António de Macedo Vitorino

MVConversations with António Macedo de Vitorino

As Artificial Intelligence becomes less of a futuristic prediction and more of a realistic companion, one question keeps cropping up: Will the legal profession be taken over by machines?

With opinions on the subject ranging from alarmist to utter denial, a more realistic approach is finding the balance between embracing what Artificial Intelligence (AI) has to offer without jumping the gun, according to António Macedo de Vitorino. “I believe my generation is not in any danger, we’re talking about future-generation problems that are well beyond our current horizon.”

With every step we take, he explains, the landscape of course increases. But as AI systems relative to the legal market are still very much at their infancy, we are a very long way to achieving an AI that understands cultural, legal and linguistic nuances and achieving the same level of awareness and rationale as a human being.

We also need to be careful in how we define ‘AI’ itself, he says. “Are these new systems really AI or just algorithms? Yes, they facilitate research, collating and organising information, but do they learn and evolve yet? They are still heavily reliant on human input, so while they have the potential to streamline the provisions of legal services, the type of leaps forwards that many are talking about are still a long way off.”


So what does AI mean for lawyers, now and in the future?

AI is definitely making moves into taking away some of the routine ‘heavy lifting’ work, from due diligence to contract review, work that currently requires a large number of bodies and a great deal of time, says António Macedo de Vitorino. “In the systems I've looked at for law firms, they are not making near the same progress as you see in Google AI for example. It's still very mechanical key word search, key terms search, etc., and the end product is all about cutting down on admin, but nothing truly to do with legal work.”

One of the things that is having an effect on the way lawyers work is having systems that assist in bridging the language barrier and facilitating the internationalisation of transactions. “A great deal of work here at the firm is transnational, so we need documentation to be available in all the relevant languages,” he explains. “This is something that used to be an enormous undertaking for any law firm, due to the size of the documentation and the speed at which they are usually needed. You used to have huge teams working around the clock, but with the advent of automated translation systems, that work has been cut in half.”

While these automated systems are evolving at speed, and there is the potential in future for the end result to be near perfect, the AI is not yet so evolved as to be able to take into account the legal aspects of a translation, not just in terms of language but in understanding the legal systems and requirements of the respective country’s legal system. “This finite knowledge, interpretation and application is something that can only be provided by a human,” explains António Macedo de Vitorino. “Legal language is like mathematics, it is a language of precision, with fundamental differences in each country, as well as cultural considerations. Every word counts, and legally, an entire contract or transaction can be affected with the incorrect use of a word.”

So while these systems are a huge help in terms of cutting down some of the time-consuming work, they are far from having the necessary awareness to playing an interpretive or advisory role. “You need the involvement of lawyers at the end of the day, because human rationale is not something that can be based on algorithms. And we're only talking here about translating, a relatively simple concept, but even this shows how much margin there is for error.”


The business of ‘lawyering’

With the eventual evolution of AI systems, where we will see significant changes is in the actual role of the lawyer. “If we look at current due diligences, contract or evidence reviews, for example, we are talking large numbers of lawyers collating, reviewing and analysing huge amounts of documents,” says António Macedo de Vitorino. “What AI will eventually do is take care of all of that, so you will no longer need the same sort of lawyer that you need today.”

So what will be left for the lawyers? Ironically, as AI takes away much of the grunt and routine work, lawyers will be freed up to be able to concentrate again full-time on the business of ‘lawyering’, he explains. “We’ll see a return to the old days where lawyers truly acted as advisors and legal counsellors, solely helping clients in terms of interpretation, options, strategies and decision-making.”

As much routine work is usually carried out by very junior lawyers or paralegals, the way firms train their junior lawyers will also change, and we may even see the elimination of the role of paralegals. As a consequence we will see smaller teams, a concentration of talent and a streamlining of the legal process, says António Macedo de Vitorino. “It won’t be a question of getting as many lawyers involved as possible anymore, but a focus on concentrated teams of strategic advisors. That’s where AI will make the biggest impact.”

What may come as a surprise to law firms looking to invest in the AI systems of today is that they will have difficulty passing the costs of investment onto the client - the current AI offerings on the market come at a stiff price, he explains. “As with any new tech, when it comes out, people pay a fortune, but as it evolves it gets commoditised and the price drops.  We’re talking software licences, training, etc., of a very new technology. Clients know that five years down the line, as this technology becomes commoditised, it will also get much cheaper.”

So we are just entering the start of the AI evolution. There will come a time when AI will evolve in such a way as to be able to eliminate routine legal work, concludes António Macedo de Vitorino, and we will see lawyers return to a fulltime strategic and advisory role. “But until AI has achieved awareness and rationale at human level, you will always need the involvement of a human lawyer.”


