I INTRODUCTION TO CLASS ACTIONS FRAMEWORK
Spain has a judicial collective redress mechanism called ‘collective action’. The Spanish collective actions framework was set forth in Spanish law as part of the Civil Procedure Act passed in 2000, which entered into force in January 2001. The framework was not included in the initial drafts prepared by the Ministry of Justice. However, it was subsequently incorporated in the draft bill at the last stage of drafting prior to it being submitted to the Spanish parliament. For that reason, the draft collective actions regulations received scant analysis and discussion during the parliamentary proceedings for the enactment of the Civil Procedure Law. Collective action regulations are limited to a few rules (essentially Articles 11, 15, 220, 221 and 519) spread throughout the Civil Procedure Law (i.e., they are not drafted as a systematised, consolidated body of regulations).
As we will further discuss below, the Spanish collective action system is basically an opt-out system. It is only applicable to consumer protection issues, in which procedural standing to initiate the action is not granted to a member of the class but to consumer associations and the Public Prosecutor.
II THE YEAR IN REVIEW
Collective actions in Spain have been used very infrequently to claim individual – normally monetary – homogeneous rights of a class (i.e., a group of consumers that share common factual and legal issues in the underlying individual cases). Furthermore, in those very limited cases in which collective action regulations have been used to claim individual homogeneous rights, they nevertheless involved contractual issues. We are not currently aware of any collective actions brought in Spain claiming damages arising from non-contractual liability (i.e., based on tort).
Thus, the most significant collective actions in Spain are related to contractual damages in connection with the execution of financial or other types of mass-service contracts.
In particular, Spanish consumer associations have filed numerous claims in recent years on the basis of EU Directive 93/13/ECC on unfair terms in consumer contracts. They have sought a declaration of nullity for non-negotiated contract terms that are found to be unfair and, therefore, contrary to the consumers’ rights. The relief sought in these claims is the removal of the unfair term from the defendant’s model contract. While a declaration of the nullity of unfair terms is binding for the defendant company in relation to all of its clients (i.e., it is understood to have res iudicata effects erga omnes), most Spanish courts take the stance that each consumer must individually claim compensation for damages arising from the execution of the unfair term by the defendant.
Nevertheless, some courts take the position that the mere reimbursement to consumers of the amounts the defendant has collected as payments under the unfair term is not a compensation issue. Rather, it is a direct consequence of the declaration of nullity of the term and, therefore, no further individual action is required and reimbursement should form part of the relief granted in the collective action.
Nevertheless, we are not aware of any firm decision in Spain in which a court has ordered a defendant to reimburse consumers represented in a collective action brought by a consumer association.
However, in the past year, some consumer and user associations in Spain announced the initiation of a collective action against some vehicle manufacturers in order to claim economic compensation for those affected by the emissions scandal. For the moment, no collective action seems to have been filed yet. Some individual cases have already been lodged and solved differently depending on the specific circumstances of the case. These can be used as test cases for any collective action.
Most recently, the Court of Appeal of Madrid upheld an appeal filed by the manufacturer of the banned pregnancy drug, thalidomide. The appeal was against a decision of a court of first instance in Madrid that ordered the appellant to pay a significant amount in compensation to several people who were born with birth defects in the 1960s. In its decision, the Court of Appeal of Madrid accepted the statute of limitation defences that the manufacturer had argued to refute its liability. This decision was recently confirmed by the Supreme Court.
i Types of action available
Traditionally, the Spanish civil procedure regulations have granted consumer associations legal standing to file legal actions aimed at protecting the consumers’ general rights or interests. These are rights or interests that cannot be apportioned to each consumer, such as the right to a clean environment. Protection is usually afforded by means of injunctive relief or, in contract law, by having a clause declared to be contrary to consumer rights and therefore void. However, before the enactment of the Civil Procedure Law 1/2000 of 7 January (the ‘Civil Procedure Law’), consumer associations could not file legal actions aimed at protecting the individual homogeneous rights or interests of undetermined consumers.
The Spanish Civil Procedure Law instituted a system of collective actions whereby certain consumer associations can take legal action on behalf of either a determined or an undetermined number of consumers who have sustained injuries or suffered a loss as a consequence of consuming a product or using a service.
ii Commencing proceedings
The Spanish collective actions system is a representative system. Nevertheless, not all consumer associations are entitled to file legal actions on behalf of an undetermined number of consumers, but only those which (1) have a nationwide and long-standing activity in the defence of consumer rights; (2) have been certified as ‘representative’ associations by the government; and (3) have been appointed as members of the Spanish National Committee of Consumer Protection.
