Intellectual Property Australia observes that intellectual property is the “property of your mind or proprietary knowledge and is a productive new idea you create”. This includes inventions, trademarks, designs or processes that you come up with. Hence, slogans and logos around branding may all be intellectual property. Intellectual Property gives you exclusive rights for a restricted duration and within certain boundaries. Many businesses neglect their ownership of their intellectual property and its inherent value; indeed, 67.1% of businesses with 0 to 4 employees use no form of Intellectual Property protection methods (Australian Bureau of Statistics 2012). Commercial entities can innovate and expand their brand as IP rights are protected through the creation of the business themselves. Protections include the use of patents, copyright and registered designs and trademarks.

There are two main ways to transfer IP rights: licensing and assigning.

An Intellectual Property Agreement is effective when you want to:

• Transfer ownership of Intellectual Property in writing;
• Transfer ownership of newly created Intellectual Property Rights when joining a company as a co-founder or during the start-up phase;
• Transfer ownership of Intellectual Property Rights from new employees to your company;
• Transfer ownership of Intellectual Property Rights from your business as a sole trader/partnership to your new company.

In licensing, the licensor will transfer the right to use the IP. It will usually involve a long-term business relationship between licensor and licensee. The licensee will pay a fee for the right to use it, either through a lump sum or installment payments. Note that a licensor can opt to grant an exclusive, sole or non-exclusive licence. This will determine how many parties will be able to use the IP. Contracts may be flexible and further restrictions can be added so that IP may only be used for a particular purpose, class of product or geographical location.

Assignment is the complete transfer of IP ownership from the assignor to the assignee. The agreement must be meticulously drafted to ensure that both parties understand their respective obligations. Getting the services of an expert IP lawyer to assist with the agreement’s finalisation is recommended. Indeed, the contract will include an irrevocable transfer of commercial rights to the assignee; as it would be a one-time deal, parties are not expected to have further endeavours about the business and how the IP will be used after the agreement. Unlike installments of royalties with a licensee, the assignor will usually receive the payment in a lump sum from the assignee. It will include many considerations such as a profit component and market value and should be determined very carefully.

As licensee or assignor, your team should always perform due diligence which includes determining the market-value and profitability aspect attached to the IP.

If you are considering selling your business, you need to consider how you wish the IP aspect is managed. To ensure that every step of the process is correctly handled, it is important that you have a skilled professional assist you.  Here at Harris Gomez Group, our knowledgeable team has a wealth of experience in helping both companies and individuals with their IP needs.

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Harris Gomez Group is a Common Law firm, with offices in Santiago, Bogotá, and Sydney. We also have legal teams in Mexico, Peru, Brazil, and Argentina. Over the last 16 years, we have been supporting foreign companies with their growth in Latin America and Australia. Many of our clients are technology companies, service providers and engineering companies that focus on the mining, energy and infrastructure markets.

To better understand how we can support your management team in the Region, please contact Cody Mcfarlane at cmm@hgomezgroup.com

Pre-purchase inspections are critical for the reason that you need to know of any potential issues with a property prior to when the contracts become binding (i.e., at exchange). If after exchange you discover something about the property that is problematic or that you simply don’t like, then you generally won’t have any right to get out of the purchase, unless there has been a breach of contract or statutory warranty or some form of misrepresentation. Simply put, pre-purchase inspections will allow you to make an informed decision about the property you are considering buying, it’s worth, and ultimately whether you even want it at all.

There are a number of inspections that a good solicitor will assist you to carry out as part of the due diligence process. These include:

• Strata Inspection: For purchasers of a unit, townhouse or house that is part of a community title, your inspector will attend the office of the strata/community title manager to inspect the available records. These records will be able to tell them a number of things, such as if the vendor is up to date with payments of levies, whether there are any impending or proposed major works scheduled, the level of insurance on the property, whether there are any “harmony” issues among neighbours, as well as many other things.
• Building Inspection: Pending the results of the strata inspection, it could be a good idea to carry out a building inspection. Even if there appears to be no issue from the strata records, a building inspection is certainly worthwhile, as it can save a lot of trouble further down the line. A building inspector will attend the property and review for any defects. This will include inspecting the foundations, whether extensions have been carried out, and whether any repairs may be required.
• Pest inspections: Similar to a building inspection, a pest inspector will attend the property and specifically look for any evidence of current or previous issues of pests. The most notable thing they will be looking for is termites, a problem which affects 1 in 4 Australian homes in their lifetime. Other things they will be watching for are fungal rot and whether the conditions overall are conducive to pests.
• Other Inspections: As appropriate, a number of inspections may be required, such as electrical inspections (for older houses), plumbing inspections, or a pool safety check to ensure any pool is compliant with safety regulations.

Depending on the individual property, there may be additional searches relevant to the circumstances. This will all fall under the due diligence process— your solicitor will be able to assist in determining what inspections should be carried.

If you are currently considering purchasing or selling a property, always get in touch with an expert who can help you through the process. Doing your homework and getting help to tick off the legal checklist can save a lot of time, money in the long run, and help you get the most out of your property.

