In Mexico, the civil law legal system is applicable.
The federal judicial power is vested in the district courts as the first instance of appeal, the federal circuit courts as the second instance of appeal, and the Supreme Court of Justice as the final instance of appeal.
For their part, the 32 state governments have judicial power to decide local civil and commercial matters and criminal controversies, while the federal judicial power decides federal matters, such as IP, foreign investment, commercial matters and criminal matters that fall under federal jurisdiction.
In general terms, Mexico is open to foreign investment, although it is necessary to obtain authorisation for foreign investment to participate, directly or indirectly, in more than 49% of the capital stock of the following:
At the same time, some activities are restricted in terms of foreign investment, such as the following.
In order to obtain authorisation for foreign investments, it is necessary to file the following documentation before the National Foreign Investments Commission:
Such authority has a maximum time of 45 business days in order to issue its resolution. Should the authority deny the authorisation, this means that the agreements, by-laws and all actions carried out by the parties are null and void, and therefore not enforceable with third parties.
Any foreigner who is involved in the act of incorporation of any company in Mexico, or who at any future time acquires an interest in or participates in such company, shall be considered because of that simple act as a Mexican national regarding said interest or participation, as well as regarding the goods, rights, concessions, participations or interests which such company might acquire, or the rights and obligations derived from the agreements entered into by the company. Such foreigner therefore agrees not to invoke the protection of its government, under the penalty for failure to comply with same, of forfeiting said interest or participations in favour of the Mexican nation.
According to the Mexican legal system, all decisions rendered by the administrative authorities can be appealed before the Federal Court for Administrative Affairs (FCAA) through a Nullity Claim or, before the same authority that rendered the resolution to be appealed, through a Review Recourse.
The Review Recourse is optional and can only be filed within a term of 15 working days after being served with the administrative decision to be challenged. The timeframe to obtain a definitive decision in a Review Recourse is usually about six months. The decision of a Review Recourse can also be appealed through the ordinary appeal remedy (Nullity Claim) before the FCAA.
On the other hand, the Nullity Claim can only be filed within a term of 30 working days after being served with the administrative decision to be challenged. The timeframe to obtain a definitive decision in a Nullity Claim ranges from approximately six months to one year.
Those decisions rendered by the FCAA on Nullity Claims can only be appealed by the affected party in one last stage of appeal, namely the “Amparo” appeal.
The Amparo appeal is a constitutional action: its unique purpose is to revoke an administrative or jurisdictional ruling that has been unconstitutionally issued and therefore contravenes a person’s (individual or corporation) constitutional rights. The legal term foreseen in the Amparo Law to file the initial brief or complaint before the defendant authority is 15 working days, which shall be counted from the day on which the offended party was served notice with the ruling to be challenged, and afterwards the defendant authority will render its reply and remit the file to a Federal Circuit Court (FCC) to be solved. A final and definitive ruling is usually issued within a term of approximately six months to one year.
The General Law of Business Corporations provides for several types of companies in which a partnership can be organised. However, the main forms are: Sociedad Anónima (SA), which is a stock corporation; Sociedad de Responsabilidad Limitada (S de RL), which is a limited liability company; and Sociedad Anónima Promotora de Inversión (SAPI), which is regulated by the Securities Market Law.
Sociedad Anónima (SA)
The Sociedad Anónima (SA) may adopt the form of a Sociedad Anónima de Capital Variable (SA de CV). The difference is that the variable capital company may increase or decrease its capital accordingly with its by-laws through a shareholders’ meeting without any of the formalities applicable to the SA.
Each company in Mexico must be integrated by at least two shareholders (individuals or corporations). The shareholders' liability is limited to their shares or capital contribution and the directors are liable for the management of the company.
An auditor who will supervise the operations of the company must be appointed. This auditor may be integrated by one or more members, who may or may not be shareholders.
Sociedad de Responsabilidad Limitada (S de RL)
The S de RL is popular among US corporations looking for a presence in Mexico, because they can reduce their tax liabilities in the USA.
The partners’ liability is limited to their partnership contribution and the directors will be liable for the management. However, in this corporation there is no legal requirement to appoint an auditor.
The shares, which represent the equity interests, are not freely transferrable and/or cannot be traded publicly.
Sociedad Anónima Promotora de la Inversión (SAPI)
This kind of corporation is regulated by the Securities Market Law. It is widely used as a vehicle to invest in Mexico because of its flexibility in corporate governance, which allows the obligations and contractual arrangements used by equity investors to be taken.
For the incorporation of a company in Mexico, it is necessary to define what the corporate legal name will be. Authorisation to use this legal name must be requested before the Secretary of Economy (SE).
Once the authorisation is obtained, the foreign investors may proceed with the creation of the corporate by-laws which include the following requirements:
In the case of a SAPI, the company can be run by a board of directors.
It is worth mentioning that the S de RL is not required to name an auditor. It is up to the partners to appoint one.
Once the articles of incorporation or by-laws are drafted and the deed of incorporation has been signed before a notary public, it will then be mandatory to file such deed of incorporation in the Public Registry of Commerce for these documents to be public and to become effective.
Additionally, the new company must be registered at the Taxpayers’ Registry in front of the tax authority Servicio de Administración Tributaria (SAT) and at the Foreign Investment Registry.
The execution of the incorporation deed before the notary public takes an estimated time of one week once the articles of incorporation or by-laws have been drafted. To file the deed before the Public Registry of Commerce takes an estimated one or two weeks.
According to the General Law of Business Corporations, companies are obliged to hold an annual ordinary shareholders/partners meeting. In the case of the SA, this meeting must be held within the four months following the end of the fiscal year – ie, up until 30 April.
