The Asset Tracing and Recovery Review: Mexico
The design of the Mexican legal framework makes asset tracking and recovery a feasible yet elaborate and tricky affair. Article 16 of the Mexican Constitution provides that no one may be asked to disclose information about their belongings without an order from an authority empowered to do so. Article 14 of the Constitution forbids being deprived of one's possessions or belongings without an express legal order. Both of these Articles provide that possessions belong to the finder until a legal statement proves otherwise. While the primary intention of these provisions is to safeguard the human right to property and due process, unfortunately, they also provide a segue to this finders-keepers rule that is so often abused to hide misappropriated assets.
This chapter concerns the intricacies of tracking and recovering an asset. First, it delves into tracking assets, and how to legally find the location or the person currently holding an asset of interest. Then, once the asset has been detected, the chapter explains the process to recover it. Succeeding in these activities will most certainly take some time and require tackling some challenges. However, unlike other countries, Mexico has no recognition or regulation of private investigators. Thus, certain services offered in the market could trigger a risk as to how the information was actually obtained.
Tracking an asset is mostly done through public registries in Mexico. Finding an asset may be a challenging enterprise, as not all of them are recorded in one of these registries. Likewise, public registries are local and, therefore, a search may involve a Herculean task of dozens of filings or more, just in one state, to try to find an asset in such location. Often, zeroing in on an asset through a registry is more a stroke of luck. Tracking misappropriated money is also a testing quest. Banking secrecy is applicable in Mexico and, therefore, only through a court ruling or an order from the district attorney – in the case of criminal investigations – can that secrecy be pierced.
Once an asset is located, the path is clearer. Whoever is the rightful owner or possessor of an asset must file a judicial petition to secure a court order to recover the asset. A court order is the only way that a person or a company may be legally deprived of an asset currently under its possession, even if such possession is unlawful in its origin. Otherwise, ironically, repossession without such an order would be unlawful. The Constitution grants the right to a hearing before repossession definitively takes place.
Tracking and recovering a rogue asset is as cumbersome as the person holding it wants it to be. Naturally, if the unlawful holder is skilful enough to hide the asset through several movements, dispersion or simulations, the process to find and recover it will then be more difficult. However, the Mexican legal framework is robust enough that, if used correctly, it may ultimately guarantee a successful ending.
Legal rights and remedies
i Civil and criminal remedies
Finding an asset
The method of finding an asset depends on the type of asset that is being looked for. Money, goods or real estate (finding out who holds it) all call for different procedures.
Tracking money is difficult. Credit and financial institutions in Mexico are bound by banking secrecy pursuant to applicable constitutional protections. They are subject to a non-disclosure obligation concerning their clients' information. Thus, not even a formal request evidencing a misappropriation suffices for a financial institution to be required to reveal the location or proceeds of funds.
The only way to ask for the location and tracing of money is through a civil or criminal procedure. In this procedure, the relief sought would be an order calling for a financial institution or the Mexican Banking and Securities and Exchange Commission to inform the court of the location of the funds. A court order (in the case of a criminal investigation at the request of the district attorney) is the only mechanism to pierce banking secrecy.
Therefore, a preliminary matter would be determining who the person responsible for the misappropriation might be. Such person or company then becomes the defendant in whichever proceeding is chosen. These proceedings are described in detail in Section II.ii; however, for the purposes of this section, it should be mentioned that only if the defendant fails in its case against the petitioner will the order requesting the credit and financial institutions to disclose the location of money be issued.2
Assets different from money
For other assets, it may not be necessary to exhaust a legal proceeding to locate them. Finding assets may be as simple as filing an application before the public registries where records of rights and properties might be available. For example, requests might be filed before the following, among others:
- property public registries to track real property and titleholders;
- the Mexican Industrial Property Institute to track industrial property rights;
- the Merchant Navy Registry to track ships and other types of navy equipment;
- Indeval (the Institute for the Deposit of Securities) to track securities;
- the Registry of Secured Movable Guarantees to find goods subject to guarantees.
