The Constitution of Mexico states that persons have a right to a healthy environment for their development and well-being. The government has the responsibility as well as the mandate to ensure that this right is afforded and protected.

Environmental liability is defined in Mexico 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”.

Mexico has enacted many federal and laws, as well as regulations and technical standards. The most important ones are the following:

• General Ecological Balance and Environmental Protection Law (the “General Law”);
• General Climate Change Law (the “Climate Change Law”);
• National Water Law;
• Federal Environmental Liability Law (the “Liability Law”);
• Waste Prevention and Integral Management Law (the “Waste Law”);
• General Wildlife Law; and
• General Sustainable Forestry Development Law.

The country’s 32 states have enacted their own environmental laws and regulations. These tend to cover areas that are not subject to the federal government’s oversight.

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

The federal environmental authorities are:

• ASEA – Industrial Safety and Environmental Agency for the Hydrocarbons Sector;
• CONAGUA – National Water Commission;
• PROFEPA – Federal Bureau of Environmental Protection; and
• SEMARNAT – Ministry of Environment and Natural Resources.

All of Mexico’s states have their own environmental agencies that regulate all matters that do not fall under the control or oversight of federal environmental authorities, such as waste water discharges into urban sewerage systems, stationary air emission sources under state control, non-hazardous waste-handling and disposal as well as land use and zoning matters.

In the area of international environmental co-operation, Mexico is a party to a number of international treaties and conventions. The most important ones are the following:

• the Paris Climate Agreement;
• the North American Agreement on Environmental Cooperation with the United States 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”);
• the Montreal Protocol on Substances that Deplete the Ozone Layer;
• the Marpol Protocols to Prevent Pollution from Ships; and
• the Basel Convention on the Control of Transboundary Movements of Hazardous Wastes and their Disposal.

The United States-Canada-Mexico Agreement (USMCA), although not an environmental agreement in a strict sense, also contains important provisions requiring the three parties to take all necessary actions to ensure that their domestic environmental laws are complied with and enforced.

Domestically, federal, state and municipal authorities regularly enter into co-ordination agreements in order to ensure proper enforcement of existing environmental laws.

The General Law contains several provisions requiring the federal government to enact regulations and standards designed to protect environmental assets. The General Wildlife Law states that it is the duty of all inhabitants to preserve wildlife, and that any act that implies its destruction or harm in detriment to the nation’s interest is prohibited.

National goods such as water, soil, flora and fauna are protected by federal laws, such as the General Law, the National Water Law and the General Sustainable Forestry Development Law. There are many regulations and standards that are designed to protect water resources as well as natural habitats and landscapes, such as the Regulations to the General Law in the area of Natural Protected Lands and standards that list the natural species that have protected or endangered status.

It is a federal crime to carry out any act or omission that harms, captures or kills an endangered or protected species, as well as undertaking any act that causes harm to natural wildlife or fragile ecosystems. Also, causing environmental damage may generate liability and an obligation to restore any damage caused to affected ecosystems.

Any individual or entity that causes environmental damage or breaches environmental laws may be subject to citations, fines, temporary partial or total shutdowns, the seizure of hazardous materials or of illegally obtained flora and fauna species, remediation or compensation obligations and, in some cases, prison terms.

Federal and state environmental agencies have broad investigative powers. Agencies may carry out inspections on a regular basis intended to verify compliance with environmental laws. There is no need for a complaint to be submitted for an inspection to be carried out. Nevertheless, any person that suspects that an activity is being carried out in breach of environmental law may file a public complaint before federal or state agencies. These complaints may be in writing, by telephone or by electronic means and may be done anonymously. Regulators are required by law to conduct an investigation whenever a complaint is submitted, by carrying out inspections. Inspected parties are afforded the right to defend themselves.

