An Overview of Punitive Damages in Mexico

Under the Federal Civil Code, effective nationwide in Mexico for all federal matters including commercial law, and pursuant to the provisions of the Civil Codes applicable in all Mexican states, an individual impacted by harm due to any illicit conduct – defined by law as any action or inaction which is contrary to mandatory statutes or to good customs – has the right to compensation both for their direct losses and for loss expectancy damages, from the person responsible for such harm.

Under Mexican law, the word “damages” strictly refers to the loss of the victim’s assets, and “loss expectancy damages” refers to the lawful and foreseeable earnings that were thwarted as a result of the illicit act or omission.

Moreover, Civil Codes in effect throughout Mexico additionally acknowledge the existence of immaterial damages that an illicit act or omission can cause, either to a person’s emotions, relationships, beliefs, dignity, honour, reputation, private life, physical constitution or appearance, or self-perception; and there is even an established legal presumption in most jurisdictions in Mexico providing that those immaterial damages occur when a person’s freedom or physical or psychological well-being is unlawfully compromised. Under Mexican law, these immaterial damages are referred to as “moral damages”.

In Mexico, the enduring legal standard for demonstrating the existence of either material or immaterial damages is that they must be an immediate and direct consequence of the action or inaction that caused them.

Despite the above, in July 2014, the First Chamber of Mexico’s Supreme Court of Justice established a precedent in which it held that, within the framework of the right to fair compensation, there exists an element of damage law aimed at deterring conduct that causes harm, which seeks to dissuade and prevent such future illicit acts or omissions.   

Therefore, the compensation awarded to the victim not only allows them to fulfil their desire for justice, but also ensures that the perpetrator faces negative repercussions for their actions and, in turn, that the compensation serves the purpose of deterring the offender from causing harm to others in the future. This preventative and retributive aspect of the compensation is known as “punitive damages”.

In the same precedent previously referred to, in which the concept of punitive damages was established in Mexico, the First Chamber of the Supreme Court held that damages of this kind arise from the interpretation of Article 1,916 of the Civil Code for the Federal District, applicable in Mexico City. Although not explicitly referring to punitive damages, this article mandates that, when quantifying the amount of compensation to be awarded to the victim for “moral damages”, judicial authorities must take into consideration, among other things, the rights infringed by the harmful action or inaction, as well as the level of responsibility attributable to, and the economic status of, the offender.

Thus, punitive damages will be awarded when aggravating circumstances exist, according to the level of responsibility of the offending party, which must be considered in order to determine the amount of compensation to be awarded.

Since this landmark precedent was established, Mexico’s Supreme Court of Justice has continued to develop and specify the concept of punitive damages through precedents and judgments.

For instance, in an administrative law precedent published by the Second Chamber of the Supreme Court in the summer of 2018, it was clarified that punitive damages cannot be awarded against the State, within the framework of “moral damages” as applied to patrimonial responsibility, among other reasons, because there is no legal framework specifying the conditions under which such damages could be awarded.

Likewise, towards the end of the same year, the First Chamber of the Supreme Court of Justice determined that, when the State is a defendant in civil matters, the award of punitive damages against it is also inadmissible. The main reason for this is that the dissuasive element sought by damages law within the scope of private law presupposes that individuals or corporations cannot be compelled to act or refrain from acting in a certain manner in the future, although the financial cost of their actions or inactions can be significantly increased to deter them from repeating them. However, in the context of State actions, International Human Rights Law envisages a different approach, which does not seek to dissuade or prevent certain actions or inactions, but rather, to alter the conditions which allowed the conduct that caused the damages to occur in the first place, which may be achieved through “guarantees of non-repetition”.

More recently, while resolving an amparo plea in 2022, the First Chamber of the Supreme Court of Justice held that the award for punitive damages is also inadmissible in commercial matters where the issues at hand are solely the breach of obligations derived from a legal agreement. This decision stems from the fact that commercial law only provides for the award of losses and loss expectancy damages, as a result of a breach of contract, and furthermore, according to Supreme Court precedents, punitive damages may be awarded in civil matters only, and only when the existence of a “moral damage” arising from an illicit act or omission – that is, a tort, and not a contractual breach – is proved.

Since their introduction into Mexican legal practice, punitive damages have been widely contested on a nationwide basis in civil, commercial and administrative matters, in order for the courts to determine, on a case-by-case basis, when they are or are not admissible, as well as how their quantification must be determined.

Arguments presented by the parties’ counsels regarding both the scope of application of punitive damages awards, and the evidence that can be submitted in trial in connection with the level of responsibility of the offending party, will be essential for the adequate development of this legal concept in the years to come.