Mexican Supreme Court of Justice dismisses Constitutional Controversies on the amendments to the Electricity Industry Law

After deciding on the Action of Unconstitutionality 64/2021 filed against the decree of March 2021, through which various provisions of the Electricity Industry Law (LIE) were amended, on April 18 and 19, the Plenary of the National Supreme Court of Justice (SCJN) discussed and voted the Constitutional Controversies 44/2021 and 45/2021 filed by the Antitrust Federal Commission (COFECE) and by the Executive Branch of the State of Colima, respectively.

Unlike Actions of Unconstitutionality, Constitutional Controversies are legal tools for constitutional control focused on harmonizing general legal provisions and powers vested to different levels of government. In accordance with article 105 of the Federal Constitution, the SCJN could declare that the amendments to the LIE were invalid upon a super-majority vote (8/11) on the merits.

Constitutional Controversy 44/2021

The Plenary of the SCJN resolved to dismiss the aforementioned legal action because it considered that COFECE did not have the legitimate interest necessary to file the Constitutional Controversy. Thus, the SCJN did not proceed to analyze the merits of the case.

Constitutional Controversy 45/2021

Likewise, the Plenary of the SCJN resolved to dismiss this Constitutional Controversy considering that there was a lack of legitimate interest. As in the previous case, the Justices did not analyze the merits of the matter and therefore refrained from issuing their opinion regarding the constitutionality of the amendments to the LIE.

Where are we and what's next?

As we reported in our previous alert regarding the resolution of the Action of Unconstitutionality 64/2021, the 2021 amendments to the Electricity Industry Law will continue to be applied as mandatory law. According to the General Agreement 3/2022 of the SCJN, the Amparos filed against the amendments to the LIE will continue their procedural course so that judges will no longer have any impediment to issue their ruling and will decide according to the constitutional text that includes the 2013 reform as the initiative for constitutional reform in electricity matters has been discarded in the Chamber of Representatives.

To rule on the merits of each Amparo, the judges could rely on a guiding way on what was decided in the Action of Unconstitutionality 64/2021 without being obliged to follow the opinion of any of the Justices of the SCJN.

In the case of Amparo appeals, the SCJN must decide whether to assume the authority to resolve them, in which case only a simple majority of the Justices is required for a resolution to be issued. If the SCJN does not assume such authority, the First and Second Circuit Courts Specialized in Antitrust Matters will resolve those Amparo appeals in which a simple majority of two out of the three Justices is required to issue a ruling.

Companies that did not file an Amparo against the amendments to the LIE may consider the possibility of filing this legal action against the first application act of the amended provisions.

What international defense mechanisms are available for investors?

As we have reported in our previous alerts, the amendments to the LIE in force open the door to acts of authority that in application of it may involve indirect expropriation or violations of the standard of fair and equitable treatment in the light of the various bilateral and multilateral treaties on investment protection. In this regard, investment arbitration could be a viable alternative for foreign investors to defend their interests in a neutral forum. A case-by-case analysis is necessary to determine when would be the right time to initiate investment arbitration. Some investment protection treaties require investors to obtain a final judgment from a national court of last resort before commencing an arbitral proceeding, while other treaties prevent the investor from going to arbitration if there is an outstanding procedure in national courts (fork in the road clauses). However, the requirements to obtain a final judgment from a national court of last resort must be analyzed on a case-by-case basis to assess whether the available resources actually grant access to justice.