International Trade 2022

Last Updated November 11, 2021

Sweden

Law and Practice

Authors



Mannheimer Swartling has an extensive international practice, with a strong focus on the Nordic region. The firm employs over 400 lawyers, based in offices in Sweden, Belgium, Russia, Singapore and the USA. The firm has considerable experience in trade matters, covering customs, national security and foreign direct investment, trade defence measures and export control and sanctions. The firm regularly handles trade law matters before various authorities, including complex classifications and voluntary disclosures, as well as litigation before Swedish and European courts and arbitration. The trade law team also helps clients with risk assessments, compliance programmes and investigations, and has an extensive network of international trade law professionals in other jurisdictions.

Sweden is a member of the WTO and the European Union (EU). As a member of the EU, Sweden’s trade-related commitments primarily stem from agreements concluded between the EU and other members of the WTO.

As a member of the EU, Sweden does not conclude any free trade agreements on its own. However, Sweden takes an active part in the preparations and negotiations led by the EU.

The EU actively engages with countries or regional groupings to negotiate trade agreements. These agreements grant mutually beneficial access to the internal markets of the EU and to the countries concerned.

For a full overview of the free trade agreements that Sweden, as a member of the EU, is a party to, as well as other free trade agreements that the EU is negotiating, please see the European Commission's Directorate for Trade website.

Sweden does not conclude any other agreements and does not adopt any unilateral measures to reduce tariffs beyond those adopted in the EU.

However, Sweden does participate in regional partnerships, such as Nordic Co-operation (Nordiskt samarbete), which is deeply rooted in the political, economic and cultural commonalities of the Nordic region. In general, the partnership focuses on areas where a Nordic approach generates added value for the countries and peoples of the region. The vision of Nordic Co-operation is to make the Nordic region the most sustainable and integrated region in the world.

Nordic Co-operation also examines questions such as trade barriers in practice – see, for instance, their report from 21 September 2020, 'Trade in goods on equal terms? Customs and VAT in the Nordic region from a border barrier perspective' (Varuhandel på lika villkor? Tull och moms i Norden ur ett gränshinderperspektiv).

The EU has trade agreements in place with multiple countries/regions, and is currently negotiating various new agreements, including with Australia, China, Indonesia, New Zealand and the Philippines.

Key developments occur at EU level, as Sweden does not conclude any trade agreements on its own.

As a large trading bloc, the EU is consistently renegotiating and developing agreements with its trading partners. Details of current and ongoing renegotiations are available on the European Commission’s website.

The name of the administrative authority governing customs matters in Sweden is Swedish Customs (Tullverket).

Decisions by Swedish Customs can be appealed to the Administrative Court (Förvaltningsrätten) in the first instance and the Administrative Court of Appeal in the second instance (subject to leave of appeal). Although it is very rare that leave of appeal is granted against a second-instance court ruling, parties may seek to appeal such rulings to the Supreme Administrative Court (Högsta förvaltningsdomstolen, HFD).

Swedish Customs also has a separate and independent function called the General Representative of Swedish Customs (Allmänna Ombudet), which has the powers to appeal decisions by Swedish Customs.

Additionally, the National Board of Trade Sweden (Kommerskollegium) handles certain trade licences and authorisations such as applications for duty suspensions and export licences.

Swedish Customs has a special branch that enforces customs laws and regulations, which may hand over cases to a prosecutor in case of suspected violations.

Swedish companies experiencing barriers when trading with other countries can report the issue to the National Board of Trade, which will investigate the reported issue and explore possible solutions. The National Board of Trade also takes on a proactive role by approaching companies to collect information about experiences of trade barriers.

Some of the most common trade barriers that the National Board of Trade investigates are high customs duties, discriminatory taxes, unjustified requirements for goods and services, and testing of already approved products, as well as national standards.

When investigating trade barriers, the National Board of Trade co-operates with the Swedish Ministry for Foreign Affairs, the European Commission, trade associations, and Swedish embassies around the world.

Some trade barriers can be reported to the free service SOLVIT (in Sweden provided by the National Board of Trade), which companies and private individuals can turn to if, for instance, they encounter trade barriers within the EU (ie, the internal market).

Furthermore, companies from developing countries that want to start exporting to Sweden can contact Open Trade Gate Sweden, which is part of the National Board of Trade. Open Trade Gate Sweden is a one-stop information centre tasked with assisting exporters from developing countries interested in the Swedish market. In order to facilitate trade and increase exports from developing countries, Open Trade Gate Sweden provides information on rules and technical requirements, as well as market information.

