1. USE OF COMMERCIAL ARBITRATION
1.1 Describe the prevalence of commercial arbitrations as a method of settling disputes, both domestic and international.
Commercial arbitration is most commonly found in Mexico in international contracts such as joint venture agreements, stock purchase agreements, building works agreements, distribution agreements and the like. However, there is a current trend in Mexico to incorporate arbitration as a method of resolving disputes in the domestic realm, such as references to the ability to arbitrate disputes in the Federal Law of Consumer Protection, the Copyright Law, the Federal Telecommunications Law, the Law for the Protection and Defence of Users of Financial Services, the Law for the Sustainable Development of Sugar Cane, the Civil Aviation Law, the Airports Law, the National Waters Law, the Federal Law of Bonding Institutions and the Procurement and Public Works Law, among others.
2.1 What are the principal sources of law and regulation relating to domestic and international arbitration? (Describe the role of federal or state laws and relevance of court decisions.)
Mexico has a federal system of government, expressly granting authority over commercial matters to the federal government while reserving civil matters to the states. Therefore, the Federal Congress has issued commercial laws that include rules on commercial arbitration, while the state governments may have included arbitration rules in their individual Codes of Civil Procedure. In addition, numerous international instruments to which Mexico is a party contain arbitration provisions.
Through persistent efforts to inform judges at both the federal and state levels of their responsibilities regarding commercial arbitration, in Mexico there is now fairly wide acceptance and understanding of this institution in the judicial branch.
In the past few years, the Mexican courts have, in relation to commercial arbitration, issued different jurisprudential criteria. The matters over which there have been pronouncements are basically those which deal with the legal nature of arbitration, the extent of the faculties of the arbitrators to direct or conduct the arbitration proceedings and the limits and faculties of judges to recognise the decisions reached by an arbitral tribunal.
In this sense, it can be added that the Mexican courts’ adaptation to arbitration, while gradual, has in most cases provided positive and favourable results for development and consolidation in Mexico.
2.2 List and briefly describe relevant arbitration statutes, international treaties and conventions.
The Commercial Code incorporates the UNCITRAL Model Law (the ‘Model Law’) on arbitration with minor modifications into the Mexican system, and accepts commercial usage as a source of commercial rules.
On the other hand, the Federal Code of Civil Procedure, and the great majority of the codes of civil procedures of the different states of the Republic, regulates the arbitration procedure for strictly civil controversies.
In dealing with commercial arbitration, the Commercial Code, by express reference to the Federal Code of Civil Procedure, establishes how foreign awards are to be recognised and enforced in Mexico.
Together with the Model Law, two international instruments with great relevance to the development of commercial arbitration in Mexico are the New York Convention and the Panama Inter-American Convention on Commercial Arbitration (the ‘Panama Convention’).
In addition, the numerous free trade agreements and bilateral investment treaties executed by Mexico generally establish international arbitration as the means of resolving disputes. In this regard the North American Free Trade Agreement (NAFTA), to which Mexico is a party, was innovative, allowing individual investors in one of the member states to arbitrate investment disputes directly with another member state, which example was followed by other free trade agreements more recently executed by Mexico.
3.1 What are/describe the principal institutions and/or government agencies that assist in the administration or oversight of international and domestic arbitrations?
The principal institutions in charge of administering commercial arbitrations in Mexico include:
4.1 What is the relationship between agreements to arbitrate and access to the courts? Is there a presumption of arbitrability/policy support for arbitration? Will the courts stay court actions in favour of agreements to arbitrate?
If a dispute submitted to a judicial proceeding is the subject of an arbitration agreement, judges are obliged under the Commercial Code to refer the parties to arbitration unless the matter is specifically excluded from arbitration under Mexican law. Excluded matters are generally those having to do with public law or unwaivable rights. In practice, Mexican judges now know to refer cases to arbitration when a valid arbitration agreement exists.
Nevertheless, the Commercial Code also establishes that a party to an arbitration may request provisional remedies from a court prior to or during an arbitration without jeopardising the arbitration agreement.
4.2 May an arbitral tribunal rule on a party’s challenge to its own jurisdiction (‘competence-competence’)? Need a tribunal suspend its proceedings if a party seeks to test jurisdiction in the courts?
