International Fraud & Asset Tracing 2021

Last Updated April 30, 2021

Sweden

Law and Practice

Author



Delphi is a Swedish independent commercial law firm with specialists in most areas within business law. Delphi’s dispute resolution practice group comprises more than 30 lawyers and the team acts as counsel in all areas of dispute resolution, arbitration and litigation – domestic and international – in a variety of industries and areas of law.

Fraud Claims under Swedish Law

Under Swedish law, different types of fraud claims may arise in different contexts and under different circumstances. General statutes on fraud and other cases of dishonesty, including conspiracy to commit such offences, are found in the Swedish Criminal Code.

Generally, under Swedish law, fraud can be characterised as an act of intentional deception whereby the offender induces someone into an action or omission that involves an unlawful financial gain for the offender and a financial loss for the person being deceived. The fraudulent act can be carried out in any kind of manner, such as by making false statements, orally or in writing, or by omitting information or by adopting a certain false demeanour, such as creating an outward false appearance of being someone else (including identity theft or identity fraud) or of having a certain position or authority.

Common Types of Fraud

Common types of fraud include investment frauds (such as Ponzi schemes), securities frauds, credit card frauds and government subsidies frauds (such as COVID-19 wage subsidies frauds). Depending on the circumstances, an act that would amount to accounting fraud, tax fraud, bankruptcy fraud, insider trading or market manipulation (including “pump and dump” schemes), for instance, may serve as a means to perpetrate another offence, for instance an investment fraud, such as when a company’s financial data is manipulated, its revenues inflated or its expenses deflated, but may also be prosecuted as a free-standing offence.

Corrupt Payments

The making of corrupt payments can be characterised as giving or offering, improperly, an item of value to influence an official or other person in charge of a public or private legal duty in the carrying out of his or her duties. The mirror crime of bribe taking is characterised by the corresponding requisites of someone receiving or requesting, improperly, an item of value for the performance of his duties.

Even though making or receiving corrupt payments is punishable under the Criminal Code, bribe giving and bribe taking do not fall within the same general category as fraud or misappropriation (or embezzlement). However, it would not be uncommon for corrupt payments to occur in connection with various kinds of frauds. For instance, a bribe can be offered as an inducement for someone to participate in some fraudulent scheme, in breach of his or her fiduciary duties (see 1.2 Causes of Action after Receipt of a Bribe (Breach of Fiduciary Duty, Damages and Termination)).

Recently, there have been several cases in Sweden where pension fund managers have been alleged of bribe taking and where it has been alleged that the bribe served the purpose of inducing the pension fund managers to buy, on behalf of the pension funds, securities from the bribe giver at highly inflated prices and to the detriment to those whose retirement income is secured by the fund. Other crimes, such as accounting fraud, tax fraud and money laundering, often occur in connection with bribe giving and bribe taking, either to facilitate or conceal or as a result of the corrupt payment.

Embezzlement and Misappropriation

Depending on the circumstances, the wrongful or fraudulent use of another person’s funds or property that is in the care of the offender can be characterised as either embezzlement or misappropriation, both of which are punishable under the Criminal Code. Embezzlement has a certain resemblance to fraud in that it requires an unlawful financial gain and a financial loss, while the punishable aspect of misappropriation is the owner being dispossessed of their assets or otherwise deprived of their rights.

Differing from fraud, in the case of embezzlement and misappropriation, the offender has come into the lawful (or at least not unlawful) possession of – or control over – someone else’s funds or property, which assets are then misused by the offender for his or her own purposes. In the case of embezzlement, the offender has come into the possession of those assets because he has been entrusted with the management or control over them, as a result of a contract, an employment or a similar position. In the case of misappropriation, the offender may have come into the possession of those assets by mistake, such as a mistaken payment, or through some sort of financial arrangement with the owner of those assets, such as a hire-purchase or a finance lease that was eventually intended to see the offender become the owner of those assets, but only after having fulfilled his financial obligations to the owner.

Both offences are characterised by the first person (the offender) disregarding their obligation to the second person (the owner) to surrender, give account or pay for the assets, and instead using them inappropriately and to their own benefit.

Objective and Subjective Legal Requirements under Criminal Law

In Swedish criminal law, a distinction is made between the objective and subjective legal requirements in order for an act or an omission to be punishable.

Objective requirements

Generally, the statutes in the Criminal Code shall explain the criminal deed as a certain activity, omission or conduct and, usually, a certain resulting effect, such as a financial loss or some other detriment to the victim of the offence. Normally, the criminal offence shall relate to a certain deed, but the offence of misappropriation may (not infrequently) consist of a lack of action, such as an omission to return property to its owner.

Subjective requirements

In order to be punishable, most but not all offences must have been carried out with what may be referred to as “a guilty mind” or intent (to commit a crime) – ie, a subjective state of mind must accompany the act or lack of action in order for it to constitute a punishable violation (mens rea). For there to be intent, the defendant’s state of mind must embrace all the objective requirements of the offence. However, being ignorant of the fact that a certain deed or omission is punishable under the statutes shall not serve as an excuse that excludes criminal liability (“ignorance of the law excuses not”). The requirement for intent is never expressly set out in the applicable statutes, but, unless otherwise stated, intent is always required. Only when the statute indicates differently shall carelessness suffice for there to be a punishable offence. In cases where the bar for punishment is lower than to require intent, this is indicated in the statutes by phrases such as “ought to have known”, “with disregard for”, “through carelessness” or similar expressions.

