THE INDUSTRIAL SECRET AND ITS MECHANISMS OF PROTECTION IN REAL ESTATE.

One of the main objects of the Industrial Property Law, is to protect and regulate industrial secrets, but, what is considered an industrial secret? The law establishes in its article 82, that it is all the information of industrial or commercial application that keeps a physical or moral person with confidential character, which allows him to obtain or maintain a competitive or economic advantage in front of third parties in the realization of economic activities and in respect of which he has adopted sufficient means or systems to preserve your confidentiality and restricted access to it.

This information can include from production procedures of objects for sale, manuals, products, services, technical specifications, materials, sales procedures, promotion and commercialization, business plans, manuals, database, customer list, commercial strategies or plans of sale, and in general information related to the know-how of its operations, which represent an important value, whose disclosure or exploitation by third parties would cause severe and substantial damages. The Law states that this information must be recorded in documents, electronic or magnetic media, optical discs, microfilm, films or other similar instruments.

It is very important to know and to identify that not all the information that is transmitted is considered as an industrial secret as established in article 82 third paragraph of the law that exclude the following:

  • Information that is in the public domain,
  • Information that is evident to a technician in the field, based on previously available information.
  • Information that must be disclosed by legal provision or by court order.

It is important to clarify that it will not be considered that it enters into the public domain or that it is disclosed by legal disposition, the information that is provided to any authority by a person who holds it as an industrial secret, when it is provided for the purpose of obtaining licenses, permits, authorizations, registrations, or any other acts of authority.

MECHANISMS OF PROTECTION.

The law foresees in article 223 fractions IV, V and VI, that any disclosure to a third party, the empowerment and/or the use of information contained in an industrial secret without the consent of the person who keeps it or of its authorized user, with the purpose of obtaining an economic benefit for oneself or for a third party or for the purpose of causing harm to the person who keeps the secret, constitutes an offense of a criminal nature, which will be prosecuted by the offended party’s complaint.

Considering that the assumptions mentioned above constitute a crime, it important to protect industrial secrets through a legal instrument that allows the owner of confidential information have protection when transmitting information to another person allowing to establish guidelines to regulate its use, the foregoing with the purpose of preventing the disclosure of the information of the industrial secret that is considered confidential.

The above can be embodied in a confidentiality agreement (Non Disclosure Agreement “NDA”) between the individual or entity that keeps the secret (disclosing party) and between employees, suppliers, customers, person with whom it is intended to establish a relationship of business and in general with any other person (receiving party) which will have access to confidential information.

In addition to the confidentiality agreements, there are other protection mechanisms that can also be implemented, such as establishing in the documents legends that indicate “CONFIDENTIAL INFORMATION”; restricting the access of information to the staff of the company, authorizing only certain persons who, for the development of their work, require access to it; as well as having a mechanism of control that registers the people who have or had access to it.

The protection of industrial secrets is of vital importance especially in the real estate sector, as real estate developers have confidential information essential to carry out their operations as they are, sales strategies, costs, information of suppliers, customers, among others. Such information is considered as an industrial secret, since it allows to have a competitive advantage over other companies in the same sector, and that failure to implement adequate mechanisms of protection, the industrial secrets become susceptible to disclosure, which would generate damages losses to the developer.

In GP&H we have highly experienced attorneys, who can help develop a model of confidentiality and non-disclosure to protect industrial secrets, which allows greater protection to regulate the use and transmission of confidential information to other people, preventing this way the disclosure and disclosure of confidential information.

PROTECTION OF PERSONAL DATA IN THE REAL ESTATE SECTOR.

Do you know about Personal Data?

Personal Data is any information about a physical person that allows to identify its owner. The law that regulates this subject is the Federal Law on Protection of Personal Information Held by Individuals (Ley Federal de Protección de Datos Personales en Posesión de los Particulares – LFPDPPP), which does not protect moral persons, but it does to the information that is collected from physical persons who work for organizations directly or indirectly.

There is also the Sensitive Personal Data, which is the information that could affect the most intimate sphere of its owner, or whose improper use could cause discrimination of the owner. These data may reveal aspects such as racial or ethnic origin, health status, genetic information, religious, philosophical and moral beliefs, union affiliation, political opinions and sexual preferences, which should be treated with more attention, this previous to obtain express consent and in writing from the owner for its processing, through his handwritten or electronic signature.

