Resolution of the Supreme Court of Justice of Mexico on the Action of Unconstitutionality of the amendments to the Electricity Industry Law: where are we, and where are we going to?

The SCJN discussed whether or not each of the proposed reforms to the provisions of the LIE would be rendered ineffective in a general manner for being unconstitutional.

A super-majority of at least 8 votes (out of 11 justices) was required to declare the general invalidity of each reformed provision. Although in some cases a simple majority of 7 votes was reached against the constitutionality of the amendments, after their discussion in the plenary, none of the amended provisions reached such super-majority vote..

Where are we?

As a result of the foregoing, the Unconstitutionality Action 64/2021 was dismissed for not reaching the qualified majority to declare the invalidity with general effects of the amendments to the LIE. However, two other constitutional controversies are still pending resolution, mainly in the areas of economic competition and environmental rights.

Thus, the LIE (including its 2021 amendments) will continue to be in force despite the fact that the simple majority of the SCJN has already ruled in favor of the unconstitutionality of certain articles. The fundamental purpose of such reforms is to strengthen advantage in the power generation of electricity to the state-owned companies.

The resolution of the SCJN allows for the injunctions filed by private generators that were provisionally suspended at the time to continue their course and for the constitutionality or unconstitutionality of the application of the reformed provisions of the LIE to be resolved on a case-by-case basis.

In this sense, although the votes issued by the Justices of the SCJN do not constitute binding precedents, they may serve as a basis for the arguments presented in the substantiation of such appeals.

Below, we show schematically the provisions of the LIE that the simple majority of the SCJN considered unconstitutional (and notwithstanding will be in force and effect because no super-majority was reached), and those that are deemed as valid:

Where are we going?

This resolution may trigger the following legal actions:

1. Provisional injunctions granted by the District Courts suspending the effects of the amendments to the LIE in favor of the plaintiffs will remain in effect until the appeals filed by the Mexican government against such injunction are resolved by the Collegiate Circuit Courts, either confirming or revoking the injunction or regulating the effects thereof, who may resolve as they deem appropriate.
2. Companies that did not file an Amparo against the amendments to the LIE may consider the possibility of filing an Amparo against the first act of application of the amended provisions.
3. The SCJN will have to decide if it assumes jurisdiction to resolve the Amparos appeals that deal with the amendments to the LIE filed before the First and Second Circuit Courts Specialized in Antitrust Matters or if such courts will continue with the resolution of these Amparos appeals.
   
   1. If the SCJN assumes jurisdiction, the appeals for review will be resolved by the Chambers or, exceptionally, by the Plenary. A simple majority is required, in either case, to resolve the appeals for review.
   2. If the SCJN orders the First and Second Circuit Courts to resolve the Amparo appeals, a simple majority of two of the three Justices is required to resolve the Amparo appeals in each Chamber.

On the other hand, during the next few days the Mexican Congress will discuss and vote on the constitutional reform initiative proposed by the President of Mexico that would limit private participation in this sector and substantially change the market rules.

In light of the situation, investment arbitration based on multilateral or bilateral investment treaties may be seen as an option for the protection of foreign investors that may be harmed as a result of the above.