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Towards a single legislation in civil and family procedural matters

Wednesday September 21st, 2022By

One of the relevant background facts on the New National Code of Civil and Family Procedures which should have already been issued pursuant to the Decree reforming and adding Sections 16, 17 and 73 of the Political Constitution of the United Mexican States, in matters of daily justice, published on September 15th, 2017, is the constitutional remedy/”amparo” lawsuit filed by the Mexican Bar Association, Colegio de Abogados, A. C. (“BMA”), before the Seventh District Court in Administrative Matters in Mexico City on April 12nd, 2018, and in which the following omissions of the National Congress were pointed out as claimed acts: (i) the omission to issue the National Code of Civil and Family Procedures, (ii) the omission to issue the necessary amendments to the general and federal laws regarding the principle of legality in oral proceedings and (iii) the omission to issue the necessary amendments to the general and federal laws regarding substantive resolution of the conflict.

On June 6th, 2018, the District Court issued a judgment dismissing the “amparo” lawsuit considering that the plaintiff had not accredited its legitimate interest; however, upon resolving the appeal for review filed by the BMA, the Fourth Collegiate Court in Administrative Matters of the First Circuit revoked the judgment considering that the District Court in Administrative Matters lacked jurisdiction. Subsequently, the “amparo” lawsuit was referred to the Eighth District Court in Civil Matters in Mexico City, being so that on June the 28th, 2019, the judgment was issued in which the “amparo” was granted to the effect that the Mexican Congress:

a) Issue national legislation on civil and family procedural matters within a period of no more than 180 days.

b) Comply with the second transitory article of the Decree of Constitutional Reform, adjusting federal and general laws to the amendments made to Sections 16 and 17 of the Federal Constitution.

The Chamber of Deputies and the Chamber of Senators of the National Congress filed appeals for review, which were referred to the Tenth Collegiate Court in Civil Matters of the First Circuit; however, on September 29th, 2020, the First Chamber of the Supreme Court of Justice of the Nation reassumed its original jurisdiction to hear the appeal for review, since it had to determine the constitutionality of the omission to issue or reform federal regulations. Among the issues that were analyzed by the First Chamber while hearing Amparo en Revisión 265/2020 are the following:

  • Whether the BMA had a legitimate interest to file the amparo lawsuit.
  • Whether there was a legislative omission on the part of the Mexican Congress.
  • Whether there was a violation by the Congress of the human rights of access to justice and legal security, among others.

The Supreme Court of Justice of Mexico resolved the Amparo on Review concluding that the BMA had a legitimate interest to file the amparo lawsuit and that the legislative omissions incurred by the Congress precisely violated the BMA’s human right of access to justice in its collective aspect.

The First Chamber stated in the judgment that the Congress had to issue the National Code of Civil and Family Procedures and adapt the general and federal laws before April 30th, 2022. However, the Congress of the Union requested an extension and, according to the Senate of the Republic, within the first days of September 2022 it would approve the single legislation on civil and family procedural matters. However, it is likely that once again there will be a delay due to the great amount of work involved, including the forums that are being held in the different states of the country to homologate rules, terms and procedural criteria.

Undoubtedly, the creation of a National Code of Civil and Family Procedures is a complicated task, because if it is not properly legislated, it could lead to certain legal insecurity and violations of human rights, thus distancing us from the guarantee and protection of fundamental rights that our Constitution seeks to provide.

Daniel Rubio de la Rosa

Pasante

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Socios

BONDS ISSUED BY BLOCKCHAIN

Wednesday August 17th, 2022By

The world is constantly changing and everything is beginning to be automated with the digital age, so the world of Law should not be the exception. The use of new technologies in the legal field will ensure that the work is carried out with greater efficiency, reliability, and truthfulness. In commercial and transactional law, new technologies advance more than ever; an example is the use of a technology called Blockchain. This tool has been used in the world of finance and implemented for the issuance of bonds in various parts of the world.

What is a Bond?

Pursuant to article 208 of the General Law of Credit Instruments and Credit Operations, a bond is: “It is a credit instrument issued by stock corporations, in which obligations are issued that represents the individual participation of their holders in a collective credit in charge of the issuing company”. These credit instruments are ways in which a company guarantees a debt through the issuance of titles that will give the holders a certain share of a collective credit within these companies, in which they can generate rights over the company; either for the recovery of the credit or for converting the participation within the credit into shares of the same company (when it is provided that the Bonds will be convertible).

