Mining law reform involving lithium: legal considerations
The draft decree provides that the exploration, exploitation and use of lithium are reserved exclusively to the State; therefore, no concessions shall be granted to private parties; and areas with lithium deposits shall be considered reservation areas.
The “nationalization of lithium” was approved by the Chamber of Deputies on April 18th, 2022, and by the Senate on the day after; therefore, the initiative will be sent to the Executive Branch for its enactment. Due to the relevance of this matter, ECIJA would like to raise awareness of the most significant aspects of this initiative.
Both the Chamber of Deputies and the Senate approved, in general, the draft decree amending articles 1, 5, 9 and 10 of the Mining Law, whose fundamental purpose is to provide that the exploration, exploitation, and use of lithium are reserved exclusively to the State.
With 298 votes in favor from the political party Morena and its allies, zero against, and 197 abstentions from the opposition as a group (except for Movimiento Ciudadano), the Executive´s initiative was approved, waiving formalities and sent to the Chamber of Deputies, on April 17th, 2022.
For the discussion, amendment proposals were filed to modify the explanatory statement, the aforementioned articles, and the first, second and third transitional provisions of the draft decree approved by the Deputies.
Likewise, the Senate approved the initiative with 87 votes in favor (from Morena and its allies, Movimiento Ciudadano, and four out of five legislators belonging to Grupo Plural), 20 against (from the PRI and PAN), and 16 abstentions (from the PRD and PAN).
The current Mining Law states that individuals, legal entities, and indigenous communities have the possibility of exploring and exploiting the minerals or substances’ referred to in the Law (which includes lithium); however, the draft decree provides that the exploration, exploitation and use of lithium are of public interest, therefore, no concessions, licenses, contracts, permits, allocations or authorizations on this matter shall be granted to individuals. In addition, those areas with lithium deposits shall be considered reservation zones.
The foregoing raises for public debate whether it is constitutionally valid for a law to establish State-reserved zones, since State monopolies are established directly in article 27 of the Federal Constitution, therefore, it also ushers possible judicial challenges.
The exploration, exploitation and use of lithium, in accordance with the draft decree, are reserved exclusively to the State, and shall be conducted by a decentralized public agency.
It also establishes that such public agency must comply with international laws and treaties on environmental protection and indigenous people’s rights. However, by attempting to amend article 10 of the Mining Law, we are also facing a possible violation to the human rights of indigenous people and agrarian population groups, since the draft decree eliminates their right to be able to obtain a concession regarding exploration and exploitation of lithium, especially in the State of Sonora, where a lithium deposit was discovered in 2018, which could represent one of the largest lithium reserves in the world.
Likewise, the draft decree repeals all legal and regulatory provisions opposing such reform.
Although it can be considered that there are constitutional grounds for the draft decree, specifically in article 28 of our Magna Carta, it must be taken into account that the haste for its approval did not allow for a comprehensive and serious discussion of its content and scope by all deputies and senators, including those from the opposing parties. From the explanatory memorandum of the reform, it seems that mainly ideological and political reasons, rather than economic and practical feasibility reasons, gave rise to it, since, even though the “nationalization of lithium” is addressed, the legislators overlooked the fact that article 27 of our Constitution already provides the State ownership of land, water and natural resources.
Since the reform will be enacted by the Executive Branch, problems with previously granted concessions will arise. The draft decree does not address them in any transitional provision.
From an economic – financial perspective, it would be best to allow the possibility of granting concessions and strategic associations with groups of private parties, under a mixed economy system which is favorable to the Common Good, specially due to the large investments required for these types of activities, which also require highly specialized knowledge and technologies. Bolivia, which has served as a model for this paradigmatic reform, has maintained this possibility (with a model called government take), due to these special circumstances, and taking into account that the cost of these activities has represented more than 800 million dollars in the South American country, which has also allowed them to produce potassium chloride, batteries and lithium carbonate, and thus be able to build alliances with German and Chinese companies in the electric car market.
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