I INTRODUCTION TO THE DISPUTE RESOLUTION FRAMEWORK
The Swedish legal system is based on the civil law tradition. The main source of law is statutes, which are enacted by the Swedish parliament upon suggestions from the government. Important secondary sources of law are preparatory works, case law and legal doctrine, which are all often referred to by Swedish courts. Since Sweden is a member of the European Union, legislation from the institutions of the European Union and case law from the Court of Justice of the European Union are also important sources of law in Sweden.
There are three types of courts in the Swedish court system; general courts, administrative courts and specialist courts. The general courts include district courts, courts of appeal and the Supreme Court. The general courts handle both criminal and civil cases. There are, however, certain types of civil cases over which a specialist court, and not the general courts, has jurisdiction. One such example is certain labour disputes, which are tried by the Labour Court as first and last instance. The administrative courts include administrative courts of first instance, administrative courts of appeal and the Supreme Administrative Court. Cases before these courts are normally initiated by an individual appealing a decision by a public authority, in matters regarding, for example, tax, social insurance, compulsory care and migration.
Commercial disputes may be brought before the general courts but larger commercial disputes are more commonly resolved through arbitration. The leading arbitration institute in Sweden, the Arbitration Institute of the Stockholm Chamber of Commerce (SCC), is one of the world's leading arbitration institutions. The SCC handles both international and domestic commercial disputes. It is also the world's second-largest institute for investment disputes, after the International Centre for Settlement of Investment Disputes.2 In addition to its arbitration rules (regular arbitration and expedited arbitration), the SCC also has its own mediation rules. The Swedish Arbitration Act has recently been modernised and a revised version came into force on 1 March 2019.
II THE YEAR IN REVIEW
i Modernisation of the Swedish Arbitration Act
On 1 March 2019, a revised version of the Swedish Arbitration Act came into force. One of the main purposes of the revision was to make the Act more accessible for foreign parties and attract international arbitrations to Sweden. Another main purpose was to further enhance the efficiency and legal certainty of arbitration proceedings.
The revisions include, inter alia:
- a possibility to challenge an arbitral tribunal's decision that it has jurisdiction before the Svea Court of Appeal as proceedings are ongoing, within 30 days from such decision;
- excluding the possibility for other parties than consumers to initate a declaratory action regarding the arbitral tribunal's jurisidicton before Swedish courts, during ongoing arbitration proceedings;
- an adjustment of the Act to multiparty arbitrations;
- introducing an express requirement that an excess of mandate must probably have affected the outcome of the case in order for the award to be set aside;
- shortening the time period to initiate challenge actions before Swedish courts, from three months to two months; and
- an extended possibility to use the English language for the hearing of evidence in challenge proceedings.
ii Challenges to arbitral awards
Challenge cases relating to the CJEU's decision in Achmea
In March 2018, the Court of Justice of the European Union (CJEU) issued its judgment in the Achmea case.3 The question before the CJEU concerned an arbitration clause in a bilateral investment treaty between the Netherlands and Slovakia. The clause allowed an investor from one of the contracting parties to initiate arbitration proceedings against the other contracting party, regarding an investment in the latter. The CJEU held that the arbitration clause was incompatible with Articles 267 and 344 of the Treaty on the Functioning of the European Union (TFEU).
Following Achmea, a debate has arisen regarding the impact of the judgment on other intra-EU investor-state disputes. One debated issue is whether the CJEU's conclusions in Achmea cover intra-EU disputes under the Energy Charter Treaty (ECT).
Under the ECT, an investor may choose between different dispute resolution mechanisms and one possible choice is arbitration under the Arbitration Rules of the SCC. Consequently, a number of investor-state awards under the ECT have been rendered in Sweden under the SCC rules.
