Gabriel Calvillo
Partner
Carswell & Calvillo
/
View from the Top

Strong Agencies Must Ensure Legal Enforcement

Wed, 02/24/2016 - 12:42

Q: The Constitution guarantees the right to a healthy environment. How has the Energy Reform followed through in this obligation?

A: The Constitutional Reform was designed not only to promote investment in the sector, but to encourage human rights that had been lacking for some time in Mexico. This has a huge transcendence and it irrevocably changes the rules of the game, especially taking into account the political system ruling Mexico. The biggest changes will be the way laws will be enforced and how they will be interpreted by the arriving companies. When Mexico joined NAFTA, a corresponding environmental agreement was signed to guarantee that the investments arriving in Mexico would adhere to environmental human rights. It has been over two decades since NAFTA was ratified, and the Energy Reform reflects similar social demands. Mexico wishes to develop an energy market but not at the expense of the environmental human rights of Mexicans. We are measuring how companies view Mexico in terms of guaranteeing that the investments will be socially responsible.

Q: How would you describe the capacity of PROFEPA to enforce the laws, and which areas must be addressed urgently?

A: We have been working with Congress since 2008 to write and issue a new organic law for PROFEPA and it has been under discussion since then. It was presented to the Chamber of Deputies, and the final version is being debated by the Environmental Commission of the Chamber and by PROFEPA. The law proposes the creation of a new PROFEPA, since at the moment it does not exist in the law but as an administrative regulation. If we compare PROFEPA with Environment Canada or EPA from the US, we see that Mexico clearly lacks some basic tools. For example, PROFEPA cannot initiative collective actions, and it does not have an area dedicated to civil enforcement or technical experts. This reaches deep into the constructs of PROFEPA, transforming the agency from one dedicated to environmental protection to an agency defending the environmental human rights of Mexicans. The theme is not only in solving the conflicts between PROFEPA and private investors, but also in involving the affected communities. Companies entering the hydrocarbons industry cannot operate because there are social conflicts in the area. The agencies are not addressing these community problems and are only focusing on legal matters.

Q: Do you believe the creation of agencies like ASEA is beneficial and necessary for the enforcement of environmental responsibility?

A: The intention to create an agency like ASEA was positive, given the level of specialization of the hydrocarbons industry. The drawback we identified was that we need a much stronger PROFEPA rather than dividing competencies between agencies. When we were consulted by the Senate during the creation of ASEA, we suggested incorporating the agency within the body of PROFEPA. While this might sound ambitious, it has been carried out in other agencies in the past. For example, the Federal Investigation Agency was within the Office of the Attorney-General of Mexico.

Dividing the competencies between agencies has created duplicity of functions that companies in the private sector find difficult to navigate. For instance, a company with contracts in the hydrocarbon industry might not know which entity to approach for permits, raising the question of what defines membership in the hydrocarbons industry. Imagine there are two companies, one is a hydrocarbon player and the other is not, and both carry out identical environmental violations. The non-hydrocarbon player can be fined MX$3 million (US$200,000) while its counterpart can pay up to MX$600 million (US$40 million). The model that has been created for the agency is unconstitutional. We want the agencies to work efficiently in solving the problems, and this is important for citizens and investors. In order to generate successful businesses and investments, we need strong agencies.

Q: What are the barriers Carswell & Calvillo has faced during the process of proposing this organic law?

A: The main barrier we have encountered is PROFEPA itself, and we cannot understand why previous administrations of the agency refused a law that gave them multiple tools other than the system PROFEPA currently has. The law would give PROFEPA additional tools such as advisory reports in order to carry out collective actions. We have been working to reform the Environmental Responsibility Law. The main barrier we have been combatting is the agency’s inertia, but with a new administration under the guidance of Guillermo Haro Bélchez, we have seen the doors open and this organic law has been reactivated.

Q: What is the process for punishing companies that inflict environmental damages and what are the complications involved?

A: The community is interested in companies and authorities taking responsibility for the direct and indirect impacts the accident has generated. PROFEPA operates under the criteria that it can only act administratively with laws expedited prior to the Environmental Responsibility Law. If the agency is dealing with soil contamination, then it only applies the administrative procedures of the law pertaining to waste management. Then the culprit is ordered to repair the damages. To repair the damage, a soil remediation order is carried out. While it might seem simple, it can actually turn into an administrative nightmare. Administrative laws are theme-based and revolve around water, residues, forests, and wildlife, and each are partially integrated into the reparation payments.

For soil remediation the only order PROFEPA can make is for the removal of pollutants from the soil. Yet what happens if the damage extends to water? At this stage CONAGUA takes charge of the administrative processes. However, what happens if it is discovered that wildlife was also affected? PROFEPA must return with a different administrative order to apply a new law. This is an administrative complication has been addressed by the Environmental Responsibility Law. With this law it does not matter which authority intervenes, and remediation is carried out in a single integrated administrative process. It is difficult for our clients who wish to resolve a conflict to work with an agency that only partially solves the problem. Fortunately, the judicial power is beginning to endorse change by informing the agencies that they must fully enforce the law.