On July 18th, 2016, Mexican President Enrique Peña Nieto promulgated the legislation package that gives rise to the Anticorruption National System, which includes the General Law for the Anticorruption National System; Organic Law for the Federal Tribunal on Administrative Justice; and the General Law of Administrative Responsibilities. These laws basically complete the implementation of the constitutional reforms of May 27, 2015, which in turn were a result of promises made during the 2012 campaign by then Presidential Candidate Peña Nieto.
Among the promulgated or amended legislature to date, we want to highlight the General Law of Administrative Responsibilities (“GLAR”). The law is aimed at establishing administrative duties and responsibilities for public servants and private parties, as well as the applicable sanctions, and the procedures for their application.
The scope of the GLAR includes all public servants and private parties (legal entities and individuals) that engage in serious administrative offenses. Specifically, legal entities are liable for serious administrative offenses when the acts related to the offenses are committed by individuals acting in the name or representation of the legal entity.
Both Chambers of Congress passed the GLAR after an amendment to Article 32 suggested by President Peña Nieto was approved. This amendment will only require for public servants to file a statement of assets, statement of interests, and annual tax return (Ley 3 de 3). The prior text of the article extended this requirement to any individual or legal entity that received or executed public resources.
Under the GLAR, serious administrative offenses derived from private parties activities include: bribery, illegal participation in administrative procedures, traffic of influences, use of false information, conspiracy, wrongful use of public resources, wrongful recruitment of ex public servants.
Administrative sanctions for individuals consist of: economic sanction of up to twice the amount of the acquired benefits or around $600,000 USD; temporary ineligibility to participate in procurement, leases, services or state-owned projects for a period ranging from 3 months to 8 years; and payment for damages. For legal entities, the sanctions are: economic sanction for up to twice the amount of the acquired benefits or around $6 million USD; temporary ineligibility to participate in procurement, leases, services or state-owned projects for a period ranging from 3 months to 10 years; suspension of activities for a period ranging between 3 months to 3 years; partnership dissolution; and payment for damages.
Nevertheless, legal entities can use a couple of mitigating factors provided in the law. On the one hand, it will be considered as mitigating at the time of determining liability on a serious administrative offense if the legal entity has a current compliance program in place. Regarding the application of sanctions, it will be considered as mitigating if the internal administrative bodies, or the partners of the legal entity, denounce or collaborate with the investigations.
Another noteworthy aspect of the GLAR is that it introduces the concept of whistleblower in its Article 88. Under this concept, the person who had committed, or is committing, a serious administrative offense can confess his or her responsibility, and fully and continuously cooperate with the authorities in exchange of a sanction reduction. Such reduction may vary between fifty and seventy percent of the amount of the sanctions imposed; or up to the totality of the sanction when it comes to temporary ineligibility to participate in procurement, leases, services or state-owned projects.
As for the administrative process through which guilt is determined and sanctions are imposed, there are two important points to mention. First, the standard of proof is beyond a reasonable doubt. Second, the statute of limitations for serious administrative offenses is 7 years from the date the offenses were committed, or from the moment in which they ceased.
With the promulgation of this legislation, Mexico joins the group of countries that already have wide scope legislation on anticorruption in place. This is especially relevant due to the position Mexico has been in global reports of corruption perception for years.
We consider the terms of this legislation to be highly important to companies established in Mexico, which are now potentially liable for incurring in a serious administrative offense. It is necessary to understand the acts and omissions that can result in administrative investigation, but even more important are the corruption prevention mechanisms that can be implemented.