Analysis and expectations for 2023 in litigation and arbitration in the Iberian market
As we have done in previous years, we would like to share Uría Menéndez’s views and predictions on what the main developments and trends in litigation and arbitration will be in the Spanish market in 2024.
1. Effects of recent legislative developments in civil proceedings
- The main change in 2024 for civil proceedings will be the entry into force of Royal Decree-Law 6/2023 of 19 December.
- A large portion of this law aims to promote the digitalisation of the justice system, encouraging more virtual hearings and procedural notifications through electronic means. It also establishes an "Electronic Judicial File" (Expediente Judicial Electrónico). How effective these measures ultimately prove will significantly depend on the resources that are made available to the courts as well as how well legal operators recognise (and accept) that this represents a true paradigm shift. A provision that may have a particularly significant impact establishes that even the initial summons must be served electronically in the case of persons obliged to communicate electronically with the justice system.
- The Royal Decree-Law also introduces the “pilot case” (procedimiento testigo) mechanism, which may entail a highly significant change in how matters regarding general contract conditions are litigated. Under this mechanism, the effects of the judgment in a particular set of proceedings in which an individual action on general contract conditions has been brought may be extended to other proceedings in which substantially identical claims are being brought.
2. International arbitration
- In international arbitration, disputes will continue to occur in the renewable-energy sector, both in the pre-contractual and contract-negotiation phase as well as during project construction and operation. We also expect the trend of large arbitrations involving oil & gas supply contracts to continue, particularly when it comes to adjusting pricing components. The development of large infrastructure projects throughout the world (and particularly in Latin America) will also lead to significant disputes, which will be resolved through international arbitration.
- In large construction projects, ADR methods, including dispute boards,will be increasingly used as a prior step before resorting to arbitration, which will expedite the resolution of disputes and help prevent from becoming entrenched and escalating. Other ADR methods, such as mediation, will continue to be used with increasing frequency. These ADR mechanisms will lead to increased use of tiered dispute resolution clauses.
- How recent amendments to the rules of the Madrid International Arbitration Centre (CIAM) are applied in practice will also be pivotal. The CIAM is expected to play a significant role given Madrid’s growing importance as a seat of arbitration.
- Finally, we expect investment arbitration to consolidate its expansion into less traditional areas for the field, such as disputes regarding tax measures or international sanctions. In parallel, attention should also be paid to the implementation of the Code of Conduct for Arbitrators in International Investment Dispute Settlement, prepared by the United Nations Commission on International Trade Law and ICSID, published in October 2023, which is set to impact not only investment arbitration practice, but also international arbitration in general.
3. Digital sphere
- Regarding digitalisation, the main news at the end of 2023 was the agreement reached by the Council and Parliament of the European Union on the proposed Artificial Intelligence Regulation (AI Act). The expanding use of artificial intelligence both for business and household applications, together with the focus that the legislature has placed on these technologies, make contract, tort and consumer litigation in the area increasingly probable in the coming years. In particular, it is foreseeable that there will be more disputes in relation to intellectual property, both regarding the actual solutions generated by AI but, above all, regarding the inputs used to train these systems. We may also see increased unfair competition litigation as a result of acts of deception linked to the inadvertent publication of AI-generated content.
- From 17 February 2024, the Digital Services Regulation (Regulation (EU) 2022/2065 of the European Parliament and of the Council of 19 October 2022) will be generally applicable. The regulation increases the obligations and diligence required of digital platforms and other intermediary service providers in terms of moderating illegal content, transparency and advertising. This increase in standards, together with the changes that various platforms are implementing to their service provision models, may lead to increased litigation, especially involving issues of content moderation and the removal of illegal content.
- The powers attributed to the Commission to classify players as “very large platforms” and “gatekeepers”under the Digital Markets Regulation (Regulation (EU) 2022/2065 of the European Parliament and of the Council of 19 October 2022) have led some major platform operators to challenge specific Commission decisions, which may in turn have important effects in the future.
