Sweden

Sweden has a long-standing tradition of resolving civil disputes through arbitration. In 1734, Sweden passed a law that allowed parties to resolve certain forms of disputes by means of arbitration, and in the late 1800s Sweden adopted its first comprehensive arbitration act. Moreover, over the course of the 20th century, Sweden positioned itself as a popular venue for international arbitration. During the Cold War, parties from the United States (and other Western countries), the Soviet Union and China regarded Sweden as a neutral venue and the Arbitration Institute of the Stockholm Chamber of Commerce (the SCC Institute) as a neutral administrator of disputes. Therefore, they frequently included arbitration clauses in their agreements that stipulated that the seat of arbitration should be Stockholm, Sweden, and that the arbitration should be administrated by the SCC Institute. Since then, the SCC Institute’s popularity has anything but declined.

During the past 10 years, the SCC has had 152 to 216 new cases every year, of which around half have been international arbitrations. In 2018, 152 new cases were registered with the SCC and the total value in dispute in those cases was €13.3 billion. Around half of the 152 cases commenced in 2018 were international and the parties came from 43 different countries. ¹ As regards the administration of investment treaty disputes, the SCC Institute ranks as the second largest institution in the world. ² In short, Sweden continues to be one of the world-leading forums for international arbitration.

Several factors may explain why Sweden has established itself as one of the most popular venues for international arbitration. Sweden’s reputation as a relatively independent state as far as world affairs is concerned continues to be cited as one main reason. In addition, it is often recognised that the Swedish justice system demonstrates a high degree of efficiency and respect for the rule of law. Further, Sweden has promoted itself internationally by being an active participant when rules and standards pertaining to international arbitration have been adopted.

Notably, the Swedish government has recently taken steps to maintain and develop Sweden’s position as a hub for international arbitration. In August 2018, the government introduced a new bill titled ‘A modernisation of the Arbitration Act’. The bill contained several proposals intended to make the law even more easily accessible to Swedish and foreign parties and lawyers alike, and to ensure that Sweden remains a popular venue for international arbitration. In November 2018, the Swedish parliament adopted the government’s legislative proposal and the revised Arbitration Act entered into force on 1 March 2019.

Below, we provide a brief overview of some of the key provisions set out in the Arbitration Act, and shed light on some of the new provisions that entered into force on 1 March 2019. In the following section, we provide a brief introduction to the SCC Rules and to SCC arbitrations. In the final section, we comment on a recent judgment of the Swedish Supreme Court related to arbitration in Sweden.

Brief overview of the Swedish Arbitration Act

Arbitrability

It follows from the Swedish Arbitration Act that any dispute that concerns matters in respect of which the parties may reach a settlement may, by agreement, be referred to one or several arbitrators for resolution. Such an arbitration agreement may concern future disputes concerning a legal relationship specified in the agreement (however, the legal relationship as such must exist at the time the arbitration agreement is concluded). The dispute may concern the existence of a particular legal fact. The parties may also ask the arbitrators to fill out gaps in agreements in a manner that goes beyond what follows from mere interpretation of the relevant agreements.

Arbitrators may also rule on the civil law effects of competition law as between the parties.

Arbitrators

Any person in possession of full legal capacity regarding his or her actions and his or her property may serve as an arbitrator. However, the parties may of course agree that the arbitrators shall have certain other qualifications than those stipulated in the Arbitration Act. Notably, the Arbitration Act does not require that the arbitrators are Swedish citizens or have residence in Sweden.

The parties are free to determine the number of arbitrators and how they shall be appointed. If the parties have not agreed on the number of arbitrators, the arbitral tribunal shall consist of three arbitrators, where each party appoints one arbitrator and the two party-appointed arbitrators appoint the chair­person. In accordance with the provisions set out in the Arbitration Act, the district court may, in some situations, get involved in the appointment of arbitrators (eg, if one of the parties fails to appoint an arbitrator).

The arbitration procedure

Unless otherwise agreed by the parties, the arbitral proceedings commence when a party receives a request for arbitration that fulfils certain requirements set out in the Arbitration Act.

