SWEDEN: An Introduction to Dispute Resolution

Chambers Global 2022: Practice Area Overview  

Sweden: Dispute Resolution 

by

Ginta Ahrel and Dr Maria Fogdestam Agius

Westerberg & Partners

Sweden prides itself on being an open, free-trading and innovative country. This approach to business informs, in a number of ways, the preferences and trends in the Swedish market when it comes to dispute resolution. This brief overview discusses some salient features and recent developments in this respect.

International arbitration and express procedures 

As a result of the trade with and exposure to foreign markets, many disputes take on a cross-border dimension, and there is a notable preference among Swedish blue-chip companies for settling their disputes through arbitration. This also reflects the long-standing tradition that arbitration has within the jurisdiction. Alternative forms of dispute resolution have been used in Sweden since the Middle Ages. Arbitration is thus well established: its conditions are regulated in modern legislation most recently updated in 2019; it is a plausible alternative to judicial dispute resolution in the minds of parties; and it is fully recognised by courts, practising lawyers and scholars.

While many domestic disputes are still resolved by arbitral tribunals under the Arbitration Act in ad hoc proceedings unaffiliated with any institution or set of arbitral rules, both Swedish and foreign parties arbitrating in Sweden strongly favour the arbitration rules of the Arbitration Institute of the Stockholm Chamber of Commerce (the SCC). With an annual caseload of approximately 200 cases, the SCC is one of the most frequently selected venues for international arbitration. In particular, it traditionally attracts cases with an East-West dimension, i.e., involving entities from Eastern Europe.

The SCC itself has recently proven capable of innovation in the form of the SCC Express, launched in 2021. The SCC Express is a new set of rules for express dispute assessment, developed in response to arbitration users’ calls for time and cost-efficiency. The procedure sits somewhere in between mediation and arbitration and provides parties with a legal assessment of their dispute within a mere three weeks and at a predictable cost. The assessment is envisaged to assist parties in resolving their dispute with a view to salvaging their business relationship, finding an amicable solution or assessing their prospects of success in later arbitral or judicial proceedings.

Digitisation and virtual hearings 

The SCC Express procedure benefits from the SCC digital case management platform. This was introduced about two years ago, just months before the COVID-19 pandemic paralysed the world, and it became an instant success among arbitration practitioners. The platform ensured that ongoing arbitrations could proceed seamlessly and empowered the conduct of digital hearings.

Of course, the latter has been a particularly notable feature during the pandemic. Like courts and tribunals in multiple countries, arbitral tribunals in Sweden have embraced technological solutions that make it possible to conduct fully virtual hearings. However, the idea of a virtual hearing turned out to be controversial in Sweden due to the fact that, before Swedish courts, oral hearings are mandatory if requested by a party. The question thus arose whether a hearing in person can be replaced by a virtual hearing against the will of either party. Among practitioners and commentators, the majority agree that it can, while the minority take the opposite view. Both camps eagerly await a pending decision from the Svea Court of Appeal, which is expected to address this point.

Disputes related to COVID-19: insurance policies and components

The COVID-19 pandemic still affects businesses and legal relationships in Sweden in ways that can be seen through dispute resolution trends. For example, one can see a growing number of insurance disputes related to business interruption policies, where restaurants and night clubs claim insurance coverage to cover shortfalls due to government restrictions in response to the coronavirus. So far, courts have been unsympathetic. The Stockholm District Court, for example, held in a pilot case brought by a well-known Stockholm night club that the restrictions were not aimed specifically at the insured party’s premises and that general restrictions imposed by law and regulations could not trigger the insurance policy. The judgment has been appealed and the matter is now before the Court of Appeal.

Another trend for disputes relates to the scarcity of manufacturing components. As one could predict at the beginning of the pandemic, many businesses have suffered delays and knock-on effects from the breakdown in worldwide production and supply chains. The legal ramifications of this continue to be brought before Swedish courts and tribunals with notable regularity.

Enforcement of arbitral awards and sovereign immunity 

In the field of sovereign immunity, the Supreme Court recently issued an important precedent which confirms the willingness of Swedish courts to allow enforcement of arbitral awards against States, thereby affirming Sweden’s reputation as an arbitration-friendly jurisdiction. The Supreme Court ruled in November 2021 that assets of a Kazakh sovereign wealth fund, managed by Kazakhstan’s central bank on behalf of the State, were not immune from enforcement on the ground that these assets bore no connection to central bank activities and the realisation of Kazakhstan’s monetary policy. In applying the general purpose-oriented test for immunity of State property under customary international law, the Court ruled that general saving for future needs of the State was not in itself a sovereign activity, absent a “concrete and clear connection to a qualified purpose of sovereign character”. Notably, this departs from the stance taken in certain other jurisdictions, including England and Wales and the Netherlands, where saving for future generations has been accepted as a sovereign purpose.

The potential for litigation related to corporate sustainability and climate change

In addition to being innovative and arbitration-friendly, Sweden is well-known for its stance on human rights and its strict environmental standards. In the wake of rising awareness of corporate responsibilities to respect human rights, the Swedish government was quick to adopt a National Action Plan on Business and Human Rights in 2015, where it formulates its expectation that Swedish companies adhere to the United Nations Guiding Principles on Business and Human Rights and similar frameworks. Like in other EU Member States, companies are adapting to expected reinforcements of EU rules on human rights due diligence and sustainability reporting, promised in 2022 and likely to come into force in 2023. These developments will assist in making corporate ESG and human rights responsibilities more tangible.

This begs the question whether Swedish courts, like courts in certain other jurisdictions, will see an increase in strategic human rights litigation or climate change activism being routed through the courts. An earlier such attempt was not successful. In 2017-2018, a suit against the Swedish State for failure to intervene to ensure sustainability in relation to State-owned entity Vattenfall’s sale of brown coal power facilities to a Czech entity failed to convince Swedish courts of any real damage arising out of the alleged environmental threats caused by fossil fuels. In 2021, the youth movement Aurora nevertheless announced its intention to sue Sweden over alleged failure to meet climate change commitments, inspired by the Dutch Urgenda case.