Overseas Business Risk - Spain

Information on key security and political risks which UK businesses may face when operating in Spain.

Political and Economic

With a population of 46.5 million, Spain is a constitutional monarchy in the form of a multi-party parliamentary democracy. The parliament is bicameral (Congress and Senate) and the last general elections were held in November 2011.

The country is divided into 17 regions or Autonomous Communities, each ruled by a Government elected by a unicameral legislature. These Communities differ in the scope of their political responsibilities, and some (Galicia, Catalonia, Valencia, the Balearic Islands and the Basque country) have their own official languages in addition to Spanish.

The municipalities (of which there are over 2,500 across the territory) are also representative in nature, with elections held every four years. Since often their main source of income are the taxes raised on property development and building licenses, this bottom level of the Spanish public administration has concentrated the most corruption cases in the last few years.

Spain joined the EU in 1986 and has been one of the principal recipients of EU Structural and Cohesion funding. Spain was also one of the first countries to join the Euro. Between 1994 and 2007 the Spanish economy grew at an average annual rate of 3.6% and during much of that period it was creating about one in every 3 new jobs in the Euro-zone.

But since 2007, the global economic downturn and Spain’s overdependence on the construction and property sectors has sparked a sharp slowdown in the Spanish economy. Unemployment reached 25% in 2012, and the country is likely to be one of the last of the Euro-zone markets to emerge from recession (with negative growth rates in 4Q11 and 1Q12, Spain has re-entered technical recession for the second time in 3 years). Public deficit remains the biggest challenge for the new conservative government, with EU-imposed objectives of 5.3% for 2012 and 3% by the end of 2013. Pursue of these objectives has led to draconian budget cuts across all government departments and the regional governments.

Exports are holding up despite the crisis and fell only 7% in 2009, which is less than the average fall to EU countries (11%). Generally, Spain is the UK’s 7th largest export market and one of the leading investors in the UK in recent years (the largest one in 2006). The UK was also the second largest investor in Spain in the last decade, and bought goods and services enough to make Spain the 6th largest provider in 2009, after Germany, the US, France, the Netherlands and China.

More information on political risk, including political demonstrations, is available in the FCO Travel Advice

Human Rights

Spain is signed up to the European Convention on Human Rights and the UN Universal Declaration of Human Rights.

Spain is a strong supporter of gender equality. During the Spanish Presidency of the European Union in 2010 Spain held the 2nd European Women in Power Summit which concluded with the Cadiz Declaration on the full participation of women in all areas of society. Same sex marriage has been legal in Spain since 2005. The Government has committed to reform the Judicial System to improve efficiency.

Bribery and Corruption

Bribery is illegal. It is an offence for British nationals or someone who is ordinarily resident in the UK, a body incorporated in the UK or a Scottish partnership, to bribe anywhere in the world.

In addition, a commercial organisation carrying on a business in the UK can be liable for the conduct of a person who is neither a UK national or resident in the UK or a body incorporated or formed in the UK. In this case it does not matter whether the acts or omissions which form part of the offence take place in the UK or elsewhere.

In Spain the construction-led economy (800,000 new houses built in 2005 only) has increased the perception of corruption in the last few years. According to the NGO Transparency International’s corruption perception index (CPI), Spain ranked 31 in 2011-particularly among low-level public officials and on public contracting. A new ethical code for civil servants was passed in 2007, and still, a recent opinion poll showed that 85% of Spaniards think corruption is widespread or very widespread in business and government alike.

According to the OECD, Spain has taken some steps to implement the Phase 2 recommendations on combating bribery of foreign public officials in international business transactions made in June 2006, but there is still some way to go to be fully compliant with the Convention..

Spanish Flag

Exporters must now declare that neither they nor anyone acting on their behalf have failed to comply with the Convention or any related Spanish laws. With regard to money laundering, Spain has introduced a mandatory annual audit of every financial and non-financial institution by an external expert; and the personnel dedicated to investigating and prosecuting money laundering has been significantly increased.

