Mexico City, May 26th, 2020.
On April 29th, 2020, the National Center of Energy Control (“CENACE”) released an administrative resolution with measures to guarantee the efficiency, reliability, quality, continuity and safety of the Electric National System. Likewise, on May 15th, 2020, the Energy Ministry (“SENER”) published an administrative resolution by means of which a new public policy in such respect was issued (the “Resolutions”).
As per the referred Resolutions, new rules and regulations were provided to all electric industry participants, including those engaged in electric generation by means of renewable energies such as photovoltaic and wind sources.
The measures and public policy included in the referred Resolutions would imply for the industry participants, among others: (a) impacts in clean electric energy generation; (b) limitations to competition in the market; (c) compromise commitments made by Mexico regarding the decrease of air emissions; (d) delays in the entrance of commercial operations of certain power plants; and (e) affectations regarding the rights to obtain and sell Clean Energy Certificates (“CEL´S”) by clean energy generators.
INVESTMENT ARBITRATION CLAIMS
It is worth noting that these new clean energy policies referred herein have caused controversy among the industry, as many foreign investors consider that it might damage their investments or limit their competition in the market.
México is part of international treaties such as NAFTA and CPTPP, as well as multiple Bilateral Investment Treaties (BITs) concluded with a number of countries such as Spain, that confers investment protection to foreign investors.
Subject to a detail analysis of the of the provisions of the international treaty in question, it is possible to identify in the Resolutions various elements that might represent violations of the investment protections typically offered in investment treaties, and could lead foreign investors in Mexico to consider claiming damages and injury caused (specifically to recover the cost of investments and losses caused by these new regulatory measures) by means of an investment arbitration claim aimed to compensate the investor for the damages caused by the treaty violation of the host state, regardless to the domestic mechanisms also available (administrative or constitutional proceedings, such as amparo procedures).
Although the provisions contained in the different treaties appear similar at first, there are sometimes important differences between the different protections they offer. Therefore, it is advisable to analyze and compare the different options before initiating an investment arbitration claim.
Eversheds Sutherland, as one of the largest international Firm and Basham, Ringe y Correa, as one of the most reputed Mexico´s Firms, have extensive experience in energy and international dispute resolution, specifically in investment arbitration claims, and would be happy to assist investors affected by these regulatory changes.
SINCERELY,
Juan Carlos Serra
Antonio Bravo