The Commercial Code provides that the arbitral tribunal may rule on its own jurisdiction. However, the Code also provides that if an arbitral tribunal determines that it does have jurisdiction as a preliminary question, a party may request a judge to decide the matter and such decision is final and cannot be appealed. While a decision is pending, the arbitral tribunal may continue its proceedings and issue an award.
5.1 Provide a selected bibliography of the most influential publications in or relied upon in the jurisdiction – books, journals, newsletters and pamphlets.
The different institutions responsible for administering arbitrations in Mexico have been given the important task of disseminating the use of arbitration. As part of this effort, the Mexican Chapter of the International Chamber of Commerce periodically issues the journal Pauta and other centres such as the National Chamber of Commerce of Mexico City and the Mexican Arbitration Center publish informative bulletins regularly.
In addition, the Mexican Bar Association has created a special commission to study and disseminate materials regarding commercial arbitration, and this commission has issued useful publications such as El Foro.
Books
Y Derains and E A Scwartz El nuevo reglamento de arbitraje de la Cámara de Comercio Internacional. Guía de Arbitraje Comercial Internacional (Mexico City: Oxford University Press, 2002)
G Tapia and Enrique El Arbitraje Comercial (Mexico City: Themis, 2000) L Pereznieto Castro (compilation) Arbitraje Comercial Internacional (Mexico City: Distribuciones Fontamara, 2000) R Santos Belandro Arbitraje Comercial Internacional (Mexico City: Oxford University Press, 3rd edn, 2000) J A Silva Silva Arbitraje Comercial Internacional en México (Mexico City: Oxford University Press, 2nd edn, 2001) G Uribarri Carpintero El arbitraje en México (Mexico City: Oxford University Press, 1999)
6.1 Are there form and/or content requirements for an enforceable agreement to arbitrate? How may they be satisfied?
Since becoming a signatory to the New York Convention and the subsequent adoption of the Model Law, in Mexico an arbitration agreement must be in writing, but may be found as a clause in a contract, in a separate agreement or in an exchange of letters, telegrams, faxes or other means of telecommunication. Since an agreement to arbitrate is considered a separate and independent contract, it must meet the basic requirements under Mexican law for the formation of a contract. The essential elements are: (i) the object of the agreement – to submit present or future disputes that arise between the parties – must be stated. In this regard it should be clearly stated what disputes may be submitted to arbitration; (ii) the parties’ consent to arbitration must be evident; (iii) requirements of form must be met, which are primarily that it be in writing as set out in art 1423 of the Commercial Code, which is based on the Model Law; (iv) the purpose must be legal, that is the arbitration agreement must be in relation to an arbitrable dispute; (v) consent is invalid if given by mistake, misrepresentation, fraud or duress; and (vi) the parties must have legal capacity to bind themselves under an arbitration agreement.
There are numerous domestic laws that provide for the option of resolving conflicts by arbitration, but none require its use, with the sole exception of the Law for the Sustainable Development of Sugar Cane, which appears to establish arbitration as mandatory to resolve any dispute arising between sugar cane growers and mill owners. Any arbitral decision reached by this special institution specifically created for that purpose must necessarily be recognised and executed by the competent courts.
7.2 Is arbitration prohibited for certain types of dispute (restraints of fundamental public policy)?
According to the Federal Code of Civil Procedure, any disputes regarding the following matters are reserved exclusively to the national courts and may not be submitted to arbitration: land and water resources inside Mexican territory; resources located in the exclusive economic zone of the sea; acts of authority or pertaining to the internal regime of the state and the federal agencies; the international regime of embassies and consulates of Mexico abroad and their actions; and those cases specified in other laws.
In addition, the Civil Procedure Code of the Federal District, and possibly other state Civil Codes, prohibits arbitration of certain matters, such as the right to receive maintenance, divorce, matrimonial nullity, civil status of persons and other matters expressly prohibited by law.
