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Arbitration in Sweden and the role of the SCC Johan Lundstedt Legal Counsel.

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1 Arbitration in Sweden and the role of the SCC Johan Lundstedt Legal Counsel

2 Sweden and Swedish

3 History of Swedish arbitration Statutory text from the 14th century (Visby City Law) 1734 Statute Book 1917 Arbitration Institute of the SCC is established East-West Disputes 1977 US-USSR Optional Clause Agreement The 1999 Swedish Arbitration Act Today: 400 arbitrations or more each year in Sweden

4 Current focus for the SCC Sweden Europe Russia China Cross border investments

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6 The case load  A majority of SCC’s large cases concern East-West disputes involving exploration and/or purchase of natural resources, particularly within the energy sector.  13 out of the “top 20” arbitrations concern energy  Total claim ranging from EUR 0,5 billion to 8,9 billion  4 state respondents in the “top 20”  1 ½ to 5 years from registration to final award Efficiently facilitating arbitral proceedings in international disputes since 1917

7 SCC Organisation

8 SCC Board

9 The Swedish Legal System Civil law or common law? Model law country? Statute Book of 1734 Procedural Code of 1948 No stare decisis doctrine Three court instances – District, Appeal and Supreme

10 The legal framework for arbitration in Sweden New York Convention 1958 Swedish Arbitration Act (1999:116) SCC-Rules

11 Applicable law Seat of arbitration Sweden ->Lex arbitri: Swedish Arbitration Act (1999:116) “Swedish” arbitration SAA Section 46 “This Act shall apply to arbitral proceedings which take place in Sweden notwithstanding that the dispute has an international connection.” SCC Rules Article 22 Applicable law – the arbitral tribunal shall apply the law or rules of law which it considers to be most appropriate

12 Main feautures of the Swedish Arbitration Act 60 sections Based on party autonomy Structure of proceedings determined primarily by the parties, secondly by the arbitrators Parties free to contract out of most provisions

13 The role of state courts Appointment/removal of arbitrators (section 10, 17, 14-16) Interim measures Witness/expert testify under oath Document production (section 26) Jurisdiction Action against the award regarding arbitrators compensation Enforcement of international awards Challenge of awards

14 The arbitration agreement SAA Section 1 Disputes concerning matters in respect of which the parties may reach a settlement may, by agreement, be referred to one or several arbitrators for resolution. Such an agreement may relate to future disputes pertaining to a legal relationship specified in the agreement. The dispute may concern the existence of a particular fact. In addition to interpreting agreements, the filling of gaps in contracts can also be referred to arbitrators. Arbitrators may rule on the civil law effects of competition law as between the parties.

15 The arbitration agreement (continued) Capacity (legally qualified) Form (does not have to be written, reference clause is ok, may be bound by conduct or inactivity) No vitiating element (duress, fraud, undue influence etc.) Arbitrality

16 What is not arbitrable under Swedish law Registration and validity of patents and trademarks (license ok) Consumer disputes (not ex officio dismissal) Labour disputes Competition law ( civil law effects of competition law as between the parties ok) Family and criminal law matters (questions of punishment)

17 The Arbitrators The parties may determine the number of arbitrators and the manner in which they shall be appointed. If no agreement, the arbitrators shall be three in number. Each party shall appoint one arbitrator, and the arbitrators so appointed shall appoint the third (who will be chair) Any person of full age and capacity with regard to his or her actions and property No requirement to be admitted by the Swedish Bar Judge can act as chairman (but not party-appointed)

18 The arbitrators’ jurisdiction Section 2 The arbitrators may rule on their own jurisdiction to decide the dispute. The aforesaid shall not prevent a court from determining such a question at the request of a party. The arbitrators may continue the arbitral proceedings pending the determination by the court. Notwithstanding that the arbitrators have, in a decision during the proceedings, determined that they possess jurisdiction to resolve the dispute, such decision is not binding. The provisions of sections 34 and 36 shall apply in respect of an action to challenge an arbitration award which entails a decision in respect of jurisdiction.

