28 Nov Constitutional Reform of the Judicial Branch
On September 15th, 2024, the Mexican government published a Reform that modifies and amends various provisions of the Constitution concerning the composition of the Judicial Branch. This Reform introduces substantial changes to the structure and performance of the Judicial Branch, among other significant amendments, resulting in a new legal landscape and a shift of scenario for both, domestic and international companies, seeking to operate or continue its operations in Mexico.
1. Introduction
The main changes brought by the September 2024’s Judicial Reform (hereinafter referred to as "the Reform") include: deadlines for rulings in cases involving fiscal matters and claims, the elimination of suspension in constitutional disputes and actions of unconstitutionality concerning general provisions, the introduction of election for Supreme Court justices, district judges and circuit judges, as well as a change in the number of Supreme Court justices; the establishment of a Judicial Discipline Court and a Judicial Administration Office, replacing the Federal Judiciary Council (CJF by its acronym in Spanish), among other relevant modifications.
Therefore, it is important to understand the scope and implications of these changes and adjustments for the day-to-day operations of companies in Mexico, and to determine the optimal approach to address the challenges such changes represent.
It is worth noting that the Supreme Court recently dismissed the draft opinion by Justice Juan Luis González Alcántara Carrancá, seeking to partially invalidate the Judicial Reform by resolving Constitutional Action 164/2024 and its joined cases 165/2024, 166/2024, 167/2024, and 170/2024, initiated by political parties and civil society groups. The aforementioned due to the fact that the Court's plenary session did not reach the substantive analysis of the case, not going further from the initial stage of discussing "standing" and "admissibility," without analyzing, whether the constitutional amendments undermine judicial independence, affect judges' rights, or if there should be limits on the so-called "Supreme Reforming Power" (comprising a qualified majority of Congress along with the majority of state legislatures and Mexico City).
2. Background
In Mexico, the Reform represents a turning point in the recent history of judicial reforms. However, it is not the first attempt to transform the Mexican judicial system.
As previously stated, the 1987 reforms on the independence of state judicial branches and the specialization of the Supreme Court (SCJN by its acronym in Spanish) marked the beginning of a trend towards restructuring the Judicial Branch. Later, in 1994, the SCJN underwent restructuring, including the creation of the Federal Judiciary Council.
In 2011, a Constitutional Reform on human rights marked a significant change in how the relationship between authorities and individuals was understood, representing the greatest legal achievement in optimizing the recognition, enjoyment, and exercise of human rights. This reform incorporated human rights from international treaties as constitutional rights and imposed obligations to rule based on the pro persona principle, and to promote, respect, protect, and guarantee human rights.
Ten years later, in March 2021, the Judicial Branch underwent various modifications, including measures to strengthen the Supreme Court’s role as a Constitutional Court. These changes remained in effect until the publication of the current Reform.
This Reform introduces democratic elections for judges, aiming to enhance the legitimacy of the judicial system through mechanisms of popular participation. However, examples from countries like the United States, Japan, and Switzerland show that while electing judges democratically can promote transparency and accountability, it also risks politicizing the judiciary and subjecting it to external influences. Additionally, the Reform modifies the effects of suspensions of measures in constitutional disputes and shortens the deadlines for rulings on tax matters, among other changes.
3. Content of the Reform and Potential Implications for Businesses
3.1. Deadlines for Rulings in Tax Matters.
Before the Reform, no specific deadline was set forth for resolving cases involving tax liabilities. The Reform establishes a maximum period of six months to issue rulings in these cases.
Potential Implications for companies: This new deadline could be seen as a step forward towards better judicial efficiency in tax matters, or as a method to expedite the collection of disputed contributions.
3.2. Composition of the Supreme Court and Salary Cap for Judicial Officials.
With this Reform, the Supreme Court will be reduced from 11 justices divided into two specialized chambers to 9 justices. The presidency will rotate every two years based on the highest number of votes received. Additionally, a salary cap is imposed, preventing judicial officials from earning more than the head of the Executive Branch (i.e., President of Mexico).
Potential Implications for companies: Reducing the number of justices may contribute to the decision-making, but it could also increase polarization within the Court. The frequent rotation of the presidency could hinder continuity in decision-making, affecting legal certainty for companies and individuals.
3.3. Introduction of Popular Elections for judges.
The Reform establishes a new process for the popular election of Supreme Court justices, Magistrates of the Electoral Tribunal, and District Judges, which is meant to be organized by the National Electoral Institute (INE) and held simultaneously with the federal elections.
Potential Implications for companies: Although intended to enhance transparency and legitimacy, the politicization of the judicial appointment process could jeopardize the impartiality of the judiciary system, diminishing legal certainty for businesses and individuals.
3.4. Access rights to Radio and TV advertisements and the prohibition of public or private campaign financing.
The candidates will have the right to access radio and tv advertisement, attending the distribution quota established by the INE, withholding the possibility of participating in discussion forums organized by such Institute, the private, public and social sectors, under conditions of equality. The Reform also prohibits candidates from receiving public or private campaign financing and bans the direct or third-party purchase of media advertisements for electoral purposes.
Potential Implications for companies: While this aims to prevent external influence in judicial elections, as well as to guarantee transparency and the same conditions to all candidates, the lack of financing may affect lesser-known candidates, potentially increasing the illegal influence of economic groups, companies, organized crime groups, among others, compromising the decision-making process of judges.
3.5. Prohibition to reinstate Circuit and District Judges.
Pursuant to the amendments made to the Constitution, Circuit as well as District Judges, may not be reinstated outside the judicial circuit in which they have been elected, unless it is determined by the Court of Judicial Discipline for exceptional reasons.