The Arbitration Act states, inter alia, that the arbitrators shall handle the dispute impartially, appropriately and in a speedy fashion. They shall thereupon act in accordance with what the parties have determined, insofar as there is no impediment to doing so.

According to the Arbitration Act, it is the parties that shall supply the evidence. The parties to arbitral proceedings may rely on written witness statements, which in practice is common. If a party so requests, a final hearing shall be held before the arbitral tribunal renders a final award, unless the parties have agreed otherwise.

If a party wishes to have a witness or expert testify under oath, or a party examined under an affirmation of truth, the party may, after obtaining permission from the arbitrators, file a request for such hearings with the district court. This also applies if a party wishes to obtain an order for production of documents.

Costs of arbitration

As a main rule, the parties shall be jointly and severally liable to pay reasonable compensation to the arbitrators for work and expenses. However, the Arbitration Act also includes, inter alia, a provision that prescribes that the parties may jointly decide other­wise in a manner that is binding upon the arbitrators.

International matters

The Arbitration Act applies to arbitral proceedings that take place in Sweden even if the dispute has an international connection. Arbitral proceedings under the Arbitration Act may be initiated in Sweden:

• if the agreement stipulates that the proceedings shall take place in Sweden;
• if the arbitrators, or an arbitration institute in accordance with the agreement, have decided that the proceedings shall take place in Sweden; or
• if the opposing party otherwise consents thereto.

Moreover, arbitral proceedings under the Arbitration Act may also be initiated in Sweden against a party that is domiciled in Sweden or is otherwise subject to the jurisdiction of the Swedish courts in respect of the matter in dispute, unless the arbitration agreement stipulates that the proceedings shall take place in another country.

Invalidity and annulment of awards

An award or a part of award is invalid if:

• it includes determination of an issue which, under Swedish law, may not be decided by arbitrators;
• the award, or the way in which the award was rendered, is clearly incompatible with the basic principles of the Swedish legal system (ie, public policy); or
• the award does not fulfil certain requirements with regard to written form and signature.

Furthermore, a party may bring a challenge action before a court of appeal and request that the award be wholly or partly set aside. The court of appeal shall set aside the award if:

• it is not covered by a valid arbitration agreement between the parties;
• the arbitrators have rendered the award after the expiration of the period determined by the parties,
• the arbitrators have exceeded their mandate, in a manner that probably influenced the outcome;
• the arbitral proceedings should not have taken place in Sweden (according to a provision set out in the Arbitration Act);
• an arbitrator has been appointed in violation of the parties’ agreement or in violation of the Arbitration Act;
• an arbitrator was unauthorised in the sense that he or she lacked legal capacity regarding his or her actions and his or her property, or failed to fulfil the requirement of impartiality; or,
• for reasons not pertaining to the party, there otherwise occurred an irregularity during the proceedings and it is probable that the irregularity influenced the outcome of the case.

An award may not be set aside if the party challenging the award relies on a circumstance that the party is deemed to have waived, for instance, by participating in the proceedings without raising an objection. Moreover, an action to set aside an award must be initiated within two months of the date on which the party received the award or, where correction, supplementation or interpretation has taken place pursuant to the Arbitration Act, within two months of the date on which the party received the award in its final wording.

An action to have an award set aside shall be filed with the court of appeal. A decision laid down by the court of appeal may not be appealed. However, the court of appeal may grant permission for its decision to be appealed to the Swedish Supreme Court if it is considered that the adjudication process in Sweden at large is well served by a precedent from the Supreme Court. For the Supreme Court to review the court of appeal’s determination in challenge proceedings, leave of appeal by the Supreme Court is required.

Recognition and enforcement of foreign awards

Sweden is a party to the 1958 New York Convention. Thus, as a main rule, foreign arbitral awards based on an arbitration agreement shall be recognised and enforced in Sweden. However, some exceptions apply. For example, a foreign award shall not be recognised and enforced in Sweden if the award includes an assessment of an issue that, according to Swedish law, cannot be resolved by arbitrators, or if recognition and enforcement is deemed incompatible with the basic principles of the Swedish legal system.

