Client Alert

Mexico Enacts Important Commercial Litigation Reform

April 28, 2008

En Español

On April 17, 2008 reforms to the Mexican Code of Commerce, governing commercial litigation, were published in the Federal Official Gazette. The reforms, which will become effective July 16, 2008, primarily concern the appeals process. A new system of “preventive” appeals aims at substantially reducing the complexities that currently tend to complicate commercial proceedings in Mexico. The reforms also include new rules regarding documentary evidence and testimony from fact and expert witnesses; grant more time (15 instead of 9 business days) to file an answer, and harmonize default rules.

New Appeals System

The current system of appeals in commercial proceedings in Mexico is rather complicated. There are, for instance, intermediate and final appeals; the type of appeal depends on whether the challenge is directed against a resolution issued by the judge during the proceedings (intermediate appeal) or against the final resolution on the merits of the case (final appeal). Currently, when filing an intermediate appeal, parties have to put forward all of their arguments and allegations before the court of appeals, even though there is the possibility that the issues discussed in the intermediate appeal will become moot once a resolution on the merits is rendered by the court of first instance. The reforms intend to remedy that.

• All intermediate appeals (with some limited exceptions)¹ are of interim or “preventive” nature and are to be analyzed by the court of appeals once a final resolution on the merits is rendered by the court of first instance and only if there is also an appeal on the merits. If a party believes that an intermediate resolution of the court of first instance violates its due process rights, it may file a writ (called “preventive” appeal) with that court, within three days of notice, indicating its dissatisfaction with the resolution and, more importantly, without the need to set forth legal arguments in support of the appeal. Such a “preventive” appeal will be kept in abeyance and, if upon the conclusion of the proceedings the judgment rendered by the court of first instance is adverse, the aggrieved party may then file an appeal on the merits formulating allegations both concerning the procedural violations that gave rise to the “preventive” appeal and with regards to the merits of the final judgment of the court of first instance.² 
• Appeals (both intermediate and final) may be filed only in cases were the amount in dispute exceeds $200,000 pesos (approximately US$20,000). 
• Intermediate appeals, even if they are not “preventive,” do not suspend the proceedings before the court of first instance. 
• If the enforcement of an intermediate decision by a court of first instance may cause irreparable harm, the aggrieved party can appeal and move to stay the enforcement (conditioned upon the posting of a bond).³

Changes in the Rules of Evidence

Amendments to the Rules of Evidence in commercial proceedings aim at providing both the parties and the judge with better tools to establish the true facts, and to navigate through the proceedings. The amended rules concern documents, experts, and fact witnesses.

(i)     Documents

Under the current rules, parties have the right to object or challenge, through an ancillary proceeding, the documents produced by the opposing party. This objection or challenge can be made alleging that the documents produced by the counterparty do not support its claims or statements, or that a certain document is false.

Under the amended rules, it is not necessary to file an ancillary proceeding when the basis for the objection or challenge is that the documents do not support the other party’s claims. Rather, the aggrieved party only needs to file an objection that will be decided in the final resolution together with the merits of the case.

When challenging a document as false, the new rules set forth that the court will decide the challenge within its resolution on the merits of the case and that no ancillary proceeding is necessary for these purposes unless the document in question was filed after the initial complaint (in which case an ancillary proceeding is necessary).

(ii)     Experts

Two major changes were introduced with respect to expert witnesses.

First, if none of the parties' experts files an expert opinion, the court has the obligation to nominate an expert witness.

Second, the time limit for the expert witnesses to file their reports is to be determined by the judge according to the circumstances of each case. Currently, the time limit to file an expert report is a fixed ten-day period regardless of the complexity of the case.

(iii)     Fact Witnesses

With regard to fact witnesses, a small but important modification has been implemented: a party has the right to appeal (through a “preventive” appeal) the legality of the questions posed by the other side to a fact witness.

More time to file Answer

One of the features of Mexican litigation that have been widely criticized is that currently the defendant has only nine business days to answer the complaint, no matter how difficult or complex the case may be. Under normal circumstances, the parties cannot extend this time period by agreement, nor can they request more time from the court.⁴ Given that in commercial proceedings in Mexico the parties have to submit all the facts, arguments and supporting evidence (including the names of all witnesses) with their initial pleadings (or will otherwise be precluded from doing so), the new rules are trying to provide the defendant with a little more time to level the playing field (since the plaintiff has unlimited time to prepare the complaint). Not by much though -- the defendant now has fifteen business days to file its answer.⁵

Harmonization of default rules

Currently, the Federal Code of Civil Procedure serve as default rules in commercial proceedings for those cases where the Code of Commerce is silent. While maintaining that system, the new rules add that where the Code of Commerce and the Federal Code of Civil Procedure are silent, the local rules of civil procedure of the State in which the proceedings take place are to be used to fill in any gaps.

Conclusion

While far from remedying all issues that make litigating before Mexican courts challenging at times, the current reforms will certainly contribute to a more transparent and efficient commercial litigation environment in Mexico.

<sup>1. Exceptions include appeals against resolutions that deny the admission of a claim or a counterclaim, deny the legal representation of a litigant, deny (or grant) interim measures, and resolutions that terminate the proceedings without a decision on the merits. Appeals in these cases shall be filed within six days of notice.
2. Appeals against final judgments shall be filed within nine days of notice.
3. The bond amount is going to be determined by the judge considering the amount and relevance of the dispute and shall be of no less than $6,000 pesos (approximately US$600).
4. An extension can be granted only in exceptional cases: if requested by both parties (which is not very usual) or if the defendant resides 200 kilometers (approximately 125 miles) or more from the court.
5. Obviously, in complex or very large cases this is still insufficient and requires experienced counsel.</sup>