We would like to hereby inform you that on this date the new Federal Anticorruption in Public Contracts Law (hereinafter the “Anticorruption Law”) was published in the Official Federal Gazette. In this regard, allow us to share with you our legal analysis of this new law.
Scope and Nature of the Law
This law is directed to the private sector, not to public officials, and its purpose is to impose liabilities and sanctions on individuals and entities, Mexican and foreign, for infringements resulting from their participation in acts of corruption in government purchases derived from federal Public Contracts, as well as those that must be imposed on Mexican individuals and entities for the infringements in International Commercial Transactions established in the same law.
Through this Law, Mexico strengthens the sanctioning scope of the anticorruption practices in the country by establishing as subjects thereof private parties directly or indirectly involved, themselves or through another, in any act derived from government purchases that result from the assignment of an administrative contract to provide a service, to carry out a public work, or to sell products, goods or merchandise.
This law is thus the other side of the coin of the Federal Law for Liability of Public Officials, by establishing mechanisms of investigation, accusation and sanction of private parties that are similar to those applicable to the employees of the Federal Government. The purpose of the law is to prevent and punish acts of corruption engaged in by private parties, establishing an investigation mechanism that can be activated “ex officio” or at the “request of a party”, including by anonymous accusation. Once the investigation is exhausted, the competent authority can initiate the Sanctioning Procedure against not only individual private parties but also companies.
This law thus grants greater powers to the Ministry of Public Affairs, the Internal Control Bodies of the Agencies and Entities of the Federal Public Administration and the heads of the Complaints and Liabilities Areas of these bodies, to initiate investigations, sanctioning procedures and to impose sanctions. These penalties can be very severe, since the fines can reach 124 million pesos (at the minimum wage in effect on this date) and a prohibition on contracting for up to 10 years for the company.
Two relevant procedural provisions are included: i) the suspension of the prohibition on contracting is prohibited while the corresponding defense is processed, and ii) a reduction of sanctions mechanism is created for the case that those implicated accept their responsibility and cooperate with the investigation. The imposition of sanctions is considered successive if the authorities issue more than one against the same person.
The public officials that know of acts that could result in any investigation or in their opinion could give rise to an investigation in terms of the law must denounce the act and if they do not, they become responsible in terms of the Law applicable to them and they will be considered accomplices or accessories of the private party involved.
Legal Particularities
According to article 2 of the Anticorruption Law, the following persons are subject to this Law:
The individuals or entities, Mexican or foreign, that participate in federal Public Contracting, as interested parties, bidders, invited parties, suppliers, winners, contractors, permission holders, concession holders or analogous persons.
The individuals or entities, Mexico or foreign, who as shareholders, partners, associates, representatives, principles or agents, attorneys-in-fact, commission agents, handlers, advisers, consultants, subcontractors, employees or that in any other capacity intervene in the Public Contracts under this Law in the name of, on behalf or in the interest of the persons referred to in the previous paragraph.
The Mexican individuals or entities that participate, directly or indirectly, in the development of International Commercial Transactions.
The public officials who participate, directly or indirectly, in federal Public Contracting, who will be subject to liability in terms of Title Four of the Political Constitution of the United Mexican States (Liabilities of Public Officials and of the State Assets).
Federal Public Contracting is understood as the contracting procedures, their prior acts, and those derived from the entrance into, execution and compliance with contracts in the area of acquisitions, leases, services, public works and related services, carried out by contracting public institutions in terms of the public contracting laws and regardless of the special contracting regime or scheme used for carrying them out.
Also included are acts and procedures related to a contest or invitation to bid or public bid for the granting of federal permits and concessions or their extension, as well as any other authorization or procedures related to public contracting.
International Commercial Transactions are understood as Public Contracting, provided such procedures and/or acts are carried out by any public body or organizations of a foreign State or they involve the participation of a foreign public official and in whose development individuals or entities of Mexican nationality participate directly or indirectly.
The legal framework subject to the new Law in public procurements are:
Law of Public Sector Acquisitions, Leases and Services.
Public Works and Related Services law.
Petróleos Mexicanos Law.
Other laws and norms that establish a special public contracting regime, scheme or mechanism (e.g. Public Private Partnerships Law).
Competent authorities
The authorities empowered to apply the Anticorruption Law, issue the necessary administrative provisions for the adequate compliance with it and interpret its provisions for administrative purposes, in relation to federal Public Contracting, are the following:
The Government Affairs Ministry (SFP), in the scope of the Federal Public Administration and of the Attorney General of the Republic (PGR), as well as the states, municipalities and the political-administrative bodies of the territorial delimitations of the Mexico City that carry out oublic procurement of a federal nature.
The Senate Chamber and Deputies Chamber of the Congress of the Union.
