The Pérez-Llorca/IE Law School Chair launches a decalogue of proposals to attract more international investment to Spain

The Chair proposes to improve the regulatory and judicial framework, to approve a new labour statute, and to speed up and facilitate the public listing of Spanish companies on the stock market
 

The Pérez-Llorca/IE Chair in Business Law, an initiative of Pérez-Llorca and IE Law School (IE University), has prepared a document or decalogue presenting a series of proposals in the areas of the securities market, business law and practice, labour, tax, international regulation and dispute resolution, among others, with the aim of attracting more international investment to Spain.

This proposal stems from the conclusions of the conference "Spain, market of opportunities", organised by the Chair in collaboration with LLYC, which brought together academics, investors, lawyers, experts, supervisors and regulators, both Spanish and foreign.

"The aim of this conference is to highlight the potential of our country in terms of investment and talent, as well as to analyse the best practices of other jurisdictions in order to face the main challenges of the Spanish market", said Eduardo Arbizu, Of Counsel at Pérez-Llorca and director of this conference.

The proposals include:

- To improve the regulatory and judicial framework through the full digitalisation of the system and the specialisation of judges.

- To provide more resources to the administration responsible for granting authorisations for
foreign investment

- To make the IPO process for Spanish companies more attractive, more agile and simpler.

- To bring forward the implementation in Spain of the measures to modernise the European Commission’s proposed "listing act" regime.

- To approve a Companies Code that regulates in a flexible and simpler way the incorporation and operation of unlisted companies.

- To create a legal-contractual framework that enhances the dimension of unlisted Spanish companies so that they can compete internationally in digital matters, technological innovation and export capacity.

- To create an independent body to advise the Government and Parliament in the phase of defining tax policy.

- To reform and modernise the mechanisms to ensure certainty in the interpretation and application of tax rules.

- To adopt a new 21st century Labour Statute, with greater adaptability of labour law to anticipate changes in the labour market.

- The regulation of a specific procedure for the recognition of foreign awards.

Regulatory and judicial framework as a boost to investment in Spain

In relation to the regulatory and judicial framework, the Chair proposes the creation of an independent body similar to the Regulatory Scrutiny Board of the European Commission, with jurisdiction over the entire Spanish legal system, which can assess the quality and impact of the most significant regulations.

The Chair also proposes to improve the effectiveness of previous control and post evaluation of regulatory quality, in coordination with the impact assessment of public policies, and to reduce the scope of administrative authorisations in the field of foreign investment to non-EU countries.

On this point, the Chair considers it necessary to provide resources to the administration responsible for granting foreign investment authorisations, as well as to improve transparency in the management of the procedure through the publication of recurrent criteria on substantive issues that can provide clarity and reduce procedural times.
 
With regards to the judicial system, it is essential to fully digitalise the judicial file; the interoperability of the procedural management systems of the Autonomous Communities; the reorganisation of the judicial office to make it more efficient, dynamic and accessible; the introduction of independent advisory bodies in matters requiring complex technical assessments beyond the legal, particularly in the Supreme Court; and to deepen the specialisation by duly adapting training programmes for judges.

A more attractive, streamlined and simpler securities market

With regard to the Stock Market, the Chair stresses the need to make the process of listing Spanish companies on the stock market more attractive, agile and simple.

To this end, it suggests bringing forward the implementation in Spain of some of the measures to modernise the regime already contained in the European Commission’s listing act proposal, such as reducing the percentage of initial free float required or simplifying the verification of the prospectus. Eliminate the special features of the Spanish rules that do not provide appreciable advantages and improve the fiscal treatment of equity financing.

Similarly, it is advisable to modify the substantive regulations of listed companies to improve their attractiveness for family businesses and for private equity and venture capital funds, as well as to adopt the most advanced European models: making the system for attributing voting rights to shareholders with a majority or controlling stake more flexible, beyond the current system of loyalty or multiple voting shares and non-voting shares so that, with transparency and knowledge of the market, corporate solutions adopted in other EU countries that have proved very attractive to international investors can be implemented in Spain.

With regards to streamlining the time and processes for regulating takeover bids, the Chair points out the need to eliminate the difficulties that increase risk and increase volatility and uncertainty in this type of transaction, as well as allowing administrative authorisations to be processed and obtained in parallel to the offer period.

A competitive framework to enhance the size of unlisted companies

In order to provide a competitive framework for unlisted companies, the Chair underlines the opportunity to approve a Companies Code that regulates the incorporation and operation of unlisted companies in a flexible and simpler way.

In other words, to establish a simpler and more flexible regulation of limited liability companies that is more appropriate for the different forms of organisation of unlisted companies: family companies, SMEs, industrial and service companies, start-ups, venture capital, private equity or groups, among others. Improving the coordination of regulatory processes in the European Union and in Spain is also essential to achieve this objective.

It is also necessary to establish a legal-contractual framework that enhances the dimension of unlisted Spanish companies so that they can compete internationally in digital matters, technological innovation, export capacity, financing instruments, guarantees, rights and duties in environmental and climate matters, distribution, logistics and transport.

Finally, the Chair points out that another measure would be to facilitate and simplify access to the Commercial Register for the incorporation and performance of corporate operations. Strengthening the publicity and transparency function of the Commercial Register. Intensifying the use of telematic means. Reducing the costs of accessing and disseminating information from the Commercial Register. The internationalisation of the registry system.

Improving the quality of taxation, legal certainty and institutional architecture

With regards to taxation, legal certainty and institutional architecture, the Chair proposes the creation of an independent body to advise the Government and the Parliament (on an
 
The Chair proposes the creation of an independent body to advise the Government and Parliament (on an ongoing basis, not as temporary groups of experts) in the tax policy definition phase, allowing for the stable introduction of technical criteria to serve as a counterbalance to strictly political criteria.

