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Crypto

Litigation on cryptocurrencies and digital assets in commercial contracts

Executive Summary:

  • Cryptocurrencies have burst onto the global scene as an alternative means of exchange and a new form of digital asset. In Mexico, although cryptocurrencies are not recognized as legal tender, their use in the commercial and financial sphere has proliferated, generating both opportunities and challenges.
  • One of the significant challenges we must address regarding the increasingly frequent use of cryptocurrencies is found in litigation arising from commercial contracts involving cryptoassets, which reflect the tension between a regulatory framework that has not yet fully adapted to this technological innovation and the needs of modern commerce.

The regulatory framework that addresses, albeit partially, cryptocurrencies in Mexico is the Law to Regulate Financial Technology Institutions (Fintech Law). This law was enacted in 2018 with the aim of regulating the operations of Financial Technology Institutions (ITF) and their interaction with virtual assets, including cryptocurrencies. Based on article 30 of the Fintech Law, a virtual asset is ““a representation of value recorded electronically and used by the public as a means of payment for all types of legal acts”. However, the law clearly states that such assets are not considered legal tender in the country.

In this regard, the Bank of Mexico (Banxico) has been categorical in prohibiting financial institutions from offering cryptocurrencies as products or services to the general public, limiting their use to internal operations, with prior authorization and under strict risk control measures. This restrictive stance reflects a concern about the risk that these assets represent, especially in terms of money laundering and terrorist financing, due to the anonymity they offer and the difficulty of tracing their origin.

One of the critical points in litigation over cryptocurrencies in commercial contracts is their nature as a means of payment. As already mentioned above, in legal terms, a cryptocurrency is not considered currency; according to the Bank of Mexico Law, only the Mexican peso has the status of legal tender, and no other currency can have that status within the country. However, cryptocurrencies can be used in contracts under the figure of barter, provided for in article 2327 of the Federal Civil Code, which regulates the obligation to exchange one thing for another –Taking into consideration that cryptocurrencies only represent value-.

The problem arises in practice: although the parties can enter into a swap contract using cryptocurrencies, the tax and operational complications of executing the contract are obvious. For example, the Tax Administration Service (SAT) does not yet include cryptocurrencies among the forms of payment recognized for tax purposes, which makes it difficult for the parties involved in these transactions to comply with their tax obligations.

Another recurring issue in litigation is the fluctuation in the value of cryptocurrencies, which can lead to large discrepancies in the fulfillment of contractual obligations. Article 1796 of the Federal Civil Code establishes that the price of an obligation must be “certain and determined,” which becomes problematic in the context of cryptocurrencies, where their value can vary considerably in a matter of hours or even minutes. Courts have faced the difficulty of interpreting contracts when prices are determined in cryptocurrencies, especially when adjustment clauses or mechanisms to stabilize value fluctuations are not included.

In recent litigation, there has been a trend to require that contracts using cryptocurrencies include safeguards, such as provisions allowing for the recalculation of the value of the obligation in legal tender or renegotiation clauses in the event of extreme fluctuations in value.

However, a deeper and central issue in cryptocurrency litigation is the legal nature of cryptocurrencies. Since they are not backed by the state and do not have consumer protection mechanisms, cryptocurrencies are more like intangible goods, which places them in a special category of digital assets that require a different interpretation within the traditional legal framework.

The absence of institutional support and the impossibility of cancelling transactions carried out in blockchain –the underlying technology of cryptocurrencies– increases the risk of litigation, as parties cannot easily reverse failed or fraudulent transactions.

Additionally, and despite the advances in the regulation of cryptocurrencies in Mexico, challenges remain for the enforceability of this type of assets. The existing regulatory framework covers only the ITF and some exchange houses that offer cryptocurrency buying and selling services, but leaves out other non-financial entities that also participate in the ecosystem, which leaves anyone who finds themselves involved in a risky situation totally defenseless.

Cryptocurrency litigation often raises questions about which law should apply (given the cross-border nature of many transactions) and how to ensure enforcement of judgments involving cryptocurrencies, especially when they can be transferred to foreign jurisdictions in a matter of seconds. In addition, The Bank of Mexico Circular XNUMX/XNUMX, published in the Federal Official Gazette, has recommended maintaining a “healthy distance” between cryptocurrencies and the formal financial system, which reveals a clear reluctance of the Mexican authorities to fully integrate them into daily operations and which should undoubtedly be a parameter and a crucial focus of attention, since this could lead to or cause unnecessary limitations among merchants.

Cryptocurrency litigation in commercial contracts in Mexico represents an emerging and constantly evolving area of ​​law. The volatility of these assets, combined with their unregulated nature and lack of recognition as legal tender, has created unique challenges for the Mexican legal system. The development of a comprehensive regulatory framework and the creation of solid jurisprudential precedents will be key to mitigating future disputes and providing certainty to parties who decide to use cryptocurrencies in their commercial transactions.

As cryptocurrencies become a more integral part of digital commerce, disputes over their use will also continue to increase, particularly around the validity of contracts, the fluctuation of their value, and the lack of institutional backing. This will require the continued development of a more detailed regulatory framework that addresses existing gaps, especially in areas such as taxation, consumer protection, and the rights of parties in contracts involving cryptocurrencies.

Role of Arbitration

The Role of Arbitration in Judicial Reform

Part 2: What types of cases are arbitrable?

