Sweden

In summary

This article provides a brief overview of arbitration in Sweden and an overview of dispute resolution pursuant to the Arbitration Rules of the Arbitration Institute of the Stockholm Chamber of Commerce (the SCC Institute), as well as an insight into recent developments concerning the SCC Institute. Moreover, this article provides insight into a sample of recent Swedish case law in the field of arbitration.

Discussion points

• Background to the role of Sweden and the SCC Institute in international arbitration
• The Arbitration Rules of the Arbitration Institute of the Stockholm Chamber of Commerce and key changes in its latest version
• The SCC Platform
• The SCC Express
• Recent Swedish case law in the field of arbitration

Referenced in this article

• The Arbitration Institute of the Stockholm Chamber of Commerce
• The Swedish Arbitration Act
• The Arbitration Rules of the Arbitration Institute of the Stockholm Chamber of Commerce
• The Swedish Supreme Court, Case Ö 3828-20 (published in NJA 2021 s 850)
• Svea Court of Appeal, Case 7158-20

Introduction

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.

During the past 10 years, the SCC has had 152 to 213 new cases every year, of which around half have been international arbitrations. In 2021, 165 new cases were registered with the SCC. Of the 165 new cases in 2021, a total of 78 cases were international disputes, involving parties from 41 other 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. It is often recognised that the Swedish justice system demonstrates a high degree of efficiency and respect for the rule of law. As noted above, Sweden has a long-standing tradition of solving domestic as well as international commercial disputes through arbitration. 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. The revised Arbitration Act entered into force on 1 March 2019.

In the following section, we provide a brief introduction to the SCC Rules and to SCC arbitrations, including a mention of the recently launched tool SCC Express.

Brief introduction to the SCC Rules

Many of the provisions set out in the Swedish 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: 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; and the cost of the arbitration. 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.

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 chair. If the parties are of different nationalities, the chair (or the sole arbitrator) must 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 must act in an efficient and expeditious manner. Furthermore, under the SCC Rules, the arbitral tribunal must promptly arrange a case 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 must 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 must 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 reasoned request from the arbitral tribunal or if otherwise deemed necessary. Statistics for 2021 confirm that arbitration under the SCC Rules tends to result in expeditious proceedings: more than half of the awards were rendered within six to 12 months of 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.

In the authors’ view, the aforementioned statistics and the recent changes to the SCC Rules highlights the fact that arbitration under the SCC Rules continues to be an efficient, flexible and secure way for Swedish and international parties to resolve disputes.

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 these rules, the parties are only allowed to make a limited number of written submissions. In addition, written submissions must 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 can be held only at the request of a party and if the arbitrator considers the reasons for the request to be compelling. In 2021, a majority of the awards rendered under this framework were rendered within three months, and only 11 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 emergency arbitrators. A party that wishes to seek a decision on interim measures may file a request with the SCC 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 and a decision on interim measures must 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. During 2021, seven emergency arbitrator proceedings were commenced. In all cases, an emergency arbitrator was appointed within 24 hours, and decisions were rendered on average after 6.6 days.^[5]

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 Institute is the second-largest arbitration institute in the world (after the International Centre for Settlement of Investment Disputes) for the administration of investment disputes.^[6]

SCC Express

In May 2021, the SCC Institute launched a new set of rules called ‘The SCC Rules for Express Dispute Assessment’ (the SCC Express). The SCC Express is a dispute resolution tool designed to help resolve a disagreement between business partners on an issue that needs to be investigated quickly, and where there is a wish to explore an alternative to a full-length arbitration or court proceedings. The SCC Express procedure is based on the consent of all parties involved, and it is not conditioned upon that the parties have agreed to resolve disputes according to arbitration under the SCC Rules.

In short, in SCC Express proceedings, a party to a dispute may request that the SCC Board appoints a neutral assessor (the Neutral) to evaluate issues of fact or law relating to the dispute. The other party or parties are invited to respond to the request. If the other party or parties consent(s) to the request, the SCC Board shall appoint the Neutral. The Neutral manages the proceedings closely and plays an active role in the proceedings. As a general rule, the Neutral shall then deliver their findings no later than 21 days after the date the request was referred to the Neutral. The findings must be made in writing and include the Neutral’s position and reasoning on the issues presented by the parties. The parties can agree to make the assessment contractually binding or use the non-binding findings to guide settlement discussions or other ways forward. The purpose is to help parties reach an end to the dispute while keeping time and costs down.^[7]

In the authors’ view, the SCC Express is an innovative alternative dispute resolution mechanism that may prove to be a useful alternative to arbitration in certain circumstances. It remains to be seen whether the SCC Express will gain popularity in this respect.

