This article appeared on ThoughtLeaders4 FIRE Magazine, Issue 2, August 2020 and is reproduced by kind permission of ThoughtLeaders4 FIRE
Dowload this article in PDFSpain, despite being a continental jurisdiction, has interesting asset recovery methods that are unheard of in other countries of the same legal tradition.
The current existence of these methods is part of a modernization effort of the Spanish judicial system experienced in recent years. This effort has led Spain to have somewhat different litigation tools than those typically available in other continental jurisdictions. This is true not only in terms of asset recovery.
The Spanish asset recovery system at a glance
First of all, it should be noted that Spanish law does not recognize banking or tax secrecy as barriers to asset recovery. On the contrary, in the enforcement of precautionary measures as well as of final legal titles, the collaboration of both banking entities and tax authorities is expected.
In addition, this collaboration occurs regularly through electronic means. Amounts existing in the debtor’s bank accounts can be frozen by Spanish courts through electronic orders sent to a centralized database containing information on all Spanish bank accounts.
At the same time, the cooperation of the debtor is also expected through asset disclosure orders. Furthermore, Spain has both Real Property and Companies Registries. These are governed by generous transparency criteria and their information is accessible electronically, quickly and at a reasonable cost. They are available to the creditor who wishes to research his debtor’s solvency and/or bring asset information to the procedure.
Pre-litigation asset recovery
During the pre-litigation phase of asset recovery, the features of the Real Property and Companies Registries are certainly of interest for the creditor.
The Real Property Registry contains information on all existing real estate in Spain. The search can happen both through the name of the owner or using the data of the property (address, property number, etc.). The information is generally obtained through the website of the Spanish Institute of Registrars. The current cost is € 9.02 (VAT included) per property. Information is usually received by email in less than 24 hours.
An interesting element of the Real Property Registry is the possibility of researching past ownerships of a certain individual. Thus, it can be discovered whether a person who currently lacks real estate properties has owned them in the past. If so, it is possible to obtain the data of the current owner, as well as the date of the conveyance and the nature of the exact legal transaction that enabled the transfer of ownership (sale, donation, inheritance, etc.). This information can be of the essence in fraud cases. It enables to find out the possible existence of suspicious transactions aimed at concealing the assets of the debtor. In this way, crucial data is quickly and inexpensively obtained to determine the best recovery strategy under the circumstances.
For its part, the Companies Registry contains information on all the companies domiciled in Spain. The search can be carried out through the company data (company name, Tax Identification Number, etc.) or through the director’s name. For justified reasons (for example, in order to notify a claim), the postal address of the director can also be obtained by making a specific request to the corresponding Registry. On the contrary, the information on the shareholders of a company is not updated in the Registry. Information is only available on the shareholders who incorporated the company or who took part in a capital increase. Shares transfers are thus not registered.
Finally, there is also a Registry of Beneficial Ownerships that is available only to authorities and only affects entities that are registered in the Companies Registry (of which foundations or associations, for example, are excluded). Spain is still pending the transposition of the 5th Anti-Money Laundering Directive that should allow free access by any interested party to said Registry.
Litigation phase of asset recovery
For the purposes of enforcing a provisional measure, a judgement or any other equivalent enforceable title, it is possible to obtain the collaboration in asset recovery of banks and tax authorities. Banks must inform the court about the existence of all and any bank accounts owned by the debtor. Tax authorities must also inform the court about all the assets and sources of income that they have on record in relation to a certain debtor.
The information is obtained through the consultation of an electronic database available to all Spanish courts. Likewise, it is possible that the Spanish Courts order the electronic freezing of bank accounts, as well as of credits that the debtor may have against the Spanish tax authorities. Freezing can occur, on a good number of occasions, even without the debtor being aware of it. Indeed, in many cases, the debtor is only notified “ex post” of the existence of the enforcement against him and of the electronic freezing practiced.
Likewise, other third parties related to the debtor, such as his employer or other creditors, may be notified of the freezing of any amount they have to pay to the debtor (this instrument is known in some jurisdictions as “third party debt order” or “garnishment order”). Upon receiving notice of said freezing, such third parties are required to make available to the court the amounts they would have had to pay the debtor.
Finally, during the enforcement of a judgement or any equivalent enforceable title (but not for the purposes of enforcing a provisional measure), the debtor may also be compelled to disclose his assets. The lack of response or the indication of false information may lead to the imposition of periodic fines, or even to the commission of a criminal offence known as “enforcement obstruction”, which entails potential imprisonment of between 6 months and 3 years.
Third parties may also be forced to respond to court disclosure orders. In case of not responding or responding falsely, said third parties may also suffer the imposition of periodic fine payments, or may also even commit a criminal offence.
Conclusion
Spain is well equipped with strong civil asset recovery tools. These same methods are also available in criminal proceedings, notwithstanding the powerful tools available in the latter for the confiscation of the assets used to commit a crime and the profits resulting from it. Of course, all systems are perfectible. However, we can affirm that Spanish law is governed by the principle of asset transparency. Therefore, any creditor can be sure that if his debtor owns assets in Spain, he will be able to trace them relatively quickly and cheaply, with the support of the courts. Likewise, it will have such support at the slightest indication of fraud. In short, the instruments exist, you just need to know how to use them to try and get the most out of them.
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