Arbitration and Spanish Accounting Standards

1. Introduction

Arbitration involving Spanish accounting standards is increasingly important in shareholder disputes, M&A transactions, earn-outs, valuation disputes, joint ventures, financial claims, construction and infrastructure contracts, and disputes concerning annual accounts.

The central point is that Spanish accounting rules are not merely technical guidance for accountants. The Plan General de Contabilidad (PGC) forms part of Spain's regulatory accounting framework and develops principles contained in Spanish commercial legislation. The current PGC is principally contained in Real Decreto 1514/2007, together with subsequent amendments and mandatory ICAC developments.

For arbitration, accounting standards can therefore operate at several levels:

1. as substantive rules governing contractual calculations;
2. as evidence concerning the financial position of a company;
3. as the basis for an expert accounting opinion;
4. as a mechanism for calculating damages or purchase-price adjustments;
5. as standards for determining whether accounts present a "true and fair view" (imagen fiel); and
6. as mandatory Spanish commercial rules that an arbitral tribunal cannot simply disregard where they are legally applicable.

A particularly important recent development is the Spanish Supreme Court's Judgment 1089/2025 of 9 July 2025, concerning the relationship between annual accounts and PGC valuation rules. The Court recognized that annual accounts may be challenged where they fail to comply with applicable legal and technical accounting criteria and consequently fail to present a true and fair view.

2. Spanish Accounting Framework Relevant to Arbitration

A. Código de Comercio

The Spanish Commercial Code establishes the statutory foundation for accounting obligations.

A fundamental principle is that annual accounts must be prepared clearly and must provide a true and fair view of the company's assets, financial position and results.

This principle is extremely significant in arbitration because an arbitrator deciding a dispute involving accounts cannot treat accounting figures as purely mechanical numbers. The tribunal may need to determine whether the accounting treatment accurately reflects the underlying economic transaction.

3. Plan General de Contabilidad

The PGC approved by Real Decreto 1514/2007 contains:

• the conceptual accounting framework;
• accounting principles;
• recognition criteria;
• measurement and valuation rules;
• presentation requirements;
• rules concerning assets and liabilities;
• financial instruments;
• inventories;
• revenue;
• provisions;
• taxes;
• business combinations;
• related-party transactions;
• accounting errors and changes in estimates; and
• subsequent events. 

The PGC expressly identifies the Código de Comercio, the PGC, sector-specific adaptations, ICAC regulations and other applicable Spanish legislation as sources of generally accepted accounting principles.

Consequently, an arbitrator applying Spanish law should distinguish between:

Contractual accounting rules → PGC rules → mandatory commercial law.

The hierarchy matters where the contract says, for example:

"EBITDA shall be calculated in accordance with Spanish GAAP."

The tribunal must then determine what "Spanish GAAP" means at the relevant contractual date.

4. Why Accounting Standards Matter in Arbitration

Accounting disputes generally arise in five principal forms.

4.1 Purchase-price adjustment disputes

An acquisition agreement may provide:

Final consideration = €100 million + adjustment based on net debt and working capital.

The parties subsequently disagree over:

• whether a liability qualifies as debt;
• recognition of provisions;
• treatment of receivables;
• inventory valuation;
• accrued expenses;
• deferred tax;
• contingent liabilities; or
• foreign-exchange adjustments.

The arbitral tribunal may have to interpret the accounting methodology and determine the contractual purchase price.

4.2 Earn-out disputes

An earn-out may depend on:

• EBITDA;
• EBIT;
• net profit;
• revenue;
• cash flow;
• adjusted EBITDA; or
• another accounting metric.

A party might attempt to increase or decrease the earn-out by changing:

• depreciation;
• provisions;
• revenue recognition;
• intra-group charges;
• management fees;
• impairment;
• related-party transactions.

The PGC becomes particularly important if the agreement incorporates Spanish GAAP.

4.3 Share valuation

Accounting information can be used to establish the value of shares.

Issues may include:

• book value;
• net asset value;
• adjusted net assets;
• normalized EBITDA;
• cash and debt;
• provisions;
• impairment;
• contingent liabilities.

However, book value is not necessarily market value.

