Counsel: Advokat Einar Wanhainen and advokat Sascha Schaeferdiek P.O. Box Stockholm

Transcription

1 SVEA COURT OF APPEAL JUDGMENT Division December 2004 Case No. Department 16 Given in T Stockholm Case file No. 37 CLAIMANT Peiker acustic GmbH & Co. KG Max-Planck-Strasse 32, Friedrichsdorf Germany Counsel: Advokat Einar Wanhainen and advokat Sascha Schaeferdiek P.O. Box Stockholm RESPONDENT Saab Automobile Aktiebolag, Reg. No Trollhättan Counsel: Advokaterna Stefan Brocker and Fredrik Norburg P.O. Box 2235, Gothenburg MATTER Challenge of arbitral award JUDGMENT OF THE COURT OF APPEAL The Court of Appeal rejects the claims of the claimant. Peiker acustic GmbH & Co. KG is ordered to compensate Saab Automobile Aktiebolag for its litigation costs before the Court of Appeal in the amount of SEK eight-hundred-fifty-six-thousand four-hundred-forty-six (856,446), out of which SEK 850,000 comprises costs for legal counsel, plus interest thereon pursuant to Section 6 of the Swedish Interest Act from the day of the judgment of the Court of Appeal until the day of payment.

2 BACKGROUND Peiker acustic GmbH & Co. KG (Peiker) is a mid-sized German company involved in systems integration and production of phone systems for cars. In August of 1999, Peiker and Saab Automobile Aktiebolag (Saab) entered into a cooperation with the purpose of developing and integrating a telephone and telematics system for Saab s 9-3 and 9-5 models. The idea was that Peiker would develop the system and thereafter, for a period of five years until 2005, deliver the system to Saab and thereafter, for no less than 15 years, supply spare parts and undertake warranty repairs. The system was intended to be launched in the summer of 2000 in connection with the start of production of the Saab 2001 models. Initially, the parties worked on establishing Saab s requirements as to functionality and other wishes more precisely. In June of 2000, Saab announced that it had decided to postpone the project by one year, which was accepted by Peiker. Peiker received a time line for the new project, which now was limited to the 9-5 model and the year 2002 (Project 602). In November of 2000, the parties discussed the so-called echo cancellation functionality. This was done, because it had been established that an echo arose in the hands-free functionality in calls between two Saab cars. For this reason, Saab and Peiker met on 7 December 2000 in Trollhättan to test the system and discuss possible solutions. Shortly thereafter, Saab terminated the project. Dispute has arisen whether Saab was entitled to cancel or terminate the cooperation agreement. Saab maintained that the ground for the termination was that Peiker had committed numerous breaches of contract. Peiker disputed all allegations on breaches of contract and claimed that Saab should complete the project. When the parties failed to resolve the dispute, Peiker requested arbitration. In the arbitration proceedings Peiker moved that the arbitral tribunal should affirm that Saab was obliged to compensate Peiker for any and all losses suffered by Peiker as a result of Saab s termination of the project in December of Further, Peiker claimed compensation for tool costs in the

3 amount of almost half a million euros plus interest. In the event that the arbitral tribunal would not affirm the first motion, Peiker moved, in the alternative, that it should be compensated for its costs in the project in the amount of over EUR 1.2 million plus interest. Saab, in its turn, claimed compensation for its costs in the project in the amount of approximately SEK 9.5 million. Simultaneously, Saab moved that the arbitral tribunal should affirm that Peiker was liable for any further losses ( any additional loss ) suffered by Saab as a result of Peiker s breaches of contract and Saab s subsequent termination of the project. On 5 February 2003, an arbitral award was rendered in the case; the language of the award is English. The arbitral tribunal rejected Peiker s motions, and ordered Peiker to pay to Saab SEK 1,164,000 plus interest. The arbitral tribunal further established that Saab was entitled to damages for any further losses ( any additional loss ) suffered by Saab as a result of Peiker s breaches of agreement and Saab s subsequent termination of the agreement, however, only to the extent that loss related to Project 602. MOTIONS BEFORE THE COURT OF APPEAL Peiker has moved that the Court of Appeal shall annul the arbitral award of 5 December 2003 in the arbitration proceedings between Peiker and Saab. Saab has objected to the claimant s claims. The parties have claimed compensation for their respective litigation costs before the Court of Appeal. POSITION OF THE PARTIES Peiker has as grounds for its case maintained 1. that the arbitral tribunal in several instances has exceeded its mandate by 1.1 not having dismissed Saab s case,

