SWEDEN: An Introduction to Dispute Resolution

Over the past few decades, globalisation has led to a massive increase in international trade and investments, giving more disputes an international or transnational dimension. As a result, international law has come to play a more integrated role in domestic legal practice in many countries. This is also true in Sweden. But just how willing are domestic courts to engage with international legal norms and jurisprudence? This brief overview looks at some relevant trends in dispute resolution with an international dimension.

In Sweden, the courts have traditionally been hesitant to apply international law. Sweden adheres to the so-called dualist tradition of giving international law effect in domestic law only after it has been implemented through national legislation.

In recent years, this approach seems to have shifted, at least to a degree. For example, in a 2022 decision, the Svea Court of Appeal declined to hear evidence on the content of international law, finding that the principle of jura novit curia extended to the applicable public international law rules and principles (Oleg Vladimirovich Deripaska v Government of Montenegro, Sweden, Svea Court of Appeal, Case No T 731-20, 3 March 2022). In a decision from 2021, the Supreme Court referred exclusively to customary international law to decide whether sovereign wealth fund assets found in the jurisdiction could be attached to satisfy an award against the state (Ascom Group SA v Anatolie Stati and others, Sweden, Supreme Court, Case No Ö 3828-20, 18 November 2021). Both these cases involved issues that were unregulated under Swedish domestic law, leading the courts to decide entirely on the basis of international law. In both cases, the courts were receptive to international norms as a direct source of law.

In the 2021 decision pertaining to the sovereign immunity of state assets, the Supreme Court also proved willing to engage in a dialogue of sorts with courts in other countries, by deliberately (albeit not expressly) departing from the practice of the Dutch Supreme Court and the English High Court, both of which have been more protective of sovereign wealth management as acta jure imperii.

Swedish courts have also grown increasingly accustomed to applying international law in exercising their supervisory function over Swedish-seated international arbitrations. Sweden has traditionally been the seat of so-called East-West disputes and the Arbitration Institute of the Stockholm Chamber of Commerce (SCC Arbitration Institute) has attracted a significant number of international commercial or treaty-based arbitrations to the jurisdiction. The Swedish legal order is known for its stability, predictability and transparency. Swedish procedural rules are clearly drafted and pragmatic, reflecting a mix of civil and common law traditions. This makes Sweden a suitable venue for contracting parties that need to settle their international disputes.

Recently, the Swedish courts have entered the spotlight due to decisions on the validity of arbitral awards concerning investments made by EU citizens or entities in other EU member states. In a series of high-profile decisions, the Court of Justice of the European Union (CJEU) has declared that agreements between EU investors and EU member states to arbitrate disputes regarding such investments are contrary to EU law (Slovak Republic v Achmea BV, CJEU, Case No C-284/16, 6 March 2018; Republic of Moldova v Komstroy LLC, CJEU, Case No C-741/19, 2 September 2021; Republic of Poland v PL Holdings S.á.r.l., CJEU, Case No C-109/20, 26 October 2021). This creates a normative conflict for EU member states that have offered foreign investors within the EU access to arbitration as a dispute settlement tool under binding international treaties.

Under public international law, states may not rely on their internal law to justify non-compliance with their international obligations. However, EU law is famously sui generis: it self-defines as international law in origin, but its efficiency derives from how it operates at the domestic level of EU member states, in that much of EU law is directly effective and also superior to national rules in accordance with the principle of primacy.

The courts of EU member states are obliged to give effect to EU law and to decisions of the CJEU. In doing so, Swedish courts have recently ruled on a number of occasions that awards made in Sweden under intra-EU investment arbitration agreements are in violation of procedural public policy and therefore invalid (Republic of Poland v PL Holdings S.á.r.l., Sweden, Supreme Court, Case No T 1569-19, 14 December 2022; Spain v Novenergia II, Sweden, Svea Court of Appeal, Case No T 4658-18, 13 December 2022; Festorino Invest Limited and others v Republic of Poland, Sweden, Svea Court of Appeal, Case No T 12646-21, 20 December 2023), and further cases are pending. The effect is particularly drastic under Swedish law, which provides for such awards to be annulled, as opposed to just setting them aside or refusing to enforce them.

In such cases, the Swedish courts have been less prone to take on an assertive role or to engage with the potential tension between international law and EU law. In a 2022 annulment decision, the Supreme Court aligned closely with the reasoning of the CJEU in a related preliminary reference, which did not contain any detailed discussion of the wider public international law implications (Republic of Poland v PL Holdings S.á.r.l.). In 2023, the Supreme Court declined to hear a case involving the annulment of an award made in an intra-EU context under a multilateral treaty, despite arguable differences in international law between this situation and its 2022 decision.

There are other examples of the Supreme Court declining to consider issues of international law, although given the opportunity to do so. In 2022, the Supreme Court rejected leave to appeal in a case concerning state succession to treaties (Oleg Vladimirovich Deripaska v Government of Montenegro, Sweden, Supreme Court, Case No T 7853-22). A possible reason why the Supreme Court chose not to review the case is that it considered the jurisprudential value limited: the likelihood of another such case being raised in the Swedish jurisdiction would perhaps be low. However, one could propose that domestic high-ranking courts should seize the opportunity to contribute to the development of an international body of case law on issues that, although uncommon in their jurisdiction, may be of considerable importance. When an event is relatively rare, such as state succession, there will usually be less jurisprudence to help in addressing the event, when it does occur.

The approach to intra-EU awards is also an area where there is presently insufficient guidance from local courts. While the courts tend to invalidate intra-EU awards, tribunals have stubbornly continued to assert jurisdiction over intra-EU arbitrations, and so it does not appear that this issue will be going away in the near future.

The Swedish approach to annulling intra-EU awards has furthermore led to some odd results. In a 2023 decision, the Svea Court of Appeal’s annulment of an intra-EU award made in Sweden entailed that the respondent state lost its title to recover its legal costs in the underlying arbitration, despite prevailing on the merits of the claim (Festorino Invest Limited and others v Republic of Poland).

One could ask whether the Supreme Court ought to be more involved in contributing to the construction and application of international and EU law concepts as they are received in the Swedish legal order, and in taking an active role in explaining the law, including its acceptance or rejection of distinctions proposed by parties.

At a recent consultation with selected Swedish bar members, judges, in-house counsel and other members of the legal community handling commercial disputes, the Supreme Court sought input on the development of the court’s jurisprudence, including whether the Court of Appeal and the Supreme Court are sufficiently generous in granting leave to appeal. While the justices appeared to be of the view that the Supreme Court would accept for review most, if not all, arbitration-related cases, statistics suggest otherwise. Data shows that in the last three years (2021–2023), six judgments rendered by the Courts of Appeal were appealed to the Supreme Court, which refused to grant leave to appeal four of them. It could be argued that it would benefit the development of Swedish arbitration law, and the application of international and EU law concepts, if the Supreme Court would be more generous in accepting more such cases for review.