An arbitrator must distinguish an accounting valuation from an economic valuation.

4.4 Damages

Accounting records frequently provide the factual foundation for damages.

For example:

Loss = Expected EBITDA – Actual EBITDA

But the tribunal must determine whether EBITDA has been calculated consistently and whether alleged losses are causally connected to the breach.

4.5 Disputes over annual accounts

Shareholders may challenge:

• approval of accounts;
• accounting treatment;
• recognition of assets;
• provisions;
• impairment;
• revenue;
• related-party transactions;
• consolidation;
• valuation methodologies.

Such disputes can intersect directly with arbitration of corporate disputes.

5. The "Imagen Fiel" Principle

The imagen fiel principle is perhaps the most important accounting concept for arbitration.

The PGC requires annual accounts to present a faithful picture of the company's:

• assets;
• financial position;
• results.

The PGC also establishes that where accounting principles conflict, priority should be given to the principle that best ensures the true and fair presentation of the company's financial position.

This has an important arbitral consequence:

An arbitrator should not mechanically accept an accounting entry merely because it appears in the company's ledger.

The tribunal may need to investigate the economic substance of the transaction.

6. Accounting Standards as Contractual Standards

This is an important distinction.

Suppose an agreement provides:

"The accounts shall be prepared in accordance with Spanish GAAP consistently applied."

There are then two possible functions of the PGC.

First function: contractual incorporation

The parties have incorporated accounting standards into their contract.

The tribunal is therefore interpreting a contractual obligation.

Second function: mandatory law

Certain accounting requirements arise independently of the contract from Spanish commercial legislation and mandatory accounting regulations.

The tribunal cannot necessarily override them merely because the parties have adopted a different commercial calculation.

Therefore, the tribunal should ask:

1. What does the contract say?
2. Which accounting framework does it incorporate?
3. What was the applicable PGC at the relevant date?
4. Is the contractual methodology exhaustive?
5. Does mandatory Spanish law impose an additional requirement?
6. Does the proposed interpretation undermine the true-and-fair-view requirement?

7. Role of the Accounting Expert

Accounting disputes are particularly suitable for expert evidence.

An expert may be asked to determine:

• appropriate recognition treatment;
• valuation methodology;
• depreciation;
• impairment;
• provisions;
• revenue recognition;
• working capital;
• net debt;
• EBITDA;
• accounting errors;
• restatement effects;
• purchase-price adjustments;
• damages.

The expert should, however, distinguish between:

Accounting opinion and legal conclusion.

For example:

"Under NRV 9, this financial instrument should be classified in category X."

This is an accounting proposition.

But:

"The claimant therefore breached the contract."

That is ultimately a legal conclusion for the tribunal.

8. The Tribunal's Treatment of Expert Evidence

The tribunal is not necessarily bound by the conclusions of an accounting expert.

It may:

• accept the expert's methodology;
• reject it;
• adopt one party's methodology;
• construct its own calculation;
• appoint a tribunal expert where permitted;
• require additional accounting documentation.

The important limitation is that the tribunal must provide sufficient reasoning.

The Spanish courts have repeatedly emphasized that an annulment proceeding is not an appeal on the merits merely because one party disagrees with an arbitrator's assessment of evidence.

9. Six Important Spanish Case Laws

There is an important methodological qualification: Spanish reported jurisprudence specifically combining an arbitral award with a detailed application of individual PGC provisions is relatively limited. Accordingly, the following cases are best understood as a combination of (i) directly relevant arbitration/accounting cases and (ii) Spanish decisions establishing the legal principles governing accounting, corporate arbitration and judicial review of arbitral determinations.

Case 1 — STS 355/1998, 18 April 1998 — Sugem, S.A.

This is a foundational Spanish case on corporate arbitration.

The Supreme Court considered whether disputes concerning shareholder resolutions could be submitted to arbitration. It rejected the older restrictive approach and held, in principle, that disputes concerning the invalidity of shareholders' meetings and corporate resolutions were not automatically excluded from arbitration.

Importance for accounting disputes

This case is particularly important because corporate resolutions frequently concern:

• approval of annual accounts;
• distribution of profits;
• appointment of auditors;
• accounting policies;
• shareholder information rights.

