IUC Subjective Incidence in Financial Leasing: CAAD Arbitral Decision 333/2018-T

ARBITRAL DECISION[1]

The Arbitrator, Dr. Sílvia Oliveira, designated by the Ethics Council of the Centre for Administrative Arbitration (CAAD) to form the Arbitral Tribunal, constituted on 24 September 2018 with respect to the process identified above, decided as follows:

REPORT

1. A..., S. A. (hereinafter referred to as "Claimant"), legal entity no. ..., with headquarters at Rua..., n°..., in Lisbon, submitted a request for an arbitral decision and for the constitution of a Single Arbitral Tribunal, on 12 July 2018, under the provisions of article 4 and no. 2 of article 10 of Decree-Law no. 10/2011, of 20 January [Legal Framework for Arbitration in Tax Matters (RJAT)], in which the Tax and Customs Authority (hereinafter referred to as "Respondent") is the respondent.

2. The Claimant intends that the Arbitral Tribunal should conclude "by declaring the illegality and consequent annulment of the act of assessment of IUC relating to 1 (one) motor vehicle identified (…); reimbursement of the amount of € 257.76, relating to the tax and compensatory interest unduly paid by the Claimant; and the payment of indemnifying interest, for the deprivation of the aforementioned amount of € 257.76, under the terms of article 43 of the General Tax Law".

1.3. The request for constitution of the Arbitral Tribunal was accepted by His Excellency the President of CAAD on 13 July 2018 and notified, on the same date, to the Respondent.

1.4. Given that the Claimant did not proceed with the appointment of an arbitrator, under the provisions of article 6, no. 2, subsection a) of the RJAT, the undersigned was designated as arbitrator, on 3 September 2018, by the President of the Ethics Council of CAAD, with the appointment having been accepted within the legal time limit and terms.

1.5. On the same date, the Parties were duly notified of this designation and did not manifest their will to refuse it, under the combined terms of article 11, no. 1, subsections a) and b) of the RJAT and articles 6 and 7 of the Ethics Code.

1.6. Thus, in accordance with the provisions of subsection c) of no. 1 of article 11 of the RJAT, the Arbitral Tribunal was constituted on 24 September 2018, with an arbitral order being issued on the same date, directing the Respondent to, under the terms of article 17, no. 1 of the RJAT, submit a Response within a maximum period of 30 days and, if it so wished, request the production of additional evidence.

1.7. Additionally, it was also stated in that arbitral order that the Respondent should send to the Arbitral Tribunal, within the time limit for the Response, a copy of the administrative file.

1. On 25 October 2018, the Respondent submitted its Response, having defended itself by way of impugning the facts and concluding that "(…) the tax act in question does not suffer from any defect of violation of law, in that in light of the provisions of article 3 of the CIUC and article 6 of the same code, it was the Claimant, in its capacity as owner, the subject liable for the IUC", petitioning that "(…) the present request for an arbitral decision be judged to be unfounded, for being unproven, and that the Respondent be absolved accordingly from the claim" having, on the same date, attached to the file a copy of the administrative file.

2. By an arbitral order dated 29 October 2018, taking into account (i) the fact that no exception was raised in the Response that requires knowledge, as well as (ii) the fact that the position of the Parties is fully defined in the file and supported by the means of documentary proof provided, the Arbitral Tribunal decided that testimonial evidence was not necessary and, therefore, also saw no utility in holding the meeting provided for in article 18 of the RJAT.

3. Thus, under the principles of autonomy of the Arbitral Tribunal in the conduct of proceedings, celerity, simplification and procedural informality (articles 19, no. 2, and 29, no. 2, of the RJAT), as well as taking into account the principle of limitation of useless acts provided for in article 130 of the Code of Civil Procedure (CPC), applicable by force of the provisions of article 29, no. 1, subsection e) of the RJAT, it was decided:

1.10.1. To dispense with the holding of the meeting referred to in article 18 of the RJAT;

1.10.2. To dispense with the taking of testimonial evidence presented by the Claimant;

1.10.3. To determine that the proceedings continue with optional written submissions, to be presented within the simultaneous period of 10 days, counting from notification of this order;

1.10.4. To designate 30 November 2018 as the date for the pronouncement of the arbitral decision.

1.11. In the same order, the Claimant was also warned that "by the date of the pronouncement of the arbitral decision it should proceed with payment of the subsequent arbitration fee, in accordance with the provisions of no. 3 of article 4 of the Regulation of Costs in Tax Arbitration Proceedings and communicate that payment to CAAD".

1. The Claimant did not submit written submissions, while the Respondent submitted its written submissions on 12 November 2018, to the effect that "(…) it maintains the position already assumed in its Response" and that "(…) out of respect for those who have the dignified task of adjudicating, the Respondent will not submit Submissions restating, now under a new heading, that which was previously and opportunely explained", "(…) it will limit itself to using the procedural prerogative that these final submissions constitute in order to make some final considerations", defending that "the request for an arbitral decision cannot at all be upheld, in that the Claimant makes an interpretation and application of the legal norms subsumable to the case sub judice notoriously erroneous, in particular of article 3 of the CIUC, in the version CURRENTLY in force" (capitals of the Respondent).[2][3]

CAUSE OF ACTION

2.1. The Claimant begins by clarifying that the Request for Arbitral Decision relates to the "(…) legality of 1 (…) act of assessment of Single Tax on Circulation (…) identified (…), carried out by the Tax and Customs Authority (…) with respect to 1 (…) motor vehicle also identified (…), relating to the year 2018, in the amount of € 255.71, plus compensatory interest totalling € 2.05, thus making up the total amount of € 257.76 (…)".

2.2. According to the Claimant, "(…) this act reveals the (…) legal-tax framework (…) of which, during the validity of the financial leasing contract, the Claimant here, current lessor entity of the motor vehicle in question, is responsible for the payment of the IUC, instead of the lessee, which it seeks to contest (…)" (underlined by the Claimant).

The relevant factuality

2.3. The Claimant continues by stating that "(…) it is a credit institution (…)", and that "(…) among its areas of activity, automotive financing assumes particular relevance (…)", because "a substantial part of its activity amounts to the conclusion (…) of financial leasing contracts aimed at the acquisition, by companies and individuals, of motor vehicles".

2.4. The Claimant clarifies that "during the period to be stipulated in the contract (…)" the "lessee maintains temporary use of the vehicle - which remains the property of the Claimant, by way of remuneration (…) in the form of rental payments; and may be able to acquire the leased motor vehicle, at the end of the contract, by payment of a residual value (…)".

