Royal Decree-Law 5/2023 on measures for the Ukraine war consequences, La Palma reconstruction, EU directive transposition, and compliance

I. GENERAL PROVISIONS HEAD OF STATE 15135 Royal Decree-Law 5/2023, of June 28, adopting and extending certain measures to respond to the economic and social consequences of the War in Ukraine, supporting the reconstruction of the island of La Palma and other vulnerability situations; transposing European Union Directives on structural modifications of commercial companies and the reconciliation of family and professional life of parents and carers; and executing and complying with European Union Law.

I The timely transposition of European Union Directives is a fundamental objective of the European Council. To this end, the European Commission submits periodic reports to the Competitiveness Council, which are given high political value due to their function of measuring the effectiveness and credibility of Member States in implementing the internal market.

Likewise, the European Council, aware of its importance as a structural element of the internal market, established at that time as objectives that each Member State must transpose into its internal law, at least, 99% of the internal market Directives (Deficit 1) and as an additional objective, 100% of the internal market Directives that had a delay in their transposition greater than two years with respect to their deadline (Deficit 0).

Compliance with this objective is entirely priority, given the scenario designed by the Treaty of Lisbon of 2007, which amends the Treaty on European Union and the Treaty establishing the European Community, for failures to transpose on time, for which the Commission may ask the Court of Justice of the European Union to impose significant economic sanctions in an accelerated manner (Article 260.3 of the Treaty on the Functioning of the European Union –TFEU–).

It should also be recalled that, since the introduction by the Commission of a new criterion for the application of said article in January 2017, henceforth, in addition to the coercive fine, a lump-sum fine against the Member State in question will be requested from the Court of Justice. In this way, even if the Member State transposes the Directive while the lawsuit is pending before the Court, the Commission will not withdraw its action, but will pursue to the end a condemning judgment imposing a lump-sum sanction.

Spain has consistently complied with the transposition objectives within the committed deadlines since they were established. However, in recent years, events such as the repetition of general elections in 2019, with the consequent dissolution of the Cortes Generales, the existence of a caretaker government for a prolonged period, as well as the outbreak of the COVID-19 pandemic in 2020, explain the accumulation of delays in the transposition of some Directives, which require a law with the rank of law for their incorporation into the internal legal order.

Such is the case of Directive (EU) 2019/2121 of the European Parliament and of the Council, of November 27, 2019, amending Directive (EU) 2017/1132 as regards cross-border transformations, mergers and divisions, the transposition of which is the object of the first book of this royal decree-law; of Directive (EU) 2019/1158 of the European Parliament and of the Council, of June 20, 2019, on work-life balance for parents and carers and repealing Council Directive 2010/18/EU, which is transposed in the second book; and of Directive (EU) 2018/843 of the European Parliament and of the Council of May 30, 2018, amending Directive (EU) 2015/849 on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing, and amending Directives 2009/138/EC and 2013/36/EU, which is incorporated in the third book.

These Directives are at risk of a fine according to what is established in Article 260.3 of the TFEU, as there is, regarding the first, an infringement procedure opened by the European Commission. Since the transposition deadline ended on January 31, 2023, Spain received on March 22, 2023 a letter of formal notice from the European Commission for failure to notify transposition measures. Likewise, in the case of Directive (EU) 2019/1158, the transposition deadline expired on August 1, 2022; having received a letter of formal notice from the European Commission of September 20, 2022, as well as a reasoned opinion for failure to communicate national transposition measures dated April 19, 2023.

In turn, the transposition deadline for Directive (EU) 2018/843 expired on June 30, 2021, and there is also an open infringement procedure by the European Commission regarding this matter.

Finally, Regulation (EU) 2021/784 of the European Parliament and of the Council, of April 29, 2021, on combating the dissemination of terrorist content online, although directly applicable, required Member States to incorporate and notify the Commission, by June 7, 2022 at the latest, the regime of sanctions applicable to the infringements regulated therein; the corresponding infringement procedure for non-compliance having been initiated, with a letter of formal notice of January 26, 2023.

