Legal Market Overview
The Costa Rican economy has had another successful year in line with its strong track record of economic growth and political stability, especially when compared to other jurisdictions in the Central American region. President Carlos Alvarado Quesada has been in office for the centre-left Citizens’ Action Party (PAC) since May 2018 and has so far focused his term on sustainable development and growth. The country has been in the OECD accession process since 2015 and has therefore adopted numerous legislative reforms in various areas of law to comply with membership requirements. The most impactful changes affected the corporate sector as well as tax law. The government has primarily stepped up reporting duties, most importantly introducing a mandatory shareholder registry. The deadline for filing has been postponed to September 2020 due to Covid-19, but the system is still set to be implemented. On top of that, a comprehensive reform of competition law was enacted in October 2019, introducing a two-stage merger control process, a new notification threshold and a leniency programme, among other changes. The tax reform entailed numerous alterations to the law, most notably the modification of value-added tax (VAT) and income tax. As of 1 July 2019, VAT is no longer imposed on the sale of goods only, but also includes the service industry. Income tax was increased through the reduction of deductible expenses and the addition of new taxable events such as non-habitual capital gains. More changes such as a credit card usury bill and a new insolvency law are being debated at the time of writing. All in all, these reforms have increased the cost and bureaucracy linked to commercial operations in Costa Rica, with some international and domestic firms deciding to simplify and downsize their activities in the country as a response. To reflect this elevated need for regulatory advice, we have introduced a ranking for compliance this year. The numerous legislative changes have led to a new demand for compliance programmes, not only from international companies but also from local corporations that didn’t require legal assistance in this regard previously. At the end of the day, however, the reforms have borne fruit: on 15 May 2020, Costa Rica was formally invited to become the 38th member of the OECD and will be the first Central American country to join the organisation. The real estate sector has benefited from the stable political situation in the country and reports a lot of traction in all areas of development, including retail, commercial and housing. Demand for tourism projects and second homes is particularly high and has suffered only moderate damage due to the Covid-19 pandemic at the time of writing, as many regard Costa Rica as a safe haven due to the low number of cases. However, the aforementioned tax reform introduced an improved capital gains regime, which also applies to property ownership on personal title or by means of a corporation and real estate transactions. Unemployment was one of the most relevant issues in the area of labour and employment law in 2019. The government launched several initiatives and decrees to counteract the high unemployment rate at the beginning of 2020, but the global pandemic is forecast to exacerbate this issue further. On the other hand, a recently enacted teleworking regulation to generate employment and modernise the workplace has found unexpectedly strong implementation during the global health crisis. Other hot topics in this field of law include discrimination in the workplace, as well as the new law of January 2020 declaring strikes in essential public services illegal. Even before the coronavirus pandemic hit, labour and employment law was becoming increasingly important, as seen by the number of firms included in this table for the first time this year. Providers of intellectual property services note no particular changes to the legislation in this area. Many firms have managed to keep a steady workload and are expanding their IP departments to handle issues pertaining to technology, artificial intelligence and data privacy. Costa Rica is making a conscious effort to preserve its natural wealth and biodiversity, which is exemplified by the fact that 98% of power comes from renewable energy sources and the government is working towards decarbonising the country’s economy completely by 2050. Hence we are introducing a dedicated practice area for environmental law in this year’s edition of our Latin America guide. The use of property and natural resources is highly regulated from an environmental point of view and companies as well as investors have developed an increased awareness of environmental compliance. In addition to renewable energy, water availability is one of the current hot topics in the country. As most water supply systems are strictly operated by the government, developers often need legal assistance to obtain enough water for tourism and hospitality projects, particularly in the popular coastal regions. We have also added a dedicated projects and infrastructure ranking to this year’s coverage, showcasing firms active in infrastructure projects that are not directly related to environmental law such as transport hubs and road systems. A selection of new firms make their first appearance in our rankings this year, further extending our coverage of the growing market. BG&A Abogados focuses on cor1porate work as well as contentious services and seeks to use technology to enhance its services. Labour and employment law is the main focus of boutique firm Bufete Godinez y Asociados, which caters particularly to food, retail, telecoms, and banking and finance clients. Colbs Estudio Legal is a young and innovative corporate and commercial law firm with a notable environmental law department. With a full-service offering, Magnalex Abogados fields valuable knowledge of the local market, particularly in the corporate and finance spheres. MMonivation is an intellectual property boutique providing IP and sanitary registration services throughout Central American and the Caribbean region. Entrepreneurs are the centre of attention at Oller Abogados, a firm specialising in corporate and public law; while labour and employment law is a strong suit for Quatro Legal, which takes a multi-disciplinary approach to corporate and commercial issues. Since Costa Rica is the most stable economy in the Central American region, numerous multi-jurisdictional law firms are active in the country: Aguilar Castillo Love, Arias, BLP, Central Law Costa Rica, Consortium Legal, Facio & Cañas, Latamlex / Gómez y Galindo Abogados, S.A, Lexincorp and Sfera Legal have operations of varying sizes concentrated in San José. International giants like Dentons Muñoz, ECIJA, EY Law Central America and Deloitte Legal are also fighting for a spot in the market. It goes without saying that the legal landscape also includes local full services firms such as the noteworthy Batalla Abogados, along with boutiques, such as Artavia & Barrantes Abogados in the dispute resolution field, labour and employment market leader BDS Asesores, intellectual property boutique E-Proint, Lang & Asociados, Nassar Abogados, banking and finance specialist firms Vector Legal and Zürcher, Odio & Raven (including its IP arm, Zürcher Lawyers). The local legal market has been relatively dynamic and there are several major individual moves to report. In terms of firm expansions, Facio & Cañas absorbed three-partner firm Pragma Legal in February 2020, boosting in particular the corporate and finance aspects of the now united operation. The firm had previously suffered a few losses in this field, with former key practitioner Víctor Garita departing to lead the litigation department at Arias in September 2019, while Carlos Valverde and Tomás Guardia moved to Deloitte Legal in October 2019. García & Bodán completed an internal restructuring in March 2020 to offer a dedicated regional banking and finance service under the leadership of Honduras-based Godofredo Siercke and Carlos Eduardo Téllez Paramo, and Aguilar Castillo Love recently focused on extending its existing Ecuador branch. In labour and employment law, two practice head moves attracted attention: rising star Graciela Soto moved from regional firm Arias to Deloitte Legal in October 2019, and her former employers brought in co-chair Carolina Soto from Consortium Legal in February 2020 to fill the empty seat. Regional heavyweight BLP hired Pablo Umaña from Allen & Overy LLP‘s Washington DC branch to take the lead on energy and infrastructure projects as of March 2020.