Most Disputed Cases Of International Commercial Arbitration Resolved In The SCC

arbitration dispute resolution

The SCC, since its establishment, has been a central stage in resolving some of the most disputed cases in international commercial arbitration history. While the institution oversees domestic, commercial arbitration in Sweden, its preference for handling contentious cases on the international scene cannot be disputed.

international commercial arbitration

This article will consider some of the most disputed cases in international commercial arbitration resolved in the SCC.

Danone Group V Hangzhou Wahaha

Case type: International Investment Agreement
Case ID: SCC Case No. 061/2007
obligation: Commercial Contractual obligation
Section: SCC Awards, SCC Arbitration Rules


Case Summary

Country: China, France
Claimant: Danone Group
Respondent: Hangzhou Wahaha

The Danone V Wahaha case is arguably the most disputed case in the SCC and has been taught in different areas and fields of study. Both companies, which were major food brands in France and China, respectively, agreed to merge and work as a single Joint venture. At the time of the agreement, observers predicted a fairy-tale story and possible domination of the single company formed.

The headquarters of the single joint venture was to be based in China, and both companies shared information with the other. Danone pumped $45,000,000 into the JV, which bore the Hangzhou Wahaha name to retain China Consumers accustomed to it. The injected capital catapulted the JV to the top of the China Food market.

The deal was entered in 1996, and by the early 2000s, china was Danone Group’s biggest market due to the JV. However, disputes between the two companies became public in 2007, and Danone filed an arbitration action against Wahaha on the SCC Arbitral rules.

Before filling the arbitral action, Danone and Wahaha had gone over 30 legal suits in China, but at every point, Danone could not get the case ruled in their favor.

commercial arbitration in Sweden

At the Arbitral tribunal, Danone stated that while Hangzhou Wahaha was obligated to honor the JV contracts, it secretly established parallel companies that directly compete with the JV while also putting in place policies that limited it and favored the secretly established companies. It stated that Wahaha had sold the Joint venture branded product and also kept the revenue to itself.

Wahaha countered and stated that the non-JV companies were not in any way secret and that they bear its personal trademark and not that of the JV (the JV also bear Wahaha, and Danone never acquired the trademark solely for the JV despite trying at the time of the contract)

The case lasted for two more years, and it was until 30 September 2009 the tribunal under the SCC guideline concluded that Wahaha had breached the contract. It also stated that that the latter pay damages up to €890 million.

However, that same day after the ruling, the two disputing firms had reached a settlement with Wahaha offering Danone €300 million to relinquish its 51% right on the JV. The former agreed to the settlement, and observers stated that the decision was the best as the €890 million award may be extremely difficult t implement in China due to its hostility to awards.

The resolution of the case ended the landmark merger between two food giants.

Franz Sedelmayer v. The Russian Federation
Case type: International Investment Agreement
Treaty: Germany-Russian Federation BIT
Section: SCC Awards, SCC Arbitration Rules
Outcome: favor of the investor

Summary of The Case
Country: Russian Federation, Germany
Claimant: Sedelmayer
Respondent: Russian Federation

IIA Breaches Alleged
Direct Expropriation

IIA Breaches Found
Direct Expropriation

One of the biggest and most disputed cases in international commercial arbitration is the case involving Mr. Frank Sedlmayer, a German and the Russian Federation. The arbitration seat was the SCC,, and the treaty was the Germany-Russian Federation BIT. This case has been covered globally and outlined the difficulty of an investor seeking compensation through arbitration for illegal policies and activities by a hostile state.

Mr. Sedlmayer, the claimant,, is a security consultant that set out to establish a security consultancy firm in Russia after reaching an agreement with the state in the early 1990s. The agreement in specific terms was with the police department of St. Petersburg, and He worked successfully with the city deputy mayor Vladimir Putin (current president of Russia).

Vladimir Putin and the St. Petersburg Police department provided the premises where the firm was established while mr Sedlmayer built, trained, equipped, and wholly financed the FSB Counter-Terrorist Team for the sake of the Goodwill Games in 1994. The firm became joint-owned with the Police department and the investor as co-owners.

However, the joint venture, which promised a lot of success, was halted as the state under President Boris Yeltsin seized the shares of Mr. Sedelmayers and declared the property as state-owned. The Government did not compensate Sedelmayers for the seized assets and business lost. It also went on to use the property for hosting foreign guests of the president.

