The Projects and Construction Review: Spain


Project finance has been one of the most widely used financing methods in Spain in recent years. The transition to renewable energies, both in Spain and globally, has been one of the key factors behind the success of project finance schemes in the past years. Although the construction of infrastructure megaprojects used to be equally relevant for project finance, the construction and operation of renewable energy project (mainly wind and solar) has become by far the main subject of this type of limited-recourse financing schemes in Spain.

The year in review

There has been a lot of activity in the Spanish energy market. The importance of renewable energy as a matter of public policy has significantly increased during the past few years. Evidence of that has been the 2019 United Nations Climate Change Conference (COP25) held in Madrid (Spain), and the National Plan of Energy and Climate 2021-2030 (PNIEC) developed by the Spanish Government and recently submitted to the European Commission. The PNIEC sets forth ambitious goals, such as the use of at least 42 per cent of renewable energy in Spain by 2030, with the aspiration of achieving a 100 per cent by 2050. Under the PNIEC, it is estimated that €241,400 million will be devoted for the development of renewable energies and the Spanish electrical network until 2030. This transition towards a fully-renewable energy system is being led by the European Union, but although promising, it is uncertain whether such goals are indeed achievable as they heavily rely on both Government and foreign investment. On top of that, the effects that the covid-19 pandemic may have on the Spanish economy, and on the PNIEC itself, are still uncertain.

On the other hand, the activity in the infrastructure market in Spain has been at an all-time low. The 2020 General State Budget has not been passed by the Spanish Government, and therefore the 2019 General State Budget has been extended, which resulted in no additional public investment for infrastructure projects in Spain. The Extraordinary Highways Investment Plan (PIC), which would involve the tender for several highway concessions, in the hope of attracting fresh investment into the infrastructure network, is currently on hold.

The entry of experienced and refined foreign investors (acting as the projects' sponsors) in the Spanish renewable energy market has also led to some changes on the Spanish market standards, especially under the engineering, procurement and construction agreements (EPCs).

In fact, the main transactions with respect to renewable energy in Spain during the past year have been acquisitions by foreign players of big renewable energy-related portfolios from Spanish companies. A good example of this is the acquisition by Galp Energía of the whole PV portfolio of the ACS Group, which in aggregate amounts to 2,930MW.

Following restructurings of renewable assets conducted as a result of the regime on feed-in tariffs approved by the Spanish government, we are seeing several projects being taken over and prepared to compete in free market conditions. In this context, the use of power purchase agreements (PPAs) is becoming more common in the Spanish market.

The market is showing an increasing appetite for PPAs which are becoming considerably more sophisticated contracts, especially as investment funds and utilities are gaining weight in the Spanish renewable energy market. Our experience shows that the preferred option by offtakers and sponsors is a synthetic PPA for an approximate term of 10 years, leaving some years of merchant risk which lenders usually try to reduce by implementing cash sweep mechanisms. Additionally, the binding nature of a PPA could not be understood without the appropriate liquid guarantees in place (mainly, letters of credit (LC) provided by a financial institution). The cost of the LCs and the limitations to obtain the same by the sponsors has led to the pursuit of alternatives which are more cost-effectively for the sponsor, but at the same time provide sufficient comfort for both the financiers and the offtaker. One of this new alternative schemes would be the implementation of a call-option in favour of the offtaker, in respect of the borrower's shares. In this case, upon the occurrence of a payment default (or the acceleration of the debt) by the borrower, the offtaker may at Its own discretion exercise the call option and become the owner of the project, by repaying the debt to the financiers (or curing the relevant payment default). It is yet to be seen whether this new alternative schemes will become popular in the project finance arena.

Despite of the increasing relevance of PPAs in the Spanish market, the Spanish government has recently announced its intention to return to feed-in tariffs during 2020, with an estimated 3,000MW auctions on a 'pay as bid' basis. However, it is uncertain whether this plan will finally move forward as the effects of covid-19 on the Spanish economy may play a major role on the Spanish renewable energy market. Thus it is expected that the PPAs will remain as one of the most important tools behind the renewable energy projects in Spain.

