BINATIONAL PANEL REVIEW
PURSUANT TO
THE NORTH AMERICAN FREE TRADE AGREEMENT
Article 1904

IN THE MATTER OF:

Imports of Cut-to-Length Plate Products from the United States
(Continued)

B. The Statutory Language

1. Article 238

Official Spanish language and unofficial English language versions of Article 238 of the ⁶⁷ Federal Fiscal Code are set out below:

Artículo 238 Código Fiscal de la Federación	Article 238 Federal Fiscal Code
Art. 238.—Se declarará que una resolución administrativa es ilegal cuando se demuestre alguna de las siguientes causales:	Art. 238—An administrative determination shall be declared illegal when any one of the following grounds is established:
I. Incompetencia del funcionario que la haya dictado u ordenado o tramitado el procedimiento del que deriva dicha resolución.	I. Lack of jurisdiction or authority of the agency or official issuing the challenged determination or ordering, initiating or carrying out the proceeding in which the challenged determination was issued.
II. Omisión de los requisitos formales exigidos por las leyes, que afecte las defensas del particular y trascienda al sentido de la resolución impugnada, inclusive la ausencia de fundamentación o motivación, en su caso.	II. An omission of formal legal requirements by the agency or official issuing the challenged determination which affects the person’s right of proper defense as well as the scope or meaning {outcome} of the challenged determination, or a failure of the agency or official to provide a reasoned determination based upon the record.
III. Vicios del procedimiento que afecten las defensas del particular y trasciendan al sentido de la resolución impugnada.	III. A violation or defect of procedure by the agency or official issuing the challenged determination, which affects the person’s right of proper defense as well as the scope or meaning {outcome} of the challenged determination.
IV. Si los hechos que la motivaron no se realizaron, fueron distintos o se apreciaron en forma equivocada, o bien se dictó en contravención de las disposiciones aplicadas o dejó de aplicar las debidas.	IV. If the facts which underlie the challenged determination do not exist, are different from the facts cited by the agency, or were considered by the agency in an erroneous way; if the challenged determination was issued by the agency in violation of the applicable laws or rules; or if the correct laws or rules were not applied by the agency.
V. Cuando la resolución administrativa dictada en ejercicio de facultades discrecionales no corresponda a los fines para los cuales la ley confiera dichas facultades.	V. Whenever a discretionary determination by an agency falls outside the lawful scope of that discretion.

2. Related Provisions

Before reviewing the specific clauses of Article 238 of the Federal Fiscal Code, the Panel notes that this provision does not exist in isolation from other provisions of that Code that also bear upon its operation. Indeed, these related statutory provisions—Articles 237 and 239 of the Federal Fiscal Code—have become a source of dispute and controversy in this review. Official Spanish language and unofficial English language versions of these two articles also appear below.

Artículo 237 Código Fiscal de la Federación

Article 237 Federal Fiscal Code

Art. 237.—Las sentencias del Tribunal Fiscal se fundarán en derecho y examinarán a todos y cada uno de los puntos controvertidos del acto impugnado, teniendo la facultad de invocar hechos notorios. Cuando se hagan valer diversos conceptos de nulidad por omisión de formalidades o violaciones de procedimiento, la sentencia o resolución de la Sala deberá examinar y resolver cada uno, aún cuando considere fundado alguno de ellos. En el caso de que la sentencia declare la nulidad de una resolución por la omisión de los requisitos formales exigidos por las leyes, o por vicios del procedimiento, la misma deberá señalar en qué forma afectaron las defensas del particular y trascendieron al sentido de la resolución. Las Salas podrán corregir los errores que adviertan en la cita de los preceptos que se consideren violados y examinar en su conjunto los agravios y causales de ilegalidad, así como los demás razonamientos de las partes, a fin de resolver la cuestión efectivamente planteada, pero sin cambiar los hechos expuestos en la demanda y en la contestación. No se podrán anular o modificar los actos de las autoridades administrativas no impugnados de manera expresa en la demanda.

Art. 237.—The judgments or orders of the Fiscal Tribunal shall be based on law and shall examine and discuss each and every one of the points challenged in the determination under review. The Fiscal Tribunal shall be able to take well-known facts into account. When different arguments or grounds for the nullification of the determination under review are made, based on the omission of legal formalities or procedural defects, the opinion or judgment of the Chamber [of the Fiscal] shall discuss and resolve each one, even when it considers one of those arguments or grounds to be well-founded. When the Tribunal or judgment declares the nullity of an opinion administrative determination on the basis of the omission of legal formalities or for procedural defects, it shall indicate in what way thdefenses of the party are affected by the omissions or defects and how these affect the scope or meaning {outcome} of the administrative determination. answer. The Chambers may correct errors in the legal principles alleged by the complainant to have been violated and may examine the applicable legal principles together with the questions of damages and caustion, as well as the other arguments of the parties, in order to effectively resolve the questions raised, but without altering the facts set out in the complaint and The Chambers may not annul or modify acts of the administrative authorities that have not been expressly contested in the complaint.

