Guimarães Court of Appeal | Supervening Impecuniosity | Ineffectiveness of the Arbitration Agreement | 21-02-2019 | Case #088

Guimarães Court of Appeal  
Date: 21-02-2019
Case Nr. 317/18.8T8PRT.G1
LINK DGSI

Headline:

The supervening economic impossibility of the signatories of an arbitration agreement (preventing them from bearing the inevitable costs of such dispute resolution mechanism), may constitute a manifest ineffectiveness of such arbitration agreement.

Accordingly, the state court is competent to decide the question of whether the supervening economic impossibility actually exists and whether such circumstance can turn the existence of an arbitration agreement no longer an objection to the state court’s competence to decide the entire dispute.

 

Summary:

I. In the current LAV (Law no. 63/2011, of December 14 / VOLUNTARY ARBITRATION LAW), it is expressly enshrined in Art. 5 the possibility of the State Court ruling on its own jurisdiction to assess the negative effect of the arbitration agreement and, in cases limited to the final part of paragraph 1, – the nullity, ineffectiveness or unenforceability of the arbitration agreement – assess defects that determine the invalidity of such clause and, seemingly, to admit its own jurisdiction, notwithstanding the existence of an arbitration agreement;

II. Furthermore, number 3 of Art. 5, stipulates that the decision of the State Court which considers that the arbitral tribunal does not have jurisdiction, as provided for in paragraph 1, implies the termination of the arbitral proceedings and renders the respective award ineffective;

III. There is, therefore, no requirement that such an issue should always be dealt with beforehand by the arbitral tribunal as provided for in the agreement in question;

IV. The supervening economic impossibility of the signatories of an arbitration agreement (preventing them from bearing the inevitable costs of access to such jurisdiction), which is subject to the provisions of Art. 790 of the Civil Code (also in light of Art 20, paragraph 1, of the Constitution of the Portuguese Republic) may constitute a manifest ineffectiveness that admits the judgment of the matters set forth in Art 5, paragraph 1, of the L.A.V. by a State Court, which may in turn consider the arbitral tribunal as lacking competence to settle the dispute;

V. Even if such consequence is not admitted, this same Art. 20, paragraph 1, of the Constitution of the Portuguese Republic may lead to an interpretation of the current Art. 577º, paragraph 1, al. a), of the C.P.C., or of the mentioned Art. 5, paragraph 1, of L.A.V., more in accordance with that constitutional provision, especially when the access to the courts and the right to impose the arbitration agreement is called into question, within the framework of the supervening economic insufficiency of the respective parties;

VI. In view of this, it is necessary for the State Court where such an exception is raised, before examining it, to instruct and adjudicate the disputed facts with which the signatories, petitioners herein, want to demonstrate the circumstances that are an obstacle to this exception of absolute incompetence of the state courts raised by the defendants, especially those related to the abovementioned supervening economic impossibility, invoking, if in the phase of reorganization, the provisions of Art. 595 (4) of the Code of Civil Procedure.