A Reliable Solution for Litigation in Mexico.

To begin litigation, you must make sure that your collection claim is a good candidate for litigation. To filter good candidates from the bad and put a game plan in place, there are three issues that creditors should address before deciding to sue:

• Costs and rewards. Going into litigation has to make business sense. For this, you must determine the actual costs and expenses of litigation, including attorneys’ fees. The total cost must be largely offset by the potential recovery.
• You must make sure that there are not unreasonable risks that will halt your collection potential. There are two main questions that you must answer affirmatively:
  1. Will you be able to win your case?
     • How strong is your case? Do you have good supporting documents?
     • How good are the courts that will hear your case? All State are different; courts have different problems, some performing good and others not so much.
     • What is the history of the debtor? Does he have a history of lawsuits?
  2. Will you be able to execute a judgment if you win the case?
     • Is the debtor company still in business? Is he operating under the same company name?
     • Does the debtor have substantial assets that are unencumbered (no liens or charges attached)? Are these assets sufficient to cover your debt?
     • Are there other creditors after your debtor?

• Legal strategy. Putting a good legal strategy in place is essential for reducing risks and raising your chances of success. Do you have a good law firm or lawyer in Mexico that will assist with this case? Do they have a proven track record of debt collection litigation? Have they explained the risks involved in your claim and the plan of action moving forward?

For detailed information on this question please read our full article on Assessing and Reinforcing Litigation in Mexico.

Much of this decision has to do with practical reasons, that is, when will a Mexican court provide for a more efficient and cost-effective litigation for your recovery of debt. Generally, a non-complex contested commercial case will take approximately 1-2 years to be resolved in a Mexican court, without adding an appeal process and any constitutional injunction proceedings (“Amparo”), which could add up another 9 to 12 months. That time could very well double in a complex commercial dispute or a collection case involving a large amount of money. It is probably only in these two last scenarios where you could consider choosing a foreign court or arbitration for resolving your disputes instead of a Mexican court.

Just to get an idea, the following costs should be considered when thinking about bringing a claim to a foreign (judicial) court or an arbitration tribunal:

• Arbitration costs. According to the International Chamber of Commerce (ICC), costs add up to $5,875 dollars for a $25,000 dollars case, and $13,000 dollars for a $100,000 dollars case, for arbitrator’s fees (one, and not including his expenses) and administrative expenses. In Mexico, the Arbitration Center of Mexico (CAM) charges around $7,700 dollars for arbitrators’ fees (also one, and not including expenses) and administrative expenses for any lawsuit of up to $100,000 dollars.
• Counsel’s fees for arbitration. Lawyers involved in arbitration generally will charge an hourly fee for their services, and not a fixed fee or a contingency fee.
• Costs for service of process. If you are going to bring a case in a foreign court and your debtor is located in Mexico, you will have to comply with Mexican procedure rules for proper service of process in Mexico. That means you will have to go through a Mexican court to serve the defendant properly (through a law clerk and “not” through private process-servers) once a formal request has been done through a letter rogatory from the foreign court. Failure to follow this process will make your judgment unenforceable. This service will require the help of counsel in Mexico, who will generally charge an hourly fee. (It is also recommended to substantially comply with Mexican procedure rules for the service of process during arbitration. Failure to do this could allow a defendant to argue violation of his fundamental rights of due process provided under the Mexican Constitution).
• Costs for enforcing a judgment. Again, you are going to need the help of counsel in Mexico to enforce a judgment. They can charge either hourly fees or a contingency fee. (For additional information about enforcement of foreign judgments please check out or article: “How to Enforce a US Judgment in Mexico: Hidden Rules on Homologation.”)

Adding up all these costs (without considering pre-judgment remedies), you would realize that a recovery for a modest amount of money may not result in a profitable business after all if filing suit outside of Mexico or commencing arbitration. For this reason, we believe that collection cases worth $100,000.00 dollars or less are best pursued directly through a Mexican court.

You should be confident that Mexican courts are each day more and more reliable and efficient, especially for these kinds of cases. Retaining an attorney in Mexico for collection will waive all the above-mentioned costs, since many will be willing to work under a contingency fee.

For detailed information on efficiency of Mexican courts and legal proceedings in Mexico to enforce claims, as well as the legal strategies to overcome challenges, please read our article “A Lawyer’s Guide to Strategic Legal Debt Recovery in Mexico.”

