apuntes de mercantil 1 en inglés, Apuntes de Derecho Mercantil

¡Descarga apuntes de mercantil 1 en inglés y más Apuntes en PDF de Derecho Mercantil solo en Docsity! Lesson 1 Introduction to commercial law: Concept, sources and commercial jurisdiction 1. Concept of commercial law A. Preliminary considerations One of the first questions to be posed is the delimitation of the part of the legal system that we qualify as commercial law. Commercial law has been described as special private law, the content of which varies according to changes in the legal system, which is conditioned by the evolution of the economic and social facts that it regulates. It follows that research into the concept of commercial law is carried out in accordance with a particular legal system at a particular historical moment. B. Reference to the company's doctrine In view of the insufficiency of other criteria, in the first half of the last century the doctrinal current that considers the company as the central nucleus of commercial law became established, insofar as the subject matter regulated by this law had its raison d'étre in the function developed by the com pany within the economic system, as an organised means for the production of goods and services for the market. The extension that the authors have traditionally made of the concept of "trader", which included indust: s, bankers, insurers and service providers, could be explained - paying attention to eco nomic ideas and especially to economic historians - if one notices that the trader has been replaced by the entrepreneur. The traditional activity of organization of the trader (whose most expressive manifestation is the keeping of accounts) was carried out in a market economy by every entrepre neur, even if his economic activity was not trade. Moreover, the trader's role as intermediary between suppliers and consumers was paralleled by the intermediary role that every entrepreneur plays in intermediating between the prices of the so-called factors of production (capital and labour) and those of his products and services, in both cases ten ding to maximise profits. Along this path it was concluded that since the field of commercial law was broader than that of trade, it was more accurate to say that commercial law was business law. C. Formulation of the concept of commercial law As the concept of commercial law is oriented, the assertion that commercial law is the law of the company was considered to be imprecise and was the subject of certain clarifications. They were based, firstly, on the observation that not all business law is commercial law. The relationship bet ween the employer or owner of the undertaking and the employees is at the heart of a separate legal discipline: labour law. There are administrative and fiscal rules governing relations involving the enterprise which are not commercial law. Secondly, starting from a purely economic concept of the enterprise, it was extremely difficult to assign to that enterprise a regime, that is, a discipline for le gal relations, because it is not known whether in those relations the enterprise appears as a person or as a thing, so that the simple economic concept of enterprise could not be a sure support for the construction of all commercial law. Precisely for this reason, in order to make the concept more concrete, it must focus on the idea of the entrepreneur, as the owner of the company, and that the rules that regulate the productive business system that interest us, within the market economy, are essentially those that form part of private law. So we can define commercial law as the part of private law, which comprises the set of legal rules concerning entrepreneurs and acts arising in the course of their professional activity on the market. The following are fundamental notes of this concept. a. Part of private law Commercial law is treated as a part of private law which is one of the two fundamental categories into which objective law is traditionally divided. While private law regulates relations between pri vate individuals, the core of commercial law is the law that specifically aims to regulate the rela tions of employers with each other, or between employers and their clients. Commercial law is qua lified as special because it applies simply to certain individuals and the acts they perform, as oppo sed to civil law, which is the common or general law. While the subjugation of individual interests to general interests has given private law a "public" slant - which certainly does not mean that it has become public law - the pressure of these general interests has been particularly strong in commer cial law and its traditional institutions have been largely altered. This means that the relative value of a definition of the type set out is increased by the difficulty of making a clear distinction between the rules of private law and those of public law. b. Employers' law The reference to the employer is considered to be another fundamental note. In this way, the profes sional nature of commercial law is recognised. Although in everyday language the company is considered a legal subject, the real legal subject is the entrepreneur, who is a person (natural or legal, in this case often arising from the incorporation of a company) who owns a company. For this reason, the decisive factor in determining the scope of commercial law is that we are dealing with a subject who exercises a business. * Commercial law as part of private law regulates the relations of entrepreneurs with each other, and their relations with their clients who purchase the goods or services they produce, which may be other entrepreneurs or natural or legal persons. In this last aspect, commercial law has been modified by the emergence of a wide range of regulations for the defence of consumers and users, developed by Article 51 of the Constitution, as protection for those who demand the goods and services offered by entrepreneurs. + On the other hand, we would like to point out that in the indicated concept of commercial law we will refer to entrepreneurs without qualifying them as mercantile. This is not only to avoid inclu ding the definition, but above all because it is assumed that this law affects entrepreneurs in all economic activities (commercial, industrial and service activities) with the relative exclusion of agriculture. Article 149.1.6 of the Constitution considers that the State has exclusive competence over "com mercial legislation”. The Spanish Constitution of 1978 makes an express declaration of the recognition of "freedom of enterprise in the framework of the market economy. The public authorities guarantee and protect its exercise and the defence of productivity, in accordance with the requirements of the general eco nomy and, where appropriate, of planning” (Art. 38). This impact of the economic constitution in the framework of the market economy can be seen mainly in the following aspects: + Recognition of the private initiative of entrepreneurs within the framework of the market eco nomy (Art. 38, cited above), which is combined with the right to property (Art. 33.1), although all the country's wealth is subordinated to the general interest (Art. 128.1). + The possibility that, when the law so authorises, the economic initiative of the Public Adminis tration may be taken alongside this initiative by private individuals, either by adopting business forms under private law (public limited companies, etc.) or by administrative bodies. 4 direct horizontal effect, they cannot impose obligations on individuals, only on the State. The doc trine of direct effect of directives has subsequently been developed with complementary principles determining that Member States must refrain from adopting any measure which might compromise the aims of the directives and that national judges and courts must interpret the transposition rules in the light of the directives in question. When the Treaty on the Functioning of the European Union was adopted, an effort was made to dis tinguish between legislative acts, which include the above-mentioned rules, and non-legislative acts. The latter are further divided into delegated and implementing acts, the adoption of which is, in principle and except in specific cases set out in the Treaty, the responsibility of the European Commission. In particular, delegated acts are intended to supplement or amend certain non-essential elements of legislative acts. Like directives, delegated and implementing regulations are of signifi cant importance in the commercial field. D. Intervention of the Autonomous Communities in the development and implementation of certain commercial laws. The Constitution is based on the state character of commercial legislation. The unity of the market requires a uniform legal regime for inter-private relations, hence the statehood of commercial law as private law, which excludes the Autonomous Communities from regulating, as our Constitutional Court has declared, the areas of commercial activity relating to the capacity to exercise trade, the creation and legal regime of commercial establishments or the regulation of general conditions of contract or contractual modalities. It is also incumbent on the State, in accordance with the Constitution, to regulate the "bases of cre dit management, banking and insurance”, among other matters. However, the reservation to the Sta te of the bases on this matter does not imply an exclusive State competence, but rather in matters in which, together with this competence, those of the Autonomous Communities concur, in the terms recognised in their Statutes of Autonomy for the legislative development and execution of the bases of the State in this matter, and those which they may have exclusively in the promotion, economic development and planning of economic activity in accordance with the general organisation of the economy. The Constitutional Court has repeatedly stated that "the definition of the bases must nor mally be carried out by the Cortes Generales, either expressly or in such a way that, due to the structure of the regulation, its vocation or claim to be basic can be inferred directly or indirectly, but without particular difficulty". 4. Commercial uses Usages, in the usual sense, are the second source of commercial law. This was born and developed essentially as customary law, and although with the Codification it lost some of that character, the Commercial Codes were respectful of usage, to the extent that our Commercial Code assigns it pri macy over civil law. Use is understood to mean the effective and repeated practice of a certain behaviour. This practice must respond to the idea that a certain rule of conduct is followed in commercial traffic. However, the link to this rule must not derive from individual freedom, but from the objective existence of this traffic rule. The use, although it has the advantage over the law of perhaps being better adapted to the needs of the traffic, since it arises from the traffic itself, has the serious disadvantage of its lack of fixity and clarity. 5 The difficulty of knowing the existence of the usage justifies the traditional position in the case law that commercial usage must be proved by the parties and that it is not understood that it is known to the judge (so the maxim of ¡ura novit curia does not apply). 5. Commercial courts The Commercial Courts deal with all matters arising in insolvency proceedings (which arise in the event of the debtor's insolvency) and with civil matters in certain areas, many of which are com mercial. However, these commercial courts do not have to deal with all commercial matters, and some of those that fall within their competence are not commercial. The commercial courts shall hear all matters falling within the jurisdiction of the civil courts, in respect of "a) Lawsuits in which actions are brought relating to unfair competition, industrial property, inte llectual property and advertising, as well as all those matters which, within this jurisdictional order, are promoted under the regulations governing commercial companies and cooperatives; b) Claims that are promoted under the protection of national or international transport regulations; c) Those claims relating to the application of maritime law; (d) Actions relating to general conditions of contract in the cases provided for in the legislation on this matter; e) Appeals against the decisions of the Directorate General of Registers and Notaries regarding the qualification of the Commercial Registrar; f) The procedures for the application of Articles 81 and 82 of the European Community Treaty (currently 101 and 102 TFEU) and its secondary legislation, as well as the procedures for the application of the articles determined by the Law on the Defence of Competition”. In addition, the commercial courts have been entrusted with the recognition and enforcement of fo reign judgments and other judicial and arbitration decisions, when they fall within their jurisdiction, unless an international treaty requires another body to take cognisance of them (Article 86 ter LOPJ). Finally, it should be noted that the fact that arbitration is not a commercial institution (as it can cover any dispute on matters of free disposition), does not prevent it from being pointed out that it is commercial issues and matters that are most often submitted to it. Similarly, the introduction of mediation in, among others, commercial matters should be highligh ted. Mediation is defined as "a means of dispute resolution, whatever it may be called, where two or more parties voluntarily attempt to reach an agreement by themselves with the intervention of a mediator”. Both institutions, arbitration and mediation, seek to resolve commercial matters with greater flexibi lity and speed than if they were submitted to the jurisdiction of the Commercial Courts or any other competent court. Lesson 2. Business. The business can be conceived as the set of goods organised by the entrepreneur as a means to achieve his economic purpose (production and exchange of goods or services for the market). Some authors consider that the concept of the business - or the enterprise in its objective sense - should be limited to the organisation, so that it would be a purely immaterial good in which the organised ob jects would simply be the carriers or supports of the entrepreneur's intangible realisation. However, most of our doctrine and jurisprudence considers that the business is made up of an organised set of goods. From this concept we can deduce: + that itis a set of goods; + that these goods are not simply juxtaposed, but organised; + that the organization made by the employer has been made for a certain purpose. Within these conceptions, the idea dominates that in the business or company in its objective sense we are faced with a set of goods, which while retaining their individuality, creates a unity because of the economic function for which they are intended. It is said that the plurality of heterogeneous goods are linked precisely by their common destiny. For this reason, business can be considered as a unit formed by the organised set of goods in which the immaterial element is the fundamental binding link of the elements that make it up. The elements of a business can be divided into 4 categories: + The human element. There is no doubt that the human being is the key element of any company. Within it, we have to differentiate: - The owners or shareholders of the company. They are the ones who have provided the capital of the companies. Their role is different in small and large companies. In large companies, shareholders only contribute money and expect to receive profits in return. In small compa nies, the owners not only put up the money, they usually also run the entire company. - The managers. They make the decisions in the company. In large companies they receive a salary in return for this role, and may be dismissed if they do not do their job properly. In small companies, the managers are usually the owners. - The workers. They are in charge of running the entire production in exchange for a salary. We live in the knowledge society, and there is no doubt that workers and managers are key ele ments in any company. + Material elements. They are the tangible elements of a company. We make a distinction: - Non- current capital. This refers to the permanent elements that are going to be in the company for a long time and which allow the company to carry out its activity: installations, machines, computer equipment, furniture, etc. - Current capital. These are the changing elements of the company that are in continuous mo vement: raw materials, money in cash or in banks, etc. + Intangible elements. These are intangible elements that are not so visible to the naked eye but which are of great importance to the company. We distinguish: - The organization. It shows us all the relationships between human and material elements. In other words, what are the roles and responsibilities of workers, who is in charge of whom (hierarchy), or how do people communicate and relate to each other 9 intended both of the contracts that have been concluded for the constitution of the business (the contracts that bind the entrepreneur to the goods that constitute it) and of the contra result of the exercise of the business; exercise that is carried out by means of the business. Be cause if the parties want the transfer of the business, it must be considered in their interest that all the contracts to the buyer that affect the operation of the business and whose validity is rele vant to the maintenance of the organization of the business are transferred. However, for the transfer to take place, the express will not only of the seller and buyer, but also of the third party, is required. born as a + The transfer of the seller's claims relating to the business requires only the agreement of the par ties, without the consent of the debtor. The willingness of the parties to dispose of the business as a whole gives rise to the presumption that they intended to transfer the claims relating to the bu siness, for which the transferor is liable in relation to all of them and not in isolation. + The issue is different as regards the seller's debts relating to the business, since they will only be transferred to the buyer if there is an express agreement between the parties and there is also ex press consent from each of the creditors. Payment of the price The buyer undertakes to pay the price as agreed. It is common for the buyer to postpone part of the payment of the price as a guarantee that the business meets the agreed conditions and that there are no undeclared obligations on the seller (so-called "hidden liabilities”). On the other hand, a clause is frequently inserted which establishes that in the event that the buyer delays the fulfilment of the obligation of the deferred part of the price, a penalty clause is established, with the power of the se ller to request the resolution of the contract. B. Leasing of the business Notion and regime. The business can be leased, by means of a contract by which one person (lessor) is obliged to pro vide another (lessee) with the use and enjoyment of a business in exchange for a price. Case law has declared that the distinction between business premises and industry or business lea ses is absolutely clear, given that while in the former the real estate element is ceded, that is to say, a constructed space suitable for the business to be operated in, in the latter the contractual object is determined by a double integrating composition, on the one hand the premises as a material support and, on the other, the business or company installed and which is developed in the same, with the necessary elements for its operation, forming a patrimonial whole. The object of the lease is the business in its unit, the specification of which - i.e. its composition - results from its very nature and from the will of the parties. This does not prevent the unit of the productive organism remaining, and precisely for this maintenance, from requiring the replacement of some of its elements, in particular goods and raw materials. These elements should not be consi dered to become the property of the lessee, but the latter has the right to dispose of them according to the needs of the running of the business and must therefore replace them if necessary for this purpose. Tf the lessor was an entrepreneur precisely because of the exercise of the business, once he has lea sed the business he loses the status of entrepreneur and the lessee acquires that status, not because he succeeds the lessor in that ownership, but because of the exercise of the entrepreneurial activity through the business. 