International arbitration has become widely used as a dispute resolution mechanism in Portugal over the last few decades, particularly in transactions involving Portuguese companies and foreign counterparties. Domestic parties also resort to arbitration in purely domestic disputes, especially where confidentiality, technical expertise and procedural flexibility are valued. That said, court litigation remains the default forum for many domestic disputes, particularly smaller claims and matters where the cost of arbitration may not be justified.
International arbitration in Portugal is based primarily on arbitration agreements, whether in the form of submission agreements or arbitration clauses. Portuguese law also provides a comprehensive framework for the recognition and enforcement of foreign arbitral awards.
In recent years, the following sectors have generated the most significant international arbitration activity involving Portugal:
These industries tend to generate more international arbitration because they involve high-value investments and complex contractual arrangements, often with foreign investors, lenders, contractors and suppliers operating across multiple jurisdictions. In such cases, parties frequently rely on arbitration clauses to resolve disputes efficiently and confidentially.
The leading arbitral institution in Portugal is the Commercial Arbitration Centre of the Portuguese Chamber of Commerce and Industry (CAC-CCIP), based in Lisbon. It is the principal institution for commercial arbitration and is widely used in both domestic and international disputes. Other relevant institutions include the Commercial Arbitration Institute of Oporto and the Concórdia Centre for Conciliation, Mediation and Arbitration, in Lisbon.
The most notable institutional development in the last 12 months is the commencement of operations of the Unified Patent Court’s Patent Mediation and Arbitration Centre in Lisbon, in January 2026.
Portugal does not have specific courts designated to hear disputes related to international arbitrations and/or domestic arbitrations. State courts have jurisdiction over proceedings to set aside arbitral awards (courts of appeal) and proceedings for the enforcement of arbitral awards (courts of first instance).
International arbitration in Portugal is governed by the Voluntary Arbitration Law (Law No 63/2011 of 14 December 2011), which entered into force on 14 March 2012. It applies to domestic arbitrations and to international arbitrations seated in Portugal.
The Portuguese Arbitration Law is closely based on the UNCITRAL Model Law. The major differences are that the Portuguese Arbitration Law contains rules on the appointment of arbitrators when there are multiple claimants or respondents, rules regarding third-party joinder and a default 12-month time limit (which may be extended) for issuing the award, from the date of acceptance of the last arbitrator.
No amendments to the Portuguese Arbitration Law have entered into force during the last 12 months. The legislative framework governing both domestic and international arbitration has remained stable, and Law No 63/2011 continues to be the cornerstone of arbitration in Portugal.
For an arbitration agreement to be enforceable under Portuguese law, it must be in writing (including electronic communications) and must clearly identify either an existing dispute or the legal relationship from which future disputes may arise. Parties must have capacity and the subject matter must be arbitrable.
Beyond these requirements, Portuguese law adopts a pro-arbitration stance, recognising, for example, references in a contract to a document containing an arbitration clause as a valid agreement. Portuguese courts consistently enforce such agreements unless they are manifestly invalid, inoperative or incapable of being performed.
Portuguese law adopts a broad and arbitration-friendly approach to arbitrability. Pursuant to Article 1 of the Voluntary Arbitration Law, a dispute is generally arbitrable if it involves an economic interest or, where no economic interest is involved, if the parties are legally entitled to settle the legal relationship in dispute by agreement. This means that disputes involving non-monetary interests that may not be settled are not arbitrable – for example, disputes relating to family rights, such as those arising from filiation or adoption, are not arbitrable. The Law also provides for the possibility of disputes being expressly submitted, by a special law, to state courts or to compulsory arbitration. In this regard, examples include criminal law matters and insolvency proceedings, which are subject to the exclusive jurisdiction of state courts. Disputes on IP, antitrust, competition law, securities transactions and intra-company disputes are arbitrable, except in certain cases.
The decisive criterion is therefore whether the rights at issue are at the parties’ disposal.
