Analysis and forecast of litigation in Portugal and international arbitration in 2025
January 2025
As we have been doing for some years, we share Uría Menéndez’s views and predictions on the main developments and trends we expect to see in 2025 regarding litigation in Portugal and international arbitration
1. Civil and criminal proceedings
4. Insolvency and restructuring
5. General contract terms and consumer litigation
6. Class actions and competition offences
1. Civil and criminal proceedings
We expect 2025 to be marked, in relation to civil law matters, by new measures that simplify and speed up procedures and, in relation to criminal law matters, by new general measures against corruption, that will affect, for example, matters relating to extended asset forfeiture, whistleblower protection and the duration of proceedings.
- In relation to civil law matters, new measures are planned to simplify and speed up procedures, a trend that the current government started with Decree-Law 87/2024 of 7 November, which established electronic service as the default for companies.
- The government is also expected to clarify other issues relating to how credits are to be classified – as it did with Decree-Law 48/2024 of 25 July – namely regarding the scope of the property privilege granted to workers and the survival of lease contracts in the event of a sale.
- In relation to criminal law matters and criminal proceedings, in 2025 the government is expected to implement the various general measures against corruption that it had announced in 2024.
- In addition to adopting preventive measures (e.g. to make procurement more transparent), new wider and more effective measures are expected to be developed to help investigative and reduce corruption, such as speedier proceedings (particularly with regard to interlocutory appeals and by giving judges more power to conduct proceedings), additional measures to protect those who report corruption (i.e. whistleblowers), a “blacklist” of State suppliers and, primarily, innovation in terms of the widespread loss of assets in favour of the State as a result of corruption. In particular, asset-forfeiture measures could continue to be problematic if they target third parties (i.e. non-defendants) and the third-party defence framework continues to be regulated inadequately and in a generic way, as is currently the case in Portugal.
- Also in this context, since the government has already received suggestions from the public consultation it carried out on the anti-corruption agenda, we also expect developments in 2025 in the form of measures to combat illicit enrichment and regulate lobbying.
- The National Anti-Corruption Mechanism (MENAC) is also expected to be more proactive in 2025 by carrying out administrative inspections into public and private entities, which will, in turn, probably result in more public and private corruption cases (and related offences) being reported to the Public Prosecutor’s Office and in entities covered by the General Corruption Prevention Regime having to corroborate that their compliancesystems are adequate and effective.
- Progress is expected in ongoing cases on alleged offences against the financial interests of the European Union and alleged fraud in obtaining subsidies (including final decisions for trials ended in 2024) and in the mega-cases concerning economic offences.
2. International arbitration
As a favourable projection for 2025 in the field of international arbitration in Portugal, the restrictive interpretation of actions to annul arbitration awards seems to have been confirmed in recent months. The expectation is that co-operation with Portuguese-speaking arbitration markets, especially Angola, will progressively make Portugal a more important seat for international arbitration.
- By dismissing the applications to annul arbitration awards that had been brought before them in two decisions handed down in 2024, the Portuguese courts have reinforced arbitration as a definitive dispute resolution mechanism, promoting the legal certainty of arbitration awards and preventing annulment actions from being misused as a thinly veiled appeal against arbitration decisions.
- In one of the cases, the Portuguese State Court rejected the annulment of the arbitration award deciding, in brief, that (i) in order to assess whether a contract containing an arbitration clause had been breached, the arbitral tribunal had to analyse the performance of a related contract, which the arbitration clause did not cover; (ii) as the parties did not object to the arbitral award, they are deemed to have accepted the arbitral tribunal’s “extended jurisdiction” to rule on the breach of the other contract; (iii) there was insufficient evidence for the objection based on an international public order of the Portuguese State.
- In another case, the Portuguese State Court rejected the annulment of the arbitration award ruling, in brief, that (i) even if, in applying the contract, the arbitration award breached Portuguese law (specifically a rule derived from EU law), as the claimant argued, (ii) the award is not automatically null for violation of a principle of international public order of the Portuguese State.
