Commutations an Opportunity to Improve Environmental Protection

Businesses have an opportunity, provided by Mexican law, to replace fines imposed on them with investments that can contribute to the preservation, protection or restoration of the environment and natural resources. This work presents an overview of the inclusion of this measure in the Mexican legislation and an opinion on the additional benefits that enterprises may obtain when they decide to apply this benefit.

In some cases, companies may incur in violations of the environmental legislation, in particular to the General Law of Ecological Balance and Environmental Protection (LGEEPA). In such cases, the LGEEPA provides for the imposition of administrative sanctions. 

Those administrative sanctions may range from fines to arrests or the suspension or revocation of concessions, licenses, permits or authorizations. It should be noted that, in imposing these sanctions, the authority will consider different aspects applicable to each particular case.

The imposition of these sanctions may serve a variety of purposes, which may include preventing further damage, discouraging breaches of the law, or preventing reoffences. Thus, the LGEEPA, with the purpose of seeking to favor conduct that has a direct effect on environmental conditions, established the opportunity to apply for the commutation of fines that have been imposed by the authority. 

The commutation of fines provided for in Article 173 of the LGEEPA is an existing concept that implies the substitution of one sanction for another. This benefit is frequently used in the case of lenient penalties. For this reason, it shall not be granted when security measures have been imposed, as these measures are related to cases where there is an imminent risk of ecological imbalance, or of serious damage or deterioration of natural resources and cases of pollution with dangerous repercussions for ecosystems, their components or for public health. 

This benefit was included in the law when in 1996, several articles of the LGEEPA were modified. One of these articles was Article 173, which originally only listed the considerations to be taken into account for the imposition of sanctions for infractions to the said law. After the amendment of 1996, the following paragraph was added to the  article: 

“[…] The corresponding authority may grant the infractor the option to pay the fine or make equivalent investments in the acquisition and installation of equipment to avoid contamination or in the protection, preservation or restoration of the environment and natural resources, as long as the obligations of the infractor are guaranteed, provided it does not involve any of the cases established in Article 170 of this Law and the authority fully justifies its decision.”

The explanatory statement prepared to support the amendments to the LGEEPA does not present an extensive discussion on the reasons that led to the addition of this paragraph, but it does point out its purpose as has been previously noted. 

Then in 2001, this article was further amended to clarify that this opportunity given to the infractors should operate at the request of the infractor himself. The foregoing, because it was considered that, from the wording previously transcribed, it could be inferred that the authority was the one who granted, in its resolution, the option to pay the fine or to make equivalent investments in environmental projects. 

This amendment also sought to eliminate the contradictory interpretations as to whether the benefit of commuting the fine could be granted when the security measures, provided for in Article 170 of the LGEEPA, had been imposed.

As a result of the above, the wording that prevails to this day became the following: 

“[…]The corresponding authority, by itself or at the request of the offender, may grant the latter, the option to pay the fine or make equivalent investments in the acquisition and installation of equipment to prevent pollution or in the protection, preservation or restoration of the environment and natural resources, provided that the obligations of the offender are guaranteed, it does not involve any of the cases provided for in Article 170 of this Law, and the authority fully justifies its decision.”

It can be noted that the substantial change can be found at the beginning of the paragraph, while the rest remains the same. However, as stated before, the explanatory statement clarified that this benefit was not applicable in the event that a security measure had been imposed during the proceeding. 

In Mexico, the Federal Prosecutor's Office for Environmental Protection (PROFEPA) has broad experience in the application of the provisions related to commutation of fines. It is worth recalling that PROFEPA is the Mexican agency in charge of verifying compliance with environmental regulations in order to contribute to sustainable development and enforce compliance with environmental laws.

In turn, the National Agency for Industrial Safety and Environmental Protection in the Hydrocarbons Sector (ASEA), which began operations in 2015, assumed similar tasks to those of the PROFEPA, but referred only to the hydrocarbons sector and its law also establishes that this agency has the authority to decide on the applications of commutation of fines. 

Therefore, companies that may have committed faults that resulted in the imposition of fines by these environmental authorities may evaluate if applying for their commutation may turn out to be a better investment of time and resources. More than ever, it is understood that compliance with environmental law is needed to face the climate and environmental crisis and contributing to reach such objectives through commutation may offer certain benefits. 

Companies may regard this benefit as an incentive to prevent environmental damage and at the same time, they may be encouraged to comply with the law and they can identify that with their investments, while contributing to the protection of the environment, they are also part of the solution to these serious problems.

The commutation of fines may represent a positive choice that encourages businesses to obtain a reward for their efforts in favor of the environment, as opposed to the risk of having to pay a fine and the negative reputational presumptions that this may entail.

Therefore, this option represents an opportunity that could contribute to building good public perception of the businesses and to improve public trust in the environmental authorities of the country. Both the government and business are making a commitment to undertake certain activities. On the one hand, the business, by applying for a commutation, will commit to making an investment that it expects to be used to protect, preserve, or restore the environment and natural resources. On the other hand, the authority will be able to access the resources it requires to carry out its functions, it must use the investment for these purposes and will inform the businesses about the result. In a way, both government and business are held accountable to each other, as they reaffirm their responsibility to the other. 

Finally, sanctions can be regarded as mere punitive measures against an infractor, as sanctions may start to be seen as measures that can help, in a more direct way, to reduce environmental damage, to preserve and protect the environment.