Litigation 2021

Last Updated December 04, 2020

Macau

Law and Practice

Authors



Riquito Advogados provides legal services to a diverse range of clients in various industries, but has a particular focus on corporate clients. The firm has five qualified lawyers and offices in Macau SAR and Lisbon, Portugal, and its key practice areas include corporate/M&A, contracts/contractual investment, restructuring, litigation and arbitration, IP, foreign investment, corporate finance, real estate, aviation, private equity, project finance, labour and taxation.

The legal system of the Macau Special Administrative Region (MSAR) is based on civil law. The judicial system of MSAR is composed of the courts and the Public Prosecutor’s office.

Judicial authority is entirely vested in the courts, the Public Prosecutor’s office being an independent judicial body whose main duties are to uphold the law, represent the MSAR (and other entities) in court and to direct and conduct criminal investigation.

Judicial System

MSAR’s judicial system follows an adversarial model.

The court, however, has powers to order evidence to be produced which it may find relevant to the decision, but in no circumstance can a court take the initiative to resolve a dispute unless it is requested to do so by one of the parties involved in that dispute. The court may only consider the facts submitted to it by the parties (with the exception of those that are public and evident and those it becomes aware of while performing its duties as well as those that are relevant to determine whether the parties are acting with fraudulent intent).

The adversarial principle must be observed throughout the proceedings and ensures that no decision can be taken unless the relevant parties are called to provide their views and evidence. During every stage of the proceedings, each party will have the right to form their position in respect of any of the parties’ actions and evidence submitted to the court. Naturally, there are a few exceptions to this principle, which are intended to ensure the effectiveness of the decision. In those situations, an interim decision may be made and the party against whom that decision is taken will have the opportunity to submit its defence and evidence after the decision, which will then be reviewed by the court accordingly. 

The court acts in strict compliance with the principles of impartiality and objectiveness and its decisions are based strictly and only on the law. The parties are to be treated equally. The particular procedure will depend on the type of action sought by each party.

Civil Proceedings

The initial stage of the proceedings is based on initial written submissions. The court will review the parties’ submissions and documentary evidence and, if further evidence is required, the matter will be submitted to trial. The trial hearing is fundamentally of an oral nature, where witnesses, experts and the parties' depositions are produced before the court. The court and the parties are admitted, with certain limitations, to interrogate and counter-interrogate the witnesses and seek further clarifications through the judge. Written statements can only exceptionally be admitted and final arguments on matters of fact are produced orally before the court. Closing legal arguments may be produced orally if the parties so agree, otherwise they are to be produced in writing before the final decision is issued.

Each court decision should provide the reasoning that led to it, whilst observing a certain structure to ensure that they are clear and objective, thus allowing it to be reviewed by the parties and by superior courts in case of appeal.

Criminal Proceedings

Criminal proceedings also follow an adversarial principle, but with a different structure. The investigation is conducted by the Public Prosecutor's office, which is an independent judicial body. After the investigation is completed, the Public Prosecutor’s office will determine whether an indictment is made based on the evidence collected, and will submit the matter to trial. During the investigation, the proceeding is mainly inquisitory. However, after the investigation is completed, the defendant will have the ability to contradict and dispute any indictment made by the Public Prosecutor. For that purpose, the defendant may request the indictment be reviewed by a pre-trial judge before the matter goes to trial, or simply submit its defence to the trial court.

MSAR has an independent judicial system, extending to final adjudication. The structure of the court system is regulated by Law No 9/1999, amended by Law No 4/2019. There are three instances in MSAR, hierarchically organised, which have jurisdiction over its entire territory:

  • the Courts of First Instance, which include the Judicial Base Court and the Administrative Court;
  • the Court of Second Instance; and
  • the Court of Final Appeal.

The Judicial Base Court is organised into different sections, based on the types of matters considered (two pre-trial criminal sections, five criminal sections, three civil sections, one small claims civil section, one labour section and one family section). The civil sections have general competence to try any matters that do not fall within the specific matters attributed to any other sections.

The Administrative Court is competent for matters of administrative law, taxation and customs.

The Court of Second Instance and the Court of Final Appeal are, as a matter of principle, courts of appeal. The Court of Second Instance is primarily a court of appeal and reviews the decisions from the Courts of First Instance (both the Judicial Base Court and the Administrative Court). It encompasses two sections:

  • a criminal section, which reviews criminal matters and
  • a general section, which reviews all other matters.

The Court of Final Appeal is the highest court in the hierarchy and its primary competencies are to review appeals from decisions of the Court of Second Instance and to standardise jurisprudence. It is currently composed of only one section with a panel of three judges, with competence to review all matters.

Exceptionally, however, the Court of Second Instance and the Court of Final Appeal may serve as courts of first instance in relation to certain matters, or in certain matters involving certain entities that benefit from a forum privilege. 

The proceedings are open to the public, save as otherwise provided by law. This does not mean, however, that any person can inspect the proceedings. Lawyers have the ability to inspect any proceedings and obtain copies. The parties may inspect their own proceedings and obtain copies. Other than that, all other persons must have a legitimate reason to access the contents of the court filings and proceedings.

The court hearings are, however, in principle, entirely public and any person may attend.

The court may (on its own initiative or by request of any of the parties), exceptionally, establish limitations on the public nature of the proceedings and hearings when the matters involved may offend the parties’ or other persons' dignity, their privacy, public policy or undermine the effectiveness of the decision to be issued. The law expressly states that certain proceedings (such as marriage annulment, divorce, filiation, and injunction) may only be accessed and inspected by the parties and their attorneys. Pending injunction proceedings, which should be decided ex parte, may only be inspected by the applicant and its attorneys until the decision is taken.

Criminal proceedings and hearings, on the other hand, should remain secret during the investigation and pre-trial stages, shifting to public (with the meaning referred to above) once they are submitted to trial and the trial hearing date is scheduled, thus allowing any person to attend the hearings, save when, exceptionally, restrictions are imposed to preserve people’s dignity, public policy and public order. The hearing in which the verdict is to be announced is always public. 

Legal representation in court is required for most cases.

Civil actions with a tax value exceeding MOP100,000, appeals, proceedings initiated in the higher courts; and enforcement proceedings exceeding MOP1 million or (in cases where objections are raised or any other issues require the declaration form of procedure) enforcement proceedings exceeding MOP100,000, always require legal representation.

In administrative actions and criminal proceedings, legal representation is always required.

Only lawyers admitted to the Macau Lawyer’s Association (irrespectively of their nationality) are allowed to represent the parties in a court of law. All lawyers have the same rights of audience before any courts in MSAR.

Trainee lawyers admitted to intervene in judicial proceedings are admitted to represent the parties in proceedings when legal representation is not mandatory, in criminal proceedings and with regard to specific issues where no points of law are raised.

When legal representation is not mandatory, the parties can represent themselves or be represented by a trainee lawyer.

According to MSAR procedural rules, the proceedings’ relevant party shall be responsible for the payment of court fees and expenses, and the transferal of payment liability for court costs and expenses is not foreseen. As such, neither a specific regime for third-party funding, nor a legal entity as a third-party funder is provided for in law. However, payment may be settled by other individuals or entities at the last day for voluntary payment.

