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Unconstitutionality of the absolute prohibition of the commercialization of cannabis

Written by Santamarina + Steta en July 4, 2023. Published in Updates.

Executive Summary:

The First Chamber of the Supreme Court issued the thesis “Absolute prohibition of the commercialization of cannabis classified as a narcotic. Articles 234, 235 and 235 bis of the General Health Law that establish it violate the human rights to freedom of trade and work.".
It was decided that the absolute prohibition of the commercialization of cannabis violates the rights to freedom of trade and work by not passing the proportionality test and the degree or sub-principle of necessity.
This precedent lays the groundwork for the creation of a new market for the marketing of cannabis between producers and the general public.

On March 3, 2023, the thesis 1a. III/2023 (11a.) under the heading “Absolute prohibition of the commercialization of cannabis classified as a narcotic. Articles 234, 235 and 235 bis of the General Health Law that establish it violate the human rights to freedom of trade and work." issued by the First Chamber of the Supreme Court of Justice of the Nation when resolving the amparo review 461/2020 (available at the following link: https://sjf2.scjn.gob.mx/detalle/tesis/2026073).

In this precedent, it is determined that the content of articles 234, 235 and 235 Bis of the General Health Law has a negative impact on the fundamental rights to commerce and work, since it constitutes an obstacle for individuals to lawfully exercise the actions of commercialization of hemp classified as a narcotic, considering that the proportionality test is not passed, in its nuance of necessity.

In this regard, the Supreme Court considered that the absolute prohibition of the commercialization of cannabis is an unnecessary measure, since it absolutely prevents its commercialization for industrial purposes, when in order to achieve the objectives intended by the prohibition (protection of health) it could be limited to implementing a series of measures similar to those provided for medical and/or scientific purposes, such as authorization, monitoring, control, prevention and phytosanitary measures.

Likewise, it is relevant to note that when resolving the amparo in review 461/2020, the First Chamber of the Supreme Court of Justice of the Nation issued a diverse thesis of the heading "Absolute prohibitions contained in the General Health Law on different activities related to cannabis or marijuana. Scope of application of the proportionality test”, available at the following link: https://sjf2.scjn.gob.mx/detalle/tesis/2026074).

In this precedent, it was determined that although it has been the criterion of the Supreme Court that legislative restrictions that affect economic freedoms must be controlled by an ordinary test or one of mere reasonableness, which is less demanding than the proportionality test, in the case of the regulatory circuit established in the General Health Law related to cannabis, it must be specified that this standard of lax scrutiny is applicable to that legislation to regulate an economic activity, not to prohibit it totally. In this sense, it was determined that in the case of absolute prohibitions contained in the General Health Law, it is appropriate to subject them to a proportionality test as opposed to the ordinary one.

Based on the above, we consider that the theses recently published by the Supreme Court and those that determined the legality of recreational cannabis use lay the foundations for the creation of a new market related to large-scale production and marketing of cannabis to the general public, provided that the limits established in the applicable legislation are complied with.

The above, given that the Supreme Court of Justice of the Nation, when applying the proportionality test, has been emphatic and consistent in determining that there are other, less burdensome, measures for the protection of people's health, with regard to the activities of the previous phases of the cannabis production chain and activities related to its commercialization.

CNH publishes new guidelines on assignments, corporate changes and liens in hydrocarbon exploration and extraction contracts

Written by Santamarina + Steta en July 4, 2023. Published in Updates.

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Executive Summary:

On March 8, 2023, the National Hydrocarbons Commission published Agreement CNH.E.89.010/2022 by which the Guidelines for Assignments, Corporate Changes and Liens are issued.
The Guidelines are applicable to contracts for the exploration and extraction (CEE) of hydrocarbons and repeal the previous guidelines that establish the requirements and the procedure for entering into alliances or associations in which the transfer of corporate and management control or control of operations is carried out, with respect to hydrocarbon CEEs.
The Guidelines will enter into force on March 9, 2023.

On March 8, 2023, the National Hydrocarbons Commission (“CNH”) published, in the Official Gazette of the Federation (“DOF”), Agreement CNH.E.89.010/2022 by which the Guidelines for Assignments, Corporate Changes and Liens (“Guidelines”) are issued.