In order to issue Bonds, an Extraordinary General Assembly of Shareholders is required to agree on the issuance in accordance with section X of Article 182 of the General Law of Commercial Companies.

The Bonds serve for the company to gather money without being considered a capitalization. In other words, a company that requires resources to continue or expand its operations can obtain them (through the Bond issue) without resorting to a bank and without the creditors being Shareholders of the company that issues the Bonds (except that it is agreed in a certain case, these Bonds will be converted into shares, as indicated above).

These Bonds, being credit instruments, have traditionally been physically issued on paper, but the transformation to the digital era has raised the need to issue credit instruments in a digital format; however, it is not clear if the broadcast in digital format can be carried out with the current laws, or if amendments to the laws are needed for its use and regulation.

What is Blockchain? How does it work?

Blockchain is a shared and decentralized database or distributed ledger that is made up of several computers or nodes, which facilitate the process of recording asset tracking transactions of a business network. Anyone who has access to this network can track it and anything of value can be traded within it. Likewise, being traceable reduces the risk of counterfeiting and the costs of carrying out and issuing these transactions are reduced for all those involved.[1]

Blockchain has great advantages, such as the speed and accuracy of the information obtained; the transparency of the shared data; storing the data in a distributed ledger; its inalterability and limitation of access to authorized members. A great advantage of this tool is that users have the same reliable source of information, and it allows them to build greater trust and efficiency by being able to see all the details of a transaction from start to finish.

A) Key elements of

All network users have access to the distributed ledger information and its immutable record of transactions. Transactions are recorded only once, thus avoiding the duplication that is typical in traditional business networks.

No network user can modify or falsify a transaction after it has already been recorded in the shared ledger. If there is an error within a transaction, a new transaction must be made to reverse the error, and, in this sense, both the erroneous transaction and the new one will be visible to users.[2]

B) Smart contracts.

These instruments are programs stored in a chain of blocks (Blockchain) which are executed when predetermined conditions are met and are used to automate the execution of an agreement. In this sense, users can be sure of an immediate result, and its advantage is the non-participation of an intermediary and the loss of time that this entails. In these smart contracts, you can stipulate the conditions for the transfer of bonds or corporate obligations.

C) Why Blockchain?

When a transaction is made through Blockchain, it is recorded as a block of data and shows the movement of an asset. The data block records the information that was programmed for it, such as: who, what, when, where, how much, as well as the conditions of the transaction.

Blocks of data are connected to the next and the previous, and these make up a chain of data as an asset move. The blocks record both the exact time and the sequence of the transactions and these are joined to prevent information from being modified or added between two existing blocks; generating the irreversible data chain called Blockchain. This chain is unalterable, which prevents the chain from being modified in bad faith and the participants can have absolute confidence in the information of the distributed ledger.[3]

III. Countries in which Bonds have already been issued through Blockchain.

On August 23, 2018, the Commonwealth Bank of Australia issued for the first time the first global bond in the Australian capital market using Blockchain technology, by mandate of the World Bank. This mandate authorized the Commonwealth Bank of Australia to assign ownership of the bond, transfer ownership of it and manage the life cycle of the issue for 2 (two) years, which allowed raising around 79.8 million US dollars.[4]

In Spain, the BBVA bank and the Inter-American Development Bank made the first issue of a corporate bond listed on a regulated market and registered with Blockchain technology in 2022. The platform was developed by the technological partner of this transaction, ioBuilders, and will serve to future bond issues for the markets of Spain, Latin America, and the Caribbean.[5]

May it occur in Mexico?

Within the Mexican legislation, we can observe that the assumption of the issuance of bonds through Blockchain is possible in our country since it would be a very efficient and reliable means for all parties because of the veracity of the Blockchain system. However, the General Law of Credit Instruments and Credit Operations does not make a distinction between credit instruments as physical documents and digital ones, and the only cases in which it could be distinguished is in their transmission. The General Law of Credit Instruments and Credit Operations mentions in Article 28 that the transfer of a credit instrument through endorsement can be carried out utilizing a sheet attached to it; this is an assumption in which a distinction could be made between digital and physical credit instruments. But this same Law in Article 26 mentions that these credit instruments can be transferred through any other legal means, which results in the transmission of these credit instruments by electronic means. However, no circumstance could prevent the issuance of the bonds.

