Judges Freeze Controversial Hydrocarbons Law Definitely

Judges Juan Pablo Gómez and Rodrigo de la Peza have issued a definite suspension to crucial parts of President López Obrador´s Hydrocarbons Law which recently passed through Congress. The judges argue that the law unfairly re-establishes a monopoly in favor of national oil company PEMEX. When introduced, the bill was met with widespread criticism from the private sector and regulatory watchdogs, nevertheless defended by López Obrador and SENER.

Both judges assess that the law’s efforts to pull PEMEX once again to the forefront of the sector will negatively impact private investment, hamper competition and eventually increase petrol prices for consumers. Private participants are left defenseless against the contradictions to the status quo established in the 2014 Energy Reform, the judges argued. The definite suspension applies in general, meaning that it does not only apply to the companies who raised the issue in court but to every permit holder in the Mexican oil and gas sector.

Juan Manuel Zamora, a Consultant and Defense Attorney of the Energy Legal Defense Office explained to El Financiero that the matter could be resolved between 10 months and one year by Mexico’s Supreme Court.

Judge Pablo Gómez has already attracted the president´s direct attention by suspending the change to the Electricity Industry Law (LIE) and by blocking a National Register of Mobile Telephone Users (PANAUT). The president suspects the judge must have ulterior motives and announced that he had requested an inquiry into Gómez’s actions to the Supreme Court. Gómez and de la Peza clarified that their resolutions is based on the legal provisions of the Energy Reform, which are anchored in Mexico’s Constitution, and therefore “not based on ideological judgements.”

Passing the Hydrocarbons law through Congress is one of many steps the government has taken to reorient Mexico’s energy sector around its state-productive companies, such as PEMEX and CFW. The slew of measures taken by López Obrador and SENER have caused much anxiety among industry stakeholders in the country, and experts fear the lack of certainty is discouraging investments. On May 5, SHCP issued an official record on Mexico’s public finances for 1Q21, revealing that PEMEX is now operating under a historically low tax rate. On April 29, the Senate approved a notion to eliminate asymmetric regulation for PEMEX, so that CRE would no longer have the power to determine the price of hydrocarbons, petroleum products and petrochemicals offered by the NOC.

La Jornada reported that The Employers' Confederation of the Mexican Republic (Coparmex) celebrated the decision. “Since its approval, we warned that a flood of injunctions would arrive because these recently passed laws are unconstitutional, since they affect the principles established in the Constitution regarding free competition and equality,” the confederation commented.