The Chilean Constitution

Article 19 No 8 sets forth the right to live in an environment free of pollution and establishes that it is the state’s duty to ensure both the preservation of nature and that the environment is not negatively affected.

Article 20 guarantees compliance with this duty by granting a very strong and effective constitutional action against those who have illegally polluted or harmed the environment.

Law No 19,300

The Constitution is further detailed in Law No 19,300 on General Bases of the Environment, which outlines the main aspects of several mechanisms to protect the environment, such as:

• the Environmental Impact Assessment System (Sistema de Evaluación de Impacto Ambiental – SEIA);
• Strategic Environmental Assessment for any policy that could intervene or affect environmental components;
• environmental audits;
• environmental responsibility; and
• emission standards.

It also details the functions, organisation and other aspects of the Ministry of the Environment, the “MMA” (policy maker) and the Environmental Assessment Service (SEIA manager).

The key principles of environmental law in Chile are also found in Law No 19,300, including the preventative principle, the participation principle and the efficiency principle, among others.

Supreme Decree No 40/2012

This decree details several aspects of Law No 19,300, specifically regulating the SEIA, and the type of projects that must be environmentally assessed to obtain an environmental permit, known in Chile as an RCA. During the assessment, several public agencies review the project and verify that it complies with the legislation and does not affect the environment, all within their legal jurisdiction.

Law No 20,417

This law regulates the Superintendence of the Environment (Superintendencia del Medio Ambiente or SMA) that oversees environmental compliance. Thus, it regulates inspections, sanctioning procedures, fines and compliance incentives.

Law No 20,600

This law regulates the Environmental Courts established in the country. There are currently three Environmental Courts in Chile, with jurisdiction in the northern (Antofagasta), central (Santiago) and southern (Valdivia) regions. The Environmental Courts are collegiate bodies formed by three judges, two being lawyers and one having a degree in science.

It is important to note that, as this legislation is relatively new, the contours of the right to live in a pollution-free environment, and of environmental law in general, have been defined, in many respects, by jurisprudential criteria. Therefore, the Environmental Courts and the Supreme Court play an important role in the construction of environmental law application criteria, permanently shaping the limits and powers of each environmental agency when they regulate an issue or adjudicate over a dispute. They are not part of the executive branch; they are independent and impartial.

Ministry of the Environment

The Ministry of the Environment is the main environmental policymaker, focusing on the protection and conservation of biological diversity, renewable resources, water sources; the promotion of sustainable development; and the remediation, decontamination, restoration and recovery of the environment, with a special emphasis on sacrifice zones and river basins.

Environmental Assessment Service or SEA

The SEA is another key regulatory authority. It manages the SEIA, and the process of public and, when applicable, indigenous participation in the SEIA in accordance with ILO Convention No 169. The SEA authority also manages public information of all assessed projects and keeps a public register of certified environmental consultants.

It is also in charge of drafting guidelines that standardise and unify criteria for the application of environmental law. Finally, the SEA clarifies the true meaning of any environmental permit (RCA or Resolucion de Calificación Ambiental), whether it refers to its content or to its text.

SMA

The SMA is in charge of overseeing compliance with all environmental permits; all the environmental and sectoral legislation included within these permits, and any project that should obtain an RCA but does not have it. It is entitled to impose significant fines and penalties, which, depending on the severity of the non-compliance, can reach up to 10,000 Yearly Tax Units (approximately USD8 million) per charge, mean the cancellation of the RCA, or the temporary or permanent closure of facilities.

Other Sectoral Authorities

Other sectoral authorities with environmental jurisdiction include:

• the Biodiversity and Protected Areas Service (law still not published in the official gazette);
• the General Board of Water (Dirección General de Aguas – DGA);
• the Agricultural and Livestock Service (Servicio Agrícola y Ganadero – SAG);
• the National Corporation of Forestry (Corporación Nacional Forestal – CONAF);
• the National Service of Geology and Mining (Servicio Nacional de Geología y Minería – Sernageomin); and
• National and Regional Health Agencies.

Ministry of the Environment

The Ministry of the Environment creates policy, among other means, by debating relevant or urgent matters with other authorities. Members meet through the Council of Ministers for Sustainability, which is chaired by the Minister of the Environment and includes the following Ministers:

• Agriculture;
• Finance;
• Health;
• Economy, Development and Tourism;
• Energy;
• Public Works;
• Housing and Urban Development;
• Transportation and Telecommunications; and
• Mining.

The main functions of this Council are to propose environmental public policy to the President of the Republic, and to give its opinion regarding environmental bills and administrative acts.

The SEA

The SEA manages the SEIA, which includes the environmental assessment of all projects that need an RCA to operate. During the assessment, the SEA asks all sectoral authorities to review the project so they can verify that the project complies with all relevant legislation. If they do not verify full compliance, they will decide against the project when the SEA asks them to grant the RCA.

The SMA

The SMA does not have the workforce to oversee every RCA in the country so they delegate to other sectoral authorities to oversee and supervise many of the audits and inspections the SMA would otherwise not be able to do.

Environmental Courts

Environmental Courts have the obligation to confirm or deny the SMA’s harshest measures against RCA sponsors hence they need to co-ordinate beforehand with the SMA the relevant information regarding their decision to impose these measures.

All environmental assets have a general protection through a trilogy of actions:

• the constitutional action;
• the environmental complaint before the SMA; and
• the sectoral specific claim.