As of November 2019, five challenge cases are pending before Swedish courts in which, for example, Achmea is raised as a basis for an invalidity/set-aside action. All five cases concern intra-EU investment disputes, one under a bilateral investment treaty and four under the ECT. Four of the cases are still pending before the Svea Court of Appeal.4 In the fifth case, the challenge action was rejected by the Svea Court of Appeal in February 2019.5 The Svea Court of Appeal held, inter alia, that the arbitration clause in the bilateral investment treaty was invalid, referring to Achmea. However, since the Member State (Poland) had, according to the Svea Court of Appeal, not objected to the tribunal's jurisdiction in due time, Poland's action was rejected. The judgment has been appealed to the Supreme Court where it is currently pending. In December 2019, the Supreme Court decided to make a request for a preliminary ruling from the CJEU.
The Supreme Court's judgment in the Belgor case
In a judgment dated 20 March 2019,6 the Supreme Court interpreted the scope of an arbitration clause in a contract between a Belarussian company and a Turkish company regarding construction works. The issue in the challenge action was, inter alia, whether claims relating to additional works based on separate contracts were covered by the arbitration clause in the original contract.
The Supreme Court held that when determining whether a dispute is covered by an arbitration clause, the arbitral tribunal must sometimes make an in-depth review of the parties' relationship, and that in such cases, there is reason to assume that parties to a commercial relationship wish to have disputes within the scope of their relationship settled by one single forum. The Supreme Court then held that when a court shall review the arbitral tribunal's decision on jurisdiction, regard should be made to the fact that, typically, the arbitral tribunal is best positioned to determine the issue of its own jurisdiction. Therefore, according to the Supreme Court, the starting point for the court's review should be that the arbitral tribunal's interpretation and evaluation of evidence is correct.
This case has attracted much attention in Sweden, for example, due to the statements made by the Supreme Court regarding the starting point for the court's assessment of the arbitral tribunal's decision on its own jurisdiction.
III COURT PROCEDURE
i Overview of court procedure
The Swedish Code of Judicial Procedure came into force in 1948 and governs the procedure in civil and criminal cases in the general courts. The procedure is based on the principles of immediacy, orality and concentration. According to the principles of immediacy and orality, a judgment may only be based on what has been orally presented to the court by the parties at the main hearing. This includes that witnesses must appear in person to give testimony; written witness statements are consequently not used. The principle of concentration entails that a main hearing shall continue without interruption until the entire case has been heard.
In terms of evidence, the principle of free evaluation of evidence applies. According to this principle, the courts are given a wide discretion when assessing the value of the presented written and oral evidence. This principle also entails that there are no rules regarding inadmissibility of evidence due to, for example, that the evidence was unlawfully obtained or subject to privilege. It is generally considered that the principles of immediacy, orality and concentration facilitate the application of the court's discretion in terms of assessing the value of evidence.
The parties must identify the evidence on which they rely prior to the main hearing, and as a main rule parties are not allowed to introduce new evidence at the main hearing. There is a limited possibility to introduce new evidence on appeal.
A district court's ruling can be appealed to a court of appeal and, further and finally, to the Supreme Court. As from 2008, leave to appeal in civil cases is required not only in the Supreme Court but also in the courts of appeal. This general requirement for leave to appeal in civil cases was introduced by the Swedish legislator as a means to achieve faster proceedings and a more efficient use of resources at the court of appeals. The idea was that the main part of the judicial administration shall take place in the district courts and that the higher courts shall focus on cases where there is a reason to believe that the district court's judgment is incorrect.
ii Procedures and time frames
Civil proceedings are initiated by the claimant filing an application for summons with the court. Provided that all formal requirements of the application for summons are fulfilled, the district court will issue a summons against the respondent. The respondent is normally given three to four weeks from being served to submit an answer. Thereafter, further submissions may be exchanged. Unless it is deemed unnecessary considering the nature of the case, a preparatory hearing is held after the initial submissions have been exchanged. The purpose of such hearing is, for example, to clarify the parties' respective claims and objections and to what extent the parties differ regarding the facts of the case. At such hearing, the court will also investigate the possibilities of a settlement between the parties and discuss case management. As from 2008, the court is under an obligation to produce a timetable for the proceedings.