Having said that, the prerequisites for becoming a consumer association with standing to start collective actions are neither strict nor detailed. Therefore, the adequacy of representation is under-regulated in Spain.
According to the Civil Procedure Law, if the number, identity and specific circumstances of the aggrieved consumers is determined or is easily determinable at the declaratory stage of the proceedings, both the consumer associations and the groups of aggrieved consumers by themselves (i.e., they do not need to be represented by a consumer association) have the capacity to sue on behalf of all of the aggrieved consumers. In this regard, the group is considered to be legally constituted as the representative plaintiff (i.e., as the plaintiff in the proceedings) when it comprises at least 50 per cent of its members. For this reason, group actions is actually a sort of aggregation mechanism rather than a collective action.
Initially the Civil Procedure Law limited standing to initiate a collective action to consumer associations. However, in March 2014, the Spanish parliament passed Law 3/2014 of 27 March, which amended the 2007 Consumer Protection Law. It added new regulations to the Civil Procedure Law on standing to initiate collective actions. Pursuant to the new regulations, Spanish public prosecutors have standing to initiate collective actions seeking compensation for consumers.
Regulation of class actions
Contrary to other legal systems, Spanish class actions are not tightly regulated. In particular, there is no express regulation on the requirements that class actions must comply with, such as numerosity, commonality, typicality or adequacy of representation. Nor is there a certification of class process, that confirms the fulfilment of these requisites. The Spanish Procedure Law does not regulate the specific requirements that a collective claim must fulfil in order to be accepted. Therefore, no specific reference to commonality as a prerequisite is required. However, it is understood that only actions where the underlying factual issues in each case are sufficiently common, can be considered to be class actions.
The Spanish collective actions system, related to homogeneous individual monetary rights, is an opt-out system in the sense that the Civil Procedure Law provides that a decision issued in a collective action is binding on all members of the class whether the court rules on the claim or dismisses it (i.e., the decision has res judicata effects ultra partes, and not only in utilibus).
Regulations also allow any represented consumer to file supplementary allegations to the collective action. This is not an opt-in mechanism since the consumer will be bound by the decision (whether or not the consumer appears in the proceedings filing the supplementary allegations). Instead, it is a procedural mechanism, whereby represented consumers are entitled to contribute to the case by filing allegations supporting or supplementing those already made in the initial lawsuit.
In that regard, Spanish law establishes specific procedures for publicising a lawsuit in order to facilitate any class member’s joinder to the claim on a supplementary basis.
Surprisingly, the Civil Procedure Law does not establish any mechanism to allow represented consumers to opt out (to avoid being bound by the decision on the collective claim and, therefore, to preserve their individual action).
While this lack of regulation casts doubts on the constitutionality of the regulations, we are not aware of any attempts by consumer organisations to challenge the constitutionality of the absence of any opt-out mechanism. In any case, the lack of an opt-out system should oblige judges and courts to be very strict in their assessment of the traditional prerequisites for class actions (particularly in connection with the assessment of commonality and adequacy of representation). This is true given that, if the prerequisites are applied very strictly so that very few collective actions are ultimately admitted, in those limited cases in which commonality is out of the question (basically, mass accidents in which causation is simple and evident, and no reliance issues need be discussed, e.g., the dam that failed and caused damages to civilians in the Presa de Tous case), then the lack of an opt-out mechanism for the represented consumers may be constitutionally acceptable.
In short, the lack of an opt-out system either renders the entire body of collective-action regulations inconsistent with the constitutional rights of represented consumers, or justified because of the extremely narrow circumstances in which collective actions would be admitted.
No minimum threshold
Considering there is no regulation regarding the configuration of the class, there is no minimum threshold or number of claims required. However, the group is considered to be legally constituted as the representative plaintiff (i.e., in case of determined or easily determinable consumers claiming) when it comprises at least 50 per cent of its members.
iii Procedural rules
Courts that hear class actions
First instance civil courts of have jurisdiction to hear damage cases filed by either a single consumer or a consumer association. According to the Civil Procedure Law, when consumers acts as the plaintiff, they will be entitled to choose between filing the lawsuit with: the courts of first instance in their own domicile; the courts in the defendant’s domicile; or the courts linked to the underlying factual or legal relationship related or affected by the litigation, provided the defendant has an establishment, open to the public, in that location or a representative who is authorised to act on its behalf. The various alternatives available to the consumer to file a lawsuit make it difficult to identify the most likely forum.