That being said:

• water is specially protected by the Water Code and the General Board of Water that oversees its compliance;
• soil does not have a specific legislation nor a special authority;
• flora and fauna have overlapping authorities: the Agricultural and Livestock Service (or SGA) and the National Forestry Corporation (or CONAF); and
• national parks, sanctuaries and other natural habitats are indirectly protected by the Urban Wetland body of legislation.

Specific consequences from any of the sectoral non-compliances previously stated will regularly include minor fines and temporary or permanent closure of facilities. However, if environmental damage is demonstrated, the liable party or parties will be subject to an environmental damage lawsuit.

The enforcement of environmental licences, legal standards and regulations in Chile is carried out by the SMA, which has powers to investigate and prosecute administrative liability if deemed necessary after an inspection or reviewing the company’s documents.

As for its investigative powers, the SMA is the only environmental authority that can request the police to break into private property, gather testimony or documents from witnesses, and compel compliance with requests through the issuance and enforcement of subpoenas.

Regarding its access powers, the SMA has a very strict policy of requiring many follow-up documents from all sponsors of any type of project, which allows the former to have every piece of information they need, and fine the sponsor that does not submit the information in the time allotted by the SMA to do so, even accusing it of not being truthful.

The SMA also manages several reporting and disclosure systems, which operate on web-based platforms and are not publicly available, unless the SMA starts a punitive proceeding against a regulated entity.

The SEIA Environmental Assessment

The SEIA is an administrative process managed by a specialised agency, the SEA, in which several public agencies with environmental jurisdiction make observations within the scope of that jurisdiction, and particularly regarding the environmental impact(s) of the project or activity being assessed. As a result, these agencies can, with respect to the relevant statutes, impose measures and conditions on the project owner to mitigate these impacts.

Article 10 of Law No 19,300 lists the type of projects and activities that must be assessed under the SEIA to obtain an RCA to operate. If the RCA is granted, it will also mean that it should be built and operated while complying with all sectoral and environmental legislation, which in turn will allow the project to request and obtain all of its applicable sectoral permits.

Two Alternatives for an Environmental Assessment: DIA and EIA

A project can enter the SEIA by means of an environmental impact declaration (declaración de impacto ambiental – DIA) or an Environmental Impact Study (estudio de impacto ambiental – EIA). In general, a project that must enter the SEIA will be assessed by a DIA, unless it generates or creates any of the impacts, effects or circumstances described in Article 11 of Law No 19,300, in which case it must be submitted through an EIA.

These impacts, effects or circumstances are significant adverse impacts and include:

• endangerment to public health;
• adverse effects on natural resources; and
• proximity to or location inside protected areas.

The administrative record of the environmental assessment is always publicly available, whether on the website of the SEIA or in the offices of the SEA. In exceptional circumstances, and at the request of the interested party, the authority may keep technical, financial or other background information under reserve so as to protect commercial or industrial confidentiality, or to protect patents or inventions linked to the assessed project or activity.

Community Input

Communities potentially affected by a project under assessment may participate in the assessment, making observations on the project. Communities may always participate in an EIA, and may participate in a DIA only if:

• this is requested by ten directly affected persons, or by two or more citizen organisations with valid legal entity; or
• the project being assessed places an environmental burden on nearby communities.

Whenever an indigenous community is affected by a project assessed in the SEIA, the SEA will open a special participation stage, tailored to the requirements laid out by ILO Convention 169.

Observations and comments made by the community or by indigenous communities will be considered by the SEA as an integral part of the assessment process and must be addressed by the SEA, which must issue a well-founded response to every one of these comments. If the SEA fails to properly respond to any of the observations and comments made by the community, the person who made the observation may file an appeal to invalidate the RCA.

Amendments and Permits

RCA provisions are strictly binding throughout the life cycle of the project. Any significant amendments must be assessed within the SEIA. Where there is doubt over whether an amendment is significant, it is possible to ask the SEA its opinion through a Pertinence Letter or “consulta de pertinencia”. The SEA’s response will not have the status of a permit or an authorisation: it will merely be the opinion of the SEA as to, in light of the information provided, whether the project or amendment studied should enter the SEIA or not.

Within the SEIA process, the project’s owner must also request specific permits for the project. These are sectoral permits that are granted by different sectoral authorities, but have environmental contents. These are called Environmental Sectorial Permits (permisos ambientales sectoriales – PAS), examples of which include:

• permits to cut down native forest;
• permits to build a tailings deposit; or
• permits to build large hydraulic works.

The environmental aspects of those permits are assessed and approved within the SEIA, after which the sponsor will have to request authorisation for the same permit before the sectoral authority, exhibiting the RCA. Although the authority might reject the permit for technical reasons, it will not be allowed to reject the sectoral permit for environmental reasons.

Appeals Process

The project holder may appeal the RCA if it imposes onerous conditions or requirements, or if it rejects the assessment. Appeals against an RCA shall be filed before the Executive Office of the SEA if the challenged RCA was based on a DIA, or before the Council of Ministers if it was based on an EIA. In turn, these decisions may then be reviewed by the Environmental Court, whose decisions are subject to review by the Supreme Court via cassation.

Members of the community that made observations of the assessed project, but feel that their observations were not duly considered during the process, may also appeal the RCA, following the same routes outlined above.

The SMA has always lacked sufficient levels of personnel and resources to exercise all of its powers as the law prescribes. Several programmes and subprogrammes are decided each year to co-ordinate and execute as best as possible all the inspections that are needed to cover claims, complaints, compliance incentives (self-reporting and compliance programmes), and focused economic areas that might be known for operating while non-complying with the law or affecting the environment, and yet it is not even close to the amount of inspections that should be carried out.

