The Arbitration Institute of the Stockholm Chamber of Commerce (SCC) celebrated its 100th anniversary in 2017. Since its establishment in 1917, it has developed into one of the world's leading forums for international dispute resolution. In its centennial year, it celebrated the importance of international arbitration for trade, economic development and the peaceful resolution of disputes.
Arbitral proceedings in Sweden are governed by the Swedish Arbitration Act of 1999 (Act).2 Although the Act is heavily inspired by the UNCITRAL Model Law on International Commercial Arbitration (Model Law), it includes some traditional Swedish features, mostly with respect to the legislative style. It should be emphasised, however, that there are no provisions in the Act that deviate from, let alone contradict, the general approach taken by the Model Law. The Act governs both domestic and international arbitral proceedings, but with some provisions being applicable only in international arbitral proceedings. In addition, the Act includes provisions on the recognition and enforcement of arbitral awards, which transform the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards into Swedish law.
International arbitration in Sweden is to a large extent synonymous with arbitral proceedings under the SCC Rules. The SCC provides rules for ordinary arbitral proceedings, expedited proceedings and emergency arbitrator proceedings. That said, there are several other international arbitral proceedings – for example, proceedings under the ICC Rules or ad hoc proceedings under the UNCITRAL Rules – that are handled by Swedish arbitrators or that have Sweden as their seat for the arbitral proceedings, or both.
In 2017, the SCC administered 200 cases, representing its third-highest caseload since it was founded in 1917. Almost 50 per cent of these cases were international, with parties from 40 different countries. Russia is the foreign state that most frequently appears before the SCC, followed by the United Kingdom, Germany, Norway and Turkey. The SCC is the second-largest forum (after ICSID) in the world for investor–state disputes, with eight cases administered during 2017.
The arbitrations initiated in 2017 were disputes stemming from a wide range of contract subjects. Most frequently parties brought disputes arising out of delivery contracts, service contracts, business acquisitions, construction contracts and shareholders' agreements.
For the majority of awards rendered under the SCC Arbitration Rules in 2017, it took between six to 12 months from the time of registration of a case until the rendering of an award.
II THE YEAR IN REVIEW
i Developments affecting international arbitration
The new SCC Rules
As of 1 January 2017, the new SCC Arbitration Rules and SCC Rules for Expedited Arbitration entered into force. The new sets of rules include a number of noteworthy revisions and innovations that will make arbitration more user-friendly as the SCC enters its second century. The most important areas of amendments are as follows:
- the inclusion of provisions regarding joinder of additional parties (Article 13) and multi-contract disputes (Article 14);
- clarifications regarding the consolidation of arbitrations (Article 15);
- the inclusion of provisions regarding an administrative secretary of the arbitral tribunal (Article 24);
- the inclusion of provisions regarding security for costs (Article 38); and
- the inclusion of provisions regarding summary procedure (Article 39).
Similar amendments may be found in the SCC Rules for Expedited Arbitration. With respect to the provisions on joinder and multi-contract disputes, the new SCC Rules are aligned with the increased complexity at hand in commercial disputes today.
Of the 200 cases in 2017, 72 were expedited cases. This is a significant increase over previous years; typically around one-quarter of the total SCC caseload has been disputes under the Expedited Rules. In 2016, there were 55 expedited arbitrations out of 199 cases in total, showing that the new rules have probably had an impact.
When the SCC emergency arbitrator rules entered into force in 2010, they were a novelty in international arbitration. Since then, other institutions have introduced their own emergency arbitrator rules. In this respect it should be noted that the SCC emergency arbitrator rules, in contrast to similar rules, have a retrospective effect and are applicable to all arbitration agreements referring to the SCC rules (i.e., even those agreements entered into prior to the rules' entry into force in 2010). The SCC emergency arbitrator rules provide that an emergency arbitrator shall, if possible, be appointed by the SCC within 24 hours from an application, and that a decision on the security measure sought shall be given within five days from the date when the application was referred to the emergency arbitrator. For a decision to remain valid, arbitral proceedings must be commenced within 30 days from when the decision was made.
