Thursday, March 23, 2023
198 Mexico News
No Result
View All Result
  • Home
  • BUSINESS NEWS
  • VIDEO NEWS
  • FEATURED NEWS
    • MEXICO USA TRADE NEWS
    • MEXICO EU NEWS
    • MEXICO UK NEWS
    • MEXICO BRAZIL NEWS
    • MEXICO INDIA NEWS
    • MEXICO GULF NATIONS NEWS
    • MEXICO CHINA NEWS
    • MEXICO EGYPT NEWS
    • MEXICO AFRICA NEWS
    • MEXICO NIGERIA NEWS
    • MEXICO THAILAND NEWS
  • POLITICAL NEWS
  • TECHNOLOGY
  • CRYPTO
  • AGRICULTURE
  • MORE NEWS
    • MEXICO IMMIGRATION NEWS
    • MEXICO SCHOLARSHIP NEWS
    • MEXICO VENTURE CAPITAL NEWS
    • MEXICO EDUCATION NEWS
    • MEXICO BUSINESS HELP
    • MEXICO PARTNESHIPS
    • MEXICO MANUFACTURE NEWS
    • MEXICO UNIVERSITY NEWS
    • MEXICO JOINT VENTURE NEWS
  • ASK IKE LEMUWA
  • CONTACT
198 Mexico News
  • Home
  • BUSINESS NEWS
  • VIDEO NEWS
  • FEATURED NEWS
    • MEXICO USA TRADE NEWS
    • MEXICO EU NEWS
    • MEXICO UK NEWS
    • MEXICO BRAZIL NEWS
    • MEXICO INDIA NEWS
    • MEXICO GULF NATIONS NEWS
    • MEXICO CHINA NEWS
    • MEXICO EGYPT NEWS
    • MEXICO AFRICA NEWS
    • MEXICO NIGERIA NEWS
    • MEXICO THAILAND NEWS
  • POLITICAL NEWS
  • TECHNOLOGY
  • CRYPTO
  • AGRICULTURE
  • MORE NEWS
    • MEXICO IMMIGRATION NEWS
    • MEXICO SCHOLARSHIP NEWS
    • MEXICO VENTURE CAPITAL NEWS
    • MEXICO EDUCATION NEWS
    • MEXICO BUSINESS HELP
    • MEXICO PARTNESHIPS
    • MEXICO MANUFACTURE NEWS
    • MEXICO UNIVERSITY NEWS
    • MEXICO JOINT VENTURE NEWS
  • ASK IKE LEMUWA
  • CONTACT
No Result
View All Result
198 Mexico News
No Result
View All Result

Mexico’s Reforms to Hydrocarbon Law and Electricity Industry Law May Violate Investment Treaty Protections

by 198 Mexico News
June 1, 2021
in MEXICO USA TRADE NEWS
Reading Time: 6 mins read
A A
0
Home MEXICO USA TRADE NEWS
Share on FacebookShare on Twitter

[ad_1]

You might also like

New group of 2,000 migrants sets off in southern Mexico

New group of 2,000 migrants sets off in southern Mexico :: WRAL.com

US-Mexico migrant smuggling is now worth $13bn

June 1, 2021

Click for PDF

Recent amendments to Mexico’s Hydrocarbon Law (“Hydrocarbon Reform”) and Electricity Industry Law (“Electricity Reform”) may have a significant impact on the operations of foreign investors in the energy sector in Mexico.  The recent legislative amendments curtail the market power of private electricity, and oil and gas producers in Mexico and discriminate against foreign investors.

The Hydrocarbon Reform grants the Government broad discretion to suspend or refuse to renew existing permits granted to private companies, with corresponding provisions granting State-owned company Petróleos Mexicanos (“Pemex”) the right to take over the facilities of private companies who no longer have a permit without compensation.[1]  At its core, the Hydrocarbon Reform aims to recalibrate the existing regulatory framework to revive the dominance of Pemex and limit the prevalence of privately owned oil and gas companies in Mexico.[2]

Similarly, the Electricity Reform disadvantages private electricity providers by granting dispatch preference to electricity generated by State-owned company Comisión Federal de Electricidad (“CFE”).[3]  Prior to this amendment, Mexico’s electrical grid rules prioritized dispatch on the basis of the least expensive generated electricity.[4]  The Electricity Reform has been developed to consolidate CFE’s market participation to the detriment of private producers, many of whom generate wind and solar energy.[5]

A judge in Mexico has ordered an indefinite suspension on the implementation of the Reforms pending resolution as to their constitutionality under domestic law.[6]  If the suspension is lifted, foreign investors may well have an investment treaty claim as set out further herein.

