Shaping a culture of settlement: Spain’s legal reform through a UK lens

In the first quarter of 2025, Spanish civil courts registered over 1 million new claims.[1] By contrast, the UK – despite having a much larger population – saw fewer than 500,000 new filings over the same period.[2] This disparity may be explained by differences in dispute resolution systems.

In the UK, mediation and other forms of alternative dispute resolution (“ADR”) mechanisms are integral to procedure, fostering early settlement and reducing courts’ backlog. Spain, however, has traditionally seen fewer disputes resolved before trial. The recent Efficiency Law, in force since April this year, aims to change this dynamic. However, without effective safeguards in place, it risks becoming a mere procedural formality rather than the structural shift towards early dispute resolution that Spain seeks.

The Spanish Efficiency Law

Article 19 of the Ley de Enjuiciamiento Civil (LEC, Spanish Civil Procedure Law) recognises the right of litigants to settle disputes and have their agreements approved by the court. However, the relatively low cost of litigation in Spain and limited infrastructure to support ADR may have hindered the development of a settlement culture.

The Efficiency Law aims to make litigation a measure of last resort. Article 5 requires claimants to attempt in good faith to reach an out-of-court settlement through any of the appropriate means of dispute resolution (in Spanish, medios adecuados de solución de controversias en vía no jurisdiccional or “MASC”) before filing most civil and commercial lawsuits. Non-compliance with the Law triggers the automatic dismissal of the claim. While this could represent a major step toward fostering ADR, it ignores the old adage that “it takes two to tango” by failing to create legal incentives for defendants to engage in negotiations.

While it is too early to assess the reform’s real impact, there’s a risk that the Efficiency Law does not encourage real engagement by defendants in settlement and will instead be vulnerable to use by defendants as a tactic to delay litigation. Further, without sanctions for non-participation, it will merely create an additional burden on claimants, as defendants may have limited incentives to engage meaningfully in settlement discussions.

UK Pre-Action Protocols

Spain’s approach contrasts with England and Wales, where parties are generally required to follow pre-action protocols before filing a claim. Although the specific requirements vary depending on the subject matter of the case, they share a common goal: to encourage parties to engage in information exchanges and consider settlement options at an early stage of disputes.

Importantly, if a party fails to comply or unreasonably refuses to engage in ADR, the court may impose penalties, including adverse cost orders, sometimes on an indemnity basis, or interest adjustments. These sanctions are consistently enforced by the courts, and parties are regularly penalised in costs for failing to engage with pre-action requirements.

In recent years, UK case law has increasingly recognised the mandatory nature of ADR under certain circumstances. In PGF II SA v OMFS Company 1 Ltd [2013] EWCA Civ 1288, the Court of Appeal held that simply ignoring an offer to mediate amounted to an unreasonable refusal, justifying cost sanctions. Churchill v Merthyr Tydfil CBC [2023] EWCA Civ 1416 went even further to confirm judges’ authority to mandate parties to engage in ADR when deemed appropriate under the circumstances.

Comment

Settlements provide an efficient alternative to protracted and costly litigation. The UK’s sanction-based approach creates strong incentives for both claimants and defendants to settle disputes early. Although it is too soon to assess the full impact of the Spanish Efficiency Law, it lacks this crucial element: without penalties for parties who refuse to engage – including defendants – it may remain a compliance exercise rather than a tool for promoting genuine early engagement. For the law to achieve its aims, Spain should therefore consider giving its courts sanctioning powers to create meaningful consequences for parties, including defendants, who refuse to engage in ADR.

This article is also available in Spanish. 

With thanks to Paralegal Inés Berizzo for her assistance with this piece.

Footnotes