Federal Anticorruption Law on Public Procurement

The Anticorruption Law endured a long legislative process prior to its issuance and it seeks to complement and align Mexican legislation with the obligations assumed by the Mexican State under different international conventions and treaties, which seek to combat corruption in public procurement, and to which Mexico was already a party to, such as the Convention on Combating Bribery of Foreign Public Officials in International Business of the Organization for Economic Co-Operation and Development (“OECD”).

The Anticorruption Law endured a long legislative process prior to its issuance and it seeks to complement and align Mexican legislation with the obligations assumed by the Mexican State under different international conventions and treaties, which seek to combat corruption in public procurement, and to which Mexico was already a party to, such as the Convention on Combating Bribery of Foreign Public Officials in International Business of the Organization for Economic Co-Operation and Development (“OECD”).

The Anticorruption Law thus completes our internal legal framework regarding corruption, which was formerly only regulated in the sphere of public servants through administrative laws such as the Federal Law on Administrative Responsibilities of Public Servants, and in the criminal sphere by classifying corruption acts as crimes, which are difficult to demonstrate and, therefore, penalize, or enforce.

An interesting aspect of the Anticorruption Law is that it also comprises corruption acts performed outside the territory of Mexico, being enforceable against Mexican entities or natural persons participating in foreign public procurements.

Object/Subject Matter

The Anticorruption Law regulates actions carried out under the proceedings for federal public procurements (acquisitions, lease, and service contracts, or concessions over public goods), classifies irregular conducts, and foresees penalties for such conducts, as well as the procedures for investigations and penalties necessary for its enforcement.

Subjects

The Anticorruption Law shall be applicable to any person, Mexican or foreign, or third parties representing the same interest, taking part in public procurements, as well as Mexicans taking part in international commercial transactions such as foreign public procurements.

Authorities Designated for its Enforcement

The authorities designated, in principle for the enforcement of the Anticorruption Law, within the sphere of public procurements carried out by the federal public administration, are the Ministry of the Public Function or Comptroller’s Office, and the Federal Attorney General’s Office. Additionally, the Anticorruption Law authorizes the legislative and judicial power to apply the Anticorruption Law and designate the internal organs in charge of investigating and applying penalties for the irregular activities taking place under their scope of competence.

Irregular Conducts

The conducts prohibited by law, i.e. irregular conducts, are the following:

i. To promise, offer or grant money or any other gratification to a public servant in order to obtain a benefit, independent of the acceptance of the money or gratification, or the result obtained there from.
ii. Any action, together with one or more subjects, seeking to obtain an unlawful benefit in public procurement.
iii. To carry out or omit to carry out any actions, in order to participate in federal public procurements, while being impeded to participate.
iv. To carry out any actions to evade or simulate the compliance of the legal requirements and rules in public procurements.
v. To intervene by one’s own name, but in the interest of a third party impeded to participate in a public procurement process.
vi. To force a public servant to subscribe, destroy or deliver a document or a good, in order to obtain a benefit.
vii. To use one’s influence, economic or political power, whether real or simulated, to obtain a benefit, independent of the acceptance or of the result obtained.
viii. To present or file false or altered documentation in order to obtain a benefit in a public procurement proceeding.
The Anticorruption Law provides that any of these practices may be carried out by an intermediary, in which case, legal consequences shall apply to both the corresponding intermediary and the person holding an interest in the public procurement.

Penalties

The Anticorruption Law provides the following penalties to the previously described irregular conducts:

a. Individuals. Fine between 1,000 and 50,000 general daily minimum wages, valid in Mexico City, as well as impediment to participate in public procurements processes for a minimum period of 3 months and up to 8 years.
b. Entities: fine between 10,000 and 2,000,000 general daily minimum wages valid in Mexico City, as well as impediment to participate in public procurements processes for a minimum period of 3 months and up to 10 years.
Moreover, if the benefit obtained by the infringer is larger than the maximum fine, then the fine may be increased up to 50%.

Further, if the contract has been granted to the infringer and the maximum fine results in less than 30% of the contract’s worth, the fine awarded shall be established between 30% and 35% of the worth of the contract.

Nonetheless, as previously mentioned, the Anticorruption Law governs private subjects or individuals, and therefore, public servants shall remain regulated and penalized by the Federal Law on Administrative Responsibilities of Public Servants and any other administrative or criminal laws that may be applicable, according to the government office or agency to which such public servants are ascribed.

Fines imposed in accordance to the Anticorruption Law shall be deemed as fiscal credits, and consequently, their collection shall be executable or enforceable according to the administrative proceeding foreseen in the applicable fiscal legislation.