Breach of Fiduciary Duty, Damages and Termination

An agent that has received a bribe and, as a result, has acted or promised to act in the interest of the person paying the bribe, rather than in the interest of the agent’s principal, whether public or private, would be in breach of his fiduciary duty, in addition to being guilty of the offence of bribe taking. Breach of fiduciary duty is punishable under the Criminal Code, and would also make the agent liable to damages, termination or dismissal.

Contract Avoidance

A contract entered into by the agent on behalf of his or her principal – whether with the person paying the bribe or a third party – as a result of the bribe may be voided or set aside, depending on the circumstances. In a contract with a third party, avoiding or setting aside the contract would normally require the third party to have had actual or constructive knowledge of the corrupt practices and of the contract being the result of such corrupt practices.

Aiding and Abetting/Accessory to a Crime

In addition to the principal offender, a person may equally be guilty of an offence if they encourage, assist, aid and abet, counsel or procure the commission of an offence by a principal offender.

Receiving

Depending on the circumstances, a person receiving fraudulently obtained monies or other assets may be punished for the offence of receiving. The same would apply if a person obtains an improper gain from another person’s criminal acquisition, such as a person living on the criminal earnings of their spouse while knowing that those earnings are the spoils of crime. Asserting a claim with knowledge of the fact that it arises from an offence would also be treated as receiving. A person receiving fraudulently obtained monies could also be punished for money laundering.

Damages and Proprietary Claims

A person assisting in or facilitating a fraudulent activity could be liable to damages. A person guilty of receiving could also be subject to a proprietary claim.

Time Bars for Prosecution

There are limitation periods for the prosecution of all criminal offences, with a few rare exceptions (such as murder, genocide and certain terrorist crimes). The criminal prosecution of fraud would always be subject to limitation periods, which vary according to the seriousness of the offence. If the fraud is deemed a misdemeanour, the limitation period would be two years from the commission of the crime; in the case of gross fraud, the limitation period would be ten years. If the fraud is not gross but is also not a misdemeanour, the limitation period would be five years. These limitation periods are set out in the Criminal Code.

Time Bars for Civil Law Remedies

There is also a limitation period of ten years for the associated civil law remedies, which is set out in the Statute of Limitations Act. However, there would be no limitation period for a proprietary claim against property. As an exception to this rule, under limited circumstances, an ownership claim may be time barred as a result of usucaption – ie, ownership gained through possession beyond a certain period of time. In the case of movables, ownership is gained by a good faith possession for ten years.

Interrupting the Limitation Period

The limitation period for criminal prosecution is tolled when the suspect is either charged with the offence or arraigned by a court of law because of the offence. The limitation period for damages is tolled when the offender receives a claim or admits liability.

Proprietary Claims and Good Faith Acquisitions

A proprietary claim for the restitution or return of misappropriated specific and identifiable property, and such specific and identifiable property that the owner has been induced by fraud to transfer to another person, can always be asserted against the offender. Such a claim can also be asserted against a third party that has acquired the property from the offender, unless said third party has made a good faith acquisition. Notably, a good faith acquisition is never possible in the case of stolen property or robbery.

Converted Proceeds

If the original property has been converted into some other property, the general rule is that a proprietary claim can be asserted against such converted proceeds, provided that there is a strong causality between the original property and the converted proceeds, and provided that the latter property is specific and identifiable. Put differently, the converted proceeds must be specifically and identifiably traceable back to the original property.

A proprietary claim can never be asserted against some property only because it is of the same kind as the misappropriated or diverted property or fully equivalent to the original property. The converted proceeds can, however, have changed hands several times and still be treated as traceable and still be subject to a proprietary claim. Assets that are the proceeds of fraud or some other crime and that have been mixed with other assets in such a way that they have become indistinguishable cannot generally be subject to a proprietary claim. However, in limited circumstances, the Swedish Supreme Court has formulated an exception, under which a proprietary claim relating to monies, including bank deposits, that are the proceeds of a crime may be allowed when they have been mixed with other monies. A further exception in the Supreme Court’s case law applies to other non-specific assets that are found in the defendant’s possession immediately or very shortly after the crime.

A special case of property being mixed is what is referred to under property law as accession, which is a special mode of acquiring property that involves the addition of value to property through the addition of new materials. In the case of accession, a proprietary claim can be affected, particularly when the added new materials cannot easily be separated from the other property.

Gains

If gains are specifically and identifiably traceable back to the original property, they would be treated in the same way as other converted proceeds, at least up to parity with the value of the original property, but probably also above par value. To the extent a proprietary claim would not be allowed, such gains could probably be subject to a compensatory claim under unjust enrichment theories.

Procedural Sanctions

There are no express or specific procedural rules setting out what conduct or steps parties or litigants are expected or required to take before commencing proceedings for civil law claims (unlike criminal proceedings, which always follow strict rules and protocols). However, if the claimant fails to write to the defendant with enough details of its claim and offer the defendant a reasonable opportunity to respond to the claim and the possibility of settling or satisfying it, before initiating legal proceedings, this may affect the court’s assessment of compensation for costs.