19 Two options to review the jurisdiction in Court Declaratory judgement at any time Appeal of negative decision by the Tribunal

20 Court review of the arbitrators’ jurisdiction by declaratory judgement Declaratory judgement on the jurisdiction Can be brought at any time Courts not allowed to stay proceedings Judgment binding. Failure to comply =award challengeable/void Brought pursuant to Procedural Code. Requires : - jurisdiction of the Court (the dispute or the parties must have a sufficiently strong connection to Sweden for there to be a Swedish interest in the administration of justice). - “uncertainty exists as to the legal relationship and the uncertainty exposes the plaintiff to a detriment” (Ch 13, s 2 of the Procedural Code) -> Russian Federation v RosInvestCo UK Ltd (NJA 2010 s 508)

21 Russian Federation v RosInvestCo UK Ltd Supreme Court: “… where the parties have agreed that the proceedings shall take place in Sweden, it is irrelevant if the parties or the arbitrators have decided to hold hearings in other countries, if the arbitrators are not from Sweden, if their duties have been carried out in another country or if the dispute concerns a contract which otherwise has no connection to Sweden.” “Under Section 2, paragraph 1, the arbitrators may rule on their own jurisdiction to decide the dispute. Such a ruling does not, however, prevent a court, at the request of a party during the arbitral proceedings, from ruling on the jurisdictional issue. The court’s decision on the matter will have legal force and be binding on the arbitrators.” “Since RosInvestCo and the Russian Federation have agreed that the arbitral proceedings shall take place in Sweden, the Swedish Arbitration Act is applicable. Consequently, Swedish courts are competent to rule on the arbitrators’ jurisdiction and as to whether there is sufficient connection to the Swedish legal system.”

22 Court judgement on negative ruling on jurisdiction Negative ruling by the Tribunal shall be made as an award (s 27) Award may be appealed to the Court of Appeal (s 36) Court may replace the arbitrator’s ruling with a binding judgment confirming the jurisdiction of the tribunal Section 27 The issues which have been referred to the arbitrators shall be decided in an award. Where the arbitrators terminate the arbitral proceedings without deciding such issues, such shall also take place through an award. Section 36 An award whereby the arbitrators concluded the proceedings without ruling on the issues submitted to them for resolution may be amended, in whole or in part, upon the application of a party.

23 Confidentiality Bulgarian Foreign Trade Bank Ltd (Bulbank) v A.I. Trade Finance Inc.NJA 2000, p 538 AIT had published a separate award in the course of proceedings. Bulbank sought to terminate the arb.agreement and subsequently tried to have the final award declaed void or set aside on the basis that AIT had breached the fundamental principle of confidentiality. Supreme Court rejected Bulbank’s claim in its entirety. Party autonomy, parties have to agree. -> Confidentiality is not an implied term of an arb.agreement

24 Interim measures Section 25 SAA Unless the parties have agreed otherwise, the arbitrators may, at the request of a party, decide that, during the proceedings, the opposing party must undertake a certain interim measure to secure the claim which is to be adjudicated by the arbitrators. The arbitrators may prescribe that the party requesting the interim measure must provide reasonable security for the damage which may be incurred by the opposing party as a result of the interim measure. Cannot be enforced in Sweden.

25 Court decision on interim measures Prior to or after constitution of the tribunal – Apply to the District Court for an interim measure Ch 15 § 3 CJP – Show probable cause that the party has a claim that is or can be made the basis of judicial proceedings determined by another similar procedure, and if it is reasonable to suspect that the opposing party, by carrying on a certain activity, by performing or refraining from performing a certain act, or by other conduct, will hinder or render more difficult the exercise or realization of the applicant's right or substantially reduce the value of that right, the court may make an order for measures suitable to secure the applicant’s right.

26 Obtaining evidence through court Witness or expert testify under oath Production of documents A party must obtain consent of the Tribunal If the measure is justified, the Tribunal will approve The party can then submit an application to the District Court

27 Award or decision Section 27 The issues which have been referred to the arbitrators shall be decided in an award. Where the arbitrators terminate the arbitral proceedings without deciding such issues, such shall also take place through an award. Where the parties enter into a settlement agreement, the arbitrators may, at the request of the parties, confirm it in an award. Other determinations, which are not embodied in an award, are designated as decisions. The mandate of the arbitrators shall be deemed to be completed when they have delivered a final award, unless otherwise provided in sections 32 or 35.

28 Voting rules Section 30 Where an arbitrator fails, without valid cause, to participate in the determination of an issue by the arbitral tribunal, such failure will not prevent the other arbitrators from ruling on the matter. Unless the parties have decided otherwise, the opinion agreed upon by the majority of the arbitrators participating in the determination shall prevail. If no majority is attained for any opinion, the opinion of the chairman shall prevail.

