Contributed By Gonzalez Calvillo, S.C.
Secured lenders can enforce secured collateral if and when the principal obligor of the secured obligations is subject to a corresponding event of default as contractually agreed in the relevant financing documents. Such enforcement will involve a judicial proceeding in order for the secured lender to validly foreclose on the collateral. However, under certain circumstances, the parties thereto may agree on an extra-judicial foreclosure procedure which, among other things, entails less time.
As for restrictions, enforcement of collateral is limited by insolvency, concurso mercantil, bankruptcy, moratorium, labour, tax and other laws of general application affecting the obligations of debtors and the rights of creditors.
A choice of governing law will be upheld in Mexico as long as the parties to the corresponding financing documents expressly (i) submit to the applicable jurisdiction, and (ii) waive any other jurisdiction to which they may be entitled for whatever reason.
A judgment issued by a foreign court would be enforceable in Mexico subject to compliance with the requirements of Article 1347-A and other applicable articles of the Mexican Commerce Code (Código de Comercio) and Articles 569 and 571 of the Mexican Federal Code of Civil Procedure (Código Federal de Procedimientos Civiles).
Generally, these requirements are that: (i) the relevant judgment should be final and obtained in compliance with the legal requirements of the jurisdiction of the court rendering such judgment; (ii) the relevant judgment is strictly for the payment of a sum of money (in personam action, as opposed to an in rem action); (iii) service of process should be carried out personally on the defendant or a duly appointed agent; (iv) the judgment should not contravene Mexican law, public policy, international treaties, or agreements binding upon Mexico or generally accepted principles of international law; (v) the procedure under the laws of Mexico with respect to the enforcement of foreign judgments (including issuance of a rogatory letter by a competent authority of such foreign jurisdiction, requesting enforcement of such judgment and the certification of such judgment as authentic by the corresponding authorities of such jurisdiction, in accordance with the laws thereof) should be observed; (vi) the court issuing the final judgment should be considered competent under internationally accepted rules that are compatible with Mexican procedural laws; (vii) the action in respect of which such judgment is rendered should not be the subject matter of a pending lawsuit or final judgment among the same parties before a Mexican court; (viii) the judgment should not contravene a final judgment of a Mexican court considered as “cosa juzgada” (final and non-appealable) under Mexican law on the same subject matter between the parties thereto; and (ix) the relevant foreign courts should recognise the principles of reciprocity and, thus, would enforce a final judgment issued by a federal or state court of Mexico as a matter of reciprocity.
Enforcement of collateral is limited by insolvency, concurso mercantil, bankruptcy, moratorium, labour, tax and other laws of general application affecting the obligations of debtors and the rights of creditors.
Also, in the event of a foreclosure procedure, foreign lenders may be restricted from owning certain assets (including stock) because of limitations on foreign investment, or in the case of regulated assets. Notwithstanding this, lenders may foreclose on Mexican collateral and sell off the underlying asset to a third party without ever becoming the legal holder (owner) thereof.