On 2 February 2022, the Madrid Regional Council passed the Draft Open Market Bill (“Draft Bill“) which is currently undergoing a parliamentary procedure at the Madrid Assembly and is expected to be passed by June of this year. Once it is passed, it will become enforceable three months after it is published in Madrid’s Official Regional Gazette.

The approval of this Draft Bill takes place in a context in which the European Union has urged the Member States to adopt measures to eliminate obstacles to the free movement of goods and services, particularly after the economic and social crisis caused by the COVID-19. In the case of Spain, the European Commission’s Report on Spain 2020, dated 26 February 2020, states that “restrictive and fragmented regulations depending on the Regional Governments” constitutes a barrier to investment, and it urged Spain to “eliminate restrictions on the establishment of companies and the free movement of goods and services throughout the country by reinforcing the principles of better regulation and cooperation between administrations”.

Indeed, the preamble of the Draft Bill states that, although it is true that Spain attempted to comply with the EU mandate by passing Market Unity Act 20/2013, dated 9 December (MUA), and by applying the principles of efficient regulation and enforceability, the Constitutional Court partially annulled the MUA, on the grounds that the principle of enforceability regulated in its Articles 19 and 20 was a violation of the Spanish Constitution, given that the MUA surpassed the authority stipulated for the national government under Article 149. 1.13 of the Spanish Constitution (“bases and coordination of general economic planning”) and it encroached upon the authorities granted to the regional governments. Thus, the Constitutional Court ruled that the Regional Governments (Comunidades Autónomas) had the authority to regulate the free movement of goods and services within their territorial scope.

Therefore, the Draft Bill considers it necessary to comply with the recommendation that the European Commission establishes in the Report on Spain 2020 and with the ruling of the Constitutional Court. It does so by eliminating the regulatory obstacles that hinder trade in the Madrid Region, with the aim of helping companies that are already established in other Spanish Regions to establish their business in Madrid and thus attract new investors. It is expected that thanks to this new law, the Madrid Region’s GDP will grow 1.6% and 50,000 new jobs will be created.

Content of the Open Market Act

We highlight some of the most important features of the Draft Bill below:

• It is based on the Principle of Efficiency, which implies that companies and self-employed individuals who have obtained the necessary licenses and permits to carry out their business, or who have met the registration requirements established in any Spanish Region, will not have to obtain new permits to set up or market their products in the Madrid Region, thus facilitating the free movement of goods and services. To such end, the Madrid Region plans to implement a telematics system through which the permit obtained in another Region will be submitted for comparison and validation.

The foregoing will not be applicable to (i) those permits that refer exclusively to physical facilities or infrastructure; (ii) the occupation of public property; and/or (iii) cases there are duly justified reasons for public order, public safety, or civil protection that discourage it.

• It establishes the principles of non-discrimination with regard to the economic operator’s place of residence, and the principles of necessity and of proportionality with regard to the restrictions that may be established for accessing or carrying out a business under the MUA.

Actions that limit free business establishment and movement are defined as acts or interventions that contain or impose:

1. Requirements to obtain an authorization, approval, accreditation, classification, certification, qualification, recognition, or the submission of a declaration of responsibility, notice or registration in any registry to carry out the relevant business, if such requirements are different from those established by the regional authority of origin.
2. Professional qualification requirements additional to those required in the place of origin or wherever the operator entered the business or profession, such as those related to homologation/approval, validation, accreditation, classification, qualification, certification, or recognition of the diplomas or certificates necessary to evidence certain professional qualifications.
3. Technical specifications for the legal circulation of a product, or for its use, when rendering a service, if such specifications are different from those established at the place of manufacture.

As can be seen, by passing the Draft Bill, the Madrid Region seeks to expand its territorial scope and open the market to new business initiatives that may come from other regions in Spain, facilitating their business establishment and start-up. This will be key to facilitating foreign investment projects, which currently are faced with the traditional stumbling block of having to comply with 17 different regional authorization regimes, in cases where the project involves establishments in more than one region.