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  • Writer's pictureSámano Abogados

Application of the Principle of the Presumption of Innocence on entities in the Sanctioning Admin P.

[24/02/2016].


Companies as subjects of rights and obligations can be sanctioned by the State and therefore be affected in many aspects, among them economically and in terms of reputation.

Economic Damage: Against persons (Individuals or Entities) or their assets. Damage to reputation: Criteria of the Federal Civil Code (honor, decorum, esteem, reputation, etc.)

Under the Rule of Law, every person (individual and entity) has the right to a trial and to be considered “innocent” until proven guilty and to fulfill this, in our country there have been a series of reforms in the last few years intended to protect the interests of private parties before the State, in order to achieve an equilibrium in the interest of legal security and therefore of competitiveness and productivity.

The principle of Presumption of Innocence of entities is a concept that while it has precedents in other countries, in our Mexican law it is a new matter that is important to fully understand, not in isolation. In order to orient ourselves in the context of the reforms that evoke this principle, the following are mentioned as background principles:

1. Article 56 of the United Nations Charter of 1945:


  • The individual is recognized as holding rights in relation to the State.

  • The concept of accountability is introduced (responsibility of the State to the citizens), which is of no use if it cannot be executed, and therefore the principle of enforceability is also defined (effectiveness of the protection)

  • An ex profeso court is created to defend the rights and freedoms of individuals: International Court of Justice (The Hague Court)


This evolved to the Universal Declaration of Human Rights of 1948

2. Recognition in Mexico of the Principle pro homine (pro persona)

Amparo Review Decision 799/2003, It defines it as a criterion that establishes that in matters of Human Rights the authorities must make the most extensive interpretation of the rights protected, and in contrast the most limited in the case of restrictions.

Contradictory decisions 6/2008. The Supreme Court of Justice of the Nation (SCJN for its initials in Spanish) ruled, based on an interpretation derived from the principal of presumption of innocence contained in International treaties and conventions to which Mexico is a party, to recognize the active right to vote of persons subject to a criminal procedure not resulting in incarceration.

Various Cases 912/2010 Derived from or related to the “Radilla Case”. The SCJN ruled: that the decisions of the Inter-American Human Rights Commission (IHRC) where the Mexican state has been a party constitute res judicata and are binding according to their terms.

That all judges must have a control of conventionality ex officio, imposing a new diffuse model of control of constitutionality (new scope of article 133).

That the case law of the IHRC, in the cases in which Mexico has been a party, will have the nature of “guiding principle” for Mexican judges.

3. Contradictory Decisions 293/2011, by which the SCJN addressed the matters of:

i) constitutional positioning of the International human rights treaties, and ii) the binding nature of the IHRC decisions:


  • Confirms the double dimension of the Pro Persona Principle: broadest interpretation when it is in favor of the human right and most limited when it is against it.

  • Surpasses the hierarchy between Constitution and International Treaties, establishing the prevalence based on the greater degree of protection of the Human Right protected. This is not so in the case of restrictions, where the Constitution prevails.

  • Recognizes the scope of Article 1 of the Constitution under this principle, and the new corpus juris composed of the Constitution, the International Human Rights Treaties, and the Case Law of the IHRC (internal judicial control of conventionality –Ferrer Mac-Gregor)

  • Thus breaking the paradigm of the personal and direct grievance and the strict application of the law and to some extent Mexico assumes the guiding principle res interpretata.


4. The Constitutional Reform of June 2011 of articles 94, 103, 104 and 107 of the Constitution which, among other things:


  • Included Human Rights as subject to protection under the jurisdiction of the Federal Judicial Branch Courts (conforming interpretation clause).

  • Introduced the concept of active standing to file the amparo proceeding, based on legitimate interest and not just on legal interest (rules of action and of relation). It is sufficient that there is one or more people (class actions) that may be affected.

  • Originates the Tenth Period of the SCJN, beginning with the expanded interpretation of Article 1 of the Constitution on the principles of universality, interdependence, indivisibility and progressivity of human rights, which must be applied under criteria of reasonableness and proportionality (beginning October 4, 2011).

  • The Individual (like the Entity) is in reality a legal fiction to be the center of attribution of rights and obligations and to be subject of the protection of Human Rights.

  • The premises of reasonability and proportionality are applied to find the Golden mean and that there is neither abuse of power nor abuse of right.