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Harris Gomez Group is an international law firm with offices in Santiago, Bogotá, and Sydney. In Australia, our residential, commercial and industrial real estate law practices represent individuals, developers, investors, lenders, and business users in the purchase, development, financing, sale, and leasing of real estate. Over the last 21 years of operating, we find that our clients appreciate the quick turnaround times and fixed pricing.

To better understand how we can support you, please contact Cody Mcfarlane at cmm@hgomezgroup.com

Prior to signing

Once you have decided you want to buy a property, the first step is to talk with your bank to confirm the amount you can borrow, and to get a written pre-approval of this figure. It is also a good idea to make sure that the amount you are going to pay for the property is within the right price-range for the area—you can do this buy simply browsing some real-estate webpages or alternatively speaking with local real-estate agents who will be able to give you some estimates.

Next, you need to contact your solicitor and request for them to look over the Contract. A sale for contract is a complex legal document, but your solicitor will be able help explain some of the ‘legalese’ terms and conditions, such as easements and covenants, so that you are able to understand what exactly you are agreeing to. If there is anything in the contract you don’t like, your solicitor will be able to assist in making the required changes.

Exchanging contracts and paying a deposit

A sale is neither complete nor legally binding until the exchange has taken place and the deposit has been paid. The exchange of contracts is the legal conclusion of the purchase. Prior to exchange, both you and the vendor have the right to change your minds. It is called an exchange because there are two copies of the sale contract—one for you and one for the vendor. Each party will sign and swap the copies (in hand or by post and is usually arranged by the solicitor).

At the same time of the exchange, you will have to pay a deposit. Usually, the vendor will request a deposit of 10 per cent of the purchase price, however, sometimes the parties may agree to a different figure.

Cooling-off

During the five days following the exchange of contracts for a residential property in NSW, you are free to rescind the contract with only token penalty—0.25% of the purchase price. This is called the ‘cooling-off’ period. The cooling-off period commences immediately after the contracts have been exchanged and ends at 5pm on the fifth business day after exchange. It is important to note that no cooling-off period applies for properties bought at auction.

If a property is attracting a lot of attention from buyers and you are worried that you may miss out on it, it can be a good tactical move to organise a quick contract exchange and to then carry out building and pest instructions during the cooling-off period. This way, you haven’t let the opportunity of the property ‘get-away’ but you also still have the chance to back out if any issues come to light in the inspection process.

It is possible to modify the cooling-off period, by either reducing it, extending it, or waiving it entirely. Your solicitor will be able to assist with any of these modifications as required. An example of why you may wish to modify the cooling-off period is if you already have completed all the other steps (i.e., if your solicitor has already examined the appropriate certificates, a pest and building inspection has been carried out, and the finance has been approved), then offering to waive the cooling-off period may act as an incentive for the vendor to accept your offer.

Settlement

The final stage of purchase is settlement, which will generally take place around 6 weeks following the exchange of contract. On the day of settlement, your solicitor will meet with the vendor’s legal representative and representatives from each of the banks. The necessary cheques will be exchanged and documents for title in the property will be transferred to your name in order to give you legal ownership.

On the morning before settlement, either yourself or your solicitor should conduct a final inspection of the property to ensure that everything is in the same condition as when the contracts were exchanged—this is to avoid any unpleasant surprises after you’ve picked up the keys!

Sometimes, things may not go exactly as planned and it may become necessary to delay settlement to a different day due to a minor mistake by one of the parties. This can cause inconvenience, particularly if you had planned to immediately move in to the property following settlement. It’s a good idea to maintain contact with your solicitor through the period leading up to settlement to ensure everything is on track to go off without a hitch.

Following settlement, it’s time to breath again and celebrate—you’re the legal owner of the property!

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Harris Gomez Group is an international Law firm, with offices in Santiago, Bogotá, and Sydney. Our Sydney office specializes in property, commercial and corporate law. We find that our real estate clients appreciate the quick turn arounds on contracts, often same day, helping them look good in front of clients while ensuring the deal gets done.

To better understand how we can support you in Australia, please contact Cody Mcfarlane at cmm@hgomezgroup.com

A Will is a legal document in which a person specifies the way in which their estate will be handled following their death. There are a number of reasons for having a will, including:

• To give directions for dividing your estate between family, loved ones, or charity
• To give instructions regarding your funeral
• To permit for your body to be donated to science or your organs donated
• To ensure your beneficiaries are protected in case of any adverse possibilities, such as maritial breakdown, illness, etc
• To address complicated family situations (particularly blended families)
• To properly distribute any shares of a company or partnership you may have
• To repay loans incurred during your lifetime
• To ensure your wishes and instructions are clear and to reduce the risk of your Will being challenged

Despite the clear importance of having a Will, statistics show that about 45% of Australians do not have a valid Will. When someone dies without a Will, this means they die “intestate”, meaning that legally speaking no one knows whom they wanted as their beneficiaries or executor. Dying intestate means that a pre-determined formula will be used to divide up that person’s estate. The most simple example is that in NSW, if a person dies without a Will and they have a spouse who survives them by at least 30 days, then they automatically inherit the estate. This includes de facto relationships and operates regardless of whether the relationship bore any children. It should be stressed that this is the most simple scenario imaginable—for example, when children from previous relationships exist, things become immediately more complicated.

