ICCA Focus on Sweden

• applicable law to substance determined by arbitral tribunal
• applicable law to substance is law of country of closest connection
• discretion of arbitrator to determine applicable law to substance
• applicable law to substance and choice of seat of arbitration
• Hong Kong law applied
• seat of arbitration determined by arbitral institution
• CISG is not part of the law of Hong Kong
• interpretation of arbitration clause
• interpretation of contract
• nominal v. actual contract
• hidden defects of goods
• timely notification of defects (no)
• reimbursement of payment (no)
• proof of damage (no)
• mining of cryptocurrencies

Yearbook XLVI (2021) pp. 120-126

seat of the arbitration: Stockholm, Sweden

• breach of contract by wrongfully terminating connected contract
• pacta sunt servanda
• Swedish law applied
• valuation of shares subject to put option right
• calculation of damages
• interest
• modification of claim (interest) under SCC Rules
• modification of claim after cut-off date
• apportionment of legal costs
• legal costs in proportion to unsuccessfulness
• reasonable legal costs
• costs of arbitration shared equally by parties

The sole arbitrator decided a dispute concerning the effects of the premature termination by the respondent of a Distribution Agreement concluded with a company (the distributor), in which the present claimant was a minority shareholder, on an Option Agreement between the respondent and the claimant. The Option Agreement, which was governed by Swedish law, established both a call option right for the respondent and a put option right for the claimant. The respondent had terminated the Distribution Agreement two years before the contractual expiry of the current term; this termination had been deemed unjustified in a previous SCC award between the respondent and the distributor. The claimant argued that the unjustified premature termination had destroyed the business of the distributor, and thereby negatively affected the claimant's put option right in respect of its percentage of the distributor's shares under the Option Agreement, since the value of the put option was to be calculated based on the sales made by distributor in the preceding 12 months. (1) Based on the language of the two agreements, a related agreement, and the parties' correspondence, the arbitrator held that the Distribution Agreement and the Option Agreement were closely related, so that a wrongful termination of the Distribution Agreement constituted a breach of the Option Agreement. By making it impossible for the claimant to exercise its put option right before the contractual expiry of the Distribution Agreement through its unjustified termination, the respondent had breached the Option Agreement and was required to pay damages to the claimant. The arbitrator rejected the respondent's argument that while the Option Agreement expressly required the claimant, in respect of the respondent's call option, not to take any action that could adversely affect the business of the distributor, the claimant had not asked for a similar protection in respect of its put option right and therefore lacked such protection. The arbitrator explained that the claimant could rely on the principle of pacta sunt servanda, i.e., could expect that, absent a breach, the Distribution Agreement would remain in force and create the opportunity for the exercise of the put option. (2) As to the quantum of the damages, the sole arbitrator held that the claimant failed to prove the assumption of sales and commissions growth on which it based its calculation. Referring instead to the historical sales numbers and the arguments of the parties in the arbitration, the arbitrator held that only a much smaller amount of commissionable sales in the relevant period was proved, leading to damages of about one-fourth of the damages claimed by the claimant. (3) The arbitrator granted the claimant's claim for interest in accordance with the Swedish Interest Act from the date of the request for arbitration until full payment under the award. He denied the argument of the respondent that the claim should be rejected because the claimant had modified it – in response to a remark from the arbitrator as to, inter alia, the starting date of the interest claimed – after the general cut-off date set forth in a procedural order. The arbitrator explained that the general cut-off date did not exclude the application of Art. 30 of the SCC Rules, according to which a party could amend or supplement its case prior to the close of the proceedings. In this case, the proceedings had not yet been closed on the date of the modified request. (4) Considering that the claimant had prevailed on the breach of contract issue, on which considerable resources had been spent by both parties, but had been granted only about a fourth of the damages claimed, the arbitrator held that the claimant should bear its own legal costs and reimburse Respondent for one third of its legal costs – which were significantly lower than the costs claimed by the claimant and thus to be deemed reasonable – and that the parties were to bear the costs of the SCC arbitration equally.

Yearbook XLVI (2021) pp. 127-130

seat of the arbitration: London, United Kingdom

• license agreement
• Swedish law applied
• interpretation of contract
• right of first refusal
• cost allocation under English law
• reasonable legal costs

The award resolved a dispute centered on the parties' conflicting interpretations of the term “Line Extension Products”, and the extent of a right of first refusal in a License Agreement governed by the law of Sweden. The arbitral tribunal found that the product that was the subject of the dispute qualified as a Line Extension Product according to the clear terms of the relevant provisions in the parties' License Agreement. Therefore, the respondent had a right of first refusal in respect of that product. The broad language of the clause that contained the definition of the term “Line Extension Products” had to be read in conjunction with the narrower language of the definition “of Line Extension Products” in the clause concerning the right of first refusal. The latter clause comprised a non-exhaustive illustrative list of new developments of a product that would subject it to a right of first refusal. The arbitral tribunal found that each of the new developments listed applied to the product at issue. Moreover, each of the declarations the claimant sought in its request for relief would have required the tribunal to exclude from the definition of “Line Extension Products” one, several, or all of the new developments of the non-exhaustive list. Having granted to the respondent the relief it requested, the arbitral tribunal ordered the claimant to pay the costs of the arbitration and the respondent's legal costs, with the exception of the costs the respondent had claimed for the time its in-house counsel had spent on the dispute, as there was no evidence that the respondent had incurred extra costs for that time.

Yearbook XLVI (2021) pp. 131-136

seat of the arbitration: Malmö, Sweden

• interpretation of contract
• share purchase agreement
• Swedish law applied
• limitation of liability
• termination of contract due to breach of contract
• apportionment of legal costs
• arbitration costs in proportion to unsuccessfulness

The case concerned the termination of a share purchase agreement governed by Swedish law. The sellers (Claimants 1-17) had terminated the agreement for the sale and purchase of shares in a company they owned because the purchaser had failed to find the necessary additional funding by the agreed closing date. The purchaser did not contest that its failure amounted to a breach of contract, but argued (i) that its liability was contractually limited to the proved costs incurred by the sellers in respect of the sale, or (ii) that the sellers' right to damages had expired because of their conduct following the missed closing date. (1) The arbitral tribunal held that the liability of the purchaser was contractually limited. The argument of the sellers that there was a drafting mistake in the limitation clause was unsupported by the wording of the clause and not justified by an alleged internal contradiction. The tribunal found that the wording of the clause also supported a finding that the clause applied even if termination was executed not on the basis of the clause itself but, as claimed by the sellers, on general principles of Swedish contract law. The tribunal then determined, on the facts of the case, the reimbursable costs. (2) The arbitrators rejected the objection of the purchaser that the sellers' right to damages had expired, finding that, on the contrary, the sellers had made it clear to the purchaser on several occasions, after the missed closing date and onwards, that they considered the purchaser to be in breach of its contractual obligations. The fact that the sellers did not terminate the agreement until one year later did not affect this conclusion.

