20/2020 Trial Ruling: New Legal Risks on Environmental Compliance

In Mexico, environmental risk has shifted from a niche technical matter to primary financial and reputational exposure. An exceedance of wastewater parameters, a plant that “starts up and regularizes later,” or a poorly prepared environmental study can trigger closures, sanctions, repair orders, and, increasingly, judgments that presume causation between a company’s activity and environmental harm even when the factual chain is complex. For capital allocators, the message is unambiguous: diligence must be evidenced, not asserted.

The Pivotal Case: Amparo Directo 20/2020 (First Chamber, SCJN)

The Dispute in Brief

Plaintiff Juan Torres Morales sued Karey Alimentos, S.A. de C.V. — operator of an abattoir in Mazatlan, Sinaloa — for environmental damage, citing hazardous waste management and wastewater discharges into the municipal sewer. He sought to establish both objective and subjective environmental liability under the Federal Environmental Liability Act (LFRA), with restoration, compensation, and monetary sanction. A first-instance court acquitted the company; on appeal, the unitary tribunal confirmed. The Supreme Court took the case to clarify standards.

The SCJN granted amparo to the plaintiff, dated April 30, 2025, set aside the acquittal, and ordered the appellate court to issue a new judgment reaffirming objective and subjective liability and to rule on remedies and sanctions. It also gave notice to state and municipal authorities for potential local infractions.

Two Facts With Business Consequences

NOM-002-SEMARNAT-1996 exceedances (discharge to sewer): a municipal test of Feb. 21, 2014 reported BOD₅ = 334 mg/L (limit 150) and TSS = 436 mg/L (limit 125). The municipality ordered contaminant reduction. The SCJN concluded the company contravened NOM-002-1996. Years without treatment and permit: applying precaution and in dubio pro natura, the court may reasonably infer untreated discharges prior to permitting and will not penalize the claimant for evidentiary gaps caused by the operator’s non-compliance.

The Standards the Court Set (or Reinforced) — and Why They Change the Game

1) Pro natura, precaution, and in dubio pro aqua

Where scientific uncertainty exists about risks or harm magnitude, courts must decide in favor of nature. The pro natura principle is tied to prevention and precaution; in dubio pro aqua mandates heightened protection of water resources and connected ecosystems. In environmental disputes these principles operate as general interpretive commands.

Investor translation: In data-imperfect contexts — common in real-world systems — the benefit of doubt is not the company’s. If the file shows gaps, the default tilts toward protective measures, suspensions, and precautionary findings.

2) Civil standard of proof for complex environmental facts

The SCJN underscored that environmental liability in civil proceedings requires preponderance of the evidence (more likely than not), acknowledging that in complex pollution one rarely finds a pristine causal chain. Judges must use sound inference, the best available science, and weigh reasonable probabilities.

Implication: Your data management (monitoring, QA/QC, maintenance logs) is your defence; without traceability, adjudication leans on pro-environment principles and legal presumptions.

3) Legal causation and the presumption of nexus (LFRA art. 25)

Adopting adequate causation as legal causation, the Chamber held that article 25 LFRA creates a presumption of causal nexus where operators of risky or regulated activities breach their duty of care. On that basis, it presumed the link between the company’s hazardous wastes and deterioration in the Estero de Urías, thereby updating objective liability.

Investor translation: If there are breaches (permits, limits, waste handling, discharge control) and you cannot prove diligence, the law presumes causation. That presumption carries costs: restoration, compensation, and possibly sanctions.

4) Coexistence of objective and subjective liability

In environmental matters both regimes may apply: objective liability for hazardous/risky activities and subjective liability for unlawful acts (such as exceeding a limit). They can be simultaneously established.

Implication: A single exceedance or omission can trigger subjective liability; the very risky nature of the activity can ground objective liability.

5) Practical effects: restoration, compensation, sanction, and proportional participation

The Chamber instructed the appellate court to quantify remedies under integral restitution (or compensation where restitution is impossible) and to consider monetary sanctions where intent is found. For multifactorial damage, liability should reflect the operator’s proportional participation. Authorities were notified for potential local breaches.

Implication: Significant awards may ensue even if the company is not the sole source; what matters is the attributable share — and the documented diligence.

What the Precedent Means for Investors

Diligence is a legal and evidentiary duty. It is not enough to “comply,” you must demonstrate it with traceable evidence. Absent that, article 25 LFRA’s presumption may attach. Water is a judicial activator. Projects involving discharges or water risks will be read through in dubio pro agua, raising the practical protection standard. Yesterday’s lax practices offer no shield. Even if zoning and discharge rules were once thin, courts will test your current conduct and proof of compliance and mitigation. Greenwashing and “regularize later” inflate expected loss. A single official test showing exceedances or a string of breaches can flip causation against you.

Translating the Case Into Due Diligence and Controls

A. Risk mapping by project vertical:

• Regulatory: prior permits (EIA, water, waste), conditions, compliance schedule, past inspections.
• Technical-operational: design and capacity of pre-treatment/treatment, planned maintenance, alarms and redundancies, contingency plans.
• Data and QA/QC: accredited laboratories, chain of custody, historical series (BOD, TSS, fats & oils, metals, sector-specific compounds).
• Socio-environmental (Escazú): information and grievance mechanisms, community agreements, response traceability.
• Governance: responsibility matrix, internal audits, Board/ Risk Committee reporting.
• Outcome: a probability × impact score driving mitigation CAPEX, time-to-permit, and expected failure cost.

