RD 16/2020

Royal Decree 16/2020 on Procedural Measures, Blade Runner and Desperate Lawyers

RD 16/2020 on procedural and organisational measures to deal with Covid19 in the field of the administration of justice, aims to normalise the situation of justice, but has only succeeded in getting desperate lawyers.

The famous final monologue by the replicant Roy Batty in Blade Runner claimed to have seen things that we would not believe. And he talked about burning ships beyond Orion, and C-beams shining on the Tannhäuser Gate. And he ended up saying it’s time to die.

Dear Replicant, that’s nothing. We are seeing months of August counting as business days and, considering absences as acquiescence. Also there are modifications of firm procedural resolutions, procedural procedures that disappear.

And here we continue, undaunted in our goal to keep you up to date on the changes in Spanish regulation. Even if, on April 28th, the new rule has stolen August holidays from procedural lawyers.

As you know, since March 14th, 2020, the terms and deadlines for proceedings have been suspended. This has paralysed the entire administration of justice, suspending deadlines, trials, proceedings, executions, collections, etc.

To the everlasting delay of justice, the chaos caused by Covid19 and the state of alarm has been added.

To alleviate it, this Decree of 3 chapters, 28 articles and 10 provisions appears, with two objectives and one consequence. The two objectives are to help normalize the situation of Justice and to avoid contagion in the courts. Although to do so, the right to access to Justice of the citizens must be handled.

The consequence is the anger of all the professionals of Justice, in particular lawyers and solicitors.

Contacto No te quedes con la duda, contacta con nosotros. Estaremos encantados de atenderte y ofrecerte soluciones.

Chapter 1. Urgent Procedural Measures

Art. 1. Authorisation of days for procedural purposes

The days between 11 to 31 of August 2020 are enable as business days. For its effectiveness measures will be adopted to distribute the vacations of the members of the Administration of Justice. The Royal Decree does not specify what these measures are.

Art. 2.- Calculation of procedural deadlines and extension of the period for appeal

The deadlines suspended by the state of alarm will be recalculated from the beginning. Therefore, the first day of the period will be the next working day after the suspension is lifted.

In other words, all documents submitted within the time limit will be returned to the exit box. In addition, the time limit for appeals against judgments and decisions that end the proceedings is doubled. This double time limit will affect decisions notified during the suspension of procedural deadlines and 20 business days after its end.

This article is in fact the procedural equivalent of the flattening of the health curve. By starting all the deadlines from scratch and also doubling some of them, we manage to keep Justice from collapsing. Doesn’t that ring a bell?

Art.3. – Scope of the special and summary procedure in family matters

It establishes a special and summary procedure in the family area, during the alarm and 3 months after its completion. This procedure will apply to the following claims:

  1. Restoration of balance in terms of visits or shared custody altered by the Covid19
  2. Review of economic measures, when the situation of the parents has been modified by the Covid19.
  3. The provision of spousal maintenance, when it is based on a change in economic circumstances by the Covid19

Art.4 and 5 Competence and processing.

Regarding the previous family procedures, the competence of the claims is established. It will have competence for revisions and modifications the court that has set the measures. For the provision of maintenance, the competence will depend on for whom they are requested.

  • The procedure will be initiated by a lawsuit, in which a certificate of benefits or subsidies must be provided.
  • If it is admitted, a hearing will be called within 10 business days since admission. Mediation will be attempted, prior to the hearing.
  • For this procedure, the old oral trial is exhumed, with the defendant answering “in voce”.
  • The judgment may be given orally, but must be summarized in writing.
  • If, after hearing the judgment, the parties state that they will not appeal against it, the ruling will become final. If they express a decision to appeal, the deadline for the appeal shall not begin to run until it is notified in writing.

It would be very interesting to know in one year’s time how many “in voce” judgments have become final in the Chamber. I bet my August vacation, less than 5%.

Art 6. Challenge by Covid19´s Temporary Labour Force Adjustment plans.

The Temporary Labour Force Adjustment plans caused by Covid19 will be processed as collective conflicts. Submitted by the legitimated subjects of art 154.2 (trade unions, business associations, employers, employees´ representatives, public authorities, associations of self-employed persons).

Art 7. Preferential treatment of certain procedures

  1. In family law, those of article 158 Civil Code, in addition to those referred to in article 3 of this decree
  2. In civil law, those relating to mortgage and tenant measures to alleviate the consequences of the Covid19
  3. In contentious-administrative proceedings, those who appeal the refusal of aid by Covid19
  4. In Labour, those of dismissal, those of recovery of the hours not provided in the mandatory paid leave. Appeals to Temporary Labour Force Adjustments Plans. Those which are dealt with in order to make distance working effective or adjustments to working conditions.

