Paraguay Adopts a Conflict of Interest Law

1. Area of enforcement

Law of 26 April 2023 No. 7089 “On the Framework for the Prevention, Management of and Liability for Conflicts of Interest in the Public Service (Ley Nº 7089 Establece el Régimen de Prevención, Corrección y Sanción de Conflictos de Intereses en la Función Pública) covers officials fulfilling public functions (hereinafter, officials).

In this context, “public functions” are:

Legislative, judicial, executive or administrative functions fulfilled by a natural person on a permanent or temporary basis and paid for under a contract or by a royalty;
Activities undertaken in the quality of a servant or on behalf of any public body or entity, an authority of a department (an administrative and territorial unit in Paraguay – note of the author) or a municipality at any hierarchical level and regardless of the character of these activities or remuneration due to their fulfilment and whether they are undertaken as a result of election or appointment;
Activities of managers and staff fulfilling functions in Paraguay’s service in binational units, multilateral or international public bodies, including the bodies of Mercosur and other bodies of regional integration which Paraguay is a member of.

2. Definition of a conflict of interest

Under the Law, a conflict of interest is a situation where personal, working, economic, financial, professional or other interests of an official or his/her close relatives affect or can affect the fulfilment of his/her professional duties.

Close relatives in this context are spouses, partners, cohabitees, adult children, relatives, blood relatives and in-laws up to the second degree of affinity, including the persons under the guardianship and/or custody.

3. Notification of a conflict of interest

Under the Law, officials who do not disclose their conflicts of interest are subject to disciplinary sanctions foreseen for serious offences under the applicable disciplinary framework (for example, under Law of 27 December 2000 No. 1626 “On Civil Service” serious offences are punished by such sanctions as the suspension of the right to professional promotion for one year, removal from office without payment for up to 30 days, removal from office or dismissal with no right to hold public office for a period between two and five years).

Additionally, the Law entitles any person who has the evidence sufficient to prove that an official has a conflict of interest, including potential one, to report this information to law enforcement authorities.

4. Declaration of interest

The legal act imposes the obligation to disclose interests on officials. This is a part of a single asset and interest declaration submitted by them upon the assumption of office or election, upon termination and in the case of a considerable change in assets and interests.

A declaration includes the information on:

Membership of officials in boards of directors, administrative, governing, supervisory or control bodies of the company and other collegial body;
Public and public service positions (if the declaration is filed for the first time, the data is provided for the two previous years);
Fulfilment of the functions of director, consultant, representative or employee of commercial and/or not-for-profit organisations (if the declaration is filed for the first time, the data is provided for the two previous years);
Persons to whom the official has provided services if he/she has undertaken independent professional activities;
Employment of close relatives and their marital status.

Declarations are made publicly available on the websites of the Office of the Comptroller General ((Contraloría General de la República) and of the public body (organisation) where the official serves (is employed). Under the Law, the Comptroller General should establish a Pubic Register of Interests (Registro Público de Intereses) containing public information on how officials fulfil their obligation to submit declarations and on the sanctions imposed if they fail to meet it.

5. Restrictions and prohibitions for officials

The Law also establishes a number of restrictions and prohibitions related to conflicts of interests for officials.

Officials are, in particular, prohibited from:

Undertaking any professional activities in a private and/or non-public organisation falling within the area of regulation of the official, providing services to any person employed in this organisation;
Being a partner or shareholder of or participating in any other way in the organisations falling within the area of regulation of the official;
Providing, directly or through third parties, goods, works and services for the public body (organisation) where the official holds a position or that falls within the area of regulation of the official.

Consequently, before assuming or being elected to a position, the official must:

Adopt measures to alienate the share in the authorised capital, shares and/or other forms of participation in the companies if he/she is an owner, shareholder or partner of organisations and this can lead to a conflict of interest;
Resign if he/she is the director and not a shareholder or partner of a company and this can lead to a conflict of interest.

Furthermore, the official must opt out of the decision making process if this regards:

The organisations that were owned by the official less than three years ago;
The natural and/or legal persons that the official provided professional services to or had working and/or other professional relationship in the preceding three years;
Contracts, projects and other matters in which the official was involved in the preceding three years before the assumption of the public position;
The causes in which the official and/or his close relatives have personal, working, economic, financial, professional or other interests;
The causes with the participants, representatives or lawyers of which the official has marital, partner or cohabitee relationship, is in close blood kinship up to the fourth degree of affinity or in in-law kinship up to the second degree of affinity;
The causes in which the official and/or his close relatives have a partnership or other kind of interaction through legal persons with any of their participants, representatives or lawyers;
The causes whose participants are in a state of court proceedings with the official and/or his/her close relatives;
The causes with the participation of a person for whom the official and/or his close relative is a creditor, debtor or guarantor;
The cases where the official and/or his/her close relative is the complainant, claimant or plaintiff against a party to the proceedings;
The cases where the official and/or his/her close relative has obtained a benefit from a party to the proceedings;
The cases that see the participation of natural and/or legal persons with whom the official and/or his/her close relative is conducting employment negotiations.

6. Restrictions and prohibitions for former officials

Within one year from the termination, former officials are prohibited from:

Providing goods, works and services through third parties for the public body (organisation) where he/she held a position, as well as for the entities subordinate to it;
Being a representative and warrantor of and fulfilling administrative formalities for third parties in the public body (organisation) where he/she held a position if he/she exercised a decisive impact on the issues related to these parties or their family members throughout the fulfilment of his/her public functions;
Providing advice or other similar services to natural and/or legal persons under control, supervision and/or regulation of the public body (organisation) where the official held a position if he/she exercised a decisive impact on the issues related to these persons;
Being a partner or shareholder or participating in any other way in the organisations falling under the powers of the official.

7. Sanctions

The Law also contains provisions on the penalties for failing to comply with the established requirements, in particular:

Failure to file the declaration or submission of incomplete information is subject to a fine of 200 minimal wages (400,000,000 PYG or roughly 55,000 USD) and the prohibition to hold public positions for five years;
Submission of knowingly false information and infringement of restrictions imposed on the former officials are punished by a fine of 300 minimal wages (660,000,000 PYG or around 91,000 USD) and the prohibition to hold public positions for five years.

8. Measures to prevent conflicts of interest

Besides the standards for officials, the Law defines the measures for managing conflicts of interest that can be adopted by public bodies (organisations):

Promote participation of society in the detection of conflict-of-interest situations;
Publish draft legal acts, organise their discussions and hold consultations with regards to other decisions, appointment of officials etc.;
Organise public hearings;
Apply the integrity pacts mechanism;
Redistribute the functions of officials where conflict-of-interest situations occur, as appropriate;
Provide access to information on how officials comply with the established restrictions, prohibitions and obligations;
Publish daily agenda of officials on the official website of the public body (organisation), in particular, information on the meetings held and issues explored etc.

The control of enforcement of the provisions of the Law are entrusted with the Comptroller General.