"The Transportation Antitrust Update"
Issue No. 24 Winter 2005 INTERNATIONAL LAW The Mexico Update Mexico Committee • Section of International Law • American Bar Association In This Issue: A NOTE FROM THE International Arbitration Review CHAIR Leonel Pereznieto Castro and This is the 24th issue of the Mexico James A. Graham ............................................... 2 Committee’s newsletter. In celebration of The past year has been an exciting and eventful one its sixth year anniversary, the Mexico for arbitration in Mexico. Leonel Pereznieto Castro Committee has refreshed its format, changed and James A. Graham summarize recent its title to ―The Mexico Update‖ and added developments in investment and commercial arbitration, and also examine a recent important additional content. The leadership of the Mexican Supreme Court decision. Mexico Committee would like to give special thanks to Chris Oatway and to the Developments in U.S. - Mexican Trade publications department of Covington & Melanie Brown................................................... 8 Burling for the time spent in editing and A number of U.S.-Mexican trade issues continued to designing the newsletter. be hotly contested, both within the NAFTA framework and outside of it. Melanie Brown of the The Mexico Update continues to provide its International Trade Administration discusses the key ―Highlights of Legislative Developments,‖ developments in the past year. which summarizes significant legislative Highlights of Legislative Developments developments in Mexico. Also, we have Mexico Committee Staff .................................. 14 included – and will include in future issues – In the fall of 2004 the Mexican legislature passed a articles written by practitioners and variety of legislation of interest to attorneys involved academics willing to share their expertise in business transaction and/or the general practice of with other members of the Committee. law. This section includes selected legal developments published in the Mexican Federal Official Gazette (―FOG‖). Upcoming Event The conference on ―Strategies for Trade & Investment in Mexico,‖ will be held The Mexico Committee at the Jolly Madison Hotel in New York on WEBSITE is here: March 21-22, 2005. This event will focus on http://www.abanet.org/intlaw/divisions/comparati recent business developments and legal ve/mexiconews.html strategies for trade, investment and We invite you to provide us with feedback on our maximizing operations in Mexico. It is website and on this publication. sponsored by DuaneMorris, Greenberg Taurig, Thatcher Proffitt and the U.S.- Mexico Chamber of Commerce. Detailed information can be found at www.atlas.sfi.com. 1 The Mexico Update Winter 2005 - Issue No. 24 MEXICO COMMITTEE LEADERSHIP Mexico: International Arbitration (2004-2005): Review 2003-2004 Co-Chair ....................................... Jimmie Reyna by Leonel Pereznieto Castro1 and email@example.com James A. Graham2 Co-Chair ........................ Carlos Ramos Miranda firstname.lastname@example.org I. INTRODUCTION Vice-Chair ............................. Charlie Meacham L email@example.com ast year was an exciting one for Vice Chair ..................................... Luis Moreno arbitration in Mexico, both in terms firstname.lastname@example.org of important international arbitral decisions as well as a Supreme Court ruling Vice-Chair ..................................... Chris Oatway email@example.com that promises to change the future landscape of arbitration within Mexico. This article Vice-Chair ............................. Gustavo Santillana will first describe and comment on firstname.lastname@example.org developments in international investment arbitration and will then turn to commercial arbitration. II. INTERNATIONAL A Call for Articles INVESTMENT ARBITRATION A. Waste Management Award We are interested in recruiting new authors for future Committee After the Metalclad decision in 2000 in which a foreign hazardous waste firm newsletters. We invite and obtained a very commented-on award encourage members of the against Mexico,3 the Waste Management Committee, as well as qualified non-members, to submit short 1 articles on Mexican law related Dr. Pereznieto Castro is a Professor of Law at the Universidad Nacional Autónoma de México and is topics that may be of interest to our Of Counsel to Von Wobeser & Sierra. He can be membership. If you are interested contacted at lpereznieto@.vwys.com.mx in contributing to a future issue, 2 Dr. Graham is a Professor of Law and Director of please contact Chris Oatway at the Dispute Resolution Center, FLDM, Monterrey. (202) 662-5456 or He is also Senior Partner at Lobo & Graham in email@example.com. Monterrey. He can be contacted at graham@lobo- graham.com. 3 ICSID, No. ARB(AF)/97/1, 8/25/2000, (Lauterpacht, Siqueiros (J.L.), Civiletti), 40 ILM 36 (2001), 95 AJIL 910 (2001). Metalclad, a U.S. company, alleged that Mexico, through its local governments, interfered with Metalclad’s development and operation of a hazardous waste landfill, notwithstanding the apparent support that the company received from federal and local authorities in favor of the project. The Tribunal established, among other things, that once governmental 2 The Mexico Update Winter 2005 - Issue No. 24 award in 2004 brought some good news for As a starting point, the Waste Management the Mexican government. The dispute arose decision – in the middle of the ongoing from a concession for the provision of waste ―Fork on the Road‖ discussion6 made an disposal services in the City of Acapulco. important distinction between treaty The agreed terms for this operation were set breaches and contract breaches. According forth in a Concession Agreement between to the Tribunal,7 ―NAFTA’s Chapter 11 the City and Waste Management’s Mexican does not give jurisdiction in respect of subsidiary.4 Waste Management undertook, breaches of investment contracts such as the in exchange for payments by the City, to Concession Agreement. Nor does it contain provide on an exclusive basis certain an ―umbrella clause‖ committing the host municipal waste disposal and street cleaning State to comply with its contractual services in a specified area of Acapulco. commitments.8 This does not mean that the The City also undertook to negotiate with Tribunal lacks jurisdiction to take note of or the State-owned bank Banobras an interpret the contract, but such jurisdiction is irrevocable, contingent and revolving line of incidental in character, and it is always credit to guarantee all payment obligations of the City for the term of the Concession Agreement. the claimant didn’t want to waive its domestic proceedings. This first proceeding (ICSID, No. ARB Over the 27 months of Waste Management’s (AF)/ operations, its invoices to the City totaled 98/2, 6/2/2000, (Cremades, Siqueiros (E.), Highet), more than 49 million pesos, of which the 15 ICSID Rev. 214 (2000), 95 AJIL 186 (2001) is City itself paid 2,225,000 pesos and sometimes referred to as ―Waste Management I,‖ and Banobras paid 4.9 million pesos. the subsequent (and important) one as ―Waste Management II‖, but for simplicity we call the Approximately 80% of the total amount second proceeding ―Waste Management.