Litigation 2022

Last Updated December 02, 2021

Mexico

Law and Practice

Authors



Von Wobeser y Sierra, SC was founded in 1986 and is one of the foremost Mexican law firms offering full-service legal solutions. The firm has more than 80 attorneys and covers more than 30 different practice areas, including specialised desks with a strong roster of international and national clients. The firm’s lawyers are renowned for their expertise in advising and fortifying leading companies in establishing and conducting day-to-day business related to entering and expanding their operations in Mexico and internationally. Von Wobeser y Sierra has built a broad and diverse team of litigators and arbitration practitioners from the best law schools in Mexico, the USA and Europe.

Mexico has a civil law legal system and is a federal state. For historical reasons, it has received certain influence from the US legal system, especially in matters related to constitutional law. Proceedings before Mexican courts traditionally followed an inquisitorial model, based mainly on written submissions, but influence from common law systems has become more notable of late; for example, in 2014 the Supreme Court introduced a particular notion of punitive damages, and in 2011 Congress amended the Federal Code of Civil Procedure to allow collective actions.

The inquisitorial model is also becoming a thing of the past, since Congress has passed several amendments to the procedural codes to establish adversarial proceedings conducted through both written submissions and oral argument, with an emphasis on the oral part of the proceedings. This new type of proceedings is already applied to criminal matters and most commercial disputes. This model has also been replicated in several states for civil disputes.

Mexico is a federal state and therefore the court system is made up of federal and local courts.

The federal court system is four-tiered, as follows:

  • district courts, which hear commercial cases, insolvency cases, civil cases with a federal element and collective actions, and also act as trial courts for amparo proceedings;
  • single-judge circuit courts, which are courts of appeal and also have jurisdiction to hear amparo proceedings;
  • collegiate circuit courts, which hear amparo complaints and act as courts of appeal for indirect amparo claims; and
  • the Supreme Court of Justice, which has jurisdiction to hear direct amparo proceedings under certain circumstances and particularly important and relevant cases.

The states’ judicial systems are usually two-tiered, with first instance courts and appellate collegiate courts. However, amparo challenges can be submitted against judgments issued by the appellate courts.

Federal courts have jurisdiction over commercial disputes, but in cases dealing only with private interest, the claimant can choose to file a claim in either a federal or a state court.

Courts are organised by subject matter jurisdiction. It depends on the amount of cases in each circuit or state, but there are usually civil/commercial courts, administrative courts, family courts and criminal courts.

Court filings are not open to the public; only interested parties have access to the judicial records. However, federal courts publish a redacted summary version of every ruling and a redacted version of the final judgment.

Parties can request the court to keep certain documents confidential, in which case they are not added to the record and access to them is controlled by a court clerk.

Only attorneys admitted to practise law in Mexico are allowed to appear as counsel before Mexican courts. To be admitted to practise law before a Mexican court, a lawyer must hold a law degree and a professional licence to practise law issued by the General Director of Professions of the Ministry of Public Education, and must register that professional licence before the federal courts or the State’s Superior Court.

Other representatives can appear before a court, but only as attorneys in fact. Foreign lawyers cannot conduct cases before Mexican courts as an attorney of record.

Litigation funding by a third party is not regulated in Mexico. Since there is no restriction in the applicable laws, third-party funding is generally allowed.

Any type of lawsuit is available for third-party funding.

Third-party funding is available to both the plaintiff and the defendant, although it is more common to see third-party funding for plaintiffs.

Since there is no specific regulation regarding third-party funding, there are no minimum or maximum amounts.

Third parties usually fund attorneys’ fees and expenses related to factual and expert witnesses, as well as any bonds or other guarantees that may be necessary if an injunctive measure is obtained.

Contingency fees are permitted under Mexican law. There is no general regulation applicable to contingency fees, but lawyers are not allowed to buy the assets that are the subject of a trial in which they are intervening (Article 2276 of the Civil Code for the Federal District). This prohibition is sometimes interpreted to mean that an attorney cannot acquire any right disputed before a court when he or she is participating in the case, although there is no binding precedent on the issue.

There are no time limits for a party to the litigation to obtain third-party funding; it could be done before the trial starts or at any point during the proceedings.

In general, Mexican law does not impose any rules on pre-action conduct, although there are some exceptions – for example, if the contractual right is not yet enforceable because the agreement did not establish a deadline for payment, in which case the party has to require payment judicially or before a Notary Public or two witnesses and wait 30 days before filing a lawsuit. However, this has more to do with the substantive right than with the procedural steps that must be taken before initiating a trial.

There are certain pre-trial motions (medios preparatorios) that the parties can file before they submit a claim, usually to prepare evidence or obtain relevant information for their case under very specific circumstances. For example, they may seek the examination of witnesses who are elderly or in imminent danger of dying, or the judicial inspection of assets.

In commercial disputes, the general statute of limitations is ten years (Article 1047 of the Commerce Code). The relevant exceptions include actions derived from a company’s by-laws or against the liquidators, which have a statute of limitations of five years (Article 1045 of the Commerce Code). However, other exceptions apply.

Other types of claims have specific statutes of limitations – for example, the statute of limitations for collective actions is three and a half years, starting from the day on which the damage was caused. Also, the general rule for claims based on tort is two years.

For commercial and civil disputes, if there is no forum selection clause agreed upon between the parties, the judge with jurisdiction to hear the case will be the judge of the place that the defendant selected to be judicially required to pay, the judge of the place designated in the contract for the fulfilment of the obligation, or the judge of the domicile of the defendant. If there are multiple defendants, the judge of the domicile of one of the defendants can exercise jurisdiction over all of them (Article 1104 of the Commerce Code and Article 156 of the Code of Civil Procedure for the Federal District). In civil matters, this may vary depending on the state legislation and the type of action.

According to the Commerce Code, an initial complaint must contain the following information:

  • the court before which the lawsuit is submitted;
  • the name, domicile and tax identification number of the plaintiff;
  • the name and domicile of the defendant;
  • a list of claims;
  • the facts on which the action is based, indicating the documents and witnesses that support each fact;
  • the legal basis and type of action;
  • the value of the claim;
  • all documentary evidence and evidence that the plaintiff is planning to produce; and
  • a signature (Article 1390 Bis 11 of the Commerce Code).

