The war currently taking place in Ukraine has captured the world’s attention. It has also impacted Mexico, notwithstanding how distant the conflict rages. Mexico condemned the attack on Ukraine before the United Nations Security Council, of which Mexico serves as a member. Despite its denunciation at the U.N., Mexico has maintained a neutral position based on its constitutional principles governing the conduct of foreign policy. Such principles are: peoples’ rights to self-determination; non-intervention; peaceful conflict resolution; prohibitions on the threat or use of force in international affairs; the legal equality of the Nations; international cooperation for development; and the fight for international peace and security. A careful review of these principles suggests that the condemnation of the aggression occurring in Ukraine is not against Mexican constitutional provisions. On the contrary, numerous elements exist which allow the country to support taking a tougher stance against the conflict.
The enunciation of these constitutional principles suggests: peaceful resolution of conflicts, non-intervention, prohibition of threat or use of the force in international affairs and the international cooperation for development and the fight for international peace and security. Additionally, the world’s situation demands a proactive - not a passive and neutral - position. After the two countries at war Ukraine (invaded) and Russia (invader), a large burden of the response to the conflict falls on the United States based on its position as a nuclear, economic and military superpower. The United States has shown its leadership to the NATO member countries and the world. Mexico is no exception. Being the United States’ main commercial partner (80% of the Mexican exports go to the U.S.), it is only natural and appropriate that Mexico display a less neutral expression and more energetic disapproval of the atrocities that are currently taking place in Ukraine.
Recently, the Fifth Collegiate Labor Court of the First Circuit published judicial precedent number I.5o.T. J/1 L (11a.), titled “Resignation. Standards for weighing evidence that courts must consider if an employee argues that a resignation was forced, and he received instructions to execute it, and the employer states the termination was voluntary.”
In this decision, the Court held that when the employer alleges that the termination of the employment relationship was voluntary, and the employee argues that he was forced to sign his resignation and, even received instructions to do so, the employer must prove the existence of the original resignation, which must contain with certainty elements to demonstrate convincingly and logically the intent, voluntary nature, and spontaneity of the employee’s decision to resign.
Additionally, the Court determined that if the employer can show the above evidence, it shall fall on the employee to show, among other requirements, the influence, coercion or alleged physical, moral or economic intimidation of the employer. However, the employee is required only to provide objective indications that reasonably allow one to conclude that consent attributed to the voluntary termination of the labor relationship was questionable or uncertain. The employee’s proof shall evidence the suspicion, doubt or likelihood of concluding the absence of required safety, autonomy and free will conditions to underlie the resignation, or otherwise that such show that the human rights of the employee were violated. The above will apply since the Court recognized the existence of disproportionate or unequal positions between employers and employees from an economic, social and cultural perspective, as well as the existence of practical situations in which, among others, the firing of the employee is intentionally concealed.
Regardless of the outcome of the recall election held throughout the country on April 10, 2022 to determine whether the president will remain in office, Mexico will hold local government elections in the states of Aguascalientes, Durango, Hidalgo, Oaxaca, Quintana Roo and Tamaulipas. All these states play an important role in national compact that governs the Republic; however, current conditions will focus public attention on a few of them, which will in turn raise the politic temperature of the country. The big mystery is whether MORENA, the party of President Andrés Manuel López Obrador, will continue to win elections and hold an increasing number of political positions. The approval rate of President López Obrador decreased four points, from 62% at the beginning of 2022, to 58% in March, but such does not constitute an unequivocal indicator that voters will change their political preferences when elections are held on June 5, 2022.
Of the six states being contested, the Partido Acción Nacional (PAN) governs three: Aguascalientes, Durango and Tamaulipas; the Partido Revolucionario Institucional (PRI) governs two: Hidalgo and Oaxaca; and the Partido de la Revolución Democrática (PRD) just one, Quintana Roo. The ruling MORENA party currently governs none of the six states. Therefore, in some ways MORENA has everything to gain and nothing to lose. The other parties that form the political opposition will use their political capital to fight for increased support, particularly the PRI, which has maintained its bastion in traditionally pro-PRI states such as Hidalgo and Oaxaca. Losing such States would present the PRI with an even bigger crisis than the one it faces now.