The Guidelines are applicable to contracts for the exploration and extraction (“CEE”) of hydrocarbons. In addition, they repeal the previous guidelines that establish the requirements and procedure for entering into alliances or associations in which the transfer of corporate and management control or control of operations is carried out, with respect to hydrocarbon CEE, published in the DOF on January 30, 2017, as well as its modification published in the DOF on December 17, 2020.

Relevant Aspects

The Hydrocarbons Law states that the CNH must authorize, in advance, any partial or total transfer of operations, corporate control of a Contractor ⁽¹⁾ and/or the rights conferred under hydrocarbon EECs.

Based on the experience acquired by the CNH in recent years, these new Guidelines are issued with the aim of regulating more efficiently the review and approval procedure of the following “Procedures”:

(i) Applications to accredit the legal, financial, technical, experience and execution capacities of the Contractors;
(ii) Applications for authorization to enter into alliances or associations in which corporate and management control or control of operations is transferred;
(iii) Applications to impose liens on the Participating Interest ⁽²⁾, and
(iv) Notices of changes in share capital or Participation Interest.

Among the most relevant topics of the Guidelines are the following:

Regarding the request for accreditation of capabilities, the person who, in relation to his CEE, intends to carry out an assignment, to be part of a Contractor or intends to modify the structure of the share capital, whether fixed or variable, of an individual Contractor or a Participating Company ⁽³⁾ and which involves the departure of the jointly liable party, the CNH must be asked to evaluate the legal, financial, technical, experience and execution capacities of the potential assignee, the potential contractor or the potential jointly liable party.
Regarding the requirements for the transfer request, the Contractor shall submit an application for authorization of an assignment, by filling out forms and providing specific information and documentation, aimed at formalizing the agreements for the transfer of corporate and management control or the transfer of control of operations, as appropriate, and formalizing the amendment agreement to the CEE. In this sense, the definition of corporate and management control is not limited to direct control, but also includes indirect control up to the level of the company through which the Contractor or the Participating Company has accredited technical and financial capabilities.
Regarding the notice of change in the share capital structure of an individual Contractor or a Participating Company, which does not result in a transfer of corporate and management control, must notify the CNH of its completion by completing forms and providing specific information and documentation. In the event that said modification implies the departure of the jointly liable party, the Contractor or the new jointly liable party must prove that it maintains the same financial and, where applicable, technical, experience and execution capabilities as those demonstrated by the outgoing jointly liable party.
Regarding the notice of modification of the Participation Interest percentages between Participating Companies that make up a Contractor and that does not result in a transfer of corporate and management control or control of operations, the CNH must be notified of its completion by filling out forms and providing specific information and documentation.
Regarding the request to tax the Participation Interests, the CNH must give its consent for a Lien to be established ⁽⁴⁾ on part or all of the Participating Interest. The creation of a CNH Lien will be carried out by providing specific information and documentation. Likewise, the Guidelines establish the need to give notice to the CNH regarding the formalization, modification or termination of a Lien. In this regard, a definition of Creditor is included, as the persons in favor of whom a Lien is created.
Inclusion of new formats for the presentation of the information required for the Procedures.

Each procedure will be subject to payment of the corresponding fees and will have a specific procedure for the CNH to issue the respective resolution, with applicants having periods to correct any objections that the CNH may make. This is without prejudice to the CNH being able to deny any of the requested procedures.

The Guidelines will enter into force on March 9th 2023; However, the procedures initiated before the CNH prior to the entry into force of the Guidelines will be processed in accordance with the previous regulations in force at the time of submission of the corresponding procedure.

^Notes:

^{(1) Defined in the Guidelines as the person signing the Contract individually or Participating Companies or signatories of the CEE, jointly, as appropriate.}

^{(2) Defined in the Guidelines as the undivided share of each of the Participating Companies in the rights and obligations of the Contractor under a CEE entered into in a consortium or joint venture. In the case of individual Contractors, their Participating Interest is one hundred percent (100%).}

^{(3) Defined in the Guidelines as each of the Persons signing the CEE, including the operator, who together constitute a Contractor.}

^{(4) Defined in the Guidelines as the legal act entered into between the individual Contractor or the Participating Company, as applicable, and the Creditor, by which an obligation to give, do or not do with respect to the Participating Interest is established, and may consist of all types of guarantees in terms of the Guidelines.}

Enriqueta Molina receives the 2023 MUSIC Recognition

Written by Santamarina + Steta en July 4, 2023. Published in Announcements.

