The Council of State has issued a report regarding the request for a declaration of the administration’s financial liability made by a party expropriated for fair value in legal proceedings in view of the declaration of insolvency of the concessionaire benefitting from the expropriation.

The report analyzes whether expropriated parties can claim for payment of the fair value unpaid by concessionaires under insolvency through a compensation claim for the administration’s financial liability. The Council of State dismissed the claim for the payment of the fair value and declared the inadmissibility of declaring the administration’s financial liability stating that the suitable procedural channel for bringing claims for fair value is through expropriation proceedings. However, the most relevant part of this report is the comments on the classification of the claims of the expropriated parties in the insolvency.

The Council of State stated that the expropriated parties’ position in the insolvency involved specifics differentiating them from the other creditors. This position derived from the expropriated parties not having established economic relations with the concessionaires voluntarily, and from their claim being protected on being configured as a constitutional guarantee. Therefore, unlike all case law on the subject, they stated that claims for fair value of the expropriated parties can be classified as general privileged claims under article 91.3º IA, and that “it was obvious” that the expropriated parties’ claims are public law claims as they arise from the exercise of public authority, namely, obligatory expropriation. It also stated that although most expropriated parties should be legal-private entities, this does not obstruct classification, since the classification as a general privileged claim does not require the holder to be a public administration. This contradicts the Supreme Court’s ruling dated July 16, 2013, in which it defined public law claims as those meeting two requisites: (i) they are held by the General State Administration or its autonomous bodies; and (ii) they derive from administrative powers.

The Council of State stated that the classification of privileged also extends to any interest accrued due to the non-payment of the fair values, since their nature is not default or penitentiary, but rather they are mechanisms for updating the amount owed. It also added that these claims are not affected by the 50% limitation established under article 91.3º IA, since this limitation only refers to the Treasury and Social Security.

In all concessionaire insolvencies, the expropriated creditors sought unsuccessfully to have their claims recognized as general privileged claims, with this classification being denied by all the commercial courts, which maintained the classification of ordinary claims on the understanding that they were not public law claims. With this opinion, the Council of State has extended its consultation role to the insolvency classification of claims, a competence inherent in commercial judges. However, based on this opinion, many expropriated parties have asked the courts to amend the classification of their claims, although the courts have not yet ruled on these requests.