Spain
In recent years, Spain has witnessed an increasing reliance on alternative dispute resolution mechanisms, such as mediation and arbitration, as parties seek more efficient and cost-effective methods of resolving disputes. Madrid has emerged as a thriving hub for international arbitration, with institutions such as the Court of Arbitration of Madrid (CIAM) and the Madrid Court of Arbitration (CAM) playing pivotal roles in facilitating arbitration proceedings.
1. Is third party funding permissible for disputes?
Yes, third-party funding is permissible for disputes in Spain. Since 2016-2017, the market has seen exponential growth, albeit still not as mature as in other countries like Australia, the US, or the UK. The types of claims driving this growth include natural resources, energy, regulatory markets, and intellectual property.
The legal framework in Spain lacks specific regulations for third-party litigation funding, relying instead on general statutory rules applicable to civil and commercial operations. However, certain court decisions have validated the legality of third-party funding transactions under existing laws. Additionally, the Spanish arbitration community has developed soft law rules aimed at ensuring proper disclosure and avoiding conflicts of interest in arbitration proceedings involving third-party funding.
2. Are lawyers able to work on a contingent basis in the jurisdiction and are there any restrictions?
Yes, lawyers in Spain have the option to work on a contingency basis known as “cuota litis.” In 2008, the Supreme Court of Spain overturned a prohibition issued by the General Council of Spanish Bar that restricted the use of contingency fees, citing its contradiction with the principles of free competition.
Nevertheless, it’s typical for lawyers in Spain to blend standard fees (whether flat fees or hourly rates) with contingency fees as a complement.
3. Can the court or tribunal order one party to pay the other’s legal costs?
Yes, Article 394 of the Spanish Code of Civil Procedure establishes the criterion of defeat as the general principle of cost allocation, aimed at reimbursing expenses and losses incurred unjustly According to this provision, if the claims are completely dismissed, the general rule dictates that the unsuccessful party must bear the legal costs of the successful party, in accordance with guidelines set by the Law Society. Conversely, if only some claims are partially upheld, each party is responsible for their own legal costs.
Exceptions to this general rule also apply in cases characterized by significant factual or legal uncertainties, where costs may not be imposed on either party. However, the judge must provide careful justification for such exemptions, taking into account interpretations of evidence and legal ambiguities, often drawing upon caselaw for guidance.
4. Is insurance available to protect against adverse outcomes for funded litigation?
Yes, insurance options are accessible in Spain to mitigate the risks associated with adverse outcomes in funded litigation (After The Event (ATE) insurance). However, it is not yet commonly used in smaller cases. ATE insurance is more widely used in complex international arbitrations and mass litigation. Among the common insurance policies utilized by claimants in Spain are car insurance and home insurance, which typically encompass civil liability insurance and legal expenses insurance.
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