Author: Duarte G Henriques

Posted on

Costs of Arbitration in Portugal

Arbitration Costs in Portugal

When selecting a dispute resolution method, the expense of arbitration is a primary consideration. As disputes become unavoidable, parties often first wonder, “What will the financial implications be?” Sometimes, by this stage, it might feel late for such considerations.


Surprisingly, many arbitration agreements don’t directly address cost concerns. Typically, detailed discussions on this topic emerge only in prominent cases during dispute resolution clause negotiations. One reason might be that during the initial agreement, parties either don’t anticipate conflicts or underestimate the financial ramifications of their chosen method. In some instances, due to time constraints (a situation often referred to as “midnight clauses”), parties might hastily use a standard clause from an arbitration institute, assuming it addresses all potential concerns. However, by the time conflicts manifest, reevaluating such decisions is often not feasible.


This overview generally aligns with the situation in Portugal. Arbitration in Portugal often incurs higher costs than state court litigation.


There’s a belief that for disputes involving sums greater than €3 million, arbitration proves more economical. But this notion isn’t entirely grounded. The Judicial Procedural Costs Regulation grants judges the discretion to forgo final account preparations in cases, implying parties might not face additional costs beyond initial procedural fees. When making such a determination, judges consider the case’s intricacies and the efforts invested. Portugal’s Constitutional Court has clarified that any decision that fails to account for these factors, while still mandating parties to adhere to the full Regulation’s cost schedule, contravenes the national Constitution. Thus, in most cases, judges are inclined to trim the payable amounts.


Furthermore, the prevailing party in a court scenario cannot fully recuperate all costs tied to their claim or defense, especially legal team expenses. These recoverable sums are generally a fraction of the total legal fees. On the contrary, according to Portuguese Arbitration Law and prevalent arbitration institution rules, arbitrators have the liberty to incorporate legal fees into the final award, determining the extent borne by the unsuccessful party.


This flexibility often renders arbitration more enticing compared to court proceedings. However, it’s pivotal to juxtapose this with the initial financial outlay that arbitration participants typically need to cover, often in full, prior to the award.


Lastly, when looking globally, Portugal boasts several competitive advantages in arbitration expenses. One of the advantages is that, while maintaining high-quality legal services, attorney charges are considerably lower than in other leading jurisdictions. Another advantage in this respect is that arbitral institutions usually entail reduced costs when compared to other international venues.

Posted on

Independence and Impartiality of Arbitrators and Artificial Intelligence

Victoria Associates - International Disputes

The independence and impartiality of the arbitrators is a long lasting hot topic in international arbitration. Indeed, one of the fundamental requirements of the decision-making process of arbitration is that the arbitrators must be, and remain throughout the entire proceeding, independent and impartial.

When selecting the arbitrators, there are a number of questions that arise, and running a proper conflict of interests check is paramount, lest there is any circumstance related to the arbitrator’s independence and impartiality that may jeopardise the entire process.

In this regard, we can ask the questions: can AI help in selecting (or even make the final decision on the selection of) the arbitrator? How does the use o AI help in relation to the independence and impartiality of the arbitrators?

The use of AI in the selection of arbitrators can definitely help and have a positive impact on the independence and impartiality of arbitrators.

Here are some specific advantages:

1. Objective evaluation: AI algorithms can assess the qualifications, experience, and performance records of potential arbitrators in an objective manner, without being influenced by personal biases or subjective factors. This helps ensure a fair and unbiased evaluation of candidates based on their merits, enhancing the independence of the selection process.

2. Reduced human bias: human biases, conscious or unconscious, can sometimes affect the selection of arbitrators. By relying on AI algorithms, which are designed to be neutral and objective, the risk of bias in the selection process can be minimized. This promotes greater impartiality in choosing arbitrators.

3. Comprehensive analysis: AI systems can gather and analyse extensive data on potential arbitrators, including their past cases, decisions, and feedback from parties involved. This comprehensive analysis allows parties to make more informed decisions based on objective information, reducing the reliance on subjective assessments and further enhancing the impartiality of the selection process.

4. Diverse and inclusive selection: AI can help address concerns about diversity and inclusivity in arbitrator appointments. By examining a wide range of data and criteria, AI algorithms can identify a more diverse pool of candidates, including individuals from different backgrounds, genders, and regions. This promotes inclusivity and contributes to the independence and impartiality of the arbitration process.