The SEA, on the other hand, is in charge of co-ordinating every environmental assessment, for which it needs the help of the public agencies with some degree of environmental jurisdiction. However, these public agencies regularly surpass the scope of their jurisdiction, requiring sponsor information which is environmentally irrelevant or technically unnecessary to the project’s compliance with the law.

RCAs (environmental permits in Chile) may be transferred. The sponsor must inform the SEA of the transfer, and prove that it has complied with all of the RCA’s provisions. If no contingencies are raised by the SEA, they will acknowledge that the transfer has been made, and report to the SMA.

There are no immediate consequences since non-compliance must be first investigated and then sanctioned. Once the breach has been investigated and confirmed, the SMA will file charges against the project, and determine if it can continue to execute/operate, depending on the severity of the non-compliance. In practice, the project will most likely be discredited and, until the sanctioning procedure is over, it will not be executed/operated normally.

The key types of liability related to environmental damage or to the breach of environmental regulations are the following.

Administrative Liability

Administrative liability arises from a breach of environmental regulations, non-compliance of an RCA, or from being liable for an event that has caused environmental damage, notwithstanding civil or criminal liabilities that might arise. As stated in 2.1 Regulatory Authorities, the SMA can investigate any project or activity in order to verify environmental compliance. Note that the SMA usually considers any deviation from the RCA as a breach of its contents.

If a breach is detected, the SMA can file charges against the project owner, starting an administrative procedure that can conclude with penalties ranging from a written reprimand to fines of up to 10,000 Annual Tax Units (approximately USD8 million) per charge, and mean the cancellation of the RCA, or the temporary or permanent closure of facilities.

Furthermore, if environmental damage has occurred but can be repaired, the SMA can order the project owner to execute a repair plan. If the damage cannot be repaired (such as damage to an archaeological site), then the SMA can impose a fine or other measures, such as the ones detailed above.

When indicted, a project holder can also submit a compliance programme to the SMA for its approval. Compliance programmes can be presented only once and cannot cover very serious violations. This plan must be executed in its entirety, and any breach of the programme will result in the reopening of the penalty proceeding and the imposition of up to twice the original fine. If the plan is completely executed, and this is approved by the SMA, then the proceeding will be concluded and no other penalty will be imposed.

Fines and sanctions imposed by the SMA can be appealed to the Environmental Court.

Civil Liability

Civil liability arising from environmental damage is set forth in Articles 51 to 55 of Law No 19,300, according to which, anyone causing environmental damage, whether by malice or fault, must restore or compensate those damages. In addition, any breach of any administrative regulations will result in a presumption of liability. After the Environmental Court has established liability, the affected parties may seek redress according to the general rule before the civil courts.

Criminal Liability

Enactment of Law No 21,595 amends the Penal Code and creates several environmental offences, which can be perpetrated either by people or by companies (starting for companies on 1 September 2024).

A first group of offences relates to projects that:

• have generated a particular type of pollution:
1. discharged polluting substances into the ocean or rivers;
2. extracted water from the ocean or rivers (surface or groundwater);
3. discharged polluting substances in the ground or into the subsoil;
4. discharged earth or other materials into wetlands;
5. extracted components from the ground or the subsoil;
6. released polluting substances into the air; and
• have also been previously sanctioned for an administrative or sectoral non-compliance:
1. should have been environmentally assessed and knowingly did not;
2. an RCA sponsor has been sanctioned twice for severe or very severe non-compliances in the last 10 years;
3. a water rights owner has made wrongful use of his right.

A second group of offences relates to the severity of the harm that has been generated to the environment or to one of its particularly protected components, such as national protected areas, internationally protected wetlands, and glaciers. Severity is defined according to the following:

• spatial extent;
• duration of the exposure;
• repairability or recovery capabilities;
• several species are involved in the event;
• species involved in the event are threatened or heavily threatened;
• event endangers human health; and
• event significantly affects ecosystem services.

A third group of offences relates to particular conducts within administrative processes:

• malicious submitting of false information within the SEIA process; and
• obstruction of the SMA’s inspection activities.

Punishments for convictions of these crimes can mean:

• terms of imprisonment between 61 days and 10 years; and
• fines between 24,000 and 120,000 UTMs (1 UTM (Unidad Tributaria Mensual) is equivalent to USD80).

If there are known liabilities regarding an asset, or within the construction or operation of a project, that party must completely disclose that information to the other, otherwise it will be liable for any environmental issue that could arise, as well as for the corresponding damages that those issues might cause.

In Chile there are no special regulations regarding the environmental liability of current landowners arising from historical incidents or past owners’ actions.

In accordance with Law No 19,300, there is a 5-year statute of limitations to file an environmental damage claim, beginning from the definitive cessation of the event causing the damage.

Regarding civil damages, if the claim is filed directly before a civil court (without a ruling from an Environmental Court establishing the existence of environmental damage), the term to file the claim is the general term for torts (4 years from the occurrence of the event).

Notwithstanding specific reporting requirements set forth in an RCA, every sponsor must comply with two general reporting obligations before the SMA:

• complete follow-up compliance with all commitments, conditions and permits contained in the RCA throughout all the phases of the project; and
• all monitoring activities and their corresponding results.

Additionally, the SMA also requires several reporting obligations from the public agencies in charge of overseeing decontamination plans and emission standards.

Administrative Liability

Please see 5.1 Key Types of Liability. As previously discussed, the SMA can file charges against the project owner, who may:

• respond to the charges submitting its defences (term of 15 working days); or
• submit a compliance programme (term of ten working days).