Additionally, the authority designated to determine and impose the penalty shall establish the fine for any infringement considering specific elements or circumstances of the infringer or the case, such as the gravity of the infringement, the economic situation of the infringer, cases of second offense or recidivism (within 10 years as from the notification of the first infringement), the precedents of the infringer in public procurement, the degree of implication in the infringer, and the means of execution of such conduct, and the benefit obtained by virtue of such conduct.
The authority to penalize an irregular conduct shall have a limitation period of ten years as from the day the infringement took place or ceased, in the case of a continuous act.

It is also important to note that the Anticorruption Law provides that, in the case of bans imposed upon infringers, no recourse may be used to suspend the effect of such ban, which may call for constitutional questioning of that legal provision.

Reduction of Penalties

The Anticorruption Law foresees the possibility of a reduction of the corresponding penalties between 50% and 70%, in case the infringer confesses his responsibility before the notification of the irregular conduct, or cooperates in the proceedings against the other infringers implicated in it, or be the first to provide evidence of the existence of the infringement.
Additionally, the Anticorruption Law also foresees the reduction of the penalties in the amount of 50% to the infringers that confess their responsibility within 15 days as from the date the initial notification of the administrative proceedings is made.

Obviously, these measures seek to expedite the proceedings, reduce costs and, more importantly, encourage cooperation with authorities from private parties, which enables the authority to obtain sufficient evidence in order to impose the penalties and, subsequently, achieve the enforcement and eventual suppression of the infringements in a more effective way.

Investigation Proceedings

The investigation may be initiated officially by the authority or by report of a third party. The Anticorruption Law foresees the following means for report of irregular conducts:

i. Report through the “Compranet” system.
ii. Report through any of the public institutions implicated in the procurement or any other authority.
iii. Report under oath from private parties, indicating the alleged infringement.
iv. Anonymous report through the means established by the law to that effect.
v. Report complaint formulated by a foreign state or international organism.
Public servants have the obligation to report any irregular activity foreseen in the Anticorruption Law, of which they may have ground knowledge of during the performance of their work. Non-compliance of such obligation shall be punished according to the Federal Law on Administrative Responsibilities of Public Servants.

Requirements issued by the authorities to private parties shall be fulfilled within a term of 10 days, which may be extended for another 10 days through a petition that justifies such extension.

The authority shall have access to the necessary information for the elucidation and gathering of the facts, including information that may be classified as reserved, confidential or confidential by other legal provisions.

The authorities in charge of investigation shall analyze the information obtained, and determine whether or not to proceed with the penalization proceeding.

Penalization Proceedings

The penalization proceeding shall initiate with the corresponding resolution, which shall indicate the infringements attributed, to the persons implicated, including action against whom may have acted as an intermediary. Such resolution shall be notified to the implicated persons, providing a term of 15 business days for a response during which term the persons implicated shall express confirm or deny the accusation, and provide evidence, in case of denial of responsibility.
In case of acceptance of responsibility within the term of 15 business days mentioned above, fulfilling the aforementioned requirements, the authority shall issue a resolution applying a reduction of 50% of the penalties as previously described.

In case of denial of responsibility, the authority shall proceed to the taking of evidence. Subsequently, the authority will provide a term of 5 days for the implicated persons to formulate their final allegations. After such term, the authority shall emit their resolution within the next 40 business days.

The authority shall admit and qualify evidence presented by the infringers according to what is provided in the Federal Civil Procedural Code, and the resolutions may be challenged according to the provisions contained in the Federal Law on Administrative Proceedings.

Within the penalization proceeding, the authority shall have the capacity to dictate enforcement measures in the form of warnings and/or fines.

One last aspect to consider is that the LFPAC does not contain an express legal provision whereby the supplementary law is established or foreseen, especially from a procedural point of view, but rather, the statute contains isolated provisions mentioning the Federal Law on Administrative Proceedings, as well as the Federal Code of Civil Proceedings and the Federal Law of Administrative Liabilities of Public Servants instead.

For further information, please contact your principal Firm representative or one of the lawyers listed below:

Mexico City Office

Lic. Alejandro Luna A. (Partner)
Lic. Mariano Calderón V. (Partner)
Tel.: +52 55 5279.5400
Fax: +52 55 5280.7614 / 5280-3214 / 5280-7866

Lic. Jorge Barrero (Partner)
Tel.: +52 81 8133.6000
Fax: +52 81 8368.0111

Tijuana Office

Mr. Aarón Levet (Partner)
Tel.: +52 664 634.2978