The above are not only useful to find assets but also to gather information about other assets that the individual or company in question may own or possess. A successful search in any of these registries depends on the assets, individuals or companies registered in any of those public databases. Notwithstanding, real estate poses a hurdle – there is no national registry, as each state administers the real estate. Thus, doing such research proves sometimes burdensome, timely and expensive, unless one has an idea of, at minimum, the specific location where the asset could be. Besides, each request for a search involves a filing fee that varies according to the specific municipality.
Information obtained via public records is only useful once a competent court has ruled that the holder of an asset must return it to its rightful owner or possessor in a court proceeding.
There are two main avenues through which an asset may be recovered: a criminal or civil proceeding. Each of these implies radically distinct procedures. However, both are associated with the concept of damage restitution for the victim.
In Mexico, the damage restitution principle implies that the person liable for harming someone must restore the status quo of the victim as if the damaging conduct never existed, if possible. Otherwise, the obligation is to pay monetary relief equivalent to the damage suffered.
The evolution of victims' restitution in Mexico
The history of restitution of a victim's damage in Mexican criminal law is long and arduous. For a long time, this procedural institution remained ignored by the Mexican legal community.
It was not until 1993 that the state recognised victims' restitution at a constitutional level. Nevertheless, since that moment, victims' rights in criminal procedures are suddenly of interest in the field.3
Driven by this interest in victims' restitution, among many other issues, on 18 June 2008, Congress amended the Constitution in one of the most relevant criminal legal reforms in Mexican history. As a consequence of that reform, it was recognised at a constitutional level that the criminal procedure has victims' redress as one of its objectives and that a victim has a right to damage restitution.
In fact, the Constitution imposes on public prosecutors the obligation to request that the judge decides on a victim's damage repair upon exercising a criminal action.4
Based on this constitutional amendment, in 2014, Congress enacted a new National Code of Criminal Procedure (CNPP). This Code, in line with the new constitutional principles, expressly recognises a victim's right to be compensated for damage caused as a consequence of a criminal offence.5 Based on this amendment, a convicted felon could not only be imprisoned but also ordered to pay for the damage its criminal action caused.
These legal reforms have entirely changed the victims' role in criminal proceedings. While they used to be absolutely prevented from participating in the criminal process,6 the new tendency is to ensure their active participation to affirm their legal rights.7
Victims' redress under the CNPP
Pursuant to the CNPP, repairing damage is twofold. It can take the form of public punishment, or it can be considered as civil liability (even in the criminal law context). It is the former when the public prosecutor is the one who requests restitution from the defendant. It is the latter when restitution needs to be requested from a third party different than the defendant.8 This second civil liability action can be exercised in the same criminal proceeding, or in the civil arena, as further explained below.
This section addresses victims' restitution as a public punishment, as the civil liability action is not part of the main criminal proceeding, but an accessory matter addressed in the following section.
The public prosecutor or district attorney has the constitutional mandate to request damage restitution,9 and the judge cannot discharge the defendant of such restitution if he or she has been convicted of the crime in question.10 Under this rationale, when the public prosecutor files a restorative action along with the criminal action, it forms part of the main proceeding and, under the congruence principle, the judge must decide it in the final resolution.11 Thus, under this new model of justice, restitution takes the form of public punishment, effectively shifting the state's aim from punishment to the overarching welfare of its citizens.
Mexico is driven by the principle of full compensation. This has even been considered a fundamental human right. Restitution aims to annul the consequences of an illegal act (in this case, the criminal offence) and reestablish the condition of the offended party as if no illegality had been committed.12 Under this logic, the Federal Criminal Code (FCC) provides that the compensation13 must be full, adequate, efficient, effective and proportional, covering, at least:
- restitution of the object obtained by the crime,14 or an equal compensation;
- compensation for the material and moral harm;
- lost profits;
- opportunity costs;
- declaration for the restoration of the victim's dignity and reputation; and
- a public apology.
The obligation of the public prosecutor to file a restorative action, the judge's obligation to award the damage restitution and the principle of full compensation create a legal atmosphere where the victims' redress is attainable. When a person different than the defendant (e.g., ascendants, legal guardians, among others) seeks the compensation, the possibility to file a civil liability action to obtain redress also exists.