If a compliance programme is eventually rejected by the SMA, the sponsor will still have 5 days to submit its defences. If a project owner decides to submit a defence, it can use all means admitted by law, which will be evaluated by the SMA pursuant to the logical and reasonable rules of evaluation and procedure (sana crítica).

Environmental Damages Liability

Chile operates a fault-based system in relation to liability due to environmental damage. Apart from specific cases where the law sets forth a strict liability scheme (the application of pesticides, hydrocarbon spillages into bodies of navigable waters, etc), fault expressed as malice or negligence must be proven in order to establish liability. The following requirements must also be met:

• an action causing environmental damage;
• significant damage or injury to the environment; and
• a causal connection between the action and the damage.

Environmental damage claims such as these must be filed before the Environmental Court by:

• the individual who suffered the damage;
• the municipality in whose territory the environmental damage happened; or
• the State.

In this case, the burden of proof lies with the plaintiff. Key defences include:

• denying a causal connection between the action and the damage;
• arguing against the significance of the damage; or
• proving there was no malice and that standards of due care were followed.

To give rise to environmental liability, the damage must be “significant”. It is accepted that any human activity will cause some sort of damage to the environment, so the damage must be significant to allow a claim for reparations from the person or entity that caused it.

The law does not define the concept of “significance”, so the Environmental Courts and the Supreme Court have defined some criteria to establish the existence of significant damage on a case-by-case basis, which include:

• duration and entity of the damage;
• quality and quantity of natural resources affected;
• effects on the ecosystem; and
• capacity, and time required, for regeneration.

According to Chilean legislation, environmental damage can be caused by any person or legal entity, and the same can be said of breaches to any obligation of environmental legislation. There is a general provision related to corporate liability in Chilean Law No 18,046, on Stock Corporations, transferring the liability of the company to its administrators or representatives unless their lack of participation in, or their opposition to, the act constituting the infringement is proven. In other words, in a breach of environmental law, or in case of environmental damage, the administrators or legal representatives of a stock corporation will be liable unless it is proven that they did not participate or that they opposed the act constituting the violation.

As for Law No 21,595, and with effect from September 2024, corporate entities will also be liable through the actions of their employees, managers or directors where the result has meant a financial gain or economic benefit for that entity.

In 2017, Chile established a tax on emissions to the atmosphere of carbon dioxide, particulate matter, nitrogen oxide and sulphur dioxide produced by facilities whose fixed sources, formed by heaters or turbines, add up to 50 MW or more.

The tax is also applicable to new vehicles, light and medium, depending on their performance, emissions, and sales price. The tax levied amounts to USD5/ton.

This regulation was recently modified by Law No 21,210, which removed the requirement that these emissions should only be produced by establishments whose fixed sources are heaters or turbines and replaced it with any source that generates more than 100 annual tons of particulate matter (PM). This modification came into effect on 1 January 2023.

Chile does not have any incentives nor exemptions or penalties for good or bad environmental citizenship.

In Chile, shareholders or parent companies are not currently liable for breaches of environmental law. As stated in 7.1 Liability for Environmental Damage or Breaches of Environmental Law, the party liable before environmental authorities is the project owner. However, with the enactment of Law No 21,595, parent companies’ profits will be taken into consideration when determining whether the alleged perpetrator is in fact a large or small company.

Following the Financial Market Commission’s General Rule No 461, issued in 2021, several companies, including banks, insurance companies, issuers of publicly offered securities, general fund managers and stock exchanges, must include several ESG issues in their Annual Reports. The obligation is born after the growing relevance that the disclosure of this type of information has acquired both locally and internationally, particularly considering that it allows the investors to better evaluate their investment alternatives.

These requirements imposed on finance-related companies prompt similar requests for information to the project owners and RCA sponsors, which need to comply with these requirements if they hope to obtain any kind of funding.

Among others, the ESG issues required deal with the following topics:

• entity profile, regarding corporate purposes;
• corporate governance and risk management frameworks, regarding composition and role of the board of directors and sustainability risks, particularly those related to climate change;
• general strategy layout, including objectives, timeframes and investment plans;
• personnel indicators and policies;
• business model, considering the industry sector, stakeholders, properties, subsidiaries and associates;
• supplier management, including payment policies and supplier assessments;
• regulatory compliance indicators, in matters related to customers, workers, environment, free competition, and others; and
• sustainability indicators, according to the type of industry.

Depending on the size of the entity, this CMF General Rule applies from 31 December 2022 (companies with consolidated assets over USD1 billion) or 31 December 2023 (companies with consolidated assets over USD50 million).

RCA sponsors must regularly conduct audits in their projects in order to fully comply with SMA’s Exempt Resolutions Nos 844/2013 and 223/2015, regarding several obligations to provide complete information regarding the compliance of every provision contained in the RCA, as well as continuous follow-up of every monitoring activity also described by the RCA.

According to Chilean legislation, any person – whether a natural or a legal entity – wilfully or negligently causing environmental damage is liable both to restore the damaged environment and to compensate those affected by that damage. Several laws have been enacted in the last few years and have reshaped our understanding of corporate governance.

Civil liability can be transferred to its administrators or representatives unless their lack of participation in, or their opposition to, the act constituting the breach is proven.

As for criminal liability, Law No 18,046 regarding Stock Corporations has been completely overhauled and complemented in the past 15 years, particularly by Law No 20,393 that allows corporations to be criminally liable, and Law No 21,595 that establishes several environmental offences that trigger particularly harsh punishments if committed by officers and directors, as stated in 5.1 Key Types of Liability, Criminal Liability.

