This country-specific Q&A provides an overview of the legal framework and key issues surrounding arbitration law in Sweden including arbitration agreements, tribunals, proceedings as well as costs, awards and the hot topics concerning this country at present.
This Q&A is part of the global guide to Arbitration.
For a full list of jurisdictional Q&As visit http://www.inhouselawyer.co.uk/index.php/practice-areas/arbitration/
What legislation applies to arbitration? Are there any mandatory laws?
The Swedish Arbitration Act of 1999 governs both domestic and international arbitration, as well as the enforcement of arbitral awards. However, there is a new draft of the Arbitration Act underway which most likely will enter into force during 2019.
Is the country a signatory to the New York Convention? Are there any reservations to the general obligations of the Convention?
Sweden is a signatory to the New York Convention and has ratified the Convention in 1972 without either the “reciprocity” reservation or the “commercial nature” reservation available for the signatories.
What other arbitration-related treaties and conventions is the country a party to?
Sweden is a party to the Lugano and the Brussels Conventions and, by its membership of the European Union, Sweden is also bound by the Brussels Regulation on Jurisdiction and the Recognition and Enforcement of Judgments in Civil and Commercial Matters.
Sweden has ratified the ICSID Convention.
In addition, Sweden is a party to the 1980 Rome Convention on the Applicable Law to Contractual Obligations and the Rome I Regulation.
Sweden is also a party to the 1955 Hague Convention on the Law Applicable to International Sales of Goods and has ratified the United Nations Convention on Contracts for the International Sale of Goods (CISG), as well as the Vienna Convention on the Law of Treaties.
Is the law governing international arbitration based on the UNCITRAL Model Law? Are there significant differences between the two?
The Arbitration Act is not directly based on the UNCITRAL Model Law. However, the Model law was considered in the preparation of the Arbitration Act enacted in 1999. No major differences exist. The draftsmen of the new Arbitration Act have pointed out that it was seen urgent that the provisions of the Model Act should be considered in the drafting of every part of the new Arbitration Act (not yet in force).
Are there any impending plans to reform the arbitration laws?
The Arbitration Act is currently under review and there is a new draft of the Act underway.
Several of the suggested revisions are designed to clarify and improve the procedures for setting aside an arbitral award in court. Reflecting the increasing number of international arbitrations in Sweden, the committee proposes that proceedings for setting aside awards may be conducted in English if a party so requests. However, this being considered, the current draft of the new Arbitration Act will not allow proceedings entirely in English, but will allow documents and witness testimonies in English without translation. Moreover, revisions regarding multi-party disputes, provisions governing the determination of applicable law, consolidation of arbitrations and court intervention regarding arbitral jurisdiction are proposed.
What arbitral institutions (if any) exist? Have there been any amendments to their rules or are there any being considered?
The Arbitration Institute of the Stockholm Chamber of Commerce (the “SCC”) was established in 1917 and is today one of the world’s leading forums for dispute resolution. The SCC handles around 200 cases a year, whereof more than 50 percent are international cases.
Both the SCC Arbitration Rules and the SCC Rules for Expedited arbitration have recently been amended and the new set of rules entered in to force 1 January 2017. Some of the main changes were new rules regarding joinder of additional parties and multi-contract disputes, the introduction of a summary procedure and further emphasis on efficiency and expeditiousness, especially in relation to arbitration costs. Furthermore, a new appendix concerning investment treaty disputes has been added.
What are the validity requirements for an arbitration agreement?
The Arbitration Act provides that the arbitration agreement must be an agreement between two and more parties and that it must provide for resolution of the dispute by arbitration. An arbitration agreement providing for arbitration of a future dispute must also relate to an identified legal relationship, e.g. a contract, in order to be valid.
There are no requirements that an arbitration agreement be made in a particular form. Oral arbitration agreements are thus valid or even arbitration agreements “implied” by virtue of the parties’ conduct or trade customs.
Are arbitration clauses considered separable from the main contract?
Yes, Sweden recognizes the doctrine of separability.
Is there anything particular to note in your jurisdiction with regard to multi-party or multi-contract arbitration?
Different arbitration proceedings may be consolidated with the consent of the parties. However, a court cannot order consolidation of arbitration proceedings.