Alternative outcomes: redressing agreements
Another innovative aspect of the aforementioned legal reforms is that they bolstered alternate outcomes to criminal proceedings. One of the most salient alternatives is the redressing agreement.
A redressing agreement is an arrangement between the defendant and the victim to compensate the latter for the harmful consequences of a crime. The effect of this agreement is the conclusion of the procedure once the agreement is fulfilled.
Redress is not the sole objective of the Mexican legal system. Deterrence and rehabilitation are also much-desired goals. Therefore, redressing agreements do not apply to every criminal offence, but rather only to:
- offences prosecuted through a private criminal complaint or allowing the victim's pardon;
- negligent or reckless offences; and
- property offences committed without violence.
Only if the assets were obtained through theft, fraud or any other property offence without any violent intervention can a redressing agreement be reached with an offender. In terms of recovering assets, redressing agreements are unquestionably a readily available opportunity to recover assets swiftly.
Alternative outcomes: conditional tolling of the procedure
The CNPP provides for another alternative in the criminal arena whenever redressing agreements are not available: the conditional tolling of the procedure. The underlying principle of this remedy is that the public prosecutor or the defendant may file a damage restitution plan and comply with several requirements aimed at securing the victim's rights, having the criminal action concluded as a consequence.
Just as with redressing agreements, conditional tolling is not an option that is available in every scenario. It can only be considered when the arithmetic average of the punishment is equal to or less than five years,15 and there is no well-founded objection from the victim regarding said tolling.
Through this mechanism, the defendant undertakes the obligation to comply with the full restoration of the damage.16 Once the defendant fulfils all the conditions and obligations in the damage restitution plan, the criminal action is concluded. However, if any of the obligations are breached, the suspension is lifted and the criminal procedure is resumed.
It is important to note that this is more a defendant's right than a victim's right because the former can apply for this alternative if the legal conditions are met, and the latter has only a limited right to object. Even being a defendant's right, it is a plausible alternative for the victim to obtain redress if the court approves a proper restitution plan.
Each of the Mexican states' Civil Procedure Codes governs the proceedings to recover assets. Not all procedural codes follow the FCCP, although they share the same principles applicable to all proceedings. To depict how a civil proceeding looks, this chapter uses the example of the FCCP.17
In general, the civil procedure starts by filing a statement of claim before the competent civil court. In this statement, the claimant must narrate all the facts and file all the documents that support its claim, as new facts, documents or claims will not be admitted.18 The court can admit the statement of claim, request clarification or dismiss the claim.19 If the court admits the claim, it serves the defendant to answer the claim within nine days.20 It is essential to answer the claim, otherwise it implies acknowledgment from the defendant.21 Once the defendant files the response to the claim within the legally determined period, the court opens the evidentiary stage for 30 days.22
During the evidentiary stage, evidentiary material shall be prepared and rendered, such as witness statements, witness experts' reports and interrogatories to the parties. Once the evidentiary stage ends, the parties have the opportunity to orally render their final pleadings23 (depending on the Civil Procedure Code, the pleadings can be rendered in written form). Afterwards, the court has a 10-day period to issue a judgment.24 No amended complaints, an extension of legal terms, discovery as in the US, or trial by jury are permitted. Mexican proceedings under the FCCP are formalistic and quite rigid, although the court has certain leeway to attenuate certain formalities.
The parties have the right to appeal a judgment before a superior court within five days before the court that issued the judgment,25 and the favoured party has the right to express its position towards the appeal.26 The parties have the right to make pleas in the corresponding hearing. When the hearing finishes, the superior court has five days to issue a resolution on the appeal. Against the resolution issued in the appeal procedure, the parties can file a constitutional challenge within 15 days before a federal collegiate court. Parties cannot challenge the decision. Under exceptional circumstances, there is a chance to file a federal appeal before the Supreme Court of Justice when issues about constitutionality are still at stake.
