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Spain: What happened in 2019 and significant events in 2020

Spanish Law: Due to the political situation in the country, we did not see major legislative changes in 2019, beyond the implementation of certain European laws (such as the Mortgage Credit Directive). Notable court rulings included the Spanish Supreme Court judgment relating to accelerated repayment of mortgage loans.

Updates in

42

key areas in 2019 and 2020

Significant legal and regulatory events in 2019

Explore the tabs below to review the key developments you need to be aware of from 2019

Brexit

Brexit: In March 2019, the Spanish government approved a series of contingency measures to try to minimise the impact of a no-deal Brexit. The new law guarantees the continuity of contracts for the provision of banking securities, insurance or other financial services entered into in Spain by UK regulated entities before the UK’s withdrawal from the EU.

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Competition

Competition - bar from public contracts: In March 2019, the Spanish markets and competition authority (CNMC) for the first time referred a decision in a cartel case to Spain’s public contracts advisory board, to consider the possibility of barring the sanctioned companies from public contracts.

Officers’ responsibility for involvement in anti-competitive practices: This year the Supreme Court made a ruling for the first time on company officers’ liability for their involvement in anti-competitive practices. According to the precedent set by the Supreme Court, any involvement, even if secondary, in the anti-competitive decision or resolution is sufficient for the officers involved to receive a sanction.

Corporate

Shareholders’ exit right when dividends not paid: The Spanish Companies Act was amended to clarify and limit the situations in which shareholders can demand to be bought out if they do not receive dividends. The changes applied to any general shareholders meetings held from 30 December 2018.

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Non-financial and diversity information: On 30 December 2018, a new law made it an obligation for large companies and groups that meet certain requirements to disclose non-financial information in their financial statements for the years beginning on or after 1 January 2018 (therefore, in the accounts approved in the first half of 2019).

Employment

Requirement to record working time and other measures to protect workers: In March 2019, the government approved a number of urgent measures to protect workers and job security in terms of working hours. The main change was the requirement for employers to keep a daily record of employees’ working time.

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Equal opportunities and treatment for men and women: Also in March 2019, the government approved urgent measures aimed at guaranteeing equal opportunities and treatment for men and women, in employment and the workplace.

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Finance

New EU Prospectus Regulation: The new EU Prospectus Regulation, aimed at harmonising the legal framework for prospectuses in all Member States, applied directly from 21 July 2019. Among other aspects, changes were made to exemptions from the requirement to issue a prospectus, and the information to be included in prospectuses and approval procedure were simplified.

Prudential regulation and supervision of investment firms: The EU’s investment firms’ directive and regulation were published in December 2019, laying down new prudential requirements (eligible capital and remuneration policies) with specific oversight for these kinds of institutions.

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Interest rate benchmark reform: Major changes to interest rate benchmarks were made this year. The ECB started to publish the euro short-term rate (ESTER) on 2 October. At the same time, the method for calculating the EONIA rate was changed (the ESTER rate plus a spread of 8.5 bp). Changes have also been agreed to how the EURIBOR rate is calculated. The above will have a major practical impact in the coming months.

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Market abuse - sanctions: On 1 March 2019, Spain’s Criminal Code was amended to, among other things, implement the EU directive on criminal sanctions for market abuse. Three types of behaviour are defined as criminal offences, in line with the directive itself: insider dealing, unlawful disclosure of inside information and market manipulation.

Unfair terms in mortgage loans: Spanish courts continue to hand down judgments on the invalidity of certain general terms contained in mortgage loans to consumers, and the consequences. In January 2019, the Supreme Court made various rulings, establishing a principle for Spanish mortgage-related costs (arrangement fees, stamp duty, notaries, registrars and agency fees). In September 2019, following the highly anticipated judgment of the CJEU, Spain’s highest court made a ruling on accelerated repayment clauses.

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Public Law

Clean Energy Package: The latest pieces of legislation forming the EU’s Clean Energy Package came into force in July 2019. This is part of the EU’s strategy, adopted in 2015, to achieve an integrated European energy market and reduce greenhouse gas emissions. It involves a root-and-branch overhaul of energy regulations in the EU (and for renewable energies in particular).

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Regulatory framework for electricity and gas: CNMC Circulars In October 2019, the CNMC launched a public consultation process on various proposed Circulars under new powers for the authority this year. These include laying down the methodology for determining regulated payments for electricity and gas activities. Certain Circulars have already been approved and the rest are expected to come into effect before the end of 2019. Subject to possible challenges by companies, payments for the transmission and distribution of electricity and gas are expected to be reduced for the next regulatory periods (from 2020 to 2025 for electricity and from 2021 to 2026 for gas).

