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SWEDISH ARBITRATION

2015-08-20

A new up-to-date Swedish Arbitration Act on its way… In April 2015, a Swedish Government Official Report on a partly revised Arbitration Act was presented to the Government (SOU 2015:37). In this article, we briefly describe some of the suggestions that are most relevant to foreign participants in Swedish arbitrations.

Background

Historically, Sweden has been a frequently chosen seat of arbitration even in cases where the parties and the subject matter have no connection to Sweden. The reasons for this have mainly been Sweden’s neutrality and long tradition in arbitration, and the long-standing existence of the Arbitration Institute of the SCC, which was early on capable of administering international arbitrations. In addition, Swedish arbitration law has for a long time provided for a flexible procedure, respect for party autonomy, the right of foreign arbitrators and counsels to act in Swedish arbitrations, and the freedom to agree upon the language of the arbitration. The early enforceability of Swedish awards under the 1927 Geneva Convention also helped, and enforceability under the 1958 New York Convention was a must. The availability of commentaries in several languages on Swedish arbitration law should also be mentioned. The Swedish legislator considered the UNICTRAL Model Law on International Commercial Arbitration when drafting the current Arbitration Act. There are some differences, although they mainly relate to disposition and not substance, and Sweden is not regarded a Model Law country.

However, as fifteen years have now passed since the last revision of the Act, the arbitration community has identified a room for improvements in order to make Swedish arbitration even more attractive.

Some proposed changes

The seat of arbitration

It is proposed that the term “place” of arbitration be replaced by the term “seat” of arbitration in order to avoid, inter alia, the misunderstanding that this is a territorial concept limiting where hearings, etc., may be held, rather than a concept relating to the applicable arbitration law.

The law applicable to the merits

The Act is currently silent on how to determine the law applicable to the substance of the dispute. Mirroring, inter alia, the Model Law and the SCC Rules, it is proposed that a dispute be resolved applying the law or legal rules agreed by the parties. Further, an agreement on application of a certain country’s law should, unless otherwise expressly agreed, be interpreted as a reference to the substantive law of that country and not to its conflict of laws rules. If the parties did not agree on the applicable law, the arbitrators should decide which law or legal rules that apply, taking particular account of which legal rules the dispute is most closely connected to. Thus, in line with the international trend, a direct method for determining the applicable law is proposed, rather than the traditional indirect method still used in the Model Law which requires that a determination of the applicable conflict or laws rules is first made. The SCC Rules also provide for a direct method, although they point to the “most appropriate” law instead of a close connection test. Like in the Model Law and the SCC Rules, under the proposal, the tribunal may only decide ex aequo et bono if the parties have expressly authorized it to do so.

Appointment of arbitrators in multi-party arbitrations

The French Dutco case illustrated a problem that may arise regarding a party’s fundamental right to appoint an arbitrator and equal treatment of parties in cases where there are more than two parties to an arbitration. Like the SCC Rules, many institutional rules address the problem. However, the Swedish Act is silent on this, and it is proposed that a District Court shall appoint all arbitrators if the parties on one side cannot agree on the arbitrator.

Consolidation of arbitrations

Also in line with the international trend in institutional rules, it is suggested that consolidation of several arbitral proceedings be possible in limited circumstances.

Enforcement of orders on security for a claim

Currently, the Act empowers arbitrators to order security for a claim. However, such orders are not enforceable. It is proposed that the tribunal be empowered to make such enforceable orders in a special award if allowed by the arbitration agreement.

Court intervention regarding arbitral jurisdiction

Presently, as experienced by one of the authors in an investment treaty case, during or before an arbitration, a party may bring a positive or negative declaratory action on arbitral jurisdiction before a District court, provided that the requirements on declaratory actions of the Code of Judicial Procedure are met. Such action does not affect the arbitrators’ power to commence and/or continue the arbitral proceedings and render an award.  However, it may cause delay and result in issues concerning parallel court proceedings when the tribunal’s ruling is also challenged in court proceedings under the Arbitration Act. It is proposed that the possibility to bring declaratory court actions regarding arbitral jurisdiction be limited if the arbitrators have ruled on the matter and that any party dissatisfied with such ruling be entitled to request an examination directly by the Appeal court, without prejudice to the arbitrators’ power to continue the arbitration.

Setting aside proceedings

Among amendments suggested to the provisions concerning setting aside of awards, one feature is of particular interest to foreign parties, namely a possibility to use English as the language of the court proceedings. This would of course facilitate the participation of foreign lawyers in the proceedings and ease up the burden to translate documents. Moreover, rules are suggested with the aim to speed up the challenge procedure.

Comment

Overall, as demonstrated by the long-standing Swedish caseload in ad hoc and institutional arbitration, the Swedish Arbitration Act has been satisfying from a practitioner’s viewpoint. Regardless, in the rapidly developing and changing global landscape of international arbitration, fifteen years is quite a long time and no one can rest on one’s laurels. The proposed revision is therefore welcome and the fact that it has taken such a practical perspective in seeking improvements and making the law more transparent from a foreign point of view is promising to Sweden’s continued standing as seat for international arbitrations. Hopefully, the proposal will soon result in a Government Bill to similar effect.

 

Originally published in AI Guide to Arbitration 2015.

Related People: Paulo Fohlin, Rakel Frölich, Johan Molin

Related Service Areas: Dispute resolution, International arbitration

Related Countries: Sweden

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