PORTUGAL: An Introduction to Dispute Resolution
Dispute Resolution in Portugal
As of April 2024, the Portuguese economy is riding on a modest wave of growth, running counter to the tide of stagnation that has washed over Europe following the years of the COVID-19 pandemic. GDP grew by 2.26% in 2023, well above the European average growth of 1%, while unemployment remains stable at 6.5%. The Bank of Portugal projects that growth for the current year shall be of 2%, with an average growth of 2.3% being projected between the years of 2025-2026. Inflation is expected to continue its steady descent.
The political situation in Portugal is in a state of transition. The March 10 legislative election resulted in a Government change from the Socialist Party (which had been in power for 8 years) to a coalition led by the Social Democratic Party. This coalition ran on promises of a more economically liberal model of government, with lower taxes and less public intervention in areas like housing and real estate. However, the electoral victory of this coalition was very slim; and, lacking a majority in Parliament to support its agenda, the Government is fully dependent on reaching ad hoc agreements with rival political parties in order to pass its policy proposals.
An Atmosphere of Expectation
As such, the current atmosphere is, at once, of considerable expectation, since the new Government has high incentives to show some political achievements early in its term, and of a modicum of uncertainty, since the slim plurality of support which the Government enjoys in Parliament may lead to legislative gridlock.
The weight of expectation that falls on the current Government is particularly high, since the last few months have been fraught with strikes and demonstrations of discontent from various professional classes. Court clerks, health professionals, teachers, law enforcement officers and farmers all have stern demands for the new Government. These demonstrations of discontent have led to an amount of disruption in public services, notably hospitals and courts.
Legal Trends
As for legal trends in 2024, they are mainly a continuation, and perhaps an exacerbation, of the trends that marked 2023. There is a continuous and lively debate, among the legal profession, regarding the potential impact of generative AI in their practice and the overall economy. A few law firms have started to implement and roll out tools and applications which use generative artificial intelligence in order to speed up the drafting of briefs and contracts. The impact of generative AI on the day-to-day business of law firms remains an ongoing concern.
At the same time, the integration of Environmental, Social and Governance practices (ESG) is a top priority for Portuguese law firms. This entails a consistent effort towards being up to date with European and national regulations on this topic. Portuguese law firms are getting ready to aid companies in meeting their ESG goals, and developing solutions that will ensure their clients keep up with newly-minted ESG standards.
A parallel concern at this point is the recent enactment of Portuguese Decree-Law 4/2024, of January 5, which institutes a voluntary market for carbon and the rules for its functioning. This new piece of legislation creates economic incentives for the reduction of carbon emissions and the increase in carbon capture by private parties, thus complementing the public efforts in mitigating factors that contribute to climate change. Portuguese law firms are preparing to advise companies on how best to employ this legislation in order to decrease their carbon footprint.
Another relevant development concerns the recent legalisation of multidisciplinary firms, which allows law firms to integrate consultants in their ranks, and consultancy firms to integrate lawyers, in order to provide legal services. The consequences of this development have thus far been modest, but the market is beginning to see important changes – with major law firms hiring consultants as partners, and consultancy firms starting to build legal departments which integrate lawyers. This is likely to lead to more versatile legal services in the Portuguese market.
Market Trends
With regard to market trends in the field of dispute resolution, class actions focused on consumer rights and the private enforcement of competition law remain on the upswing, fueled by the rise of litigation funding by third parties – a niche which is still rather unregulated in Portugal, but which is beginning to show its true relevance. The transition to renewable sources of energy is a large source of investment in Portugal, and, as such, energy-related litigation is an increasingly significant area in the Portuguese legal market. The housing and construction markets are expected to keep growing; which, in turn, shall drive a correlated growth in related litigation and arbitration.
In fact, current trends show that the market for arbitration is already growing in Portugal, specifically in Lisbon and Porto – with more cases reaching arbitration, and larger values being litigated. Not only is construction and development litigation on the rise, but there has also been a noticeable increase in arbitration cases related to the economic and financial rebalancing of concession agreements, which were impacted by the Covid-19 pandemic and the recent wave of inflation.
The Portuguese legal market is quite consolidated and stable. There are about half a dozen top tier law firms with large dispute resolution departments, with a focus on all relevant areas of litigation and arbitration, and all of them with ties to other jurisdictions. There are also quite a few (circa 20) large law firms which provide wide range of services, but with less of a focus on litigation. And there is an expanding market of boutique law firms, which aim for specific branches of law and litigation. This makes for a competitive and rather innovative market landscape.