This country-specific Q&A provides an overview of the legal framework and key issues surrounding arbitration law in Portugal including arbitration agreements, tribunals, proceedings as well as costs, awards and the hot topics concerning this country at present.
This Q&A is part of the global guide to Arbitration.
For a full list of jurisdictional Q&As visit http://www.inhouselawyer.co.uk/index.php/practice-areas/arbitration/
What legislation applies to arbitration? Are there any mandatory laws?
Arbitration in Portugal is governed by the voluntary arbitration act – Decree-Law no. 63/2011, of 14 December 2011 – in force since 14 March 2012, also known as “LAV”.
There are other mandatory laws, however, that rule compulsory arbitration, regarding disputes on subject matters legally bound to be settled under arbitration. Such is the case of disputes related to minimum services during strikes; industrial property rights concerning generic medicines and medicinal reference products; acts of sports federations, professional leagues and other sports entities; consumer claims on essential public services; and compensation settlement in expropriation cases.
Is the country a signatory to the New York Convention? Are there any reservations to the general obligations of the Convention?
Portugal acceded to the New York Convention on 18 October 1994.
The Portuguese State made a reciprocity reservation in the following terms: “Within the scope of the principle of reciprocity, Portugal will restrict the application of the Convention to arbitral awards pronounced in the territory of a State bound by the said Convention.”
Without prejudice to the New York Convention mandatory provisions, as well as to other treaties or conventions which are binding on the Portuguese State, LAV establishes that the awards made in arbitrations seated abroad are only effective in Portugal, regardless of the nationality of the parties, if such awards have been recognised by the competent Portuguese State court. LAV sets the grounds for refusal of recognition and enforcement and governs its procedure.
What other arbitration-related treaties and conventions is the country a party to?
Apart from the New York Convention, Portugal is also a party to the following treaties and conventions:
a) The 1965 Washington Convention on the Settlement of Investment Disputes Between States and Nationals of Other States (otherwise known as “ICSID”);
b) The Inter-American Convention on International Commercial Arbitration, signed in Panama in 1975;
c) The Geneva Protocol on Arbitration Clauses of 24 September 1923; and
d) The Geneva Convention on Execution of Foreign Arbitral Awards, dated 26 September 1927.
Is the law governing international arbitration based on the UNCITRAL Model Law? Are there significant differences between the two?
LAV is based on the UNCITRAL Model Law and there are no significant differences between the two. However, LAV contains a few particular features, notably the following:
a) The concept of arbitrable disputes, which comprises disputes involving economic interests and disputes which, although not involving economic interests, may be settled by the parties (art. 1 LAV);
b) The concept of international arbitration: arbitration is considered to be international when international trade interests are at stake (art. 49 LAV);
c) Third parties joinder: there are specific rules on the requirements, timing and formalities of a third party intervention in arbitral proceedings, which shall only be allowed if deemed relevant and not disruptive to the normal course of the proceedings (art. 36 LAV);
d) The inadmissibility of pleas based on the domestic law of a party: within international arbitration if one of the parties to the arbitration agreement is a State, a State-controlled organization or a State-controlled company, this party may not invoke its domestic law to either challenge the arbitrability of the dispute or its capacity to be a party to the arbitration, neither to in any other way evade its obligations arising from such agreement (art. 50 LAV).
e) Arbitrators’ fees and costs: if parties fail to regulate such matters in the arbitration agreement, the arbitrators’ fees and costs shall be agreed upon in writing by the parties and the arbitrators. If parties and arbitrators fail to do so, the arbitrators shall fix the amount of their fees and expenses, taking into consideration the complexity of the issues decided, the amount of the dispute and the time spent or to be spent with the arbitral proceedings until its conclusion, and furthermore determine the payment by the parties of their advance payments (art. 17 LAV).
f) The arbitral award is only subject to appeal to the competent State court if the parties have expressly contemplated such possibility in the arbitration agreement, and provided that the dispute has not been decided ex aequo et bono or through amiable composition. (art. 39 (4) LAV)
g) A time limit to render an award: usually of 12 months from the date of acceptance of the last arbitrator, which may be freely (although duly motivated) extended one or more times by an agreement of the parties or, alternatively, by a decision of the arbitral tribunal for successive periods of 12 months (art. 43 LAV).
h) Confidentiality: as a rule, the arbitrators, the parties and the arbitral institutions are bound to keep as confidential all information they obtain and documents brought to their attention in the course of the arbitration proceedings (arts. 30 (5)(6) LAV).
