1. Outline the court system in your jurisdiction.
The Costa Rican judicial system is organised according to its Constitution and the Judicial Branch Organic Act. The Judicial Branch is responsible for admitting and deciding on civil, criminal, juvenile crime, commercial, labour, administrative, family, agrarian and constitutional matters, among other matters covered by the law (ie, traffic procedures, collection procedures, etc).
In general, the authorities responsible for managing the judicial system are the following, which may vary according the subject matter:
- small claims, misdemeanour and summary courts and tribunals;
- first-instance and criminal courts;
- three-judge courts;
- cassation tribunals;
- Chambers of the Supreme Court of Justice; and
- Plenary Court.
2. What remedies are available to a local entity or resident that is in a dispute with a foreign entity? Do the laws provide foreign entities the same rights afforded to local entities? Are there laws requiring foreign entities to post a bond or other security before they can defend a suit?
Under the Costa Rican Constitution, foreigners have the same individual and social rights and duties as Costa Ricans, with the exceptions and limitations that the Constitution and the laws establish. Furthermore, the Constitution states that foreign entities and individuals are subject to the jurisdiction of Costa Rican courts, tribunals of justice and authorities.
In general, Costa Rican law does not require foreign entities to post a bond or other security before defending a lawsuit. Nevertheless, this rule accepts exceptions. For example, the Law of Protection of Representatives of Foreign Companies states that when a local representative of a foreign entity is claiming losses and damages the civil court may order and request a prudential amount to guarantee the eventual results of the case.
3. What is the process by which a foreign entity may challenge the jurisdiction or venue of the; court where litigation is filed? What factors are considered when a court evaluates whether; to exercise jurisdiction over a foreign entity?
The defendant must challenge the jurisdiction or venue when answering the lawsuit. Nevertheless, Costa Rican law allows exceptions to this rule and admits challenges to the jurisdiction or venue at any time during the proceedings, according to the specific procedure. The judge must give the plaintiff the opportunity to answer the argument of lack of jurisdiction or venue and thereafter must decide upon its jurisdiction.
Once that decision is made the parties may file an appeal before the corresponding authority, according to the specific procedure. For example, in commercial disputes, the final decision on a jurisdictional dispute is the competence of the First Chamber of the Supreme Court.
The following factors are considered when a court evaluates whether to exercise jurisdiction over a foreign entity:
- Costa Rican courts are competent when so determined by current international treaties.
- Costa Rican courts are competent when the defendant, regardless of nationality, is domiciled in Costa Rica. The law presumes Costa Rican domicile when a foreign legal entity has an agency, subsidiary or branch within the country, but only with regard to acts or contracts entered into by the agency, subsidiary or branch.
- Costa Rican courts are competent when the contractual or legal obligation shall be performed in Costa Rica.
- Costa Rican courts are competent when the material claims of the suit are based on a fact, act or legal business occurring, entered into, or with effects within the national territory.
- Costa Rican courts are competent if the parties have so established contractually, provided one of them is Costa Rican and some criterion of connection exists with the national territory.
Costa Rican courts have exclusive competence, to the exclusion of any other, when real or mixed (real and personal) claims involving movable and immovable property situated in Costa Rica are argued; when there are suits against legal entities registered in Costa Rica that affect their incorporation, validity or dissolution or that concern the decisions or agreements of their governing bodies; and when the parties are Costa Ricans or foreigners domiciled in the country, provided their effects and enforcement occur in Costa Rica.
Costa Rican courts must declare themselves incompetent when:
- a suit has been filed or enforcement requested concerning subjects or assets that enjoy immunity pursuant to international law;
- by virtue of international treaties or conventions, the matter is attributed exclusively to the jurisdiction of another state; or
- the matter is not attributed to it pursuant to the aforementioned provisions. Notwithstanding, despite the non-existence of a connection factor, if the court does not decline its competence the defendant may tacitly or expressly extend it.
Finally, the court must decide whether or not an arbitration clause or agreement exists for resolving the dispute, regardless of whether the arbitration is national or international.
4. What is the most common type of litigation encountered in your jurisdiction by foreign entities?
The most common type of litigation may vary according the foreign entity’s specific activity, but is generally one of the following:
- labour disputes (see question 21);
- real estate disputes (between individuals and between foreign entities and the state); particularly in the coastal areas, where real estate developments have considerably increased in recent years following the 2009 crisis);
- civil and commercial disputes, mainly for breach of contract and derived losses and damages; and
- shareholder disputes.
5. How frequently do parties pursue criminal actions in the context of commercial disputes? May criminal trial evidence be adduced in follow-on civil litigation? May civil cases be brought concurrently or after criminal litigation?
When there are actions deemed criminal in the context of commercial disputes, complaints are frequently filed for investigation and, eventually, penalties may be imposed. In general, insofar as a criminal conviction may be deemed more cumbersome than a civil conviction, a criminal complaint may be filed first as a litigation strategy.
The Costa Rican legal system provides the possibility of filing civil actions within a criminal action, so consequently they are not mutually exclusive. In this scenario, the court investigates and resolves on whether or not the alleged facts constitute a crime and concurrently, but within the same case file, it decides on the civil (economic) consequences implied by the crime (compensation for damages and losses resulting from management fraud, for example).
