the mexico update

© 2014 ABA all rights reserved.

I s s u e 4 4 1

This i s sue addres se s t h ree o f Me x ico ’ s s t ruc tu ra l r e fo rms roo ted in cons t i t u t ion a l chang es , na me ly ene rgy , t e l eco mmu nica t i ons and c r i min a l p rocedure r e fo r m. I t a l so addres se s r ecen t s t a tu to ry deve lop me n t s r e l a t ive to c o mmerc ia l l aw , co mpe t i t i on l aw and mon ey l aunde r ing .

W e we lco me Mex ico Co mmi t t ee members t o sub mi t a r t i c l e s an d to j o in ou r ed i to r i a l t e am.

Y u r i x h i G a l l a r d o , K i m G o i n s , P a t r i c k D e l D u c a an d B e n R o s e n , E d i t o r s

Message from the Co-Chairs by Ben Rosen

M E X I C O U P D A T E ABA • SECTION OF INTERNATIONAL LAW • MEXICO COMMITTEE

A Note from the Editors

The S IL Fa l l Mee t ing in Bueno s Ai re s was a g rand even t . More than 800 l awy er s f ro m a round the g lob e inc lud ing ma ny Mex i co Co mmi t t ee me mber s convened in th i s wor ld c l a s s C i ty . Sec t ion Cha i r M a r c e l o B o m b a u w as a wonde r fu l and g rac iou s hos t , and ou r Div i s i on Cha i r C a r l o s V e l a zq u e z d e Le o n wa s o ne o f t he confe rence Co-Cha i r s . Our co mmi t t e e had nu mer ous speak i ng oppor tu n i t i e s , and pa r t i c ipa t ed sp i r i t ed ly in the many soc ia l a nd cu l tu ra l ev en t s , a s ev i dence d by the pho to s be lo w. For i n s t ance , ou r Co-Ch a i r E r n e s t o V e l a r d e - D a n a c h e presen t ed o n the Mex i c an ene rgy r e fo r m, j o in ing pane l i s t s f ro m Can a da , t he Un i t ed S ta t e s an d Braz i l who spok e abou t t he p reva i l i ng l ega l a nd mark e t co nd i t ions in t h e ene rgy se c to r s o f t he i r coun t r i e s . E rnes to a l so spok e on an In t e rna t ion a l E mploy men t Co mmi t t ee p rog ram en t i t l ed , Do om a t t he Lo o m?: The Pu sh fo r La bo r S ta nda rd s in the G armen t Ind us t ry , wh ich dea l t w i th emplo y ee work ing cond i t i on s in t he t ex t i l e , min ing and ma nufac t u r ing sec to r s , t he ou t sour c ing o f e mploy ees , new ru l e s on th i s r ega rd , and the cha l l e ng es ahe ad .

Mex i co Co mmi t t ee members L a u r a N a v a , L u i s P e r e z - D e l g a d o , F r a n c i s c o C o r t i n a , Le s l i e G l i c k , A u r e l i a n o G o n z a l e z , R a n d y H a n so n , and P a t r i c k d e l D u c a a l so sha red the i r know ledge , sp ea k ing on a wid e r ange o f p rog ra ms , f ro m the poss ib i l i t y o f an Amer i can he mi sph e r i ca l f r ee t r ade ag re e me n t , t o t h e chan g ing l andscap e fo r t he p ro v i s ion o f l ega l s e rv i ces i n La t in Amer i ca , t o due d i l i gence in c ros s -bo rd e r M&As , and o the r i n t e re s t ing top ic s i nvo lv ing bo th Mex ic o and La t in A mer i ca . Our co mmi t t e e h os t ed an a f t e r -hour s co ck ta i l pa r ty a t t he f a med Faen a H o te l i n Pue r to Madero a t t e n ded by mor e than 80 c onfe rence p a r t i c ipan t s ; and ou r co mmi t t ee b reak fa s t was a t t en de d by A l e j a n d r o S u a r e z , Lau ra Na v a , A n d r e s N i e t o and o the r s .

The Mex ico Co mmi t t ee p l ay ed a s t a r ro l e i n the Sec t ion ’ s f i r s t Reg i ona l Fo ru m, j u s t he ld in Vancouv e r . Co mmi t t ee member A n d r e s N i e t o and Vice -Cha i r S u s a n B u r n s were Co -Cha i r s o f t he eve n t . Susan , E rne s t o Ve la rde , an d Car lo s V e lazqu ez sp oke on Da ta P ro tec t i on , de fend i ng l i t i ga t ion in Mex ico , and FCPA co mpl i ance , r e spec t ive ly .

Down the c oas t i n T i j uana , co mmi t t ee me mber s A n t o n i o M a l d o n a d o and M a r c o C a r r a sc o ho s ted th i s Nov e mber a Cross Borde r Mee t ing w i th Co l l eagu es a t t he Cerv ece r i a T i j uana . The even t , wh ich b rough t t oge t he r more th an 7 0 US and Mex ican l a wy er s , was spo nsored by the Me x ico Bar L ia i son Co mmi t t ee o f t he San Diego Coun ty Bar Assoc i a t io n in coope ra t i on wi th ou r co mmi t t ee . W e encourage a l l ou r Ci ty Coord in a to r s (con t inu ed nex t pag e )

P r o g r e s s i n I m p l e m e n t a t i o n o f O r a l T r i a l s i n M e x i c o

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C o m m e n t s o n t h e N e w M e x i c a n C o m p e t i t i o n L a w

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U p d a t e t o C o m m e r c i a l L e g i s l a t i o n

9

P r i v a t e I n v e s t m e n t i n P i p e l i n e s a n d S t o r a g e F a c i l i t i e s f o r P e t r o l e u m , P e t r o c h e m i c a l s a n d R e f i n e d P r o d u c t s

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M e x i c o ’ s E n e r g y R e f o r m

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E n e r g y R e f o r m i n t h e E l e c t r i c S e c t o r : O p p o r t u n i t i e s a n d C h a l l e n g e s

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M e x i c o ’ s A n t i -M o n e y L a u n d e r i n g S t a t u t e

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M e x i c a n C o n s t i t u t i o n a l a n d R e g u l a t o r y T e l e c o m m u n i c a t i o n s D e v e l o p m e n t s : T e r m s o f I n t e r c o n n e c t i o n w i t h a D o m i n a n t O p e r a t o r A r e N e w l y D e f i n e d

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I s s u e 4 4 D e c e m b e r 2 0 1 4


I s s u e 4 4 2

MEXICO UPDATE

l oca t ed a ro und Mex i co and the US to o rgan ize th e se ty pes o f even t s , a s i t i s a g rea t oppor tun i ty to mee t o the r l awy er s w i th s i mi l a r i n t e re s t s i n Mex ico and to c o n t i n u e t o b u i l d o u r c o m m i t t e e me mber sh ip and ne twor k .

Look ing ah ead , t he Mex ico Co mmi t t ee has a nu mb er o f can’ t - mi s s progra ms on the ca l en da r .

On Nove mb er 28 , 2014 in Guada la j a ra , V ice -Cha i r M e l i n a S u a r e z wi l l co -hos t t he Energy Forum —Five S t ra t eg i e s t o Succ ess fu l l y Dabb le in the Mex ico Energ y Marke t . The ev en t i s o rga n ized by the Mex ican Bar A ssoc ia t io n (Bar ra Mex i can a de Abogad os ) , i n con j unc t ion w i t h t h e M i n i s t r y o f E c o n o m i c Deve lo p men t o f t he S ta t e o f J a l i s co , Mex i co and ou r own Mex ico Co mmi t t ee o f t he S IL . The p rogram boa s t s e s t ee me d pub l i c and p r iva t e se c to r spe ake r s a s we l l a s academic expe r t s i n t he f i e ld , who wi l l sha re p rac t i ca l s t r a t eg ie s and pa thway s to success fu l l y pa r t i c ipa t e i n t he open in g o f Mex ico ’ s ene rgy sec t o r .

Mov in g fo rward to the Spr ing Me e t ing in W ash ing ton , DC on Apr i l 28 – May 2 , 2015 , t he Mex i co Co mmi t t ee wi l l b e the l ead sponso r o f a p rog ra m, The Open i ng o f Mex ico ’ s Energ y S ec to r t o In t e rn a t ion a l Inves tmen t : a p ra c t i ca l , l ega l ana ly s i s o f t he cons t i t u t iona l r e fo rm s and sec onda ry l eg i s la t ion . Speak e r s i nc lud e Be a t r i z C a m a r e n a M a n e y , Gen e ra l Coun se l fo r a US-base d inde penden t o i l & gas co mpany , and J o h n P a d i l l a f rom I PD La t in Amer i ca , a l ead ing o i l & gas co nsu l t ancy wi th o f f i ce s i n New York , Mex ico C i ty and Bogo t a , a mo ng o the r i nd us t ry expe r t s .

W e a re p roud to the announce tha t ou r c o m mi t t e e a n d t h e A B A S e c t i o n o f In t e rna t iona l Law wi l l sponso r a un ique an d t h o u g h t - p r o v o k i n g p r o g r a m o r g a n i z e d toge the r w i t h the Un ive r s i ty o f Ca l i fo rn i a a t San Diego’ s Cen te r fo r US-Me xican S tud ie s , en t i t l ed , R u l e o f L a w S u m m i t : J u d i c i a l R e f o r m , F e d e r a l i s m a n d A n t i - C o r r u p t i o n i n M e x i c o , t o be he ld in San Diego on May 27 -29 , 2015 , so SA VE THE DATE and s t ay tuned fo r more de t a i l s t o co me!

Mexico Committee members at October 2014 Buenos Aires meeting

Mexico Committee Members enjoy a Saturday afternoon at El Gaucho Las Pampas where they witnessed a professional polo match, horse show and folk dancing followed by a typical Argentine feast—a great way to relax after three days of high powered meetings. From left to right: Santiago Concha, Ernesto Velarde, Ben Rosen, Alejandro Staines, Carlos Velazquez, Luis Perez-Delgado, Enrique García and Andres Nieto.

Top left: Francisco Cortina and Marcelo Bombau, top right: Aureliano González, bottom left: Laura Nava, bottom middle: Luis Pérez-Delgado, bottom right: Patrick Del Duca.


I s s u e 4 4 3

About the Mexico Committee

MEXICO UPDATE

Upcoming Events — Save the Date

D I S C L A I M E R The materials and information in this newsletter do not constitute legal advice. MEXICO UPDATE is a publication that is made a v a i l a b l e s o l e l y f o r informational purposes and should not be considered legal advice. The opinions and comments in MEXICO UPDATE are responsibility solely of each author/ contributor and do not necessarily reflect the view of the ABA, its Section of International Law, the Mexico Committee or the Universidad Panamericana.

Anchored by coordinators in cities in Mexico and the United States, the Mexico Committee seeks to grow its members’ involvement in dialog on current and potential developments of Mexican, United States and other law relevant to their practice of law and to the establishment of sound policy. Current substantive focuses of the Committee’s work include arbitration, antitrust law, criminal procedure reform, data privacy, environmental law, legal education, secured lending, and trade law. The Committee contributes to the annual Year In Review publication, is developing its newsletter in partnership with a leading Mexican law faculty, maintains its website, and actively organizes programs at the spring and fall meetings of the International Law Section.

The Mexico Committee’s membership is its most important asset. We encourage all Committee members to be involved in Committee activities and to communicate freely their suggestions and ideas.

The Mexico Committee holds periodic monthly calls. Keep an eye on the committee listserve for circulation of bridge number and agenda information.

Please reach out to the Committee Co-Chairs to participate in organizing the Mexico Committee’s Rule of Law Summit: Judicial Reform, Federalism and Anti-Corruption in Mexico, to be held in collaboration with the University of California at San Diego’s Center for US-Mexican Studies in San Diego, May 27-29, 2015.

Join us at the Section of International Law 2015 Spring Meeting in Washington, DC, April 28-May 2, 2015 for a full slate of Mexico Committee substantive, social and committee business meetings.

Now is the season to propose Mexico Committee programs for the Section of International Law 2015 Fall Meeting to be held in Montreal, Canada from October 20-24, 2015. Please reach out to the Committee Co-Chairs with your proposals.

M e x i c o C o m m i t t e e L e a d e r s h i p

2 0 1 4 - 2 0 1 5

C o - Ch a i r s B e n R o s e n E r n e s t o V e l a r d e D a n a c h e

V i ce - Ch a i r s R e n e A l v a S u s a n B u r n s L u i s P e r e z - D e l g a d o P a t r i c i a E s q u e r M e l i n a J u á r e z A l e j a n d r o S u a r e z

S t e e r in g G r o u p B a r b a r a A l d a v e E l i C o n t r e r a s K i m G o i n s A u r e l i a n o G o n z a l e z - B a z A l o n s o G o n z a l e z V i l l a l o b o s M a t t H a n s e n M a n u e l R a j u n o v J o a q u í n R o d r i g u e z J a y S t e i n O l g a T o r r e s

I m me d i a t e P a s t Ch a i r L e s l i e A . G l i c k

S e n io r A d v i s o r s P a t r i c k D e l D u c a J u a n C a r l o s V e l á z q u e z d e L e ó n O b r e g ó n


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MEXICO UPDATE

DISCLAIMER The materials and information in this newsletter do not constitute legal advice. MEXICO UPDATE is a publication that is made available solely for informational purposes and should not be considered legal advice.

Progress in Implementation of Oral Trials in Mexico

Alonso González-Villalobos & Paulina Aguilar Cervantes

After centuries of conducting trials under a mixed/inquisitorial system, Mexico has shifted to an accusatorial system, in which the powers to investigate, accuse and adjudicate will

be clearly divided. The incorporation of the new paradigm aims to achieve a more fair and more equitable administration of justice, by addressing endemic vices that that plague public institutions all across the country.

For instance, in 2008 statistics showed that 85% of the victims of crimes refused to denounce them, because 98% of felonies went unpunished and the proceedings could be slowed, postponed and delayed ad infinitum.1 Even worse, most judges were not present during the hearings, and the general idea was that anyone could be corrupted.2 To change this perception, new values and principles are to be implemented with the new system, such as publicity, transparency, continuity and propinquity of the judicial process. Also, new mechanisms have been created to guarantee the protection both of victims’ and the accuseds’ human rights. Such an enterprise

clearly implies a substantial modification of the criminal system as a whole, from the very early stages of police investigation to the penitentiaries, with discretionary powers for the prosecutor to decide whether to bring formal charges, alternative dispute mechanisms, and bargaining mechanisms in the middle.

Nevertheless, the central and perhaps most important part of this reconstruction of

the criminal system is probably that the trials will be oral. This means that trials, as well as rulings, will not be solely based on written arguments and declarations from police officers, prosecutors, accused, victims and witnesses that were submitted to the judge. Now those involved will stand before a court, speak aloud and be heard. At some stages there will be a panel of three judges; at others there will be only one judge who will decide by observing the development of each hearing and the reasons given live.

As corresponds to adversarial models, judicial authorities will personally see and hear the evidence during public hearings, and defendants will be able to challenge abuses or illegal searches in a meaningful manner. Confession

1Survey by Prisma Consulting Latin America, http://prismamx.net/pdfs/juiciosorales.pdf. 2 Transparency International, http://www.transparency.org.

C o n t r i b u t o r s t h i s i s s u e :

P a u l i n a A g u i l a r C e r v a n t e s A B A R O L I M e x i c o C i t y

G e r a r d o C a l d e r o n

B a k e r & M c K e n z i e M e x i c o C i t y

S t e f a n o D e L u c a A v v o c a t u r a d e l l o S t a t o R o m a

A l o n s o G o n z á l e z - V i l l a l o b o s A B A R O L I M e x i c o C i t y

M e l i n a J u á r e z S e g u r a S o t o r i s o l v e G u a d a l a j a r a

M a r í a F e r n a n d a L a z c a n o A r r e g u i R o b l e s , L a z o , G a l l a r d o & V a l d e z G u a d a l a j a r a

J o s é M a r í a L u j a m b i o I r a z á b a l C a c h e a u x , C a v a z o s & N e w t o n A u s t i n

M i c h e l l N a d e r S . N a d e r , H a y a u x & G o e b e l M e x i c o C i t y

D a n i e l a O n t i v e r o s V a r g a s S o t o r i s o l v e G u a d a l a j a r a

I s a a c S h e f e r I b a r r a , D e l P a s o , G a l l e g o y B e r e z o w s k y , S . C . M e x i c o C i t y

J o s é S i f u e n t e s D . N a d e r , H a y a u x & G o e b e l M e x i c o C i t y

Confession will no longer be the protagonist of the show, . . .

All thirty-three jurisdictions have already created public offices specifically entrusted with the task of coordinating public and private institutions in their efforts to implement the accusatorial system . . .


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MEXICO UPDATE

will no longer be the protagonist of the show, as more relevance is given to scientific evidence and truthful testimony. This will help to eradicate torture and corruption. The goal is, as well, to expedite the judicial process as a whole.

Naturally, the transformation process has been difficult. Change always gives rise to fear, and most of those accustomed to the old methods are barely helping – especially an important fraction who have indecently benefitted from their obscurity. To date, only three out of the thirty-tree jurisdictions (32 states and the federation) are fully operative under the new model: Chihuahua, Estado de México and Morelos; and while there are at least twelve more that have partially implemented it, the clock is ticking at a worrying speed, as the deadline for all of them is June 2016.

