Originally from Handbook on Third-Party Funding in International Arbitration, Second Edition

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PART I.  THE THIRD-PARTY FUNDING LANDSCAPE

1.  The TPF market in Portugal

1.1.  Please shortly describe the TPF market in your Jurisdiction.

The Portuguese legal community is yet to become completely aware of the dimension, singularities, and challenges arising from this business model. Despite some efforts that have been made by some sectors of the legal community, third-party funding has not gained much attention in the last few years. There are no decisions from state courts referring to or analyzing this financial facility and much less may one find even the slightest references to it in any legal provision, including those applicable to the exercise of the legal profession.

However, it is safe to say that the Portuguese arbitral community knows of third-party funding, albeit few practitioners can report experience with its use.

This scenario is likely due to a combination of factors such as the low costs that parties face when starting litigation before state courts, a fair use of contingent fee structures by local lawyers, the general perception that high-stakes disputes are solved in state courts (and, therefore, need not channel relevant financial sources) or, at least, when resolved through arbitration the involved parties are sufficiently equipped in financial terms. The scenario is also due to a general lack of information on the use of third-party litigation funding by the businesses themselves.

In a nutshell, TPF is a financing mechanism which is “uncommon” in the Portuguese legal community.

However, if one includes “before-the-event” insurance policies in the definition of “Third-Party Financing”, the Portuguese market is well aware of this non-recourse financing of litigation expenses and legal fees.

Notwithstanding the landscape described above, one may predict that the third-party funding phenomenon will be deeply discussed in the near future, especially in state courts, in connection with class actions that have been brought in the context of anti-trust private enforcement lawsuits. In fact, in the last couple of years, a host of private enforcement lawsuits have been initiated against international corporations operating in Portugal (such as Mastercard, Apple, and Google) or even relevant Portuguese businesses (such as Superbock and EDP) where the external litigation funding was announced and is claimed as part of the compensation that is being sought from those defendants. Because the costs of litigation funding are claimed in those lawsuits, it will necessarily follow that state courts will deal with this reality and, for that reason, the public is going to become more aware and more prone to intervene in that context. In any event, this host of cases should be considered a limited fraction of the litigation taking place in Portugal which could potentially benefit from the use of third-party funding and, therefore, should be seen as an exception to the general landscape existing in Portugal.