Issue #
July - September 2022

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Economic Indicators

On September 14, 2022, updated financial indicators reflected:
Peso/Dollar Exchange Rate: $19.9653 pesos per Dollar.
Mexican Stock Exchange: The Mexican Stock Exchange (BMV) closed 46,745.15 points.
Interest Rates: The Average Interbank Rate (TIIE) for a 28-day period was at 8.8787%.

Methods for Judges to Uphold the Principles of the Mexican Constitution and Treaties

August 17, 2022

On June 19th, 2022, two important judicial decisions were issued by the First Chamber of the Mexican Supreme Court and published under case numbers 1a./J. 84/2022 (11a.) and 1a./J. 85/2022 (11a.), with the headings: “Adherence to Constitutionality and conventionality ex officio. Methodologies to exercise such adherence” and “Upholding Ex officio legal constitutionality and conventionality. Such does not imply that authority must always be exercised, without formally considering material aspects of admissibility and origin of the attempted actions.”

In said rulings, the First Chamber confirmed the obligation of judicial authorities not to apply laws and norms that could violate human rights in cases in which, in a particular way, such action is requested by the parties, or they notice that the law warrants said control, without setting aside the formal and material aspects of admissibility of the attempted actions.

The Court specified a practical methodology to be used by judges to exercise ex officio their authority regarding a law’s conventionality or constitutionality according to the following steps:

1) Identification. Identify the potentially affected human right, based on the facts of the case, which emerges from the narrative of the rightsholder or the evidence in the case file;

2) Source of law. Determine the source of that human right; that is, if it is recognized in the Constitution and/or international conventions to which Mexico is a member, and establish its subject matter by explaining its contents, in light of both its source and the precedent developed by the corresponding court;

3) Analysis of constitutionality and conventionality. Analysis of the potentially unconstitutional and unconventional law in light of the subject matter of the human right at issue and determine if such law is violated; and,

4) Determination. Rendering a decision on a law’s constitutionality and/or conventionality; that is, determining if the law is constitutional or unconstitutional, or conventional or unconventional; how it should be interpreted, and, if applicable, whether it should or should not apply in a specific case.

Through these case precedents, the criteria of the Court has been confirmed in the sense that judicial authorities must ex officio carry out their responsibility to control the constitutionality and conventionality of the laws and regulations they apply, clarifying the cases in which it proceeds to carry out said authority and control, as well as a practical methodology at the time of applying it, in such a way that it is not an arbitrary exercise of the judge’s decision not to apply the law to a specific case.


SENER Seeks to Limit Competition in the Natural Gas Market

August 9, 2022

On June 13th, Mexico’s Department of Energy ("SENER") issued an official communication instructing the National Center for Natural Gas Control ("CENAGAS") , as part of the requirements to transport natural gas from the import points where a State productive company (or its subsidiaries or affiliates; the "EPE") has reserved capacity upstream of said points, to observe the following  mandatory aspects:

1. That shippers, or those interested in receiving the natural gas transportation service, prove within a period of 60 calendar days that they receive their supply from an EPE. In the points where an EPE has reserved capacity, contracting with such should prevail.

2. That the provision of transportation services in any modality within the system operated by CENAGAS (“Sistrangas” by its Spanish acronym) is ensured by contracting upstream transportation capacity with an EPE.

3. That the authorizations of requests for transportation services (technical feasibility) are conditioned on the fulfillment of any of the above points.

Additionally, in its official communication, SENER exhorted the Energy Regulatory Commission (“CRE”) to modify the terms and conditions for the provision of services within Sistrangas in order to include the aforementioned rules.

In other words, SENER intends for Sistrangas’ shippers to purchase natural gas from the Federal Electricity Commission (“CFE”) or Petróleos Mexicanos (“Pemex”), or at least acquire the transportation capacity from them in U.S. territory. This is insufficiently grounded on SENER’s authority to establish, conduct, and coordinate Mexico’s energy policy. Thus, under the argument of using the EPE’s idle capacity in Sistrangas, SENER seeks to impose the EPE, and especially CFE, as marketers, which would violate the constitutional principle of free economic competition and concurrence. This is called for instead of making available to any interested party the idle capacity of the EPE through an open season in accordance with current legislation.

