Environmental Law 2019 Comparisons

Last Updated December 07, 2018

Contributed By Baker McKenzie

Law and Practice

Authors



Baker McKenzie has an environmental practice group in Mexico comprised of seven practitioners, three of whom work in the Mexico City office, two in the Tijuana office, one in Guadalajara and one in Monterrey. The Mexico team works closely with Baker McKenzie’s global environmental practice group, which spans several key jurisdictions, including the USA, Canada, Brazil, the EU and countries in the Asia-Pacific region. Its key practice areas are environmental impact permitting; risk evaluation and prevention; land use/zoning; air emissions permitting and compliance/climate law; water and wastewater permitting and compliance; waste handling and disposal; site remediation; toxic, flammable and explosive substance permitting; occupational health and safety; and administrative, civil and criminal litigation.

The most important principle governing environmental protection in Mexico is enshrined in the country's Constitution. Article 4 states that every person has a right to a healthy environment for his or her development and well being and that it is the government's responsibility to ensure that this right is afforded and protected.

All activities that may adversely affect the environment and public health must be carried out in compliance with applicable environmental laws and regulations. Since 1988, Mexico has enacted a considerable number of laws, regulations, directives and standards that have as their main purpose ensuring that air quality is satisfactory, that water and waste-water are not contaminated, that wastes are properly handled, recycled and disposed of, that contaminated soils are remediated, and that all activities that may generate adverse environmental impacts secure the required authorisations prior to initiating. The most important environmental laws in Mexico include the General Ecological Balance and Environmental Protection Law (the "General Law"), the Federal Environmental Liability Law (the "Liability Law"), the General Law of Waste Prevention and Integral Management (the "Waste Law") and the Climate Change Law, as well as a set of specific laws for the hydrocarbon sector. In addition, all of Mexico's 32 states have enacted their own environmental laws and regulations.

Mexico is also a party to the most important international environmental treaties and agreements, such as the Paris Climate Agreement, the North American Agreement on Environmental Cooperation (NAAEC) with the USA and Canada, the Agreement on Cooperation for the Protection and Improvement of the Environment in the Border Area (also known as the "La Paz Agreement") with the USA, the Marpol Protocols to Prevent Pollution from Ships, and the Basel Convention on the Control of Transboundary Movements of Hazardous Wastes and Their Disposal.

In addition, Mexico has developed and enacted regulations, directives and more than 100 standards covering a number of areas and topics, such as those that set maximum allowable limits for waste-water and pollutant air emissions, and some that establish remediation action limits and set criteria to determine whether waste are hazardous.

The most important legal developments in Mexico in recent years have been in the area of access to environmental justice as well as the creation of a new environmental agency regulating the hydrocarbons sector.

In 2011, collective actions on environmental matters were introduced in Mexico, granting legal standing to groups of 30 or more individuals, environmental enforcement agencies and non-governmental organisations to file civil actions against parties that cause environmental damage. In 2013 the Liability Law was enacted, establishing more precise legal guidelines on determining the existence of environmental damage and making it possible for any party affected by acts or omissions that degrade the environment to go to court and force a polluter to carry out restoration or compensation activities.

The Liability Law included for the first time a definition of environmental damage. According to Article 2, it is defined as "adverse and measurable loss, change deterioration, detriment, affectation or modification of habitats, ecosystems, natural resources and elements, their chemical physical or biological conditions, of their interaction as well as of the environmental services they provide".

No environmental damage is deemed caused if it is reported in advance to regulators when applying for an environmental impact authorisation, or if the maximum allowable pollutant limits established in applicable Mexican Official Standards are not exceeded.

In 2014, as a result of the much awaited energy reform that opened the oil, gas and power sector to private participation and investment, the National Agency of Industrial Safety and Environmental Protection of the Hydrocarbons Sector ("ASEA") was created.

ASEA is the agency that regulates the oil and gas sector. It has a dual role: (i) regulatory, allowing it to issue environmental authorisations and licences; and also (ii) enforcement, having a legal mandate to conduct inspections and impose penalties to individuals or entities that breach environmental laws.

There are questions on the constitutionality of the law that created ASEA, because the fines that the agency may impose on the oil and gas sector far exceed those that may be imposed to other sectors and activities in Mexico, such as industrial operations, mining activities or the power sector. It is because of this that Mexico's Senate passed in September 2016 a number of amendments to Chapter VI of the General Law that include fines equivalent to the ASEA Law for parties that cause contamination. This bill has not been approved by Mexico's Chamber of Deputies.

ASEA is playing a key role in ensuring that all activities dealing with oil, gasoline, and gas exploration, extraction, transportation and distribution fully comply with environmental laws and regulations.

