Metropolitano de Lisboa, Carris, Metro do Porto and STCP have appealed to the UK’s highest court in a bid to have recognised what they say is their right to have Portuguese rather than English law applied to the contracts.
The four companies are appealing a ruling by a lower court in March that article 3 of the Rome Convention does not apply in this case because the elements relevant to the situation at the time the swaps were chosen were not related only to Portugal, with the result that the contracts are not exclusively domestic.
In his verdict the judge, William Blair, himself noted that if article 437 of the Portuguese civil code were applied, the companies could argue that the global financial crisis constituted an “abnormal alteration of circumstances” that took place after the swaps were taken out between 2005 and 2007 - which could in turn lead to the annulment of seven of the nine contracts.
Hearings on Monday and Tuesday at the High Court served for the two sides to present their technical legal arguments and their interpretations of the two articles in question, with a final verdict expected some time next year.
The companies argue that in the case of these swaps the Rome Convention allows and foresees the application of domestic law - in this case Portuguese - while lawyers for Banco Santander Totta counter that when the contracts were signed English jurisdiction was accepted by mutual agreement.
The conflict dates back to early 2013 when the companies announced that they believed that the swap contracts were invalid and suspended the payments due under them. The contracts had been taken out as an insurance against rising interest rates but had the opposite effect when rates tumbled in the wake of the global crash, with payments due ballooning.
If the High Court rejects their claim, the companies may appeal to the Supreme Court and, ultimately, to the European Court of Justice.