Macedo Vitorino & Associados


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Cláudia Fernandes Martins

MVConversations with Cláudia Fernandes Martins

Collecting, reviewing and then acting up on it – what data actually means for businesses

The hot topic of data protection hit a high note in 2018 with countries and companies scrabbling to ensure proper implementation of the EU General Data Protection Regulation (GDPR). As EU and international businesses struggled to ensure they were in compliance, one big question emerged: how many businesses realised the power of what it was they were actually protecting? “For you to be able to realise the power of data,” says Cláudia Fernandes Martins, “you need to first realize what data actually means”.

Businesses know that data-driven decision-making can have multiple returns, including a better understanding of the circumstances at stake, assessment of alternative options, benchmarking, etc. But she points out that while businesses are very aware that they need to collect ‘data’ and understand it as a strategic asset, many struggle with how to process that into ‘insights’ or take the further step of using it to benefit their business. “This is likely explained by the fact that many do not have a solid governing structure enabling them to use/align data they collect along with their business requirements and goals.”

Younger generations are infinitely more prepared to ride this challenge. Businesses collect their data via a range of sources from mobile communications and smart phones, emails and IoT to YouTube videos, blogs and Skype. “These are tools that the younger generation has grown up with,” says Cláudia Fernandes Martins. “We definitely see a difference between the  understanding of Start Ups and young entrepreneurs versus traditional companies, for whom all this is still very new.”

Not just personal

Many see ‘data’ as just referencing ‘personal data’, but there is so much more, she says. “Business information is data, company secrets are data – businesses cannot lose focus of the wealth of data they have access to every day. While dominating the processing of personal data is an important starting point, businesses need to start investing in data and AI (artificial intelligence) tools to understand how to use all of the data they collect, interpret their insights and then act upon it. That’s where the true value of data is.”

The implementation of the GDPR has certainly brought to light the issue of ‘data protection’, but Cláudia Fernandes Martins finds that many Portuguese companies are still unclear on what actually constitutes ‘personal data’ and falling foul of compliance with the GDPR. “Large companies – retail, health, banks etc. – are in compliance, but there are many small to medium sized businesses that are not. They (or some of them) have implemented formal measures, but in practice there is still the risk that they are not applying them properly.”

In the summer of 2018, the Portuguese Data Protection Authority (CNPD) issued two fines totalling €400 million to the Hospital Barreiro following a data protection audit, for amongst others, failure to respect patient confidentiality and limit access to patient data. This raised fears among many public entities and businesses, she explains, as this will not be a unique case, with predictions for further fines in the near future, especially with new legislation coming into force in Portugal (probably in May 2019) implementing further parts of the GDPR.

Her main question from clients at present, is therefore how to implement the GDPR, which she tackles this with a three-step approach. First, reviewing the current status, then implementing measures, such as privacy policies, reviewing contracts etc, and finally, training, from the top-level down. The benefits of ensuring compliance are being able to make full use of any and all customer data collected, she adds. “This knowledge can enable businesses to better understand their customers, to satisfy their needs and to be able to provide the answers and solutions they require.”

The data evolution

From personal data to commercial and now through to AI, the evolution of data is constantly bringing new challenges. “Organizations will increasingly need to use a range of tools based on algorithms, data and AI – the so-called ADA-based technologies – to strengthen their business relationships with customers,” says Cláudia Fernandes Martins, “which brings with it new issues including about the level of transparency in the use of data algorithms and the responsibility for errors”.

Strategies need to be employed now to ensure not to get left behind. And there is no ‘one-size-fits-all’ approach she adds. “Using company-wide training is a starting point, as well as taking into account ethical core considerations, mainly focused on developing business culture and values and ingraining them through every level within the organization, from the most junior to Board level.”

Ethical core considerations were recently the subject of draft guidelines laid out by the EU High-Level Expert Group on AI - ‘Ethics Guidelines for Trustworthy AI’ – including transparency, non-discrimination and human agency and oversight. While there will be no obligations on companies to follow these, says Cláudia Fernandes Martins, these guidelines clearly show the key requirements that the EU will be monitoring going forwards.

The potential commercial value of data cannot, therefore, be underestimated and remaining in the dark is no longer an option. Data itself, regardless if personal or business, is just a collection of ‘facts’, she concludes. “Alone, they are worthless. To ensure that they take advantage of the data evolution, businesses need to understand that the power of data is only harnessed by reviewing and acting upon it.”

Macedo Vitorino & Associados

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João de Macedo Vitorino

MVConversations with João Macedo Vitorino 

Comparing Brexit to a corporate demerger highlights failings at both UK and EU level, and the consequences of delivering what the people ‘want’ rather than what they actually ‘need’. 

The first rule of a demerger is you do not enter into one without a demerger plan. This is your baseline and starting point. But it should also be the end point if no plan is submitted to the shareholders. If you compare Brexit to a corporate demerger, one of the major distinctions is how everything has been clouded by politics. The UK Government put their ‘demerger’ from the EU to a public vote without so much as a plan in place nor any kind of detailed informative packet circulated to give the people the facts upon which to base their decision. 