Yearbook XLVI (2021) pp. 137-141

seat of the arbitration: Stockholm, Sweden

• adaptation of contract
• sale and purchase contract
• breach of contract by failure to pay invoice(s)
• fall in the product’s price
• United Nations Convention on Contracts for the International Sale of Goods (CISG) applied
• Russian law applied
• Cost and Freight (CFR) per INCOTERMS (International Rules for the Interpretation of Trade Terms) (2010)
• currency regulations (Russian Federation)
• rate of interest
• starting date of interest
• calculation of interest
• contractual penalty not punitive/excessive
• arbitration costs in proportion to unsuccessfulness
• legal costs in proportion to unsuccessfulness
• reasonable legal costs

The award dealt with a dispute arising in respect of two orders placed under a contract between the parties, which was governed by the United Nations Convention on Contracts for the International Sale of Goods (CISG) and subsidiarily by Russian law. Delivery was Cost and Freight as per Incoterms 2010.The sole arbitrator upheld the seller's right to full payment of invoices for ordered goods and for interest as contractually agreed. The buyer had paid for delivery of a first lot of goods but had asked the seller to hold the second and first lots until it found end buyers, following a drop in the goods' price, and had then sought to lower the contract price. The sole arbitrator denied the buyer's contentions that it was common industry practice that the terms of specific orders could be revised in response to changing market conditions, and that the seller had misled the buyer into believing that it had agreed to a lower price by its conduct. The sole arbitrator ruled that industry practice and evidence of other instances in which orders had been altered could not override the explicit terms of the contract between the parties, which clearly stated that once an order was placed and accepted, its specific terms formed a binding contract in respect of the agreed quantity and price, and could not be changed without both parties' consent. The contract moreover stated that any difficulties the parties encountered in meeting their obligations under the contract would serve as no excuse for failure to meet those obligations. The sole arbitrator found that the buyer could not infer any agreement on the seller's part to revise the terms of the orders by the seller's agreeing to cancel the second order. The seller had clearly indicated in correspondence that it regarded that cancellation as a favor, and not as a right to be exercised at the buyer's discretion. The buyer also could not rely on the seller's acceptance of partial payment and waiver of penalty fees for late payment of certain invoices as an indication of agreement or a waiver of the seller's rights. The sole arbitrator thus ordered the buyer to pay the outstanding sums for the ordered goods, as well as the costs the seller incurred in relation to the arbitration, the costs of the sole arbitrator, and the fees of the SCC plus accrued and penalty interest. The arbitrator rejected the buyer's claim that the contractually agreed penalty interest rate of 15 percent was too high, given the prevailing 7 to 7.5 percent rate of the Bank of the Russian Federation during the relevant period, pointing out that penalty interest rates often ran considerably higher than normal interest rates. Moreover, the buyer had not provided evidence for its position that it would be possible for the arbitrator, pursuant to the applicable CISG and Russian law, to revise the contractually agreed interest rate.

Yearbook XLVI (2021) pp. 142-146

seat of the arbitration: Stockholm, Sweden

• bad leaver v. good leaver
• Swedish law applied
• leaver provision in shareholders agreement
• obligation to purchase shares of good leaver
• interpretation of contract
• evaluation of evidence
• arbitration costs in proportion to unsuccessfulness
• legal costs in proportion to unsuccessfulness

The award resolved a dispute concerning the interpretation of the terms “Good Leaver” and Bad Leaver”, and the compensation to be paid to a departing CEO and shareholder on his exit from the respondent company, pursuant to a shareholders agreement (SHA) governed by Swedish law. The claimant contended that he had retired from his position as CEO, and was therefore a Good Leaver entitled to compensation of his shares at full market value according to the terms of the SHA. The sole arbitrator instead determined that the claimant had resigned voluntarily, which qualified him as a Bad Leaver. The respondent therefore was not obligated to purchase the claimant's share but had a right to do so if it so wished. According to Swedish law, the definition of the terms “Good Leaver” and “Bad Leaver” fell within the parties' freedom of contract. Where the parties had clearly expressed their joint will in a written agreement, that agreement served as an independent basis for interpretation. The sole arbitrator found that it was clear from the evidence that the SHA had been drafted on the shareholders' joint instruction. She considered that the wording of the relevant clause in the SHA was clear and unambiguous. Moreover, it clearly reflected the general purpose of Good Leaver/Bad Leaver clauses to motivate shareholders to promote the success of a company, so that the circumstances qualifying someone as a Good Leaver – death, illness and redundancy – were all circumstances outside of an individual's control. She therefore deemed it sensible to consider that the parties to the SHA would have wanted to characterize as a Bad Leaver someone who had resigned and subsequently went to work at another company, as the claimant had done. The sole arbitrator further ordered the claimant to pay the respondent's legal costs and the costs of the arbitration.

Yearbook XLVI (2021) pp. 147-151

seat of the arbitration: Stockholm, Sweden

• applicability of arbitration clause to preexisting obligations
• sales and purchase contract
• European Union law applied
• jurisdiction based on arbitration clause in connected contract
• expectation that existing issue be governed by arbitration clause
• burden of proof of damage
• counterclaim

