We all empirically assume that from March 2020 until the end of the pandemic, courts had and will have a huge decrease in their activity, with fewer claims, fewer trials, fewer decisions and, in consequence, fewer outcomes.

Besides the restrictions required by the pandemic, the decrease in economic activity would certainly have reduced the number of claims presented to courts, and the global moratorium awarded by the banks on certain loans granted to companies and individuals will have surely avoided litigations arising from the expected wave of defaults.

Maybe it is not quite like that.

In fact, if we look at the resolution rate of civil claims (that is, the ratio of closed claims over new claims) in 2019 and 2020, it has indeed decreased – it was 11330 at the end of 2019 and 10811 at the end of 2020. But the total number of claims pending in court was almost the same: 133004 in 2019 and 133647 in 2020.

If, in the end, the number of claims is equivalent and the resolution rate is lower, that apparently means that there were fewer new civil claims in court in 2020. But the truth is that courts managed to keep a positive balance between new and closed civil claims: 6549 in the last quarter of 2019 and 3590 in the last quarter of 2020.

Nonetheless, with regards to collecting enforcement procedures, the total number of claims pending in court continued a decreasing tendency that dates back, at least, to 2012, and at the end of 2020 there were 457284 collecting enforcement procedures pending in Portuguese courts, 70522 fewer claims than in 2019 (527806).

And if it’s true that the resolution rate has shown a considerable decline in 2020 (15411 in the last quarter of 2019 and 13857 in the last quarter of 2020), it must be duly underlined that during the shutdown of the second quarter of 2020 the rate rose up to 21974, which means that the courts and the enforcement agents kept working on the claims.

These numbers show that the judicial system was resilient in times of the pandemic, which is confirmed by the Disposition Time for the resolution of all civil and enforcement procedures. In fact, if we measure, in days, the time needed to close all pending claims at the end of a period, considering the number of new and closed claims in that period, we will see that the ratio stayed very stable in the civil claims (217 days in 2019 compared with 255 in 2020) and even decreased in the enforcement procedures (1012 days in 2019 compared with 997 days in 2020).

But don’t these numbers actually hide the effects of the economic slowdown during 2020? And what can we expect from the extension - and, later, the end - of the general moratorium on the loans?

What we can learn from 2020 is that the judicial system reasonably managed to work things out during the pandemic, but with

• 10.4% fewer new civil claims and 14.7% fewer closed civil claims than in 2019; and

• 2.2% fewer new enforcement claims and 13.3% fewer closed enforcement claims than in 2019.

However, insolvency procedures decreased 9.9% and there were 15.7% fewer insolvencies declared in 2020, of which 76.6% were of individuals and not of companies.

We certainly can hear the tick-tock and the bomb will explode.

The general moratorium declared in March 2020 has already ended for some companies and people but in January 2021 there was still more than EUR24 billion in loans available. The 31st December 2021 is currently the limit but even that is not for everyone. In the last few months some legal initiatives have been presented in order to continue the moratorium. The extension of the suspension on capital reimbursement has been approved by the Portuguese Parliament for some vulnerable sectors of the economy but is expressly conditioned on the approval of the EBA (European Bank Authority), which doesn’t seem to be likely. Therefore, it is definitely the time to prepare for the day after, the post-moratorium, and a general plan to restructure the loans is needed. Otherwise, litigations will rise, the collecting enforcement procedures will increase, and a massive insolvency scenario will impose itself on the economy. The judicial system, which has apparently withstood the collision with the pandemic, will not resist such a clash.

The solutions must be public with the Government providing guarantees on the part of the restructured loans, not just to the more exposed sectors of the economy but to individuals with severe income reduction as well. The guarantees can be credit assurances, bails, bank guarantee or any other credit facility that grants security to the market and the economic actors in general. The aim should be to preserve sustainable productive companies and their jobs and allow them to re-enter the banking market in ordinary conditions without pressing the judicial system with unnecessary judicial procedures.

For those that do not match the sustainable criteria, insolvency or judicial restructuring of debts will be the obvious solution and that will certainly put additional pressure on commercial courts that are already overloaded. Once more, the solution must be public and the Government should foresee, in due time, the needs and the responses to be given, with additional human and technical means but also with new procedural solutions.

At this stage, figures related to the courts’ activity in the first semester of 2021 are not yet available. But we already hear the tick-tock.

Tick-tock

Tick-tock