“This is where Brexit has inverted the entire logic of a demerger,” explains João Macedo Vitorino. “There was no plan, and no scenarios given that truly outlined the costs of a ‘demerger’. The shareholders of one side (the UK people) were asked ‘stay or leave’ but they weren’t told what either actually meant. It has only been after the vote that all this has come to light, the Irish backstop being a classic example.” If leaving is possible scenario for every EU country, he adds, then the EU regulators should have in place a demerger plan for those countries that choose to opt-out of the EU. The EU treaties should also have a full chapter dedicated to this, instead of taking for granted that being an EU member is such a privilege that no one will ever want to leave. 


Informative Voting 

In a demerger, the shareholders have a right to information, a right to understand what each scenario involves so as to be able to make an informed decision. The UK Government should have made all this information accessible, as should the EU. Without this, in the strict sense, they are in breach of the minimum requirements for a corporate resolution and so any resolution voted upon should be nullified, he explains. And this has been a failing of both parties involved. 

The UK is still an EU-member, but in the public eye the EU appears to be acting as if Brexit is solely a UK problem. “At EU level, the demerger has been discussed, but the shareholders haven’t been consulted,” says João Macedo Vitorino. “We have a ‘demerger’ where one side has put the decision to an (uninformed) public vote, while the older side’s shareholders (the rest of the EU citizens) haven’t had a say. EU citizens have not been asked what they think about the process nor the agreement put forward by the European Commission, something which should have been done as this decision affects us all as ‘shareholders’ in the EU.”  


All but rational thinking 

A second but fundamental issue when entering into a demerger process is you need to have reasons behind the demerger and explain ‘why’ you are considering it before it has happening at all. And this ‘why’ has to be for the good of both companies shareholders. Brexit has been sold’, but rather than being sold it is unfortunately based solely on UK internal political reasoning. “If you are motivated by issues such as immigration or internal security, then you forget about your own country's needs,” he explains. “In the UK, foreign labour continues grow and its economy over the past 40 years is based on an open market and its standing as the financial centre of the European Union.” Not discussing this beforehand was not ‘in the people’s interests’ but it was pure politics. Politics also took the lead on the EU sideEU representatives speak of the protection of EU citizens in the UK and of UK subjects in the EU, but the main concern is to set an example to other potential EU-leavers of the pain that leaving the EU can cause, says João Macedo Vitorino. We cannot forget that certain individual national interests enter into play with the UK leaving the EU, which explains the different views we have seen in relation to extending the article 50 deadline. 


A Lose-Lose Situation 

Another consequence of not having a well-formed demerger plan is the lack of method when it comes to compensation mechanisms or knowing the ratio exchange between both parties. “A demerger, when it happens, is always seen as a win-win situation for both parties, otherwise, parties do not follow through with it. When you compare it to Brexit, what’s so unique here is how there is a clear view assumed by all politicians and both sides that we’re in a lose-lose situation,” says João Macedo Vitorino. 

Therefore, what should obviously have been addressed from the start is how you mitigate those losses. In a demerger you make a simulation that takes into account the costs and ricks and adjusts accordingly, as well as establishing the allocation of assetsintercompany debt, tax positions, demerger expenses, consequences for employees, etc, he adds. There has been no mitigation of costs nor risks, and the ‘assets’ in this case are the advantages gained from forming part of the EU, and the losses that will be sustained upon leaving on both sides, neither of which were outlined prior to the definitive vote. 


Fated to fail 

Ultimately, while the comparison between Brexit and a demerger are structurally different, what we can say is that in Brexit everything is missing, says João Macedo Vitorino. “If this had been a demerger in the corporate world, it would have been doomed from the start. There was no demerger plan, no full disclosure of facts and information, and only the shareholders of one of the parties were consultedalthough blindly.” 

Many demergers measures fail precisely because the shareholders cannot agree on compensations, division of assets, etc, before taking the final decision to demerger. But they fail with the agreement of both parties, and before any form of decisive voting has taken place. “We’re discussing the first demerger between two EU countries and, without a precedent, we should be even more careful to ensure we get it right, proceeding only if it’s in the best interests of both parties,” he concludes. For Brexit, therefore, the logical conclusion would be to stop this now. But just like the lack of demerger plan, ‘logic’ is another thing that has been missing from the get-go. 


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Guilherme Machado Dray

The Miracle of Portugal: A tale to remember

MVConversations with Guilherme Machado Dray

Portugal’s success story is being used as an example across Europe for hitting the sweet spot between economic growth and social justice.