The exchange of written submissions and the preparatory hearing is referred to as the preparation phase of the proceedings. The Code requires that the district courts proceed with the preparation phase with the aim of a speedy adjudication of the case and the Code provides the courts with a variety of tools to achieve this. For example, the court may in civil cases under certain circumstances issue a default judgment against a party not complying with the court's instructions to, for example, submit a written answer to the claimant's summons application, or against a party failing to appear before the court for the preparatory or main hearing.
When the case is sufficiently prepared, and provided that the parties have not reached a settlement, a main hearing is held where each party, pursuant to the principles mentioned above, presents the circumstances and the evidence on which it relies.
The time period for civil cases before district courts and courts of appeal vary depending on the complexity of the case and the courts' workload. Generally, civil cases take around 12 to 18 months before the district court and a corresponding time before the courts of appeal.
A claimant may apply for interim measures in order to preserve its rights. Sequestration is one of the most common forms of interim measures used in Swedish proceedings but a claimant can also, for example. request that the court prohibits the respondent from taking certain actions under penalty of a fine. To obtain an interim measure, the claimant must show probable cause for the claim and further show that it is reasonable to suspect that the respondent will compromise the claimant's alleged rights.
Should the claimant ultimately be unsuccessful in the dispute, the claimant is liable for any damages incurred by the respondent as a result of the interim measure. To preserve the respondent's right to damages, the claimant, as a main rule, must provide security for the possible damage. An interim measure may be obtained ex parte, if delay places the claimant's claim at risk.
If the interim measure is sought (and granted) prior to court or arbitration proceedings, the claimant must initiate such proceedings within one month from the court's order. Failing to do so will result in the interim measure lapsing immediately.
In cases where a party has a claim for payment and has reason to belive that the claim will not be contested, a summary procedure may be initiated before the Swedish Enforcement Agency. If the claim is not contested, the Enforcement Agency may issue a payment order which can be enforced as a court judgment. This procedure is considerably faster than court proceedings and is preferable for undisputed, often smaller, claims. If the respondent contests the claim and the claimant wishes to pursue the claim, the dispute will be referred to a district court.
iii Class actions
Class actions may be brought before the general courts under the Swedish Class Actions Act. A class action is defined as an action brought by a claimant on behalf of, and with legal effect for, a group of class members who are not parties to the action. Any claim that may be tried by a general court in a civil action may be subject to a class action, provided that the other requirements for a class action are met.
There are three forms of class actions under Swedish law: private, public and organisational class actions. In addition to the specific requirements applicable to each of the three forms of class actions, certain general requirements must be met for all types of class actions. One such requirement is that a class action may only be brought if the action is based on circumstances which are mutual (or at least similar) for the entire group of class members. Another requirement is that the claimant must be deemed appropriate to represent the group of class members considering, inter alia, his or her financial conditions.
When the Class Actions Act was introduced in 2003, it was predicted that approximately 15 to 20 cases would be initated each year. This prediction has not come true. Instead, only approximately one to two cases have been initated each year since the Act came into force and there is still no trend towards more class actions. Many of the initiated cases have been settled and a number of cases have been dismissed for not fulfilling the formal requirements.
iv Representation in proceedings
In Sweden, parties to court proceedings are not required to be represented by counsel and very few formal requirements are imposed on persons who act as counsel. One such requirement is that a counsel must master the Swedish language and, as a main rule, reside in Sweden, another state within the European Economic Area or Switzerland. Further, the court may dismiss a person as counsel if he or she is not deemed suitable to act as counsel in the matter. In practice, even though there are no formal requirements regarding, for example, legal education, it is uncommon for counsel not to be legally educated.
In commercial disputes the parties' counsel are normally members of the Swedish Bar Association.
v Service out of the jurisdiction
The EU has adopted legislation facilitating the service of documents within the EU in matters of civil or commercial nature (Regulation (EC) 1393/2007). In accordance with this Regulation, Swedish courts and agencies may apply to the competent authority of another Member State to assist with the service. Likewise, authorities in other Member States may request that the competent authority in Sweden (the Stockholm County Administrative Board) assist with service of documents in Sweden.