Executive Summary:

  • Radical Transformation of the Judicial System: On September 15, 2024, a reform that drastically redefines Mexico's judicial system was published in the Federal Official Gazette. This reform, which amends the Political Constitution of the United Mexican States and several key laws, profoundly alters the structure and functioning of the Judiciary. The magnitude of these changes has raised concerns about the independence and effectiveness of the judicial system, creating a climate of uncertainty for litigants and investors.
  • Arbitration as a Strategic and Reliable Alternative: Amidst this transformation and emerging challenges, arbitration is presented as a robust and reliable solution for conflict resolution. However, it is important to clarify that, although arbitration has been promoted as a universal solution for all types of disputes, not all cases are arbitrable. It is crucial that the requirements for arbitrability are met and that all parties involved have given their consent to undergo this process. Arbitration offers an efficient way to resolve conflicts in the new judicial context, provided that these principles are respected.

On September 15, 2024, the President of Mexico published the reform that radically transforms the judicial system in the Federal Official Gazette. This reform, which was tumultuously approved by the Congress of the Union and the majority of state legislatures, amends the Political Constitution of the United Mexican States and several key laws, redefining the organization and functioning of the Judiciary.

The magnitude of these changes raises serious concerns about the independence and effectiveness of the judicial system. As a result, litigants and investors are worried about how these modifications will impact access to justice and trust in the judiciary, creating an environment of uncertainty that requires for effective solutions.

In my previous article in this Newsletter, I addressed the role of arbitration as an alternative mechanism for conflict resolution. In the current context, arbitration is presented as a reliable tool that offers an efficient solution to handle disputes that could become complicated due to changes in the judicial system.

However, it is crucial to highlight that arbitration is not a universal solution applicable to all types of conflicts. Although some voices promote arbitration as a viable alternative for any dispute, this view does not always align with practical reality. Arbitration has limitations and not all matters are suitable to be resolved by this mechanism, a consideration that is sometimes overlooked in discussions about its scope and application.

For a case to be resolved through arbitration, it is necessary that the parties involved have agreed to submit to this mechanism, either from the beginning of the contractual relationship, at a later time, or even after the conflict has arisen. The willingness of all parties is essential. Therefore, it is highly recommended to establish arbitration as a method of dispute resolution from the beginning, as this can prevent future complications and ensure an efficient resolution in the event of a conflict.

In short, for a case to be arbitrable, all parties must have consented to arbitration. An arbitrator's decisions are binding, based on the principle of law. pacta sunt servanda[1], and no one can be forced to submit to arbitration without their consent. However, it is important to note that once accepted, the parties are committed and obliged to follow the arbitration procedure.

Additionally, there are matters that cannot be the subject of an arbitration procedure, since their resolution is reserved exclusively for state jurisdiction. In Mexico, there are no uniform rules on which matters are arbitrable. The general rule is that, if the rights are freely available, the matter is arbitrable.

According to the doctrine and criteria of the Judicial Branch of the Federation, the following factors must be considered to determine arbitrability: (i) the subject matter must not be excluded by law; (ii) must be freely available rights; (iii) must not affect the public interest; and (iv) must not involve third party rights.

In accordance with the points mentioned above, by way of example, some matters that are not arbitrable in our legal system include labor disputes, family law, alimony, parental authority, marriage, guardianship and custody of minors, conflicts related to the civil status of persons, disputes related to criminal liability or crimes, tax law, insolvency and bankruptcy proceedings, among others. These areas are reserved for state jurisdiction due to their complex nature and the need to safeguard fundamental rights and principles.

In conclusion, arbitration is presented as a relevant and powerful alternative to the reform of the Judiciary. Given that the reform introduces significant changes that could affect the independence and quality of the judicial system, arbitration offers an effective and reliable solution. However, it is essential to ensure that the requirements of arbitrability are met and that the parties have expressed their consent to resolve their disputes through arbitration.

I reiterate that, for arbitration to succeed, it is necessary for the parties and their legal counsel to adapt their strategies to the new judicial environment. For arbitration to be truly effective, it must be established from the outset or, at least, preemptively agreed for future disputes. Furthermore, the effectiveness of arbitration requires that arbitrators maintain impartiality and independence and that the parties commit to respect and comply with arbitral awards, regardless of the outcome, as long as a correct arbitration procedure has been followed.

If these principles are followed, arbitration can minimize the need to resort to state courts, ensuring that disputes are resolved impartially, expertly and efficiently.


[1] “Pact is served” It is a fundamental principle of law that establishes that contracts and agreements between parties must be respected and executed according to the agreed terms.

Reform of the judiciary: Challenges and strategies for its implementation

The Judicial Reform: Challenges and Strategies for its Implementation

Impact of Judicial Reform on Legal Proceedings: What You Should Know

Executive Summary:

  • The Reform Decree by virtue of which various provisions of the Political Constitution of the United Mexican States are added and repealed to make significant modifications in the organization and operation of the Federal Judicial Branch, was approved and published on September 15, 2024 in the Federal Official Gazette, entering into force on the following September 16.
  • We believe that the possible political-judicial transition foreseen by the reform scheduled for September 2025 represents a challenge for the procedures initiated prior to the entry into force of the reform. The above, given the latent risk of prolonging the procedural deadlines for a longer time than initially planned, making it essential to act diligently and expedite the resolution of the same to avoid possible additional delays.

