What Types of Guarantees Suspend Appealed Administrative Decisions?
14/07/2022 Uría Menéndez (uria.com)
Courts must weigh up two sets of conflicting interests when deciding whether or not to grant precautionary measures in contentious-administrative proceedings: those of the individual seeking the measure and the general interest that public authorities safeguard (article 103 of the Spanish Constitution). For example, in tax proceedings, granting a precautionary measure that suspends an administrative decision could result in a penalty not being paid when the appealed payment or penalty decision is upheld. According to case law, this risk can be mitigated if the taxpayer seeking the precautionary measure provides sufficient security to ensure payment if the appealed administrative decision is upheld.
According to the contentious-administrative legislation, the security offered must meet two requirements: it must be legally valid (“any legally valid form of surety or guarantee may be provided”) and cover the amounts in question. In practice, however, only those guarantees that, according to the General Tax Law, automatically suspend the obligation to pay the tax debt are generally accepted, such as bank guarantees or surety insurance, or even real estate mortgages in some cases, but only if the mortgaged assets are located in Spain.
The problem is that the appellant rarely has the financial resources to provide this type of guarantee, especially when the debt bears no relation to the appellant’s financial capacity (as is the case, for example, when the tax authority transfers liability for paying a tax debt to another party (derivación de responsabilidad tributaria), which is happening more and more.
Given how the statutory provision is worded, it is hard to understand why the validity of guarantees “created in a legally valid form” and regularly used in transactions (e.g. non-possessory pledges over inventory or shares, guarantees, surety bonds or first demand personal guarantees granted by a shareholder or third parties) is being challenged. And especially when the amount being claimed is beyond the appellant’s financial capacity and a third party provides the guarantee and supplements the limited financial capacity of the taxpayer seeking the precautionary measure with its own.
Even though the public authorities’ general interest purpose would really be better served by interpreting the legal validity of the guarantees restrictively, it is concerning that doing so could have a significant adverse impact on a decision upholding the appellant’s claim. A more flexible interpretation would is required when the right to effective judicial protection apply to precautionary protection, especially given that the law itself allows security to be provided in “any legally valid form”.