Compensation in Distribution Contracts: a snapshot of Portuguese Law

I. Background

The right to compensation in the event of termination may arise in multiple legal contexts. The contracts where this issue arises the most are the distribution contracts (agency, franchise and the like).

In Portugal, distribution contracts do not follow a specific legal framework. However, there is a specific legal regime applying to agency contracts, enacted by Decree-Law no. 178/86, of July 3, 1986 and later amended by Decree-Law no. 118/93, of July 3, 1993). This legal regime may also be applicable by analogy to other (if) similar distribution contractual relationships (e.g., franchise or concession contracts). In such cases, one must take into account, among others, the type of business model in question and also the obligations arising from the contract to both parties.

II. Rights to compensation

According to the agency legal regime, there are two different compensations to consider in case of termination: (i) a compensation, in general terms, for damages resulting from the other party’s default or breach and (ii) a so called “goodwill compensation”. Consequently, the agent (or other type of distributor, depending on the case) is entitled to a general compensation when it has suffered damages resulting from the breach or violation of the contract by the other principal. In specific cases, this compensation shall be calculated according to equity.

The agent may also be entitled to a “goodwill compensation”, provided that the following cumulative criteria are met: (i) the agent has brought new customers to the principal or increased substantially the volume of business of the latter with existing clients; (ii) the principal will benefit considerably after the termination of the contract due to the agent‘s activity; and (iii) the agent ceases to receive any remuneration for the contracts negotiated or concluded, after termination of the contract, with the customers referred in the first criterion. Such compensation is determined in accordance with equity, but cannot exceed a value equivalent to an annuity, calculated out of the average annual remuneration received by the agent during the previous five-year period.

The question that follows is whether this “goodwill compensation” also applies in case of termination of other types of distribution contracts, by virtue of analogy. The answer is not clear as it will depend on a case-by-case assessment. However, as a general rule, we now have the guidance from the Portuguese Supreme Court of Justice. Indeed, the Portuguese Supreme Court of Justice affirmed that the criterion above mentioned in (iii) should also be considered for the purposes of awarding a “goodwill compensation” in the context of concession contracts (Judgement no. 6/2019, of 4 November 2019). In other words, when applying such regime to other types of distribution contracts in case of termination, all the criteria set forth in the agency legal framework must also be met.

Accordingly, other types of distributor may be accorded with the “goodwill compensation” in case of termination. This holds a very important consequence: indeed, according to the Portuguese law on the agency contract, the goodwill compensation is not subject to any waiver, that is, it is mandatory. This means that any distributor may not waive its right to goodwill compensation.

III. Final notes

Several other legal and contractual details exist, notably when the reality of each business differs and parties agree on clauses to better suit their contractual relationship. This is why the application of the agency legal regime to other types of contracts should be considered cautiously and on case-by-case basis.

The Portuguese team of Victoria Associates has successfully represented clients in disputes related to termination of distribution contracts and welcomes any question that may arise in this context (

Victoria Associates


Duarte G Henriques

João Nuno Frazão

SVAMC Task Force on Tech Disputes, Tech Companies & International Arbitration

Victoria Associates’ Member Duarte G Henriques is co-chairing the Silicon Valley Arbitration and Mediation Center Task Force on Tech Disputes, Tech Companies & International ArbitrationThe Silicon Valley Arbitration and Mediation Center (SVAMC), a not-for-profit “think tank” organization with a global focus that encourages the use of alternative dispute resolution in the technology sector, has established this Task Force on Tech Disputes, Tech Companies & International Arbitration (the “Task Force”).

The Task Force, which is led by Paul Cohen, Duarte Henriques and Patricia Shaughnessy, seeks to explore the apparent underrepresentation of global technology companies in the arbitration community.

The lack of use of arbitration by this resourceful industry puzzles as arbitration would seem to offer a particularly attractive dispute resolution mechanism for technology company disputes. Unlike litigation, arbitration offers expeditious, private, flexible, effective adjudication by specialized arbitrators resulting in awards enforceable in 162 countries. The Task Force aims to find out why this is so through a comprehensive study using reliable methodologies and engaging in dialog with technology companies and other relevant players in the sector. Through the study and dialog with leaders and lawyers in the tech sector, the arbitration community can learn how to better serve this sector, as well as share needed information about the process and opportunities that arbitration may offer.