The reform proposed by the Federal Executive, approved and published in the Federal Official Gazette on September 15, 2024, modifies various provisions established in the Political Constitution of the United Mexican States[1] including, among others: (i)the composition of the Supreme Court of Justice of the Nation, (ii) the process for appointing Justices of the Supreme Court, Circuit Court Judges, and District Judges by establishing a popular election process for these positions, and  (iii) setting a maximum period of six months for the resolution of matters, counted from the date they are brought to the judicial body’s attention.

In this regard, given that the Decree has been approved and published in the Official Gazette of the Federation, the implementation of the reform to the Judicial Branch must comply with the transitional provisions established by the Opinion issued by the Constitutional Affairs Committee of the Chamber of Deputies, which provides, among others, that with the entry into force of the reform, the extraordinary electoral process for 2024-2025 will begin for the election of all the Ministers of the Supreme Court of Justice of the Nation, as well as half of the positions of Circuit Magistrates and District Judges; The remaining half will be elected in the ordinary election of 2027.

Thus, since the Senate will have a period of 30 calendar days from the entry into force of the reform to issue the call for candidates to participate in the election, and given the lack of secondary and regulatory provisions, the Decree grants the General Council of the National Electoral Institute the authority to issue the necessary agreements for the organization of these elections. Those currently serving in these positions may participate in the extraordinary election on the first Sunday of June 2025. However, if they are not elected by popular vote, they must step down when the newly elected public officials take office.

As a result, for cases initiated before the entry into force of the reform, if those proceedings have not been concluded before the inauguration of new officials, the 6-month period established by the Decree amending Article 17 of the Constitution will restart. If a judgment is not rendered within this period, the public official in charge of the case must notify the Judicial Discipline Tribunal to justify the delay.

Therefore, we recommend pushing the trials and procedures that are pending to be resolved, to attain the issuance of the corresponding judgements before the political-judicial transition expected in September 2025. Failure to do so may result in procedural deadlines being extended beyond those initially anticipated due to the changes stemming from the ongoing reform. It is crucial to act diligently to avoid further delays.

[1] https://www.gob.mx/cms/uploads/attachment/file/892010/REFORMA_AL_PODER_JUDICIAL__2_CS.pdf

Mexican,Flag,On,Building,In,Mexico,City

Reform of the Judiciary: Its Phased Implementation

Executive Summary:

  • The decree to reform, add and repeal various provisions of the Political Constitution of the United Mexican States to make significant changes to the organization and operation of the Federal Judicial Branch was published on September 15, 2024.
  • We consider that the phased implementation provided for by the reform decree will face technical, factual and legal difficulties in being implemented in the terms provided for by the transitional articles of the same.

The reform proposed by the Federal Executive, which was published on September 15, 2024 in the Official Gazette of the Federation, modifies various provisions established in the Political Constitution of the United Mexican States.[1] In this regard, and in accordance with the transitional articles provided for in said decree, the implementation of the reform must be carried out in accordance with the following:

VF Reform

It is important to mention that, although the Decree provides for a phased implementation of the reform, said document does not provide for an express or explicit sanction as a consequence of failure to comply with the deadlines established therein. In addition, in some cases such as those regarding the funds and trusts established for the Judicial Branch of the Federation, although their extinction is foreseen no later than December 16, 2024, there are currently suspensions granted within various constitutional processes (such as amparo trials) that prevent compliance with said measure until the substance of the matter is resolved.

For the above reasons, we consider that the phased implementation provided for by the reform decree will face technical, factual and legal difficulties in being implemented in the terms provided for by the transitional articles thereof.


[1] https://www.gob.mx/cms/uploads/attachment/file/892010/REFORMA_AL_PODER_JUDICIAL__2_CS.pdf

Reform of the Judiciary

Reform of the Judiciary: Content and Scope

Executive Summary:

  • The Initiative that reforms, adds and repeals various provisions of the Political Constitution of the United Mexican States to make significant changes in the organization and operation of the Federal Judicial Branch, has currently been approved by both Chambers of the Legislative Branch and is under discussion by the state legislatures.
  • We consider that in view of the possible political-judicial transition foreseen by the reform scheduled for September 2025 It represents a challenge to the procedures initiated prior to the entry into force of the reform.

In this regard, the reform proposed by the Federal Executive, which has been approved by both Chambers of the Legislative Branch and is under discussion by the state legislatures, modifies various provisions established in the Political Constitution of the United Mexican States.[1] reforming, among others, articles 17, 20, section B, 94, 95, 96, 97, 98, 99, 100, 101, 107, 110, 111, 116, and 122.[2]

That is to say, although the cornerstone of judicial reform is the popular election of Judges, Magistrates, Ministers, and Ministers; in it, points such as: (i) the redesign of the Supreme Court of Justice of the Nation (“SCJN”), (ii) the replacement of the Federal Judicial Council by the Judicial Disciplinary Court and the Judicial Administration Body, (iii) various budgetary measures, such as the elimination of retirement benefits for ministers, (iv) the establishment of maximum time limits for the issuance of sentences, and (v) prohibiting the general effects on the suspension and merits of amparo proceedings, unconstitutionality actions and constitutional disputes. Considerations on which, below, a brief summary of its scope and content will be made:

1. New integration of the Supreme Court of Justice of the Nation

Regarding the SCJN, the reform foresees substantial modifications to its composition, structure and operation. Among the changes, the reduction of the members of the Court from 11 to 9 Ministers stands out; which has as a consequence the modification of the vote necessary to form precedents of obligatory observance, decreasing it to 6 votes. In addition, it is foreseen that the Ministers of the SCJN will remain in office for 11 years, without the possibility of being elected for a new period.