Proper notice or notification of an assignment, or a payment instruction to the debtor, will be effective every time the debtor acknowledges such notice either by express or implied means, such as complying with the new terms of payment, such as paying the assignee. However, if the debtor does not acknowledge the notice, does not agree with new payment terms to the assignee, or just defaults payment with no cause, a formal notification will have to be done in accordance with Mexico’s commercial laws.

Article 390 of Mexico’s Commercial Code provides that the assignment of receivables is to be done with proper notification of the debtor before two witnesses. However, it is a common practice in Mexico to give notice to a debtor with the help of a Notary Public instead of witnesses.

The notice must be provided in Spanish, or in English with the Spanish translation. It is also highly recommended that a copy of all documents pertaining to the assignment are furnished to debtor, making sure he is well informed that the rights of the assignee have been conveyed and is now capable of pursuing enforcing such rights through the courts. This step should be taken to avoid future problems the assignee may encounter when trying to collect such receivables in court.

If a foreign company intends to pursue legal action in Mexico or is entering into a formal contract within Mexican territory, a representative must be legally appointed to act on its behalf through a formal power of attorney. A power of attorney to be used in Mexico must be carefully drafted and signed, and must also conform with either one of the following international treaties:

• The Washington Protocol on the Uniformity of Powers of Attorney Which are to be Utilized Abroad of 1940; or
• The Panama Inter-American Convention on the Legal Regime of Powers of Attorney to be Used Abroad of 1975.

Both these treaties provide for a handful of legal requirements and conditions that will have to be strictly complied with in order to have full binding effects in Mexico. Some of the basic requirements include:

• Certification and attests by a Notary Public (that the company granting power of attorney was duly formed and is legally existing; that the individual acting on behalf of the company has proper representation and authority to delegate special and general powers of attorney; etc.).
• Purpose and extent of the power of attorney. It must determine the scope of authority (e.g., for lawsuits and collections, to buy and sell goods, to manage the company’s business, etc.).
• The power of attorney should be prepared in Spanish or provide an official translation of it and of all documents pertaining to the same.
• Authentication and legalization of power of attorney. The notary’s signature and certification must be asserted by a government official as valid, and an Apostille for such official certification must be obtained.
• It is recommended that general powers of attorney are filed in the public registry of commerce, in such city or state where the power of attorney is to be used.

These are just some of the main requirements provided under the international treaties. You should, therefore, seek further legal advice from counsel in Mexico to make sure that every condition and all requirements are met.

There are several options available to pursue debt collection through the Mexican courts, all based on a different strategy which will depend on how the commercial transaction was conducted and documented. In general, you will be able to pursue your claim through an ordinary or an executory proceeding, the latter of which is preferable. If an executory proceeding is not available due to its strict nature and constraints, there is a preliminary proceeding available that can further allow access the executory proceeding. It is also possible to obtain a prejudgment judicial attachment order to seize assets from your debtor at the outset of the case, but that will be discussed in the next question. The following are rough ideas about each of these proceedings:

