Academic journal article Energy Law Journal

The Application of the Antitrust Law under the New Rules of the Oil and Gas Industry in Mexico

Academic journal article Energy Law Journal

The Application of the Antitrust Law under the New Rules of the Oil and Gas Industry in Mexico

Article excerpt

I.INTRODUCTION

During the administration of President Enrique Peña Nieto, especially at the end of 2013 and 2014, several laws were modified, supplemented, incorporated, or abrogated with the purpose of allowing private investment (national or foreign) in the energy sector. These included: (1) changes to Articles 25, 27 and 28 of the Constitution;1 (2) the promulgation of a new oil and gas law named the "Hydrocarbon Law;"2 (3) the Hydrocarbons Revenue Law;3 and (4) the new Petróleos Mexicanos Law (Pemex Law)4 (together referred as the "2014 Energy Reform"). These various modifications and reforms effectively opened all sectors of the oil and gas industry to the participation of the private sector. Now, public, private, and social economic agents (either national or foreign) will be able to participate in: (1) upstream activities, through allotments or contracts granted to the so-called Productive State Entities such as Petroleos Mexicanos (Pemex); (2) midstream and downstream activities; and (3) alliances and partnerships with Pemex and any Productive State Entity.

In addition to the modifications to the energy legal system, a new Antitrust Law was promulgated in Mexico.5 The need was clear: (1) the Mexican government seeks to avoid passing on public legal or de-jure monopolistic practices to a regime of private de facto monopolistic practices, which historically have been more difficult to regulate; and (2) the government also seeks a redistribution of powers and faculties between the Federal Competition Commission (Comisión Federal de Competencia-the "Antitrust Commission" or the "Commission") and the energy public entities as described below.

The impetus behind the decision to abandon the mistaken nationalist vision of placing all phases of the oil and gas industry in the controlling hands of the Mexican government for more than fifty-six years include: (1) the collapse of oil prices in the mid-eighties and the modern time since 2015; (2) recognition that existing legal restrictions were a disincentive for the participation of the private sector (national or foreign) with their desired experience, technology, and capital; (3) Pemex's revenue going directly to the Mexican Treasury and leaving very few profits for re-investment in activities such as exploration, exploitation, refining, petrochemicals, and maintenance. In fact, Pemex has become the largest and most important taxpayer in Mexico.6

These modifications are important not only for the Mexican oil and gas industry, but also for the local and foreign private industry that wishes to participate in this sector. They will be analyzed in this article, with a focus on explaining: (1) the new regulatory scheme in Mexico; and (2) the array of legal protections to be provided to national and foreign concerns through several new competition provisions established in different legal ordinances, including various limitations on the general powers of the public entities involved in this sector.

II.GENERAL LEGAL FRAMEWORK APPLICABLE TO THE OIL AND GAS INDUSTRY AND THE ANTITRUST LEGAL SYSTEM

In the past, most of the laws applicable to the Mexican oil and gas industry were related to public policy laws, since Mexico has a de-jure monopolistic energy industry. However, the new legal regime establishes Pemex as another competitor in the industry whereby private law is also applicable to Pemex. The Mexican oil and gas industry is now more transparent and fair since the modified antitrust legal system applies to all entities that participate in the oil and gas industry, notwithstanding a variety of existing laws and Constitutional provisions. The most important of these applicable laws to this sector are the following: (1) the Constitution;7 (2) the Hydrocarbons Law;8 (3) the Pemex Law;9 (4) the Hydrocarbons Revenue Law;10 (5) the Foreign Investment Law (FIL);11 (6) the Regulations of the Antitrust Law;12 (7) the Law on the National Security Industrial Agency and the Environmental Protection in the Hydrocarbon Sector;13 (8) the Mining Law;14 (9) the Regulatory Bodies in Energy Matters Law;15 (10) the Law of the Mexican Petroleum Fund for Stabilization and Development;16 (11) Law on Public-Private Partnerships;17 (12) Federal Budget and Fiscal Responsibility Law;18 and (13) the General Law of Public Debt19 among others. …

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