Documents and transactional structures

i Transactional structures

Financing a project in Spain under a project finance structure is generally made through a newly incorporated special purpose vehicle with private or public-to-private share capital.

As regards to renewable energy projects, the popularity of the PPA schemes is growing rapidly with the end of feed-in tariff scheme. We are also seeing projects assuming full merchant risk, although these are less common and some banks are still reluctant to finance these projects.

In the case of projects under concession regimes (mainly for highway construction and exploitation), Spanish authorities have opted for the build-operate-transfer or build-own-operate methodologies. Highways have often been financed either through tolls paid directly by the users or by 'shadow tolls', in which the remuneration is set depending on the amount of traffic and is paid directly by the Spanish authorities to the concessionaire.

Occasionally, more innovative formulas such as build-lease-transfer have been implemented, particularly for financing of prisons and healthcare construction projects. Under this formula, the private sponsor leases the facility to the authority in exchange for a fee or a periodic rent to be paid throughout the asset's exploitation period.

ii Documentation

As a consequence of the growing interest of sophisticated investors in the Spanish infrastructure and renewable energy markets over the last years, the standards applicable to the finance and project documents have evolved to conform to internal deal financing standards.

Project agreements include all the non-financial agreements signed by the sponsor and the project company with third parties for the construction, supply of materials, commissioning, operation and maintenance of the project. Lenders are not often party to such agreements. They are generally drafted by the sponsor (and its legal advisers, if applicable) and audited by the lenders' independent legal, technical-environmental and insurance advisers, who may propose certain amendments thereto.

Construction agreements are always negotiated between the parties on a 'turnkey' basis (EPC agreements). Operation and maintenance agreements are often signed at the beginning of the construction period, but they come into force only once the project has been commissioned. The underlying agreement might be a supply or a sales agreement entered into by the project company with a private party (e.g., sale of electricity) or even with a public administration (administrative concessions, leasing, etc.). Insurance agreements also need to be signed by the project company with a reputable and creditworthy insurer subject to the insurance independent adviser's approval.

Financial agreements include all those entered into by the project company and the sponsor with the lenders. The lender's legal counsel is usually the one taking the lead on the drafting of such agreements. The set of documents in a project finance deal in Spain is typically composed of facility agreement, intercreditor agreement, sponsor support agreement, hedging agreements, accounts agreement, security documents and direct agreements (normally entered into only with the main contractors). Additionally, debt service cash reserves are being replaced by debt service reserve facilities of revolving nature. Likewise, the VAT accrued during construction is also financed by means of separate revolving facility agreements.

The intercreditor agreement is particularly important if the European Investment Bank acts as a lender, with a commercial bank syndicate in the same transaction. In addition, the intercreditor agreement is a core agreement for transactions being financed under a project bonds scheme or by a variety of creditors (subordinated creditors, mezzanine creditors, etc.).

Insurance agreements signed with export credit agencies are also customary for transactions with an international component. In the event that an export credit agency is involved, a thorough review of the financial documents should be carried out by legal counsel alongside the mandated lead arranger regarding the compliance of the financing with the OECD Arrangement on Officially Supported Export Credits and the insurance agreements.

What sets Spain apart from common international practice is that secured financial agreements have to be notarised for enforcement purposes. This means that every financial agreement must be signed simultaneously in Spain by all the parties and that each party, or its representative, must be present at the signing. Therefore, foreign counterparties will very likely have to grant powers of attorney, notarised and apostilled (if the country of residence of the foreign counterparty is a member of the 1961 Hague Convention) or legalised, as applicable, prior to the financial closing. Additionally, they will have to apply for a tax identification number for foreign entities as a requirement for notarisation of any document. There are also certain new requirements on anti-money laundering and terrorism financing that will have to be fulfilled. Compliance with such formalities may be time-consuming so it is advisable to work on them from the very beginning of the transaction. Notarial fees will also be considered a transaction cost that has to be borne by the sponsors or the project company.

iii Delivery methods and standard forms

The standard delivery method is very often based on a turnkey structure. It is very unlikely that lenders will accept delivery methods based on a design-bid-build structure. The most important characteristics of construction agreements in Spain are fixed price and term, application of penalties as a result of delays, shortfalls in profits for the project company and termination events that would eventually require the contractor to reimburse the full amount of the price paid by the project company. The last of these might not be a standard in other jurisdictions, but Spanish lenders will be reluctant to accept an alternative in the event of termination caused by a fault of the contractor.