There is no opportunity to amend the complaint after it has been filed, unless there are supervening facts.

Service of process is done by an authorised court clerk called an actuario. The court clerk must go to the domicile of the defendant indicated by the plaintiff, and request to see the defendant or his or her representative or agent. If the clerk cannot find the defendant or his or her legal representative, the clerk can serve a relative, employee or any other person that lives there, once he or she has confirmed that it is the defendant’s domicile.

Service of process includes a writ indicating the date and time of the notice, the kind of proceedings, the names of the parties, the court hearing the dispute, a transcription of the relevant court’s rulings, and the name of the receiving party. Copies of the complaint and documents submitted by the plaintiff are attached to that writ (Article 1390 Bis 15).

If the plaintiff does not know where the defendant lives, the court may request information from certain authorities or companies; if no domicile can be found, the court can order the service of process through publications in a newspaper (Article 1070 Bis).

Unlike other jurisdictions, service of process is a very formalistic and crucial part of judicial proceedings. Entire proceedings may be declared null and void due to an omission when the defendant was served with process, so it is very important to make sure that the court clerk properly fulfils all the applicable requirements.

According to the Code of Civil Procedure for Mexico City, if the respondent fails to file an answer to the complaint, the facts are considered admitted if process was served on the defendant or his or her legal representative. If process was served on someone else (for example, an employee or a relative), the facts are considered denied (Article 332 of the Code of Civil Procedure for the Federal District).

Even if the facts are considered admitted, the plaintiff still has to prove all the affirmative statements made in its claim, which serve as the basis of the action. The defendant also has the opportunity to offer evidence.

Collective actions have been allowed in Mexico since 2011. Federal courts have exclusive jurisdiction to hear this type of claim. Pursuant to the Federal Code of Civil Procedure, only class actions concerning the protection of collective interests or rights related to consumer relationships or environmental matters are allowed. Matters related to antitrust issues, financial services, product liability and consumer redress are considered included within the scope of consumer relationships.

However, in order to file a collective action for damages caused to consumers in relation to monopolistic practices or unlawful acquisitions, it is necessary to first obtain a final ruling from the Federal Antitrust Commission, declaring the existence of that practice or acquisition.

The Mexican Congress decided to adopt the opt-in mechanism for collective actions, which means that the intent of a member of the class to join the collective action must be expressly declared. This consent can be declared during any stage of the proceedings or up to 18 months after the judgment issued is considered final.

Under Mexican law, there are no requirements to provide clients with a cost estimate of the potential litigation at the outset.       

It is possible to obtain interim injunctions before a full trial, in the specific cases in which provisional remedies are available (see 6.1 Circumstances of Injunctive Relief).

A party cannot apply for early judgment on some or all of the issues in dispute, nor for the other party’s case to be struck out before a trial or substantive hearing of the claim.

However, if the defendant confesses and agrees to the terms of the claim, the court shall summon the parties directly to the trial hearing in which a final judgment shall be rendered (Article 1390 Bis 19).

Additionally, if there is only documentary evidence, the court might decide to concentrate the whole procedure in the preliminary hearing (instead of appointing a new date for the trial hearing) and to enter a final judgment directly (Article 1390 Bis 37).

A case can also be concluded before trial if certain matters – such as lack of authority, lack of representation, lack of subject matter or territorial jurisdiction, lis pendens – are resolved in the preliminary hearing or in ancillary proceedings. Most issues that can lead to an early conclusion of a trial have to be alleged as a defence when the answer to the complaint is filed (Article 1127 of the Commerce Code).

No dispositive motions are usually made before trial, other than the ones related to the application for interim relief to maintain the status quo, typically consisting of the attachment of assets.

Any party who may be affected by the judgment has the right to be heard in the proceedings. In that case, the third party may become involved in the proceedings by being summoned by one of the parties or by appearing voluntarily before the court.

In a commercial or civil action, a defendant cannot apply for an order for the plaintiff to pay a sum of money as security for the defendant’s costs.

Courts do not impose costs on interim applications or motions. However, they can consider whether they are frivolous or only meant to delay the proceedings when they decide if one of the parties must pay the costs of the trial (Article 1082 of the Commerce Code).

In practice, the timeframe for a court to deal with an application or motion depends on the issue presented to the court. If it is related to defences such as lack of authority, lack of representation, lack of subject matter or territorial jurisdiction, obtaining a ruling usually takes between three and six months from the answer to the complaint being filed.

A party may not request for a motion to be ruled on an urgent basis, except for emergency interim measures (see 6.2 Arrangements for Obtaining Urgent Injunctive Relief).

Discovery is neither regulated nor allowed under Mexican law, which means that parties do not have the opportunity to depose potential witnesses or further investigate or develop the facts of the case once a complaint has been filed. The only exception that allows a party to obtain documents from the opposing party is if they identify the specific documents and declare to the judge that they are unable to produce them, asking the judge to issue an order against the party who has the document (Article 1061, Section III, of the Commerce Code).

The only way to obtain documents from third parties that are not named as a plaintiff or defendant is to make the same declaration as explained under 5.1 Discovery and Civil Cases, so that the judge can issue a production order against the third party. However, the scope is limited.

Discovery is not required, and is in fact not even allowed under Mexican law.

The only alternative to discovery, but with a very limited scope, is to start preparatory proceedings before the court, in which the plaintiff can request, for example, the examination of witnesses, a judicial inspection, a declaration from the opposing party, or the showing of a chattel. This type of preparatory proceedings is not used often, because the law imposes strict limits – for example, a party may only request to examine witnesses if they are elderly or at risk of death. Each party is required to exhibit all the documentary evidence to support their case with the complaint, answer to the complaint (and counterclaim, if applicable), and reply to the answer.

Mexican law recognises the concept of legal privilege, but its regulation is not as developed as in other countries. The applicable provisions are scattered throughout different acts and regulations, and the federal judiciary has issued very few precedents on the topic. This often presents challenges for determining the scope of legal privilege.

The Professions Law imposes a generic obligation on every professional to keep matters that are revealed to them by virtue of their profession confidential, and federal courts have held that attorney-client privilege is a consequence of the constitutional rights to privacy and defence. In fact, Procedural Codes protect those that receive information through the exercise of their profession and exempts them from testifying as witnesses in trial, and the Criminal Codes make the violation of professional secrecy a crime.

