Practical Guide To International Debt Collection in Spain

Practical Guide

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Spain

Is there a minimum amount to start a legal action?

In Spain, there is no minimum amount required to start a judicial process. Even so, the costs to carry it out may cause it to be inconvenient. In general, it is considered that a claim below €2,000 is uneconomical due to the costs involved in its recovery.

Will the amount due condition the type of procedure?

There are two standard procedures, which depend on the amount involved: the Verbal procedure (for claims up to €6,000) and the Ordinary procedure (from €6,000).

However, the most common way to start a recovery claim is the Summary Process (Proceso Monitorio) independently of the involved amount. Although no minimum amount is foreseen, as mentioned in the previous question, under €2,000, the claim may be uneconomical due to the costs involved.

The Summary Process has some requirements regarding the documents that must be submitted to the Court. According to the Law, one of the following must be provided:

  1.  documents in which the debtor has participated — in a broad sense— (such as with their signature, their stamp or similar); or
  2. (2) invoices, delivery notes, or other documents that can usually prove the relationship between debtor and creditor.

In practice, courts have followed different approaches and have interpreted these requirements differently, so, in order to increase the possibilities of success, it is always recommended to provide invoices, delivery notes, orders, and, where appropriate, the contract evidencing the relationship between the parties.

Once the Summary Process has started, the following steps can be summarized as follows:

  • If the debtor pays within 20 days from the date they receive the judicial requirement, the process is terminated.

  • If the debtor does not respond within the 20-day period, the process is transformed into a Standard enforcement procedure for the amount of the debt, plus 30% to cover the costs of enforcement and interest. The term to have the judge's decision on the enforcement may be one month from the end of the 20-day period.

  • If the debtor objects within 20 days, the procedure will be transformed into a Standard process, which, depending on the amount, may be verbal or ordinary. Once the process has been transformed, it is difficult to estimate the resolution deadlines, although it is possible that the Judgement could be issued in 6 months. In any case, this can vary greatly depending on the court, procedural incidents that may arise, possible counterclaims, etc.

The Summary Process is very advisable when it comes to unpaid invoices, although the creditor could also directly use the Standard Process. In cases where there is not exactly a claim for unpaid invoices but another type of economic claim (such as civil liability, compensation for clientele, etc.), the Standard Process is the only possibility.

On the other hand, if the debt was supported, not only with invoices but also with promissory notes (bills of exchange, checks, promissory notes, etc.), there is the possibility of claiming their payment directly in an enforcement procedure.

Is it mandatory to send a warning letter before taking legal action to collect a debt?

Although sending a warning letter is not mandatory before starting legal action, it is common and advisable to do so as a preliminary step. In doing so, it is advisable to take into account several relevant tips:

  1. It is advisable that the letter should be prepared and sent by a lawyer because there are certain content and form requirements according to which the debtor will be obliged to pay the costs of the process that follows.
  2. The letter should be as simple as possible, brief, and without unnecessary warnings. According to our experience, the most effective letters are those sent by a lawyer who simply communicates the decision of the creditor to start a court procedure if the debt is not paid within a certain period.
  3. We also recommend an accurate calculation of the interest on the debt. This is an amount that can be a relevant one and can be an encouraging element for the debtor to pay or to reach an agreement.
  4. It is finally advisable to send the letter once the creditor has all the documents to start the judicial process so that it will be possible to immediately file the claim in case the debtor does not pay within the given period. Warnings that are not followed with such a reaction are often counterproductive, and, in our experience, they further encourage noncompliance.

What are the best practices for creditors to increase the possibility of recovering the debt?

In general, any evidence that documents business relationships can be useful: correspondences, messages, witnesses, third-party documents, and any other possible evidence that can prove the relationship between the parties.

We recommend properly documenting the relationship with the assistance of an attorney at each step, taking as many of the following documents and precautions as possible:

  1. Signed contracts, containing the obligations of the parties.
  2. Organize orders for goods or services with detailed written documents.
  3. Try to ensure the solvency of the debtor or agree on guarantees such as first demand bank guarantees.
  4. Agree in writing any further modification of the obligations.
  5. Leave written evidence of any objection of the debtor for the goods delivered or services provided.
  6. Document the deferred payments through appropriate trade effects (such as promissory notes). In Spain, this will grant the creditor the possibility to follow a fast track procedure for debt recovery, in which the debtor's assets could be seized from the very beginning. In order to verify if these documents will provide sufficient proof for this privileged enforcement possibility, it is advisable to ask for specialized advice.
  7. Always try to find out and keep documents that can be used to locate assets of the debtor subject to future seizure if necessary (such as bank accounts, movable properties, offices open to the public, etc.)

How can a foreign creditor start a procedure for international debt collection in Spain?

