The 2007–2008 financial crisis and the European debt crisis both had a substantial impact on the Portuguese economy and the consequences of it are still being felt, particularly in the financial system. These crises also had a decisive influence on setting the trend of the banking disputes that have been pending in the Portuguese courts ever since. The following three groups of cases have set the trend for banking litigation in Portugal in recent years: (1) disputes related to swap agreements executed between banks and state-owned companies or private entities; (2) disputes related to the amendment of finance agreements; (3) disputes related to the mis-selling of investment products by banks; and, more recently, (4) disputes to waive the banking privilege.

i Swap agreements

Disputes related to the validity of swap agreements, in particular interest rate swap agreements, have been in the spotlight in Portugal in recent years. The media focused on this controversial issue because of the large sums involved in swap agreements entered into by several banks and state-owned companies before the 2008 crisis, who faced significant pressure from the beginning of 2009 onwards when the Euribor rate fell to unprecedented values, bringing the mark-to-market of those contracts to a value that was highly unfavourable to investors and banks’ clients.

Among the disputes related to swap agreements brought before the courts, three arguments can be distinguished that are invoked by the counterparties of the banks to challenge the validity of swap agreements.

First, swap agreements have been challenged by several parties based on the theory of the unexpected change in the circumstances during the negotiation of the agreement, as per Article 437 of the Civil Code.2 The Supreme Court deemed this argument valid in one case, annulling the relevant swap agreement, in a decision of 10 October 2013.3 This argument was also deemed valid on two occasions by the courts of appeal (second instance courts).4 These decisions considered that the drastic fall in interest rates after the financial crisis led to huge losses for the counterparties of the banks, causing an imbalance between the parties of the swap agreement that were not covered by the normal risks of this type of agreement. Thus, owing to such an unexpected and unreasonable change of circumstances, the Supreme Court considered that the provision of Article 437 of the Civil Code was fulfilled, allowing the aggrieved party to terminate the swap agreement.

However, since the beginning of 2015, the courts of appeal, notably the Lisbon Court of Appeal,5 have repeatedly considered that the fall in interest rates after the financial crisis should not be deemed an unexpected change of the circumstances under the legal regime set out in Article 437 of the Civil Code. This understanding has also been confirmed by the Supreme Court6 upholding the validity of the swap agreements at stake.

Secondly, some swap agreements have also been challenged on the ground of their alleged speculative nature. In this context, the counterparties of the banks invoked two different causes of nullity of the swap agreements: (1) the violation of public policy, which renders the agreement null under Article 280 of the Civil Code; and (2) the qualification of swap agreements as gaming and wagering agreements, which are considered null and void under Portuguese law.

The Supreme Court, in a decision of January 2015,7 considered that the agreements with a purely speculative nature (i.e., that do not cover any real risks) breach public policy and are therefore null under Article 280 of the Civil Code. In a previous decision of March 2013,8 the Lisbon Court of Appeal had considered that the risk covered by a swap agreement must be connected to one or several parallel financial transactions, otherwise it should be considered as a wagering agreement, which is null under Article 1245 of the Civil Code. However, subsequently, the Oporto Appeal Court, in a decision of October 2015,9 and the Supreme Court, in decisions of February 2015 and May 2016,10 have decided in the opposite direction and accepted that Portuguese law allows for agreements with an abstract nature (i.e., the swap agreements are valid and enforceable even if not connected to parallel financial transactions, being clearly and expressly considered in those decisions that the swap agreement does not violate public policy or constitute a wagering agreement).11

Thirdly, the nullity of the swap agreements has also been invoked before the courts based on error in negotio, and the invalidity of standard form agreements based on the lack of information that should be provided by the banks and other financial institutions under the legal regime of general contractual terms. However, this argument has not been generally upheld by superior courts.12 Nevertheless, in a very recent case,13 the Supreme Court decided that there was a breach of the information duties under the legal regime of general contractual clauses, and considered that the client was not properly informed of the precise terms of the swap or the associated risks.

The validity of the jurisdiction clauses contained in swap agreements has also been discussed before the Portuguese courts – see Section V, below.

ii Amendment of finance agreements

In recent years, there was some litigation before the Portuguese courts about the amendment of finance agreements. Several debtors have filed lawsuits against the banks in which it has been argued that the financial crisis should be considered as an unexpected change in the circumstances considered during the negotiation of the agreement, which, in turn, would require the amendment of such agreements.