Furthermore, in relation to obligations arising from a mine closure plan, Law No 20,551 provides that the mining company or the mining entrepreneur is responsible for compliance with the closure plan, whether that plan is executed directly or by a third party. If the requirements of the mine closure plan are infringed, the legal representatives of the mining company, and whoever is responsible for the breach, will be sanctioned with a fine ranging from 100 to 1,000 Monthly Tax Units (approximately USD7,000–70,000).

There is no regulation in Chile regarding insurance against environmental liability. However, insurance could be purchased to cover the civil damages related to this liability.

There is no environmental insurance commercially available in Chile, though it is not forbidden to negotiate one with a private entity. There is no uninsurable environmental risk, but this will highly depend on the risk factor involved and the type of project that is negotiating the insurance.

Neither lenders nor financial institutions are liable before the environmental authorities for a breach of environmental laws and regulations by any RCA sponsor, nor in the case of environmental damage.

Even though lender protection is not regulated in Chile, and lenders will not be liable before the environmental authorities if they are not listed as the project owners before those environmental authorities, there are several steps that can be taken to prevent project owners from suffering losses in their investments.

For example, lenders could protect themselves by conducting annual environmental due diligence, or by implementing tough conditions and covenants by which full environmental compliance is expected before any disbursements occur.

Environmental liability arises from the generation of environmental damage. If environmental liability is established, it is possible to claim reparation for civil damages derived from the environmental ones. This claim must be filed before a civil court, only after the Environmental Court has determined that environmental damage exists.

If the Environmental Court rules that there was no environmental damage, there could still be liability to compensate those civil damages caused, actionable as per the general rules of civil liability before civil courts.

Chilean legislation provides that compensation should cover only the damage caused according to the principle of “integral damage reparation” (ie, the claimant should be restored to the position they would have held if the damage had not occurred). Therefore, the courts cannot award exemplary or punitive damages.

There are no class or group actions in Chilean environmental law. The parties with standing to claim environmental damage are those directly affected (whether natural or legal entities), municipalities or the State.

In some cases, the Supreme Court has broadened the definition of standing, admitting a more relaxed evidential standard for parties to prove they have been “affected” in relation to the constitutional right to live in an environment free of pollution. However, this broader standing does not fall into the definition of a class or group action. The only class actions recognised in Chilean law can be found in consumer protection legislation.

There are numerous cases that have defined a significant portion of the current environmental legislation. The following will be included in most lists, but there are many more:

• Arauco Valdivia Cellulose Plant;
• Barrick’s Pascua Lama Mining Project;
• The Ventanas’ Thermoelectric Complex;
• CODELCO’s Smelter in Ventanas;
• Agrosuper’s Hog Processing Plant in Freirina;
• MPX’s Castilla Thermoelectric Power Plant in Punta Cachos;
• ENDESA and Colbún’s HidroAysen Hydroelectric Power Plant;
• AES Gener’s Alto Maipo Hydroelectric Power Plant;
• Maricunga Mining Company’s Refugio Project;
• Ultramar and COPEC’s Invierno Mining Project; and
• Said, Urenda and Bolocco Groups’ Punta Piqueros Hotel in Roca Oceánica.

The holder of an environmental licence is solely responsible for its permanent compliance and is the only liable party when a breach or environmental damage is detected. As a result of this, the relevant environmental authority must be informed of any change in ownership of a project that has been environmentally approved, as described in 4.4 Transferring Permits/Approvals.

Even though it is possible to transfer or apportion liability among the parties, these agreements are only binding between the parties, and not on the regulator. In other words, the party registered as the project owner before the authority is the only liable party, regardless of any private agreement to the contrary.

As stated previously in 8.2 Insuring Against Liability and 9.1 Environmental Insurance, Chilean legislation does not provide for overall environmental insurance covering environmental damage or breaches of environmental legislation. There are, however, forms of private insurance that could cover such events, such as policies covering the costs of compensation to third parties, or the costs derived from a clean-up operation. These are governed by the common rules applicable to insurance.

There is no special legal regime related to the remediation of contaminated land in Chile, so any event necessarily falls under the environmental damage regime.

If environmental damage is caused with negligence or intent, it will give rise to three different liabilities:

• administrative liability triggered by the non-compliance or environmental damage;
• civil torts liability, to compensate or repair those whose rights have been harmed by the environmental damage; and
• criminal liability arising from the malicious intent or deliberate action of the RCA sponsor and its directors or officers.

Usually, the SMA will pursue reparation, and then the government or the affected parties will be entitled to pursue civil liability against the responsible parties.

Contaminated land must be cleared up by the RCA sponsor, by the property owner if there is no RCA, or by the previous owner, if the purchaser was not duly and completely informed about the contaminated land at the moment of purchase.

That said, responsibility can be delegated or transferred according to general rules of civil law.

There are no special rules to determine liability in an event of contaminated land, hence liability is likely to be solved, first, through a lawsuit, and then according to general rules of civil law, in compliance with the corresponding ruling.

Some ten years ago, locus standi requirements would include being directly affected by the contaminated land or its effects. Today, locus standi itself is in a grey zone, and anyone with a personal interest, as subjective as it might be, can meet the court’s specific requirements for locus standi.

RETC System

The generation, transport and elimination of waste, whether hazardous or not, must be reported through the web platform of the Pollutant Release and Transfer Registry (also called RETC), which will be probably the most important obligation for a waste operator since its compliance allows for complete control of the type, amount and location of all waste produced or handled by a waste operator.