Proposed amendments to the Swedish Arbitration Act

In 2014, the Swedish government appointed a government committee mandated to consider how the Arbitration Act may be amended to ensure that it continues to be a modern and efficient law that is attractive to Swedish and foreign parties and lawyers. On 30 August 2018, the government introduced a bill that comprised several, albeit not all, of the government committee’s proposals. Later in 2018, the bill was passed by the Swedish parliament and the revised Arbitration Act entered into force on 1 March 2019.

Below, we summarise some of the key amendments of the Arbitration Act.

• Under the previous Arbitration Act, the issue of the arbitrators’ jurisdiction could be subject to several parallel proceedings in a way that the government considered unsatisfactory.
  

  The revised Arbitration Act includes new rules according to which a decision from the arbitrators that they have jurisdiction to resolve the dispute may be appealed to the court of appeal within 30 days. Furthermore, the Arbitration Act now includes a procedural impediment that bars a party from filing a separate request for a declaratory judgment with a general court after the arbitral proceedings have been initiated, unless the parties agree that the issue of jurisdiction shall be subject to such court proceedings.

• As mentioned above, the Arbitration Act provides that the arbitrators must be impartial. This impartiality requirement was set out also in the previous Arbitration Act and the preparatory works relating to that Act provided that this requirement includes an assessment of whether an arbitrator is independent. However, since the Model Law sets out both an impartiality and an independence requirement, and since the government has concluded that foreign parties may be confused as to whether independence is included in the assessment notwithstanding the absence of an explicit requirement to such effect, the term ‘independent’ has now been added to the relevant legal provision.
• The previous Arbitration Act lacked provisions governing the possibility to consolidate two or more arbitrations. However, since the Act entered into force in 1999, provisions regarding consolidation of arbitrations had been introduced in the SCC Rules, as well as the set of rules provided by several other arbitration institutes. Now, the revised Arbitration Act also includes consolidation rules. According to these rules, several arbitrations may be consolidated if the parties consent thereto, the arbitrators deem that the handling of the proceedings will benefit from a consolidation and the same arbitrators have been appointed in the arbitrations.
• Contrary to several other arbitration frameworks, such as the Model Law and the SCC Rules, the previous Arbitration Act did not include any explicit provisions concerning applicable substantive law. The following has now been explicitly set out in the Arbitration Act.
  • It has been clarified through an explicit provision that the dispute shall be resolved in accordance with the substantive laws or the set of rules agreed upon by the parties. According to statements in the preparatory works, the parties shall also be able to choose to have their dispute resolved under a non-governmental framework such as the Principles of European Contract Law.
  • For the purposes of further clarification, the revised Arbitration Act includes a provision that provides that an agreement that designates a country’s law shall be understood as a reference to that country’s substantive law and not to its rules governing conflicts of law, unless otherwise prescribed pursuant to the parties’ agreement.
  • The previous Arbitration Act did not contain any explicit rule governing the situation where the parties have not agreed on the applicable substantive law. The revised Arbitration Act, however, stipulates that if the parties have not entered into such an agreement, the arbitrators shall decide which substantive law shall be applied. The revised Arbitration Act does not, however, direct the arbitrators as to how to reach such a decision.
• As mentioned above, an award may be set aside if the arbitrators have exceeded their mandate. In the previous Act, it was not required that the excess of mandate should have affected the outcome of the arbitration. The relevant rule has now been complemented with a requirement to the effect that it must also be probable that the excess of mandate has affected the outcome.
• Furthermore, the time limit for filing a request for the setting aside of an award has been shortened from three to two months. The purpose of this amendment is to ensure that arbitration is indeed a speedy and efficient form of dispute resolution and to put the legislation closer in line with the law in, for example, France and England.
• The revised law increases the opportunity to use the English language during the taking of evidence in the context of the challenge proceedings in court. This is a concrete example of how the Swedish government is striving to further facilitate litigation in Sweden for foreign parties. Under the amended law, the court may take oral evidence in English (ie, parties and witnesses may be allowed to testify in English without interpretation in Swedish). It may also be noted that parties may submit written evidence in English to Swedish courts (this was the case already under the previous Act) and that the Supreme Court has stated that such evidence often ought to be accepted.
• The revised Act introduced a requirement that parties seeking to appeal a court of appeal’s judgment in a challenge proceeding must obtain permission to appeal from the Swedish Supreme Court. As mentioned, the court of appeal may in challenge proceedings grant permission for its judgment in a challenge proceeding to be appealed to the Supreme Court, if it is considered that the adjudication process in Sweden at large is well served by a precedent from the Supreme Court. Under the previous Act, no permission to appeal was required from the Supreme Court in these cases and the government had noted that this meant that the Supreme Court was unable to limit its assessment to the very issue that is deemed necessary to clarify through a precedent from the highest court. Therefore, the revised Arbitration Act now includes a requirement for permission to appeal.