Enforcement of unpaid court bills shall be brought against the responsible party.

The above-mentioned does not hinder out-of-court contractual arrangements with third parties in respect of the payment of court bills, despite note being enforceable vis-à-vis the court.

There are no provisions in MSAR legal system regarding third-party funding of litigation and, consequently, any agreement on the matter will not be effective vis-à-vis the court. In other words, the court will always issue the bill to the name of one of the parties to the plea and will enforce the bill against that party only.

The above does not prejudice the validity of out-of-court agreements between either party with third parties, but these will only be effective vis-à-vis such parties, not the court. However, it is not a common practice in Macau.

On the other hand, the law allows a third party to settle an outstanding court fees bill, without the consent of the party responsible to it. In such case, unless such payment was in bath faith, the third party is legally entitled to be reimbursed by the responsible party.

See 2.2 Third-Party Funding: Lawsuits.

See 2.2 Third-Party Funding: Lawsuits

There is no limit as to the nature of the costs that can be settled by a third party, when that payment is allowed (see 2.1 Third-Party Litigation Funding). 

Contingency fees are not applicable to MSAR jurisdiction.

Time limits are not applicable to MSAR jurisdiction.

Pre-action conduct is not imposed by civil procedural rules unless required by statute, such as when a creditor seeks performance of a certain obligation (in which case the creditor must serve notification to the debtor to before starting legal action), as it serves the purpose of converting a situation of delay into a case of non-performance of an obligation.

The standard statute of limitation to start a civil suit in MSAR is 15 years, but for certain specific rights or entitlements (eg, lease rents, interest or dividends) a shorter statute of five years applies.

There is a special set of statutes, the lapse of which do not prevent the plaintiff from bringing the claim to court, but render the performance of the relevant obligation as presumed. This presumption is only waived with the confession of the non-performance of the obligation by the debtor. Such statutes are of six months (for credits held by housing, food and beverage businesses; and in respect of payment for housing, food and beverages only) and two years (eg, for credits held by self-employed professionals).

The general factors that determine the competence of the MSAR courts for a civil suit are the following:

  • some or all of the facts that substantiate the claim were performed in MSAR;
  • the defendant is a non-resident and the plaintiff a resident, but only if, in abstract terms, the courts of the defendant’s country of residency would be competent to judge similar proceedings if they were started in that jurisdiction by the defendant against the plaintiff; and
  • the right or entitlement being claimed can only be effective by means of legal action started in MSAR, provided that there is a strong connection between the proceedings and the jurisdiction, in terms of the people or the assets involved.

MSAR courts' competence for certain types of actions is subject to other requisites (eg, they are competent for proceedings for the recovery of debts if the obligation was to be performed in MSAR or the defendant is domiciled in MSAR).

MSAR courts have exclusive competence to try legal proceedings, in respect of erga omnes rights, over real estate located in MSAR and in respect of the bankruptcy or insolvency of entities which have their registered office in MSAR.

A lawsuit is initiated by submitting a statement of claim (petição inicial), which identifies the court where the action is filed, the parties (including their names and domicile), and the adopted form of proceeding, and describes the facts and legal grounds of the claim, its request(s) and tax value. At this stage, the plaintiff should append all fact-supporting documents to the statement of claims, present the list of witnesses as well as request other evidence to be produced.

The party can submit additional statements (articulado superveniente) if any ulterior fact constitutes, modifies or extinguishes the rights in discussion.

Typically, when no grounds for preliminary rejection of statement of claim are found, the defendant will be summoned, by means of double-registered mail, or through their attorney or another judicial representative, per request of the plaintiff.

If delivery of the mail is unsuccessful, summoning will be made directly by the court clerk before the defendant.

If the defendant’s location is unclear, summoning will take place by means of edicts and announcements, which will be drafted in the presumed language of the defendant, or in the MSAR official languages. 

A party can be sued outside the jurisdiction, in which case the court shall summon the defendant as per international conventions applicable to MSAR; if none is applicable, the defendant will be summoned by double-registered mail. If it is not possible to summon the defendant by post, they will be summoned by rogatory letter (which shall be served with the assistance of the courts of the country of residence of the defendant).

If the defendant does not respond to a lawsuit, nor constitute attorneys or intervene in any form in the proceedings, the court shall first verify if the summons was carried out in accordance with the legal rules. The court will summon the defendant again if irregularities are found.

If the court considers the defendant duly summoned, the facts alleged by the plaintiff will be considered admitted by the defendant (with certain limitations) and the action will proceed for submission of the final arguments and judgment.

Associations or foundations (the purpose of which is related to the interests in dispute), the Public Prosecutor's office, and any citizen entitled to civic and political rights, are permitted to initiate lawsuits for protection of the following collective or representative interests:

  • public health;
  • environment;
  • quality of living;
  • cultural heritage;
  • the public domain;
  • the protection of goods and their consumption; and
  • services provision.

All of these entities are equally able to initiate these actions. 

Court fees and costs can be estimated in advance by lawyers, depending on the nature and expected complexity of the proceedings.

At the request of clients, lawyers will also provide an estimation of their fees, the calculation of which is subject to multiple factors, such as:

  • the time spent;
  • the complexity of the case;
  • the importance of the services provided;
  • the financial situation of the interested party;
  • the results obtained; and
  • the general practice of the lawyers.       

Pending proceedings, parties may request interim relief measures and they may also submit an array of specified or unspecified requests to the court, depending on the particulars of the case. These include requests:

  • to submit further evidence;
  • to claim against the decision on the facts established and not established before trial;
  • to dismiss certain requests of the other party;
  • to seek the annulment of certain procedural actions; and
  • to request the intervention of other entities as parties to the proceedings.

Certain remedies are available, such as the suspension or the obstruction of a judge to the case or the request for the declaration of the other party, or its legal representative, as a mala fides party.

After the written submissions, the court may immediately make an award based on the merits of the case, which may happen when it considers that the information and evidence made available up to that stage allows it to decide without further trial.

Please refer to 4.2 Early Judgment Applications.

Furthermore, a party may submit an application for the early termination of the proceedings:

  • if they come to a standstill for three years due to either party’s negligence in carrying out the required actions; or
  • if, by virtue of certain ulterior facts or circumstances, the proceedings are no longer useful to the parties.

If certain requirements are met, interested parties besides the plaintiffs or defendants are allowed to join a lawsuit, thus assuming the position of main parties, or parties ancillary to the main parties.

Interested parties who share the same interest as the plaintiff or defendant may intervene as a main party at their own initiative or at the request of any existing (main) parties.

Third parties against whom the defendant may have a reimbursement right, and who may have a justified interest that the final decision be favourable to one of the parties, may intervene as ancillary parties.

A third party may also request to join a lawsuit to claim his or her own right, which may be fully or partially incompatible with the claim of the plaintiff or the defendant.

There is no specified motion for security for the defendant’s costs, although it may be awarded subject to particulars.

Generally, the parties are requested to make a deposit for part of the fees and costs applicable to the claim and counterclaim, appeals and other submissions.

Besides the deposit for expenses, applicants and respondents shall be liable for 25% of the following applicable fees:

  • initial deposit (due upon submission of the application); and
  • deposit for trial (due upon the scheduling of the trial, or before the issuance of a written decision).