Radical changes adopted since 2015 have seen Portugal hit its lowest unemployment rate since 2002, dropping from 17% in 2013 to 6.3% in 2019. The International Labour Organisation (ILO), in its report  - Decent Work in Portugal 2008-18: From Crisis to Recovery - recently exemplified Portugal’s success case, stating that Portugal stands as a solid example of successful and swift economic and labour market recovery.

Why is this so significant? “Because it sets a precedent across Europe for what is possible with the right measures, mindset and use of the rule of law as an instrument for change,” says Guilherme Machado Dray.

In isolation dropping from 17% to 6.3% is impressive; but taken in the context of the country’s recovery as a whole, one sees that the Government, policymakers and private investors have been taking a far more holistic approach to putting Portugal back on the map. “Aside from creating a more flexible labour market and reducing associated costs, economic and social policies have been implemented to tackle the far larger issue of improving the country’s business environment and positioning in the global markets.”

Rewind to the 2009-2014 Euro crisis years, and the headlines revolved around Portugal’s emigrating talent, searching for opportunities abroad that were simply unavailable at home. At its height, explains Guilherme Machado Dray, economic growth stalled leading to the 2011 bailout from the European Central Bank and the International Monetary Fund (IMF) and the putting in place of austerity policies aimed at fiscal consolidation. “There was a reduction in labour costs, wages were frozen, severance compensation was reduced as well as overtime remuneration, and we saw a significant increase in taxes and labour market segmentation.”

All change

2015, however, was where things started to change. Economic policies were brought in introducing a new environment of social justice side by side with economic competitiveness. The minimum wage was increased, wages were no longer frozen and collective bargaining was back in play, says Guilherme Machado Dray. “Social dialogue was promoted and as a consequence we started to see a consistent portion of economic growth, external debt was reduced, the country regained access to the international financial market, private sector investments picked up and we began to thrive again.”

The Government began creating opportunities to attract foreigners to Portugal, with the Golden Visa for example, as well as bring back those millennials that left in the crisis years. Foreign investment was encouraged, and private sector investment increased, aiding in the creation of jobs and a return of confidence in the country’s potential. “We’ve also had an amazing influx of high-tech individuals in recent years, particularly as hosts of the annual Web Summit and the booming start-up ecosystem of Lisbon’s Hub Criativo do Beato, which is proving itself as a focal point for the millennial generation.”

In terms of legal advice, the change has not gone unnoticed, says Guilherme Machado Dray. “We’ve gone from advising on collective dismissals and redundancies to helping set up new corporations, create new jobs, and better working conditions: the effects have been far-reaching.”

Taking it a step further

For Portugal to continue on its current trajectory, he sees a few areas that need to be addressed: increasing private and foreign investment, tackling the issue of segmentation of the labour market, and reducing the wage gap between Portugal and the rest of the EU.

He highlights, as an example, the question of temporary employment contracts. “Across the EU, the average percentage of temporary contracts is around 14%, while in Portugal we are at over 22%. We need to put an end to precarious working conditions and take more affirmative action to put the younger generation into the labour market via open-ended contracts, ensuring that corporations that hire them receive the appropriate fiscal and social security benefits.”

There is also a huge gap between monthly wages in Portugal and the European average. In Portugal the average is around €900, while in Europe it stands at over €1500, explains Guilherme Machado Dray. “Until we tackle this problem, we are not going to stop the flow of millennials emigrating for jobs that offer far better salaries. Increasing the minimum wage and implementing good wage policies would be a start, as well as attracting foreign companies with new work methodologies and wage strategies based on fringe benefits policies. And we must continue to promote collective bargaining, as it’s a great instrument and asset for agreement and cohesion between corporations and Unions.”

Ultimately for Guilherme Machado Dray, the key to Portugal’s turnaround has been the changes made to the country’s legal framework. “We now have a balance between entrepreneurship and job security, between flexibility and dignity at work and between freedom of management and collective bargaining,” he explains. “As a lawyer and as someone that believes in the rule of law, implementing change without compromising vested rights is incredibly important when it comes to promoting and fostering the recovery of any country when facing a crisis.”

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António de Macedo Vitorino
The Internet is open to anyone with a mobile phone hiding behind an Internet ‘identity’, and this is where the real work is for Governments and Regulators to step in to protect our communities.


MV Conversations with António de Macedo Vitorino


Recent and past atrocities have thrust the Internet and social media into the spotlight. From cyberbullying, slander and trolling to live streaming terror, the worldwide web is becoming ever more entangled.

While there is legislation in place to punish those held accountable, one of the main problems facing our Governments is the anonymity of those actually responsible, says António Macedo de Vitorino. “The priority is rectifying the lack of regulation governing digital identities and Internet and social media conduct, as well as evolving and accepting a degree of control in the public interest.”

In the old days, the village gossip sat in the main square passing judgement and spreading rumours, similar to the way people use the Internet today, explains António Vitorino. “The huge difference is that in those days the gossip stayed within the village: today it goes viral at the click of a button for anyone to comment on, share, judge and use against others.”

