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Legal News: Energy Regulatory Commission – Grid Code 2.0

Written by Santamarina + Steta en February 10th 2022. Published in Updates.

Version to print | January 2022

On December 31, 2021, the Energy Regulatory Commission (“CRE”) published, in the Official Gazette of the Federation (“DOF”), the “Resolution No. RES/550/2021 of the Energy Regulatory Commission by which the General Administrative Provisions containing the criteria of efficiency, quality, reliability, continuity, security and sustainability of the National Electric System are issued: Grid Code”[1] (the “Resolution”). This Resolution establishes the regulations on efficiency, quality, reliability, safety and sustainability of the national electric system (“SEN”) that must be applied for its development, maintenance, operation and planning.

The Network Code is the integration of all the general administrative provisions that contemplate the technical requirements for the correct and efficient development of the planning, control, operation, access and use processes of the SEN, therefore, the Resolution has as its main objective the issuance of the criteria that must be followed in order to guarantee the efficiency, quality, reliability, continuity, security and sustainability of the SEN, under an open and non-discriminatory access scheme of the electricity market.

The new Grid Code is composed of two main sections, which are divided into: a) general provisions of the SEN, and b) operational provisions of the SEN. The instrument also includes 12 (twelve) interconnection criteria for power plants, 11 (eleven) connection criteria for load centers and 8 (eight) criteria for electrical substation arrangements for the interconnection of power plants.

In order to achieve the above objective, various modifications were proposed to the Network Code, among which the following stand out:

The scope of the regulation is modified in relation to the order of the technologies considered for the procedure for reducing generation due to reliability, which leads to greater discretion on the part of the National Energy Control Center (“CENACE”) in the procedure;

The causes of liability applicable to generators are modified, especially those causes that lead to an interruption in the electricity supply;

The technical requirements for the interconnection of power plants to the SEN are modified, and

New requirements are imposed on the control of active and reactive power during power plant failures, which increases the costs of power plants.

In addition to the above, the Resolution is not clear about the regulation that will apply to load centers or power plants that intend to migrate from the legacy regime to the wholesale electricity market, especially regarding which version of the Grid Code would apply to them. That is, those power plants that are in trial periods or in the process of migrating to the MEM should adhere to the previous Grid Code, since their migration process was initiated prior to the entry into force of the Resolution. Otherwise, the application of the new Grid Code could be considered as an act of a retroactive nature, in violation of Article 14 of the Constitution.

Our firm offers the possibility of supporting the affected agents based on the arguments presented in general in this document, as well as on the specific aspects derived from the analysis and study of each particular case, with the purpose of developing an ad hoc strategy for each situation, with the collaboration of our lawyers specialized in energy, economic competition, human rights, constitutional litigation and protection of rights.

The Resolution and its annex entered into force the day after its publication in the DOF.

[1] Original publication in DOF: https://www.dof.gob.mx/nota_detalle.php?codigo=5639920&fecha=31/12/2021

If you require additional information, please contact the partner responsible for your matters or one of the lawyers mentioned below:

Legal Update: Mexican visa requirement for Venezuelan nationals entering Mexico as visitors

Written by Santamarina + Steta en February 10th 2022. Published in Updates.

printable version | January 2022

On January 6, 2022, the Agreement determining the obligation to obtain a Mexican visa prior to entering Mexico for Venezuelan nationals was published in the Official Gazette of the Federation.

As of January 21, 2022, all Venezuelans who wish to enter the national territory as visitors must apply for a consular visa at the Mexican consulate closest to their residence, which will allow them to enter Mexico for up to 180 days. However, if a Venezuelan national holds any of the documents or visas listed below, they will not need to apply for a Mexican visa:

Valid and current visa issued by any of the governments of Canada, the United States, Japan, the United Kingdom and Northern Ireland, or any country that is part of the Schengen area.

Document proving permanent residence in the United States, Canada, Japan, the United Kingdom and Northern Ireland, or any country that is part of the Schengen area, as well as permanent residence in Colombia, Chile or Peru (countries that are part of the Pacific Alliance).