Likewise, the Chambers that make up the Supreme Court of Justice of the Nation are eliminated; which, currently, have the jurisdiction to hear those matters that the Plenary did not retain for resolution in the second point of general agreement 1/2023.[3] The above has the consequence of reducing the workload, allowing the Plenary to focus on the discussion and resolution of matters of greater constitutional relevance. Therefore, by eliminating the Chambers, the Plenary will be the body responsible for hearing all matters that are admitted and processed in our High Court.  

2. Modification to the procedure for electing public servants

Pursuant to the reform, the Ministers of the SCJN, the Magistrates of the Superior Chamber and the Regional Chambers of the Electoral Tribunal of the Judicial Branch of the Federation, the Magistrates of the Judicial Disciplinary Tribunal, the Magistrates of the Circuit and District Judges will be elected by popular vote in a free, direct and secret manner.

For the purposes of the above, the Senate of the Republic is responsible for compiling and publishing the call for the integration of the list of candidates within 30 calendar days following the installation of the first ordinary session of the year prior to the election. For such purposes, the Senate of the Republic will receive the nominations and send them to the National Electoral Institute no later than February 12 of each year. These will be made in accordance with the following:

  • The Ministers of the SCJN, the Magistrates of the Superior Chamber of the Electoral Tribunal of the Judicial Branch of the Federation: The Executive Branch will propose up to 3 candidates; the Legislative Branch will nominate up to 3 candidates (1 by the Chamber of Deputies and 2 by the Senate, by a qualified vote of 2/3 of its members) and the Judicial Branch of the Federation, through the Plenary of the SCJN, will nominate up to 3 people by a majority of 6 votes.
  • Circuit Magistrates, District Judges: The election will be held by judicial circuit, granting each of the Powers of the Union the possibility of nominating up to 2 people for each position.

In this regard, it is foreseen that candidates will have the right to access radio and television equally, in accordance with the distribution of time determined by the National Electoral Institute, expressly prohibiting public or private financing of their campaigns, as well as the hiring of spaces on radio and television or any other means of communication to promote candidates. In addition, it expressly prohibits political parties from taking a position in favor of or against any candidate.

For its part, the following requirements are foreseen to be a candidate for popular election: (i) be a Mexican citizen by birth and in full exercise of his or her civil and political rights; (ii)have a professional degree in law with a general average of at least 8 points or its equivalent and 9 points or its equivalent in the subjects related to the position for which you are applying; (iii) enjoy a good reputation and not have been convicted of a criminal offense punishable by imprisonment; (iv) have at least 5 years of legal practice at the time of application; (v) Having resided in the country for two years prior to the date of publication of the call; (vi) not having been Secretary of State, Attorney General of the Republic, Senator, Federal Deputy or head of the executive branch of any federal entity during the year prior to the call;

In this regard, following the legislative procedure, if the Decree is approved and published in the Official Gazette of the Federation, the implementation of the reform to the Judicial Branch must attend to the transitional provisions established by the Opinion issued by the Constitutional Points Commission of the Chamber of Deputies, which provides, among others, that with the entry into force of the reform, the extraordinary electoral process 2024-2025 will begin for the election of all the Ministers of the Supreme Court of Justice of the Nation, as well as half of the positions of Circuit Magistrates and District Judges; while the remaining half will be elected through the ordinary election of 2027.

Thus, since the Senate will have a period of 30 calendar days from the entry into force of the reform to issue the call for candidates to participate in the election, and given the lack of secondary and regulatory provisions, the Decree grants the General Council of the National Electoral Institute the authority to issue the necessary agreements for the organization of these elections. Those currently serving in these positions may participate in the extraordinary election on the first Sunday of June 2025. However, if they are not elected by popular vote, they must step down when the newly elected public officials take office.

3. Replacement of the Federal Judicial Council by the Judicial Disciplinary Court and the Judicial Administration Body

Within its articles, the reform provides for the disappearance of the Federal Judiciary Council, replacing it with the Judicial Disciplinary Tribunal, before which any person or authority may report any public servant of the Federal Judicial Branch so that they may be investigated for acts or omissions contrary to the law, the public interest or the proper administration of justice, including those linked to acts of corruption, influence peddling, nepotism, complicity or concealment of alleged criminals or when their determinations do not conform to the principles of objectivity, impartiality, independence, professionalism or excellence.

It is expected that the said Judicial Disciplinary Court will operate in Plenary Session and in Commissions: the Plenary Session will be in charge of substantiating and resolving in second instance the matters within its jurisdiction, being able to order ex officio or by complaint the beginning of investigations, attract procedures related to serious faults or facts that the laws indicate as crimes, order precautionary measures of coercion and sanction public servants who incur in acts or omissions contrary to the law.

In this regard, the Court will conduct the administrative liability procedure in the first instance through its committees, which will be made up of 3 members who will act as the substantiating and resolving authority in the matters within their jurisdiction. The resolutions of the committees may be challenged before the Plenary (which will resolve by a majority of 4 votes), on the understanding that, as the Plenary is a second instance body, the resolutions reached by it will be considered final and unassailable.

Likewise, the Judicial Disciplinary Court is designated as the body responsible for evaluating the performance of the Circuit Magistrates and District Judges who are elected.

