I OVERVIEW

i Sources of law

The primary source of securities law in Spain is the Securities Market Act (LMV), approved by Royal Legislative Decree 4/2015 of 23 October.

The current LMV is the product of the consolidation of the previous Act 24/1988 of 28 July, on the Securities Market, which has been amended several times, mostly with the purpose of transposing European Union (EU) directives and other provisions codified in various laws. An example has been the implementation of EU Directive 2014/65/EU (MiFiD II), which entered into force on 3 January 2018. The LMV was recently amended by Royal Decree-Law 14/2018 of 28 September,2 to continue with the implementation of the said Directive, essentially with the purpose of strengthening investor protection by further specifying the information obligations towards them and by assigning new supervisory powers in this respect to the National Securities Exchange Commission (CNMV).

Other subordinated legal provisions regulate in detail certain aspects of the Spanish securities market. These regulations are mainly implemented through Royal Decrees, including Royal Decree 1362/2007 of 19 October on transparency requirements and Royal Decree 2119/1993, which regulates the sanctioning procedure applicable to securities market operators; and Orders issued by the Ministry of Economy and Competitiveness.

The CNMV also issues Circulars for the implementation and enforcement of these legal provisions (e.g., Circular 1/2018 of 12 March on warnings relating to financial instruments).

Additional sources of securities law in Spain include the Civil Code, the Commercial Code, the Criminal Code, the Corporations Act, legislation on the protection of consumers, the Judiciary Act 6/1985 of 1 July, the Civil Procedural Act (CPA) and the Criminal Procedural Act. These are not specific regulations on securities, but they are all relevant in the context of securities litigation.

ii Regulatory authorities

Civil actions involving securities are usually filed with the courts and, although less frequently, before arbitral tribunals. Rulings issued by civil judges or arbitrators are immediately enforceable, regardless of whether they are subsequently appealed. Criminal enforcement proceedings are instigated mainly by Public Prosecutors.

The CNMV is the main domestic regulatory and supervisory authority in Spain. As discussed in Section III, the CNMV is entrusted with inspection and sanctioning powers.

Other important domestic supervisory and regulatory authorities on financial institutions and securities markets are the Bank of Spain, regarding the public debt market, the Ministry of Economy and Competition and the economy departments of some Spanish regions.

Finally, the European Securities and Markets Authority oversees the stability of the EU's financial system.

iii Common securities claims

The most common civil securities claims3 in Spain are those filed by non-professional investors against sellers of securities seeking compensatory damages, on the basis of contractual or non-contractual liability, or the annulment of the contract. Lawsuits normally include actions for annulment, termination and damages, with the last two usually being subsidiary claims in the event that the action for annulment is dismissed. Additionally, lawsuits seeking the annulment of unfair contractual terms are also common.

Claims are mainly grounded on the lack of information provided to investors regarding the risks of the investment or the inadequacy of the product for the plaintiff given its previous financial experience and knowledge. Additionally, some recent judgments have been issued on prospectus liability.

Apart from claims against the securities' issuer and its directors, claims may also be filed against placing agents for breach of information duties during commercialisation. The probability of success in these types of claims must be analysed on a case-by-case basis.

Other forms of secondary liability (e.g., against accountants or directors), although theoretically possible, are less common.

II PRIVATE ENFORCEMENT

i Forms of action

The main actions in securities litigation are those based on contractual liability and those seeking the annulment of the contract entered into by the parties.

While contractual liability is usually claimed on the basis of an alleged fraudulent or defective commercialisation of securities that lead to an error in consent,4 annulment is claimed on the basis of an infringement of imperative regulations, absence of essential elements of the contract or vices in the plaintiff's consent (i.e., fraud or error). On different legal grounds, all these actions seek the recovery of the losses derived from financial investments.

Setting aside procedural or material exceptions (e.g., lack of standing, statute of limitations), the main defence against these claims is usually focused on proving that the information provided during commercialisation was complete and accurate5 and that the financial product was appropriate for the client.

The burden of proof in these actions generally lies with the plaintiff. However, when the plaintiff falls into the category of 'consumer', courts have tended to reverse the burden.

