Judgment Date: 29 November 2024
Summary
The Svea Court of Appeal ruled that contracting states to the <span class="news-text_italic-underline">1954 Hague Convention on Civil Procedure</span> (the “<span class="news-text_medium">Convention</span>”) are exempt from providing security for costs in Sweden. The decision arose in the context of an investment treaty arbitration involving the Kyrgyz Republic (“<span class="news-text_medium">KR</span>”) and UAB Garsu Pasaulis (“<span class="news-text_medium">GP</span>”). The court found that under Swedish law, KR was not obligated to provide security for costs because Sweden and KR are both contracting states to the Convention, which prohibits requiring security from nationals of other contracting states.
Background
The case arose from an investment treaty arbitration where GP brought a claim against KR and the arbitral tribunal upheld its jurisdiction over the dispute. KR subsequently applied to the Svea Court of Appeal for a declaration that the tribunal lacked jurisdiction. Meanwhile, GP sought an order requiring KR to provide security for GP’s costs under the <span class="news-text_italic-underline">Swedish Act on Providing Security for Costs for Foreign Claimants</span> (the “<span class="news-text_medium">Act</span>”). The Act requires foreign claimants to provide security for costs upon a respondent’s request, unless exemptions under Section 5 of the Act apply.
Legal Issues
The central issues before the court were:
- Whether KR, as a foreign state, was exempt from the obligation to provide security under the Act.
- Whether the Convention’s exemption extended to investment treaty arbitrations.
Court’s Analysis and Findings
- <span class="news-text_medium">Exemption for Contracting States under the Convention</span>
The court determined that both Sweden and KR are contracting states to the Convention, which prohibits requiring security for costs from nationals of other contracting states (Article 17). The court referred to the preparatory works of the Act, which stated foreign states should be treated as legal persons under Section 1. The rationale for the general obligation to provide security was to ensure respondents could recover costs, as judgments from Swedish courts are often unenforceable in foreign jurisdictions. However, the Convention specifically provides for the enforceability of costs judgments among contracting states (Article 18). Therefore, the court held that KR was exempt under Section 5 of the Act as any costs judgment issued by a Swedish court would be enforceable in KR. - <span class="news-text_medium">Application of the Convention to Investment Treaty Arbitrations</span>
GP argued that the Convention’s exemption did not apply to investment treaty arbitrations as these fall outside the Convention’s scope of civil and commercial cases. The court rejected this argument, noting that Sweden’s declaration under the Convention extended the exemption to all cases not concerning criminal liability. The court concluded the exemption applied in the current proceedings. - <span class="news-text_medium">Reciprocity and Broader Implications</span>
The court stated that the Convention’s reciprocity principle ensures mutual enforcement of costs judgments between contracting states. This reciprocity reduces the need for security for costs, as foreign judgments are presumed enforceable.
Implications
This judgment has implications beyond Sweden as the Convention is grounded in reciprocity among all contracting states. Courts in other jurisdictions may reference this decision when assessing security for costs applications involving foreign states. The ruling reinforces the importance of international conventions providing consistent treatment for foreign entities in cross-border disputes.