In the framework of International Women's Day 2023, Eng. Enriqueta Molina, intellectual property specialist for the agri-food sector at Santamarina + Steta, participated in the event “Women of the Quality Infrastructure System” (MUSICA), which was attended by representatives of various government agencies, business chambers, associations and civil organizations linked to standardization, standardization and conformity assessment.

At this event, Ms. Molina was recognized for her contribution to standardization actions, as well as for the constitution of this group as a Civil Association, which seeks to promote the gender perspective in standardization and regulation policies.

Labor rights for older adults

Written by Santamarina + Steta en July 4, 2023. Published in Updates.

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Executive Summary:

The job market for older adults is very limited, as a very high percentage of companies in Mexico do not open spaces within their workforce for them.
The Senate of the Republic approved an initiative to reform the Federal Labor Law that establishes the obligation to hire 5% of the total workforce of senior citizens when they have more than 20 employees.
The project seeks to promote equal opportunities in access to employment, encourage formal employment and combat age discrimination.

On March 14, the Senate of the Republic approved an initiative to reform the Federal Labor Law that establishes an obligation for employers to hire 5% of the total workforce of older adults when they have more than 20 employees.

The initiative presented by the senators as a step forward in human rights seeks to reform articles 132 and 133 of the Federal Labor Law, given that currently the labor market for older adults (over 60 years old) is very limited, since a very high percentage of companies in Mexico do not open spaces within their workforce for older adults and, if they do, precarious working conditions are presented.

Through the project, legislators recognize that older adults experience limitations in accessing employment and social protection, therefore, with its approval, they seek to promote equal opportunities in access to employment, encourage formal employment and combat age discrimination.

The bill was sent to the Chamber of Deputies where it will continue its legislative process.

Organic Statute of Lithium for Mexico (LitioMX)

Written by Santamarina + Steta en July 4, 2023. Published in Updates.

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Executive Summary:

Litio MX was created on August 23, 2022 to achieve the energy transition objectives in accordance with the Energy Transition Law.
On March 17, 2023, CONAMER published the Organic Statute of Litio MX, which establishes the bases that will govern said organization, as well as its hierarchical organization, operation, and powers.
Its main objective is the exploration, exploitation, benefit and use of lithium located within the national territory, as well as the administration and control of the lithium economic value chains.

On March 17, 2023, the Organic Statute of Lithium for Mexico was published on the CONAMER portal, with the acronym “Litio MX”, which establishes the bases that will govern said organization, as well as its hierarchical organization, operation and its attributions, as well as the functions, organization and powers of its Board of Directors and General Director.

Likewise, on the same day his address was published, which is located at Avenida Insurgentes Sur, Number 890, Colonia del Valle Centro, Benito Juárez Delegation. CP 03100, Mexico City.

Legal Nature and Objective of Litio MX

Litio MX was created as a decentralized public body by the Decree published in the DOF on August 23, 2022, assigned to the Ministry of Energy with its own legal personality and assets, as well as technical, operational and management autonomy.

Its main objective is the exploration, exploitation, benefit and use of lithium located within the national territory, as well as the administration and control of the economic value chains of lithium, subject to the provisions of the Political Constitution of the United Mexican States, the Mining Law, the Federal Law of Parastatal Entities and other applicable regulations, obligating itself to comply in the same way with the legislation and international treaties regarding environmental protection and the rights of native peoples, indigenous and Afro-Mexican communities.

It is noteworthy to consider that this Agency is created to achieve the objectives regarding energy transition in accordance with the Energy Transition Law, and will be coordinated with the Undersecretariat of Planning and Energy Transition of the Ministry of Energy (“SENER”).

Lithium MX Heritage

The assets of this organization will be integrated with:

Income obtained from the exploitation, use, benefit of lithium, its value chains and any derivatives.
The resources assigned to it in the Federal Expenditure Budget for the corresponding fiscal year.
The movable and immovable property that the government provides them.
Other income, assets, rights or resources that it receives, acquires, is transferred, assigned, donated or awarded by another title.