• Ordinary proceedings. These proceedings accommodate for most of the cases where an international business transaction is disputed. This is mainly because they do not rely on a credit instrument or a special title document (executory title or “título ejecutivo”) and, therefore, do not allow for immediate interim measures to secure proper execution of a final judgment unless, strict guidelines for prejudgment remedies are followed, including the posting of a required bond. The ordinary proceeding is a relatively longer proceeding, allowing you more time and opportunity to prepare and request the admission of evidence in court, and also providing wider opportunities to counterclaim.
• Executory proceedings. Plaintiffs find more effective and efficient to sue through executory proceeding rather than through the ordinary proceeding. Reasons are plenty. First, the executory title (título ejecutivo) on which the proceeding is based, creates a presumption that the claim exists and that it’s legally valid and, therefore, turning the burden of proof on the defendant. Second, the same executory title gives a preliminary certitude of the plaintiff’s claims allowing, therefore, an immediate ex parte prejudgment attachment order without the need to place a bond. Third, it is rather a summary proceeding in which evidence admission and proposals (submissions) are limited to the initial stages through the pleadings of complaint and answer. This makes for a shorter and faster proceeding in which a final judgment is usually going to be reached in less time. The drawback to this proceeding is that is not always available to all creditors since they must account for a título ejecutivo, which can be a credit instrument (such as a pagaré or a bill of exchange), a judgment, or a judicial acknowledgment of debt —among other possibilities.
• Civil Summary Proceedings. The summary proceeding is analogous or similar to the executory proceeding but, it is mostly used in civil cases at State level courts. The main purpose of a summary proceeding is usually to demand payment of an obligation or liability arising out of contract or tort, as recognized in the specific situations provided under State civil procedure rules. It is specially or more commonly used to foreclose on a mortgage and to evict tenants for non-payment of their lease. As with the executory proceeding, this proceeding is “summary” in nature and, thus, evidence admission and proposals (submissions) are also limited to the initial stages through the pleadings of complaint and answer, which is aimed at making for a shorter and faster proceeding to try to reach a final ruling in less time.
• Preliminary proceedings. The main purpose of a preliminary proceeding —within the collection process— is to obtain a judicial acknowledgment of debt that will enable an executory proceeding instead of pursuing your claim through the ordinary proceeding. It usually starts with a formal petition from the creditor in which facts relating to the debt are stated and a subpoena or citation for the debtor is requested. The court will setup a hearing date in which debtor will have to respond as to whether he owes the creditor or not. If debtor fails to attend the hearing at the scheduled time, the Judge will consider the stated claim as legally acknowledged by debtor. The supporting documents to the acknowledged debt will constitute an executory title (título ejecutivo) that will be enforceable and can be pursued through an executory proceeding.
• Oral proceedings. About ten years ago (2011), Mexico passed federal laws to established procedures that would gradually convert all commercial proceedings from a formal written nature (based on an inquisitorial model), into one of an “oral” or “adversarial” nature, to become what are now known as “oral proceedings”. The purpose of this reform was to make the legal process more efficient, more transparent, where the judge would become more involved and more immersed in the cases at hand, handing down justice in a much faster and effective way. These new set of rules apply today (2021) over all new commercial disputes, turning all of the ordinary and executory proceedings into oral proceedings of that same quality or nature (i.e., oral executory proceedings, and oral ordinary proceeding). There are some exceptions, including the preliminary proceedings and preliminary precautionary measures, which continue the same formal process as before.

For detailed information on all available legal remedies and proceedings in Mexico applicable to debt collection claims, please read our article “A Lawyer’s Guide to Strategic Legal Debt Recovery in Mexico.”

According to the Federal Code of Civil Procedure (FCCP)—which most States’ Codes have followed, a foreign court will be recognized as the proper venue (with jurisdictional powers), for purposes of enforcing its judgments, when rules on jurisdiction taken into account by the foreign court are compatible with those provided for under Mexican law. These are the following:

1. Forum selection clauses will be valid and enforceable if there is no actual obstacle or denial of justice, considering the circumstances involved and its relations among parties.
2. Forum selection clauses will not be valid when the right to select a forum works exclusively in favor of one of the parties.
3. If there is no forum selection clause, territorial jurisdiction is conferred to the court of either:
   • The place designated by the defendant to be notified or summoned for an action, or where a formal demand is to be made upon him to perform on a contract or obligation.
   • The place where performance of a contractual obligation was agreed to.
   • The address or place of residence of the defendant.

The Mexican Commercial Code provides for several precautionary measures for commercial matters (cases that arise out of commercial disputes), including the orders for seizure of assets (“embargo”), which has both features of the attachment and garnishment orders. Such remedy (the “attachment order”), will allow us to seize movables assets in possession of the debtor, or to levy on real estate owned by the debtor by an act of recording or filing, and also to levy on the debtor’s tangible personal property in the possession of a third party, or to garnish rights (intangible assets) such as debt owed to a debtor, or funds in bank accounts.

Although the remedy is available to all creditors, there are certain conditions and requirements that must be fully complied with since the measure is granted as an ex parte relief. First, the petition for an attachment order, as a precautionary measure, has to be supported by documents or witnesses showing that: 1) petitioner has a prima facie underlying claim on the merits; and 2) there’s a potential risk that debtor will hide or transfer ownership rights on his real or personal property.

Second, once the attachment order is granted, the creditor must post a bond that will indemnify the debtor for damages if there’s any wrongful attachment, or if creditor does not prevail in his case with a favorable judgment. The attachment will be executed only after the bond is posted. (The amount required for the bond is left to the court’s discretion, and generally ranges from 5% to 20% of the value of the claim).

Third, since the attachment is a remedy ancillary to a lawsuit, the attachment will be ineffective if a complaint is not filed within three days of executing the attachment order. Such term can be extended if the complaint has to be filed and followed in a foreign country.