If companies from developing countries experience obstacles when trying to export to Sweden, they can report this to Open Trade Gate Sweden. Should Open Trade Gate Sweden find that a requirement or procedure is unjust or too bureaucratic, they will try to solve the problem by contacting the relevant authorities in Sweden. 

The Union Customs Code (UCC), which is the main legal framework for customs regulations and procedures within the customs territory of the EU, provides for a complete transition to a paperless environment for customs formalities. The purpose of the ongoing transition is to modernise and simplify customs administration, from the perspective of both companies and customs authorities. Swedish Customs are currently working on implementing such changes. For instance, companies can now communicate electronically with Swedish Customs through electronic data interchange (EDI).

The UCC entered into force on 1 May 2016 and set an initial deadline of 31 December 2020 for the progressive completion of the work in terms of IT transition and implementation. However, the Council and the European Parliament adopted a regulation in April 2019 (Regulation (EU) 2019/632) establishing new deadlines of 2020, 2022 and 2025 for cessation of the use of transitional arrangements. The relevant electronic systems must be in place by the same deadlines.

Furthermore, there has recently been a notable change in attitude to the application of customs law in the Swedish administrative courts. In particular, the courts appear more amenable to directly applying EU customs law and the EU charter of fundamental rights in court proceedings, as well as an increased willingness to refer customs law questions to the Court of Justice of the European Union. Please refer to the adjacent Sweden Trends and Developments article, in which three recent judgments illustrating these developments are detailed.

The most significant expected changes are the further development of e-customs and digitalisation. See 2.4 Key Developments in Customs Measures.

Sweden does not apply any unilateral sanctions regimes. Sweden implements and applies the sanctions regimes adopted by the United Nations Security Council and the EU.

The responsibility for the co-ordination of sanctions lies with the Ministry of Foreign Affairs (Utrikesdepartementet).

The Act on Certain International Sanctions (Lagen (1996:95) om Vissa Internationella Sanktioner) and a number of government decrees adopted on the basis of that Act contain provisions concerning the implementation of international sanctions and embargoes decided by the UN Security Council and the EU.

Government agencies that administer or enforce sanctions include:

  • the Inspectorate of Strategic Products (Inspektionen för Strategiska Produkter, ISP), which has the main responsibility for handling export control and sanctions, including granting many types of export authorisations under sanctions regimes;
  • the Swedish public prosecutor’s office, which is responsible for the investigation of crime;
  • the National Board of Trade (Kommerskollegium), which is responsible for processing applications for (i) certain types of export authorisations and (ii) exemptions from the freezing of assets and other financial resources for legal persons, as well as matters under the EU Blocking Statute;
  • the Social Insurance Agency (Försäkringskassan), which is responsible for granting asset-freezing exemptions for natural persons;
  • the Financial Supervisory Authority (Finansinspektionen), which is the competent authority receiving information concerning frozen accounts and, when applicable, granting exemptions from the prohibition for routine administrative costs; and
  • the Swedish Customs (Tullverket), which is responsible for monitoring imports and exports.

Sweden does not apply extraterritorial jurisdiction when ruling on sanctions cases that go beyond what is stipulated in the EU sanctions regimes. The rules on the scope of sanctions criminalisation are the same as for other types of crimes and are set out in Chapter 2 of the Swedish Criminal Code (Brottsbalken), available in English on the government’s website

Sweden does not maintain any unilateral lists of sanctioned persons. The EU sanctions regulations that include such lists are directly applicable in Sweden. UN Security Council sanctions are generally implemented under Swedish law through the sanctions regulations of the EU. However, under the Act on Certain International Sanctions, the Swedish government has a mandate to adopt decrees to implement UN sanctions.

Sweden does not maintain any unilateral comprehensive sanctions or embargoes against other countries or regions. Sweden applies the sanctions adopted by the EU, which are directly applicable.

Sweden does not maintain any other types of sanctions regimes beyond those adopted by the EU.

Sweden does not apply anything similar to US secondary sanctions.

Under Swedish law, criminal acts can be committed by natural persons only. Corporations cannot face criminal liability.

The penalty for an intentional violation by a natural person of a sanctions provision ranges from a low fine to imprisonment of up to four years. If committed with gross negligence, the penalty for a natural person ranges from a low fine to imprisonment for up to six months. However, an indictment for such offences is unlikely to result in penalties more severe than a fine. The criminal provisions can be found in the Act on Certain International Sanctions.

In principle, there are no administrative penalties for companies that have transgressed sanctions laws. Nonetheless, under Swedish law, a company may be subject to a corporate fine (Företagsbot), which is technically a specific legal construct, referred to as “a special legal effect of a crime” (särskild rättsverkan av brott). The corporate fine is contingent on the prosecutor being able to prove that a natural person in the company has committed a crime in the exercise of the company’s business activities (näringsverksamhet).