The Judicial Administration Body is envisaged as the entity in charge of the administration, budget, evaluation and internal control of the Judicial Branch of the Federation, as well as the entity in charge of determining the number of circuits, territorial jurisdiction and subject matter specialization of the Courts. Its Plenary will be made up of 5 public servants, who will have a non-renewable term of 6 years.

In this regard, the Judicial Administration Body is empowered to prepare the Budget of the Judicial Branch of the Federation, which will be included in the Draft Expenditure Budget of the Federation.

In this regard, joint work is planned between the Judicial Disciplinary Court and the Judicial Administration Body, ensuring that the former is able to request the latter to issue agreements or execute resolutions to ensure the proper exercise of the federal jurisdictional function.

4. Budgetary measures

The reform provides that the remuneration received by the Ministers of the SCJN, the Circuit Magistrates, the District Judges, the Magistrates of the Judicial Disciplinary Tribunal, the Electoral Magistrates and other persons who make up the Judicial Branch of the Federation, may not be greater than that established for the President of the Republic in the corresponding budget. 

For its part, and notwithstanding the Tenth Transitional Article of the reform establishes that the labor rights of the workers of the Judicial Branch of the Federation and of the federative entities will be respected, through its Seventh Transitional Article, the reform establishes that the Ministers of the Supreme Court of Justice of the Nation who conclude their term for not running or not having been elected in the extraordinary election of the year 2025 will not benefit from a retirement pension, except when they submit their resignation from the position before the closing date of the call.

The reform also provides that funds, trusts, mandates or similar contracts that are not provided for in the law may not be created or maintained in operation; which has the consequence of elevating to constitutional rank the elimination of trusts carried out on October 27, 2023.

5. New procedural rules

Finally, it is important to note that the reform makes two important changes to the means of control recognized in our legal system; the first is the establishment of a maximum period for the issuance of resolutions once the controversy is brought to the attention of the body and, the second, is the express prohibition elevated to constitutional level of giving general effects to the rulings issued through constitutional controversies, unconstitutionality actions or amparos.

In this sense, the Decree raises to constitutional level the prohibition not only of the general effects in suspensions granted in amparos against norms, which was already reflected in the Amparo Law with the reform published on June 14, but also in the substantive resolutions. In this line, the Decree prohibits the suspension of norms in constitutional controversies and unconstitutionality actions. Although the Regulatory Law of Article 105 of the Constitution, as well as the Amparo Law contemplates this limitation, the SCJN has interpreted the law in order to, in some cases, attend to a reading per person the rights already at stake, being able to grant the suspension.

Likewise, in the case of cases initiated prior to the entry into force of the reform, in the event that said procedures had not been concluded prior to taking office, the 6-month period provided for by the Decree amending Article 17 of the Constitution will begin again. If the resolution is not issued within said period, the public servant in charge of the matter must notify the Judicial Disciplinary Tribunal to justify said delay.

For the above reasons, we recommend that the relevant proceedings be submitted to trials and litigation that are currently underway as soon as possible, in order to expedite obtaining a resolution before the political-judicial transition scheduled for September 2025. Failure to do so risks extending procedural deadlines longer than initially anticipated due to changes resulting from the ongoing reform. Therefore, it is crucial to act diligently to avoid possible additional delays.


[1] https://www.gob.mx/cms/uploads/attachment/file/892010/REFORMA_AL_PODER_JUDICIAL__2_CS.pdf

[2] The second paragraph of article 17; the second, third, fourth, fifth, sixth, eighth, ninth, twelfth, thirteenth, fourteenth and fifteenth paragraphs of article 94; sections II, III, V and VI of the first paragraph of article 95; the first and second paragraphs of article 96; the first, second and third paragraph of article 97; the first, third and fourth paragraph of article 98; section I of the fourth paragraph, and the tenth, eleventh, twelfth, thirteenth and fourteenth paragraphs, all of article 99; the first, second, third, fourth, fifth, sixth, seventh, eighth, ninth, twelfth and thirteenth paragraphs of article 100; the first and second paragraphs of article 101; the first and third paragraphs of section II , and section X of article 107; the first and second paragraphs of article 110; the first and fifth paragraphs of article 111; the second, third, fourth, fifth and sixth paragraphs of section III of the second paragraph of article 116; and the first and third paragraphs of section IV, Section A, of article 122. A second paragraph is added to section VII, Section B, of article 20; sections I and II, as well as the third, fourth and fifth paragraphs to article 96; a second paragraph, with subsequent paragraphs being moved, to article 97; a fifth paragraph to article 98; a sixth paragraph, with subsequent paragraphs being moved, and a seventh, eighth, ninth, tenth and eleventh paragraph, with subsequent paragraphs being moved in their order, as well as a final paragraph, all from article 100; and a final paragraph to article 105 are repealed. The current second paragraph of article 95; the current second paragraph of article 98; the current tenth and eleventh paragraphs of Article 100.

[3] https://dof.gob.mx/nota_detalle.php?codigo=5678751&fecha=03/02/2023#gsc.tab=0

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New approaches to liquidation of assets during the bankruptcy stage in commercial insolvency proceedings

Executive Summary:

  • The Supreme Court of Justice of the Nation has issued a jurisprudence that significantly impacts commercial insolvency in Mexico, by prohibiting the suspension of the alienation of assets during the bankruptcy stage.
  • This measure prioritizes social interest and public order, guaranteeing a rapid and efficient liquidation of insolvent companies, which maximizes the value of assets and generates legal certainty for both creditors and the country's economic development.
  • The ruling underlines the importance of prioritising speed in bankruptcy proceedings, contributing to the stability of the economic system and protecting the parties involved.

