SWEDEN Law and Practice Contributed by: Niklas Sinander, Elin Carlsson, Axel Schelén and Björn Wendleby, Harvest Advokatbyrå
6. Enforcement 6.1 Enforcement of Collateral by Secured Lenders Enforcement of security is typically carried out by way of an auction sale. Under Swedish law, a pledgee has a fiduciary duty to take into account the interest of the pledgor when enforcing the security. This means that the pledgee should seek to realise a fair market value of the asset being realised given the circumstances at hand. Further, a security may only be enforced to the extent that it secures the debt owed, and any excess proceeds from an enforcement sale should be paid to the pledgor. Security agreements generally regulate the circum- stances in which security may be enforced. If the par- ties have not agreed on how enforcement should be done, the pledgee may seek enforcement assistance from the Swedish Enforcement Authority. Enforcement of property mortgage certificates and business mortgage certificates is limited to being made through a public sale process at the Swedish Enforcement Authority. In addition, there is a forfeiture prohibition under Swedish law restricting a pledgee from assuming ownership of the pledged asset if such acquisition is not made in fair competition with other potential acquirers on the market, which adds to the reasons for arranging an auction sale of the relevant asset. 6.2 Foreign Law and Jurisdiction Swedish courts generally recognise the choice of foreign law to govern contracts, subject to conflicts with public policy (ordre public). Foreign law contracts may be enforced in Sweden provided that Sweden has jurisdiction over them. Waivers of immunity are generally legally binding and enforceable under Swed- ish law. 6.3 Foreign Court Judgments Judgments given by a foreign court may be enforce- able in Sweden under the Hague Convention, the Brussels I Convention or the Lugano Convention.
Arbitral Awards Sweden is a party to the Convention on the Recogni- tion and Enforcement of Foreign Arbitral Awards 1958 (the “New York Convention”), meaning that all arbitral awards issued by a connected party thereunder are enforceable in Sweden. 6.4 A Foreign Lender’s Ability to Enforce Its Rights There are generally no restrictions in relation to a foreign lender’s ability to enforce its rights under a Swedish law-governed loan agreement or Swedish law-governed security agreement. Swedish entities that have been declared bankrupt will, by operation of law, have their assets managed by an appointed bankruptcy receiver, who will man- age the insolvency process and ensure that the total assets of the bankruptcy estate – after certain deduc- tions – are being distributed among the relevant credi- tors in a certain order. Perfected security may still be enforced by way of auction sale in such scenario, although an insolvency process may delay the sale process of certain assets. 7. Bankruptcy and Insolvency 7.1 Impact of Insolvency Processes It may be noted that there are different types of claw- back periods under Swedish law, which means that certain transactions may be recovered by a bankrupt- cy receiver for the benefit of the bankruptcy estate if such transactions have been made within the relevant claw-back period. For example, there is a three-month claw-back period regarding newly granted security provided in respect of existing debt, which generally affects security assets with delayed perfection. 7.2 Waterfall of Payments Under Swedish law, there are several tiers of prior- ity between creditors in the event of insolvency of a borrower: • special priority right – ie, claims that are connected with a particular collateral (such as security over real property or other pledge);
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