ARBITRATION vs. CIVIL LITIGATION

ARBITRATION vs. CIVIL LITIGATION Pursuant to article 569 and 570 of the Federal Civil Procedural Code, its correlatives in local civil procedure codes, and 1347-A of the Commerce Code, foreign Court judgments, private arbitration awards and other resolutions will be recognized and enforced in Mexico, when they are not in contradiction with the public policy in terms of the Federal Civil Procedures Code and other applicable laws, as well as international treaties signed by Mexico. In order for foreign civil resolutions to be executed in Mexico, it is necessary to follow an homologation procedure; said procedure is contemplated in the Federal Civil Procedural Code, as well as in local Procedural Codes. Arbitration awards do not require to be homologated. 1

Civil Litigation ARBITRATION vs. CIVIL LITIGATION There are three Multilateral International Treaties executed by Mexico regarding the recognition and execution of foreign court judgments this are (i) the Inter American Convention for the Execution of Foreign Court Judgments and Arbitral Resolutions; (ii) the Inter American Convention of Competence in the International Sphere for the Extraterritorial Enforcement of Foreign Court Judgments; and (iii) the Hague Convention on the Recognition and Enforcement of Foreign Judgments in Civil an Commercial Matters. Arbitration The following two International Treaties are applicable: i. Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York, 1958); ii. Inter-American Convention on International Commercial Arbitration (Panama, 1975). 2

ARBITRATION vs. CIVIL LITIGATION Arbitration The average length of time for the enforcement procedure is approximately between six to eight months, however it will also depend on the defense arguments presented by the defendants, and other factors which could vary the length. 3

Pathological Arbitration Clause Example Any dispute of whatever nature arising out of or in any way related to the Agreement or to its construction or fulfillment may be referred to arbitration. Such arbitration shall take place in the U.S.A. and shall proceed in accordance with the Rules of Conciliation and Arbitration of the International Chamber of Commerce. * *Cravat Coal Exp. Co. v. Taiwan Power Co., 1990 U.S. Dist. LEXIS 21074 4

Pathological Arbitration Clause Example Any dispute between the Parties arising out of or relating to this Agreement which cannot be settled amicably shall be referred to and determined by arbitration in the Hague under the International Arbitration Rules. * *Marks 3 Zet Ernst Marks GmbH & Co KG v. Presstek Inc., 455 F.3d 7 (1st Cir. 2006). 5

New York Convention 157 members Angola newest member as of June 4, 2017 Limited defenses 6

Litigation vs. Arbitration Defenses Foreign Judgments Judicial system not impartial No jurisdiction Fraud Inconvenient forum for trial Due process issues Public policy May require reciprocity Arbitration Awards Agreement to arbitrate not valid Party unable to present case Tribunal or procedure not in accordance with parties agreement Award vacated at seat Public policy 7

ENFORCEMENT Civil Litigation The Commerce Code establishes in article 1347-A the same requirements the Federal Civil Procedural Code establishes in the aforementioned article, with the exception of the first requirement stated above, since the Commerce Code establishes that all foreign judgments must comply with the formalities concerning letters rogatory; established in International Treaties Mexico is a part of. 8

Civil Litigation ENFORCEMENT Article 1347-A of the Commerce Code: Final judgments and decrees of foreign countries may be enforceable if the following conditions are followed: I. The formalities established by international treaties to which Mexico is a signatory in respect to letter rogatory coming from overseas have been followed; II. The judgments or decrees were not the result of an in rem action; III. The foreign judge or tribunal had jurisdiction over the subject-matter and can rule on the case in accordance with the recognized rules of international law that are compatible with those adopted by this Code; IV. The defendant received notice or was served personally so as to insure him the right to be heard and assert his defenses; 9

ENFORCEMENT V. The matter is re judicata in the country of origin or there is no further recourse available; VI. The cause of action that resulted in the foreign judgment is not the subject-matter of a pending action between the same parties in a Mexican tribunal predating the foreign action or letters rogatory to serve the other party have not been processed and delivered to the Foreign Secretariat or the state authority to effect service of process. The same shall apply if a domestic final judgment has been entered; VII. The underlying obligation for which enforcement has been requested locally shall not be against public policy in Mexico; and, VIII. The judgment or decree shall comply with all requirements to establish its authenticity. Notwithstanding compliance with the preceding conditions, the judge may refuse to grantexecutionifitsisshownthatinthecountyoforiginofthejudgmentor decree in analogous situations execution is not granted. Nevertheless, even if the requirements are met if it is demonstrated that in the country of origin, foreign resolutions are not recognized and enforced in similar cases, the foreign judgment will not be enforced in Mexico. 10

ENFORCEMENT Civil Litigation Mexican law establishes in article 571 F. V of the Federal Civil Procedural Code, its correlatives in local civil procedural codes and 1347-A, of the Commerce Code that foreign court judgments have to be final and that no means of appeal must be available against them in order for said judgments to be executed in Mexico. The Federal Civil Procedural Code, establishes in article 571 the following requirements in order for a foreign judgment to be recognized and enforced: That it meets all the formalities established in said Code concerning letters rogatory; That said judgment is the result of exercising a personal action; That the issuing judge or court was competent to carry out the trial, in accordance with all international jurisdiction rules compatible with the Federal Civil Procedural Code; That the defendant was dully and personally notified or served; That the resolution is final in the country where it was issued, or that there is no ordinary appeal against it; That there is no other pending trial concerning the same issue, with the same parties in Mexican courts; That the cause of the trial is not contrary to Mexican public order; and That it complies with the requirements to be considered as authentic. 11