A corporate fine can be issued in relation to all crimes under Swedish law that can be committed in the exercise of a company’s business activities. Generally, the corporate fine is tried in the same criminal court procedure as the liability of the company representative or employee that has allegedly committed a criminal act. If the defendant (ie, the accused company representative or employee) is acquitted – for instance, because the prosecutor fails to prove intent or gross negligence – the company would also be cleared, since no prerequisite crime has been committed.

As of 1 January 2020, the cap on corporate fines in Sweden, previously at SEK10 million, increased to SEK500 million.

Sweden has not adopted any unilateral general licences which authorise activities that would be otherwise prohibited under EU sanctions regulations.

The compliance expectations of the responsible Swedish authorities are in line with what follows from official EU guidance documents, such as the EU Best Practices for the effective implementation of restrictive measures.

As regard to standards of liability, please refer to 3.9 Penalties for Violations. As Sweden does not have any administrative penalties for sanctions violations, the standards of liability correspond to those applicable to natural persons under general criminal law (intent or gross negligence by the responsible individual).

Except for the requirements and prohibitions under the EU Blocking Statute, Sweden does not maintain any sanctions-related blocking or reporting requirements.

Provisions on the implementation of the EU Blocking Statute, including criminal provisions, can be found in the so-called Act on the EU’s Regulation on Protection against Extraterritorial Legislation Adopted by Third Countries (Lagen (1997:825) om EG:s förordning om Skydd mot Extraterritoriell Lagstiftning som Antas av Tredje Land) and a government decree (1997:83) adopted on the basis of that Act.

Besides the EU Blocking Statue, Sweden does not have any anti-boycott regulations or other restrictions that prohibit adherence to other jurisdictions’ sanctions.

There are no key developments in law, regulatory activity, enforcement or litigation in the prior 12 months related to sanctions.

Further, many banks have adopted strict internal policies on transactions relating inter alia to comprehensively sanctioned countries such as Iran and Syria, resulting in very strict compliance requirements on the banks’ customers.

Sweden does not have any unilateral sanctions regimes, and therefore no pending changes are relevant for Sweden in terms of regulation.

Nevertheless, Swedes is a small and export-oriented nation, and new sanctions regimes will at times have a large and sometimes unforeseen impact. In particular the EU’s new sanctions regime against human rights violations have had repercussions against individuals and companies in Sweden.

Swedish export control laws and regulations include the Military Equipment Act (Krigsmateriellagen) and the Council Regulation (EC) 2021/821 of 20 May 2021 setting up an EU regime for the control of exports, brokering, technical assistance, transit and transfer of dual-use items (the “EU dual-use regulation”). The EU dual-use regulation is complemented in Sweden by the Act on Control of Dual-use Items and Technical Assistance (Lagen (2000:1064) om Kontroll av Produkter med Dubbla Användningsområden och av Tekniskt Bistånd).

Sweden has not imposed any authorisation requirements for the export or transfer of dual-use items, other than those listed in the annexes to the EU dual-use regulation, as provided for in Articles 9 and 11 of the EU dual-use regulation.

The Swedish Military Equipment Act largely correspond to the EU Common Military List.

The main administrative authority for export controls is the Inspectorate of Strategic Products. With regard to dual-use controlled encryption, the ISP works together with the National Defence Radio Establishment (Försvarets Radioanstalt, FRA).

For nuclear-related items, the responsible authority is the Swedish Radiation Safety Authority (Strålsäkerhetsmyndigheten).

The ISP is the authority responsible for enforcing export controls, except for nuclear-related items, which fall under the competence of the Swedish Radiation Safety Authority. However, if the ISP suspects that actions would constitute criminal acts, the ISP can hand over a case to the Swedish public prosecutor’s office.

Swedish Customs also has certain monitoring and enforcement responsibilities in relation to export controls.

Sweden does not apply extraterritorial jurisdiction in relation to export control. Swedish laws and regulations are not applicable on re-exportation of Swedish origin items in or between foreign countries.

However, a non-Swedish entity wanting to re-export controlled items procured from Sweden may be restricted from doing so by virtue of guarantees given in an end-use certificate. Such certificates may, for example, include commitments to obtain written consent from the competent Swedish authority.

Sweden does not maintain any publicly available lists of restricted persons for export control purposes. Nonetheless, the ISP may – on a case-by-case basis – deny export authorisations to specific entities that the ISP considers sensitive.

Sweden does not maintain any lists of sensitive exports beyond what is set out in EU legislation.

