May procedural statements made by arbitrators or parties be ineffective due to lack of clarity?
Av professor emeritus LARS HEUMAN
Sometimes it is required that contract clauses or certain types of statements made by a party are expressed in a clear way in order to be effective. This requirement may be based on law or on precedents or some other source of law. The requirement may be posed against both parties or one of the parties. The requirement often places a burden on one of the parties. It affects the assessment of issues of interpretation in the field of civil law, procedural law and arbitration. In other cases, a requirement of clarity is directed against arbitrators or arbitral institutes under the Swedish Arbitration Act or institutional rules. If the arbitrators or institutes disregard the requirement, then it is possible that the award may be set aside.
An arbitral award or a procedural order may sometimes be ambiguous, as may statements made by the chair during a hearing. Such ambiguity may take different forms, and the wording may be more or less confusing.1 A party’s claim for relief or the basis in support of it may also be expressed in an unclear way. Further, an arbitration clause or a procedural agreement may occasionally be vaguely worded. In all those cases the lack of clarity causes problems of interpretation.
Placing a burden on one of the parties can solve problems of uncertainty. Thus, when uncertainty refers to facts, applying a principle of burden of proof may solve the problem. If a party cannot discharge its burden of proof for certain facts, the award must not be based on those facts. Problems of interpretation can be solved in a similar way by placing a burden on one of the parties. If a legislative provision or a precedent requires that a certain type of view of a contracting party can only be accepted if it has been made expressly, this requirement creates a presumption in the other party’s favor (tolkningsföreträde) in cases where the wording causes problems of interpretation. Sometimes the burden to clarify or to prove are mentioned as two alternatives, for instance where it is asserted that a contract between two parties creates a right for a third party, if it is proved or if it is made clear in the contract.2
1 Westberg, Domstols officialprövning, Juristförlaget i Lund 1988, p. 149. 2 NJA 2005 s. 142, 164 and 165.
If a party has expressed a view in an obscure way, the arbitrators can reject its interpretation. A reason for this is that the party ought to take the consequences of its failure to express its view in a more comprehensible way. If the arbitrators have not clarified the issue, they may either disregard the statement or accept an interpretation presented by the other party. A party’s alleged purpose with a sentence included in an arbitration clause may also be rejected if the wording is ambiguous or unclear. When a procedural order is drafted in a confusing way, none of the parties can be blamed for this. The abstruseness is as a rule caused by the arbitrators. Therefore, there is no reason to place a burden on one of the parties and request that a party has to convince the arbitrators that its interpretation is correct. However, other reasons may justify a presumption for accepting one of the parties’ interpretations. If courts or arbitrators are inclined in some special cases to establish a clarity requirement, it is of great importance that reasons for this assessment are presented in the judgment or the award.
It seems that the two Swedish words clear and express are used as synonyms in the governmental bill to the Swedish Arbitration Act (SAA). Those words may however have different meanings. An express view has to be put into words in a contract. If there is no such clear support for an interpretation in the written contract, this view may nevertheless be implicitly clear taking into consideration other interpretation factors than the wording of the contract. Sometimes it is provided that a procedural declaration has to be specific, firm or determined. Those words express requirements that slightly deviate from the requirement of clarity. Under the SCC Rules and the Swedish Code of Procedure, the statement of claim shall include the specific relief sought.3 It seems that the Swedish Supreme Court stretched this wording when it accepted a request that a contractor should be ordered to remedy existing defects consisting of moisture penetration in a garage, lacking an indication of the remedial action and the precise location of the defects. The requirement of specific relief perhaps does not mean that the claim must be specified in all respects. It may suffice that it is so in some important respects. The amount claimed has to be specified.
When dealing with matters of interpretation, the wording will be of great importance. The degree of uncertainty often varies. A statement may be slightly unclear, obscure, confusing or contradictory. Further, the effects of the different interpretations can be more or less burdensome for a party. Thus, an interpretation of a clause sometimes means that a party is deprived of a fundamental right, as appointing
3 SCC Rules Article 24 (1) (i) and the Swedish Code of Procedure, chapter 42, paragraph 2. and Heuman, JT 2006–07 s. 442 and 443.
an arbitrator or applying for nullification of the award. Tribunals and courts are probably disinclined to accept such interpretations. The opposite is true if an alternative construction of the wording of an arbitration clause or a procedural order would place the parties on equal footing. The principle of equal treatment strongly speaks in favor of such an interpretation.