In this sense, it should be remembered that Directives are considered at risk of a fine for which less than 3 months remain for the transposition deadline to be met and which require, at least, a law with the rank of law for their transposition without such law having started its parliamentary processing; as well as all those Directives that already have an open infringement procedure by the European Commission for having met their transposition deadline.

In light of this situation, it is necessary to resort to the approval of a royal decree-law to proceed with such transposition, which will allow closing the infringement procedures opened by the European Commission.

Regarding the existence of "non-compliance procedures against the Kingdom of Spain", it should be taken into account that, despite the optional nature provided for in Article 260.3 of the Treaty on the Functioning of the European Union, in the Communication on "Financial sanctions in infringement procedures" (2023/C 2/01), the Commission recalls that "The possibility for the Court to impose financial sanctions on Member States (and for the Commission to request the imposition of such sanctions) dates back to the Maastricht Treaty of 1992. In order to guarantee transparency and equal treatment, the Commission has published since 1996 a series of communications and notes in which it sets out its policy and the methodology it applies for the calculation of financial sanctions".

In this latest communication, published in the OJEU on January 4, 2023, the criteria for calculating lump-sum payments and coercive fines that will be proposed to the Court of Justice in infringement procedures are updated. These new amounts result from the application of the new criterion for determining the payment capacity of a Member State, which the Commission has been forced to revise following the judgment of January 20, 2022 (Case C-51/20, Commission/Greece). Consequently, the Commission attributes two-thirds of the calculation to GDP, while one-third of the weight of the estimate corresponds to the population of the Member State.

On the other hand, the Commission recalls that it does not withdraw its action when the Member State remedies the infringement during the judicial procedure, "but maintains its claim to impose a lump-sum payment covering the period during which the infringement persisted until the moment it was remedied". The logical consequence of the lump-sum payment approach is that, in cases where a Member State remedies the infringement by transposing the directive during an infringement procedure, the Commission does not withdraw its action solely for that reason.

As for the use of the royal decree-law as a transposition instrument, and in addition to the analysis of the concurrence of the ordinary requirements that will be carried out subsequently, it should be recalled that the Constitutional Court in its Judgment 1/2012, of January 13, validates the concurrence of the enabling budget of the extraordinary and urgent need of Article 86.1 of the Spanish Constitution when there is "patent delay in transposition" and the existence of "non-compliance procedures against the Kingdom of Spain".

Likewise, it should be noted that the Council of State, in its report on the insertion of European law into the Spanish legal order, of February 14, 2008, considers that, although it should not become an ordinary mechanism for the incorporation of directives, it is justified in view, for example, "of the deadline set by the community norm, the need to give an urgent response to certain circumstances, or the existence of a declaration of non-compliance by the Court of Justice of the European Communities".

Precisely the declaration by Judgment of January 19, 2023 of the Court of Justice of the European Union that Spanish legislation, which requires the award of courses on awareness and re-education for the recovery of points on the driving license through a public service concession, is contrary to Directive 2006/123/EC of the European Parliament and of the Council, of December 12, 2006, on services in the internal market, also justifies the modification introduced in the Consolidated Text of the Law on Traffic, Motor Vehicle Circulation and Road Safety, approved by Royal Legislative Decree 6/2015, of October 30.

Likewise, the recent ruling of the Court of Justice of the European Union, in Case C-50/21, "Prestige and Limousine", of June 8, 2023, has outlined the limits that condition the intervention of the Administrations involved in the regulation of the market for car rental services with driver to achieve the pursued public policy objectives; requiring an immediate adaptation of national legislation, to guarantee legal certainty in the sector.

II On the other hand, from spring 2022 to date, a total of six packages have been approved, with the initial aim of addressing the consequences in Spain of the war in Ukraine, with both normative and non-normative measures, which have been adapted to the evolution of the economic and social situation.