Rules of Professional Conduct

As a general rule, subject to a limited exception for compelling reasons only, such as urgency, under the Swedish Bar Association’s Rules of Professional Conduct, a member of the Swedish Bar is required to give the defendant advance notice prior to initiating legal proceedings. Failing this, the lawyer may be sanctioned by the Bar.

Freezing Injunctions

To prevent a defendant from dissipating or secreting assets, the victim of a fraud may motion for an interim or interlocutory freezing injunction. Such an injunction may be ordered against a defendant, either for the general purpose of securing the defendant’s assets in an amount sufficient to offer financial compensation to the victim of the fraud or to secure a proprietary claim against some specific assets. The freezing injunction is directed towards specific assets only in cases involving proprietary claims. The normal approach would therefore be to direct the freezing injunction towards the defendant’s general – worldwide – assets, without any limitation other than in terms of the amount of the claim to be secured by the court order. Which specific assets to attach would then be a matter of how best to enforce the freezing injunction. A freezing injunction would always be against a specific person, but it could be limited to that person’s actions in respect of some specific property only.

Pre-trial Freezing Injunctions

The victim could also motion for a freezing injunction ahead of initiating legal proceedings on the merits, but he or she would then be required to initiate such proceedings on the merits within one month from the freezing injunction being granted.

Court Fees

The only court fees that would be payable would be the regular, flat-rate court fees, and such rates would not be geared towards the amount of the claim or the value of the property.

Injunction Bonds

A plaintiff enforcing a freezing injunction would be liable under law for any loss or damage suffered by the defendant as a result of the freezing injunction having been enforced should the freezing injunction later be found to have been improper. Therefore, as a condition for the granting of a freezing injunction, as a rule, a court requires the plaintiff to provide a cross-undertaking in damages. Since the defendant is already liable under law, such a cross-undertaking must be issued by a third party. Such third party must be solvent for the full amount of the cross-undertaking and, in practice, the cross-undertaking would normally be in the form of a bank guaranty, often referred to as an injunction bond. Under very limited circumstance, the court may waive the posting of an injunction bond. The injunction bond must be in an amount sufficient to cover the defendant’s potential loss or damage. It must also be sufficient to cover the defendant’s costs for exercising their rights under the injunction bond.

Enforcement of Freezing Injunctions

Freezing injunctions are enforced, on the plaintiff’s application, by the Enforcement Authority, which decides whether to take possession of the attached property or to entrust the property with the defendant. If the attached property is entrusted with the defendant, the defendant may not assign or otherwise dispose of the property in a manner that would be to the detriment of the plaintiff. Non-compliance with the freezing injunction by the defendant would be punishable under the Criminal Code.

A Freezing Injunction’s Effects on Parties Other Than the Defendant

A freezing injunction shall not provide the plaintiff with a proprietary claim or any preferential right or lien over the attached property. Therefore, despite the freezing injunction, a third party may seek enforcement against the attached property, for instance. In principle, any disposition by the defendant of attached property after execution shall be null and void. However, depending on the type of assets, a good faith acquisition may be possible.

Other Protective Orders

In addition to freezing injunctions, a plaintiff may seek other procedural orders with the aim of preventing the defendant interfering with the exercise or realisation of the plaintiff’s rights or substantially undermining the value of those rights.

Disclosure of Assets

Other than under family laws, a defendant would be under no obligation, in their capacity as a litigant, to disclose their assets for asset preserving purposes. Under bankruptcy laws and enforcement laws, however, a debtor is required to provide full disclosure of his assets and a debtor who knowingly and fraudulently conceals their assets may be liable to a fine or imprisonment. However, there is no “disclose it or lose it” rule.

Other than petitioning to have the defendant declared bankrupt or to enforce a judgment, there are no procedures whereby a defendant could be compelled to disclose their assets for asset preserving purposes. There is no requirement for the claimant to provide a cross-undertaking in damages in order to initiate such proceedings. However, an unfounded petition for bankruptcy may make the petitioner liable to damages, and enforcing a judgment that is under appeal shall make the plaintiff liable to damages if the judgment is not upheld.

Assisting in Preserving Assets

Except for the possibility of obtaining a freezing injunction (see 1.7 Prevention of Defendants Dissipating or Secreting Assets (Freezing Injunctions)), there are no procedures whereby a defendant can be required to assist in preserving their assets. An insolvent or distressed debtor, however, is under a general obligation not to dispose of his or her assets (for instance by removing or hiding them) to the detriment of creditors; failing this, the debtor may be liable to a fine or imprisonment.

General Rules on the Taking of Evidence

Under procedural rules, the parties are generally responsible for the taking of evidence but may seek the court’s assistance on the taking of evidence in somewhat limited circumstances (for instance, by means of a request for document production). However, no non-specific searches for information or documentary evidence – or, in pejorative terms, “fishing expeditions” – shall be allowed, and the court shall not render assistance when the sole purpose of a request for court assistance is to attempt to ascertain the identity of a potential defendant (see 2.8 Claims against "Unknown" Fraudsters) or to obtain the disclosure of documents or other evidence the sole purpose of which would be to help the plaintiff assess whether he has a legal basis for his claim or to formulate his or her legal grounds.