Brief introduction to the SCC Rules

Many of the provisions set out in the Arbitration Act are optional. Thus, to a large extent, the parties may decide whether their procedure shall be governed by the Arbitration Act or other rules. For example, the parties may agree that an arbitration shall be governed by a set of rules provided by an institution. As mentioned, institutional arbitration is very common in Sweden and most of these proceedings are administered by the SCC Institute and governed by the SCC Rules.

The latest version of the SCC Rules entered into force on 1 January 2017. The SCC Rules govern all fundamental aspects of the arbitral proceedings including, for example, confidentiality, the initiation of proceedings, the composition of the arbitral tribunal, challenge to arbitrators, the proceedings before the arbitral tribunal, evidence, interim measures, awards and decisions, time limits for the final award, costs of the arbitration and so on. Of course, the SCC Rules also provide the parties and the arbitral tribunal with a great deal of freedom to agree on a procedure as they see fit. It is also worth noting that the SCC Institute serves as an administrative body and that it is not a court of arbitration. Consequently, when the SCC Institute has referred a case to an arbitral tribunal, it has little involvement in the proceedings as such and it does not perform scrutiny of awards.

Where the parties have not agreed on the number of arbitrators, the SCC Institute shall decide whether the arbitral tribunal shall consist of one or three arbitrators, having regard to the complexity of the case, the amount in dispute and any other relevant circumstances. If the arbitral tribunal shall consist of three arbitrators (and if the parties have not agreed otherwise), each party shall appoint one arbitrator and the Board of the SCC Institute appoints the chairperson. If the parties are of different ­nationalities, the chairperson (or the sole arbitrator) shall be of a different nationality from the parties (unless the parties have agreed otherwise, or the SCC Institute otherwise deems it appropriate). In practice, arbitrators from many different countries act as arbitrators in SCC arbitrations. It may also be noted that the Board of the SCC Institute includes nationals from several different countries.

The SCC Rules have been adopted with the aim of ensuring a speedy and efficient proceeding. At the outset, a general rule prescribes that the arbitral tribunal and the parties shall act in an efficient and expeditious manner. Furthermore, under the SCC Rules, the arbitral tribunal shall promptly arrange a management conference with the parties to organise, schedule and establish procedures for the conduct of the arbitration. Immediately after the case management conference, the tribunal shall establish a timetable, including the date for rendering the award. The aim of ensuring speedy and efficient proceedings also underpins several other provisions set out in the SCC Rules, such as article 43, which provides that the final award shall be rendered no later than six months from the date on which the case was referred to the arbitral tribunal, unless the SCC Board decides to extend this time limit upon a reasonable request from the arbitral tribunal or if otherwise deemed necessary. Statistics for 2018 confirm that arbitration under the SCC Rules tends to result in expeditious proceedings: the majority of awards were rendered within six to 12 months from the time of registration. ³

As mentioned, the latest version of the SCC Rules entered into force on 1 January 2017. Key changes made in the latest version of the SCC Rules include the following:

• introduction of a summary procedure, under which the tribunal may decide one or several issues of fact or law without necessarily undertaking every procedural step that might other­wise be adopted for the arbitration;
• provisions regarding joinder of additional parties under which a party to an arbitration may request that the Board of the SCC Institute join one or several additional parties to the arbitration;
• provisions that allow parties to make claims arising out of or in connection with more than one contract in a single arbitration;
• provisions regarding consolidation of arbitrations under which a newly commenced arbitration may be consolidated with a pending arbitration;
• provisions regarding the use of administrative secretaries, which regulate the relationship between the secretaries, parties and tribunal;
• provisions that allow arbitrators to order a claimant (or counterclaimant) to pay security for costs and to stay or dismiss the party’s claims in whole or part if the party fails to provide security; and
• provisions emphasising the standard of efficiency and expeditiousness.