The claimant – a company appointed by the bankruptcy trustee to manage a company in insolvency which produced a certain product – sought payment for a delivery of product under a sales and purchase contract governed by the “substantive law which is valid in the territory of the European Union”. The sole arbitrator granted this claim, which was undisputed, together with interest. He then denied both counterclaims for set-off filed by the respondent: a counterclaim for reimbursement of the costs for registering the product to comply with an EU directive; and a counterclaim for the costs to repair damages to three containers used for transporting the product, allegedly occurred through incorrect handling while the containers were in the custody of the claimant. (1) In respect of the first counterclaim, the registration costs claim, the sole arbitrator held that he lacked jurisdiction. First, the meeting and the telephone call in which the claimant allegedly agreed to take over the managed company's responsibility for compensating the respondent for these costs predated the contract containing the arbitration clause. Hence, the claimant could not have agreed to be bound by a not-yet existing arbitration clause in respect of this responsibility. Second, the conditions for extending the arbitration clause to pre-existing obligations were not met. Pursuant to this “rarely used exception”, an arbitration clause could govern pre-existing obligations not specifically referred to in the clause, where either the contract giving rise to the pre-existing obligation and the contract containing the arbitration clause were so closely connected that it would be nearly impossible to separate the undertakings under both, or it could be assumed that the parties expected all issues, including issues under the previous contract, to be covered by the arbitration clause, even if that assumption was not expressed in any way. This was not the case here: the alleged undertaking to pay the registration costs was not so intertwined or closely connected with the Contract to be covered by the arbitration clause in the Contract without a clear reference, and it could not be assumed that the parties expected a dispute regarding the alleged registration costs undertaking, to be governed by the arbitration clause. (2) In respect of the second counterclaim, the container damages claim, the arbitrator held that he had jurisdiction as the claim was closely connected to the Contract, though not mentioned therein. However, the claim failed on the merits because, on the facts of the case, the respondent could not meet its burden to prove that the containers were damaged whilst under the custody of Claimant.

Yearbook XLVI (2021) pp. 152-158

seat of the arbitration: Stockholm, Sweden

• exclusive distribution agreement
• termination of contract due to breach of contract
• Swedish law applied
• Swedish Commercial Agents Act
• interpretation of contract
• burden of proof
• breach of contract by termination of contract
• notice of damages (claim)
• calculation of damages
• commission fee on future sales
• judicial precedent as to loss of future profits
• discretion of arbitrator to apportion legal and arbitration costs
• legal costs in proportion to unsuccessfulness
• reduction of legal fees
• arbitration costs in proportion to unsuccessfulness
• expedited arbitration

The sole arbitrator decided, in expedited arbitration proceedings, a dispute concerning the manufacturer's premature termination of a distribution agreement governed by Swedish law, and subject in particular to the Swedish Commercial Agents Act. The arbitrator made six findings: (1) according to a general principle of Swedish law with regard to the termination of fiduciary legal relationships – which principle the arbitrator found to be applicable to agency relationships, though not expressly included in the Commercial Agents Act – premature termination ended such a relationship, regardless of whether the termination was justified or not. Hence, the distribution agreement had come to an end here, even if the arbitrator found the termination to be unjustified, since (2) the manufacturer failed to prove that the distributor's breach of contract had been so serious as to justify termination. While the distribution agreement did not contain a seriousness requirement, the Commercial Agents Act contained a mandatory provision that the breach be of material importance for the terminating party. (3) As a consequence, the manufacturer was liable to pay damages to the distributor, because the unjustified premature termination of an agency agreement constituted in principle a breach of contract. In accordance with Sect. 34 of the Commercial Agents Act, however, it was necessary that the other party did not forfeit its right to damages by failing to claim them without unreasonable delay. Here, the distributor added damages to the declaratory relief originally sought only in its fourth submission in the arbitration (Claimant's Submission no. IV – C IV), that is, with unreasonable delay. However, the contents of the letter it timely sent to the manufacturer three weeks after receiving the notice of termination reasonably fulfilled the requirements of Sect. 34, although the letter did not expressly state that the distributor would submit a claim for damages, and referred instead to a claim for sales commissions. (4) The arbitrator then quantified damages. The distributor put forward two separate claims: a performance claim for damages for the period between the termination and C IV, and a declaratory claim for damages for the period between C IV and the contractual expiry of the distribution agreement. As to the declaratory claim, the arbitrator deemed it substantiated that the distributor would have earned at least some sales commissions if the distribution agreement had continued in force, and granted a declaration that the distributor was entitled to damages for that period, equivalent to what it would have received in sales commission minus the related costs. As to the performance claim, the distributor was entitled to damages calculated on the basis of past earnings, but failed to meet the high standard to prove its claim that its earnings would have increased in the relevant period, particularly taking into account the impact of the Covid-19 pandemic on the Utopian economy. (5) The sole arbitrator then found that a clear contractual provision entitled the distributor to an indemnity following the termination of the distribution agreement, equivalent to a two-year commission, minus normal expenses for sale collection and sale-related travel, based on the commissions received during the two preceding years. (6) Finally, the distributor was entitled to penalty interest on the damages and indemnity claims, in accordance with the Swedish Interest Act, as of the date of C IV, the submission in which it raised those claims.

Yearbook XLVI (2021) pp. 159-162

seat of the arbitration: Stockholm, Sweden

• sales and purchase contract (shares)
• conclusion of contract under coercion
• access to bank account
• interpretation of contract
• unjustified expenses in interest of company
• fiduciary duty on bank account

The award concerned a dispute under a contract for the sale by the individual seller of shares in a company he owned. The governing law of the contract was not indicated. (1) The sole arbitrator granted the seller's claim for payment of the last instalment of the purchase price, which was undisputed. The arbitrator then granted the buyer's counterclaims in part. (2) First counterclaim: Subsequent to the share purchase contract, the parties had concluded an amendment agreement lowering the purchase price and altering the payment conditions. The buyer claimed that this agreement was null and void because the buyer had been coerced into entering into it as the sole manner to obtain access to the company's bank account, which the seller was withholding. The sole arbitrator dismissed as “odd” and unsupported by the text of the relevant provision the seller's argument that the contractual obligation to hand over the company's “accounts” on the closing date only referred to the documentary accounts, not to the company's bank accounts. He then found that it appeared from the evidence that the seller had clearly used access to the bank account as leverage to obtain certain earn-out payments, and that the need to resolve that issue had led to the amendment agreement. However, this did not amount to coercion, since the buyer had other means at its disposal to resolve the situation, such as seeking interim relief in SCC emergency arbitration proceedings. (3) Second counterclaim: the arbitrator ordered the seller to reimburse the buyer for monies the seller had undisputedly spent by using the company's bank account, which he could not justify as company expenses – thereby violating the fiduciary duty he had assumed by keeping control of a bank account he had no right to.