This immediate and unlimited access to information is one of the Internet’s most defining features, but also its Achilles heel. What we need to address is the ease with which people can set up fake profiles, accounts and hide IP addresses. This is where the real work is, says António Vitorino. “If you choose to use the Internet then you need to have a verifiable digital identity. We must have clear controls worldwide over digital identities, safeguarding the Internet and being able to hold people accountable for what they do and say.”

This would be a step forwards, but if we take the recent New Zealand terrorist attacks as an example, those were committed by someone with an identifiable Internet persona, they were effectively hiding in plain sight. “So, the second question is what is permitted on the Internet and how can you bar conducts that fall foul of this?”


Freedom, censorship: who decides?

While we cannot give away our freedom of expression or free speech, unfortunately we cannot stop people from ‘thinking’ the unthinkable, says António Vitorino. What we must put an end to is an unpoliced forum where hate, violence, racism, etc can be disseminated and acted upon, and apply real world standards to Internet conducts.

As important is how 'normal' everyday people have been transformed by the Internet, and seemingly freed from moral and social constraints. When speaking in cyber space, many times using their personal identities, they often expressive themselves in extremely offensive or utterly slanderous ways, saying things that they would never say face-to-face in the real world. The problem then is that this 'outrageous' behavior is shared worldwide on social media triggering equally offensive/slanderous comments and often resulting in hate campaigns.

But where do we draw the line when it comes to freedom of opinion or speech? “Slander, defamation, scare mongering, racism, etc? Yes of course, that shouldn’t be allowed” he says. “Use of words or conduct that incite violence or racism? Again, without a doubt.”

But if we put a blanket ban on certain words or opinions, we can’t forget that a great deal of art has been built on these words and opinions he adds. From the ancient Greek comedies to the rock songs of the 60s, if you just dig a little deeper you find many things that could fall into the censorship net. “Take the Sex Pistols’ ‘Schools are Prisons’ or Pink Floyd’s ‘We don’t need no Education’ - these are touted as freedom anthems, but really these are closer to manifestos against education. Can you say they can’t write those songs or express their opinions? No, you can’t. But how or who do we have that will be able to take the decision on what gets banned and what gets through?” One way would be to apply double standards, policing the use of certain words or words in a certain context on the Internet while allowing them to be used in public spaces, such as print media or before live audiences.

However, this policing of the Internet cannot realistically be done by humans, it’s just too big. While having AI systems in control would be another step forward, says António Vitorino, it still doesn’t tackle the question of who decides what can and can’t be said.

“Facebook, Instagram and other social media, all have their internal policies and can decide what words, comments and conducts will be banned, and no one has really been questioning that. That’s the status of where we are now. But why should they have the right to decide how to police the Internet? Shouldn’t that be our right as a community?” he asks.


Legislating for change

Ultimately, we need to tackle this from both a legal and political standpoint on a worldwide basis because the Internet knows no frontiers. The builders of the Internet wanted a space that was completely free of regulation, but that was built on the assumption that everyone that uses it does so with good intentions.

While there is no current legislation in Portugal or the EU focused on Internet and social media regulation, António Vitorino believes that most of the relevant legal problems can be solved with the laws we now have. “Accountability is covered by the laws we have in place; the recourse is there to punish those that commit crimes through their Internet conduct. But those are only workable if we tackle the issue of regulating digital identities and do so on a worldwide basis. This is the first and probably most difficult step to take.”

Policing the Internet begins with policing those hiding behind ‘virtual personas’ using and misusing information, spreading lies and hate and fabricating fake news, he adds. “We’ve seen it most recently at the highest levels of decision-making and influence, from the Trump campaign to Brexit. It is not just a criminal problem but a problem for society as a whole and we must bring regulation of the Internet up to speed in line with how we regulate the real world.”

The second step is what sanctions we should apply to those that breach those laws. In the same way football hooligans can banned from matches, Internet ‘abusers’ could be prohibited from going online. But all of this must be done within the rule of law, with appropriate safeguards and judicial control.

The bottom line is that we need to align the Internet with the real world and not the other way around or we risk living in a real-world videogame nightmare.

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António de Macedo Vitorino
How the Government almost got it right with Novo Banco


MVConversations with António de Macedo Vitorino

By failing to fix a crucial piece of the puzzle, has the success of Novo Banco been undermined by an inability to draw a line under the BES legacy?

The €4.9 billion bailout of Banco Espírito Santo (BES) by a special bank Resolution Fund in 2014 saw one of Portugal’s largest listed banks split into Novo Banco, the ‘good’ bank, and a ‘bad bank’ of toxic assets.

This split, however, is turning out to be more of a ‘break’ than a clear-cut divorce, and Novo Banco is now set to receive a fresh capital injection after posting losses of over €1.4 billion.