Moreover, a criminal action may be filed without including a civil action for damages. This scenario does not prevent the injured party from filing a civil action, however. That is, two actions are processed: one in the criminal jurisdiction and one in the civil jurisdiction. In this case it is possible to submit evidence to the civil proceeding that has been legally and validly gathered in the criminal proceeding.
It should be emphasised here that article 34.2 of the Civil Procedure Code stated that the existence of a criminal proceeding shall at no time give rise to prejudice. This may change the litigation strategy in cases where the dispute may be filed in either venue.
6. Is there a right to a trial by jury in a commercial dispute?
No. The Costa Rican judicial system does not contemplate trial by jury in any kind of proceeding.
7. Do courts require or strongly encourage mediation or other alternative dispute resolution methods before or during a litigation proceeding?
Yes. Most Costa Rican court procedures include a conciliation stage as part of the ordinary procedure. Furthermore, it is common practice during conciliation hearings for judges to strongly encourage the parties to reach an alternative resolution that is mainly negotiated by the parties themselves. Mandatory attendance is not required at conciliation hearings.
8. Will choice of law and choice of forum provisions in a contract be recognised? Must these provisions meet certain requirements or formalities to be enforceable?
Yes, choice of law and choice of forum provisions in a contract are recognised. Article 98 of the Civil Procedure Code, which took effect on 8 October 2018, states that the parties can base their substantive matter on foreign law, providing its existence, effectiveness, content and interpretation is legally accredited. Pursuant to this code, all parties must agree on the applicable law and forum and in no case may the judge decide on his own to apply foreign law.
Foreign law shall apply as it would in the courts of the country to whose legal system it belongs, unless such laws violate international public order. Finally, the code expressly establishes that foreign law is inapplicable to proceedings as such, in which case Costa Rican law would apply. That is to say, international laws apply with regard to substantive matters but not procedural matters.
9. Does your jurisdiction have a specific arbitration law? Are arbitration awards enforced by the courts? May courts enjoin/prohibit arbitration proceedings in matters that are also pending in a court proceeding?
Costa Rica has a dualistic arbitration system: (i) the Law on Alternative Dispute Resolution and Promotion of Social Peace (in force since 1998), which governs domestic arbitration, and (ii) a law that governs international arbitration, the Law on International Commercial Arbitration, based on the UNCITRAL Model Law on International Commercial Arbitration (in force since 2011).
Arbitration awards are enforced by the courts, since they are considered res judicata. Furthermore, breached awards can be mandatorily executed in the same terms as a final judement granted by an ordinary court.
According to the Costa Rican Constitution, all individuals have the right to settle their patrimonial disputes by means of arbitrators, even when there is pending litigation. In such case, both parties must agree to submit the dispute to arbitration.
Furthermore, if a lawsuit concerns a matter covered by an arbitration agreement, courts will refer the parties to arbitration at the request of the defendant.
10. Do courts in your jurisdiction retain authority to grant interim measures in support of arbitration? Do domestic arbitration laws address the enforceability of emergency arbitrator relief?
11. Is your country a signatory to any investor-protection treaties? Please comment on any recent investor-state cases to which your country is a party and the impact of its outcome.
12. Do the courts recognise attorney-client privilege? If so, is the privilege applicable to in-house lawyers?
Yes. Costa Rica has specific regulations concerning attorney–client privilege, which is applicable to in-house lawyers since they are not excepted in the regulations.
Attorney–client privilege applies even to professional relationships that are terminated for any reason.
Costa Rican law admits exceptions to the attorney-client privilege in the following cases:
- an attorney may disclose all necessary relevant and pertinent information when he or she is a defendant in a criminal procedure;
- an attorney may disclose all pertinent information when it is necessary to demonstrate the complexity of a case within a court dispute over the attorney’s fees;
- an attorney may disclose all pertinent information when it is necessary to prevent the criminal conviction of an innocent defendant; and
- an attorney may disclose all pertinent information when it is necessary to prevent potential crimes.
Breach of client–attorney privilege may imply civil, ethical, disciplinary and even criminal consequences.
13. Are legal proceedings public? In other words, can the general public observe hearings and review the filings of the parties?
Pursuant to article 2.1 of the Costa Rican Civil Procedure Code, proceedings are public. In practice, however, civil procedures are allowed to be observed and reviewed solely by the parties and their accredited attorneys and legal representatives. Any incorporated attorney or person authorised by the parties may review court files, but cannot participate in the hearings. Some proceedings, such as criminal and traffic cases, are fully public at different stages. Arbitration proceedings are confidential.
14. May a defendant join other potentially liable parties to the existing lawsuit?
Yes. this particular possibility is known as litis consorcio (joint litigation), which is applicable if the final judgment necessarily affects third parties. They must be part of the proceedings as either plaintiffs or defendants.
15. How may a party enforce a foreign judgment?
Pursuant to article 99.2 of the Costa Rican Civil Procedure Code, a party may enforce a foreign judgment or award, which is considered res judicata. The interested party must file for formal recognition of the foreign judgment or award at the respective chamber of the Supreme Court of Justice, according to the subject matter (see question 1).