As general rule, final judgment shall be issued within 20 days from the closing of the final arguments, and decisions on other applications/motions within ten days. But these deadlines are, in most cases, exceeded.

Other specific rulings may be subject to different deadlines (eg, injunctive relief shall be issued within two months or 15 days, the latter when issued ex parte).

Either party can request that the application be dealt with on an urgent basis if the circumstance gives grounds for such urgency.

Unlike most common law jurisdictions, pre-trial discovery procedure is not available in MSAR; instead, certain mechanisms such as depositions, interrogatories, requests for production of documents, expert evidence and judicial inspection are available.

These mechanisms, however, are not as wide-ranging as those in common law jurisdictions, nor do they follow the same rules. In principle, each party has the burden to state and produce relevant facts and evidence, in as detailed a manner as possible, since amendments after submissions encounter significant limitations.

Depositions are used to obtain the other party’s confession, whereas interrogatories are used to produce witness evidence, both being provided orally during the trial hearing.

Requests for the production of documents may be addressed to the other party(ies) and to non-parties in acknowledgment of possession. It is necessary to identify the document(s) and their relevance to the case before the court will issue an order to the relevant party to surrender such documents. Refusal to co-operate may be sanctioned with fines, without prejudicing other compulsory measures. A refusal by litigants will be evaluated by the court in the light of the evidence and, in certain circumstances, may lead to an inversion of the burden of proof regarding certain facts. If the party claim that it does not hold the requested document, the applicant has the burden of demonstrating that this claim is false.

Discovery mechanisms shall be requested by the parties (any parties) and are administered by the court, provided that they do not offend anyone’s physical or moral integrity or pose an intrusion to their private life, including their domicile, correspondence and any other forms of communication.

It is possible to obtain discovery from third parties not named as a plaintiff/claimant or defendant. In principle, as long as it is relevant to establishing the facts, any party who is aware of any facts, or is in possession of any evidence, is bound to co-operate with the court upon request, by providing witness statements or producing documents.

Witness statements are provided during the trial hearing. The witness list is submitted along with the initial pleading or modified after the court has issued the decision regarding the classification of proven facts and facts to be proven by considering the submissions of both parties (until 30 days before the hearing). The witnesses are identified by their names, professions, addresses and other necessary circumstances.

There are limitations as to the maximum number of witnesses allowed but the court does not exercise previous control over the witnesses’ knowledge of the facts or respective relevance. Witnesses called by the court must attend the hearing and MSAR might be compelled by the court when necessary, without prejudice to certain individuals’ right to refuse to testify or prerogative to provide their statement in writing. The parties have the responsibility to ensure that any witnesses living outside MSAR attend the hearing to provide their statements, unless the party requests the court to issue a collaboration request to the relevant foreign authorities to obtain a witness statement.

Should, during the hearing, any party become aware of additional relevant witnesses, it may make a request to the court for admission, which is subject to its discretion.

The court may order, upon the request of either party, a third party to produce documents. This request can be included in the initial submission(s) or later, together with the evidence submission, which is to be presented after the court has established the facts proved or to be proven. The party needs to identify the document and explain its relevance. The court will decide after hearing all parties.

See 5.1 Discovery and Civil Cases and 5.2 Discovery and Third Parties.

As general rule, parties shall produce the relevant documents with respective submissions, but, without prejudice to rules on mala fides, documents can be submitted at a later stage, although likely subject to the payment of fines.

See 5.1 Discovery and Civil Cases and 5.2 Discovery and Third Parties.

Lawyers and certain other professionals are subject to legal privilege. In particular, client-attorney privilege is well protected under MSAR law and only in very limited and exceptional circumstances can the court allow testimony which breaches this privilege. The duty of secrecy may also be lifted by the Lawyers Association upon a voluntary request by the lawyer involved, when it is justified for the purposes of defending the rights and legitimate interests of the lawyer or his or her clients. 

Any evidence obtained in breach of professional privilege is considered null and thus cannot be used in court.

There is no distinction, as regards privilege, between external and in-house counsel, provided they are both lawyers registered with the Macau Lawyers’ Association.

Documents and other materials may be refused to be disclosed when their disclosure:

  • may cause the violation of a persons’ moral or physical integrity;
  • may cause an intolerable violation of someone’s privacy, domicile, correspondence or other means of communication;
  • may cause a breach of legal privilege or secrecy; or
  • implies a general disclosure of business books, which is subject to certain restrictions.

In general, injunctive relief measures can be awarded when there is a justified concern that a certain right may be harmed in a serious and barely recoverable manner. Such measures can be of a conservatory nature, such as when the interested party seeks to arrest his or her debtor’s assets for future enforcement, or of an anticipatory nature, when the interested party seeks to obtain his or her claim (in total or in part) in advance of the court’s final ruling. Parties can request interim relief in either pending proceedings or before starting legal proceedings.

Without prejudice to the request of unspecified interim injunctions, the MSAR’s Civil Procedure Code provides an array of specified interim measures, including:

  • provisional restitution of certain asset(s);
  • suspension of corporate resolutions;
  • provisional alimony;
  • provisional compensation;
  • arrest and deposit of assets; and
  • embargo of works.

Besides the aforementioned, interested parties may seek to obtain any other (unspecified) forms of injunctive relief.

The general requirements for the award of injunctive relief are:

  • likelihood of the existence of the claimant’s right (fumus boni juris); and
  • likelihood of the occurrence of damage to it (periculum in mora).

Notwithstanding the above, the relief will not be awarded if it will cause significantly more damage than it is meant to prevent.

The court may authorise the substitution of the interim relief measure for the provision of a bond deemed adequate.

Injunctive relief measures may be requested in Macau in connection with foreign legal proceedings, depending on the existence and terms of international conventions or agreements for judicial co-operation between the jurisdictions involved.

Injunctive relief proceedings are of an urgent nature, and their handling shall supersede any non-urgent actions. Their urgent nature also means that the required actions and hearings also take place during court holidays.

As general rule, injunctive relief shall be decided upon within two months from the application for it, but when the proceedings run on an ex parte basis, this time limit is reduced to 15 days.

By default, injunctive relief is not awarded without the respondent having the opportunity to submit his or her defence and being present at the hearing. That will not be the case when it may represent a serious risk for the effectiveness of the measures being requested; in such cases, the injunctive relief is decided on an ex parte basis.   

Certain forms of interim relief, specifically foreseen in the Civil Procedure Code (such as the arrest of assets), are awarded on an ex parte basis by default, irrespective of any risk to the effectiveness of the measure.

If the injunctive relief is found to be unjustified or expires because of an action or omission attributable to the applicant, he or she will be liable for damages suffered by the respondent if the court finds that he or she (the applicant) did not act with the required prudence.

Therefore, irrespective of a request by the respondent, the judge may award the relief, subject to the provision of bond by the applicant.

Subject to their competence for the main proceedings (multiple factors or circumstances justify the competence of the local courts), injunctive relief can be requested and awarded by MSAR courts.

Enforcement of injunctive relief awarded by MSAR courts in foreign jurisdictions depends on international conventions or agreements for judicial co-operation and recognition of judicial or arbitration decisions, between MSAR and those jurisdictions.