The only exception to this in intellectual property infringement cases, in which so-called Anton Piller orders (ie, orders that provide the right, through the Enforcement Authority, to search premises and seize evidence) shall be available to the plaintiff, subject to certain conditions being fulfilled, and in which  a plaintiff can exercise his right of information, pursuant to the so-called Enforcement Directive.

Evidence to Be Used in Future Legal Proceedings

When there is a risk that evidence concerning circumstances deemed to be of importance to a person’s legal rights may be lost or difficult to obtain and where, as of yet, no proceedings concerning such rights are pending, a court may take and preserve evidence for future proceedings under special rules, upon the request of a party whose rights are so concerned. Such evidence may be taken in the form of witness examinations, expert opinions or documentary evidence. Typically, such assistance may be sought if a potential witness in future legal proceedings is terminally ill and has a limited life expectancy.

Even though there is no published case law on such situations, there is no reason to assume that the same rules would not apply in less typical situations, such as when there is a risk that someone would deliberately try to destroy or suppress evidence. However, the rules for the taking of evidence to be used in future legal proceedings shall probably prove rather ineffective in such cases, since they cannot be applied ex parte. The rules for the taking of evidence to be used in future proceedings are relatively rarely relied upon. If proceedings are already pending, different rules shall apply and general discovery rules may be relied upon and witness examinations may take place in the course of a special early session, separate from the main hearing.

Discovery

As noted above, general discovery rules may be relied upon for the purpose of obtaining documentary evidence only once legal proceedings have been initiated. Also, the purpose of discovery is not the preservation of documents per se, but rather to obtain evidence from the other party. Therefore, a document production order shall only be granted when the party seeking such an order can convince the court of a document’s specific evidentiary value in the pending proceedings. There are several exemptions from the disclosure obligation (see 2.3 Obtaining Disclosure of Documents and Evidence from Third Parties (Exemptions from the Disclosure Obligation)).

Party Conducted Search at the Defendant’s Residence or Place of Business

Other than in criminal cases, there are no rules that would allow a party to conduct a search at the defendant’s premises or that would allow a party to seize evidence itself. Also, as noted above, the search and seizure opportunity available in intellectual property cases has to be exercised through the Enforcement Authority.

Criminal Proceedings

The rules for the taking of evidence to be used in future legal proceedings may not be used for the purpose of investigating a crime. Different rules apply in criminal proceedings, which give law enforcement authorities wide powers to secure evidence. For example, a variety of search and seize means are available to the law enforcement authorities, such as searches of premises and body searches.

Unlawful Suppression of Evidence

Under the Swedish criminal code, the deliberate destruction or suppression of documentary evidence is punishable.

A Third Party Shall Be Subject to the Same Disclosure Obligations as a Private Litigant

A private litigant shall be able to obtain disclosure or discovery of documentary evidence from its opposing party and third parties alike. Procedures to obtain disclosure can only be invoked once legal proceedings have been commenced. If no such proceedings are pending, private litigants have to rely on such rules as explained in 2.2 Preserving Evidence (Evidence to be Used in Future Legal Proceedings). Different rules apply in criminal proceedings (see 2.2 Preserving Evidence (Criminal Proceedings)).

Exemptions from the Disclosure Obligation

There are several exemptions from the disclosure obligation, some of which are absolute and some of which do not apply in extraordinary circumstances. The most important exceptions are described immediately below.

Correspondence between close family members

A party and a party’s close family members cannot be compelled to disclose communications among themselves.

Legal professional privilege

Legal professional privilege shall exempt a client from the disclosure obligation (see 6.2 Undermining the Privilege over Communications Exempt from Discovery or Disclosure).

Self-incriminating documents

There shall be no obligation to disclose documents that would reveal the holder of the document or such person’s close family member to have committed a crime or a dishonourable act.

Personal notes

Personal notes prepared for the document holder’s private use shall be exempt from the disclosure obligation, except in extraordinary circumstances.

Trade secret information

Trade secret information shall be exempt from the disclosure obligation, except in extraordinary circumstances. In cases where disclosure has been ordered, notwithstanding the fact that those documents may contain trade secret information, the party obtaining access to such documents shall be liable to damages if he or she makes unauthorised use of or discloses such trade secret information for purposes (eg, for a business purpose) other than those for which the documents were obtained, pursuant to Swedish law on the protection of trade secret information. Also, under general rules, a court may issue a non-disclosure order to preserve secret information that has been obtained as a result of a court order.

Obligation to Make Property Available for Inspection

Anybody (a party to litigation and a third party alike) who holds an object other than documentary evidence that can be conveniently brought to the court and that can be assumed to be of importance as evidence can be ordered to make the object available for inspection. However, no such obligation may be imposed on a defendant in criminal proceedings or on such a defendant’s close family members. Furthermore, the exceptions regarding self-incriminating documents and trade secret information, as explained above, shall apply.

Ex Parte Procedural Orders

In urgent cases, such procedural orders as discussed in 1.7 Prevention of Defendants Dissipating or Secreting Assets (Freezing Injunctions) and (Other Protective Orders) may be granted ex parte. An ex parte procedural order would only serve as a temporary order awaiting the defendant’s response and further hearings in the matter.