29 Invalidity and challenge of awards Section 33 An award is invalid: 1. if it includes determination of an issue which, in accordance with Swedish law, may not be decided by arbitrators; 2. if the award, or the manner in which the award arose, is clearly incompatible with the basic principles of the Swedish legal system; or 3. if the award does not fulfil the requirements with regard to the written form and signature in accordance with section 31, first paragraph. The invalidity may apply to a certain part of the award.

30 Invalidity and challenge of awards (continued) Section 34 An award which may not be challenged in accordance with section 36 shall, following an application, be wholly or partially set aside upon motion of a party: 1. if it is not covered by a valid arbitration agreement between the parties; 2. if the arbitrators have made the award after the expiration of the period decided on by the parties, or where the arbitrators have otherwise exceeded their mandate; 3. if arbitral proceedings, according to section 47, should not have taken place in Sweden; 4. if an arbitrator has been appointed contrary to the agreement between the parties or this Act; 5. if an arbitrator was unauthorized due to any circumstance set forth in sections 7 or 8; or 6. if, without fault of the party, there otherwise occurred an irregularity in the course of the proceedings which probably influenced the outcome of the case. An action must be brought within three months from the date upon which the party received the award or, where correction, supplementation, or interpretation has taken place pursuant to section 32, within a period of three months from the date when the party received the award in its final wording. Following the expiration of the time limit, a party may not invoke a new ground of objection in support of his claim.

31 Invalidity and challenge of awards (continued) Court of Appeal only instance May grant leave to appeal to Supreme Court if it is a matter of precedent ”Exceeded mandate” and ”irregularity in the course of the proceedings” most frequently invoked 112 challenges during Only 2 successful challenges -> Exceeded mandate and impartial arbitrator

32 Recognition and enforcement of domestic awards Swedish Enforcement Code Enforced based on application to the Swedish Enforcement Authority Refusal only if: -the award is not in written form or is missing signatures -Arb.agreement includes right to appeal on merits

33 Recognition and enforcement of foreign awards SAA Section Application for enforcement lodged with Svea Court of Appeal Applic. communicated to other party Undergoes exequatur proceedings Grounds of refusal based on NY-conv. -Lacked capacity/not properly represented -Arb.agreement not valid -Not given proper notice/unable to present case -Excess of mandate by the Tribunal - Composition of tribunal/arbitral procedure not in accordance with party agreement/law of seat -Award has not yet become binding/has been set aside/suspended by comptenent authority where the award was made

34 Swedish style arbitration Two rounds of written pleadings -Rather precise, not very lengthy No production of documents/discovery A “recital” circulated prior to the hearing -Basically the first part of the award -Formal description -The procedure -Summary of the parties’ positions Oral witness evidence Oral closing arguments

35 What to expect from a Swedish arbitrator Less active “Facts and evidence should be presented to me” The floor belongs to the parties – arbitrator should safeguard that each party is given ample opportunity to present his case Do not interfere with hearing of the witnesses Unless the arbitrator does not understand or need confirmation on certain information Party appointed – not party arbitrator

36 Arbitration Rules (2010) Expedited Arbitration Rules (2010) Investment Arbitrations (ECT, BITs) Emergency Arbitrator (2010) UNCITRAL arbitrations Mediation Rules (1999) Rules applicable to the SCC

37 SCC Arbitration Rules – specific issues 6 months to render award from referral Interim measures Emergency Arbitrator Consolidation Separate award for costs Efficiently facilitating arbitral proceedings in international disputes since 1917

38 Expedited Rules Developed for minor disputes regarding less complex issues and involving a smaller amount in dispute. Speedy and cost-efficient dispute resolution The SCC administers both domestic and international arbitration cases under the Expedited Rules. The parties decide whether to use the Expedited Rules or the Arbitration Rules (SCC cannot change) - in the arbitration agreement or once the dispute has emerged. Another option is to let the SCC determine what set of rules should be applied taking into account the complexity of the matter, the amount in dispute and other relevant circumstances (combination clause). Efficiently facilitating arbitral proceedings in international disputes since 1917

39 Key features of the Expedited Rules: The arbitral tribunal always consists of a sole arbitrator Unless the arbitrator for special reasons decides otherwise the parties each may, in addition to the statement of claim and the statement of defence, only submit one written statement, including statement of evidence. The statements should be brief and the time limits within which the documents shall be submitted may as a general rule not exceed 10 working days. A hearing will be held if requested by a party and if deemed necessary by the arbitrator The award shall be made within three months. A party may request a reasoned award. Efficiently facilitating arbitral proceedings in international disputes since 1917

40 SCC Mediation Rules Entered into force on 1 April 1999 Condition for mediation is that the parties are in agreement to use a mediator. The mediator shall complete his or her task within two months. The settlement agreement can be confirmed in an arbitral award. Any persons participating shall respect the confidentiality of the mediation. Efficiently facilitating arbitral proceedings in international disputes since 1917

41 SCC Model Clause Any dispute, controversy or claim arising out of or in connection with this contract, or the breach, termination or invalidity thereof, shall be settled by arbitration in accordance with the Arbitration Rules of the Arbitration Institute of the Stockholm Chamber of Commerce.

