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Jáuregui y Del Valle

ANTI-CORRUPTION LAW

This Informational Notice refers to the enactment of the Federal Anti-Corruption Law applicable to Procurement Contracts (Ley Federal Anticorrupción en Contrataciones Públicas) (the “Anti-Corruption Law”) published in the Official Daily of the Federation on June 11, 2012.

1. Purpose of the Anti-Corruption Law

The Anti-Corruption Law seeks, inter alia, to ferret out corruption in federal procurement contracting and penalizes entities and individuals: (i) Mexican and non-Mexican regarding violations in connection with their participation in federal public contracting; and, (ii) Mexican regarding violations in connection with their participation in international commercial transactions.

2. Relevant Definitions.-Federal public contracting and international commercial transactions are defined in the Anti-Corruption Law, as follows:

2.1. Definition of Federal Public Contracting

Federal public contracting encompasses contractual procedures, preparatory acts and those which stem from acts, such as contracting, conclusion, execution and performance of contracts concerning acquisitions, leases, services, public works and related services, implemented by contracting public entities set forth in the Anti-Corruption Law, pursuant to public procurement provisions, regardless of the specific legal type of engagement or the structure used for its implementation. The foregoing includes acts and procedures related to public bids or calls, in connection therewith or public auction for the granting of federal permits or concessions or the extension thereof, including any other authorization or arrangement related with public contracting in general.

2.2. Definition of International Commercial Transactions

International commercial transactions encompasses the acts and procedures directed to the contracting, execution and performance of contracts regarding acquisitions, leases, services of any nature, public works and services related in connection therewith; acts and procedures related to the granting and extension of permits or concessions, including any other authorization or arrangement related to the above mentioned transactions that may be implemented by any entity or public entity of a foreign state or that may involve the participation of a foreign public official, in which Mexican individuals or entities participate, directly or indirectly.

3. Individuals and Entities Subject to the Anti-Corruption Law.-The legal provisions of the Anti-Corruption Law are applicable to the following individuals or entities:

3.1. Individuals or entities, whether Mexican or non-Mexican, participating in federal public procurement in their capacity as interested parties, participants in public auction proceedings, guests, suppliers, awardees of contracts, contractors, permit holders, concessionaries or similar;

3.2. Individuals or entities, whether Mexican or non-Mexican, participating in federal public procurement, in their capacity as shareholders, partners, associates, representatives, attorneys-in-fact, legal representatives, brokers, agents, processor, advisors, counselors, subcontractors, employees, in any other capacity, in the name of, on account of or in the interest of the individuals or entities referred to in Item 3.1. above;

3.3. Mexican individuals or entities participating, directly or indirectly, in international commercial transactions; and,

3.4. Public officials who, directly or indirectly, participate in federal public procurement.

4. Authority of Federal Entities.- The Federal Entities set forth below, acting in federal public procurement, have authority as follows:

4.1. The Ministry of the Public Function (Secretaría de la Función Pública) is responsible of enforcing the Anti-Corruption Law, vis-à-vis, cases with merits which involve the Federal Public Administration, including the Office of the Federal Attorney General (Procuraduría General de la República), the States of the United Mexican States, Municipalities of such States, and the Boroughs of the Federal District, upon their carrying out of federal public procurement.

4.2. The Senate (Cámara de Senadores) and the House of Representatives (Cámara de Diputados) of Congress have authority to enforce the Anti-Corruption Law upon acts carried out before them.

4.3. The Supreme Court of Justice of the Nation (Suprema Corte de Justicia de la Nación), the Council of the Federal Judiciary (Consejo de la Judicatura Federal) and the Electoral Court of the Federal Judiciary (Tribunal Electoral del Poder Judicial de la Federación) have the authority to enforce the Anti-Corruption Law upon acts carried out before them.

4.4. The Federal Court of Tax and Administrative Justice (Tribunal Federal de Justicia Fiscal y Administrativa) has the authority to enforce the Anti-Corruption Law upon acts carried out before it.

