On 30 April 2019, the Swedish Supreme Court rendered its ruling in the CicloMulsion case which has gained some attention in the Swedish arbitration market following the Court of Appeal’s decision to set an arbitral award aside based on a procedural error made by the tribunal. The Supreme Court’s ruling primarily concerned under which circumstances an error by the tribunal may be deemed to have ‘likely influenced the outcome of the case’ as required for a challenge under the Swedish Arbitration Act.
Under the Swedish Arbitration Act an arbitral award shall be wholly or partially set aside upon the request of a party if, without fault of the party, an irregularity has occurred in the course of the proceedings (a procedural error) which likely influenced the outcome of the case.
The dispute concerned a license agreement and was resolved by arbitration under the Rules of the Arbitration Institute of the Stockholm Chamber of Commerce. During the arbitral proceedings the tribunal had issued a procedural order containing the tribunal’s standpoint on the interpretation of a clause in the license agreement. The tribunal also stated in its procedural order that it would not deviate from this standpoint without informing the parties thereof and allowing them to elaborate on the issue. The Supreme Court held that the tribunal in its arbitral award had deviated from its standpoint in the procedural order without informing the parties of its intention to do so, entailing that there had been a procedural error which the challenging party had not caused, and that the award should consequently be set aside provided that the error had ‘likely influenced the outcome of the case’ (the “Influence Requirement”).
The Supreme Court made the following statements regarding the Influence Requirement. As a result of the Influence Requirement, the scope of application of the provision on procedural errors has been limited to manifest errors. It is not sufficient that there is a material possibility of the error having an impact on the outcome of the case; there must be a concrete link between the error and the outcome. The relevant test would typically consist of a comparison between the erroneous procedure and a hypothetically correct procedure, where the Influence Requirement is fulfilled if the correct procedure would likely have resulted in a different outcome. In certain situations it may, however, be presumed that the error has influenced the outcome. Such presumption may be applied in certain cases where it is difficult to prove that the error has influenced the outcome although there are serious doubts as to whether the procedure has been acceptable, e.g. where a party has not been granted due opportunity to argue its case, but the threshold for deviating from the main rule and applying a presumption is high.
Applying the above principles on the CicloMulsion case, the Supreme Court held that the challenging party had been deprived of its opportunity to argue its case. It was also stressed that the challenging party had been entitled to assume that the tribunal’s standpoint as stated in the procedural order would not be reconsidered in the arbitral award. As the error resulted in a breach of fundamental principles of legal certainty, the Supreme Court concluded that there was reason to presume that the error had influenced the outcome, entailing that the award should be set aside.