5. Transparent and traceable process: The use of AI in arbitrator selection can provide transparency by offering a clear and traceable process. Parties can understand the criteria and factors that led to the selection of a particular arbitrator, ensuring transparency in the decision-making process. This transparency fosters confidence in the independence and impartiality of the selected arbitrator.

It is important to note that while AI can enhance the independence and impartiality of arbitrator selection, it should not replace the exercise of human judgment. Human oversight and final decision-making remain crucial in considering the unique circumstances of each case. AI should be viewed as a tool to assist and augment the selection process, reinforcing the core principles of independence and impartiality in arbitration.

Photo of Saúl Bucio on Unsplash

Posted on

Arbitration and Art Law: Navigating the Intersection of two Complex Fields

The need for expertise

As the art world continues to grow, so does the need for professionals who understand both the legal and commercial aspects of the industry. With the increasing frequency of disputes in the art market, it is crucial to have a deep understanding of arbitration and its relationship with art law.

Arbitration is a method of resolving disputes outside of the traditional court system. It is often used in art law to settle disputes between buyers and sellers, collectors and museums, and artists and galleries. The key benefit of arbitration is that it provides a confidential and efficient process for resolving disputes, without the need for public court proceedings.

Art law, on the other hand, covers a wide range of legal issues related to the creation, ownership, and sale of art. It encompasses areas such as copyright, trademark, and cultural heritage laws, as well as contracts and negotiations in the art market.

As arbitration and art law intersect, it is essential for professionals to have a thorough understanding of both fields. Whether you are a lawyer, art dealer, or artist, having a deep understanding of both arbitration and art law will give you a significant competitive advantage in the art world.

Types of Disputes in the Art sector

The art sector is subject to a variety of disputes, including:

  1. Ownership disputes: when multiple parties claim ownership of the same work of art.
  2. Authentication disputes: when the authenticity of a work of art is called into question.
  3. Contract disputes: when disagreements arise over the terms of an agreement between an artist, gallery, or collector and a buyer.
  4. Copyright disputes: when someone uses a work of art without the permission of the copyright holder.
  5. Forgery disputes: when a work of art is found to be a fake or counterfeit.
  6. Insurance disputes: disagreements between insurance companies and policyholders over coverage for losses related to works of art.
  7. Financing disputes: when a work of art is used as a collateral in a financial facility.
  8. Valuation disputes: when the value of a work of art is in dispute, often in the context of insurance or tax matters.
  9. Cultural heritage disputes: disputes over the ownership and display of cultural artifacts, including works of art.

Stakeholders to Disputes in Art Law

In art law disputes, there can be several potential stakeholders, including:

  1. Artists – They have a vested interest in the protection of their work and the recognition of their rights as creators.
  2. Collectors – They may be involved in disputes over authenticity, title, and ownership of artworks.
  3. Dealers and Galleries – They can be impacted by disputes over commission, fraud, and breaches of contract related to the sale or exhibition of art.
  4. Auction Houses – They can be parties to disputes involving the sale or authenticity of artworks.
  5. Insurance Companies – They may be involved in disputes over coverage for loss or damage to artworks.
  6. Museums – They may be involved in disputes over the ownership, loan, or exhibition of artworks.
  7. Estate Executors and Heirs – They may be involved in disputes over the distribution of artworks in an estate.
  8. Governments and Public Institutions – They may be parties to disputes over the return of cultural heritage or stolen artworks.

These stakeholders may seek to assert their rights and interests through various legal mechanisms and arbitration is surely the best tool to do so.

***

Duarte Henriques is a founder member of Victoria Associates and he is arbitrator listed at the Court of Arbitration for Art (CAfA)

#Arbitration #ArtLaw #Legal #ArtMarket #Culture #Heritage #Copyright #Trademark #Negotiations #Disputes #Confidentiality #Efficiency #CompetitiveAdvantage #Lawyers #ArtDealers #Artists

(Photo of Steve Johnson on Unsplash)

Posted on

Third-Party Funding: Portuguese and International Experiences and Current Trends

When Third-Party Funding (TPF) is mentioned, surely the first question that (still) arises for most people is: what is it all about? If we translate this expression into “third-party funding of litigation”, perhaps the doubts will be dispelled for the overwhelming majority of people. However, it is inevitable to question right away what TPF really is and how it works.

