Contracts and clauses which contain elements of non-compete and/or no investment, which impose a prohibition to compete against or invest in a certain activity or business, likely are not valid under Mexican law based on the Mexican constitutional guaranty to freely exercise one’s profession, employment or business, which is enshrined in Article 5, first and sixth paragraphs of the Political Constitution of the United Mexican States. In the case of individuals, in general terms it is unconstitutional to impede or prohibit such persons from temporarily or permanently engaging in any type of work, commerce or profession.While no Mexican case decisions or federal court jurisprudence exist with respect to the application of non-compete clauses in relation to theguaranty contained in Article 5 of the Constitution, various case decisions and jurisprudence do exist in judicial or administrative cases statingthat such right may be restricted only if it benefits public order and the public interest. In the case of business associations or corporations,the analysis is different since it is clear that the constitutional guaranty mentioned above does not apply to entities or corporations. The aboveopinion is based on the fact that an interpretation of Article 5 of the Constitution implies that the constitutional guaranty was drafted andintended to protect individuals, not collective legal persons, which have a constitutional basis in Article 9, which permits individuals toassociate for legal purposes, not meaning that said persons have the right to protect themselves through the right to freely associate in theirprofession. On the other hand, it is worth noting that the Federal Law of Economic Competition (Ley Federal de Competencia Económica)prohibits any individual or entity from establishing agreements or contracts that restrict, limit or prohibit the distribution, sale, processing andproduction of various products or services, since such could be considered as an agreement or contract in furtherance of a monopolisticactivity. In this sense, it would not necessarily be contrary to Mexican law to enter into a non-compete and/or no investment agreement witha corporation, so long as the provisions of the Federal Competition Law are complied with, and which does not seek to impede or restrict theactivities or professional undertakings of individuals who form a part of a corporation, whether as employees, partners, shareholders, directorsor managers.

Through its decision on May 12, 2006 the Second Chamber of the Supreme Court of Justice of the Nation determined that it was unconstitutional forthe Taxpayer Administration Service (SAT) to exercise its audit authority two or more times with respect to the same fiscal year, in regard tothe same contributions currently permitted in Article 46 of the Fiscal Code of the Federation. The Supreme Court determined that the legalprovision mentioned above violates the guaranty against legal security, stating that if the audit authority of the Mexican tax agency isdiscretionary, its exercise is regulated by laws governing such authority, and once the tax service has exercised its audit authority in order toreview, prove, evaluate or confirm compliance with tax obligations, issuing a final decision to the corresponding taxpayer, in which case itdetermines a credit or charge applicable to the taxpayer, this concludes the matter. This means that once the tax service has issued aliquidating resolution, under no circumstances may such authority audit the same taxpayer for the same fiscal year, as such would beunconstitutional and possibly subject the taxpayer to constant interventions into its affairs, in addition to being an unwarranted return by thetax authorities to issues that have been already reviewed and determined by such authorities. Amparo under Revision 726/2006. TI GroupAutomotive Systems, S. de R.L. de C.V. Unanimous vote of four, May 12, 2006. Author of Decision: Sergio Salvador Aguirre Anguiano