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PLMJ on class action litigation and the future trends and potential pitfalls for businesses to keep in mind when facing a claim in Portugal

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We are a leading, national and independent law firm in Portugal that is focused on providing legal advice to the business sector, and we have one of the largest teams of lawyers in the country.

Our dispute resolution team supports our clients in highly complex disputes critical to their business and reputations, and we work consistently on the most sophisticated and sensitive Portuguese and international disputes.

Class action litigation in Portugal:a few points to note

Legal framework – the general legal framework for class actions is set out in the Class Action Act (83/95). There are also sector-specific class action rules (eg the Private Damages Act when there is a breach of competition law).

‘Opt-out’ representative basis – the general rule under Portuguese law is that all class actions proceed on an opt-out representative basis. If the class action is accepted by the court, class members will be served (i) to join and participate in the proceedings proactively if they wish; or (ii) to state that they do not agree to be represented by the claimant(s). The right to opt out may be exercised by class members until the end of the evidential stage of proceedings. Not opting out of an action by the deadlines set will result in automatic opt-in.

Absence of a separate certification stage – Portuguese law does not provide for a standalone class certification process. However, for a class action to proceed in Portugal, the court must carry out a preliminary analysis of the claim. In that assessment, the court can summarily reject the claim if it considers that it is manifestly unlikely to proceed. One of the grounds for such a decision can be the absence of a proper class. It is rare, however, for class actions to fail at this stage of proceedings. Notwithstanding the above, the parties to class action proceedings can make submissions regarding class membership prior to judgment. As a rule, the court will rule on all substantive issues – including class membership – in the final judgment.

Relatively low costs for bringing class actions – the general rule is the ‘loser-pay rule’. Costs comprise court fees and adverse costs, including the prevailing side counsel’s fees. Under the specific class action rules, if the court finds even just partially in favour of the claimant, the claimant will be exempt from court costs. If the claim is universally unsuccessful, claimants will be ordered to pay an amount to be fixed by the court as costs. This amount will range from 10% to 50% of the amounts due in ordinary civil claims. In determining the specific amount to be paid by an unsuccessful claimant, the court will consider the economic situation of the claimants and the reasons why the claim did not succeed. Conversely, defendants in class actions must pay court costs, as is the case in any other civil proceedings.

Third-party funding is not yet specifically regulated in Portugal – to date, there is no identifiable established case law on whether and to what extent third-party funding arrangements are lawful in Portugal. Until very recently, third-party funding was very rare. However, since December 2020, several class actions backed by litigation funding arrangements have been brought before the Portuguese courts. The extent to which litigation funding arrangements common in jurisdictions such as the US, the UK and Australia are permitted by Portuguese law is not yet clear.

Typically available defences – several procedural and substantive defences are available in class action proceedings in Portugal.

The key procedural defences brought in class action litigation include (i) lack of jurisdiction of the Portuguese courts; (ii) limitation; (iii) the absence of interests covered by the class action regime (diffuse interests); and, in class actions where the claim is brought by consumer associations, (iv) a defence as to whether the association in question meets the requirements as a class representative and therefore has standing to bring the claim.

The key substantive defences brought in class action litigation in Portugal include (i) the absence of any unlawful behaviour or, in the case of standalone competition litigation, any infringement of EU and/or domestic competition law; (ii) the absence of causation of any damage arising from the conduct at issue; (iii) the absence or miscalculation of any alleged damage to the claimant(s); and (iv) pass-on (in the case of competition law class actions).

There are a number of additional defences that are currently being run in Portuguese class action litigation. The extent to which these defences will remain available in the future will depend on the outcome of current litigation.

Compensation is set globally – the court has the discretion to set the compensation of unidentified claimants as a whole, considering the overall damage. This amount must be reduced by the amount of compensation due to claimants who opted out. Identified claimants will be compensated according to the general rules of civil liability (ie according to the damage they have actually sustained).

Class action landscape and future trends

The class action litigation landscape in Portugal is evolving rapidly. Since December 2020, self-proclaimed consumer associations have brought numerous class actions against both multinational and domestic firms, especially competition and consumer law class actions. Many of these actions are copycat cases of class actions brought in other jurisdictions. We expect the volume of class actions to continue to increase in the short to medium term and witness the rise in privacy/data breach, Big Tech and crypto class actions litigation. The ESG movement may lead to class litigation in the near future as well. It is to be expected that Portugal will soon have transition steps underway to implement the EU Directive on Representative Actions ((EU) 2020/1828).

Anticipating potential pitfalls

Businesses would be advised to keep the following key points in mind when facing a claim in Portugal:

• Anyone can bring a class action and the general rule is that class actions are opt out.
• There is no separate class certification stage. A decision on the class of potentially harmed consumers is only made on final judgment. This means that a claimant is not burdened by a procedural hurdle which in other jurisdictions can result in delays to a final hearing on the merits and final judgment.
• The costs associated with bringing class actions are relatively low. Judicial costs are only due on final judgment and the claimant is exempt from any court costs if the claim is totally or partially upheld. If the claim fails entirely, judges have the discretion to cap cost orders against claimants. Based on past judicial practice, it is unlikely that a claimant will be burdened with an order to pay a large amount of the defendant’s costs in the event that the claim is dismissed in its entirety.
• Portugal is a one-shot jurisdiction. This means that a defendant must present all of its procedural and substantive defences in its defence to a claim. This can often place a defendant on the back foot, as the deadlines for submitting a defence are very tight – a domestic defendant will need to respond to a claim within 30 calendar days of service on the last defendant, while a foreign defendant has 60 days to respond from service on the last defendant.

The combination of these reasons makes Portugal an attractive jurisdiction for class action claimants and can put Portuguese proceedings at or near the front of a defence strategy for a defendant facing similar/identical claims across jurisdictions. This is because, as noted, a defendant must submit all defences at a very early stage of litigation. As a result, while in other jurisdictions a defendant may be litigating class certification, in Portugal the same defendant will have to have developed all its arguments on the merits of the case in addition to presenting any procedural defences.

We are ready to help you navigate complex class actions

Our team has represented clients in defending high stakes class actions that require a multifaceted approach, including liability of directors of listed companies and manufacturers’ civil liability. We also have extensive experience representing clients in competition class action claims before the Portuguese Competition Court.

We are mindful that class actions are a rough sea for businesses: they entail significant risks, including high monetary exposure and reputational hazard. Our class actions defence lawyers are well placed to work with our clients facing class actions and employ their specialised skills and strategic experience to achieve positive outcomes. We have an in-depth knowledge of the substantive and procedural aspects of class actions in Portugal and keep a close eye on the international landscape to monitor emerging trends. We invest strongly in detailed case planning and assessments, especially in the case of multi-jurisdictional and cross-border actions. Last but not least, we do not overlook the importance of working with leading national and/or international economic experts and providing our clients with robust and cost-effective defences.

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