On September 19, 2020, Law 3/2020, of September 18, on procedural and organizational measures to address the COVID-19 in the area of the Administration of Justice (hereinafter, "Law 3/2020") was published in the Official State Gazette (hereinafter, BOE). It contains measures that were already included in Royal Decree 16/2020, of April 28 ("RDL 16/2020"), which is repealed by virtue of the repealing provision on the law.

This Law 3/2020 consists of twenty-three articles, seven additional provisions, two transitional provisions, one repealing provision and thirteen final provisions, and focuses on procedural (in all jurisdictions) and organizational aspects, as well as on bankruptcy and corporate matters.

Priority and urgent processing of certain procedures

It is established that the following procedures will be processed with preference until December 31, 2020:

Civil jurisdiction

• Procedures derived from the lack of recognition by the creditor of the legal moratorium in the mortgages in habitual residences and of properties connected to the economic activity, the procedures derived from any claims that the tenants could raise due to the lack of application of the legally foreseen moratorium or of the obligatory extension of the contract, as well as the bankruptcy procedures of debtors natural persons.
• Procedures or files of voluntary jurisdiction in which measures contained in article 158 of the Civil Code are adopted.

Contentious-administrative jurisdiction

• The appeals lodged against the acts and resolutions of the Public Administrations denying the application of aid and measures provided for by law to alleviate the economic effects of the health crisis produced by the COVID-19.

Social jurisdiction

• Dismissal or contractual extinction procedures.
• Procedures related to the declaration of the duty and form of recovery of work hours not provided during the paid leave provided for in Royal Decree Law 10/2020.
• Procedures derived from the application of the Plan “MECUIDA" (special rights to the reduction of the workday and schedule adaptation due to COVID-19)
• Procedures related to the individual, collective or ex officio challenge of the ERTEs due to force majeure or objective causes derived from the COVID-19.
• The refusals of extraordinary benefits due to cessation of activity provided for in Article 17 of the aforementioned Royal Decree 8/2020.
• Resolutions rejecting applications for recognition of the right to health care, without prejudice to the regulatory development of the competence of the contentious-administrative jurisdiction provided for by the second transitional provision of Royal Decree 7/2018, of July 27.
• Those procedures that are substantiated to make effective the modality of telecommuting.

Finally, in matters of the Civil Registry, preference is also given to birth registries, marriages and deaths; the issuance of certificates, including those of faith of identity and civil status; marriage and wedding records; and the processing of oaths in nationality records. In addition, the first additional provision of Law 3/2020 grants until June 20, 2021 the term to contract marriage in the cases in which an estimative sentence has been issued.

Organizational and technological measures

Already in the Royal Decree 16/2020 a series of measures were established, which in their majority are not only maintained, but their application is extended in time, extending in some cases until the mid-year 2021.

- That is, until June 20, 2021:

• Trials, Court appearances, declarations and hearings and, in general, all procedural acts, will be carried out preferably by means of telematic presence (not applicable in the criminal order in the case of trials for serious crimes). Of course, reference is made to the fact that this will be done only if the necessary technical means exist in the Administration of Justice.
• In some cases, the judge or the Court Clerck may require the physical presence of some of the appearing parties. This occurs since the state of alarm was raised and in some civil proceedings, the party and the witnesses come to court, while lawyers and attorneys appear online.
• Parties attending oral proceedings shall be excused from wearing gowns at public hearings.
• Customer service at any courthouse will be provided online, by telephone or by e-mail. When essential, it will be necessary to make a settled appointment in order to attend any judicial headquarter.

- Royal Decree 16/2020 provided for the creation of judicial entities to deal exclusively with procedures associated to COVID-19, by transforming the judicial entities that were awaiting entry into operation. Law 3/2020 empowers the Ministry of Justice to anticipate the entry into operation of the judicial entities corresponding to the 2020 programming, and to devote all or some of them exclusively to the knowledge of procedures associated to COVID-19.

- The period for which morning and afternoon workdays are established for all services and courts is extended, i.e. hearings may be held in the morning and afternoon until 20 June 2021.