In case of necessary joinder, where several parties’ legal rights and obligations are inseparable, one arbitrator must be appointed for all such joint parties. If the joint appointment fails, the district court, or where applicable the arbitration institute, will make the appointment upon request of the other party.
A dispute under the SCC Rules may, under certain circumstances, be consolidated with another dispute at the request of a party. Under certain circumstances, it is also possible to accept a joinder of additional parties and to invoke claims arising out of more than one contract in the same arbitration.
How is the law applicable to the substance determined?
Under the Arbitration Act, the starting point is that the law of the arbitration agreement is the law chosen by the parties to govern the arbitration agreement.
If there is no choice of law, the modern view in Sweden is that the arbitrators must not go through a conflict of laws system to find the applicable law. The Arbitration Act has no such requirements. Rather, the arbitrators may directly determine the law applicable to the substance of the dispute. For example, the SCC Rules stipulate that the tribunal “shall apply the law or rules of law which it considers to be most appropriate” (cf. the UNCITRAL Model Law). It is, however, fair to say that the Swedish conflict of laws rules will often serve as a point of departure in the search for the applicable substantive law.
The new Arbitration Act (not yet in force) will include specific provisions on the determination of the applicable law.
Are any types of dispute considered non-arbitrable? Has there been any evolution in this regard in recent years?
A dispute is considered non-arbitrable if the subject matter is not capable of being settled by agreement between the parties. This is the case e.g. if the relief requested would be illegal, criminal, or constitute pactum turpe. A dispute is also likely non-arbitrable in cases where third party’s consent is required and in some aspects as far as it concerns rights in rem. Furthermore, a claim for relief, which can exclusively be granted by a court or a state authority, is non-arbitrable. Such cases include declaration of bankruptcy, taxation, existence and validity of patents, certain competition law disputes such imposition of fines, ordering a company to cease and desist activities harmful to competition, and granting clearance for acquisitions of businesses.
In recent years there has been a discussion concerning the arbitrability in relation to some competition matters, where a fairly high threshold have been established in respect to what is deemed admissible.
Are there any restrictions in the appointment of arbitrators?
Under the Arbitration Act, anyone who enjoys full legal capacity in regard to his actions and his property are capable of being an arbitrator, i.e. you must be at least 18 years old and you cannot have a trustee or be bankrupt. In addition, the arbitrator must be independent of the parties. No other restrictions apply, e.g. sitting judges of the Swedish courts may be appointed as an arbitrator.
Under the SCC Rules, when the parties are of different nationalities, the SCC must appoint an arbitrator who is of a different nationality than the parties, unless the parties have agreed otherwise. No such restrictions are found under the Arbitration Act.
Swedish courts have recognized the IBA Guidelines on Conflict of Interest in International Arbitration and it is fair to say that these guidelines serve as a general restriction in the appointment of arbitrators.
Are there any default requirements as to the selection of a tribunal?
The main rule under the Arbitration Act is that the tribunal shall consist of three arbitrators; one each appointed by the parties and one chairman appointed by the party appointed arbitrators. However, freedom of contract applies and the parties may agree on other set ups for the tribunal, e.g. a sole arbitrator.
The default rule under the SCC Rules, in absence of an agreement, is that the Board shall decide the number of arbitrators depending on the circumstances of the case. Under the previous SCC Rules, the default rule was three arbitrators.
Can the local courts intervene in the selection of arbitrators? If so, how?
The district court has an overall obligation to assist the parties in any matters regarding the appointment of arbitrators under the Arbitration Act.
Should respondent omit to appoint its arbitrator within the 30 days’ notice period under the Arbitration Act, the district court shall, on claimant’s request, appoint the arbitrator on behalf of respondent. The same applies should the party appointed arbitrators fail to appoint the chairman.
In the event that one of the arbitrators resigns or is disqualified, the district court shall appoint a new arbitrator. The same applies should an arbitrator unduly delay the proceedings.
Can the appointment of an arbitrator be challenged? What is the procedure for such challenge? Has there been an increase in number of challenges in your jurisdiction?
The appointment of an arbitrator can be challenged based on lack of impartiality, and in rare circumstances, for unduly delaying the proceedings. Unless the parties have agreed otherwise, e.g. to apply institutional rules, requests for removal of an arbitrator will, in the first place, be tried by the tribunal. If the tribunal denies the request, a party may apply to a district court for removal of the arbitrator. In comparison to the overall numbers of arbitral proceedings in Sweden, the numbers of challenges of the appointment of arbitrators are low. No increase can be noticed.
