SWEDEN

Stefan Bessman, Magnus Stålmarker and Farzad Niroumand

A.              LEGISLATION AND RULES

A.1          Legislation

The latest update to the Swedish Arbitration Act (SAA) came into force on 1 March 2019. The updates intend to ensure that the arbitration process is more efficient and more easily accessible. For instance, the new SAA gives arbitrators the power to determine the applicable substantive law in the absence of party agreement. The grounds for challenging an arbitral award have also been revised. Moreover, the timeline for applications to set aside an arbitral award has been reduced from three to two months from the date on which the party received the award. Moreover, certain aspects of the set-aside procedure can be undertaken in English, without interpretation in Swedish.

No legislative amendments have been introduced in 2020.

A.2          Institutions, rules, and infrastructure

A.2.1   The SCC Rules

The Arbitration Institute of the Stockholm Chamber of Commerce (SCC) is the central arbitration institute in Sweden that administers domestic and international arbitrations. The SCC administered over 200 cases in 2020 and maintains its position as one of the leading international arbitration institutes in the world.

The current SCC Arbitration Rules (SCC Rules) entered into force on 1 January 2017. The SCC Rules are available in various languages, including Swedish, English, Russian, Chinese, Arabic, and German.

The SCC has mediation rules and rules for expedited arbitrations, procedures for the administration of cases, and procedures as appointing authority under the 2010 UNCITRAL Arbitration Rules.

A.2.2   A new model clause for dispute resolution

Given the effects that the COVID-19 pandemic has had on the courts, the SCC has introduced a new model clause for parties wishing to agree on submitting an existing or forthcoming dispute to arbitration in accordance with the SCC Rules. The purpose of the model clause is to assist businesses in need of a quick option to resolve disputes in, e.g., instances where the parties’ agreement does not refer to arbitration. The SCC has included a model submission agreement for parties to agree on to bring a dispute to the SCC. The model clause is available in various languages.

A.2.3   The SCC platform

In late 2019, the SCC launched its arbitration platform. Each party to an arbitration proceeding is given its own secure access site to the platform, e.g., the platform allows the parties to file submissions and exhibits. The platform also allows the tribunal to notify the parties of procedural orders, schedules of the proceedings, and timelines.

The SCC platform has been made available free of charge for ad hoc arbitrations for the duration of the arbitration (from start to finish) to support the online administration of ad hoc proceedings during the COVID-19 pandemic. The use of the platform will remain free of charge for any cases registered by 30 May 2021, although the date may be extended.

A.2.4   Publication of SCC awards

While some international arbitration institutes already have, or are considering, the option to publish their awards, the SAA and the SCC Rules allow very little information to be published about a dispute. Awards may only be published with the parties’ consent, provided they are redacted to maintain confidentiality and will not include the names of the arbitrators, parties, or their counsels. However, in late 2020, the SCC released a limited number of anonymized awards rendered under the SCC Rules between 2016 and 2019. The awards are published in the ICCA Yearbook and in the Kluwer Arbitration database. They are meant to serve as guidelines but have all been edited to meet the requirements of confidentiality and discretion.

B.              CASES

B.1          The validity of an arbitration agreement in light of the Achmea ruling

The Svea Court of Appeal decided to stay proceedings and request a preliminary ruling from the European Court of Justice on whether the Achmea ruling requires it to set aside two intra-EU bilateral investment treaty awards against Poland before ruling on two SCC awards.

The case[1] concerned a claim for damages between a Luxembourg company and the Republic of Poland. The arbitral tribunal had determined, in one separate and one final award, that Poland had violated its obligations under an intra-EU BIT between Poland, Luxembourg, and Belgium by expropriating the Luxembourg company’s shareholdings in a Polish bank and, subsequently, the company was entitled to damages.

The awards were challenged by Poland on the grounds that, among other things, the dispute was not arbitrable since the investment treaty did not provide any possibility to request a preliminary ruling from the Court of Justice of the European Union (CJEU) and therefore undermined the autonomy of EU law. The arbitration clause was also in conflict with the foundation of the EU legal system and, thus, the Swedish legal system. According to Poland, arbitral awards based on such an arbitration clause were subsequently manifestly incompatible with the foundation of the legal system (ordre public).