The City Councils Transparency Index 2009 issued by the Berlin-based NGO Transparency International, reflected a significant improvement over the previous year in terms of transparency levels achieved in the procurement of services; delivery of public works and urban planning; and overall financing procedures of City Councils across Spain.

This improvement was less noticeable in the case of small town councils, which is consistent with the news over corruption on real estate developments that have hit the press recently. The high level of autonomy these City and Town Councils enjoy, coupled with the fact that most of their income is generated from granting building licenses, seem to be the key factors behind most cases of real estate corruption. The most notorious of the past few years was the Government’s decision to dissolve the City Council of Marbella, in Malaga, following the arrest of some counselors over claims of urban planning fraud. Over €2.4bn worth of assets were seized.

Finally on political parties funding, the EU’s Group of States Against Corruption (GRECO) working group reported recently that “the absence of detailed and stringent transparency requirements, coupled with a weak control and sanctioning system, has opened up possibilities for abuse as a series of notorious scandals concerning the illegal financing of political parties have evidenced in the last two decades. In effect, political corruption has been repeatedly identified as one of the most serious concerns in public opinion surveys conducted in Spain.”

According to the GRECO working group, important shortcomings were identified in the Spanish legislation with respect to bribery in the public sector. It also claimed that bribery in the private sector is not criminalized sufficiently, or not at all, and found that some of the penal sanctions are too weak given the value of sums involved in business transactions and that of the potential bribes.

Some sources suggest that the Spanish legislation is hindered by the fact that only individuals, as opposed to legal persons (ie. companies) can be held criminally liable for the actions of a company.

Read the information provided on our Bribery and corruption page.

Terrorism Threat

The Basque terrorist organisation ETA has been less active in recent years and announced a definitive cease-fire in October 2011. ETA’s last major attack was in 2006 when a car bomb in the car park at Barajas International Airport in Madrid killed two people.

In March 2004, 192 people died and over 1,400 were injured following bomb attacks on three trains in Madrid. A group purporting to represent Al Qa'ida claimed responsibility.

The Spanish authorities take measures to protect visitors and a high level of alert is maintained, but business travelers should be vigilant. You are advised to follow the instructions of the local police and other authorities in case of disruption.

Read the information provided on our Terrorism threat page

Protective Security Advice

In June 2007 EU-wide measures were implemented to improve security, including the requirement to supply personal details to the airline before flying to Spain.

Street crime does exist in Spain's largest cities and the main tourist areas, and is occasionally accompanied by violence. You are advised to remain alert and guard valuable personal items at all times. The majority of reported thefts are a result of items (mobile phones, laptops) being left unattended or thieves using distraction techniques.

There is a requirement to provide proof of your identity if requested by a Police Officer. The only legally acceptable documents by Spanish Police are a passport or a national ID card. The Spanish Police have the right to hold you at a police station until your identity is confirmed.

Read the information provided on our Protective security advice page

Intellectual Property

Torre Espacio

IP rights are territorial, that is they only give protection in the countries where they are granted or registered. If you are thinking about trading internationally, then you should consider registering your IP rights in your export markets.

For information on registering your Trademark in Spain, you should contact:

Office for Harmonisation in the Internal Market:

Avenida de Europa, 4

03008 Alicante

Spain

T: +34 96 513 9100

F: +34 96 513 1344

Email: information@oami.europa.eu

Web: www.oami.europa.eu

For information on obtaining a patent in Spain, you should contact the Spanish Patent Office: Oficina Española de Patentes y Marcas

Refer also to the website of the World Intellectual Property Organisation (WIPO), and the Madrid Protocol for the international registration of marks.

Read the information provided on our Intellectual Property page.

Organised Crime

There have been complaints about lottery scams, in which a person receives what appears to be official notification from the Spanish Inland Revenue Office (Hacienda) that they have won the Spanish lottery and are required to deposit an amount of money in a bank account to secure their substantial winnings.

As in many other major European countries, international organised criminal activity takes place in parts of Spain, in particular linked to drugs and people trafficking. There has been government action to tackle these issues and the UK and Spain work closely together in this area.

Read the information provided on our Organised crime page.