A company leased a helicopter to an entity domiciled in Mexico. In the event of a dispute, the parties agreed that it would be resolved before courts in Louisiana. The lessor believed this would provide greater certainty and protection. It did not.
The lessor filed a claim in the United States (US) due to the lessee’s breach. It then requested a Mexican judge to freeze the lessee’s bank accounts as a provisional remedy, and the court granted it. After the lessor informed the Mexican judge that it had initiated proceedings in the US, the judge lifted the measures.
The lessor reversed the sequence: it filed first in Louisiana and only then requested the measures. Before a claim is filed, Article 1112 of the Mexican Commercial Code allows provisional remedies to be requested from the court competent to hear the merits of the case, or, in urgent cases, from the court where the defendant or its assets are located. That Mexican court had jurisdiction to order the measures. However, once the claim has been filed, Article 1177 of the same code provides that jurisdiction becomes exclusive to the court hearing the merits of the case, even if it is located abroad. Express submission to a US court did not eliminate the possibility of freezing the lessee’s bank accounts in Mexico; what did was the decision to file the claim first in Louisiana.
When provisional remedies are requested before filing the claim, the applicant has three days to initiate proceedings; otherwise, the measures are automatically lifted. This deadline is critical for the applicant as a key window of time and also for the counterparty, as it becomes its first line of defense if the claim is not filed within that period.
For a foreign company, choosing courts to resolve disputes with Mexican counterparties does not always provide greater certainty. If it seeks to attach assets, it must request it from a Mexican judge before initiating the claim. Otherwise, that opportunity is lost.
On the other hand, many companies in Mexico enter into contracts with foreign clients drafted by those clients, which include express submission clauses to courts outside Mexico.
They sometimes overlook that, if a dispute arises, the fact that a foreign court will resolve the merits of the case does not prevent their assets from being subject to provisional remedies in Mexico. Understanding this and the deadline the applicant has to initiate proceedings before the competent court can make the difference between executing an effective defense and disrupting ordinary operations.
This is not the first time that a clause accepted as a mere formality in a contract determines what happens to your bank accounts and assets in Mexico.
Do you know who drafted your contracts with non-Mexican clients? Are they subject to foreign courts? Did anyone advise you of the implications those clauses may have for your assets in Mexico?
