Mexico City, May 9, 2023.
Preliminary comments on potentially challenging the recent amendments to Mexico’s Mining Law and related laws
The “Decree amending, adding and repealing several provisions of the Mining Law, the National Water Law, the General Law of Ecological Balance and Environmental Protection and the General Law for the Prevention and Integral Management of Waste, regarding mining and water concessions“, was published on May 8, 2023, in Mexico’s Official Gazette (the “Decree”). The Decree became effective on May 9, 2023.
I. Preliminary relevant comments on a potential challenge against the Decree
- The Decree as a complex regulatory system
- The Decree establishes what Mexico’s Supreme Court (“MSC”) defines as a complex regulatory system, and therefore, it may be “analyzed as wholly self-executing, and therefore may be challenged since it became effective, as long as the plaintiff proves, through the evidence she deems appropriate, that given the nature of the activities, knowledge, services or its commercial activities, she is subject to the obligations, prohibitions or sanctions established by such special legal regime”.
- Decree unconstitutionality
- Several sections of the Decree go against different constitutional principles, provisions, and rules. The Decree abruptly, unjustifiably, and disproportionately modifies the applicable regime to an economic activity of high constitutional relevance. The Decree alleges to protect certain legal rights, but in doing so, hinders other legal rights and principles of high individual and collective relevance.
- Who can challenge the Decree since it became effective?
- All individuals and legal entities that, considering the activities that they carry out, are directly or indirectly subject to the regime imposed by the Decree, may challenge the Decree as a complex regulatory system.
- Term to file an amparo claim given that the Decree establishes a complex regulatory system
- The legal term of 30 business days (deadline), counted from the entry into force of the Decree to file an amparo claim (juicio de amparo indirecto) against it, expires on Monday, June 19, 2023.
- Jurisdiction by subject matter
- Even though that the Decree violates principles and rights related to economic competition rights, in our opinion, considering recent judicial decisions of the MSC and relevant Circuit Courts, it is reasonable to argue that Administrative District Courts have material jurisdiction over the claims to be filed against the Decree.
- Convenience of preparing a technically sound defense in a timely manner
- It is highly recommendable that those individuals and corporations who intend to challenge the Decree, should be already working on comprehensive development of factual, technical and legal arguments, subject to the applicable parameters and standards, so that they can increase their success likelihood.
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II. Relevant modifications to mining activity in Mexico
Among other relevant amendments of the Decree, we highlight the following:
- Mining concessions exclusively through public bidding processes
- Before the Decree came into force, mining concessions were granted on free land to the first applicant in time. Now, mining concessions will only be granted through public bidding processes that guarantee the State best economic conditions and benefits for the population.
- Limitation of the scope of mining concessions
- Before the Decree came into force, mining concessions were granted for the exploration and exploitation of mining lots, and the holders could take advantage of all mineral products obtained during the concession’s term. Now, concession titles will specify and limit each mineral or exploitable substance.
- Reduction of the term of mining concessions
- The term of mining concessions is reduced from 50 (fifty) to 30 (thirty) years. These 30 (thirty) years will be counted from the date of their registration in the Mining Public Registry (the “MPR”), of which, the first five years will be for pre-operational activities. The concessions may be extended once for an additional term of 25 (twenty-five) years.
- Once the extension expires, the mining lot will be put out to bid, where the prior concessionaire will be preferred in case that its proposal equals the highest one; this last extension will be granted for a non-extendable term of 25 (twenty-five) years.
- Special regime for parastatal entities
- Regarding the federal public administration parastatals entities, the Ministry of Economy (Secretaría de Economía) may directly grant the concessionaires titles for the exploration, exploitation, benefit, use and exploitation of minerals or strategic substances or substances reserved to the State. The term of these titles will be undefined, and will only be terminated when it is proven that there is no longer a cause of public utility, public interest, general interest, social interest to be safeguarded, or motives of national security that justify such allocation.
- Prior, free, informed, culturally appropriate and good faith consultation to obtain the consent of indigenous and Afro-Mexican communities
- In the case of lots located in the territories of indigenous or Afro-Mexican communities, the Ministry of Economy, in order to grant a mining concession or allocations, will request the competent authority to carry out a prior, free, informed, culturally appropriate and good faith consultation, and must obtain the consent of such communities. This consultation must be carried out simultaneously with the environmental impact assessment.
- The right of holders of mining concessions to obtain the expropriation of land for mining exploitation is eliminated; the obtaining of a land use permit is required instead
- The right of mining concessionaires to obtain the expropriation of essential land for carrying out exploration works and activities is eliminated. Now, when there is any type of settlement occupying an area within a land subject to bidding, the winning bidder is obligated to execute an agreement with the corresponding community to obtain the land use permit, as well as to pay a consideration of at least 5% of the amount resulting from reducing the fiscal result referred to in the Income Tax Law (Ley de Impuestos Sobre la Renta), the amounts paid by the concession holder for non-deductible contributions for the purposes of said tax.
- Water availability as a condition for the granting of the mining concession
- The granting of mining concessions in areas without water availability is forbidden. Likewise, it imposes the obligation to obtain a title of concession of national waters for industrial use in mining. Any authorization, permit, concession, allocation or extension granted under this law must prioritize human and domestic water consumption. In case there is a risk of water availability for human and domestic consumption, the Water Authority shall decrease or cancel the volume of water granted.
- Mining concession assignments are limited
- Before the Decree came into force, assignments of mining concessions could be made by means of private contracts, which effects before third parties were subject to its registration in the RPM. Now, transfers of mineral concessions are subject to an administrative procedure by means of which the Ministry of Economy may or may not authorize the intended transfer.
- Cancellation causes of mining concessions are incorporated
- Cancellation causes of mining concessions are incorporated, such as failure to timely pay taxes, failure to initiate or carry out the corresponding works under the concession, lack of a valid water concession for industrial use in mining, imminent risk of ecological imbalance, among others.
- Obligation imposed to current concessionaires to guarantee potential damages
- The holders of mining concessions, within a period of 365 calendar days counted from May 9, 2023, must submit an insurance policy, letter of credit, deposit with the Treasury of the Federation (Tesorería de la Federación), trust or any other suitable means, to guarantee the prevention, mitigation, and compensation measures derived from the possible damages generated during the execution of mining activities, as well as submit for authorization by the Ministry of Environment and Natural Resources the Mine Restoration, Closure and Post-Closing Program.
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The purpose of this document is to provide information, and it does not provide specific legal advice.
Our unique team of professionals, with extensive experience and proven capabilities facing recent attempts to change the Mexican legal framework in specific economic sectors, is ready to advise you and develop an effective defense strategy in light of the challenges posed by the Decree.
Please do not hesitate to contact our experts:
| Federico Martens Alva | Luis G. González Meyer |
| [email protected] | [email protected] |