10 Obligations of the parties The obligations of the parties are essentially those deriving from the rental contract, although given the nature of the rented object some specialities arise which we will refer to below. It must be taken into account the predominance of the autonomy of will and the supplementary application of certain articles of the current Law on Urban Rentals and the Civil Code. + From the landlord: The lessor has the obligation to deliver the business in good working order for the agreed use, to make the necessary repairs and to keep the lessee in peaceful use. + From the tenant: The lessee is obliged to pay the price and to use the thing in the terms agreed upon (art. 1555 C.c.). The use of the business imposes on the lessee the duty not to modify the destination of the business, to preserve the efficiency of its organization, of its machinery, tools and the normal provision of all those consumable elements, such as goods and raw materials. Assignment of contract and sublease Unless the parties have agreed to exclude the application of Article 32 of the LAU, the lessee may sublet the business or assign the lease without the consent of the lessor. In these cases, the lessor is entitled to raise the rent in the manner established by the LAU. The assignment of a contract is not considered to be a change in the person of the lessee as a result of the merger, transformation or di vision of the rental company. Termination of the contract The contract is terminated for general reasons: + Compliance with the agreed term is one of the cases of termination of the business lease, by ap plication of Article 1581 of the Spanish Civil Code. It should be noted that, since Article 1581 presumes that the contract is made for a specific period of time, case law declares that if the con tract has been agreed for an indefinite period of time, such a clause is ineffective in the industrial or business lease. + The destruction of the business or its loss in general will result in the termination of the contract (cfr. art. 1560 C.c.). This happens when the administrative revocation occurs for the exercise by the lessee of the business activity through the business, when the business is expropriated or when, for any reason, it is manifestly impossible to continue with such exercise. + In the event that the exercise of the business leads to a situation of insolvency that results in ban kruptcy proceedings, the declaration of bankruptcey will not in itself be cause for the termination of the lease contract if the lessee pays the rent (art. 61 of the LCon), since this law aims at the continuity of the business activity (art. 44 LCon). A different question is whether the liquidation phase will be opened, from which the lessor's assets will be excluded (Article 80 LCon). + Unless otherwise agreed, the death of the hirer will not be a cause for termination of the contract, as the heir or legatee may be subrogated to the legal position of the deceased until the agreed deadline has passed. Once the lease has expired, the lessee must return the business as received (cf. art. 1561 C.c.). Ho wever, the fact that the goods are of a different nature, many of which must necessarily have been replaced (e.g. the goods that were part of the warehouse), means that the lessee's duty must relate to the business as a whole, so that the inventory of the goods that are returned may have a value simi lar to that of those received. In the event of an impairment or loss of value of the business, the les see must compensate the lessor, unless he proves that such losses have been caused by causes not attributable to his fault (cf. Art. 1563 and 1564 of the Civil Code). Conversely, increases in value produced by the hirer, as noted above, must give rise to compensation in his favour at the expense of the lessor. 11 Lesson 3. The entrepreneur and the consumer The notion of an entrepreneur is basic to commercial law. The Commercial Code in 1885 used the term "trader" and not "entrepreneur”. However, already originally in the Code there is a disconnect between the economic notion of "trader" and the definition it gives, which covers not only purely commercial activities, but also industrial, banking, general warehouse and transport activities, etc. In effect, the first article tells us that "traders" are: "1. Those who, having legal capacity to exercise commerce, habitually engage in it; 2. It should be noted, therefore, that since the object of the companies, in addition to commercial acti vity, is the industrial, banking, insurance, etc., from the time of the enactment of the Code there was a lack of coincidence between the legal and economic concept of "merchant". This diversity has expanded over time to such an extent that both a large part of mercantilist doctri ne and special laws have renounced using the term "trader" in this very broad sense and speak of a company or, more properly, of an "entrepreneur”, as has been said when referring to the subjective aspect of the company. Indeed, special laws very often use the term "enterprise" in a subjective sen se, were a person (natural or legal). However, since these same laws use the term "enter pri objective sense (as something that can be the subject of legal transactions, or as an acti vity), the authors and some laws, more precisely, use the term "entrepreneur” to refer to the owner of the enterprise, and therefore subject in the legal relations that arise in its activity. An entrepreneur can be defined as a natural or legal person who professionally and in his own name exercises the activity of organising the elements necessary for the production of goods or services for the market. In a shorter way it can be said that the person who professionally and in his own name exercises an economic enterprise is an entrepreneur, but then it would be necessary to explain what is meant by an enterprise. sifit in an The concept of entrepreneur has traditionally excluded holders of liberal professions (doctors, engi neers, lawyers, etc.) and artists, in so far as their provision of services for the market is dominated by their own personality, particularly of an intellectual nature. However, the way in which they ca rry out their activity has become closer to that of entrepreneurs, insofar as it is carried out in a way that can be assimilated to business. This happens not only when professionals take on the form of a company (under the traditional social types, collective, limited liability, etc.) which is often descri bed as a "professional company” (e.g. a group of doctors form a health care company, engineers form an engineering company, etc.), but more generally when professionals carry out their activity, even without forming a commercial company, by organising a set of material and personal means which offer their services to the market with advertising. Law 14/2013 on support for entrepreneurs and their internationalisation introduces the figure of the so-called "limited liability entrepreneur”. It was created with the intention of promoting entrepre neurial activity by creating a framework that prevents the individual entrepreneur from being held accountable for the results of his business activity with all his assets. Essentially, the property that is excluded from the potential liability derived from that activity is the entrepreneur's habitual resi dence. In order to benefit from this exemption, the entrepreneur must comply with a series of formalities required by law. Basically, he must appear before a Notary Public to formally declare his wish to acquire such status, identifying the activity he is going to carry out as well as his habitual residence. Subsequently, it will be registered in the Mercantile Registry. From then on, the entrepreneur must 14 dation must necessarily be coordinated and subordinated to the achievement of these general in terest objectives. - The foundation can exercise the business activity indirectly by participating in commercial companies "in which it is not personally responsible for the company's debts" (that is, in the so-called capital companies), and it can even hold the majority or all of the shares in these companies. In addition, foundations, like entrepreneurs, must keep an orderly accounting sys tem that is appropriate for their activity. - In some cases the foundation carries out business activities directly to the point of becoming an entrepreneur, albeit with a special status. B. Classes of entrepreneurs by size of business The C.de c. established a single legal status for the trader, regardless of his size. However, by means of special provisions, the distinction between entrepreneurs, depending on whether they are large, medium-sized or small, is becoming relevant from various points of view. In other words, by virtue of the size of the enterprise, which implies a relativity of the distinction. Even within this relativity, the most relevant definition in the field of commercial law for the purpo se of distinguishing between large and small and medium-sized enterprises is perhaps that of the "General accounting plan”. This is because, based on the obligation imposed by Article 25 of the Civil Code on "all entrepreneurs” to keep orderly accounts, our legal system distinguishes between the General Plan applicable to large companies and the Plan relating to small and medium-sized companies, with special provisions for micro-enterprises. C. Private and public entrepreneurs The existence of certain public legal persons exercising an economic activity similar to that carried out by private entrepreneurs gives rise to the distinction between private and public entrepreneurs. In an economic regime of free market, public entrepreneurs occupy a position that could be descri bed as exceptional within the general economic activity, since this activity is usually entrusted to individuals and not to entities that are linked to the State or to public corporations. The direct inter vention of the State in economic life with the aim of defending general interests makes the so-called public sector, i.e. the activity carried out by public entrepreneurs, certainly relevant. In order for the public employer to acquire this qualification, he or she must carry out the economic activity with a certain degree of autonomy in relation to the public administration. Sometimes itis the State itself or other public bodies that carry out this economic activity directly through one of their bodies, but in these cases we are not dealing with true entrepreneurs, even though in their ac tions they operate without the empire that characterises them, because a separate body has not been created to which the development of this economic activity is exclusively assigned. The entrepre neur arises when the State or public corporations create a different entity, whose exclusive or main purpose is to exercise an economic enterprise. The body set up may take a public-law form which normally falls within the category of "autonomous body”, or a private-law form (usually in the form of a commercial company). The use of private law forms is mainly due to the desire of the State and public corporations to move away from the traditional systems of public administrative activity, since their lack of agility, their slowness, the bureaucratisation and politicisation of civil servants, etc., are serious drawbacks to the development of the entrepreneur's own economic activity. D. Social enterprises. Social economy entities are "cooperatives, mutual societies, foundations and associations carrying out economic activity, labour companies, insertion companies, special employment centres, fisher 15 men's associations, agricultural processing companies and singular entities created by specific rules are governed by the established principles”. It is the presence of these entities that defines as social economy all of their economic and business activities, through which they "pursue either the collec tive interest of their members, or the general economic or social interest, or both" (Article 2 LESo cial). 3. Limitations on the exercise of entrepreneurial activity A. General. The principle of economic freedom encounters a number of limitations to the exercise of entrepre neurial activity and, therefore, to the acquisition of the status of entrepreneur resulting from that exercise. These are the establishment of incompatibilities, disqualifications or submission to admi nistrative authorisation prior to the commencement of that activity, which ultimately entail a prohi bition on persons having the capacity to do so from lawfully pursuing the profession of entrepre neur. This means that the terms of prohibition and incapacitation are diverse. The capacity requirement is designed in a particular way to protect the employer, the main reason why the disabled are not wan ted to become employers (the interest of third parties is also relevant, but in the second place). The prohibition, on the other hand, affects persons who have legal capacity but the legal system, for va rious reasons, always governed by the concern to protect the public interest, does not want them to exercise the economic activity, or if they do, it is after certain conditions have been met. B. Incompatibilities. The Commercial Code declares the exercise of trade to be incompatible with certain functions or professions. It thus seeks to protect the public interest which goes hand in hand with the proper per formance of those functions, so that they cannot be used to benefit the private interest of those who wish to exercise a business. These incompatibilities are prohibitions of a subjective nature, which cover not only the individual exercise of the business activity, but also the exercise of the economic activity on behalf of another person (whether natural or legal) (see articles 13 and 14 of the C. de c., which extend the prohibition to "having charge of or direct administrative or economic intervention in commercial or industrial companies”). The scope of the incompatibility may vary. C. Conditioning the exercise of the business to an administrative authorisation The principle of freedom of enterprise does not prevent the State from intervening to monitor the exercise of that freedom and to that end it is sometimes necessary to obtain prior administrative authorisation for the development of certain economic activities. However, it should be noted that there has been a trend towards liberalisation in this area since the Constitution came into force, and this has been reflected, especially for small and medium-sized enterprises, in Law 17/2009, of 23 November, on free access to service activities. Article 84 of the RRM establishes that, unless special legislation provides otherwise, the registration of the subject (whether an individual or a legal en tity) who intends to carry out activities requiring a licence or administrative authorisation may not be carried out unless proof is provided that it has been obtained. The same rule applies to the regis tration of subsequent acts subject to licence or administrative authorisation. 4. Employer's liability The employer carries out an economic activity that takes the form of a set of acts for which he is responsible. From an economic point of view, it is said that the employer assumes the risk of his activity, which corresponds, from a legal perspective, to the assertion that he assumes responsibility. 16 However, this expression covers different problems, in that it is necessary to ask, firstly, what goods the entrepreneur is responsible for; secondly, what facts he is responsible for, and finally, what per sons he is responsible for. + The entrepreneur is liable, like any other debtor, with all his present and future assets (art. 1911 C.c.). This applies to both the individual entrepreneur and the entrepreneur that is a legal person. The asset liability of the individual entrepreneur includes not only the assets that are affected by the exercise of the business activity, but also those that are not; or, in other words, there is no dis tinction for this purpose between his commercial and civil assets. There is, however, a certain tendency to limit the liability of the entrepreneur to his assets affected by the exercise of the bu siness, so that the rest of the assets, which are considered as family or non-commercial assets, are protected from the claims of commercial creditors. An entrepreneur who is a legal entity is also liable without restriction with all his assets. However, in some cases the partners are also liable for the company's debts, while in other cases the partners are not liable for the fulfilment of the company's debts. However, there is currently a general tendency to make those who have management power over the company or effective control over it, and who exercise it abusively, liable for the company's debts in certain cases. Such liability has been specified in the jurispru dence doctrine, which considers that in certain cases, for reasons of justice, the legal personality of the company should be disregarded and the person or persons behind it should be held respon sible, through the so-called "penetration of the legal personality” or "lifting the veil" doctrine for abuse of that personality. + The liability of the entrepreneur arises in the contractual and non-contractual sphere, either for the breach of contracts made with other persons (whether other entrepreneurs or customers) or for damage caused outside that contractual sphere, in accordance with the general rules contai ned in the C.c. or in accordance with specific rules (as is the case in the field of product liability or unfair competition). L. Consumers has harmonised the regime of civil liability for damage caused by defective products under three headings: - The first of these contains common provisions indicating that its rules refer to the right of any injured party to compensation for damage caused by the goods or services. With the necessary precision that it deals with non-contractual liability, not with that which may arise from breach of contract. The regime is mandatory, so that any clause exempting or limiting civil liability which is not provided for in the text is ineffective against the injured party. - Producers are liable for damages caused by defects in the products they manufacture or import (art. 135). The Act provides for a number of grounds for exemption from liability, such as the fact that the producer did not put the product into circulation, that the defect did not exist at the time the product was put into circulation, that the product was manufactured in accordance with existing mandatory standards or that knowledge of technology or science did not allow the existence of the defect to be assessed. It is up to the injured party to prove the defect, the damage and the causal link (Art. 139). The overall civil liability of the producer caused by identical products is limited to 63,106,270 euros (Art. 141). - Service providers will be liable for damages caused to consumers and users, unless they can prove that they have complied with the requirements of the regulations and other care and at tention required by the nature of the service (health care, household appliances, vehicles, re novation or repair of housing, gas and electricity and means of transport). For certain services a higher degree of liability is required by law, however liability for them will, unless there is a different rule, be limited to slightly more than EUR 3 million. 