The Swedish Svea Court of Appeal found that the principles laid down in the Achmea ruling (C‑284/16)[2] were applicable to the dispute. In the Achmea ruling, the CJEU set out that an arbitration clause in an investment treaty, which permits an investor to request an arbitration against a Member State at an arbitration tribunal whose competence the Member State is bound to approve, is incompatible with EU law and thus invalid. The CJEU thus concluded that articles 267 and 344 TFEU must be interpreted as precluding a provision in an international agreement concluded between EU member states, under which an investor from one of those member states may, in the event of a dispute concerning investments in the other member state, bring proceedings against the latter member state before an arbitral tribunal whose jurisdiction that member state has undertaken to accept. The equivalent arbitration clause in the intra-EU BIT between Luxembourg and Poland was also declared invalid by the Swedish court of appeal.[3]

However, the invalid arbitration clause did not, according to the Swedish court of appeal, restrain the Luxembourg company and Poland from entering into a valid arbitration agreement on an individual basis. The court found that Poland had passively entered into a valid arbitration agreement with the Luxembourg company due to the fact that Poland did not object to the validity of the arbitration in a timely manner. The Swedish court of appeal thereafter concluded that, as the dispute was arbitrable and neither the arbitral awards nor the manner in which they arose were incompatible with Swedish ordre public, the arbitral awards were determined valid.[4]

After the case was appealed by Poland, the Swedish Supreme Court, contrary to the Court of Appeal, established that it is unclear how EU law should be interpreted in the case and therefore requested a preliminary ruling from the CJEU to clarify the matter. A response is requested regarding whether articles 267 and 344 TFEU entail, as interpreted in the Achmea ruling, that an arbitration agreement between a member state and an investor is invalid due to an invalid arbitration clause contained in an intra-EU BIT if the member state freely accepts the investor’s request for arbitration and refrains from objecting to the jurisdiction.[5]

B.2          The dismissal of an application for summons due to res judicata

In 2013, an arbitration tribunal with its seat in Sweden concluded that the Republic of Kazakhstan (“Kazakhstan“) had violated international law by seizing and nationalizing certain petroleum operations in Kazakhstan in 2010. The investors of the petroleum operations were awarded approximately USD 500 million in damages and legal costs with interest by the tribunal.

Kazakhstan subsequently challenged the SCC award in numerous court proceedings in Sweden, which were finally resolved in several judgments handed down by the Swedish Supreme Court and the Svea Court of Appeal in 2020.

In one of these cases — the Svea Court of Appeal[6] (the court of appeal is the first instance court for a challenge to an arbitral award) ⁠— the arbitral award was challenged by Kazakhstan on the grounds that the award was in violation of fundamental principles of Swedish law.

The main question for the court to decide, however, was whether Kazakhstan’s application for a summons should be dismissed due to procedural impediment (res judicata), as Kazakhstan had already requested the court to set aside the arbitral award in 2016.

The Court of Appeal concluded, with reference to Swedish legislation, case law, and legal doctrine, that the proceeding was barred given that the arbitral award and the parties remained the same. The court also noted that “the legal consequences of the case” were the same as those in the previous court proceeding in 2016. The Court of Appeal stated that it was clear that the issues were the same in both proceedings and that there was a procedural impediment, i.e., res judicata. The Court of Appeal dismissed Kazakhstan’s claim since it included a review of a matter that was previously decided by a court.

The Court of Appeal held that a judgment after the period for appeal had expired was final and binding on Kazakhstan. Accordingly, it cannot be subjected to a renewed court proceeding. The case was dismissed by the court of appeal.

B.3          The ruling on the immunity of foreign state property

In another appeal case brought before the court by Kazakhstan, the Supreme Court[7] was subsequently left to decide on the enforcement of the USD 500 million SCC award.

In enforcing the arbitral tribunal’s award, the investors had made an application with the district court for a freezing order in respect of property belonging to Kazakhstan’s government. The district court allowed the freezing order. An application was then made to the Swedish enforcement agency to freeze property, which included funds held by Kazakhstan’s government in a Swedish bank.