- Another factor that may lead to increased complex litigation in the digital sphere is claims arising from infringement of the data protection and consumer protection regulations and their possible inclusion in the Unfair Competition Act (Ley de Competencia Desleal). We cannot rule out the possibility of an increase in collective and individual actions for injunctions, damages and removal based on an alleged infringement of Article 15 of this law and, in particular, on an alleged abuse by large technological operators of a competitive advantage in the market acquired through a breach of data, consumer or e-commerce regulations. Likewise, the requirements relating to fake reviews or, in general, to unfair commercial practices vis-à-vis consumers, could lead to increased litigation (either in civil lawsuits or contentious-administrative proceedings resulting from consumer sanctions).
- The traditional types of disputes over defamation and the right to rectification are making something of a comeback, particularly in the digital sphere.
4. Consumer litigation and general conTRACT conditions. Class actions
- In consumer matters, 2024 will be marked by new regulations governing collective legal action, as the process of transposing the Representative Actions Directive (Directive (EU) 2020/1828 of 25 November 2020) is expected to be completed. The new system will constitute a profound change for collective litigation that is expected to result in an increase in the number of collective actions brought (particularly redress measures such as restitutionary and compensatory actions seeking damages) against companies in sectors that have experienced less mass-consumer litigation (gas, energy, telecommunications, insurance, etc.). It is also reasonable to expect that this trend will be accompanied by a significant decrease in individual litigation regarding consumer matters and general contract conditions.
- Also on the topic of collective actions, an important CJEU ruling is expected on the scope of transparency test that may set guidelines on the homogeneity necessary to bring a collective action, which is one of the requirements established in the future regulation governing the pre-certification phase of collective actions.
- In the financial sphere, the CJEU will issue its rulings regarding the start of the limitation period for actions brought for the restitution of sums paid under the application of mortgage-cost clauses. Lawsuits can continue to be expected regarding insurance associated with loans, arrangement fees (on which new questions have been referred for a preliminary ruling), the IRPH (Índice de Referencia de Préstamos Hipotecarios) (the Supreme Court has yet to rule on this issue in the wake of the CJEU’s latest ruling) and on consumer loans and credit, in which lawsuits on the transparency of revolvingcard clauses and usury in financing contracts for the purchase of consumer goods or vehicles will play a leading role.
- Consumer litigation in the digital sphere may intensify given that the new EU Regulation on harmonised rules on fair access to and use of data (Regulation (EU) 2023/2854 of the European Parliament and of the Council of 13 December 2023) enumerates the terms that will always be considered unfair as well as the terms that will be presumed to be unfair.
5. Copyright and audiovisual sectors
- The main trends in copyright law will be linked to legislative developments in the field and the implementation of new digital realities. The recently created “related right” (derecho conexo) of press publishers has raised practical doubts in terms of its application, which could lead to disagreements between the various operators involved.
- The dominant position of copyright collecting societies in Spain has attracted attention from the competition authorities, which have occasionally found that collecting societies’ pricing practices in various sectors infringe competition law. This has been compounded by the approval in April 2023 of the new Order on the methodology for determining tariffs (Orden de metodología para la determinación de tarifas) (Order CUD/330/2023 of 28 March) and the consequent obligation for collecting societies to review their tariffs in accordance with this Order. This could give rise to claims for damages in cases where it has been determined that a collecting society’s tariff practices have infringed competition law.
- Attention must still be paid to immersive virtual environments (metaverses), the application of artificial intelligence to audiovisual sectors and the use of blockchaintechnology in digital art.
- The doubts over the scope of the new pastiche limit (which are clearly identified in the preliminary ruling of the CJEU in Case C-590/23 Pelham, expected to be resolved in 2024) could foment further litigation in the content-creation sector and a relaxation of the system of limits and exceptions in copyright law.
- Legal disputes concerning the marketing and exploitation of audiovisual rights to sporting events are becoming rapidly increasingly. The development of the content industry and, within it, the increasing presence of fictionalised portrayals of real events (e.g. true crime) has also led to increased litigation concerning personality rights and, in particular, image rights.