However, Portuguese courts have generally rejected the consideration of the financial crisis as an unexpected change in circumstances and therefore dismissed this kind of claim.14

iii Disputes related to the mis-selling of investment products by banks

The number of disputes related to the breach of duties attributed to financial intermediaries also increased in Portugal because of the financial crisis. In fact, the market turmoil affected several investment products sold by banks to clients, which, in turn, raised questions about the role of banks acting as financial intermediaries.

In this context, numerous mis-selling claims have been started by clients against banks in the past few years and have, since then, been judged. In particular, the focus has been on the adequacy and completeness of the information provided by banks to clients. The approach of Portuguese courts to these cases has evolved over time.

Initially, Portuguese courts tended to be protective of clients, particularly when the investment product originated from entities that had some kind of relationship with the bank (which acted as a financial intermediary). In some cases, the courts have found the banks liable for damage caused to clients by investment products that were sold several years before the financial crisis, and that have only become problematic as a result of the crisis. This was the case in the Supreme Court decision of 10 January 2013,15 in which a bank was held liable for damages caused to a client by a debt security sold in 2001, at a time when the financial crisis was not expected.16

Portuguese courts have typically been keen to protect individual investors, notably when banks have breached their duty to provide investors with adequate and complete information about the products sold.

Nevertheless, in some cases the courts have used a more thorough analysis. For instance, in the decision of the Lisbon Court of Appeal of 28 April 2016,17 the court analysed a case in which the bank had informed a client that the bonds issued by an Icelandic bank and a Greek bank, which were later bailed out, were safe investments with guaranteed capital returns. The court decided that there was no mis-selling by the financial intermediary, as the market perception about the bonds in question before the financial crisis was that they were safe products, similar to bank deposits. Therefore, considering that the financial crisis was not likely to be anticipated at that time, the court understood that the information provided by the bank to the client was appropriate and adequate. In another case, the Coimbra Court of Appeal18 decided that the conduct of a bank that presented to a client (with a conservative risk profile, without knowledge or experience of the securities market), as a risk-free product, the bonds issued by Icelandic banks that at that time had positive investment grade ratings by Moody’s and Fitch, with Iceland sovereign bonds having an identical rating, was not unlawful.19

In any case, in the majority of the cases, the courts have been holding the financial intermediaries liable for the repayment of principal and interest payable under the same terms on which the issuers would be, if proved that the decision to subscribe to the financial product was based on misleading information provided by financial intermediaries’ officials regarding the financial product in question (e.g., no or low risk, lack of clarification on the characteristics of the financial product, aggressive sales techniques, etc.).20

Take, for instance, the most recent judgment on the matter – the decision of the Lisbon Court of Appeal of 22 February 2018.21 In this case, a bank’s official persuaded an individual client22 to invest his savings (in the amount of €100,000) in junior bonds, comparing their risk to that of a regular term deposit. By failing to provide the due gains to the client, the bank was held liable to repay the client the due principal amount applied, as well as interest accrued and guaranteed (€115,000).

The relevance that the resolution measures have assumed should also be noted – see Section II, below – in the context of these disputes. In fact, many proceedings have been recently decided (and terminated) by taking into account the effects of these regulatory acts of the Bank of Portugal (BOP), namely the power to establish the ‘perimeter’ among assets and liabilities to be transferred (or not) from the ‘bad bank’ to the ‘good bank’. This has been shown to be a very contentious issue, considering the impact that the non-transfer of a mis-selling liability poses to investors.

See the following decisions, for example:

  1. Lisbon Court of Appeal of 11 May 2017,23 according to which the applicants pleaded for contractual liability based on the breach by the ‘bad bank’ of its duties to inform and act loyally, alleging that they were informed that their investment corresponded to a term deposit, when, in fact, they were acquiring shares on a special purpose vehicle from Jersey;
  2. Lisbon Court of Appeal of 11 May 2017,24 in which the applicant alleged that it ended up investing in preferential shares, instead of a term deposit, as pretended; and
  3. Lisbon Court of Appeal of 7 March 2017,25 in which the applicants alleged that they were pressured to acquire a financial product, the details of which were not disclosed to them.

