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Portugal's judicial system not fit for purpose

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Despite being about to be entrusted with billions of EU funds, serious questions are being asked of Portugal, with the country's judicial system alone being branded “not fit for purpose”.

That is one of the messages to emerge from an online conference about whether effective oversight can hasten realistic reform.

The conference on Tuesday (25 May) heard that €45 billion will be allocated to Portugal over the next few years from the EU’s Next Generation fund.

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The fund is meant to help all EU member states, including Portugal, recover economically from the crippling pandemic.

But, the conference was told, question marks still hang over Portugal’s credentials to receive such funding, not least as the EU has repeatedly highlighted the need for judicial reform in Portugal.

Participants heard that the Commission can, if it suspects recipient governments of corruption or foul play, block disbursements of EU money, including from the Recovery and Resilience Facility (RRF), the official name for the coronavirus funding.

Despite its economic recovery in recent years, concerns about infringements of the rule of law in Portugal have gathered pace, not least following the collapse of Banco Espírito Santo in 2014.

Stories of mismanagement and litigation surrounding Novo Banco have blighted the image of Portugal as a place to do business.

All this comes at a time when Portugal is very much in the spotlight with it holding the rotating EU presidency.

The event, called 'Recovery and Resilience Facility: Can effective oversight bring about true reform?,' featured a range of speakers, including Ana Costillas, from Recover Portugal,  a group of European financial institutions holding Novo Banco bonds.

They invested in the reform and recovery of the Portuguese economy, which has led some to describe it as a "poster boy" of reform and are taking action against the  retransfer of Novo Banco notes in 2015.

Each member state must submit its own  RRF plan to the EU for its approval and Costillas, in an opening statement, noted that prior to the Portuguese plan being accepted by the European Comission the executive needs to ask Portugal to solve the BES/ Novo Banco case.

She said the European Parliament, Court of Auditors (ECA) and European Public Prosector’s Office (EPPO) should also have substantial oversight roles in the disbursement of Portugal’s RRF funding.

The question of how the EU would enforce the rule of law as a condition of receiving RRF monies was posed to  Ivana Maletic, a member of Court of Auditors, who is responsible for the ECA opinion on the RRF regulation.

Maletic said that if a country does not follow fundamental Treaty obligations, then it is “fair and just that that member states does not benefit from the funds”.

If there is a rule of law problem there is the huge risk that the country will not use it in the proper way, legal or regular way.

The official said the EU also had, at the same time, to be cautious not to block the implementation of funds, adding: “We have to strike the right balance between what we want to achieve and conditions”.

“The rule of law is also connected to the judicial system. Some reforms will take a long time, and are ongoing, but we expect to see change in a positive sense.”

Costillas, even so, said that the rule of law and independence of the justice system was paramount, adding: “We’ve been suffering from a highly-politicised judicial system in Portugal”.

In the case of Portugal, she pointed out that both the EPP and RE groups in the European parliament had complained about Portugal’s appointment of their EPPO national prosecutor, which raises concerns and “shows how politicised the system is”.

She told the conference: “Digitilization of the judicial system is great, but they need first to look into past cases that have been blocked for political reasons. This does not look good for the EU. Other institutions must put pressure on member states to solve these cases.”

The conference was timely as the Portuguese EU presidency will host a summit in June in Lisbon on the quality and efficiency  of modern public administrations in Europe.

The event heard that one part of the Recovery Fund finance will come from the Commission’s own borrowing. Another substantial part will come from financing on the international markets, through the purchase of EU bonds by private investors. The Commission, it was said, has encouraged member states to crowd in private investment to multiply the impact of the RRF.

Portugal has applied for grants worth more than 4% of its Gross Domestic Product, a staggering €45 billion over the next few years, from the EU’s Next Generation fund.

But the virtual debate this week comes amid a backdrop of continuing concern about the situation in Portugal and its suitability for and ability to manage such huge EU funding.

Portugal suffers of serious systemic problems in its administrative justice which are nationally known by the relevant authorities, including the administrative courts themselves.

