Spotlight: Chile's new economic and environmental crimes law

Chile’s new law against economic and environmental crimes, aimed at promoting corporate sustainability and public trust, imposes more demanding transparency and compliance measures and increases penalties for infringements.

Law No. 21,595 went into effect in August and targets those who occupy "a higher hierarchical position in a company, whether CEO or member of the highest administrative body, whose annual income is equal to or greater than that of a medium-sized company," Andrés Bustos, an expert in economic crimes at Bustos Gómez law firm, told BNamericas.

The law also reforms criminal liability to include members from public universities, political parties and religious organizations – but at the expense of prosecuting crimes committed by smaller companies bringing in less than 900mn pesos (US$1mn) in annual revenue, he added.

The law is ambiguous in differentiating between criminal and administrative wrongdoing and would not pursue the crimes committed by small companies,  overall brings much-needed progress in the prosecution of environmental crimes, according to analysts.

For the first time, pollution, illegal water extraction and ecocide are included alongside crimes such as fraud, collusion and corruption – and executives found guilty could face prison time. Previously, people found guilty of economic and environmental crimes in Chile were made to take ethics classes and pay fines. 

However, concerns are emerging that the law could be used to “criminalize business failure; for example, for insolvency crimes, according to the new article 463 paragraph 4 of the penal code,” Bustos said. He highlighted indebtedness, periods of poor financial performance and “acts contrary to the demands of rational administration of assets, or to those who act with inexcusable ignorance of the poor state of their businesses” as examples of potential legal liability.

Such definitions raise problems of compliance monitoring “from the perspective of prevention, the model for which must emphasize enforceable measures, according to the corporate purpose, line of business, size, complexity, resources and activities.”

The law forces companies to determine a person who ensures that the protocols are respected and “a court may even appoint a supervisor, in order to ensure that the legal entity is effectively developing an adequate crime prevention system, with the powers to issue mandatory instructions and impose operating conditions,” according to Bustos.

“Specific responsibilities should be assigned, monitoring reviews established, reporting channels and certifications applied, especially since penalties increase as the level of responsibility rises,” Ignacio García, a partner at Porzio-Ríos-García law firm, told a recent seminar hosted by mining supplier association Aprimin.

Jorge Castillo, director of mining arbitration and mediation center Cammin, said in a statement that “we have identified the need to incorporate management elements for administration, water resources, tailings and plants, etc.”

Castillo called for the standardization of processes and contracts so that corporate performance can be certified by sector and environmental authorities.