Mexico’s Federal Economic Competition Commission (“COFECE”) has warned that this strategy seriously and irreparably damages the conditions of competition in the natural gas market, and also in the electricity market, since it prevents equal access to the capacity of Sistrangas to shippers who would not want to contract with State-owned companies. The strategy limits the entry of new natural gas marketers, preventing to contract with the most efficient suppliers by adding a mandatory intermediation that could raise the prices of this fuel.

Meanwhile, CENAGAS has already notified certain transportation shippers via an official communication, requiring them to comply with SENER's strategy and to submit information showing that they have contracts with CFE or Pemex. In turn, Pemex issued a letter informing shippers of its available capacity to facilitate compliance with CENAGAS requirements.

As announced on July 20th, the United States Trade Representative decided to include the actions of SENER and CENAGAS in this field as one of the four items of Mexico's energy policy recently submitted to consultations in accordance with the United States, Mexico and Canada Agreement (“USMCA”).

As of today, some affected companies have filed amparo lawsuits against SENER's strategy and its initial implementation by CENAGAS. It has been made public that the First District Judge specialized in economic competition has granted at least one definitive injunction against the acts claimed in favor of ten companies, which implies that the new requirements would not be enforceable for them until their lawsuits have concluded.

We consider that that the lawsuits initiated by companies and, especially, the consultations initiated by two of the USMCA parties, may exert some pressure on the Mexican federal administration to rethink an energy policy that has repeatedly proven in court to be contrary to currently applicable law.


Mexico Publishes New Rules for Teleworking and Health & Safety in the Workplace

August 2, 2022

On January 21, 2021, Chapter XII Bis was added to Mexico’s Federal Labor Law ("LFT" for its acronym in Spanish) regarding the performance of work activities from a remote location to the workplace, now called teleworking (Teletrabajo in Spanish).

Although it is true that this type of work offers considerable benefits, it also generates new challenges for employers since it increases the locations where the employees’ obligations are carried out, and its obligations of care for the safety and health of employees.

The amendment to the LFT created new obligations for employers in connection with remote or teleworking, which will be established by the implementation of an Official Mexican Standard (“NOM” for its acronym in Spanish).  On July 15, 2022 the “Draft of the Official Mexican Standard PROY-NOM-037-STPS-2022, Remote Working – Safety and Health Conditions at Work” (the “Draft”) was published in the Official Journal of the Federation. You can read the complete Draft in Spanish by clicking here.

From a review of the Draft, it should be noted that, if approved, the NOM will apply only to employees working more than 40% of their shift in the remote work modality. It also establishes that the employer, with prior authorization from the employee, must inspect the place where remote work is carried out in order to verify health and safety conditions and to confirm an adequate workspace exists.

The process of creating a NOM begins with its inclusion in the Annual National Quality Infrastructure Program published by Mexico’s Department of Economy. Then, following the subsequent stages of proposal presentation, analysis, review, draft, assembly of working groups for the NOM’s study, deliberation, as well as the publication of the draft NOM in the Official Journal of the Federation requesting comments or suggestions for changes, which interested parties must make within the following 60 days.

Once the comment period has concluded, such comments are considered in the assembled working groups, regarding which it is important to keep track of the development of proposals and final terms in which NOM 037 may be established so that employers may properly implement the new rules as applicable to them.

Labor and Employment

Mexico’s Supreme Court Issues Decision on Scope of Powers of Attorney

July 28, 2022

In accordance with Mexican law, the delegation of authority to a third party, whether by a company or an individual, must follow a formal procedure through the execution of a written power of attorney, which in most cases consists of a written instrument establishing the specific authority that the attorney-in-fact will have. The granting of powers and legal authority takes on special importance in the case of companies, considering that the only way such can operate is through representation by individuals, who acquire the character of legal representatives or attorneys-in-fact to carry out those acts the company requires to fulfill its purposes.

The powers that may be granted to an attorney-in-fact can be general, limited or special, depending on the actions that the attorney-in-fact must carry out. Without the need to carry out a detailed analysis, in accordance with the provisions of article 2554 of the Federal Civil Code (“FCC”), the general powers can be described as follows: (i) lawsuits and collections, which are important in the context of litigation or disputes in any matter; (ii) acts of administration, which are essential for the operation of a company and allow for the execution of contracts and the execution of actions that are intended to preserve the assets of the company; and (iii) acts of ownership, which allow the sale or disposition of the principal’s assets.

