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Analysis of the normative proposal of the General Council of the Judiciary to the Ministry of Justice in order to raise the state of alert and reactivate legal operators in the civil sector

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Analysis of the content and purpose of the proposals made by the Permanent Commission of the GPCJ regarding the measure of a general nature and those affecting the civil judicial order

On April 20st 2020, we learned of a proposal by the General Council of the Judiciary (hereinafter "GCJ") urging the Ministry of Justice to include, or take into consideration, a series of regulatory measures in the Royal Decree-Law on urgent measures for the Administration of Justice in relation to the management of the COVID-19 coronavirus pandemic, which the Executive is currently preparing in view of the rise in the state of alert and the consequent reactivation of legal practitioners.

The proposal is made up of a total of thirteen measures, six of which concern civil jurisdiction, two administrative and four social, in addition to a general measure relating to the calculation of administrative and procedural terms and deadlines interrupted and suspended as a result of the declaration of the state of alert.

Following, we will analyse the content and purpose of the proposals made by the Permanent Commission of the GCJ with respect to the measure of a general nature and those that affect the civil jurisdictional order.

FIRST MEASURE: Introduction of a precept in the Royal Decree-Law that establishes the rules applicable to the calculation of terms and periods interrupted and suspended because of the state of alert

  1. Content

It is clear that, in the legal field, the measures that have had the greatest impact are the 2nd, 3rd and 4th Additional Provisions of the14th March Royal Decree 463/2020, which declares the state of alert for the management of the health crisis situation caused by COVID-19, modified by 17TH March Royal Decree 465/2020, as well as the first section of 31st March Additional Provision 8 of Royal Decree-Law 11/2020, which adopts additional urgent measures in the social and economic field to deal with COVID-19, all of which relate to the calculation of administrative and procedural terms and deadlines that were interrupted and suspended as a result of the declaration of the state of alert.

In view of the controversy that these provisions have generated, the measure proposed by the GCJ aims to clarify these points, and regulate them in the following terms:

  1. Signalling by the judicial and administrative bodies, ex officio, of a new term in all those cases of suspension of actions subject to a term with cause in the state of alert.
  2. With regard to procedural time limits that have been suspended or interrupted, it is proposed that they be resumed, for the time remaining, from the first day on which the state of alert is not in force, with the following differentiation regarding the nature of the time limits:

o Within the periods established by days, the remaining periods will be counted as working or calendar days depending on whether the interrupted or suspended period was established in working or calendar days.

o In the periods established by months or years, in order to determine the final day of the period, the calendar days of the period of interruption or suspension will be added from the ordinary day of expiry, calculated from date to date.

  1. The above rule does not apply to the calculation of the period of time for lodging administrative appeals or for initiating other procedures of challenge, claim, conciliation, mediation and arbitration that replace them in accordance with the provisions of the Laws, in any procedure that may have unfavourable effects or a burden on the interested party, in which case the calculation of the period of time will be reinitiated in its entirety from the first business day in which the state of alert is not in force.
  2. As regards the limitation and expiration periods for the exercise of actions, it is proposed that they be restarted on the same terms as for the calculation of procedural periods.
  3. Purpose

The purpose of this measure, as well as the need for regulation of these issues, is, for procedural purposes, nuclear, since in order to avoid interpretations and, therefore, litigation, it is necessary for the legislator, ab initio, and in a clear and forceful manner, to feel the interpretative criteria with respect to the calculation of administrative and procedural terms and deadlines interrupted and suspended as a consequence of the declaration of the state of alarm, after its rise.  

SECOND MEASURE: Introduce via a transitional provision an exceptional procedure to resolve the ordinary procedures relating to general conditions of contract included in financing contracts secured by real estate whose borrower is a private individual

  1. Content

The GPCJ proposes in this second - exceptional - measure the creation of a procedural mechanism by

virtue of which, in certain types of proceedings, the act of prior hearing could be eliminated, leaving,

after the response to the defendant's demand, the orders seen to dictate sentence without the need for

any type of act in person.

The procedures in which the GCJ proposes to implement this measure should have the following characteristics:

  1. Standard procedures.
  2. Relating to general terms and conditions for financing contracts secured by property and real estate whose borrower is a private individual.
  3. Proceedings in which the plaintiff's status as a consumer is not in dispute.
  4. The previous hearing had already been scheduled.

In those procedures where these circumstances exist, the GCJ proposes the following mechanism:

  1. First, the parties in person would be granted a period of 10 days to decide on the necessity of the pre-hearing.
  2. If the parties agree that such an act is unnecessary, the case will be considered for judgment.
  3. If one or both parties consider it necessary to hold the hearing beforehand, it will be the judge who, in the light of the evidence already before him and the circumstances of each case, will decide whether to hold the hearing, and he may agree to hold it, or else order that the case be closed for sentencing without further formalities.
  4. Purpose

The purpose of this measure is none other than to alleviate the burden of accusations that the courts throughout Spain have, mainly the specialized ones, as a result of the large number of claims filed regarding the nullity of general conditions for mortgage loans (the so-called "mass" procedures).

