Portugal has questions to answer

The Portuguese judicial system has attracted considerable criticism in recent years and demands for reforms have gained prominence, writes Colin Stevens.

Such calls have gained fresh momentum in recent months following the recent controversial decision to drop serious criminal charges against Portugal’s former Prime Minister Jose Socrates.

On 25 May 2019, EPP’s candidate for new Commission president , German Manfred Weber wanted to apply sanctions against Portugal. Right-wing Paulo Rangel and Nuno Melo do not miss a chance to point out that it was a socialist government – at the time led by José Sócrates – that had asked for the intervention of the “troika”(European Commission, International Monetary Fund and European Central Bank). 

A judge in Lisbon ruled that, more than six years after his arrest in a major corruption investigation, Socrates will stand trial, but only on lesser charges of money laundering and falsifying documents. In a decision that sent shockwaves through the country, the judge dismissed corruption accusations against Socrates as weak, inconsistent or lacking sufficient evidence, and noted that the statute of limitations had run out on some of them.

Rosa also dismissed tax fraud charges against Socrates, who will be tried on three counts of money laundering worth some €1.7 million and three others of faking documents related to service contracts and the purchase and renting of an apartment in Paris.

In a country notorious for its slow justice system, it had actually taken prosecutors three years after Socrates’ initial arrest to formally charge him with 31 crimes allegedly committed in the 2006-2015 period.

Those included financial crimes in an alleged scheme involving the disgraced former head of Banco Espirito Santo (BES), which collapsed in 2014 under a mountain of debt.

BES was the second largest private financial institution in Portugal. Run for nearly 150 years by one of Portugal’s most wealthy and powerful families, the Espírito Santo family, its activities included tourism, health and agriculture.

But the bank failed and, in 2014, it had to be rescued and BES was subsequently split into a “good bank”, renamed Novo Banco, and a “bad bank”. Novo Banco was recapitalised to the tune of €4.9 billion by a special bank Resolution Fund which included €4.4bn from the Portuguese state. It is not known if NB is still receiving money from the Portuguese state.

On 25 January 2019 a letter from Ana Gomes MEP claimed that the BES resolution was steered by the EC and the Troika, so that Portuguese taxpayers would pay, and continue to pay to Lone Star up to €3.9 billion 

But this did little to restore confidence and Novo Banco would later cut 1,000 jobs to help to reduce operating costs by €150 million as part of its EU restructuring plan.

Back in 2011 at the time of his arrest, a photo of Socrates in a police car on his way to face corruption questioning shocked many Portuguese.  Socrates resigned in the middle of his second four-year term in 2011 as an escalating debt crisis forced him to request an international bailout. At about the same time, Portugal’s then Interior Minister Miguel Macedo also quit following yet another investigation into alleged corruption linked to the allocation of residence permits.

So, what do these and other scandals,  such as Mario Centero’s elevation to the post of Governor of the Bank of Portugal in July 2020, tell us about the state of Portugal’s justice system?

Well, the  original indictment accused Socrates of playing a pivotal role and receiving millions of euros in a scheme involving the disgraced former head of the Espirito Santo banking empire. BES may have since ceased to exist but only after its demise inflicted billions of euros in losses on taxpayers and shareholders and with their former top brass having been accused of other crimes in separate investigations.

It was not the first time Socrates, now 63, had found himself at the centre of unwanted headlines. He originally studied to become a civil technical engineer, but that career ended with his dismissal for allegedly shoddy construction. In 2007, a scandal blew up over whether he had ever really got a proper degree. Among his other low points, he fell under suspicion for activity while he was Minister for Environment in 2002, and approved a licence to build a giant mall outside Lisbon, partly on supposedly protected land. Socrates was the object of allegations that illegal payments were made. That corruption case was eventually dropped.

Way back in 2014 Transparency International said the justice system in Portugal was “bottlenecked” with its report adding that inquiries related to the economy, finance and corruption had resulted in very few indictments, let alone prison sentences.

