A historical perspective on the China-Sweden arbitration connection

A 1980s-era government handbook instructed Chinese state-owned enterprises negotiating contracts with foreign entities that there were only two acceptable options for dispute resolution clauses: CIETAC arbitration in China, or arbitration in Stockholm under the Arbitration Institute of the Stockholm Chamber of Commerce (SCC) Rules. How did Sweden, a sparsely populated country on the northern edge of Europe, gain that status in the eyes of the Chinese government?

The arbitration bonds between Sweden and China have their origins in the post-World War II global political climate. During the Cold War, the need arose for impartial venues in neutral jurisdictions for the resolution of commercial East-West disputes. Sweden had pursued a policy of non-alignment in foreign affairs since the 19th century, and thus had earned a reputation as a neutral, middle-road country. It was a jurisdiction in whose neutrality most parties had confidence.

The SCC thus became a hub for East-West disputes during the second half of the 20th century. In that period, the SCC’s case load became increasingly international, having been mainly domestic since the Institute’s establishment in 1917. In 1977, a major milestone was reached when the American Arbitration Association and the USSR Chamber of Commerce and Industry signed the so-called Optional Clause Agreement, whereby US-Soviet commercial disputes would be resolved in Sweden under the SCC Rules.

Anja Havedal-Ipp is legal counsel at the SCC in Stockholm. Relevant historical information is drawn from Michael Moser’s article, “Ulf Franke, Stockholm Arbitration, and the Bridge to China” in Between East and West: Essays in Honour of Ulf Franke.