Legal issues of general application

Government permission

What government approvals are required for typical project finance transactions? What fees and other charges apply?

No specific fees, approvals or licences are required for typical project finance transactions; however, foreign lenders may require certain tax certifications to qualify for reduced income tax rates.

Registration of financing

Must any of the financing or project documents be registered or filed with any government authority or otherwise comply with legal formalities to be valid or enforceable?

As a general rule, the financing documents (other than security documents) and other project documents (except for those related to real estate rights) do not need to be registered or filed with any government authority or otherwise comply with legal formalities to be valid or enforceable. However, in the case of financing documents, it is sometimes advisable to have them registered along with the security documents, attaching official Spanish translations. This registration is intended to facilitate their enforcement, as it provides certainty about the terms of the financing documents and the terms of the official translation that is to be used in the event that the documents are to be enforced in a judicial procedure before Mexican courts. Mortgages, non-possessory pledges and certain trusts must be notarised and registered to be valid and enforceable. See question 2.

Arbitration awards

How are international arbitration contractual provisions and awards recognised by local courts? Is the jurisdiction a member of the ICSID Convention or other prominent dispute resolution conventions? Are any types of disputes not arbitrable? Are any types of disputes subject to automatic domestic arbitration?

Although not yet a party to the ICSID Convention, Mexico fully recognises arbitration awards and arbitration agreements through its internal laws and other international treaties to which Mexico is a party. Arbitration in Mexico is mainly governed by the Commerce Code (which substantially adopted UNCITRAL’s Model Arbitration Law) and the New York Convention, in addition to a number of other international arbitration treaties such as the Montevideo and the Panama Inter-American Conventions. Moreover, early in 2018, Mexico adhered to the Convention on the Settlement of Investment Disputes between States and Nationals of other States (the ICSID Convention), and as a result, foreign investments in Mexico will be vested of additional legal certainty, mainly on the enforcement of awards derived from investment disputes and recourses available for annulment, interpretation and revision of the same. (Despite not being part of the ICSID Convention before, Mexico has been one of the most active countries in investment disputes, with more than a dozen cases conducted according to either the ICSID Additional Facility Rules or the rules of United Nations Commission on International Trade Law, as incorporated by reference in the BITs executed by Mexico thus far.) International treaties are deemed, under the Constitution, as ‘the Supreme Law of the Land’. Courts have a duty to decline jurisdiction and to order that the parties in controversy submit to arbitration, if the controversy is permitted to be resolved through arbitration and there is a written arbitration agreement.

Almost all commercial matters may be subject to arbitration; thus, most project agreements involved in a financing package can be subject to arbitration. Controversies arising under industrial property law, antitrust, labour and criminal laws, tax and administrative laws and bankruptcy law are generally not arbitrable. With respect to government procurement contracts, the government procurement laws contemplate certain restrictions for cases in which a controversy can be subject to arbitration, the rules of which have not yet been issued; however, the government procurement laws already contemplate that the administrative rescission of a government procurement contract (ie, rescission by the relevant government agency or instrumentality based on a default by the contractor or supplier, pursuant to the rescission procedure contemplated in such laws) may not be subject to arbitration. The same rule is contemplated by the Hydrocarbons Law with respect to the administrative rescission of exploration and production contracts. Pemex and CFE contracts are exceptional where their own organisational statutes authorise submission of commercial disputes to international arbitration and even foreign law when required.

Law governing agreements

Which jurisdiction’s law typically governs project agreements? Which jurisdiction’s law typically governs financing agreements? Which matters are governed by domestic law?

Irrespective of Mexican conflict of laws rules, project agreements and financing agreements may be governed by the law indicated in the corresponding choice of law clauses (either Mexican or foreign). Unlike other jurisdictions, there is no need to have a substantial relationship between the law contractually chosen and the parties or subject matter of the relevant contract. Likewise, Mexican law follows the principle of iura novit curia; therefore, foreign law is given full faith and credit, and is binding and enforceable in Mexican courts to the extent it does not contradict Mexico’s public policy or was selected to wilfully defraud Mexico’s public policy (fraus legis).

While Mexican law generally allows the parties to choose the applicable law, project agreements are usually subject to Mexican law because, for infrastructure development, contracts usually address a number of regulatory and local issues, and interface with permits and concessions, and substantial performance of the contracts plays a major role in Mexico. The international lending community is usually comfortable with the choice of Mexican law for project agreements. Project agreements that stem from a federal government procurement process are governed by domestic federal laws.

On the other hand, pursuant to Mexico’s conflict of laws rule (lex rei sitae), real estate property rights cannot be subject to a choice of law other than the law of the realty’s location. Therefore, real estate property and rights (including security interests) in Mexico shall always be governed by Mexican federal or local laws.

Regarding the documents comprising the financing package, the loan documents, including certain offshore collateral, are usually subject to New York law (and occasionally to other laws of choice of the lenders), while security documents (mortgages, share pledges and security trusts related to property in Mexico) are subject to Mexican law.

Submission to foreign jurisdiction

Is a submission to a foreign jurisdiction and a waiver of immunity effective and enforceable?

Submission to a foreign jurisdiction is effective and enforceable under Mexican law if its enforcement is reciprocal (ie, its enforcement is not left to the discretion of one of the parties), the jurisdiction and venue contractually selected is where performance of the contract occurs or the court selected has personal jurisdiction over one of the parties or the relevant contract, or the subject matter of the contract is not subject to the exclusive jurisdiction of Mexican courts (eg, real estate matters, natural resources), and the parties have unequivocally waived their corresponding jurisdiction. Federal rules of civil procedure, and those of most Mexican states, contain an entire chapter governing recognition and enforcement of foreign money judgments.

Unlike other jurisdictions, no sovereign immunity is recognised under Mexican law; there is, however, certain immunity against attachments, attachments in aid of execution, garnishments or foreclosures of certain assets that are government property or used in services under the exclusive control of the government.