Requisites for the Granting of an Ex Parte Order

A procedural order may be granted ex parte when the delay caused by the defendant having the opportunity to respond to the plaintiff’s request for such an order would “place the plaintiff’s claim at risk”. The reality behind this requisite is that it is not so much the delay in itself that would place the plaintiff’s claim at risk as it is the risk that the defendant, being forewarned, would use the respite to attempt to dissipate or secrete assets, or to try to avoid the consequences of the procedural order and, by extension, a judgment. The Supreme Court has emphasised that there must be an imminent risk of the defendant obstructing or sabotaging the plaintiff’s prospects of being able to have his claim satisfied in order for the plaintiff’s claim to be “at risk”.

Injunction Bonds

General rules on the posting of injunction bonds (see 1.7 Prevention of Defendants Dissipating or Secreting Assets (Injunction Bonds)) would also apply to ex parte orders, but no additional such burden would be placed on the plaintiff.

Seeking Redress Against a Perpetrator of Fraud via the Criminal Process

A victim of fraud may request the public prosecutor to prepare and present his or her claim via the criminal process, provided that the claim is not manifestly meritless and that no major inconvenience to the criminal proceedings would result therefrom. However, when the public prosecutor agrees to bring such a claim, it is ultimately the court that decides whether to allow the joining together of the victim’s claim for damages, for instance, with the criminal prosecution. Normally, the courts will allow such consolidation unless the joint adjudication would cause a major inconvenience.

If the joining together is disallowed, the court shall order the victim’s claim to be handled in civil proceedings and the victim shall then have to prepare and present his or her case without the assistance of the public prosecutor. Unless the offender consents to the victim’s claim, in many fraud cases the public prosecutor declines to assist the victim or the court disallows consolidation because the victim’s claim is considered too complex to be adjudicated in conjunction with criminal proceedings. Criminal proceedings should not be allowed to be slowed down or complicated because of a damages claim. Unless there is consolidation, the criminal and civil proceedings shall run their separate courses. However, depending on the circumstance, civil proceedings may be stayed pending resolution of the criminal case.

Judgment without a Full Trial in Criminal Proceedings

A judgment that finds the defendant guilty is not possible without a full trial, with one exception. The sole exception relates to misdemeanours, but only if there is no reason to consider any sentence other than a fine, and if neither party requests a full trial and the court does not consider a full hearing to be necessary in order to aid the inquiry.

Judgment without a Full Trial in Civil Law Proceedings

A so-called default judgment – ie, a judgment in favour of either party based on the other party’s failure to take action as required by the court – may be entered in certain instances. Also, if the court deems the plaintiff’s case to be without any legal basis or if it is otherwise clear that the plaintiff’s case is unfounded, the court may immediately render a judgment in favour of the defendant, without first issuing a summons calling upon the defendant to answer the case.

The test for determining that a plaintiff’s case is without any legal basis is when the relief sought by the plaintiff cannot be granted if the plaintiff is able to prove the existence of those facts upon which he or she is relying. Furthermore, if the court determines that a full trial is not necessary for inquiry reasons, it may rule the case without a full trial, but only if neither party requests a full trial. Additionally, a court may enter a judgment based upon the defendant’s consent or the plaintiff’s concession.

The court cannot rule on a case without a full trial only because it considers the defendant’s case to be meritless. However, under very limited circumstances and when the court is of the opinion that it is evident how a certain dispute should be resolved, the court may decide to rule on the case following a simplified form of trial, but only provided that it takes place in immediate conjunction with a pre-trial, preparatory, meeting. In practice, a simplified form of trial shall require that there shall be no oral evidence. The court may also decide to hold a simplified trial in conjunction with a pre-trial meeting if both parties consent to such.

Defamation

In order to plead fraud, the plaintiff would need to be able to demonstrate that the allegation is true or that there are reasonable grounds to assume that it is true. In practice, this would require cogent evidence. Pleading fraud without such evidence would not make the pleadings inadmissible, but it may make the plaintiff guilty of defamation. If the allegation is of such a nature that it is liable to result in “serious damage” to the defendant, the plaintiff may be held guilty of gross defamation, which is a crime that carries the risk of a jail sentence. In other cases, the plaintiff could be fined.

In addition to the requirement for cogent evidence, a litigant would need to have a justifiable cause for alleging fraud. However, when fraud is pleaded as grounds for damages or some other relief and when there is convincing factual evidence in support of such pleadings, such allegations would be deemed justifiable in most cases. Normally, litigants would be allowed some latitude when determining whether a certain allegation was justifiable in the circumstances.

Rules of Professional Conduct

Under the Swedish Bar’s Rules of Professional Conduct, a lawyer may not “in the course of a legal proceeding submit evidence of circumstances which are disparaging to the opposing party or make offensive or disparaging statements about the opposing party unless, in the circumstances, this appears justifiable in order to act in the best interest of the client.” In a published commentary, the Bar has emphasised the balancing of competing interests between a lawyer’s responsibility to act in the best interest of their client but also show consideration for the opposing party. The published commentary then goes on to explain that the lawyer’s actions should be assessed as perceived at the time of the lawyer’s doings and without the possible benefit of hindsight wisdom being held against the lawyer. However, in practice, the rule against disparaging evidence and statements has been very strictly upheld by the Bar. The lawyer must ascertain the truthfulness of what is alleged and, in so doing, cannot solely rely on their client. However, merely ascertaining truthfulness is not enough: the allegation must also be deemed objectively justifiable in furtherance of the client’s interest.