19 transfer of his company or business, the acquirer obtains ex novo the status of entrepreneur, or, ha ving that status, simply takes over that business. With regard to the reasons for termination of the status of employer, it is important to note the dis tinction between cases of natural and legal persons. + The individual entrepreneur will cease to be in his condition due to death, incapacity, incompati bility, disqualification or voluntary cessation of the activity. In the event of the death of the en trepreneur, the heirs, once the inheritance has been accepted, may continue the business activity and, as a consequence, acquire the status of entrepreneurs. The heirs succeed the entrepreneur in his business, but normally acquire ex novo the status of entrepreneur. In the event of the entre preneur's incapacity or incompatibility, it is understood that since he cannot act as such, he must cease to be an entrepreneur. In the event of incapacity, he may maintain his status as an employer if he has the assistance of his legal representatives. In the event of the voluntary termination of the employer's activity, the employer must liquidate his or her business, and until such liquida tion has taken place, his or her activity cannot be considered to have been completely terminated. + The company employer ceases its normal activity once its dissolution has been agreed, which opens the period of liquidation, during which the directors and the normal management of the company cease, and is replaced by that of the liquidators. + The employer's declaration of bankruptcy will not interrupt the continuation of his professional or business activity, which will only happen if he enters the phase of liquidation of his company. $. General considerations on the employer's employees A. Distinction between dependent and independent collaborators The entrepreneur carries out his activity with the collaboration of other people, who are generically referred to as collaborators or assistants. However, within this broad category a distinction is made between dependent and independent collaborators. The former, described as "auxiliary” to the employer, are characterised by a generally stable rela tionship of subordination or dependence. Dependent employees are linked to the employer by an employment contract. In the case of auxiliaries who perform senior management, government or board functions in the company (General Director, Manager, General Secretary, etc.), their link with the employer is also considered to be an employment contract, but subject to a special "senior ma nagement" regime. It should be pointed out that if the person in question is simply a member of the company's board of directos, his relationship with the company is different and falls exclusively within the scope of commercial law [thus Article 1.3. c) of the Workers' Statute]. Self-employed workers are those people who help, in a certain sense, the employer in carrying out his activity, but who are not subject to his hierarchical subordination and are outside the company (understood as a unit of work). Independent collaborators, insofar as they have management auto nomy and because they act in their own name, acquire the qualification of entrepreneurs and are owners of their own company. This is the case with commercial, insurance and transport agents, co llegiate mediators, etc. The contract that binds the principal entrepreneur and his independent colla borators is generally a commission, agency or mediation contract, to which we refer in the section on commercial contracts. B. Dependent employees The Commercial Code deals with them in Articles 281 and following. Its regulation is inadequate, not only because it offers a reduced cadre of the employer's a ants, but also because it confuses the internal relationship between the assistant and the employer (which it improperly considers as a 20 "commercial mandate”) with its power of representation, that is, the way in which the assistant, when contracting with third parties, can link the employer with his or her acts. The internal relationship can be qualified as an employment contract, taking this term in a broad sense, and the rules on this point contained in the Commercial Code have been superseded by mo dern labour legislation (in particular Articles 299 to 302). On the other hand, the rules concerning the power of representation enjoyed by the assistant (or dependent employee) to bind the employer remain in force. There is a tendency, which is pointed out in the Commercial Code and tries to be generalized by the doctrine, to consider that the assistant to the employer is endowed with those powers that are necessary to perform the functions that normally correspond to him in the position in which he has been placed. If it is this aspect of the power of representation that is of particular interest to commercial law, we must not worry about dependent collaborators who carry out purely internal tasks, the performance of which must not involve an external activity of contracting with third parties (e.g. technicians whose exclusive function is the production of a product). It should be remembered that the essential core of commercial law is the discipline of the entrepreneur and his/ her activity with third parties, and consequently for this law the collaboration of employees is rele vant insofar as they help to carry out this activity. A. General proxy or factor Among the employer's auxiliaries, the factor occupies a leading position, being a general proxy of the employer for all acts in which his activity is carried out. Article 283 gives a "legal concept of factor” saying that it is "the manager of a company or a manu facturing or commercial establishment for others, authorized to administer it, direct it and contract about things concerning it, with more or less faculties, according to the owner's convenience". Both doctrine and jurisprudence understand that the figure of the factor or manager extends to all kinds of entrepreneurs, whether natural or legal persons, and that it can be given other names, such as "general manager", and that the same entrepreneur can have more than one factor or general ma nager, either because he or she considers it necessary for the proper functioning of the business gi ven its size or because of the existence of various branches. In the case of a company, the adminis trators appear in front of the factors or managers, since in this case we are dealing with people who, as we have to see, have a representation qualified as organic. This does not prevent them from ha ving other representatives - whether they are managers, general directors or individual proxies - ot her than the company directors, who have voluntary representation in front of the company direc tors. The factor replaces the employer, since it carries out all the operations that affect the company's bu siness or traffic (Article 286). The legal relationship that links the manager or factor to the employer cannot be considered a sim ple mandate, but rather a special employment relationship concerning senior management person nel, which is regulated by RD 1382/1985 (see art. 2). This relationship derives from a contract based on the mutual trust of the parties, who must adapt the exercise of their rights and duties to the requirements of good faith. This relationship is gover ned by the agreements between the parties, which must be supplemented by the provisions of civil or commercial law (Articles 2 and 3). The contract must be formalised in writing and is presumed to be concluded for an indefinite period of time (Articles 4 and 6). A different regime from that of the factor - which is dependent on the employer - is that of the com pany's administrators, who lack this link of dependence, since they are simply the people who form 21 part of a social body that is integrated into the organisation of the company, so that not only are their relations of an organic nature, but also their representation. There are a number of issues surrounding the manager's or factor's power of representation: + The factor needs a general power of attorney for the exercise of its activity. If extensive limita tions are imposed, it will lose its factor status. This power of attorney may be registered with the Commercial Registry, in which case it must be granted in a public deed. The general power of attorney - such as the appointment of a manager or factor - can be carried out by both individual entrepreneurs and companies, but in the first case, in order for the general powers of attorney to have access to the Commercial Registry, the individual entrepreneur must first have opted for his own registration, which, as we know, is optional, but as long as the entrepreneur is not registered, he cannot request the registration of any document in the Commercial Registry. In the case of general proxies for companies, their power of attorney must be entered in the Register. In the lat ter case, the powers of the factor (or factors) must not be confused with those of the directors, who have a special regime. The power of attorney may provide for and authorise so-called "self employment": the proxy is expressly authorised to use the powers conferred on him by the em ployer and to contract with himself. + The factor must act on behalf of the employer and must be expressly stated in all acts and con s. As a result of the representation, the entrepreneur is liable for the acts of the factor vis-á vis third parties and not personally, unless there is a confusion of assets between the factor and his principal. In this case the factor is also liable. traci + It is understood that the factor is authorised to carry out all acts that normally concern the opera tion of the business. The Code establishes the presumption that contracts made by the factor, which is well known to belong to a company, have been made in the name of the entrepreneur when these contracts concern the business or traffic of that company, even if at the time of inter vening in the contract the name of its principal has been omitted (Art. 286). Case law has insisted in various judgments that the behaviour of the factor in relation to third parties creates a legal appearance with the consequence of a link between the employer and the third party, since ot herwise it would violate the principle of legal certainty. If there is no such notoriety, or if the acts in question exceed the business or trade of the undertaking and the factor operates in its own name, it is directly liable to the third party. However, if the transaction has been made on behalf of the entrepreneur, the third party may direct his action either against the entrepreneur or against the factor. The employer is also liable for fines, tax or administrative offences that may arise from the management of the factor and that relate to the company, but the employer may repeat the offence against him if he has acted culpably. The factor is also liable to its principal for the damage it causes in any other case in which it has acted negligently or in breach of the orders it has received (Art. 297). + The power of attorney of the factor (or general manager) is based on the legal appearance, and is typified by our law. In this sense, article 286 of the C. de c. declares that contracts entered into by the factor of an establishment, manufacturing or commercial company when the latter "noto riously belongs to a known company or corporation", it is understood that such contracts have been made on behalf of the owners of the company or corporation "even if the factor has not ex pressed this at the time of entering into the contract, or there is an alleged abuse of trust, trans gression of powers or appropriation by the factor of the effects which are the object of the con tract, provided that these the decisions adopted by the latter, not only on matters affecting the organization of work such as staff restructuring, total or partial relocation of facilities, but also on processes of merger, ta keover or modification of the legal status of the company involving any incident that may affect the volume of employment. The works council has a duty of secrecy outside the scope and pur poses for which the employer provides information (Article 65 of the Statute). 24 Lesson 4 Business register 1. Types of records. There are three types of records: 1. Property registration. It serves to make the right effective against third parties and to protect them (based on the confiden ce in what is entered in the register (reality vs. appearance)). The Mortgage Act sacrifices the holder of the right and legal certainty (reality) in favour of legal transactions and third parties (appearance). E.g. A sells to B, but B does not register it. A, who remains the owner of the register, sells to C (a bona fide third party). In the event of a conflict between B and C, itis C who is protected. 2. Registration of goods. This is a legal registry of title to and encumbrances on movable property. 3. Commercial register. Part of the same ideas as those of the Land Registry, but applied to another type of reality. Itis a register of persons, of entrepreneurs. Commercial Registry Regulation (RRM): regulates the entire internal functioning of the registry and also contains certain company law rules. 2. Need for information to third parties. There are two central issues: Regarding the registered event and its effectiveness against third parties. Historically, since the exi stence of commercial law, the commercial register has existed, mainly for two reasons: + Commercial activity as an organisational activity aimed at the market: the commercial register serves to oppose legal situations with regard to third parties (legal certainty), which is necessary when legal relations are established on a mass scale, as the need to inform third parties arises (as legal relations are established between the latter and the holder). + Commercial activity as an activity with a special need for credit: legal relations involve a risk for third parties, who must be able to rely on what is published in the register (traffic safety). In conclusion, we see that registration arises from the need of third parties to know the identity and legal position of the entrepreneur (liability and representation). Meaning of registration vis-á-vis third parties (material advertising). It is not commercial advertising, but legal advertising, i.e. it has legal consequences. There are dif ferent degrees of advertising: Announcement or news: in an official gazette. E.g.: members are invited to a meeting by means of an announcement in the BOE. Qualified: certain facts can only be opposed against third parties if they are published in certain do cuments. Legitimating: when presenting documents in the register, the registrars carry out the so-called "qua lification", which is a control of legality. As every document to be published in the register must pass the qualification, everything published is presumed to be "accurate and valid” ($ 20 CCom). 25 To counter this presumption, a legal action must be brought to declare the nullity of the registration, but taking into account that rights acquired by third parties in good faith cannot be attacked. Constitutive: certain actions are constituted by advertising them. E.g.: the registration of a mortgage has constitutive effect. 3. Other functions of the business register. In addition to advertising, the Register has other functions: + Legalisation of books (Articles 12.6 and 27.4 of the Commercial Code). + Appointment of independent experts for certain situations. E.g. valuation of non-cash contribu tions ($$ 67.1 and 300 LSC) or of shares held by a separate or excluded partner ($ 353 LSC). + Appointment of auditors (Art. 265.2 LSC). + Deposit and publication of the annual accounts (articles 41 CCom and 279 ff. LSC). 4. Organization Central Commercial Register (Articles 17 and 18.3 CCom). It is kept under the authority of the Ministry of Justice. Its headquarters are in Madrid. Centralizes information from the land registers: it is merely for information purposes and for the communica tion of essential registration data. It is responsible for the publication of the BORME (Official Ga zette of the Commercial Registry), which is a way of publicising what is registered in the MR. Itis also responsible for the filing and advertising of company names and legal entities (negative certification) [see Addendum 14. Law 17/2001, on Trade Marks] and the registration of entities that have moved their domicile abroad without losing their nationality, etc. (Art. 379 of the Spanish Civil Code). Once the entries have been made in the Commercial Register, the essential data shall be communi cated to the Central Register, which shall publish them in the BORME. This publication will be re corded in the corresponding Register. Territorial registers. The seat of the company shall be located in the capital of each province (and in the towns where, due to service needs, established in accordance with the legal provisions in force). Provincial competence is given according to the domicile of the entrepreneur. There are also offices in the islands and in Ceuta and Melilla. These are public offices in the interest of private traffic. Re, s These are civil servants with a special status, as they are organically attached to the Ministry of Ju stice, but on an autonomous basis and paid by tariff. 5. Content of the registration Registry information can be obtained through registrations and simple notes (in the simple notes you are informed of the name of the company, its corporate purpose, registry data...). Personal folio system. By means of this system, when an entrepreneur goes to make a registration, it is opened in the name of the entrepreneur (German-Swiss model). This is laid down in $ 3 BGB and $ 17 (1) CCom ("the Commercial Register shall be kept [...] with the personal foil system”). In addition, there are other registers in the commercial field such as 26 + Spanish Patent and TradeMark Office: for the registration of industrial property. + Register of Movable Goods: for the registration of "things” (ships, aircraft, motor vehicles, industrial machinery, commercial establishments, general conditions etc). Registrable subjects. These are regulated in articles 16.1 and 19 CCom and 81 RRM. Registration may be: + Obligatory: for the social entrepreneur (commercial companies) and the industrial shipowner (art. 19 CCom and art. 81 RRM), i.e. registration is obligatory for all entrepreneurs except the individual (with the exception of the shipowner). + Potential: for the individual entrepreneur ("self-employed"). The burden on the voluntary nature of the registration is the impossibility of opposing certain facts to third parties, as they are not advertised. + Subjects eligible for registration who are not subjects: the MR is a register of persons, of em ployers, but there are subjects eligible for registration who are not legal persons, but rather: - Non-personified persons (entities): such as pension funds or investment funds. - Branches of foreign and Spanish entrepreneurs: they do not have legal personality. They are intended to attract clients. A company can set up a branch here, so that, if it goes wrong, liabi lity is limited to here and does not extend to the company's country of origin. - Professional Civil Societies (Law 20/2007): these are partners who are engaged in professio nal activities, ¡.e. activities that require a state title (e.g. lawyers, architects...). These companies, despite being civil, must be registered with the RM. + Forced registration of the sole proprietorship: although the general rule is that registration of the sole proprietorship is optional, there are situations that can force registration: - At the request of the spouse (art. 88.3 RRM). - By representatives of minors (art. 82.2 RRM). - By court order before an insolvency proceeding (articles 322.2 and 3 of the Civil Code). Registrable events (art. 22 CCom and arts. 87 and 94 RRM). RM is governed by the principle of typicality, i.e. only entrepreneurs and other subjects provided for by the Law and the acts and contracts relating to them that are determined by the Law and the RRM are eligible for registration (Art. 2 RRM). The company secretary is usually responsible for ensuring that the acts that must be registered are registered (they help the employer to document the changes, etc.). They are mainly regulated in $ 22 CCom, which reads “1. The sheet open to each individual entre preneur shall record his identification data, as well as his trade name and, where appropriate, the sign of his establishment, the seat of his business and of the branches, if any, the purpose of his bu siness, the date of commencement of operations, the general powers of attorney he grants, the con sent, opposition and revocation referred to in Articles 6 to 10; Marriage settlements, as well as final judgements on annulment, separation and divorce, and other matters established by the Laws or Re gulations. 2. In the sheet open to trading companies and other entities referred to in Article 16, the constituent act and its amendments, the termination, dissolution, reactivation, transformation, mer Oppossibility. When an act is registered and published in the RM, it is enforceable "erga omnes" (against all) on the basis of art. 21.1 CCom. The general rule is that registration and publication must be the same. 29 There are two exceptions: + Operations carried out within 15 days of publication in respect of third parties who were not able to ascertain the registered and published act (Art. 21.2 CCom). + Actions that appear to be contradictory to the registration (attributable to the owner of the right, legal - business onerous, third parties in good faith). Negative publicity In this case the registration and the reality do not coincide due to the lack of registration of a fact, as the registration is silent. This relieves the third party of the need to know. The MR is silent on a fact that can be registered and the third party must be protected from discre pancies in this respect: + The normal legal situation (e.g. a change from a system of property ownership to a system of separation of assets must be registered in the MR). + The previous legal situation (which may result from registration in the MR or from the well known exercise of that situation independently of registration). Budget: acts subject to compulsory registration and protection only of third parties in good faith. Third parties in good faith are given the option of choosing between appearance and reality Positive publicity. In this case the registration and the reality do not coincide, since "the declaration of nullity or inac curacy of what has been registered will not prejudice the rights of third parties in good faith acqui red in accordance with the law (which are not vitiated)” (art. 20.2 CCom). RM has incorrectly stated the actual situation, however, the bona fide third party is protected. The inaccurate content of the MR (appearance) takes precedence over the reality. Budget: imputability and protection of third parties in good faith Effects of the registration on the written event. The registration can be: + Constitutive: this is a sine qua non requirement for the legal act or transaction to have the effects desired by the parties (e.g. registration of a capital company, acquisition of legal personality by a joint stock company). + Declaratory: this is the general rule. It takes effect independently of registration. Registration has legal effect and not a sanction: the act is presumed to be accurate and valid (20.1 CCom) on the basis of the control of legality carried out by the registrar ($ 18 CCom and $ 5 RRM). Registration is a rebuttable presumption on the basis of $ 20 Paragraph 1 CCom (positive publicity): + The content of the Register is presumed to be accurate and valid. The entries in the Register are subject to the protection of the courts and shall remain in effect until such time as a judicial de claration of inaccuracy or invalidity is entered. + The registration does not validate acts or contracts that are null and void according to the Law (principle of legality). The declaration of inaccuracy or nullity shall not prejudice the rights of third parties in good faith, acquired in accordance with the law. Practice: on the basis of art. 727.5 LEC, precautionary measures can be requested for the pre ventive recording of a claim (i.e. the existence of a claim is recorded in the RM which, if succes sful, will result in an alteration to the Register). In this way one is protected against the protec tion of bona fide third parties). 