Is a Swedish Arbitral Award Ever Final After Achmea?
A recent judgment from the Swedish Supreme Court interprets the principle judgments from the Court of Justice of the EU (CJEU) holding arbitration in investment arbitration as incompatible with EU law as conservatively as possible by allowing for invalidation only for “EU internal” relations. Hence, the arbitral award is upheld in relation to a Swiss investor, but invalidated in relation to EU investors. Still, the peculiar Swedish invalidation action that is not limited in time and that exists as an alternative to a traditional time-limited actions of having an arbitral award set aside, raises the question whether a Swedish arbitral award ever is final. As much speaks for that time-limited challenging possibilities are sufficient, the Swedish lack of time-limitation stands out and declines the international value of a Swedish arbitral award compared to other arbitral seats.
Background
Five investors initiated arbitration proceedings against the Republic of Poland under the Energy Charter Treaty (ECT). Whereas four of the investors were domiciled in the EU, the fifth investor was a Swiss citizen domiciled in Switzerland. The investors claimed that actions taken by the Polish state had made their investments in Poland useless. The arbitral tribunal dismissed the investors’ claims and held them liable to pay all the costs related to the arbitration procedure.
As the arbitral tribunal had had its seat in Sweden, the investors challenged the arbitral award in the Svea Court of Appeal, claiming that it should be invalidated according to Section 33 of the Swedish Arbitration Act (officially: lag [1999:116] om skiljeförfarande) as the arbitration clause was incompatible with EU law and hence also incompatible with Swedish public policy (ordre public).
Historically, the Swedish public policy exception has been conservatively used. However, since the EU court of justice held in its landmark judgment Achmea, C-284/16, EU:C:2018:158 that has changed. As follows from the Achmea ruling, arbitration clauses in bilateral investment treaties are incompatible with EU law. This has challenged the Swedish traditional approach to the public policy exception. Not only has the CJEU confirmed that the legal principle also extends to ECT arbitration (Komstroy, C-741/19, EU:C:2021:655), it has also, on the request of the Swedish Supreme Court, held that the legal principle stands also in a situation when an investor has initiated ad hoc arbitration against a state (PL Holdings, C-109/20, EU:C:2021:875). Applying the legal principles of the CJEU, the Swedish Supreme Court held in its final judgment (judgment in case T 1569-19 of December 14, [in Sweden reported as “the Investment Agreement”, NJA 2022 p. 965]) that an “EU internal” investment agreement is incompatible with EU primary law and that it therefore must be considered to be ordre public in Sweden.
With references to the judgments above, Svea Court of Appeal found in its judgment of December 20, 2023 that the arbitral award was to be invalidated in its entirety. That judgment was appealed to the Swedish Supreme Court that made another assessment of the invalidation issue.
The Supreme Court’s Judgment
In its judgment of 26 May 26, 2025 in case T-555-24 (titled “Blue Gas Holding”, not yet given a Swedish NJA-reference) the Supreme Court emphasized that the Swedish Arbitration Act allows for partial invalidation of an arbitral award and that a strong rationale for arbitration is that awards become final and binding. Therefore, the Supreme Court concluded that invalidation must not be used more than what is necessary. In the delicate assessment of what parts of an award that are separable from each other, the Supreme Court held that it is decisive whether a remaining standing part of the award would constitute res judicata for a new trial of the other parts of the award. In such a case, the parts are not separable.
In this case, the Supreme Court stressed that the invalidation ground based on the Achmea principle applied solely to “EU internal” investment agreements. Since the Swiss investor was to be considered a third country investor under the ECT, the legal relationship between Poland and the Swiss investor did not classify as “EU internal”. The Achmea based ground for invalidation of the arbitral award did not extend to him. Hence, that part of the award could also be treated separately from the remainder of the dispute.
In the case at hand, the Supreme Court ruled that the validation ground based on the Achmea principle only concerned “EU internal” investment agreement. As the legal relationship between Poland and the Swiss investor was not such an “EU internal” relation, it could be treated separately from the rest of the dispute. As the Swiss investor was to be considered a third country investor, the ground for invalidation of the arbitral award did not extend to him. Therefore, the Supreme Court concluded that the arbitral award should not be invalidated regarding the relation between the Swiss investor and Poland. Additionally, the Swiss investor was held liable to pay for the arbitral proceedings as well as for the court procedure.
Comment
Even if it is reasonable and clarifying that the Swedish Supreme Court upholds the finality idea of arbitral awards as much as possible, the judgment raises issues of the Swedish Arbitration Act’s peculiar separation of invalidation issues and the possibility to setting awards aside. The Swedish Arbitration Act stands out internationally by having two separate legal possibilities for challenging arbitral awards. An arbitral award can either be set aside under Section 34 on e.g. the grounds that the arbitrators have exceeded their mandate or if there has been an irregularity that has influenced the outcome. Such an action must be brought within two months from the date the award was rendered. Beside the time-limited possibility of setting an arbitral award aside, an award may also be invalidated under Section 33 if e.g. the matter was unarbitrable or if the award is ordre public. Quite notably, a Swedish invalidation action is not time-limited. The idea behind is that invalidation is reserved for grave breaches, e.g. that an arbitral award is incompatible with Swedish public policy (ordre public).
That invalidation actions now has been made accessible for new types of arbitral awards, one can question whether a Swedish arbitral award is less firm (i.e. not fully final) compared to an award rendered under an arbitral seat that does not offer time-unlimited actions against arbitral awards. The issue boils down to whether the Achmea principle requires that actions against wrongful arbitral awards are unlimited in time or whether it is sufficient to time limit such challenges. This issue is left open in the Achmea judgment. However, in the predecessor landmark case EcoSwiss, C-126/97, EU:C:1999:269, the CJEU not only established the principle that national law must not undermine EU law. It actually did examine a national procedural law time-limit for challenging an arbitral award. The Court held that “[s]uch a period, which does not seem excessively short compared with those prescribed in the legal systems of the other Member States, does not render excessively difficult or virtually impossible the exercise of rights conferred by Community law”. Bearing that in mind, much speaks for that challenge actions may be time-limited. A time-limitation of the Swedish invalidation action seems necessary to mitigate the effects of the Achmea ruling for Swedish arbitration to be an attractive alternative in the highly competitive legal market for international commercial arbitration. On the other side, the invalidation possibility under Swedish law can also be viewed as putting pressure on the arbitrators to render effective and enforceable awards.