The root of the problem, according to António de Macedo Vitorino, stems not from the good or bad bank, but from bad strategic decision-making by the Government, an open backdoor in the contract, and a free ride to the private sector resulting in a tremendous amount of collateral damage.

“What has been really ‘bad’ in the BES situation is the unacceptable and illogical transfer of taxpayer money by the Government to the private sector and a total lack of protection of the public interest,” he explains. “Added to the damage done to the victims of BES and the taxpayers, we have the unseen costs to the judicial system, where the courts are faced with hundreds of ongoing lawsuits, and the reputational damage to Portugal as a whole.”

The Resolution

While there is no doubt that major mistakes have been made in the handling of BES and Novo Banco, the fundamental action taken by the Bank of Portugal with the Resolution Fund has, according to António Vitorino, cost the taxpayer less in the long run than had BES been nationalised or if the Government had funded the recovery of the bank.

All things considered, while not without flaw, the Resolution has paid off. “When regulations are made in the midst of a crisis, it's difficult to achieve the desired end result as the whole issue becomes so politicised and discussions are based more on ideology than reality,” he says. “The Government at the time was under a pressure to please the public, it was close to the elections etc, but there would always be some damages and losses coming out of the BES/GES fraud case that would be paid by the taxpayer.”

The fact that Novo Banco is alive is a victory in itself, he adds, we could have lost much more. “But the real question is could we have lost less if the Government and the Bank of Portugal had acted in a speedy and competent manner ensuring that Novo Banco was clear of the BES legacy? We knew that BES loans to the Espírito Santo group would be lost; but these bad loans were supposed to stay with BES. We believed that Novo Banco would have a fresh start.”

The Irresolution

The real issue is an inability of the Government and regulators to manage processes and make decisions with the same level of professionalism as private companies, says António Vitorino. “They went back and forth without actually taking definitive action, as if they needed someone to decide for them. Add to that political agendas, calendars and economics, and there is an inefficiency across the board whereby politics and reality clash.”

Of course, everyone makes mistakes, he adds, but here it’s the taxpayers that are having to foot a far higher bill than necessary. “If things had been done properly, if the Government and the Bank of Portugal hadn’t dragged their feet and had wrapped up the resolution in a couple of months, ensuring the Novo Banco sale contract was watertight and insulating the system and the various players/stakeholders, we would not be in the situation we are now in.”

The State holds a tremendous amount of power in public negotiations, he explains, with that a habit of saying no, we won't do it, we don't accept it, and if you are on the other side you have to swallow it. “The problem is that they don’t have the flexibility to truly understand the private sector’s concerns while properly protecting the public interest, so when they do yield pressed by the political demands and accept things, they always give away too much.”

In the sale of a 75% stake in Novo Banco to US Fund Lone Star, assurances were given to the public that a €3.9 billion cash reserve was there as a ‘last ditch resort’ but would not be touched. “But the Government knew that by allowing discussions to be centred on the intended value of Novo Banco’s assets and bad loans, they had a problem: they opened a back door in the contract and set in stone the fate of the so-called reserve fund,” says António Vitorino. “This reserve was not a ‘last ditch resort’ at all, it was always to be used up to the full €3.9 billion”.

In a typical M&A, especially involving banks, the reps and warranties given by the seller rest on what they have and not on what the buyer would expect or ‘like’ to have, he explains. “It’s an important distinction, and with Novo Banco, the Government didn’t hold their ground when it came to the scope of the offer from Lone Star, nor mark a line that if crossed would result in a failed negotiation. They allowed for discussions to take place that fundamentally changed the entire tender offer and the rules mid-way through the game.”

And it's important to note that this is a legal discussion, he adds. It has to do with strategic legal decisions that needed to be taken along the way. “It’s not unexpected for any bank coming out of a crisis to have non-performing loans and other troubled assets, wherever they are in the world. But if there is a tender document with an offer on the table for assets and then you allow the buyer to open up discussions on price or cherry-picking assets, as well as allowing for additional capital calls, then any lawyer would, or should, know that you are creating a backdoor in the contract that will ultimately be used by the buyer.”

Year-on-year, Novo Banco has been eating into this capital. The recent fresh injection of capital into Novo Banco has prompted Portugal’s Finance Minister to order an audit to get some clarity on Novo Banco’s capitalisation, but nothing new will be uncovered. “This is only for show, to save the face of the political decision makers.”

These consequences are completely uncalled for, says António Vitorino, and one wouldn’t have expected all these problems to emerge after the act. By giving this free ride to the private sector instead of safeguarding the Portuguese taxpayer monies, the Government has undermined what could have been a successful resolution.

