Mexico: New amendments provide for use of electronic, optical, or other technologies in the issuance of negotiable instruments
On March 26, 2024, reforms to Mexico’s General Law of Titles and Credit Transactions (Ley General de Títulos y Operaciones de Crédito, or LGTOC) and the General Law of Credit Organizations and Ancillary Activities (Ley General de Organizaciones y Actividades Auxiliares del Crédito, or LGOAAC) were published (the Amendments) in order to legally recognize negotiable instruments issued through electronic, optical, or any other technology-based means (Electronic Means) using information systems that generate, transmit, receive, or process data messages (the Relevant Negotiable Instruments).
The Amendments entered into effect on March 27, 2024. The changes are based on the Model Law of the United Nations Commission on International Trade Law (UNCITRAL) on electronic commerce.
In this alert, we take a concise look at key changes derived from the Amendments.
The Amendments published in the Official Gazette of the Federation (Diario Oficial de la Federación) aim to facilitate commercial transactions while providing legal certainty to the parties involved. With these legal changes, rights contained in both written negotiable instruments and the Relevant Negotiable Instruments, this is those issued through Electronic Means, shall be legally valid and enforceable in Mexico.
The Amendments acknowledge other jurisdictions existing laws on conducting commercial activities digitally. Although the Commercial Code (Código de Comercio) already regulates digital commercial transactions, the latest measures establish protection mechanisms for Relevant Negotiable Instruments, aiming to prevent fraud and provide legal certainty to economic agents involved in commercial activities. The LGTOC sets out minimum requirements for Relevant Negotiable Instruments to be operable, helping for the protection for parties involved in commercial transactions.
The Amendments (i) provide that the information contained in Relevant Negotiable Instruments must be available to the parties and third parties involved in commercial activities; (ii) aim to ensure the integrity of Relevant Negotiable Instruments, (iii) provide tools to verify that the signatures contained therein are from the attributed persons, (iv) allow access to Relevant Negotiable Instruments information at any time and only transit through Information Systems, and (v) implement security standards to ensure confidentiality, information availability, and prevent fraud and cyberattacks.
Per the amended laws, parties must conduct operations related to Relevant Negotiable Instruments through relevant Information Systems, which are understood as controlled and verified environments in which the electronic traceability of the existence and circulation of Relevant Negotiable Instruments can be safeguarded (the Information Systems). The use of Information Systems will allow the Relevant Negotiable Instruments for compliance with requirements applicable to negotiable instruments issued through written means.
Among other provisions, the validity of Relevant Negotiable Instrument Endorsements will depend on whether such endorsements were conducted through Information Systems. The same applies to delivery of Relevant Negotiable Instruments, which will be deemed delivered if completed through the Information Systems.
Similarly, important aspects such as verifying the identity of signatories of Relevant Negotiable Instruments will also be carried out through Information Systems. This process will also apply to guarantee (avalar) and/or cancel Relevant Negotiable Instruments, which must be done through Information Systems.
Warehouse receipts/pledge bonds
The Amendment states that general warehouses (Almacenes Generales de Depósito) must issue warehouse receipts (Certificados de Despósito) through Electronic Means via Information Systems, which will be cryptographic and must be registered in the Single Registry of Warehouse Recipts and Goods (RUCAM) in accordance with the terms provided in LGOAAC.
LGTOC provides various rules regarding the issuance, registration, and transmission of warehouse receipts.
Further, among other key changes, the LGTOC provision that gives rise to pledge bonds (bonos de prenda) has been repealed. The creation of a real right over the goods covered by the warehouse receipt shall be recorded in the warehouse receipt itself. The creation of such right will be completed through the depositor’s representation regarding if the goods covered by the Relevant Negotiable Instrument are pledged or not. The Warehouse Receipt shall outline the corresponding secured credit characteristics.
Warehouse receipts and pledge bonds issued prior to the Amendment date will remain valid and subject to the previous provisions of LGTOC and LGOAAC.
LGOAAC has been amended to include rules consistent with those of the LGTOC in connection with the issuance, registration, and transmission the Relevant Negotiable Instruments, but applicable to the warehouse receipts in the chapter corresponding to Deposit Warehouses as auxiliary credit organizations.
Deposit Warehouses must adjust their operations based on the Amendments within the following 18 months of the effective date of the Amendments.
The amended LGOAAC provides the creation and operation rules of RUCAM, which shall be managed by the Ministry of Economy (Secretaría de Economía).
Going forward
The federal executive branch, including the National Banking and Securities Commission (Comisión Nacional Bancaria y de Valores), shall have 180 business days from the effective date of the decree containing the Amendments to adjust any regulations and to issue relevant rules.
For additional information, please contact Diego Martinez, Emilio Lie, or Iker González-Luna.
