A. LEGISLATION AND RULES
A.1 Legislation
The Swedish Arbitration Act (SAA) continues to be the primary source of arbitration law in Sweden and governs both domestic and international arbitration proceedings. The SAA does not differentiate between domestic and foreign proceedings, with the exception of the enforcement and recognition of foreign awards and proceedings. There have been no legislative amendments in 2023.
A.2 Institutions, rules and infrastructure
The SCC is the central arbitration institute in Sweden that administers domestic and international arbitrations.
The SCC Rules
In 2023, the SCC changed its name in English from Arbitration Institute of the Stockholm Chamber of Commerce to SCC Arbitration Institute. Changes were made in the various SCC rules to accommodate the name change.
On 1 January 2023, a number of revisions to the SCC Arbitration Rules entered into force. A new provision was incorporated in Article 32(2), which clarifies that the arbitral tribunal may, after consulting with the parties, decide whether a hearing should be conducted: (a) in person, at a specified location; or (b) remotely, in whole or in part, by videoconference or other appropriate means of communication. The previous version of the provision on hearings neither prohibited nor expressly provided for the possibility of remote hearings.
Article 45(2) was amended so that if the arbitration is terminated before the final award is made for any other reason than settlement, the arbitral tribunal has the option to either issue an order or an award recording the termination. Previously, only an award could be issued.
Article 51(5), concerning the consequences of failure to pay the advance on costs for the arbitration, has also been amended so that if the case has been referred to the arbitral tribunal, it may terminate the case, in whole or in part, due to failure to pay. Previously, only the SCC Board could dismiss a case on these grounds, and the provision did not expressly stipulate the course of action if the case had already been referred to the arbitral tribunal.
Recommended addition to the number of arbitrators in the SCC Model Clause has been removed
The SCC Model Clause was revised by removing the recommended number of arbitrators. By commenting on the number of arbitrators in the request for arbitration (Article 6(vi)) and the response thereto (Article 9(1)(v)), the parties can influence the costs of the proceedings when they have a better appreciation of the potential value and complexity of the case.
Higher fees for arbitrators from 1 January 2024
In 2023, the decision was made to increase the fees for arbitrators handling cases under the SCC Arbitration Rules and the SCC Expedited Arbitration Rules. The new schedules of costs will apply to arbitrations commenced from 1 January 2024 or thereafter, and the decision is a response to the need to adjust for inflation. The compensation paid to the arbitrators will increase by between 5% and 15%, depending on the amount in dispute. There will be a more substantial increase in larger cases compared to smaller cases, while the smallest cases will see no increase.[1]
The SCC has administered its first SCC Express case
In 2021, the SCC launched a new dispute resolution tool called “SCC Express” which is a faster option for parties who do not want to get stuck in negotiations on disputed contractual issues but move forward with the business project. SCC administered its first SCC Express case in 2023, where a resolution was issued in less than three weeks. During the year, the SCC Express model clauses were also launched to set out how these kinds of processes should be carried out.[2]
SCC 2023 Analytics – Ad hoc vs. Institutional Arbitration in Construction Disputes
The SCC released a report in 2023, comparing construction disputes resolved in Sweden during 2017 to 2022. The report confirms that in Sweden, settling construction disputes by ad hoc arbitration is generally more expensive and more time-consuming than arbitrations within the SCC Arbitration Institute. The average disputed amount in SCC arbitration proceedings is usually substantially higher than the disputed amount in ad hoc arbitrations. The average disputed value in ad hoc arbitrations is EUR 4.8 million, compared to SCC arbitrations where that value is EUR 64.1 million. On average, an award from an ad hoc tribunal takes 18.1 months to be rendered, whereas an SCC tribunal in a construction dispute takes 15.8 months to render an award. In expedited SCC arbitrations with a sole arbitrator, it takes about 6.4 months, on average, to render an award. The report also states that the average costs for tribunals in SCC arbitrations are about 40% lower than in ad hoc arbitrations.[3]
B. CASES
B.1 The role of the dispositive principle in arbitration proceedings
In 2023, the Supreme Court granted leave to appeal in a case concerning challenging of an arbitral award. The case raised the question of the applicability of the so-called disposition principle in arbitration proceedings. Under Swedish procedural law, this principle means that the court may not rule on anything other than what has been claimed by any of the parties, nor may it base its decision on a circumstance that has not been invoked by the parties.
