1.- Introduction: The Spanish Court System
The Spanish Court System is divided into five different jurisdictions classified by subject: civil, criminal, administrative, labour and military. Each of the jurisdictions has its own substantive law and procedure rules.
All jurisdictions have a pyramid-shaped organisational structure, and therefore have different levels: down below we find the First instance Courts (Juzgados de Primera Instancia) or Commercial Courts- for commercial matters (Juzgados de lo Mercantil);- Appeal Court (Audiencia Provincial); Superior Court (Tribunal Superior de Justicia); and the Supreme Court (Tribunal Supremo).
The Spanish Court system is as well organised geographically. Spain is divided into different autonomous communities. Each community has its own Superior Court, which is named after the autonomous community where it is, for example, the Superior Court of Catalonia. At the same time, Each autonomous community is divided into regions, and each region has its own Appeal Court, so for example, Catalonia has four different regions: Barcelona, Tarragona, Lleida and Girona, there for each region has its own Appeal Court. Each Appeal Court is named after the region where it is, for example, the Appeal Court of Barcelona.
In this article, we are going to focus on the civil jurisdiction, particularly in the specialised courts of the civil jurisdiction, the Commercial Courts.
2.- Spanish Court System of the civil jurisdiction: the Commercial Courts (Juzgados de lo Mercantil)
As we were just explaining the Commercial Courts belong to the civil jurisdiction. These courts were created in 2003 by a legislative reform of the Bankruptcy Law. The Commercial Courts resolve disputes concerning exclusively commercial matters regarding competition law, insolvency proceedings, intellectual property rights infringements, unfair competition matters, corporations and maritime issues, among others.
The resolution of commercial disputes in the first instance is entrusted to the Commercial Courts, which means that down below the pyramid-shaped organisational structure we find the Commercial Courts.
3.- Pre-action: settlement and interim remedies
Before filing a claim some things need to be taken into consideration. If it is better to try and negotiate with the other party and find a solution. But, if the negotiation fails, it can be necessary to request interim remedies for the claim to be successful.
An amicable settlement can be successful, as long as the confronted parties collaborate with each other, to find a solution that satisfies both of them. In Spain the negotiation carried out before filing a claim, is normally made with the intervention of each party’s attorneys, we believe this is the best way given that the solution not only will satisfy the applicable legal framework, but it will help the confronted parties to set feelings aside to find the best solution.
If for any reason the claimant filed a claim before getting to an agreement with the other party, but an agreement is settled before the end of the judicial procedure, the parties will be able to submit the agreement to the court’s approval, as long as the agreement does not infringe the law. Once the court approves the agreement, it will be enforceable.
3.2.- Preparation of the trial: Interim remedies
Interim remedies are very useful when the final objective is filing a claim. These legal tools are requested before the competent court to secure the enforcement of a future favourable court decision. The law foresees different possibilities.
Precautionary measures are requested with the purpose of securing the effectiveness of any right recognised by a court decision.
The law does not contemplate a closed list of precautionary measures but rather foresees some possibilities. Down below we give some examples:
- Request the judge to suspend the effectiveness of a challenged company agreement that can be considered abusive for a minority shareholder.
- Request the judge for the defendant to temporarily deposit any income obtained by the infringement of intellectual or industrial property rights.
- Request the judge for the defendant to temporarily deposit any work or object created infringing intellectual or industrial property rights, and any other material deemed to be necessary to create such work or object.
It is important to take into consideration that the request for precautionary measures has to comply with four requirements:
- Fomus boni iuris or appearance of legal standing: the claimant has to prove that the precautionary measure will guarantee the effectiveness of the judicial protection that may be recognised in the future court decision, once the procedure has finished.
- Periculum in mora or risk of procedural delay: the precautionary measure may only be conceded when the claimant justifies that there is a high possibility that during the ordinary trial the defendant could endanger the effectiveness of a future affirmative court decision.
- Economic allowance: the law requires an economic allowance or compensation for those cases in which the precautionary measures cause any damage to the estate of the defendant.
