A. LEGISLATION AND RULES
A.1 Legislation
Both international and domestic arbitration in Sweden continues to be governed by the 1999 Arbitration Act[1], to which there have been no legislative amendments.
A.2 Institutions, rules and infrastructure
The SCC Arbitration Institute (SCC) is the principal arbitration institute in Sweden, administering both domestic and international arbitrations. While there have been no amendments to any of the SCC’s rules, the SCC has adopted a few new policies and procedures which may impact parties to SCC proceedings.
A.2.1 Policy on the disclosure of interested third parties
On 16 October 2024, the SCC adopted a policy on the disclosure of third parties in arbitration.[2] Under the new policy, each party is required to disclose any third party with “a significant interest in the outcome of the dispute”. According to the policy, this includes, but is not limited to, parent companies, beneficial owners and third-party funders. The disclosure must be made in the party’s first written submission. The rationale of the policy is mainly to ensure that arbitrators can conduct diligent conflict checks so that any conflicts of interests, including those that may otherwise not have been discovered, are caught early on.
A.2.2 Policy on deciding the seat in intra-EU investment arbitrations
Under article 25(1) of the SCC Arbitration Rules, when the parties have not selected a seat, that duty is vested in the SCC Board. On 16 October 2024, the SCC Board adopted a new policy in deciding the seat in intra-EU investment arbitrations.[3] The policy was adopted following recent years’ development in the case law of the Court of Justice of the European Union (CJEU) which now provides that intra-EU investment arbitrations violate EU law and are therefore impermissible.[4]
Following the new CJEU case law, many courts in EU member states have invalidated or set aside intra-EU investment treaty awards. Recognizing the situation, and, in accordance with article (2) of the SCC Arbitration Rules, striving to “ensure that any award is enforceable”, the SCC Board adopted the instant policy providing that when the choice of seat falls on the SCC Board, it will no longer designate Stockholm or any other place within the European Union, or within a European Union candidate state, as the seat of the arbitration. Instead, the policy provides that the SCC Board will designate seats that are located outside of the EU member and candidate states.
A.2.3 Online filing of requests for arbitration
On 15 April 2024, the SCC announced its new online form for filing requests for arbitration. From having previously been directed to commence arbitration by e-mailing a request for arbitration, parties are now asked to upload the request along with its exhibits, using the new SCC online form.[5] It should be noted that applications for an emergency arbitrator should still be sent by email.
B. CASES
B.1 Withdrawal of counsel due to EU sanctions with respect to Russia not cause to set aside of award
In OAO Tyumenneftegaz v. First National Petroleum Corporation[6], the Svea Court of Appeal held that the withdrawal of the counsel of a Russian party due to EU sanctions on transactions with certain Russian entities did not in itself constitute such a violation of that party’s right to counsel so as to warrant automatic set aside of award. The court also held that the fact that one of the parties was the object of sanctions did not make the dispute non-arbitrable or repugnant to public policy (ordre public).
The arbitration arose out of a joint venture agreement between Russian OAO Tyumenneftegaz (TNG) and American First National Petroleum Corporation (FNP) entered by the parties in 1992. In 2021, FNP commenced an arbitration against TNG, claiming interest on damages which FNP had been awarded following a previous arbitration between the parties. During the course of arbitration, on 16 March 2022, a new EU sanctions package (“Sanctions Regulation“)[7] entered into force. In short, the Sanctions Regulation prohibited direct or indirect transactions with any Russian entity covered by the regulation, one of which was TNG. Shortly after the entry into force of the Sanctions Regulation, TNG made a submission to the arbitral tribunal, arguing that the Sanctions Regulation brought with it challenges to conduct the arbitration, both for the counsel and for the tribunal. For that reason, TNG took the position that unless relevant authorities made clarifications with respect to the Sanctions Regulation’s applicability to the instant situation before 15 May 2022, the arbitration should be terminated or stayed. Additionally, TNG’s counsel explained that it would also have to withdraw following that date. In a letter dated 2 May 2022, TNG again requested that the proceedings be terminated or stayed. TNG also claimed that the dispute had become non-arbitrable because it could no longer be settled by the parties as a result of the Sanctions Regulation (amenability to settlement is a requirement for arbitrability under Swedish law).