The latest country-specific recommendations of 2019 and 2020 for Portugal are, among others, that it increases the efficiency of its administrative and tax courts. According to the latest EU Justice Scoreboard from 2017, Portugal is amongst the EU countries with the highest number of pending civil and commercial cases, with 12 cases per 100 inhabitants, against just two in France and six in Italy.

In recent years alternative means of dispute resolution, such as arbitration, have mushroomed due to the lack of reform and investment in the legal system.

The Portuguese government’s RRF plan – yet to be formally submitted to the EU - foresees €288 million of investment in “digital transition in justice”, with the aim of increasing the efficiency of the courts, especially the administrative and tax courts, including the development and modernisation of the technological and information infrastructure, the simplification and updating of services and training.

However, the conference  heard that, currently, there are no measures to address the speedy resolution of old proceedings, or administrative disputes,  and no solutions for the problems arising from the reassignment of cases and other structural problems identified.

Costillas said that for the EU to raise the €750b of debt in the financial markets to finance its Recovery and Resilience Fund at market prices, it must first demonstrate to international institutional investors that it will treat them fairly and equitably – first and foremost by resolving the BES / Novo Banco issue.

She asked: “Who is going to ensure that investors will be protected in national EU member state courts, now that intra-EU bilateral treatries have been terminated?

“What assurances can be given to investors that issues of grave concern at member state level in the judiciary will be resolved, prior to the issuing of any new bonds?”

Recover Portugal, the group she represents, is now pushing for satisfactory redress and has also called for member state reform, particularly of the judiciary, as a strict condition of receipt of EU Recovery Funds.

Respect for the rule of law in member states, particularly of political influence of the judiciary, is another demand.

The group also seeks redress for past investors. In the Portuguese example, this would apply to the Banco Espirito Santo and Novo Banco banking fiasco.

They also want reassurances for future investors  who, as the group points out, are part-funding the EU Recovery Fund.

Representing the commission, Luc Tholoniat, of DG  ECFIN, stressed at the conference that the delivery mode of the RRF money will be profoundly new at EU level, with disbursements “linked to results”.

So, it is all eyes now on Portugal – and the commission – to see if their fine words about reform and accountability will be backed up with firm action.

Costillas had a simple concluding message for the conference, saying Recover Portugal seeks “a clear commitment, a timeline and EU oversight”.

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Flawed governance culture still remains in Portugal

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Portugal is among all 27 member states receiving their share of the EU’s post- pandemic “pot of gold”, writes Colin Stevens.

Under the Recovery and Resilience Facility (RRF) Portugal will receive €13.9 billion in grants and €2.7bn.

That is the good news.

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But exactly what happens if Portugal (or any other member state) falls short of the tough spending criteria required by the RRF? How far can the Commission go in enuring the money is spent on real reform projects in Portugal?

On this, Portugal has been mentioned, but not singled out, by the European Commission.

Portugal, which has just passed on the EU presidency to Slovenia, has made great play of its so-called reforms but the reality of Portuguese politics, sadly, is a good deal more convoluted than its shiny “poster boy” image suggests.

In recent years, there have been assorted scandals and events which highlight a raft of issues ranging from corruption and reform of the judicial system to the banking system and how the government managed the coronavirus.

Other matters still to be addressed include the investment climate and the rule of law situation in Portugal.

Overall, the RRF will provide up to €672.5bn to support investments and reforms (in 2018 prices). This breaks down into €312.5bn in grants and €360bn in loans.

The first pre-financing payments to Portugal will start this month.

But, crucially, payments under the RRF will be linked to performance and this is where all eyes will be (among others) on Portugal.

The Commission will authorise disbursements based on the satisfactory fulfilment of a group of “milestones and targets” reflecting progress on reforms and investments of the Portuguese plan. Since disbursements can take place a maximum of twice a year, there cannot be more than two groups of milestones and targets per year.

The Commission will prepare an assessment within two months and ask its Economic and Financial Committee for its view on the satisfactory fulfilment of the relevant Portuguese milestones and targets.

