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Francisco González de Cossío
Arbitrator and advocate, Mexico City
fgcossio@gdca.com.mx

The Mexican Judiciary has recently issued salutary judgments regarding the enforcement of arbitration agreements and awards. This article summarises and comments upon them.

Negative effect of the arbitration agreement

A recent Supreme Court decision irons out a textual blemish of the Mexican arbitration statute, which relates to the negative effect of arbitration agreements.¹

Mexican arbitration law is a (quasi-) verbatim copy of the UNCITRAL Model law on International Commercial Arbitration. One of the three departures of the Mexican lex arbitri from the Model text is the equivalent of article 8, having to do with the enforcement of the arbitration agreement. Whilet Model Law, article 8(1) provides that referral to arbitration need occur when a party so requests ‘no later than when submitting his first statement on the substance of the dispute’, Mexican arbitration law provides that referral may occur at any time any party so requests.

The difference may at first seem pro-arbitration – and that was the rationale of the author of the change. Further thought, however, reveals that it procures mischief: wasteful litigation is fostered; dilatory tactics are encouraged; and uncertainty results.

The arbitration statute was amended on 27 January 2011 to add an article indicating that referral need occur upon immediate request. As the textual blemish was not erased, an unfortunate antinomy remains.

Mexican practice on the matter was checkered, albeit inclined towards referral upon immediate request. However, technically, the statute could be read to warrant referral at any time. The textual versus practice divorce naturally lead to a challenge: the Mexican Supreme Court tacked the matter and held that referral need occur if requested in the first substantive brief. It anchored the conclusion on three premises: (1) the procedural principle that matters of jurisdiction need to be immediately raised; (2) that litigating while having an arbitration agreement meant that claimant’s ‘invitation’ not to exercise the right of arbitration ‘was accepted’ by the defendant when she did not ask for deferral; and, interestingly, (3) that a clash between two fundamental rights existed: the right to seek justice before courts, on the one hand, and the right to effective alternative dispute resolution (which includes arbitration), on the other. An equipoise conclusion was therefore called for, and the result was precisely that: the right to seek justice is exercised, not waived, when agreeing to arbitration. But said right is still a right: a claimant may lodge its claim before the judiciary and the respondent may refuse it by asking for referral. But an absent respondent asking for referral in its first brief, the right to hold the claimant to its arbitration-bargain is waived.

The decision is commendable, both in its premise and its conclusion. Not only does it reconcile the Mexican lex arbitri with its proper UNCITRAL heritage, but it also dissuades chicanery, allowing parties the flexibility of litigating if they wish to.

Characterisation of enforcement proceedings

In October 2019, the Mexican Supreme Court decided upon the proper constitutional (amparo) remedy to challenge judgments deciding upon the setting aside or enforcement of arbitral awards.²

The decision was much awaited as the initial ruling (called ‘Tesis’) took the view that indirect amparo was the proper procedural means to challenge them. Yet the final judgment awaited formal issuance.

The practical import of the decision is that two instances exist to challenge judgment either setting aside or enforcing awards. This result was disappointing to many: indirect amparo means that two procedural phases need be followed to reach a definitive ruling – one having res iudicata effect. When reading the Supreme Court’s reasoning, however, one finds that there is more than meets the eye.

The matter turned upon the proper characterisation of setting aside and enforcement proceedings: are they full-blown ‘procedures’ or simply satellite proceedings to secure coercive enforcement of the outcome of a true ‘procedure’: the award? (Under Mexican amparo law, final judgments are treated differently than other judicial acts, including enforcement decisions, while the former are challengeable by the amparo casación (which involves only one stage – direct amparo), the latter are challengeable by means of the indirect amparo, which involves two-stages.

The issue had divided several courts. And the split involved not only courts of different circuits, but of the same circuit, including the most active and important circuit (Mexico City). While the Third, Fourth, Seventh, Eighth, Twelfth and Thirteenth Appellate Civil Courts of the First Circuit characterised setting aside and enforcement proceedings as true procedures, the Second, Sixth, Tenth and Eleventh Civil Appellate Courts for the First Circuit considered that they were not.

The contradiction was brought to the attention of the Mexican Supreme Court and it held that the proper amparo was indirectas it was not an independent, autonomous procedure. Its existence was a function of what is to be construed as the main proceeding: the arbitration, and that procedure should be respected. The rationale is therefore one of deference to the arbitration procedure (even if the outcome means one more procedural phase).

In so holding, interesting dicta were voiced. For instance, it was said that the regime applicable to the setting aside and enforcement procedures is not wholistic; it is confined to enforcing the award. It is, therefore, not an autonomous, independent, procedure, but an ancillary one. It lacks substance (sustantividad propia). The congressional intention when regulating that procedure was establishing a specialised procedure, with limited jurisdiction.

Another obiter comment worth echoing is the view that a pro-enforcement bias exists as a result of the adoption of the New York Convention – quite a useful statement, coming from the highest court of the land.

The decision, therefore, is commendable in its analysis even if unsatisfactory in result: it displays an analytical backdrop favouring respect and finality of arbitration proceedings.

In this author’s view, as framed, a false dilemma may be unnecessarily assumed: one can accept that the setting-aside and enforcement proceedings are ancillary, have narrow jurisdiction, and should respect the arbitration, and still conclude that they are ‘final judgments’ of the sort challengeable through direct amparo. In so doing, more expedited enforcement would be procured.

Enforcement of arbitration awards

In June 2020, an important LCIA-award involving more than $220m was issued and its enforcement is being sought against a Mexican utility. Halting the enforcement action was sought by asking for interim relief whilst cognisance of the nullity/enforcement action was taken by the court. The court of first instance rejected the request (July 2020). Although the decision does not yet have precedential force, its reasoning is as profound as it is laudable and pro-arbitration. Three of its analytical steps deserve mention.

First, the court reasoned that conferring interim relief aimed at suspending the enforcement of arbitral awards would impinge upon the ‘system of distribution of competencies established by the Constitution and applicable legislation’.

Second, conferring that interim relief would allow that an authority (the judiciary) suspend acts of another (arbitrators), something to be disallowed as each have their proper jurisdiction, which should be respected. Doing otherwise would ‘prejudice legal certainty of parties in arbitration’ as interim relief would be used to interfere with the rights contained in an arbitral award.

Third, it would be contrary to the nature of arbitration proceedings.

The decision is commendable. The final bell, however, has yet to be rung.

Notes

1. Amparo directo en revisión 6916/2019; Judgment of the First Chamber of the Mexican Supreme Court of 20 May 2020.

2. Contradicción de tesis 250/2019; Judgment of the First Chamber of the Mexican Supreme Court of 16 October 2019.

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