Administration and Organizational Structure

Powers of the Board of Directors

Pursuant to the Organic Statute, the Board of Directors has various powers, including:

Define the policies, guidelines and strategic vision for the exploration, exploitation, benefit and use of lithium, as well as its value chains.
Approve the Strategic Program that will be presented annually by the General Director of Litio MX, as well as the corresponding reports.
Analyze and approve the annual lithium management report prepared by the Director.
To be aware of and authorize matters that, due to their importance or significance, must be submitted for consideration by this Council or the Director.
Appoint or remove public servants at the two lowest hierarchical levels, at the proposal of the General Directorate.
Know the Report of actions and results presented by the Director.
Appoint a Technical Secretary at the proposal of the President of the Council, as well as the Deputy Secretary.
Invite with voice, but without vote, people who have activities related to the object of Litio Mx.
Approve the Organic Statute and the Lithium Organization Manual for Mexico, as well as other internal administrative and regulatory instruments.
Approve the Regulations of the Board of Directors of Lithium for Mexico and its amendments.

The Organic Statute of Litio Mx will come into force on March 17, 2023. In addition, it is worth mentioning that the General Director will have to register this Statute in the Public Registry of Decentralized Organizations.

Publication links:

https://sidof.segob.gob.mx/notas/5683113
https://sidof.segob.gob.mx/notas/5683114

Vision 2023: Diagnosis of the Mergers and Acquisitions market

Written by Santamarina + Steta en July 4, 2023. Published in Updates.

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How did 2022 end worldwide and in Mexico in terms of mergers and acquisitions (M&A)? How does 2023 look globally and in Mexico in terms of transactional issues, specifically speaking of M&A? Jorge León Orantes, partner and expert in transactional corporate advice to national and international companies in the automotive, financial, educational, technological and entertainment sectors, shares his perspectives for this market in 2023.

Current situation

The beginning of a year is a good time to look back and see how 2022 performed in relation to the previous two years, globally and also in Mexico. It is also a good time to analyze expectations for 2023.

In the wake of the COVID pandemic, M&A transactional operations globally were historically high, the number of operations seen around the world was impressive. The cash stimulus provided by different governments and the savings that companies with solid balance sheets already had to make acquisitions showed us an extremely active 2020 and 2021. But this changed in 2022.

Globally, during 2022, in contrast to 2021, there was a reduction of approximately 30% in the value of transactions and approximately 20% in the number of transactions globally. We consider this situation normal, since it ended the active buying momentum of the previous year and the considerable decrease of 30% in value and 20% in the number of transactions really means a return, in general terms, to the normal numbers that existed before the COVID-19 pandemic began.

Mexico, on the other hand, did not have this same impact. Although there was a decrease in general terms, in 2022 there was a 1% increase in the number of operations, compared to 2021. The operations carried out in the country, according to a report recently published by TTE Data, left approximately $16,000,000,000.00 dollars in mergers and acquisitions in Mexico. One of the most important was the capital investment made by Apollo Global Management in Aeroméxico for approximately $2,400,000,000.00 dollars, in which Santamarina + Steta had the opportunity to participate. Another important operation in 2022 was the substantial capital injection that Altán Redes made to continue with its plans to bring telecommunications infrastructure to the entire Republic and in which we also participated.

Expectations for 2023

The expectation for Mexico is very positive for 2023. The concept of nearshoring is triggering regional movements where Mexico certainly benefits from being so close to the United States and in North America. At the North American Summit held in Mexico in January, it was announced that the North American region is being sought to be closed and strengthened. That same month, Credit Suisse published data showing that Mexico attracted approximately $2,200,000,000.00 dollars per year. nearshoring from November 2022 to the end of February 2023. The above shows that the phenomenon of nearshoring is proving extremely positive.

The concept of nearshoring It is a global phenomenon that emerged to protect regional supply chains as a result of the COVID pandemic. As part of this phenomenon, in January Brazil and Argentina announced the intention to have a common currency that would strengthen the South American market, something similar to what the Euro did with the European Union. On the other hand, in Mexico the main focus that has been given to this concept is in the automotive industry. For example, the investment that BMW made in its plant in the North, where it will invest approximately $850 dollars. In Nuevo León, we have seen an increase in Asian investment in the auto parts market, in addition to the mega giga-factory from Tesla in Monterrey.

The country should benefit from all these movements and we hope that 2023 will continue to be an active year. However, this level of activity is not expected to be uniform throughout the Mexican Republic. The most benefited will of course be and are the northern states, although they are not the only ones.

Challenges to consider

In the current situation, there are three important challenges worth considering. One is infrastructure, the other is skilled labor, and the third is finding alternative sources of investment to the United States.