Yearbook XLVI (2021) pp. 163-168

seat of the arbitration: London, United Kingdom

• expedited arbitration
• SCC Expedited Rules 2017
• withdrawal of claim
• abuse of process by attempt to withdraw claim
• dismissal for failure to post security for costs
• judicial precedent as to dismissal of claim with prejudice
• legal costs in proportion to unsuccessfulness
• discretion of arbitrators in allocating legal costs
• reduction of legal costs
• discretion of arbitrator to reduce legal costs
• challenge of arbitrator

The sole arbitrator, deciding in expedited arbitration proceedings, held that the claimant was not entitled to withdraw his claim unilaterally. The claimant had refused, without explanation, to comply with both the arbitrator's decision that he give security for costs in accordance with Sect. 39(3) of the SCC Expedited Rules, and with the arbitrator's peremptory order to do so, issued in accordance with Sect. 41(5)-(6) of the English Arbitration Act 1996, the lex arbitri. (1) The arbitrator found that the claimant could not circumvent these provisions by purporting to withdraw his claim. Moreover, the claimant was clearly seeking to put himself in the position where he would be able to bring his claim before a different tribunal. In these circumstances, the claimant's attempt to withdraw his claim constituted an abuse of process and a violation of the obligation, implicit in the agreement to arbitrate under the SCC Expedited Rules, to act efficiently and expeditiously, and ought to be disregarded. (2) The arbitrator then held that the claim should be dismissed as a consequence of the claimant's failure to provide security for costs, in accordance with both Art. 39(3) of the SCC Expedited Rules and Sect. 41(6) of the Arbitration Act 1996. (3) Applying English precedent, the arbitrator dismissed the claim with prejudice, reasoning that to do differently would be an abuse of the procedure of arbitration under the Arbitration Act 1996, and manifestly unfair to the respondent. (4) The arbitrator found that the respondent was entitled to reimbursement of its costs under both the SCC Expedited Rules and the Arbitration Act 1996, in application of the general principle under the Rules that costs follow the event – which was unaffected by considerations of party conduct, as the actions of both parties could be open to criticism and therefore balanced themselves out. (5) The arbitrator found that the costs claimed ought to be reduced to 75 percent: while it had been reasonable for the respondent to engage both leading and junior counsel, and both the time devoted by them to the case and their hourly rates were reasonable, possible excess or duplication of work had to be taken into account. (6) The arbitrator granted the interest claimed by the respondent, 1 percent above the official UK base rate between the date of the award and payment, in accordance with the relevant provision of the Arbitration Act 1996.

Yearbook XLVII (2022) pp. 78-84

seat of the arbitration: Stockholm, Sweden

• condition precedent to arbitration
• expedited arbitration under 2017 SCC Rules for Expedited Arbitrations
• multiple respondents
• jurisdiction and non-participation in arbitration proceedings
• breach of contract and obligation to negotiate
• breach of contract by not proceeding with transaction
• breach of contract by not responding to notice of arbitration
• law of England applied to substance
• loan agreement
• arbitration costs in proportion to unsuccessfulness
• legal costs in proportion to unsuccessfulness

The sole arbitrator resolved a dispute over repayment of a loan pursuant to a loan agreement, governed by English law, and held that the respondents were jointly and severally liable for repayment of the sum lent by claimant plus accrued interest. The first respondent, the borrower, did not participate in the arbitration proceedings. (1) The arbitrator rejected the objection to his jurisdiction raised by the second respondent, the guarantor, dismissing the contention that the claimant had failed to comply with the requirement in the loan agreement’s dispute resolution clause that the parties first attempt to settle any disputes through negotiation before commencing SCC arbitration. The arbitrator explained that while the negotiation clause in the loan agreement was enforceable pursuant to English law, because it specified a time period within which negotiations had to take place, the claimant had complied with its obligation to attempt to settle the dispute in good faith by sending a notice of dispute to the respondents and inviting them to reply. The claimant had also not been required to propose a specific date, place, and format of the negotiations, or to actively seek a response. Moreover, the respondents’ failure to respond to the notice of dispute was in itself a breach of the obligation to negotiate. The arbitrator also dismissed the second respondent’s contention that it had never received the notice of dispute. (2) The arbitrator determined that, pursuant to the 2017 SCC Rules for Expedited Arbitrations, he had jurisdiction over the first respondent, despite its lack of participation in the arbitration, because the claimant’s claim against the first respondent had been properly made out: the claimant had proven that the parties had concluded the loan agreement, that the copy of the loan agreement submitted by the claimant was a true copy, and that the first respondent had not repaid the loan. (3) The arbitrator rejected the second respondent’s contention that the claimant’s decision not to proceed with a related transaction in the Loan Agreement – by which the claimant would acquire a 50 percent stake in the first respondent through the conversion of the amount of the loan plus accrued interest into equity – was a breach of the loan agreement that discharged the second respondent from its liability as guarantor. The arbitrator found that, although the claimant had had a positive obligation under the loan agreement to complete the transaction, the obligation had been contingent on the claimant having concluded that there were no legal and financial risks involved in doing so. The due diligence that claimant had already carried out in respect of the loan agreement itself sufficed to assess those risks; the claimant had not been obliged to carry out additional due diligence specifically related to the transaction as the second respondent argued. Hence, the arbitrator was satisfied that the claimant had based its decision not to proceed with the transaction in accordance with the terms of the loan agreement. Pursuant to the loan agreement, the non-completion of the transaction thus triggered the second respondent’s liability as guarantor. (4) The arbitrator therefore (i) ordered the respondents jointly and severally to repay the loan plus interest and the costs of the arbitration; and (ii) in light of the first respondent’s non-participation and that most of the defences related only to claims against the second respondent, ordered that the respondents jointly were liable for one-third of claimant’s reasonable costs, and that only the second respondent was liable for the remaining two thirds.

Yearbook XLVII (2022) pp. 85-90

seat of the arbitration: Stockholm, Sweden

• interpretation of contract
• non-compete clause
• waiver of non-compete obligation
• applicable law to waiver of non-compete obligation
• adjustment of claim for unreasonableness (Sect. 36 Swedish Contract Act)
• law of Sweden applied to substance
• expedited arbitration under 2017 SCC Rules for Expedited Arbitrations