There is no specific statutory regulation of attorney-client privilege, so in principle the same obligations apply to external and in-house counsel. However, certain court precedents seem to suggest that attorney-client privilege is only applicable to external counsel.

A party that is ordered to produce a document by a judge may only refuse to disclose said document if it is considered to be privileged.

Under the Commerce Code, interim injunctions are only available on the following two grounds:

  • if there is reason to believe that a person may disappear or hide to avoid being summoned before the court; or
  • to preserve assets if the defendant has no other assets and there is a reason to believe that the assets the defendant possesses could be hidden or disposed of.

The Commerce Code provides a limitation on the type of remedies that can be granted, but some federal courts have held that the judge may grant other precautionary measures regulated in supplementary procedural laws if the circumstances to grant an interim measure are different from the ones described in the Commerce Code. Also, federal courts have stated that the two grounds established by the Commerce Code should be interpreted in an ample and flexible manner.

Mexican law does not expressly contemplate anti-suit injunctions to prevent parallel proceedings.

A party may request a motion for obtaining injunctive relief to be dealt with on an urgent basis, even without hearing the other party, if the circumstances support the urgent nature of the measure. In that case, courts usually rule on the issue within a week.

Once a trial has started, injunctive relief can generally only be obtained after notice of the request has been given to the respondent. However, Mexican courts have granted injunctive relief ex parte if the plaintiff can demonstrate a certain urgency that justifies not waiting to notify the opposing party. However, once the injunctive relief has been granted, the respondent still has the opportunity to be heard, and to submit challenges to reverse or modify the order.

The applicant can be held liable for the damages suffered by the respondent if the respondent successfully discharges the injunction and proves that he or she suffered damages. In fact, in order to obtain injunctive relief, the applicant must submit a guarantee for the potential damages caused to the party against whom the injunction will be issued.

Injunctive relief can be granted against the worldwide assets of the respondent. However, the enforcement of that relief outside Mexico would require international judicial assistance from the judges of the place where the assets are located.

In principle, injunctive relief is only granted against the parties to the dispute. However, in some cases the court can order third parties to co-operate – for example, it can order a bank to freeze banking accounts or a debtor of the respondent not to pay him or her and instead deposit the money before the court.

If the respondent fails to comply with the terms of an injunction, the court may impose different sanctions, which can range from a fine to administrative detention for contempt of court. Ultimately, the defiance of a court order may constitute the crime of judicial disobedience.

In practice, there are no jury trials in Mexico; all trials are bench trials. An oral trial proceeding in Mexico has four stages: the pleadings stage, the preliminary hearing, the trial hearing and the final judgment.

To start an ordinary oral commercial action and the pleadings stage, the claimant must file a complaint before the court, along with all the relevant documents and the names of any witnesses the plaintiff intends to call. Once the complaint is admitted, the defendant is served with process and has nine business days to file an answer and a counterclaim. The defendant must also submit all the documents to prove his defences and indicate the names of any witnesses he intends to call. The plaintiff then has three business days to respond, or nine days if a counterclaim was filed.

After the pleadings stage, the court shall appoint a date for the preliminary hearing, which is an oral hearing with the following purposes:

  • the refinement of the proceeding;
  • conciliation or mediation;
  • the establishment of agreements on undisputed facts;
  • the establishment of probatory agreements;
  • the qualification of the admissibility or not of the evidence; and
  • the citation for the trial hearing.

In addition, the judge, among other things, shall hear the procedural defences, receive evidence on such regards and rule on them (except for matters of lack of jurisdiction).

In the trial hearing, the court will process the evidence and then grant the floor to each of the parties to make their arguments. The court shall then enter its decision, briefly explaining orally the factual and legal grounds of the decision and the specific rulings.

These rules shall vary regarding special or summary proceedings.

In the preliminary hearing, the judge, among other things, shall hear the procedural defences, receive evidence on such regards and rule on them (except for matters of lack of jurisdiction). Additionally, the preliminary hearing works similarly to a case management hearing (see 7.1 Trial Proceedings).

In commercial matters, it should be remembered that parties can freely agree the proceedings under which they want their dispute to be heard, and therefore could establish a case management hearing. Parties usually follow statutory proceedings without agreeing on any modifications to the rules.

There are no jury trails in civil or commercial cases.

Any evidence that may convince the judge about the disputed facts is admissible; the scope is very general. The burden of proof rests with the party making an affirmative statement (Article 1194 of the Commerce Code).

All documentary evidence must be submitted with the complaint or the answer to the complaint or reply; otherwise, it will not be admitted, unless it is supervening. Witnesses and expert witnesses must also be identified by name in the complaint or answer to the complaint. In the preliminary hearing, the judge rules on the admissibility of the evidence, reviewing whether it is appropriate and whether the legal formalities for its offering were followed – for example, indicating the facts that the offering party intends to prove.

Expert testimony is permitted at trial, but only in cases in which ruling on the dispute requires special knowledge of science, arts or an industry. Each party can appoint an expert and prepare an interrogatory report for both experts to answer. If the reports are completely contradictory, the court may appoint a third expert witness.

The court may seek expert testimony itself if it needs guidance on a technical issue, because the Federal Code of Civil Procedure allows it to request any additional evidence to reach a more informed decision (Article 598 of the Federal Code of Civil Procedure).

In commercial proceedings, all hearings are public (Article 1080 of the Commerce Code). Other bodies of law, such as the Federal Civil Procedure Code, establish that the court will determine in which cases the hearings shall not be public (eg, in family matters or when one party is a minor).

Previously, judges were supposed to preside over every hearing, review the interrogatories for witnesses and experts, encourage the parties to reach a settlement, etc. However, in practice, judges often delegated much work to their staff and intervened only when there was a conflict over a procedural decision. Judgments are reserved to a later date.

However, in the new oral proceedings, which have applied to every commercial dispute since 2020, judges must be more involved in the case, as they personally have to preside over the hearings. Judgments are supposed to be notified at a hearing. However, in more complex cases, the judge shall suspend the hearing and appoint a later date to enter the final judgment.