- Proportionate: lastly the precautionary measures requested have to be proportionate, meaning that no other precautionary measure can be equally effective to the requested one and that the precautionary measure has to be the least harmful to the defendant.
The law foresees two different moments to request a precautionary measure:
- The first one coincides with the moment of filing the claim, in the same claim, besides asking the court for the protection of a right it is possible to request as well the adoption of a precautionary measure.
- The second moment, defined by the law, is before filing the claim, but if the court admits the precautionary measures requested, these only shall be effective at least until the end of the proceeding when the claimant files the claim within the next 20 days from the request.
Early gathering and seizure of evidence
The evidence that any of the parties have at their disposal in a legal proceeding can be determinant to solve a conflict of interest.
As a general rule, the evidence is purposed by each party at the preliminary hearing, and most of it directly is submitted with the claim or the defence. If such evidence is admitted by the court at the preliminary hearing, the evidence will be presented in the trial. But there is an exception that allows gathering and seizing evidence before any proceeding is commenced or before the stipulated procedural time in which the evidence is presented.
The party which intends to initiate this, or any of the parties during the course of the proceedings, may request the court to examine evidence in advance, when there is grounded fear that, due to the persons or due to the state of things, the evidence cannot be presented at the trial.
The request to early gather and seize evidence shall be done before the competent court to resolve the matter at issue.
Just like the request for precautionary measures, the seizure of evidence has to comply with different requirements:
- That the evidence to be seized is possible, relevant and useful at the time its seizure is sought.
- There are reasons to fear that it would be impossible to take such evidence in the future if no measures to seize are adopted.
- The measures to seize evidence may be performed within a short space of time without causing serious disproportionate harm to the parties or third parties involved.
Down below we describe some examples, applicable to commercial matters:
- When it comes to the infringement of intellectual property rights, the author of a computer program shall request to enter the domicile of a company to check if such company is using unauthorized copies of the program
- In conflicts between partners, a shareholder may request to seize evidence requesting a company to show the minutes of a General Shareholder’s Meeting.
It is highly important to keep in mind, that any evidence obtained before the file of the claim, will only keep its probatory value during the proceeding if the claimant files the claim within the next 2 months from the request.
Preliminary proceedings, just like the other interim remedies explained above, seek to not only prepare the trial but also try to protect the claimant’s rights even before the file of the claim and at least until the end of the proceeding.
The Law foresees different possibilities, however, for these preliminary proceedings, the law establishes a closed list, which means that only the preliminary proceedings defined by the law can be requested. Here we give you the preliminary proceedings offered by the law:
- Request the future defendant to declare under oath or promise to tell the truth on a fact concerning his capacity, representation or legal competency required, or to exhibit the documents proving such capacity, representation or legal competence.
- Request a partner to exhibit documents and accounts of the company.
- Regarding the future claim due to the infringement of intellectual or industrial property rights, the future claimant may request the application of any possible legal measures to obtain information about a possible offender, the origin and distribution networks for the works, goods or services that infringe those rights.
4.- The non-contentious proceeding Law (Ley de Jurisdicción Voluntaria)
There is a special law, the non-contentious proceeding Law contemplates some special proceedings for the resolution of disputes given, among other areas of law, within the framework of business law.
The fundamental purpose of this law is to connect the exercise of a private right with the judicial authority, as the recognition of such rights is subordinated to the intervention of public powers, particularly the commercial courts for those matters regarding companies.
The non-contentious proceeding law foresees six different proceedings regarding commercial matters; to start any of the proceedings mentioned down below, it will be necessary to file a claim before the competent court (registered office of the company) and the defendant shall fill its defence.
- Display of books by persons required to keep accounts
- Calling general meetings
- Appointing or removing an entity’s liquidator, auditor o administrator
- Reducing share capital and redeeming or disposing of equity or shares
- Judicial dissolution of companies
- On the robbery, theft, loss or destruction of securities or the representation of shareholding
5.- Business litigation: ordinary procedure.