As stated above, the Mexican Senate passed a bill amending Chapter VI of the General Law, which regulates administrative procedures and establishes penalties for violators of federal environmental laws. Among the most important amendments are the following.

Fines for environmental violations will increase substantially if the bill passes. Currently, the maximum fine that may be imposed is equivalent to 50,000 times an UMA (measurement and updating unit), which amounts to MXN4.05 million (approximately USD225,000). The new maximum fine amount will be 7.5 million times an UMA, which will be roughly equal to MXN566,175,000 (approximately USD31 million).

New rules for conducting regulatory inspections are introduced, simplifying and consolidating in one single inspection the procedures contained in several environmental laws dealing with waste, forest development, national assets, biosafety, wildlife and climate change, as well as guidelines for administrative procedures which will become more in tune with the Federal Environmental Liability Law. New criteria on how companies may be liable for environmental damage will also be introduced. There are also important developments on the energy sector, particularly in the area of risk assessments. New administrative provisions have been unveiled by ASEA requiring oil and gas companies to prepare comprehensive risk assessments in order to prevent or mitigate risks to the environment and human health.

Also, as part of the amendments to Chapter VI of the General Law, the concept of "presumption of innocence" is introduced on administrative procedures; it will require regulators to demonstrate that a party is causing environmental damage before being able to issue penalties.

Several international NGOs have been active in Mexico along with national and regional ones focusing on many issues, such as access to environmental justice, waste minimisation and disposal, air quality and water resources.

NGOs have traditionally focused their efforts on lobbying the government to be more aggressive in its enforcement of environmental laws. Since environmental laws, and specifically the Liability Law have granted environmental NGOs legal standing to go to court on behalf of communities that may suffer environmental damage, their environmental oversight role has increased as well as their active participation in the Mexican court system. This trend will likely continue in the coming years.

At a federal level, the cabinet agency in charge or overseeing environmental policy in Mexico is the Ministry of Environment and Natural Resources ("SEMARNAT"). There are two de-concentrated agencies within SEMARNAT: one is the Federal Bureau of Environmental Protection ("PROFEPA") which is SEMARNAT's enforcement arm, and the other is the National Water Commission ("CONAGUA") which is the agency that establishes federal policy in the area of water and also regulates waste-water discharges into federal water bodies or federal land (discharges into municipal sewage systems are regulated by state or municipal agencies).

ASEA is the environmental agency that oversees the oil and gas sector and has a mandate to issue environmental permits and authorisations as well as to conduct inspections and impose penalties.

All of Mexico's 32 states have their own environmental agencies that regulate all matters that do not fall under the control of federal environmental authorities, for example, waste-water discharges into urban sewage systems, stationary air emission sources under state control, and non-hazardous waste-handling and disposal.

Many municipalities also have their own environmental agencies that regulate matters that are not reserved to federal or state authorities.

Mexico's Constitution requires that all acts of authority be properly grounded and supported in law. Therefore, all laws have to be clear as to the attributions they may grant to government agencies to perform their regulatory duties. Environmental agencies in Mexico have broad powers to investigate incidents that may cause environmental damage or that may breach laws or permits. They must act in a way that is consistent with the specific areas over which they have legal standing. For example, federal environmental agencies cannot enforce state environmental laws and may only act within the scope of their specific attributions.

Agencies can carry out regulatory inspections at any time and may also act upon becoming aware of an incident that may constitute a breach of law. They may impose penalties and in some cases revoke or suspend permits or authorisations or order the temporary shutdown of a source or location where environmental damage is being caused; they are also empowered to file civil actions on environmental matters and to file criminal complaints if they have reason to believe that certain acts or omissions constitute crimes against the environment.

Generally, environmental agencies initiate their investigations through regulatory inspections. If violations are detected, the inspected party is given an opportunity to present evidence on its behalf and an administrative procedure may be initiated. In many instances a procedure concludes with an agency issuing a resolution containing penalties (which may be contested by the allegedly culpable party). Prior to an administrative resolution being issued, it is possible for the inspected party to request the execution of a compensation agreement with the agency, limiting liability on the grounds of such an agreement.

There are instances, however, in which individuals or entities are given the opportunity to correct their violations without penalties being imposed and, in some cases, they may carry out voluntary audits to detect possible violations and may enter into agreements to implement any necessary actions to become fully compliant.

On the other hand, in the area of civil liability, judges may allow the entering of a settlement agreement which may put an end to a trial, in which a defendant agrees to carry out all mitigation or compensation actions; these may be in the form of negotiated settlements allowed for under rules governing collective actions or civil lawsuits under the Federal Environmental Liability Law.