On 5 May 2022, the arbitral tribunal notified the parties of its decision that the proceedings should proceed. Following the tribunal’s decision, TNG’s counsel notified the arbitral tribunal that it had withdrawn, and that all future correspondence in the matter be directed to TNG’s in-house lawyer. Almost a month after TNG’s counsel had withdrawn, the European Commission published an advisory opinion on the Sanctions Regulation which explained that the prohibition on transactions with certain entities did not prevent such transactions that were strictly necessary to ensure access to judicial or administrative proceedings in a member state. On 21 July 2022, the relevant provision of the Sanctions Regulation was officially amended so as to include an exception for transactions that were strictly necessary to ensure access to judicial or administrative proceedings, or arbitral proceedings, in a member state.
In the time following the withdrawal of TNG’s counsel, the tribunal directed its communications in the proceedings to the in-house lawyer of TNG, who never responded to any of the communications. On 3 October 2022, a main hearing was held in Stockholm, which TNG did not attend. The final award was made on 19 December 2022. Following the award, TNG commenced action against FNP before the Svea Court of Appeal, requesting that the court declare the award void or that it set aside the award. As grounds for the award being void, TNG argued that the dispute was non-arbitrable, or alternatively, that the award was contrary to public policy in ordering a transaction between FNP and TNG. With regards to the request for set-aside, TNG argued the tribunal’s handling of the case violated article 23(2) of the 2017 SCC Arbitration Rules (providing that the tribunal must give the parties an equal and reasonable opportunity to present its case) and thus constituted a procedural error in violation of the arbitration agreement, which is a ground for set-aside under Swedish law.
The court denied TNG’s claims and upheld the award. Starting with the due process claim, the court noted that the issue before it was whether the arbitral tribunal failed to give TNG an equal and reasonable opportunity in failing to terminate or stay the arbitration at the time TNG’s counsel withdrew, and in later deciding to hold a main hearing, while TNG still had no counsel. With respect to the first of these decisions, the court noted that TNG’s counsel withdrew only after having submitted TNG’s statement of defense. When the tribunal, a few days before the withdrawal, declined to stay or terminate the arbitration, no main hearing had yet been scheduled, nor had it even been decided that a main hearing should take place. Relying, on those facts, the court held that failing to terminate or stay the proceedings did not constitute any procedural error. Moving on to the second of these decisions, to conduct the main hearing in October 2022, the court did not find that decision able to be challenged either. The court noted that following the advisory opinion issued by the European Commission and the subsequent amendment to the Sanctions Regulation, the opportunities for TNG to retain new counsel must have increased considerably. Despite this change in circumstances, and despite being contacted several times by both FNP and the tribunal, TNG failed to engage or answer any attempts to communicate with it. While TNG, in the set-aside action, argued that it had difficulties retaining new counsel even after the amendments to the Sanctions Regulation, the court did not find that fact to have been proven by TNG. Moreover, the court added, TNG had failed to communicate its purported difficulties in retaining new counsel to the tribunal. In short, the court concluded that TNG had remained entirely passive in relation to the tribunal and could therefore not invoke the purported fact that it had difficulties in retaining new counsel.
