What you always wanted and need to know about the legal environment of Spain.

• Author: Nadal, Santiago

After dictatorship and isolation, since 1975 Spain has been evolving a modern legal system as a part of the new Europe

SPAIN emerged from nearly 40 years of dictatorship in 1975 and has since made a remarkable transformation from a sheltered, agriculture-based society to the firstworld nation with a thriving economy that it is today. Part and parcel of this transformation has been Spain's development of a just and stable legal system. As more global businesses look toward Spain as a promising place for investment, it becomes increasingly important for lawyers, particularly those in North America, to have an understanding of the legal environment within which businesses will operate and commercial and other disputes will be resolved.

This article provides a basic overview of Spain's legal and court structure, a sampling of substantive laws of interest to businesses, a roadmap of procedures that are followed in the various courts (and chambers thereof), and some practical aspects of litigating in Spain.

LEGAL AND COURT SYSTEM

1. Legal System

   Spain's Constitution, ratified on December 27, 1978, establishes a parliamentary monarchy form of government and a regionalized organization of 17 "autonomous communities." Some of the communities--for instance, Cataluna, Galicia and the Basque Country--retain a higher degree of political autonomy than others. Each community is divided into provinces and then into local municipalities.

   The Constitution provides for the distribution of authority and power amongst the central government and the autonomous communities. Article 149 grants exclusive authority to the central government with respect to criminal, procedural, mercantile, labor, civil, tax, telecommunications and intellectual property laws, as well as matters concerning international affairs, national defense, organization of the court system, customs, the monetary system and social security.

   The autonomous communities may, at their option, assume authority with respect to those matters not controlled by the central government, such as environmental law, agriculture and cultural affairs.

2. Court System

   The Spanish court system is divided by both territory (national, autonomous community, provincial and district) and subject matter (civil/mercantile, criminal, administrative and labor/social) jurisdiction.

   Within each district of each province are the following courts:

   * Courts of First Instance (Juzgados de Primera Instancia), which hear claims concerning civil and mercantile matters;

   * Courts of Instruction (Juzgados de Instruccion), which conduct preliminary investigations of criminal matters;

   * Criminal Courts (Juzgados Penales), which hear oral trials pertaining to certain previously investigated criminal matters (the remainder of which are forwarded directly to the criminal chamber of the Provincial Courts);

   * Contentious Administrative Courts (Juzgados de lo Contencioso Administrativo), which hear claims against the acts of local and autonomous community governmental authorities;

   * Social Courts (Juzgados de lo Social), which hear matters concerning labor law, individual and collective disputes between employers and employees and claims to the National Health System.

   The number of courts in a particular district varies by population.

   Within the capital city of each province sits a Provincial Court (Audiencia Provincial). These courts have jurisdiction over the entire province and are divided into civil and criminal chambers. They hear appeals of judgments issued by the lower courts within the province.

   The highest court within each autonomous community is the High Court of Justice (Tribunal Superior de Justicia). Each one is divided into chambers. The civil chamber hears appeals concerning certain special regional and local civil matters. The criminal chamber has only limited authority over criminal matters. The labor/ social chamber hears appeals of judgments issued by the district level social courts. The contentious administrative chamber hears, among other issues, appeals concerning acts of certain office holders of the autonomous community, as well as appeals of rulings by the district level contentious administrative courts.

   A special court with jurisdiction over the entire nation is the Central National Court (Audiencia Nacional). It hears criminal matters that affect national security and society in general, such as terrorism, counterfeiting and drug smuggling. The Central National Court is divided into two branches: the Central Court of Instruction and the Central Criminal Court. The famous Spanish judge Baltasar Garzon, whose investigation of former Chilean dictator Agusto Pinochet was the subject of worldwide media coverage, sits on a Central Court of Instruction.

   The highest court in Spain is the Supreme Court (Tribunal Supremo). Located in Madrid, it has jurisdiction over the entire country and is divided into four chambers: civil/mercantile; criminal; contentious administrative; and labor/social. Each chamber has its own justices and hears appeals (known as "cassation appeals") against judgments rendered by the provincial courts. The Supreme Court serves as the court of first instance for claims against holders of certain high public offices. It is also empowered to determine whether foreign--that is, non-European Union member)--judgments and arbitration awards will be recognized in the absence of an applicable treaty.

   The Constitutional Court (Tribunal Constitucional) serves a narrow yet important function in Spain's court system. It is charged with (1) resolving conflicts between the national government and the autonomous communities, (2) ruling on the constitutionality of legislation and (3) protecting the constitutional rights of individuals against violations by any government authority. The Constitutional Court consists of 12 justices and has jurisdiction over the entire country.

3. Organization of Legal Professionals

   Legal professionals in Spain are organized into two main categories: lawyers (abogados) and procurators (procuradotes). The lawyer's function is to set the technical legal direction of the court proceedings and to draft the required writs. The procurator's function is to serve the court with all documents prepared by the lawyer and to notify the party and his lawyer of all writs related to the proceeding at bar. With the exception of labor and certain administrative proceedings, a procurator must be retained.

   Spanish lawyers and procurators follow more or less identical courses of university study. The curriculum requires approximately five years to complete and results in a degree in law (licensiado en derecho). The graduate then chooses to join either the Bar Association of Lawyers (Colegio de Abogados) or the Bar Association of Procurators (Colegio de Procuradores), but not both.

   Each association has its own code of ethics, which is very similar in content to that of the other, as well as to those of bar associations in other nations. For instance, the codes cover such subjects as lawyer-client confidentiality and conflicts of interest. Unlike in the United States, legal professionals in Spain are not required to take or pass a professional examination in order to enter a bar association.

   There are approximately 80 bar associations in Spain, each of which is local or regional in scope. Membership in a particular bar association entitles the member to appear before courts only within its designated territory. Membership in the Madrid Bar Association is required in order to appear before the Supreme Court. Spanish legal professionals may hold membership in as many Spanish bar associations as they choose, regardless of the province or autonomous community in which it sits.

   Foreign lawyers who wish to practice before Spanish courts may do so either by becoming licensed as a lawyer in Spain or by requesting a special right of audience from the appropriate Spanish bar association. The procedure for becoming licensed as a lawyer in Spain differs depending on whether the candidate is from a European Union member country or another nation.

   Lawyers from European Union countries who wish to become licensed in Spain must prove that they have earned a university law degree in their home country and then pass an examination administered by the appropriate bar association. On the other hand, lawyers from non-European Union countries must prove that they have earned a university law degree in their home country, submit their law school transcripts to the Ministry of Education, whereupon the candidate's course work will be compared to that which is required of Spanish law students, then pass an examination pertaining to each area in which the candidates' course work is found to be lacking.

   Foreign lawyers wishing to appear before a Spanish court, but not to become licensed in Spain, may petition the pertinent local bar association for a special right of audience.

   SUBSTANTIVE LAWS

   A number of substantive laws in the Spanish legal system are of particular relevance to companies doing business in Spain. These laws may have a great effect on both the operations of the companies and the personal interests of the directors thereof.

1. Company Directors

   Certain laws in the Spanish legal system impose liability directly on company directors for acts and omissions within the scope of their duties. Company directors may be subject to liability for negligence, failure to wind up the company promptly, and criminal behavior, as well as for other situations in which "piercing the corporate veil" is allowed.

   1. Negligence

      Under Article 133 of Spain's Company Law, directors may be liable to the company, its creditors and/or shareholders for losses caused by their negligent or bad faith acts or omissions. In order to prevail in an Article 133 action, plaintiffs, who typically are the company itself, creditors or shareholders, must prove that (1) a negligent or bad faith act or omission was...