COVID-19: Consequences for dispute resolution in Spain

By Pablo Berenguer, Maria Fuentes

04-2020

1) Current general rule: suspension of proceedings and procedural deadlines

On March 14, 2020 through Royal Decree 463/2020 ("RD 463/2020") the Spanish government declared the State of Alarm for the management of the health crisis situation caused by COVID-19. 

Among many other measures, RD 463/2020 sets forth, as a general rule, the suspension of court proceedings and procedural terms. 

As an exception, this  suspension does not prevent the adoption of those judicial actions necessary to avoid irreparable damage to the rights and legitimate interests of the parties. Urgent interim measures may be considered included within this exception.

The suspension will remain in place as long as the State of Alarm is in effect (currently, until April 26 2020, although this deadline may be further extended).

2) Suspension of limitation and expiration periods

Additionally, RD 463/2020 (4th Additional Provision) sets forth the suspension of the statute of limitation and expiration terms applicable to any actions and rights during the term of the State of Alarm.

3) Litigation after COVID-19 crisis

The current COVID-19 crisis is expected to have an important impact on litigation in Spain in terms of congestion in the Courts and the capability of the judicial system to provide efficient resolution of disputes in the coming months and years. This is due (i) to the current suspension of Courts' work, which may cause itself significant delays in existing proceedings; and (ii) to the fact that litigation and Courts' workload may significantly increase, both in terms of COVID-19 matters directly related disputes (contractual breaches, force majeure, frustration, etc.) and also new matters related to the economic and social impact of the crisis (collective dismissals, contractual breaches, unpaid debts, insolvency proceedings, etc.). 

The Spanish Government and Justice authorities are currently working on an action plan to minimise such impact to the extent possible.

In any event, an increase in the use of alternative dispute resolution methods is generally perceived as part of the solution to the expected congestion of judicial Courts, particularly in the field of commercial disputes.

4) Arbitration

Arbitration proceedings are not directly affected by the suspension of judicial proceedings set forth by RD 463/2020.

In relation to the management of existing proceedings in the current situation, and in the absence of specific statutory provisions, the different Spanish arbitration courts are following different approaches to respond to the current situation. While some of these courts have decided, as general rule or indication, to suspend proceedings and deadlines in progress, other institutions on the contrary have decided to generally continue proceedings to the fullest extent possible, particularly in relation to the filing of written statements, holding of procedural calls or hearings – through telematic means- and issuance and notification of awards. Of course, the above general approaches or indications are applied on a case by case basis and, subject to the parties' requests with the decisions to be ultimately taken by the arbitrators.

In regards to expectations post-COVID-19 , it is generally considered that the use of commercial arbitration may experience a significant increase, not only for international big cases but generally for medium size commercial disputes too, given the abovementioned expected increase in disputes and congestion of the judicial system.

Spanish arbitration courts are already carrying out significant investments in technology as it is also generally considered that management of cases through telematic means is not only necessary during the current COVID-19 situation is in place but, it will also be the case going forward as more efficient solutions to dispute resolution will be needed as an alternative to judicial proceedings.

5) Mediation

Despite the efforts of the European and national authorities to promote mediation for commercial disputes, this alternative dispute resolution method is still in its early stages of development in Spain. However, there is also a general perception that the current crisis may cause an increase in its use, as a particularly appropriate way to efficiently solve many of the commercial disputes directly and indirectly related to COVID-19 and its economic consequences.

In this regard, the Government may follow legislation action to boost mediation and in the near future may even introduce mandatory mediation steps for certain disputes, similar to the case of other European jurisdictions.

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