Is the way conflicts are resolved changing in Mexico?: The growing importance of dispute resolution mechanisms in a transitional environment

Over the past few months, the public debate surrounding judicial reform has raised numerous questions about the future of the justice system in Mexico. The popular election of judges, the restructuring of courts, and changes to appointment criteria have placed the independence and specialization of the judiciary at the center of the discussion. Beyond the various positions on these changes, one reality seems increasingly clear: companies are paying closer attention to how their disputes will be resolved.

Historically, companies have devoted much of their effort to structuring their business operations; today, a growing number of organizations are also taking a closer look at how they will resolve their conflicts.

This phenomenon is particularly relevant at a time when Mexico continues to attract domestic and foreign investment in strategic sectors such as manufacturing, infrastructure, energy, logistics, and technology. For many companies and investors, certainty regarding the mechanisms available to resolve a dispute has become as crucial a factor as the commercial or financial terms of a transaction.

In long-term operations or those with cross-border components, predictability regarding how and where a potential dispute will be resolved is often a determining factor when assessing risks and making investment decisions.

In this context, issues that historically occupied only a few lines at the end of contracts (such as jurisdiction clauses, arbitration or alternative dispute resolution mechanisms) have begun to acquire strategic relevance.

Why now?

The attention currently given to dispute resolution mechanisms cannot be analyzed in isolation from the institutional context that Mexico is going through.

The changes resulting from the judicial reform (in particular, the election by popular vote of judges, magistrates and ministers, as well as the creation of the Judicial Disciplinary Tribunal) have generated questions within different business sectors regarding the specialization of the jurisdictional bodies, the predictability of judicial decisions and the time required to resolve complex disputes.

Regardless of how these changes evolve in the coming years, the fact is that many companies have begun to review more closely the legal tools available to manage potential conflicts.

From this perspective, mechanisms such as commercial arbitration, mediation and other alternative dispute resolution methods have acquired renewed relevance within corporate risk management strategies.

This does not mean that the courts will cease to play a fundamental role in protecting rights and resolving disputes. However, it does reflect an increasingly visible trend: companies are seeking greater certainty and predictability regarding how their future conflicts might be resolved.

Dispute resolution as a risk management tool

When parties negotiate a business transaction, they typically focus their efforts on economic, financial, and operational aspects. However, they rarely stop to analyze what will happen if the business relationship does not develop as expected.

Experience shows that even the best-structured operations can face disagreements arising from delays, breaches of contract, regulatory changes, cost increases, modifications to the scope of work, or differences regarding the interpretation of the obligations assumed by the parties.

It is precisely at these moments that dispute resolution clauses become relevant.

Far from being mere procedural provisions, these clauses determine fundamental aspects for the management of a dispute, including who will resolve the conflict, where it will be resolved, what rules will be applicable, and what mechanisms will be available to enforce any eventual decision.

In other words, they constitute a risk management tool that can directly influence the costs, times, and results associated with a dispute.

Arbitration and its growing relevance

Among the various mechanisms available to resolve disputes, commercial arbitration has acquired increasing importance both in Mexico and internationally.

From a legal perspective, arbitration is based on the principle of autonomy of the will of the parties and is mainly regulated in Title Four of Book Five of the Commercial Code (articles 1415 to 1480), whose structure largely incorporates the principles contained in the Model Law of the United Nations Commission on International Trade Law (UNCITRAL).

This regulatory framework allows parties to agree to submit certain disputes to an arbitration tribunal instead of resorting to the ordinary jurisdiction of state courts.

However, the importance of arbitration lies not only in its domestic regulations. Proof of this is that Mexico is also a party to the 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention), among other instruments that facilitate the recognition and enforcement of arbitral awards in a wide range of jurisdictions around the world.

For companies with international operations, global supply chains, or assets located in different countries, this feature can be especially valuable. After all, obtaining a favorable decision is only one part of the process; the possibility of execute it effectively In other jurisdictions it is usually equally important.

Added to this are other factors that frequently explain the growing business interest in arbitration, such as the possibility of appointing specialized arbitrators, the confidentiality of the proceedings, the procedural flexibility and the neutrality that can be offered in disputes with international components.

The above has led many companies to evaluate the advisability of agreeing to arbitration administered by specialized institutions such as the International Chamber of Commerce (ICC), the Arbitration Court of Mexico (CAM) or the International Centre for Settlement of Investment Disputes (ICSID), depending on the nature and complexity of the operation.

Naturally, arbitration is not the appropriate solution for all disputes. The suitability of resorting to an arbitral tribunal or a judicial court will depend on the specific characteristics of each transaction, the type of dispute, and the objectives pursued by the parties.

What are we seeing in the market?

Although it is still too early to determine the definitive scope of the institutional changes that Mexico is currently experiencing, it is possible to identify certain trends that are beginning to be reflected in practice:

• Greater attention to dispute resolution clauses: companies in various sectors are reviewing and strengthening these provisions before formalizing new transactions.
• Review of existing contracts: Some organizations are auditing their existing agreements to assess whether the agreed dispute resolution mechanisms remain adequate in light of the new institutional environment.
• Growth in disputes related to investment projects: sectors such as infrastructure, energy and manufacturing are registering an increase in controversies arising from delays, cost overruns and regulatory changes.

What can we expect?

Beyond the discussion about judicial reform, there is a question that every company should ask itself regarding its most important contracts:

If a significant controversy were to arise tomorrow, do we have clarity on how it would be resolved?

The answer to that question can directly influence the costs, timing, and risks associated with a future dispute.

Trade disputes will continue to be a part of business activity. What can change, however, is how organizations prepare to deal with them.

In an increasingly complex and interconnected economic environment, strategic dispute management has ceased to be an exclusively legal issue and has become an essential component of business planning.

After all, the best strategy for resolving a dispute is not the one designed when the conflict already exists, but the one built from the negotiation of the contract itself.