Image credits: Ksenia Kudelkina
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News Article

Mexico Is Country with Fifth Most Energy Arbitrations

By Kristelle Gutiérrez | Tue, 06/28/2022 - 11:10

In 2021, Mexico ranked fifth in a list of 150 countries that face the most international disputes concerning private investment. According to the International Chamber of Commerce (ICC), most of Mexico’s cases involve companies in the energy and infrastructure industries, which recently saw weighty modifications to their public policy laws or operational guidelines.

The ICC claims that this relatively high number of disputes has contributed to reducing investment or driving it away altogether, as many companies feel these changes could potentially limit their participation in the energy and infrastructure sectors.

The institution also reported that throughout 2021, 70 percent of the number of growing disputes were in the energy sector, which explains why between 2019 and 2021, Mexico climbed up nine places in the ranking. The country is only behind the US, Brazil, Spain and the United Arab Emirates.

Claus von Wobeser, Founding Partner, Von Wobeser y Sierra commented that the government’s tendency to strengthen public policy laws and operation rules was in fact logical during a post-pandemic economic recovery. He went on to say that such measures were “very much necessary.”

“I have seen disputes all over the energy sector, in the electricity sector as well as in oil and gas, which came from the modifications to the federal law,” von Wobeser added, although also clarifying that the ICC has yet to see any disputes between investors and the López Obrador administration.

Alexander Fessas, Secretary General, ICC’s International Court of Arbitration, explained that throughout 2021, private companies turned legal arbitration against state-owned companies. Fessas highlighted that a decrease in private investment is already evident, as reported by the Bank of Mexico (Banxico), especially in comparison to the pre-pandemic levels. He suggested that the only way to start recovering is through the private initiative since “only 15 percent of investments come from the public sector,” according to Fessas. 

The US, which has notoriously topped the list for years now, and Mexico are currently working through disputes involving American companies in the Mexican energy sector. The disputed projects are estimated to be worth more than US$30 billion in investment. On 15 June 2022, Minister of Foreign Affairs Marcelo Ebrard, Minister of Energy Rocío Nahle, Minister of the Interior Adán Augusto López and Ken Salazar, US Ambassador to Mexico, met to discuss the many unresolved arguments between the countries.

One particularly relevant issue that was addressed was the negotiation between PEMEX and Talos Energy regarding the Zama field. The President reassured the press that the IOC will continue working alongside PEMEX and invest in upstream activities.

After the meeting, Salazar told Reuters that both governments have made progress in resolving disputes. He described the issue as both an opportunity and a challenge to both parties. The Ambassador concluded that Mexico understands the need to “integrate North American’s economies to encourage near-shoring of manufacturing capacity from China and elsewhere.”

The data used in this article was sourced from:  
El Economista, MBN, Reuters.
Photo by:   Ksenia Kudelkina
Kristelle Gutiérrez Kristelle Gutiérrez Junior Journalist & Industry Analyst