According to the General Law, any activity that may cause environmental damage or that may adversely affect an ecosystem is required to be evaluated in the area of environmental impact. In some instances, if an activity may not cause significant environmental impacts a more simplified approval process may be put in motion (by filing a preventive notice in lieu of an environmental impact manifest), but in the case of projects that because of their nature may generate significant environmental impacts (such as industrial or energy projects, large-scale tourism developments or infrastructure), a comprehensive environmental impact manifest must be prepared in order to obtain an environmental impact authorisation. The General Law also describes the circumstances under which a project may not require an authorisation of the Environmental Impact or the cases when it may be exempted.

Activities or projects that require an environmental impact authorisation either from ASEA or SEMARNAT, are:

  • hydraulic projects, general means of communication, oil, gas and coal pipelines;
  • oil and petrochemical industries as well as chemical, steel, paper, sugar, cement and power industries;
  • exploration, exploitation and use of minerals reserved to the nation (mining activities and nuclear power projects);
  • hazardous and radioactive waste treatment, confinement or elimination installations;
  • forestry projects in tropical areas, jungles and arid zones;
  • industrial parks where high-risk activities are to be carried out;
  • real estate projects that affect coastal ecosystems;
  • activities or projects in wetlands, mangroves, lagoons, rivers, lakes and basins connected to the sea, as well as in coastlines and federal zones;
  • works or projects in federal natural protected areas;
  • fisheries, aquaculture, agriculture or farming that may put at risk the preservation of one or more species or damage ecosystems;
  • works or projects under federal control that may cause ecological imbalances.

Activities not expressly subject to federal control are subject to state oversight, such as industries not listed in the General Law, discharges of waste-water into municipal or urban sewage systems and the handling and disposal of non-hazardous wastes.

Almost all activities that may in one way or another cause some sort of environmental impact require an environmental impact manifest or assessment.

The process of securing an environmental permit is clearly specified in each law and regulation. It generally begins with an application being submitted and an agency initiating a review process. In the area of environmental impact evaluation, there is also a public review process that must be carried out in which the applicant is required to disclose to the public information on the mitigation activities it will carry once the authorisation is issued.

In some instances, particularly in the case of large-scale projects, federal agencies may organise public meetings in which any member of a community that may be affected by a project may ask questions and receive information on how a permit holder intends to mitigate or reduce any environmental damage.

Also, a party that considers that a project may be environmentally damaging may appeal the validity of an environmental permit or permitting decisions, aside from having legal standing to go to court, in accordance with the Federal Law of Environmental Liability or rules governing collective actions.

A permit applicant may also file an appeal, recourse or initiate an administrative procedure if it is denied the issuance of a permit from a regulatory agency. Appeals must be submitted within 15 business days after being notified of a denial and an annulment complaint (filed before a Federal Administrative Justice Court) must be filed within 30 business days.

An integrated permitting regime is in place, particularly at a federal level (although some states also have a similar regime). A consolidated environmental licence (Licencia Ambiental Única) is required to operate a stationary federal air emission source and is issued either by SEMARNAT or by ASEA. This licence also covers waste-water discharges into federal water bodies as well as hazardous waste generator registrations.

In some cases it is necessary to secure other authorisations, such as an environmental risk assessment or a forestry land use change authorisation in parallel with the environmental impact authorisation.

Some environmental permits are transferable. For example, a federal environmental impact authorisation may be transferred by simply submitting a written notice to SEMARNAT or to ASEA, in which the transferee agrees to abide by all of the requirements contained in the authorisation. Other permits require agency approval to be transferred. Consolidated environmental licences are not transferrable.

In the case of a transaction involving the purchase of stock of a company holding environmental permits, there is no legal requirement to provide a notice to regulators or to seek the transfer of permits. However, in the case of an assets transfer, permits must be transferred or re-issued in favour of a purchaser. In many cases regulators will agree to re-issue a permit but there are instances in which they may require new permit applications to be submitted by a purchaser.

Many environmental permits are time-limited. Environmental impact authorisations or water concessions generally establish a specific validity term (covering a project's construction and operation) and a set of conditions to be complied within a specific timeframe. Other permits, such as air emission licences do not contain expiration terms and are valid for indefinite terms or until the permitted activity ceases. In many instances, environmental permits contain specific record-keeping and compliance requirements that must be met in order for them to continue to be valid and enforceable.

In most cases, breaching a permitting requirement may bring about a fine, but if the permitting violation also involves a serious breach of environmental law, an agency may order the temporary or permanent shutdown of a site, the seizure of polluting equipment, the implementation of remedial requirements or the revocation of a permit. Causing environmental damage may also bring about economic penalties that may be imposed by civil judges, as well as ordering restoration or mitigation activities.