Rebus sic stantibus

The seventh additional provision introduces an issue that has been controversial since the declaration of the state of alarm on March 14, 2020: the application of the “rule” "rebus sic stantibus", as it is named by Law 3/2020. However, the only thing contained in this Law is a period of no more than three months for the Government to present an analysis and study of the legal possibilities and options before the Justice Committees of the Congress and the Senate. It will be necessary to keep a close eye on the parliamentary development of this provision.

Until December 31, 2020, the debtor in an insolvency situation will not be required to apply for a declaration of bankruptcy

• This will be the case whether or not the debtor has notified the competent court of the opening of negotiations with creditors to reach a refinancing agreement, an out-of-court settlement agreement or adhesion to an early settlement proposal.
• Furthermore, until that date, the judges will not admit the necessary bankruptcy petitions that have been submitted since March 14, 2020. If up to December 31, 2020 the debtor has filed a voluntary petition for bankruptcy, the petition will be admitted for processing with preference, even if it is dated later than the petition for necessary bankruptcy.
• If up to and including December 31, 2020, the debtor has notified the opening of negotiations with creditors to reach a refinancing agreement, an out-of-court settlement. or accession to an early settlement proposal, said processes will be subject to the general regime established by law
• However, in that case, the debtor will not have the duty to apply for bankruptcy until six months after it has been communicated.

Until March 14, 2021 new homologated refinancing agreements may be renegotiated or signed

• The debtor who had a refinancing agreement approved may modify the agreement in force or reach a new one, even if a year has not passed since the previous approval.
• Until October 31, 2020, the judge will inform the debtor any requests for a declaration of noncompliance with the refinancing agreement submitted by the creditors but will not admit them until one month after said date.
• During that month the debtor may inform the court with jurisdiction for the declaration of bankruptcy that it has initiated or intends to initiate negotiations with creditors to modify the agreement that he or she had homologated or to reach a new one, even if a year has not passed since the previous request for homologation. If, within three months of the communication to the court, the debtor has not reached an agreement to modify the one in force or to reach a new one, the judge will admit the applications for declaration of default filed by the creditors.

Classification as ordinary of the credits derived from financing and payments on behalf of the insolvent party made by persons especially related to the debtor since the declaration of the state of alarm

• In insolvency proceedings declared up to and including March 14, 2022, those credits derived from treasury income from loans, credits or other businesses of a similar nature, which since the declaration of the state of alarm would have been granted to the debtor by those who, according to the law, have the status of persons especially related to him, shall be considered as ordinary credits.
• Likewise, those credits which, according to the law, in which those persons especially related to the debtor might have subrogated as a result of the payment of ordinary or privileged credits made on behalf of the debtor, as of the declaration of that status, shall be considered ordinary credits.

The insolvency incidents to challenge the list of assets and the list of creditors will be handled, preferably, in writing

• Until March 14, 2022, it will not be necessary to hold a hearing in the incidents that are initiated to challenge the list of assets and the list of creditors, unless the judge of the insolvency procedure determines otherwise.
• The lack of response to the lawsuit by any of the defendants will be considered acquiescence, except in the case of public law creditors.
• The means of proof that the parties intend to use must necessarily accompany the incidental claim of challenge and the replies that are presented.

Possibility of modifying the bankruptcy agreements that are in compliance until March 14, 2021

• Until March 14, 2021, the insolvent debtor may submit a proposal to modify the agreement that is in compliance period. The application must be accompanied by the following documents:
  • a list of the bankruptcy credits that are pending payment and of those that, having been contracted during the period of compliance with the agreement, have not been satisfied,
  • a feasibility plan,
  • and a payment plan.
• The proposal for modification will be processed according to the same rules established for the approval of the original agreement, although the processing will be in a written form regardless of the number of creditors.
• In no case shall the amendment affect the claims accrued or incurred during the period of performance of the original agreement or the privileged creditors to whom the effectiveness of the agreement has been extended or who have adhered to it once it has been approved, unless they vote in favor of or expressly adhere to the proposed amendment.
• The judge will inform the insolvent debtor about any requests for declaration of noncompliance with the agreement presented by the creditors up to October 31, 2020 but will not admit them until three months have passed since the end of that period. During these three months the insolvent debtor may present a proposal for the modification of the agreement, which will be processed with priority to the application for a declaration of noncompliance.

