In a judgment delivered in summer 2024, the Svea Court of Appeal (Svea hovrätt) of Sweden in Case T-2082-23 (Mål T 2082-23), OAO Tyumenneftegaz v First National Petroleum Corporation, it confirmed that EU restrictive measures (sanctions) under the EU’s Common Foreign and Security Policy (CFSP) – and its constitutional regime (Butler, 2019) – cannot halt commercial arbitration as parties to disputes continue to have access to research and legal services necessary for aribtral proceedings
Ultimately, the national court affirmed the arbitral award of Complaint of arbitration award announced in Stockholm on December 19, 2022 (SCC Arbitration No. 094/2021) (Klander av skiljedom meddelad i Stockholm den 19 december 2022 (SCC Arbitration No. 094/2021)) in favour of First National Petroleum Corporation.
Background and facts
The defendant in the case before the Swedish court, was First National Petroleum Corporation, a US company based in Texas. In 2021, it initiated arbitration proceedings in Sweden against OAO Tyumenneftegaz, a Russian company, under the auspices of the SCC Arbitration Institute (Arbitration Institute of the Stockholm Chamber of Commerce). However, since 2022 and the Russian invasion of Ukraine, OAO Tyumenneftegaz, a subsidiary of Rosneft, has been commercially affected by the EU’s restrictive measures regime, as it Russia-based.
The arbitral tribunal established under the SCC Arbitration Institute ruled, on the substance of the commercial dispute, in favour of First National Petroleum Corporation.
OAO Tyumenneftegaz sought for the arbitral award to be set aside before the national courts of Sweden on the basis that it could not find legal counsel to represent it in Sweden owing to the EU’s restrictive measures, given that it claimed that the EU’s restrictive measures, and in particular, Regulation 833/2014, prevented EU-based parties from engaging with Russian companies.
Before the Svea Court of Appeal, OAO Tyumenneftegaz was the applicant, and First National Petroleum Corporation was the defendant.
Grounds of the judgment
The first ground that the Svea Court of Appeal rejected the case on was that OAO Tyumenneftegaz failed to bring up that it had difficulty getting access to counsel during the arbitral proceedings itself.
The second ground that applicant had its plea rejected was that it was informed that EU restrictive measures does not prevent access to legal services. For the national court, EU restrictive measures imposed on natural or legal persons do not affect the provision of services that are strictly necessary for the exercise of the right of defence in judicial proceedings and the right to an effective legal remedy as referred in Article 47 of the EU Charter of Fundamental Rights and Article 6 of the European Convention on Human Rights, as confirmed by the Consolidated Frequently Asked Questions (FAQs) on the implementation of Council Regulation No 833/2014.
The third ground for why the applicant had their case rejected was that it was not acting in good faith. In fact, the applicant had not participated in the arbitral proceedings at all, as a conscious choice.
The fourth ground for why the applicant was unsuccessful in their case was that the national court found no evidence that the arbitral proceedings conflicted with Swedish law in any way.
Analysis of the judgment
The judgment of the Svea Court of Appeal is solid, in that it is absolutely necessary that parties, whomever they are, have appropriate access to the provision of services that are strictly necessary for the exercise of the right of defence in judicial proceedings at national and EU level.
This is necessary for rights under national law, but also, more important, in light of the right of everyone to an effective legal remedy as found in Article 47 of the EU Charter of Fundamental Rights, as well as Article 6 of the European Convention on Human Rights.
This is confirmed as the Commission’s reading also, as found in its ‘Consolidated Frequently Asked Questions (FAQs) on the implementation of Council Regulation No 833/2014’ document, that is being frequently updated.
The judgment adds to the growing number of cases that are appearing before national courts and tribunals of EU Member States dealing with EU restrictive measures (sanctions). Only a small handful are reaching the Court of Justice of the European Union (CJEU) through the preliminary reference procedure under Article 267 TFEU. But in any event, it is good to see national courts are handling EU legal quite appropriate in such cases, as the Svea Court of Appeal has in this situation.
Whilst the result, in this author’s view, is the correct one, the Svea Court of Appeal confirmed that the issues raised in this case were important, and accordingly, the losing party, the applicant, is permitted to petition the Supreme Court of Sweden (Högsta domstolen) to see if it wants to take up the case. If it does not petition, and/or the Supreme Court does not take it up, the judgment of the Svea Court of Appeal is final.
Judgment
The Svea Court of Appeal (Svea hovrätt) of Sweden delivered its judgment in Case T-2082-23 (Mål T 2082-23), OAO Tyumenneftegaz v First National Petroleum Corporation on 28 June 2024, and the judgment is on file with the author.
Suggested citation
Graham Butler, ‘Svea Court of Appeal: EU restrictive measures (sanctions) cannot halt commercial arbitration as parties to disputes continue to have access to research and legal services necessary for arbitral proceedings’, Nordic Institute of European Legal Studies, 20 August 2024.