Except for the catch-all provisions in Article 4 of the EU dual-use regulation, Sweden does not maintain any non-listed export controls.

Under Swedish law, criminal acts can be committed by natural persons only. Corporations cannot face criminal liability. (See also 3.9 Penalties for Violations.)

The penalty for an intentional violation by a natural person of an export control provision ranges from a low fine to imprisonment of up to six years. If committed with gross negligence, the penalty for a natural person ranges from a low fine to imprisonment of up to two years. However, it is generally unlikely that an indictment for such offences would result in more than a fine.

Sweden has not adopted any unilateral general export licences for dual-use items and relies solely on the general licences set out in the EU-dual use regulation.

With regard to military equipment, there are five general licenses available (TFS 2012:7-11). All general licences include conditions – for example, that the exporter already has a manufacturing or supply authorisation from the ISP.

The compliance expectations of the responsible Swedish authorities are in line with what follows from official EU guidance documents, such as Commission Recommendation (EU) 2019/1318 on internal compliance programmes for dual-use trade controls, and the Wassenaar Arrangement Best Practice documents).

As regard to standards of liability, please refer to 3.9 Penalties for Violations. Since Sweden does not have any administrative penalties for export control violations, the standards of liability are equal to those applicable to natural persons under general criminal law (intent or gross negligence by the responsible individual).

Regardless of whether a violation of export control law is deemed a criminal offence, the competent authority has a broad discretion to withdraw or deny export authorisations for companies that have a deficient record with regard to compliance.

In Sweden, there are several reporting requirements relating to the export of dual-use items and military equipment. Such requirements include notifying the ISP on the use of any EU general licence, and annually reporting the total export value of dual-use items to the ISP. It is also common that global and individual export licences include various reporting obligations.

The discussion on a new and reformed dual-use regulation has been followed closely in Sweden and will have some impact on Swedish industry. Further, many economic operators encounter challenges in complying with both EU and US export control and sanctions provisions at the same time.

There are not pending changes to the Swedish export control regulations.

However, a related law, the Protective Security Act, which in many instances target companies involved in export control has recently been amended to become stricter.

As Sweden is a member of the EU, the European Commission is the authority responsible for investigating dumping claims and imposing trade defence measures.

The European Commission monitors measures to ensure these are effective and respected by exporters and importers.

In order for the Commission to ensure the proper enforcement of measures, it is necessary that member states monitor – and report to the Commission on – the import of products subject to investigation or subject to measures, as well as the amount of duties collected under Regulation (EU) 2016/1036 of the European Parliament and of the Council of 8 June 2016 on protection against dumped imports from countries not members of the EU.

In Sweden, Swedish Customs is responsible for monitoring and reporting breaches to the Commission, and collecting such duties. In case of a suspected violation of AD/CVD duties, Swedish Customs may conduct inspections, audits or raids at importing companies' premises. Often such cases will result in parallel legal proceedings – that is, criminal proceedings for natural persons involved and administrative proceedings for the company.

The European Commission opens an investigation after receiving a complaint from the European producers of the product concerned. However, the Commission can also open an investigation on its own initiative.

Complaints for new investigations may be initiated by EU producers on an ad hoc basis. With regard to expiry reviews, during the final year that measures are in force, the European Commission services publish a notice of impending expiry in the Official Journal, stating that the measures will expire on a given date. If EU producers wish to request a review, they must do so no later than three months before the date of the expiry of measures.

Anti-dumping and anti-subsidy measures normally expire automatically after five years, unless it is determined in an expiry review that measures should remain in force.

Following the initiation of an anti-dumping or anti-subsidy investigation, the EU-producers and all other interested parties (having registered as interested parties within the framework of the investigation) will have an opportunity to participate in the investigation.

Interested parties consist of economic operators which are directly or indirectly affected by the measures. This mainly concerns exporters in the country (or countries) targeted by the investigation, EU producers of the product in question, as well as EU importers and users of the product.

An investigation officially starts with the publication of a notice of initiation published in the Official Journal of the European Union. Following the initiation, known exporters, EU producers and all other interested parties will receive forms or questionnaires to be completed by a specific deadline as indicated in the notice of initiation. In investigations involving many exporters, EU producers, importers or users, sampling will be applied. In practice, this means that companies will be asked to provide relatively limited information on, for example, production volume and turnover, to allow the European Commission to choose a sample that is representative of the category as a whole.

Once a sample has been selected, the sampled companies will receive a questionnaire, which has to be completed within 30 days. Once the European Commission has analysed the questionnaire replies, it may ask companies for additional information.

