The Pérez-Llorca/IE Chair on Commercial Law, an initiative from the law firm Pérez-Llorca and IE Law School of IE University, has prepared a document offering a series of proposals in the areas of capital markets, commercial law and practice, employment, tax, international regulation and dispute resolution, among others, with the aim of attracting more international investment to Spain. This proposal stems from the conclusions of the conference “España, mercado de oportunidades” (Spain, market of opportunities), organised by the Chair in collaboration with LLYC, which brought together academics, investors, lawyers, experts, supervisors and regulators, both Spanish and foreign.
“The aim of this congress is to highlight our country’s potential in terms of investment and talent, as well as to analyse the best practices of other jurisdictions in order to face the main challenges of the Spanish market” said Eduardo Arbizu, Pérez-Llorca of counsel and director of this congress.
A regulatory and judicial framework as a boost to investment in Spain
In relation to the regulatory and judicial framework, the Chair has proposed the creation of an independent body similar to the European Commission’s Regulatory Scrutiny Board, with jurisdiction over the entire Spanish legal system that can assess the quality and impact of the most significant regulations.
The Chair has also proposed improving the effectiveness of ex-ante control and ex-post evaluation of regulatory quality, in coordination with the impact assessment of public policies, and to reduce the scope of administrative authorisations in the field of foreign investment to non-EU countries.
On this point, the Chair considers it necessary to provide resources to the administration responsible for granting foreign investment authorisations, as well as to improve transparency in the management of the procedure through the publication of recurrent criteria on substantive issues that can provide clarity and reduce procedural times.
As regards the judicial system, it is essential to fully digitalise the process of making judicial filings; to make Autonomous Communities’ procedural management systems interoperable; to reorganise the Courts Office to make it more efficient, dynamic and accessible; to introduce independent advisory bodies in matters requiring complex technical assessments beyond legal matters, particularly in the Supreme Court, and to deepen specialisation by duly adapting judges’ training programmes.
Making capital markets more attractive, more agile and simpler
With regard to capital markets, the Chair has stressed the need to make the process of listing Spanish companies on the stock market more attractive, more agile and simpler.
To this end, it has suggested to bring forward the implementation in Spain of some measures to modernise the regime already set out in the European Commission’s listing act proposal, such as reducing the initial free float percentage required or simplifying the verification of the issuance prospectus. Eliminating the particularities of Spanish regulations that do not provide appreciable advantages and improving the tax treatment of equity financing are other proposals to streamline our securities market.
Likewise, it would also be opportune to modify the substantive regulations of listed companies to improve their attractiveness for family businesses and for private equity and venture capital funds, as well as to adopt the most advanced European models: to make the system for attributing voting rights to shareholders with a majority or controlling stake more flexible, going beyond the current system of loyalty or multiple voting shares and non-voting shares so that, with transparency and knowledge of the market, corporate solutions adopted in other EU countries that have proved very attractive to international investors can be implemented in Spain.
With regard to streamlining the time and processes for regulating takeover bids, the Chair has pointed out the need to eliminate the difficulties that increase risk and increase volatility and uncertainty in this type of transaction, as well as to allow administrative authorisations to be processed and obtained in parallel to the offer period.
A competitive framework that strengthens the position of unlisted companies
In order to create a competitive framework for unlisted companies, the Chair has underlined the opportunity to adopt a Company Code that would regulate the incorporation and operation of unlisted companies in a flexible and simpler way.
In other words, to establish simpler and more flexible regulation of limited liability companies that is more suited to the different forms of organisation of unlisted companies: family companies, SMEs, industrial and service companies, start-ups, venture capital, private equity or groups, among others. Improving the coordination of regulatory processes in the European Union and in Spain is also essential to achieve this objective.
The Chair also believes it is necessary to establish a contractual legal framework that strengthens the position of unlisted Spanish companies so that they can compete internationally in digital matters, technological innovation, export capacity, financing instruments, guarantees, rights and duties in environmental and climate matters, distribution, logistics and transport.
Lastly, the Chair has pointed out that another measure would be to facilitate and simplify access to the Commercial Registry for the incorporation and conduct of corporate transactions: enhancing the publicity and transparency function of the Commercial Registry; increased use of remote technologies; reducing the costs of accessing and disseminating information from the Commercial Registry; and making the registration system more international.
Improving the quality of taxation, legal certainty and institutional architecture
With regard to taxation, legal certainty and institutional architecture, the Chair has proposed the creation of an independent body to advise the Government and Parliament (on an ongoing basis, not as temporary groups of experts) in setting tax policy, allowing for the stable introduction of technical criteria to serve as a counterweight to strictly political criteria.
In comparable systems of law there are several examples of bodies that help governments or parliaments to define a sound tax policy, such as those in Australia, Sweden, New Zealand and the United States. Consideration should be given to their introduction in Spain, as well as which would be most appropriate for our legal culture. In Spain, the Independent Authority for Fiscal Responsibility (AIReF) could be used as a reference, but the mission of these bodies in relation to the tax system is different from that of the AIReF in its functions and scope.
