Introduction Model contracts Payment Dispute resolution mechanisms Contract types

Introduction

On June 2 2016 the agreement containing the guidelines and model contracts regarding the use, enjoyment and acquisition of land, goods and rights for the exploration and extraction of hydrocarbons and their transportation via pipelines was published in the Federal Official Gazette. The agreement establishes the minimum requirements for such contracts with regard to payment, other terms and conditions (including rights and obligations) and dispute resolution mechanisms.

The model contracts are binding on parties. Parties must agree to the minimum requirements set out in the guidelines, but can add additional provisions or engage professional counsellors to draft additional clauses if they do not conflict with those established in the guidelines.

The guidelines and contracts have federal jurisdiction. Additional provisions not required by the guidelines will be governed by the Commerce Code and the Federal Civil Code.

The Ministry of Energy, through the Social Impact General Directorate, will be responsible for interpreting the guidelines.

Model contracts

Under the guidelines, contracts must be signed by all parties involved. They must be written in Spanish and contain, at a minimum:

  • a header which states the contract type and the parties involved;
  • declarations regarding the property description and the parties' legal capacity to engage in business in regard to that property;
  • clauses stipulating the agreed terms and conditions, rights and obligations and dispute resolution mechanisms;
  • the federal venue in which the contract was signed and the date on which it was signed;
  • the signature of each party (proof that they agree to comply with the obligations); and
  • the contract's objective.

Contracts regarding the use, enjoyment and acquisition of property will be subject to Article 45 of the Agrarian Law. In general, such contracts can be concluded for no longer than 30 years, although this is extendable in some circumstances.

The validity of contracts regarding private property will be equal to that of assignation, exploration and exploitation contracts and permits issued by the competent authority.

Payment

Payment under the contracts is governed by Article 103 of the Hydrocarbons Law. Appraisals are governed by Article 104 thereof.

The following should be considered when establishing payment:

  • an exhibition payment for periods exceeding 10 years;
  • an exhibition payment for periods less than 10 years; or
  • a monthly payment.

The minimum value of each of the above payments should be based on the average value of the land in question.

Payment will comprise an allowance for the occupation and use of the land and any rights to structures that are separate from the land, as well as the provision of damages. If the project involves the commercial extraction of hydrocarbons, Article 101(VI)(c) of the Hydrocarbons Law applies. If the project will affect the communal population, Article 102(IV) of the law applies.

Contracts can provide that payment be made:

  • in Mexican peso;
  • through an account deposit or a trust;
  • by way of a National Ejido Development Fund Trust administration mechanism, in the case of development projects that will benefit the affected community; or
  • in any other format agreed by the parties.

Contracts can also include a requirement for any other kind of payment, as long as it is lawful.

All payments should respect the fiscal legislation.

Dispute resolution mechanisms

The following dispute resolution mechanisms are available:

  • arbitration;
  • conciliation;
  • mediation; and
  • agreement by the parties.

The contract should be registered in the Agrarian National Registry, the Commerce and Property Public Registry or the Federal Commerce and Property Public Registry, as appropriate, in accordance with Article 105 of the Hydrocarbons Law.

Contract types

The type of contract used should reflect the type of use, enjoyment, or acquisition agreed by the parties in light of the characteristics of the specific project. The following types of contract are available.

Superficial occupation contract Under a superficial occupation contract, the property owner or holder will allow the promoter, in exchange for a single payment, to use and enjoy temporarily the property's exterior and underground surface, including existing constructions or ones yet to be built.

The property owner must own the existing constructions referred to above. If this is the case, the affected area may be identified as a 'fraction' when required by the project. Likewise, the parties may, if necessary, settle the payment by means of periodic instalments.

Voluntary and continuous apparent servitude contract Under a voluntary and continuous apparent servitude contract, the property owner or holder will allow the promoter to establish, in exchange for a single payment, a levy on the fraction located within the property – on a voluntary and continuous basis – which will be announced by external works or exterior signs, for the land's use and enjoyment.

Leasing contract Under a leasing contract, the property owner will grant the temporary use and enjoyment of the land. The promoter must satisfy the rent in accordance with the agreed terms. If this is the case, the affected area may be identified as a 'fraction' when required by the project.

Sale contract Under a sale contract, the property owner or holder will transfer the property to the promoter, which must pay a certain price in accordance with the agreed terms.

In the case of communal property, it will be noted that full control is indispensable with regard to the area subject to sale, as contemplated in Articles 23(IX), 81 to 84 and 86 of the Agrarian Law, which results from the express agreement of the Assembly of Ejidatarios and Comuneros. Due to the legal nature of this type of contract, they will not contain all of the clauses previously mentioned; instead, they must contain provisions regarding sanitation in the case of eviction and delivery of the property, as well as documents regarding payment for services, which must be formalised by way of a public deed.

For further information on this topic please contact José Álvarez Márquez at Ibáñez Parkman y Asociados SC by telephone (+52 55 5250 5912) or email (jalvarez@iparkman.com.mx). The Ibáñez Parkman y Asociados SC website can be accessed at www.i-parkman.com.

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