To this end, while a Will is very important for everyone, it is particularly critical for people in defacto or same sex relationships to have a Will. This is because if someone in a defacto or same-sex relationship dies without a Will, their loved-ones will have the added burden and stress of having to meet the legal requirements for proving the relationship, at a time where they are already grieving.

Even though most people realise the importance of keeping a Will, it is important that a Will is able to be found when required. The original Will should be kept in a safe place—such as your solicitor’s office—and you should keep a hold of several copies for your records. Ensure that the people close to you are aware of your Will and importantly, who your solicitor is.

If someone owns assets overseas, it is possible to create an “international Will” will be accepted in most jurisdictions. An international Will is a good idea if someone has most of their assets in NSW but then has a minor secondary bank account in another country. However, if someone has more substantial assets across more than one country, we advise making sure that a valid Will is in place in each separate country.

It is important that everyone has a legally valid, up to date Will in place to ensure that in the hardest of times for your family things can run as smoothly as possible and no unneeded stress is added. You should seek the appropriate professional advice relating to your individual personal and financial circumstances—remember, you are never too young or “risk-free” not to need a Will! To ensure that your wishes and instructions are followed after your death, talk to one of Harris Gomez Group’s experienced lawyers today.

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Harris Gomez Group is a Common Law firm, with offices in Santiago, Bogotá, and Sydney. We also have legal teams in Mexico, Peru, Brazil and Argentina. Over the last 15 years we have been supporting foreign companies with their growth in Latin America and Australia. Many of our clients are technology companies, service providers and engineering companies that focus on the mining, energy and infrastructure markets.

To better understand how we can support your management team in the Region, please contact Cody Mcfarlane at cmm@hgomezgroup.com

Choice of business structure

The first and key decision is deciding upon the right business structure for your organisation. Will an Australian organisation be created or will it be run via an offshore entity? The factors that will contribute to what will be the right option for any given company are by their nature specific to the individual circumstances of each business, but will include issues such as taxation, contractual factors, and employment and visa concerns.

In practice, the majority of companies will set up a new subsidiary for Australian operations, with the process of registering an Australian branch of a foreign company being somewhat more complicated. Regardless of which option is chosen, the process is done via ASIC (Australian Securities Investment Commission). When a foreign company does decide to use a new subsidiary, the most common option to use is a proprietary private company limited by shares (Pty Limited), but in reality they have another four options of the type of entity, including as a joint venture (incorporated or unincorporated), discretionary trust, partnership, or public company.

Directors’ duties

Directors and officers need to be aware of the their duties and obligations under the the requirements of the Corporations Act 2001 (Cth), which relate primarily to issues such as reasonable care, due diligence, honesty and the proper use of information and position. Serious penalties exist for breaching the duties under the Corporations Act, ranging from legal proceedings and fines up to criminal charges in the most severe of cases. As part of meeting the standards of the Corporations Act, directors are required to actively partake in the interests and affairs of the company. This involves taking positive steps to ensure he or she is adequately informed about the financial affairs of the company, with the ultimate rule being that directors must prevent insolvent trading.

A directors’ compliance program should be developed and implemented to ensure that the requirements of the Corporations Act are met, particularly in regards to the maintaining of proper financial records.

Employment concerns

Foreign entities either already working in Australia or looking to enter the market should consider preparing template employee contracts/agreements. Federal and state employment is highly developed and informs nearly all levels of the employer-employee relationship, and it is important that foreign companies are aware of their obligations and rights.

Visa concerns

The Australian government has recently made sweeping changes to the Temporary Work (Skilled) visa (subclass 457). This visa is commonly used by foreign controlled subsidiaries to sponsor its foreign employees for both permanent and temporary Australian visas, typically for executives and technical/expert staff. It is important that foreign companies are aware of these changes and how they will impact their plans, when the changes are implemented from March 2018.

Intellectual property

It is important that foreign entities recognise and appreciate the value that their intellectual property holds, and take appropriate steps to ensure that their IP is protected in Australia—just because it is covered in the home jurisdiction does not mean it is in the Australian market! The Australian system protects IP through a mixture of legislation and common law. Trademarks, design, copyright and patents are all covered. It is extremely advisable that foreign companies immediately register their intellectual property in Australia as soon as they begin planning their operations in the jurisdiction.

Foreign investment regulation

The foreign investment framework in Australia is governed by a mixture of the Foreign Acquisitions and Takeovers Act 1975, its related regulations, and Australia’s Foreign Investment Policy. Investors are expected to understand and abide by their obligations and requirements under this framework. Certain investments will have to submit a proposal to the Australian Foreign Investment Review Board (FIRB) for their approval.

