LIE Amendments Unenforceable

Despite having the Federal Collegiate Courts lift two permanent suspensions on amendments made to Mexico’s Electrical Industry Law (LIE), they remain unenforceable due to ongoing injunctions formulated by private companies who initiated amparo constitutional review procedures and as a result have been suspended.

President Andres Manuel López Obrador had originally pushed LIE through congress to prioritize state-owned utility CFE whilst reversing the liberalization of Mexico’s energy sector at the detriment of private energy producers. The Morgan Lewis firm predicts that the Collegiate courts will most likely dismiss the pending amparo procedures and lift the 100+ corresponding injunctions on appeal. Notably, because the independently presented injunctions affect the private energy sector as a whole, the lifted amendments will remain nonbinding until all injunctions are lifted.

Lifting the numerous injunctions will be no easy task. The firm predicts that while some courts can try to lift the majority of them within the next two months, others will take much longer depending on status of each case. Parties that require address from the Mexican Supreme Court are expected to take the longest. Such possible case may involve environmental nongovernmental organization Greenpeace who cited legitimate interest in protecting the right to a healthy environment, sustainable development, and free competition and contestability in the power generation industry says Holland & Knight.

If the First Collegiate Court by chance successfully lifts all suspensions, investors would be able to apply again for constitutional protection (amparo) and injunctive relief once the secondary regulation and guidelines affected by the amendments are adjusted or when the energy regulatory authorities start reviewing, renegotiating or revoking the permits of investors on the basis of the amendments. Therefore, while CFE’s recent move to ask independent Energy Regulatory Commission (CRE) to suspend projects that may hamper  the national electricity grid (SEN) it may interestedly hurt private energy producers, it was done in response to amendment changes and thus does not meet the criteria for injunction proceedings.

“These matters do not have a black and white answer. Not all rulings will move the same way” says Deloitte Partner, Valeria Vázquez to MBN. "The issues will be interpreted differently by various courts. However, I do not believe that the energy sector’s model will be changed through these decisions.” All that remains now is to observe how these cases play out in court and prepare accordingly.