SPAIN: An Introduction to Dispute Resolution

Spain: Dispute Resolution 

The health crisis we are experiencing is having an undeniable effect on the global economy and on the activity of citizens and companies, which is triggering legal consequences of various kinds. The first and most relevant is the regulatory hyperactivity unleashed by the declaration of a state of alarm to deal with the health emergency caused by the COVID-19 pandemic. In this regard, it should be noted that 39 Royal Decree-Laws and 793 regulations were approved in Spain in 2020.

Regarding the economic situation, the COVID-19 health emergency has impacted both the supply side (production stoppage, workers leaving their physical sites, expansion of teleworking, etc.) and the demand side (reclusion of a large part of the population, changes in consumption patterns, etc.), generating a clear economic recession for the year 2020, a year in which an economic slowdown was already expected.

The measures adopted and the orders issued have had a critical impact on contractual relations in both the public and private sectors. Many companies have been forced to close due to lack of liquidity, and many tenants have not been able to meet their rental costs due to lack of income. In the ordinary jurisdiction, the trend nowadays is towards the rebus sic stantibus clause (hardship) and force majeure, two alternatives that are being considered in the legal field to try to deal with contractual situations of impossibility of performance and supervening imbalance of benefits that has arisen from the existing situation.

The legal configuration of both figures is predominantly of a jurisprudential and doctrinal nature, and given the exceptional nature of their application, many doubts arise when considering their invocation in each specific case. The Spanish Supreme Court itself differentiates between:

(i) the supervening impossibility to fulfil the performance (force majeure), which only affects obligations to deliver a specific thing or to do something, and not pecuniary debts, and

(ii) that of those cases in which the performance is exorbitant or excessively onerous (rebus sic stantibus clause), applicable regardless of the content of the agreed performance.

In this sense, the autonomy of the will of the parties and those contractual clauses that have agreed to exclude or expressly regulate situations of force majeure or supervening extraordinary circumstances will have to be taken into account. It is also noteworthy that claims for patrimonial liability against the State are the order of the day.

Likewise, due to the great judicial collapse, which has been increased by the coronavirus crisis, there has been an increase in the promotion of ADR.

In this sense, in December, the Preliminary Draft Law on Procedural Efficiency Measures for the Public Justice Service was approved. In order to decisively promote the use of ADR, it has been established that future claims must be accompanied by a document that proves that a negotiation activity prior to the judicial process has been attempted as a requirement for proceeding. This requirement will be deemed to be fulfilled if mediation, conciliation or the neutral opinion of an independent expert has been previously sought. In addition, one of the great novelties is that the validity of the agreement reached through ADR is exactly the same as if it is resolved by a judge.

Furthermore, in June 2020, the judges of the civil area of Barcelona adopted an agreement to unify criteria for the purpose of imposing fees and costs. The aim of the agreement is to encourage settlement methods between the parties and, in particular, to promote intra-judicial mediation.

Notwithstanding the above, it should be noted that, despite the innumerable damages indirectly caused by the pandemic, new opportunities that will undoubtedly prove decisive in the coming years are also opening up in the legal world.

For example, through the European funds (Recovery plan for Europe), a new opportunity is opening up for many business projects to be eligible to receive financing from the Public Administrations and, in this way, carry out new projects that will allow them to consolidate the strategies already adopted previously and initiate new projects in their lines of business.

Undoubtedly, in these new opportunities, the legal sector will play an essential role, helping clients adapt their new projects to comply with the regulatory requirements, as well as providing them with solid legal assistance that will allow them to be viable in the future and provide new opportunities that respond to their interests.

In this regard, we at Roca Junyent offers our clients a specialised service that aims to help maximise companies’ chances of obtaining financing or subsidies from Next Generation EU funds for economic recovery. To this end, we carry out the so-called Consistency Test-IN, where our team analyses the starting point of the proposal, carries out a study of the situation, prepares a strategic and legal analysis of the project and, finally, issues a final report. In this way, we help identify the projects that are likely to receive funding and we seek their adjustment to the European funds.

In addition, the current momentum around the Sustainable Development Goals, Corporate Social Responsibility, ASG criteria and sustainable investment in general, represents a great business opportunity.

As for the SDGs, they are not only a vehicle to achieve a more sustainable management, but a business opportunity that can open doors to new markets and improve the efficiency as well as the reputation of companies, which would consequently lead to better economic results.

While rivers of ink have been written about ASG, not so much has been said about ASG-related disputes, vital though they are, as they have the potential to profoundly affect the company and its ongoing viability.

ASG disputes have the potential to affect the essence of corporate purpose, reputation, corporate values and relationships with investors, suppliers, customers, employees and other stakeholders.

To date, ASG litigation has largely focused on environmental issues or natural disasters. However, while climate change will continue to have a major influence in relation to ASG litigation, it goes far beyond that. To cite a few examples:

- Environmental issues such as biodiversity degradation and long-term resource availability (including water).
- Social issues such as problems relating to working conditions and diversity in the workplace.
- Governance issues such as corporate reporting and audits and assurance.

In particular, the impact of COVID-19 has sharpened the focus on social issues, such as diversity issues and the social conditions of supply chain partners. Increasingly, these demands are being addressed at the parent company level and/or to individual managers themselves. This drives the demand for company’s “observational” capabilities, including improved oversight/governance and data and systems to provide timely information across operating areas, business models and supply chains.

In conclusion, it is necessary that the clients receive a complete and specialised service to help prevent potential litigation and, in relation to the opportunity to obtain new financing, to help analyse projects and ideas for the modernisation of the sector or industry and, in this way, to assess their possible financing within the framework of the European Funds.

Marlen Estévez
Partner Dispute Resolution Roca Junyent