Under special circumstances, injunctive relief measures may be awarded against individuals or entities who are not parties to the main proceedings to which the injunctive relief is ancillary (third parties). This will be the case when the assets to be arrested are in the possession of an individual who is not the debtor. This third party will be a respondent to the injunctive relief proceedings, but not to the main proceedings where the claimant will be requesting that the court convict the defendant to settle the debt.

Breach of injunctive relief entails criminal liability for qualified disobedience, which is subject to imprisonment for up to two years, or criminal fine of up to 240 days.

A day-fine is a criminal sanction used as an alternative to imprisonment. The number of days of the fine varies with the type of crime as well as the particulars of its commitment, from a minimum of 10 and up to 360 days.

The daily rate of the fine ranges between MOP50 to MOP10,000 which is determined by the judge in accordance with the proportionality principle and the financial condition of the offender.

Civil court proceedings start with written submissions; following these, the trial is primarily verbal and is presided over by a judge. Once all summoned are present, trial will commence with an attempt at conciliation which, if unsuccessful, will give way to the depositions from the respondent and the plaintiff, followed by the taking of evidence, expert testimonies, hearing of witnesses, and oral arguments on the facts, in that order although subject to change when deemed necessary or convenient.

The court will then recall and issue the judgment on the facts, delivered in writing and read aloud in the presence of all those directly involved. It is common to adjourn the proceedings for the issuance and reading of the decision on the facts. Parties may submit complaints and clarifications against the decision on the facts. After a decision on such queries, the parties shall present their legal arguments, in writing, or subject to agreement, verbally. The judge shall then issue the final judgment.

Case management hearings are allowed by the Civil Procedure Code, but are not common practice in MSAR, where most of the ruling is made in writing by the judges. An attempt at conciliation may take place prior to the trial, at the request of the parties or by a summons to appear before a judge. A summons to appear before a judge may also be issued at any other stage of the proceedings, provided the parties have not previously requested an attempt at conciliation and the summons is issued no more than once.

According to MSAR’s Civil Procedural Code, trial by jury is not available. Instead, civil court proceedings are either decided at first instance by one single judge or by a panel of three judges, depending mostly on the value of the proceedings.

In the superior courts, judgments are in general issued by a panel of three judges, although the presiding judge has powers to rule by him or herself on procedural matters and, in limited circumstances, decide on the merits. 

All relevant evidence should be submitted or requested during the written submissions stage. The parties have a further opportunity to amend and complement these requests, when the court (after the written submissions and prior to the trial) decides on the facts that are already established and those which need further assessment during trial. Documents, witnesses and other evidence may be further added during trial, with limitations.

Depositions from the plaintiff and the respondent, expert testimony and the hearing of witnesses will typically take place during the trial, unless circumstances make it impossible to do so, in which case they will be produced beforehand (including in writing).

The key principle, in terms of admission of evidence, is that no evidence shall be considered without the counterparty having an opportunity to analyse and contradict it.

The court and/or any of the parties may select a subject or matter which they feel requires expert opinion or guidance due to its highly specialised nature and request that such expertise be provided, for the purpose of which one or more experts will be appointed. In this event, although the expert’s report is produced out of court and delivered before the trial, the expert may be called to testify before the court during the trial regarding any question or request for clarification arising from his or her report.

In certain circumstances, the court may order the production of a second expert opinion.

See 1.3 Court Filings and Proceedings.

Furthermore, although hearing and trial minutes are produced in writing, detailed transcripts are not prepared or kept.

Audio recording of testimonies may be requested by the parties, or ordered by the judge; however, when such testimony is not made before the court, recording is mandatory.

Minutes and recordings will be kept in the court file and access to it is generally granted to parties, lawyers and persons with a justified interest, without prejudice to limitations when access is deemed to violate an individual’s dignity and privacy, offend morality, or jeopardise the court’s final judgment.

Stemming from four centuries of Portuguese administration, MSAR’s legal system is typically inquisitorial, with great emphasis being put by MSAR’s Civil Procedure Code on the court’s duty to provide for the harmonious and prompt progress of the proceedings, from inception to completion. Besides assuring the legality of the parties’ procedural actions, the judge has the power to order actions that may be necessary to ensure the fulfilment of procedural requirements or to invite the parties to do so, as well as the power to perform or order actions that he or she deems necessary for the establishment of the relevant facts and for a fair trial and judgment. The judge has also the power to adjust certain rules of procedure, when he or she deems this to be adequate considering the particulars of the case.

The judge is also in charge of presiding over hearings and trials, where he or she supervises all the parties and intervenients’ actions, and rules – where necessary or convenient – to ensure their legality and keep order.

Although MSAR’s Civil Procedure Code provides for strict deadlines for pleadings, procedural acts, and the like, no general timeframe for proceedings exists and their duration may differ depending on a variety of internal and external factors, such as:

  • the complexity of the subject matter;
  • the constancy of all those involved; and
  • the absence of interruptions, such as the hearing of intermediate appeals with suspensory effect.

Notwithstanding a general deadline of 20 days to issue the final judgment, counted from the day of closing of arguments, this deadline is in general exceeded by the courts.

The parties may choose to settle their differences before the judge or out of court, in which case they must, however, communicate this agreement to the court and discontinue the proceedings. In any event the judge needs to endorse the settlement by confirming each party’s capacity to settle and whether the matter under discussion is available for settlement.

If a settlement is reached between the parties before the judge, as well as if its terms are communicated to the judge for endorsement, they will become part of the proceedings and therefore subject to the general rules and principles, alluded to in 1.3 Court Filings and Proceedings and 7.6 Extent to Which Hearings are Open to the Public, regarding publicity. The parties may however choose to keep certain terms and conditions of the settlement confidential.

Settlement agreements are enforceable under the general terms and provisions of the MSAR’s Civil Procedure Code. The terms for enforcement will depend on whether the terms of the settlement were disclosed in full, or only in part, to the court. If the matter to be enforced was endorsed by the court, the enforcement will follow the rules of enforcement of court decisions; if not, it will follow the rules for enforcement of contracts.

Settlement agreements endorsed by the court as res judicata may only be set aside by means of extraordinary appeal, where the settlement will be declared null and void by a decision as res judicata.

The above does not prevent the parties from reaching an out-of-court agreement whereby they agree to settle the matter subject to the previous proceedings on a different manner. 

In civil declaratory proceedings, the court will:

  • declare the existence of the claimant’s rights or entitlements;
  • order the defendant to perform an action or fulfil a legal or contractual obligation; or
  • declare the constitution, modification or annulment of a particular legal relationship, contract or act.

Depending on the nature and particulars of the claim, the court may order remedies such as indemnity, compensation, or restitution of assets or monies.

In certain circumstances, the court may also determine the payment by the defendant of a certain amount for each day, week or month of delay in the performance of a certain action (or omission) or the fulfilment of a certain obligation.

As general rule under MSAR law, a successful party cannot be awarded in excess of the damages suffered as a result of breach of legal or contractual rights or obligations. The scope of indemnity is defined by causation: it comprehends any and all damages that were caused by the relevant illegal and faulty actions (principle of adequate causation).

Both losses – which include pecuniary damages (danos patrimoniais) and personal damages (danos não patrimonais) – and loss of profits (which is the net increase of the claimant’s assets that he or she fails to obtain due to the injury event) are included in the legal scope of indemnity.

