1. MEXICOS 2014 TAX REFORM: A BRIEF REVIEW OF SOME OF ITS MOST RELEVANT ISSUESand officers ultimate liability (quite apart from their interim liability to pay while the appeal was ongoing); availability of insurance to fund the amount claimed; and scope of resources available to the MOE to devote to a novel proceeding. What is abundantly clear from the settlement is that directors and officers are currently at risk of being named in environmental protection orders and to being exposed to personal liability for costs. Prudence would dictate that appropriate environmentalcompliance and contamination-mitigation measures be put in place to minimise the likelihood of an environmental incident (these measures are commonly implemented through an environmental management system). Further, it would be prudent to proactively consider obtaining directors and officers insurance (specifically including coverage for environmental liability) and other available protections to ensure that directors and officers are protected from the spectre of personal liability for environmental orders. Should the MOE continue the practice of issuing cleanup orders against former directors and officers, it will be interestingto see if the ERT and the courts revisit the erosion of the application of the so-called fairness factors that occurred in the Kawartha Lakes appeals.3 The facts involved in this dispute namely, that certain directors began their terms well after the contamination was alleged to have occurred and had nothing to do with the pollution may have been ripe for reconsidering whether fairness should be a factor in appealing environmental cleanup orders. Without the clarity of a decision on the MOE Orders, the lingering uncertainty and the possibility of personal liability caused by the MOEs actions in this matter may discourage qualified people from participating on corporate boards, particularly on boards of struggling companies most in need of help. Notes 1 See: www.osler.com/NewsResources/Ontario-DivisionalCourt-Confirms-That-Former-Directors-and-Officers-MustRemediate-While-Order-Is-Under-Appeal/. 2 See: www.theglobeandmail.com/report-on-business/ industry-news/the-law-page/former-northstardirectors-officers-reach-deal-with-ontario-over-cleanup/ article15125063/. 3 See: www.osler.com/NewsResources/Appeal-CourtConfirms-That-Innocent-Party-Must-Clean-Up-Pollution/.Mexicos 2014 tax reform: a brief review of some of its most relevant issues Introduction On 8 September 2013, the Mexican President submitted to the Mexican Congress a bill proposing a comprehensive tax reform. Among other aspects, this bill proposed: the enactment of a new Income Tax Law; the suppression of the business flat rate tax (IETU) and tax on cash deposits (IDE); and significant amendments to the Value Added Tax Law, Federal Tax Law and to various excise taxes. After extensive discussions, on 31 October 2013, the Mexican Congress issued the final text of the bill which included, among other things: 12 an eight per cent tax levying high calorie food products; different provisions seeking to effectuate revenue generation and taxpayer control; increases to tax rates for individuals; a new tax for dividends distribution; and several restrictions on what may be considered validly deductible expenses. The Organisation for Economic Co-operation and Development (OECD) has been developing recommendations on taxing principles, including the principle that businesses increasingly integrate across borders, while tax rules often remain uncoordinated: Domestic rules for international taxation andINTERNATIONAL BAR ASSOCIATION LEGAL PRACTICE DIVISIONJuan Francisco Torres-Landa R Barrera, Siquieros y Torres Landa, SC, Mexico City jftorreslanda@bstl.mxRafael Tena C Barrera, Siqueiros y Torres Landa, SC, Mexico City rtena@bstl.mx

2. MEXICOS 2014 TAX REFORM: A BRIEF REVIEW OF SOME OF ITS MOST RELEVANT ISSUESinternationally agreed standards the OECD has said are still grounded in an economic environment characterised by a lower degree of economic integration across borders.1 In that respect, the OECD recently launched in St Petersburg the Action Plan on Base Erosion and Profit Shifting (BEPS). In this document the OECD sustains that fundamental changes are needed to effectively prevent double non-taxation, as well as cases of no or low taxation associated with practices that artificially segregate taxable income from the activities that generate it.2 It is precisely based on those recent OECD based theories that the new Income Tax Law includes probably the first formal adoption of the anti-base erosion and profit shifting policy. Moreover, this new Income Tax Law includes several provisions based on OECD tax policy and administration recommendations. With that general background in mind, our goal in this article is to provide general information and a broad review of some of the most relevant aspects of this 2014 Tax Reform, stressing in particular aspects that may be relevant in cross-border and international tax aspects. Due to the length of this article, some of the specific domestic rules and customs duties will not be dealt with and thus must be separately