Regarding its legal effects and force of validity as evidence before authorities, the Mexican Commercial Code additionally supports it by pointing out that the information generated, sent, received, or archived by electronic, optical or any other technology may be used as means of proof before authorities and will have the same legal effects as printed documentation.[6]

Although there is an opportunity for all public stock corporations to use this tool to issue bonds, public stock corporations are the ones that will have the greatest benefit from using the bond issuance through Blockchain, since these are the companies that use it the most and this situation is regulated in accordance with the Securities Market Law (“LMV” by its initials in Spanish).

The LMV includes bonds in the definition of securities, and how they can be used digitally. Therefore, with the Blockchain tool, said bonds would be more secure, reliable, and verifiable by the parties and the authorities.

Conclusion

In accordance with what is stated here, it can be concluded that the issuance of bonds through Blockchain is the future to guarantee its reliability, veracity, and trust, as well as a process of greater efficiency in terms of its issuance. However, in Mexico, the law must evolve and reform the legal system that is being carried out in order to include provisions on electronic credit instruments and to have greater certainty and legal security about its regulation, so rules are clearer in terms of the elements that they may have. Digital and electronic tools are the future and present of industries and commerce.

References:

[1] IBM. (s.a.). ¿What is Blockchain technology? 2, August 2022, IBM, web site: https://www.ibm.com/es-es/topics/what-is-blockchain

[2] IBM. (s.a.). ¿What is Blockchain technology?. 2, August, 2022, IBM, web site: https://www.ibm.com/es-es/topics/what-is-blockchain

[3] Gil Hernández, Regina. (2021). ‘Blockchain’ y su aplicación en los mercados de capitales. 3, August, 2022,  BBVA website: https://www.bbva.com/es/opinion/blockchain-y-su-aplicacion-en-los-mercados-de-capitales/

[4] Fernández Froilan. (2018). Banco Mundial lanza bono de deuda de $73 millones sobre blockchain privada. 4, August, 2022, Criptonoticias website: https://www.criptonoticias.com/comunidad/adopcion/banco-mundial-lanza-bono-deuda-73-millones-blockchain-privada/

[5] Hernández, Enrique. (2022). Emiten el primer bono respaldado en blockchain en España. 2, August, 2022, Forbes México website: https://www.forbes.com.mx/emiten-el-primer-bono-respaldado-en-blockchain-en-espana/

[6] For further information, look at the Article 282 of the Securities Market Law.

 

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Definitive Suspension of the Strategy that forces the purchase of gas from State Productive Companies

Wednesday July 20th, 2022By

By means of Official Communication number SENER.100/195/2022 dated June 13, 2022, the Ministry of Energy urged the Energy Regulatory Commission to modify the “Terms and Conditions for the Provision of Services of the Independent Management Permit of the Integrated National Natural Gas Transportation and Storage System” (“SISTRANGAS“), in order to implement a “Supply Guarantee Strategy for the optimization of capacity in SISTRANGAS” (hereinafter, the “Strategy“).

Likewise, it required the National Gas Control Center (“CENAGAS“), in its capacity as independent manager of SISTRANGAS, and as a requirement for the provision of natural gas transportation services at the import points of SISTRANGAS, to require the users or those interested in receiving natural gas transportation services to provide the following:

a) Supply of gas by State Productive Companies. Users or those interested in receiving the gas transportation service must prove, within 60 calendar days, that they receive the natural gas supply from one of the State’s productive companies or their subsidiaries or affiliates (for example, a supply agreement entered into with Pemex);

b) Contracting the Federal Electricity Commission (“CFE”). That, at the points where the CFE (or its subsidiaries and affiliates) has reserved capacity in the transportation systems (i.e., capacity in the gas pipelines), the contracting (of the natural gas transportation service) with the CFE shall prevail;

c) Transportation service. That the provision of the transportation service, in any of its modalities in SISTRANGAS, is assured with the contracting of transportation capacity in pipelines, with any of the State Productive Companies, respecting the priority identified in the previous paragraph (giving priority to the CFE).

As a result of the official communication issued by the Ministry of Energy, CENAGAS issued the communication CENEGAS-UGTP/00434/2022, addressed to the users of the CENAGAS Natural Gas Transportation Service, where it informed the actions to implement the Strategy.