The background to the case was that a property owner rented premises to a limited liability company. According to the tenancy agreement, the company was entitled to transfer the tenancy agreement to another company within its group without the property owner’s written consent, provided that the limited liability company provided acceptable security. Another company within the limited liability company’s group began operating a hotel on the premises. A dispute arose as to whether the tenancy agreement had been transferred to the company operating the hotel business and whether the limited liability company had provided acceptable security. The property owner initiated arbitration proceedings in which the primary relief sought was that the arbitral tribunal should determine that there had not been a valid transfer of the tenancy agreement, and otherwise, the arbitral tribunal should order the limited liability company to provide acceptable security in accordance with the tenancy agreement. In the award, the arbitral tribunal confirmed that a valid transfer of the contract had taken place and also ordered the limited liability company to issue a guarantee corresponding to 36 guaranteed rent payments. The property owner challenged the award and requested that the Court of Appeal set it aside. The property owner stated both an excess of mandate and procedural errors on the part of the arbitral tribunal and asserted, inter alia, that the arbitral tribunal, by requiring the limited liability company to provide security corresponding to 36 guaranteed rent payments, had deviated from the property owner’s relief sought and thus ruled outside the scope of the proceedings. The limited liability company opposed and asserted that the real estate company had adjusted its claim during the hearing or had been responsible for the arbitral tribunal’s perception that the security could be determined in accordance with the award.
The Court of Appeal rendered its judgment on 24 November 2022, and found that the property owner’s original relief sought could only be interpreted to mean that the property owner requested that the security consist of an amount determined in crowns and pennies. Nothing in the case supported the argument that the property owner would have adjusted its relief sought during the negotiation. Since the expression “guaranteed rent“ did not appear in the property owner’s relief sought and could not be understood as corresponding to a certain fixed amount, the Court of Appeal found that the award deviated from the property owner’s relief sought. According to the Court of Appeal, the arbitral tribunal had, therefore, exceeded its mandate, and the error had an impact on the outcome of the case that was not of a negligent nature. Therefore, the Court of Appeal set aside the award in its entirety.[4] One member of the Court of Appeal dissented and pointed out that arbitration is of special character, which, inter alia, means that more types of reliefs sought can be allowed in arbitration proceedings than in court proceedings. The dissenting judge interpreted the arbitral tribunal’s assessment as meaning that the arbitral tribunal, in its substantive review, had found that the property owner had indeed been entitled to security but that none of the property owner’s reliefs sought for certain security could be granted. For this reason, the arbitral tribunal had to choose between dismissing the property owner’s relief sought or consider a more general relief sought, as reflected in the award. In summary, the dissenting judge found that the award addressed a pattern of conduct that had been expressly described in the property owner’s relief sought and that the award was within the scope of the claim. Therefore, according to the judge, there had been no excess of mandate or procedural error.
The case has been appealed to the Supreme Court, which granted leave to appeal on 26 June 2023.[5]
B.2 The Supreme Court rejects an appeal against an objection to the enforcement of an arbitral award
On 27 December 2023, the Supreme Court rendered its judgment in a case concerning an objection to the enforcement of an arbitral award. A company had entered into a franchise agreement with a franchisor. Under the terms of the agreement, the franchisee was given the right and obligation to operate a juice bar. Two years after the conclusion of the franchise agreement, the franchisee initiated arbitration proceedings against the franchisor. The franchisee requested that the franchisor be liable to pay SEK 1.1 million and interest on the amount. The franchisor contested the company’s action and requested that the franchisee be obliged to pay the franchisor SEK 600,000. In June 2022, the arbitral tribunal issued an award granting the franchisor’s relief sought and dismissing the franchisee’s claims.
The franchisee requested the Court of Appeal to set aside the arbitral award. In support of its application, the franchisee argued that the assessment in the award gave the franchisee reason to question the sole arbitrator’s impartiality and independence.
According to the Court of Appeal’s assessment, it was clear that what the franchisee had invoked in support of its claim did not objectively entail that doubts arose as to the sole arbitrator’s impartiality and independence. The franchisee’s action was therefore dismissed, as stated in the judgment on 2 February 2023.
