Initiative to reform, add and repeal various provisions on administrative matters

Executive Summary:

• The Federal Executive sent an initiative to the Chamber of Deputies in which it proposes to reform, add to and repeal various provisions on administrative matters.
• The purpose of the initiative is supposedly to reverse acts of corruption, safeguard public finances and strengthen the federal public administration.
• If approved without any modification, it will have consequences for individuals, since it violates fundamental rights provided for in the Constitution and International Treaties.

On March 24, 2023, the President of the Republic sent to the Chamber of Deputies an initiative to reform various administrative laws with the purported purpose of reversing acts of corruption, safeguarding public finances, and strengthening the federal public administration. 

In total, the initiative seeks to amend 23 laws to change regulations relating to the federal budget, public procurement, revocation of concessions and authorizations, tenders and the termination of administrative contracts, as well as compensation for federal public administration. 

Among the most relevant reforms and the violations of constitutional principles and international treaties that they generate, we estimate that the following are included:

Reform the Federal Law on Administrative Procedure to include new grounds for revocation of concessions, authorizations, permits and licenses, as well as the addition of cases in which compensation for damages by the federal public administration will not apply.

With this proposal, the Federal Executive intends to depart from the general regulation of compensation for damages in public procurement, by including that this does not apply when the damage is caused by "causes of public utility", which, being a subjective concept, generates a state of legal uncertainty.

It is proposed to modify the Federal Law on Administrative Litigation Procedure to eliminate the extraordinary nature of the so-called judgment of harmfulness, adding new causes for its admissibility, specifically, when the act favorable to the individual causes harm to the federal public administration or the public interest is harmed. Concepts that are also broad, subjective and abstract, such that there is legal uncertainty to the extent that arbitrary actions by the authorities are permitted.

Reform the Federal Law on Parastatal Entities so that the Federal Executive has the power to directly assign to parastatal entities the provision of public services, as well as the use, exploitation and exploitation of assets subject to the public domain regime for reasons of public utility and interest, general, social or national security. In addition, it is proposed to grant the Federal Executive the power to group parastatal entities according to the public interest or national security.

In our opinion, this modification may have an impact on competition and free competition among individuals who offer their services to the Federal Government, since there is a possibility that contracts may be awarded directly to other State entities, without respecting the bidding procedure that allows healthy and free competition in the different sectors, generating undue and arbitrary advantages.

With regards to Expropriation Law, it is proposed to eliminate the mandatory application of international treaties to which Mexico is a party and the arbitration agreements that are entered into, which violates the principle of constitutional supremacy and hierarchy of laws, as international treaties are hierarchically superior to the aforementioned Law.

Reform the Ley de Acquisiciones, Leases y Servicios del Sector Público to reduce the requirements for open international tenders. This may imply a violation of the international treaties to which Mexico is a party, specifically with regard to the chapters on government procurement, since, as a general rule, prior to the open international tender, a public tender must be held under the coverage of treaties, a situation that allows the possibility that national companies cannot compete on equal terms.

The inclusion of a so-called exorbitant clause, consisting of the State's discretionary power to terminate Contracts for reasons of public, general or social interest. The reform aims for this clause to be included always, under penalty that public officials involved incur administrative liability.

From our perspective, this is a figure that only seeks to benefit the State in a discretionary manner to terminate without any liability, under reasons that can be arbitrarily alleged as it suits the interests of the Executive, which generates clear legal uncertainty in contracting with the State.

Amend Article 19, paragraph 4 of the General Law of National Assets; Article 1 and 13 of the Federal Law of Patrimonial Responsibility of the State, and article 21 of the Expropriation Law, with a view to establishing a limit on the amounts of compensation in the event of being ordered to pay them in jurisdictional or arbitration proceedings.

This is a topic that must be studied carefully if there are arbitration clauses, since it disrupts the essence of what it means to agree to an Arbitration.

The obligation to follow and self-determine arbitration as an autonomous procedure and independent of any State rests on International Treaties that promote the conduct and execution of an award, such as, for example, the New York Convention and various treaties that protect foreign investments. These International Treaties are protected by Article 133 of the Constitution, so that the intention of the contracting parties must enjoy legal certainty, providing fair treatment to companies and investors that interact with the government.

Since the initiative was recently submitted, it must be referred to the corresponding Committee for processing, study, discussion and approval, so it may still be subject to various modifications.

If the initiative is approved without modifications, we consider that violations of multiple rights recognized in the Federal Constitution and, even, in various International Treaties may be brought before the Judicial Branch of the Federation. This is due to the fact that the proposed modifications violate the rights to legal certainty, constitutional supremacy and hierarchy of laws, legitimate trust, proportionality, legality, equality, freedom of work and, even, economic competition.