MEXICO Law and Practice Contributed by: Bernardo Cortés and Fernando Quesada, Cortés Quesada Abogados, S.C.
• constitutional preference of the Mexican State, primarily through CFE, in electricity generation and basic supply activities, as well as a strategic role in mixed participation generation projects; and • the complete exclusion of private (and thus for- eign) participation in nuclear power, transmission and distribution activities, which remain under the exclusive authority of the State. In addition, foreign investors participating in genera- tion projects must comply with the binding planning criteria issued by SENER, including consistency with PLADESE, reliability requirements, energy transition goals, and the constitutional principle of State preva- lence. Failure to satisfy these requirements may result in the denial of permits, regardless of nationality. Foreign investors benefit from both local and interna- tional protections against government actions such as seizure, confiscation, expropriation or other regulatory measures affecting their assets. Locally, foreign investors may resort to administra- tive courts to seek relief. Internationally, foreign inves- tors are (typically) protected under the relevant bilat- eral investment treaties (BITs) executed and ratified by Mexico, which provide access to investor-state dispute settlement mechanisms. Mexico has rati- fied more than 40 BITs and has recently ratified its adherence to the ICSID Convention. The protections granted to foreign investors in Mexico under such BITs are usually the same – ie, fair and equitable treatment, national treatment, most-favoured nation clause, per- formance requirements and protection against expro- priation (whether direct or indirect). Mexico is also party to broader investment protec- tion frameworks under international trade agreements, including the United States-Mexico-Canada Agree- ment (USMCA) and the Trans-Pacific Partnership, although investor-state dispute resolution mecha- nisms under such instruments are more limited than under their predecessors (such as NAFTA). Limitations include different remedies, depending on the sector and nationality of the investor. Despite not being party to the ICSID Convention until recently, Mexico has been a prominent participant in
international investment arbitration, with approximate- ly 50 procedures (most of them governed by Chapter XI of the North American Free Trade Agreement). The international investment protection obligations assumed by Mexico provide foreign investors with a number of benefits and remedies intended to secure the legal certainty of their investments in Mexico; how- ever, the scope and applicability of these protections may vary, depending on the specific structure, nation- ality and characteristics of each investment. 1.4 Sale of Power Industry Assets The sale of power assets or businesses is subject to regulatory authorisations, as well as pre-merger con- trol clearance. The LSE (and its relevant regulations) governs the transfer of permits, while the Federal Law of Economic Competition (LFCE) establishes the rel- evant rules and procedures on merger control. From a regulatory standpoint, the CNE has authority to approve or deny the assignment of power genera- tion, storage or supply permits, changes of control within permit holders, and the migration of legacy per- mits into the new regulatory modalities established under the LSE. It is worth noting that power activities (including fuel supply) are subject to strict legal sepa- ration requirements, which are designed to prevent vertical integration that could distort market dynamics and free competition principles. These restrictions are particularly relevant in transactions involving genera- tion assets combined with supply, fuel marketing or large qualified-user portfolios. On the antitrust front, the sale of power assets may be subject to approval by the federal antitrust agen- cy. Thresholds are determined based on the value of the transaction and/or the parties’ market power, as established in the LFCE. This is particularly relevant in transactions involving large generation portfolios, strategic transmission-adjacent assets, or acquisi- tions involving qualified supply activities anchoring hedging agreements with generation assets. The Mexican legal regime on economic competition is also undergoing material changes due to the replace- ment of the Federal Economic Competition Commis- sion (COFECE) (as an independent antitrust agency)
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