Subsequently, the question of enforcement of the judgment was brought before the district court following a decision by the Enforcement Authority.[6] Under Chapter 1, Section 1, paragraph 1 of the Swedish Enforcement Code, the provisions of the code are applicable to the enforcement of judgments or other enforcement orders involving payment or other obligations. A judgment in which it is only established that a certain obligation exists, without any requirement of fulfillment of an obligation, e.g., to pay damages, does not constitute an enforcement order. According to the District Court, the decisive factor as to whether a judgment or decision entails a performance obligation or a confirmation of a legal relationship need not always be the words used in the judgment or decision, but the actual meaning of the judgment or decision. The District Court found that the arbitral award did not expressly contain an obligation for the franchisee and its guarantor to pay a certain amount for the arbitration costs to the franchisor. Instead, the award merely stated that the parties were jointly and severally liable for the costs to the arbitrator and the arbitration institute, and that the franchisee’s guarantor was ultimately liable to bear the costs since the franchisee had been declared bankrupt. The District Court, however, noted that this did not mean that the franchisor could use the award to enforce a recourse claim against the guarantor. In order to have such a claim enforced under the Enforcement Code, the franchisor must have it established in a writ of execution that the guarantor is obliged to pay a certain amount to the franchisor. The Swedish Enforcement Authority, which had to decide on the enforceability of the enforcement order at the time of the application for enforcement, should have rejected the application in this respect; however, this was not done. The District Court therefore amended the decision.[7]
The enforcement case was appealed to the Court of Appeal. The court referred to Section 37, paragraph 2 of the SAA, which states that the arbitrators may order the parties to pay their fees in a final award. Such a decision on compensation constitutes a writ of execution. According to Section 42 of the SAA, the arbitrators may decide how the compensation to the arbitrators shall be finally distributed between the parties. The question of whether such a cost allocation decision constitutes an enforceable title is not entirely clear. The decisive factor for whether a judgment or decision can be used as a basis for enforcement is not always the wording in the award but the actual meaning of it. According to the Court of Appeal, the arbitration award in question could not be understood in any other way than that the franchisee and its guarantor were ultimately liable for all arbitration costs. If the franchisor paid all or part of the costs, the franchisor took over the arbitrator’s right to compensation under the award by subrogation. Thus, according to the Court of Appeal, there was no impediment to the enforcement of the award. The Court of Appeal, therefore, amended the District Court’s decision accordingly.[8] The case was appealed to the Supreme Court, which granted leave to appeal on 19 June 2023.[9]
On 27 December 2023, the Supreme Court tried the case on the merits and reviewed the question of the requirements for enforcement.[10] The Supreme Court stated that an order that only relates to the establishment of a legal relationship cannot constitute a writ of execution. Like both the District Court and Court of Appeal, the Supreme Court also stated that the decisive factor in determining whether a writ of execution entails such an obligation to perform something is the actual meaning of the words used and not the words themselves. An arbitral award can constitute a writ of execution, and the SAA contains the detailed requirements for enforcement in its Chapter 3, Section 15-18. The Supreme Court found that it was clear from the judgment that the franchisee, between the parties, was obliged to finally pay the arbitration costs. Although not expressly stated, the wording could not be understood in any other way than that there was a joint and several liability between the franchisee and its guarantor. The Supreme Court found that the award contained a sufficiently clear obligation for the guarantor to compensate the franchisor for what the franchisee had paid of the arbitration costs and that the amount to which the obligation referred could be calculated without difficulty. There was, therefore, no impediment to the enforcement of the award, and the Supreme Court rejected the appeal.