In terms of infrastructure, Mexico must strengthen its electrical infrastructure and also consider renewable energy sources that will allow investors to meet their international commitments.

In addition to the electrical infrastructure, we need to strengthen the telecommunications, road and rail infrastructure, at least to be able to continue attracting and providing the service that investors who come to Mexico with the nearshoring.

As far as labor is concerned, Mexico must compete with its geographical advantage and cheap labor. Let us remember that one of the objectives of the Free Trade Agreement, when it was signed in 1994, was to raise the standard of living of Mexican workers and the level of wages, an objective that has not been fully achieved so far and we hope that important progress will continue to be made in that direction.

Mexico must compete with skilled labor rather than cheap labor. For several years, the country had the most engineers in the world, and that makes it very competitive for companies that want to come and invest in Mexico. Unfortunately, the current administration has not seen education as one of its basic banners; on the contrary, it has undermined it and even reversed the Educational Reform. Without this push for education, we run the risk of not having the skilled labor we need to remain competitive in the international market. An effort in education by the Government would be very useful.

As for alternative sources of investment, our most important investor remains the United States, but there are other investors to watch, such as China. This Asian country was closed for a long time after the COVID pandemic, but following the opening of China at the beginning of this year, China is turning to Mexico in particular, which is a change in trend in China's relationship with Latin America, where it was mainly focused more on South America, such as Brazil and Argentina.

The relationship with China is very interesting because although we are competitors as an investment destination, we can also complement each other and see ourselves as reciprocal investment destinations, since for Chinese investors we can be a bridge to enter the North American market.

This should be a very good year for Mexico, but only if the government and the economic sector do what they must do to continue attracting investment to the country.

Court case law eliminates VAT crediting in compensations

Written by Santamarina + Steta en July 4, 2023. Published in Updates.

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On March 15, 2023, the Supreme Court approved a jurisprudence establishing that civil compensation, which is a way of extinguishing reciprocal obligations between the creditor and the debtor, is not a means of payment of the value-added tax (VAT) for the purposes of its crediting and refund.

Therefore, even if the main obligation is civilly extinguished, the offsets do not generate the right to credit VAT, so it will not give rise to its credit or refund until there is actually a cash flow.

The jurisprudence will result in greater scrutiny of taxpayers of this tax. This position will affect various operations, for example, the centralized treasury. In addition, the impact in different scenarios must be analyzed, such as the retroactivity of the jurisprudence, the use of compensation in the last five years of returns, audits in progress, possible lawsuits for damages, ISR deductions for non-creditable VAT and the effects on interest on loans paid through compensation, among others.

Santamarina + Steta experts are at your disposal to explain the implications of this jurisprudence and advise you on how to avoid possible contingencies with the authorities.

Chambers Global Practice Guides TMT 2023 | Mexico: Trends & Developments

Written by Santamarina + Steta en July 4, 2023. Published in Updates.

Despite the high degree of uncertainty in the world and in the TMT sector, digital evolution has continued at a steady and rapid pace. Cybersecurity remains a priority on the agendas of business leaders and policymakers alike. Policymakers are increasingly focusing on regulating the digital economy, big tech companies, and new disruptive technologies (such as AI), leading to various legislative initiatives and evolutions.

The “TMT 2023” guide presented by Chambers and Partners provides the latest legal information on the metaverse, the digital economy, cloud computing, artificial intelligence (AI), big data, the Internet of Things (IoT), regulation of audiovisual media services, telecommunications rules, technological agreements and trust services and digital signatures.

Paola Morales y Daniel Legaspi contributed to documenting the relevance of all aspects of TMT services in Mexico. Check out the guide here:

TMT 2023: Trends and Developments

Criteria for the non-onerous allocation of Clean Energy Certificates (CEL) for the year of obligation 2020

Written by Santamarina + Steta en July 4, 2023. Published in Updates.

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Executive Summary:

Agreement A/001/2023 published by the CRE establishes the criteria for the allocation of Clean Energy Certificates available in the CRE account, corresponding to the year of obligation 2020.
The Agreement's criteria establish that CELs that have not been issued or granted will be transferred to the CRE account, provided that a period of six months has elapsed from the date on which they should have been issued and granted.
The allocation will be non-onerous and will be distributed proportionally to the consumption of all obligated participants at the end of the obligation period, and who are current with their obligations from previous periods.

