Mexican energy reform and NAFTA Chapter 11: Articles 20 and 21 of the Hydrocarbons Law and access to investment arbitration

Abstract

Mexican energy reforms open the energy sector to foreign participation via different types of contracts, some of which may qualify as investments under North American Free Trade Agreement (NAFTA) Chapter 11. Mexican NAFTA reservations exclude some Mexican regulation from the scope of application of specific obligations in Chapter 11, such as those regarding performance requirements, most-favoured-nation treatment, and national treatment. However, Mexico’s legislative restrictions on foreign investors’ right to pursue investor–state arbitration are not covered by its NAFTA reservations and should not affect access to NAFTA Chapter 11 dispute settlement. Those restrictions are inconsistent with NAFTA Chapter 11 and Mexico cannot invoke its domestic laws to justify a violation of its international obligations. Moreover, Mexico’s reservations do not prevent the application of obligations regarding fair and equitable treatment and expropriation.