SPAIN: An Introduction to Dispute Resolution
The year 2024 is seeing significant changes to the Spanish dispute resolution framework, particularly in the sphere of collective and mass claims, as new legislation is being introduced either to adapt current norms to EU Directives or to ease the burden on courts dealing with these claims. Of note is the reform of the Spanish Civil Procedure Act (SCPA), bringing innovative solutions in areas such as digital service of process and consumer-centric proceedings. Another area of increased activity (due to upcoming EU reforms) is expected to be ESG litigation, with its potential for new consumer, shareholder and unfair competition disputes (such as greenwashing cases).
Arbitration will continue developing as an alternative dispute resolution method, with special emphasis on the construction and energy sectors. Madrid will keep raising its profile as a seat for international arbitration and a growing number of Madrid-based arbitration practitioners will be setting their sights ever more firmly on Latin America.
Reform of the SCPA: What’s New?
On 20 March 2024, Royal Decree-Law No 6/2023 of 19 December entered into force. This is the most significant reform of the SCPA since 2015. The purpose of the new reform is to tackle the workload of Spanish courts dealing with consumer claims under general contract conditions and to facilitate a more efficient framework for the resolution of such claims.
An important development would be the introduction of the so called “lead case” (pleito testigo), whereby individual consumer claim proceedings concerning the same general contractual conditions can be stayed until the first case —the lead case— is decided as a matter of priority (including any appeals). Likewise, under the extensión de efectos (extension of effects) provision of the new SCPA, cases involving the same defendant can be decided automatically whenever a final judgment has been rendered in a previous and identical case (involving the same general contractual conditions).
The reform also focuses on digitalisation, aiming to provide a more agile and predictable platform to settle consumer claims (seeking, for example, to reduce appeals that are currently interfering with the work of higher courts in other cases).
The use of remote hearings is set to become the norm (especially for hearings that do not involve the production of evidence) together with new electronic means to perform service of process on corporations (including via email, which will force corporations to increase monitoring to avoid missing deadlines).
Mass and Collective Claims: Proposed Class Action Legislative Reforms
2024 will be an important year for class actions in Spain, with the transposition of the Representative Actions Directive (2020/1828) already in the pipeline (a legislative proposal is currently being discussed in the Spanish legislature).
As of the date of these lines, Spain seeks to implement an opt-out mechanism under which consumers will be bound by the result of collective proceedings related to a specific conduct (including as regards compensation) unless they explicitly request to be left out. This is an unprecedented change in Spanish litigation (although plaintiffs will still be allowed to opt in to join proceedings in specific circumstances or judges may decide under certain requirements that opt-in is more suitable).
The new regulation also tackles third party funding, which will be subject to scrutiny (to avoid possible conflicts of interest) throughout the main phase of the proceedings (the “certification phase”, during which key issues such as standing, or the homogeneity of the claims will be decided before the claim can move forward).
Standing to bring class actions (to be termed “collective” claims) will only be attributed to previously inscribed consumer associations. The new rules also allow for document disclosure (importing the mechanism that is currently only foreseen for follow-on competition damages claims).
Antitrust Damages Litigation
Spain will continue to be one of the most active EU jurisdictions in antitrust follow-on damages litigation given the unparalleled activity of litigation funds and the self-funding practice of well-known and highly active claimants’ firms. Bolstered by the recent Supreme Court judgments in June 2023 and March 2024, commercial courts will continue to be busy in this field.
ESG: Corporate Sustainability Claims and Greenwashing
ESG and related topics will also be at the forefront with the possibility to bring civil claims against corporations that do not follow the rules set out in the envisaged Directive on corporate sustainability due diligence (which is still in the process of being approved, as a political agreement between the EU Council and the European Parliament was only reached in December 2023). Other developments in this field are unfair competition claims between corporations in connection with greenwashing (ie, claims arising out of allegedly misleading statements on, inter alia, compliance with environmental standards). These claims are being brought to regulatory agencies (including advertisement watchdogs) as well as ordinary courts.
International Arbitration: Construction, Energy and Madrid as a hub for LATAM Disputes
Arbitration has become increasingly popular after the Constitutional Court clarified the limits on annulment actions against arbitral awards namely, that Spanish courts are not empowered to encroach on the merits of awards and that the public policy exception in the Spanish Arbitration Act is not a catch-all mechanism to review them, but rather a subsidiary remedy against blatant breaches of due process.
High Courts of Justice (which are competent to hear annulment actions against awards) are steadily following suit and rejecting annulment claims that do not respect the parameters set by the Constitutional Court. Arbitration users have welcomed the fact that actions seeking a wholesale review of the decisions of arbitrators or including various concurrent or vague grounds for annulment are being thrown out.
Energy and construction are the two industrial sectors that will continue to see an increase in arbitration activity, due to the ever-growing presence of Spanish contractors in complex projects in Spain and abroad. Also, as sizable investment continues to flow into the Spanish renewables sector, so will disputes arise and be submitted to arbitration.
In investment arbitration, renewable energy will remain in the spotlight, as the interplay between CJEU rulings and investment arbitration takes centre stage in the long-running battle for the enforcement of arbitral awards against Spain (that were rendered as a result of regulatory changes in the renewables sector).
The efforts to advance Madrid as an international arbitral seat (particularly for disputes with a Latin American component) are beginning to bear fruit. To illustrate, the Madrid International Arbitration Centre’s (CIAM) caseload has grown to 40 cases worth over EUR140 million. Madrid’s international profile has also been bolstered by the growing number of practitioners that have relocated to Spain from well-established arbitration hubs.