Initially, the investor sought compensation on Russian courts but did not get the needed backing as the state courts favored the states, claiming sovereign immunity.

Seldelmayer vacated Russia after a series of intimidations from the Government and activated the Germany-Russian Federation BIT at the SCC. Citing Article 10 of the treaty, he filed for direct Expropriation and requested full compensation for his losses. The case was introduced to the SCC on 10 October 1995.

Russia attempted to counter the claims of the investor by stating it was not a party to the contract and only a sector (St. Petersburg Police Dept.) independently went into the contract. The state claimed that it was opposed to the agreement from the start and, as such, should not be held to it.

After three years of consistent litigation wars, the tribunal ruled in favor of the claimant and ordered the Russian Federation to pay the sum of US$2,350,000. The claimant had initially sought US$7,000,000 as compensation. Russia refused to pay the compensation and rejected the award, claiming sovereign immunity.

The claimant, in response, sought to enforce the award against the state by targeting its assets in foreign countries where the New York Convention was valid. The claimant targeted a series of Russian assets in Germany, which led to him and the state garnering up to 80 different legal proceedings.

The claimant was finally able to claim a Russian building which was formerly the Soviet Trade Office in Cologne. A German court approved that the claimant could sell the building on the strength of his arbitration award. The Court stated that unlike other assets of Russia that were immune to claims, the Trade office was no longer used for any official state activities and was not immune.

The Russian Federation reacted to the decision by seeking court judgments for the award dismissal. The state appealed for dismissal in Stockholm City Court in 2002 and again in The Svea Court of Appeal in June 2005. The courts rejected the appeals and upheld the award.

In an act of defiance, Russia stated that it did not recognize the Swedish stance on the award. The Swedish courts responded by stating that the SCC was independent in its decision and had no external influence.

At risk of denting its already fragile international image, Russia eventually conceded and reluctantly commenced payments of damages in installments. This tactical approach was taken to frustrate the claimant. In Total, Russia paid US$5,000,000, with the final payment made in 2014.

Novenergia II – Energy & Environment (SCA) (Grand Duchy of Luxembourg), SICAR v. The Kingdom of Spain


Case type: International Investment Agreement
Case ID: SCC Case No. 2015/063
Treaty: The Energy Charter Treaty (1994)
Section: SCC Awards, SCC Arbitration Rules 2017
Outcome: favor of investor
Amount of damages: US $62,000,000

The Energy dispute between an investor party and Spain federation was one of the most disputed cases in the Energy sector. The investor’s home state, which doubles as the claimant, is Luxembourg, while the Host state where the investment was made was Spain.

The Details of the investment is as follows:

The investor made an Indirect financial investment in 8 (eight) photovoltaic plants in Spain through the local-incorporated company Novenergia II Energy & Environment España, S.L.

Summary of the dispute

The investor claims arose due to several detrimental energy reforms taken by the Spain government, which directly affects the renewable sector and the agreement between the two parties. The reform introduced a seven percent (7%) increase in tax for power generators revenues while reducing the subsidy already placed for producers of renewable energies at the time the investor agreed to the contract.

The claimant aggrieved by the policy activated the arbitration clause in the form of The Energy Charter Treaty (1994) against Spain for hurtful reforms.

The investor arbitrator team alleged a number of IIA breaches that were based on four categories. However, the tribunal found the State to have breached only a category of the contract.

The case generally involved the indirect investment of the claimant in Spain through a local company, Novenergia II Energy & Environment España, S.L., with the Government agreeing to make reforms that would favor the investor. The Government refused to honor the reforms signed in the contract and instead made damaging reforms to the investor that threatened its ability to make profits.

The Spain Government refused to rescind its decision that was counterproductive to the client, and as such, the claimant activated the Energy Charter Treaty. Following a preliminary objection, the setup arbitration tribunal had a series and phases of proceedings to see if Spain had breached any part of the contract. The respondent was found wanting, and the concluded it has breached its ECT with issues pertaining to fair and equitable treatment of the investor and the agreement, denying justice to the investor, and also implementing a minimum standard of treatment of the investor.