Normally during the third or fourth month after initiation of the investigation, the Commission conducts verification visits at the premises of sampled companies. The purpose of such visits is to verify the data provided in the questionnaire replies. Provisional anti-dumping duties may be imposed before the investigation has finished, normally within seven months, but at the latest eight months after initiation. Provisional anti-subsidy duties may be imposed within nine months after initiation.

Three weeks before imposing provisional measures, the European Commission will make public on its website its intention whether to impose such measures, so that interested businesses can plan ahead. At the time of the potential publication of the provisional measures, interested parties will also receive the so-called disclosure. The disclosure gives the details of all the facts of the investigation and the detailed calculations for the company concerned. Parties have 15 days to provide comments. Where provisional measures are imposed, they can remain in place for a maximum of six months in cases of anti-dumping duties and four months in cases of anti-subsidy duties before definitive measures are imposed or the investigation is terminated.

In anti-dumping cases, definitive measures are normally imposed at the latest 14 months after the initiation of an investigation (13 months in anti-subsidy cases). Companies will usually receive the definitive disclosure in the 12th month after initiation. The definitive disclosure must contain all essential facts that form the basis for the final determinations and the detailed calculations regarding the company concerned. All comments received after the provisional disclosure are analysed and taken into account as appropriate in the definitive findings. Parties have ten days to comment on the definitive disclosure.

The outcome of investigations are published in the Official Journal – for example, as a regulation imposing provisional or definitive anti-dumping/anti-subsidy duties, or terminating the proceeding without duties being imposed.

Further, the European Commission publishes an Annual Report directed to the Council and the European Parliament on the EU's Anti-Dumping, Anti-Subsidy and Safeguard Activities and the use of trade defence instruments by third countries targeting the EU.

The European Commission can impose anti-dumping/anti-subsidy duties and safeguards on any third country (ie, countries that are not members of the EU).

Please refer to 5.4 Ad Hoc and Regular Reviews.

During the final year that measures are in force, the European Commission publishes a notice of impending expiry in the Official Journal, stating that the measures will expire on a given date. The evidence in a request to extend the measures should support allegations of the likelihood of recurrence or continuation of dumping/subsidisation and injury with regard to the imports subject to measures.

If a substantiated review request is received, the European Commission publishes a notice of initiation and begins investigating whether dumping/subsidisation and injury are likely to continue or recur. Normally, expiry reviews are completed within 12 months, but they may take up to 15 months. During the investigation, measures remain in force.

An applicant can challenge the validity of an act of the Commission (for instance, a regulation imposing anti-dumping duties) either by (i) filing an action for annulment of an act under Article 263 of the Treaty on the Functioning of the European Union (TFEU), or (ii) in the context of national proceedings, asking an EU member state court to request a preliminary ruling on the validity of an act under Article 267 TFEU.

An action for annulment under Article 263 TFEU is brought by an applicant before the General Court, and a judgment of the General Court can be appealed to the Court of Justice. If successful, the General Court (in first instance) or the Court of Justice (on appeal) annuls the contested act (fully or partially).

A request for a preliminary ruling under Article 267 TFEU is made by a member state court, usually an administrative court in the case of challenges of anti-dumping measures, to the Court of Justice, in the framework of a national court proceeding. If successful, the Court of Justice invalidates the contested act.

In Sweden, there are on average one or two cases each year involving Swedish Customs bringing cases against importers that have circumvented AD/CVD measures (eg, incorrect classification or origin), which also end up in court proceedings. There have not been any high-profile cases in Sweden during the past 12 months.

Please refer to 5.12 Key Developments Regarding AD/CVD Measures.

Sweden is one of few EU member states that does not yet have a FDI screening law in place. This is about to change. In 2019, the Swedish government ordered a parliamentary inquiry for the dual purpose of adapting Swedish law to the Council Regulation (EU) 2019/452 of 19 March 2019 establishing a framework for the screening of foreign direct investments into the Union (the “EU FDI Regulation”) and to introduce a completely new Swedish FDI screening system. The proposal will now go through the legislative process including stakeholder consultation, and the new law is expected to enter into force on 1 January 2023.

In sum, the main take-aways of the proposal are as follows

  • All direct investments, regardless of investor nationality will be subject to notification.
  • A threshold of 10% ownership will apply.
  • All types of essential services will be covered.
  • The competent authority will be the ISP, already the competent authority for handling export control in Sweden.
  • A two-step screening procedure is foreseen. In the first step, a notification is submitted, and the ISP has 25 business days to decide whether to clear the investment or to proceed to further review. The second step provides the ISP with three months to conduct an in-depth investigation into the investment. If special reasons are at hand, this time period may be extended to six months.
  • Failure to notify an investment may lead to the investment being declared null and void, and the investor may be subject to administrative fees. An administrative fee may also be imposed in case of gun-jumping or for the failure to provide required information.