Artículo 239 Código Fiscal de la Federación	Article 239 Federal Fiscal Code
Art. 239.—La sentencia definitiva podrá:	Art. 239 .— The final judgment may:
I. Reconocer la validez de la resolución impugnada.	I. Recognize the validity of the challenged determination.
II. Declarar la nulidad de la resolución impugnada.	II. Declare the challenged determination a nullity.
III. Declarar la nulidad de la resolución impugnada para determinar efectos, debiendo precisar con claridad la forma y términos en que debe cumplirla, salvo que se trate de facultades discrecionales. Si la sentencia obliga a la autoridad a realizar un determinado acto, o iniciar un procedimiento, deberá cumplirse en un plazo de cuatro meses aun cuando haya transcurrido el plazo que señala el artículo 67 de este Código. En caso de que se interponga recurso, se suspenderá el efecto de la sentencia hasta que se dicte la resolución que ponga fin a la controversia. El Tribunal Fiscal de la Federación declarará la nulidad para el efecto de que se emita nueva resolución cuando se esté en alguno de los supuestos previstos en las fracciones II y III, y en su caso, V del artículo 238 de este Código.	III. Declare the purposes of the challenged determination a nullity, specifying with clarity the form and terms the agency must comply la autoridad with, except where the agency has been granted discretionary powers. If the opinion or judgment obligates the agency to carry out a given act, or to initiate an administrative proceding, it must be complied with in a term of four months, even when the time indicated in Article 67 of this [Federal Fiscal] Code may have elapsed. If an appeal is filed, the effect of the judgment shall be suspended until an order is issued which puts an end to the controversy. The Fiscal Tribunal shall declare a nullity for purposes of a new administrative determination when the provisions of paragraphs II, III, and V of Article 238 of this [Federal Fiscal] Code are applicable.

3. Arguments by the Investigating Authority and the Complainants

The Investigating Authority, in its briefs and at oral hearing, has presented two fundamental arguments that must be addressed initially by the Panel. The first argument is that Annex 1911, by making explicit reference only to Article 238 of the Federal Fiscal Code, intended thereby to exclude any possible application of its related provisions, Articles 237 and 239. ⁶⁸

The second argument of the Investigating Authority is that, unlike the Fiscal Tribunal which may rely directly upon the language of Article 239, the Panel is possessed of only limited remedial authority, citing for this purpose NAFTA Article 1904(8): "The panel may uphold a final ⁶⁹ determination, or remand it for action not inconsistent with the panel’s decision." The Investigating Authority’s main concern is the language of Article 239 which allows a reviewing court to declare, in certain situations, an agency determination "a total nullity." The Investigating Authority believes that binational panels have no such authority.

For their part, the Complainants argue that while the Panel may not directly "nullify" a determination by the Investigating Authority, the Panel possesses ample powers to issue an order to the Investigating Authority requiring it to terminate the proceeding, the functional equivalent of ⁷⁰ nullification.

4. Determination of the Panel

As set out in detail below, the Panel has carefully considered these arguments and has determined that:

The Mexican standard of review is Article 238 of the Federal Fiscal Code, which article must, however, be read in conjunction with Articles 237 and 239 of the Federal Fiscal Code to the maximum extent consistent with the nature of the binational panel review process; The Panel has authority under the NAFTA and under relevant Mexican laws to instruct the Investigating Authority to modify a final determination previously made by it in a manner which effectively terminates the proceeding.

a. Proper Application of the Mexican Standard of Review

With regard to SECOFI’s first argument, the essential question for the Panel to consider is whether the NAFTA Parties intended, by the language of Annex 1911, to not only point broadly to the applicable standards of review but, at least in the case of Mexico, to at the same time delimit or alter that standard of review. Stated another way, the question for the Panel is: whether Annex 1911 should be read as merely saying that binational panels should consider and be bound by the Mexican standard of review, as usually and normally applied by the Fiscal Tribunal; or whether Annex 1911 should be read to say that binational panels must apply a more limited standard of review, one which expressly or effectively ignores the relevant language of Articles 237 and 239, despite the fact that the Fiscal Tribunal can and must apply Articles 237 and 239 along with Article 238. For several reasons, this Panel determines that there was and is no demonstrated intent on the part of the NAFTA Parties to exclude consideration of Articles 237 and 239 when they drafted Annex 1911. The appropriate rule, therefore, is to apply Article 238, but to include Articles 237 and 239 to the maximum extent allowable by the nature of the binational panel review process.

i. Need for Uniform Standard of Review

In support of the above determination, the Panel first notes the basic policy consideration, expressed on numerous occasions by one or more NAFTA governments, that binational panels ought not to create a separate antidumping jurisprudence from that created by the local courts. ^{71 72}

Obviously, however, a separate jurisprudence would inevitably be created if binational panels were compelled to apply one form of the local standard of review while the local courts, in the exact same factual situation, would apply another form of that standard of review. Such a construction is plainly inconsistent with the underlying purpose and spirit of the NAFTA binational review process.