Obtaining a commercial property

Foreign companies have to choose whether they will buy or lease commercial premises when they enter the Australian market. Generally, most new entities will favour entering into a lease. As with any property dealings, it is important that a foreign entity negotiating either a purchase or lease have appropriate legal advice and assistance.

Use of standard contracts

In Australia, contracts are governed by the common law, with some limited supplementation from legislation. For a contract to be valid and enforceable, it requires all of the basic elements of offer, acceptance, consideration, intention to create a legal relationship and certainty. Because of the complex nature of the common law system, it is recommended that foreign entities prepare standard contracts for use commercially. Additionally, foreign entities need to be aware of statutory warranties on goods and services that cannot be contracted out of.

Conclusion

Obviously the setting up process for foreign entities in Australia is a complicated process and this article does not encompass all the concerns that will need to be considered. It is important that relevant experts are consulted at each step of the way to ensure that foreign entities are meeting the strict Australian legal requirements. It is best to ‘get it right’ the first time and avoid mistakes which could result in costly and time-consuming consequences further down the line.

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Harris Gomez Group is a Common Law firm, with offices in Santiago, Bogotá, and Sydney. We also have legal teams in Mexico, Peru, Brazil and Argentina. Over the last 15 years we have been supporting foreign companies with their growth in Latin America and Australia. Many of our clients are technology companies, service providers and engineering companies that focus on the mining, energy and infrastructure markets.

To better understand how we can support your management team in the Region, please contact Cody Mcfarlane at cmm@hgomezgroup.com

Take for example automated legal systems document systems. Their use is nowhere more prevalent than in business and investment structures such as companies and trusts, where they are regularly used to prefill deeds or contracts. While these robotic systems may be perceived to save time and money, in reality they can have serious professional repercussions for businesses when not used correctly.

Generally, such systems are essentially template legal documents that are filled in by the computer based on an algorithm or branching logic system. They are usually sold by online-only providers that generally do not offer physical assistance. What assistance they can provide is unlikely to be even specific to a client’s needs or situation. This further complicates the ability of businesses or individuals using these programs to respond to difficult situations in a timely and effective manner.

Such complications can arise out of any number of issues with these programs, beginning with the initial possibility of substandard legal templates being used by such programs. The individuals operating these systems will often lack the detailed knowledge and education of a lawyer who has been trained to become an expert in the specific field of law, which means mistakes, can be readily made. Of course, we then need to keep in mind the distinction between “automation”, and “artificial intelligence” which means in practical terms that the programs themselves are nothing more than basic coding, lacking the cognition required to recognise when mistakes are being made and so are unable to raise any sort of red flag to the user. The problem is further compounded if advisors filling the role of human checking mechanisms fail to pick up on errors and they become enshrined, waiting to be repeated again.

Mistakes such as these are not easily rectified and they can cause serious problems and liabilities for the affected parties. It is important to remember that such liabilities will fall on the advisors using these systems, rather than the automated system itself. The question becomes, then, whether the monetary savings achievable through using such automated services outweigh the risks.

In our opinion, progress is never a bad thing. Automation boosts productivity and it lowers costs. The idea is to understand the limitations of said technology and recognise where a human touch may be necessary.

Harris Gomez Group is a Common Law firm, with offices in Santiago, Bogotá, and Sydney. Over the last 15 years we have been supporting foreign companies with their growth in Latin America. Many of our clients are technology companies, service providers and engineering companies that focus on the mining, energy and infrastructure markets. 

To better understand how we can support your management team in the Region, please contact Cody Mcfarlane at cmm@hgomezgroup.com

These changes will affect a number of people, but particularly:

• Foreign investors who are considering an investment in Australia (given the significant application fees proposed to apply from 1 December 2015);
• Foreign investors with an existing interest in Australian agricultural land (who are required to register their interest on a new statutory register); and
• Developers or investors in Australian real estate.

APPLICATION FEES

Applicants will need to pay the fee before their foreign investment application can be processed. If an application falls into a number of categories, the category with the highest fee will apply.

RESIDENTIAL REAL ESTATE 

Non-resident foreign persons are prohibited from purchasing established dwellings in Australia.

Temporary residents can apply to purchase one established dwelling to use as their residence while they live in Australia, which must be sold if the property ceases to be their principle place of residence.

The following application fees apply:

• Property valued $1 million or less – $5,000
• Property valued over $1 million – $10,000
• In addition, $10,000 incremental fee increase per additional $1 million in property value

PROPERTY DEVELOPERS OF RESIDENTIAL REAL ESTATE

• Property developers can apply for new dwelling exemption certificates to sell new dwellings in a development of 50 or more residences to foreign investors.
• However, if a single foreign investor wants to purchase more than $3 million worth of apartments in any one development then they will have to seek individual approval.
• Additionally, developers will be required to market dwellings in Australia as well as overseas.
• Property developers will pay an upfront application fee of $25,000 with a reconciliation of properties sold to foreign persons based on above residential rates

 COMMERCIAL REAL ESTATE

The threshold for office, industrial and commercial accommodation requiring prior approval has been increased from $55 million to $252 million (pegged to CPI) or $1,094 million for foreign investors from the United States, New Zealand, Chile, Korea, Japan and soon China.

