Shining a light on 30 years of successful arbitration law and practice in Mexico

In 2023, Mexico marked the 30th anniversary of incorporating the 1985 United Nations Commission on International Trade Law (UNCITRAL) Model Law on International Commercial Arbitration into its Commerce Code.

Since adopting the Model Law, Mexico has maintained a consistent arbitration framework. In 2011, the Commerce Code was updated to reflect the 2006 amendments to the Model Law and to better regulate the interaction between domestic courts and arbitral proceedings. The Mexican lex arbitri therefore provides a secure environment for arbitration.

Arbitration practice and judicial case law in Mexico have consistently aligned with the country’s pro-arbitration regulations. This alignment provides a healthy environment for arbitration proceedings, ensuring respect for the process and the final arbitral award.

Mexican lex arbitri

Mexican arbitration law is provided for in Chapter Four, Title Five of the Mexican Commerce Code. Like the UNCITRAL Model Law, the arbitration system adopts a monist approach, providing uniform regulation for both domestic and international arbitration proceedings.

Both pieces of legislation cover every phase of the arbitral process, from arbitration agreements to the recognition and enforcement of arbitral awards, reflecting the global consensus on the foundational principles of commercial arbitration.

Articles 1464 to 1480 of the Mexican Commerce Code provide additional regulations on judicial intervention in arbitration proceedings. These provisions cover the referral of disputes to arbitration, arbitrator appointment, enforcement of interim measures, judicial assistance in the collection and presentation of evidence and arbitrator fee determination. The Mexican Commerce Code also regulates the annulment and enforcement of arbitral awards in accordance with the Model Law and the 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the New York Convention).

The 2011 amendments to Mexico’s arbitration framework addressed various tensions and conflicting interpretations regarding the judiciary’s role in arbitral proceedings. For instance, the revised text of Article 1465 outlines specific and limited circumstances under which a judge may not immediately refer a dispute to arbitration, deviating from the default rule under Article 1432. Additionally, it grants arbitrators broad discretion to order interim relief, contrasting with the more restricted interim remedies available in commercial judicial proceedings, thereby favouring the arbitral regime.

The 2011 updates explicitly govern the enforcement of interim measures ordered in arbitration by state courts. Following the introduction of these updates, the Mexican Supreme Court of Justice determined that enforcing interim measures granted in arbitration does not necessitate a hearing or an opportunity for the affected party to present arguments. Therefore, state courts to obliged to enforce these interim measures immediately upon request.^[2]

In 2008, the Mexican arbitration framework was reinforced by an amendment to Article 17 of the Mexican Constitution, granting alternative dispute resolution (ADR) mechanisms such as arbitration the same constitutional protection and respect as judicial procedures. Following this constitutional recognition, parts of the Mexican judiciary have determined that arbitration and state litigation share the same ‘dignity’ and purpose,^[3] meaning that arbitration in Mexico is afforded the same status as traditional state proceedings, which ensures its efficiency and effectiveness.

The Mexican Supreme Court of Justice has affirmed that this constitutional recognition embodies the liberties enshrined in the Constitution, warranting judicial protection.^[4] Elevating arbitration and ADR to the status of a constitutional right (or liberty) inherently influences all aspects of federal arbitral legislation. Therefore, arbitral proceedings, as well as judicial proceedings supporting arbitration, must be treated similarly to arbitration processes, in line with the fundamental access to justice principles in the Mexican Constitution. Failure by a state court to support arbitration would directly violate the relevant party’s fundamental rights under the Mexican Constitution, including the right to arbitrate.

International treaties

Mexico is a party to many international treaties, which form an integral part of the country’s legal framework. Their provisions are directly applied by Mexican judges in the same manner as legislative text. Mexico has ratified the New York Convention and the 1975 Inter-American Convention on International Commercial Arbitration (the Panama Convention).

In the realm of investor–state arbitration, Mexico was a signatory to the 1994 North American Free Trade Agreement (NAFTA), a pivotal instrument in investor–state dispute settlement (ISDS). NAFTA generated numerous decisions that significantly shaped the early development and evolution of international investment protection law into its current form.

