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Client Alert | The President has delivered Congress a bill proposing relevant amendments to the Hydrocarbons Law

On March 26th, 2021, the President of Mexico submitted to the House of Representatives of the Federal Congress a Bill by which significant amendments to the Hydrocarbons Law (the “Bill”) are proposed.  

The Bill proposes the following amendments:

1. New causes for revoking of permits are established, including: 

– Permits where, upon non-appealable resolution of competent authority, it is determined that products in the activities of crude oil treatment and refining, natural gas processing, and the export and import of hydrocarbons and refined products, transportation, storage, distribution, compression, liquefaction, decompression, regasification, marketing and retail sales of hydrocarbons, refined products, or petrochemicals, as well as the management of integrated systems, have been illegally acquired or imported.

– Re-occurring of one of these infringements: (i) noncompliance of the general provisions of quantity or quality measurement of refined products and hydrocarbons and (ii) modification of the technical conditions in systems, pipelines, facilities, or equipment, without the corresponding authorization.  

2. The possibility of suspending permits is included in article 57, and the Initiative excludes that third parties with technical capability may operate temporarily occupied, intervened, or suspended permits. 

3. Article 59 BIS is added to regulate a permit suspension proceeding. Permit suspensions shall be  enforced in case an imminent danger to national or energy security, or to the national economy is foreseen, and shall last for the period determined by the relevant governmental authority, in which case such authority will manage and operate the activities of the suspended permit holder.

4. The permit applicants shall demonstrate to comply with storage capacity to comply with the requirements established by the Ministry of Energy.

5. Applications for the assignment of permits will no longer be deemed approved (afirmativa ficta) but rejected (negative ficta). 

6. The transitory provisions include that permits will be revoked if the permit-holders fail to comply with: (i) minimum inventory requirements, (ii) the corresponding requirements [for granting them], or  (iii) the provisions contained in the Hydrocarbons Law. Permit holders affected by these provisions may request an indemnification of their damages. 

As it is an Initiative without any preferential treatment, there is no expedite process for its approval. In connection with the vote required for its approval, a simple majority of each of the Congress Chambers suffices.

The Bill  may breach Mexico’s Constitution and international treaties with investment protection mechanisms adopted by Mexico.

If the Bill is approved as proposed by the Executive, affected parties may challenge it through an amparo relief. The statue of limitation for filing such claims shall run from the entry into force and/or from the first specific implementing action. Similarly, there are other investment protection mechanisms in terms of existing bilateral and multilateral treaties.

At González Calvillo we are prepared to provide the advice they require in relation with this Bill. We remain at your disposal for any questions or clarifications regarding the scope of this.

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