A wide range of environmental permits must be secured prior to carrying out any activity that has adverse environmental effects. The following are the most important ones. Prior to construction or start-up of any project that may cause environmental harm:

• environmental impact permit;
• civil protection certification;
• risk assessment (in some cases);
• forestry land use change permit (in some cases); and
• water concession (in some cases);

During operation:

• air emissions licence;
• waste water discharge permit or registration; and
• hazardous and non-hazardous waste generator registration.

During an environmental impact permitting process, third parties are allowed the right to review and comment on the content of an environmental impact study; indigenous communities that may be affected by a project to be carried out on their land must also be consulted and social impact studies are required. In the case of energy projects that may affect vulnerable communities, permitting decisions may be appealed by any person or entity that may be adversely affected by a work or activity.

Regulators are required by law to review and authorise any activity that may cause environmental harm or adversely affect ecosystems. This is done through the environmental impact permitting process and through other permitting processes like the ones described in 4.2 Environmental Permits/Approvals.

Federal and state regulators may enforce laws and regulations through inspection visits, summons to respond and administrative resolutions which may contain penalties such as fines, if there are elements proving that laws have been breached. In some extreme cases, environmental regulators may file criminal complaints before federal or state prosecutor offices, if there are elements to suggest that environmental crimes have been committed.

Some environmental permits may be transferred by providing a written notice to regulators, stating the name of the transferee. This is the case with environmental impact permits issued by SEMARNAT or ASEA. Water concessions or waste water discharge permits may be transferred, but the transfer requires the prior approval of CONAGUA. In the case of air emission licences, these are generally not transferable; however, regulators may approve their transfers in certain cases, such as when an industrial site has been transferred to a new company and its operation will not suffer any changes. This is also true of companies that have secured environmental permits from state agencies.

Failure to comply with the requirements and conditions contained in an environmental approval or permit may bring about penalties such as fines and an order from regulators to fully comply with the permit. If there is a repeat offence, regulators may order a temporary shutdown or may issue a suspension order that may remain standing until all legal violations or deficiencies have been corrected.

Operators or polluters may be subject to any of the following types of environmental liability.

Administrative

This is the most common and widespread form of liability and generally involves fines, temporary shutdowns, the seizure of pollutant sources and the revocation of environmental permits. Administrative penalties may be imposed by federal enforcement agencies, such as PROFEPA, ASEA and/or state or municipal agencies. Under the Liability Law, judges may impose monetary penalties that may be substantial (up to USD3 million in some cases) aside from ordering remediation or compensation.

Civil

Civil liability may stem from civil lawsuits, either in the form of collective actions or those that are based on the Liability Law, and generally result in judicial rulings ordering polluters to carry out restoration, compensation or remediation requirements and in some cases to compensate plaintiffs in a collective action.

Criminal

This form of liability may be generated as a result of carrying out acts that are considered environmental crimes. Criminal liability involves prison sentences that may range from 3 months to 12 years, as well as fines that are calculated taking into account the yearly earnings of a person convicted of a crime. There is an entire chapter in the Federal Criminal Code devoted to environmental crimes. In instances of repeated serious crimes, judges may order the dissolution or liquidation of companies that have been involved in environmental crimes committed by their employees or legal representatives. However, this is rare.

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 notified immediately so that they may adopt the necessary actions to prevent damage from being caused, in co-ordination with the parties causing the spill.

Failure to disclose may bring about administrative penalties such as fines or shutdowns or in some cases civil liability and orders to compensate for environmental damage.

According to the General Law, and the Law of Access to Public Information, any person has the right to have SEMARNAT, ASEA, as well as other federal or state environmental agencies, put at their 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 cases, regulatory agencies may deny access to information if it is deemed of a confidential nature or if its disclosure may damage third-party rights.

It should be noted that companies are not required by law to disclose environmental information in their annual reports. However, many companies do provide reports on their sustainability initiatives and on how they are contributing to the fight against climate change. This is becoming more common and widespread.