Portuguese courts generally adopt a pro-arbitration approach when determining the law governing the arbitration agreement. The Portuguese Voluntary Arbitration Law does not contain a specific conflict-of-laws rule on this issue, and there is no settled judicial test. Courts will give effect to the parties’ express choice of law; in the absence of such a choice, they will determine the applicable law by reference to the relevant connecting factors, including the law governing the underlying contract and the law of the seat of arbitration. Portuguese courts also seek to uphold the validity and effectiveness of arbitration agreements, in line with the principles of separability, party autonomy and the pro-enforcement policy reflected in the New York Convention.
Where court proceedings are commenced in breach of a valid arbitration agreement, Portuguese courts will generally decline jurisdiction and refer the parties to arbitration, unless the arbitration agreement is manifestly null, ineffective or incapable of being performed.
The Portuguese Arbitration Law expressly sets out that, while assessing the existence, validity or effectiveness of the arbitration agreement or the contract in which it is inserted, or the applicability of the arbitration agreement, to determine its own jurisdiction, the arbitral tribunal shall deem the arbitration clause as an agreement independent from the other clauses of the contract (rule of separability). The Portuguese Arbitration Law also sets out that the award issued by the arbitral tribunal in which the contract is deemed as null and void does not entail, by itself, the nullity of the arbitration clause.
Portuguese arbitration law affords the parties a high degree of autonomy in the selection of arbitrators.
Arbitrators must be natural persons with full legal capacity. The parties’ freedom to select arbitrators is subject to mandatory principles of equality, non-discrimination and public policy, but there are no statutory restrictions regarding nationality, profession or Bar admission.
The parties may agree on specific qualifications, such as technical expertise, industry experience or language skills, and such agreements are generally respected.
Under the Portuguese Voluntary Arbitration Law, if the parties’ agreed procedure for appointing arbitrators fails, a default mechanism applies. In a three-member tribunal, each party appoints one arbitrator and the two party-appointed arbitrators appoint the presiding arbitrator. If a party fails to appoint an arbitrator within 30 days of receiving the other party’s request to do so, or if the two arbitrators fail to agree on the presiding arbitrator within 30 days of the appointment of the second arbitrator, the competent state court will make the necessary appointment upon the request of either party. Where the tribunal is to consist of a sole arbitrator and the parties fail to agree on the appointment, the court will appoint the arbitrator at the request of either party.
The Law also contains specific provisions for multiparty arbitrations. Where there are multiple claimants or multiple respondents in an arbitration before a three-member tribunal, they must jointly appoint one arbitrator. If they fail to do so, the competent state court will appoint the missing arbitrator upon the request of any party. If it is established that the parties required to make the joint appointment have conflicting interests in relation to the merits of the dispute, the court may appoint all members of the arbitral tribunal, designate the presiding arbitrator, and set aside any appointment already made by a party.
Courts intervene in the selection of arbitrators when the parties’ agreed procedure for appointment fails, as described in 4.2 Default Procedures. The courts’ role is strictly limited to ensuring the proper constitution of the tribunal, and its decision is not subject to appeal.
An arbitrator may be challenged where there are justifiable doubts as to their independence or impartiality, or if they do not possess the qualifications agreed by the parties. In the absence of an agreed procedure, the challenge must be submitted to the arbitral tribunal within 15 days. If the challenge is rejected, the challenging party may request the competent state court to decide the matter. Where an arbitrator is successfully challenged, withdraws or is unable to act, a replacement is appointed in accordance with the agreed or statutory appointment procedure.
Arbitrators have a continuing duty to disclose circumstances that may give rise to justifiable doubts as to their independence or impartiality.
Portuguese courts and arbitral tribunals increasingly refer to the IBA Guidelines on Conflicts of Interest in International Arbitration as a persuasive benchmark, although these Guidelines are not legally binding.
The principle of competence-competence applies in Portugal: arbitral tribunals are empowered to rule on their own jurisdiction, including the existence, validity and scope of the arbitration agreement. This priority of the arbitral tribunal in deciding jurisdiction is recognised and reinforced by law and by case law.
The competence-competence principle is expressly recognised under Portuguese law, with both a positive and a negative effect. As a rule, the arbitral tribunal has priority to decide on its own jurisdiction, including on the existence, validity, effectiveness and applicability of the arbitration agreement, and state courts must abstain from full review of jurisdiction until the arbitral tribunal has ruled on it.
State courts may, however, address jurisdiction in the following two main situations.
