Lisbon Court of Appeal
Case Nr. 2186.13.5TVLSB.L1-7
An arbitration agreement included in a standard form contract (such as a swap agreement) produces a negative effect upon the jurisdiction of the state court to hear a dispute brought in relation to it, even if the petitioner has claimed for its invalidity and inoperability, unless such invalidaty is blatant.
1. The swap or financial swap contract is an economic transaction included in the larger group of so-called “derivative products”, including contracts traded in organized markets such as “futures” and “options”, and over-the-counter contracts.
2. A swap agreement is an agreement whereby the parties undertake to make reciprocal and future payments of monetary amounts, in the same currency or in different currencies, on one or more predetermined dates, calculated by reference to financial flows associated with one underlying asset, generally a given exchange rate or interest rate.
3. Portuguese law (Article 5(1) of the LAV) recognizes the principle of the exclusive jurisdiction of arbitral tribunals, both with positive and negative effects. Therefore, before the arbitrators decide on their own jurisdiction, the state court may only decide on the jurisdiction of the arbitral tribunal if, in a law action relating to a dispute covered by an arbitration agreement, the circumstances that may affect the validity and enforceability of that arbitration agreement are blatant.
4. Standard form contracts are pre-elaborated proposals that are available or addressed to an indeterminated number of individuals that are constricted to either reject or accept the proposal. Standard form contracts are thus inflexible in that they are not subject to bargain.
5. In order to conclude for the existence of a standard form contract, the party invoking such characteristic bears the burden of proof that there was no negotiation between the contracting parties.
6. The arbitration agreement does not become invalid or inoperable merely because the company claims to be in a condition of financial distress.