Spain: Legal Highlights Of Doing Business In Spain By A Foreign Investor - Part 14 of 1

Last Updated: 18 November 1995
9.9 Transfer of the business

Any changes of title to the business, work centre or independent productive unit shall not terminate per se the labour relation. The new employer will be subrogated to the former.

Any transfer should be notified to the workers' representatives. The transferor and the transferee will be jointly and severally liable during three years for all outstanding labour obligations arising before the transfer.

They will be equally liable for all obligations arising after the transfer should the transfer be deemed a criminal offence.

9.10 Social security system

All staff must be registered with the Social Security System. Payments to the system vary according to different factors, but the average total payment may be estimated at 38.19% of the employee's salary, to be paid about 6.40% by the employee and the remaining 31.79% by the employer.

There are unemployment benefits (64), as follows:

a) To have a right to the unemployment benefit, the minimum period during which an employee must contribute to the unemployment benefit under Social Security has been increased from six to twelve months.

b) The scale that linked the time during which contributions were made, to the period an unemployed worker has a right to receive unemployment benefit has been modified. Thus, for example, such a worker had a right to three months' benefit if he had contributed for between six and twelve months. Now the scale ranges from 2,160 days of contributions which allows 720 days' unemployment benefit to between 360 and 539 days (12 to 18 months) which allows 120 days' unemployment benefit. This is referred to a period of six years prior to the actual unemeployment situation.

c) The rates of unemployment benefit payable have been modified. Formerly they ranged from 60 to 80% of the unemployed's last basic salary and now they range from 60 to 70%, with the upper cap of 170% of the interprofessional minimum salary or 220% of said salary should the unemployed have children, and a minimum cap of 75% of the interprofessional minimum salary or 100% should the unemployed have children.

d) For the beneficiaries of unemployment benefit to lose such a right it will suffice for them to refuse, without a valid reason, an adequate offer of employment or the participation in social co-operation work, employment schemes, training programmes or professional re-training. Before such a loss occurred after a second rejection.

e) In the case of unemployed persons of over 45 years of age, the period has been increased from 6 to 12 months during which they may carry out a temporary job while they are unemployed, without it affecting their right to obtain unemployment benefit, although this will be suspended until the end of the temporary job.

There are also temporal incapacity benefits.

9.11 Foreign personnel

Foreign personnel working in Spanish companies require a work permit and a residence permit, otherwise they are prevented from working.

There are several classes of work permits. These are given on the basis of an employment contract with a Spanish based operation. At present, it is quite difficult to obtain such permits since the Administration has the power to grant or deny them, at its discretion, and the present level of unemployment in Spain has caused the Administration to grant permits only according to restrictive criteria. Furthermore a special visa must be obtained in the country of origin prior to entry into Spain, otherwise it is virtually impossible to request a work permit from the Spanish authorities.

Special provisions have been laid down for citizens of EC countries.

Under the transitory periods envisaged in the Treaty for the accession of Spain to the Communities, citizens of EC countries wishing to work as employees in Spain were required to obtain a residence permit and a work permit until December 31st., 1992. Thereafter they would be free to work in Spain. There were also special and more flexible rules for citizens of EC countries who were working in Spain prior to Spain's accession and that were authorised to do so after the accession on January lst., 1986. The transitory period was then shortened to 1st January 1992.(65)

It is no longer necessary for Spanish and Portuguese nationals to hold work permits so that they may work as salaried or self-employed workers in any of the Member States and vice versa. The same rules will apply to the nationals of a Member State who move to another country as those which apply to the nationals of the latter country. It will not be possible to discriminate against them when they apply for a job. This equality of opportunities involves all working conditions, among them remuneration, social benefits and health care. The rights cover the spouse and children younger than 21 years of age of the community citizen.

Only the relations between Spain and Portugal with Luxembourg were excluded from this regime. The free circulation of Spanish and Portuguese workers in Luxembourg, and vice versa, is effective since January 1st., 1993.

In the event of jobs (or simply stays) which are due to last for more than three months but less than one year, it will be necessary for the worker (or the visitor) to apply for a residence permit, without this being a prerequisite before entering into an employment contract. This permit is only necessary for purely administrative purposes, which is why if the worker does not apply for one he/she will be penalized, but not lose his/her employment. If the intended job or simply the stay in the country will last for more than one year, a residence permit must be obtained for an extendable five years.

