The recent Organic Law 1/2025, published on 3 January, aims to improve the efficiency of the courts. To this end, various measures have been adopted, including those that promote the out-of-court resolution of civil and commercial disputes. For instance, as of 3 April 2025, the use of appropriate alternative dispute resolution methods (ADR) will be mandatory before initiating civil or commercial court proceedings.

The general rule is that non-compliance with this requirement will lead to the dismissal of the claim.

Certain proceedings are excluded from this requirement. Among others, those that have as their object: (a) the protection of fundamental rights; (b) the request for preliminary injunctions prior to the filing of the lawsuit; or (c) the request for preliminary proceedings.

Appropriate alternative dispute resolution methods

Appropriate alternative dispute resolution methods refer to “any type of negotiation activity undertaken in good faith by the parties to a dispute with a view to finding an out-of-court solution to the dispute, either by themselves or through the intervention of a neutral third party“.

Organic Law 1/2025 lists a number of systems to be considered as “appropriate alternative dispute resolution methods”. Among others, the following are listed:

1. Mediation or conciliation,
2. Confidential binding offer, acceptance of which is irrevocable,
3. A neutral, non-binding and confidential opinion of an independent expert, to which the parties may voluntarily adhere,
4. Direct negotiation between the parties or with the intervention of their lawyers,
5. Submission to a collaborative law process, consisting of a negotiation in which the lawyers involved will waive the right to represent their clients in court if they do not achieve a total or partial solution to the dispute.

How to prove compliance with this requirement

The claim must include a section describing the prior alternative dispute resolution process or the impossibility of carrying it out.

In addition, the claim must be accompanied by documentation proving the attempt to engage in the ADR/negotiation process or, if applicable, a declaration stating that it has been impossible to carry it out due to the defendant’s address and contact information being unknown.

Effects of the ADR/negotiation process on the statute of limitations and the lapse of actions

The request to initiate an ADR/negotiation process shall interrupt the statute of limitations or suspend the lapse of actions, from the date on which the attempt at communication is recorded. The request may be made by any of the means of electronic communication used by the parties in their previous relations.

The interruption or suspension of the statute of limitations and lapse periods will be extended until the date of the signing of the mutual agreement reached or the termination of the ADR/negotiation process without agreement. On the other hand, there are rules for restarting the calculation of time limits if the ADR/negotiation process does not progress, and special time limits if a neutral third party intervenes as mediator, conciliator, independent expert, etc.

Deadline for filing a claim

In the event that the initial request for ADR/negotiation process is not answered, or the ADR/negotiation process ends without agreement, the parties must file a claim within one year from the date of receipt of the request for ADR/negotiation process or, as the case may be, from the date of termination of the ADR/negotiation process without agreement.

Special time limits are foreseen for cases where preliminary injunctions have been granted.

Confidentiality

The parties may conduct the ADR/ negotiation process through any type of telematic procedure, such as videoconference or other similar means, provided that the identity of the intervening parties is guaranteed.

The negotiation process and the documents used in the negotiation process are confidential, except for information relating to whether or not the parties attended the ADR/negotiation attempt, and information relating to the subject matter of the dispute. Other exceptions are also provided for (voluntary waiver, proceedings for the assessment of costs, criminal offences or the protection of public order).

Costs of proceedings

The courts will have to assess the cooperation shown in reaching a consensual resolution of the dispute when deciding who should bear the costs of the trial.

Criminalisation of the abuse of justice

Organic Law 1/2025 also introduces other relevant reforms aimed at streamlining judicial processes. Among these is the creation of the concept of abuse of the public service of justice, which will make it possible to sanction litigants whose behavior is not compatible with the sustainability of the justice system, such as irresponsible access to the courts when a consensual solution would have been feasible and evident or when the claims are notoriously lacking grounds.

La entrada New rules to encourage out-of-court settlement of civil and commercial disputes aparece primero en Faus Moliner.

In 2018 the High Court of Justice of Madrid passed a judgment that annulled an arbitration award which ordered the dissolution and liquidation of an important private company as a solution to the confrontation existing between the two groups of shareholders. 

The High Court of Justice of Madrid justified such decision on the grounds that the award was contrary to public order, as it was not properly reasoned. In the judgment, it criticised the fact that the award had not assessed the evidence that had been presented in a proper manner since it had not considered certain legal consequences resulting from such evidence.

