INTRODUCTION

In Sweden, there are mainly two systems for resolving a commercial dispute; litigation or arbitration. To effectively navigate the Swedish legal landscape, it is crucial to understand the intricate aspects of both systems. This article aims to provide foreign parties with an overview of the litigation and arbitration processes in Sweden, covering various aspects such as court system, costs, timeframes, preparatory measures, evidence, interim remedies and enforcement procedures.

1.            LITIGATION

Litigation in Sweden involves resolving disputes through proceedings in the general courts; district courts, courts of appeal and the Supreme Court. The primary law governing civil litigation in Sweden is the Swedish Code of Judicial Procedure, which was adopted by the Swedish government in 1942 and has since then undergone periodic revisions.

The Swedish Code of Judicial Procedure addresses all aspects of civil procedure and describes the roles and responsibilities of the courts, parties and legal practitioners involved in litigation. It provides procedural rules for the initiation of proceedings, the presentation of evidence, the conduct of hearings and the delivery of judgements. Furthermore, it establishes mechanisms for appealing and enforcing court decisions, ensuring the integrity and efficiency of the legal system.

Additionally, case law supplements and interprets statutory provisions. Court decisions, particularly those from the Supreme Court, are central to developing legal principles and and interpreting regulations.

1.1         The General Courts

As mentioned above, the general courts consists of three instances; district courts, the courts of appeal and the Supreme Court. There are 48 district courts in Sweden and they are the first instance where most civil cases commence.

Parties who are not satisfied with a judgement or decision from a district court may appeal to one of the six courts of appeal. An appeal must normally be made within three weeks of the district court´s decision. In many cases, a leave to appeal is required for the court of appeal to try the case.

The Supreme Court is the final instance for matters brought before the general courts in Sweden. The Supreme Court's most important task is to provide precedents that can serve as guidance for how similar cases should be assessed in the future by courts and legal practitioners in general. This is usually referred to as the Supreme Court's precedent function.

1.2         Limitation of Actions

In Sweden, the general limitation period for bringing a claim is ten years from the occurrence of the event giving rise to the claim.

The limitation period may be interrupted by a number of factors, including: i) the debtor acknowledging the debt, ii) the creditor making a demand for payment and iii) the creditor filing a lawsuit. If the limitation period is interrupted, the time period starts to run again from the date of the interruption.

In addition to these general rules, there are specific situations where the limitation period is shorter before the claim is time barred. Specific types of claims, such as contractual disputes, may have shorter limitation periods.

Also, there is generally an obligation for a party to notify the other party about a defect/claim within a reasonable time to maintain the right to the claim. What is considered "reasonable time" can vary based on the agreement between the parties and the specific circumstances of the situation. Failure to notify within a reasonable time could result in the loss of the right to claim, highlighting the importance of being aware of these time constraints.

The main effects of limitation period are that the debtor is no longer obligated to pay the debt, and the creditor can no longer enforce the claim through legal actions.

The regulatory framework regarding limitation periods is complex and there are a number of exceptions from the general rule. It is important to be aware of this complexity because otherwise it can lead to major legal losses.

1.3         Costs

The primary costs for litigation in general courts in Sweden are court fees, legal fees and litigation expenses.

The court fees are generally modest compared to other costs and are payable upon filing the claim. The parties are responsible for their own legal representation, with attorney fees calculated based on factors such as the complexity of the case and the lawyer's experience. Litigation expenses may also include "out-of-pocket expenses", remuneration to fact witnesses, fees for expert witnesses and travel expenses for witnesses.

However, a key factor mitigating the financial burden for the prevailing party is the Swedish principle of cost allocation. In most cases, the losing party is typically ordered to reimburse the winning party for their reasonable legal costs. This recovered sum can significantly offset the winning party's own litigation expenses.

In addition to these traditional funding methods, third-party funding has emerged as a viable option for litigants in Sweden. This involves external financiers covering the legal costs of a party's litigation in exchange for a portion of the awarded damages. Third-party funding can provide access to justice for parties who might otherwise lack the financial resources to pursue or defend a legal claim. It also allows parties to mitigate the risks associated with litigation costs, especially in complex cases where expenses can escalate rapidly. As this practice gains traction, it introduces a new dynamic into the Swedish legal landscape, offering an alternative route for managing the financial risks of legal disputes.