30 Lesson 5. The defense of competition. The legal discipline of business activity, together with the aspect relating to free economic initiative in its aspect of acquiring the status of entrepreneur (which is basically expressed in the right of free access to the market as a businessman), has another aspect that we are going to deal with now, which is the regulation of competition between entrepreneurs. As stated in the explanatory memorandum of the Law 15/2007 of July 3, 2007 on the defense of competition ("LDC”) "Article 38 of the Constitution recognizes the freedom of enterprise in the framework of a market economy and the guarantee and protection of the same by the public autho rities, in accordance with the requirements of the economy in general and, where appropriate, plan ning. Based on this principle, the existence of effective competition between companies constitutes one of the essential elements of the market economy, insofar as it disciplines the actions of compa nies and allocates productive resources in the most efficient manner in favor of economic operators and the most productive techniques, which ultimately benefits the consumer who can obtain pro ducts at lower prices and in greater quantity, variety and quality. Free competition is, therefore, a basic principle that the legal system must protect. But unlike the systems of the last century, which considered that the protection of free competition should be ba sed purely and simply on its recognition, at present the discipline of free competition is considered more complex. This is due to the fact that the crisis of the theoretical model of perfect competition, outlined by classical economists, meant that such competition did not occur in reality (due to the frequency of situations of market domination by certain companies; due to the lack of homogeneity in the goods offered, which even though they are substantially identical, appear as diverse, due to the effect of trademarks and advertising, which prevents market transparency; due to legal restric tions for the establishment of new companies; due to the difficulty in dismantling the companies created, etc.). Moreover, the phenomenon emerged that if freedom of economic initiative had as a consequence free competition, it also derived from it autonomy of will in the contractual aspect, which allowed competitors to lose the aggressiveness expected of them and to establish agreements among them selves if they did not compete: thus, conventional limitations of such competition arose, with dama ge to competitors who are outside such agreements, and more seriously, to consumers in general. For this reason, the legislator has had to intervene to put a stop to practices that restrict competition and possible abusive behavior by companies that may occupy a dominant position in the market cu rrently regulated by the LDC (reformed by Royal Decree Law 9/2017, of May 26, in order to trans pose Directive 2014/104/EU on the pursuit of damages actions for breaches of competition law). The LDC has been completed by its Regulations approved by Royal Decree 261/2008, of February 22nd. At the same time, in the context of competition, a phenomenon with different nuances occurs when the competition between entrepreneurs is marked by the use of unfair practices, which occurs when the entrepreneur uses any means to attract consumers (denigration of the products of the opposite party, misleading advertising, bribery of the competitor's employees, etc.). The legal system also intervenes here with a discipline of unfair competition, through which it is intended to put a brake on free competition, so that the economic struggle does not degenerate and runs within channels of loyalty. The regime of this discipline is found in Law 3/1991, of January 10, of unfair competition ("LCD"), reformed, as we will have occasion to indicate later. 31 Both in cases of regulation of practices that restrict competition and in cases of unfair competition, the law wishes to protect the interests of competitors who participate or wish to participate in this fight and those who benefit from it, that is, consumers or the general public. 1. Defense of the competition. European and Spanish regime The system for the defense of free competition included in Community law and Spanish law is, for the most part, identical; which is logical, inasmuch as the extensive Community legislation that exists in this regard has served as a model for Spanish legislation, and more specifically, for the LDC and the Regulation that implements it. European and Spanish regulations coincide in distinguishing the various cases that affect the main tenance of free competition: collusion between companies, abuse of dominant position, economic concentrations and public aid. In fact, the LDC has tried to avoid divergences in the application of European and Spanish law, particularly in certain practical areas such as the system of restrictive agreements, in accordance with the provisions of Regulation No. 1/2003. At the same time, an at tempt has been made to promote effectiveness in the application of the competition rules through far-reaching institutional reforms. And although there are specific issues in the Spanish regime that differ from the European one, as is the case, for example, with the inclusion in our LDC of the prac tice of "distortion of free competition by unfair acts" (Art. 3 LDC), or in the way of dealing with the public aid regime, this does not prevent us from considering that both regulations, from a global perspective, are the same. Therefore, we will focus our attention on the Spanish regime and will proceed to make the corresponding references to European law when necessary, that is, when, in view of the coincidence of both regulations, the decisions issued by the Community bodies must be taken into account for the interpretation of Spanish law -insofar as the Spanish bodies will take them into consideration, since substantially the same rules are applied-, or when the opposite effect occurs: that the two disciplines, Spanish and Community, differ substantially. A. Prohibition of agreements and practices restrictive of competition One of the aspects of the competition discipline, as indicated above, is the prohibition of agree ments and practices that restrict competition itself. This matter is currently regulated, as we have already indicated, by the LDC and its Regulations, which as indicated in its explanatory memoran dum "addresses fundamental issues for the development of the Law", while empowering the Minis ter of Economy and Finance to issue the necessary provisions for the development of the Regula tions themselves. The Law, influenced as the previous ones by the rules of European Law, has taken into account in a special way the Council Regulation (EC) No. 1/2003 of December 16, 2002, regarding the applica tion of the rules on competition provided for in Articles 101 and 102 of the consolidated version of the Treaty on the Functioning of the European Union (TFEU), which contains the basic lines of the useful in this case to have recourse to Community case law (especially since Article 2 of the Law is clearly inspired by Article 102 TFEU), which does so by defining as such "the posi strength enjoyed by a company which enables it to prevent the maintenance of effective competi tion in the relevant market by enabling it to behave, to an appreciable extent, independently of its competitors and customers. ion of economic Now, as has been rightly pointed out, the determination of a position of dominance cannot be done in the abstract, but must refer to a concrete assumption. Logically, the main criterion to be conside red will be the subject's market share (although without forgetting other factors such as the number of competitors or the structure of the market), although the assessment of that share must be made with respect to the relevant market (or relevant market) in which the subject in question operates. 34 Nor does the Law define what should be considered as "abuse" of that position, although (once again, following the European legislator, see Article 102 TFEU) it enunciates, by way of example, a series of concrete assumptions that are so. It thus states that abuse may consist, in particular, of + The imposition, directly or indirectly, of prices or other unfair commercial or service conditions; + Limitation of production, distribution or technical development to the unjustified detriment of enterprises or consumers; + The unjustified refusal to satisfy demands for the purchase of products or the provision of servi ces; + The application, in commercial or service relations, of unequal conditions for equivalent servi ces, which places some competitors in a disadvantageous situation with respect to others; « The subordination of the conclusion of contracts to the acceptance of additional services which, by their nature or in accordance with commercial practice, are not related to the purpose of such contracts. According to the jurisprudence of the Court of Justice, the above is not a closed list of abusive practices. In fact, if the forms of abusive practices are varied, the ways to classify them are no less so. It is usually said that the control of competition law over dominant companies is limited to pre venting exploitative and exclusionary behavior. The former are those that are designed to obtain the maximum benefit from the market power enjoyed by the dominant firm. That is why exclusionary conduct is said to create direct harm to consumers. Among the exploitative behaviors, excessive pricing practices, production limitation or discrimination are worth mentioning. On the other hand, exclusionary conducts are those that are detrimental to the competitive structure of the market, that is, to competitors, whether current or potential. Exclusionary conducts include tying practices, refu sal to supply or license, loyalty discounts, predatory pricing, margin compression and bundling practices. c. Disturbance of free competition by unfair acts Acts of unfair competition, as we have indicated in section I of this chapter, may even distort com petition. To address this, the LDC was issued. However, the acts of unfair competition are also relevant -at least in certain cases- for the LDC, which establishes in its Article 3 that the CNMC or the competent bodies of the Autonomous Com munities, shall know in the terms established in this Law the prohibited conducts and the acts of unfair competition that by distorting free competition affect the public interest. In this case, the pu blic interest to be protected is that which may be affected by those unfair practices that threaten "the competitive operation of the market", such as dumping, or the so-called predatory acts that produce their effects in a significant part of the market (sales at a loss to expel competitors). Knowledge of issues that may arise from distortion of free competition by unfair acts is therefore divided between the CNMC and the Commercial Judges. The dividing line between the two is whether or not the act of unfair competition affects public order. In the latter case, the actions deri ved from unfair competition will correspond to the persons entitled to exercise them before the Commercial Courts, in accordance with the provisions of Articles 33 and 34 of the LCD. d. Assumptions excepted from. the prohibitions The LDC sets forth three cases, of a different nature, which are exempted from the previously prohibited conducts referring to collusive , abuse of dominant position and distortion of free competition by unfair acts (see articles 4, 5 and 6). This is, according to the explanatory memoran dum of the Law, one of the novelties of the Law that moves from the regime of individual authori 35 zation (in force with the previous Law) to a system of legal exemption in line with the Community model. These exempted behaviors are as follows: + Conduct resulting from the application of a law, without prejudice to the possible application of Community rules on the defense of competition (Article 4.1), since the latter, the Community rules, take precedence over national laws that may exempt some of them from compliance with a prohibition. + Conduct of "minor importance” (Article 5 LDC and Articles 1 to 3 of its Regulations) is exem pted from the prohibition, even though in principle it could be considered to fall under Articles 1 to 3 of the LDC. That is to say, collusive conduct and conduct deriving from a dominant position are considered lawful, without the need for a prior declaration to this effect, insofar as they affect a reduced percentage of the joint market share, which Article 1 of the Regulation of the LDC sets at 10 or 15 percent, depending on the case (depending on whether the companies are competitors or non-competitors). However, Article 2 of the Regulation sets out some cases which, being below these percentages, cannot be considered in any way as "minor", as they are agreements or conducts considered "parti cularly serious” (hard core restraints): (i) those carried out between competing undertakings that have as their object the fixing of sales prices, the limitation of production or sales, the allocation of markets or customers (including fraudulent bids, or the restriction of imports or exports); (ii) as well as - if the undertakings are not competitors - the establishment of fixed or minimum resale prices to be observed by the buyer, the restriction of active or passive sales to end users by the members of a selective distribution network; etc. (see these and others in the aforementioned Article 2 CDCR). Apart from the cases indicated, when the public interest so requires, the CNMC, following a report from its Board, may adopt an ex officio decision declaring that certain conduct is not affected by the prohibitions of Articles 1 to 3 of the LDC. These are conducts that, although in principle would be prohibited, are authorized by a declaration of "inapplicability" by this body (see Article 6 LDC). The aim is thus to allow certain collusions whose beneficial effects from the economic and social standpoint exceed the harm caused by the existence of the collusion. B. Control of economic concentrations a. Notion of economic concentration The LDC has dealt with the control of economic concentrations and, to this end, has departed to a certain extent from the previous regime and even from that provided for in Regulation (EC) No. 139/2004, based on a complex definition of concentration (Article 7.1 LDC) which seems to want to approach the idea of a change in the control structure, whether de facto or de jure, of a company. The provision thus refers to any "stable change of control of the whole or part of one or more com panies" as a result of a series of operations: merger, acquisition of control of the whole or part of another company, creation of a joint venture and, in general, the acquisition of joint control over one or more companies, when they permanently perform the functions of an autonomous economic entity. In paragraph 2 of the same provision, the legislator attempts to go deeper into this difficult concept by providing an illustrative list of sources from which such control may arise, and finally, in an attempt to cover all those situations of control not foreseen by its literal wording, it includes a reference to the concept of control in Article 4 of the LMV (which, as is known, after its last amendment, was left empty of content, referring now to Article 42 C. de c., which contains a defini tion of a group of companies based precisely on the element of corporate control). 36 This precept ends, after having pointed out such a broad concept of concentration, by pointing out the assumptions that for these purposes certain conglomerates are not considered to be concentra tions (cf. art. 7.3 of the L.D.C.). Articles 4 and 5 of the Regulations to the Law, in turn, lay down rules on the calculation of market share and turnover. Following this diffuse notion of concentration, in which what is relevant in this case is to focus on the moment of its constitution or formation, Article 8 LDC delimits the scope of application of the Law to concentrations on the basis that one of the two following circumstances is present: + That as a consequence of the concentration a share equal to or greater than 30 percent of the re levant product or service market is acquired or increased at the national level or in a defined geographical market within the same shall nevertheless be exempt from this control procedure all those concentrations in which, even if the above-mentioned is complied with (i) the overall turnover in Spain of the acquired company or of the assets acquired in the last accounting year does not exceed the amount of 10 million euros, (ii) provided that the venturers do not have an individual or joint share equal to or greater than 50% in any of the affected markets, on a natio nal basis or in a geographical market defined within the same; + That the overall turnover in Spain of all the participants exceeds 240 million euros in the last ac counting period, provided that at least two of the participants have an individual turnover in Spain of more than 60 million euros. These cases do not include concentrations with a European dimension, as defined in Council Regu lation (EC) No. 139/2004 of January 20, 2004, on the control of concentrations between underta kings, unless the concentration has been the subject of a decision by the European Commission to refer it to Spain in accordance with Article 9 of the aforementioned Regulation. b. Regime for the control of concentrations The LDC establishes a regime for concentrations of companies whose essence lies in the fact that those included within the scope of application established by the LDC (see Article 8 referred to above) are obliged to notify, in advance, their intention to form or incorporate to the CNMC, and cannot carry it out until this body grants the appropriate administrative authorization (Article 9 LDC). The obligation to notify falls either jointly on the parties involved in a merger, creation of a joint venture or in the acquisition of joint control, or individually on the party acquiring exclusive control over a company or part of it (Article 9.4 LDC). However, this notification obligation will not affect concentrations with a Community dimension [regulated by the aforementioned Regulation (EC) 139/2004], unless the European Commission has decided to refer the concentration to the Spanish authorities. concerned does not comply with this decision within the prescribed period, the Commission or any other interested State may, notwithstanding Articles 258 and 259, refer the matter directly to the Court of Justice of the European Union. D. Reference to supervisory bodies at national and european level a. National scope As it has already been expressed, the body in charge of the control of this matter of competition de fense is the CNMC, which is attached to the Ministry of Economy, which must act with full organic and functional independence, subject to the LDC and the rest of the legal system. Its legal regime is contained in Law 3/2013, of June 4, which created the CNMC and in Royal Decree 657/2013, of August 30, which approved its Organic Statute. The highest authority body of the CNMC is the Council, which is configured as a collegiate deci sion-making body, composed of ten directors. It acts in full and in chambers, one dedicated to com 39 petition issues and the other to regulatory supervision. Its resolutions, once adopted, put an end to the administrative process and can only be challenged before the contentious-administrative juris diction, particularly before the National Court. On the other hand, the Law regulates the basic struc ture of the management bodies, establishing four directorates of instruction: one for the defense of competition files and another three for regulatory supervision matters in the telecommunications and audiovisual services, energy and transport and postal sectors. The most relevant functions of the CNMC are (i) the care in the application of the provisions of the Law in matters of conducts that restrict competition or abuse the dominant position in the market (without prejudice to the competences that correspond to the autonomous bodies in their respective field); (ii) the application of the provisions of the Law in matters of control of economic concentra tions; (iii) the application in Spain of the Community provisions, as well as the adoption of measu res for the implementation of cooperation and allocation of files with the European Commission; (iv) the performance of arbitration functions submitted to it by economic operators (v) the applica tion of the provisions of the Law on the Control of Economic Concentrations. art. 24). It also has a set of consultative powers relating to the defense of competition (set forth in Article 25) and other functions among which are those aimed at promoting the existence of effective competition in the markets (see Article 26). The LDC contains a detailed regime on the regulation of procedures in matters of defense of com petition, in particular that relating to the control of economic concentrations (arts. 55 to 60) and the sanctioning regime (see arts. 61 to 70). It is of interest to note that the first additional provision of the LDC, in accordance with the provi sions of the Organic Law of the Judiciary, establishes that the Commercial Courts will hear any matters that fall within the jurisdiction of the civil jurisdiction in the procedures of application of articles 1 (relating to collusive behaviour) and 2 (relating to abuse of dominant position) of the LDC. b. European scope In the European Union system, the competent body for the application of the provisions of Articles 101 et seg. TFEU is the European Commission, whose acts are subject to review by the General Court (formerly the Court of First Instance) and the Court of Justice. The Commission, as guardian of the Treaties, has the task of ensuring that European law is respec ted and, as far as the defence of competition in the market is concerned, has the power to apply Union regulations directly, in particular through the Directorate-General for Competition. This di rectorate acts ex officio or in response to complaints or leniency applications when it has sufficient evidence to establish the infringement of Articles 101 and 102 TFEU. When it concludes that a company has violated competition law, the Directorate General for Competition proposes to the Co llege of Commissioners to adopt a formal decision to prohibit the conduct and impose corrective measures. Of course, it may impose the cessation of the prohibited practices and in Regulation No. 1/2003, it is foreseen that it may reach commitments with the companies on which it will impose the cessation (Article 9). In addition, the Commission may impose fines (Article 23), consisting of a percentage of turnover, and coercive fines (Article 24), in which the fine operates for each day of delay in complying with the order. The Commission's decisions on competition matters can be appealed in the first instance to the Ge neral Court by means of the direct appeal provided for in Article 263 TFEU. The General Court conducts the review of decisions and its examination deals with both factual and legal issues. Deci sions issued by the General Court may in turn be appealed to the Court of Justice on a point of law under Article 256 TFEU. The Court of Justice may also be called upon to give a ruling on the inter 40 pretation of the provisions on jurisdiction in the context of a reference for a preliminary ruling made by a national court pursuant to Article 267 TFEU. E. Sanctions, "leniency' procedure and transactions In order to impose sanctions, the LDC distinguishes between very serious, serious and minor infrac tions (Article 62). Minor infringements are sanctioned with a fine of up to 1% of the total turnover of the offending company in the immediately preceding financial year (the one in which the fine was imposed). Serious fines can be up to 5% of turnover, and very serious fines can be up to 10%. In addition, when the offender is a legal entity, it must be taken into account that a fine of up to 60,000 euros may be imposed on each of the legal representatives or persons who make up the ma nagement bodies that have intervened in the agreement or decision (Article 63). An important novelty of the LDC consists in the inclusion of rules that incorporate the so-called "leniency" policy (cf. Articles 65 and 66 LDC), by virtue of which a company or natural person can be exempted from the payment of the fine when they have provided substantive evidence for the investigation of the existence of a cartel. The benefit of the exemption from the fine is only applied to the first company or person that has provided such evidence, while those who subsequently pro vide other evidence concerning the cartel - with a significant value - will only be granted a reduc tion of the fine. Examples of the application of this leniency policy at the Community level, which is carried out in accordance with the Commission Notice on Immunity from fines and reduction of fines in cartel cases (OJEU of 8 December 2006), are the Commission Decision of 31 May 2006 (Methacrylates Case, OJEU of 22 November 2006) and that of 13 September 2006 (Bitumen Case, OJEU of 28 July 2007). It should be noted that, at the European level, it is also common to resort to the settlement procedu re, described in detail in the Commission's Communication on the conduct of settlement procedures in view of the adoption of decisions pursuant to Articles 7 and 23 of Council Regulation No 1/2003 in cartel cases (OJEU of 2 July 2008). F. Private enforcement of competition rules: compensation for damages caused by antitrust practices It has been noted above that, in addition to the rules provided for in the LDC, Articles 101 and 102 TFEU produce direct effects on relations between individuals and generate, for those affected, rights and obligations that national courts must apply. Therefore, national courts and judges also have an essential role in the application of European competition rules. This is what is known as the private enforcement of competition rules, which is not intended to replace enforcement by the ad ministrative authorities (public enforcement), namely the CNMC or the Commission, but to com plement it. When ruling on disputes between private individuals, national courts protect the subjec tive rights arising from Union law, for example by awarding damages to the victims of infringe ments. The full effectiveness of Articles 101 and 102 TFEU, and in particular the practical effect of the prohibitions laid down therein, requires that any person, whether a private individual, including consumers and businesses, or a public authority, may claim damages from the national courts for an infringement of these provisions. All these issues have been addressed in Directive 2014/104/EU on the pursuit of damages actions under national law for breaches of competition rules (both European and national), which with some delay, has been implemented in our system with the enactment of Royal Decree Law 9/2017 of 26 May. By virtue of this, the LDC has come to have a new Title relating to the compensation of damages caused by restrictive practices of competition. In this title, any violation of Articles 101 or 41 102 TFEU (or of Articles 1 or 2 of the LDC) is considered an infringement of competition law. In summary, the main aspects of this new regime are The responsibility of the companies or persons controlling the offending company is observed, ex cept when the economic behavior of the latter is not determined by any of them (Article 71.2 LDC). This is a provision that is relevant in the area of corporate groups. The so-called "right to full compensation” (Article 72 LDC) is recognized before the ordinary civil jurisdiction, for the damages caused by these conducts, which shall include the right to compensa tion for consequential damage and loss of profit, in addition to the payment of interest. Joint and several liability is imposed (Article 73 LDC) among the participants in the infringement (with special rules for SMEs). A longer limitation period of five years is established for the exercise of actions for damages, detai ling when the calculation of the period begins, and the assumptions of its interruption (Article 74 LDC). Irrefutable probative value is given to the resolutions of the competition authorities, both national and from other Member States (Article 75 LDC). A iuris tantum presumption of causation of the damage is introduced in the infractions qualified as "cartel" (art. 76 LDC). The effects of agreements (out-of-court settlements) on the right to compensation for damages are provided for (Article 77 LDC). Rules on the quantification of damages are incorporated, as well as the burden of proof, both in rela tion to the damage and the defense of repercussion of the over costs (arts. 76, 78 and 79 LDC). The actions for damages brought by plaintiffs located at different levels of the supply chain are also regulated (art. 80 LDC). 44 cause this leads to "degraded anti-juridicality, by means of the qualification of disloyalty applied to actions or omissions that do not meet all the requirements that make up the case typified to prevent In view of the meaning of the general clause on unfair competition contained in the aforementioned Article 4 LCD, it is appropriate to analyse the case-by-case list of acts of unfair competition ex pressly prohibited by law. In this sense, it should be noted that the reform of the LCD by Law 29/2009, as has been pointed out by our doctrine, has broken the structural unity that characterised the Law of Unfair Competition: thus, Chapter II (Articles 4 to 18) sets out the main acts of unfair competition on a case-by-case basis, while Chapter HI (Articles 19 to 31) is dedicated to regulating what is incorporated as another specific category, "unfair commercial practices with consumers or users”. We will analyse both chapters separately. B. Case-by-case list of the main acts of unfair competition Although the general clause contained in the Law serves as a guide for the classification of an act as an act of unfair competition, following a certain tradition contained in other legal systems and also in ours, the LCD has typified a series of specific cases as acts of unfair competition, in order to pro vide greater certainty to the regime on this matter, which seems essential given the lack of definition of the Law when it comes to formulating that general clause. The classification of acts of unfair competition is intended to provide certainty to the discipline, but without resulting in the establishment of a numerus clausus of illegal acts. The general principle of good faith should not only operate as a value criterion that will contribute to the construction of ot her types of unfair behaviour different from those specifically enunciated in the "special clauses" (Articles 5 to 18 LCD), but also to correctly interpret the cases of unfair competition ex pressly contemplated in those precepts. Acts of unfair competition can be classified according to various criteria. Of these, perhaps the sim plest is the following: a. Acts directed ag; pecific competitor 1. Those of denigration, consisting of the making or dissemination of statements on the activity, services, establishment or commercial relations of a third party that undermine its credit in the mar ket, unless they are accurate, true and relevant (cf. Art. 9, which considers that statements on strictly personal circumstances of the affected party are not relevant). The Supreme Court has been forced to rule repeatedly on acts of vilification and has established dif ferent rules on the application of Article 9 LCD. The protection offered by this provision to an eco nomic agent does not seek to provide direct protection, but rather to ensure that this protection works in favour of the correct functioning of the market. The assessment of the existence of an unfair denigration does not require a specific intention to de nigrate or damage the reputation of the competitor against whom it is made, nor does it require the eflectiveness of the denigrating statement, since what matters is that it is suitable or capable of un dermining the injured party's credit. In addition, the relationship between the prohibition of certain denigrating demonstrations and the fundamental right to freedom of expression is particularly important. On the basis of this relations hip, it has been pointed out that the competitive offence referred to in Article 9 LCD must be inter preted in a restrictive manner, attempting to reconcile the protection of market transparency and the reputation of its participants with the validity of the aforementioned fundamental right. Expressions that do not affect the preferences and decisions of consumers and other market players should not be subject to the truthfulness fee. Expressions that imply an unnecessary and injurious disqualifica 45 tion of a company's professional behaviour or that question, without further ado, its probity or et hics are denigrating. 2. Public comparisons, including comparative advertising, by explicit or implicit reference to a competitor. However, such acts of comparison shall be deemed to be permitted where (a) the goods or services being compared have the same purpose or satisfy the same needs d) such products or services are not presented as imitations or replicas of others with a protected trademark or trade name; e) the act of comparison does not contravene the provisions of the LCD itself regarding acts of deception, denigration and exploitation of the reputation of others (v. Article 10). 3. Those of imitation of the services and initiatives of a third party, when consumers may associate such acts with the services of the third party or take undue advantage of the reputation or efforts of others (see Article 11 and its qualifications), based on the principle that imitation of the initiatives and business services of others is free, unless there is an exclusive right protected by law; e.g. a pa tent right and, in general, so-called industrial property. This provision does not apply when the reci pients are not consumers. Likewise, the systematic imitation of the services and initiatives of a competitor will be considered unfair when this strategy is aimed at preventing its assertion on the market. 4. Those of taking unfair advantage, for one's own benefit or that of others, of the advantages of the reputation acquired by another in the market (Art. 12). Unfair competition occurs for those who equate their performance with that of a competitor with whom they collaborated in the past, thus seeking to create confusion between the two. 5. The violation of business secrets, which shall be governed by the provisions of the busines cret legislation (see Article 13, after its drafting by Law 1/2019, of 20 February, on business secrets). This specific legislation will protect any information or knowledge, including technologi cal, scientific, industrial, commercial, organisational or financial, that is secret, has business value (precisely because it is secret) and has been subject to reasonable measures to maintain its secrecy. 6. Inducing employees, suppliers and customers to breach a contract when the purpose of the con tract is the dissemination or exploitation of an industrial or business secret or when it is accompa nied by circumstances such as deceit, the intention to eliminate a competitor from the market or ot her similar circumstances (Art. 14). b. Acts contrary to the proper functioning of the market in general 1. Acts of deception (art. 5 LCD), which must meet two conditions to be considered as such: (i) contain false information or information which, although true, by its content or presentation induces or may induce the recipients to error by altering their economic behaviour; (ii) affect any of the as pects indicated in the provision itself (the existence of the good or service, its essential characteris tics, after-sales tance and the treatment of complaints, the scope of the commitments of the en trepreneur or professional, the reasons for the commercial conduct and the nature of the operation, the price or its method of setting or the existence of a specific advantage with regard to the price and the need for a service or part, replacement or repair). 2. Those of confusion with the activity, services or establishment of others (cfr. Art. 6). 3. Those involving misleading advertising by omission or silence of the advertiser. These acts of misleading omission are typified in the recently reformed Article 7 LCD and include six scenarios: 1) the total lack of necessary information or its concealment; 2) information provided in an unclear manner; 3) information that is unintelligible; 4) ambiguous information; 5) information provided at an inappropriate time; and 6) concealed advertising (that is, where "the commercial purpose of the practice is not made known, when it is not evident from the context”). 46 4, The so-called "aggressive practices” after the reform, i.e. behaviours that may significantly im pair the freedom of choice of the recipient or alter by means of harassment, coercion, use of force or undue influence, his economic behaviour in relation to the good or service in question (Art. 8). 5. Prevailing on the market of a competitive advantage, which is significant, acquired by infringing the law (Art. 15). 6. Discrimination against consumers without just cause (cf. Art. 16.1), exploitation of situations of economic dependence on customers or suppliers (Art. 16.2), total or partial severance of commer cial relations without notice [Art. 16.3, a)] and obtaining under threat of price or conditions not provided for [Art. 16.3, b)]. 7. Systematic sales below purchase price or cost (so-called "sales at a loss") which mislead consu mers as to the price level of other products in the same shop and those aimed at eliminating compe titors from the market (see Article 17). 8. Illicit advertising, which shall be deemed to be unfair (Art. 18). Thus, an illicit advertising mes sage will allow recourse to actions derived from unfair competition legislation. C. Unfair commercial practices with consumers or users As already indicated, following the reform of Law 29/2009, the LCD has incorporated a new Chap ter TIT (Articles 19 to 31) devoted to regulating another specific category, listing it casuistically, of specific acts of unfair competition carried out against consumers or users. With the aim of offering a systematization of those precepts we could distinguish between mislea ding conducts (arts. 20 to 27) and aggressive conducts towards this category of subjects. a. Misleading behavior Within this category we can include the following behaviours that the legislator enumerates in a somewhat confusing and sometimes repetitive way in a kind of what some authors have called "black list": 1) the so-called misleading consumer practices (Article 20), considering as unfair all those com mercial practices which create confusion or a risk of association with goods, services, registered trademarks, trade names or other distinctive marks of a competitor, provided that they are likely to affect the economic behaviour of these consumers; 2) those that deal with codes of conduct or other quality marks (Article 21), insofar as they are ai med at affirming the public endorsement of a certain code or the adhesion of certain employers or professionals to it, when this is not true (this one, that of the codes of conduct, represents one of the most interesting novelties of the reform of the LCD to which we will refer later: see section E); 3) practices that the legislator calls “bait", as well as misleading promotions (listed in Art. 22), such as not supplying goods or services offered at a certain price, offering prizes that are not awarded, etc; 4. those which mislead the consumer about the nature and properties of the goods or services, their availability and after-sales services (Art. 23), such as false claims about the curative properties of goods or services, use of a language in after-sales services other than that used in the commercial transaction without warning before the transaction is concluded, etc; 5) pyramid sales (art. 24), consisting of compensation for the consumer or user derived from the entry of others into the contracted plan; (6) misleading promotions (Article 25) aimed at deliberately inducing the consumer to believe that the good or service comes from a particular entrepreneur or professional, when this is not the case; 49 In addition to the definition of commercial advertising in general, it also defines what is considered illegal advertising. Article 3 of the General Law on Advertising establishes that illegal advertising is that which violates the dignity of a person, or if it infringes the rights or values recognised by Arti cles 14, 18, 20 and the Constitution, ÓN ESPAÑOL Aor other values of the Constitutionón Españo la. This article explains various cases that are considered illicit publicity, which are typified. The General Law on Advertising is closely linked to the Law on Unfair Competition, since between the two there is a more specific determination of illicit advertising, as it is considered to be an element which attempts against free competition. The cases of illicit advertising provided for in the rule are a) Advertising which violates the dignity of the person or infringes the values and rights recognised by the Constitution ón EspañolaThese violations are especially those relating to the right to equality, honour, privacy, children and young people, 3 General Law on Advertising. This section was amended by Law 1/2004 of 28 December on Measures for Comprehensive Protec tion against Gender Violence. This law seeks to protect women and to condemn all acts that are considered to violate the right to freedom and non-discrimination. The General Law on Advertising now incorporates that illegal advertising is considered to be that which violates the dignity of wo men if it is presented in an abusive manner, using their body or parts of it as an object unrelated to the product being advertised, or if their image is associated with stereotyped behaviour which viola tes the foundations of the legal system. b) Advertising aimed at minors. This advertising was