In addition to these rules facilitating the service of documents within the EU, a Swedish court may order a party who does not reside in Sweden to retain a counsel who resides within the European Economic Area or Switzerland and who is authorised to receive services on behalf of the party. Therefore, Swedish courts seldom need to serve documents outside the European Economic Area or Switzerland.
vi Enforcement of foreign judgments
A foreign judgment is only enforceable in Sweden if it is covered by an international convention on enforcement or relevant EU regulations.
If a judgment was rendered in an EU Member State and the proceedings preceding the judgment were initiated before 10 January 2015, the original version of the Brussels I Regulation7 is applicable. If the proceedings were initiated after this date, the enforceability of the judgment is instead regulated by the recast version of the Brussels I Regulation.8
Although both versions of the Brussels I Regulation provide that judgments rendered within the EU9 are enforceable in Sweden, the enforcement procedure differs slightly between the two versions.
Pursuant to the recast version, a judgment rendered in another Member State which is enforceable in that state is enforceable in Sweden without any declaration of enforceability being required. Thus, the party seeking enforcement can apply for enforcement directly with the Swedish Enforcement Agency. The party against whom enforcement is sought may apply for a refusal of recognition before the Svea Court of Appeal. Such refusal may be obtained, for example, if the judgment is manifestly contrary to Swedish public policy.
Under the original version of the Brussels I Regulation, enforcement is first subject to an exequatur procedure before the Svea Court of Appeal. The Svea Court of Appeal shall immediately declare the judgment enforceable, subject to certain formal requirements being met, without subjecting it to any review with respect to, for example, public policy. Upon appeal the declaration of enforceablity may be revoked, for example, on grounds of public policy.
If the judgment was rendered in a state outside the EU, and if there are no applicable instruments regulating the enforceability of the judgment, the judgment will not be enforceable in Sweden. Such foreign judgment may, however, still serve as a basis for a Swedish court judgment, which is in turn enforcable.
vii Assistance to foreign courts
Pursuant to Regulation (EC) 1206/2001, a court situated in another Member State may make a request for the taking of evidence in Sweden. The Regulation provides two alternative procedures for this purpose. A foreign court may ask a Swedish court for assistance (i.e., ask that a Swedish court take evidence on behalf of the foreign court). Such a request shall be transmitted to a Swedish district court. A foreign court may also ask to take evidence directly in Sweden (i.e., ask for permission to take evidence in Sweden without the involvement of a Swedish court). Such requests shall be transmitted to the Swedish Ministry of Justice.
Sweden assists foreign courts in the taking of evidence also where Regulation (EC) 1206/2001 does not apply, for example under the 1970 Hague Convention on the Taking of Evidence Abroad in Civil or Commercial Matters.
viii Access to court files
The principle of public access to information is fundamental in Swedish law. When it comes to court proceedings, this principle entails that court files and court hearings are as a main rule open to the public. However, there are certain exceptions stipulated in the Swedish Public Access to Information and Secrecy Act. Court records containing trade secrets may for example be kept secret. Furthermore, if it can be assumed that information to which secrecy applies will be presented at a court hearing, the court may under certain circumstances direct that the hearing is held behind closed doors.
ix Litigation funding
Litigation is normally funded by the parties themselves or by insurance companies. There are no rules on third-party funding and there is no developed market for such funding in Sweden.
