Arbitration in Portugal can be said to be well established, following the Model Law tradition. Recent years have seen a number of new developments, including the publication of public law arbitration awards, updates regarding tax, patent and consumer arbitral disputes, a discussion in the community regarding ethics in arbitration, along with a number of new state court decisions in support of arbitration. This chapter highlights these significant trends and provides a snapshot of the Portuguese arbitration framework.
- Portugal as a Model Law country
- Publication of public law arbitral awards
- Updates regarding tax, patent and consumer disputes
- Institutional arbitration and ethics
- Approach of state courts of appeal in support of arbitration
- Snapshot of the Portuguese arbitration framework
Referenced in this article
- Law 63/11 of 14 December
- Law 118/2019 of 17 September
- Ministerial Order 165/2020 of 7 July
- Law 24/96 of 31 July, as amended by Law 63/2019 of 16 August
Considered by its investors as ‘the best place in the world to invest’, because it offers incentives to businesses and favourable tax arrangements for foreign nationals, Portugal has been able to attract a substantial number of foreign citizens from the European Union and the rest of the world. But what about arbitration?
A Model Law country
Arbitration in Portugal is governed by Law 63/11 of 14 December (the Law), which came into force in March 2012. Drafted by local practitioners and subject to wide public discussion before its final approval, the Law clearly – and intentionally – follows the standard established by the UNCITRAL Model Law (the Model Law). In order to better define some of the Model Law’s solutions (that were considered too vague), several improvements were made to the latter’s text to accommodate Portugal’s legal tradition (eg, specific rules for multiparty and multi-contract arbitrations, express allowance for interim measures and express mention of the principle of the validity of arbitration agreements). The Law generally applies to both domestic and international arbitration, although some minor additional provisions regulate specific aspects of the latter. It is, therefore, a monist law.
Nine years after its enactment, arbitration practitioners around the world have praised its content, and it is safe to say that there are no major application problems. Moreover, arbitration continues to be the favourite dispute resolution method in relation to complex disputes requiring a reasonable degree of specialisation.
Trends and recent developments
Publication of public law arbitral awards
There is a long-standing tradition of arbitration in the administrative field, with the Portuguese state actively promoting the inclusion of arbitration agreements in all sorts of administrative contracts. Consequently, many state-related disputes have been resolved through arbitration in recent years.
Specifically, the state and state entities may enter into arbitration agreements involving private law disputes (as opposed to public law), as long as the entities involved are authorised by law.
Criticisms have been raised against administrative arbitration that have led to several changes in the past few years, including the possibility of an appeal in all arbitration cases with a value exceeding €500,000, which was considered a step backward by the arbitral community.
More recently, a new rule was introduced requiring all public law arbitral decisions to be sent to the Ministry of Justice for publication online, with the redaction of any details identifying the parties involved, as a condition for enforcement. However, the website for these publications was only recently set up.
Besides being in line with international trends of transparency in arbitration, the publication of arbitral awards has been favoured by practitioners as a reaction against criticisms made in connection with the involvement of the state in arbitration.
All in all, and despite the backwards step regarding the possibility of appeal, Portuguese public law can still be considered as pro-arbitration, because arbitration clauses are possible in virtually all contracts. As a result, the Portuguese system continues to be considered one of the most advanced in relation to public law.
Arbitration’s success is so meaningful that it has extended to other fields of law. For example, tax disputes between private citizens, companies and tax authorities are now being resolved through arbitration. Even though the state, whenever involved, maintains some degree of control over the appointment of arbitrators, it is nonetheless a good sign of favor arbitratis in Portugal. Tax law arbitral decisions are also expected to be published online from July 2020.
To clear a category of patent disputes over medical drugs from the state courts, it became mandatory to resolve these disputes by arbitration in 2011. However, this legislation has recently been repealed and, since January 2019, parties are free to choose between voluntary arbitration and the judicial system.
Often involving global pharmaceutical companies and generic drugs manufacturers, and despite their specific characteristics, these disputes were able to bring forth a substantial number of decisions from state courts of appeal, creating a steady flow of case law addressing arbitration issues.
Finally, consumer disputes with a lower economic value, up to €5,000, are now subject to mandatory arbitration or mediation, if the consumer expressly requests this from a consumer arbitration institution. Consumers may be represented by lawyers and may apply for legal aid if needed.