The Task Force also envisages to offer a bundle of tools that can make the use of arbitration more friendly for those who may be less familiar with its advantages, are accustomed to state court litigation, or have some negative impressions of arbitration.As a starting point, the Task Force has ventured some initial premises that may underlie the underuse of arbitration by technology companies; these premises are discussed in the White Paper.

The Task Force will test and adjust these premises through research, a large-scale survey, and dialog with the tech sector. A diverse working-group of experts representing different backgrounds and regions will be enlisted to carry-out the work. The on-going work of the Task Force will be presented for public discussion and comment to ensure robust review and to enhance collaboration within the arbitration and the technology business communities.

The Task Force report will become a public document which can serve to explain and adapt arbitration to technology companies needs and to inform the tech industry about the suitability of arbitration for effectively resolving their disputes.


Patricia Shaughnessy

Paul Cohen

Duarte G. Henriques

Download the white paper HERE

Katie Hyman & João Nuno Frazão Join Victoria Associates

It is our pleasure to announce the Victoria Associates’ new members. Katie Hyman, based in Washington DC, and João Nuno Frazão, based in Lisbon joined Victoria Associates as of September 2020.

Katie Hyman is dual-qualified as an English solicitor and New York attorney and is admitted as a special legal consultant in the District of Columbia. She is widely experienced in international dispute resolution, including multijurisdictional, offshore and investor-state matters.

Katie represents a variety of clients, including in the energy and telecoms industries, in high-value, complex international commercial arbitration proceedings under the major arbitral rules all over the world, as well as in investor-state arbitrations. She is a Fellow of the Chartered Institute of Arbitrators, and accepts arbitrator appointments in addition to her practice as counsel.

With this addition, Victoria Associates has now offices in Washington D.C.

João Nuno Frazão is a lawyer qualified in Portugal, admitted to the Portuguese Bar Assocation in 2016. João is a PhD candidate at Nova School of Law, with research focused on Space Law, International Law and European Law.

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 —

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.

How Victoria Associates is boosting my international practice

How Victoria Associates is boosting my international practice

By Duarte G Henriques

Perhaps the biggest challenge that I face as an international arbitration practitioner is myself. As you all may know, I’m born, brought up and educated in Portugal and in Portuguese law (or, from a negative point of view, I wasn’t born or educated in an English environment). 
This can represent a major hindrance for an international career. Let’s face it: in the international disputes arena, Portugal is largely peripheral; and if one doesn’t speak English at native level or if one isn’t educated in a common law system, the chances of getting appointments as arbitrator or being retained for arbitration cases located outside Portugal, are rather minimal. 

You have to take the cards you are dealt and the key is to take advantage of the situation and make it into a strong point as Portugal has done in various contexts such as the United Nations and the European Union. The Portuguese are known for their willingness to leave their comfort zone and explore the world taking advantage of what it offers to those who are hardy and courageous. Our people are known to be hard working, fair and reasonable. That is why I feel so comfortable being a part of Victoria Associates.

Having invested “tons” of hours in training and developed “international” skills throughout the years (which, in any event, has brought me very interesting international cases where I’ve been acted as counsel or arbitrator), the founding of Victoria Associates has been simply spectacular. 

Since the beginning of 2020, I’ve been approached a number of times to represent new clients and to serve as arbitrator in international cases. None related Portugal. No Portuguese language or seat, nor even the law of Portugal (or other Portuguese speaking countries). Truly international cases. 

Just to point out two recent cases, since January 2020 I was appointed as co-arbitrator and chairman in two arbitrations seated in Hong Kong (one “institutional” and the other “ad hoc”), the other arbitrators coming from London, Perth (coincidentally two of them), Hong Kong and Singapore. The parties come from different corners of the world. English law applies to both cases. And, it goes without saying, English is the language of the proceedings. 

Now, how did I accomplish that? Many factors contributed but Victoria Associates is the crowning touch, the factor which brings everything together.