Therefore, the Panel believes that its broad obligation under the Treaty is to apply the same standard of review as would the local court, not a different one—just as it is required to examine the same body of substantive antidumping law, not a different one.

ii. Binational Panel Determinations Must Take Into Account Constitutional Guarantees

Second, the Panel notes that the Fiscal Tribunal has the authority under Articles 238(1) and 239 to declare an agency determination to be a "nullity" in situations where fundamental principles are at stake, particularly when basic constitutional provisions, incorporated through Article 238, are deemed to have been violated. In these situations, binational panels need to have a similarly effective remedy for such violations. If Article 1904(8) were read to limit the ability of the binational panel in this regard, a panel might find itself in the unacceptable position, once having determined that fundamental constitutional provisions had been violated by the Investigating Authority, that it had no effective remedy for such violation.

iii. Treaty Interpretation by the NAFTA Parties

Third, in addition to these basic policy considerations, the Panel has considered whether Canadian or U.S. panels have addressed this general issue in the past, for the same argument could be made in the context of Canadian and U.S. Chapter 19 cases as well. As to the question of whether Annex 1911 operates to delimit or narrow the normal standard of review when it references a particular statute, the Canadian experience is particularly enlightening and supports the Panel’s interpretation. It further illustrates that the NAFTA negotiators of Article 1911 were, or should have been, aware of the following Canadian experience. Article 1911 of the CFTA and Annex 1911 of the NAFTA once again point to a single statute as "representing" the applicable standard of review for binational panels to follow. Under the CFTA, that statute was specified as section 28(1) of the Canadian Federal Court Act, and under the ⁷³ NAFTA, that statute is specified as subsection 18.1(4) of the Federal Court Act. The latter ⁷⁴ statute is the successor to the former.

Despite the fact that Article 1911 pointed to a single provision of the Federal Court Act as representing the applicable standard of review, Canadian panels which have considered the issue have noted that a separate statute must also be taken into account in determining the applicable standard of review. This statute was section 76(1) of the Special Import Measures Act ("SIMA"), which ⁷⁵ required the reviewing court or binational panel to apply a more deferential standard of review than would otherwise be the case.⁷⁶

In Canada, therefore, despite the fact that Article 1911 of the CFTA pointed only to the pertinent clause in the Federal Court Act as being descriptive of the standard of review to be applied by panels, every Canadian panel that considered the matter concluded that the reference to the Federal Court Act alone was insufficient. The Federal Court Act provision had to be read together with the well-accepted interpretation of SIMA, despite the fact that the CFTA negotiators failed to make express reference to the latter provision when drafting Article 1911. Such reaching beyond the specific language of Article 1911 in the Canadian context appears to have been accepted by all parties, it was never challenged before an Extraordinary Challenge Committee nor, to the knowledge of the Panel, in any other CFTA or NAFTA context.

While the foregoing perhaps cannot be taken as definitive for any present purpose, it nevertheless represents a strong contextual showing that the CFTA/NAFTA negotiators, when formulating the language of Article 1911 of the CFTA and Annex 1911 of the NAFTA, were not engaged in a process of attempting to narrow, delimit, or otherwise the scope of the relevant standards of review. Rather, the approach seems to have been that the CFTA/NAFTA negotiators were simply pointing broadly to the applicable local standard of review, as it is usually and normally applied in the relevant jurisdiction. Therefore, the Panel concludes that when the NAFTA ⁷⁷ negotiators referred solely to Article 238 of the Federal Fiscal Code, they understood that reference to include other relevant provisions, in particular, Articles 237 and 239 of the Federal Fiscal Code.

iv. Article 238 Cannot Be Uniformly Applied Without Also Applying Article 239

Finally, and most importantly, the Panel considers itself compelled to include Articles 237 and 239 within the standard of review required by the Treaty for the simple reason that a failure to do so would lead to a serious distortion of the standard of review as actually practiced by the Fiscal Tribunal. As will be noted below, a bare reading of Article 238, which sets out five different categories of "illegality," would suggest that all five categories should be treated identically in terms of the remedy to be imposed by the Fiscal Tribunal. The final paragraph of Article 239, however, as well as applicable case law, requires that Article 238(1) and (4) be treated by the court differently from Article 238(2), (3) and (5). In the former case, the entire agency proceeding must be declared a "nullity" ab initio, while in the latter case, it is only the individual agency action that is at peril; once remanded for correction, the original proceeding may continue. Therefore, the Mexican standard of review simply cannot be applied accurately and in conformity with the Fiscal Tribunal’s well-established practices and principles unless Article 238 is interpreted in conjunction with its related articles, most particularly Article 239.

b. Authority to Issue Orders that Provide Instructions to the Investigating Authority

The second argument made by SECOFI is that Article 1904(8) of the Treaty effectively limits the remedial authority of binational panels. SECOFI in effect suggests that while the Fiscal Tribunal demonstrably has authority to order the "nullification" of an agency proceeding, a binational panel, ⁷⁸ considering identical facts, may not do so. The end result of identical cases brought before the Fiscal Tribunal and before a Chapter 19 panel would therefore, on this reasoning, be very different. The Panel believes that such a result was not intended by the NAFTA Parties.

i. Treaty Interpretation by the NAFTA Parties

The Panel has found it useful, once again, to consider the Canadian experience in the context of the remedies available to binational panels, particularly in situations of serious agency defaults, such as a violation of the constitution or other fundamental principles. In Canada, a few panels have considered whether the agency "failed to observe a principle of natural justice or otherwise acted beyond... its jurisdiction", which is the first test set forth in the Federal Court Act under the former Canadian standard of review.⁷⁹