4 1.2 having gone beyond what the parties had referenced in the case, 1.3 not having taken Peiker s objections into account during the arbitration proceedings, 2 that the arbitral tribunal committed procedural errors that affected the outcome. Saab has disputed all referenced grounds for the challenge and has maintained that neither the arbitration proceedings nor the arbitral award are defective in the manners alleged by Peiker. In the event that the Court of Appeal would find that procedural errors were committed during the arbitration proceedings, Saab has objected that they have in any event not affected the outcome. Saab has further maintained that Peiker in any event partook in the arbitration proceedings without objecting to the arbitral tribunal s dealing with the case and that Peiker as a consequence has lost the right to rely on any possible procedural errors. THE PARTIES CLAIMS The parties have provided further details in support of the challenge and the objections, respectively, as follows. 1. Saab s motions/the calculation of damages 1.1 The question of whether the arbitral tribunal should have dismissed Saab s case Peiker In the arbitration proceedings Saab put forth a motion that Peiker should be ordered to make a payment (in relation to incurred costs) as well as a motion for an declaration (in relation to indirect losses). Thus, Saab s case was based on compensation for the full value of the agreement. In Peiker s opinion, a procedural impediment prevented the arbitral tribunal from trying both Saab s motions in the arbitration proceedings and it constitutes a procedural error to try a claim for compensation for specific

5 costs as well as a motion for affirmation of the right to damages, when the claimant s case is for the full value of the agreement. The arbitral tribunal ought to have dismissed Saab s case, because the claims for damages must be tried in one comprehensive context to guarantee that the outcome is correct. It is in fact not permitted to present claims for the same outcome twice (damages up to the full value of the contract), i.e. once in the motion for compensation of a specific amount and once when claiming compensation based on the affirmation judgment. The fact that an arbitral tribunal tries a motion on its merits although it should have been dismissed gives grounds for a challenge. Even if Peiker never formally presented a motion for dismissal during the arbitration proceedings, Peiker nevertheless objected to the arbitral tribunal s dealing with the case. This was done, inter alia, at a preparatory meeting on 17 September 2002 chaired by the arbitral tribunal s chairman. Peiker directly maintained that it is not permitted if a claim for damages is presented up to the full value of an agreement to at the same time claim compensation for specific costs within the scope of the project. That Peiker has presented this objection is evidenced by the recitals of the arbitral award, p. 12, heading 5. The procedural errors committed by the arbitral tribunal affected the outcome of the case, since the arbitral tribunal should have dismissed Saab s case. Saab Saab disputes that there were procedural impediments preventing the arbitral tribunal to try Saab s two motions. An arbitral tribunal is neither entitled nor obliged to dismiss a party s claims ex officio, with the exception for claims which if granted would result in an arbitral award which is obviously in breach of Swedish ordre public and consequently invalid. Peiker appears to disregard the fact that the parties have greater freedom to decide over the proceedings in arbitration than before public courts. The law provides greater freedom to present motions for the affirmation of certain facts than what is permitted under the Swedish Code of Judicial Procedure. The Swedish Arbitration Act (SFS 1999:116) (the LSF), consequently, lacks a provision

6 corresponding to Section 2 of Chapter 13 of the Swedish Code of Judicial Procedure. The principle of party autonomy further entails that the parties are entitled to submit various disputes to be settled by arbitrators as long as civil agreements on the subject matters thereof are permitted. Saab disputes that Peiker during the arbitration proceedings hinted at and even less so moved that the arbitral tribunal should wholly or partially dismiss Saab s counterclaim. The objections raised by Peiker during the arbitration proceedings were aimed at the merits of the case. Thus, it fell within the jurisdiction awarded by the parties to the arbitral tribunal to try Saab s counterclaims in their entirety. 1.2 The question whether the arbitral tribunal has awarded compensation for the full value of the contract and whether, if answered in the affirmative, the arbitral tribunal s review went beyond what was referenced by the parties Peiker In the arbitration proceedings Saab moved that the arbitral tribunal should order Peiker to pay to Saab SEK 9,507,000 plus interest, corresponding to the costs incurred by Saab in the project, as well as affirm that Saab was entitled to compensation for any additional loss incurred by Saab as a result of Peiker s breaches of contract and Saab s subsequent termination of the agreement. Thus, Saab s case was based on compensation for the full value of the contract, however, without stating to what the expected revenues under the agreement would amount. Peiker objected that it is not permitted, when the claimant s claim is for the full value of the agreement, to concurrently present a claim for compensation for specific costs as incurred within the project; costs that would have been incurred also if the project had been completed. Damages to the full value of a contract are not compensation for specific costs, but is rather an estimate of the net damages based on a comparison between two chains of events, the presumed (hypothetical) and the actual. To be able to establish that a loss has been incurred, the claimant must as grounds for the claim for damages reference a presumed and an

