Covid-19: Q&A about the state of emergency declared by the Spanish government

What is the state of emergency and how long will it last? How was it declared in Spain?

It is a constitutional measure that enables the government to take exceptional steps to deal with serious disruptions to normality, such as a healthcare crisis. The government can harness the necessary executive powers of state to confront the crisis (including the powers of regional or local authorities) and take actions without the need for formal legislation. These measures are set out in the royal decree declaring the state of emergency and successive related decrees.

It lasts for 15 calendar days, but can be extended with authorisation from Spain’s parliament.

In the case of the COVID-19 pandemic, the state of emergency and related measures were declared through Spanish Royal Decree 463/2020 of 14 March 2020, taking effect that same date.

What constitutional limits are there on measures taken in a state of emergency?

Fundamental rights cannot be suspended in a state of emergency (unlike in states of exception and siege, more serious). This means that the Government’s measures, although restrictive, must respect the “essential core” of fundamental rights.

 

What measures are contained in the Royal Decree declaring the state of emergency?

The main measures are:

  • All Spain’s security and armed forces are subject to the authority of the central government.
  • Restrictions on freedom of movement in public places, save for certain reasons (buying food, medicines and vital goods; going to the doctor, to work or to the bank; carers; other situations of need).
  • The government can temporarily commandeer all types of goods and impose individual obligations on private individuals. 
  • Closure of all educational and most retail establishments.
  • Authority for the Spanish Health Ministry, where necessary to protect public health and maintain supplies, to temporarily take over all kinds of industrial operations, including in particular private healthcare and pharmaceutical premises; and temporarily commandeer all kinds of goods or impose individual obligations on private individuals. 
  • Similar authorisation for the Spanish Transport Ministry within its area of responsibility. 
  • Authorisation for the government to take over companies or food services.
  • Authorisation for the government to impose measures to guarantee the supply of electricity, oil and petroleum products and natural gas.
  • Obligation for operators of critical services to guarantee those services.
  • Suspension, for the duration of the state of emergency, of all time limits in judicial (with certain exceptions) and administrative processes, and suspension of statutory limitation periods for rights and remedies.

Can this declaration and the measures taken be challenged?

Can this declaration and the measures taken be challenged?

  • According to Spain’s Constitutional Court, a royal decree declaring a state of emergency (or extending it, with parliamentary approval) is primary legislation, so cannot be challenged directly in court, only at the Constitutional Court (by those legally entitled to lodge an appeal on the grounds of unconstitutionality, which do not include private parties). 
  • Private parties can only take court action over steps and decisions taken in implementation of the royal decree. In that case, the ordinary courts can refer questions of unconstitutionality to the Constitutional Court.

How could the state of emergency affect companies?

All companies could be subject to specific obligations, restrictions of all kinds on their operations, or being taken over or having their goods or operations commandeered. This is particularly the case for operators of critical facilities, providers of public services and firms involved in the energy, healthcare, pharmaceutical and food industries.

 

Is the Spanish government required to provide compensation for its measures?

A distinction has to be made between (i) the government’s extra-contractual or ‘tortious’ liability, and (ii) its contractual liability.

(i) ‘Tortious’ liability: compensation for damages outside a government contract.

There is a duty to provide compensation to private parties involved when there is a causal relationship between declaration of the state of emergency and the harm done, if that harm is actual, individual and can be evaluated, and those parties had no legal duty to bear it. No compensation is due however “in cases of force majeure”. This raises the following issues:

Are there precedents of damages compensation due to a state of emergency? 

No. This state has only been declared on one previous occasion and it was a very different situation: flights were suspended due to a huge walkout by air traffic controllers, and the measure taken was for Spain’s military to intervene and force the staff to go back to work.

However, there are court precedents relating to similar cases, relating to measures taken by authorities to deal with situations of emergency such as droughts or health alerts. It is not easy though to draw a general principle from these precedents.

Does the force majeure exception apply to the case of Covid-19? 

Most of the harm caused will probably fall under this exception. Spanish courts are inclined to consider that the measures taken by public authorities in cases of emergency (healthcare crises, droughts etc.) are due to force majeure, so not subject to compensation.

Are there other cases where the government is exempt from liability? 

Spanish case-law also excludes compensation in cases where, in view of the particular circumstances, private parties have a “legal duty to bear the loss”, and this happens when the measures that cause a loss constitute a “general burden”, imposed on everyone (and not an ‘individual burden’ imposed on a citizen or company due to their particular situation). This exclusion will foreseeably apply to the losses caused in the sectors affected by the lockdown (hospitality, public shows etc. ).

What happens with those subject to specific measures?

The legislation on states of emergency (Spanish Organic Law 4/1981) specifically states (article 3.2) that whoever is “directly” harmed “as a result of application of the actions and decisions taken” while it lasts, for situations that are not attributable to them, are entitled to compensation.

The Spanish law on compulsory purchases (Ley sobre Expropiación Forzosa) also allows (article 120) for compensation for public measures taken to confront “epidemics” (among other things) that lead to the destruction, damage or confiscation of goods or rights. 

In principle, therefore, compensation would be due for harm caused by the imposition of specific individual obligations, such as for public service, or occupying or taking private property. Possible examples are taking over a hotel to deal with patients, commandeering medical equipment from a factory or from private healthcare premises, non-payment for certain services (the use of private hospitals) or direct orders to specific factories or industrial operations.

How would compensation be determined in the relevant cases?

In cases where the authorities take over premises, compensation can be agreed with the owner or, otherwise, will be determined on the basis of the owner’s loss of income had their property not been taken over. Compensation for commandeered movable property is determined by their market value.

Compensation for individual obligations imposed must cover the cost of the service provided.

In a few cases, there are specific rules. For example, if measures are taken in the electricity or gas sectors, the government will determine the support payments scheme applicable to those activities affected by the adopted measures, guaranteeing in any event “an equal sharing of costs”

(ii) Contractual liability: compensation for losses under a government contract

Force majeure is an exception to the general principle whereby contractors take on the “risks and benefits” of work under concessions or contracts with the authorities.

Spanish law defines causes of force majeure and, although healthcare crises and epidemics are not specifically mentioned, it does include “natural phenomena of catastrophic effects” and “serious disruptions of public order”. Healthcare crises are precisely “serious disruptions of public order” that justify the state of emergency (article 4 of Spanish Organic Law 4/1981).

The general rule is as follows:

  • Contractors for works are entitled to be compensated for damages incurred in their fulfilment of the contract in cases of force majeure (article 239.1 of the Spanish Public Contracts Act, LCSP). Compensation is determined by assessing “the harm caused” by the situation of force majeure (art. 146.2 of the Spanish General Contract Regulations 2001).
  • Concession holders for works or services for the government are entitled to ask for the economic balance of the contract to be restored for the same reason, when that balance is directly and substantially lost. The original economic/financial terms of the agreement should be recovered, using the initial internal rate of return as reference. This can be a lump sum to cover the harm caused or changes to particular aspects (such as fares or charges).

The terms of each agreement must in any case be checked, in case there is specific provision for the circumstances that entitle the contractor to compensation (whether to extend or narrow those circumstances).

  • Contracts for services and supplies are subject to the ‘risks and benefits’ principle (art. 197 LCSP), with no specific exception for force majeure. Unforeseen circumstances may in any event justify variation of such contracts (art. 205 LCSP) and, if impossible to fulfil, their rescission (art. 211.1.g LCSP).