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Civil and insolvency procedural alert about deadlines, statute of limitations, expiration and application for insolvency proceedings in Spain / March 24, 2020

Impact of Royal Decree 463/2020, dated march 14, and Royal Decree-law 8/2020, dated march 17, on procedural deadlines, statute of limitations and expiration in the civil and insolvency areas

Procedural deadlines

As a consequence of the approval and entry into force of RD 463/2020, dated March 14, declaring the state of alarm throughout the national territory, the procedural and administrative actions and deadlines and, de facto, all judicial procedures, have been suspended, except in those cases of urgent actions expressly regulated in the legal norm - urgent criminal actions (habeas corpus, proceedings with detainees, prison surveillance, precautionary measures, etc.); procedures for the protection of minors, protection of fundamental rights and issues regarding judicial authorizations of non-voluntary internments, procedures in the matter of collective conflict or in matters of fundamental rights; and those that a judge of any order may agree to avoid irreparable harm to the defendant - (Additional Provisions 2 and 3 of RD 463/2020).

The suspension of proceedings and procedural deadlines will extend during the period of validity of RD 463/2020 (15 calendar days), as well as any extensions to the state of alarm that may be agreed. Once the state of alarm loses its validity, the suspension and interruption of procedural deadlines will therefore be lifted, and its calculation will resume.

Statute of limitations and expiration

The aforementioned Royal Decree also states (Additional Provision 4 of RD 463/2020) that the deadlines to exercise all kinds of actions (statutes of limitations or expiration periods) are interrupted during the validity of RD 463/2020 and its extensions. It is necessary to take into account that this suspension does not apply to the deadlines established in contracts, which remain unchanged in accordance with the terms established therein, without prejudice to what may be applicable regarding cases of force majeure, or in application of the jurisprudential clause rebus sic stantibus.

The provision of the norm that decrees the state of alarm in relation to the suspension of the statute of limitations and expiration applies indistinctly to any deadlines to exercise any actions provided by our legislation. In this sense, at present, the statute of limitations to exercise actions in the civil jurisdiction is, among others[1], the following:

· THIRTY (30) year statute of limitations: actions regarding real state have a 30-year statute of limitations, without prejudice to the provisions for the acquisition of the possession mentioned in arts. 1,957 and 1,959 of the Spanish Civil Code - hereinafter “Cc” - (art. 1,963 Cc).

· TWENTY (20) year statute of limitations: mortgage actions have a 20—year statute of limitations (art. 1.964.1 Cc).

· SIX (6) year statute of limitations: actions regarding chattels have a six-year statute of limitations, unless the holder has acquired its dominion in a shorter period according to article 1,955 Cc., and excepting cases of loss, public sale or theft (article 1,962 Cc).

· FIVE (5) year statute of limitations: this is the most common statute of limitations:

a) After the reform of article 1,964 CC through Law 42/2015, personal actions of all kinds that do not have a special statute of limitations have a five year one from the moment in which the obligation could be claimed, taking into account that in continuous obligations to do or not to do, the deadline will begin each time the obligations is not complied with (art. 1,964.2 Cc).

Prior to Law 42/2015, the general statute of limitations was FIFTEEN (15) years. Therefore, we must pay special attention to the transitional regime established in the aforementioned norm. We can essentially distinguish the following periods:

i. Actions derived from legal relations born between 7-10-2000 and 7-10-2005: the previous legal regime will remain in force and therefore, the term of fifteen (15) years will continue to be in force.

ii. Actions derived from legal relations born between 7-10-2005 and 7-10-2015: the new 5-year statute of limitations will apply, until, in principle, October 7 of this year (in fact, later, as we will see below) five years after law 42/2015 entered into force.

iii. Actions derived from legal relations born from 7-10-2015 onwards: the new statute of limitations established by Law 42/2015 applies, therefore the statute of limitations is five (5) years.

b) Actions to request compliance of the following obligations (art. 1,966 Cc):

i. Alimony payments

ii. Lease payments, from rural or urban properties.

iii. Any other payments that must be made on a yearly basis or in shorter terms.

c) Actions derived from personal insurance contracts (art. 23 of the Spanish Insurance Law).  

· THREE (3) year statute of limitations for the actions regarding the compliance of the following obligations (art. 1,967 Cc):

a) Payment of the fees and rights of judges, lawyers, registrars, notaries, experts, agents and clerks, and the expenses and disbursements they might have made in the performance of their positions or offices in matters to which the obligations refer.

b) Payment of the medicines that pharmacists supplied, of the fees and stipends of professors and teachers regarding their lessons of for the exercise of their profession, art or trade, counting from the moment the services have been fully delivered.

c) Payment of their services to workers, servants and day laborers, plus payment of the supplies or disbursements that they might have made regarding said services, counting from the moment said services have been fully delivered.

d) Payment of food and room to innkeepers, and payment to merchants of the price of the goods sold to others who are not, or who are engaged in different traffic; counting from the moment their services are no longer provided (Spanish jurisprudence has long considered that this particular statute of limitations applies to actions related to the claim for payment of supplies (eg water, gas, electricity).

· TWO (2) year statute of limitations for the actions derived from damage insurance contracts (art. 23 Spanish Insurance Law

· ONE (1) year statute of limitations (art. 1968 Cc): it applies to

a) The action to regain or retain possession.

b) The action to demand civil responsibility for injury or slander, and for the obligations derived from negligence mentioned in article 1,902, since the aggrieved party knew of the damage incurred by it.