Failure to complete the RETC files will likely trigger a Health Authority Inspection and a fine, though, if there is an RCA, it will be the SMA.

Law No 20,920: Extended Producer Responsibility (or REP Law)

Law No 20,920contains the broader statute regarding waste management, including an economic instrument for waste management, seeking to reduce waste generation and increase recovery. The MMA will gradually set goals for waste generation and recovery, and compliance will be overseen by the SMA.

The REP Law sets forth the following hierarchy for waste handling:

• first – prevention of waste generation;
• second – reuse;
• third – recycling; and
• fourth – total or partial energy recovery.

Waste elimination is seen as the last resort for waste handling. Also, the REP Law represents an important step towards a more comprehensive waste handling policy that includes recovery and recycling in the life cycle of waste.

The MMA can impose fines of up to 10,000 Yearly Tax Units (approximately USD8 million) for non-compliance with this law.

An environmental accident will be dealt with by the SMA in the same way as any other environmental incident since it will only be considered an accident after the corresponding investigation is concluded.

Chile has been an active part of the international negotiations regarding climate change. It has joined the United Nations Framework Convention on Climate Change (UNFCCC), the Kyoto Protocol and the 2015 Paris Agreement, among others. Chile also headed the 25th Conference of the Parties of the UNFCCC, which was held in Madrid.

Since Chile is not a relevant emitter of greenhouse gases (GHG) at either the global or OECD scales, it has not been included in Annex 1 to the UNFCCC. However, Chile has been steadily increasing its GHG emissions, which may not cause substantive global effects but has a significant local impact.

The Framework Law for Climate Change

The Framework Law for Climate Change, Law No 21,455, was published and entered into force in June 2022. This law establishes a legal framework to face the challenges presented by climate change, in order to achieve and maintain neutrality of GHG by 2050 in accordance with the commitments adopted in the 2015 Paris Agreement.

To achieve said mitigation goal, the law establishes climate change management instruments at the national, regional and local levels. It also determines the environmental legal system for climate change, assigning specific functions and responsibilities to each of the national, regional and collaborating bodies that comprise it, with the Ministry of the Environment being its head authority.

In addition, it creates a National Information Access System and Citizen Participation on Climate Change, which will be managed and co-ordinated by the Ministry of the Environment and establishes guidelines and financial mechanisms to face climate change.

Law No 21,455 also establishes that the Ministry of Public Works will prepare the Water Management Strategic Plans for each basin. This will help identify the water gaps of surface and underground water and establish the water balance and its projections. Each of these plans will be public and must be reviewed every five years and updated every ten.

Notably, there will be a national GHG emissions budget structured according to the Nationally Determined Contribution (NDC), using criteria of cost-effectiveness and equal distribution of burden. These criteria will also guide the definition of sectoral GHG emissions budgets.

Finally, the law makes a series of modifications to different legal bodies in order to adapt the current legal system to this new regulation. One of these modifications is contained in Article 40, which mandates the following:

“to consider climate change in the relevant environmental variables whenever a project is being assessed in the SEIA; to describe, when a project is being assessed in the SEIA, the manner in which those projects will be related to the sectoral mitigation and adaptation plans, as well as regional and local management instruments; and to consider the climate change variable when assessing the occurrence of unforeseen environmental impacts in the context of the administrative revision process of an RCA.”

Current Regulation of Emissions

However, the implementation of the Climate Change Framework legislation is still incipient at the time of writing, as Chile does not yet broadly regulate GHG emission standards. There are only specific and old standards in place that regulate GHG through primary air quality standards, aimed at curbing concentrations in the environment of some pollutants considered as dangerous to public health, as explained above. The GHGs regulated in Chile through primary air quality standards are nitrogen dioxide (SD No 114/2003 of the MMA), ozone (SD No 112/2003 of the MMA) and carbon monoxide (SD No 115/2002 of the MMA). However, some pollutants controlled by emissions standards are also GHGs (eg, SD No 13/2011 of the MMA governs the emissions standard for thermoelectric power plants, aimed at capping emissions of nitrogen oxides, among others).

Through the regulation of air pollutants, some of which are GHGs, Chilean legislation currently regulates climate change indirectly, with the caveat that these pollutants are regulated as a risk to public health or to the environment overall, and not as GHGs causing climate change.

Equity and Climate Justice

Another notable aspect of the Climate Change Framework Law is the enshrining of some mandatory principles in the climate action taken by political and administrative authorities. One of those principles is contained in Article 2 d) as “Equity and Climate Justice” and states that, while combating climate change, it is the duty of the State to ensure a fair allocation of burdens, costs and benefits, safeguarding the ability of future generations to meet their own needs, stressing also that climate justice seeks the fair treatment of all people, as well as avoiding discrimination that can arise in certain policies and decisions that seek to address climate change.

In April 2020, the Chilean government presented its 2020 Nationally Determined Contribution to the UN Framework Convention on Climate Change, which contains Chile’s commitment to reduce its GHG emissions by 30% by 2030 (compared to 2019 emissions levels), and to become carbon neutral by 2050.

In addition, the Ministry of Energy has set the goal of closing every thermoelectric power plant in Chile by 2040. A Schedule of Withdrawal or Reconversion of Coal Plants has been presented, which establishes the closure of the eight oldest plants by 2024, representing 19% of Chilean carbon-based power plant capacity. The schedule also establishes a commitment to define dates in worktables formed every 5 years, which will allow the setting up of specific retirement schedules in the future.