A special scheme has been devised whereby the worker will have the right to claim unemployment benefit for a maximum of three months, whilst he/she looks for work in another community country.

Restrictions on the free circulation of workers will only be possible for public order, security and public health reasons.

In no event it is necessary to hold a work permit to be a member of the Board of Directors of a company, Single Administrator or Joint Administrator as long as no executive role is played by such member.


10.1 Background: Sources of liability

In very general and broad terms there are three main sources of obligations and potentially of liability under Spanish law: (i) the law, (ii) the contract (and quasi-contracts) and (iii) any unlawful or negligent actions or omissions.(66)

The last two sources give rise to contractual liability, which arises within the scope of a contractual relationship(67), and to non-contractual or tortious liability which arises out of the infringement of the general duty imposed by the law of not harming or injuring anyone with whom there is normally no contractual link.(68)

Although there are certain cases in which the Civil Code provides for strict liability, generally speaking liability is based on fault. Case law however has on occasions reversed the burden of proof.

10.2 The Consumers' protection

10.2.1. Historical background

The Spanish Constitution of 1978, Article 51, requires the public powers to guarantee the defence of the consumers and users protecting through effective procedures their safety, health and legitimate economic interests. The public powers are also required to promote the information and education of the consumers and users, foster their organisations and hear them in any matters affecting them in the terms prescribed by the law.

The Consumers and Users General Protection Act (the Consumers Act) was promulgated on July 19th, 1984 following the colza oil tragedy which took a toll of 475 people dead and thousands injured. This is known in Spain as the "colza" oil case. The oil intended for industrial uses was apparently denaturalised with aniline and sold as cooking oil.

10.2.2. Scope of the Consumers Act

A) From an objective point of view the Consumers Act refers both to defective products and services thus going beyond the Council Directive 85/374/EEC of 25 July 1985 (the Directive) which concerns liability for defective products and the provisions of Law 22/1994, of 6 July on Defective Products Liability (hereinafter DPL Act), which incorporated into Spanish law said Directive. Products and services include a wide range of items, even real estate.

B) From a subjective point of view the Consumers Act has been designed to protect the consumers and users. These are defined as those individuals or companies that purchase, use or enjoy as final recipients movable or immovable property, products, services, activities or functions irrespective of the public, private, individual or collective nature of the producers, providers, suppliers or shippers.(69)

Are not deemed to be consumers and users those not intending to be the final recipients but just to purchase, store, use or consume goods or services in order to incorporate them in processes of production, transformation, commercialisation or delivery to third parties.(70)

C) The scope of potential defendants is wider than the Directive and the DPL Act since the Consumers Act includes not only the producer (who is not defined) but any providers, suppliers or shippers. That is to say the whole chain from production to distribution (including wholesale and retail). Indeed under the Consumers Act any manufacturer importer distributor or supplier of products or services may be in the position to answer to Spanish consumers and users for the origin, identity and suitability of such products and services, always taking into consideration the nature and purpose of those products and the rules for their manufacturing use and distribution.

(64) Royal Decree-Law 1/1992 of April 3, confirmed by Resolution of Parliament of 30th April 1992, effective since April 8th, 1992.
(65) By EEC Regulation 2194/91 of 25th June 1991, issued by the Council of the European Communities (Official Gazette of the European Communities of 29th July 1991), To supplement (and implement) the Regulation, a number of Directives were approved on the residence status. These Directives were transposed into the Spanish law by the Royal Decree 766/1992, of June 26th, published on June 30th, which regulates the entry and stay of EEC citizens in Spain and took effect on July 1st, 1992.
(66) Article 1089, Civil Code.
(67) Article 1101, Civil Code.
(68) Article 1902, Civil Code.
(69) Article 1„.2 of the Consumers Act.
(70) Article 1, paragraphs 2 and 3, of the Consumers Act.

The content of this article is intended to provide a general guide to the subject matter.
Specialist advice should be sought about your specific circumstance.

For further information contact Mr. Jorge Angell, L. C. Rodrigo Abogados, Madrid Spain. Fax: +341 576 6716 or text search 'L.C. Rodrigo Abogados' and 'Business Monitor'.

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