reviewed. New Income Tax Lawhigh tax countries because it allows the crosscrediting of taxes between high-tax countries and low-tax countries. Hence, the reform proposes a new foreign tax credit system on per country baskets, that is, taxpayers must compute the excess foreign tax credit under application of the per country limitation instead of under the overall limitation. Royalty payments A withholding tax on royalties must apply when the sale is conditioned to the use, productivity or sale of certain rights. By contrast, the plain sale of such rights should not be subject to the withholding tax as royalties. Dividends The reform includes a new tax for individuals resident in Mexico, as well as foreign residents, consisting of a ten per cent tax on dividends or profit distributions starting with the tax year 2014. Mexican companies will have to withhold ten per cent of the payment and permanent establishments of a foreign resident will have to pay this ten per cent. This can breach some provisions of the tax treaties signed by Mexico and, as a natural consequence, there can be an instinctive response to not distribute dividends, unless some relief is granted by the contracting states.Claiming treaty benefitsLimits on deductionsIn related party transactions, foreign residents may be asked to provide a written declaration under oath stating that the relevant transaction is in fact taxable in the foreign country, including the foreign legal provisions that generate such double taxation and documents proving it. Additional requirements to claim treaty benefits have been included.Although the reform eliminates the Business Flat Rate Tax Law, some of its principles have been included in the new Income Tax Law, such as the limitation on the deductibility of tax-exempt benefits to employees (ie, fringe benefits, saving funds, severance payments, etc). These payments will be deductible to the employer but only up to 47 per cent of those expenses.Limitation of deductibilityConsolidation regimeConsistent with Action 2 of the OECD Action Plan on BEPS,3 the reform proposes to limit the deductibility of certain relevant payments.The consolidation regime has been eliminated. Nevertheless, groups may opt for a new integration regime in which a deferral for up to three years instead of five years is allowed.Foreign tax credit The system established in the current Article 6 of the Mexican Income Tax Law has been considered to act as a subsidy from Mexico toCapital gains The reform proposes for individuals to be taxed at the rate of ten per cent for capitalNORTH AMERICAN REGIONAL FORUM NEWS DECEMBER 201313 3. MEXICOS 2014 TAX REFORM: A BRIEF REVIEW OF SOME OF ITS MOST RELEVANT ISSUESgains derived from the sale of stock through the Mexican stock market.by the Mexican Supreme Court, the Mexican Congress argued that tax courts have standing to sustain such interpretations.Increase in individual tax rate Tax rates are increased for individuals by introducing three new brackets: a 32 per cent tax rate from Mex$750,000.01; 34 per cent from Mex$1,000,000.01; and 35 per cent from Mex$3,000,000.01. Value Added Tax Law The preferential VAT rate of 11 per cent is eliminated and incorporated in the general 16 per cent VAT rate. Likewise, certain items are eliminated from the 0 per cent tax rate, such as ground transportation of persons, except for ground transportation of persons in urban, suburban and metropolitan zones. Furthermore, certain goods that are not strictly intended to satisfy human food needs, such as, among other things, chewing gum and processed food for dogs and cats, are now subject to the general 16 per cent VAT rate. The international transportation of goods are now subject to the same rules that apply to the international transportation of passengers, and thus 100 per cent of the VAT transferred would be creditable.Persons jointly liable The original tax bill also established the possibility of lifting the corporate veil and thus imposing personal liability to shareholders of companies for any unpaid corporate tax liabilities up to each owners equity participation percentage. Such provision would have had significant impact in commercial dealings and crossborder structures. However, the Mexican Congress limited that excess liability only to shareholders that have effective control under the company and, at the same time, meet the three requirements of the Federal Tax Code that basically involve tax avoidance structures. Certification of financial statements The reform proposes the elimination of the obligation to certify the financial statements before a CPA for tax purposes, and instead simply comes up with a new obligation of filing an informative return to, among others, taxpayers with income in the previous tax year higher than Mex$644,599,005. Conclusive agreementsExcise taxes Justified by public health arguments, the reform includes a new excise tax (IEPS) to flavoured drinks with added sugars. It consists of a fixed sum of Mex$1 per litre, which will also apply to sweetened energy drinks. Similarly, the reform introduces a new eight per cent excise tax to some food products with a caloric density higher than 