João de Macedo Vitorino

MVConversations with João Macedo Vitorino

Recent changes to the law and an upcoming auction hope to take Portugal from Europe’s lowest solar user to a being considerable presence in the market.

The future may be getting brighter for Portugal’s solar industry. The country’s as yet unexploited sunny climate is being put to market next month with its first ever solar auction for 1.4 GW in four key regions - Portugal’s largest ever solar energy auction. The auction comes on the back of recent reforms to the Energy Law addressing setting up the way forwards for increasing the energy grid capacity.

There has, however, been criticism and a worry that the longer-term costs are being compromise for hitting short-term goals, says João Macedo Vitorino. “While the auction system itself has been discussed at government level, it has never been discussed with the market itself. Certain issues such as the impact of reducing the return on investment in a very competitive European market, long-term costs to consumers and clarity on the actual capacity available on the grid remain unclear.”      

Until recently, solar project licences were sought directly from DGEG, the Portuguese Energy Authority. Without a clear view of the actual capacity available on the grid, investors would go down the road of working on obtaining the production licence, getting environmental and geology reports, etc, but in the end there was either no capacity or the authorities simply said ‘no’, he explains. “This risk just wasn’t attractive for investors.”

Up until recently the costs of implementation were high and wouldn’t be feasible at market prices. “To sell energy at that price on the market wouldn’t get a return on an investment,” says João Macedo Vitorino, “but over the past two years, prices of solar panels has gone down, projects at market value are viable and the political will is there to get things moving with a new regime.”

From now on, to apply for a licence you first need a grid connection reservation title. This can be done in one of three ways. First, enter into a direct contract with a grid operator where there is available capacity in the grid; second, where there’s no such capacity, a direct contract with a grid operator but with the producer assuming the costs of connection to the grid; and finally through a Government auction, such as the one next month.

These positive changes to the regime have had a knock-on effect for current projects with licences or in the process obtaining them. “The Government has effectively cancelled these projects and they need to resubmit to the auction,” explains João Macedo Vitorino, “which means running the risk of refusal, so we are likely to see some court cases cropping up in the future”.

While next months’ auction has the potential to increase the number of projects to be connected to the grid, one concern is that successful bids are to be awarded on the basis of the lowest tariffs. While an aggressive  fixed tariff (starting at 20% below the market price as of today) means short-term savings for consumers, should energy prices go down the fixed tariffs granted in the auction will remain the same, adding a substantial advantage for the producers but imposing high invoices for the consumer.

Comparison can be drawn with what happened with the Portugal’s  small hydroelectric projects auction for capacity back in 2010. Bidders made offers for tariffs that couldn’t sustain the investments that the projects needed, projects didn’t go ahead, and no further auctions took place, he explains. “To hit the new 5GW to 6GW solar targets set by the Government, we would need at least 3 or 4 auctions to take place, which may not be feasible if conditions remain as they are as they may not be enough to attract investors.”

An alternative to this auction system would be a free market approach where all stakeholders have clarity on the grid capacity available today and in the near future. This would mean they could plan in advance where to invest, with a grid connection being granted on a simple principle of first-come first-served. While there are numerous viable locations for solar projects, such as in the Alentejo region, many do not have grid capacity access in their vicinity. To cover the distance needed to put these locations on the grid requires substantial investment, driving up the costs of the project itself, adds João Macedo Vitorino. “This is something that could deter investors when coupled with auction conditions designed to reduce project profitability. Although encouraging costs sharing between grid operators and developers could be one way to bridge this gap, as laid out in the revised Energy Law, investors will not be attracted to auctions in areas of low grid density.”

Ultimately, while elements of the new legislation and auction system do address difficulties brought up by market players, the overall solution and architecture has never been validated by those same market players. “While the potential is there to put Portugal on the solar map, the Government is trying to force the market players to share profit margins with consumers, which will most likely result in delaying the deployment of solar energy output in Portugal,” explains João Macedo Vitorino. Unless these conditions change for future auctions, we run the risk of history repeating itself and either failing to get the investors needed to increase grid capacity or see consumers bearing the costs in the long-term.

