From 3 April 2025, pre-litigation negotiation ceased to be a mere professional courtesy between lawyers and began to carry direct financial consequences in legal proceedings. The Civil Procedure Act, as amended by Organic Law 1/2025 of 2 January, imposes costs on any party who, having been duly summoned to an appropriate dispute resolution process, refuses to participate without good cause. The result is counterintuitive for many debtors and creditors alike: a party can win the case and still be denied a costs award, or lose only in part and end up paying the other side's costs.
It is important to understand how this mechanism works before deciding whether or not to respond to a negotiation request. This is not a minor tactical choice: it determines the final cost of the proceedings and, in certain cases, whether the claim will even be admitted.
Pre-litigation negotiation as a procedural admissibility requirement
Article 5 of Organic Law 1/2025 provides that, in civil proceedings as a general rule, a claim will only be admissible if the claimant has first attempted one of the appropriate dispute resolution methods set out in Article 2 of that Law. Not just any contact will suffice: the law requires that the subject matter of the negotiation corresponds to the subject matter of the dispute, even if the specific claims subsequently brought before the court in relation to that same subject matter may differ.
The requirement is considered satisfied where the parties have engaged in mediation, conciliation, or a neutral evaluation by an independent expert, where a confidential binding offer has been made, or where any other form of negotiation recognised under that law or any other applicable legislation, whether national or regional, has been used, provided it complies with the provisions of Sections 1 and 2 of that chapter or with the relevant sector-specific legislation. The law adds something particularly significant in practice: the requirement is also deemed met where the negotiation is conducted directly by the parties themselves, or between their lawyers acting on their instructions and with their approval, as well as where the parties have engaged in a collaborative law process.
This prior negotiation activity is required in all declaratory proceedings under Book II and in the special proceedings under Book IV of the Civil Procedure Act, subject to the exceptions expressly listed in that Act. The initiative may come from one of the parties, from both parties jointly, or from a judicial decision or a court clerk directing the parties to these types of alternative dispute resolution mechanisms.
This gives rise to the central figure in this analysis: the party that receives the summons and chooses to ignore it. The law does not require that party to accept the other side's proposal. It does, however, require an explanation if that party wishes to avoid an adverse costs order.
Admissibility of the claim
From 3 April 2025, prior recourse to an appropriate dispute resolution mechanism is a procedural prerequisite in declaratory proceedings under Book II and in the special proceedings under Book IV of the Civil Procedure Act, except for the matters excluded by Article 5.2 of Organic Law 1/2025. There must be a direct correspondence between the subject matter of the negotiation and the subject matter of the dispute.
What happens to costs when a party refuses to participate
Winning the case but losing the costs award
Article 394.1 of the Civil Procedure Act retains the traditional rule: in declaratory proceedings, first-instance costs are awarded against the party whose claims have been entirely dismissed, unless the court identifies and sets out reasons why the case raised serious doubts of fact or law, having regard to the case law arising from similar cases.
The key change lies in the following paragraph. Where participation in a dispute resolution mechanism is legally mandatory, or has been ordered during the course of proceedings by the judge, the court, or a court clerk with the parties' consent, no costs order shall be made in favour of a party that has expressly refused, or refused through conclusive conduct, and without just cause, to participate in an appropriate dispute resolution mechanism to which it had been duly summoned.
Read this carefully. A party may obtain a wholly favourable ruling and still fail to recover its legal fees and representation costs, simply because it did not bother to respond to an invitation to engage in dispute resolution. The provision refers to express refusal or refusal by conclusive conduct, meaning that sustained silence in the face of a valid invitation may be construed against the party that remained silent.
Partial success: from neutrality to a costs order
Article 394(2) of the same provision starts from the general rule that, where claims are partly upheld and partly dismissed, each party bears its own costs and shares the common costs equally, unless there are grounds to order one party to pay all costs on the basis of reckless litigation.
However, if a party fails, without justification, to participate in an appropriate dispute resolution process when required to do so by law, or when ordered to do so by the judge, the court, or the court administrator during the proceedings, that party may be ordered to pay costs, in a duly reasoned decision, even where the claim is only partially upheld. The usual equal-split arrangement breaks down to the detriment of the party that refused to engage.
Protection for the party that attempted to negotiate
Article 394(4) completes the picture from the opposite angle. Where the party invited to participate in pre-litigation negotiations aimed at avoiding court proceedings has refused to do so, the inviting party is exempt from any costs order, unless an abuse of the public justice system is found.