Energy - CNMC notice on indebtedness ratios: In October 2019, Spain’s markets and competition authority (CNMC) published defined ratios for assessing the level of indebtedness and economic-financial capacity of companies engaged in regulated activities and recommended value ranges for these.

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Reasonable rate of return for plants producing energy from renewable sources, CHP and biomass: In November 2019, the government approved a Royal Decree-law to, among other things, set the reasonable rate of return applying to installations under the special support scheme for energy generation from renewable sources and the rate of financial compensation for electricity production, with additional compensation for non-mainland territories for the next regulatory period, which starts on 1 January 2020.

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Real Estate

Mortgage credit agreements: In March 2019, a new law on mortgage credit agreements was introduced. Notable are the new requirements for lenders to be able to demand repayment of mortgage loans (depending on when default occurs and by how much) and the new rules on default interest and dividing up costs between the lender and borrower.

Rental housing: Also in March 2019, the government introduced a new Royal Decree-law on housing and rentals, after the Spanish parliament repealed the 2018 law (see YIR 2018). The main change compared to the December 2018 Royal Decree-law is the inclusion of a national system of benchmarks for rental prices.

Restructuring and Insolvency

Preventive restructuring and second chance: The EU preventive restructuring and second chance directive was published in June 2019. Spain’s implementation of the directive, aimed at preventing viable enterprises from becoming insolvent, will bring significant changes to Spanish laws on pre-insolvency procedures.

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Tax

Double taxation treaty between Spain and the U.S.: On 27 November 2019, the new protocol came into effect that amends the double taxation treaty between Spain and the U.S. This includes major changes aimed at enhancing the efficiency of direct and reciprocal investments between Spain and the U.S. Among other amendments, withholdings are removed from: (i) dividends paid to shareholders that possess 80% of the capital and voting rights, subject to certain conditions; and (ii) interest and royalties, with certain exceptions. Capital gains will only be taxed at source when arising from real estate or real estate companies.

Local land value tax: In October 2019, Spain’s Constitutional Court held that a local tax on gains in urban land value (Impuesto sobre el Incremento de Valor de los Terrenos de Naturaleza) cannot be levied in cases where, despite value increasing, the tax is higher than the gain actually obtained by the taxpayer on selling the property.

Basque Country - carried interest: In February, the Basque Country’s regional government introduced rules on carried interest for the purposes of personal income tax, setting the parameters for this income to be considered as investment income.

Significant legal and regulatory events in 2020

Explore the tabs below to review the key developments we expect to see in 2020

Competition

New guidelines on public tenders and competition: The Spanish markets and competition authority (CNMC) is expected to update its guidelines on public tenders and competition, which date from 2011, this year. The experience gained since the guidelines were published and new legislation on contracts (Law 9/2017 on Public Sector Contracts) are among the reasons the authority has indicated for updating its publication, which is intended to provide guidance for those responsible for public procurement to make decisions that favour competition.

Amendment of Spanish Competition Act: A raft of changes to the Spanish Competition Act 2007 are being prepared to adapt Spanish legislation to EU Directive 2019/1 (the ECN+ Directive). Among the anticipated changes, it is expected the Spanish markets and competition authority (CNMC) will set priorities in applying competition regulations and even shelve, without further consideration, complaints that are not a priority to investigate (something which, to date, is not possible in Spain).

Corporate

Corporate governance. Changes to the Spanish Companies Act and Securities Market Act: The EU directive on long-term shareholder engagement is expected to become part of the Spanish legal framework during 2020. In addition to changes coming from the directive, the draft bill includes further changes such as the introduction of double voting rights for long-term shareholders in Spanish listed companies.

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Digitalisation of company law: Spain’s Ministry of Justice has launched a public consultation process on transposition of the EU directive on digitalisation of company law. The directive is aimed at facilitating company formation by electronic means and by reducing costs, time and red tape.

Foreign investment: The EU regulation providing a framework to monitor foreign direct investment in the EU will be directly applicable in September 2020. The regulation will have a relatively limited impact, as it simply establishes a general framework of co-operation and information exchange between Member States.

Finance

Basel reforms: The deadline for transposition of the package of banking reforms to adapt EU law to Basel III (reforms of CRR/CRD/BRRD) is 28 December 2020. We expect plans to implement the directives to the Spanish legal system will be discussed and put into effect this year.

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Usury - revolving loans: In 2020, Spain’s Supreme Court is expected to outline its position on the usurious nature of consumer loans, determining whether the average rate, for considering whether the interest on a revolving loan is usurious, is the average of consumer loans in general or whether the information provided by the Bank of Spain for these kinds of revolving products should be taken as the basis.

