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Bribery is not widespread in business dealings in Spain, yet companies cite corruption as a business impediment. Many corruption cases have been initiated in recent years, revealing corruption risks and mismanagement in local-level public procurement in urban planning and construction. The Criminal Code (in Spanish) makes it illegal for individuals to offer and accept bribes, and corporate entities can be held criminally liable for corruption offenses committed by their representatives. Facilitation payments are prohibited, and gifts and hospitality may be considered illegal depending on the intent and benefit obtained. Spain’s attempts to limit corruption have intensified in recent years. New anti-corruption units have been created, new transparency-enhancing legislation has been passed, and efforts have been made to improve public control and governance systems. As a result, corruption investigations, arrests and prosecutions have significantly increased.
There is no evidence suggesting that corruption in the courts is an obstacle for businesses in Spain. Companies experience the judicial system as transparent and independent, and complaints mainly concern bureaucratic obstacles, case handling and very slow enforcement; a situation that has been further exacerbated with the current economic crisis in the country (ICS 2015). Businesses consider the courts’ ability to settle disputes and challenge government regulations to be weak (GCR 2015-2016). The judiciary and prosecutorial service are generally of high quality (FER 2014). The justice system is characterized as being impartial and honest, but there are concerns that the appointment of judges and judicial control systems are under strong political influence (NISA 2012). Half of citizens consider the judiciary to be corrupt (GCB 2013). Nonetheless, the public perception of the efficiency of the courts in prosecuting corruption is improving (ICS 2015). Spain is a signatory to the New York Convention 1958 and the Convention on the Settlement of Investment Disputes.
Corruption is not widespread among Spain’s police forces. The police services are considered reliable in protecting companies from crime (GCR 2015-2016), and the necessary mechanisms are in place to investigate and punish abuse and corruption in the police services. There are isolated reports of police corruption, but these are typically resolved effectively by the authorities (HRR 2014). About a third of citizens have low confidence in police integrity (GCB 2013), and approximately the same proportion of citizens believe that bribery and abuse are widespread among police officials (European Commission, Feb. 2014).
Firms may contend with corruption risks when dealing with public services. Irregular payments and bribes are sometimes paid when obtaining public utilities and licenses, with more than three-quarters of business reporting that bribery and the use of connections are often the easiest way of obtaining certain public services (European Commission, Feb. 2014). Nepotism and cronyism are also reported by more than two-thirds of companies to be a problem within public institutions (European Commission, Feb. 2014), and almost half of surveyed citizens perceive bribery and abuse to be widespread among officials issuing business permits (European Commission, Feb. 2014). Companies report that it can be very burdensome to deal with Spanish administrative requirements (permits, licences, reporting, etc.), and cite inefficient government bureaucracy among the main obstacles to business (GCR 2015-2016).
To streamline the uneven regulatory requirements between Spain’s 17 regions, the government has introduced a ‘single licence’ system that enables companies to operate throughout Spain with only one license, instead of having to request one from each region (ICS 2015). Spain also eased the process of starting a business by improving the efficiency of the commercial registry and eliminating the requirement to obtain a municipal license before starting a business (ICS 2015). Despite the aforementioned achievements, the efficacy of regulations is uneven at the regional level, and starting a business is more time-consuming and costly compared to other OECD countries (ICS 2015, DB 2015).
Corruption and irregularities in land management are major problems in Spain. Multiple cases of fraud, bribery and money laundering have emerged in urban planning and the construction sectors since the ending of the Spanish building boom in 2008. The magnitude and scale of the problem is exemplified by almost 1,800 judicial proceedings being opened in illegal land use cases in one year alone (EUACR 2014). Land management is vulnerable to corrupt practices due to the broad discretionary powers given to mayors and city councils in the areas of urban planning and related public procurement decisions (EUACR 2014). Dealing with construction permits is more time-consuming and more costly on average compared to other OECD countries (DB 2016).
To increase municipal oversight, specialized prosecution services and a police unit specialized in land-planning crimes have been created (EUACR 2014). More than half of Spanish citizens believe bribery and abuse of power are widespread among public officials issuing building permits (EB 2014).