- A provisional agreement was recently reached between the Council and the European Parliament on the Directive on corporate sustainability due diligence, meaning that it is likely to be formally adopted in the coming months.
- This Directive aims to avoid adverse impacts (both potential or actual) on human rights and the environment caused by business activities. It establishes obligations to integrate due diligence into corporate policies and to identify, assess, prevent, mitigate and remedy adverse impacts on human rights and the environment. These obligations apply to both the company itself and its subsidiaries, as well as to its value chain and business partners.
- The Directive will apply to “large” companies (determined according to the number of employees and worldwide turnover) based in the EU, as well as to non-EU companies if they have net turnover in the EU above certain thresholds. Financial services are temporarily excluded from the scope of the Directive.
- Failure to comply with the Directive’s obligations may lead to the imposition of penalties by the independent domestic authority designated by each Member State. Penalties must be act as deterrent and may be up to 5% of the company’s net turnover.
- It also establishes a civil liability framework under which injured parties can claim compensation for damage suffered as a result of a breach of these obligations. This framework establishes a five-year limitation period, broad legal standing in favour of trade unions and civil society organisations, limitation of legal costs, and specific rules on evidence and injunctive relief.
7. European litigation
- As regards the Court of Justice of the European Union, the most important development in 2024 should be the reform of the Statute of the CJEU, as the provisional agreement of the Parliament and the Council on the proposal submitted by the Court of Justice was announced recently. The main novelty of the reform is the attribution of jurisdiction to the General Court to issue preliminary rulings in certain areas. In the context of preliminary rulings, the reform also strengthens transparency by establishing a general rule that the pleadings of those intervening will be published after the judgment, unless they object to publication. Another change is the extension of the pre-filtering mechanism to appeals against judgments of the General Court concerning decisions of independent Boards of Appeal of any body of the Union. This mechanism limits the possibility of lodging an appeal to those cases that raise an important issue for the unity, consistency or development of EU law.
- The Court of Justice is expected to rule on a number of important cases in 2024. One of the Commission’s new actions against Hungary for failure to fulfil obligations (Case C-769/22) is especially noteworthy. The action is directed at certain child-protection laws that have introduced prohibitions, inter alia, on underage children accessing content promoting or portraying gender identities that do not correspond to the sex assigned at birth, gender reassignment or homosexuality, imposing an obligation on media service providers offering linear media services to classify in certain restrictive categories all programmes where the defining element is the promotion or portrayal of such content. This is the first infringement procedure concerning the rule of law in which the Commission is independently invoking Article 2 of the TEU as having been infringed.
- Another important procedure that is expected to be decided in 2024 is Case C-470/21, La Quadrature du Net e.a. II, a French preliminary ruling on whether Directive 2002/58 on the processing of personal data and the protection of privacy in the electronic communications sector allows domestic legislation that enables service providers to retain IP data and give access to it to a domestic authority in charge of prosecuting copyright and related rights infringements, without prior judicial or independent administrative authority control.
- Joined cases C-541/20 to C-555/20 are also noteworthy. These comprise 15 actions for annulment by seven Member States against the so-called Mobility Packageof rules on road transport. Other important pending proceedings include Case C-621/21 Intervyuirasht organ na DAB pri MS, a Bulgarian preliminary ruling on the possibility – and, if indeed appropriate, the type – of international protection (refugee status) to be granted to a Turkish national of Kurdish origin on account of the risk of domestic violence to which she may be exposed in her country of origin; and Case C-670/22 Staatsanwaltschaft Berlin (EncroChat), a German preliminary ruling on the European Investigation Order in criminal matters, governed by Directive 2014/41.