The FDI screening procedure will apply in parallel with other existing legislation, such as the Swedish Protective Security Act. Since 1 January 2021, there is a mandatory consultation requirement before sale of operations, assets or shares in companies that are important for Sweden’s national security, so-called “security-sensitive operations”. The Protective Security Act (Säkerhetsskyddslagen (2018:585) and its complementing decree (Säkerhetsskyddsförordningen (2018:658) require an operator that falls under the Protective Security Act to prepare specific security assessments and consult the competent authority before such sales. Thus, businesses falling under both set of laws (FDI rules and the Protective Security Act) would face a dual approval process.

Furthermore, new amendments will enter into force on 1 December 2021, making the Protective Security Act more stringent in some respects – for example, by placing a burden on the business to report to the relevant authority when it considers itself to be caught by the Protective Security Act. Also, sanction fees are introduced and the supervision is broadened to companies that have entered into protective security agreements with operators of security-sensitive business. 

On the subject of investment security, please see the adjacentSweden Trends and Developments chapter.

As of today, the main relevant government agencies that administer and enforce investment security measures are the ISP, together with the Swedish Security Service (SÄPO), the Armed Forces and County Administrative Boards (Sw. länsstyrelser).

As of 1 December 2021, the consultation mechanism under the Protective Security Act is placed on a number of additional surveillance authorities.

As of today, such reviews are limited to the change of control in Swedish companies involved in the manufacturing and/or supply of military equipment and companies dealing with security-sensitive operations in sectors targeted by the Protective Security Act.

For future rules, please refer to the proposed new FDI rules. 

Under both the Protective Security Act and, indirectly, the Military Equipment Act – through any manufacturing or supply licences granted under that Act – a change of control in a legal entity covered by the scope of the relevant legislation is subject to notification requirements.

For the Protective Security Act, real estate and shares in companies that qualify as “public” companies (usually those traded on a stock exchange) are to be exempt from the rules in the Protective Security Act.

As of 1 January 2021, the failure to start the consultation procedure if required by the Protective Security Act could amount to the transaction becoming prohibited (ie, null and void). See further under 6.9 Pending Changes to Investment Security Measures.

Under the Military Equipment Act, a failure to comply with a notification requirement may result in the company losing its manufacturing and/or supply licence with the ISP.

There are no fees associated with the change of control notification obligations described above.

In Sweden, the key development regarding investment security in the prior 12 months mainly relates to the proposal for a new Swedish FDI screening mechanism; see 6.1 Investment Security Mechanisms.

The most significant pending change is the presentation of proposal for a new FDI screening mechanism in Sweden. The proposal will now pass through the consultation process and the new law is expected to enter into force on 1 January 2023.

EU State Aid Rules

The EU state aid rules set the framework for Sweden’s ability to support certain activities with public funds. The EU rules are set out in Articles 107 to 109 of the TFEU and stipulate that state aid is prohibited if it does not comply with certain pre-determined exceptions.

The public sector in Sweden may provide subsidies as long as the exceptions to the general prohibition in the Treaty are met. For the most commonly supported areas, there are guidelines that clarify the rules. For instance, this applies to regional aid and business areas such as research, development and innovation, employment, training, energy and environmental protection.

Generally, these support measures must be approved by the European Commission before they can be granted. However, the public sector may provide support to certain designated areas without first having to wait for the European Commission's approval. In order to do so, the aid must be designed in accordance with the requirements set out in the Block Exemption Regulations, (EU). Further information about the Block Exemption Regulations is available on a dedicated webpage

Regional Aid

On the basis of Article 107(3)(a) and (c) of the TFEU, the European Commission may consider compatible with the internal market state aid to promote the economic development of certain disadvantaged areas within the European Union. This kind of state aid is known as regional aid.

In Sweden, regional aid is more common within certain areas. For instance, aid is commonly given to regional airports, film production, broadband infrastructure and sports infrastructure. 

The State Aid Temporary Framework

The State Aid Temporary Framework was adopted on 19 March 2020 to enable member states to use the full flexibility foreseen under state aid rules to support the economy in the context of the COVID-19 outbreak.

Since its adoption, the Temporary Framework has been amended five times. The Temporary Framework will be in place until the end of 2021.

However, on 30 September 2021, the Commission launched its consultation with member states on a draft proposal to prolong the State Aid Temporary Framework until 30 June 2022 and to extend its scope. More information on the Temporary Framework and other actions taken by the Commission to address the economic impact of the COVID-19 pandemic can be found on the Commission’s website.