Who must comply with the Federal Law on Protection of Personal Information Held by Individuals?

When performing operations in a real estate company, it is necessary to collect Personal Data of countless of people who join in day-to-day operations.

The protection of Personal Data is a right recognized in Article 16 of the Political Constitution of the United States of Mexico, which grants the right exclusively to physical persons so that their Personal Data are treated in a lawful manner, guaranteeing adequate protection, their privacy and proper use, as established by the “Federal Law on Protection of Personal Information Held by Individuals”, which guarantees that this same exchange of data is carried out in a protected manner.

If you ask yourself if you are required as a real estate agent to comply with the LFPDPPP, the answer is yes. Likewise, it does not matter what sector you are involved in, when collecting Personal Data from physical persons you are responsible for this information with the duty to give it an adequate treatment.

Why shall we comply with the Federal Law on Protection of Personal Information Held by Individuals?

The order establishes that there are certain sanctions for non-compliance, ranging from a warning, fine, initiation of the sanctions imposition procedure, or even imprisonment, for this reason it is a matter that must be taken seriously.

A Real Estate Agency may directly request or collect the Personal Data of its clients for its use, disclosure and/or storage by any means, pointing out the purposes for which it will be used, with prior consent of the owner. If the Real Estate Agent will have the help of a third party to join in in any phase of the processing of Personal Data, this third party should keep confidentiality regarding them, as well as request the consent of the owner.

Steps to comply with the LFPDPPP:

  • First, you must have a Privacy Notice physical, electronic document or in any format generated by the responsible person, which must be available to the owner, prior the processing of their Personal Data, in accordance with the Article 15 of the LFPDPPP.
  • Internal policies for protection of Personal Data must be established, so that all employees, and especially those who have an obligation to obtain, use, or store Personal Data in relation to their job, have knowledge of the treatment that should be sought. The security measures that must be taken by the person in charge and their attendants in terms of their management, the use of the Personal Data request forms to obtain the consent, the existence of the ARCO rights and how to request them, as well as responsibilities and consequences of non-compliance.
  • Elaboration and use of Personal Data Request Forms in order to obtain the consent of the owners and to inform them of the purpose for which their data will be used. Document that serves as proof of good practices by the Real Estate. As well as the creation of ARCO Rights request forms, by means of which an individual can exercise control over their Personal Data of access, rectification, cancellation and opposition, which can only be exercised personally by the owner of the data or their legal representative, and finally a request for doubts, complaints and suggestions. In order for these rights to be exercised, a physical address, an electronic mail, and a contact number should be made available to the users of their website, where the owners can address themselves and be attended agile and clearly.
  • Conduct evaluations to the staff of the Real Estate, in order to document the information the staff has, and verify whether it is sufficient or necessary to be trained on the subject.
  • Carry out trainings in order to raise knowledge among the staff of the good use and confidentiality of the Personal Data granted to the person in charge.
  • Appoint a supervisor and a department to make consecutive audits, and enhance the use of the established formats, compliance with the policies and regulations, and knowledge of the Privacy Notice, as well as its operation.
  • Update your website as the data collection is not only related to the information obtained through telephone calls or face-to-face meetings, but also to the data collected through your web page.
  • A cookie window must be created. Cookies are a small information that is sent by a website and stored in the user’s browser, so that the website can consult the previous activity of the same. Not everyone has them and have them activated, but your mission is to install a plugin to warn the navigators of your website that you use them and obtain their consent.

The requested data would be the following, which must be established in the Real Estate Privacy Notice:

Full name, address (street, external number, internal number, colony, zip code, state, delegation or municipality), telephone numbers, age, marital status, email, IDs, birth certificate, proof of address, Federal Taxpayers Registry, Tax Identification Card, ownership documents, Single Registry of Population Registration, Interbanking code, account number, banking institution to which the card belongs.

Can the Real Estate company share the information requested?