Institutional arbitration and ethics
Despite the fact that institutional arbitration centres have existed for many years, and that international centres are widely accepted, ad hoc proceedings continue to be quite popular in Portugal.
Although not measurable by official statistics, practitioners state that ad hoc arbitrations continue be preferred by parties to new cases.
Nonetheless, there are active arbitration centres in Portugal, notably the Commercial Arbitration Centre of the Portuguese Chamber of Commerce and Industry, with its own set of Rules and a Code of Ethics, all drafted in accordance with best international practices.
Besides the Portuguese Chamber of Commerce and Industry, other institutions administrating arbitration exist, notably the Centre for Conciliation, Conflict Mediation and Arbitration and the Commercial Arbitration Institute of the Oporto Commercial Association.
In addition, the Portuguese Arbitration Association, which can be said to congregate the Portuguese arbitral community, has recently revised its Code of Ethics, which binds its members. It is also in the process of approving a Code of Best Practices in Arbitration.
Approach of state courts of appeal
Appellate courts set aside arbitral awards on limited grounds and usually decide those cases under the guidance of international standards such as the International Bar Association (IBA) Guidelines on Conflicts of Interests in International Arbitration.
This is an example of the positive contribution of the Law to the improvement of arbitration practice and to the maturity of the arbitral community.
Furthermore, the legislation has been serving the purpose of evidencing the support given by state courts of appeal to arbitration, highlighting a clear favor arbitratis.
The subjects addressed in each case vary substantially, but there are some matters that are recurrently addressed and, fortunately, consistently decided.
State courts have systematically refused to analyse allegations of nullity of arbitration clauses on the grounds that such competence belongs exclusively to arbitral tribunals. Only in cases where it is evident that there is no valid and operative arbitration clauses may a state court decide on the matter directly. 
Conflicts of interest, independence and impartiality
There is a substantial number of recent judicial decisions setting aside awards on the grounds of conflicts of interest, but also addressing independence and impartiality, and making wide reference to international standards such as the IBA Guidelines on Conflicts of Interests in International Arbitration.
Portuguese international public policy
State courts have been careful in highlighting the exceptional nature of Portuguese international public policy (as opposed to internal mandatory rules) as grounds to set aside or refuse enforcement of foreign arbitral awards.
Arbitrators’ costs and fees
The current arbitration law provides the parties with the opportunity to challenge the amount charged as arbitrators’ costs and fees if there is no prior agreement. As a consequence, many decisions have been issued on the matter.
Access to justice
The financial crisis was instrumental in creating a number of situations in which respondents (or even claimants) tried to avoid arbitration based on a lack of financial conditions to resort to the proceedings. Decisions are very case-specific, but it seems these will be of the utmost importance in the near future as we anticipate another crisis arising from the covid-19 pandemic.
Courts have been reaffirming that the scope of the proceedings to set aside an arbitral award is limited and cannot entail a review of the merits or a rehearing of the case.
Law 63/2011 of 14 December
Any dispute regarding economic interests may be submitted to arbitration (article 1). In addition, non-economic matters may also be referred to arbitration, provided they concern issues that the parties have the right to settle. Finally, arbitral tribunals may also be requested to interpret, complete, adapt or supplement existing contracts.
Besides dealing with disputes involving the state and state entities, Portuguese legislation extends the possibility of arbitration to other fields of law, such as tax disputes and, in limited cases, even employment disputes.
Arbitral clause and negative effect of the arbitration agreement
The Law reproduces the doctrine arising out of the New York Convention and the Model Law. Although it requires a written agreement, it also interprets the term ‘written’ in the widest possible way (article 2).
As to the negative effect of the arbitration agreement, the principle of competence-competence is firmly established in articles 5, 18 and 19, except in cases where the state court concludes that the arbitration agreement is clearly null and void, became inoperative or is incapable of being performed. Special emphasis is given to the fact that, regardless of any proceedings in state courts, arbitration may commence or continue, and the parties cannot file a claim in the state courts with the sole purpose of arguing over the validity of an arbitration agreement. Judicial courts widely accept this system and have been consistently upholding arbitration clauses, even when non-signatory parties are involved.