The unlevel playing field was further unbalanced by the fact that each state (and the federation) were left to decide the contents of procedural codes for each of their jurisdictions, and the time of their adoption. This approach proved a major obstacle given that the various existing codes interpreted the basic rules of the accusatorial model (embodied in the Constitution since the reform) differently; thereby creating a scenario of uncertainty within a context and a cyring need for basic minimum standards throughout. Cognizant of this need, President Peña’s administration promoted the creation of a unified, single code for the entire country, which was broadly discussed and finally adopted by Congress in March 2014. This National Code of Criminal Procedure is a major step towards the full implementation of the system, even when, it must be said, such a code maintained certain provisions that should be seriously revised if the determination is to operate under a model that truly corresponds to the basic tenets of adversarial justice. One can only hope that, until such legislative

amendments transpire, judges will fill in the gaps.

However, for that to happen, many challenges are yet to be completely met. Instances include a serious commitment towards the professionalization of all law enforcement bodies and meaningful training for judges, prosecutors, defense counsel, law professors and students. Notably, a strong framework for the legal profession to introduce certification and accountability procedures for private practitioners will be fundamental, if the system is to succeed.

Fortunately, evidence suggests that serious (at least more serious than previously) steps are being taken. All thirty-three jurisdictions have already created public offices specifically entrusted with the task of coordinating public and private institutions in their efforts to implement the accusatorial system, all of them under the general coordination of a national secretariat (SETEC), which started operation in 2010.

Such entities advise on and help to oversee the construction

of proper facilities, and the incorporation of state-of-the-art information technology for oral proceedings, as well as training and development of local legislation necessary for the operation of the national code.3

As suggested above, is not easy to implement the most important change that Mexico’s criminal system has faced in over one hundred years. Much remains to be done, and the time is running out. In addition, Mexico’s geography and population –more than 120 million– complicate the process. However, no one ever expected this to be an easy project – at least no one who seriously understood its implications. Let us hope that those involved realize that it will take more than eight years building courtrooms and learning rules. Let us hope that we all understand that only by fully accepting the change of culture, by switching our inner approach towards the rule of law, that this and any other similar effort can be fruitful.

3 Strategy for implementation, SETEC, available at http://www.setec.gob.mx/es/SETEC/EstrImpl

This National Code of Criminal Procedure is a major step towards the full implementation of the system . . .


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MEXICO UPDATE

Comments on the New Mexican Competition Law

Gerardo Calderon*

On July 7, 2014, a New Federal Economic Competition Law (the “New Mexican Antitrust Law”) came into force in Mexico. It maintains most of the concepts and provisions of the Antitrust Law in force since 1993, but strengthening the Federal Economic Competition Commission (“Cofece” per its Spanish acronym) and introducing novel concepts aimed at increasing competition in all product and service markets.

The Mexican Antitrust Law, published in 1992, and in force since 1993, represented a radical change in Mexican antitrust policy, and was intended to generate competition in an open market economy. The New Mexican Antitrust Law aims to consolidate that policy.

What’s New? The New Antitrust Law establishes, within Cofece, an “Investigating Authority” responsible to conduct investigations of monopolistic practices and illegal concentrations, although Cofece’s Plenary (comprised of its seven Commissioners) remains the body deciding cases. Clear rules for appointment and removal of the Commissioners and the Had of the Investigating Authority are intended to assure the autonomy and independence of these authorities.

With respect to procedural issues, the following changes aim to increase Cofece’s investigative powers, so that it will carry out more efficient investigations:

Coercive measures have been strengthened. For instance, Cofece may order the arrest of individuals uncooperative with an investigation;

New rules for conducting verification visits (so-called “dawn raids”) are established. Under these, Cofece may access any place, storage device, or any other source of evidence, obtain copies of information, and impound the same. Moreover,

the rules allow Cofece to request explanations from any officer, representative, or member of the inspected company regarding such information;

The decision to initiate an investigation will no longer be published in the FEDERAL OFFICIAL GAZETTE, which limits a target’s ability to respond or defend itself. Under the 1993 law, potential targets of a Cofece investigation learned about said investigation from the publication (although the name of the target was not disclosed, the information about the conduct being investigated as well as the involved markets usually sufficed to identify potential risks).

Companies may now be facing dawn raids at any time without even knowing of the initiation of an investigation of their markets.

The Investigating Authority will have powers to file a claim or complaint regarding presumed criminal conducts in antitrust matters, with no need to await a final resolution issued by the Plenary in the administrative stage; and

The administrative appeal (“recurso de reconsideración”) is eliminated.2

Under the New Mexican Antitrust Law, any indication of the existence of monopolistic practices, or prohibited concentrations, is enough to trigger an investigation, thereby increasing the likelihood of a Cofece-initiated investigation and resulting sanctions.

Another relevant modification will increase the likelihood of success for private actions for damages that an affected party may initiate, either as individual

* Content originally published CPI ANTITRUST CHRONICLE, July 2014.

DISCLAIMER: The materials and information in this newsletter do not constitute legal advice. MEXICO UPDATE is a publication made available solely for informational purposes and should not be considered legal advice. The opinions and comments in MEXICO UPDATE are those of its contributors and do not necessarily reflect any opinion of the ABA, their respective firms or the editors.

Companies may now be facing dawn raids at any time without even knowing of the initiation of an investigation of their markets.


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MEXICO UPDATE

or class (collective) actions. Specifically, the term to claim for damages will be interrupted by the commencement of an investigation. Also, Cofece’s final resolution will serve as the basis for processing complaints before Federal Courts specialized in economic competition issues to prove the illegality of the conduct (engaging in the monopolistic practice or the prohibited concentration).

All the foregoing will result in a substantial increase of Cofece’s investigating activities; since, on the one hand, they afford tools sufficient to start investigations ex officio and, on the other, there will be more incentives for those affected by anticompetitive conduct to file claims with the authority, as they will be able to obtain a resolution sooner.

Cofece’s strengthening is accompanied by controls to prevent abuses, which include increased transparency and accountability. For instance, the Internal Comptrollership was created, along with rules for interaction among economic agents and Cofece’s officials, the disclosure of such contacts, and other acts of the authority (resolutions, plenary sessions, and rulings) were incorporated.

Under the New Mexican Antitrust Law, Cofece will now be obligated to respond to ruling requests and to issue general guidelines on free competition matters upon request by private parties. Although Cofece has always been obligated to issue an opinion upon request, only now is the need for such opinions to have binding effect as a prerequisite for their effectiveness acknowledged. Indeed, to date the procedure (without being binding and without having legal effects) is rarely used.

The New Mexican Antitrust Law incorporates novel definitions regarding conduct considered to constitute monopolistic practices. On the cartel side, the exchange of information between competitors has been incorporated as an independent per se monopolistic practice when such exchanges result from, or the purpose of which is, any of the other

conducts classified as absolute monopolistic practices (price-fixing, supply restriction, market division, or bid-rigging). Previously, the exchange of information could be penalized only when it had resulted from, or had the purpose of, price-fixing. This exchange of information was also incorporated as a criminal offense in the Federal Criminal Code, and therefore individuals potentially involved in such conduct may face severe consequences (up to 10 years of imprisonment), even when the information exchange occurred without the intent to violate the antitrust laws; for instance, during due diligence processes in preparation of corporate transactions.

On the dominance side, two types of conduct have been established as violations: (i) refuse, restrict, or grant discriminatory access to essential inputs; and (ii) margin squeezes (i.e. when the margin between the price at which a vertically-integrated firm sells a downstream product and the price at which it sells an

essential input to rivals is too small to allow downstream rivals to compete).

Concerns of uncertainty exist around the lack of clear provisions in the New Mexican Antitrust Law to define when or under what circumstances an input may be deemed an essential input.

Another issue generating concern is the authority accorded Cofece to conduct studies to look for market power and then to order measures to eliminate “barriers to free competition” including the divestiture of assets. As in the case of essential inputs, there is no precise definition of the novel concept of

the foregoing will result in a substantial increase of Cofece’s investigating activities; since, on the one hand, they afford tools sufficient to start investigations ex officio and, on the other, there will be more incentives for those affected by anticompetitive conduct to file claims with the authority, as they will be able to obtain a resolution sooner.


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MEXICO UPDATE

“barriers to free competition,” and the New Mexican Antitrust Law only indicates that they are:

any structural characteristics of the market, facts, or acts of economic agents the purpose or effect of which is to impede competitors’ access or limit their ability to compete in the markets; those that impede or distort the free competition process, as well as legal provisions issued by any level of the Government that unduly impede or distort the free competition process.

Cofece’s officials have said that the New Mexican Antitrust Law imposes a high standard for a company or product to be found to have a dominant status before being regulated under the rules on essential inputs, margin squeeze, or barriers to free competition. However, the concepts themselves, as well as the proceedings for dealing with the relevant cases, seem to be designed—or at least they could be used—to over-regulate efficient companies.

The ability to conduct investigations into certain markets and then order a company to sell off parts of its business (despite no suggestion of any wrongdoing by the company) is not exclusive to Mexico. For example, the U.K. competition authorities have in the past investigated and then required divestitures in markets for airports, healthcare, and cement.

Cofece issuance of regulatory provisions and technical criteria will allow more detailed analysis of how, in practice, these concepts will be applied, as well as their actual impact on economic agents.

Changes to Merger Review The most relevant change to merger control regulations in Mexico is the migration to a suspensory merger control regime, which eliminates Cofece’s limit on issuing stop orders only for those transactions representing potential risks to the competition process. Under the New Mexican Antitrust Law, all transactions must now wait to obtain clearance before closing—even those

transactions in which it is evident that no harm to the affected markets will be generated.

Closely related to the foregoing is the extension of the resolution period from 35 business days to 60 business days (with the possibility of extending the term for 40 additional business days in complex cases). The 35-day term established in the 1993 Law has proven to be more than enough to substantiate

the procedure; therefore, there seems to be no justification for such an extension. The negative impact is

even greater considering that all transactions must await closing until Cofece issues its authorization.

The merger control thresholds have been modified to consider only annual sales originated in Mexico and/or assets in the Mexican territory of the parties, instead of such amounts at a global level, as set forth in Article 20(III) of the 1993 Law. Under this modification, a large number of transactions that were subject to notification will no longer be analyzed by Cofece, which may cause Cofece to miss an opportunity to prevent those with a negative impact on the market.

Last but not least, the regulatory burdens for the parties have been increased (e.g. elements have been incorporated into the list of “basic” information required, Cofece has been given powers to require information at any stage throughout the procedure, terms to require information have been extended, and additional formal requirements have been set for documents and translations). We believe these changes are unjustified, considering that Cofece might ask for all of them only in particular cases.

Finally, a positive addition is that, under the New Mexican Antitrust Law, Cofece will be obligated to inform the parties to a notification procedure of any possible risks for competition that might result from a transaction, allowing the parties to submit proposals of remedies or conditions.

all transactions must now wait to obtain clearance before closing—even those transactions in which it is evident that no harm to the affected markets will be generated.


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Update to Commercial Legislation María Fernanda Lazcano Arregui

Mexico seeks to achieve a more flexible and practical legal system for commercial transactions. Whether recent amendments achieve this goal remains to be seen.

On June 13, 2014 the Ministry of Economy (“SE”) published Amendments to Commercial Regulations in the Federal Official Gazette (“DOF”).

The amendments concern three main topics: (i) introduction of a new electronic system, (ii) additions to regulation of security interests in movable collateral, and (iii) incorporation of principles of the Sociedad Anónima Promotora de Inversión (“SAPI”) into the Sociedad Anónima (“SA”).

1. Publication Prior to the current amendment, merchants, when required to publish relative to their commercial character, had to do so in traditional print media. This requirement was sometimes expensive and very inefficient. From June 2015 on, this obligation will change, as merchants are required to make publications through a public Electronic System, which will be operated by the Ministry of Economy. The new publication modality will likewise apply to commercial companies in matters such as publication of annual financial statements and calls for meetings of owners.

2. Single Registry for Liens on Moveable Assets (“RUGM”*) Registration matters in Mexico have always been local, each federal entity having been left to administer, control and manage a public registry. The amendment improves the RUGM, which facilitates the registration of security interests in moveable collateral, as henceforth there will be only a single registry instead of the previous 32 corresponding to the number of states in Mexico.

Further, and contrary to previous legislation, the Code of Commerce (“CC”*) now recites a list of the

movable guarantees and acts of commerce that must be registered in the RUGM to be enforceable against third parties. The list includes, among others, the establishment, modification, transfer and/or cancellation of security interests in moveable collateral, financial leasing, financial factoring, fideicomiso (a term with analogies to trusts in US law) guarantee (the corpus of which is a movable asset) and judicial and administrative decisions relating to moveable property.

3. Amendments to General Law of Business Corporations (“LGSM”*) The amendments to the LGSM are address mainly the Sociedad Anónima, introducing to it norms associated with the SAPI. Accordingly, an SA is subject to more corporate governance principles, such as:

An SA may be subject to restrictions to transfer of ownership or associated rights.

An SA may (i) contemplate conditions for expulsion of a shareholder, (ii) issue shares without voting rights or shares with different economic rights besides voting rights, without such shares being deemed preferred shares, and (iii) increase, limit or deny preferential subscription.

The threshold to: (i) exercise the action of civil liability against managers, (ii) delay voting on any issue in stockholders’ meetings and (iii) judicially challenge to general stakeholders’ resolutions is reduced from 33% to 25% of represented capital stock

An SA may establish tag along, drag along, and

* Acronyms are drawn from the Spanish names.


three main topics: (i) introduction of a new electronic system, (ii) additions to regulation of security interests in movable collateral, and (iii) incorporation of principles of the Sociedad Anónima Promotora de Inversión (“SAPI”) into the Sociedad Anónima (“SA”).


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similar rights.

An SA may limit liability of management body and employees.

An SA now longer has the obligation annually to publish its financial statements and the notes to those statements.

Despite the amendments, SAPIs remain more flexible in their regulation. Examples of what a SAPI, but not an SA, may do, are:

The issuance of shares with limited or extended rights of profit distribution.

Minorities still need a lower percentage of represented capital stock to (i) exercise the action of civil liability against managers -15%, (ii) delay voting on any issue in stockholder meetings -10%, and (iii) judicially challenge general stakeholders’ resolutions -20%.

Shareholders may agree non-compete clauses.

A SAPI may acquire its own shares.

In addition to the amendments to the SA, all corporations may now perform any act of commerce needed to pursue their corporate purpose, except from the actions expressly forbidden by law and the charter. This amendment is a meaningful advance, although “old school” in the sense that it limits the corporations’ capacity only to acts of commerce, and accordingly may be construed a contrario sensu as a limitation to any other nature acts.

Further, the amendment establishes the duty of managers to maintain confidentiality regarding information and business knowledge arising from their duties in the SA. This obligation pertains during their engagement and for one year thereafter. In our opinion, the legislator failed in this amendment by establishing

only one year of obligation of confidentiality, despite the SA’s interest in confidentiality throughout its corporate life.

4. Other Amendments Amendments to the General Law of Negotiable Instruments and Credit Transactions (“LGTOC”*), relating to non-possessory pledge agreements, grant

more freedom to the parties by eliminating some formalities, requirements for the contract, and the prohibition to pledge goods that

are already out of the owner’s possession by virtue of any other agreement.

Concerning customs law, in cases of pledge of goods that are in temporary importation in regime of non-possessory pledge in case of execution of the pledge, the judge is now allowed to authorize the creditor to negotiate the definitive importation on behalf of the debtor to proceed with the sale of the pledged goods.

Regarding fideicomisos,2 the LGTOC grants more flexibility to the parties, among others, (i) to the creditor by trust to decide whether to declare the agreement expired or to keep it in force in case of lack of incorporation formalities and (ii) contractual freedom regarding the risks of the trust’s assets.

Conclusion In our opinion the legal reform falls short in its ambition of assuring flexible business-driven tools of commerce. Much more remains to be done, and many other impediments are yet to be modified to achieve the asserted goal.

The amendment improves the RUGM, which facilitates the registration of security interests in moveable collateral, as henceforth there will be only a single registry instead of the previous 32 corresponding to the number of states in Mexico.

the amendment establishes the duty of managers to maintain confidentiality regarding information and business knowledge arising from their duties in the SA.