In these meetings the shareholders or partners will be asked to approve the financial statements of the company and the sole director or manager's or board’s report.
Additionally, companies must renew their registration at the Foreign Investment Registry annually.
Moreover, all companies must submit an annual online report before SAT within the first three months of the year – ie, up until 31 March.
Companies in Mexico are run by either a sole administrator or a board of administrators, depending on whether they are an SA or an S de RL.
In the case of an SA, it is run by a sole director or a board of directors. An S de RL, on the other hand, is run by a sole manager or a board of managers.
This sole director/manager or board of directors/managers may also appoint executive committees within the company, as well as executive officers.
A SAPI is run by a board of directors.
Shareholders’ liability in Mexican companies is limited to capital contributions; directors, on the other hand, are liable for their management in the company before such company, as well as before the shareholders and third parties.
Likewise, directors or managers are jointly liable for the shareholders’ contributions, compliance with statutory requirements regarding the payment of dividends, accounting and corporate book-keeping and all records required by law, to fulfil the shareholders’ resolutions. However, directors or managers are not liable for specific resolutions resolved by the board or actions carried by the management with which such directors or managers have expressly disagreed.
Officers are liable for the fulfilment of the duties appointed to them.
The corporate veil as conceded within the General Laws of Business Corporations applies to the shareholders or partners of the company and not the directors/ managers or officers. Directors who act against the company’s interests, and not under the specific directions of the equity holders, are personally liable for their actions towards shareholders and third parties.
The main regulations that govern labour law in Mexico are the following:
These laws govern all employment relationships between unionised and "trusted" Mexican and foreign employees. (In this context, "trusted" refers to those in positions of responsibility.) Even Mexican employees working abroad are subject to Mexican laws.
According to the law, there are two different jurisdictions, federal and local, depending on the industry and activities.
The Social Security Law governs security, nursery, medical and retirement mandatory benefits granted by the social security system to all employees.
The Federal Labour Law (FLL) provides that it is strictly mandatory to execute an employment agreement with all employees, since all the terms and conditions, as well as both the rights and obligations of the employee-employer are agreed upon.
The execution of the agreement is the sole obligation of the employer. Even if an agreement has not been reached between the parties, the FLL provides that when an individual renders personal and subordinated work to another party in exchange for a contribution, the two parties have formed an employment relationship just as if they had reached an agreement.
The FLL provides that the employment relationship can be for a specific task or definite term, for a specific season or indefinite term, and as applicable, such employment relationship can be subject to a trial or training period.
The most common type of employment agreements are entered into for an indefinite period of time.
An employer can hire employees for a definite time or specific tasks, or as limited and provided by the FLL.
A seasonal agreement is used when an employer has an increased workload in specific periods of the year.
Trial and training periods are limited to three months and to six months for a management position. These conditions must be agreed in writing and the employer must guarantee social security obligations. Also, trial periods may not be applicable simultaneously or successively to the same employee, whether in the same or different positions within the company.
It is worth mentioning that, as a result of a 2021 reform, subcontracting or outsourcing of personnel is prohibited.
The exception to this rule is subcontracting of specialised services or the execution of specialised works, which are not part of the company’s corporate purpose.
This allowed subcontracting must be formalised in a written contract, in which it must be noted the object of the services or work to be executed and the number of workers who will participate in said contract.
The employer or company that subcontracts specialised services will be jointly and severally liable for the breached contractor.
The companies that provide outsourcing of specialised services or specialised works must, among others, have a proper registration with Work Authority.
Then, the employment agencies or intermediaries that intervene in the process of hiring personnel may only participate in the recruitment, selection, training and capacitation, but they will not be considered employers.
Sanctions and fines up to approximately MXN4.3 million will be imposed on those who subcontract personnel, or the employer who hires without complying with the provisions of law, or who benefits from subcontracting.
This FLL reform also contributed to the reform of the Federal Tax Code, the Income Tax Law and VAT Law; such dispositions establish that payments made by subcontracting personnel will not have a tax effect.
According to the FLL, employees are entitled to one resting day per six working days with full payment, which will preferably be on a Sunday. If the job requires continuous work, such resting day may be agreed between the employee and employer. If employees are required to render their services on Sundays, their employers must pay an additional 25% premium to their daily wage.
There are three types of work periods in Mexico, as provided by the FLL, which are:
Furthermore, employees are entitled to at least half-an-hour to eat, away from their working spaces; if employees cannot go out to eat, such time shall be calculated as time effectively worked.
Employees, according to the FLL, are not obliged to render their services for longer than their agreed shifts, although shifts may be extended extraordinarily, without exceeding three hours daily or three times a week. Such extra time must be paid as an equivalent amount to the corresponding hourly wage.
When extra time exceeds nine hours a week, the employer is obliged to pay 200% of the wage corresponding to the worked hours, notwithstanding the sanctions the FLL may impose.
The termination of employment relationships in Mexico is delicate, since an employer may not terminate a relationship at will, only according to the causes provided by the FLL, giving written notice and expressly identifying the dates of the actions carried out by the employee or employer so that the employee can be indemnified for the time worked for the employer.
It is important to note that, in Mexico, the employer holds the burden of proof in case of controversy or litigation, therefore, the employer must have sufficient records of employees' conduct and causes. Also, if the employer fails to give due notice, this is considered to be an unjustified termination and is subject to a claim. Since it is a sensitive and difficult subject to prove before a court, employers in Mexico usually turn to settlements agreed with the employees, which can be carried out through the signing of a voluntary resignation letter and termination agreement.