“The main Portuguese banks had serious bad loan problems,” he adds. “But all private banks were able to repay the money loaned by the Government and paid interest on it. No public money was lost in BCP and BPI for instance.” Only the money given to banks that ended up under State control was lost, namely BPN, Novo Banco and Banif. CGD was also State-owned.”

As an asset Novo Banco is positioning itself extremely well to generate more money for its shareholders than the losses sustained, explains António Vitorino. “But because of the Government’s inability to draw a line through where the BES legacy ends and Novo Banco’s begins, we can see big profits coming through in the future that won’t be used to cover the resulting costs of the bondholders’ claims or pay for the extra taxpayer money that is being injected into the bank. All these unnecessary loose ends will end up being covered by the resolution fund and so ultimately the taxpayer will lose yet again.”


 Footnote: Macedo Vitorino & Associados is advising several Novo Banco bondholders and investors in Espírito Santo securities in various proceedings related to the BES/GES collapse.

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António de Macedo Vitorino

Blackmail, extortion, corruption, extradition and football – it’s what media dreams are made of.
But do the ends justify the means?

MVConversations with António de Macedo Vitorino

Football leaks – the largest data leak to date revealing some of the sport’s best kept secrets – has prompted a media firestorm in Portugal. One man’s fight for transparency in the world of football, uncovering widespread wrongdoing at some of Europe’s biggest Clubs and by world class players, is being done at the expense of everybody’s right to privacy.

While what Rui Pinto exposed is clearly a Pandora’s box of criminal conduct prompting numerous investigations by authorities in nine EU countries, is that enough to forget the small detail of how it was obtained? Not according to António de Macedo Vitorino.


Whistleblower or hacker?

Pinto’s lawyer, William Bourdon, is arguing that Pinto must be protected by certain fundamental legal principles, specifically that of EU whistleblowing legislation. The paradox, however, is that a fundamental legal principle is obstructed when it comes to the source of the incriminating information.

António Vitorino believes everything hinges on where we draw the line between whistleblowing and hacking: “One upholds the law, the other falls foul of it.”

Whistleblowing, in very basic terms, denotes someone who comes across material exposing criminal wrongdoings. Be it corruption, money laundering, human trafficking etc, by coming forward with information that triggers criminal investigations, these people have acted in the public interest and are protected by the law, specifically the EU Whistleblowers Directive proposals.

Hacking, however, is built on “intent”. “This is someone who goes that one step further and mounts his own private investigation” says António Vitorino, “breaking into computers purposefully looking for incriminating material. In the last Directive proposal, a whistleblower is defined as “a natural person who reports or discloses information on breaches lawfully acquired in the context of his or her work-related activities”. This is hardly the case of Mr. Pinto.”


Crossing the ethical lines

As criminals become ever more evolved, the weapons we have to fight crime need to evolve. However, António Vitorino questions whether, as a society, we can accept the blurring of the lines between legal and illegal obtaining of information, and the overstepping of our core constitutional values.

“Police cannot enter your home or your computer without a search warrant and probable cause. Freedom is paramount and our privacy needs to be protected,” he says. “If our legal system and police powers are not up to date, then that’s something that needs to be addressed.”

In the case of Football Leaks, information was obtained by hacking into the systems of Football Clubs like Sporting CP, Porto FC, Real Madrid and Paris Saint Germain, taking information and passing this to the media. In the public interest? For António Vitorino, that one fundamental line was crossed.

But what about hacking into personal emails and client-attorney messages bound by legal privilege, or sharing confidential Club information with rivals? Is crossing these lines for information that has uncovered corruption at the highest levels of the sport seen as acceptable or should it be seen as an attack on personal privacy? One more line crossed, says António Vitorino.

The line between fair and foul play plays a crucial part in determining the legality of a subsequent investigation., he adds. “The illegal and intentional breaching of privacy cannot be an acceptable practice.”

He takes the media as an example. “Journalists have a right to protect their sources. But shouldn’t the media care about how their sources came across the information?”

If wrongdoings can only be uncovered by illegal means, there is something fundamentally wrong with society.

Ultimately, António Vitorino believes “we cannot accept that allowing unfettered access to our privacy is the only way to uncover criminal actions”.

“As citizens it is our duty to fight anyone who says that we must give up our privacy and our freedom to help put criminals away.”

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For several years, the Portuguese Government supported a free market approach for renewable energy producers, withdrawing all incentives to solar energy production. This meant the end of new feed-in tariff contracts and the difficult task of promoting new solar projects with free market tariffs. Expectably, the financing of such projects was heavily affected, resulting, to quote the Minister of Environment and Energy recent interview, in “…1.2 gigawatts of solar power licensed, and only 49 megawatts implemented”.

To change this state of affairs, the Portuguese Environment and Energy Minister announced in January two auctions for solar licenses with guaranteed tariffs.