2.5. Thus, the Claimant states that, in the situation underlying the said assessment of IUC:

2.5.1. The motor vehicle subject thereof was leased under a "(…) financial leasing contract concluded on 13 December 2011 (…)";

2.5.2. The "financial leasing contract (…) which was fully in force in the year – or, more specifically, in the relevant month of the year – in which the obligation to pay the IUC associated with (…) the vehicle became due" already that "the anniversary month of this motor vehicle was January" and,

2.5.3. Thus, "(…) the use of this motor vehicle was always exclusively at the disposal of the respective lessee" and therefore "(…) the potential benefit thereof could not even belong to the (…) Claimant".

1. In consequence, it understands that "(…) the Claimant could not be responsible for payment of the tax" because it could not "(…) assume the quality of subject liable for the tax that was erroneously assessed against it" but, even so, given that "(…) the TA came to demand payment of the IUC from the (…) Claimant", it paid the same "(…) as evidenced by the proof of payment (…)".

2. The Claimant states that "(…) the TA acts on the basis of a rationale that (…) appears (…) to be wrong (…)" because it understands that the Respondent believes that "(…) the (…) owner and lessor entity of a certain motor vehicle is, in light of the provisions of the IUC Code, (…) unavoidably the subject liable for this tax and, therefore, must be responsible for its payment", an understanding with which the Claimant does not agree nor acquiesce "(…) and which it considers (…) absolutely illegal".

As to the Law – The rationale underlying the IUC

1. The Claimant argues that underlying the rule of incidence of this tax "is (…) the presumption of the potential for use of motor vehicles (…) generating a certain level of pollution, wear on roads (…)", an "(…) increased potential to cause damage to the environment and to infrastructure, damage that justifies (…) its taxation under the IUC", arguing that the Claimant believes that "the weight of the environmental component" was "one of the central points of the comprehensive reform of automotive taxation" carried out in 2007.[4]

2. To this extent, "the determining criterion for taxation ceased to be (exclusively) engine displacement, and came instead to derive (…) from indicators of the polluting capacity of a vehicle, it being certain that as a structuring and unifying element of these categories, the principle of equivalence is enshrined, thus making it clear (…) that the tax (…) is subordinate to the idea that taxpayers should be burdened in the measure of the cost they cause to the environment and to the road network, this being the raison d'être of this tax figure" (bold and underlined by the Claimant).[5]

3. In this context, and also citing Diogo de Leite Campos[6], the Claimant argues that "the Single Tax on Circulation does not have the vehicle, in itself, as the object of its incidence, but rather its use (in act or in potentiality)", concluding that the Claimant believes that the burden associated with the IUC is incumbent "in the first instance on the person or entity that has the potential for use of the said automobile; i.e., that has the potential to produce the pollution that it is sought (…) to discourage", which will be, "in the majority of cases, (…) the owner of the automobile (…)", by being its "(…) user par excellence (…)" that is "(…) its most easily detectable (…) user" (bold and underlined by the Claimant).

4. In these terms, the Claimant understands that, in such cases, there is "a mismatch between the behaviour that constitutes the rationale of this tax figure (…) and the exact reality (…)" in that, in cases in which "the owner did not have, does not have, and will never have (…) the potential for use" of a vehicle, it will not make sense "(…) that the owner should be burdened with the duty to pay the IUC".[7]

As to the Law – The substantive standing of the lessee

1. In this context, the Claimant states that "it is not surprising (…) that, in such cases, the legislator has departed from the general rule of ownership (…) in favour of greater adherence to the economic substance of the situation" and that, in cases of financial leasing, "the legislator opted (…) to burden with the tax obligation not the owners, but the individuals to whom it falls to enjoy (…) exclusive benefit of the motor vehicles", that is, "the financial lessees (…) or lessees with an option to purchase", "(…) not their legal owners, but those to whom its economic ownership belongs".[8]

As to the Law – The financial leasing contract

1. In this regard, the Claimant states that "in a financial leasing contract, there is no doubt that the right to use the good is removed from its respective owner (…) to be integrated into the sphere of the lessee" because, in accordance with the definition presented by Diogo de Leite Campos, "financial leasing can be defined as the contract for the medium or long term aimed at financing someone, not through the provision of a sum of money, but through the use of a good" providing the "lessee not so much the ownership of certain goods, but their possession and use for certain purposes (…)".[9]

2. In these terms, the Claimant understands that "(…) the legal qualification of lessor – encompasses (…) but clearly goes beyond the qualification of owner" and that "the lessor is merely an instrumental owner, (…) whose rights and duties are very different from those typically associated with the legal figure of ownership".

As to the Law – The lack of standing of lessor entities to pay the IUC

1. Now, according to the Claimant, "(…) knowing in advance that the IUC seeks to impute to taxpayers the responsibility that is attributed to them by the potential use of vehicles (…) it cannot fail to consist of the burden of those who effectively cause such costs, which must be the person to whom the right to use the vehicle in question belongs", reiterating thus that the Claimant believes that "when a financial leasing contract is in force at the moment when the IUC becomes due, it is to the lessee, and not to the lessor (…) that it falls to assess it, for being the subject liable for the tax", and therefore "(…) the Claimant is not the subject liable for the IUC in question with respect to the financial leasing contract of which it is a party, in its capacity as lessor entity, and therefore the tax act to which it was subject is (…) manifestly illegal" (bold and underlined by the Claimant).[10]

As to the Law – The arbitral case law

1. In this matter, the Claimant states that "this is how it has been decided (…)" in the matter of "arbitral decisions delivered (…) on this subject (…)".[11]

As to the costs of the present arbitration process and indemnifying interest

1. In this regard, the Claimant understands that, as it is not responsible for the payment of the IUC that is the subject of the arbitral request, since it understands that the same "(…) is the exclusive and sole responsibility of the TA", it will be to the Respondent that responsibility should be attributed for payment of indemnifying interest and for payment of arbitration costs.

RESPONSE OF THE RESPONDENT

3.1. The Respondent, in the Response presented, defended itself by way of impugning the facts and, in summary, presented the following arguments:

As to the error regarding the assumptions

3.2. In this context, the Respondent argues that "(…) the allegations of the Claimant cannot at all succeed, in that it makes an interpretation and application of the legal norms subsumable to the case (…) notoriously erroneous" given that "the understanding advocated by the Claimant not only incurs a skewed reading of the law, but also the adoption of an interpretation that does not take into account the systematic element, violating the unity of the regime established throughout the CIUC and, more broadly, throughout the entire legal-fiscal system and also flows from an interpretation that ignores the rationale of the regime established in the article in question, and likewise throughout the CIUC" (bold of the Respondent).

