PORTUGAL Trends and Developments Contributed by: Nuno Temudo Vieira, Alexandra Valpaços, Miguel Santos Almeida and João Saúde, Sérvulo & Associados
is recovered it is distributed in the order the parties agreed. Alternatives (or complements) to third-party funding There are two common alternatives to fund the costs of a dispute: • after-the-event (ATE) insurance; and • lawyers’ contingent fees. ATE insurance ATE insurance is taken out once a dispute has already started (or is about to start), rather than in advance, as ordinary insurance usually works. The policy covers the costs of pursuing the case, and in some versions also covers the risk of having to pay the other side’s costs if the case is lost. What makes it function like a form of TPF is that the insurer effectively takes on the financial risk of the dispute: if the claim fails, the insurer bears the cost rather than the client. Lawyers ’ contingent fees A contingent fee is an arrangement under which the lawyer’s payment depends on the outcome of the case – typically, the lawyer receives a percentage of what the client recovers, and receives little or nothing if the case is lost. In many countries, this is a common way of sharing the financial risk of litigation between the client and the lawyer. In Portugal, however, there are significant restric - tions to this option. Article 106 of the Statute of the Portuguese Bar Association ( Estatuto da Ordem dos Advogados , approved by Law 145/2015) prohibits what is called the “quota litis pact”: an agreement, made before the case is over, under which the lawyer’s fee depends exclusively on the outcome and the cli - ent must pay the lawyer a percentage of whatever is awarded. That said, pursuant to Article 106 (3) (which excludes from the quota litis prohibition arrangements combin - ing a (reduced) fee calculated on criteria other than the outcome with an uplift tied to the result), it is lawful and very common for lawyers to partially finance the
costs of a legal dispute by agreeing to accept legal fees lower than their usual rate, on the understand- ing that they will receive a percentage of the sums recovered by the client at the end of the proceedings, should the case be ruled in favour of the client. Combination of litigation finance tools ATE insurance and contingent fee arrangements should also be understood as complementary com - ponents of the broader litigation finance ecosystem, as they can complement TPF by addressing differ - ent aspects of the costs and risks associated with litigation. ATE insurance protects claimants – and, indirectly, funders – against the risk of adverse costs orders or other litigation expenses in the event of an unsuccessful outcome, thereby reducing the overall financial exposure of the case. At the same time, con - tingent or success-based fee arrangements defer or make legal fees conditional upon success, reducing the claimant’s immediate funding needs. When used alongside TPF, these mechanisms can enhance the economic viability of claims, improve the allocation of litigation risk among participants, and make funding arrangements more attractive to commercial funders. Third-party funding in other Portuguese-speaking countries In other Portuguese-speaking countries, such as Bra - zil, Angola, Cape Verde, Guinea-Bissau, Mozambique and São Tomé e Principe, the legal and regulatory framework is similar to Portugal – ie, there is no spe - cific law dedicated to TPF and, in the absence of any prohibition, funding arrangements should be deemed legal if they are compliant with the general rules of contract, together with other general rules that may be applicable. That said, with the exception of Brazil (an emerging but increasingly active TPF landscape), there is lit - tle evidence that a litigation funding market has yet developed in those countries. It is likely, however, that its use will increase exponentially in the coming years. In fact, in recent years, there has been an ongoing trend towards the creation of a Portuguese-speaking arbitration community. Portuguese-speaking arbi - tration associations have emerged, as well as joint publications and events including different Portu -
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