What You Should Know About Doing Business In Spain
• Spain has one of the fastest growing economies in the European Community. It
enjoys a long-standing and wide-ranging bilateral relationship with the United
States and has traditionally provided a healthy export market. U.S. exports to
Spain through September 2007 were USD 4.6 billion, an increase of 26 percent
compared with the same period in 2006.
• Spanish economic growth was estimated at 3.9 percent in 2006, slightly higher
than that of the previous year, making Spain one of the fastest growing countries
in the European Union (EU). Full-year 2007 growth is expected to be around 3.8
percent. 2008 economic growth is projected to drop to something between 2.5
percent and 3.0 percent, though it should still be above the Eurozone average.
Higher interest rates and tighter credit terms are slowing Spain’s hitherto very
strong construction sector. Moreover, inflation remains above the Eurozone
average. Thus, for the first time in about 10 years, Spaniards are somewhat less
optimistic about the economy.
• Spanish Government economists see local spending on capital goods remaining
bouyant. General export performance has also been positive. Spain is the
seventh worldwide manufacturer of cars and first European producer of light
commercial vehicles. New vehicles with complex electronic/electrical
components will force auto shops to seek more modern and sophisticated
equipment in order to meet consumer demand and avoid loosing clients to
competitors. In the tourism sector, Spain continues to be one of the star
performers in the European Union. Travel to the United States is estimated to
rise over 20 percent in 2007. Within the energy sector, Spain’s installed wind-
power capacity (more than 12,800 MW) makes it the second largest winder-
energy producer in the world.
• Major Spanish firms in the telecommunications, banking, infrastructure and
energy sectors have become global leaders. The largest bank in the Euro area,
Europe’s second largest phone company by market capitalization, and the
majority of Europe’s top-ten construction companies are headquartered in Spain.
Major procurement decisions for the largest British airports, Brazil’s major cellular
operator, Mexico’s leading bank, and the Trans-Texas Corridor Project are made
• Spain will hold parliamentary elections in March 2008. Terrorism, housing,
immigration and employment are among the key local issues.
• Despite a significant drop in investment levels, the U.S. continues to rank among
the top ten investor nations in Spain. Official statistics show that U.S. direct
investment went from USD 10.5 billion in 2000 to USD 14.8 billion in 2002, USD
6.4 billion in 2003, USD 2.2 billion in 2004, USD 1.8 billion in 2005 and USD
633.6 million in 2006. In 2006 the U.S. was the fourth largest source of FDI in
Spain with 5.2 percent of the total. U.S. investors also hold significant portfolio
investment in shares of some of Spain’s largest companies.
• Venture capital increased by 44 percent in 2007 to Euros 4.3 billion (USD 5.9
billion), surpassing the record high of Euros 4.2 billion (USD 5.8 billion) in 2005.
Market Challenges • The weakness of the dollar versus the euro is advantageous for U.S. exporters.
Nevertheless, U.S. suppliers will continue to face stiff competition from EU
countries and from Japan.
• Cost, financing terms, and after-sales service are important competitive factors.
European exporters provide generous financing and extensive cooperative
advertising, and most European governments support exporting with trade
promotion events. Japanese and Chinese companies are also emerging as
formidable competitors. Although U.S. products are well respected for their high
level of technology and quality, American firms sometimes fall short of their
competitors in flexibility on financing, adaptation of product design to local market
needs, and assistance with marketing and after-sales service.
• Export-ready U.S. firms are urged to explore opportunities in Spain and
throughout the euro zone.
Market Entry Strategy
• The Spanish market is made up of a number of regional markets joined by the
two hubs of Madrid and Barcelona. There are a total of 17 autonomous
communities in Spain (similar to U.S. states) with varying degrees of autonomy
and cultural identity. However, the vast majority of agents, distributors, foreign
subsidiaries and government-controlled entities that make up the economic
power block of the country, operate in these two hubs. The key to a foreign firm’s
sales success is to either appoint a competent agent or distributor, or to establish
an effective subsidiary in the Madrid or Barcelona areas.