Standard construction agreements (e.g., those sponsored by the International Federation of Engineers) are not currently in use unless there is a Spanish version available, but rather the sponsor or the contractor proposes the contract form that has to be audited by the lenders' independent (legal, technical-environmental and insurance) advisers, who may in turn suggest amendments.

Risk allocation and management

i Management of risks

The main risks associated with project financing are those common in other jurisdictions.

Credit risk

Credit risk attached to sponsors relates to contingent funding obligations in addition to base equity contributions to the project company to comply with the required leverage ratio.

Contractors, operators, insurance companies and suppliers are generally assessed in terms of their creditworthiness to make required payments under the relevant project agreement. In addition, an assessment should also be made with respect to offtakers and their creditworthiness to comply with their payment obligations during the life of the PPA (if any). The creditworthiness of the lenders is also assessed by the sponsors, which may limit the ability of the lenders to assign their position to credit entities below certain rating (especially during the availability period to draw down).

Credit risk relating to public bodies during the early years of the rise of project finance in Spain was mitigated by means of insurance provided by monoline international insurance companies. However, these companies were severely affected by the international financial and economic crisis in 2008. As a result, most projects originally backed by such guarantees were restructured to set those insurances aside. No guarantee mechanisms have been implemented as a replacement, other than those provided by corporations themselves or a third financial party (i.e., bank guarantees).

Construction and start-up risk

This type of risk relates to delays in the commissioning and start-up of the project. It can result in an increase in the financial cost and, eventually, the project company's lack of funds to fulfil its payment obligations under the financing.

As a general rule, lenders try to reduce as much as possible their exposure to risks during the project's construction period. Corrective measures are usually demanded under the turnkey agreements (i.e., by means of the regulation of 'completion tests' audited by the independent technical adviser), and under the insurance agreements (i.e., in the case of a force majeure event). These corrective measures were traditionally also implemented under the financial agreements by the granting of completion guarantees by the sponsors. However, these are becoming very rare under project finance schemes in Spain, as the sponsors are increasingly limiting their exposure under the construction phase of the project. This is significant as the recent project financings in Spain are becoming truly limited-recourse. Therefore the importance and degree of negotiation between the sponsor and the financiers of the EPC contract has heightened.

Lenders may also require the funding of special reserve accounts by the project company for different purposes. These accounts might be funded against project cash flows, contributions made by the sponsors or utilisations under the project financing.

Market and operating risk (project risk)

This risk relies on the project's ability to honour commitments forecasted under the financial model. This risk will generally be borne by the lenders from the expiry date of the guarantee periods under the EPC agreement (i.e., those guarantees will normally lapse around 24 months after the commissioning of the project). As mentioned above, the Spanish market is showing an increasing enthusiasm for PPAs as they are a tool to partially mitigate the merchant risk in subsidy-free schemes. This is allowing lenders who were initially reluctant to enter the renewable energy market, because they did not want to bear merchant risk, to now be willing to finance renewable projects when a PPA is in place. Nevertheless, a synthetic 10-year PPA – which is currently the market standard in Spain for this kind of agreements – is not enough to fully and effectively cover the merchant risk for the financiers under a long-term non-recourse project finance situation, as the tenor of the financing is usually longer than that. This is why the financiers who are unwilling to bear merchant risk are also requesting, in addition to a PPA, certain tools such as cash sweeps to reduce the tenor of the financing, and therefore minimising the exposure to the merchant risk post-PPA.

