The Texas Company of Mexico's Opposition to Article 27 and the Nationalization of Mexican Oil

Article 27 of Mexico's Constitution, ratified following the Mexican Revolution of 1917, guarantees the country's ownership of all of its oil and other natural resources. The Texas Company of Mexico, S.A. was among the international oil firms that fought against it.

The Texas Company of Mexico's Opposition to Article 27 and the Nationalization of Mexican Oil
Credit: AGN, Photographic Archives, Díaz, Delgado y García, box 106/16.

Once the 1917 Constitution was enacted, several private individuals protested against Article 27 to protect their economic interests, as was the case with The Texas Company of Mexico. In the following article, learn about their actions and the Mexican State's response to such a situation.

One of the results of the Mexican Revolution was the passing of the 1917 Constitution. This document not only dealt with social and political problems but also economic ones. For example, Article 27 of the Constitution made sure that Mexico had full control over natural resources like oil.

Most foreign oil businessmen saw the 1917 Constitution as a great threat to their interests. This led to the creation of a group of people who didn't agree with nationalizing Mexican oil. Their goal was to protect their interests from what they thought would be the bad effects of nationalizing Mexican oil.

The oil company, The Texas Company of Mexico, S.A., was one of the reactionary groups. It was a foreign-owned company that merged in Mexico a month after the Constitution of 1917 was signed. This gave it the right to use some oil lots in Veracruz under the old Porfirian law.

In one of the letters between the legal representative of The Texas Company of Mexico and the Ministry of Industry, Commerce, and Labor, the nationalization of the oil proposed by the application of Article 27 was questioned. This was because it would mean that the law would apply to rights gained under the mining law of November 25, 1909, and the Mining Code of 1884, which said that the private owner of the land was the owner of all the minerals on the land.

Likewise, the foreign company stated that applying such retroactivity to the law meant a contradiction of the same principles outlined in the 1917 Constitution since Article 14 established the following: "No law shall be given retroactive effect to the detriment of any person." So, making Article 27 apply to the past meant that the owners and lessees of the oil lands had their private rights broken.

The foreign company was sure that the new constitutionalist government would not apply the law retroactively and would respect the rights gained under the Porfirian laws. However, this did not happen because President Venustiano Carranza became more extreme at the time he interpreted and enforced Article 27 to give oil concessions.

Thus, in 1920, Venustiano Carranza granted a series of concessions to Mr. Rafael Cortina on the Zacamixtle lands in the municipality of Tancoco, Veracruz, which belonged to the Texan company, as they had been denounced by Cortina as uninhabited wells based on the decrees issued by Carranza in 1918. So, he was able to get the permissions he needed to look for and use them.

The Texas Company of Mexico proceeded to file an injunction to stop the acts of the President of the Republic before the Supreme Court of Justice for these actions, but it was denied. But in September 1921, the Supreme Court of Justice talked about and looked into it again, especially the question of whether Article 27 and Venustiano Carranza's decrees from 1918 about taxes and rules for using oil funds were still in effect.

After a lot of thought, the Supreme Court of Justice decided that Venustiano Carranza's decrees on oil matters did not violate Article 14 of the Constitution, even though they went back in time. This was because a retroactive decree or law was only against the law for judges and courts but not for the Legislature, which had given the President of the Republic special powers to make decrees like these.

On the other hand, Article 27 of the Constitution could not be considered retroactive, "neither by its letter nor by its spirit," since it did not violate acquired rights. Because of this, the Supreme Court of Justice ruled against nationalizing oil and its derivatives, but this did not change the legal rights that people had before May 1, 1917, when the current Constitution went into effect.

With this ruling, the Supreme Court of Justice recognized the particular rights that The Texas Company of Mexico had over the Zacamixtle lands and, therefore, the non-retroactivity of Article 27 of the Constitution and any other decree on such rights. Unfortunately, this was not the only case of a foreign oil company demonstrating and proceeding legally against the application of the 1917 Constitution; in the vast majority of cases, an award favorable to private interests was issued. The Mexican government didn't claim ownership of all the oil in the Mexican subsoil until the just and necessary oil expropriation.