On 28th July 2010, the Court of Auditors declared the existence of an alcance of more than €1.4 million in the funds of Marbella Town Council and ordered its repayment, holding the first deputy mayor, the councillor for Finance and the councillor for Financial Control directly liable in accounting terms[1].
However, before reaching the adjudicatory stage, the alleged persons liable had faced the so-called preliminary proceedings. This article examines that preliminary phase, which provides the necessary investigative foundation preceding judicial proceedings before the Court of Auditors. Although, on paper, this phase is provisional and preparatory, in practice it is central to determining accounting liability.
1. What are reimbursement proceedings for alcance?
Reimbursement proceedings for alcance, as we explained in our previous publication, are judicial proceedings concerning accounting liability conducted by the Adjudication Division of the Court of Auditors.
The purpose of those proceedings is to determine claims concerning accounting liability arising from alcance[2] or misappropriation[3] of public funds or assets, and to order repayment, including default interest.
2. What does the preliminary proceedings phase entail?
In this context, the preliminary proceedings constitute the administrative, investigatory and preparatory procedure for the judicial proceedings concerning repayment of the alcance. Accordingly, they provide the foundation for the judicial proceedings. They are governed by Articles 46 to 48 of Law 7/1988 on the Operation of the Court of Auditors (“LFTCu”), and their conduct is entrusted to a specific administrative unit within the Adjudication Division of the Court of Auditors, as provided in Article 11.3 LFTCu.
This preliminary proceedings phase begins when, following an examination of accounts, an audit procedure or any other means, there is evidence of facts allegedly constituting alcance or misappropriation (Article 46.1 LFTCu). It may also be commenced at the instance of a party, by exercising the public action (Article 47.3 LOTCu), or by means of a complaint.
- Investigation
Where the facts prima facie appear to constitute alcance or misappropriation, the Adjudication Division proposes to the Governing Commission the appointment of an Investigating Delegate responsible for directing the investigation (Article 46.1 LFTCu).
During this phase, the Investigating Delegate shall carry out such inquiries as he or she considers appropriate to ascertain the facts and identify the alleged persons liable, in accordance with Article 47.1 LFTCu.
However, such inquiries cannot attain “a degree of exhaustiveness or depth that would turn them into an anticipation of the evidential stage provided for by law at first instance”[4]. Accordingly, Investigating Delegates are not required to carry out every inquiry proposed by those participating in the preliminary proceedings. In practice, it is extraordinarily unusual for inquiries requested by a party to be admitted.
The reality is that this investigative function, as noted by the Court of Auditors’ legal counsel González Soler, is nevertheless distorted: Investigating Delegates focus more on satisfying evidential requirements and establishing culpability than on ascertaining the facts, exercising a supervisory rather than investigative function. This has gone so far as to result in negative Provisional Liquidation Records being issued without any investigation being undertaken[5].
The preliminary proceedings must be completed within two months, extendable by one further month for good cause (Article 47.4 LFTCu). However, that provision is no more than a dead letter, the time limit being merely indicative and non-preclusive. This is established by the Judgment of the Supreme Court of 14 June 2006 (Rec -3108/2001), which held that failure to comply with the time limit does not result in the lapse of the procedural step, the action or the proceedings.
- Preliminary Investigative Inquiries and Provisional Liquidation
This procedure, conducted by the Investigating Delegate, must refrain from addressing the merits of the matter. Accordingly, it is administrative, provisional and subordinate in nature to the subsequent judicial phase before the Adjudication Division.
As noted above, during this stage, the Investigating Delegate shall carry out such inquiries as he or she considers appropriate to ascertain the facts and identify the alleged persons liable. However, the Investigating Delegate is not competent to admit or take complex evidence, and must therefore refuse requests for evidence that seek to anticipate the subsequent debate at the judicial stage. All of this significantly restricts the taking of evidence that may take place during this phase.
Moreover, until the Provisional Liquidation Record is made available for inspection, the proceedings generally take place without the alleged person’s knowledge, with no obligation to notify the alleged person of the commencement and conduct of the preliminary proceedings, or to provide access to the inquiries or documents.
During this phase, the person under investigation—if he or she has entered an appearance before the Provisional Liquidation Record—is not involved in any material way; nevertheless, it is advisable to make written submissions in light of the outcome of the investigation. Not so much to influence the Investigating Delegate’s decision as to place the submissions on record and thereby avoid a claim being brought in the future.
- Provisional liquidation
Once the inquiries have been completed, the Investigating Delegate proceeds to draw up the Provisional Liquidation Record, after hearing the alleged persons liable, the Public Prosecutor’s Office, the State Attorney or, where applicable, the representative of the injured entity (Article 47.1.e LFTCu).