Although no panel has found cause to rule affirmatively when reviewing under this standard, the language used in considering the issue is revealing. In Induction Motors, the panel stated: "A breach of natural justice, however slight, which is found to affect the essential fairness of the hearing under review, will render a decision invalid." Similarly, in Certain Beer From The United ⁸⁰ States , the panel stated: "If an administrative decision contains an error where the administrative ⁸¹ body incorrectly determined the scope of its jurisdiction or authority, then the decision may be overturned." Later the panel said: "If the proceedings violate the fairness standard of the principles of natural justice, the administrative body may lose jurisdiction."⁸²

In Certain Flat Hot-Rolled Carbon Steel Sheet Products Originating In Or Exported From the United States (Injury), the panel stated: "There is a consensus among the participants, and the ⁸³ Panel agrees, that the standard of review for questions of jurisdiction, including issues of natural justice, is ‘correctness. The Tribunal must be right. It is not entitled to deference when it addresses a question of jurisdiction. If the Tribunal were wrong, the Panel would remand with instructions to correct the finding." Finally, in Certain Hot-Rolled Carbon Steel Plate and High-Strength Low-Alloy Plate, Heat-Treated Or Not, Originating In Or Exported From The U.S.A., CDA-93-1904-06 (December 20, 1994), the panel, considering a challenge to Chapter 19 roster members from acting as counsel before the agency, stated:

If the participation of Roster Members in the Tribunal’s investigation contravenes principles of natural justice, then the determination arising from that investigation is a nullity. The natural justice issue is inextricably interwoven with the Tribunal’s final decision. The Panel has jurisdiction to review the Tribunal’s final, "definitive" decision. We therefore have jurisdiction to review the natural justice elements of that decision. Panel Opinion, at 24. (Emphasis added)

These opinions make it clear that Canadian binational panels do not regard their remedial authority as specially limited by Article 1904(8) or otherwise. In a case where "natural justice" has been denied by the agency, these decisions suggest strongly that a Canadian panel would have no hesitancy in regarding the proceeding below as "a nullity," causing it to render an opinion fully appropriate to the nature of that finding. In the United States, although binational panels rarely, if ever, have addressed fundamental constitutional or jurisdictional questions raised by agency action, there once again has been little hesitancy about crafting orders which effectively overturn the determinations of the agency. In Certain Softwood Lumber Products From Canada, this was done explicitly when the binational ⁸⁴ panel ordered the local investigating authority to make certain determinations that were specifically designed to bring the case to an end. No doubt, other binational panels in the United States have done effectively the same thing, albeit without so direct a purpose.

ii. Panel Authority to Issue Appropriate Orders

SECOFI makes much of the fact that Article 1904(8) allows binational panels to uphold or to remand the investigating authority, but not to reverse it. In the Panel’s view, this is not a substantive limitation, but merely a recognition that it is the agency itself, and not the panel, that must issue the final order terminating a case. Panels have no authority to issue an order in the name of the Investigating Authority; panels have authority only to issue an order to the Investigating Authority. Therefore, although this Panel does not claim the capacity to directly "nullify" an agency determination, it does have the ability under Articles 238(1) and 239, read in conjunction with NAFTA Article 1904(8) and other authority, to remand to the Investigating Authority with directions that effectively terminate a proceeding. It is then the legitimate expectation of the Panel that the Investigating Authority will comply with that order.⁸⁵ The Panel now turns to a more detailed examination of the Mexican standard of review with focus, first, on the constitutional underpinnings of that standard.

C. Constitutional Foundations of the Mexican Standard of Review

It is a core principle of the Mexican juridical system that state organs and administrative authorities may do only that which they have been expressly authorized by law to do. Sourced ⁸⁶ in the Constitution itself, this principle structures the basic relationship between public power and the Mexican people.

Because of the importance pertaining to this case, Articles 14 and 16 of the Constitution will be analyzed.

Article 14(2) of the Constitution establishes a basic guarantee, a "guarantee of legal security" (garantía de audiencia) against acts of deprivation (privación):

Artículo 14(2).—Nadie podrá ser privado de la vida, de la libertad o de sus propriedades, posesiones o derechos, sino mediante juicio seguido ante los tribunales previamente establecidos, en el que se cumplan las formalidades esenciales del procedimiento y conforme a las leyes expedidas con anterioridad al hecho.

Article 14(2).—No person shall be deprived of life, liberty, property, possessions, or rights without a trial before a previously established court in which the essential formalities of procedure are observed in accordance with laws in effect at the time of the act.

By its terms, Article 14(2) establishes that any deprivation of right must be done through the means of a previously established tribunal, acting in a trial or proceeding which observes all essential legal formalities and in conformity with the then applicable laws. It is said that, in particular, four specific rights are covered by Article 14(2): no sanction or other deprivation of right may be imposed upon a person except by means of trial or other judicial proceeding; such trial or proceeding must be held before a previously established court or tribunal; such trial or proceeding must observe all relevant procedural formalities; and the decision of the court or tribunal must be based upon the laws that were in existence at the time.⁸⁷

The principle of legallity flows most directly from Article 16, which provides the Mexican people with what is known as a "guarantee of legality" (garantía de legalidad), which has not been adopted in any other country in such a liberal fashion as in Mexico . According to Article 16(1), this ⁸⁸ guarantee protects individuals against acts of the governmental authority which are not justified or based in a relevant legal provision:

Artículo 16(1).—Nadie puede ser molestado en su persona, familia, domicilio, papeles o posesiones, sino en virtud de mandamiento escrito de la autoridad competente, que funde y motive la causa legal del procedimiento...