In all of the above-mentioned judgments, the court established that the referred liability had not been transferred to the ‘good bank’, based on a harmonised set of arguments: (1) the BOP holds the necessary legal powers to determine the transfer of all the assets and liabilities from the ‘bad bank’ to the ‘good bank’; (2) the analysis of the lawfulness of the transfer falls within the jurisdiction of the administrative courts; and (3) the legal regime of bank resolution, especially the scope of the transmission process, is not subject to any unconstitutionality.26


It comes as no surprise that the most significant recent legislative development in the field of banking law should be the implementation of the widely acknowledged Banking Recovery and Resolution Directive (Directive 2014/59/EU of the European Parliament and of the Council of 14 May) (BRRD). The implementation of the BRRD in Portugal was not a straightforward process. The first step towards the establishment of a national banking resolution framework took place in 2012 prior to the publication of the BRRD, as part of the 2011 financial assistance programme entered into with the European Commission, the European Central Bank and the International Monetary Fund.27 Two years later, in 2014, the government approved legislation implementing the BRRD a mere two days before the announcement of the resolution of Banco Espírito Santo (BES), one of the largest private banks in Portugal at the time. Full implementation of the BRRD followed in 2015.28

The BRRD was implemented mainly by amending the General Regime for Credit Institutions and Financial Companies (Decree-Law No. 298/92 of 31 December 1992) (RGICSF). The resolution mechanisms foreseen in the RGICSF and the conditions for their application are mostly in line with those established in the BRRD. The BOP, as the resolution authority, can apply a resolution measure provided that the following conditions are met:

  1. it has determined that the institution is at risk of, or in a situation of, insolvency (termed ‘failing or likely to fail’ in the BRRD);
  2. resource to alternative measures is not a viable option;
  3. the measure is necessary and proportional with a view to achieving the resolution objectives;29 and
  4. the winding up of the institution would not have achieved those objectives more successfully.30

The resolution tools set out in the RGICSF, as foreseen in the BRRD, are: (1) the sale of business tool; (2) the bridge institution tool; (3) the asset separation tool; and (4) the bail-in tool. Thus far, the bridge institution tool has been applied to BES, and the sale of business and asset separation tools to Banco Internacional do Funchal (Banif), a Portuguese bank to which a resolution measure was applied in December 2015.

One of the most relevant aspects as far as banking litigation is concerned, especially in Portugal and the BES resolution, is the separation of assets, rights and liabilities between the ‘bad bank’ and the ‘good bank’. According to the RGICSF, the BOP will select the assets, liabilities, off-balance sheet items and assets under management to be transferred from the bank under resolution to the bridge bank, which is a discretionary power (and includes the power to retransfer to the bank under resolution such assets31), subject to two main limitations. First, the total value of the liabilities transferred to the bridge institution cannot exceed that of the transferred rights.32 Second, pursuant to the RGICSF, the rights held by shareholders who owned more than 2 per cent of the bank’s share capital in the two-year period preceding the resolution, and held by members of the bank’s administration and supervision bodies, cannot be transferred to the bridge bank.33

In the wake of the BES resolution, the breach of the principle of equality of creditors is being invoked as a ground for challenging the resolution mechanism applied to BES before the courts, notably as shareholders and junior creditors were left in the ‘bad bank’.34 There has been also litigation connected with the BOP’s decision taken in December 2015 to transfer to BES senior bonds worth €2 billion35 and to ‘leave behind’ an €835 million liability arising from a facility agreement.36,37

Notwithstanding the asset separation, following the application of any resolution measure under the RGICSF no creditor or stakeholder can incur greater losses than those he or she would have incurred had the bank been wound up (the ‘no creditor worse off’ principle38). This is ensured through (1) carrying out an independent evaluation of the total value of the assets of the bank prior to the application of the resolution measure; and (2) the right to be compensated by the resolution fund for the losses, should the evaluation demonstrate a breach of the principle.39

Finally, the Portuguese banking resolution regime contains a specific provision governing the right of appeal of resolution decisions, which is aligned with Article 85, No. 3 of the BRRD. This provision specifies that the decisions of the BOP that apply resolution mechanisms, exercise resolution powers or appoint board members can be challenged under the general administrative procedural rules.40 It further states that if a ruling41 declares that a BOP decision is void, the BOP can oppose the enforcement of such ruling, following which compensation will be due to those affected by ruling not being enforced. As mentioned above, several actions were started before Portuguese administrative courts seeking the annulment of the BES resolution decision, but it may take some years before a decision is made.