The sole arbitrator resolved a dispute concerning whether compensation to be paid to the claimant on leaving the respondent company, pursuant to an agreement governed by Swedish law, was to be considered as severance pay or as compensation for the obligation not to compete with the respondent and its subsidiaries, and whether the respondent had the right, pursuant to Swedish law, to unilaterally waive the non-compete obligation. (1) On the basis of an overall assessment of the agreement, considering its drafting history, wording, nature and purpose, as well as the relevance of a prior agreement between the claimant and the company that had originally employed him, which subsequently had become a subsidiary of the respondent, the sole arbitrator ruled that the agreement was primarily an agreement for compensation not to compete but that it also comprised elements of severance pay. (2) The arbitrator then determined that Swedish labor law was the law applicable to the question of whether the respondent could unilaterally waive the non-compete obligation. He rejected the claimant’s contention that Swedish contract law applied because the agreement ought to be interpreted as a shareholder agreement, rather than an employment agreement, because the claimant had not been employed directly by the respondent but by one of the respondent’s subsidiaries. The arbitrator pointed out that the claimant had not submitted any evidence on the relationship between the subsidiary and the respondent, or any legal reasoning to support this argument; furthermore, in other contexts, the claimant had argued that the relationship was an employer-employee relationship. (3) The arbitrator held that the respondent had not been entitled to waive the non-compete clause with the effect that the claimant’s right to compensation ceased. Although there appeared to be a general trend in the literature on an employer’s entitlement to unilaterally waive a non-compete agreement pursuant to Swedish labor law, that right was based on certain presumptions – that the purpose of the non-compete clause was to protect the employer, that the payment of compensation ceased at retirement, and that the unilateral waiver would not be unreasonable – which were not applicable in the present case. Moreover, the former CEO of the respondent, who had been involved in negotiating the agreement, had conceded in oral testimony that the obligations under the agreement could only be waived by mutual agreement, not unilaterally. (4) The sole arbitrator rejected the respondent’s request to adjust the sum claimed by the claimant, which the respondent had argued was in contravention of the Swedish Contract Act because it included sums for bonus pay, holiday pay, supplementary provisions and social charges in calculating the sum owed for severance pay. The arbitrator explained that the Swedish Contract Act was not relevant here, because at the time the agreement was negotiated, the respondent had considered that the sum was reasonable. (5) The sole arbitrator ordered the respondent to bear the costs of the arbitration and compensate the claimant for his costs.

Yearbook XLVII (2022) pp. 91-95

seat of the arbitration: Stockholm, Sweden

• refund of prepayment for delivery under umbrella sale and purchase contract
• United Nations Convention on Contracts for the International Sale of Goods (CISG)
• choice for CISG as governing law
• discretion of arbitrator to determine applicable law to substance for matters not governed by CISG
• obligation to supply from specific manufacturer
• fundamental breach of contract under CISG
• good faith (venire contra factum proprium)
• good faith (Verwirkung) in German law
• legitimate expectation of waiver to claim breach of contract
• notice of termination of contract under CISG
• termination of contract for delay in delivery
• contractual penalty depends on claim of breach on agreed delivery date
• arbitration and legal costs in proportion to unsuccessfulness
• SCC Arbitration Rules 2017

The sole arbitrator decided a dispute concerning a delivery of a chemical product under an umbrella sale and purchase contract. The buyer had paid the full contractual price for the delivery in advance, but the seller had incurred a delay because of a dispute with the product’s manufacturer. While the parties were discussing solutions, including supply by an alternative manufacturer, the buyer allegedly terminated the contract as to the delivery at issue. It then commenced SCC arbitration, claiming to have terminated the contract and demanding return of the advance payment, together with interest, and contractual delay penalties. (1) The arbitrator first determined the applicable law, as she was allowed to do under Art. 27(1) of the SCC Rules 2017, and decided that German substantive law applied to the contract in respect of matters not directly governed by the 1980 United Nations Convention on Contracts for the International Sale of Goods (CISG), on whose application the parties had agreed. (2) The arbitrator held on the merits (i) that the contract had not obliged the seller to obtain the chemical from a specific manufacturer; (ii) that the delay in delivery had not constituted a fundamental breach of contract within the meaning of Art. 25 of the CISG in this case, because it appeared from the evidence and from the conduct of the buyer – which had discussed the possibility of a later delivery – that timing had not been of the essence; (iii) that the seller had acted in good faith at all material times; and (iv) that the buyer had breached the good faith principle in Art. 7 of the CISG and Sect. 242 of the German Civil Code (venire contra factum proprium), because it had failed to timely raise the delay in the delivery as material breach of the contract and to exercise its right to claim breach, thus entitling the seller to have a legitimate expectation that the buyer had waived its right to claim the breach.. (3) The arbitrator established that the buyer had not validly terminated the contract: none of its letters constituted a proper letter of termination, and the buyer could not have validly terminated the contract for non-fundamental breach under Art. 49(1)(b) of the CISG, because it had not granted the seller additional time to perform. (4) The arbitrator therefore concluded that the buyer was not entitled to a refund of the advance payment. As a consequence, the claim of interest on that sum became moot. (5) The buyer was not entitled to a contractual penalty, because it had not claimed the breach of the contract on the agreed delivery date, as it ought to have done in accordance with the contractual penalty clause. The parties’ negotiations of a possible late delivery showed that the existing delivery date was no longer the agreed delivery date for the purposes of the contract. (6) The sole arbitrator ordered the buyer to bear the costs of the arbitration and the legal costs of the seller.

Yearbook XLVII (2022) pp. 96-100

seat of the arbitration: Stockholm, Sweden

• conditions to be fulfilled for transfer of shares
• common intention of parties as to contractual requirements
• interpretation of contract and filling of gaps
• filling of contractual gaps requires mutual consent of parties
• contractual delay penalty
• apportionment of arbitration costs
• apportionment of legal costs
• law of Sweden applied to substance
• expedited arbitration under 2017 SCC Rules for Expedited Arbitrations