The parties affected by the ruling of the High Court of Justice of Madrid appealed such decision to the Constitutional Court. In the Judgment we are commenting on, the Constitutional Court upheld the constitutional appeal filed by the affected parties and held that the High Court of Justice of Madrid had exceeded its authority by making an interpretation of public order that went beyond the powers granted by law.

Public order as a ground for annulment

In this judgment, the Constitutional Court reiterates its previous doctrine and once again warns about the risks that an interpretation of public order such as the one made by the High Court of Justice of Madrid generates for arbitration.

The judgment states that ordinary courts may indeed verify if an award is in accordance with public order but they cannot replace the arbitrator function of applying the law and/or resolving the dispute. The annulment action cannot turn into a second instance for reviewing the facts and rules applied in the award, nor a mechanism for reviewing the correct application of case-law.

The Constitutional court says that the mere discrepancy on the legal conclusions that the court may draw from the practice of evidence does not per se imply a violation of public order, even more so when the parties have submitted their dispute to arbitration ex aequo et bono, which enables the arbitrator to adopt the solution that it deems fairest and most equitable, without having to resort to legal rules, or even being able to depart from the legal conclusions that may be derived from them. 

In the present case, according to the judgment of the Constitutional Court by just reading the challenged award, it could be noted that it was reasoned, logical and did not contain any inconsistency or contradiction that justified its annulment for infringement of public order. Consequently, it should not have been annulled.

As it has done in previous cases, the Constitutional Court once again limits the expansive interpretation of public order as a ground for annulment of awards and reinforces Spain’s position as a safe arbitration seat.

La entrada The Constitutional Court rules in favour of arbitration once again aparece primero en Faus Moliner.

This Judgment resolves a constitutional appeal against the annulment by the High Court of Justice of Madrid (TSJM) of an arbitration award on the basis that such award was contrary to “public order” (the appellant had claimed that the arbitration court lacked the required neutrality).

The TSJM took this decision despite the fact that no party had requested the annulment of the award for “public order” grounds, and that both parties had requested the withdrawal of the annulment proceeding because an agreement had been reached on the substance of the case.

The TSJM dismissed parties’ requests and argued that if a “public order” infringement is observed, the annulment proceeding becomes imperative (there is a public interest to be protected) and out of the control of the parties. 

The parties did not agree with this ruling and filed an appeal before the Constitutional Court alleging an infringement of the right to an effective judicial protection recognized in the Spanish Constitution.

Judgement of the Constitutional Court (TC)

The TC upholds the appeal: dismissing the parties’ claim to withdraw the case was not reasonable and was definitively contrary to the parties’ right to an effective judicial protection.

The TC also rejects the interpretation of “public order” made by the TSJM. In this respect, the TC recalls that:

(i) in civil/private matters, parties are free to settle or otherwise terminate their dispute at any time, even after the award has been rendered by the arbitration court (no procedural rule forbids this option);

(ii) in a judicial proceeding for the annulment of an arbitration award, the Court cannot review the substance of the matter (otherwise, the very nature of the arbitration proceeding would be affected). “Public order” cannot be used by the Court as a pretext for such purposes.

Take-home message

Judgments like this strengthen confidence in arbitration; help to reduce the overuse of “public order” as a ground to review the merits of a case and/or annul an award; and improve the image of Spain as a reliable seat for  arbitration proceedings.

La entrada Spain is a reliable place for arbitration aparece primero en Faus Moliner.

This Judgment resolves a constitutional appeal against the annulment by the High Court of Justice of Madrid (TSJM) of an arbitration award on the basis that such award was contrary to “public order” (the appellant had claimed that the arbitration court lacked the required neutrality).

The TSJM took this decision despite the fact that no party had requested the annulment of the award for “public order” grounds, and that both parties had requested the withdrawal of the annulment proceeding because an agreement had been reached on the substance of the case.

The TSJM dismissed parties’ requests and argued that if a “public order” infringement is observed, the annulment proceeding becomes imperative (there is a public interest to be protected) and out of the control of the parties. 