Mexico’s reforms to the energy sector may violate investment treaty protections

The Hydrocarbon and Electricity Reforms may violate investment treaty protections owed by Mexico to foreign investors who have invested in the State and are protected by an applicable investment treaty.  For example, investors from the United States and Canada can arbitrate claims directly against Mexico for breaches of the protections granted by the investment chapter in the Agreement between the United States of America, the United Mexican States, and Canada (“USMCA”) and its predecessor the North American Free Trade Agreement (“NAFTA”).[7]  In fact, in response to Mexico’s ongoing discriminatory treatment of foreign investors, three U.S. companies filed claims on 12 May 2021 before the International Centre for Settlement of Investment Disputes (“ICSID”)—Finley Resources Inc, MWS Management Inc and Prize Permanent Holdings LLC—on the basis that Mexico had breached its obligations under Chapter 14 of the USMCA and Chapter 11 of NAFTA.

In addition, investors from Australia, Brunei, Canada, Chile, Japan, Malaysia, New Zealand, Peru, Singapore and Vietnam may also have a claim against Mexico pursuant to the investment chapter in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (“CPTPP”).  Mexico is also party to a number of bilateral investment treaties with more than 20 States that provide for recourse to international arbitration.[8]

The right to national treatment

Investment treaties commonly include a protection that requires the host State to treat investments of foreign investors no less favorably than it treats domestic investors in “like circumstances.”[9] Arbitral tribunals considering the meaning of “like circumstances” have found that this has “a wide connotation” that requires an assessment of whether “a non-national investor complaining of less favourable treatment is in the same ‘sector’ as the national investor. . . . [this] includes the concepts of ‘economic sector’ and ‘business sector.’”[10]

While it is not necessary to prove an intent to discriminate, tribunals have held that a State measure which “on its face, appears to favour its nationals over non-nationals” is a “factor[ that] should be taken into account.”[11]  Arbitral tribunals have added that “[d]iscrimination does not cease to be discrimination, nor to attract the international liability stemming therefrom, because it is undertaken to achieve a laudable goal or because the achievement of that goal can be described as necessary.”[12]  A previous tribunal found Mexico liable for breach of the national treatment protection where a controversial tax “was enacted for the purpose of protecting the domestic Mexican sugar industry from foreign competitors.”[13]  The tribunal awarded the investor in excess of US$ 33.5 million in damages.[14]

Mexico’s Reforms are facially discriminatory to foreign investors operating side-by-side with State-owned operators Pemex and CFE, with the laws being structured in a manner that the adverse impact will be felt almost exclusively by foreign investors.  President Andrés Manuel López Obrador and other members of the Government have likewise stated publicly that the purpose of the Reforms is to reestablish State control over the energy sector.[15]  As a consequence, it is questionable whether Mexico is complying with its obligation to provide national treatment under various investment treaties to which it is Party.

The right to fair and equitable treatment

Most investment treaties also include a protection granting investors the right to fair and equitable treatment by host States. This includes a right to “protection of [a foreign investor’s] legitimate expectations, protection against arbitrary and discriminatory treatment, transparency and consistency.”[16]

Many of Mexico’s investment treaties require Mexico to treat the investments of a foreign investor fairly and equitably.[17]  Arbitral tribunals have held that host States like Mexico cannot exercise legislative power “to act in an arbitrary or discriminatory manner, or to disguise measures targeted against a protected investor under the cloak of general legislation.”[18]

Given the targeted purpose and impact of the Reforms, impacted foreign investors may arguably have a claim that Mexico has breached its fair and equitable treatment obligation by arbitrarily discriminating against foreign investors.  The changes in the legislative framework affecting hydrocarbon permitting and electricity distribution may likewise amount to a violation of foreign investors’ legitimate expectations.

* * *

Investment treaties can offer important protections to foreign investors operating in markets that present significant political and legal risks.  Gibson Dunn lawyers have extensive experience advising clients in disputes against States for breaches of investment treaties.  If you have any questions about how your company can take advantage of such protections, or if you think your company has an investment treaty claim based on Mexico’s Hydrocarbon or Electricity Reforms, we would be pleased to assist you.

____________________

[1] See here.

[2] See here.

[3] See here.

[4] See here.

[5] See here.

[6] See here and here.

[7] Canadian and U.S. investors in Mexico are able to file claims against Mexico before July 1, 2023 pursuant to the investor-State dispute settlement provisions available under the USMCA’s predecessor, NAFTA, provided that the dispute arises out of investments made when NAFTA was still in force and remained “in existence” on July 1, 2020.  See USMCA, Annex 14-C.  Thereafter, Canadian investors can seek recourse against Mexico under the CPTPP, and U.S. investors can seek recourse under Annex 14-D and Annex 14-E of the USMCA.

