SCC introduces new policy on deciding the seat of arbitration in intra-EU investment treaty disputes

Background

Since 1917, SCC has gained a reputation for neutrality, efficiency, and reliability. As one of the world’s leading international arbitration institutes, the SCC has played a critical role in administering both commercial and investment treaty disputes. The SCC, Stockholm, and Sweden are today referred to in over 120 international investment agreements (IIAs) concluded between states. 

Sweden has been an EU member state since 1995. However, recent CJEU rulings have posed challenges to the traditional framework for investment treaty arbitrations within the EU. These rulings have invalidated arbitration agreements contained in IIAs between EU member states, deeming them incompatible with EU law. Despite this, many international investment treaties remain in force, and EU investors continue to turn to arbitration seeking access to justice. The SCC’s new policy aims to address the evolving legal landscape while ensuring the legal enforceability of arbitral awards rendered under the SCC Rules.

The seat of arbitration

The seat of arbitration refers to the legal jurisdiction under which the arbitration is conducted, rather than the physical location of the proceedings. This is crucial because the legal framework of the seat determines which courts have jurisdiction over various arbitration-related matters, such as the appointment of or challenge to arbitrators, or applications to set aside the award. The seat stipulated should be a judicial district rather than a country to clearly define the legal setting.

The seat of arbitration provides the legal basis for the proceedings but does not restrict where hearings can be held, as they may take place in other locations or virtually. Importantly, the law governing the seat can significantly influence the proceedings, especially in investment treaty arbitration cases involving EU law.

SCC Rules and practice

The SCC Rules provide that unless agreed upon by the parties, the Board shall decide the seat of arbitration. The Board’s decision may be based on various factors, including the nationality of the parties, practical considerations, cost-effectiveness, and the parties’ expectations.

Stockholm has long been a preferred seat for arbitration. When disputes are referred to the SCC, the Board has thus generally decided that Stockholm is the seat of arbitration unless specific circumstances suggest otherwise.

New approach

In light of the legal developments within the EU, the SCC has clarified its policy on deciding the seat of arbitration in investment treaty arbitrations concerning parties in the EU. Unless agreed upon by the parties, the SCC Board will no longer select Stockholm, or any other judicial district within the EU, as the seat of intra-EU, or potentially intra-EU, investment treaty arbitrations. The SCC Board will instead decide on a seat outside the EU to ensure the legal enforceability of the arbitral award.

Ensuring legal enforceability

This new policy highlights the SCC’s ongoing commitment to ensuring that arbitral awards rendered under the SCC rules are legally enforceable, in line with the SCC Rules. This change will bring clarity to investors and states and reflects the SCC’s pragmatic approach to administering commercial and investment arbitrations under the SCC Rules.

Further information

For further information, please contact the SCC Secretariat.