The parties did not agree with this ruling and filed an appeal before the Constitutional Court alleging an infringement of the right to an effective judicial protection recognized in the Spanish Constitution.

Judgement of the Constitutional Court (TC)

The TC upholds the appeal: dismissing the parties’ claim to withdraw the case was not reasonable and was definitively contrary to the parties’ right to an effective judicial protection.

The TC also rejects the interpretation of “public order” made by the TSJM. In this respect, the TC recalls that:

(i) in civil/private matters, parties are free to settle or otherwise terminate their dispute at any time, even after the award has been rendered by the arbitration court (no procedural rule forbids this option);

(ii) in a judicial proceeding for the annulment of an arbitration award, the Court cannot review the substance of the matter (otherwise, the very nature of the arbitration proceeding would be affected). “Public order” cannot be used by the Court as a pretext for such purposes.

Take-home message

Judgments like this strengthen confidence in arbitration; help to reduce the overuse of “public order” as a ground to review the merits of a case and/or annul an award; and improve the image of Spain as a reliable seat for  arbitration proceedings.

La entrada Spain is a reliable place for arbitration aparece primero en Faus Moliner.

Electronic notifications

Avon considered that the sanction procedure should have been barred by limitation because a period of more than 12 months elapsed from the submission of the complaint before the AEPD (4 March 2017) to the date when the initiation of the sanction procedure was notified to Avon (11 April 2017 according to Avon). Avon argued that the first notification made available to Avon at its email address on 2 March 2018 should not be considered in order to determine whether the 12 months period had lapsed or not because it had  never opened by Avon.

The National High Court rejected Avon’s allegations. Although it is true that electronic notifications shall be deemed made at the time when the recipient downloads them, a different standard applies when assessing the limitation period of a sanction procedure. For these purposes, the limitation period is interrupted when the notification is made available to its addressee, not when it is downloaded. . In the present case the Court ruled that notification made available to Avon on 2 March 2018, although it was not opened by Avon, interrupted the period of limitation.

The importance of protocols

Avon also argued before the Court that it had no commercial relationship with the individual. Avon alleged that it was the victim of a fraud in which a third party impersonated the identity of the individual in order to fraudulently purchase Avon products without paying.

According to the National High Court whether Avon was victim of a fraud or not is not relevant for the case. Avon should have had an adequate protocol for the processing of the personal data of its customers (i.e. a protocol that ensures the accuracy and veracity of the recorded personal data) and Avon did not have it. In this regard, the Court refers to the fact that Avon recorded the individual’s personal data in its system without having any evidence (such as a contract or a photocopy of his/her ID) showing the individual’s consent for the processing of his/her personal data. Finally, the Court points out that if Avon would have had an adequate protocol, the fraud would probably have been avoided.

La entrada Legal consequences of the electronic notifications in the administrative procedures aparece primero en Faus Moliner.

As we have previously commented in our Capsulas newsletter, the strict liability regime for defective products foreseen in Royal Legislative  Decree 1/2007 (“RLD 2007”) states that the only one responsible for the damages caused by a defective product should be the so-called “producer” of the same. Such “producer” being understood as (i) the manufacturer or the importer of the product in the European Union, or (ii) whomever presents himself as manufacturer or importer by indicating its name, brand or other distinctive sign on the product. If the “producer” cannot be identified, responsibility then falls with the supplier unless, within a period of three months, such supplier indicates to the harmed party the identity of the manufacturer or the provider of the product.

Background

In the present case, a patient who was implanted an allegedly defective hip prothesis sued the distributor of such prothesis under the RLD 2007 strict liability regime.

Previously, the patient addressed an out-of-court complaint to the distributor of the product, which responded by identifying itself as distributor and requesting additional information about the allegedly defective prothesis in order to carry out the appropriate verifications. In the response, the distributor did not identify the manufacturer or the supplier of the product.

On the basis of such lack of identification, the Court considered the distributor as “manufacturer” of the product and ordered it to pay the amount claimed by the patient.

The identification of the manufacturer is not always necessary

The case reached the Court of Appeal of Barcelona which revoked the first instance judgement and acquitted the distributor.

The Court of Appeal, in view of the documents provided with the claim, considered that the patient had the capacity to know who the manufacturer was without the distributor identifying it. For this reason, the Court of Appeal considered that the claim should have not been directed against the distributor.

