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SPAIN: An Introduction to Dispute Resolution

Spain: Dispute Resolution 

One of the biggest challenges of the year 2021 had to do with the generation of up-to-date information related to the state of alert and COVID-19. Indeed, the outbreak of the COVID-19 pandemic was a revolution in everyone's life and we are still affected by it today. While 2022 looks set to be one of less uncertainty from a legal perspective than its predecessor, the new year does present a number of challenges and opportunities for the legal sector.

In addition to the predictable regulatory tsunami that we expect to take place in the fields of renewable energy and sustainability, an example of the above is the approval, by the Plenary of the General Council of the Judiciary, on 22nd July, 2021, of the report on the preliminary draft Law on Procedural Efficiency Measures for the Public Justice Service (the “Report”).

One of the most striking aspects of this preliminary draft is that it contemplates, among its proposals, tools to mitigate the effects of the flood of identical claims in the courts, creating (among the approval of Directive 2020/1828) what at first sight might appear to be a scenario favourable to the definitive take-off of class actions in Spain.

In this sense, the draft bill incorporates two relevant measures for the implementation of class actions in Spain: the extension of effects and the so-called “witness procedure”. On the one hand, extension of effects means to extend the effects of a final judgement to other interested parties who are in the same legal situation as the parties to the proceedings. On the other hand, “witness procedure” makes reference to the conduct of a single proceeding by suspending the conduct of other proceedings, on the basis that the proceedings that are suspended have the same subject matter as the one that is being conducted in its entirety, and the result of the proceedings that are being conducted in their entirety is then extended to those that have been suspended.

As it is well known, the landscape of mass litigation in Spain is far from being clear and easy to manage. This, together with the collapse of the Spanish courts as a result of the pandemic situation, makes the implementation of this type of measures particularly relevant at this point in time.

Although the Report is positive about this legislative initiative, considering it to be a step towards the modernisation and rationalisation of the judicial organisation, it does not fail to highlight various criticisms or inadequacies of the text.

The most relevant one refers to the markedly circumstantial nature of the proposed regulation, linked to the current situation of the health crisis and the impact on the justice system as a result of it, and therefore questions "the suitability of reform measures adopted in view of this situation and which, nevertheless, are designed to be general and permanent". In addition, the Report considers that the preliminary draft seems to confuse the concepts of efficiency and effectiveness, "for while certain provisions are clearly efficient and their effectiveness is easy to guess, in others it is doubtful that these qualities are present".

The Report adds that some of the measures introduced, as well as the promotion of the use of the new technologies, put a strain on basic principles of the civil procedural system and stresses that "the deficiencies in the justice system should not be solved or corrected by violating established procedural principles such as orality, immediacy, publicity, or the same principle of the dispositive principle that animates civil proceedings".

Finally, the approved text regrets that the preliminary draft does not develop the measures included in the General Council of the Judiciary's so-called Shock Plan for reactivation after the state of alarm.

Apart from the above-mentioned shortcomings, it is important to note that the general opinion on the draft law has been positive, considering that the preliminary draft promotes appropriate means of dispute resolution (ADR) to increase sustainability, reduces litigation in the courts and promotes social cohesion.

In addition to the above, some of the most relevant conclusions set out in the Report are as follows:

• On appropriate means of dispute resolution (ADR) in non-jurisdictional proceedings: the preliminary draft establishes an open list of ADR and imposes, in the civil jurisdictional order, the obligation to resort to any of them prior to the filing of the lawsuit. The Report recalls, however, that in civil proceedings the nature of the disputes is very diverse and not all of them are equally susceptible of being resolved by negotiation, and it therefore considers that it would have been more appropriate to have circumscribed this obligation to those matters that, by their nature, may be more susceptible to transaction.

• Amendments to the Civil Procedural Law:

- Electronic communications: although in the Report some criticisms are made in relation to the regulation of the acts of communication that have as their object the first procedural summons by electronic means, the Report praises the intention of the pre-legislator to give greater virtuality to electronic communications within the process.

- Telematic proceedings: the Report points out that the regulation of telematic hearings must ensure the guarantees required for the testimony of the parties, witnesses and experts, including the precise identification of the declarants, the lack of communication between witnesses and experts and the assurance that the testimony is given without external influences, by means of written notes or suggested answers from the parties or lawyers. The Plenary also holds that physical presence should be the rule in cases of a certain complexity.

- Extraordinary appeals: the Civil Procedural Law links the admissibility of the extraordinary appeal for procedural infringement to the admissibility of the appeal in cassation, with the consequence that, when there is no appeal on the merits, flagrant procedural infringements cannot be reviewed by the Supreme Court.

The preliminary draft simplifies the system of extraordinary appeals by providing for a single appeal, the appeal in cassation, with a single ground for appeal, consisting of a breach of law, either procedural or substantive. This entails the disappearance of the extraordinary appeal for breach of procedure and the appeal in the interest of the law.

We hope that this Law will finally address the set of structural inadequacies from which the Spanish justice system has suffered for decades, and which have made it difficult for it to fully occupy the place it deserves in an advanced society.

Finally, we venture to predict that the litigation that we will be facing in 2022 will most likely continue to be determined by proceedings relating to the doctrine of rebus sic stantibus and force majeure, and also due to the current juncture regarding:

- Cost overruns and price increases in sectors such as construction and industrial sectors;

- The progressive entry of litigation finance funds in Spain with two new types of litigation: climate and security breaches; and

- The end of the bankruptcy moratorium, which will expectedly increase insolvency applications.