The SCC received three applications for appointment of an emergency arbitrator in 2017, compared to 13 in 2016. Arbitrators were appointed within 24 hours in all three cases, and the median time for rendering an emergency decision was 6.5 days from referral.
A new Swedish Arbitration Act?
Since 2014, the Ministry of Justice has been reviewing the Act. A proposal for amendments to the Act was presented in 2015, and was referred to several instances (e.g., courts, universities, the SCC, the Swedish Bar Association, the Swedish Arbitration Association) for consideration. The Ministry of Justice is currently working on a government bill for a new Act, which must be approved by Parliament. The new Act is expected to enter into force on 1 March 2019. The most important proposed amendments to the Act are as follows:
- the inclusion of provisions regarding the choice of law;
- a new provision regarding multiparty arbitrations;
- the inclusion of provisions regarding the power of arbitral tribunals to order interim measures in the form of a special award; and
- amendments to the rules and procedure of challenges of arbitral awards, including a proposal that challenge proceedings before the court may be conducted in English.
It should be noted that the general perception of the Act is that it has, on the whole, been effective. Hence, rather than amending the entire Act, the inquiry, which has resulted in the proposal for amendments to the Act, has attempted to address a number of 'problems' identified by the SCC and active arbitrators, among others, and the legal literature. The primary concern has been to make Swedish arbitration even more attractive than it is at present, not only for Swedes but also for foreign parties and arbitrators.3
The Svea Court of Appeal's initiative
On a more informal level, the Svea Court of Appeal, which deals with most of the challenge proceedings in Sweden, has invited the Swedish arbitration community to discussions regarding the court's handling of arbitration-related cases and issues. These discussions have resulted in an internal programme established by the Svea Court of Appeal aimed at increasing the efficiency and foreseeability of such proceedings.
The Svea Court of Appeal's initiative is indirectly supported by several cases from 2010 onward in which the Supreme Court has confirmed that Sweden is an arbitration-friendly jurisdiction where international best practice is considered by the courts. For example, in Nilsson,4 where the impartiality of arbitrators was considered, the Supreme Court was explicitly influenced by the IBA Guidelines on the Conflict of Interest in International Arbitration when giving its judgment.
Swedish arbitration law and procedure available in English
Nowadays, Swedish arbitration law and procedure are to a large extent accessible for foreign parties and arbitrators. There are several monographies on international arbitration in Sweden,5 as well as guidelines and commentaries on the Act and the SCC Rules,6 available in English.
In 2012, the SCC launched the Swedish Arbitration Portal (the Portal), which provides free access to English translations of Swedish court decisions on arbitration issues.7 The Portal contains decisions from all instances of the commercial Swedish court system on issues relating to both international and domestic arbitral proceedings. The project's mission is to increase transparency in arbitration by making Swedish case law more accessible to the international community.
In addition, Young Arbitrators Sweden has launched an initiative, supported by the Swedish Arbitration Association and the SCC, intended to make Swedish substantive law more accessible and known to foreign parties and arbitrators. The purpose is simply to assure foreigners that Swedish substantive law on commercial issues is very straightforward and contains no peculiarities. The initiative has resulted in translations into English of Swedish substantive law in several areas, and more will follow.
ii Arbitration developments in local courts
The primary task for Swedish courts in this respect is to support arbitral proceedings conducted in Sweden. The Supreme Court's confirmation of Sweden as an arbitration-friendly jurisdiction is very important for this notion.
The competence of the Swedish courts to handle arbitration-related issues depends on the matter at hand. To simplify, issues that arise prior to the commencement of arbitral proceedings and during such proceedings are primarily handled by the competent district court. Such issues include, for example, the appointment of an arbitrator (in cases where a party has failed to appoint its arbitrator), the discharge of an arbitrator, the taking of oral evidence under oath (subject to leave from the arbitral tribunal), document production and security measures. Moreover, the district court is competent to try the jurisdiction of the arbitral tribunal at the request of a party.