Thus, the case provides the foundation for arbitrating disputes in which accounting issues arise within a broader corporate controversy.

Principle:

The fact that corporate law contains mandatory rules does not automatically make every dispute involving those rules non-arbitrable.

Case 2 — STC 231/1991, 10 December 1991

The Constitutional Court dealt with judicial proceedings arising from the execution of an arbitral award and a subsequent accounting/peritaje calculation.

The underlying dispute involved a liquidation performed by a court-appointed/directory expert following an arbitral award. The subsequent court decision attempted to alter the result based partly on alleged accounting errors.

The Constitutional Court emphasized the principle of intangibility of final judicial decisions, holding that a final determination could not be substantially altered through an inappropriate procedural route.

Importance for accounting arbitration

The case illustrates a broader proposition:

Accounting calculations performed in implementing an arbitral award cannot become an indirect mechanism for reopening the substance of the award.

If the award establishes the methodology, a subsequent accounting exercise should ordinarily implement that methodology rather than rewrite it.

Case 3 — TSJ País Vasco, Civil and Criminal Chamber, Judgment 9/2019, 9 December 2019

This is one of the most directly relevant cases.

The dispute involved an arbitral award concerning a company and, among other matters, approval of annual accounts.

The applicant argued that the arbitral tribunal had improperly evaluated evidence relating to the company's accounts and that this amounted to a violation of public policy.

The Basque High Court rejected the challenge.

It emphasized that the annulment proceeding could not be transformed into a judicial reconsideration of the merits simply because a party disagreed with the arbitrator's evaluation of evidence. The court found no irrational or arbitrary assessment of the evidence.

Importance

This establishes a crucial practical rule:

A party cannot ordinarily use an action for annulment to obtain a second accounting trial.

If the tribunal considered financial statements and expert evidence rationally, the court will generally not substitute its own accounting assessment.

Case 4 — TSJ País Vasco, Judgment 10/2019, 11 December 2019

This case is closely related to the preceding decision and concerned the approval and formulation of annual accounts.

The applicant argued that an arbitral award improperly affected the statutory functions of the company's governing bodies.

The court rejected the challenge, emphasizing that the award did not authorize an unlawful approval of accounts and that the specific circumstances did not establish a violation of public policy.

The court also distinguished between:

• procedural defects concerning company resolutions; and
• defects sufficiently serious to constitute a violation of public policy.

Importance

This distinction is critical for accounting arbitration.

Not every alleged accounting or corporate irregularity constitutes public policy under Spanish arbitration law.

Therefore:

Incorrect accounting ≠ automatically violation of public policy.

A party seeking annulment must establish one of the statutory grounds for annulment.

Case 5 — TSJ Madrid, Judgment 24/2023, 14 June 2023

This is highly relevant to accounting evidence and share valuation.

The applicant sought annulment of an award and argued that it had been deprived of essential evidence, particularly access to accounting information necessary for an expert valuation of the company's shares.

The case illustrates the procedural importance of accounting documents.

Where valuation of shares is central to an arbitration, financial information may be indispensable for the preparation of an expert report.

Importance

The case demonstrates that accounting evidence can become part of the right to present one's case.

A tribunal must therefore carefully consider whether refusal to disclose accounting information prevents a party from properly defending its position.

The relevant question is not simply:

"Was accounting information withheld?"

but rather:

"Was the withheld information genuinely material to the party's ability to present its case?"

Case 6 — STS 1089/2025, 9 July 2025

This is currently one of the most important Spanish Supreme Court decisions concerning the legal significance of accounting standards.

The dispute concerned challenge of annual accounts and the use of PGC valuation provisions.

The Supreme Court held that annual accounts can be challenged where they are not prepared in accordance with applicable legal and technical accounting criteria and consequently fail to reflect the company's true financial position.

Importantly, the Court explained that the PGC provisions are regulatory rather than statutory in rank, but that they can nevertheless be relevant where they develop specific statutory accounting obligations.

Why this matters for arbitration

This distinction is extremely important.

An arbitrator should not simply say:

"The PGC is a regulation, therefore it is irrelevant."