- The fact that Portuguese courts have rejected these annulment actions – which involved different annulment grounds – shows that Portuguese courts are confirming their position in a way that enhances the legal certainty of arbitration awards. This prevents parties from being able to use formal arguments aimed at annulling arbitral awards as a veiled mechanism to appeal the award.
- With a view to expanding the market, Portuguese arbitration associations and centres have cooperated and sought to establish themselves as a benchmark for arbitration in disputes involving investments and contracts in Portuguese-speaking countries, or those with strong links to the Portuguese legal community. We highlight the following initiatives in recent months: the international arbitration conference “Promoting and Protecting Foreign Investment in Angola”, held in the Salão Nobre of the Portuguese Chamber of Commerce and Industry, and the Macau 2024 Lusophone Arbitration Congress. This commitment to arbitration in these Portuguese-speaking markets, especially Angola, is expected to bear fruit in 2025, progressively making Portugal a more attractive seat for international arbitration.
3. Digital law and AI
The various ongoing damages class actions in Portugal against big tech companies are expected to move forward in 2025, specifically in terms of assessing dilatory motions filed by the defendants, which could bring new developments and clarifications on the viability of this type of action as currently constructed. We may also begin to see the first AI-related disputes as the European Commission’s rules in this area are implemented.
- Several class actions – all financed by third parties – against some big tech companies, including Google (Play Store), Apple, Sony (PlayStation), TikTok and Meta are ongoing in Portugal, with more expected to follow in 2025, as the sector faces constant regulatory changes and intervention.
- The highly active Portuguese consumer associations – who are supported by international litigation funders – coupled with a favourable legal framework for consumer class actions, is the reason why these lawsuits have increased in recent times and why we expect more of them in 2025.
- Although some of these cases were decided in 2024, especially at first instance, in 2025 we expect new case law and clearer guidelines on procedural issues that will shed some light on whether this type of action is feasible, namely (i) in terms of whether some consumer associations have legal standing to sue (legitimidade ativa), (ii) the independence and absence of conflicts of interest by third-party funders and even (iii) whether some actions are admissible given that they are not the same as the class allegedly represented, not to mention (iv) the major issue of consumer associations needing a mandate in class actions for compensation from a personal data perspective.
- Finally, the start of the phased application of the rules of the European Artificial Intelligence Regulation (Regulation (EU) 2024/1689) from 2 February 2025, which aim to establish a harmonised internal AI market in the European Area, will certainly bring with it news and potential litigation between creators, suppliers and users of AI systems.
4. Insolvency and restructuring
The number of insolvencies and business restructurings is expected to rise in 2025, especially in the industrial sector.
- The number of corporate restructurings and insolvencies in Portugal increased significantly in the second half of 2024. Although primarily occurring in the industrial sector, it also affected many other sectors, such as agriculture and property development, and even one of Portugal’s largest companies that is listed on the Lisbon Stock Exchange.
- This trend is expected to continue in 2025 due to a number of factors, such as the indebtedness of Portuguese companies and high interest rates, which have slowed the European economy and negatively impacted external demand for domestic products, as well as the repercussions of protectionist measures that the new US administration may adopt.
- From a regulatory point of view, we do not expect to see major changes or legislative developments in 2025, although the courts are expected to continue clarifying how the rules in force should be interpreted and applied following the major reform of 2022.
5. General contract terms and consumer litigation
The coming year is expected to be another busy one in terms of litigation, especially given how active consumer associations have become, the private financing initiatives in this area and the possibility of qualified foreign entities bringing class actions or the feasibility of cross-border class actions; on the flip side, we expect considerably less individual litigation on consumer matters and general conditions.
- In 2025, the upward trajectory of disputes regarding general contractual clauses and consumer matters, particularly unfair commercial practices, misleading advertising and non-compliance with the e-commerce rules is expected to continue.
- In fact, the main reason for the rise in this type of litigation has been, on the one hand, the growing interest of the Food and Economic Safety Authority (ASAE) in e-commerce and, on the other, the emergence of consumer associations that specialise in these matters. These associations have already filed dozens of lawsuits – a trend we expect to continue – covering an array of sectors, from banking to retailers, and types of conduct, from general contractual clauses to non-compliance with labelling rules and misleading advertising.