A requirement of clarity in support of an interpretation is not a part of the ordinary way of interpreting a contract or a declaration made by a party. The Supreme Court has stated that decisive for the interpretation is the wording of the contract, its legal background, the general object and the context.4 The Supreme Court has used a similar, but more extensive, formula for interpretation of insurance terms. A court shall take into account the wording, the purpose of the terms, the character of the insurance and the customers, drafting tradition, adherence to wording in legislation, case law and so on. The Supreme Court added that one also has to assess if an interpretation is sensible and reasonable. In cases where a result cannot be achieved after such an assessment, the Supreme Court held that general principles of interpretation might be applied, as the principle contra stipulatorem.5 This means that several factors have to be considered in the interpretation and not just one, such as the wording of the contract. The principle of contra stipulatorem shall be used only as a last resort if the other factors would not form a sufficient basis for solving the interpretation problem. If a clause is drafted in a clear way, this factor is not alone decisive under general principles of interpretation.6 When a requirement of clarity has been established either through legislation or by the Supreme Court, then the wording will be decisive for the interpretation. This means that a requirement of clarity forms an exception from ordinary principles of interpreting a contract.7 Thus, it is of great importance to determine under what circumstances a requirement of clarity ought to be posed. Is for instance a requirement of clarity justified where a party’s interpretation of a clause would lead to a burdensome effect for the other party? A requirement of clarity may be posed in order to protect just one of the contracting parties, for instance a consumer. Where a businessperson submits an interpretation in such a case the wording of the contract will be decisive, not other interpretation factors. If, however, a consumer presents an interpretation, other arguments than the wordings of the contract may by be of great importance for a court. In a consumer
4 NJA 1991 s. 319 and Ramberg and Ramberg, Allmän avtalsrätt, nionde upplagan, p. 168. 5 NJA 2001 s. 750. 6 Radetzki, Tolkning av försäkringsvillkor, Liber 2014, p. 86. 7 Unnersjö, JT 2014–15 s. 176 and 177.
price dispute, the Swedish Supreme Court held that rather stringent requirements have to be posed on a businessperson in order to induce him and her to contribute to the drafting of a contract that makes the meaning clear to the consumer. The legal consequences for the consumer were reasons for placing a “clarity burden” on the businessperson. Thus, the Court stressed that the contract concerned an isolated case of great importance for the consumer, where the businessperson furnished the contractual document concerning such an important matter for the consumer as the price. In the case at hand, the written contract contained clauses on the delivery of a prefabricated house, but not on the mounting of the house. In this respect, the Supreme Court concluded that the written contract did not give an exhaustive account for the contractual relationship.8 Thus, the clarity requirement raised against a businessperson will not prevent a court from paying regard to consumer arguments that lack support in the contract.
The Supreme Court has explained the meaning of the requirement of clarity in some civil law cases. These cases may be of interest when dealing with questions in the field of arbitration, although the cases are not of procedural character. Sometimes a person has several debts in relation to a creditor. If the debtor makes a payment, he or she has the right to choose and indicate the debt that is paid. When the debtor exercises this right, a certain amount of clarity is required. Even if a determination does not need to be express, it may be evident from the circumstances at hand. If the amount of the payment coincides with one of the debts, this is a sufficient ground for such a determination.9 In a case concerning interpretation of a penalty clause, a point of departure was that the clause deviated from the non-mandatory provisions of the law. Where such a clause is surprising, far-reaching and clearly advantageous for one of the parties (a contractor), the Supreme Court held that clear support by the words of the contract or by other interpretation factors are required.10 The requirement of clarity can be met in other ways than an express statement in the contract. Here the words clearly and expressly have different meanings. Sometimes a contracting party denies that there is an effective reference to standard terms. In the legal literature, it is stated, in respect to unexpected and burdensome terms, that it is required that the terms are visible and apparent.11 It seems that the Supreme Court previously has held that arbitration clauses were burdensome.12 Later the
8 NJA 1986 s. 596. 9 NJA 1989 s. 177 (the district court held that the reference was clear and the Supreme Court that the arbitration clause was covered by the contract) and NJA 2013 s. 1190 and Unnersjö, JT 2014–15 s. 176 and 177. See also NJA 2016 s. 900, 14. 10 NJA 2012 s. 597, 19. 11 Adlercreutz & Gorton, Avtalsrätt, Sjätte upplagan, Juristförlaget i Lund 2010, p. 76. 12 Adlercreutz & Gorton, Avtalsrätt, p. 78.
