AMLO's Efforts to Restore Dominance of PEMEX Could Prompt Investment Treaty Arbitrations
Mexican President Andrés Manuel López Obrador's new bill could harm existing investments in Mexico and violate rights afforded to foreign investors under international investment treaties and free trade agreements, King & Spalding lawyers say.
On March 26, the president of Mexico, Andrés Manuel López Obrador (“AMLO”), sent a new bill to Congress intended to amend the Federal Hydrocarbons Law (the “Hydrocarbons Bill”). This is AMLO’s latest attempt to upend the Mexican energy sector and to restore the dominance of PEMEX, the national oil company.
Consistent with his recent announcements, AMLO claims that the privatization of the Mexican energy market has caused grave harm to Mexico’s national energy security. The Hydrocarbon Bill’s stated purpose is to grant a greater role to state-owned entities in midstream and downstream activities rather than “leave those activities in the hands of the private sector in light of the imminent risks to national security.” The Hydrocarbons Bill indicates that the world is entering an energy transition that will affect Mexico’s ability to guarantee its energy security and financial stability; and that a shortage of hydrocarbons supply poses serious risks to the country.
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