The following application fees apply:

• Vacant commercial land -$10,000
• Commercial real estate – $25,000

AGRICULTURE

• A new agricultural land foreign ownership register has been established, and the screening threshold for proposed foreign purchases of agricultural land by private investors was lowered from 252 million to $15 million.
• Additionally, direct investments in agribusiness over $55 million will generally be screened by the Foreign Investment Review Board. The threshold may vary depending on where the non-government investors are from.

ATO

From 1 December 2015, the ATO will:

• Process applications received from foreign persons proposing to invest in Australian residential land. Applications for purchases of non-residential land will continue to be processed by the Treasury;
• Be responsible for the Agricultural Land Register; and
• Collect all fees in relation to all foreign investment applications.

 NEW PENALTIES 

• A new regime of civil penalties will be introduced and the existing criminal penalty regime will be expanded. The maximum criminal penalties will be increased to $135,000 or 3 years’ imprisonment, or both for individuals; and up to $675,000 for companies;
• New civil penalties have been introduced with the maximum penalties being dependent on the type of breach. These penalties potentially extend to third parties who knowingly assist foreign investors to break the rules. Under the new arrangement foreign investors who fail to comply with the rules will not be able to profit from doing so including forfeiting any capital gains made on divestment of a property;
• The Government is also proposing an infringement notice regime for minor breaches (being primarily acquisitions undertaken without approval where approval would have been granted in the normal course). In particular, if a company makes such an acquisition and voluntarily reports the breach, the proposed infringement notice fine is $10,200, plus the relevant application fee. If the breach is identified through compliance monitoring (as opposed to having been voluntarily reported), the proposed fine is $51,000, plus the relevant application fee.

INCREASES THRESHOLD FOR FOREIGN INVESTORS FROM CHILE, SOUTH KOREA, AND JAPAN

The projects will add 1,442MW to the country’s electricity generation capacity; 2,385km to its natural gas pipeline network; 122km to the transmission network, and 2,962km to the distribution grid, CFE chief executive Enrique Ochoa Reza (pictured) announced at a press conference.

Pipelines (Natural Gas)

Gasoducto Tula – Villa de Reyes

The length of the pipeline will be 280 km with 36 inches in diameter. It will interface with the Tuxpan pipeline – Tula, currently under bid and Villa de Reyes – Aguascalientes – Guadalajara, which is already tendered.

It will have the capacity to transport 550 million cubic feet per day (MMSCFD) of natural gas and will provide fuel to the centre and west regions of the country.

The estimated investment is $ 420 million. The publication of the prebase is scheduled for June 2015 and commercial operation is scheduled for December 2017.

Pipeline Villa de Reyes – Aguascalientes – Guadalajara

The length of the pipeline will be 355 km with 42 inches in diameter. It will interface with pipelines Tula – Villa de Reyes and La Laguna – Aguascalientes, which are already tendered. It will pass through the states of San Luis Potosi, Aguascalientes and Jalisco.

The pipeline will have the capacity to transport 1,000 million cubic feet of natural gas.

The estimated investment is USD$555 million. The publication of the prebase is scheduled for July 2015 and commercial operation is scheduled for December 2017.

South Texas pipeline – Tuxpan (Marino)

It will transport natural gas from an underwater route in the Gulf of Mexico, specifically from the south of Texas, USA, to Tuxpan, Veracruz. It will have an approximate length of 800 km with 42 inches in diameter. It will interface with the Nueces pipeline – Brownsville, that is already tendered, and the pipeline Tuxpan – Tula, currently under tender.

It will have the capacity to transport 2,600 million cubic feet of natural gas and will address the requirements of this fuel in the East, Central and West Regions of the country.

The estimated investment is USD$3.1 Billion. The publication of the prebase is scheduled for July 2015 and commercial operation is scheduled for June 2018.

Nuts pipeline – Brownsville

The Pipeline will have an approximate length of 250 km and 42 inches in diameter. It will provide natural gas to pipeline Marino.

The pipeline will have the capacity to transport 2,600 million cubic feet of natural gas and will address the requirements of this fuel in the East, Central and West Regions of the country.

Being a project that will be located in the United States, it will be tendered in accordance with the rules of that country, through a RFP (Request for Proposal).

The estimated investment will be USD$1.550 Billion. Publication of the RFP is planned for July 2015 and commercial operation is scheduled for June 2018.

Pipeline La Laguna – Aguascalientes

The pipeline will have a length of 600 km and will be 42 inches in diameter. It will interface with pipelines El Encino – La Laguna, currently under construction, and Villa de Reyes – Aguascalientes – Guadalajara, that is being tendered. It will pass through the states of Durango, Zacatecas and Aguascalientes.

It will have the capacity to transport 1,150 million cubic feet of natural gas and will address the requirements of this fuel in the centre and west Regions of the country.