Losses and loss of profits can be present or future, but the latter are only subject to indemnity when it can be established that they will effectively occur in the future (if the respective amount cannot be determined at the time of the issuing of the award, its liquidation shall be referred to a later stage, when such losses become determinable).

The parties may, however, agree in advance to the amount of compensation to be paid in case of default, delay or defective performance of certain obligations, in which case the compensation to be awarded may be higher or lower than the damages that would result from the application of the principle of adequate causation, unless the court finds them excessive.

Furthermore, the successful party may be entitled to further compensation if the counterparty acts in the proceedings in bad faith, which is the case when the unsuccessful party, with fault or gross negligence:

  • submits a claim or defence being aware of the lack of respective merits;
  • changes or omits facts relevant for the decision;
  • commits a serious offence to the obligation to co-operate with the court; or
  • uses the proceedings or certain procedural mechanisms for censurable purposes.

Notwithstanding the above; court orders in general, and in indemnity claims in particular, are limited to the request made by the successful party. In order words, they cannot rule in excess of the party’s claim, either in the nature or in the specific amount of damages requested.

In respect of pecuniary obligations, interest is due from the day the debtor is considered to be in delay (mora) of the delivery of the obligation. Therefore, if the debtor is considered to have been in delay since before judgment, pre-judgment interest will be available.

If the obligation needs to be liquidated by the court, such as in the case of an indemnity claim (where the court has to assess the damages subject to indemnification pursuant to the principles described in 9.2 Rules Regarding Damages), interest will only be due post-judgment.

Judgments and orders are enforced by further court procedures and, where necessary, by court officials. There is no procedure for direct enforcement (ie, not involving the court) by the successful party against the counterparty. In the case of non-voluntary compliance with an award, the successful party must initiate enforcement proceedings, as the court will not enforce a judgment automatically.

The nature of enforcement proceedings will vary in accordance with the particulars of the judgment or order to be enforced.

Enforcement proceedings will proceed according to the following steps:

  • submission of claim for enforcement based on court order/judgment;
  • submission of defence to enforcement proceedings within 20 days;
  • enforcement through, for example, seizure of assets, rights or entitlements; and
  • discharge of judgment/order.

Depending on the type of order or judgment to be enforced, the main means of enforcement may consist of:

  • seizure and auctioning of assets (the assets can also be sold through negotiation by an expert appointed by the court), if a third party is liable for the debt the court proceedings for the enforcement have to be commenced against that third party;
  • seizure of earnings;
  • forced sale;
  • charging orders;
  • periodical penalty payments; or
  • attachment of a third-party debt owed to the debtor (eg, a debtor's bank account).

Unless otherwise provided for in international agreements in force in MSAR, judgments and arbitral awards from a foreign country can only be enforced in MSAR after revision and confirmation by its courts.

Such confirmation is not necessary when the foreign judgment is used in MSAR only as evidence of certain facts in court proceedings.

Confirmation is subject to the following requirements

  • The document is authentic and the decision is written plainly.
  • The judgment is res judicata in the country of issuance.
  • The matter does not fall within the exclusive competence of the MSAR courts and the issuing court’s competence was not fraudulent.
  • The matter has not been previously submitted to litigation, nor has it been previously decided as res judicata in Macau.
  • Verification of the regular summoning of the defendant and that the due process principles have been observed.
  • The decision will not cause a result that goes against public policy.

The defendant is summoned and has 15 days to offer a defence, whereas the claimant may submit rejoinder within ten days.

Besides the non-verification of any of the above requirements, the defendant may also oppose the confirmation on the following grounds.

  • There is a judgment decided as res judicata that the award pending confirmation was issued under prevarication or corruption of the judge.
  • There is a document that the defendant was not aware of or was unable to use during the initial proceedings, which would by itself be sufficient to lead to a decision more favourable to him or her.
  • There is a previous judgment decided as res judicata which is contrary to the decision under confirmation.

Before submission to trial, the proceedings are further analysed by the public prosecutor.

The MSAR’s Civil Procedure Code provides for ordinary and extraordinary appeals. Two types of ordinary appeals exist: an appeal can be filed to the Court of Second Instance from a judgment by a Court of First Instance, and to the Court of Final Appeal from a judgment by the Court of Second Instance.

Beyond these are found so-called extraordinary appeals:

  • In the form of a petition to review a judgment (eg, when a defendant’s confession is found to be null and void by a later judgment, although it served as justifying grounds for a previous one) and opposition by a third party.
  • In the event of collusion between the original complainant and plaintiff with the goal of being granted a favourable judgment, under false pretexts and at the expense of someone who was not directly involved in the proceedings.

An ordinary appeal can only be filed provided that:

  • the value of the lawsuit is superior to the value of the jurisdiction of the court (alçada) whose judgment is under appeal (as of today, MOP100,000 for a Court of First Instance and MOP1 million for the Court of Second Instance); and
  • the value of the losses incurred by the losing party is superior to half of the value of the jurisdiction of the court whose judgment is under appeal.

However, should the Court of Second Instance uphold the judgment of the Court of First Instance, irrespective of the reasons, no further appeal can be filed with the Court of Final Appeal, unless that judgment is against previous mandatory jurisprudence of the Court of Final Instance.

The right to appeal on certain matters, such as in respect of the court’s jurisdiction for the proceedings or on grounds of breach of mandatory precedent, is not subject to the limitations set out above.

Within ten days after being notified of the final judgment, the losing party must apply for a leave to appeal with the issuing court. Provided all requisites are met, the court issues an order to that effect and duly notifies the appellant, who will then have 30 days to file the statements of appeal. The appellee enjoys a further 30 days to file the counter-statements of appeal.

The primary goal of an appeal is to provide for the review of a lower court’s judgment; the appellant is accordingly limited to what was brought before that lower court by both plaintiff and respondent during the original proceedings. When hearing an ordinary appeal, the Court of Second Instance, although in principle bound to the statements of appeal’s subject-matter, enjoys broad room for manoeuvre and may examine and decide on matters of fact and matters of law. It can choose to:

  • alter the judgment of the Court of First Instance;
  • declare that judgment null and void;
  • order the judgment's grounds to be further substantiated, should they be incomplete or missing; and
  • order the retaking of evidence when deemed necessary to ascertain the truth.

The Court of Final Appeal is also bound to the statements of appeal’s subject-matter and the scope of its revision is generally limited to legal arguments such as:

  • situations of wrongful interpretation or application of the law by the Court of Second Instance;
  • where the judgment is null and void; or
  • where any lower court’s judgment was decided against a mandatory precedent.

The revision of the facts established, and not established, is not included per se, but only when it is argued that a certain fact was judged as established, or not, in breach of legal provisions.

The right to appeal is only subject to the requirements/limitations expressly provided for in the MSAR’s Civil Procedure Code and described in 10.2 Rules Concerning Appeals of Judgments.

Appeals are granted, or not, based on the facts established and not established at the time of their issuance. If the appellate court believes such facts require further substantiation, or that there are other facts that must be considered, it shall order further trial to determine those facts.