As to the value of arbitral case law and the opinions submitted by the Claimant

1. In this matter, the Respondent states that "(…) it is not unmindful of the existence of settled case law in the Centre for Arbitration (…) on the subject matter in question (…), however it does not agree with it" because it is guided "(…) by legal norms and not by jurisprudential currents".

2. On the other hand, and with regard to the legal opinions that the Claimant appended with the arbitration request, the Respondent comes to put into question the impartiality of their authors.

As to the subjective incidence of the IUC

1. In this respect, the Respondent alleges that "the first misunderstanding underlying the interpretation defended by the Claimant hinges on a skewed reading of the letter of the law" (…) because "the tax legislator when establishing (…) who are the subjects liable for the IUC expressly and intentionally established that these are the owners (…), being considered as such the persons in whose names the same are registered (…)", thus defending the rejection of the establishment of a presumption by the legislator.

2. Thus, the Respondent understands that "in light of this wording it is manifestly not possible to invoke that it is a presumption, as the Claimant argues (…) it is (…) a clear option of legislative policy adopted by the legislator, whose intention (…) was that, for the purposes of the IUC, those registered as such in the vehicle register be considered owners", concluding that "(…) it is manifestly not possible to invoke that it is a presumption, as the Claimant argues".[12]

As to the interpretation that does not take into account the systematic element, violating the unity of the regime

1. In this respect, the Respondent understands that "from the articulation between the scope of subjective incidence of the IUC and the constitutive fact of the corresponding tax obligation it follows unequivocally that only the legal situations that are the subject of registration (…) give rise to the birth of the tax obligation (…)" and that "in the absence of such registration (…) the owner will be notified to fulfil the corresponding tax obligation (…)".

2. Now, "if one accepts the position defended by the Claimant (…) the Respondent would have to proceed with the assessment of the IUC in respect of that other person identified by the person appearing in the vehicle register to whom it had previously assessed the IUC (…)" and, "in turn, after assessing the IUC in respect of that other person, this one could also allege and prove that in the meantime it has already concluded a contract of (…) financial leasing (…) with another third party, but that this one also did not register (…)", "(…) and so on (…)", "thus putting (…) in question the period of limitation of the tax" and therefore the Respondent understands that "such an interpretation cannot at all be followed".

As to the interpretation that ignores the teleological element of interpretation of the law

1. In this context, the Respondent understands that it was the intention of the tax legislator "(…) to create a tax based on the taxation of the owner of the vehicle as appears in the vehicle register", with the IUC having become "(…) due by the persons appearing in the register as owners of the vehicles" (bold of the Respondent).[13]

2. Thus, according to the Respondent, "it is clear that the tax act in question does not suffer from any defect of violation of law", in that in light of the applicable legislation, "it was the Claimant, in its capacity as owner, the subject liable for the IUC" (bold of the Respondent).

As to the documents attached with a view to rebutting the presumption

1. In this context, the Respondent reiterates that "in light of everything that (…) has been set out (…), it was the Claimant, in its capacity as owner appearing in the Vehicle Register Office, the subject liable for the IUC", hence the Respondent understands that "(…) all the reasoning advocated by the Claimant is riddled with error, it not being possible to rebut the presumption established" but, "(…) accepting that it is admissible to rebut the presumption in light of case law that has already been settled (…) reference is made to the information contained in the Administrative File now attached (…)".

As to the interpretation in breach of the Constitution

1. In this matter, the Respondent comes to state that "(…) if the interpretation conveyed by the Claimant were to be accepted, then it would be in breach of the Constitution, in that such interpretation translates into the violation of the principle of trust, the principle of legal certainty, the principle of efficiency of the tax system and the principle of proportionality", since it understands that "the interpretation proposed by the Claimant (…) devalues the registered reality to the detriment of an informal reality and not susceptible to a minimum degree of control by the Respondent (…)".[14]

As to the payment of indemnifying interest and responsibility for payment of arbitration costs

1. In this regard, the Respondent alleges that "the registration of ownership constitutes an essential element in the information system between the Respondent and other public entities (…) with a view to the exchange of information necessary for the assessment and inspection of (…) the IUC" and that "the transfer of ownership of motor vehicles is not susceptible to being controlled by the Respondent (…)", and therefore "(…) the IUC is assessed in accordance with the registered information (…) transmitted by the Institute of Registers and Notary" (bold of the Respondent).

2. In summary, the Respondent alleges that "the IUC is not assessed in accordance with information generated by the Respondent itself" and therefore "as the Claimant has not been diligent in updating the vehicle register (…) it is inevitable to conclude that the Claimant did not proceed with the care that was required of it", leading "(…) the Respondent to confine itself to fulfilling the legal obligations to which it is bound (…)" (bold of the Respondent).[15]

3. And, as it was not "(…) the Respondent who gave rise to the filing of the request for an arbitral decision, but rather the Claimant itself", "(…) the Claimant should be sentenced to pay the arbitration costs arising from this request for an arbitral decision (…)", applying "the same reasoning (…) to the request for condemnation to payment of indemnifying interest formulated (…)", concluding the Respondent that "(…) the legal requirements that confer the right to indemnifying interest are not met".

4. Finally, the Respondent also states that "even if this were not the case (…), it is still undeniable that the Respondent confined itself to complying with article 3, no. 1 of the CIUC, (…), and therefore also for this reason the recognition of the right to payment of indemnifying interest must necessarily fail".

5. In these terms, the Respondent concludes its Response to the effect that "(…) the present request for an arbitral decision should be judged to be unfounded, for being unproven, (…) abssolving (…) the Respondent from the claim".

PRELIMINARY RULING

4.1. The request for an arbitral decision is timely, because submitted within the period provided for in subsection a), of no. 1, of article 10 of the RJAT.

1. The parties enjoy legal personality and capacity, are legitimate as to the request for an arbitral decision and are duly represented, in accordance with the provisions of articles 4 and 10 of the RJAT and article 1 of Ordinance no. 112-A/2011, of 22 March.

2. The Tribunal is regularly constituted, in accordance with article 2, no. 1, subsection a), articles 5 and 6, all of the RJAT and is competent as to the appraisal of the request for an arbitral decision formulated by the Claimant.

4.4. No procedural defects were identified.

4.5. There are no exceptions, nor preliminary questions that require knowledge, and therefore nothing stands in the way of the appraisal of the merits of the case.