On March 27, 2023, the Energy Regulatory Commission (“CRE”) published, in the Official Gazette of the Federation (“DOF”), Agreement A/001/2023 (“Agreement”) establishing the criteria for the allocation of Clean Energy Certificates (“CEL”) available in the CRE account, corresponding to the year of obligation 2020.

The purpose of this Agreement is to establish the mechanism by which the CRE will carry out the non-onerous allocation of Clean Energy Certificates corresponding to the 2020 obligation period.

The allocation corresponds to the CELs that were not issued or granted; these will be transferred to the CRE provided that a period of six months has elapsed from the date on which they should have been assigned in the corresponding account of the Clean Energy Certificate and Compliance Obligations Management System (“S-CEL”).

The allocation will be non-onerous and will be distributed proportionally to the consumption of all obligated participants at the end of the obligation period, and who are current with their obligations from previous periods.

Background

On October 31, 2014, the DOF published the Guidelines that establish the criteria for granting CELs and the requirements for their acquisition, with the purpose of achieving the goals regarding the participation of clean energy in the generation of electric energy, with the minimum cost and based on market mechanisms ("Guidelines").

On March 30, 2016, the General Administrative Provisions for the operation of the S-CEL were published in the DOF, issued through Resolution RES/174/2016 (“S-CEL Resolution”), which regulate the operation of the S-CEL and the administrative procedure through which the CELs will be issued, granted, liquidated and cancelled.

Important Aspects of the Agreement

The criteria of the Agreement are based on provision 34 of Resolution S-CEL, which establishes that CELs that have not been issued or granted will be transferred to the CRE account, provided that a period of six months has elapsed from the date on which they should have been issued and granted.

The criteria of the Agreement correspond to the non-onerous allocation of the CELs, corresponding to the year of obligation 2020 and some remnants of 2019, so the allocation must be made through the S-CEL.

Derived from the above, the criterion for the allocation of available CEL consists of allocating a proportional part of the consumption that each Obligated Participant represents in proportion to the total consumption of the year in question.

In cases where Obligated Participants have not registered in the S-CEL, this will constitute a breach of their Clean Energy Obligations, and they will therefore not be eligible to receive CEL as a non-onerous allocation.

In the event that there are cases of Obligated Participants who are not registered in the S-CEL and who, therefore, are not eligible to receive CEL on a non-onerous basis, it is foreseeable that the sum of the percentages of consumption represented by each Obligated Participant in the S-CEL will not reach 100% of the electricity consumption of the National Electric System. Consequently, it is possible that there are CELs in the CRE account corresponding to the obligation year 2020 whose non-onerous allocation cannot be made.

Thus, any CELs that are not assigned will remain in the CRE account and will be considered in the calculation of the availability of CELs for the following year of obligations referred to in the Agreement.

Determination of the CEL Remaining for the year of obligation 2019

To calculate the remaining CEL of the non-onerous pool corresponding to the year of obligation 2019, the CRE used a formula within the Agreement.

The CRE applied the following criteria:

Regarding the total electricity consumption in 2019, the value sent by the National Energy Control Center ("CENACE") of 277,757,746.24 MWh was used.
The criteria for the allocation of CEL available in the CRE account, corresponding to the year of obligations 2019, establishes that the CEL balance is 3,247,055 CEL as of March 2020.
The total electricity consumption of the 99 Obligated Participants who received non-onerous CELs for the year 2019, in accordance with the S-CEL, is 251,508,287.86 MWh.
The CEL fractions that were not awarded will be transferred back to the CRE.
To determine the remaining amount of the non-onerous fund for 2019, the number of CELs assigned must be subtracted from the number of Certificates available in the CRE account. Based on the above, the remaining amount was 306,912.
The remaining amount in the non-onerous pool for 2019 is due to the fact that the S-CEL cannot deliver fractions of CEL, and that the total consumption of the Obligated Participants who were chosen to receive CEL is the lowest reported by CENACE.

Conditions for Granting

All persons who are:

Obligated Participants in accordance with the Guidelines.
Clean Generators and Suppliers representing Distributed Clean Generation who wish to be granted CEL.
Voluntary entities that wish to voluntarily acquire, sell or cancel CEL.