Nor should the tribunal necessarily treat every PGC provision as if it were an independent statute.

The correct approach is:

Commercial Code / statutory obligation → PGC development → contractual or accounting consequence.

This case therefore provides a powerful framework for determining the legal significance of PGC provisions in arbitration.

10. A Seventh Particularly Useful Authority — ICAC Accounting Consultation

Although not a judicial case, ICAC Consultation concerning a sale of shares where the final purchase price was subject to arbitration is directly relevant to the subject.

The consultation considered when the contingent portion of the consideration should be recognized where the final price depended upon an arbitral determination.

ICAC concluded that the relevant income accrued in the accounting period in which the arbitral court resolved the dispute, while significant uncertainty remained to be disclosed in the notes to the annual accounts until that uncertainty disappeared.

This is an excellent practical illustration of the interaction between:

arbitration → uncertainty → accounting recognition → disclosure.

11. Accounting for Pending Arbitration Claims

One of the most difficult issues is whether a company should recognize an asset or liability while arbitration is pending.

Suppose a Spanish company has a €50 million arbitration claim.

The claimant may argue:

"We are likely to win €50 million, so the company should recognize a €50 million receivable."

That conclusion does not automatically follow.

The accounting treatment depends upon the applicable recognition criteria and the degree of certainty.

The ICAC consultation concerning an arbitral price adjustment demonstrates the importance of the resolution of the arbitration in determining when the relevant economic benefit becomes sufficiently certain for recognition.

12. Provisions and Contingent Liabilities

The reverse problem occurs with a defendant.

Suppose a company faces:

€100 million arbitration claim.

The claimant may say:

"The company must provision €100 million."

But the existence of litigation or arbitration alone does not necessarily mean that the entire amount should be recognized as a provision.

The tribunal and accounting expert must distinguish between:

• provision;
• contingent liability;
• possible obligation;
• present obligation;
• probability of loss;
• reliably measurable amount.

This becomes especially important when preparing Spanish annual accounts.

13. Revenue Recognition and Arbitration

Revenue recognition is another significant area.

The PGC has been supplemented by mandatory ICAC rules concerning recognition of revenue from the delivery of goods and provision of services. The 2021 ICAC Resolution expressly develops the PGC's recognition principles for revenue.

In arbitration, this becomes important where the dispute concerns:

• milestone payments;
• performance obligations;
• long-term contracts;
• construction contracts;
• termination payments;
• bonuses;
• variable consideration.

For example, a contractor may claim:

"€20 million should have been recognized as revenue in 2025."

The employer may respond:

"The contractual milestone was not achieved until 2026."

The tribunal may therefore need to distinguish contractual entitlement from accounting recognition.

14. Impairment and Valuation

Spanish accounting disputes frequently involve impairment.

An asset may appear in the books at:

€30 million.

But one party argues its recoverable amount is only:

€18 million.

The accounting issue may affect:

• net assets;
• shareholder value;
• purchase price;
• earn-out;
• damages;
• solvency analysis.

An arbitrator should therefore determine whether the valuation is being used:

1. to comply with PGC;
2. to determine contractual value; or
3. to establish economic damages.

Those are not necessarily the same exercise.

15. Accounting Errors and Restatements

The PGC contains specific treatment for:

• accounting errors;
• changes in accounting estimates;
• changes in accounting criteria.

This becomes important in arbitration where one party discovers that historical accounts contained an error.

For example:

Original EBITDA: €15 million
Corrected EBITDA: €11 million

If a purchase agreement uses EBITDA as a pricing metric, the correction could generate a substantial purchase-price dispute.

The tribunal must determine whether the parties intended:

• historical reported EBITDA;
• corrected EBITDA;
• EBITDA calculated according to PGC;
• EBITDA calculated according to a contractual definition.

16. PGC Versus IFRS

A major issue in international arbitration is determining which accounting framework applies.

A Spanish company might prepare:

• individual accounts under Spanish PGC; but
• consolidated listed-group accounts under applicable EU-adopted IFRS.

Therefore, an arbitration agreement or contract should not simply state:

"Spanish accounting standards."