The sole arbitrator decided a dispute arising from the transitional term sheet signed by the parties following the termination by the respondent of the distribution agreement between them. The claimant principally sought orders under the term sheet that the respondent transfer all business related to certain products in a certain territory to the subsidiary established by the respondent in Xanadu; transfer 15 percent of the shares in the Xanadu subsidiary to the claimant at nominal value; and provide financial statements to the claimant to be used for the shares’ valuation. The parties agreed on expedited arbitration under the 2017 SCC Rules for Expedited Arbitrations, and on the application of Swedish substantive law. (1) The arbitrator held that the wording of the term sheet did not support a finding that the respondent had an obligation to transfer the business to the Xanadu subsidiary, because though it stated that the respondent had established the subsidiary for the purpose of distributing the products, it did not provide specifically that the respondent was to conduct business in the territory through that subsidiary; also, the term “business” was not specified. (2) The arbitrator held that the respondent was not obliged to transfer the shares, because the conditions for the transfer established in the term sheet – payment by the claimant of its outstanding debt, and the existence of a shareholders’ agreement – had not been complied with: (i) the claimant had not paid its outstanding debt, and it did not appear on the facts of the case that the parties had expressed a different common intent in this respect; and (ii) the draft agreement supplied by the claimant could not be deemed a shareholders’ agreement within the meaning of the term sheet through mere contract interpretation. Such finding would require the arbitrator to fill contractual gaps, which the arbitrator could only do based on a mandate given by both parties. There was no mutual consent here. (3) As a consequence of the finding that there was no obligation to transfer the shares, the arbitrator denied the claimant’s request that the respondent supply financial information relevant for the valuation of the shares. (4) The arbitrator also denied the counterclaims filed by the respondent: (i) as to the request that the claimant be ordered to pay its outstanding debt, the arbitrator found that the parties had agreed to set off a termination fee, which the respondent had not paid, against the outstanding debt; and (ii) as to the request that the claimant be ordered to pay liquidated damages, the arbitrator found that the contractual penalty in the term sheet was not triggered, because it appeared from the facts that the claimant had complied with its obligation to timely provide certain information. The fact that the respondent had requested additional information after the deadline did not alter this conclusion. (5) The arbitrator directed the claimant to bear 75 percent of the costs of the arbitration, and to compensate the respondent for 50 percent of its costs, together with interest, even though both claims and counterclaims had been denied, reasoning that the proceedings had mainly focused on the claimant’s claims.

Yearbook XLVII (2022) pp. 101-106

seat of the arbitration: Stockholm, Sweden

• time and material agreement
• compensation for work in excess of estimate
• margin of error of estimate
• interpretation of contract
• common intention of the parties
• burden of proof of relevance of work done
• waiver of contractual claim (no)
• expedited arbitration
• arbitration and legal costs in proportion to unsuccessfulness
• law of Sweden applied to substance

The sole arbitrator decided a dispute concerning an agreement under which the claimant developed and implemented an IT system for the entities in the respondent’s group. The agreement established a consultancy fee based on hourly rates and provided for an estimate of hours needed to perform the base scope of the project. It further specified that work parts not included in the estimate would be invoiced on a time and material basis in accordance with the established hourly rates. The respondent refused to pay invoices issued by the claimant, claiming that they exceeded the estimate, which, according to the respondent, was an agreed price cap. The parties agreed on expedited arbitration in Stockholm and the application of Swedish substantive law. (1) The sole arbitrator found preliminarily that both the claimant and the respondent could raise their claims in the arbitration: the claimant had consistently maintained that the agreement was on a time and material basis and it was claiming compensation for work exceeding the estimate, and the respondent had not objected to the number of hours charged by the claimant for the first time in the arbitration, but rather before. (2) Based on the text of the agreement and the facts of the case, the arbitrator found that the estimate in the agreement was not a price cap. However, this did not mean that the claimant could perform any work in relation to the agreement and be entitled to compensation for the time spent: it was for the claimant to show that the circumstances were such that the time for which it claimed compensation was reasonable. The arbitrator found this burden of proof to have been met in respect of time that did not exceed the estimate by more than 15 percent – the range of error in respect of estimates established in the governing Swedish law. In order to award compensation to the claimant beyond that threshold, the claimant ought to have provided strong supporting evidence. No such evidence had been provided. (3) The arbitrator directed the claimant to bear the costs of the arbitration and the legal costs of the respondent, finding that the respondent had to be deemed the winning party for the purpose of the apportionment of costs, since the claimant had been granted only about a tenth part of its claim.

Yearbook XLVII (2022) pp. 107-112

seat of the arbitration: Stockholm, Sweden

• share purchase agreement
• asbestos removal
• environmental risk
• conditions for closing agreement
• condition for returning deposit
• weight of parties’ correspondence for interpreting contract
• law of Sweden applied to substance

The dispute before the arbitral tribunal arose under a sale and purchase agreement (SPA) for the shares in a company that was the sole owner of a certain immovable good (the Property). The SPA was governed by Swedish law, and contained a clause for SCC arbitration. The parties had initially entered into a first agreement for the sale and purchase of the same shares (the First SPA), and the respondent (the buyer) had paid a deposit thereunder. The respondent had subsequently terminated the First SPA when the suspected presence of asbestos in the Property was confirmed by a consultancy firm report. The parties had renegotiated the deal and concluded the SPA at issue for a lower purchase price; its closing was conditioned upon, among others, asbestos remediation work being carried out on the parts of the Property indicated in the consultancy firm report. A remediation contractor submitted an offer and was hired. It eventually issued a certificate stating that it had completed the remediation work by removing the asbestos from parts of the Property and encapsulating it in the parts of the Property where removal was not possible. The buyer refused to close the SPA, claiming that the closing conditions were not fulfilled because not all asbestos had been physically removed from the Property. It then sought the return of the deposit it had paid under the First SPA. Pursuant to the SPA, the deposit was in principle non-refundable; non-refundability, however, was conditioned upon the sellers providing the buyer with a certification from the remediation contractor that the remediation work had been executed in accordance with the contractor’s offer. The sellers commenced SCC arbitration, seeking, inter alia, a declaration that the deposit was non-refundable; the buyer counterclaimed for compensation for any losses resulting from the sellers’ breach of the SPA. (1) The arbitral tribunal denied the sellers’ claim for a declaration that the deposit paid under the First SPA was non-refundable. It held, first, that the closing conditions had not been complied with, because the SPA required the removal of all asbestos indicated in the consultancy firm report. This conclusion was supported by the text of the SPA and its drafting history, and by the termination of the First SPA when asbestos had been discovered, so that it was clear that the buyer did not wish to purchase a property with asbestos. The offer submitted by the remediation contractor also contemplated complete removal: while the Swedish terms in the offer (demolition work/remediation work) were not specific and could be open to interpretation, the correspondence between the parties showed that only a complete removal of the asbestos had been contemplated. The tribunal dismissed the sellers’ argument that communications from individual sellers ought not be given weight when considering the intention of the sellers as a group, finding that contemporaneous documentation served as evidence of the discussions leading up to the signing of a contract, and merited to be given considerable weight in the tribunal’s assessment. Second, the tribunal held that the conditions for the non-refundability of the deposit also had not been complied with, since non-refundability required certification that the remediation work had been carried out in accordance with the offer of the remediation contractor. Regardless of certification, it was undisputed here that not all asbestos had been removed. (2) The tribunal dismissed the buyer’s counterclaim for damages. Although the notice of termination sent by the sellers had not explicitly referred to a clause in the SPA that gave a party the right to terminate the agreement, but had to be expressly invoked, the sellers were not barred from relying on that clause in the arbitration, because it appeared from correspondence that the sellers had indicated their intention to rely on that clause, and the buyer had acknowledged the sellers’ right of termination thereunder. Further, since not all the asbestos had been removed, the sellers’ termination of the SPA had not been unlawful, and the buyer was not entitled to damages for breach. (3) The arbitral tribunal ordered the sellers to bear 85 percent of the costs of the arbitration, and to reimburse the buyer for 85 percent of its reasonable costs.