In the event that the Obligated Participants receive energy from isolated supply, as well as the holders of the Legacy Interconnection Contracts that include Load Centers, in which the electric energy does not come entirely from a Clean Power Plant, they may receive the CELs available on behalf of the CRE provided that:

They are Obligated Participants with active registration in the S-CEL during the grant period.
Have registered before May 15, 2021.
Have submitted their annual return at 100% for the year of obligation 2019.
Have filed their annual return with a deferral equal to or less than 25% of their obligation for the 2020 period.
Do not have a non-compliance notice for the year of obligation 2020.
Stay up to date with your annual payments for S-CEL account administration until 2020.

The Agreement entered into force on 28 March 2023.

Link to the Agreement

https://dof.gob.mx/nota_detalle.php?codigo=5683881&fecha=27/03/2023#gsc.tab=0

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Initiative to reform the Mining Law

Written by Santamarina + Steta en July 4, 2023. Published in Updates.

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Executive Summary:

On March 24, 2023, the President sent an initiative to reform various laws, including the Mining Law, with the intention of radically modifying the regulation of mining concessions.
Such a reform would violate multiple constitutional rights, including those of legal certainty and non-retroactivity of the law.
This initiative may be modified during the legislative process, which may alter possible violations of constitutional rights.

On March 24, 2023, the President sent to the Chamber of Deputies an initiative seeking to reform various laws, including the Mining Law. The above, with the intention of radically modifying the regulation of mining concessions.

The points we consider most relevant are the following:

Allocations to state-owned enterprises may now be granted.
The validity of new concessions is reduced from 50 to 15 years, which can only be extended once.
It is incorporated as a requirement to obtain a mining concession to previously obtain a concession on national waters.
Applications currently being processed will be discarded immediately.
The concession titles that are currently in force will have a new extension of 15 years and will not be extendable.

We believe that such a reform would violate multiple constitutional rights, including those of legal certainty and non-retroactivity of the law.

In this regard, if applicable, the holders of concessions that were issued prior to the reform, those who have pending applications to be resolved, and even those who submit new applications will have the right to initiate an amparo trial before a District Judge.

Of course, the initiative can be modified during the legislative process, which may alter possible violations of constitutional rights.

Walter Julian Angel Jimenez is appointed as the new Commissioner of the CRE

Written by Santamarina + Steta en July 4, 2023. Published in Updates.

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Executive Summary:

Walter Julián Ángel Jiménez was appointed as Commissioner of the Energy Regulatory Commission (“CRE”).
The Commissioner's term of office will end on 31 December 2030.
This assignment may be extended for another period of seven years.

As a result of the vacancy generated in the CRE due to the death of Commissioner José Alberto Celestinos last year, on March 30, 2023, the Senate of the Republic approved the appointment of Walter Julián Ángel Jiménez as the new Commissioner of the CRE with 92 votes in favor.

Walter Julián Ángel Jiménez will serve as Commissioner for a period of seven years, which will end on December 31, 2030. This assignment may be extended for a period of seven additional years.

Walter Julián Ángel Jiménez was the winner from among the three candidates that the Federal Executive presented to the Senate at the beginning of the month. The other two candidates were Alfonso López Alvarado and Víctor David Palacios Gutiérrez, who previously in 2020 and in January 2023 were also candidates to occupy a position as Commissioner of the CRE.

Walter Julián Ángel Jiménez is an electrical and electronic engineer from the Universidad Nacional Autónoma de México and has completed the Domestic Solar Technology course, taught by said university. Since 2021, he has been General Director of Clean Energy at the Ministry of Energy (“SENER”) and has been a member of the Board of Directors of the Generation VI Subsidiary of the Federal Electricity Commission. During the period 2018-2021, he was private secretary of the Hydrocarbons Subdirectorate of SENER and was a representative on the Technical Committee of the SENER Universal Electric Service Fund.

It is worth noting that the CRE has an additional vacancy for a Commissioner position, since Luis Guillermo Pineda Bernal ended his assignment on December 31, 2022.

Link to the post: https://www.gob.mx/cre/prensa/el-pleno-del-senado-designo-al-ing-walter-julian-angel-jimenez-al-cargo-de-comisionado-de-la-cre

Initiative to reform, add and repeal various provisions on administrative matters

Written by Santamarina + Steta en July 4, 2023. Published in Updates.

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Executive Summary:

The Federal Executive sent an initiative to the Chamber of Deputies in which it proposes to reform, add to and repeal various provisions on administrative matters.
The purpose of the initiative is supposedly to reverse acts of corruption, safeguard public finances and strengthen the federal public administration.
If approved without any modification, it will have consequences for individuals, since it violates fundamental rights provided for in the Constitution and International Treaties.