7 actual chain of events, which when compared show that a loss has been incurred. By awarding certain fixed costs as compensation for the full value of the agreement, despite that Saab had not referenced a presumed chain of events relating to the assumed revenues, the arbitral tribunal has considered other circumstances than those referenced by Saab. This comprises an excess of mandate, which under item 2 of the first paragraph of Section 34 of the LSF should entail the annulment of the arbitral award following challenge proceedings. In any event, a procedural error under item 6 of the said paragraph is at hand. The procedural error affected the outcome. Even if the arbitral award would be interpreted so that it takes into account the full value and negative value of the agreement, the arbitral tribunal nevertheless considered other circumstances than those referenced by Saab. This comprises an excess of mandate which should entail the annulment thereof following challenge proceedings. Saab Saab disputes that the arbitral tribunal based its decision to award damages on compensation for the full value of the agreement and that the arbitral tribunal assumed that Project 602 had been profitable or that the awarded amount constitutes any form of estimated future profits. In the arbitration proceedings Saab presented a motion for compensation based on unnecessary costs incurred by Saab and reported in the accounts of the project (SEK 9,507,000) as well as a motion for the affirmation of Saab s right to damages for any additional loss incurred by Saab. Saab s claims were permitted under Section 1 of the LSF, and it is these claims that were considered by the arbitral tribunal. Saab further disputes that no statements were made on expected profits. Saab never withdrew the claims that Saab incurred lost profits in the amount of more than SEK 40 million, which is found in Saab s Statement of Defense and Counterclaim, Section 3.13 and in the recitals of the award, p. 52. Thus, the arbitral tribunal did not consider other circumstances than those referenced by Saab in the case, and the review did consequently not go

8 beyond what the parties referenced. This applies also if the arbitral tribunal would be deemed to have ruled based on the negative agreement value. Further, no procedural error that affected the outcome of the case occurred. 1.3 The issue of the binding effect of the arbitral award Peiker The procedural inadequacies leading up to the arbitral award make it highly difficult to determine the binding effect of the arbitral award. The main rule under Swedish law is that by way of a judgment, the legal outcome sought through the judgment, and which corresponds to the motion presented in the case, is precluded. The legal outcome motioned for by Saab is damages up to the full value of the agreement. The main rule is, as mentioned, that by way of the judgment the same legal outcome is precluded if the motion is based on the same grounds. Certain exceptions are provided, such as for recurring undertakings and for factum superveniens. In the arbitration proceedings Saab chose to claim compensation for the full value of the contract in the form of compensation for certain costs that Saab maintained were rendered useless, but which Saab must have considered to be covered if the agreement had been completed in the form of sold phones. If Saab today were to request arbitration against Peiker and present a motion for a completion of any action under the agreement, the question of the binding effects of the first arbitral award would arise immediately. For example, Saab could maintain that it has incurred a loss of SEK 2 million, the difference between lost revenue of SEK 15 million and saved costs of SEK 13 million. In such proceedings, Peiker would maintain that out of that amount SEK 1,164,000 would have covered development costs. Since the arbitral tribunal has already awarded SEK 1,164,000, the second arbitral tribunal would have to pose the question as to what lost revenue the first arbitral tribunal compensated by awarding SEK 1,164,000 and how big, in the view of that arbitral tribunal, the costs saved by Saab were.

9 There are several alternatives for how a new arbitral tribunal in theory could view the binding effect in such a situation, namely 1. that a case is being brought, which has previously been tried and therefore dismiss the case, 2. that the claim for damages relates to losses for the time after the first arbitration proceedings (no limit in time has been referenced by Saab), 3. that the arbitral tribunal finds the preclusive effects to be solely for a certain amount, or 4. that the arbitral award is deemed so obtuse that it is not deemed to have any binding effects whatsoever. Further, a particularly complicating aspect is that Saab s case was rejected in large parts. It is obvious that the procedural errors that occurred are material. The arbitral tribunal materially failed in guiding the proceedings when allowing Saab s claim for the full contract value in the form of specific costs. On several occasions Peiker pointed out that the relationship between Saab s motion for compensation (relating to incurred costs) and its motion for an affirmation (relating to indirect losses) was unclear and would lead to complications when determining the binding effects of the arbitral award. Despite this, the arbitral tribunal never requested that Saab would clarify its claims for compensation. Failed procedural guidance relating to unclear procedural actions, such as ambiguous motions and grounds, comprise procedural errors that can form the grounds for challenge proceedings (item 6 of the first paragraph of Section 34 of the LSF). Saab Saab disputes that the arbitral tribunal committed any errors in its dealing with the case and that it would be very difficult or even impossible to determine the binding effect of the arbitral award. Saab disputes that Peiker in later arbitration proceedings could object that the awarded amount of SEK 1,164,000 shall be deducted. The affirmative portion of the award establishes that Saab is only entitled to compensation for any additional loss. Thus, it has been established with legally binding effect that in the event that Saab would in later arbitration proceedings claim compensation for any and all losses (without deductions) that the already

10 awarded amount shall be deducted (provided that Peiker makes this objection). In fact, the effects are the same as when a liable person is permitted to deduct from an awarded amount payments already voluntarily made to the loss suffering party prior to the rendering of the judgment. The affirmative portion of the arbitral award does not entitle Saab to again receive compensation for the already awarded amount. Moreover, it would have been on Peiker, if Peiker in the arbitration proceedings considered that Saab s case would cause problems in determining the binding effect of the arbitral award, to expand the scope of the dispute. This could have been achieved, e.g., by Peiker presenting its own motion for an affirmation ruling, which in the event that the arbitral tribunal would find that Saab was entitled to damages in the sought way would limit the scope of the compensation for damages (cf. Government Bill 1998/99:35 p. 61). Saab disputes that its motions in the arbitration proceedings were ambiguous or not permissible and that the arbitral tribunal ought to have guided the proceedings in these matters. In any event, the arbitral tribunal did guide the proceedings on the now relevant matter. The respective motions and grounds of the parties were as a matter of fact discussed in preparatory meetings with the arbitral tribunal, which led to both parties adjusting and clarifying its respective motions. Peiker has never presented any complaints about the guidance of the arbitral tribunal or other aspects of the arbitral tribunal s dealing with the case. 2. The relationship between the arbitral tribunal s review and the references of the parties in other respects The issue of the authority of the Saab employees present at the meeting of 7 December 2000 Peiker With respect to the audio quality of the system, which according to the opinion of the arbitral tribunal did not meet the required standards in