The case law consistently stresses that courts must adopt a restrictive approach and show reluctance to intervene pre-award. Doubts as to the validity, effectiveness or scope of the arbitration agreement are resolved in favour of the arbitral tribunal’s priority, and only cases of manifest nullity, ineffectiveness or inoperability justify the state court retaining jurisdiction.
Portuguese law provides a specific mechanism for reviewing positive jurisdiction rulings: where the arbitral tribunal issues an interlocutory decision affirming its jurisdiction, either party may challenge that decision before the competent court of appeal within 30 days of notification, and failure to do so is understood as precluding later annulment on that ground.
By contrast, there is no equivalent immediate review for negative rulings on jurisdiction. If the arbitral tribunal declines jurisdiction, the arbitration ends; the parties may then bring the dispute before the state courts, which will determine their own jurisdiction to hear the case. In that context, the state court is not “reviewing” the negative arbitral decision as such, but is rather making its own, independent determination of jurisdiction.
A jurisdictional objection must generally be raised by the respondent before or together with its first memorial addressing the merits. Any objection that, in the course of the arbitral proceedings, the arbitral tribunal has exceeded or may exceed its jurisdiction shall be raised immediately after the matter allegedly giving rise to such excess of jurisdiction is introduced in the proceedings. Separately, when an arbitral tribunal issues an interlocutory decision affirming its jurisdiction, any challenge must be brought to the competent court within 30 days of notification; failure to do so precludes later reliance on jurisdictional objections in annulment or enforcement proceedings.
When dealing with jurisdictional objections, under Portuguese arbitration law, the standard of judicial review is generally deferential, reflecting the competence-competence principle in both its positive and negative effect. At the referral stage, when a claim is brought before a state court in apparent breach of an arbitration agreement, the court only undertakes a limited, prima facie review, and must decline jurisdiction unless the arbitration agreement is manifestly null, ineffective or inoperative. While decisions on jurisdiction are reviewable by courts, decisions on the admissibility of a claim are final and binding, unless otherwise agreed by the parties.
Portuguese courts adopt a strongly pro-arbitration stance. When a party commences state court proceedings in breach of a valid arbitration agreement, the court must – upon timely objection – dismiss the case due to the court’s lack of jurisdiction, unless it concludes that the arbitration agreement is manifestly null, ineffective, inoperative or incapable of being performed. Since the arbitral tribunal has power to rule on its own jurisdiction, Portuguese courts generally show reluctance to entertain proceedings brought in breach of an arbitration agreement and favour allowing the arbitral tribunal to determine jurisdictional issues in the first instance.
Non-signatories may be bound by an arbitration agreement in certain cases, such as through assignment of contractual position, subrogation or a contract for the benefit of a third party. Admission of a third-party intervention is subject to the arbitral tribunal’s discretion, after hearing the parties and the third party, and is allowed only where it will not unduly disrupt the proceedings and is justified by significant reasons. Such reasons include, in particular, the third party’s legal interest in the dispute, competing claims, joint liability issues, or potential rights of recourse arising from the tribunal’s decision. The admission of third-party intervention applies to both domestic and foreign third parties.
Under Portuguese arbitration law, arbitral tribunals are expressly empowered to grant preliminary and interim measures. Unless the parties have agreed otherwise, the tribunal may, at the request of a party and after hearing the other side, order any provisional relief it considers necessary in relation to the subject matter of the dispute. Such measures are binding on the parties; however, like in most jurisdictions, the arbitral tribunal has no direct coercive powers over assets or third parties, so enforcement may require assistance from the state courts.
The law is drafted in broad terms and allows a wide range of interim relief, including:
In parallel, the law makes clear that a request for interim measures to state courts is not incompatible with an arbitration agreement, so parties may seek judicial interim relief before or during the arbitration where stronger coercive mechanisms are needed.
Portuguese courts play an important supportive role in relation to interim and conservatory relief in arbitration. Under Portuguese arbitration law, the existence of an arbitration agreement does not prevent a party from seeking interim protection from the state courts, and judicial intervention for that purpose is not regarded as being incompatible with arbitration.
This power extends not only to arbitrations seated in Portugal, but also to foreign-seated arbitrations. Portuguese courts may grant interim relief in support of arbitral proceedings regardless of the seat of the arbitration.