The arbitral tribunal
The constitution of the arbitral tribunal (articles 8 to 16) has received special attention in the Law and several changes were adopted in comparison with the previous legislation. However, one could say that such changes simply reflect what has been the recent trend in international arbitration.
The tribunal will be composed of an uneven number of arbitrators or, if the parties are silent, three. These arbitrators must be independent and impartial, and have the duty to disclose any circumstances that, in the eyes of the parties, may affect such independence and impartiality.
If the parties fail to appoint one or more arbitrators, then, unless they have designated another entity for this purpose (such as an arbitration centre), state courts will have the power to make the appointment at the request of the most diligent party. When making appointments, judicial courts must take into account all relevant circumstances to ensure that an independent and impartial arbitrator is appointed. In the case of international arbitrations, the law establishes that, if requested to appoint the chairman or a sole arbitrator, state courts should consider the convenience of appointing arbitrators with a different nationality from that of the parties, applying the ‘neutrality’ rule.
In the case of multiple parties (article 11) and failure of one of the sides to agree on the name of the arbitrator, state courts will appoint the missing arbitrator. This rule, in principle, will not compromise the appointment of the arbitrator chosen by the other party. As an exception, if the state court is convinced that the parties have conflicting interests and that justice will be better served, it may appoint all the arbitrators. Therefore, the Dutco doctrine is accepted to a certain extent.
If a party wants to challenge an arbitrator (and he or she is not the sole arbitrator), the challenge request must be submitted to the arbitral tribunal (articles 13 and 14). If the challenged arbitrator does not step down, the tribunal will decide with the participation of the challenged arbitrator. In the case of rejection of the request, the challenging party may resort to state courts, but the arbitral proceedings may follow their normal course.
The legislation also contains a specific provision on arbitrators’ fees (article 17), which requires the parties to settle this question in writing before the tribunal is fully constituted. If that agreement is not concluded but the case continues, the arbitrators will rule on their own fees, but the parties are entitled to challenge them before the state courts.
Interim measures and provisional orders
This specific matter created some discussion, to the extent that there were doubts in face of the 1986 law as to whether arbitral tribunals could issue interim measures and, in the affirmative, what types of measures could be ordered.
One of the main concerns when drafting the new law was to avoid any links to the Civil Procedure Law (because many practitioners applied those rules directly to arbitration, thus strangling the procedure). Thus, it was agreed that the interim measures should be regulated independently from the procedural law. As a result, Chapter IV of the Model Law text was fully adopted, making it part of the arbitration legislation (articles 20 to 29).
Ultimately, the solutions now established in the Arbitration Law go, in some cases, beyond what is possible under civil procedural rules.
Conduct of the proceedings
As mentioned above, the drafters intended to draw a clear line between arbitration and civil procedure to avoid a tendency to apply civil procedure provisions in arbitration proceedings.
Therefore, Chapter V of the Law (articles 30 to 38) reflects this dissociation. The parties are free to agree on the rules of the procedure and, failing such agreement, the tribunal will conduct the proceedings as it sees fit, in accordance with the principles of due process.
Taking a clear stand in a long worldwide tradition, the Law expressly states that arbitral proceedings are confidential (article 30.5), without prejudice to the possibility of publishing final awards and other decisions, provided that all details identifying the parties are removed.
Article 35 addresses default by one party and states that the failure of a party to contest a pleading or appear at a hearing will not be deemed an admission of facts. Therefore, the arbitral tribunal should continue the proceedings on ex parte basis.
Article 36 focuses on third-party intervention, which is permitted provided the third party is bound by the arbitration agreement. If the third party is not an original party to the arbitration agreement, its intervention will only be valid if accepted by the other parties to the arbitration, for the purposes of those arbitration proceedings. The intervention may take place before or after the constitution of the tribunal, but in the latter case, the intervening party is prevented from challenging the constitution of the arbitral tribunal. In any event, the tribunal may always refuse the intervention if it considers that it may disrupt the conduct of the proceedings.
Article 37 regulates tribunal appointed experts. Although this was an issue covered by the Model Law, it is a substantial evolution in view of what would happen in accordance with civil procedural law, where the parties would each appoint an expert and the tribunal a third expert, and the three would agree on the result of the joint work.
