Dispute Resolution in Mexico
By Enrique Benet Gregg
Dispute Resolution in Mexico, Civil and business litigation
In general, but not only, but the following factors also influence jurisdictional scope:
i. Subject matter: civil or business-related.
ii. Territory: based on the state. As a rule, the court with jurisdiction is the court of the defendant's residence or place of abode.
iii. Amount in dispute: the law specifies which amounts may be heard by a certain court.
iv. Parties may typically choose the court's jurisdiction and/or consent to the court's jurisdiction. The submission to a certain jurisdiction entails waiving the jurisdiction that corresponds to the aforementioned conditions.
Also, a claimant may submit to a court's jurisdiction by bringing a lawsuit in that court, and a defendant may do so by answering a lawsuit unless it specifically rejects the court's jurisdiction.
In addition to submitting their disagreements to alternative means, such as arbitration, the parties may also waive court jurisdiction and opt-out of the court's authority.
Court proceedings Structure of the legal system
The judicial system of the federal republic of Mexico is comprised of both federal and state courts. Civil disputes are heard by state or municipal courts, and both state and federal courts have authority over commercial issues.
Typically, the court structure consists of the following:
i. initial proceedings before a single judge (state or federal;
ii. appeals court by three magistrates and
iii. an Amparo court composed of a Federal judge or three Federal magistrates.
Civil and commercial dispute resolution
Civil or commercial litigation in Mexico often consists of two instances: a) the initial instance, and b) the appeal or second instance. Claimant and defendant may also seek redress for the infringement of human rights, which may include procedural infractions, through an Amparo challenge. The Amparo is seen as an unusual challenge and not a third instance in the process.
Typically, procedures consist of the following steps: a) the claim; b) the defense and counterclaim; c) the evidence period; and d) the conclusion or closing arguments; e) the final verdict; f) an appeal, and g) Amparo.
Claimants seeking civil or commercial action must file a lawsuit or claim with the court having jurisdiction over the matter, together with all pertinent papers and the names of witnesses they want to call to testify.
Mexican procedural law does not provide for discovery. However, parties may petition the court to compel the submission of documents by the opposing party, third parties, or government agencies. Additionally, parties may submit other relevant evidence.
Generally, first instance rulings are subject to appeal. The appellate courts may affirm, cancel, or amend the ruling of the trial court. The appellate courts are restricted to considering just the arguments made by the appellant. Specifically, they examine any legal or factual errors made in the initial decision.
Almost invariably, the final verdict in a civil or commercial procedure before local/state or federal courts is amenable to a direct Amparo petition. Before launching Amparo procedures, a party must typically exhaust all regular challenges, including the appeals process.
Typically, a direct Amparo is handled by a Federal Collegiate Court. In extraordinary situations, such as a direct interpretation of a constitutional clause, the Supreme Court of Justice of Mexico may rule on a direct Amparo. Indirect amparos are often considered by Federal District Courts and may only be brought in extremely limited circumstances that differ from a final ruling on the merits but do suggest a violation of human rights under the Constitution or international treaties.
Final judgments vary based on the type of remedy sought, but generally, a court can declare or order:
i. the cancellation of the contract;
ii. cancellation of the agreement;
iii. execution of a certain activity;
iv. payment of immediate and direct losses, including moral damages;
v. reimbursement for immediate and direct loss of earnings;
vi. affirmative relief Note that despite the common belief that Mexico only permits compensatory damages, the Mexican Supreme Court issued a historic ruling in 2013 that appears to permit punitive damages in situations involving moral injury.
In 2020, modifications to the Commerce Code will go into force, transforming the commercial procedure system from a written to an oral format.
The rulings of courts of first and second instance are generally enforceable under the law. In reality, however, a court will enforce a ruling until it becomes final (i.e. when the decision may not be subject to any challenge).
The triumphant party may attach the assets of the losing party to obtain payment and finally sell them at a public auction. If the losing party is insolvent, the victorious party may apply for bankruptcy or reorganization to attempt debt recovery.
Note that the Commerce Code also permits executive procedures, by which a claimant with an enforceable title (such as debt securities or credit titles, acknowledgment of debt before a notary or authority, etc.) may request the court to set off goods of the opposing party since the notification of the claim.
Commercial mediation and arbitration
Since 2008, Article 17 of the Mexican Constitution clearly recognizes alternative dispute resolution processes as viable options for resolving conflicts.