In principle, the remedies herein described would be filed in a civil proceeding. However, if the parties are merchants, and the misappropriated asset has a commercial nature, there is a possibility to file it in a commercial proceeding. In this regard, Mexico has implemented a legal reform to introduce oral proceedings in all types of commercial claims.27
A compensation action could be deemed as a generic action for asset recovery. The premise is simple: if a person, acting against law or morality, damages another person, the injuring party must repair the damage.28 For example, if the director of a company takes the company's funds for personal purposes, the company has suffered a detriment or loss in its wealth; therefore, the company can sue the director to obtain the damage reparation.
Through this action, the affected person seeks the reparation of the damage from the liable person. The reparation consists of reestablishing the situation before the damage was made or payment of damages and lost profits (monetary relief).29
Based on these provisions, Mexican courts and scholars have interpreted that the monetary relief shall be equal in amount to the caused damage, plus the loss of profit – or in other words, full compensation. This means that only restitution damages are granted by courts – no punitive, indirect, consequential or injunctive damages are awarded.
One of the essential principles of this action is that damages and lost profits must be a direct and immediate consequence of the illegal conduct of a person. Therefore, liability is limited to the direct and immediate damage caused, and no more. Limitation of liability clauses are normally valid and enforceable.
While the damage may be caused intentionally (dolo) or by a lack of diligence (culpa), for civil liability, there is no distinction. The only requirement for a claim to prosper is to prove that illegal conduct caused damage.
The time limit to oppose this action as an extracontractual liability is two years since the misappropriation occurred; otherwise, the action is barred.30
This action is not established in the FCC or the FCCP; therefore, we must resort to the local procedural codes. For this section, the Code of Civil Procedures for Mexico City (CPC) is used.
While the other remedies described in this chapter are personal actions (since they are directed against a possibly liable person), the restitution action is an in rem action. This means that it does not matter who the liable person is per se, because the action is pursued against the person that has the possession over the right in rem (i.e., property).
The restitution action is filed by the rightful owner – without possession – of a specific asset, against the person that has possession over the specific asset. The sought remedy is a judgment declaring that the plaintiff is the legal owner of the asset and ordering the restitution of the asset along with its byproducts and accessories.31
The action must be filed against the person that has possession over the specific asset, independently if he or she has good or bad faith possession. In other words, the action can be filed against the possessor, no matter how possession was obtained, whether he or she misappropriated the specific asset, or acquired the possession from the person who misappropriated it.
As mentioned above, because this is an in rem action, it is used to recover the possession over specific assets such as goods or real estate (i.e., land, cars, furniture).32
For example, if the general director of a company sells, without authorisation, some land of the company to a third party (who might have knowledge of the misappropriation or not), the company can start a restitution action against the third party as the possessor of the lands to get the lands back. Moreover, if the possessor of the land built any construction on the land, the company benefits from it. Even if the third party has leased the land, the company has the right over any payment made for rent.
The statute of limitations for such action is 10 years.
Motion for nullity in the case of malice or fraud
Other cases of misappropriation could occur when a person – through certain illegal conduct – obtains the consent of another party to enter into a contract, and this party relied on the conduct or representations. In this case, the affected party can request a court to declare the nullity of the agreement.
Article 1812 of the FCC provides that the consent is not valid if it is obtained due to an error (mistake). Therefore, if the consent is obtained by these means, the agreement would be invalid.33
The invalidity of the consent might be caused by two reasons: fraud or malice. Fraud is any positive action to mislead a person into an erroneous understanding of the terms of an agreement or to keep such a contracting party from realising such misunderstanding. Malice is passive conduct involving the lack of action of one party to keep the other party from realising the misunderstanding.34 Malice or fraud is found when the misunderstanding is about the essential elements of the agreement in question or over one of the motives determinant of a party's will.
Since the immediate objective of this action is to void the agreement, its ultimate consequence is to recover any payments made or any assets surrendered. For instance, if a person wants to buy land from a company, and the company will not sell the land unless it is used for social purposes – the person might lie and state that the land will be used for a hospital, to motivate the company to sell the land. The company can claim the nullity of the purchase agreement, as it was fraudulently induced into executing it.
