Recognition and Enforcement of Arbitral Awards
This section contains a broad description of the procedure to recognise and enforce arbitral awards (both domestic and foreign arbitral awards) and addresses also a preliminary enforcement procedure (“PEPEX”) that enables a search for assets.
This section deals with the recognition and enforcement of international arbitral awards. It addresses also a “pre-enforcement” procedure (so-called “PEPEX”), and matters related to sovereign immunity in the Portuguese jurisdiction.
Contrary to “domestic” arbitral awards (and despite a conspicuous judicial decision that adopted a different understanding), foreign arbitral awards need prior recognition before they can be enforced. The grounds for resisting recognition are identical to those set forth in Article V of the New You Convention, and match exactly those grounds to resist enforcement, when such opposition is available.
Notwithstanding, according to the new PAL, if the time limit for making an application to set aside the award–60 days from the date of the notification of the award (PAL, art 46(6))–has already expired at the time of the notification of the commencement of the enforcement procedure, the award debtor will be prevented from using any of the grounds set out in art 46(3)(a) of PAL. However, the debtor may rely on, and the court judge may also examine ex officio, any of the grounds set out in art 46(3)(b) of PAL.
a. Need for Recognition
According to Article 55 of the PAL, foreign awards (those made in arbitrations seated abroad) may only be effective in Portugal, regardless of the nationality of the parties, if they have been recognized by the competent Portuguese State court.
b. Competent State Court
The Court of Appeal in which the domicile of the person against whom the decision to be invoked is located shall be competent to decide the recognition lawsuit (Article 59 PAL).
There are five courts of appeal in Portugal (a) Lisbon, (b) Porto, (c) Coimbra, (d) Évora, and (e) Guimarães.
c. Recognition Procedure
Article 57 PAL sets forth the procedure for recognise an international arbitral award.
A party seeking the recognition of a foreign arbitral award shall supply the an authenticated original award or a duly certified copy thereof, as well as the original of the arbitration agreement or a duly authenticated copy thereof.
If the award is not drafted in Portuguese, then a certified translation must be filed with the application to obtain the recognition.
The award debtor shall be summoned to file its opposition, within a 15 days time-limit.
After the written pleadings and the procedural steps deemed indispensable by the rapporteur are taken, access to the file is granted to the parties and to the Public Prosecutor, for 15 days, for the purpose of closing arguments.
The trial is conducted pursuant to the rules applicable to appeals.
a. Generic grounds for refusing the recognition
The recognition of a foreign arbitral award may only be refused on the following basis (PAL, art 56(1)):
a) At the request of the party against whom the award is invoked, if that party furnishes to the competent court to which recognition or enforcement is demanded proof that:
i) A party to the arbitration agreement was under some incapacity; or the said agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law of the country where the award was made; or
ii) The party against whom the award is invoked was not given proper notice of the appointment of an arbitrator or of the arbi-tral proceedings or was otherwise unable to present its case; or
iii) The award deals with a dispute not contemplated by the arbitration agreement or contains decisions on matters beyond the scope of the arbitration agreement; however, if the decisions on matters submitted to arbitration can be separated from those not so submitted, that part of the award which contains decisions on matters submitted to arbitration may be recognised and enforced; or
iv) The composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties or, failing such agreement, was not in accordance with the law of the country where the arbitration took place; or
v) The award has not yet become binding on the parties or has been set aside or suspended by a court of the country in which, or under the law of which, that award was made; or
b) If the court finds that:
i) The subject-matter of the dispute is not capable of settlement by arbitration under Portuguese law; or
ii) The recognition or enforcement of the award would lead to a result clearly incompatible with the international public policy of the Portuguese state.
b. Local nuances vis-a-vis the New York Convention
The aforementioned grounds follow the framework of the New York Convention, but there are some nuances, for instance regarding the “‘international public policy”, which is not specific grounds under the Convention, this latter referring more generally to ‘public policy’.
Further, not every violation of the “international public policy of Portugal” is grounds for refusing recognition: there must be a ‘blatant’ violation of such public policy.
On the other hand, PAL, art 56(1) states that:
Recognition and enforcement of an arbitral award made in an arbitration taking place in a foreign country may only be refused (…)
This wording (‘may only be refused’) gives room to admit the recognition (and enforcement) in Portugal of a foreign arbitral award that may have been set aside elsewhere. In other words, the refusal is not mandatory, much less automatic and, to some extent, it is subject to the discretion of the court judge.
c. Subsequent proceedings
After the exequatur has been granted, the award creditor will follow the same procedure for the enforcement of a domestic arbitral award (including as to the competent court), but the opposition to the enforcement–should it be admissible in the same terms as those provided for the ‘domestic’ award–will be restricted to the circumstances that may form the basis of the refusal of recognition. The wording, again, states ‘may only be refused’, where ‘only’ clearly means an exhaustive list of grounds.
A particular feature of the Portuguese legal regime applicable to the enforcement of arbitral awards, whether domestic or foreign, is the option that a creditor enjoys of resorting to a special ‘pre-enforcement’ procedure.
This procedure is the ‘PEPEX’ (“Procedimento Extrajudicial Pré-Executivo” or Pre-Enforcement Extrajudicial Procedure, enacted by Law No. 32/2014 of 30 May 2014) and it is designed to enable a search for assets which may potentially be seized and, therefore, for the creditor to assess whether or not an enforcement procedure will have any chance of succeeding.
It is a mere information tool–assets will neither be arrested nor seized–but it may be converted into a definitive enforcement procedure if the creditor opts to do so.
