Lisbon Court of Appeal | International Public Policy of Portugal | Excessive Liquidated Damages | Abuse of Rights | 02-06-2016 | Case #0011

Lisbon Court of Appeal
Date: 02-06-2016
Case Nr. 103/13.1YRLSB-2
LINK DGSI

Headline:

A foreign award that imposes a disproportionate and excessive penalty on a party is manifestly inconsistent with the international public order of Portugal, and is therefore unenforceable by a  Portuguese court.

Summary:

  1. Prior to enforcement of the award, the court must satisfy itself that the arbitral award conforms with the validity requirements defined in Art. 2(3) of the New York Convention, 1958 (NYC). Lack of fulfilment of these requirements is a ground for refusal as per Art. 5(a) of the NYC.
  2. The doctrine of separability provides that the invalidity of an agreement does not affect the validity of the arbitration clause contained within it. However, in situations where the grounds of invalidity affect both the contract and the arbitration agreement, this doctrine of separability does not preclude an assessment by the Court of whether the requirements under Art. 2(3) of the NYC have been met.
  3. Courts are generally prohibited from reviewing the merits of the arbitral award. However, this does not prevent them from re-examining the merits of the decision when there is a potential violation of international public order.
  4. Based on justice, morality, and good faith, is a fundamental principle of Portuguese State policy to protect the debtor from the creditor’s abuses in demanding the right to punishment.. Thus, a foreign award that imposes a disproportionate and excessive penalty on a party is unenforceable by a  Portuguese court.

This case summary was kindly prepared by Rishabh Raheja, (rishabharaheja@gmail.com, NALSAR University of Law), Sameer Thakur (sameerthakur@live.in, NALSAR University of Law), and Abhishek Babbar (abhishekbabbar1996@gmail.com).

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