There is no need for the employer to give notice to the union about the redundancy of the employee, provided that the union agreement does not contemplate such disposition, nor is it necessary for the employer to give notice to the government. It is a common practice in Mexico to offer a redundant employee full statutory severance in exchange for the execution of the termination agreement and voluntary resignation.
According to the FLL, it is within employers’ and employees’ obligations to form different commissions regarding several work matters, such as civil protection, training commissions, internal working regulations, and profit-sharing commissions. These must be governed by at least one employer’s representative and one employees' representative.
Moreover, employees have the right to form or be a member of an already organised union in order to negotiate working conditions with the employer and execute a bargaining agreement. The most important right of unions is their right to strike and to suspend their duties until their demands are satisfied.
However, under Mexican regulations, employees do not have statutory rights to representation on the management board.
Mexican tax regulations state that employers are required to withhold the following taxes:
An individual is considered to be a Mexican resident for tax purposes if such individual establishes their residence in Mexico or if the individual’s centre of vital interests is in Mexico.
Companies are liable to pay taxes in Mexico when such companies:
Taxes in Mexico are divided into federal and state taxes.
These include income tax, value added tax and social security, among others.
Income tax (impuesto sobre la renta) – up to a maximum rate of 30% – is paid on gross income less the applicable or authorised deductions, carry-over losses, special reductions and certain taxation paid abroad.
Value added tax (impuesto al valor agregado) – at 16% – is paid on the sale of goods and services, granting the use of certain goods and the importation of goods. However, food and medicines are not subject to VAT.
Local taxes include the following:
The tax incentive in Mexico is the reduction in VAT under certain and specific circumstances.
Tax consolidation is not available under Mexican regulations.
The Income Tax Law states that interest related to the debts of a company in excess of three times its equity, arising out of debts with related foreign parties, will be non-deductible.
Additionally, the Corporate Income Tax Law states that companies that take on operations with related parties that are local or resident abroad will have to keep records of documentation that proves their income and deductions, according to the prices or payments made by independent parties in similar transactions.
Corporate Income Tax Law states that companies that take on operations with related parties that are local or resident abroad will have to keep records of the documentation that proves their income and deductions made, according to the prices or payments made by independent parties in similar transactions.
Taxpayers that undertake transactions with related parties are required to determine their revenues and deductions allowing for prices and amounts of consideration that would have been used with or between independent parties in comparable transactions, applying the transfer pricing methods.
Parties are related when one of them participates, directly or indirectly, in the administration, control or equity of the other, or when a person or group of persons participates, directly or indirectly, in the administration, control or equity of said persons.
Mexican legislation recognises six methods for transfer pricing:
According to the Income Tax Law, the rules for anti-evasion apply to interest and royalty payments made to foreign entities which qualify as tax havens.
Merger notification in Mexico is mandatory. In specific scenarios it must be notified to the Federal Commission of Economic Competition (COFECE), in order to grant certainty to the process.
According to the Mexican Antitrust Law the following thresholds apply for merger notification to the COFECE:
The standard merger control procedure begins with the filing before the COFECE of a written merger notification, enclosing the proper documentation.
If the written notification fails to comply with the requirements established by the Mexican Antitrust Law, the COFECE has ten working days to issue a request for basic information (RFBI). Parties must respond in the same period, although this may be extended once for an additional ten working days upon request.
Once the notification is admitted, the COFECE has 15 working days to issue an additional request for information (RFI). Parties must respond in the same period, which may be extended in duly justified cases.
The merger control procedure may last 60 working days, following the date on which the parties responded to the RFBI or RFI, as applicable until the moment when the merger unit has assessed the operation and the board has made a final decision.
Upon conclusion of such period without the issuance of a resolution, it may be understood that the COFECE has no objection to the notified concentration.
This standard period can be extended once by 40 working days in exceptionally complex mergers. Where a merger raises competition concerns, the COFECE must inform the parties of such concerns within ten working days before the board session’s agenda is made public, which allows the parties to propose conditions or remedies. Remedy submission and modifications of submitted remedies may restart the clock for another period of 60 plus 40 working days.
The average timeframe during which the COFECE analyses mergers is shorter that the maximum legal time period.
Cartels in Mexico are known as prácticas monopólicas absolutas (PMA) and are contracts, agreements or arrangements between competing economic agents, which are intended to:
Through these agreements, the competing companies stop competing. These acts are prohibited by Mexican law as being harmful to the free competition process, since they create something similar to a monopoly market. They are therefore dealt with very severely.
Abuse of dominant position in Mexico is known as prácticas monopólicas relativas (PMR) and involves one or more companies that have substantial power in a certain market misusing their power to displace others, prevent access or establish exclusive advantages in favour of one or more agents.
Mexican law establishes that the following can all be regarded as PMR:
An invention is defined as any human creation that allows the transformation of matter or energy that exists in nature, for its use and to meet mankind’s needs. In consequence, an invention will be subject to patentability if the Federal Law for the Protection of IP (FLPIP) coincides with the international criteria for patentability, as an invention is patentable if it is new, involves an inventive step and is susceptible to industrial use.
Patent documents should contain descriptions of scientific and technical concepts as well as practical details of the processes and apparatus required to enable the inventions. However, the following developments are not considered as inventions or not patentable under the FLPIP:
Term of Protection
A patent is in force for 20 years and is not renewable. This protection starts from the filing date or, if it has one, the international filing date and is subject to the payment of maintenance fees every five years.
During such term, the exclusive right of use of the patented invention confers on the respective owner the right to prevent others from manufacturing, using, selling, offering for sale or importing the patented product or process without the owner's consent.
The Mexican Institute of Industrial Property (MIIP) launched the current version of the system “inventions online” for the e-filing of patent and utility model applications and issued guidelines for their use.