Financial risk

This risk relates to fluctuations in interest rates (and exchange rates, if applicable) inherent to the project financing. It is normally covered by lenders by means of financial derivatives (e.g., swaps, caps, collars, floors) to be entered into by the project company.

Political, administrative and regulatory risk

Lenders used to feel comfortable with this risk and, as a result, they did not request sponsors to contribute funds or to provide bank guarantees as cover.


The measures put in place by the Spanish government as a result of the covid-19 pandemic do not entail any changes to the contractual framework of companies that have entered into facility agreements, in contrast to the case of consumers. Provisions have so far only been established that are designed to temporarily suspend the commercial and insolvency obligations deriving from the existence of grounds for the company's mandatory dissolution or situation of insolvency.

The current scenario does not in itself entail the suspension of the effects of a facility agreement, nor does it grant borrowers a moratorium on the payment of principal or interest. For such a suspension to occur, the parties would need to agree to it or the creditor grant a unilateral release, or a court pronounce in that regard.

The possibility of the effects of a default or breach being limited, in light of the concept in legal doctrine known as rebus sic stantibus and the provisions set out in the Spanish Civil Code on force majeure, would have to be analyzed on case by case basis.

ii Limitation of liability

No compulsory provision constrains the liabilities borne by the parties under a project financing. It is customary, however, to agree on a maximum liability to be borne by the contractor, supplier or operator limited to the full price (annual price for the operator) under the relevant project agreement. Penalties and liquidated damages are normally based on the financial model. Likewise, with the progressive disappearance of the completion guarantees (as a result of the influence of new sophisticated investors), it quite common that the liability of the sponsors under new projects is only limited to contribute up to certain amount of equity to the project company.

Indirect or consequential loss is a category not recognised by the Spanish legal system. Therefore, it is not advisable to make a reference to them in project agreements.

Force majeure in project agreements generally exempts the parties from fulfilling their obligations thereunder. Parties usually agree that, after an initial suspension period, either party is allowed to terminate the agreement after a period of roughly 180 days. In addition to that, adverse consequences arising from force majeure events should be covered by the insurance policies. Other adverse consequences not covered by insurance policies are often borne proportionally by the contractor or the operator (as the case may be) and the project company.

Security and collateral

The security package normally required by lenders for project financing in Spain includes the following:

  1. pledges over the project company's shares;
  2. pledges over all the bank accounts relating to the project (other than the distributions account);
  3. pledges over project agreements from which relevant payments or compensations may arise in favour of the project company (construction agreements, operation and maintenance agreements, insurance, supply, energy sales agreements, etc.); and
  4. mortgages over real estate, installations (e.g. wind turbines, PV panels, etc.) or concessions (this security is often required by lenders when the asset to be mortgaged is essential in terms of cash generation (e.g., mining or motorway concessions)).

Pledges are typically taken with the transfer of possession, thus (1) they do not incur stamp duty in Spain; (2) they do not need to be registered with any public registry; and (3) they become perfected by means of the transfer of possession of the asset under the security and the execution of a public deed before a Spanish notary public.

Regarding mortgages must be registered with the Land Registry (if granted over real estate assets) or with the Movable Assets Registry (if granted over installations) and will accrue stamp duty tax (which may correspond up to a 1.5 per cent of the secured amount, depending on the Spanish autonomous region). As a result, it is customary that lenders agree to defer the creation of a mortgage until certain events have taken place (usually upon the occurrence of a default or if the debt service coverage ratio goes below certain level).

Sponsors' contributions to the project company are often made by means of share capital and debt subordinated to the project finance (senior) debt.

Step-in rights are generally allowed in project finance under Spanish law, but are not advisable. Under Spanish insolvency law, there is a risk that enforcement by the lenders of those rights might eventually lead to them being considered as shadow directors, resulting in the subordination of their credits vis-à-vis the project company.

