“The choice of Portugal as the seat of arbitration is set to increase considerably”

Leaders League: How would you describe the state of arbitration in Portugal in 2024?

José Carlos Soares Machado: The development of arbitration in Portugal, in its different aspects, and essentially in the commercial and tax areas, has been consistent and constant in recent years, both in terms of the number of cases, which is always growing, and the quality of the services provided by the institutional centers.

The number of ad hoc arbitrations is still higher than that of institutional arbitrations; nevertheless, it has become relatively common for the parties and arbitrators in ad hoc proceedings to use the services, facilities and equipment of the main arbitration centers, which has generally contributed to improving the conditions in which cases are processed, namely more rigorous production of testimonial and expert evidence and its recording.

Arbitrator training has also developed significantly, and a good number of advocates are also much more experienced in complex cases that require a great deal of knowledge of national and international procedural and soft law rules.

How has Portugal’s legal framework for collective proceedings fostered the development of arbitration in the country?

The number of collective proceedings has increased very significantly, largely because of the presence of legal regulations that are friendly to this type of case, which necessarily makes Portugal a hotbed of arbitration.

We’ll see what the future holds in this area, but it seems certain that the choice of Portugal as the seat of arbitration proceedings is set to increase considerably.

What factors should companies consider before including an arbitration clause in contracts?

There are many factors to consider when drafting arbitration clauses in commercial contracts, but it is essential that the contracting parties have a real and complete overview of the variety and importance of each of these factors.

To choose the most appropriate solutions for each client and each type of dispute, it is essential to always listen to the recommendation and opinion of a lawyer that specializes in arbitration, who should suggest, after careful analysis, the course of action which most clearly satisfies the concerns of each client and the requirements of each specific dispute.

It can be a huge mistake not to give due importance to the wording of an arbitration clause, which often ends up being a simple copy of one previously used in a different contract and for a different type of dispute, which may be totally inappropriate in the specific case.

“The presence of legal regulations in Portugal are friendly to collective proceedings.”

Therefore, close collaboration is a must between the lawyer specializing in arbitration and the lawyer accompanying the client in the negotiations of the contract itself and its substantive drafting.

It should be borne in mind that any possible errors in the arbitration clause can have a major impact on how the arbitration process will proceed.

What advice would you give to companies that need to decide between arbitration or judicial litigation in contracts?

It’s not just a simple piece of advice, but rather a conclusion to be drawn from an in-depth analysis of the contractual relationship established between the parties and an anticipation of the type and nature of disputes that may arise from that particular contract.

These conclusions must then be analyzed very carefully, since there may be greater or lesser advantages or disadvantages in choosing one path or the other, and this choice often also depends on external factors, i.e. factors that do not only have to do with the specific dispute, but also with the way in which each client sees their commercial activity in the present and values more or less the maintenance and continuation of a good relationship with the opposing party. In this last respect, I believe it may also be important to consider adding to an arbitration clause a possible mandatory previous mediation proceeding as a preliminary phase.