There are three types of liabilities that may be imposed to any party that causes environmental damage or breaches environmental laws.

Firstly, administrative – this is the more common form of liability and generally involves fines, temporary shutdowns, the seizure of pollutant sources and the revocation of environmental permits. Administrative liability is imposed by regulatory agencies, such as PROFEPA or ASEA.

Secondly, civil – this is becoming more widespread; it results from civil lawsuits, either in the form of collective actions or those that are based on the Liability Law, and generally results in judicial rulings ordering polluters to carry out restoration, compensation or remediation requirements, and in some cases to compensate plaintiffs in a collective action.

Thirdly, criminal, which stems from carrying out acts that are considered environmental crimes. This type of liability involves prison sentences that may range from three months up to 12 years, as well as fines.

The Waste Law states that owners or operators of a contaminated site are jointly liable for remediation, regardless of fault and irrespective of historic environmental contamination. They, in turn, can bring an action against the party that caused contamination.

The Waste Law requires that SEMARNAT or ASEA be notified if a contaminated property is to be transferred. SEMARNAT and/or ASEA must approve the transfer; however, failing to secure this authorisation will not prevent the transfer from taking effect. It also requires a seller or transferor to inform a buyer (or transferee) of the environmental conditions of a site being acquired. The parties must agree on who will be responsible for remediating a contaminated site.

If the seller fails to inform a buyer of the environmental conditions of a site and it turns out the be contaminated once it has been transferred, the seller will be liable for remediation.

Liability for environmental damage is strict. A polluter is required to pay and, in some cases, liability is objective (such as when damage is caused by handling hazardous materials or waste). Liability may be administrative, civil or criminal. Liability for environmental incidents or damage is generally limited to carrying out restoration, remediation or compensatory activities and ordering, in some cases, the payment of fines or economic penalties (punitive damages are rare, but may be awarded – see below, 9.2 Exemplary or Punitive Damages).

It should be noted that economic penalties may be substantially reduced by a court order, if the party at fault (i) has purchased environmental insurance, (ii)  has been audited by PROFEPA and has secured a Clean Industry Certificate, and (iii) has implemented an environmental management programme.

In the case of a resolution imposing administrative liability (such as a fine), it may be contested through a recourse or an annulment complaint (at a federal level) filed before an administrative court. A final defence may be in the form of an "amparo" lawsuit filed before a federal circuit court, particularly if there may be constitutional violations incurred by a regulatory agency.

A civil judgment (requiring the remediation of a contaminated site, for example) may be contested through an appeal before a superior court and also through an amparo lawsuit. It is important to add that the statute of limitations in the area of environmental damage is 12 years as of the moment when damage is caused or its effects cease.

In the case of a criminal judgment imposing a prison sentence, an appeal can also be heard before a state or federal superior court and through an amparo lawsuit.

A mining company in the State of Sonora was ordered to carry out remediation activities after being found responsible for discharging toxic substances into a river. PROFEPA  imposed fines as well as remediation requirements and a federal civil judge ordered it to pay an economic penalty in the range of USD3 million.

Also, more than 350 companies (of which 80 are mining companies) have been cited for environmental violations in the State of Zacatecas alone, according to PROFEPA. Most of them have been ordered to pay fines for spilling toxic substances.

In 2017 PROFEPA ordered the shutdown of up to 166 companies in the states of Puebla, Tlaxcala, Guanajuato, Jalisco, State of Mexico, Michoacán and Querétaro, all for contaminating several rivers in Mexico. It also imposed severe fines on each.

In 2018, PROFEPA entered into a compensation agreement with a manufacturing Company in the State of Veracruz setting a limit to administrative liability.

In 2017 PROFEPA imposed a penalty of USD25,000 to a hotel developer in Cancun as a result of environmental damages not foreseen in the environmental impact authorisation. Likewise, the Port Administration in such entity was also penalised USD15,000 for environmental damages resulting from activities executed without a proper impact authorisation.

The Federal Environmental Liability Law provides that legal entities are liable for environmental damage caused by their legal representatives, directors, administrators, managers, directors, employees and by any party having functional control over their operations, if such persons are either careless or acting in accordance with their functions. The law does not name shareholders as parties that may be liable for environmental damage caused by companies or legal entities.

Officers, employees and agents are generally liable for:

  • negligence or misconduct when carrying out their duties;
  • breaches of instructions received from a company;
  • actions which exceed their authority; and
  • (solely for officers, examiners and similar organs) allowing, within the scope of their functions, violations to the Environmental Crimes Chapter of the Federal Criminal Code.

