Tvistlösning Nyhet

Swedish Court of Appeal dismisses Poland’s challenge of arbitral awards and applies the principles of the Achmea ruling

Svea Court of Appeal ren­de­red an award on 22 February 2019 re­gar­ding chal­lenge of ar­bi­tral awards between the Republic of Poland and an in­vest­ment com­pa­ny from Luxembourg. The ca­se be­fo­re the Court of Appeal con­cer­ned se­ve­ral is­sues, but of par­ticu­lar in­te­rest was the is­sue whet­her the ar­bitra­tion clau­se of the re­le­vant bi­la­te­ral in­vest­ment tre­a­ty was va­lid in light of the Achmea ru­ling from March 2018. In its re­a­so­ning, Svea Court of Appeal ap­pli­es the prin­ciples set forth in the Achmea ru­ling and emp­ha­si­ses the im­por­tan­ce of ra­i­sing ob­jec­tions at the ini­ti­al stage of the ar­bitra­tion.

Background

On 26 November 2016, an in­vest­ment com­pa­ny re­gis­te­red in Luxembourg (the “Investor”) com­menced ar­bi­tral pro­cee­dings against the Republic of Poland in Sweden un­der the Arbitration Rules of the Arbitration Institute of the Stockholm Chamber of Commerce. The ar­bitra­tion was ba­sed on an ar­bitra­tion clau­se in an in­vest­ment tre­a­ty between Poland and Luxembourg da­ted in 1987 (the “Treaty”).

The dis­pu­te con­cer­ned Poland’s al­le­ged bre­ach of the Treaty by ex­pro­pri­a­tion of the Investor’s sha­res in a Polish bank. The ar­bi­tral tri­bu­nal ren­de­red a par­ti­al award whe­re­by Poland was held li­ab­le and a fi­nal award in which Poland was or­de­red to com­pen­sa­te the Investor in the amount of ap­prox­i­ma­tely SEK 1.5 bil­li­on plus in­te­rest and costs.

Poland chal­leng­ed the awards be­fo­re the Svea Court of Appeal (the “Court”) and sought to ha­ve them decla­red in­va­lid or set asi­de. Poland ba­sed most of its ar­gu­ments on the so-cal­led Achmea ru­ling from the Court of Justice of the European Union (the “ECJ”) from March 2018, (C-284/16, EU:C:2018:158). In that ru­ling, the ECJ established that an ar­bitra­tion clau­se in a bi­la­te­ral in­vest­ment tre­a­ty between EU mem­ber sta­tes is in­com­pa­tib­le with cer­tain key prin­ciples of EU law.

On the ba­sis of the Achmea ru­ling, Poland ar­gu­ed that the dis­pu­te was not ar­bitrab­le sin­ce it was a dis­pu­te between an in­ve­s­tor and a mem­ber sta­te un­der an int­ra-EU bi­la­te­ral in­vest­ment tre­a­ty. Further, Poland ar­gu­ed that the con­tent of the awards, and the man­ner in which the award aro­se, we­re cont­ra­ry to fun­da­men­tal prin­ciples of EU law and hence in bre­ach of Swedish pub­lic po­li­cy. Poland al­so ar­gu­ed that the ar­bitra­tion agre­e­ment was in­va­lid becau­se the ar­bitra­tion clau­se of the Treaty was in­com­pa­tib­le with EU law, en­tailing that the awards should be set asi­de.

The re­a­so­ning of the Svea Court of Appeal

The Court took its star­ting point in the prin­ciples established through the Achmea ca­se. The Court sta­ted that the ECJ has established that EU law preclu­des a pro­vi­sion in an in­ter­na­tio­nal agre­e­ment con­clu­ded between mem­ber sta­tes un­der which an in­ve­s­tor from one of tho­se mem­ber sta­tes may, in the event of a dis­pu­te con­cer­ning in­vest­ments in the ot­her mem­ber sta­te, bring pro­cee­dings against the lat­ter mem­ber sta­te be­fo­re an ar­bi­tral tri­bu­nal who­se ju­ris­dic­tion that mem­ber sta­te has un­der­ta­ken to ac­cept. In the Achmea ru­ling, the ECJ se­pa­ra­ted com­mer­ci­al dis­pu­tes ba­sed on the par­ti­es’ ex­press con­sent to ar­bitra­te from in­ve­s­tor- sta­te ar­bitra­tion and sta­ted that EU law do­es not preclu­de com­mer­ci­al ar­bitra­tion.

After out­li­ning the prin­ciples set forth in the Achmea ru­ling, the Court as­ses­sed Poland’s ar­gu­ment that the dis­pu­te was not ar­bitrab­le on the ba­sis of the prin­ciples from the Achmea ru­ling. The Court held that the dis­pu­te was ar­bitrab­le sin­ce it con­cer­ned mat­ters in re­spect of which the par­ti­es could re­ach a sett­le­ment (Poland’s bre­ach of the Treaty and its li­a­bi­li­ty the­re­for).