If you require additional information, please contact the partner responsible for your matters or one of the lawyers mentioned below:

Legal News: New SAT verification to submit the merger notice

Written by Santamarina + Steta en February 10th 2022. Published in Updates.

printable version | February 2022

The Miscellaneous Tax Resolution (“RMF”) for 2022 incorporated the obligation to request a verification from the SAT as a mandatory requirement before submitting the cancellation notice in the RFC due to the merger of companies.

The verification request is regulated in the “316/CFF” procedure form of Annex 1-A of the RMF and must be requested by the merging company through the SAT Portal, which must validate that the taxpayer:

Don't count on audits or tax credits.
That your declared income is consistent with your electronic billing.
Do not be on any SAT blacklist.
There has been no tax effect on invoices received from taxpayers included in the list of companies that invoice simulated operations.

The aforementioned form establishes that the verification must be resolved within 10 business days, establishing that during this time the deadline for submitting the merger notice will not be interrupted. The RFC cancellation notice must be submitted within the month following the merger taking effect in order for it to be considered exempt.

The verification requirement reduces the days in which taxpayers can file the merger notice since it does not suspend the deadline and leaves the taxpayer in a state of helplessness since they have to wait until the response to the verification is issued in order to cancel the RFC., which may occur after the 30-day period and therefore be considered taxable.

For these reasons, We consider this requirement to be unconstitutional as it violates various rights of taxpayers. We suggest that you take the above into account in order to protect your rights in your merger operations.

***The publication of this note does not constitute legal advice, nor is it intended to be applicable to particular cases.

If you require additional information, please contact the partner responsible for your matters or one of the lawyers mentioned below:

Legal Report Mexico 2021: Part One

Written by Santamarina + Steta en February 10th 2022. Published in Updates.

The year's highlights

Among the many lessons that the pandemic is leaving us, in addition to an economic crisis and various legislative nonsense, is the growing interest in promoting and defending the exercise and rule of law.

We began 2021 in an environment of pressure that led to strikes that had not been seen for several years. The press closely followed these events to ensure that legal avenues for resolving these disputes were respected. On the other hand, Mexico's commitment to the USMCA led us to reduce the historical gap in minimum wages.

At the same time, we reviewed the dangerous aspects of the initiatives to reform the Bank of Mexico Law, which established legal bases for money laundering and put its autonomy at risk, and with it, the country's financial stability.

On the business side, we saw the arrival of a scenario of mergers and acquisitions that injected foreign currency into the Mexican economy. We attended various forums to combat stigmas that prevent the development of promising industries, such as cannabis, which has faced late, defective and confusing regulatory initiatives.

Our labor lawyers have been very busy analyzing initiatives and advising key industries. The law that now prohibits insourcing and outsourcing in Mexico was drawn up throughout the year with much tension. The changes curbed the bad practices of some companies, but also ended up eliminating some good practices and, in doing so, reduced the country's competitiveness at the worst possible time.

The restructurings, bankruptcy proceedings and bankruptcies of companies would soon come to light. We made it clear to the productive society that the Mexican bankruptcy law is a strategy that protects companies, as in other parts of the world. Its purpose is the survival of companies, to retain the majority of employees and the supplier roster, and to create a new relationship with creditors. The largest companies in the world have resorted to these legal resources to change their skin and are now healthier and stronger. We also noted throughout the year that the number of judges rejecting requests for bankruptcy proceedings has increased dramatically, mainly due to a lack of training and resources. Specialized courts are urgently needed.

In 2021, it was expected that an environment of non-compliance and controversies would prevail, which saturated the courts, which in themselves reduced their operations due to the health provisions imposed by the pandemic. At this point, we have insisted a lot on spreading the message that there are alternative dispute resolution mechanisms (ADRs), which are very effective, expeditious and provide options to place disputes in the hands of experts in the corresponding industry. They are effective even in acting at the first outbreak of conflict between companies and thus prevent cases from growing and becoming bogged down in lengthy processes in which time and a lot of money are lost.

Mexico Legal Report 2021: Part Two

Written by Santamarina + Steta en February 10th 2022. Published in Updates.

Health crisis or economic crisis?

As 2021 began, Mexico and the world faced a terrible dilemma: closing businesses or implementing stricter health measures. A decision that was made at the dawn of a global economic crisis and with a greater need for resources for medical care.