Finally, article 38 regulates assistance by state courts, particularly in the production of evidence. The parties may apply for such assistance, but only after obtaining the leave of the arbitral tribunal.
Award and closing of the proceedings
Unless the parties authorise the tribunal to decide ex aequo et bono, the award will be rendered in accordance with the applicable law (article 39) and the decision can only be appealed if the parties expressly agree (except in cases involving public contracts, as referred above). As will be seen below, the solution has specific characteristics when it comes to an international arbitration.
Article 43 regulates the time limit to render an award. Contrary to the previous legislation, the Law establishes a 12-month limit for arbitrators to render an award. They are also entitled to extend the time limit, unless both parties oppose the extension. Finally, the arbitration agreement remains valid even if the time limit to render the award is exceeded.
Similarly, within the 30 days following the notification of the award, the parties may ask for its correction (in respect of manifest errors) and for the interpretation of any part of the award that it considers obscure or ambiguous (article 45.1 and 45.2). More interesting is the possibility of the parties to ask the tribunal to render an additional award regarding claims or parts of claims they consider not to have been addressed in the award (article 45.5).
Challenging the award
Except when the parties have explicitly admitted the possibility of appeal, and in arbitrations involving public contracts, awards are final and not subject to any review by state courts. Therefore, the only possible judicial intervention is through annulment proceedings. The grounds for setting aside an award are in line with the principles established by the New York Convention regarding the recognition and enforcement of foreign awards. The proceedings will take the form of an appeal and be judged by the appellate court.
After extensive debate, the Law included the possibility for the courts to set aside an award on public policy grounds (but limited to the international public policy of the country).
Article 46.8 states that, at the request of one of the parties, state courts have the power to send the award back to the arbitral tribunal so that it has the opportunity to address a specific matter, avoiding the setting aside of the award. This is a provision without precedent in the Portuguese system, but one that may be an effective solution that benefits the parties and avoids the need to start a new arbitration after the setting aside of an award.
Chapter IX of the Law covers international arbitration. As mentioned above, and despite the existence of this chapter, the Portuguese system cannot be classified as dualist, to the extent that the rules applicable to domestic and international arbitration are substantially the same (as expressly determined by article 49.2). Therefore, this chapter is good evidence of how committed the Portuguese legislature was to enacting an arbitration-friendly system aiming at attracting international disputes to its territory.
Following French law, Portuguese law considers that international arbitration is the one that concerns interests of international trade (article 49.1).
Article 50 addresses the inadmissibility of pleas based on the domestic law of a party. This means that a state or a state-controlled entity cannot invoke provisions of its internal law to challenge the arbitration agreement.
Similarly, article 51 sets the substantial validity of the arbitration agreement. Under this article, an agreement may be submitted to arbitration if the requirements established in that respect are fulfilled, either by:
- the law chosen by the parties to govern the arbitration agreement;
- the law applicable to the merits of the case; or
- Portuguese law.
The law applicable to the merits is regulated by article 52. The tribunal must apply the law chosen by the parties and, failing such choice, the law having the closest connection with the dispute. The article also makes express reference to the contractual terms agreed by the parties and the relevant trade usages.
Regarding the possibility of appeal, the rule is once again that there is no appeal unless the parties expressly agree otherwise (article 53). However, even if such an agreement exists, the appeal has to be brought before another arbitral tribunal, and the rules and terms applicable have to be set in advance (this provision is not applicable to cases involving public contracts). This is an innovative provision intended to limit the intervention of state courts in international arbitration.
Recognition and enforcement of foreign awards
All foreign awards must be recognised (ie, an exequatur must be obtained) before they can become effective in Portugal. This matter is covered by the New York Convention, so the scope of application of article 55 is reduced. In any event, the provisions of articles 55 to 57 are very similar to the ones contained in articles IV, V and VI of the New York Convention.
Articles 59 and 60 of the Law address the jurisdiction of state courts in all matters where their intervention may be required in accordance with the Arbitration Law.
Contrary to the previous legislation, the competence for ruling on important arbitration related matters has been centred in the appellate courts (second instance courts). The aim is to have, in the future, specialised appellate courts devoted to arbitration, as currently happens in France. The competence of the courts of appeal covers:
- the appointment of and challenges against arbitrators;
- challenges against arbitrators’ fees; and
- any appeals (where admissible) or requests to set aside.