Arbitration has been the preferred venue for large and complicated business disputes during the past decade. Arbitration is used extensively in the following industries: I energy; (ii) building; (iii) mergers, acquisitions, and joint ventures involving complicated factual and legal difficulties, as well as substantial sums of money; (iv) government procurement
The arbitration legislation is established inside the Mexican Commerce Code and is based on the 1985 UNICTRAL Model Law. These guidelines apply to all Mexican arbitration proceedings involving business issues.
In order for an arbitration agreement to be valid, (i) it must be stated in writing and signed by the parties or by an exchange of letters, telexes, telegrams, faxes, or any other means of telecommunication that properly express or record the agreement; (ii) it must be inferred from a written complaint and a written response to the complaint where such an inference cannot be denied; or (iii) it must be supported by a reference in an agreement to
To be enforceable, an arbitration agreement must satisfy the following conditions:
i. that the subject matter is subject to arbitration;
ii. that the parties' consent was not obtained via error, fraud, or coercion; and
iii. that the parties signed the agreement with full ability and/or authority. In general, Mexican courts enforce arbitration agreements. Due to the constitutional authorization of alternative conflict resolution, there is a growing trend to recognize arbitration agreements.
According to the Mexican Commerce Code, the award must be in writing, signed by the arbitrators, and indicate the location and date of the arbitration. If the award is granted by more than one arbitrator, just the signatures of the majority are required, together with an explanation of why any arbitrator did not sign. Unless the parties have agreed otherwise or resolved their disagreement, the award must include the rationale for the judgments.
The verdict is conclusive and binding. Unless the parties have agreed differently, the award cannot be susceptible to a merits-based appeal. In fact, it is uncommon for the parties to agree that the award is open to judicial court appeal.
The enforcement and recognition of arbitral awards
A local or federal court of the first instance has jurisdiction over an application for recognition and execution of an arbitral award. The asking party must provide the court with I the original arbitration agreement or a certified copy of it, (ii) the original award duly authenticated or a certified copy of it, and (iii) a certified translation of the non-Spanish papers. The recognition and enforcement action is adversarial, and both parties may present their reasons and submit. The opposing party has the duty to demonstrate why the award is not recognized and enforceable unless the court is required to conduct an ex officio analysis.
Regarding international treaties that facilitate the recognition and enforcement of arbitral awards, Mexico is a party to I the New York Convention of 1958, ratified in 1971, and has made no declarations or reservations regarding its enforceability; (ii) the Inter-American Convention on the Recognition and Enforcement of Foreign Arbitral Awards; and (iii) the Hague Convention on the Recognition and Enforcement of Foreign Arbitral Awards.
on International Commercial Arbitration (Panama Convention), which was ratified in 1977; (iii) the Inter-American Convention of Extraterritorial Validity of Foreign Judgments and Arbitral Awards (Montevideo Convention), which was ratified in 1987; and (iv) the Convention on the Settlement of Investment Disputes between States and Other States (ICSIS Convention), which entered into force in 2018.
Reversal of an arbitration award
Local or federal courts may set aside awards in the following restricted circumstances, which must be demonstrated by the petitioning party: I one of the parties to the arbitration agreement was not legally capable; (ii) the arbitral agreement was not valid under the law to which the parties subjected it or, in the absence of an agreement, the arbitral agreement is not valid under Mexican law; (iii) the party was not given proper notice of the appointment of an arbitrator or the arbitral proceedings or was unable to enforce its rights for any reason; (iv) the award deals with issues not included or falling outside the scope of the arbitration
The court's decision in a process to vacate cannot be challenged. The award may be contested in federal courts through an Amparo action.
Mediation's usage as an alternative conflict resolution technique has expanded in Mexico during the past decade, although it is still limited compared to arbitration. Before progressing to a claim, it is customary for big and complicated commercial contracts to have clauses with many tiers.
According to some state alternative dispute resolution laws, parties may agree to a non-institutional mediation without written consent; nevertheless, they may only consent to an institutional mediation with written permission.
Mexican courts are required to order disputing parties to participate in mediation. However, under Mexican law, the mediation procedure is still optional. Parties cannot be compelled to participate in mediation. Any agreement made through mediation before a court is enforceable as a final decision and can be executed through a summary procedure.