According to the Waste Law, owners or occupants of a contaminated site are jointly liable for remediation regardless of fault, and irrespective of historic environmental contamination. They, in turn, can bring a legal action against the party that caused contamination. Prior to transferring title over a contaminated site, seller and buyer must agree on who will carry out remediation if the site is contaminated. Agreeing on who will remediate involves having actual knowledge of the existence of contamination and this may also involve conducting characterisation studies and finding out whether there is a remediation obligation.

The federal government has published two standards in the area of soil contamination. Standard NOM-138-SEMARNAT/SSA1-2012 establishes maximum allowable limits for hydrocarbons in soils; standard NOM-147-SEMARNAT/SSA1-2004 sets limits for heavy metals. In the absence of clear regulatory guidelines, however, human health and risk studies may have to be performed to determine if remediation must be carried out.

SEMARNAT and/or ASEA must approve the transfer of a contaminated site. However, failing to secure this authorisation may not prevent the transfer from taking effect. If a seller failed to inform a buyer that a site was contaminated and the buyer later discovers that it was, the seller will be liable for remediation.

The statute of limitations for making a claim of environmental liability is 12 years as of the moment when contamination occurs or its effects cease.

Any establishment, whether industrial, commercial or of any other nature, is required to report its greenhouse gas (GHG) emissions to SEMARNAT on a yearly basis. The report must cover direct or indirect GHG emissions. The idea behind this reporting requirement is for the federal government to keep track of Mexico’s GHG output in compliance with the Paris Agreement.

Industrial establishments are also required to submit yearly reports disclosing their air emissions, waste water discharges and waste generation.

Also, 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 notified immediately so that they may adopt the necessary actions to prevent damage from being caused, in co-ordination with the parties causing the spill.

As mentioned in 5.1 Key Types of Liability, environmental liability may be administrative, civil or criminal. 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. In these cases, liability is objective.

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.

Economic penalties may be substantially reduced by a court order, if the party at fault:

• has purchased environmental insurance;
• has been audited by PROFEPA and has secured a “clean industry” certificate; and
• 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 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. A criminal judgment imposing a prison sentence may be contested through an appeal heard before a state or federal superior court and through the submittal of an amparo lawsuit.

The Liability Law states 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, including whether such persons are either careless or acting in accordance with their functions.

Officers, employees and agents are generally liable for:

• negligence or misconduct when discharging their duties;
• breaches of instructions received from management;
• actions that exceed their authority; and
• allowing, within the scope of their functions, violations to the Federal Criminal Code, solely in the case of officers, legal representatives, managers or employees.

States in Mexico have begun enacting laws that impose “green taxes” over air emissions. These taxes vary because they are based on the annual volume of emissions (including GHGs) that are generated by stationary air emission sources. There are currently 14 states in Mexico that require the payment of environmental taxes.

It should be noted that, as a result of a legal challenge to the state of Zacatecas Green Tax Law in 2018, the Supreme Court ruled that environmental taxes do not violate the tax proportionality principle enshrined in the Constitution and therefore such taxes are legal.

Even though the General Law and all state laws establish the legal possibility of awarding financial incentives for being a good environmental citizen, these are generally not awarded. As discussed in 5.1 Key Types of Liability, bad environmental behaviour is punishable by fines, shutdowns, orders to restore and remediate and, in some cases, by prison sentences.

There is no piercing of the corporate veil for environmental violations; therefore, shareholders cannot be liable. Only the legal entity (a corporation) may be found liable, along with its legal representatives, directors, administrators, managers or employees. However, environmental agencies may summon shareholders of a particular company to the administrative procedure or judicial trial in order to negotiate an agreement on behalf of a company found to be causing environmental damage.

It is rare for parent companies to be accused of playing a role in environmental damage caused by their subsidiaries. However, collective actions on environmental matters could target parent companies if there is evidence that they may have been complicit in any action or omission that causes environmental damage.

