Ancient and Modern: Arbitration in Northern Europe
- Western Europe
- 01/21/2008
- Roschier, Attorneys Ltd. - Finland
Northern Europe offers arbitral systems of pedigree – and ones of early promise. Petri Taivalkoski, Helle Lindegaard and Per Franke, from Roschier together with other members of the RoschierRaidla network, offer a comparison between them.
Arbitration has old roots in Sweden, and for many years in Sweden and Finland arbitration has been used to resolve commercial disputes, national as well as international. As early as 1359, provisions concerning arbitration first appeared in Swedish legislation, and the arbitration institutes of the Stockholm Chamber of Commerce and the Central Chamber of Commerce of Finland will celebrate their 100th anniversaries within the next decade.
To respond to the demands of the increasing internationalization of arbitration, the Swedish and the Finnish arbitration acts were modernized in the 1990s and today both countries’ legislation reflects the UNCITRAL Model Law on International Commercial Arbitration. The approach of the national courts in both Sweden and Finland also supports arbitration.
During the last 15 years, the Stockholm Chamber of Commerce has experienced a steady increase of international arbitrations. The chamber now handles disputes with parties from as many as 40 different countries in a given year. The most common type of international arbitration handled by the chamber is “east-west” disputes, usually involving parties from China, Russia, or the former Soviet bloc, versus parties from the US and Western Europe. This development not only reflects the general increase in international disputes, but also Sweden’s long history of arbitration, which has led to the accumulation of a relatively sophisticated body of arbitration case law and a distinct arbitration culture.
It is expected that the number of international arbitrations will continue to increase in light of the fact that a considerable number of bilateral investment treaties provide for Stockholm Chamber of Commerce arbitration and the Energy Charter Treaty mentions arbitration at the chamber as one of a limited number of dispute resolution tools.
As a reflection of the increased number of international arbitrations, during 2006 the chamber increased the number of board members to 12, so as to include six foreign members: Mohamed Aboul-Enein (Egypt), Pierre Karrer (Switzerland – vice chairman), Alexander Komarov (Russia), David Rivkin (USA), VV Veeder QC (England) and Wang Sheng Chang (China). The chamber also issued new arbitration rules, which took effect at the start of the year. The main objective of the revision was to create truly international arbitration rules, which are easily accessible and comprehensible to international users, and which in all respects meet the demand of international commercial arbitration of today.
Arbitral proceedings, including international arbitral proceedings, conducted in Sweden and Finland, as well as the other Nordic counties, are generally characterized by pragmatism and informality, and are focused on accommodating the needs and wishes of the specific parties in dispute in a flexible and case-by-case oriented manner.
Norway and Denmark
In Norway and Denmark arbitration has also long been used to resolve commercial disputes (in Norway, maritime disputes in particular). It is, however, only quite recently that these countries have taken steps to regulate arbitration in a comprehensive manner and adapt it to international standards. The present Norwegian arbitration act entered into force in May 2004 and the present Danish arbitration act in June 2005. Both of these new acts are based on the Model Law and apply to domestic as well as international arbitral proceedings with their seat in said countries.
One unique feature of the new Norwegian arbitration act is that it specifically addresses issues related to the confidentiality of arbitral proceedings and the publication of arbitral awards. Unless otherwise agreed by the parties, the arbitral proceedings and the arbitral award are not confidential. Third parties may, however, only be present during the arbitral proceedings if and to the extent the parties have agreed.
National and international arbitration services in Denmark are provided by the Danish Institute of Arbitration and in Norway by the Arbitration and Dispute Resolution Institute of the Oslo Chamber of Commerce.
Estonia
Looking at the Baltic countries, the picture becomes more diverse. In Estonia, general provisions on arbitration were only introduced at the start of 2006. Up to that point, arbitrations in Estonia were covered by the Act of the Republic of Estonia on the Arbitration Court of the Estonian Chamber of Commerce and Industry. The act entered into force in 1991 and regulated arbitration with this institution only and not ad hoc arbitration. The new Estonia legislation is, in general, based on the Model Law and applies to both national and international arbitral proceedings. However, it also reflects the fact that the Estonian legal system (especially with respect to civil law) is largely influenced by the German legal system. Similar to the arbitration provisions of the German Civil Procedure Code, the Estonian code contains a number of provisions that differ from the Model Law.
The most notable differences between the Model Law and the Estonian arbitration legislation, as far as arbitration of business-to-business disputes goes, are the following:
An arbitral tribunal shall apply Estonian law if the parties have not agreed on the law applicable [to the merits of the dispute] and the applicable law does not arise from any Act.