Article 16(1).—No person shall be distubed in his person, family, domicile, documents or possessions, except by virtue of a written order issued by a competent authority stating the legal grounds and justification for the action taken...

The constitutional implications of an agency acting outside the scope of legal authority is illustrated in the following Thesis : ⁸⁹

Las autoridades administrativas no tienen más facultades que las que expresamente conceden las leyes, y cuando dictan alguna determinación que no está debidamente fundada y motivada en alguna ley, debe estimarse que es les violatoria de la garantías consignadas en el artículo 16 constitucional.

Administrative Authorities have no more powers than those expressly conferred by law, and when they render any determination which is not properly grounded and motivated in a law, it must be considered to be in violation of the constitutional guarantee set in Article 16 of the Constitution.

Article 16 of the Constitution also distinguishes among specific rights: a state organ that originates an act or procedure which can be interpreted as a nuisance or disturbance (molestia) must be properly established in law; the act or procedure which is interpreted as "molestia" must, in terms of its scope and meaning, itself conform to and fall within a legal norm; the act of "molestia" must be derived from and set out in a written order; and the written order which is the basis of the act of "molestia" must set out the legal grounds upon which the order is based and the justifications for issuing it.⁹⁰

The guarantees of legality and legal security established by Articles 14 and 16 of the Constitution are of fundamental importance in Mexican law. Pursuant to Article 1 of the Constitution, these ⁹¹ guarantees protect all persons and individuals in Mexico, including the Complainants. For panel purposes, these guarantees impact both the intepretation to be given to the standard of review and to the substance and procedures of any Mexican antidumping proceeding. The enforcement of these guarantees is regarded as a primary function of judicial review by Mexican courts and, therefore, is a primary function of this Panel as well.

The Supreme Court has frequently been in a position to apply these principles, ruling on numerous occasions that administrative authorities may only carry out those functions and perform those acts which the law allows them expressly to do. To state the matter more fully, in order for ⁹² the actions of Mexican authorities to be legal, the agency issuing or carrying out a function, or performing an act, must be "competent" to do so. In order for an agency to be competent, two fundamental requirements must be met: (i) the existence of the acting entity or unit must be formally established in a legal provision; and (ii) that entity or unit must only act in accordance with the express authority granted it by Mexican law.

1. Authority of an Administrative Entity to Act Must be Expressly Attributed by Law

The first requirement establishes that in order for an administrative entity or unit to legally exist, its creation and operation must be expressly established in a body of laws. Actions that are ⁹³ carried out by administrative organs or units that have not been formally created or established in legal bodies of laws will not be recognized as being valid. Therefore, if an action of an official is either ordered or carried out by an entity that does not have its existence recognized by law, that action is unlawful under the Constitution, due to incompetence. This rule is also accepted and consistently applied by the Fiscal Tribunal, as illustrated by the following recent case. This decision, rendered in March, 1995, involved a case brought by a claimant who alleged that the Director de Responsabilidades y Sanciones de la Contraloría General del Departmento del Distrito Federal ("Director") had imposed an administrative sanction against him, suspending his employment for a period of 15 days. On review by the Fiscal Tribunal, the claimant ⁹⁴ asserted that the Director lacked competence to issue the challenged resolution, arguing that only his administrative superior, the Secretario General de Protección y Vialidad del Departmento del Distrito Federal, had competence to do so.

Against argument by counsel for the Director that his competence was derived from delegated authority which had previously been published in the D.O., the Fiscal Tribunal held that the Director was incompetent to impose the sanction and that the resolution should be declared a nullity under Article 238(1) of the Federal Fiscal Code.

In reaching this conclusion, the Fiscal Tribunal analyzed the internal regulations of the subject agency, which failed to provide for the office in question. Moreover, it was clear to the Fiscal Tribunal that the proper office to issue such a sanction was the Contralor General del Departmento del Distrito Federal. The Fiscal Tribunal also rejected the argument that the Director’s authority had been delegated to him by virtue of the publication in the D.O. of the previous Acuerdo Delegatorio de Facultades, issued by the chief of the Departamento del Distrito Federal, since that official lacked competence to create new administrative units, although he could delegate particular authority to administrative units that had previously been established by law.

In its opinion, the Fiscal Tribunal expressly relied on a previous "jurisprudencia," supporting its right to declare the challenged resolution a "nullity": "... consequently, the acts and resolutions issued by the cited administrative unit will be a nullity because they were issued by an authority which was legally nonexistent."⁹⁵

2. Administrative Entity May Only Act Within Scope of Attribution

As noted above, the second requirement of Mexican law is that "authorities may only do what the law expressly allows them to do." Under the Constitution, officials do not have more authority ⁹⁶ than what is expressly attributed to them by law and the "actions of administrative authorities which are not authorized by any law, are a violation of [the legal] guarantees." Expressed another way, ⁹⁷ administrative authorities must be expressly authorized and public officials may only issue or carry out acts against the interest of individuals when there is a body of law which expressly authorizes them to do so. If a Mexican official orders or carries out an action which affects the interests and rights of individuals, but has not been expressly and individually authorized to do so, this action ⁹⁸ is therefore unlawful due to incompetence. The guarantee stated in Article 16 of the Constitution puts limits in what government officials can do.