Since the inception of NAFTA, Mexico has ratified over 30 bilateral investment treaties that provide for arbitration in breaches of investment protection standards. Mexico is also a participant in several multilateral free trade agreements that include investment protection and arbitration provisions, such as the Trans-Pacific Partnership and the Mexico–Central America Free Trade Agreement.

Mexico signed the United States–Mexico–Canada Agreement (USMCA) on 30 November 2018, with a revised version signed on 10 December 2019. The USMCA replaced NAFTA on 1 July 2020.

In 2018, following a long history of ISDS involvement, Mexico ratified the Convention on the Settlement of Investment Disputes between States and Nationals of Other States, which reinforced Mexico’s commitment to arbitration as a means of resolving investment disputes and its dedication to honouring awards rendered under these proceedings.

The foregoing is evidence that ADR has found fertile land in Mexico for various reasons, including the country’s robust arbitral legislation, support from the judiciary and the sophisticated and efficient arbitral process as opposed to its lengthy and rudimentary judicial processes.

Arbitration provisions

Because Mexican arbitration legislation is based on the UNCITRAL Model Law, it stipulates that arbitration agreements must be executed in writing by the parties. As provided by Article 1424 of the Mexican Commerce Code, this can be through an exchange of letters or other forms of telecommunication that confirm the agreement’s existence, as well as through the exchange of a complaint and an answer where the arbitration agreement is not disputed. In addition, Mexican arbitration law permits arbitration agreements to be incorporated by reference, provided that the document in which the reference is made is executed and explicitly states that the arbitration agreement is an integral part of its terms.

Another distinct item of Mexican arbitration law is the incorporation of the kompetenz-kompetenz principle as imported from Article 8(1) of the UNCITRAL Model Law. The Commerce Code provides that a judge shall refer parties to arbitration when an arbitration agreement exists. Notwithstanding this, the Mexican Supreme Court determined that when a party argued that the arbitration clause was null and void, the judge, not the arbitral tribunal, would be the one to make this determination.^[5] The 2011 reform to the Commerce Code, which included a new chapter on judicial intervention on arbitration, clarified this issue by establishing that reference to arbitration shall be made by a judge unless there is an unappealable judgment or award declaring the arbitration clause as null and void, or if a judge can determine the existence from the outset of a notorious ground for annulment, inefficacy or that the agreement is incapable of being performed.

According to other judicial criteria issued by federal courts, Mexican judges shall adopt a ‘rigorous criteria’ when analysing whether to decline to send disputes to arbitration.^[6] The latter is consistent with the general pro-arbitration principle that binds the Mexican judiciary (and all Mexican authorities) because of the constitutional nature of arbitration as part of the human right of access to justice enshrined in Article 17 of the Mexican Constitution.

The Commerce Code also mirrors the UNCITRAL Model Law in terms of how the place of arbitration is determined when this is not specified in the’ agreement. Article 1436 of the Commerce Code establishes that if the parties have not selected the seat of arbitration, this shall be decided by the arbitral tribunal, ‘taking into account the circumstances of the case, including the convenience[] of the parties’. Mexican arbitration law also provides for the freedom of parties to agree on the language or languages of proceedings, and it grants the arbitral tribunal authority to rule on this issue when there is no agreement in place.

The Commerce Code adheres to the UNCITRAL Model Law’s empowerment of arbitral tribunals to base decisions on the substantive law of another country. The Code provides that if the parties have not agreed on the substantive law, this shall be decided by the arbitral tribunal, ‘taking into account the characteristics and connections of the case’. Article 1445 of the Commerce Code provides arbitral tribunals seated in Mexico with a more flexible approach to determining the applicable substantive law than the Model Law, which refers only to ‘the conflict of laws rules which it considers applicable’ (in Article 28) for issuing a decision on this matter.