11 December of 2000, the project meeting of 7 December 2000 becomes vitally important. During the arbitration proceedings Peiker referenced that the parties at the meeting agreed upon a plan to take measures in accordance with the action plan of 8 December The action plan entailed that Peiker was granted extended time to correct the alleged deficiencies and if the agreement between the parties was deemed to include the obligation to develop a solution for four to eight loudspeakers an agreement to amend the agreement. However, the arbitral tribunal found that the meeting of 7 December and the action plan of 8 December were irrelevant. The arbitral tribunal based its ruling on the fact that the Saab employees present at the meeting and that were involved in producing the action plan lacked authority, despite the fact that Saab in the arbitration proceedings never raised this issue. Thus, the review of the arbitral tribunal went beyond what had been referenced by the parties and this comprises an excess of mandate, which under item 2 of the first paragraph of Section 34 of the LSF shall entail the annulment of the award following challenge proceedings. In any event, a procedural error under item 6 of the said paragraph has been committed. The procedural error affected the outcome of the case. Saab Saab disputes that the issue of mandate affected the outcome. The arbitral tribunal finds following a clarification of the parties opinions on the matter that Peiker bears the burden of proving that, at the meeting in Trollhättan on 7 December 2000, an agreement was reached concerning alternative solutions to the sound quality issue and that all in all, the evidence does not provide sufficient support for such an agreement having been entered into (arbitral award, p. 77). The arbitral tribunal has not hinted that the issue of lack of jurisdiction would have had any importance for its decision, but has in the same paragraph clarified that it has decided the issue purely on an evaluation of the evidence, p. 77 of the arbitral award.

12 Saab disputes that Saab had not referenced that the participants at the meeting of 7 December 2000 lack authority. Saab referenced insufficient authority in its closing statements as the last alternative ground. Peiker commented on Saab s closing statement without referencing Saab s comments on authority. Peiker did not mention anything thereon in its closing statement. Hereby, Peiker must be considered to have accepted Saab s reference. 3. The arbitral tribunal s review of Peiker s objections 3.1 The issue of analogous application of the third paragraph of Section 27 of the Sale of Goods Act Peiker During the arbitration proceedings, Peiker objected that any potential liability for damages should not include lost profits, arbitral award p. 12, heading 6. The objection was based on an analogous application of the third paragraph of Section 27 of the Sale of Goods Act (SFS 1990:931) which provides that indirect losses are not subject to compensation, unless the delay was due to negligence on the part of the seller. Since Peiker during the arbitration proceedings proved that based on the advancement of technology at the time, it was not possible to develop a system that used more than one loudspeaker while being full duplex, it was established that there was no negligence on the part of Peiker. Saab has not even alleged that Peiker had been negligent with respect to the echo cancellation functionality and the delay. The arbitral tribunal, which obviously found the Sale of Goods Act directly applicable, has entirely failed to consider Peiker s objection that Saab in no event was entitled to compensation for lost profits, despite the fact that the tribunal apparently considered that a delay was at hand (arbitral award p. 82 f.). This comprises a procedural error that affected the outcome of the case, since the liability should rightfully have been limited to direct losses (item 6 of the first paragraph of Section 34 of the LSF). Even if the tribunal could be deemed to have considered Peiker s objection, the tribunal appears to have assumed that the delay was caused by negligence

13 on the part of Peiker, since the award does not limit the compensation to direct losses. Saab has not even alleged that Peiker had been negligent with respect to the echo cancellation functionality and the delay. Thus, the arbitral tribunal based its decision on a reference which Saab never made in the case. In such case, the arbitral tribunal has gone beyond what the parties have referenced, and this comprises an excess of mandate which shall entail the annulment of the arbitral award following challenge proceedings (item 2 of the first paragraph of Section 34 of the LSF). In any event a procedural error under item 6 of the same paragraph has occurred that affected the outcome of the case. Saab Saab disputes, firstly, that an arbitral award may be challenged because the arbitral tribunal allegedly did not consider a specific circumstance. An arbitral tribunal is not obliged to provide the grounds for its award. The absence of grounds do not, much like insufficient, contradictory or incorrect grounds do not, form grounds for challenge proceedings under the LSF. Since there is no obligation to provide detailed and comprehensive grounds, it is not possible from the grounds to infer far reaching conclusions on the scope of the arbitral tribunal s considerations. For example, the arbitral tribunal may have considered a certain objection, but found that it had not been sufficiently established, without going into the details thereof in the grounds. The arbitral tribunal could also have found that a certain objection was irrelevant because of the arbitral tribunal s opinion on a specific matter, without this being expressed clearly in the award. Thus, Peiker s statements are not of such nature that they can entail that annulment of the arbitral award. Saab disputes that the arbitral tribunal found that the Sale of Goods Act was directly applicable to the parties agreement. To the contrary, from the grounds it is clear that the arbitral tribunal mainly applied Saab s general purchasing conditions ( Accordingly, since nothing else has come into light, the General Conditions shall govern the parties Agreement in its entirety p. 70 of the arbitral award).