B. First-line controls (operator):

• “Plus compliance” on water: operate 15–30% better than the applicable limit; if discharging to sewer, NOM-002-1996 applies; if to national receivers, NOM-001-2021. Maintain current permits and certified monitoring. In Karey, one municipal table of BOD/TSS exceedances upended the company’s position.
• Hazardous waste: full manifests, transport/disposal traceability, authorized contractors, cross-audits.
• Digital traceability: logs, work orders, calibrations, photos, geotags, signatures — retrievable on demand.

C. Second-line controls (investor):

• Owner’s Engineer or technical committee to audit the operator/consultant: gate reviews (Go/No-Go), red flags, verification of raw datasets.
• Financing covenants: no disbursement without permits; default triggers for exceedances or non-reporting.
• Insurance: Environmental Impairment Liability (EIL), business interruption for environmental events, general liability with appropriate endorsements.

D. Smart procurement (avoiding “cheap and poor”):

• Two-envelope system (80% technical / 20% price): if a bid fails the technical threshold, price remains sealed.
• Mandatory pre-qualification: sector-and-region experience, named key staff, ISO/IEC 17025 labs, E&O cover, verifiable authorization record.
• Tight Terms of Reference: regulatory route, baseline, modeling, Escazú engagement, conditions-compliance plan, QA/QC, editable deliverables.
• Contract levers: no-cost re-work for technical defects, 10–20% retentions, penalties for QA/QC failure or unauthorized staff changes, data ownership for the client, capped reimbursables.
• SLAs and KPIs: % preventative notices vs benchmark, time-to-authorization, “zero unworkable conditions,” audits with no critical findings.
• Why it pays: when you compute Total Compliance Cost (TCC) and Expected Failure Cost (EFC), apparently cheap proposals often double true cost via re-work, regulatory queries, and months of delay.

Anti-Greenwashing and “No Regularise Later”

The judgment exposes a pattern: firms that communicate “green” without verifiable evidence or that build without permits end up with precautionary measures, closures, and presumptions of causation. The countermeasure is traceability and verification:

• Responsible communications: every environmental claim must map to data and norms (parameter, method, limit, sampling point, date).
• Public-facing docket (where feasible): identifiable filing number, conditions, compliance status.
• Voluntary programs with hard evidence: such as environmental audits with measurable commitments.
• Regularization plans only as exception: with timetable, investment, and public verification — the aim is to sunset the plan swiftly.

The Karey Template as a Due-Diligence Simulator

For a water-intensive project, an investor should now ask:

• Permits and applicable NOM: sewer (NOM-002) or national receiver (NOM-001)? Are permits current and monitoring series sound? In Karey, a single table with two parameters sufficed to show non-compliance.
• Hazardous waste & LFRA: where hazardous wastes exist, LFRA article 25 can presume causation if diligence is not evidenced; do manifests, routes, and final disposal records stand up? In Karey, the court updated objective liability and tied harm in the Estero de Urías to the operator’s lapse.
• Missing evidence: who bears the risk? If an operator ought to hold data and permits, absence is imputed to the operator, not to the claimant. This was decisive.
• Quantum: even in multifactor scenarios, the court may award based on proportional participation; with intent, monetary sanctions arise.
• Bottom line: if a project cannot today show operation within limits and with permits, legal risk is high and expensive. Adjust CAPEX to close gaps before committing capital.
• Governance: From “we comply” to “we can prove it:”

The judgment raises the bar for corporate governance:

• Living legal matrix: what is monitored, by whom, how often, with which method; deviation alarms; accountable owners; documented corrective actions.
• Board/Risk Committee reporting: trendlines (BOD/TSS/fats & oils, settleable solids), incidents, root-cause analysis, remedial CAPEX/OPEX.
• Evidence culture: if it is not in data, logs, and permits, it does not exist.
• Contingency planning: drills, authority/community communication, and documented post-incident reviews.

Five Moves in 100 Days to Secure Your Investment

• Gap audit (water and hazardous waste): permits, limits, monitoring, installed capacity, maintenance discipline.
• Rapid-fix plan: close obvious deviations (such as fats and oils, solids), recalibrate instruments, tune operations and logs.
• QA/QC and laboratories: contracts with accredited labs, chain-of-custody protocols, digital data archiving.
• Governance: technical committee or Owner’s Engineer; environmental KPIs embedded in executive incentives.
• Procurement: launch an RFP with a hard technical threshold, objective rubric, and re-work/retention clauses.

Golden rule: No permit, no work. Starting without authorizations triggers presumptions against you that are costly to reverse — the Karey case is the reminder.

Conclusion: 'Doing it right the first time' is a financial decision

Amparo Directo 20/2020 draws a clear map: if you breach, the law presumes; if there is doubt, it protects the environment; if evidence is missing, it looks to the party who should hold it. The right investment question is not “are we compliant?” but “can we prove it tomorrow — with data and permits — before a judge?”

Three Final Takeaways for an Investment Committee:

• Traceability = defense: data, QA/QC, permits, conditions, maintenance, and social engagement on record. Without this, legal risk is elevated.
• Quality consultancy: a weak EIA or baseline is not a saving; it is a liability. Procure quality at the outset; measure performance; require re-work.
• Water and hazardous wastes are high-leverage triggers: treat them as projects within the project with dedicated capex and governance.

Markets reward anticipation: investing in environmental diligence reduces the cost of capital by minimizing interruption, sanction, and reputational risk. In 2025, compliance is necessary but insufficient; demonstrable compliance — timely, verifiable, and well-governed — is the competitive edge.

Good luck!