Portuguese Voluntary Arbitration: An ongoing cultural change

​published on July 4, 2018

Portuguese law admits 2 different types of arbitration: voluntary arbitration (arising from the will of the parties) or mandatory arbitration (arising from special legislation that imposes such procedure).
 
Voluntary arbitration was governed for many years by Law 31/86 of 29 August which entered into force on 28 November 1986, with minor amendments by decree law 38/2003 of 8 March.

 
Its essential matrix was based on principles such as freedom of contract in the constitution and operation of the Court of Arbitration, the jurisdictional efficiency of the arbitration decision independent of judicial court intervention and the incentive to the institutionalized arbitration (using permanent arbitration centres and pre-existent to the dispute).
 
Nevertheless, the application experience by arbitrators, attorneys and judicial courts has slowly shown the need for the government to consider revising the arbitration law, not only to adapt the text to arbitration law evolution in the past twenty-five years, with important legal reforms in many countries and territories, for instance Spain, England, Germany, Finland, Italy, Ireland, Greece, Sweden, but also to clarify a few articles which were responsible for complex interpretations.
 
In this path for reform one of the inevitable references to follow was obviously the model law of 21 June, 1985, UNCITRAL (United Nations Commission on International Trade Law) – the model law was not, as one may think at a first glance, solely intended to harmonize the international commercial arbitration regimes. In fact, since the last decades its harmonizing influence was extended also to internal arbitration, having been used as a model to various national legal regimes (for example, the 2003 Spanish arbitration law, which majority of articles can be lead back to the model law).
 
It also seems evident that the Portuguese reform could not be an exclusive application of UNCITRAL model law, because it would surely not be the most adequate solution in light of the Portuguese arbitration tradition. However, it is also unquestionable that in an ever more competitive and global world the Portuguese arbitration law could not ignore those that were the European and worldwide arbitration trends.
 
Furthermore, systematically following the modern European legal trends it is essential that one understands that arbitration is today a preferred vehicle, using the legal system to help a country become more competitive.
 
Additionally, if the Portuguese objective was the promotion of the country as a preferred hub for international arbitrations, it was also evident that the Portuguese arbitration law should be in accordance with the new world realities and above all to the XXI century trends.
 
In that demanding legislative procedure, some questions were seriously considered by the Portuguese legislator.
 
First of all, the excessive and growing judicialization of the arbitration courts. Today, judicial intervention generally undertakes two essential strands: firstly, to support the arbitration procedure and secondly, to appraise the legality of the procedure. If we think that the judicial courts may be called on to undertake a decisive role on the arbitration procedure in phases and matters as distinct as, for example, the nomination of the arbitrators, the nomination of the president of the arbitration court, proof gathering, the deposit of the arbitration decision, the confirmation of a foreign arbitration decision, to trial appeals, to trial an annulment procedure or the execution of an arbitration decision, we rapidly concluded that to consider the role of judicial courts was not only a concern but also timely and necessary.
 
In that time it was clear for the Portuguese legislator that the fundamental principle to be adopted was a residual and minimum intervention of the judicial courts within the arbitration procedures.
 
On the other hand, the silence of Portuguese arbitration law regarding issuing injunctions by the arbitration courts was also one of the aspects that has been underlined by several authors and jurisprudence alike has one of the causes for disturbance. Another aspect that was a priority for us was the explicit permissibility of the immediate revelation principle. This principle / duty foresees the mandatory obligation for arbitrators to reveal certain facts that may be an indication or that indicate possible conflict of interest situations. In these situations, arbitrators should have the obligation and the duty to immediately communicate these facts to the parties as soon as those same facts are known by the arbitrator. In my opinion the explicit adoption of this principle ended up contributing to make arbitration more credible and in general to make alternative dispute resolution mechanisms more credible.
 
Other situations such as multi-party arbitrations, multi-contract arbitrations or with entities of the same company group were also provided in the new arbitration law. The possibility to clarify and correct the arbitration decisions without causing the extinction of the jurisdictional power of the arbitrators, the appeals regime standardization, both in international and national arbitration, and the reinforcement of the annulment causes of the arbitral awards were matters included in the adjustment of the Portuguese arbitration law.
 
The adoption of new technologies in the notifications regime – which was based on the old and surpassed letter with receipt notice –, the possibility to litigate electronically or even to litigate in different locations with the possibility to execute material acts, as well as the adoption in the arbitration procedure of different languages were factors inevitable and also expressly introduced as factors of competence of Portuguese law.
 
The Portuguese goal was clear. 
 
We believe that it was possible and desirable to review the arbitration law by creating an adequate legal framework not only to develop and disseminate internal voluntary arbitration but also to transform Portugal into a preferred international arbitration hub with the consequent legal, social and economic benefits.
The last few years have given us reason with a significant development of arbitration in Portugal.
Arbitration is increasingly consolidated in Portugal. There is an ongoing cultural change but there is still plenty to do.