Mexican arbitration law also allows for tribunals to be decided ex aequo et bono if the parties have expressly allowed it. Furthermore, the Mexican Supreme Court has interpreted arbitral tribunals’ power to make decisions as a means to achieve outcomes that are fairer and more equitable than those based strictly on legal reasoning. This interpretation allows for flexibility in arbitration, creating an exception to the constitutional mandate that typically requires decisions to be based on the applicable law. The Court recognises that arbitration can prioritise fairness and equity over strict legal adherence. Notwithstanding this, the same interpretation criteria provide that, following Article 1445 of the Commerce Code, even in ex aequo et bono arbitration, tribunals must still take the relevant agreement and applicable commercial practices into consideration. Unless there is agreement to the contrary, the decision must be documented in writing, signed by the arbitrators, and include the reasons behind the decision.

In terms of correction and interpretation of awards, Article 1450 of the Commerce Code regulates the rights of parties to request that tribunals correct calculation, typographical or other errors within 30 days of the issuance of the award. Article 1450 also authorises arbitral tribunals to issue an interpretation on a specific point or part of an award if agreed to by the parties and considered justified by the tribunal.

Mexican arbitration law also allows for parties to request an additional award in connection with claims that were part of the proceedings but not addressed in the original arbitral award. Under the Commerce Code, the arbitral tribunal has discretion to issue an additional award if it considers it justified, in which case it must render the award within 60 days of the petition.

The Commerce Code allows parties to agree on arbitration costs, often through the rules of specific arbitral institutions. If no agreement is reached, Article 1454 provides that the arbitral tribunal’s fees must be ‘reasonable’, taking into account the complexity of the case, the time spent on it by the tribunal and other relevant factors.

Article 1445 of the Commerce Code stipulates that the losing party is responsible for the arbitration costs, but it also permits the tribunal to distribute these costs between the parties if considered appropriate.

Supreme Court declared arbitral award authentication unconstitutional

Article 1461 of the Commerce Code refers to the enforcement of arbitral awards in Mexico. The provision generally follows the wording of Article 35 of the UNCITRAL Model Law, except for certain additions stipulating that the original award must be ‘duly authenticated’ to be enforced, which is not provided for in the Model Law.

This requirement created challenges for the enforcement of arbitral awards, as some Mexican courts interpreted the ‘authentication’ requirement to mean that evidence had to be provided to prove that the award was genuinely issued by the arbitrators who signed it.^[7] The authentication requirement entailed proving that the award was rendered by the arbitrators in question. A Mexican public notary or a member of the relevant arbitral institution was also required to attest to this fact and, in some cases, also to witness the signing or ratification of the award.

The above generated considerable problems as certain parties used this requirement to obstruct the enforcement of awards in Mexico. Particular difficulties arose where foreign arbitrators were required to ratify the execution of awards before Mexican public notaries. In addition, arbitral institutions’ personnel generally do not witness nor attest to the authenticity of arbitrators’ signatures.

In December 2022, the Mexican Supreme Court addressed this interpretative issue by ruling that the ‘authentication’ requirement for enforcing an arbitral award, as stated in Article 1461 of the Commerce Code, was unconstitutional. The Court found that this requirement lacked proportionality in relation to the right to access arbitral justice as provided by Article 17 of the Mexican Constitution.^[8]

Interim relief

As a consequence of the 2006 amendments to the UNCITRAL Model Law, Mexico introduced a new chapter to its Commerce Code in 2011, which stipulates judicial intervention and the powers of arbitral tribunals to adopt and enforce interim measures, as well as proceedings under which Mexican judges may provide interim relief.

The 2011 reform expressly declares that Mexican judges have ‘broad discretion’ to issue or adopt interim relief prior to, or during, arbitration. This widening of tribunals’ powers in arbitration proceedings contrasts with the more restrictive approach that Article 1168 of the Commerce Code adopted regarding interim relief available for judges in commercial judicial proceedings, which is limited to orders directing an individual to stay at the place of a proceeding or the freezing of assets.

Instead, Mexican federal courts have confirmed that the Commerce Code grants broad discretion to issue interim relief, not only to arbitral tribunals, but also to Mexican judges when issuing measures. In other words, Mexican judges have broad discretion to issue interim relief in arbitral matters but not for other types of judicial proceedings under the Commerce Code.^[9]

Mexican law allows for the adoption of interim measures by a judge prior to, or during, arbitration and allows for the relevant judge to adopt these measures ex parte or without the participation of the affected party. Mexican courts have ruled that this authority exists to protect the subject matter of the case.^[10] This criteria is also applicable for the judicial enforcement of interim measures adopted by an arbitral tribunal.