[8] See, e.g., Kuwait-Mexico BIT, Article 10; China-Mexico BIT, Article 12; Republic of Korea-Mexico BIT, Article 8.

[9] See, e.g., Bahrain-Mexico BIT, Article 3 (“Each Contracting Party shall accord to investors of the other Contracting Party and their investments, treatment no less favourable than that it accords, in like circumstances, to its own investors”); Belarus-Mexico BIT, Article 3 (“Each Contracting Party shall accord to investors of the other Contracting Party treatment no less favourable than that it accords, in like circumstances, to its own investors”); Mexico-Slovakia BIT, Article 3 (same).

[10] S.D. Myers, Inc. v. Government of Canada, UNCITRAL, Partial Award, 13 November 2000, ¶ 250.

[11] S.D. Myers, Inc. v. Government of Canada, UNCITRAL, Partial Award, 13 November 2000, ¶ 252.

[12] Corn Products International Inc. v. United Mexican States, ICSID Case No. ARB(AF)/04/1, Decision on Responsibility, 15 January 2008, ¶ 142; Quiborax S.A. and Non Metallic Minerals S.A. v. Plurinational State of Bolivia, ICSID Case No. ARB/06/2, Award, 16 September 2015, ¶ 253.

[13] Archer Daniels Midland Co. & Tate Lyle Ingredients Americas, Inc. v. United Mexican States, ICSID Case No. ARB(AF)/04/05, Award, 21 November 2007, ¶ 210.

[14]  Archer Daniels Midland Co. & Tate Lyle Ingredients Americas, Inc. v. United Mexican States, ICSID Case No. ARB(AF)/04/05, Award, 21 November 2007, ¶ 293.

[15] See here and here.

[16] Crystallex International Corporation v Bolivarian Republic of Venezuela, ICSID Case No. ARB(AF)/11/2, Award, 4 April 2016, ¶ 543.

[17] See, e.g., United Arab Emirates-Mexico BIT, Article 4 (“Each Contracting Party shall accord to investments . . . fair and equitable treatment . . .); Turkey-Mexico BIT, Article 4 (same).

[18] Rusoro Mining Ltd. v. Bolivarian Republic of Venezuela, ICSID Case No. ARB(AF)/12/5, Award, 22 August 2016, ¶ 525.


Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding these issues. Please contact the Gibson Dunn lawyer with whom you usually work, any member of the firm’s International Arbitration Practice Group, or any of the following:

Penny Madden – London (+44 (0) 20 7071 4226, pmadden@gibsondunn.com)
Cyrus Benson – London (+44 (0) 20 7071 4239, cbenson@gibsondunn.com)
Jeffrey Sullivan – London (+44 (0) 20 7071 4231, jeffrey.sullivan@gibsondunn.com)
Graham Lovett – Dubai (+971 (0) 4 318 4620, glovett@gibsondunn.com)
Rahim Moloo – New York (+1 212-351-2413, rmoloo@gibsondunn.com)
Lindsey D. Schmidt – New York (+1 212-351-5395, lschmidt@gibsondunn.com)
Marryum Kahloon – New York (+1 212-351-3867, mkahloon@gibsondunn.com)
Maria L. Banda – Washington, D.C. (+1 202-887-3678, mbanda@gibsondunn.com)

© 2021 Gibson, Dunn & Crutcher LLP

Attorney Advertising:  The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.

[ad_2]

Source link

Tags: ElectricityHydrocarbonIndustryInvestmentLawMexicosProtectionsReformsTreatyViolate
Share30Tweet19
Previous Post

Leonora Carrington’s Wondrous Mexico City Home Will Become a Museum Filled With Thousands of Her Personal Belongings

Next Post

Mexico midterm elections: Candidates, politicians threatened, killed as cartels seek control

Recommended For You

New group of 2,000 migrants sets off in southern Mexico

by 198 Mexico News
July 25, 2022
0
New group of 2,000 migrants sets off in southern Mexico

TAPACHULA, Mexico -- A new group of about 2,000 migrants set out walking Monday in southern Mexico with the goal of reaching the United States. The group started...

Read more

New group of 2,000 migrants sets off in southern Mexico :: WRAL.com

by 198 Mexico News
July 25, 2022
0
New group of 2,000 migrants sets off in southern Mexico :: WRAL.com

By EDGAR H. CLEMENTE, Associated PressTAPACHULA, Mexico — A new group of about 2,000 migrants set out walking Monday in southern Mexico with the goal of reaching the...

Read more

US-Mexico migrant smuggling is now worth $13bn

by 198 Mexico News
July 25, 2022
0
US-Mexico migrant smuggling is now worth $13bn

On 27 June, authorities discovered an abandoned tractor-trailer outside of San Antonio, Texas, filled with dead people smuggled from Mexico and Central America. Fifty-three migrants would ultimately die...

