On March 26, 2024, a Decree was published in the Federal Official Gazette amending, adding and repealing several provisions of the Mexican General Law of Negotiable Instruments and Credit Transactions (“LGTOC”, as per its acronym in Spanish) and the Mexican General Law of Credit Organizations and Auxiliary Activities (“LGOAAC”, as per its acronym in Spanish), including provisions related to electronic negotiable instruments (the “Amendment”). The Amendment became effective on March 27, 2024.

As a result of the Amendment, it is recognized that negotiable instruments may be issued in electronic, optical or any other technology (“Electronic Means”) through an information system[1] to be used to generate, transmit, receive, deliver or otherwise process data messages[2] (“Data Messages”), in terms of Article 89 of the Mexican Commercial Code.

Negotiable instruments issued through Electronic Means shall be considered Data Messages and the legal effects, validity and enforceability of the rights consigned in such instruments shall be fully recognized for the sole reason that they are contained in a Data Message, thus equating written means with electronic means.

An important aspect of the Amendment is that when the LGTOC requires transactions in writing, the requirement will be met with respect to a negotiable instrument as long as it is expressly permitted by law and it is kept complete and available. Integrity shall mean that the information contained in the negotiable instrument issued by Electronic Means has been kept complete and unaltered, allowing for normal changes in its communication, filing or presentation, traceable in the information system, and availability shall be when it can be consulted in the information system.

Accordingly, a negotiable instrument will be complete and available when it can be consulted in the information system. The signature requirement in the negotiable instruments issued through Electronic Means will be considered fulfilled as long as it is attributable to the person in accordance with the Mexican Commercial Code.

On the other hand, the endorsement of the negotiable instruments issued by Electronic Means will have to be made through the information system, being understood as delivered to the endorsee, in the understanding that the endorsee will acquire a right independent from that of the endorser.

It is important to mention that, in terms of the Amendment, the exhibition, endorsement, transfer by assignment or other legal means, delivery for payment and opposition to acts related to a negotiable instrument issued by Electronic Means, as well as the verification of the identity of the holder of the instrument and the continuity of the endorsements and the granting of a surety, must be carried out through the information system.

On the other hand, as a consequence of the Amendment, certificates of deposit, which certify the ownership of merchandise or goods deposited in the General Warehouse that issues them, may only be issued electronically through the cryptographic system or systems of certificates of deposit that the General Warehouse issuing the certificate determines, and such certificates of deposit must be registered in the Single Registry of Certificates, Warehouses and Merchandise (RUCAM, by its acronym in Spanish) in accordance with the LGOAAC.

The National Banking and Securities Commission will be the authority in charge of determining by means of general provisions the requirements and characteristics to be met by the cryptographic system, as well as the minimum security characteristics and standards through which the certificates of deposit will be issued, in order to guarantee the confidentiality, availability and integrity of the information and the prevention of fraud and cybernetic attacks.

The generation, transfer by endorsement, reception, delivery or any other act related to the certificates of deposit must be carried out through the cryptographic system or systems that have been determined. However, it is important to point out that the use of digital signatures will not be allowed, so only advanced electronic signatures will be valid[3].

As a result of the Amendment, the concept of the pledge bond was repealed and the possibility of creating a pledge loan on the merchandise or goods indicated in the certificate of deposit was established, setting forth certain rules for this purpose. Likewise, the issuance of multiple certificates covering identical goods or merchandise was prohibited.

The Amendment has broad legal, technological and commercial implications, and aims to promote modernization and efficiency in the financial and commercial system, since by recognizing the legal validity of the negotiable instruments issued by Electronic Means and establishing clear provisions on their security, authenticity and technological standards, it facilitates their adoption and use in commercial transactions.

It should be taken into account that, in addition to the Amendment with regard to the issuance and management of negotiable instruments through Electronic Means, it is required to comply with the provisions of the Mexican Commercial Code regarding Data Messages, and the Mexican Official Standard NOM-151-SCFI-2016, Requirements to be observed for the conservation of data messages and digitalization of documents, according to which the intervention of a Certification Service Provider is required to obtain a Certificate of Conservation of Data Messages in order to prove and verify the integrity of the document, in this case the negotiable instrument.

Thus, in addition to the information system that complies with the provisions of the Mexican Commercial Code, an electronic signature attributable to those who sign the corresponding negotiable instrument will be required, as well as obtaining the Certificate of Conservation of Data Messages from a Certification Service Provider to certify the authenticity of the document.

[1] In terms of Article 89 of the Mexican Commercial Code, an information system is understood to be any system used to generate, send, receive, file or otherwise process Data Messages.

[2] In terms of Article 89 of the Mexican Commercial Code, a Data Message is understood as the information generated, sent, received or filed by electronic means, optical means or any other technology.

[3] The advanced electronic signature will be that Electronic Signature that complies with the requirements contemplated in sections I to IV of article 97 of the Mexican Commercial Code.