3.6. The creation of the Judicial Discipline Court, replacing the Federal Judiciary Council.
The Judicial Discipline Court will be a branch of the Federal Judiciary Branch with technical, administrative, and decision-making independence. It will be comprised of five members elected in compliance with the procedure established for this purpose. This Court will operate both in joint sessions and in commissions, and its decisions will be final; therefore, no legal action or appeal may be brought against their decisions.
3.7. The creation of the Judicial Administration Office, replacing the Federal Judiciary Council.
The Judicial Administration Office (OAJ by its acronym in Spanish) will have technical and administrative independence and will be responsible for the administration and judicial career within the Federal Judiciary Branch. It will determine the number, division into circuits, territorial jurisdiction, and specialization by subject matter of the Circuit Courts, the Courts of Appeal, and District Courts, the recruitment, retention, and dismissal of judicial and administrative staff, as well as training, promotion, and performance evaluation, among other responsibilities, will also fall under the scope of this office.
3.8. Suspension in Constitutional Controversies and Actions of Unconstitutionality; Effects of Judgments in Amparo Proceedings
According to the Reform, in cases of constitutional controversies or actions of unconstitutionality challenging general norms, their admission will never lead to the suspension of the challenged norm. On the other hand, in amparo proceedings that handle the unconstitutionality of general laws, the rulings shall never contemplate general effects for all companies and individuals.
Possible Implications for companies: The Reform eliminates the "automatic" suspension in constitutional controversies and actions of unconstitutionality, and establishes that rulings that may arise from an amparo lawsuit will not have general effects. This is not favorable for those companies or individuals whose rights may be affected by an amparo judgment they deemed unconstitutional, as they will have to suffer its effects until the corresponding appeal process is completed.
4. Possible Outcomes and Scenarios that may arise from the Implementation of the Judicial Reform
4.1. Increased Politicization of the Judiciary.
The popular election of judges may lead to the politicization of the judicial system, potentially affecting the level of impartiality in the decision-making process and decreasing public trust in justice.
4.2. Instability and “backlog”.
The Reform may create instability within the judicial system, possibly encountering internal resistance to changes, which could affect the speed of the reform’s implementation and the delivery of justice.
4.3. Potential Increase in Conflicts.
The Reform could generate new areas of conflict, particularly regarding the challenge of general laws and a potential court overload due to the volume of actions filled related to constitutional disputes.
4.4. Increased Judicial Efficiency.
The introduction of deadlines for the issuance of resolutions in certain areas, such as tax matters, and the creation of new administrative and judicial discipline offices could lead to efficiency in the resolution of judicial cases. However, there is a risk that the pressure to meet deadlines may compromise the quality of serving justice. It remains to be seen whether the courts will have sufficient resources to comply with these requirements, while issuing well-reasoned and thorough decisions, without undermining the procedural rights of the parties.
4.5. Legal Uncertainty Could Discourage Investment.
The implementation of voting for electing judges is expected to create an environment of legal uncertainty for foreign and domestic investors.
5. Recommendations for Addressing the Challenges resulted by the Judicial Reform and the Shift of Scenario
5.1. Business and Legal Readiness.
Companies should keep an eye at changes in judicial deadlines, especially in tax matters, to optimize their strategy. It is advisable for companies to have prepared legal teams and/or obtain adequate professional advice to operate under the new procedures and deadlines established by the Reform.
5.2. Review of Commercial Contracts and Applicable Law and Jurisdiction Clauses to Assess the Feasibility of Domestic or International Arbitration.
It is worth to consider reviewing commercial contracts, as well as applicable law and jurisdiction clauses, and to evaluate the available options regarding applicable law and submission to domestic or international arbitration for conflict resolution. Particularly for certain complex or high-value matters, arbitration may be a suitable dispute resolution method. Although it cannot enforce their decisions (arbitral awards) without judicial support, arbitration often remains an attractive alternative to resolve certain disputes. Not all matters are arbitrable, so legal advice is necessary to evaluate each specific case.
5.3. To Avoid Judicial Instances for the Resolution of Conflicts.
Although the Judicial Discipline Court and the Judicial Administration Office may enhance the judiciary's structure, the new procedure for selecting judicial officials could create a scenario of legal uncertainty and lack of specialization in the delivery of justice, resulting in the need of more complex strategies.
5.4. Promoting Alternative Dispute Resolution Methods.
In addition to the aforementioned, due to the legal uncertainty arising from the selection process of judicial officials, it is recommended to evaluate the use of different methods to avoid judicial instances; this includes increasing the volume of cases solved through conciliation, mediation, arbitration, among others. The advantages and disadvantages of these alternatives, as well as the regulation and formalities required by law for these dispute resolution methods, must be carefully considered.
To conclude, the Judicial Reform may represent progress toward greater efficiency and transparency, but it also implies significant challenges in terms of politicization, concentration of power, and transparency in the effective delivery of justice. Proper and monitored implementation is crucial to avoid negative effects on the justice system and, consequently, on the country’s social and economic environment.
For any assistance regarding specific situations that may affect your interests, please feel free to contact us. We will be glad to help you address the potential implications of this Reform.
Contact:
Azucena Marín
amarin@cuestacampos.com
Rafael Sánchez
rsanchez@cuestacampos.com
THE ABOVE IS PROVIDED AS GENERAL INFORMATION PREPARED BY PROFESSIONALS REGARDING THE REFERENCED TOPIC. THIS DOCUMENT ONLY REFERS TO APPLICABLE LAWS IN MEXICO. ALTHOUGH EVERY EFFORT HAS BEEN MADE TO PROVIDE ACCURATE INFORMATION, WE ASSUME NO RESPONSIBILITY FOR ERRORS OR OMISSIONS. THIS DOES NOT CONSTITUTE LEGAL, ACCOUNTING, OR PROFESSIONAL ADVICE OF ANY KIND.