Are there any impending plans to reform the arbitration laws?
No, as LAV is quite recent, there are no impending plans for its reform.
What arbitral institutions (if any) exist? Have there been any amendments to their rules or are there any being considered?
The most relevant arbitral institution in Portugal is the Commercial Arbitration Centre (“CAC”) of the Portuguese Chamber of Commerce and Industry (http://www.centrodearbitragem.pt/index.php?lang=en). The CAC Rules of Arbitration are recent, as they date back to March 2014, and have recently been amended to include the “Fast Track Arbitration Rules”, which have entered into force in March 2016.
There are other noteworthy arbitral institutions, such as:
i. Concordia (http://www.concordia.pt/)
ii. Centro de Arbitragem de Conflitos de Consumo (http://www.centroarbitragemlisboa.pt/)
iii. Arbitrare (https://www.arbitrare.pt/en/centro_a.php)
iv. Portuguese Arbitral Tribunal for Sports (https://www.tribunalarbitraldesporto.pt/)
What are the validity requirements for an arbitration agreement?
In order to be valid, the arbitration agreement must refer either to disputes involving economic interests or to disputes, which, although not involving economic interests, may be settled by the parties, provided that said disputes have not been exclusively submitted by a special law to the State courts or to compulsory arbitration.
In addition, the subject matter of an arbitration agreement must be a present or a future dispute, arising from a legal, contractual or non-contractual relationship. Also, in private contracts involving a public entity disputes may only be submitted to arbitration if so authorised by a special act.
Furthermore, the arbitration agreement must be in writing, although not necessarily included in a document signed by the parties. It may simply be inserted in exchanged letters, telexes, telegrams, and other means of communications of which there is a written proof.
Within international arbitration, the arbitration agreement is valid as to its substance if the requirements set out either (i) in the law chosen by the parties to govern the arbitration agreement, (ii) in the law applicable to the subject-matter of the dispute (lex causae) or (iii) in Portuguese law (lex fori) are met (art. 51 LAV).
Are arbitration clauses considered separable from the main contract?
The arbitration clause is deemed to be an autonomous agreement entered into between the parties and therefore separate from the remaining of the contract. Thus, any issues concerning the non-existence, nullity, revocability, voidability or unenforceability of the main contract remaining clauses do not endanger the validity and efficacy of the arbitration clause.
Is there anything particular to note in your jurisdiction with regard to multi-party or multi-contract arbitration?
Without prejudice to what may have been stipulated in the arbitration agreement for multi-party arbitrations, in case of multiple claimants or respondents, when they fail to agree on the appointment of an arbitrator, the State court may, upon request of any party, appoint all arbitrators “if it becomes clear that the parties that failed to jointly appoint an arbitrator have conflicting interests regarding the substance of the dispute” (art. 11 LAV).
How is the law applicable to the substance determined?
As a rule, the arbitral tribunal shall decide the dispute in accordance with the law, unless the parties agree that it shall decide ex aequo et bono.
In international arbitration, the parties may choose the rules of law to be applied by the arbitrators, if they have not authorised them to rule ex aequo et bono. Any choice of the law or legal system of a given State shall be construed, unless otherwise expressly agreed, as directly referring to the substantive law of that State and not to its rules on conflict of laws. In the absence of choice by the parties, the arbitral tribunal shall apply the law of the State to which the subject matter of the dispute has the closest connection. In both cases, the arbitral tribunal shall take into consideration the contractual terms agreed by the parties and the relevant trade usages. (art. 52 LAV).
Are any types of dispute considered non-arbitrable? Has there been any evolution in this regard in recent years?
Under Portuguese law, arbitrable disputes are the ones involving economic interests and others which, although not involving economic interests, may be settled by the parties.