The Real Estate may reveal, disclose and/or transfer inside and outside the country the Personal Data provided with collaborators, employees, including its affiliates, suppliers, advertisers, contractors, service providers and/or partners, as long as when requesting this information from its owner by means of a pre-established format, it is made known to him that the information can be transferred, with whom and for what purposes, that format must contain a space in which the owner can insert whether or not it is their consent to transmit that information for the purposes stated. The third parties that receive the information related to the Personal Data of the clients are obliged to comply with the provisions of the Privacy Notice and the applicable legislation in Mexico.

Avoid unnecessary sanctions.

Finally, it is worth mentioning that in some of the cases information is requested such as name and telephone number, without requesting the owner’s consent, which is considered a bad practice, since the purpose is not being informed, you are not asking for express consent, nor is he being made aware of the ARCO Rights, for which reason he should not seek such information in the first instance, without having obtained prior authorization.

In some other cases, your website contains a box to apply to a job vacancy in your company, where the user would have to leave their data, resumé, etc. This without requesting consent to use their information for convenient purposes, or any of the purposes mentioned above.

For each company it is extremely important to generate trust and distinguish itself from the rest of its competitors as a protective guarantor of Personal Data. Therefore, it is recommended to have mechanisms to protect information that we obtain from physical persons, to provide them with proper treatment, even after concluded the relationship with them, maintaining confidentiality. It is worth mentioning that these practices will help us to demonstrate the authority our compliance with the applicable provisions.

Do you need help to comply with the LFPDPPP?

At GP&H we can help you to have the appropriate forms, Privacy Notice, as well as adapt your website in the correct way. Contact our legal team to know the solutions we offer and how to comply with the Federal Law on Protection of Personal Information Held by Individuals.

Alejandra Hernández Treviño

Geographical Indications, the aperture of a new normative framework in Mexico.

The last August 10th, 2017, it was published in the Official Journal of the Federation (DOF for its Spanish initials) the “Notice by which it´s given to know and it submits to consult the geographical denominations that the European Union seeks to protect in the Mexican territory in the framework of the negotiations of modernization of the Economic Partnership Agreement, political coordination and cooperation agreement between Mexico, on one side, and the European community and its members, on another.

Since this agreement of economic association, which is part of the Free Trade Agreement between Mexico and the European Union (Mexico-EU FTA), the past May 24th, 2016, communication was kept between Mexico´s Secretary of External Affairs and the Union´s High Representative for Foreign Affairs and the Security Policy to begin negotiations of modernization in three key aspects within the agreement, which are: political, cooperation and commercial.

The Intellectual Property chapter, which is part of the Commercial subject, has been one that is being negotiated, since the European Union and Mexico seek the mutual recognition and protection of their geographic indications.

In the past publication of the Official Journal of the Federation of August 10th, about 340 names are contemplated in a request by 19 countries from the European Union. The goal of the publication is that individuals, as well as legal entities, manifest their objection to such recognition or protection in the understanding that it could affect rights previously acquired.

In Mexico, the only legal provisions that we counted on in the matter of Geographic Indications were the Trade-Related Aspects of Intellectual Property Rights (ADPIC for its Spanish initials), which, in its 22nd article define them as:

         Article 22.- “…indications that identify a good as originating in the territory of a Member, or a region or locality in that territory, when a given quality, reputation, or other characteristic of the good or service is essentially attributable to its geographical origin.”

Last year we had a major advance in our legislation in this area, due to the fact that the Chamber of deputies approved a minute from the Senate in which it reforms and adds the Industrial Property Law, modifying in its total the fifth title of such law and, also, 31 new articles are added to it.

The commission in charge of approving the mentioned reforms and additions held that:

         “The new approach in the matter will be an economic trigger to national products that, in their case, meet the necessary requests to be protected as Geographic Indications, with positive repercussions in the national, and international, market.”

With what´s been previously said our legislation gains strength in the Designations of Origin, and the Geographic Indications are included in our normative framework, allowing different products, primarily from the food industry such as wines, beers, cheeses, meats, among others, not only a protection emanating from their origins, but also from its reputation.

The fact that Geographic Indications are included within the Mexican legislation will allow products that count with certain quality, reputation or characteristic, attributable to their origins to be protected, something that didn’t happen when there were only Designations of Origin, promoting an aggregated value to the wealth associates of our country.