Confirming the favor arbitratis, some of these procedures were classified as expedited proceedings.
For all other matters, from interim measures to assistance in the production of evidence, jurisdiction remains within first instance courts, as they are more suited to these types of proceedings.
Portugal as an international venue for Portuguese-speaking countries
Portugal has an arbitration legislation consistent with international best practices and standards. As noted above, the law clearly favours arbitration, and the tradition of Portuguese courts has been to uphold the great majority of arbitral awards brought before them. The country has a vast legal community and a number of lawyers actively involved in arbitration, both as counsel and arbitrators.
Located at the western edge of Europe, it maintains a strong relationship with all Portuguese-speaking countries in Africa (Angola, Cape Verde, Guinea-Bissau, Mozambique and São Tomé and Príncipe), as well as with Brazil, Macao and Timor. As for the above African countries, most of them still have their legal system based on the Portuguese matrix. Together with a common language, the same legal approach places Portuguese practitioners in a privileged position to contribute to the development of international arbitration in those countries.
Those factors, together with its location and easy access, facilities and available resources (including a large and experienced arbitral community), not to mention its good weather, moderate prices and general attractiveness, make Portugal – with Lisbon in pole position –an ideal place to function as a venue for international arbitration.
For historical and cultural reasons, Portuguese language countries are the obvious candidates. However, Portugal’s next challenge is to widen the scope of users to other countries.
In sum, now that you have taken the time to read this article to the end, the next step is to try Portugal as a seat of arbitration.
 Liz Alderman, ‘Portugal Dared to Cast Aside Austerity. It’s Having a Major Revival’, The New York Times, 22 July 2018.
 The previous law was Law 31/86 of 29 August 1986. Although not specifically based on any other law, it was inspired by French law and it contained solutions not substantially different from the ones adopted in other countries, despite some particularities of the law that were a consequence of our civil procedural tradition. In fact, the main evidence of the success of that law was that it remained in force for 25 years, with only a minor amendment, and it allowed arbitration to flourish.
 The Board of Directors of the Portuguese Arbitration Association, working pro bono. The author of this text was among the seven drafters.
 When discussing the revision of Law 31/86 of 29 August 1986, there were many opinions on the path to follow, including simply amending the law or approving a completely new document. Eventually, the latter option prevailed and the decision was taken to base the new text on the UNCITRAL Model Law. One of the purposes of changing the law was to make Portugal a more interesting seat for international arbitration, and that would be more easily achieved with a law following an internationally accepted standard.
 See article 476 of the Code of Public Contracts, as amended by Decree-Law 111-B/2017 of 31 August.
 See Law 118/2019 of 17 September.
 See Ministerial Order 165/2020 of 7 July, and the relevant platform: https://servicos.tribunais.org.pt/servicos/arbitragem-administrativa-tributaria.
 See Decree-Law 10/2011 of 20 January, as amended by Laws 64-B/2011 of 30 December, 20/2012 of 14 May and 66-B/2012 of 31 December.
 Decree-Law 110/2018 of 10 December.
 See Law 24/96 of 31 July, as amended by Law 63/2019 of 16 August.
 Decisions of the Lisbon Court of Appeal of 11 February 2020, Case No. 1577/18.0YRLSB-1 of 23 January 2020, Case No. 661/18.4YRLSB-2 of 1 February 2018, Case No.1320/17.0YRLSB-8 and of 24 March 2015, Case No. 1361/14.0YRLSB.L1-1; Decision of the Oporto Court of Appeal of 3 June 2014, Case No. 583/12.2TVPRT.P1; all available at www.dgsi.pt.
 Decisions of the Supreme Court of Justice of 20 March 2018, Case No. 1149/14.8T8LRS.L1.S1 of 8 February 2018, Case No. 461/14.0TJLSB.L1.S1; Decisions of the Lisbon Court of Appeal of 20 June 2017, Case No. 5365/15.7T8LSB-D.L1-7 of 6 April 2017, Case No. 461/14.0TJLSB.L1-2 of 12 October 2016, Case No. 2130/14.2T8CSC.L1-4 of 29 September 2015, Case No. 827/15.9YRLSB-1 and of 24 March 2015, Case No. 1361/14.0YRLSB.L1-1; Decision of the Oporto Court of Appeal of 7 May 2020, Case No. 1188/16.4T8STS.P1 of 3 June 2014, Case No. 583/12.2TVPRT.P1; Decision of the Évora Court of Appeal of 8 September 2016, Case No. 204/14.9T2GDL.E1; all available at www.dgsi.pt.