There is no piercing of the corporate veil on environmental liability matters in Mexico. However, in several occasions the authorities have summoned the shareholders of a particular company to the administrative procedure or judicial trial in order to negotiate an agreement with such company.

Under the Federal Environmental Liability Law, directors and other officers may be ordered to pay fines of up to 50,000 times a measurement and updating unit (UMA) for each violation (equivalent to around USD4.1 million), aside from facing criminal liability in some instances.

Criminal Law also contemplates the feasibility to directly penalise directors, officers, or any person that ordered an action that caused an environmental damage.

Individuals may purchase environmental liability insurance or in some case may acquire surety bonds to cover against environmental damage that may be caused as a result of breaching a legal obligation or an environmental permit.

Employees, directors or representatives of financial institutions could be liable for environmental damage or breaches of environmental law if they have been instructed to carry out actions that result in environmental damage. Financial institutions or lenders could be ordered to undertake site remediation activities if they own or occupy a contaminated site as a result of a financial arrangement, lien or other type of agreement.

Also, if a financial institution holds title over a contaminated site as a result of a mortgage guarantee or any other type of guarantee, it may be liable for carrying out remediation activities because of the strict liability provisions established by the Waste Law.

Lenders can protect themselves by incorporating adequate indemnity and release language in credit or loan agreements, making the debtor or actual occupier of a site liable for carrying out remediation or compensation activities and securing a release from any and all liability associated with contamination or environmental damage.

In Mexico, financial institutions are not legally required to adopt the Equator Principles. However, many of these institutions consider such regulations as a good practice when authorising different transactions. Among other things, the Equator Principles require financial institutions to comply with local environmental regulations within their activities.

Civil claims for compensation may be brought in cases in which an individual or entity may cause environmental damage, taking into account the definition established by the Liability Law (see above, section 2 Enforcement).

Liability in most cases is subjective, except when handling hazardous materials or waste, when carrying out high-risk activities, when operating vessels in coral reefs or when operating machinery or equipment that may cause environmental damage.

The claim may be brought by an individual or by a group of 30 or more individuals through a collective action. A judge must "qualify" the complaint to make sure that the groups has proper standing or, if it is being represented by an NGO, that it has been formed and registered to deal with environmental protection matters.

The general rule is that if it is proven that there was environmental damage caused, a judge should order either restoration or compensation activities. Restoration implies returning a site to the state it had prior to the damage being caused, but if this is not possible, compensation may be required.

Mexican environmental laws have traditionally not contemplated exemplary or punitive damages. However, the Mexican Supreme Court ruled in 2016 that in certain cases it is permissible to award punitive damages, particularly in cases of gross negligence. Even though this ruling was not properly an environmental case, it opened the door to civil courts awarding large sums to plaintiffs that are successful in showing that certain acts or omissions incurred by defendants have caused serious environmental damage. Courts have the prerogative of awarding punitive (or moral harm) damages at their discretion.

As mentioned, under the Liability Law, collective actions may be brought for environmental claims. A group of 30 or more individuals, along with NGOs duly registered, as well as regulatory agencies, may file a collective action against a party accused of causing environmental damage.

Collective actions may be brought to safeguard:

  • diffuse and collective interests, which are defined as those that are of an indivisible nature, held by a specific or unspecified group of persons, all of them related by common factual or legal circumstances; and
  • individual rights and interests, but with a collective incidence, defined as those of a divisible nature, held by individuals that are identifiable members of a group of persons, all related by legal circumstances.

The statute of limitations for filing collective actions is three years and six months from the moment when damage or injury was caused. However, in the case of damage or injury having continuous or ongoing effects, the term will run as of the last day (or more recent day) in which the damage has been caused.

A federal judge may issue any of the following rulings once the procedural and probative phases have concluded:

  • in diffuse actions, a judge may only condemn a defendant to repair the damage caused to the group, consisting in restoration to the state existing prior to the damage having been caused, if at all possible – if this is not possible, a judge may impose substitute compliance (monetary compensation), taking into account the rights and interests of the group;
  • in collective actions in a strict sense, as well as in homogeneous actions, a judge may order that the defendant repair the damage, by carrying out one or more actions or by requiring that each individual be compensated.

Most cases in Mexico have focused on the area of consumer protection. However, by the end of 2015, an explosion in an oil platform of PEMEX caused an NGO (ONG in Spanish) to file a collective claim against such entity, seeking that PEMEX undertake remediation or at least compensation and that fisheries be compensated for harm caused to their livelihood.

