law for the Development of Aquaculture and Fishing.

The environmental authority supervises and participates in the regulation of different areas, including, but not limited to, agriculture, animal production, aquaculture, forestry; hydrocarbon activities focused on the exploration, development and production, industrialisation, commercialisation, manufacturing of petroleum and coal products; mining activities relating to artisanal, small, medium and large-scale mining operations, free use mining of minerals; activities of environmental services such as wholesale and retail commerce, repairs and maintenance, transportation and storage, air fumigation, accommodation, professional, scientific and technical services; hazardous and special waste management activities; and chemical and dangerous substances.

Reporting and disclosure obligations

Since the Ministry of the Environment and Water is an authority of supervision and control, all activities that may pose an environmental risk must be duly regularised and obtain all the necessary administrative permits, which will depend on the activity’s environmental impact. The three types of permits are environmental licence (high and medium impact), environmental registry (low impact) and environmental certificate (no significant impact).

Other types of administrative documents that must be complied with include environmental management plans, social participation processes, environmental compliance audits, registration of waste generators, and its consequent declarations, such as the extended producer responsibility (among others).

Monetary sanctions and recent behaviour

From an administrative perspective, a new sanctioning system was implemented in environmental matters (in accordance with the Environmental Organic Code), which comprises three steps. The first is to analyse the financial capacity of the offender, which is based on an analysis of the offender’s gross annual income obtained from the previous fiscal year. From this information, the authority will classify the offender under one of the four groups provided by the Organic Code: Group A (for which income ranges from US$0 to US$11,315) to Group D (income from US$113,150), the latter being for the highest gross income and therefore subject to the highest fines (Articles 322 and 323, Environmental Organic Code).

The second step is to analyse the infraction, which can be categorised as mild, serious or very serious (Articles 316 to 318, Environmental Organic Code).

Finally, the competent environmental authority can determine whether the actions of the accused are considered aggravating or attenuating. The former is penalised with an additional 50% of the total fine, whereas the latter results in a penalty reduction by a similar amount, as established in Article 327 of the Environmental Organic Code.

In summary, the Environmental Organic Code sets out administrative sanctions ranging from US$400 to US$80,000, depending on how serious the infraction is considered to be.

One of the most frequent activities for which corporations are sanctioned is non-compliance with the parameters and regulations of discharges of wastewater or industrial water. This is classified as a very serious infraction and is therefore subject to the highest fine (US$80,000, applied only if the company’s annual gross revenues are in the Group D category).

The environmental regulation also states that if an infraction has affected communities and individuals, an ‘integral reparation’ must be carried out, which may include compensation for the damages suffered, which shall be determined by the competent authorities.

Regarding criminal liability, the Comprehensive Penal Organic Code (Article 258) states that corporations can be subject to fines. These fines and their amounts will depend on the crime that has been committed. The main types of crimes that fall within environmental criminal liability are those that involve serious damage to water, soil and air. The higher the number of years of imprisonment, the greater the fine. For example, for crimes for which the sanction is between one and three years of imprisonment, the fine may range from US$40,000 to US$120,000. If the sentence exceeds five years, the fine may range from US$200,000 to US$400,000.

The amounts of these fines are linked to the minimum wage in Ecuador, which is updated annually. Therefore, each year, the fines will increase by the same amount as the minimum wage (which for 2020 is US$400).

Non-monetary sanctioning powers and behaviour

Article 320 of the Environmental Organic Code contains all the administrative sanctions that apply to infractions, which consist of:

  • monetary fines (as detailed in the previous section);
  • seizure of wildlife (native, exotic or invasive species), tools, equipment, means of transportation and other instruments used to commit the offence;
  • destruction of the means of transportation, tools or goods use to commit the offence;
  • temporary suspension of the activity or the activity’s official endorsement;
  • revocation, suspension or loss of incentives; and
  • eviction of people from the area where the offence is being committed, with full guarantee of their rights, as well as the dismantling and demolition of infrastructure or instruments used to commit the offence.

When the violation affects nature, in addition to these sanctions, the Ecuadorian Constitution will guarantee the integral reparation of the ecosystems that have been affected. In the Environmental Organic Code and its Regulations, priority is given to regeneration to the natural state when this is possible from a technical, economic and social point of view. Therefore, restoration implies the execution of all the activities or acts required for the recovery and re-establishment of the natural processes. When the corrective measures approved by the competent environmental authority are not complied with, the definitive closure of the activity can be imposed.

Likewise, the regulations establish that when required by the magnitude of the damage, and even after applying all the necessary and required measures, it has not been possible to restore the state and conditions prior to the infraction, compensatory measures must be taken. These compensations will generate environmental benefits proportional to the losses caused by the environmental damage. Social environmental compensations may also be undertaken, such that actions, programmes or plans must be executed by those responsible for the environmental damage, in coordination with the respective regulating bodies that favour individuals who have been environmentally affected. These measures may be temporary or permanent and must be carried out until the original conditions are restored, with the consent of the affected individuals, who may sign negotiation agreements.