It should specify whether it means:

• Spanish PGC;
• PGC-PYMES;
• sector-specific PGC;
• EU-adopted IFRS;
• Spanish GAAP as amended from time to time;
• accounting standards applicable on a specified date.

This is particularly important for cross-border M&A arbitration.

17. Accounting Date Is Crucial

The applicable accounting rules can depend upon the relevant date.

For example:

Contract signed: 2020
Closing: 2021
Dispute: 2024
Arbitration award: 2026

The tribunal should ask:

Which accounting rules govern?

Possibilities include:

• rules at signing;
• rules at closing;
• rules applicable to the financial year;
• rules specified by the contract;
• rules in force when the accounts were prepared.

The answer should come from the contractual language and applicable Spanish law rather than being assumed.

18. Consistency Principle in Arbitration

Accounting calculations often fail because parties change methodology after the dispute arises.

For example:

Before dispute

Company calculates EBITDA:

€25 million.

During arbitration

Claimant recalculates EBITDA:

€31 million.

Respondent's calculation

€18 million.

The tribunal should examine whether the methodology is:

• consistent;
• objectively justified;
• supported by accounting standards;
• consistent with historical practice;
• consistent with the contract.

Consistency can be especially important in earn-out and purchase-price disputes.

19. Contractual Accounting Definitions Override Generic Accounting Terminology — Subject to Mandatory Law

Suppose a contract defines EBITDA as:

Net profit + interest + taxes + depreciation + amortization + extraordinary expenses.

That contractual definition may differ from conventional accounting usage.

The tribunal's task is therefore not simply:

"What does EBITDA normally mean?"

It is:

"What did the parties agree EBITDA would mean?"

However, where the contractual methodology purports to require preparation of statutory annual accounts, mandatory Spanish accounting requirements may remain relevant.

This produces a useful hierarchy:

Contract → applicable accounting framework → mandatory Spanish law → interpretation by tribunal.

20. Public Policy and Spanish Accounting Rules

A difficult question is whether violation of accounting standards automatically constitutes public policy for purposes of annulment.

The answer should generally be no.

The TSJ País Vasco decisions of 2019 illustrate that courts distinguish between ordinary disagreement concerning:

• evidence;
• accounts;
• corporate procedure;
• accounting consequences;

and a genuine violation of Spanish public policy.

Therefore, an unsuccessful party cannot ordinarily convert an accounting disagreement into an annulment action simply by labeling the tribunal's conclusion "public policy."

21. Judicial Review of Accounting Findings

Spanish courts generally do not function as appellate accounting tribunals in annulment proceedings.

The distinction is:

Tribunal's task

Determine:

• facts;
• accounting evidence;
• expert evidence;
• contractual interpretation;
• applicable accounting standards.

Court's task in annulment proceedings

Determine whether a statutory ground for annulment exists.

It is therefore generally insufficient to demonstrate:

"The arbitrator selected the wrong accounting expert."

The applicant must demonstrate a legally recognized ground for annulment, such as:

• invalid arbitration agreement;
• lack of proper notice;
• inability to present the case;
• excess of jurisdiction;
• procedural irregularity;
• award contrary to public policy.

The 2019 Basque cases are particularly useful in this respect.

22. Disclosure of Accounting Records

Accounting arbitration frequently requires extensive disclosure.

Relevant documents may include:

• general ledger;
• trial balance;
• journal entries;
• invoices;
• bank statements;
• management accounts;
• audited financial statements;
• tax records;
• consolidation schedules;
• impairment calculations;
• working-capital schedules;
• debt schedules;
• related-party ledgers.

Where valuation of shares is involved, the TSJ Madrid 2023 decision demonstrates the potential importance of access to accounting information for expert valuation evidence.

23. Tribunal-Appointed Expert

A tribunal may benefit from an independent accounting expert where:

• both party experts use incompatible methodologies;
• complex financial instruments are involved;
• there are multiple accounting standards;
• historical restatements are required;
• the calculation of damages is highly technical.

The tribunal should nevertheless retain ultimate responsibility for the legal determination.

24. Accounting Standards in Construction Arbitration

The issue is not limited to corporate disputes.

