Jonas Rosengren comments the Proposed Modernisation of the Swedish Arbitration Act

The Swedish Arbitration Act of 1999 is now in its late teens. On 1 March 2018, the Swedish Government issued a proposal for certain amendments to the Act (“The Modernisation of the Swedish Act on Arbitration”). The purpose of the amendments is to maintain arbitration as an attractive means of dispute resolution and to further Sweden’s position as a seat for international arbitration.

The proposal will now be considered by the Swedish Council on Legislation (a Government Agency composed of senior judges which comment on the legal aspects of proposed legislation). Accordingly, this is not the final word on the matter, one may expect some adjustment to the proposal before a government bill is finally presented to the Swedish Parliament, something which is expected to take place later this year.

The Government proposal builds upon a report presented in April 2015 by a Parliamentary Committee which was set up to review certain issues of arbitration in Sweden. The Committee found that the Arbitration Act had, on the whole, worked well and advised against a wholesale adoption of the UNCITRAL Model Law that would change the structure of the Swedish Act. Instead, the Committee proposed a number of amendments to address shortcomings in the Arbitration Act and to take account of the developments that have taken place in the field of arbitration since its enactment.

The Government Proposal presented on 1 March 2018 represents a substantial reworking of the Parliamentary Committee’s Report. It adopts many of the proposals presented by the Parliamentary Committee, in whole or in part, but at the same time rejects some of the Committee’s proposals.

The main proposed amendments are as follows:

Appeal jurisdiction

The arbitrators’ decision on jurisdiction shall be subject to appeal to the Court of Appeal within 30 days after the party has taken part of the decision. The Tribunal may continue the proceedings pending the court proceedings. As a general rule, it shall no longer be possible to bring a declaratory action concerning the arbitrators’ jurisdiction in court proceedings before the District Court once arbitration proceedings have been commenced, as this may cause the jurisdiction issue to be determined in two different sets of proceedings at the same time. This is to be applauded.

Multi-party situations

The Act is adapted to multi-party arbitrations by introducing a provision commonly found in institutional arbitration rules. If arbitration is commenced against two or more respondents and they cannot agree on an arbitrator, the arbitrator shall be appointed by the court. An arbitrator already appointed by a respondent shall be vacated.

Consolidation of proceedings

It is proposed that a set of arbitration proceedings may be consolidated with another if the parties agree to if it is considered be appropriate for the handling of the case and the same arbitrators have been appointed in both sets of arbitration proceedings. The arbitration proceedings may be separated at a later stage if there are reasons for this.

A decision to terminate the proceedings without a determination on the merit shall take the form of a decision and not an award

A decision whereby the arbitral tribunal terminates the proceedings without any determination on the merits shall take the form of a decision and not an award. The provision in the Arbitration Act on Arbitral Awards shall apply in relevant parts. As the law now stands, all decisions whereby the Tribunal closes the proceedings shall take the form of an arbitral award, even if the parties chose to settle the case or the claimant withdraws from the proceedings. This has been regarded as a procedural oddity by international arbitrators and has sometimes caused confusion, especially in ICC proceedings where all Arbitration Awards shall be scrutinized by the ICC Court. A minor but welcome amendment.

Rules on substantive law

A provision on substantive law has been lacking in the 1999 Arbitration Act. The Government Report proposes a provision to the effect that the arbitral tribunal shall decide the dispute in accordance with the law or the legal regime (e.g., the Unidroit Principles on International Commercial Contracts) chosen by the parties as applicable to the substance of the dispute. Unless otherwise agreed, an agreement by the parties to apply the laws of a certain country shall be deemed to refer to that country’s substantive law and not to its rules on conflicts of law. Failing any designation by the parties, the arbitral tribunal shall decide on the applicable law. The arbitral tribunal may decide ex aequo et bono or as amiable compositeur only if the parties have so agreed.

No power of the Tribunal to order enforceable interim measures

The Parliamentary Committee proposed that the arbitral tribunal should be empowered to order enforceable interim measures in a separate award if the parties had agreed to this in the arbitration agreement. The Government proposal rejects this suggestion and concludes that the power to order enforceable interim measures should exclusively be reserved for the courts. This will not prevent the Tribunal from ordering interim measures, but their decision will not be enforceable in Sweden. Moreover, the Tribunal may issue a separate order on security for costs which will be enforceable.

Excess of mandate only ground for setting aside if it probably has affected the outcome

Under the 1999 Swedish an arbitral award may be set aside on the ground that the arbitrators have exceeded their mandate. This ground for challenge is now qualified by providing that the excess of mandate must “probably have affected the outcome” in order for the award to be set aside.

The time period for of Awards is reduced from three to two months

As the law now stands, a challenge of an award shall be brought within three months after the date on which the party making the application received the Award. Although the Parliamentary Committee did not recommend any change in this respect, it is proposed that the time for challenge shall be reduced to two months. The Government Proposal notes that certain other countries (notably France and England) shorter time periods and that the use of electronic means of communication means that there is no longer the same need for a three months period.

Witnesses in challenge proceedings before Swedish courts may be heard in English without simultaneous interpretation into Swedish

The Parliamentary Report proposed that the Court of Appeal, which is the court of the first instance in cases of challenge against arbitral awards, should be able to allow the proceedings in challenge cases to be held in English to an appropriate extent, if this is requested by one of the parties and the opposite party agrees. The Government Proposal is not prepared to go that far as to allow English to be used as the language of the proceedings but proposes that the Court of Appeal should be able to allow that witnesses in challenge cases be heard in English without the need for simultaneous interpretation into Swedish. It is already possible to file written evidence in English in challenge proceedings without the need for Swedish translation.

Entry into force

It is proposed that the amendments shall enter into force as of 1 March 2019.

The proposal (in Swedish only) is available here.

Jonas Rosengren is a partner of WERKS Advokater and fellow of the Chartered Insitute of Arbitration (FCIArb). He frequently acts as arbitrator and counsel in Swedish and international arbitration proceedings. He also represents parties in court proceedings, including set aside proceedings, and has argued several cases before the Swedish Supreme Court.