Meanwhile, and due to a very recent modification of Spanish procedural laws, the commercial courts hear collective claims based on general contractual conditions or consumer regulations, such as cessation actions. As their name implies, commercial courts are specialised courts with a high level of expertise. Commercial courts also have experience dealing with consumers’ individual cases related to regulations on general terms and conditions, corporate matters, and unfair competition law and advertising, among others.
In these cases, the competent court will be that of the place where the defendant has an establishment or, failing that, has an address. If the defendant has no address in Spain, then the court will be that of the place of the plaintiff’s address.
In principle, only cessation actions – or pure class actions – are considered collective actions. However, court may consider mere aggregated claims filed as false class actions may be accepted as collective claims and be referred to be handled by the commercial courts.
In Spain, there are two basic declarative procedures for seeking compensation: verbal proceedings and ordinary proceedings. They type of proceedings will depend on the amount claimed, namely: (1) where the amount claimed is more than €6,000, it is handled in ordinary proceedings; (2) where the claim seeks compensation for up to €6,000, it is handled in verbal proceedings.
Cessation actions filed by consumer associations are tried in accordance with the regulation on verbal proceedings. However, depending on the amount claimed, collective actions filed by consumer associations in which homogeneous individual monetary rights are disputed are tried in accordance with the regulations governing ordinary proceedings or verbal proceedings.
In both cases, civil proceedings start with the filing of the claim. The claim must include all factual allegations on which it is based, in as much detail as possible, as well as the legal grounds on which it is based. However, under the principle of jura novit curia, (1) the plaintiff is not required to set out the legal grounds in thorough detail; and (2) the legal grounds claimed are not binding upon the judge, who may uphold the action based on alternative legal grounds.
If verbal proceedings are initiated, once the claim has been filed and given leave to proceed, the defendant is notified so that a defence (or a counterclaim) can be presented within 10 working days (this excludes Saturdays, Sundays, the month of August, national holidays, and non-working days in the autonomous region or the city where the proceedings take place). This period cannot be extended except when both parties agree to stay the proceedings.
Subsequently, the court will call the parties to a hearing in which they set out the evidence they are going to submit, produce that evidence and present their final conclusions, all at the same hearing.
If ordinary proceedings are initiated, once notified of the lawsuit the defendant will have 20 working days to file the brief in response. This period cannot be extended except when both parties agree to stay the proceedings. As explained in detail below, any allegation on which the defence is based, and any documentary evidence and expert reports on the facts or events on which the defence is based, needs to be attached to the allegations. It is unlikely that any other documents will subsequently be accepted, save for specific exceptions to be analysed.
The court will then call the parties to a preliminary hearing in which they set out the evidence they are going to submit and, ultimately, the court calls the parties to the trial where the evidence and final conclusions are presented. Although the Procedural Law requires the trial to be held within one month from the preliminary hearing, it is very common that the trial is scheduled to be held between two and 12 months after the preliminary hearing, depending on the court’s agenda and workload. When there are a lot of witness and experts, the court may schedule more than one day for the trial.
Admissibility of claims
Unfortunately, no procedure exists to determine, at an early stage, whether a claim is admissible and passes the applicable minimum criteria (so that manifestly unmeritorious cases are not continued). In fact, the collective actions framework does not establish any preliminary proceedings similar to Federal Rule of Civil Procedure (FRCP) 23, aimed at clarifying whether or not the traditional prerequisites of any collective action are met (i.e., commonality, numerosity, typicality and adequacy of representation). This is clearly one of the major failings of the Spanish collective actions system.
In general (i.e., both for individual cases and collective actions), the admission of a lawsuit is a highly bureaucratic procedural step that is managed by court officials and not the judge, and the procedural defences challenging the suitability of collective actions must be filed simultaneously with the statement of defence of the case on the merits (i.e., procedural motions such as misjoinder of actions or lack of standing must be filed together with the defence).