B.3 A challenge of an arbitral award concerning procedural errors was dismissed by the Court of Appeal
A company and a non-profit association entered into an agreement on 3 November 2016, which was amended by a supplementary agreement. In general, the association would work to ensure that the company would be able to deliver its services within a certain area, and according to the agreement, compensation would be paid to the association for its services. At the end of November 2019, the association submitted a request for arbitration against the company and requested, inter alia, that the company be liable to pay compensation to the association. The basis for the claim was that the association had fulfilled its obligations under the agreement and therefore had a right to compensation. The arbitration clause in the agreement stated that any dispute would be settled through arbitration according to the SCC’s rules for expedited arbitration. The company opposed the payment obligation and requested for the association’s action to be dismissed since the association did not have legal competence as a non-profit association. On 18 May 2020, the final award was rendered, and the company’s motion for dismissal was rejected. The company was ordered to pay compensation to the association for its services under the agreement. The company challenged the award and requested, inter alia, that the arbitration agreement be declared invalid due to the association’s lack of legal capacity and because there had been procedural errors. In a judgment on 2 November 2021, the Court of Appeal found that the association lacked legal capacity and annulled the award.[11] The question of procedural errors was not examined. The association appealed the Court of Appeal’s judgment to the Supreme Court, which, on 10 January 2022, decided to grant leave to appeal on the question of whether the association had legal competence to enter into an arbitration agreement as a non-profit association and initiate arbitral proceedings. In a judgment dated 30 June 2022, the Supreme Court declared that the association did have such legal capacity.[12] In addition, the Supreme Court granted leave to appeal the case in general, set aside the Court of Appeal’s judgment, and referred the case back to the Court of Appeal for further proceedings.
The proceedings were resumed in the Court of Appeal, and the company requested that the question of the association’s legal capacity be re-examined in the Court of Appeal. The company argued that after the Supreme Court’s judgment, a new circumstance had arisen concerning the fact that the association was not an open association. The association requested that the Court of Appeal dismiss the company’s action regarding the association’s legal capacity and parts of the company’s evidence regarding this issue. In a decision dated 10 February 2023, the Court of Appeal rejected the association’s motion to dismiss the company’s action and evidence.[13] The company requested that the Court of Appeal set aside the arbitral award. As grounds for its request, the company argued that it had not lost its right to object to the validity of the arbitration agreement. The award was not covered by a valid arbitration agreement because the association had never had legal capacity and thus could not enter into an arbitration agreement or initiate the arbitration. Furthermore, the company argued that there had been procedural errors, which were not caused by the company and which likely affected the outcome of the case.
The association argued that the company had no right to object to the invalidity of the arbitration agreement, that the association was a non-profit association with legal capacity, and that there were no grounds for the company’s allegations of procedural errors. The Court of Appeal delivered its judgment on 13 March 2023, and began by stating that the Supreme Court had declared that the association did have legal competence, as a non-profit association, to enter into an arbitration agreement and initiate arbitration, and that the Court of Appeal is bound by the Supreme Court’s decision. According to the Court of Appeal, what had emerged did not constitute grounds to deviate from the Supreme Court’s decision, and the action could thus not be upheld on the grounds that the association lacked legal competence. The company’s action was therefore dismissed.[14]
The authors would like to thank Charlotte Säke, a trainee in Baker McKenzie’s Dispute Resolution Practice Group in Stockholm for her help in preparing this chapter.
[1] Higher fees for arbitrators from 1 January 2024 | SCC Arbitration Institute.
[2] SCC Arbitration Institute in 2023: Celebrating milestones and shaping the future | SCC Arbitration Institute.
[3] SCC Arbitration Institute in 2023: Celebrating milestones and shaping the future | SCC Arbitration Institute.
[4] Svea Court of Appeal, 24 November 2022, Case no. T 3623-21.
[5] Supreme Court, decision on leave to appeal, 26 June 2023, Case no. T 8250-22.
[6] Decision of the Swedish Enforcement Authority, 14 September 2022, Case No. U-33862-22/2110, U-43673/2110 and U-43674-22/2110 (KFM 19769-2022).
[7] Nacka District Court, 28 October 2022, Case no. Ä 6831-22.
[8] Svea Court of Appeal, 4 April 2023, Case no. Ä 13377-22.
[9] Supreme Court, decision on leave to appeal, 19 June 2023, Case no. Ä 2885-23.
[10] Supreme Court, 27 December 2023, Case no. Ä 2885-23.
[11] Göta Court of Appeal, 2 November 2021, Case no. T 2236-20.
[12] Supreme Court, 30 June 2022, Case no. T 7416-21 (NJA 2022 s. 592).
[13] Göta Court of Appeal, 10 February 2023, Case no. T 2556-22.
[14] Göta Court of Appeal, 13 March 2023, Case no. T 2556-22.