Postponement of the duty to apply for the opening of the liquidation phase and consequences on credits

• Until March 14, 2021 the debtor will not have the duty to request the liquidation of the overall assets if he or she knows of the impossibility of complying with the committed payments or the obligations contracted after the approval of the bankruptcy agreement, provided that the debtor presents a proposal for the modification of the agreement and this is admitted within said term.
• During the deadline foreseen in the previous section, the judge will not issue an order opening the liquidation phase, even if the creditor proves the existence of some of the facts that may support the declaration of bankruptcy.
• In the event of failure to comply with the agreement approved or modified within two years from March 14, 2020 the credits derived from treasury income for loans, credits or other businesses of a similar nature that have been granted to the bankrupt party or derived from personal or real guarantees constituted in favor of the bankrupt party by any person, including those who, according to the law, have the status of persons especially related to the bankrupt party, will be considered as credits against the estate, provided that the agreement or the modification contains the identity of the obligor and the maximum amount of the financing to be granted or the guarantee to be constituted

Up to and including March 14, 2021 the following procedures will be processed on a preferential basis:

1. Bankruptcy incidents in the labor field.
2. Actions aimed at the disposal of production units or the lump-price sale of assets
3. The proposals of agreement or modification of those agreements that were in period of fulfillment, as well as the procedures of opposition to the judicial approval of the agreement.
4. Bankruptcy procedures regarding recovery of the overall assets.
5. The admission of the application for approval of a refinancing agreement or the modification of the one in force.
6. The adoption of precautionary and any other measures that the judge considers that may contribute to the maintenance and conservation of the goods and rights.
7. The consecutive insolvency proceedings of a natural person in current insolvency, who lacks assets and the possibility of proposing a payment plan urged by a mediator in which there is a provisional list of creditors, a fortuitous qualification and a request for the benefit of exoneration of unsatisfied liabilities, together with a responsible declaration by the debtor in which he or she states the lack of assets.
8. The benefit of exoneration of unsatisfied liabilities.

Disposal of assets

• In the bankruptcies declared up to and including March 14, 2021 and in those in progress at the date of entry into force of this Law, the auction of assets and rights may be carried out either by auction, judicial or extrajudicial, or by any other means of enforcement by the judge from among those provided for in Royal Legislative Decree 1/2020, of May 5, which approved the revised text of the Bankruptcy Law. Preferably and whenever possible, the auction will be carried out online.
• If the judge, in any state of the bankruptcy, has authorized the direct realization of the assets and rights with special privilege or the giving in payment or for payment of such assets, the terms of the authorization shall apply.

Liquidation Plan Approval

• When this Law enters into force, the Court Clerk will immediately agree to the disclosure in the court office of the liquidation plans already submitted by the bankruptcy administration. Once the legal period for making observations or proposals for modification has elapsed, the judge of the agreement will be informed and must immediately issue an order, in which he will approve the liquidation plan with the modifications he deems necessary or appropriate.

Expediting the processing of out-of-court settlements, consecutive bankruptcy proceedings and the benefit of exoneration of unsatisfied liabilities

• Until March 14, 2021 it will be considered that the extrajudicial settlement of payments has been attempted by the debtor without success, if it is proven that there have been two failures of acceptance of the bankruptcy mediator to be appointed, for the purpose of initiating consecutive bankruptcy, by communicating it to the court.

Suspension of the cause of dissolution for capital loss

• For the sole purpose of determining the concurrence of the cause for dissolution provided for in Article 363.1.e) of the revised text of the Law on Corporations, the losses for the year 2020 will not be taken into consideration. If the result for the financial year 2021 shows losses that reduce the net assets to less than half of the share capital, a general meeting must be called by the directors or may be requested by any partner within two months of the end of the financial year in accordance with Article 365 of the aforementioned Law, to proceed with the dissolution of the company, unless the capital is increased or reduced to a sufficient extent.
• The aforementioned paragraph is understood without prejudice of the duty to request the bankruptcy declaration in accordance to the terms of the Spanish Bankruptcy Law.