The adoption of this measure, in addition to lightening the heavy schedules of the courts, would make it possible to avoid the common agglomeration of people at the doors of the specialized courts, which, until the state of alert was declared, had held a large number of preliminary hearings every morning, with the consequent agglomeration of lawyers, attorneys and inclusive parties.

THIRD MEASURE: Establish a procedural channel for the processing of all those claims that aim to modify certain contracts as a result of the situation created by the current crisis

  1. Content

Another aspect that has been written about and discussed during the period of the state of alert is the ensuing imbalance of contractual benefits that this situation is generating and may generate in the future.

The GCJ proposes the procedural regulation of the so-called rebus sic stantibus clause ("things standing thus") by proposing the creation of a summary and specific procedure for the prosecution of this type of lawsuit, which will certainly proliferate in the future.

In particular, it raises the possibility that, as with other types of procedure, claims brought for the purpose of modifying, in a supervening manner, certain contractual clauses with cause of action in the situation generated by the crisis, whatever their amount, will be dealt with through the channels of oral proceedings with certain particularities.

In order to have access to this summary procedure, the GCJ proposes that the following requirements be verified beforehand:

(i) Contracts which are the subject of the procedure must have been concluded prior to the declaration of the state of alert.

(ii) Documentary evidence of an attempt at out-of-court settlement (negotiation) shall be required.

As regards the procedural aspects of the case, the GCJ proposes the following:

(i) Cumulation of proceedings would not be allowed.

(ii) In the event of default of the defendant, the court may, even without receiving a trial by probation, give full probative value to the documents accompanying the complaint, and hold the defendant to be liable for any acts of which the defendant has personally been involved and which are established as being wholly prejudicial to him.

(iii) If the defendant is found to have defaulted, the case shall be closed for judgment unless the defendant requests a hearing within two days, giving reasons for the decision.

(iv) If a counterclaim is filed and admitted because of a due connection between the claims made in that document and those that are the subject of the main claim, it shall be answered orally at the beginning of the hearing referred to in Article 443 of 7th January Law 1/2000 on Civil Procedure (hereinafter, the "LCP") once it has been verified that the dispute between the parties continues.

(v) The possibility of an oral judgment, and in case the parties agree with it, the possibility of agreeing, in the same act, on the finality of the judgment.

(vi) The written judgment shall be delivered within five days after the hearing.

(vii) The processing and resolution of this procedure shall be preferential in all its instances.

  1. Purpose

The purpose of this measure is to anticipate, through the creation of this summary procedure, the foreseeable proliferation of procedures in which the modification of what was agreed is sought as a cause in an eventual imbalance of what was agreed and as a consequence of the crisis. 

In addition and taking into account the proposed requirements for access to this procedure, it is intended to encourage the parties to negotiate out of court beforehand, and thus avoid an increase in litigation.

MEASURE FOUR: Modification of the current regime of oral eviction proceedings for non-payment.

  1. Content

The GCJ proposes to amend Article 444.1 of the Civil Procedure Law in such a way that, in eviction procedures due to non-payment -regardless of whether the lease is for housing or business use-, the impossibility of complying with or unbalanced contractual benefits should be included as a reason for opposition, provided that such circumstances are caused by the health crisis situation generated by the evolution of the COVID-19.

  1. Purpose

The purpose of the CGJ is to prevent evictions caused by the inability of the tenant to pay the rent, provided that such non-payment is due to the current economic and health crisis generated by the COVID-19.

Certainly, the current regulation of the eviction procedure due to non-payment prevents the defendant from invoking, as a cause for opposition, circumstances of force majeure or from invoking the rebus sic stantibus clause.

The proposal, as it stands, offers two mechanisms for opposing the defendant which, a priori, appear to be freestanding:

  1. The impossibility of fulfilling the payment obligation.
  2. The ensuing imbalance of contractual benefits.

The first of these refers to those situations where the defendant's compliance with its payment obligation has been directly impossible -force majeure-, while the second assumption suggests the opening of a mechanism for reviewing the terms and conditions of the contract -rebus sic stantibus- at the seat of opposition to eviction.

With the implementation of the first of the causes for opposition (impossible to comply with), the eviction of the tenant who has not been able to pay the rent due to the alarm situation would be avoided -without prejudice to the fact that the amounts due may or may not be payable through other procedures.

However, the scope of the opposition would be greater if the second proposed cause (the ensuing imbalance of the contractual benefits) were definitively established, since it would expressly include the possibility that, despite the defendant's economic capacity to pay the rent, he might present the non-payment -total or partial- as a measure that is justified, proportional, reasonable and respectful of the balance between the parties' benefits, as a reason for opposing the eviction.

