Building law and regulation in Mexico during Covid-19

Updated on 17.04.2020

1. Is there construction-relevant COVID-19 regulation?

Currently, there is no specific construction regulation related to COVID-19.

However, on 30 March 2020, the Federal Government and the General Health Council declared COVID-19 as a national health emergency.

As a result, on 31 March 2020, the Federal Government ordered the stoppage of all non-essential activities from until 30 April 2020. This stoppage includes construction works, except for those related to the maintenance and repair of critical infrastructure that ensures the production and sharing of essential services, including: water, electricity, gas, oil, gasoline, jet fuel, basic sanitation, public transportation, hospital and medical infrastructure.

Finally, on 6 April 2020, the Federal Government made clear that the companies involved in glass, cement and steel production would be considered essential activities. However, such industries must fulfil additional requirements which are described in the respective publication.

2. Subsidies and other government support for employer, contractor and other involved parties? (generic, high level only).

The Government has not issued subsidies or financial support for employers, contractors or other parties involved.

Force majeure is referred to in the Federal Civil Code, Commercial Code, Administrative Law and in other legislation at the Federal Level. For certain matters, force majeure is governed by local law or the corresponding Local Civil Code.

Force Majeure is comprised of two different terms, namely force majeure (fuerza mayor) and Acts of God/unforeseen circumstances (caso fortuito). Except for certain legal technicalities, both terms imply the same effects and consequences, i.e., both require fulfilment of the same test and provide an exemption of liability should an event of default occur as a consequence of such event, in the form of not paying interests or damages, avoiding termination of an agreement or obtaining an extension of a deadline, among others.

Statutorily speaking, there are several references to force majeure, however, there is no uniform definition.

Mexican courts have mentioned in several non-binding precedents that a force majeure event is understood to be a situation that is beyond a party’s control, prevention or foreseeability. The principal legal effect of force majeure events is the exclusion of liability if one party is unable to fulfil its obligations vis-à-vis the other party.

Mexican jurisprudence indicates that force majeure events include acts by humans (e.g. war or terrorist attacks), acts of nature (e.g. fire, floods or earthquakes) or acts by governmental authorities (e.g. material change to a regulatory regime), provided such acts were not caused by the party claiming force majeure.

In accordance with the jurisprudence and criteria provided by the Mexican Supreme Court of Justice (“SCJN”) a force majeure event has to meet the following characteristics:

  • Render fulfilment of the obligation impossible;
  • It must be outside the party(s) control;
  • It must be unpredictable; and
  • Even if the event was anticipated, the outcome must be unavoidable or inevitable.

Generally, a judge will consider whether a different party in the same situation would also be prevented from complying with the obligation.

Considering the foregoing, if as a consequence of the effects of the Epidemic either party defaults on its contractual duties, such situation can be deemed a force majeure event (unless expressly provided for otherwise in the agreement). This could result in an extension to contractual obligation timelines, during which time the defaulting party is not obligated to pay interests or damages (unless expressly provided for otherwise in the agreement).

4. Does the Epidemic give rise to termination rights to either party?

No, unless the agreement expressly provides that this is a termination event.

5. Do the measures currently being taken in relation to the Epidemic amount to change in law? What are the price and time consequences?

No, currently Mexico has not taken measures that represent a change in the law.

As mentioned above, Mexico declared the COVID-19 as a health emergency and order the stoppage of all non-essential activities without amending existing or enacting new legislation.

6. Are there any other issues relevant to COVID-19 the construction industry should be aware of?

On 17 March 2020, the SCJN published an official notice declaring that the Coronavirus, or COVID-19, is considered a force majeure event for the purposes of the SCJN’s activities. Whilst this is not a general ruling applicable to construction contracts, it sets an important precedent in the context of the current circumstances.

Portrait ofCesar Armando Lechuga Perezanta
Cesar Armando Lechuga Perezanta
Partner
Mexico City
Portrait ofGiancarlo Schievenini
Giancarlo Schievenini
Partner
Mexico City