The practice of issuing proceedings against persons unknown, or fictitious persons, as defendants is not possible in Sweden.

Subpoena to Appear in Court

In both civil and criminal proceedings, a witness will be subpoenaed to appear in court. The subpoena will be under the threat of legally enforceable penalties for failure to appear. Also, a court may have the police bring an absenting witness to court. A witness refusing to appear before court can also be detained.

Refusal to Answer Questions

A witness who is not exempt from the duty to testify (see below) may be excused from answering particular questions (see, mutatis mutandis, paragraphs 2.3 Obtaining Disclosure of Documents and Evidence from Third Parties (Legal Professional Privilege), (Self-incriminating Documents) and (Trade Secret Information)). Unless so excused, a witness who refuses to answer questions can be compelled to do so under the penalty of a fine and, if still refusing to answer, may be remanded in custody for a period of no more than three months. However, an express refusal to answer questions shall not be treated as perjury.

Exemption from the Duty to Testify

There are a few exemptions from the duty to testify. A criminal defendant can never be forced to testify (see also 6.1 Invoking the Privilege against Self-incrimination). Close family members cannot be compelled to testify in criminal proceedings. Legal professional privilege shall also provide a certain testimonial privilege (see 6.2 Undermining the Privilege over Communications Exempt from Discovery or Disclosure).

A company is a legal person and as such can acquire rights and incur obligations. Also, a company is capable of suing and of being sued. However, unlike a natural person, a company does not have a will or a mind separate from the will and mind of those natural persons that manage and control it. When considering a company’s lack of will and a mind in the context of liability for fraud (or any other criminal liability), there are some important principles or doctrines to consider, which, at least at the outset, may appear somewhat difficult to distinguish from one another. Still, they manifest themselves in different ways.

Only Natural Persons Can Incur Criminal Liability

In order to have criminal liability, the offender must have had a certain state of mind (see 1.1 General Characteristics of Fraud Claims (Subjective Requirements)). A company itself cannot have a state of mind and, therefore, is not capable of committing a crime in the legal sense. It is also an established principle under Swedish law that only natural persons can incur criminal liability, not legal entities.

Corporate Fines

This principle notwithstanding, in specific circumstances a corporate fine can be imposed on a company if an offence is committed in the exercise of the company’s business activities or of some other activity when the offence was liable to result in a financial gain for the company. However, a fine can only be imposed if the company failed to take reasonable steps to prevent the offence, and also if the offence was committed by someone in a leading position or by someone that had a special responsibility for the supervision or control of the activity in question.

To confuse matters, the statute on corporate fines is to be found in the Criminal Code and cases concerning the imposition of corporate fines largely follow the same procedural rules as those in criminal proceedings. However, at least technically, corporate fines – like the confiscation of property – manifest themselves not as a criminal sanction, but rather as a means of criminal prevention or deterrence. In the Criminal Code, corporate fines are described as “special legal consequences of offences”.

The Respondeat Superior Doctrine

Under the respondeat superior doctrine, an employer is vicariously responsible for the acts and omissions of its directors and other employees, and can incur civil law liability as a consequence of such acts and omissions, but only if the director or employee was acting in the course of and within the scope of his or her employment. Importantly, however, a company cannot incur criminal liability for the wrongdoings of its directors or employees. Because the respondeat superior doctrine only applies to actions in the course of and within the scope of employment, it would be unusual for a company to incur any liability as a result of a fraud committed by a director or other employee.

The respondeat superior doctrine manifests itself not in criminal law (other than possibly in terms of the imposition of corporate fines) and not in contract, but in tort. The fact that a company may be responsible to third parties under the respondeat superior doctrine, however, should not be confused with what may appear to be a similar matter, that of whether the knowledge of a director or another employee should be attributed to the company (corporate attribution).

Corporate Attribution

Because a company is merely an artificial person, without any mind and will of its own, the knowledge of those who manage and control the company may be attributed to the company and treated as the knowledge of the company, depending on the circumstances. However, this is not the case when the company itself has been the victim of some wrongdoings by those same persons. Corporate attribution manifests itself not in criminal law (other than possibly in terms of the imposition of corporate fines) and not in tort, but in contract and could result in contract avoidance or setting aside. For instance, a third party that has been deceived by a company director through misrepresentations or otherwise to enter into a contract with the company can then seek contract avoidance against the company because of the director’s state of mind.

Piercing of the Corporate Veil

Even though there are no statutory rules enabling a plaintiff to disregard the limited liability characteristics of a corporation in order to make its shareholders answer for the corporation’s liabilities, the principle of piercing the corporate veil has been recognised in Swedish case law, in limited circumstances. When the corporate veil, or protective shield, is pierced, contrary to the general concept of a limited liability corporation, the shareholders have to assume liability for the corporation’s liabilities. Piercing of the corporate veil actions are not common in Sweden and, due to the scarcity of such cases, there is no definitive guideline regarding the circumstances in which such an action will be successful, although the following common traits may be identified:

  • the number of corporate shareholders is limited;
  • the corporation’s operations are not independent of its owners and the corporation strives to ensure the interests of its owners rather than its own interests;
  • the owners misuse the limited liability format in a disingenuous manner so as to avoid personal liability; and
  • the corporation is undercapitalised relative to its operations.