Maria Galaviz.
Lawyer
Gloria Ponce de León & Hernández.

Pharmaceutical Industry: 5 Key points for its operation in Mexico.

In our country, pharmaceutical and health regulation has evolved with the participation of various actors such as the Ministry of Health (“Secretaría de Salud”) and the Federal Commission for the Protection against Health Risks (“Comisión Federal para la Protección contra Riesgos Sanitarios”).

In a contextual way, we must understand that pharmaceutical regulation has as its main objective the safe and effective use of Medicines;  available when needed; that there are no barriers to access them; that the expense is optimal (including the adequate use by mexican citizens); as well as promoting the introduction to the market of new therapeutic alternatives.

Health regulation in our country is in charge of the Federal Commission for the Protection against Sanitary Risks (hereinafter “COFEPRIS”) which is a decentralized body of the Ministry of Health. COFEPRIS, whose constitution and entry into operation dates from 2001, has powers in matters of regulation, control and health promotion, under the terms of the General Health Law and other applicable legislation.

Throughout these years, the regulation imposed by COFEPRIS has been relevant and defining for the pharmaceutical industry as well as for the food industry in our country, since modifications have been made in the following areas: (i) Renewals of Health Records; (ii) the elimination of the plant requirement; (iii) policies to promote generic medicines; (iv) the Certificate of Good Manufacturing Practices; and (v) recognition by international organizations such as the Pan American Health Organization and the World Health Organization.

However, it is important to mention that pharmaceutical industries and retail pharmacies nationwide should consider having an agenda in terms of health compliance to comply with the obligations, permits, licenses and authorizations established by law and that are required by COFEPRIS, and thus avoid falling into breaches of the provision and be the object of closure of the establishments and administrative fines, in accordance with the above mention we believe it is important to follow these recommendations.

  1. Maintain an order in the compliance documentation of the pharmaceutical industry, example. Health Licenses, Notice of Operation, Permits and Authorizations issued by the Health Authority.
  2. File in a timely manner the requests for Registries, Health Licenses and Notices before COFEPRIS, in order to perform the necessary functions for the operation of the Industry.
  3. Train personnel for the management and sale of Controlled Drugs in compliance with the provisions established by the General Health Law and COFEPRIS.
  4. Conduct periodic audits of the necessary and mandatory compliance documentation in accordance with the General Health Law for the operation and function of the Industry, in order to detect anomalies or unforeseen events and correct themselves before receiving an administrative sanction or Closure by COFEPRIS.
  5. Comply with the provisions stipulated by the General Health Law and by the ordinance and requirements by the COFEPRIS.

Why a Personal Data Protection Law?

The Federal Law on the Protection of Personal Data held by Individuals (LFPDPPP) has already been in force in our country for a while and after analyzing its application it is my perception that there is still a great lack of knowledge about the subject of the law by the individuals and therefore many obligations emanating from it that individuals are not aware of their compliance by the mere fact of ignorance of it. A recurring question among professionals and companies forced to comply with it is ¿why and for what was this new law issued?

It is common among individuals that when a law like this comes into force is perceived as an increase in the regulatory burden that exists on said company or professional, although it is sometimes considered as a burden, I differ from that perspective since a good protection of personal data and compliance with the law can benefit the core business in the interconnected world we live in.

The right to privacy already existed among the first generation, who protected closed correspondence, prohibited the intervention of communications and deprivation of documents without a judicial mandate. However, the development of technology and its potential to accumulate and process personal information motivated international organizations to analyze and resolve the issue of personal data protection and privacy rights. In order to be in agreement with the international organizations in 2009, our Constitution was reformed, in order to regulate the protection of personal data and to establish the rights to access, rectify and cancel personal data, as well as the opposition to its treatment.

The main objective of the Law is the protection of personal data held by individuals, with the purpose of regulating their legitimate, controlled and informed treatment, in order to guarantee the privacy and the right to self-determination of persons.

However, the need to regulate the collection, exploitation and flow of personal information is obvious in an era in which personal data is an asset with which commercial agreements are carried out and on which business models are built, and in which the means for their processing have increasing capacity and lower cost. The challenge of the law is that such regulation be effective for people whose data they seek to protect, but also efficient, so as not to hinder the development of new business.