The SCC Platform

Since September 2019, all new SCC arbitrations have been administered on the SCC Platform, which is a secure digital platform for communication and file sharing between the SCC, parties and the tribunal. The SCC itself states that the SCC Platform ‘provides participants with a secure and efficient way of communicating and filing all case materials in the arbitration, such as procedural orders, submissions and exhibits, and will constitute the forum through which the SCC communicates with the parties, counsel and arbitrators throughout the proceedings.’^[8]

Moreover, the SCC also offers an ad hoc platform for providing the same secure and efficient communication also in ad hoc arbitrations.^[9]

Recent case law

The Swedish Supreme Court, Case Ö 3828-20 (published in NJA 2021 s. 850)

As a general rule, arbitral awards are enforceable in Sweden. However, a recent decision from the Swedish Supreme Court shed light on issues related to enforcement in Sweden of arbitral awards against sovereign states.

In short, the facts of the case and the issues in dispute were as follows. A dispute between a group of investors and Kazakhstan resulted in an award rendered by a SCC tribunal pursuant to which Kazakhstan was ordered to pay approximately US$500 million to the investors. Kazakhstan challenged the award and argued that it should be set aside, but the challenge action was denied by the Court of Appeal. The investors applied to the Swedish enforcement agency to have the award enforced against Kazakhstan. The enforcement agency accordingly seized assets in, inter alia, an account in a Swedish bank. The assets consisted of, inter alia, shares in Swedish companies.

Kazakhstan, as well as the National Bank of Kazakhstan, both appealed the decision of the Swedish enforcement agency to seize the assets, inter alia, on the ground that the assets were part of a non-commercial national fund belonging to the National Bank of Kazakhstan and, thus, that the assets were protected by state immunity as set out in article 19(c) and 21.1(c) of the United Nations Convention on Jurisdictional Immunities of States and Their Property (the Convention). This appeal was first adjudicated by the district court, which denied the appeal.

The decision of the district court was in turn appealed to the Svea Court of Appeal, which, in short, reasoned as follows on the issue of state immunity. The Convention had not entered into force. However, the Convention is generally considered to codify customary public international law on issues regarding state immunity, and the articles of the Convention should therefore be the starting point in the assessment of the issues in dispute. Accordingly, article 19(c) of the Convention provides that the award could only be enforced against Kazakhstan if ‘it has been established that the property is specifically in use or intended for use by the State for other than government non-commercial purposes’. Furthermore, the court noted that article 21.1(c) of the Convention provides that ‘property of the central bank or other monetary authority of the State’ should explicitly not be considered property ‘specifically in use or intended for use by the State for other than government non-commercial purposes’ pursuant to article 19(c) of the Convention.

The Court of Appeal found that the seized assets in dispute belonged to the National Bank of Kazakhstan. Furthermore, the Court of Appeal found that the National Bank of Kazakhstan must be deemed a ‘central bank’ in the meaning of article 21.1(c) of the Convention. Moreover, the Court of Appeal found that article 21.1(c) of the Convention must be interpreted in such a way that the seized assets in question were protected by state immunity already in its capacity as assets belonging to a central bank. Accordingly, Kazakhstan’s appeal was granted and the seizure order was revoked by the Court of Appeal.

The investors appealed the decision, and the Swedish Supreme Court granted leave to appeal as regards the issue of whether the assets were protected by state immunity. The Supreme Court gave a rather comprehensive reasoning, which may be briefly summarised as follows. Similarly to the Court of Appeal, the Supreme Court found that the Convention can be of significance despite the fact that it has not entered into force, to the extent the articles of the Convention are deemed to reflect customary public international law. Article 21.1(c) of the Convention is intended to give central banks and similar authorities special protection against enforcement measures. However, it is not entirely clear how far-reaching this protection is under public international law. Considering the interests reflected in article 21.1(c), it is not clear that this protection should apply to all property a central bank owns or disposes of. The reason for the special protection must be considered to be that a central bank conducts activity within the monetary policy of the state. For property used in such a context, an almost absolute immunity against enforcement is motivated.