‖ invoiced went unpaid. Consequently, Waste 6 Management brought various proceedings The term ―Fork on the Road‖ designates in before Mexican federal courts, all of which International Investment Arbitration the debate regarding the possibility of choosing one or another were dismissed along with Waste forum depending the nature of the submitted dispute Management’s various appeals. Waste – i.e. can a breach of contract be at the same time a Management was also unsuccessful in breach of an international investment treaty? See initiating a commercial arbitral proceeding ICSID, Vivendi v. Argentina, No. ARB 97/3, against the City.5 11/21/2000, (Portier, Crawford, Fernández Rozas), 16 ICSID Rev.641 (2001); ICSID, SGS v. Filipinas, No. ARB/02/6, 1/29/2004, (El-Kosheri, Crawford, Crivellaro), Revue Général de Droit international authorities become aware of any prospect for public, 2004, 512. ; LCIA, OEPC v. Ecuador, No. misunderstandings, it is their duty to ensure that the UN 3467, 1/7/2004, (Orrego, Brower, Barrera). For a correct position is promptly determined, in order to more general view: James Crawford, Les articles de la CDI sur la responsabilité (Paris: Pédone, 2003) ; give full effect to the NAFTA’s principle of James A. Graham, ¿Dónde se queda la legitima transparency (R. Doak Bishop and William W. expectativa de los Estados en los arbitrajes sobre Russel, Survey of Arbitration Awards Under Chapter inversión extranjera?, 3 Latin American Journal for 11 of the North American Free Trade Agreement, 19 Mediation and Arbitration 96 (2003), at J. Int’l. Arb. 505, 544). http://www.med-arb.net. 7 4 Chaired by Crawford and composed by Civiletti and The organization of the Waste Management Group Magallón. was a somewhat complex, but essentially the City’s 8 contract was with a Mexican subsidiary of Waste For the first Mexican case, see ICSID, Técnicas Management. Medioambientales Tecmed S.A. v. Mexico, No. ARB 5 (AF)/00/2, 29/5/2003, (Grigera Naón, Fernandez Also, at this time Waste Management filed its Rózas, Bernal Verea). original NAFTA claim, which was rejected because 3 The Mexico Update Winter 2005 - Issue No. 24 necessary for a claimant to assert as its cause and Loewen14 awards suggest that the of action a claim grounded in one of the minimum standard of treatment of fair and substantive provisions of NAFTA, i.e., in equitable treatment is infringed by conduct Articles 1116 or 1117. Furthermore, while attributable to the State and harmful to the conduct (e.g. an expropriation) may at the claimant if the conduct is ―arbitrary, grossly same time involve a breach of NAFTA unfair, unjust or idiosyncratic, is standards and a breach of contract, the two discriminatory and exposes the claimant to categories are distinct.‖9 sectional or racial prejudice, or involves a lack of due process leading to an outcome There were two substantive provisions at which offends judicial propriety—as might issue in Waste Management: a minimum be the case with a manifest failure of natural treatment claim and an expropriation justice in judicial proceedings or a complete allegation. lack of transparency and candour in an administrative process. Evidently the 1. Alleged Denial of Due Process and standard is to some extent a flexible one NAFTA’s Minimum Treatment which must be adapted to the circumstances Provision (Art. 1105) of each case.‖15 According to Waste Management, the Waste Management emphasized that the investment was subject to arbitrary acts by arbitration agreement for resolving the City and Banobras, which Waste contractual disputes under the Concession Management alleged had ―conspired to Agreement had no effect in the light of the obstruct its access to judicial and arbitral City’s resistance to the arbitration and the forums to resolve claims under the Arbitration Center’s request of an advance concession: more specifically, these entities payment of 2.5 millions pesos from each ―funnelled‖ the litigation by raising party as a condition of continuing the procedural issues to delay the merits claims arbitration. In effect, the City’s refusal to and deny Waste Management the pay this amount toward the arbitration opportunity to obtain timely payment from proceeding would have had to be wholly Banobras, aggravating its bad financial funded by Waste Management, a financial position.‖10 burden that was, according to Waste Management, impossible to bear. Following the Tribunal, a general standard for Article 1105 is emerging. Taken The tribunal emphasized that the Arbitration together, the S.D. Myers11, Mondev12, ADF13 Center ―is not a State organ, and in any event its sole role was to facilitate the arbitration. Evidence of collusion between the Center and the City with respect to the conduct of the arbitration or of 9 discrimination against Waste Management #73 of the Award. on account of its foreign ownership would 10 #87 of the Award. have been very material, but there was no 11 Ad hoc UNCITRAL, Myers v. Canada, 13/11/2000 such evidence before the Tribunal. Although (Hunter, Schwartz, Rae), at http://www.naftaclaims.com. the deposit sought was very large by local 12 ICSID, Mondev v. U.S., No. Arb (AF)/99/2, 14 11/10/2002, (Stephen, Crawford, Schwebel). ICSID, Loewen v. U.S., No. Arb (AF)/98/3, 13 26/6/2003, (Mason, Mikva, Mustill). ICSID, ADF v. U.S., No. Arb (AF)/00/1, 9/1/2003, 15 (Feliciano, de Mestral, Lamm). #98 of the Award. 4 The Mexico Update Winter 2005 - Issue No. 24 standards, the claim was large and the case them. In regard to the failure of the City to threatened to be complex,‖ stressing out the make available promised land for the seriousness of Mexican arbitration centers. disposal site, it was considered by the Tribunal as a breach of contract and not as In regard to the lost judicial proceedings, the an expropriation. In other words, an arbitrators first observe that NAFTA enterprise is not expropriated just because its Tribunals are not a further court of appeal, debts are not paid or other contractual nor is Chapter 11 of NAFTA a novel form obligations towards it are breached. In the of review for decisions of the federal courts Tribunal’s view, ―it is not the function of the of States parties. Even if these cases might international law of expropriation as have been decided differently in each legal reflected in Article 1110 to eliminate the system, the Tribunal does not discern in the normal commercial risks of a foreign Mexican courts rulings anything ―evidently investor.