International arbitration has a long-standing tradition in Sweden. As an arbitration-friendly jurisdiction, Sweden has traditionally been a popular place of arbitration, especially for parties from the ex-Soviet Union and China when negotiating with their counterparties from the USA, Western Europe and Canada. The reasons for this are historical and date from the Cold War since, as early as the 1970s, the Arbitration Institute of the Stockholm Chamber of Commerce (the “SCC”) was recognised by the US and the Soviet Union as a neutral place for resolving international disputes.[1]
Until today, the SCC remains the most popular institution for resolving domestic and international arbitrations in Sweden. The SCC recently changed its name from the “Arbitration Institute of the Stockholm Chamber of Commerce” to the “SCC Arbitration Institute” with the new SCC rules that came into force on 1 January 2023 (“2023 SCC Rules”)(see also New 2023 SCC Arbitration Rules).
The Swedish Arbitration Act 1999
International arbitration in Sweden is governed by the Swedish Arbitration Act 1999 (Lagen om skiljeförfarande)(“Swedish Arbitration Act”), which came into force on 1 April 1999.[2] The most recent amendments of the Swedish Arbitration Act entered into force on 1 March 2019.[3]
The Swedish Arbitration Act applies to arbitrations commenced after 1 April 1999, whereas the current version, amended in 2019, applies to arbitrations initiated after 1 March 2019.
The 2019 amendments were intended to enhance the efficiency and accessibility of arbitration in Sweden and challenge proceedings before Swedish courts for international parties.[4] The most notable changes introduced by the Swedish Parliament in 2019 include, inter alia, a clarified mandate for arbitrators to determine the applicable substantive law, an enhanced possibility for a party to appoint a replacement arbitrator, and new provisions on consolidation and arbitrator appointment.[5]
Even though Sweden did not formally adopt the UNCITRAL Model Law on International Commercial Arbitration (the “Model Law”), the Model Law was very much a source of inspiration for Swedish legislators and most of the provisions are very similar to the provisions of the Model Law, even more so following the 2019 amendments. There are a few notable differences between the two, however:[6]
- The scope of application – while the Model Law is limited only to international commercial disputes, the Swedish Arbitration Act applies to both domestic and international arbitrations when the seat of arbitration is in Sweden;[7] even in certain cases where the seat of arbitration is not in Sweden, certain provisions may nevertheless apply, such as, for instance, the provisions regarding recognition and enforcement of foreign arbitral awards;[8]
- Notice requirements – while the Model Law provides a rule on written communication, which is considered received once delivered in accordance with Article 3 of the Model Law, the Swedish Arbitration Act is silent on how to serve the notice in Swedish Arbitration proceedings; certain helpful clarifications on this matter were provided by the Swedish Supreme Court in Lenmorniiproekt OAO v. Arne Larsson & Partners AB, holding that actual receipt of the document is a requirement for the notice to be considered valid as a matter of Swedish law;[9]
- Form of an arbitration agreement – unlike the Model Law and the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the “New York Convention”), the Swedish Arbitration Act does not require an arbitration agreement to be in writing, as it can also be made orally or tacitly;
- Arbitral tribunal – the Swedish Arbitration Act, unlike the Model Law, sets out certain formal requirements which arbitrators must meet; for instance, that a person who does not have full legal capacity cannot act as an arbitrator (Swedish Arbitration Act, Section 7); furthermore, while the procedure for the appointment of the arbitrator is the same under both the Model Law and the Swedish Arbitration Act, one notable difference is that the Swedish Arbitration Act provides district courts with the power to appoint an arbitral tribunal in its entirety where arbitration has been requested by multiple respondents who cannot agree on the appointment of the arbitrators.[10]
The Swedish Arbitration Act contains only a few mandatory provisions from which the Parties cannot derogate. For instance, Section 1 provides that arbitration can only be used in disputes in which parties may reach a settlement. Section 8 of the Swedish Arbitration Act, which provides that arbitrators must be impartial and independent, is another provision which is considered mandatory under Swedish law. The arbitral award must also comply with the basic principles of Swedish public policy and be in writing, duly signed by the arbitrators, as explicitly provided in Section 33.
Arbitration Agreement and Arbitrability
An arbitration agreement which provides for arbitration in Sweden is typically governed by Swedish law, unless the parties have agreed otherwise. For an arbitration agreement to be valid, the following conditions have to be fulfilled:
- The parties have to have the legal capacity to conclude an arbitration agreement;
- The arbitration agreement must refer to a dispute arising out of a specific legal relationship or concern a specific dispute;
- The matter must be arbitrable.
Section 6 of the Swedish Arbitration Act explicitly provides that an arbitration agreement may not be invoked where it was entered into prior to a dispute in the case of disputes between a business enterprise and a consumer of certain goods, services or other products for private use, unless otherwise provided by Swedish law. In other words, Swedish law does not allow arbitration agreements concerning future disputes between a business and a consumer.