The statute of limitations for such an action is 60 days since the party that suffered the fraud or malice becomes aware of it.
ii Defences to fraud claims
The most common defences to fraud claims are (civil and criminal):
- the elapsing of the statute of limitations established for the relevant criminal or civil action;
- a good faith purchase by an innocent third party. In this case, the compensation for the damage caused would still be applicable, but the recovery of the specific asset becomes extremely complicated, given that a better right has to be evidenced; and
- absence of proof of intent. In accordance with Mexican criminal law, offences against property require intent (dolo), and cannot be committed negligently or recklessly (culpa). Thus, if the intentional requirement is not fulfilled, a conviction might not be reached.
Seizure and evidence
i Securing assets and proceeds
Once an asset has been located, it is critical to have that asset secured. On the criminal law side, it should be considered how to ensure that the asset can be recovered from the defendant once a conviction is reached. On the civil law side, it should be considered how to avoid the liable person hiding the funds once they have been found, and an order has been issued to return those assets.
In criminal proceedings, provisional measures may be the answer. These have a dual objective. On the one hand they intend to ensure the presence of the defendant during the trial, and on the other they aim to guarantee a victim's redress.35 Provisional measures may become essential towards assuring the asset recovery or, at least, an equivalent damage repair.
The CNPP provides, in Article 138, the provisional measures that can be ordered by the judge to guarantee a victim's damage repair. In this sense, the victim or offended party or the public prosecutor may request the seizure of goods, or the freezing of bank accounts and other securities in the financial system.
It is crucial to keep in mind that, under the CNPP, these provisional measures are granted if the evidence provided demonstrates that the damage repair is possible and that there is a strong possibility that the defendant is responsible for repairing such damage.
These provisional measures can also be cancelled (hence, lifting the seizure or the unfreezing of bank accounts) if the defendant provides countersecurity for or pays the reparation of the damage. The measures can be cancelled if a conviction is not reached, or if the final judgment exonerates the defendant from the damage repair.
The flip side is that, if a conviction is reached and the defendant is sentenced to repair the damage caused, the provisional measure becomes effective in favour of the victim or the offended party. This means that the seized or frozen assets will be used to pay the victim for their damage. Interestingly, the CNPP provides that the seizure is governed by the rules established in the FCCP.
In civil cases, there are also provisional measures that facilitate the recovery of assets at the end of a proceeding. All the procedural codes, whether civil or commercial, provide for interim relief to safeguard the assets that are subject to the aforementioned civil actions. Under the FCCP, interim relief consists of the seizure of assets to guarantee the result of the trial, or the seizure and deposit of the assets encompassing the subject matter of the proceeding.36
For example, if a company that suffered a misappropriation of funds has already tracked the person who misappropriated such funds and knows the bank accounts where the person might have the money, the company can request freezing the money in these bank accounts, either before trial or during the trial.
Interim relief can be requested to the court during a trial or before it begins.37 For the court to grant this, the plaintiff must evidence urgency, namely that there is a real possibility that the assets might be hidden or used by the defendant. Interim relief may be granted ex parte, without hearing the affected party, who will also not be able to challenge the seizure order. However, if the relief is not granted, the plaintiff has the right to challenge the decision.38
It is important to note that the plaintiff must guarantee the damage and lost profits that the person affected by the interim relief might suffer. On the other hand, just as in criminal proceedings, the affected party (defendant) can offer countersecurity to lift the seizure order.39
The downside of requesting interim reliefs in a pretrial stage is the obligation imposed on the claimant of filing its claim within five days. Otherwise, the injunctive relief is revoked.40
ii Obtaining evidence
There are no specific rules to obtain evidence in fraud proceedings. Parties must offer all evidence they deem necessary to back their claim or defence. All evidence is admissible when it is aimed at supporting claims or defences. Parties are free to submit and produce any type of evidence – documents, the examination of witnesses, expert witnesses, visits to a specific site, among other things – insofar as the piece of evidence is not illegal or against morality.41
Regarding documents, in Mexico claims are required to include all supporting documents from the beginning of the proceedings. As a general rule, a document that has not been submitted with the parties' claim or reply to it is not accepted or considered unless said document was unknown or did not exist at the moment of filing a claim or answer.