Obtaining a first instance judgment in a typical oral commercial proceeding takes around five to six months on average from the complaint being submitted. The duration may vary depending on the complexity of the dispute.

Settlement agreements do not need to be certified or approved by the court. However, there are significant advantages of obtaining a certification of the agreement – mainly that the agreement will be authenticated and considered res judicata, and could be enforced like a final judgment.

Settlement agreements between the parties are not a matter of public record. Even if the settlement agreement is certified or approved by the court, it is not a document that is considered public information, and therefore only interested parties can have access to it. However, a specific provision must be included in the agreement in order for the document to be considered confidential, thereby imposing specific obligations on the parties.

Settlement agreements certified by a judge or an authorised mediator, under the Law of Alternative Justice for the Federal District, are enforced through an independent summary proceeding or by initiating the enforcement stage before the judge who originally heard the case. The proceedings are designed to be abbreviated and efficient, and injunctive measures are available.

In principle, a settlement agreement can only be set aside by filing a lawsuit asking a judge to declare the agreement null and void. The circumstances in which a settlement may be set aside are limited, because the law recognises settlement agreements as being fully enforceable. It would only be possible if the party seeking to set aside the settlement agreement alleges, for example, that there was fraud or violence, or that the person who signed the agreement had no powers of representation, etc. The parties may jointly modify the settlement agreement at any time.

Successful litigants can obtain declarative judgments and orders for specific performance. The remedies available are very broad, and typically involve damages and lost profits.

Compensatory damages under Mexican law must be a direct and immediate consequence of a breach of contract or an illegal act (Article 2110 of the Civil Code for the Federal District). Pain and suffering damages (moral damages) are also available as a remedy. In 2014, the Supreme Court introduced a particular notion of punitive damages for certain specific cases.

A party may only collect interest based on the period before a judgment is entered, according to the interest rate agreed upon by the parties or the statutory legal interest rate that is applicable. Once the judgment is issued, interest keeps accruing until the respondent makes a payment. However, interest is not awarded on costs. Also, in certain types of actions, interest can only be awarded from the date the judgment was issued and onwards.

The mechanism to enforce a judgment depends on the nature of the decision. First, if the order refers to a monetary payment to the prevailing party, these decisions can only be enforced through the seizure of assets. That seizure can be made through attachment proceedings or through a new summary action, which is a separate trial and can be filed before a different court (Articles 400, 407 and 421 of the Federal Code of Civil Procedure).

If the decision involves an order against the losing party to do something that only that party is capable of doing, such as executing a contract, the judge can sign the contract in lieu of the party if that party refuses to comply with the order (Article 421 of the Federal Code of Civil Procedure).

Finally, if the losing party is obliged to perform an obligation that someone else can do and he or she refuses to comply with the order, a third party can be designated to perform the obligation at the expense of the losing party (Article 421 of the Federal Code of Civil Procedure).

Foreign judgments are recognised and enforced in Mexico (Article 569 of the Federal Code of Civil Procedure). Mexico is a party to the Inter-American Convention on Extraterritorial Validity of Foreign Judgments and Arbitral Awards, so foreign judgments are enforced if the following conditions are met:

  • they comply with all the formal requirements necessary for them to be deemed authentic in the state of origin;
  • the judgments are duly translated into Spanish;
  • the judgments are duly legalised;
  • the judge or tribunal rendering the judgment is competent in the international sphere to try the matter;
  • the plaintiff has been summoned or subpoenaed in due legal form;
  • the parties had an opportunity to present their case;
  • the judgments are final or are considered res judicata; and
  • the judgments are not contrary to the principles and laws of Mexican public policy.

Also, Mexico is a party to the Hague Convention on Choice of Court Agreements. If applicable, this convention facilitates the enforcement of foreign judgments in a significant manner.

Under Mexican law, commercial oral judgments cannot be appealed.

In other specific cases (for example, summary proceedings), there might be only one level of appeal, unless the value of the claim is below a certain threshold. Appeals against an order issued by a district court go to a single-judge circuit court, and appeals against an order issued by a local first instance judge go to a collegiate court.

If it is not possible under the applicable law to file an appeal, or even after the appeal has been resolved, the parties can file a constitutional protection action (amparo), alleging violations of the Mexican Constitution.

An appeal against a final judgment must be filed within nine days of the judgment being notified to the party. An appeal may be filed by the losing party, by the winning party who did not obtain damages and lost profits, costs or other ancillary claim, or by an interested third party.

The appeal must be filed before the judge that issued the order, expressing all the grievances arising from the judgment. The judge then gives the opposing party the opportunity to make allegations, and finally sends the appeal to the superior court. Once the superior court receives the appeal, it confirms the admission and summons the party for a final judgment.

The appeals court may review any alleged violation of the applicable law. Typically, there is no re-hearing. If the appeals court determines that there was a violation that had an impact on the judgment, it may reassess the claims and the evidence produced, and issue a new judgment. However, if the appeals court considers that certain evidence shall be taken, it might order a re-hearing.

New issues or arguments that were not explored at first instance cannot be introduced at an appeal.

Courts cannot impose conditions on granting an appeal. When appeals are allowed under the law applicable to the specific type of proceedings, then the parties can exercise this right without any conditions.

The appellate court has limited powers, since it must rule only on the grievances exposed by the parties. However, if one of those grievances is enough to reverse the first instance judgment, the appellate court may study the entire record, reassess the evidence and issue a completely new judgment.

There are no court fees or costs to file a civil or commercial lawsuit, and in principle each party must bear the costs of attorneys and other related expenses. However, the losing party is required to reimburse the prevailing party when the court considers that the losing party acted with temerity or bad faith, or if that party did not provide any evidence to justify his or her action or defence, submitted false evidence, lost a summary action, obtained two unfavourable identical judgments in the first instance and the appeal, filed improper claims or made unwarranted defences (Article 1084 of the Commerce Code). The prevailing party must prove all the costs with proper evidence during an ancillary proceeding. Also, depending on the applicable rules, costs may be awarded based on a percentage of the amount in dispute.

The main factors considered when awarding costs are whether the losing party provided any evidence, whether the action or defence was frivolous or unwarranted, whether there was any false evidence, and whether the first and second instance judgments against the losing party were identical.