Mexican law also establishes that judges must uphold interim relief issued by arbitrators, consequently recognising it as binding. Article 1480 of the Commerce Code provides limited grounds for denial of recognition and enforcement of arbitral interim relief in addition to the grounds for denying enforcement of an award (in line with the New York Convention); these grounds include non-compliance with a judge’s security decision or if the measure in question has been revoked or suspended by the arbitral tribunal.

The Commerce Code also provides that enforcement of interim relief by a Mexican judge may be denied if the relief is ‘incompatible’ with the powers or authorities of the judge, in which case it allows the judge to modify the interim relief and ‘adjust’ it to make it compatible with its powers.

Article 1480 of the Commerce Code also provides that the party requesting the interim relief and the arbitral tribunal that grants it are responsible for the damage caused in connection therein. While this provision may generate a chilling effect on arbitral tribunals that issue decisions on interim measures, it is not mandatory and may be waived by the parties, therefore liberating the arbitral tribunal of any responsibility. There are no reported cases in Mexico of parties holding an arbitral tribunal responsible for an interim relief decision under this or any other provision.

Enforcement and annulment of awards

Mexico mirrors the Model Law in terms of annulment and enforcement of arbitral awards. The Commerce Code echoes Article V of the New York Convention and Article V of the Panama Convention in respect of available grounds for denying the enforcement of awards in Mexico.

While Mexico does not have specialised arbitral courts, the judiciary has historically demonstrated healthy control of awards, favouring the validity of awards when facing annulment petitions.

For example, in December 2022, the Mexican Supreme Court overturned a federal court decision regarding the interpretation of Article 1457(I)(b) of the Commerce Code, which refers to the lack of opportunity to present a case as grounds for annulment (Article 36(1)(a)(ii)) of the UNCITRAL Model Law).

In that decision, the Supreme Court clarified that when deciding whether to annul an award, a judge cannot assess how much importance or weight was given to a piece of evidence. The Court emphasised that arguments about how arbitrators evaluated evidence, even if one party claimed that a different standard of proof was applied to the other party, fall within the tribunal’s discretion. These matters relate to the substance of the dispute and are not subject to judicial review.^[11]

Mexican federal courts have ruled that even if an award is annulled, the arbitral tribunal is not required to return its fees. This is because the arbitrator’s duty to act diligently in resolving a dispute does not include guaranteeing the outcome or the final decision, including the possibility of the award being annulled.^[12]

Mexican arbitration law has not created additional grounds for annulment or denying the enforcement of an award other than those provided for in the Model Law, the New York Convention (Article V) and the Panama Convention (Article V).

Mexican courts have interpreted ‘public policy’ narrowly as a basis for seeking the annulment or refusing the enforcement of an arbitral award. They have set a very high threshold for an award to be considered in violation of public policy, stipulating that this ground applies only when the issue directly and immediately affects society as a whole and significantly deviates from fundamental principles of justice.^[13] In other words, if a defect in the award affects only the parties to the arbitration and does not generally affect society, it would not constitute a breach of Mexico’s public policy and would not be grounds for annulment.

Arbitration limitations in Mexico

Traditionally, Mexican law permitted arbitration of private law disputes only, specifically in the areas of civil and commercial law. This was because these disputes generally involve parties that could clearly exercise their right to arbitrate (waiving their right to a judicial proceeding) without affecting other parties.

While Mexican law does not specify a list of arbitrable subjects, certain laws do reserve specific matters for Mexican courts.

For example, the Mexico City Civil Procedure Code provides that family law matters, such as maintenance (alimony), divorce, matrimonial property and custody, are reserved for Mexican courts. The Federal Civil Code provides that matters corresponding to an individual’s legal capacity, criminal damages and wills or estates are reserved for Mexican judicial tribunals.