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Private Investment in Pipelines and Storage Facilities for Petroleum, Petrochemicals and

Refined Products José María Lujambio I.*

The 1995 Mexican energy reform legally allowed private sector participation in activities such as transportation, storage and distribution of gas through what was then a new permit regime. In 2008, a bill by President Calderón proposed that, in accord with the Hydrocarbons Law relating to gas, permits could also be granted for transport through pipelines, and the storage related to such or to import terminals, for basic petrochemicals and refined products. Naturally, the regulator for these infrastructure networks would be the Energy Regulatory Commission (Comisión Reguladora de Energía, CRE). The odd consensus behind this reform yielded useless legislation, as the activities described above were subjected to regulation by CRE in accord with that agency’s governing law; but, the necessary amendment of the Hydrocarbons Law never occurred. Consequently, private projects were impossible to finance as they lacked fundamental regulations clearly supported by legal obligations, the violation of which could be sanctioned. Activities “regulated but not permitted” would be subject to technical regulations under the Federal Law of Metrology and Normalization, but were not subject to the provisions of the Hydrocarbons Law, as they applied only to permit holders. This was the CRE’s interpretation in Resolution A/001/2012 dated January 16, 2012. The legal uncertainty caused by this peculiar arrangement hampered the intent to create an industry allowing for the participation of private parties in such sectors, which would have resulted in greater economic efficiency given that the costs of using pipelines to transport liquid and gas fuels are much lower than using wheeled vehicular transport such as trains and trucks. Fortunately, this problem was finally resolved with the December 2013 constitutional reform on energy. Indeed, the tenth transitory article, section c), of the reform decree ordered Congress to make the necessary changes to the legal framework, among others, in order to grant to the CRE the authority to regulate and grant permits for the storage, transportation and distribution of petroleum, petrochemicals and refined products, including third

party open access to such infrastructure. In accordance with such mandate, the Hydrocarbons Law published in the Official Journal of the Federation on August 11, 2014 has the intent to regulate, among other activities, the transportation and storage of petroleum; the transportation, storage and distribution of refined products (such as gasoline, diesel, fuel oil, and liquefied petroleum gas or “propane”), and the transportation through pipelines and storage of petrochemicals related to such. The performance of any of these activities will require a permit from the CRE. During its review of the permit application and potential granting of the permits for transportation through pipelines or storage, the CRE may analyze the impact on the efficient development of such activities and the common infrastructure needs in the applicable region, with the ability to require that such facilities operate under open access conditions and fee regulations. Of course, permit holders that render services to third parties will do so at all times granting open access that is not unduly discriminatory, subject to the available capacity in their systems. Furthermore, the transportation systems through pipelines and the storage of refined products and petrochemicals that are interconnected may form integrated systems operated by independent managers to increase coverage and provide systemic benefits for the safety, continuity, quality and efficiency of rendering these services. Given these changes, Pemex must apply for and obtain the permits from the CRE no later than December 31, 2015, for oil and fuel pipelines, storage and distribution terminals, and other similar infrastructure. In the upcoming years, we will see new terminals in Mexico for the import of gasoline and diesel on the U.S. border; pipelines that transport jet fuel to airports, or ethane to plants which manufacture raw materials for plastics; and pipelines which transport crude oil from platforms to refineries located along the coasts of the Gulf of Mexico. This entire infrastructure should provide beneficial conditions for the vigorous growth of the Mexican economy.


* Formerly General Legal Counsel, CRE, 2009-2012.


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Mexico’s Energy Reform Michell Nader & José Sifuentes

On August 7, 2014, Mexico’s Congress approved a set of bills that contain the secondary legislation to implement the Energy Reform legislation initially submitted by President Peña Nieto in August 2013, and constitutionally ratified in December 2013.

The bills establish 9 new laws and amend 12 existing ones. The 9 new laws respectively address:

1) Hydrocarbons Industry; 2) PEMEX and its new regime; 3) Revenue from Hydrocarbons for Mexico; 4) The New Mexican Oil Fund; 5) A New National Agency for Industrial Safety and

Environmental Protection of the Oil Sector; 6) Electric Industry; 7) CFE and its New Regime; 8) Geothermal Energy; and 9) Coordination of Energy Sector Regulators.

The 12 laws amended laws concern:

1) Foreign Investment; 2) Public Procurement for Works; 3) Public Procurement for Services and Products; 4) Public Debt; 5) The Federal Budget; 6) Tax Coordination Issues; 7) Governmental Tariffs and Fees; 8) Public-Private Associations; 9) Public Sector Entities; 10) The Federal Public Administration; 11) Mining; and 12) National Waters.

Highlights of the Energy Reform follow.

OIL & GAS Upstream A. PEMEX Round Zero / Entitlements. The Ministry of Energy (Secretaría de Energía) (“SENER”) with technical assistance from the National Hydrocarbons Commission (Comisión Nacional de Hidrocarburos) (“CNH”), will grant PEMEX “Entitlements” (asignaciones) to perform upstream activities in specific areas, provided it has sufficient

technical, financial and performance capacity to undertake the activities required for each Entitlement.

When implementing work under any Entitlements, PEMEX may work with the private sector only through service and supply schemes.

PEMEX may lose its Entitlements through relinquishment or by SENER revocation for cause. The relinquished or revoked Entitlements may be awarded to private companies by public bids conducted by SENER.

The first round of Entitlements for PEMEX (Round Zero) was expected to conclude in September 2014.

B. Private Sector Participation. The Energy Reform allows private sector participation in competitive bids for upstream activities (exploration and exploitation of oil & gas), either directly (through production sharing agreements, profit sharing agreements or licenses) or indirectly, by means of a joint venture with PEMEX or service and supply agreements. The CNH will directly enter into any of these contractual schemes with private sector companies.

The first round of public bidding processes for upstream activities in areas designated for the private sector is expected to commence by mid-2015.

C. Booking of Reserves. PEMEX and private sector companies performing upstream activities under Entitlements, and contractual and license schemes may book or report reserves, for accounting and financial purposes, provided the underlying documents clearly specify that underground hydrocarbons remain property of Mexico.

D. National Content. Subject to specific provisions of Mexico’s existing free trade agreements, beginning in 2015, companies involved in upstream activities (including PEMEX) will be required to comply with a minimum of 25% of national content when



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performing such activities, except in deep and ultra-deep water operations where national content percentage will be determined by Mexico’s Ministry of Economy taking into account SENER’s technical opinion. The national content percentage will be gradually increased until it reaches a minimum of 35% in 2025.

E. Payments / Consideration.

(i) Payments to the Mexican State.

“Exploration Fee” shall be payable to Mexico by contractors performing exploration activities.

“Royalties” shall be payable to Mexico by contractors that actually extract hydrocarbons. Royalties will be calculated considering gross income of each specific field, international hydrocarbon prices and type of hydrocarbon extracted. As an incentive, contractors extracting gas will pay considerably lower Royalties. Standard Royalties are expected to average around 10%, provided the crude oil price is US$100 per barrel.

The Exploration Fee and Royalties are intended to apply to all contractual and licenses schemes.

“Signing Bonus” shall be payable to Mexico by contractors when awarded licenses for upstream activities.

“License Percentage Rate” shall be payable to Mexico and will serve as the main consideration received under license schemes. License Percentage Rates will be calculated based on operating profits or the hydrocarbons’ contract value.

“Contractual Percentage Rate” shall be payable to Mexico and will be the main consideration received under profit sharing and production sharing agreements. The Contractual Percentage Rate will be calculated based on operating profits, while discounting other amounts paid to Mexico and production costs. The Contractual Percentage Rate under profit sharing and production sharing agreements will be paid in cash or in kind, respectively.

(ii) Types of Consideration to Private Companies. -

“Cash” form of consideration payable to private companies under profit sharing and service and supply agreements.

“In Kind” (a portion of hydrocarbons being extracted) form of payment under production sharing agreements.

Combination of the above.

The type of payments to Mexico and form of consideration payable to private companies will be set on a case by case basis by Mexico’s Ministry of Finance and Public Credit (Secretaría de Hacienda y Crédito Público) (the “Ministry of Finance”) considering the offers by participants in public bidding processes. Cost recovery schemes (if applicable) for contractors will be taken into consideration when calculating the payments to Mexico under each contract or license.

F. Tax Framework. Companies performing upstream activities will be subject to Mexico’s general tax framework.

G. Authorities. The most relevant governmental authorities concerning upstream activities are:

SENER: charged with

selecting areas or fields for private sector participation;

creating technical and contractual guidelines for public bidding processes;

resolving upon migration of Entitlements relinquished or lost by PEMEX to contractual or license schemes with private companies.

Ministry of Finance: charged with laying out economic and consideration aspects that will apply to public bidding processes, contracts and licenses.

CNH: charged with

providing technical assistance to SENER; organizing and calling public bids, awards and

execution of public contracts; and determining general rules and guidelines for

upstream operations.

H. Mexican Oil Fund. The “Mexican Oil Fund for Stabilization and Development” (Fondo

©

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Mexicano del Petróleo para la Estabilización y el Desarrollo) will be a sovereign fund of Mexico created by the Ministry of Finance as settlor and the Mexican Central Bank as trustee. Its main purpose is to receive, manage and distribute income (excluding taxes) that result from PEMEX Entitlements and license and contractual schemes in upstream activities. The proceeds received by the Mexican Oil Fund for Stabilization and Development will be used to pay private contractors of upstream activities (when required), fund specific projects and funds, cover a portion of Mexico’s public expenditure and invest in long term savings.

Midstream & Downstream A. Private Sector Participation. Midstream activities (such as, storage, pipelines and bulk transportation) and downstream activities (such as refining, processing of raw natural gas, marketing and distributing products derived from crude oil and natural gas) may be performed by private sector companies through the issuance of permits that will be authorized by SENER or the Energy Regulatory Commission (Comisión Reguladora de Energía) (“CRE”), depending on the activity.

Registration with the CRE is only necessary for the marketing of crude or refined oil, products and gas.

B. Gasoline & Diesel Markets. Permits for the sale (to the general population) of gasoline and diesel by private sector companies will be authorized after January 1, 2016. Prior to December 31, 2016, PEMEX will be the only one authorized to import gasoline and diesel; thereafter the CRE will grant permits to private sector companies.

C. Asymmetric Regulation for Pemex. In order to procure a balanced oil & gas market, CRE will subject the first-hand sale (initial sale) of oil & gas and its derivatives to asymmetric regulation principles (i.e., encouraging competition, no barriers to entry, creating incentives to improve performance and promoting price structures that improve economic efficiency, among others) in order to limit PEMEX’s dominant position, and to foster efficiency and competitiveness by allowing new players to participate

in the oil & gas and derivatives markets.

D. New Regime for Pemex. PEMEX and CFE will be converted to productive companies owned by the Mexican State, and will be participants in the oil & gas and electricity markets, with non-regulatory roles, specific mandates and preferential treatment in some activities. There will be a period to allow transition of PEMEX and CFE into their new roles as productive state owned companies. Regulatory and market coordination roles will be transferred to SENER, CNH, CRE and the National Energy Control Center, among others. The organic laws of PEMEX and CFE now include private company practices in their corporate governance, surveillance and audit, transparency and accountability, among other standards.

Labor Unions Based on number of employees and other causes specified in law, private participants in the oil & gas sector may be required to enter into collective bargaining agreements with labor unions representing such employees. For these purposes, PEMEX’s union (Sindicato de Trabajadores Petroleros de la República Mexicana) will have no exclusivity relative to other unions.

Round “0” On August 13, 2014, SENER authorized Entitlements to PEMEX for 83% of 2P (Probable) Reserves and 21% of 3P (Possible) Reserves. In summary, PEMEX will keep most of the fields where investments have been made.

Round “0.5” PEMEX has the intention to “Migrate” some Entitlements with high technical difficulty to E&P Contracts. In such migrations PEMEX will be looking to partner with private sector companies with the necessary technical expertise to develop such areas. PEMEX’s partners for these projects will be selected through public tender processes expected to occur before the end of 2014.

Round “1” Open rounds for upstream contracts are expected to begin in February 2015.


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Energy Reform in the Electric Sector: Opportunities and Challenges1

Melina Juárez Segura Editor: Daniela Ontiveros Vargas

On August 11, 2014, the Electricity Industry Law was published. It is controversial, because for the first time since nationalization of the electric sector in the 1960s, activities concerning the industry will be open to free competition. The law lays sweeping new foundations, but also triggers doubts and uncertainty about the economic impact that its application will represent. This work sets forth in a simple manner the various concepts covered by the new legislature.

Object The law governs the planning and control of the National Electric System and the Public Service for the Transmission and Distribution of Electrical Energy, and the activities associated with the Electric Industry.

Purpose This law promotes sustainable development of the power sector, seeking a continuous, efficient and safe operation for the benefit of the users. It also regulates performance and obligations of the Public and Universal Service, regarding clean energy and reduced of pollutant emissions.

Activities Regulated The law regulates the electric industry, including: generation, transmission, distribution and sale of electricity. The law also regulates the planning and control of the National Electricity System and the operation of the Wholesale Electricity Market.

Authorities a) Ministry of Energy The ministry is to lead energy national policy, develop plans, and programs for coordinating with various authorities, seeking proper functioning of the National Electricity System

b) Energy Regulatory Commission (CRE in Spanish) The CRE is responsible for issuing the permits contemplated in the law. Also it creates the bases for the

provisions, methodology, mechanisms, and the norms of the market.

c) National Energy Control Center (CENACE in Spanish) CENACE is a Decentralized public entity of the Federal Government, with legal personality and its own patrimony, created by the Law. It is responsible for:: 1) operational control of the National Electricity System ; 2) operation of the Wholesale Electricity Market.; and 3) management of access to the National Network of Transmission and the General Distribution Networks.

Common Provisions a) The activities of the Electricity Industry are under federal jurisdiction.

b) Regarding issues not provided in this law, the activities of the Electrical Industry are considered as commercial. Therefore, they are governed by the Code of Commerce and additionally by the Federal Civil Code.

c) Permittees shall be individuals or companies incorporated under Mexican law.

d) Generation, transmission, distribution, marketing, and procurement of the primary inputs for the electric industry will be carried out independently of each other and under conditions of strict legal separation.

1) Generation a) Generator:

Owner of one or more permits to “Generate” Electricity in Power Plants.

b) Holder of a Market Participant Agreement,

One who will represent at the Wholesale Electricity Market the power plants authorized by CRE, and who will represent the Power Plants located abroad.

c) Exempt Generator:

Owner or holder of one or more Power Plants that do


1 The Electrical Industry Law is available in Spanish at www..dof.gob.mx.


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not require or have permission to generate electricity.

d) Distributed Generation:

Performed by an exempt generator, in a power plant interconnected to a distribution circuit that contains a high concentration of load centers, under the terms of the Market Rules.

Obligations of Generators Connected to the National Generation System: To sign interconnection contracts issued by the CRE Operate a power plant, following the instructions of

CENACE Maintenance of the power plant in coordination with

CENACE Notify CENACE of withdrawals programmed from

its power plants. Provide related services if necessary for reasons of

emergency that threaten the facilities of the National Electric System or Power Supply.

Regarding Production of Their Own Power Plants, Generators May: Represent exempt generators in the Wholesale

Electricity Market Acquire transmission and distribution services based

on Regulated Rates; Acquire and sale related services not included in

Electricity Market. Trading of: Electricity, related services included in

Electricity Market, Financial Transmission Rights, Clean Energy Certificates, sign Electrical Contracts Coverage and acquire or perform operations regarding Clean Energy Certificates.

Does the Generator Need a Permit? Yes, indeed, all activities including financing, installation, maintenance, management, operation, expansion, modernization, monitoring and conservation of Private Networks that are necessary to deliver the output of the Power Plant to the National Transmission Network or to the General Distribution Networks or for isolated supply.

A Power Plant in which is generated energy and associated products, requires a permit if it has equal to or

greater capacity than 0.5 MW, is represented by a generator in the wholesale electricity market or its located abroad and connected exclusively to the National Electrical System.

2) Supply It is a public interest service that corresponds to the set of products and services required to fulfill the demand and consumption of electricity of the Final Users, regulated by CRE and comprising:

Representation of Final Users in the Wholesale Electricity Market

Acquisition of electricity and associated products. Signing of electrical coverage contracts. Sale of electricity for its delivery to the load centers of

the users. Billing and attention to Final Users.

3) Final Users A person or company that acquires for its own consumption or for the consumption on its premises, the Electricity Supply in their charge centers, as Market Participant or through a Supplier.

There Are Three Types of Supplies: Basic, Qualified and Last Resource (see table).

4) Transmission and Distribution A Distributor is the agency or production company of the State or subsidiary that offers public services of distribution of Electricity, charging the rates established by the CRE for the use of the infrastructure, being responsible for the National Network of Transmission and the General Distribution Networks. This law allows the State and the distributors to form partnerships or sign contracts with individuals to, on behalf of the Nation, perform financing, installation, maintenance, management, operation and expansion of the infrastructure required to deliver the Public Service of Transmission and Distribution of Electricity. Thus it appears as a particular opportunity to invest in the execution of construction, extensions or modifications of transmission or distribution under its full payment or through contributions.

Having analyzed the actors of the activities in the


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electrical industry, economic issues: are addressed as follows.

5) Marketing In a system of free competition, the following activities comprise the marketing of Electric Power:

Offers Electricity Supply to End Users Represents Exempt Generators in the Wholesale

Electricity Market Acquires transmission and distribution services based

on Regulated Rates Acquires and provides related services not included in

the electricity market with intermediation of CENACE

6) Wholesale Electricity Market CENACE oversees the wholesale electricity market. The market is shaped by those who sign a contract of a Market Participant with CENACE in the mode of Generator, Supplier, Marketer-Supplier, Marketer not Supplier or Qualified User.

7) Clean Energy Energy sources and electricity generation processes,

whose emissions or residues do not exceed the thresholds set out in the regulations comprise Clean Energy. Such sources include wind, solar radiation, bioenergy, and nuclear, among others.

8) Market Clean Energy Certificates Suppliers, Qualified Users as Market Participants, Final Users that get supplier from an isolated supply and holders of Interconnection Legacies Agreements that include public or private load centers shall comply with the obligations of Clean Energy. Clean Energy Certificates are tradeable. CRE is to establish and maintain a register of Clean Energy Certificates, which will contain information such as date of issue, validity, and ownership history information.

9) Use and Occupancy of Land The electricity industry is considered a public utility, therefore, it benefits from rights of expropriation of the occupation, superficial damage or constitution of easements necessary to provide the Public Transmission Service, the Distribution of Electric Energy and the construction of power plants. Preference will be given to


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the use of the surface or subsurface of the land. Being a priority matter, the Federation, the state governments and the Federal District, municipalities and delegations are obligated to contribute to development of these projects. The law establishes procedures for negotiation of payments or compensations with owners of such land or rights. In case of private property, the purchase and sale may also be freely agreed.