What happens in the case of a truncated tribunal? Is the tribunal able to continue with the proceedings?
According to the Arbitration Act, the case of a truncated tribunal does not mean that the arbitration proceeding collapses, but that a new arbitrator shall be chosen before the proceeding continues. Depending on the reason regarding why the tribunal is truncated, the new arbitrator is either chosen by the party choosing the original arbitrator or by the district court.
The SCC Rules stipulates that a new arbitrator shall be appointed if the tribunal is truncated. If the tribunal consists of three or more arbitrators, the Board has the authority to decide that the remaining arbitrators shall continue with the arbitration, without appointing a new arbitrator.
Are arbitrators immune from liability?
Whereas the SCC Rules provide for a general exclusion of liability for arbitrators, the Arbitration Act does not contain any provision concerning immunity from liability for arbitrators. Hence, arbitrators can be held liable for damages under general contract liability, unless a separate agreement between the parties and the arbitrators exists.
Is the principle of competence-competence recognised? What is the approach of local courts towards a party commencing litigation in apparent breach of an arbitration agreement?
Under the Arbitration Act, the tribunal has the power to rule on its own jurisdiction.
If the tribunal finds that it lacks jurisdiction, it shall dismiss the dispute in an arbitral award. Such award becomes final unless challenged by a party.
In contrast, if the tribunal finds that it has jurisdiction, the ruling shall be in the form of a decision. Such decision may not be appealed.
However, in parallel proceedings, the district courts may also rule on the tribunal’s jurisdiction, which will overrule any decision of the tribunal.
The sanctions available for local courts to “punish” a party for commencing arbitration in apparent breach of an arbitration agreement are first to declare that the tribunal lacks jurisdiction and secondly to order that party to pay the other party’s costs for the jurisdictional proceedings before the court.
How are arbitral proceedings commenced? Are there any key provisions under the arbitration laws relating to limitation periods or time bars of which the parties should be aware?
Under the Arbitration Act, the parties may agree on how the arbitral proceedings shall be commenced. In absence of such agreement, the Arbitration Act provides that the proceedings are commenced when the respondent receives a written request for arbitration from the claimant (including an express and unconditional request for arbitration, a statement of the issue covered by the arbitration agreement which is to be resolved by the arbitrators and a statement of the party’s choice of arbitrator).
Subsequently, the respondent has 30 days from the receipt of the request for arbitration to appoint its arbitrator, failing which the claimant may request that the respondent’s arbitrator be appointed by the district court.
Any other limitation periods are governed by the applicable substantive law and there are no other explicit time bars in the Arbitration Act connected to the commencement of the proceedings.
What happens when a respondent fails to participate in the arbitration? Can the local courts compel parties to arbitrate? Can they order third parties to participate in arbitration proceedings?
If a party without valid cause fails to appear at a hearing or otherwise fails to comply with an order of the tribunal, such failure shall not prevent the continuation of the proceedings and a resolution of the dispute. However, the dispute must be adjudicated on the merits, i.e. “default awards” are not available for the tribunal. With respect to a respondent’s failure to appoint its arbitrator, see item 14 above.
The local courts cannot compel parties to arbitrate, and cannot order third parties to participate in the arbitration proceedings.
Under the SCC Rules, the tribunal may render a separate award on the advance on costs, should a party fail to make its contribution. Such award is enforceable in at least Sweden.
In what circumstances is it possible for a state or state entity to invoke state immunity in connection with the commencement of arbitration proceedings?
It is generally accepted under Swedish law that a valid arbitration agreement constitutes a waiver of sovereign immunity, with the possible exception for immunity from execution. With respect to the latter, a state or state entity does not enjoy immunity with respect to activities of commercial nature, whereas activities connected to the sovereignty per se arguably are covered by state immunity.
This being said, it is highly likely that a tribunal will accept jurisdiction over a dispute even where the state or state entity has invoked state immunity in connection with the commencement of arbitration proceedings. The potential problems in relation to the subsequent enforcement of the award should be of no concern for the tribunal in this respect.
