The Arbitration Institute of the Stockholm Chamber of Commerce (“SCC”) was founded in 1917. It is part of the Stockholm Chamber of Commerce, but acts independently in its administration of domestic and international disputes. On February 2017, the SCC published a report on investor-state disputes registered at the SCC, describing among other things, the nationalities of the parties and arbitrators appointed, the basis of consent invoked by investors, the outcomes of the cases decided under the SCC Rules, and the time for their resolution. The report can be found here.
Overview of Investor-State Disputes Registered at The SCC
A total of 92 investor-state disputes were registered with the SCC between 1993 and 2016, constituting approximately 5% of all publicly known investor-state disputes. Of these 92 investor-state disputes, 67 cases were filed under the SCC Arbitration Rules and 25 cases were requests for the SCC to act as appointing authority under the rules of other institutions. With respect to the cases filed under the SCC Arbitration Rules, 30 concluded with an award, 16 were discontinued due to failure to pay the Advance on Costs, withdrawal before the case referral, or lack of consent for the SCC to administer the dispute, 20 cases are either pending or under Emergency Arbitrator procedures, and 1 case was consolidated with another one.
The majority of SCC investor-state disputes involve parties from Europe and Central Asia, with intra-EU disputes accounting for 53% of the cases registered between 2012 and 2016. Specifically, about 88% of investors and 96% respondent states in SCC disputes come from Europe and Central Asia.
Most of the arbitrators that were appointed came from Europe & Central Asia (about 74%), primarily from Sweden, the UK, Germany, USA, France and Switzerland.
Generally, there is a preference for three-member arbitral tribunals, which falls in line with Article 12 of the SCC Rules which provides that when the parties have not decided the number of arbitrators, the Arbitral Tribunal shall consist of three arbitrators, unless the board of directors, having regard to the complexity of the case, the amount in dispute or other relevant circumstances determines that a sole arbitrator decides the dispute.
The majority of appointments in investor-state disputes have been made by parties or co-arbitrators, with the SCC making only 20% of appointments, mostly for chairpersons, pursuant to the appointment procedure under the SCC Rules. Specifically, under Article 17(3) of the SCC Rules, the Board appoints the sole arbitrator when the parties fail to appoint within the given time limit, and in the case of three-member tribunals Article 17(4) states that the Board appoints the chairperson, while each party appoints an equal number of arbitrators.
Basis Of Consent For SCC Jurisdiction
Most investor-state disputes were filed by investors invoking a breach of the standards of protection contained in a bilateral investment treaty (“BIT”). Energy disputes, however, have increased over the past years and 26% of investor-state disputes in the time period studied were brought under the Energy Charter Treaty (“ECT”).
In some cases, investors have invoked a concurrent basis for jurisdiction based on the investment agreement, the BIT, and/or the foreign investment law of the host state.
The majority of cases have applied the SCC Arbitration Rules. Specifically, for cases brought under a BIT, 60% applied the SCC Rules, 31% applied UNCITRAL Rules, and 11% were ad-hoc arbitrations. For cases brought under the ECT, all applied the SCC Arbitration Rules.
Cases Concluded With An Award
There have been 30 investor-state disputes at the SCC that have concluded with an award, from which 24 were rendered by tribunals deciding on the merits of the case and 6 were rendered under Article 45 of the SCC Rules (2 as consent awards and 4 as termination awards).
Cases Decided on the Merits
The average duration for cases that were decided on the merits was 36 months (median of 32 months) for cases decided by a three-member tribunal and 13 months (median of 10 months) for cases decided by a sole arbitrator. Duration was measured from the time the case was registered with the SCC, to the day when the final award was rendered.
The average amount in dispute for these cases was EUR 332,130,109. Successful investors recovered on average 29% of the amount claimed, with one case of full recovery.
Most of these cases arose from the energy sector, with 34% of them in the Oil, Gas, and Mining sector, and 29% relating to electricity and power.
Most awards were rendered in favor of respondent states—21% declined jurisdiction, 37% denied all of the investor’s claims, and 42% upheld investor’s claims in part or in full.
Pursuant to Article 49 of the SCC Rules, costs of the arbitration consist of the arbitrator’s fee, the SCC’s administrative fee and their respective expenses. Under Article 50 of the SCC Rules, party costs consist of the reasonable expenses incurred by a party, such as costs for legal representation, expert evidence, witnesses, etc.
With respect to total costs spent in an arbitration, a majority (median 88%) was paid for costs for legal representation, with the remaining 12% devoted to pay the costs of the arbitration.
Although SCC Rules have varied over the years when it comes to the apportionment of costs, practice has shown that SCC tribunals consider the outcome of the case as the primary factor to apportion costs, with the conduct of the parties as a relevant circumstance for which a tribunal could adjust their cost decisions. For this reason Articles 49 and 50 of the 2017 SCC Rules provide that tribunals shall apportion costs of the arbitration and party costs “having regard to the outcome of the case, each party’s contribution to the efficiency and expeditiousness of the arbitration and any other relevant circumstances.”
When defining the outcome of the case, tribunals have taken different approaches. Some have looked at the success of a party in relation to the portion of the claims awarded, while others have defined the outcome of the case on the basis of the relevance of the issues decided, and which party succeeded in a specific issue, while some tribunals have combined both approaches.
A majority of tribunals (about 58%) have deviated from standard apportionment (where parties are ordered to bear the costs of the arbitration in equal shares and each party bear its own costs) and have partially apportioned costs. In partial apportionment, tribunals adjust the proportion in which they allocate the costs of the arbitration and/or party costs between the parties. There were no cases of full apportionment, where the tribunal fully apportions both the costs of the arbitration and the party costs in favor of one party.
Costs of the arbitration are calculated using the table included in Appendix III to the SCC Rules, which is based on a formula according to which arbitrators’ fees and the SCC’s fee are calculated depending on the amount in dispute.
In determining how much a party may recover for its party costs, tribunals apply the “reasonableness test” and consider:
- the proportion of the costs claimed by the parties, or the proportion of the amount in dispute;
- the efficiency of the parties and its impact on the proceedings;
- whether the costs claimed are sufficiently evidenced by a party; and
- the work and time devoted to a specific issue and whether the party lost or succeeded in that issue.