fivehundred magazine > > Interview with… Manuel Galicia, M&A, B&F and ESG practices partner Chairperson of the Executive Committee

Interview with… Manuel Galicia, M&A, B&F and ESG practices partner Chairperson of the Executive Committee

Do you consider sustainability credentials important to your firm’s business?
ESG is no longer an option, but a must for our firm. Our ESG practice definitively has granted our firm an additional advantage in the market by advising our clients with ESG related needs.

Have ESG considerations prompted you to re-evaluate the service you provide?
Yes, and we consolidated some of the practice areas already engaged in related ESG activities in order to be able to assist in a holistic way our clients. As soon as we announced the formalization of our ESG practice, we revived request for advice by some of our publicly held clients. The major immediate impact was in the financial activity as a factor for credit rating agencies.

Where do you feel your clients will need more legal support in the next 12 months?
In regulatory aspects, compliance, litigation and commercial diplomacy to convince authorities of the benefits of some projects.

 What sets your firm apart from competitors?
In the last several years, Galicia has strengthened its leading position in the
Mexican and LatAm markets because our main differentiator is clear: We are the only Mexican leading firm with the ability to provide a unique legal service offer that includes strong transactional and regulatory advice coupled with strategic capabilities in litigation and ESG.

Our focus on a unique people-centered culture based on strong values such as respect, trust, innovation, adaptability, creativity and a pro-business vision and having a business model based on collaboration as a means to provide a unique and multidisciplinary legal advice to each client.

It would appear that in Mexico there has been a far greater return to ‘presencialidad’ than in many other countries in the region. Do you consider that the recent Ley de tele-trabajo adequately meets the requirements of employers, workers and clients? In addition, is the new regulation regarding sub-contracting continuing to cause difficulties- particularly in relation to fiscal/tax requirements – or has the impact of this now largely been assumed and accommodated by the business sector?

The Telework Amendments to the Mexican Federal Labour Law were enacted on January 2021, as a response to the Covid-19 pandemic. Telework regulation only applies to employees rendering more than 40% of their work from home. In our opinion, telework regulation can be improved for what regards to (i) employee’s right to disconnect, (ii) working hours and overtime, (iii) social security and tax treatment of electricity and internet payments made by employers to teleworkers, as well as (iv) other flexible work arrangements or hybrid and flex work schemes that currently lack of any regulation whatsoever.
The return to offices is just beginning, globally we are still in the process of defining the best way of working and we have seen that what it is required is flexibility. A law that sets rules based on the number of working days in-person is not a flexible solution by itself and can become a constraint to achieving the objectives of firms, partners and members of the firm.

In addition, is the new regulation regarding sub-contracting continuing to cause difficulties – particularly in relation to fiscal/tax requirements – or has the impact of this now largely been assumed and accommodated by the business sector?

The Labor Subcontracting Reform entailed business restructuring, amendments to organizational documents, renegotiating services agreements and employee transfers, which happened largely during 2021. It has been implemented by most businesses precisely because of tax reasons in connection with income tax deductibility and VAT credits. However, in certain sectors, such as electricity generation, infrastructure and construction services, companies have been somehow reluctant to adapt, arguing they do not fall within the scope of the reform. Further, we are just starting to see the labor subcontracting reform effects on profit sharing. As you know, payment of profit sharing to employees was capped last year as part of the reform. Some unions have been alleging that the cap is unconstitutional. Unclear rules on how the cap is calculated have generated uncertainty among employers. Since the reform became effective ten months ago, there are still no court precedents addressing such issues.

Another labor-related issue keeps employers awake at night, and it is about the legitimation of protecting collective bargaining agreements under the 2019 labor reform and the USMCA. Collective bargaining agreements shall be legitimated through workers’ consultation process and secret ballot voting system, no later than May 1, 2023; four years after the 2019 labor reform became effective. Less than 10% of the existing agreements in Mexico have been legitimated as of this date. Employers cannot intervene in the legitimation process, which must be conducted by unions. Collective bargaining agreements that are not legitimated within the timeframe will be terminated.

Cryptocurrencies have been of growing relevance in Mexico (a firm advising an energy client on how to convert its carbon bonds into bitcoin, for example) and now it would appear that NFTs (non-fungible tokens) are becoming similarly fashionable. Concurrently, at present, there is no dedicated legislation regarding this area and as a result, the new industrial property law has had to be adapted to provide a degree of protection. What do you regard as the likely scenario for this sector in the short to medium future?

