Gonçalo Machado Borges and Pedro Gouveia e Melo discuss the recent history of litigation in Portugal, and review expected changes to legislation and the effects on current practices
1 Are there any particular sectors in your jurisdiction which tend to be a focus for competition damages actions? Why do you think this is the case?
In Portugal, there is a rather limited history of litigation involving the private enforcement of competition rules. However, some authors point to the existence of between 30-40 cases in the civil courts over the three decades spanning roughly from 1983 to 2012 (see Leonor Rossi / Miguel Sousa Ferro, Private Enforcement of Competition Law in Portugal (I): An overview of case-law, in Revista de Concorrência e Regulação, 10, 2012). The majority of these law suits, however, did not involve compensation for damages resulting from competition law infringements, but rather other issues such as declaring contract clauses null and void as a result of the prohibition of anticompetitive agreements.
Although, since 2003, the Portuguese Competition Authority (the Autoridade da Concorrência, or “AdC”) has adopted a significant number of infringement decisions fining companies for participating in cartels and bid rigging (when the 2003 Competition Act was enacted by Law no. 18/2003, of 11 June), to our knowledge no competition damages actions have been brought to court in connection with these specific cases.
The more significant examples of competition damages actions (in terms of the value of damages for which the plaintiffs seek compensation) have been initiated as follow-on actions in abuse of dominance cases after the AdC has imposed fines on the dominant players, irrespective of whether those decisions and fines have subsequently been upheld on appeal.
These cases involving abuse of dominance have focused almost entirely on the telecoms sector.
Several cases are pending at the moment:
(i) an action brought by TVTEL, a former regional cable network operator, against Portugal Telecom (currently Meo/Altice), claiming 15 million EUR in damages resulting from a refusal to provide access to underground telecommunications ducts (Case 1684/04.6TLVSB – 1st Civil Section of the Lisbon Court, J1);
(ii) an action brought by Optimus (currently NOS) against Portugal Telecom (currently Meo/Altice), related to the implementation of a margin squeeze in the wholesale and retail broadband internet access markets in Portugal, in which the plaintiff seeks compensation for damages in the amount of 8.6 million EUR and the reimbursement of excess payments under the defendant’s wholesale bitstream broadband offer of approximately 2.6 million EUR (Case 1774/11.9TVLSB – 1st Civil Section of the Lisbon Court, J20);
(iii) an action brought by Cogeco Cable against Sport TV (a television operator that produces several premium sports channels for distribution on pay-tv platforms) and its shareholders, Controlinveste and NOS, in relation to the pricing terms for access to the channels and in particular discriminatory rebates and excessive prices, in which 9.1 million EUR are claimed due to excess payments and an additional 2.4 million EUR as the loss resulting from the unavailability of capital during the period of the infringement (Case 5754/15.7T8LSB – 1st Civil Section of the Lisbon Court, J15); and
(iv) an action brought by Cabovisão, a local cable network operator, against Sport TV based on the same grounds as the lawsuit described previously in (iii), in which the plaintiff claims compensation in the amount of 16.4 million EUR, plus interest (Case 16725/15.3T8LSB – 1st Civil Section of the Lisbon Court, J3).
In addition, a collective action was brought in 2015 against Sport TV by a representative association on behalf of consumers (pay-tv subscribers) for practices related to the former’s distribution of its premium sports channels. This action seeks compensation for damages in an indeterminate amount to be liquidated by the court (Case 7074/15.8TVLSB – 1st Civil Section of the Lisbon Court, J6).
2 Who do damages claims tend to be brought by in your jurisdiction? (e.g. direct purchasers, indirect purchasers, end consumers?). If claims are not currently being brought by indirect purchasers and/or end consumers, why do you think this is?
In Portugal, damages claims tend to be brought by direct purchasers. The fact that the (relatively few) competition damages actions initiated in the Portuguese courts have resulted from abuse of dominance infringement decisions by the AdC has meant that the plaintiffs are normally corporate entities that have purchased the relevant goods, or services, from the dominant operator in the relevant product markets.
There may be several reasons for the fact that claims are not currently being brought by indirect purchasers and/or end consumers.
There is still a relative lack of awareness on the part of consumers, and consumer associations, of the right to claim compensation for damages specifically caused by competition law infringements. This has been particularly visible in the lack of compensation damages actions pursuant to cartel fines imposed by the AdC.
In addition, despite picking up in intensity once again since 2013, the public enforcement activity by the AdC was noticeably more discrete between 2008-2013, generating a smaller volume of infringement decisions for potentially injured parties to follow with subsequent actions for compensation.
In the specific case of end-consumers, the volume of litigation may also be influenced by a generally negative cost-benefit analysis (taking into account legal costs and associated fees) and by some practical difficulties in the application of the legal regime governing collective actions (or class actions (actio popularis)).
3 What approach are the courts taking to claims that originate from investigations or infringements arising out of the jurisdiction?
We are not aware of any pending claims originating from investigations or infringements arising out of the Portuguese jurisdiction.