The tribunal concluded the case in favor of the investor, and the award was issued on 15 February 2018. The number of damages paid to the investor was Sixty-Two Million Dollars (US $62,000,000).

City-State N.V., Praktyka Asset Management Company LLC, Crystal-Invest LLC and Prodiz LLC v. Ukraine

Case type: International Investment Agreement
Case No: SCC Case No. 2014/063
Treaty: Netherlands – Ukraine BIT (1994)
Section: SCC Awards, SCC Arbitration Rules 2017
Outcome: favor of investors

Summary of The Case

Country: Netherlands, Ukraine

Claimant: City-State NV
Respondent: Ukraine

IIA breaches Alleged
Fair and equitable treatment/Minimum standard of treatment, including denial of justice claims

Indirect expropriation

IIA breaches found

Fair and equitable treatment/Minimum standard of treatment, including denial of justice claims

Indirect expropriation

The City-State NV…. V Ukraine is one of the most disputed bank cases due to the respondent’s hostile reception and the claimant’s fightback to seek damages for alleged breaches of the BIT entered.

The clamant filed an arbitration action against the respondent for alleged breaches to the contract entered by both parties. The claimant invested in the Ukrainian financial institution PJSC KreditPromBank buying the majority of the shares while having the state agree to protect its shares and not engage in harmful measures that could cause its losses.

The claimant at the tribunal alleged that the Ukraine Central banking authority breached the contract by neglecting oversight on its (claimant) deposit in the KreditPromBank following its sales to a Ukrainian National. Also, some of the bank assets and accounts were transferred to offshore companies, which violated Ukraine’s banking regulations. Finally, the state’s Government was also alleged to interfere with the domestic judicial proceedings and cause bias for fair ruling on the investor claim.

The tribunal found the respondent to have breached some IIA agreements as based on the BIT and issued an award in favor of the claimant in 2018 and damages of $8,910,490.

RosInvestCo UK Ltd V Russia

Case type: International Investment Agreement
Treaty: Russian Federation-United Kingdom BIT
Section: SCC Awards, SCC Arbitration Rules 1976
Outcome: favor of investors

Summary of The Case

Country: Russia, United Kingdom
Claimant(s): RosInvestCo UK Ltd.
Respondent state: Russian Federation

IIA breaches Alleged

Indirect expropriation

IIA breaches found

Indirect expropriation

RosInvestCo is one of the investors on Yukos, the biggest commercial oil exploration and exportation firm which was eventually liquidated by the Russian federation following deliberate hurtful policies.

Following the steps of three major investors of the same company that had successfully won the biggest award ever issued in history, RosInvestCo also filled an arbitration against Russia for indirect Expropriation.

The claimant stated that Russia had breached the Russian Federation-United Kingdom BIT through its series of actions against Yukos Oil Company, of which it was an investor. The action taken by Russia had led to it losing all its 7 million shares.

As expected, Russia proved hostility and rejected the claims. The arbitral action was filed in 2005, and the award was issued in 2010 October with $3,000,000 as the damages caused.

Russia rejected the award and filed for it to be set aside. In 2013, the award was concluded to be valid by the SVEA Court of Appeal.

Conclusion

Disputes resolutions are not a new occurrence in the SCC and the institution is globally trusted for its neutral stance in every cases and this is why it is considered the home of the biggest disputes in the world.

Hence if you are considering entering a contract and thinking if the best arbitration seat or rules to guide a potential dispute, then the SCC Arbitration Rules is one of the most reliable ones to go for. Also, apart from choosing the SCC as the seat of arbitration, equipping yourself and your interest with a good arbitrator is a key to victory.

Many arbitration firms promise efficiency and effectiveness. However, some have actually proven their capability in disputes. One of these firms is Rattsakuten, a top Swedish litigation firm that oversees commercial arbitration in Sweden and abroad. The firm has some of the most reputable arbitrators with a great track record in turning disputes resolution in their favor. The firm can be reached via call for further inquiries concerning its arbitration process and award enforceability.

About Rattsakuten

Rattsakuten is a leading law firm focused on Commercial Arbitration and Dispute Resolution. Based in Sweden, Rattsakuten handles dispute resolution and Arbitration matters before the SCC (Swedish Chamber of Commerce), ICC, HKIAC, and several other Arbitration tribunals


Fredrik Jörgensen

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