The business model can be summarised as follows: for a lawsuit or set of lawsuits, there is a third party that will bear all the costs (including the lawyer’s fees and, in the case of arbitration, the arbitrators’ fees) in exchange for a percentage of the amount received by the financed party (usually 30% to 40%) or a multiple of the money invested (typically between three and five times, i.e. for every euro financed, the third party will receive between three and five euros). The specificity of this business model is that there is only an obligation to repay if the client succeeds; if the client loses the case, the funder will not be entitled to recover the amounts that were spent in the case.

This is, broadly speaking, the business model. But, there is an inevitable question that follows: is it “legal”? Is there not a quota litis prohibited by ethical regulation? The answer, categorically, is: no! There is no legal rule that prohibits this business model. Nor does it involve any violation of the ethical duties of the lawyer (in particular the prohibition of quota litis), provided that the lawyer does not allow the relationship with his client and with the cases he handles to become conditioned or submitted to rights and duties that should typically be located only within the agreement between funder and funded party.

By way of example: it may be thought that the funder (because it is the funder who up-fronts the cash to move the case forward), will determine the way the process is conducted and will condition the procedural strategy (including the choice of counsel). This would involve a clear violation of the lawyers’ ethical duties. Admittedly, this type of conditioning may occur, particularly when the funder is not “comfortable” with the legal team, either because they have never worked with them or for any other reason. However, our experience shows otherwise.
In cases where we have worked with third party funding, the funder already knows the team of lawyers well. Often, the funders themselves come to us to understand which cases they can fund, which involves a judgement of trust in the team that is in charge of sponsoring the case. Afterwards, during the case, the funders limit themselves to a monitoring of the case in a “light touch mode”.

Despite the attractiveness that this model involves, there is a catch, because not all the cases are likely to be funded.

Firstly – and one would expect nothing less – the case must have a fair chance of success (better said: the case needs to present a high likelihood of success, typically above 80% of chances of prevailing). It is therefore expected that due diligence of the case and of the entities involved will be conducted to some extent and depth. This immediately raises a concern: information provided to the funder is not covered by professional privilege, which naturally impacts on the confidentiality of the information.

Secondly, not all the amounts involved are attractive to funders. Internationally, and from what we have seen in our practice, it is very difficult to find anyone willing to fund litigation involving sums of less than 10 or 15 million euros. The reason for this threshold is that the entities that, in turn, are behind the third party funders, and the funders themselves, are looking for minimum returns on their investments.

This point means that the phenomenon is not yet very popular in Portugal. It is not that there are not areas of the law where this financing could blossom (for example, companies in insolvency or actions related to intellectual property rights, especially patents). Among us, business initiatives to launch this financial model have already been started but, as we see it, they do not seem to be adjusted to the dimension of the Portuguese landscape. We must keep in mind the scale of our legal market and must direct the focus towards small and medium litigation of SMEs which are the ones that mostly make up the business fabric of our country. Eventually, some more specific and higher value cases may benefit from this funding, but those will be isolated cases.

There are some trends that have been developing, as regards TPF, at the international level, more specifically in international arbitration and, within this, in investment arbitration.
The most prominent one concerns the duty to disclose the existence and identity of the funder in order to ascertain the existence of conflicts of interest. In fact, it is enough to think that one of the arbitrators has a connection with the funder (because the funder has funded another case where the arbitrator acts as counsel for the party, to give just one example) to understand that the integrity of the tribunal (its independence and impartiality) may be at risk.

From this point, a duty of disclosure has been firmly affirmed and is virtually internationally consolidated. However, this (limited) duty of disclosure has quickly evolved into a duty to disclose the terms and conditions of the funding arrangement, with a view to address another very hot topic in this area.