Also noteworthy was the issuance of Decree-Law No. 74-A/2017 of 23 June 2017 on the credit contracts relating to immovable property, establishing the rules applicable to consumer credit when secured by mortgage or other rights over immovable property – which partially implements Directive 2014/17/EU of the European Parliament and of the Council of 4 February 2014. The law, which entered into force on 1 January 2018, foresees a set of rules concerning credit agreements, focusing on the protection of consumer rights and personal guarantors and thus foreseeing a set of duties encumbered on the creditor (duty to assist the consumer, under Article 14; duties to evaluate the debtor’s solvency, and the immovable properties’ value, under Article 16 et seq.; and the duty to adhere to alternative dispute resolution mechanisms). The breach of the provisions of the referred Decree-Law by creditors is punishable with fines amounting from €1,000 to €1.5 million.

Directive 2014/17/EU became fully implemented with Decree-Law No. 81-C/2017 of 7 July 2017 on the credit intermediary activity and the provision of advisory services in relation to credit agreements concluded with consumers. The Decree-Law establishes the need for intermediaries to apply for authorisation to perform their activity, under Article 11 et seq.; and technical and reputational requirements to perform their activity, under Articles 12, 13 and 14; among other provisions regulating the intermediary and consultancy activities. The breach of the provisions of the referred Decree-Law by creditors is punishable with fines amounting from €750 to €250,000.

Lastly, the approval of a series of new laws regarding information duties and compliance of the financial institutions should also be noted, namely: (1) Law No. 83/2017 of 18 August 2017, which establishes measures on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing, implementing the widely acknowledged Directive (EU) 2015/849 of the European Parliament and of the Council of 20 May 2015; (2) Law No. 89/2017 of 18 August 2017 on the beneficial owner regime and registry, implementing Chapter III of Directive (EU) 2015/849; (3) Law No. 30/2017 of 30 May 2017, on the freezing and confiscation of instrumentalities and proceeds of crime in the implementing Directive 2014/42/EU of the European Parliament and of the Council of 3 April 2014; and (4) Law No. 109/2017 of 24 November 2017, implementing the 45th amendment to the RGICSF on conflicts of interests and reputation.


The Code of Civil Procedure sets forth a wide range of interim relief measures in order to ensure the effectiveness of the final decision adopted by the court. In general, the court may order an interim relief measure if a party suffers serious damage that is the result of a threat to the effectiveness of its rights, and that is difficult to repair.

Interim relief measures may be statutory or non-statutory. Statutory measures are specified in the Code of Civil Procedure – for example, freezing orders, provisional restoration of the possession of assets and suspension of corporate bodies’ decisions. Non-statutory measures may consist of any type of measure aimed at securing the effectiveness of the affected right.

In order to apply for an interim relief measure, a party must submit a request to the court either in the course of an ongoing judicial lawsuit or in advance of commencing the main proceedings. The interim relief measure is therefore generally linked to main proceedings. According to the Civil Procedure Code, the court may, under certain circumstances, turn the interim relief measure into a final decision, in which case the defendant will have the burden of initiating a new lawsuit in order to challenge said measure.

Under the Portuguese general civil regime, the judicial seizure of an asset depends, in principle, on proof by the creditor of the just fear of loss of its patrimonial guarantee. However, under the Portuguese legal framework of financial leasing,42 a special regime is foreseen, where the lessor is entitled to request the court to provide a protective measure consisting in the immediate and direct delivery of the leased asset to the lessor, in cases where, after the term of the lease agreement or its breach, the lessee does not proceed with the voluntary restitution of the asset to the lessor. In these situations, the financial lessor must previously request the cancellation of the lease registration, and, in the request addressed to the court, provide brief evidence of the term or breach of the lease agreement and of the situation of non-restitution of the asset.43

On 18 January 2017, Regulation (EU) No. 655/2014 of the European Parliament and of the Council of 15 May 2014 (the Regulation) entered into force establishing a European Account Preservation Order (EAPO) procedure to facilitate cross-border debt recovery in civil and commercial matters. The Regulation creates a European procedure as an alternative to national procedures, which will only be applicable in cross-border cases. This procedure enables a creditor to obtain an EAPO that prevents the subsequent enforcement of the creditor’s claim from being jeopardised through the transfer or withdrawal of funds up to the amount specified in the EAPO that are held by the debtor or on his or her behalf in a bank account maintained in a Member State.

