Share:

Subcontractor protection in Spain in the construction sector

Subcontractor protection in Spain is a matter of interest because it is an area of construction law with great disparities among different EU countries.
These disparities become particularly apparent when the principal or the contractor become insolvent.

Unlike other jurisdictions (for example, Germany), our laws do not contemplate the existence of “trustee-like” or “escrow” accounts for the sake of subcontractor protection in Spain.

Therefore, under Spanish law, the contractor does not have to deposit the amounts received from the principal in any special accounts for the purpose of making payments to the subcontractors. This is indeed an handicap for subcontractor protection.

 

Direct action against the principal for subcontractor protection in Spain

In fact, subcontractor protection in Spain consists mainly in a direct action that the subcontractor has against the principal (Article 1597 of the Spanish Civil Code).

Consequently, under Spanish law, should the contractor have a past-due and claimable credit against the principal or the contractor, the subcontractor may file a direct action against the principal, limited to the amount of the outstanding debt of the principal towards the contractor.

However, subcontractor protection in Spain diminishes in case of insolvency of the principal or the contractor, as the direct action of the subcontractor against the principal disappears in such cases.

Insolvency of the principal and subcontractor protection

Indeed, in case of insolvency of the principal, Article 50 of the Spanish Insolvency Law establishes that the direct action of the subcontractor against the principal becomes inadmissible from the date when the insolvency of the principal is declared.

Also, Article 51 bis of the Spanish Insolvency Law orders all direct actions pending at that date to be immediately stayed.

Insolvency of the contractor and subcontractor protection

In our opinion, the same can be said in case of insolvency of the contractor, even though the situation has been controversial among Spanish scholars and case-law.

Indeed, before 2011, it was widely accepted that, even if the contractor had been declared insolvent, the subcontractor could still use its direct action against the principal, meaning that the outstanding debt of the principal vis a vis the contractor could still be collected by the subcontractor outside of the insolvency proceedings of the contractor.

However, from 2013, the Spanish Supreme Court has modified its approach based on the reasoning that the direct action does not confer any guarantee nor preferred credit in favor of the subcontractor.

The Spanish Supreme Court has since then considered (Judgments nº 322/2013 of 21 May 2013, nº 756/2013 of 11 December 2013, nº 691/2014 of 26 March 2014 and nº 397/2016 of 14 June 2016) that the direct action of the subcontractor against the principal can not be used after the declaration of insolvency of the contractor, as this would go against the universality and the “vis attractiva” principles of the insolvency proceedings of the contractor.

Do not hesitate to contact us using the form below should you have any query.

 

Photo: “Construction” by DocChewbacca under CC BY-SA 2.0 license

Leave a Reply

Your email address will not be published. Required fields are marked *