We are referring to the problem of the security to cover the costs of the proceedings (cautio judicatum solvi or “security for costs”). In fact, when the existence of a third-party funder is known, the logical step is to presume, as some (admittedly few) arbitral tribunals have already done, that the (funded) claimant is not in a position to honour a potential “adverse” award obliging him to pay the costs of the winning party. And from this it will invariably follow a request for that funded party to provide security for costs. The understanding of the vast majority of arbitral tribunals has been very restrictive on this point since, addressing it as a typical interim measure, they require the verification of all its requirements (including the danger of not being able to recover the costs). International arbitral tribunals also have made a point that the existence of a TPF is not synonymous to “impecuniosity”. However, it is clear that respondent parties in arbitration, when suspecting or knowing about the existence of a funding arrangement, very hardly escape from the temptation to seek security for costs, as it also represents a weapon to weaken the strategy and distract the procedural endeavours of the claimant.
Nonetheless, often times a poor command of the issue on security for costs endangers the procedural strategy (of either claimant or respondent). A curious example in this regard occurred in an investment arbitration case where the arbitral tribunal relied on a statement made by the legal team (who had stated that the law firm would be responsible for paying the costs of the arbitration) to require from the claimants the filling of a unilateral undertaking to pay those costs. The law firm eventually produced that undertaking.

This is indeed a point where the greatest care must be taken by counsel lest a court considers them to be the “funders of the litigation” and consequently orders them to pay the opposing party’s costs (as has it happened in the past in England).

There is no doubt, however, that the litigation financing by third parties continues to attract a great deal of attention and some criticism as well but, on the other hand, it deserves the necessary support because it represents an undeniably useful tool when it comes to guaranteeing access to the justice.

Photo by Lukasz Radziejewski on Unsplash

Posted on

Custody Deposit and Publication of Arbitral Awards

Custody Deposit and publication of arbitral awards

Portugal is unquestionably spearheading the use of technology, transparency and publicity regarding arbitration and, more particularly, arbitral awards.

Indeed, the recently enacted Ordinance (Portaria) nº 165/2020 of July 7, 2020 sets forth that all arbitral awards related to disputes involving matters of administrative law (whether or not administrated by arbitral institutions) or tax law (administered by the only authorized arbitral institution) are now subject to a custody deposit and to publication in a web-based platform.

The custody deposit must be requested by the presiding arbitrator or by the sole-arbitrator (not by the Chairman of the arbitral institution in question), through an online process which entails the upload of the award in pdf searchable format. The applicant must fill up the form with, inter alia, the following details:

  • Name and address (and other details) of the applicant;
  • Date of the award and date when the award has become final and subject to no appeal (if applicable);
  • Summary of the decision (redacted from any detail that could identify the parties in question);
  • Identity of the members of the tribunal;
  • Identity of the parties and related details;
  • Arbitration agreement whereby the public entity submitted itself to arbitration.

The platform will make those awards publicly available, with the following details:

  • Number and date of the deposit;
  • Date of the award and date when it has become final;
  • Identity of the members of the tribunal;
  • Summary of the decision (redacted from any detail that could identify the parties in question);
  • Full text of the award (redacted from any detail that could identify the parties in question); and
  • Indication of whether the arbitration was administered by an arbitral institution and, if so, identity of the arbitral institution.

This step certainly represents a progress towards transparency in arbitrations involving public entities, making arbitration less opaque and subject to public scrutiny, which have been the major criticisms that have been levelled against the use of arbitration by those entities.

If you want to learn more about arbitration and international dispute resolution, please reach out to us — info@victoria.associates

Posted on

Why Arbitrate in Portugal? Reason 8 – Internationally Oriented Community

International Arbitration & Portugal

Internationally Oriented Community

International arbitration in Portugal has taken off in recent years, and as previous posts have discussed, there are a wide variety of compelling reasons why this has been the case. Past posts have touched upon some aspects of how Portugal is internationally oriented in terms of the longstanding cultural and legal ties with Lusophonic countries as well as it being a country where the vast majority of the population speaks a relatively comprehensive level of English.

In Portugal, international standards are applied when dealing with international arbitration cases. International events regularly take place in Portugal and shed new and innovative light on the topic at hand, including the ICC Portugal Arbitration Day, with the second edition having taken place during 2018. ICC Portugal has now existed for 80 years and has had the mission of organizing not only Portugal Arbitration Day but has also taken on the task of putting together several workshops and conferences with the goal of extending a hand to the international arbitration community.

ICC Portugal has members from over 130 different countries, including businesses and associations, making it among the few with such a vast and diverse community. The fact that Portugal partakes in these events show its willingness to open itself up to the world in terms of showcasing the positive qualities as a sound jurisdiction for the resolution of disputes.

