The Mexican Senate voted on May 6, 2021, to approve a bill to reform various provisions of the General of Negotiable Instruments and Credit Transactions (Ley General de Títulos y Operaciones de Crédito or LGTOC), the Federal Code of Civil Procedure (Código Federal de Procedimientos Civiles or CFPC), the Law of Credit Institutions (Ley de Instituciones de Crédito or LIC) and the Commerce Code (Código de Comercio or CC), regarding electronic promissory notes and other credit transactions. The bill was submitted to the lower house (Cámara de Diputados) for discussion and subsequent approval.
The validity and enforceability of legal acts created by electronic means and the use of electronic signatures have been well established under Mexican law for several years. (See Holland & Knight's previous alert, "Mexican Businesses May Consider Electronic Signatures for Signing Legal Documents Amid COVID-19," March 27, 2020.) However, lawyers and courts have held different positions with respect to the validity of electronic negotiable instruments (and securities) in general and in particular regarding promissory notes (pagarés) and endorsements, mainly due to the lack of binding precedent ruling on the issue.
With the bill, most of these discrepancies among lawyers seem to have been resolved in favor of the validity of electronic promissory notes and electronic endorsements as a legal way of transferring them. We think there is room for improvement in the final wording and drafting of the bill. The lower house will have the opportunity to refine aspects that remain somewhat ambiguous. In any case, we find it important to highlight that electronic signature, whether advanced or not, and electronic means, in general, are valid and enforceable in the execution of legal acts.
If approved, the bill will represent an excellent opportunity to reopen a needed discussion among legal and financing experts regarding basic concepts, risks and evidentiary duties inherent to the use of any technology and the closing of a transaction using electronic means.
The following is a breakdown of the relevant aspects of the bill.