New court precedents in the Mexican energy sector benefiting private companies
Greenberg Traurig, Mexico
Greenberg Traurig, Mexico
On 20 December 2013, the Federal Official Gazette published amendments to the Mexican Constitution as it relates to the energy sector. These long-awaited amendments were the beginning of what is referred to as the Mexican Energy Reform. One of the most significant changes was the ability for private parties to participate in almost all activities in the oil, gas and electric industries. Another significant change was the creation of the Coordinated Regulatory Agencies in the Energy Sector ('ORCs') which includes the National Hydrocarbons Commission ('CNH') and the Energy Regulatory Commission ('CRE').
The Mexican Energy Reform was reinforced with the enactment of secondary legislation on 11 August 2014. This provided the legal framework the Mexican Energy Reform needed. The secondary legislation contained amendments to 12 existing laws and established nine new laws, including the Law of the Coordinated Regulatory Agencies in Energy Matters ('the Law').
The Law regulates the organisation and function of the ORCs. It states that the ORCs have technical, operating and administrative independence. It further establishes that the ORCs have legal and economic capacity similar to that of private entities, which means that they are able to collect government established fees for the services they provide and use the revenue as they see fit.
Conflict between Article 27 of the Law and the Mexican amparo proceeding
The Law also prohibits plaintiffs contesting administrative actions of ORCs considered unconstitutional to request the suspension of such administrative actions through amparo proceedings. This conflicts with the purpose of the amparo proceeding, which is to protect human rights and guarantees infringed by general regulations, administrative actions or omissions of governmental authorities.
Generally, the amparo proceedings provide plaintiffs with the opportunity to request that the court suspend the administrative action being challenged. This means that, if a court grants a provisional or indefinite suspension of a particular administrative action, it could ultimately cease to be enforceable.
The purpose of suspending an action is to invalidate such action in order to maintain the previous state of operations.
Article 27 of the Law establishes that ‘the general provisions, actions or omissions of the ORCs may be challenged only through an indirect amparo proceeding and shall not be suspended.’ Essentially, Article 27 of the Law permits that any administrative action of the ORCs (including the issuance of regulations and guidelines) considered unconstitutional could be challenged by means of an indirect amparo [emphasis author's own] but prohibits the plaintiff to request the suspension of said action during the amparo proceeding.
In Mexico, an amparo can be filed as a direct amparo or an indirect amparo, depending on the circumstances giving rise to the claim as follows:
Can be filed to challenge:
Final rulings, arbitral awards and resolutions issued by judicial, administrative, agrarian or labour courts that settle a proceeding or that invoke general regulations that violate human rights or guarantees.
General regulations (including federal and local laws and regulations to these laws) that, upon their entry into force or enforceability, lead to an infringement; acts or omissions of authorities other than judicial, administrative or labour courts; acts, omissions or resolutions within administrative procedures; acts of judicial, administrative, agrarian or labour courts carried out separately/aside from the proceeding or after it has been settled; acts within a proceeding whose effects are irreparable (materially infringe constitutional rights and treaties) and acts that affect a person who either is or is not a party to certain proceedings.
The importance of an amparo proceeding is to protect the plaintiff by suspending the action it considers to be a violation of its constitutional rights during the proceeding and potentially thereafter. If the judgment is ultimately favourable to the plaintiff, the administrative action may be suspended indefinitely, thus making it invalid or unenforceable towards that particular plaintiff.
Creation of Mexican case law (jurisprudence)
Mexican case law is unlike that of other jurisdictions. Mexico has a civil law system which means that cases play a different role in establishing enforceable legal precedents, referred to as ‘jurisprudences’ in Mexico. In Mexico, the federal judiciary is authorised to issue case law through the reiteration of criteria, through thesis contradiction or through substitution.
For the sake of Article 27, the relevant enforceable legal precedent benefiting private companies is expected to be created by reiteration of criteria. Case law by reiteration of criteria arises when courts resolve five cases in the same tenor and on the same subject, which are not interrupted by another one on the contrary. Once the foregoing has occurred and the court has issued a ruling, then the enforceable legal precedent is set and other federal courts must rule consistently for similar cases.
Hope for private entities
According to recent media news, the Second Court Chamber of the Supreme Court of Justice has granted nine amparo judgments against a regulation issued by the CRE, filed by gas station dealers and fuel distributors.
Unfortunately, in Mexico the publication of judgments can take several months from the date a resolution is issued. Nevertheless, the information currently available on some of these nine amparo judgments indicates that the Supreme Court has ruled that only the Federal Constitution and the Amparo Lawsuit Law can set forth in which cases suspensions on amparo lawsuits are or are not allowed. Article 27 of the Law does not allow the plaintiff to request the suspension of actions, thus limiting the right of defence of private parties granted in the constitution. One of the public judgments sets forth that this restriction violates the human right of access to effective judicial protection.
Based on this information, the requirement to create an enforceable legal precedent by reiteration is likely to have been met and, thus, it is anticipated that Article 27 of the Law may be declared unconstitutional.
In conclusion, if, as indicated by the recent news sources, there are at least five judgments ruled in this same tenor declaring Article 27 of the Law unconstitutional, then it may mark the potential of the issuance of a new enforceable legal precedent (jurisprudencia) that would have to be enforced by any court in the country. This could benefit any private entity considered affected by any provision, action or omission issued or ruled by the CRE and CNH.