In general, e-filing has as an advantage a reduction in late filing and paper costs, faster examination of formalities, and the existence of electronic documents issued by the system that are considered originals given the electronic signature of the officers. However, e-filing is not feasible for same-day filings, all documents filed in the system as digital copies only may be required in original form by the MIIP at any time, and changes and corrections through the system are not possible once a case has been paid.
Patents are filed before the MIIP in Spanish with the formalities set by the MIIP. Priority is recognised according to the Paris Convention and/or the Patent Cooperation Treaty (PCT). Filing a certified copy of the priority document and its translation along with the application, or within three months of the filing date, is mandatory for priority recognition under the Paris Convention, for which there is no express requirement from the MIIP.
In addition, assignments from the inventors are required when the applicant is not the inventor(s), and powers of attorney are required for filings through an agent in Mexico, which is necessary for foreign applicants because an address for receiving notifications within Mexican territory is mandatory. However, filing of assignments is not required for PCT national stage applications.
Applications are subject to a formalities examination and, upon compliance with all the formalities, they are published as soon as possible after 18 months of the filing or priority date. Utility model and design register applications are published as soon as possible after compliance with formalities.
Once the applications are published, any third party may submit observations regarding the patentability of the published applications within two months of the date of publication, which may or may not be considered by the MIIP during substantive examination.
After publication, patent applications are subject to a substantive examination to assess eligibility and determine novelty, inventive step and industrial applicability. If a patent is granted in a country where Mexico has a patent prosecution highway (PPH) agreement in place before the issuance of the first office action, examination may be accelerated through such PPH. Substantive examination may take from months up to five years more, once the application is published and there is a limit of four office actions for a given application and a maximum substantive examination time of five years.
Once the examination is concluded, the MIIP must issue a final decision, where the MIIP is responsible for issuing a decision on the granting or denial of the patent. Unfortunately, the MIIP does not issue partial grants or rejections when a patent contains both patentable and non-patentable subject matter, but a denial will affect all claims even if only one is not patentable. If a final decision denies a patent, there is the possibility to appeal and a further instance of revision. If the final decision grants the patent, granting fees and the first five years of maintenance must be paid. Renewals for the design register and annuities for the rest of the rights are due every five years thereafter.
Enforcement and Remedies
There are two ways to enforce a patent. The first is through administrative proceedings (infringement action) before the MIIP, which is not a court of law but a federal administrative office that, among other matters, grants patents; the second is through a civil action claiming damages from the violation to the patent rights.
In case of administrative proceedings , the MIIP is technically competent to resolve a patent infringement case.
The FLPIP regards the following as infringements:
If an infringement is declared, the MIIP will also sanction the infringer with a fine of up to MXN21.72 million.
There are no criminal actions for violation to patent rights.
An IP right-holder is entitled to enforce a patent through a civil action filed before the Civil Courts to claim compensatory damages that cannot be less than 40% of the indicator of legitimate value indicated by the patent holder.
One of the most important novelties of the FLPIP, is that now the holder of an affected right has the possibility of claiming damages through the following two independent actions:
Therefore, now allowed to claim damages, the affected IP right-holder does not need a prior administrative infringement action decision declared as final and beyond the shadow of an appeal.
In accordance with the FLPIP, trade mark may be applied by any individual or entity that wishes to distinguish its products or services, and the right to their exclusive use is obtained through a trade mark registration.
In Mexico, trade mark protection is granted to any sign that is perceivable by the senses and that can be represented in a clear and precise manner which makes it distinguishable from other products and services in the market.
The FLPIP recognises the following signs available for registration:
Furthermore, the FLPIP also foresees the possibility to register the following distinctive signs:
Term of Protection
In Mexico, a trade mark registration is in full force and effect for a ten-year period, with the possibility to file subsequent renewals for the same period. The ten years are counted from the granting date of the corresponding registration.
The FLPIP contemplates that declarations of use are compulsory at two different points:
If the third anniversary declaration of use is not filed, the relevant registration will automatically lapse.
Trade-mark applications are the subject of two examinations that will be conducted together. The first is performed to verify that all the information supplied complies with the formal requirements, and that the goods or services sought to be protected are duly classified. The second examination is called the “novelty exam”, in which the officer determines whether the proposed mark is inherently registrable in the light of prior registered or applied trade marks.
Once a trade mark application is filed, the MIIP will publish the same in the Official Gazette for opposition purposes within a ten-working-day period, counting from its filing date, granting a non-extendable term of one month to allow third parties to bring opposition against the application.
In parallel, after the said month – counted from the publication date in the Official Gazette – the MIIP will proceed with both examinations and will issue only one official communication containing formal requirements and objections and/or anticipations and/or any opposition filed by a third party.
After the official notification of this office action, the applicant will have two months to file a response to the office action, which can be automatically extended for another two months.
If no opposition is filed and the examiner considers that there is no legal requirement or objection in accordance with the FLPIP, the authority will grant the certificate of registration.
Enforcement and Remedies
There are three ways to enforce a trade mark: (i) through an administrative infringement action filed before the MIIP, (ii) through a civil action claiming damages and (iii) through a criminal action filed before the FPO.
The FLPIP establishes, among other matters, the legal hypothesis of infringement, as well as the penalties that can be imposed to an infringer (if the infringing conduct is demonstrated).
According to the FLPIP, the following are considered to be trade mark infringements and the IP right-holder is entitled to start such action if someone:
Where the MIIP determines in a decision that an infringement was demonstrated, such authority is obliged to impose one of the following penalties on the defendant: a fine (up to MXP22,405,000), or the temporary/permanent closure of the infringer's business.