Since the enactment of SD No 656/2000, the production, importation, distribution, sale and use of asbestos or any other product or material that contains it is forbidden, with the exceptions set forth in the mentioned regulation.

Asbestos is also addressed in SD No 594/2000, which provides for minimum health and safety standards in workplaces, forbidding the use of blue asbestos-crocidolite. The Decree also considers asbestos (both dust and fibres) as a hazardous waste material to be handled as per the regulations set forth in SD No 148/2003.

There are three different types of waste, each with separate legislation for their corresponding activities:

• liquid waste;
• solid waste (includes sludge); and
• hazardous waste.

Each of these types of waste have different environmentally relevant activities (waste management):

• storage;
• transportation;
• treatment (if applicable); and
• final disposal.

Liquid Waste

Liquid waste has different applicable laws and supreme decrees depending on its type: sewage and industrial waste water (including agricultural waste water), and most obligations relate to quality standards, monitoring obligations, and accident prevention plans.

Transportation of liquid waste, when it is (rarely) needed, will be subject to solid waste transportation legislation, hazardous or non-hazardous depending on the liquid.

Final disposal of liquid waste can be done into a body of water, to the sewers or into the subsoil. All three options are regulated by SD No 90/00.

Solid Waste

Whether generated by a group of people (garbage) or by an industrial process, solid waste is regulated in SD Nos 594/00 (storage and transportation) and 189/08 (final disposal).

Hazardous Waste

Hazardous waste has specific applicable legislation depending on the substances that need to be stored, transported or disposed of, but, if no specific Supreme Decree applies, then SD Nos 148/04 (storage and final disposal) and 298/95 (transportation) will apply.

Inspections

Breach of any obligations related to waste management will likely lead to an inspection from:

• the Health Authority, which in turn will result in a fine being imposed or the activity being suspended, terminated or closured; or
• the SMA, if there is an RCA directly related to any waste management activity.

The REP Law sets forth an extended liability for producers of “priority” products, designated as such by the Law due to their size, their hazardous characteristics or the presence of exploitable components, with the purpose of decreasing the generation of waste and promoting reuse, recycling and other types of recovery. These priority products are lubricating oils, electric and electronic equipment, packaging and containers, tyres and batteries.

The extended producer liability set forth by the REP Law entails that the producer of priority products will remain responsible for them until they are properly recovered or eliminated by another authorised entity, such as a waste treatment facility or a landfill site.

The REP Law sets forth a hierarchy in waste handling where elimination is the last alternative (see 16.1 Key Laws and Regulatory Controls). This way, any waste potentially recoverable must be recovered, setting this as an obligation for priority product producers.

The MMA has yet to issue a decree for the goals for waste collection and recovery of lubricants, batteries, and electrical and electronic equipment, as well as others, which will prevent or reduce the generation of waste, including eco-designs, labelling and rebate programmes. To date, the following regulations are in force:

• Goals for waste collection and recovery of packaging and wrapping (SD No 8/20);
• The Recycling Fund (SD No 7/17);
• Procedure for Setting Recycling Goals for Priority Products (SD No 8/17); and
• Goals for waste collection and recovery of tyres (SD No 8/19).

Law No 20,417, which created the SMA, established an incentive, originally similar to the one existing in the Antitrust Law, by which RCA sponsors would report an emergency, incident or any event that could mean non-compliance with their environmental permit. Like other similar incentives, in order to work, the self-reporting incentive critically depends on the timing the sponsor chooses to communicate the event to the SMA.

This communication must satisfy the following criteria:

• faithfully, verifiably and precisely describe all the facts related to the event;
• describe how the event has come to an end and the non-compliance has ended; and
• describe what measures have been set in place to reduce or eliminate the negative effects that the event might have caused to the environment.

In practice, the self-reporting incentive is now just another way of prompting a sanctioning procedure: the SMA that reviewed the first self-reporting incidents never understood the self-reporting as an incentive for compliance and hence denied all of them, sanctioning all of the first projects for several non-compliances. As should be expected, no sponsor today would use the self-reporting instrument.

Public services in Chile are guided by the principle of transparency: all information held by the administration, and all administrative proceedings, shall be public unless there are reasons provided in the law for making that information reserved or secret. If information has not been made publicly available by an authority, the public is allowed to request access to such information, which will be granted unless there is a legal exemption that allows concealing the requested information.

There are several public databases of environmental information, the most relevant of which are as follows:

• E-SEIA, where the electronic records of environmental impact assessment processes are publicly available;
• Sistema Nacional de Información de Fiscalización Ambiental (SNIFA), where all punitive proceedings carried out by the SMA are public; and
• the website of the MMA, which also contains public databases of the process of elaboration or review of policies, regulations, and emission and quality standards.

There are different regulations covering the corporate disclosure of environmental information. For example, the release of emissions and waste must be reported through the RETC carried by the MMA. Different emissions standards provide reporting requirements. Also, many RCAs establish the obligation to provide monitoring and reports that must be disclosed to the relevant authority.

Finally, all regulated parties are obliged to disclose any information requested by the SMA.

For corporations’ annual reports, please see 7.5 ESG Requirements.

Since 2018, the Chilean Minister of Finance has been seeking to promote the development of ESG green asset class (green/social/sustainability) bonds to attract foreign investment and support the country’s sustainable infrastructure needs, while diversifying the investor base.

According to the International Capital Market Association (ICMA), social bonds are debt instruments that finance or refinance eligible social projects, completely or partially. On the other hand, green bonds are debt instruments that fund or refinance initiatives for climate change mitigation, adaptation and environment protection. Finally, sustainable bonds are debt instruments that finance both social and green projects.

