May 24, 2022

Amendments to Mexican Mining Law Published in Federal Official Gazette

Holland & Knight Alert
Rodolfo Rueda | Gabriel Ruiz | Selene Espinosa | Adrián Ortiz de Elguea Leiva

The president of Mexico, on April 17, 2022, sent to the Congress an initiative with a draft decree that seeks to amend and add several precepts to the Mining Law in order to reserve to the state the exclusive right to explore and exploit lithium (a mineral used for the manufacture of electric batteries). Subsequently, on April 18, 2022, one day after the Federal Branch sent the initiative, Congress approved it, with 288 votes in favor, 0 against and 197 abstentions. On the other hand, the Senate also approved the initiative, endorsing it with 87 votes in favor, 20 against and with 16 abstentions.

Finally, on April 20, 2022, the decree was published by the Ministry of Economy in the Official Gazette.

Importance of the Lithium Industry in Mexico

Pursuant to Mining Development General Direction, belonging to the Ministry of Economy, lithium is a white-color metal and silver in its pure state, which is used in different industries, but mainly as a source of energy such as 1) rechargeable batteries, 2) ceramics, 3) glass-ceramic, 4) lubricants, 5) polymers, 6) powder metallurgy, 7) air treatment and 8) primary batteries, among others.

Mexico has lithium deposits in the exploitation stage that are licensed to companies in countries such as Canada, United States, England and China. To date, deposits of this mineral are found in Baja, California; San Luis Potosí; Zacatecas and Sonora. Mexico is ninth in the world in lithium reserves. According to the U.S. Geological Survey (USGS), Mexico has 1.7 million tons of lithium reserves. It should be mentioned that the largest deposit of lithium in rock in the world is found in Sonora. Bolivia is listed as the first in the world.1

Explanatory Note on Mining Law Amendments

The amendments to the Mining Law aim to guarantee the self-determination of the nation, as well as the energy sovereignty of the people over lithium and other minerals that are strategic and necessary for the energy transition, technological innovation and national development, as well as to determine that a decentralized public body will take charge of exploration and exploitation of this mineral. In addition, it emphasizes that Mexico has significant lithium reserves, which must be preserved for the benefit of the general interest and not for national or foreign commercial interests, prohibiting private capital from participating in mining allocations related to lithium, leaving the exploitation of lithium and its value chains to the Mexican Government to protect and guarantee the health of Mexicans, the environment and the rights of indigenous peoples.

Amendments to Mining Law Provisions

Below, we detail the main additions and amendments to the Mining Law of Articles 1, 9 (first paragraph), 10 (first paragraph), an Article 5 Bis and a third paragraph, going through the current third and fourth paragraphs, to Article 10 of the Mining Law.

Amendments to the Provisions to the Mining Law

  1. Article 1 is amended to provide that all the activities related to the exploration, exploitation and profit of lithium shall be the responsibility of the decentralized body to be determined by the president.
  2. On the other hand, new Article 5 Bis of the Mining Law establishes that lithium is considered a public utility and that no concessions, licenses, contracts, permits or authorizations may be granted, and those in which there are lithium deposits will be considered mining reserve areas, recognizing that lithium is the legacy of the nation. Similarly, this amendment on the Mining Law establishes that lithium value chains will be managed and controlled by a public body determined by the president.
  3. The amendments to Article 9 provide that the public body determined by the president and the Ministry of Economy shall rely on the Mexican Geological Survey to promote the best use of mineral resources and generate the basic geological information of the nation.
  4. Finally, Article 10 provides for an exception to lithium and other minerals declared as strategic for the state, so that these cannot be explored or exploited through mining concessions. Finally, it emphasizes that the exploration, exploitation, and benefit and use of lithium is exclusively the responsibility of the state and will be carried out by the decentralized public body determined by the Federal Executive.

The amendments to the Mining Law became effective the day after their publication in the Official Gazette (April 21, 2022). Moreover, the president will issue the instrument of creation of the decentralized public body mentioned in this document 90 business days after the amendments become effective.

Cause of Action

In accordance with Article 107 of the Amparo Law Section I, the Amparo trial proceeds against the general rules that by their mere entry into force or on the occasion of the first act of its application cause harm to the complainant. Naturally, it will be important to analyze the feasibility of requesting the suspension of the act in the specific case. The deadline for filing an amparo claim is 15 days, with the exception of when a self-applying general rule is claimed, in which case it will be 30 days.

Conclusion

Most of the amendments to the Mining Law relate to the creation of an entity of the federal public administration: the decentralized public body to be created for the purposes set forth above. Such a body shall have fairly robust financing and trained personnel who meet high standards of specialization to be able to exercise their functions within the industry. In the same way, we anticipate that, with the entry into force of the reform of the Mining Law, a flood of amparo lawsuits will be filed, since there are many companies in the mining industry that as part of their business plan, seek to exploit lithium, due to the fact that it is considered the fuel of the future, since it is used for electric car batteries, cell phones and other leading edge technologies.

Please contact the authors for any queries arising from the reforms, and even advise them if there is an interest in filing an injunction against them or any other matter related to the mining industry.

Notes

1 Lithium Market Profile, General Directorate of Mining Development, Ministry of Economy. December 2018.


Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem, and it should not be substituted for legal advice, which relies on a specific factual analysis. Moreover, the laws of each jurisdiction are different and are constantly changing. This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship. If you have specific questions regarding a particular fact situation, we urge you to consult the authors of this publication, your Holland & Knight representative or other competent legal counsel.


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