“There is a big problem of lack of efficiency of justice,” it concluded.

According to the latest EU Justice Scoreboard from 2017, Portugal is amongst the EU countries with the highest number of pending civil and commercial cases, with 12 cases per 100 inhabitants, against just 2 in France and 6 in Italy. In recent years alternative means of dispute resolution, such as arbitration, have mushroomed due to the lack of reform and investment in the legal system.

Despite this, little seems to have changed in the intervening years and, in the latest Corruption Perceptions Index of Transparency International, Portugal scored a lowly 62/100 and ranks 10th in the European Union and 30th globally.

Some 94% of Portuguese respondents to the 2020 Special Eurobarometer survey on corruption consider corruption widespread in their country (EU average 71%), and 59% of people feel personally affected by corruption in their daily lives (EU average 26%). As regards businesses, 92% of companies consider corruption to be widespread (EU average 63), and 53% of companies consider that corruption is a problem when doing business (EU average 37%).

The EU 2020 Rule of Law report on Portugal  says: “The Portuguese justice system continues to face challenges as regards its efficiency, in particular in administrative and tax courts.
– constraints as regards an effective anti-corruption prosecution result from a lack of resources and specialisation of the law enforcement bodies.”

MEPs are now weighing in to the debate with the EPP Group calling for a European Commission inquiry and action to be taken over serious allegations of an improper process by the Portuguese government concerning the appointment of the Portuguese Prosecutor to the European Public Prosecutor’s Office (EPPO), which is tasked with fighting crimes against the EU budget.

“The misleading approach used by the Portuguese government to push their preferred candidate for appointment to the newly-formed EPPO is of grave concern. There are questions to be answered over the methods used and the legitimacy of the prosecutor’s appointment in light of this new information”, warned EPP Group Vice-Chairman, Esteban González Pons.

“We are requesting that the Commission President, Ursula von der Leyen, launches an immediate inquiry into this matter and takes whatever action is necessary to rectify the situation. We do not want to see the mistakes of the Portuguese government unfairly tarnish and damage EPPO at this crucial time. We have made our request in writing to the Commission President”, Pons confirmed, speaking on behalf of his MEP colleagues who co-signed the letter, Monika Hohlmeier and Jeroen Lenaers.

It is vital that the integrity of EPPO is protected, according to MEP Hohlmeier, Chair of the European Parliament’s Budgetary Control Committee, who adds, “The behaviour of the Portuguese Justice Minister risks the independence and credibility of the European Public Prosecutor’s Office. The Portuguese Government should withdraw the candidate, especially at the time when Portugal presides over the Council of the European Union. The selection of Mr Guerra was based on false arguments presented by the Portuguese government and made against the recommendation of the European selection panel.”

Elsewhere, in an official  letter to the President of the European Council and the Prime Minister of Portugal – the country that holds the Council presidency – Renew Europe requests an immediate public clarification about this appointment. It must be stated if there has been political interference, then all the information provided about the candidate must urgently be confirmed. If the legitimacy of the appointment fails to be verified, Renew Europe will ask for a debate on this issue during the next plenary session and do not rule out calling for an independent enquiry. 

Renew Europe President Dacian Cioloș, says, “If the reports are correct, then the Council has chosen to appoint a candidate going against the recommendation of the independent selection panel possibly based on false information and for political reasons. In doing so, the Council has potentially jeopardised the functioning of the EPPO.

Prosecutors and judges have intensified a campaign against corruption in a country notorious for its flawed justice system but the Socrates case and such findings will make depressing reading for those who say little has changed, not least for the independence of the judiciary and access to justice for the poor.

In 2016, Joao Costa, director of metal-parts manufacturer Arpial, said, “Justice works terribly, never has worked and I doubt it ever will.”

Today, some judges and entrepreneurs in Portugal say the system was never really fixed and a deeper analysis of case-load data shows it has improved less than the official statistics suggest.