ENFORCEMENT Arbitration Commerce Code: Article 1461 Regardless of the country where an arbitration award is entered, it shall be given full faith and credit and upon petition in writing to judge it shall be enforced in accordance with the provisions of this Chapter. The party who asserts an award or petitions for its enforcement shall present the original of the award duly authenticated, or a certified copy and the original of the agreement of arbitration referred to by Articles 1416, subparagraph I and Article 1423, or a certified copy thereof. If the award or the agreement is not in Spanish, the party presenting them shall provide a translation into Spanish prepared by an official interpreter. 12

ENFORCEMENT Arbitration Commerce Code: Article 1462 Full faith or enforcement of an award may only be denied, regardless of the country from which it originates, if: I. The party against whom the award is presented proves to the satisfaction of the judge of appropriate jurisdiction in the country in which full faith and execution is demanded that: a) One of the parties to the arbitration agreement was affected by a legal disability, or that the agreement is invalid under the applicable law chosen by the parties, or if nothing is mentioned in that respect, by the laws of the country where the award is entered. b) He was not duly notified of the designation of an arbiter or of the arbitration proceedings, or was unable by whatever reason to assert his rights. c) The award refers to a controversy not foreseen in the arbitration agreement, or contains determinations that exceed the terms of the agreement. Nevertheless, if the determinations of the award refers to submitted issues that can be separated from those that were not, the former may be validated and given execution. d) The constitution of the arbitration tribunal or the arbitration procedure was not in accordance with the agreement between the parties, or in the absence of agreement, it did not comply with the law of the land where the arbitration was held: or, e) The award is not compulsory jupon the parties or has been annulled or suspended by the judge of the country where it was entered; or, II. The judge finds that according to Mexican law, the controversy is not subject to arbitration; or that full faith or enforcement of the award will be against public policy. 13

ENFORCEMENT Competent Court Article 573 of the Federal Civil Procedural Code, and its correlatives in local civil procedural codes, establishes that the competent Court to decide an enforcement application and execute a foreign resolution is the Court located in the place of residence of the defendant, or in the place where the defendant s assets are located within the Republic. Article 576 ofthefederalcivilproceduralcode,statesthatallissuespertainingtoseizes, confiscations, deposits, appraisements, sales, and all other issues related to the settlement and enforcement of a foreign court judgment will be solved by the Court in charge of the homologation procedure, in other words, the Court in charge of deciding the enforcement application. The foreign judge will be in charge of distributing the resulting quantities after a sale. Articles 1105 and 1107 of the Commerce Code establish the same rules as the Federal Civil Procedures Code (the competent court is the court located in the residence of the debtor or in the place the assets are located if no domicile is available). 14

INTERIM AND PRECAUTIONARY MEASURES Types Interim measures can be (i) attachment of assets in civil and commercial matters; and (ii) restraining orders prohibiting a person from leaving the jurisdiction of a court, only in commercial matters. The parties are only allowed to apply for attachment measures which are stated in the Federal Civil Procedures Code or applicable laws, according to article 399. Regarding precautionary measures the Federal Civil Procedural Code establishes the parties can request the seizure of certain goods, documents papers, or books. The Commerce Code contemplates confiscation of assets and house arrest as precautionary measures. 15

INTERIM AND PREUCATIONARY MEASURES Timing It is possible to apply for an interim measure at the time the lawsuit is filed, or before or during on arbitration procedure Article 1433 establishes that the Arbitrators will be able to dictate interim measures regarding the object of the procedure, when a party requests them to do so. They will also be able to request securities to any of the parties for the enforcement of said measures. Both parties can agree in the Arbitration agreement that the arbiters will not have the ability to adopt and grant interim measures. In any case, the enforcement of an interim measure granted by the arbiter corresponds to the judicial authority., when applying for an interim measure, the applicant must demonstrate why such measure is necessary, the judge must decide whether he grants the measure or not. In some cases a bond will be requested to the applicant as a security. This will be a previous requirement and will have to be satisfied when requesting the measure. Specifically, those cases are the following: When applying for seize, the applicant will have to grant a security, in order to cover all damages that could be caused. When applying for deposits or confiscations, the applicant will also have to grant a security to pay for damages, if caused. When applying for a house arrest with the application, the applicant must grant a security to repair all damages the defendant might suffer. 16

CRITERIA The measure will be granted, or not, without giving the counterpart the option to oppose and without hearing his opinion. Once the measure is requested the court decides unilaterally if it grants it or not. The applicant will have to prove that the measure is necessary and that there is a real peril in waiting for the trial to be solved. The foregoing does not mean the other party cannot appeal the decision once the measure has been granted. When the measure consists in a seizure, the defendant can offer a counter guarantee sufficient to cover the total compliance with the trial, in which case the measure Will be releases or not enforced. 17