A Commission spokesman told this website: “Where one or more member state considers that there are serious deviations from the satisfactory fulfilment of the relevant milestones and targets of another member state, they may request that the President of the European Council refers the matter to the next European Council.”

But what happens if the milestones and targets associated with a payment request are not all met?

Well, if the Commission assesses that not all the milestones and targets associated with an instalment are satisfactorily met, it can make only a partial payment. The rest of the payment of the installment (whether loan or grant) will be suspended.

The member state in question can continue with the implementation of the rest of the plan.

After presenting its observations, the member state concerned then has six months to take the necessary measures to ensure the satisfactory fulfilment of the milestones and targets. If this has not been done within six months, the Commission can reduce the overall amount of the financial contribution.

For a payment to be made by the Commission, none of the previously met milestones or targets can be reversed.

In case milestones and targets are no longer achievable for objective circumstances, the Member State has the possibility to submit an amended plan to the Commission.

The European Parliament also has a role in all this and be asked to given an overview of the Commission's preliminary findings on the fulfilment of milestones and targets related to payment requests and disbursement decisions.

The key question for some is that the money is proven to be well spent.

So, in the case of Portugal, for instance, how will he EU's financial interests be protected?

Well, it will have to guarantee compliance with Union and national laws, including the effective prevention, detection and correction of conflict of interests, corruption and fraud, and avoidance of double funding.

Given Portugal’s relatively poor record in the disbursement of EU funds in the past, some question its capacity to handle such a huge pot of money now.

But the Commission has warned that it will carry out on-the-spot checks, covering all countries, including Portugal.

The Commission spokesman said: “Even if milestones and targets have been fulfilled, where the Commission finds serious irregularities (namely fraud, conflict of interest, corruption), double funding or a serious breach of obligations resulting from the financing agreements and the member states do not take timely and appropriate measures to correct such irregularities and recover the related funds, the Commission will recover a proportionate amount and/or, to the extent applicable, request an early repayment of the entire or part of the loan support.”

OLAF, the Court of Auditors, the European Public Prosecutors Office and the Commission itself may access relevant data and investigate the use of funds if necessary.

Portugal’s plan was the first to be approved by the commission and it is worth recalling how the Commission actually assessed Portugal's recovery and resilience plan.

Portugal had to meet no less than 11 criteria of whether:

  • Its RRF measures have a lasting impact;
  • the measures address the challenges identified in the country;
  • the milestones and targets which allow for monitoring the progress with the reforms and investments are clear and realistic;
  • the plans meet the 37% climate expenditure target and the 20% digital expenditure target;
  • the Portuguese plans respect the do no significant harm principle, and;
  • its plans provide an adequate control and audit mechanism and “set out the plausibility of the costing information”.

Portugal, importantly in its case, also had to show that is plan includes reforms that address long-lasting bottlenecks in the business environment (licensing and regulated professions) and that aim at modernising and increasing the efficiency of the judicial system.

Of course, the EU has part funded its massive recovery plan by borrowing on the financial markets.

Therefore, it (the EU) must also demonstrate to international institutional investors that it will treat them fairly and equitably.

A banking scandal in Portugal - the collapse of Banco Espirito Santo (BES), Portugal’s second largest bank in 2015 – suggests Lisbon will struggle to meet this particular demand.

The demise of BES has given rise to Recover Portugal, a group that represents a group of European financial institutions holding Novo Banco bonds. They invested in the reform and recovery of the Portuguese economy and are taking action against the illegal retransfer of Novo Banco notes in 2015.

This still unresolved case gives cause for real concerns among some international institutional investors about the risks of lending the EU €750bn to finance its RRF.

Portugal has also been hit by rule of law scandals and was criticised for its extremely contentious nomination by Lisbon for the position of the European Public Prosecutor’s Office (EPPO).

The Commission has also highlighted the slow pace of administrative and fiscal justice in Portugal, and has demanded reforms that the Portuguese government needs to take.

The harsh truth, clearly, is that a series of events in recent years suggest that, behind the reform headlines, a particularly flawed governance culture still remains in Portugal.

