July 17 2017 Legal servitude of hydrocarbons Ibáñez Parkman y Asociados SC | Energy & Natural Resources - Mexico Energy & Natural Resources Hydrocarbons LawNegotiation processJudicial routeAdministrative routeFollowing the latest energy reform and the enactment of the new Hydrocarbons Law in 2014, a new legal concept regarding the legal servitude of hydrocarbons has been introduced. This concept aims to replace direct expropriation by giving landlords more options when negotiating the ownership of properties used by public utilities in the acquisition of land needed for hydrocarbon activities.Hydrocarbons LawArticle 109 of the Hydrocarbons Law states that:"The legal servitude of hydrocarbons shall include the right of transit of persons; transportation, and storage of construction materials, vehicles, machinery and goods of all kinds... for construction, installation or maintenance of the infrastructure or the carrying out of works necessary for the adequate development and monitoring of the activities covered by virtue of a Contract or Allocation, as well as all those that are necessary for that purpose. In any case, the legal servitude of hydrocarbons cannot exceed the term of the respective Contract or Assignment.The legal servitudes of hydrocarbons shall be decreed in favour of the Assignee or Contractor and shall be governed by the provisions of federal common law and disputes relating thereto, whatever their nature, shall be the responsibility of the federal courts.The legal servitudes of hydrocarbons may be decreed by judicial or administrative route, in terms of this Law and other applicable provisions.The experts appointed by the jurisdictional authority must comply with the provisions of article 104 of this Law and, in what is conducive, what is indicated in fractions V to VII of article 101 of this Law."According to this article, there is a jurisdictional and an administrative route for decreeing the legal servitude of hydrocarbons.Negotiation processThe acquisition of land, which is the stage of negotiation between the interested party and the owner, is the starting point for determining the applicable route and which process to follow. Article 101 specifies certain formal requirements which must be adhered to in such negotiations – namely:The landowner must be notified in writing of the intention to acquire the land by way of one of the contracts specified in the Guidelines and Models of Contracts for the Use, Enjoyment, Affectation or Acquisition of Land, Property or Rights to Carry Out Hydrocarbon Exploration and Extraction and Pipeline Transport Activities.The characteristics and scope of the project must be explained to the landowner.A consideration must be proposed to the landowner.The Secretariat of Agrarian, Territorial and Urban Development (SEDATU) and the Ministry of Energy (SENER) must be notified of the start of negotiations.In addition to the interested party and the landowner, social witnesses may also participate in the negotiation process. Where the property is governed by the Agrarian Law, the landlord may request advice or representation from an agrarian attorney.Following the negotiations, in case of an agreement, the actions must be formalised by means of the conclusion of one of the contracts provided for in the guidelines – namely:a shallow occupation contract;a voluntary servitude contract;a lease; ora sale and purchase contract.Once the respective contract has been concluded, the interested party must present it before a civil judge or an agrarian court, as appropriate, in order to validate it and for res judicata to apply.Parties have 180 days from the start of negotiations to undertake the above actions. However, if an agreement is not reached within this time, the interested party may request the legal servitude of hydrocarbons by way of the judicial or administrative route.Judicial routeIf following the judicial route, the interested party must initiate an ordinary civil trial or, if applicable, a trial in an agrarian court.Administrative routeIf following the administrative route, the interested party must request mediation from the SEDATU. On considering the existing appraisals, the SEDATU will then suggest a consideration amount and the type of contract to be concluded. If the parties agree with the SEDATU's proposal, the negotiation will be terminated without further requirements. If they do not agree, the SENER will request that the SEDATU process the legal servitude before the federal executive, following the same procedure established for federal expropriations.For further information on this topic please contact Mauricio Lievana at Ibáñez Parkman y Asociados SC by telephone (+52 55 5250 5912) or email ([email protected]). The Ibáñez Parkman y Asociados SC website can be accessed at www.i-parkman.com.