8.1 May an arbitral clause be considered valid even if the rest of the contract in which it is embedded is invalid?
An arbitral clause will be considered valid even if the rest of the contract in which it is embedded is invalid. Even if the agreement to arbitrate is found in a clause within a contract, art 1432 of the Commercial Code establishes that it is considered as an independent agreement. Therefore, in the event the contract is found to be null and void, this does not necessarily imply that the arbitration agreement is also null and void.
9. QUALIFICATION/APPOINTMENT/LIABILITY OF ARBITRATORS
9.1 Are there specific provisions regulating the qualifications of arbitrators? Are there requirements (including disclosure) for ‘impartiality’ and ‘independence’, and do such requirements differ as between domestic and international arbitrations?
The Commercial Code does require that potential members of an arbitral tribunal reveal any circumstances that may cause doubt regarding their impartiality or independence. Other qualifications are not mentioned by the Commercial Code, although personal capacity to act (of legal age and sound mind) can be implied. Arbitration under the international treaties to which Mexico is a party may have an additional requirement of expertise. For example, NAFTA requires arbitrators of investor-state disputes to be experienced in international law and investment matters.
9.2 Are there provisions governing the challenge or removal of arbitrators? Do the courts or other jurisdictions play/have a role in any such challenge?
The Commercial Code provides for the challenging of an arbitrator in the case of concerns about his or her impartiality or independence, or lack of qualifications agreed to in the arbitration agreement. Such challenge is made in writing to the arbitral tribunal itself. However, if the tribunal rejects the challenge, the challenging party has 30 days to appeal to a judicial decision regarding the matter. The decision is unappealable.
In the event that an arbitrator is impeded legally or in fact from performing his or her role and does not resign, the parties may agree on the arbitrator’s removal. If the parties cannot agree, either party may appeal to the courts. In any case, a replacement will be appointed following the same procedures as the original appointment.
9.3 Does legislation govern, or have the courts developed rules regarding the liability of arbitrators for acts related to their decision-making function?
The Commercial Code does not address any possible liability of arbitrators and no jurisprudence exists on this matter in Mexico. However, since it may be considered that arbitrators have a contractual relationship with the parties, they could be sued for breach of their contractual duties. In such a case it would have to be proven that: (i) the arbitral tribunal breached the arbitral agreement; (ii) damage and/or loss was caused; and (iii) such damages and losses were a direct consequence of the breach of the arbitral agreement. In Mexican legal practice, proving the causal nexus is extremely difficult.
10. PARTY REPRESENTATION
10.1 Are there particular qualification requirements for representatives (‘counsel’) appearing in the jurisdictions?
The law does not establish any particular qualifications for representing a party in an arbitration, although it is always recommended to use people knowledgeable in arbitration and particularly the arbitration process.
In addition, in the event that one of the parties is Mexican in an international arbitration, it would be advisable to ensure that counsel for both parties are duly appointed according to Mexican law to act on behalf of their clients. Otherwise the award could be challenged on those grounds.
11. PLACE OF ARBITRATION/PROCEDURES
11.1 Are there provisions governing the place (seat) of arbitration, or any requirement for arbitral proceedings to be held at the seat?
The Commercial Code specifically provides (art 1436) that the parties may freely determine the place of arbitration. If the parties have not specified, the arbitral tribunal may so decide. In any case, the tribunal is free, unless the parties have agreed otherwise, to meet at any place it chooses, including for hearings involving the parties, witnesses, experts or others.
11.2 Are specific procedures mandated in particular cases, or in general?
The Commercial Code grants the parties freedom to determine the procedure that will be applied to their case. Such determination may be made in the arbitration agreement or subsequently.
In an ad hoc arbitration, if the parties have not agreed on the arbitral procedure, the arbitral tribunal will make such determination. In the case of an institutional arbitration, the tribunal generally must follow the procedural rules established by that institution.
12. EVIDENCE GATHERING
12.1 What is the general approach to the gathering and tendering of evidence at the pleading stage and at the hearing stage (production, discovery, privilege, use of witness statements etc)? Are there differences between domestic and international arbitrations?