Such bodies, for which there are precedents in comparable systems of law, would also allow Parliament and society to carry out greater control of the quality, proportionality and appropriateness, in a transparent manner, of tax rules. Likewise, such mechanisms make it possible to assess and take a position on international initiatives and their suitability for the country. At the same time, these kinds of bodies can take on the role of making proposals to amend the existing rules in the most controversial and obsolete areas and to improve the position and competitiveness of the tax system.
Elsewhere, the Chair recommends reforming and modernising mechanisms to ensure certainty in the interpretation and application of tax rules, assuring that a review of the mechanisms that provide legal certainty and security to taxpayers in the Spanish legal system is a requirement, since the existing ones (for example, the traditional tax consultations) are insufficient, could be improved or do not fully guarantee that subsequent disputes with the tax administration can be avoided.
Therefore, there is a pressing need for greater horizontal (Directorate General for Taxation – Tax Authorities) and vertical (State – Autonomous Communities – Local Corporations) coordination in the interpretation and application of the tax system. In comparable systems of law, there are also models of public entities, similar to the Taxpayer Ombudsman and with greater powers with respect to the Spanish model, which mediate between the tax administration and taxpayers in the most controversial cases and allow taxpayers to make quite effective claims in the event of erroneous, excessive or arbitrary application of tax rules without the need to go to court.
Such institutions are extremely useful for the protection of taxpayers’ rights and the guarantee of legal certainty (as shown, for example, by the experiences of Mexico or the United States).
The Chair has warned that an urgent review of the obsolete tax dispute resolution system ought to take place in order to ensure a transition to a more efficient one which overcomes its current limitations (resolution times, accuracy of resolutions in a highly specialised sector, etc.), which will result in greater legal certainty, but, above all, in a release of resources to undertake investments and productive activities.
Within the framework of comparable systems of law, two trends can be observed in countries close to Spain that aim to guarantee decisions that resolve disputes between the tax administration and taxpayers with a high degree of specialisation in tax matters, improving the quality of decisions and reducing the time taken to resolve tax disputes, thus freeing up resources that can be used for productive investment.
These are, firstly, the establishment of tax arbitration bodies as an alternative to ordinary courts (e.g. as in Portugal) and, secondly, the regulation of specialised tax courts by subject matter and composition (e.g. this is the direction of the recent reform in Italy).
Employment and talent: a new Workers’ Statute for the 21st century
In the field of employment, the Chair has placed particular emphasis on the proposal to promote a stable programme of public support and incentives for technology and the green transition of SMEs and the self-employed.
It also advises the promotion of a social pact for training for employment, through public-private collaboration and in cooperation with companies, to update and adapt university and vocational training degrees to new training requirements, diversifying the offering of specialised short-cycle degrees, especially in scientific and technological disciplines.
Finally, the Chair recommends that a process of social dialogue be launched to approve a new Workers’ Statute for the 21st century, with greater job adaptability in anticipation of changes and to avoid excessive regulation and public interventionism, reasserting collective bargaining as the main way to regulate employment relationships.
Spain as a forum for international dispute resolution
In order to improve the settlement of international disputes, the Chair proposed the establishment of a specific procedure for the recognition of foreign arbitral awards, noting that Art. 46.2 of the Arbitration Act refers to the rules on the recognition of judgments when establishing the procedure for the recognition of foreign arbitral awards.
This procedure is established in Article 54 of the Law on International Judicial Cooperation, although it is a procedure that sets out a single written procedure for each party, without the possibility of additional pleadings, with no provision for hearings and with the mandatory intervention of the Public Prosecutor’s Office. This scant regulation is often supplemented by the judicial practice of the different High Courts of Justice, a practice that is not always homogeneous.
Therefore, in order to ensure a regulated procedure, adapted to the specificities of this type of case, homogeneous all over Spain and therefore respectful of the principle of equality, the right to be heard and adversarial proceedings, it would be advisable to introduce the appropriate amendments to the Arbitration Act and/or the International Judicial Cooperation Act to develop a procedure that covers the possibility of additional submissions, where appropriate, evidence taking, holding hearings and the scope of the Public Prosecutor’s Office’s intervention.
The Chair also calls for reflection on whether Spain should have judges specialised in international disputes. In this regard, countries of a similar economic, political and commercial environment to Spain have for some years now been equipping themselves with judges and courts specialised in international commercial disputes, complementary to and not exclusive of the International Arbitration Courts. This is the case in the UK, France, the Netherlands, Germany, Belgium and Switzerland. This type of dispute requires specialisation in certain complex matters, both technical (international trade law, private international law, the need to apply foreign law, knowledge of the practices and customs of international transactions or the need to enforce decisions in other jurisdictions, among others) and practical (documentary or witness evidence in one or more languages other than the official languages).
In short, the existence of these courts, together with the potential development of international treaties for the recognition of their decisions and the possibility for the parties to voluntarily submit to them, regardless of whether or not there is a connection with Spain, would favour and increase: economic exchange with Spain’s trading partners, whether European or, of course, Latin American; Spain’s brand as a country and international prestige; the creation of economic and social value; and the internationalisation and competitiveness of Spain’s commercial network.