Portugal is under the international spotlight for the best and worst reasons.
The country is praised as one of the best international tourism destinations. It is consistently top-ranked and has collected a record number of international awards in every tourism category, with the tourism industry achieving consistent annual growth of above 12% since 2013. However, Portugal is consistently in the news for its economic and financial difficulties, having reached a low point in 2011 with the sovereign debt crisis.
Recent numbers show that the tourism industry represents a direct impact of 6% on the country’s GDP (its indirect impact is estimated at 16%) and 8.2% of employment, with growth of 2.4% in employment compared to the country’s 0.9% average.
The unprecedented growth in tourism has been instrumental in the development of the country’s trade balance. However, analysts are concerned that structural problems and fundamental reforms and changes to the Portuguese economy are being postponed.
Portugal’s previous centre-right government was successful in leading the country out of the EUR78 billion Troika international bailout, having implemented and enacted several legal and economic reforms aimed at boosting the country’s economic, labour and business competitiveness.
This left-wing coalition government was formed with the firm purpose of reversing some of the austerity measures generally pinpointed as responsible for social difficulties and inequalities. This government has actually been effective in reducing the deficit as agreed with the Troika, but it has lacked the will to keep on implementing additional reforms, and has even increased public spending (albeit with scarce public investment).
The previous privatisation strategy – under which Portugal targeted international investment for the necessary structural modernisation of its public services while reducing public spending – has been altered by the current government. This government has reversed or renegotiated a number of the privatisations agreed by its predecessor, notably those involving TAP (Portugal's flag carrier airline), Carris, Metropolitano de Lisboa, Metro do Porto and STCP (Lisbon and Porto’s public transport companies). In fact, the first ICSID case against Portugal was brought as a result of the Lisbon transport sub-concession to a Mexican group being reversed.
This new government is managing the fall of four of its major banks (BPP, BPN, BES and BANIF) and the reform and recovery of the state bank CGD. It is also handling the restructuring of other Portuguese banks, such as Montepio and BCP.
The fall of PT was subject to intensive media scrutiny. PT was once the crown jewel of Portuguese companies, with an international presence in every Portuguese-speaking country and a worldwide turnover in excess of EUR6.2 billion in 2011. Following an ill-fated tie-up with Brazilian company Oi (now in insolvency proceedings), the Portuguese assets of the company were sold to Altice Group in 2015 against a controversial background strongly influenced by the fall of BES. Public scrutiny of these companies' decision making processes and strategies led, among other things, to a considerable increase in D&O litigation involving directors and external auditors.
Despite the bumpy road, Portugal is emerging from its sovereign debt and economic crisis as a modernised country that is better prepared to compete internationally.
Portugal’s international popularity does not begin or end with tourism. With our mild (and mostly sunny) climate, low cost of living, first-world infrastructures, legal system and warm hospitality, Portugal is one of the top international destinations for retirement and an international hub for start-ups – Lisbon is now the host for the elite technology international conference Web Summit.
Portugal’s social, legal and economic developments are acknowledged not only through its capacity to attract tourism and investment, but also by its improved reputation worldwide, from the recent above-average PISA results to ranking 19th in the Social Progress Index, or 25th in the World Bank’s Doing Business guide.
Portugal’s international popularity is thriving for all the right reasons, not least of which being the excellence of our tourism-related services. The challenge is to show the world we excel in other areas and industries too, and in particular that Portuguese legal services in dispute resolution can match and exceed the highest international standards.
From a regulatory point of view, dispute resolution in Portugal has proven itself up to the challenge in recent years – and the challenge has been great. Portugal has all the modern tools necessary to deal with both high-profile and complex litigation, and with smaller and simpler claims.
Ten years ago, Portugal had a very bureaucratic judicial system, with cases funnelled into state courts, bound by dogmatic procedural rules, constant delays and extensive backlogs. Back then, it was not uncommon to endure four to five years in court before getting a first instance judgment, and this meant an increased asset dissipation risk.
Fortunately, Portugal is emerging from its economic and financial crisis with a modern and high-standard dispute resolution system. Portugal has successfully implemented an e-justice platform (CITIUS), which has enabled a completely paperless justice system, introduced a more flexible and simplified Civil Procedure Code, and upgraded its insolvency law (including a chapter 11-style mechanism which has proven to be a solid handrail for struggling businesses). Changes have also been made to the allocation of costs in judicial proceedings, allowing for a mitigated loser bears all system, which is expected to reduce frivolous claims and the backlog of court cases.
In terms of ADR, Portugal has successfully created reliable solutions to address a full spectrum of disputes. It has implemented international standards for mediation practice, created hybrid mediation-litigation courts, the Julgados de Paz, and introduced an UNCITRAL model-law inspired Arbitration Act (drafted by private practitioners who are members of the Portuguese Arbitration Association board instead of government officials). The country has also allowed for the creation and consolidation of various mediation and arbitration centres, which have made a great contribution to the popularity and credibility of ADR in Portugal, and to the development of a Portuguese arbitration community with a growing presence in international arbitration forums.
In general, dispute resolution practitioners are very well prepared to work for and in an international market, adapting and accommodating their services for clients from different cultural and legal backgrounds. Moreover, the most reputed dispute resolution teams have internationally educated lawyers and offer multi-disciplinary and multi-location teams, with considerable experience and impressive track records in international litigation and arbitration.
Portugal’s bailout programme and the profound reforms raised new opportunities for dispute resolution practitioners, who have been confronted with unprecedented decisions forcing them to create new and innovative legal reactions. The effects of these decisions are still being felt today and will endure for a number of years to come.
Bank-related litigation is currently one of the strongholds of dispute resolution practice, from small and medium-sized companies' credit default disputes to the more complex investment-related cases brought by creditors and investors of the fallen banks, in particular in relation with BES and BANIF.
We have also witnessed an increase in large-scale litigation, notably class actions triggered by this recent trend for financial and economic litigation, and especially due to the opt out rules established long ago but only recently really discovered by NGOs and groups of citizens.
The strategy of reversing privatisations is also an important challenge for both the private and public sectors and, above all, it presents a remarkable opportunity to test Portuguese investor-state dispute resolution practitioners.
Recent years have been kind to dispute resolution practitioners and, fortunately, more and greater challenges lie ahead.