MATTER OF FACT

1. Taking into account that the Tribunal does not have to rule on everything that has been alleged by the parties, but rather has the duty to select the facts that matter for the decision and to discriminate between the facts proved and those not proved (cf. article 123, no. 2, of the Code of Tax Procedure and Process (CPPT) and article 607, nos. 3 and 4, of the Code of Civil Procedure (CPC), applicable ex vi article 29, no. 1, subsection a) and subsection e), of the RJAT), having regard to the positions assumed by the parties, the documentary evidence provided to the file and the testimonial evidence produced, the following facts are considered to be proved:[16]

From the facts proved

1. The Claimant is a credit institution, authorized to conduct its business in Portugal, being subject to the supervision of the Bank of Portugal.

2. The Claimant conducts, among others, the business of consumer financing, with automotive financing assuming particular relevance, concluding for this purpose financial leasing contracts intended for the acquisition, by companies and individuals, of motor vehicles.

3. The Claimant concluded, on 13 December 2011, a financial leasing contract with the respective lessee (as a copy attached with the arbitration request), relating to the motor vehicle registration ..., in which the payment of 84 installments (term of 7 years) was provided.

4. The Claimant was notified of the following assessment of IUC and interest relating to the year 2018:

1. The Claimant paid, on 7 May 2018, the said assessment of IUC and interest.

2. As of the date to which the assessment of IUC identified in point 5.5, above, related, the financial leasing contract (see point 5.4, above) concluded between the Claimant (as lessor entity) and the respective lessee was still in force, having regard to the information extracted from it and which is summarized below:[17]

1. As of the date of the assessment of IUC identified in point 5.5, above, the Respondent was unaware that the vehicle subject to assessment was covered by a financial leasing contract, in which the Claimant assumed the position of lessor.

2. No other facts were proved that would be capable of affecting the decision on the merits of the claim.

Reasoning as to the matter of fact

5.10. With regard to the matter of fact proved, the conviction of the Arbitral Tribunal was founded, in addition to the free appraisal of the positions assumed by the Parties (as to matter of fact), on the content of the documents attached to the file and on the administrative file.

As to the facts not proved

1. No facts were found to be not proved with relevance to the arbitral decision.

LEGAL GROUNDS

6.1. In the file, it will be crucial to determine who was, in this case, the subject liable for the tax, so as to decide whether the said assessment of IUC suffers or not from illegality, in light of the applicable legislation as of the date to which the tax fact relates.

6.2. The Claimant, in the request for an arbitral decision, states that the motor vehicle, subject to the assessment of IUC in question, was leased under a "(…) financial leasing contract concluded on 13 December 2011 (…)", "(…) which was fully in force (…) in the relevant month of the year (…) in which the obligation to pay the IUC associated with (…) became due".

6.3. Now, given that "(…) the use of this motor vehicle was always exclusively at the disposal of the respective lessee", the Claimant understands that "(…) it could not be responsible for payment of the tax", concluding that "(…) it could not (…) assume the quality of subject liable for the tax that was erroneously assessed against it" (underlined by us).

6.4. The Respondent, in the Response presented, states that "the tax legislator when establishing (…) who are the subjects liable for the IUC expressly and intentionally established that these are the owners (…), being considered as such the persons in whose names the same are registered (…)", thus defending the rejection of the establishment of a presumption by the legislator, concluding that "(…) it is manifestly not possible to invoke that it is a presumption, as the Claimant argues".[18]

6.5. The Respondent, in its Response, understands that it was the intention of the tax legislator "(…) to create a tax based on the taxation of the owner of the vehicle as appears in the vehicle register", with the IUC having become "(…) due by the persons appearing in the register as owners of the vehicles", thus reiterating that "(…) the regime for taxation of the IUC came substantially to alter the regime for automobile taxation, with the subjects liable for the tax being the owners appearing in the property register (…)".

6.6. In consequence, for the Respondent, "it is clear that the tax act in question does not suffer from any defect of violation of law", in that in light of the applicable legislation, "it was the Claimant, in its capacity as owner, the subject liable for the IUC".

6.7. In this context, it will be necessary to determine the subjective incidence of the IUC, in accordance with the provisions of the respective Code, in the wording in force as of the date of the assessment in question, so as to ascertain which of the Parties is correct in determining the subjective nature of the said tax.

As to the subjective incidence of the IUC

6.8. In accordance with the provisions of article 1 of the IUC Code, "the single tax on circulation complies with the principle of equivalence, seeking to burden taxpayers in the measure of the environmental and road cost that they cause, in concretization of a general rule of tax equality", thus fulfilling the constitutional imperative provided for in article 66 of the Constitution of the Portuguese Republic (CRP), under which it is stated that "to ensure the right to the environment, within the framework of sustainable development, it is incumbent upon the State, through its own bodies and with the involvement and participation of citizens (…) to ensure that fiscal policy is compatible with development while protecting the environment and quality of life" [no. 2, subsection h)], thus promoting a principle of "polluter pays", fulfilling the requirement of material equality among all citizens that give rise to environmental cost and thus embodying the IUC with the environmental concerns that fiscal policy must address.

6.9. Thus, how should the provision of article 3, no. 1, of the IUC Code, in its current wording, be interpreted?

As to responsibility for payment of the IUC during the validity of a Financial Leasing Contract

6.10. The Legal Framework of the Financial Leasing Contract (provided for by Decree-Law no. 149/95, of 24 June, with the amendments subsequently introduced to it), establishes that it is an obligation of the lessor, among others, to "grant the enjoyment of the goods for the purposes for which they are intended".

6.11. On the other hand, the same decree-law establishes the obligations of the lessee, namely, to "pay the rental payments", to "ensure the preservation of the good and not make an imprudent use of it", as well as to "use and enjoy the leased good".

6.12. Having regard to the obligations set out above, by way of example, for both parties to a Financial Leasing Contract, it will be possible to conclude that during the validity of a contract of that nature, although the lessor remains as the owner of the good in question, only the lessee has the exclusive enjoyment of the leased good, using it as if it were the true owner.

6.13. Now, as the lessor does not have, by legal and contractual imposition, the potential for use of the vehicle and as the lessee has the exclusive enjoyment of the automobile, the ratio legis of the IUC Code dictates that it shall be the lessee who is responsible for payment of the tax, since it is the lessee who has the potential for use of the vehicle and for causing the road and environmental costs inherent thereto.

6.14. In fact, in the wording prior to the entry into force of Decree-Law no. 41/2016, of 1 August, the said article 3, no. 1 of the IUC Code provided, in the matter of subjective incidence, that "(…) subjects liable for the tax are the owners of the vehicles, being considered as such the natural or legal persons, of public or private law, in whose names the same are registered", and no. 2 of the same article referred that "financial lessees, acquirers with reservation of ownership, as well as other holders of purchase option rights by virtue of the leasing contract are equated to owners" (underlined by us).