The award debtor will not be notified at this stage of the application of such pre-enforcement procedure and, therefore, the procedure preserves the confidentiality of the investiga-tion taking place.
Further, the enforcement officer is granted with a generic legal permission to conduct these searches and, therefore, it is not necessary to obtain a prior court permission to do so.
The search is conducted throughout several databases available in Portugal, such as the real estate register, register of companies and register of companies’ names, motor vehicle register, tax authorities, social security system, industrial property register, and the bank accounts’ database of the Bank of Por-tugal.
This latter search will produce the identity of the bank account owner and the bank institution on-ly, but not the amounts deposited or assets under management, which can be traced later through an enquiry addressed to the bank institution in question.
The enforcement officer tasked with this investiga-tion is chosen randomly from among an official list of enforcement officers.
The ‘PEPEX’ system works very efficiently (it takes 1-2 months) and it has been reported as having re-duced the number of enforcement procedures by nearly 30,000 cases in a single year.
A creditor may seek to enforce the arbitral award (either domestic or foreign after recognition has been granted).
Under the new legal regime,
‘The party applying for the enforcement of the award to the competent state court shall supply the original award or a certified copy thereof and, if the award is not made in Portuguese, a certified translation thereof into this language’ (art 47(1), PAL).
In case of a foreign arbitral award, a certified copy of the court judgment granting its recognition must also be filed with the application for enforecement.
The procedure is run entirely online through the web-based platform (‘Citius’), and the costs depend on the number of assets to be seized.
However, broadly speaking, the costs of initiating enforcement pro-cedures are an advance on costs of EUR 52 and a subsequent charge of around EUR 100 for each real estate arrested (seizure of other types of assets are subject to other costs).
The ‘Enforcement Court of First Instance’ with jurisdiction to administer the enforcement is determined according to the Portuguese Code of Civil Procedure (PAL, art 59(9)).
The award debtor must file the opposition to enforcement within 20 days of notification of the enforce-ment procedures (art 728(1) of the Portuguese Code of Civil Procedure).
The Portuguese law provides two kinds of grounds that an award debtor may rely on when opposing enforcement: (i) those applicable generically to the enforcement of any kind of enforceable title, and (ii) those specific to arbitral awards.
Similarly to the enforcement of judicial decisions or any other kind of enforceable title (letter of credit, bank checks, etc), the enforcement of an arbitral award is subject to the following generic grounds of opposition (art 729 of the Portuguese Code of Civil Procedure):
– inexistence of the award,
– falsehood of the proceeding,
– lack of procedural requisites for the enforcement (for instance, enforcement of an arbitral award against a person who was not a party to the arbitration),
– lack or nullity of the notification of the enforcement procedure,
– uncertainty or lack of quantification of the credit subject to enforcement,
– prior res judicata concerning the same credit, any changing or extinctive fact affecting the credit (for example, by virtue of the applicable statute of limitations), credit held by the debtor against the creditor (set-off credit), or any cause producing the invalidity of an award made by consent.
Regarding the grounds specific to arbitral awards, an opposition may be filed in the following situations, ‘provided that, on the date on which the opposition is presented, an application for setting aside on the same grounds has not already been rejected by a final and binding judgment’ (PAL, art 48(1)):
a) The party making the application furnishes proof that:
i) One of the parties to the arbitration agreement was under some incapacity; or the said agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under this law; or
ii) There has been a violation within the proceedings of some of the fundamental principles referred in article 30, paragraph 1, with a decisive influence on the outcome of the dispute; or
iii) The award dealt with a dispute not contemplated by the arbitration agreement, or contains decisions be-yond the scope of the latter; or
iv) The composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agree-ment of the parties, unless such agreement was in conflict with a provision of this Law from which the par-ties cannot derogate, or, failing such agreement, was not in accordance with this Law, and, in any case, this inconformity had a decisive influence on the decision of the dispute; or
v) The arbitral tribunal has condemned in an amount in excess of what was claimed or on a different claim from that that was presented, or has dealt with issues that it should not have dealt with, or has failed to de-cide issues that it should have decided; or
vi) The award was made in violation of the requirements set out in article 42, paragraphs 1 and 3; or
vii) The award was notified to the parties after the maximum time-limit set in accordance with article 43 had lapsed; or
b) The court finds that:
i) The subject-matter of the dispute cannot be decided by arbitration under Portuguese law;
ii) The content of the award is in conflict with the principles of international public policy of the Portuguese state.
The Portuguese Civil Code provides in its art 564(2) that the court judge may refer the quantification of damages to a subsequent procedure if the factual determination does not warrant such quantification.
This provision may apply not only to domestic arbitrations but also to international arbitrations, insofar as the Portuguese law may be the proper law.
In such a case, according to art 47(2) of PAL, the award creditor may request the arbitral tribunal to issue an additional award (PAL, art 45(5)) within 30 days of receipt of the notice of the award.
The arbitral tribunal, after giving the other party the opportunity to state its views and after evidence has been taken, shall issue a supplementary decision, deciding according to ex aequo et bono within the limits of the proven facts.
Alternatively, the award creditor may request that this quantification shall proceed as an incidental procedure within the judicial enforcement procedure (PAL, art 47(2)).
If this is the option of the award creditor, the procedure will follow the terms of a regular judicial lawsuit (including the statement of claim, statement of defence and production of evidence), and the court judge will be entitled to ex officio determine any kind of evidentiary measure he may deem appropriate, including expert witness.