Chapter 2. Bankruptcy and Corporate Measures. Or the Legal Concept of the Forward Kick.

Given that this chapter refers, on many occasions, to the date of the state of alarm and subsequent periods. To facilitate the understanding of the legislation, we have calculated the exact dates. Please note that:

  • The State of Alarm was decreed on 3/14/20.
  • 6 months after the declaration of the State of Alarm 9/14/20
  • 1 year after the declaration of the State of Alarm 3/14/21
  • 2 years after the declaration of the State of Alarm 3/14/22

(i) Bankruptcy Measures

Art.8. Modification of the bankruptcy agreement

During the year following the declaration of the state of alarm, modifications of the agreement can be presented in compliance. It will be processed with the same rules of the original agreement. It may not affect claims against the estate, nor privileged creditors, unless they vote in favour of the modification.

Creditors may file applications for a declaration of noncompliance with the agreement during the 6 months following the Alarm Decree (9/14/2020). But they will not be admitted for processing until 3 months after that date, i.e. 12/14/20. During this period, which runs from 9/14 to 12/14, the debtor may request the modification of the agreement.

The Bankruptcy Procedure must be initiated within two months of the date on which the insolvency became known or should have become known. But are there any exceptions?

Art.9. Postponement of the duty to apply for the opening of the liquidation phase

Even if the debtor knows that he will not be able to fulfil his obligations under the creditors´ agreement. He is not obliged to apply for liquidation until 3/14/21, if a proposal to amend the agreement has been accepted.

Nor will the creditor’s application for commencement of liquidation be admissible, even if it is well-founded.

Will be considered claims against the estate, the loans, credits or instruments granted in favour of the debtor. Also those derived from personal or real guarantees of third parties (including those coming from specially related persons). Provided that they are included in sufficient detail in the agreement approved or modified, from now until 3/14/22.

This provision brings to mind the English aphorism of “throw good money after bad”. It makes us wonder if all these new credits are going to have the qualification of credits against the estate. How are the creditors without privilege going to collect? We’ll answer that in 2022, when the ball lands.

Art.10. Refinancing agreements

Until 3/14/21, the financing agreement may be amended, even if a year has not passed since its judicial approval. Up to 9/14/20, creditors may submit applications for the breach of the financing agreement, which the judge will communicate to the debtor. However, they will not be admitted for processing until 10/14/20.

Such admission to proceedings may be delayed even further. During that month (from 9/14 to 10/14) the debtor may inform the judge of the attempt to renegotiate the agreement. In this case, the creditor’s application for default will not be admitted for processing. And, the creditor will have to wait another 3 months (counting from the renegotiation communication). If after 3 months from the notice of renegotiation no agreement is reached, the application for default will be processed.

This is confusing; what it will mean in practice is a mandatory wait dictated by the State. And, it is not going to be a short wait, but it is going to go to January 2021, so:

  • Between September 14th and October 14th , the breaching debtor and aware of the claims filed by the creditors, will communicate to the judge his attempt to renegotiate
  • From that date, you will have 3 months to reach an agreement, and the creditor’s applications will not be admitted for processing.
  • Finally, on 14/1/21, if no agreement has been reached, the judge will admit incidents of non-compliance.

Art. 11. New regime for applications for declaration of insolvency

Until 31/12/20 there is no obligation to submit a Bankruptcy Procedure application. This will prevail under all circumstances.

The necessary Bankruptcy Procedure (submitted by the creditors) is completely inactive and will not be admitted until 31/12/2020. Nor will they be admitted, even if they are of an earlier date, if the debtor files for voluntary bankruptcy procedure before 31/12/2020.

Therefore, in “roman paladin”, the figure of the necessary bankruptcy procedure is eliminated until next year.

Art.12 Financing and payments of persons especially related to the debtor.

Until 3/14/22, payments made by persons especially related, in favour of the company, will be considered as ordinary credit. Payments of credits made by persons especially related to the debtor will have the same condition.

In other words, Mr. Entrepreneur, you may save your company, even if it is at the expense of your personal finances.

Art. 13. Contesting inventory and list of creditors

This article could well be entitled, from the elimination of the inventory challenge views and procedural aberrations.

It states that only documentary and expert evidence will be admitted to the challenge hearings. They will be admitted in those bankruptcy procedures where no inventory and list of provisional creditors have been submitted. Also they will be admitted in all new bankruptcy procedures that will be declared until 14/3/22.

A hearing will only be admitted if the judge considers it necessary, and not if the parties request it, either individually or jointly.

