Speed of arbitration: arbitration is a faster form of dispute resolution compared to litigation in Portugal. It is therefore recommended to use arbitration for dispute resolution in the case of commercial disputes.
Limited judicial intervention: unless the parties have expressly agreed that the arbitration award may be subject to appeal on the merits of the case, as well as on procedural arbitration matters, the intervention of the Portuguese courts in respect of arbitration proceedings is strictly.
Support of courts: courts may provide support for arbitration by way of injunctive relief, where there is a need for the urgent production of evidence and in respect of the recognition and enforcement of foreign and domestic awards.
Location and neutrality: Portugal is well positioned as a centre for international arbitration, particularly in respect of disputes involving Portuguese and Spanish-speaking parties. Full neutrality is ensured.
Arbitration law: Portugal has a modern and comprehensive new arbitration law, which was enacted recently in March 2012 (Law No. 63/2011, dated 14 December 2011) (the ‘2011 Law’). In addition, the Portuguese courts are generally favourable to arbitration. Portugal is a signatory to the New York Convention and has a number of arbitrators and counsel with a great deal of experience in domestic and international arbitration.
The new Law entered into force on 14 March 2012 and is based on the UNCITRAL Model Law (the ‘Model Law’). With regard to aspects of the law not directly covered by the Model Law, the 2011 Law contains provisions which are very friendly to arbitration, and which provide some of the most modern solutions to arbitration issues.
The principal sources of arbitration law in Portugal are the 2011 Law, the New York Convention, the Model Law, the ICSID Convention, 42 bilateral investment treaties and 10 international treaties or agreements on conciliation, judicial settlement and arbitration entered into between Portugal and other countries.
Only the courts may, in very limited cases, set aside an arbitration award, unless the parties have expressly agreed to allow for the appeal of the award on substantive and procedural issues.
Parties have complete freedom to choose arbitrators. There are no restrictions on the parties’ ability to choose arbitrators on the basis of their qualifications or the number of arbitrators or on other grounds.
Arbitrators are subject to disclosure requirements regarding their impartiality and independence.
A party cannot challenge an arbitrator that it appointed on the basis of something it already knew before the nomination.
If the arbitrator does not withdraw from the arbitration, after having been challenged, the arbitral tribunal shall decide on the matter with the participation of the challenged arbitrator.
Arbitrators are not liable for acts related to the elaboration and adjudication of the award’s contents, that is, their decision about how they have judged the dispute, which falls under the same exclusion of liability as the judges.
However, arbitrators may be found liable for breach of the agreement entered into with the parties to form the tribunal which they are deemed to have entered into upon acceptance of their appointment as arbitrator (which could include liability for breach of express or implied duties to render the award within the statutory or contractual time limit, to be impartial and independent, absence of corruption, duties of confidentiality, etc).
Arbitrators are bound to keep the arbitration proceedings and the award confidential, unless the parties waive this obligation. This is an essential component of arbitration.
Also the parties are bound by a duty of confidentiality (Article 30(5) of the 2011 Law) regarding all information and documents they have obtained during the arbitration proceedings. However, the parties are entitled to make public any part of the proceedings to the extent necessary to protect/defend their rights, and also where they are bound by a mandatory duty to disclose them to the authorities.
Any party may apply to a court to order the counter-party to disclose a confidential document (notwithstanding that the parties may have agreed duties of confidentiality). The party from whom disclosure is sought is entitled to oppose it based on the confidentiality of the document. The court will decide the issue, taking into consideration both the interests of the applicant, the position of the party owning the document and the nature and contents of the document (Article 575 of the Civil Code). In such case the court shall attempt to deal with the application in a confidential manner as far as possible.
There are no grounds on which national courts will stay arbitral proceedings in particular, the courts are not permitted to grant anti-suit arbitration injunctions in order to respect the principle of competence-competence.
There is no presumption of arbitrability or policy in support of arbitration. Under Portuguese law the following matters are in general terms defined as being arbitrable:
- any disputes which are not required to be settled exclusively by mandatory arbitration or under the state court jurisdiction by reason of any special law; and
(ii) the issue under dispute concerns alienable assets or rights or it is a dispute on which a settlement agreement is legally allowed.
The procedure of an arbitration and/or the conduct of an arbitration hearing are matters to be agreed upon by the parties in the first instance and/or as provided for in the rules of the relevant institution where applicable. If no agreement exists or no institutional rules apply regarding the procedure to be followed the arbitrators themselves can decide this.
The arbitrators must adjudicate the award within 12 months of the date that the last arbitrator accepted his or her appointment. This deadline may be freely extended by the parties or by the tribunal one or more times. The tribunal must justify any extension of the initial term sought, and any party is entitled to challenge this.
The arbitrators may be liable for damages if they do not render the award within the relevant deadline without justification.
The parties may agree the rules on disclosure.
Cross-examination is used, reflecting the principles of the right to be heard and the equality principle.
Arbitrators are fully empowered to require the parties to cooperate in the production of evidence, especially documentary evidence.
If a party refuses to cooperate, the arbitrators may take this into consideration in their deliberations. There is no statutory rule, but it is generally accepted as a common practice.