introduced after the reform of the Law 29/2009 in the Art. 3 ¡General Law of Advertising. It is illegal to advertise to minors to encourage them to buy a product or service, or to convince their parents of this, taking advantage of their vul nerability and credulity. Children may not be presented in dangerous situations, nor may they be misled about the characteristics of products. c) Subliminal advertising. It is illegal, since it consists of stimulating the recipients of the adverti sing, so that they do not perceive it, to buy the products or services advertised, (Art. 4 General Law on Advertising). The public is not aware that it is being induced to buy products or acquire services, since stimulation techniques of different intensities, similar to people's senses, are used. This form of advertising leads people to buy products because of that incentive, and not because they really want to, so this type of advertising is detrimental to consumers and to free competition, and is therefore prohibited. d) Advertising which infringes the legislation regulating this particular type of advertising relating to products, goods, activities or services, (Art. 3 General Advertising Law). This advertising must follow certain rules for its implementation. If it is not done, it will not be valid. Advertising of this kind is found in the case of: medical devices, or activities or services that may cause a risk to health. Advertising for games of chance; for narcotic or psychotropic products or medicines; for alcoholic beverages of a certain strength. These cases are foreseen in Art. 5 General Law of Advertising. Thus, for example, alcoholic beverages with a strength of more than twenty degrees cannot be ad vertised on television. Nor can medicines be advertised which have to follow specific regulations because of the warnings and restrictions that have to be taken into account. e) Misleading, unfair and aggressive advertising is already regulated by the Unfair Competition Act. See More... ás relevantes de la Ley de Competencia Desleal This advertising is banned because it is misleading, i.e. it is wrong for the consumer, because it is unfair, i.e. it does not respect the rules of free competition, or because it is deceptive, i.e. it does not 50 conform to reality. In these cases the consumer is used, as he is made to believe that the product or service is something different from what it really is. Furthermore, it cannot affect freedom of com petition. In these s it would be advertising contrary to the law, and would not be valid, (Art. 3 ¡General Advertising Law). It also includes misleading advertising by omission, i.e. advertising which omits the essential details of the products or services, and this leads consumers into error. This misleading is necessary for advertising to be established as misleading. It is also misleading advertising that is not easily defined as advertising even though it really is. In other words, it is pre sented in such a way that it cannot be seen to be advertising. For example, this is the case with pro duct placement, which is the placement of products strategically in a film or television series, wit hout this being perceived as advertising. - The repression of illegal advertising. Law 29/2009 modified the advertising regime, and establis hed a new method of controlling such advertising. Ilicit advertising will be controlled by a series of actions that are set out in Art. 6 General Law on Advertising. The actions are those derived from the Law on Unfair Competition, which are set out in Chapter IV, of Art. 32 ,Law on Unfair Competition and following. See más relevantes de la Ley de Competencia Desleal. Aspects.ás relevantes de la Ley de Competencia Desleal The actions are: Declaratory action, action for cessation, action for removal of effects, action for rectification, action for compensation for damages and the action for unjust enrichment. But in addition to these, a special legitimacy is maintained over illegal advertising. Here the Go vernment Delegation for Gender Violence, the Women's Institute or its equivalent in the autono mous region, as well as women's defence associations and the Public Prosecutor's Office are recog nised as legitimate. Also worth mentioning is the Autocontrol Association, which serves to protect consumers against advertising abuses, bringing together advertisers, agencies and media to solve problems between them through decisions. - The subjects of advertising and their contracts. Within the subjects foreseen by the General Law on Advertising, three types are distinguished, which are: the advertiser, the advertising agencies and the advertising media. The advertiser is the one who carries out the advertising, it can be a natural or a legal person. Advertising agencies are those that are professionals in advertising production. They are responsible for the creation, preparation, programming and execution of advertising. They can be natural or le gal persons. The advertising media are the ones that spread the advertisements through the social media. They can also be natural or legal persons. The media is referred to as television in Art. 8 General Law on Advertising Advertising contracts are regulated by Art. 7 General Advertising Law. Contrac! by this law or by the general rules of law. s must be regulated It is forbidden in these contracts to establish clauses on the attribution or limitation of the responsi bility that may arise from the advertising contract in relation to third parties, (Art. 11 ¡General Law on Advertising). Also by Art. 12 ¡General Law of Advertising, it is established that any clause that guarantees the performance or results of the advertising will be considered as not being included. 51 An advertising contract is one in which an advertiser commissions an advertising agency to execute and create advertising in exchange for a fee. The obligations of the parties are established in Art. 15 ¡General Law of Advertising and Art. 16 General Law of Advertising. The contract for advertising and advertising sponsorship is also regulated here. The advertising contract is a contract that establishes an obligation of a medium in favour of an ad vertiser or an advertising agency, by means of which, these may use a medium, during a certain time, and to use a technical activity in order to be able to advertise, Art. 17 General Law of Adver tising. The main breaches of this contract occur due to the lack of agreed broadcasting or defective execu tion of the medium. The advertising creation contract is a contract that establishes the obligation of a natural or legal person to carry out an advertising project, in favour of an advertiser or an agency, in exchange for a consideration, (Art. 20 General Advertising Law). The advertising sponsorship contract is one by which the sponsored party, in exchange for financial support, advertises the sponsor (Art. 22, General Law on Advertising). 54 + Plant varieties and animal breeds + Essentially biological procedures for obtaining plants or animals. + The methods of therapeutic surgical treatment and the methods of diagnosis referred to the hu man or animal body. + The human body or the simple discovery of one of its elements, which includes the total or par tial sequence of a gene + The DNA sequence with no indication of any biological function D. The right to the patent. The right to the patent belongs to the inventor or his successors in title. Therefore, the inventor has, in principle, the right to apply for a patent, and since this right is considered to be of a patrimonial nature, it can be transferred to a third party. Of course, the right to the patent, whether acquired by the inventor or by the third party, can also be transferred by any means recognized by law (Article 10.1). When the patent is obtained, the absolute right to the exploitation of the same is born, which prevents third parties that may disturb the owner of the patent from exploiting it. In any case, it is important to note that the inventor has the right to be mentioned as such, even if he does not become the owner of the patent (Article 14). This right refers precisely to the so-called right to the paternity of the invention, which is of a very personal nature and, of course, non-transfe rable. The Law establishes a certain procedure -to which we will refer later- for the Public Administration to grant the patent, as an industrial property title. Once the procedure has been initiated before the Spanish Patent and Trademark Office, it is presumed that the applicant is entitled to exercise the right to the patent. However, it may happen that this applicant is not the legitimate owner of the right to the patent because he is not the inventor or the person to whom he has transferred the right. In such a hypothesis, the Law protects the legitimate owner, both in the event that the patent has not yet been granted to the applicant and in the event that it has already been granted. In the first case, the person who believes himself to be the legitimate owner may bring an action before the courts seeking, in short, either to have the application rejected or to have the patent granted to him and not to the applicant (see Article 11, which indicates the various possibilities). In the second case, i.e., when the patent has already been granted, the person who believes himself to be the legitimate ow ner of the right may bring an action to have it recognized as such and to have the person who obtai ned the patent dispossessed. The Law speaks, in this case, of "claiming" the patent, since he must request that "the ownership of the patent be transferred to him” (see Article 12). E. The right to patent in the case of labor inventions The Law has regulated the case of inventions that have arisen within a company and that have been made by a worker of the same. This is what justifies the introduction within the LP of special rules for "inventions made in the context of an employment or service relationship". In relation to such a case, the Law distinguishes three classes of labor inventions (arts. 15 and fo llowing): + The inventions reached by the worker during the validity of their work contract or of services and that they are fruit of an activity of investigation that explicitly or implicitly constitutes the object of that contract. In this case, the inventions shall belong to the employer. + The inventions denominated mixed, that are those carried out by the worker not hired to investi gate, but that obtains certain inventions in their professional activity in the company, with the help of the knowledge or means acquired inside the company. In this case, the employer may 55 choose to assume ownership of the invention or reserve a right to use it, in both cases having to compensate the worker financially. + The denominated free inventions are those in which none of the circumstances before described concurs and, in such hypothesis, their ownership is attributed to the worker. In the first two cases, the Law imposes on the worker the duty of information that will be translated into a written communication to the employer of the results obtained. On the other hand, it declares the nullity of any early waiver by the worker of the rights granted by the Law in this field. The re gime for labor inventions extends to all public officials, although some special rules are provided for inventions made by university professors (Articles 20 and 21). F. Procedure for obtaining the patent In order to obtain a patent, it will be necessary to file an application that must contain certain men tions, among which the "description of the invention for which the patent is requested” (art. 23 LP) stands out. The patent application may not include more than one invention or a group of inventions that make up a single general inventive concept (Article 26). Otherwise, they must be divided into as many applications as there are different inventions in them. The invention must be described in the patent application in a sufficiently clear and complete manner for a person skilled in the art to be able to carry it out, and must be accompanied by the claims defining the object for which protection is sought and an abstract of the invention itself (Art. 27). Articles 32 to 57 deal with the various aspects of the procedure for granting a patent. Limiting our selves to mentioning its fundamental aspects, it should be noted that once the application has been received, the Spanish Patent and Trademark Office will check that the legal requirements have been met and, if necessary, will admit it for processing. The patent is subjected to an ex officio examina tion in which the determination of patentability stands out. The Office must issue a report on the state of the art in relation to the invention for which the patent is requested. Within the period indi cated for this purpose, the patent application will be published and the corresponding file will be made available to the interested parties. Third parties may make observations and the Office shall proceed with what is called the substantive examination of the patent application and the invention that constitutes its subject matter and, where no requirement is deduced from such examination, the Office shall grant the patent, which shall be announced in the Official Industrial Property Gazette. As of that publication, opposition to the grant based on any of the grounds set forth in Article 43.1 SPA is allowed. The appeal provided for in Article 44 of the SPA is available against the resolution of the opposition. G. Content of the patent right The patent holder is entitled to the exclusive enjoyment of the invention, which is manifested in the double faculty of being able to exploit the patented invention and prevent third parties from exploi ting it, marketing it or introducing products derived from the patent into the country without his authorization. a) The owner obtains a monopoly right over the object of the patent (whether it is a product or a process), which is a limitation to free competition, but which the legal system recognizes as fair compensation for the inventor's activity. This monopoly extends, in the case of a process patent, not only to the process itself, but also to the product directly obtained by the process. This right is of a patrimonial nature and, therefore, can be transmitted by all means recognized by the Law. The pa tent right has a limited duration in time (twenty years, non-renewable, art. 58) and space (it extends to Spanish territory). 56 Together with his right to exploit the invention, the patent holder, as has been said, has the power to prevent third parties from exploiting, marketing or importing the object of the patent. The Law ex pressly rejects that the third party may rely on the fact that it has subsequently obtained a patent in its favor, since the previous one will have absolute priority. The article 55 of the Law has wanted "to cut the abusive and generalized practice of the so called "cover patents” that have caused so many damages to the priority holders of the patents". It is interesting to specify that the right to exploit the patent is limited to the industrial and commer cial fields. Consequently, the use of the invention by unauthorized third parties for purposes of scientific experimentation or domestic use, or its temporary and accidental introduction into Spain as an integral element of certain means of transport, shall not imply exploitation or infringe the right to exclusivity. Likewise, the holder of a patent does not have the right to prevent the exploitation of the object of the patented invention by anyone who has previously exploited it in good faith in Spain. The Law has also recognized that the simple applicant for a patent has provisional protection consisting of the right to demand compensation from any third party that uses the invention for which protection is sought during the period from the filing of the application to the act of assign ment of the patent (Article 67). b) Once granted the patent, next to the right or exclusive monopoly, their holder assumes the obliga tion to exploit it. Obligation that is one of the counterparts that has to fulfill for having received a monopoly that breaks the principle of the free competition. If there is no exploitation, some of the favourable effects that patents have for the economic, industrial and technological development of the Community are reduced or even eliminated. For such purpose, the Law requires that the exploi tation must be carried out by the patent holder or by a person authorized by him, within a period of four years as of the date of filing of the patent application, or three years as of the date in which its grant was published in the Official Gazette of Industrial Property. If it does not exploit the patent or it does it insufficiently, its holder will be sanctioned by means of the concession of obligatory licen ses to third interested parties. The patent holder must pay annual fees for the maintenance of the legal life of the patented inven tion. It is important to emphasize that once the twenty-year term has elapsed, or previously if the legal obligations are not fulfilled, the patent falls into the public domain, and can be freely exploited by everyone. c) Among the causes of invalidity established by the Law, the absence of some of the requirements of patentability, the insufficiency of the description, the inadequacy between the object of the patent and the content of the application and the absence of legitimacy to obtain the patent, that the object of the patent exceeds the content of the application, that the protection conferred by the patent has been extended after the concession or that the holder of the patent does not have the right to obtain it (art. 102.1 LP). The partial nullity of the patent is admitted. With regard to expiration, four causes for expiration are established: passing of time, non-exploita tion, resignation of the holder and non-payment of fees. 2. Protection of the right of exclusivity The LP grants special protection to the right to the patent through the establishment of new actions in favor of its owner - and in certain cases in favor of the licensee - and contains some procedural rules. a) As for the actions, the LP establishes in its article 70 the general principle that the holder of the patent can exercise before the organs of the ordinary jurisdiction the actions that correspond, anyo 57 cus instead on industrial design as a unitary object of protection. The implementing regulations for the Law were approved by Royal Decree 1937/2004 of 27 September. Design is understood as the appearance of all or part of a product that is derived from its formal characteristics (taking into account, in particular, its shape, lines, contours, colors, texture, materials or ornamentation). The design can refer to all kinds of products, industrial or handmade (art. 1). Any design that meets these requirements may be registered in the Register of Designs, which is also maintained by the Spanish Patent and Trademark Office. The registration of the design, which includes the protection established in the aforementioned Law 20/2003, depends on the circumstances of its novelty and uniqueness. Any design with respect to which no other identical design has been made available to the public prior to the date of filing of the application for registration is novel (Article 6). Uniqueness consists of the fact that the impres sion generated by the design on an informed user differs from the impression that would have been caused on that same user by any other design accessible to the public prior to the filing of the appli cation for registration (Article 7). In general, designs that are contrary to public order or morality may not be registered (Article 12). The right to register the design belongs to the author or his successor in title (Article 14.1), and the Law has paid particular attention to designs created within the framework of an employment or ser vice relationship, which is of great importance in many economic sectors. According to Article 15, any design developed by an employee within the framework of his or her functions or following the instructions of the employer confers the right to register the design on the employer. Law 20/2003 regulates in detail the entire application, registration and opposition procedure for in dustrial designs (Articles 20 to 42). Registration of the design - which can be refused ex officio or at the request of a party for any of the reasons set forth in Article 13 - is granted for a period of five years from the date of filing of the application and can be renewed one or more times up to a maxi mum of twenty- five years (Article 43). Failure to renew at the end of a five-year period shall be grounds for lapse and cancellation of the registration. Other grounds for lapse are the owner's re nunciation and failure to comply with the conditions for entitlement laid down in article 4. A judi cial declaration of invalidity may also be made in the event of any of the grounds laid down by law (article 65). The right to the design is projected in the already known double aspect: the positive one consists of the exclusive faculty to use the design; the negative one constitutes the recognition of the right to prohibit the use of the design by third parties without the consent of its owner (Article 45). To this end, the use includes a wide range of activities (manufacture, supply, marketing, import, storage, etc.). The design right has limits based on the law, morality, public order and public health (Article 55), and also finds some exceptions: the design right does not extend to acts carried out in the priva te sphere, for non-commercial or experimental purposes, for illustration, teaching and others (Arti cle 48). Article 53 of Law 20/2003 sets out the various actions that can be used by the owner of the design against those who carry out acts contrary to their rights, which are subject to a limitation period of five years. 