For detailed information on all preliminary actions (including pre0judgment attachment) applicable to debt collection claims, please read our article “A Lawyer’s Guide to Strategic Legal Debt Recovery in Mexico.”

Like most Civil Law countries around the world, Most Mexican States provide for remedies against the fraudulent conveyance of assets through an action of nullity known as “actio pauliana”. The Federal Civil Code—which many States have followed, provides that any transaction made by debtor to harm or with prejudice of his creditor can be annulled, if there is evidence that proves that: 1) the debtor’s insolvency resulted from such transaction, and 2) the credit that originated the annulment request took place prior to the transaction. If the transaction was onerous, there must be evidence that the transaction was conducted in bad faith(fraud) by the parties involved. However, the creditor will be relieved from this burden of proof when the debtor sold goods (onerous transaction) following either a judgment or an attachment order (embargo) issued against him. In this case, it is presumed that the transfer was fraudulent.

The process involved for recognition and enforcement of foreign judgments in Mexico (called “homologation”), is quite a rigorous one. It is a process in which both local and federal rules of procedure come into play, and one that goes hand in hand with another procedure on letters rogatory. According to article 571 of the Federal Code of Civil Procedure—which most States have followed, recognition and enforcement of a foreign judgment will take place only when the following conditions are met:

1. All formalities for letters rogatory are satisfied.
2. Judgment is not the result of an in rem right (pertaining to real estate).
3. The court rendering the judgment had proper jurisdiction to try the matter and to pass judgment on it.
4. Service of process has been completed upon defendant in due legal form.
5. The judgment must be final and have the force of res judicata.
6. There must be no case tried by a Mexican court which is a result of the same legal actions.
7. The judgment must not be contrary to Mexican public policy (ordre public).
8. The judgment must meet all the formal requirements necessary to be deemed authentic (legalization).

The process for homologation requires that defendant is granted a nine-day period to file an answer to the petition for enforcement and to make allegations or to bring evidence in court. After the court has decided which evidence proposals are admitted, it will set up a hearing date for its reproduction. Once the evidence is fully rendered, the court will be ready to rule either granting homologation or denying it, through formal judgment. An appeal process will be available to both parties, granting them five days to appeal and file their briefs. (For detailed information on how to enforce a foreign judgment, including recommendations, please read our article on “How to Enforce a US Judgment in Mexico: Hidden Rules on Homologation“).

An amparo is a constitutional injunction proceeding that can supersede any other type of proceeding or resolution. An action of amparo can be filed whenever a fundamental human right provided under the Federal Constitution or under an International Treaty that Mexico has subscribed, is allegedly breached or infringed by any government agency or institution, including courts. This is not a legal remedy within a certain civil, criminal or commercial case but, instead, it’s a different and independent proceeding. Acts that give rise to an amparo action and proceedings are numerous, ranging from arrest warrants to interim and final judgment in civil and commercial cases. But these Amparo proceedings are very technical in nature and, thus, few amparo awards are granted. Only in those cases where there is clear evidence that there was a violation of fundamental rights will a district court grant an amparo award. This denial, however, doesn’t stop the delay that such amparo proceedings bring along, although they tend to be faster and more efficient each day.

Mexican law binds a party to a commercial transaction even when no written agreement has been executed, or no documentary evidence is accounted for. In support of this the Vienna Convention provides that no international transaction will need to be executed in writing, nor that written evidence will be required upon any controversy. If you have some evidence that you honored your end of the bargain, that you performed on your part of the deal or contract, we can usually enforce your rights to collect a debt. The only problem in this situation is that witnesses will be most dependable for your claim, especially in contested lawsuits. Often when there is enough documentary evidence to support your claim, witnesses will not be necessary, especially when your debtor has recognized the exhibited documents as true and correct, or when he has acknowledged the debt in any way.

Although discontinued in September 2021, the 2020 Guide on Doing Business from The World Bank (with the most recent round of data collection completed on May 19, 2019) is a good reference point to get an idea on timeframes of contract enforcement. According to its survey and report on judicial contract enforcement in Latin America and the Caribbean, it takes on average 774.2 days and costs 32% of the debt value to enforce contract through the courts in this region. Compare that to the USA where it takes 444 days and costs 30.5% of debt value (on average), and Canada with 910 days and cost of 22.3%. The report also showed that in Mexico it takes on average 341 days and costs 33% of the debt value to enforce a contract. Mexico ranked at #43, out of 190 countries surveyed back in 2019, according to the World Bank report.

