Relevant Aspects about Distribution Contracts Prepared in the USA and Executed in Mexico
March 30, 2009 By Molina Izabal SC
By definition, most of the Distribution Contracts signed between US distributors and Mexican growers, involve 2 different applicable laws and jurisdictions. Even though the majority of these contracts are prepared and signed, under the regulations of some US state, once the default of the grower comes up, those contracts need to be executed by a Mexican Court, where the grower is actually located.
By definition, most of the Distribution Contracts signed between US distributors and Mexican growers, involve 2 different applicable laws and jurisdictions. Even though the majority of these contracts are prepared and signed, under the regulations of some US state, once the default of the grower comes up, those contracts need to be executed by a Mexican Court, where the grower is actually located.[1]
In this scenario, we find that, even when the Federal Mexican Civil Code prevents the application of a foreign law by the local or federal courts (applicable for commercial cases), previously established jurisdiction and applicable law clauses, that didn't took in consideration any of the Mexican Law regulations, often limit the legal action the distributor can really accomplish on this side of the border.
Since Mexico and the US Laws have a substantially different structure (common law vs civil law), in most cases, the quickness and speed of the US Law hits with the formality of the Mexican Law with not very good results for the distributor. The first collision takes place when the plaintiff attempts to execute the remedies he is entitled under the US Law, which in the agriculture business often are the most carefully planned clauses: the Mexican Courts have no jurisdiction to admit the claim or cannot act on the grower's assets without a complete trial or a final resolution.[2]
Remedies: US Law prevents a number of remedies that can be immediately executed before a final resolution has been dictated in a controversy. Mexican Law, on the other hand, provides only very special remedies under specific circumstances that can be executed before the conflict has reached its final instance.
Jurisdiction:Different to Mexican Law, some foreign regulations prevents the privilege of the plaintiff to file the claim or attempt the remedies of the Distribution Contract in whichever jurisdiction the grower or the product is located, waiving a previously designated jurisdiction in the contract.
Jurisdiction is a very complex matter in Mexico, there are strict formal rules that must be followed in order to legally waive the Mexican courts jurisdiction, these rules are even different for civil or commercial matters. When these rules aren't followed, the jurisdiction clause can declared null by the local courts and the party located in Mexican territory would need to be defeated before a local Judge.
Distributors have a tendency to consider that the regulation thereof by US Law provides them with a more expedite access to their remedies, considering also that such is the law with which they are generally more familiar. It must be considered however that, in practice, the enforcement of an Distribution Contract subject to foreign jurisdiction against a Mexican grower and in respect to an eventual crop located in Mexico, has proven to be a far more complex ordeal that it is to proceed against grower under a contract regulated by Mexican law and subject to the jurisdiction of the courts of Mexico.
Nonetheless, parallel documents can be signed and prepared for every operation, keeping US Law as the applicable for the main contract, but introducing some important provisions of Mexican law, and preparing additional documents in order to have a better starting point when the time to execute the remedies come.
[1] Different to the common law systems, no foreign judgements can be executed in Mexico when such shall be resultant from the exercise of rights 'in rem'.
[2] According to article 1347A of the Commercial Code, Foreign resolutions seeking to be enforced must pass by a "homologación de sentencia" procedure, which means that it shall be assumed by a Mexican court as if such would have been issued by the same.
ABOUT THE AUTHOR: Mario Molina
Attorney at Law. Mr. Molina has centered his legal practice in the main areas of Mexican Law, regarding domestic and international matters, on behalf of foreign companies and individuals doing business in Mexico. He is part of the new generation of Mexican Lawyers prepared in the best Law Schools of the country that combine insightful knowledge of corporate issues with top litigation experience in commercial, civil and labor law.