1.4         Time Frame

The duration of litigation in Sweden can vary significantly depending on several factors. The inherent complexity of the case plays a major role, with straightforward matters potentially reaching a conclusion within a year. Conversely, intricate disputes involving numerous factual or legal issues can take several years to wind their way through the court system.

1.5         Pre-actions and Discovery

Before initiating litigation, parties are encouraged to engage in pre-action negotiations. These negotiations allow parties to discuss settlement options and potentially avoid the time and expense associated with a court case.

Unlike common law jurisdictions, Sweden does not employ a formal discovery process where each party can extensively gather information from the other before trial. However, this does not preclude the possibility of obtaining evidence during the litigation itself. Parties can request the court's assistance in compelling the production of identified and relevant documents or witness testimony, albeit within a more streamlined framework compared to formal discovery procedures.

1.6         Evidence and Experts

In Swedish litigation, parties are responsible for presenting their evidence to the court. This means that it is the responsibility of the parties involved in the lawsuit to gather and present the evidence that they wish to rely on to support their respective cases. This may include witness testimonies, documents, and expert opinions. Witness statements are generally not accepted in litigation.

1.7         Interim Remedies

In the context of ongoing litigation, Swedish courts wield the authority to grant interim remedies. These measures serve a critical purpose: safeguarding the subject matter of the dispute, preventing potential harm to a party's interests, or preserving vital evidence before a final judgment is reached.

The Swedish courts possess a broad repertoire of interim remedies at their disposal, allowing them to tailor the specific measure to the unique circumstances of each case. Examples of interim remedies:

The requesting party must demonstrate a reasonable likelihood of success on the merits of their case. Secondly, they must establish the potential for irreparable harm if the interim remedy is not granted.

By granting interim remedies, Swedish courts play a proactive role in safeguarding the integrity of the litigation process and ensuring the effectiveness of any final judgment issued. These measures promote a fair and just outcome by preventing irreversible actions or the loss of crucial evidence before the final determination of the dispute.

1.8         Enforcement

Upon the issuance of a final judgment by a Swedish court, the prevailing party has the right to seek its enforcement.  This enforcement process is overseen by the Swedish Enforcement Authority (Kronofogdemyndigheten), a government agency specifically tasked with ensuring compliance with court orders.

The Enforcement Authority possesses a comprehensive set of tools to enforce judgments.  These tools encompass the attachment and potential seizure of the losing party's assets, such as real estate, bank accounts, or personal property.  Additionally, the Authority can implement wage garnishments, where a portion of the losing party's wages are automatically withheld and directed towards satisfying the judgment debt.

The enforcement process is designed to be efficient and effective.  The Enforcement Authority utilizes a centralized database to track debtors and their assets, facilitating the swift identification and seizure of resources to satisfy the judgment.  Debtors are also afforded due process rights throughout the enforcement process, with the ability to challenge the enforceability of the judgment or propose alternative repayment plans.

The existence of a robust enforcement mechanism through the Swedish Enforcement Authority strengthens the efficacy of the Swedish court system for resolving commercial disputes.  It ensures that court judgments are not merely symbolic pronouncements but rather carry the weight of the state's enforcement power, ultimately compelling compliance from the losing party.

2.            ARBITRATION

In Sweden, parties in dispute have the option to choose between ad hoc arbitration and institutional arbitration, such as that administered by the Stockholm Chamber of Commerce (SCC).

Ad hoc arbitration under Swedish law is characterized by its flexibility and autonomy, allowing parties to tailor the arbitration process to their specific needs. They have the liberty to define key aspects of the arbitration, including the selection of arbitrators, the procedural rules to be followed, and the governing laws of the arbitration. This form of arbitration is guided by the Swedish Arbitration Act, which provides a supportive legal framework while granting parties significant discretion in structuring their proceedings. Ad hoc arbitration is often preferred for its adaptability and the control it affords the disputing parties over the arbitration process.