Conclusion “The future contains the feared or the expected; according to human intention” states Ernst Bloch in the preface of “The Principle of Hope”. The Electricity Industry Law rather than merely laying the foundations of a new system of energy exploitation, , ruptures all economic and social paradigms. We are on the threshold of a large number of investment opportunities and participation in activities related to generation, supply, distribution and marketing of Electric Power. The new law opens a field of specialized market, which we expect to be a major economic development for the country. Every opportunity has challenges and risks, those challenges and risks here being in the main: lack of market rules, specialized norms, approved contracts, or a system of standardized rates. One of the main regulatory authorities under the law, “CENACE”, does not yet exist. We have a general scheme, which in certain areas is confusing and incomplete in others. We will have to wait for a complete legal framework and its correct application. If it works, we will come face to face with a genuine economic and social momentum. It only remains to observe that this emerging industry needs to be channeled correctly, so that the future will bring the expected and not the feared.

Mexico’s Anti-Money Laundering Statute Isaac Shefer

On October 17, 2012, the Federal Law for the Prevention and Identification of Transactions with Resources of Illicit Provenance (Ley Federal para la Prevención e Identificación de Operaciones con Recursos de Procedencia Ilícita, commonly known as the “Anti-Money Laundering Statute”, hereinafter the “Statute”) was published in the Federal Official Gazette. On July 13, 2014, it took effect. It is designed to protect the Mexican economy through establishment of measures and procedures to prevent and detect transactions involving unlawful resources.

The Regulations of the Statute promulgated August 16, 2013 (the “Regulations”) and the General Rules for the application of the Statute promulgated August 23, 2013 further elaborate the provisions of the Statute. The General Rules continue to be modified and amended from time to time.

The Statute identifies certain non-financial activities as “Vulnerable Activities”. Financial Entities and their activities are also regulated by a specific chapter (as contemplated in Articles 13 to 16 of the Statute, among others), and such entities are also subject to the Statue when they engage in Vulnerable Activities.

The main governmental authorities pertinent to application of the Statute are the Ministry of Treasury and Public Credit (Secretaría de Hacienda y Crédito Público “Hacienda”) for the general application and enforcement of the Statute; the Attorney General’s Office (Procuraduría General de la República) through the Special Unit of Financial Analysis, which focuses on money laundering transactions; and the Financial Intelligence Unit (Unidad de Inteligencia Financiera), which acts as a general prosecutor.

Achieving International Commitments The Statute’s adoption not only provides a regulatory framework that addresses an increasingly complex reality in Mexico, but it also aligns Mexico with international efforts in the fight against money laundering and terrorism activities.



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In Mexico, operations conducted with illicit source resources (money laundering), terrorism, financing terrorism and international terrorism are criminal offenses punishable by the Federal Penal Code.3

Moreover, the adoption of the Statute also responds to international commitments assumed by the Mexican State as part of the Financial Action Task Force, “FATF”, an inter-governmental body established in 1989 by ministries of its member jurisdictions. FATF’s objectives are to set standards and promote effective implementation of legal, regulatory and operational measures for the combat of money laundering, terrorism financing, and other related threats to the integrity of the international financial system. Hence, FATF is a “policy-making body” which works to generate the necessary political will to bring about national legislative and regulatory reforms in these areas.

In addition, Mexico is a part of Latin America’s Financial Action Group (Grupo de Acción Financiera de Sudamérica) “GAFISUD”, a regionally based inter-governmental organization that gathers twelve countries from the America’s to fight money laundering and terrorism financing, by committing to continuous improvement of the national policies against both wrongdoings, as well as through the enhancement of cooperation mechanisms among its member countries. In February 2014 FATF recognized that Mexico had made “significant progress” in addressing deficiencies identified in a 2008 evaluation and accordingly could be removed from an action list maintained by FATF.

Vulnerable activities The Statute lists a series of activities considered “Vulnerable Activities”. The initiation of a Vulnerable Activity triggers obligations to obtain and retain on file certain information, mainly “Know Your Costumer” information (“KYC”). Files shall remain and be made available for the authorities in case of requirement for at least five years, and a responsible person (for entities) before Hacienda must be designated, among other obligations.

Moreover, if the transaction entails an amount over certain thresholds (or if a group of transactions of the

same nature accrue an amount that exceeds or equals such thresholds) the same shall be identified and when those activities are performed for amounts over certain thresholds, then the same shall also be reported through a special website established by Hacienda. The Financial Intelligence Unit has authority to gather information that it may consider useful in order identify and prevent money laundering operations.

Among the Vulnerable Activities, are operations involving:

Gaming; Credit cards/Services cards; Prepayment cards, reward cards and coupons; Travelers checks; Financing or loan transactions; Armoring activities; Real estate transactions, including leasing,

development, sale and granting of in-rem rights; Jewelry; Works of art; Vehicles; Transportation or custody of money and other

securities; Professional services such as customs agents, legal,

financial and administrative services; Public trust services (for notaries public and

commercial public brokers); Donations (gifts); and Foreign Trade activities.

Considerations From a legal stance, this Statute has provoked criticism from the sectors affected by it. An important flaw of the Statute is the lack of regulation in certain areas, such as the proper way to comply with the obligations contemplated in the Statute and its Regulations (although this has somewhat been ameliorated through the General Rules and its amendments). Also, there have been assertions that the Regulations purport to regulate beyond the scope of the Statute.

Perhaps the most remarkable consequence of the adoption of the Statute in business circles has been the limitations that it represents for several industries. For


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instance, the real estate market has changed its operation and dynamics, as since the Statute came into effect, brokers, property managers, real estate developers, notaries public and any other person involved in that sector now must to carry out several formalities and gather information before entering into an operation. This has represented a general “slow down” in the operation of real estate transactions.

Other sectors that have been significantly impacted by the Statute are the Jewelry and Vehicle-Armoring businesses. Prior to the adoption of the Statute, operations with jewels were commonly practiced and accepted. Now, since the Statute bans the use of Jewelry to satisfy obligations, this market has been dramatically restricted (if not extinguished for certain segments). Likewise, in light of the security environment in Mexico, vehicle-armoring has become a flourishing industry. Given that organized crime has operated in the shadows of these two businesses, the Statute has dramatically cut down their operations and restricted their ability to trade and move funds.

Although Hacienda officials have preached the contrary, the general public perception is that the Statute is aimed to aid in the collection of taxes. Interestingly, all notices of Vulnerable Activities shall be submitted not later than the 17th calendar day of the month following the occurrence of the Vulnerable Activity1, which coincidently is the same due date for the filing of monthly tax returns.

Cash transactions are also limited by the Statute as the same are no longer allowed above certain thresholds for operations in certain areas, such as real estate, in-rem rights and vehicles.

Public notaries and commercial brokers are one of the most affected parties, as the Statute requires from them several new obligations, along with the possibility of being sanctioned even with the definite cessation of their functions.

Furthermore, in practice, compliance with the Statute has not always been clear nor easy for those who have attempted the timely and due report of Vulnerable

Activities. In addition to requiring tax payers to have electronic devices for complying with the Statute, during the first months of the Statute, the web portal that Hacienda enabled to receive the Vulnerable Activity notices was much more limited in terms of alternatives and description of transactions than what the Statute and the Regulations foresaw. Heavy traffic also made access very difficult. Therefore, on more than one occasion Hacienda had to grant extensions and authorize additional terms for submitting the corresponding notices.

Although it is desirable that all the measures adopted in the Statute be aimed at preventing and identifying illicit source resources, it has been pondered whether the Statute, by imposing all these restrictions and sanctions is actually causing other adverse effects in an economy that is still developing and in which, due to apparent social contrasts, cash transactions represent a substantial portion of the economic flow. Perhaps it is too soon to tell.

Sanctions Infringement of the obligations contemplated in the Statute may give rise to administrative and criminal sanctions encompassing fines from 200 to 65,000 minimum wages (i.e. approximately US$1,035 to US$336,450); revocation of licenses to notaries public and commercial public brokers; as well as criminal sanctions of up to twenty years of imprisonment. Punishments may vary according to the circumstances, the type of infringement, and other contextual elements.

Not only are the economic sanctions and criminal liabilities important, but also infringement of the Statute creates an undesirable background for entities and individuals before Hacienda.

After a Year of Adoption Criticism of the Statute emerged in economic circles due to the heightened administrative burdens that it creates for the normal day-to-day operation of businesses. Although the Statute came into force on July 13, 2014, as of September 2014, several entities and individuals are still nascent in their adoption of measures and are seeking to abide by it and its secondary regulations. As a


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relatively new Statute, at this point in time there are not yet enough precedents. There have been endeavors from professional and commercial sectors, such as lawyers and other professionals, to confirm criteria with the authorities about the construction and enforcement of the Statute. Because in certain ways it entails the adoption of new or revised business practices with accounting and legal implications, practitioners are developing guidelines for implementing the compliance with the Statute, such as protocols for spotting a Vulnerable Activity, and KYC questionnaires for suppliers, clients and counterparts, as well as training courses.

Formal inquiries confirming criteria from the authority, creation of new areas for services providers (lawyers and accountants particularly) regarding the Statute, fora, conferences and private efforts have unfolded since the Statute came into force. As indicated, one of the most important consequences of the Statute is the creation of administrative burdens for the productive sector in Mexico, thus, the Statute has also required the restructuring of the way of working by companies and individuals affected by it, in some cases, leading to the creation of compliance departments.

Working groups created following adoption of the Statute have established direct contact with the authorities to clarify certain provisions of the Statute, especially those that affect certain sectors or activities, such as legal services. So far authorities have been receptive, allowing direct consultations and dialogue with particular parties, and positive results have been obtained, such as the interpretation of some obligations of the Statute in a less restrictive manner. However, as mentioned before, precedents are yet to be developed and the overall effects on the economy and legal practice remain pending.

As indicated, the obligations contained in the Statute have also impacted commercial transactions. While the image of Mexico worldwide has been improved in terms of regulation against money laundering activities, the regulatory limitations have also caused difficulties for those who perform Vulnerable Activities as a core

business. The Statute contains at least 120 more provisions than do the laws of the United States of America pertaining to anti-money laundering provisions, which makes Mexico one of the most advanced countries on this subject (at least when it comes to regulation); however sales and operations may have been reduced significantly in virtue of the aforementioned limitations.1

The hope is that as the market embraces and rapidly becomes familiar with the Statute, these difficulties will disappear.

What to Do? 1. - Know the Statute and applicable regulations. Knowledge of the Statute and its regulations is the first step to understanding and easing compliance with the obligations foreseen.

2. - Create and design mechanisms for compliance. Laws requiring formalities and procedures are not new; therefore, the obligations of the Statute should not represent a problem but rather an opportunity to improve operations and practices in a company or for professionals. The best way to ensure compliance with the Statute is to know the obligations and adapt the operation of the company or individual, either by the modification of current structures in a company or by the creation of new structures aimed to complying with the applicable regulation. The preparation of special KYC forms and mechanisms to gather information (such as the moment in which the information has to be gathered, usually at the beginning of a relationship with clients and providers) are ways that these burdens could be easier.

3. - Seek Advice. Currently, lawyers, accountants and other professionals offer their services in connection with these obligations, not only for legal or financial aspects, but also for regulatory burdens such as the filing of notices for the performance of Vulnerable Activities.

4. - Training. Staff training is an important tool when it comes to compliance. If all the members of a company are equally prepared and are communicating, then the tasks which they have to perform will be equally easy for


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all of them. It is necessary for the employers (and the employees) that anti money laundering provisions become part of the companies’ policies, so that they can be incorporated and performed as a regular standard.

5. - Due Diligence. Due diligence is commonly used to know the status of a company. As this Statute is relatively new, a due diligence report (which works as a “photograph” of the company) will be useful to understanding the particular needs and areas of opportunity for a company. Once the strategic areas of opportunity have been established, the incorporation of mechanisms should be easier. Several firms of lawyers and/or accountants may provide this service.

6. - Ask for information. The authorities welcome questions. Since information rights are a constitutional right, citizens have the right to ask for any governmental information, and confirmation of criteria or inquiries in general that may arise from any governmental acts. Confirming information with authorities and asking for it is always a valuable source of elements that may help in complying with regulatory obligations. Questions to the authority do not necessarily have to contain information that may be sensitive or delicate, and mechanisms to ask for information are easy to access (although not always as expeditious as necessary).

7. - Follow up on updates. As the application of the Statute generates precedents, administrative and judicial criteria shall clarify many aspects that remain uncertain and likely will result in reforms that might change the current framework. As of September 2014 there have been reforms to secondary regulation of the Statute.

8. - Use the advantages that the Statute offers. There are some advantages in the Statute that can be used in order to gain time, such as simplified measures to gather information from clients (when they are “low risk” clients) and the figure of collective entities to submit notices (“Entidades Colegiadas”).

Certainly, the desired positive effect is that with the Statute, law enforcers will have more elements to fight crime and the financial system in Mexico will be strengthened. If such is the case, the administrative burdens and all aches related with the adaptation process will be worth it.

Mexican Constitutional and Regulatory Telecommunications Developments:

Terms of Interconnection with a Dominant Operator Are Newly Defined

Stefano De Luca*

Mexico’s new Federal Institute of Telecommunications–”IFT”, the present Mexican telecommunications regulator, has defined the terms on which “preponderant economic operators” Telmex, Telnor and Telcel must make available interconnection for completion of calls originating from competitors’ customers. In addition, the recently enacted Federal Telecommunications and Broadcasting Law has set a zero interconnection rate in favor of non-preponderant economic telecom operators completing calls in the preponderant economic operators’ network, raising the possibility of argument that the law unconstitutionally limits the IFT’s autonomous constitutional power to determine interconnection rates on preponderant economic operators as stated in the Mexico’s Constitution. IFT’s establishment of interconnection rates benefits from the recently amended constitutional provisions that recast the writ of amparo so as to prevent suspension of IFT’s definition of interconnection rates and other terms during the pendency of amparo proceedings. The authority of IFT’s definition of the terms of interconnection with preponderant economic operators, its determination that Telmex, Telnor and Telcel are preponderant economic operators, and the constitutional recasting of the writ of amparo are all built on prior regulatory and judicial actions.

The centrality of IFT’s role with respect to compelling interconnection on terms that can allow a competitive telecommunications market not only has legal foundations, but also derives its legitimacy from the public policy objectives that IFT pursues. The legal foundations for IFT’s current role are: 1) the Constitution, 2) the New Federal Telecommunications and Broadcasting Law (hereinafter TBL) as long with, before the TBL entered into effect, the repealed Federal Telecommunications Law as amended (hereinafter FTL), and 3) prior Supreme Court judgments that addressed IFT’s immediate predecessor, COFETEL. Indeed, the new Mexican telecommunications and antitrust constitutional framework for law, as well as Mexico’s recently enacted TBL, and recent judgments of


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the plenary chamber of Mexico’s Supreme Court are all sources that support the authoritative role of IFT’s decisions on interconnection matters involving telecom operators holding substantial power in the market. With the benefits of these foundations, IFT’s decisions on

interconnection have potential to serve as tools to further both social interest and public order in the telecommunications sector. By virtue of these developments, IFT as a regulator has the independence and autonomy necessary to carry out its responsibilities, namely, to ensure that the telecommunications market is competitive and that it achieves public policy objectives of making available affordable services to all parts of society.

A fundamental innovation of the development referenced above is that IFT’s decisions on interconnection may be challenged only through the procedure of indirect amparo, with the consequence that their effectiveness will not be the object of suspension during the pendency of any challenge.

What is amparo? “Amparo encompasses a set of federal judicial procedures by which any private person (individual or enterprise) may contest the action of a government agency or official, either at state or federal level, on the ground that the action is unconstitutional. Under the Amparo Law the federal courts are empowered to issue what amounts to an order (fallo de nullidad) preventing the governmental defendant from carrying out the contested action.” Hence, amparo is a judicial procedure in the Mexican legal system aiming to protect individuals against governmental abuses of authority.

Mexican courts and legal experts identify two broad categories of amparo, according to the number of procedural levels (instancias) or courts involved in the process: “indirect” and “direct” amparo.

Mexican law has long understood the pendency of a writ of amparo to suspend the effects of acts of governmental authorities alleged as unconstitutional until the merits of the

challenge are addressed. As a consequence, indiscriminate use of the writ of amparo has been available to impede government in its exercise of regulatory power to implement public policies.

The writ of amparo protects citizens’ or corporations’ constitutional rights against the State’s improper use of power by allowing the judicial system to suspend governmental acts until the amparo challenge is resolved. However at the same time, amparo restricts the State’s

authority to set public policies and regulations by delaying the effectiveness of governmental actions and allocating to the judicial system the power to make decisions regarding regulatory policies. Indeed, one feature of practice with the Mexican writ of amparo is that any action of an authority of one of the Mexican states, including a Mexican state court, can be stayed and challenged by initiating action in a Mexican federal court. This aspect of practice in association with the writ of amparo served to maintain central power in Mexico.

The importance of interconnection Considering that one of the goals of launching a cellular telecommunications company in Mexico is to enable its customers to interconnect across networks and to communicate with subscribers of different operators, providing interconnection is crucial for the new company to be able to deliver its services and avoid failure. According to 47 C.F.R 51.5, a regulation implementing the US Federal Communications Act, interconnection is “the linking of two networks for the mutual exchange of traffic.” This concept can be further subdivided into the two terms: network interconnection and access interconnection. The former takes place between operators possessing networks, and the latter between an operator with a network and an operator without one. From the perspective of a new operator entering the market, and given the high cost of developing an owned network infrastructure, reaching an agreement to use the existing facilities of another operator for providing services is likely the best solution. “It is generally recognized that a satisfactory interconnection and access regime is indispensable to the development of a competitive

In sum, an essential stage for a new mobile telephone company to enter the market is to reach an interconnection agreement with other telecom operators so that its customers can communicate without barriers.