These constitutional principles are of considerable importance to the Panel because the Complainants have directed several constitutional challenges to the Final Determination and to the procedures followed by the Investigating Authority leading up to that determination. Moreover, they are of importance because the applicable standard of review, as expressed in Article 238 and related provisions of the Federal Fiscal Code, is clearly structured and based, in substantial part, on the legal guarantees established by Articles 14 and 16 of the Constitution. D. "Logical Order" Rule; Declaration of "Nullity" Before turning to a detailed review of the specific grounds of illegality set out in Article 238, the Panel will note the "jurisprudencia" of the Fiscal Tribunal to the effect that each of these grounds must be studied in a "logical order." That is to say, the Fiscal Tribunal uniformly follows the rule and practice of applying each paragraph of Article 238 in a consecutive or hierarchical order. It examines whether any ground of illegality exists under Article 238(1) and will examine a ground under Article 238(2) only if it is satisfied that a ground under Article 238(1) has not been established, etc. The following "jurisprudencia" illustrates this rule:⁹⁹

SENTENCIAS FISCALES. ORDEN LÓGICO EN EL ESTUDIO DE LAS CAUSALES DE ANULACIÓN.

TAX JUDGMENTS. LOGICAL ORDER IN THE STUDY OF CAUSES OF ANNULMENT.

El artículo 238 del Código Fiscal de la Federación enumera las causales de anulación de una resolución fiscal o de un procedimiento administrativo, dentro de un orden lógico, en tanto que el estudio de la causal anterior excluye el análisis de las siguientes para decretar, cuando sea procedente, la nulidad del acto o del procedimiento administrativo impugnado, por lo que las Salas Fiscales, antes de resolver que los proveídos combatidos carecen de las formalidades que legalmente deben revestir, analizarán la causal relativa a la competencia de la autoridad emisora ya que dicha cuestión es de análisis preferente, y en caso de que dicha causal resulte ineficaz para declarar la nulidad de la proveídos, entonces deberán proceder en el orden indicado por el referido precepto legal, al estudio de las restantes causas de anulación que se aduzcan para resolver en la forma que legalmente procede.

Article 238 of the Fiscal Code of the Federation enumerates the causes for annulment of a tax judgment or administrative proceeding in a logical order, so that the analysis of a previously-listed cause excludes the analysis of the following causes [as a source] for decreeing the nullity of a challenged act or administrative proceeding when a declaration of nullity is appropriate. Therefore, before deciding that the challenged decisions lack the legally-required formalities, that Tax Chambers must analyze the cost [of annullment] concerning the jurisdiction of the emitting authority since that question is of preferential analysis, and in the event that said cost is insufficient to support the nullification of the decisions, then the court may proceed in the order indicated. In the cited legal precedent to the study of the remaining causes of annullment that are to result them in the legally appropiate manner.

In its review of the specific challenges to the Final Determination made by the Complainants, the Majority intends to follow the Fiscal Tribunal’s "logical order" rule. In addition, as will be noted below in connection with the discussion of Article 239, the Fiscal Tribunal will declare a case of illegality falling under Article 238(1) and (4) as a "nullity," requiring that the determination in question be quashed and the entire proceeding be terminated by the administrative agency. However, with respect to cases falling under Article 238(2), (3) and (5), the Fiscal Tribunal will ordinarily declare the determination in question illegal only for the purposes and reasons identified and will remand the determination to the agency for correction of the errors found. In the latter case, the determination is not quashed nor is the proceeding itself terminated; following correction of the errors, it would normally continue on the basis set out in the agency’s remand determination.

Continue on to Subsection E: Article 238(1)

⁶⁷ This English language translation of Article 238 of the Federal Fiscal Code was prepared by the Panel itself as an attempt to express in English the legal concepts involved somewhat more clearly than the more literal translations provided the Panel by the parties in their briefs. The Panel appreciates the difficulty of preparing a translation of this provision into English which is effective as well as precise, and in any event has used such translation only as a tool. It has been guided in its analysis ultimately only by the Spanish language original. All other English language translations of original Spanish language text appearing in this Opinion should also be considered to be informal and unofficial.

⁶⁸ See pages 22-23 of SECOFI´s March 3, 1995 Case Brief (Volume 9, S.P.R. 198) and pages 70-71 of the transcript of the hearing held on May 3-4, 1995 (Volume 17, S.P.R. 461).

⁶⁹ See pages 71-73 and 77-78 of the hearing transcript (Volume 17, S.P.R. 461).

⁷⁰ See pages 11-12 of the hearing transcript (Volume 17, S.P.R. 461).

⁷¹ This term is used in its English sense of a separate body of law and is not intended to reflect the Mexican legal concept of "jurisprudencia."

⁷² See n. 65 supra.

⁷³ See Article 1911 of the CFTA. The Federal Court Act was found at R.S.C. 1985, c. F-7 and read as follows: Notwithstanding section 18 or the provisions of any other Act, the Court of Appeal has jurisdiction to hear and determine an application to review and set aside a decision or order, other than a decision or order of an administrative nature not required by law to be made on a judicial or quasi-judicial basis, made by or in the course of proceedings before a federal board, commission or other tribunal, on the ground that the board, commission or tribunal:

(a) failed to observe a principle of natural justice or otherwise acted beyond or refused to exercise its jurisdiction;

(b) erred in law in making its decision or order, whether or not the error appears on the face of the record; or

(c) based its decision or order on an erroneous finding of fact that it made in a perverse or capricious manner or without regard for the material before it.