Indeed, with the different international backgrounds and educations, and global reach, the members of Victoria Associates can work virtually everywhere, out of any country and under any law. 

All VA members embarked on this new venture with passion: We do what we like, and we like what we do!

And share the risks and rewards with our clients. 

Victoria Associates is already a tale of success, in spite of these troubled times. So it is more than appropriate to say: 

Embark with us!!!

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.


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

Fourth Circuit held that parties can apply for discovery orders from federal district courts to support foreign seated commercial arbitration

Fourth Circuit held that parties can apply for discovery orders from federal district courts under Section 1782 to support foreign seated private arbitration – case note of Servotronics, Inc. v. Boeing Co., No. 18-2454 (4th Cir. March 30, 2020)

Tony Ng, Kathryn (Lee) Boyd and George Yates

The United States Court of Appeal for the Fourth Circuit has recently held that federal district courts can order discovery in support of foreign-seated private commercial arbitration under Section 28 U.S.C. § 1782. This decision, together with the Sixth Circuit in re Application to Obtain Discovery for Use in Foreign Proceedings, 939 F.3d 710, 723 (6th Cir. 2019), have created a split with the previous rulings of the Second and Fifth Circuits in which the courts held that federal district courts do not have the power to order discovery for private arbitration seated outside the US.

Circuit Court Decisions before Boeing

Section 1782 provides that a U.S. district court may, on the request of an interested party, provide assistance in connection with a proceeding before “a foreign or international tribunal” by ordering a person in its district to give his “testimony or statement or to produce a document or other thing” to support an arbitration. But can parties in foreign seated private arbitration obtain Section 1782 assistance? The issue will then be whether a private arbitral tribunal is a “foreign or international tribunal” under Section 1782.

i. Second and Fifth Circuits in Bear Stearns and Biedermann

In National Broadcasting Company, Inc. v. Bear Stearns & Co., Inc., 165 F.3d 184 (2d Cir. 1999) and Republic of Kazakhstan v. Biedermann International, 168 F.3d 880 (5th Cir. 1999), the Second and Fifth Circuits held that, in respect of arbitration,
Section 1782 assistance is only available to governmental or intergovernmental arbitral tribunals.

Those courts arrived at their conclusion by focusing on the absence in the legislative history of Section 1782 of any mention of private arbitral proceedings [1][2]. In particular, the Second Circuit considered that “significant congressional expansion of American judicial assistance to international arbitral panels created exclusively by private parties would not have been lightly undertaken by Congress without at least a mention of this legislative intention.[3]. Both the Fifth and Second Circuits also relied on several policy considerations to deny the expansion of Section 1782 assistance to private arbitration, including that such authorisation would undermine the efficiency of the arbitration proceedings [4].

ii. Sixth Circuit in re Application to Obtain Discovery for Use in Foreign Proceedings

Twenty years later in 2019, the Sixth Circuit veered from the Second and Fifth Circuits and held that a private commercial arbitration tribunal is a “foreign and international tribunal” under Section 1728.

The Sixth Circuit reached its conclusion mostly by a textual analysis of “foreign and international tribunal”. The Sixth Circuit consulted different dictionaries and judgments and concluded that the phrases “foreign tribunal” and “international tribunal” are not a “term of art with a specialized meaning[5] and that “tribunal” should cover private tribunals. Moreover, the Sixth Circuit noted that the Supreme Court decision Intel Corp. v. Advanced Micro Devices, Inc., 542 U.S. 241 (2004) will support its conclusion and that Intel “contains no limiting principle suggesting that the ordinary meaning of “tribunal” does not apply[6].

The Sixth Circuit expressed doubts in the approach by the Second and Fifth Circuits in Bear Stearns and Biedermann in overly relying on the absence of specific mention of private arbitral tribunals in the legislative history of Section 1782. It reasoned that “the Second and Fifth Circuits turned to legislative history too early in the interpretation process[7] and noted that “some scholars and judges have questioned the reliability of legislative history as an indicator of statutory meaning[8]. Even assuming the legislative history was helpful in the analysis, the Sixth Circuit considered that Congress intended to expand the applicability of Section 1728 and “the legislative history does not indicate that the expansion stopped short of private arbitration[9].