Supreme Court has explained that they are not of a surprising or burdensome character for businesses of some size (though probably with an exception for small businesses).13 In some cases, the Supreme Court has held that no requirement of clarity shall be maintained. In one case, a tenant asserted that a contract term stating a duty to shut of dishwashers was not clear concerning the type of dishwasher. The clause ought to be taken as a provision aiming at preventing water damage. The Supreme Court did not accept the tenant’s view, but without giving reasons for the nonacceptance.14 In cases where one of the spouses claims that he or she is a matter-of-fact (not registered) owner of a house where they live, it is required that the spouses as buyers of the house have the joint intention to be co-owners. This requirement can be met by a silent agreement. The reason why the Supreme Court has not established a requirement of clarity is explained by family law considerations to create economical safeguards for the spouse that is not a registered owner.15 When it comes to procedural orders made by a court or arbitrators, a requirement of clarity is often justified. The Swedish Supreme Administrative Court has touched upon this general question in a recent case concerning a writ of subpoena and an unsanctioned injunction. When a public authority has issued an order under a penalty of fine, it is required that the order is clear and that the person who is enjoined to do something understands in all respects what he or she has to do to avoid the fine. An obligation to do something or refrain from doing something has to be defined in a clear way. As a consequence of uncertainty, a person may refrain from carrying out his obligations or do so only partly.16 When the legal effect of a failure to comply with an order is burdensome for the party it seems reasonable to stick to the view of clarity. The Supreme Administrative Court held that the requirement of clarity is essentially the same in cases where the order is unsanctioned. A reason for this view was that a failure to comply with such an order, leads to a new order backed by a sanction. Also in arbitration, a procedural unsanctioned order could be replaced by a sanctioned order, under which a party will lose its right to develop its case or to invoke new grounds or new evidence.17 For efficiency reasons, it is important that there is no need to clarify vaguely worded procedural orders at a later stage. The need for subsequent clarifications may cause unnec-
13 NJA 1980 s. 46. 14 NJA 2011 s. 454, 5 and 19. 15 NJA 2002 s. 142 and NJA 2004 s. 397. 16 The Supreme Administrative Court’s verdict on February 6 2017, case no 426815. 17 See about preclusion Heuman, Arbitration Law of Sweden, Juris publishing 2003, p. 388 and 401.
essary costs. Thus, the meaning of an order ought to be clearly understandable for both parties, and not just for one of them.
2 Unclear dispute resolution clauses
Sometimes a dispute resolution clause does not clarify what mechanism is to be used for solving disputes. Perhaps the wording leaves open whether a clause provides for mediation, arbitration, expert determination or some other method for dispute resolution or settlement.18 A party’s right to a fair trial is of fundamental importance and creates procedural safeguards. Since arbitration is an exception from the principle of access to court proceedings, it has been held that an arbitration agreement has to be proved and that the standard of proof ought to be rather high.19 When it comes to interpreting a clause, it has been stated that the wording has to make clear that it aims at arbitration.20 Thus, one may consider that in cases of doubt a clause would not have effect as an arbitration agreement. A standard arbitration clause will meet the requirement of clarity, just like a contractual reference to standard terms containing an arbitration clause.21 However, this is not the case if a clause provides that a dispute shall be decided by a public authority, for example a rent board, without mentioning arbitration. In a rent case, the Swedish Housing Court held that it is required that the clause in some way indicates that the ordinary dispute resolution system is to be replaced by arbitration. The Housing Court stated that the wording of the clause has to make this clear. The clause in question did not have the effect of an arbitration agreement.22 In international arbitration, a party often prefers to have a dispute decided by arbitration and not by the courts in the country where the other party is domiciled. The reason for this may be that the party believes that there will be no fair trial before the national courts because of undue involvement or corruption. This could be a reason for interpreting a dispute resolution clause in an arbitration-friendly way. However, the respondent may object that it must not be deprived of its right to a fair trial by an unjustifiable interpretation of the dispute resolution clause.
In a case concerning contradictory dispute resolution clauses, providing for litigation and arbitration, the respondent held that the arbitration agreement was inoperative. The respondent referred inter alia to the contra proferentum principle (the other party had drafted the
18 Heuman, p. 31 and 32 and Lindskog, Skiljeförfarande, Andra upplagan, Norstedts juridik 2012, p. 46–56. 19 Lindskog, p. 62. Cfr p. 98. 20 Lindskog, p. 97 and 99. 21 NJA 1981 s. 711. 22 Rättsfall från bostadsdomstolen 1979:9.
clause). The arbitrators stated that the respondent’s reference was unfounded as it was not inherently to the advantage of one party or the other as to how the dispute resolution clauses should be understood, since at the time of contract it was not known who might be the claimant in a future dispute.23 Under Swedish law, the contra proferentum principle is seldom used. However, under this principle it is only required that one party has drafted the agreement, that the agreement is unclear and that the other party asserts a reasonable interpretation. Then this interpretation shall be accepted. In B2B cases it is not required that this interpretation is to the advantage of the party according to the view of the court or the arbitrators. It is suffice that the non-drafting party asserts a reasonable interpretation. The assessment whether a party’s interpretation is advantageous to this party is of no relevance under Swedish law.24 By introducing this requirement, the arbitrators achieved a highly arbitration-friendly result, but also an unwarrantable result.