5. The New Amparo Law of April 2013:


  • Expands the sphere of protection of the amparo proceeding not only to disputes arising from laws or acts, but also for general rules or omissions of the authority.

  • Recognizes legitimate interest as qualified interest with respect to the legality of certain acts of authority.

  • Attributes to private parties the possibility of carrying out acts of authority (equivalence, affect and derivation from a general rule).

  • Creates the concepts of the Collective Amparo and the Adhesive Amparo.


6. Court Precedents relative to the Recognition of Rights of Entities that have originated related decisions: Although there are restrictions, there is now express recognition of these rights for Entities.


  • Legal Entities shall enjoy not only the fundamental rights constituted by the human rights recognized in the Constitution and in the International Treaties and the guarantees for their protection, provided they are intended to protect their corporate purpose, but also those that appear as means or instruments necessary to achieve the purpose they pursue. (August 2012).

  • Control of Conventionality Ex Officio. Should be oriented to the protection of legal entities when the rights and freedoms of access to justice, legal security and legality of its partners, members or shareholders are protected. (December 2012).

  • Legal Persons. They are holders of the human rights compatible with their nature. (August 2012).



SUBSTANCE OF THE PRINCIPLE OF PRESUMPTION OF INNOCENCE

The actions of the Public Administration toward the private party (governed) and the Principle of Presumption of Innocence have to do with the “Principle of Legality” which implies limits for the State protected in Constitutional articles 14 (acts of deprivation) and 16 (injurious acts). The Principle of Legality comes from the liberal thinking that: “The private party can do what the law does not prohibit, in contrast to the authority which can only do what the law permits it to do”. Thus, for example, after the commission of a crime and the issuance of an arrest warrant, the person who committed it is subject to a process and is deprived of his freedom (even if preventively) and if after having carried out due process, he is subsequently convicted, he will also remain deprived of his freedom. In this way we see that two different acts of authority (arrest warrant and conviction) have the same effect: deprivation of freedom. However, each act has a different nature:


  • The arrest warrant is not a definitive act (it can be modified).

  • The conviction, once it is final, is definitive (it cannot be revoked).


In an administrative procedure (not just in proceedings, but for example in an invitation to bid), certain formalities must be observed such as:


  • Service of process (notify a person that he will be subject to a proceeding).

  • Evidence.

  • Pleadings.

  • Ruling.


Within these proceedings in the form of a trial, there is the Sanctioning Administrative Proceeding, in which the public administration determines if the conditions of the private party merits a sanction under the administrative laws. In this procedure:


  • The involvement of the judicial body is not required for the application of the sanctions. For example: requirement to pay taxes. They are immediately enforceable acts, and therefore they must be guaranteed.

  • There is no impartial third party in the dispute resolution. The authority is judge and jury (unless it goes to an ex profeso court). The authority hears, judges, determines and rules, in addition to having an interest in the matter.


In view of the above the administrative sanctioning power (ius punendi), like the criminal power forms part of a generic right actionable to the State (non-commutative). According to the Principles of Sanctioning Administrative Law, the substantive criminal principles can be referred to but not automatically (criminal conduct, anti-juridical, guilt). The elements of criminal law cannot necessarily be transferred to administrative law. It is necessary to see if they have the same elements and the same rationality.

Thus the following principles of Administrative Law must be taken into account:

1. Principle of reservation of Law (element shared by Criminal Law and Administrative Law) in the sanctioning administrative procedure: establishment of illicit acts in law in a formal and material sense. The element of conduct that gives rise to the sanction must be established in law (not in other types of agreements of general application like NOMs (standards))

2. Principle of presumption of innocence. Limits the repressive power of the State in exercise of its punitive right, procedural guarantee in favor of the accused in every administrative procedure and it implies:


  • Puts the burden of proof on the accuser (authority). The State must demonstrate to the private party the unlawful conduct it engaged in.

  • Disproving innocence by proving the unlawfulness of the conduct, there is no burden on the accused to prove his innocence. This is a procedural principle of Administrative Law, the principle of legality. The State has limits and the private party no, and therefore the State must demonstrate that the private party surpassed the limits. The State has the obligation (not the right) to exhaust the procedural burden and demonstrate the guilt of the private party.