In what instances can third parties or non-signatories be bound by an arbitration agreement or award?
Generally, the arbitration agreement is only binding between the parties. However, a third party or a non-signatory may be bound by an arbitration agreement in case of universal succession. Moreover, following a Supreme Court Case in 1997 (the Emja-case), it is now generally accepted that an arbitration agreement may be transferred with binding effect also in case of singular succession.
The issue whether a guarantor of any of the parties to the main contract also should be bound by the arbitration clause in the main contract has been deliberately left open for case law to decide and it is fair to say that yet there is no precedence. Rather, case law shows that tribunals and the courts have taken a pragmatic stance and the outcome is very much dependent on the particular circumstances of the case.
Under Swedish law, the approach is generally skeptical towards the so-called “group of companies” doctrine and the possibility to pierce the corporate veil is very limited. The same goes for binding third parties to an arbitration agreement by so-called third party beneficiary agreements.
What interim measures are available? Will local courts issue interim measures pending the constitution of the tribunal?
A tribunal may grant interim measures to (i) maintain or restore the status quo pending determination of the dispute, (ii) take action that would prevent, or refrain from taking action that is likely to cause current imminent harm or prejudice to the arbitral process, (iii) provide means or preserving assets out of which a subsequent award may be satisfied or (iv) preserve evidence that may be relevant and material to the resolution of the dispute. However, the tribunal’s decision on interim measures is not enforceable.
A court can grant interim measures prior to or during the arbitration proceedings, including sequestration of assets. Such order by the court is enforceable in at least Sweden.
Are there particular rules governing evidentiary matters in arbitration? Will the local courts in your jurisdiction play any role in the obtaining of evidence?
What ethical codes and other professional standards, if any, apply to counsel and arbitrators conducting proceedings?
Swedish counsels and arbitrators admitted to the Swedish Bar Association must observe the Bar Association’s Code of Conduct.
No specific ethical code on arbitrators exists. However, the Swedish Supreme Court has explicitly recognized the IBA Guidelines on the Conflict of Interest in International Arbitration.
The SCC Rules provide that the arbitrators must be and remain independent and impartial.
How are the costs of arbitration proceedings estimated and allocated?
Generally, the costs of arbitration proceedings are allocated based on the outcome of the case. The relative success of the parties on the principal issues is determinative. Typically, the outcome of procedural issues is also taken into account. Costs for counsel must be reasonable. In relation to the tribunal, the parties are jointly and severally liable for its costs, but these costs are also allocated as between the parties based on the outcome of the case.
Whereas the Arbitration Act is silent on the compensation of the arbitrators, the SCC Rules have an ad valorem based schedule for the arbitrators’ fees and the administrative costs for the SCC. As mentioned in question 6 above, the degree of efficiency and expeditiousness regarding the conduct of the parties can now be taken into account when allocating costs under the SCC rules.
Can pre- and post-award interest be included on the principal claim and costs incurred?
Interest on the principal claim will be included on request of a party, both pre- and post-award interest. Interest may also be added to a party’s costs from the date of the award until payment is made.
What legal requirements are there for the recognition of an award?
A domestic arbitral award can be enforced directly with the Swedish Enforcement Authority. This requires that the award is in written form and duly signed. The opposing party will be heard before the enforcement is carried out.
A foreign award can be recognized and enforced by the Svea Court of Appeal in Stockholm. The application must include the original award or a certified copy.
Does the law impose limits on the available remedies? Are some remedies not enforceable by the local courts?
The limitations with respect to available remedies to a far extent go hand in hand with the issue of arbitrability. Hence, the remedy cannot include non-arbitrable measures, such as penalties or fines. Apart from these limitations, the tribunal is free to award any remedy, however, within the scope of the parties’ pleadings.
Enforcement of an award can be refused on basis of the defenses available under the New York Convention. In addition, enforcement will only be accepted with respect to specific obligations imposed on a party, e.g. payment, restitution, etc. Declaratory awards cannot be enforced.
Can arbitration proceedings and awards be appealed or challenged in local courts? What are the grounds and procedure?
Arbitration proceedings and awards cannot be appealed. However, an award may be challenged in the Court of Appeal.
Moreover, an award can be declared invalid if the subject matter was non-arbitrable, violates public policy, or the award was not in writing or signed by the majority of the arbitrators.