Any dispute regarding commercial matters shall be decided upon an ordinary procedure. The ordinary procedure is the standard proceeding of the Spanish civil procedure. Such proceeding has four different phases: filing a claim, submitting the defence, preliminary hearing and trial.
5.1.- Requirements for the parties: legal representation and capacity to be a party
In Spain, the exercise of legal actions before a Court shall be done with Power of Attorney (PoA). The PoA entitles one or more lawyers and court agents (procurador) to represent each party of the procedure in all types of legal proceedings with broad powers.
Both claimant and defendant are required to own the capacity to be a party and have a legitimate interest to hold that position in the proceeding. In commercial matters, it is important to consider that companies have the capacity to be a party, as both claimant and defendant. The intervention of a company in a legal proceeding shall be done through a representative, that will normally be the director or another person that belongs to the governing body of the company.
5.2.- Initiating a Lawsuit: territorial jurisdiction and filing a claim
The proceeding starts with the submission of a claim before the competent court. As a general rule, in Spain the jurisdiction of a court is based on the defendant’s domicile, therefore the defendant shall be sued before the courts of his domicile.
In commercial matters, however, we need to take into account some special rules regarding the competent courts:
- In proceedings regarding the challenge of corporate decisions, the competent court shall be the one where the registered office of the company is.
- In proceedings regarding the infringement of intellectual property rights, the competent court shall be the one where the offence has been committed or where there is evidence that it has been committed or where there are unlawful copies, at the discretion of the claimant.
- In proceedings concerning unfair commercial practices, the competent court shall be the one where the defendant has his establishment, and failing such establishment, shall be competent the one where his residence is and if such residence is not in Spain, shall be competent the court of the place where the act of unfair competition was committed, or where its effects are occurring, at the discretion of the claimant.
The claim has to include the facts that give place to claim a determined right or rights and the breach of the defendant’s duties, the claim shall have strong legal grounds and evidence to support the claim. At the end of the claim (suplico de la demanda), it is expected to request the court to declare that a right has been infringed and to order the defendant to do, or not to do something, or to stop an offence, or to pay a determined amount of money.
The claim is presented before the court through the claimant’s court agent, who in Spain, holds the legal representation of the parties in a legal procedure. The court agent is the main intermediary between the court and the client and the client’s lawyer who carries the technical representation of the parties.
Presenting a claim in Spain is subject to a judicial fee. The judicial fee is a fixed fee that depends on the type of procedure. In the case of the ordinary procedure, the judicial fee is 300.-€.
5.3 Defence and other positions of the defendant
The claim shall be notified to the defendant. The defendant must file a defence within 20 working days after being served with the summons and the claim.
The defence shall deny the facts on which the claim is based, the legal grounds and evidence that support the claim. The defendant shall as well purpose the necessary evidence to give support to the defence. The defence shall be presented to the court through the intervention of the defendant’s court agent, and from this moment on, any communication from the court regarding the ongoing process shall be done exclusively through the defendant’s court agent.
If the defence is not presented presented before 20 working days from the notification, the defendant will be in failure (rebeldía). Such condition will be notified to the defendant, and if there is no response, without further notice the proceeding will continue without him, and at the end of the procedure, the court decision will be notified to him.
Another alternative is that the defendant acquiesces to the claim (allanamiento). In such a case, the court will issue a judgement against the defendant keeping with the claimant’s petitions. The defendant can partially acquiesce to the claim, which means that the defendant will agree with some of the claimant’s petitions or requests but not all of them. In such a case, the proceeding will continue with the rest of the claims.
The defendant, besides submitting the defence, can as well file a counterclaim (reconvención), to which the claimant will have to submit his defence, within 20 working days from the notification.
Evidence provided by both parties is necessary to prove the facts on which the claim and the defence are based. There is no limit to providing evidence, as long as is relevant to solve and clarify the facts at issue.
In commercial matters, documentary evidence is very important and the most common one.
