New regulation puts focus on civil procedural costs in Spain

The reform introduced by Organic Law 1/2025 on 2 January, which focuses on efficiency measures for the public justice service, changes the prevailing criteria regarding civil procedural costs. A key aspect of this new regulation emphasises collaboration between parties in appropriate means of alternative dispute resolution (ADR) processes.

Organic Law 1/2025 stipulates that parties must first engage in an ADR for a claim to be accepted in civil proceedings. The regulation identifies several forms of ADR, which include mediation, conciliation, the neutral opinion provided by an independent expert, a confidential binding offer or any other type of legally recognised negotiating activity. All methods employed as ADR must adhere to sections 1 and 2 of Organic Law 1/2025.

These ADR mechanisms are mandatory for the admission of claims and considerably impact legal costs.

Historically, legal costs in civil matters were primarily determined based on the objective criterion of defeat, as per article 394.1 of the Civil Procedure Law. However, this recent legal reform introduces changes that warrant attention.

Refusal to participate in an ADR process

Organic Law 1/2025 amends article 394.1 of the Civil Procedure Act by adding a third paragraph. According to this provision, if participation in an ADR process is legally required or agreed upon by the parties during court proceedings, costs will not be awarded to a party that has explicitly refused or has taken definitive actions without cause, to engage in the ADR process.

This aims to penalise parties who refuse to participate in ADR without a valid reason, even if they ultimately win the lawsuit.

Abuse of the public service of justice

The reform introduces a new fourth section to article 394 of the Civil Procedure Law. Under this section, if the losing party requests the initiation of an ADR process and the opposing party declines to participate, the losing party will be exempt from paying costs unless it is established that there has been abuse of the public service of justice.

Section IV of the preamble to Organic Law 1/2025 labels such abuse as completely incompatible with the sustainability of the public justice service. It provides two examples of what constitutes such an abuse.

Partial acceptance of the claim

Under the current regulations, a partial summary judgment requires that each party pay their own incurred costs and share the common costs equally unless the court deems a request reckless.

However, the recent amendment to paragraph 394.2 of the Civil Procedure Act introduces a new provision. It states that if either party fails to engage in an ADR process when it is legally required or if the court has explicitly ordered them to do so during the proceedings, they may be held responsible for the costs. This ruling can occur even if the final claim is only partially upheld, provided that the court issues a duly reasoned decision.

The revised Article 394.2 of the Civil Procedure Act states that if either party fails to engage in a mandatory ADR procedure as the court requires, they may be ordered to pay costs, even if the claim is only partially upheld.

The decision to award costs will not be automatic; it will require a duly reasoned judgment from the court.

Surrender of the case

Article 395 of the Civil Procedure Act has been amended to include significant changes.

The first section introduces the concept of "abuse of the public service of justice" as a new exception for imposing costs when the defendant acquiesces before formally responding to the lawsuit. In such cases, the court must thoroughly justify its decision, similar to the existing requirement for situations involving bad faith.

Furthermore, the reform adds a third section to this article. It stipulates that if the defendant fails to engage in ADR when it was either legally mandated or explicitly ordered by the court, they will be liable for the costs incurred. However, the court may choose not to impose these costs if it identifies exceptional circumstances, provided this decision is adequately reasoned.

Challenging the assessment of costs

A major recent development involves disputing the evaluation of costs.

A significant aspect of this reform is introducing a new fifth section to Article 245 of the Civil Procedure Act. This section outlines the specific conditions under which a party ordered to pay costs may request exoneration or modification of those costs.

This provision applies under the following circumstances:

• A settlement proposal was made to the opposing party during an ADR process.
• The defendant did not accept the settlement proposal.
• The court’s decision to terminate the proceedings aligns substantially with the terms of the proposal.

To facilitate such a request for cost modification or exoneration, the party must provide complete documentation related to the settlement proposal. It is important to note that confidentiality regulations do not apply at this stage of the proceedings.

Entry into force

According to the ninth transitional provision of Organic Law 1/2025, the new regulations will apply exclusively to proceedings initiated after it enters into force, which is scheduled for 3 April 2025.

Osborne Clarke comment

The introduction of ambiguous and vague terms and a lack of clear criteria may lead to legal uncertainty and result in numerous disputes regarding costs. This is a paradoxical outcome, as the reform aims to enhance procedural efficiency. Therefore, paying special attention to the new regulations is essential when requesting the imposition of costs in legal pleadings.