There is yet to be a law or regulation defining what ESG is, or what the ESG disclosure requirements should be. However, the Mexican Senate has approved an amendment to the Stock Exchange Law that allows the Ministry of Finance and Public Credit to seek sustainability information from publicly traded companies. As of 30 November 2023, this amendment has yet to be discussed and approved by the Chamber of Deputies, which is Mexico’s Lower Chamber.

The federal government enacted a voluntary environmental auditing regulation in 2010 that allows companies that do not comply with environmental laws the opportunity to correct themselves and avoid liability. “Clean Industry Certificates” are issued by PROFEPA in favour of companies that fully implement the corrective actions derived from the auditing process.

Corporate officers, employees and agents are generally liable for:

• negligence or misconduct when discharging their duties;
• breaches of instructions received from management;
• actions that exceed their authority; and
• allowing, within the scope of their functions, violations to the Federal Criminal Code, solely in the case of officers, legal representatives, managers or employees.

Under the 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 USD210,000), aside from facing criminal liability if they wilfully caused contamination or were grossly negligent.

Criminal law also contemplates the feasibility to directly penalise directors, officers or any person that ordered an action that caused an environmental damage. As mentioned above, there is also a possibility that a criminal court may order the dissolution of a company if it has been proven that its directors, employees or legal representatives committed serious crimes against the environment.

Individuals or companies may purchase environmental liability insurance or in some cases may acquire surety bonds to cover against environmental damage that may be caused due to breaching a legal obligation or an environmental permit.

In the case of large projects, such as petrochemical installations, infrastructure projects, power plants or industrial facilities that may be deemed “high-risk”, regulators will order the project owners or developers to purchase insurance to cover any type of environmental damage that may be caused. If an entity has caused contamination, penalties against it may be reduced if it is able to show that it has acquired insurance.

Individuals or companies may purchase environmental liability insurance or in some cases may acquire surety bonds to cover against environmental damage that may be caused due to breaching a legal obligation or an environmental permit.

If an activity subject to evaluation in the area of environmental impact may cause serious environmental damage, SEMARNAT may require the purchase of environmental insurance or other types of surety guarantees.

In the case of large projects, such as petrochemical installations, infrastructure projects, power plants or industrial facilities that may be deemed “high-risk”, regulators will order the project owners or developers to purchase insurance to cover any type of environmental damage that may be caused. If an entity has caused contamination, penalties against it may be reduced if it is able to show that it has acquired insurance.

Employees, directors or representatives of financial institutions may be liable for environmental damage or for breaching environmental law if they have been instructed to carry out actions that are detrimental to the environment or public health. 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 may legally 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 site 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” or ESG policies. 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.

Any action or omission that causes environmental damage may generate civil liability. The Liability Law allows any person the right to file a civil action against an individual or entity that causes environmental damage. This action may be brought by an individual or by a group of 15 or more individuals through a collective action. A judge must “qualify” the complaint to make sure that the group has proper standing or, if it is being represented by an non-governmental organisation (NGO), that it has been formed and registered to deal with environmental protection matters.

Civil 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 general rule is that if it is proved that environmental damage was caused, a judge should order either restoration or compensation activities. “Restoration” implies returning a site to the state it was in prior to the damage being caused, but if this is not possible then compensation may be required.

Traditionally, Mexican environmental laws have not contemplated exemplary or punitive damages. These were introduced into the Mexican legal system in 2011 through a constitutional amendment. In 2016, the Supreme Court ruled that in certain cases it is permissible to award punitive damages, particularly when there is gross negligence involved. Even though this ruling was not properly an environmental case, it opened the door for civil courts to award large sums to plaintiffs that are successful in demonstrating 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 and these damages may run to millions of US dollars, particularly if it is shown that environmental damage was the result of gross negligence or a wilful disregard for the environment or public health.