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telecommunications sector.” Therefore, typically the national regulatory authority imposes interconnection requirements including an obligation to interconnect and the prices for interconnection.

In sum, an essential stage for a new mobile telephone company to enter the market is to reach an interconnection agreement with other telecom operators so that its customers can communicate without barriers.

Telecommunications Regulatory Authority and Interconnection in Mexico. Interconnection in Mexico Although private enterprises reappeared in the Mexican telecommunications sector in the mid 1990s with the privatization of Telmex through a group led by Mr. Carlos Slim, one company dominates the field, and it is almost impossible for new entrants to avoid seeking interconnection with this entity. Indeed, Telmex and Telcel held respectively 80% of the fixed line market and 70% of the mobile phone market in terms of subscribers. The América Móvil Group, related to Mr. Slim, owns both companies. Telmex and Telcel are the incumbents in the Mexican telecommunications sector, and reaching an interconnection agreement with them is essential for new entrants seeking to provide efficient services to end users.

Implementation process of the new Federal Institute of Telecommunications (IFT) The new Mexican 2013 constitutional amendment concerning telecommunications has created the present telecom regulatory authority, IFT, which is characterized by actual independence and much more regulatory power in executing its responsibilities than the former telecom regulatory authority, COFETEL. The following elements establish IFT’s authority regarding interconnection: 1) promulgation of the Constitutional Decree on Telecommunications, 2) promulgation of the new Federal Telecommunications and Broadcasting Law (hereinafter TBL), 3) ratification of IFT’s President and governing body by Mexico’s Senate, 4) legislative adoption of the organic statute of IFT, and 5) IFT’s issuance of decisions that identified Mexican dominant operators and set interconnection rates.

The Constitutional Decree on Telecommunications (June 11, 2013) amended Art. 28 of the Mexico’s Constitution, providing that a new telecommunications regulatory body (the Federal Institute of Telecommunications, known as IFT) would replace the former one (COFETEL). According to the constitutional amendment, IFT is an independent agency with constitutional status that has the power to coordinate the entire telecom sector including to address legal issues such as antitrust, universal coverage, quality of the telecom service and access. Most importantly, the constitutional amendment grants to the actions of IFT, including its interconnection decisions, the status of being subjected only to the process of indirect amparo, and excludes the possibility that IFT’s actions would be the object of suspension during the pendency of any challenge reinforcing the immediate effectiveness of IFT’s regulatory powers.

The provisions of the Constitutional Decree on Telecommunications have been incorporated in the recently enacted Federal Telecommunications and

Broadcasting Law. The recently adopted TBL adds a statutory recognition to the new constituted independent regulatory authority (IFT), building on the constitutional one already accorded IFT through Art. 28 of the Mexico’s Constitution as amended by the Constitutional Decree on Telecommunications. The TBL, effective August 13, 2014, has repealed both the FTL and the Federal Radio and Television Law.

In addition, on September 10, 2013 the Senate of Mexico’s ratified IFT’s President and governing body, which had been previously appointed by the Federal Government (the President and all the State Ministers), formally constituting IFT (see transitory Art. 6 of the Telecommunications Constitutional Decree.) “What we have to do is to resolve

The new Mexican 2013 constitutional amendment concerning telecommunications has created the present telecom regulatory authority, IFT, which is characterized by actual independence and much more regulatory power in executing its responsibilities than the former telecom regulatory authority, COFETEL


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before March 9 who are the preponderant economic actors and the regulation that we should impose on them,” IFT President Gabriel Contreras said last December, 4, 2013 at an event in Mexico City after IFT’s establishment. “Those processes have indeed started.”

Following the Mexican Senate’s ratification, IFT plenary committee approved its organic statute, which was published in the official gazette on September 23, 2013 contemplated by the constitutional amendment provisions.

Finally, as IFT President Gabriel Contreras had promised, in March 2014 the new regulatory authority issued two decisions, which determined the preponderant economic operators in the Mexican telecommunications market and the asymmetric interconnection rates to apply to them. On March 6, 2014 IFT adopted a decision, which identified Telmex, Telnor and Telcel as preponderant economic operators in the Mexican telecommunications market. As a result of their dominant position, on March 26, 2014 the IFT plenary committee determined the asymmetric interconnection rates to apply to the preponderant economic operators based on a long-run average incremental cost model (hereafter, the “LRIC model”). As stated in IFT’s determination of preponderant economic agents in the telecom sector “Agreements (ACUERDOS) Art. 3 (TERCERO) par. 3,” the asymmetric interconnection rates set in the former agreement will be effective from the commencement of the measures imposed on the preponderant economic agent in the telecom sector (April 6, 2014) until December 31, 2014. The actions reported above, namely the determination of preponderant economic operators in the Mexican telecommunications market and the setting of asymmetric interconnection rates related to preponderant economic operators, have been taken in reliance on the transitory Art. 8 of the Telecommunications Constitutional Decree. Pursuant to that article, IFT has the authority, within 180 calendar days from the appointment of all its commissioners, to:

Identify in the telecommunications, broadcasting, and radio industries if there are preponderant economic agents that exceed 50 percent of the national market share in a direct or indirect way, calculated by users, subscribers, audience, installed capacity, or usage, of such a network.

Issue norms to establish accounting, structural, and functional segregation; asymmetric regulations of tariffs; and essential asset dispositions or sales, in order to avoid harm to competition and consumer abuse.

Implement local loop unbundling obligations and obligations of provision of access to the local loop of the preponderant economic agents in telephony, pay TV, and fixed internet.

The actions concerning the preponderant economic operators and the asymmetric interconnection rate determinations were issued within the 180 calendar days framework set by the Telecommunications Constitutional Decree. Indeed, both the decision that determined Telmex, Telnor and Telcel as preponderant economic operators (March 6, 2014) and the decision to apply asymmetric interconnection rates to them (March 26, 2014) had been made within this 180 day period running from the appointment of all IFT’s commissioners, which occurred on September 10, 2013, thus triggering the operativity of IFT’s regulatory powers.

IFT regulatory authority The recently amended Federal Telecommunications Law (repealed by the new TBL on August 13, 2014), and IFT’s regulatory powers to impose asymmetric interconnection obligations, as well as the constitutional protection accorded by Art. 28 of the Mexican Constitution against an immediate suspension of IFT’s interconnection decisions under the shadow of the writ of amparo, have collectively offered certainty and stability to the Mexican telecommunications sector, thus setting a potentially positive time to conduct telecommunications negotiations involving Mexico. Indeed, the new legal tools mentioned above helped to set out reasonable conditions for infrastructure sharing and removed the main bottlenecks, such as lack or expensive interconnection access, which prevented competition.

The recently amended Federal Telecommunications Law (repealed by the new TBL on August 13, 2014) defines objectively the interconnection legal framework and IFT’s authority to solve disputes on interconnection rates. According to its Art. 42 (at present, Art. 129 TBL):

© 2014

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“Holders of licenses to public telecommunication networks shall interconnect their networks, and to this end shall reach an agreement within 60 calendar days from when any may request it. If said term has elapsed and the parties have not executed an agreement, or before so requested by both parties, the Ministry shall reach a decision within 60 calendar days concerning the conditions upon which no agreement has been made.”

Taking into consideration a constitutional reading of the FTL (repealed by the new TBL on August 13, 2014), as it was amended by the Telecommunications Constitutional Decree, in the event of a failure to reach an agreement between the parties, prices are to be fixed by IFT within 60 days.

Indeed, the transitory Art. 8 of the Telecommunications Constitutional Decree, as transposed in Art. 28 of the Mexican Constitution, states that IFT has the regulatory powers to determine the existence of preponderant economic operators in the fields of broadcasting and telecommunications, and to impose the necessary measures to develop a competitive market including asymmetric interconnection rates. As shown by the “Agreement by which the Plenary of IFT Committee determined the Asymmetric Interconnection Rates to Apply to Preponderant Economic Operators,” the interconnection rates IFT applies in the case of a missing interconnection agreement with a preponderant economic operator (at

present, Telmex-Telnor-Telcel) have been already set by IFT in its decision of March 26, 2014. The interconnection rates set by IFT on March 26, 2014 are effective from April 6 to December 31, 2014. Below are reported the specific interconnection rates which were determined by IFT for both the fixed and mobile market:

Last but not least, the Mexican Constitution (last amended by decree published in the Official Gazette of December 20, 2013) incorporated the provisions of the Telecommunications Constitutional Decree providing only a right to indirect amparo and a status of non-suspension against the decisions of the new regulatory authority (IFT). As stated in Art. 28 sec. VII of the Mexican Constitution, “The general norms, acts or omissions of…the Federal Institute of Telecommunications may be impugned uniquely through the process [juicio] of indirect amparo and will not be the object of suspension” during the pendency of any challenge.

IFT v. COFETEL comparison The independent nature of IFT, the exclusion of the “double window” procedure from IFT’s operation, and the constitutional protection of IFT decisions against amparo suspension place the new regulatory authority, IFT, in a better position than its predecessor, COFETEL.

The establishment of IFT as an autonomous agency with the

Service Interconnection fee

(USD) Fixed Market (Telmex)

a) Interconnection rate per minute within the same regional node $0.00154

b) Interconnection rate per minute among regional nodes that depend on a domestic node $0.00173

c) Interconnection rate per minute among regional nodes that depend on different domestic nodes

$0.01790

d) Transit rate per minute within the same regional node $0.00864

e) Transit rate per minute among regional nodes that depend on a domestic node $0.00066

f) Transit rate per minute among regional nodes that depend on different domestic nodes $0.00091

Mobile market (Telcel)

a) Switched termination rates of mobile users under the “calling party pays” system or “domestic calling party pays” system

$0.0156 per minute

b) Termination rate for the short message services (SMS) of mobile users $0.00299 per message


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power to coordinate the entire telecom industry avoids the flaws in COFETEL’s operation that derived from COFETEL’s subordinate status to the Ministry of Communications and Transports (hereinafter SCT). COFETEL’s subordinate status that gave rise to the so-called “double window” procedure requiring the cumulative approval of each of COFETEL and the Ministry in order to adopt regulatory decisions in the telecom sector. According to Art. 28 of the Mexican Constitution, IFT is “an autonomous body, with legal personality and its own patrimony, that has the objective of the efficient development of broadcasting and telecommunications, according to that provided in this Constitution and in the terms established by the laws.”

Further, IFT has full constitutional powers to (i) establish the national and regional frequencies for telecommunications, broadcastings, and radio that could be used through concessions; (ii) issue regulations and grant concessions for the telecommunications, broadcasting, and radio industries; (iii) approve any transfers of concessions; (iv) review the monopolistic issues in the industry with authority to order disinvestments; and (v) to be the authority in the matter of economic competition of the sectors of broadcasting and telecommunications, exercising in an exclusive form the powers contemplated for the Federal Commission of Economic Competition with the objective of eliminating the barriers to competition. Concerning interconnection matters, IFT is empowered to issue decisions based on a prior opinion of the Minister of Finance. The Minister of Finance’s opinion is not binding, thus avoiding a potential amparo claim asserting that although IFT’s decisions are protected against suspension during the pendency of a claim of amparo, the Minister of Finance’s decisions are not. The Minister of Finance’s non-binding opinion “…must be issued in a time period not greater than thirty days; such period [having] lapsed without issuing the opinions, IFT will continue the corresponding proceedings.”

The disappearance of the subordinate dependence on the SCT and of the associated inefficient “double window” process grants IFT full regulatory powers in the telecommunications sector, avoiding political pressure and delays in its regulatory policy activity.

First, the constitutionally independent character enjoyed by IFT has superseded the subordinate nature and the political dependence of COFETEL on the Ministry of Communications and Transports. Indeed, COFETEL’s legal status was that of a “de-concentrated body” directly related to the Ministry of Communications and Transportations (hereinafter SCT), which approved its budget and its actions, leaving COFETEL with at best

limited autonomy.

Second, the inefficient regulatory decision process, known as “double window”, where a) COFETEL gave an opinion, b) SCT reached a decision and c) COFETEL was responsible for its implementation had a detrimental

effect, which included: delaying decision-making processes, raising conflict of interest between policy formulation and regulatory functions, and in particular exposed every single step of the regulatory decisions (e.g. interconnection rates) to be challenged by amparo claims. Indeed, this lack of division between policy formulation and regulatory functions (double window) weakened COFETEL’s decision on interconnection matters, by multiplying the likelihood of appeals against any of the numerous steps in the procedure by a potential challenger. For instance, in setting interconnection rates there was both an administrative procedure of COFETEL and a separate administrative procedure of SCT that could each separately be appealed and immediately suspended by a potential challenger under the writ of amparo.

How did the writ of amparo formerly affect interconnection and the public interest? As opposed to COFETEL, the new telecommunications regulatory authority is now safeguarded from many legal challenges. Indeed, the recourse against actions taken by IFT, including interconnection and public interest ones, can only be made through a constitutional writ of indirect

The disappearance of the subordinate dependence on the SCT and of the associated inefficient “double window” process grants IFT full regulatory powers in the telecommunications sector, avoiding political pressure and delays in its regulatory policy activity.


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amparo, as no administrative recourse is possible. In addition, constitutional writs of amparo cannot be used to apply for injunctions to halt IFT actions.

In practice, access delayed is often access denied. Although the effect of a COFETEL and SCT interconnection action suspended by an amparo claim could have been resuscitated by a favorable court decision on the legitimacy of the regulatory action, “a suspension ensured that the incumbent obtained several years of higher revenue until the court took a decision.”

“In 2009 COFETEL issued a Technical Plan for Interconnection and Interoperability with the intention of giving operators greater certainty over the availability and pricing of interconnection and access services.” However, the leading operators in the market –

Telmex, Telcel and Telefonica – appealed the plan through a judicial injunction preventing its application to the companies. In this case, the Federal Court of Tax and Administrative Justice granted amparo against COFETEL’s interconnection decisions, disregarding the public interest argument put forward by COFETEL and harming drastically the new entrants’ commercial interest in having a predictable interconnection framework.

This past context drastically harmed new entrants into the telecommunications market that had to pay interconnection rates well above costs to complete calls and final consumers who had to pay higher telephone rate plans due to the lack of competition between telecom operators. Indeed, suspending COFETEL’s interconnection decisions, rather than ensuring that the regulator’s decisions remained in force until the appeal process has run its course, was harmful for both 1) the protection of the market’s competitiveness and 2) the public interest in the telecommunications sector.

In the Mexican telecommunications market, the writ of amparo was used to suspend COFETEL’s decisions on interconnection access and rates until the merits of the case were litigated. This outcome affected the Mexican economy by establishing barriers to entry of new competitors and damaging the welfare of its population through exceptional monopoly rents. Thus, to weaken the powers of the telecom authority by suspending its regulatory mandates on interconnection matters meant a support for the lack of

competition that resulted in low infrastructure development and high prices for final consumers due to the impossibility of new entrants to compete with the incumbent in the absence of fair interconnection conditions. Indeed, the aftermath related to the delay in assuring access to interconnection or fair interconnection rates due to the suspension of COFETEL’s decisions was that new entrants could not develop their network and offer low fees to their final consumers.

Suspending the decisions of the regulator related to cost-based interconnection prices or to interconnection access was against the public interest because final users had to pay high prices and enjoy a less developed telecommunication infrastructure. For instance, “in 2009 COFETEL established regulations for a framework on interconnection, which would have applied to all market players,” but the incumbent managed to achieve suspension of the framework to prevent it from being subjected to its conditions, thus achieving its goal of delaying the implementation of the plan because the plan was suspended during the several years of pendency of the amparo proceedings. As expected, the higher costs of interconnection applied to new entrants were reflected in telephone rate plans available to the final consumers. This situation, together with the lack of interconnection access that led to the loss of new entrants’ capacity to provide services, constituted weaknesses of a non-competitive market.

In sum, excessive recourse to amparo together with the grant of suspension of the challenged decision during the pendency of the amparo action harmed both the commercial interest of new entrants to receive interconnection as well as the interest of consumers to pay low rates. Hence, this abusive use of amparo negatively impacted the public interest to develop an efficient telecom infrastructure and provide the best telecommunication service for the society.

The End of the Regulatory Authority’s Decisions Suspension During the Pendency of a Claim of Amparo: From COFETEL to IFT The fundamental innovation from the Mexican Telecommunications and Antitrust Constitutional Legal Framework in this regard, is that IFT’s decisions on


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interconnection may be challenged only through the procedure of indirect amparo, and their effectiveness will not be the object of suspension during the pendency of any challenge. This legal achievement was built on prior regulatory and judicial actions such as: COFETEL enjoyment of IFT powers during the implementation process, a majority interpretation of the Plenum of Mexico’s Supreme Court related to the FTL (repealed by the new TBL on August 13, 2014) in accordance with the public interest concern, and the Plenary Chamber of Mexico’s Supreme Court rulings that set the main characteristics of the regulatory authority interconnection decisions which would later be incorporated in the Telecommunications Constitutional Decree.

