Supreme Court of Justice | Interpretation of the Arbitration Agreement | Kompetenz-Kompetenz | Inoperativeness of the Arbitration Clause | Lack of Financial Means| Case #98

Case nr. 8927/18.7T8LSB-A.L1.S1
12-11-2019
LINK DGSI

Headline:

An arbitration agreement is interpreted according to the rules that apply to the interpretation of contracts. The arbitral tribunal is competent to decide upon its own competence. The impecuniosity of a party may be grounds to refuse the enforcement of an arbitration agreement if that impecuniosity is not attributable to the party in question. The fact that a party is benefiting from state legal aid is not sufficient to show the impecuniosity that may rule out the competence of the arbitral tribunal.

Summary:

I. The arbitration agreement is subject to the general rules of interpretation of contracts. The agreement will be valid with the meaning that a average recipient , placed in the position of the real recipient, could have deduced from the declarant’s behavior, unless the recipient could not reasonably expect that meaning; being a formal business, it cannot be valid in a way that does not have a minimum of correspondence with the text of the respective document (articles 236, 238 of the Civil Code and 2, paragraph 1. of the Portuguese Law of Arbitration – LAV).

II. In this case, when the agreement sets forth that parties may resort to arbitration if they cannot reach an amicable solution of the dispute, it refers to the option that either party has to resort to such a litigious route, through the constitution of an arbitral tribunal, and not as an alternative to state courts.

III. In light of the principle enshrined in article 18(1) of the LVA, according to which it is up to the arbitral tribunal to rule upon its own jurisdiction, assessing its requirements – validity, effectiveness and applicability to the dispute of the arbitration agreement -, the courts should only reject the objection related to the arbitration agreement where it is clear and uncontroversial that the arbitration clause/convention invoked is invalid, ineffective or incapable of producing its effects, or that the dispute ostensibly does not fall within the scope of the arbitration clause.

IV. The subsequent impecuniosity that it is not attributable to the party in question must lead the state court to retain its jurisdiction over the dispute even if an arbitration agreement is invoked by the opposing party. If the court decides to uphold the arbitration agreement that decision would entail a violation of the right of access to justice set forth in Art. 20, paragraph 1 of the Constitution of the Portuguese Republic. V. However, the mere benefit of the state legal aid is not sufficient to conclude that the party in question should succeed in avoiding the competence of the arbitral tribunal.