  • To impose a sanction the certainty of guilt is essential; in the case of doubt of the existence of a harmful-sanctioned conduct, there is no reason to impose the sanction.

  • The State must be governed by the principle of presumption of innocence of the private party; therefore, if the State does not prove it, the private party does not have to. However, in practice, it is advisable for the private party to prove his innocence in order to make shorter the road to a swift and expedited justice and not wait for a conviction to be able to assert the presumption of innocence of the private party.

  • Following the ruling (conviction) of the authority, the private party has the Motion for Review (before the same authority that issued the act) or the Administrative Law Proceeding


Regarding the administrative sanctions and provisional measures:


  • The enforcement of administrative sanctions is different from the enforcement exercised in provisional measures. The provisional measures are temporary solutions while the matter is resolved definitively, so no more damages are caused.

  • The enforcement of the administrative sanctions is different from the execution of the provisional measures which are considered justified in light of the social interest at stake. (Both the administrative sanctions and the provisional measures must be grounded in law and fact).

  • The presumption of innocence in the case of the provisional measures does not apply since there is a greater interest that permits the imposition of injurious acts on the accused, but not deprivation of liberty. In the sanctioning procedure of course the principle of presumption of innocence must prevail.


SANCTIONING ADMINISTRATIVE PROCEDURE AND ECONOMIC LIABILITY OF THE STATE What happens when the private party has a favorable ruling after a Sanctioning Administrative Procedure and the private party has the right to be indemnified by the State? The State has economic liability for:


  • Damages

  • Lost Profits

  • Moral Damages (real, direct and immediate)


To enforce this liability, the provisions of the following articles must be taken into account: Art. 6 of the Federal Law of Administrative Law Procedures (LFPCA for its initials in Spanish) establishes three requirements (non-concurrent):

“The defendant authority shall indemnify the private party affected for the amount of the damages and losses caused, when the administrative unit of such body commits a serious infraction in issuing the challenged ruling and does not concede to answer the claim in question. It will be a serious infraction when:

I.- It is annulled for absence of grounds in law and fact in relation to the substance or competence.

II.- It is contrary to court precedent of the Supreme Court of the Nation in regard to legality. If the court precedent is published after the answer, there is no serious infraction.

III.- It is annulled based on article 51, section V of this Law.” Art. 51, V.- of the LFPCA establishes that: “When the administrative ruling issued in exercise of discretional powers does not correspond to the purposes for which the law confers such powers”

“The order to pay costs or the indemnity established in the second and third paragraphs of this article will be claimed through the respective ancillary proceeding, which will be processed as established by the fourth paragraph of Article 39 of this Law” If the administrative act is annulled, the claim is valid, but the damages, losses or moral damages must be proven.

To make the claim before the authority and present the evidence, it is not necessary to have the annulment of the act.

Furthermore, there is court precedent in the sense that Article 6 of the LFPCA does not violate article 113, second paragraph, of the Constitution, upon establishing a special regime for requesting an indemnity for damages and losses when the defendant authority in the Federal Administrative Law Proceeding has committed a serious infraction upon issuing an annulled ruling and not having conceded to answer the claim.

For its part, Art. 9 of the Federal Law of Economic Liability of the State (LFRPE) establishes that: “This Law will be applied secondarily to the different administrative laws that contain a special economic liability regime for the State. In the absence of an express provision in this Law, the provisions contained in the Federal Administrative Procedures Law, the Federal Tax Code and the Federal Civil Code, and the general principles of law will be applied.”

Art. 1 of the above cited law indicates that “This Law regulates the second paragraph of article 113 of the Political Constitution of the United Mexican States and its provisions are of public order and general interest; its purpose is to establish the bases and procedures for recognizing the right to an indemnity of whoever, without legal obligation to do so, suffers damages in any of its assets and rights as a consequence of the irregular administrative activity of the State. The non-contractual liability of the State is strict and direct, and the indemnity shall be adjusted to the terms and conditions indicated in this Law and in the other legal provisions it refers to.

For purposes of this Law, irregular administrative activity will be understood as that which causes damages to the assets and rights of private parties that are not legally obligated to suffer it, since there is no legal basis or legal justifying cause to legitimize the damage in question.”

CONCEPT OF LIABILITY

As established in Art. 109 (previously 113) of the Constitution: “The liability of the State for the damages that, as a result of its irregular administrative activity, it causes in the assets or rights of private parties, will be strict and direct. Private parties will have the right to an indemnity according to the bases, limits and procedures that the laws establish.”

