Context
On October 1st, 2024, Mexico sworn in its first female president, Claudia Sheinbaum, who vowed to continue the legacy of her predecessor and party leader, Andrés Manuel López Obrador (hereinafter referred to as “AMLO”).[1]
This transition of power occurs amidst massive protests throughout the country and a paralyzed judiciary, which has been on strike since August 19th due to recent constitutional reforms that might change the future of the country for the following decades.[2]
In February of this year, AMLO, the now-former president of Mexico, presented Congress with more than 20 constitutional and legislative reform proposals, covering a broad variety of topics. These, among others, included the dissolution of autonomous specialized bodies[3], like Mexico's Antitrust Agency (COFECE), the Transparency and Access to Information Agency (INAI), the Development Evaluation Agency (CONEVAL) and Telecoms Regulator (IFT), as well as giving control to the Army over the civilian National Guard[4], the latter of which was published on September 30th, 2024.[5]
Notwithstanding the major structural changes of the judicial reform -including the election of judges by popular vote, and the reorganization of the Supreme Court with a focus on limiting its independence- its overall impact on arbitration in the country will be the main focus of this article.
Why the Judiciary?
Both AMLO and Claudia Sheinbaum justify the necessity of the reform on the alleged corruption of the judiciary, the need to eliminate nepotism, influence peddling, the conflict of interest and the sale of justice to the highest bidder, as well as condemning their high salaries.
While those remarks are not entirely untrue, especially at the 32 state judicial branches, many agree that the reform comes as a result of political retaliation. Throughout AMLO’s presidential term, the Judicial Branch, specially at the federal level, was the only power to keep the executive in check, by suspending and/or declaring as unconstitutional several legal reforms pedaled by the political forces in power.
Just to mention a few examples:
In 2022 Mexico’s Congress passed legal changes giving the army the operational, financial and administrative control of the National Guard. Months later, however, the Supreme Court of Justice of the Nation (hereinafter “SCJN” or “Supreme Court”) ruled the proposal unconstitutional.[6] On September 30th, 2024, these reforms were enshrined in the Constitution.
The Supreme Court invalidated AMLO's “decretazo”, a presidential decree which sought to classify as “of public interest and national security” the main infrastructure projects, which prevented them from being transparent and accessible through requests for information.
In 2022-2023 an attempt was made to legislate a set of electoral reforms known as “Plan B”, which weakened the pillars of Mexico's electoral system. The SCJN declared it unconstitutional and suspended its application due to serious violations in the legislative process.[7]
AMLO's electricity reform, approved in 2021, sought to prioritize energy produced by the Federal Electricity Commission (CFE), a state-owned company, over renewable energy from the private sector. The reform was suspended by a federal judge on the grounds that it violated the principles of economic competition and free concurrence[8], and at the president's request, this judge was investigated for his decision.[9] Finally, the SCJN declared the reform unconstitutional on the grounds that it contravened fundamental rights and international agreements on clean energy and competition.[10]
With the support of a qualified majority in the Chamber of Deputies and the Senate, Morena and its allies pushed for the approval of this reform. However, the legislative process has been questioned due to the speed with which the initiatives were approved, as well as the irregularities reported during the sessions, such as the use of alternate venues, like a public gym, and voting against judicial orders. Despite these controversies, the reform was enacted on September 15, 2024, the day of Mexico’s Independence celebrations.[11]
Key Changes introduced by the Reform
The recent judicial reform in Mexico establishes fundamental changes in the structure of the Judicial Branch, highlighting the popular election of judges as one of its most controversial points. Starting in 2025, these judges will be elected by popular vote in various stages, which will imply a massive reconfiguration of the judicial system, replacing the current career-judges. Below are the key details of the reform:
❖ Popular Election of Judges
➢ “The Senate will have to issue a call for candidates for the thousands of judgeships nationwide. And Mexico’s electoral agency would have to start organizing the judicial elections. At some point, state legislatures would modify their local constitutions.”[12]
➢ “The plan is for voters next June to elect all the Supreme Court justices; members of the newly created Disciplinary Tribunal; and about half of the country’s 7,000 judges, with the rest elected in 2027. An average Mexican might have to sift through anywhere from hundreds to thousands of candidates when they vote.”[13]
❖ Reducing the number of Supreme Court Justices from 11 to 9, and their term from 15 to 12 years.
❖ Introduction of “Faceless Judges”
➢ A mechanism that seeks to protect the identity of judges in high-risk cases, especially those related to organized crime. This practice, previously implemented in other countries, has been stated to be contrary to human rights by the Inter American Commission on Human Rights[14] as a flagrant violation of due process.
❖ New Supervising Organ
➢ The reform eliminates the Federal Judiciary Council, which administers and monitors the conduct of judicial officers, and mandates the creation of an administrative body and a Judicial Disciplinary Tribunal.
The Impact of the Judicial Reform on Arbitration
There has been much speculation about what these changes will imply for the rule of law in Mexico, and this article will be no exception. However, it is important to note that, like other analyses, what is presented here remains generally speculative.
