Dispute Resolution News

Arbitral award set aside by the Swedish Supreme Court following an arbitral tribunal’s deviation from its own procedural order

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.