The result of the presidential recall election will likely be an indicator of the results to expect in the June elections. However, two months is a long time in the volatile world of Mexican politics. We shall soon see how the political thermometer in Mexico will behave.
On November 12, 2021, a Decree amending various provisions of the Mexican Income Tax Law and related regulations was published, effective January 1, 2022. The Decree includes changes to article 160 of the Income Tax Law and establishes that for purposes of proceeds from the sale of Mexican real property, the source of wealth is considered to be in Mexican national territory when such property is located in Mexico. This means that non-Mexican residents who pay taxes abroad are now required to pay Mexican income tax (“ISR”) on income from the sale of real estate in Mexico. Further, tax residents abroad may also be subject to the payment of ISR when they acquire real estate in Mexico.
With respect to income tax payable by tax residents abroad, the reform to the fifth paragraph of article 160 of the Income Tax Law establishes that, when the tax authorities conduct an appraisal (exercising its powers of oversight and verification) that results in a valuation exceeding 10% of the amount of the purchase price, the total difference will be considered as income to the purchaser residing abroad. The tax would then be determined by applying a25% rate on the total of such difference, with no deductions allowed, which must be withheld and paid by the seller if the seller is a Mexican tax resident or a foreign tax resident with a permanent establishment in Mexico. In this manner the seller will take on the purchaser’s obligation to make the required tax payment. Thus, the obligation becomes a joint responsibility of the seller and purchaser. It is important to note that the amendment is consistent with the provisions governing gratuitous acquisitions, which also generate a 25% tax on the value of the agreed consideration charged to acquiring parties who reside reside abroad.
On January 14, 2022, the Mexican Department of Economy published in the Official Journal of the Federation new Official Mexican Standard NOM-004-SE-2020, Commercial information-Labeling of textile products, clothing, its accessories and linens. Such new set of rules (“NOM” per its acronym in Spanish) serves to cancel NOM-004-SCFI-2006). The new NOM will enter into force as of January 14, 2023, and replaces the current NOM-004-SCFI-2006, which has been in force since August 20, 2006.
The purpose of the new NOM is to establish the rules for providing information to final consumers that must be contained in packaging and labels of textile products, clothing, its accessories and linens, either for domestic manufacturing or importation, for products imported and sold in Mexico.
Among the new provisions of the NOM are the following:
1. The list of products exempted from compliance is increased, including surgical face masks, disposable clothing, textile laces and straps, among others.
2. The provisions of NMX-A-029-INNTEX-2010,Textile industry-Intertwined textiles-Auto-extinguishable fabric-Specifications, and ISO 13688:2013 Protective clothing General requirements, are incorporated as referenced regulations.
3. Relevant definitions are added, such as “marketer”, “QR code label”, “recycled fibers”, “recovered fabrics”, “protection supplies”, “licensee”, “product responsible”, “protection clothing”, “protection textiles” and “technical textile”, among others, and certain existing definitions are amended such as “consumer”, “manufacturer”, and “textile”, among others.
4. The use of the Taxpayer Registry Number of the manufacturer, licensee or importer, as appropriate, becomes mandatory.
5. The procedure to evaluate compliance with the new NOM is detailed.
6. The option of adding labels with QR code (Quick Response Code) is included, without such replacing the mandatory labels or the other information that must be included.
7. It is mandatory to specify any contents from ornaments incorporated into the products regulated by the NOM when the weight of such is more than 5% of the total product weight.
It is important that manufacturers, importers and sellers of the products regulated by the NOM become familiar with the new contents of such, and be ready to comply with the new rules beginning on the date the NOM enters into force. In this regard, any certifications and audit compliance reports issued under the current rules will continue to be valid as issued, and products audited under the current rules may be sold until current inventories have been exhausted.
When the pandemic arrived in 2020, the way in which certain legal proceedings were conducted changed, in some cases radically. These may be the most important and significant updates not deriving from legislative amendments, but rather the existing legal framework. This resulted in certain modifications to the way the legal machinery was carried out to achieve a modernized and efficient system, appropriate to the prevailing health and safety needs.
