The use of arbitration has increased over past few years, based on various factors, including, but not limited to an increase of cross border trader, between Mexico and its major commercial partners, and the interest in using alternatives other than national courts to resolve disputes in the event they should arise. This has caused that more and more Mexican lawyers use arbitration clauses as part of their “boiler plate” provisions in the contracts they are involved with.
Arbitration by Mexican state owned businesses (mainly PEMEX and the Federal Electricity Commission or “CFE”), has also had an impact, and has made these two companies frequent parties in international arbitration cases.
At the local level, Mexican businessmen are starting to look at arbitration as an option to exclude their disputes for courts that are heavily burdened with work, and are unfortunately, still infamous for corruption. Arbitration is also appealing for Mexican businesses involved in international trade, because it gives them a greatere degree of control in the event a dispute arises. Some Mexican companies are fearfull of having a case tried before what they perceive to be biased juries, and the perception that these favor “the locals” and that they can award incredibly large amounts in damages.
Conventions signed by Mexico on the enforceability of Arbitration Awards
Mexico is Contracting State to both the New York and the Panama Conventions on the Enforcement of Arbitral awards, making Mexico an excellent situs for arbitrating disputes. These international treaties provide the required framework for the enforcement of arbitral awards, regardless of where they were rendered.
Mexico`s Incorporation of the UNCITRAL Model Law
In 1993, Mexico incorporated the UNCIRAL Model Law as part of the Mexican Commercial Code, with some minor changes. For example, the default rule regarding the number of arbitrators is one, while the Model Law provides for a three arbitrator tribunal.
Additionally, the Commerce Code was ammended in 2011 to properly regulate the few instances where judicial intervention is allowed –and required—under the Commerce Code. On the issue of enforcement, the Commerce Code now contemplates a simple non-appealable procedure to request the enforcement of an award. Once ordered, the only recourse is to a Federal Circuit Court that would have a very narrow scope of review, based on violations to due process rules, but in no way could these go beyond the scope of review permitted under an action to set-aside.
The 2011 changes to the Commerce Code further elaborate on the type of motion that is to be filed when requesting court assisted taking of evidence, an area that, prior to the changes, was confusing at best.
Enforcing Arbitral Awards in Mexico
The requirements to enforce an award in Mexico tracks the language of both the New York and Panama Conventions, as well as the Model Law as incorporated by the Commerce Code.
Per article 1461, an arbitral award, regardless of where it was issued, shall be considered binding, and after a written request has been made to a Judge, shall be enforced. In order to request its enforcement, the moving party must present an original or a certified copy of the award and of the agreement to arbitrate. If issued in a language other than Spanish, the award must be accompanied by an official translation.
Setting Aside and Refusal to Enforce an Arbitral Award
The reasons to set aside an award or to refuse its enforcement are the same. The difference is that under the Commerce Code, an action to set aside must be commenced within three months following the issuance of the award before the courts where the award was issued, before the courts with jurisdiction, which are the ones where the award was issued. On the other hand, the refusal to enforce an award is a defense that is raised before the enforcing judge.
The causes for either the an active attack of against an award, or a passive defense against an award’s enforcement, are:
i) incapacity of one of the parties to the agreement to arbitrate, or that the agreement is not valid under the Law to which the parties have valid under the law to which the parties have subjected it or, failing any indication thereon, under the law of this State; or
(ii) the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or
(iii) the award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or contains decisions on matters beyond the scope of the submission to arbitration, provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, only that part of the award which contains decisions on matters not submitted to arbitration may be set aside; or
(iv) the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of this Law from which the parties cannot derogate, or, failing such agreement, was not in accordance with this Law; or
Additionally, a Court may set aside or refuse to enforce an award if it finds that
(i) the subject-matter of the dispute is not capable of settlement by arbitration under the law of this State; or
(ii) the award is in conflict with the public policy of Mexico.
Institutional Arbitration in Mexico
Mexico has very active institutions promoting the use of arbitration. In no specific order of preference, these are The Mexican Chapter of the International Chamber of Commerce National Chamber of Commerce; CANACO (National Chamber of Commerce of Mexico City)
The AAA’s International Center for Dispute Resolution, The Mexican Arbitration Center (CAM), all of which have experienced staff to provide the administrative support required to administer institutional arbitration.
NOTICE: This brief paper is a general opinion, but it is not meant to substitute for proper legal advice. If you require specific information or advice regarding international arbitration or any other matter, do not hesitate to contact me.
About our Experience
Alejandro Osuna is an experienced arbitrator and mediator.
He is a member of the North-American Branch of the Chartered Institute of Arbitrators, and is on the roster of arbitrators for the Mexican Arbitration Center (CAM), and with the Vienna International Arbitration Centre. He has been an arbitrator at the prestigious Willem C. Vis International Moot Court Competition in Vienna, Austria.
He has also represented parties in arbitrations administered under the rules of the International Chamber of Commerce (ICC), the American Arbitration Association, the Grain and Feed Trade Association (GAFTA), and under the rules of the Mexico City Chamber of Commerce. He has also taught courses on International Arbitration with numerous private and public law schools in Baja California.
He was trained as a mediator by the San Diego Mediation Center in 2003 (currently known as the National Conflict Resolution Center), and has mediated bilingual cases, and has participated as a trainer on mediation skills and techniques on both sides of the border.
Copyright, 2017, Osuna González y Asociados, S.C. All rights reserved.