The Code: a blockbuster?

None of the numerous legislative initiatives passed this year can overshadow the proposal for a Commercial Code unveiled by the Ministry of Justice at the end of June. The proposal seeks to replace the current Spanish Commercial Code, in force since 1885, by recasting and consolidating in one single text the entire existing body of corporate/commercial legislation and including new categories of contracts, which are nowadays absolutely commonplace in commercial dealings.

As a work that will not leave any jurist unmoved, it aspires to introduce numerous new developments into the Spanish legal system, affecting companies and commercial transactions alike. Such is the scale of the changes proposed that it is impossible to know right now how the tale of the 1900 articles of 'summer vacation reading' suggested by the lawmakers will end.

Although, in theory, we should have an answer by January 1 2015–when the proposed Code, or what remains of it after its passage through parliament, is supposed to come into force–, it's impossible not to hazard a guess about whether the script proposed by the Code will reach to the big screen to become a real legislative-blockbuster or will be kept in the drawer forever.


Back to reality with the Official State Gazette, this has been an extremely busy year in terms of new legislative developments, which, while being more modest in scale, have still had a definite impact on our day-to-day work. A good example of this is the legislative changes that have turned the Fund for the Orderly Restructuring of the Banking Sector (FROB) into a sort of financial-sector superhero.

November saw the approval of Law 9/2012 on the Restructuring and Resolution of Credit Institutions, a piece of legislation bristling with surprising powers and drastic rethinks, which gave the FROB an extremely powerful arsenal of measures to carry out the reorganization of the Spanish financial sector, drawing its inspiration from the Memorandum of Understanding agreed by the Kingdom of Spain with the European authorities just over a year ago now.

The FROB can now force shareholders to sell their bank shares to a third party or compel holders of hybrid subordinated debt/equity instruments to take a haircut "as if" the bank were going bankrupt, integrating the burden-sharing principle into Spanish law. What is more, in bank restructuring scenarios, it has the tools to render change-of-control clauses ineffective, or even to prevent the legislation on tender offers from being triggered.

To bolster that law, Royal Decree-Law 6/2013, on the protection of holders of certain savings and investment products and other financial measures, was published in March 2013. As a sequel, it further expands the FROB's powers and, in the context of so-called liability exercises relating to hybrid instruments (basically, preferred participations) and subordinated debt under Law 9/2012, its fundamental aim is, on the one hand, to monitor any claims by customers against the FROB's investee financial institutions, due to the possible misselling of these complex products and put in place flexible dispute resolution mechanisms (mainly in the form of arbitration) in certain cases, and on the other, to offer, on an exceptional basis, liquidity for the shares that the holders of these instruments will receive in exchange, since such shares will not be listed on any official market, involving the Deposit Guarantee Fund (another superhero in the making) for this purpose.

(Regulatory) Big Brother

The last of the noteworthy new features this year premiered on June 4, with the publication of Law 3/2013. This Law makes far-reaching changes to the existing system of regulatory supervision by creating a new Big Brother or Super Regulator: the National Markets and Antitrust Commission (CNMC).

This new super agency will swallow up the existing National Antitrust Commission and the majority of the existing industry supervisory authorities, namely, the National Energy Commission, the Telecommunications Market Commission, the Rail Regulation Committee, the Airport Economic Regulation Commission and the National Postal Industry Commission. The Law also drops plans to set up a future National Gaming Commission and a State Council for Audiovisual Media. However, financial supervisory authorities (the National Securities Market Commission, Bank of Spain) and the Nuclear Safety Council are not included within the scope of application of the Law and therefore remain as separate regulators.

The Law merely sets out the new institutional framework, leaving the legislative content in the areas of antitrust law and compliance largely untouched. In particular, the definitions of 'prohibited conduct', the system for controlling concentrations and the rules on monitoring State aid remain unchanged, as do the specific rules on the different regulated sectors.

The creation of the CNMC stems from a critical review of what the Preamble to the Law calls "the proliferation of bodies with supervisory powers," a situation in practice that can undermine legal certainty and institutional confidence. The new approach should allow economies of scale to be harnessed and an integrated view to be taken, in line with trends observed in certain neighbouring countries. At the same time, the Law overhauls the powers attributed to the newly integrated authorities, stripping them of those that do not require the involvement of an independent authority and transferring them to the relevant government ministries in each field.



Fernando Vives

About the author

Practices in the areas of corporate/M&A, private equity, securities market law, banking and finance and insurance. Specialises in major transactions including regulatory matters concerning listed companies. Most recently advised in the €405 million sale of Seguros Groupama (2012), the €6.5 billion merger of Iberia and British Airways (2011) or the €5 billion acquisition by BBVA of 24.9% in Garanti (2010).

Professional Memberships: Madrid Bar Association. Commercial Law Professor (ICADE).

Career: Doctor in law (Cum Laude) and law and economics graduate from ICADE. Joined Garrigues in 1986 becoming partner in 1998. Head of the Corporate/Commercial Law (2001-09). Managing Partner since September 2009.