The SCC Rules for Expedited Arbitration

The SCC framework also allows parties to choose a particular form of expedited arbitral proceedings by agreeing before or after the dispute has arisen that the dispute shall be resolved in accordance with the SCC Rules for Expedited Arbitration. Under the Rules for Expedited Arbitration, the parties are only allowed to make a limited number of written submissions. In addition, written submissions shall be brief and the time limits for the filing of submissions may not (as a main rule) exceed 15 working days. Furthermore, under the Rules for Expedited Arbitration, the arbitration shall be decided by a sole arbitrator and the time limit for a final award is three months from the date on which the case was referred to the arbitrator. Further, a hearing shall be held only at the request of a party and if the arbitrator considers the reasons for the request to be compelling. In 2017, a majority of the awards rendered under this framework were rendered within three months and only 3 per cent of the awards were rendered after more than six months. ⁴

Emergency arbitrators

In 2010, the SCC Institute became one of the first arbitration institutes in the world to offer the appointment of so-called emergency arbitrators. A party that wishes to seek a decision on interim measures may file a request with the ICC Institute to have an emergency arbitrator appointed in accordance with the rules set out in an appendix to the SCC Rules and the SCC Rules for Expedited Arbitration. In such a case, the SCC Board shall seek to appoint an emergency arbitrator within 24 hours of receipt of the application (in all three cases coming before the SCC Institute in 2017, an emergency arbitrator was indeed appointed within 24 hours) and a decision on interim measures shall be made no later than five days from the date on which the application was referred to the emergency arbitrator under the relevant SCC rule. The emergency decision is binding on the parties when rendered, and by agreeing to arbitration under the SCC Rules the parties thereby undertake to comply with any emergency decision without delay. However, the arbitral tribunal is not bound by the decisions and reasoning of the emergency arbitrator, and the emergency arbitrator’s decision ceases to be binding, for example, if the arbitral tribunal so decides.

Investor treaty disputes

The SCC Rules also include an appendix that sets out provisions that apply specifically to investor treaty disputes (ie, disputes based on a treaty providing for arbitration of disputes between an investor and a state). The SCC Rules are the third most commonly used arbitration rules in investment disputes and this makes the SCC Institute the second largest arbitration institute in the world (after ICSID) for the administration of investment disputes. ⁵

Recent case law

The Swedish Supreme Court, Case T 5437-17

A judgment by the Swedish Supreme Court, pronounced on 20 March 2019, has provided further guidance on, inter alia, the application and interpretation of arbitration agreements. The Supreme Court case concerned challenges against an award that had been rendered by an arbitral tribunal in respect of a dispute between a Turkish claimant and a Belarusian respondent. The arbitral proceedings had been administered by the SCC in accordance with the SCC Rules of 2010.

First of all, the Supreme Court reviewed whether the arbitral tribunal had jurisdiction to rule on claims that concerned certain additional works that had been ordered after the agreement that included the relevant arbitration clause had been cancelled. The issue was whether the arbitral tribunal had, in respect of these additional works, decided on an issue that fell outside the scope of the relevant arbitration agreement and whether the award on that basis should be wholly or partly set aside pursuant to the Arbitration Act. In deciding on this issue, the Supreme Court made some interesting statements that provide for a fairly extensive application and interpretation of arbitration agreements assessed under the Arbitration Act.

The Supreme Court stated that the scope of an arbitration agreement is to be determined pursuant to the conventional principles for contract interpretation. Further, the Supreme Court stated that the Arbitration Act requires that an arbitration agreement must pertain to a specific legal relationship and expressed that the term ‘legal relationship’ ought to be interpreted taking into account the principles that underpin the New York Convention and that these principles have in foreign case law and international jurisprudence been taken as justification for an expansive interpretation of the arbitration agreement, as well as the New York Convention’s concept of a ‘legal relationship’. The court proceeded to state, inter alia, the following.