The Supreme Court of Justice of the Nation, the Federal Judicial Council and the Electoral Court of the Federal Judicial Branch.
The Federal Court of Tax and Administrative Justice.
The Conciliation and Arbitration Labor Boards, the Federal Conciliation and Arbitration Court and the agrarian courts.
The Federal Electoral Institute.
The Federal Superior Auditor.
The National Human Rights Commission.
The National Statistics and Geography Institute.
The Bank of Mexico.
The other autonomous public bodies that the laws determine.
The SFP as well as the heads of the Internal Control Bodies and the heads of the complaints and liabilities areas of such Bodies, will be the competent authorities for the investigation, processing and resolution of the proceeding and appeal established in this Law.
Furthermore, the SFP will be the only competent authority responsible for investigating possible infringements in relation to International Commercial Transactions. For purposes of the above, the SFP may request from a Foreign State the information it needs for the investigation and processing of the sanctioning administrative proceeding referred to in Chapters Three and Four of the Law, in the terms established in the International instruments to which both States are party and other applicable laws.
Causes of infringement
The persons subject to this Law will incur liability when in the federal Public Contracting, they directly or indirectly engage in one or more of the conduct specified below:
Promise, offer or deliver money or any other gift to a public official or a third party in exchange for such public official carrying out or abstaining from carrying out an act related to his/her function or those of another public official, for the purpose of obtaining or maintaining a benefit or advantage, regardless of the acceptance or reception of the money or the gift or the result obtained.
Liability will also be incurred when the promise or offer of money or any gift is made to a third party that in any form intervenes in the design or drafting of the invitation to a public bid or any other act related to the federal Public Contracting procedure.
To execute with one or more of the persons subject to this Law, actions that imply or have as their purpose or effect to obtain an undue benefit or advantage in federal Public Contracting.
Carry out acts or omissions of which the purpose or effect of which is to participate in federal Public Contracting, notwithstanding that by law or administrative ruling it is disabled from doing so.
Engage in acts or omissions that have the purpose or effect of evading the requirements or rules established in the federal public contracts or simulate compliance with them.
Intervene in their own name but in the interest of another or other persons who are disabled from participating in federal public contracts, in order for the latter to obtain, totally or partially, the benefits resulting from the contract.
Obligate, without having the right to, a public official to give, subscribe, grant, destroy or deliver a document or good, in order to obtain for itself or another an advantage or benefit.
Promote or use its influence, economic or political power, real or fictitious, on any public official, with the purpose of obtaining for itself or another a benefit or advantage, regardless of the acceptance by the public official or officials or the result obtained.
Present false or altered documentation or information for the purpose of achieving a benefit or advantage.
When the infraction has been carried out through an intermediary for the purpose that the individual or legal entity referred to in section I of article 2 of this Law obtains a benefit or advantage in the public contract in question, both will be sanctioned following a sanctioning administrative proceeding that is substantiated in terms of this Law.
According to article 9 of the Anticorruption Law, Mexican individuals or legal entities incur liability when participating, directly or indirectly, when in an International Commercial Transaction, themselves or through another, promote, offer or deliver money or any other improper gift, to a foreign public official or to a third party determined by the latter, in exchange for such public official doing or abstaining from doing an act related to his function or to those of another foreign public official, in order to obtain or maintain a benefit or advantage, regardless of the acceptance or the result obtained. When in addition to the Mexican State a foreign State or States have jurisdiction over the infraction indicated in this paragraph, the competent authorities of such States, at request by one of them, shall consult in order to coordinate the actions and measures to prosecute and sanction it.
Investigation Procedure
The investigation that precedes the sanctioning administrative procedure will begin ex officio or by accusation.
The means for presenting an accusation are the following:
CompraNet, through the accusations section established in that system.
Accusation formulated by the contracting public institutions or any other authority, which must remit it to the SFP or to the corresponding authority pursuant to article 4 of this law.
Accusation of private parties indicating, under oath, the presumed infractions. A false manifestation will be sanctioned in terms of the applicable criminal law.
Anonymous accusations received through the means established for that purpose.
International accusation formulated by a foreign State or organization or international public organization, in which the presumed infractions must be specified.
The competent authorities have the obligation to keep confidential the identity of the persons making the accusations of the presumed infractions of the Law, and of those who attempt to participate in the benefit of reduction of sanctions established in article 31 thereof.
It is important to mention that the Anticorruption Law obligates every public official to denounce in writing the actions or omissions that in exercise of his functions he learns of and that could be sanctioned under its terms. Failure to comply with this obligation is reason for the sanctions established in the Federal Administrative Liability of Public Officials Law or of the law applicable in the states, in the case of federal public contracting done by such states, the municipalities, including the public entities of both and the political-administrative bodies of the territorial delimitations of the Federal District.