The holder of a trade mark is also entitled to pursue a civil action filed before the civil courts to claim compensatory damages from the violation to its trade mark rights, that cannot be less than 40% of the indicator of legitimate value indicated by the trade mark holder.
One of the most important novelties of the FLPIP, is that now the holder of an affected right has the possibility of claiming damages through the following two independent actions:
Therefore, now to be allowed to claim damages, the affected holder of the trade does not need a prior administrative infringement action decision declared as final and beyond the shadow of an appeal.
IP right-holders can also start a criminal action against any third party that falsifies trade marks, using the following steps:
The FLPIP recognises the protection of industrial designs, including under such categories as industrial drawings and industrial models.
An industrial drawing is defined as any combination of shapes, lines or colours incorporated in an industrial product for ornamentation purposes and which provides a specific appearance of its own, whereas an industrial model is constituted to be a three-dimensional shape that serves as a model or pattern for the manufacture of an industrial product, giving it a special appearance that does not involve any technical effects.
Term of Protection
The registration of industrial designs is valid for a term of five years as of the filing date and is renewable for successive periods of the same duration up to a maximum of 25 years, subject to the payment of the corresponding fees.
Enforcement and Remedies
There are two ways to enforce an industrial design registration. The first is through administrative proceedings (infringement action) before the MIIP, which is not a court of law but a federal administrative office that, among other matters, grants patents; the second is through a civil action claiming damages from the violation to the industrial design rights.
The MIIP is therefore technically competent to resolve an industrial design infringement case.
The FLPIP establishes as infringements:
The sanctions and remedies are the same as for 7.1 Patents.
There are no criminal actions for violation to patent rights.
An industrial design registration-holder is also entitled to pursue a civil action filed before the civil courts to claim compensatory damages that cannot be less than 40% of the indicator of legitimate value indicated by the holder of the trade mark.
One of the most important novelties of the FLPIP is that now the holder of an affected right has the possibility of claiming damages through the following two independent actions:
Therefore, now tallowed to claim damages, the affected IP right-holder does not need a prior administrative infringement action decision declared as final and beyond the shadow of an appeal.
According to Article 11 of the Mexican Federal Copyright Law (MFCL), copyright is the recognition given by the state to a creator of any of the literary and artistic works specified in the MFCL and its regulations. The MFCL grants the author exclusive prerogatives and privileges of a personal (moral rights) and economic nature (economic rights).
The author is the individual who has created the literary or artistic work.
The categories of copyrightable works in Mexico are:
Term of Protection
Economic rights remain in force for:
The author is the sole, original and perpetual owner of the moral rights.
Moral rights are regarded as vested in the author and they are inalienable, imprescriptible, non-renounceable and non-resizable.
Under the MFCL, the basic requirements for obtaining copyright protection are:
To obtain the registration of a copyright, an application needs to be submitted before the National Institute of Copyright (NIC), with all the formal requirements, as well as the respective original examples of the works to be protected.
Mexico follows the international trend of copyright protection. The Berne Convention for the Protection of Artistic and Literary Works is in force in Mexico and the provisions of this international treaty are incorporated into Mexico's national legislation. Therefore, artistic or literary works are protected at the time they are fixed into a material form and, in theory, a copyright registration is not necessary to achieve copyright protection.
The lack of obtaining copyright registration for a literary or artistic work should have no negative impact for the work or for the copyright owner, since copyright protection is granted at the same time the work is fixed into a material form.
In practice, however, obtaining copyright registration from the NIC is highly advisable. The certificate of copyright registration constitutes proof of existence of the work and a presumption about copyright ownership on behalf of the registrant. It facilitates the exercise of commercial actions with the registered work and helps to expedite the initiation of enforcement proceedings before the MIIP.
According to Article 17 of the MFCL, all works to be published must display a copyright notice with the following information:
Enforcement and Remedies
There are three ways to enforce a copyright: through an administrative infringement action filed before the MIIP, through a criminal action filed before the FPO, and through a civil action.
According to the MFCL, the following conduct is considered as copyright infringement and the owner of a copyright is entitled to start action if someone:
These type of actions are filed before the MIIP if they were made seeking a direct or indirect profit, if the MIIP determines in its decision that an infringement was demonstrated, such authority is obliged to impose a fine (up to MXP1,971,640) on the defendant, depending on the severity of the infringement. If the infringement action prevails, the MIIP could increase the fine.
A copyright-holder is entitled to pursue criminal action against any third party that fraudulently reproduces, imports, stores, transports, distributes, sells or leases, without the corresponding authorisation, works protected by the MFCL, by taking the following steps:
A copyright-holder is entitled to pursue a civil action filed before the civil courts to claim compensatory damages that cannot be less than 40% of the sale price to the public of each infringing product or service. In civil action regarding copyrights, it has never been necessary to have an administrative infringement action decision that is final and beyond the shadow of an appeal.
A trade secret is not registrable and the owner of such trade secret must follow several processes to limit access to the trade secret and keep it as confidential as possible.
Appellation of Origin/Geographical Indication
The MIIP recognises those that are protected abroad and in accordance with international treaties. The owner of an AO or GI protected abroad may apply for its recognition before the MIIP, enclosing the document showing its protection under the law of the corresponding country or according to the international treaties.
Protection is available to plant varieties in Mexico by breeders' rights. These are governed by the Mexican Law of Plant Varieties, the provisions of which are in line with the UPOV Convention of 1978.
This is protected as a copyright in Mexico.
The main regulations that safeguard individual data protection in Mexico are the Federal Law on the Protection of Personal Data Held by Private Parties (FLPPP), its regulations and Privacy Notice Guidelines, the last of which are adopted by private parties in order to let their users know the treatment of the users’ data.