In this regard, it informed the users that, in the event that the Transportation Service Contract signed by the users with CENAGAS contains the Commercial Nodes referred to in Table 1 of said official communication[1], said users have the obligation to prove compliance with the requirements established in the Strategy (in other words, to prove the execution of the contracts with State Productive Companies).

In view of the harm that the implementation of the Strategy could cause, 10 companies promoted an amparo trial against the application of the Strategy to their detriment. Consequently, yesterday (July 18, 2022), the Second District Judge in Administrative Matters, specialized in Economic Competition, Broadcasting and Telecommunications, granted the definitive suspension against the Strategy and, with this, such companies will not have to comply with the obligation to prove that they receive the supply or transportation service of natural gas from any of the State Productive Companies. It is worth mentioning that the suspension granted is so that the responsible authorities refrain from executing, to the detriment of the complainants, the obligations contained in the Strategy.  In other words, the suspension is not applicable to all the companies that are in this situation, but only to those that promoted the amparo trial.

Finally, yesterday, the Ministry of Energy issued a press release informing that they will file a review and appeal against such resolution, considering it illegal.

In Acedo Santamarina we have vast experience in natural gas matters, as well as in litigation before different authorities, to support you in guaranteeing the continuity of your business.

[1] V030 GLORIADIOS; V818 ELCASTILLONINY; V076 GASA; V055 LNGALTINY; V067 IMPENERGT; V061 RAMONES; V074 MONTEGRANDE; V062 INYTGNHELSAUZ; V078 INYLEONGUZMAN

Enrique López

Partner

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Finding Balance in Society: Pro-bono Work

Thursday June 30th, 2022By

Economic and social inequalities are considered one of the greatest challenges in society. The injustices prevent marginalized groups to be heard, exercise their rights, and have the same opportunities as others, which causes social disparity and the undermining of the public order. In the legal environment, inequalities are reflected in the lack of access to justice for vulnerable and low-income groups, a circumstance that is frequently left unresolved.

With the common good in mind, the legal industry provides a position of knowledge, enabling representation and providing effective legal assistance to the public. Which is why to face the issue at hand, the intervention of legal experts is essential. It is only them who will recognize their commitment to society and will contribute to a fairer and more equal system, implementing what is currently known as the provision of pro-bono legal services.

Pro-bono, of Latin origin, means “for the public good”, or in other words, conducts in benefit of society. According to the Declaration of Pro-bono Work for the American Continent, created by lawyers from Latin America and the United States, doing pro-bono work refers to:

“[…] provide legal services free of charge or without the expectation of payment, and that mainly benefit poor or underprivileged individuals or communities and the organizations which assist them. These may include representing and advising individuals, communities or organizations on matters of public interest, which otherwise would not obtain them in an effective manner. In addition, pro bono legal services may also benefit civic, cultural, and educational institutions serving the public interest which would also lack effective representation and counsel.”

Apart from being a voluntary and non-remunerated service in most law firms, schools, foundations, among other organizations, pro-bono work is known to provide ethical norms and parameters that maintain the same quality standards as paid legal services.

To illustrate, pro-bono assistance is made latent in practice through legal advice or representation, legal training, and defense in trial, in benefit of different social groups, which commonly include migrants, children and teenagers, women, people with disabilities and indigenous communities, who would otherwise not have access to legal counsel. On the other hand, areas such as the provision of legal services to family and friends, teaching in law-schools and legal support in order to receive a favorable condition, does not qualify as pro-bono work.

Law firms have been increasingly interested in contributing to this social cause, either individually or collectively, by raising awareness of the positive impact this service has in the promotion and defense of human rights. Pro-bono work also provides lawyers with the opportunity to enrich their knowledge, gain experience and develop their social and judicial expertise.

Pro-bono work expresses the social responsibility of lawyers to seek justice for all. It is a way to ensure the greater good, contributing to a fair and equal rule of law, which includes those who are in an unfavorable position, with the aim of uniting society. The legal industry has demonstrated that by devoting experience, knowledge, and time to legal assistance, justice can be served without expecting something in return. The time has come to strengthen the confidence in legal work, and pro-bono work is a great way to do so. At Acedo Santamarina, A.C. we are committed to doing pro-bono work, offering high-quality legal services in benefit of the most needed sectors in society.

Ana Patterson

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