‖17 arbitrary, unjust or idiosyncratic‖, acknowledging thus that the Mexican 3. Costs judicial system not always errs.16 Finally, in regard to the costs of the Waste Management also argued that there arbitration proceeding, the Tribunal, had been a denial of justice originated by the notwithstanding its decision to reject the respondent who initiated allegedly frivolous claims of Waste Management, underlines judicial proceedings one after the other. that the conduct of the City was by no However, as the Tribunal states, ―the point means beyond criticism, and thus concludes is that a litigant cannot commit a denial of that a fair outcome would be that each party justice unless its improper strategies are bear its own legal costs and expenses, and endorsed and acted on by the court, or that the costs and expenses of the Tribunal unless the law gives it some extraordinary be borne equally between them. privilege which leads to a lack of due process. There is no evidence of either B. GAMI Award circumstance in the present case,‖ thus emphasizing that even though Mexican legal A few weeks after the Waste Management practice may differ from the one in the decision, Mexico once again enjoyed the United States, it does not mean that it is a taste of victory in a proceeding about ―bad‖ practice. alleged expropriation of sugar mills. 2. Alleged Expropriation Under NAFTA In 1996, the U.S. investment corporation (§1110) GAMI Investments Inc. (―GAMI‖) purchased a block of shares of the Mexican Waste Management also alleged that company Grupo Azucarero México S.A. de the city’s conduct was a measure tantamount C.V. (―GAM‖), which owned at the time to an expropriation. The Tribunal rejects the various sugar mills in Mexico. However, the claim, however, finding that Waste entire Mexican sugar industry experienced a Management’s allegations did not rise to crisis beginning in 1999. One year later, that level. Significantly, Waste GAM filed for bankruptcy. On September 3, Management at all times had the control and 2001, the Mexican Government use of its property, and it was able to service its customers and earn collection fees from 17 ICSID, No. ARB(AF)/99/1, 16/12/2002, (Kerameus, Covarrubias Bravo, Gantz) (quoting 16 Compare with the Metalclad decision. Marvin Feldman v. Mexico). 5 The Mexico Update Winter 2005 - Issue No. 24 expropriated 22 sugar mills, including the obtained reparation under Mexican law and ones belonging to GAM, on grounds of thus there is no legal proof that GAMI’s public purpose. However, on February 9, shares could never have regained their lost 2004, the Mexican First Circuit in value. Administrative Matters invalidated the expropriation of the concerned sugar mills 2. Review of the Application of National and returned them to GAM. Nevertheless, Law by National Authorities GAMI argued that during the period of the expropriation, GAMI’s shares lost value and Nonetheless, as to the objection of Mexico thus harmed the company. Consequently, that an arbitral tribunal has no mandate to GAMI initiated a NAFTA proceeding for a control the application of national law by arbitrary and discriminatory expropriation national authorities, the Tribunal, like many (NAFTA 1105), less favorable treatment others, repeats (once again)20 that it has than Mexican investors whose mills were jurisdiction to review the application of not expropriated (NAFTA 1102), and national law in order to verify that the wrongful expropriation in regard to article obligations under the international treaty had 1110 of the NAFTA. been faithfully executed. In this sense, the arbitrators agree to examine GAMI’s The final decision of an UNCITRAL argument that the expropriation measures Tribunal18 rejected all the claims of GAMI, were grossly unfair, relying on the focusing on two principal issues. beforementioned Waste Management Award. However, in the light of the facts of 1. Identification of the Victim of the case, the tribunal rejected the claim. Expropriation C. General Observations GAMI did not claim that the Mexican expropriation measures were directed In both Waste Management and GAMI, the against its shareholding in GAM, but that arbitrators emphasized many dysfunctions in obviously the value of these shares were the Mexican judicial and administrative affected and thus harmed GAMI. However, system. However painful they may be, they as emphasized by the Tribunal, it is critical do not constitute per se breaches of NAFTA. to distinguish between de facto For Mexico, regardless of its arbitral expropriations and de jure ones. The fact success, this message should be heard and that GAMI is a minority shareholder does should be a reason to continue with its not preclude it from seeking a remedy under efforts to reform its institutions. For foreign NAFTA on the grounds that its investment investors, the lesson should be that because had suffered ―something tantamount to of these ―particularisms‖ of the Mexican expropriation,‖ a notion defined by the system, it is important to understand that Tribunal as this: ―The affected property things must be done differently in Mexico must be impaired to such an extent that it than how they probably are accustomed to must be seen as ―taken.‖19 GAMI’s operating in their home countries. shareholding ought to have been ―taken‖ in order to obtain protection under NAFTA 1110, but the fact is that GAM could have 18 20 Comprising Jan Paulsson, Michael Reisman, and Loewen Group, Inc. and Raymond L. Loewen v. Julio Lacarte. United States, 6/26/03. 19 #126 of the Award. 6 The Mexico Update Winter 2005 - Issue No. 24 III. INTERNATIONAL choice of arbitrators and eventually their COMMERCIAL ARBITRATION final decision on the merits. Furthermore, according to claimant X, the foreseen A. Time Limits for Judicial arbitrators for designation had a friendship Review with Y. However, the judge determined first of all that he had no jurisdiction given the Title IV of the Fifth Book of Mexico’s presence of an arbitration clause, and, Commercial Code not only governs second, as the First Circuit had already arbitration proceedings taking place in ruled,23 the sole fact of an existing Mexico, but also the judicial reviews for friendship between an arbitrator and a nullification and execution of international party’s lawyer cannot constitute bias per se. commercial arbitration awards. Article 1419 Furthermore, the chosen arbitration center’s provides that for any time-limits previewed rules established proceedings to challenge in Title IV, the counting starts 24 hours after the appointment of arbitrators whose having been served. However, the 