Enter to open, tab to navigate, enter to select
Swedish Supreme Court to rule on jurisdiction in the Yukos arbitration
Practical Law UK Legal Update Case Report 7-500-9191 (Approx. 3 pages)
Swedish Supreme Court to rule on jurisdiction in the Yukos arbitration
by Practical Law
| Published on 03 Dec 2009 • Sweden |
Polina Permyakova (Associate), Delphi
On 2 November 2009, the Swedish Supreme Court granted RosInvestCo UK Ltd (RosInvest), a shareholder in Yukos, leave to appeal on certain jurisdictional issues in relation to the pending Yukos arbitration.
Background
In 2005, following the forced sale of the Yukos subsidiary "Yuganskneftegas" by an auction arranged by the Russian Federation, RosInvest, a shareholder in Yukos, requested arbitration against the Russian Federation under the UK-Russian bilateral investment treaty (the BIT). The arbitration had its seat in Stockholm and proceeded under the SCC Rules. In May 2006, the tribunal was constituted and included Prof. Dr. Karl-Heinz Böckstiegel, Sir Franklin Berman KCMG QC and the Rt Hon Lord Steyn. The Russian Federation denied the competence of the tribunal to hear the case but the arbitral tribunal disagreed and confirmed its jurisdiction in a separate decision in October 2007.
The Russian Federation requested that the Stockholm District Court declare that the arbitration agreement in question did not grant the tribunal any authority to rule on whether the Russian Federation had taken expropriatory measures against RosInvest. RosInvest argued that the Russian Federation's request should be dismissed as:
- The Swedish courts do not have jurisdiction under the Brussels Regulation.
- There is no Swedish jurisdictional interest in determining the Russian Federation's request.
- The request for a declaratory judgment was not permitted under the Swedish Procedural Code as the final arbitration award is expected before the final court decision.
RosInvest's arguments were dismissed by both the Stockholm District Court and the Appeal Court.
Decision
RosInvest appealed to the Supreme Court requesting it to decide whether:
- The Brussels Regulation applies to negative declaratory requests relating to the validity or scope of an arbitration agreement.
- The Swedish courts have jurisdiction in respect of declaratory requests relating to the validity or scope of an arbitration agreement when foreign parties, without connection to Sweden, agree to arbitrate in Sweden.
- A negative declaratory request relating to interpretation and application of an international treaty between two foreign states can be tried by the Swedish courts.
- A negative declaratory request meets the requirements under the Swedish Procedural Code considering that an award may be rendered prior to the declaratory issue being resolved by the court.
On 2 November 2009, the Supreme Court granted leave to appeal in respect of the second and fourth issue and ordered a stay of proceedings in respect of the first and third issue.
Comment
This case highlights the issues that may arise in connection with requests to local courts to declare that an arbitral tribunal in a pending arbitration lacks jurisdiction. The Swedish Arbitration Act is based on the principle of kompetenz-kompetenz which allows arbitrators to rule on their own jurisdiction to decide the dispute. However, parties may also submit jurisdictional questions to the local courts and the arbitrators may, in such cases, continue the arbitral proceedings pending the determination by the court.
A number of procedural issues arise when court proceedings take place in parallel to arbitration proceedings, where the award will be rendered prior to the determination by the court on the arbitral tribunal's jurisdiction. There are various views on whether the jurisdictional issue in such a case should be tried in the challenge proceedings against the arbitral award or in the initial court proceedings for a declaratory judgment. The decision of the Supreme Court may bring clarity to some of these issues. We will report on the Supreme Court's decision in due course.