In conclusion, the constitutional reforms and the creation of the Law on the protection of personal data are due to international trends in the area of data protection and right to privacy, but also to the global economic sense of protecting the personal assets of different companies or businesses and in our country the law came to stay and to be fulfilled by individuals, so I believe that instead of being seen as a regulatory burden, it should be seen as an investment in the development of the business, which will generate confidence in the client, employees and will improve the business of the company.

Not all governments are bad: Corporate Governance.

Mexico is a country of families; the majority of companies, including the big conglomerates, are or started as a family company. Throughout their growth and globalization, regulatory and transparency issues hindered and even took away certain business opportunities.

Because of this, certain new actions and measures had to be adopted that would address these areas, which led to create Corporate Governance structures.

But, what entails Corporate Governance?

  • Issues regarding decision making that would affect the general strategic direction of the company and its corporate policies: investments, mergers and acquisitions, appointing executives, inheritances, etc.
  • The means of control regarding the proper performance of the directors and the implementation of the approved strategic plans.
  • Regulatory Compliance: establishing policies and proper procedures to guarantee that the company, directors, employees and third parties, comply with the regulatory framework that applies.
  • The interactions between the internal areas that govern the company, including their rights and duties of each of them: the board of directors, shareholders meetings, etc.

The installment of a code of good government is a guarantee for sustainable growth of the company in mid and long term, because it helps to establish investor confidence, increase foreign financing, attract talent and enhance the brand.

The rules if a good corporate government could be crucial elements to increase the stock value of the company, reduce capital costs and increase opportunities in capital markets. A good and healthy government structure would create the needed conditions to make strategic decisions to increase competitivity and generate value, enhancing the attractiveness of the company to outside investment.

In the same topic, having the position of compliance officer that carries out the control concerning the compliance with regulations regarding the company, complies with what international markets and new structures are pushing to.

The practices regarding corporate government point that besides looking after the needs and interests of the shareholders, keeping a permeant and efficient dialogue, prodding them to participate in the decision making of the company; as well as looking for the interests of third parties, employees and clients.

At Gloria Ponce de León & Hernández, we know of the importance that our clients put in simplifying and moving forward with their business, but at the same time complying with regulations and applicable laws, but is also important having access to cheaper financing sources. We understand the need to offer trust and results, as well as being innovative, being these 3 values the core f our firm: “innovation, trust and results”.

 

Essential points for the fulfillment of the Obligations for the Prevention of Operations with Resources of Illegal Origin

The operation and application of the Law represents an advance in Mexican legislation, but at the same time it could become a workload for companies or individuals with business activities that carry out acts that are stipulated as vulnerable activities mentioned on article 17 of the Law; as of entry and effect of such law such sectors shall comply with the imposed obligations.

The main objective of the Law is to establish measures and procedures to prevent acts and operation with illicit resources, and with this to access the information of the companies and their clients so that it can facilitate and prevent the commission of crimes.

For the administrative authority, there are non-financial activities that must be classified as vulnerable and must comply with the obligation to collect the client’s information, as well as to give notice of the operations in accordance with the amounts stipulated by law. Such activities are Gaming, Sweepstakes and Lotteries, the purchase of real estate, as well as vehicles (air, sea and land), jewelry, works of art and prepaid cards, Construction and sale of real estate, armoring services, in addition to certain operations performed by professional service providers.

The law stipulates two essential obligations that the obligated parties must comply with it and these are the identification of the clients with whom vulnerable activities are carried out and the obligation to notify the Tax Administration Service of the vulnerable activities when they surpass the amount mentioned in the Law.

In order to carry out a favorable application of the law, we recommend to follow the following points and to comply with the obligations stipulated by law in order to avoid administrative sanctions which amounts are high and could cause a prejudice in the operation of companies.