4th independence or neutrality could be Circuit’s decision dated January 24, 2003,21 compromised. The Supreme Court of the establishes that for review of a judges’ Federal District of Mexico upheld the first decision to refuse to execute the award, it is ruling, underlining that there was no not to be referred to article 1419 but instead jurisdiction for judicial tribunals to nullify to the general rule contained in article 1075, an arbitral agreement, and that it is which provides that deadlines start to run the exclusively up to the arbitrators to rule on day after notification is given. It is logical to this point.24 think that the same reasoning would apply with respect to the review of a judicial On August 11, 2004, the Second Federal decision to nullify an award. District for Civil Matters for the Federal District of Mexico25 voided a decision of the B. Conflicts of Interest and Supreme Court of the Federal District of Arbitral Bodies Mexico, because Article 1424 of the Commerce Code, which corresponds to In a case decided August 9, 2004, in first Article 8 of the UNCITRAL Model Law, instance,22 party X claimed that the establishes expresis verbis the State arbitration agreement contained in the tribunals’ jurisdiction for nullifying contract should be nullified because legal arbitration agreements, even though during representative Y of the counterparty Z is the time of judicial proceedings the also the director of the arbitration center that arbitration may proceed. had been chosen in the mentioned agreement – and that this fact had never been disclosed C. Organization of Arbitral to party X. Thus, there would be a violation Proceedings of the principle of equality between parties, as Y could, according to X, influence the The First Chamber of the Mexican Supreme Court of Justice ruled in June 2004 that the 21 Tercer Tribunal Colegiado en Materia Civil del 23 Segundo Tribunal Colegiado en Materia Civil del Cuarto Circuito. Clave: IV.3o.C. , Núm.: 23 C. Amparo en revisión 670/2002. Javier Mario Elizondo Primero Circuito, 3782/2002, 3/5/2002. González. 24 de enero de 2003. Unanimidad de 24 Tercera Sala Civil del Tribunal Superior de Justicia votos. Ponente: Pedro Pablo Hernández Lobato. del Distrito Federal, 692/2004. Secretario: Jacobo López Ceniceros. 25 Juez Segundo de Distrito en Materia Civil en el 22 Juez Cuarto de lo Civil, 1009/03. Distrito Federal, 556/2004-I. 7 The Mexico Update Winter 2005 - Issue No. 24 second paragraph of Article 1435 of the obviously is unfamiliar to arbitration, to Commerce Code is constitutional. That constitute unconstitutional ―excessive Article corresponds to Article 19.2 of the authority‖ – notwithstanding the fact that UNCITRAL Model Law, and its second what the parties are looking for is precisely paragraph provides: the avoidance of detailed formalities,27 given than such formalities are one of the causes "If no stipulation was made, the Arbitral of dysfunction in the judicial system. This Tribunal may, subject to the provisions of this Title [Title Four of Book Five of the is why the Supreme Court’s favor arbitrii is Commerce Code], direct the arbitration in very important for counterbalancing the the manner it considers appropriate. This Circuit and District Courts, which still power conferred to the Arbitral Tribunal consider arbitration proceedings to be includes that of determining the something ―abnormal.‖ Hopefully, with this admissibility, relevance and value of the evidence‖. already famous decision, the inferior federal courts and local tribunals will follow the In the dispute set forth, the Claimant Supreme Court’s lead28 and thus contribute invoked the Federal Code of Proceedings to to the renewal of international arbitration in allege that according to Mexican procedural Mexico. rules, the judge (or the arbitrator) must adhere to the text of the law and only has Developments in U.S.-Mexican those powers that such law establishes. Therefore, to give an arbitral tribunal total Trade discretional powers regarding the evaluation by Melanie Brown1 of evidence, the article must be declared unconstitutional. In response, the Supreme Court ruled that an arbitral tribunal does not have absolute discretion since its actions are governed by Title Four of the Fifth Book of the Commerce Code. There is thus a defined T his article summarizes major developments in the past year involving U.S.-Mexican trade, including decisions of the U.S. Department of Commerce, of the NAFTA Binational legal framework that obliges the arbitral Panel, and Mexico’s Secretaría de tribunal to conduct arbitrations according to Economia. clear rules and in which fundamental procedural rights are granted to the parties, 27 such as equal treatment of the parties and the For a very liberal approach, see: Leonel Pereznieto right to a fair hearing.26 Another significant Castro, Derecho internacional privado, 8th ed. aspect of this decision that it rejected the (Mexico: Oxford, 2003), 267; James A. Graham, El argument developed by certain authors (and derecho internacional privado del comercio by the claimant) that Title IV must be electrónico (Mexico: Themis, 2003), 29 (plaidoyer in complemented by supplemental rules like favor of the so-called formless ―cyber-arbitration‖). the Federal Code of Proceedings. 28 Without entering into procedural details, it is appropriate to simply mention that the great majority General Conclusions of the Mexican Supreme Court’s decisions are not binding on inferior federal courts or local tribunals. In Mexico’s highly formalistic legal system, 1 Ms. Brown is an attorney for the International Trade the broad powers of the arbitrator have often Administration in Washington, D.C. been held by a certain doctrine, which 2 The International Trade Commission (―ITC‖) determines whether the domestic industry has 26 Article 1434 of the Commerce Code; Article 18 of suffered material injury as a result of the subsidized the UNCITRAL Model Law. or dumped imports. 