⁷⁴ See Annex 1911 of the NAFTA.

⁷⁵ R.S.C. 1985, c. S-15.

⁷⁶ SIMA provided that, subject to certain exceptions, "every order or finding of the Tribunal under this Act is final and conclusive." In Canadian law, this statute is to be interpreted as a "privative clause." See National Corn Growers Association v. Canadian Import Tribunal, [1990] 2 S.C.R. 1324 at 1370 (per Gonthier J.). See also Certain Dumped Integral Horsepower Induction Motors, One Horsepower (1HP) to Two Hundred Horsepower (200HP) Inclusive, With Exceptions Originating In Or Exported From the United States of America (hereinafter "Induction Motors"), CDA-9-1904-01, at 16, 4 TCT 7065 at 7072 (September 11, 1991) ("This Panel’s jurisdiction is further circumscribed by virtue of section 76(1) of SIMA."). Accord An Inquiry Made By The Canadian International Trade Tribunal Pursuant To Section 42 Of The Special Imports Measures Act Respecting Machines Tufted Carpeting Originating In Or Exported From The United States Of America, CDA-92-1904-02, at 7 (April 7, 1993) ("In Canada, it is the standard of review found in s. 28(1) of the Federal Court Act, as limited by the so-called privative clause in s. 76(1) of SIMA....") and Certain Flat Hot-Rolled Carbon Steel Sheet Products Originating In Or Exported From The United States, CDA-93-1904-07, at 13 (May 18, 1994) ("As a privative clause, SIMA section 76(1) affects the standard of review applicable to the decisions of the Tribunal."). See Certain Hot-Rolled Carbon Steel Plate and High-Strength Low-Alloy Plate, Heat-Treated Or Not, Originating In Or Exported From the U.S.A., CDA-93-1904-06 (December 20, 1994) at 14. The existence of a "privative clause" may have a significant outcome on the decision. As stated in the foregoing case, at 17, "[C]hanging the standard of review ... affects the substantive rights of [the] parties." SIMA was amended by the North American Free Trade Agreement Implementation Act, S.C. 1994, c.44, effective January 1, 1994, which repealed the privative clause in SIMA section 76(1) with respect to agency determinations involving the United States and Mexico. Id.

⁷⁷ This also appears to be true with respect to the United States. The standard of review cited by Annex 1911 for the United States is section 516A(b)(1)(B) of the Tariff Act of 1930. However, it is uniformly accepted that this narrow statutory language may not be understood or applied without the rich body of Supreme Court and other decisions which intrepret this language in a fashion that is hardly self-evident from the language itself. See, for example, Chevron U.S.A. Inc. v. Natural Resources Defense Council, 467 U.S. 837, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984), and Udall v. Tallman, 380 U.S. 1, 85 S.Ct. 792, 13 L.Ed.2d 616 (1965).

⁷⁸ See Article 95 of the new Foreing Trade Law, discussed in n. 49 supra, which states that decisions of the investigating authority can be opposed before the Fiscal Tribunal, asking for the nullification of said decision.

⁷⁹ A challenge on the ground of "natural justice" is akin to a constitutional challenge on the ground of incompetence.

⁸⁰ Induction Motors, at 25. (See n.76 supra). The panel relied on significant prior judicial authority in reaching this conclusion, citing Supermarchés Jean Labrecque Inc. v. Flamand, [1987] 2 S.C.R. 219 (L’Heureux-Dube, J.) ("A departure from this rule of natural justice has been held to constitute want or excess of jurisdiction", at 236) ("...the absence of any real and present prejudice ... can in no way remedy such an infringement", at 238) and Cardinal v. Director of Kent Institution, [1985] 2 S.C.R. 643 (LeDain, J.), at 661: I find it necessary to affirm that the denial of a fair hearing must always render a decision invalid, whether or not it may appear to a reviewing Court that the hearing would likely have resulted in a different decision. The right to a fair hearing must be regarded as an independent, unqualified right which finds its essential justification in the sense of procedural justice which any person affected by an administrative decision is entitled to have. It is not for a court to deny that right and sense of justice on the basis of speculation as to what the result might have been had there been a hearing.

⁸¹ The full title is Certain Beer Originating In Or Exported From The United States Of America By G. Heileman Brewing Company, Inc., Pabst Company, And The Stroh Brewery Company For Use Or Consumption In The Province of British Columbia, CDA-91-1904-01 (August 6, 1992), at 11.

⁸² Id., at p. 12.

⁸³ CDA-93-1904-07 (May 18, 1994), at 8.

⁸⁴ USA-92-1904-01, December 17, 1993.

⁸⁵ Under Article 1904(8), the agency must issue an order or otherwise act in a manner which is "not inconsistent

with the panel’s decision."

⁸⁶ In contrast, the individual may do whatever he is not prohibited by the law from doing.

