The internationalisation of business has significantly increased disputes related to debts and credits in Spain. Cross-border operations, diverse legal frameworks, and the demand for legal certainty have created a complex environment. Domestic and foreign companies require more effective mechanisms for recovering commercial credit. The confidential binding settlement offer is as a debt recovery mechanism.
Organic Law 1/2025 and Its Impact on Debt Claims
Spain enacted Organic Law 1/2025 on January 2 to improve the efficiency of the Public Justice Service. The law took effect on April 3, 2025.
ADR as a Prerequisite to Litigation
One of the most significant changes introduced by Organic Law 1/2025 is the requirement to use Alternative Dispute Resolution mechanisms (ADR) before filing a lawsuit.
Companies must demonstrate that they have attempted to resolve the conflict through ADR methods. The law provides for:
- Confidential binding settlement offers
- Mediation
- Private conciliation
- Arbitration
- Neutral expert determination
The Confidential binding settlement offer: A Key Tool in Debt Recovery
Definition and Purpose
The confidential binding settlement offer, defined in Article 17 of Organic Law 1/2025, is emerging as the most practical ADR tool in commercial debt recovery. This offer is a unilateral proposal—usually made by the creditor to the debtor—to recover unpaid debts without going to court. Its main purpose is to facilitate quick settlements and reduce the workload of courts.
Minimum Legal Requirements
The law establishes that the offer must include:
- Identity of the offeror and the offeree
- Specific terms of the proposal
- Proof of receipt by the offeree
- Date of receipt
- Deadline for acceptance (where no time limit is specified, the law presumes a period of one month)
Both sending and acceptance must use reliable means that prove proper communication.
Legal Effects: Acceptance, Rejection or Silence
- Express acceptance: If the debtor (offeree) clearly agrees to the terms of the offer, both parties must follow those terms. This outcome is legally binding and has the same effect as an out-of-court settlement, meaning it cannot be changed or withdrawn.
- Rejection or silence: the offer expires, and the creditor may proceed with judicial action.
Confidentiality as a Negotiation Guarantee
A key innovation of Organic Law 1/2025 is that the binding offer is confidential. Its content cannot be disclosed to third parties or judges, even in the event of litigation. This measure guarantees a safe environment for negotiation.
Implications for Foreign Companies in Spain
For foreign businesses operating in Spain, this regulation makes specialised local legal advice essential. Meeting the legal requirements is not just a procedural formality—it is a strategic necessity that can:
- Ensure effective recovery of commercial credits
- Avoid procedural delays
- Prevent inadmissibility of claims and associated costs
Conclusion: A New Era in Debt Recovery in Spain
Organic Law 1/2025 reshapes debt recovery in Spain by making ADR a mandatory step before accessing the courts. For foreign companies, adapting to this framework is not optional—it is a legal obligation that, when managed properly, can become a competitive advantage in commercial credit recovery.
Frequently Asked Questions
The confidential binding settlement offer is a mechanism provided for under Organic Law 1/2025 that allows a creditor company to propose a payment agreement to the debtor without resorting to the courts. It constitutes a mandatory preliminary step prior to initiating any judicial action in debt recovery matters.
The reform aims to relieve the congestion of Spanish courts and to promote Alternative Dispute Resolution (ADR) mechanisms. By requiring companies to attempt an amicable settlement, the law encourages faster, more confidential, and more cost-effective solutions.
Unlike mediation, the binding settlement offer is unilateral: it is made by only one party, typically the creditor, and does not require the involvement of a mediator. If the debtor accepts the terms, the agreement becomes legally binding.
- If accepted, the agreement is equivalent to a final extrajudicial commitment.
- If rejected or ignored, the offer lapses, and the creditor may initiate legal proceedings, demonstrating compliance with the mandatory preliminary requirement imposed by law.
Yes. The content of the offer is strictly confidential: neither judges nor third parties may access it. This confidentiality fosters open negotiations without risk to the parties.
They must ensure that ADR mechanisms are incorporated into their debt recovery procedures. Local legal advice is recommended to ensure compliance with Organic Law 1/2025 and to avoid the dismissal of legal action due to failure to comply with the mandatory preliminary procedure.
If your company is facing unpaid debts in Spain, we can guide you through the confidential binding settlement offers and other ADR mechanisms to maximise recovery while minimising costs.