In relation to the non-arbitrability and public policy claims made by TNG, these too were overruled by the court. Under Swedish law, disputes that are not amenable to settlement (such as paternity, custody of children, divorce decrees etc.) may not be arbitrated. In the instant case, TNG had argued that as a result of the Sanctions Regulation, the parties could not enter into a settlement of their dispute, thus making it non-arbitrable. However, the court held that the issue of amenability to settlement should be viewed in light of the dispute, as opposed to the parties. Here, the dispute itself was such that it could be settled, and was therefore arbitrable as such. Additionally, the court noted that Swedish law does not include a general rule that contracts in violation of law are void. Instead, whether a transaction in violation of government sanctions should be considered void should be determined on a case by case basis. On the final issue, whether the award was void as being contrary to public policy, TNG had argued that the award violated Swedish public policy by ordering the parties to undertake a transaction which would, according to TNG, violate the Sanctions Regulation. The court did not agree and noted that there was nothing indicating that the award or the proceedings constituted a circumvention of the applicable sanctions, and therefore the award could not be deemed to violate the purpose of the sanctions. Moreover, the Sanctions Regulation explicitly excluded receipts of payment under contracts concluded before 15 May 2022, and it also excluded transactions that were strictly necessary, to no later than 30 June 2023, dissolve joint ventures or similar legal arrangements that were concluded before 16 March 2022 and include sanctioned entities.
In conclusion, the Svea Court of Appeal denied TNG’s claims and upheld the award. While the court, finding that its decision contained issues of precedential value, allowed its decision to be appealed, the Supreme Court of Sweden declined to hear the case, following TNG’s appeal.[8]
The ruling brings with it important takeaways for parties and arbitration practitioners encountering procedural decisions they disagree with, especially in the context of not finding legal representation. Where a party, despite diligent efforts, has failed to retain legal representation, it is important that the party still communicates with the tribunal and relays any difficulties the party may have to it.
B.2 Arbitrator awarded more than party had requested – award partially set aside for excess of mandate
In Link Norge A/S v. Oxe Marine AB,[9] the Court of Appeal for Western Sweden partially set aside an arbitral award since the arbitrator had awarded more than the counter-claimant in question had requested. The background to the dispute was that Oxe Marine AB (“Oxe Marine“) had entered an agreement with Link Norge A/S (“Link“), for Link to be Oxe Marine’s exclusive distributor of certain products in Norway. In 2021, Oxe Marine terminated the agreement for material breach, claiming that Link had infringed on Oxe Marine’s intellectual property and that Link had failed to meet certain minimum quotas set out in the parties’ agreement. Link contested the termination and claimed that Oxe Marine had breached the contract by marketing its product in Norway itself, thus violating Link’s exclusivity rights. In March 2022, Link commenced an arbitration against Oxe Marine, seeking an award ordering Oxe Marine to pay Link’s outstanding invoices and to pay a specified amount of damages to Link for the breach of Link’s exclusivity rights. Oxe Marine brought a counterclaim in the arbitration, seeking an award ordering (i) the payment of EUR 86,326 in unpaid invoices (Oxe Marine’s first claim) and (ii) the payment EUR 7,474 in damages for breach of another contract (Oxe Marine’s second claim).
During the proceedings, Link admitted liability, with respect to Oxe Marine’s first claim, to an amount of EUR 74,431, which Link requested be deducted from its own claim against Oxe Marine. Following a main hearing, the arbitrator rendered a final award in which, among other things, Oxe Marine’s first claim was granted to an amount of EUR 123,189. The award specified that EUR 74,431 of the amount was what Link had admitted liability for, and that the remaining EUR 48,758 was the sum the arbitrator found that Link still owed Oxe Marine in unpaid invoices. Link, contending that it had been ordered to pay Oxe Marine a higher amount than the latter had requested, requested the arbitrator to correct the award under section 32 of the Swedish Arbitration Act (allowing arbitrators to, within certain time limits, correct typographical, computational or other similar mistakes in awards). Following the arbitrator’s denial of Link’s request, as relevant here, Link commenced a set-aside action before the Court of Appeal for Western Sweden.