In order to obtain an EAPO, the creditor has to submit sufficient evidence to satisfy the court that there is an urgent need for a protective measure in the form of a preservation order because there is a real risk that, without such a measure, the subsequent enforcement of the creditor’s claim against the debtor will be impeded or made substantially more difficult. Where the creditor has not yet obtained a judgment in a Member State, or court settlement or an authentic instrument requiring the debtor to pay the creditor’s claim, the creditor shall also submit sufficient evidence to satisfy the court that he or she is likely to succeed on the substance of his or her claim against the debtor.

This is an ex parte procedure, which means that the debtor shall not be notified of the application for a preservation order or be heard prior to the issuing of the order. Before issuing a preservation order in a case where the creditor has not yet obtained a judgment, court settlement or authentic instrument, the court shall require the creditor to provide security for an amount sufficient to prevent abuse of the procedure and to ensure compensation for any damage suffered by the debtor as a result of the order to the extent that the creditor is liable for such damage (by way of exception, the court may dispense with the provision of security if it considers it inappropriate in the circumstances of the case).

Where the creditor has already obtained an enforceable judgment, court settlement or authentic instrument, the creditor may ask for information on whether the debtor holds one or more accounts in a specific Member State before a preservation order is issued, from the designated information authority of the Member State in which the creditor believes that the debtor holds an account.

Banks have an obligation to declare whether and to what extent the order has led to the preservation of any funds of the debtor. Creditors have an obligation to ensure the release of any funds preserved that exceed the amount specified in the order.


With regard to attorney–client privilege, confidentiality must be maintained in respect of facts of which a lawyer (a member of the Portuguese Bar Association) becomes aware during the course and as a result of the practice of his or her legal profession, pursuant to the Portuguese Bar Association Professional Conduct Rules. The determining factor is not whether a certain document is in itself privileged, but that lawyers in Portugal are under a duty not to disclose confidential information.

In addition, this privilege is non-waivable by the client, meaning that, even if the client releases the lawyer from the privilege obligations, the lawyer will still be bound to those obligations.

The form of the information does not matter – as long as the information itself is privileged, the ‘document’ will be privileged. However, a lawyer in Portugal may disclose privileged information to the extent that it is absolutely necessary to preserve the lawyer’s or the client’s reputation, legal rights and legitimate interests, and provided that prior authorisation is obtained from the relevant entities of the Bar Association.

Information disclosed in the context of a dispute in contravention to attorney–client privilege rules cannot be taken into consideration by the courts for the purposes of issuing a final decision.

Privilege, as set out by Portuguese law, applies to all lawyers registered with the Portuguese Bar Association in the practice of their profession, both in Portugal and abroad. Likewise, the aforementioned rules also apply to EU lawyers who practise their profession in Portuguese territory, as long as they are members of a foreign bar association.

Foreign lawyers exercising their profession in foreign territories are not bound by Portuguese law provisions on privilege. However, if a document is produced by a foreign lawyer in a foreign territory at the request of a Portuguese lawyer, Portuguese provisions on privilege will apply. The doctrine of privilege is respected and applied in Portugal. However, where a judge wants a lawyer to testify in criminal proceedings, the Portuguese Bar Association must present a written opinion beforehand regarding privilege issues. In relation to criminal and other investigations carried out by regulatory authorities, the investigative bodies generally require judicial authorisation before searching premises and seizing documents. When the search is carried out in a lawyer’s office, it must be led by the judge, and the presence of a Portuguese Bar Association member is always required. They may interview lawyers and request disclosure of information or documents relevant to the inquiry.

A breach of attorney–client privilege is a very serious offence. Not only can it constitute grounds for a lawyer to be disbarred from the Portuguese Bar Association, which would mean being prohibited from practising in Portugal, but it can also give rise to criminal charges.


The issue related to the validity of the jurisdiction clauses and choice of law – usually English jurisdiction and English law – in swap agreements was one of the most disputed and publicised issues brought before the Portuguese courts recently.