The estimated investment is USD$1 billion. The publication of the prebases is scheduled for July 2015 and commercial operation is scheduled for December 2017.

Ramal Empalme

The pipeline will have a length of 20 km and be 24 inches in diameter. It will transport 236 million cubic feet of natural gas from the pipeline Sásabe – Guaymas Guaymas – El Oro, the combined cycle plants Empalme Empalme I and II, in the state of Sonora.

The estimated investment is USD$35 million. The publication of the prebases is scheduled for August 2015 and commercial operation is scheduled for April 2017.

Branch Hermosillo

The pipeline will have a length of 48 km with 16 inches in diameter. It will transport 100 million cubic feet of natural gas from the pipeline Sásabe – Guaymas to Hermosillo combined cycle plant in the state of Sonora.

The estimated investment is USD$68 million. The publication of the prebases is scheduled for August 2015 and commercial operation is scheduled for June 2017.

Ramal Topolobampo

The pipeline will have a length of 32 km and will be 24 inches in diameter. It will transport 248 million cubic feet of natural gas from the pipeline El Encino – Topolobampo, to combined cycle plants Northwest (Topolobampo II) and III Topolobampo in Sinaloa state.

The estimated investment is USD$55 million. The publication of the prebases is scheduled for October 2015 and commercial operation is scheduled for March 2018.

Electrical Generation

Central Geothermal Los Azufres III, Phase II

The project is located in the municipalities of Hidalgo and Zinapécuaro, Michoacan.

The plant will have a capacity of 25 MW. The publication of the prebase was held on 19 May. The bases will be published in July 2015 and commercial operation is scheduled for June 2018.

The estimated investment is USD$63 million. Transparencia Mexicana will participate in this process as a Social Witness appointed by the Ministry of Public Administration.

Central Internal Combustion (Dual) Baja California Sur VI

The project is located in the municipality of La Paz, Baja California Sur. It is the construction of an internal combustion engine with oil and natural gas as the fuel. It will have a capacity of 42 MW (summer design condition).

The estimated investment is USD$105 million. The publication of the prebases is scheduled for July 2015 and commercial operation is scheduled for May 2018.

The Ministry of Civil Service shall appoint a Social Witness for this project.

Combined Cycle Power Plant San Luis Potosi

The project is located in the municipality of Villa de Reyes, San Luis Potosi. It will be a combined cycle plant. And have a capacity of 790 MW (summer design condition).

The estimated investment is USD$864 million. The publication of the prebases is scheduled for July 2015 and commercial operation is scheduled for April 2019.

The Ministry of Civil Service shall appoint a Social Witness for this project.

Central Wind East II and III

The project is located in the town of Ixtepec, Oaxaca. It will consist of two modules with a total capacity of 585 MW and will generate electricity from the wind.

The estimated investment is USD$1.79 billion. The publication of the prebases is scheduled for July 2015 and commercial operation is scheduled for December 2017.

The Ministry of Civil Service shall appoint a Social Witness for this project.

Transmission Lines and Electrical Substations

Northwest substations and Compensation 1902 (3rd phase)

This project is located in the state of Sinaloa. It includes five transmission lines 400 and 115 kilovolts (kV), with a total length of 74 km-C. It will include two substations with a capacity of 500 megavolt ampere (MVA) and eight feeders of 400 and 115 kV. The project will be implemented as a Financed Public Works.

The estimated investment is USD$35 million. The prebases and bases were published in April and May 2015 respectively. The start of commercial operation is scheduled for March 2017.

The CFE provides for the participation of a social witness in this process.

Transformation of the Northeast 1302

This project is located in the state of Coahuila. It includes five transmission lines of 115 kV with a total length of 25 km-C. It will include a substation with capacity of 500 MVA eight feeders in 400 and 115 kV.

The estimated investment is $ 37 million. The prebases and bases were published in April and May 2015 respectively. Commercial operation is scheduled for March 2017.

The CFE will include the participation of a social witness in the process.

Transmission and Transformation of Baja California (5th phase)

This project is located in the state of Baja California. It comprises two transmission lines 230 and 161 kV, and a total length of 23 km-C. It will include three substations with two 230 kV feeders and two 161 kV.

The estimated investment is USD$19 million. The publication of the prebases is scheduled for June 2015 and commercial operation is scheduled for January 2017.

The CFE will include the participation of a social witness in the process.

Electricity Distribution Projects

Substations and Distribution Lines 1920 (6th stage)

This project is located in the city of Hermosillo, Sonora. It consists of an electrical substation with a capacity of 30 MVA and 2 feeders in 115 kV and six in 13.8 kV.

The estimated investment is USD$6 million. The prebases and bases were published in May and June, respectively. Commercial operation is scheduled for October 2016.

The CFE will include the participation of a social witness in the process.

2021 Project: Reducing Energy Losses in Distribution (8 phases)

The project includes 44 works, divided into eight stages. It aims to reduce energy losses in Campeche, Chiapas, Mexico City, State of Mexico, Morelos, Quintana Roo, Sinaloa, Tabasco and Veracruz.