A dispute resolution clause, which is equivocal, ought to have no effect as an arbitration agreement under the view that it has to be clarified by the wording (or otherwise) that the clause aims at arbitration. If a clause is contradictory and provides for both arbitration and litigation, it is even more evident that the clause would have no effect as an arbitration clause. A dispute resolution clause is consistent if it provides that some types of disputes shall be decided by courts and others by arbitrators. If the borderline between court disputes and arbitral disputes is highly unclear, the dispute resolution clause may be contradictory in some respects. A clause is not contradictory when it affords one party the opportunity to choose between arbitration and litigation. The same is true if both parties may choose between those two alternatives when commencing the dispute resolution. Being first is decisive. However, a clause is contradictory when it indicates, that arbitrators shall decide any dispute, and that courts shall decide all future disputes. In the contra stipulatorem case mentioned above, the respondent applied to the Svea Court of Appeal to have the award set aside, because the choice of forum clause and the arbitration clause were not consistent as they referred to all disputes. For this reason, the party asserted that the arbitration clause could not be applied. This action was not based on the rules in the Swedish Contracts Act. It seems that the party deemed that the arbitration agreement was invalid, inoperative or incapable of being performed under the New York Convention Article II and the SAA section 49. One clause provided that any action or proceeding arising out from or relating to this Agreement must be brought before the courts of Ontario, Canada. Another clause pro-
23 See Svea Court of Appeal’s award in cases no T 10329-10 and T 10401-10, case file no 3 (Final Award p. 98). 24 Adlercreutz & Gorton, Avtalsrätt, p. 111.
vided that any dispute, controversy or claim arising out of or in connection with the Agreement or the breach, termination, or invalidity thereof, should be settled by arbitration in accordance with the Rules of the Arbitration Institute of Stockholm Chamber of Commerce.
The Court of Appeal concluded that there was no contradiction such as to make the clauses invalid or ineffective. The court held that the clauses could be deemed as alternative. The reasons for this conclusion was as follows:
If a claimant in spite a valid arbitration agreement chooses to start court proceedings, then the arbitration agreement forms a bar to litigation only if the respondent makes an objection. Therefore, the arbitration agreement does not exclude dispute resolution by a court in a situation where both parties consider it appropriate. In spite of the existence of an arbitration agreement there may be a need to regulate forum and choice of law questions if a court nevertheless shall try a dispute.25
It is true that a respondent under the principle of party autonomy may make an invalid arbitration clause effective by refraining from raising an objection to the court’s jurisdiction. The same is true if both parties accept an invalid arbitration agreement, for instance because they deem it to be advantageous. In the case at hand, the respondent did in no way accept the arbitration agreement. Instead, it made an objection to the arbitrators’ jurisdiction and held that the arbitration clause was invalid or inoperative. When a party has denied the effectiveness of an arbitration clause, which forms part of a contradictory dispute resolution clause, then the court must not base its assessment on the view that the arbitration clause was accepted by the respondent in the arbitration.
So what made the court so strongly inclined to declare the arbitration clause valid in spite of the existence of the contradictory wording of the dispute resolution clauses? What made the court disposed to deprive a party of the fundamental right to litigation despite the clause making no clear exception? Why is the requirement of clarity totally disregarded? It is hard to find any other explanation than the strivings to make awards final and binding. This means that a requirement of clarity may be maintained only as long as it does not conflict with the principle of finality. If the procedural safeguards that accompany the requirement of clarity may be extinguished as soon as the principle of finality so indicates, then the procedural safeguards will be eroded or excluded. It is regrettable that the Court of Appeal did not realize that it ought to have granted leave to appeal, enabling the Supreme Court to decide the case. No firm general conclusions can be drawn from the judgment of the Court of Appeal.
25 Svea Court of Appeal’s award on May 10 2012 in cases no T 10329-10 and T 10401-10.
3 Unclear agreements excluding or limiting a party’s right to apply for setting aside an award
A party may waive, wholly or partly, its right to have an award set aside. A party can do so either during arbitration or before the arbitral proceedings start. The SAA section 34, paragraph 2 makes it evident that a party during arbitration may waive its right to invoke a certain ground for setting aside an award. It can be done expressly or implicitly. Thus, under this section a party may implicitly waive its right by participating in the proceedings without objection or in any other manner, which means that the party may be deemed to have made a waiver.
Before arbitration proceedings have started, foreign parties are not entitled to implicitly exclude or limit the application of grounds for setting aside an award. It can only be done “through an express written agreement” (SAA Section 51). Considering the risk that a party may sustain losses of its legal rights, the government held that a waiver has to be “clear” and “express”.26 According to the wording of section 51 it is only required that the written waiver is an express agreement, without touching upon the clarity. The government added that it is important that a party is not deprived of its right to recourse just by a reference to institutional rules, which may contain an exclusion clause, without the party’s knowledge.27 The reason why a foreign party beforehand may only waive its right explicitly, seems to be that an exclusion agreement is aiming at abstract unknown procedural errors of varying types leading to more or less serious effects. The lack of foreseeability justifies the formal requirement of clarity, which forces the parties to carefully consider whether it is wise or venturesome to exclude the grounds for setting aside a future award.
