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The rise of commercial arbitration as a means to resolve disputes in Mexico emerged in 1993 as a product of theamendment of the Mexican Commercial Code, which was adopted by the Model Law of the United NationsCommission on International Trade Law (UNCITRAL).From 1993 until the present, the practice of private arbitration in Mexico has become quite active and dynamic. Itis increasingly becoming a preferred alternative for resolving conflicts between private parties, without the needto resort to a judicial proceeding in Mexican courts and tribunals.Some of the advantages which make commercial arbitration in Mexico a good option for resolving disputesbetween parties, as opposed to a court proceeding, include:1. Judicial Saturation: Even though Article 17 of the Political Constitution of Mexico clearly establishes thatthe justice system in Mexico should be prompt and expeditious, the reality is that there is currently anoversaturation of lawsuits in Mexico deriving from a growing caseload, making the resolution of disputesbetween parties a slow process and which can take several months or years.Based on the above, commercial arbitration increasingly presents itself as a quicker and more efficientoption to resolve conflicts between parties.2. Lower Cost from Time Savings: Even though the justice system in Mexico presided over by the courtsand tribunals is a free public service, the delay and the slow performance of the Mexican courts andtribunals in issuing decisions makes the cost of a traditional lawsuit burdensome in many cases, includingamong others, attorneys' fees, which are often greater than those for an arbitration proceeding.3. Specialization: In Mexico, the tendency to create specialized courts and tribunals in different subject areasmakes the administration of justice more agile and accurate. However, the specialties of such courts andtribunals often cannot compare with the specialty of the members of an arbitral tribunal, who are selectedprecisely because of their high degree of preparation and expertise with respect to the subject matter ofthe conflict that is submitted to arbitration.4. Transparency, Trust and the Absence of Corruption: Despite the enormous efforts that have been made inrecent years to combat legal uncertainty in Mexico, at present cases of corruption, bribery and influencingthe judiciary still exist in Mexico, which causes parties to call into question some decisions of Mexicancourts and tribunals. This has led more parties to subject themselves to arbitration as an alternative meansto resolve their disputes, since arbitral tribunals may offer the confidence and transparency that might belacking in some judicial forums in Mexico.In view of all these factors, private commercial arbitration as an alternate means of resolving disputes betweenparties is a viable option that is worth considering when it comes time to negotiate and enter into a contract inMexico.Sources of information and disclaimer: The following sources of information, among others, have beenused in preparing this document: Official Journal of the Federation, the Bank of Mexico, Supreme Court ofJustice of the Nation, Department of Finance and Public Credit. The CCN MéxicoReport ™ does notconstitute legal or tax advice and should not be used for purposes other than as purely informative for thegeneral public. For more information on the CCN MéxicoReport ™, any of the issues mentioned therein orto inquire about legal services, please contact Rob Barnett (rbarnett@ccn-law.com) or Mario Melgar(mmelgar@ccn-law.com), phone (210) 222-1642.
On November 13, 2014, the Mexican Department of Labor and Social Security published, in the Official Journalof the Federation, new Federal Regulations on Safety and Health in the Workplace (the “Regulations”), whichcame into force on February 13, 2015. On the same date, the Federal Labor Regulations on Safety, Hygiene andthe Work Environment were repealed, which had been in force since 1997. The purpose of the Regulations is to ensure the right to perform work activities under conditions that safeguard the life and health of workers.However, it should also be noted that the Regulations establish additional obligations, including fines, whichwere increased to the same degree that penalties were increased in the recent reform to the Federal Labor Law(the “Law”). In addition, a new General Regulation on Labor Inspection and Implementation of Penalties cameinto effect in mid-2014, making it clear that Mexican labor authorities now have comprehensive authority tocarry out their functions of oversight and enforcement, including the imposition of fines.The Regulations establish a vast number of duties to be carried out by employers, including the following: a) toprovide a Diagnosis of Safety and Health in the Workplace as well as studies and risk analysis; (b) to implementa Health and Safety Program at work; (c) to establish and implement the Safety and Health Committee within 90calendar days from the beginning of operations; and (d) to supervise and ensure that contractors comply withoccupational safety and health measures when performing work within their facilities.Protective measures for pregnant women or women who are breastfeeding, for the most part, are the same asthose established by the previous regulations. However, the following prohibitions were added: carrying loadsexceeding 10 kilograms, unnatural postures or repetitive movements for long periods of time and activitiesinvolving abdominal effort or lower limbs; work in extreme weather conditions in open fields and in productiveactivities in industries such as gas, cement, and mining for iron, steel, oil, and nuclear and electrical power.The Regulations contain a chapter on workers with disabilities, which sets forth the obligation to have adequatefacilities for access to, and performance of, activities for persons with disabilities in companies with more thanfifty employees, and, if necessary, require performing the necessary modifications and adaptations to theworkplace in order to ensure their safe operation. It is important to remember that, in accordance with thetransitory articles of the Decree by which the law was amended, obligations relating to adaptations in theworkplace will take effect as of December 1, 2015.The Federal Labor Law also increased labor fines substantially. The Regulations now provide for fines rangingfrom 50 to 5,000 times the general minimum daily wage applicable in the Federal District, while the highest finethat was established in the previous regulations was 315 times the minimum wage. It is important to mention thatfines will be doubled if the employer fails to provide proof that the irregularities were remedied within the timeperiod established by the authorities.Based on the above, it is important to understand the obligations set forth in the Regulations which may beapplicable to your company, as well as the obligations established under the Mexican Official Norms (NOMs) onlabor matters, the same which are closely related to the provisions contained in the Regulations.