• Spanish commercial procedures are in line with the rest of Western Europe,
where price and value remain paramount. However, credit terms, marketing
assistance and after-sales service are also important factors in local purchase
decisions. The use of credit to purchase consumer goods is widely accepted in
Spain, particularly in the cities, with banks competing to offer coverage.
• The Spanish government has eased regulations at all levels and increased
incentives in an effort to attract foreign firms and investments. In recent years
investment incentives designed to reward investors for establishing
manufacturing operations in less developed areas have dispersed some
investment from the major hubs. Except in a few cases, Spanish law permits
foreign investment of up to 100 percent of equity. However, disincentives such
as high labor costs, inflexible labor laws, and concern for intellectual property
rights in the copyright area still exist.
• Spaniards tend to be more formal in personal relations than Americans but much
less rigid than they were 10 years ago. Nonetheless, the approach to doing
business is more in line with that in Italy or France rather than Mexico and Latin
America. Professional attire is recommended and business cards are expected.
• There is no substitute for face-to-face meetings with Spanish business
representatives to break into this market. Spaniards expect a personal
relationship with suppliers. Initial communication by phone or fax is far less
effective than a personal meeting. Mail campaigns generally yield meager
results. Less than 30 percent of local managers are fluent in English.
• Spaniards tend to be conservative in their buying habits. Known brands do well.
Large government and private sector buyers appear more comfortable dealing
with other large, established organizations or with firms that are recognized as
leaders within their sectors.
Using an Agent or Distributor
There are several forms of representation agreements in Spain. The most common are:
Commission Agency Agreements
The law applicable to this type of contracts in Spain is similar to that in most other OECD
Companies wishing to use distribution, franchising and agency arrangements need to
ensure that the agreements are in accordance with European Union (EU) and member
state national laws. Council Directive 86/653/EEC establishes certain minimum
standards of protection for self-employed commercial agents who sell or purchase goods
on behalf of their principals. In essence, the directive establishes the rights and
obligations of the principal and its agents; the agent’s remuneration; and the conclusion
and termination of an agency contract, including the notice to be given and indemnity or
compensation to be paid to the agent. U.S. companies should be aware that the
directive states that parties may not derogate certain requirements. Accordingly, the
inclusion of a clause specifying an alternate body of law to be applied in the event of a
dispute will likely be ruled invalid by European courts.
The European Commission’s Directorate General for Competition enforces legislation
concerned with the effects on competition in the internal market of “vertical agreements.”
Most U.S. exporters are small- and medium-sized companies and are therefore exempt
from the regulations because their agreements likely would qualify as “agreements of
minor importance,” meaning they are considered incapable of affecting competition at
the EU level but useful for cooperation between SMEs. Generally speaking, companies
with fewer than 250 employees and an annual turnover of less than Euros 50 million
approx. USD 62 million) are considered small- and medium-sized undertakings. The EU
has additionally indicated that agreements that affect less than 10 percent of a particular
market are generally exempted as well
Distribution agreements in Spain have traditionally allowed the contracting parties broad
discretion to decide on the form of contract.
The distributor obtains the merchandise from the supplier “in its own name and
interest” and assumes the risk of the transaction for later re-sale at a profit.
The relationship between the supplier and the distributor is a legal relationship
within a specific time period.
The distribution contract may obligate the parties to future purchases and sales.
The ordinary clauses of a distribution contract may cover any subject to which the
parties agree unless the clauses are contrary to the laws of Spain. Normally, the
standard clauses include the markets or territory covered, volume of sales, conditions
regarding the sale of goods, pricing, length of contract, advertising, financing, servicing,
licensing of industrial property and conditions for termination, among others.
The most common basic distribution agreements are:
1) Commercial Concessions or Exclusive Distribution Agreements: The supplier agrees
not to supply its products to more than one distributor in a specific territory and also not
to sell those products directly to end users in the territory of the exclusive distributor.
2) Sole Distribution Agreement: Similar to the above category, but in this case the
supplier reserves the right to supply certain products to end users in the territory.
3) Authorized distribution agreements under the selective distribution system: The
distributors are carefully selected according to their ability to handle technically complex
products and to retain a certain image or brand name.