Issues that arise subsequent to the arbitral proceedings are primarily handled by the courts of appeal, of which, as previously mentioned, the Svea Court of Appeal in Stockholm handles most matters. Such issues include, for example, challenge proceedings for setting aside arbitral awards, and the recognition and enforcement of foreign arbitral awards
In 2017, a number of arbitral awards have been challenged in Swedish courts.8,9,10,11 None of the challenges were successful. This again goes to show that Sweden indeed is an arbitration-friendly jurisdiction, where the starting point is that arbitral awards are to be upheld by the courts. Only in very specific and extraordinary circumstances may arbitral awards be annulled.
iii Investor–state disputes
As previously mentioned, the SCC is the second-largest forum in the world after ICSID for investor–state disputes. In this respect, it should be noted that the SCC is one of the optional forums for disputes under the Energy Charter Treaty (ECT).12
Republic of Kazakhstan v. Stati et al13
The Republic of Kazakhstan brought a challenge to the Svea Court of Appeal against an award in an investor–state arbitration under the ECT in favour of a group of Moldavian investors. The state claimed, inter alia, that the arbitral tribunal lacked jurisdiction since the investors had not complied with the procedure under the ECT and, in addition, that the award was tainted by fraud.14
The US$500 million award, one of the largest ever rendered under the ECT, was issued in 2013 by an SCC tribunal seated in Stockholm.
The claim that the arbitral tribunal lacked jurisdiction was based on an interpretation of Article 26 of the ECT. The state argued that the cooling-off period for negotiations under Article 26 ECT constituted a jurisdictional requirement that must be fulfilled for a valid arbitration agreement to exist. The majority (two out of three) of the judges in the Court did not agree, whereas one judge dissented and found in favour of the state in this particular respect.15 The majority concluded that the wording of Article 26 does not in itself clearly indicate that the cooling-off period is a jurisdictional requirement. However, this does not suffice to finally determine this issue. In the continued analysis, the majority found that there seems to be no uniform case law, nor any uniform position in legal literature, in this respect. Therefore, the majority determined the purpose of the cooling-off period. The conclusion was that the purpose (in short, to give the parties an opportunity to amicably resolve the dispute) in some instances could be fulfilled even subsequent to the commencement of arbitral proceedings. Consequently, the majority concluded that the issue of cooling off is not of a jurisdictional nature. The majority's conclusion was therefore that a valid arbitration agreement existed between the parties, and that the arbitral tribunal had jurisdiction in the dispute.
In brief, the claim for invalidity of the award due to fraud was based on the allegation that the investors had initiated a fraudulent scheme to deceive the state regarding the amount invested in a liquefied petroleum gas plant. The fraudulent scheme was claimed to include sham agreements and other means by which the investors had inflated the value of the gas plant and made streams of money flow out of the state into tax havens in the Caribbean. To uphold the arbitral award would thus be in conflict with public policy, according to the state.
The Court found that the subject of the dispute in itself (i.e., the investment in a gas plant) was not in violation of Swedish public policy. The Court further noticed that, although the potential existence of forged or false evidence in the arbitral proceedings could be seen as a violation of public policy, the threshold for such determination under Swedish law is very high. There is no case law in support of such a claim. Without determining whether forged or false evidence in fact was invoked in the arbitral proceedings, the Court concluded that such evidence, in any event, did not directly influence the outcome of the case. From this point of departure, the Court found that, even if forged or false evidence existed, this could not result in the invalidity of the arbitral award in this case.
The Republic of Kazakhstan's claims were thus rejected in their entirety.
