Pathological arbitration clauses, good faith and the protection of legitimate expectations

Abstract

This article examines a recent case decided by the Portuguese courts that dealt with the issue of ‘pathological’ arbitration clauses, the legal mechanisms to construct such clauses, and the relevance of the principle of good faith in arbitration. In this respect, this article endeavours to frame those topics within the context of prior decisions that have been taken by the arbitral tribunal. It also addresses the question of whether the standards of good faith generally applicable to arbitrators are extendable to arbitral institutions when managing arbitration cases. In this context, this article also addresses the significance of institutional arbitration rules that set forth good faith as generally applicable to all participants in arbitration proceedings. Such is the case of the recent London Court of International Arbitration (LCIA) Rules. LCIA (London Court of International Arbitration) Arbitration Rules (2014)Portuguese Arbitration Act (2011) [ Lei no 63/2011 de 14 de Dezembro ]ACL (Arbitration Centre of the Portuguese Chamber of Commerce and Industry-Lisbon) Arbitration Rules (2008)Portuguese Civil Code (1966) [ Decreto-Lei no 47344/66, de 25 de Novembro (Codigo Civil) ]Portuguese Arbitration Act (1986) [ Lei no 31/86, de 29 de Agosto (Arbitragem voluntaria) ] “A” and “B” v “F” – Comercio de Automoveis, S.A. and ors , Case No. 659/13.9YRLSB-2, Lisbon Court of Appeal, Judgment (2013)