6.15. And as regards the question of whether this norm of subjective incidence enshrined or not a presumption, it is appropriate here to highlight the case law established at CAAD which indicated, as a general rule, that article 3, no. [1] of the IUC Code, in that wording, established a rebuttable legal presumption.

6.16. In this context, it is also appropriate to refer to the Decision of the Central Administrative Court of the South (TCAS), delivered within the scope of Case no. 08300/14, of 19-03-2015, under which it was understood that "the aforementioned article 3, no. 1, of the IUC Code establishes a legal presumption that the holder of the vehicle register is its owner, and such presumption is rebuttable, by virtue of article 73 of the General Tax Law".

6.17. This is an understanding, obviously, valid and applicable, without need for further development for assessments carried out under the previous wording of article 3 of the IUC Code, given the abundant reasoning contained in numerous decisions delivered by the Arbitral Tribunals functioning at CAAD, as well as given the reasoning contained in the Decision identified in the previous point, an understanding with which the Respondent has never agreed.

6.18. But what is to be said of the wording given by Decree-Law no. 41/2016, of 1 August, to the said article 3, no. 1 of the IUC Code, to the effect that "subjects liable for the tax are the natural or legal persons, of public or private law, in whose names the ownership of the vehicles is registered" and that no. 2 of that article now refers that "financial lessees, acquirers with reservation of ownership, as well as other holders of purchase option rights by virtue of the leasing contract are equated to subjects liable" (underlined by us).

6.19. In this matter, it should be noted that this amendment, motivated by the need to "(…) overcome interpretative difficulties that arose with previous wordings of this Code and with the objective of clarifying who is the subject liable for the tax", in no way altered, in the opinion of this Tribunal, insofar as this case is concerned.

6.20. In fact, the amendment introduced in article 3, no. 1 by referring that "subjects liable for the tax are the persons (…) in whose names the ownership of the vehicles is registered" instead of "subjects liable for the tax are the owners of the vehicles, being considered as such the persons (…), in whose names the same are registered", sought to go beyond the legal notion of ownership, shifting the determining focus of the incidence of the tax to the registration of ownership.

6.21. However, the registration of the property right in a vehicle has a merely declarative effect and not a constitutive effect of any registered right, so it is configured as a presumption of the existence of the right, in the terms in which it is registered, which can be rebutted, that is, it admits proof to the contrary.

6.22. In fact, as stated in Arbitral Decision no. 16/2018-T, "the definitive registration constitutes nothing more than the presumption that the right exists and belongs to the registered holder, in the exact terms of the registration (…), admitting (…) counterproof, as follows from the law and as exemplified by judgments of the Supreme Court of Justice nos. 03B4369 and 07B4528, respectively, of 19/02/2004 and 29/01/2008".

6.23. Thus, and in line with the content of the Arbitral Decision delivered within the scope of Case no. 145/2017-T, "the function legally reserved to the register is thus, on the one hand, that of publishing the legal situation of the goods (…) and, on the other, to allow us to presume that the right over these vehicles exists and that it belongs to the holder, as such registered in the register, which means that the register does not have a nature constitutive of the property right, but only declarative, and such presumptions are rebuttable, either by virtue of that established in no. 2 of art. 350 of the Civil Code, or in light of the provisions of art. 73 of the General Tax Law. Hence, from the moment these presumptions are set aside, by means of adequate proof, the TA cannot persist in considering as the subject liable for the IUC the person in whose name the vehicle continues to be registered" (underlined by us).

6.24. In this way, and continuing to follow the understanding set out in the Arbitral Decision cited in the previous point, "the interpretation of no. 1, of art. 3 of the IUC Code, (...), taking into account, in particular, the legal relevance conferred on the principle of equivalence, does not allow for the taxation, in IUC, of the lessor who, as the formal owner of the vehicle, does not have, consequently, any polluting potential, which means that the damage resulting to the community from the use of motor vehicles should be assumed by their actual users, as costs that only they should bear" (underlined by us).

6.25. Having reached this point, it is important to note the provision of no. 2 of article 3 of the IUC Code, in the wording given by Decree-Law no. 41/2016, of 1 August (in force as of the date of the assessment in question), under which it is stated, as we have already seen, that "financial lessees (…) are equated to subjects liable".

6.26. Now, in this context, as stated in the Arbitral Decision already identified, "the lessee (…) has full use and enjoyment of the vehicle, as legally established, being the (…) true user and effective generator of environmental damage, and must therefore be responsible for the corresponding tax, and this is the understanding that, given the ratio legis of the IUC Code, should be drawn from the provision of no. 2 of art. 3 of that same Code".

6.27. In fact, this "(…) interpretation of no. 2 of art. 3 of the IUC Code will only allow the lessee to be viewed as responsible for payment of the IUC (…)", and it is important to note here that the provision in the now repealed article 19 of the IUC Code imposed on lessor entities (for the purposes of article 3 of the IUC Code, that is, for the purposes of subjective incidence), the obligation to provide the TA with data relating to the tax identification of the users of the leased vehicles (lessees), which revealed that, in particular, for the purposes of the said incidence, it was intended to find out who were, ultimately, the actual users of the leased vehicles, so that they, and not others, would bear the single tax on circulation, an understanding that is in total harmony with the principle of equivalence, as the structuring principle of the IUC Code.

6.28. Now, as on the date of the tax event, the motor vehicle that gave rise to the act of assessment that is the subject of the Request for Arbitral Decision was leased under a Financial Leasing Contract (identified in point 5.4, above), the Claimant attached to the file, for purposes of evidence, a copy of the said contract concluded between the Claimant (lessor) and the respective lessee, duly signed by both parties, and therefore, regardless of what appeared in the register, the Claimant demonstrated that, as of the date of the tax event of the IUC of 2018, it was the lessor of this motor vehicle and that it was, on that date, delivered to a third party (lessee), under a leasing contract.

6.29. In fact, a financial leasing contract is a suitable means to prove the quality of lessor and lessee, for the purposes of the provision of no. 2 of article 3 of the IUC Code, that is, for the purposes of equating the lessee to a subject liable for the tax incident on the vehicle that is the subject of the leasing contract and of its, consequent, binding to payment of the tax in question.

