Judicial reform may worsen Mexico's legal limbo for mining

The Mexican mining industry fears that the likely approval of a controversial judicial reform could further complicate the already uncertain legal landscape. 

Under outgoing President Andrés Manuel López Obrador, new mining concessions were halted, and essential permits, especially environmental ones, have faced delays. The 2023 reform that gave Mexico's geological service (SGM) exclusive rights to exploration remains unregulated, affecting the sector's operations.

Mining companies have filed injunctions (known as amparos) against the legislative changes. While some courts issued provisional rulings, the supreme court has assumed these cases and is expected to unify criteria in its final rulings. Two major constitutional challenges to the 2023 reform are still pending resolution, contributing to the overall uncertainty.

With the judicial reform now being discussed in the senate and expected to pass due to the ruling coalition's majority, the mining industry fears that not only will the pending constitutional challenges and amparo rulings be further delayed, but the sector itself may face prolonged stagnation.

Alberto Vázquez, an expert on mining law, told BNamericas that the supreme court must first address the constitutional challenges before the lower courts can issue rulings on the amparos. However, if the proposed ban on open-pit mining currently being debated in congress is also approved, the government would need to amend the constitution and revise the current mining law again.

In mid-August, the lower chamber's constitution committee approved the executive’s proposal to ban open-pit mining, initially introduced by López Obrador as part of a package of 20 constitutional and legal reforms. These also include the overhaul of the judiciary.

Uncertainty

The prospect of such changes has left the industry in a state of heightened uncertainty. Joel González, senior partner at ALN Abogados, highlighted at the Mexico Mining Forum 2024 that if the open-pit mining ban does go into effect, it will lead to further stagnation as legal defenses emerge.

Andrés Pérez Howlet, a partner at law firm Molina, Hanff & Pérez-Howlet, told the Mexico Mining Policy Framework panel at the Mining Forum that while the judicial reform, already approved by the lower house, does not directly impact mining regulations, the judiciary plays a crucial role in resolving sector disputes.

He said delays in regulating the 2023 mining law, coupled with the uncertainty surrounding the judicial reform, which would see judges elected by popular vote, have deepened the industry’s concerns. The possibility of ideologically-aligned judges gaining power has raised alarms about the impartiality of future rulings on mining disputes.

"The fear is about who will win those elections. Looking at the results of recent votes, it seems likely that those aligned with this bill will be victorious, which means our challenges could fall into the realm of ideology. That’s why there’s concern and the industry must play a more active role in this," said Pérez Howlet.

Industry voices, like José Jabalera, VP of sustainability at Discovery Silver, emphasized the long-term nature of mining and how changing regulations affect business strategies. 

"On the business side, we've been dealing with uncertainty: the rules keep changing, and this is a long-term business. These projects have very long maturation periods, and suddenly the rules change," he said.

"Like with last year's reform, yes, there was a change to the mining law and the water law.... The change was made, but we never received the regulations, which led to more uncertainty, leaving things in limbo."

Jabalera added that the lack of clarity surrounding the fate of the injunction requests assumed by the supreme court further contributes to the legal instability in the sector.

"This growing uncertainty impacts the country's competitiveness index, and new investments are either withdrawn or postponed. And that doesn't even include exploration, which we've seen decrease significantly compared with previous levels in Mexico," the executive said.

"Being optimistic, we hope there's a change, a new administration less driven by ideology... and more focused on social welfare," he added. 

González, from ALN Abogados, underscored that one of the lessons to be learned is how the actions of companies and the industry as a whole should be approached.

"I believe there has to be a period or stage of adaptation to this new administration and policy. I've heard about 'welfare mining', which emphasizes the social backdrop of these initiatives, and I think that's very important. One of the main allies must be the community where operations are based, as they're key defenders of the industry's projects," he said.

Meanwhile, Pérez Howlet said there was a "ray of light" with more technically oriented people entering the cabinet when the new administration takes over on October 1, "without the ideological pressure that currently prevails. We can expect a new vision once the new president takes office," he said.

President-elect Claudia Sheinbaum, of the same Morena party, will take over from López Obrador.