The Swedish Parliament has passed a revised Arbitration Act (the ‘revised Act’), which entered into force on 1 March 2019 and applies to arbitrations commenced after that date.1

The changes include a clarified mandate for the arbitrators to determine the applicable substantive law, an enhanced possibility for a party to appoint a replacement arbitrator, new provisions on arbitrator appointment and consolidation for multi-party situations. Also, a number of changes aim at more efficient court procedures for challenging the award, such as a narrowed scope of application of ground for challenge, a reduced time limit to bring a challenge action, requirement for certiorari following a leave to appeal in challenge proceedings, and the possibility to take oral evidence in English without interpretation or translation into Swedish. This article highlights the key changes of the revised Act.

Applicable substantive law

The Act did not previously provide for a procedure to determine the substantive law applicable to the dispute. With the new Section 27(a), the arbitrators shall in the first place determine the dispute with application of the law agreed to by the parties. Unless otherwise agreed by the parties, such law shall be deemed to include the country’s substantive law but not its rules of conflict of laws. If the parties have not agreed on the applicable law, the tribunal may independently determine the applicable law.

The section also provides that the arbitrators may base the award on ex aequo et bono considerations only if the parties have authorized it to do so.

Replacement of arbitrators

The revised Act states that if an arbitrator resigns or is released due to circumstances which were known at the time of appointment, the district court shall appoint a new arbitrator, upon the request of a party. The revised Section 16 allows the party that appointed the original arbitrator to propose a new arbitrator, who will be appointed by the district court unless it finds circumstances speaking against it.

If an arbitrator cannot complete the assignment due to circumstances which have arisen after his or her appointment, the party that appointed the original arbitrator will be granted the possibility to appoint a new arbitrator (Section 16, para 2). This provision applies unless the parties have agreed otherwise, or if arbitral institutional rules, such as those of the SCC or ICC, provide otherwise.

Multiple parties and multiple proceedings

A provision with regard to arbitrator appointment in multi-party arbitral proceedings is introduced in Section 14, para. 3. Under this provision, if multiple respondents are unable to jointly appoint an arbitrator, a respondent may request the district court to appoint all arbitrators on behalf of all parties, and also to release any arbitrator previously appointed by the claimant.

Furthermore, the revisions include a new provision for consolidating multiple arbitral proceedings. Section 23(a) allows parallel proceedings to be consolidated if (i) the parties agree to the consolidation, (ii) the consolidation benefits the administration of the arbitration, and (iii) the same arbitrators have been appointed in both arbitrations. A single proceeding may also be divided in separate arbitrations under the same provision, if justified. This provision will not apply when parties have agreed to arbitral rules providing for consolidation procedures.

Jurisdictional objections

The revisions introduce a new procedure for judicial review of jurisdiction. Under the previous Act, the parties could bring a declaratory action to the district court prior to or during the arbitration, and the arbitrators were entitled to continue the proceedings in parallel to the court proceedings. Under Sections 2 and 4(a) of the revised Act, a party may bring a declaratory action to determine jurisdiction only prior to the commencement of arbitration, unless the other party agrees to parallel state court and arbitration proceedings after the commencement of arbitration.

The revisions also include a new provision allowing arbitrators to decide on jurisdiction in an affirmative order, which a party may appeal to the Court of Appeal within 30 days, resulting in a final jurisdiction decision. The arbitration may continue during the judicial review, hence amounting to a more efficient procedure in compliance with Article 16 of the UNCITRAL Model Law. Parties also have the option of challenging an award on jurisdictional grounds in challenge proceedings, unless the jurisdiction has already been finally determined by the competent court.

Termination of arbitral proceedings

Previously, the arbitration could only be terminated through an award. This requirement raised difficulties when the parties settled, withdrew a case, or failed to pay the advance on costs, which in other jurisdictions or under institutional rules could lead to an order (or termination order).

The revised Section 27 of the revised Act allows the tribunal to dismiss the arbitration in the form of a decision (or order). Provisions of the revised Act with regard to arbitral awards also apply to such decisions, to the extent applicable.2

Procedure to challenge awards

Challenge grounds. Under Section 34, a new causality requirement has been introduced to the ground of excess of mandate (item 3), effectively narrowing the scope of application. Under the revised Act, the claimant now needs to show that such excess of mandate has likely influenced the outcome of the case. The same causality requirement applies to alleged procedural irregularities (item 7 of the revised Section 34).3

Time limits. The time limit to challenge an award before the Court of Appeal has been reduced from three to two months in Section 34. Section 33 however remains unchanged and there is no time limit for a recourse against a potentially invalid award, i.e. when the award i) contemplates a dispute that is not arbitrable, ii) violates Swedish ordre public, or iii) is not made in writing or signed.

Oral evidence in English. While the submission of written evidence in English was generally and widely accepted under the previous Act, the revised Act provides for the possibility to present oral evidence in English in challenge proceedings before Swedish courts without interpretation or translation into Swedish (new Section 45(a)). Briefs, hearings and judgments will however still have to be in Swedish language pursuant to constitutional requirements regarding public court proceedings.

Leave to appeal/certiorari

In Sweden, the challenge to an arbitration award is in first instance made before the Court of Appeal, which must then give permission to appeal its judgment to the Supreme Court. Such permission is granted on the basis of the importance of the issues and the need for precedent.

Under the previous Act, the Supreme Court had to try the appeal to the full extent. Under the revised Section 43, the appeal procedure still requires the Court of Appeal’s permission, but the Supreme Court can now either grant or deny certiorari in its own assessment of the case and delimit the issues it will try and decide. This increased threshold for judicial review of arbitration awards will ensure the relevance of challenges and thus enhance swift enforcement of valid and legitimate awards.

Concluding remarks

Sweden is known for its arbitration-friendly legal environment with regard to international and domestic arbitration and the recent revisions further enhance efficiency as well as accessibility for foreign parties. Practitioners will need to consider the revised Act for all future arbitrations seated in Sweden but can be reassured that the new provisions provide a favourable, modern legal framework up-to-date with international best practices.

There are some exceptions: Sections 41 (court action for contesting arbitrator compensation) applies to proceedings brought to court after 1 March 2019; Section 43, para. 2, (oral evidence-taking in English in challenge proceedings) applies to challenges commenced after 1 March 2019; and Section 45(a) (permission for appeal in challenge proceedings to the Supreme Court) applies to challenge judgments made after 1 March 2019.

Such as inter alia, the provisions with regard to the formal requirements of an award, recourses against award, forum, time limits and costs of arbitration.

Grounds for annulment are the following: (1) the dispute is not covered by a valid arbitration agreement between the parties; (2) the arbitrators have rendered the award after the expiry of the time limit set by the parties; (3) the arbitrators have exceeded their mandate in a manner that likely influenced the outcome; (4) the arbitration, according to Section 47, should not have taken place in Sweden; (5) an arbitrator was appointed in a manner that violates the parties’ agreement or the Act; (6) 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, an irregularity otherwise occurred in the course of the proceedings and likely influenced the outcome of the case.