Unless specified otherwise by the parties, the arbitral tribunal may direct the arbitration as it sees fit, including the determination of the admissibility, relevance and weight of the evidence, which authority has just been recently confirmed as constitutional by the Mexican Supreme Court. The parties should include with the filing of their pleadings any documentary evidence they consider relevant or refer to any such documents they will present. Also, unless otherwise specified by the parties, the tribunal may decide whether to hold hearings to present evidence or oral pleadings, or to base the arbitration on written documents and other evidence. The tribunal has the authority, unless the parties do not allow it, to appoint an expert or experts to issue an opinion and request the parties to provide such experts with all the relevant information, documents, merchandise or other goods. The tribunal itself, or at the request of a party, may require the expert to appear at a hearing where the parties may interrogate them as well as present their own experts to address points in conflict.
If one of the parties does not present documentary evidence, the tribunal may continue the arbitration and issue the award based on the evidence that was presented.
While discovery as practised in common law countries does not exist in Mexico, the parties are free to establish in the arbitration agreement the principles and rules that should be followed in the gathering of evidence. If the parties have so agreed to a discovery process, since they wish to appear co-operative with the arbitral tribunal, generally such a process can be applied. In the event that in spite of having agreed to a discovery process a party refuses to deliver the information requested, the arbitral tribunal may ask the competent judge to order the party to do so, through the right of the parties to request provisional remedies from the court and the right of the tribunal to request assistance from the court in the gathering of evidence (Commercial Code, arts 1433 and 1444). However, the information being requested should be specific or determinable. Otherwise the non-co-operating party could challenge any subsequent award against it arguing eg that since it was not clearly informed of what was required, it did not know how to comply and therefore could not adequately defend its position. This could result in the nullification of the award by a court on the grounds that such party was not given the opportunity to assert its rights.
No distinction is made in the Commercial Code between domestic and international arbitrations with regard to evidence gathering.
12.2 What powers of compulsion or court assistance are there for arbitrators to require attendance of witnesses or production of documents, either prior to or at the substantive hearing? Is there a difference between domestic and international tribunals or as between parties and non-parties? Do special provisions exist for arbitrators appointed pursuant to international treaties (ie bilateral or multilateral investment treaties)?
If a party fails to comply with the tribunal’s request for evidence, either the parties or the tribunal may request the intervention of a judge to compel the presentation or inspection of such evidence.
Although the arbitral tribunal may order the preservation of evidence (as distinguished from orders to inspect evidence) under its general powers to conduct the arbitration in the manner it sees fit, there is no legal basis under Mexican law to enforce orders to preserve evidence, and therefore in practice it may be difficult.
Regarding witnesses, the arbitral tribunal does not have the authority to issue subpoenas or compel appearance of a witness that is not in Mexico. If the witness is in Mexico, however, the interested party can request the court to summon them and the judge can apply the sanctions set out in the Commercial Code if the witness fails to comply.
13. INTERIM MEASURES/ROLE OF THE TRIBUNAL
13.1 Are there special provisions relating to the granting of interim and preliminary relief? Have the courts recognised and/or limited any such authority? Do the courts themselves play a role in interim relief in arbitration proceedings?
The parties can request a judge to adopt provisional remedies at any time before or during arbitration. The Commercial Code also provides that the arbitral tribunal may, at the petition of either of the parties, order provisional remedies to be taken, which under Mexican civil procedure consist of attachment of the goods in litigation or a restraining order against an individual. In such a case, the tribunal may also require a bond from the party requesting the measures to cover any damages caused by such measures to the other party in the event that the requesting party does not prove its case.
The tribunal may also make an interim or preliminary award regarding certain issues such as jurisdictional questions at the request of the parties.
As mentioned above, in ordinary civil proceedings under the Commercial Code in Mexico, provisional remedies are limited to restraining orders against individuals and the attachment of goods. Injunctive relief regarding restraint from certain acts, for instance, is only available in Mexico in certain specific areas such as trade marks law, and is not provided for in ordinary civil proceedings. There is a debate over whether the interim measures mentioned in the Commercial Code in reference to arbitration are also limited to the measures allowed in ordinary civil proceedings. While it can be argued that the arbitration legislation is based on the Model Law and therefore should be based on international practice rather than domestic practice, this theory has not been tested by the courts.