6.30. On the other hand, as there are no elements that would permit understanding that the data contained in the financial leasing contract (whose copy was attached to the file by the Claimant) do not correspond to the contractual truth, this Tribunal saw no reason to put into question its content, and it is also true that the law [in this case, no. 1 of article 75 of the General Tax Law (GTL)], attributes to that document a presumption of truthfulness that was not rebutted.

6.31. Thus, there is no doubt that, since the vehicle, on which the assessment of IUC in question was made, was transferred to a third party under a financial leasing arrangement, the subject liable for this tax will be the lessee (by being the one who has the enjoyment of the vehicle) and not the lessor (in whose name the vehicle is registered), thus setting aside the rule of subjective incidence established in no. 1 of that article, in accordance with the provision of no. 2 of the same article.

6.32. For all these reasons, it will be said, in harmony with what has been set out above, that the act of assessment relating to the vehicle identified in the file is considered illegal in that, on the date when the IUC became due, a financial leasing contract was in force, with the respective lessee being the subject liable for the tax, and not the Claimant, in light of the provision of no. 2 of article 3 of the IUC Code.

6.33. And it is also important to note the lack of merit in the position of the Respondent, when, in articles 75 and following of its Response, it alleges that "(…) if the interpretation conveyed by the Claimant were to be accepted, then it would be in breach of the Constitution, in that such interpretation translates into the violation of the principle of trust, the principle of legal certainty, the principle of efficiency of the tax system and the principle of proportionality".

6.34. As to the principle of legal certainty and trust, it must be noted first and foremost that, with regard to the principle of trust, it corresponds to a concretization of the principle of good faith, which, having had recognition in our legal order since 1996, came to have express constitutional inscription in no. 2 of article 266 of the CRP, under which it is established that "administrative bodies and agents are subordinate to the Constitution and the law and must act, in the exercise of their functions, with respect for the principles of equality, proportionality, justice, impartiality and good faith".

6.35. On the other hand, the principle of trust is also regarded as a consequence of the principle of legal certainty, inseparable from the Rule of Law, which, having to guarantee a minimum of certainty in the rights of persons and in the legal expectations created for them, generates trust among citizens in the legal protection afforded by the Public Administration.

6.36. Thus, the aforementioned principles are closely associated, considering that "(…) legal certainty is connected with objective elements of the legal order - guarantee of legal stability, security of orientation and realization of law - whilst the protection of trust is more concerned with the subjective components of security, namely the calculability and predictability of individuals in relation to the legal effects of acts of public authorities" and that, in any case, the "(…) general principle of legal certainty in the broad sense (thus encompassing the idea of protection of trust) can be formulated as follows: the individual has the right to be able to rely on the fact that his acts or public decisions concerning his rights, positions or legal relationships grounded in legal norms that are in force and valid give rise to the legal effects provided and prescribed by those same norms" (underlined by us).[19]

6.37. As to the principle of efficiency of the tax system, it can be stated, in technical sense, that this principle is commonly regarded, in the domain of tax procedure, as a corollary of the principle of proportionality, which imposes an adequate proportion between legal purposes and the means chosen to achieve those ends, that is, as stated by Diogo Leite Campos, Benjamim Silva Rodrigues and Jorge Lopes de Sousa (in "General Tax Law", Annotated and Commented, 4th Edition 2012, page 488), it is a principle that obliges "(…) the tax administration to refrain from imposing on taxpayers obligations that are unnecessary to the satisfaction of the purposes it pursues".

6.38. In this context, the said principle of efficiency of the tax system will mean the capacity to achieve the legally fixed objectives with the minimum of means, which will have nothing to do with respect for citizens' rights, nor with the need to observe other principles to which the tax administration must subordinate its activity (namely the principle of inquiry and discovery of material truth), and the application of the aforementioned principle of efficiency cannot obviously be made, either to the detriment of citizens' rights, or through non-observance of legal purposes.

6.39. As to the principle of proportionality, it is appropriate, first and foremost, to highlight that the same, insofar as it is materially inherent to the regime of rights, freedoms and guarantees, being inscribed in their defence, aims, in essence, to regulate the conduct of the Public Administration in order that its activity, in its relationship with individuals, be guided by the choice of the most equitably adequate measures for the pursuit of the public interest.

6.40. Citing J. J. Gomes Canotilho and Vital Moreira (in "Constitution of the Portuguese Republic", Annotated, Volume I, 4th Edition, 2007, Coimbra Editora, pages 392/393), these authors consider that the said principle is divisible into three sub-principles, namely: "(…) a) principle of suitability (also called principle of aptness); b) principle of necessity (also called principle of necessity or indispensability); c) principle of proportionality in the strict sense, which means that the restrictive legal means and the ends obtained must be in a just measure, preventing the adoption of legal measures that are restrictive, disproportionate, excessive, in relation to the ends obtained (…)".

6.41. Now, as argued in Arbitral Decision no. 145/2017-T, of 13 July 2017, which we have followed in this matter (with the necessary adaptations), "the aforementioned sub-principles have, all of them, a common denominator, which is that of just balance and permanent coherence between the purposes of the law and the means adopted to achieve such purposes, which, in the circumstance and attempting the transposition of said principle to the case of the file, will imply answering the question of what is the appropriate interpretation of no. 1 of art. 3, having in view the pursuit of the legal purposes foreseen in art. 1 of the IUC Code (…)" (underlined by us).

6.42. In the sense of the prohibition of excesses, the case law also points, notably the Decision of the Supreme Administrative Court of 01-07-1997 (Case no. 041177) when it considers that "the principle of proportionality in the broad sense comprises the congruence, suitability or aptness of the means or measure to achieve the legally proposed end and, in the strict sense, encompasses the prohibition of excess".

6.43. Thus, "the principle of proportionality is a corollary of the principle of justice, which means and implies that in its conduct the Public Administration should harmonize the specific public interest that it has to pursue with the rights and legitimate interests of individuals who may be affected by its acts, interests and rights which, in the case at hand, amount to non-taxation in IUC of persons who (…) in no way contribute to the realization of any road and environmental cost".[20]

6.44. Thus, what matters is to balance the legal purposes and the means to pursue them, and, within a balancing judgment, to identify the most suitable means for that purpose which, in this case, translate into the interpretation adopted by the Arbitral Tribunal.

6.45. Finally, it is also important to state that the interpretation adopted by the Arbitral Tribunal, in addition to not conflicting with any of the aforementioned principles, is directly and substantively inscribed within the context of the constitutional order, taking into account "(…), within the systematic element of interpretation, that which relates to the Constitution" because "(…) each legal provision must not only be understood in the context of the provisions of the same law and each law in the context of the legal order; it must also be considered in the context of the constitutional order (…)".[21] [22]

6.46. In these circumstances, it is not apparent that the interpretation carried out by the Claimant (in the arbitral request) and by this Arbitral Tribunal, in this decision, with respect to the provision of article 3 of the IUC Code, contends with any constitutional norms or principles invoked by the Respondent.