4.5. The Arbitration and Conciliation Boards (Juntas de Conciliación y Arbitraje), the Arbitration and Conciliation Court (Tribunal Federal de Conciliación y Arbitraje) and the Agrarian Courts (Tribunales Agrarios) have the authority to enforce the Anti-Corruption Law upon acts carried out before them.

4.6. The Federal Electoral Institute (Instituto Federal Electoral) has the authority to enforce the Anti-Corruption Law upon acts carried out before it.

4.7. The Accounting Office of the Federation (Auditoría Superior de la Federación) has the authority to enforce the Anti-Corruption Law upon acts carried out before it.

4.8. The National Commission of Human Rights (Comisión Nacional de los Derechos Humanos) has the authority to enforce the Anti-Corruption Law upon acts carried out before it.

4.9. The National Institute of Statistics and Geography (el Instituto Nacional de Estadística y Geografía) has the authority to enforce the Anti-Corruption Law upon acts carried out before it.

4.10. The Bank of Mexico (Banco de México) has the authority to enforce the Anti-Corruption Law upon acts carried out before it.

5. Acts in Violation of the Anti-Corruption Law.- The Anti-Corruption Law is applicable for individuals or entities incurring in violations regarding federal public procurement upon carrying out, directly or indirectly, the following:

5.1. To promise, offer or give money or any other gift to a public official or a third party related to such public official in exchange for doing an act or refraining from doing an act that is within the authority of such public official or within the authority of another public official, with the purpose of obtaining or maintaining a benefit or an advantage, regardless of whether the money or gift is accepted or received or whether the expected result is actually obtained;

5.2. To promise, offer or give money or any other gift to a non-Mexican public official or to a third party related to such public official, in the context of an international commercial transaction, to do or refrain from doing any act that is within the authority of such public official;

5.3. To carry out acts which purpose or effect is to obtain an unlawful benefit or advantage in federal public procurement;

5.4. To participate in federal public procurement notwithstanding a legal impediment to do so;

5.5. To carry out acts or abstain from acts which purpose or effect is to evade requisites or rules of federal public procurement procedures or simulate that such requisites and rules have been complied with;

5.6. To personally intervene for the benefit of another impeded from participating in federal public procurement with the intent that the latter obtains partial or full benefits arising therefrom;

5.7. To force or obligate a public official, without the right to do so, to give, subscribe, grant, destroy or deliver a document or property in order to obtain a personal advantage or benefit or an advantage or benefit for a another;

5.8. To promote or use influence, economic or political power, real or fictitious, on any public official for the purpose of obtaining a personal benefit or advantage or a benefit or advantage for another, regardless of whether there is an acceptance by the public official or the expected result is actually obtained; or,

5.9. To present documents or false or altered information for the purpose of obtaining an advantage or benefit.

6. Legal Sanctions in the Anti-Corruption Law

6.1. Violations to the Anti-Corruption Law by individuals are sanctioned, as follows:

a) Fines, ranging from one thousand times to fifty thousand times the general minimum wage in the Federal District; and,

b) Prohibition to participate in federal public procurement for a period not less than 3 months and not greater than 8 years.

6.2. Violations to the Anti-Corruption Law by entities are sanctioned, as follows:

a) Fines, ranging from ten thousand times to two million times the general minimum wage in the Federal District; and,

b) Prohibition to participate in federal public procurement for a period of no less than 3 months or greater than 10 years.

6.3. Subject to certain requisites set forth in the Anti-Corruption Law, in the event that the individual or entity violating the Anti-Corruption Law confesses and cooperates with competent authorities, it may obtain a reduction of applicable sanctions.

7. Final Considerations

The Anti-Corruption Law introduces a legal innovation, which is to say, that now entities are subject to sanctions upon participating their representatives in corrupt practices, resulting in the prohibition to participate in federal public procurement, for a period up to 10 years.

With the enactment of the Anti-Corruption Law, Mexico now complies with its obligations under the Inter-American Convention Against Corruption of the Organization of American States, the Convention on Combating Bribery of Foreign Public Officials in International Business Transactions of the Organization for Economic Co-operation and Development and the United Nations Convention Against Corruption.