PORTUGAL: An Introduction to Dispute Resolution

An Introduction to Dispute Resolution 

After a pandemic-driven gross domestic product (GDP) record fall in 2020 (-8.4%), Portugal saw an economic upswing in 2021 (4.8%), a trend that held in 2022 (6.7%). In 2023, however, the Portuguese economy growth has slowed down (2.1%) but not as much as had been forecasted. According to the Bank of Portugal, such economic slowdown reflects weaker momentum in major trading partners, inflation fall-out, and monetary policy tightening.

The Portuguese political landscape has again changed significantly in 2023. After a relatively stable six years under a Socialist Party-led government supported by a left-wing coalition in Parliament (namely, the Communist Party and Bloco de Esquerda (Left Block)), the former Socialist Party partners refused to approve the 2022 General State Budget, which led to political instability in late 2021 and to the fall of government. The Socialist Party won an absolute majority in Parliament in the ensuing election. This result was supposed to bring political stability, but surprisingly the opposite occurred. A series of political scandals led the government to lose 11 of its members over 2022. In 2023, things took a turn for the worse, with Prime Minister, António Costa, stepping down hours after prosecutors examining alleged corruption charges involving lithium and “green” hydrogen deals announced that he was under investigation. Police and public prosecutors searched dozens of addresses, including the Prime Minister’s official residence and the ministries of environment and of infrastructure. Parliamentary elections were called for 10 March 2024 (the second such election in a two-year span). Polls currently show a tie between left- and right-wing parties, which adds even more political unpredictability for the foreseeable future.

Regarding the social landscape, as widely anticipated, the ousting of the most left-wing parties from power has led to an increase in strikes in 2023. Courts, schools and hospitals were particularly affected by strikes, which led to an even greater degradation of public services.

Regarding the legal trends that emerged or consolidated during 2023 and that should continue to be a feature in 2024, proceedings regarding competition breaches and general consumer rights violations are becoming recurrent, with increasingly higher amounts. Decree Law No 114-A/2023 of 5 December, which has transposed Directive (EU) 2020/1828 of the European Parliament and of the Council, of 25 November 2020, on representative actions for the protection of the collective interests of consumers, entered into force on 6 December 2023. The number of Corporate and M&A disputes, which consolidated during 2023, is also expected to continue to rise, with parties trying to recover some value in the wake of a highly dynamic and highly valued transaction period. Similarly, after the dynamic of the real estate markets in the past years, disputes in these areas are already on the rise. Environmental, social and governance (ESG) issues are now very much on the radar of local firms and are expected to give rise to legal disputes in the foreseeable future.The courts and arbitral tribunals remained busy dealing with cases centred around contract performance and remedies for non-performance, despite the emergence of the above-mentioned new trends.

The legal market in Portugal is considered to be mature with a few international firms and strong local firms. Of the top ten law firms, five are Portuguese, three Spanish, and two are from the United Kingdom. The top three firms based on revenue are well-established Portuguese firms. On a final note, the end of the year was marked by Pérez-Llorca announcement of its intention to start operating in Portugal in mid-2024. While the size of Pérez-Llorca's Portuguese operation is not yet clear, it will certainly shake the market.