Presentation is loading. Please wait.

Presentation is loading. Please wait.

Workshop of the Berne Union International Union of Credit & Investment Insurers Vienna, 4 October 2010 Dr. Herfried Wöss © Credit Securities in Mexico.

Similar presentations


Presentation on theme: "Workshop of the Berne Union International Union of Credit & Investment Insurers Vienna, 4 October 2010 Dr. Herfried Wöss © Credit Securities in Mexico."— Presentation transcript:

1 Workshop of the Berne Union International Union of Credit & Investment Insurers Vienna, 4 October 2010 Dr. Herfried Wöss © Credit Securities in Mexico 1

2 General Remarks Absence of the good faith principle in business dealings: the good faith principle exists in the Federal Civil Code but is a rather empty legal institution The business culture is marked by Spanish, Lebanese and Jewish influences Legal islands system: some institutions work (summary action under promissory notes) and others exist on paper in the Civil Code which is based on the French system 2

3 General Remarks Weak judicial system: the first two instances are mostly at a local level and the third and fourth on a federal level, however the third and the fourth level are mainly institutions of annulment Use of criminal actions and other chicanery against creditors (e.g. HypoVereinsbank vs. Colortex/Kimex) Existence of a legal mine field where formal errors easily lead to the credit becoming irrecoverable 3

4 General Remarks Insufficient or incorrect contracting is an invitation to Buyer not to comply with its payment obligations Typical arguments in order not to make payment: defects of the machines defects in legal representation whatever imagination allows Problem: lack of assets (rich entrepreneurs and poor companies) in case of collection actions 4

5 Proper Contract A proper contract should be drafted using the ICC model sales contract and the credit security instruments of Mexican law An order confirmation is not sufficient It is important to revise the powers of attorney of the Buyers legal representative: there is no general powers of attorney in Mexico The object of the sale has to be properly described in Spanish and the goods should be marked as the property of Seller Invoices are sent upon payment but not before: pro forma invoices are used for customs purposes 5

6 Applicable law and forum UN Sales law should not be opted out: the application of foreign law is expensive (legal experts are necessary) and often does not lead to the correct results it is important to limit the remedies of the Buyer to warranties and to exclude damages claims, unless for intentional acts or omissions The forum should always be in the country of the debtor: the execution of foreign judgements is cumbersome and there are few lawyers who know how such cases the requirement of the proof of reciprocity adds cost 6

7 Applicable law and forum Division of fora: The payment and repossession of property should be litigated before Mexican courts subject to formal requirements. Technical issues should be brought to arbitration (ICC or VIAC). This includes the specifications of the goods, warranty issues, operation, etc. 7

8 Credit Securities Reservation of title and termination clause: The reservation of title clause and the termination clause in case of non-performance of a partial payment by Buyer have to be registered in the Public Registry of Property. In order to do that, the contract signatures have to be authenticated and the foreign notarial certification be apostilled. In order to save cost, bilingual contract versions should be used and local attorneys be authorized in the contract to execute the registration of the reservation of title clause and termination clause for the non-performance of instalments in the Public Registry of Property. 8

9 Credit Securities Reservation of title and termination clause: The government fees depend on the the respective state legislation. Normally, there is a percentage with a top rate. The reservation of title clause duly registered allows for the repossession action under a summary procedure. The reservation of title allows for the separation of the goods in case of bankruptcy. The reservation of title permits the filing of criminal actions in case of improper disposal of the goods, provided there are the respective clauses in the contract. 9

10 Credit Securities Promissory notes: Mexico follows the Second Geneva Convention but is not a party to such convention There should be one promissory note for each instalment The promissory notes have to contain a so-called acceleration clause which has to be formulated according to jurisprudence; i.e. all payments become mature in case of non-payment of only one instalment This allows for the collection of the total outstanding amount and serves as an incentive for payment. 10

11 Credit Securities Promissory notes: It is important that the principal shareholder of the Buyer signs the promissory notes as guarantor. The promissory notes have to match the sales contract as a mirror image. Otherwise the Buyer might put forward defences based on the contract under article 8 of the General Law of Negotiable Instruments and Banking Operations (causal defences). Such defences can be avoided through the endorsement of the promissory notes to a banking institution prior to maturity. 11

12 Credit Securities Promissory notes: The instalments and the promissory notes should already contain capital interest for financing, unless the separation of the financing charges is necessary for customs valuation reasons. The default interest in the sales contract and the promissory notes have to be the same. 12

13 Credit Securities Bankruptcy: In case of a reservation of title duly registered, a so-called separation action (incidental action) may be filed before the Federal Bankruptcy Judge to recover the possession of the goods. 13

14 Credit Securities Factual Credit Securities: In case of machines, software should be installed to have them switched off in case the Buyer does not pay. Particular, care has to be taken when such software is activated to avoid warranty claims and criminal actions. A separate maintenance agreement should be entered into. Such maintenance agreement has to establish that maintenance may be refused in case of non-payment of the price under the sales agreement. Maintenance obligations should not be included in the sales agreement. 14

15 Credit Securities Other recommendations: Labour contingencies have to be excluded from force majeure as in case of a repossession actions, the Buyer will request its trade union to commence a strike in order to avoid the return of the machines. 15

16 Credit Securities The Sole Registry of Securities in Mobile Goods Modification of the Commercial Code as of August 27, 2009 New Regulations of the Public Registry of Commerce as of September 23,

17 Credit Securities The Sole Registry of Securities in Mobile Goods Registration of multiple operations: reservation of title pledge without possession limited recourse financing industrial mortgage airplanes financial lease guaranty trusts rights of retention and other privileges 17

18 Credit Securities The Sole Registry of Securities in Mobile Goods Authority: Ministry of Economy Filing: electronic filing Commencement date: emission of the corresponding guidelines by the Ministry of Economy by April 7,

19 Credit Securities Conclusions Insufficient contractual structures represent an invitation to Buyer not to perform Utmost care is necessary to secure payment Errors of form lead to collection problems Insured should be obliged to fulfil minimum requirements to secure their credits 19

20 Torre Esmeralda I Blvd. Manuel Ávila Camacho Col. Lomas de Chapultepec México, D.F. Tel: +52 (55) Fax: +52 (55)


Download ppt "Workshop of the Berne Union International Union of Credit & Investment Insurers Vienna, 4 October 2010 Dr. Herfried Wöss © Credit Securities in Mexico."

Similar presentations


Ads by Google