Capes corporation is a wholesaler of industrial goods

1. What is the “special character” of Law 194/93, and how is its purpose achieved?

2. How does the court justify not implicating the social order of Paraguay?

The Paraguayan government enacted a law that specifically protects Paraguayan representatives of foreign companies. Among other things, the law requires a foreign company to make an extraordinarily large payment to the Paraguayan representative if the representative is terminated for some reason other than “just cause.” The Paraguayan statute narrowly defines “just cause.” There is no similar law protecting Paraguayan distributors or other representatives of Paraguayan-based enterprises.

Compañía Antártica, a Brazilian firm, terminated Electra-Amambay, its Paraguayan representative. Electra-Amambay argued that the termination was not for good cause and sought its statutory penalty. Compañía Antártica countered by arguing that the Paraguayan statute was an unconstitutional discrimination based on national origin.

Compañía Antártica advances the objection that [the] Articles…of the Law No. 194/93, on which the [ElectraAmambay] bases its lawsuit, is unconstitutional. The objection maintains that Articles 1, 4, 5, 6, 7, and 8 constitute an unjust and arbitrary discrimination against foreign manufacturers and companies … . They establish obligations, assumptions, and sanctions only and exclusively against foreign manufacturers and firms, but not against persons domiciled within the country. [The objection is that] this inequality violates Articles 46 and 47, paragraph 2 of the National Constitution. ***

This Law, 194/93, is of a special character, regulating the relationships between foreign manufacturers and firms and their representatives, agents, and distributors of their products domiciled in the country. And in the case of the termination of these relationships without a statement of just cause, it sets forth how the amount of damages should be calculated. It is customary that a foreign firm which contracts for the services of physical and legal persons domiciled in Paraguay lays down the ground rules of said relationship, establishing the rights and obligations of both parties. With the promulgation of this law, the parties are placed on an equal footing, establishing the damages that should be paid by the foreign firm in the case of a rupture of the contractual bond without just cause. The firm or persons who find themselves in the country, for the promotion, sale, or placement within the republic of products or services provided by the foreign firm necessarily had to incur expenses in investments so that the referred product would have success in the local market. However, it is necessary to underscore that if there exists just cause, the foreign firm or provider has suitable and appropriate means at its disposal to seek exoneration from liability for the damages.