- 2024 looks to be a year in which the insolvency reforms brought about by Law 16/2022, transposing the EU Restructuring and Insolvency Directive 2019/1023 into Spanish law, will take hold in practice. The new corporate restructuring framework has generated intense activity in 2023, and companies of all sizes (including listed companies) have obtained court approval for restructuring plans within this framework. It is expected that this trend will continue – and even intensify – in 2024 and, most particularly, that it will continue to generate interpretative criteria in courts of appeal on contentious issues in the new regulations, which will result in increased legal certainty when it comes to their interpretation and in the very effectiveness of these agreements.
- In view of the current economic situation, it is foreseeable that there will be a huge increase in insolvency proceedings in those companies that cannot reach agreements with their creditors to restructure their debt, or as a consequence of the failure of the plans already approved, which will imply something of a return to more classic insolvency law, as opposed to the dynamic under which – until now – insolvency proceedings without assets predominated and the implementation of the special procedure for micro-companies has been advancing.
- The final approval of the Proposal for a Directive on the harmonisation of certain aspects of insolvency law is also expected to take place, which will entail further legislative work when it comes to transposing it into domestic law.
9. Civil litigation for competition torts
- This year has been an important one for civil litigation in the field of competition law as a result of various important judgments, including both those handed down in Spain and abroad. The cases of primary importance in Spain were the judgments of the Civil Chamber of the Supreme Court in the well-known “trucks” case. With regard to judgments from outside Spain, those handed down in the United Kingdom, Norway and Portugal have had an understandably large impact on Spanish litigation. Finally, the effects of important CJEU rulings resulting from preliminary rulings referred from Spain have begun to be felt. The CNMC’s publication of its own guidelines on the quantification of damages is another notable milestone. The expected trends for this year essentially stem from these developments.
- In 2024 we will have to pay attention to the consequences of the Supreme Court’s rulings in the “trucks” case in terms of two specific issues: the results of the challenges against some of its rulings and the potential ramifications for other cases.
- Finally, appeals against some of the rulings handed down in other countries are expected to be resolved during 2024, which, in some cases, may lead to the re-evaluation of specific approaches that appeared to be here to stay. Likewise, significant rulings are expected from the CJEU that will directly affect the “lorries” case, but also have very foreseeable repercussions for other cases.
10. Product liability
- On 28 September 2022, the Proposal for a Directive on liability for defective products was approved. As it currently stands, this latest proposal is in the trilogue phase, but if it is approved as drafted, it will repeal the current regulations – both European and national – and modify the legal framework applicable to product-liability claims.
- The implications of this proposal are significant: it modifies the subjective scope of application of the regulation (expressly limiting it to individuals); it broadens the list of potentially liable parties (to include different operators in the distribution chain); it expands the types of damage that must be compensated (such as loss or corruption of data), with moral damage capable of being included in certain cases; it incorporates, within the concept of “product”, digital manufacturing files and computer programs (with the consequent implications this may have for artificial intelligence); it establishes presumptions regarding defects and causality that entirely revamp the current framework; it establishes the possibility of the injured party requesting that the manufacturer produce specific types of evidence; and, among other circumstances, it modifies the framework for discharging liability, extending it in the event of latent defects that result in personal injury.
- Finally, the proposal seems to aim for maximum harmonisation by excluding the possibility of Member States maintaining or introducing more or less stringent provisions in domestic law to achieve a different level of protection.
11. Corporate and financial disputes
- The indicators point to a year in which major corporate disputes may arise. In the last two years, important court rulings have been handed down that establish criteria and guidelines for action in matters that have traditionally been the subject of disputes between shareholders, such as the distribution of profits or the separation from the company. Within family businesses, these situations are often further complicated by the existence of other situations such as inheritance disputes. Times of crisis create a ripe environment for tension in relations between shareholders, and this is being seen with increasing intensity.
- In the financial sphere, the consequences of the health crisis caused by the pandemic continue to be felt and continue to lead to disputes. As is commonly known, over this period a large number of financing transactions were formalised under the ICO-Covid guarantee and loan lines. These transactions are generating conflicts that will undoubtedly increase in 2024, a year in which pivotal rulings will be handed down that will determine the path such disputes will take.