In a Supreme Court case concerning the former Swedish Arbitration Act, the Court solved the question of uncertainty by applying a principle of burden of proof.28 The Court placed the burden upon the party who asserted that there was an effective exclusion agreement included in the ICC Rules. Under the ICC Rule Article 29 the parties undertook — to the extent it was legally possible — to waive their right to appeal the award. This clause may be interpreted as aiming only at an action for having an award invalidated due to substantive matters but not at exclusion agreements. The Supreme Court held that the respondent had not proved that the parties by the reference to the ICC Rules entered into an exclusion agreement. However, it seems that the uncertainty did not refer to the existence of facts, but rather in what way the ICC Article ought to be construed. This view would be clarified by explaining that it was not evident that the word-
26 Prop. 1998/99:35 s. 158. 27 Prop. 1998/99:35 s. 158 and 159 and NJA 1989 s. 143. 28 NJA 1989 s. 143.
ing of the clause clearly expressed an exclusion agreement. Section 51 of the SAA is based on this view.
Sometimes arbitrators terminate the proceedings by declaring that they have no jurisdiction (negative jurisdictional award). Under the SAA section 36, an appeal court may amend such an award.29 An application for amendment has to be filed within a period of three month from the date when the party received the award. If no such application is made, the jurisdictional question is decided in a final and binding way. This means that a court has jurisdiction to decide the dispute. If the arbitrators reject the claimant’s case due to lack of jurisdiction, the claimant is forced to start court proceedings in order to have the dispute resolved by arbitrators. Sometimes the claimant wants to avoid litigation in the country where the respondent is domiciled, because it has no confidence in the courts of this country.30 Therefore, the claimant often considers it to be of great importance to exercise its right to convince an appeal court to reverse a negative jurisdictional award.
The parties may take different views on whether an ordinary exclusion agreement covers a negative jurisdictional award. It is evident from the wording of the SAA section 51 that it refers to exclusion of a party’s right to have an award set aside under the SAA section 34. This section does not mention proceedings under section 36 for having a negative jurisdictional award reversed. However, one may pose the question whether section 51 can be applied by analogy in two respects, namely as to the restriction of party autonomy and the requirement of clarity. The Supreme Court has dealt with an exclusion agreement where the parties “excluded any right of application or appeal to any court and in particular in connection with any question of jurisdiction or question of law arising in the arbitration or out of the award.” (Italics added here.) It shall be stressed that Swedish parties are not allowed to exclude their right to challenge an award.
In NJA 2015 s. 991 the Supreme Court held that section 51 means that party autonomy is restricted, but that there is a difference between the situations regulated in sections 34 and 36. If application of section 36 is excluded by an agreement, then the Supreme Court underlined that the consequence is that a court is competent to decide the dispute. The Supreme Court held that the procedural safeguards are of great importance as a precondition for the legislation, which recognizes arbitration agreements and arbitral awards. The Court added that such safeguards have no relevance in cases where a court
29 In the SAA section 36, paragraph 1, it is provided that an award should contain clear instructions as to what must be done by a party who wishes to challenge the award. The bill lacks an explanation why the instructions have to be clear. Prop. 1998/99:35 s. 238. A party must not be informed of its right to file an application that the award should be invalidated or set aside by an appeal court under the SAA section 34. 30 NJA 2015 s. 991 the appeal court s. 998.
shall interpret section 36 in the SAA. The Court stated that a negative jurisdictional award would only have the effect that a court, not arbitrators, shall decide the dispute. The Supreme Court concluded that the restriction of party autonomy, when it comes to setting aside an award under section 34, had no bearing on an exclusion agreement referring to section 36.31 This means that that an exclusion agreement in respect of a negative jurisdictional award is effective both in international and domestic arbitration. However, it remains to be decided whether such a clause has to be clear.
The appeal court opined that an exclusion agreement on negative jurisdictional awards has to be express and clear without giving any reasons for its view. The Supreme Court, however, held that there was no cause to maintain a requirement of special clarity in order for an exclusion agreement on negative jurisdictional award to be effective. The reason for this was that such an award has no other consequences than the claimant having to start court proceedings. According to the Supreme Court, a clause that does not explicitly exclude appeal for amendment may be effective if it does so implicitly under ordinary principles of contract interpretation.32 In the case at hand the Court held that it was natural to conceive the wording of the clause as referring only to awards deciding the substantive issues. The Court opined that the wording allowed that the exclusion clause also covered procedural decisions. Then, the general aim of dispute resolution clauses was deemed to be a factor of great importance.33 The Court held that the clause expressed an evident intention that arbitrators should decide disputes, not courts. It was held to be inconsistent with this aim to interpret the exclusion clause in such a way that a negative jurisdictional award had been exempted from appeal under section 36. The Court added that appeal in such cases would promote the aim with the dispute resolution clause that arbitrators should decide disputes. These reasons were decisive for the interpretation of the exclusion clause. The Court concluded that the clause should be interpreted in such a way that the parties had not excluded appeal under section 36.34 The reasons for the judgment mean that a strongly arbitrationfriendly interpretation creates a presumption that different types of exclusion agreements do not encompass the right of appeal of negative jurisdictional awards. In the case at hand, it is difficult to share the view of the Supreme Court that the wording of the clause was equivocal. The clause excluded “appeal to any court and in particular in connection with questions on jurisdiction”. It is difficult to interpret this clause as allowing appeal of awards on jurisdiction.35 Thus,
31 NJA 2015 s. 991, 13–19. 32 NJA 2015 s. 991, 20. Cfr. Samuelsson, JT 2016–17 s. 485 and 490–493. 33 NJA 2015 s. 991, 21. 34 NJA 2015 s. 991, 22 and 23. 35 NJA 2015 s. 991, Svea Court of Appeal s. 999 and 1000.