Under the National Civil and Family Procedure Code, collective actions may be brought in the case of environmental claims. A group of 15 or more individuals, NGOs duly registered as well as federal environmental agencies such as PROFEPA, may file a collective action against a party accused of causing environmental damage. The main purpose of a collective action is for the damage caused to the environment to be restored and, if this is not possible, for compensation activities to be ordered.

Collective actions may be brought to safeguard:

• diffuse and collective interests, 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 5 years 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.

This contradicts the term contained in the Liability Law, which provides that the statute of limitations for demonstrating environmental damage is 12 years as of the moment contamination took place or when its effects cease. Since the Liability Law expressly deals with environmental liability as opposed to the Federal Civil Procedure Code, the 12-year statute of limitations would apply in the case of environmental collective actions.

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

• 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; or
• 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 (the state-owned oil company) caused an NGO to file a collective claim against the entity, seeking that PEMEX undertake remediation or at least compensation and that fisheries be compensated for harm caused to their livelihood.

Several NGOs have announced their intention of filing public actions against the Dos Bocas Refinery that the Mexican government has constructed in the State of Veracruz, alleging that this project, worth billions of US dollars, has caused widespread environmental damage, and is adversely affecting flora and fauna and will degrade air quality. NGOs have also filed actions against the Maya Train project, which spans the Yucatán Peninsula. Judicial resolutions on these two cases are pending.

In 2015, a company operating a copper mine in the State of Sonora, Mexico, was fined by PROFEPA in an amount equivalent to USD1.1 million for discharging cyanide into a river. The company was also required to create a trust worth approximately USD105 million to help in environmental restoration activities and to assist the population affected by the environmental damage that was caused.

Indemnities and suchlike may 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 properly met.

For example, in the case of an environmental permit granted to an oil company for offshore drilling, 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.

When hiring a company to transport and dispose of hazardous wastes, it is very important to have a contract in place making the transporter liable for any damage caused when the wastes are being transported to a final destination facility (which could be a landfill, a recycling yard area or a transfer station). This is because the Waste Law provides that, in the absence of a contract that defines the role of the generator, the transporter and the disposal company, the waste generator would be liable if the wastes are not sent to a licensed disposal facility.

Authorising hazardous wastes to be sent to an unlicensed disposal facility is also a federal crime, punishable with prison terms that may be as high as 4 years.

Please see 9.1 Environmental Insurance.

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 pursue owners or occupiers of a contaminated site when requiring remediation activities to be carried out because the law makes them liable for remediation regardless of fault. In some cases, 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.

As mentioned in 6.1 Liability for Historical Environmental Incidents or Damage, there are two standards that establish maximum allowable limits for pollutants in soils. One is NOM-138, which establishes maximum limits for hydrocarbons in soils; the other is NOM-147, which 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.

In order to be able to get a regulator or a court to force an original polluter, former landowner or any other 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 of the Waste Law.

Determining liability for contamination is not a simple endeavour for environmental authorities. This is why the Waste Law makes an owner or occupier of contaminated site liable for remediation regardless of fault or intent. This rule forces an owner or occupier to file a legal action against the party or parties that actually caused contamination. More often than not, it is difficult to demonstrate a party’s culpability, let alone multiple parties, even when there is objective environmental liability that stems from the use of hazardous substances. If multiple parties handle or use such substances and contamination is caused, regulators may attempt to make each party liable, but this may prove to be difficult, particularly if there is no clarity on what action or omission caused contamination. Again, this is why making an owner or occupier liable for remediation is an easier path for environmental authorities.

From an administrative law standpoint, proceeding against polluters is not difficult for regulators. An owner or occupier of contaminated private land – or a concession-holder over public land – are required by law to remediate if there is soil or groundwater contamination, and environmental authorities do not need to demonstrate intent or fault.

From a civil liability perspective, the requirements to bring a legal action for environmental damage are more demanding. There have to be sufficient elements to infer that a party has caused environmental damage. If a party uses hazardous substances and damage to a third party is caused, determining civil liability may not be legally difficult because of the objective liability principle discussed in 6.1 Liability for Historical Environmental Incidents or Damage.

