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The new bills, which target minerals and concessions in the country, have been met with shock and disappointment, Covington points out. (Photo: Mexican Economy Ministry)
Miguel López Forastier, Kimberly Breier and Jay Smith, Covington & Burling. (Latinvex collage)
Wednesday, April 19, 2023

Mining: Mexico Could Curtail Private Investors

Bills may result in the expropriation of foreign investments, other breaches of Mexico’s international obligations.


Mexican President Andrés Manuel López Obrador submitted bills to Congress intended to further curtail the rights of private investors in the mining sector and beyond. As part of his resource nationalism agenda, on display in the energy sector at first, López Obrador has also nationalized lithium reserves and created a state-owned company to lead development of those reserves. The new bills, which target other minerals and concessions in the country, have been met with shock and disappointment. If passed as drafted, and to the extent the proposed amendments are implemented to restrict vested rights arising from pre-existing mining and potentially other concessions, these bills may result in the expropriation of foreign investments and other breaches of Mexico’s obligations under applicable international investment agreements.


On March 28, López Obrador sent to the Chamber of Deputies a bill seeking to reform the Mining Law, the National Water Law, the General Law of Ecological Equilibrium and Environmental Protection, and the General Law for Prevention and Integral Management of Waste Residues (the “Mining Bill”).

The Mining Bill will be discussed and reviewed by four Committees in the lower house—three of them presided over by López Obrador’s party, MORENA, or allied parties—giving it a relatively easy path forward. The Mining Bill requires a simple majority to be approved, and MORENA and its allied parties have the required votes to pass it. Considering that the current legislative session ends on April 30, it is possible that the bill will move fast through the Chamber of Deputies.

In the Senate, the Mining Bill might face some opposition but probably not enough to make substantial changes as most of the commissions where it will be discussed are also presided over by MORENA or its allies.

Around the same time, López Obrador also sent to the Chamber of Deputies a bill that includes sweeping changes to administrative regulations, including rules for concessions, permits, and other authorizations, which could impact the mining, infrastructure, and energy sectors, among others (the “Administrative Law Bill”). While MORENA has enough votes to pass the Administrative Law Bill as well, it may face more resistance, particularly in the Senate.


Some of the main proposed amendments in the Mining Bill include the following:

  • The duration of a mining concession would be reduced from 50 to 15 years, with the possibility of a one-time 15-year extension (for a maximum 30-year concession term). This would increase risk to mining investments and would render some projects economically unviable as the shortened time horizons may not be sufficient to justify the significant up-front investments that mining projects require.
  • Mining concessions would now be awarded only through public bidding, which could carry some benefits for transparency, or to the contrary, could create more opportunities for social actors, such as NGOs, to oppose projects.
  • Instead of granting the right to produce various minerals available within a concession lot, concessions would only grant the right to produce the minerals specifically granted in the concession.
  • Prior to the award of mining concessions, applicants must meet additional requirements, including completion of a social impact study, public consultations with the affected communities, and establishment of a restoration, closure, and post-closure program, as well as a waste management program.
  • Mining concessions in protected natural areas, protected water basins, or federal maritime terrestrial zones would no longer be authorized.
  • Mining concessions would be made conditional on water availability and the prior award of water concessions. This provision seems likely to impact mining projects in northern Mexico, where water scarcity has been a prevalent issue and a major focus of López Obrador’s government.
  • Mining concessions could be revoked due to imminent ecological risks or irreversible ecological damage or due to the lack of ecological risk or damage reports, environmental permits, water concession titles, waste management programs, or closure programs.
  • It would be a crime to undermine the physical safety of workers by failing to comply with the provisions of the Mining Law and its regulations. This provision seems aimed at further empowering the top unions in the mining sector and giving them additional leverage over mining companies.
  • State-owned companies would enjoy priority over the private mining industry and could be granted concessions without going through a competitive process. This provision rings familiar, as it seems to echo provisions in the energy reforms that López Obrador and his party passed earlier in his tenure. Giving preference to state-owned actors may violate provisions of international investment agreements to which Mexico is a party, including the U.S.-Mexico-Canada Agreement (USMCA) and the Comprehensive Progressive Trans-Pacific Partnership (CPTPP).
  • A specific water-use concession for mining activities, different from the general industrial water-use concession, would be created and be subject to a maximum term of five years, as long as an extension of the relevant mining concession for an equal term is granted.
  • Water-use concessions for mining activities that require more than 30 percent of the yearly available volume of the relevant water basin will not be authorized.
  • Water-use concessions could be revoked for public, general, or social interest reasons, or due to non-compliance with the restoration, closure, and post-closure program.