the judgment places a heavy “drafting” burden on a party who wants to exclude appeal on negative jurisdiction awards. Using the cited words on jurisdiction will not suffice.
If an exclusion clause does not clearly refer to proceedings for having the award set aside, it may do so in a sufficiently clear manner as to the right to have a negative jurisdictional award reversed under section 36. Then, a party is entitled to have a jurisdictional award set aside under section 34. As the award cannot be challenged under section 36, a party is expressly allowed under section 34 to challenge the award under this section. 36 In section 34 p. 1 it is provided that an award shall be set aside if the dispute is not covered by a valid arbitration agreement. This provision is not applicable as the challenge is based on “opposite view”, namely that the arbitrators erroneously have concluded that there is no covering arbitration agreement. Section 34 p. 6 on procedural errors is applicable.
4 Request for arbitration
Under the SAA section 19, a request for arbitration must be in writing and include inter alia an “express and unconditional request for arbitration”. Further, the request has to contain a statement of the issue, which is to be resolved by the arbitrators. It is not provided that the issue in dispute has to be described expressly and clearly. When this issue is depicted in concreto, the request will be effective. However, if the issue to be resolved is described in abstracto as a breach of the contract, then the request will not be effective as long as it is not specified. If an account for the issue in dispute is very short and abstract, it can nevertheless be effective where it is evident to the parties that the request refers to an earlier exchange of e-mails where the issue is specified. This is true even if the e-mails are not attached to the request.37 The lack of a requirement that the issue in dispute needs to be described in a clear way does not mean that the fundamental right of the respondent to present its case may be violated. It is so because the claimant later has to indicate its “claim in respect of the issues stated in the request for arbitration as well as the circumstances invoked by the party in support thereof.” This does not mean that a request must not be specified at all. The issue in dispute has to be indicated in such a manner that there are prerequisites for the respondent to appoint an arbitrator with the necessary competence.
36 NJA 2015 s. 991, 17. 37 After the government mentioned NJA 1955 s. 224 it stated that the existing rules were well adapted for its purpose. It seems that the view expressed in the Supreme Court case was accepted, at least not rejected. Prop. 1998/99:35 s. 101.
5 Agreements transferring a district court’s competence to an arbitral institution
Where a party has challenged an arbitrator, the tribunal shall decide whether the arbitrator shall be discharged. If the challenge is successful, the decision of the tribunal shall be subject to no appeal. If the challenge has been rejected, the dissatisfied party may file an application with the district court that the arbitrator shall be removed (SAA section 10). The decision of the district court is final and binding.38 Under the SAA section 11, the parties may agree that an arbitration institute shall conclusively determine a challenge. This means that the competence of the tribunal and a district court may be transferred to an arbitration institute. The government held that the legal safeguards then could be reduced. Because of the risks for a party, the government deemed that a waiver had to be clear. However, it was not required that the waiver was in writing. Institutional rules like the SCC Rules often contain a provision that empowers the institute to decide a challenge in a final way. The governmental bill indicates that a reference in the arbitration agreement to institutional rules would meet the requirement of clarity.39 As stated above in section 3, an exclusion agreement cannot be made effective just by such a reference, probably because the legal effects of such a waiver are more far reaching than in challenge cases.
6 The respondent’s right to appoint an arbitrator within a specified time limit
Some of the submissions in arbitration are of fundamental importance. Hence, it is justified to require that a party can prove that the other party has received such pleadings, which for instance make it clear that the counter party has a right to appoint an arbitrator and to present its case. The requirement of clarity shall be developed in relation to the request for arbitration and the respondent’s right to appoint an arbitrator.