Those who saw the most changes in their practice are litigation attorneys and court personnel, since prior to the pandemic the law and tradition dictated that court files must always be kept physically, and any legal action must be evidenced on paper. However, the isolation and social distancing ordered by the authorities brought rapid technological advances that have allowed parties to continue legal proceedings, even with the corresponding delays caused by scheduling and by the spread of infections in the workplace.
Such technological advances have been implemented by using identity verification and virtual document delivery systems, through platforms created specifically by the federal and local judicial authorities for such purposes. Such systems have made available to litigants the tools needed to make to review case files virtually through a website or a mobile application, and to be able to file motions without the need to be physically present at the courthouse, as has always been required.
The updates mentioned do not imply that courts are not obliged to keep a physical version of the case file, but with each passing day, the migration to a virtual file management system, as opposed to a physical one, is becoming more of a reality considering the efficiency and convenience of the software in which these documents are created. Likewise, handling a virtual file in the past two years has guaranteed access to justice as provided by the Mexican Constitution and international treaties. Without such advances, and given the suspension of in person activities in the courthouses, it once seemed impossible to ensure parties are provided proper access to justice.
In this context, the various State courthouses throughout Mexico have developed the platforms needed to file motions virtually and have even developed their own advanced electronic signature (i.e. Estado de Mexico, Coahuila and Tamaulipas, among others), which requires that the litigant visit the court’s office to carry out a verification of identity. It should be noted that the Federal Judiciary was able to make available the acquisition of the advanced electronic signature to all its users, through remote verification means with an Interinstitutional Agreement with the National Electoral Institute. Such efforts allowed for and guaranteed access to justice at a time when the public was not allowed to physically review their case files.
These advances allowed the judicial system to continue in motion and to be suspended the little time as possible during the pandemic, especially considering that the administration of justice is an essential activity in any legal system. Without any doubt today there is better access to the court system and the democratization of justice, considering that access to judicial files may be carried out from anywhere in the world and at any time with just an internet connection.
There are certain local courts which to date have not achieved the same technological advances, which makes them less competitive and make access to justice more difficult. In connection with this, in the wake of the pandemic, the judicial system leaves us with technological advances which translate to and materialize in better administration of justice, reduction of time and costs, and a better general perception of the work carried out by judicial authorities.
On December 16, 2021 the Department of Infrastructure, Communications and Transportation (“SCT” per its acronym in Spanish) issued a Decree updating the Bill of Lading form for Federal Motor Carrier Transportation and ancillary services (the “Decree”). The Decree was published in the Official Journal of the Federation in order to update the Bill of Lading forms previously issued by the SCT. The updates stem from new regulations issued for Supplemental Bills of Lading (the “Supplement”), and is incorporated into the income Internet Digital Tax Invoice (“CFDI” for its acronym in Spanish). The Decree establishes that the Supplement will constitute legal title of the contract between carriers and their clients, and that the conditions set forth in the Exhibit to the Decree will govern the relationship between such carriers and clients. The Decree revokes previously applicable regulations issued December 15, 2015. This means that going forward Bill of Lading templates used under the prior regulations will no longer be valid.
The Decree contains a Single Exhibit setting forth the terms and conditions of services governed by a Supplement, among which the most relevant are:
1. The client is responsible for delivering and providing all information and documents needed to engage the transportation services, and for compliance with the document requirements mandated by the applicable laws and regulations, including the proper fulfillment and compliance when issuing a Supplement.
2. If the load is not taken from the carrier’s facilities when as agreed, within 30 business days from the date on which such load is available to client, the carrier may carry out a public auction to sell the load per the terms of the Mexican Commerce Code.
3. In order for a carrier to assume liability for the replacement value of the load for any risks, including acts of God and force majeure, the value of the load must be expressly stated, and the parties must agree to an additional charge equivalent to the insurance premium obtained, and the collection of such needs to be included in a CFDI with Supplement.
4. In case no additional charge is agreed and coverage is waived, if the load is lost, the carrier will be liable only for the equivalent of 15 Measurement and Update Units (“UMA” per its acronym in Spanish) ($1,433.30 pesos) per ton, for shipments exceeding 200 kg., and 4 UMA ($344.88 pesos) for shipments under 200 kg. Note that this provision, and that described in item 3. above, contravene section V of article 66 of the Law for Roads, Bridges and Federal Motor Carrier Transportation.
