Arbitration as an alternative to the judicial reform

December 30, 2024

Following the publication of the decree reforming, adding, and repealing various provisions of the Political Constitution of the United Mexican States regarding the reform of the Judiciary, published in the Official Gazette of the Federation on September 15, 2024, uncertainty has arisen concerning the functioning of this body in resolving disputes. This has resulted in a lack of trust among individuals and legal entities in the judicial system, leading to the search for viable alternatives for dispute resolution, making arbitration an attractive option.

Despite the fact that the aforementioned reform seeks to promote democracy in justice within the country’s conflict resolution system, it also creates a framework that generates legal uncertainty by eliminating a crucial aspect of the judiciary: its solvency, autonomy, and independence, which are essential for providing legal certainty. This distrust is further heightened by the creation of the Judicial Discipline Tribunal, established to investigate and sanction judges who act against the public interest. This body may influence the rulings issued by judges, potentially clouding their judgment and undermining their ability to make objective decisions.

Considering the above, arbitration offers a conflict resolution mechanism that differs in many aspects from traditional courts. Arbitration is an independent process for dispute resolution, and the enforcement of arbitral awards is supported by legislative frameworks and jurisprudence, ensuring that companies are not left unprotected by the decisions of arbitrators. This tool provides a viable and reliable alternative for any company, whether national or international, as it offers greater flexibility, specialization of arbitrators, confidentiality in dispute resolution processes, and increased control over the process by the parties. The new judges who assume office will require a familiarization period, which will delay the resolution of disputes. Additionally, the current labor strikes protesting the reform of the judiciary have created further delays that many companies cannot afford, as they would be severely affected. Therefore, resolving disputes through arbitration can present a practical solution in these circumstances.

Arbitration allows the parties greater control over the dispute resolution process without being affected by the reform and its potential consequences, such as delays, changes in the judicial structure, and uncertainties. It ensures that disputes are resolved in accordance with the terms agreed upon by the parties, within a shorter time frame and in an impartial manner. By choosing this option, the parties involved have the opportunity to customize the rules based on their specific needs and requirements, which is not possible to the same extent in a traditional court. Considering that new judges will undergo a learning process, it is also reasonable to infer that they will not possess the same level of specialization as an arbitrator specifically selected for resolving an agreement between the parties within their sector.

For foreign investors, arbitration is a tool that guarantees legal certainty, ensuring that their rights are not violated despite the changes and uncertainties surrounding the stability of the reformed judicial system. Likewise, Mexico has entered various international treaties that serve as arbitration mechanisms between investors and the State, ensuring that State interests do not interfere with a potential ruling by a judge, who may now also be subject to sanctions by the Judicial Discipline Tribunal. This promotes a neutral conflict resolution mechanism.

Arbitration in Mexico is currently utilized by a significant number of companies, and its use is expected to grow in the coming years, as it is not only an attractive alternative but often the best option in specific cases and sectors due to their complexity, making a subject-matter specialist arbitrator essential. However, it is crucial to ensure its proper implementation. Legal teams must be trained in conflict resolution, the drafting of complex and well-crafted clauses, and, more generally, the specifics of the arbitration process to solidify it as an effective tool for both parties.

We recommend analysing the different legal conflict resolution mechanisms before making a decision.

Contact Information:
For further guidance, reach out to:

Jair Bravo Gutiérrez
Managing Partner
jbravo@j-bravo.com

52-81-24748538
www.j-bravo.com
Blvd. Antonio L. Rodríguez 3000, Colonia Santa María, 5to piso, Interior 501 Torre Albia, C.P. 64650 Mty, N.L., México T.