In general terms, in order to start a judicial process, a lawyer and a court representative (“procurador”) are necessary. In exceptional cases, the Law allows starting Court procedures without a lawyer or a court representative. This is the case for Verbal Procedures claiming less than €2,000, Summary procedures, other special procedures, and for some formalities.

This being said, and even in cases in which it is not mandatory, it is never advisable to go to Court without at least being advised by a lawyer on the convenience of doing so.

When parties are represented by a lawyer and a Court representative, it is necessary to grant a special power of attorney. Although it is, in theory, possible to release such a power before the Court, in the case of foreign creditors, it is highly recommended to do it before a Public Notary and always with The Hague Apostille. This power will follow the draft the lawyer themselves shall provide.

In order for a legal person to claim before a court, in Spain, there is a judicial fee whose amount varies depending on the type of process: €300 for the Ordinary process, €150 for the Verbal one, and €100 for the Summary procedure. Natural persons are exempt from paying these fees.

In many cases, and particularly in those where the parties do not wish to stop their relationship, it is very convenient first to try mediation as an alternative conflict resolution procedure. Mediation allows the parties to continue their relationship, saves time, is less expensive than a complete court procedure, offers the possibility for the parties to discuss different alternative solutions to their situation, and in Spain, can be organized with prestigious institutions and well-trained mediators. In addition, Courts usually hold litigants in good esteem who have first tried to resolve their conflict by alternative means judicial proceedings.  

Which documents are necessary for the debt collection in Spain?

In Spain, there is not a special form required for most of the contracts (there a few exceptions, such as real estate donations, for example). Therefore, the main element to verify before making any decision to recover the debt before a court will be how to prove the debt.

As we have pointed out in Question 2, there are formal requirements to show evidence of the debt only when a Summary process begins. If the creditor does not have the documents required by the Law, it is advisable not to start this procedure.

In Ordinary proceedings, debts can be proven by any means admitted by law, including witnesses, legal or judicial presumptions, and even the debtor's conclusive acts. Some of this evidence might be provided with the claim (for example, documents); others shall be proposed and carried out in a second step of the process (for example, witnesses).

This being said, and although the different possibilities for providing evidence, Courts usually prefer certain evidence to others. Although in Spain, there is the principle of free evaluation of evidence by judges, conclusive documents will always be better evidence than witnesses, for example. Therefore, the better a debt can be evidenced with documents, the more possibilities there will be to overcome in Court, or to reach a good agreement.

What happens after the first demand for payment?

If the Court procedure has not still been initiated, and only a warning letter has been sent, the debtor's actions will have consequences depending on the answers they may provide, if any (for instance, if they refuse or contest the relationship or the amount, or if they include other counterclaims, or if they simply do not answer).

If a recovery Court process (either Verbal or Ordinary) has been initiated, the debtor's acceptance and payment may imply their obligation to also pay procedural costs if it has been previously required by any recorded means. If the debtor opposes, then the trial will continue in its different phases.

However, if a Summary process has started, there are several possibilities:

  1. If the debtor pays within 20 days of being required, then the procedure will be terminated. In this case (although the courts do not always accept it), the debtor may be condemned to pay the procedural costs if they were previously and formally required to pay.
  2. If the debtor objects to the payment, the Summary procedure will be transformed into a new procedure (Verbal or Ordinary) depending on the amount (see question 1).
  3. If the debtor does not pay nor opposes, an executive process will continue against them, and their assets may be directly seized.

Can interim measures be taken?

In general terms, the best opportunity for the creditor to start any legal claim is to find out, with the help of al lawyer, as much as possible on the solvency of the debtor.

In addition, there are several precautionary measures that can be taken to ensure the effectiveness of a judgment.

Very generally, in order to start this precautionary measures procedure, it is necessary:

  1. to prove that there is a real risk of insolvency of the debtor due to the procedural delays; and
  2. (2) that the action to be initiated has the appearance of viability.

On the other hand, the party asking for the precautionary measure will be required to offer a guaranty enough to back possible damages that may be caused to the debtor.

That being said, the precautionary measures procedure shall be considered very carefully in order to have all the steps and legal requirements fulfilled. Otherwise, the creditor takes the risk of being condemned to pay the costs of this phase of the procedure.

If, for any reason, the recovery was not possible, is there any other action that the creditor could take to write off such debt in its accountancy?

In the event of insolvency of the debtor or impossibility of collection, the safest and most effective way to obtain a document that allows the credit to be taken as a loss, and obtain the tax benefits that this entails, is to try to claim the debt through a lawyer.

In some cases, it is possible to obtain a judicial document proving the insolvency or, at least, to obtain a certificate issued by the lawyer who followed the case, attesting the difficulty or impossibility of such collection. This certificate is valid for these purposes for many European tax authorities.

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