60 Lesson 8. Protection of the distinctive signs of the business. 1. Trademarks. Trademarks are the distinctive signs of goods and services. They individualise products and services by indicating to consumers their business origin, informing them, at least indirectly, about their cha racteristics and quality, and playing a valuable advertising role. The legal regulation of distinctive sigl ontained in Law 17/2001, of 7 December, on Trademarks (LM). This Law has replaced the previous Law 32/1988, which represented a profound reform of the legislative system in force until then, which dated back to the Industrial Property Statute of 1929 (EPI). The LM has been partially modified and has been complemented by its Regulation (RLM), approved by means of RD 687/2002, of 12 July. The main aspects addressed by the RLM are those of procedure and registra tion of the trademark, including the different businesses and declarations that the LM admits in this respect (e.g., renewal, transfer, waiver, etc.) and in relation to each of the types of distinctive signs provided for in the same. It should be noted, in any event, that the protection of certain distinctive signs also involves considering the LCD as a complementary regulation to the LM, so that certain aspects of the protection of a distinctive sign that are insufficiently guaranteed by trademark law may be satisfied by the application of the law against unfair competition. An example of this rela tionship between the two laws is the change in the shop sign which has become protected solely th rough the LCD. A. Concept and classes of marks According to Article 4(1) of the Trade Mark Law, a trade mark is any sign capable of being repre sented graphically which serves to distinguish the goods or services of one undertaking from those of other undertakings on the market. This highlights the distinguishing function or distinctive cha racter as the essential feature of any trade mark. As regards the elements which may make up the sign to be adopted as a trade mark, it may be verbal (a word or combinations of words), graphic or emblematic (images, figures, symbols and drawings), composed of letters or numbers, three-dimen sional (packaging, wrapping, etc.), sound and mixed (involving any possible combination of the signs mentioned above). In any event, the essential presupposition is that the sign has an individua lising function, in the sense that it serves to distinguish the goods or services from others which are identical or similar. However, it must be emphasised that the list of signs which may form part of a trade mark is merely for the purposes of illustration, so that the possibility of atypical trade marks is allowed in so far as the sign which forms part of them has not been included in the list in Article 4(2) of the Trade Mark Law. Thus, olfactory marks, consisting of colours or a slogan, are permitted. There are several criteria according to which the marks may be classified. We will limit ourselves to listing the main classes of mark contemplated in the LM: + "Product" mark and "service" mark, depending on whether they serve to distinguish one or the other. While the product brand serves to identify a specific product manufactured by the entre preneur, the service brand refers to a specific activity. « The "derivative” mark was expressly contemplated in the 1988 Law, that specific provision ha ving been eliminated by the current Law. However, this does not mean that the possibility of the owner of a registered trade mark for certain products or services being able to apply for another new trade mark for the same products or services which, while retaining the same principal dis 61 tinctive sign, introduces certain variations in its non-substantial or ancillary elements, has been eliminated. + A "collective" trade mark is a trade mark which serves to distinguish on the market the goods or services of the members of an association which is the proprietor of the trade mark from the goods or services of other undertakings (Article 62 of the Trade Mark Law). + The "guarantee" mark certifies the common characteristics, in particular the quality, components, geographical origin, technical conditions or method of manufacture of the product or provision of the service, being a sign that is used by several undertakings under the control and authorisa tion of its owner (Art. 68 LM). + The "well-known" or "reputed” trade mark is that which is well known in Spain by the sectors concerned, even though it is not registered. Those signs which are generally known by the public for whom the goods or services they identify are intended are considered to have that notoriety or reputation. + The Law has sought to provide greater protection for well-known and reputable trademarks, and this is evidenced by the fact that the same rights are recognised for them as for the owner of a registered trademark (Article 34.7 of the Spanish Law on Trademarks). + "Agent or representative's trademark” refers to the possibility for the owner of a trademark gran ted under the Paris Convention or the World Trade Organisation to authorise his agent or repre sentative to register it as a trademark under the Law. + "International trademarks" are those that derive from international registration carried out in ac cordance with international standards (detailed in Article 79 of the Spanish Law on Trademarks), which may take effect in Spain provided that the owner has expressly requested it. + The "Community trademark" is that which is subject to Council Regulation (EC) No. 207/2009 of 26 February 2009 (see section VI below) and which offers its owner protection throughout the European Union. The LM contemplates it both by accepting the possibility that an application for such a mark may be filed with the Spanish Patent and Trademark Office, and whose applica tion may be converted into a national trademark application (see articles 84 and ff. LM). B. Signs that cannot be registered as trademarks As we have seen, Article 1 of the Law indicates the characteristics that signs or means must have to be registered as trademarks. Consequently, if these characteristics are missing, such signs or means will not have access to the register kept by the Spanish Patent and Trademark Office. But not every sign that has distinctive force can be validly registered in that Register. For such re gistration to be possible it is furthermore necessary that the sign chosen is not covered by any of the prohibitions laid down in the Law on Trade Marks. These prohibitions shall be considered by law to be either absolute or relative. This distinction is particularly important for the purposes of bringing an action for invalidity of a registered trade mark, since while it is not time-barred from bringing such an action if the trade mark has been granted despite the existence of an absolute prohibition (article 51.2), the limitation period for bringing an invalidity action is generally five years if the tra de mark has been registered despite the existence of a relative prohibition (article 52.2). a. Absolute prohibitions Article 5 of the Act sets out the absolute prohibitions, and they are based either on the consideration that they cannot in any circumstances have a distinctive character or on grounds of public order. Of these prohibitions, we can highlight the following: 62 + Those that cannot constitute a trademark because they do not comply with Article 4.1 of this Defence of trademark rights The owner of a registered trademark may exercise the civil and criminal actions provided for in the Law and demand the necessary measures to safeguard it (art. 40 LM): + In criminal matters, the proprietor of the trademark may exercise the criminal actions relating to the infringement of industrial property rights, under the provisions of Article 274 of the Criminal Code. + In civil matters, the owner of the right to the trade mark who has suffered damage to his right may request: 1. the cessation of the acts which violate his right; 2. compensation for the damage suffered; 3. the adoption of the measures necessary to prevent the violation from continuing and, in particular, the removal from the market of the goods and other material in which the violation of the trade mark right has taken place; 4. The destruction or transfer for humanitarian purposes, if possible, of the products unlawfully identified with the trademark; 5. The attribution in ow nership of the products, materials and means seized pursuant to the provisions of paragraph 3 above, where possible, affected to the payment of the amount of compensation to be granted to the trademark owner; 6. The compensation for damages shall include both the consequential damage and the loss of ear nings, which must be quantified in accordance with one of the criteria set out in the Law (see Article 43.1 and 2). The owner of the trade mark may not prohibit the use of a trade mark registered subsequently when it cannot be declared null and void in accordance with the various provisions of the LM itself or of the European legislation (Art. 41bis 1 and 2 LM, introduced by Royal Decree Law 23/2018, of 21 December. In the event that this possibility of prohibiting the use of the later trade mark does not exist, the proprietor of the later trade mark will not be able to prohibit the use of the earlier trade mark in an infringement action, even though the right of the earlier trade mark may no longer be invoked against the later trade mark. Civil actions arising from the infringement of the trademark right shall be subject to a five-year li mitation (Article 45) and the rules provided for in Title XI of Law 11/1986, on Patents (first a.d. of the Spanish Law on Intellectual Property) shall apply to their exercise, provided that those provi sions are compatible with the nature of the corresponding distinctive sign. The protection of the rights inherent to the trademark may also be raised by its owner through the exercise of the actions provided for in the LCD, which may be subject to accumulation with those specifically provided for in the LM. ssignment and license of trademark The trade mark and its application are assets of the business, economically valuable and, therefore, of a patrimonial nature. As intangible property, trade mark rights may be the subject of rights in rem and are transferable. Article 46(2) of the EC Treaty states that "irrespective of the transfer of all or part of the undertaking, the trade mark and the trade mark application may be transferred by any means which the law recognises”. Both the trade mark and the trade mark registration are indivisi ble goods. Of special practical interest is the transfer of the use of the trademark by means of a license, a mat ter to which the Law has paid attention. By the licence contract the owner of the trademark (licen sor) authorises a third party (licensee) to use the trademark in exchange for the agreed price. While the transfer of the trade mark implies the full transfer of ownership of the right to the trade mark, the licence is a simple authorisation of use by the proprietor of the trade mark to a third party. This licence may be of several kinds: firstly, for all or part of the goods or services for which the trade 65 mark is registered; secondly, for all or part of the Spanish territory; finally, exclusive, so that only the licensee may use the trademark, or non-exclusive (Article 48). The acts of assignment or licensing of the trademark will only be enforceable against third parties in good faith from the time of their registration at the Patent and Trademark Office (art. 49 LM; on the registration of the license, see arts. 50 and 32 RLM). The rights conferred by the Law on the owner of the registered trade mark may be exercised against any licensee who violates the limits set out in the licence agreement (art. 48.2). Use of the trade mark by the licensee must be controlled by the licensor. If the proprietor of the trade mark does not control the use of his sign by the licensee, and the licensee misleads the public, in particular as to the nature, quality, characteristics or geographical origin of the goods or services, this error or mis leading behaviour could lead to revocation of the trade mark [Article 55(1)(e) of the TM]. D. EXTINCTION OF THE RIGHT TO THE TRADE MARK Unlike patents, trademarks and other distinctive signs of the company have a legal life that can be indefinite. If the trademark and other signs are renewed every ten years in compliance with the legal provisions, they will not be extinguished by the passage of time, unless, of course, such renewal does not take place. Similarly, the trademark - like the other signs - may become extinct for various reasons. In this res pect the LM distinguishes between the causes of invalidity (cf. Art. 51 et seq. LM) and the causes of expiry (cf. Art. 55 et seq. LM). 2. Trade names. Article 87 of the EC Treaty defines a trade name as a sign which serves to identify an undertaking in the course of trade and to distinguish it from other undertakings carrying on the same or similar ac tivities. This means that the rule of speciality also applies to trade names, so that trade names enga ged in different activities may be the same. The trade name is linked to the signature of the com pany, which shares with it the function of identification before third parties. However, apart from the regulations on so-called Industrial Property, it is interesting to note that the doctrine of the General Directorate of Registries and Notaries has stated that every legal entity has the right to its own individuality and therefore its name, as a differentiating sign, must be based on the principles of novelty and truthfulness. Novelty, insofar as the assumption of a name already used, apart from entailing the danger of reciprocal confusion, may be equivalent to the usurpation of an essential right of the legal person, and truthfulness, insofar as it must not contain expressions that may mislead third parties, since the company name is the ideal means of providing security and speed in legal transactions. Freedom of name The new regulation breaks with the principle of veracity of the trade name contained in the Indus trial Property Statute, which required that the name of the entrepreneur and the trade name be the same. When establishing which signs or names may constitute trade names, Article 87(2) of the LM, in a list which is merely enunciative and not limitative, states the following: a) Patronymic names, company names, and names of legal persons; b) Fantasy names; c) Names alluding to the object of the business activity; d) Anagrams and logotypes; e) Images, figures, and drawings; and f) Any combination of the signs which, by way of example, are mentioned in the previous paragraphs. In this way, any sign, whether verbal, graphic or mixed, whether or not it coincides with the civil name or the business name of the entrepreneur, may be registered as a trade name. 66 As with the regulation of trade marks, the registration of a trade name is subject to certain absolute and relative prohibitions (Article 88 of the Law on Trade Marks). Registration of the name Article 2.1 LM establishes that the property right over the trade name is acquired by valid registra tion in accordance with the provisions of the Law itself (a procedure very similar to that regulated for trademarks). The registration of a trade name confers on its owner an exclusive right, similar in content and sco pe to that of trademarks. However, it should be noted that the mere registration of a sign as a trade name does not entitle the proprietor to use that sign to individualise goods or services, the identifi cation of which will require the registration of the corresponding trade mark. Regime The legal regime for trade names is based on the general provisions (articles 1 to 3 of the Spanish Law on Trade Names), which subjects trademarks and trade names to the same principles. Subse quently, itis declared that the rules regarding trademarks will be applicable to the trade, name "inso far as they are compatible with the nature of the trade name” (art. 87.3 LM). Transmission The right to the trade name may be transferred. On this point, the LM has abandoned the criterion adopted by the previous LM in 1988, in which the trade name could be transferred only with the entire company. The difficulties of interpreting what constituted a transfer of a business and the problems of applying that system made it advisable to abandon that approach and allow the trade name to be transferred independently and freely. 3. Shop or business sign. A business sign is a sign or name that serves to make an establishment known to the public and to distinguish it from others that are intended for the same or similar activities. This definition was contained in the 1988 Law which exempted the sign from the same regime as that for trade marks and commercial names, in particular in that it regulated registration as a distinctive sign, although its scope was limited to the municipalities in which the relevant establishment was located. However, the current Law has ceased to recognise the sign as a distinctive sign capable of being registered and the only provisions it contains are of a transitional nature, in order to establish the validity of business signs registered before its entry into force. As a result of this change in legislation, the protection of industrial property rights linked to signs identifying the premises where business activities are carried out must be considered through the common rules established by the LCD. It is foreseeable, in any event, that those who have a special interest in having an exclusive right to the sign identifying their establishment will seek to obtain a trademark or trade name that fulfils a similar function to that which the sign fulfilled under the pre vious regime. 4. Apellation of Origin Indication of origin means the designation, directly or indirectly, of a geographical point as the pla ce of manufacture, processing or extraction of the product. The Trademark Act prohibits the use of false and misleading indications of origin (art. 5 g). The basis of this prohibition is the protection of consumers against the deception that would occur if an entrepreneur falsely designated a product as coming from a geographical area from which it does not actually originate. It is for this reason that patrimony will be born, since there may not be a common patrimony, but it is the company's patrimony. 69 + Permanence: Society must endure over time, either indefinitely or occasionally + Profit motive: These companies are created with the intention of obtaining undetermined patrimonial gains, of obtaining a benefit from the development of their activity. Civil and commercial companies In order to know if a company is civil or mercantile it has to be seen if it develops a business activity. If so, we will be dealing with a mercantile company, if not a civil one. In the field of civil societies, the typical one is that society in which, besides the general part (business origin and common purpose) the following additional elements are given: publicity, patrimony, permanence and profit spirit. If all these elements are present, we would be dealing with a strict civil society, if not with a corporate figure. The scope of commercial companies is more protective for third parties who contract with the company. The re are two ideas: + Solidarity responsibility of the partners for the social debts. + Disjunctive responsibility. + Joint accounts (Articles 239 and ff CCom). The joint account contract is a collaboration contract between two individuals or legal entities, whereby one of them, the participant, contributes goods, money or rights to the other, the manager, with the manager ha ving to apply this contribution to the agreed business activity. On the one hand, this activity will be carried out independently and in its own name. On the other hand, the manager has the obligation to inform and sha re with the participant the profits and losses resulting from the activity. The manager is responsible for repre senting the interests of the participants, using its credibility and good reputation. Partners' agreements. These are agreements adopted by all or some of the partners of a company to specify, complete or modify their internal relations and the legal or statutory regulations that govern them. These agreements will not be enforceable against the company, that is, they will not have any effect against it, as the LSC refers to when it states that "the agreements that are kept reserved between the partners will not be enforceable against the company”, with the exception that the company itself has signed this agree ment. Therefore, the shareholders' agreements will have effect only between the partners who have signed the agreement, unless the company itself has also signed the shareholders' agreement. s the traditional, general trading company. It is characterised by the fact that the partners directly invol ved in the management of the company are personally liable for the company's debts (their liability is unlimi ted and joint and several, although in the second degree in relation to the company). It has a business origin, a common purpose promoted by the partners and is an external company. External mercantile companies are classified from the outset as collective, irregular companies, because they are not registered in the MR. The consequence of this is that the partners are jointly and severally liable for the debts, and it is considered that any partner can bind the company (disjunctive representation regime). 