What is the regime of challenges to arbitral awards in arbitrations seated in Portugal?

Context about The Voluntary Portuguese Arbitration Act

The Voluntary Arbitration Law, Law No. 63/2011, (Portuguese Arbitration Act), entered into force in 2012 and entirely replaced the previous regime, repealing the former Voluntary Arbitration Law of 1986 (the 1986 Act). 

This legislative reform marked an important step in the development of Portugal’s arbitration framework, aiming to enhance the credibility, predictability, and effectiveness of arbitration as an alternative to proceedings before the state courts.

The enactment of the new Portuguese Arbitration Act took place in a particularly demanding economic and institutional context. Broadly speaking, the reform formed part of a wider package of modernization measures and structural adjustments associated with Portugal’s period of external financial assistance, and with the reforms promoted at the time to improve the functioning of the economy and the justice system. In that environment, arbitration was viewed as a tool capable of helping reduce court backlogs, delivering potentially faster and more specialized dispute resolution, and increasing Portugal’s attractiveness for investment and business activity.

At the same time, the reform reflected a legislative policy focus on harmonization with international standards. It sought to bring the Portuguese regime closer to the solutions most commonly adopted in international arbitration and in leading arbitral centers, aligning key concepts and procedural mechanisms with widely accepted practices in cross-border trade and investment. 

In summary, the new law aimed to modernize Portugal’s arbitration framework, making it more competitive and functional, while preserving legal certainty and ensuring an appropriate relationship with the state judicial system.

Effects of the awards and possible reactions 

Arbitration the awards will have the same effect as a decision of the state courts of the lowest rank in the judicial hierarchy, and would therefore be directly enforceable (Portuguese Arbitration Act, art 42 (7)).

Within 30 days of the award being rendered and received by the parties, the arbitral tribunal may correct any material or typographical errors, or any errors of a similar nature, on its own initiative or upon the application of a party. (ibid, art 45(1) and (4)).

Either party may also request the arbitral tribunal to clarify any obscurity or ambiguity in the award within this timeframe. (ibid, art 45(2)).

Unless otherwise agreed by the parties, either party may request the arbitral tribunal to make an additional award within 30 days of receiving the rendered award in relation to claims presented in the arbitral tribunal proceedings but not dealt with in the award issued. (ibid, art 45(5)).

Appealing conditions

The Portuguese courts will not entertain an appeal to an arbitral award unless explicitly agreed to by the parties. In this regard, the jurisdiction of the courts is therefore limited to applications to set aside, recognise and enforce awards.

The award is final. However, parties may stipulate otherwise in their arbitration agreement. (ibid, art 39(4) and 59(1) (e)).

However, where the parties, by means of the arbitration agreement, authorise the arbitral tribunal to adjudicate the case on equitable terms, the award may not be appealed in any circumstances. (ibid, art 39(4)).

In an international arbitration, the parties are also not entitled to appeal an award, unless the parties have expressly agreed to the possibility of appeal to another arbitral tribunal and have regulated its terms and conditions. (ibid, art 53)).

It should nonetheless be noted that in arbitral proceedings involving the Portuguese state or public law entities on matters regarding administrative contracts, civil liability and administrative acts, the award can be appealed irrespective of the agreement of the parties when:

• the decision is in contradiction with a judgement issued by the Central Administrative Court or by the Supreme Administrative Court regarding the same fundamental question of law;
• the decision assesses a matter that, due to its legal or social relevance, is of fundamental importance or when the admission of the appeal is clearly necessary for a better application of the law. (Portuguese Administrative Courts Procedure Code, art 185-A(3), which entered into force on 16 november 2019).

The rules of most arbitral institutions in Portugal confirm the finality of the award. In this regard, please see Portuguese Chamber of Commerce Rules of Arbitration, art 42, and consult https://www.centrodearbitragem.pt/xms/files/Legislacao/1abr2021-Rules-of-Arbitration.pdf.

