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Svea Court of Appeal refuses to set aside SCC arbitral award
Practical Law Legal Update 5-501-3995 (Approx. 3 pages)
Svea Court of Appeal refuses to set aside SCC arbitral award
| Published on 04 Feb 2010 • International, Sweden |
Sverker Bonde (Advokat and Senior Associate), Delphi
On 18 December 2009, the Svea Court of Appeal in Stockholm refused to set aside a 2007 SCC arbitral award in relation to a dispute between US Global Nuclear Services and Supply (GNSS) and the Russian company AO Techsnabexport (Tenex).
The original dispute, which was arbitrated under the Stockholm Chamber of Commerce (SCC) rules, concerned a contract for the purchase and resale of uranium from nuclear weapons from the former Soviet Union. GNSS had purchased such uranium from Tenex for resale. Tenex is responsible for all of Russia’s exports of uranium products and uranium services and is wholly-owned by the Russian state. GNSS was formed as a joint venture between Tenex and a Swiss company, to support Tenex with marketing and distribution. The ownership of GNSS has since changed and it is now privately held.
The SCC arbitral tribunal found that the contract was inequitable and unfair and that GNSS had been aware of this at the time it entered into the contract. Therefore, the tribunal held that the contract was invalid and could not be relied upon by GNSS.
GNSS argued that the award should be set aside on the basis that:
- The arbitral tribunal addressed and decided a criminal law matter; and
- There were seven separate counts of procedural irregularities.
As background to the criminal law issue, the Swedish Arbitration Act provides, in short, that only disputes which may be settled by the parties are arbitrable: thus, an arbitral tribunal may not render an award where they make a criminal law assessment. When determining this issue, the Svea Court of Appeal held that the assessment made by the arbitral tribunal related to the circumstances in which a contract may be invalidated pursuant to the Contracts Act, and not to criminal law.
Section 33 of the Contracts Act provides that a contract may be invalidated if the circumstances when it came into being are such that it would be inequitable if a party, having knowledge of the circumstances, were allowed to rely on the legal act (in this case the contract). In the present case, a previous contract had been replaced by a revised version. The tribunal found that the only reason that Tenex accepted the revised contract was that it was under the impression that GNSS was wholly owned (indirectly) by the Russian State, which was not the case.
The alleged procedural irregularities included claims that the tribunal had:
- Ruled on the same issues in a partial award and in the final award.
- Accepted evidence which should have been dismissed (certain written evidence and witness statements).
- Based the award on circumstances which were not invoked by Tenex in support of their claim for invalidity.
- Not considered circumstances and evidence before it.
- Deprived GNSS of the possibility to present its case and have a fair trial.
- Improperly taken third party interests into account.
- Committed significant procedural errors through deficient case management.
After a detailed review of the allegations made, the Svea Court of Appeal concluded that the arbitral tribunal had not exceeded its mandate and had not committed any procedural errors. Further, since GNSS had not, during the arbitral proceedings, protested in enough detail with regard to some of the alleged irregularities, they were, in any event, time-barred from invoking them in support of their claim. The Svea Court of Appeal did not grant leave to appeal the award.