MEXICO Law and Practice Contributed by: Julián J. Garza Castañeda and Paulina Bracamontes Belmonte, Nader Hayaux & Goebel
6.3 Foreign Court Judgments See 6.2 Foreign Law and Jurisdiction regarding enforcement of a foreign court judgment. 6.4 A Foreign Lender’s Ability to Enforce Its Rights The following additional matters might impact a for- eign lender’s ability to enforce its rights under a loan or security agreement. • In the event that proceedings are brought in Mexico seeking performance of the obligations of the borrower in Mexico, pursuant to the Mexican Monetary Law, the borrower may discharge its respective obligations by paying any sums due in a currency other than Mexican currency in Mexican currency at the exchange rate prevailing in Mexico and fixed and published by the Mexican Central Bank ( Banco de México ) in the Official Gazette of the Federation ( Diario Oficial de la Federación ) of Mexico on the date preceding the date of payment. • In the event that any legal proceedings are brought in the courts of Mexico concerning transaction documents prepared in English, a Spanish trans- lation of such documents required in such pro- ceedings prepared by a court-approved translator would have to be approved by the court after the defendant had been heard with respect to the accuracy of the translation. Proceedings would thereafter be based on the translated documents. • The enforceability of the terms of certain financ- ing and collateral documents may, for example, be limited by bankruptcy, insolvency, • concurso mercantil or other laws relating to credi- tors’ rights generally. • When evaluating available enforcement options, it must be considered that remedies may not be cumulative or exercised concurrently.
Provided prior authorisation of the Insolvency Court is obtained and subject to its supervision, secured creditors under a mortgage or a pledge may foreclose on their collateral. Under Mexican Insolvency Law, trust assets are excluded in principle from the estate of the insolvent entity to the extent that they have been validly con- veyed to the security trust. Therefore, if the collat- eral is subject to a security trust, the first beneficiary (lender) under the trust agreement may commence an extrajudicial foreclosure procedure outside the insolvency proceeding. Such rule, however, may be subject to exceptions and the final determination of the Insolvency Court. Provided there is an insolvency judgment in place, the following effects will arise: • The insolvent entity’s unsecured obligations in Mexican pesos will be converted into indexed units of account ( unidades de inversión , or UDIs), and interest will stop accruing. • Any unsecured obligations contracted in foreign currency will be converted into Mexican pesos and then into UDIs. • Secured obligations will be kept in the currency they were contracted in, and may continue to accrue ordinary interest up to the amount of the respective collateral. The insolvent entity’s obligations will then become due. However, their payment is subject to: • entering into a reorganisation agreement between the insolvent entity and its court-approved credi- tors; or • the bankruptcy declaration of the insolvent entity, containing the sale of its assets under a court- supervised liquidation. 7.2 Waterfall of Payments Under Mexican law, the distribution of proceeds from the liquidation of an insolvent entity’s assets for credi- tor repayment is structured as follows:
7. Bankruptcy and Insolvency 7.1 Impact of Insolvency Processes
As a general rule, the enforceability of the terms of certain financing and collateral obligations may be limited by bankruptcy, insolvency, concurso mercan- til or other laws relating to creditors’ rights generally.
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