Interesting article on Supreme Court ruling No. 74/2015 of 15 January on perpetual clauses against Anfi's contracts.

I have recently come across this article, written by professor Joaquín J. Forner that published in the International Company and Commercial Law Review, 2015 [Sent September 2015]. For its undoubted interest I reproduce it below:

"Nullity of Contracts. Timesharing. Inter Temporal Law. Norwegian Claimant. Spanish Supreme Court, Civil Division. Judgement of 15 January 2015 (74/2014) (XV. ANFI SALES, SL) by Joaquin-J Forner.

(Published: International Company and Commercial Law Review, 2015)

Spanish Supreme court has interpreted in judgment of 15 January 2015 some inter temporal rules of the Spanish timesharing regulations. This judgment affirmed on the relevant point the court of appeals judgment of Las Palmas of 21 February 2013 that reversed the judgment of the court of first instance.

Facts: The claimant, a Norwegian citizen, acquired from Alfi Sales, SL some timesharing rights referred to apartments situated in Puerto Alfi (Canary Islands) for an undefined period of validity on 7 December 2000 and on 28 March 2001.

Among other claims, the claimant contended that the contracts infringed Spanish Law 42/1998, of 15 December. This law implemented into Spanish law the European Directive 94/47/EC on timesharing. Currently, Spanish law is contained in Law 4/2012, of 6 July implementing Directive 2008/122/EC, but this is immaterial in the present case. In particular, Law 42/1998 required that contracts had a maximum duration of 50 years (Arts. 1.6 and 3.1). According to Art.1.7 of the same law, contracts of longer duration were null and void. Notwithstanding this, Law 42/1998 also contained some transitory rules on the adaptation of preexisting rights of longer duration. Moreover, transitional rule N. 3 of Law 42/1998 created a nullity action for preexistent situations not adapted to the law in a two years period.

The precise meaning of these rules was disputed in the procedure. While the claimant believed that the contract infringed the Law, the defendant Alfi Sales contended that it has duly complied with the transitional rules of Law 42/1998 that, under certain conditions, allowed prior indefinite contracts to survive. The Transitional rule N. 2 of Law 42/1998 interpreted by the court said -in its relevant part- that preexisting rights shall have a maximum duration of 50 years as from the entry into force of Law 42/1998 unless an express declaration was made that the rights created were either of a longer duration than 50 years or of indefinite duration. Such declaration had to be executed in a deed of adaptation to Law 42/1998 during a two year period as from the entry into force of Law 42/1998.

Held: The Spanish Supreme court ruled that the option given by Transitional rule N. 2 of Law 42/1998 was limited to rights already conveyed before the entry into force of Law 42/1998. In other words, rights that had already been both created and later conveyed before the entry into force of the Law. Therefore, rights previously created but not already sold before the entry into force of Law 42/1998 had to be adapted the new law. Rights not adapted, as in the instant case, would cause a contract null and void.

Commentary: In a nutshell, Law 42/1998 established the only legally admitted variations that would allow to convey the right to use an apartment for a certain repeated period of time during the year. Before Law 42/1998, those variations were globally known in the Spanish language under the name of “multipropiedad”, a name that was banned from legal language by Law 42/1998. Therefore, apart from implementing Directive 94/47/EC oriented to consumer protection, the Spanish legislator wished to establish a comprehensive regulation of timesharing rights. In so doing, the legislator had to establish the room left to party autonomy in order to create and give content to timesharing rights.

The legislator took the following approach: On one side, he allowed the creation of a limited ius in rem, highly regulated by the Law itself; on the other side, he also allowed the creation of a personal right under the form of a holiday rental. Therefore, anything else was forbidden. The duration of the rights created were allowed by Law 42/1998 to range between 3 and 50 years. This rule required transitional rules to deal with rights created before the entry into force of Law 42/1998. As seen, the Supreme Court has clearly stated that time limitation of the rights imposed by Law 42/1998 affected rights conveyed for the first time once Law 42/1998 was already in force. The fact that these rights were created before the entry into force of Law 42/1998 is immaterial.

The nullity sanction accorded might be considered misplaced as long as it referred to a contractual relationship that has been running for almost ten years. The defendant in the nullity action underlined both the facts a) that while the claimant had acquired similar rights concerning three apartments under Law 42/1998, the claimant has limited the procedure to only one of them, and b) that a longer duration of the right could hardly prejudice the economic interest of the claimant. Nevertheless, the claimant might have her legitimate economic or procedural reasons to initiate the action as well as to limit the action in the way she did. From this point of view and taking into account that long period contracts tie buyers excessively, the contractual nullity sanction is in tune with the competition law nullity sanction. Therefore, the interest of the case lies in the radical, strong effects of nullity striking contracts currently in force.

Finally, it was not disputed that Spanish law was applicable. Supplemental rule N. 2 of Law 42/1998 made Spanish law mandatorily applicable if the immovable property has its seat in Spain, regardless of the personal qualities of the parties in the contract or the place of execution of the contract.

Quim Forner Delaygua Universitat de Barcelona."