42 Efficiently facilitating arbitral proceedings in international disputes since 1917 Recommended additions to any arbitration clause Number of arbitrators Seat of arbitration Language of the proceedings Substantive law

43 43 Time – the Stockholm perspective 43 Average number of months for a final award on the merits in international cases under the SCC Rules.

44 44

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46 Average amount in dispute

47 The SCC as an option in investment disputes  Energy Charter Treaty (Part III, art. 26)  Bilateral Investment Protection Treaties  Investment agreements between investors and states (in particular, from former USSR)  Since 1993: 38 investment arbitrations at the SCC  UNCITRAL (appointing authority)

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52 Investment arbitration under the SCC Rules  The SCC Rules (2010) apply equally to commercial and investment disputes.  Chairperson of neutral nationality is appointed by the SCC Board.  Fees are value-based (for claims up to EUR 100 million)  SCC and the Tribunal shall maintain confidentiality

53 Investment Arbitration under the SCC Rules (cont’d)  Majority of cases relate to CIS countries, but also EU states, South America and North America  Average length of proceedings: 21 months  Procedural issues: jurisdiction, bifurcation, multiple claimants  Average cost: EUR (fees, expenses and admin.fee)  Claimants: private companies, holding companies and private investors

54 The decisions by the Board Appointment of arbitrators Challenges to arbitrators Jurisdiction Seat Number of arbitrators Consolidation Advance on costs

55 Appointment of arbitrators, art. 13  Party autonomy  Three arbitrators unless other agreement  No list of arbitrators  Parties appoint one arbitrator each, and the SCC appoints the Chairperson  Sole arbitrator is appointed jointly by the parties (within 10 days). If parties fail to make an appointment, the arbitrator shall be appointed by the SCC (art. 13(2))  Where there are multiple Claimants or Respondents, they jointly or separately appoint equal number of arbitrators.  Requirements to the arbitrators: independent and impartial (Swedish Act: arbitrator also shall posses full legal capacity and not insolvent)  Chairperson, or sole arbitrator, shall be from a neutral country

56 Factors to take into consideration Elementary Specific comptence Experience of arbitration Other factors The parties and the arbitrators nationality Applicable law Language for the procedure The parties geographical location Seat

57 Who were appointed by the SCC ( )? 10 most frequent appointed arbitrators – average age of 62 years Youngest – 35 years Lawyers – 67 % Judges – 28 % (declining) Professors – 4 % YEAR 2009 NationalityNumber Swedish269 Russian12 British9 Finish9 Unknown7 American6 Swiss6 Italian4 Norwegian4 German4 Ukrainian4 Danish3 Australian2 French2 Chinese1 Nigerian1 Pakistani1

58 Jurisdiction (art.10) Prima facie decision by the Board ”Manifestly lacks jurisdiction” Dismissal, in whole or in part Final negative decision -> Positive decision: Tribunal rules on its own jurisdiction 131 decisions on jurisdiction for 720 cases ( ) ”Manifestly” in 6 out of these 131 cases

59 Challenge to arbitrators, art. 14 and 15 Every arbitrator must be impartial and independent Duty to disclose  signed statement Challenge Circumstances which may give rise to justifiable doubts Within 15 days from when circumstances became known (preclusion) Parties and arbitrators submits comments If the other party agrees to the challenge  resign The Board makes a final decision

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61 Basis for the challenge decision by the Board SCC Rules SCC previous practice SAA (if applicable) IBA Guidelines on Conflicts of Interest Best practice (Swedish and International) Doctrine The decision by the Board is not reasoned.