The general powers contained in the FCC have been the subject of analysis by the Mexican courts on multiple occasions. In one of the most recent case studies, the Mexican Supreme Court of Justice resolved in 2018 through precedent for contradiction of thesis 225/2016, that a power of attorney for acts of administration is different from the power of attorney for lawsuits and collections and that each one has its own nature and purpose, since there is no hierarchy or gradation between both types of powers. The foregoing means that a power of attorney for acts of ownership does not contain implicit powers to administer, and likewise, that a power of attorney for acts of administration does not contain implicit powers for lawsuits and collections, as had been interpreted prior to said contradiction of thesis decision.

This new Supreme Court decision is important for companies, since those powers that they grant to their attorneys-in-fact must be in accordance with the actions that each attorney-in-fact performs in order to avoid situations in which the actions carried out by the attorney-in-fact could be disputed in terms of their authority.  Therefore, it is recommended that companies always determine the authority to be granted to attorneys-in-fact according to each case and specific situation.


The Importance of Complying with Mexican Health and Safety Regulations

July 18, 2022

As a result of the COVID-19 pandemic, and as part of the 2022 Inspection Program issued by the Department of Labor and Social Welfare ("STPS" for its acronym in Spanish), which is aligned with the obligations assumed by Mexico under the USMCA, with at least 40,000 actions scheduled for this year, there has been a significant increase in safety and health inspection visits at Mexican workplaces to detect violations in terms of general working conditions, outsourcing and safety and hygiene.  Inspections have also increased, due to the fact that the STPS inspectors realized that the majority of companies did not fully comply with applicable safety and health regulations when they were conducting extraordinary inspections to verify compliance with the guidelines related to COVID-19.

In many workplaces, this occurs due to the companies’ ignorance of the labor, social security and tax amendments that have entered into force in terms of general working conditions and outsourcing, as well as the applicable Official Mexican Standards (“NOMS” for its acronym in Spanish) issued by the STPS, pertaining to such workplaces and the activity they carry out.  Many companies that lease their facilities assume that it is the lessor who has the duty to comply with the amendments, provisions and NOMS in terms of safety and hygiene, which is only partially true, since the company, as employer of the employees and possessor of the facility, also has an obligation to comply with part of the above mentioned amendments, provisions and NOMS.

For purposes of compliance with applicable health and safety provisions and NOMS, the facilities, equipment, machinery and production processes must not only be analyzed from the perspective of their condition and technical characteristics, but also in accordance with the analysis of the work methodologies, organizational system and employees’ skills for the jobs they perform.  Thus, it is important that each company evaluate in terms of general working conditions, compliance with provisions related to the outsourcing reform, as well as its compliance with the applicable studies so that they are able to identify and analyze not only the risks that may lead to an accident or work related illnesses, but also those dysfunctional processes that may cause economic and productivity losses for the company.

As per the above, employers may through a preventive strategy detect risks, increase their response capacity in emergency situations, analyze safety conditions in facilities, update and improve processes and job descriptions for employees, identify deficiencies in its legal documents, and the equipment before any damage occurs and ensure greater availability of the facilities and the production process to achieve operational excellence. This will minimize the risks for the company and ensure it is in legal compliance and prepared for any inspection by the STPS.

It is worth noting that in most cases, at least five to twelve NOMS apply to each workplace in terms of health and safety matters.  Also, each one of these can include at least 30 guidelines, and the sanctions and/or fines for violations in terms of general working conditions, outsourcing and safety and hygiene may be calculated for administrative offenses and for the number of employees affected, at a rate of between 50 and 50,000 times the value of the Mexican Measurement and Updating Unit (from $4,811.00 Mexican pesos to $4,811,000.00 Mexican pesos; or around $250.00 to $240,000.00 USD). Such lack of compliance could have severe consequences for companies. In response to this, CCN has developed a specialized area for audits that includes matters of Mexican general working conditions, outsourcing, health and safety matters with extensive experience and the ability to support our clients to provide and assessment of their facilities and a preventive diagnosis.

Labor and Employment