The Legal Path to Success In Mexico’s Mining Industry
STORY INLINE POST
Q: What are the most important changes in Mexico’s mining legal landscape since the beginning of President López Obrador’s government?
A: The López Obrador administration’s National Development Plan 2019 to 2024 includes principles such as honesty, the eradication of corruption, respect for the rule of law, the stoppage of migration due to hunger or violence and the economic support for popular welfare. These pillars include the need for the promotion of economic growth and sustainable development, as well as the providing of opportunities for the less fortunate. The mining industry is and should be recognized as a strategic ally to the Mexican federal government and to the new president to be elected in 2024. The mining industry has always worked together in coordination with municipal, local, and federal governments, such as the current “national inventory” of tailing dams being held by public and private entities or the collaboration of mining companies in the drafting of the indigenous consultation law.
Although the Mining Law has not been amended by our Congress during this presidency, there have been some relevant amendments to other federal laws that regulate the industry and have a direct impact, including the reform to other industries’ legal frameworks, such as the electric and hydrocarbon laws. We perceive a change in the public rhetoric and in the implementation of public policies toward the mining industry by some relevant government members. For many years, there have been voices requesting the amendment of the Mining Law. Nevertheless, if we consider amending the legal framework of our mining activity, it is important to make a respectful but firm call to our authorities, including lawmakers and public officials, to complete a deep, comprehensive and technically supported analysis on any given initiative of reform. This analysis should contemplate the effects these reforms would have on local and foreign investments, as well as international treaties signed by Mexico. This analysis should also consider the impact on local economies that are currently receiving the benefits from mines operating near their communities. Our Mining Law has been tested several times by “amparo” procedures and the Supreme Court of Mexico has always resolved that the current law respects and is aligned with the Mexican Constitution.
As I have said before, the responsible mining industry is the best strategic ally for the federal government to meet its goals.
Q: Why should miners trust CR Legal’s expertise?
A: We take mining very seriously, since it is an industry that promotes the creation of shared values, social and economic wealth and prosperity. We advise our clients by communicating an innovative focus on sustainability as the basis for a positive transformation of the industry. This includes compliance with the sector’s current legal framework, as well as risk management, compliance of corporate goals and great relationships with interest groups. We also focus on the social dimension of mining by prioritizing employee safety, human rights protection, development of the local host communities and protection of the environment, water and biodiversity. We work together with agents and companies that are committed to achieving a more responsible industry as we accomplish with them the legal path to success.
Q: How can mining companies best protect themselves against the risk of expropriation?
A: Expropriation by definition is the “formal and materially administrative act by virtue of which private property is extinguished, for reasons of public utility, through compensation.” It is regulated in Mexico by the Expropriation law of 1936, which was amended for the last time in 2012. We need to analyze this legal term from two perspectives. First, the Mining Law recognizes in Article 6, the “public utility” character of exploration, exploitation, and beneficiation activities, and therefore expropriation is a mechanism that with some limits, including a preference for oil exploration and extracting activities, can be used and has been used by mining companies and holders of mining concessions to obtain access to the usage of the surface area covered by the mining lot.
But there is a second type of “expropriation,” which is known as the action of a government to interfere with private activities in the form of suspension of granted permits or recognized rights. This could be the case of Article 57 of the Hydrocarbons Law, which entitles the Mexican authorities to suspend permits granted within this industry to “secure the interests of the nation.” I believe this kind of legal language does not provide certainty to investors or key players in any given industry in any country. Considering that expropriation is an administrative act, the Expropriation Law considers and describes the proper legal resources and mechanisms to oppose these kinds of practices. Formally, we recommend that each case shall be analyzed based on its own merits and legal framework to determine the best protective mechanism. We believe this second, negative “expropriation” practice should be removed from the law and should be contained and avoided by our lawmakers. As I have explained before, they should be very responsible and cautious of the content of the law they wish to amend or enact.
CR Legal is a Chihuahua-based law firm that specializes in mining law, corporate law, labor law, administrative law and litigation, among other areas.