Lisbon Appeal Court | Time Limit to Seek Annulment | Annulment of Arbitral Awards | Vexatious Litigation | Litigate in Bad Faith | Limitation Period | Bad Faith’s Litigation | IBA Guidelines | Independence and Impartiality | Case #107
Case nr. 661/18.4YRLSB-2
The period for the annulment of an arbitration action is a procedural period, to which the rules for counting of periods provided for in Article 138.º et seq., of the Civil Procedure Code are applicable, and is thus suspended during the judicial holidays.
However, even if it is understood that the 60-day period of annulment is a period of expiry having a substantive nature, it would always have to be understood with respect to Article 279, and particularly sub-point (e) of the Civil Code, as set out in Article 296 of the same legislation.
Bad faith litigation is regulated through Articles 542.º to 545.º of the Civil Procedure Code. The regime contained in these articles manifests as a substantial extension of the procedural good faith duty inherent in Article 8.º of the same code. These Articles have translated this principle “in(to) the imposition of increased duties of a deontological order for all procedural actors with a view to producing, in the field of civil procedure, an “ethicization” similar to that which substantive law has long managed to achieve in certain areas”.
I- The start of the 60-day period within which an action to contest/set aside an arbitral award must be filed, provided for in Article 46(6) of the Voluntary Arbitration Law – approved by Law 63/2011 of 14/12 – is always the notification of a decision by the arbitrators, whether it is in reference to the award that decided the arbitration dispute, or the decision (order) for an award’s rectification, clarification, or completion, made at the request of a party, pursuant to Article 45 of the same law;
II- If a time limit is directly related to another action, which is fundamentally of a procedural nature, such a time limit must be considered to be of a procedural nature. The action for setting aside an arbitral award is procedural in nature, because any challenge to the integrity of an award or to the process adopted by the tribunal deals not with substantive rights, but only with principles, rules, and fundamental values of a legal system;
III- In the event that the Claimant’s representative did not have the requisite power of attorney to sign the Second Arbitration Agreement, and that the Defendant has not ratified the proceedings undertaken, the Arbitral Tribunal, constituted with a sole arbitrator, would lack the competence to hear the dispute submitted to it. However, the Claimant (as a defendant in that proceeding) was aware of these facts at the time, and had the burden of arguing such lack of jurisdiction during the proceeding;
IV- The failure to do so, to which must be added an equal omission in relation to the alleged lack of a power of attorney on the part of the now Claimant, and instead proceeding with the arbitral proceedings without raising such a question, amounts to a waiver of the right to contest the arbitral award on the ground of incapacity of the parties to bind themselves in the arbitration agreement, pursuant to the combined terms of Articles 18(4) and 46(4) of the Voluntary Arbitration Law;
V- The Claimant was effectively aware of the circumstances revealed by the Arbitrator, at least since the date of the First Arbitration Proceeding, and did not raise any objection. Therefore, even if we were faced with circumstances that could give rise to justifiable doubts about the impartiality and independence of the Arbitrator, which would constitute grounds for his removal under the terms set forth in Article 13 of the LAV, the parties did not raise any objection to the revealed information, and did not initiate any proceedings for the removal of the Arbitrator, as provided for in Article 14 of the LAV, during the conduct of either the first of the second arbitral proceeding;
VI- Despite this knowledge, the Claimant only raised an objection during annulment proceedings, and therefore, it’s conduct must be taken to constitute a waiver of the right to contest the award on this ground- specifically that there has been a serious irregularity in the composition of the arbitral tribunal, due to the fact that the appointed arbitrator does not meet the requirements of independence and impartiality- as stated in Article 46(4) of the VAL;
VII- In view of the nature of the information/circumstances disclosed by the appointed Arbitrator in the disclosure made by him/her in the two Arbitration Agreements, it is noted that the circumstances disclosed, at best would appear in the Orange List of the IBA Guidelines on Conflicts of Interest in International Arbitration, all depending on the temporality in which the functions of the attorney disclosed were performed;
VIII- Therefore, the information duly communicated by the appointed Arbitrator, and to which no objection was made, does not give rise, by itself, to justifiable doubts as to the arbitrator’s impartiality and independence;
IX- Thus, it is concluded that the independence and impartiality of the arbitrator appointed are not compromised and that the grounds for annulment of the arbitration award are not met;
X- The Plaintiff alleged that the Arbitrator appointed by the Respondents was recurringly appointed as an arbitrator by the law firm of which the Respondent’s lawyers are a part, based solely on rumors and information allegedly heard from “other lawyers” in a general manner. The Plaintiff has not taken due care to find out whether such facts were true – to the contrary – he acted in a clearly reckless manner by invoking clearly relevant facts without having previously ascertained their veracity, as was manifestly required of him. This in itself justifies the framing of his conduct as a litigation in bad faith.
Summary and headlines kindly prepared by Avani Agarwal (final year law student at NALSAR University of Law, Hyderabad, India; Avani Agarwal may be contacted by email: firstname.lastname@example.org