Mexican law now allows for arbitration in public contracts. Statutes such as the Public Sector’s Acquisitions, Leases and Services Law, the Public Works and Related Services Law, the Public Private Partnership Law and the Hydrocarbons Law allow for arbitration as the dispute resolution mechanism between contractors and Mexican state-owned entities or Mexican ‘state productive companies’ (Article 6 of the Hydrocarbons Law). These statutes prohibit parties from referring administrative rescission or early termination of contracts regulated by these laws to arbitration. The Public Private Partnership Law prohibits the revocation of concessions and actions in which the state acts in its official capacity, as opposed to as a contracting private party. Currently, these matters are exclusively handled by administrative state tribunals, meaning that arbitration is not an option.

Nevertheless, damages resulting from the illegal termination or administrative rescission of contracts can be resolved through arbitration. Furthermore, there is ongoing debate about whether settlements of administrative contracts issued by a state agency are arbitrable. The discussion revolves around whether a settlement is an act in which the state agency exercises its authority (as is the case in administrative rescission) or a bilateral act involving both the state agency and the contractor; therefore, not falling under the ‘exorbitant’ powers of the state.

Mexico’s arbitral institutions

Mexico has two main arbitral institutions: the Mexico City Chamber of Commerce (CANACO) and the Arbitration Center of Mexico (CAM).

CANACO’s arbitration rules follow the 1976 UNCITRAL Arbitration Rules. CAM has issued an ad hoc set of rules inspired by the Arbitration Rules of the International Chamber of Commerce (ICC). CANACO also serves as the national section of the Inter-American Commercial Arbitration Commission, which was formed in 1934 to provide a system for the settlement of international commercial disputes through arbitration and conciliation.

Mexico also has a long-standing tradition of using international arbitration institutions for the resolution of both international and domestic arbitration. In this context, the Mexican chapter of the ICC is one of the most active arbitral forums within the ICC network. This results in a significant number of ICC cases involving Mexican parties, seats or applicable laws.

Because of Mexico’s proximity to the United States, many Mexican disputes are resolved through the International Centre for Dispute Resolution (ICDR), the international division of the American Arbitration Association, which is frequently used by US parties conducting business in Mexico.

Mexican state-owned entities such as the Federal Electricity Commission also frequently include contractual provisions for arbitration under the London Court of International Arbitration.

Judicial reform in arbitration

At the time of writing, the Mexican Congress is in the process of debating a widely criticised Constitutional reform that aims to transform the basis and structure of the Mexican federal judiciary, including its composition and the way in which judges, magistrates and justices are elected to their positions.

Reform proposals include:

• reducing the number of Supreme Court justices from 11 to nine and shortening their term in position from 15 years to 12 years;
• changing the structure of the Mexican Supreme Court. Instead of having two separate chambers for non-constitutional matters (one for employment and administrative law, and another for civil and criminal law), the Court would operate exclusively in plenary sessions where all justices would participate in and decide on all types of cases; and
• introducing a cap on Mexican federal judiciary members’ salaries, ensuring they do not exceed that of the Mexican president.

The most debated and criticised aspect of the reform is the proposal to elect judges, magistrates and justices through a secret and popular vote, rather than appointing them based on their judicial careers. Under the existing model, judicial positions are filled based on the judicial and academic development of the candidates, their experience in lower courts, continuous education requirements and a merits-based competition system (including exams and knowledge assessments open to qualified members, depending on their experience and current positions).

A fundamental criticism of the reform is the potential for politicisation and reduced specialisation within the judiciary. This could undermine judicial independence and allow interference from economic groups and criminal organisations, which might offer financial and political campaign support to judicial candidates. In addition, it could lead to the intimidation of other candidates who do not align with these groups’ interests.

The reform is expected to increase the use of arbitration and other forms of ADR because of the potentially reduced specialisation in the judiciary.

Historically, arbitration in Mexico has been used for complex and high-value disputes. However, although their full impact remains uncertain, the proposed reforms have the potential to expand arbitration practices to a wider spectrum of cases. Despite this promising shift, the involvement of state courts in the arbitration process – both before and after proceedings – means that Mexico’s status as a key arbitration hub relies heavily on a robust and competent judiciary. The judicial reforms could significantly influence this capability.

