Q&A: Clyde & Co – Garza Tello

Clyde & Co – Garza Tello on Mexico’s legal market and its current trends

What are the current trends and developments in the disputes legal market in Mexico, and how do they impact legal practitioners?

During the last decades, the dispute legal market has been in constant growth in Mexico. The nearshoring phenomenon has caused Mexico to become the biggest commercial partner for the US, and foreign companies settling in Mexico are in constant need of more sophisticated legal services. This has caused many foreign firms to acquire or merge with firms in Mexico, providing legal services subject to a more rigorous competition every day.

Even with these changes, Mexico is not increasing its ethical environment, particularly in the field of litigation, where multimillion-dollar disputes are commonly hostage of courts that are unduly influenced. Succeeding in this environment demands highly technical skills, and in high-stakes litigation, to challenge arbitrary decisions up to the final instances, including the Supreme Court of Justice.

Can you provide an overview of the key regulations and legal frameworks that govern dispute resolution in Mexico?

Commercial disputes in Mexico are governed by the Commercial Code, which includes the rules for oral commercial trials, written commercial trials (the exception), summary commercial trials and other special proceedings, including those for the assistance and supervision of commercial arbitration. In the absence of express provisions, the Federal Code for Civil Procedures applies and, ultimately, the respective local code for civil procedures.

All judicial proceedings are subject to a last-instance recourse called ‘amparo’. Amparo is a constitutional recourse intended to protect human rights and due process and is available for individuals and companies. Most practitioners are of the opinion that this last recourse is necessary to ameliorate the effects of trial courts that are generally susceptible to undue influences; however, they create a substantial layer of delays and costs that need to be considered when companies are faced with the choice between arbitration and judicial proceedings.

How has the demand for dispute resolution services evolved in Mexico in recent years, and what factors contribute to this change?

International firms are acquiring or merging with smaller local firms to reach a wider range of clients worldwide. In addition, many boutique litigation firms are constantly emerging. Firms are faced with the challenge of attracting talented attorneys and keeping them as part of their teams.

What are the common types of disputes that legal professionals in Mexico are currently handling, and are there any emerging areas of contention?

It is common for boutique firms to specialise in certain areas of the law, but one of the many trends in the market is the existence of interdisciplinary litigation with cross-border effects involving high-stakes disputes, which require a ‘complex litigation’ team. These cases require a high degree of legal expertise and meticulous management.

Another trend has been caused by the political environment in Mexico. The current president in Mexico does not have the qualified majority of Congress necessary to amend the Constitution and reverse many of the liberal reforms of his predecessors. When faced with this reality, the current administration along with the favouring fraction of the legislative branch, have enacted dozens of federal statutes that contradict the Mexican Constitution. This has caused a new type of specialised litigation for our firm: amparo recourses against legal reforms that contradict the Constitution and, in some cases, reforms that pass without following the legislative process. In this type of litigation, obtaining injunctive relief becomes vital for the survival of certain companies.

How do cultural and regional factors influence the approach to dispute resolution in Mexico, and how do legal practitioners navigate these dynamics?

Mexico is a civil law country immersed in a formalistic approach to evidence, aiming to avoid bad faith conducts (unlike other countries, that are based on assuming that everybody acts in good faith). The trend, however, is to create more flexible procedures where good faith is considered, and also, where trials are handled orally and there is a more immediate approach to the legal truth. This has been an influence from the common law system of our northern neighbour. An example, during the pandemic, the litigation migrated from a system where submissions were made and filed in hard copy, to a system that operates electronically. This has ameliorated the formalisms, as electronic documents – that need to be sworn to be truth – are now considered as originals, unless they are objected to by one of the parties or unless the court exceptionally orders the parties to submit them in hard copy.

Are there any notable challenges or obstacles faced by legal professionals in the disputes market in Mexico, and how are they addressing them?

Corruption and lack of preparation have been historic obstacles in our judiciary, particularly in state courts. There is still a lot to grow in this area, and at least the policy of the judicial committees is to show zero tolerance to corrupt public servants. Legal professionals facing this kind of trouble may resort to administrative complaints against judges and/or their personnel (something unusual in most countries). In parallel, the proper use of amparo recourses generally resolves the deficiencies that may be observed during a trial.

With respect to ADR, although arbitration and mediation have seen a continued growth, they still face challenges. Mediation has not permeated the business culture. And in arbitration, arbitrators with heavy loads of work, even when they have a good reputation, tend to be superficial when analysing and resolving the cases. Choosing the right arbitrator is of the utmost importance when commencing an arbitration.

What role do alternative dispute resolution methods, such as arbitration and mediation, play in the Mexican legal landscape, and how have they evolved over time?

Alternative dispute resolution methods are developing widely in Mexico, nevertheless they have not permeated enough within underlying agreements among national companies, while almost all transnational contracts include arbitration clauses. One exception is maritime agreements, particularly charter agreements, which include arbitration clauses by default. However, the problem in maritime arbitrations is that they are regularly seated in the US or the UK, even in cases where both parties are Mexican companies. This situation increases the costs of arbitration procedures and in many cases complicates the enforcement of provisional measures (for example, arbitrators’ measures are not enforceable in Mexico if they are issued in an arbitration with a foreign seat).

How are advancements in technology impacting the disputes legal market in Mexico, particularly in terms of case management, evidence gathering, and communication?

To this moment, most international firms have adopted a form of case management platforms; for example, to automatically review and follow-up the dockets of federal and local courts. Likewise, there are new tools to assist in the organisation and selection of documents during an arbitration or litigation case, that help to minimise costs. Also, during and after the pandemic, other technologies like videoconferencing and serving the parties via e-mail (which has been used in arbitration for a long time) have been implemented in judicial proceedings, something that has significantly reduced times and costs, and more importantly, are friendly to the environment as they avoid paper waste.

In our consideration, artificial intelligence has still not impacted the dispute practice in Mexico. The challenge is to implement AI tools that do not expose sensitive data of the cases and clients. Our firm is currently working in developing AI tools that respect clients’ data and will cause efficiencies in favour of our clients.

Can you discuss any recent landmark cases or legal precedents in Mexico that have significantly shaped the disputes legal market?

As explained above, the legal reforms proposed by our current President have triggered various amparo recourses. We have successfully obtained federal judgments declaring the unconstitutionality of those laws, in the maritime, scholarly research and mining sectors, as well as in some pro-bono cases defending the confiscation of trusts that were created in benefit of the public servants from the federal judiciary.

In these sectors, the firm has secured dozens of favourable Amparo resolutions as well as stays to protect the mining and marine companies’ rights and is representing on a pro-bono basis over 100 researchers and personnel of the judiciary to protect their rights. This new area in the firm has emerged from the current political situation of our country.

How are law firms in Mexico adapting their strategies and services to meet the changing needs of clients in the disputes legal market, and what competitive trends are emerging in the industry?

As explained in the first question, the current trend is for attorneys to become more specialised and sophisticated. Competitive firms are hiring top talents that fulfil these expectations and adapting programmes of continued education for both junior and senior associates. As technology is changing the face of litigation and arbitration, the attorneys must also evolve.

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