The Portuguese Environment and Energy Minister is “certain that there will be lots of investors with different dimensions” interested in bidding for the licenses under new tariff structure. Promoters will be grouped by the dimension and financing capacity. But, possibly, in the auction with guaranteed tariff will not apply to the “largest players”. Auctions with guaranteed tariffs will more likely be destined to smaller players, to facilitate the access to credit to less bankable promoters.

The impact of this policy change will, of course, depend on the guaranteed tariff’s range. So, we will have to wait until April, when the auctions’ details are to be revealed.

The new solar energy policy comes in the context of the also new National Energy and Climate Plan (in Portuguese, Plano Nacional para a Energia e Clima – “PNEC”) which is mandatory to all EU countries under Regulation 2018/1999 of the European Parliament and of the Council of 11 December 2018 on the Governance of the Energy Union and Climate Action. The Portuguese Minister of Environment and Energy announced that PNEC is due to publication on July, after a public consultation period beginning in April.

The new PNEC targets to reduce total energy consumption in 35% by 2030. It forecasts a private investment amounting to 18 billion euros in renewable energy generation facilities and in transport and distribution networks. The aim is to achieve a 47% of renewable sourced of the total energy consumption in Portugal.

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Susana Vieira

The new Portuguese Real Estate Investment Trusts (“REIT”) have been established by Decree-Law no. 19/2019, of January 28, as a new type of property investment companies: sociedades de investimento  e gestão imobiliária (“SIGI”).

These are the main features of SIGI:

(1) They must be incorporated as private limited liability companies by shares (sociedade anónima) with a minimum share capital of € 5,000,000. It is possible, upon decision of the general meeting, to convert already existing limited liability companies by shares or property investment undertakings with a corporate form, into SIGI.

(2) They must have a registered office and their effective management in Portugal.

(3) Their main corporate purpose is the acquisition of (i) property rights; (ii) shares of other SIGI or REIT similar companies based in another State Member, (iii) participation units or shares of real estate investment funds for urban leasing, real estate investment companies for urban leasing and also collective investment undertakings (with dividend policies similar to SIGI).

SIGI can directly manage the properties whose rights they own or contract third parties for that purpose. In addition to leasing, such properties may be used for the development of construction and rehabilitation projects and also to rehabilitation or be allocated to the use of stores or spaces in commercial centers or office spaces.

(4) SIGI shares must be listed within one year after incorporation. For that purpose, new simplified admission rules will apply, as well as specific equity dispersion requirements (at least 20% of their equity must be held by 2% or less equity holders).

(5) SIGI will be subject (i) to rules on composition and holding of assets (the value real estate assets must represent at least 75% of the total assets value and such assets must be held for at least three years after their acquisition); (ii) to the obligation of distributing a percentage of their profits in the form of dividends (iii) and to comply with a maximum indebtedness ceiling (60% of the total value of their assets).

These rules entered into force on February 1st 2019. A tax package for SIGI is expected, exempting SIGI of CIT on their asset generated income, on real estate capital gains and dividends. All combined, SIGI can be a powerful tool to foster the Portuguese real estate market, at a time this market gives signs of deacceleration.

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João de Macedo Vitorino

Following devastating forest fires in 2017 and 2018, the Portuguese government published four regulations on 21 January 2019 imposing new obligations on forest land owners and tenants, as well as control measures on eucalyptus plantations and reforestation in general.

Decree-Law no. 11/2019 extends the regional forest management plans ("PROF") obligations to forest land owners and tenants.

PROF establishes specific rules for the use and exploitation of forest areas, assessing the potential of forest areas and defines the critical areas from the point of view of fire risk.

Forest land owners and tenants are required to:

  • Prepare a forest management plan;
  • Comply with the intervention standards in forestry areas; and
  • Not to exceed the limits of area that may be occupied by eucalyptus.

With Decree-Law no. 12/2019, all afforestation and reforestation actions are subject to the authorization of the Institute for Conservation of Nature and Forests ("ICNF"), regardless of the forest species. The authorization is valid for a period of two years.

If afforestation or reforestation is not carried out correctly, ICNF may obligate the responsible land owner or tenant to remove the illegal plantations within a maximum of 180 days.

ICNF has now also the specific powers to control all areas planted with eucalyptus.

Decree-Law no. 13/2019 obliges forestry products traders to be licensed and to notify ICNF when at the beginning and end of the harvest and the places where harvesting will occur. A statement with the quantity collected must also be submitted to ICNF. After receiving that information, ICNF will issue a certificate that is now required for selling the products. Licensing and certification are both subject to the payment of fees. The entire procedures are conducted electronically at the ICNF website.

Finally, Decree-Law no. 14/2019 subjects all authorizations for the construction of buildings in areas classified as high or very high risk of rural fire and the construction of buildings for agricultural or forestry activities with municipal interest to a binding favorable opinion by the forest defense commissions.

The four new regulations are effective since January 22, 2019.

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