According to the previous voluntary arbitration act, dated 1986, only disputes relating to disposable rights could be subject to arbitration. The new voluntary arbitration act (LAV), currently in force, has thus broadened the concept of arbitrability by adopting the economic criteria of interests at stake along with the disposition of rights.
Are there any restrictions in the appointment of arbitrators?
In Portugal, arbitrators should necessarily be individual persons with full legal capacity, independent and impartial (art. 9 (1) and (3) LAV). The law does not determine that only arbitrators with a legal background may be appointed.
Also, whoever is invited to exercise functions as an arbitrator has a duty to disclose all the circumstances that may cause justified doubts regarding its impartiality and independence (art. 13 (1) LAV).
Are there any default requirements as to the selection of a tribunal?
Yes there are. Arbitral tribunals must necessarily be constituted by one arbitrator or by several, but always in an uneven number. If the parties have not agreed on the number of arbitrators, the tribunal shall be composed by three (art. 8 LAV).
If the arbitral tribunal is composed by one arbitrator the parties should agree on its designation. If it is composed by three or more arbitrators, each party should appoint an equal number of arbitrators and the appointed arbitrators should choose another arbitrator who will act as chairman of the tribunal (art. 10 (3) LAV).
Can the local courts intervene in the selection of arbitrators? If so, how?
Yes. If the parties cannot agree on the appointment of the sole arbitrator, such appointment will be made by the State court (art. 10 (2) LAV).
Also, if a party does not appoint the arbitrator (or arbitrators) that it should within a period of 30 days counting from the reception of the request from the other party, or if the party-appointed arbitrators do not agree on the choice of the chairman within a period of 30 days counting from the appointment of the last arbitrator, such appointments can also be made by the State court at request of any of the parties. The State courts should take into account the qualifications required by the agreement of the parties as well all the relevant facts to assure the appointment of an independent and impartial arbitrator. In case of international arbitration the State court should also take into consideration the possible convenience to appoint an arbitrator who has a different nationality from the parties (art. 10 (6) LAV).
Can the appointment of an arbitrator be challenged? What is the procedure for such challenge? Has there been an increase in number of challenges in your jurisdiction?
The appointment of an arbitrator can be challenged if circumstances arise that may cause justified doubts as to its impartiality or independence or if it does not have the qualifications that the parties agreed upon (art. 13 (3) LAV).
The parties are free to agree on the challenge procedure. If there is no agreement, the party that wishes to challenge an arbitrator should state in writing its motives to the arbitral tribunal within a period of 15 days counting from the appointment or from the date that had knowledge of the circumstances that motivate such challenge. If the challenged arbitrator does not renounce to its functions and the party that has appointed him insists in its maintenance, the arbitral tribunal, with the participation of the challenged arbitrator, will decide on the challenge. If however the destitution of the arbitrator still cannot be obtained, the party that challenged the arbitrator may, within a period of 15 days after being notified of the decision that rejects the challenge, request the State court to decide. Such decision will not be subject to appeal (art. 14 LAV).
The challenge of arbitrators is not particularly frequent within the Portuguese jurisdiction and there is no data to support that there has been an increase in the number of challenges.
What happens in the case of a truncated tribunal? Is the tribunal able to continue with the proceedings?
Yes, the arbitral tribunal is able to continue with the proceedings. Even within the pendency of a challenge to an arbitrator, the arbitral tribunal, including the challenged arbitrator, may continue the arbitral proceedings and issue an award (art. 14 (3) LAV).
On the other hand, if the challenge is accepted, it shall be nominated a substitute arbitrator according to the rules applicable to the appointment of the substituted arbitrator. Notwithstanding, the parties may agree that the replacement of the arbitrator is made in a different form and may even waive its right of substitution. The tribunal shall decide if any procedural acts should be repeated in light of the new composition of the tribunal (art. 16 LAV).
Are arbitrators immune from liability?
Arbitrators cannot be held liable for damages arising from decisions issued except in the cases in which the State judges may also be held liable. Such liability is limited and regards mostly gross errors in which there may have been intent or serious negligence. Also, the liability is only towards the parties.
