I assume that the loan was made properly at the Notary in Spain.
Under Spanish law, the grantor can request the refund of the moneys paid, the interests and also a compensation for damages. Consequently, the first option would be to go to court in Spain, have a ruling against him, and then to execute the ruling abroad. The main disadvantage is that the notification would be done abroad and this implies an additional delay. However, if this friend had property in Spain, it could be worth starting legal action here.
If the problem is that the ex friend does not have any assets in Spain as all his money and assets is surely in the UK, then it would be worth thinking about taking civil action in the UK, at the UK courts, supporting your claim on Spanish law. This option will involve the official translation of all the documents concerning the loan and probably getting a report done by an expert in Spanish law, who would cooperate with your UK based lawyers.
However, be advised that the loan document might contain a clause stating the exclusive jurisdiction of the Spanish Courts for all issues which arise from the loan contract. If this is so, the friend could possibly defend himself by claiming that the competent courts are the Spanish courts. In other words, if such clause exists, your claim in the UK would probably be dismissed.
My advise would be to check first what the loan contract says about jurisdiction and then contact a UK lawyer in order to explain the case to him, underlining the jurisdiction clause.
As to the auction issue, I would suggest appearing at court URGENTLY and fighting the decision on the basis that you have not been notified properly. Have you checked with an Spanish lawyer or just with the bank?
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