Theory of Punitive Damages in Mexico

May 8, 2015
Theory of Punitive Damages in Mexico

Due to the constitutional reform published in the Official Journal of the Federation on June 10,2011, the protection of human rights was expanded, through the “Pro Homine” principle, toinclude provisions which require that international treaties be observed when they result in afavorable outcome. The foregoing applies despite the fact that prior to such reform, article 133 ofthe Constitution already incorporated the provisions of the treaties to which Mexico was a partyunder Mexican law. One of the international agreements that is of significant importance in thisarea is the American Convention on Human Rights, also known as the Pact of San Jose. Article63 of said convention establishes the fundamental right to “total reparation” or “faircompensation”, where the State must take the necessary actions to ensure that any violation offundamental rights, including ones caused by individuals, is repaired entirely or compensated ina fair manner given the damage caused.The concept of reparation consists of restoration of the victim to their situation prior to theviolation of their rights. Fair compensation applies when reparation is not possible, and consistsof reparation through monetary compensation that is sufficient given the damage caused.Based on the fair compensation of fundamental rights, the Mexico’s Supreme Court Justice hasbegun to issue criteria which lay out the process for incorporating the theory of “PunitiveDamages” into Mexican law.As its name indicates, the theory of punitive damages can generally be defined as an economicpunishment imposed on the party responsible for said damage, by the judge, in an extraordinaryamount, as a result of acting in bad faith or with malicious conduct. The theory has twoobjectives: (i) to provide relief for the victim and punish the responsible party for their conduct;and (ii) at the same time, to serve as an example.Traditionally, the notion of “damages” that has prevailed in Mexico has been limited to thereparation for direct and immediate consequences of harmful conduct against the victim, withoutany other objectives.Accordingly, by means of the two recent criteria issued by the First Chamber of theMexicanSupreme Court of Justice, Mexican law has been extended to allow for the issuance ofpunitive damages.It remains to be seen if Mexican courts will be cautious when applying these criteria, given thatthe expansion to allow for punitive damages may result in an increase of frivolous lawsuits.Additionally, it is desirable that legal reforms be enacted to provide for civil provisions on suchdamages, thereby establishing the guidelines for the application of the theory of punitivedamages in Mexico.Sources of information and disclaimer: The following sources of information, among others,have been used in preparing this document: Official Journal of the Federation, the Bank ofMexico, Supreme Court of Justice of the Nation, Department of Finance and Public Credit. TheCCN MéxicoReport ™ does not constitute legal or tax advice and should not be used forpurposes other than as purely informative for the general public. For more information on theCCN MéxicoReport ™, any of the issues mentioned therein or to inquire about legal services,please contact Rob Barnett (rbarnett@ccn-law.com) or Mario Melgar (mmelgar@ccn-law.com),phone (210) 222-1642.

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