Swedish Subsidies in Light of COVID-19

The COVID-19 pandemic has led Sweden, like many other countries, to grant government support to businesses and in certain sectors. This support includes the following:

  • on 27 July 2021, the Commission confirmed that the modification of an existing compensation scheme to support companies affected by the pandemic was in line with the EU state aid rules;
  • on 12 July 2021, the Commission approved a state aid measure of approximately EUR150 million to support the Scandinavian Airlines System (SAS) aviation company in the context of the pandemic;
  • on 2 July 2021, the Commission approved an EUR297 million scheme to support organisers of events;
  • on 18 June 2021, the Commission approved the modification of an existing scheme to support companies active in air ambulance services; 
  • on 17 June 2021, the Commission approved the modification of an existing rent abatement scheme aimed at supporting tenants operating in several sectors that have been affected by the pandemic;
  • on 11 March 2021, the Commission approved a scheme of approximately EUR16.3 million to support air traffic control services;
  • on 15 February 2021, the Commission approved a scheme of approximately EUR1.4 billion to support the uncovered fixed costs of companies affected by the pandemic.

More information about COVID-19-related Swedish state aid measures can be found on a dedicated Commission webpage

Most standards and technical requirements in Sweden correspond to those set out in EU legislation.

The National Board of Trade (Kommerskollegium) is Sweden's so-called Product Contact Point (PCP). Such contact points exist in all EU countries and in Norway, Iceland and Liechtenstein. Any business can contact the National Board of Trade, which will provide information on what rules apply to a specific product in Sweden within 15 working days. This assistance is free of charge.

Most sanitary and phytosanitary requirements in Sweden correspond to those set out in EU legislation.

As noted above, the National Board of Trade (Kommerskollegium) is Sweden's so-called Product Contact Point (PCP). Any business can contact the National Board of Trade which will provide information on what rules apply to a specific product in Sweden within 15 working days. This assistance is free of charge.

To the best of the authors’ knowledge, Sweden does not have any competition policies or price controls that appear to be aimed at reducing imports and/or encouraging domestic production.

In this regard, Swedish competition policy corresponds to, and is bound by, EU competition legislation as well as other EU legislation.

The state is a significant owner of enterprises in Sweden. The portfolio of state-owned enterprises includes 46 fully or partially owned enterprises.

Examples of large, fully state-owned enterprises in Sweden include:

  • Systembolaget (the Swedish Alcohol Monopoly), which has a legal monopoly on retail sales of alcohol (for beverages with an alcohol content exceeding 3.5%) – sales to restaurants and the import, export and production of alcohol are not subject to this monopoly;
  • Vattenfall (energy);
  • LKAB (mining and steel production);
  • SJ (trains).

Companies in Sweden that are partially state-owned include:

  • Telia Company (telecommunications);
  • PostNord (postal and delivery services);
  • SAS (airlines).

The authors are not aware of any “buy national/local” requirements in government procurement aimed at reducing imports and/or encouraging domestic production.

Geographical protections in Sweden are regulated by, and correspond to, EU legislation.

EU quality policy aims to protect the names of specific products to promote their unique characteristics, linked to their geographical origin as well as traditional know-how.

Products that are under consideration or have been granted geographical indication recognition are listed in quality products registers. Names of products registered as GIs are legally protected against imitation and misuse within the EU and in non-EU countries where a specific protection agreement has been signed.

The EU legislation covers three types of geographical indications:

  • PDO – protected designation of origin (food and wine).
  • PGI – protected geographical indication (food and wine)
  • GI – geographical indication (spirit drinks and aromatised wines).

An application for protection of a GI in Sweden is submitted to the Swedish Food Agency (Livsmedelsverket). The registration process is covered by a fee, consisting of a basic fee of SEK2,700 and thereafter a running time fee of SEK900 per hour.

If the Swedish Food Agency finds that the requirements in Regulation 1151/2012 are met, the application is registered with the European Commission, which then reviews the application. More information about applying for a GI in Sweden can be found on the Swedish Food Agency’s website

EU and non-EU producers, national authorities and the European Commission can oppose or cancel the registration of a product name under a quality scheme.

Following the publication of its White Paper on 5 May 2021, the European Commission issued a proposal for a regulation to tackle foreign subsidies. The proposal provides a very broad scope and targets all types of economic activities in the EU that have been subsidised by a foreign government. The objective is to create a level playing field within the EU. The European Parliament and the member states are currently discussing the Commission’s proposal in the context of the ordinary legislative procedure.

As mentioned in 6.1 Investment Security Mechanisms, amendments to the Protective Security Act entered into force on 1 December 2021, making the law more stringent in some respects. It aims to clarify the scope of application by introducing a notification requirement and to enable a more effective enforcement.