This changes the risk calculation for any court claim. A party that formally issues an invitation and documents it reduces its exposure to the costs of the proceedings, even in the worst-case outcome. A party that receives the invitation and ignores it takes on an additional risk that has nothing to do with the merits of the case.
| Procedural situation | General rule | Where a party refused ADR without good cause |
|---|---|---|
| All of a party's claims are dismissed | Costs awarded against the losing party, unless the court identifies serious factual or legal doubts and gives reasoned grounds | No costs order in favour of the party that refused ADR, where that party had been duly summoned to participate |
| Partial success or partial dismissal | Each party bears its own costs and shares common costs equally | The court may order that party to pay costs in a reasoned decision, even where the outcome is only a partial success |
| Admission of liability before filing a defence | No costs order applies | Bad faith is presumed where the party rejected a settlement offer or refused to participate in ADR, or where it was formally and justifiably required to engage prior to the claim |
| Admission of liability after failing to attend mandatory or agreed ADR | As per Article 394.1 | Costs awarded against that party, unless the court identifies exceptional circumstances and gives reasoned grounds |
| The requesting party's invitation to ADR is rejected by the other side | Standard costs-follow-the-event rules apply | The requesting party is exempt from a costs order, unless it has abused the public justice system |
Submission after rejecting the pre-litigation notice
It is common for a debtor who has ignored all prior notices to react upon receiving the claim and decide to submit to the claim. Article 395 of the Civil Procedure Act governs this scenario and, following the recent reform, does so with considerable strictness.
As a general rule, if the defendant submits to the claim before filing a defence, no order for costs will be made, unless the court, with adequate reasoning, finds bad faith in the defendant's conduct or an abuse of the public justice system. The provision itself defines when bad faith exists for these purposes: where, prior to the claim being filed, the defendant had been formally and duly notified to fulfil the obligation, or where the defendant had rejected a settlement offer or declined to participate in an appropriate dispute resolution mechanism.
Where submission occurs after the defence has been filed, Article 394(1) applies. Article 395(3) adds a specific rule: if the defendant failed, without justification, to engage in an appropriate dispute resolution process when legally required to do so or when directed by the court during proceedings, and subsequently submits to the claim, costs will be awarded against them, unless the court, by a duly reasoned decision, identifies exceptional circumstances warranting otherwise.
In plain terms: acknowledging the debt at the end of the road no longer cancels out the cost of staying silent at the beginning. For a creditor preparing legal proceedings, this reinforces the evidential value of a formal prior notice. For the debtor, responding to that notice becomes a decision with direct financial consequences.
Fines for abuse of the public justice system
Alongside costs, there is a second enforcement mechanism. Article 247 of the Civil Procedure Act requires all parties to any type of proceedings to conduct themselves in good faith, and empowers courts to reject, with proper reasoning, applications and procedural incidents brought in manifest abuse of rights or involving fraud of law or procedural fraud.
If the court finds that a party has acted in breach of the rules of procedural good faith or has abused the public justice system, it may impose, in separate proceedings, by means of a reasoned decision and in compliance with the principle of proportionality, a fine ranging from one hundred and eighty to six thousand euros, which may in no case exceed one third of the value of the dispute. When setting the amount, the court must take into account the circumstances of the conduct, the harm caused to the proceedings, to the other party or to the administration of justice, the financial means of the offender, and whether the conduct is repeated.
The legislation also provides that, where conduct contrary to good faith or abuse of the public justice system may be attributable to one of the professionals involved, the matter shall be referred to the relevant professional bodies for consideration of disciplinary action. Obstructive conduct in relation to pre-litigation dispute resolution mechanisms (MASCs) is therefore not purely a financial matter.
Identify the precise subject matter of the dispute
The pre-litigation process must concern the same subject matter as the prospective proceedings, even if the claims ultimately brought may differ.
Choose the appropriate mechanism
Mediation, conciliation, neutral evaluation by an independent expert, confidential binding offer, collaborative law, or direct negotiation between the parties or between their lawyers acting on their instructions and with their consent.
Give proper, documented notice of the meeting
The costs exemption under Article 394.1 requires that the other party was effectively summoned. Keep a record of the recipient, address, date and content of the notice.
Always respond, even if only to disagree
Rejection may be expressed explicitly or through conclusive conduct. A reasoned response enables the court to assess whether just cause exists.
Document the outcome before filing a claim
Whether the result is full agreement, partial agreement with reservations on outstanding points, or no agreement at all, that document will support your position on costs.
What may constitute just cause, and how to evidence it
The law does not impose an obligation to accept proposals. It imposes an obligation to act in good faith. Articles 394 and 395 both refer to a party who refuses without just cause or fails to attend without a justifying reason, meaning that the assessment rests with the court and must be set out with reasoning in its decision. There is room to mount a defence, but it must be supported by evidence.
There is also an objective element that tends to be decisive in these disputes: the notice must have been effectively served. Article 394.1 refers to the party that has been effectively notified. The party issuing the notice must be able to demonstrate to whom it was addressed, at what address, with what content and in respect of what subject matter, because Article 5 requires that the subject matter of the negotiation match the subject matter of the dispute. A vague notice, sent to the wrong address or relating to a claim different from the one ultimately brought, is fertile ground for challenge.