In this respect, there are several models in comparative law of bodies that help the Government or Parliament to define a sound tax policy, such as Australia, Sweden, New Zealand or the United States, so that consideration should be given to their introduction in Spain and which would be most appropriate for our legal culture. In Spain, the AIREF could be used as a reference, but the mission of these bodies in relation to the tax system is different from that of the AIREF in its functions and scope.

Such bodies, of which there are precedents in comparative law, will also allow Parliament and society to carry out greater control of the quality, proportionality and adequacy, in a transparent manner, of tax rules. Likewise, such mechanisms make it possible to assess and take a position on international initiatives and their suitability for the country. At the same time, this type of bodies may assume the function of making proposals to amend the existing rules in the most controversial and obsolete aspects and to improve the position and competitiveness of the tax system.

On the other hand, it is recommended to reform and modernise the mechanisms that guarantee certainty in the interpretation and application of tax rules. The Chair asserts that a review of the mechanisms that provide certainty and legal certainty to taxpayers in the Spanish system is necessary, since the existing ones (for example, the traditional tax consultations) are either insufficient or can be improved or do not fully guarantee that subsequent disputes with the tax administration can be avoided.

Therefore, there is a pressing need for greater horizontal (Directorate General of Taxes - Tax Agency) and vertical (State - Autonomous Communities - Local Corporations) coordination in the interpretation and application of the tax system. In comparative law, there are also models of public entities, similar to the Taxpayer Ombudsman and with reinforced powers with respect to the Spanish model, which mediate between the Tax Administration and taxpayers in the most controversial cases and allow the latter to complain quite effectively in cases of erroneous, excessive or arbitrary application of tax rules without the need to go to court.

Such institutions are extremely useful for the protection of taxpayers’ rights and the guarantee of legal certainty (as shown, for example, by the experiences of Mexico and the United States).

The Chair warns of the urgency of revising the obsolete tax dispute resolution system in order to ensure a transition to a more efficient one, which overcomes the limitations of the current one (resolution times, accuracy of resolutions in a highly specialised sector, etc.), which will result in greater legal certainty, but, above all, in a release of resources to undertake investments and productive activities.

In the framework of comparative law, two trends can be observed in countries close to Spain that seek to ensure that decisions are obtained that resolve tax administration-taxpayer disputes with a high degree of specialisation in tax matters, improving the quality of rulings and reducing tax litigation times in order to free up resources that can be used for productive investment.

In this respect, firstly, the establishment of tax arbitration bodies as an alternative to ordinary courts (e.g. as in Portugal) or, secondly, the regulation of tax courts specialised by subject matter and composition (e.g. this is the direction of the recent reform in Italy).

Employment and labour talent: a new Labour Statute for the 21st century

In terms of employment, the Chair emphasises the proposal to promote a stable programme of public support and incentives for the technologicalisation and green transition of SMEs and the self-employed.
 
It also advises the promotion of a social pact for training for employment, through public-private collaboration and in cooperation with companies, to update and adapt university and vocational training degrees to the new training requirements, diversifying the offer of specialised short-cycle degrees, especially in scientific and technological disciplines.

Finally, it proposes launching a process of social dialogue for the approval of a new Labour Statute for the 21st century, with a greater dose of labour adaptability to anticipate changes and avoiding excessive regulation and public interventionism, by referring to collective bargaining the main capacity to regulate labour relations.

Spain as a forum for international dispute resolution

To improve the resolution of international disputes, the Chair proposes the regulation of a specific procedure for the recognition of foreign awards.

They recall that Article 46.2 of the Arbitration Act refers to the rules on the recognition of judgments when configuring the procedure for the recognition of foreign awards. This procedure is established in Art. 54 of the Law on International Judicial Cooperation, although it is a procedure that contemplates a single written procedure for each party, without the possibility of additional pleadings, without the possibility of holding hearings and with the mandatory intervention of the Public Prosecutor’s Office. This scant regulation is often supplemented by the judicial practice of the different High Courts of Justice, a practice that is not always homogeneous.

Therefore, in order to ensure a regulated procedure, adapted to the specificities of this type of case, homogeneous throughout the national territory and therefore respectful of the principles of equality, hearing and contradiction, it would be advisable to introduce the appropriate amendments to the Arbitration Act and/or the International Judicial Cooperation Act to develop a procedure that contemplates the possibility of additional pleadings, where appropriate, the taking of evidence, the holding of hearings and the scope of the intervention of the Public Prosecutor’s Office.

The Chair also calls for reflection on whether Spain should have judges specialised in international disputes. In this sense, among others, countries in Spain’s economic, political and commercial environment have for some years now been providing themselves with Judges and Courts specialised in international commercial disputes, complementary to and not exclusive of the International Arbitration Courts. This is the case in the United Kingdom, France, the Netherlands, Germany, Belgium and Switzerland. These types of disputes require specialisation in certain matters of a certain complexity, both technical (international trade law, private international law, the need to apply foreign law, knowledge of the practices and customs of international transactions or the need to enforce decisions in other jurisdictions, among others) and practical (documentary or witness evidence in one or more languages other than the official languages).

In short, the existence of these courts, together with the potential development of international treaties for the recognition of their decisions and the possibility for the parties to voluntarily submit to them, regardless of whether or not there is a connection with Spain, would favour and increase: economic exchange with Spain’s trading partners, whether European or of course Latin American; Spain’s country brand and international prestige; the creation of economic and social value; and the internationalisation and competitiveness of the Spanish business network.

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