Judgment of the Supreme Court of Justice of April 21, 2016

Swap Contrats – Agreement conferring exclusive jurisdiction

In this judgment, the Applicant asked to the Portuguese Courts to declare the invalidity of two Swap contrats, notwithstanding the fact that a previous agreement conferring exclusive jurisdiction to the English Courts had been concluded between the parties . For this purpose, the Applicant alleged that the Defendant’s domicile was in Portugal, that the referred contrats were concluded in Portugal and that the fulfillment of the corresponding obligations was to occur in Portugal, which constituted a purely in ternal legal situation. Furthermore, the applicant and also claimed that the agreement conferring exclusive  jurisdiction to the English Courts was invalid in face of the title clauses legal regime established by the Decree-Law n.º 446/85, of October 25.

However, the Supreme Court ruled to be incompetent to decide on this matter, due to the existence of an agreement previously concluded between the parties that conferred exclusive jurisdiction to the Courts of a foreign country, and argued that in order for the said agreement to be valid it is only necessary, considering the established in the Council Regulation (EC) n. º 44/2001 and in name of contractual freedom, that one of the parties is domiciled in a Member State, that the Court the parties choose as c ompetent is located in the Member State where exists the mere possibility of the fulfillment of the contractual obligations, and that the celebrated contrats are involved in a chain of international financial interests.

Bearing this in mind, the swap contrats concluded between the parties are intrinsically characterized as adjustments of international nature, were drafted in English using Anglo - Saxon terminology, were subjected to the English law, the parties predicted the possibility of its execution to occur in London or in the Cayman Islands, and the Bank with which the Applicant celebrated the swaps acted as an international Bank. Therefore, all the conditions stated in the previous paragraph are met and the validity of the agreement made by the parties regarding jurisdiction may not be assessed by the requirements of a national law because European law is to be interpreted autonomously and ultimately prevails.

Judgment of the Supreme Court of Justice of April 5, 2016

Information Obligations – Regulated Markets

In the judgment under analysis, the Supreme Court referred the article 7 of the Portuguese Securities Market Code (“CdVM”), which establishes that the information to be disclosed by a legal entity that issues securities, must be “complete, truthf ul, up-to-date, clear, objective and lawful”, and which breach can be considered as a crime of market manipulation, punished by article 379, n.º 1 of the CdVM. This provision highlights the importance of information as a key value to be preserved by all market agents, so that the latter can work in an effective way and in order for the investors to be able to act duly informed.

Moreover, the Court stated that, in order for the legal scope and the material content of that rule to be observed, the omission or the failure to provide the legally required information by a legal entity that issues securities, regarding the information disclosed in its prospectuses or in its periodic reporting mechanisms, can result in the breach of an information obligation.

However, the Court also established that it is the article 251.º of the CdVM, instead of the previously mentioned article 7.º, which is the provision contained in the CdVM that is able to generate civil liability. This article 251.º, which defers to the regi me set out in article  243.º of the same Code, is an autonomous and self-governing rule that establishes a special legal regime of civil liability regarding the securities regulated market, which prevails over the general one set out by the Civil Code.

Therefore, the Supreme Court concluded in this judgment, that regarding the limitation periods of the liability arising from the violation of any information obligation prescribed by the CdVM, they are set out by article 243. º, paragraph (b), being of six an d two years, respectively. This limitation periods are shorter than the ones generally prescribed by the Civil Code, but do not contradict the constitutional right to an effective judicial protection because they were established by the legislator bearing in mind the trust of futures investors and the extent and level of demand of the information obligations set out throughout the CdVM.