8 The Mexico Update Winter 2005 - Issue No. 24 I. U.S. DEPARTMENT OF (―NAFTA‖) Binational Panel or the Dispute COMMERCE DECISIONS Resolution Panel. The U.S. Department of Commerce (―the The following is a recap of the final Department‖) is charged with investigating antidumping and countervailing duty allegations of dumping by foreign decisions made by the Department of companies and government subsidizing. Commerce in 2004. The Department enforces countervailing duty (―CVD‖) and antidumping duty (―AD‖) Certain Cut-to-Length Steel Plate from laws.2 If the Department makes an Mexico; Final Results of the affirmative decision in an AD and/or CVD Countervailing Duty Review, 69 FR 1972 case, it calculates an antidumping duty (Jan. 13, 2004). The Department calculated margin or an ad valorem rate for subsidy duties on imports of cut-to- length steel plate cases. These margins and rates are entered during January 1, 2001 through translated into antidumping and December 31, 2001. In this review, the countervailing duties. Antidumping and Department calculated 13.37 percent ad countervailing duties are calculated if an valorem rate on all entries produced and import has been dumped or benefitted from exported by Altos Hornos de Mexico, S.A. government subsidies, respectively. An (―AHMSA‖). AHMSA’s imports of certain order is then issued if a final affirmative cut-to-length steel plate have been subject to determination is made by both the ITC and a CVD order since 1993. In the 2004 the Department. Subsequently, the proceeding, the Department continued to Department issues and sends to the U.S. find that AHMSA was uncreditworthy, and Bureau of Customs and Border Protection, received benefits from seven government instructions on how much duties are to be subsidy programs, most notably a National collected on which products produced by Bank of Foreign Trade export loan, certain producers and importers. The committed investment into AHMSA, and issuance of an AD or CVD order marks the asset tax credits from an immediate end of the investigative phase of a deduction program. proceeding and signifies that importers are no longer able to post bonds as security for Notice of Final Determination of Sales at antidumping or countervailing duties, but Less than Fair Value and Negative Final are required to make a cash deposit to cover Determination of Critical Circumstances: estimated duties Prestressed Concrete Steel Wire Strand from Mexico, 68 FR 68350 (Dec. 8, 2003). On the anniversary of the Department’s Based on this notice, the Department issued issuance of the AD or CVD order, the an AD order on January 28, 2004, Department presents an opportunity to establishing the duties required for imports request an AD or CVD review of a specified of pre-stressed concrete steel wire strand period of review for those imports covered from Mexico. Two Mexican producers were in the AD and/or CVD order. Domestic and chosen as respondents - Cablesa S.A. de foreign manufactures or importers may C.V. (―Cablesa‖) and Aceros Camesa S.A. request a review. At the conclusion of these (―Camesa‖).329Both are manufacturers of reviews, the Department may recalculate the duties established under the order. Once final decisions are made by the Department 3 See Notice of Preliminary Determination of Sales at and the ITC, Mexican and Canadian Less Than Fair Value, Postponement of Final companies may challenge the decisions with Determination, and Affirmative Preliminary the North American Free Trade Agreement Determination of Critical Circumstances in Part: 9 The Mexico Update Winter 2005 - Issue No. 24 pre-stressed concrete steel wire strand that pursuant to a petition filed by the domestic exported to the United States. Pursuant to producers of LWRPT. 531The Department the order, Cablesa will pay a 62.78 percent chose Perfiles y Herrajes LM, S.A. de CV margin, and Aceros will pay a 77.20 percent (―LM‖), Galvak, S.A. de C.V. (―Galvak‖), dumping margin on all entries that entered Productos Laminados de Monterrey, S.A. de during 2002. In arriving at these margins, C.V. (―Prolamsa‖), and Regiomontana de the Department used adverse facts available Perfiles y Tubos (―Regiomontana‖), as because both companies failed to comply respondents that accounted for the largest with the Department’s repeated request for volume of exports during the period of imperative information in order to calculate investigation. On September 2, 2004, the an accurate margin. Department published its final decision in the investigation of LWRPT from Mexico. Stainless Steel Sheet and Strip in Coils The Department determined the following from Mexico: Final Results of duties: LM - 14.45 percent; Galvak - 17.46 Antidumping Duty Administrative Review, percent; Prolamsa - 6.08 and Regiomontana 69 FR 6259 (Feb. 10, 2004). The - 6.36 percent. Department calculated a 7.43 percent antidumping duty margin for Mexinox S.A II. NORTH AMERICAN FREE (―Mexinox‖) and its affiliates. The margin TRADE AGREEMENT applies to entries for the period of July 1, BINATIONAL PANEL 2001 to June 30, 2002. In 1999, the DECISIONS Department first instituted the antidumping duty order covering Mexinox entries of Once the Department of Commerce or its SSSC.430Since that time, Mexinox’s entries Mexican counterpart, the Secretaría de have been reviewed under the AD order. In Economia (―Secretariat‖), has issued a final arriving at its final decision in this decision, that decision can be challenged proceeding, the Department used partial within the NAFTA framework. Below is a facts available, pursuant to section 776(a)(1) recap of the decisions issued in 2004 by the of the Tariff Act of 1930, because Mexinox NAFTA Binational Panel (―Panel‖) with failed to provide certain information respect to challenges by U.S. or Mexican necessary for the Department to conduct its companies. analysis. A. Review of Department of Light-Walled Rectangular Pipe and Tube Commerce AD/CVD from Mexico: Notice of Final Decisions Determination of Sales at Less Than Fair Value, 69 FR 53677 (Sep. 2, 2004). The Cement (USA-MEX 99-1904-03). On Department established duties on imports of January 22, 2004, the Panel issued a final light-walled rectangular pipe and tube order with respect to the Department’s final (―LWRPT‖). The Department initiated an results of the administrative review of the investigation of LWRPT from Mexico antidumping duty order on gray portland cement and clinker from Mexico, covering Prestressed Concrete Steel Wire Strand From 5 Mexico, 68 FR 42378 (July 17, 2003). See Notice of Initiation of Antidumping 4 Investigations: Light-Walled Rectangular Pipe and See Notice of Amended Final Determination of Tube from Mexico and Turkey, 68 FR 57668 Sales at Less Than Fair Value and Antidumping Duty (October 6, 2003). Order: Stainless Steel Sheet and Strip in Coils from Mexico, 64 FR 40560 (July 27, 1999). 