Philip T. von Mehren, New York and Eduardo Ruiz Vega, Mexico City
NAFTA imposes an international treaty obligation on each NAFTA country to act in accordance with NAFTA's substantive rules. These substantive rules specifically impose obligations on the types of laws and regula- tions and other measures that a NAFTA coun- try may adopt or apply with respect to certain entities, such as, for example, a NAFTA inves tor. Nonetheless, an interesting conundrum exists when a NAFTA rule conflicts with a domestic law. For example, how would a domestic court in a NAFTA country rule if that country enacted a law that conflicts with, for example, Chapter Eleven's rule of national treatment, which essentially states that a NAFTA country may not discriminate against a NAFTA investor in favor of a domestic investor? Under U.S. Iaw, the solution is fairly straighfforward: the statute would govern because it is last in time. Under Mexican law the solution is not as clear and, due to the rapid reform of Mexican law prior to, during and after the negotiation of NAFTA, more likely to be an issue.
Under only NAFTA, the analysis is fairly straighfforward. With respect to those laws and regulations that are either more or less liberal than NAFTA requires, pursuant to Article 27 of the Vienna Convention on the Law of Treaties, which states that a "party may not invoke the provisions of its internal law as justification for its failure to perform a treaty," Mexico would violate NAFTA if Mexico en- forced a domestic law or regulation against, for example, a NAFTA investor that violated NAFTA. (In such a case, Mexico would, of course, run the risk of either an investor-state or state-state arbitration depending on the specific substantive rule of NAFTA breached by Mexico.) Thus, to the extent that a domes- tic or non-NAFTA investor has a right to invest in Mexico, a NAFTA investor must have the same right.
How a Mexican court would approach a conflict between NAFTA and a municipal Mexican law is not as clear. Nonetheless, the starting point for such an analysis is Article 133 of the Mexican Constitution, which states:
This Constitution, the laws of the Congress of the Union that emanate from it [the Constitution] and all treaties that are in accordance with the same [the Constitution], entered into or to be entered into by the President, and with the approval of the Senate, will be the Supreme Law of all the Union. The judges of each State shall conform with such Constitution, laws and treaties, notwithstanding contrary provisions that might exist in the Constitutions and laws of the States.
Mexican jurists interpreting this constitutional provision have come to different conclusions regarding the relationship between international treaties and national law. One view, the internationalist school, is that international treaties are of a higher rank than federal laws, except laws that emanate from the Constitu- tion (leyes constitucionales), which include leyes organicas -- laws that establish agencies provided for in the Constitution, leyes reglamentarias -- laws that develop constitu- tional norms, and leyes sociales -- laws that develop constitutional rights. As a result, a contradiction between NAFTA and a federal law, except a ley constitucional, would be resolved in favor of the NAFTA provision.
A second view, the last-in-timers, is that all federal laws emanate from the Constitution and, thus, treaties and federal laws are of the same hierarchical level. Some textual support for this position exists in the last sentence of Article 133, which appears merely to state the supremacy of the federal constitution, laws and treaties over state constitutions and laws. Under this view, as in the United States, the rule of last in time from the effective date of law would apply. As a result, the law or treaty would govern depending on which had a later effective date.
A third view, that of the nonconfrontationalists, takes a somewhat different approach. Under this view, the emphasis is on avoiding conflicts so that both the federal law in question and the treaty, such as NAFTA, are given full effect. Pursuant to this view, an international treaty such as NAFTA is consid- ered a "specific" law because it governs "specific" matters involving the NAFTA coun- tries. In contrast, for example, the Foreign Investment Law is a ~general~' law because it generally governs foreign investment in Mexi- co. Any "conflict" between NAFTA and a specific Mexican law, such as the Foreign Investment Law, is, therefore, illusory. In- stead, NAFTA investors are entitled to the benefits under the specific law, NAFTA, that governs a NAFTA investor's right to invest in Mexico, while the Foreign Investment Law governs all other investors. One implicit change that demonstrates both the pervasive effect of NAFTA and the difficulty of analyzing Mexican legal rules under NAFTA is the well-known Mexican rule that a foreign shareholder may not have a greater percentage control of the board of directors of a Mexican company than the shareholder's percentage of the capital stock of the Mexican company. In other words, if a foreign investor controlled fifty percent of the stock of a company, the foreign investor would not have the right to appoint the majori ty of the company's board members. The rule was originally designed to prevent the operat- ing control of a Mexican company to vest in the foreign investor when foreign investors were limited to owning a minority of the capital of a Mexican company. The genesis of the rule prohibiting a foreign shareholder from controlling a greater percentage control of the board of a Mexican company than the foreign shareholder's percentage of the capital stock of the compa- ny dates back to the 1970's. The old foreign investment law, the Law for Promoting Mexican Investment and Regulating Foreign In- vestment, states in Article 5 that "[t]he partici- pation of foreign investors in the Board of Directors of a company may not exceed the investors' participation in the company's capital." In 1989, new regulations to the Law for Promoting Mexican Investment and Regu- lating Foreign Investment were promulgated.