Bonds and insurance

The guarantees normally required under construction agreements are the advance payment and performance guarantees, both for an amount in the range of 10 to 15 per cent above the agreement's price. Both guarantees may be formalised by means of bank guarantees or surety bonds, with certain minimum ratings often required by the lenders. The advance payment guarantee will be returned to the contractor on the project's provisional acceptance date, upon delivery at the same time of the performance guarantee, and the performance guarantee is returned to the contractor on the project's final acceptance date.

Lenders are paying increasing attention to the existence and quality of these guarantees as a result of the reluctance of Sponsors to provide completion guarantees under the finance documentation.

Enforcement of security and bankruptcy proceedings

Apart from insolvency implications that may arise, lenders may enforce their rights as secured parties by filing the corresponding claim before the competent court in Spain. It is essential for that purpose that (1) all secured financing agreements (including any assignment agreements in connection therewith) are executed as public documents before a Spanish notary public by all parties thereto; and (2) all parties (in particular, any debtor) appoint the agent bank as the calculation agent for all applicable purposes (such calculations to be prima facie accurate). If these requirements (and others specified in the Spanish Civil Procedure Law) are fulfilled, lenders will benefit from an accelerated enforcement procedure against Spanish debtors.

There are also special procedures available for lenders to enforce security created in Spain, provided that certain specifications are complied with. Lenders may also benefit from an auction procedure organised by a notary public to sell pledged assets to third parties or even from the direct appropriation of certain pledged assets considered financial collaterals pursuant to Royal Decree-Law 5/2005.

In insolvency proceedings, the general applicable rule is that a secured lender has privilege over the security. However, if the asset that is subject to the security is considered necessary for the debtor's professional or business activity (excluding shares of companies owning a specific asset and related liabilities, provided that the enforcement of security does not result in the termination of agreements relating to exploitation of the asset), the security may not normally be enforced until one year has elapsed since the bankruptcy declaration.

Spanish insolvency law contemplates a two-year clawback period prior to the bankruptcy declaration. All transactions carried out within this period that are detrimental to the debtor's estate can be rescinded, irrespective of the fact that there is no fraudulent intention. The law provides a list of transactions that are presumed to cause damage and that may not be rebutted by evidence to the contrary (e.g., transactions that extinguish non-secured obligations maturing after the bankruptcy declaration) and other transactions in which damage is presumed, unless evidence is provided to the contrary (e.g., creation of security over pre-existing obligations, as well as transactions that extinguish obligations secured by security that matures after the bankruptcy declaration). Spanish insolvency legislation also provides the refinancing arrangement and the court scheme of arrangement as instruments to drag along minority (blocking) lenders in the context of a refinancing.

Spanish insolvency law also provides a category of credits that benefits from a general qualification in terms of reimbursement (credits relating to employees' salaries, tax credits and social security credits), provided, however, that none of the credits will affect the special privileged nature of secured ones.

Loans provided by persons with any special relationship with the debtor will be subordinated (e.g., loans granted by shareholders who, at the time the credit arises, held at least 10 per cent of the share capital in the project company or companies within its group of companies).

Other credits not categorised under Spanish insolvency law as qualified or subordinated will be considered ordinary.

Entities pertaining to the state's territorial organisation, public bodies and other public corporations cannot be declared insolvent pursuant to Spanish insolvency law.

Spanish insolvency law contemplates certain pre-insolvency arrangements that are very likely to be relevant in the context of current refinancing processes resulting from the renewable energy sector reform. As a result of the implementation of those arrangements, a minority of creditors might eventually be compelled to accept terms imposed by certain majorities, provided that certain thresholds are reached and that the refinancing agreement is approved by the courts.

Socio-environmental issues

i Licensing and permits

Construction of assets

The permits, licences and authorisations most commonly applied for in Spain for the construction of assets under a project financing are the following.

Administrative authorisation and approval of construction plans

Construction of installations that fall under the regulations of regulated sectors (e.g., energy) is normally subject to first obtaining an administrative authorisation, which is granted by the relevant authority of the autonomous community in Spain where the building or installations are to be located. The construction plans for the building or installations must also be approved by the same authority.

