COVID-19: Exceptional measures in the area of Justice introduced by the PEES in Portugal

According to the Council of Ministers Resolution, published in the State Gazette (Diário da República) on June 6, 2020, with the most critical stage of the public health emergency having been overcome, we are now entering a stabilization stage, which will last until the end of this year and will involve the adoption of exceptional measures for helping families and companies to overcome any difficulties caused by the pandemic, and supporting the sustained recovery of business activity.

In order to embody these economic and social stabilization measures, the PEES establishes various changes of an institutional nature, especially in order to simplify and facilitate court actions in any aspect necessary to try and mitigate the effects of the pandemic and speed up economic recovery.

This Alert explains the most relevant measures established under the PEES for the area of Justice.

I. Transitional regime for reducing Court fees

An exceptional regime is established for reducing Court fees, with a view to encouraging the parties to bring an end to the proceedings, through agreements, settlements or simple withdrawals.

II. Reinforcing Commercial and Labor Courts

Anticipating an increase in demand for the economic and social justice service, the staff of the court clerks and judges of the Commercial and Labor Courts are to be reinforced.

III. Public System for Supporting Conciliation on Over-Indebtedness (Sistema Público de Apoio à Conciliação no Sobre-endividamento) (SISPACSE)

The creation is envisaged of an alternative dispute resolution procedure open to individuals who are in serious difficulties as regards the fulfillment of monetary obligations assumed. Through the use of a conciliator, the idea is to encourage the creation of a pre-judicial negotiation space between the adhering debtor and creditors, in order to prevent the use of credit protection measures through the courts.

The PEES establishes that this should be a voluntary low-cost system for the debtor, with the added advantage of the creditor obtaining an enforceable title.

IV. Increase in the efficiency of the administrative and tax courts

Specification of the specialization of the administrative and tax courts, reinforcing the efficiency and agility of this area.

Improvement of the electronic processing of tax and administrative proceedings, with a view to introducing mechanisms making tax and administrative court proceedings faster and more transparent.

V. Insolvency and Company Recovery Procedures

1. Extraordinary procedure for the viability of companies

The creation of a new extraordinary company viability procedure (processo extraordinário de viabilização de empresa) (PEVE), exceptionally and temporarily, that can be used by any company which, not having any special revitalization procedure pending, is in a position of economic difficulty or imminent or current insolvency due to the economic crisis caused by the COVID-19 pandemic, provided the company shows it is still subject to becoming viable.

This procedure, aimed at the judicial approval of an agreement reached out of court between the company and its creditors, is classified as urgent, assuming priority over the processing and judging of proceedings of a similar nature.

2. Mandatory partial distributions in insolvency proceedings

Assuming as a premise that it is essential for the State (which safeguards significant sums of money in insolvency proceedings) to allow these to be distributed to the creditors as soon as possible, injecting liquidity into the economy, the PEES establishes that it is mandatory for partial distributions to be made in all pending insolvency proceedings in which there are liquidation proceeds equal to or greater than €10,000, the ownership of which is not disputed.

3. Payment installment plans

For companies in insolvency, in any special revitalization procedure (Processo Especial de Revitalização) (PER) or out-of-court business recovery regime (Regime Extrajudicial de Recuperação de Empresas) (RERE), with an approved plan to then be fulfilled, the PEES establishes:

1. Including in any business recovery plans in progress, subject to the same conditions (without requiring any additional guarantees, and with the possibility of payment up to the maximum limit of installments missing from the plan approved), any tax debts and social security payments the taxable event of which has occurred or will occur between March 9 and June 30, 2020;
2. Allowing, in the same situations, should the payment installment plan in progress end before December 30, the number of installments applicable to new debts to be extended until such date.