Carlos Rodríguez
Partner for Energy
Wöss & Partners
/
View from the Top

Resolving Disputes With Legal Precision

Tue, 01/21/2020 - 16:35

Q: Which services does Wöss & Partners provide that sets it apart from the competition?

A: We offer preventive services for companies that may want added security given the government’s remarks that energy contracts could be rescinded or revoked. Nothing has happened yet but there is a concern that contracts in areas including E&P and transport and distribution could be modified. We proactively review any amendments and try to introduce clauses or provisions that protect our clients’ investments and reduce their need to ask for legal protection from international bodies. 

Our process delivers agreements within three or four months while an arbitration process may take three or four years. For example, we worked with a major energy company to issue a legal opinion that allowed our client to reach an agreement with another party and avoid an expensive arbitration process. The costs of these arbitrations do not only relate to the expense of the legal process but also the time wasted when projects are held up.

Similarly, we offer expert legal advice on local issues, like changes to tax laws in individual Mexican municipalities. Because municipalities are independent, they have the autonomy to develop certain laws that can be problematic for companies that have entered into contracts with the federal government. Some municipalities amend the tax laws every year and introduce new tax contributions without any justification. These local issues cause problems for a company’s budget because they are unforeseeable. Lawsuits are often filed as a result. 

Q: How strong is the oil and gas industry’s legal framework and is it attractive to IOCs?

A: The energy industry’s legal framework is in force since 2013. It was ushered in by the Energy Reform and we hope it will not be altered significantly. It complemented the previous 1995 and 2008 reforms well. With the new legal framework, Mexico will be able to take general legal guidelines from the new energy policy and the experience created along these 6 years of the Energy Reform in place. 

The strength of the framework means there are very clear guidelines for private-public JVs. With the Energy Reform, the Foreign Investment Law was amended and changed PEMEX into a State Productive Enterprise (EPE). PEMEX is now run like a private company, with a board of directors and an ethics code, and competes against national and foreign private companies in the country. These changes have a constitutional basis so there is no legal precarity for IOCs working in Mexico. The only reason IOCs might be concerned is due to political policies, not the law.

Q: What are the firm’s hopes for the legal framework of Mexico’s oil and gas industry?

A: We hope that the framework and Energy Reform drive the development of the Mexican oil and gas industry. While Mexico was at the forefront of Latin America’s oil and gas industry in the 1980s, PEMEX shunned private investment for too long and infrastructural technology has suffered. Now, we are many years behind the rest of Latin America. At the moment, the government is using the idea of resource sovereignty as a political issue to please certain groups. The cancellation of bidding rounds in the oil and gas and energy sectors was a way to reinforce PEMEX but economic issues and the involvement of companies already invested in Mexico must be taken into account.

It is important that the Energy Reform does not go the way of the environmental reforms of the 1990s to become a watered-down version of the original idea. Mexico does not have companies to clean public drinking water, or the instruments to properly monitor corporations’ emissions, players in charge of the construction and operations of landfills. Furthermore, the state does not have the resources to do it alone. This cannot be repeated with the Energy Reform.

 

Wöss & Partners is a Mexican law firm specialized in legal arbitration and litigation services across the energy sector. Founded in 2001, the firm has become known for its pioneering expertise on energy rights.