Secondary liability claims may be also grounded on non-contractual liability arising from the defendant's conduct. In these instances, the plaintiff must evidence that the conduct was negligent and that it was the cause of the alleged damage.

ii Procedure

Disputes concerning securities are subject to the standard civil procedure under the CPA. Most cases will fall under the jurisdiction of first instance courts.

Spanish civil procedure has been traditionally adversarial and written phases remain of predominant importance. Standard proceedings are structured in three main phases,6 with the filing of the statements of claim and defence being the most important. In these briefs, the parties define their positions and, as a general rule, submit all documentary evidence supporting their claims, including expert reports.

The CPA envisages short and non-extendable time limits. Once a lawsuit has been filed, the respondent must submit a statement of defence within 20 working days.

Two hearings are held after the written stage: a preliminary hearing and the trial. In the preliminary hearing, procedural matters, if any, are discussed and the parties propose the evidence on which they intend to rely. Evidence proposed, if accepted by the court, will be examined during the trial, at which the parties will orally submit their conclusions before the case is remitted for judgment.

Spanish law does not envisage a discovery stage comparable to that of the United States. However, rules on access to evidence are being more flexibly interpreted by courts and have been recently broadened by law in certain matters.7 This may indicate a new trend in civil litigation, more generally. Under the current general framework, parties may petition the court to gather information they may need to file their claim8 as well as to examine specific pieces of evidence before the trial, or to secure them for examination at a later stage.9 Once the proceedings have started, the parties are entitled to request that other litigants or third parties10 produce documents relevant to the case and directly connected to its object.11 In general, only documents that are relevant to the case and previously identified trigger the duty of disclosure. These requests, which should be limited in scope and nature, must be approved by the court. General petitions of information or documents are not admissible.

Civil procedure in Spain is mainly designed for individual claimants; however, Public Prosecutors and associations of users and consumers have legal standing to file class actions on behalf of groups of individuals that were affected by the same event and whose damage was occasioned by the same cause of action.12 Judgments resulting from class actions will be binding on every individual in a given class, even if they decided to not participate in the proceedings or were unable.13 Unlike in the US legal system, there is no certification of class process under Spanish law or opt-out mechanisms.14 Conversely, the law envisages opt-in mechanisms that allow individuals to join the proceedings at different stages.15

As an alternative to class actions, plaintiffs have resorted to joinder16 or consolidation of multiple cases into a single proceeding when claims are connected.17 Unlike class actions, these judgments only affect the litigants.

Both class actions and joinders are subject to the standard rules of civil procedure.

iii Settlements

Litigants have the right to waive, accept and reach agreements at any stage of the proceedings, unless contrary to an express legal prohibition or where there is a potential harm to third parties or general interests.18 Provided that these restrictions do not limit the parties' right to settle the dispute, courts will approve their settlement agreement,19 bringing the proceedings to an end. There are no specific mechanisms envisaged for collective settlements.

Proceedings may also terminate when the plaintiff's claims are satisfied out of court in a way that leaves the plaintiff without a legitimate interest in obtaining the court's protection. In those cases, the corresponding circumstance must be recorded and the court clerk will order the termination of the proceedings.

No legal costs will be awarded if a settlement agreement has been reached. In these cases, the parties may include legal costs in the object of their negotiations.

When proceedings terminate by means of a judgment, the court will generally order the unsuccessful party to bear the counterparty's legal costs. Should the claimant succeed only partially, then each party will bear its own costs.20 Legal costs include, among others, the fees of attorneys, court agent fees and experts, as well as the travelling expenses of witnesses.21 The fees of attorneys and court agents are calculated following the parameters set forth by the corresponding Bar Associations. As such, in practice, not all fees incurred by the successful party may be recovered. Moreover, the CPA creates a general limit on the payable amount of legal fees equal to one-third of the amount in dispute for each of the unsuccessful litigants.22

iv Damages and remedies

Violations of securities law may trigger compensation for damages when the respondent files a complaint for contractual or non-contractual liability.23

There are no specific rules under Spanish securities law for calculating the amount of damages that should be awarded. However, the general principle is that the harm must be fully repaired. Thus, compensation should include not only consequential damages but also loss of profit.