- We also expect to see more consumer litigation following the adoption in 2024 of Decree-Law 114-A/2023 of 5 December, which transposed Directive (EU) 2020/1828 on representative actions for the protection of the collective interests of consumers, given the specific framework of private litigation funding for this type of action.
- As a result of the above, we expect litigation risks to increase, especially as consumer associations get more actively involved, private funding in this field is more readily available and qualified foreign entities can bring class actions or other cross-border class actions have become feasible, but we expect individual litigation regarding consumer matters and general conditions to decrease significantly.
- To this end, several associations presented a joint declaration in November 2024, including a request for private third-party litigation funding to be regulated at the EU level[1].The joint statement raises concerns about third-party litigation funding, the lack of supervision and its potential implications for the judicial system and economic security. We also expect there to be developments in this area in 2025.
6. Class actions and competition offences
Our past predictions on the growing number of class actions in Portugal in 2024 have materialised, with dozens of new class actions having been filed during the year, especially against banks penalised by the Competition Authority for competition offences. We expect this trend to continue – and stabilise – in 2025, given the uncertainty surrounding the practical consequences of using third-party financing in this type of action.
- Our projections for Portugal in 2024 that (i) the number of class actions would grow, (ii) new higher-court case law would be developed and (iii) there would be more clarity on the legitimacy of recourse to third-party funding by the most active consumer associations in this area (Ius Omnibus and Citizens’ Voice), have come true.
- In addition to the new class actions in 2024, in particular those Ius Omnibus filed against several banks that had been penalised in a Competition Authority decision, which the Competition, Regulation and Supervision Court of Santarém (TCRSS) has since confirmed and are currently under appeal, the Portuguese courts handed down new decisions in the context of the truck cartel case, and the discussion on the viability of using third-party financing in this type of action has developed.
- In terms of case law, while we await the Supreme Court of Justice’s first decisions on the matter, the decisions of the Lisbon Court of Appeal[2] in the context of the truck cartel case have confirmed that damages are payable, although the claimants’ quantification of the damages has been rejected, setting the surcharge at 5% by estimating the damage in accordance with Article 17(1) of the Damages Directive (Directive 2014/10/EU of the European Parliament and of the Council of 26 November) and article 9.2 of Portuguese Law 23 /2018 of 5 June, which transposes it. In this context, we note that a TCRSS ruling[3] has for the first time reduced the surcharge from 5% to 3% of the price of lorries, based on the “pass-onargument”, according to which the companies acquiring the lorries passed on to consumers – at least partially – the surcharge they paid in the price they charged for their services.
- This represents an important development in TCRSS decisions, which reveals how difficult it has been to quantify damage and prove that quantification in the pending cases in Portugal, as well as the ability of Portuguese courts to monitor and understand the matters in question. We expect damage quantification to become progressively more central to the debate in this type of action in 2025.
- Another area in which we expect new developments in 2025 is the use of third-party funding in this type of action, reflecting the application of the rules on the independence of consumer associations and the management of conflicts of interest vis-à-vis litigation funders or third-party funders introduced by Decree-Law 114-A/2023 of 5 December, which transposed Directive (EU) 2020/1828 on representative actions for the protection of the collective interests of consumers.
- In fact, although this debate dates back to when the first such lawsuits were filed in Portugal in 2020, the approval of a legal framework with a specific set of elementary rules and principles – such as the independence of consumer associations from their funders, as well as the safeguarding of conflicts of interest in relation to the interests of the consumers represented – has reinvigorated the debate, which could impact the business model of consumer associations and their funders and, in turn, affect the way and pace at which this type of action has been developing in Portugal.
- In any event, we expect Portugal to continue to be one of the most active European countries in terms of class actions in 2025, as a result of its favourable legislation, the opt-outregime applicable to most class actions – except those for damages in data protection matters – the rather proactive consumer associations and the strict approach of the Competition Authority.
