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Stockholm Arbitration Report (SAR)

Preview Page SAR 2003 - 1

Observations by Hans Smit

Subject-matters:
1) Application, under Swedish law, of an arbitration clause laid down in a business contract, to a third party guarantor.
(2) Applicable law. Whether a choice of “governing law” in a supply contract is applicable when determining whether a guarantor is bound by an arbitration clause in the supply contract.
(3) Is state sovereign immunity a bar to arbitration?

Findings:
(1) Where the performance under a supply contract has been guaranteed by a third party, the third party (the guarantor) is bound by the arbitration clause in the main agreement when the undertakings of the debtor and the guarantor are identical or equivalent.
(2) The effect on the guarantor of an arbitration clause in the supply contract (to which it is not a party) shall be decided on the basis of the choice of law made by the parties in the supply contract.
(3) Under Swedish law, a state which becomes a party to an arbitration agreement, has waived any immunity with respect to the arbitration proceedings.