IV LEGAL PRACTICE
i Conflicts of interest and Chinese walls
According to the Code of Conduct of the Swedish Bar Association a mandate may not be accepted if there exists a conflict of interest or a significant risk of a conflict of interest. A mandate must further be declined if a conflict of interest arises after the mandate is accepted. The absence of a conflict of interest is considered to preserve the lawyer's duties of independence, loyalty and secrecy towards his or her clients. Chinese walls are not accepted.
ii Money laundering, proceeds of crime and funds related to terrorism
The Swedish Act on Measures against Money Laundering and Terrorist Financing implements the Fourth EU Money Laundering Directive10 and entails certain obligations for members of the Bar Association and their associates. Such obligations include identifing and conducting reviews of clients, monitoring ongoing mandates and separate transactions, discovering deviant activities and deepening the examination of circumstances that may indicate money laundering. Matters such as disputes are, however, generally excepted from these obligations. The obligations under the Act also include an obligation to report suspected cases of money laundering or funding of terrorism to the Financial Police.
iii Data protection
In 2018, the General Data Protection Regulation,11 which applies throughout the EU, came into force. The Regulation sets forth a number of fundamental principles that apply to processing of personal data. For example, personal data may only be collected for specific, explicitly stated and legitimate purposes and there must be a lawful basis for the processing under the Regulation. The Swedish Data Protection Agency may fine violators of the Regulation up to €20 million or 4 per cent of the company's global annual revenue, whichever is greater. On 20 August 2019, the Swedish Data Protection Agency issued Sweden's first fine for violation of the Regulation. The decision has been appealed.
V DOCUMENTS AND THE PROTECTION OF PRIVILEGE
The relationship between a member of the Swedish Bar Association and his or her client is privileged in different ways. The correspondence between a lawyer and the client may not be subject to an order for production of documents. Further, a lawyer and his or her associates may, as a main rule, refuse to testify before a court on issues relating to the client-attorney relationship.
Communications with and information specifically entrusted with someone acting as counsel in court proceedings are privileged even if the counsel is not a member of the Swedish Bar Association. There are no specific rules applicable to in-house counsel, and communications with in-house counsel as such are not privileged under Swedish law.
ii Production of documents
Upon request by a party, the court may order a counterparty or a third party to produce documents. To obtain such an order, the party requesting the production order must explain what circumstance the documents shall prove and identify the documents concerned to a reasonable degree. If the requesting party cannot identify the documents due to lack of information, the party may request that a hearing is held with the potential holder of the documents or other persons.
Certain types of documents (e.g., documents containing trade secrets) may, in general, not be subject to a production order.
Only the entity holding the documents in question may be ordered to produce the documents. In general, the entity that owns the documents or has the right of disposition to them is considered as the holder of the documents.
The aforementioned rules in the Code came into force before documents were stored digitally. On 2 September 2019, the Supreme Court gave leave to appeal in a case concerning the question whether someone can be ordered to produce digitally stored information in digital form (and not just in printed form). The Supreme Court has not yet rendered its judgment.
VI ALTERNATIVES TO LITIGATION
i Overview of alternatives to litigation
Arbitration is a frequently used alternative to litigation in Sweden. Larger commercial disputes are generally resolved through arbitration rather than in court. Other forms of ADR such as mediation or expert determinations are not widely used.
Arbitrations seated in Sweden are governed by the Swedish Arbitration Act of 1999. As discussed in Section II above, a revised Arbitration Act came into force on 1 March 2019. The Act is based on party autonomy and contains very few mandatory rules. The parties are thus to a large extent free to agree on the conduct of the arbitration. Although the Act does not follow the UNCITRAL Model Law as to its form, it is very similar in content.
As already mentioned, the SCC is one of the world's largest arbitration institutes. In 2018, the Institute registered a total of 152 cases and around 50 per cent of these cases were international disputes. The total value in dispute for all cases commenced in 2018 amounted to approximately €13.3 billion. Most of these proceedings were governed by the Arbitration Rules of the SCC.12
Since 2010, the Arbitration Rules of the SCC contain rules on emergency arbitrators. These rules allow for parties to obtain a swift interim relief from an arbitrator before an arbitral tribunal has been constituted. The SCC appoints an arbitrator within 24 hours from the application and a decision shall, as a rule, be rendered within five days.