From the perspective of the party receiving the notice, a reasoned and documented response is almost always preferable to silence. Contesting the amount, disputing the existence of the debt itself, or invoking circumstances that prevent negotiation at that time all leave a record that the court can assess. Silence, by contrast, readily falls into the category of rejection by conclusive conduct.
Where the disagreement is purely financial and the matter is straightforward, documenting a serious settlement proposal is quick and inexpensive. In more routine cases, it may be useful to send a settlement proposal with verifiable proof of dispatch and content, so that it is on record that the party did not refuse to engage.
Matters and proceedings that fall outside the requirement
Article 5.2 excludes from the requirement to attempt prior negotiation, among other matters: civil judicial protection of fundamental rights; the adoption of measures provided for in Article 158 of the Civil Code; judicial support measures for persons with disabilities; claims relating to parentage, paternity and maternity; summary judicial protection of possession against dispossession or disturbance; claims for the summary demolition or removal of a building, structure, tree, column or similar object in a state of disrepair that poses a risk of causing harm to the claim; certain matters involving minors; and bill-of-exchange proceedings.
Paragraph 3 further provides that it is not necessary to resort to an appropriate dispute resolution mechanism in order to bring an enforcement claim, to apply for interim measures prior to the claim, to request preliminary proceedings, or to initiate non-contentious (voluntary) jurisdiction proceedings, with the exception of proceedings for judicial intervention in cases of spousal disagreement and in the administration of jointly owned matrimonial property, and proceedings for judicial intervention in cases of disagreement over the exercise of parental responsibility. The requirement also does not apply to applications for a European Payment Order under Regulation (EC) No 1896/2006, or to requests to initiate a European Small Claims Procedure under Regulation (EC) No 861/2007.
This distinction matters greatly when it comes to enforcement. A party who already holds an enforceable title and proceeds to execution is not required to demonstrate prior negotiation. A party pursuing a declaratory action is.
Partial agreements and the limits of what can be negotiated
Article 4 of Organic Law 1/2025 recognises that the parties are free to reach agreements or settle their rights and interests through these means, provided that what is agreed is not contrary to the law, good faith or public policy. It expressly permits both total and partial agreements. Where a partial agreement is reached, the parties may file a claim in respect of the points on which the dispute remains unresolved.
This option is particularly useful in complex monetary claims. The undisputed portion of the debt can be settled, leaving only the contested elements to be litigated, reducing the value of the proceedings and, with it, the financial exposure. Where the only outstanding issue is the timing of payment, it is sensible to establish a payment schedule for the agreed amount and reserve court proceedings for anything that remains in dispute.
There are limits. The same Article 4 prohibits the use of these mechanisms, even by judicial referral, for disputes concerning matters that are not at the parties' disposal under applicable legislation, though it does allow their application in relation to the effects and measures provided for in Articles 102 and 103 of the Civil Code, without prejudice to judicial approval of any agreement reached. In no circumstances may they be applied to civil disputes involving matters excluded from mediation under Article 89(9) of Organic Law 6/1985 of 1 July on the Judiciary.
The cap on recoverable legal costs
Article 394(3) is worth bearing in mind, as it is the provision that allows the financial risk to be quantified. Where costs are awarded against the unsuccessful party under paragraph 1, that party is only required to pay, in respect of the fees of lawyers and other professionals not subject to a fixed scale or tariff, a total amount not exceeding one third of the value of the proceedings, per winning party who has obtained such an award. For this purpose alone, claims that cannot be given a monetary value are assessed at €24,000, unless the court determines otherwise on grounds of the complexity of the matter. This cap does not apply where the court finds that the party ordered to pay costs has acted recklessly or in bad faith.
The legislation also addresses the situation of those entitled to legal aid, both where they are ordered to pay costs and where costs are awarded in their favour, along with the notification obligations to the relevant professional bodies as set out in the law itself.
How we handle these matters at Conesa Legal
When a client comes to us with a disputed debt, the first thing we examine is not the claim itself, but the prior documentary trail. We check whether a formal demand was served, whether the call to engage in pre-litigation negotiation was effective, whether the subject matter of that negotiation matches the subject matter of the anticipated proceedings, and whether the other party's response can be characterised as an express refusal or one inferred from their conduct. This preliminary work shapes the costs strategy for the entire case.
Where the client consulting us is the party who received the demand, the approach is the reverse: building a legitimate justification, recording it properly, and preventing silence from turning into a costs order, even in cases of subsequent submission or partial success on the claim. In both scenarios, the law rewards those who act in good faith and can demonstrate it. A lawyer handling a judicial claim does not simply prepare the claim: they also prepare their client's position in relation to Articles 394 and 395 of the Civil Procedure Act.
If you have received a formal demand, are pursuing a debt recovery claim, or have proceedings already under way and are unsure how to respond to a call for pre-litigation dispute resolution (MASC), review your file before making any decisions. The cost of getting it wrong is measured in legal costs.
