Changes to Mexican Judicial Reform Highlight the Importance of Proactive Investment Treaty Structuring

Mexico's first judicial election took place on June 1, 2025, following a 2024 constitutional amendment that mandated the democratic election of all judges. In the wake of the judicial election, President Sheinbaum has passed a reform that seeks to address concerns arising in relation to the election. These concerns include low voter turnout, the need to improve the screening of judicial candidates as a way of preselecting the best available candidates, and the need to properly streamline judicial and political elections in order to promote a more informed process. President Sheinbaum's 2026 Amendment introduces a number of adjustments and changes: (i) to the electoral calendar; (ii) to the selection criteria for judicial candidates; and (iii) to the specific ballot system used. Because Mexican judges hold lifetime appointments, these new measures will have a greater impact on future elected judges than on those already appointed following the 2025 election.

Timing

The 2026 Amendment provides that both federal and local judicial elections be postponed by one year, to Sunday, June 4, 2028, which is the same date as a possible presidential recall election.

Professionalization Measures

In order to achieve greater professionalization, the 2026 Amendment will create a commission composed of the heads of the evaluation committees of the three branches of Mexico's government. This commission will be tasked with verifying candidate eligibility and with establishing consistent verification criteria and methodologies. Such new criteria and methodologies include mandatory professional examinations, thus moving beyond a simple evaluation of academic degrees or résumés.

Other professionalization measures set forth in the 2026 Amendment are mandatory ongoing training for all judicial officers and the establishment of transparent standards of evaluation. These efforts will be coordinated by the Judicial Disciplinary Tribunal, an independent organ of federal judicial oversight that was created by the 2024 amendment, and by the Judicial School, which is the organization responsible for judicial training and certification.

Simplification of the Election Process

As a means of simplifying the election process, the 2026 Amendment prescribes that anticorruption committees must preselect the four most-qualified judicial candidates for each open position. A lottery process will reduce the four preselected candidates per position to two, while maintaining compliance with gender-parity requirements.

The ballot will be simplified such that, for federal judges, each voter will vote for only one judge and one magistrate per judicial specialty (i.e., civil, criminal, and administrative law). In addition, the ballot for federal judicial candidates, who under the 2024 amendment are each nominated by one of the three branches of government, will clearly label which branch proposed which candidate.

Nominations for the Supreme Court of Justice of the Nation ("SCJN"), Mexico's highest court, will be reduced from 81 to 54 candidates; for the Judicial Disciplinary Tribunal, from 45 to 30; and for the Electoral Tribunal, a federal court for election-related disputes, from 63 to 42.

Currently, judicial elections must occur in polling stations that are separate from those for other elections taking place on the same day, such as gubernatorial or presidential recall elections (depending on the year). The 2026 Amendment provides that judicial elections will take place in the same polling station as political elections.

Other Institutional Adjustments

The 2026 Amendment also adopts the creation of two "sections" within the SCJN to handle minor matters, so that the main body of the SCJN may focus its work on matters of what the amendment terms, vaguely, "greater legal significance." Moreover, vacancies caused by death or resignation will not be filled until the next judicial election cycle. A further adjustment will require state judicial branches to mirror existing federal standards. This includes the establishment of anticorruption committees, lottery-based selection, ballot simplification, an enhanced selection process, and early performance evaluations—all parts of the initial amendment.

Concerns Regarding the 2024 Constitutional Amendment

While President Sheinbaum's Morena party and its supporters view the 2024 constitutional amendment and 2026 Amendment as an effort to position Mexico among the most democratic nations in the world, some groups are wary of judicial capture by political interests, organized crime, and other elements. In response to the 2026 Amendment, on May 25 of this year the Mexican Bar Association issued a statement on X (formerly Twitter) expressing "profound concern" with the changes on the grounds that they fail to remedy issues of inadequate judicial independence created by the 2024 constitutional amendment. In particular, according to the Mexican Bar Association, "No modern economy can sustain adequate levels of growth when investors lack confidence in tribunals that have stopped being independent, technically competent, and capable of resolving controversies in accordance with the law."

The United Nations special rapporteur on the independence of judges and lawyers warned in 2024 that dismantling an entire nation's judicial branch to elect all judges at all levels is unprecedented worldwide and will "place Mexico in a unique position in terms of its method for judicial selection." The major credit rating agencies have stated that Mexico's judicial reform has heightened investor uncertainty, eroded business confidence, and weakened institutional counterweights.

Treaty Protections for Foreign Investors

While investors with potential or pending litigation in Mexico may be concerned that national courts will apply the law with an eye to political or other special interests, they are not necessarily without recourse. Indeed, depending on the corporate structure relative to the investment and on the particular stage and nature of any dispute, foreign investors may be able to benefit from international treaty protections.

Many free trade agreements ("FTAs") and bilateral investment treaties ("BITs") provide avenues for legal recourse related to unlawful judicial actions that harm investments. Many of these agreements include provisions requiring states to afford fair and equitable treatment ("FET") to foreign investors. Among the various principles of the FET standard enumerated in treaties and defined through customary international law, there is a protection against denial of justice. According to this principle, investors pursuing litigation or administrative proceedings in national courts may claim relief for serious procedural defects and irrational outcomes that go beyond mere misapplications of the law.

For U.S.-based investors, the United States–Mexico–Canada Agreement, which supersedes the North American Free Trade Agreement ("NAFTA"), allows for denial of justice claims to be brought against Mexico only in certain enumerated investment sectors. These industries include oil and natural gas, power generation, telecommunications, public transportation, and transportation infrastructure services. Multinationals whose investments in Mexico are in other sectors should structure their investments to take advantage of other treaties. Alternatively, where possible, they should aim to bypass the domestic judicial system through international arbitration forums.

While many of Mexico's BITs and FTAs with other countries do not explicitly provide investors with the option of bringing denial of justice claims against the Mexican state, it is generally accepted that FET provisions encompass denial of justice claims under the norms of public international law. Importantly, many of Mexico's treaties, such as the Mexico–United Kingdom BIT and the Mexico-China BIT, explicitly tie the FET standard to the customary minimum standard of treatment in international law. Per customary international law norms, this means that although denial of justice claims are available to investors, any such claim has a high evidentiary burden that requires a willful disregard of due process or fundamentally unfair proceedings with a radically incorrect result. In addition, investors must generally exhaust all local remedies prior to bringing a denial of justice claim. In Lion Mexico Consolidated v. United Mexican States, an arbitration that the International Centre for Settlement of Investment Disputes administered under NAFTA's denial of justice provision, a Canadian investor successfully proved that it had used up all local remedies because continuing local proceedings in Mexico would have been futile. That claimant succeeded on its denial of justice claim and was awarded US$22 million.

On the other hand, some treaties, such as the Mexico-Netherlands BIT, have stand-alone FET provisions that are untethered to customary international law. These afford claimants the option to make broader denial of justice claims regarding unfair judicial procedures unanchored to customary international law norms.

Thus, companies with investments in Mexico should determine whether they are protected by an agreement that affords denial of justice protections, and if so, whether those protections are the most advantageous ones available. If not, then foreign investors may be able to restructure their investments to maximize protections under existing agreements. While the act of restructuring an investment to gain treaty protection after the investment has been made is not prohibited, several arbitral tribunals have held that investors cannot gain treaty protection if they restructure their investment after a dispute has become foreseeable. Therefore, restructuring has the best chance of being recognized as legitimate if it takes place before any alleged breach occurs or becomes foreseeable, that is, before any judicial impropriety begins to occur.