Recently, the Second Circuit Court of Appeals of the Auxiliary Center of the Fifth Region approved non-bindinglegal opinion number (V Región) 2o. 7 C (10a), titled: "Relative Nullity of the Contract. A seller who learns thatthe purchaser did not have legal capacity to enter into a contract lacks standing to bring a claim if the selleraccepted the execution of such and received a benefit, in accordance with the principle of contractual good faith.”In this legal opinion, the court found that a plaintiff who intends to file a claim alleging that the person withwhom he/she entered into a contract lacked the legal capacity to do so in an attempt to obtain relative nullity ofthe respective contract, when he/she received a benefit from such contract at the respective moment, lacksstanding to bring such a claim. The foregoing is consistent with the principle of contractual good faith recognizedin Mexico’s Federal Civil Code, which provides that once a contract is perfected, the parties are bound not onlyby the obligations expressly undertaken therein, but also by those legal consequences which given their naturearise in accordance with good faith, custom or law, and whose validity and performance cannot be left to thediscretion of one of the contracting parties. Therefore, a person may not demand the relative nullity of a contractthat he/she entered into and accepted at the time of contracting, believing such to be valid, when he/she receiveda benefit for years, also applying the provision of the same Code which provides that the legal incapacity of oneof the parties may not be invoked by the other to his/her own advantage.
Article 27 of the Coordinated Energy Regulatory Agencies Law (LORCME) establishes that the general rules,acts and omissions of the National Hydrocarbons Commission (CNH) and of the Energy Regulatory Commission(CRE) may be challenged only through means of an appeals process known as an indirect amparo lawsuit.However, Article 22 of such law establishes the authority of both agencies to hear appeals filed against their ownacts and decisions. This incongruity reveals an instance of oversight by the Mexican executive branch andCongress, the solution to which will eventually have to be addressed by the courts.Before the LORCME took effect in August 2014, the CRE Law allowed parties to file an administrative motionfor reconsideration against decisions of the CRE, to be resolved in accordance with Title Six of the FederalAdministrative Procedure Law (LFPA). On the other hand, the CNH Law did not establish a special procedure,such as a motion for reconsideration. Therefore, the administrative remedy available with respect to the CNH wasthe administrative appeal available under the LFPA. Both appeals had to be filed before the very authority thatoriginally issued the act or decision.In order to challenge the decisions by the CNH and the CRE regarding those appeals, individuals could file anaction for judicial review of an administrative law decision before the Federal Tax and Administrative Law Court(TFJFA), and eventually, an amparo lawsuit before the federal judiciary. As a result, litigation against the CNHand the CRE, as against other Mexican administrative authorities, could be prolonged for several years, incontravention of prompt and expeditious justice as guaranteed by the Mexican Constitution.For now, the decisions issued by the CRE reiterate that the only means of appeal with respect to such decisions isan indirect amparo lawsuit, making it clear that the motion for reconsideration established by the prior law is nolonger available.Even more troublesome is another rule established in Article 27 of the LORCME, according to which the generalrules, acts and omissions of the CNH and the CRE are not subject to suspension. Only in cases where fines areimposed will such be suspended until the pending amparo lawsuit is resolved.A suspension allows the stay of enforcement of the respective decision while the matter is being resolved onappeal. The suspension prevents the definitive imposition of a negative effect on the appellant while the appealprocess is underway. The Constitution provides that in order to suspend the acts that are appealed in an amparolawsuit, judges must analyze the proper application of law to such acts versus the public interest at stake, andbalance such considerations. The Amparo Law specifies cases where it is considered that the public interest mustprevail during the legal process. For example, the public interest must prevail when the use or exploitation ofpublic property referred to in Article 27 of the Constitution would be impeded or obstructed. However, even inthose cases, the jurisdictional authority may make an exception and grant the suspension.With respect to the LORCME, the Federal Congress eliminated the possibility for federal judges to evaluate thepublic interest at stake in the acts and decisions issued by energy regulatory agencies, which is blatantlyunconstitutional. The question is whether all cases involving the suspension of a decision by energy regulatoryagencies would pose a threat to the public interest. For example: Is there a prevailing public interest in providingthat in no event should a decision approving the fees that a hydrocarbons transport permit holder may charge forrendering services be suspended? Must a decision ordering the intervention of a company in the hydrocarbons orelectricity sectors be enforceable throughout the course of the appellate process?It is understood that the intent was to ensure the stability of energy regulation against frivolous or excessivechallenges. However, the result is that ongoing businesses can be ruined by what may be arbitrary rulings thatwill remain in effect, in a best case scenario, until a favorable judgment on the merits has been granted.The litmus test for Article 27 of the LORCME will take place for the first time when a party requests asuspension in an amparo lawsuit, the presiding judge denies such, and a motion for review is filed before thecompetent Mexican Federal Collegiate Circuit Court. Alternatively, a district judge could choose not to apply therule in question and grant the suspension under the new protective paradigm of Mexico’s constitutional system.The paradox Mexico faces is that distrust of the judicial system may affect the certainty in the rule of law forparties in the energy sector. There is no doubt that in light of the jurisdictional confusion that could occur givencurrent laws, the Executive Branch and Congress should reconsider this provision.