275 kilocalories per each 100 grams. Further, green taxes have been introduced to levy the import and sale of some fuel products. Federal Tax Code Anti-tax-avoidance clause The original tax bill included in Article 5 of the Federal Tax Code an anti-tax-avoidance clause, which allowed the tax authority to analyse and reassess the substance of transactions carried out by taxpayers. If they were not based on valid business reasons, the transactions could be re-characterised. However, considering some precedents issued 14The reform proposes the introduction, for the first time, of the so-called conclusive agreements. These new instruments refer to regularisations made by the taxpayers during tax audits. The conclusive agreements will not be obligatory for the taxpayers, but entering into such settlements may result in benefits for them. New crimes There are new criminal liabilities that are imposed on companies, apply not only to legal representatives but also, among other things, to the sole manager of the company, the chairman of the board of directors, etc. The basis for that personal liability resides in the fact that those high management tiers have the power to prevent such crimes and thus must be responsible. Conclusion This comprehensive tax reform will come into effect on 1 January 2014. SeveralINTERNATIONAL BAR ASSOCIATION LEGAL PRACTICE DIVISION 4. MASSACHUSETTS HIGH COURT NARROWS SCOPE OF TITLE INSURERS DUTY TO DEFENDaspects of the reform will have a somewhat adverse impact on some cross-border and international transactions. From the Mexican tax authoritys perspective, the reform will contribute to revenue generation and taxpayer control, perhaps resulting in a more simple and efficient relationship between taxpayers and tax authorities. In the end, we must all bear in mind that the tax reform must be carefully analysed to gauge if some of its provisions collide or in some way encroach on human rights contained in the Mexican Federal Constitution and other international instruments signed by Mexico. If that infringement on Constitutional rightsLaura Bange Edwards Wildman Palmer, Boston lbange@ edwardswildman.comcan be validly argued, taxpayers will have the possibility of filing an amparo lawsuit before federal courts seeking judicial review and protection against those potentially anti-constitutional provisions. As we are talking about a new Income Tax Law, provisions declared unconstitutional based on the yet in existence law would have to be challenged again even if the actual text reflects the same provision. Notes 1OECD, Addressing Base Erosion and Profit Shifting, 2013, 5. 2OECD, Action Plan on Base Erosion and Profit Shifting, 2013, 12. 3 Ibid, 15.Massachusetts High Court narrows scope of title insurers duty to defendIn the United States, title insurance is very popular in both commercial and residential real estate transactions. The popularity of title insurance is due in large part to the magnitude of potential loss faced by purchasers of real estate and lenders if the title acquired by a purchaser is impaired.1 Title insurance protects against loss or damage that an insured may sustain by reason of: existing defects in or unmarketability of title to an estate, mortgage or interest; leases and encumbrances changing the same as of the date of the title insurance policy; or defects in the title of a mortgagor to the mortgaged estate, or mortgaged interest.2 The ultimate obligation of a title insurer is to see that the insured suffers no uncompensated loss, at least up to the face amount of the policy.3 Title insurance policies commonly afford title insurers a range of options by which they may fulfill their policy obligations, including paying the amount of the insureds loss within policy limits, defending the insured against adverse claims, and instituting affirmative litigation to clear title.4 Recently, the Massachusetts Supreme Judicial Court considered the standard for determining when a title insurers duty todefend is triggered. Finding that the scope of the title insurers duty to defend is narrow, the court concluded that a title insurer owes a duty to defend only where the title insurance policy at issue specifically envisions the type of loss alleged. The decision establishes a standard for the duty to defend that is different from the broad duty typically owed by general liability insurers. In Deutsche Bank National Association v First American Title Insurance Company, No SJC-11265 (Mass, 11 July 2013), the insured bank instituted an action seeking a declaration that First American, which had issued a title insurance policy to the insureds predecessor in interest, owed a duty to defend the insured in an underlying action in which the claimant alleged that she had been the victim of a predatory lending scheme. The claimant sought rescission of a note and an accompanying first mortgage. First American took the position that the underlying action did not trigger its duty to defend because the claimant merely alleged that she had been misinformed as to the terms of the note, and was not challenging the validity of the mortgage itself.NORTH AMERICAN REGIONAL FORUM NEWS DECEMBER 201315