In contrast, institutional arbitration, exemplified by proceedings under the SCC rules, offers a more structured approach with the backing of a recognized institution. The SCC provides a comprehensive set of procedural rules and administrative support, ensuring a streamlined and efficient arbitration process. This includes predefined protocols for appointing arbitrators, setting timelines, and conducting the arbitration proceedings. Opting for institutional arbitration under the SCC brings the advantage of a formalized process, supported by the chamber's extensive experience and resources in dispute resolution. It's important to note that while the SCC rules provide a structured framework, parties in SCC arbitrations still enjoy a degree of flexibility in customizing certain aspects of the process.

Both ad hoc and institutional arbitration under Swedish jurisdiction share key benefits such as confidentiality, the finality of decisions, and the efficiency of proceedings. The choice between ad hoc and institutional arbitration depends on the parties' preferences for flexibility and control versus the desire for a structured process managed by an experienced institution.

For arbitration to be an option, there must be an arbitration agreement between the parties. The parties usually include a dispute resolution clause in the agreement stating that any dispute shall be settled through arbitration.

The Swedish Arbitration Act upholds party autonomy. Parties have significant flexibility in shaping the arbitration process. They can agree on the number of arbitrators, the applicable arbitration rules, the language of the proceedings, and the location of the arbitration.

Arbitration proceedings are generally confidential, unlike court proceedings which are usually public. This can be beneficial for parties who wish to protect sensitive business information.

An arbitral award issued in Sweden can be enforced domestically and internationally under relevant conventions, such as the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards.

The arbitration proceeding commerce when the Claimant (the requesting party) submits the request for arbitration.

The parties appoint the arbitrator(s) according to the terms of the arbitration agreement. If the agreement is silent, the Arbitration Act or the institutional rules provide a framework for appointment. The arbitral tribunal normally conducts a hearing where both parties present their cases through oral arguments, witness testimonies and/or witness statements, and evidence submission. The hearing format can be tailored to the parties' needs and the complexity of the dispute.

Following the presentation of evidence and closing arguments, the arbitral tribunal deliberates and issues a binding arbitral award.

2.1         Costs

The costs of arbitration are generally higher than the costs of court proceedings. The costs of court proceedings are limited to attorney's fees and a small fee for filing the lawsuit.

In arbitration, fees and reimbursement of expenses must also be paid to the arbitral tribunal. If the arbitration is administered by an institution, such as the SCC, there is usually an additional administrative fee.

In ad hoc arbitration, the parties have significant autonomy in determining the payment for arbitrators. Fees are often negotiated directly with the arbitrators and are influenced by factors such as their expertise, the complexity of the case, and the time commitment required. High-profile arbitrators with extensive experience or specialized knowledge in the relevant legal area might negotiate higher fees. Moreover, if the arbitration venue is distant from the arbitrators' base locations, additional costs for travel and accommodation can accrue, increasing the financial obligations of the parties involved.

Conversely, in arbitrations governed by the SCC rules, the arbitrators' compensation is structured according to predefined scales and guidelines set by the SCC. These rules aim to provide transparency and predictability in the cost of arbitration. The SCC considers the complexity of the case, the amount in dispute, and the workload to determine fees, ensuring a more standardized approach to compensating arbitrators. While the SCC's framework also accounts for expenses such as travel and accommodation, these are typically managed within the structured fee schedules and administrative support provided by the SCC, offering a streamlined process for parties.

Both systems strive to fairly compensate arbitrators for their expertise and time while balancing the need for cost-efficiency and transparency in the arbitration process. The choice between ad hoc arbitration and SCC arbitration can significantly influence the approach to arbitrator compensation and the overall cost structure of dispute resolution in Sweden.

In both arbitration proceedings and in general courts, the main rule is that the losing party must bear all the costs of the dispute, both its own and those of the other party. The issue of cost is often weighed against the benefits of arbitration.