These eight phases include over 1 million meters; 36.612 distribution transformers and installing 2,962 Km-C line.

Reduction of Energy Losses in Distribution 2021 (1st phase)

The project includes the supply and installation of 16,048 meters, 957 distribution transformers and 37 Km-C. This phase will be installed in the state of Morelos.

The estimated investment is USD$14 million. The prebases and bases were published in May and June, respectively. The start of commercial operation is scheduled for October 2016.

The CFE provides for the participation of a social witness in this process.

Reduction of Energy Losses in Distribution 2021 (2nd phase)

The project includes the supply and installation of 5,727 meters. This phase will be installed in the state of Sinaloa.

The estimated investment is USD$5 million. The regulations will be published in June 2015 and commercial operation is scheduled for October 2016.

The CFE provides for the participation of a social witness in this process.

Reduction of Energy Losses in Distribution 2021 (3rd phase)

The project includes the supply and installation of 20.456 meters. This phase will be installed in the state of Veracruz.

The estimated investment is USD$8 million. The prebases and bases were published in April and June, respectively. The start of commercial operation is scheduled for September 2016.

The CFE provides for the participation of a social witness in this process.

Reduction of Energy Losses in Distribution 2021 (4th phase)

The project includes the supply and installation of 93.241 meters. This phase will be installed in the states of Campeche and Quintana Roo.

The estimated investment is USD$48 million. The prebases and bases are published in May and June, respectively. The start of commercial operation is scheduled for April 2017.

The CFE provides for the participation of a social witness in this process.

Reduction of Energy Losses in Distribution 2021 (5th phase)

The project includes the supply and installation of 378.054 meters, 12,687 distribution transformers and 1,214 km-C. This phase will be installed in the State of Mexico.

The estimated investment is 276 million. The publication of the prebases is scheduled for June 2015 and commercial operation is scheduled for June 2017.

Transparencia Mexicana will participate in this project as a Social Witness appointed by the Ministry of Public Administration.

Reduction of Energy Losses in Distribution 2021 (6th stage)

The project includes the supply and installation of 187.817 meters, 1,951 distribution transformers and 158 km-C. This phase will be installed in the states of Chiapas and Tabasco.

The estimated investment is USD$95 million. The publication of the bases will take place in July 2015 and commercial operation is scheduled for June 2017.

Of the amount, the Ministry of Public Service appointed a Social Witness for this project.

Reduction of Energy Losses in Distribution 2021 (7th stage)

The project includes the supply and installation of 336.935 meters, 19.338 distribution transformers and 1,269 km-C. This phase will be installed in the State of Mexico.

The estimated investment is $ 283 million. The publication of the bases will take place in July 2015 and commercial operation is scheduled for June 2017.

The Ministry of Public Service will appoint a Social Witness for this project.

Reduction of Energy Losses in Distribution 2021 (8th stage)

The project includes the supply and installation of 179.121 meters, 1,679 distribution transformers and 284 km-C. This phase will be installed in the State of Mexico and Mexico City.

The estimated investment is USD$116 million. The publication of the prebases will take place in July 2015 and commercial operation is scheduled for June 2017.

The Ministry of Public Service will appoint a Social Witness for this project.

The full list of projects can be seen here in Spanish.

About Harris Gomez Group: 

Harris Gómez Group is a Common law-Latin American legal and business advisory firm. In 2001, HGG was the first Australian law firm to have a local office in Latin America. The firm specialises in Common Law and Latin American cross-border issues in areas such as Mining and Energy, Corporate, Mergers and Acquisitions, Tax, Intellectual Property and Business Enterprises. With over 21 years of experience immersed in the respective legal and business cultures of Australia and Latin America, we create a seamless bridge between the two regions and have become an essential partner to many multinational enterprises.

If you need assistance with expanding your operations into Mexico or have an existing business, do not hesitate to contact Cody McFarlane at cmm@hgomezgroup.com.

In our experience, expatriate Australians living and working overseas, but with some residual connections to Australia, are often targeted in ATO review and audit activity. This has become increasingly common as the ATO’s data matching capabilities increase.

The ATO default position in the letters we have seen is that if the client does not respond to the letters within 28 days and establish that they are not residents, the ATO will automatically issue assessments on the basis that the clients are Australian residents for tax purposes, which will include all known foreign source income.

If you are contacted by the ATO, it is important that you organise a detailed response and provide relevant evidence within the 28 day time frame or seek and extension of time if necessary. The first impression is the most important.

Given the ATO’s ‘threat’ to issue default assessments if clients cannot satisfy that they are not residents, the response will need to set out the client’s position in detail including:

1. full details of the client’s specific circumstances;
2. documents and other extrinsic evidence that the client is not an Australian resident; and
3. technical submissions outlining how the Australian domestic laws and any double tax agreements apply to their circumstances.

Our experience is that these matters are best resolved prior to the ATO issuing an assessment and having to object to the assessment.

Please contact Harris Gomez on +61 2 8095 6441 if you would like to discuss.