Recently, the Supreme Court of Justice of the Nation (“SCJN”) has issued a jurisprudence that has a significant impact on bankruptcy proceedings within commercial insolvency proceedings, whose heading reads: “BANKRUPTCY. THE PROMPT DISPOSAL OF THE BANKRUPTCY'S ASSETS IS OF SOCIAL INTEREST AND PUBLIC ORDER, THEREFORE ITS SUSPENSION IS NOT APPLICABLE[1].

Case law establishes that it is not appropriate to grant the suspension of acts aimed at the alienation of assets during the bankruptcy stage, since this would contravene the social interest and public order. The underlying reason lies in the executive nature of the bankruptcy stage –which involves the liquidation, alienation and/or immediate realization of the assets of the bankrupt company-, which implies prioritizing the speed that is crucial to maximize the value of the assets and ensure efficient liquidation, generating viability not only for creditors, but also for the general economic development of the country.

According to Articles 1 and 3 of the Bankruptcy Law, the purpose of bankruptcy proceedings is to preserve the value of companies and, when this is not possible, to ensure that the liquidation of their assets is as efficient and beneficial as possible for the bankrupt's creditors. The law highlights that one of the main objectives is to prevent non-compliance with obligations from jeopardizing the viability of companies and, by extension, of the economic system in general.

The prompt disposal of assets during the bankruptcy stage responds to this legal design and is seen as a key factor in generating certainty and confidence in the resolution of conflicts arising from a commercial bankruptcy. The SCJN's criteria indicate that any suspension of these acts, which are essential for the liquidation of the company, can cause multiple effects, both direct and indirect, to a wide range of people.

These effects worsen over time, which justifies that the social interest and public order prevail over the private interest that any creditor may have who, by promoting an amparo trial, seeks to obtain the suspension of acts related to the alienation of assets.

Article 1 of the Bankruptcy Law establishes that the law is of public interest and its objective is to regulate bankruptcy proceedings in order to preserve companies and protect creditors. This provision underlines that all actors involved in a bankruptcy process must govern their actions under the principles of transcendence, procedural economy, speed, publicity and good faith.

The criterion in question reinforces this legal framework by prioritizing the collective interest over the individual, particularly at the bankruptcy stage. It is recognized that, although some consequences may be irremediable, the need to protect the public interest and economic order justifies the prohibition of suspending the sale of assets at this stage of bankruptcy.

Through this jurisprudence, the SCJN underlines the importance of a fast and efficient execution in the bankruptcy stage of a commercial insolvency proceeding, reaffirming that social and public interests must prevail over individual interests in these cases. Companies in bankruptcy represent a significant value for the national economy, and their rapid liquidation not only benefits creditors, but also contributes to the economic development of the country as a whole.

This new criterion is of great importance, as it provides legal certainty, especially to creditors recognized in a bankruptcy proceeding. In many cases, these creditors represent a large number of people and entities that depend on the correct and rapid liquidation of the company's assets in the bankruptcy stage in order to recover their recognized credit.

In addition, in recent years, complaints and applications for bankruptcy proceedings have been increasing, reflecting the growing use of this legal tool in the face of widespread breaches of obligations. In this context, bankruptcy proceedings have become a popular way to protect the interests of companies and their creditors.

It is important to note that any company could be involved in bankruptcy, either because it cannot meet its own obligations or because a key client or supplier is insolvent. This scenario highlights the importance of having a legal framework that provides stability and predictability, ensuring that the bankruptcy process is carried out in an orderly and fair manner for all parties involved.


[1] Supreme Court of Justice of the Nation, Digital Registry 2029135, Eleventh Period, Subject(s): Common, Civil, Thesis: PR.ACCS. J/1 C (11th), Regional Plenums, Jurisprudence, Judicial Weekly of the Federation, Publication: Friday, July 5, 2024, 10:12 hours. “BANKRUPTCY. THE PROMPT DISPOSAL OF THE BANKRUPTCY'S ASSETS IS OF SOCIAL INTEREST AND PUBLIC ORDER, THEREFORE ITS SUSPENSION IS NOT APPLICABLE. " Detail – Thesis – 2029135 (scjn.gob.mx)

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Oral Trials in the National Code of Civil and Family Procedures

Executive Summary:

  • The National Code of Civil and Family Procedures, published in June 2023, introduces oral trials as part of a reform that seeks to streamline and improve justice in Mexico, especially in the civil and family sphere.
  • These trials are based on the principles of immediacy, publicity, concentration, continuity and contradiction, guaranteeing faster, more transparent and efficient processes. In addition, the code incorporates the use of digital technologies to facilitate virtual hearings and optimize access to justice.
  • Despite its benefits, the implementation of oral trials presents challenges in terms of training, infrastructure and cultural change, key elements for the success of this transformation.

The National Code of Civil and Family Procedures (“CNPCF”), published in the Official Gazette of the Federation on June 7, 2023, introduces important changes to the administration of justice in Mexico. One of the most notable elements is the implementation of oral trials, which serve to streamline and improve civil and family procedures.