• The term ‘legal relationship’ does not only cover those rights and obligations that have been set forth in an original agreement. Subsequent legally relevant circumstances, which alter the content of the agreement, fall within the scope of the term and thereby within the scope of application of an arbitration clause set out in the original agreement.
• In other cases, the ground for a party’s case could fall outside the scope of the arbitration clause (the Supreme Court referred to a couple of previous Supreme Court cases).
• However, legally relevant facts outside the contractual relationship may be deemed to fall inside the scope of application of the arbitration clause. In this context, the Supreme Court referred to a previous Supreme Court case and noted that, in that case, a non-contractual ground for the requested order had been deemed so closely related to the other grounds for the request that the former ground also was considered covered by the arbitration clause.
• The determination of whether a dispute is covered by an arbitration agreement may, at times, encompass the arbitral tribunal conducting an in-depth analysis of the parties’ relationship. In these cases, there is reason to assume that parties to a commercial relationship strive to have disputes within the scope of their relationship settled by one single forum, because other solutions would contain a risk of time delays, increased costs and contradicting decisions on matters that are connected to one another.
• When, in a challenge proceeding, a court is tasked with reviewing the arbitral tribunal’s decision on its jurisdiction, regard should be made to the fact that, typically, it is the arbitral tribunal that is best positioned to determine the issue of its own jurisdiction. This means that the starting point for the court’s review should be that the arbitral tribunal’s interpretation and evaluation of evidence is correct.

After setting out these legal starting points, the Supreme Court made an assessment in casu and found that the arbitral tribunal had not decided on an issue that fell outside the scope of the relevant arbitration clause.

The Supreme Court also reviewed whether the arbitral tribunal had exceeded its mandate or committed a procedural error by not reviewing a legally relevant circumstance that was in dispute between the parties. In this context, the court stated, inter alia, that the effect of a procedural error ought to be of some reasonable importance to the challenging party in order for the challenging party to successfully invoke it. Importance should be related to the part of the arbitral award that may be set aside. As regards the case at hand, the court found that the arbitral tribunal had committed a procedural error by not ruling on the circumstance that was in dispute between the parties and, more precisely, that the arbitral tribunal had failed to take into account that the respondent had objected to the claimant’s assertion that interest should be calculated from a certain point in time. However, the court concluded that the effect of this error had added only a single day as regards the calculation of interest in relation to each relevant invoice and therefore the procedural error had not been of reasonable importance to the respondent. Therefore, the challenging party’s action in this regard was rejected.

Next, the Supreme Court assessed the challenging party’s claim that the arbitral tribunal had committed a procedural error by not giving the challenging party the opportunity to sufficiently argue its case. In this regard, the challenging party referred to the arbitral tribunal’s decisions to dismiss the company’s requests for extension of time for the submission of an expert report and its request that the arbitral tribunal should appoint an independent expert. The court stated that it is the arbitral tribunal that has the best position to assess whether a request for an extension shall be granted or rejected, taking into account the reasons presented by the parties. As a starting point, the decision of the arbitral tribunal on whether to grant an extension should be accepted, unless the decision appears indefensible. As regards the ground relating to the fact that the arbitral tribunal had not appointed an independent expert, the court pointed out that a rejection of a party’s request that the arbitral tribunal itself shall appoint an expert cannot constitute a procedural error, unless otherwise provided by the arbitration agreement. Against the backdrop of these legal starting points, the court rejected the challenging party’s action in this regard.

Last, the Supreme Court assessed whether the arbitral tribunal had committed a procedural error by laying down an arbitral award that, according to the challenging party, was not based on the evidence invoked in the proceedings. In relation to this claim by the challenging party, the court stated that an arbitral tribunal’s assessment of questions concerning burden of proof and evidentiary thresholds are part of the tribunal’s assessment on the merits. Hence, even if the arbitral tribunal had committed an error in any of these respects, it could not result in the conclusion that the arbitral tribunal had acted outside its mandate, nor that it had committed a procedural error. Hence, the challenging party’s action was rejected also in this regard.