Russian Federation v. GBI 9000 SICAV et al16
In March 2007, the Spanish investment funds GBI 9000 SICAV SA, Orgor de Valores SICAV SA, Quasar de Valores SICAB SA and Rovime Inversiones SICAV SA (jointly, SICAV) submitted a request for arbitration against Russia. SICAV claimed that an arbitration agreement existed, and that such proceedings were to be administered by the SCC in accordance with the bilateral investment treaty entered into between Spain and the Soviet Union on 26 October 1990 (the treaty). An arbitral tribunal was constituted and subsequently decided17 that, in accordance with Article 10 of the treaty, it had jurisdiction to determine whether Russia had committed expropriation measures against SICAV.
In short, SICAV claimed that they had made investments within Russian territory and that such investments were protected by the treaty. The relevant investment consisted of SICAV's acquisition of American depository receipts representing a shareholding in the Yukos Oil Company (Yukos). As a result of tax revisions by authorities in Russian, the taxable income for Yukos significantly increased in 2000 and 2001. Yukos was not capable of paying the additional taxes, and its shareholding in its subsidiary, Yuganskneftegaz, was sequestered and sold on executive auction. Further measures were also taken to enforce the tax decisions, and Yukos was finally declared bankrupt and its remaining assets liquidated. SICAV claimed that the actions taken by Russia constituted an expropriation of property, and that SICAV was entitled to reimbursement in accordance with the treaty.
In September 2009, Russia filed a claim with the Stockholm District Court requesting that it was to establish that the arbitral tribunal did not have jurisdiction to determine the dispute initiated by SICAV with a request for arbitration dated 25 March 2007. Meanwhile, the arbitration proceedings continued and the arbitral tribunal rendered its award on 20 July 2012. The arbitral tribunal found that the actions taken by Russia were expropriation measures, and that SICAV was entitled to reimbursement.
In the case before the district court, Russia claimed that the American depository receipts did not constitute an investment as defined in the treaty, and that in any event the investment had not taken place within Russian territory, both being prerequisites according to Articles 1 and 2 of the Treaty for the determination of what shall be considered an investment. Moreover, Russia claimed that the arbitration clause in the treaty did not provide the arbitral tribunal with jurisdiction to determine whether the invoked actions constituted expropriation measures, and that Russia had not admitted that any expropriation had taken place. Moreover, contrary to what SICAV had invoked, Russia claimed that Article 5(2) of the treaty, a most favoured nation clause (MFN clause), and other investment treaties between Russia and other countries, did not provide grounds for jurisdiction by extending the scope of Article 10 of the treaty.
On 11 September 2014, the Stockholm District Court rejected Russia's claim. The judgment was appealed by Russia to the Svea Court of Appeal. The Svea Court of Appeal reversed the judgment of the District Court and ruled in favour of Russia, thus declaring that the arbitral tribunal lacked jurisdiction to determine the dispute with reference to the treaty.
The treaty is a bilateral treaty between sovereign states and governed by international law, which does not provide a general obligation for any state to submit to the jurisdiction of an arbitral tribunal. On the contrary, such jurisdiction requires that the relevant state has consented thereto. By use of Articles 31 and 32 of the Vienna Convention on the law of treaties, the Court of Appeal interpreted the relevant articles of the treaty and concluded that:
- the wording of Article 10 provided a clear restriction on which matters18 an arbitral tribunal would have jurisdiction to determine, and that no jurisdiction existed for determining whether expropriation measures had been taken with reference to said article;
- an MFN clause could per se provide grounds for an arbitral tribunal to determine jurisdiction based on another investment treaty, but that this would be dependent on the chosen wording of the actual MFN clause in each individual case; and
- the particular MFN clause in the treaty did not constitute a valid ground for jurisdiction for the arbitral tribunal.