The CNPCF is based on several guiding principles that guide oral trials, highlighting the following:

  • Immediacy: The judge must be present during all hearings, allowing direct interaction with the parties.
  • Advertising: Hearings are public, except in exceptional cases where confidentiality is justified, thus ensuring the transparency of the process.
  • Concentration: The process must be carried out in the smallest number of hearings possible, avoiding unnecessary delays and promoting the expeditious resolution of disputes.
  • Continuity: Hearings must be uninterrupted, with exceptional suspension permitted in the cases established in the CNPCF.
  • Contradiction: The parties have the right to discuss the facts, legal arguments and evidence of their counterpart.

All civil and family disputes that do not have a special procedure are governed by the Ordinary Civil Oral Trial and the Family Oral Trial, respectively. These trials have several similarities, since both procedures contain the following stages:

1. Application stageThe process begins with the presentation of a request or claim (in Family Oral Trial this can be in writing or by appearance), specifying the facts on which the claim is based. If admitted, the defendant will be ordered to personally summon the defendant to respond to the request or claim within the period set for this.

Once the application stage has been completed, a date and time will be set for the preliminary hearing.

2. Preliminary hearing: The preliminary hearing consists of different stages, including the conciliation of the parties, the clarification of the debate and the qualification of the evidence. Therefore, during the development of the preliminary hearing, conciliation between the parties is encouraged; if an agreement is reached, it becomes binding. If conciliation is not achieved, the evidence is reviewed and admitted, and agreements are established on non-controversial facts.which will have the purpose of establishing events that will be outside the debate-, and the evidentiary agreements necessary to eliminate unnecessary evidence in whole or in part.

Once the above has been concluded, the jurisdictional authority will summon the parties to the trial hearing.

3. Trial hearing:Once the trial hearing has opened, the judge will listen to the opening arguments of the parties, so that they may present their respective theories of the case. Subsequently, the evidence will be presented, in accordance with the agreements established in the preliminary hearing. Once the evidence has been presented, the parties will be given the floor once again, so that they may make their closing arguments.

The final judgment will be issued immediately.

It is important to highlight that the CNPCF incorporates the use of information and communication technologies to carry out virtual hearings and use digital justice systems. These tools allow remote proceedings to be carried out, increasing the accessibility and efficiency of the judicial system. The implementation of virtual rooms and videoconferences facilitates the participation of all parties, even those in different geographical locations.

However, the implementation of the oral process presents challenges that must be addressed, such as the following:

  • Training: Judges, lawyers and judicial staff require specialized training in oral litigation techniques and audience management.
  • Infrastructure: It is necessary to have adequate hearing rooms and technology that supports the recording and transmission of hearings.
  • Cultural change: Adapt the mentality of judges, lawyers, judicial personnel and those seeking justice to the new system, promoting a culture of oral tradition under its guiding principles.

Finally, CNPCF introduces oral trials to streamline civil and family procedures in Mexico. With a focus on efficiency and transparency, CNPCF faces challenges such as training and infrastructure, but has the potential to transform the administration of justice, offering a more agile and accessible system.

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The Role of Arbitration in the Proposal to Reform the Judiciary

Executive Summary:

  • The proposed reform of the Judiciary in Mexico, presented in February 2024, has raised concerns about the independence and effectiveness of the judicial system, both for those seeking justice and for investors. Given this scenario, arbitration is positioned as a reliable alternative for conflict resolution, standing out for its independence, neutrality, efficiency, confidentiality, flexibility and international enforceability.
  • As the judicial system may face changes that affect its impartiality and quality, arbitration offers a specialized and agile route that guarantees greater predictability in the resolution of disputes, protecting the interests of the parties in a context of legal uncertainty.

On February 5, 2024, the head of the Federal Executive presented an initiative that reforms, adds and repeals various provisions of the Political Constitution of the United Mexican States, through which it is intended to make modifications in the organization and operation of the Judicial Branch, as well as various laws, with the aim of transforming Mexico's judicial system.

This proposal has generated concern and uncertainty among both those seeking justice and investors, both national and foreign, regarding the future of the administration of justice in Mexico. The greatest concern is that the reform proposes significant changes in the structure and functioning of the judicial system, which is why it is thought that it could negatively impact the independence of the courts, the equity in the administration of justice and the competence of judicial officials.

In this context, arbitration is reinforced as a convenient and relevant alternative means of dispute resolution. Below are some of the strengths of arbitration, as a viable and favorable alternative to the potential new Mexican judicial order:

1. Independence and Neutrality

Some of the main concerns arising from judicial reform are both the possible loss of independence and neutrality in the courts, and the lack of specialization and preparation of judges. The proposed changes could lead to the selection of judicial authorities based on political or convenience criteria, rather than impartiality, experience and professional competence. Arbitration, in contrast, offers a process in which the parties choose arbitrators according to their experience and specialization in the subject matter in dispute. This ensures that the process is conducted by independent professionals with the specific knowledge necessary to resolve the dispute, thereby reducing the risk of bias that could arise in a reformed judicial system.

2. Efficiency and Specialization

Arbitration is known for its efficiency in resolving disputes. Arbitration procedures are often more streamlined compared to traditional court proceedings, allowing parties to resolve their disputes more quickly. Furthermore, in cases involving technical or specialized issues, arbitration offers the possibility of selecting arbitrators with specific experience and knowledge in the relevant area. This specialization can result in more informed and accurate decisions, something that could be at risk if judicial reform affects the quality and experience of judges in the state justice system.