In Spanish construction arbitration, accounting standards can affect:

• percentage of completion;
• contract revenue;
• provisions;
• loss-making contracts;
• retention amounts;
• variation orders;
• claims;
• liquidated damages;
• impairment of receivables.

For example, whether a contractor may recognize revenue from a disputed variation order is both:

a contractual question and potentially an accounting question.

The tribunal should avoid confusing the two.

25. Accounting Standards and Damages

A damages expert may use accounting records to calculate:

Lost profits

Lost Profit=Expected Profit−Actual Profit

EBITDA loss

EBITDA Loss=But For EBITDA−Actual EBITDA

Working-capital adjustment

Adjustment=Contractual Working Capital−Actual Working Capital

The accounting standard determines how the underlying financial data is constructed, while the contract and applicable law determine whether the resulting amount is legally recoverable.

26. Practical Analytical Framework for Arbitrators

An arbitrator dealing with Spanish accounting standards should proceed in approximately this sequence:

Step 1 — Identify the dispute

Is it:

• accounts;
• valuation;
• purchase price;
• earn-out;
• damages;
• revenue;
• debt;
• provisions?

Step 2 — Identify the contractual definition

Determine exactly what the parties agreed.

Step 3 — Identify the accounting framework

Determine whether the contract incorporates:

• PGC;
• PGC-PYMES;
• IFRS;
• sector-specific standards;
• another GAAP.

Step 4 — Determine the relevant accounting date

Identify the rules applicable at the relevant date.

Step 5 — Examine mandatory law

Determine whether Spanish commercial law imposes requirements that cannot be contracted away.

Step 6 — Examine accounting evidence

Review:

• ledgers;
• accounts;
• audit reports;
• expert reports;
• supporting documents.

Step 7 — Separate accounting from legal questions

The accountant determines the accounting treatment; the tribunal determines the legal consequence.

Step 8 — Apply the contractual consequences

Translate the accounting result into:

• price;
• damages;
• liability;
• payment;
• declaration.

Step 9 — Give reasoned findings

The award should explain:

• applicable standard;
• competing methodologies;
• evidence accepted;
• calculation;
• contractual consequence.

27. Model Example

Assume a Spanish company is sold for:

€80 million + earn-out.

The earn-out is:

20% of EBITDA exceeding €10 million.

The parties dispute whether €4 million of restructuring costs should be deducted.

Buyer's position

EBITDA = €8 million.

No earn-out.

Seller's position

EBITDA = €12 million.

Earn-out =

20%×(€12m−€10m)=€400,000

The tribunal must examine:

1. contractual EBITDA definition;
2. PGC treatment of the expenditure;
3. whether the restructuring costs are operating expenses;
4. whether the contract expressly excludes them;
5. historical accounting practice;
6. consistency of treatment;
7. expert evidence.

The answer is not necessarily determined by the PGC alone.

The contract may intentionally create an EBITDA measure different from statutory accounting EBITDA.

28. Key Lessons from the Case Law

The six principal cases collectively establish several important propositions:

The most significant modern development is the STS 1089/2025, because it clarifies that PGC rules can have legal significance when they develop statutory accounting requirements, even though the PGC itself has regulatory rather than statutory rank.

29. Conclusion

Spanish accounting standards and arbitration intersect most significantly where the dispute involves financial measurement.

The PGC is not simply an accounting manual. It forms part of Spain's regulated accounting system and provides mandatory recognition and valuation rules for many transactions.

Nevertheless, the tribunal must carefully distinguish:

Accounting compliance

from

contractual calculation

and from

legal liability.

The most defensible approach is therefore:

First identify the contractual accounting rule; second identify the applicable Spanish accounting framework; third determine whether mandatory commercial law applies; fourth evaluate expert and documentary evidence; and finally translate the accounting result into the legal remedy required by the arbitration agreement.

The jurisprudence also shows that Spanish courts are reluctant to turn annulment proceedings into an appellate review of an arbitrator's accounting assessment. At the same time, the Supreme Court's 2025 decision confirms that accounting standards can have genuine legal significance when the correctness of annual accounts and the imagen fiel principle are at issue.