"Mediation doesn’t threaten arbitration; it fulfils a distinct function”

Leaders League: Mediation has been gaining prominence at major arbitration conferences. In your view, how does it complement ‒ or challenge ‒ traditional arbitration?

Paula Costa e Silva: In my view, mediation has been gaining legitimate prominence among the different means of dispute resolution. It is curious how it seems that, for so long, we forgot about it, as if, because we did not talk about it, it did not exist.

But that is not the case. Even though we may have forgotten about mediation for a long time, relying entirely on arbitration to resolve disputes, mediation has always been among the possible methods for overcoming disputes. After all, it is a manifestation of private autonomy, which we say is inherent to human dignity and, as such, a pillar of the rule of law. Its potential is enormous: since the parties have no limits to their private autonomy other than those resulting from the preservation of the fundamental values of a legal system, the parties can, in mediation, find the solution they deem appropriate to overcome the crisis.

Unlike what happens in a court, the parties ‒ whether state or arbitral ‒ are not constrained by a principle of the device, and can agree on a solution that seems acceptable to both, regardless of what the strict law might dictate for their case. In this way, the parties are able to resolve not only the dispute, as happens with a court that is constrained in its actions by the principle of the claim, but also to resolve the conflict. And we all know that when a dispute is resolved but a conflict is left open, it is difficult to reestablish relations of trust between the parties; sooner or later, if these parties maintain relations with each other, they will litigate again. 

And this is not so uncommon; just think of the number of requests for contract termination submitted to the courts and dismissed, or, in long-term administrative contracts, the requests for financial rebalancing that are submitted to a court for decision. In both cases, the parties are condemned to reach an agreement. Why do they ask a court to tell them this, instead of sitting down at the table and trying to find a way out of the conflict? Assisted by an impartial and independent third party to whom they can reveal everything and before whom they can discuss. 

For all these reasons, I do not believe that mediation threatens arbitration; it fulfils a distinct function. If, by achieving high success rates and becoming part of the habits of those who litigate, it may divert cases from arbitration (as well as from the courts), this is an inevitable conclusion. But I believe that this is a conclusion sought by those who understand that private autonomy is the most relevant operator in a democratic legal system. This is not always possible; the parties are not always able to find this solution or even to begin direct negotiations; the conflict may be so acute that progress is no longer possible. But that is where the mediator comes in, the impartial and independent third party, an expert in rapprochement techniques. 

How would you assess the maturity of arbitration in Portugal today? What are the most pressing obstacles to bringing the country more in line with international best practices?

Arbitration has now reached a high degree of maturity in Portugal, with no noticeable deviation from international best practices. It is probably one of the jurisdictions where arbitration has spread to the most areas ‒ from classic commercial arbitration to tax arbitration, administrative arbitration, industrial law arbitration, sports arbitration and consumer arbitration, among many others ‒ arbitration has gained a very robust body of arbitrators and has seen the development of a very high-quality legal profession.

Two clear signs of this are, on the one hand, the frequent appointment of Portuguese arbitrators to sit on or preside over arbitral tribunals based in other jurisdictions and, on the other, the sharing of mandates by teams of lawyers from different jurisdictions, including Portugal. This movement has been accompanied by the creation of highly efficient and very competitively priced arbitration centers. And this competitiveness is not only evident in comparison with arbitration centers in other jurisdictions, but also with the court fees that are payable when litigating before state courts. This observation is not always emphasized, creating the perception that arbitration is expensive; this is not always, nor indeed necessarily, the case. 

That said, there is always room for improvement. Deepening the dialogue between state courts and arbitral tribunals, enhancing the transparency of decisions rendered by arbitral tribunals and more effectively disseminating the contribution made by arbitral justice to the evolution of the legal system as a whole will be factors in the growing affirmation of arbitration in Portugal. 

In a global environment marked by complex disputes and growing geopolitical instability, what should the role of the arbitrator be in conflict management and prevention?

I believe that in the current global climate, arbitrators must prepare themselves for enormous challenges. The matters to which they have traditionally devoted themselves, namely contractual types, particularly in the area of construction, to which they have become accustomed and which are challenged by the shift from EPC to EPCM contracting, the irrelevance of the nationality of the parties, which was the standard case and which, with the emergence of international sanctions, has come to the fore, the intensification of the use of AI tools, with the exponential growth of information brought into the proceedings, accompanied by the inability of arbitrators, without recourse to the same tools, to process all the information in the time given to them to decide, all of which has changed the scenario in which arbitrators typically performed their duties.

The emergence of the ESG agenda, with a strong focus on protecting values such as the environment and public health, protecting human rights and workers' rights, strengthening the social responsibility of companies and various economic agents, with strong repression of phenomena such as endemic corruption, all of this has had an enormous impact on arbitration in general, but particularly on investment arbitration. These are all new substantive areas, many of which entail complex procedural problems (as is the case with the proliferation of parallel proceedings in the shift from the EPC to the EPCM paradigm). These are challenging times for arbitrators, who will have to rush to keep up with all these changes.