When lending and taking security in Spain, Direct Lending Funds do normally the Facility Agreement to be governed by the laws of England and Wales (normally the LMA agreements will be used as a starting point for negotiations). Security documents, on their side, are usually governed by the laws of the country where the security itself is located. In the case of Spain, Spanish laws are mandatory for security over real estate property pursuant to section 10.1 of the Spanish Civil Code.  

In practice, there is no suggestion that Brexit should cause parties to reconsider their choice of English law as regards the facility agreement. Under REGULATION (EC) No 593/2008 on the law applicable to contractual obligations (Rome I), the courts of each member state are required to give effect to the parties’ choice of law, regardless of whether that law is the law of an EU member state.  

Thereupon, where such parties have chosen English law to govern the facility agreement, notwithstanding Brexit, the Spanish courts – and those of any other EU member states except for Denmark – should respect such decision.   

English law, if selected by the parties, should therefore continue to be upheld following Brexit. The LMA has yet indicated that it has no current intention to adjust the governing law clauses in light of Brexit.