Models of distribution contracts and clauses can be obtained on-line from the bookstore
of the International Chamber of Commerce, section “Model of Commercial Contracts”,
Further counseling on international contracts can also be obtained from US Export
Assistance Centers and local chambers of commerce.
Through an agency agreement, and individual or company, called the agent, is bound
with another (the principal) to advance the principal’s business, or to advance and
conclude transactions on the principal’s behalf, without assuming the risk of such
Beyond the basic obligations (to act loyally and in good faith), the agent must:
Promote the products, and if authorized to do so, conclude the transactions;
Inform the principal supplier of all matters relating to the agency, especially the
financial aspects of all parties with whom there are pending transactions;
Follow the principal’s instructions and company policies (for example, prices,
delivery dates, and procedure for claims
Receive any claims by third parties regarding defective merchandise in the
merchant’s name; and
Maintain independent accounting for each principal represented.
Beyond the same basic obligations of loyalty and good faith, the principal supplier must:
Provide books, catalogs, price lists and other needed literature;
Make payments on time and as agreed;
Give the agent the information required for the performance of the agency
Inform the agent with reasonable advance notice of the acceptance, refusal, or
the lack of performance of each deal obtained by the agent. The agent has the
power to request the accounting books of the principal.
Commission Agency Agreements Under Commission Agency Agreements, an authorized agent (commission agent)
participates in a commercial transaction or agreement on behalf of another (the
principal). Commission agents may act in their own name or that of their principal.
The main difference with an Agency Agreement is that Commission Agency Agreements
involve occasional engagements. In addition, a commission agent facilitates the
conclusion of an agreement but does not ultimately represent either party. The
commission agent brings the parties together so that they can conclude an agreement,
but is not party to that agreement, whereas an agent represents one of the parties.
As Spain is part of the EU, U.S. companies benefit from greater transparency in agent
and distributor commissions throughout Europe, uniform compensation plans and
greater transparency in reporting revenues to local tax authorities.
Establishing an Office
U.S. companies interested in investing in Spain must first decide whether to incorporate
a subsidiary (i.e. as a separate corporation) or establish a branch. Both have full legal
status and their profits are taxable in Spain.
If the investor decides to incorporate a subsidiary, the next decision is whether to
incorporate a corporation or public limited-liability company (Sociedad Anonima, SA) or a
private limited company (Sociedad de Responsabilidad Limitada, SL or SRL). The
structure of the SA is for larger operations and the SL for smaller.
Shareholders in corporations (S.A.) and limited liability companies (S.L.) are not liable
for the company’s debts, and limited to their contribution. The main differences between
these entities are: capital (Euros 60,000 minimum versus Euros 3,000); the number of
founding members (three versus two), flexibility permitted at general meetings, transfer
of shares and management of an SL.
Other kinds of mercantile entity can be formed, but they are not used very frequently.
Companies interested in setting up operations in Spain should obtain legal advice.
Major consulting groups and law firms are available to help firms incorporate.
Processing Customer Data
The EU’s general data protection Directive (95/46/EC) spells out strict rules concerning
the processing of personal data. Businesses must tell consumers that they are collecting
data, what they intend to use it for, and to whom it will be disclosed. Data subjects must
be given the opportunity to object to the processing of their personal details and to opt-
out of having them used for direct marketing purposes. This opt-out should be available
at the time of collection and at any point thereafter. This general legislation is
supplemented by specific rules set out in the “Directive on the processing of personal
data and the protection of privacy in the electronic communications sector”
2002/58/EC). This requires companies to secure the prior consent of consumers before
sending them marketing emails. The only exception to this opt-in provision is if the
marketer has already obtained the intended recipient’s contact details in the context of a
previous sale and wishes to send them information on similar products and services.