The only regulation on the subject concerns limitation on certain entities to trade in virtual assets (crypto). Otherwise, there are no relevant restrictions for
unregulated entities or individuals.

There is lack of definition on different fronts:

a. Tax treatment of movements in value of crypto (marked to market or
capital gains)
b. New “ultimate beneficiary” rules impede dealing with DAOs
c. Lack of counterparty in a block chain (difficulty to enforce a judicial
d. No restrictions in (or even interest in addressing) energy consumption
issues of crypto farming.

The pandemic resulted in a significant upturn in the number of firms seeking out of court restructuring, with certain market segments – such as microcredit providers – in serious difficulty. At the same time, while the jurisdiction of the bankruptcy courts is now nationwide (and this should permit greater specialization on the part of judges), bankruptcy procedures remains poorly viewed and problems in the handling of these case mean that many companies opt for a US Chapter 11 process to avoid the pitfalls of the bankruptcy system in Mexico. How do you see the development of this practice with the new courts?

We expect the new designated specialized courts to become more acquainted with the nature of insolvency proceedings, and therefore, sensible to the realities of reorganization, in the near future.

There is still a long learning curve, but at least the Judiciary is implementing courses and other education tools for the court personnel.

Are there specific practice areas you see as particularly thriving, which you intend to bolster in coming years? Are there any new areas of practice that have emerged recently?

Technology, ESG, Venture Capital, Tax Controversy, Regulatory Compliance.

How active are members of your team in terms of thought leadership?

We focus on identifying and developing or strengthening each partner’s leadership capabilities and soft-skills through a unique integrated program as follows:

a) Partners´ Core Skills Development Program: innovative program that identifies and assist each partner in the development of specific core skills. In a second phase, this program will be implemented to additional decision-making position collaborators and lawyers. Firms often oversee that partners are one of the most important motivators and leaders within the organization. We, on the contrary, invest and assist them in developing and maximizing their leadership potential and Thought Leadership.

b) Soft Skills and Professional Development: providing our team with non-legal tools that will help them advance in their professional path -i.e. Leadership.

What are your firm’s policies on diversity and inclusion? Does your firm have any specific diversity initiatives?

DEI Institutional Programs and Initiatives
Consistent with our guiding principles, our strategy focus in developing and implementing innovative initiatives, which we can proudly say have resulted in spearheading DEI programs and initiatives in the Mexican legal market. Each initiative and project is develop to consider, in an equitable way, each of the relevant aspects of our Diversity, Equality & Inclusion strategy into three major programs: 1. Career Development, 2. Work-Life Balance and 3. Gender Diversity.

Impact of our DEI Programs / Goals
The impact of these programs, projects and initiatives aim to focus our resources towards our talent being the key component, distinguishing Galicia as an elite institution from the rest of our colleagues. By procuring non-legal skills, human development and professional tools, we allow our collaborators to have a holistic approach to personal and professional development.

Our teams will achieve greater happiness by knowing that the Firm is investing time and resources in each one of them. Our talent is our most valuable asset.
Our DEI Programs and initiatives are focused not only on soft skills but also, looking for extracurricular activities that demonstrate an interest beyond the law.

This will allow our Firm to integrate balanced and more productive teams and individuals who will feel safe in a friendly and supportive environment.
Our short and mid-term goals are:

a. Every collaborator will benefit from developing and honing his or her nonlegal skills.

b. To identify development opportunities and offer the ability to track development progress over time.

c. Turn ourselves into a talent breeding institution. The law firm that attracts and maintains the top talent will be the one with the most interesting clients
and mandates and the highest profit per partner.

d. To listen (through our Mentoring Program, focus groups and close communication processes) the concerns of young lawyers and collaborators
to learn from them and be able to shape the profession of the future.

e. Capitalize the youth force of our Firm by learning from them. Be open to innovation and creativity.

f. Reject any discrimination motivated by ethnic or national origin, gender, age, disabilities, social condition, health conditions, religion, opinions, sexual
orientation, marital status or any other condition that violates dignity and intends to nullify or impair the rights and freedom of people.

What technological changes have you implemented at your firm to improve the legal services you provide to your clients?

• Mobile phones and laptops to all personnel
• Beefed up VPN and remote access tools
• Cybersecurity continued education
• Began implementation of “moving to the cloud”
• Equipment of videoconferencing infrastructure