In its ruling of December 5, 2024 (Case No. 25000-23-24-000-2010-00132-01), the Colombian Council of State (hereinafter, the “CS”) upheld the authority of the Superintendence of Industry and Commerce (hereinafter, the “SIC”) to declare breaches of regulatory compliance commitments and enforce the corresponding regulatory surety bonds.
1.Background
As part of an investigation into alleged anti-competitive practices, the SIC allowed the investigated entities to voluntarily offer regulatory compliance commitments, secured by surety bonds (insurance), to close the administrative proceedings. Subsequently, the SIC issued resolutions declaring that the commitments had been breached and triggered the coverage under the surety bonds. The affected entities challenged these resolutions, arguing that (i) the SIC lacked authority to declare the breach, and (ii) surety bond payments should be proportionate to the degree of non-compliance.
2.Key Findings
Authority to Declare Breach:
The CS ruled that the SIC had the legal authority to declare the breach of regulatory compliance commitments. It emphasized that these commitments are not private contractual agreements, but rather unilateral administrative acts issued by the SIC as part of its regulatory oversight. Therefore, the SIC’s determination of non-compliance does not require judicial intervention, as the commitments are legally binding and enforceable under Colombian administrative law.
Purpose of Regulatory Surety Bonds (insurance):
The CS clarified that regulatory surety bonds differ fundamentally from traditional surety bonds. Unlike commercial surety bonds, which arise from private contractual relationships, regulatory surety bonds are specifically designed to guarantee compliance with obligations imposed by administrative authorities. The court reiterated that the bonds in question do not cover obligations freely negotiated by the insured parties, but rather those mandated by law or regulatory orders, making them enforceable through administrative mechanisms rather than contractual dispute resolution.
Full Payment of Insurance Coverage:
The CS rejected the argument that indemnification under a regulatory surety bond should be proportional to the degree of non-compliance. Instead, it held that the full amount of the bond could be claimed, based on the principle of “sufficient guarantee” established in Colombian competition law. The ruling confirmed that once a breach is determined, the insurer is obligated to pay the full bond amount, regardless of whether the violation affected all aspects of the commitment or only certain elements. This approach ensures that regulatory penalties maintain their deterrent effect and that administrative enforcement mechanisms remain effective.
3. Implications
This ruling reinforces the enforceability of regulatory surety bonds in Colombia and affirms the SIC’s power to hold companies accountable for commitments made in administrative proceedings. It also clarifies that such bonds differ from those arising from private contracts, as the former secure compliance with legally imposed obligations rather than voluntary agreements.
Lucas Fajardo
Luis Alejandro Peña
Brigard Urrutia. Insuralex´s Exclusive Member in Colombia
