The British people’s decision to leave the European Union (‘EU’) will drive many companies, currently operating in the United Kingdom (‘UK’), to relocate to other European countries to continue enjoying the freedom of movement guaranteed by EU law. Some companies will decide to relocate only partially, keeping strategic business areas in the UK. Others will relocate entirely, moving their headquarters to other European countries with the means and resources to host the arrival of new highly qualified workers.
After the UK’s departure, Spain will be the EU’s fourth largest economy. In the wake of a difficult economic crisis, Spain has emerged as a leading player with a robust economy growing at 3%. It has a stable political landscape and highly attractive workforce, infrastructure, office space and living standards on offer. Companies in Spain enjoy free movement to provide services, and the freedoms of establishment and movement of goods, capital and persons. Spain is also an important Euro zone country with a highly competitive financial system that allows financial institutions to make full use of their passporting rights throughout the European market.
This dossier outlines the main features of the Spanish legal system, particularly in the areas of most interest to companies considering relocating, partly or entirely, from the UK to continue operating within the internal market.
With more than 70 years of experience, Uría Menéndez has consolidated its position as a leading law firm in the Iberian and European legal markets. The firm was founded in Spain in the 1940s by two university professors who instilled the firm’s distinct values that attract the best legal talent in Spain. It has evolved to become the leading legal services provider in every field of law, with a top tier position in more practice areas than any other firm in Spain.
An international and harmonised financial system
The Spanish banking and financial system uniquely combines the discipline and stability brought about by EU financial legislation, particularly the EU banking union and the expertise and innovation of its players. It is a competitive and open market populated by national and international service providers who are driven by its harmonised regulations and the diversity of its demand.
The Spanish legal system provides significant security and predictability in real estate transactions at two levels:
• At one level, the role of public notaries is very important, since they are public officials in charge of ensuring that the real estate transaction has been performed in compliance with all applicable regulations. This includes ensuring the following: the proper identification and capacity of the signatories; compliance with any anti money-laundering regulations; and the effectiveness of payments within the transaction. However, this does not lessen the parties’ freedom to determine and agree on the terms of the transaction. The notary’s involvement in the signature of a document establishes the presumption in favour of its legality. This favours legal security in real estate transactions, especially for foreign parties who are unfamiliar with the Spanish legal system.
• At another level, the role of land registries also provides certainty and security. This is because the transfer of ownership, whether it is in relation to real estate, a charge, or an encumbrance limiting such ownership, is not valid until properly registered with the relevant land registry. In other words, a right that has been validly registered with the land registry is immune from challenges from unregistered rights.
The information filed with land registries is considered part of the public domain and enforceable against third parties. Therefore, it provides certainty to the legal status of real estate, which renders elements customarily used in other jurisdictions (e.g. insurance policies securing title) as unnecessary in Spain.
Some observations about Madrid
Apart from Madrid’s status as Spain’s financial, economic and commercial centre, it has recently been moving towards becoming the most attractive destination for investments with underlying real estate in Spain. Apart from the benefits of the less restrictive tax system, there are other significant advantages, amongst which we highlight the following two:
• The city of Madrid, as well as other Spanish cities, has implemented an agile and flexible system for obtaining licences related to construction work and opening businesses. The procedure has been simplified by ‘sworn declarations’ (declaraciones responsables). These are merely forms in which applicants explain the grounds for requesting the licence and enclose the necessary supporting documentation and information. With regard to construction work permits, once the request complies with the applicable law, the applicant can start the activity for which the licence was requested, with one obligation: the applicant must communicate the completion of the construction work to initiate the verification process, which confirms whether the work has been executed in accordance with the declaration submitted. To expedite the licensing process, the Madrid City Council has entrusted the management and verification of licence applications to private urban planning entities, and thus the procurement process is relatively short.
• Secondly, the Autonomous Region of Madrid has eliminated all special licences that were previously required to develop large commercial areas, and this has bolstered these types of investments in recent years.