14 Saab s own view on contents of the agreement and the applicability of the Sale of Goods Act is made clear in the recitals of the arbitral award (arbitral award p ). From this it is clear that Saab considered its general purchasing conditions part of the agreement. With respect to the applicability of the Sale of Goods Act, Saab s opinion is found on p. 35 of the recitals: Saab maintains that the Agreement is in essence a purchase agreement and that the Sale of Goods Act is directly applicable to issues not regulated by the parties. Saab s general purchasing conditions contain provisions on, amongst other things, termination (Section 13) and damages for delays (Section 15), which deviate from the provisions of the Sale of Goods Act on these matters. Section 15 provides unlimited liability for the supplier s delays and this provision replaces the third paragraph of Section 27 of the Sale of Goods Act. Thus, there has not been any reason for the arbitral tribunal to closer consider whether the delay was caused by Peiker s negligence. The arbitral tribunal found that Peiker had breached the agreement and that Saab was consequently entitled to damages. This means that the arbitral tribunal rejected Peiker s objection with respect to the provisions of the Sale of Goods Act, and not that the arbitral tribunal, as maintained by Peiker, forgot to consider the objection. In sum, it is disputed that the arbitral tribunal has exceeded its mandate or has committed procedural errors. If a procedural error is considered to have occurred, then Saab disputes that the error affected the outcome of the case. No limitation of liability in relation to what was awarded by the arbitral tribunal could ever have been set, since the arbitral tribunal would nevertheless have considered Saab s general purchasing conditions applicable. A negligence requirement would under no circumstances have been deemed applicable. 3.2 The issue of the applicability of the Sale of Goods Act during the development stage

15 Peiker The arbitral tribunal failed to review the objection that the Sale of Goods Act was not applicable on events during the development stage and that Peiker was not strictly liable for the outcome of the development but was only under the obligation to act professionally. Despite Peiker having explained that Peiker did not consider the Sale of Goods Act applicable, the arbitral tribunal did not even attempt to qualify the legal status of the development assignment Peiker received from Saab. In the grounds, the arbitral tribunal instead bases its conclusions on the fact that the parties did not dispute that the Sale of Goods Act was applicable to the whole of the agreement ( Section 26 of the General Conditions states, inter alia, the Swedish contract law shall apply to any agreement hereunder. In these proceedings, the parties also appear to have assumed that this would be the case and only referred to the Swedish Sale of Goods Act, arbitral award p. 70). This constitutes a challengeable excess of mandate on the part of the arbitral tribunal. In any event, a procedural error that affected the outcome of the case has occurred, since Peiker had proven that it was technically impossible at the time to develop a system using more than one speaker which was also full duplex. Thus, Peiker had acted professionally. If the arbitral tribunal had taken the objection into consideration, the arbitral tribunal would not have reached the conclusion that Peiker had breached the contract and consequently would have rejected Saab s claim. Saab Saab disputes that the arbitral tribunal has failed to review the objection that the Sale of Goods Act was not applicable during the development stage and that Peiker was not strictly liable for the outcome of the development, but only an obligation to act professionally. Saab further disputes that the arbitral tribunal assumed that it was not disputed between the parties that the Sale of Goods Act was applicable to the whole agreement. The arbitral tribunal has not stated that the whole of the Sale of Goods Act was directly applicable to the agreement between the parties, and certainly not that the parties agreed this to be the case. The paragraph quoted by Peiker does not provide other

16 than that the arbitral tribunal has found Swedish law, as opposed to foreign law, to applicable to the parties agreement. The arbitral tribunal has provided its reasoning on the implications of the agreement and its nature in connection with the review of whether Saab s general purchasing conditions were applicable to the agreement. The arbitral tribunal noted that the agreement was complex and included both a development and delivery stage. Further, the arbitral tribunal noted that Saab s general purchasing conditions must be deemed applicable between the parties, despite certain Sections thereof were less suitable for the part of the project relating to Peiker s development assignment (arbitral award p. 69 f.). These conditions provide strict and unlimited liability for delays. Saab disputes that Peiker during the arbitration proceedings proved that it was technically impossible to develop a system using more than one speaker while being full duplex. Thus, the arbitral tribunal would not have reached another conclusion even if it had accepted Peiker s claim that it was not strictly liable for the outcome of the development project. In sum, the arbitral tribunal has neither exceeded its mandate nor committed any procedural errors based on what Peiker has maintained. In the event that the Court of Appeal would find that a procedural error has been committed, the error did not affect the outcome, since the arbitral tribunal would not have reached another conclusion without the procedural error having occurred. 3.3 The question of analogous application of Section 26 of the Sale of Goods Act Peiker Peiker objected during the arbitration proceedings that a right to terminate due to the alleged delay would be at hand only if Saab s purpose with the agreement was undone by the delay. As grounds for this objection, Section 26 of the Sale of Goods Act was referenced (arbitral award p. 19). Saab did not object to Peiker s statement that the purpose of the agreement had not been undone. The arbitral tribunal, which obviously considered the Sale of Goods