Portugal is considered to be among the best jurisdictions, recognized on an international level, when it comes to the ease of resolving disputes. Portugal is 9th in the European Union in regards to the ease of resolving insolvency and considered to be 15th in the world.

Portugal has also been considered appealing to the international community due to the pro-arbitration mindset of the Portuguese Courts. The courts act with swift procedures to assist arbitrations. Another advantage within this realm are dedicated

Portuguese practitioners also regularly publish articles in English, in order to reach a wider audience. The Portuguese arbitration community is in permanent contact with other communities including the Brazilian, Spanish and French colleagues.

Posted on

Why Arbitrate in Portugal? Reason 7 – Supportive Courts

International Arbitration & Portugal

Supportive State Courts

In addition to the several previously mentioned advantages in regards to selecting Portugal as an all-encompassing jurisdiction for the resolution of international arbitration disputes, it is worthwhile mentioning the adaptive and supportive Portuguese state courts.

As touched upon in previous posts, Portugal shares historic and legal roots with other Lusophonic countries, which has been a critical factor in the selection of Portugal in the execution of bilateral agreements, making it appealing as a jurisdiction for international arbitration. These agreements have led to Portugal being considered as having supportive state courts within the realm of arbitration.

Courts in Portugal consistently adhere to the principle that the arbitral tribunals are competent to decide on their own competency. A number of cases related to swaps show that courts do not hesitate to refer parties to arbitration even in the event that there exist allegations that these contracts are null for violating public policy. Arbitral tribunals are sufficiently competent to decide on the costs of arbitration, and courts will only intervene where excessive situations occur. Arbitral awards are only set aside when there is a violation of public policy or other fundamental principles of arbitration – which is very rare!

The UNCITRAL Model Law contains the fundamental principles of party autonomy as well as all the legal tools necessary for the successful resolution of an international arbitration dispute. These tools, embodied within the Portuguese state court system, include equality of parties, due process as well as the finality of the award. Another advantage of this system entails the fact that any dispute can be subject to arbitration as long as it is not exclusively submitted to the state courts and concern economic interests. Disputes not involving economic interests can also be subject to arbitration so long as the dispute in question is capable of being subject to a settlement by the parties. The state court system also allows for the arbitration of issues concerning labor agreements, which in the past were only open for dispute within judicial courts.

LEARN MORE

If you would like more information or have any questions regarding international arbitration in Portugal, please send us an email to info@victoria.associates and we will be in touch as soon as is possible.

Posted on

Why Arbitrate in Portugal? Reason 6 – A Robust Legal System

International Arbitration & Portuguese Law

A robust legal system

When selecting a jurisdiction for international arbitration, as noted in previous posts, there are several important factors to consider, among them, is the legal system of the country chosen. Portugal has recently implemented some changes to its legal system, including to international arbitration laws, which make it an alluring jurisdiction.

On the 14th of March 2012 the new Portuguese Voluntary Arbitration Law (PAL) came into effect and revoked the former, and more outdated, Portuguese arbitration law. The PAL is inspired by the Uncitral Model Law, and aims to introduce a more modernized system for arbitration and further promote Portugal as an appealing jurisdiction for international arbitration.

PAL provides for the most in-demand features ranging from the principle of separability of arbitration agreements as well as the competence of arbitral tribunals to decide on their own competence to the joinder of third parties, as well as the powers that are granted to arbitral tribunals to order interim measures in pending or about to start arbitrations. The general advantageous principles underlying the PAL are:

  • Party autonomy;
  • Kompetenz-kompetenz: the PAL confers jurisdiction on state courts to decide a dispute only where the arbitration agreement is manifestly null and void, inoperative or incapable of being performed;
  • Adhering to procedural principles such as, party equality, due and fair process, and the adversarial principle.

The principle of separability of the arbitration clause recognized by the PAL is also an advantage as a finding of nullity or unenforceability of the contract will not affect the validity of the arbitration clause.

Arbitral awards in Portugal are final and subject to no appeal. An annulment of the arbitral award may only be granted under very limited and special circumstances. This new arbitration law also provides for very constricted and limited circumstances under which a foreign arbitral award may be refused recognition and enforcement.