These laws aim to:
The right to the protection of personal data is provided within the dispositions of the Mexican constitution which:
The legal framework applicable to public government federal entities is the FLPPP, as well as the General Guidelines for the Protection of Personal Data in the Public Sector.
The FLPPP does not have extraterritorial application, meaning that entities or individuals that process personal data outside Mexico are not obliged to comply with the FLPPP dispositions, even if those private parties target Mexican residents.
The agency in charge of enforcing the data protection regulations is the National Institute of Transparency, Access to Information and Protection of Personal Data (INAI).
It is an autonomous public entity in charge of facilitating and guaranteeing people's access to public information and access to, and protection of, personal data, promoting the culture of transparency in public management and government accountability to society. It has authority in all the institutions, dependencies and organisations – public or private – that receive, generate or manage the public resources of the federation.
The FLFIP entered in force on 5 November 2020, and the amendments to the MFCL entered in force in July 2020. However, the regulations for such laws are still pending. To date, there is no information regarding the date of issuance of such regulations, however, they should be issued later this year (2021).
2021 started with a surge of COVID-19 infections. The health crisis was carried over from 2020 but the surge was a direct result of the December holiday period, during which people – weary after several months of enforced social distancing and lockdowns – gathered to celebrate the end of a difficult year. Shortly thereafter, advancements in vaccinations across the world signalled a partial return to normal life. As the pandemic entered its second year, people were starting to see light at the end of the tunnel.
In Mexico, government-implemented restrictions on public gatherings, public space reopenings and business reopenings were subject to a “traffic light signal” system, whereby, as infection and hospitalisation levels decrease, restrictions are gradually lifted. By mid-May, several states were in the yellow (least serious) phase of the pandemic, but a full reopening of the economy had not yet been achieved.
The Mexican economy is still reeling from the effects of the pandemic, which impacted several of the economy’s core industries, such as tourism and entertainment. More recently, the decision by the Federal Aviation Administration to downgrade Mexico’s aviation safety rating is expected to negatively impact the tourism and aviation sectors’ recovery and prevent additional expansion, possibly even affecting the operations of the new airport being built near Mexico City.
However, certain sectors, such as healthcare and e-commerce, have seen their business thrive. Meanwhile, others, such as real estate, are making a comeback.
This year will also bring what are probably the most important mid-term elections in the country’s recent history. At stake are the renewal of the House of Representatives, as well as elections for the governor of 15 states, among numerous other state and local elected offices. The country’s political parties have essentially separated into two different blocks – one aligned with the government and ideology of President Andrés Manuel López Obrador, and the other seeking to prevent the governing party from obtaining the majority of the House of Representatives and looking to act as a counterweight to the current government. The outcome of the elections will dictate the course for the remainder of this administration, which ends in 2024.
Reform of Employee Subcontracting Regime and Profit-Sharing
In an unprecedented effort not seen in decades, the Mexican government pushed through a series of reforms aimed at ending two harmful practices that had been used for many years in connection with the work force: (i) abusive outsourcing mechanisms used to avoid labour obligations and to artificially reduce the payment of social security contributions and employment income taxes; and (ii) limitation of profit-sharing that has to be paid to employees. The reforms exceeded their reach in many cases – affecting not only the intended harmful practices but also lawful employee outsourcing and insourcing structures – and will certainly change the way in which business in Mexico is conducted, going forward.
The reforms, which included amendments to the federal Labour Law, the Income Tax and Value Added Tax laws, the Federal Tax Code and the Social Security Law, were approved by Congress and published in the Official Gazette on 23 April 2021.
The entry into force of the amendments is gradual, until all the related rules for the application of the new legal provisions are issued, and certain terms elapse. Its main effects can be summarised as follows: (i) labour and social security law amendments entered into force on 24 April 2021; (ii) amendments to the tax-related provisions will become effective on 1 August 2021.
Summary of the main labour and tax ramifications of the reform
Subcontracting personnel is prohibited, with subcontracting of personnel being understood as a provision of services in which an entity or individual provides or makes available to another entity its own employees for the other entity’s benefit.
Contracting specialised services will be permitted only if such services or tasks are not part of the corporate purpose or main economic activity of the contracting party, and only if the contracted party is listed in a public registry of specialised service providers. Rules for the registration process were issued by the labour authorities on 24 May 2021.
Complementary or shared services or tasks provided between companies of the same corporate group will also be considered as specialised, as long as they are not considered within the corporate purpose or the main economic activity of the company that receives such services or tasks.
Individuals or entities providing personnel outsourcing services will be required to complete a registration process before the Labour Ministry and to renew such registration every three years. To be registered, individuals or entities must prove they have complied with all their tax and social security obligations.
A joint and several liability is recognised between the individual or entity who engages the specialised services or specialised works and the contractor who fails to comply with the obligations resulting from the relationships with its workers.
As a legal requirement for an employer substitution to occur, the assets of the company or establishment are to be transferred to the substitute employer. However, individuals or companies that operate under a subcontracting regime will have 90 days (until 24 July 2021) to transfer its employees to the beneficiary company without need of transferring assets to the substitute employer as long as the latter recognises the employment conditions of employees, including seniority.
The amount of profit-sharing to be paid to employees will be capped to three months of salary or the average amount received by the employee in the last three years, the applicable amount being whichever is more favourable to the employees. The rest of the rules to compute and distribute profit-sharing to employees are not affected.
Substantial economic sanctions could result for employers who benefit from personnel subcontracting arrangements in violation of the new provisions of the Mexican Labour Law.
For tax purposes, tax invoices issued for disallowed subcontracting of personnel will not have legal effects (ie, non-deductible expense for income tax purposes and inability to claim a value added tax credit on such expense).
