What Chile’s new economic and environmental crime law means for legal entities

With the entry into force of Chile’s Law 21,595 on Economic Crimes and Attacks on the Environment, companies are obliged to increase their ethical standards and compliance with models to prevent illegal actions.

The new legal framework, which introduced amendments to Law 20,393 on the criminal liability of legal entities in September, increases the number of crimes and penalties in matters related to banking, the stock exchange and others.

For the first time, prison sentences or other restrictions on freedom as well as high fines are also possible, even if the crimes were committed by third parties.

To learn more about this matter and its impact on mining, BNamericas speaks with Jorge Castillo, executive director of the Mining Arbitration and Conciliation Center CAMMIN, affiliated with the Chilean Chamber of Mines.

BNamericas: How complex is the economic and environmental crime law for companies in Chile?

Castle: The criminal procedure reform introduced in 2010 affected everything related to industrial accidents, whether serious or fatal, because before direct compensation agreements could be reached with the affected families, the Public Prosecutor’s Office stepped in as a new actor to investigate accidents and determine criminal liability, file formalizations at your own discretion and contact the Guarantee Court [a criminal court] to conclude reparation agreements.

In the new law, the Public Prosecutor’s Office has a more important role, as it complements Law 20,393, which regulates the criminal liability of legal entities, and we have increased from about 20 crimes to over 200, distributed among different legal bodies such as customs, taxes , banks, general laws, etc.

BNamericas: What aspects should mining companies pay more attention to?

Castle: With the introduction of compliance regulations, several crimes will be of importance. When it comes to occupational health, we are the DFL No. 1 [a decree with the force of law] from the Ministry of Health, which relates to the health certificates of workers.

Previously, when manipulating a health certificate there was an administrative sanction that affected the individual, but now the sanction is direct and has a criminal connotation for the legal entity.

Another important regulation refers to Article 490 of the Criminal Code on quasi-homicide offenses in cases of serious damage to the health or integrity of the employee, which occurs through the application of compliance regulations, The public prosecutor can classify it as a criminal offense and hold the legal entity criminally liable.

BNamericas: In other words, even if an employee forged a medical certificate, is the legal entity the one that assumes all legal responsibility?

Castle: Yes, the employer. Ultimately, the person who committed the crime is the guarantee that this does not happen. It is therefore important that every legal entity implements good crime prevention models, which must be dynamic, manageable and reportable. In addition, they must contain the signature of a person responsible for crime prevention, managed at board level and verified by an independent third party.

In the mining industry, this model must be a living system coupled with all protocols and processes. It is important that it is known to everyone so that in any case the exercise of compliance can be accredited and the legal entity can be exempted from criminal liability before the Labor Authority or Sernageomin fines are imposed and the criminal connotation can be eliminated. The crime prevention model will be the only tool that can constitute an exemption from criminal liability.

BNamericas: Will liability for crime always lie with legal entities rather than individuals?

Castle: Although it is the individuals who commit the crimes, it is the legal entity that is punished. Previously, it was assumed that those potentially responsible were those who made decisions in the company, such as the CEO or the board of directors. However, the law went further and stated that a person holding a supervisory or resource manager role could endanger the legal entity.

In the Penta case, for example, it was the intermediaries who committed the crimes, and the board excused itself by saying that these people had acted on their own behalf and were therefore dismissed from the company. However, although the operations were carried out by the intermediate bodies with administrative powers, their actions were in favor of the company. These situations are intended to be prevented, meaning that even if it is the intermediaries who commit crimes, the legal entity bears full responsibility.

Today, compliance officers must be able to be trained to the highest standards. The standard is complex because it involves extending responsibility to third parties. It will no longer be enough to look at your own navel, but it will be crucial to worry about the actions of others. The crime could even be committed by a supplier who may be carrying out an act for the benefit of the legal entity. In these cases, criminal liability also lies with the party who received the benefit. There is an update of liability.

BNamericas: What types of penalties or punishments are there?

Castle: The public prosecutor’s office will determine the specific nature of the crime, but the maximum penalties could be the dissolution of the legal entity or the imposition of fines of 10,000 UTA [annual tax units, currently at 796,000 pesos or US$853, so approximately US$8.5mn].

Violations can be published in the commercial register or the official gazette and companies can be identified as perpetrators, which can have a negative impact on their reputation. This is an important factor in the business world that can lead to the loss of the company’s stock value.

BNamericas: How can criminal offenses be distinguished from cases such as corporate insolvency or errors in asset management?

Castle: I do not believe that there is an excessive criminalization of the business world, since the prosecutor’s office must analyze the circumstances to determine whether a crime has occurred, and legal entities can demonstrate whether they have a crime prevention model and exercise their rights to defend themselves against accusations .

BNamericas: The law mentions the figure of a compliance officer with the authority to intervene in the company and issue instructions if a crime is detected.

Castle: I am convinced that mining companies will not see this person. Knowing their high standards, they must prepare or update all their crime prevention models and transform their compliance officers into responsible individuals.

BNamericas: What are the penalties associated with environmental crimes in cases such as pollution, illegal water extraction or other impacts that may arise from mining projects?

Castle: Prosecutors from the Public Prosecutor’s Office are already preparing for environmental issues, but they will have cooperation units such as the State Defense Council. Unlike other cases, environmental crimes do not use the logic of establishing that the act benefited the company; Rather, the benefit for the company lies in the lack of management or the foregoing of resources to protect the environment.

Defining environmental crimes will not be easy, although the types of punishment, such as unauthorized abstraction of water or the discharge of environmentally harmful chemicals into surface or groundwater, will be clearer. It will be necessary to refine the regulations and environmental techniques to define what constitutes harm and offense in cases where there is a valid environmental qualification decision.

I have seen cases where climate change caused thaws that caused retention ponds to collapse and diverted sediment into tributaries. In these cases they would not necessarily be classified as dumping offences.

BNamericas: What motivated the legislature to enact this law?

Castle: It was assumed that the country needs to raise standards of conduct for legal entities. This started with the tax area, then also included white-collar crime and finally also included related crimes such as those against the environment. In this way, crimes such as bribery, unfair administration and asset management have increased.

For example, great emphasis is placed on mining tenders, as they are not so free and it will not be easy to invalidate them or redirect assets. If a third party believes that the diversion of assets as part of a tender is a criminal offense, this can be investigated and it does not concern the procurement or financial managers, but the legal entity.