Member:
American Bar Association
International Bar Association
International Center for Dispute Resolution
The London Court of International Arbitration
Maricopa County Bar Association
Scottsdale Bar Association
Education:
Attorney at Law, Universidad Nacional Autonoma de Mexico (UNAM)
Post-graduated Studies in Amparo Trial, Instituto Tecnologico Autonomo de Mexico (ITAM)
Legal Auditing, Instituto Tecnologico Autonomo de Mexico (ITAM)
Government Contracts and Tenders, Universidad Iberoamericana (UIA)
Copyright Molina Izabal SC
More information about Molina Izabal SC
Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer. For specific technical or legal advice on the information provided and related topics, please contact the author.
In this scenario, we find that, even when the Federal Mexican Civil Code prevents the application of a foreign law by the local or federal courts (applicable for commercial cases), previously established jurisdiction and applicable law clauses, that didn't took in consideration any of the Mexican Law regulations, often limit the legal action the distributor can really accomplish on this side of the border.
Since Mexico and the US Laws have a substantially different structure (common law vs civil law), in most cases, the quickness and speed of the US Law hits with the formality of the Mexican Law with not very good results for the distributor. The first collision takes place when the plaintiff attempts to execute the remedies he is entitled under the US Law, which in the agriculture business often are the most carefully planned clauses: the Mexican Courts have no jurisdiction to admit the claim or cannot act on the grower's assets without a complete trial or a final resolution.[2]
Remedies: US Law prevents a number of remedies that can be immediately executed before a final resolution has been dictated in a controversy. Mexican Law, on the other hand, provides only very special remedies under specific circumstances that can be executed before the conflict has reached its final instance.
Jurisdiction:Different to Mexican Law, some foreign regulations prevents the privilege of the plaintiff to file the claim or attempt the remedies of the Distribution Contract in whichever jurisdiction the grower or the product is located, waiving a previously designated jurisdiction in the contract.
Jurisdiction is a very complex matter in Mexico, there are strict formal rules that must be followed in order to legally waive the Mexican courts jurisdiction, these rules are even different for civil or commercial matters. When these rules aren't followed, the jurisdiction clause can declared null by the local courts and the party located in Mexican territory would need to be defeated before a local Judge.
Distributors have a tendency to consider that the regulation thereof by US Law provides them with a more expedite access to their remedies, considering also that such is the law with which they are generally more familiar. It must be considered however that, in practice, the enforcement of an Distribution Contract subject to foreign jurisdiction against a Mexican grower and in respect to an eventual crop located in Mexico, has proven to be a far more complex ordeal that it is to proceed against grower under a contract regulated by Mexican law and subject to the jurisdiction of the courts of Mexico.
Nonetheless, parallel documents can be signed and prepared for every operation, keeping US Law as the applicable for the main contract, but introducing some important provisions of Mexican law, and preparing additional documents in order to have a better starting point when the time to execute the remedies come.
[1] Different to the common law systems, no foreign judgements can be executed in Mexico when such shall be resultant from the exercise of rights 'in rem'.
[2] According to article 1347A of the Commercial Code, Foreign resolutions seeking to be enforced must pass by a "homologación de sentencia" procedure, which means that it shall be assumed by a Mexican court as if such would have been issued by the same.
ABOUT THE AUTHOR: Mario Molina
Attorney at Law. Mr. Molina has centered his legal practice in the main areas of Mexican Law, regarding domestic and international matters, on behalf of foreign companies and individuals doing business in Mexico. He is part of the new generation of Mexican Lawyers prepared in the best Law Schools of the country that combine insightful knowledge of corporate issues with top litigation experience in commercial, civil and labor law.
Member:
American Bar Association
International Bar Association
International Center for Dispute Resolution
The London Court of International Arbitration
Maricopa County Bar Association
Scottsdale Bar Association
Education:
Attorney at Law, Universidad Nacional Autonoma de Mexico (UNAM)
Post-graduated Studies in Amparo Trial, Instituto Tecnologico Autonomo de Mexico (ITAM)
Legal Auditing, Instituto Tecnologico Autonomo de Mexico (ITAM)
Government Contracts and Tenders, Universidad Iberoamericana (UIA)
Copyright Molina Izabal SC
More information about Molina Izabal SC
View all articles published by Molina Izabal SC
Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer. For specific technical or legal advice on the information provided and related topics, please contact the author.
