Landmark Judgments Rendered by Swedish Courts in the Achmea Saga

by Anina Liebkind[1] and Andreas Holst[2]

SUMMARY: The Achmea saga reaches the precipice in Sweden with two landmark judgments. In judgments issued a day apart, the Svea Court of Appeal first declares the Novenergia II v. Spain award invalid because the issues in dispute are not arbitrable under Swedish law (Case No. T 4658-18, 13 December 2022), after which the Swedish Supreme Court declares the award in PL Holdings v. Poland invalid because it contradicts Swedish public policy (Case No. T 1569-19, 14 December 2022).

Within 24 hours, the Swedish Supreme Court and the Svea Court of Appeal have each rendered judgments addressing the invalidity of arbitration awards in investor-state disputes where EU law is said to have been interpreted or applied by the tribunal. Notably, while both the Supreme Court and the Court of Appeal found each award invalid, the former did so with reference to public policy, while the latter with reference to arbitrability. The backdrop of the parties’ pleadings and the judgments is a series of preliminary rulings from the Court of Justice of the European Union (“CJEU”), which essentially inhibited arbitration under bilateral investment treaties (“BITs”) and the Energy Charter Treaty (“ECT”) where EU law has been interpreted or applied by the tribunal (namely the cases Achmea, Komstroy, and PL Holdings).

The Swedish Supreme Court’s judgment in Poland v. PL Holdings (Case No. T 1569-19)

The CJEU provided a preliminary ruling in the case. In the preliminary ruling, the CJEU pointed out that EU law precludes an arbitration tribunal from having jurisdiction in an intra-EU BIT or in a construed ad hoc agreement pursuant to national law. This is due to intra-EU investor-state arbitration’s fundamental incompatibilities with EU law, as first set out by the CJEU in Achmea (PL Holdings, paras 44 ff and Achmea, para. 60).

The arbitration itself concerned a damage claim under the BLEU (Belgium-Luxembourg Economic Union) – Poland BIT brought by PL Holdings, a company incorporated under the laws of Luxembourg, an EU member state, against Poland, also an EU member state, due to alleged improprieties within the state administration. The two awards, in which the tribunal found that Poland had violated the BIT (Case No. T 1569-19, paras 11–13), were both challenged by Poland. After the Court of Appeal found that the parties did enter into an ad hoc arbitration agreement (paras 14–17), an interpretation that, as noted above, was later overturned by the CJEU, the judgment was appealed to the Supreme Court.

The Supreme Court judgment begins with a rather extensive account of the CJEU’s case law, with an emphasis on the CJEU’s preliminary ruling concerning the case at hand and the national courts’ obligation to adhere to the CJEU’s rulings (paras 20–44). The Supreme Court then notes that it is up to the national courts to decide how this general incompatibility between EU law and intra-EU investor-state arbitration should be regarded under national law (paras 45–46).

With reference to the CJEU’s conclusions in Achmea, Komstroy, and PL Holdings, the Supreme Court reiterates that intra-EU investor-state arbitration withholds the (competent) national court’s application and interpretation of EU law, thus failing to ensure the full effect of EU law (para. 50). The Supreme Court further explains that under Swedish law, ordre public (i.e., public policy) is a general legal principle that refuses the recognition or enforcement of a foreign rule or judgment that is incompatible with the basic principles of the Swedish legal system. In terms of arbitration, the principle is recognised in sections 33(1)(2) and 55(2) of the Swedish Arbitration Act (“SAA”).

Since the preliminary rulings from the CJEU primarily concern the question of whether member states may withhold disputes concerning the application of EU law from the EU court system, the Supreme Court noted that the preliminary rulings regarded fundamental (procedural) legal principles. Such legal principles should be regarded as Swedish public policy according to the Supreme Court, and hence an award that breaches those fundamental principles is invalid under section 33(1)(2) of the SAA (paras 52–57).

The Svea Court of Appeal’s judgment in Spain v. Novenergia II (Case No. T 4658-18)

The case before the Svea Court of Appeal concerned an SCC investor-state arbitration award between Spain, an EU member state, and Novenergia II – Energy and Environment (SCA) SICAR, a company incorporated under the laws of Luxemburg, another EU member state. Following the award, in which the tribunal found that the state had breached its obligations under the ECT, Spain initiated the now-concluded challenge proceedings (Case No. T 4658-18, pp. 8–9).

Spain relied on five different grounds for its challenge, under both section 33 and section 34 of the SAA. Spain argued, inter alia, that there was no valid arbitration agreement between the parties, that the dispute was not arbitrable under Swedish law, and that the award was against Swedish public policy (pp. 9–12).

Due to the different legal grounds of the challenge, the Court of Appeal began by examining which ground it should review first. Similar to the Supreme Court’s judgment in the PL Holdings case, the Court of Appeal concluded that section 33 of the SAA was the most appropriate provision since the grounds for invalidity therein (e.g. due to arbitrability or public policy) in part seek to also protect the public and third party interests; this in contrast to the grounds for setting aside the award in section 34, which essentially only protects the parties’ rights. Within section 33, the Court decided to first review whether the award included a determination of an issue which in accordance with Swedish law, may not be decided by arbitrators (i.e., arbitrability) (p. 33).

After giving an account of the CJEU’s findings (pp. 35–37), the Court of Appeal noted that in order to determine whether the issues decided upon in the award were arbitrable under Swedish law, it must consider the conclusions that can be drawn from the CJEU’s preliminary rulings (p. 37).

Analysing the present case in the light of these conclusions, the Court of Appeal noted that “The positions of the CJEU entails that [the parties], neither in advance nor afterwards, could have agreed on that the present questions should be resolved by arbitration” (p. 39; our translation). With reference to the primacy of EU law and the requirement of its effective application, the Court of Appeal, therefore, found that the ban set out by the CJEU under the ECT is equivalent to a corresponding ban under Swedish law, thus making the underlying dispute non-arbitrable under Swedish law. The Court of Appeal, therefore, concluded that the award was invalid (p. 39).

It should be noted that the Court of Appeal dismissed the respondent investor’s objection that the Court’s conclusion would violate inter alia the company’s right to a fair trial and protection of property under the European Convention on Human Rights (“ECHR”). At the outset, the Court of Appeal set forth a presumption that the CJEU considers its preliminary rulings’ to be in conformity with the ECHR. Thereafter, the Court of Appeal noted that the investor had failed to show that it would be precluded from bringing a motion in the state’s own courts corresponding to its requests for relief in the arbitration. It was thus not necessary to further review the alleged violations of the ECHR (pp. 42–43).

It remains to be seen whether the judgment will be appealed to the Swedish Supreme Court. The Svea Court of Appeal decided that the judgment may be appealed; however, the Supreme Court must also grant leave.

Going forward

Going forward, it will be interesting to see how the Swedish Courts will define the scope of “intra-EU arbitration” in related cases, given the broad scope set out by Komstroy, and how the aftermath of the invalidation of an award will play out in terms of enforcement in other jurisdictions, especially outside of the EU. Considering that invalidity under section 33 of the SAA has effect without limitation in time (ex tunc), the decisions may significantly impact the enforcement of Swedish investment awards where EU law has been applied or interpreted in the manner set out by the CJEU.

  1. Partner, Norburg & Scherp, Stockholm, Sweden. Contact:

  2. Associate, Norburg & Scherp, Stockholm, Sweden. Contact:

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