With it clear that health measures would continue, our labor and real estate specialists once again pointed out options for the productive society. They spoke of modernizing labor relations through teleworking, of alternatives for converting offices into housing, and of the “dark kitchens” or “ghost kitchens” phenomenon, as new opportunities for the weakened restaurant industry.

The state of health emergency was declared, which does not contingency, because that single word would open the door to legalizing non-compliance with contracts, collateral damage began to appear: violations of environmental legislation, which also included the works on the Mayan train and the first signs of bankruptcy in the hardest hit sectors.

It must also be said that there were signs of recovery of foreign investments in some states such as CDMX, Nuevo León, Querétaro, State of Mexico and Jalisco, but they encountered obstacles due to the paralysis of immigration procedures for the foreign executives who accompany them.

There was also an atmosphere of constitutional controversies before the Supreme Court, or at least of injunctions, against bills such as the one on the electric industry; the initiative to establish a cell phone registry, which threatened the protection of personal data; the increasingly distant legal certainty to promote investments in clean energy, such as hydrogen; and the blunders in health regulations that have closed the doors to a true promise: the hemp industry. Our legislators continue to confuse marijuana, a variant with a psychoactive compound, with hemp, a non-psychoactive plant, which serves as raw material to produce biofuel, textiles, cosmetics and components for the construction industry, among others.

In the middle of the year, pressure again prevailed due to the imminent entry into force of the legislation on outsourcing, characterized by the lack of clarity of its regulations, which did not contemplate or calculate the complexity of labor relations and third-party contracting for key industries, such as the automotive industry. The above, coupled with the threat of criminal taxation that comes with non-compliance, a situation that our specialists pointed out to the public.

And to be fair, despite legislative contradictions and absurdities, the defense of the Constitution, the autonomy of key institutions and the rule of law were maintained. As was the defense of the environment.

At the beginning of the year, the dilemma seemed clear: “society or economy”, “future or present”. Today, it is fading. One of our partners told the media: “The productive society, with the wounds of the pandemic, will take savage capitalism out of the game.” I would add that statism and savage congresses will also be eliminated, but that will be the subject of the next installment.

Mexico Legal Report 2021: Part Three

Written by Santamarina + Steta en February 10th 2022. Published in Updates.

The difficult path of the rule of law

2021 brought not only unexpected things, but also situations that we no longer expected to see again: two banks lost their license and a third, of great importance, will change owners. And although these operations began last year, their repercussions will crystallize during 2022. Last year, we expected to see more financial restructurings and not so many mergers and acquisitions, a change that may well be predicting a deeper transformation. Meanwhile, we are witnessing more activity in courts, which continue to be saturated.

Our energy sector specialists report that, instead of supporting new businesses for a beneficial economic spillover for Mexicans, they are advising companies that already have investments in Mexico and seek to defend their rights acquired in contracts against possible drastic changes in the law and of course immediate changes in policies and regulations.

It was a fact that the Federal Government implemented a policy of suspending oil rounds, cancelling tenders, rounds and energy auctions. Likewise, the freezing of permits to develop clean energy and the issuance of a decree to reform the Electricity Industry Law to grant a predominant role to the Federal Electricity Commission (CFE), which immediately became subject to constitutional controversies.

It is true that the pandemic has brought us much greater awareness at all levels. Globally, corporations have continued to adopt a much deeper awareness of social and environmental responsibility. The wounds that the pandemic continues to inflict on us every day are crystallizing in a new type of productive society, which will replace that of wild capitalism.

Legislators, companies, end consumers, employees, communities, suppliers, investors, customers, shareholders, regulators, media and governments in different parts of the world have a consciousness of responsibility that confronts industrial abuses more firmly.

In Mexico, the controversial point is whether or not to accept the government as the sole governing body and watchdog. As if it were a father, as if it were the State itself, when there is already a mature society, with autonomous institutions, that guarantee limits to abuses, for example, the Federal Economic Competition Commission and COFECE. We believe in and faithfully support the social institution that has bravely opposed attempts at legislation that seek to revive government monopolies in the country's key industries. The world as a whole has already matured towards environmental, social and corporate governance (ESG) compliance. Mexico does not have to be the exception.

The laws of the countries with the largest economies are responding to this call for responsibility. The Constitution and laws of Mexico have also reached a point of progress in this regard. The autonomy of powers is the only guarantee for a State of Law to prevail. Not one of people, no matter how well-intentioned they may be.