14. TAXATION OF ARBITRATORS’ FEES
14.1 Does the state, or any of its sub-divisions, purport to tax domestically the fees of foreign arbitrators conducting hearings in the state? Is there a difference if the arbitration is ‘seated’ in the state or elsewhere?
It is extremely unlikely that any fees earned by a foreign arbitrator would be taxed in Mexico. The fees of a foreign arbitrator would only be taxed in Mexico if he or she stays within the country for more than 183 days, consecutive or not, within a 12-month period.
15. DEFAULT PROCEEDINGS
15.1 Are there provisions governing a tribunal’s ability to determine the controversy in the absence of a party who, on appropriate notice, fails to appear at or seek adjournment of the arbitral proceedings?
Assuming a party has been given due notice of all actions of the tribunal and the other party, an arbitration may proceed in the total absence of a party from the arbitration or in the case of failure to appear in a particular hearing or present documentary evidence without sufficient reason (art 1441, Part II and III).
16. THE ARBITRAL AWARD
16.1 Must an award take any particular form, eg in writing, signed, dated, place, the need for reasons, delivery etc?
According to the Commercial Code, the award must be in writing and signed by the arbitrator(s). In the case of more than one arbitrator, the majority of the tribunal must sign. The award should include the date of issuance and each party should be notified by delivery of a signed copy of the award.
The Commercial Code also specifies that the award must be reasoned, and based on legal principles in the case of an arbitration at law, unless the parties have agreed otherwise or in the event that the award is announced as a settlement agreed to by the parties.
16.2 Are there limits on arbitrators’ powers to fashion appropriate remedies, eg punitive or exemplary damages, rectification, injunctions, interest and costs?
Arbitral tribunals are free in theory to impose specific performance or an injunction on a party. However, since the tribunal itself has no enforcement power, the effectiveness of such orders will depend on the willingness of the national courts to enforce them, keeping in mind the limitations on provisional remedies applicable in the Mexican national context.
Mexican law only allows for the restitution of a party or the payment of direct and immediate damages and lost profits. While in theory the parties are free to establish that the arbitral tribunal may award punitive or exemplary damages, in practice, courts in Mexico are not likely to enforce such an award if the party does not willingly comply, on the grounds that it would violate public policy since such damages are not awarded in Mexico.
Unless the parties adopt rules regarding the costs of arbitration, the arbitral tribunal shall set such costs upon issuing the award or an order concluding the arbitral proceeding. Costs generally should be charged against the losing party, but may be divided among the parties as the tribunal considers reasonable under the particular circumstances of the case. The costs of legal representation and assistance may also be charged as the tribunal considers fair and reasonable.
The fees of the arbitral tribunal must be reasonable taking into consideration the amount in dispute, the complexity of the matter, the time involved in resolving the matter and other relevant circumstances. The tribunal may request advance fee deposits to cover travel and other expenses at the beginning of the proceeding and at particular intervals throughout.
The payment of interest can be mandated in the award and therefore would be enforceable, at least to the extent it corresponds to payments of interest under the Mexican commercial law generally. Under the Commercial Code, a contractual interest agreed to by the parties may be applied or in the absence of such an agreement, the legal interest rate of six per cent per annum.
17. RECOURSE FROM AN AWARD
17.1 Are there provisions governing modification, clarification or correction of an award?
The parties may request the tribunal to correct any errors in calculation or typography or to clarify certain points of the award. If the tribunal agrees such changes are justified it may make them and they shall be considered part of the award.
The Mexican courts are prohibited from reviewing the merits of a final award, but may set aside an award on the following grounds: (i) incapacity of a party or invalidity of the arbitration agreement under the law to which the parties have subjected it or under Mexican law; (ii) procedural irregularity such as failure to treat the parties equally or to allow the losing party to be heard (in the latter case the party requesting the set aside of the award must demonstrate why it could not present its case); (iii) exceeding of authority or lack of jurisdiction in the event that the tribunal addresses issues not contemplated within the arbitration agreement; and (iv) where the award is contrary to public policy.
In the same terms as the Model Law, arts 1457–1463 of the Commercial Code indicate that in the event that any of the circumstances mentioned in the above paragraph occurs, a request for nullity of the arbitral award or that the award not be executed may be filed before the competent judge.