Generally, once the judgment awarding costs is final, it accrues interest under the general 6% rate if it is under the Commerce Code (Article 362), or 9% if it is under the Civil Code (Article 2395).

Alternative dispute resolution is becoming more common in Mexico, especially because judges are supposed to encourage the parties to engage in some methods – mainly mediation. There have been substantial efforts to professionalise the practice – for example, a few years ago, the Superior Court of Justice of Mexico City started to train and certify mediators.

The most popular ADR method in Mexico is still arbitration, both domestic and international.

The Mexican legal system promotes ADR, and Article 17 of the Mexican Constitution expressly acknowledges ADR as a valid method to resolve disputes. Many procedural laws establish a conciliation hearing as part of the proceedings. For example, in commercial oral proceedings, the judge has express powers to mediate during the initial hearing (Article 1390 Bis 2 of the Commerce Code). Likewise, in civil proceedings, the judge and the conciliator have powers to mediate between the parties during the whole process (Article 55 of the Code of Civil Procedures for the Federal District). However, there are no sanctions for refusing ADR – costs are not even awarded against a party who refuses to participate in ADR.

In Mexico, institutions offering and promoting ADR are well organised. In arbitration, the Mexican Arbitration Centre (CAM) and the Chamber of Commerce of Mexico City (CANACO) are among the most important domestic institutions. In mediation, the better organised institution is probably the Alternative Justice Centre, which is part of the structure of the Superior Court of Justice of Mexico City.

The law governing commercial arbitration proceedings and the enforcement of arbitral awards in Mexico is Book Five, Title Four of the Commerce Code. This body of law incorporates the United Nations Commission on International Trade Law (UNCITRAL) Model Law on arbitration (1985), with only minor modifications. It is a federal law that applies in the whole country, making the regulation of arbitration consistent everywhere in Mexico.

Mexico is also a party to the New York Convention for the Recognition and Enforcement of Foreign Arbitral Awards (the New York Convention), the Inter-American Convention on International Commercial Arbitration (the Panama Convention) and the Inter-American Convention for Extraterritorial Validity of Foreign Judgments and Arbitral Awards (the Montevideo Convention). It is also a party to the Convention on the Settlement of Investment Disputes between States and Nationals of other States (ICSID).

Under Mexican law, the following subject matters cannot be referred to arbitration:

  • personal and commercial bankruptcy (Article 1 of the Bankruptcy Law);
  • criminal liability (Article 1 of the National Code of Criminal Procedure);
  • disputes regarding the management of Mexican embassies, consulates and government agencies (Article 568 of the Federal Code of Civil Procedure);
  • territorial resources and waters (Article 568 of the Federal Code of Civil Procedure);
  • exclusive economic zone area resources (Article 568 of the Federal Code of Civil Procedure);
  • sovereign decisions and acts of authority (Article 567 of the Federal Code of Civil Procedure);
  • labour disputes (Article 123, Section XXXI, of the Mexican Constitution);
  • agrarian disputes (Article 27, Section XIX, of the Mexican Constitution);
  • family and civil status issues (Article 52 of the Superior Court of the Federal District Organisational Act);
  • administrative rescission of exploration and extraction agreements between a private contractor and the National Commission of Hydrocarbons (Article 321 of the Hydrocarbons Law);
  • administrative rescission and early termination of public purchase and sale, lease and service agreements (Article 80 of the Law of Acquisitions, Leases and Services of the Public Sector);
  • administrative rescission and early termination of public works contracts (Article 98 of the Law of Public Works and Related Services);
  • taxes (Article 14 of the Tax and Administrative Federal Court Organisational Law); and
  • other matters as recognised by applicable statutory law.

Parties can file a petition to set aside an award within three months of notice of the award being given. The challenge can only be based on limited and specific causes that mirror the ones provided in the UNCITRAL Model Law, as follows:

  • a party to the arbitration agreement was under some incapacity, or said agreement is not valid under the law to which the parties have subjected it;
  • the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings, or was otherwise unable to present his or her case;
  • the award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or contains decisions on matters beyond the scope of the submission to arbitration;
  • the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties; or
  • the court finds that the subject matter of the dispute is not capable of settlement by arbitration, or the award is in conflict with public policy.

The Commerce Code provides for a specific proceeding to enforce arbitral awards. The proceedings begin with a complaint, which the defendant can answer within 15 working days. After the response is filed, the court receives the evidence offered by the parties. After all the evidence is received, the court holds a hearing on the merits within the next three days. Finally, the judge renders a final judgment. The proceedings to enforce an award usually take between six and 12 months.

The oral adversarial commercial proceeding fully came into force in Mexico in 2020. This proceeding was previously limited to small claims.

In addition, the Constitution was reformed in 2017, granting the federal Congress powers to legislate on civil and family procedural matters, which were previously reserved to each state. In May 2021, the Supreme Court of Justice issued a resolution ordering Congress to enact the corresponding legislation. However, at the time of writing, Congress has neither discussed nor approved any bill on the matter. This law will likely replicate the oral commercial proceeding.

The COVID-19 pandemic impacted litigation in two main ways. First, the courts were forced to close for a few months and only urgent matters were processed, which significantly hindered access to justice and meant that the proceedings that were pending and those that were initiated during the last year suffered delays.

Second, both federal and local courts were forced to transition to online trial processing in order to make personal court attendance unnecessary. Although there had already been an effort in this regard, the final necessary steps were taken and the success of the system was tested during the pandemic.

Von Wobeser y Sierra, SC

Paseo de los Tamarindos 60, cuarto piso
Bosques de las Lomas
05120 Ciudad de México
Mexico

+52 (55) 52 581 000

info@vwys.com.mx www.vonwobeser.com
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White & Case, SC is recognised for its market-leading presence in Mexico City. The firm offers highly specialised and integrated services to its clients, bringing critical insights borne from almost three decades of experience working in leading innovative transactions and resolving high-profile disputes, working seamlessly with its global platform of 45 offices in 31 countries. The administrative litigation team comprises eight lawyers and has long been involved in shaping the development of constitutional and administrative litigation in Mexico, representing market-leading clients in landmark disputes challenging legislation and decisions by the authorities that exceed the provisions and rights set forth in the Mexican Constitution, international treaties and domestic laws. Recent work highlights include representing several energy and oil and gas companies against questionable decisions by the current administration, and acting in telecommunications, financial and antitrust disputes.

