What a buyer needs to know about arbitration. Stockholm Chamber of Commerce (SCC) provides one of the most popular methods for resolving disputes between parties. It is a flexible and efficient process that allows parties to avoid the time, expense, and uncertainty of litigation in national courts.

In this blog post, we will explore the benefits of arbitration at SCC and how it works and ending with an example of framework for an arbitration agreement.

• Flexibility: One of the biggest advantages of arbitration at SCC is its flexibility. Parties can tailor the arbitration process to suit their specific needs and requirements. For example, they can choose the language of the proceedings, the number of arbitrators, the place of arbitration, and the applicable law.
• Efficiency: Arbitration at SCC is known for its efficiency. The process is typically faster than litigation in national courts, as parties can agree on a timeline for the proceedings. This can save parties time and money, as they can avoid lengthy court procedures.
• Confidentiality: The arbitration proceedings at SCC are private and confidential. Unlike court proceedings, which are often open to the public, the details of the arbitration proceedings are not disclosed. This can be particularly important for parties who wish to avoid negative publicity or protect sensitive information.
• Expertise: SCC has a panel of experienced arbitrators who are experts in various areas of law. The parties can select an arbitrator or a tribunal with relevant expertise to their dispute. This can lead to more informed and reasoned decisions.

How Does Arbitration at SCC Work?

• Initiation: The arbitration process is initiated when one party sends a notice of arbitration to the other party. The notice should include a brief description of the dispute and the relief sought. The other party then has a specified period to respond to the notice.
• Appointment of Arbitrators: If the parties cannot agree on the number of arbitrators and the appointment of the tribunal, SCC will assist in the appointment process. Typically, the tribunal will consist of one or three arbitrators.
• Preliminary Hearing: Once the tribunal has been appointed, a preliminary hearing will be held. The hearing allows the parties and the tribunal to discuss procedural matters, such as the language of the proceedings, the scope of the dispute, and the timeline for the proceedings.
• Proceedings: The arbitration proceedings themselves will consist of written submissions and oral hearings. The parties will submit written evidence and arguments to the tribunal, and there will be an opportunity for oral presentations.
• Award: The tribunal will issue an award, which will be binding on the parties. The award will set out the decision of the tribunal and the relief granted. The award can be enforced in national courts.

Examples Arbitration clause:

Here are two examples of Arbitration clauses to explain what a buyer needs to know about arbitration:

Example 1 (Saab AB):

“22.1 Any dispute controversy or claim arising out of, or in connection with, the Agreement, or the breach, termination or invalidity thereof, shall be finally settled by arbitration in accordance with the Rules of the Arbitration Institute of the Stockholm Chamber of Commerce.

All arbitrators shall be appointed by the institute. The seat of arbitration shall be Stockholm, Sweden. The language to be used in the arbitration proceedings shall be English. The Parties undertake and agree that all arbitral proceedings will be kept strictly confidential.

22.2 The Agreement (including clause 22.1) shall be governed by and construed in accordance with the laws of Sweden, excluding its conflict of law principles providing for the application of the laws of any other jurisdiction.”

Source: https://www.saab.com/about/for-suppliers/terms-and-conditions

Example 2 (Volvo):

37 APPLICABLE LAW

37.1 Subject to Section 38.4, any and all disputes, claims or actions arising out of or related to a Purchase Agreement (including these General Purchasing Conditions or other documents integrated therein) or directly or indirectly to the commercial relationship between Volvo and the Supplier, whether arising in contract, tort, or other legal theory shall be governed by and construed in accordance with Swedish substantive law, unless both Parties have their principal place of business (i) in the same country and (ii) that country is France, the United States of America, China or India.

In such case the Purchase Agreement shall be governed and construed in accordance with the substantive laws of that country. If the Parties have their principal place of business in the United States of America, the Purchase Agreement shall be governed by the substantive laws of the state of New York. Irrespective of which substantive law that shall apply, such law shall exclude its conflict of laws principles providing for the application of the laws of any other jurisdiction.

37.2 However, Purchase Agreements that are subject to disputes according to 38.4 below, where all the Parties do not have their principal place of business in the same country, shall always be governed by and construed in accordance with Swedish substantive law, excluding its conflict of laws principles providing for the application of the laws of any other jurisdiction.

37.3 Notwithstanding the above, a Party shall always be entitled to apply for interim or conservatory measures in accordance with section 38.5 below.

38 DISPUTES

38.1 If, in accordance with Section 37.1-37.2 above the Purchase Agreement shall be governed by either Swedish, Chinese or Indian law, then any disputes arising out of or relating to the Purchase Agreement shall be finally settled by arbitration in accordance with the rules of the Arbitration Institute of the Stockholm Chamber of Commerce.

The seat of arbitration shall be Stockholm, Sweden. The language to be used in the arbitral proceedings shall be English, unless both Parties are domiciled in Sweden in which case Swedish shall be used.