Indemnities and the like can be used to transfer or apportion liability. However, these may have very little binding effect or influence over regulators or even civil judges. For example, regulators or judges may require an owner or occupier of a contaminated site to remediate it, irrespective of a contractual arrangement with a third party. It will be up to the parties entering into the agreement – and not regulators or judges – to ensure that the contractual obligations are met.

For example, in the case of an environmental permit granted to an oil company to drill for oil offshore, that company may hire a third party to conduct the drilling and may enter into a service agreement containing a number of environmental indemnity provisions, making the contractor liable for remediation in case of an oil spill. However, in the eyes of regulators such as ASEA, if there is an oil spill the permit holder will be the liable party and may face civil or even criminal liability in the case of serious environmental harm, notwithstanding any contractual arrangement that may be in place.

Environmental insurance is readily available in Mexico. There are a number of carriers that offer coverage for any of the following risks:

  • personal or material damage;
  • remediation costs;
  • civil liability for environmental damage;
  • liability for economic loss; and
  • environmental liability arising from the conditions of environmental impact authorisations.

Also, ASEA has unveiled administrative guidelines that establish the amounts that insurance must cover against losses and damages caused by parties that carry out activities relating to the hydrocarbons sector ("Regulated Entities").

Regulated entities must register their insurance policies with ASEA prior to carrying out any works or activities. If regulated entities have already secured a valid insurance policy as of the date of publication of the guidelines, they may register it with ASEA, and at the end of the term of the insurance policy, the corresponding adjustments must be made in accordance to the guidelines.

The guidelines state that regulated entities must purchase insurance if they carry out any of the following activities:

  • natural gas compression, liquefaction, decompression and regasification, as well as transportation, storage, distribution and retail;
  • transportation, storage, distribution and retail of petroleum products; and
  • pipeline transportation and storage linked to petrochemical pipelines, oil refining products and natural gas processing.

Insurance limits will be set: (i) in accordance with results of a likely maximum loss study or (ii) based on the liability limits established the guidelines. Maximum coverage may be USD1 billion in the case of ocean tankers weighing 15,000 GT.

Most environmental impact procedures require the preparation of a technical economic study to determine the amounts of insurance to be approved.

The main law governing contaminated land is the Waste Law and its regulations, along with standards that establish maximum allowable pollutant limits in soils.

Regulators generally go after owners or occupiers of a contaminated site when requiring remediation activities to be undertaken, because the law makes them liable for remediation regardless of fault. In some instances they will also impose penalties against parties that are known to have caused soil or groundwater contamination.

The Waste Law defines a contaminated site as "a place, space, soil, water body, installation or any combination thereof that has been contaminated with hazardous materials or wastes that, because of their quantities and characteristics, may represent a risk to human health, living organisms and the use of personal goods or properties." The authority in particular keeps a record of contaminated lands.

A legal requirement for remediation may be ordered when a site characterisation study reveals that there are pollutants in the soil in quantities or concentrations exceeding the maximum allowable limits established by applicable standards or in the absence of a standard, if the conclusions contained in a human health and risk study make remediation necessary to protect the environment or human health.

There are two standards that establish maximum allowable limits for pollutants in soils. One is NOM-138-SEMARNAT/SASH-2012 that establishes maximum limits for hydrocarbons in soils, and the other is NOM-147-SEMARNAT/SASH-2004 that establishes maximum allowable limits for heavy metals. If there are other pollutants in soils that may pose a risk to human health or the environment, a human health and risk assessment may have to be carried out.

Parties liable for remediating contaminated land include:

  • any party that causes soil contamination whether wilfully or by negligence – this party may also incur administrative, civil or even criminal liability if environmental damage is caused;
  • owners or occupiers – if they did not cause contamination then their obligation is solely limited to remediating the site; and
  • holders of a concession over federal land.

Owners and occupiers are jointly liable for remediation of contaminated land. However, there are no clear rules on how the liability is apportioned. This is why it is important to define these issues with appropriate contractual indemnity language.

In order to be able to get a regulator or a court to force an original polluter, former landowner or any or the person to remediate, the liable person will have to demonstrate that any of them caused contamination or environmental damage; in the case of the former owner, if it failed to disclose the environmental conditions of the site, prior to its transfer of ownership, it may be liable for remediation in accordance with the regulations to the Waste Law.

Contractually, remediation liability may be transferred to a purchaser from a polluter or landowner. Also, a written notice may be submitted before ASEA or SEMARNAT making a purchase liable for any remediation required over a purchased property.

The Climate Change Law provides that it is in the country's strategic interest to carry out actions designed to mitigate or compensate for climate change and to develop the corresponding technical, as well as economic, instruments. Also as a signatory to the Paris Climate Agreement, Mexico has agreed to contribute to fighting climate change and reducing greenhouse gas ("GHG") emissions within the country and to implement mitigation and compensation policies.