That said, in 2019 Chile became the first country in Latin America to issue a Green Bond and, in 2022, the first one in the world to issue an SSLB or Sovereign Sustainability-Linked Bond. In short, both instruments aim to develop the key role that debt markets can play in funding and encouraging companies that contribute to sustainability, from an ESG standpoint.

Every SLB must comply with the five core components outlined in the ICMA SLB Principles, issued in 2020:

• selection of Key Performance Indicators (KPIs);
• calibration of Sustainability Performance Targets (SPTs);
• bond characteristics;
• reporting; and
• review and verification.

In 2020, the Minister of Finance published the Sustainable Bond Framework, which also updates and broadens the Green Bond Framework published by the Ministry of Finance in 2019. Along with this, and responding to its funding commitments, the Ministry of Finance, in co-ordination with the Ministry of the Environment, developed a Financial Strategy on Climate Change, which included the creation of the Public-Private Green Finance Table (Agreement, Declaration, Survey, Workshops to generate capacities), the research to generate data and analysis (Green Growth Opportunities for the Decarbonisation Goal for Chile), and the promotion of financial instruments to fund these green initiatives, such as Green Bonds.

These instruments lay the groundwork for the issuance of Chile’s Social, Green and Sustainable bonds mentioned above.

The development of the Sustainable Bond Framework and the selection of the eligible portfolio is the result of a coordinated work led by the Ministry of Finance and the valuable support of the Inter-American Development Bank.

The Sustainable Bond Framework establishes the following categories for eligible projects.

• Green Categories:
1. clean transportation (which takes 95% of the total Climate Bond Initiative certified portfolio);
2. energy efficiency;
3. renewable energy;
4. living natural resources, land use and marine protected areas;
5. efficient and climate resilient water management; and
6. green buildings (ecological buildings) (which takes 4% of the total Climate Bond Initiative certified portfolio).
• Social Categories:
1. support for the elderly or people with special needs in a vulnerable situation;
2. support for low-income families;
3. support for human rights victims;
4. support for the community through job creation;
5. access to affordable housing;
6. access to education;
7. food security;
8. access to essential health services; and
9. social programmes designed to prevent and/or alleviate unemployment derived from socio-economic crises, including through the potential effect of financing SMEs and microfinances.

The party liable for the breach of environmental obligations is the RCA sponsor. Therefore, environmental due diligence is usually conducted whenever there is a relevant transaction involving projects, activities or facilities that are governed by environmental law.

The review is usually composed of documents and information provided by the seller, public information sources and rounds of questions and answers aimed at determining compliance and possible exposure to liability due to the breach of environmental obligations. Depending on the size and nature of the project, a specific environmental audit might be conducted as well as one or more field visits, regularly requiring full sectoral and environmental legislation compliance.

Liability is determined by the statute of limitations, which runs for 5 years following the environmental damage being evidenced and assuming it has stopped, and for 3 years for administrative breaches in general.

Although Chilean contracts legislation is built upon the principle of good faith, there is no specific obligation to disclose environmental information to a prospective purchaser. Considering that environmental liability falls upon the party registered as the project owner before the authority, a proficient environmental due diligence is a useful tool in having a clearer view of the risk involved in a specific transaction. In addition, indemnity clauses can be an aid to the recovery of costs associated with liability, even when they have no validity before the regulator.

Please see 7.2 Environmental Taxes.

Though Chile has one of the highest environmental conflicts per capita rates in the world, it does not have a proper legal framework regarding the management and resolution of this type of conflict. On the contrary, the current legislation aims to prevent conflict, within the SEIA and through strong public participation. However, if conflicts are not solved at this stage, or if they arise after the RCA is granted (which is actually a strategy used by many stakeholders, NGOs and interested third parties), conflict management is dealt with in the context of a judicial procedure, which is necessarily adversarial and does not include any formal opportunity for negotiations between the parties, nor does it provide (besides some well-known exceptions) judicial co-operation or any incentive that might prompt the parties to sit down and negotiate a different solution to that of the court ruling.

One of the most important objectives the legislator had in mind when enacting Law No 19,300 was to compile the vast sectoral and environmental regulations that were scattered, creating a SEIA that would co-ordinate the evaluation of investment projects, allowing and encouraging them to comply with environmental legislation and granting them legal certainty that there would be no additional or supervening requirements with which they could fall into non-compliance.

The reality of the environmental assessment today is that projects are required to include much more information than what could be considered environmentally relevant, and authorities very often require the incorporation of mitigation measures and ask for compliance with legislation that has no relationship to the project’s description.

The aforementioned elements of the current environmental assessment have had harmful consequences throughout the life of many investment projects, since the regulations and conditions imposed outside the scope of the project become very burdensome or outright impossible to comply with, which in turn significantly increases the number of sanctioning processes for inevitable non-compliances.

Due to the above, the most important reform would be to the evaluation procedure itself.

• Reinforcement of the mandatory nature of the role of co-ordinator the SEA has to have, and tightening the limitation of the authorities with environmental jurisdiction to act exclusively within their technical scope.
• Reinforcement of the protection given to an RCA that has been granted including a citizen participation process, limiting the actions available to third parties that did not participate in the evaluation process.
• Regulate the complete and forced separation between environmental aspects and sectoral elements in an assessment, which would improve the technical quality of the assessment, and would give more meaning to the sectoral permitting which occurs after the approval of the RCA.