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Major overhaul to Mexico’s mining regulation
Global | Publication | May 2023
Following months of discussion, the Mexican Congress passed a set of amendments to existing statutes that, materially change mining regulation and projects outlook in Mexico (the Mining Reform).
The Mining Reform was published in the Federal Register on May 8, 2023, and includes major changes to Mexico's Mining Law, National Waters Law, General Law of Ecological Equilibrium and Environmental Protection and General Law for the Prevention and Integral Handling of Wastes.
Among others, the Mining Reform has introduced the following key changes:
| New regulation (effective as of May 9, 2023) | Prior regulation | |
| Rules for granting mining concessions | All mining concessions are to be awarded under public bidding processes. The awarded bidder will receive the concession only after securing any and all necessary environmental, social and / or labor authorizations and permits. | Granted on an "free land, first applicant" basis. |
| Term of mining concessions | 30 years, subject to a one-time renewal for a second term of 25 years. | 50 years, subject to a one-time renewal for a second term of 50 years. |
| Scope of mining concessions | Similar to other jurisdictions, mining concession titles will be granted for the exploitation of a specific mineral. | Mining concessions grant exploration and exploitation rights over all minerals deposited in a given area. |
| Legal nature of mining activities | Mining activities are no longer considered preferential. Among others, concession holders will no longer be entitled to request land access and superficial rights to conduct mining activities. | Mining activities are considered preferential. Among others, this entitles concession holders to obtain land access and superficial rights on adjacent properties to the area covered by the concession. |
| Limitations to transfer of title of mining concessions | Transfer of mining concessions requires prior approval by the Ministry of Economy. | No governmental authorizations needed to transfer title to mining concessions (but transfer must be registered before the Mining Registry). |
| Limitations to security interests over mining concessions |
Security over mining concessions may only be created to guarantee obligations of the concession holders only in the event the mine is "operating". Among others, the beneficiary of the security will be required to confirm in writing its obligation to, within 6 months as of the concession being transferred (i.e. in the event of enforcement of the security), comply with all applicable requirements to hold the concession. The beneficiary of the security will lose all rights to the concession should it fail to comply with all such applicable requirements within the 6 month term. |
Pledges over mining concessions rights may be created and recorded in the Mining Registry. |
Other key developments introduced by the Mining Reform include:
- The possibility of the Ministry of Economy granting permanent mining concessions to public instrumentalities and governmental agencies.
- Revised and expanded indigenous and public consultation rules and processes.
- Additional economic and administrative obligations to concession holders. Among others, concession holders are required to pay at least five percent of net profits to adjacent / affected indigenous communities.
- A new catalogue of crimes in mining activities, that may potentially render mining concession holders and its personnel criminally liable (in addition to and in irrespective of any administrative liability).
- Water for human and domestic use is now expressly considered a priority. Accordingly, even if a water concession has been granted for mining activities, the volume of water subject to the concession may be reduced (and / or the concession canceled) in order to guarantee access to water for human / domestic use in case the government so determines. Further, water and mining concession holders are required to "recycle" at least 60 percent of the water used under the concession.
- All mining concessions applications ongoing as of the date of the enactment of the Mining Reform are to be automatically cancelled and rejected.
- Mining exploration activities are to be undertaken by the Mexican Geological Service only; provided that private parties may submit relevant data (e.g. as to the existence of minerals or metals in a given area) for the Ministry of Economy to analyze and consider the possibility of issuing bids for mining concessions.
- The legal term for the Ministry of Economy to verify compliance with and impose penalties related to breach of mining related obligations, has been increased from five to 10 years.
The implementing provisions of the Mining Reform expressly provide that "laws and regulation contrary to the Mining Law [as amended by the Mining Reform]" are to be repealed.
Existing mining concessions will not be revoked or cancelled as a direct result of the Mining Reform; however, it is unclear whether existing concessions would be subject to the 50 year renewal term.
Any actions by the Mexican government seeking to revoke, cancel or reverse a concession validly granted, or any other expropriatory or eminent domain actions, may give grounds for the affected party to seek judicial and / or arbitral relief.
While this should of course be reviewed on a case by case basis, any such governmental actions may be construed as unconstitutional and / or contrary to international treaties to which Mexico is signatory, which could open the door for affected parties to seek compensatory damages to the Mexican government through investment arbitrations.
Similarly, the Mining Reform may potentially impact contractual relationships entered into by investors and / or mining companies prior to its enactment, potentially triggering claims for breach of contract, early termination, force majeure events, change in law and / or material adverse effect provisions. Involved parties should review whether any contractual changes or notices are necessary, required or convenient to preserve their interests as applicable in each case.
The Mining Reform is effective as of May 9, 2023, whereas additional implementing regulation is to be issued within 180 calendar days. This marks the second major reform in the sector during President López Obrador's term, following last year's controversial lithium nationalization. You can read more about it in our previous update, Mexico moves to nationalize lithium mining.
Please reach out to our Norton Rose Fulbright contacts below for any further information.
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