The EU’s general data protection Directive provides for the free flow of personal data
within the EU but also for its protection when it leaves the region’s borders. Personal
data can only be transferred outside the EU if adequate protection is provided for it or if
the unambiguous consent of the data subject is secured. The European Commission
has decided that a handful of countries have regulatory frameworks in place that
guarantee the adequate protection of data transferred to them – the United States is not
The Department of Commerce and the European Commission negotiated Safe Harbor to
provide U.S. companies with a simple, streamlined means of complying with the
adequacy requirement. It allows those U.S. companies that commit to a series of data
protection principles (based on the Directive), and who publicly state that commitment by
“self-certifying” on a dedicated website, to continue to receive personal data from the
EU. Signing up is voluntary but the rules are binding on those who do. The ultimate
means of enforcing Safe Harbor is that failure to fulfill the commitments will be
actionable as an unfair and deceptive practice under Section 5 of the FTC Act or under a
concurrent Department of Transportation statute for air carriers and ticket agents. While
the United States as a whole does not enjoy an adequacy finding, companies that join
up to the Safe Harbor scheme will. Companies whose activities are not regulated by the
FTC or DoT (e.g. banks, credit unions, savings and loan institutions, securities dealers,
insurance companies, not-for-profit organizations, meat packing facilities, or
telecommunications carriers) are not eligible to sign up to the Safe Harbor.
EU based exporters or U.S. based importers of personal data can also satisfy the
adequacy requirement by including data privacy clauses in the contracts they sign with
each other. The Data Protection Authority in the EU country from where the data is being
exported must approve these contracts. To fast track this procedure the European
Commission has approved sets of model clauses for personal data transfers that can be
inserted into contracts between data importers and exporters. The most recent were
published at the beginning of 2005. Most transfers using contracts based on these
model clauses do not require prior approval. Companies must bear in mind that the
transfer of personal data to third countries is a processing operation that is subject to the
general data protection Directive regardless of any Safe Harbor, contractual or consent
EU countries’ Data Protection Authorities (DPAs) and large multinational companies are
also developing a third major approach to compliance with EU rules on transfers of
personal data to countries outside the EU. This is based on country-by-country approval
of “binding corporate rules” (BCRs). Companies that set up BCRs that satisfy European
DPAs will be able to use the presumption of conformity that these approvals provide to
transfer personal data from the EU to any location in the world – not just the United
States. BCRs can be a tool for compliance with privacy rules on a global scale. The
process of negotiation and approval of the BCRs is currently lengthy and complex, and
has not been attempted by small or medium-sized companies.
The franchise sector has been a steady performer over the past several years. Spanish
franchisors account for 83 percent of the systems; the remaining 17 percent are from the
United States, France, Italy, Portugal and the UK.
Statistics vary due to the difference in criteria used by main trade sources. The number
of systems is estimated at 830 – 900 with 51,500 - 63,000 outlets, and sales averaging
Euros 16 billion (USD 22 billion).
Although Spain does not have specific legislation regulating franchising, Article 62 of the
1996 Retail Trade Act provides a definition as well as conditions for franchising in Spain.
When drawing up contracts, franchisors should bear in mind that franchise companies -
whether Spanish, foreign, or master franchisee – must be registered in a special
administrative Franchisors Registry. They are also bound by the Disclosure of Pre-
Contractual Information requirement.
All required information must be delivered in writing to the intended franchisee at least
20 days prior to signing a franchising contract or pre-contract or prior to any payment to
As of April 2003, Spanish legislation enacted EU regulations on franchising, distribution
agreements and exclusive purchases. The purpose of the EU regulation is to guarantee
competition practices in agency and distribution contracts. Some of the areas covered
include term of contract, market share considerations, exclusivity rights, and mandatory
volume of products. Companies are advised to have all new contracts drawn up in
compliance with this new legislation, and to have current contracts reviewed whenever
The different sub sectors of direct marketing are feeling the impact of expanding e-
commerce. Some have already been absorbed by e-commerce, and currently many
activities previously performed via telephone or regular mail are conducted via Internet.
The telemarketing sub sector employs 48,000 permanent employees and is the sector
that generates the most positions for the disabled. Banks, insurance agencies, and
public administration are the leading consumers of telemarketing services in Spain.
Sales for 2006 are estimated at USD1.59 billion, mainly fueled by the proliferation and
success of call centers. The sector’s future is brightened by increased sophistication in
the telephone services offered by Spain’s largest telecom company, Telefonica, as well
as competition by a number of new telecom providers. The five main call center
operators in Spain - Atento, Sitel Ibérica, Qualytel Teleservicios, TeleTech, and AGM
Contacta - control 46 percent of market share.
