This post was contributed by Yanet C. Aguiar, Partner, Norton Rose Caracas and Valentina Albarrán, Associate, Norton Rose Caracas

Venezuela is no stranger to the existence and proliferation of Group of Companies or Business Groups, they have become a fundamental part of Venezuelan economy. However, throughout the last decade or so, we have witnessed the departure and reduction of many of them.

Naturally, the subject is intertwined with the economic life of our country, so it would seem odd that for quite some time the subject was reduced to a regulatory state (article 21 of the Regulations to the abrogated Organic Labour Law), instead of being introduced into a formal organic law. That situation changed with the New Labour Law in force since May 7, 2012. The aforementioned body of rules gave little article 21 a full legal character. The writing of the article might have changed somewhat, but the essence was the same. The corporations that function as a single economic entity will be jointly and severally liable regarding their labour obligations towards their employees.

However, the story does not follow up so happily for that once little article 21, now article 46 of the New Labour Law. The New Labour Law has set forth a lot of ground for differing interpretations, but that statement was not entirely right when talking about a Group of Companies regulation. An employee working in a Group of Companies knew without much doubt, that all the parties that formed it were jointly and severally liable, but now we are not so sure.

The Venezuelan Supreme Tribunal of Justice had been toying around with the concept of the Group of Companies for some time, generally relegating their opinion on the matter to the dissenting vote section. However, on December 17, 2012 the Supreme Tribunal of Justice in decision N° 1,513, in the case of G. Pérez vs. Procter & Gamble de Venezuela, S.C.A., took the leap and issued a ruling on a case regarding an employee of a Group of Companies formed between Procter & Gamble and Gillete claiming Venezuelan Labour Benefits derived from a labour relationship shared between Venezuela and the U.S.

The Supreme Tribunal of Justice established that Procter & Gamble and Gillete formed an International Group of Companies, and thus being International, they are regulated by foreign laws. Consequently, they are not jointly and severally liable before such an employee; saying otherwise would result in the overreaching of the principle of territoriality of law by a Venezuelan Court of Law.

It is only been three months since the ruling, but we cannot help on speculating that consequences should be beneficial for International Group of Companies. They will not have to account for the obligations contracted with employees by other members of the group as long as they have an international location. This also means that they would need to be notified directly outside of Venezuelan territory regarding litigations filed against foreign members of the group. What the real consequences may be, only time, the Court, and maybe a Regulation of the New Organic Labour Law shall say definitely.

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