MEXICO: An Introduction to Dispute Resolution: Arbitration

Introduction

As Mexico has transitioned to a new presidential administration, a significant evolution is underway in the relationship between the State, its strategic sectors, and dispute resolution mechanisms. While the incoming government maintains the popular-oriented principles of its predecessor – emphasising sovereignty, social justice and state stewardship over natural resources – it has introduced a new policy orientation designed to foster domestic economic growth by actively involving Mexican private investors. This dual approach signals continuity in national priorities, paired with a pragmatic recalibration aimed at achieving economic dynamism from within. 

This internal reorientation takes place in parallel with a rapidly shifting international landscape. The return of Donald Trump to the US presidency has challenged the global free trade consensus and disrupted the foundations of Mexico’s export-led economy. Simultaneously, domestic institutional reforms – particularly in the judiciary – have raised new questions about the role of arbitration as a neutral, reliable and internationally accepted method for resolving disputes. Together, these developments place Mexico’s arbitration framework at the intersection of economic transformation and geopolitical uncertainty.

A Notable Shift in Dispute Strategy

Traditionally, Mexican state entities have engaged in arbitration predominantly as respondents. While arbitration clauses have long been embedded in the contracts of major SOEs – particularly in the hydrocarbons and electricity sectors – those entities have historically adopted a defensive posture in arbitral proceedings. However, recent trends point to a material change. Certain State-owned companies, notably in the energy and infrastructure sectors, are now managing disputes more proactively, initiating arbitration claims, and relying on increasingly specialised legal teams.

This evolution reflects not only a strategic shift within public entities but also a broader institutional confidence in arbitration as a legitimate forum to enforce the State’s commercial rights. Importantly, this arbitral confidence is now complemented by new domestic policies encouraging partnerships with Mexican private capital. The new administration has launched initiatives to promote co-investment between the State and national entrepreneurs, aiming to drive strategic infrastructure, energy and technology development from within. This emerging public-private model may yield more complex contractual ecosystems, in which arbitration will continue to play a key role as a neutral dispute resolution forum.

Strengthening Institutional Confidence in Arbitration

Mexico’s evolving arbitral posture underscores a pragmatic appreciation for arbitration’s neutrality, flexibility and international enforceability. As public entities and domestic investors enter into more sophisticated and high-stakes contractual arrangements, arbitration provides a predictable and commercially sensitive mechanism for dispute resolution.

However, while arbitration is increasingly discussed in commercial and legal forums as an alternative to litigation – particularly amidst concerns regarding judicial impartiality – its systemic adoption across all levels of government and industry remains limited. The new administration’s ability to translate discourse into practice will determine whether arbitration becomes truly embedded in Mexico’s legal and commercial culture, especially in contracts involving public functions and regulated sectors.

Ideological Continuity and Policy Innovation Under the New Administration

The 2024 elections confirmed an ideological continuity in national leadership, but with new pragmatic adjustments. The current administration has reaffirmed the social, sovereign and redistributive principles of its predecessor while adopting a more economically inclusive posture. A central pillar of this approach is the deliberate inclusion of domestic private investors in national development projects, alongside continued efforts to prioritise local communities, indigenous rights, and national ownership of strategic sectors.

This renewed model blends economic nationalism with a recognition of the catalytic role that domestic capital can play. It opens up new spaces for public-private partnerships, concessional regimes and co-financing schemes – many of which will be governed by contractual frameworks that reference arbitration as the preferred dispute resolution mechanism. As a result, the landscape of arbitration in Mexico is likely to grow in both complexity and relevance.

The Judicial Reform and Its Implications for Arbitration

One of the most controversial legacies of the prior administration – continued under the current one – is the judicial reform initiative proposing the election of judges by popular vote. While its stated purpose is to democratise the judiciary and enhance public accountability, the reform has raised deep concerns about politicisation, diminished judicial independence, and weakened adjudicative capacity in cases involving State interests or politically sensitive reforms.

In this context, arbitration is increasingly seen as a safeguard against judicial uncertainty. Legal practitioners and business leaders alike view arbitral proceedings – particularly those seated abroad or administered by reputable institutions – as offering a level of neutrality that may no longer be assured in the local judiciary. Yet, despite these perceptions, arbitration’s expansion remains largely aspirational. Its broader materialisation in practice will depend on sustained institutional support, judicial co-operation, and the standardisation of arbitration clauses across public-private and intra-private contracts.

The Global Context: the Return of US Protectionism and the TMEC’s Fragility

The return of Donald Trump to the presidency of the United States has significantly altered the geopolitical and economic context in which Mexico operates. Built around the vision of North American integration – first under NAFTA and then the USMCA/TMEC – Mexico’s export-driven economy now faces growing uncertainty. The Trump administration’s rejection of multilateralism, threats to withdraw from the TMEC, and imposition of new tariffs have exposed the vulnerabilities of overreliance on a single trade bloc.

If the TMEC is weakened or terminated, Mexico could experience severe disruptions in supply chains, industrial production and foreign investment. These disruptions are likely to trigger an increase in trade-related and investment-related disputes, many of which may be resolved through investor-State or commercial arbitration. In this context, the role of arbitration as a stabilising legal framework becomes even more critical.

Constitutional Recognition of Indigenous and Afro-Mexican Communities

Continuing the trajectory of social inclusion, the current administration is pursuing constitutional reforms that elevate the legal recognition of indigenous and Afro-Mexican communities. These reforms guarantee free, prior and informed consultation for legislative or administrative actions affecting communal assets or territories. While these protections are essential from a human rights perspective, they introduce additional layers of regulatory compliance for infrastructure, energy and resource extraction projects.

This framework could reshape the arbitration landscape in two significant ways: first by increasing the complexity of due diligence and permitting processes for investors, and second by potentially introducing community-driven challenges into arbitration proceedings – either as amici curiae, intervenors, or as part of treaty-based disputes alleging indirect expropriation or breach of fair and equitable treatment.

Regulatory Reconfiguration of Strategic Sectors and BIT Exposure

Mexico’s recent regulatory reforms reaffirm State control over strategic sectors – such as oil, gas, electricity, telecommunications and water – but now with a renewed emphasis on collaboration with domestic capital. By prioritising national self-sufficiency while welcoming local investment, the government aims to reconfigure the public-private dynamic in a way that retains sovereignty yet unlocks economic growth.

Nevertheless, regulatory modifications affecting licences, tariffs, service obligations or concession terms may still be perceived as adverse measures by foreign investors. Given that Mexico maintains one of the world’s most extensive networks of Bilateral Investment Treaties (BITs), it remains exposed to claims for treaty breaches. Arbitration under ICSID and UNCITRAL rules will likely remain the forum of choice for these disputes, reinforcing the need for careful legal harmonisation between domestic policy and international obligations.

Sector-Specific Reforms and the Prospect of Investor Claims

Several additional sectoral initiatives carry potential arbitration implications:

• agriculture – the prohibition on genetically modified corn, already a contentious issue under the TMEC, may prompt investor-State claims alleging trade discrimination or unjustified regulatory interference;
• hydrocarbons – the ban on hydraulic fracturing could affect pre-existing concessions and development plans, giving rise to potential expropriation or indirect loss claims; and
• transportation – the restructuring of rail concessions to favour government-provided passenger services could create disputes over concession scope, termination clauses, or expectations of exclusivity and investment recovery.

In each of these sectors, the expansion of domestic arbitration frameworks – and the strengthening of institutional support – will be critical to managing disputes while preserving investor confidence.