An award rendered in Sweden can be set aside, as a whole or partly, if (i) the arbitration agreement is invalid, (ii) the arbitrators have exceeded their mandate, (iii) Sweden was not the proper place of arbitration (iv) an arbitrator was appointed contrary to the parties’ agreement, (v) an arbitrator failed to meet the impartiality standard or did not possess full legal capacity, or (vi) a procedural irregularity exists which likely affected the outcome of the case.
Hearings will be held, if a party so requests and the court does not find it inappropriate.
The judgment of the Court of Appeal may be appealed to the Supreme Court, but only if leave to appeal is granted by the Court of Appeal.
Can the parties waive any rights of appeal or challenge to an award by agreement before the dispute arises (such as in the arbitration clause)?
The right to declare an award invalid may not be waived by agreement.
If neither party is domiciled in Sweden or has its place of business here, the parties may waive the right to set aside an award or limit the scope of a potential challenge. Such right is not available for parties to arbitrations with at least one of the parties domiciled or having its place of business in Sweden.
To what extent might a state or state entity successfully raise a defence of state or sovereign immunity at the enforcement stage?
See question 21 above.
To what extent might a third party challenge the recognition of an award?
See question 22 above. As long as a third party does not become bound by the legal effect of the award due to involvement in the procedure, the third party will not become authorized to challenge the recognition of an award.
Have there been any significant developments with regard to third party funding recently?
Swedish law does not restrict third-party funding. However, third-party funding is still not regularly used in arbitration proceedings, at least not openly.
Is emergency arbitrator relief available? Is this frequently used?
Since 2010, the SCC Rules offers rules on emergency arbitration, which can be used to obtain a decision on interim measures before the tribunal is constituted.
The SCC has received approximately two applications a year for an emergency arbitrator. However, in 2016, the SCC saw an increase in numbers when 13 emergency arbitrator proceedings were initiated.
Are there arbitral laws or arbitration institutional rules providing for simplified or expedited procedures for claims under a certain value? Are they often used?
The SCC provides rules for expedited arbitration, a fast-track procedure for smaller and medium sized claims in less complex cases. There are no value based limitations for the expedited rules to be used.
Under the expedited rules, a sole arbitrator will decide the dispute. Certain restrictions with respect to the number of written submission and the time available therefor also exist. Moreover, a hearing will only be held on request of a party and if the arbitrator does find a hearing appropriate. A final award is to be rendered within three months from referral of the case to the arbitrator.
Statistics from the SCC illustrates that of the 2016 caseload 28% were administered under the SCC Rules for Expedited Arbitrations, compared to 62% under the SCC Arbitration Rules.
In addition, it should be mentioned that the SCC Rules (2017) include a novelty in the possibility to render awards by way of summary procedure in exceptional cases.
Have measures been taken by arbitral institutions to promote transparency in arbitration?
To increase transparency in arbitration, the SCC provides the Swedish Arbitration Portal since 2012. This database offers free access to English translations of decisions from all instances of the Swedish courts on issues related to international and domestic arbitration.
Is diversity in the choice of arbitrators and counsel (e.g. gender, age, origin) actively promoted? If so, how?
The SCC is actively promoting diversity in the choice of arbitrators. For example, the SCC is seeking to appoint younger arbitrators in less complex disputes in order to safeguard the coming generation of arbitrators. Moreover, it should be noted that, during 2015, the SCC appointed a woman as arbitrator in almost 27% of the cases. This should be compared to cases where the parties themselves appointed an arbitrator, in which a woman was appointed in only 6.5% of the cases.
In close connection to the SCC, the organizations Young Arbitrators Sweden (YAS) and Swedish Women in Arbitration Network (SWAN) are actively trying to influence the SCC and the market with respect to, inter alia, the choice of arbitrators.
Have there been any developments regarding mediation?
Mediation continues to struggle with its general popularity in Sweden. The SCC has new mediation rules as of 2014 but the area continues to be fairly unregulated in Swedish law, save in some specific areas.
Have there been any recent court decisions considering the setting aside of an award that has been enforced in another jurisdiction or vice versa?
Challenges of arbitral awards in Sweden are very seldom successful. There are no recent decisions in this regard.