The types of relief available are those generally provided under Portuguese procedural law, including measures aimed at:
As regards emergency arbitrators, the Portuguese Voluntary Arbitration Act does not contain any provisions establishing or regulating emergency arbitrator proceedings; accordingly, Portuguese legislation neither expressly authorises nor prohibits their use. Emergency arbitrators may nevertheless be available where the parties have adopted institutional arbitration rules providing for such a mechanism, in which case their authority derives from those rules rather than from the Act itself. The rules of arbitration of the Commercial Arbitration Centre of the Portuguese Chamber of Commerce and Industry, the Commercial Arbitration Institute of Oporto and the Concórdia Centre for Conciliation, Mediation and Arbitration provide for an emergency arbitrator prior to the constitution of the arbitral tribunal.
The Portuguese Arbitration Law does not contain any specific rules on security for costs, and there is no consensus among Portuguese scholars and practitioners on whether arbitral tribunals may order security for costs.
If admissible (by analogy with the general requirements for provisional measures), a security for costs may be ordered if:
The procedure of arbitration is governed primarily by the parties’ agreement, the applicable institutional rules (if any) and the Portuguese Arbitration Law.
The Portuguese Arbitration Law imposes few mandatory procedural steps:
Arbitrators have broad powers to organise the proceedings, determine the admissibility and relevance of evidence, issue interim measures and decide the merits. They owe duties of independence, impartiality, diligence and confidentiality, as well as a duty to treat parties equally and to ensure that each party has a reasonable opportunity to present its case. Breach of these duties may be grounds for challenge or annulment if it had a decisive impact on the award.
There are no specific qualification requirements under the Portuguese Arbitration Law for legal representatives appearing in arbitral proceedings. Unlike proceedings before Portuguese state courts (where representation is mostly reserved to lawyers with Bar admission requirements), representation in arbitration is largely governed by the parties’ autonomy and the procedural rules applicable to the arbitration.
Unless otherwise agreed by the parties, the arbitral tribunal has discretion to determine the admissibility, relevance and weight of the evidence. Documentary evidence is typically the primary means of proof, while written witness statements are commonly submitted and, where appropriate, followed by oral cross-examination. Party representatives may also testify. Requests for document production are frequently made by the parties, within time limits established by the tribunal.
Both party-appointed and tribunal-appointed experts are admissible, the latter either at the request of a party or on the tribunal’s own initiative.
In practice, arbitral tribunals often look to the IBA Rules on the Taking of Evidence in International Arbitration for guidance.
There is no rigid statutory code of evidence applicable exclusively to arbitration. The tribunal has discretion to determine the admissibility, relevance, materiality and weight of evidence, subject to the parties’ agreement and due process requirements.
Arbitral tribunals can order parties to produce documents and attend hearings, but they lack coercive powers. If the provision of evidence is within the control of one of the parties, or of a third party who refuses to co-operate in providing it, the interested party may apply to the relevant state court for an order that the evidence be produced before the state court. In order to apply for the court’s assistance, the interested party must first seek the permission of the arbitral tribunal. The evidence produced before the state court must then be communicated to the arbitral tribunal.
Arbitration proceedings in Portugal are generally confidential. Arbitrators, the parties and arbitral institutions are under a duty to keep confidential all information and documents obtained in the course of the arbitration. Information from arbitral proceedings may only be disclosed where such disclosure is necessary for the protection or enforcement of a party’s rights or is required by law, including in subsequent court or arbitral proceedings.
That said, the publication of awards and other decisions of the arbitral tribunal with the identification of the parties redacted is allowed, unless any of the parties object to it. Finally, there are specific rules concerning arbitrations involving the state or state entities, which set out restrictions on the confidentiality of the proceedings, under certain circumstances.
For an arbitral award to be valid and enforceable, it must:
The award must further indicate the date of its issuance, the seat of the arbitration and, unless otherwise agreed by the parties, the apportionment of the costs arising directly from the arbitral proceedings.
