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The Swedish and Russian approach to public policy: One case, two opinions


The public policy exception to the enforcement of arbitral awards has traditionally been applied very narrowly, for example, where a failure to vacate the award would violate the due process rights of the participants. However a recent case illustrates the contrasting approaches of the Swedish and Russian courts in this regard. In a recently published article I discuss both the Swedish and Russian court rulings and consider the implications for both freedom of contract and arbitration as a method of dispute resolution in each jurisdiction.

Background

On 21 March 2006, a Russian company, PAX-Designs LLC (PAX) and a Swiss company, Connyland AG (Connyland) entered into a contract under which PAX sold an amusement park ride “Cobra” (the property) to Connyland. According to the agreement, PAX were to deliver and install the ride.

The contract contained an arbitration clause naming the Arbitration Institute of the Stockholm Chamber of Commerce (SCC)) as the forum. Swiss law was chosen as the governing law of the contract.

The parties subsequently became involved in two separate arbitration proceedings.

Arbitration procceding # 1. As a result of defects to the property and a delay in the delivery, Connyland commenced arbitral proceedings. On 15 May 2012, the panel of arbitrators, which included an arbitrator from Russia, awarded more than €500,000 in Connyland’s favour.

Arbitration proceeding # 2. After the award of May 2012, PAX requested new arbitral proceedings, claiming that Connyland should be ordered to return the property to PAX. The grounds for PAX’s action were based on alleged gaps in the contract. Section 7.1. of the contract, regulating the issue of the transfer of ownership, read as follows: «The right of property to the ride shall be transferred to the Buyer after the signing of the final Acceptance Report by both Parties and the transfer the final amount»., Section 4.3. of the contract prohibited the operation of the property without the final Acceptance Report, but the final Acceptance Report could only be signed after one year of operation.

Connyland objected to the claims by PAX and on 14 November 2013, the arbitral tribunal found in favour of Connyland, affirming its right as the owner of the property.

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