I. Identify whether your commercial activity or the principal commercial object is within the vulnerable activities stipulated in article 17 of the Law;

II. Create records of clients or subjects with whom you carry out vulnerable operations so that you keep the detailed information of the operation and avoid administrative penalties by not submitting complete information when requested by the authority;

III. Review all commercial transactions carried out in cash, since the Law establishes cash transaction limits for vulnerable activities;

IV. Maintain trained and certified the personnel involved with the law and the vulnerable activity operations, by always updating their information with the guidelines and obligations established by the law in order to avoid administrative sanctions; and

V. Perform external audits of the vulnerable operations in order to detect anomalies within the information and with this prevent administrative sanctions.

The MIDAS touch – How to take a Company to the Capital Markets

Mexico is not particularly known for its intensive use of its Stock Exchange; generally, this is looked as taboo by a big number of companies. This situation is stemmed by the perception of complexity and staunch regulations concerning the transactions., which creates a sense of a high entry barrier to have Access to the benefits of financing and investment that the Bolsa Mexicana de Valores (“BMV”) offers to its participants.

Furthermore, the family business model is not that attractive to private investors or several financial institutions. To offer greater certainty to concerning their activities, these types of companies are asked to offer higher transparency in their operations, which is not always achieved; allowing the families to keep control of the Company is not always a risk that investors are willing to take. Due to this, and with the purpose of creating a larger and more Dynamic market, Nacional Financiera S.N.C. (“NAFIN”), created a program which goal is to institutionalize these companies, thus incorporating new players to the market.

The Alternative Corporate Debt Institutional Market – Mercado Institucional de Deuda Alternativa Societaria (Midas) in Spanish – tries to define and guide the structuring and financing of projects that contribute to environmental sustainability, focuses in creating employment, generates value chains where they are established and those that require high investments on the long term.

How does it work? The first step is to identify the type and size of the company. This program focuses in industrial, commercial and service companies (except those in the financial area), medium or large, that are seeking to change their family company structure to something more institutional.

Once the project is identified, NAFIN, in some cases in participation with other financial institutions, grants financing to these companies with the purpose of redefining its corporate structure, thus establishing certain limits, also acquiring resources to buy assets that will help in the growth of the company and refinance their debt.

The endgame of the MIDAS program is to establish corporate governance policies and improve the financial situation of the Company, so that in a term of 5 years, it would be in the position of issuing debt or equity certificates, through the BMV, thus finding new ways to finance their operations and/or new projects.

In a broad sense, we can see that some of the incentives that this program offers are decreasing the interest rates of the financing, and providing counsel during the institutionalization process.

At Gloria Ponce de León y Hernández, we strive for our clients to have Access to these types of programs through the review and restructure of their corporate schemes, in such a way that they Will become in safer and attractive investment objectives, or, in some cases, have access to alternative financing options, such as the MIDAS program, thus the companies will have the resources to be more successful.

In the same way, our Firm is capable of acting as a bridge between the client’s Project and those willing to invest in it, or the financial institution, providing legal certainty y surpassing the expected results of the involved parties, being results and trust, two of our three core values.

Fintech Regulation Echoes

By: J. Arnoldo Gutiérrez / Partner

        Natalia Montoya / Analyst

The Mexican financial ecosystem is constantly shifting and evolving. In a way, we can say that financial institutions are always the one at the Forefront of the development of financial technologies, be it in areas like security as in the development of new tools and services for their clients. However, these developments could not have been possible without the arrival of small startups que have garnered the attention of these financial titans We are referring to the FINTECH companies.

A lot has been written about them, about how they are trying to create innovative technologies that the user would find appealing to use.; about how they would help facilitating the Access to financing to projects that maybe the large Banks wouldn’t even consider due to their size or risk level. Because of this, one of the hot topics of the regulation points to a specific area: “Crowdfunding”.

Depending on their business model, Crowdfunders could be classified into 3 types: those who deal with direct investments in the projects (equity), those who offer an interest in the amount committed to the Project (debt) and those that offer the incentive of a finished product or service provided; being this last type the most common that would be unlikely to be as heavily regulated as the other two. And I mention this in the way that the first two models carry certain similarities to brokering securities (stock and bonds), which are subject traditionally to stern regulations and oversight.

It is known that a regulatory Project is making its rounds, it has yet to be made public or be presented to the reviewing commissions or even the legislative bodies, thus this column must be taken as merely speculative.