Arbitrators may also be held liable for damages in specific cases such as when they unjustifiably refuse to exercise its functions after having accepted the position to arbitrate (art. 12 (3) LAV) or when they unjustifiably hamper that an arbitral award is issued within the determined period (art. 43 (4) LAV).
Is the principle of competence-competence recognised? What is the approach of local courts towards a party commencing litigation in apparent breach of an arbitration agreement?
Yes, it is. Art. 18 (1) LAV determines that the arbitral tribunal may decide upon its own jurisdiction even if for such is necessary to determine the existence, validity, efficacy or applicability of the arbitration agreement or of the agreement in which is inserted.
The LAV also embraces the “negative effect of the arbitration agreement”. Art. 5 (1) determines that the State court in which is submitted a lawsuit relating to an issue covered by the arbitration agreement should, at request of the Respondent (lodged until the moment that it should submit its first memorial regarding the substance of the cause), dismiss the case, except if the arbitration agreement is clearly null, if it is or became inoperative, or is incapable of being enforced.
How are arbitral proceedings commenced? Are there any key provisions under the arbitration laws relating to limitation periods or time bars of which the parties should be aware?
Arbitral proceedings are formally commenced with the reception by the Respondent of the request for arbitration submitted by the Claimant (except if the parties agree otherwise).
There are no particular provisions in the LAV regarding limitation periods or time bars. There are however several limitation periods foreseen in other statutes such as the Civil Code, the Commercial Code and other specific legislation. For instance, the Civil Code establishes a limitation period of three years for non-contractual civil liability and a limitation period of twenty years for contractual civil liability.
LAV also determines that the arbitrators should notify the parties of the final arbitral award within a period of 12 months counting from the date of acceptance of the last arbitrator (except if the parties agreed differently). Although this period can be extended by agreement of the parties or by the arbitral tribunal, if the award is not issued within the maximum term, the arbitral proceedings shall terminate automatically and the arbitrators will no longer have jurisdiction to decide on the dispute conferred to them (art. 43 (3) LAV).
What happens when a respondent fails to participate in the arbitration? Can the local courts compel parties to arbitrate? Can they order third parties to participate in arbitration proceedings?
If a Respondent fails to participate in the arbitration, namely by not submitting its opposition, the arbitral tribunal will still proceed with the process. Such omission shall not be considered as an acceptance of the allegations of the Claimant (contrarily to the rules of civil procedure which determine that if a Respondent does not submit its opposition, the facts alleged by the Claimant can be considered as admitted).
Also, if a party does not attend a hearing or does not produce documental evidences within a given deadline, the tribunal may also proceed with the proceedings and issue an award with basis on the submitted evidence.
The local courts may only compel parties to arbitrate if there is a breach of an arbitral agreement and if such breach has been invoked in the local court (see question 18 above).
Local courts cannot order third parties to participate in arbitration proceedings. Third parties can only participate in arbitral proceedings already in course if they are bound by an arbitration agreement and upon authorization from the arbitral tribunal after hearing the parties, if the intervention does not disrupt the normal course of the proceedings and if there are relevant reasons to do so.
In what circumstances is it possible for a state or state entity to invoke state immunity in connection with the commencement of arbitration proceedings?
As a rule, Portuguese courts consider that a State can invoke immunity from jurisdiction from acts that are jus imperii as opposed to acts of juri gestionis.
Additionally, the limitations and extension of sovereign immunity are determined in accordance with the European Convention on State Immunity and its Additional Protocol and the United Nations Convention on Jurisdictional Immunities of States and Their Property.
In what instances can third parties or non-signatories be bound by an arbitration agreement or award?
Portuguese jurisdiction embodies the principle that only the parties that have executed an arbitration agreement can be bound to it. Third parties which have not signed the arbitration agreement, but who subsequently adhered to it, may also be allowed to join on-going arbitral proceedings based on such arbitration agreement.
Legal figures and doctrines such as the “Group of Companies”, “Estoppel” (in Portugal “Abuse of Right”) or “Piercing the Corporate Veil” pose exceptions to bind non-signatories to arbitration agreements or arbitral awards and are of extremely limited use in Portugal.
