SPAIN Law and Practice Contributed by: Miguel Cases, Toni Barios, Joaquín Fabré and David Navarro, Cases & Lacambra
Notarial Approach The out-of-court method, defined primarily by Article 1,872 of the Spanish Civil Code and related provi- sions from the Spanish Notarial Law ( Ley 28 de mayo de 1862, del Notariado ), permits alternative enforce- ment of an in rem security interest via a public auction conducted under a Spanish notary’s oversight. The notarial procedure grants parties flexibility in estab- lishing the process’s specifics, which should be docu- mented in the security agreements. Key facets of this procedure include: • oversight by a Spanish notary; • public auction-based sales; • borrower and collateral owner notification; • option for multiple auctions if the initial one lacks attendees or fails; • a 10% asset value deposit requirement for auction participation; • secured parties initiating the process are exempt from the deposit; and • direct asset appropriation is barred. For cash pledges, due to their fungible nature, the enforcement may involve offsetting cash against the remaining secured obligations or directly using the cash from the pledged bank accounts. This process requires clear mention in the pledge agreement and notifying the bank account holder about the pledge enforcement, prompting them to transfer the due The Spanish Royal Decree Law 5/2005, dated 11 March, which incorporates the EU Collateral Direc- tive in Spain, presents the potential to enforce spe- cific security interests via a direct sale or appropriation when an enforcement event transpires. It offers pro- tection during insolvency, provided certain conditions are met. Assets eligible for a security interest under RDL 5/2005 include: • monies in any account, irrespective of the cur- rency; amounts to the secured parties. Specific Regulation (RDL 5/2005)
• marketable securities or other financial instru- ments, as described in the Spanish Securities Markets Act (R • eal Decreto Legislativo 4/2015, dated 23 October) and associated rules, alongside any direct or indi- rect rights over these securities or financial instru- ments; and • credit rights, referring to monetary rights from an agreement where a credit institution provides a loan or credit, excluding specific exceptions. The applicability of RDL 5/2005 should be examined individually. Eligibility to create a security interest under this provision demands that neither party is a natural person and at least one party in every secu- rity agreement is a qualified entity, such as a public institution, central bank, or credit institution, among others. 6.2 Foreign Law and Jurisdiction Generally, parties are free to choose the law applica- ble to the agreement. When Spanish law is not used, English law is often agreed, especially in large cross- border transactions where the arrangers act from the United Kingdom or from other European jurisdictions. Spanish banks will tend to agree on the law appli- cable to the facilities agreement not being Spanish law if there is a material connection from a solvency standpoint between the borrower and the relevant jurisdiction. From a legal perspective, Spanish courts would recognise a foreign governing law in contracts in accordance with Regulation (EC) No 593/2008 of the European Parliament and of the Council of 17 June 2008, on the law applicable to contractual obligations (Rome I), and therefore, the choice of law should be enforceable. However, the choice of a foreign law as the govern- ing law of the agreement will not restrict the appli- cation of the Spanish “overriding mandatory provi- sions”, as defined in Article 9.1 of the Regulation (EC) No 593/2008 of the European Parliament and of the Council of 17 June 2008 on the law applicable to con- tractual obligations (Rome I). Furthermore, Spanish courts may refuse to apply a provision of the chosen law if such application is
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