IFT is the phoenix rising from COFETEL’s ashes. Indeed, IFT takes up an innovation of Mexican law achieved through significant struggles in the final period of COFETEL, its predecessor agency. Only in its last years of COFETEL’s existence were its interconnection decisions not subjected to suspension by amparo recourses.

COFETEL: the Mexican telecommunications regulatory body during the implementation process of IFT COFETEL was responsible for solving disputes between operators concerning interconnection matters until the new regulatory authority, IFT, was fully constituted. During the transition to IFT, COFETEL enjoyed the IFT’s interconnection decisions’ status of not being object to suspension under amparo recourses during the pendency of any challenge. Indeed, the transitory Art. 7 of the Telecommunications Constitutional Decree established that COFETEL had the duty to exercise all the powers stated in the Decree until full implementation of the new Federal Institute of Telecommunications.

The legal bases supporting this result were the Telecommunication Constitutional Decree, the transitory Article 7 of the same Decree, and Art. 28 of the Mexican Constitution:

- Pursuant to the Telecommunication Constitutional Decree of June 11, 2013, a new telecommunication regulatory body (the Federal Institute of Telecommunications, known as IFT) replaced the old one (COFETEL) with much powerful regulatory powers.

- In addition, transitory Article 7 of the Telecommunications Constitutional decree granted COFETEL the duty to exercise all the powers stated in the decree until IFT would have been implemented. In those powers, there was a provision of no suspension for decisions related to interconnection. Consequently, COFETEL enjoyed the same protection on its interconnection decisions as IFT.

- Also, the Mexican Constitution, restated to reflect the provisions of the Telecommunications Constitutional Decree, recognized the constitutional protection of not being subjected to suspension by amparo recourses during the pendency of any challenge to COFETEL’s interconnection decisions. If as stated in Art. 28 sec. VII of the Mexican Constitution,

“The general norms, acts or omissions of…the Federal Institute of Telecommunications (IFT) may be impugned uniquely through the process [jucio] of indirect amparo and will not be the object of suspension”,

the result of a comprehensive reading of the Telecommunications Constitutional Decree in agreement with the Mexican Constitution supported the interpretation of the impossibility of a COFETEL’s interconnection decision suspension by “amparo” until the appeal ran its course. Likewise, if as is stated in transitory Article 7 of the Telecommunications Constitutional Decree, COFETEL had the authority to exercise all the powers assigned to IFT (e.g. including no suspension of interconnection decisions) until IFT would have become operative; it was a logical consequence that suspending COFETEL’s decisions on interconnection matters was unconstitutional because it contradicted Art. 28 of the Mexican Constitution. Indeed, COFETEL had been exercising IFT’s powers assigned by decree as a default rule until IFT became operational, and during that period any suspension of COFETEL’s interconnection decisions was the same as the suspension of IFT’s interconnection decisions.

The 2011 Plenary Mexican Supreme Court constitutional reading of the FTL in accordance with the public interest concern. Article 28 of the Mexican Constitution, as amended effective 2013, prevents the application of stays (amparos) to


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interconnection rate decisions issued by IFT. This provision gives definitive stability to the majority view of the Plenary Chamber of Mexico’s Supreme Court that in May 2011 granted protection to COFETEL’s interconnection decisions from the possibility to be subject to suspension during the pendency of an amparo claim on the ground that such a suspension would have been against the public interest.

In Mexico, as in the US, the judicial power is distributed between independent but interrelated systems of federal and state courts. The Mexico’s Supreme Court, the top of the three-tier federal court system structure, works as a constitutional court.

“The Mexico’s Supreme Court (herafter SCJN) is composed of a Chief Justice (Presidente de la Suprema Corte) and ten associate justices (ministros) who are organized in into two chambers (salas) of five justices each. Each chamber of the court adjudicates cases according to subject matter. … All other cases within the Court’s jurisdiction, including special constitutional disputes and suits challenging the constitutionality of certain governmental actions, are handled by the full Court sitting in plenary session (sesionado en pleno). Decisions by the Court when sitting en banc and by each chamber are by majority vote, unless otherwise specified by law.”

The Mexican legal system has unique procedures to defend the supremacy of the Constitution over conflicting laws and governmental acts. One of these is the juicios de amparo procedure leading to the Plenary SCJN’s decision on May 2011. The writ of amparo “… offers federal judicial protection from improper action under color of governmental authority to the plaintiffs who seek it.” Federal amparo jurisdiction derives from articles 103 and 107 of the Mexican Constitution. Art. 107, together with other federal laws, establish the jurisdiction of the SCJN, circuit courts, and district courts over different types of amparo actions. In the Plenary SCJN’s decision on May 2011, the Plenary was acting as a constitutional court under

a “contradiction of thesis jurisdiction” (jurisprudencia por contradicción de thesis) on reference of a question submitted by the Federal Décimo Tercer Tribunal Colegiado en Materia Administrativa del Primer Circuito acting on an indirect amparo claim on revision. Indeed, according to Art. 107 of the Mexican Constitution sec. XIII, “when…the Collegiate Tribunals of one same circuit with different specialization sustain contradictory opinions, (the Collegiate Tribunals) may denounce the contradiction before the Supreme Court of Justice, with the objective that … (the Supreme Court of Justice) decides on the opinion that must prevail.” This procedure is intended to promote uniformity in the constitutional interpretation of laws and regulations.

In the Plenary SCJN decision on May 2011, a contradiction of thesis related to an indirect amparo claim on review related to interconnection rates - between two collegiate tribunals belonging

to the same first circuit with different specializations - led to a denouncement of the contradiction before the Plenary of the SCJN. Indeed, the Décimo Tercer Tribunal Colegiado en Materia Administrativa del Primer Circuito denounced the contradiction of thesis before the SCJN, leaving to the Supreme Court the duty to decide whether the suspension of COFETEL’s interconnection rates subject to an indirect amparo claim was against the social interest or the public order.

In line with the view expressed by six of the eleven Justices of the Plenum of Mexico’s Supreme Court in the decision on interconnection prices issued on May 2011, COFETEL’s interconnection decisions were not subject to suspension during the pendency of amparo proceedings because any such suspension would have been against the public interest as described in Art. 1 and Art. 42 of the Federal Telecommunications Law (repealed by the TBL on August 13, 2014). Consequently, the suspension of the legal injunction on COFETEL’s interconnection decisions could not have been provided because it would have been in contrast with the requirements set by Art. 128 sec. 2 of the Ley de Amparo as amended as of April 2, 2013, which are set up to avoid prejudice to the public interest. In compliance with the provisions established in the FTL (repealed by the

leaving to the Supreme Court the duty to decide whether the suspension of COFETEL’s interconnection rates subject to an indirect amparo claim was against the social interest or the public order.


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TBL on August 13, 2014), the Mexican State had the authority to regulate the interconnection rates by means of COFETEL to pursue the public interest. Hence, any delay in the effectiveness of COFETEL’s decisions regarding interconnection rates through the claim of amparo would harm the public interest goals that the Mexican State wanted to pursue.

From Justice Sergio A. Valls Hernández point of view, suspension of COFETEL’s interconnection rate decisions undermined the authority of the Mexican State in the telecom sector to foster fair competition and to promote adequate coverage against the public interest objectives established in the provisions of the FTL (repealed by the TBL on August 13, 2014). In addition, Justice Jorge Mario Pardo Rebolledo argued that Art. 1 of the FTL accorded a public interest character to the Federal Telecommunication Law Act’s provisions and that COFETEL’s interconnection price decisions enjoyed this character. As stated in Art. 42 and Art. 9-A of the FTL, “licensees shall reach an agreement on interconnection within 60 days on any request, and if agreement is not reached COFETEL (at present, IFT) shall reach a decision within 60 days.” Hence, COFETEL’s decisions on interconnection prices taken on behalf of the Ministry of Communication and Transports had a public interest character that protected them from suspension related to “amparo” claims.

As ruled by the Court, if Art. 42 and Art. 9-A of the FTL assigned to COFETEL (at present, IFT) the power to solve issues related to interconnection prices between competitors on behalf of the Ministry of Telecommunications and Transports and, at the same time, article 1 of the FTL states that the Federal Telecommunications Law provisions are of public interest, then the COFETEL’s decisions on interconnection rates (at present, IFT’s decisions on interconnection rates) were also of public interest.

Consequently, COFETEL’s decisions on interconnection could have not been suspended under “amparo” in agreement with the Art. 128 sec. 2 of the Ley de Amparo, which did not allow to suspend an action during the pendency of an amparo proceeding when such suspension would have been against either the public interest or the public order.

In conclusion, the amended Art. 28 of Mexico’s Constitution restated the path adopted by the majority of the Plenary Chamber of Mexico’s Supreme Court acting under a “jurisprudencia por contradicción” procedure on whether a suspension of COFETEL’s interconnection decision was constitutional in relation to the prejudice against the public interest. Moreover, the constitutional amendment adds constitutional value to the result achieved by the ruling of the Plenary of the Supreme Court. It should be noted that, although the Plenary of the SCJN was clear in its conclusion that any stay during the pendency of an amparo proceeding challenging the telecom regulator’s decision would be contrary to the public interest character of such decision, the Plenary of the SCJN’s ruling enjoyed only the limited precedential character typical of a court in a civil law jurisdiction. Indeed, there is no general rule of stare decisis in Mexico. Although the lack of stare decisis, Mexico’s SCJN does have a concept of precedent binding for lower state and federal courts, known as jurisprudencia, only when either 1) five consecutive judgments of the SCJN apply the same rule by a vote of at least eight of eleven ministers for cases decided in plenary session or four of five ministers in cases decided by salas ( judgment known as jurisprudencia obligatoria),or 2) judgments of the SCJN resolve conflicts arising between chambers of the SCJN, the Circuit Plenaries, and the Collegiate Tribunals (jurisprudencia por contradicción). Hence, unless five consecutive and consistent SCJN’s judgments about the same legal issue are issued by the Court with the majority cited above or a conflict of thesis arises, SCJN’s rulings may be persuasive, but do not achieve the status of having to be followed by lower state and federal judges in deciding subsequent cases. In our case, the Plenary of the SCJN’s decision was binding only for lower courts because it was a conflict of thesis resolution (jurisprudencia por contradicción). Hence, the future Plenary of the SCJN’s decisions on similar legal disputes did not have to follow the May 2011 decision as a binding precedent because the Plenary of the SCJN does not bind itself. Indeed, the Plenary of the SCJN might have overturned the May 2011 decision simply by changing its mind through a subsequent decision on a similar dispute. Furthermore, unlike the declaration of the constitutionality of a law by a US court, a Mexican judge’s determination whether to grant amparo


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against alleged unconstitutional acts benefits only the parties in the amparo action because it does not invalidate the relevant law or other acts with general effects. Consequently, the incorporation of the Court’s holding in a clause of the Constitution values the substance of the holding as clearly binding on all Mexican authorities whether legislative, executive, or judicial.

Plenary Chamber of Mexico’s Supreme Court decision reports on interconnection issues: Amparo en revision 318/2011 and Amparos en revision 426/2010 y 318/2011 03/07/2013. Recent rulings of the Plenum of Mexico’s Supreme Court accorded judicial deference to COFETEL’s interconnection decisions, granting them the status of not being suspended until the end of the dispute. Legal principles expressed in those decisions clarified the legal evolution that led to the draft of the Mexican Constitution amendment that prevents suspension of IFT’ regulatory decisions during the pendency of amparo proceedings.

Report of the Mexican Supreme Court decision on the Amparo en revision 318/2011. In May 2011, Mexico’s Supreme Court (hereafter SCJN) issued a significant decision, which stated that in the context of decisions by COFETEL on interconnection prices, these decisions could remain in effect until an appeal in Court led to the decision being rescinded. The general overview regarding the Plenary’s SCJN May 2011 decision, showed in sec. ii. above, is stressed here to better focus on the policy reasons leading the Plenary of the SCJN to recognize to COFETEL’s interconnection decisions the status of not being suspended during the pendency of an amparo claim.

The outcome of the SCJN’s decision 318/2011 was the solution of the contradicting judicial conflict on the suspension of COFETEL’s interconnection decisions arisen between the Décimo Tercer Tribunal Colegiado en Materia Administrativa del Primer Circuito related to the review of amparo R.A. 38/2010-204 and the Noveno Tribunal Colegiado en Materia Administrativa del Primer Circuito related to the review of R.I. 458/2008 and R.I. 474/2006. Indeed, the SCJN resolved the contradiction (jurisprudencia por contradicción) of the former collegiate circuit courts thesis related to whether the suspension of the decisions made by COFETEL on interconnection

obligations or interconnection rates should be seen as contradicting the public interest and the public order, and therefore, whether to suspend these COFETEL interconnection mandates.

On the one hand, the Décimo Tercer Tribunal Colegiado en Materia Administrativa del Primer Circuito overruled the amparo granted against a COFETEL administrative decision which set interconnection conditions that were not agreed between private operators in the judgment 1107/2009. From the Court’s point of view, COFETEL’s interconnection conditions decisions were legal because they were in compliance with the Art. 87 sec. III of the Administrative Procedure Law. According to the former legal framework, the Court foresaw in the suspension of the regulatory decision a possible harm for social interest and the public order.

On the other hand, the Noveno Tribunal Colegiado en Materia Administrativa del Primer Circuito did not consider an eventual suspension of COFETEL’s decisions on interconnection rates as a prejudice for the social interest and the public order. Consequently, when deciding the appeal RI 458/2008, this court granted amparo and suspended COFETEL’s decision on interconnection rates applying the old Art. 124 sec. II of the Law of Amparo (at present, Art. 128 Ley de Amparo). According to the old Art. 124 sec. II of the Law of Amparo, the suspension of the administrative act will be granted every time that a prejudice to the social interest or the public order does not exist.

By a majority of six out of eleven votes, the Plenum of the SCJN decided that, whenever private telecommunications operators did not reach an agreement related to interconnection access or interconnection rates, COFETEL’s subsequent decisions on interconnection obligations and interconnection rates were administrative acts that enjoyed a presumption of validity and legality and were not subject to suspension.

According to the Plenary of the SCJN, COFETEL’s decisions were expression of the Constitutional power of the Mexican State to regulate the telecommunications sector. Hence, COFETEL’s interconnection decisions tended to perform the goals set by the Federal Telecommunications Law such as supporting the presence


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of new operators and services in the telecommunications market, promoting fair competition between telecom operators, providing adequate social coverage and assuring top conditions in the viability of the telecommunication services for the benefit of the society.

For the reasons explained above, the SCJN issued that granting amparo would have been against the social interest and the public order. In fact, suspending COFETEL’s interconnection decisions would affect competition in the market between telecommunications operators and may be considered harmful for final consumers that were going to bear the lack of a competitive telecommunication market paying high fees.

To conclude, as shown by the two decisions discussed above, whether or not to grant amparo against COFETEL’s interconnection decisions depended on the urgency of avoiding a delay in their effectiveness simply because it may have affected the social interest and the public order. As a matter of fact, the only way to save COFETEL’s decisions on interconnection from granting amparo was to find a social interest or a public order prejudice reaching out from that suspension in compliance with the Art. 87 of the Ley Federal de Procedimento Administrativo and the old Art.124 of the Ley de Amparo.

For this reason, the main legal issues in the Mexico’s Supreme Court decision 318/2011 were: 1) whether suspending COFETEL’s decisions on mandatory interconnection obligations was prejudicial to the social interest and the public order; and 2) whether suspending COFETEL’s decision on interconnection rates was prejudicial to the social interest and the public order.

First, the SCJN ruled that it was not possible to make a distinction between mandatory interconnection obligations and interconnection rates for analyzing the effect of suspension. This was because both the access to interconnection and the rate of the interconnection were essential to not affect the social interest of the final consumer (i.e. mobile telephone owner). For instance, a mobile-telephone owner was not only interested in having interconnection with other mobile-telephone owners who were customers of different mobile operators (guarantee interconnection access), but, most important, a customer is also interested in having a strong competition between

mobile operators in order to choose the lowest mobile rate plan. One of the ways to promote fair competition and low mobile rate plans was to assure low interconnection rates from the incumbent to new entrants and Other Licensed Operators (hereinafter OLOs) in the telecommunication sector. Indeed, a suspension of a COFETEL’s interconnection decision that tried to impose lower rates meant that new entrants and OLOs had to pay interconnection rates well above costs to complete calls. This undermined considerably their ability to expand in the market and to offer competitive mobile rate plans with harm for the social interest of the final consumer (i.e. mobile-telephone owner). In addition, a strict interpretation of Art. 42 of the Federal Telecommunication Law (repealed by the TBL on August 13, 3014) showed that when private parties did not reach an agreement on interconnection conditions, COFETEL had the duty to solve the issue regardless of whether it was interconnection access or interconnection rates. In conclusion, the court accepted the lack of distinction between mandatory interconnection obligations and interconnection rates with a majority of six votes out of eleven. Consequently, the problem of granting amparo on COFETEL’s interconnection decisions was treated as a unique legal issue.

Secondly, according to Justice Luis María Aguilar Morales, both COFETEL’s decisions related to mandatory interconnection obligations and interconnection rates were affecting the final consumer, so suspending COFETEL’s decisions on those matters would have been against the public interest in contrast with the provision of the old Art. 124 of the Ley de Amparo (at present, Art. 128 of the Ley de Amparo). Following the Justice’s reasoning, it was not possible to make a distinction between suspending a mandatory interconnection obligation decision and suspending a decision fixing rates of interconnection as the former was affecting a social interest and the latter was just a commercial agreement between telecommunication operators without indirect effects on the final consumers. Indeed, returning to the example of the mobile-telephone owner, interconnection access and interconnection rates were intrinsically related to the final goal of assuring the best public service for consumers. Consequently, it was not possible to grant amparo against COFETEL’s


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interconnection decisions because they aimed to pursue the social interest and the public order requirements set by the old Art. 124 sec. 2 of the Ley de Amparo (at present, Art. 128 of the Ley de Amparo).

