In one of his final acts as president of Mexico, Andrés Manuel López Obrador promulgated a contentious judicial reform. López Obrador, whose six-year term ended on Sept. 30, celebrated the overhaul of the judiciary as a necessity and an important legacy of his government. However, the reform has proven deeply controversial, drawing criticism from Mexico’s supreme court—Supreme Court of Justice of the Nation (SCJN), the private sector, and U.S. critics state it erodes checks and balances, weakens judicial independence and threatens democracy.
By Ira Gonzalez, McCarter & English, LLP and Aidan McCartan
In one of his final acts as president of Mexico, Andrés Manuel López Obrador promulgated a contentious judicial reform. López Obrador, whose six-year term ended on Sept. 30, celebrated the overhaul of the judiciary as a necessity and an important legacy of his government. However, the reform has proven deeply controversial, drawing criticism from Mexico’s supreme court—Supreme Court of Justice of the Nation (SCJN), the private sector, and U.S. critics state it erodes checks and balances, weakens judicial independence and threatens democracy. While López Obrador’s successor and ally, President Claudia Sheinbaum, has expressed support for the reform, it is likely to cause her considerable headaches in the coming months.
López Obrador had long spoken of his intention to overhaul the judiciary, which he accused of being corrupt. The reform finally went to congress for a vote in early September. The timing was significant given the new legislature had just taken up its seats and the ruling Movimiento Regeneración Nacional (Morena) party and its allies had a supermajority in the lower chamber—the threshold needed to pass constitutional reforms. In the senate, the ruling party fell just short of this threshold but ultimately flipped enough opposition senators to ensure passage of the reform.
The most controversial aspect is the direct, popular election of judges, SCJN justices and magistrates. Under the reform, the public will elect thousands of positions including new SCJN justices, vacant positions on the electoral tribunal, and half the magistrates of the collegiate circuit courts and courts of appeal in June 2025. The remaining positions will be elected in 2027. Evaluation committees representing each of the three branches of the federal government will produce the lists of candidates.
The reform also alters the structure and powers of the SCJN. The number of SCJN justices will be reduced from 11 to nine, with term lengths reduced from 15 to 12 years. Additionally, the SCJN will no longer be able to universally suspend the application of laws that are challenged through an “amparo,” a legal mechanism that enables citizens to appeal unconstitutional laws before the courts, reducing the scope of these suspensions to affect the plaintiff alone.
Another significant aspect is the creation of a new judicial disciplinary tribunal and a new judicial administrative body, which will replace the current federal judicial council (CJF). The tribunal will have the power to impose sanctions, file criminal charges and request the impeachment of judges. Its members will be elected by the public and its decisions will be unappealable. The new administrative body will be responsible for administering resources and internal control mechanisms.
Concerns
A primary concern is that the reform weakens judicial independence, reducing checks and balances on the government. There are fears the election process could be open to political influence, reducing the judiciary’s autonomy from government and strengthening Morena’s already considerable dominance. There are also concerns that organized crime groups could interfere in the election of judges, threatening access to justice for victims and further inflating impunity levels.
Another concern surrounds the professionalism of the judiciary. The criteria that candidates must meet to be elected as justices, judges or magistrates would allow for less experienced individuals to take up positions than under the current system. Critics have warned this could lead to a loss of specialized legal knowledge and a decline in competency within the judiciary.
The private sector has warned about the impact on business confidence and foreign investment. International credit ratings agencies such as Fitch Ratings and Moody’s have warned that the reform could damage Mexico’s potential to attract nearshoring investment due to the uncertainty it creates. The changes may also limit investors’ ability to challenge State actions, as the judiciary’s powers of intervention are weakened (such as with the amparo). This will prove particularly off-putting for investors in sectors in which Mexico has proven hostile to foreign investment in recent years, such as the energy sector.
If or when the judicial reforms take hold, American and international business entities will need to evaluate whether they are willing to accept the elevated risk of ‘doing business’ in Mexico. Such drastic judicial political intervention illustrates a lack of consistency and/or predictability in establishing long-standing socio-economic policies or private sector opportunities, which are fundamentally affected by the ever-changing perspective of Mexico’s government leaders.
Impact on Business, Government Relations
Given the concerns underlined, it is likely international businesses with a presence in Mexico will engage in a robust review of their agreements to evaluate venue provisions—such as whether potential disputes in the country will necessarily be litigated in Mexican courts or adopt some other dispute resolution process. The use of arbitration is not a novel idea amongst Mexican legal practitioners, and some feel that the controversial changes to the judiciary could lead to a greater use of arbitration. However, there is considerable concern whether the Mexican government’s altering of the judicial landscape will in actuality promote more alternatives to dispute resolution from the traditional courts since there is growing pessimism about whether the judges who will be elected based on the reforms in the near future will uphold arbitration awards—and more importantly, whether they will feel bound by them. Businesses may very well require that any disputes arising on Mexican soil take place elsewhere—perhaps even in the United States.
The reform has also caused considerable tensions with the U.S. government. López Obrador announced a “pause” in embassy-level relations after U.S. ambassador to Mexico Ken Salazar warned the reform was a risk to democracy. While Sheinbaum, who took office on Oct. 1 has signaled the normalization of such relations, the reform is likely to be an ongoing source of bilateral strain. The changes also risk violating obligations made under the U.S.-Mexico-Canada Agreement (USMCA), which mandates courts should be free from political influence. This may prove a sticking point in the USMCA review process due in 2026.
Takeaways
It is unlikely that opposition to the reform will disappear any time soon. The SCJN has admitted several challenges to the constitutional changes, arguing it must safeguard judicial independence. While the process for the SCJN to challenge constitutional reforms is unclear and potentially lengthy, the acceptance of the complaints indicates there is appetite to fight against the reform.
Despite all the concerns, Sheinbaum has stated that national and foreign investors do not have anything to worry about with these judicial reforms. As the Mexican legal environment will continue to be called into question, time will tell whether the reforms are an altering course from prior practices, which coupled with security concerns, will challenge Mexico’s ability to compete in the international marketplace and on the geopolitical stage in coming years, which unfortunately may keep the country ensnared in instability. In the meantime, a considerable amount of uncertainty will continue to dominate the Mexican legal redesign for the foreseeable future. Commercial entities with pending or forthcoming disputes in Mexico, need to evaluate risks they face and may need to adopt new strategies and manage their legal risks differently—including considering other dispute resolution mechanisms.
Ira Gonzalez is co-managing partner of the McCarter & English Miami office. A seasoned litigator, he advises and defends U.S.-based and international companies headquartered in Latin America and Europe on the full lifecycle of business needs.
Aidan McCartan is a corporate intelligence adviser who leads the work of Intelligence Research (parent company of LatinNews) in the United States. Based in Miami, he supports legal and business professionals with sensitive human-source intelligence operations in the Latin America and Caribbean region.
Reprinted with permission from the Nov. 11, 2024 edition of “Daily Business Review” © 2024 ALM Global Properties, LLC. All rights reserved. Further duplication without permission is prohibited, contact 877-256-2472 or reprints@alm.com. “