The legal and practical implications of this provision remain to be seen.
The code does not differentiate between the request for arbitration and the statement of claim – to initiate arbitration proceedings the claimant must file a statement of claim.
The arbitral tribunal may issue interim measures, to be enforced by Estonian courts.
An arbitral award may only be set aside if proper notice regarding the appointment of an arbitrator has not been given, or following irregularities in the arbitral proceedings – if it can be presumed that this has materially affected the outcome of the case (the Model Law does not include the materiality requirement).
Due to the immaturity of Estonia’s legislation, court practice has had little chance to evolve. The Supreme Court has, however, recognized some of the generally held principles of international arbitration that were reflected in previous legislation. For example, the court recognizes the principle of separability and has confirmed the applicability of the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards in Estonia.
Estonia has one general international commercial arbitration institution, the Arbitration Court of the Estonian Chamber of Commerce and Industry. Most arbitrations in Estonia are handled by the arbitration court. Awareness about the arbitration court is increasing and arbitration is becoming more popular in Estonia. In 2006, the arbitration court handled 23 requests. Fourteen disputes were referred to arbitration, and 16 awards were made. Thirteen requests concerned domestic disputes and the other 10 involved parties from Russia, Sweden, Italy, Germany, Cyprus, Latvia, Lithuania and Finland. The arbitration court does not appoint arbitrators from a closed list. Arbitrators appointed by the institute are mainly lawyers and Estonian judges. Estonian judges can only be appointed by the arbitration court and not by the parties to the dispute.
Latvia
The Latvian Civil Procedure Code provides for a legal framework for both international and domestic arbitration, without making any distinction between the two. While the code encompasses fundamental Model Law principles such as competence-competence and party equality, Latvia cannot be considered a Model Law country.
Arbitration is increasingly popular in Latvia. Particular features of the Latvian law on arbitration are relevant for contract disputes:
Latvian courts are not obliged to assist parties with the appointment of arbitrators;
Latvian courts do not assist in obtaining evidence;
during the arbitral proceedings, parties cannot challenge the jurisdiction of the tribunal before Latvian courts;
if a party wishes to request security for a claim, it must make its request to a court before initiating arbitral proceedings; and
after the final award has been rendered, it is only possible to challenge the award in connection to its enforcement, as no setting aside procedure exists.
One of the most remarkable features of arbitration in Latvia, however, is the country’s record number of arbitration institutions. There are currently 122 arbitration institutions registered by the Ministry of Justice of the Republic of Latvia. Arbitration institutions may be established at the formation of a new company. This has led to the emergence of arbitration institutions founded by businesses that are the only users of such institutes. Latvian courts do not enforce arbitral awards rendered by ad hoc tribunals in domestic arbitrations. Awards rendered by ad hoc tribunals in international disputes, however, are enforced in Latvia in accordance with the New York Convention.
Some of the most popular arbitration institutions in Latvia are the Court of Arbitration of the Latvian Chamber of Commerce and Industry, the Riga International Arbitration Court, the Baltic International Arbitration Court and the International Arbitration Court. The arbitration rules of most of these institutes are based on the Latvian arbitration legislation or the UNCITRAL arbitration rules, though with some deviations. Arbitration institutions in Latvia usually have a list of arbitrators and, if the parties agree to arbitrate under a particular institution’s rules, arbitrators will be selected only from that institute’s list.
Lithuania
Lithuania adopted a Law on Commercial Arbitration in 1996, based on the Model Law and applicable to international and national arbitration. It is not common in Lithuania to use arbitration to solve disputes, however. There are only 20 to 30 commercial arbitrations a year in Lithuania, compared with more than 100,000 civil disputes handled by the state courts each year.
When speaking about commercial arbitration in Lithuania, practically everything revolves around the Vilnius Court of Commercial Arbitration. This arbitration institute was founded in 2003 through a merger between the Arbitration Court at the International Chamber of Commerce of Lithuania and Vilnius International Commercial Arbitration. The founders and the main stakeholders of the Vilnius Court of Commercial Arbitration encompass the most authoritative business associations in Lithuania: the Association of the International Chamber of Commerce of Lithuania, the Association of Lithuanian Banks, the Lithuanian National Road Carriers’ Association, the Association of Lithuanian Chambers of Commerce, Industry and Crafts, the Lithuanian Confederation of Industrialists, and the Infobalt association, as well as the Lithuanian Lawyers’ Association. The fact that the institute has been founded by and is supported by such a broad and prominent group of players in Lithuanian business is considered to guarantee the reliability and quality of the service.