10 The Mexico Update Winter 2005 - Issue No. 24 imports entered from August 1, 1996 ruling as it applied to Galvak S.A. de C.V. through July 31, 1997. This final decision (―Galvak‖), an exporter of certain circular comes after the initial request for a Panel welded non-alloy steel pipe. On December review made by Cemex, S.A. de C.V., and 23, 1998, the petitioners contested the GCC Cemento, S.A. de C.V. (respondents) Department’s scope ruling that mechanical and the Southern Tier Committee (the tubing manufactured to meet the industry petitioner), contesting various aspects of the standard was outside the scope of the Department’s decision. On May 30, 2002, antidumping duty order.632The Panel the Panel unanimously affirmed the previously issued three opinions on this Department’s decision in part, but remanded issue, all pertaining to the characteristics of a portion of the Department’s determination. the product sought to be excluded from the In the remand, the Panel requested order. In the Panel’s fourth opinion and explanations on several of the Department’s order, it affirmed the Department's third decisions including: clarifying which sales redetermination that particular A-787 of cement were in the ordinary course of products characterized as mechanical tubing trade, recalculating indirect selling expenses, are not within the scope of the order, while and reconsidering its decision that sales of other tubing characterized as standard pipe bag cements and bulk cement should be the are within the scope of the order. same like products. B. Review of Mexican After the Department responded with its Investigating Authority second determination on remand, on April AD/CVD Decisions 11, 2003, the Panel again remanded on certain issues to the Department. On Urea (MEX-USA-00-1904-01). On January September 4, 2003, the Panel issued an 29, 2004, the Panel issued its final decision order and remanded part of the and order regarding its review of the final Department’s response to the panel’s determination of urea imported from the original order. In that remand, the Panel United States and the Russian Federation. instructed the Department to determine The Panel was established on May 4, 2000, whether the U.S. sales by GCC should be pursuant to a request made by Agromex compared to the home-market sales of a Fertilizantes, S.A. de C.V. (―Agromex‖) particular type of cement as sold by Cemex. challenging the Mexican Ministry of The Panel issued its next order on Commerce’s (Secretaría de Economia) November 25, 2003, and remanded to the (―Secretariat‖) final determination of the Department to recalulate duties for antidumping and countervailing duty Cementos de Chihuahua, S.A. de C.V. and investigation of urea. Subsequently, the Cemex. Panel issued three orders seeking information and making rulings on the scope On January 22, 2004, the Panel issued an of the Panel review. The Panel issued its order affirming the Department’s fourth final decision and order on May 23, 2002, determination on remand, and on February and remanded to the Secretariat with several 2, 2004, the NAFTA Secretariat issued a instructions. This present review was based notice of final panel action. on challenges by Promotora Nacional Circular Welded Non-Alloy Steel Pipe from Mexico (USA-MEX-98-1904-05). On June 6 7, 2004, the Panel issued its decision on the See Circular Welded Non-Alloy Steel Pipe and Tube from Mexico: Final Results of Antidumping Duty Department’s third determination on remand Administrative Review, 57 FR 42953 (Sept. 17, regarding the Department’s final scope 1992). 11 The Mexico Update Winter 2005 - Issue No. 24 Agropecuaria Mexicana, S.A. de C.V. and Secretariat’s decision was in accordance Agrium U.S., Inc. (―Agrium‖), to the with the law, because it did not use the Secretariat’s determination on remand. relevant market as an economic concept of After a review of the challenges, the Panel factor in its final determination. made a series of decisions in its order. First, the Panel found that Agrium’s representative On the issue of whether or not the had the capacity to represent Agrium in this Secretariat’s ruling that beef exporters and matter and accepted Agrium’s challenges. manufacturers be required to present to Second, the Panel found that the Secretariat customs a certificate demonstrating that did not exceed the Panel’s first order by their exports complied with the using evidence extraneous to the classification of ―select‖ or ―choice‖ beef, administrative record. Third, the Panel and that no more than thirty (30) days had found the Secretariat did comply with the passed since the slaughter, the Panel ruled Panel’s previous decision and that the that there were no legal provisions Secretariat’s actions in assessing duties authorizing the Secretariat to make such a based on future urea production was request. Furthermore, the Panel found that consistent with the Panel’s ruling. the Final Determination gave no explanation of the special circumstances or reasons Beef (MEX-USA 00-1904-02). On March which led the Secretariat to make such a 15, 2004, the Panel made a final ruling in decision. actions by the Secretariat were the review of the April 27, 2000, final not carried out in accordance with the legal determination by the Secretariat’s provisions on the subject of antidumping antidumping investigation on imports of duties of the importing party, furthermore bovine beef originating from the United that there are no legal provisions that allows States. Specifically, this ruling applied to the Secretariat to request a certificate of this the antidumping investigation determination nature. of carcasses or half carcasses or cuts with bone and boneless cuts. The complainants Based on a challenge raised by the in this review included U.S. beef packers, complainants, the Panel found that the cattlemen and exporters. Prior to this March Secretariat was not authorized to impose 15, 2004 decision, the Panel made 19 residual duties on imports from companies previous orders or decisions on procedural that did not comply with the certification issues central to this case. There were classification requirement imposed in the several issues before the Panel during this Final Determination. These residual duties review. were based on best information available and therefore had the highest margin applied The Panel found that the Final to certain classifications of meat. The Panel Determination was legal because the Deputy also rejected the Secretariats claim that it Director of the Department of Legal Affairs imposed higher duties because the (―DGATJ‖) and the Secretariat of the complainants failed to provide necessary Economy had the authority to order and information to calculate the dumping process action by the parties in the margin. The Panel found that the investigation, and that these orders did not information required to calculate duties on rise to the level of ―nuisance‖ as charged by meats aged over 30 days was never the complainants in this review. Next, the requested by the Secretariat, and therefore Panel dismissed the complainants charge the parties did not have a duty to provide that the Secretariat of the Economy’s this information. The Panel remanded on determination with respect to the relevant this issue. market. The Panel found that the 12 The Mexico Update Winter 2005 - Issue No. 24 Two beef companies, PM Beef Holdings, Article 42 of the LCE need to be present in LLC. and Murco Foods, Inc. argued that