In relation to the above, there is court precedent that establishes that "direct liability" means that when in the exercise of its functions the State generates damages for private parties in their assets or rights, they may sue it directly, without having to show the unlawfulness or intent of the public official that caused the claimed damage, but only the irregularity of his actions, and without having to first file a claim against such public official; while "strict liability" is that in which the private party does not have the duty to support the economic damages caused by an irregular activity of the State, this understood as the acts of administration carried out illegally or abnormally, which is to say without following the regulatory conditions or the parameters created by the administration itself.

Notwithstanding the above, neither the court precedent nor the doctrine fully clarify what happens when the acts that affect the private parties are not the consequence of an irregular activity of the State.

ACTIVE AND PASSIVE SUBJECT

According to Art 2. of the LFRPE- “The following are subjects (active) of this Law: federal public entities. For purposes thereof, federal public entities will be understood as, unless expressly mentioned otherwise, the Federal Judicial, Legislative and Executive Branches, autonomous constitutional bodies, agencies, entities of the Federal Public Administration, the Attorney General’s Office of the Republic, the Federal Administrative Courts and any other federal public entity.

The passive subjects are: individuals and legal entities

IRREGULAR ADMINISTRATIVE ACTIVITY


  • Defined by article 1 of the LFRPE.

  • Administrative in nature.

  • Outside of the legal regulation, contrary to it or for lack of it.

  • Causes damages


EXCEPTIONS TO THE ECONOMIC LIABILITY OF THE STATE:

According to Art. 3 LFRPE, the State is not liable for damages and losses derived from:


  • Cases of an act of God or force majeure.

  • Damages and losses that are not a consequence of the irregular administrative activity of the State,

  • Those derived from events or circumstances that could not have been predicted or avoided according to the state of knowledge of science or technology existing at the time of its occurrence.

  • Those cases in which the petitioner of the indemnity is the sole source of the damage.


COMPENSATION OR INDEMNITY BY THE STATE:

The form in which the compensation and indemnity by the State should be made, according to article 11 of the LFRPE, should be material:


  • In National Currency.

  • In kind.

  • According to the date on which it was produced or the date on which they have ceased.

  • It may be indexed to the time in which compliance must be fulfilled. (Federal Tax Code)

  • It may be in installments in subsequent fiscal years. Subject to budget availability.


For the calculation of the indemnity a certification must be made which must follow the criteria and rules established in the Expropriation Law (LE for its initials in Spanish), General National Assets Law (LGBN), Federal Tax Code (CFF). For the case of personal damages, although it is debated, the criteria for evaluating them are based on the Federal Labor Law (LFT).

In Administrative Law the compensation for moral damages is limited, that limit being unconstitutional according to court precedent since such limit violates the international obligations signed by the Mexican State and could cause problems for complying with the provisions of the Inter-American Court and with the recommendations of the Inter-American Commission in relation to compensation for damages, since the second paragraph of article 2 of the LFRPE provides that compliance with the indemnities ordered by those bodies is governed by the provisions of its Chapter II.

PROCEEDURE FOR CLAIMING ECONOMIC LIABILITY FROM THE STATE

There are two types of procedures: 1. Administrative:


  • By claim before responsible agency or entity. (1 year statute of limitations)

  • If challenged, it will be suspended until there is a ruling.

  • The annulment of the administrative act does not presume in itself the right to the indemnity. (The governed has the burden of proof of the damages and losses or the moral damages)

  • Challenge by administrative appeal: Review or by the Administrative Law Proceeding. (Lastly the Amparo Proceeding).


2. Judicial: Requirements of validity


  • It must have illegal conduct and irregular administrative conduct

  • There must be a cause and effect relationship between the conduct and the damage (this is the hardest to prove).


We hope we have provided a panoramic view of the nature of Economic Liability of the Mexican State and how it is claimed in the Sanctioning Administrative Procedures that affect private sector parties, especially companies as legal entities; please let us know if you have any comments in relation to the above.

If you would like to learn more about this matter, please contact: Lic. Rafael Manuel Sámano Palacios: rsamano@samanosc.com.mx Lic. Marco Aurelio Parra Téllez: marco.parra@dpma.com.mx





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