Unlike the Model Law, Swedish law does not require an arbitration agreement to be in a specific form (it can be in writing, or concluded orally, or even by implication). The parties can also be considered to be bound to arbitrate under practices established between them, as held by the Svea Court of Appeal in Värmeledningsaktiebolaget Radiator v. Skanska AB.[11]
In practice, the vast majority of arbitration agreements are nevertheless made in writing.
The arbitrability of disputes is also governed by Swedish law, even when the law applicable to the merits of the dispute or the arbitration agreement is a foreign law.[12] Under Swedish law, disputes which the parties may not settle by agreement cannot be subject to arbitration (i.e., are considered as non-arbitrable). These typically include disputes related to criminal or family law, but also the registration and validity of patents and trademarks, and questions of punishment and forfeiture. In matters of competition law, arbitrators may only rule on the civil law effects of competition law between parties but not on the substance of competition law.
Principles of Separability and Competence-Competence
Swedish law provides for both separability of the arbitration agreement and competence-competence principles. Section 3 of the Swedish Arbitration Act provides that the arbitration agreement is deemed to constitute a separate agreement when the validity of the arbitration agreement is determined in conjunction with a determination of the jurisdiction of the tribunal.
The principle of competence-competence, namely, that the arbitral tribunal may rule upon its own jurisdiction, is also deeply established as a matter of Swedish law. A competent Swedish court, however, has the final say on whether the arbitral tribunal has jurisdiction to decide the dispute. A dissatisfied party has 30 days to challenge a positive jurisdictional decision by an arbitral tribunal, which is decided by a competent court of appeal. Otherwise, it is not possible to bring a separate action before a court regarding the tribunal’s jurisdiction.
Choice of Law
The parties in arbitrations seated in Sweden are also free to agree on any applicable law. Absent such an agreement, the arbitral tribunal decides on the applicable substantive law. This is firmly established as a principle under Swedish law. This was also formally incorporated in 2019 amendments to the Swedish Arbitration Act, which leaves broad discretion to the tribunal to decide on the applicable law:
Section 27a
The dispute shall be determined with application of the law or rules agreed to by the parties. Unless otherwise agreed by the parties, a reference to the application of a certain state’s law shall be deemed to include that state’s substantive law and not its rules of private international law.
If the parties have not come to an agreement in accordance with the first paragraph, the arbitrators shall determine the applicable law.
The arbitrators may base the award on ex aequo et bono considerations only if the parties have authorized them to do so. SFS (2018:1954).
The 2023 SCC Rules also include a very similar provision in Article 28 (Applicable law), which reads:
Article 28 Applicable law
(1) The Arbitrator shall decide the merits of the dispute on the basis of the law(s) or rules of law agreed upon by the parties. In the absence of such agreement, the Arbitrator shall apply the law or rules of law that the Arbitrator considers most appropriate.
(2) Any designation by the parties of the law of a given state shall be deemed to refer to the substantive law of that state, not to its conflict of laws rules.
(3) The Arbitrator shall decide the dispute ex aequo et bono or as amiable compositeur only if the parties have expressly authorised the Arbitrator to do so.
Multiparty Arbitrations and Joinder of Additional Parties
As a matter of principle, an arbitration agreement is only binding on the parties to the agreement, although a third-party non-signatory may become bound by an arbitration agreement through implied consent or succession. The Swedish Supreme Court has also ruled that, following a singular succession, a successor is normally bound by an arbitration agreement unless this would be unreasonable.[13]
The Swedish Arbitration Act does not contain any specific provisions regarding the joinder of third parties. The parties are free to agree to join a third party to the proceedings, but a third party cannot be forced to join. The SCC Rules, on the other hand, contain explicit provisions regarding the possibility of joinder of additional parties. This is set out in Article 13, which provides that the SCC Board may decide to join one or more additional parties provided that the SCC does not manifestly lack jurisdiction over the dispute.
Section 23 of the Swedish Arbitration Act also provides for the possibility of the consolidation of new claims with pending proceedings, upon the request of a party and after consultation with the parties and tribunal. Specifically, Section 23a, which was introduced in 2019, tersely provides the following:
Section 23 a
An arbitration may be consolidated with another arbitration, if the parties agree to such consolidation, if it benefits the administration of the arbitration, and if the same arbitrators have been appointed in both cases. The arbitrations may be separated, if there are reasons for it. SFS (2018:1954).
A similar provision is also contained in the SCC Rules, which stipulate that the SCC Board may consolidate new claims with pending proceedings upon a request of a party and after consulting the parties and the tribunal (2023 SCC Rules, Article 15).
Interim Measures and Arbitration in Sweden
As a matter of Swedish law, both foreign and domestic parties in either ad hoc or institutional arbitrations may obtain interim measures from either courts or arbitrators.