Securitisation: The European regulation laying down a general framework for securitisation and creating a specific framework for simple, transparent and standardised securitisation has applied directly in Spain since 1 January 2019. This year may see approval of the amendment to Law 5/2015 of 27 April 2015 on lending to businesses, to adapt the current Spanish regulations to the EU regulation.

Money laundering: Further changes to Spanish anti-money-laundering regulations are expected in the coming months, to adapt to the EU’s Fifth Money Laundering Directive (AMLD V), approved in June 2018.

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Market abuse - ESMA consultation: In October 2019, the ESMA launched a public consultation to review certain aspects of the EU market abuse directive. We expect the specific scope of proposed changes to become known during 2020.

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Insurance: Spain’s private insurance and reinsurance bill was halted in 2019 when parliament was dissolved. The bill regulates the activity of insurance brokers and agents more comprehensively and gives more protection to users. It is to be hoped that, once the new government is formed, processing of the bill will restart.

Mortgages – unfair terms: Rulings from the CJEU are expected in the coming months on: (i) the potentially unfair nature of IRPH (Mortgage Loan Reference Index) provisions and consequences of their invalidity; and (ii) the incompatibility with Directive 93/13/EU of settlement agreements between banks and consumers to mitigate the effects of interest rate floor clauses given that these may be held to be void.

Fintech

Digital transformation of the financial system: A draft bill is in progress containing steps for the digital transformation of Spain’s financial system. Measures include a regulatory sandbox or controlled testing ground, aimed at technology-based financial innovations.

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Political Agenda

General election: A general election was held in Spain on 10 November. The party that won the most seats (PSOE) is in discussions with the other political factions to reach agreements that give it the majority needed to govern. Everything indicates that the next legislature will be driven by an eminently social agenda, mainly focused on housing, jobs and protection of workers.

Public Law

Climate change and energy transition law: In February 2019, Spain’s Council of Ministers approved a draft bill on climate change and energy transition aimed at progressing towards a carbon-free economy. The new law sets targets for reducing greenhouse effect gases for 2030 and 2050 and sets out various means of promoting energy from renewable sources, alternative fuels and sustainable mobility. We expect the draft bill to be processed once the new government is formed.

European Green Deal: In December 2019, the European Commission announced a legislative package containing various initiatives and measures to tackle climate change, with the goal of making continental Europe climate-neutral by 2050. Expected developments include the presentation of the first “European climate law” and plans to reduce greenhouse gas emissions by at least 50% by 2030. The Green Deal will also include many other measures affecting various sectors (amongst others, industry, agriculture, transport, finance).

Real Estate

Measures to reduce non-performing loans (NPLs): European negotiations are expected to make progress in 2020 on the European legislation on credit servicers, credit purchasers and the recovery of collateral, aimed at encouraging a secondary market for NPLs.

Restructuring and Insolvency

Insolvency law: In 2017, the government announced its intention to systematise Spanish insolvency legislation, to recast the successive reforms made by different laws and clarify certain provisions. It looks like this major recasting work will see the light of day during 2020. Once the recast law is approved, Spanish legislators are expected to start working on implementation of the EU preventive restructuring and second chance directive (see YiR 2019).

Tax

Financial transactions and digital services taxes - Spain’s budget: In January 2019, the government published its draft budget for the year, which in the end was not approved. The new government may push forward similar initiatives to those contained in the bill, including changes to Spanish corporate income tax and the creation of new taxes on financial transactions and on certain digital services.

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Measures to combat tax fraud -anti-avoidance laws: Spain is yet to implement EU directives 2016/1164/EU laying down rules against tax avoidance practices and 2017/1852/EU on tax dispute resolution mechanisms in the European Union. The government published a draft bill in 2018, which we expect to be processed in 2020. It contains a wide range of tax measures, notably changes to the rules on international tax transparency and the inclusion of an exit tax.

To read our Year in Review 2019 Year to Come 2020 publication in Spanish, click the download button below.

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2019 has seen significant changes in law at EU level, which will impact your business in the years to come. By watching this video, you can get a sneak peek into:

  • the sustainable finance package, which seeks to integrate environmental, social and governance considerations into the investment process;
  • the banking package, which brings changes to prudential regulation and the resolution of banks;
  • the investment firms review package, which marks a major reform for capital and liquidity rules for investment firms;
  • the clean energy package, which aims to create an integrated energy market;
  • the screening of FDI regulation, which sets minimum standards for national FDI screening.

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We hope that you have found this guide useful. Please contact your usual Linklaters contact, if you would like to discuss any of these matters further.

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