The energy agenda of the Mexican government is no longer settled in Congress, but in the courts. The reforms promoted by President Andrés Manuel López Obrador to limit private participation in the sector have run into hundreds of judicial appeals and various appeals before the Supreme Court of Justice. The latest setback came this Monday after a judge confirmed the suspension of the changes to the Hydrocarbons Law for the duration of the trial. Although the president has promised this Tuesday to litigate to the end, the entanglement threatens to block the new rules or, at least, postpone their application until the end of the six-year term.
“We are not going to take a step back,” declared President Andrés Manuel López Obrador in March, after the approval of the electricity reform. The reality has not allowed the Government to take a step forward either. The changes to both the Electricity Industry Law, approved in early March, and the Hydrocarbons Law, voted on this month, have been suspended by the judges a few hours after their entry into force. The two initiatives have a common feature: they seek to strengthen parastatals, the Federal Electricity Commission (CFE) and Pemex against private initiative.
The affected companies have responded with the presentation of amparos, a mechanism that allows requesting the temporary suspension of the measure while the trial is resolved. The strategy has been successful. There are already more than 300 injunctions in the case of the electrical reform and several dozen for the hydrocarbon one. The legal defense is similar in both; Articles of the Constitution are invoked that refer to free economic competition and, for the electricity reform, also the right to a healthy environment.
The vast majority of the injunctions have led to indefinite suspensions, many of them of a general nature, that is, the initiatives cease to be applied while the trial proceeds for the entire sector, not only for the complaining companies. Judge Juan Pablo Gómez Fierro has justified that decision not to give “a competitive advantage” to the complainants compared to their competitors, as he pointed out in a car last week. The trial can last up to a year and a half in the first instance, according to the experts consulted. If it is challenged before a collegiate court and then before the Supreme Court, the times are even longer, between two and three years.
The blows were predictable, the jurists consulted agree. “They could be anticipated. The suspensions are reasonable because the reforms are openly contrary to the Constitution ”, points out the lawyer César Hernández, undersecretary of Electricity in the previous six-year term. The academic Alfonso Herrera, a professor at the Ibero-American University, agrees: “The possibility of legal success through legal means is very uphill. They have wanted to follow that route because there was not going to be a political consensus to modify the Constitution, which was what was really appropriate ”.
Having a suspension that can last for months and even years has given energy companies some peace of mind. Sources from two important companies in the sector explain to this newspaper that the injunctions have gone “as expected” and that they are confident that the judges will decide in their favor. However, they point out that “victory cannot be claimed” and that, in any case, the environment is still not conducive to new investments.
In parallel to the amparos, autonomous bodies and political parties have appealed directly to the Supreme Court. Last week, the highest court admitted to processing the constitutional controversy presented by the Federal Economic Competition Commission (Cofece) against the electricity reform.
The calendar of this legal channel is uncertain due to the accumulation of files in the Supreme Court. “He has cases from two years ago still unsolved. This is going to go to the queue and can be resolved a year before the departure of López Obrador from power or with his departure, ”says Alfonso Herrera, who worked in the highest court. However, the president of the court, Arturo Zaldívar, decides when the draft sentence is put to a vote and, consequently, can stop a decision or accelerate it, says Herrera
The Government, in search of partial victories
The legal paralysis has caused obvious frustration in the government, which has complied with court rulings but has promised to continue litigating. “The structural reforms were made to favor vested interest groups. Now the shelters are raining because they want to maintain the same privileges. We are going to continue defending that this ends, “the president declared this Tuesday, in addition to predicting that the process” will be concluded in the [Suprema] Cut”.
In the short term, the government may aspire to some “partial victories”, according to César Hernández. A collegiate court, affirms the lawyer, can correct the general nature of the suspensions granted in the first instance and limit them to the complaining companies. In this sense, the Executive has filed an appeal against the decision on the electricity reform that is still pending resolution. Even if the general character is eliminated, César Hernández qualifies its impact: “As there are more than 100 injunctions, the companies are going to consider themselves well served even if the suspensions have particular effects,” he says.
In the Supreme Court, where López Obrador has placed his hopes, the numbers favor the Government. Invalidating a legal reform through a constitutional action or controversy requires a qualified majority of eight of the 11 ministers. It is a high requirement, especially considering that three of its members have been appointed in the current Administration and a fourth, Arturo Zaldívar, has been praised by López Obrador as a person in whom he has “confidence”.
However, even if the plenary rejects to invalidate the rule, the amparo proceedings will continue their course and the suspensions may continue to stand. Furthermore, in the event that a qualified majority is not reached, but a simple majority is reached, the judgment of these judges against the constitutionality of the reforms may influence the decisions of the lower instances.
If the process goes on forever, the “nuclear” option that López Obrador has claimed to consider is a constitutional reform. If carried out, the amparos and the actions and controversies before the Supreme Court would be dismissed, as they no longer have legal support. It is, however, a complicated path. The president would need a qualified two-thirds majority in both houses. The composition of the Chamber of Deputies is at stake in the June 6 elections, but not that of the Senate, where Morena and his allies are far from two-thirds.
If a constitutional amendment is approved, the companies would have one last letter: the arbitration mechanisms contemplated by trade agreements such as the T-MEC with the United States and Canada. “The companies have approached for advice”, says the lawyer specialized in arbitration Rodrigo Barradas. “If there is a constitutional reform and internal defense mechanisms are closed, I see it very likely that the procedures will begin.” But going to a panel, in addition to being a long process that can take up to three years, would not suspend the rule and only compensation could be requested.
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Eddie is an Australian news reporter with over 9 years in the industry and has published on Forbes and tech crunch.