This article was featured in Jus Mundi‘s 2024 Arbitration Year in Review, in collaboration with VYAPs, a yearly collection of articles from jurisdictions all around the globe updating you on arbitration-related developments from the previous year.
THE AUTHORS:
Beatriz Vitorino, Teaching Assistant at the University of Lisbon School of Law & Researcher for the Research Centre for Private Law (“CIDP”)
Juliana Trivoli, Trainee Lawyer at DLA Piper ABBC
This article provides an overview of arbitration developments in Portugal in 2024. Specifically, the article summarizes Portuguese court judgments from 2024 relating to arbitration and outlines the most relevant legislative and institutional news.
Court Judgements
Court judgments connected to arbitration underwent significant developments in 2024, as evidenced by a series of recent rulings by the Supreme Court of Justice (“SCJ”). These cases address an array of procedural and substantive issues, including the scope of arbitral jurisdiction, the enforceability of arbitration agreements, and the grounds for annulment of arbitral awards. In particular, the SCJ examined the validity of arbitral awards in situations involving contractual gaps, the appealability of decisions regarding arbitrator appointments, and the interpretation of time limits for issuing awards under the Voluntary Arbitration Law (“VAL”).
Additionally, the Courts of Appeal upheld key principles such as Kompetenz-Kompetenz and the binding nature of arbitration agreements, while also emphasizing the importance of procedural fairness. Notable decisions also included annulments of arbitral awards due to violations of the right to be heard or of the duty to substantiate decisions.
In the next paragraphs, we provide a deeper insight into some of the most prevalent cases decided by the SCJ.
In the case of Novo Banco v. Resolution Fund (I), Judgment No. 1195/22.8YRLSB.S1, dated January 31, the SCJ examined the possibility of annulling an arbitral award concerning the filling of a contractual gap between the parties. The appeal was based on alleged violations of right to be heard, the ultra petita and ciltra petita doctrines, as well as the violation of international public policy.
The court unanimously ruled that the appeal was unfounded, thereby upholding the arbitral tribunal’s decision. Regarding the right to be heard, the SCJ concluded that there is no “surprise decision” when the parties have the opportunity to address relevant legal issues, even if these issues are not explicitly raised by the Tribunal before the final decision. The court highlighted that it is not necessary to submit a draft decision to the parties before the arbitral award is issued. As for the arbitral tribunal’s jurisdiction and the claim of ultra petita (excess of authority), the SCJ clarified that arbitration allows the tribunal to interpret and apply the terms of the parties´ agreement, considering the gap-filling process as a legitimate part of the decision-making.
Finally, with respect to the alleged violation of international public policy, the SCJ held that both the arbitral award and the procedure followed respected the principle of equality of arms. While the public nature of one of the parties was acknowledged, the court determined that this did not result in unequal treatment. Rather, it recognized that solutions involving public resources should aim to minimize the burden on the community. Thus, the consideration of these factors was seen as a method of ensuring a fair and equitable application of public policy principles, rather than generating inequality.
In Case No. 13/24.7YRPRT.S1, dated April 10, the SCJ, ruled on the appealability of decisions regarding the appointment of arbitrator(s) by the competent state court, which is ruled out by Article 10(7) of the VAL. The SCJ held that this rule does not exclude the appealability of decisions that offend the requirements of the state court’s jurisdiction, namely decisions refusing jurisdiction because there is doubt as to whether recourse to arbitration is mandatory.
In this regard, the SCJ clarified that, Article 10(4) of the VAL is intended solely and exclusively for the appointment of the missing arbitrator(s) and prevent delays in the constitution of the arbitral tribunal. Any other issues, including matters related to the arbitration agreement, its interpretation, and wording, must be raised before the arbitral tribunal, which has the authority to assess them under the competence-competence principle. Also relevant was the SCJ’s ruling that, since the Court of Appeal functions as the Court of First Instance, both collegiate and individual decisions can be challenged in appeals to the SCJ.
In Case No. 2230/23.8YRLSB.S1, dated September 19, the SCJ ruled on the time period requirements for the validity of an arbitral award. The VAL establishes that an arbitral procedure may last up to two years, however, the parties had agreed that the award should be rendered before the expiration of this period. The arbitral tribunal rendered the award on the last day of the deadline agreed by the parties, and the parties were subsequently notified. However, according to the minutes of installation of the Arbitral Tribunal, the parties would be considered notified the day after an email was sent to them. In this sense, the central issue was whether the arbitral tribunal had adhered to the agreed-upon timeline for issuing the award. The SCJ ruled that the arbitral procedure would only be considered to have expired when the general deadline mentioned by the VAL was surpassed – not the specific deadline established by the parties and the tribunal for the award’s issuance. The distinction was made between the period to render an award and the overall duration of the proceedings. As expiration dates (caducidade) set out by the law may not be altered by the parties, the SCJ also stated that the VAL ought to be interpreted, in this respect, in a literal manner, i.e., only referring to the deadline to render an award (as stated by Article 43(1)), with nothing being established in the law in regards to the date in which the parties ought to be notified of the award.
In Case No. 230/23.7YPRT.S1, of November 12, the SCJ reinforced the Kompetenz-Kompetenz principle, stating that in order to decide on its own competence to hear a case, the arbitral tribunal may assess the applicability of the arbitration agreement and of the contract in which it is included. The SCJ stated that this may be done either via interlocutory decision or take place in the final award issued on the merits of the case. In the event that this ruling takes place in an interlocutory decision, the Voluntary Arbitration Law warrants the party in disagreement the right to challenge such decision within 30 days upon having been notified (Article 18 (9)), but the challenge of a decision that confirms the tribunal’s competence does not entail the suspension of the arbitral proceedings (Article 18 (10)). In casu, in an interlocutory decision, an arbitral tribunal had deemed that, in order to resolve a dispute arising from the breach of a consortium contract, it was necessary to consider the damages arising from the breach of the works contract that had led to the formation of the consortium. The SCJ held that if a party believed the decision lead to a broader competence of the arbitral tribunal than had been agreed by the parties, such party could have challenged the decision, but had to do so within the legal timeline. Since, no such challenge was made, the party’s right to the annulment of the decision was precluded. Hence, a challenge of the final award on the grounds of a breach of the arbitration agreement for the motives above-stated would not be admissible.