The Court of Appeal also highlighted that the fact that the distributor showed interest for the incident, requesting additional information about the allegedly defective product, did not imply the assumption of any type of liability. Also, the distributor subsequent refusal to respond was not a violation of the doctrine under which one cannot act contrary to its previous conduct.

La entrada The distributor of a defective product might be exempted from liability without identifying the manufacturer aparece primero en Faus Moliner.

It is a well established principle that  parties that agree to submit to arbitration are obliged to comply with the arbitrator’s award.

Notwithstanding the foregoing, applicable legislation contemplates the possibility to request the judicial annulment of the award under certain very specific grounds. Such grounds mainly relate to the arbitral proceeding itself and not the substance of the award. Generally speaking, the courts are not authorized to carry out a substantive review of the award.

Violation of public order as grounds for annulment

Public order is an undetermined legal concept which can be defined as the set of principles, general governing rules and basic fundamental rights that are non-derogable by the will of the parties and that inspire the political, social and economic organization of the country where they apply.

Due to the legally undetermined nature of this ground for annulment, it is not unusual for a party that wishes to annul an arbitration award by questioning the substance of the same, to claim that the award is contrary to public order.

However, as recalled by the High Court of Justice of Madrid, when a Court examines whether a particular award should be annulled on the grounds of a potential violation of public order, the Court should not evaluate whether the award complies with applicable regulations but analyze if the same incurs in such a lack of legal rationale that leads to arbitrariness.

Lack of legal rationale

An example of an arbitral award that incurred in a lack of legal rationale comparable to arbitrariness can be found in the judgment of the High Court of Justice of Catalonia of 23 May 2019. According to such judgment an award lacks the sufficient legal rationale when it:

(i) determines, without any explanation, and contrary to the allegations of the parties, the prescription or limitation of actions submitted to its decision;

(ii) arbitrarily determines the applicable law;

(iii) rejects claims submitted to its decision with a simple “it is not relevant” motivation, without offering any further justification.

In this case, the lack of motivation of the arbitral award implied such lack of legal rationale (comparable to arbitrariness) that led the High Court of Justice of Catalonia to the annulment of the award.

La entrada Reason before impulses: public order and arbitral award aparece primero en Faus Moliner.

The efficacy of arbitration as an alternative dispute resolution mechanism is based, inter alia, on the fact that arbitral awards are binding on the parties. In this regard, one can compare an arbitral award to a court judgement. From the moment in which such award is final, the parties must comply with it. In case of non-compliance, the affected party can request the enforcement of the arbitral award before court.

An arbitral award ceases to be binding only when it is annulled by a competent court. The chances of this happening are very limited. In order to decide about the annulment of an arbitral award, an action must be filed before the court within 2 months of the notification of the award. Furthermore, the annulment is only possible under certain grounds set out in the law. One of these grounds is that a party is not duly notified during the arbitration.

The filing of the annulment action does not suspend the enforcement procedure. To obtain such suspension, the concerned party must request the suspension as a preliminary measure within the annulment procedure.

Court’s decision

In this case, the winning party of an arbitration requested the competent Court to enforce the arbitral award which, among other issues, obliged the losing party to make certain payments. The losing party opposed the enforcement arguing that the arbitral award was null because it had not been notified of neither the demand for arbitration nor the arbitral award.

The Court dismissed the opposition stating that whether the arbitral award is declared null or not, is not is not a matter to be decided in the enforcement procedure.

The position of this Court has been confirmed by the Court of Appeals of Barcelona. The Court of Appeals has expressed that the annulment of the award should have been sought in a separate annulment action that could have been filed when the request for enforcement was notified to the affected party.

Final thought

Arbitral awards are as mandatory as judicial decisions. It is well-known that if the party affected by a court judgment fails challenge it when possible, then such party will not be able do so in the future.

When it comes to arbitration, the same principle must apply. If the party affected by an arbitral award does not file an annulment action in due course, then such party cannot claim that the award should be annulled in the enforcement proceeding.

In our opinion, judicial decisions such as this one enhance trust in arbitration.

La entrada An arbitral award cannot be annulled in the enforcement proceeding of such award aparece primero en Faus Moliner.