Given the significant degree of economic integration and the patterns of trade at Iberian level, it is likely that, in future, investigations undertaken or infringement decisions adopted by the Spanish Competition Authority – the Comisión Nacional de los Mercados y de la Competencia (CNMC) – may result in damages claims in the Portuguese courts, assuming the anticompetitive practices in question have effects within the Portuguese territory, affecting local customers or consumers.
Without prejudice to the provisions of the applicable European regulations and other international instruments (including, inter alia, the recast Brussels I Regulation on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (Regulation (EU) 1215/2012)), the Portuguese courts have international jurisdiction as a matter of civil procedural law (Article 62 of the Civil Procedure Code) when: (i) according to Portuguese territorial jurisdiction rules, the claim may be brought before a Portuguese court (coincidence criterion); (ii) the facts determining the cause of action took place in Portugal (causality criterion); and (iii) when the rights of the claimant can only be effectively enforced by means of an action filed in a Portuguese court or the claimant would have considerable difficulty in lodging a claim abroad, provided there is a strong element of connection between the object of the claim and the Portuguese legal system (necessity criterion).
As a general rule, when a claim is based on non-contractual (tort) liability or strict liability, territorial jurisdiction belongs to the court(s) where the relevant events occurred (Article 71(2) of the Civil Procedure Code).
4 Do claimants favour your jurisdiction when they have a choice as to where to lodge a claim? Why?
To our knowledge, only a very limited number of compensation claims resulting from competition law infringements have been lodged with the Portuguese courts (see question 1). In none of these cases does there appear to have been an alternative jurisdiction for lodging the claim: the defendants, and a majority of the claimants, have been entities located (with a registered office) in Portugal and, most of all, the competition law infringements causing the damages have taken place in Portugal.
Whether the Portuguese courts will be favoured by claimants in situations where alternative fora are potentially available will depend on several factors, including the comparative duration of judicial proceedings until a final judgment is issued and the level of court costs and expenses (which, according to the Portuguese Judicial Costs Rules, are calculated by reference to the amounts in dispute). In this regard, if a specialised court is awarded jurisdiction to decide competition damages actions – which is a possibility in the context of the implementation of Directive 2014/104/EU (Directive 2014/104/EU of the European Parliament and of the Council, of 26 November 2014, on certain rules governing actions for damages under national law for infringements of the competition law provisions of the Member States and of the European Union) – this may contribute to making the Portuguese jurisdiction more attractive for damages claimants in comparison with other jurisdictions where the competence for these actions rests with non-specialised judicial courts.
5 In practice, are the courts generous to claimants when awarding disclosure, including pre-action disclosure?
Disclosure, understood as a formal procedural mechanism enabling a party to require another party to produce information or documents, notably at the pre-trial stage, is not available under Portuguese law. The provisions contained in Articles 573 to 576 of the Civil Code specify a duty to provide information (extending to physical objects and documents, in the latter case provided the requesting party has a relevant legal interest in examining them) in limited circumstances: only when (i) a party seeking to invoke a right has serious doubts as to that right’s existence or content; and (ii) another party is in a position to provide the necessary information. This generic information duty may, in case of a refusal by the party in possession of the information or documents, be enforced by the courts in accordance with Articles 1045 to 1047 of the Civil Procedure Code.
In any case,, a party to judicial proceedings may, under Article 429 of the Civil Procedure Code and after the proceedings have commenced, request that the other party(ies) present specific documents in their possession or control. In order to do so, the particular document(s) must be identified to the extent possible (access is not given to classes, or generic types, of documents, nor to information or data not contained in pre-existing documents) and the requesting party must state which specific facts it intends to prove with the requested documents. This means that the documents’ evidentiary relevance to the case in question must be substantiated. Also, the requesting party should be unable to obtain the document(s) by any other means.
A party to judicial proceedings may also request access to documents in the possession or control of third parties (e.g. documents pertaining to a case file or in the possession of a competition authority). If the court considers that the requested documents can prove relevant facts, it may require that the relevant third parties provide them (Article 432 of the Civil Procedure Code).
All persons, whether parties to a legal action or not, are under a general duty to cooperate with the court which may include disclosing documents or other evidence that is requested by the court in order to clarify the facts in dispute (Article 417 of the Civil Procedure Code). Any refusal to submit requested documents is freely evaluated by the court for evidentiary purposes and, in addition to fines, may result in a reversal of the burden of proof (Article 344 of the Civil Code).
6 How do the dynamics of a settlement really work in your jurisdiction? Is there a mechanism by which a “global settlement” can be approved/enforced?
In general, the court’s approval is required when the parties intend to settle a lawsuit (Article 290 of the Civil Procedure Code). This is different from extrajudicial settlements by which the parties agree that the plaintiff will drop his claim, in which case there is no need for court approval. Otherwise, a settlement proposal is reviewed by the court before the proceedings are definitely concluded, as it is necessary to confirm the validity of the terms of the settlement agreement (e.g. making sure no non-disposable rights are in question).