Actio Pro Socio

Under the Swedish Companies Act, shareholders together holding at least one tenth of all shares in a limited liability company have standing to bring an action pro socio in court – ie, an action whereby the plaintiff shareholder, in its own name and at its own cost risk, requires the defendant company director to pay damages or fulfil some other obligation towards the company. If successful, the plaintiff shareholder would be entitled to have its legal costs reimbursed by the company, but only from the proceeds of the court action. Shareholders holding one tenth of all shares would also be able to prevent the discharge of liability for a fraudulent company director. Similar rules also apply to partnerships and co-operatives.

General Rules on Joinders

Under procedural rules, there is a mechanism whereby a third party – either domestic or overseas – can initiate legal proceedings and, in appropriate circumstances, have such proceedings joined into ongoing court proceedings. Such a joinder will be granted when the pleadings in both proceedings concern the same matter, or if the joinder would aid the inquiry in those proceedings.

Intervention Parties

A third party, whether domestic or overseas, may seek to participate in ongoing proceedings as an intervenor to support one of the parties in the ongoing litigation, also without instituting an action of its own, by making an application to the court. However, an intervenor shall not be treated as a party to the proceedings and shall not have standing in its own name to have an award issued against the defendant. An intervenor shall be able to take the same procedural steps as would be available to the party on whose side the intervenor has intervened.

With very few exceptions, however, the intervenor shall not be able to act in opposition to the party on whose side the intervenor has intervened, and shall have no right of appeal except by supporting the appeal of the party on whose side the intervenor has intervened. If the party on whose side the intervenor has intervened loses, the intervenor shall be liable to the opposing party for its reasonable litigation costs caused by the intervention.

Cost Bonds

With some exceptions, upon a timely request by the defendant, non-resident plaintiffs are required to post a plaintiff surety bond to guarantee that they will be able to pay the defendant’s reasonable costs for the litigation if they lose. An important exemption from this obligation to post a cost bond shall apply to plaintiffs from other EU Member States; as the UK has left the European Union, UK plaintiffs are no longer exempt from this obligation.

The obligation to post a cost bond applies to a non-resident litigant submitting a writ whereby a legal action is started. On a strict semantic interpretation of the statute, this would not include an act of intervention. The reason for the law requiring the posting of a bond would, however, seem to speak in favour of applying the same rule also to an intervenor, although there is no settled case law on this matter.

Extraterritorial Jurisdiction

In several cases, the Criminal Code establishes extraterritorial jurisdiction for crimes committed outside Sweden. Most importantly, such extraterritorial jurisdiction exists over Swedish citizens and non-Swedish citizens that are domiciled in Sweden. However, to establish extraterritorial jurisdiction, the dual criminality requirement must be satisfied, meaning that the offence must also be subject to criminal punishment under the laws of the place where it was committed. With some exceptions, establishing extraterritorial jurisdiction requires authorisation by the government, which is rarely denied.

Enforcing a Money Award

A request for the enforcement of a money award shall always be filed with the Enforcement Authority. Hence, enforcement is not automatic and will not be done through the courts. The Enforcement Authority has some simple rules to comply with, but requesting enforcement is quite uncomplicated. Methods of enforcement include attachment of the debtor’s assets, which can eventually be sold to pay the debt, or, when the debtor is a natural person, attachment of the debtor’s earnings. Enforcement can also be sought if the award is under appeal, but no attached goods will be sold and the debt will not be paid until all appeals have been exhausted. As noted in 2.2 Preserving Evidence (General Rules on the Taking of Evidence), enforcing a judgment that is under appeal may make the plaintiff liable to damages.

A member of the Swedish Bar is required to give the debtor advance notice before seeking enforcement. Failure to do so may lead to the lawyer being sanctioned by the Bar.

Rights under the European Convention on Human Rights

The European Convention on Human Rights (the Convention) has status as Swedish law and is therefore directly applicable, for instance, in Swedish criminal proceedings. Under the Convention, anyone charged with a crime has the right to a fair trial (Article 6.1), shall be assumed innocent until proven guilty according to law (Article 6.2), and is provided certain minimum rights, such as the right to a proper defence (Article 6.3). The right to silence and the privilege against self-incrimination would flow from Article 6 of the Convention.

Exceptions to the Testimonial Duty and Disclosure Obligation

A defendant in criminal proceedings would have no obligation to give evidence that would incriminate himself, nor to produce documents that would equally incriminate him. During criminal investigations, a suspect may not be coerced or lured into providing information. A defendant in criminal proceedings shall also not testify under penalty of perjury.

Drawing Inferences from a Defendant’s Refusal to Co-operate in Criminal Proceedings

According to the case law of the European Court of Human Rights, depending on the circumstances, a court shall be allowed to draw inferences from a defendant in criminal proceedings invoking the privilege against self-incrimination and to assess the evidentiary value of the defendant’s silence or refusal to produce documents, but only together with the other evidence in the case, and the defendant’s refusal to co-operate may not be used as the sole or primary evidence to convict the defendant of a crime. According to Swedish case law, a court may draw inferences from a defendant's refusal to answer a specific question that they could have been expected to be able to answer; this would not be the case if the defendant is consistent in his or her refusal to answer questions and thus remains silent throughout the entire proceedings.