2.2         Time Frame

Arbitration proceedings in Sweden are generally more flexible and expedited compared to litigation. The duration of arbitration depends on factors such as the complexity of the dispute, the number of hearings, and the availability of parties and arbitrators. Under the SCC rules, an award should be made no later than six months from the date the case was referred to the arbitral tribunal.

An award in an arbitration cannot be appealed. This is one of the fundamental principles of arbitration. This helps to ensure that the dispute is usually settled more quickly than in a general court.

However, there are some limited possibilities to challenge and annul an arbitral award. If there have been serious errors in the arbitration procedure, such as bias of the arbitrators or violation of fundamental principles of legal certainty, the court can annul the award.

2.3         Pre-actions and Discovery

Swedish arbitration proceedings prioritize efficiency and cost-effectiveness, reflected in the streamlined approach to pre-hearing procedures. Swedish arbitration emphasizes a more direct path to resolving the dispute.

Parties retain the autonomy to engage in preliminary negotiations to explore the potential for an amicable settlement. Furthermore, the Swedish Arbitration Act embraces party autonomy by allowing for the crafting of pre-arbitral procedures specifically tailored to the unique circumstances of their dispute. These bespoke procedures may encompass protocols for the upfront exchange of critical documents, the establishment of a binding timeline for submissions of pleadings and evidence, or the outlining of procedures for witness testimony. This collaborative approach fosters a more efficient arbitration process by circumventing the potential for protracted discovery battles, a common feature of traditional litigation.

2.4         Evidence and Experts

Similar to litigation, the arbitral process in Sweden relies heavily on the presentation of evidence by the parties themselves to substantiate their respective claims and defenses. This evidence can encompass a wide range of materials, including written documents, witness testimony, and physical exhibits. To bolster their arguments and address complex technical or specialized issues that may arise during the proceedings, parties have the right to appoint their own expert witnesses.

These expert witnesses are typically qualified professionals with specialized knowledge and experience relevant to the subject matter of the dispute. They may be called upon to provide independent, objective opinions on technical matters, analyze complex data, or interpret industry standards. The specific role of the expert witness will be outlined in a report submitted to the arbitral tribunal, which may also include supporting documentation and methodologies employed in reaching their conclusions.

The opposing party has the opportunity to challenge the qualifications and opinions presented by the expert witness through cross-examination during the arbitration hearing. This adversarial process allows the arbitral tribunal to carefully evaluate the credibility and weight of the expert's testimony in the context of the overall evidence presented.

By permitting the introduction of expert evidence, Swedish arbitration proceedings ensure a comprehensive and informed decision-making process. This empowers the arbitral tribunal to reach a well-reasoned and just resolution, even in disputes involving intricate technical or specialized matters.

2.5         Interim Remedies

Swedish arbitral tribunals have an important power to protect the integrity of the arbitration proceedings and the eventual award. This power allows them to grant interim measures during the course of the arbitration. These measures aim to preserve the subject matter of the dispute, maintain the status quo or prevent potential irreparable damage to a party's interests before the final award is rendered. However, such interim measures are not enforceable.

The availability of interim measures within the arbitral framework is not exhaustive. Parties may also seek interim relief from the Swedish courts in support of their ongoing arbitration proceedings. This recourse is particularly relevant in situations where the arbitral tribunal lacks the jurisdictional authority to order the desired interim measure or where swift action is necessary to prevent imminent harm.

2.6         Enforcement

Once a Swedish arbitration has been concluded, the arbitral tribunal issues a binding and final award that determines the rights and obligations of the parties in the dispute. The enforcement of the award is an important aspect of Swedish arbitration law and ensures the successful resolution of the dispute.

For awards to be recognized and enforced in foreign jurisdictions, the process is often governed by the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 1958, to which Sweden is a signatory. This international treaty facilitates the enforcement of arbitration awards across borders, allowing an award issued in Sweden to be recognized and enforced in over 160 other signatory countries.

Conclusion

Navigating commercial disputes in Sweden requires a comprehensive understanding of both litigation and arbitration procedures. Whether opting for litigation through the Swedish court system or arbitration under the Swedish Arbitration Act, foreign parties must carefully assess their options, consider the costs and time frames involved, and seek legal advice to protect their interests effectively.