Generally, the party seeking compensation for damages must prove the existence and the extent of the damages, the respondents' wilful or negligent conduct and the causal link between the damage and the conduct. As indicated in Section II.i, the burden of proof can be reversed in some instances. However, no compensation for damages can be awarded if one of the previously mentioned elements is not validly evidenced.

When the claimant seeks the annulment of the contract, the granting of the annulment entails reciprocal restitution of compensation between the parties, plus accrued legal interest.24

Other remedies available under Spanish law include specific performance, compulsory performance, withholding of fulfilment, termination of contract and a price reduction. Nevertheless, compensation and restitution are the most frequent remedies in securities litigation.

III PUBLIC ENFORCEMENT

i Forms of action

The CNMV is entitled to initiate an administrative procedure that may lead to the imposition of a sanction when an issuer or a market operator violates securities regulations. Sanctions imposed by the CNMV can be appealed before administrative courts.

Nevertheless, the CNMV is not entitled to file a criminal complaint or prosecute securities-related crimes. If, in the course of its supervisory activity, the CNMV finds indications of a criminal offence, it must refer the case to the Public Prosecutor. The CNMV will not be a party to the criminal proceedings, but will assist the prosecutor and the court by producing documentary evidence or issuing expert opinions.

Criminal enforcement of securities regulations has recently been enhanced by an amendment to the Criminal Code that entered into force in March 2019. Through this amendment, Spain has transposed Directive 2014/57/EU of the European Parliament and the Council, of 16 April 2014, on criminal sanctions for market abuse. It has also clarified what conduct qualifies as market abuse and manipulation and insider trading offences, while keeping corporate criminal liability for securities-related crimes.

ii Procedure

Enforcement actions may be divided into two main categories: administrative proceedings conducted by the CNMV and criminal proceedings pursued mainly by the Public Prosecutor before the criminal courts.

Administrative sanctioning proceedings are initiated by the CNMV ex officio. The resolution of initiation will be notified to the defendant, who may file written allegations. The CNMV's Legal Affairs Department acts as the investigative body and is entitled to perform all necessary fact-finding tasks. In view of the initial findings, the investigative body will issue a preliminary statement of charges against the defendant, who will have 20 days to reply. Once the investigation is concluded, the investigative body will issue a motion for a resolution, regarding which the defendant will have 20 days to submit objections or comments.

After this time, the investigative body will refer the motion to the board of the CNMV, which is the competent authority to resolve sanctioning procedures. The board of the CNMV may take additional investigative measures before issuing its decision. Decisions (sanctions) issued by the board of the CNMV may be appealed to the Minister of the Economy. In turn, decisions by the Minister of the Economy may be appealed before an administrative court (the National Court in Madrid).

The duration of an administrative proceeding is limited to one year from the date of the decision to initiate the proceeding. Simplified proceedings (limited to four months) are available for minor infringements or cases in which the facts have been fully disclosed.

It is noteworthy that securities issuers and market operators are legally bound to cooperate with the CNMV during its investigations by disclosing and providing all requested information and documentation deemed necessary for the administrative proceedings. Refusal to cooperate with the CNMV is classified as a very serious administrative infringement.

As regards criminal enforcement, there is no special criminal procedure for the prosecution of securities-related crimes. Therefore, standard criminal procedure is applied.

Criminal proceedings under Spanish law are divided into three stages: the investigation stage, the accusation stage and the oral trial or hearing. The investigation stage is aimed at investigating the alleged crimes and the alleged perpetrators (both legal and natural persons) to allow the investigating judge to decide whether the case should be dismissed (if there are insufficient grounds) or tried (if there are sufficient indications that a crime has been committed by the alleged perpetrators). The accusation stage is an intermediate step between investigation and trial during which the parties (the prosecutors25 and defendants) file their respective briefs of accusation and defence. In the oral trial, prosecutors attempt to establish the facts and guilt of the accused parties (whether natural or legal persons).