Recent and upcoming developments

The Regulations to the Environmental Organic Code were promulgated in the Official Registry No. 507, 12 June 2019. These Regulations address and expand on environmental issues such as extended producer responsibility (EPR), the inclusion of clean technologies in production processes, and the circular economy.

With regard to EPR in Ecuador, counsel should take into consideration that the following products are currently being regulated: used batteries, unused electronic items, used oils, tyres, agrochemicals and unused cell phones. It is expected that other products will be included in the future.

Ministerial Agreement 048 was issued on 19 June 2019 on behalf of the Ministry of the Environment, which regulates new incentives (an additional deduction of 100% of depreciation rates) to companies that implement machinery, equipment and technologies that is environmentally friendly.

On 1 April 2020, the Environmental Regulation of Hydrocarbon Operations was promulgated, a normative that regulates all persons, without exception, who carry out hydrocarbon activities and that are involved in the phases within this process, as well as the environmental administrative organisations that they must comply with. A key aspect to highlight is the definition of the operator, contemplated in Article 4 of Regulation, which includes those corporations that maintain determining economic power over the technical operation of the activity, thus substantially expanding the spectrum of responsibility in environmental matters. Another key aspect is found in Article 14, the purpose of which is to imperatively determine that in all phases of industrial production, equipment, materials and technologies that are compatible with the protection of the environment must be used.

From an environmental tax perspective, on 6 May 2020, the Internal Service Revenue of Ecuador issued a regulation that imposes a tax on plastic bags.

Finally, a Bill titled the Organic Law of Circular Economy has been introduced in the National Assembly of Ecuador, which proposes the regularisation of businesses’ activities, seeking sustainable production within the use of natural resources.

Challenges

The main challenges for the Ministry of the Environment lie in granting environmental permits. Since most economic activities require environmental permits, this generates an overload of administrative procedures that the authority cannot handle, which in turn produces a delay in the issuing of environmental licences, registrations and certifications. This situation leaves companies, who wish to operate, devoid of permits, subjecting them to unnecessary delays or risks caused by the inability of the authority to operate effectively.

Another challenge is the regularisation of certain sectors, such as mining. Large-scale mining will have a major role in Ecuador’s economy in the coming decades. The Ministry of the Environment will face challenges derived from overseeing and enforcing regulations in an agile and effective manner, while also stopping illegal mining operations (which undermine the legitimacy of the mining sector in a serious way). The role of the authority will be key in the further development of this industry in Ecuador, especially considering the current state of opposition to this activity from some local communities and environmental groups.

Interacting with the regulator

The Ministry of the Environment offers various means of communication. They may be reached by phone (+593 398 7600). However, most procedures are handled by email ([email protected]). Response times vary, but most enquiries are answered within the same week.

For more urgent and time-sensitive matters, it is recommended to go directly to the government official in charge, by appointment.

Notes for foreign investors

Ecuador’s Constitution contemplates various legal principles within environmental matters that must be taken into consideration by an investor, namely:

  • nature as a subject of law (Article 71), which allows any individual or community to claim any affectation or impairment to nature or ecosystems;
  • prevention and precaution, restricting any person who carries out an activity to adopt all the necessary care and measures so as not to affect the environment;
  • objective liability, which implies that the causality of the event is disregarded from the analysis and only the event is considered relevant (applied only for administrative purposes);
  • reversal of the burden of proof, which determines the obligation to prove innocence in the event of being involved in the administrative sanctioning procedure of an environmental matter relevant (applied only for administrative purposes); and
  • environmental liability is not subject to statute of limitations, which means that the authority or an interested individual may denounce and initiate a process regardless of the passage of time.

By virtue of the above, if an investor wishes to carry out a merger and acquisition process, it is recommended to carry out an exhaustive due diligence so that all environmental contingencies are identified in advance.

Likewise, the Environmental Organic Code provides that environmental liability can be extended to companies that have decision-making powers (parent companies), legal representatives (directors or officers) and those in charge of environmental management duties who are directly responsible for the consequences of activities and damage to the environment. Therefore, having in place an exhaustive compliance system is highly recommended, to monitor compliance with applicable regulations and reduce the risks and costs of environmental breaches or damage.

Other regulators it works closely with

Ministerio de Minería
Ministry of Mining (Ecuador)

Ministerio de Energía y Recursos Naturales no Renovables
Ministry of Energy and Non-Renewable Natural Resources (Ecuador)

Ministerio de Hidrocarburos
Ministry of Hydrocarbons (Ecuador)

Ministerio de Acuacultura y Pesca
Ministry of Aquaculture and Fishing (Ecuador)

Ministerio de Agricultura y Ganadería
Ministry of Agriculture and Farming (Ecuador)

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