Mexico City, May 27th, 2020.
In recent dates, Mexican energy authorities published resolutions and measures that have disrupted some provisions of the Energy Reform and have legal consequences on the rights and estate of private participants of the Mexican energy market.
On April 29, 2020, the National Center of Energy Control (CENACE for its acronym in Spanish) issued a Resolution to guarantee the efficiency, quality, reliability, continuity and safety of the National Electric System, due to the pandemic caused by the virus SARS-COV2 (COVID-19) whereby, in essence, pre-operative tests for intermittent power plants (wind and photovoltaic) in commercial operation process were suspended and tests for those that have not begun to operate are not authorized.
Subsequently, on May 15, 2020, the Energy Ministry published in the Federal Official Gazette the Reliability, Safety, Continuity and Quality of the National Electric System policy in which Mexican government essentially and among other consequences, prioritizes electricity generation through the premises owned by Federal Electric Commission in detriment of generation by means of wind or photovoltaic power plants and delays the beginning of operations of such plants.
These measures are contrary to several constitutional provisions, such as the right to an appropriate environment, sustainable development, legal certainty and free competitiveness, which could cause patrimonial affectations challengeable before national courts and even by means of an investment arbitration if they are contrary to an investment treaty signed by Mexico.
As per the Amparo Law, legitimate interest suffices to challenge the constitutionality of acts of authority as well as the affectations caused in the estate, and a constitutional action could be a remedy available to electricity marketplace participants such as marketers, generators, suppliers and end users depending on their particular situation.
Additionally, the change of priorities of energy authorities might give rise to a large number of legal actions of a private nature due to the different legal relationships between the electric market participants.
Finally, economic affectations to foreign investments protected by investment treaties signed by the Mexico could be claimed by investors through investment arbitration as per the relevant international treaty.
The lawyers and partners of the corporate, energy, administrative, litigation and arbitration practice areas of the firm are looking forward to advice our clients in this matter.
Juan Carlos Serra
Jorge Eduardo Escobedo