Event: Business Investment Summit

Written by Santamarina + Steta en February 10th 2022. Published in Events and Webinars.

The first cannabis event in Mexico focused on business and investment opportunities. From November 18 to 20 in Playa Mujeres, Cancun.

From the creators of the leading medical cannabis event in Mexico comes a three-day event focused on business opportunities and investments in the emerging medical, recreational and industrial cannabis markets in Mexico.

Announcement: New Partners and Counsels 2022

Written by Santamarina + Steta en February 10th 2022. Published in Announcements.

We are pleased to announce that Daniel Legaspi, Guillermo Moreno and Diego Ostos have been appointed partners of the Firm. Likewise, Margarita Casarín, Efraín Olmedo and Jaime Vázquez have been promoted to counsels. Both appointments will take effect as of January 1, 2022.

We wish you much success!

asg and esg criteria what are the meaning of indicators and principles

Productive society, with the wounds of the pandemic, will take wild capitalism out of the game: Santamarina + Steta

Written by Santamarina + Steta en February 10th 2022. Published in Updates.

Social change from the population. Government, laws and companies are just adapting.
Work now for a world with a sustainable future, but also without deep inequalities.
In Mexico, there is an urgent need to adopt new comprehensive concepts of environmental, social and corporate governance monitoring, especially in value and supply chains.

16 2021 November. Juan Carlos Machorro, Partner and Head of the Transactional and Financial Practice Unit of the law firm Santamarina + Steta He pointed out that the wounds of the pandemic are crystallizing a new type of productive society that is replacing that of wild capitalism. He reported that legislators, companies, end consumers, employees, communities, suppliers, investors, clients, shareholders, regulators, the media, social networks and governments in different parts of the world have a consciousness of responsibility that more firmly confronts industrial abuses.

All these groups, which from different angles make the operation of a company effective, already revolve around environmental, social and corporate governance surveillance that is more appropriate to a new productive society, which is more demanding and aware of the future.

“Following the close of the 2021 United Nations Climate Change Conference, we can clearly see that the pandemic has only dramatically highlighted wounds and inequalities that should now be considered unsustainable and absolutely unacceptable,” said.

The specialist stressed that this is a real social change that comes from a population that is increasingly aware of its rights, not from a fad. He clarified that it is something that has been brewing for some years and that was first translated into the concept of socially responsible company (ESR) but then deepened under the concept of environmental, social and governance (ESG) compliance.

“There is still talk of sustainable projects, but the pandemic accelerated awareness of the impact of companies and government works with a much broader vision. Now, the ESG concept involves labor issues, human rights, the social impact of projects, their community impact and the participation of various social groups that make the operation of the company possible and that constitute the productive society. Only in this way can compliance, ethical management of the company, data privacy, industrial property and, of course, corporate governance become effective. In short, countless areas that must be addressed by the productive society as a whole,” He explained.

Juan Carlos Machorro added that the ESG concept is the future of the global economy and of companies. It is already a fact in the policies of global companies and is now associated with local companies through compliance requirements for value and supply chains.. “The British Academy has already said it in very clear terms: the purpose of companies is to solve, profitably, the needs of people and the planet and no longer to achieve profitability by causing problems at any cost. In our country, a rapid adoption of this concept is urgent. We are far from Europe, the United States and Canada, but we have everything to do it,” concluded.

Mexico City Office

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Monterrey Office

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Queretaro Office

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Appleseed Mexico Foundation will present recognition to legal firms committed to Pro Bono work in Mexico

Written by Santamarina + Steta en February 10th 2022. Published in Announcements.

On November 30, and as part of its 18th anniversary, Appleseed Mexico will hold its annual event to present Pro Bono awards to law firms that provided free legal support to Civil Society Organizations (CSOs) that requested legal assistance in 2019 and 2020.

The event will be held virtually and will feature the presence of the Mexican Orchestra Director, Alondra de la Parra, who will share with us her vision of leadership and collaborative work to make Mexico a better country.

We are standing on an agricultural treasure, we must open our eyes to take advantage of it: Santamarina + Steta

Written by Santamarina + Steta en February 10th 2022. Published in Updates.