A. Widespread use of Alternative Dispute Resolution Methods
The most obvious hypothesis is that the growing distrust in the courts, due to suppression of the technical and exam-based judicial career track, will increase the use of alternative dispute resolution methods, like arbitration. As the independence, specialization and professionalism of popularly elected judges are called into question, many commercial and civil agents will surely opt to resolve their disputes with a method that guarantees, at least theoretically, all the aforementioned qualities.
B. Court Interference, Enforcement of Arbitral Awards and State-Owned Entities
There is little reason to believe that popularly elected judges will annul or refuse the enforcement of awards issued in arbitral procedures between two or more private parties. In this scenario, my view is that arbitration remains an effective and relatively secure tool for the resolution of disputes.
In my estimation, elected judges may be more susceptible to political pressures in arbitrations regarding Mexican state-owned entities. In these cases, as well as in investment arbitration cases, they may face considerable pressure to protect national interests or government resources, leading to potential biases in their decisions. We can expect rulings that favor state entities by either annulling unfavorable arbitral awards or refusing to enforce them, citing public policy concerns or national sovereignty to be more and more common as the reform is fully enforced. While it would not be the first time[15], the new judicial framework might exacerbate similar challenges.
C. Risk to Mexico’s Standing in International Arbitration
The reform has justifiably raised significant concerns internationally about the country’s standing in international arbitration forums. The reform, as well as the outcome of the election have caused a decrease in the value of the Mexican currency of near 12%.[16]
Mexico has historically been viewed as a jurisdiction that generally respects arbitration awards by adhering to the standards set by numerous international treaties. Still, the introduction of a politicized judiciary threatens to erode this trust and negatively impact Mexico’s competitiveness and attractiveness in the global arbitration arena. Moreover, the enforcement of international treaties, such as those under the USMCA, could become less reliable.
Foreign investors will most likely be discouraged from choosing Mexico as either a venue for arbitration or as a profitable country to invest in. They will fear that any potential disputes may not be resolved fairly or that their final awards will not be properly enforced.
D. The Challenge of the Reform before the Supreme Court
The Reform was challenged before Mexico’s Supreme Court through several Actions of Unconstitutionality promoted by the political parties in the minority. It was thought unlikely—though not impossible—that these challenges would succeed. Legally, constitutional reforms cannot be contested based on their content. However, there are precedents where the Supreme Court has hinted at the possibility of contesting a constitutional reform by focusing on procedural violations in the legislative process rather than the substance of the reform itself.[17]
Surprisingly, on the 5th of November 2024, the Supreme Court discussed Justice’s Alcántara Carrancá draft resolution which validated the process of the reform and aimed at the partial invalidity of it. The draft resolution actually accepted certain elements of the reform, including the popular election of Supreme Court justices, magistrates of the Disciplinary Tribunal, and senior magistrates of the Electoral Tribunal, as well as implementing austerity measures for future judicial positions, dissolving certain trust funds, creating a Disciplinary Tribunal, among others. However, the draft resolution aimed at the invalidation of other sensitive aspects of the reform, such as the popular election of all district judges and magistrates, the mass removal of judges, salary cuts for active judges and magistrates, making Disciplinary Tribunal rulings unchangeable, and prohibiting the suspension of general laws in amparo (constitutional relief) cases.[18]
The draft resolution was approved only by a 7 to 4 vote, and was therefore dismissed, since a qualified majority of 8 was deemed necessary to invalidate the reform. Eight out of the eleven Supreme Court Justices have already announced their resignation and refusal to participate in the upcoming judicial elections—a decision that, according to many experts, signals the beginning of the end for Mexico’s judiciary.
5. Conclusion
The immediate concerns of a politicized judiciary, the potential for inconsistent enforcement of arbitral awards and Mexico’s diminishing attractiveness as an international arbitration hub remain. Regardless of the implications for the rule of law in Mexico and the impact on citizens seeking justice in its courts, arbitration tends to prosper in jurisdictions where domestic courts are strong and respected. The arbitrary changes on Mexico’s judiciary may generate too much instability, which will undoubtedly affect its attractiveness as an arbitration venue.
The current outlook appears grim. The long-term effects on arbitration, while mostly negative as of the time of writing this article, may evolve as the legal and political landscape stabilizes or shifts under future administrations. Furthermore, the secondary laws supposed to regulate and enforce the reform are still in line to be discussed by Congress.
Now more than ever, the legal profession must champion the preservation of these fundamental principles to safeguard both domestic and international justice.
[1]Rodríguez Mega, Emiliano and Kitroeff ,Natalie. “Mexico’s First Female President Takes Office
.” The New York Times, 1 Oct. 2024,www.nytimes.com/2024/10/01/world/americas/mexico-claudia-sheinbaum-president.html.
[2] More Mexican Judges Join Strike over Proposed Judicial Overhaul." Reuters, 20 Aug. 2024, www.reuters.com/world/americas/more-mexican-judges-join-strike-over-proposed-judicial-overhaul-2024-08-20/.
[3] Alín, Paola. “Órganos Autónomos: Qué Son y Qué Implica la Reforma para Desaparecerlos.” El País, 28 Aug. 2024,www.elpais.com/mexico/2024-08-28/organos-autonomos-que-son-y-que-implica-la-reforma-para-desaparecerlos.html.