17 Act directly applicable to the agreement, nevertheless failed to consider Peiker s objection. This constitutes a challengeable excess of mandate on the part of the arbitral tribunal. In any event, this constitutes a procedural error that affected the outcome of the case. Saab s case would have been rejected if the arbitral tribunal had taken the objection into consideration, since Saab never even claimed that the purpose with the agreement had been undone. Saab Saab disputes that what Peiker has maintained could constitute a challengeable error. Saab again refers to the fact that the arbitral tribunal applied the termination provisions of Saab s general purchasing conditions in precedence over the provisions of the Sale of Goods Act. The arbitral tribunal obviously found that the provision referenced by Peiker was not applicable (arbitral award p. 83). Thus, there was no reason for the arbitral tribunal to go into the issue of whether Saab s purpose with the agreement had been essentially undone or not because of Peiker s breach of contract. In the event that the legal considerations set out in the arbitral award are incorrect, which is disputed, they relate to the application of substantive law, and does not constitute a procedural error. 3.4 The question of time extension Peiker During the arbitration proceedings, Peiker objected that the agreement set out in the action plan of 8 December 2000 granted Peiker extended time to complete its obligations. The arbitral tribunal ignored this objection. This constitutes a challengeable excess of mandate by the arbitral tribunal, or at least a procedural error. The procedural error affected the outcome of the case. The arbitral tribunal based its decision on a right to terminate because of delay. Such a termination right does not exist during a time extension (see the third paragraph of Section 25 of the Sale of Goods Act). Thus, the arbitral

18 tribunal would have rejected Saab s case, if it had taken the objection into consideration. Saab Saab disputes that the arbitral tribunal ignored Peiker s objection that the agreement set out in the action plan of 8 December 2000 granted Peiker a time extension. The arbitral tribunal dedicated a full page of the arbitral award to the alleged agreement (arbitral award p. 77). Thus, it is entirely clear that the arbitral tribunal, when considering whether parties agreed to amend the agreement at the meeting of 7 December 2000 also considered whether a time extension had been agreed or not. The arbitral tribunal found that Peiker had not established the existence of such an agreement. Thus, the arbitral tribunal has rejected Peiker s objection about the time extension, not failed to consider it. In light of the above, no excess of mandate and no procedural error has occurred based on what Peiker has maintained in this respect. To the extent that a procedural error would be deemed to have been committed by the arbitral tribunal as claimed by Peiker, the error has under no circumstances affected the outcome of the case. This is because the arbitral tribunal would nevertheless have reached the conclusion that Peiker did not prove that a time extension had been agreed. GROUNDS OF THE COURT OF APPEAL The case has been decided following a main hearing. The parties have referenced documentary evidence. 1.1 The question of whether the arbitral tribunal ought to have dismissed Saab s case Peiker has maintained that the arbitral tribunal ought to have dismissed Saab s case, because it is not possible to bring a case for the same legal outcome twice. In Peiker s view, it would be possible to have a case for the payment of a certain amount at this moment in time, as well as another case for the payment of another amount in the future, which may then be based on

19 a judgment declaring liability for damages, despite the fact that the two claims ought to be considered together. Saab has mainly objected that parties in arbitration proceedings can frame the proceedings to a greater extent than what is possible before public courts and that the Swedish Arbitration Act (SFS 1999:116) (the LSF) does not contain a provision corresponding to that of Section 2 of Chapter 13 of the Swedish Code of Judicial Procedure. The Court of Appeal s conclusion It is generally held, supported by case law and jurisprudence, that the jurisdiction to review various matters on the nature of disputes is greater for arbitral tribunals than for courts. The parties autonomy in an arbitration context entails that they may in principle submit to the arbitrators any type of dispute just as far as freedom of contract allows (Section 1 of the LSF, Government Bill 1998/99:35 p. 60 f.). A party s case before an arbitral tribunal may only be dismissed in rare exceptional cases. This appears to only be the case when a party s claim aims to achieve something that, if granted, would lead to the arbitral award s invalidity under items 1 and 2 of the first paragraph of Section 33 of the LSF. In other words, this would be the case if the arbitral tribunal reviewed something that is not eligible for arbitration under Swedish law, or if the arbitral award or the manner in which it has been rendered would breach Swedish ordre public. Peiker has not referenced any circumstances of this nature. It should be added that Peiker did not during the arbitration proceedings motion for dismissal of Saab s case. No other circumstance has been referenced that would indicate that Saab s case fell outside the scope of the arbitral tribunal s jurisdiction. Thus, it fell upon the arbitral tribunal to consider the merits of Saab s case. 1.2 The question whether the arbitral tribunal has awarded compensation for the full value of the contract and, if so, whether the review of the arbitral tribunal went beyond the references of the parties