When a document is requested as evidence, the request must be specific enough with the document or documents requested; otherwise, the court will not grant it deeming it as a prohibited inquiry according to Article 16 of the Constitution. Under Mexican law, there is very little discovery and there is no mechanism for party-directed document production or depositions.
Fraud in specific contexts
i Banking and money laundering
In 2012, a new Anti-Money Laundering Act was enacted in Mexico.42 This was a significant step forward in Mexican legislation, given the prevalent practice in the country. One of the objectives of this new regulation is the prevention of crimes associated with and funded through money laundering.
While there are certain offences regulated in this Act, the money laundering offence is governed by the FCC and is considered a serious offence. It warrants imprisonment ranging from five to 15 years, and a fine43 tantamount to at least 1,000 and up to 5,000 times the unit of measurement and update.44
These penalties are aggravated if the offending party is composed of directors, managers, officials, employees, attorneys-in-fact or service providers of any person or company subject to the regime to prevent operations with unlawful resources. In general, persons subject to this regime are financial entities and people who perform vulnerable activities.45
Under the insolvency civil concept – and not a bankruptcy scenario – arguably, the most traditional legal action is an action against creditors' fraud. When a debtor purposefully engages in conduct to become insolvent (e.g., sells or gives away his or her assets), its creditors can claim, before a civil court, the nullity of such conduct only if the credit is previous to such acts.46 Insolvency occurs when the debts are bigger than the assets, and the debtor commits fraud only when it knows it will become insolvent after the execution of such acts.47
The requirements to exercise this action are:
- the existence of an act that provokes the debtor's insolvency;
- the act is made after the debt is acquired; and
- the act was committed in bad faith (if the act that places the debtor in insolvency is a gratuitous act (e.g., donation): bad faith is not a necessary component for pursuing the action).48
The effect of the nullity is to return the assets to the original debtor.49 These do not return for the benefit of the debtor, but only to be seized by the creditors, as if they had never left the debtor's estate.
Criminal matters such as fraud are not arbitrable under Mexican law. However, civil claims could be solved through arbitration should an arbitration agreement exist.
Mexican arbitration law per se does not provide for any particular procedure or relief when a claim is related to fraud or misappropriation. As for the merits of the claim, the same remedies outlined above could be brought to arbitration. The merits will remain the same and the only change would be the venue.
iv Fraud's effect on evidentiary rules and legal privilege
No Mexican statue specifically regulates legal privilege. Hence, there are no specific provisions or rules within the Mexican system regarding evidentiary rules or legal privilege when dealing with misappropriation or other fraudulent conduct.
i Collection of evidence in support of proceedings abroad
There are no special rules for collecting evidence in Mexico for fraud proceedings abroad. The procedure shall be conducted according to international treaties Mexico is part of – specifically, the HCCH Convention on the Taking of Evidence Abroad in Civil and Commercial Matters 1970 (Hague Evidence Convention) and its regional equivalent, the OAS Inter-American Convention on the Taking of Evidence Abroad 1975.
When relying on the Hague Evidence Convention, the central authority to which the letter of request must be sent is the Directorate-General of Legal Affairs of the Ministry of Foreign Affairs. The request can be sent either through diplomatic or consular channels or directly to the competent judicial authority. The request must be in Spanish and meet all the requirements in the Hague Evidence Convention.
One important thing to note is that Mexico made a reservation to Article 23 of the Hague Evidence Convention. Through this reservation, Mexico:
[S]hall only be able to comply with letters of request issued for the purpose of obtaining the production and transcription of documents when the following requirements are met:
(a) that the judicial proceeding has been commenced;
(b) that the documents are reasonably identifiable as to date, subject and other relevant information and that the request specifies those facts and circumstances that lead the requesting party to reasonably believe that the requested documents are known to the person from whom they are requested, or that they are in his or her possession or under his or her control or custody; and
(c) that the direct relationship between the evidence or information sought and the pending proceeding be identified.