For anyone interested, the tender documents and maps of grid availability can be accessed online at https://leiloes-renovaveis.gov.pt/ and bidders registration is open until 7th July.

See pdf Share

Last 14 June of 2019, the European Parliament published new regulations aligned with the long term goals for full integration of the EU energy market.

Regulation (Eu) 2019/941 Of The European Parliament And Of The Council, of 5 June 2019 on risk-preparedness in the electricity sector, repeals the Directive  2005/89/EC and establishes new rules concerning the storage of energy to guarantee its in case of a crisis. This Regulation also uniformizes the obligations of the grid operators on this regard, specially, with the need of making plans for contingency periods and new forms of cooperation among the State Members.

Regulation (Eu) 2019/942 Of The European Parliament And Of The Council, of 5 June 2019, redefines the legal framework of the European Union Agency for the Cooperation of Energy Regulators (“EUACET”). EUACET will issue opinions and recommendations to the players and national agencies and submit guidelines on energy policy to the European Commission agency aiming to further involve all Member States regarding in energy cooperation within the EU.

Regulation (EU) 2019/943 Of The European Parliament And Of The Council, of 5 June 2019 addresses the two main goals for the decade: decarbonize the sector and generate cleaner energy. It includes thresholds for CO2 emissions of each electric facility that generates power using fossil sources.

Directive (EU) 2019/944 Of The European Parliament And Of The Council, of 5 June 2019 on common rules for the internal market for electricity and amending Directive 2012/27/EU aims to confront the new challenges to the energy market  posed by smart grids and the smart metering.



See pdf Share
Cláudia Fernandes Martins

We are still waiting…

Portugal has not yet approved a local law implementing the General Data Protection Regulation (GDPR).

On March 2018, the Portuguese Council of Ministers presented a bill to the Portuguese Parliament. The new law was supposed to come into force on the same application date of the GDPR, 25 May 2018. In May 2019, we are still waiting for the bill to be voted.

During the last year, the Portuguese GDPR bill was criticized by many, including the Portuguese supervisory authority, the Data Protection Authority (Comissão Nacional de Proteção de Dados - CNPD), which had no say on the drafting of the bill.

Among other issues, the Government’s proposal replicated several provisions of the GDPR and, in some cases, contravened the GDPR. For instance, the bill proposal stated that the local law would apply to “the processing of personal data of data subjects resident in Portugal”, instead of referring to the data subjects who are in Portugal, irrespectively whether they are (or not) resident in Portugal, which limits the scope of the law and leaves unprotected non-residents that happen to be in Portugal.

After the discussion period and a review by Portuguese Parliament members, the territorial scope provision was amended to comply with the GDPR. The current version also shows some effort in avoiding useless duplications of the GDPR text.

The exemption of fines to public entities was another provision receiving a strong disapproval by the Portuguese supervisory authority. In this regard, Article 83/7 of the GDPR states that “(…) each Member State may lay down the rules on whether and to what extent administrative fines may be imposed on public authorities and bodies established in that Member State.

In Portugal, there is no tradition of exempting public entities from fines. There is no material reason for a different treatment between public and private entities. In fact, the proposed exemption gave many public entities the idea that controls would not apply to them and that they would have more time to implement the GDPR. As a consequence, the public sector, along with the SMEs, have been delaying implementing the GDPR.

In the meantime, answering to the public criticism, the Portuguese Parliament proposed a compromise. In the current draft bill, the exemption will be applicable under justified grounds on a case by case basis by the Portuguese supervisory authority and for a maximum period of three years. All the other rules, including corrective GDPR measures, will apply to public entities.

However, this compromise solution is still considered a sensitive matter. If this provision was approved, it is very likely that the Portuguese supervisory authority will apply the exemption in very exceptional cases only.

The Portuguese bill also includes specific provisions on the Data Protection Officer (DPO), including secrecy and confidentiality duties, tasks, and which public entities are obliged to appoint a DPO.