As re­gar­ded Poland’s as­ser­tion that the award was cont­ra­ry to Swedish pub­lic po­li­cy be­ing in­com­pa­tib­le with EU law, the Court held that the con­tent of the awards did not in­fringe fun­da­men­tal pro­vi­sions of EU law, un­li­ke the cir­cumstan­ces in the Eco Swiss ru­ling (C-126/97, EU:C:1999:269). The Court con­ti­nu­ed to as­sess whet­her the man­ner in which the award aro­se was cont­ra­ry to pub­lic po­li­cy. The Court held that the Achmea ru­ling, do­es not pre­vent a mem­ber sta­te from en­te­ring in­to a va­lid ar­bitra­tion agre­e­ment direct­ly with an in­ve­s­tor ba­sed on the fre­ely ex­pres­sed wishes of the par­ti­es, i.e. com­mer­ci­al ar­bitra­tion. In this ca­se, Poland par­ti­ci­pa­ted in the ar­bi­tral pro­cee­dings and did not ra­i­se the re­le­vant ob­jec­tion un­til six mont­hs af­ter its sta­te­ment of de­fence. The Court held that, un­li­ke the Mostaza Claro ru­ling (C-168/05, EU:C:2006:675), the­re was no ob­li­ga­tion for the Court to en­su­re ex of­fi­cio that man­da­to­ry EU law is uph­eld for the pro­tec­tion of a wea­ker par­ty. Therefore, the Court con­clu­ded that the way in which the ar­bi­tral award had be­en ren­de­red did not vi­o­la­te pub­lic po­li­cy.

In ad­di­tion, the Court as­ses­sed Poland’s ar­gu­ment that the ar­bitra­tion was not ba­sed on a va­lid ar­bitra­tion agre­e­ment and that the pro­vi­sion of the Swedish Arbitration Act re­gar­ding wa­i­ver (Sw. pre­klu­sion) of chal­lenge should not be ap­pli­ed. The Court held that Poland had wa­i­ved its right to ob­ject on this ground by failing to ra­i­se an ob­jec­tion in its sta­te­ment of de­fence and that, ba­sed on the EU prin­cip­le of pro­ce­du­ral au­to­nomy, the pro­ce­du­ral ru­les con­tai­ned in the Swedish Arbitration Act should ap­p­ly. Consequently, Poland was found to ha­ve wa­i­ved its right to ra­i­se the ar­gu­ment that the­re was no va­lid ar­bitra­tion agre­e­ment.

Finally, Poland ar­gu­ed that the ar­bi­tral tri­bu­nal had ex­cee­ded its po­wers (Sw. upp­dragsö­ver­skri­dan­de) and con­duc­ted se­ve­ral pro­ce­du­ral er­rors (Sw. hand­lägg­nings­fel) du­ring the ar­bitra­tion. The Court re­jec­ted most of the­se ob­jec­tions. However, the Court held that the ar­bi­tral tri­bu­nal had com­mitted one er­ror du­ring the ar­bitra­tion pro­cee­dings which led to the set­ting asi­de of one pa­ragraph in the fi­nal award re­gar­ding post-award in­te­rest of ap­prox­i­ma­tely SEK 200 mil­li­on.

Commentary

This ca­se is in­te­re­s­ting both from a na­tio­nal and an in­ter­na­tio­nal per­specti­ve.

The Court de­ci­ded not to re­quest a pre­li­mi­na­ry ru­ling from the ECJ sin­ce the­re was no such re­quest from the par­ti­es and it was not de­e­med ne­ces­sa­ry for the Court to ru­le on the ca­se. Thus, it would ap­pe­ar that the Court con­si­de­red the pre­ce­dents of the Achmea ca­se to be clear; the Achmea ru­ling shall ar­gu­ably not be gi­ven a wi­de in­ter­pre­ta­tion and do­es not preclu­de com­mer­ci­al ar­bitra­tion ba­sed on the fre­ely ex­pres­sed wishes of the par­ti­es.

Following the Achmea ru­ling, the mar­ket ex­pec­ted a cer­tain incre­a­se in the num­ber of (suc­cess­ful) chal­leng­es of ar­bi­tral awards ren­de­red un­der int­ra-EU bi­la­te­ral in­vest­ment tre­a­ti­es. Although the full and fi­nal ef­fects of the Achmea ru­ling re­main to be seen, this ru­ling from the Svea Court of Appeal ser­ves as a remin­der that each mem­ber sta­te’s na­tio­nal pro­ce­du­ral law plays an im­por­tant ro­le in the chal­lenge of an award.

The Court gran­ted le­a­ve to ap­pe­al to the Swedish Supreme Court and the award has sub­se­quent­ly be­en ap­pe­a­led to the Supreme Court (ca­se no. T 1569-19). It should be no­ted that the Supreme Court may re­quest a pre­li­mi­na­ry ru­ling from the ECJ.

The au­thors are Johannes Ericson and Kajsa Lindvall.