Most of the swaps agreements entered into with state-owned companies, and some of those entered into by private parties, were subject to English law and jurisdiction – normally because of the fact that they were made with reference to the 1992 International Swaps and Derivatives Association (ISDA) Master Agreement (Multicurrency Cross-Border form). It is possible to identify two different kinds of issue: the issue brought before the Portuguese courts and related to the choice of jurisdiction, and the issue brought before the foreign courts and related to the choice of law.

The validity of jurisdiction clauses included in swap agreements has been broadly discussed by the Portuguese courts. It is invoked by the aggrieved parties – considering the argument of the banks that the Portuguese courts do not have jurisdiction in the disputes involving swaps agreements under which a foreign jurisdiction was chosen – that the swap agreements are subject to the legal regime of the general contractual clauses, under which the choice of foreign jurisdiction would be invalid as it would cause serious inconvenience to one of the parties.

This argument was upheld once by the Lisbon Court of Appeal in a decision of 10 April 2014,44 which considered the jurisdiction clause invalid and deemed that the Portuguese courts had jurisdiction to settle the case. However, this decision was overruled by the Supreme Court,45 which has established that the validity of a clause whereby the courts of a Member State are granted the jurisdiction to settle a case should be analysed pursuant to the provisions of Article 23 of the Council Regulation (EC) No. 44/2001 of 22 December 2000 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters, and not pursuant to Portuguese local law. This understanding was confirmed in other decisions.46

Further, there is a widely covered dispute that took place in the English courts between a Portuguese bank (which is part of a Spanish financial group) and several Portuguese state-owned companies in connection with several swap agreements (Banco Santander Totta v. Companhia de Carris de Ferro de Lisboa [2016] EWCA Civ 1267). Although such swap agreements indicated English law as the applicable law, it was argued by the Portuguese companies that Article 3(3) of the Rome Convention 1980 on contractual obligations applied so as to provide them with defences under certain rules of Portuguese law, considering that the Portuguese legal regime of gaming and wagering, and unexpected changes in the circumstances, should be applied, despite the parties’ choice of English law. The Portuguese companies pointed to the fact that the parties were all Portuguese and that all swaps were negotiated and concluded, and ought to be performed in Portugal. However, these arguments were not upheld by the first instance or the appeal courts of England, which considered that the Portuguese legal regime should not be applied since there were a number of elements relevant to the situation that pointed away from Portugal. In particular:

  1. the fact that the terms of the swaps allowed for substitution of a non-Portuguese bank in the Portuguese bank’s place, coupled with the long-term nature of the swaps – the parties specifically envisaged the possibility of a non-Portuguese bank performing under the swaps at some point;
  2. the use of documentation (in the form of the 1992 Multicurrency Cross-border ISDA Master Agreement) specific to the international capital markets, coupled with the fact that the swaps were expressed and confirmed in English;
  3. the participation of a Spanish group entity, as a matter of practical necessity, in approving the swaps and providing pricing and other technical support to the Portuguese bank;
  4.  the fact that the swaps were concluded in an international market for over-the-counter derivatives where international banks competed for business; and
  5. the fact that the Portuguese bank entered into back-to-back hedging contracts with a Spanish group entity in circumstances where such arrangements were routine.


As examined in this chapter, banking litigation in Portugal in recent years has been considerably influenced by the financial crisis. In this context, swap agreements and the mis-selling of investment products by banks shall be highlighted as an important source of litigation involving banks. We believe that this trend will continue in the coming years.

It is important to note that the fall of BES in August 2014 and of Banif in December 2015 has generated numerous disputes, most of which are still pending in the first instance courts. We firmly believe that the core of banking litigation in Portugal in the coming years will be determined by such disputes.

The types of disputes already generated, or yet to be generated, by BES’s and Banif’s cases are varied:

  1. there is a significant number of mis-selling disputes, since both the banks in question used their network of clients to place investment products issued by their holding companies, which are currently bankrupt;
  2. there are several lawsuits aimed at challenging the resolution measures applied by the BOP to both banks. Naturally, there is great expectation by the market players and most of Portuguese society as to the outcome of these lawsuits; and
  3. the asset-separation criteria used by the BOP are also in the spotlight and there are several lawsuits, with significant amounts at stake, where such criteria are being discussed, particularly in cases where the BOP has decided that debts held by banks to which a resolution measure was applied should stay with the ‘bad banks’.

We also envisage that there will be litigation in relation to the liability of directors, senior managers and auditors of the banks that have been subject to a resolution measure.