17.2 May an award be appealed to or set aside by the courts? If so, on what grounds and by what procedures?
The Mexican courts lack jurisdiction to review the merits of a final award, so if the losing party asks the judge to review the merits of the award, he or she should declare him or herself incompetent to do so.
Within three months from the date of notification of the final award or any clarification, interpretation or additional award, the parties may apply to the court to have the award set aside. The procedure is based on art 360 of the Federal Code of Civil Procedure and admits no appeal. The grounds for setting aside the award are the same as for denying the recognition and enforcement of the award.
The court may also set aside the award of its own motion if the tribunal has ruled upon a matter which is not arbitrable or if the award is contrary to public policy. The court may give the arbitral tribunal the opportunity to remedy the cause of the set aside and suspend the proceedings pending such remedy.
Article 1457 of the Commercial Code provides that the grounds for setting aside the award are the following:
18. ENFORCEMENT OF AWARD
18.1 What are the procedures and standards for enforcing an award? Is there a difference between ‘domestic’ and ‘non-domestic’ awards?
Mexico is a party to the New York Convention and the Panama Convention, among others, applicable to the enforcement of foreign arbitral awards in Mexico. These treaties are incorporated into the Mexican legal hierarchy above federal legislation and are self-executing without the need for implementing legislation. However, with the incorporation of the Model Law into the Mexican Commercial Code, the most important provisions of such treaties are now found in domestic legislation and courts seldom need apply them directly.
The procedures for enforcing an award are equally applicable to domestic and non-domestic awards, whether or not Mexico is the place of arbitration. Nevertheless, an arbitration will be considered international if the parties, upon signing the arbitration agreement, have their establishments in different countries or if the place of arbitration, the place of a substantial part of the obligations of the commercial relationship or the place having the closest ties to the object of the conflict is located outside the country in which the parties have their establishment. In the case of such an international arbitration, the federal judge of first instance or of the applicable local court of the domicile of the party against whom the award is issued or, failing that, the location of the assets of the losing party, shall be responsible for enforcing the award. In the case of domestic arbitrations, the federal judge of first instance or the applicable local court shall enforce the award. No judicial approval of the award is necessary for its enforcement unless the parties have agreed otherwise.
The only requirement for recognition or enforcement of an award is an application by the interested party attaching the original or an authenticated copy of the arbitration agreement and the award, with translations into Spanish by an official translator if they are not in Spanish. The other party must be notified within three days and if no evidence is filed a hearing will be held within three days or if evidence is submitted, within ten days. The decision should be issued within five days from the hearing, although these time periods can be extended. If one of the parties has requested the annulment of the award in the country where it was issued, the Mexican court, where its enforcement has been requested, can suspend enforcement for a period set at its discretion and at the request of the party requesting enforcement, order the other party to issue a bond guaranteeing performance.
The recognition or enforcement of an arbitral award, whatever the country of issuance, can only be denied in the following cases:
Finally, an amparo or constitutional appeal regarding a violation of constitutionally protected individual rights may be filed before a federal court against the resolution of a judge in an enforcement or nullification proceeding. In this case it is usually argued that the judge violated the constitutional guarantee of the proper application of the law by not correctly analysing the causes of nullity or non-enforcement asserted. Therefore, the presence of the causes of nullity or non-enforcement would be taken up, but not the substance of the award.
19. CONFIDENTIALITY OF PROCEEDINGS
19.1 What are the confidentiality requirements of the arbitral process, ie existence of the arbitration, pleadings, documents produced, hearing, award?
The law does not have any specific provisions regarding confidentiality. However, it is generally recognised that commercial arbitral proceedings between private parties are private, not public, and all aspects of them are confidential.
Under NAFTA, on the other hand, since it is an international treaty between sovereign governments, the information generated from conflicts between the signing parties or between a private party and a government is considered public, and therefore generally not treated as confidential.
20.1 Is there any particular aspect of the approach to arbitration in the jurisdiction which bears special mention?
There are no particular aspects of the approach to arbitration in Mexico which bear special mention.