the order for the Secretariat to determine threat Secretatiat improperly calculated a dumping of injury. The Panel ruled that the margin based on a sample of seven Secretariat must consider all the factors exporting companies because the Secretariat outlined in the Article, but not all have to be did not provide legal grounds for excluding present in order to determine injury. The the remaining nine beef exporters. The Panel found that the Secretariat failed to Panel dismissed the companies’ claims properly determine the rate of increase of because they lacked standing to raise this imports to Mexico in determining injury. It issue because they did not suffer injury remanded the issue to the Secretariat to based on the Secretariat’s determination. clarify the methodology used to project the rate of increase of imports. Next, Packerland Packing Company, Inc. made a similar argument, but specifically As to the Complainants arguments in regard argued that the Secretariat had a duty to get to the material injury to the national consent from the exporters before taking the production of boneless meat, the Panel held sample. As a result, Packerland argued that that the Secretariat failed to determine that it had no recourse to object or respond to the the unfairly traded imports were the cause of Secretariat’s calculated margin. The Panel the alleged material injury. The Panel ruled that Packerland also lacked injury as a remanded on this issue. The Panel found result of the Secretariat’s actions. that the Secretariat properly used the correct Furthermore, the Panel found that currency in the Final Determination. The Packerland’s rights were not denied because Panel upheld the Secretariat’s final the Final Determination stated it could determination on the use of TIF receive a antidumping duty margin slaughterhouses. Lastly, the Panel ruled that specifically applicable to Packerland and the Secretariat properly considered all unrelated to the other margins, if Packerland information submitted by PM Beef Holdings provide necessary information. LLC., and that no applicable provision was violated. CKE Restaurants, Carl’s Junior de Monterrey, S.A. de C.V., Industrializadora de Comida Tapida, S.A. de C.V. argued that the Secretariat erred by imposing antidumping duties greater than the dumping Highlights of Legislative margin calculated. The Panel ruled that the Developments Secretariat imposed a condition on CKE’s Restaurant’s dumping margin which resulted in a greater AD duty, and was therefore illegal. The Panel reasoned that the AD duty shall not exceed the margin. Therefore, the Panel remanded this issue back to the B elow is a brief summary of significant legal developments in Mexico that highlights certain legal topics published in the Mexican Federal Official Gazette (―FOG‖). The topics are Secretariat to determine the appropriate margin as it relates to CKE. The Panel selected to include those that may be of found that Carl’s Junior and Comida Tapida interest to persons involved in business did not suffer injury because the final transactions and/or the general practice of determination was favorable to them. law with respect to Mexico. The Panel rejected the Complainants Promulgation of the Cultural and Educative argument that all the provisions under Cooperation Agreement Signed Between the 13 The Mexico Update Winter 2005 - Issue No. 24 Government of the United Mexican States obligations and restrictions, training and the and the Kingdom of Thailand (FOG of applicable sanctions and penalties. It creates October 1st, 2004). The purpose of this a National Registry of Companies and agreement is to increase and promote Employees in the private security field, cultural and educational cooperation which will also contain information on between both countries. This, among other equipment and armor utilized. Further, things, will encourage the exchange of employees will be required to be registered students, the diffusion of each country’s with the National Registry of Public cultural heritage, the exchange of Security Officers. Employees will need to documents, information and specialists of have an identification credential in order to each country and the granting of the be eligible for employment in the field. necessary administrative, fiscal and customs facilities for the supply of equipment and These regulations are welcomed by users of materials to be used in such projects and private security services as they are intended programs. to create a much needed reliable environment regarding personal security Nautical Tourism Regulations (FOG of services. October 1st, 2004). The regulations provide rules for the control of recreational Rules for the Creation of the Credit Files navigation in navigable waterways with Kept by Banking Institutions (FOG of minor recreational and sport boats, both for October 13, 2004). These Rules are personal use and for the provision of third designed to oblige banking institutions to party commercial services. The Regulations properly maintain a file for each debtor or also provide that requirements must be met counterparty, depending on the nature of the in order to provide nautical tourism services, transaction, and to maintain the necessary included much-needed insurance information in each file in order to better requirements. assess the credit risk to be allocated to such parties. The lack of proper filing may result Amendment to the Law on Prizes, in an increase in the reserves to be kept by Incentives and Civil Rewards (FOG of the bank of up to 100% of the amount of the October 11, 2004). This amendment allows debt. a single person to receive two or more different prizes awarded by the federation Amendment to the Financial Institutions with the only requirement that they are not Law (FOG of November 5, 2004). The in the same field. The regulations were also amendment requires banking institutions to amended to further provide for rules give notice to the Ministry of Finance and applicable to prizes awarded in the sports Public Credit of all the relevant information field including the National Sports Award, with the opening, relocation or closure of which can be granted to the same person as their respective branch offices 30 days in many times as he or she deserves, taking advance. into consideration the specific performance and athletic career. Amendments to the General Health Law (FOG November 5, 2004). The amendments Private Security Services Regulations (DOF regulate and control the organ donation October 13, 2004). These regulations are process and describe the specific situations intended to better regulate private security in which certain sanctions are to be applied. services when rendered within two or more The amendments are intended to better