The Climate Change Law sets an aspirational 30% greenhouse gas reduction target by 2020, increasing to 50% by 2050 with regard to the year 2000 emissions. These targets may be achieved if an international regime is in place that provides for financial and technological support afforded by developed countries.

The Mexican government is requiring that emitters of 50,000 MT of GHGs a year report their emissions. This is widely seen as a prelude to a future emissions trading scheme.

Currently, the government has a target for 35% of the nation's energy output to come from renewable or "clean" sources by the year 2024.

There are currently no laws establishing a mandatory emissions trading scheme in Mexico. However, in August 2016, the Mexican Stock Exchange and SEMARNAT unveiled a pilot programme to develop a carbon market in Mexico so that the private sector may reduce its GHG emissions and remain competitive in a global environment. At this time, however, such pilot programme has not started and is only a virtual exercise among the parties involved. There is, however, a voluntary market of emissions enacted which is administered by MexiCO2, a company created by the Mexican stock market. This company also has a market specific for the renewable energy sector.

It is unclear whether the new administration of President Andrés Manuel López Obrador – whose term of office began on 1 December 2018 – will ratify these targets or establish new ones.

Asbestos fibres are considered hazardous waste once they are free from the areas or places where asbestos is affixed, present or found and must be handled, contained, transported and disposed of in compliance with federal regulations.

There are no asbestos abatement regulations in Mexico. Occupational health and safety laws require workers that are exposed to asbestos fibres to wear protective equipment and to undergo medical examinations if exposed to certain quantities.

There is one Mexican Official Standard that regulates the sanitary requirements for the processing and use of asbestos: NOM-125-SSA1-2016.

It is important to add that, since 2011, the government of Mexico City began promoting preventive actions to reduce diseases caused by the use of asbestos.

There are no specific asbestos removal requirements in Mexico except when it becomes a hazardous waste, or in an emergency situation where the levels of asbestos are surpassed in specific areas.

Asbestos litigation cases are not common in Mexico. However, under Mexican employment laws, employees may terminate a labour agreement if an employer fails to provide a safe and hygienic working environment or fails to comply with applicable Mexican occupational health and safety regulations and standards.

We are not aware of any such cases involving asbestos exposure.

We are not aware of any significant cases of asbestos liability in Mexico.

The Waste Law and its regulations establish the basic legal framework regarding the generation, handling, management, containment, transportation and disposal of hazardous and non-hazardous waste in Mexico. There are also a number of standards containing criteria to determine if a waste may be hazardous as well as on containment and disposal requirements for specific types of waste.

States have also enacted laws establishing handling, transportation and disposal requirements for non-hazardous and municipal wastes.

A producer or consignor of waste retains liability for waste only if it has hired disposal services from a party that lacks the required licences to store, transport and dispose of waste, or if it has sent waste to a location lacking a licence to receive it. Also, consenting to the transportation of hazardous waste to an unlicensed site is a federal crime, punishable by a prison term of one to four years.

Certain wastes are subject to specific management (including take-back) requirements. Generators, producers or owners of these wastes must prepare and file waste management plans, specifying how these wastes are to be managed.

Producers, importers, exporters and distributors of goods that at the end of their life cycle become hazardous wastes are also required to prepare management plans. 

Among the wastes that must be included in management plans are: spent oils, used organic solvents, catalytic converters, mercury or nickel-cadmium batteries and pesticides. Waste management plans must be registered with SEMARNAT, ASEA or with state or municipal agencies in the case of certain non-hazardous wastes.

Accidental releases of waste-water, as well as of hazardous materials or wastes, must be reported to regulators, and all actions designed to reduce or minimise environmental damage must be implemented.

In the case of an accidental hazardous waste spill covering an area not exceeding 1 M³, generators or transporters must immediately carry out the necessary actions to minimise and limit its dispersion and clean up the affected area.

If the spill covers a large area, PROFEPA or ASEA must be immediately notified so that they may adopt the necessary actions to prevent damage from being caused, in co-ordination with the parties causing the spill.

According to the General Law, and the Law of Access to Public Information, any person has the right to have SEMARNAT, as well as other federal or state environmental agencies, put at his or her disposal any environmental information requested. Any petition must be in writing, specifying the type of information being requested and the reasons behind the request.

In some instances, regulatory agencies may deny access to information if it is deemed of a confidential nature or if its disclosure may damage third-party rights.

