Download Naturaleza, Evolución y Contexto del Derecho Internacional de

Credit Securities in Mexico
Workshop of the Berne Union
International Union of Credit & Investment Insurers
Vienna, 4 October 2010
Dr. Herfried Wöss ©
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General Remarks
 Absence of the good faith principle in business dealings: the
good faith principle exists in the Federal Civil Code but is a
rather empty legal institution
 The business culture is marked by Spanish, Lebanese and
Jewish influences
 Legal islands system: some institutions work (summary
action under promissory notes) and others exist on paper in
the Civil Code which is based on the French system
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General Remarks
 Weak judicial system: the first two instances are mostly at a
local level and the third and fourth on a federal level,
however the third and the fourth level are mainly institutions
of annulment
 Use of criminal actions and other chicanery against creditors
(e.g. HypoVereinsbank vs. Colortex/Kimex)
 Existence of a legal “mine field” where formal errors easily
lead to the credit becoming irrecoverable
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General Remarks
 Insufficient or incorrect contracting is an invitation to Buyer
not to comply with its payment obligations
 Typical arguments in order not to make payment:
 defects of the machines
 defects in legal representation
 whatever imagination allows
 Problem: lack of assets (rich entrepreneurs and poor
companies) in case of collection actions
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Proper Contract
 A proper contract should be drafted using the ICC model sales
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contract and the credit security instruments of Mexican law
An order confirmation is not sufficient
It is important to revise the powers of attorney of the Buyer’s legal
representative: there is no general powers of attorney in Mexico
The object of the sale has to be properly described in Spanish and
the goods should be marked as the property of Seller
Invoices are sent upon payment but not before: pro forma invoices
are used for customs purposes
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Applicable law and forum
 UN Sales law should not be opted out:
 the application of foreign law is expensive (legal experts are
necessary) and often does not lead to the correct results
 it is important to limit the remedies of the Buyer to warranties
and to exclude damages claims, unless for intentional acts or
omissions
 The forum should always be in the country of the debtor:
 the execution of foreign judgements is cumbersome and there
are few lawyers who know how such cases
 the requirement of the proof of reciprocity adds cost
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Applicable law and forum
 Division of fora:
 The payment and repossession of property should be litigated
before Mexican courts subject to formal requirements.
 Technical issues should be brought to arbitration (ICC or
VIAC). This includes the specifications of the goods, warranty
issues, operation, etc.
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Credit Securities
 Reservation of title and termination clause:
 The reservation of title clause and the termination clause in case
of non-performance of a partial payment by Buyer have to be
registered in the Public Registry of Property.
 In order to do that, the contract signatures have to be
authenticated and the foreign notarial certification be
apostilled.
 In order to save cost, bilingual contract versions should be used
and local attorneys be authorized in the contract to execute the
registration of the reservation of title clause and termination
clause for the non-performance of instalments in the Public
Registry of Property.
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Credit Securities
 Reservation of title and termination clause:
 The government fees depend on the the respective state
legislation. Normally, there is a percentage with a top rate.
 The reservation of title clause duly registered allows for the
repossession action under a summary procedure.
 The reservation of title allows for the separation of the goods in
case of bankruptcy.
 The reservation of title permits the filing of criminal actions in
case of improper disposal of the goods, provided there are the
respective clauses in the contract.
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Credit Securities
 Promissory notes:
 Mexico follows the Second Geneva Convention but is not a
party to such convention
 There should be one promissory note for each instalment
 The promissory notes have to contain a so-called acceleration
clause which has to be formulated according to jurisprudence;
i.e. all payments become mature in case of non-payment of only
one instalment
 This allows for the collection of the total outstanding amount
and serves as an incentive for payment.
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Credit Securities
 Promissory notes:
 It is important that the principal shareholder of the Buyer signs
the promissory notes as guarantor.
 The promissory notes have to match the sales contract as a
mirror image.
 Otherwise the Buyer might put forward defences based on the
contract under article 8 of the General Law of Negotiable
Instruments and Banking Operations (causal defences).
 Such defences can be avoided through the endorsement of the
promissory notes to a banking institution prior to maturity.
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Credit Securities
 Promissory notes:
 The instalments and the promissory notes should already
contain capital interest for financing, unless the separation of
the financing charges is necessary for customs valuation reasons.
 The default interest in the sales contract and the promissory
notes have to be the same.
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Credit Securities
 Bankruptcy:
 In case of a reservation of title duly registered, a so-called
separation action (incidental action) may be filed before the
Federal Bankruptcy Judge to recover the possession of the
goods.
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Credit Securities
 Factual Credit Securities:
 In case of machines, software should be installed to have them
switched off in case the Buyer does not pay. Particular, care has
to be taken when such software is activated to avoid warranty
claims and criminal actions.
 A separate maintenance agreement should be entered into. Such
maintenance agreement has to establish that maintenance may
be refused in case of non-payment of the price under the sales
agreement.
 Maintenance obligations should not be included in the sales
agreement.
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Credit Securities
 Other recommendations:
 Labour contingencies have to be excluded from force majeure
as in case of a repossession actions, the Buyer will request its
trade union to commence a strike in order to avoid the return
of the machines.
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Credit Securities
 The Sole Registry of Securities in Mobile Goods
 Modification of the Commercial Code as of August 27, 2009
 New Regulations of the Public Registry of Commerce as of
September 23, 2010
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Credit Securities
 The Sole Registry of Securities in Mobile Goods
 Registration of multiple operations:
 reservation of title
 pledge without possession
 limited recourse financing
 industrial mortgage
 airplanes
 financial lease
 guaranty trusts
 rights of retention and other privileges
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Credit Securities
 The Sole Registry of Securities in Mobile Goods
 Authority: Ministry of Economy
 Filing: electronic filing
 Commencement date: emission of the corresponding guidelines
by the Ministry of Economy by April 7, 2011
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Credit Securities
 Conclusions
 Insufficient contractual structures represent an invitation to
Buyer not to perform
 Utmost care is necessary to secure payment
 Errors of form lead to collection problems
 Insured should be obliged to fulfil minimum requirements to
secure their credits
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Torre Esmeralda I
Blvd. Manuel Ávila Camacho 40-1606
Col. Lomas de Chapultepec
11000 México, D.F.
Tel: +52 (55) 2623-7100
Fax: +52 (55) 2623-7200
Email: [email protected]
http://www.woessetpartners.com
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