· We must add to all these statutes of limitations (although it is not strictly relevant for the purposes of this note) a mention to the fact that the action of nullity of a general condition of the contract or any actions of nullity -not of annulment-, have no statute of limitations and may be exercised at any time by consumers.[2].

As established by the Civil Code, when there is no special provision that determines otherwise, the deadline to exercise actions shall be counted from the date on which such actions could be exercised (art. 1.969 Cc or art. 121-23 CCCat), and the deadlines can be interrupted -whenever there is a statute of limitations involved- by filing a claim before the Courts, by extrajudicial claim of the creditor and by any act of recognition of the debt by the debtor (art 1,973 Cc or art. 121-11 CCCat). Such an interruption has now occurred, both for statute of limitations purposes and also for the periods that the jurisprudence had deemed as non-interruptible, due to a legal provision which states that all deadlines, without exception, are now extended while RD 463/2020 remains in force, including any possible extensions that may be agreed, ultimately expanding automatically and ex lege said deadlines during the full period of state of alarm.

In this sense, Additional Provision 4 of RD 463/2020 leaves no room for doubt by clearly ordering that “statute of limitations and expiration deadlines of any actions and rights will be suspended during the length of the state of alarm and, where appropriate, of its extensions

Consequently, due to its practical significance in light of the currently existing litigation, one must bear in mind that the date of October 7, 2020, which was hitherto the deadline to exercise personal actions derived from credit rights that had no other deadline expressly mentioned in the law (among which are those relating to mas actions for compensation for damages that are being exercised before Spanish Courts) has been rendered ineffective by the entry into force of RD 463/2020. This period has already been extended for a period of 15 additional days, which, foreseeably, will be extended again for periods still unknown once Congress authorizes, as everything seems to indicate, the extension of the state of alarm decreed in Spain.

We must also signal that this provision of DA 4ª of RD 463/2020 will be equally applicable with respect to the expiration periods established in the Civil Procedure Law (for example, the expiration period of 5 years for the executive action based in judicial judgments or arbitration awards of article 518 LEC, or even the expiration of the judicial process due to lack of activity attributable to the parties – caducidad en la instancia - regulated in article 237 of the Spanish Civil Procedure Law), deadlines which, again, are automatically extended throughout the period in which the state of alarm decreed by the Government is maintained and, presumably, will be extended by express authorization of the Congress of Deputies in the near future.

 

[1] The different statutes of limitations we are now going to mention is not a complete list, since there are several different of them in the Spanish Civil Code not mentioned in this document, plus some others in special laws, plus in regional jurisdictions.

[2] The statute of limitations for some actions in the region of Catalonia are the following:
  • TEN (10) year statute of limitations: for any kind of claims (art. 121-20 Catalan Civil Code, hereinafter “CCCat”-).
  • THREE (3) year statute of limitations (art. 121-21 CCCat) for:
a) Claims regarding periodic payments that must be made in yearly or shorter terms.
b) Claims related to the payment of services and works.
c) Claims for price collection in consumer sales.
d) Claims derived from non-contractual liability.
  • ONE (1) year statute of limitations for claims exclusively regarding possession (art. 121-22 CCCat).

Insolvency Law

Regarding Insolvency Law and as a result of the many queries raised after the suspension of the procedural terms we have already mentioned, Royal Decree-Law 8/2020, dated March 17 introduces in its article 43 some important novelties with which it intends to grant the debtor a protective shield against potential bankruptcy requests filed by creditors. This modification, which is aligned with other changes which are being implemented in other countries, aims to prevent the debtor from going into insolvency as a consequence of the health alarm caused by COVID19, given that experience shows that bankruptcy is not the ideal mechanism to save companies.

The aforementioned article 43, which fully touches articles 2, 5 and 22 of the Spanish Insolvency Law, states as follows:

  • As long as the state of alarm is in force, the period provided for in article 5 of Insolvency Law to request the initiation of insolvency proceedings is also interrupted. Consequently, the debtor, even if he is insolvent, will not have the duty to request it during the state of alarm.
  • Absolute priority is given to the voluntary initiation of insolvency proceedings over forced initiation of them (by a third party): until two months have elapsed after the end of the state of alarm, no third-party request to initiate insolvency proceedings will be processed. During that two-month period, priority will be given to a voluntary bankruptcy request that the debtor may submit, even if it is subsequent to the third-party “forced” bankruptcy request. This provision implies a de facto modification of art. 22 of the Spanish Insolvency Law to favor the interests of the debtor over those of the creditor, since the necessary or forced bankruptcy of the debtor will not be declared during the extraordinary time period of two months after the conclusion of the state of alarm.
  • If a debtor, prior to the state of alarm, had notified the Commercial Court of the start of negotiations with creditors provided for in article 5 bis of Spanish Insolvency Law 22/2003, he will not be obliged to request bankruptcy until said alarm state ends, even if the period established in said article 5 bis has ended during the alarm state.

This modification is correct, since it clarifies the doubts raised by the suspension of the procedural deadlines and gives the debtor, in this situation of unforeseeable economic crisis, an additional time of two months to avoid, as far as possible, bankruptcy. Thus, the debtor will have a certain time frame to assess the best solution to his insolvency and seek alternative mechanisms to the bankruptcy.

However, it will be necessary to attend to the extensions that may be approved of the state of alarm, since the expected two-month extension period could be insufficient.