Depending on the findings of the appellate court regarding the lower court’s judgment, it may decide:

  • to overturn it;
  • to order its reform; or
  • to order the execution of further procedural steps deemed necessary, including the retaking of evidence, the taking of further evidence, or even to order the repetition of the trial before the same court.

As a general rule the court costs and fees are paid by the losing party, or, in the event that neither party won, by the party who has benefited from the proceedings.

The successful party is entitled to have their court fees – and costs paid in advance – reimbursed, as well as some compensation for legal fees incurred. Unless the court finds that a party has acted in bad faith, this compensation is determined by the court in an amount up to half of the total court fees. If a party is found to have acted in bad faith, the court may determine the compensation for the legal fees incurred by the other party in full, as well as compensation for other costs and damages suffered as a result of those actions.

The outcome of the proceedings is the most relevant factor to be considered when awarding costs. Costs are paid by the losing party.

If the proceedings terminate pending judgment, an array of factors may determine the responsibility for the costs, such as whether either party has yet benefited from the proceedings, or if the termination is a result of an action attributable to one of the parties. In cases of settlement, without prejudice to an agreement otherwise, the costs shall be settled in equal parts. If either party withdraws or confesses the claim, the costs shall be paid by that party.

Actions which are deemed to have been useless shall be paid for by the requesting party.

Court costs are subject to interest after expiry of the deadline for voluntary payment (20 days from the notification of the bill of costs).

Such interest is in the amount of 1% per month of the unpaid costs.

The main alternative dispute resolution (ADR) mechanism currently available in MSAR is arbitration. Although certain legislation refers to mediation, it does not regulate mediation or conciliation as standalone processes.

However, certain institutionalised arbitration centres provide mediation and/or conciliation processes, and almost every arbitration regulation provides for a conciliation hearing where a settlement is attempted before the matters go to trial. For example, the WTC Macau Arbitration Centre provides autonomous mediation in relation to disputes arising in the context of the Closer Economic Partnership Arrangement (CEPA) on trade services between MSAR and the People’s Republic of China as well as an autonomous conciliation process to which any matters can be submitted; and the Real Estate Administration Arbitration Centre provides for a mandatory conciliation phase before the matter is finally referred to arbitration.

In the existing framework, there are neither general compulsory arbitration provisions nor sanctions for unreasonable refusal of ADR.

There are currently three institutional arbitration centres in Macau:

  • the Consumer Conflicts Arbitration Centre;
  • the WTC Macau Arbitration Centre; and
  • the Lawyers’ Association Arbitration Centre.

The WTC Arbitration Centre and the Lawyers’ Association Arbitration Centre are able to take arbitrations on any matters that may be submitted to arbitration while the others are limited to specific matters and, in certain cases, by the value of the dispute (the Consumer Conflicts Arbitration Centre and the Private Funds Conflicts Arbitration Centre can only accept arbitrations for disputes not exceeding MOP100,000).

A new Arbitration Law (Law 19/2019) came into force in Macau SAR on 3 May 2020. It is fundamentally inspired by UNCITRAL Model Law on international commercial arbitration (with the amendments approved in 2006) and revokes and unifies the currently existing dual arbitration regimes in Macau, therefore replacing the previous parallel regimes:

  • the Domestic Arbitration Law (Decree Law No 29/96/M); and
  • the International Commercial Arbitration Law (Decree Law No 55/98/M).

Although the new law is applicable to arbitrations commenced after such date, arbitral agreements signed before the entry into force of Law 19/2019 that expressly refer to any of the former regimes may be conducted in accordance with such procedures if the other party does not oppose within 15 days from receiving the arbitration proposal.

The recognition and enforcement of foreign arbitration awards is governed by Law 19/2019 by the Macau Civil Proceedings Code. There are, however, specific agreements for the recognition and enforcement of arbitration awards between Macau and Hong Kong as well as between Macau and the PRC.

Matters not susceptible to settlement agreements may not be submitted to arbitration, such as:

  • disputes whose respective objects involve inalienable rights (ie, rights in respect of which the parties may not surrender, negotiate or transfer (such as parental relations));
  • matters that are by law submitted to the jurisdiction of the judicial courts, such as matters in relation to real estate rights over land located in Macau and the bankruptcy and insolvency of corporations with registered offices in Macau;
  • the effective enforcement of any awards;
  • matters that have already been decided by a res judicata award (except in relation to aspects of its implementation which are not covered by the award); and
  • matters in relation to which the Public Prosecutor has to intervene in representation of individuals who lack legal capacity to act.

The arbitration award issued in arbitration proceedings may only be challenged by annulment on the following grounds.

  • Lack of legal capacity of any of the parties to enter into the arbitration agreement.
  • Unenforceability of the arbitration clause according to the agreed jurisdiction (or according to Macau SAR law, in case of omission).
  • Impossibility of a party to exercise their respective rights during the arbitration proceedings due to inadequate information of the appointment of the arbitrator or of the arbitration process, or due to any other reason.
  • Arbitration award falls outside or exceeds the scope of the arbitration agreement.
  • Irregular constitution of the arbitration tribunal according to the arbitration clause (save when the provision is non-compliant with Macau SAR law) or according to Macau SAR law, in case of omission.
  • Insusceptibility of submission to arbitration of the subject matter of the decision in accordance with Macau SAR law.
  • Contrary to public order.

Annulment proceedings should be submitted within three months from the date the award has been notified to the relevant party or – if any rectification, interpretation, clarification or additional complementary decision has been requested – from the issuance date of the decision on the latter.

The enforcement of domestic arbitration awards does not require any previous confirmation by the Macau courts and they are considered equivalent, for enforcement purposes, to judicial awards.

The recognition and enforcement of foreign arbitration awards take place through separate proceedings, which fall within the competence of the Court of Second Instance.

The general requirements for confirmation of the award are fundamentally formal by nature, but there are a few exceptions, namely.

  • Previous submission of the matter to litigation in Macau or previous decision as res iudicata by the Macau SAR courts.
  • Non-exclusive competence of the Macau SAR courts to rule over the subject matter.
  • Verification of the regular summoning of the defendant and the observation of due process principles.
  • Decision will cause a result that goes against public policy.

The defendant may oppose the confirmation proceedings on the following grounds.

  • Lack of legal capacity of any of the parties to enter into the arbitration agreement.
  • Unenforceability of the arbitration clause according to the agreed jurisdiction (or in accordance with the law of the state or region where the decision was reached, in case of omission).
  • Impossibility of a party exercising their respective rights during the arbitration proceedings due to inadequate information of the appointment of the arbitrator or of the arbitration process, or due to any other reason.
  • Arbitration award falls outside or exceeds the scope of the arbitration agreement.
  • Irregular constitution of the arbitration tribunal according to the arbitration clause, or according to the law of the state or region where the award was rendered, in case of omission.
  • Arbitration award has not yet become binding to the parties, or has been annulled or suspended by a court of the state or region in which, or under the law of which, the arbitration award was rendered.
  • Insusceptibility of submission to arbitration of the subject matter of the decision in accordance with Macau SAR law.
  • Decision is contrary to public order.

After being confirmed by the Court of Second Instance, the award may be enforced through the Court of First Instance. The proceedings will commence with the seizure of the defendant’s assets before the defendant is called to oppose the enforcement or the seizure of certain assets.