The 1989 Regulations state that "[t]he appoint- ment of foreigners as members of the man- agement of companies having foreign inves- tors in their capital stock does not require authorization, provided that the provisions of the last paragraph of Article 5 of the 1973 Law are met." The Foreign Investment Law, which was passed in 1994 after NAFTA passed the U.S. Congress, is silent on whether foreign share- holders may control a greater percentage of the board of a Mexican company than the shareholder controls of the capital stock of the company. Transitory Article 4 of the Foreign Investment Law merely states that, pending issuance of new regulations to the Foreign Investment Law, the 1989 Regulations will govern to the extent that they do not "oppose" the Foreign Investment Law. Thus, if the reference in the 1989 Regulations to the rule opposes the Foreign Investment Law, the reference would be invalid. Nonetheless, such an argument is not necessary. Although Mexico would violate NAFTA, specifically Chapter Eleven's rule of national treatment, if Mexico prohibited a U.S. or Canadian investor from gaining a greater percentage control of the board of directors than such investor controls of the company's capital stock, only an analysis of the rules of Mexican jurisprudence relating to international treaties can determine what is in fact the content of Mexican law. Under two of the views of the relationship between international treaties and Mexican law, NAFTA's rules would take precedence over any rules derived from the Foreign Investment Law. Under the internationalist view of the relationship, as we have seen, international treaties govern ex- cept for all laws that emanate from the consti- tution, so-called leyes constitucionales. Since under this view the Foreign Investment Law is not a ley constitucional, ~IAFTA's provisions would govern with respect to NAFTA inves- tors. Alternatively, if the non-confronta- tionalist approach is applied, NAFTA's provi- sions would also govern because the Foreign Investment Law is a general law and NAFTA is a specific law. Thus, under two of the views of the relationship between NAFTA and Mexi- can law, even if a Mexican court concluded that the Foreign Investment Law read in conjunction with the 1989 Regulations still prohibited a foreign shareholder from control- ling a greater percentage of the board of directors than the shareholder's percentage of the capital stock, rules of Mexican jurispru- dence should lead a Mexican court to hold that NAFTA takes precedence over the For- eign Investment Law with respect to the treatment of NAFTA investors. Nonetheless, under the last-in-time approach, a Mexican court could reach a different result, depend- ing on what date a statute is considered promulgated under Mexican law. On one hand, the Foreign Investment Law was pub- lished in the Diario Oficial on December 28, 1993, with an effective date of December 29, 1993. On the other hand, NAFTA was pub- lished in the Diario Oficial on December 20, 1993, with an effective date of January 1, 1994. Thus, if the relevant date is the day of publication, pursuant to the last-in-time view of the relationship between international treaties and domestic law, the Foreign Invest- ment Law would appear to trump NAFTA in cases of conflicts because the Foreign Investment Law was published on a later date, December 28, 1993, while NAFTA was published on December 20, 1993. Conversely, if the relevant date is the effective date, which appears to be the better view under Mexican law, NAFTA would govern because its effective date, January 1, 1994, was later than the Foreign Investment Law's effective date, December 29, 1993.
International Report July 1996. Reprinted with permission
Home-page extraída e adaptada de: http://natlaw.com/pubs/spmxcu3.htm