Kazakhstan appealed the decision with the objection that the property, among other things, was protected by state immunity. It was claimed that such enforcement would violate ordre public. The district court concluded that the property could not be regarded as protected by state immunity.

The decision by the district court was appealed by Kazakhstan to the court of appeal. In its judgment, the court of appeal considered the notion of sovereign immunity, which generally exempts a state’s commercial or private acts from immunity. The Court of Appeal also took into consideration the United Nations Convention on Jurisdictional Immunities of States and Their Property (“UN Convention”), which largely stipulates that a foreign state can only be subjected to enforcement measures with its consent. Although exemptions from sovereign immunity exist, such as the property of a central bank of a state, the court held that the provisions of the UN Convention should be applied categorically. Accordingly, the court held that the Kazakhstani property was protected by state immunity and annulled the freezing orders.

The Svea Court of Appeal’s judgment has been appealed to the Supreme Court. The Supreme Court has announced that it has granted Kazakhstan a partial leave to appeal[8] , but no decision has yet been made.

B.4          Contracts referring to arbitration and litigation

The Svea Court of Appeal[9] considered the interpretation of two separate contracts that had been decided on by an arbitral tribunal.

The two contracts – one share purchase agreement (“SPA”) for the sale of shares as well as a loan and pledge agreement (containing provisions on, amongst others, the right to claim interest) (“Loan Agreement”). According to the SPA, disputes were to be resolved by arbitration. The Loan Agreement, on the other hand, referred disputes to court litigation.

In its award, the arbitral tribunal concluded that it had jurisdiction to decide on matters relating to the SPA and awarded the claimant approximately USD 340,000 with interest. The tribunal, however, determined that it could not decide on the main interest claim since this was based on the Loan Agreement. The interest claim was therefore dismissed by the tribunal, and the parties were ordered to jointly and severally pay the costs for the arbitration proceeding.

The arbitral award was challenged on, among others, the grounds that the specific performance claim was based on the Loan Agreement rather than the SPA and therefore not covered by the arbitration clause.

The Svea Court of Appeal clarified that the starting point for determining whether a dispute is covered by an arbitration agreement relates to the legal relationship in the parties’ agreement. The court noted that an arbitration agreement will need to be specific to a specific legal relationship.

The court cited a judgment from the Supreme Court[10] in which it was held that the applicability of an arbitration agreement must be determined by customary principles for contract interpretation. If no guidance can be determined, it must be assumed that the parties intended that disputes should be resolved quickly and in one proceeding before an arbitral tribunal. The court also noted that an arbitral tribunal is generally better suited to determine the issue of its own jurisdiction than the courts. The starting point for a court challenge of an arbitration award should be that the arbitral tribunal’s interpretation and assessment of evidence are correct.

Thus, the subject of a challenge of an arbitral award should be on whether the claimant has succeeded in establishing that the arbitral tribunal made an incorrect assessment of the scope of the arbitration agreement.

As such, the court concluded that there were no grounds to annul the arbitral award, and the challenge of the arbitral award was rejected.

 

[1] The Svea Court of Appeal, 22 February 2019, Case no. T 8538-17 and T 12033-17.

[2] The Achmea case, Case no C 284/16.

[3] Judgment of the Svea Court of Appeal, 22 February 2019, Case no. T 8538-17 and T 12033-17. The Eco Swiss case (Case no. C-126/97), the Mostaza Claro case (Case no. C 168/05) and the Achmea case (Case no. C 284/16) were outlined and compared in the judgment of the court of appeal.

[4] Judgment of the Svea Court of Appeal, 22 February 2019, Case no. T 8538-17 and T 12033-17.

[5] The Supreme Court, 4 February 2020, Case no. T 1569-19.

[6] Judgment of the Svea Court of Appeal, 17 June 2020, Case no. OA 7709-19.

[7] Judgment by the Svea Court of Appeal, 31 January 2020, Case no. T 12462-19.

[8] Decision to grant leave to appeal by the Supreme Court, 21 September 2020, Case no. O 3828-20.

[9] Judgement of Svea Court of Appeal, 26 May 2020, Case no. T 1151-19.

[10] Judgment by the Supreme Court, 20 March 2019, Case no. NJA 2019 p. 171.

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