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Joinder of actions in Spanish financial litigation

03 October 2012

This article examines the Spanish courts’ attitude to collective claims against banks, in particular to what extent litigants have been allowed to combine their claims in a collective action.

In the past few years, banks in Spain have faced collective claims in financial litigation. Assorted groups of litigants have claimed that, inter alia when they entered into their agreements with a bank, they did not understand the main characteristics and risks of the financial products that they were purchasing.

Article 72 of the Spanish Civil Procedure Act provides that actions may be joined and simultaneously brought to court provided such actions are based on the same title or cause of action. A key issue in these collective actions has been whether a joinder of actions is appropriate in legal proceedings in which the only common issue at stake is whether or not a client understood the characteristics of certain financial products.

For example, in cases where several litigants, with no relationship between each other, claim that they do not understand the contracts they signed, it has been argued that the different actions brought together are not based on the same cause of action, as they do not rely on the same facts, but on the same type of facts (ie an alleged error in the consent of each claimant when signing their corresponding agreement).

Those arguing against joinder have stressed that each contracting process and the consent provided by each client is different. It is important to take into account each client’s commercial expertise (the approach to consent in a case in which the relevant financial agreement was signed by a stock market broker is different to the approach to a case in which the client has no investment experience at all). Furthermore, each client may have received different documentation and differing advice from different employees of a bank.

The Spanish courts have issued several rulings which have been broadly in line with the banks’ arguments. For example, in a case before the First Instance Court Number 8 of Madrid (12 December 2010) it was held that joinder of actions was not possible because the agreements in question were signed on different dates, by different people and under different circumstances.

Likewise, a decision issued by the First Instance Court Number 81 of Madrid in 19 July 2011, established, in a case in which 26 plaintiffs sought the nullity of swap transactions entered into with the same bank, that joinder of actions was not valid as the precise circumstances under which each agreement had been negotiated would be determinative for each of the plaintiffs. Moreover, the court said that this type of action should not be joined on the grounds of the principle of procedural economy, because such a joinder would entail the analysis of each individual case in a single proceeding (thus overloading the court with work).

Finally, a judgment issued by the First Instance Court Number 63 of Madrid, dated 16 April 2012, held that these type of actions may not be joined because: (i) the development of each contractual relationship is different, (ii) compliance with applicable legislation has to be analysed in each individual case, and (iii) there was no relationship between the plaintiffs to justify a joinder of actions.

Under Spanish Law, only the decisions rendered by the Spanish Supreme Court are binding as case law. Therefore, the previous decisions are not binding for other courts. Nevertheless, the arguments used by First Instance Courts in these types of proceedings are likely to be followed by other courts when analysing financial litigation triggered by different individuals. More importantly, claimants will think twice before jointly filing their actions in a single proceeding, since, after dismissal of the joinder of action, they may only continue their claim by filing a separate action (which entails more costs in their claim against the bank).

Accordingly, joinder of actions in these types of proceedings ought to be possible only when the facts are the same (ie an individual representing several companies in purchasing financial products).

Further Information

The European Finance Litigation Review is a quarterly publication on recent developments in the finance litigation and regulatory sector in key European jurisdictions. For more information please contact Amy Edwards