These days, it is easy to find reports from consulting and law firms trying to reassure investors that, despite the destruction of Mexico's judiciary, arbitration and other dispute-resolution mechanisms appear to remain viable substitutes for settling conflicts in the country.
The Reassurance That Isn't
Alternative dispute resolution mechanisms are, at best, a false substitute, momentary relief for a handful of cases and for a select few, but by no means a replacement for a serious, independent national judiciary. The uncertainty and damage caused by Mexico’s judicial counter-reform mean that a range of actors now have to innovate, doing damage control and reducing risk through alternatives external to and independent of what is still misleadingly called Mexico’s Judiciary.
The overtures and agreements that other countries pursue with Mexico now require new forms and strategies to compensate for having to operate with a government that lacks a traditional separation of powers. It was therefore to be expected that mechanisms would begin to emerge to substitute for (and pull away from) the federal judiciary: alternatives meant to contain the distrust and the threat that this new political arrangement (more political than judicial) generates both inside and outside the country.
Corporate America Wants an Exit
In a letter sent late last year to the Office of the U.S. Trade Representative, the business group Business Roundtable, which brings together CEOs of major U.S. multinationals, urged the following in its section on Mexico:
“To mitigate the risk stemming from politicized judicial systems, the Roundtable strongly recommends that the Office of the Representative consider reinstating the Investor-State Dispute Settlement (ISDS) mechanism with Mexico. Over the past five years, Mexico has adopted several troubling measures that have negatively affected U.S. investments in the country […]. By fully restoring the ISDS system in Mexico, U.S. investors would have the option of resolving their disputes through independent arbitrators. The mere existence of the ISDS mechanism would likely lead political actors to reconsider decisions such as expropriating investments or pressuring the courts to serve political interests.”
This is one example of how uncertainty is beginning to change the way other countries see, treat, and trade with Mexico. Some recent negotiations and overtures show that, as a condition for investing in Mexico, parties are demanding more reservations, conditions, and independent bodies to check an unpredictable government that lacks reliable mechanisms for resolving disputes and guaranteeing access to justice.
Brussels Hedges Its Bets
A recent case illustrates this pattern of caution and reaction. In May, a round of negotiations between Mexico and the European Union that began in 2016 came to a close, and on July 8, the European Parliament approved the Modernized Global Agreement and the Interim Trade Agreement. This agreement will replace the Global Agreement, which governs commercial relations between the two parties. On the question of dispute resolution, however, the agreement introduces a significant departure from traditional investment-arbitration models: it establishes a permanent tribunal.
A Court Built on Distrust