In its set-aside action, Link requested that the court partially set aside the award with respect to the granting of Oxe Marine’s first claim and the distribution of costs (which relied on the outcome of the dispute). Link alleged that the arbitrator had exceeded her mandate by awarding Oxe Marine more than it had requested, and that Link had no opportunity to raise the issue during the arbitration. Oxe Marine contested Link’s action and claimed that the arbitrator acted correctly since Link had admitted liability to an amount of EUR 74,431, and that the amount for which the arbitrator found in favor of Oxe Marine, EUR 48,758, did not exceed the amount of Oxe Marine’s first claim, which was EUR 86,326. Additionally, Oxe Marine claimed that Link had lost the right to invoke the arbitrator’s excess of mandate as a ground for set-aside, because Link had not made any objections during the arbitration proceedings. Finally, Oxe Marine contended that if the court was to set aside the award, the set-aside, should be total as opposed to partial, since the award concerned mutually connected obligations between the parties.
The Court of Appeal for Western Sweden found in favor of Link, and partially set aside the award. The court noted that the Swedish Code of Judicial Procedure bars courts from awarding plaintiffs more than what they have requested, and that this rule, while not directly applicable in arbitration, nevertheless generally applies. According to the preparatory works of the Swedish Arbitration Act, the court noted, it is apparent that an arbitrator must stay within the confines of what the parties have requested in the arbitration. Additionally, while Swedish procedural law principles are not as applicable in international arbitration as they are in domestic arbitrations, the court noted that Link, despite being a Norwegian company, was represented by Swedish counsel.
Moving on to the issue at hand, the court concluded that even though Link had admitted liability for parts of the requested amount, that admission did not serve to expand Oxe Marine’s claim, but instead stipulated the accuracy of parts of the amount in question. Hence, in awarding EUR 123,189, the arbitrator awarded Oxe Marine more than the EUR 86,326 it had requested, and thus exceeded its mandate. Moreover, the court found that Link did not have any opportunity to object to the excess of mandate as it was made apparent for Link only after receiving the award. In its conclusion, the court relied on email exchanges between the parties’ attorneys after receiving the award, which supported the conclusion that the award “came as a surprise for the parties”.
Finally, the court found that the award was suitable for a partial set-aside because the different parts of the award were separable from each other. There were no issues separating the different portions of the award, because the dispositive portion of the award specified the amount of Link’s claim against Oxe Marine (which the arbitrator had granted), without first having deducted Oxe Marine’s claim against Link. The court held that also setting aside the award on Link’s claim against Oxe Marine, even though it was not affected by the arbitrator’s excess of mandate, would be contrary to the interest of finality on which Swedish arbitration law rests. Therefore, the court set aside the part of the award, which granted Oxe Marine’s claim, as well as the parts of the award that distributed the costs between the parties, as this had been depending on the outcome of the dispute at large. The court explained that the parties were free to claim the costs from each other in a new proceeding, where Oxe Marine also could set forth its claim against Link, again.
In conclusion, the Court of Appeal for Western Sweden granted Link’s action. The court, finding that its decision contained issues of precedential value, allowed its decision to be appealed. While Oxe Marine has appealed the Court of Appeal’s decision to the Supreme Court, the latter has yet to decide whether it will review the case.
The decision provides a clear example of the importance the level of accuracy and detail required from parties when seeking relief in Swedish arbitrations.
[1] Lagen (1999:116) om skiljeförfarande.
[2] The policy may be found at https://sccarbitrationinstitute.se/wp-content/uploads/2024/12/scc_policy_disclosure_third_parties_2024.pdf
[3] The policy may be found at https://sccarbitrationinstitute.se/wp-content/uploads/2024/12/scc_policy_seat_of_arbitration_2024-1.pdf
[4] E.g., Slowakische Republik v. Achema BV, judgment of 6 March 2018, C-284/16.
[5] The form may be found at https://sccarbitrationinstitute.se/en/our-services/arbitration/commence-arbitration.
[6] Judgement of the Svea Court of Appeal on 28 June 2024 in case no. T 2082-23.
[7] Council Regulation (EU) 2022/428 of 15 March 2022 amending Regulation (EU) No 833/2014 concerning restrictive measures in view of Russia’s actions destabilising the situation in Ukraine.
[8] Order of the Supreme Court on 5 December 2024 in case no. T 5961-24.
[9] Judgment of the Court of Appeal for Western Sweden on 20 May 2024 in case no. T 1747-23.