3. Confidentiality

Another important advantage of arbitration is its confidential nature. In situations where parties wish to protect sensitive information or maintain the privacy of the matters in dispute, arbitration provides a confidential environment, unlike public court proceedings. This feature is particularly relevant to investors and entrepreneurs who handle confidential information and prefer to avoid the public exposure that might accompany litigation in a changing court system.

4. Flexibility in the Procedure

Arbitration offers a flexibility in procedural design that is rarely available in the court system. Parties have the ability to agree on key aspects of the process, such as the location of the arbitration, the procedural rules, and the schedule of hearings at which evidence will be presented. This adaptability is valuable in an environment of legal uncertainty, as it allows parties to adjust the dispute resolution process to their specific needs and the changing context. It even offers an openness to analyzing means of evidence that are not common in traditional court proceedings.

5. International Enforceability

For international disputes, arbitration provides an additional advantage: the enforceability of arbitral awards in different jurisdictions. Arbitral awards are generally recognized and enforced under international agreements such as the New York Convention, which is signed by multiple States Parties, facilitating the resolution and enforcement of arbitral decisions in various countries. This is crucial for foreign investors seeking to ensure effective enforcement of decisions anywhere in the world, without being fully dependent on a Mexican judicial system that may be undergoing reform.

6. Arbitration in Mexico

In our country, an arbitration process can be , designed by the parties, or may be followed before recognized arbitration institutions, both national and international, such as the International Chamber of Commerce, CANACO and the Mexican Arbitration Center. These institutions have proven procedural rules and expert arbitrators, both national and foreign, who can be appointed to process an arbitration.

Conclusion

In summary, arbitration, both national and international, is presented as a relevant and convenient option in the face of the proposed reform of the Judicial Branch in Mexico. Given that the judicial reform proposes significant changes that could affect the independence and quality of the judicial system, arbitration offers a reliable alternative for the resolution of disputes.

The advantages of arbitration include its independence and neutrality, efficiency in conflict resolution, confidentiality, flexibility in procedure and international enforceability. These characteristics make it especially valuable in a context of legal uncertainty, providing parties with a way to resolve their disputes with greater predictability and specialization.

However, for arbitration to be fully effective, the parties must agree to voluntarily respect and comply with arbitration awards. This approach will reduce the need to resort to state courts and ensure a more expeditious resolution of disputes.

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Decree by which the INAI would be extinguished

Executive Summary:

  • The current President of the Mexican Republic, Andrés Manuel López Obrador, at the beginning of this year, presented an initiative that proposes the modification of various articles of the Political Constitution of the United Mexican States, regarding organic simplification.
  • Derived from this initiative, the Constitutional Points Commission of the Chamber of Deputies concluded the preparation of the opinion in which it proposes the disappearance of several autonomous constitutional bodies (the “Opinion”), including, among others, the INAI, (National Institute for Transparency, Access to Information and Protection of Personal Data).
  • The Opinion will be presented for discussion, and possible approval, in the Chamber of Deputies for the period between August 1 and 22 of this year.

It is argued that the structural modification proposed in the Opinion is in response to the recognition of the supremacy of the general, public and social interest, which leads to the effective exercise of human rights that imply the enjoyment of the common goods of the Nation, as an indispensable condition. As a result, they rethink the administrative organization of the Mexican State to make it consistent with the principles of rationality, austerity, efficiency, effectiveness, and the right to better public administration.

Furthermore, by modifying the constitutional text in terms of organic simplification, the Opinion states that it is intended to strengthen the traditional public powers recognized in the constitutional history of Mexico and specifically in the Constitution of 1917.

On the other hand, the Opinion indicates that the administrative functions carried out by autonomous constitutional bodies that are being extinguished or merged (such as the INAI) can be exercised by the basic dependencies of the Federal Executive Branch. In this sense, the functions of the INAI would be transferred to the following public entities at the federal level:

  • Secretariat of the Civil Service.
  • Control and disciplinary body of the Judiciary.
  • Control bodies of autonomous constitutional bodies.
  • Comptroller's Offices of the Congress of the Union.
  • National Institute of Elections and Consultations (an organization whose constitution has not been approved).

The distribution of powers to the aforementioned public entities would be replicated at the state level with their comptroller's offices or homologous areas of the Executive, Legislative and Judicial Branches.

In relation to INAI officials, the Opinion establishes that, upon its entry into force, those officials who continue in their position will conclude their functions until the legislation that will be issued to comply with the provisions of these constitutional reforms comes into force, both at the federal and state level, respectively, except for those whose term of their appointment ends previously.

With this reform, the nature of INAI as an autonomous constitutional body would be extinguished, and its powers would pass mainly to the Federal Executive Branch, this through one of its dependencies: the Secretariat of Public Function. This change in the nature of the public entity in charge of ensuring the protection of personal data, guaranteeing access to public information and complying with public transparency would imply that its decisions could be subject to the guidelines established by the President of the Republic (head of the Executive Branch), through the secretaries of state that he himself appoints, replacing the functional autonomy that INAI currently enjoys, which allows its actions not to be subject to any of the three powers of the Union, which provides greater independence, specialization, agility, control and transparency in the execution of its functions.

It is important to remember at all times that the main argument in favour of establishing autonomous constitutional bodies was to establish independent bodies that would allow a barrier to be established between (i) the provision of services by the State in highly specialised areas of great relevance to the protection of rights and the development of certain industries; and (ii) the interference of political parties that tend to influence the direction of decisions taken within the traditional institutions of the State.