USMCA and investment treaty arbitration

Although the USMCA has been in place for over four years, no claims have yet been registered in accordance with its Chapter 14-D. One reason for this may be the sunset period for the termination of NAFTA’s Chapter 11, which allowed US and Canadian investors to submit claims under NAFTA until 30 June 2023.

Of the USMCA jurisdictions, Mexico was the most active respondent state in ICDR investor–state arbitration in the 2024 tax year, accumulating nine claims during this time.

It is anticipated that foreign investors will continue to file claims against Mexico considering certain regulations and state conduct, as well as the policies being pursued by the state. It is not inconceivable that the Mexican judicial reform will give rise to ISDS cases against Mexico linked to denial of justice or judicial expropriation.

Mexico is party to more than 30 bilateral investment treaties, as well as 14 free trade agreements, including covering investment protections for foreign investors. The country has historically honoured ISDS awards rendered against it and, to date, has only sought the annulment of one award (by Lion Mexico Consolidated LP), which is pending at the time of writing.

Under the review clause, Mexico, the United States and Canada will decide on the USMCA’s continuation on 1 July 2026. One of the main points of debate and analysis regarding renegotiation or termination concerns the USMCA’s Chapter 14, which regulates investments and the protections granted therein.

It is important to note that Canada chose note to participate in Chapter 14 of the USMCA. Additionally, Mexico and the United States made significant carve-outs regarding the types of investments covered and the extent of protections granted, differing from the provisions provided in Chapter 11 of NAFTA. Mexican and Canadian investments remain protected by both states through the Comprehensive and Progressive Agreement for Trans-Pacific Partnership.

A renegotiation or termination of the USMCA’s investment chapter would have a significant impact on US investments in Mexico, as well as in Mexico’s participation in ISDS because the bulk of investor–state cases involving Mexico have been based on NAFTA (now the USMCA).

Final remarks

With 30 years of arbitration legislation and experience, Mexico now boasts a strong legal framework and a thriving practice in commercial arbitration.

The Commerce Code has consistently respected the UNCITRAL Model Law’s text. The 2011 reform of the Model Law addressed various challenges and misinterpretations, and introduced special and expedited proceedings for specific aspects of arbitration, such as challenges to the arbitral tribunal’s competence, obtaining judicial interim measures in support of arbitration, enforcing interim measures adopted by an arbitral tribunal, and annulling and enforcing arbitral awards.

The Mexican judiciary has consistently supported arbitration, establishing consistent precedents, particularly regarding a tribunal’s authority to rule on its jurisdiction, the binding nature of and judicial deference to arbitration agreements, the lack of ordinary recourse against annulment decisions, the special nature of arbitration within the Commerce Code and the inappropriateness of applying general commercial norms outside the Mexican arbitral framework.

The most important contribution of the Mexican judiciary to arbitral practice is likely its strict interpretation of the Commerce Code (which incorporates the UNCITRAL Model Law), and the Panama and New York conventions, particularly when analysing ‘public policy’ as grounds for annulling an award or preventing its enforcement.

In Mexico, public policy in arbitration is an extraordinary concept linked to the most fundamental principles and pillars of its legal order. As long as an award does not harm these pillars and principles, any challenge against it should fail.

Local arbitration institutions and the Mexican chapters of international institutions play an important role in Mexican arbitration. They not only promote arbitration, but also advocate for additional rules and initiatives in areas such as gender equality, transparency, best practices and ethics.

Mexico’s arbitration practice has been a success story for the past 30 years, thanks to the favourable alignment and evolution of its legal framework, a strong and ethical group of practitioners and robust arbitral institutions, as well as knowledgeable and respectful courts.

With this in mind, arbitration in Mexico could be on the verge of exponential growth due to imminent judicial reforms. While these reforms may initially appear to weaken arbitration as a dispute resolution method, they could ultimately drive greater use and reliance on arbitration, thereby reaffirming the path it has followed for over three decades.

Endnotes