Yearbook XLVII (2022) pp. 113-118

seat of the arbitration: Stockholm, Sweden

• limitation period to file claim
• commencement of period of limitation
• commencement of warranty period by conduct
• successive notices of defects
• law of Russian Federation applied to substance

The arbitral tribunal found by majority that the claims brought by the customer for works performed by the contractor, which had failed to reduce the water inflow in a tunnel owned by a third party (the owner), were time-barred under Russian law, chosen by the parties to be the governing law of the contract. (1) The tribunal held that the three-year limitation period under Art. 725(1) of the Russian Civil Code (CC) applied. This Article provided for a one-year limitation period for claims made in connection with the improper quality of work done under a work contract, but specified that the three-year limitation period in Art. 196 CC applied to “buildings and structures”. A 2013 Resolution of the Presidium of the Supreme Arbitrazh Court further established that the three-year limitation period in Art. 196 CC only applied to “capital”, rather than routine, works to a building or structure. Here, the works undisputedly concerned a “structure”, and the tribunal found that they were “capital”, as they had been extensive and aimed at accomplishing essential goals to the operation of the tunnel, because the protection of tunnels against water inflow was a fundamental aspect of tunnel safety and usability. (2) Pursuant to the Russian Civil Code, the limitation period started running (i) either from the moment a notice of defects was given within the warranty period, if a warranty period was established by law or the contract (Art. 725(3) CC); or (ii) from the day when a party learnt or should have learnt of the violation of its right and the identity of the appropriate defendant to a claim to protect that right, if there was no warranty period (Art. 200(1) CC). The arbitrators concluded by majority that a warranty period had commenced in the present case, and that Art. 725(3) consequently applied. While the contract provided that the warranty period would start on the date a summary acceptance protocol was signed, and no such protocol had been signed, there was support under Russian law for courts and tribunals to adopt a less formalistic approach by considering a wider set of circumstances in determining whether works were accepted and warranty periods commenced. Here, the contractor had informed the customer that it had reached a water inflow reduction which was lower than the reduction contractually agreed, but complied with the specifications of the contract between the customer and the owner of the site, and had warned that further work would likely cause an increase in the water inflow. The contractor had suggested that the customer deliver the works to the owner in their present state (the possibility of further work would be examined later). The customer’s transfer of the works to the owner shortly thereafter could be interpreted as an acceptance of the works, and therefore triggered the commencement of the warranty period. (3) The tribunal found that the customer had made a declaration of defects in the works within the warranty period. Two communications – separated by one year – both qualified as a declaration. The customer argued that only the more recent was a valid notice of defects, because only at that time was the customer aware of the precise reasons for the defects, having received an expert report from the owner of the tunnel. The majority of the tribunal held that it appeared from Russian jurisprudence that where there were multiple notices, the limitation period commenced following the first declaration of defects and was unaffected by subsequent notices, and that it was irrelevant that the customer understood the precise cause of the failure of the contractor’s work. It sufficed that, at the time of the first communication, the customer knew that the water inflow in the tunnel exceeded the contractually agreed level. Since the SCC arbitration had been commenced over three years after the first declaration of defects, the claims were time-barred. (4) The parties were each to bear their own costs, while the customer was ordered to bear the costs of the arbitration.

Yearbook XLVII (2022) pp. 111-122

seat of the arbitration: Stockholm, Sweden

• license agreement
• streaming services
• applicable law to arbitration agreement is law of place of arbitration
• arbitration clause binding on nonsignatory guarantor
• non-participation in arbitration proceedings
• joint liability of debtors
• expedited arbitration
• law of Sweden applied to substance
• starting date of interest
• rate of interest
• overdue payment interest is conceptually the same as late payment interest
• arbitration costs in proportion to unsuccessfulness
• legal costs in proportion to unsuccessfulness

The sole arbitrator resolved a dispute in respect of the payment of fees under a streaming rights licensing agreement governed by Swedish law, signed by the claimant as the licensor and the first respondent as the licensee, and a related amendment by which the second respondent guaranteed the first respondent’s obligations under the agreement. (1) The sole arbitrator held that although the respondents had not participated in the arbitration, he had jurisdiction because (i) the respondents had been notified of the proceedings and provided with the opportunity to participate; (ii) the licensing agreement contained a valid arbitration clause that covered the scope of the claim and was signed and stamped by both the licensor and the licensee; and (iii) although the second respondent, as guarantor, was not a signatory to the agreement, it was bound to the arbitration clause therein pursuant to the amendment to the licensing agreement, by which it had acknowledged and accepted joint liability for the first respondent’s obligations under the licensing agreement, and pursuant to Swedish case law, which held that a guarantor ought to be obliged to participate in arbitration proceedings brought by a creditor unless special circumstances led to a different conclusion. There were no such circumstances in the case at hand. The arbitrator specified that Swedish law, as the law of the seat of the arbitration, applied to the issue of jurisdiction. (2) On the merits, the sole arbitrator found that the licensor had complied with its obligations under the licensing agreement, and the respondents had not objected to the licensor’s performance or invoices. The arbitrator therefore granted the licensor’s claim, together with the costs of the arbitration, the licensor’s legal costs, and interest. As to interest, the arbitrator agreed with the licensor that the applicable rate was the 11 percent per annum rate for overdue payment provided in the agreement. He reasoned that overdue payment interest was conceptually the same as late payment interest; hence, it must be deemed that the parties agreed to vary the statutory late payment interest rate of six percent specified in the Swedish Interest Act.