Recognition of the foreign judgment is subject to fulfilment of the following legal requirements:
- an authentic copy of the judgment or award, issued by the legal authority or a competent arbitrator, showing that the diplomatic or consular requirements of the country of origin and Costa Rica have been met;
- official translation of the judgment or award in Spanish, if the original is in a different language;
- proof from the interested party that the plaintiff has been duly notified or represented or declared in contempt, if such is the case, pursuant to each country’s laws;
- hearing of the recognition and warranting by the competent Chamber of the Supreme Court that the claim made in the foreign court or arbitration proceeding was not of the exclusive competence of the Costa Rican courts (see answer to question number 3);
- the fact that the claim has a connection to Costa Rica and is not contrary to domestic public order. For example, it cannot concern obviously inappropriate matters such as approval of criminal behaviour, according to Costa Rican law; and
- non-existence in Costa Rica of an ongoing proceeding or one with a judgment or award with the authority of material res judicata.
16. How is service of process effected? How long does it typically take?
Claims must be filed directly at the courts. In particular, claims may be filed digitally or at the specified offices for receipt of documents. In both channels, they are assigned randomly to the corresponding court. Once the suit has been received, the assigned court or tribunal studies its admissibility. When the suit is admitted, the court issues a writ of summons (in the case of civil suits) and gives the respondent a deadline for answering the complaint.
Costa Rican law states that initial service of process in any procedure must be effected by personal means unless for some reason the defendant has already appeared for the procedure.
In any case, personal service of process should not necessarily be construed as delivering notice into the hand itself of the defendant. The law permits service of process at the defendant’s residence or the residence of the legal representative of the defendant legal entity, delivering the document to a person who seems to be 15 years of age or older, at their real or contractual domicile (which must coincide with the real residence of the individual or the real or corporate domicile of the entity) or their registered office.
Personal notice may be served by different means: through the court system’s notices and communications office by certified mail with acknowledgement of receipt or by means of a notary public, who must be completely impartial and cannot have any relationship to the parties or any interest in the result of the procedure. If the process must be served outside of Costa Rica, notice must be effected through the Costa Rican consulate in the place of service or by means of a notary public.
The time for service of process varies according the proceeding selected. The Costa Rican law allows both the Judicial Branch, through auxiliary officers, and notaries public, to conduct notification procedures. In the first case and in ordinary cases, the procedure may take from three to six weeks as of the filing of the lawsuit. If a notary public conducts the service procedure, it may take one week as of the issuance of the first resolution.
17. How much time does a party have to answer a complaint? Can a party extend this time?
The time a defendant has to answer a complaint may vary according to the procedure. Civil and commercial lawsuits must be answered within 30 business days after notification. Before, the Civil Procedural Code provided a longer term (up to two months) so the foreign entity to answer the complaint; however, this possibility was deleted in the Civil Procedural Code.
Nevertheless, terms may vary depending on the proceedings (ie, in collection proceedings the response must be filed within five business days after notification of the payment order against the defendant, and in mortgage foreclosure proceedings, the debtor must file the challenge to the payment order no later than five business days after notification).
18. What types of pretrial proceedings are available in court? What kinds of dispositive motions can be filed before trial? Under what circumstances may a lawsuit be dismissed prior to trial?
Costa Rican law permits different pretrial proceedings to assure the future results of the process (in the case of injunctions) or to pre-establish evidence (preliminary evidence).
In the case of preliminary evidence, the Civil Procedure Code permits any means of proof (statements by the parties to the procedure or witnesses, documents, expert opinions, etc) to be requested by the interested party and admitted and used by the respective court. Notwithstanding, this only applies when there is a risk of not being able to gather the evidence later or of the evidence losing its effectiveness even if it could be gathered.
The most common pre-lawsuit protection is that of injunctive relief. This consists of filing for court-ordered seizure in order to prevent a debtor from evading eventual payment of pecuniary damages by hiding or diverting assets. The creditor or future plaintiff must deposit a guarantee equivalent to 25 per cent of the requested seizure amount unless the action is substantiated by an enforceable title. Furthermore, as with all injunctions, it must fulfil the necessary characteristics, mainly periculum in mora (danger in delay) and fumus boni iuris (likelihood of success on the merit of the case).
The Civil Procedure Code, which took effect on 8 October 2018, adds a new pretrial procedure for the sole purpose of determining or completing capacity or legitimation when the plaintiff does not know or is not sure of the person to be sued. Article 21.2 states that anyone can be subpoenaed to declare under oath on the facts concerning capacity and legitimation in order to locate the legitimate person to be sued.
A lawsuit may be dismissed under different circumstances, such as, for example, failure to fulfil the formal written complaint requirements provided by article 35. One of the most notable inclusions in the Civil Procedure Code is the vexatious action. Pursuant to the code’s article 35.5, the lawsuit should be dismissed, either ex officio by the judge or at the instance of the defendant, if the case is manifestly inadmissible because it falls under any of the following nine circumstances:
- the object or claim is obviously contrary to public order or is unsustainable or frivolous or shows a lack of purpose;
- procedural fraud or abuse of process is involved;
- the statute of limitation has passed;
- a judgment with the force of res judicata has already been reached on the claim in an earlier procedure;
- the plaintiff obviously lacks legitimation;
- the right was waived in an earlier procedure;
- the right has been previously conciliated or negotiated;
- the procedure refers to procedural nullities that have been duly claimed in the proceeding in which they were caused; and
- the claim clearly lacks a material or essential assumption.