This case started when the company Integral filed a lawsuit against Laboratorios Liconsa before the Commercial Court number 3 of Barcelona.

In such lawsuit, two legal actions were jointly flied: one action claiming payment of unpaid invoices issued in consideration for certain projects made by Integral; and the other action was based on unfair competition practices supposedly committed by Liconsa by hiring the workers of Integral who were performing the projects from which the unpaid invoices derived.

In order to support the filing of both legal actions jointly, Integral argued that the projects, the non-payment of the invoices arising from such projects and the subsequent hiring of those employees of Integral who were performing the projects was all part of the unfair plan conceived by Liconsa. According to the plaintiff, such plan had two purposes: firstly, avoiding payment of the work done and, secondly, acquiring the know-how developed by Integral in connection with the projects. Integral argued that Liconsa would be taking advantage not only of the work done but also of the knowledge and training of the employees after their participation in the projects.

At first, the Commercial Court considered that filing these two legal actions in a joint manner was unproperly done by the plaintiff and such Commercial Court declared itself without jurisdiction over the unpaid invoices claim.

According to the Commercial Court, pursuant to the provisions contained in the Spanish Code of Civil Procedure, the Courts having jurisdiction over debt recovery claims were only the Spanish Civil Courts.

Position of the Court of Appeals

The judgement of the Commercial Court declaring itself without jurisdiction over the unpaid invoices claim, was appealed by Integral and the case came to the knowledge of the Court of Appeals. The Court of Appeals considered that the joint filing of both legal actions was correct and that, in this case, the Commercial Court had jurisdiction over the debt recovery claim. Consequently, the Court of Appeals declared that all court proceedings were null and ordered the restart of such proceedings.

According to the Court of Appeals, both legal actions were interdependent and derived from claims based on the same facts, because the implementation of the projects, subsequently unpaid, was one of the main reasons that led Liconsa to hire the employees of Integral. Considering the foregoing, the Court of Appeals considered that, in this case, it was necessary to make reasonable interpretation of the Code of Civil Procedure and, thus, allow both actions to be jointly filed. The Court of Appeals considered that requiring two different proceedings to prosecute the same facts would be unreasonable in this case and would constitute a breach of the plaintiff‘s right to effective legal protection.

La entrada Spanish Commercial Courts have jurisdiction over debt recovery claims when such claims are related to unfair competition lawsuits aparece primero en Faus Moliner.

The judgments of a Member State shall be directly enforceable in the EU

The biggest novelty of Regulation 1215/2012 is the abolishment of the exequatur. Currently, in order to execute a judgment given in another Member State the declaration of enforceability on behalf of a national court is required prior to its enforcement. In the new regulation such requirement disappears, therefore any judgment given in a Member State of the EU must be automatically recognized without the need of any proceedings and must be directly enforced, as if it were issued in the State where the enforcement is sought.

However, Regulation 1215/2012 maintains the mechanisms for challenging the recognition and enforcement of the judgments in case the recognition is contrary to the public order of the State where such recognition is sought, the judgment has been issued by default without  the defendant having been given enough time to defend itself, if the judgment is irreconcilable with another one issued between the same parties or if it comes into conflict with the provisions of the Regulation in matters of insurance, consumers, employees or exclusive jurisdiction.

Reinforcement of the freedom of choice-of-court

Regulation 44/2001 already established that the parties are free to agree which must be the competent judicial authority to settle any dispute that might arise from their contractual relation. However, under such Regulation it is necessary that at least one of the two parties is domiciled in an EU State. With the new Regulation such requirement disappears, and therefore a court of the EU shall have to declare itself to be competent when the parties have agreed to be subjected to its jurisdiction although both parties are domiciled outside the EU.

Likewise, Regulation 1215/2012 reinforces the effectiveness of choice-of-court agreements modifying the lis pendens rules. Under the new Regulation, in the case that claims involving the same subject-matter and cause of action are filed between the same parties before courts of two different Member States, the court designated by the parties shall have priority over any other, regardless of before which court the first claim was brought. In this way, a court that is not the one designated by the parties shall be required to stay its proceedings until the designated court rules on its jurisdiction.

La entrada New European Regulation on jurisdiction and the recognition and enforcement of judgments aparece primero en Faus Moliner.