Nevertheless, the Judiciary Law of 1985 allows courts to reject legal actions that are ‘clearly flawed’ or which have been filed with ‘procedural fraud’. In the limited day-to-day practice of collective claims, this provision has allowed defendants to file motions challenging the admissibility of claims on the basis that the lack of commonality in the represented consumers’ underlying cases impedes the plaintiff consumer association’s standing to file a collective action. Although the Civil Procedure Law does not expressly state that commonality is a prerequisite for collective actions, it nevertheless establishes that collective actions can be filed when a ‘damaging act’ affects several consumers. The reference to a single, damaging act potentially suggests commonality is a fundamental prerequisite for collective actions.
However, since there are no specific regulations on the admissibility of collective actions, defendants do not have any guarantee that they will be entitled to challenge the admissibility of the legal action due to the lack of commonality (i.e., the consumer association’s lack of procedural standing to file the action).
Defendants may challenge commonality by: (1) disputing the lawsuit’s admissibility (although it does not stay the proceedings); and (2) filing a procedural motion as part of their defence on the merits once the collective action has been admitted (i.e., following admission and simultaneously with the statement of defence on the merits).
iv Damages and costs
Trial before civil jurisdiction is held before a judge and there is jury.
The Spanish civil liability system is based on compensation. Consequently, indemnifiable damages should match the impairment or loss suffered by a person as a result of a given event or fact, whether the impairment or loss affects the person’s vital physical attributes or his or her property or assets.
Indemnifiable damages include strictly economic damages and ‘non-material damages’ (including, for instance, suffering or pain).
The Spanish legal system does not provide punitive damages.
The ‘loser pays’ rule applies in Spain, except when the losing party has been granted legal aid benefits. In that case, even if the judgment orders the loser to pay the legal fees incurred by the counterparty, the order cannot be enforced against the loser.
On 4 November 2008, the Spanish Supreme Court issued a decision declaring Article 16 of the Code of Ethics of the National Bar Association to be null. The Article banned contingency fees and quota litis agreements. As a consequence, contingency fees and quota litis agreements have now become fully valid in Spain.
Although no specific regulation exists relating to the settlement collective actions cases, and no judicial experience on class settlement has been reported up to date, it may be understood that court approval is required for collective actions to be settled. However, the court can only reject a settlement if it affects (1) the fundamental individual rights of any of the parties that cannot be waived, or (2) the interests of third parties.
IV CROSS-BORDER ISSUES
There is no specific regulation that considers cross-border issues under Spanish procedural law. We are not aware of any case in which Spanish courts asserted jurisdiction over any ‘foreign’ or global claims. However, EU law allows any authority or entity of any other Member State, with procedural standing for cessation actions, to file cessation actions to protect general consumers’ rights in any Member State.
In accordance with the international rules of jurisdiction set out in Council Regulation 44/2001 of 22 December 2000 on jurisdiction, recognition and enforcement of judgments in civil and commercial matters, and the Lugano Convention, the fact that Spain may be the competent jurisdiction to hear claims filed by consumers and users residing in Spain, avoids the possibility of excluding overseas claimants opting into a Spanish class action.
V OUTLOOK AND CONCLUSIONS
On 26 July 2016, the deadline granted by the European Commission to Member States to adapt their procedural systems to the principles set out in the June 2013 Recommendation (the Recommendation) expired.
Although Spain’s collective action framework is already more ambitious than that derived from these principles in the Recommendation, its incompleteness and somewhat unsystematic nature generates a number of problems regarding its interpretation and enforcement. This is evidenced by the judicial experience to date. The Spanish parliament could consider the European Commission’s Recommendation as an invitation to reflect on the opportunity to introduce amendments to improve and complete the regulation of collective actions.
In our view, any amendment of the current Spanish regulation on collective actions should include at least (1) the regulation of a pre-certification stage similar to that regulated by the US Federal Rule No. 23; (2) an accurate regulation of commonality and the other prerequisites to certify collective actions; and (3) the introduction and regulation of a mechanism to opt out, which can be easily used by consumers represented in collective claims. Additionally, the Spanish parliament should seriously consider mass dispute resolution systems as an alternative to litigation. The North European Ombudsman’s compensation mechanism provides a clear alternative to the ineffective (and in many cases, unfair) judicial collective redress system.
1 Alex Ferreres Comella and Agustín Capilla Casco are partners and Cristina Ayo Ferrándiz is a counsel at Uría Menéndez.