The declaration of vexatious cause of action must be issued as a reasoned judgment after a hearing of the plaintiff.
19. How long does it take to obtain a first-instance judgment in a typical commercial litigation case?
The time varies according the proceeding. In our experience, it may take between one and two years to obtain a first-instance judgment. The most recent civil procedure regulation seeks to prevent unnecessary delays and provides for an expedited procedure.
20. Is a party required to submit all facts, arguments and supporting evidence with its initial pleading?
Yes. According to article 35.1 of the Civil Procedure Code (and in other procedural regulations), a plaintiff must submit all the facts, arguments and supporting evidence with the initial pleading. Additionally, the initial written statement must include:
- the authority, the kind of procedure and the specific legal matter of the dispute or case;
- the name and basic information of the involved parties (identification number and domicile);
- an accurate narration of the facts, one by one, numbered and clearly specified (the plaintiff must set out the facts clearly, accurately, chronologically, and in an orderly manner, as far as possible);
- the cause, specific description and liquidation of all requested losses and damages;
- the legal grounds of the lawsuit;
- a monetary estimate;
- the attorney directing the process; and
- all supporting evidence that the plaintiff must reasonably have.
New documentary evidence can only be filed by both parties when: (i) it is posterior, (ii) the party did not previously have knowledge of its existence, and (iii) the party offering new evidence was not able to obtain it before.
21. Does litigation provide a process for investigating claims or right to discovery of evidence prior to trial?
Costa Rican legislation does not provide a process for investigating claims or right to discovery of evidence prior to trial. However, during the proceedings both parties are obligated to cooperate with the other party and disclose all appropriate documents they may have as per the court’s request.
22. Does litigation provide a process to subpoena or obtain documents or testimony from third parties?
The manner in which witnesses or experts are subpoenaed and documents are obtained from third parties varies according to the type of procedure.
In civil and commercial procedures, in principle, each party has the obligation to submit evidence to support their theory of the case. Furthermore, pursuant to article 41.4.1 of the Civil Procedure Code, the plaintiff is exclusively responsible for asking the court to obtain orders, subpoena witnesses and experts and order their appearance by any available means.
The same code states that the parties and witnesses have a legal obligation to declare. This obligation extends to public officials with regard to reports and certifications. The courts will request their attendance at hearings by any means, even with the help of the police, if necessary. If a deposing party does not attend or refuses to answer, this will be clarified, and the interrogation will be recorded.
Criminal procedures are more rigorous, since witnesses, regardless of their nature or the proposing party, can be forced by the police to appear and declare.
In addition, it is worthwhile mentioning that in civil matters there are procedures through which one party may demand, using judicial support and before filing a complaint, the counterparty to produce certain documents. This is the case in which partners in a commercial partnership may request producing legal and accounting books, in the event they are unjustifiable denied.
23. Does the judge or opposing counsel examine witnesses?
Both possibilities exist. Notwithstanding, the order established by law must be respected. In civil and commercial matters, witnesses are questioned first by the proposing party. They may later be questioned by the opposing party or the opposing counsel and, finally, the court. In practice, however, the court intervenes as often as necessary to ask for clarification of the responses given by witnesses or to ask questions that may arise in the moment.
24. How may evidence be challenged? Are there specific rules of evidence?
Costa Rican civil procedure law admits different types of evidence. Article 41.2 of the Civil Procedure Code specifically gives them as declarations of the parties and witnesses, expert opinions, documents, legal recognition, and scientific and technological evidence. A new aspect of this code is its broadness with regard to evidence, since any evidence not expressly prohibited is admitted.
The way evidence is challenged depends on the type of evidence. General rules exist, however, that apply to any evidence. For example, evidence may be challenged that is irrelevant, excessive or illegal, or that lacks a direct relationship to the lawsuit’s facts or claims or seeks to demonstrate uncontested facts.
In civil and commercial matters, the Civil Procedure Code has specific rules of evidence. Section VIII of the code establishes general rules for proposing and examining each type of evidence.
25. Do courts typically allow hearings at or before a trial? At what stage may parties present expert witness testimony?
Yes. As stated earlier, preliminary evidence may be received, provided the legal requirements are met (in particular, the danger of not being able to take it later or that it may lose its effectiveness, even if it were taken). Preliminary taking of evidence may occur under two typical modalities: (i) prior to filing of the lawsuit, or (ii) after filing of the lawsuit but prior to setting of the supplementary hearing (in civil matters) or public oral trial (in criminal and contentious administrative matters).
Furthermore, there are different mandatory hearings that must be held prior to the trial hearing. Such is the case of the preliminary hearings involved in civil and contentious-administrative procedures and primarily in arbitration procedures at the main domestic arbitration centres in Costa Rica.