Yes. The limitation period in Mexico for enforcement of commercial transactions made within the country is one year for retail sales, and ten years for wholesale. On international or cross-border sales, the limitation period is four years, according to Vienna Convention. For criminal matters where a debtor committed fraud to obtain credit or goods, the limitation period is one year from the time of notice or acknowledgement of such crime, extendable to two years on special cross-border matters.

Besides limitation periods and other legal constraints, collectability has a lot to do with how fast and efficient our actions are, and how fast the claim is pursued when compared with other creditors. The premise “first come, first served,” is proven to be true when a debtor has hit financial crisis. Undercapitalized businesses are common in Mexico (maybe everywhere), so the few assets a company has to pay its debts with will be allocated to those who seize assets first. In addition, it’s common to see debtors in Mexico easily transfer the company’s assets to another business without the proper liquidation process. Although there is legal recourse against a fraudulent conveyance of assets, this road usually carries an additional longer and more complex proceeding that prevents an immediate recovery. Therefore, it is highly recommended to act fast and execute upon debtor’s property as soon as possible.

There are many factors that determine if and to what extent a court will be effective and efficient in enforcing your contract. Unfortunately, corruption is one of those factors in some places and at some levels, but it is NOT a general situation or a general rule. In some places and at some levels corruption is not a factor within courts, but there are other factors that you need to keep in mind. For instance, courts in some places are short staffed, or there are simply not enough courts in that State to entertain the number of cases filed, or to serve remote areas or towns. In other places, personnel at courts (including clerks, secretaries and sometimes judges) are not qualified or well-trained, or they work under heavy pressure from tight deadlines and high volume of cases (such as federal courts), which lowers their performance significantly.

In general, federal courts have improved remarkably in recent years in their fight against corruption, as pursued and lead strongly by the Mexican Supreme Court. Thus, in many places, corruption will be less a factor at the federal courts, although other factors might arise and hinder their performance levels. Similarly, there are some States that are recognized for the good performance levels of their courts, well above other States, and for their minimum corruption levels.

In order to determine the possible best courts to hear your case (which is key for choosing proper forum or venue for your contract or for litigation), you need to consult with a trusted litigation lawyer that has experience throughout the country and understands the problems pointed out, in all the regions and at both State and Federal levels in Mexico.

For detailed information on challenges and performance levels of Mexican courts during litigation in Mexico, please read our article “A Lawyer’s Guide to Strategic Legal Debt Recovery in Mexico.”

According to the 2021 Corruption Perception Index from Transparency International (released on January 2022), countries in the Americas scored on average 43 (on a scale of 0-100, with 0 being highly corrupted and 100 being 100 very clean), the top score being Canada, and the worst being Venezuela. Compare that to the Europe where countries scored 66 on average. Mexico scored 31, and ranks #124, out of 180 countries and jurisdictions around the world.

The Rule of Law Index 2021 by the World Justice Project presents a portrait of the rule of law in 139 countries and jurisdictions by providing scores and rankings organized around eights factors: constraints on government powers, absence of corruption, open government, fundamental rights, order and security, regulatory enforcement, civil justice, and criminal justice. Denmark ranking at #1 (scoring 0.90) is where the Rule of Law is perceived to be stronger, while Venezuela ranking last at #139 (scoring 0.27), is where Rule of Law is perceived to be the weakest.

In overall Rule of Law, Mexico scored 0.43, and ranks #113, out of 139 countries. In Civil Justice, Mexico scored 0.37 and ranks #131 out of 139 countries. (There is a Rule of Law Index for the Mexican States (2020-2021) that further provides information on rule of law specific to regions in Mexico, with evaluation on all factors, including civil justice.)

Lawyers in Mexico are not required to belong to any Bar Association (whether State or Federal) to practice law in Mexico (including litigation through the Mexican courts). Upon finishing law school through a credited University and completing final examinations and other requirements (as approved by the Secretary of Public Education in Mexico), a student will receive a professional title and a license to practice in their field of study by the Secretary of Public Education. Lawyers in Mexico will be allowed to practice law throughout the country (both in State and federal courts), once they receive their license, which they usually register in State and Federal courts, as required to engage in litigation. The Secretary of Public Education makes publicly available its database of professionals through the following link, where you can search lawyers by their full name. During collection and legal work in Mexico, HMH Legal will only employ or partner with Mexican lawyers who are duly licensed to practice law in Mexico.