Pursuant to the Portuguese Arbitration Law, the arbitral tribunal is required to notify the parties of the award within 12 months from the date on which the last arbitrator accepted the appointment, unless the parties have agreed, before the acceptance of the first arbitrator, on a different time limit. This period may be extended either by agreement of the parties or by a reasoned decision of the arbitral tribunal, on one or more occasions, for successive periods of up to 12 months.
The parties may, however, jointly object to any such extension.
An arbitral tribunal may render different types of awards and grant remedies comparable to those available before the state courts, provided they fall within the scope of the arbitration agreement and concern arbitrable matters. As arbitral tribunals do not possess ius imperii (the coercive authority of the state), they are not empowered to enforce their own awards, which must instead be enforced through the state courts. The awards that may be issued include:
Although they lack enforcement powers, arbitral tribunals may grant substantially the same forms of relief as state courts, including declaratory relief, monetary compensation, specific performance and injunctive relief.
Under Portuguese law, interest may be awarded for both principal claims and costs, but the applicable rate depends on the nature of the claim and the parties’ agreement.
Unless the parties have agreed otherwise, the arbitral award must determine how the costs arising directly from the arbitral proceedings are to be allocated between them. The tribunal may also order one or more parties to reimburse the other party or parties for all or part of the reasonable costs and expenses incurred in connection with the arbitration, where it considers such an allocation fair and appropriate and those costs have been duly demonstrated.
In exercising this discretion, the tribunal may take into account both the outcome of the dispute and the parties’ conduct throughout the proceedings. Depending on the circumstances, costs may be allocated on the basis that the unsuccessful party bears them, in proportion to each party’s degree of success, with each party bearing its own costs, or by reference to the parties’ procedural conduct, particularly where one party has acted in bad faith, caused unnecessary delays or pursued manifestly unmeritorious claims. Costs resulting directly from the arbitration generally include:
An arbitral award may be challenged either by means of an appeal or by an annulment action. An arbitral award may only be subject to appeal (on the merits) to the competent state court if the parties have expressly provided for such a possibility in the arbitration agreement, and provided that the dispute has not been decided ex aequo et bono or by amiable composition.
An arbitral award may only be annulled by the competent state court in the following circumstances.
In international arbitrations, the parties may only provide for the possibility of appeal to a different arbitral tribunal (not to courts).
Under Portuguese arbitration law, an arbitral award is not subject to appeal on the merits, unless the parties have expressly agreed otherwise. Accordingly, parties may expand the scope of review by agreeing that the award will be subject to appeal and by defining the applicable terms of that appeal.
By contrast, the parties cannot exclude the statutory action for setting aside (annulment). The grounds for annulment are mandatory and derive from the Portuguese Arbitration Law.
In set-aside proceedings, Portuguese courts do not review the merits of the dispute. Judicial review is limited to the statutory grounds for annulment and does not involve a reassessment of the facts or substantive law. If the arbitral award is subject to appeal, Portuguese courts may review the merits de novo.
Portugal is a contracting state to the New York Convention on the Recognition of and Enforcement of Foreign Arbitral Awards (the New York Convention). Under Article I of the New York Convention, Portugal declared on the basis of reciprocity that it will apply the Convention to the recognition and enforcement of awards made only in the territory of another contracting state.
A domestic arbitral award rendered in Portugal is enforceable in the same manner as a state court judgment, without the need for prior recognition, and enforcement is sought before the competent first instance court. Foreign arbitral awards are recognised and enforced primarily under the New York Convention.
Portuguese courts will not enforce a domestic award that has been set aside in Portugal. For foreign awards annulled at the seat, enforcement is governed by the New York Convention as incorporated in the Voluntary Arbitration Law; set aside at the seat is a strong reason to refuse recognition but not an automatic bar in the statutory text, and the court will also consider international public policy.
When an award is subject to ongoing set-aside proceedings at the seat, Portuguese courts apply the New York Convention framework. There is no automatic rule in domestic law that such proceedings have “no impact”; courts will typically consider whether to stay or adjourn recognition/enforcement in Portugal pending the outcome at the seat, particularly where annulment appears credible or public policy concerns are raised.
At the enforcement stage, courts will examine immunity from execution asset by asset, usually protecting sovereign and public purpose property (acta jure imperii) while being more open to enforcement against commercial assets (acta jure gestionis). A state or state entity may therefore raise sovereign immunity defences, but their success will depend on the nature of the dispute and the assets targeted.
