Class actions

Class actions are now an unavoidable hot topic in the legal and media landscape. The right to class action has been enshrined in the Constitution of the Portuguese Republic since 1976 and regulated by our law since 1995. Only very recently has this figure begun to grow in quantity, complexity and media coverage, culminating in very significant compensation claims from an economic point of view, allegedly in favor of the diffuse or collective interests of the citizens represented in the action.

Many factors justify this development: the most recent financial crises, the emergence of new players in the Portuguese market (including new consumer associations, the specialization of law firms and the involvement of international financiers), but also the emergence of an increasingly regulated market, particularly in matters related to competition law, the environment (including ESG) and, in general, consumer protection.  In this context, the transposition of Directive (EU) 2020/1828 of the European Parliament and of the Council, of June 5, is particularly relevant. This directive regulated and transferred to the Competition Court jurisdiction overcompensation for infringements of competition law (Law no. 23/2018, of June 5, also known as the Private Enforcement Law) and the transposition of Directive (EU) 2020/1828 of the European Parliament and of the Council, of November 25, which specifically regulates collective actions for the protection of consumer interests (Decree-Law no. 114-A/2023, of December 5).

These legal actions are distinct by the broad legitimacy for bringing them and by the breadth of its effects. They allow for, in theory, the defense of interests of a certain collectivity, such as public health, the environment, quality of life, consumer protection, competition law, cultural heritage and the public domain, even by those who do not have a personal and direct interest in the action, and without requiring the presentation of a power of attorney for this purpose. The court decision binds all the holders of the interests at stake in the action, even without intervention in or even knowledge of the action.

For potentially affected companies, class actions are an increasing risk, not least because of the following specificities of the Portuguese legal system, which tend to benefit the plaintiffs and create fertile ground for class actions for damages:

1. There is no autonomous phase for certifying the class represented in the action.
2. An opt-out system is in force in Portugal, in which all the holders of the interests in question are considered, by default, to be represented in the action, unless they have opted out.
3. No costs are payable for bringing this type of action, except in cases where the claim is manifestly unfounded. Since the aim of the law is to facilitate access to justice for the defense of this type of interest, the characteristics of the Portuguese system naturally give greater shelter, in contrast to other jurisdictions, to a potential abuse of the right of class action, reflected in the filing of actions with underlying economic interests other than those of the citizens allegedly affected and represented in the action and the filing of perhaps inappropriate claims (given the exemption from paying costs) against the defendant companies, with natural repercussions on their reputation, normal functioning and even their economic and financial situation.

How can we help?

Morais Leitão's litigation team has unique experience in the area of class actions. For several years now, we have been overseeing high-profile lawsuits in a variety of sectors. Our full-service experience, working in all areas of law and accompanying clients in all sectors of activity, gives us in-depth knowledge of their characteristics and idiosyncrasies, with a pragmatic response that is attentive to the strategic needs of each client, and through a complete, integrated, and transversal advisory service.

Fully aware of the financial, commercial, reputational, and even media impact of these actions, we support our clients from the outset in identifying and mitigating situations that could lead to the filing of this type of action. We subsequently assess, anticipate, and manage the threats in their various aspects (legal, economic, reputational, media, etc.) and develop, together with the clients, effective strategies that respond to the subtleties of each process and the interests of each company. We are particularly sensitive to risk assessment, presenting complete scenarios that allow for informed decision-making.

In the current legislative and social context, it is expected that there will be an increase in this type of action, which is why it is essential to invest in preventing it and reacting quickly and robustly at all levels.