Declaration of public utility

This may be applied for at the same time as the administrative authorisation or the approval of the construction plans. Although it is not compulsory, the declaration of public utility implies the 'need of occupation' of the properties affected by the project and the 'need to acquire' the affected rights, which would enable the sponsor to implement expropriation procedures, if necessary.

Local licences

Local licences to be issued by the relevant city council include works licences, first occupancy licences, activities licences and operating licences. The works and activity licences are normally required to start the construction works and the first occupancy and operating licences are required after all the works are finished to verify that the conditions established in the works licence and the activity licence have been complied with.

Declaration of environmental impact

Buildings and installations may be subject to first obtaining an environmental decision authorising their construction. This authorisation is governed in the relevant environmental rules and regulations for each autonomous community, and usually consists of a declaration of environmental impact. However, in the case of relatively new installations, a unified or comprehensive environmental authorisation may be issued instead. Whatever the situation, a declaration of environmental impact or unified or comprehensive environmental authorisation, as the case may be, must be granted prior to the relevant municipal licences.

Operation of assets

The permits, licences, authorisations and registrations usually required for the operation of assets under a project financing in Spain are the following:

  1. Start-up certificate – this certificate may be obtained once the construction has been completed in accordance with the approval of the construction plans.
  2. First occupancy and operating licences – these licences may also be necessary for the operation of installations. However, depending on the type of premises or installation and the planned operation, other permits, authorisations and licences may be required.

ii Equator Principles

A few financial entities in the Spanish market require, as a condition precedent to financial close, the delivery of a report rating the project under the Equator Principles.2

iii Responsibility of financial institutions

One of the main risks borne by lenders in Spain is that of being characterised ultimately as shadow directors of the project company. If characterised as such, they would bear the same liabilities, as legal entities as ordinary managers and their claims with regard to the company would be subordinated by virtue of law.

PPP and other public procurement methods


The most common public-private partnership structures for the construction of infrastructure in Spain are the following:

  1. Payments made by the public administration to the private company: these may be made directly during construction or the exploitation period (e.g., shadow tolls).
  2. Construction carried out by the project company supported by private financing and subsequent transfer of the installations to the public administration: the public administration authorises the project company to develop the project in a public area, so that the project company can carry out the construction of the infrastructure. As from the date on which the infrastructure is erected, the public administration pays the project company a rent in consideration for its use of the installations.
  3. Creation of public-private capital companies for the development of projects.
  4. Financing granted by public administrations (e.g., by means of subordinated loans to the project company), which will be reimbursed to the public administration as debt subordinated to the full reimbursement of amounts owed to the lenders.

Law 9/2017 (the Law on Public Sector Contracts) governs the private financing of the concession of public works agreements in Spain. This law expressly foresees collaboration agreements between the public and private sectors. In such agreements, a public administration or a public entity contracts a private entity, for a specific period, to provide a global and comprehensive service that, in addition to including the financing of the intangible investments, works or supplies necessary to fulfil a certain public service, also comprises some of the following services:

  1. the construction, installation or transformation of works, equipment, systems and products or complex goods, as well as their maintenance, updating or renewal, exploitation or management;
  2. the comprehensive management of the maintenance of complex installations;
  3. the manufacture of goods and the rendering of services incorporating specifically developed technology, for the purpose of providing the most advanced and most economically advantageous solutions, compared with those currently existing in the market; and
  4. other services associated with the fulfilment by the public administration of the public service or general interest objectives entrusted to them.

The consideration to be received by the contractor will consist of a price to be paid while the agreement remains in force, which may be dependent upon the fulfilment of certain performance objectives.

These collaboration agreements are foreseen in the Plan for Infrastructure, Transportation and Housing for the years 2012–2024, published by the government, with investment as a key instrument in the coming years because of the expected decrease in the budget allocated by the government for investing in infrastructure. Particular mention is made of the intention to apply this methodology to other sectors and to provide a stable and tax-efficient legal framework that promotes agreements of this kind.