What interim measures are available? Will local courts issue interim measures pending the constitution of the tribunal?
Except otherwise agreed by the parties, arbitral tribunals may decree interim measures considered necessary as to the scope of the dispute as long as: a) there is a serious probability of existence of the right invoked by the petitioner and there is a sufficiently justified fear of sustaining damages; and, b) the damages arising to the other party resulting from the determination of the interim measure do not considerably exceed the damages that the petitioner wishes to avoid (arts. 20 (1) and 21 (1) LAV). Arbitral tribunals may also issue preliminary orders without the preliminary hearing of the other party in order to not frustrate the goal of the requested interim measure.
There are also specific interim measures foreseen in the civil procedure law (such as provisional restitution of possession, suspension of corporate deliberations, attachment, suspension of construction works, etc.). Local courts may issue such measures pending the constitution of the arbitral tribunal.
Are there particular rules governing evidentiary matters in arbitration? Will the local courts in your jurisdiction play any role in the obtaining of evidence?
Arbitral tribunals in Portugal have the power to determine the admissibility, importance and value of any evidence. The parties are free to attach to their pleadings the documents that they consider important to prove their case.
Save upon a different agreement by the parties, the arbitral tribunal can decide if there will be any hearings for the production of evidence or if the proceedings will be conducted with basis on documents alone (art. 34º (1) LAV).
When the production of evidence depends on the will of one of the parties or of third parties and they refuse to collaborate, a party can request the local courts that the evidences are produced (with the previous authorization of the arbitral tribunal). This is applicable even in cases of requests for production of evidences arising within the scope of arbitrations seated abroad (art. 38º LAV).
What ethical codes and other professional standards, if any, apply to counsel and arbitrators conducting proceedings?
The Portuguese Arbitration Association issued a code of ethics for arbitrators that can be used within ad-hoc arbitrations or adopted by arbitral institutions. It contains guidelines for arbitrators concerning issues such as their independence and impartiality, duty to disclose, communications with the parties, costs and confidentiality. The code should be interpreted and integrated taking into account the IBA Rules on Conflict of Interest in International Arbitration. It has been adopted by institutions such as the Commercial Arbitration Centre of the Portuguese Chamber of Commerce and Industry and the Portuguese Arbitral Tribunal for Sports.
Professional standards applicable to counsels are determined by the Portuguese Bar Association Statute (Law 145/2015 of 9 September) which includes strict duties towards clients, tribunals, colleagues, etc.
How are the costs of arbitration proceedings estimated and allocated?
According to article 17 of LAV, the costs of arbitration proceedings must be regulated by the parties in the arbitration agreement or must be agreed before the acceptance of all the appointed arbitrators. If there is no such agreement, the tribunal will fix the amount of their fees and when the payment must be made.
According to the rules of arbitration of the Commercial Arbitration Centre of the Portuguese Chamber of Commerce and Industry, it is also the arbitral tribunal’s responsibility, unless the parties otherwise agree, to decide how the arbitration costs (comprising the arbitrator’s fees, expenses and administrative costs) must be allocated. In this case, the arbitrators’ fees and the administrative costs are established bearing in mind the value of the arbitration and the tables annexed to the rules.
Can pre- and post-award interest be included on the principal claim and costs incurred?
Yes, pre- and post-award interest can be included on the principal claim.
What legal requirements are there for the recognition of an award?
An arbitral award granted by a tribunal seated in Portugal must have a res judicata effect in order to be recognized. However, it is also possible to enforce an arbitral award even when there is an application for setting aside the award. In this exceptional case, the party against whom the enforcement is invoked may request the enforcement to be suspended provided that such party offers any kind of security.
An arbitral award granted by a tribunal seated in a foreign country is recognized according to the New York Convention or according to LAV if the award was granted in a country that is no party to the New York Convention.
Does the law impose limits on the available remedies? Are some remedies not enforceable by the local courts?
LAV does not exclude any available remedies although the tribunal is of course limited by the request/claim presented by the parties in their claim and counter-claim.
It means that all remedies available in Portuguese Civil Procedural Code are also available to arbitrators as long as they do not violate the principles of public policy.
