Over the last few weeks, two important pieces of jurisprudence were issued by the First Courtroom of the Mexican Supreme Court of Justice (Suprema Corte de Justicia de la Nación) (“Court” or “SCJN”). These constitute binding criteria/precedent for all courts in Mexico and directly impact the Mexican energy sector. The two pieces of jurisprudence are the following:
- On 17 June 2022, the thesis of jurisprudence 1a./J.83/2022 (11a.) was published in the Federal Judiciary Journal (Semanario Judicial de la Federación) (the “Journal”).
- On 01 July 2022, the thesis of jurisprudence 1a./J.90/2022 (11a.) was published in the Journal.
- Thesis 1a./J.83/2022 (11a.)—Energy Permits..
The first criterion establishes that the conditions of electricity generation permits granted by Mexico’s Energy Regulatory Commission (Comisión Reguladora de Energía) (“CRE”) are subject to de jure amendment as a result of legislative action, without such fact violating the principles of legal certainty and non-retroactive application of the law.
This criterion resulted from a Constitutional review action filed by the holder of a power generation permit who challenged certain provisions of the Energy Transition Law (Ley de Transición Energética) (“LTE”) on grounds that the permit, when originally granted by the CRE, did not include the obligations imposed by the LTE when it was enacted years later.
According to the Court, the resolutions through which power generation permits are granted do not grant their holders the right to maintain themselves in the same circumstances at the moment the relevant permit was granted. On the contrary, it is imposed upon them the obligation to comply with applicable law, in the absence of which the permit may be revoked. More importantly, the Court concluded that permit holders do not have vested rights (derechos adquiridos) under the permits, because these are not created upon the granting of the permit; the effectiveness of permits is conditioned upon the compliance with applicable law.
Thus, the fact that through applicable legal rules the conditions included in the permits are amended does not entail that such vested rights are affected because such conditions are linked to the applicable legal framework, as required by the public interest.
Although this criterion relates to power generation permits, it would be equally applicable to any permit granted by the CRE for other regulated sectors because these are granted under the same legal authority of the CRE. For this reason, permits granted for oil and gas activities would be subject to the same legal standard.
Considering the number of legislative amendments that the present administration has successfully passed and attempted to pass over the last couple of years, the Court’s apparent disregard for the non-retroactive application of the law is and should be a concern for the industry as a whole.
It must be noted, however, that in the case of oil & gas exploration and extraction activities, as opposed to the majority of all other energy activities, the granting instrument is neither a permit nor an authorization granted by a federal agency/body but is rather a commercial agreement entered into with the Mexican State. For this reason, we believe this criterion is not equally applicable to such instruments.
Jurisprudence 1a./J.90/2022 (11a.)—Compulsory Stock Obligations.
The second criterion deals with the authority of the Ministry of Energy (Secretaría de Energía) (“SENER”) to regulate compulsory minimum storage levels of refined products in Mexico.
In this case, the holders of refined products (petrolíferos) commercialization permits granted by the CRE entered Constitutional review actions against SENER’s authority to issue regulation pursuant to section II of article 80 of the Hydrocarbons Law (Ley de Hidrocarburos) and underlaying regulation in matters of storage and supply of hydrocarbons and refined products. The claimants alleged that SENER’s regulation was arbitrary due to its lack of clarity and precision.
In the opinion of the Court, the aforesaid provision of the Hydrocarbons Law does not violate the legal certainty principle established by the Political Constitution of the United Mexican States (Constitución Política de los Estados Unidos Mexicanos) because it is supplemented by other provisions of the Hydrocarbons Law. According to the Court, the Order through which SENER established the compulsory stock obligations for refined products (as amended) is based on the principles of security, sustainability, continuity in the supply of fuels and diversification of markets, and therefore it is allowed to establish international technical standards that enable SENER to set performance metrics to evaluate compliance therewith.
In summary, the fact that section II of article 80 of the Hydrocarbons Law provided broad authority to SENER to regulate storage and security of supply does not mean that SENER may not, through rule-making authority, issue detailed regulation on the subject matter.
Given that may fuel importers and holders of commercialization permits challenged the ORDER through which the Public Policy on Minimum Storage of Refined Products is issued (ACUERDO por el que se emite la Política Pública de Almacenamiento Mínimo de Petrolíferos) issued by SENER, this criterion by the Court may entail that many Constitutional review actions may be affected to the extent predicated on the same legal arguments.
Another important potential impact of this criterion is that it opens the door for any potential cases dealing with the application of best international practices and standards (or similar concepts) in energy activities in Mexico. While this principle is generally provided for in the Mexican Constitution, the absence of regulation or potentially conflicting regulation often requires the application of the best international practices and standards; to some extent, this criterion cements the valid application of this principle across petroleum granting instruments and other regulated activities in the sector.
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Campa & Mendoza
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This document does not constitute legal advice.