The standard of proof depends on the procedural stage. In the investigation and accusation stages, prosecutors must provide the criminal court with sufficient indications (not evidence) that a crime may have been committed by the suspect so that an oral trial can be held. If there are insufficient indications of criminal activity, criminal proceedings will be dismissed at this stage. In the oral trial, the accused legal or natural person can only be declared guilty if criminal liability is proved beyond a reasonable doubt.

As regards discovery in criminal cases, parties may propose any investigative measure they deem necessary; however, the investigating judge has sole authority to order the measures (e.g., depositions, searches and seizures, wiretapping and document discovery). Unlike in administrative procedures, suspects have no obligation to cooperate with the court or the Public Prosecutor or to produce evidence.

iii Settlements

Unlike in other administrative proceedings, administrative sanctioning procedures involving securities do not allow settlements (or findings of conformity) between the defendant and the authorities concerned (in this case, the CNMV). The only possibility available to the defendant is to fully recognise and admit the infringement and redress it at its own initiative to the extent possible. Both the admission of liability and redressing actions are factors taken into account by the competent body when deciding to impose a less severe penalty within sentencing guidelines.

As regards criminal procedures, under Spanish law, public prosecutions are governed by the principle of mandatory prosecution (linked to the principle of legality). As a consequence, a Public Prosecutor is not entitled to drop or defer prosecution in the context of a settlement as long as there are indications that a crime has been committed.

However, the Criminal Procedure Act allows parties in criminal proceedings to enter into plea bargain agreements at any time before the oral trial is finished, except if the requested penalty exceeds six years of imprisonment. All securities-related crimes are subject to plea bargains given that none is punishable by a sentence exceeding six years.

A plea bargain consists of an agreed acceptance by the defendants (either legal or natural persons) of the charges, counts and penalties brought by the prosecutor before the criminal court. As a consequence, the criminal court issues a judgment in accordance with the mutually agreed penalties and damages, which are imposed on the defendants. The criminal court may only refuse to issue a judgment on those terms if:

  1. there exists some doubt that the accused's decision to enter into the bargain was taken under duress;
  2. the defendant's attorney deems it necessary to hold the trial; or
  3. the court believes that the prosecution's charges and counts contravene the law or that the sentencing requested is inappropriate.

The plea-bargain judgment may only be appealed if it does not comply with the terms of the agreement.

The general rule regarding attorneys' fees in criminal proceedings is that the convicted party is responsible for all legal costs (including attorneys' fees) of the claimants (private prosecutors). As a particular feature, procedural costs may only be imposed on private prosecutors where it is established that they have acted recklessly or in bad faith.

iv Sentencing and liability

The LMV classifies administrative infringements as minor, serious or very serious, establishing different sanctions for each class of infringement.

Very serious infringements26 are punishable with a fine amounting to the highest of the following figures: five times the amount of the gross profit made or the loss avoided as a result of the infringement; 5 per cent of the shareholders' equity of the offending entity; 5 per cent of the offending entity's or of third parties' funds used to commit the infringement; 10 per cent of the offending entity's annual turnover; or €5 million. In addition to the fine, other sanctions may be imposed, such as:

  1. suspension or limitation of the type or volume of transactions and activities that may be undertaken by the offender in securities markets for up to five years;
  2. suspension from membership in an official secondary market or a multilateral trading facility for up to five years;
  3. removal of a financial instrument from trading on a secondary market or a multilateral trading facility; or
  4. withdrawal of authorisation to trade.

Serious infringements27 are punishable with a fine amounting to the highest of the following figures:

  1. three times the amount of the gross profit made as a result of the infringement;
  2. 2 per cent of the shareholders' equity of the offending entity;
  3. 2 per cent of the offending entity's or of third parties' funds used to commit the infringement; or
  4. €300,000.

In addition to the fine, other sanctions may be imposed, such as:

  1. suspension or limitation of the type or volume of transactions and activities that may be undertaken by the offender in securities markets for a period of up to one year;
  2. suspension from membership in an official secondary market or a multilateral trading facility for a period of up to one year; or
  3. withdrawal or suspension of the authorisation to trade for up to five years.