COVID-19’s Lasting Effects on Litigation

Many of the first measures that were put in place to prevent the spread of COVID-19 are still in effect, a good year after they were initially implemented, and the consequences of the pandemic are not over.

The pandemic abruptly changed litigation in Mexico, and litigators had to adapt to keep cases moving and to file new ones. As was noted last year, the measures taken by the Federal Judiciary Council and the Supreme Court of Justice to address the pandemic were presented in three stages. To date, most of the measures taken in August 2020 (the third stage) are still in place, along with the repercussions for litigation, necessitating constant adaptation of the way litigators work.

As most of the entities of the Federal Administration and the legislative branch began to resume normal activities, restrictions in the Judiciary did not allow the courts to work as quickly as they usually do. Courts have to work with a third of the personnel (ie, only 30% of court employees are allowed to be in person at the court at the same time) and have limited working hours on site. In antitrust, telecommunications and broadcasting matters, there are only two Federal District Courts and two Collegiate Courts, which have had to deal with more than 10,000 lawsuits against the Federal Telecommunications and Broadcasting Law (LFTR), the Electric Power Industry Law (LIE), the Hydrocarbons Law and other resolutions; these courts usually receive around 2,000 lawsuits in a year.

The efforts of the Judicial Branch have been outstanding despite the workload and the circumstances under which they have had to work, although courts and litigators would perhaps benefit from a uniform and full implementation of electronic means for hearings and to ensure constant communication between litigators and court officers.

In Mexico, litigation practice is based on written briefs and resolutions rather than oral procedures. Specifically in amparo and contentious administrative procedures, there is no oral part of the procedure regulated as such, with the exception of constitutional hearings, when the parties meet with judicial clerks and judges and present a verbal explanation of a matter or case.

The lack of uniform policies to fully implement electronic means for case hearings (which is the competence of the Federal Judiciary Council) means that litigators have encountered many challenges in communicating with courts aside from written filings.

It is believed that the measures taken during the COVID-19 pandemic set the stage for a further modernisation of the Judicial Branch. This could have a great benefit but litigators and the judiciary have to adapt and, to jumpstart this modernisation, it seems essential to have rules to fully implement electronic means not only during the pandemic but also in the long run.

Reforms to the Judicial Branch

In March 2021, the Ministry of Interior published a constitutional reform to revamp the organisation and to modify certain faculties of the Judicial Branch, specifically to consolidate the Supreme Court as the highest constitutional court and to speed up the administration of justice.

The constitutional reform made way for the enactment of new laws and the modification of others, such as a new Organic Law for the Mexican Judiciary and a new law to regulate the judicial career of public officers, and amendments to the Amparo Law, to the Law that governs Constitutional Controversies and Constitutional Actions and to the Federal Code on Civil Proceedings. These changes to the Judicial Branch entered into force in June 2021 and will be applied gradually.

This reform was highly criticised and controversial when it was enacted because Congress included a transitory article to extend the time in office of the current Chief Justice and certain members of the Federal Judiciary. The political parties that oppose the current administration saw these moves by Congress as a way to compromise the independence of the Judicial Branch because the Chief Justice and certain members of the Federal Judiciary are linked to the President and have even supported the MORENA Party in public appearances. That said, public concern about the reform has decreased because the Supreme Court is assessing the constitutionality of the transitory article and the Chief Justice has already rejected the extension of his time in office.

The most relevant changes to the Judicial Branch and to the practice of law in Mexico can be summarised as follows.

Changes to the mandatory precedent system (jurisprudence) for the Supreme Court

Before the constitutional reform, the Supreme Court – either by any of its chambers or in a plenary session – set jurisprudence in the following ways:

  • by the reiteration of criteria in five consecutive and uninterrupted cases; or
  • when it decided on contradictory decisions issued by the first and second chamber of the Supreme Court or by Collegiate Tribunals in different judicial regions.

After the constitutional reform, jurisprudence will be set with a decision by a qualified majority of the Justices with at least eight or more votes in plenary sessions or four or more votes on decisions adopted by either of the chambers.

The amendments to the Constitution seek to expedite the process to set jurisprudence, decrease the workload of the Supreme Court and consolidate it as the highest constitutional organ. The process to set jurisprudence by the Collegiate Tribunals remains the same: Collegiate Tribunals will set mandatory criteria for District Courts with the reiteration of five uninterrupted and consecutive decisions or by the decision on a contradiction by the Circuit Plenary Sessions.

With this change, relevant decisions on the constitutionality of new laws and regulations are expected to be streamlined to follow the decisions by the Supreme Court, bringing an improvement in security and certainty for parties in litigation as to how a particular matter will be decided.

Concentration of amparo trials

The reform created a new faculty for the Federal Judiciary to order the concentration of amparo trials related to serious human rights violations in one or more judicial organs. This decision will need to be justified on the bases of social interest and public order, and seeks to have consistent criteria across all related matters on similar or equal conditions.

This modification is the most controversial of the changes included in the reform, because the Executive Branch has been highly critical of the activity of certain District Courts and Collegiate Tribunals that have fiercely opposed the application of questionable laws and rules in line with the agenda of the current administration. There is high concern among litigators that this faculty will be used by the Federal Judiciary (politically pressured by the President) to instruct ad hoc courts to decide on heavily criticised and questionable actions.

Simplification of the process to issue general orders of unconstitutionality

Before the reform, the process to issue general unconstitutionality orders was slow and complicated, requiring the Supreme Court to issue three uninterrupted decisions deciding on the unconstitutionality of a law or regulation to inform Congress or the corresponding authority. After the fifth decision, in the same sense, the Supreme Court would require Congress or the corresponding authority to amend the provision as having been declared unconstitutional within the next 90 days. If Congress or the corresponding authority did not amend the contested legal provision, the Supreme Court could issue a general order of unconstitutionality with a qualified vote of its Justices acting on a plenary session. On such general order, the Supreme Court would declare that such legal or regulatory provision must not be applied for any party subject to the same, and provide provisional rules to avoid a legal vacuum.