In principle, the parties must present all their evidence together with the lawsuit or answer to the lawsuit (or reply and counterclaim), which includes bringing in expert witnesses. The court decides on the admissibility of this evidence in an oral hearing held for this purpose (preliminary hearing). The evidence is taken, in principle, in the supplementary hearing (in civil matters) or in the oral trial (in contentious-administrative and criminal matters), without prejudice to it being taken in advance, as indicated earlier, provided there is a danger of the evidence being lost or losing its effectiveness.
It is important to mention that, in civil matters, the courts can propose to add evidence that was not presented by the parties and even to order it ex officio in either the preliminary or the evidentiary hearing.
26. What must be demonstrated to collect a debt based on a written instrument?
Debts backed by a written instrument can be collected through two different procedures, depending on the creditor’s evidence in an ordinary proceeding, and collections claims court.
If a creditor has a document that states a liquid, enforceable monetary obligation, presenting this as evidence of the debt suffices for processing the debt at collections claims court, which is swifter in principle and has limited causes for opposition by the defendant. The document must comply with certain requirements: it must be an original that is physically or digitally signed.
27. What remedies are available in your jurisdiction to a minority shareholder of a corporation in a dispute with the corporation or the majority shareholders?
The Law for the Protection of Minority Investors, which took effect in 2016, is a change that benefits minority shareholders of commercial corporations. It introduced a key amendment to the Commercial Code.
One of the main remedies that minority shareholders have is the possibility of requesting, with the help of the courts, an audit of the company. By law, this audit can be requested by shareholders with less than 10 per cent of the capital stock; notwithstanding, this can be reduced in the by-laws of the commercial company in question.
If this right is denied by the company’s legal representatives or other shareholders, they can ask a judge to order an audit of the company’s legal and accounting books, correspondence and other documents showing the company’s status. The shareholders also have the right to examine the documents and contracts for transactions involving the purchase, sale, mortgage or pledge of the company’s assets representing 10 per cent or more of its total assets.
Furthermore, every shareholder has the right to ask for a general meeting to be called for approving the annual balance sheet and deciding on the distribution of profits. In the case of stock corporations, shareholders with 25 per cent of the capital stock can ask management to call a meeting of shareholders for the purpose indicated in their request.
Finally, any shareholder can ask for agreements taken in the meeting to be annulled. To do this, the shareholder must file a legal action within one year of the respective meeting.
Claims without an expressly stated procedure must be processed through an ordinary proceeding. Minority shareholders can use this forum to make different claims, including a request for indemnification for losses and damages deriving from the illegal actions of the company’s shareholders.
28. What rights are available in the courts for someone holding a maritime lien interest in a vessel?
Under Costa Rican law, a lien interest in or pledge on a vessel may be recorded at the Public Registry on the title of the property to secure payment of a debt.
The Costa Rican Public Registry is the government institution that keeps records of all documents and information concerning real estate properties, vehicles, vessels and legal entities. Any instrument that constitutes, modifies or extinguishes a right regarding a vessel, such as a pledge, must be recorded at the Public Registry.
A pledge is created by the vessel’s owner through a public deed. It may be granted to secure an obligation acquired by such owner or by a third party. The public deed must expressly detail the terms and conditions of the loan and its payment, including but not limited to principal amount, interest rate and payment schedule.
If the debtor defaults, the creditor may file a foreclosure proceeding on the pledge. The foreclosure procedure (applicable to both mortgages and pledges) is outlined as follows:
- To initiate the proceeding, the lender must file a petition before the court (i) attesting to the existence of the pledge with a certification issued by the Public Registry, (ii) describing the debtor’s breach of contract and (iii) indicating the total amount owed up to the petition date (principal and interest).
- The first resolution issued by the judge must be served personally to the debtor by the court or by a notary public appointed by the former for such purpose. Furthermore, it will instruct the Public Registry to annotate the process on the property’s title.
- The debtor has the right to file a written objection. If the objection is legitimate and well-grounded the judge will set a date for an oral hearing, at the end of which a final ruling will be issued.
- The debtor may terminate the process at any time by paying the total amount owed to the lender, including the legal fees and any incurred costs.
- Three auctions on different dates are scheduled for each foreclosure. Bidders are invited through an announcement in the judicial newspaper that communicates the time, date, place and bidding base for each auction.
- As a condition to participate in the auction, each bidder must provide a certified check for an amount equal to 50 per cent of the opening bid.
- The winning bidder will have three business days to pay the outstanding balance. Failure to complete the payment implies forfeiture of the deposit, which is in turn credited to the debt. In this event, the judge will call three new auctions.
- The opening bid in the first auction is the base value, which is agreed to by the parties in the mortgage document (usually the total amount owed on the principal and interest).
- If the first auction is unsuccessful because no bidders attended, the foreclosure will move into the second auction. The opening bid will be 75 per cent of the base value. If the second mortgage is also unsuccessful, a third and final auction will be held in which the opening bid will be 25 per cent of the base value. As an example of how this procedure works, bids for a property with a base value of US$100,000 will begin at US$75,000 in the second auction and US$25,000 in the third.