Next, the SCJN’s reasoning moved to analyze the Mexican State power on the telecommunications sector from a constitutional and statutory perspective, finding that the Mexican State sovereignty in this field allowed the government to make interconnection decisions to pursue public interest by means of COFETEL’s mandates and that a suspension of those decisions would have been in contrast with the old Art. 124 sec. 2 of the Ley de Amparo (at present. Art. 128 of the Ley de Amparo).

According to Justice José Ramón Cossío Díaz, the Mexican Federal Constitution provides that the concession and exploitation of a state ownership as the frequency spectrum by licensees shall always respect the conditions of public interest, in which interconnection access and rates are included. Furthermore, an interpretation of Art. 42 (at present, art. 129 TBL) of the Federal Telecommunications Act (repealed by the TBL on August 13, 2014) shows that the Mexican State has regulatory power to fix the interconnection rates whenever the licensees do not reach an agreement within 60 days.

According to the prior Art. 42 FTL (at present, art. 129 TBL), the Ministry of Communications and Transportation reached its decision on interconnection issues by means of COFETEL as provided by Art. 9-A FTL, which assigned to the old telecommunications regulatory authority, COFETEL, the power to fix the interconnection conditions that had not been agreed between the licensees of the public telecommunications networks.

Because Art. 1 of the FTL defines the Federal Telecommunications Law and its dispositions of public interest, it could have been implied that also COFETEL’s interconnection decisions, which were in compliance with the FTL articles, had a public interest nature too. Therefore, suspending COFETEL’s interconnection decisions, as provided by Art. 1 of the FTL, would have affected the public order and it would not have satisfied the requirement provided by the old Art. 124 of the Ley de Amparo (at present, Art. 128 of the Ley de Amparo).

Finally, the Court discussed the regulation of the

telecommunications sector provided in the Mexican Constitution as assuring the public interest by fostering fair competition and defending fundamental rights and it explained how a suspension of COFETEL’s interconnection decisions might have affected both. Firstly, Justice Guillermo I. Ortiz Mayagoitia, asserted that one of the main goals of the FTL (repealed by the TBL on August 13, 2014) is developing a fair competition in the telecommunications market in compliance with the Art. 28 of the Mexican Constitution, and that COFETEL’s interconnection decisions were the main tool to assure fair and non-discriminatory interconnection rates that lead to competitiveness in the telecommunication market. Secondly, Chief Justice Juan N. Silva Meza argued that in Art. 28 of the Mexican Constitution is written that one of the duties of telecommunications is defending fundamental rights such as access to information, freedom of speech, education, democratic participation and integration of indigenous communities. For these reasons, COFETEL’s interconnection decisions on access and rates were important to develop the fundamental rights shown above and, as an expression of the public interest, those decisions should prevail over the private interest of the frequency spectrum licensees that did not want to reach an interconnection agreement with others.

The constitutional role of the State in the telecommunications sector, as expressed by COFETEL’s interconnection decisions, was cardinal to the defense of fundamental rights and to the develop of competition and, therefore, it could not be subjected to suspension. In fact, suspending COFETEL’s interconnection decisions meant undermining the competitiveness and the fundamental rights in the telecommunications market against Mexican constitutional provisions.

In conclusion, the Mexican State’s constitutional power to regulate the telecommunications sector for public interest reasons such as defending fundamental rights, protecting final consumers, and promoting fair competition led the Plenary of the SCJN to rule against granting amparo related to COFETEL’s interconnection mandates. Indeed, a suspension of COFETEL’s interconnection rates decisions during the pendency of an amparo claim would delay and frustrate the effectiveness of regulatory measures taken to


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promote the public interest in the telecommunication sector until a final decision on the amparo claim is made. For instance, starting in 1998 the Mexican telecommunications incumbent Telmex succeeded in delaying the effectiveness of a regulatory authority decision affirming that Telmex had substantial power in the telephony market for 10 years, through filing a series of amparos and appeals, until a final judicial decision on the case. Because COFETEL’s interconnection mandates were expressions of the former constitutional regulatory authority, the Plenary of the SCJN saved COFETEL’s interconnection rate decisions from being subject to a long period of suspension related to the amount of time required by a claim of amparo to reach its final judicial outcome.

Report of the Mexican Supreme Court decision of March 7, 2013 on the amparos en revision 426/2010 and 318/2011. The SCJN decision on March 2013 established several legal criteria that led to the recognition of the constitutionality of the FTL (repealed by the TBL on August 13, 2014) and the legality of COFETEL’s interconnection decisions, granting them judicial deference against suspension and strengthening the role of COFETEL as the regulatory authority in the Mexican telecommunications.

The outcome of the main legal issues addressed by the SCJN in this decision was:

The Constitutionality of Art. 9-A, sec. X of the FTL (repealed by the TBL on August 13, 2014) that gave power to the regulatory authority to determine the interconnection conditions when parties cannot find an agreement.

COFETEL had the power to fix the interconnection rates and other economic conditions when the licensees could not reach an agreement.

The discretional power of COFETEL in its regulatory decisions was subjected to the legal principles established by law.

COFETEL’s discretional decisions that were gradually reducing the interconnection rates as well as the possibility to reduce call traffic in compliance with the principles of the FTL (at present, TBL) were legal.

Conclusion

In sum, the rulings of the Plenum of Mexico’s Supreme Court restated the legality of COFETEL’s interconnection decisions and reinforced COFETEL role as the undisputed regulator in the Mexican telecommunications sector. These rulings have functioned as a trailblazer for the telecommunications constitutional reform that recognizes powerful and effective regulatory tools to the new Mexican telecommunications regulatory authority, IFT.

New Federal Telecommunications and Broadcasting Law The last step of the deep transformation of the telecommunications and broadcasting industries that has taken place in Mexico starting from the 2013 Constitutional amendment has been achieved with the adoption of the New Federal Telecommunications and Broadcasting Law, published July 14, 2014. The new Federal Telecommunications and Broadcasting Law (hereafter TBL) has repealed both the FTL and the Federal Radio and Television Law starting from August 13, 2014. The TBL implemented and expanded the Constitutional amendment concerning the telecommunications and antitrust legal framework adopted in June 2013. The TBL, among other things, 1) states IFT’s powers, 2) establishes access and interconnection procedures, and 3) defines a preponderant economic agent’s obligations along with its asymmetric regulation.

IFT’s Powers Following the legal framework already set in Art. 28 of the Mexico’s Constitution by the 2013 Constitutional amendment, Art. 7 of the TBL restated Mexico’s Constitutional provisions such as IFT’s autonomy through its juridical personality and own patrimony, and IFT’s promotion and regulation role with the objective of the efficient development of all broadcasting and telecommunications matters, including IFT’s exclusive exercise of authority in antitrust matters affecting both markets. In particular, IFT will exercise its exclusive authority affecting antitrust matters under its jurisdiction with respect to the provisions of Art. 28 of the Mexico’s Constitution, the TBL, the Federal Competition Law, and other applicable regulations.

Access and Interconnection


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The TBL states in Art. 129 the rules to achieve network access and set interconnection rates between telecom operators following a two step procedure: 1) like in Art. 42 of the repealed FTL, holders of licenses to public telecommunication networks shall interconnect their networks, and to this end shall reach an agreement within 60 calendar days from when any may request it; and 2) if said term has elapsed and the parties have not executed an agreement, the interested party shall request IFT to rule on the interconnection rates, conditions, and terms not agreed with the other party.

The proceeding before IFT related to interconnection matters can be terminated by either a) IFT’s decision on interconnection matters issued no later than 30 working days from the parties’ deadline to make allegations (Art. 129 sec. VI), or b) the parties’ agreement ratified before the IFT before IFT issues a decision on the dispute. According to Art. 129 par. 2 sec. IX, IFT’s decision on interconnection rates will be effective no later than 30 days starting from the day after either i. notification of IFT’s decision or ii. the parties’ ratification of an agreement before the IFT. Moreover, IFT enjoys the power to apply sanctions against telecom operators that do not comply with either IFT’s interconnection rate decisions or parties’ agreements ratified before IFT.

Finally, as explained throughout the paper, IFT’s interconnection decisions can be appealed only with a claim of “indirect amparo” that does not suspend the regulatory decision during the pendency of the amparo proceeding before the court.

Preponderant Economic Agent’s Obligations and Asymmetric Regulation The TBL confirmed IFT’s ability to impose asymmetric obligations on any operator found to be preponderant in each of the telecommunications or broadcasting sectors. Article 262 of the TBL qualifies as preponderant economic operators those who hold a national participation in the telecommunications or broadcasting sectors that exceeds 50% of users, subscribers, audience, traffic on its networks or used capacity thereof.

Among the most important obligations IFT can impose on preponderant telecom operators are the following: a) obligations to provide interconnection on a non-

discriminatory basis, b) unbundling local loop services, c) infrastructure sharing, d) obligation to obtain IFT’s prior approval for all service pricing to consumers.

As already shown in IFT’s decisions on March 2014, IFT has the power to determine preponderant economic operators in the telecom and broadcasting sectors and impose on them asymmetric interconnection rates pre-fixed by IFT. First, in the decision of March 6, 2014, IFT determined Telmex, Telnor, and Telcel as preponderant economic operators in the telecom sector. Second, in the decision of March 26, 2014, the plenary of IFT set the asymmetric interconnection rates applying to telecom preponderant economic operators that are in effect from April 6 until December 31, 2014. However, the new Federal Telecommunications and Broadcasting Law goes further than IFT’s March 2013 asymmetric interconnection decision by stating in Art. 131 sec. a) that a preponderant economic operator does not have the right to charge anything for termination of traffic in its own network. Therefore, calls of all the Mexican non-preponderant operators completing in the preponderant operators’ network (Telmex, Telcel, and Telnor) are not subject to interconnection charges at all.

Although the purpose of Art. 131 of the TBL is to unravel the highly concentrated Mexican telecom market and to foster competition by imposing a zero interconnection rate for calls completing in the preponderant operators’ network, the provision of Art. 131 of the TBL may be subject to constitutional challenge. Indeed, even though Art. 131 of the TBL seems to follow OECD best practice that recognizes innovation and greater flexibility in business models where the termination rates are set low or at zero, it subtracts from IFT the constitutional power of imposing measures on preponderant economic operators to avoid results affecting competition – including asymmetric interconnection rates – assigned to the new regulatory authority by Mexico’s Constitution. Therefore, Art. 131 of the TBL may violate IFT’s autonomous constitutional power to set asymmetric interconnection rates on preponderant economic operators stated in sec. IV of the transitory Art. 8 of the Constitutional Decree on Telecommunications of June 11, 2013. IFT’s constitutional power, indeed, has already been exercised by the new


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regulatory authority through setting the asymmetric interconnection rates applying to preponderant economic operators in the decision of March 6 and 26, 2014.

In order to understand more fully the application of Art. 131 of the TBL, the difference between a “preponderant economic agent” and an “agent with substantial power” in the telecom market should be appreciated. The former (preponderant economic agent) is determined by Art. 131 par. 2 of the TBL to be those who hold a national participation in the telecommunications or broadcasting sectors that exceeds 50% of users, subscribers, audience, traffic on its networks or used capacity thereof, and is subject to a mandatory statutory application of a zero interconnection rates for calls originating from competitors’ customers and completing in the preponderant economic operator’s network. The latter (agent with substantial power), falling below the quantity requirements set in Art. 131 par. 2 of the TBL but still handling a substantial power in the telecom sector, is subject to IFT’s assessment of either 1) continuing to apply the original zero interconnection rate for calls originating from competitors’ customers and completing in the preponderant economic operator’s network (as in Art. 131 sec. a) of the TBL), or 2) fixing a new asymmetric interconnection rate according to Art. 131 par. 2-3-4 sec. b) of the TBL. Hence, while the procedure of letting IFT free to decide either whether imposing a zero interconnection rate or fixing asymmetric interconnection rates on agent with substantial power respects IFT’s constitutional powers to encourage competition by imposing fair or cost-based asymmetric interconnection rates, the same may not be asserted for the mandatory statutory zero interconnection rate applied on preponderant economic agent through Art. 131 sec. a) of the TBL. Indeed, the latter raises possible grounds of unconstitutionality with respect to transitory Art. 8 of the Constitutional Decree on Telecommunications - stating IFT’s power to set asymmetric regulation against preponderant economic agents in the telecom sector including fixing asymmetric interconnection rates – by imposing a political influence that it is not necessarily related to market consideration of efficiency.

As a result of the new, strong regulatory powers enjoyed by IFT to set access obligations against dominant operators in the telecom sector as well as the new TBL provision setting

zero interconnection rates for calls completing in the network of dominant operators, the América Móvil Group – who owns both the Mexican dominant operators Telmex and Telcel – has declared is intention to divest subscribers and assets to reduce its market share below 50% in order to avoid the stringent dominant operators asymmetric regulation set by the new Federal Telecommunications and Broadcasting Law. Indeed, the América Móvil’s board of directors advised through a press release on July 8, 2014 that it “resolved to authorize measures to reduce its national market share in the Mexican telecommunications market under fifty percent in order to cease being a “preponderant economic agent,” under the terms of the Constitution of the United Mexican States and its implementing legislation.”

Conclusion “We are living a historic new phase in the Mexican telecommunications sector, which began with the last year’s constitutional reforms,” said former telecom regulator Mony de Swaan. “We are seeing the beginning of the end of a period of almost complete dominance of Mr. Slim.” The new TBL seems to be the cure for the highly concentrated Mexican telecom market because, along with the Telecom Constitutional reform, it is capable of attracting new telecom operator entrants, and fostering competition to the benefit of Mexican consumers. * Laurea Magistrale in Giurisprudenza 2012, University of Rome I “La Sapienza”. Certificate on Communications and Media Regulation 2013, European University Institute. LL.M., 2014, UCLA School of Law. Trainee lawyer 2013, Avvocatura Generale dello Stato. 1.Ley de Amparo [LA] [Legal Protection Law], as amended, DIARIO OFICIAL DE LA FEDERACÍON [DO], el 2 de Abril de 2013 (Mex.). See Stephen Zamora, José Ramón Cossió, Leonel Pereznieto, José Roldán-Xopa & David Lopez, MEXICAN LAW 213 (2004). 2.For further definitions of “direct” and “indirect” amparo, see Zamora et al., supra note 1 at 266-268: “Indirect amparo…encompasses all two-stage procedures that begin at the District Court level and move up either to the Circuit Court, or in some instances, all the way up to the Supreme Court… By means of indirect amparo, challenges can be lodged against the constitutionality of legal provisions that apply to the general population (amparo contra leyes), against most administrative decisions resulting from proceedings other than a trial (amparo administrative and some types of agrarian amparo), and against


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arbitrary detention (amparo habeas corpus)…Direct amparo…encompasses all processes that must be heard in a single stage before panels of Circuit Court judges. This type of amparo is the process designed for individuals to assert their right to judicial protection against a decision of any Mexican court at any level of government, local, state, or federal, in either criminal, civil, administrative, or labour matters, and is also known as “judicial amparo” (amparo judicial).” 3.Zamora et al., supra note 1 at 213. 4.47 C.F.R. § 51.5 (2013). 5.OECD (2012), OECD REVIEW OF TELECOMMUNICATION POLICY AND REGULATION IN MEXICO 65, OECD Publishing, available at http://dx.doi.org/10.1787/9789264060111-en. 6.For history leading to the creation in Mexico of the State monopoly in the telecommunications sector, see Patrick Del Duca, The rule of law: Mexico’s approach to expropriation disputes in the face of investment globalization, 51 UCLA L.R. 65 (2003) 7.Decreto por el que se reforman y adicionan diversas disposiciones de los artículos 6o., 7o., 27, 28, 73, 78, 94 y 105 de la Constitución Política de los Estados Unidos Mexicanos, en materia de telecomunicaciones [Decree to reform and add various provisions to the Political Constitution of the Mexican United States in the areas of telecommunications], DIARIO OFICIAL DE LA FEDERACÍON [DO], 11 de Junio de 2013 (Mex.). 8.Id. 9.Ley Federal de Telecomunicaciones y Radiodifusión [LFTR] [Telecommunications and Broadcasting Law], as amended, Diario Oficial de la Federacíon [DO], 14 de Julio de 2014 (Mex.). 10.Comunicado de Prensa No. 13/2014 [Press Release No. 13/2014], Instituto Federal de Telecomunicaciones, El Pleno del IFT determina las tarifas asimétricas por los servicios de interconexión que cobrará el agente económico preponderante (Mar. 31, 2014), available at http://www.ift.org.mx/iftweb/2014/03/el-pleno-del-instituto-federal-de-telecomunicaciones-determina-las-tarifas-asimetricas-por-los-servicios-de-interconexion-que-cobrara-el-agente-economico-preponderante/. 11.Estatuto Organico del instituto Federal de Telecomunicaciones [EOIFT] [Organic Statute], Diario Oficial de la Federacíon [DO], 23 de Septiembre de 2013 (Mex.). 12.Instituto Federal de Telecomunicaciones, Acuerdo Mediante el cual el Pleno del Instituto Federal de telecomunicaciones determinas las tarifas Asimétricas por los servicios de Interconexión que cobrará el agente económico preponderante [Agreement by which the Plenary of IFETEL Committee determined the Asymmetric Interconnection Rates to Apply to the Preponderant Economic Agent], 4 (Mar. 26, 2014), available at http://www.ift.org.mx/iftweb/wp- content/uploads/2014/03/P_IFT_260314_17.pdf. 13.Ley Federal de Telecomunicaciones y Radiodifusión [LFTR] [Telecommunications and Broadcasting Law], as amended, Diario Oficial de la Federacíon [DO], 14 de julio de 2014 (Mex.).