Portugal is a part of around 60 bilateral investment treaties, making it a prime location for the resolution of international arbitration cases from a varying and wide range of countries.  Portugal is also a signatory party to the most relevant international treaties related to arbitration, such as the New York Convention and the International Centre for Settlement of Investment Disputes (ICSID) Convention. Being a part of these various treaties makes it so that there is less legal confusion when selecting Portugal as a jurisdiction for arbitration.

LEARN MORE

If you would like more information or have any questions regarding international arbitration in Portugal, please send an email to info@victoria.associates and we will be in touch as soon as is possible.

Posted on

Why Arbitrate in Portugal? Reason 5 – Modern Country, Modern Facilities

Portugal & International Arbitration

Recently modernized infrastructures and facilities

Portugal is a developed country with many modern infrastructures and facilities. In recent times, Portugal has been considered a spearhead in terms of new technologies and IT solutions. This is especially relevant in terms of the fact that many of these new technologies have also been applied to the Portuguese judicial system.

Since the late 90’s, Portugal initiated a program to renovate and modernize its infrastructures, including court premises. The judicial system is supported by a modern IT infrastructure that allows almost every lawsuit to be managed online by court judges, court clerks and counsel. Almost every court judge will allow the taking of witness depositions via video-conferencing, including by Skype as well as other applications.

Portugal currently contains modern arbitration centres and state-of-the-art facilities to manage arbitrations and hold hearings. An example of those facilities may be found in the website of the Arbitration Centre of the Portuguese Chamber of Commerce and Industry (CAC) HERE.

Procedures before state courts are almost entirely managed through web-based platforms, the most important and notable of which is referred to as “Citius”, which was introduced by the Portuguese ministry of justice. Thanks to this web-based platform, paperless dockets have been a reality in Portugal for many years now. There are many other advantages of this platform including allowing for the submittal of court documents and decisions, as well as the consultation of proceedings by judges, lawyers and court clerks. Other advantages of this platform included notifications being provided online, as well as the logistical coordination of the proceedings themselves.

Arbitration has been benefiting from this new landscape, for example, if one party intends to begin arbitration and needs an interim measure; all that must be done is to file a request via the “Citius” web-based platform. The request will then arrive at the judge’s desk the following day. This online system works for every arbitration related matter that needs to be dealt with by state courts, with the exception of the Supreme Court of Justice.

What makes Portugal’s adaptation of modernized facilities and the usage of new technology in the judicial system is that not only has this greatly streamlined and facilitated the international arbitration dispute resolution process, but also that Portugal’s path to modernization, in comparison to other countries, has been less fraught with setbacks during this process.

LEARN MORE

If you would like more information or have any questions regarding international arbitration in Portugal, please send us an email to info@victoria.associates and we will be in touch as soon as is possible.

Posted on

Why Arbitrate in Portugal? Reason 4 – A Safe and Friendly Place

Portugal & International Arbitration

A safe, stable and reliable jurisdiction

Portugal, with its stable economic, political and legal systems has been growing increasing popular in the realm of being considered as an advantageous destination not only for tourism but also for the resolution of international arbitration disputes. Alongside this, Portugal is considered to be one of the safest countries in the world with a ranking as among the top 5 safest countries in the world, according to World Atlas.

With the recent destabilization in many European countries in regards to political, economic and even in terms of elevated terror threats, Portugal has remained among the very few which has remained stable in all these regards over the past years.

With the looming uncertainty of Brexit in the UK and the fact that the fate legal and political systems has been up in the air until the decision has been completely resolved, has deterred many from selecting the UK as a stable jurisdiction.

The rise of the extreme right in several other European countries has also served to destabilize not only their respective economies but has also brought uncertainty to the fate of their political and legal systems.

The rise of terrorism in Europe over the past few years in many countries has also served to dissuade many in seeking out these countries. There have been several significant terrorist attacks, and in some countries more than one attack, over the past decade alone in France, Germany, Norway, Ukraine, and the UK. Portugal’s terrorist threat index rate is the lowest within the EU, due to political, but also geographic reasons as it only borders Spain, with the other border being the Atlantic Ocean.

These considerations all factor into the selection of a safe and stable jurisdiction for the resolution of international arbitration disputes. Those who select Portugal as a jurisdiction have the peace of mind that at any given moment the political and legal systems won’t simply drastically change, thusly potentially negatively affecting the outcome of a successful resolution.

If you need more information, send us an email info@victoria.associates