5. The motor carrier’s client may make claims in writing for any missing load or damages solely within the 24-hour period following the delivery of the load by the carrier. Such provision runs contrary to the term to claim a missing load or damages under article 592 of the Mexico Code of Commerce.
It is advisable that shippers using motor carrier transportation companies execute written transportation services agreements specifically including the motor carrier’s service terms and conditions, and waiving the provisions of the Decree. This is especially the case given that the Decree’s appears to mainly benefit carriers, leaving their clients, and users of federal motor carrier transportation services, at a disadvantage.
Several weeks have passed since Mexico’s President submitted his initiative to amend the Constitution on energy matters to the Chamber of Deputies. Since then, much has been written and said about its aims and the negative consequences it would have if approved. Most of the analyses have dealt with the substantive aspects of the initiative such as: (i) re-including all electricity generation and supply as activities belonging exclusively to the State; (ii) “cancelling” permits granted for such activities; and (iii) ensuring that the Federal Electricity Commission (“CFE”) generates at least 54% of the country’s electricity requirements.
However, little discussion of the organic aspects of the proposal has taken place, which include transforming the CFE into a federal agency with constitutional autonomy; integrating it vertically and horizontally, with certain exceptions; bringing the National Energy Control Center (“CENACE”), operator of the National Electric System, back to CFE; and lastly, but very importantly, eliminating the National Hydrocarbons Commission (“CNH”) and the Energy Regulatory Commission (“CRE”).
The initiative proposes to delete the eighth paragraph of Article 28 of the Mexican Constitution, a precept dedicated to enshrining free economic competition. Today, such paragraph establishes that the Executive branch will have coordinated regulatory bodies in energy matters named the CNH and CRE. In the third transitory article of the reform decree, the initiative reiterates that the CNH and CRE are eliminated, and that their structures and attributions would be incorporated into the Department of Energy (“SENER”), as appropriate.
Unfortunately, the initiative’s explanatory note does not justify the elimination of the regulatory bodies, and merely argues that their creation took fundamental decisions away from the State and entrusted them to bodies that were “not politically responsible”. If this refers to the successive institutional isolation of the CRE from electoral politics, this was indeed the intention since its creation in 1994 as a body of SENER but with deliberative and independent integration; with its own law and powers of authority since 1996, until it became the federal agency conceived in the 2013-14 reform, separate and at the level of SENER, yet coordinated by the latter.
Under the “Regulatory State” model adopted by Mexico during the last decades, regulatory bodies detail the rules of the economic market using technical knowledge, monitor the application of those rules, sanction non-compliance, and act as arbitrators with a claim of impartiality. In open energy markets where there are dominant players, natural monopolies, information asymmetries, and negative externalities, the existence of a State body that provides certainty to all investments is indispensable. But, above all, that serves as a body to protect end users, who are the ones to be benefitted by effective economic competition.
If the initiative is approved in its terms, the powers of CRE would become the responsibility of SENER, “as appropriate”, as stated in the third transitory article. However, none of what currently corresponds to the CRE in the electricity sector would correspond to SENER, since the reform would turn the CFE into the State agency responsible for the entire strategic area of electricity, including the activities of the sector’s value chain, but also its planning (currently in charge of SENER), control of the electricity system and dispatch of generation (currently the responsibility of CENACE), as well as determining transmission, distribution, and end user tariffs (currently determined by the CRE). In addition, there would no longer be any generation or supply permits to be granted, nor would there be any records in the registries of traders or qualified end users.
In the case of both electricity and hydrocarbons grids, the CRE now approves the general terms and conditions for rendering services, including the maximum rates that companies may charge, in order to meet the key principle of open and non-discriminatory access. Without a deliberative and independent body with transparent deliberation, Executive instructions would translate into direct orders down the public administration’s chain of command, eroding the certainty essential for investment.
Instead of making the constitutional mistake of eliminating the CRE, serious thought should be given to its definitive strengthening by providing it with greater autonomy, outside the sphere of the Executive branch. Regulators must be committed to the public interest and should not promote the specific interests of any particular company or companies, even if they are State-owned enterprises.
An extended Spanish version of this article was published on January 17, 2022 at think tank Mexico Evalúa’s blog in “Animal Político”; please click here to read it.