The use of simulated schemes of provision of specialised services or the execution of specialised works, as well as the subcontracting of personnel, will be considered a criminal tax offence.
The reform described above will change the way companies do business in Mexico in future, and it has caused an impressive investment of thousands of labour hours on the part of companies, businesses, lawyers, tax and labour advisors, labour authorities, employer and entrepreneurial associations, among others, to adapt, restructure and otherwise modify operating structures to become compliant with the new rules on time. A lot of work is still needed to finalise all the necessary restructuring, but decisive steps to implement the most urgent parts of the reform are under way. As with any new standard of operation, it is certain that the work for legal professionals will continue strongly in the months to come, until all – or at least, most – of the effects of the reform are felt and tested.
Mexican Energy Sector/Antitrust
Starting in 2019, the new Mexican federal administration has attempted to implement significant changes in the energy sector, seeking to override the new market configuration that was established during the previous federal administration. In 2013–14, the energy sector was structurally reformed with an almost full opening to private investment.
Changes were initially sought through administrative decrees issued in 2019 and 2020 by the Ministry of Energy (SENER), the sector’s regulator, the Energy Regulatory Commission (CRE), and the independent system operator, the National Center for Energy Control (CENACE). The main goal has been to strengthen the state-owned utility CFE and the state-owned oil company PEMEX and to displace private investment.
Specifically, the federal administration issued regulation to the effect that (i) CFE’s power plants would be dispatched preferentially, and (ii) CFE’s supply division could bring on more legacy GenCos, and for a larger period of time, into its legacy supply contract, while cancelling long-term and medium-term auctions (which were the preferred method for the purchase of power by CFE’s supply division).
For context, prior to the energy reforms of 2013, CFE was a fully integrated monopoly tasked with the generation and supply of electricity. Following such structural amendment, CFE was unbundled vertically, in generation, transmission, distribution, commercialisation and supply units, and horizontally in its generation segment, creating several generation divisions based on the legal regime that would apply to each power plant, with the aim of fostering competition in the market. In addition, rules were enacted so that while CFE’s supply division could continue to purchase electricity from the several CFE legacy GenCos to ensure supply (through a legacy supply contract), on the one hand, new medium-term and long-term contracts would have to be obtained through auctions (where only renewables could be awarded long-term contracts for the sale of electricity), and, on the other, legacy GenCos would have to be gradually phased out from the supply pool.
It is also worth noting that the implementing regulations of the energy reforms established an "energy dispatch" based on economic efficiency and merit. In this system, the more economically efficient power plants, considering their variable costs, would be dispatched first. This led to clean energy being preferred over fossil fuel-based generation, as the variable costs of the former are next to zero compared to the high cost of fuels borne by conventional sources. Economic dispatch also ensured that market prices were the lowest possible, since the market pricing configuration was based on price nodes determined by the power plant to be dispatched last in such hub (marginal facility).
As for the hydrocarbons sector, PEMEX was the exclusive player in the exploration and production (E&P) sector. It dominated first-hand fuel sales, allowing private investment to participate only through franchise agreements, and controlled the national pipelines system, although the development of natural gas transportation systems by private parties was allowed. Post-reform, public tenders were launched for oil firms to take part in upstream activities, and midstream and downstream was completely opened up through a permit regime, where all applicants who fulfilled the required legal conditions are allowed to carry out transportation, storage, processing, distribution and commercialisation of hydrocarbons. For purposes of the foregoing, asymmetric regulation was imposed by CRE upon PEMEX in all areas.
Similarly to energy auctions, public tenders for E&P activities were called off by the current federal administration. Likewise, SENER tried to amend existing regulations in matters of import and export of hydrocarbons, so as to eliminate the possibility of obtaining long-term permits (with a 20-year validity).
In addition to the foregoing regulatory changes, CRE has generally delayed the issuance and amending of permits well beyond the applicable statutory deadlines and, to the extent possible, required sponsors to submit additional documents and information, above and beyond the requirements of law.
SENER, CRE and CENACE have remained practically closed to the public since the early days of the COVID-19 outbreak (CRE only opening up for a couple of months by the end of 2020). These shutdowns have prevented or delayed filings in matters of social impact assessment, permit applications and interconnection requests, impeding the development of new projects or the continuance of existing projects, which were already facing other COVID-19-related delays in construction and supply.
Early in 2021, the President and his political party introduced bills to Congress to amend the main laws of the energy sector. These bills were passed by Congress without much debate.
In the electricity sector, the amendment to the Power Industry Law formally provided that CENACE would dispatch CFE’s generation fleet first, especially if contracted by CFE’s supply unit. In addition, it provided that CRE should follow SENER’s directive in the granting of permits and that CENACE should limit open access to the grid.
On the other hand, the amendments to the Hydrocarbons Law introduced wider powers for CRE to revoke permits related to downstream activities and, for reasons of “national interest”, even take over service stations and hand control over to PEMEX, while imposing harsher requirements for new players to obtain permits and enter the market. Furthermore, such amendments led to the annulment of all asymmetric regulation that had been imposed on PEMEX resulting from the energy reforms, with the goal of presenting a level playing field for other competitors to enter the hydrocarbons market.
So far these legal reforms have been halted by federal courts specialised in economic competition, following a flood of amparo lawsuits (constitutional reviews) brought by the private sector to defend their acquired rights, free competition and environmental rights, through permanent injunctions that will remain in force until the merits of the case are ultimately resolved. These amparo proceedings are supplemented by other constitutional remedies brought before Mexico’s Supreme Court of Justice by state governments, the Mexican Economic Competition Commission (COFECE) and even congressional minorities.