 Decisions of the Supreme Court of Justice of 21 June 2016, Case No. 301/14.0TVLSB.L1.S1 of 12 May 2016, Case No. 710/14.5TVLSB-A.L1.S1 and of 9 July 2015, Case No. 1770/13.1TVLSB.L1.S1; of the Appeal Court of Lisbon of 13 September 2016, Case No. 581/16.7YRLSB.-1 of 7 July 2016, Case No. 508/14.0TBLNH-A.L1-2; all available at www.dgsi.pt. There are, however, some decisions that consider this text inadequate for the real Portuguese arbitration market, especially in patent disputes. See more recently the Decision of the Appeal Court of Lisbon of 22.01.2019, Case No. 1574/18.5YRLSB.L1-7, available at www.dgsi.pt.
 Decisions of the Supreme Court of 1 October 2019, Case No. 1254/17.9YRLSB.S1 of 26 September 2017, Case No. 1008/14.4YRLSB.L1.S1, of 27 April 2017, Case No. 93/16.9YRCBR.S1 of 14 March 2017, Case No. 103/13.1YRLSB.S1 Decisions of the Lisbon Court of Appeal of 9 September 2019, Case No. 382/19.0YRLSB-1 of 14 April 2016, Case No. 2455/13.4YYLSB-A.L1-2 and of 15 March 2016, Case No. 871/15.6YRLSB-7; all available at www.dgsi.pt.
 As examples, see Decision of 30 May 2017, Case No. 39/16.4YRLSB-1 of 14 July 2016, Case No. 660/16.0YRLSB-2; Decision of 12 February 2015, Case No. 1551/14.5YRLSB-8; Decision of 15 January 2015, Case No. 1362/14.8YRLSB.L1-8; Decision of 4 December 2014, Case No. 1181_14.1YRLSB.L1-6; Decision of 1 July 2014, Case No. 200/14.6YRLSB-7; Decision of 29 April 2014, Case No. 1337/13.4YRLSB-7; Decision of 13 February 2014, Case No. 1053/13.7YRLSB-2; Decision of 13 February 2014, Case No. 1068/13.5YRLSB-6; Decision of 06 February 2014, Case No. 866/13.4YRLSB-2; all of the Lisbon Court of Appeal and available at www.dgsi.pt.
 See, for example, Decisions of the Supreme Court of Justice of 12 November 2019, Case No. 8927/18.7T8LSB-A.L1.S1; Decision of the Lisbon Court of Appeal of 5 March 2020, Case No. 415/18.8T8SNT.L1-2 of 22 September 2015, Case No. 1212/14.5T8LSB.L1-7, all available at www.dgsi.pt.
 See, for example, Decision of 19 March 2017, Case No. 1052/14.1TBBCL.P1.S1 and of 22 September 2016, Case No. 660/15.8YRLSB.L1.S1, both from the Supreme Court; Decision of 26.11.2019, Case No. 100/19.3YRCBR.C1 of the Court of Appeals of Coimbra; all available at www.dgsi.pt.
 Decision of 28 May 2015, Case No. 2040/13.0TVLSB.L1.S1; Decision of 2 June 2015, Case No. 1279/14.6TVLSB.S1; both of the Supreme Court. Decision of the Lisbon Court of Appeal of 4 November 2014, Case No. 194466/12.2YIPRT.L1-7; all available at www.dgsi.pt
 Decision of the Lisbon Court of Appeal of 24 March 2015, Case No. 7666/13.0TBOER.L1-1; Decision of the Oporto Court of Appeal of 10 February 2015, Case No. 3795/13.8TBMTS.P1; all available at www.dgsi.pt.
 The LAV accepts, with almost absolute flexibility, the rules of national and international centres and, therefore, many of the articles of the LAV have only subsidiary application in the case of institutional arbitration.
 See Manual de Arbitragem International Lusófona, Vol. I, Catarina Monteiro Pires & Rui Pereira Dias (eds), Almedina, 2020.