In general terms, the GDPR establishes that public authorities are required to appoint a DPO. In order to determine which public entities have to fulfil this obligation, the Portuguese GDPR bill provides a list of public entities, including the Portuguese State, the Autonomous Region of Madeira, the Autonomous Region of Azores, municipalities, independent supervisory authorities, public institutes, public law schools, State, municipal business sectors and public associations.

Between the earlier version and the latest one, there are two major differences. Portuguese parish councils (juntas de freguesia) with more than 750 inhabitants are obliged to appoint a DPO. Earlier, the appointment of a DPO was decided by each parish on a case by case basis.

There is also another change, which may have a significant impact on the State business sector (sector empresarial do Estado «SEE»): while the first proposal provided that only the public undertakings (entidades públicas empresariais – «EPE») were obliged to appoint a DPO, the new version includes all public business entities of the SEE, all of them must have a DPO.

The Portuguese bill also provides the following:

(a) GPDR codes of conduct or certification mechanisms must be approved by a certification body recognized by Instituto Português de Acreditação (IPAC, I.P.) and in accordance with the requirements established by the Portuguese supervisory authority. As far as we know, no codes of conduct or certification mechanisms about GDPR are in place until now;

(b) In relation to the offer of information society services, the Portuguese bill establishes that data processing of a child above the age of 13 years will not require consent given by the parents. Although Portuguese law usually adopts a conservative approach on minors’ rights establishing the age of 16 years, as a reference age, the Portuguese bill opted to follow the majority of the Member States, which consider the age of 13 years old for information society services;

(c) The Portuguese bill provides for specific rules on the processing of employees' personal data in the employment context, in particular as regards the conditions under which employees’ personal data may be processed on the basis of the employee’s consent, as well on the use of video surveillance systems and employees’ biometric data. Generally, the employee’s consent is not a lawful basis for employees’ data processing if: (i) from the employee’s data processing results a legal or financial advantage for the employee; or (ii) the data processing is necessary for the performance of the employment contract. Video surveillance systems may only be used against employees in the scope of a criminal lawsuit. The use of employees’ biometric data is only lawful for purposes of employees’ attendance and access controls to the employer’s premises.

(d) The processing of genetic data and data concerning health rules are subject to the principle of “need-to-know” the data. Data controllers are obliged to give notice to data subjects of  all accesses to their personal data concerning health. This means that data controllers will have then to implement such traceability mechanism;

(e) No data retention deadlines are applicable for data concerning Social Security contributions for retirement purposes;

(f) Except for willful cases, the starting of a misdemeanor proceeding by the Portuguese supervisory authority must be preceded by a warning for the remedy of the breach within a reasonable deadline. For very serious infringements, the fines thresholds are divided into three different recipients categories: (i) €5,000 to €20,000,000 or 4% of the annual turnover, for large companies; (ii) €2,000 to €2,000,000 or 4% of the annual turnover, for SMEs; and (iii) €1,000 to €500,000 for individuals. Half of these amounts are applicable in case of serious infringements.

In some matters, the Portuguese GDPR bill is silent. For instance, the bill does not establish specific rules applicable to private life data, including solvency and creditworthiness. This data was considered similar to sensitive data (now, special categories of data) under the former Portuguese data protection law.

The Portuguese GDPR bill also does not contain specific provisions about the relationship between the GDPR provisions and the access right to public documents, nor private enforcement rules in relation to the decisions taken by the supervisory authority.

Moreover, the Portuguese bill surprisingly establishes a «standstill» period for new consents, entitling data controllers, either private or public entities, to obtain new data subjects’ consents within an additional period of six months from the effective date of the local law. This provision, which remains unchanged in both versions of the bill, clearly contravenes the GDPR, which is directly applicable in all Member States, including Portugal. The GDPR does not include any special rules on consent matter, which allow Portugal to set a different deadline beyond 25 May 2018. Therefore, it is expected that this provision is not incorporated into the statutes of law.

Although some sensitive issues still remain, the final text should be voted and approved by the Portuguese Parliament’s members during next month.

See pdf Share
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


See pdf Share
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

See pdf Share
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. 


See pdf Share
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.”

See pdf Share
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.

See pdf Share
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.

See pdf Share
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.”

See pdf Share