Read more

6 people shot dead at drug rehab center in Mexico

by 198 Mexico News
July 25, 2022
0
6 people shot dead at drug rehab center in Mexico

Six people were shot dead at a drug rehabilitation center near the western Mexican city of Guadalajara, authorities said Monday.Five men and one woman were killed in the...

Read more

US motorists crossing Mexico border for cheaper gas: report

by 198 Mexico News
July 25, 2022
0
US motorists crossing Mexico border for cheaper gas: report

Sky-high US prices have led some American motorists to make a previously unheard-of trip across the border to fill up their tanks with cheaper gas in Mexico, according...

Read more
Next Post
Mexico midterm elections: Candidates, politicians threatened, killed as cartels seek control

Mexico midterm elections: Candidates, politicians threatened, killed as cartels seek control

A massive sinkhole opened up in Mexico — and it’s growing

A massive sinkhole opened up in Mexico -- and it's growing

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

  • Trending
  • Comments
  • Latest
Unprecedented price hikes put the squeeze on Iranian tenants | Economy News

Unprecedented price hikes put the squeeze on Iranian tenants | Economy News

July 26, 2022
U.S. is sidelined in critical minerals push

U.S. is sidelined in critical minerals push

July 26, 2022
China, Russia Dominate Nuclear Reactor Construction, IEA Says

China, Russia Dominate Nuclear Reactor Construction, IEA Says

July 26, 2022
Credentials for cosmetic surgery centers in Tijuana to be scrutinized

Credentials for cosmetic surgery centers in Tijuana to be scrutinized

July 25, 2022
New group of 2,000 migrants sets off in southern Mexico

New group of 2,000 migrants sets off in southern Mexico

July 25, 2022
New group of 2,000 migrants sets off in southern Mexico :: WRAL.com

New group of 2,000 migrants sets off in southern Mexico :: WRAL.com

July 25, 2022
Ethereum Weekly Exchange Net Flow Points To Growing Accumulation Trend

Ethereum Weekly Exchange Net Flow Points To Growing Accumulation Trend

July 25, 2022
San Diego’s wastewater shows COVID-19 cases about to spike

San Diego’s wastewater shows COVID-19 cases about to spike

July 25, 2022
198 Mexico News

198 Mexico News will provide the latest news update as the government facing a growing challenging in preventing Mexico from breaking apart along ethnic and religious lines.

198massmedia Group. USA. 3821 Dominion Drive, Dumfries, USA. 22026.

Toll Free 1 888 642 8433.
Contact: info@198mexiconews.com

LATEST UPDATES

Unprecedented price hikes put the squeeze on Iranian tenants | Economy News

U.S. is sidelined in critical minerals push

China, Russia Dominate Nuclear Reactor Construction, IEA Says

Credentials for cosmetic surgery centers in Tijuana to be scrutinized

New group of 2,000 migrants sets off in southern Mexico

New group of 2,000 migrants sets off in southern Mexico :: WRAL.com

Ethereum Weekly Exchange Net Flow Points To Growing Accumulation Trend

San Diego’s wastewater shows COVID-19 cases about to spike

RECOMMENDED

No Content Available
  • Disclaimer
  • Privacy Policy
  • DMCA
  • Cookie Privacy Policy
  • Terms and Conditions
  • Contact us

Copyright © 2022 - 198 Mexico News.

No Result
View All Result
  • Home
  • BUSINESS NEWS
  • VIDEO NEWS
  • FEATURED NEWS
    • MEXICO USA TRADE NEWS
    • MEXICO EU NEWS
    • MEXICO UK NEWS
    • MEXICO BRAZIL NEWS
    • MEXICO INDIA NEWS
    • MEXICO GULF NATIONS NEWS
    • MEXICO CHINA NEWS
    • MEXICO EGYPT NEWS
    • MEXICO AFRICA NEWS
    • MEXICO NIGERIA NEWS
    • MEXICO THAILAND NEWS
  • POLITICAL NEWS
  • TECHNOLOGY
  • CRYPTO
  • AGRICULTURE
  • MORE NEWS
    • MEXICO IMMIGRATION NEWS
    • MEXICO SCHOLARSHIP NEWS
    • MEXICO VENTURE CAPITAL NEWS
    • MEXICO EDUCATION NEWS
    • MEXICO BUSINESS HELP
    • MEXICO PARTNESHIPS
    • MEXICO MANUFACTURE NEWS
    • MEXICO UNIVERSITY NEWS
    • MEXICO JOINT VENTURE NEWS
  • ASK IKE LEMUWA
  • CONTACT

Copyright © 2022 - 198 Mexico News.

Are you sure want to unlock this post?
Unlock left : 0
Are you sure want to cancel subscription?