Minor infringements28 are punishable with a fine of up to €30,000.

Article 310 of the LMV sets forth the criteria for calculating fines, such as the nature and severity of the infringement, the degree of responsibility and the financial strength of the offender, the seriousness and duration of the hazard or damage caused, the losses caused to third parties, the profit obtained or the loss avoided or the fact that the offender redressed the infringement at his or her own initiative.

After its 2019 amendment, the Criminal Code foresees the following securities-related criminal offences:

  1. investment fraud;
  2. market abuse and manipulation;
  3. insider trading;
  4. unlawful disclosure of inside information; and
  5. incitement and conspiracy to commit market abuse and manipulation, insider trading and unlawful disclosure of inside information.

Investment fraud

Article 282 bis of the Criminal Code punishes the directors of a securities issuer that forge the prospectus of an initial public offering (IPO) of shares or any other mandatory statements or periodic reports to unlawfully obtain investments. No loss need be incurred by any investor for a crime to have been committed. This offence is punishable by imprisonment of between one and four years. If a loss is caused to an investor, the punishment imposed will fall within the upper half of that range (imprisonment of two-and-a-half to four years). In addition, if the damage caused is particularly serious, the penalty will range from between one and six years' imprisonment and a fine of between €360 and €144,000.

Market abuse and manipulation

Article 284 of the Criminal Code punishes three different conducts of market abuse and manipulation:

  1. alteration of prices by using violence, intimidation, deceit or any other form of contrivance;
  2. alteration of prices of a financial instrument or a related spot commodity contract and manipulation of a benchmark by spreading false news or rumours, if the offender obtains a profit, provided that, at least, one of the following conditions is met:
    • the profit obtained or damage caused exceed €250,000;
    • the funds used exceed €2 million; or
    • market integrity is seriously impaired;
  • entering into transactions or placing orders to trade that give false or misleading signals as to the supply of, demand for, or price of, a financial instrument or a related spot commodity contract or a benchmark, or securing the price of one or several financial instruments or a related spot commodity contract at an abnormal or artificial level, provided that, at least, one of the following conditions is met:
    • the offender has obtained a profit exceeding €250,000 or has caused damage exceeding that amount;
    • the funds used exceed €2 million; or
    • market integrity is seriously impaired.

This offence is punishable with:

  1. imprisonment of six months to six years;
  2. a fine between €1,440 and €720,000 or of up to three times the profit obtained or the loss avoided, where this is a higher figure; and
  3. a special disqualification (debarment) from trading on financial markets for two to five years.

Insider trading

Article 285 of the Criminal Code punishes the person who, possessing inside information, engages in insider trading or recommends or induces another person to engage in insider trading, either by acquiring or disposing of financial instruments to which that information relates or by cancelling or amending an order concerning such financial instruments, provided that, at least, one of the following conditions is met:

  1. the offender has obtained a profit exceeding €500,000 or has caused damage exceeding that amount;
  2. the value of the financial instruments involved exceeds €2 million; or
  3. market integrity is seriously impaired.

This provision applies to any person who possesses inside information as a result of:

  1. being a member of the administrative, management or supervisory bodies of the issuer or emission allowance market participant;
  2. having a holding in the capital of the issuer or emission allowance market participant;
  3. having access to the information through the exercise of an employment, profession or duties; or
  4. being involved in criminal activities.

It also applies to any person who has obtained inside information under other circumstances, where that person knows that it is inside information; however, in such a case, applicable penalties will be less serious.

This offence is punishable with:

  1. imprisonment of six months to six years;
  2. a fine between €1,440 and €720,000 or of up to three times the profit obtained or the loss avoided, where this is a higher figure; and
  3. special disqualification (debarment) from markets and securities-related offices or activities from two to five years.

The penalties imposed will be in the upper half of the range if the offender regularly trades with inside information, or the profit obtained, the loss avoided or the damage caused is especially significant.