Yearbook XLVII (2022) pp. 123-130

seat of the arbitration: Stockholm, Sweden

• compensation for design changes
• responsibility for consequences of design changes
• acceleration measures
• interpretation of contract
• pre-contractual duty of information
• pre-contractual duty of loyalty
• doctrine of failed assumptions (Norwegian law)
• unreasonableness of enforcing contract (Sect. 36 Norwegian Contracts Act)
• arbitration costs in proportion to unsuccessfulness
• legal costs in proportion to unsuccessfulness
• law of Norway applied to substance

The sole arbitrator decided a dispute concerning compensation for extra costs incurred by the buyer in relation to the construction of a plant (the unit). Claiming that the original design of the unit supplied by the buyer had been deficient and that the buyer ought to pay for the costs incurred because of the ensuing redesign, the builder had submitted three variation order requests (VORs): (i) a first VOR for costs due to acceleration measures taken to compensate for delays caused by the redesign; (ii) a second VOR for costs due to the increase – following the redesign – of the area to be treated with a certain product (the Area); and (iii) a third VOR for incentives paid to workers for working over the New Year, either as an acceleration measure or under the parties’ contract. The buyer counterclaimed for the costs the builder had saved by using an allegedly inferior product to treat the Area, and for the extra costs the buyer had incurred as a result of the builder’s decision to build part of the unit in a different city than the city indicated in the contract. (1) The arbitrator denied the claim under the first VOR, dismissing all the arguments raised by the builder. He held that: (i) the responsibility for the redesign of the unit lay with the builder. The contract – the primary factor to be examined in determining the common intention of the parties – strongly indicated that the responsibility for design was placed on the builder. On the facts of the case, this conclusion was confirmed by the parties’ negotiations, their justified expectations in connection with the conclusion of the contract, and their subsequent conduct. This responsibility extended to the work done by the designer and the consultant engaged by the buyer, before and after the conclusion of the contract; (ii) on the facts of the case, the builder had not shown that the buyer had breached its duty under Norwegian law to inform the builder of circumstances of material importance before the conclusion of the contract, and its duty of loyalty; (iii) the argument based on the Norwegian law doctrine of failed assumptions was unsuccessful, because the builder did not prove that it had relied on basic assumptions when entering into the contract, and that those assumptions had failed; and (iv) Sect. 36 of the Norwegian Contracts Act – according to which an agreement could be set aside or wholly or partially modified if it was unreasonable to enforce it taking into consideration, among others, its content and the circumstances at the time of its conclusion, subsequent circumstances, or the general circumstances of the case – did not apply here. The builder was a highly professional and experienced party that had been given ample documentation in respect of the project and its complexity, and had consciously taken the risk of entering into the contract. (2) The arbitrator denied the claim based on the second VOR, which consisted of two sub-claims. The first sub-claim – additional costs due to the fact that the redesign of the unit had increased the area to be treated with a certain product – was based on the same arguments and evidence invoked in respect of the claim under the first VOR, and failed for the same reasons. The second sub-claim also did not succeed: even if, as alleged by the builder, the area to be treated had been incorrectly indicated in the invitation to tender to which the builder had responded, the builder was an experienced company that had been provided with documentation sufficient to make its own calculations, and had in fact not relied on the disputed information. (3) The arbitrator denied the claim based on the third VOR, holding that the contract did not entitle the builder to compensation of incentives given to workers for working during holidays. Nor could this claim be granted as an acceleration measure, as the arbitrator had found that acceleration measures were the builder’s, not the buyer’s, responsibility. (4) The arbitrator then examined the two counterclaims filed by the buyer: (i) The first counterclaim concerned the costs saved by the builder by using an allegedly inferior product to treat the area; it failed because the evidence showed that the buyer had unconditionally accepted the product change. (ii) The second counterclaim sought compensation for extra costs incurred by the buyer as a result of the builder’s decision to build part of the unit in a different city than the city indicated in the contract. The arbitrator held that this was a breach of contract, and that the buyer was entitled to recover the costs of hiring two extra local inspectors, which it had proved to be connected to the change of location. The connection of other costs claimed by the buyer to the relocation was not established, and these costs could not be compensated. (5) The arbitrator apportioned costs based on unsuccessfulness, and directed the builder to bear 75 percent of the costs of the arbitrator and to reimburse Buyer for 75 percent of its legal costs.

Yearbook XLVII (2022) pp. 131-136

seat of the arbitration: Stockholm, Sweden

• interpretation of contract
• compensation for additional work
• contractual penalty for delay in delivery
• delay in delivery and liquidated damages
• liability for delay in delivery
• set-off
• delay interest
• rate of interest
• burden of proof
• law of Sweden applied to substance
• arbitration costs in proportion to unsuccessfulness
• legal costs in proportion to unsuccessfulness

The sole arbitrator decided a dispute concerning a contract under which the respondent subcontracted the erection of a number of metal towers (the works) within a project to the claimant. The contract established a price for the works and referred to the claimant’s offer – annexed to the contract – detailing the works and specifying the total weight of the structures and a per kilo price for that weight. Upon the (late) completion of the works, the claimant requested additional payment, based on the fact that the weight of the works delivered exceeded the weight stated in the contract. The claimant calculated the additional payment based on the per-kilo price set out in the offer. The respondent refused to pay and in turn raised a claim for penalty interest/liquidated damages due to claimant’s delay in completing the works, claiming that it was entitled to offset its claim against payment for work performed by the claimant. In the arbitration, the claimant also sought payment of additional work done in respect of a component of the works. The parties agreed that Swedish law applied to the substance of the dispute. (1) The sole arbitrator held that the claimant was not entitled to compensation for the additional weight of the works, finding that the contract set a fixed price and not a price per kilo that could be adjusted based on the final weight delivered. (2) The arbitrator granted reasonable compensation for the additional work done by the claimant on the individual component. The per-kilo price, he found, did not apply because that type of price only referred to the contract works, not to additional works. (3) The arbitrator held that the respondent was not entitled to a contractual penalty/liquidated damages for the claimant’s undisputed delay in delivering the works, because it had contributed to causing the delay. Consequently, the respondent could not offset its claim against the claimant’s claim for payment of contract works and was therefore liable to pay the remaining part of the contract price. (4) As to the claimant’s claim for delay interest on the payment of the additional works on the component and on the payment of the outstanding part of the contract price, the sole arbitrator found (i) that the rate of delay interest established in the contract did not apply to payment of additional works; and (ii) that, with regard to contract works, the rate, although high, was not unfair and did not need to be adjusted. However, since the contract provided for a cap to contractual penalties (25 percent of the contract price), the contractual rate of delay interest only applied up to the 25 percent cap, while further interest on the unpaid amount had to accrue with an interest rate determined in accordance with the Swedish Interest Act.