In addition, public-private capital companies are authorised by the Law on Public Sector Contracts to raise funds as a result of capital increases procedures and to securitise credit rights with regard to the Spanish authorities under the relevant public sector contract, provided that certain conditions are fulfilled.

ii Public procurement

The Law on Public Sector Contracts governs the awarding of agreements to third-party entities. The main aim of the Law is to regulate the contracting of the public sector, with the purpose of (1) ensuring that public sector agreements uphold the principles of freedom of access to tenders, publicity and transparency of the procedures, and non-discrimination and equality of treatment among the candidates; and (2) regarding the budgetary stability and spending controls objectives, to ensure the efficient use of the funds allocated to the execution of works, the acquisition of goods and the contracting of services, based on the prior definition of the needs to be met, the safeguarding of competition and the selection of the most economically advantageous offer.

Public sector agreements established in the Law on Public Sector Contracts are works agreements, public works concessions, agreements for the management of public services, supplies, other services and collaboration schemes between the public and the private sector.

Foreign investment and cross-border issues

As a consequence of the covid-19 pandemic, the Spanish Government has established some temporary restrictions to foreign investments in Spain. The impact of these restrictions in relation to any specific investment shall be carefully assessed on a case by case basis with the legal advisor before undertaking any such investment. Apart from this, there are no general restrictions on foreign investment in Spain in relation to project finance deals. To register securities in Spain, foreign lenders must first obtain a Spanish tax identification number.

Repatriation of profit and investments

There are no specific restrictions regarding the repatriation of profit earned by foreign investors or lenders, except for the usual tax implications deriving from possible double taxation on income. Thus, a case-by-case basis analysis must be carried out on those countries with which Spain has signed treaties to avoid any international double taxation that are in force.

The countries considered by the Spanish tax authorities to be tax havens are those listed in Royal Decree-Law 1080/1991, as amended, except those ones that (i) have entered into a double tax treaty with Spain which is in force and includes an exchange of information clause; or (ii) have entered into an exchange of information agreement with Spain which is in force.3

Dispute resolution

i Special jurisdiction

There are no specialised courts in Spain to which disputes under project finance or construction agreements may be submitted.

It is customary that disputes relating to financial documents will be subject to the jurisdiction of the courts of Madrid or Barcelona. In contrast, disputes under project agreements will be submitted to arbitration.

ii Arbitration and ADR

Submission to arbitration is common practice in project agreements and is also often required by lenders to speed up dispute resolution.

The Madrid Civil and Mercantile Arbitration Court, the International Chamber of Commerce and the arbitration courts dependent on regional chambers of commerce, industry and navigation are the courts usually designated by parties.

There are no restrictions in Spain to submit disputes to arbitration, provided that this submission is expressly stated. Spain is a signatory state to the ICSID Convention and to the 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the New York Convention). Arbitration in Spain is domestically regulated by Law 60/2003 on Arbitration, which aims to accommodate the New York Convention rules to national principles and facilitate international arbitration. As Spain has not enforced the reciprocity reservation in Article 1.3 of the New York Convention, the Convention is applicable to any arbitral award rendered in a foreign country, even if it is not a party to the Convention itself. In addition, as Spain has not enforced the 'commercial reservation' in Article 13 of the New York Convention either, the Convention is also applicable to any kind of award, regardless of the subject it rules on.

According to the Arbitration Law (Law 60/2003), competence for the recognition of foreign awards is attributed to regional high courts and competence for their enforcement is attributed to the first instance courts.

Usual restrictions in other jurisdictions may eventually apply to restrict the recognition in Spain of arbitral rulings such as breaches of public policy (including economic public policy) applicable in Spain.

Outlook and conclusions

The number of project finance transactions in Spain is expected to increase in 2020 as a result of factors outlined in this chapter. Traditional banking and long-term financing will be progressively replaced by other innovative structures brought in by new participants in the market. However, the actual impact of covid-19 pandemic for project finance in Spain is yet to be seen.



1 José Guardo is a partner, Juan Ignacio Guillén is an associate and Gabriel Miranda is a junior associate at Clifford Chance, SLPU.

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