According to Portuguese law,(1) arbitration cannot apply to disputes concerning non-disposable rights, and any arbitration agreement to that effect is invalid. Nonetheless, the Lisbon Court of Appeal recently held that in such cases the invalidity of an arbitration agreement relates only to those rights which are absolutely non-disposable, not to those which are relatively non-disposable, such as rights that involve an economic interest - these are arbitrable.(2)
The plaintiff brought proceedings against the defendants, seeking indemnity for damages and commission arising out of an agency contract. The defendants objected, claiming that an arbitration clause had been breached. The court found this to be true and dismissed the proceedings against all defendants.
The plaintiff appealed, stating that the arbitration agreement was invalid. The plaintiff maintained that not all disputes can be resolved by arbitration, as the law states that disputes concerning non-disposable rights are not arbitrable. In this case, one of the claims in the plaintiff's petition referred to indemnity for damages arising out of the termination of an agency contract, which it regarded as a non-disposable (and therefore non-arbitrable) right. It was argued that, as a result, the arbitration agreement should be deemed invalid and unenforceable.
The Lisbon Court of Appeal confirmed the first instance decision, stating that only rights which are absolutely non-disposable result in the arbitral convention being null and void. As a result, disputes are non-arbitrable only where the parties have no freedom whatsoever to establish or dispose of their rights.
The appellate court correctly observed that the concept of non-disposable rights must be determined on a case-by-case basis.(3) In this case, the right to be indemnified for damages caused by the termination of the agency contract was a right with an economic interest. This made it a disposable right, which could therefore be submitted to arbitration.(4)
The Lisbon Court of Appeal decision is well reasoned and entirely accurate. As in many other jurisdictions,(5) arbitration cannot apply to disputes concerning non-disposable rights. Nevertheless, as was correctly noted, the legislative project for a new Arbitration Law, which is being debated in Parliament, establishes a different criterion for arbitrability: disputes are arbitrable if they are related to economic interests.(6)
The question of the best criterion for determining arbitrability opens up a further issue for discussion; however, on the basis of existing law the appellate court's interpretation on non-disposable rights was correct.
For further information on this topic please contact José Miguel Júdice or António Pinto Monteiro at PLMJ - AM Pereira, Saragga Leal, Oliveira Martins, Judice e Associados - Sociedade De Advogados, RL by telephone (+351 21 319 7300), fax (+351 21 319 7400) or email ([email protected] or [email protected]).
(1) Law on Voluntary Arbitration, Article 1(1).
(2) Lisbon Court of Appeal decision of January 11 2011, Case 3539/08.6TVLSB.L1-7, (Judge Abrantes Geraldes).
(3) This view is consistent with academic opinion on the matter. See, for example, Carlos Ferreira de Almeida, "Convenção de arbitragem: conteúdo e efeitos" in I Congresso do Centro de Arbitragem da Câmara de Comércio e Indústria Portuguesa, Almedina, Coimbra, 2008, page 86; and Paula Costa e Silva, "Anulação e Recursos da Decisão Arbitral" in Revista da Ordem dos Advogados, 52, vol III, December 1992, page 922.
(4) See Manuel Pereira Barrocas, "Manual de Arbitragem", Almedina, Coimbra, 2010, pages 217 and 219. Regarding the arbitrability criteria and the concept of non-disposable rights, see also Luís de Lima Pinheiro, "Arbitragem Transnacional - a Determinação do Estatuto da Arbitragem", Almedina, Coimbra, 2005, pages 103 to 119, and Antonío Sampaio Caramelo, "A disponibilidade do direito como critério de arbitrabilidade do litígio", in Revista da Ordem dos Advogados, 66, II, December 2006.
(5) See, for example, Spanish, Italian and Dutch arbitration law.
(6) This criterion applies in some other countries, such as Germany and Switzerland.