Thus, Royal Decree-Law 6/2022, of March 29, was approved, adopting urgent measures within the framework of the National Plan for response to the economic and social consequences of the war in Ukraine, which had as basic objectives the containment of energy prices for all citizens and companies, support for the most affected sectors and the most vulnerable groups, and the reinforcement of price stability. Among the measures adopted, the reduction of taxes in the electrical sector, a bonus on fuel prices, and a social shield to especially support the most vulnerable groups stand out, in addition to important aid to the most affected productive sectors by the rise in energy prices, such as transport, agriculture and livestock, fishing, and electro and gas-intensive industries. Furthermore, a significant increase in social benefits (Minimum Vital Income and non-contributory pensions) and other protection measures for the most vulnerable groups was adopted.

For its part, Royal Decree-Law 10/2022, of May 13, established a mechanism for adjusting production costs for the reduction of electricity prices in the wholesale market, known as the "Iberian solution", which has led to a significant reduction in electricity costs in Spain and Portugal, protecting the economy and society from part of the effects of the war in this area.

The maintenance of the armed conflict and its effects on the general price level led to the approval of a second package, through Royal Decree-Law 11/2022, of June 25, adopting and extending certain measures to respond to the economic and social consequences of the war in Ukraine, to address situations of social and economic vulnerability, and for the economic and social recovery of the island of La Palma. Through this norm, not only were the main temporary measures to reduce energy prices, inflation, and protect the most vulnerable groups, included in Royal Decree-Law 6/2022, of March 29, extended, but also important additional measures were incorporated, such as the freezing of the price of the butane cylinder, the subsidy of up to 30% of multi-journey public transport tickets, or provisions aimed at increasing public support for agricultural insurance.

In turn, Royal Decree-Law 14/2022, of August 1, adopted a set of measures aimed at promoting energy savings and containing inflation, among which the free medium-distance public transport by rail and the increase in the line of direct aid for urban and road transport stood out. Likewise, through Royal Decree-Law 17/2022, of September 20, the reduction of VAT on natural gas was agreed.

Royal Decree-Law 18/2022, of October 18, increased this catalog of measures to reinforce savings and prepare the Spanish economy for winter. Among these measures, the possibility for neighborhood communities to benefit from the last-resort tariff for natural gas stands out.

These first five packages of measures represented an important fiscal effort that has been covered without prejudice to the fulfillment of deficit and public debt reduction objectives through efficient management of the approved budget.

During 2022, approximately 30,000 million euros of public resources were mobilized to cover fuel and public transport subsidies, direct and indirect tax cuts, provide direct aid to companies, increase benefits for the most vulnerable groups (such as the Minimum Vital Income and non-contributory pensions), and support middle-class families.

The aforementioned measures have proven their effectiveness considering the evolution of inflation and the main economic variables throughout 2022. Inflation dropped four points from the peak in July, while support measures for lower-income families allowed compensating for about 3.5 percentage points of purchasing power, preventing a deterioration in inequality indicators. The decline recorded since August placed the Spanish inflation rate below the euro area average, while the maintenance of a path of strong increase in real activity and employment, the external sector, and the reduction of the deficit and public debt evidenced the solidity of the Spanish economy in such a complex external and energy environment.

In fact, in the last months of 2022, energy prices moderated, being replaced as factors increasing the general price level by other fundamental goods such as food, raw materials, and intermediate goods. This price increase, which was explained mainly by the impact of the war on global supply and production chains and by previous increases in energy prices, was especially relevant in food, with basic necessity products, such as flour, butter, or sugar, experiencing year-on-year increases close to 40%. Furthermore, although the price of natural gas and fuels also moderated, important elements persisted that suggested this trend would reverse during 2023. With this scenario, it was necessary to continue adopting measures to prevent a rebound effect of inflation while protecting the most affected and vulnerable groups, all without putting at risk the fulfillment of fiscal objectives for 2023.