⁸⁷ Los Derechos del Pueblo Mexicano, Antecedentes, Origen y Evolución del Articulado Constitucional, Vol. III. Art. 14-3.

⁸⁸ BURGOA, Ignacio, Las Garantías Individuales Ed. Porrúa, 1979.

⁸⁹ Quinta Epoca: Tomo XXIX, Pág. 669. Olivares Amado. In Mexican law, a Tesis (thesis) is a case precedent that may have persuasive value but is not itself, or has not yet become, a Jurisprudencia (jurisprudence). When five Tesis in a row adopt the identical holding (without intervening contrary authority), the five cases become a Jurisprudencia, which is treated as a binding legal precedent.

⁹⁰ J. Jesus OROZCO HENRIQUEZ. The Principio de Legalidad in Mexican Legal Dictionary. Porrúa. 1985 p. 2537.

⁹¹ To distinguish between Articles 14 and 16, it may be said that Article 14 establishes the constitutional requirements that sanctions and other ultimate acts of deprivation must satisfy, while Article 16 establishes the various characteristics, conditions and requirements that acts of public authorities must follow from a procedural standpoint up to the point of imposition of such sanctions or acts of deprivation.

⁹² Government officials may only do what the law permits them to do. (Las autoridades sólo pueden hacer lo que la ley les permite). See Quinta Epoca: Tomo XII, Pág. 928. Cía. De Luz y Fuerza de Puebla, S.A. Tomo XIII, Pág. 44. Velasco W. María Félix. Tomo XIII, Pág. 514. Caraveo Guadalupe. Tomo XIV, Pág. 555. Parra Lorenzo y Coag. Tomo XV, Pág. 249. Cárdenas Francisco V. See also Tesis (AUTORIDADES ADMINISTRATIVAS.-Los actos de las autoridades administrativas, que no estén autorizados por ley alguna, importan una violación de garantías), Quinta Época: Tomo XXIII, p. 97. Indart Tiburcio, and Tesis (AUTORIDADES ADMINISTRATIVAS, FACULTADES DE LAS. Las autoridades administrativas no tienen más facultades que las que expresamente les conceden las leyes, y cuando dictan alguna determinación que no está debidamente fundada y motivada en alguna ley, debe estimarse que es violatoria de las garantías consignadas en el artículo 16 constitucional), Quinta Época: Tomo XXIX, p. 669. Olivares Amado.

⁹³ See José OVALLE FAVELA, Los Derechos del Pueblo Mexicano, México a través de sus Constituciones, Chamber of Deputies of the Honorable Congress of the Union. Committee of Editorial Affairs - Grupo Editorial, Miguel Angel Porrúa, 4th ed., Mexico, 1994, at 163-171; and Efrain POLO BERNAL, Summary of Constitutional Guarantees, Editorial Porrúa, S.A. de C.V., Mexico, 1993, at 162-173. The internal operation d organizational structure of governmental entities and units may be freely established by the units and entities themselves, without endangering the guarantee of legality. Nevertheless, if those entities and units issue or carry out actions which affect individuals, then it is a necessary requirement that the competent officials have their legal existence acknowledged and have their express authority indicated in a legal body of laws.

⁹⁴ Juicio: 1432394. Luis Morales Merlos. March 17, 1995. Unanimous.

⁹⁵ Tesis de Jurisprudencia, La Revista del Tribunal Fiscal de la Federación, 3a., Epoca, Año II, No. 13, enero de 1989, p. 48 (DIRECCION DE RESPONSABILIDADES Y SANCIONES DE LA CONTRALORIA GENERAL DEL DEPARTAMENTO DEL DISTRITO FEDERAL, CARECE DE EXISTENCIA LEGAL).

⁹⁶ See the Thesis "ADMINISTRATIVE AUTHORITIES," in No. 68 of the Appendix to the Weekly Legal Journal of the Federation, 1917-1985, eighth part at 114.

⁹⁷ Id.

⁹⁸ The granting of authorizations to officials must be done individually and personally for each one of them. Therefore, in Mexico it is unacceptable from the constitutional point of view for the authority conferred on one official to be understood to be automatically attributed to another official, unless a body of law grants authorization to the other authorities as well. The authorization of Mexican officials is not inferred or assumed, but rather it must be expressly and individually conferred by a body of laws.

⁹⁹ Segundo Tribunal Colegiado en materia administrativa del primer circuito. See also: Amparo directo 842/88.- Ómnibus de México S.A. de C.V.- 21 de junio de 1988.- Unanimidad de votos. -Ponente: Ma Antonieta Azuela de Ramírez.,- Secretario: Francisco de Jesús Arreola Chávez. Amparo directo 1362/88 .- Ómnibus de México S.A: de C.V.- 18 de octubre de 1988.- Unanimidad de votos.-Ponente: Ma Antonieta Azuela de Ramirez.- Secretario: Marcos García José. Amparo directo 12/93.- Operaciones Técnicas, S.A. de C.V.- 17 de febrero de 1993.- Unanimidad de votos.-Ponente : Guillermo I. Ortiz Mayagoitia.- Secretaria: Angelina Hernández Hernández. Amparo directo 792/93.- Termoformas, S.A: de C.V. - 15 de abril de 1993.- Unanimidad de votos. Ponente; Carlos Amado Yáñez.- Secretario: Miguel Ángel Cruz Hernández.