The reforms changed this proceeding to make it consistent with the new rules on mandatory precedents and provides that, once the Supreme Court decides that a law or regulation is unconstitutional, it will inform the Congress or the corresponding authority to amend the legal or regulatory provision declared unconstitutional; if the corresponding authority does not comply with the order, the Supreme Court may issue a general order of unconstitutionality with a qualified vote of its Justices acting on a plenary session.

The modifications also consider the possibility of issuing a general order of unconstitutionality after the Collegiate Tribunal issues mandatory jurisprudence (by criteria reiteration). In these cases, the Supreme Court may also issue the general order of unconstitutionality with the qualified vote of its Justices acting on a plenary session.

Appeal Tribunals in substitution of Unitary Tribunals

Unitary Tribunals received and decided on amparos or appeals filed against the District Court (whenever the District Courts acted as an ordinary court – ie, in civil or commercial trials). The reform modifies the denomination of these tribunals and their integration. Unitary Tribunals were previously made up of one single magistrate but will now be composed of three magistrates.

Appeals against the decisions on amparo directo

The reform provides that appeals against the decisions issued by a Collegiate Tribunal in “amparo directo” trials are exceptional and may be processed by the Supreme Court only when it considers that such appeal complies with an exceptional interest standard to set a relevant precedent on constitutional affairs or on interpreting a fundamental right. The decision by the Supreme Court to process the appeals in these cases is final and definitive.

Aside from the reform, in September 2021 the Supreme Court decided that all Judicial Organs are allowed to perform ex officio assessments of any law in amparo trials. This decision abandons the reservation of such authority to the Supreme Court and, in practice, means that a District Court or a Collegiate Tribunal may decide that a law contravenes the Constitution from the start of the process and apply a Constitutional principle or mandate directly. With this new criterion, the mandate to protect the Constitution is extended to District Courts and Collegiate Tribunals, and ensures the supremacy of fundamental rights.

Energy Sector

In 2013, Articles 25, 27 and 28 of the Constitution were amended to open the energy sector to private investment, including electricity and oil and gas. Although this has benefitted the sector and consumers, the current administration aims to strengthen the role and market power of the state-owned enterprises in the electricity market (the Federal Commission of Electricity – CFE) and in hydrocarbons (Petróleos Mexicanos – PEMEX).

Direct attack on renewable and private investment in electricity

Through 2013’s Constitutional Reform, Mexico liberalised generation and supply activities based on the principles of free competition and sustainable development. This meant that private entities could freely participate in the generation of electricity and that Mexico ended 70 years of monopolistic activities. In 2014, Mexican Congress passed the LIE, which provided for the following, among other principles:

  • guaranteed private entities open and not unduly discriminatory access to the national transmission network and the general transmission networks;
  • established a wholesale electricity market, in which all power plants had to offer their available capacity, power and related services based on their costs, meaning that the electricity generated by power plants providing the lowest cost is preferred; and
  • established mechanisms to promote investment in the electricity industry, including public auctions as the exclusive method to grant medium and long-term electricity coverage contracts, as well as the granting of Clean Energy Certificates (CEL) for the production of energy without fossil fuels.

Since the Judiciary Branch stopped administrative actions to strengthen CFE to the detriment of private investment, through injunctions and amparo resolutions, the President filed an initiative before Congress to amend the LIE though a fast-track legislative procedure. This “Amended LIE” was published on 9 March 2021 and includes these modifications:

  • establishes that access to the national transmission network and the general distribution networks will be granted only when technically feasible;
  • access to the network will be granted to energy produced by CFE’s generation plants first and then to plants owned by private entities;
  • preference in the wholesale market will be given to CFE’s power plants, and the price of electricity will now be determined by unit costs rather than marginal costs;
  • the National Centre for Energy Control (CENACE) must give priority to legacy power plants (operated by CFE);
  • eliminates the mandatory long-term auctions for electricity coverage contracts;
  • grants CELs to any generator that produces energy from clean energy regardless of the date of commencement of commercial operations, which would include CFE’s hydroelectric and nuclear plants, which did not originally qualify to receive such certificates;
  • revokes legacy self-supply permits that were “obtained through fraud”. The provision is written in broad terms without clear parameters; and
  • reviews contracts for the purchase of capacity and electric power entered into with independent power producers to ensure their legality and compliance with the requirement of profitability for the Federal Government. Where appropriate and at its sole discretion, the government will renegotiate or terminate such contracts early.

Private parties challenged the Amended LIE before the Federal Courts, which granted injunctions to halt its enforcement and effects even though the Executive Branch put a lot of pressure and publicly disregarded the judges’ resolutions. Also, the Federal Antitrust Commission (COFECE) and the minority in Congress, respectively, filed a judicial review before the Supreme Court because of its implications against the free market and other relevant human rights, such as environmental protection and sustainable progress.

Constitutional Reform Initiative

On 30 September 2021, the Mexican President filed an initiative before Congress to amend Article 25, 27 and 28 of the Constitution to reshape the electricity sector created by the energy Constitutional Reform of 2013. The main purpose is to return full control of the electricity sector to state-owned CFE; therefore, the initiative proposes to cancel the following, among other measures:

  • all power generation permits that have been granted;
  • power purchase agreements that have been executed with the private sector; and
  • all requests related to permits and contracts that are pending resolution.

Since the Amparo Law does not admit constitutional relief against constitutional reforms, if the initiative passes, it will be interesting for litigators to establish a strategy to challenge the Amparo Law and achieve the admission of amparo lawsuits. It would also be very interesting to see how this potential challenge motivates new and innovative judicial precedents and consolidates the Supreme Court as the premium interpreter of the Constitution, allowing it to decide on contradictions set by different Articles of the Constitution.

Limitation on Private Investment in the Hydrocarbons Sector

The Mexican Congress issued two questionable amendments to the Hydrocarbons Law in 2021, which were followed by hundreds of amparo trials. The first amendment includes new faculties for the Ministry of Energy (SENER) and the Energy Regulation Commission (CRE) to suspend the activities of permit holders for undefined risks based on national or energy security grounds or on risks to the economy, and allows PEMEX to intervene in the operations and facilities in those cases. It also provides new reasons to revoke permits – including the breach of any type of administrative obligation that previously gave way only to economic sanctions – and changes the requirements to obtain permits to prove the compliance of minimum storage conditions, among others. The second amendment modified CRE’s faculties to issue asymmetric rules on PEMEX and ordered the revocation of all the asymmetric rules created in the past.