The Sixth Circuit also found the other policy considerations in Bear Stearns and Biedermann unpersuasive. For the consideration in efficiency of arbitration proceedings, the Sixth Circuit was of the view that a district court has the discretion to limit or reject intrusive or burdensome discovery requests [10].

Servotronics, Inc. v. Boeing Co.

After the Sixth Circuit’s decision of re Application, the Fourth Circuit has recently sided with the Sixth Circuit in the interpretation of Section 1728 in Boeing.

Servotronics supplied a valve to Rolls-Royce PLC. The latter installed the valve in an engine it manufactured. The engine was supplied to the Boeing Company for a new Boeing aircraft. During an engine test in January 2016, the engine caught fire and caused significant damage to the aircraft. Rolls-Royce settled Boeing’s claim for damages. Rolls-Royce contended that Servotronics’ valve caused the fire and commenced arbitration against Servotronics.

The arbitration was seated in Birmingham, UK. To obtain evidence for the arbitration, Servotronics filed an application under Section 1782 to obtain testimony from three Boeing employees residing in South Carolina.

The issue here was whether the UK tribunal was a “foreign tribunal” under Section 1782.

Relying on Bear Stearns and Biedermann, the district court ruled that the private arbitration between Servotronics and Rolls-Royce was not a “foreign tribunal” and denied Servotronics’ application. 

Servotronics appealed to the Fourth Circuit.

Decision of Fourth Circuit

The Fourth Circuit overturned the decision of the district court and concluded that the private arbitration in the UK was a “foreign tribunal” under Section 1782.

Unlike the Sixth Circuit, the Fourth Circuit did not carry out an extensive analysis of the reasoning of the Second and Fifth Circuits in Bear Stearns and Biedermann. It also did not approach the issue with a “textual analysis” of the wording of Section 1728.  Nevertheless, its reading of Intel is somewhat similar to the Sixth Circuit’s.

The Fourth Circuit’s decision turned on its analysis of the legislative history of Section 1782, in particular a 1964 amendment adding the language “a foreign or international tribunal” to the scope of the act [11]. The Court noted that the Supreme Court in Intel emphasised Congress’s insertion to a proposed amendment of “a foreign or international tribunal” to replace a previous version of “in any judicial proceeding pending in any court in a foreign country”. The Fourth Circuit noted that the Supreme Court considered that “Congress understood that its change would authorize U.S. assistance not only in connection with court proceedings but also “in connection with administrative and quasi-judicial proceedings abroad”[12]. The Fourth Circuit considered that the 1964 amendment “manifests Congress’ policy to increase international cooperation by providing U.S. assistance in resolving disputes before not only foreign courts but before all foreign and international tribunals[13].


The Fourth Circuit Court’s decision in Servotronics has concretized a pivotal departure in the interpretation of “foreign and international tribunals” from the decades old Second and Fifth Circuits’ limited reading of Section 1782 to apply only to proceedings before governmental or intergovernmental tribunals.

Servotronics reflects both the proliferation of private commercial arbitration in the recent past and U.S. courts’ growing acceptance and encouragement of arbitration for dispute resolution. We predict other courts will follow suit in a broad application of Section 1782, and perhaps obviate review by the Supreme Court, particularly given the Intel decision. In any case, we likely await final resolution of this issue by the Supreme Court.

[1] Republic of Kazakhstan v. Biedermann International, 168 F.3d 880 (5th Cir. 1999), 882

[2] National Broadcasting Company, Inc. v. Bear Stearns & Co., Inc., 165 F.3d 184 (2d Cir. 1999), 190

[3] Ibid, 190

[4] Biedermann, 883 and Bear Stearns, 190-191

[5] In re Application to Obtain Discovery for Use in Foreign Proceedings, 939 F.3d 710, 723 (6th Cir. 2019), 719

[6] Ibid, 726

[7] Ibid, 726

[8] Ibid, 727

[9] Ibid, 728

[10] Ibid, 729-730

[11] Servotronics, Inc. v. Boeing Co., No. 18-2454 (4th Cir. March 30, 2020), 209, 213

[12] Ibid, 213

[13] Ibid, 213


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.


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