Spain's Supreme Court rules that assignment of claims does not determine insolvency ranking

The Spanish Supreme Court, in its ruling 22/2026, has addressed a frequently contested question in Spanish insolvency law: whether the subordination of a claim based on the creditor being a related party should be determined at the time the claim originates or at the time it is later acquired by assignment.

The court considered a situation that frequently arises in practice. A claim initially granted by an unrelated third party is subsequently assigned to an entity that qualifies as a related party to the debtor. The question is whether that subsequent relationship alters the classification of the claim in insolvency.

The Spanish Supreme Court’s answer is clear: it does not.

The background

The facts follow a straightforward timeline. A financial institution with no special relationship with the debtor created mortgage-backed claims in September 2007. No related party relationship exists between the future assignee and the debtor. In November 2017, those claims were assigned to a company that is a related party to the debtor. When the debtor was declared insolvent in July 2019, the question arose arises whether the claims should be classified as subordinated.

The insolvency receiver and the Murcia Court of Appeal considered the time of assignment to be relevant. The Spanish Supreme Court disagreed and overturned this approach.

The decisive criterion

The court's ruling is grounded in the literal wording of the Spanish insolvency law, which requires the analysis to be carried out at the time “the claim arises”.

This element is decisive. The Spanish Supreme Court is explicit: it is at this moment" that one must assess whether a related party relationship exists. An assignment does not give rise to a new claim; the assignee merely steps into the shoes of the assignor. Accordingly, the relevant factor for classification purposes is the relationship existing at the time the obligation was incurred by the debtor, not when the creditor subsequently changed.

The rule aims to capture situations in which the claim is granted in circumstances of proximity between creditor and debtor that may compromise the creditor’s neutrality. Where proximity did not exist at the outset, the rationale for subordination falls away. This is consistent with the underlying purpose of the subordination regime.

The ruling emphasises a key point: the assignment does not alter the nature of the claim. In practical terms no new claim is created; there is no novation; and the claim retains its identity, terms and security.

Following the assignment, the debtor remains bound on the same terms, only the identity of the creditor changes. Accordingly, the assignment cannot serve as the reference point for the purposes of subordination.

Purpose of subordination

The Spanish Supreme Court sets out a particularly helpful clarification on the function of subordination based on related party status. It highlights that this concept rests on a presumption of detriment to the insolvency estate when the claim is granted in a related-party context.

By contrast, where the claim is granted on arm's length market terms and in the absence of special relationship between creditor and debtor, there is no such risk justifying subordination. Extending subordination to subsequent assignments would imply applying the rule beyond its intended purpose.

Assignments following the declaration of insolvency

Spanish insolvency law contains a specific rule for assignments made after the declaration of insolvency: where the assignee is a person specially related to the debtor, the acquired claim is to be classified as subordinated.

The rationale is to prevent related persons from acquiring claims once insolvency has been declared in order to influence the proceedings.

The Spanish Supreme Court makes clear that this rule cannot be extended to assignments made prior to the declaration of insolvency. In particular, it would contradict the general rule, which focuses on the time the claim arises. Pre-insolvency assignments lack the element that justifies the rule – namely, the suspicion of opportunistic acquisition once insolvency proceedings have commenced). The  rule that restricts rights and, as such, must be interpreted strictly.

Where the assignment took place prior to the commencement of insolvency proceedings, the only relevant consideration is whether a special relationship existed at the time the claim arose, not at the time it changed hands.

Practical implications

The ruling has direct implications for the debt market and financing transactions. It provides certainty in number of common scenarios.

In intragroup credit acquisitions, a subsidiary or related company acquiring debt prior to the commencement of insolvency proceedings will not have its claim reclassified as subordinated merely by reason of the special relationship, provided the claim was originally granted on an arm's length basis.

In distressed debt transactions, funds or investment vehicles acquiring loan portfolios in financial distressed situations gain certainty as to the insolvency ranking of those claims. In internal debt reorganisations, intra-group restructurings involving assignments between related parties can be structured with greater legal certainty.

The principle is clear: a pre-insolvency assignment does not, in itself, trigger subordination.

Osborne Clarke comment

The ruling reinforces a principle of stability: the insolvency ranking of a claim is determined by reference to its origin. A subsequent connection arising from an assignment does not in itself justify subordination.

For the market, the message is clear. The acquisition of claims prior to the commencement of insolvency proceedings, even by related parties, does not lead to automatic subordination. This enhances predictability and strengthens legal certainty in the context of debt financing and secondary debt transactions.

If you have ongoing transactions that may be affected by this development, our team would be pleased to assist in assessing the potential impact on your debt portfolio or your financing structures.