Some particular features of the Lithuanian law on arbitration are of relevance for business-to-business disputes:
disputes involving competition law may not be submitted to arbitration in Lithuania;
it is the chairman of the permanent arbitration institution – which in practice means the chairman of the Vilnius Court of Commercial Arbitration, since this is the only permanent arbitration institute incorporated under Lithuanian law at present – to which parties should resort to for assistance, if they cannot agree on the appointment of arbitrators;
it is the chairman of the Vilnius Court of Commercial Arbitration to whom parties should turn to if they wish to challenge an arbitrator;
the chairman of the Vilnius Court of Commercial Arbitration also has competence to determine the mandate of or lack of jurisdiction of an arbitral tribunal; and
an application for the annulment of an arbitral award may be made on the grounds stated in the Model Law. An application for annulment should be presented to the Court of Appeal of Lithuania. Decisions regarding the annulment of arbitral awards by the Court of Appeal are subject to review by the Supreme Court of Lithuania. This wide access to review challenges of arbitral awards has led to criticism, and the need to limit access to such recourse is likely to be considered in connection to possible future legislative reforms. In spite of the wide access to seek recourse, Lithuanian courts seldom annul arbitral awards. Recently there has only been one case in which the arbitral award was annulled.
Enforcement
Sweden, Finland, Norway, Denmark, Estonia, Latvia and Lithuania have all ratified the New York Convention.
A foreign arbitral award can be enforced in Sweden and Finland whether or not the country in which it was rendered is a party to the New York Convention, as neither Sweden nor Finland has made the reciprocity reservation. Unlike the New York Convention and the Model Law, nonarbitrability of a dispute under Finnish law does not constitute grounds for refusing recognition or enforcement of a foreign arbitral award in Finland. Major post-arbitral disputes are still quite rare in Finland and arbitral awards are often complied with voluntarily.
In Sweden, enforcement is rarely denied by the courts and in the few instances where enforcement has been denied, it has been due to exceptional circumstances.
Compulsory enforcement of arbitral awards made in Estonia – domestic or international – requires recognition and a declaration of enforcement by an Estonian court. Arbitral awards resulting from arbitral proceedings administered by an Estonian arbitral institution are, however, enforceable without recognition and a declaration of enforcement by Estonian courts. If a foreign award which has been declared enforceable in Estonia is subsequently annulled abroad, the obligated party may also apply for annulment of the declaration of enforceability in Estonia.
In 2005, 6,949 applications for the enforcement of arbitral awards were presented to the courts of Latvia, and 6,390 of them were satisfied. It is not possible to determine precisely how many of these requests concerned the enforcement of foreign arbitral awards.
Lithuanian courts have a very liberal – that is, pro-arbitration – approach to the recognition and enforcement of foreign arbitral awards. From 2001 to 2006, recognition and enforcement was only rejected in one case out of 50. Requests for the recognition and enforcement of foreign arbitral awards are heard by the Court of Appeal of Lithuania. It may take several months for the court to decide the matter, as parties are allowed to present comments both in writing and orally. Decisions on the recognition and enforcement of foreign awards may be made subject to review before the Lithuanian Supreme Court.
Arbitral awards are enforced according to the same rules as Lithuanian state courts’ judgments. In order for an arbitral award rendered in Lithuania (regardless of whether resolving a national or international dispute) to be enforceable, a writ of execution must be issued. This is done by the district court upon request. The district court’s decision to issue or refuse to issue a writ of execution may be appealed to the regional court. Appeal to the Supreme Court of Lithuania is also possible. Arbitral awards rendered outside of Lithuania become enforceable after recognition by the Court of Appeal of Lithuania, or the Supreme Court of Lithuania (in case of appeal). Writs of execution regarding foreign arbitral awards are issued by the Court of Appeal of Lithuania. It is not possible to appeal such decisions.
Northern Europe is an arbitration-friendly region. The Stockholm Chamber of Commerce has a long and distinguished history of administering international arbitrations, and other regional institutes have much to offer in the way of commercial dispute resolution. Arbitration’s increasing popularity will help create a rich new layer of case law and legal practice on top of the existing bedrock.
The following members of the RoschierRaidla network have contributed to this article: Petri Taivalkoski, Helle Lindegaard and Per Franke of Roschier for Finland and Sweden; Toomas Vaher and Pirkka-Marja Põldvere of Raidla & Partners for Estonia; Girts Lejins and Maija Volkova of Lejins, Torgans & Partners for Latvia; and Rimantas Simaitis of Norcous & Partners for Lithuania.
This article was first printed in Global Arbitration Review, Volume 2, Issue 6.