Consequently, the Court of Appeal found that an MFN clause could per se provide an arbitral tribunal with the possibility to determine jurisdiction over a matter by referencing a more favourable dispute resolution mechanism in another investment treaty that has been entered into by the relevant state. However, this would be dependent on the wording of the MFN clause at hand. In this case, it was stated in the MFN clause, Article 5(2), that each state warranted the fair and equitable treatment of investors from the other state. The Court of Appeal also concluded that the standard of fair and equitable treatment is one of the cornerstones of current investment law, and shall provide investors protection from serious cases of arbitrary decision-making, discrimination and abuse of the host state. Furthermore, the Court of Appeal concluded that said standard includes the right of judicial review and a fair trial, but it does not provide an unconditional right for an investor to have a dispute tried by an international arbitral tribunal. As the Court of Appeal found that no jurisdiction existed for the arbitral tribunal, it did not find it necessary to determine whether any arbitration agreement existed between the parties.
One of the judges of the Court of Appeal had a dissenting opinion regarding the reasons for the judgment. The dissenting judge was of the opinion that the American Depository Receipts in question did not meet the treaty's definition of an investment, and that SIVAC's request for arbitration did not conform to the offer for arbitration in the treaty. As a result, the dissenting opinion considered that the request for arbitration did not result in a valid arbitration agreement.
III OUTLOOK AND CONCLUSIONS
Sweden continues to attract a large number of international arbitrations, and hosts a very active arbitration community. Any measures aimed at strengthening the position of Sweden on the international arbitration market are very welcome and supported by the community. The fact that the new SCC Rules and the proposed amendments to the Act have taken the thoughts and ideas of foreign and Swedish practitioners into consideration is very positive. It remains to be seen what comes of these proposals, but it is fair to say that many of the proposed amendments would be beneficial for Swedish arbitration, in particular from an international perspective.
1 Pontus Ewerlöf and Martin Rifall are partners at MAQS Advokatbyrå.
2 The Act is currently under revision and an amended Act may be introduced in 2019 (see further below).
3 Report of the inquiry, SOU 2015:37 (Review of the arbitration procedure).
4 Swedish Supreme Court, NJA 2010 p. 317.
5 For example, Hobér, International Commercial Arbitration in Sweden, Oxford University Press, 2011; Swedish Arbitration Association (Herre, ed.), Arbitration in Sweden, Jure Law Books, 2011; and Heuman, Arbitration Law of Sweden: Practice and Procedure, Juris Publishing, 2003.
6 Franke et. al (ed), International Arbitration in Sweden, A Practitioner's Guide, Wolters Kluwer, 2013; and Madsen, Commercial Arbitration in Sweden, Oxford University Press, 2006.
8 Carl A. Sax v. the City of St. Petersburg et al., Svea Court of Appeal's judgment on 10 February 2017 in Case No. T 5937-12.
9 City Sakerhet v. SafeTeam, Svea Court of Appeal's judgment on 9 March 2017 in Case No. T 1968-16.
10 BTH v. Surmonte Invest, Svea Court of Appeal's judgment on 30 May 2017 in Case No. T 6335-16.
11 Wayne och Margareta's Coffee v. Ammouris Kaffe et al., Svea Court of Appeal's judgment on 28 August 2017 in Case No. T 756-16 and T 4427-16.
12 The other 'fora' for ECT cases are the ICSID and ad hoc proceedings under the UNCITRAL Rules.
13 The Svea Court of Appeal's judgment on 9 December 2016 in case No. T 2675-14.
14 The Republic of Kazakhstan invoked several other grounds for its challenge of the arbitral award, all of which were rejected.
15 The dissenting judge found that the cooling-off provision in fact must be fulfilled prior to the commencement of arbitral proceedings. Hence, in his opinion, the provision is a jurisdictional one. However, the dissenting judge found that the investors in fact had fulfilled the requirements for the cooling-off period prior to the request for arbitration and thus that a valid arbitration agreement existed between the parties.
16 Svea Court of Appeal judgment on 18 January 2016 in case No. T 9128-14.
17 Said decision was rendered 20 March 2009.
18 Article 10; 'Any dispute […] relating to the amount or method of payment of the compensation due under article 6[...]'.