- In the event of a successful bid and payment of the offered amount, the judge will transfer the property to the new owner and instruct the police to assist him or her in taking possession of the asset.
- If all auctions are unsuccessful, the judge will assign the property to the lender as partial payment. The value of the assignment will equal the opening bid of the last auction. The debtor will still be obligated to pay the outstanding balance of the debt, so the lender may seek payment by seizing other assets owned by the debtor.
29. What rights are available for a party holding a security interest in real property and personal property? Are there expedited proceedings to allow the recovery of property serving as security for debt obligations?
Yes. There are two specific procedures for collecting monetary debts that are speedier than the ordinary proceeding: small claims court (for collecting personal, liquid and enforceable debts that are not guaranteed by security interests), and foreclosure proceedings (mortgage or collateral), which was discussed extensively in the previous question.
Regarding judicial collections, it is possible to collect liquid and due debts in documents that constitute executable instruments or not. In the case of the former, debtor's assets can be seized without the creditor having to submit a guarantee. The most typical executable instruments in Costa Rica are the promissory notes, the bills of exchange and the commercial invoice, although there are some others that include a court ruling involving the payment of a certain amount of money.
30. Describe the types of employment disputes that frequently result in litigation.
The Costa Rican Constitution includes a chapter on labour guarantees and rights. Moreover, a specialised jurisdiction exists for resolving disputes of this nature. The most common disputes include the following:
- ordinary proceedings for collecting labour rights and benefits, such as amounts for advance notice, severance, vacations, mandatory year-end bonuses, minimum wages, etc;
- claims for lack of social security insurance; and
- workplace accident proceedings.
31. Does your jurisdiction allow class actions or some form of collective litigation proceeding?
No. Costa Rican procedural law does not consider this. Notwithstanding, in certain cases it is possible to file actions on behalf of a group, when different interests are involved. This possibility would mostly exist in cases involving basic rights (such as environmental rights), but this has also been recently added to civil law. Articles 19.1 and 106.2 of the Civil Procedure Code permit this.
32. Do government-owned or controlled entities enjoy any privilege when they are engaged in commercial activity and involved in a commercial or administrative litigation?
No. There are no procedural privileges whatsoever with regard to the courts, not even under the indicated circumstances or for any of the indicated institutions. However, in cases where the Attorney General´s Office is involved, it is possible to extend the term to submit whatever is necessary. This is applicable only when it is requested during the original term and justified by the needs of the Office. In these cases, the term is automatically extended by a third of the original term.
33. Do foreign states or entities controlled or owned by foreign states enjoy any privilege when they are engaged in commercial activity and involved in a commercial or administrative litigation in your jurisdiction (state immunity)?
No. As with government-controlled entities or public institutions, entities and companies, they enjoy no privilege whatsoever.
34. Is injunctive or other relief available on an emergency basis?
Yes. Costa Rican law provides the possibility of filing for injunctions. Injunctive relief can be granted upon filing of a formal complaint or during the procedure following the filing of a lawsuit.
For a court to order injunctive relief it must assess several assumptions established by law. Specifically, it must verify if there is a danger of loss, alteration, or actual or potential damage of the legally relevant interest or right, or if the injunction is necessary to ensure future results or consolidate potential or certain legal situations. To decree a precautionary measure, the court must rationally assess the likelihood or truthfulness of the claim, as it cannot issue injunctions on unfounded or reckless petitions. To sum up, it must assess: (i) the likelihood of success on the merit of the case, (ii) the proportionality and reasonableness of the measure, (iii) its relationship to the claim, and (iv) the eventual effect on third parties or the public interest.
35. Is injunctive relief available as part of a final award? If so, in what types of cases do courts usually provide injunctive relief?
Yes, the Costa Rican Civil Procedure Code includes this possibility. In sentences involving payment, the court may order seizure of the defendant’s assets. Furthermore, when the sentence is in the abstract, the judge may specify the bases on which the amount shall be set.
In their awards, the arbitration tribunals customarily seek to clearly specify how the award should eventually be executed to prevent disagreement over what the tribunal wanted to concede or not concede in the event of an eventual foreclosure proceeding, or for the purpose of eliminating or minimising the possibility of the losing party failing to comply with the award.
36. What are the typical court fees and costs required to file a civil lawsuit? Is a bond required for a non-resident? What is the amount of the bond?
The Costa Rican justice system is a free service. That is, no court fees must be paid to access public justice. However, there are associated costs, such as the mandatory payment of the Costa Rican Professional Association of Lawyers revenue stamp, depending on the estimated amount of the claim. In some jurisdictions, such as family, agrarian and labour matters, no revenue stamps must be paid.
Furthermore, there are other associated costs such as payment for certifications issued by public institutions (such as the National Registry), which on average may cost at least US$5 each.
37. What types of damages are available? How are damages quantified? Are punitive damages available?
Costa Rican law admits the awarding of certain types of damages. Damages must be certain, real and effective rather than eventual, hypothetical or based on conjecture.