Corruption in the tax administration is not an obstacle to business (GCR 2015-2016). One-third of citizens believe bribery and abuse of power are widespread in the tax administration (EB 2014). Paying taxes has been made less costly by reducing the rates for corporate income, capital gain and environment taxes, and the time required to pay taxes is lower than the OECD countries’ average (DB 2016). Spanish tax regulations represent a moderate challenge for foreign companies.
Several cases of political corruption involved tax fraud. Former president of the region of Catalonia admitted to concealing large sums of undeclared money in secret foreign bank accounts for more than thirty years. The Catalan parliament has opened a formal investigation into the alleged tax evasion and corruption (HRR 2014). In two other separate cases, the king’s sister, Princess Catarina, as well as former economy minister and IMF chief, Rodrigo Rato, have been involved in tax fraud. Rodrigo Rato allegedly concealed a fortune of EUR 26.6 million in foreign bank accounts (BBC News, Apr. 2015). Princess Catarina and her husband are to stand trial in January 2016 (The Guardian, Oct. 2015).
Spain’s border administration is transparent and irregular payments in relation to exports and imports pose a moderate risk for businesses (GETR 2014). Burdensome procedures and high costs are among the main constraints for importing in Spain (GETR 2014, GCR 2015-2016). Trading in Spain is ranked number one in the world with regards to the ease of trading across borders with just one document required for import and export (DB 2016).
Recent news stories have revealed that corruption in public procurement is a serious problem in Spain. Almost half of businesses believe corruption has prevented their company from winning a public tender in the past three years (European Commission, Feb. 2014), and almost a third of companies report it being common practice to pay bribes in order to win contracts (NTCBR 2013). Alleged corrupt practices, particularly kickbacks, are endemic in the construction and waste-collection sectors. Other common irregularities in public procurement procedures involve tailor-made specifications for particular companies, abuse of negotiated procedures, conflicts of interest in the evaluation of the bids, collusive bidding, and amendments of contractual terms after conclusion of a contract (EUACR 2014). Added to the list in a report published by the Spanish Court of Auditors is the use of unjustified emergency procedures, the splitting of contracts into minor ones, unjustified contract modifications, and unjustified exceptions for the obligatory publishing of tenders (Corruption Research Center Budapest, Feb. 2015). Procurement corruption and mismanagement is particularly widespread in local politics, where municipalities often suffer from poor oversight mechanisms and where local officials can act with discretion (European Commission, Feb. 2014; EUACR 2014). Government officials showfavoritismm towards well-connected companies and individuals when deciding upon policies and contracts (GCR 2015-2016), and a majority of firms report that too close links between politicians and businesses leads to corruption (European Commission, Feb. 2014).
In Spain’s biggest corruption case, 40 people are to stand trail. Among them several politicians and businessmen, including three former treasurers of the ruling Popular Party (PP) and even Prime Minister Rajoy himself. The date has not yet been set. The case revealed the far-encompassing kickback scheme manoeuvred by the politician and leader of a group of corrupt businessmen, Francisco Correa Sanchez. The businessmen allegedly paid kickbacks to PP governments in Madrid, Castilla-La Mancha and Valencia, in return for lucrative contracts. Luis Barcenas, former PP treasurer, allegedly handed out envelopes of money to PP ministers for as long as he managed the finances of the party, while Prime Minister Rajoy was at the receiving end of an annual sum of EUR 25,200 in cash. The courts have ordered 36 of the 40 suspects to pay a combined bail bond of EUR 449 million. The 40 suspects will stand trial on crimes carried out between 1999 and 2005, yet investigations are still looking into the connected crimes which have continued into 2006 and 2009 (Olive Press, Feb. 2014; The Local, Mar. 2015). Companies are recommended to implement special due diligence procedures to counter the likelihood of encountering corruption in Spain’s procurement process.
No companies report being asked or expected to pay a bribe for environmental permits (including waste and water treatment) in Spain (European Commission, Feb. 2014).