Unlawful disclosure of inside information

Article 285 bis of the Criminal Code punishes unlawful disclosure of inside information, which arises when a person possesses inside information and discloses that information to any other person, endangering market integrity or investors' confidence, except where the disclosure is made in the normal exercise of an employment, profession or duties, including where the disclosure qualifies as a market sounding made in compliance with EU regulations.

This offence is punishable with:

  1. imprisonment of six months to four years;
  2. a fine between €720 and €288,000; and
  3. special disqualification (debarment) from markets and securities-related offices or activities from one to three years.

Incitement and conspiracy

Article 285 quater of the Criminal Code punishes the incitement and conspiracy to commit the above-mentioned criminal offences with less serious penalties than those set out in Articles 284, 285 and 285 bis for such offences.

Finally, according to Articles 31 bis and 288 of the Criminal Code, a legal person may be held criminally responsible for any of these offences, together with guilty natural persons, if the crime was committed by its directors, representatives, agents or employees to the benefit of the entity. In these cases, the legal person will face mandatory fines ranging from one to five times the profit obtained or between €5,400 and €9 million.

In addition, the judge may impose one or more of the following penalties on the legal person:

  1. winding up of the company;
  2. suspension of activities (for up to five years);
  3. closure of premises (for up to five years);
  4. business ban (for up to 15 years);
  5. disqualification (debarment) from entering into public contracts, applying for state subsidies and tax or social security benefits (for up to 15 years); and
  6. judicial management of the company.

A 2015 amendment to the Criminal Code provides for an affirmative defence of compliance (set out in Chapter 2 of Section 31 bis of the Criminal Code) that allows legal entities to be exonerated if they prove in court that an effective compliance programme (or model) to detect and prevent crimes, or to reduce the risk of them being committed, was implemented before the offence took place.

IV CROSS-BORDER ISSUES

Under Regulation (EU) No. 1215/2012 (Brussels I bis) Spanish courts have jurisdiction in civil and commercial matters when the contractual parties agreed to submit their disputes to Spanish courts29 or when the respondent, irrespective of nationality, is domiciled in Spain.30

A defendant domiciled in another EU Member State may be sued in Spain in the following cases:

  1. when the contract in which the claim is based was performed in Spain;31
  2. in tortious matters when the harmful event occurred (or, in some cases, had effects) in Spain;32
  3. when civil liability stems from criminal proceedings held in Spain;33 and
  4. under certain circumstances where there is more than one respondent and one is domiciled in Spain.34

There are two main instances relevant to securities litigation in which defendants not domiciled in an EU Member State may be sued before Spanish courts when the dispute is connected to the operations of a branch, agency or other establishment situated in Spain;35 and when disputes arise out of contracts with consumers that are domiciled in Spain36 provided that the other party pursues commercial or professional activities in Spain.37

If EU law is not applicable in accordance with the aforementioned rules, a foreign person can be subject to Spanish jurisdiction when so provided by an international or bilateral treaty signed between Spain and the state in which the defendant is domiciled. In these cases, the scope of Spanish jurisdiction will be determined by the treaty. In the absence of an international instrument alone, the Judiciary Act will apply, which establishes a very similar scheme to that of EU law in this matter.

To challenge jurisdiction, the respondent may file a motion to dismiss before the court38 within 10 days of service of process. Once the motion is filed, the proceedings will be suspended until the court issues a decision. The doctrine of forum non conveniens is not recognised in Spain. When Spanish courts have jurisdiction according to the law, they are bound to exercise it on the basis that a different solution would compromise legal certainty.

In criminal matters, Article 23.1 of the Judiciary Act states that Spanish courts have jurisdiction to try any offence committed in Spanish territory.

V YEAR IN REVIEW

The financial crisis of 2008 triggered an outbreak of securities litigation and arbitration in Spain that is still ongoing. Thousands of claims have since been filed before Spanish courts and the Supreme Court has had the opportunity to issue important rulings in the field, sometimes revisiting old civil categories of renewed importance.

