Mexico: Initiative To Amend, Add And Repeal Several Provisions In Administrative Matters

Published on Mar 27, 2023

Executive Summary

The Federal Executive sent a bill to the Chamber of Deputies proposing to amend, add and repeal several administrative provisions.
The purpose of the initiative is supposed to reverse corruption, safeguard public finances and strengthen the federal public administration.
If the bill is approved without modification, it will affect private individuals since it violates fundamental rights outlined in the Constitution and international treaties.

On March 24, 2023, the President of Mexico sent to the Chamber of Deputies an initiative to reform several administrative laws with the supposed purpose of reverting acts of corruption, safeguarding public finances, and strengthening the federal public administration.

The initiative seeks to amend 23 laws to change regulations related to the federal budget, public procurement, revocation of concessions and authorizations, bids, and the termination of administrative contracts, as well as those relating to indemnities payable by the federal public administration.

Among the most relevant reforms and the violations of constitutional principles and international treaties that they generate, we consider the following to be the most significant:

Amend the Federal Law of Administrative Procedure to include new grounds for the revocation of concessions, authorizations, permits, and licenses, as well as the addition of cases in which the federal public administration will not be liable for damages.

With this proposal, the Federal Executive intends to deviate from the general regulation of compensation for damages in public procurement by including that this does not apply when the damage is caused by "public utility causes," which, being a subjective concept, generates a state of legal uncertainty.

It is proposed to amend the Federal Law of Contentious Administrative Procedure to eliminate the extraordinary nature of the so-called "injunctive relief" trial, adding new grounds for its proceeding, particularly, when the act favorable to the private party causes damage to the federal public administration or harms the public interest. Concepts that are also broad, subjective, and abstract, in such a way that there is legal insecurity to the extent that arbitrariness of the authorities is allowed.

To amend the Federal Law of Parastatal Entities so that the Federal Executive has the power to directly assign to parastatal entities the rendering of public services, as well as the use, development, and exploitation of assets subject to the public domain regime for reasons of public utility and interest, general, social or national security. In addition, it is proposed to grant powers to the Federal Executive to group parastatal entities according to the public interest or national security.

In our opinion, this amendment may interfere with competition and free concurrence among private parties that offer their services to the Federal Government since there is the possibility of awarding contracts directly to other State entities without respecting the bidding procedure that allows a healthy and free competition in the different sectors, generating undue and arbitrary advantages.

Regarding the Expropriation Law, it is proposed to eliminate the mandatory application of international treaties to which Mexico is a party and the arbitration agreements entered into, which transgresses the principle of constitutional supremacy and hierarchy of laws, since international treaties are hierarchically superior to the mentioned Law.

Reform the Law of Acquisitions, Leasing and Services of the Public Sector to reduce requirements for open international bids. The above may imply a violation of the international treaties to which Mexico is a party, specifically about the chapters on government procurement, since, as a general rule, before the open international bidding, public bidding must be carried out under the coverage of treaties, which allows the possibility that national companies may not be able to compete under similar circumstances.

The inclusion of a so-called exorbitant clause, consisting of the discretionary power of the State to terminate the Contracts for reasons of public, general or social interest. The reform intends that this clause is always included, under penalty of public officials involved incurring administrative liability.

From our point of view, this figure only seeks to benefit the State in a discretionary manner to terminate without any responsibility under grounds that can be alleged arbitrarily according to the interests of the Executive, which generates a clear legal uncertainty in contracting with the State.

To amend Article 19, paragraph 4 of the General Law of National Assets; Articles 1 and 13 of the Federal Law of Patrimonial Responsibility of the State, and Article 21 of the Expropriation Law, to establish a limit to the amounts of compensation in the event of condemnation in jurisdictional or arbitration proceedings.

This issue should be carefully studied if there are arbitration clauses since the essence of the meaning of the arbitration agreement is altered.

The obligation to follow and self-determine arbitration as an autonomous procedure and independently of any State is based on International Treaties that promote the conduct and enforcement of an award, such as the New York Convention and various treaties that protect foreign investments. These International Treaties are protected by Article 133 of the Constitution, so the intention of the contracting parties must enjoy legal certainty, providing fair treatment to companies and investors that interact with the government.

Since the initiative was recently presented, it must be turned to the corresponding Commission for its processing, study, discussion, and approval, and therefore, it may still be subject to various modifications.

If the initiative is approved without modifications, we consider that violations of multiple rights recognized in the Federal Constitution and various international treaties may be brought before the Federal Judiciary. This is because the proposed amendments violate the rights of legal certainty, constitutional supremacy and hierarchy of laws, legitimate trust, proportionality, legality, equality, freedom of labor, and even economic competition.

Authors