Vol 4 (2007) - Issue 2

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The Spanish Bill on Concurrence and Priority of Claims upon Individual Enforcements

1. Introduction

This article will discuss the Bill on concurrence and priority of claims upon individual enforcements,1 which the Spanish Government introduced into Parliament following the mandate included in the new Insolvency Law2 (although with some delay). The Bill aims to change the current rules governing priority of claims where several individual enforcements (as opposed to universal enforcements, which are subject to the rules on insolvency proceedings) are brought against the assets of a debtor.
The preamble to the Bill highlights what its main objectives are:
a) The Bill intends to make the provisions governing priority of claims upon individual enforcements similar to those relating to universal enforcements (i.e. insolvency proceedings), so that, as a general rule, the kind of enforcement pursued (whether individual or universal) does not alter the rules governing the relationship between the different creditors of a debtor.
b) Along the lines of insolvency laws, the Bill aims to reduce the multiple privileges and preferences of creditors, which have been progressively increased in several very different laws in addition to those initially contemplated in the Civil and Commercial Codes.
c) The Bill redefines specially privileged claims so that, instead of these being defined on the basis of the nature of the charged asset (movable or immovable),
the features of the protected claim determine if it is privileged and to what extent.
d) Claims established by definitive arbitration awards are to have the same treatment as those established by public deed or judgment.
e) The Bill expressly contemplates that a law or a contract may provide for certain claims to be subordinated
to those of ordinary (non-privileged) creditors.

2. Main features of the new Bill

2.1. General considerations
If passed into law, the Bill will modify the Civil Code in order to achieve a systematic and ordered set of provisions within a single legal text, which should apply when two or more creditors seek enforcement over the assets of a debtor, out of the orbit of insolvency proceedings.
However, the rules on privileges and order of priority included in the specific legislation governing enforcement or liquidation proceedings affecting financial institutions (credit institutions, investment firms, insurance institutions, members of securities markets and members of securities payment and settlement systems) will continue to apply. The Bill will only apply subsidiarily to these norms.
2.2. Classification of claims: specially and generally privileged claims
The Bill follows the traditional classification between specially and generally privileged claims.
Unlike the provisions currently in force, the Bill classifies specially privileged claims on the basis of the features of the claim rather than on the basis of the nature of the relevant asset (movable or immovable). Additionally, the Bill deletes references to some other specific special privileges in the current law that have now become obsolete (e.g. references to claims for seeds and expenses of cultivation, etc.).