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Alternatives to litigation

i Overview of alternatives to litigation

The greatest flaw of the Portuguese legal system is the length of time that proceedings take. According to the latest data from the Portuguese National Institute of Statistics, the average duration of a civil action at trial is 11 months (which represents a positive development compared to past statistics). Civil appeals take approximately four to six months.

In light of the foregoing, both the wider civil society and the government have been encouraging the promotion of ADR, namely, arbitration, mediation, conciliation and resolution by justices of the peace. In 2001, the government created the Cabinet for Alternative Dispute Resolution, a department of the Ministry of Justice exclusively dedicated to ADR.

ii Arbitration

In recent years, arbitration has been flourishing in Portugal. Parties have progressively added arbitral clauses to contracts, and there is a general sense that Portugal may become a privileged forum for arbitrations between companies based in Portuguese-speaking countries such as Brazil, Angola and Mozambique.

On 15 March 2012, a new Law on Arbitration entered into force,10 replacing the former Portuguese Arbitration Law.11

The Arbitration Law is rather innovative, drawing inspiration from the 2006 version of the UNCITRAL Model Law, and introduces provisions intended to grant more flexibility with regard to the formal validity of an arbitration agreement, making it simpler to comply with the written form requirement.

It is now legitimate to state that the Law has increased flexibility in Portuguese arbitration and facilitated the increasing number of arbitral clauses included in contracts.

Among its most important innovations, the Arbitration Law:

  1. contains a major change in the analysis of arbitrability;
  2. expressly sets out that independence and impartiality are not only required for the appointment of arbitrators, but that arbitrators must comply with those requirements throughout proceedings;
  3. regulates the most important aspects of the application of interim measures, closely following the Model Law;
  4. includes the regulation of multiparty arbitration and third-party intervention; and
  5. provides that an award will not be subject to appeal, unless otherwise expressly established by the parties in the arbitration agreement (without prejudice to the applicable procedures to set aside the award, which cannot be waived in advance).

The leading Portuguese arbitral centre is the Arbitration Centre of the Portuguese Commercial Association. Law No. 74/2013 of 3 September created the Sports Arbitration Court, which became operative in October 2015.

As regards foreign arbitration, Portugal is party to the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards; however – and although Portuguese jurisprudence is arbitration-friendly, narrowly interpreting the grounds for refusal of recognition or enforcement of foreign arbitral awards – an interested party may also appeal against a decision of the first instance court that recognises or declares a foreign arbitral award enforceable before the Supreme Court, provided that the aforementioned requirements as to the value of the action are met. Thus, parties should always seek adequate guarantees to secure fulfilment of the contracts they enter into, or to secure compensation for the breach of such contracts.

Tax arbitration is becoming increasingly common and some decisions have already been handed down.

In addition, consumer arbitration has increased following the transposition of Directive 2013/11/EU (Law 144/2015 of 8 September).

iii Mediation

Law 29/2013 of 19 April establishes general principles applicable to mediation in Portugal, as well as measures regarding civil and commercial mediation, mediators and public mediation regimes. The Law filled a lacuna where there was previously no specific law or act governing mediation and conciliation.

The Law has introduced important provisions establishing that any dispute regarding property issues or any rights that may be the subject of transactions by parties may be submitted to mediation.

Another important provision establishes that private mediation settlement agreements are, under specific circumstances, enforceable directly, without the need to obtain from a court or the obligation to execute extrajudicial settlements in mediation centres supervised by the Ministry of Homologation Justice.

The specific circumstances are as follows:

  1. the settlement's object must be able to be mediated and not subject to a mandatory court decision;
  2. parties must have capacity to execute the settlement;
  3. the settlement must have been reached through mediation and according to law;
  4. the content of the settlement must not violate Portuguese public policy; and
  5. the settlement must be reached with the intervention of a mediator included on the Ministry of Justice's public list of mediators.

The Mediation Law also includes provisions on the training, duties and rights of mediators, as well as the rules applicable to public mediation frameworks.

Despite the Mediation Law, in Portugal, mediation and conciliation settlement agreements are traditionally negotiated between the parties' attorneys, in the majority of cases, during pending lawsuits. Parties are usually very reluctant to use mediation and conciliation. Most public mediation claims settled were related to family matters.

iv Other forms of alternative dispute resolution

Besides arbitration, mediation and conciliation, the most popular form of ADR is conducted by a justice of the peace, as governed by Law No. 78/2001 of 13 July 2001 (as amended by Law 54/2013 of 31 July, which broadened the scope and jurisdiction of justices of the peace), and numerous centres have been created under the supervision of a special commission. Justices of the peace are only available to settle disputes between individuals, and they have jurisdiction on civil matters concerning small claims (up to €15,000). Under the new legal framework on justices of the peace, legal persons may now resort to mediation (except in class actions), and preliminary injunctions are now available.

Between 2005 and 2019, approximately 116,450 claims were heard (with a success rate in 2019 of 105 per cent). Justices of the peace must have a law degree, but need have no further legal education.

The Portuguese Supreme Court has held that the jurisdiction of justices of the peace is concurrent with that of the courts.12 While justices of the peace are proving useful in simple disputes, a strong suspicion still remains about the quality of their decisions on the merits of the cases concerned.