The courts have stressed the importance of assessing error in consent on a case-by-case basis, carefully analysing the particular circumstances in which the plaintiff entered into a contract involving securities. However, the courts have also considered that the mere infringement of information duties cannot automatically imply the annulment of a contract with a consumer.39

Several class actions have recently been filed in connection with financial instruments. Nevertheless, the fact that Spanish civil procedure is mainly designed for individual claimants has led to most of them being dismissed on procedural grounds.

The Bankia case decided by the Supreme Court in February 2016, regarding the Bankia IPO in 2011, has had a significant impact in securities litigation. In this judgment, dealing with small investors, the Supreme Court considered that the alleged financial inaccuracies of the IPO's prospectus had led to an error in the investors' consent because it was directly linked to the misleading financial information provided. It also ruled that civil courts were allowed to resolve cases regarding the Bankia IPO, even though there were ongoing correlated criminal proceedings. On 24 February 2017, the Supreme Court handed down an important decision on floor clauses (i.e., those setting a lower limit on interest). The decision is important for securities litigation since it rejects the application of the res iudicata effects of judgments in class actions to individual actions with potentially overlapping scope.

Another important judgment was issued on 15 November 2017. In this ruling, which followed the criteria set by the European Court of Justice on the matter (C-186/16), the Supreme Court concluded, contrary to its former understanding, that multi-currency mortgages are not a financial instrument, and, therefore, the LMV does not apply. This approach was confirmed by the Supreme Court in its judgment of 31 October 2018.

The statute of limitations, a key procedural defence in securities litigation, has also been debated by the Supreme Court in its judgments of 31 January and 19 February 2018. Notably, while the Court confirmed its prior interpretation in the first judgment, it seemed to change its view in the second. Given the disparate factual background between the cases, whether the Court's interpretation has changed is unclear.

Another aspect worth mentioning is that, within the existing debate regarding the nature of virtual currencies and their possible consideration as securities, the CNMV unofficially declared that virtual currencies should not be per se considered as such. This position was indirectly confirmed in March 2019, in the context of the first initial coin offering (ICO) made in Spain under the utility token modality. In this case, the CNMV stated that, in view of the described nature, management and use of such tokens, this currency could not be considered as a security.40 Before that, on 20 September 2018, the CNMV had published on its website some of the initial criteria it was considering in connection with ICOs.41 Nevertheless, this guide does not expressly regard this issue.

Securities-related arbitration proceedings have continued to be brought by private investors against financial entities.

The criminal trial on Bankia's 2011 IPO started in November 2018 against the bank, its former directors and the auditors on charges of investment fraud, misappropriation and accounting fraud. It will probably end by mid 2019 and will result in the first judgment in which a Spanish court rules on the criminal offence of investment fraud.

Criminal investigation on Banco Popular's management before its resolution in June 2017 by EU's Single Resolution Mechanism is still going on against the bank's former directors and auditors. The main new feature this year is that Banco Santander (which acquired Banco Popular) has been called to the proceedings as suspect following the application by the investigative judge of a Criminal Code provision that provides for the transfer of corporate criminal liability in merger and acquisition cases. At the same time, several individual civil cases were filed against Banco Santander (which acquired Banco Popular).

VI OUTLOOK AND CONCLUSIONS

In recent years, legislation and case law have evolved to ensure that operators in securities markets conduct themselves with higher standards of diligence and that consumers are afforded enhanced protection. In this respect, EU legislation has contributed to harmonising legal systems across Europe by imposing stricter duties of information, transparency and assessment of the adequacy of financial products for potential investors.

The Bankia case continues to have an important impact on securities litigation, stressing the importance of the analysis of the investor's profile when the allegations concern the contravention of information obligations or the absence of, or faults in, the plaintiff's consent. The Supreme Court's revisited interpretation of several legal institutions in this and in some other recent judgments is a source of debate.

The developments in the Bankia and Banco Popular cases show a shift on the potential criminal liability of financial markets' supervisors and gatekeepers (e.g., auditors). From the initial prosecution of top government officers of those supervisory bodies along with the auditors, cases have evolved to criminal charges raised exclusively against the gatekeepers. The trend started in the Bankia and Banco Popular cases seems to confirm the path of prosecution.