If the competent authorities (CNBV, SHCP, CONDUSEF) would want some type of regulation, how would it start? We have to remember that one of the objectives of these authorities is to protect the user of financial services, for which if certain investments barely or wouldn’t not be compliant with certain minimum parameters to hedge risks, irreparable damage could be caused to such user, and maybe even the market, which they have a duty to protect. Bu, is it really necessary to saddle Crowdfunders with the same Stern regulations as security brokers? We consider this would be a step back and undermine the attractiveness of this method of funding projects that most traditional financial institutions would pass on, be it an issue of risk or feasibility. Protecting the user is the corollary tenet of regulators, and we understand this, but instead of establishing rigid rules, a user profile scheme should be implemented. In other words, by establishing an investment profile for the user (aggressive, medium, low), we believe that it could be easier to match projects depending on said profile and thus hedging the risk that the user is exposed to, while informing him of the risks, should be more than enough to appease regulators and comply with the rules to protect the market, without making them into traditional brokers or investment firms.

We consider that using investor profiles could be a great tool to help mitigate risk, thus protecting the user and the Crowdfunder.

At Gloria Ponce de León y Hernandez, we have taken interest in topic like these, and we consider the FINTECH arena represent an alternative to people that have Little or no access to traditional financial services.

We would like to invite you to visit our web page: www.gphlegal.mx, and our social media accounts.

Civil Aviation Law Reforms

The reforms published on the Official Journal in the past month of June related to the articles 49, 50, 52, 62, 87, 2, 42, 84 and 87 of the Civil Aviation Law have been constantly cited by the media and social media, because of the supposedly new rights that the passengers have related to the national airlines, however no one has discussed the real consequences that this has to the Airlines.

To begin, the government has to understand that it is vital that when issuing new legislation to regulate airline activities, there must be a balance to be maintained between protecting the rights of users and the rights of air service providers, so that the latter cannot fail to be sustainable.

It is not that there is no legislation that regulates the service, however, it must be appropriate and coordinated with others at international level to give the confidence and freedom to fly to the passengers of these services, this instead of those laws that “defend” only the passengers, and they produce a lack of real competition and innovation on the part of the Airlines.

Legislators and users need to take into account that the aviation system is an interdependent system, that is, it operates in a chain, which is composed of airlines, airports, air traffic management, governments and the own passengers, so not all the problems that can cause a bad service by an airline are attributable to it, since these are usually given as a result of factors such as weather, overloaded infrastructure and tight airspace.

Most governments today, such as Mexico, have included in their regulations the obligation of airlines to pay their users compensation or provide assistance in case of delayed flights, which has led in figures stated by IATA (International Air Transport Association), that in 5 years (from 2012 to 2017) airlines have had to increase their spending by 8 billion USD to cover these excessive regulations that have been imposed. This is important because let’s not forget that Airline Service is a Business, so if the Airliner need to invest more money to cover these, the cost for the users will be higher and it will affect the access to these services.

Another of the most publicized subject of the reform of the Mexican Civil Aviation Law is the one called the “Right of Repentance”, which allows passengers on a flight to cancel their booking within a period of 24 hours after purchase and obtain a full refund of the payment, which if it’s well analyze, can bring to consumers more harmful effects than positive, because being the air service a business, airlines will not lose and the way the protect themselves from the right of repentance is overbooking their flights during the period the passenger has to cancel his booking.

In addition to overbooking, this right of repentance will result in an increase in flight fares, a reduction in promotional fares, and less customer satisfaction.

Finally, we must consider a discriminatory treatment that both Mexican and worldwide legislation is given to airlines, because ¿Does the train and buses services have the obligation to reimburse the customer with the right of repentance? the answer is no and this brings with it a distortion of the market and all the competitive disadvantage for this means of transport that is so beneficial for modern society, because it connects quickly peoples and cultures, contributing also 3.5% of the world GDP.

For all of the above, it is considered necessary and urgent to break the challenge that the airlines face every day to deal with the rigorous legislation of countries such as ours, so it is a key challenge to work together with the international organizations such as IATA and ICAO,  and with governments worldwide to standardize regulations in this area, thus giving less confusion to users and efficient operations to airlines.