- After a year in which the number of restrictive practice cases has decreased, due, on the one hand, to the Competition Authority’s internal reorganisation following the entry into office of two new members of its board of directors (out of three), including its chairman, and, on the other hand, to the Constitutional Court restricting the evidentiary value of emails, we expect an upturn in activity and, in turn, more litigation in 2025.
- On this last point, we expect important developments as a result of the 2024 decisions (at the judicial and constitutional level) that provided an apparent solution to the protracted debate on the admissibility of emails seized by the Competition Authority, which held that they were admissible if a judge authorised the seizure, as the Competition Authority is likely to resume several of the ongoing investigations that needed clarification in this regard.
- Finally, the change in the European Commission’s competition commissioner, with Teresa Ribera replacing Margrethe Vestager, may lead to legislative and policy changes directly or indirectly affecting Portugal. The new commissioner has already announced that the Digital Markets Act (DMA) and the Foreign Subsidies Regulation (FSR) will be rigorously applied, that State-aid analysis will be simplified and aligned with EU industrial policy, that merger-control rules will be revised, in particular to cover “killer acquisition” scenarios following the CJEU ruling in Illumina/Grail. These goals are consistent with the Draghi Report and will likely, especially in the case of the DMA, give rise to private enforcement actions.
7. European litigation
We expect the preliminary rulings, State-aid litigation and litigation on consumer, technological and digital issues to continue to increase in 2025 as a result of the development of EU legislation in these areas.
- We expect European litigation to increase in 2025, primarily in areas such as consumer protection, data protection, and technology and digital services, partly, as mentioned, because these sectors are evolving rapidly and have been subject to recent legislative reforms and regulatory intervention.
- As in 2024, Portuguese courts are expected to continue to refer an increasing number of preliminary questions on specific matters (e.g. competition, consumer affairs, taxation) to the Court of Justice of the EU.
- Several key reviews are currently underway in the areas of evidence, access to documents, the compatibility of competition rules with the framework applicable to sport, and future reviews are expected, for example, in the area of standing to bring private enforcement actions, the outcome of which will be pivotal in this area.
- This trend seems to be common to most Member States, likely as a result of increasing legislative activity, guidelines and general European rules that apply domestically.
8. ESG litigation
The growing obligations for companies to disclose information on environmental, social and governance (ESG) matters will likely result in greater scrutiny from stakeholders and environmental associations, which, in Portugal, are quite active when it comes to litigation involving ESG matters against the State; the hope is that these initiatives will also cover private sector entities.
- Although the European Directive on Corporate Sustainability Reporting(CSRD, referred to in Directive (EU) 2022/2464 of 14 December) came into force in January 2024, its transposition into Portuguese law was not fully completed in 2024; we are confident that this will be completed in 2025, bringing with it new ESG disclosure and reporting requirements for companies. According to the CSRD, reporting will be subject to stricter and more detailed criteria, established by the European Sustainability Reporting Standards(ESRS), as defined in Delegated Regulation (EU) 2023/2772.
- In any event, on 9 December 2024, the Portuguese Securities Market Commission (CMVM) already recommended that the companies subject to its supervision (to which the new duties would apply from 1 January 2025) make their best efforts to comply with the requirements set out in the CSRD.
- On the other hand, large public interest entities (PIEs) that exceed an average of 500 employees (and the parent companies of large groups that, being PIEs, exceed the same limit of 500 employees on aggregate) are already covered by the Non-Financial Reporting Directive (NFRD), and the CSRD represents a significant development in reporting sustainability information.
- In addition, the publication in July 2024 of the European Directive on Corporate Sustainability Due Diligence (Directive (EU) 2024/1760 of the European Parliament and of the Council or CS3D) confirms the drift towards more ESG obligations (although companies will only have to apply these rules gradually from July 2027, depending on their size and turnover).
- This stricter ESG framework, combined with the increasing activity of climate associations and movements before domestic and foreign courts, is likely to result in more ESG litigation and penalties for non-compliance with obligations in this area, not least because there is (and will be) more access to corporate ESG information, which promotes greater stakeholder scrutiny and unionisation.