Television direct-marketing companies have been operating in Spain since 1990, when
television was opened to private broadcasters. In this time, it has become increasingly
popular and profitable.
Mail-order market growth has averaged 2 percent over the last 3 years. Most activity in
this sub sector has migrated to e-commerce.
Trust is an important competitive factor in this market. Direct-marketing firms that are
members of the Spanish E-Commerce and Direct Marketing Association (Asociación
Española de Comercio Electrónico y Marketing Directo) tend to inspire more confidence
in the consumer. Membership implies adherence to a number of ethical codes, including
a code of self-regulatory rules for electronic advertising. (www.fecemd.org).
The misuse of personal data is regulated in Spain by the Spanish data protection law,
known as LORTAD as well as EU legislation.
A wide range of EU legislation impacts the direct marketing sector. Compliance
requirements are stiffest for marketing and sales to private consumers. Companies need
to focus, in particular, on the clarity and completeness of the information they provide to
consumers prior to purchase, and on their approaches to collecting and using customer
data. The following gives a brief overview of the most important provisions flowing from
EU-wide rules on data protection, distance selling and on-line commerce. Companies
are advised to consult the information available via the hyper-links below for more
• Distance Selling Rules
Distance and Door-to-Door sales
The EU’s Directive on distance selling to consumers (97/7/EC) set out a number of
obligations for companies doing business at a distance with consumers. It can read
like a set of onerous “do’s” and “don’ts,” but in many ways it represents nothing more
than a customer relations good practice guide with legal effect. Direct marketers must provide clear information on the identity of themselves as well as their supplier,
full details on prices including delivery costs, and the period for which an offer
remains valid – all of this, of course, before a contract is concluded. Customers
generally have the right to return goods without any required explanation within
seven days, and retain the right to compensation for faulty goods thereafter.
Similar in nature is the Doorstep Directive (85/577/EEC), which is designed to protect
consumers from sales occurring outside of a normal business premises (e.g., door-
to-door sales) and assure the fairness of resulting contracts.
• Direct Marketing Over the Internet
The e-commerce Directive (2000/31/EC) imposes certain specific requirements
connected to the direct marketing business. Promotional offers must not mislead
customers and the terms that must be met to qualify for them have to be easily
accessible and clear. The Directive stipulates that marketing e-mails must be
identified as such to the recipient and requires that companies targeting customers
on-line must regularly consult national opt-out registers where they exist. When an
order is placed, the service provider must acknowledge receipt quickly and by
electronic means, although the Directive does not attribute any legal effect to the
placing of an order or its acknowledgment. This is a matter for national law. Vendors
of electronically supplied services must also collect value added tax (VAT).
U.S. companies can also penetrate the Spanish market through joint ventures. This type
of agreement allows the parties to share risks and combine resources and expertise.
License contracts in Spain may cover industrial property rights (patents, utility models,
trademarks), intellectual property rights (rights of use for literary, scientific, artistic works,
or software), know-how, or other uses of technology. Spanish regulations allow the
parties a wide range of freedom to negotiate terms and conditions of the agreement.
There are many clauses common to this type of contract, such as:
Exclusivity clauses, sometimes including exclusive purchase obligations;
Measures to limit the licensor’s commercial activity;
Confidentiality and non-competition obligations;
Obligations relating to improvements and innovations (this includes updating the
rights granted to the licensee and communicating to the licensor innovations
developed by the licensee
Indemnities in case of breach of contract by one party.
Selling to the Government
Government procurement theory follows the principle of best value through competition.
There is no official domestic preference policy, or discrimination against foreign
suppliers, although the Spanish Government encourages “full and fair opportunity” for
In Spain, all levels of administration – central government, autonomous communities,
municipalities and companies that have over 50 percent government ownership – have
to follow certain procurement practices as regulated by the Law of Contracts With the
Public Administration. Royal Decree 2/2000 of June 16 refunds previous legislation on
contracts with the government, and especially Law 13/95, of May 18.