Some of the most relevant proposed changes in the Administrative Law Bill include:

  • Giving the government more power to revoke concessions, permits, and other authorizations; allowing revocation due to supervening events affecting public, social, or general interest; or causing economic, social, environmental, or other imbalances.
  • Requiring all contracts with state entities to provide for early termination for public interest reasons.
  • Establishing limits on compensation payable by the Government for expropriations in domestic and international arbitrations, a change that would run counter to Mexico’s international obligations under international investment agreements.


The Mining Bill provides that pre-existing concessions shall retain the duration provided in the corresponding title. This includes pre-existing concessions that are held by a single entity and that concentrate more than 30 percent of the total available water volume of a given basin or aquifer. According to the Mining Bill, such concessions shall conclude their term in accordance with the provisions of the relevant concession title. In contrast, the Mining Bill provides that pre-existing mining concessions located in natural reserves or granted for mercury-related mining activities would not be subject to extension.

In addition, the Mining Bill creates a transitional regime requiring:

  • holders of pre-existing concessions to provide within one year of the bill’s entry into force a letter of credit as guarantee against potential damage resulting from their activities, as well as a restoration, closure, and post-closure program for approval by the Secretariat of Environment and Natural Resources;
  • holders of pre-existing concessions to remove within one year of the bill’s entry into force all waste deposits located in natural reserves or federal maritime areas that could affect populated areas or the environment; and
  • holders of pre-existing water-use concessions carrying out mining activities to request within 90 days of the bill’s entry into force the conversion of their water use concession titles from general industrial water-use to the new mining water use.

Other effects of the proposed amendments on pre-existing rights remain unclear. For example, the Mining Bill does not clarify whether all other pre-existing concessions would still be subject to 50-year extensions or to the new 15-year extension limit. Also, the Mining Bill is silent on whether pre-existing concession holders would be able to continue extracting minerals that are not specifically indicated in the relevant concession title. Moreover, the Administrative Law Bill is silent on whether any of its provisions (including the proposed amendments expanding grounds for concession revocation or early termination of contracts, as well as those on limits to compensation payable by the government in domestic or international arbitrations) will apply to pre-existing concessions and other contracts with state entities.

To the extent the Mexican Government applies the proposed amendments in the Mining Bill or the Administrative Bill to restrict vested rights arising from pre-existing mining concessions, these measures may constitute unlawful expropriations and/or result in other breaches of Mexico’s obligations under applicable international investment agreements. In that case, foreign governments and/or eligible foreign investors might be able to avail themselves of dispute-resolution mechanisms under applicable agreements, including under:

  • the USMCA (allowing claims against Mexico by state parties and by qualifying U.S. investors);
  • the CPTPP (allowing claims against Mexico by state parties and, among others, by qualifying Australian, Canadian, Chilean, Japanese, and Peruvian investors); and
  • the various bilateral investment treaties to which Mexico is a party (allowing claims, among others, by qualifying British, Chinese, Dutch, Korean, French, German, Spanish, and Swiss investors).

Investors potentially affected by the proposed amendments in these bills should analyze available protections and consider taking steps to preserve their rights under applicable international investment agreements before the bills become law.

Miguel López Forastier co-chairs the Global Problem Solving practice at Covington & Burling. Based in Washington, DC, his practice focuses on international arbitration and litigation and he has successfully represented a wide range of clients, including those in the oil and gas, mining, biotech, pharmaceutical, communications, financial services, and food industries in both investor-State and commercial arbitrations.

Kimberly Breier is a senior advisor to Covington & Burling with than 20 years of experience in foreign policy, primarily focused on Western Hemisphere affairs. Prior to joining the firm, Breier, a non-lawyer, was Assistant Secretary in the Bureau of Western Hemisphere Affairs at the U.S. Department of State.

Jay Smith is of counsel in the Washington office. He joined Covington after several years as a professor of political science and international affairs, during which he specialized in international trade policy and international dispute settlement. His practice in the International and Litigation groups draws on this academic and policy experience.

Senior advisor Gerónimo Gutiérrez Fernández, Special Legal Consultant Ricardo Chrinos and Latin America policy advisor Lorena Montes de Oca also contributed to this overview.

This article is based on an alert by Covington & Burling. Republished with permission.



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