Refusal to recognise or enforce a foreign arbitral award is permitted only on limited grounds.
At the request of the party against whom the award is invoked, recognition or enforcement may be refused where that party proves that:
Recognition may further be refused if the court finds that:
Portuguese arbitration law does not expressly provide for class action arbitration or opt-out group arbitration mechanisms.
There are no professional conduct rules specifically governing counsel and arbitrators in international arbitration in Portugal.
Nevertheless, the Code of Ethics adopted by the Portuguese Arbitration Association in 2020 applies to both domestic and international arbitration. It is binding on the Association’s members and may also be adopted by arbitral institutions, parties and arbitral tribunals in individual proceedings.
In practice, Portuguese arbitration broadly follows the principles reflected in the IBA Guidelines on Party Representation in International Arbitration, although with some important distinctions. In particular, unlike the approach contemplated by the IBA Guidelines, arbitral tribunals in Portugal do not have the power to impose sanctions on parties or their counsel for misconduct, nor is it common for them to exclude party representatives or adopt other procedural measures in response to conflicts of interest or improper conduct during the proceedings.
There is currently no statutory regime specifically regulating third-party funding in Portugal.
Although the Portuguese Arbitration Law does not contain detailed provisions on consolidation, the rules of the leading arbitral institutions in Portugal regulate the matter and generally leave the decision to be made on a case-by-case basis. For example, under the Rules of Arbitration of the Arbitration Centre of the Portuguese Chamber of Commerce and Industry, a party may request the consolidation of pending proceedings where the parties are identical or where the conditions for third-party joinder are satisfied.
Third parties may be bound by an arbitration agreement where they have become subject to the underlying contractual relationship, such as through assignment of contractual position, subrogation or a contract for the benefit of a third party or the arbitration agreement under the applicable law.
Portuguese arbitration law also permits third-party intervention in certain circumstances where the third party is bound by the relevant arbitration agreement.
Portuguese courts do not possess a general power to bind foreign third parties who are strangers to the arbitration agreement.
Rua Garrett, 64
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Third-Party Funding in Portugal
Third-party funding (TPF) has recently been the subject of growing interest and development in Portugal. TPF involves the financing of the costs associated with resolving a dispute (lawyers’ and experts’ fees, court fees and arbitration costs, amongst others) by someone other than the party itself or its lawyers, and offers a significant range of advantages.
First and foremost, TPF helps to improve access to justice. Although companies in Portugal may benefit from legal aid in judicial proceedings in certain circumstances, the costs and financial risks associated with litigation and arbitration can still discourage or constrain the pursuit of meritorious claims. In such situations, TPF precisely enables companies to pursue those claims without having to bear the full financial burden of the proceedings, thereby facilitating access to justice by mitigating the economic barriers and risks that might otherwise deter litigation or arbitration. In addition to cases of financial incapacity, TPF can also constitute an important management tool, enabling companies to litigate without having to allocate their resources to cover the costs of the dispute, thereby avoiding any resulting liquidity constraints.
Regarding the terms of such funding, it should be emphasised that litigation funding is typically provided on a “no-win, no-fee” basis, which means that the funder is not entitled to reimbursement of the amounts financed if the claim is dismissed. The risk of the litigation is therefore, to a large extent, transferred to the funder. In turn, should the case be successful, the funder’s remuneration will normally correspond to a proportion of the sums recovered and will be a multiple of the value of the funding. Invariably, litigation funding is preceded by rigorous due diligence on the part of the funders, conducted by teams of lawyers, which analyses the likelihood of the claim succeeding, the foreseeable costs of the litigation and the opposing party’s assets.
The legal and regulatory framework in Portugal
Portugal has no specific law dedicated to TPF. In the absence of any prohibition, funding arrangements are legal and are simply governed by the general rules of contract, together with the ordinary rules of court and arbitration procedure and the conduct rules for lawyers.
The prevailing opinion is that a pure litigation funder does not fall within the categories of bank or financial company that require a licence from the authorities, insofar as it does not grant credit or otherwise carry out financial intermediation activities within the meaning of the Legal Framework of Credit Institutions and Financial Companies (RGICSF, approved by Decree-Law 298/92), but instead only acquires a contingent economic interest in the outcome of the dispute.