Footnotes

1 Cristian Gual Grau is a partner and Manuel Álvarez Feijoo is a counsel at Uría Menéndez. The authors would like to acknowledge the significant contributions of Alba Solano Avelino, Jorge Azagro Malo, Mario Montes Santamaría and Laura Lozano García in the drafting of this chapter.

2 A Royal Decree-Law is a regulation approved solely by the government, which means that despite this norm being already in force, it can be either validated or abolished by Parliament according to Article 86 of the Spanish Constitution.

3 Criminal claims are discussed in Section III.iv.

4 The error in consent must be essential (i.e., regarding one of the key elements of the contract) and unavoidable (i.e., not avoidable when acting diligently).

5 By submitting written evidence (e.g., all the contractual documents signed by the investor as well as the documents and information provided to the investor before and after the execution of the contract) and requesting the seller's testimony.

6 There could be a preliminary phase in which jurisdictional aspects are discussed if the defendant files a motion to dismiss on those grounds.

7 See Royal Decree-Law 9/2017 of 26 May implementing EU Directive 2014/104/EU on certain rules governing actions for damages under national law for infringements of the competition law provisions.

8 Article 256 CPA allows for the filing of a request before the court to obtain the necessary information to identify the potential respondent or respondents in the proceedings or individuals that may belong to a class before the filing of a class action.

9 Article 297 CPA.

10 Article 167 CPA.

11 Article 328 CPA.

12 These individuals are not required to be members of the association filing the complaint and may be determined at a later stage in the proceedings. When the affected individuals are not easily identifiable or are undetermined, associations have exclusive legal standing for the defence of their diffuse interests (Article 11 CPA). Article 15 CPA sets forth different publicity rules depending on whether the class is determined, determinable or undetermined.

13 Article 222.3 CPA.

14 An overview of class actions regulation in Spain can be found in Ferreres Comella, A et al. 'Spain. The Class Actions Law Review' in The Class Actions Law Review. Shallow, R (Ed.), Law Business Research, London, 2017.

15 Article 15 CPA.

16 Article 12 CPA.

17 Article 12 CPA.

18 Article 19.1 CPA.

19 Settlement agreements are regulated in Articles 1809–1819 Civil Code.

20 Article 394 CPA.

21 Article 241 CPA.

22 Article 394 CPA.

23 Articles 1101 and 1902 Civil Code.

24 The 'legal interest' is set by law (currently 3 per cent).

25 Under Spanish law, criminal prosecution may be initiated and held:

a by means of a criminal complaint filed by the Public Prosecutor (roughly equivalent to a state attorney in the United States);

b by means of a criminal complaint filed by private individuals. Private prosecution may only be initiated by those who have a direct interest in the facts (e.g., a victim or aggrieved individual); or

c by means of a criminal complaint filed by 'people's prosecutors'. The people's prosecution may be held by any individual or entity that, regardless of their involvement in the facts, seeks to prosecute a crime.

26 Articles 278 to 289 ter and 302 LMV.

27 Articles 291 to 299 and 303 LMV.

28 Articles 300 and 305 LMV.

29 Article 25 Brussels I bis.

30 Article 4 Brussels I bis.

31 Article 7.1 Brussels I bis.

32 Article 7.2 Brussels I bis.

33 Article 7.3 Brussels I bis.

34 Article 8.1 Brussels I bis.

35 Article 7.5 Brussels I bis.

36 The concept of 'consumer' is an autonomous EU law concept that has been defined as the person entering into a contract for a purpose that is outside the individual's trade or profession (Article 17.1 Brussels I bis).

37 Article 17.1(c) Brussels I bis.

38 Articles 63–65 CPA.

39 Judgment of the Spanish Supreme Court (First Chamber) of 15 December 2014 and 21 February 2017.

40 The CNMV also pointed out that this assessment should be made on a case-by-case basis.

41 An overview of the virtual currency regulation in Spain can be found in Lluesma Rodrigo, Pilar and Gil Soriano, Alberto, 'Spain' in The Virtual Currency Regulation Review. Michael S Scackheim and Nathan A Howell (eds.), Law Business Research, London, 2018.