Arbitral award in investment dispute declared invalid

In May 1987, some European countries, including Luxembourg and Poland, concluded an agreement on the mutual encouragement and protection of investments (the investment agreement). A company registered in Luxembourg acquired shares in two Polish banks which were later merged. A financial authority in Poland suspended the voting rights of the shares in the bank and decided that the shares should be forcibly sold. In Sweden, the company initiated an arbitration against Poland under the investment agreement. After a challenge of the arbitral award, the question arose of invalidity of the award. The Court of Appeal concluded that it should not be invalidated. After obtaining a preliminary ruling from the Court of Justice of the European Union the Supreme Court, sets the judgment of the Court of Appeal aside and declares the arbitral award invalid.

The Supreme Court raised the question of whether the principles laid down by the Court of Justice of the European Union in a previous ruling not only invalidate an arbitration clause under a so-called intra-EU investment agreement, but also prohibit an investor and a Member State from concluding, through their conduct in the proceedings, an arbitration agreement under the same conditions as under the investment agreement for a particular dispute.

Following a request of a preliminary ruling by the Supreme Court on this issue, the CJEU concluded that Articles 267 and 344 of the Treaty on the Functioning of the European Union must be interpreted as precluding national legislation which allows a Member State to conclude a specific arbitration agreement with an investor from another Member State, that makes it possible to continue the arbitration proceedings initiated on the basis of an invalid arbitration clause under an investment agreement.

The question remained of whether the preliminary ruling should be set aside or declared invalid under the Arbitration Act. The Supreme Court held that the award was invalid in view of the fact that the manner in which it arose was manifestly incompatible with the fundamental principles of Swedish law.


Case No: T 1569-19

Contact persons

Cecilia Andgren, Judge referee

Tel: +46 8 561 666 44

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