A reform proposal of MSAR’s Civil Procedure Code – regarding duration of proceedings, procedural steps and situations that cause delays in procedure – is under preparation and may be submitted to the Legislative Council soon.

Pursuant to COVID-19 prevention guidelines, Macau SAR courts suspended all non-urgent hearings between February 5th and February 16th.

From February 17th onwards, courts resumed operations and court hearings, however, legislation regarding the suspension of operation of limitation periods was not passed.

Riquito Advogados

Suite 1104 AIA Tower
251A-301 Av. Comercial de Macau
Macau SAR

+853 2838 9918

+853 2838 9919

jnr@riquito.com www.riquito.com
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Trends and Developments


Authors



Riquito Advogados provides legal services to a diverse range of clients in various industries, but has a particular focus on corporate clients. The firm has five qualified lawyers and offices in Macau SAR and Lisbon, Portugal, and its key practice areas include corporate/M&A, contracts/contractual investment, restructuring, litigation and arbitration, IP, foreign investment, corporate finance, real estate, aviation, private equity, project finance, labour and taxation.

Introduction

The impact of the COVID-19 outbreak has proven a colossal challenge in most aspects of peoples' lives, with palpable and immediate effects both in global and local economies entailing significant implications for legal systems around the world and measurable effects in litigation procedure. This is particularly true in the Macau Special Administrative Region (MSAR), where several restrictions on people, activity, assets and procedures, were put in place. Pursuant to the prevention, containment, mitigation and treatment of COVID-19, pandemic-related policies have, for most of 2020, prevented non-residents from passing through the city’s borders and it is expected that, despite a gradual lifting of the restrictions commenced in November, they will continue for as long as the pandemic poses a threat to public health.

With regard to pre-existing litigation in the territory, the courts suspended all non-urgent hearings between 5 February and 16 February 2020, by which time, in unprecedented fashion, all casinos had also been shut down. Although court hearings resumed in mid-February, some are nevertheless still subject to postponements, mostly given that parties and/or other participants (such as witnesses or experts) are not able to enter the territory. This has caused (and will likely continue to cause for the foreseeable future) significant delays in all related court procedures.

Furthermore, it is now quite clear that the impact of the COVID-19 pandemic on the regular and timely performance of duties and obligations, the disruptions caused by either the virus or the measures undertaken by the relevant actors to stop its advance, as well as all the unforeseeable and still unforeseen events the situation continues to bring about on the global stage, will give way to an increase in litigation, stemming from the uniqueness of the circumstances currently experienced, with significant long-lasting impact on the activity, organisation and procedures of economic agents.

Consequently, it is likely that the courts will be taken by storm once some semblance of normality returns to everyday life. As in many other jurisdictions where such an instrument is available, arbitration may take an important role in alleviating the pressure caused, not only by the resumption of pending court cases, but also by the still to-be started coronavirus-related cases. In that respect, it should be noted that the MSAR has approved the new Arbitration Law (Law 19/2019), which came into force in the MSAR on 3 May 2020. and which is fundamentally inspired by the UNCITRAL Model Law on international commercial arbitration.

It is safe to say that, regardless of the differences between countries and territories, and the approaches and policies each have adopted, the world was not ready for an event of this magnitude; however, with the benefit of almost a year having gone by since the first registered appearance of the virus, some trends seem to have settled on the legal stage.

The fact is, other than oxygen and the internet, the world runs on contracts and that contractual relations, big and small, were generally affected by the restrictions and constraints the pandemic brought along.

As a general rule, should a party to an agreement fail to perform its obligations in a timely fashion, it may be held liable for all damages and losses incurred by the counterparty as a result of such default. However, two specific legal constructions have a key role in addressing the challenges faced by the counterparties: impossibility of performance and change of circumstances.

Impossibility of Performance

In the event the impossibility of performance is due to events not attributable to the defaulting party, and where such events have a direct correlation in the execution of the contract, the defaulting party may be exempted both from carrying out its obligations and from further liability.

In order to assess if the defaulting party may make use of this legal construction (impossibility of performance not attributed to the debtor), and so have its respective responsibilities waived, the particulars must be analysed and some defining characteristics taken into account.

Should the impossibility be deemed as definitive and total, the affected obligation may be deemed as extinct, along with the debtor's liability, whereas if the impossibility is deemed as partial, the obligation may be proportionally reduced (with the consequent reduction of the creditor’s obligations). If the impossibility is only temporary, the debtor is not liable for the damages caused by the delay; however, should the counterparty lose interest in the performance of the obligation, it may as well be considered extinct as if the impossibility was definitive.

Furthermore, an objective impossibility (ie, an impossibility that affects the obligation itself) may render the performance of the obligation impossible regardless of who performs it. Events that may cause objective impossibility include force majeure events and other unforeseeable occurrences. Conversely, a subjective impossibility (ie, an impossibility that affects the person of the debtor) only renders the performance impossible if the obligation cannot be carried out by a person other than the defaulting party (the case for obligations of a non-fungible nature).

Regarding the COVID-19 pandemic specifically, in order to demonstrate that the non-performance, total or partial and definitive or temporary, is caused by a force majeure event, the existence of a causal link between the failure or delay to perform and the effects of the restrictions in place in the relevant period of time will need to be shown.

Therefore, only an absolute impossibility waives the defaulting party from the obligation to perform its obligations. In the event of a relative impossibility (difficultas præstandi), even if it refers to an extremely difficult or burdensome (but not impossible) performance, other remedies must be sought.

Change of Circumstances

Change of circumstances is a legal remedy provided for in Article 431 of the MSAR’s Civil Code (MCC), which allows for either the equitable modification of an obligation or the termination of the agreement. It is available whenever an abnormal change in the circumstances under which the parties initially operated occurs, thus generating a serious imbalance in the risk allocation and/or the rights and obligations of a contractual relationship.

This legal remedy is available provided that the following requirements are met:

  • The change is so abnormal that, had the parties been able to anticipate it, they would either not have entered into an agreement or would have agreed on different terms.
  • The change of circumstances is highly burdensome to the party which intends to make use of it.
  • Demanding the performance of the obligations would be contrary to the principle of good faith.
  • The losses incurred by maintaining the agreement as is would not be in harmony with the typical range of risks usually expected in business.
  • The requesting party was not in default of its obligations before the change of circumstances.

If the requirements are met, the court would then, based solely on an equity judgment, directly determine the contents of a contract, modifying its provisions or deciding for its termination. 

Other than the pandemic situation itself, legislative outbreaks and changes in a pandemic scenario, or any other major change in circumstances, may also constitute a change of circumstances that may justify the termination or modification of a contract under Article 431 of the MCC.

In any case, decisions on the requirements of contractual balance under Article 431 are always delicate, particularly when it comes to rejecting the effectiveness of a contract due to non-compliance with equity requirements, as well as establishing the equitable solution to adopt. For this reason, given the occurrence of the current pandemic, it is likely that courts will try to avoid the direct determination of the contents of contracts and will likely prefer, whenever possible, to resort to more neutral legal-dogmatic constructions, such as the above-mentioned impossibility of performance. Thus addressing the disruptions brought about by the pandemic and its aftershocks without resorting to Article 431 and therefore to the power to intervene in the contents of contracts, irrespective of the parties contractual will and freedom. We anticipate this legal remedy will be applied in a somewhat ancillary mode in judicial practice.