In order to help management teams understand some of these changes, we have provided a very high level overview by sector. 

Energy:

The energy reform in Mexico covers two main areas; hydrocarbons pursuant to the Hydrocarbons Law (as explained below) and geothermic and electric energy pursuant to the Electric Energy Law and the Geothermic Energy Law. Please note that pursuant to the Constitutional reform from which the above-mentioned energy reforms are derived, several new laws, regulations and modifications will be implemented.

In relation to the hydrocarbons reform, please note that pursuant to this reform a new legal framework for all hydrocarbon-related activities in Mexico has been established, including the following main modifications:

• For exploration and production (E&P) activities, the Hydrocarbons Law establishes two different regimes to be regulated by the National Hydrocarbons Commission: Entitlements (Asignaciones) granted to State Productive Enterprises (wholly owned state entities, including PEMEX) and E&P agreements entered into with private parties or State Productive Enterprises; and
• For midstream and downstream activities (treatment, processing, import and export, transportation, storage, distribution, compression, liquefaction, decompression, regasification, marketing and retail sale of crude oil, natural gas, petroleum products and petrochemicals, integrated pipeline transportation and storage systems), the law establishes a permit regime to be generally regulated by the Ministry of Energy and the Energy Regulatory Commission.

An Exploration and Extraction Agreement or an Entitlement (Asignaciones) must be granted in order to explore and extract hydrocarbons if they exist in an area subject to a mining concession (the mining concession must not be associated with coal). This rule also applies to the exploration and extraction of natural gas where it is associated with coal that is located outside of a mine.

According to the above, a mining concession does not grant any preferential rights for the exploration and extraction of hydrocarbons except where natural gas is associated with coal. If a mining concession is not associated with coal, mining concessionaires will be entitled to request the direct adjudication of an Exploration and Extraction Agreement.

Please note that pursuant to the new legislation, mining concessionaries will not be able to oppose the laying of pipelines, cables or the installation of any infrastructure works within the area of an assignment, permit or Exploration and Extraction Agreement, whether technically feasible.

Mining and METS:

Another important mining reform saw the creation of the Contribution Fund for the Sustainable Regional Development of Mining States and Municipalities (Fondo de Aportaciones para el Desarrollo Regional Sustentable de Estados y Municipios Mineros). This Contribution Fund obliges mining concessionaries to pay 5% from its net taxable income in order to contribute to the sustainable development of the corresponding state and municipality.

Agriculture and Agri-technology:

There have been no recent reforms in this sector, however, foreign investment is not limited in agriculture and agri-technology matters.. The Foreign Investment Law (Ley de Inversion Extranjera) is the only limitation to investments and pursuant to Article 7 of said law, foreign investment shall be limited to the 49% of shares representing the capital stock of companies who owns agricultural, livestock and forestry lands.

Telecommunications and Electronic Components:

The recent reforms modified the following aspects of the former Federal Telecommunications and Broadcasting Act:

• the Federal Telecommunications Institute (FTI) is authorized to prevent monopolistic practices in this sector;
• the Mexican authority is obliged to grant two new concessions for open broadcasting networks (cadenas de televisión abierta). The new broadcasters will have access to the infrastructure of broadcasters considered as preponderant;
• new penalties are provided in order to protect the consumer of the corresponding services;
• regarding mobile and fixed-line communications, phone companies are not longer allowed to charge special fees for long distance calls;
• a transition to digital television is provided (from analogical television);
• intervention of private communications for national security reasons is provided, etc.

The telecommunications reform also includes a Congressional mandate to enact legislation establishing a unique regime of concessions and mechanisms. The mandate will allow for the promotion of competition through the creation of asymmetric regulation and the elimination of barriers to competition, monopolization, and cross-property etc. Likewise, the principles of must offer / must carry have been elevated to constitutional status. The reform also mandated the Federal Telecommunications Institute – an autonomous constitutional telecommunications and broadcasting body – to determine the existence of preponderant economic agents in the sector.

The Federal Telecommunications Broadcasting Act is fundamentally a law of economic content that aims to regulate the telecommunications and broadcasting markets within that context. The Act does not prejudice the establishment of minimal technical norms, consumer and audience rights, or collaboration with the authority. With this in mind, the Constitutional Telecommunications Reform, as well as the Federal Telecommunications Broadcasting Act, depart from the premise that the market by itself has not been able to establish the conditions of effective competition; reason being that it is necessary to establish the legal means that redefine the property rights of the participants and allow the flaws in the market to be amended as well as create a robust regulator with enough tools to apply said mechanisms.

Infrastructure:

Mexico’s ambitious infrastructure plans require significant Public Private Partnership (PPP) investment. The new federal PPP law gives investors and contractors a more certain and more familiar environment. Key changes include:

• A thorough, transparent bidding process.

Requests for proposals will be widely published and contracting authorities have to prepare feasibility studies for prospective PPPs. Bidders can present unsolicited proposals; they can recover reasonable bid costs and will have a financial advantage at a public bid stage.