Prorogation of dispute to be decided by arbitration panel or court

Prorogation of dispute to be decided by arbitration panel or court

Arbitration clause for the purchase of shares

Städexia AB (Städexia) bought shares from Oskar Berger Pension AB (Oskar Berger) in a third company.

Upon transfer of the shares, the parties signed an agreement (the transfer agreement) that regulated the purchase price itself.

The transfer agreement contained an arbitration clause and future disputes would therefore be settled by arbitration.

Later, a credit and pledge agreement (credit agreement) was also signed which provided for the payment of the purchase price and the interest and interest on late payment to be paid.

Instead, the credit agreement contained a prorogation clause meaning that disputes arising out of the agreement would be resolved in a general court.

Arbitration panel and prorogation

Oskar Berger was of the opinion that Städexia did not pay off the debt under contract and therefore brought an action before the District Court seeking that Städexia pay the purchase price and interest.

Städexia then objected that a dispute would be settled by the arbitration panel, after which Oskar Berger withdrew his action and instead called for arbitration.

Instead, Städexia sought that the action should be dismissed because the dispute should be settled in a general court because of the prorogation clause in the credit agreement.

The arbitration panel found that its jurisdiction depended on whether the issues in the case were related to the transfer or credit agreement.

It was concluded that Oskar Berger’s action for payment of the purchase price was attributable to the transfer agreement and would therefore be heard by arbitration.

On the other hand, the Board did not consider itself competent to examine the claim concerning the interest rate because it was regulated in the credit agreement.

The case was decided mainly in Oskar Berger’s favour.

Städexia blamed the arbitration for the board’s alleged lack of jurisdiction and the matter was raised in the Court of Appeal (HovR).

Reproach of arbitration in the Court of Appeal

HovR initially claims that arbitration not covered by arbitration agreements between the parties shall be annulled in whole or in part on the action of a party (Section 34 of the Arbitration Act).

In order to determine the scope of arbitration agreements, the interpretation shall be made primarily on the basis of the wording of the agreement.

The Court also underlines that the starting point should be that the arbitral tribunal’s examination of its own competence is correct as it is best placed to make that assessment.

As regards the present case, HovR sees it as clear that Oskar Berger’s interest claim is not covered by a wording interpretation of the arbitration clause in the transfer agreement.

Therefore, although it is considered doubtful that the parties deliberately chose different dispute resolution procedures for agreements based on the same issue, HovR considers that the arbitral tribunal’s assessment of the matter is correct.

However, when it comes to Städexia’s obligation to pay the purchase price for the shares, HovR considers that the company has not provided any evidence to reject the arbitration panel’s assessment of the jurisdictional issue.

Authorised representative

Städexia also argues that the arbitration should be revoked due to procedural errors.

The claim is based on the fact that Städexia argued before the arbitration panel that the credit agreement was not signed by a competent representative of the company.

However, the matter was never examined by the Board, which according to Städexia constitutes procedural errors.

HovR considers, however, that the arbitral tribunal had no reason to examine the matter in question as the Board did not consider itself competent to rule on matters relating to the credit agreement.

The Court therefore does not consider that the Board has committed procedural errors which imply that the arbitration should be annulled.

In conclusion, HovR agrees with the arbitration panel’s assessment and Städexia loses the case.