Constitutional Reform

As a result of the citizens’ rejection of the text of the new Constitution proposed by the “Constitutional Convention”, a new constituent process was initiated at the end of 2022 with the signing of an agreement between most of the political parties with parliamentary representation.

This agreement provided for the drafting of a new proposal for a constitutional text by 24 experts (appointed in March 2023 by the National Congress on the basis of parliamentary representation quotas) and by a “Constitutional Council” composed of 50 people democratically elected through a mandatory plebiscite held on 7 May 2023.

In general terms, the experts drafted a preliminary text, which had as a mandatory framework a set of 12 previously defined institutional bases, including the recognition in the text:

  • that Chile is a democratic republic;
  • that it is organised as a social state under the rule of law;
  • that it is a unitary and decentralised state;
  • that the state protects and guarantees the fundamental rights and freedoms of individuals – such as the right to property, the right to life and equality before the law;
  • that it recognises Indigenous peoples as part of the Chilean nation;
  • that the state is organised into three separate and independent powers (executive, legislative and judicial);
  • that it has certain autonomous bodies such as the Central Bank, the Public Prosecutor’s Office and the Office of the Comptroller General of the Republic;
  • that the state guarantees the care and conservation of nature and its biodiversity at the constitutional level; and
  • that the state recognises that sovereignty is limited by human dignity and human rights recognised in international treaties.
  • The preliminary draft is being thoroughly reviewed by the councillors, who have four months to assess the proposal, which will include modifications and will incorporate new norms.

    Finally, the text of the proposed new Constitution approved by the Constitutional Council must be ratified by the citizens through a mandatory plebiscite, to be held on 17 December 2023.

    Currently, and given the progress of the actual constitutional process, it seems reasonable to expect a minimalist text, with an institutional and procedural approach, thus leaving the specific rules that may compromise the regulated industries to subsequent legal regulation.

    New Developments in Public Law for Regulated Activities

    In the following, we highlight certain statements made by agencies that have resolved legal conflicts of interest in the administrative and regulatory sphere, developing legal criteria relevant to regulated activities.

    Pension and healthcare costs

    Considering the Supreme Court’s ruling that annulled the increase in the prices of the annual base plans of the Pension Health Institutions, better known as “Isapres”, as the adoption of a general increase for affiliates was considered arbitrary, the Superintendence of Health published the Health Cost Indicator. This indicator set a maximum percentage of 2.6% as the threshold for Isapres to adjust their health plans, and they had to inform the authority of their decision and adjust to match the average operating cost of the institution during the previous year.

    Further, the Supreme Court ordered the Superintendence of Health to elaborate on a single table of factors for Isapres and to reinstate certain extra charges to affiliates - which has had a relevant impact on the market – and which provoked a request for clarification from the Isapres, generating different interpretations about the effects of the ruling. For these reasons, legislative and regulatory modifications are expected in this sector.

    Renewable energy and environmental assessments

    In relation to the development of renewable energy projects, the Environmental Assessment Service published an environmental assessment criteria guide, which addresses the background information that project holders must present in the description of their green hydrogen production and storage proposals when submitting these for environmental assessment, taking into consideration the current public policies promoted by the Ministry of Energy. This guide presents, in detail, the key processes that make up the green hydrogen value chain.

    Likewise, the Environmental Assessment Service has recently published a guide for the description of projects for desalination plants under its environmental impact assessment system, with the aim of unifying the criteria, background and requirements applicable to these projects.

    Employment (contrata)

    Regarding the employment regime of civil servants, the Supreme Court has indicated that the principle of legitimate expectations, which ensures the stability of the state’s decisions vis-à-vis private parties, can be invoked after five years of “contrata” work (a mixed employment regime common in the Chilean administration that subjects civil servants to most of the regulations of the Labour Code). Therefore, the decision to terminate it early, or not to renew it, with respect to persons linked to the administration for more than that certain period of time, would go against the principle described above, which protects the legitimate expectation of finishing the period of an appointment and being rehired.

    In this context, the statutory relationship of workers who are protected by the principle of legitimate expectations can only be terminated through the system of qualifications or a disciplinary procedure, and the mere fact that the period of appointment of the contrata has expired cannot be invoked.

    Notwithstanding the aforementioned majority position adopted by the Supreme Court, the principle of legitimate expectations has also been invoked and recognised in case law after a period of less than five years of contrata work, which has opened an interesting debate on the construction of the standard for invoking this principle.

    Tax reform

    Finally, it is important to note that the government presented a tax reform bill, rejected in Congress in March 2023, which has generated a series of conversations between different industry and government actors with the aim of evaluating regulatory modifications in this area, which would garner the support of Congress.

    For its part, the executive branch has evaluated alternatives to obtain the necessary financing to carry out various public policies that are part of the government’s programme, through mining royalty initiatives and taxes on large capital among other revenue-raising schemes that may have an impact on regulated activities.

    In particular, one of the initiatives that has been promoted in this regard is an increase in green taxes, a mechanism through which emissions of particulate matter, carbon dioxide and other compounds into the atmosphere from certain establishments are taxed, thus influencing the financial decisions to be made by project owners and the compensation and emission reduction measures that they must incorporate into their operations.