How Spanish Courts Handle Foreign Contracts

How Spanish courts handle foreign contracts becomes critical when agreements signed under foreign law are enforced against assets or activities located in Spain.

Many contracts choose English or Swiss law expecting disputes to stay outside Spanish jurisdiction. In practice, Spanish courts often retain competence and apply mandatory local rules, regardless of what the contract states.

The issue usually emerges at enforcement stage, when contractual clauses collide with Spanish procedural, real estate, or liability rules..

Do Spanish Courts Enforce Foreign Contracts?

In principle, yes.

A contract may be perfectly valid under its governing law and still be partially or entirely unenforceable before Spanish courts if it conflicts with mandatory Spanish rules or procedural requirements.

Spain is a signatory to the Rome I Regulation and generally respects the principle of party autonomy. 

Parties are free to choose the law that governs their relationship.However, there is a critical distinction between validity and enforceability.

This distinction matters:

• Validity refers to whether the contract exists and was properly formed.
• Enforceability refers to whether a Spanish court will apply it as written when a dispute arises.

A contract may be perfectly valid under New York or London law, but specific clauses may be rendered unenforceable in Spain if they collide with Spanish procedural rules or public policy.

Applicable Law vs. Jurisdiction: Two Different Risks

A frequent structural error in international contracts is confusing the “Rules of the Game” (Applicable Law) with the “Referee” (Jurisdiction).

• Applicable law determines which legal system governs the contract.
• Jurisdiction determines which courts will hear the dispute.

It is entirely possible to have a contract governed by UK law that ends up being litigated in Spain.

A contract is governed by English law and selects UK courts.

The asset, activity, or damage is located in Spain.
Proceedings are initiated before Spanish courts.
The Spanish judge will first assess jurisdiction.

If Spain has mandatory or exclusive jurisdiction, the choice of foreign courts may be disregarded, regardless of what the contract says.

Mandatory Spanish Rules That Override Foreign Contracts

This is the core friction point. Regardless of what was signed in London or Dubai, Spanish law imposes a “safety net” known as Public Order (Orden Público) and Overriding Mandatory Provisions.

A Spanish judge will set aside foreign clauses in favor of Spanish law in specific areas:

• Real Estate: Mortgage execution, tenancy rights (LAU), and property registration are governed strictly by the Lex Rei Sitae (law of where the property is located).
• Labour Law: If the employee works physically in Spain, they are protected by the Spanish Workers’ Statute, regardless of the contract’s governing law.
• Consumer Protection: You cannot contract out of EU/Spanish consumer rights.
• Corporate: The internal functioning and dissolution of a Spanish company (S.L.) follow Spanish Corporate Law.

Freedom of contract exists under EU law, but it is not unlimited.

The key point is simple:
Not everything is negotiable, even if it is signed abroad.

When a foreign contract collides with these rules, Spanish courts will apply local law first and adjust or disregard conflicting clauses

Scenario: Foreign Interior Design Contracts and Spanish Court Reality

A property owner hires a  Milan-based studio for a project in Ibiza.

The studio uses its standard contract, governed by foreign law and foreign jurisdiction. Liability is contractually capped, often at the level of professional fees.

During the project, a structural error causes damage worth €1 million.

The owner sues in Spain because the damage is on Spanish soil. The studio argues that their liability is capped at €100k.

The Outcome:

The Spanish judge ignores the cap. Why? Because under the Spanish Building Act (LOE), liability for structural defects is a matter of public order and cannot be limited by contract. 

The foreign clause is declared null and void in the Spanish procedure.

The contract was valid, but the risk assessment was flawed.

Language, Evidence and Interpretation Before Spanish Courts

Foreign-language contracts are admissible before Spanish courts, but they introduce procedural and interpretative risk.

Any contract not drafted in Spanish must be translated by a sworn translator, increasing litigation costs and often delaying proceedings. 

Beyond language, conceptual mismatches matter: common law notions such as implied duties, reasonable endeavours or equity do not automatically translate into the Spanish civil law framework unless they are expressly and precisely drafted.

What may seem a drafting nuance in an Anglo-Saxon context can become a decisive litigation weakness before a Spanish judge.

From Judgment to Recovery: Enforcement and the Exequatur Reality

The enforcement path depends on the origin of the judgment:

• EU judgments often benefit from simplified or automatic recognition under EU regulations.
• Non-EU judgments, including post-Brexit UK decisions, generally require an exequatur process before Spanish courts.

Exequatur proceedings do not review the merits of the case, but they do verify:

• Jurisdictional validity.
  Procedural fairness.
• Compatibility with Spanish public order.

Only after recognition can enforcement proceed under Spanish procedural law, including asset seizure or debt recovery.

In practical terms: Enforcement depends less on where you win, and more on where the assets are.

How to Reduce Risk Before a Dispute Arises

Risk reduction starts before signing.Key preventive steps include:

• Reviewing enforcement, not only governing law.
• Aligning contracts with the actual location of assets and operations.
• Conducting local legal validation before execution, not after conflict.
  

Most disputes are not caused by aggressive litigation strategies.

They are caused by contracts drafted without regard for the system in which they will ultimately be tested.

FAQs – How Spanish Courts Handle Foreign Contracts

Can a foreign contract be enforced in Spain?
Yes, but it must be proven that it is valid under its own law and does not contradict Spanish public order. It usually requires sworn translation.

Do Spanish mandatory rules override contract clauses?
Yes, when those clauses conflict with public order or overriding mandatory provisions.

What happens if the jurisdiction clause is unclear?
If the clause is ambiguous, Spanish courts may declare themselves competent based on the location of the defendant or the asset, ignoring the foreign choice of law.

International contracts do not fail when they are signed. They fail when they enter a legal system they were never designed to withstand.

Understanding how Spanish courts think and operate is the only way to ensure that a contract drafted in London or New York retains its value in Ibiza.

This article provides general legal information and does not constitute legal advice. For case-specific guidance, please contact Almar Lawyers.

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