In most proceedings, plaintiffs have successfully argued that the amendments deter competition because they impose entry barriers to new participants and give an undue advantage to the dominant agents, CFE and PEMEX.
Implications in matters of climate change
In addition to hindering competition in the market to the detriment of end-users, the federal administration’s policy in the sector has compromised Mexico’s goals and international obligations in matters of climate change.
Mexico is the 12th-largest GHG-emitter. In its Intended Nationally Determined Contribution under the Paris Agreement, Mexico committed to an unconditional reduction of 22% in its GHG emissions by 2030. This would require reaching peak emissions by 2026. The ultimate goal, also considering the cut of short-lived climate pollutants and conditional commitments, was achieving a 50% cut in the volume of emissions by 2050 in reference to a year 2000 baseline.
For purposes of the foregoing, the INDC commitments were embedded into Mexico’s domestic law. The 22% overall reduction of GHG emissions would require a decrease of emissions of, among others, 31% in the energy generation sector, of 14% in oil and gas, as well as of 18% in transportation, of 18% in the residential and commercial sectors, of 5% in the industrial sector, and of 8% in agriculture. To achieve these goals, aiming at low carbon-oriented policies in power generation and hydrocarbons industries, which provide the former sectors with basic inputs, is essential.
Particularly in the electricity industry, the General Climate Change Law and the Energy Transition Law set a goal for minimum participation of clean energies in the energy matrix, consisting of 25% for 2018, 30% for 2021 and 35% for 2024.
As a result of the current administration’s energy policy, it is unlikely that Mexico will achieve its clean energy goals. SENER’s 'Report on advances of clean energies 2018 to 2020' states that, by mid-2018, clean energies contributed to 22.2% of the energy matrix, and such figure increased to only 25.5% of the total generation by October 2020.
Specifically, in an analysis of the current status of clean energy credits in Mexico’s electricity industry, COFECE projected two scenarios: (i) "scenario A”, assuming that all clean energy projects that are considered in official plans are actually executed (ie, the expected scenario), and (ii) "scenario B”, considering the available data of installed capacity and commercial operation dates for 2018–19, with a 2020–24 projection considering the feasibility of certain projects (ie, the realistic scenario). In the expected scenario, clean energy generation would contribute 33.6% in 2024. However, in the realistic scenario, the percentage would be 29.8%, resulting in a gap of over 5% with respect to the 35% goal. It must be noted that this analysis was published before the publication of the amendment to the Electricity Industry Law and did not consider the impacts of renewables being dispatched after CFE’s facilities.
The federal government’s questionable focus on fossil fuels and the revival of CFE and PEMEX will most likely result in price increases in electricity and fuels in the short term, which will be paid directly by end-users or indirectly through subsidies, and even international arbitration claims, which would adversely complicate the economic environment in Mexico. However, of greater concerns are the effects (including through a larger burden in the GDP) that derailing the contribution of clean energies and low-carbon goals in the path to combat climate change will have.
Antitrust in Digital Markets
COFECE and the Federal Telecommunications Institute (IFETEL) have increasingly become interested in digital markets and the technology markets related to them.
COFECE has had several interviews with players in digital and technology markets in order to obtain a better understanding of these markets and determine how to approach them. Additionally, COFECE has been carefully scrutinising merger control procedures (concentrations) in these markets and conducted an investigation of a possible abuse of dominance (relative monopolistic practices) in the e-commerce and related markets, which was then closed.
As a result of the above, as well as recent international developments in these markets and Mexican federal court decisions regarding disputes between COFECE and IFETEL, in which both agencies claimed to have authority to deal with digital markets, COFECE published its 'Strategy in Digital Markets'. According to this strategy, the digitalisation of the economy requires action specifically aimed at addressing the challenges posed by the digital economy and the operation of the markets which participate in it. For the digital economy, COFECE understands the exchange of numerous products and services by consumers and suppliers in various markets, taking advantage of and exploiting the telecommunications infrastructure and information technology industries’ products (software and hardware) as inputs that allow generating new forms of carrying out this exchange.
COFECE is particularly concerned about market performance, including significant levels of concentration in digital markets, anticompetitive practices by large global technology players, the increasing accumulation of data and the increasing digital divide. COFECE has, therefore, increased its analytical and investigation capabilities, taking the following steps:
In view of the above, it is expected that COFECE will be very active in the digital and technology markets in the near future. Particularly, it is reasonable to expect that COFECE will first try to address the following concerns:
Moreover, on 24 August 2020, the Investigative Authority of COFECE published in Mexico’s federal Official Gazette an abstract of the beginning of an ex officio investigation on the possible existence of abuse of dominance (relative monopolistic practices) in the digital advertising and related services market. The investigation is being conducted under file number IO-003-2020.
Initially, the investigation will identify whether there are anticompetitive tying and/or packaging, specifically the sale conditioned to buy, acquire, sell or provide another product or service, different or distinguishable from another product or on the basis of reciprocity, as well as any other form of displacement, specifically the action of one or several economic agents aimed to increase costs, hinder the productive process or reduce the demand faced by other economic agent.
Additionally, through the new Digital Markets Office and the Markets Intelligence Office, COFECE will likely start gathering information from public sources and, through the Concentrations Office, it will use concentration proceedings to obtain additional information on the markets in which they are interested.
Finally, IFETEL published the beginning of an investigation for barriers to entry and essential facilities in online searching services, social media, mobile operating services, cloud services, and related services, to which COFECE filed a court procedure claiming that IFETEL does not have authority to investigate this market. The resolution of this dispute is pending at the time of writing this article. However, it is expected that new disputes on this issue will still arise during the next years until courts clearly rule on the authority of each agency.