To determine criminal liability, there has to be an element of gross negligence or intent. The Federal Criminal Code provides that any person that orders or allows the discharge or deposit of hazardous substances into soils or water bodies may face up to 12 years of prison and stiff fines. There are also “environmental management crimes”, such as:

• allowing or authorising hazardous waste to be sent to a site that lacks permits or licences to store or dispose of them;
• failing to keep environmental authorisations or documents; and
• providing false statements to inspectors or misleading regulators when preparing environmental permit applications.

Crimes are investigated by the National Prosecutor’s Office and any private citizen or authority may file a criminal complaint.

Waste operators (hazardous or non-hazardous waste) are required to secure a number of environmental permits and approvals. Hazardous waste storage, recycling or disposal facilities must secure operating permits from SEMARNAT and comply with a wide range of requirements to ensure that wastes are properly handled and disposed of. This is also the case with operators of hazardous waste transportation companies, noting that – aside from SEMARNAT permits – all vehicles used to transport hazardous waste, are required to secure permits from the Ministry of Infrastructure, Communications and Transportation.

Non-hazardous waste or “special waste” operators are required to comply with state or local laws and regulations and secure operating permits from state environmental authorities. Each state has its own rules on how to construct and operate non-hazardous waste disposal facilities.

Failing to comply with any of the requirements listed above may bring about administrative liability in the form of fines, shutdowns and remediation obligations. There may also be civil liability (if environmental damage is caused) as well as criminal liability if there is gross negligence or wilful intent that causes environmental damage.

Federal and state environmental laws provide a mandate to authorities to conduct investigations and inspections if there are any incidents that cause or may cause environmental damage, including accidents. Authorities have to be diligent in how they conduct investigations, because the Mexican Constitution requires all acts of authority to be properly supported by law and no person be deprived of their possessions or rights without a proper order signed by an authority having a mandate to carry out an investigation or inspection. In case of environmental emergencies or accidents, federal or state regulators may order that safety measures be applied immediately. Such measures are designed to protect public health or the environment and may consist of temporary shutdowns, the seizure of hazardous materials and any other action that may be warranted to protect the environment or third parties.

Public complaints for environmental violations – or accidents and emergencies – may be submitted without having to meet complicated formalities; as discussed above, these can even be anonymous or by telephone. Regulators may carry out investigative acts based solely on these types of complaints.

PROFEPA may act in co-ordination with Mexico’s General Prosecutor’s Office in investigating crimes against the environment.

The Climate Change Law states that it is in Mexico’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 reduce GHG emissions within the country and to implement mitigation and compensation policies.

The Climate Change Law set an aspirational 30% greenhouse gas reduction target by 2020, increasing to 50% by 2050 with regard to the year 2000 emissions. However, this target was not been achieved and the current government does not seem to be inclined to adopt actions to meet GHG reduction targets, focusing more on projects that consume fossil fuels. The Climate Change Law also provides that GHG reduction targets may be achieved if an international regime is in place that provides for financial and technological support afforded by developed countries. 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. It is highly unlikely that this target will be met.

The government requires that emitters of a minimum of 50,000 MT of GHGs a year report their output. This is widely seen as a prelude to a future emissions trading scheme which has not yet materialised.

There are currently no laws establishing a mandatory emissions trading scheme in Mexico. In 2016, the Mexican Stock Exchange and SEMARNAT unveiled a pilot programme to develop a carbon market in Mexico so that the private sector could reduce its GHG emissions and remain competitive in a global environment. However, although that pilot programme began in a very limited manner, it was only a virtual exercise among the parties involved. There is, however, a voluntary market of emissions enacted which is administered by MéxiCO₂, a company created by the Mexican stock market. This company also has a market specific for the renewable energy sector.

