Legal Market Overview
Undoubtedly the strongest and most stable economy in all of Central America thanks to its agriculture and tourism industry, Costa Rica has hit some bumps in the road lately. First and foremost, autumn 2018 saw the longest public sector strike in the country’s history. This sparked insecurity among investors who were already apprehensive due to the general elections held in February and April 2018. New president Carlos Alvarado has not been able to avert the highest unemployment rate in the country’s recent history. Nevertheless, Costa Rica provides a lot of opportunity for high investment yields and aims to become a carbon-neutral country by 2021.
More changes are on the horizon: on 1 July 2019, a new VAT of 13% on goods and services will replace the current general sales tax. Further tax reforms include intricate amends to the income tax laws in the country and the move to a calendar-based tax year. From September 2019, all Costa Rican corporations and international companies registered in the country will also have to disclose all their shareholders and beneficial owners. The registry requirement, which is intended to support both tax and drug cartel investigations, was intended to be introduced on 1 March 2019, but was postponed due to technological issues with the registration platform.
Extensive changes to the labour and employment code in 2017 led to a persistent increase in discrimination, workplace harassment and unfair termination litigation. The regulation changes also extend to recruitment: a significant number of lawsuits revolve around job applicants suing employers when they are not hired. Dispute resolution practices are also adapting to a new procedural code, more precisely the change from written procedures to oral hearings.
The real estate sector is still struggling to recover from the housing market crash in 2008. Urban areas as well as developments on the Pacific Coast are slowly picking up again with Guanacaste and Papagayo being the current hotspots. In the capital of San José, logistics and warehousing developments are booming as well. More and more foreign investors are entering the country to finance public service and infrastructure developments such as airports, seaports and energy supply projects.
Due to the competitive nature of the Costa Rican legal market, there is also a significant amount of movement among active law firms. Recent developments saw Spain-headquartered firm ECIJA enter the market in mid-2018 following its incorporation of local firm Expertis; February 2019 saw regional-player Arias strengthen its IP practice via a local merger with Castro & Pal Abogados; and in May, Nicaragua-based regional heavyweight García & Bodán announced the opening of offices in San José. The market also saw the emergence of a new player, Colbs Estudio Legal, founded in 2018 by Javier Escalante and Sebastian Jimenez (formerly at Sfera Legal and Lex Counsel, respectively); the firm -currently 13-strong (plus nine paralegals)- handles a mix of corporate and contentious matters, public law, real estate (including hospitality and leisure), aviation and data privacy.
Local market players such as LexMundi member Facio & Cañas, Lang & Asociados, Sfera Legal and Zürcher, Odio & Raven operate alongside regional heavyweights Arias, Aguilar Castillo Love, BLP and Consortium Legal. Furthermore, the market also boasts a number of boutiques, for instance labour expert BDS Asesores and IP specialist E-Proint, alongside a few firms with a global outreach such as Dentons Muñoz and EY Law Central America.