MEASURE FIVE: Implementation of an alternative dispute resolution mechanism for quantity claims in the event of cancellation, denied boarding or delay under Regulation 261/2004 establishing common rules on compensation and assistance to passengers in the event of denied boarding or delay

  1. Content

The fifth proposal of the GCC is to establish a mechanism for the alternative resolution of disputes relating to quantity claims in the event of cancellation, denied boarding or delay under Regulation 261/2004, which lays down common rules on compensation and assistance to passengers in the event of denied boarding or delay.

The measure has three main points to be considered:

(i) That the State Aviation Safety Agency (hereinafter "EASA") be designated as the competent body to resolve this type of complaint, insofar as it is the body responsible in Spain for supervising compliance with Regulation (EC) No 261/2004 of the European Parliament and of the Council of 11th February 2004.

(ii) That the submission of the dispute to this body is mandatory for the parties.

(iii) That the resolutions issued by EASA are binding for the parties, without prejudice that such resolutions may be challenged before the Commercial Courts.

  1. Purpose

The GCJ transfers to the executive the processing and resolution of thousands of air transport claims, which generates delays in the processing of other more important cases in the Commercial Courts.

In this context, the GCJ considers it an absolute priority to arbitrate measures that contribute to relieving the Commercial Courts of work - as was done with the general conditions of the contract - so that they can focus their efforts on the processing and resolution of other types of proceedings, in particular, bankruptcy proceedings.

The GCJ considers that the health crisis caused by the COVID-19 has had a significant impact on air transport, as many flights are delayed or cancelled during the days prior to the declaration of the state of alarm or even during its validity. Therefore, it is reasonable to think that the demands of this nature that are made after the conclusion of the state of alarm are in the thousands, thus contributing to the collapse of some courts that are already overloaded with work.

Therefore, the GCJ considers that the derivation of these claims to an extrajudicial procedure of satisfaction of controversies will contribute to alleviate this situation in an immediate and effective way, avoiding the collapse of the Commercial Courts.

SIXTH MEASURE: Reform of 9th July Law 22/2003, on Bankruptcy (hereinafter "LC") with the temporary introduction of the so-called "Counterclaim”

  1. Content

The GCJ proposes to reactivate the 3rd Transitional Provision of the LC and the processing of the counterclaim or modification of the bankruptcy agreement that was foreseen at the time by Royal Decree 11/2014 and Law 9/2015, of 25 May, on urgent measures in bankruptcy matters.

In summary, the proposal contemplates the inclusion of the following scenarios in the 3rd Transitory Provision of the LC:

  1. The impossibility of considering the insolvency agreement as not having been fulfilled due to the declaration of the state of alert and up to six months after its completion, in the event that the debtor has not been able to regularly meet all the payments committed in the initial agreement.
  2. The possibility that the debtor or creditors representing at least 25 percent of the total liabilities existing at the time of the default may request the modification of the agreement.

The first of these refers to those situations where the defendant's compliance with its payment obligation has been directly impossible -force majeure-, while the second assumption suggests the opening of a mechanism for reviewing the terms and conditions of the contract -rebus sic stantibus- at the seat of opposition to eviction.

  1. Purpose

The purpose of this temporary measure is to avoid that, as a consequence of the state of alert created by the health crisis, those companies that cannot meet the payment commitments assumed in the bankruptcy agreement, enter into bankruptcy liquidation as a result of a default incident initiated at the request of a creditor.

The aim is to give companies a reasonable period to overcome the possible economic crisis in which they are immersed due to force majeure (COVID 19).

SEVENTH MEASURE: Reform of the LC with the introduction of an article 148 bis, allowing the possibility of concluding the competition without the habitual residence

  1. Content

The GCJ proposes to introduce an article 148a in the LC establishing the possibility that the debtor's habitual residence will not be realised in the phase of the bankruptcy liquidation.

The main requirements for this to operate are as follows:

(i) That the home is mortgaged and that the mortgage guarantees a debt of the bankrupt.

(ii) That its value does not cover all the debt guaranteed by the mortgage that remains to be paid.

(iii) That the mortgage loan is up to date -or the mortgagee consents to it-.

  1. That the Real Estate Tax and the community of owners' fees are up to date.
  2. That the monthly amount of the mortgage is not excessive in comparison with a rent.
  3. Purpose

The GCJ transfers to the executive branch that the current regulation does not allow the conclusion of the bankruptcy proceeding nor, therefore, access to the benefit of the exemption of unsatisfied liabilities (BEPI), without having realized all the assets and rights of the debtor (including, therefore, his habitual residence), so that, if this measure is not adopted, many families would be evicted. This circumstance, in addition to seriously affecting them, may be incompatible with the necessary social confinement and distancing measures agreed by the Government

Therefore, the purpose of the measure is to avoid the need to deprive the debtor of his habitual residence when the realization of the property will only serve to partially pay the privileged creditor.

We shall have to wait and see how the GCJ's proposal is finally accepted and whether the legislator finally adopts any of the measures proposed, since, although it is true that some of them would have a clarifying and integrating effect, others would involve a real, albeit transitory, regulatory modification in the procedural field.  

You can see the article in Lefebvre-El Derecho

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