Certain specifics may be laid down in respect of the performance of both public contracts and labour contracts, and their execution in times of a global pandemic.

Public Contracts

Under the broad scope of the COVID-19 pandemic prevention measures, exceptional public procurement procedures were adopted in conjunction with several other measures. These included:

  • quarantines;
  • limitations on travel, circulation and social gatherings: and
  • the mandatory closure of existing establishments.

This greatly affected the execution of ongoing public contracts. However, since their legal framework does not provide for exceptional circumstances – as COVID-19 undoubtedly is – several questions have arisen.

When breach or delay in performance of the contract by the private contractor stems from the impossibility of performance, the next step is to determine the nature and duration of the causing event. In the event of a temporary impossibility, the parties may agree to a suspension of the contractual provisions, provided they resume as soon as the grounds for suspension end.

Unlike private contracts, the fundamental principle which guides all procedures regarding public agreements is the pursuit of public interest, which calls for a unique regime imposing different procedures on the procurement of different goods or services. As such, the decision to modify a public agreement is generally limited to three causes:

  • agreement between the parties;
  • judicial or arbitral decision; or
  • decision of the public contractor.

Therefore, any amendment to a public agreement must comply with strict guidelines or may otherwise be found to jeopardise the public interest in the regular and continuous functioning of public services and in the fulfilling of collective needs. Subsequently, the validity of any modification to a public agreement must comply with both general principles relating to its specific legal structure and specific requisites which concern the situation in particular. Moreover, the type of contract, the specific conditions to which the parties have agreed to, and its effects on the typical range of risks usually expected in business (in theory, the lengthier an agreement is, the more susceptible it will be to new and unpredictable circumstances) should also be taken into account in order to determine if the performance of the contract is likely to become excessively burdensome to the private contractor.

Labour Relations

In an economy heavily dependent on tourism from Mainland China and the Hong Kong SAR, the closure of the MSAR’s points of entry to almost all non-residents meant that countless businesses endured a severe economic impact. In the MSAR, where labour regulation is sparse, this also meant finding solutions for issues which are not specifically regulated in the local labour laws and regulations.

In early February, the MSAR’s government determined a city-wide lockdown for two weeks, and many companies, most notably the casinos where thousands of workers are employed, were forced to shut down. Although absence from work, in such situations, is deemed justified and, therefore, companies have no grounds for termination of employment contracts, workers may have been left without income, as, per the Macau Labour Relations Law, only disease and accident-related absences are paid, except when otherwise agreed upon with the employer.

In contrast, companies not covered by the mandatory shut down, which chose to shut down voluntarily, continued to be under an obligation to pay their workers’ salaries.

An additional complication came with the closure of the borders, as, due to escalating housing prices in the MSAR in recent years, many of the city’s (resident and non-resident) workers choose to commute daily from Mainland China. Because these workers were prevented from entering the MSAR and, therefore, from working for extended periods of time, the contractual bond between employer and employee was stretched to its limit.

Again, the current legal regime provides for no direct solution, as the MSAR’s only legal provision regarding furlough, promptly revoked in April, dated back to 1995 and applied only to the exporting industries. Therefore, companies were again mostly left to their own devices when dealing with the sudden inability to conduct normal business (or any business at all) with an abruptly limited number of employees, either due to the entry-ban or to the need to quarantine on arrival.

Believing travel restrictions to be temporary, companies first turned to the legal provisions regulating annual leave. This, however, offered little relief as workers are legally entitled to only six days of paid holiday per year. One impromptu main avenue was thus opened by way of necessity: if the employer wishes to retain the services of the employee, both parties may reach an agreement under which any further absence from work is treated as unpaid annual leave for all intents and purposes, a quick fix officially sanctioned by the Labour Affairs Bureau with the proviso that negotiations be carried out in good faith. But if for any given reason (eg, a sharp drop in business or an urgent need to fill a vacancy left by a non-resident worker indefinitely barred from entering), companies need to terminate an employment contract, the law, again, provides no alternative to termination without cause, as, similarly to furlough, MSAR law does not provide for a redundancy regime. Termination without cause requires, not only prior communication (whereby employer continues to pay from said notice until the termination date, or to pay in lieu of notice), but also the settlement of a severance payment.

In practice, however, most workers – both local and, above all, non-resident – were offered an agreement for "unpaid leave" and suspension of the performance of their employment contracts for an indefinite period of time, with reduced pay.

A rise in labour litigation is foreseeable, stemming from the abundance of the aforementioned agreements and from the overall trend of terminations without cause.

We anticipate that the challenges laid bare by the pandemic, with regard to the territory's labour legislation, may have the ability to push the legislature into analysing the possibility of its further revision.

Final Notes

There is no debate that, in the current situation of health emergency, it is up to the political sphere to respond, by means of appropriate legislative acts, to the problems caused by the pandemic.

The judicial power is, in its turn, responsible for ensuring, vis-a-vis each contract and relationship, that these decisions do not grossly distort justice in the face of the reality to which they will apply, knowing that all decisions of the legislative branch are only legitimate as long as the laws issued by it are an expression of the structural values and principles of the judicial system.

Although we believe the mere existence of COVID-19 does not constitute a force majeure event by itself, the current pandemic, combined with the administrative decisions implemented by different jurisdictions so as to avoid its spread, have affected the daily lives of companies and citizens and have likewise significantly hindered the world’s economy and financial system. It is broadly accepted that an event of this nature is composed of a number of cumulative elements: an unforeseeable, unavoidable, insurmountable and external event. Therefore, the exceptionality of the current situation, as well as the measures adopted, with all their foreseen and unforeseen consequences will undoubtedly boost litigation before the courts.

Alternative forms of dispute resolution, namely those under modern and effective arbitration law, may play a key role in allowing for more agile solutions. Allowing the MSAR not only to apply it to issues solely relating to the territory, but also to act, in general, as a preferred seat of arbitration between Chinese and Portuguese speaking parties.

On the other hand, electronic processing of judicial cases shall also be considered, particularly in respect of witness hearings and expert testimony, so as to, even in times not affected by pandemics, shorten the course of proceedings.

Riquito Advogados

Suite 1104 AIA Tower
251A-301 Av. Comercial de Macau
Macau SAR

+853 2838 9918

+853 2838 9919

jnr@riquito.com www.riquito.com
Author Business Card

Law and Practice

Authors



Riquito Advogados provides legal services to a diverse range of clients in various industries, but has a particular focus on corporate clients. The firm has five qualified lawyers and offices in Macau SAR and Lisbon, Portugal, and its key practice areas include corporate/M&A, contracts/contractual investment, restructuring, litigation and arbitration, IP, foreign investment, corporate finance, real estate, aviation, private equity, project finance, labour and taxation.

Trends and Development

Authors



Riquito Advogados provides legal services to a diverse range of clients in various industries, but has a particular focus on corporate clients. The firm has five qualified lawyers and offices in Macau SAR and Lisbon, Portugal, and its key practice areas include corporate/M&A, contracts/contractual investment, restructuring, litigation and arbitration, IP, foreign investment, corporate finance, real estate, aviation, private equity, project finance, labour and taxation.

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