20 In sum, Peiker has maintained that the arbitral tribunal ordered Peiker to pay damages to Saab for certain cost items as compensation for the full value of the contract. This is alleged to have been the case, without Saab having referenced any assumed chain of events that included the expected revenue. According to Peiker, this entailed that the arbitral tribunal considered other circumstances than what Saab had referenced in the arbitration proceedings. Further, according to Peiker, the same conclusion must be drawn, even if the arbitral award would be interpreted so that the arbitral tribunal has rendered its award considering both the full value and the negative value of the contract. Saab has disputed that the arbitral tribunal has awarded damages based on the full value of the contract or that the awarded amount constitutes some form of preliminarily estimated profit. Saab has objected that the company s case, to the extent it included a motion for a payment of unnecessary costs incurred by Saab as well as a motion for the affirmation of the right to compensation for any further losses, did comply with the provisions of Section 1 of the LSF, and as well that Saab never withdrew the claim that the company had suffered a loss in unrealized profits in excess of SEK 40 million. The Court of Appeal s conclusion The Court of Appeal finds that it has not been established that the arbitral tribunal has rendered its award considering other circumstances than those referenced in the arbitration proceedings. Thus, the arbitral tribunal did not exceed its mandate. Further, the arbitral tribunal has not committed any procedural errors. 1.3 The question of the binding effects of the arbitral award In sum, Peiker has maintained that the arbitral tribunal s deficient guidance of the proceedings failed to clarify the contents of Saab s motion for affirmation of liability (relating to indirect losses). In Peiker s view, the relationship between Saab s motion for declaration of liability and its claim for payment (relating to incurred costs) has been unclear and could entail difficulties in determining the binding effects of the arbitral award. These difficulties could,

21 according to Peiker, come to light if Saab in the future again requests arbitration and claims damages from Peiker. Saab has disputed that the arbitral tribunal has committed any procedural errors in this respect. In Saab s view, it has with binding effect been determined that the amount of SEK 1,164,000 which has already been awarded shall be deducted to the extent that Saab in future arbitration proceedings would be awarded damages for the same costs as in the now challenged arbitral award. The Court of Appeal s conclusion The obligation of an arbitral tribunal to guide the proceedings are not set out separately in the law, but must in essence be determined against the background set out in Section 21 of the LSF, which provides that the dispute shall be dealt in an impartial, practical and speedy manner. Unless the parties have determined otherwise, they must be deemed to have authorized the tribunal to lead the proceedings in a suitable manner. Thus, it must be held that which possible clarifications that are required is a judgment call. Further, Peiker s objections in the challenge proceedings appear to mainly take aim at the formal and substantive possibility of bringing a case as Saab did in the arbitration proceedings. Even if it is possible to raise such questions by guiding the proceedings, they are issues to be ultimately resolved through the arbitral award, rather than be solved through the arbitral tribunal s guidance of the proceedings. It should be noted, that the Court of Appeal has above reached the conclusion that the arbitral tribunal was obliged to try Saab s claims, both the claim for payment and the motion for the affirmation of liability. Peiker has not been able to establish that the arbitral tribunal s guidance of the proceedings directly or as it is indirectly evidenced in the arbitral award forms a ground to annul the arbitral award. The operative part of the award with respect to the claim for payment is unambiguous. The same must be said of the motion for affirmation of liability. It is true that the arbitral tribunal in its grounds stated that Saab is entitled to further damages, but only to the

22 extent that they relate to additional costs and that the arbitral tribunal in the operative part used the term additional loss instead of additional costs. If the used wording is contradictory, the operative part of the award takes precedence. In the Court of Appeal s view, this wording is not of itself so unclear that it would create difficulties in determining the binding effect of the arbitral award or other similar difficulties, in the event that Saab claims compensation for additional loss relating to Project 602. It should be added that Saab is not likely to be successful with a claim for payment relating, directly or indirectly, to the same compensation as has already been awarded to Saab as compensation for a specific loss, relating to Project 602. Thus, it is possible to clearly establish from the arbitral award to what the awarded amount relates. It should further be added that it is hardly the task of an arbitral tribunal, if it is at all possible, to foresee a possible future arbitral tribunal s views on issues of binding effect or the like that a party may raise in connection with a new claim for payment. In view of the foregoing, Peiker s challenge of the arbitral award based on the now relevant grounds cannot be granted. 2 The question of the authority of the Saab employees at the meeting of 7 December 2000 Peiker has maintained that the arbitral tribunal found that the meeting of 7 December 2000 and the action plan drafted the following day were irrelevant, since the Saab employees present at the meeting and involved in the drafting of the action plan were not authorized to represent Saab. According to Peiker, Saab never referenced that the employees lacked authority during the arbitration proceedings, meaning that the arbitral tribunal went beyond what the parties had referenced, which constitutes an excess of mandate or at least a procedural error that affected the outcome of the case. Saab has maintained that the arbitral tribunal decided the case on a pure evaluation of the evidence and that the issue of the employees authority was immaterial for the considerations of the tribunal.