A party may also request that the court grant a preliminary order which is similar to (and based on) the Model Law provisions. The preliminary order and the subsequent injunction may relate to the production of documentary evidence or any other injunctive relief.
The 2011 Law provides, following the UNCITRAL Model Law, for the possibility of Portuguese courts to grant injunctive relief in support of an arbitration seated outside Portugal.
The arbitrators have the power to fashion appropriate remedies, for instance, specific performance, injunctions, interest and costs, etc, if the parties have not agreed otherwise and the applicable substantive law allows such remedies in general.
Punitive and exemplary damages are unknown in Portuguese law.
The tribunal must decide on the issue of costs and issue any adverse costs award against the party or parties who are held liable to pay them. If the tribunal considers that it is fair and reasonable, it may order the unsuccessful party to compensate the successful party for the full or partial costs which were reasonably incurred by it during the arbitration.
If the tribunal concludes that it is fair and reasonable, the costs of corporate counsel, external counsels and business executives (which can include amounts charged in respect of their time and costs), may be included in the costs award described in the second paragraph of section 3.5.4 above.
There are no specific rules about the payment of taxes, including VAT, and so general tax legislation applies to the arbitrators.
The severability of arbitration clauses is a fundamental principle of modern arbitration. Under Portuguese law an arbitration clause is considered to be autonomous and independent of the rest of the contract; accordingly, the arbitration clause will remain valid even if the rest of the contract in which it is included is determined to be invalid.
Competence-competence is another fundamental principle recognised in Portuguese arbitration law.
Portuguese state courts are not permitted to grant anti-suit injunctions or to prevent or interfere with the arbitration procedure and may only do so at the end of the arbitration procedure through an action to set aside the award or an appeal (if the parties have agreed that the award can be appealed).
Although anti-suit injunctions are valid in some Common Law jurisdictions, they are not accepted in Portugal. The European Court of Justice has also, recently, decided unfavourably regarding anti-suit injunctions. However, some commentators have sustained a different position based on the Recast Regulation no. 2015/2012 which replaced the Regulation no. 44/2001.
Portuguese arbitration law only allows third parties to participate in a pre-existing arbitration if the original parties to the arbitration and the tribunal allow it and provided that the third party consents to the pre-existing arbitration agreement.
The parties are free to agree on the substantive applicable law. If they fail to do so, the arbitrators in international arbitration may determine the applicable law and, in such cases, may apply the law they consider most appropriate.
There are some limited mandatory international private law rules which must be applied by the arbitrators in Portugal irrespective of any conflict of law rules. They are called normas de aplicação imediata (lois de police). The judgment adjudicated by the Court of Justice of the European Union in the case Unamar raised questions about the lois de police applicability vis-à-vis article 9 of the Rome I Regulation.
State courts do not have the power to prevent or limit the tribunals’ power to grant interim relief.
It should be noted that the arbitrators’ powers as regards to injunctive relief are limited in the sense that the tribunal is entitled to award interim relief, but it is not empowered to enforce it. Only the state courts are empowered to enforce such interim measures.
Courts may only interfere to set aside an award in very limited circumstances which relate mainly to procedural matters, such as the violation of the equality of the parties principle and the principle of contradictory proceedings. The only ground for the court to set aside an award based on substantive law in respect of public policy (ordre public).
Defining public policy has proved particularly difficult. The 2011 Law provides that in domestic arbitrations, an award may only be set aside if it is contrary to Portuguese international public policy principles.
For international awards, there is an apparent still more limited application of Portuguese international public policy principles in respect of which the courts may only refuse recognition of an international award if the award manifestly breaches such principles.
Portuguese international public policy principles are those principles which the Portuguese state may not derogate from by way of any legislation, because such principles are intrinsic to the Portuguese culture and are fundamental to and characteristic of the Portuguese legal system.
The parties are allowed to exclude the right of appeal.
However, in principle, the parties cannot exclude the right to apply to a state court to set aside an award.
The state court is not entitled, under any circumstances, to review the merits of the award or reconsider any further question decided upon by the arbitration tribunal in a set aside the award action. It may, however, review the merits with regards to public policy issues but only to determine whether such public policy laws were violated. Review the merits is naturally allowed in case of an appeal.
Portugal has ratified the New York Convention.
A reservation was made in order to accept to recognise and enforce an award if it has been given in a member state.
In the case of domestic awards, a successful party wishing to enforce an award must file an application to enforce the award at the state court (first instance) of the district (comarca) in which the seat of arbitration is located.
If such application is successful, the award will have the same effect as a judgment of a state court at first instance.
Enforcement of a foreign award must be preceded by its recognition in a Tribunal da Relação (a second instance state court).
The grounds on which recognition of a foreign award may be refused are essentially the same as those provided for in Article V of the New York Convention and the Model Law.
After recognition is obtained (exequatur), the applicant must file an action for enforcement. Enforcement may take between six months and one year or more depending on the extent to which the unsuccessful party seeks to oppose the enforcement proceedings.
It is of importance to say that immediately after the action for enforcement is commenced, an execution officer (solicitador de execução) will attach the debtor’s assets without notice.
The same applies to the enforcement of a foreign award.
Finally, Portuguese courts are obliged to support any arbitral tribunal located outside of Portugal as to adjudication of interim relief or collection of evidence in the Portuguese territory.