Chile Asks Constitutional Court to Uphold Tax Stability and RCA Restitution in Reconstruction Law

Chile's Executive Defends Tax Stability and RCA Restitution Before the TC

Chile's government has moved to defend two contentious pillars of its Reconstruction Law before the Constitutional Court, filing three written submissions that each run to more than 100 pages. The legal team, led by Arturo Fermandois, is asking the court's plenary to uphold the law's provisions on tax invariability and on restitution of resources when an Environmental Qualification Resolution is revoked. Opposition legislators had challenged both elements.

In the tax section, the executive argues that the opposition's requirement would leave the legal system hostage to new and circumstantial majorities after every election, and that a simple electoral victory cannot mean the total defencelessness of the losers. The government points to double-taxation treaties and other international agreements as evidence that long-term legal stability is already accepted in Chile's legal order.

The defence also states that the Reconstruction Law does not prevent any future legislature from passing new tax legislation. It highlights that similar stability mechanisms have existed since 1929 under governments of different political signs and have never been declared unconstitutional. On the environmental permit front, the executive says the challenged provisions aim to restore legal certainty and the executive force of environmental permits, with a fiscal cost it describes as foreseeable and low.

Separately, on Tuesday afternoon the government asked the Constitutional Court to declare unconstitutional Article 31 of the bill, which would have required free reconnection of basic services in areas declared under a state of catastrophe.

Inside the Government's Constitutional Defence: Tax Treaties, Escazú and Article 31

A Stability Argument Built on Treaties and a Century of Precedent

The government's central move is to reframe tax invariability not as a limit on democracy but as its continuation. Its filing argues that Chile has already accepted long-term tax stability in double-taxation treaties that outlive sitting governments, and that declaring such mechanisms unconstitutional would be incoherent. The brief cites countries including the United States, Argentina, Colombia, Panama and Mongolia, and specifically highlights Argentina's tax stability norm as important for economic recovery and a Colombian Constitutional Court ruling that the mechanism does not violate the democratic principle.

The defence also leans on domestic history: it identifies similar mechanisms approved under both the 1925 and 1980 constitutions, none of which has been struck down. By doing so, Fermandois's team is creating a factual record that a TC ruling against the Reconstruction Law would break with roughly a century of legal practice, raising the stakes for the court.

The RCA Defence: A Bounded Fiscal Bill and a Stronger Environmental Signal

On environmental permits, the government is asking the court to see restitution not as compensation for weakened regulation, but as a targeted consequence for state illegality declared by final judgment. It says there have been around 20 first-instance annulment rulings in the 13 years of the Environmental Courts, and therefore the fiscal contingency is limited. The brief argues the measure is suitable, necessary and proportionate, and that it does not weaken the state duty under Article 19 No 8 of the Constitution—it deepens it by creating an institutional incentive for more rigorous environmental assessment.

The filing explicitly rejects any regression contrary to the Escazú Agreement, seeking to neutralise an argument likely to be raised by opponents that restitution could weaken environmental protection. This is the government's most delicate balancing act: it must defend compensation for permit revocations while showing that environmental standards remain intact.

Article 31 Adds a Third Front on Disaster-Era Utilities

The executive's separate request over Article 31 shows it is not only defending the Reconstruction Law but also seeking to strike down part of it. The provision would have required free reconnection of basic services in catastrophe zones. By challenging its constitutionality, the government is signalling that it views the free-reconnection mandate as constitutionally problematic, although the published report does not detail the precise grounds.

What Chile Investors and Utilities Should Watch as the TC Weighs Reconstruction Provisions

For investors and project sponsors in Chile: Check whether existing tax stability agreements or projects backed by environmental permits rely on the provisions now before the Constitutional Court. A ruling accepting the opposition's challenge would weaken reliance on long-term tax and environmental commitments in future contracts; a ruling upholding the government would preserve the current reconstruction-law framework.

For developers of projects with revoked or challenged environmental permits: The government's benchmark of around 20 first-instance annulment rulings over 13 years is the fiscal exposure baseline cited in its filing. If the restitution mechanism survives, expect compensation to flow from final judgments—not automatic re-approval—while environmental assessment standards remain unchanged.

For utilities and basic-services providers: The executive's Article 31 request puts the free-reconnection mandate in play. Until the plenary rules, do not budget free reconnections in catastrophe zones as a settled obligation; model disaster-response billing with the possibility that the article is struck down.