The anti-corruption legal framework in Spain is fairly strong, and law enforcement has shown good results in investigations of alleged corrupt practices (EUACR 2014). The Criminal Code makes it illegal for individuals to offer or accept bribes to/from corporate individuals, along with Spanish and foreign public officials. Penalties for bribery include fines and of up to six years’ imprisonment, and public officials risk being disqualified from public employment for up to 12 years. Facilitation payments are prohibited, and gifts and hospitality may be considered illegal depending on the value, intent and benefit obtained. A corporate entity can be held criminally liable under the Criminal Code for corruption offences committed by its employees or by temporarily contracted representatives. Companies risk having to pay fines of up to five times the benefit obtained from the corrupt practice, suspension of activities, forced closure of premises and debarment from public procurement for up to 15 years. Corporations’ administrators can be given prison sentences and heavy fines for receiving illegal financing (ICS 2015). Corporate criminal liability may be mitigated if the organisation has established effective preventive measures and monitoring systems. Other relevant legislation includes the Anti-Money Laundering and Terrorist Financing Act, which ensures compliance with the EU Money Laundering Directive, and the Regulation of Conflicts of Interests Law, which obliges members of the government, parliament and high-ranking officials to disclose their assets and interests. Companies cannot donate to political parties, while donations by private citizens are limited to EUR 100,000 per year (ICS 2015). The legislation also stipulates compulsory publishing of Parties’ accounting and pending financial credits (ICS 2015). The Law on Transparency guarantees the right to information on how public funds are spent and provides for the creation of the Transparency Portal through which citizens can access such information. The law has been criticised for making it too easy for the government to reject requests for information (EUACR 2014).
Spain is a signatory to the OECD Anti-Bribery Convention, the United Nations Convention Against Corruption (UNCAC) and the Council of Europe’s Civil and Criminal Law Conventions against Corruption.
Spain guarantees freedom of expression in the constitution and respects freedom of the press in practice. The media environment is dynamic, and many journalists have effectively investigated high-level corruption cases (FitW 2015; FotP 2015). Larger outlets sometimes lack independence and accountability, and it is common to find forms of ‘advocacy journalism’ in which journalists position themselves at one of the main political dividing lines (NISA 2012). The media environment is considered ‘free’ (FotP 2015).
Spanish civil society groups operate without government interference, but their capacity to influence policy-making is reportedly limited. Organisations often depend on public funding, reducing their ability to independently monitor public authorities. Their role in controlling corruption is limited (NISA 2012).
- World Economic Forum: Global Competitiveness Report 2015-2016.
- US Department of State: Investment Climate Statement – Spain 2015.
- World Bank & IFC: Doing Business 2015.
- Freedom House: Freedom in the World – Spain Country Profile 2015.
- Freedom House: Freedom of the Press – Spain Country Profile 2015.
- Guardian: ‘Spain’s Princess Cristina to stand trial on tax fraud charges’, 6 October 2015.
- Local: ‘Judge withdraws passport of ex-IMF chief Rato in corruption case’, 6 October 2015.
- BBC News: ‘Spain’s Rato corruption inquiry another blow for Rajoy’, 28 April 2015.
- Corruption Research Center Budapest: Mapping high-level corruption risks in Spanish public procurement, February 2015.
- Local: ‘Scandal: 40 to stand trial in Gurtel case’, 6 March 2015.
- US Department of State: Country Report on Human Rights Practices – Spain 2014.
- CMS: Guide to Anti-Bribery and Corruption Laws, September 2014.
- Eurobarometer: Flash Eurobarometer 374 – Businesses Attitudes towards Corruption in the EU, 2014.
- Eurobarometer: Special Eurobarometer 397 – Corruption Report, 2014.
- Local: ‘New website to boost transparency in Spain’, 10 December 2014.
- GRECO: Fourth Evaluation Round – Evaluation Report, Spain, January 2014.
- World Economic Forum: The Global Enabling Trade Report 2014.
- European Commission: EU Anti-Corruption Report: Annex 9, Spain, February 2014.
- Olive Press: ‘The Gurtel/Barcenas case: the story so far’, 22 February 2014.
- Transparency International: Global Corruption Barometer 2013.
- Ernst & Young: Navigating Today’s Complex Business Risks – Europe, Middle East, India and Africa Fraud Survey 2013.
- Manuel Álvarez: ‘Anti-Corruption in Spain: Compliance Confusion’, Uría Menéndez webpage, April 2012.
- Transparency International: National Integrity System Assessment Spain 2012.