PORTUGAL Trends and Developments Contributed by: Nuno Temudo Vieira, Alexandra Valpaços, Miguel Santos Almeida and João Saúde, Sérvulo & Associados
Third-Party Funding in Portugal Third-party funding (TPF) has recently been the sub - ject of growing interest and development in Portugal. TPF involves the financing of the costs associated with resolving a dispute (lawyers’ and experts’ fees, court fees and arbitration costs, amongst others) by someone other than the party itself or its lawyers, and offers a significant range of advantages. First and foremost, TPF helps to improve access to justice. Although companies in Portugal may benefit from legal aid in judicial proceedings in certain circum - stances, the costs and financial risks associated with litigation and arbitration can still discourage or con - strain the pursuit of meritorious claims. In such situ - ations, TPF precisely enables companies to pursue those claims without having to bear the full financial burden of the proceedings, thereby facilitating access to justice by mitigating the economic barriers and risks that might otherwise deter litigation or arbitration. In addition to cases of financial incapacity, TPF can also constitute an important management tool, enabling companies to litigate without having to allocate their resources to cover the costs of the dispute, thereby avoiding any resulting liquidity constraints. Regarding the terms of such funding, it should be emphasised that litigation funding is typically provided on a “no-win, no-fee” basis, which means that the funder is not entitled to reimbursement of the amounts financed if the claim is dismissed. The risk of the litiga - tion is therefore, to a large extent, transferred to the funder. In turn, should the case be successful, the funder’s remuneration will normally correspond to a proportion of the sums recovered and will be a mul - tiple of the value of the funding. Invariably, litigation funding is preceded by rigorous due diligence on the part of the funders, conducted by teams of lawyers, which analyses the likelihood of the claim succeeding, the foreseeable costs of the litigation and the oppos - ing party’s assets. The legal and regulatory framework in Portugal Portugal has no specific law dedicated to TPF. In the absence of any prohibition, funding arrangements are legal and are simply governed by the general rules of contract, together with the ordinary rules of court
and arbitration procedure and the conduct rules for lawyers. The prevailing opinion is that a pure litigation funder does not fall within the categories of bank or financial company that require a licence from the authorities, insofar as it does not grant credit or otherwise carry out financial intermediation activities within the mean - ing of the Legal Framework of Credit Institutions and Financial Companies (RGICSF, approved by Decree- Law 298/92), but instead only acquires a contingent economic interest in the outcome of the dispute. The one area where funding is now expressly regu - lated is consumer class actions. An EU directive on collective actions (Directive (EU) 2020/1828), which Portugal brought into national law through Decree- Law 114-A/2023, sets safeguards for how those par - ticular cases may be funded – for example, managing conflicts of interest. Outside that consumer context, funding of litigation and arbitration remains unregulated at the domestic level, and there is no indication of an imminent Portu - guese legislative initiative in this regard. This lack of comprehensive regulation leaves room for parties to develop bespoke or hybrid funding structures tailored to the particular characteristics of a dispute, subject to the limits imposed by general contract law, pro - fessional ethics and public policy. The matter may nonetheless cease to be purely domestic: the Euro - pean Parliament’s resolution of 13 September 2022 on responsible private funding of litigation called on the European Commission to propose a directive estab - lishing common minimum standards for commercial third-party litigation funding across the EU – a process that would in due course also shape the Portuguese framework, should it progress. Although the Portuguese Voluntary Arbitration Law (Law No 63/2011) contains no specific provision on the disclosure of third-party funding, arbitrators sit - ting in Portugal are, in practice, increasingly expected to enquire into and disclose known funding arrange - ments for conflicts-of-interest purposes, in line with international soft-law standards such as the 2024 IBA Guidelines on Conflicts of Interest in International Arbitration (General Standard 6 (b)), under which a
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