Swedish arbitral awards cannot be appealed on the merits. An arbitral award may be declared invalid if it includes determination of an issue which under Swedish law may not be decided by arbitrators, or if the award, or the manner in which it was rendered, is evidently contrary to Swedish public policy. Further, an award may be challenged and set aside if, for example, the award is not covered by a valid arbitration agreement or if the tribunal has exceeded its mandate in a manner that probably influenced the outcome of the case.
Claims for a declaration of invalidity and challenges to an award shall be brought before the Svea Court of Appeal. A claim for a declaration of invalidity may be brought without any limitation in time. A claim for setting aside the award must be brought within two months from the date when the party received the award, unless the award was rendered in proceedings which were commenced before 1 March 2019, in which case the previous three months time limit applies.
An arbitral award rendered in Sweden may be enforced by the Swedish Enforcement Agency as a court judgment. Sweden is party to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards and foreign awards are thus enforceable in Sweden. The grounds for refusing enforcement set out in Article 5 of the New York Convention have been incorporated into the Swedish Arbitration Act. Before seeking enforcement with the Swedish Enforcement Agency, the party must apply for a declaration of enforceability with the Svea Court of Appeal.
Mediation may be agreed upon by the parties after a dispute has arisen. The SCC has its own set of mediation rules, revised in 2014, which parties may choose to apply. In commercial disputes before a general court, the court may decide to appoint a mediator if the parties agree. The courts sometimes also conduct more informal settlement negotiations. In such cases, the judge who has conducted the settlement negotiation will not act as judge if the dispute is not settled.
In an attempt to facilitate mediation as a dispute resolution method the Swedish Code of Judicial Procedure was revised in 2011 and a new statue was introduced. The new statute, which implements the Mediation Directive,13 provides that settlement agreements concluded after mediation may be enforced directly by the Swedish Enforcement Agency. However, despite these efforts, mediation is still not widely used to settle commercial disputes in Sweden.
iv Other forms of alternative dispute resolution
Expert determination is sometimes used to settle certain disputes under construction contracts or share purchase agreements. This procedure is generally expedited and results in a decision that is normally binding on the parties as new contract content.
VII OUTLOOK AND CONCLUSIONS
A general current trend that is expected to continue in the coming years is the strive for ever more efficient legal proceedings. This relates both to court proceedings and arbitral proceedings. The introduction of the general requirement for leave to appeal in the Court of Appeal is one example of this trend. The courts' obligation to set a timetable for the proceedings at an early stage of the preparation phase is another example. Along the same lines, the modernisation of the Swedish Arbitration Act has as one of its main purposes to enhance the efficiency of arbitral proceedings. Facilitating multiparty arbitrations is one example of trying to achive this; shortening the time period for challenges is another.
Another focus in recent years has been digitalisation and the acknowledgement that the legal system must adapt to a new digital environment. In Swedish courts, submissions in commercial disputes are generally filed digitally and communications between the courts and parties are normally made by electronic means. In 2019, the SCC launched the SCC Platform, which is a secure digital platform for communication, planning and file sharing between the parties and their counsel, the arbitral tribunal and the SCC.14 This digital platform further strengthens the SCC and Sweden as a modern hub for resolving commercial disputes through arbitration.
1 Cecilia Möller Norsted is a partner and Mattias Lindner is an associate at Advokatfirman Vinge KB.
3 Slowakische Republik v. Achmea BV (C-248/16). ECLI:EU:C:2018:158.
4 Svea Court of Appeal's Cases Nos. T 4568-18, T 1626-19, T 3229-19 and T 4236-19.
5 Svea Court of Appeal's judgment on 22 February 2019, in Cases Nos. T 8538-17 and T 12033-17.
6 NJA 2019, p. 171.
7 Regulation (EC) 44/2001.
8 Regulation (EU) 1215/2012.
9 It should be mentioned that neither the original nor the recast version of the Brussels I Regulation apply in relation to Denmark. However, Danish judgments are, according to other instruments, enforceable in Sweden.
10 Directive (EU) 2015/849 of the European Parliament and of the Council of 20 May 2015.
11 Regulation (EU) 2016/679.
13 Directive (EC) 2008/52.