To this end, through Royal Decree-Law 20/2022 of December 27, on measures to respond to the economic and social consequences of the War in Ukraine and to support the reconstruction of the island of La Palma and other vulnerability situations, a sixth package of measures was adopted, mobilizing approximately 10,000 million euros of public resources to articulate the economic policy response to the war in Ukraine from January 1, 2023, concentrating its action on vulnerable groups to the increase in the price of food and other basic necessities and on the sectors most affected by the rise in energy.

However, just as it occurred on the date when this last Royal Decree-Law 20/2022, of December 27, was approved, the uncertainty linked to the duration of the war and the persistence of upward pressures on the prices of food, raw materials, and intermediate goods continues to affect the entire European and world economy, so it is necessary to proceed to the extension of some of the measures put in place to date, especially those intended to protect the most affected and vulnerable groups; as well as to adopt new measures with the same purpose.

III This royal decree-law is structured in an expository part and a dispositive part consisting of five books, formed by 226 articles, five additional provisions, ten transitional provisions, one repealing provision, and nine final provisions.

The first book transposes into the Spanish legal order Directive (EU) 2019/2121 of the European Parliament and of the Council, of November 27, 2019, as regards cross-border intra-Union transformations, mergers, and divisions, structured in four titles.

Title I includes a Chapter I containing preliminary provisions regarding the limitations and exclusions applicable to the different structural modification operations regulated; a Chapter II, which contains, novelly, the common provisions applicable to all structural modifications, regardless of whether they are internal or cross-border operations, notwithstanding the adaptations as appropriate to each operation, which comprise, the elaboration of the structural modification project, the reports of the administrative body and independent experts, the preparatory publicity of the agreement, the approval of the projected operation, the unanimous agreement of structural modification, the publication and challenge of the agreement, the protection of shareholders and creditors, and the effectiveness of the registration and validity of the registered operation.

These common provisions are completed, in Title II, with a series of specific rules for each of the types of internal modification regulated in the law: transformation by change of social type (Chapter I), merger (Chapter II), division (Chapter III), and global transfer of assets and liabilities (Chapter IV).

In this area of internal operations, the option to harmonize their regime with that of cross-border structural modifications has been carried out, maintaining in this Title II the current text of Law 3/2009, of April 3, proceeding to the change in numbering of the articles and suppressing the mentions and specialties for cross-border mergers, if any, which are collected in the title that regulates them.

Likewise, on occasion, it has been necessary to change the denomination of the traditional internal structural modifications included in Law 3/2009, of April 3, now called, in accordance with Directive (EU) 2019/2121, the "international transfer of domicile" as "cross-border transformation", which, in turn, differs from the transformation by change of social type, which does not involve a change of national law.

On the other hand, in a substantive area, it has been considered convenient to also extend to the internal scope some of the legislative policy options adopted regarding cross-border structural modifications, such as the provision contemplated in Directive (EU) 2019/2121 of two types of simplified mergers, adding to the only scenario previously provided for where the same shareholder owns all the shares or participations of the merged companies, the scenario where the same shareholders own all the merged companies in the same proportion, given that no reason is appreciated that justifies different regulation for internal mergers and cross-border mergers.

Likewise, the simplification of requirements that the aforementioned Directive establishes regarding cross-border division by segregation advises against subjecting internal segregations to greater requirements than cross-border operations.

Finally, in matters of division, it has been decided to also extend to the internal scope the regime contemplated regarding cross-border divisions, the joint and several liability of the companies benefiting from the division regarding the debts that would have remained with the divided or segregated company, limiting however the liability of the divided company to the net assets that remain in it. This was a possibility offered to Member States in Article 146.6 of Directive 2017/2011 (codified version), not accepted at the time and from which Directive EU 2019/2121 in a certain way starts.

It has been considered that this royal decree-law constitutes the adequate framework to incorporate this provision, for two reasons: on the one hand, because this regime of responsibility would allow avoiding the declaration of a high number of bankruptcy proceedings of the divided companies, which frequently happens in practice; and on the other hand, because having opted in the transposition of Directive EU 2019/2121, to extend its scope of application also to