Furthermore, with the approval of Law no. 29/2013, of 19 April, which approved the general principles governing mediation in Portugal, the court may also at any time refer the parties to mediation, staying the judicial proceedings for that purpose. If an agreement is reached during the mediation proceedings, this is submitted for the court’s confirmation. If no agreement is reached, the judicial proceedings continue and follow their course.
The settlement of a lawsuit can remain confidential and this is usually one of the goals pursued by the parties. For this purpose, the parties usually submit a written statement informing the court of the settlement and requesting its approval without filing the actual, detailed, settlement agreement terms. Moreover, according to the Portuguese Bar Association Code on professional conduct, the parties’ legal advisors are expressly prevented from disclosing any details of the negotiations that gave rise to the settlement agreement.
7 How long do damages actions take? What is the likely range of costs required to defend a claim?
The number of known competition damages actions is very limited but, nevertheless, points to an average duration of judicial proceedings in the range of four to five years at the first instance court, with an additional one to two years at the appellate stage. These timings may be distorted (excessively long) due to the limited number of cases considered. If legislative reform leads to the creation of a specialised court, as may be the case in the context of the implementation of Directive 2014/104/EU (which must be completed by December 2016), the time required to obtain a first instance judgment should be significantly reduced.
As for the costs associated with judicial proceedings, both parties are required to make payments on account of the court costs/legal fees due (calculated by reference to the amount in dispute) and are also responsible for the payment of their own expenses and lawyers’ fees.
When the court renders its decision, it determines the total amount of costs (calculated by reference to the amount in dispute and considering, amongst other criteria, the conduct of the parties and the complexity of the matter) and the proportion of those costs to be borne by each party, if they are both held partially responsible. If there is only one losing party, then it shall bear 100% of the costs.
At the end of the proceedings, the winning party may request from the losing party payment of the judicial costs incurred by the former, in proportion to the amount of the claim which is awarded by the court. For this purpose, the winning party submits a statement of its costs (custas de parte) – including the amounts paid in respect of court costs/legal fees, expenses, lawyers and enforcement agent fees – and may request payment of the expenses and lawyers’ fees it has incurred, in the latter case limited to 50% of the amount of court fees paid by all the parties (Article 533 of the Civil Procedure Code and Articles 25 and 26 of the Judicial Costs Rules).
If the claimant succeeds against multiple defendants, all of them will be liable for paying a certain proportion of the costs and the claimant can only recover costs from each defendant in the same proportion (except if the multiple defendants are considered joint and severally liable in the court’s judgment).
Court costs/legal fees are calculated by reference to the amount of the claims. As an example, a legal action involving a claim for 1 million EUR will have an overall cost of € 10,506.00, whereas a claim for 10 million EUR will result in overall costs of approximately € 120,000.00. These amounts may be increased by the courts, by approximately 50%, if the action involves adjudicating on issues of fact or law with special complexity.
8 What funding options are available for (i) claimants and, (ii) defendants, in your jurisdiction?
Third-party funding has not been implemented in Portugal and, as far as we know, has not been used previously. Under the principle of contractual freedom, legal costs may be paid by a third party but such party’s right to recover those costs is limited to the terms of the agreement reached with the party in the proceedings. In other words, said third party is not entitled to recover costs within the proceedings as it is not bound by the court’s decision.
A contingent fees arrangement, or similar, whereby a lawyer’s fees are made exclusively dependent on the outcome of a dispute is forbidden by the Portuguese Bar Association Code (Article 101). Attorneys’ fees may be composed of a fixed part (according to criteria such as the time spent, the complexity of the issue or the importance of the service provided) that may be complemented by a success fee in view of the results obtained.
9 Do you anticipate any significant increase in damages actions in your jurisdiction over the next year or two? If so, where and why do you anticipate these increases coming?
The general expectation in the legal community in Portugal is that the number of competition damages actions in Portugal will increase in the near future.
Public awareness of the possibility of claiming damages caused by competition law infringements is increasing, as a result of a more high-profile intervention by the Portuguese Competition Authority and advocacy by consumer protection associations. The implementation of Directive 2014/104/EU is also expected to contribute to a greater volume of litigation in this field, by removing certain procedural obstacles to injured third parties who may wish to submit claims for compensation.
10 In your opinion, what are the key changes (if any) required in your jurisdiction to improve the effectiveness of private enforcement of competition law?
In general, the effectiveness of private enforcement of competition law is associated to the competition authority’s public enforcement of the competition rules in the sense that the greater the number (and magnitude, as measured by the amount of fines applied) of infringement decisions, the more likely it will be for compensation damages actions to ensue.
More specifically, effectiveness of private enforcement of competition law in the Portuguese legal system could benefit greatly from: (i) the award of jurisdiction to a specialised court, in parallel with the solution that has been adopted regarding the judicial appeals from infringement decisions and fines, which are submitted with the Court of Competition, Regulation and Supervision; (ii) a more efficient mechanism for the designation and intervention, at the trial stage, of expert economists and expert witnesses in general, with a greater margin for the intervention of court-appointed independent technical advisors; and (iii) amendments to the legal regime on class actions (actio popularis) in order to make it easier to liquidate individual compensation in mass damages cases.