Lisbon Court of Appeal Strengthens Portugal’s Arbitration-Friendly Reputation
On 27 February 2025, the Lisbon Court of Appeal delivered its decision in Case No. 2369/23.0YRLSB, concerning the recognition in Portugal of a London arbitral award issued under the Refined Sugar Association Rules. The judgment provides important guidance on due process objections, the scope of international public policy, and the inapplicability of the “privilege of nationality” to arbitral awards.
Factual and Procedural Background
A Singapore company sought recognition in Portugal of a foreign arbitral award rendered in London under the auspices of the Refined Sugar Association. The Portuguese respondent, a company based in the Madeira Free Trade Zone, opposed recognition alleging violation of due process and equality of arms, incompatibility with Portuguese international public policy, and reliance on the “privilege of nationality” contained in Article 983(2) of the Portuguese Code of Civil Procedure.
The underlying dispute concerned a contract for the sale of 8,100 metric tons of Brazilian white crystal sugar at a price of USD 600 per ton. The contract contained an arbitration clause referring disputes to the Refined Sugar Association in London. The buyer paid a five percent advance on 6 April 2023. On that same day, after receiving the advance, the seller repudiated the contract, citing a surge in sugar prices, and returned the advance. On 19 December 2023, the arbitral tribunal issued an award ordering the seller to pay USD 498,231 plus interest of 7.5 percent until the date of the award and 8 percent thereafter. The damages corresponded to the difference between the contract price and the higher market price at the date of the seller’s repudiation.
The respondent argued before the Lisbon Court of Appeal that the arbitral procedure violated the principles of equality and adversarial process, that the damages award amounted to unjust enrichment contrary to Portuguese international public policy, and that the result would have been more favorable under Portuguese law, entitling it to invoke the privilege of nationality under Article 983(2) CPC. The claimant argued that recognition should follow under the 1958 New York Convention, to which Portugal is a party without reservations, and subsidiarily under the Portuguese Voluntary Arbitration Law (Law 63/2011).
Court’s Analysis
The Court began by reaffirming that recognition of foreign arbitral awards in Portugal is governed primarily by the New York Convention and, subsidiarily, by Articles 55 to 58 of the Voluntary Arbitration Law. These provisions prevail over the CPC’s general regime for foreign judgments. The Court emphasized Portugal’s pro-enforcement stance and stressed that the grounds for refusal must be restrictively interpreted.
The Court rejected the claim of violation of equality and adversarial process. It found that the respondent had been represented by counsel throughout the proceedings, had actively participated, submitted arguments and evidence, and raised objections, and that the arbitral tribunal had addressed these submissions in its reasoning. The Court underlined that the right to be heard means the opportunity to present one’s case, not a guarantee of a favorable assessment, and that recognition courts are not entitled to reassess the arbitral tribunal’s evaluation of evidence or procedural rulings.
The respondent argued that damages based on the difference between the contract price and the market price at the date of breach constituted unjust enrichment. The Court clarified that international public policy, relevant under Article V(2)(b) of the New York Convention and Article 56(1)(b)(ii) of the Voluntary Arbitration Law, is narrower than domestic public policy and functions only as a safety valve to bar recognition when enforcement would result in an intolerable outcome under fundamental Portuguese legal principles. The standard damages calculation used by the arbitral tribunal was widely accepted in international trade and consistent with Portuguese contract law principles of full compensation. Recognition of the award therefore did not violate international public policy. The Court emphasized that public policy is not a mechanism for re-examining the merits of arbitral awards.
The Court rejected the respondent’s reliance on Article 983(2) CPC, which in certain cases allows Portuguese defendants to avoid recognition of foreign judgments if Portuguese law would have produced a more favorable outcome. The Court held that this provision applies only to foreign judgments, not arbitral awards, which are governed by the New York Convention and the Voluntary Arbitration Law. Furthermore, Portuguese conflict rules pointed to English law, chosen by the parties through the arbitration clause, so Portuguese substantive law was not applicable.
This restrictive approach also mirrors comparative practice. French courts have long refused to let purely domestic privileges undermine the international enforcement regime of arbitral awards. Spanish case law too has stressed that recognition of arbitral awards is insulated from domestic procedural privileges, as the NYC provides a self-contained set of rules that supersedes conflicting national norms.
The Lisbon Court of Appeal recognized and confirmed the arbitral award (RSA Award No. 2369 of 19 December 2023) for enforcement in Portugal and ordered the respondent to pay costs. The value of the action was fixed at EUR 463,578, corresponding to the converted amount of the award (USD 498,231 as of 2 July 2024).
Concluding Remarks
This judgment confirms Portugal’s pro-enforcement approach and clarifies several important points. Due process objections will only succeed where there has been a genuine denial of participation, not where a party merely disagrees with procedural decisions. The public policy exception is interpreted restrictively, confined to international “ordre public”, and carries a high threshold. Recognition proceedings cannot be used to re-litigate the merits or damages calculation.
This approach is consistent with broader comparative trends. French courts, for instance, have long confined the ordre public international exception to cases where recognition of the award would violate fundamental principles of justice and morality. The famous Paris Court of Appeal decision in Thalès v. Euromissile (2004) illustrated this narrow interpretation by refusing to re-examine substantive reasoning under the guise of public policy. Similarly, the French Cour de cassation has consistently stressed that international public policy must be understood restrictively, as in SNF v. Cytec (2009), confirming that only flagrant violations justify refusal. Spanish courts also adopt a narrow understanding, often citing Article V(2)(b) NYC while insisting that the exception applies only where the award blatantly contradicts essential principles of Spanish law. The Spanish Constitutional Court in its judgment of 15 February 2021, for example, criticized the lower court’s annulment of the arbitral award for exceeding its jurisdiction, framing what should have been a narrow review under annulment grounds as an ordinary appeal allowing full reconsideration of the arbitral process—thereby violating the right to effective judicial protection.
Finally, the privilege of nationality under Article 983(2) CPC has no application to arbitral awards.
Placed in comparative context, the Lisbon Court’s decision reinforces Portugal’s alignment with the international pro-enforcement bias of the New York Convention. By construing public policy narrowly and by insulating arbitral recognition from domestic privileges, Portuguese courts now stand alongside French and Spanish courts in promoting consistency, predictability, and the finality of arbitral awards. This judgment thus strengthens Portugal’s reputation as an arbitration-friendly jurisdiction within the European legal landscape.