The one area where funding is now expressly regulated is consumer class actions. An EU directive on collective actions (Directive (EU) 2020/1828), which Portugal brought into national law through Decree-Law 114-A/2023, sets safeguards for how those particular cases may be funded – for example, managing conflicts of interest.
Outside that consumer context, funding of litigation and arbitration remains unregulated at the domestic level, and there is no indication of an imminent Portuguese legislative initiative in this regard. This lack of comprehensive regulation leaves room for parties to develop bespoke or hybrid funding structures tailored to the particular characteristics of a dispute, subject to the limits imposed by general contract law, professional ethics and public policy. The matter may nonetheless cease to be purely domestic: the European Parliament’s resolution of 13 September 2022 on responsible private funding of litigation called on the European Commission to propose a directive establishing common minimum standards for commercial third-party litigation funding across the EU – a process that would in due course also shape the Portuguese framework, should it progress.
Although the Portuguese Voluntary Arbitration Law (Law No 63/2011) contains no specific provision on the disclosure of third-party funding, arbitrators sitting in Portugal are, in practice, increasingly expected to enquire into and disclose known funding arrangements for conflicts-of-interest purposes, in line with international soft-law standards such as the 2024 IBA Guidelines on Conflicts of Interest in International Arbitration (General Standard 6(b)), under which a funder exercising a controlling influence over a party may be treated as bearing that party’s identity for the purpose of assessing an arbitrator’s independence. This question is far from academic, since the presence of TPF may also be invoked in support of applications for security for costs.
Use of third-party funding in Portugal
Portugal has traditionally been a small, marginal market for TPF. For a long time, the concept did not attract any attention from the local legal community, with little written about it and no court cases or legislation addressing it. Over the last ten years, however, it has become a familiar topic of discussion at conferences and webinars, and in published articles, particularly within the arbitration community.
More importantly, in recent years, there has been a significant growth in the number of funders acting in the Portuguese market, with at least ten currently active at the national level. Consequently, it is increasingly common to see high-value disputes – particularly in arbitration proceedings – in which the claimant is funded by a third-party funder. The criteria used to determine which disputes may be funded will vary depending on the funder. The minimum value of the dispute to be funded usually goes from EUR1 million to several million euros.
That said, the most notable third-party funded cases so far have been consumer class actions. Backed by international funders and helped by rules that make collective claims easier to bring, several large funded actions are under way, including cases against major technology companies. It is in this area that funded litigation has first taken on a meaningful economic scale in Portugal. This trend is already expanding to other disputes, particularly high-value arbitration cases.
Third-party funding in practice
The process normally begins when the party with the claim, or its lawyers, approaches a funder and presents the case. The funder typically carries out a risk assessment, which involves legal and financial due diligence – essentially a detailed review of how strong the case is, how much money is at stake, whether the opposing side would be able to pay if the case is won, how realistic it is to actually collect, and how long it will take to collect. This review serves two purposes: deciding whether to fund the case at all and setting the price of the funding.
The due diligence is very thorough, from both a legal and factual perspective, and requires the entity applying for funding to disclose the facts and evidence that allow the funder to properly assess the likelihood of success of the claim. Typically, funders will hire law firms with solid litigation and arbitration teams to carry out such due diligence.
If the funder decides to go ahead, the two sides negotiate a funding agreement. This is usually structured so that the funder pays the costs of the case and, in return, receives a share of the proceeds if the case succeeds. The share of the proceeds to be received by the funder may vary and will depend on a number of factors, such as the value of the claim and the level of risk to be taken by the funder. According to a recent study by the European Commission on Mapping Third Party Litigation Funding in the European Union, in Portugal the percentage of the proceeds delivered to the funder may vary between 14% and 70%. If the case fails, the funder simply loses its investment, and the funded party owes nothing back.
The agreement typically deals with a number of practical points, including:
Typically, the whole process from the first approach to the funder until a funding agreement is executed will take a few weeks.
Once the agreement is signed, the funder monitors the case through to its conclusion, and when money is recovered it is distributed in the order the parties agreed.