For corporate matters, relevant evidence will be the one regarding the management of the company, minutes of Shareholders’ General Meetings, revision of annual accounts, an experts’ report on the value of a company, an auditor’s report to verify the accuracy of the financial records and accounting of a company.
For the cases regarding the infringement of intellectual or industrial property rights, we believe it can be relevant to provide an expert’s report, mainly on those cases where technical aspects can be the matter at issue. For example, regarding a lawsuit on a patent, it can be very useful to provide such a report, so that the judge makes up his own mind, to completely understand the existing dispute.
5.5.- Hearings: preliminary hearing and trial
All of the hearings that take place in a procedure have to be done before a judge. Before starting any hearing, the judge shall give the parties an opportunity to negotiate, but if it fails, the procedure shall continue.
During the hearings, the attorneys and court agents, just like the judges of a court, have to wear a black robe. This obligation has been suspended due to the Covid-19, as not all attorneys and court agents have their own robe. It is very common in Spain that Bar associations provide black ropes in the courts that are at the disposal of attorneys and court agents.
Another practical tip is the position of the parties in the courtroom, the claimant shall be seated to the right of the judge and the defendant to the left.
Anytime one of the attorneys wants to intervene they commonly say “con la venia, Señoría” that in English could be translated into “Your Honor”.
The preliminary hearing (audiencia previa) takes place after the defendant submitted his defence to the court and before the trial.
Once the defendant has submitted his defence the court shall summon both parties to the preliminary hearing within 20 days from the notification of the preliminary hearing.
The preliminary hearing is normally held without the presence of the claimant or the defendant, as they are represented by the court agent and the attorney.
The preliminary hearing has different purposes:
- The judge shall give the confronted parties the chance to find an amicable agreement, such agreement will be submitted to the court’s approval.
- In the preliminary hearing is expected to give notice and rectify any procedural defects there may exist, and that would endanger the procedure, such as defects of capacity or representation.
- The parties shall include complimentary allegations regarding complementary or subsidiary petitions or claims and report new facts or unknown facts until that moment.
- And lastly in the preliminary hearing is expected to establish accurately the facts and legal details in dispute and the parties may purpose the evidence, and the judge will in turn admit or refuse any of the evidence purposed by any of the parties.
The trial is an oral hearing that takes place before the same judge that carried out the preliminary hearing. In the trial shall be taken all the evidence purposed by the parties, and following the order established by the law:
- Questioning the parties.
- Questioning witnesses.
- Experts’ statements regarding their reports.
- Taking of evidence by the court, if it does not have to be conducted outside the court’s premises.
- Reproduction before the court of any words, images and sounds captured through filming, recording and other similar instruments.
In the trial is expected the presence of both claimant and defendant, if they have been subpoenaed to testify. The questioning will be started with the statement of the defendant who will be questioned, by both the claimant’s attorney and his own attorney about the facts at issue.
As was aforementioned the questioning of a legal person shall be done through a representative of the company.
Witnesses and experts will be questioned by each party’s attorneys, such questioning will be started by the attorney who requested to take their statements in the trial.
Once all evidence has been taken, both attorneys, first the claimant’s attorney and after the defendant’s attorney, shall state their conclusions on the facts at issue, setting them out in an orderly, clear and concise way as to whether the relevant facts have been or should be admitted and, as appropriate, proven or uncertain. They shall as well give a brief summary of the evidence taken with regard to such facts.
The procedure will end with the court decision, which has a similar structure to the claim and the defence.
The court decision will establish the proven facts; determine the legal grounds on which its decision is based and lastly the ruling. The ruling shall declare if the defendant has committed or not any of the offences that the claimant claimed, or if the defendant has breached any of the rights claimed in the claim, and lastly the ruling shall include the admission or refusal to the petitions requested in the claim.
Court costs are the expenses that have been generated during the proceeding, that in any case shall cover the court agents’ and attorneys’ fees of both parties. In Spain, the general rule states that the unsuccessful party has to pay the court costs unless not all the requests of the claimant have been admitted or when the court considers and reasons that the case may have serious de facto or de iure doubts.
