Banking legal considerations in Mexico: Financial Arbitration – Part I

Arbitration is an effective dispute resolution mechanism that offers many advantages over any other means of dispute resolution. Although controversies may arise from the commercialization of commonly used products, they may also arise from the consumption of financial products in the market at a national and international level worldwide and which can be resolved through such mechanism.

In Mexico there are financial and banking products that have not been unrelated to the arbitration procedure, which today has become a recurring mechanism for the private sector for the resolution of disputes even though it is still not the preferred mechanism to resolve disputes.

It is important to mention that the parties of any operation/transaction carried out with financial products or services can freely agree to arbitration as a dispute resolution mechanism, as long as they comply with the formalities and requirements of the applicable legal provisions, either in Mexico or abroad.

In our country, since 2015, the so-called arbitration system of the National Commission for the Protection and Defense of Users of Financial Services (Comisión Nacional para la Protección y Defensa de los Usuarios de Servicios Financieros) (CONDUSEF) is currently in operation, where disputes between individuals/corporations and banking institutions or financial intermediaries are resolved.

Such system has the purpose of facilitating the users of financial services and financial institutions, the resolution of their controversies through arbitration, regarding certain operations, products or services that are previously registered by such financial institutions before the CONDUSEF, so before each transaction, it should be consulted whether such product is registered with the relevant authority.

In this procedure, there is an instructor who is a public officer dependent on the CONDUSEF who is in charge of the entire procedure until the formulation of the draft arbitration award.

The General Management of Arbitration and Sanctions (Dirección General de Arbitraje y Sanciones) of the CONDUSEF is in charge of issuing the arbitration award, which must be approved by the specialized arbitration committee that may be integrated by public officers of the CONDUSEF, the National Banking and Securities Commission (Comisión Nacional Bancaria y de Valores), the National Insurance and Bonds Commission (Comisión Nacional de Seguros y Fianzas), of the National Commission of the Retirement Savings System (Comisión Nacional del Sistema de Ahorro para el Retiro) and of the Ministry of Finance and Public Credit (Secretaría de Hacienda y Crédito Público); either, by independent arbitrators, or by a mixture of both.

Both the procedure and the arbitration award could be in charge of the CONDUSEF, although it may be requested –by express provision of the applicable legislation– that the arbitral court be made up of independent arbitrators appointed by the parties and whose fees would be paid by the CONDUSEF itself.

In this respect, it is important to mention that, depending on the jurisdiction of the parties, it may be necessary to establish specific requirements for the interpretation of the arbitration clause and the origin of the financial operation and the due compliance of the parties so as not to affect the validity of the principal agreement.