- ESG developments are also expected in 2025 as the environmental associations Último Recurso, Quercus and Sciaena brought the first public interest action for climate inaction against the Portuguese State. On 19 September 2024, the Supreme Court overturned the first instance ruling, which had dismissed the claim considering that the request for the State to adopt the necessary measures to reduce the 2005 greenhouse gas emissions by at least 55% by 2030 (excluding land use and forests) was not unintelligible, but rather generic, leading the Supreme Court of Justice to ask that the environmental associations specify which measures they wanted the State to adopt (case no. 28650/23.0T8LSB.S1). The environmental associations identified 50 measures, suggesting that this landmark case may likely bring significant developments in 2025.
- In addition, on 20 November 2024, the Último Recurso association filed an administrative court claim against the Environment and Energy Ministry requesting that the latter be ordered to provide information on the application of the Basic Climate Law, with a view to gaining access to documents ranging from carbon budgets, the status of the modification of the hydrocarbons legal framework (which should have been implemented by February 2023) and sectoral targets for reducing greenhouse gas emissions (case no. 44758/24.1BELSB). We expect major developments in this case in 2025, including the Environment and Energy Ministry’s appeal.
- In this climate, ESG litigation could move into the private sector in 2025. The fact that, on 12 November 2024, the Court of Appeal in The Hague overturned the first instance ruling in Shell that had upheld the action brought by an environmental association, should not preclude other ESG litigation initiatives, especially since environmental associations will likely gain valuable insight from this ruling’s detailed reasoning.
9. Energy sector litigation
The Constitutional Court is expected to confirm its case law declaring the unconstitutionality of applying the legal framework of the Extraordinary Contribution on the Energy Sector to the operators of the natural gas transmission, distribution and underground storage networks.
- The Extraordinary Contribution on the Energy Sector (also known as CESE in Portugal) was created by the 2014 State Budget Law and its framework has been amended annually and extended in subsequent State budget laws, including that of 2025.
- The CESE was created as a tax applicable to specific energy sector companies in the electricity, natural gas and oil sub-sectors whose revenue is earmarked to finance mechanisms that promote the energy sector’s sustainability.
- Although the economic operators subject to the CESE have been disputing the constitutionality of this tax since it entered into force, it has been declared constitutional until 2023.
- In 2023, a first set of rulings were handed down which, on the grounds of a violation of article 13 of the Portuguese Constitution (principle of equality), ruled that the CESE legal regime applicable to 2018 was unconstitutional because the tax is levied on the value of the assets of the concessionaires of natural gas transmission, distribution or underground storage activities.
- However, the Constitutional Court’s case law on the CESE applicable in 2018 was not consistent and, throughout 2023 and 2024, its judgments have been inconsistent, with some deeming the CESE regime applicable to 2018 constitutional and others not.
- Nevertheless, the first Constitutional Court rulings in 2024 on whether the CESE legal regime applicable to natural gas transmission, distribution and underground storage operators in 2019 and 2020 is constitutional found it to be unconstitutional on the basis that it was levied on the value of assets.
- Therefore, given that at least three judgments on the same grounds have declared that the rule (article 2(d) of the CESE’s legal framework) for 2019 is unconstitutional (because it violates the principle of equality), we expect the Constitutional Court will further assess this matter in 2025 and likely declare the rule unconstitutional with general binding force.
- If this happens, as from 2025, the CESE will no longer be levied on natural gas transmission, distribution or underground storage concessionaires and the pending court cases relating to years 2019 through 2024 will likely be decided in favour of the concessionaires.
____________
[1] Available at https://insuranceeurope.eu/downloads/3238/joint-statement-tplf/TPLF+joint%20statement%20-%20November%202024.pdf
[2] Judgment of 16 October 2024, in case no. 71719.6YQSTR.L1.
[3] TCRSS ruling of 20 April 2024, in case no. 58/19.9YQSTR, currently being heard by the Lisbon Court of Appeal.