federal states of the United Mexican States. control the approval and authorization This includes the authorization process, process for the donation of organs as well as 14 The Mexico Update Winter 2005 - Issue No. 24 to create a preferential recipient list for the Mexican Government to collect taxes. This use of organs. Specific crimes are created is the first time in many years that the yearly for preventing the extraction of organs from amendments to the tax laws were made at the deceased and the illegal transport of the beginning of December and not on the organs. last day of the previous tax period, as usual. General Mandatory Provisions for the While a substantive tax reform was expected Prevention, Treatment and Control of in order to prompt economic growth, the HIV/AIDS in Public Institutions of the political scenario encountered by the present National Health System (FOG November administration and the lack of compromise 12, 2004). The General Health Council among the various political parties only issued these provisions in order to better allowed for a few changes which continue to control aids treatment within the National be considered minor vis-à-vis the general Health System. For instance, each treatment expectation and need to fully reform the institution is to create and share with other Mexican tax system. institutions within the system a confidential file on users of HIV medicine. General Rules for Classifying Banking Institutions (FOG December 3, 2004). Income Law for the 2005 Fiscal Year (FOG National Banking and Securities November 24, 2004). This law reflects the Commission issued these rules as requested amounts that the Congress allows the by article 134 bis of the Credit Institutions Federation to receive as income deriving Law in order to classify banking institutions from all types of taxes, duties, levies and according to their capitalization index. The other contributions, including income classification allows the National Banking generated by government agencies and and Securities Commission to apply public enterprises. appropriate corrective measures to banking institutions according to each type of Promulgation of the Treaty for Cooperation category they belong and thus allows them and Mutual Judicial Assistance in the Field to maintain appropriate capitalization levels. of Criminal Law, signed between Mexico The measure will help to prevent financial and Uruguay (FOG November 30, 2004). crisis as the one existing in 1995. This is yet another of many international agreements signed by Mexico with the Promulgation of the Treaty to Avoid Double purpose of allowing for more efficient Taxation and Prevent Tax Evasion Between cooperation between the judicial systems Mexico and Austria (FOG December 8, among various countries. The treaty allows 2004). This treaty was approved by the for exchange of information, localization of Mexican Senate on September 28, 2004 and individuals and objects, domiciliary increases the already extensive list of searches, securing of assets and other countries with which Mexico has entered measures in order to facilitate criminal into double taxation treaties. proceedings. Promulgation of the Treaty to Avoid Double Miscellaneous Tax Decrees (FOG of Taxation and Prevent Tax Evasion Between December 1st, 2004). As usual, Mexico’s Mexico and Indonesia (FOG December 8, Congress approved the general amendments 2004). This treaty was approved by the to various tax laws and the issuance of 2005 Senate of the United Mexican States on tax laws, including the Income Tax Law, April 29, 2003 and increases the already Value Added Tax Law, Asset Tax Law. The extensive list of countries with which issuance and amendments allow the 15 The Mexico Update Winter 2005 - Issue No. 24 Mexico has entered into double taxation Amendment to the General Education Law treaties. Regarding Preschool Education (FOG December 10, 2004). Several provisions of Amendment to the Agreement between the General Education Law were amended Mexico and the United States of America on in order to establish pre-school as the the Agreement for the Creation of a Cross- mandatory entry-level grade and regulate all Border Ecological Cooperation Commission referring to preschool education. The and the North American Development Bank amendments also reinforce the Mexican (FOG of December 9, 2004). The government’s ability to determine amendment to the Agreement is based on educational plans for preschool, primary and the need to improve the operational secondary education, course studies, and the efficiency and cooperation between the educational calendar. Commission and the NADBANK in order to increase resources destined to ecologically sound infrastructure projects in both sides of the border between the US and Mexico. (FOG of December 31st, 2005). Congress enacted this new law, which is a Amendment to the Law for the Production consequence of the amendment to the and Sale of Roasted Coffee (FOG of Constitution on June 2002, whereby the December 10, 2004). The law was amended second paragraph of article 113 was to include specific provisions regarding amended to provide for the general liability information provided to the public on the of the State in the case of irregular specifics of coffee, coffee mixtures, and administrative actions. The amendment rules for the sale and packaging of coffee. required Congress to issue a law regulating this liability and also required all States to Amendment to the Law on Army and issue a local law on the subject matter. To Mexican Air Force Discipline (FOG of date, only a few States have issued such a December 10, 2004). The law was amended law. This new law regulates the liability of to include main principles of military the State and further regulates the process to discipline, including corrective measures be followed in order to enforce such and sanctions in cases of disobedience by liability. Likewise, the State may sue the members of the Army or Mexican Air Force. specific public officers responsible for the irregular act and therefore the damaged Regulations on the Registries, Import and caused to the victims. This is a new area of Export Authorizations, and Export Mexican law in need of further development Certificates for Pesticides, Vegetable Nutrients, Toxic or Dangerous Substances and Materials (FOG of December 28, 2004). The Regulations are designed to better coordinate the various tasks that different governmental entities perform regarding the import and export of pesticides, vegetable nutrients and other toxic or dangerous substances. The Regulations will allow for better control of substances coming into Mexico and leaving the country, ensuring that all safety measures are complied with. Law on Patrimonial Liability of the State 16