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Portugal to vaccinate 1.7 million in two weeks as COVID infections rise

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A medical worker receives the Pfizer-BioNTech coronavirus disease (COVID-19) vaccine at Santa Maria hospital in Lisbon, Portugal, December 28, 2020. REUTERS/Pedro Nunes/File Photo
A person wearing a protective mask walks in Lisbon downtown amid the coronavirus disease (COVID-19) pandemic, in Lisbon, Portugal, June 24, 2021. REUTERS/Pedro Nunes/File Photo

Portugal said on Saturday (3 July) it hoped to vaccinate a further 1.7 million people against COVID-19 over the next two weeks as authorities scramble to contain a surge in infections caused by the more contagious Delta variant, writes Catarina Demony, Reuters.

Cases in Portugal, a nation of just over 10 million, jumped by 2,605 on Saturday, the biggest increase since Feb. 13., taking the total cases since the pandemic began to 887,047.

New cases are being reported mostly among unvaccinated younger people so daily coronavirus deaths, currently in single digits, remain well below levels in February, when the country was still under lockdown after January's second wave.

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Portugal has fully vaccinated around 35% of its population, and those aged 18 to 29 can start booking vaccination appointments on Sunday.

In a statement, the vaccination taskforce said it would use all installed capacity to vaccinate 850,000 people per week over the next 14 days to "protect the population as fast as possible" due to the "rapid spread" of the Delta variant.

Around 70% of cases in Portugal are of the Delta variant, which was first identified in India but has led to a wave of new infections worldwide. The variant is sweeping across the country, with the Lisbon region and tourist magnet Algarve being the most affected.

The speed-up of the vaccination rollout could lead to longer queues outside vaccination centres, the taskforce said.

The national health institute, Ricardo Jorge, said in a report the variant was putting increasing pressure on the health system. More than 500 COVID-19 patients are in hospital.

A night-time curfew came into force on Friday evening in 45 municipalities including Lisbon, Porto and Albufeira, and restaurants and non-food shops must close earlier at the weekend in some areas. Read more.

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Tourism-reliant Portugal to quarantine unvaccinated Britons

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People arrive at Marinha beach during the COVID-19 pandemic in Albufeira, Portugal, June 4, 2021. REUTERS/Pedro Nunes/File Photo

British visitors to Portugal must quarantine for 14 days from Monday (28 June) if they are not fully vaccinated against COVID-19, the Portuguese government said, writes Catarina Demony.

The new rule, in place until at least 11 July, follows a surge in cases in Portugal to levels last seen in February, when it was under a strict lockdown. Positive cases have also risen in Britain but its vaccination roll-out has been faster.

Britons arriving by air, land or sea must show proof they are fully vaccinated or self-isolate for 14 days at home or at a place indicated by health authorities, the government said in a statement late on Sunday.

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A person is considered fully vaccinated 14 days after their second vaccine dose or the single-shot Johnson & Johnson vaccine. Passengers from Britain who have recovered from COVID-19 and received one dose will also be allowed in.

Britain is one of Portugal's biggest sources of foreign tourists but it removed Portugal from its own quarantine-free travel list earlier this month.

This means British holidaymakers must self-isolate for 10 days when they return home and also take expensive COVID-19 tests.

Lisbon's move came after Germany declared Portugal a "virus-variant zone" last week and German Chancellor Angela Merkel urged fellow EU leaders to take a firmer line on travel from countries outside the bloc, such as Britain. Read more.

Britain is not on the EU's "safe" list of non-EU countries from which it will allow non-essential travel, although fully vaccinated vistors may be able to come. At a meeting on Monday, Britain did not feature on the list of potential additions. Brunei may be added later this week.

Portuguese health authorities have blamed the rise in cases on the more contagious Delta variant, first identified in India.

It accounts for over 70% of cases in the Lisbon area and is spreading to other parts of the country, which has the EU's second highest seven-day rolling average of cases per capita, according to online publication Our World in Data. Read more.

Portugal opened its borders to British tourists in mid-May and let in thousands of English soccer fans for the Champions League final. Read more.

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