Section 25(4) of the Swedish Arbitration Act explicitly empowers arbitrators to issue decisions on interim measures upon the request of a party unless the parties have agreed otherwise.
Any competent court may also issue interim measures pending the constitution of the tribunal or thereafter. The Swedish Arbitration Act further provides that a court may issue a decision on interim measures in disputes subject to arbitration (Section 4(3)).
Article 37 of the SCC Rules provides arbitral tribunals with the power to grant interim measures as follows:
Article 37 Interim measures
(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 commenced, or before a case has been referred to an Arbitral Tribunal, are set out in Appendix II.
(5) A request for interim measures made by a party to a judicial authority is not incompatible with the arbitration agreement or with the Arbitration Rules.
When requesting interim measures before Swedish courts, parties may request them either before the arbitration proceedings have commenced or during the proceedings. If interim measures are requested before the commencement of the arbitration, the requesting party must commence the arbitration within one month from the issuance of an interim order.[14] Interim measures may also be issued in support of foreign arbitrations outside of Sweden.
The Appeal, Setting Aside and Enforcement of Arbitral Awards by Swedish Courts
One of the basic principles of arbitration, deeply entrenched in Sweden, is that arbitral awards cannot be appealed on their merits. An arbitral award may only be set aside by the courts after it has been challenged on formal or procedural grounds. Specifically, Section 33 of the Swedish Arbitration Act provides that an award is invalid, if:
it includes determination of an issue which, in accordance with Swedish law, may not be decided by arbitrators;
the award, or the manner in which the award arose, is clearly incompatible with the basic principles of the Swedish legal system; or
the award does not fulfil the requirements with regard to the written form and signature in accordance with section 31, first paragraph.
Invalidity may also apply to only part of an arbitral award.
Section 34 further provides that an award that may not be challenged in accordance with Section 36 shall, following an application, be wholly or partially set aside upon motion of a party in case of the following:
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 time limit set by the parties;
3. if the arbitrators have exceeded their mandate, in a manner that probably influenced the outcome;
4. if the arbitration, according to Section 47, should not have taken place in Sweden;
5. if an arbitrator was appointed in a manner that violates the parties’ agreement or this Act;
6. if an arbitrator was unauthorized to adjudicate the dispute due to any circumstance set forth in Sections 7 or 8; or
7. 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.
Foreign arbitral awards are also recognised and enforced in Sweden, as Sweden ratified the New York Convention on 28 January 1972 without any reservations. Article V(1) of the New York Convention, setting out grounds for refusing recognition and enforcement of arbitral awards, has been incorporated in Section 54 of the Swedish Arbitration Act, whereas Article V(2) has been included in Section 55.
To enforce a foreign arbitral award in Sweden, the award must undergo the exequatur procedure set out in Sections 56–60 of the Swedish Arbitration Act. The exequatur procedure is commenced by lodging an application for the enforcement of a foreign arbitral award with the Svea Court of Appeal. Unless the Svea Court of Appeal requires otherwise, a certified translation of the entire award into Swedish must be submitted, even though it is within the Svea Court of Appeal’s discretion to assess whether it can sufficiently comprehend the contents of a foreign award in a foreign language.[15]
[1] GAR, Survey, The Guide to Regional Arbitration, Arbitration Institute of the Stockholm Chamber of Commerce.
[2] The Swedish Arbitration Act (SFS 1999:116).
[3] SFS 2018:1954.
[4] P. Shaughnessy, Sweden Adopts Revisions to Modernize Its Arbitration Act (Kluwer Arbitration Blog, 1 December 2018).
[5] Bo G.H. Nillson, B. R. Andersson, International Arbitration in Sweden: A Practitioner’s Guide (Second Edition, 2021), Chapter 1, para. 22.
[6] Bo G.H. Nillson, B. R. Andersson, International Arbitration in Sweden: A Practitioner’s Guide (Second Edition, 2021), Chapter 1, paras. 40-48.
[7] Swedish Arbitration Act, Section 46.
[8] Swedish Arbitration Act, Sections 52-60.
[9] Lenmorniiproekt OAO v. Arne Larsson & Partners AB, decision by the Supreme Court 16 April 2010 in Case No. Ö 13-09, NJA 2010, p. 219.
[10] Swedish Arbitration Act, Section 15.
[11] Värmeledningsaktiebolaget Radiator v. Skanska AB, decision by the Svea Court of Appeal made on 15 November 1988 in Case No. Ö 2840-87, RH 1989:83.
[12] Swedish Arbitration Act, Section 49(2).
[13] Judgment of the Supreme Court of Sweden, 15 October 1997, Case No. Ö 3174/95/NJA 1997, s. 866.
[14] Chapter 15, Section 7 of the Code of Judicial Procedure.
[15] Bo G.H. Nillson, B. R. Andersson, International Arbitration in Sweden: A Practitioner’s Guide (Second Edition, 2021), Chapter 11, paras. 24-32.