62 Consolidation (art. 11) Article 11 If arbitration is commenced concerning a legal relationship in respect of which an arbitration between the same parties is already pending under these Rules,the Board may,at the request of a party,decide to consolidate the new claims with the pending proceedings. Such decision may only be made after consulting the parties and the Arbitral Tribunal. Efficiently facilitating arbitral proceedings in international disputes since 1917

63 Costs of the arbitration (art 43) Before making the final award, the Tribunal shall request the Board to finally determine the Costs of the Arbitration The Arbitral Tribunal shall include in the final award the Costs as finally determined by the Board and specify the individual fees and expenses of each member of the Tribunal The parties are jointly and severally liable to the arbitrators and to the SCC for the Costs. Efficiently facilitating arbitral proceedings in international disputes since 1917

64 Pre-award relief at the SCC Interim measures (Art 32) Emergency Arbitrator Rules (Appendix II) Separate award on advance on costs (Art 45 (4))

65 SCC Rules: Interim measures (Art 32) Article 32 (1) The Arbitral Tribunal may, at the request of a party, grant any interim measures it deems appropriate. (2) The Arbitral Tribunal may order the party requesting an interim measure to provide appropriate security in connection with the measure. (3) An interim measure shall take the form of an order or an award. (4) Provisions with respect to interim measures requested before arbitration has been commenced or a case has been referred an Arbitral Tribunal are set out in Appendix II. (5) A request for interim measures made by party to a judicial authority is not incompatible with the arbitration agreement or with these Rules. Efficiently facilitating arbitral proceedings in international disputes since 1917

66 Bridging the gap with an Emergency Arbitrator Introduced January 1, Opt-out Avaliable before referral to tribunal Respondent must be notified Appointment within 24 hours Challenge within 24 hours Decision within 5 days – can be extended Cost EUR

67 Example of an SCC arbitration 1-4 months from request to referral to Tribunal = vacuum Before 2010, only interim measure after refferal to Tribunal Now: interim measure before referral Efficiently facilitating arbitral proceedings in international disputes since 1917

68 Similarities between SCC and ICC, but also differences ICC to appoint “within a short a time as possible” (Article 2(1) App. V), SCC to “seek to appoint... within 24 hours” (Article 4(1) App. II) ICC order to be made within 15 days from arbitrator’s receipt of file (Article 6(4) App. V), SCC decision to be made within 4 days from arbitrator’s receipt of file (Article 8(1) App. II); may be extended under both Rules Challenge of arbitrator within three days (ICC) and 24 hours (SCC) ICC USD 40,000, SCC EUR 15,000 Article 29(5) ICC Rules excludes treaty-based arbitration Efficiently facilitating arbitral proceedings in international disputes since 1917

69 Claimant Applies for the appointment of an Emergency Arbitrator and pays the costs SCC Notifies Respondent SCC Appoints the Emergency Arbitrator, sends CV and Confirmation to the parties Claimant Submits any additional comments Emergency Arbitrator Contacts the parties and makes timtable Respondent Submits an Answer Emergency Arbitrator Makes its decision on written submissions or after hearing the parties Emergency Arbitrator makes a decision SCC Refers the application to the Emergency Arbitrator SCC Closes the file 24 h 5 days 23 dec dec dec 15.00

70 Efficiently facilitating arbitral proceedings in international disputes since 1917 Particulars The power of the EA does not cease when decision is made, but the EA has power until case is referred to Arbitral Tribunal. No overlapping Emergency decision may be amended or revoked upon application by a party. Emergency decision is binding, but the effect ceases in 4 situations.

71 Emergency Arbitrator – the SCC experience Four cases in 2010, two in 2011and two (so far) in 2012 The SCC has appointed an Emergency Arbitrator within the 24-hour time limit in all eight cases. Five out of eight decisions were rendered within the five days originally prescribed. Extensions were granted in three cases upon a petition by the Respondent. In all these cases, decisions were rendered within less than 12 days from the application. Efficiently facilitating arbitral proceedings in international disputes since 1917

72 The applications for an Emergency Arbitrator Disputed value of potential claims in arbitration: EUR 1 million – 100 million Parties were from: Cyprus, Netherlands, Finland, Norway, Georgia, Sweden, Israel, Switzerland, Lithuania, Russia, Germany, USA, China One application for interim measures has been successful. Seven applications have been denied. The request that was granted concerned a Shareholders Agreement. “Necessary to safeguard the substantive rights of the Applicant”. Efficiently facilitating arbitral proceedings in international disputes since 1917

73 Separate award on advance on costs Art. 45 (4) If one of the parties pays the other party’s part of the advance on costs, that party may request an award for the reimbursement of the payment.

74 THANK YOU Johan Lundstedt Tel Arbitration Institute of the Stockholm Chamber of Commerce


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