Furthermore, failure to respond to the insolvency procedure plea will be treated as acquiescence, unless it is the Administration who does not respond. The figure of the declaration in contempt and the acquiescence are change at the stroke of a pen. We will have to wait and see what the Constitutional Court says, given such an idea.

Art. 14. – Preferential treatment

Until 14/3/21 the following matters will be dealt with preferably:

  1. Insolvency procedural pleas in labour matters
  2. Actions aimed for the sale of a production unit or sale of total assets
  3. Proposals or amendments to the agreement, and its opposition to its judicial approval
  4. Insolvency procedural pleas of reintegration of the estate
  5. Approvals or modifications of refinancing agreement
  6. Adoption of precautionary measures, or measures to preserve the assets and rights of the debtor

Art. 15 Disposal of the estate

In the bankruptcy procedures that are declared until 14/3/21, or those that are in process at that date. The auction of goods and rights of the estate must be extrajudicial. It must be so even if the liquidation plan established otherwise.

This does not apply to the sale of one or more production units. This can be done out of court, in court or in any other way legally foreseen.

Art. 16. Approval of the liquidation plan

This article is particularly unintelligible. But, in short, it says that the courts will immediately approve the liquidation plans already submitted. And they will urgently request the submission of those pending plans. However, the court will not commit to any specific deadline.

Art. 17. Expediting the processing of the out-of-court payment agreement.

Until 14/3/21, the debtor shall be deemed to have attempted the extrajudicial settlement of payments without success. If two faults of acceptance by the insolvency mediator are proven. It has to be communicate to the court, to be appointed, for the purposes of initiating consecutive bankruptcy procedures.

Second transitional provision. Provisions about bankruptcy procedures.

If, between the declaration of the State of Alarm (14/3/20) and the entry into force of the Royal Decree (28/4/20):

  • Any necessary application for bankruptcy procedure has been made; the provisions of Article 11 will apply.
  • Even if the debtor had requested the opening of the liquidation phase due to the impossibility of complying with the agreement, the judge will not provide it if the debtor presents a proposal for modification. According to Article 8.
  • If a creditor has submitted an application for the opening of the liquidation phase or a declaration of non-compliance of the agreement, Articles 8 and 9 shall apply.

(ii) Corporate actions

Art. 18. Suspension of the cause for dissolution due to loss

Losses for the financial year 2020 will not be included in the calculation of net worth vs. share capital (art 361.1e LSC). In other words, during 2020 the cause of dissolution due to losses disappears.

If in the 2021 result, the losses would reduce the net worth to less than half of the share capital. A General Partners Meeting must be called to proceed with the dissolution of the company. Only if the capital is increased or reduced to a sufficient extent this meeting shall not be called.

All of this does not avoid the duty to apply for the bankruptcy procedures in accordance with this Royal Decree-Law.

Chapter III. Organizational and Technological Measures

This group of measures is focused on the objective of avoiding contagion in the courts. That social distancing that we are already tired of hearing about.

That is why, during the state of alarm and up to three times after its end:

  • The procedural acts will be processed preferably in an electronic way. Except, in the criminal jurisdictional order where the physical presence of the accused will be necessary in the trials for serious crimes. (Art.19)

It is added that this will be done, provided that the Courts, Tribunals and Prosecutors’ Offices have the means to do so. The Royal Decree does not mention the means of the lawyers to be able to carry out these hearings.

  • The court will determine if trials can be held with an audience. (Art. 20)
  • Forensic Health Reports may be made based on medical documentation only. (Art. 21)
  • The parties will not be required to wear a toga. (Art. 22)
  • Customer service will be provided online. Either by phone or by e-mail. Whenever possible, and complying with the provisions of the LOPD. If it is essential to go to the courthouse, it will have to be done by appointment. (Art. 23)
  • The possibility of creating specialized courts in procedures associated with Covid-19 is established. It speaks of possibility, without specifying anything, with which we will see if they are finally created or not. (Art. 24)
  • The possibility of assigning officials to any procedural unit that directly supports judicial bodies is established. For the performance of functions that, although inherent to their civil service, were attributed to other units. Within the same municipality and belonging to the same jurisdictional order (Art. 26)
  • Morning and afternoon business days are established for all services and courts (Art. 27)

Until December 31st 2020:

  • The practices of the initial training courses of the judicial secretary can be carried out by substitution and reinforcement. With the same scope as for the incumbents. (Art. 28)

These are all the measures taken to save Justice. We will see how much they are useful, so suddenly no one seems to have liked them.

If you want more information about the bankruptcy procedures, you can consult the following articles:

Effects of the Bankruptcy Procedure Declaration on Contracts

The Sale of a Production Unit in a Bankruptcy Procedure