ii Enforcement of judgments granted abroad in relation to fraud claims
As with collecting evidence, there are no special rules for executing in Mexico a foreign judgment related to a fraud claim. The applicable rules are contained in the Federal Civil Code, in the Code of Commerce and in the State Civil Codes where a judgment is enforced. Additionally, Mexico is part of many international conventions for the enforcement of foreign
judgments, which applies when the judgment was issued in a country that is a signatory of the following conventions:
- the Inter-American Convention on Extraterritorial Validity of Foreign Judgments and Arbitral Awards, Montevideo, Uruguay, 8 May 1979; and
- the Inter-American Convention on Jurisdiction in the International Sphere for the Extraterritorial Validity of Foreign Judgments, La Paz, Bolivia, 24 May 1984.
Mexico's enforcement procedure is divided in two steps: homologation and enforcement.
Homologation is the process under which a Mexican court analyses whether a foreign judgment should be recognised and enforced according to Mexican law. The court conducting the homologation procedure cannot look into the merits of the case, because the homologation procedure only recognises rights already acquired in a foreign proceeding.
Once the homologation has been granted, the judgment is considered as a Mexican judgment, and, therefore, can be executed in accordance with the domestic procedure. In general terms, the claimant requests the court to enforce the judgment, and the court requests the defendant to fulfil the obligation. If the obligation is not fulfilled, the court can order the attachment of assets to be sold in a public auction.
The defendant has many ways of defending himself or herself against the homologation and enforcement procedure, given that the burden to prove that the foreign award is enforceable in Mexico is on the applicant and not on the party subject to the enforcing action.
On 9 August 2019, Congress enacted the National Law for Asset Forfeiture (NLAF). Such law provides the rules for the forfeiture of assets in favour of the state when such assets are used in or are the product of illicit activities, such as organised crime, corruption and drug trafficking. The NLAF abrogated the previous Federal Law for Asset Forfeiture and the local asset forfeiture laws. The NLAF defines asset forfeiture as the loss of rights in connection with an asset without receiving compensation or consideration. For asset forfeiture to occur, the public prosecutor must file for a civil procedure in which the affected party can defend itself. However, a crucial difference from an ordinary civil procedure is that the state might sell such asset in a public auction without a final decision in the civil procedure. In the final decision, if the court decides that the plaintiff proved its case, it must declare the loss of rights of the defendant with regards to the assets involved in the illicit activity, without compensation. If the defendant prevails, it can initiate a separate damages action against the prosecution. In addition, if the asset was sold in an anticipated manner, given the specific legal scenarios provided by the NLAF, the defendant has the right to be reimbursed with the value of the asset at the time of the judicial selling process (not the market value), an aspect that has raised concerns about the due process consistency of this aspect of the law.
While the beneficiary of the procedure is the state, the procedure is relevant for parties who want to recover assets unlawfully secured.
Another relevant development in a similar vein is the performance of the Financial Intelligence Unit (UIF). This governmental office is in charge of preventing and detecting money laundering operations and funding for terrorism operations. Despite being created in 2004, the UIF increased its activity during 2019 as it filed 164 criminal complaints (a 100 per cent increase from 2018) and blocked bank accounts for a total of 4,600 million pesos, 52 million dollars and 1,875 euros.50 As part of this effort, on 21 May 2019, the Federal Judiciary Council assigned six judges to process requests to block bank accounts. The relevance of this development resides in the fact that the current federal administration is investing resources in tracking, blocking and seizing resources from and to illicit activities.
In a different matter, Congress has been drafting a National Code of Civil Procedure to replace the federal and states' codes of civil procedure. If approved, the new code might change the proceeding to recover and secure assets, mainly in the procedural time frames and how parties present their cases (e.g., orally instead of written). Nonetheless, the substantive principles would remain intact.
1 Juan Francisco Torres-Landa Ruffo, Luis Omar Guerrero Rodríguez and Jorge Francisco Valdés King are partners and Jacobo Enrique Rueda Fernández and Eduardo Lobatón Guzmán are associates at Hogan Lovells. The authors thank Erick Emmanuel Clavel Benítez for his collaboration on the first edition of this chapter.