In particular, compensation for material, bodily and moral damage has been admitted. Material damages consist of an objectively determinable equity impairment sustained by the party. Bodily damages are those that affect a person’s bodily and physical integrity. Finally, moral damage, corresponding to the suffering, pain and internal impairment an average human being may sustain in specific situations, or the objective detriment to a person or legal entity’s reputation (objective moral damage), is also indemnifiable.
Quantification must be objectively proved in the case of material and bodily damages.
With subjective moral damage, the First Chamber of the Supreme Court of Justice has ruled that indemnification for moral damage is not strictly subject to evidentiary factors (except when referring to the causal relationship) but rather to the judge’s objective consideration and prudence. When setting damages, the court must adhere to the principles of reasonableness and proportionality, according to each specific case, to avoid excessive indemnification that would imply unjust enrichment.
Costa Rica does not recognise the existence of punitive damages.
38. Is the losing party liable for the prevailing party?
Yes. The rule is that the losing party should pay all the costs of the prevailing party, including both procedural and personal costs. The law defines costs as attorneys’ fees, indemnification for time invested by the party in attending procedural acts that require its presence (personal costs) and other necessary costs associated with the procedure (procedural costs).
The personal cost component of attorney’s fees is determined according to the amount of the claim, duly set by the tribunal at the proper procedural time. The amount serves as a parameter for determining fees, which are calculated according to a decree issued by the Ministry of Justice and Peace. At present, these are calculated using a scaled percentage system.
Procedural costs (necessary costs of the procedure) are calculated according to each specific case. They include, among other things, the costs incurred by the prevailing party such as certifications, expert fees, executor fees, revenue stamps, etc.
Civil procedural law (and, in general, any procedure code) establishes the possibility of the losing party being waived from payment of the winner’s costs in some cases, such as, for example, when neither party is granted absolute reason, when the losing party acted loyalty and in good faith in using the procedural system, or when it had plausible reason to litigate.
39. Will courts enforce a liquidated damages provision in a contract?
If a penalty clause exists, yes. The penalty clause serves as a parameter for quantifying compensation. That is, the injured party must demonstrate the default event that caused the damage. If this can be shown, depending on the civil liability regime involved, the court may sentence the losing party to pay the amount indicated in the penalty clause or calculated as stipulated in advance by the parties.
40. Will courts enforce a force majeure provision in a contract? If not, are defences of impracticability and impossibility available?
41. Will courts enforce a material adverse change clause in a contract?
42. What is the appeal process against trial court decisions?
In principle, the right to appeal is guaranteed. Notwithstanding, its enforceability is manifest solely in criminal matters (after an amendment was added to criminal procedural law in 2011) but not necessarily in civil and contentious-administrative matters.
In civil matters, when the new Civil Procedure Code took effect in October 2018 it substantially changed the appeal system, specifically with regard to eliminating the recourse to appeal against first-instance judgments in the ordinary proceedings. Previously, first-instance judgments in ordinary civil proceedings were issued by single-person courts, whose judgments were subject to appeal, and if the judgments involved large claims, they were subject to cassation appeal.
At present, large claim ordinary proceedings are resolved by three-judge tribunals. By virtue of this, the decision was made to eliminate recourse to appeal against first-instance judgments. Cassation appeals are admitted and are resolved by the First Chamber of the Supreme Court of Justice in the last instance.
Appeals are admitted for first-instance judgments in other types of proceedings. When the new Civil Procedure Code took effect, the collegial courts of civil appeal were created for this purpose.
Appeals should be lodged orally before the same court that issued the challengeable decision, if the decision was handed down orally. Written decisions must be appealed within three days, and judgments must be appealed within five days.
43. How frequently do appellate courts reverse trial court decisions?
This is not necessary very common. Generally speaking, the form and structure of first-instance rulings are properly presented. Evidently, reversions in appeal or cassation do exist, but on most occasions, this is due to legal interpretations rather than improper, negligent or deliberately inappropriate behaviour. It is worth noting that specialised technical knowledge is needed to be a judge, in addition to studying and passing rigorous exams that not only accredit knowledge of the legal matters involved but also assess the judge’s personal and social aptitudes. This filter gives a reasonable guarantee of the capacity of the person occupying the position of judge, regardless of the scope and matter to be heard.
44. May the courts entertain challenges to administrative decisions made by federal or local governments? If so, how frequently do courts reverse administrative decisions in favour of a private party?
Yes. This is matter reserved precisely for the contentious-administrative jurisdiction. Here, both the administrated party and the administration itself can ask for a review and even annulment of administrative decisions, whether these are the administrative acts of public entities, autonomous institutions, professional associations or municipal governments. Petitions can even be filed to declare presidential decrees in violation of the legal system. Procedures seeking to reverse administrative or local government decisions are not infrequent. The courts’ review and processing of these types of procedures is serious and analytical, and decisions are reversed if the legal conditions exist for doing so.
45. How are trade secrets protected in judicial proceedings?
The Costa Rican legal system protects non-disclosed information pertaining to trade and industrial secrets. A specific statute, the Non-disclosed Information Act, exists for this.
Pursuant to this specific statute, in all administrative and legal proceedings where a party is forced to bring in non-disclosed information, the authority hearing the matter must take all necessary measures to prevent its disclosure to third parties not involved in the dispute. Neither of the parties to the proceeding may disclose or use such information.
