Lisbon Court of Appeal | Lack of Financial Means | Inoperativeness of the Arbitration Agreement | Kompetenz – Kompetenz | Case #109
Case nr. 415/18.8T8SNT.L1-2
05-03-2020
LINK DGSI
Headline:
In a case where the formal validity of the arbitration agreement or its application to the actual dispute between the parties is not at stake, it is only when the rules of operation of a tribunal mandate that the claimant’s inability to bear the costs of arbitration due to insufficient economic means will constitute an impediment to accessing the tribunal, that it can be held manifest and uncontroversial that the arbitration agreement is unenforceable. This unenforceability must be recognised by a judicial court to the exclusion of the tribunal.
Otherwise, the judicial court must respect the principle that arbitral tribunals have the competence to decide their own jurisdiction (understood in the broad sense, as also including the possibility of knowing the limitations on access to arbitral justice due to the plaintiff’s economic situation), and abstain from deciding on this issue until the arbitral tribunal has ruled on it.
Summary:
I- The principle that arbitral tribunals have the competence to decide on their own jurisdiction, here including the possibility of considering limitations on access to arbitral justice due to the economic situation of the claimant, determines that a plea of excluding the arbitral tribunal should not be accepted unless it is obvious that the arbitration agreement is unenforceable, in view of an obvious finding of definitive impossibility which is not attributable to the party pleading to exclude arbitral proceedings due to its economic situation.
II- The difference in economic capacity of A that may occur between the moment they sign a distribution contract (with arbitration agreement) for an indefinite period of time and the moment when they go to court to assert their right to compensate their customers, is a situation that is normally foreseeable, and the reduction of this economic capacity, resulting from the termination of the contract by the exclusive will of R, is foreseen as an inherent risk. This prevents the application of Article 437 of the Civil Code to the arbitration agreement.
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: avaniagarwal28@gmail.com