If the parties agree on the possibility of appeal, the question arises as to whether the action for annulment of the award is precluded. The Évora Court of Appeal, Case no. 38/15.3YREVR.E1, as well as the Supreme Court of Justice, Cases no. 1052/14.1TBBCL.P1.S1 and 280/17, have considered the appeal and the annulment of the award as alternative actions. On the other hand, the Southern Central Administrative Court, Case no. 20032/16.6BCLSB, the Lisbon Court of Appeal, Case no. 927/17.0YRLSB-8, and the Porto Court of Appeal, Case no. 20/20.9YRPRT, have understood otherwise.

Legal action for the annulment or setting aside of the award

Apart from appealing against the award, the parties may bring a legal action for the annulment or setting aside of the award, on one or more of the following bases:

• a party to the arbitration agreement was under some incapacity.
• the arbitration agreement is not valid under the law to which the parties have subjected it or, failing any specification of that law, under the Portuguese Arbitration Act.
• a mandatory principle of the procedure has been breached.
• the award deals with a dispute not contemplated by or not falling within the terms of submission to arbitration or contains decisions on matters beyond the scope of the submission to arbitration.
• the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties.
• the subject matter of the dispute is not capable of settlement by arbitration under Portuguese law.
• the award conflicts with the public policy of Portugal; or
• the award does not include the necessary signatures of the arbitral tribunal or is insufficiently reasoned. (ibid art 46(3)). 

Concerning the last point, note that in a recent case, the Lisbon Court of Appeal, Case nº 2794/18.8YRLSB.L1-2, ruled that an award cannot be challenged when the reasoning is merely “insufficient or unconvincing”. According to Art. 42(3) of the Portuguese Arbitration Act, only an arbitration agreement which lacks reasoning shall be considered null and void. In the mentioned case, the judge considered that there was a critical assessment of the evidence produced, albeit superficial and adapted to the informal nature of the arbitration procedure. 

The claim seeking annulment must be filed within 60 days of the notice of the award to the parties or, if a request has been made to the arbitral tribunal to clarify any obscurity or ambiguity of the award, from the date on which the arbitral tribunal has decided on that request. (Ibid, art 46(6).

The right to apply for the annulment of the award is a mandatory provision of the Portuguese Arbitration Act that cannot be excluded by agreement between the parties and will prevail over any clause of the arbitration agreement that states otherwise. (ibid, art 46(5)).

In Portugal, simply filing an action to annul an arbitral award (decision) does not, by itself, stay enforcement of the arbitral award. 

An arbitral award may serve as a basis for enforcement even if it has been challenged by an annulment application, unless the challenger requests suspensive effect and provides appropriate security. Thus, there is no automatic stay; it depends on a request and the posting of security. 

In fact, Art. 47(3) of the Portuguese Arbitration Act allows enforcement of the arbitral award even while an annulment action is pending, but permits the challenger to request that the challenge have suspensive effect “provided that security is given” under the Civil Procedure Code (to guarantee the amount under enforcement, any subsequent liquidation, and delay-related costs).

Courts apply Art. 47(3) of the Portuguese Arbitration Act in a very operational way: it is not enough to offer security in the request. The stay is typically conditional and only becomes effective when the security is actually provided, in the form and amount ordered, and within the deadline set by the court. If security is not posted on time or is considered insufficient, enforcement will continue (or resume).

The case law of the higher courts has reaffirmed this understanding.

Courts generally calibrate the amount of security to protect the enforcing party against the risk and cost of delay caused by the stay. In practice, the calculation often includes principal amount under enforcement (the “amount claimed” in enforcement); interest (already due and an estimate of interest that will accrue during the period the enforcement is stayed); and likely enforcement costs / foreseeable expenses.

The core idea is that the security – cash deposit, bank guarantee/ bank surety or real security (mortgage or pledge over assets) should be sufficient to leave the enforcing party financially protected if enforcement is delayed but ultimately succeeds.