It is a fundamental requirement that the respondent has been informed about the arbitration proceedings. The New York Convention article V 1 (b) provides that an award shall not be enforced, where the respondent was not given proper notice of the arbitration proceedings. The Supreme Court has stated that high requirements have to be maintained, when it comes to the request for arbitration. A starting point for the Court was the principle of rule of law. The Court held that it is not acceptable, that an award is recognized or enforced against a party, who has not been informed about the arbitration or could not have been aware of the ongoing arbitration. Therefore, the Supreme Court held that, in principle, it is required that the request for arbitration has been received by the respondent. En-
38 Prop. 1989/99:35 s. 88. 39 Prop.1998/99:35 s. 89 and 90.
forcement shall be refused, if it cannot be gathered from the award or otherwise that a party has been informed about the request.40 This part of the precedent demonstrates that the claimant has to make it clear that the respondent has received the request for arbitration. The claimant can do so by proving that the respondent was duly informed about the arbitration proceedings. The standard of proof is rather high.41 This is probably a mandatory principle, which cannot be excluded or impaired by an agreement or by institutional rules. 42 Furthermore, it is a fundamental right of a party to appoint an arbitrator. Thus, it is important that both parties should be afforded an opportunity to appoint an arbitrator. The French Cassation Court considered that public policy had been violated in a case were two respondents were deprived of the right to appoint an arbitrator.43 Taking into account that the right to appoint an arbitrator is of fundamental importance it seems justified to require that the time limit for a party to choose an arbitrator is indicated in a clear way and that the party is informed of the time limit in a clear way.
The SAA section 14 covers the situation where the claimant has notified the opposing party of its choice of arbitrator in the claimant’s request for arbitration. In this event, the opposing party must, within thirty days of the receipt of the notice, notify the first party in writing about his choice of arbitrator. This means that the claimant has to prove that the respondent has received a request for arbitration. The time limit is specified to thirty days and it is evident when the period of time starts to run. Under the SAA section 19, a request for arbitration does not need to contain an order for the respondent to appoint an arbitrator. The duty of the respondent to appoint an arbitrator is based on legislation as well as the length of the time limit. SAA section 14 speaks of a duty, not of a possibility, for the respondent.
Section 14 of the SAA is a non-mandatory provision. Institutional rules often contain a provision that the institute shall decide the time limit. This means that the length may vary and that the time limit may start to run from some other day than the one when the respondent received the request for arbitration. However, in one respect the party autonomy is limited. It is a mandatory requirement that the institute informs the respondent of its right to appoint an arbitrator.44 Thus, if the institute had not informed the respondent of its right to appoint an arbitrator before the institute appointed an arbitrator for the respondent, then the award may be set aside subject to a timely made jurisdictional objection. Where the sections on appointing arbitrators in the SAA are made ineffective by institutional rules, it is necessary to
40 NJA 2010 s. 219. 41 Heuman, JT 2011–12 s. 656–658. 42 Lindskog, p. 733 and footnote 119. 43 Fouchard, Gaillard and Goldman, International Commercial Arbitration, Kluwer 1999, p. 468–670. 44 Lindskog, p. 488 with footnotes 5 and 585.
substitute the law based duty for the respondent to appoint an arbitrator in some way, for instance by an order based on the institutional rules. Under the SCC Rules Article 5, the Secretariat shall set a time period within which the respondent shall submit an answer to SCC. The answer shall include inter alia comments on the number of arbitrators. Thus, both parties shall be given the opportunity to present arguments as to the number of arbitrators.45 After that, the Board of SCC will decide whether the case shall be decided by one or three arbitrators. Article 9 (iii). The answer shall include, “if applicable”, the name of the arbitrator appointed by the respondent. This provision does mean that there is an unconditional duty of the respondent to indicate the name of its arbitrator at this stage of the proceedings. The respondent is obliged to appoint an arbitrator after the Board has decided that the tribunal shall consist of three members and the respondent has been notified of its duty to appoint an arbitrator within the period specified in the order. It is provided in Article 12 that the tribunal shall consist of three arbitrators, unless the Board, taking into account the complexity of the case, the amount in dispute or other circumstances, decides that the dispute is to be decided by a sole arbitrator. If the parties have made no agreement on the procedure for appointing a three-member Tribunal, Article 13 contains a provision in respect of cases where a tribunal has not been appointed “within the period of time set by the Board.” The Board shall stipulate the time limit for the respondent to appoint an arbitrator. It is not provided that it should be proved that the respondent has been informed of its right to appoint an arbitrator within the time limit. Thus, if the respondent is not informed about a decision made by the Board in this regard, the respondent does not know the length of the time limit, the day when it starts to run and that it has been ordered to appoint an arbitrator.
The SCC Rules give rise to the question whether the Board has to make clear that the respondent has been invited to appoint an arbitrator within a specified time limit that starts to run a certain day.
In an investment dispute, the investor state requested that Svea Court of Appeal should set aside an award inter alia because the state had been deprived of its right to appoint an arbitrator. The investor state denied the view that the SCC Rules make it evident that it should have appointed an arbitrator. The investor state assumed that SCC should start to decide the number of arbitrators. The SCC-decision lacked an order for the respondent to appoint an arbitrator in its answer.