14.Ley Federal de Telecomunicaciones [LFT] [Telecommunications Law], as amended, Diario Oficial de la Federacíon [DO], 16 de Enero de 2013 (Mex.) (repealed 2014). 15.Ley Federal de Radio y Televisión [LFRT] [Radio and Television Law], as amended, Diario Oficial de la Federacíon [DO], 9 de abril de 2012 (Mex.) (repealed 2014). 16.Decreto, supra note 7, at transitory Art. 6. 17.Patricia Laya, America Movil, Televisa Deemed Dominant in Initial Finding, Dec. 5, 2013, available at http://www.bloomberg.com/news/2013-12-04/mexico-regulator-said-to-find-america-movil-televisa-dominant.html. 18.Estatuto Orgánico del Instituto Federal de Telecomunicaciones [EOIFT] [Organic Statute], Diario Oficial de la Federacíon [DO], 23 de Septiembre de 2013 (Mex.). 19.Instituto Federal de Telecomunicaciones, De la Sesiòn del Pleno del Instituto Federal de telecomunicaciones en su V Sesiòn Extraordinaria del 2014, Celebrada el 6 de Marzo de 2014 [Plenary session of IFT Committee at its V Extraordinary Session] (Mar. 6, 2014), available at http://apps.ift.org.mx/publicdata/P_IFT_EXT_060314_76_Version_Publica_Hoja.pdf. 20.Instituto Federal de Telecomunicaciones, Acuerdo Mediante el cual el Pleno del Instituto Federal de telecomunicaciones determinas las tarifas Asimétricas por los servicios de Interconexión que cobrará el agente económico preponderante [Agreement by which the Plenary of IFT Committee determined the Asymmetric Interconnection Rates to Apply to the Preponderant Economic Agent], (Mar. 26, 2014), http://apps.ift.org.mx/publicdata/P_IFT_260314_17.pdf. 21.Id. 22.Press Release, América Móvil, América Móvil Informs (March 31, 2014), http://www.americamovil.com/mailing/AMX_about_IFETEL.pdf. 23.Decreto, supra note 7, at transitory Art. 8. 24.Id. 25.Instituto Federal de Telecomunicaciones, De la Sesiòn del Pleno del Instituto Federal de telecomunicaciones en su V Sesiòn Extraordinaria del 2014, Celebrada el 6 de Marzo de 2014 [Plenary session of IFT Committee at its V Extraordinary Session] (Mar. 6, 2014), http://apps.ift.org.mx/publicdata/P_IFT_EXT_060314_76_Version_Publica_Hoja.pdf. 26.Instituto Federal de Telecomunicaciones, Acuerdo Mediante el cual el Pleno del Instituto Federal de telecomunicaciones determinas las tarifas Asimétricas por los servicios de Interconexión que cobrará el agente económico preponderante, [Agreement by which the Plenary of IFETEL Committee determined the Asymmetric Interconnection Rates to Apply to the Preponderant Economic Agent] 172 (Mar. 26, 2014), http://apps.ift.org.mx/publicdata/P_IFT_260314_17.pdf. 27.Ley Federal de Telecomunicaciones [LFT] [Telecommunications Law], as amended, Diario Oficial de la Federacíon [DO], 16 de Enero de 2013 (Mex.) (repealed 2014).


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28.Decreto, supra note 7, at transitory Art. 8. 29.Instituto Federal de Telecomunicaciones, Acuerdo Mediante el cual el Pleno del Instituto Federal de telecomunicaciones determinas las tarifas Asimétricas por los servicios de Interconexión que cobrará el agente económico preponderante, [Agreement by which the Plenary of IFT Committee determined the Asymmetric Interconnection Rates to Apply to the Preponderant Economic Agent] (Mar. 26, 2014), available at http://apps.ift.org.mx/publicdata/P_IFT_260314_17.pdf. 30.Press Release, América Móvil, América Móvil Informs (March 31, 2014), http://www.americamovil.com/mailing/AMX_about_IFETEL.pdf 31.Instituto Federal de Telecomunicaciones, Acuerdo Mediante el cual el Pleno del Instituto Federal de telecomunicaciones determinas las tarifas Asimétricas por los servicios de Interconexión que cobrará el agente económico preponderante, [Agreement by which the Plenary of IFT Committee determined the Asymmetric Interconnection Rates to Apply to the Preponderant Economic Operators] (Mar. 26, 2014), available at http://apps.ift.org.mx/publicdata/P_IFT_260314_17.pdf. 32.Decreto, supra note 7. 33.Constitución Polìtica de los Estados Unidos Mexicano [C.P.], as amended, Diario Oficial de la Federacíon [DO], Art. 28, 7 de Julio de 2014 (Mex.). 34.Id. 35.Id. 36.Id. 37.OECD, supra note 5 at 46. 38.Constitución Polìtica de los Estados Unidos Mexicano [C.P.], as amended, Diario Oficial de la Federacíon [DO], Art. 28, 7 de Julio de 2014 (Mex.). 39.OECD, supra note 5 at 55. 40.OECD, supra note 5 at 66. 41.OECD, supra note 5 at 67. 42.OECD, supra note 5 at 56. 43.Constitución Polìtica de los Estados Unidos Mexicano [C.P.], as amended, Diario Oficial de la Federacíon [DO], Art. 28, 7 de Julio de 2014 (Mex.). 44.Decreto, supra note 7, at Art. 7th transitory. 45.Decreto, supra note 7. 46.Constitución Polìtica de los Estados Unidos Mexicano [C.P.], as amended, Diario Oficial de la Federacíon [DO], 7 de Julio de 2014 (Mex.). 47.Maestro Saúl García Corona, No Procede la Suspensión de los Efectos de las Resoluciones que Fijan Aspectos No Acordados por las Partes Sobre las Condiciones de Interconexión, Obligación de Interconnectar y Fijación de Tarifas”, crónicas del pleno y de las salas, available at https://www.scjn.gob.mx/Cronicas/Cronicas%20del%20pleno%20y%20salas/cr-030511-LMAM-interconexion.pdf, (Mex.) (last visited Aug. 21, 2014). 48.Zamora et al., supra note 1 at 189. 49.For the discussion of the procedures defending the supremacy of the Mexican Constitution – juicios de amparos, controversias

constitutionals, and aciones de incostitutionalidad – see see Zamora et al., supra note 1 at 257-286. 50.Patrick Del Duca, The rule of law: Mexico’s approach to expropriation disputes in the face of investment globalization, 51 UCLA L.R. 98-99 [Mexico’ Federal Judiciary] (2003) 51.Constitución Polìtica de los Estados Unidos Mexicano [C.P.], as amended, Diario Oficial de la Federacíon [DO], Art. 103-107, 7 de Julio de 2014 (Mex.). 52.Ley de Amparo, supra note 1, at art. 225-227. 53.Zamora et al., supra note 1 at 269. 54.Maestro Saúl García Corona, “No Procede la Suspensión de los Efectos de las Resoluciones que Fijan Aspectos No Acordados por las Partes Sobre las Condiciones de Interconexión, Obligación de Interconnectar y Fijación de Tarifas”, crónicas del pleno y de las salas”, 1-3, available at https://www.scjn.gob.mx/Cronicas/Cronicas%20del%20pleno%20y%20salas/cr-030511-LMAM-interconexion.pdf, (Mex.) (last visited Aug. 21, 2014). 55.Constitución Polìtica de los Estados Unidos Mexicano [C.P.], as amended, Diario Oficial de la Federacíon [DO], Art. 107, 7 de Julio de 2014 (Mex.). 56.Décimo Tercer Tribunal Colegiado en Materia Administrativa del Primer Circuito and Noveno Tribunal Colegiado en Materia Administrativa del Primer Circuito. 57.Maestro Saúl García Corona, “No Procede la Suspensión de los Efectos de las Resoluciones que Fijan Aspectos No Acordados por las Partes Sobre las Condiciones de Interconexión, Obligación de Interconnectar y Fijación de Tarifas”, crónicas del pleno y de las salas”, available at https://www.scjn.gob.mx/Cronicas/Cronicas%20del%20pleno%20y%20salas/cr-030511-LMAM-interconexion.pdf, (Mex.) (last visited Aug. 21, 2014). 58.Ley Federal de Telecomunicaciones [LFT] [Telecommunications Law], as amended, Diario Oficial de la Federacíon [DO], Art. 1 and Art. 42, 16 de Enero de 2013 (Mex.). 59.Ley de Amparo, supra note 1. 60.Ley Federal de Telecomunicaciones [LFT] [Telecommunications Law], as amended, Diario Oficial de la Federacíon [DO], 16 de Enero de 2013 (Mex.). 61.OECD, supra note 5 at 42. 62.Patrick Del Duca, The rule of law: Mexico’s approach to expropriation disputes in the face of investment globalization, 51 UCLA L.R. 101 [Mexico’ Federal Judiciary] (2003). 63.Ley de Amparo, supra note 1, at art. 222-223. 64.Ley de Amparo, supra note 1, at art. 225. 65.Zamora et al., supra note 1 at 272. 66.OECD, supra note 5 at 58. 67.Ley Federal de Procedimentios Administrativos [LFPA] [Administrative Procedures Law], as amended, Diario Oficial de la Federacíon [DO], 4 de Agosto de 1994 (Mex.): “La interposición del recurso suspenderá la ejecución del acto impugnado, siempre y cuando: … II. No se siga perjuicio al interés social o se contravengan disposiciones de orden public;”.


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Ley de Amparo, supra note 1, at Art. 128: “Con excepción de los casos en que proceda de oficio, la suspensión se decretará, en todas las materias, siempre que concurran los requisitos siguientes: I. Que la solicite el quejoso; y II. Que no se siga perjuicio al interés social ni se contravengan disposiciones de orden público. La suspensión se tramitará en incidente por separado y por duplicado.” 69.Artículo 42, Ley Federal de Telecomunicaciones [LFT] [Telecommunications Law], as amended, Diario Oficial de la Federacíon [DO], 16 de Enero de 2013 (Mex.) (repealed 2014): “Holders of licenses to public telecommunication networks shall interconnect their networks, and to this end shall reach an agreement within 60 calendar days from when any may request it. If said term has elapsed and the parties have not executed an agreement, or before so requested by both parties, the Ministry shall reach a decision within 60 calendar days concerning the conditions upon which no agreement has been made.” 70.Id., Artículo 9-A: “La Comisión Federal de Telecomunicaciones es el órgano administrativo desconcentrado de la Secretaría, con autonomía técnica, operativa, de gasto y de gestión, encargado de regular, promover y supervisar el desarrollo eficiente y la cobertura social amplia de las telecomunicaciones y la radiodifusión en México, y tendrá autonomía plena para dictar sus resoluciones. Para el logro de estos objetivos, corresponde a la citada Comisión el ejercicio de las siguientes atribuciones: X. Promover y vigilar la eficiente interconexión de los equipos y redes públicas de telecomunicaciones, incluyendo la que se realice con redes extranjeras, y determinar las condiciones que, en materia de interconexión, no hayan podido convenirse entre los concesionarios de redes públicas de telecomunicaciones;” 71.Id., Art. 1: “This law is of public interest, and its purpose thereof is to regulate the usage, utilization and exploitation of the frequency spectrum, telecommunications networks and satellite communications.” 72.OECD, supra note 5 at 56. 73.Comision Federal de Telecomunicaciones, Resoluciones de la SCJN Fortalecen la Actuacion de la Cofetel en Materia de Interconexion (Mar. 7, 2013), available at http://www.cft.gob.mx:8080/portal/wp-content/uploads/2013/03/Comunicado-10-Resoluciones-de-la-SCJN-fortalecen-la-actuación-de-la-Cofetel-en-materia-de-interconexión-Mar-07-2013.pdf (Mex.). 74.Decreto, supra note 7. 75.Ley Federal de Telecomunicaciones y Radiodifusión [LFTR] [Telecommunications and Broadcasting Law], as amended, Diario Oficial de la Federacíon [DO], 14 de Julio de 2014 (Mex.). 76.For the mathematic formula to apply in order to determine a preponderant economic agent see: Ley Federal de Telecomunicaciones y Radiodifusión [LFTR] [Telecommunications and Broadcasting Law], as amended, transitory Art. 9, Diario Oficial de la Federacíon [DO], 14 de Julio de 2014 (Mex.).

77.Ley Federal de Telecomunicaciones y Radiodifusión [LFTR] [Telecommunications and Broadcasting Law], as amended, Art. 267, Diario Oficial de la Federacíon [DO], 14 de Julio de 2014 (Mex.). 78.Instituto Federal de Telecomunicaciones, De la Sesiòn del Pleno del Instituto Federal de telecomunicaciones en su V Sesiòn Extraordinaria del 2014, Celebrada el 6 de Marzo de 2014 [Plenary session of IFT Committee at its V Extraordinary Session] (Mar. 6, 2014), available at http://apps.ift.org.mx/publicdata/P_IFT_EXT_060314_76_Version_Publica_Hoja.pdf. 79.Instituto Federal de Telecomunicaciones, Acuerdo Mediante el cual el Pleno del Instituto Federal de telecomunicaciones determinas las tarifas Asimétricas por los servicios de Interconexión que cobrará el agente económico preponderante [Agreement by which the Plenary of IFT Committee determined the Asymmetric Interconnection Rates to Apply to the Preponderant Economic Agent], (Mar. 26, 2014), available at http://apps.ift.org.mx/publicdata/P_IFT_260314_17.pdf. 80.Press Release, América Móvil, América Móvil Informs (March 31, 2014), available at http://www.americamovil.com/mailing/AMX_about_IFETEL.pdf. 81.OECD (2013), OECD Communications Outlook 2013 52, OECD Publishing, available at http://www.oecd-ilibrary.org/docserver/download/9313021e.pdf?expires=1408584910&id=id&accname=ocid194760&checksum=535C03FA9DCCEFB85EE14014DE234296. 82.Decreto, supra note 7, at transitory art. 8. 83.Instituto Federal de Telecomunicaciones, De la Sesiòn del Pleno del Instituto Federal de telecomunicaciones en su V Sesiòn Extraordinaria del 2014, Celebrada el 6 de Marzo de 2014 [Plenary session of IFT Committee at its V Extraordinary Session] (Mar. 6, 2014), available at http://apps.ift.org.mx/publicdata/P_IFT_EXT_060314_76_Version_Publica_Hoja.pdf 84.Instituto Federal de Telecomunicaciones, Acuerdo Mediante el cual el Pleno del Instituto Federal de telecomunicaciones determinas las tarifas Asimétricas por los servicios de Interconexión que cobrará el agente económico preponderante [Agreement by which the Plenary of IFT Committee determined the Asymmetric Interconnection Rates to Apply to the Predominant Economic Agent], (Mar. 26, 2014), available at http://apps.ift.org.mx/publicdata/P_IFT_260314_17.pdf. 85.See Art. 131, Ley Federal de Telecomunicaciones y Radiodifusión [LFTR] [Telecommunications and Broadcasting Law], as amended, Art. 267, Diario Oficial de la Federacíon [DO], 14 de Julio de 2014 (Mex.). 86.Press Release, América Móvil, América Móvil Informs (July 8, 2014), available at http://www.americamovil.com/mailing/AMX_Strategic_Committee.pdf. 87.Anthony Harrup & Juan Montes, América Móvil to Sell Assets to Cut Mexico Market Share Below 50%, Wall St. J. (Jul. 8, 2014, 8:48 PM), available at http://online.wsj.com/articles/america-movil-to-sell-assets-to-cut-mexico-market-share-below-50-1404859497.


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The Mexico Committee continuously seeks qualified professionals prepared to contribute their time and talents to continue developing a more active Committee. This is a prime opportunity to become involved with a community of lawyers that share an interest in Mexico and Mexican law, who are fellow American Bar Association members.

The Mexico Committee welcomes any suggestions, ideas or contributions to enhance this periodic publication. The current submittal deadline for contributions to the next issue is January 15, 2015, but please do not wait until the deadline. Rather, be in touch now with any member of our Editorial Committee with your offer of help, be it as an editor or a contributor. We can offer topic suggestions and provide translation and editing as needed.

If you are interested in participating actively with the Committee and in joining its steering group, please contact any member of the Committee leadership.

ABA ● Sect ion of Internat ional Law ● Mexico Committee

MEXICO UPDATE American Bar Assoc iat ion

Sect ion of Internat ional Law

Mexico Committee ©

Editorial Committee: Mexico Committee

Ben Rosen, Editorial Board Chair Patrick Del Duca, Alejandro Suárez

Juan Carlos Velázquez de León Obregón Ernesto Velarde Danache

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María Eugenia Flores Chávez María Fernanda Lazcano Arregui

Eric Coufal Leaño Members of the MEXICO UPDATE editorial team at the Facultad de Derecho, Universidad Panamericana, Guadalajara Campus María Fernanda Lazcano Arregui, María Eugenia Flores Chávez, Eric Coufal Leaño, Gabriela García Escobar, and Romina Guarneros Galaz.

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