On March 24, 2023, the President of the Republic sent to the Chamber of Deputies an initiative to reform various administrative laws with the purported purpose of reversing acts of corruption, safeguarding public finances, and strengthening the federal public administration.

In total, the initiative seeks to amend 23 laws to change regulations relating to the federal budget, public procurement, revocation of concessions and authorizations, tenders and the termination of administrative contracts, as well as compensation for federal public administration.

Among the most relevant reforms and the violations of constitutional principles and international treaties that they generate, we estimate that the following are included:

Reform the Federal Law on Administrative Procedure to include new grounds for revocation of concessions, authorizations, permits and licenses, as well as the addition of cases in which compensation for damages by the federal public administration will not apply.

With this proposal, the Federal Executive intends to depart from the general regulation of compensation for damages in public procurement, by including that this does not apply when the damage is caused by "causes of public utility", which, being a subjective concept, generates a state of legal uncertainty.

It is proposed to modify the Federal Law on Administrative Litigation Procedure to eliminate the extraordinary nature of the so-called judgment of harmfulness, adding new causes for its admissibility, specifically, when the act favorable to the individual causes harm to the federal public administration or the public interest is harmed. Concepts that are also broad, subjective and abstract, such that there is legal uncertainty to the extent that arbitrary actions by the authorities are permitted.

Reform the Federal Law on Parastatal Entities so that the Federal Executive has the power to directly assign to parastatal entities the provision of public services, as well as the use, exploitation and exploitation of assets subject to the public domain regime for reasons of public utility and interest, general, social or national security. In addition, it is proposed to grant the Federal Executive the power to group parastatal entities according to the public interest or national security.

In our opinion, this modification may have an impact on competition and free competition among individuals who offer their services to the Federal Government, since there is a possibility that contracts may be awarded directly to other State entities, without respecting the bidding procedure that allows healthy and free competition in the different sectors, generating undue and arbitrary advantages.

With regards to Expropriation Law, it is proposed to eliminate the mandatory application of international treaties to which Mexico is a party and the arbitration agreements that are entered into, which violates the principle of constitutional supremacy and hierarchy of laws, as international treaties are hierarchically superior to the aforementioned Law.

Reform the Ley de Acquisiciones, Leases y Servicios del Sector Público to reduce the requirements for open international tenders. This may imply a violation of the international treaties to which Mexico is a party, specifically with regard to the chapters on government procurement, since, as a general rule, prior to the open international tender, a public tender must be held under the coverage of treaties, a situation that allows the possibility that national companies cannot compete on equal terms.

The inclusion of a so-called exorbitant clause, consisting of the State's discretionary power to terminate Contracts for reasons of public, general or social interest. The reform aims for this clause to be included always, under penalty that public officials involved incur administrative liability.

From our perspective, this is a figure that only seeks to benefit the State in a discretionary manner to terminate without any liability, under reasons that can be arbitrarily alleged as it suits the interests of the Executive, which generates clear legal uncertainty in contracting with the State.

Amend Article 19, paragraph 4 of the General Law of National Assets; Article 1 and 13 of the Federal Law of Patrimonial Responsibility of the State, and article 21 of the Expropriation Law, with a view to establishing a limit on the amounts of compensation in the event of being ordered to pay them in jurisdictional or arbitration proceedings.

This is a topic that must be studied carefully if there are arbitration clauses, since it disrupts the essence of what it means to agree to an Arbitration.

The obligation to follow and self-determine arbitration as an autonomous procedure and independent of any State rests on International Treaties that promote the conduct and execution of an award, such as, for example, the New York Convention and various treaties that protect foreign investments. These International Treaties are protected by Article 133 of the Constitution, so that the intention of the contracting parties must enjoy legal certainty, providing fair treatment to companies and investors that interact with the government.

Since the initiative was recently submitted, it must be referred to the corresponding Committee for processing, study, discussion and approval, so it may still be subject to various modifications.

If the initiative is approved without modifications, we consider that violations of multiple rights recognized in the Federal Constitution and, even, in various International Treaties may be brought before the Judicial Branch of the Federation. This is due to the fact that the proposed modifications violate the rights to legal certainty, constitutional supremacy and hierarchy of laws, legitimate trust, proportionality, legality, equality, freedom of work and, even, economic competition.

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