The industry considered these modifications to be limitations on private participation and to favour the state-owned oil company, PEMEX.

The amparos against the first amendment were dismissed by the First and Second Collegiate Tribunals specialising in Antitrust, Telecommunications and Broadcasting matters, because those Tribunals considered that the amendments to the Hydrocarbons Law would only affect permit holders once such articles were applied by SENER or CRE. The permit holders that filed their amparos expect the Supreme Court to intervene and modify the decision of the Collegiate Tribunals because the amendment has harmed free market rules, investment and legal certainty rights since it entered into force.

As for the Second Amendment, those cases are still ongoing and the Courts and Tribunals have not issued a decision on the constitutionality of the modifications. Still, both District Courts specialising in Antitrust, Telecommunications and Broadcasting matters have granted injunctions with general effects to order SENER and CRE to continue applying the asymmetric provisions to limit PEMEX’s market power.

Along with these amendments, SENER and CRE have denied new permits or been silent on requests for new authorisations. The lack of response from the authorities and the constant denial of permits and authorisations have been challenged by several parties to avoid an impasse in an already contested and disputed sector, and will probably end in several investment arbitration claims against Mexico.

Participation of Constitutional Autonomous Organs in Litigation against Questionable Decisions of the Executive Branch

Since 2020, constitutionally autonomous organs such as COFECE, the Federal Telecommunications Institute (IFT) and the National Institute for Transparency and Protection of Private Data (INAI) have played a fundamental role in litigating the most controversial laws and regulations enacted by the current administration.

COFECE successfully challenged the Reliability Policy issued by SENER. This Policy purported to modify several rules in the electricity sector related to the dispatch of power generators and to limit the participation of renewable companies in favour of CFE. The Supreme Court decided that the Reliability Policy breached the rights and principles that ensure free market conditions.

Months later, COFECE challenged the Amended LIE, which repeated many provisions of the Reliability Policy and other rules that affect and eliminate the participation of permit holders, especially for renewable companies, under free market conditions. The Supreme Court has not yet decided the case.

The IFT and INAI challenged the amendments to the LFTR that would lead to the creation of a registry with the personal and biometric data of owners and users of mobile lines (PANAUT). The INAI argued that such a registry violates the data privacy rights of mobile users and the IFT argued that the obligation included in the law for the IFT to manage and supervise such registry breaches its constitutional mandate.

Finally, both the IFT and COFECE filed other constitutional controversies against the Law for Transparency, Prevention and Combating of Undue Practices in Advertising Contracts, arguing that such law breaches the constitutional mandate of both organs and, specifically, because it contains prohibitions on economically accepted and relevant practices in the industry.

Telecommunications

On 16 April 2021, the amendment to the LFTR to create the PANAUT (a registry with sensitive data of the owners or users of mobile lines) was published. If an owner of a mobile line declines to provide the personal and biometric data requested, the carrier or mobile operator will have to cancel or deny service without the possibility of reconnecting the line. The amendment also allows the government to have access to personal and biometric information of the owner or user without a judicial order.

The measure to create and maintain this registry, which is left in the charge of the IFT, goes against the constitutional order to seek universal digital inclusion and to provide the telecommunication services with competence, plurality, continuity, universal coverage conditions and free access, because it imposes barriers to obtaining telecommunications services.

It also represents a breach of data protection because, without the consent of the mobile services user, carriers and other mobile operators are forced to obtain personal and biometric data and to keep such data up to date. In this regard, the economic independence of the IFT is at risk, because said organ must now allocate economic resources to maintain the PANAUT, which involves the preparation and training of personnel to properly treat personal data.

Although the amendment was challenged by mobile users, the Federal Courts ruled that the amendment itself did not cause harm, because the IFT has to issue the regulation in which the personal and biometric data are to be requested and what will be required from carriers and mobile operators.

The Supreme Court granted the IFT an injunction against the amendment, and a final resolution on the case is pending.

Final Words

2021 has been a year of changes for the judiciary, proving its resilience, importance and independence. Some landmark decisions have been addressed herein but others – such as the decision to declare that the laws against abortion or the absolute prohibition of vaping systems go against constitutional principles – would require an article of their own.

There are several ongoing cases in the Judicial Branch that will set interesting precedents for years to come, aside from the matters that have been mentioned here. The most relevant decisions in 2022 will probably include the final ruling on the amparos related to the new labelling system on pre-packaged food and beverages, the modifications to the rules that govern the commissions charged by Mexican pension funds and a questionable proposal to modify Tax Laws, which are currently under review by Congress; if enacted, they could harm non-governmental organisations.

These developments ensure that 2022 will be another year with a lot of activity for the Judicial Branch and a test to define the Supreme Court as the highest protector of the Constitution.

White & Case, SC

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Law and Practice

Authors



Von Wobeser y Sierra, SC was founded in 1986 and is one of the foremost Mexican law firms offering full-service legal solutions. The firm has more than 80 attorneys and covers more than 30 different practice areas, including specialised desks with a strong roster of international and national clients. The firm’s lawyers are renowned for their expertise in advising and fortifying leading companies in establishing and conducting day-to-day business related to entering and expanding their operations in Mexico and internationally. Von Wobeser y Sierra has built a broad and diverse team of litigators and arbitration practitioners from the best law schools in Mexico, the USA and Europe.

Trends and Development

Authors



White & Case, SC is recognised for its market-leading presence in Mexico City. The firm offers highly specialised and integrated services to its clients, bringing critical insights borne from almost three decades of experience working in leading innovative transactions and resolving high-profile disputes, working seamlessly with its global platform of 45 offices in 31 countries. The administrative litigation team comprises eight lawyers and has long been involved in shaping the development of constitutional and administrative litigation in Mexico, representing market-leading clients in landmark disputes challenging legislation and decisions by the authorities that exceed the provisions and rights set forth in the Mexican Constitution, international treaties and domestic laws. Recent work highlights include representing several energy and oil and gas companies against questionable decisions by the current administration, and acting in telecommunications, financial and antitrust disputes.

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