According to Mexico’s REDD+ 2017–2030 Strategy published by the federal government, as well as a Bill of Law that intends to amend the Forestry Law – which has yet to be discussed by Congress – rights over carbon credits should be bestowed exclusively on the government and not on the owners of the land where the credits are generated. This has created some controversy within indigenous communities and farming towns. It is likely that this claim by the government will be challenged in the courts.

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 has promoted preventative 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.

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. 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 “special” 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, and as mentioned in 13.4 Proceedings Against Polluters, consenting to the transportation of hazardous waste to an unlicensed site is a federal crime, punishable by a prison term of 1–4 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.

In the case of the Circular Economy Law approved by the Senate (and yet to be approved by the Chamber of Deputies), its purpose is to promote efficiency in the use of products, services, materials, energy, water, secondary raw materials and by-products, through clean production, reuse, recycling and redesign and also to meet a zero-waste target. Among the more relevant features of this Law are the following.

• Any person or entity that produces or imports containers or packing materials must submit a circular economy plan.
• Secondary raw materials may be used to produce any good. If not suitable to be reincorporated into a production process, secondary raw materials may be transformed into energy or exported to be reincorporated into other productive chains.
• Operators of final disposal sites, such as landfills, must take advantage of energy originating from gases emanating from such installations, after evaluating technical and environmental viability.
• The minimum content of recycled plastic in products should be 20% by 2025 and 30% by 2035.

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 notified immediately 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, ASEA, as well as other federal or state environmental agencies, put at their 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 cases, regulatory agencies may deny access to information if it is deemed of a confidential nature or if its disclosure may damage third-party rights.

Corporates are not required by law to disclose environmental information in their annual reports. However, many companies do provide reports on their sustainability initiatives and on how they are contributing to the fight against climate change, as part of a trend to meet global ESG requirements.

There are no legally binding arrangements in place yet for green financing in Mexico. In 2015, the members of the Mexican Banking Association signed a voluntary Sustainability Protocol that, among other things, sought to institutionalise a commitment towards sustainable development. The Protocol comprised five principles:

• a commitment to establish an internal sustainability policy;
• management of environmental and social risks in investment projects and the granting of credit;
• promote financing of sustainable projects;
• a corporate policy that encompasses sustainability principles in internal operations; and
• follow-up to sustainable policies implemented by the banking sector.

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, because the Waste Law requires that the parties involved determine who will be responsible for remediation if a site being purchased is contaminated.

It is also customary to conduct a permit review in order to determine whether 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 will be 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.

Laws do not require a seller to disclose any environmental information to a purchaser. This is more a contractual requirement. However, in the case of soil contamination, 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 is 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 may investigate to determine if a site may be contaminated, given that owners or occupiers have remediation liability 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.

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 is 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.

The federal government has yet to establish a comprehensive legal framework in the area of environmental or green taxes; however, and as discussed in 7.2 Environmental Taxes, states in Mexico have begun enacting laws that impose “green taxes” over air emissions.

In civil cases or in class actions, judicial agreements may be entered into in order to put an end to litigation and requiring a party that has caused environmental damage to carry out corrective or remedial actions; another option afforded to parties in dispute is to sign private agreements that establish environmental obligations. This is common in transactions involving the transfer of contaminated land.

The General Law allows a party that has been declared liable for breaching environmental laws to carry out activities designed to protect or preserve the environment, in lieu of paying fines. These activities or environmental investments must be approved by regulators in advance.

Mexico should enact a Circular Economy Law, to establish rules and requirements for producers of consumer goods when they generate waste. Much of the waste generated in Mexico may be recycled or used as secondary raw materials and there needs to be a legal framework that establishes rules on how waste may be reduced or minimised.

There should also be regulations in place to simplify the environmental permitting process, particularly in the case of companies which carry out activities that do not pose great risk to the environment. Permit applications should be replaced by notices to regulators, describing the activities to be carried out and their environmental effects. Regulators would thereafter hold such companies accountable for fully complying with their undertakings.