Theory of Punitive Damages in Mexico

October 19, 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, to include provisions that require that international treaties be observed when they result in a favorable outcome. The foregoing applies despite the fact that prior to such reform, Article 133 of the Constitution already incorporated the provisions of the treaties to which Mexico was a party under Mexican law. One of the international agreements that is of significant importance in this area is the American Convention on Human Rights, also known as the Pact of San Jose. Article 63 of said convention establishes the fundamental right to “total reparation” or “fair compensation,” where the State must take the necessary actions to ensure that any violation of fundamental rights, including ones caused by individuals, is repaired entirely or compensated in a fair manner given the damage caused.

The concept of reparation consists of restoration of the victim to their situation prior to the violation of their rights. Fair compensation applies when reparation is not possible, and consists of reparation through monetary compensation that is sufficient given the damage caused.

Based on the fundamental right of fair compensation, Mexico’s Supreme Court Justice has begun to issue criteria that lay out the process for incorporating the theory of “Punitive Damages” into Mexican law.

As its name indicates, the theory of punitive damages can generally be defined as an economic punishment imposed on the party responsible for said damage, by the judge, in an extraordinary amount, as a result of acting in bad faith or with malicious conduct. The theory has two objectives: (i) to provide relief for the victim and punish the responsible party for their conduct; and (ii) at the same time serve as an example.

Traditionally, the notion of “damages” that has prevailed in Mexico has been limited to the reparation for direct and immediate consequences of harmful conduct against the victim, without any other objectives.

Accordingly, by means of the two recent criteria issued by the First Chamber of the Mexican Supreme Court of Justice, Mexican law has been extended to allow for the issuance of punitive damages.

It remains to be seen if Mexican courts will be cautious when applying these criteria, given that the expansion to allow for punitive damages may result in an increase in frivolous lawsuits. Additionally, it is desirable that legal reforms be enacted to provide for civil provisions on such damages, thereby establishing the guidelines for the application of the theory of punitive damages 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 of Mexico, Supreme Court of Justice of the Nation, Department of Finance and Public Credit. The CCN MéxicoReport ™ does not constitute legal or tax advice and should not be used for purposes other than as purely informative for the general public. For more information on the CCN 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.

© Copyright 2015, CCN. All Rights Reserved.

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