6.47. In light of the foregoing, it is concluded that there is no legal ground for the act of assessment of IUC and compensatory interest relating to the motor vehicle identified in the request for an arbitral decision, since as of the date when the tax became due, that vehicle was transferred to the respective lessee under a financial leasing contract, and therefore the Claimant's claim for annulment of the assessment of IUC in question is considered to be well-founded.

As to reimbursement of the tax paid with indemnifying interest

6.48. With regard to payment of indemnifying interest, in accordance with the provision of no. 5 of article 24 of the RJAT, "payment of interest, regardless of its nature, is due, in accordance with the terms provided in the general tax law and in the Code of Tax Procedure and Process", from which it follows that an arbitral decision is not limited to the appraisal of the legality of the tax act.

6.49. In the same way, in accordance with the provision of article 24, no. 1, subsection b) of the RJAT, it should be understood that the request for indemnifying interest is a claim relating to tax acts (e.g. assessments), which seeks to explain/concretize the content of the duty to "restore the situation that would have existed if the tax act that is the subject of the arbitral decision had not been performed, adopting the acts and operations necessary for that purpose".

6.50. As Jorge Lopes de Sousa states, "it falls within the competence of the arbitral tribunals functioning at CAAD to fix the effects of the arbitral decision which can be defined in a judicial review process, in particular, the annulment of acts the declaration of illegality of which is sought, the condemnation of the Tax and Customs Authority to payment of indemnifying interest (…)".

6.51. Thus, in tax arbitration proceedings there may be a place for payment of indemnifying interest, in accordance with the provisions of articles 43, nos. 1 and 2, and 100 of the GTL, when it is determined that there was an error attributable to the services from which resulted payment of the tax debt in an amount greater than that legally due.

6.52. In these terms, the right to indemnifying interest will always depend on verification of an error attributable to the services of the Respondent, from which resulted payment of the tax debt in an amount greater than that legally due.

6.53. Following the declaration of illegality of the act of assessment of IUC already identified above (see point 6.47), under the terms of the provision of subsection b), of no. 1, of article 24 of the RJAT (in accordance with what is established there), "the arbitral decision on the merits of the claim that is not subject to recourse or challenge binds the tax administration from the end of the period set for recourse or challenge, and it must restore the situation that would have existed if the tax act that is the subject of the arbitral decision had not been performed, adopting the acts and operations necessary for that purpose", and therefore an assessment must be made of whether or not there was an error attributable to the services of the Respondent, from which resulted payment of the tax debt in an amount greater than that legally due.

6.54. Having analyzed the situation, it is verified that the Respondent in assessing the IUC in the way it did complied with the legal norm established in no. 1 of article 3 of the IUC Code, since this grants the quality of subject liable to the person in whose name the vehicle is registered in the Vehicle Register Office, which is why it is concluded that there is no error attributable to the services.

6.55. In these terms, there must be a reimbursement of the amounts paid by the Claimant, relating to the IUC of the year 2018 of the motor vehicle identified, but without the right to indemnifying interest, as the requirements for its award are not met (existence of an error attributable to the services of the Respondent).

As to responsibility for payment of arbitration costs

6.56. In accordance with the provision of article 22, no. 4, of the RJAT, "the arbitral decision delivered by the arbitral tribunal contains the determination of the amount and the apportionment among the parties of the costs directly resulting from the arbitration process".

6.57. Thus, in accordance with the provision of article 527, no. 1 of the CPC (ex vi 29, no. 1, subsection e) of the RJAT), it must be established that the Party that gave rise to the costs shall be condemned in costs or, if there is no success on the action, whoever profited from the process.

6.58. In this context, no. 2 of the said article specifies the expression "gave rise to", according to the principle of adverse judgment, understanding that the party that loses gives rise to the costs of the process, in the proportion in which it loses.

6.59. In the case under analysis, having regard to the foregoing, the principle of proportionality imposes that full responsibility for costs be attributed to the Respondent, in accordance with the provision of article 12, no. 2 of the RJAT and article 4, no. 4 of the Regulation of Costs in Tax Arbitration Proceedings.

DECISION

7.1. In these terms, having regard to the conclusions presented in the previous Chapter, this Arbitral Tribunal decided:

7.1.1. To judge well-founded the claim for annulment of the assessment of IUC identified in the process, with the consequences flowing therefrom;

7.1.2. To judge unfounded the claim for payment of indemnifying interest;

7.1.3. To condemn the Respondent to payment of the costs of the present process.

Value of the process: In accordance with the provisions of articles 306, no. 2 of the CPC, article 97-A, no. 1 of the CPPT and article 3, no. 2 of the Regulation of Costs in Tax Arbitration Proceedings, the value of the process is set at EUR 257.76.

Under the terms of Table I of the Regulation of Costs of Tax Arbitration Proceedings, the value of the costs of the Arbitration Process is set at EUR 306.00, to be borne by the Respondent, in accordance with article 22, no. 4 of the RJAT.

Let it be notified.

Lisbon, 30 November 2018

The Arbitrator

Sílvia Oliveira

[1] The drafting of this decision is governed by the spelling prior to the 1990 Spelling Agreement, except for transcriptions made.

[2] At the beginning of the submissions, possibly by lapse, the Respondent refers to a meeting held on 11-12-2017, which did not occur in this process and a wrong date for the submission of the arbitration request (17-01-2017).

[3] In this context, it should be noted that the Respondent takes the opportunity of the submissions to restructure its entire defense, directing it to the new wording of article 3 of the IUC Code, introduced by Decree-Law no. 41/2016, of 1 August (applicable to the assessment in question), because in the Response, the Respondent addressed the entire question of the incidence of the IUC in light of the content of the previous wording of that article 3 and the question of the rebuttable presumption enshrined therein, a position with which the Respondent has never agreed (see Chapter 3 of this Decision). In fact, in the Response, the Respondent developed its entire reasoning in accordance with the position it has been defending with CAAD since 2012, that article 3, no. 1 of the IUC Code, in the wording prior to August 2016, did not allow the possibility of rebutting the presumption established therein.

[4] In this context, the Claimant cites Law Proposal no. 118/X, which preceded Law no. 22-A/2007, a decree that promoted the replacement of the defunct Motor Vehicle Tax with the current IUC.