The SCJ also had to rule on the content of the duty to substantiate the arbitral award that falls upon the arbitral tribunal. The Supreme Court explained that this duty is similar in intensity to the obligation of state courts to provide reasoning. This means that decisions must be clearly articulated, based on understandable arguments, and must explicitly set out the reasoning that led the judges or arbitrators to their conclusions.
However, in this Case, the SCJ ruled that the arbitral award complied with this duty. The SCJ also considered that the arbitral award did not violate the principles of public policy of the Portuguese State. This matter arose from the fact the arbitral award had recognized the existence of material damage to the claimant and, consequently, ordered the defendant to give compensation, but the arbitrators had not unanimously agreed on how to calculate the amount of compensation. The SCJ did not annul the award, because the amount that the tribunal had arrived at was, neither arbitrary, nor merely punitive, nor disproportionate.
The SCJ, in Case No. 790/23.2YRLSB.S1, dated November 14, upheld a decision by the Lisbon Court of Appeal in which a request for annulment of an arbitration award had not been successful. In its decision, the SCJ restated that the Code of Civil Procedure is not directly applicable to arbitration. As such, the arbitration rules of the arbitration centre chosen by the parties should take precedence, namely in matters relating to the notification of the party’s legal counsel (sufficing the receipt of the email sent for such purpose, differently to what occurs in the judiciary, where certain formalities are required). Additionally, the SCJ determined that the “time limit for concluding the arbitration” as referenced by the applicable Arbitration Rules, as well as the time limit for concluding the arbitration proceedings with the “final award” referenced by the VAL, ought to be interpreted as not including the subsequent time limit for correction, clarification or additional award – especially when the request for clarification of the award was rejected and the final award was upheld without change, as occurred in the case under scrutiny. In summary, the relevant rules governing the receipt of a notification are the ones set out by the Arbitration Rules of the Arbitration Centre administering the proceedings. The Tribunal fulfills its obligation to render an award as long as it complies with the prescribed deadline, even if the proceedings do not formally conclude at that time. A subsequent time period may still allow for alterations of the award. The admissibility, analysis and response to requests for such alterations are not encompassed within the deadline for the tribunal to deliver its award.
Developments in Legislation and Arbitral Institutions
One of the most relevant legislative innovations regarding arbitration in 2024 was brought by Decree-Law No. 26/2024, from April 3. This Decree-Law established the RAL+ Platform, which aims to modernize and integrate Alternative Dispute Resolution (“ADR”) systems in Portugal, including family and labor mediation, peace courts, and consumer dispute arbitration centers. The platform enables electronic processing of cases, reducing costs and bureaucracy, while providing remote access for citizens and businesses, thereby promoting greater efficiency, transparency, and digital communication in judicial matters. The implementation of the platform is meant to be phased, with gradual adoption across different regions and systems.
When it comes to public law arbitrations, Law No. 43/2024, dated December 2, now allows for arbitration in public works contracts or contracts for the procurement of goods and services, where such agreements are funded by European Funds and where disputes could threaten the timely execution of the contract or result in the forfeiture of funding. Importantly, arbitration can now be invoked even if it is not expressly included in the contract’s terms. Parties have the option to initiate arbitration at the outset, preferably through arbitration centers, or to request the transfer of ongoing disputes from administrative courts to an arbitral tribunal.
Regarding investment arbitration, it is noteworthy that, on February 1, Portugal formally withdrew from the Energy Charter Treaty (1994) (“ECT”), following the lead of several other European Union Member States. The withdrawal takes effect on February 2, 2025. However, under the Treaty’s sunset clause, the ECT will continue to apply to investments made before the withdrawal takes effect for a period of 20 years (until February 2, 2045).
When it comes to Arbitration Centers, one of the most relevant events in 2024 was the formalization of the integration of the centers belonging to the Commercial Association of Portugal (“AEP”) and to the Association of Industrials of Civil Construction and Public Works (“AICCOPN”) in the Centre of Commercial Arbitration of the Commercial Arbitration Institute (“IAC”). Furthermore, it is also worth noting that, on January 10, the Voluntary Arbitration Association of the Automobile Sector decided at its General Assembly to close the Automobile Sector Arbitration Centre, although the normal course of pending proceedings was guaranteed.
ABOUT THE AUTHORS
Beatriz Vitorino is a Teaching Assistant at the University of Lisbon School of Law and a Researcher for the Research Centre for Private Law (“CIDP”). Beatriz Vitorino is also currently enrolled as a PhD student in Legal Sciences with a scholarship from CIDP. Previous experience includes having worked as a Junior Consultant at MLGTS, as well as a Case Manager in the Arbitration Centre Concórdia.
Juliana Trivoli is a Trainee Lawyer at DLA Piper ABBC in Lisbon, Portugal. Her practice focuses on Corporate Law and M&A, advising on both domestic and cross-border transactions. Prior to joining DLA Piper ABBC, she gained experience in international arbitration as a legal intern in Brazil. Juliana holds a Bachelor’s Degree in Law from the University of Lisbon and a Master’s Degree in Forensic Law and Arbitration from NOVA University of Lisbon.
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