July 1, 2019 / 8:35 PM / 5 months ago

U.S. Chamber of Commerce slams Mexican utility's pipeline arbitration move

MEXICO CITY, July 1 (Reuters) - The U.S. Chamber of Commerce on Monday criticized the Mexican state-owned power utility CFE’s filing with an international court to begin arbitration with several infrastructure companies over pipeline contracts, saying the move could undermine investor confidence.

The CFE said last week it would aim to negotiate a “fairer” outcome to contract disputes with several companies through a mediation process overseen by the London Court of International Arbitration.

The infrastructure firms include Mexican companies Fermaca, Grupo Carso and IEnova, a subsidiary of U.S.-based Sempra Energy, as well as Canada’s TC Energy Corp .

The London arbitration court could not immediately be reached for comment.

The U.S. Chamber of Commerce said in a statement on Monday that it was concerned by the move, stressing the importance of legal certainty to secure foreign investment.

“This action risks sending a negative signal to U.S. and other international investors about the business and investment climate in Mexico,” the group said. “We therefore urge CFE and the Government of Mexico to reconsider this decision and to observe the president’s pledge to honor the sanctity of existing contracts.”

The group did not detail what action it wanted CFE to take.

CFE began talks with pipeline builder Fermaca on Monday as part of a push to negotiate independently with the companies, CFE spokesman Luis Bravo said.

“All the companies have agreed to talk about the contracts. Today we met with Fermaca to determine how to negotiate,” CFE spokesman Luis Bravo said. The talks will take place in parallel to the process in international arbitration court, he added.

Fermaca could not be reached for comment.

Mexican President Andres Manuel Lopez Obrador has pushed back against criticism of the arbitration request, saying the terms of the agreements were “abusive” toward the state.

The U.S. chamber has repeatedly come to Mexico’s defense during U.S. President Donald Trump’s administration, defending the North American Free Trade Agreement when Trump threatened to kill the deal and urging the United States to exempt Mexico and Canada from steel and aluminum tariffs.

The CFE’s pursuit of arbitration has sparked criticism from others in the international community. Canada raised concerns about the dispute, and Moody’s said the spat was “credit-negative” for the utility, the companies involved and the sector as a whole. (Reporting by Mexico City Newsroom; writing by Julia Love; Editing by Cynthia Osterman)

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