[5] In this regard, the Claimant cites the reasons presented by the then Secretary of State for Tax Affairs when voting on the Law Proposal in Parliament.

[6] In an opinion delivered at the request of ALF - Portuguese Association of Leasing, Factoring and Renting, a copy of which the Claimant attached to the process (Annex H).

[7] In this matter, the Claimant cites Baptista Machado, in "Introduction to Law and Legitimizing Discourse", page 186.

[8] Here, and once again, the Claimant cites Diogo Leite Campos in the opinion already referred to in footnote no. 4.

[9] See Essay on Typological Analysis of the Financial Leasing Contract, in Bulletin of the Faculty of Law of the University of Coimbra, vol. XXIII, page 10.

[10] In this matter, the Claimant cites Professor Dr. Agostinho Cardoso Guedes, in Opinion issued at the request of the Association of Specialized Credit Institutions (ASFAC), a copy of which was attached to the file (Annex I), to the effect that "we must consider them (the lessees) sole subjects liable for that tax, given that there is no legal norm that, directly or indirectly, attributes to lessors (…)" that responsibility.

[11] In this regard, the Claimant cites various arbitral decisions delivered in the matter of tax arbitration, in particular the decisions delivered within the scope of Cases no. 27/2013-T, no. 14/2013-T and no. 73/2013-T, in addition to enumerating those delivered in Cases nos. 170/2013-T, 256/2013-T, 286/2013-T, 45/2014-T, 60/2014-T, 129/2014-T, 136/2014-T, 221/2014-T, 222/2014-T, 225/2014-T, 228/2014-T, 229/2014-T, 230/2014-T, 232/2014-T, 235/2014-T, 645/2014-T, 655/2015-T, 371/2015-T, etc., which "conclude in exactly the same sense" of that here advocated by the Claimant.

[12] To reinforce this understanding, the Respondent cites and partially transcribes the decision delivered within the scope of Case no. 210/13.0BEPNF of the Administrative and Tax Court of Penafiel, under which, in summary, it is stated that "(…) the lack of registration in the name of the new purchaser means that the subjective incidence of the IUC (…) is maintained in the holder of the property right registered in the Vehicle Register Office and is responsible for the assessment and payment of the IUC, regardless of its actual sale. (…)", attaching, with the Response, a copy of the said decision to the process.

[13] In this context, the Respondent refers to the content of parliamentary debates of 12-03-2008, around the approval of Decree-Law no. 20/2008, of 31 January, "(…) from which it follows unequivocally that the IUC is due by the persons appearing in the register as owners of the vehicles", in order to "avoid the problems (…) related to the fact that there are many vehicles not registered in the name of the real owner".

In the same vein, Recommendation no. 6-B/2012 of the Ombudsman, dated 22 June 2012, is cited, under which, in summary, it is stated that "(…) with the approval of Law no. 22-A/2007, of 29 July, decree-law that approved the IUC Code and that substantially altered the regime of automobile taxation (…) the subjects liable for the tax became the owners appearing in the property register, regardless of whether the vehicles circulate on the public highway (…)" and therefore "at a tax level (…) the Single Tax on Circulation is due by the persons appearing in the register as owners of the vehicles".

[14] In this sense, the Respondent cites and transcribes partially, decision delivered in arbitration, within the scope of Case no. 26/2013.

[15] In this context, the Respondent cites and transcribes partially, decision delivered in an arbitration proceeding, within the scope of Case no. 26/2013.

[16] In this context, reference is made to Decision of the TCAS of 19-03-2015 (Case no. 08300/14), under which it is stated that "with regard to the matter of fact, the judge does not have the duty to rule on all the matter alleged, but rather the duty to select only that which matters for the decision, taking into account the cause (or causes) of action that bases the claim formulated by the plaintiff (cf. arts. 596, no. 1 and 607, nos. 2 to 4, of the CPC) and to record whether it considers it proved or not proved (cf. art. 123, no. 2, of the CPPT)".

[17] In general terms, in accordance with article 4 (Temporal incidence) of the IUC Code, "1 - The single tax on circulation is periodic on an annual basis, being due in full in each year to which it relates. 2 - The taxation period corresponds to the year that begins on the date of registration or on each one of its anniversaries, with respect to vehicles of categories A, B, C, D and E, and to the calendar year, with respect to vehicles of categories F and G. 3 - The tax is due until the cancellation of the registration or record owing to scrapping effected in accordance with the law" (underlined by us).

It should be noted that in this case, it is a vehicle of category B.

In this context, it was also taken into account that, in accordance with the provision of article 6, no. 3 of the IUC Code, "the tax is considered due on the first day of the taxation period referred to in no. 2 of article 4" of that Code.

[18] In accordance with the provision of article 571 of the CPC [applicable by force of the provision of article 29, no. 1, subsection e) of the RJAT], "in the defense the defendant may both contest and raise exceptions", and "the defendant contests the facts alleged in the petition or states that such facts cannot produce the legal effect sought by the plaintiff; defends himself by exception when he alleges facts that prevent the appraisal of the merits of the action or which, serving as an imperative, modificative or extinctive cause of the right invoked by the plaintiff, result in the total or partial unfoundedness of the claim".

Under the provision of article 572 of the CPC, "in the defense the defendant must (…) set out the reasons of fact and law why he opposes the plaintiff's claim (…)" and, in accordance with the provision of article 573 of the CPC, "all defense must be raised in the defense, except for incidents that the law orders to be raised separately" and "after the defense only exceptions, incidents and means of defense that are supervening can be raised, or that the law expressly allows after that time, or of which knowledge must be had officially" (underlined by us).

Under the provision of article 120 of the CPPT [applicable by force of the provision of article 29, no. 1, subsection a) of the RJAT], "after the production of evidence, the parties shall be notified to submit written submissions within a period fixed by the judge", and "such submissions are intended to discuss the matter of fact and the legal issues that are already the subject of the process (…)" in the name of the principle of stability of the instance (article 268 of the CPC) (in this sense, see Decision of the Supreme Administrative Court no. 0895/13, of 25-09-2013).

Now, in accordance with footnote no. 3, the Respondent altered the structure of its defense in the submissions (although it maintained the conclusion of unfoundedness of the arbitration request), since it had based its Response on argumentation constructed in light of the content of the previous wording of article 3, no. 1 of the IUC Code, whereas in the submissions it directed its defense on the basis of the new wording of that article, in force since August/2016 and applicable to the case.

Notwithstanding, the written submissions should have served only to effectuate a final summary of the process, having regard to the position previously assumed in the Response. In these terms, it will be on the basis of the content of the Response that the position of the Respondent in this process will