4. Commanded partnership. The expression "en comandita” or "S. en Com” is used for this type of company. They are hardly ever used. There are some general partners, who are liable in the same way as the partners of a general partnership (un limited and joint and several), and other limited partners, who do not intervene in the management of the company and are not liable for more than they have undertaken to contribute to the company (they have limi ted liability). 70 5. Capital company. The capital companies are the basis of the capitalist system, as the partners are not liable for the company's debts, thanks to a limitation of liability through compliance with certain rules. in capital companies “work” is not a valid contribution of partners. Article 1 of the LSC defines these rules: "The capital companies are the limited liability company, the joint-stock company and the limited partners hip by shares. 2. In the limited liability company, the capital, which is divided into shares, is made up of the contributions of all the partners, who are not personally liable for the company's debts. 3. In the limited liability company, the capital, which shall be divided into shares, shall be made up of the contributions of all the partners, who shall not be personally liable for company debts. 4. In the limited liability company by shares, the capital, which shall be divided into shares, shall be made up of the contributions of all the partners, at least one of whom shall be personally liable for the company's debts as a general partner”. In order to create a limited partnership, a public deed must be granted and registered with the RM. Capital companies are based on the following principles: + Capital divided into shares/participations A distinction must be made between capital (a given figure provided for in the articles of association equiva lent to the contributions of the members and the sum of the nominal values of the shares or holdings into which it is divided) and assets (goods and rights owned by the company and deriving from the contributions of the members). The following principles are established: + Determination of capital, among other things, in the company's bylaws (Article 23 LSC). - Minimum correspondence (IMPORTANT): this relates to the annual accounts. The legislator wants there to be a certain correspondence between capital and assets during the life of the company. When the company is founded, the amount of capital and assets must be equal. - Stability: the amount of capital may be increased or reduced, but certain legal requirements must be met. - Minimum capital: there is a minimum amount of capital required to set up a capital company. In the case of S.A.'s it is 60,000 and in the case of S.L.'s itis 3,000. + No liability of the partners for company debts. + Corporate or statutory structure. That is, not personal. The structure of the company's constitution must include its statutes. + Commercial nature. Regardless of the purpose. + Constitutive nature of the registration. The company is only constitutive once it is registered in the RM. 6. Distinction between partnerships and corporations. Corporations are corporations, while the others are partnerships. 1. Types of partnership with a personalist or contractual structure. Relevance of the personal conditions of the partners (intuitus personae): + Non-transferability of the position of partner unless authorised. + Personalization of the organization: decisions are taken unanimously, because the members put their as sets at stake, there is dissolution in the event of the death of the individual member, and the organization operates informally. 71 + Centralisation of the administration: all members are administrators (self-organisation) and there is no separation between ownership and management. + Communication of assets: there is limited autonomy of the social assets and the personal responsibility of the partners is unlimited. Partnerships: civil partnership, general partnership, limited partnership, economic interest groupings and in ternal partnerships (joint ventures). Corporations. The organization is autonomous from the personal conditions and vicissitudes of the partners. Its aims are lasting and independent of the existence, interests and unique capabilities of the partners. Its characteristics are: + Free entry and exit of members: the shares/participations can be sold without the consent of the other members. To protect the other partners from this, there is a preferential right of acquisition (the partner who wants to sell has to make a claim). If the other partners decide to buy their share so that no third party enters, it will be divided proportionally). + Stability in the organization: statutes, majorities, objectification of the causes of dissolution and formali zation of the organization. + Decentralisation of the administration: heteroorganisation, differentiation between organs. There is auto nomy in the administration, but the administrator is responsible for his or her actions. + Isolation of assets: the members are not liable for social debts. These are corporations: the association, the SRL, the SA (in particular, listed companies), the limited liability company by shares, the mutual guarantee company, the cooperatives and the mutual insurance companies. The autonomy of will in the configuration of corporate types is established in Article 28 of the LSC: "the deed and articles of association may also include all the agreements and conditions that the founding mem bers deem appropriate to establish, provided that they do not conflict with the laws or contradict the princi ples shaping the chosen corporate type”. relationship between managing and non-managing partners. In this case, the Code establishes a substantial rule that when there are partners who are especially in charge of management, the others cannot interfere with or hinder their actions (Art. 131 C. de c.). The respect imposed by the Code on the manager's sphere of competence does not prevent the other partners from esta blishing certain criteria or general guidelines on the company's performance. c. Action by the directors Tf there are more than one manager, it is necessary to know whether they should act jointly or sepa rately. The problem can be solved in the articles of association, if you have dealt with the way in which the administration is structured and the way in which the administrators act. In the case of joint administration entrusted to more than two partners, it can be thought that they can act collecti vely by adopting agreements by the majority. In the event of silence on the part of the deed, it must be taken into account that Article 130 of the Spanish Civil Code starts from the principle of joint administration, stating that no new obligation must be entered into against the will of one of the managing partners who expressly declares it. Joint action is also presupposed by Article 129 of the German Civil Code in the event that all the partners can participate in the administration of the company. d. Legal relationship between the director and the company The legal relationship between the administrator and the company must be qualified, as indicated, as organic and must be carried out with the diligence of an orderly businessman. However, his liability does not arise from simple fault, but from "malice, abuse of authority or gross negligence” and he must compensate the company when it suffers damage from such acts (art. 144 C. de c.). The liability action against the directors must be brought by the other shareholders in de fence of the company's interests. The position of administrator is presumed by the Code and is generally remunerated. For this pur pose, the deed must state "the amounts that, if applicable, are allocated to each of them (of the ad ministrators) annually, for their private expenses” (art. 209.9.*? RRM), which is supplemented by the provisions of article 139 of the C. de c. in the same sense. e. Right to information of the partners The partners, whether they manage or not, have the right to examine the state of the administration and the accounts. Article 133 of the Code of Conduct concerns the exercise of this right and states that all members may, in accordance with the agreements contained in the deed or with the general provisions of law, make any claims in the common interest. This implies that the partner may ask the judge to order the books and documents of the company to be examined (cf. art. 112 and follo wing of Law 15/2015 on Voluntary Jurisdiction); in other words, every general partner has the right to directly examine the accounts and all its records. Limitations on partners in the exercise of a commercial activity on their own account The partnership is a working community and all partners have the possibility to participate directly in the social management. Moreover, all of them, even if they do not intervene in the administra tion, can be informed at any time of the progress of social business. It follows that the partner's duty of loyalty to the partnership, common to all partnerships, is particularly strong in the case of part nerships. For this reason, the Code seeks to establish a limitation on the exercise by partners of a commercial activity carried out on their own account and dictates, in relation to this point, the fo llowing rules: 75 Tf the partner is an industrial partner (i.e. one who only provides work), he may not engage in busi ness of any kind on his own account, unless the company expressly permits it (Article 138 C. de c.). This partner only provides work and is expected to carry out his entire activity for the company. Nor may the other general partners carry out transactions on their own account without the com pany's consent, if the company does not have a specific corporate purpose (or, as the Code states, if it does not have a "specific type of business", Article 136). But in this case, the prohibition is less strict, because the company's consent may be express or tacit, and furthermore tated in the afo rementioned Article 136 - it cannot be denied "without proving that it is actually and clearly preju dicial to it”. Unless otherwise agreed by the company, non-industrial partners may engage in activities on their own account other than those of the company. They may even compete with the company if this is expressly agreed by all the partners (Article 137 C. de c.). Participation in the results The Code presupposes the establishment of a common fund or acquis communautaire of which the company is the holder as a legal person. Various articles highlight the interest in defending the exis tence of such a fund, which is initially made up of the amount of the contributions which the mem bers have undertaken to make, and that amount constitutes the share capital. This can only be in creased with new contributions from the partners, but the value of the social patrimony will oscilla te according to the progress of the business, that is to say, it can increase or decrease. At the end of each financial year the company, like other entrepreneuss, is obliged to draw up the annual ac counts, which must show a true and fair view of its assets, financial situation and results for the year (Art. 34.2 C. de c.). The annual accounts of general partnerships do not, in principle, have a special status and the rules of the Commercial Code applicable to all employers will therefore apply to them. However, in the event that all the general partners are companies (Spanish or foreign), the annual accounts must be governed by the provisions of Title VIT of the LSC, with the exception of the provisions of Chapter V, regarding the approval of the accounts (Article 41.2 of the Code of Commerce). In any case, the annual accounts must be signed by all the general partners (art. 37.2 of the Code of Commerce). The partners will have to participate in these results in the way they have established in the articles of association. In the event that this point is not addressed, Article 140 of the Code of Commerce establishes that the profits shall be divided in proportion to the share of interest that each partner has in the company, including in the distribution the industrial partners, if any, to the same extent as the capitalist partner with the smallest share. Article 141 states that losses shall be allocated in the same proportion among the capital partners. Without including the industrial partners. In any case, an agreement that excludes one or more partners from any share in the profits or losses is considered null and void, with the only exception of the possibility of expressly excluding the industrial partner from the losses (Articles 1691 of the Spanish Constitution and 141 of the Spanish Constitution). External legal relations in the partnership Representation of society The doctrine that draws a distinction between the aspect of internal and external legal relations wit hin the partnership notes that while every partner is in principle an administrator of the partnership, not all partners have power to represent the partnership, but only those who have been authorised to use the partnership's signature. The partners holding the power of representation have an organic and non-voluntary representation. Furthermore, it should be noted that if we are dealing with a part 76 ner who has been granted the power to use the signature of the company as an express condition of the company contract in the company deed, his power is irrevocable (Art. 132 C. de c.). With regard to the ownership of the power of representation, our Code has followed a formalistic system of representation of the partnership that is combined with the rigour it maintains in the for mation of the corporate signature. The fundamental principle is formulated in Article 127 of the Code of Commerce, which states that the company and the partners are bound when an obligation has been contracted under the company's signature and by a person authorized to use it. This principle is clarified by article 128 of the C. de c., which states that "partners not duly authori zed to use the corporate signature shall not bind the company by their acts and contracts, evenif they execute them in the name of the company and under its signature”. The responsibility for such acts in the civil or criminal order will fall exclusively on their "authors". The scope of the power of representation must be considered unlimited, and it is sufficient that the person exercising it holds the power of representation, i.e. is authorised to use the company signatu re (cf. Art. 127, final part). The criterion of reference to the corporate purpose cannot be applied, because the Code provides that these companies may not have it determined (Articles 136 and 209.4 of the RRM), nor can reference be made to the power of the factor, because while the latter is the holder of a voluntary representation, the administrator is the holder of an organic representation. Liability for social debts The company and all its partners are liable for the company's debts. A traditional feature of the part nership is the liability of the partners for the partnership's debts, which is formulated in Article 127 of the Civil Code. This liability of the partners arises, by mandate of the law, in an ancillary manner to that of the partnership; or in other words, the partners' obligation is presupposed by the existence of the partnership's obligation. Liability affects "all the partners that are part of the partnership, whether or not they manage it" (Art. 127), and therefore also includes the industrial partners (even if they are excluded from the losses, Art. 141 C. de c.). The liability of the partners must relate to all obligations that can be attri buted to the company, both in the contractual field - which is clear from the letter of Article 127 C. de c. - and in the non-contractual field, since, as our case law has declared, legal persons are liable for the unlawful acts of their administrators. This responsibility of the general partners has the following characteristi a) The liability of the partners is personal and unlimited (art. 127 C. de c. states that the partners are liable "with all their assets”). b) It is a subsidiary or second-degree responsibility, since the partners enjoy the benefit of excem ption, inasmuch as, as stated in Article 237 of the C. of c., the private assets of the partners cannot be enforced for the obligations incurred by the company "except after the company's assets have been discharged”; consequently, that discharge is a necessary precondition for proceeding against the assets of the partner, so that even if the third party sues the company and the partners jointly, the latter's sentence will be subsidiary and the judgment can be enforced against them only after it has been fully enforced against the company. c) Article 127 of the Code of Civil Procedure also states that the partners shall be jointly and seve rally liable. But this solidarity occurs in the relations of the partners among themselves, but not in relation to the company, for which, as we have just indicated, the responsibility is subsidiary. It fo llows that the rules contained in the Civil Code on joint and several obligations (Articles 1144 et seg.) are in principle applicable to this liability of the partners. 79 Right of information of the partner In addition to the prohibition of interference in the administration, the limited partner's right to in formation on the progress of the administration, which he can only do in the form provided for in the corporate contract, is severely curtailed. Tf the deed does not say anything about this point, the limited partner is entitled - says Article 150.2 C. of c. - to necessarily be informed of the company's "balance sheet” at the end of the year. In addi tion, the background information and documents necessary for checking the annual accounts must be disclosed for a period of no less than fifteen days. It must be understood that during this period he may examine all the accounts. External legal relations Representation of society The prohibition on the intervention of the limited partner in the management of the company is es sentially based on depriving him of all representative powers. Consequently, representation of the company can only be conferred on general partners; limited partners are forbidden in any case, as we know, to use the company signature. Liability of the partner for social debts As regards the liability of the partner for company debts, it is limited to the amount that he has un dertaken to contribute to the company (art. 148, paragraph 3). In the event that the limited partner has not fully met his contribution obligation, creditors are gran ted direct action against him to claim what he has failed to contribute. The limited partner can respond without restriction, as stated in Article 148, paragraph 3, which re fers to Article 147 of the Italian Civil Code, if he includes "his name or consents to his inclusion in the company name”. This means that, if the inclusion occurs without your consent, this unlimited responsibility will not operate. We have already said that even if he responds unlimitedly he re mains a limited partner and does not become a collective. 3. Joint account (cuentas en participación). The joint account agreement is a collaboration agreement between two natural or legal persons, whereby one of them, the participant, contributes goods, money or rights to the other, the manager, with the manager having to apply this contribution to the agreed business activity. On the one hand, this activity will be carried out independently and in its own name. On the other hand, the manager has the obligation to inform and share with the participant the profits and losses resulting from the activity. The manager is responsible for representing the interests of the participants, using its credi bility and good reputation. Like everything else, it has to have a number of advantages that make the joint account contract at tractive and interesting for individuals. These are mainly summarized in that it does not require any formality, and can even be verbal. Likewise, as it is a contract of a secret nature, it does not need to be registered. And finally, what this business really offers and why it is so attractive is that it offers an opportunity to the merchant or person who wants to invest in a business, but because of its con dition, prefers not to make himself known. Joint accounts are a type of contract without express regulation, based on mutual trust. For this reason, the doctrine and the Court have accepted unilateral termination as a cause of extinction in joint accounts, even if nothing has been expressly agreed or otherwise. Thus making it possible to terminate the contract at any time. 80