Talanza Energy Consulting

June, 2019

Injunction vs energy regulators’ acts

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1.- LEGAL PROHIBITION FOR INJUNCTION

According to article 27th of the Law of the Coordinated Regulatory Agencies in Energy Matters (Ley de los  Órganos Reguladores Coordinados en Materia Energética, “LORCME”), the National Hydrocarbons  Commission (“CNH”) and the Energy Regulatory Commission (“CRE”)’s acts can only be challenged by   means of an amparo indirecto with no temporary injunction (suspensión) of the act.1 

Nevertheless, in some cases, energy companies might need to get an injunction against a regulator’s act, for example:

CNH’s approval to suspend the activities contemplated in Exploration and Development Plans, ARES and drilling permits.

» What if continuing the activities jeopardize production, safety, environment, a human right, . . . ?

2.- LORCME’S RESTRICTION CONSTITUTIONALITY

We believe that it can be argued that the restriction of injunction is unconstitutional on the following grounds:

  • First, the Mexican Constitution establishes that any government act that is contested by means of an  amparo may be injuncted in the terms established in the reglementary law, which is the Amparo Law  (not LORCME).
  • On its part, the Amparo Law establishes the exceptions for granting an injunction but does not mention  anywhere acts from the energy regulators. In the exceptions it enlists, there is one case that may be  applicable for upstream projects: in case the State is prevented from using, exploiting assets of direct  domain. In our case, that would be the hydrocarbons in the subsoil (art. 129, f.XIII). BUT even in that case,  the same Amparo Law establishes that the injunction may be granted if the denial of it causes a greater  harm to the public interest.
  • In the Mexican legal system, there are other cases of acts of authorities that can only be contested by  means of an amparo indirecto  with no injunction, which are  the Federal  Economic  Competition   Commission (“COFECE”) and the Federal Telecommunications Institute (“IFT”). However, we find that  this restriction is established in the same Mexican Constitution and then, as mandated by the Constitu-  tion, established in the Amparo Law.

As the prohibition for injunction is not included in the Amparo Law, it can be  argued then that this restriction established in LORCME is unconstitutional and  therefore, request for the injunction along with the challenged act.

1 Except for the imposition of fines which may be collected once the amparo is resolved.

ON INJUNCTIONS:

  • The writ of amparo is a Mexican legal  figure which allows any person to get  relief from a law or an authority’s act that  affects its rights. During the process, an  injunction of the contested act may be  requested.
  • LORCME’s restriction of injunction  beforehand may have economic,  technical, social, environmental and human rights implications.
  • In addition to the Mexican legal  framework, energy companies are also  subject to their own standards and codes  of conduct that may restrain them for  going along with the regulator’s decision. Getting an injunction may avoid penalties and contractual breaches.
  • There are no legal precedents yet, most  likely because these laws are fairly  recent. So, challenging the  constitutionality of LORCME will be  something new for both, the energy  regulators and the District Judge, but it is  worth trying.
  • Don’t be afraid to request an  injunction! If successful, this will be  settling precedents for the country and  the industry!

Thanks to our Regulatory and  Governmental Intelligence approach, we  have been successful in supporting our  clients in designing integral legal and  regulatory strategies (political, legal  financial, technical, social and  environmental).

Analysts

María Serna

María Serna advises on the design of the regulatory compliance strategies where she oversees that each of our suggestions is both legally viable and enforceable as well as representing the minimum government relationships wear. She has experience in advocating before high-level public servants of the energy regulators in favour of our clients often integrating diverse stakeholders’ points of view.