The procedure to bid for a specific tender is relatively straightforward. All proposals are
kept secret and must be accompanied by proper documentation. This information
Accreditation of the legal representation used by the company.
Proof of economic and financial solvency and technical or professional
competence plus a declaration that the company is not prohibited from
Proof that a provisional guarantee, as required by the conditions of participation,
has been deposited.
For foreign companies, formal acceptance of the jurisdiction of the Spanish
courts if necessary.
Accreditation of having met all fiscal and social security obligations.
U.S. companies have to comply with the Spanish Law of Procurement Process with
Public Administration (Ley de Contratos de las Administraciones Públicas). Article 23 of
this Law establishes that the U.S. supplier should provide a statement issued by the
Spanish authorities in the United States (the Spanish Embassy in Washington), stating
that Spanish companies have equal rights and access to public tenders in the United
U.S. companies interested in bidding for contracts with the public administration must
contact the Spanish Embassy in Washington DC to document their compliance, at:
Embassy of Spain
2558 Massachusetts Ave. NW
Washington, DC 20008-2865
Tel: (202) 265-8600; Fax: (202) 265-9478
Although procurement decisions are made at the respective department or agency level,
the Spanish Under Directorate of Purchasing has released a centralized bidding
mechanism that even incorporates an on-line register for bidders and open bids, valid for
some categories of products (computers, vehicles, office equipment, heating).
The EU public procurement market, including EU institutions and Member States, totals
around EUR 1,600 billion (USD 2,206 billion). This market is regulated by two Directives:
• Directive 2004/18 on Coordination of procedures for the award of public works,
services and supplies contracts, • Directive 2004/17 on Coordination of procedures of entities operating in the
Utilities sector, which covers the following sectors: water, energy, transport and
Remedies directives cover legal means for companies who face discriminatory public
procurement practices. These directives are implemented in the national procurement
legislation of the 27 EU Member States.
The US and the EU are signatories of the World Trade Organization’s (WTO)
Government Procurement Agreement (GPA), which grants access to most public
supplies and some services and works contracts published by national procuring
authorities of the countries that are parties to the Agreement. In practice, this means that
U.S.-based companies are eligible to bid on supplies contracts from European public
contracting authorities above the agreed thresholds.
However, there are restrictions for U.S. suppliers in the EU utilities sector both in the EU
Utilities Directive and in the EU coverage of the Government Procurement Agreement
GPA). The Utilities Directive allows EU contracting authorities in these sectors to either
reject non-EU bids where the proportion of goods originating in non-EU countries
exceeds 50 percent of the total value of the goods constituting the tender, or are entitled
to apply a 3 percent price difference to non-EU bids in order to give preference to the EU
bid. These restrictions are applied when no reciprocal access for EU companies in the
U.S. market is offered. Those restrictions however were waived for the electricity sector.
Distribution and Sales Channels
As a result of the growth of the Spanish economy, distribution has become a key factor
in supplying the consumer market. Sales channels to consumers have developed
significantly in the last few years, ranging from traditional distribution methods, in which
wholesalers sell to traditional shops and those shops sell to the public, to more
sophisticated methods, with an increased presence of large multinational supermarkets,
retail stores and central purchasing units.
The major competitors to U.S. exporters and investors in Spain are Western European
firms, although Japanese and Chinese companies have emerged as formidable
competitors as well. Cost, financing terms, and after-sales service play important roles
in a firm’s market success. Since Spain joined the EU, member states’ exports to Spain
have benefited from lower tariffs than U.S. goods, which remain subject to the EU’s
Common External Tariff.
Nonetheless, U.S. products are still competitive with EU exports, often due to lower
production costs in the U.S. derived from economies of scale, and are expected to
become more so as long as there is a favorable dollar-euro exchange rate.
European exporters provide generous financing and extensive cooperative advertising,
and most of their governments actively underwrite their exporting efforts with trade
promotion events and other support. Although U.S. products are well respected for their
high level of technology and quality, some U.S. firms face challenges, including flexibility
on financing, adaptation of product design to local market needs.