Suspension of Proceeding versus Suspension of Time Limit for Award - International ... Page 1 of 2
Arbitration - Portugal
Suspension of Proceeding versus Suspension of Time Limit for Award
Contributed by AM Pereira Sáragga Leal Oliveira Martins Júdice E Associados - Sociedade De Advogados
July 30 2009
Facts
Decision
Comment
The Supreme Court recently confirmed that the suspension of arbitral proceedings does not entail the suspension of the time
limit for the issuance of an award.
Facts
After the end of the hearings in an arbitration, the chair of the arbitration panel informed the parties that he was permanently
and physically unable to remain as arbitrator. The procedure for replacing the third arbitrator lasted for more than a
reasonable period, as the new president insisted on having full knowledge of the process and access to the transcripts of the
sessions as a condition of his acceptance. Therefore, the award was rendered after the time limit set forth in the arbitration
agreement.
In appealing the award to the courts, the losing party invoked the rule that an arbitral tribunal is not competent to render an
award after the arbitration agreement has expired. The award was consequently revoked by the court.
The counterparty appealed to the Supreme Court, arguing that: (i) a suspension of arbitral proceedings due to the
replacement of the presiding arbitrator also pauses the time within which the tribunal must render its final award; and (ii) the
non-suspension of a deadline for the award infringed its right to effective legal protection and an award in reasonable time as
prescribed by the Constitution.
Decision
The court declared that the deadline for an award is a substantive term, not a procedural term. Thus, the suspension of
arbitral proceedings does not entail the suspension of the time limit for the issuance of the award, except in cases specified
by law (ie, under Article 328 of the Civil Code). Moreover, arbitrators may not amend the time limit, which may be set and
modified only by agreement of the parties.
The court also stated that the arbitration agreement was concluded under the Arbitration Law (31/1986), which states that an
agreement lapses if an award is made after the expiry of the given time limit or an extension thereto (which is for six months
unless the parties agree otherwise). Therefore, the right to effective legal protection had been duly guaranteed and nothing
prevented the parties from submitting the matter to the state courts upon the expiry of the arbitration agreement.
Comment
Although the decision is not favourable to arbitration, it appears to be consistent with the strict meaning of the law. In a
previous decision the court had accepted the validity of an award rendered after a six-month period and a six-month
extension on the principle of venire contra factum proprium (ie, a party may not contradict its previous statements or actions).
In this case it appears that neither party caused the delay, either by action or inaction. Nevertheless, the ruling does not
protect the parties from losses caused by a delay for which none of the participants - including the other arbitrators - was
liable. Under Article 19(5) of the law, arbitrators are liable for damages caused by a delay if it results in unjustified conduct,
but that was found not to be the case.
Despite its strict interpretation of the law, the decision recognizes that the award would have been valid even after the set
time limit if, in light of the complexity and scale of the arbitration, the procedure for replacing the presiding arbitrator had been
completed and the award issued within a reasonable time. The court held that in this case, three months would have been a
reasonable time and that, as such, the appeal for annulment could be rejected on the grounds of abuse of rights. This more
flexible view of the deadline for an award (and of the competence of the arbitral tribunal and the validity of the arbitral
agreement) is significant in the context of a decision which is not otherwise supportive of arbitration.
The court stated that an arbitral tribunal is not competent to amend the time limit set for the issuance of an award, but also
observed that if the arbitrators had requested (and obtained the parties' approval for) an extension of the time limit, no
procedural or substantive problem would have arisen - it would have been difficult for either party justifiably to withhold its
consent, but the arbitrators ignored the party's statements on the issue. However, this position leaves open the possibility for
parties to agree that decisions on an extension of the deadline for an award should be within the arbitrators' competence and
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Suspension of Proceeding versus Suspension of Time Limit for Award - International ... Page 2 of 2
at their exclusive initiative.
The decision reflects the fact that in light of existing Portuguese arbitration law, the deadline for the award determines not
only the expiry of the arbitral tribunal's jurisdiction, but also the point at which the arbitration agreement lapses, which
jeopardizes the parties' interests. A project prepared by the Portuguese Arbitration Association at the minister of justice's
request proposes to amend this position. A new rule would clarify that if an award cannot be rendered during the time
allowed by the parties or provided for in the law, this does not imply a lapse of the arbitration agreement. Thus, even once
the time limit is exceeded, the parties would be able to lodge new arbitration proceedings and constitute a new arbitration
tribunal.
For further information on this topic please contact José Miguel Júdice or Frederico Perry Vidal at AM Pereira, Saragga Leal,
Oliveira Martins, Judice e Associados - Sociedade De Advogados by telephone (+351 21 319 7300) or by fax (+351 21 319
7400) or by email ([email protected] or [email protected]).
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Authors
José Miguel Júdice
Frederico Perry Vidal
© Copyright 1997-2011 Globe Business Publishing Ltd
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