This substantive law was expressly included in the Civil Procedure Code by permitting witnesses or deponents to not only abstain from declaring on potentially criminally self-incriminating facts but also refuse to answer questions that violate their duty or right of privacy, or to provide information protected by professional secrecy or that by law must be kept secret.
46. Are settlement agreements confidential? Must the parties’ settlement agreement be certified by the court?
Agreements as such may or may not be considered confidential, depending on the type of proceeding. If the proceeding is public, the agreement is not confidential. Notwithstanding, the content of preparatory activities, conversations and partial conciliatory agreements is confidential. The Law on Alternative Dispute Resolution and the Promotion of Social Peace (RAC Act) establishes the confidentiality of both conciliatory and mediation negotiations. Consequently, neither the parties nor the conciliators and/or mediators may later use them or disclose them for the purposes of litigation strategy or their use as evidence.
The parties do not necessarily have to resort to the courts to formalise a settlement agreement. Pursuant to the RAC Act, both court-formalised agreements and settlement agreements meeting legal requirements have the authority of material res judicata and are immediately enforceable.
47. Who has the burden of proof at trial? What is the burden?
The burden of proof rests upon the different parties to the procedure, depending on the nature of the proceeding. In civil matters, the burden of proof rests upon the party filing a claim, with regard to proving the facts constituting a right. It also rests upon the party opposing a claim to prove the facts preventing, amending or extinguishing the plaintiff’s right.
The treatment may vary in other matters. For example, in criminal matters it is the accuser (public prosecutor or complainant) who must demonstrate the existence of the crime and the guilt of the accused party, not the defendant who must prove his or her innocence.
In labour matters and matters involving consumers of goods and services, special rules apply that reverse the burden of proof, and, in principle, it is the employer and merchant, respectively, who bear the burden of proof to avoid a penalty.
With objective civil liability regimes, the burden rests on the plaintiff to prove the damage and the causality between the event or omission caused by the defendant, without having to prove the existence of malice or guilt (as he or she would have to prove in the case of subjective civil liability regimes). The defendant in these cases must prove his or her lack of relationship to the damage, blaming it on force majeure or the victim. The same thing happens in monitory procedures (collection and rent) when there is a lack of payment. The burden of proof is on the debtor who should demonstrate having made the payment to avoid a penalty.
48. What are the most significant recent developments regarding judicial reform? Is any proposed legislation likely to affect the civil litigation market?
The biggest reform has been the new Civil Procedure Code. This code took force on 8 October 2018 and may be considered the unification of a series of isolated procedural reforms of various civil matters into a single overarching code. The new Civil Procedure Code revoked relevant procedural legislation to incorporate laws such as the Judicial Collections Act and the Rent Control Act into a single code. One of its main novelties is that it shows a system based primarily on orality, which in principle is speedier, more expedited and less formalistic. Another notable feature is the elimination of appeals in ordinary large claims proceedings. Previously, these proceedings were conducted and heard in the first instance by a single judge. The judgment issued by this authority could be appealed before a civil tribunal, whose decisions could, in turn, be subject to cassation appeal before the First Chamber of the Supreme Court of Justice. With the new Civil Procedure Code, Civil Collegial Tribunals were created consisting of three judges who will hear, in the first instance, ordinary large claims procedures. The judgments issued by these authorities would be subject solely to cassation appeal, thus eliminating the ordinary appeal recourse that existed previously. In addition, it incorporates novel concepts such as the vexatious action and the possibility of joint filing of a lawsuit and answer, etc.
Another significant judicial reform is the new Agrarian Procedure Code (Act No.9606), which will take effect on February 2020. Although this law would not directly affect the civil litigation market, it is important to consider it, since disputes over productive real estate (such as for planting or livestock) are processed in that jurisdiction. This is to some extent a common matter involving foreign entities. The new regulation introduces specific rules related to environmental matters, especially on precautionary measures and types of convictions for breaching environmental local and/or international policies and legislation. Furthermore, it includes a system based primarily on orality, such as the Civil Procedure Code.
49. Describe any recent noteworthy litigation and arbitral cases.
Among the most noteworthy cases is that of the arbitration filed by Enel Green Power against the Costa Rican Electricity Institute (ICE). Although the procedure is confidential, and no details are known, the sentencing of the institute to pay approximately US$112 million was recurrent news in the mass media due to disagreements over the administrative proceeding on the construction of a hydroelectric plant in Costa Rica. ICE filed an appeal for annulment of the arbitral award. Recently, the Costa Rican First Chamber of the Supreme Court of Justice declare nulled the award. The main argument of the Court revolved around a conflict of interest of one of the three arbitrators, which was not revealed accordingly to during the arbitration procedure.
Another notable case, also in the power generation sector, is a domestic arbitration filed to settle a dispute over losses and damages deriving from an alleged contractual breach. The complainant accuses the defendant of disclosing materially significant information in the process leading to the acquisition of various assets comprising a commercial establishment. The arbitration was recently concluded, and the award favoured the seller of the project, who claimed during the proceeding to have acted transparently in the presale procedure. The dispute involved a claim of approximately US$10 million.