Testimonial Privilege

The Swedish legal professional privilege rule is not a general rule on the protection of all communications between a lawyer and their client. Instead, the privilege is aimed at protecting what has been entrusted in confidence to a lawyer by their client. The rule protecting client confidences takes the form of a statutory obligation for the lawyer not to give evidence about what the client has confided in the lawyer or what the lawyer has come to know in connection therewith. The phrase “what the lawyer has come to know in connection therewith”, and exactly how to understand this phrase, has caused considerable debate in the Swedish legal doctrine, and this discussion cannot be properly accounted for within the confines of this guide. Therefore, focus will be on what is at the core of professional legal privilege: client confidences. This statutory rule may be referred to as a “testimonial privilege”, meaning that a lawyer can refuse to give certain evidence. However, the reality behind the rule is that it confers an obligation on the lawyer not to testify about client confidences and it may be upheld by judges on their own volition, absent an objection to the lawyer testifying.

Testimony in Cases Involving Serious Crimes are Exempt from the Testimonial Privilege

When a lawyer is required to give testimony in a case involving a crime that carries a minimum sentence of two years' imprisonment, such testimony is not covered by legal privilege. For a lawyer representing the defendant in the criminal prosecution of such a crime. Notably, fraud is not such a serious crime that would exempt the lawyer from testimonial privilege.

Legal Professional Privilege is Limited to Client Confidences

The way in which the rule on legal professional privilege is drafted does not – at least not directly – prevent testimony about what the lawyer has communicated to their client other than when such communication would reveal client confidences. However, in practice, what a lawyer has communicated with their client (for instance, legal advice) may arguably be exempt from an obligation to give evidence because of its inherent lack of evidentiary value, depending on the circumstances.

Reliance on Legal Professional Privilege

Strictly following the wording of the statutory rule on legal professional privilege, the implication would be that the testimonial privilege does not extend to exempt the lawyer’s client from having to testify about their communications with the lawyer. This is because, as already noted, the rule is drafted in the way of an obligation specifically for the lawyer not to give evidence. It has, however, been argued that the aim of protecting confidences between a lawyer and their client would be defeated if the rule does not extend to also cover the lawyer’s client, although there is no settled case law on this matter. Even if a client would be able to rely on the testimonial privilege not to testify about their communications with the lawyer, the underlying facts that the lawyer-client communication is concerned with would not be protected – only the communication and the client’s confidences, as such.

The Disclosure Privilege

The testimonial privilege is mirrored by a rule protecting correspondence between a lawyer and their client from discovery, but only to the extent that the correspondence would reveal client confidences. Differing from the testimonial privilege, such correspondence is expressly exempt from discovery both from the lawyer and from their client. Unlike in some jurisdictions, however, there is no specific “attorney work-product” doctrine, and protection for a lawyer’s work-product does not extend beyond the general legal professional privilege rule, meaning that the work-product of a lawyer will be exempt from discovery only to the extent that it would reveal client confidences. As with the duty to give evidence, however, a lawyer’s work-product may be protected from discovery because of its inherent lack of evidentiary value.

Waiving Legal Professional Privilege

The client can always waive legal professional privilege, with such waivers normally being narrowly construed.

Only Compensatory Damages

Punitive or exemplary damages do not exist under Swedish law; only compensatory damages are available and only actual damages designed to replace precisely what was lost – no more and nothing less. This is a general rule of Swedish law and is not unique to fraud claims. Traditionally, Swedish courts have also tended to be somewhat conservative when assessing the quantum of damages.

Financial Privacy

The concept of financial privacy is generally recognised under Swedish law and is regulated through banking laws. Thus, as a general rule, a bank or another regulated financial institute owes its clients a legal duty not to disclose any foregoing activities (bank-client confidentiality) to a third party. In pursuit of a criminal investigation, however, law enforcement officials may require access to such information that would otherwise be protected by bank-client confidentiality.

Financial Privacy Rules Do Not Exempt from the Testimonial Duty or from the Disclosure Obligation

As noted above, as a general rule, information that qualifies as a trade secret shall be exempt from the testimonial duty and the disclosure obligation (see 2.9 Compelling Witnesses to Give Evidence (Refusal to Answer Questions) and 2.3 Obtaining Disclosure of Documents and Evidence from Third Parties (Trade Secret Information)). However, there is no similar protection for bank-client confidentiality. Therefore, whereas the credit policies of a bank or its risk management policies may generally be exempt from the testimonial duty and discovery on the grounds of being trade secret, the same would not normally apply to information regarding its actual dealings with a particular client.

Delphi

Mäster Samuelsgatan 17
P.O. Box 1432
SE-111 84
Stockholm
Sweden

+46 8 677 54 00

sverker.bonde@delphi.se www.delphi.se
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Delphi is a Swedish independent commercial law firm with specialists in most areas within business law. Delphi’s dispute resolution practice group comprises more than 30 lawyers and the team acts as counsel in all areas of dispute resolution, arbitration and litigation – domestic and international – in a variety of industries and areas of law.

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