Finally, another source of potential litigation in the coming years will be the nature and qualification of credits held by banks over insolvent companies, particularly in cases where the bank’s role in these companies was not limited to that of a finance partner, but was also to have a substantive controlling influence on the activity of those companies.

1 Nuno Ferreira Lousa is a partner and Manuel de Abreu Castelo Branco is a managing associate at Linklaters LLP. The authors would like to thank Francisco Amaral for his important contribution to this chapter.

2 Article 437, Paragraph 1 of the Portuguese Civil Code states that, ‘If the circumstances on which the parties based their decision to contract change unexpectedly, the injured party has the right to terminate the contract, or to alter it according to fair judgement, as long as the requirement of the obligations which it assumed seriously affects the principles of good faith and is not covered by the actual risks inherent in the contract.’

3 Decision of the Supreme Court of Justice of 10 October 2013 (proceedings No. 1387/11.5TBBCL.G1.S1).

4 Decision of the Guimarães Court of Appeal of 31 January 2013 (proceedings No. 1387/11.5TBBCL.G1); decision of the Lisbon Court of Appeal of 8 May 2014 (proceedings No. 531/11.7TVLSB.L1-8).

5 Namely, the decisions of the Lisbon Court of Appeal of 15 January 2015 (proceedings No. 876/12.9TVLSB.L1-6), 2 July 2015 (proceedings No. 2118-10.2TVLSB.L1.-2) and 10 May 2016 (proceedings No. 1246/14.0T8PDL.L1-7).

6 Decisions of the Supreme Court of Justice of 26 January 2016 (proceedings No. 876/12.9TVLSB.L1.S1), 22 June 2017 (proceedings No. 540/11.6TVLSB.L2.S1) and 8 June 2017 (proceedings No. 2118/10.2TVLSB.L1.S1).

7 Decision of the Supreme Court of Justice of 29 January 2015 (proceedings No. 531/11.7TVLSB.L1.S1).

8 Decision of the Lisbon Court of Appeal of 21 March 2013 (proceedings No. 2587/10.0 TVLSB.L1-6).

9 Decision of the Oporto Court of Appeal of 28 October 2015 (proceedings No. 27/14.5TVPRT.P1).

10 Decisions of the Supreme Court of Justice of 11 February 2015 (proceedings No. 309/11.8TVLSB.L1.S1) and 3 May 2016 (proceedings No. 27/14.5TVPRT.P1.S1).

11 Decision of the Supreme Court of Justice of 22 June 2017 (proceedings No. 540/11.6TVLSB.L2.S1)

12 Decisions of the Lisbon Court of Appeal of 2 July 2015 (proceedings No. 2118-10.2TVLSB.L1.-2) and 27 September 2016 (proceedings No. 1961/13.5TVLSB.L1-1); decisions of the Supreme Court of Justice of 16 June 2015 (proceedings No. 1880/10.7TVLSB.L1.S1) and 8 June 2017 (proceedings No. 2118/10.2TVLSB.L1.S1); and decision of the Guimarães Court of Appeal of 25 January 2018 (proceedings No. 1122/14.6TBBRG.G1).

13 Decision of the Supreme Court of Justice of 4 April 2017 (proceedings No. 1961/13.5TVLSB.L1.S1).

14 Decisions of the Supreme Court of Justice of 10 January 2013 (proceedings No. 187/10.4TVLSB.L2.S1) and 27 January 2015 (proceedings No. 876/12.9TBBNV-A.L1.S1) and decision of Oporto Court of Appeal of 6 June 2016 (proceedings No. 4463/14.9TBVNG-A.P1).

15 Proceedings No. 89/10.4TVPRT.P1.S1.

16 This decision prompted an important dissenting opinion statement by one of the judges (Counselling Judge Abrantes Geraldes) that was followed with other decisions of the Supreme Court and Courts of Appeal. According to this statement, the decision of the Supreme Court was wrong because, among other reasons, it did not establish a sufficient connection between the breach by the bank of its financial intermediary duties and the damages caused by the investment product as a consequence of the financial crisis.

17 Proceedings No. 428-12.3TCFUN.L1-6.

18 Decision of the Coimbra Court of Appeal of 15 December 2016 (proceedings No. 377/12.5TVPRT.C2).

19 This kind of discussion will continue, especially as a result of the financial crisis that led to the application of the resolution measure to Banco Espírito Santo in August 2014.

