PORTUGAL Law and Practice Contributed by: Manuel Requicha Ferreira and Diana Avillez Caldeira, Cuatrecasas
6. Enforcement 6.1 Enforcement of Collateral by Secured Lenders Security interests are usually enforced by the secured parties directly (if lenders hold the security directly and retain the enforcement right), or by the security agent upon the occurrence of an enforcement event following an instruction of all or the majority of lenders. Early termination clauses based exclusively on the declaration of insolvency are generally not allowed, but the Portuguese Insolvency Code expressly allows early termination in situations preceding the declara- tion of insolvency. Enforcement procedures vary significantly depending on the type of security. The enforcement of mortgages is subject to a judicial enforcement proceeding, and no private or out-of-court enforcement is allowed. The general rule is that appropriation by the creditor is not allowed; therefore, enforcement requires a court sale or an extrajudicial sale. However, the financial collateral arrangements regime and Decree Law No 75/2017 on commercial pledges allow appropriation of the asset under certain conditions. Finally, assignment of receivables only requires a noti- fication to the debtor/client of the borrower or guaran- tor to make payments directly to the secured parties. Borrowers or guarantors usually grant irrevocable powers of attorney in favour of the security agent to create additional security over the new assets, or to enforce security and sell the assets upon the occur- rence of an event of default. 6.2 Foreign Law and Jurisdiction The choice of a foreign law is valid, recognised and enforceable under Portuguese law, unless there is a mandatory provision that determines the applicabil- ity of Portuguese law, in accordance with Regulation (EC) No 593/2008 on the law applicable to contractual obligations (the “Rome I Regulation”). Submission to a foreign jurisdiction is also valid, recognised and enforceable under Portuguese law,
(a) generic ( privilégios imobiliários gerais ) – these encompass all the properties of the debtor in general and are established, for example, in favour of certain tax credits and certain social security credits; and (b) specific ( privilégios imobiliários especiais ) – these refer to a specific property and are foreseen to secure, for example, the credits of employees performing their work in the prop- erty or credits related to real estate transfer tax or real estate property tax. • Moveable assets statutory liens: (a) generic ( privilégios mobiliários gerais ) – again, these encompass all moveable assets of the debtor and are established to secure certain tax credits and certain credits of the social security and the employees; and (b) specific ( privilégios mobiliários especiais ) – these refer to a specific moveable asset of the debtor and are foreseen to secure, for example, credits arising from judicial expenses. The real estate special statutory liens rank senior to any mortgage even if the mortgage was granted prior to the creation of any such statutory lien. As a gen- eral rule, the general statutory liens and the moveable assets special statutory liens should not prevail over security already existing over the asset at the time of their creation, although there are some exceptions. Retention rights over real estate assets (eg, construc- tor’s retention rights) used to rank senior to mortgag- es even if the latter were granted prior to the former. However, pursuant to a recent legislative change intro- duced by Decree Law No 48/2024 of 25 July 2024, which limits the situations in which real estate reten- tion rights prevail over previously registered mortgag- es, those rights can only be paid preferentially over the debtor’s other creditors, including the mortgage credi- tor, if the holder’s claim guarantees the reimbursement of expenses incurred to preserve or increase the value of the property.
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