Generally, this is the procedural stage at which interested parties first gain access to the file and may make submissions and produce such documents as they consider appropriate in support of their interests.
That Record must specify the public funds or assets that have suffered loss, establish the amount together with a provisional calculation of interest, identify the alleged persons liable (directly liable parties or their successors in title), issue a formal demand for a deposit or security and, if there is difficulty in establishing secondary liability, record that fact, with proceedings continuing only against the directly liable parties (Article 47.1 LFTCu).
In other words, that decision is not intended to assess the liability of those involved or their culpability, but only the matters identified above. Accordingly, no defensive arguments will be considered in that decision. This is therefore a phase in which the person concerned has no substantive involvement.
For the purposes of the subsequent adjudication, the effects of the Provisional Liquidation are not binding and have no definitive evidential value whatsoever. In practical terms, its most significant functions are that it constitutes sufficient title to confirm the preventive attachment over the alleged persons liable and interrupts the limitation period, which may result in a significant delay in the progress of the proceedings.
On the contrary, it serves as a preparatory foundation and antecedent for subsequently proceeding, pursuant to Article 73 LFTCu, first with the issue of public notices and summonses and, thereafter, under the declaratory proceedings applicable to the amount in issue.
The Record may be classified as positive where it declares the existence of indicia of accounting liability, namely, alcance or loss; or negative where it declares that no such indicia exist, thereby providing the basis for closing the proceedings. In the latter case, no financial assessment is made and no requirements for security or attachment are issued.
- Security and attachment
Following the Provisional Liquidation Record, the Investigating Delegate requires the alleged persons liable to deposit or provide security for the provisional amount determined and the provisional calculation of interest (Article 47.1.f LFTCu). This operates as an interim measure intended to balance the protection of public funds with the right of defence.
If those required to do so fail to make the deposit or provide security, the Investigating Delegate, pursuant to Article 47.1.g) LFTCu, shall order the preventive attachment of their assets in accordance with the rules governing enforcement proceedings under the General Collection Regulations.
- General regime governing appeals
As provided in Article 48 LFTCu, as a general rule, decisions issued in the preliminary proceedings may be challenged by an appeal before the Justice Chamber of the Court within 5 days. This appeal is available only in cases exhaustively and restrictively prescribed by law, namely where the request to complete the inquiries identified by those appearing is refused or a denial of due process arises.
As regards a denial of due process, the Chamber requires it to be substantive, rather than merely formal: a real and effective deprivation of the right of defence causing specific prejudice. Thus, it has held that the following, among other circumstances, do not give rise to a denial of due process of constitutional significance: expiry of the two-month investigation period, failure to notify the interested party of commencement, refusal to extend the time for making submissions, or service of the Provisional Liquidation Record by public notice.
The figures are telling. An examination of the Justice Chamber’s case law shows that, as documented in the literature, 87 appeals were brought under Article 48 LFTCu between 2014 and 2019. Virtually all were declared inadmissible or dismissed, with a rejection rate of more than 95%. Most revealingly, 100% of the appeals brought against Provisional Liquidation Records were dismissed. A level of rejection that “has no parallel in any other Spanish administrative or judicial body“[6].
Once the appeal has been determined by the Chamber, no further appeal or challenge lies, without prejudice to any remedy available at the subsequent judicial stage or, where applicable, by way of an appeal on a point of law.
Economic Criminal Law and Criminal Compliance
Specialists in economic and corporate crimes. Criminal defence in complex cases and plans for the prevention of crimes and money laundering. We act before national and European courts with total rigour. Learn more3. Conclusion
The preliminary proceedings in reimbursement proceedings for alcance are structured as a subordinate investigative phase preceding the subsequent judicial proceedings, but with effects that go beyond their merely preparatory nature. They are conducted without the alleged person’s knowledge until the Provisional Liquidation Record is drawn up, and with very limited scope for response; all the while generating immediate consequences such as interruption of the limitation period, a requirement for security and preventive attachment.
This is compounded by the Court of Auditors’ own tendency, repeatedly censured by the Supreme Court, to channel all manner of accounting infringements through the alcance procedure, improperly broadening its scope and rendering the juicio de cuentas (accounts trial), which affords greater safeguards for adversarial submissions and evidence, obsolete.
The position of the alleged liable party is therefore structurally asymmetric. Accordingly, whenever there is any indication of action by the Court of Auditors, obtaining specialist advice from the outset is essential.
At Ayuela Jiménez, we have a team of solicitors specialising in Economic Criminal Law and proceedings before the Court of Auditors, ready to devise a coordinated defence strategy from the earliest stage of the proceedings.