20 Decision of the Oporto Court of Appeal of 30 May 2017 (proceedings No. 588/11.0TVPRT.P1) and decision of the Coimbra Court of Appeal of 16 January 2018 (proceedings No. 3906/10.1T8VIS.C1).

21 Proceedings No. 20742/16.

22 The court emphasised the fact that the bank’s official knew that the client possessed no particular qualification to understand the various forms of financial products was relevant.

23 Proceedings No. 31411/15.6T8LSB.L1-8.

24 Proceedings No. 2471/16.4T8LSB-2.

25 Proceedings No. 48/16.3T8LSB-L1-7.

26 The resolution measures have, thus, been challenged on several grounds, namely based on several rights foreseen in the Portuguese Constitution (CRP): (1) ownership rights under Article 62 of the CRP; (2) principle of equality, under Article 13 of the CRP; (3) principle of proportionality; and (4) confidence protection, among others – all of which have been continuously rejected by the high courts.

27 See MOU available on http://ec.europa.eu/economy_finance/eu_borrower/mou/2011-05-18-mou-portugal_en.pdf, p. 7 and Decree-Law No. 31-A/2012 of 31 March 2012.

28 Decree-Laws Nos. 114-A/2014 of 1 August 2014 and 114-B/2014 of 4 August 2014; and Law No. 23-A/2015 of 31 March 2015.

29 Such objectives are, pursuant to Article 145-C of the RGICSF, to ensure continuity of essential financial services; to avoid serious adverse effects on financial stability; to protect taxpayers and public funds; to protect depositors covered by Directive 2014/49/EU and investors covered by Directive 97/9/EC; and to protect client funds and client assets held by financial institutions.

30 Article 145-E, Paragraphs 2 and 145-C RGICSF.

31 Article 145-Q, Paragraph 4, sub-paragraph c) RGICSF.

32 Article 145-Q, Paragraph 7 RGICSF.

33 Article 145-Q, Paragraph 3 RGICSF.

34 See http://observador.pt/2014/11/04/tribunal-ja-tem-tres-pedidos-para-anular-divisao-bes-em-dois.

35 See the BOP’s resolution available on www.bportugal.pt/en-US/OBancoeoEurosistema/Esclarecimentospublicos/Documents/Deliberation20151229_retransfer.pdf and www.publico.pt/2017/04/03/economia/noticia/blackrock-quer-impugnar-venda-do-novo-banco-1767553.

36 See the BOP’s resolution available on www.bportugal.pt/en-US/OBancoeoEurosistema/Esclarecimentospublicos/Documents/Deliberation20151229_Perimeter.pdf and www.jornaldenegocios.pt/empresas/banca---financas/detalhe/grupo_de_investidores_da_oak_intenta_accao_contra_novo_banco_nos_tribunais_ingleses.

37 Although not focused on as much by the media, litigation has also been commenced on the same issues in relation to the resolution measure applied to Banif.

38 Article 145-D, Paragraph 1, sub-paragraph c) RGICSF.

39 Article 145-H RGICSF.

40 Article 145-AR RGICSF.

41 Article 145-AR, Paragraph 3 RGICSF.

42 Decree-Law No. 149/95 of 24 June 1995, as amended.

43 A similar regime is applicable, under the terms of the Code of Civil Procedure, where the purchase price of an asset is due in full or in part. In these cases, the creditor can obtain the judicial seizure of the asset, without having to prove the just fear of loss of its patrimonial guarantee. However, in these situations, the asset stays under judicial protection and is not delivered directly to the creditor, as is the case in the financial leasing regime.

44 Proceedings No. 877/127TVLSB.L1-1.

45 Decision of the Supreme Court of Justice of 11 February 2015 (proceedings No. 877/12.7TVLSB.L1-A.S1).

46 Decisions of the Supreme Court of Justice of 8 September 2015 (proceedings No. 542/14.0TVLSB-1), 26 January 2016 (proceedings No. 540/14.4TVLSB.S1), 4 February 2016 (proceedings No. 536/14.6TVLSB.L1.S1), 17 March 2016 (proceedings No. 588/13.6TVPRT.P1.S1) and 21 April 2016 (proceedings No. 538/14.2TVLSB.L1.S1).