Spanish Legal System: Business, Competition & IP Law

Posted on Apr 6, 2025 in Law

Spanish Legal Sources and Hierarchy

National Laws

• Organic Law: Governs the development of fundamental rights and public liberties. Requires an absolute majority in the Congress of Deputies for approval.
• Ordinary Law: Approved by Parliament (requiring a simple majority in Congress). Organic and Ordinary laws are not hierarchically superior to each other but apply to different subject matters.
• Legislative Decrees: Issued by the government, consolidating existing rules based on parliamentary delegation.
• Decree-Laws: Issued by the government in cases of extraordinary and urgent need. They cannot affect certain basic state regulations and must be submitted to Parliament for validation.
• Regulations: A set of rules established by the government to execute laws.

Government Levels and Law

• Central Government Sources: Constitution, International Treaties, Organic Acts, General Acts (Ordinary Laws), Decrees issued by the government.
• Autonomous Community Sources: Statute of Autonomy, General Acts (regional laws), Decrees issued by the regional government.

European Union (EU) Law

• Primary Law: Founding treaties establishing the EU. Ratified by member state governments and applied within the national legal system.
• Secondary Law: Acts adopted by EU institutions (Parliament, Council, Commission). Generally, do not require national government approval for validity.
  • Regulations: Directly applicable and binding in all member states.
  • Directives: Binding on each member state regarding the result to be achieved, but leave the choice of form and methods to national authorities.
  • Decisions: Binding in their entirety and specify those to whom they are addressed.

Business Structures and Liability

Patrimonial Liability of Individual Entrepreneurs

An Entrepreneur with Limited Liability (ERL) is:

• A natural person engaging in business activity with limited liability.
• This limitation typically affects only their principal residence, provided its value does not exceed €300,000 (or €450,000 in cities with over 1 million inhabitants).
• Requires compulsory registration at the Mercantile Registry.
• Requires registration at the Property Registry (for the residence limitation).
• Business documents must state ‘ERL’.

Types of Business Entities

1. Personal Company (e.g., General Partnership): All partners typically have unlimited personal liability for company debts.
2. Limited Partnership: Requires two or more partners. Features general partners (unlimited liability, manage the business) and limited partners (liability limited to their contribution, do not manage). Partners typically receive a flow of income.
3. Limited Partnership by Shares: A hybrid structure between a partnership and a limited liability company. Capital is divided into shares. Includes general partners (full liability) and shareholders (limited liability).
4. Sociedad Limitada (SL – Private Limited Company): Minimum capital €3,000. Relatively quick and easy to set up. Offers limited liability to its members (shareholders). Often features pass-through taxation characteristics. Not equivalent to a US corporation.
5. Sociedad Anónima (SA – Public Limited Company): Minimum capital €60,000. A business entity whose capital is divided into shares that can be bought, sold, and owned by shareholders, who have limited liability. Suitable for larger enterprises.
6. Sociedad Limitada Nueva Empresa (SLNE – New Enterprise Limited Company): A simplified form of SL, designed for quick and cheap startup. Minimum capital €3,000. May offer tax advantages in the first year (e.g., deferral of corporate income tax).

Competition Law in Spain

Core Principles

Competition law aims to protect the proper functioning of the market and prevent monopolies. It upholds principles such as:

• Right of private property
• Freedom of contract
• Freedom of enterprise

Abuse of Dominant Position

This occurs when a company possesses significant market strength allowing it to act independently of competitors and customers, potentially eliminating competition.

• A market share exceeding 40% can be an indicator of dominance.
• Illegality arises when this dominance is exploited in an abusive manner (e.g., predatory pricing, unfair conditions).

Antitrust Law

In Spain, this is primarily regulated by the Law for the Protection of Competition.

• Collusive Conducts: Prohibited practices include agreements between enterprises, concerted practices, or decisions by associations of undertakings that restrict competition (e.g., price-fixing, market sharing).

Unfair Competition Law

Prohibits acts that distort the economic behavior of consumers or competitors for competitive purposes. Examples include:

• Illegal or misleading advertising
• Denigrating comparative acts
• Exploitation of another’s reputation
• Unjustified price discrimination

Economic Concentrations (Merger Control)

Operations that result in a stable modification in the control structure of one or more enterprises (e.g., mergers, acquisitions) may require notification and authorization from competition authorities.

Public Aid (State Aid)

Financial assistance provided by public authorities to certain undertakings is regulated to prevent distortion of competition and discrimination within the market.

Intellectual and Industrial Property

Intellectual Property (IP)

Refers to the set of legal rules safeguarding creative works (e.g., literary, artistic, scientific works). Protection is primarily granted through copyright.

Industrial Property

Concerns the legal protection of intangible assets related to industry and commerce through exclusive rights. Key types include:

• Trademarks: Signs capable of graphical representation used to distinguish the goods or services of one enterprise from those of others in the market. Protection lasts for 10 years and is renewable.
• Trade Names: Signs or denominations that identify an enterprise in its commercial activities, distinguishing it from other enterprises. Protection lasts for 10 years and is renewable.
• Patents: Exclusive rights granted for inventions, providing the owner the right to exclude others from making, using, or selling the invention for a set period.

Contract Law Essentials

Core Elements of a Contract

• Consent: The mutual agreement of the contracting parties.
• Object: The specific thing or service that is the subject matter of the contract (must be legal, possible, and determined or determinable).
• Cause (or Consideration): The legal reason or purpose for each party entering into the contract. Contracts can be:
  • Gratuitous (or Free): Only one party receives a benefit (e.g., donation).
  • Onerous: Both parties receive a benefit or undertake an obligation (e.g., sale).
• Form: While many contracts are valid regardless of form (oral or written), certain contracts require a specific form (e.g., writing, public deed) for validity or enforceability.

International Trade Considerations

International Sale of Goods

A contract of sale is an agreement where one party (seller) is obliged to deliver a specific item (goods) to another party (buyer), who is obliged to pay the price. International sales are regulated by national laws (like the Spanish Civil Code) and international conventions (e.g., CISG).

Incoterms®

Internationally recognized standard trade terms used in international sales contracts. They clarify key responsibilities between seller and buyer, including:

• Who is responsible for transport costs?
• Where the goods are to be delivered/picked up?
• Who bears the risk of loss or damage to the goods at each step of the transport?

International Contracts

Binding agreements between parties based in different countries. When drafting or entering into such contracts, it is crucial to clearly define:

• Jurisdiction: Which country’s courts will have the authority to hear disputes arising from the contract.
• Governing Law: Which country’s substantive law will be used to interpret the contract and resolve disputes.