Companies that generate air emissions, waste-water discharges or that produce waste are legally required to submit annual reports to the government in the form of yearly operating reports (Cédulas de Operación), describing the quantity and type of pollutants and the different sources from which they stem.

Information furnished is fed into an emissions and pollutants transfer registry, which may be consulted by any interested party.

On the other hand, it is common to disclose environmental liability on the financial statements of the company on the grounds that such information may affect the value or constitute a liability for the company or group.

Particularly when purchasing or leasing land, environmental due diligence is conducted on M&A, finance and property transactions in order to determine whether there may be any type of remediation liability.

It is also customary to conduct a permit review in order to determine if the target company is in compliance with relevant permitting and compliance requirements and if it has incurred any type of environmental liability.

A buyer may incur environmental liability for historic environmental damage, because under federal law an owner or lessee of a contaminated site are jointly liable for its remediation, regardless of fault. This is why it is important to conduct proper due diligence prior to purchasing a site and, in some instances, carry out a site characterisation study that will help determine if remediation may be warranted.

If a seller fails to disclose to a buyer the fact that a site was contaminated prior to its transfer, it will retain environmental liability for historic environmental damage if the buyer discovers that the site was contaminated and that the contamination was generated prior to the transfer. This, according to the Waste Regulations. Likewise, in the absence of an express agreement to determine which party is liable for remediation of a polluted site, the seller retains liability for such remediation.

In the interest of environmental due diligence, a purchaser can investigate to determine if a site may be contaminated, because of the remediation liability that owners or occupiers have, regardless of when contamination occurred. Typically the purchaser requests the execution of a site characterisation study. In addition, a permitting review should also be conducted, in order to determine whether the company in question is legally authorised to operate and whether the permits are in full force and effect.

As a general rule, the seller is not required to disclose any environmental information to a purchaser. However, if a seller has knowledge that a site being purchased is contaminated, it should make a buyer aware of this situation and the notary public that formalises the transaction is required to register such circumstance in the corresponding deed. This may allow for the seller and purchaser to contractually agree to who will be responsible for its remediation. Under Mexican law, SEMARNAT must authorise the transfer of a contaminated site. However, lack of this authorisation will not prevent the transfer of property having legal effects.

As stated above, if a seller fails to disclose to a buyer the fact that a site was contaminated prior to its transfer, it will retain environmental liability for historic environmental damage if the buyer discovers that the site was contaminated and that the contamination was generated prior to the transfer.

Warranties, indemnities or other provisions that may be given during a share or assets sale mainly deal with remediation obligations if a site being sold or transferred is contaminated. It is common for parties to include language on who will be contractually required to undertake remediation or who will indemnify and free the other party from any liability associated with soil or groundwater contamination.

There may also be warranties and indemnities in place if a purchased site it cited or shut down for causing environmental damage that was generated prior to the purchase date, or if regulators impose penalties for violations of environmental laws occurring prior to the deal taking place.

There are no insolvency rules concerning environmental matters or liabilities. However, in certain extreme cases where crimes against the environment are of a very serious nature, judges may order that a company be liquidated as a penalty for causing environmental harm. Also, if there are vacant contaminated sites or the owners are not identifiable, SEMARNAT or ASEA may order the establishment of environmental liens, preventing such sites from being sold or conveyed until they are adequately remedied.

Mexico is yet to establish a comprehensive legal framework in the area of environmental or green taxes, although certain states and municipalities have attempted to impose environmental taxes at one time or another without much success as they have been deemed unconstitutional.

The most clear example of this kind of tax is the carbon fee to the fuel imposed by the federal government, which means that each litre of car fuel is affected by a carbon fee that is included in the Special Tax on Production and Services (IEPS), for the purpose of discouraging the use of fuels.

Baker McKenzie

Edificio Virreyes
Pedregal 24, 12th floor
Lomas Virreyes / Col. Molino del Rey
México City, 11040
Mexico

+52 55 5279 2900

+52 55 5279 2999

federico.ruanova@bakermckenzie.com www.bakermckenzie.com
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Law and Practice

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Baker McKenzie has an environmental practice group in Mexico comprised of seven practitioners, three of whom work in the Mexico City office, two in the Tijuana office, one in Guadalajara and one in Monterrey. The Mexico team works closely with Baker McKenzie’s global environmental practice group, which spans several key jurisdictions, including the USA, Canada, Brazil, the EU and countries in the Asia-Pacific region. Its key practice areas are environmental impact permitting; risk evaluation and prevention; land use/zoning; air emissions permitting and compliance/climate law; water and wastewater permitting and compliance; waste handling and disposal; site remediation; toxic, flammable and explosive substance permitting; occupational health and safety; and administrative, civil and criminal litigation.

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