Alternatives (or complements) to third-party funding
There are two common alternatives to fund the costs of a dispute:
ATE insurance
ATE insurance is taken out once a dispute has already started (or is about to start), rather than in advance, as ordinary insurance usually works. The policy covers the costs of pursuing the case, and in some versions also covers the risk of having to pay the other side’s costs if the case is lost.
What makes it function like a form of TPF is that the insurer effectively takes on the financial risk of the dispute: if the claim fails, the insurer bears the cost rather than the client.
Lawyers’ contingent fees
A contingent fee is an arrangement under which the lawyer’s payment depends on the outcome of the case – typically, the lawyer receives a percentage of what the client recovers, and receives little or nothing if the case is lost. In many countries, this is a common way of sharing the financial risk of litigation between the client and the lawyer.
In Portugal, however, there are significant restrictions to this option. Article 106 of the Statute of the Portuguese Bar Association (Estatuto da Ordem dos Advogados, approved by Law 145/2015) prohibits what is called the “quota litis pact”: an agreement, made before the case is over, under which the lawyer’s fee depends exclusively on the outcome and the client must pay the lawyer a percentage of whatever is awarded.
That said, pursuant to Article 106(3) (which excludes from the quota litis prohibition arrangements combining a (reduced) fee calculated on criteria other than the outcome with an uplift tied to the result), it is lawful and very common for lawyers to partially finance the costs of a legal dispute by agreeing to accept legal fees lower than their usual rate, on the understanding that they will receive a percentage of the sums recovered by the client at the end of the proceedings, should the case be ruled in favour of the client.
Combination of litigation finance tools
ATE insurance and contingent fee arrangements should also be understood as complementary components of the broader litigation finance ecosystem, as they can complement TPF by addressing different aspects of the costs and risks associated with litigation. ATE insurance protects claimants – and, indirectly, funders – against the risk of adverse costs orders or other litigation expenses in the event of an unsuccessful outcome, thereby reducing the overall financial exposure of the case. At the same time, contingent or success-based fee arrangements defer or make legal fees conditional upon success, reducing the claimant’s immediate funding needs. When used alongside TPF, these mechanisms can enhance the economic viability of claims, improve the allocation of litigation risk among participants, and make funding arrangements more attractive to commercial funders.
Third-party funding in other Portuguese-speaking countries
In other Portuguese-speaking countries, such as Brazil, Angola, Cape Verde, Guinea-Bissau, Mozambique and São Tomé e Principe, the legal and regulatory framework is similar to Portugal – ie, there is no specific law dedicated to TPF and, in the absence of any prohibition, funding arrangements should be deemed legal if they are compliant with the general rules of contract, together with other general rules that may be applicable.
That said, with the exception of Brazil (an emerging but increasingly active TPF landscape), there is little evidence that a litigation funding market has yet developed in those countries. It is likely, however, that its use will increase exponentially in the coming years.
In fact, in recent years, there has been an ongoing trend towards the creation of a Portuguese-speaking arbitration community. Portuguese-speaking arbitration associations have emerged, as well as joint publications and events including different Portuguese-speaking jurisdictions, and there are several partnerships between law firms in different Portuguese-speaking countries. There has also been an increase in the number of appointments of Portuguese arbitrators in other jurisdictions. Moreover, for a long time now, it has been very common for Portuguese law firms to intervene in matters in other Portuguese-speaking countries, particularly in African countries such as Angola, Cape Verde, Mozambique and São Tomé e Príncipe.
It is therefore likely that the growth of TPF in Portugal and the clear expansion it has also been experiencing in Brazil, together with the consistent building of a lusophone arbitration ecosystem, may have a spillover effect on other Portuguese-speaking countries, particularly African countries where Portuguese is the official language. This growth is expected to be driven in particular by the activities of funders operating in more developed Portuguese-speaking markets, such as Portugal, and it is expected that Portuguese law firms – by virtue of their relationships with clients and law firms in those jurisdictions on the one hand, and with TPF providers on the other – will come to play a very significant role in this growth, providing advice to both the funders and the parties receiving finance.
Conclusions
Rua Garrett, 64
1200-204 Lisboa
Portugal
+351 210 933 000
geral@servulo.com www.servulo.com