23 The Court of Appeal s conclusion From the arbitral award (p. 77) it is clear that the arbitral tribunal found that the evidence did not sufficiently support Peiker s claim that an agreement had been reached set out in the action plan of 8 December 2000 to grant Peiker a time extension. The question of the Saab employees authority to bind Saab to such an agreement was consequently irrelevant for the conclusions of the arbitral tribunal. Thus, there are no grounds to grant the challenge in this respect. 3.1 The question of analogous application of the third paragraph of Section 27 of the Sale of Goods Act Peiker has maintained that the company in the arbitration proceedings objected that possible liability should not include lost profits, but that the arbitral tribunal failed to take this objection into consideration, despite that arbitral tribunal obviously considered that Peiker was in delay under the provisions of the Sale of Goods Act. According to Peiker, this constitutes a procedural error which affected the outcome of the case, since the liability should have been limited to direct losses. Even if the arbitral tribunal would have considered Peiker s objection, it appears, according to Peiker, as if it assumed that the delay was caused by negligence on the part of Peiker, since the arbitral award does not include any limitation to direct losses. Since Saab has not even alleged that Peiker had been negligent, the arbitral tribunal based its award on an allegation that Saab never made in the case. This, according to Peiker, constitutes an excess of mandate, which should entail the annulment of the arbitral award following challenge proceedings. In any event, a procedural error that affected the outcome of the case has occurred. Saab has disputed that an arbitral award may be challenged on the grounds that the arbitral tribunal has failed to consider a specific circumstance. Saab has maintained, referencing the arbitral tribunal s statements in the arbitral award, that the arbitral tribunal has mainly applied Saab s general purchasing conditions and secondly applied the provisions of the Sale of Goods Act, to the extent issues were not regulated between the parties under these general

24 purchasing conditions or otherwise agreed between the parties. The aforementioned would lead to, amongst other things, the conclusion that the arbitral tribunal did not forget to take Peiker s objection into consideration, but rather rejected it to the extent it was based on the conditions of the Sale of Goods Act. The Court of Appeal s conclusion Peiker s objections take aim at the nature of Saab s case. The arbitral tribunal has in the arbitral award considered that case. The arbitral tribunal has in its grounds explained its considerations as to the merits and how it reached its conclusion. It has not been maintained that the arbitral tribunal has generally disregarded any requirements set by the parties on the form of the arbitral award (cf. Government Bill 1998/99:35 p. 233). In the Court of Appeal s opinion, the fact that every objection is not dealt with specifically or in detail cannot immediately lead to the conclusion that the arbitral tribunal failed to take the objection into consideration and thereby exceeded its mandate or committed a procedural error that affected the outcome of the case. An objection may also have been considered indirectly by the arbitral tribunal making a more general statement or in its reasoning reaches a basic conclusion that renders an objection based on another point of view irrelevant. It is clear from the general starting points of the arbitral tribunal s considerations that the tribunal considered the issue of Peiker s liability mainly under the provisions of Saab s general purchasing conditions and secondly under the provisions of the Sale of Goods Act (arbitral award p. 70). The Court of Appeal cannot find that the arbitral tribunal has exceeded its mandate in the sense maintained by Peiker or that it committed a procedural error that affected the outcome of the case. The considerations made by the arbitral tribunal must be deemed to be with respect to the merits, and are consequently not subject to challenge proceedings. 3.2 The question of the applicability of the Sale of Goods Act to events during the development stage

25 Peiker has maintained that the arbitral tribunal has failed to consider the company s objection that the Sale of Goods Act could not be applied to events occurring during the development stage and that the arbitral tribunal, if the objection had been considered, would not have concluded that Peiker had breached the agreement and consequently rejected Saab s case. In Peiker s view, this failure constitutes an excess of mandate subject to challenge proceedings or at least a procedural error that affected the outcome of the case. Saab has maintained that the arbitral tribunal has explained its reasoning with respect to the detailed contents and nature of the agreement when the arbitral tribunal considered the applicability of the general purchasing conditions to the agreement; the conditions were deemed applicable to circumstances occurring both during the development as well as the delivery stage. The Court of Appeal s conclusion The questions of the applicability of the Sale of Goods Act and breach of contract, which relate to the merits of the case, have been considered by the arbitral tribunal (arbitral award p. 70). The Court of Appeal finds, also for the now relevant issue, that it has not been sufficiently established that the tribunal has exceeded its mandate or committed any procedural error. 3.3 The question of analogous application of Section 26 of the Sale of Goods Act Peiker has maintained that the arbitral tribunal did not consider the objection that termination was conditional upon Saab s purpose with the agreement having become undone by the delay. This, according to Peiker, constitutes an excess of mandate subject to challenge proceedings or at least a procedural error. The error affected the outcome of the case since Saab s case would have been rejected if the arbitral tribunal had considered the objection. This is so, because never maintained that the purpose of the agreement had been undone.