38.2 If, in accordance with Section 37.1 above the Purchase Agreement shall be governed by French law, then any disputes arising out of or relating to the Purchase Agreement shall be settled by the Commercial Court of Lyon, France.

38.3 If, in accordance with Section 37.1 above the Purchase Agreement shall be governed by the laws of the state of New York, then any disputes arising out of or relating to the Purchase Agreement shall be finally settled by arbitration in accordance with rules of arbitration promulgated by the American Arbitration Association under its Commercial Dispute Resolution Procedures (the “Rules”).

Such arbitration shall take place in Washington, D.C., and conducted in English before a panel of three (3) neutral arbitrators selected pursuant to such Rules, exclusively from a list provided by the American Arbitration Association. A judgment on the award rendered by the arbitrators may be entered in and enforced by any court having jurisdiction thereof, with each Party hereby consenting to the jurisdiction of such court over it and waiving, to the fullest extent permitted by law, any defense or objection relating to in personam jurisdiction, venue or convenience of the forum.

All matters arising in any action to enforce an arbitral award shall be determined in accordance with the law and practice of the forum court. Notwithstanding the foregoing, this arbitration clause shall not apply to claims for indemnification from third-party claims where the said third party has initiated litigation against Volvo or Supplier, or both.

38.4 Notwithstanding any provision of Sections 37 and 38, disputes arising out of or relating to more than one Purchase Agreement existing between and/or among one or more Volvo Group companies and one or more Supplier Group Companies such that the disputes would be required to be adjudicated before multiple forums pursuant to Section 38.1, whether arising under or relating to contract, tort, or any other legal theory, shall, provided that such disputes are substantially related, be settled in a single arbitration in accordance with the rules of the Arbitration Institute of the Stockholm Chamber of Commerce.

All Purchase Agreements subject to any such arbitration shall (for purposes of such arbitration) be governed by and construed in accordance with Swedish substantive law excluding any conflict of laws principles that provide for the application of the laws of any other jurisdiction. The seat of arbitration shall be Stockholm, Sweden. The language to be used in the arbitral proceedings shall be English.

38.5 Notwithstanding the above, a Party shall be entitled to apply for interim or conservatory measures to any competent court and the Parties hereby agree that the courts of the jurisdiction in which either Volvo or the Supplier has its principal place of business shall constitute competent courts for purposes of this Section 38.5.

Source: https://www.volvogroup.com/content/dam/volvo-group/markets/master/suppliers/our-supplier-requirements/Volvo-General-Purchasing-Conditions-May-2021.pdf.coredownload.pdf

Arbitration seats are selected based on their legal framework.

In a blogpost about buyer needs to know about arbitration we must include a list of other well know seats. Arbitration seats are selected based on their legal framework, neutrality, and infrastructure for handling international disputes. Here are five well-known arbitration seats globally, each renowned for its robust legal system and arbitration-friendly environment:

1. London, United Kingdom – London Court of International Arbitration (LCIA)
   • London is one of the most preferred seats for arbitration due to its mature legal system and history of dealing with international commercial disputes.
   • Website: www.lcia.org/
2. Paris, France – International Chamber of Commerce (ICC)
   • Paris is favored for its supportive judicial system that respects the autonomy of the arbitration process and its historical role in the development of international arbitration.
   • Website: www.ccwbo.org/dispute-resolution/dispute-resolution-services/icc-international-court-of-arbitration/
3. Singapore – Singapore International Arbitration Centre (SIAC)
   • Singapore has become a key hub for arbitration in Asia, offering a modern, efficient, and neutral setting for arbitration.
   • Website: www.siac.org.sg/
4. Geneva, Switzerland – Swiss Arbitration Centre
   • Switzerland is famous for its neutrality, which makes Geneva a popular choice for international arbitration, particularly in disputes involving multinational corporations.
   • Website: www.swissarbitration.org/

These cities are not only significant legal hubs but also offer extensive facilities and services tailored for international arbitration.

Hidden dangers to arbitration

Arbitration is a popular alternative to traditional litigation due to its efficiency and confidentiality, but it comes with potential pitfalls. While often seen as a cost-effective solution, arbitration can become expensive, especially in complex cases with multiple arbitrators, due to administrative fees, arbitrator fees, and legal costs. To mitigate this, it’s important to review the fee structure and consider cost caps in the arbitration agreement.

A significant concern is the limited discovery process, which can disadvantage a party needing extensive evidence. Specifying the scope of discovery in the arbitration agreement can help ensure fair access to information. Additionally, arbitration awards are usually final and binding, with limited grounds for appeal, meaning legal or factual errors can rarely be corrected. To address this, selecting arbitrators with strong legal and industry expertise and including a review clause in the agreement can help.