However, there is no support in public international law for an absolute immunity with respect to assets that the central bank disposes of that have no connection to the central bank’s monetary policy activities. Such far-reaching immunity does not seem intended. Hence, the special protection for central banks pursuant to article 21.1(c) must be limited to assets clearly connected to activity within monetary policy. The extent to which other assets of a central bank are also protected by immunity must be determined based on the principles expressed in article 19 of the Convention, entailing, inter alia, that the purpose of the assets is of importance.

As regards the case at hand, the Supreme Court also found that the National Bank of Kazakhstan must be deemed a ‘central bank’ in the meaning of article 21.1(c) of the Convention. However, the assets (ie, securities) were not, under the circumstances, considered to have a clear connection with the National Bank’s activities within monetary policy. Moreover, the general purpose of the assets was deemed to be to, at a more general level, help to preserve and increase the wealth of the state. In conclusion, this purpose was not deemed to be such that state immunity applied to enforcement of the assets. Accordingly, the appeal of the investors was granted, and the Supreme Court referred the case back to the Court of Appeal to adjudicate other grounds that Kazakhstan and the National Bank of Kazakhstan had invoked against enforcement (which the Court of Appeal had not had reason to adjudicate previously because of its findings on the application of article 21.1(c) of the Convention).

Svea Court of Appeal, Case 7158-20

A topic that has caused debate in the Swedish arbitration community following the covid-19 pandemic is the meaning and definition of ‘oral hearing’ in section 24 of the Swedish Arbitration Act.

Pursuant to section 24 of the of the Arbitration Act, if the parties have not agreed otherwise, a party has a right to an oral hearing before an issue is decided by the arbitral tribunal. As a result of the covid-19 outbreak, some arbitral tribunals found themselves forced to hold a digital hearing, despite one party sometimes protesting and insisting that the proceedings shall be delayed until a physical oral hearing can be held. The protesting party then often argues that the right to an oral hearing pursuant to section 24 of the Arbitration Act means the right to a physical oral hearing (ie, that forcing one party to accept a digital oral hearing is in violation of the Arbitration Act).

One recent judgment from the Svea Court of Appeal shed light on this issue. An arbitration was initiated by a seller under a framework agreement. The seller requested that the buyer should be ordered to pay the seller a certain claimed amount. The buyer contested the seller’s claim and put forth its own counterclaim. The final hearing was held in May 2020 and June 2020. The arbitral tribunal rendered its award in June 2020. The outcome was, in essence, that the seller won.

The buyer then initiated proceedings in the Svea Court of Appeal, arguing that the award was invalid or that it should be set aside. The buyer invoked several grounds for these assertions. One of those grounds was that the arbitral tribunal had decided to hold the hearing in the case digitally, even though the buyer had expressly protested against a digital hearing and had demanded that the hearing should be postponed so that a physical hearing could be held.

As regards this issue, the Court of Appeal reasoned, in summary, as follows. The Arbitration Act contains no definition of the phrase ‘oral hearing’. It follows from the preparatory works to the Arbitration Act that section 24 has its background in the regulation in the Swedish Procedural Code as well as in article 6 in the European Convention on Human Rights. Further, it also follows from the preparatory works that issues concerning, for example, when and how the hearing should be held shall be decided by the arbitral tribunal if the parties cannot reach an agreement in this respect. Accordingly, with reference to, for example, the rules applicable in Swedish court litigation, the Court of Appeal concluded that if the parties cannot agree on the issue, the arbitral tribunal must be deemed to have a mandate to decide on a digital hearing. The fact that one party may object is no obstacle to hold a digital hearing. However, the arbitral tribunal should in each case make an assessment on whether a digital hearing is suitable. In that assessment it should be considered that the arbitrators must afford the parties, to the extent necessary, an opportunity to present their respective cases, and that the arbitrators must handle the dispute in an impartial, practical and speedy manner. Also, the technical conditions must enable good communication. For a decision by the arbitral tribunal in this respect to be considered a procedural error, the decision must in consideration of all the circumstances appear unjustifiable.

As regards the assessment in the case at hand, the Court of Appeal concluded that considering what had been presented to the court, the technical conditions – that the parties had been given an opportunity to present their respective cases, and that the parties have had the opportunity to communicate with each other, the arbitral tribunal and the invoked witnesses – must be deemed acceptable. Considering this and other circumstances, the Court of Appeal deemed that there had been no procedural error by the arbitral tribunal. The buyer was also unsuccessful on its other grounds for arguing that the arbitral award was invalid or should be set aside. Accordingly, the arbitral award was upheld by the Court of Appeal.

Footnotes