The same answer is applied regarding the remedies enforced by Portuguese Courts.
Can arbitration proceedings and awards be appealed or challenged in local courts? What are the grounds and procedure?
Unless otherwise agreed by the parties, an award can only be challenged by an application for setting aside the award according to article 46 of LAV.
Article 46 provides a restricted set of situations in which the award can be set aside, e.g. when one of the parties was under some incapacity; when there was a violation of fundamental principles referred in article 30 of LAV; when the award dealt with a dispute that cannot be considered included in the arbitration agreement; when the Tribunal was not established according the parties’ agreement; when the Tribunal condemned in amount in excess of what was claimed or dealt with issues that it shouldn’t have dealt; when the subject-matter of the dispute cannot be decided by arbitration or when the award is in conflict with the principles of public policy.
The application must be filed at the Portuguese Appeal Court and must be accompanied by a certified copy of the award or a translation into Portuguese of the award if it was granted by a tribunal seated abroad. The application must be filed within 60 days from the date on which the party received the notification of such award.
Can the parties waive any rights of appeal or challenge to an award by agreement before the dispute arises (such as in the arbitration clause)?
The awards on the merits is only subject to appeal if the parties have expressly agreed on such possibility in the arbitration agreement and provided that the dispute has not been decided ex aequo bono or through amiable composition.
To what extent might a state or state entity successfully raise a defence of state or sovereign immunity at the enforcement stage?
A state or state entity are entitled to raise a defence of state or sovereign immunity just according to the New York Conventions (or any other conventions in which Portugal is a member).
To what extent might a third party challenge the recognition of an award?
In Portugal, only the parties in the proceedings (and not a third party) are entitled to challenge the recognition of an award.
Have there been any significant developments with regard to third party funding recently?
There are no rules or specific restrictions on third-party funders in Portuguese law.
This issue is still something new and not explored. However, recently there was an increase in the number of conferences and articles where this issue has been addressed which opens the perspective of being also a hot topic in the near future.
Is emergency arbitrator relief available? Is this frequently used?
According to the rules of arbitration of the Commercial Arbitration Centre of the Portuguese Chamber of Commerce and Industry, until the tribunal is constituted (and unless otherwise agreed by the parties), any party may request that urgent measures may be granted by an emergency arbitrator, appointed by the Chairman of the Centre.
As far as we are informed, emergency arbitrator relief hasn’t been frequently requested.
Are there arbitral laws or arbitration institutional rules providing for simplified or expedited procedures for claims under a certain value? Are they often used?
The Commercial Arbitration Centre of the Portuguese Chamber of Commerce and Industry enacted the “Fast Track Arbitration Rules”, in 2016, for claims under € 200.000,00 except if the parties have excluded its application in the arbitration agreement or in other subsequent agreement; if both parties have been notified of that intention and oppose it or if the case circumstances are not adequate for its application. The Chairman of the Centre can determine the application of these rules in proceedings which value is over € 200.000,00 if deemed adequate and there is no opposition from the parties.
Have measures been taken by arbitral institutions to promote transparency in arbitration?
The approval of a Code of Conduct for the Arbitration by the Portuguese Arbitration Association is one example.
The Commercial Arbitration Centre of the Portuguese Chamber of Commerce and Industry also approved recently a document with “Criteria for the Appointment of Arbitrators”.
Is diversity in the choice of arbitrators and counsel (e.g. gender, age, origin) actively promoted? If so, how?
There is a general concern with diversity in choice of arbitrators but there are not any specific measures executed in order to promote it.
Have there been any developments regarding mediation?
Recently, the Commercial Arbitration Centre of the Portuguese Chamber of Commerce and Industry approved its rules of mediation, in force since 1 March 2016, which state that it may be subject to mediation disputes of civil and commercial nature. These mediation proceedings shall never exceed the period of three months.
Have there been any recent court decisions considering the setting aside of an award that has been enforced in another jurisdiction or vice versa?
A recent decision issued by the Appeal Court and confirmed by the Supreme Court in 14 March 2017 denied the recognition of an arbitral award granted by a Spanish tribunal essentially due to violation of the principles of international public policy of the Portuguese State.