The company receives the National Agri-Food Award. Quality models can contribute to revaluing the countryside.
Fertile ground for political bets. It is even more fertile for economic bets.

CDMX, November 29, 2021. After receiving the National Agri-Food Award To increase the value network of agricultural companies, experts in the field of the law firm Santamarina + Steta They said that Mexico is standing on an agricultural treasure, and we need to open our eyes to value it and take advantage of it for the benefit of the rural sector and society.

José Pablo Pérez Zea, partner in charge of the firm's intellectual property area, said that there are a large number of agricultural, fishing and livestock companies that could trigger the country's development if they established quality models through adequate legal advice. “They need it to produce, sell, develop technologies and export,” said.

The specialist explained that Mexico has unique geographic and climatic advantages and characteristics that allow the field to develop enormous value, especially in terms of exports, given that “We have experience, two agricultural cycles per year and regions with great potential for agriculture, such as the Pacific, Gulf and Southeast. We have capacities for livestock, aquaculture and the forestry sector. If you are an investor with vision, there is a great business opportunity there. The field has been very fertile for political bets. It is much more fertile for economic bets. They just need good advice,” stressed.

For her part, Enriqueta Molina, an intellectual property specialist for the firm's agri-food sector, stressed that it is essential to develop quality models to revalue and strengthen Mexico's agricultural sector.

“There are technologies available that we have not yet adopted. Quality labels cannot be developed for many agricultural products because we do not have processes to support them. We lack association, that is, unity between farmers themselves to establish and monitor these processes. The competitiveness of the agri-food sector is only achieved through quality and innovation, from primary production and throughout the value chain: seed development, cultivation, post-harvest handling, agro-industrial processes. Only in this way can we consolidate value strategies that the public identifies, such as designations of origin and the development of brands, both individual and collective or certification.” stressed.

Mexico City Office

Tel. +52 55 5279 5400

Monterrey Office

Tel. +52 81 8133 6000

Queretaro Office

Tel. +52 442 290 0290

The new transparency law in advertising, a reaction without knowing the industry: Santamarina + Steta

Written by Santamarina + Steta en February 10th 2022. Published in Updates.

It lacks reasoning or supporting study.
There are no clear benefits for consumers. On the contrary, processes will be hampered, which will make products more expensive.
It does not consider the investment trends that constitute digital platforms.

CDMX, August 19, 2021. Litigation, media and entertainment industry experts from the law firm Santamarina y Steta have stated that the new Advertising Transparency Law, which is intended to protect advertisers and improve competition, will end up destroying small agents who will not be able to cope with the costs and procedures that media, agents and advertisers are now obliged to pay.

“From its explanatory statement, which is not very clear, and the body of its text, the new law does not seem to know how the sector works or distinguish the parts that compose it.", He said Efraín Olmedo, an expert in litigation, licensing and intellectual property, stressing that the document does not contain a single argument, study or analysis that describes a problem and therefore a solution.

The expert also explained that large advertisers buy advertising space in advance not only to obtain better discounts from the media, but also to launch promotional campaigns without having to go through any major purchasing procedures. “Now, the law hinders this ability to react”he said.

Efraín Olmedo added that major advertisers have supplier certification procedures that ensure the quality and effectiveness of their advertising messages, which will be affected because the new law eliminates already certified integrating agents from supply chains, forcing all of them to register in complex processes that require months of testing and verification of results with the advertiser.

For its part, Paola Morales, an expert in telecommunications, media and technology at Santamarina + Steta, pointed out that the new law does not make clear how the benefits for consumers will be reflected, given that the obstruction of the chain of production and distribution of advertising messages will incur higher costs for everyone. “On the contrary, in the end they will have an impact on costs for consumers,” said.

The expert explained that the drafting of this law did not take into account the operating standards of the Mexican industry or other parts of the world.There are provisions with uncertain definitions, which leave advertisers, media and agencies with a lot of uncertainty in interpreting the rules. And even more so if we take into account that there are new players, established in platforms that are already a growing trend for advertising investments and that often cover two or all three roles in the advertising production and distribution chain.”He said.

Mexico City Office

Tel. +52 55 5279 5400

Monterrey Office

Tel. +52 81 8133 6000

Queretaro Office

Tel. +52 442 290 0290

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