Implications for Real Estate Industry, Sanctions, Criminal and Compliance
On July 18, 2024, the Mexico City Environmental Liability Act was published in the local Official Gazette (LRA).
This new regulation reproduces, improves and increases at a local level, the provisions of the Federal Environmental Responsibility Act, published in 2013. Notably the following provisions were introduced in Mexico City (CDMX):
New obligations regarding harm prevention for corporations. New administrative, environmental and criminal incentives for implementing compliance strategies.
For the first time, the LRA sets forth the duty of preventing damages to the environment and people's health, to all companies and individuals regulated by any environmental law in Mexico City. Applicable to corporations, the concept of due organizational control is introduced and detailed by law. Companies that voluntarily comply with such duty will have the following incentives:
As at the federal level, the new Environmental Act of Mexico City (enacted on past July 18) has included a Section regarding the environmental liability regime provided for in the LRA, which applies to regulatory inspections. In that regard, it is expected that inspection orders and administrative enforcement procedures verify compliance of the environmental liability regime.
LRA promotes incentives for companies operating with responsible and preventive practices, and with a due organizational control environment. It recognizes the right of companies and people resulting liable for damages, to resolve conflicts by alternative dispute resolution mechanisms. In these cases, the repair of damages and the voluntary implementation of due organizational control, for future prevention of environmental damages will exclude judicial sanctions.
It should be noted that compliance provided for by the LRA is aligned with the United Nations Guiding Principles on Business and Human Rights. Therefore, it represents the first law in Mexico endorsing the respect of human rights, requiring commitment of the business sector to undertake responsibility to comply with such prerogatives, and to encourage due diligence processes and procedures to repair negative consequences on human rights in environmental matters.
Implications for the real estate industry.
One of the unique aspects of the LRA is that neighbors and citizens, Non-Governmental Organizations or the PAOT will be able to initiate actions and judicial procedures to sue those responsible for damages caused to artificial elements of the environment.
This will be applicable to construction works that do not comply with the maximum of the total construction surface, densities, percentage of free areas, levels and/or heights, according to urban development programs, as well as constructions that do not comply with the terms and conditions of social housing programs and regulations of buildings pertaining to the cultural heritage of Mexico City.
Real estate companies that comply with the new standard of due preventive organizational control will be able to reduce the risks of lawsuits, environmental liability, administrative, and criminal sanctions applicable to such legal entities.
Corporate criminal liability of legal entities resulting from environmental and real estate crimes.
Finally, the LRA also includes Chapters on environmental criminal liability and on the corporate criminal Liability of Legal Entities in Environmental Matters.
LRA establishes that crimes against the environment and those against artificial elements will be listed as corporate crimes in the catalogs provided for in article 421 of the National Code of Criminal Procedures.
Sanctions for companies liable of environmental crimes could be up to the equivalent of 77.4 years of their net earnings, and in addition to an amount equivalent to three times the benefit obtained or facilitated by the commission of the environmental crime.
The risk of corporate criminal liability and the abovementioned sanctions would be excluded when the company complies with applicable due organizational control standards described on the provisions included in LRA.
***
The Corporate Criminal Liability, Compliance and Environmental Law Practices of our Firm have capabilities to represent our clients in complex corporate criminal litigation and to advise clients on regulatory and criminal environmental compliance matters necessary to prevent corporate criminal liability.
[1] Environmental damage is defined as the adverse and measurable losses, changes, deteriorations, impairments, effects and/or modifications of the habitats, ecosystems, elements and natural resources, their chemical, physical and/or biological conditions, as well as their interactions and the environmental services that they provide.
.svg){kind=small}