2 Actually, the petitioner – although not necessarily – would also normally include seizure of the money as part of the relief to actually recover. Otherwise, a separate proceeding would have to be exhausted to have the money recovered.
3 Julio Antonio Hernández Pliego, La Reparación del Daño en el CNPP. Instituto de Investigaciones Jurídicas de la UNAM. Mexico: 2015, pp. 342–3.
4 Article 20 of the Constitution.
5 Article 109, Section XXIV of the National Code of Criminal Procedure.
6 Under the argument that private vengeance was not desirable.
7 Julio Antonio Hernández Pliego, La Reparación del Daño en el CNPP. Instituto de Investigaciones Jurídicas de la UNAM. Mexico: 2015, pp. 342–3.
8 Article 34 of the Federal Criminal Code.
9 Public prosecutors may even be fined for not exercising such action.
10 Article 20 of the Constitution.
11 Article 403 of the CNPP provides that the final judgment has to include the decisions regarding the damage restitution and the amount of compensation. Additionally, Article 406 of the CNPP provides that if a conviction is reached, the trial court will also convict regarding the damage restitution.
12 Fundamental Right to a Full or Fair Compensation. Its Concept and Scope. Period: Tenth Period; Registry Number: 2014098; Authority: First Chamber; Type of Thesis: Jurisprudence; Source: Weekly Federal Judiciary Official Gazette; Field(s); (Constitutional); Thesis: 1a./J. 31/2017 (10a.).
13 Article 30 of the Federal Criminal Code.
14 For the purposes of this chapter, the traced asset.
15 The arithmetic average is the sum of the minimum imprisonment time set forth for a specific crime, plus the maximum imprisonment time (both in years), divided by two. For example, imprisonment for hefty frauds ranges between three and 12 years under the Federal Criminal Code. Therefore, the average is seven-and-a-half years.
16 Established in Article 195 of the CNPP.
17 In 2017 there was a constitutional reform that authorised the Federal Congress to issue a national and unique Federal Code of Civil and Family Proceedings. However, this legislation has not been created to date.
18 Articles 322, 323 and 324 FCCP.
19 Article 325 FCCP.
20 Article 327 FCCP.
21 Article 332 FCCP.
22 Article 337 FCCP.
23 Articles 342 and 344 FCCP.
24 Article 347 FCCP.
25 Article 241 FCCP.
26 Article 252 FCCP.
27 The reform was published on 25 January 2017. It came into full force in January 2020.
28 Article 1910 of the FCC.
29 Article 1915 of the FCC.
30 Article 1934 of the FCC.
31 Articles 4 and 9 of the CPC.
32 Article 8 of the CPC.
33 Article 1795 of the FCC.
34 Article 1815 of the FCC.
35 Ruth Villanueva Castilleja, Medidas de Protección y Providencias Precautorias. Instituto de Investigaciones Jurídicas de la UNAM. Mexico: n/d, p. 24.
36 Article 389 of the FCCP.
37 Article 384 of the FCCP.
39 Article 391 of the FCCP.
40 Article 397 of the FCCP.
41 Articles 79 and 93 FCCP.
42 Official name: Federal Act for the Prevention and Identification of Operation with Unlawful Resources.
43 The Federal Criminal Code still sets forth that fines are established in terms of the minimum wage. However, this was changed at a federal level.
44 The unit of measurement and update is an economic reference value or benchmark used by the state to determine the amounts payable derived from payment obligations established in Mexican statutes. Until recently, fines and other economic sanctions were established and determined based on the minimum wage. However, the reference was modified at a federal level to incorporate as a replacement the 'Unit of Measurement and Update for the quantification of the economic sanctions imposed by the Mexican State'.
45 Examples of vulnerable activities are gambling activities, the issuance of credit cards and the commercialisation of precious metals, among others.
46 Article 2163 FCC.
47 Article 2167 FCC.
48 Articles 2164 and 2165 FCC.
49 Article 2168.
50 Guitierrez, F. (2020). 'La UIF más visible y su talón de Aquiles. El Economista': https://www.eleconomista.com.mx/revistaimef/La-UIF-mas-visible-y-su-talon-de-Aquiles-20200209-0032.html.