Once the denouncement is received, if the competent authorities see the possible existence of infractions, they will initiate the investigation stage.
The public or private individuals or legal entities that are subject to investigation must address the requirements that, duly grounded in fact and law, the Competent Authorities formulate. Otherwise they will be subject to the imposition of fines.
Furthermore, the contracting public institutions must address the requests for information made to them by the Competent Authorities. When the public officials do not address such requirements, a fine will be imposed on them in terms of article 25 of the Anticorruption Law, unless there is a legal or judicial order or a justified cause in the judgment of the competent authority that impedes them.
During the investigation stage, the Competent Authorities may, in addition to requesting information, carry out other actions intended to prove the presumed infractions as they consider necessary, including the request for documentation and information from any other individual or legal entity.
Once the investigation actions are concluded, the Competent Authorities will analyze the information collected in order to determine the validity of the initiation of the Sanctioning Administrative Proceeding.
If sufficient elements are not found to demonstrate the existence of the infraction and probable liability of the infringer, a ruling of termination and closure of the case will be issued, although the investigation may be opened again if new indications are presented and the powers to sanction have not expired.
Sanctioning Administrative Procedure
If from the carried investigation done sufficient elements are found that lead to a presumption of the existence of one of the infractions established in the Anticorruption Law, the Competent Authority will issue a resolution to initiate the Sanctioning Administrative Proceeding.
Within 15 business days following the date on which the notice of initiation of the Sanctioning Administrative Procedure takes effect, the presumed infringer may manifest his rights, in writing signed under oath or by appearance before the competent authority, responding to each and every one of the acts attributed to him, offering and presenting the evidence he considers relevant.
If the presumed infringer confesses his liability, a ruling will be issued immediately, unless the competent authorities ask for the reception of evidence that proves the truth of the confession.
If the presumed infringer does not manifest in writing his rights or does not appear within the period established or ceases to respond to any of the conduct or acts attributed to him, they will be considered true unless proven otherwise.
Once the evidence has been presented, the presumed infringer will be granted a term of 5 business days to prepare arguments. Once this period has expired, the proceeding will be closed and the resolution will be issued during a term that will not exceed 40 business days.
The resolution that is issued will decide the non-existence of liability or the imposition of the sanctions, and shall be notified in a period of no more than 10 business days. The subjects sanctioned in terms of this Law may file the appeal established in the Federal Administrative Procedures Law.
Sanctions
The following sanctions are established for Individuals:
a) Fine equivalent to the amount of 1,000 to 50,000 times the general daily minimum wage in the Federal District.
In the case of permits, concessions, authorizations or procedures related to federal Public Contracting or International Commercial Transactions, the maximum fine established in the above paragraph may be increased by up to 50%, when there are objective elements for the competent authority to determine that the benefit obtained by the infringer was greater than the maximum fine.
For the case of Federal Public Contracting carried out in terms of the public contracting laws, if the maximum fine established in the first paragraph of this section is less than 30% of the amount of the contract, a fine will be imposed of between 30% and up to 35% of the amount of the contract if the latter was awarded to the infringer.
b) Prohibition from participating in federal public contracts for a period that will not be less than 3 months or greater than 8 years.
With respect to Legal Entities the following sanctions are established:
a) Fine equivalent to the amount of 10,00 up to 2’000,000.00 times the general daily minimum wage in the Federal District. For this case, the 2 paragraphs in section a) above relative to the sanctions on Individuals apply.
b) Prohibition from participating in federal public contracts for a period that will not be less than 3 months or greater than 10 years.
The fines determined in terms of the Anticorruption Law are considered tax liabilities and they are fixed in liquid amount, and executed in the same manner.
The powers of the Competent Authorities in order to impose the administrative sanctions established in the Law expire in 10 years from the day following the date on which the infractions were committed or from the time they ceased if they were ongoing.
It should be mentioned that the person who has carried out any of the infractions established in the Anticorruption Law or that is participating in them, may confess his liability in order to take advantage of reduction of sanctions established in article 31.
The application of the benefit referred to in the above paragraph will result in a reduction of between 50% and 70% of the amount of the sanctions that are imposed on the responsible person.
In the event that the Sanctioning Administrative Procedure has initiated, and if the presumed infringer confesses his liability for the acts attributed to him, a reduction will be applied of 50% of the amount of the sanctions imposed, provided it is done within the period referred to in article 20 of the Law.
Prevention
The SFP may sign collaboration agreements with the individuals or entities that participate in federal Public Contracting and International Commercial Transactions, and with the business associations or industrial or commercial associations, in order to guide them in the establishment of self-regulation mechanisms that include the implementation of internal controls and an integrity program that allows them to ensure the development of an ethical culture in their organization.
Sincerely, Sámano Abogados, S.C.