October 13 2014
The Supreme Court has once again cited the Draft Common Frame of Reference (DCFR) in one of its rulings. This begs the question of whether the DCFR will be regarded as an accepted source in Swedish law and, if so, how this will be handled by law practitioners.
The DCFR was published in 2009 following years of close cooperation by leading contract law academics in Europe working to condense the common principles in the member states' contract law. The framework is based on the Lando Commisson's Principles of European Contract Law but expands on it not least in sheer scale. The DCFR has never had the status of anything other than an academic text and is probably best categorised as 'soft law', in the sense of a non-legally binding act serving as a possible source of inspiration for courts and legal practitioners.
The year of the DCFR's official release, the Supreme Court referred to it in a question of whether a distributorship agreement concluded for an indefinite time without any conditions of termination could be terminated with immediate effect or only after a reasonable notice.(1) The Supreme Court, which turned a prior supreme court ruling, held that even though Swedish law lacks regulation in this respect, a distributorship could not be terminated without reasonable notice. The court cited the DCFR(2) both as an example of how the question has been handled elsewhere and as a direct guide on how to establish the reasonable time period.
Between 2010 and 2013 the DCFR was cited in support of the ruling in six Supreme Court decisions,(3) with another two decisions(4) where the outcome could be assumed to be heavily influenced by the DCFR (although not referred to in the final grounds for the decision).
So far in 2014 the Supreme Court has referred to the DCFR in one ruling, where it turned the lower courts' judgment and held that an auditor who had acted negligently by deviating from generally accepted auditing principles (GAAP) was not liable for damages to a shareholder who had acquired shares in the company. The court held that the claimant in this case would have acted in the same manner even if the auditor had not deviated from GAAP, thus failing to establish a casual link. The rule established by the court is almost a carbon copy of the DCFR's provision on causation(5) under the chapter regarding information services, which states that if the provider knows or could reasonably be expected to know that a subsequent decision will be based on the provided information, any loss is presumed to have been caused by the provider if it is proved that it would have been reasonable for the client to have seriously considered making an alternative decision if all required information had been provided.
A somewhat heated debate followed the first 2009 decision. The main question was whether and where the DCFR fits into the normally referred hierarchy of Swedish sources of law (ie, legislation, preparatory work, prior case law and the assessments of leading academics). Although the opinions differed, the general conclusion was that the DCFR cannot be regarded as an accepted legal source, for example, in the sense that a court ruling deviating from a clear DCFR provision constitutes a procedural error by not applying Swedish law. However, most authors also held that the status of the DCFR was to be determined by future court decisions.
Five years later, and with at least seven further Supreme Court rulings citing the DCFR, the question arises of whether this should be taken as acceptance of the DCFR as one source among others in Swedish law. The answer is no. However, that does not mean that legal practitioners can disregard the DCFR.
In Swedish legal tradition the court can and often will refer to other sources to fill a perceived gap in a contract or to render a judgment when no clear legislation or case law exists. The court has done so in both its 2009 and 2014 decisions. The 2009 decision established case law which implied that the DCFR could rank above prior case law in the hierarchy of Swedish sources of law. While none of the latter judgments could be said to change so much as to support previously accepted case law and the assessments of leading academics, it is not naive to argue that the DCFR should rank if not on the same level, then at least just below the level of accepted sources. The Supreme Court rulings of the past five years indicate that law practitioners should familiarise themselves with the DCFR and a comprehensive knowledge of it might prove valuable in any commercial litigation or arbitration under Swedish law.
For further information on this topic please contact Bo Thomaeus at Gärde Wesslau Advokatbyrå by telephone (+46 8 587 240 00), fax (+46 8 587 240 01) or email (email@example.com). The Gärde Wesslau Advokatbyrå website can be accessed at www.garde.se.
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