Potential bias is another minor but still hidden danger, particularly if arbitrators have industry ties or prior interactions with one party. Conducting thorough due diligence on arbitrators and ensuring a transparent selection process can reduce this risk. While arbitration awards are generally enforceable under international treaties, enforcement can still be challenging in some jurisdictions. Assessing enforceability in relevant jurisdictions and addressing enforcement procedures in the agreement can mitigate this issue.

Though arbitration is often confidential, this confidentiality isn’t absolute, and details may become public in certain circumstances. Defining the scope of confidentiality clearly in the agreement is crucial. Inconsistent decisions due to the lack of precedent can also create uncertainty. Choosing experienced arbitrators and established institutions can help maintain consistency.

Power imbalances, especially in employment or consumer disputes, can affect fairness. Ensuring the process is balanced by allowing representation, equal arbitrator selection, and possibly shifting costs to the more powerful party if the weaker party prevails can address this. Lastly, complex jurisdictional issues, particularly in international arbitration, can lead to delays and additional costs. Specifying the seat of arbitration and governing law, and using experienced legal counsel, can help navigate these challenges.

Conclusion – buyer needs to know about arbitration

Arbitration at Stockholm Chamber of Commerce is an efficient and flexible process that can provide parties with an effective means of resolving disputes. It offers numerous benefits over litigation in national courts, including flexibility, efficiency, confidentiality, and expertise. If you have a dispute that you think might be suitable for arbitration at SCC, you should consider seeking legal advice to determine whether this is the best option for you. 

While arbitration offers benefits like speed, flexibility, and confidentiality, it is essential to be aware of and address potential hidden dangers. By carefully drafting arbitration agreements, selecting experienced arbitrators, and considering these pitfalls, parties can ensure a fair and effective arbitration process.

Learn more about arbitration in the bundle International Sales law, delivered by Jon Kihlman.

Sign the arbitration agreement under the SCC and Swedish Law

This is what a buyer needs to know about arbitration at a basic level but lets end with an example of framework one needs to sign the arbitration agreement:

When ending a dispute through arbitration in Sweden, particularly under the auspices of the Stockholm Chamber of Commerce (SCC) and governed by Swedish law, it is essential to ensure that the arbitration agreement is comprehensive and clear. Here is a suitable framework for such an agreement:

1. Introduction

Parties to the Agreement:

• Clearly state the names, addresses, and contact details of the parties involved in the arbitration.

Purpose:

• Define the purpose of the agreement, which is to resolve the specified dispute through arbitration under the SCC Rules.

2. Arbitration Clause

Scope of Arbitration:

• Clearly describe the scope of disputes that will be resolved by arbitration, including any specific issues or claims.

Governing Rules:

• Specify that the arbitration will be conducted under the Arbitration Rules of the Stockholm Chamber of Commerce (SCC).

Governing Law:

• State that Swedish law will govern the arbitration process and the substance of the dispute.

3. Composition of the Arbitral Tribunal

Number of Arbitrators:

• Specify whether the arbitration will be conducted by a single arbitrator or a panel of three arbitrators.

Appointment of Arbitrators:

• Detail the procedure for appointing the arbitrators, including the timeline and the process for selecting a chairperson if a panel is used.

4. Seat and Venue of Arbitration

Seat of Arbitration:

• Specify Stockholm, Sweden, as the legal seat of arbitration.

Venue:

• Detail the physical location where the arbitration hearings will take place, if different from the seat.

5. Language of Arbitration

Language:

• State the language to be used in the arbitration proceedings, typically English or Swedish.

6. Procedural Rules

Submission of Documents:

• Outline the timeline and process for the submission of claims, defenses, and evidence.

Hearings:

• Specify the process for scheduling and conducting hearings, including any provisions for virtual hearings if applicable.

Interim Measures:

• Describe any provisions for interim measures or emergency relief that may be sought during the arbitration.

7. Confidentiality

Confidentiality Obligations:

• State that the arbitration proceedings, including all documents and communications, will be confidential.

8. Costs and Fees

Allocation of Costs:

• Detail how the costs of the arbitration, including arbitrator fees, administrative fees, and legal expenses, will be allocated between the parties.

Payment of Fees:

• Specify the process and timeline for the payment of arbitration fees and costs.

9. Final Award

Binding Nature:

• State that the arbitral award will be final and binding on the parties.

Enforcement:

• Outline the process for the enforcement of the arbitral award under the New York Convention or applicable Swedish law.

10. Miscellaneous

Amendments:

• Specify the process for amending the arbitration agreement, typically requiring written consent from all parties.

Severability:

• State that if any provision of the agreement is found to be invalid or unenforceable, the remaining provisions will continue to be in effect.

11. Signatures

Execution:

• Provide spaces for the signatures of authorized representatives of each party, including the date and place of signing.

Note: Illustration to blogpost “What a buyer needs to know about arbitration” is created by Chat-GPT on April 21, 2024.