The Relevance of the Place of Arbitration in Sweden – Revision of the Titan Decision

Party autonomy is a leading principle in international commercial arbitration. The flexibility and relatively wide discretion of the parties to agree on the applicable law, the place of arbitration and the structure of the proceedings is one of the advantages often cited as positively distinguishing the arbitration procedure from state court litigation. When selecting the seat of the arbitral proceedings, the parties will tend to select a country that is considered “arbitration-friendly” in the sense that it lends enforceability to the parties’ agreement to arbitrate and provides for a foreseeable procedure that meets the parties’ expectations. Parties to arbitral proceedings regularly choose a place that has no connection with either themselves - a “neutral place” - and usually favor jurisdictions that have adopted a liberal approach to arbitration. It is widely accepted that the place of arbitration or seat of the arbitral tribunal can even be fictitious, enabling the arbitral tribunal to actually conduct the proceedings (in particular the hearings) anywhere across the world.

It was therefore received with shock when, in 2005, the Swedish Svea Court of Appeal in the matter of Titan Corporation v Alcatel CIT SA case, dismissed the American Titan Corporation’s application to set aside an ICC award on the basis of a lack of sufficient connection to Sweden. The Svea Court of Appeal had held that there was no Swedish jurisdiction on the challenge as there was no Swedish judicial interest in the case. Even though the parties had explicitly chosen Stockholm as the place of arbitration and the arbitrator had confirmed Stockholm as the place of arbitration in the award, the court based its decision in part on the fact that the hearings had taken place in Paris and in London, and not in Stockholm. In the court’s view, the arbitration could not be considered to have any connection to Sweden as required for the Swedish Arbitration Act to apply.

This flaw was now remedied by the Swedish Supreme Court which, on 12 November 2010, in relation to the pending SCC proceedings of RosInvestCo UK Ltd. v. The Russian Federation, SCC Case No. Arb. V079/2005 (under the UK/Soviet BIT) ruled that, based on the principle of party autonomy, parties in international arbitration are free to choose the lex arbitri and that this choice is normally made by stating the place of arbitration. The court expressly rejected the reasoning of the Titan Corporation v Alcatel CIT SA case, holding that, if the parties have chosen Sweden as the place of arbitration, it is completely irrelevant that hearings were held in another country, that the arbitrators are not Swedish or that the tribunal has carried out its work in another country. In doing so, the Swedish Supreme Court has set the Swedish arbitration world in order again.

In this regard, it should be noted that most institutional arbitration rules as well as a number of arbitration laws – including German and Austrian legislation as well as the UNCITRAL Model Law – even expressly provide that arbitral hearings may be held at any place the tribunal may consider appropriate, irrespective of the place of arbitration as agreed by the parties or determined by the arbitral tribunal. On an overall level, the admissibility of a “fictitious” place of arbitration seems to be international standard and it would indeed have been surprising and unfortunate if this standard had not prevailed in Sweden.