The investors considered that the SCC Rules were clear. They deemed that the request for arbitration and the attached SCC Rules
45 Öhrström, Stockholms Handelskammares Skiljedomsinstitut, Norstedts juridik 2009, p. 146.
made it evident that the investor state needed to indicate in its answer who had been appointed as arbitrator. The investors added that they, in the request for arbitration, had demanded that the SCC should appoint an arbitrator for the investor state in case the state would fail to appoint an arbitrator. The investors did not explain if their view was supported by the institutional rules, and thus not based only on a unilateral request.
The Court of Appeal stated that the investor state had been afforded the opportunity to submit an answer. The court held that there was a “possibility” for the investor state to appoint an arbitrator. So far, the court had only mentioned a possibility, but not that the state was ordered to appoint an arbitrator within a specified time limit. Nevertheless, the court went on and used the word “order”. The court held that neither the order nor the reminder indicated expressly that the investor state should appoint an arbitrator. The court then raised the question whether the state had been deprived of its right to appoint an arbitrator. It seems that the following reasons deal with the question whether an implicit order may be effective.
The Court of Appeal mentioned that the investor state had explained that the SCC in earlier cases had ordered the state expressly to appoint an arbitrator and informed the state of the consequences of failure to appoint an arbitrator. The court stated that, according to its view, it was of relevance that the “order” referred to Article 5 in the attached SCC Rules. The court cited article 5 by stating that the respondent shall, if applicable, in its submission indicate the name and address of the arbitrator appointed by the party. In the request for arbitration, the investors had demanded that the tribunal should consist of three members. The court mentioned that it follows from Article 12 of the SCC Rules that the tribunal shall consist of three arbitrators unless the parties agree otherwise or SCC determines that a sole arbitrator shall decide the dispute. The court added that SCC had made no such decision.
The Court of Appeal opined that the order and the attached documents made it sufficiently clear that the tribunal should consist of three members and that the investor state had had an opportunity to appoint an arbitrator.46 In the court’s view, it was not required that SCC had made it clear by an express order that the respondent have to appoint an arbitrator
46 Svea Court of Appeal’s award on December 9 2016, case no T 2675-14 p. 53. In its summary on the following page, the court concluded that the procedure for appointing the arbitrator did not violate public policy. Then the court raised the question whether the award should be set aside because the arbitrator was appointed contrary to the SCC Rules. Without once again dealing with the questions in the above cited part of the judgment the court stated that is was not proved that a procedural error was committed when the arbitration started and when the arbitrator was appointed.
within a specified time limit. The court reduced these requirements in two respects. First, it was sufficient that the respondent had been offered a possibility to appoint an arbitrator and not, as required in the SAA section 14, that it was indicated that the respondent was obliged to do so. A possibility is placed on equal footing with a duty.
Second, the possibility to appoint an arbitrator was made sufficiently clear by the order and the reference to Article 5. This provision only states that the name of the arbitrator appointed by the respondent should be indicated ”if applicable.” Article 2 contains a corresponding provision as to the request for arbitration and the claimant’s choice of an arbitrator. The name of the arbitrator should be indicated “if applicable.”47 In a commentary to the SCC Rules it is stated that the claimant does not need to indicate its arbitrator if the arbitration clause is silent as to the number of arbitrators and the claimant presents arguments in favor of a tribunal consisting of a sole arbitrator. 48 Irrespective of the absence or existence of arguments on the number of arbitrators in the request for arbitration and the answer, none of the parties has an unconditional duty to indicate who is appointed as an arbitrator. The wording “if applicable” means that each party does not have to appoint an arbitrator at this early stage.
The Court of Appeal has transformed an offered possibility to act into a duty to act. The court’s method to interpret SCC’s decision as an unconditional order for the respondent to appoint an arbitrator has no support in the decision or in the SCC Rules. The court’s view is clearly incompatible with the view that the respondent shall be informed in a clear way of its duty to appoint an arbitrator within a specified time limit. In fact, it seems that a striving to make an award final and binding have constituted an essential factor for the outcome, and may also be a striving to prevent obstruction.
7 Concluding remarks
The legal sources provide support for the view that a requirement of clarity is justifiable where important legal effects are connected to procedural orders or the parties’ submissions. Where the arbitral procedure violates an established requirement of clarity, the Court of Appeal has based its judgment in two cases on a strained interpretation, probably in order to make the awards final and binding. This means that the procedural safeguards during the arbitration have been sacrificed for finality. Unlike the Court of Appeal, the Supreme Court has upheld the requirement of clarity in one case by refusing enforcement of an award where it was not evident that the respondent was informed about the arbitration. A requirement of clarity will
47 SCC Rules Article 2 (vi). 48 Öhrström, p. 121.
not serve its purpose if clear and unambiguous words are transformed by linguistic interpretation to an equivocal expression.