[4] Rodríguez Mega, Emiliano. “Mexican Senate Votes to Give Military Control of Civilian National Guard.” The New York Times, 25 Sept. 2024,www.nytimes.com/2024/09/25/world/americas/mexico-national-guard-military-control.html.
[5] DECRETO por el que se reforman y adicionan los artículos 13, 16, 21, 32, 55, 73, 76, 78, 82, 89, 123 y 129 de la Constitución Política de los Estados Unidos Mexicanos, en materia de Guardia Nacional." Diario Oficial de la Federación, 30 Sept. 2024, www.dof.gob.mx/nota_detalle.php?codigo=5739985&fecha=30/09/2024
[6] Action of Unconstitutionality 137/2022. Supreme Court of Justice of the Nation, 2023,www.scjn.gob.mx/sites/default/files/proyectos_resolucion_scjn/documento/2023-04/A.I.%20137-2022.pdf.
Associated Press. “Mexico court: National Guard shift to army unconstitutional.” AP News, 18 Apr. 2023, apnews.com/article/mexico-national-guard-constitution-civilian-military-8c0be1ed6c6f28d180e2b9f9d8ccbcc5
[7] Action of Unconstitutionality 29/2023 and 30/2023, 31/2023, 37/2023, 38/2023, 43/2023 y 47/2023. Supreme Court of Justice of the Nation,https://www.scjn.gob.mx/sites/default/files/proyectos_resolucion_scjn/documento/2023-05/AI%2029-2023%20Y%20ACUM%20LGCS%20PROYECTO%20PARA%20PLENO.pdf
Action of Unconstitutionality 71/2023 and 75/2023, 89/2023, 90/2023, 91/2023, 92/2023 y 93/2023. Supreme Court of Justice of the Nationwww.scjn.gob.mx/sites/default/files/proyectos_resolucion_scjn/documento/2023-06/A.I.%2071.pdf
[8] Saúl Vela, David. El Financiero.” Juez dicta suspensión definitiva a reforma eléctrica de AMLO, 19 Mar. 2021,www.elfinanciero.com.mx/nacional/juez-dicta-suspension-definitiva-a-reforma-electrica-de-amlo/.
[9] Proceso. “AMLO pide a Arturo Zaldívar investigar a juez que suspendió reforma eléctrica.” Proceso, 15 Mar. 2021,www.proceso.com.mx/nacional/politica/2021/3/15/amlo-pide-arturo-zaldivar-investigar-juez-que-suspendio-reforma-electrica-260068.html.
[10] Garrigues. “Mexico’s Supreme Court Determines the Unconstitutionality of the Reform of the Electricity Industry Law Enacted in 2021.” Garrigues, 7 Apr. 2022, www.garrigues.com/en_GB/new/mexicos-supreme-court-determines-unconstitutionality-reform-electricity-industry-law-enacted
[11] “DECRETO por el que se reforman y adicionan los artículos 108, 116, 122 y 123 de la Constitución Política de los Estados Unidos Mexicanos." Diario Oficial de la Federación, 15 Sept. 2024, www.dof.gob.mx/nota_detalle.php?codigo=5738985&fecha=15/09/2024
[12] Wagner, James. "Mexico’s Contentious Judiciary Overhaul Becomes Law." The New York Times, 15 Sept. 2024,www.nytimes.com/2024/09/15/world/americas/mexico-overhaul-judiciary-law.html
[13] Ibid
[14]OEA/Ser.L/V/II Doc. 97/24, paras. 124-126 & recommendation 7. Available at:https://www.oas.org/es/cidh/informes/pdfs/2024/Informe_EstadoExcepcionDDHH_ElSalvador.pdf
[15] Reference could be made to the famous Corporación Mexicana De Mantenimiento Integral, S. De R.L. De C.V. v. Pemex‐Exploración Y Producción, 832 F.3d 92 (2d Cir. 2016), where Mexican courts annulled an award issued against a state-owned entity by applying newly-enacted legislation retroactively. (The decision by the U.S. Court of Appeals to enforce the annulled award has also been widely criticized for undermining the principles of international comity and respect for foreign judicial decisions.)
[16] Campos, Rodrigo, and Noe Torres. "As Investors Worry over Mexico's Judicial Reform, Opportunities Emerge." Reuters, 17 Sept. 2024, www.reuters.com/world/americas/mexicos-judicial-reform-stokes-investor-fears-though-some-analysts-bullish-2024-09-17/.
[17] Alcántara Silva, Andrés. "La Reforma Judicial: Hechos, Daños e Impugnaciones." El Juego de la Corte, 18 Sept. 2024, https://eljuegodelacorte.nexos.com.mx/la-reforma-judicial-hechos-danos-e-impugnaciones/.
[18] Draft judgment for the actions of unconstitutionality 164/2024 and its accumulated cases 165/2024, 166/2024, 167/2024, and 170/2024.Suprema Corte de Justicia de la Nación. (2024).https://www.scjn.gob.mx/sites/default/files/agenda/documento/2024-10/AI-164-2024-y-sus-acumuladas-Proyecto.pdf
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