In Moscow City Golf Club OOO (of Russia) v Nordea Bank AB (of Sweden); Svea Court of Appeal case no. T 6798-10, City Golf challenged an arbitral award based on an alleged lack of arbitrability or invalidity of the arbitration agreement and failure of the appointed sole arbitrator to consider legal arguments raised by City Golf.

The arbitration proceedings concerned the application of a loan agreement. City Golf alleged that due to the mandatory nature of the applicable currency control regulations, the dispute was not arbitrable. Therefore, the dispute could not be subject to arbitration in accordance with section 1(1) of the Swedish Arbitration Act (SAA). Further, City Golf argued that the award should be declared invalid in accordance with section 33(1).1 of the SAA or set aside in accordance with section 34(1).1 on the basis that the arbitration agreement was invalid.

City Golf also alleged that the arbitrator failed to consider legal arguments that it made regarding:

On that basis, City Golf argued that the award should be set aside in accordance with section 34(1).6 of the Act.

The court held that the dispute was arbitrable, reasoning that in an international dispute the matter of arbitrability must be determined on a case-by-case basis. Often, there would be reasons to disregard foreign mandatory law when assessing whether a matter could be considered arbitrable. Taking into account certain provisions of the applicable Swedish currency regulations, the court held that the issue of the parties' claims and debts could not be seen as mandatory in the sense that the parties could not enter into an amicable settlement on such issue.

Further, the court held that the arbitration agreement was not invalid.

The court acknowledged that the arbitrator committed an error by not considering certain arguments regarding the invalidity of the arbitration agreement. However, since the court also determined that the arbitration agreement was not invalid, the error had not affected the outcome of the case and the award could therefore not be set aside on this basis.

Finally, the court held that no error was made with regard to the alleged failure to consider City Golf's arguments relating to Nordea's non-compliance with an order to produce certain documents. The court concluded that the award reflected how the matter was dealt with in the proceedings and that the arbitral tribunal was entitled to freely evaluate the evidence and only had an obligation to make references to the legal arguments and facts on which it relied upon.

The judgment has been appealed by City Golf to the Supreme Court. We will continue to report on developments.

In line with consistent practice, the Svea Court of Appeal rejected three challenges based on exceeded mandate where it was alleged that the arbitral tribunal had based its award on legal arguments or facts not raised by the other party and that therefore the award should be set aside in accordance with section 34(1).1 of the Swedish Arbitration Act.

In Perstorp AB (of Sweden) v Silver Lining Finance SA (of Luxembourg); Svea Court of Appeal, case no. T 4050-10, the issue was whether the seller in a Share Purchase Agreement (SPA) had argued in the arbitration proceedings that it had a duty to notify the purchaser during a specific notice period, where the arbitral tribunal made reference to that issue in the award. The court concluded that the legal argument had been sufficiently described by the seller and that the argument, in any case, was not decisive to the outcome of the matter.

In Tiscali International BV (of the Netherlands) v Spray Networks AB (later renamed Yarps Network AB) (of Sweden); Svea Court of Appeal case no. T 2418-07, the seller in an SPA alleged that the arbitral tribunal had exceeded its mandate by basing its decision on a price adjustment clause, which had not been relied upon by the purchaser in the arbitration proceedings. The court rejected the challenge by concluding that the arbitral tribunal had, when referring to the price adjustment clause, referred to facts raised by the parties in their submissions.

See Legal update, Svea Court of Appeal rejects two challenges based on exceeded mandate and upholds both arbitral awards.

In ETF III K/S (of Denmark) v Midroc New Technology AB (of Sweden); Svea Court of Appeal, case no. T 7449-10, the claimant (ETF) alleged that the arbitral tribunal exceeded its mandate by basing its assessment of whether a party was bound by an agreement on the concept of passivity, a legal argument which ETF claimed was not raised in the arbitration proceedings. Also, the tribunal failed to consider another argument that had been raised. Further, in relation to a legal fact raised by one of the parties, ETF alleged that the tribunal committed procedural errors by failing to clarify the circumstances on which it relied and by not including reasons for its decision. Both errors probably influenced the outcome of the arbitration.

The court held that while the tribunal's reasoning in the award may not have been entirely clear, it could not be established that the tribunal based its conclusions on grounds not raised by the parties. The court also rejected the argument that the tribunal failed to take ETF's argument into account and concluded that the tribunal had clarified the circumstances relied upon and that the award did not entirely lack reasoning.

These cases confirm that, for international arbitrations with a seat in Sweden, the arbitral tribunal could be allowed somewhat greater flexibility in the assessment of whether a legal argument or fact has been raised by the parties than would apply in arbitration proceedings between Swedish parties, where influence from the Swedish procedural code and general litigation practice would be present to a larger extent.

In KPMG AB v ProfilGruppen AB; Svea Court of Appeal case no. T 1085-11, the Svea Court of Appeal set aside an arbitral award rendered against KPMG, having found that an arbitrator had a conflict of interest (see Legal update, Svea Court of Appeal sets aside arbitral award against KPMG due to arbitrator's conflict of interest).

The dispute concerned advisory services in connection with a mergers and acquisitions transaction. The arbitrator, appointed by KPMG, was a partner of a law firm which, in October 2010, during the course of the arbitration proceedings, was asked (through a colleague of the arbitrator) to take on an assignment against KPMG. The law firm subsequently accepted the assignment, sending a demand letter to KPMG on 20 December 2010. The arbitral award was rendered on 22 December 2010 and KPMG was registered as counterparty in the firm's client register on 23 December 2010.

The Svea Court of Appeal held that it was clear that the arbitrator was aware of the potential assignment in October 2010, but not that the assignment had actually been taken on before the award was rendered. The court also concluded that if a law firm where an arbitrator is a partner takes on an assignment for or against one of the parties to the arbitration, this is normally seen as a circumstance which, viewed objectively, may give rise to justifiable doubts as to the arbitrator's impartiality. In such cases, the arbitrator shall be discharged or the award set aside. In this case, the assignment taken on against KPMG was of a very substantial nature and with an important economic impact for the firm.

The court also held that, viewed subjectively, the arbitrator, being a senior partner of the law firm, with a key position at the office, ought to have known about the substantial assignment conducted by his colleagues in the same office. According to the court this, together with the fact that KPMG was registered as counterparty the day after the award was rendered, also contributed to raising a justifiable concern over the arbitrator's impartiality.

The Arbitration Institute of the Stockholm Chamber of Commerce (SCC) has commissioned a committee to review the secretarial and administrative services the SCC provides as an appointing authority for arbitration under the UNCITRAL Arbitration Rules. The purpose of the review is to update the SCC procedures and services to reflect international best practice for UNCITRAL arbitrations and promote the SCC's role as an UNCITRAL appointing authority. The SCC provides a wide range of administrative services, including forwarding written communications, scheduling and planning hearings, providing or arranging for hearing rooms, arranging for transcripts of hearings, assisting for the legalisation of documents and providing secretarial or clerical assistance. The SCC also provides a deposit service for UNCITRAL arbitrations. The services offered by the SCC in arbitrations under the UNCITRAL Arbitration Rules are contained in the SCC Procedures and Services under the 2010 UNCITRAL Arbitration Rules (2010) and the SCC Procedures and Services under the 1976 UNCITRAL Arbitration Rules (1999).

It is anticipated that the Committee will submit its final proposal in the first half of 2012. We will continue to report on developments.