5.8.- Enforcement of a court decision
Once the court decision has been notified to both parties and such court decision will become absolute within 20 days, and if non of the parties appellate such court decision, it will be enforceable within 20 more days if the defendant does not voluntarily comply with the court decision.
To enforce a court decision, the claimant shall file an executive claim before the court that issued such decision, requesting the court the enforcement of the court decision.
The enforcement of a court decision can consist in paying an amount of money to the claimant or giving something other than an amount of money (monetary enforcement). Nonetheless, the Spanish civil procedure law foresees the enforcement of a court decision consisting in doing, not doing or stopping doing a specific act (non-monetary enforcement).
Monetary enforcement shall be applied whenever the defendant has been ordered to pay an amount of money. There are different alternatives to execute monetary enforcements. The most used one is the seizure of goods and money. It is possible to request the judge de seizure of bank accounts, salaries, and credits in favour of the defendant, among other goods.
As we explained before the ruling of a court decision, shall rule the defendant to do, or not do, or stop doing a particular act. Such ruling is common in disputes regarding the possible infringement of intellectual property rights, as if the court decision determines that there has been an infringement of intellectual property rights, the defendant will be requested to stop producing, manufacturing or using those products that violate those rights.
5.9.- Appeal of a court decision: Court of Appeal and Supreme Court
Once a court decision from the Commercial Court has been duly notified to both parties, they shall within 20 days from the next day of the notification of the court decision, appeal the court decision to the upper court, called the Appeal Court (Audiencia Provincial), such appeal is called recurso de apelación. The Appeal Court will then allow the appeal or dismiss it.
Nonetheless, the Spanish civil procedure law foresees the appeal of the court decision issued by the Appeal Court, called recurso de casación, before the Supreme Court (Tribunal Supremo) within 20 days from the next day of the notification of the court decision.
Appeal before the Appeal Court
Once the commercial court has issued the court decision, normally the unsuccessful party (appellant) shall file an appeal before the Appeal Court. The other party, the appellee will then have the chance to file a responsive brief opposing to the appeal, and ask the court to dismiss the appeal and admit the lower court decision.
The appeal of a court decision seeks to overturn the lower court decision relying on the grounds that the lower court made an incorrect legal interpretation of the law and an incorrect evaluation of the evidence taken during the trial in the lower court.
As a general rule, the appeal of a court decision does not allow providing new evidence, unless such evidence is new, was unadmitted by the lower court, or concerns new facts that had taken place after the end of the trial and before the issuing of the court decision.
Nor does an appeal before the Appeal Court allow to add new petitions than the ones requested in the initial claim or defence.
Appeal before the Supreme Court and the role of case law in Spain
The appeal before the Supreme Court seeks to protect the legal framework through the preservation of uniform case law and annulling those court decisions that contravene such legal framework. The role of the Supreme Court’s case law is not obligatory but is rather seen as an orientation to the lower courts so that the law is applied uniformly.
The appeal before the Supreme Court shall be done after the Appeal Court has issued its court decision.
The grounds of the appeal before the Supreme Court may be referred to the infringement of the rules of the civil procedure such as the infringement of jurisdiction rules, infringement of procedural rules that lead to the annulment of the court decision or defenselessness, or violation of the access to justice (fundamental right recognised in the Spanish Constitution).
The appeal before the Supreme Court may be related as well to the infringement of substantive law, in such a case the appellant shall request the Supreme Court to apply the law according to the established case law.
The appeal before the Supreme Court shall comply with a special requisite, the appeal has to show cassational interest (interés casacional), which happens, when:
1.- The appealed court decision opposes the case law established by the Supreme Court. Established case law exists when there are at least two Supreme Court decisions that interpret the law the same way or when there is no case law regarding such matters.
2.- There exists contradictory case law among Appeal Courts
3.-The appealed court decision applies laws that have been in force less than five years
These guidelines give a broad overview of business litigation in Spain from beginning to end, but if you have any doubt do not hesitate to contact us at email@example.com