Mannheimer Swartling Advokatbyrå AB

Östra Hamngatan 16,
411 09 Gothenburg
Sweden

Rue Gachard 88,
1050 Ixelles
Belgium

+46 31 355 1748

carolina.dacko@msa.se; andreas.johansson@msa.se www.mannheimerswartling.se
Author Business Card

Trends and Developments


Authors



Mannheimer Swartling has an extensive international practice, with a strong focus on the Nordic region. The firm employs over 400 lawyers, based in offices in Sweden, Belgium, Russia, Singapore and the USA. The firm has considerable experience in trade matters, covering customs, national security and foreign direct investment, trade defence measures and export control and sanctions. The firm regularly handles trade law matters before various authorities, including complex classifications and voluntary disclosures, as well as litigation before Swedish and European courts and arbitration. The trade law team also helps clients with risk assessments, compliance programmes and investigations, and has an extensive network of international trade law professionals in other jurisdictions.

Introduction

Over the past year, there have been a number of noteworthy developments in the trade law area at the EU level, which will affect Sweden as a member state. In particular, the European Commission has taken a number of initiatives to add new trade, security and competition law instruments to its toolbox, in order to address practices that the pre-existing trade, state aid and competition law frameworks were deemed insufficient and/or incapable of addressing. Among others, the proposed foreign subsidies regime and the proposed carbon border adjustment mechanism deserve particular mention.

During 2021, a new foreign subsidies regime was proposed, to fill a perceived gap between EU state aid rules and the existing trade defence anti-subsidy tools that can be used against subsidised imports. If adopted, the proposal will add new powers to the European Commission to investigate transactions and companies on the internal market, and to remedy foreign subsidies that have had a harmful effect. A notification requirement would apply in merger and public procurement where financial contributions from foreign governments are involved, and the Commission would be empowered to initiate ex officio investigations into the existence of foreign subsidies to EU undertakings operating within the EU.

Another major development is the EU’s proposal for a carbon border adjustment mechanism (CBAM), which was announced in 2021. If adopted, it will involve levying a carbon tax for imports into the EU, where the producer has not had to carry a similar cost for greenhouse gas emissions in the country of production as those imposed on EU industry under the emissions trading system (ETS). For a country such as Sweden, investing heavily in green technologies, CBAM would likely have a considerable impact.

Beyond this, developments relating to, for example, the Trade Enforcement Regulation, the proposed anti-coercion instrument, the Digital Markets Act and Digital Services Act proposals, the new Article 22 "killer acquisitions" merger control guidelines, and the unfair trading practices in the agricultural and food sector legislation all contribute to a changing regulatory landscape for non-EU companies trading within and into the European Union.

For trade law developments specific to Sweden, or of particular importance in Sweden, we would like to highlight three topics:

  • a new trend in Swedish courts’ application of EU customs law;
  • a proposal for new Swedish foreign direct investment (FDI) screening rules; and
  • increased focus on human rights commitments and sanctions in global supply chains

A Possible Breakthrough in Swedish Customs Law

Sweden has recently seen a notable change in the application of customs law by the administrative courts. In particular, the courts appear to have obtained a greater awareness of, and a willingness to directly apply, EU customs law and the EU charter of fundamental rights in court proceedings. In addition, the year also gave a rare instance of a Swedish court referring a question on the interpretation of EU customs law to the Court of Justice (CoJ) of the European Union. In particular, three recent judgments are worth noting.

Combinova

The case concerned a customs debt that had incurred during the importation of goods for inward processing. Departing from the assessment of the first instance court, the Administrative Court of Appeal in Gothenburg ruled in favour of the Swedish entity Combinova and decided to extinguish the customs debt.

The case is of interest both from a procedural and substantive perspective.

Procedurally, the case illustrates a particular feature of Swedish Customs – ie, that an independent function, called the General Representative of Swedish Customs (Allmänna ombudet hos Tullverket), may appeal cases on behalf of individual companies, acting against Swedish Customs stricto sensu. The role of the General Representative is to appeal decisions where the application of law is not uniform or where there is a need for a precedent. Decisions by Swedish Customs, the Administrative Courts and the Administrative Courts of Appeal may be appealed by the General Representative, ultimately to the Supreme Administrative Court.

In the case at hand, Combinova had appealed Swedish Customs’ decision to impose duties to the first instance (ie, the Administrative Court in Gothenburg), but lost. That ruling was appealed by the General Representative of the Swedish Customs (Allmänna ombudet hos Tullverket) on behalf of Combinova, to the Administrative Court of Appeal in Gothenburg. On appeal, the second-instance court took the – in the context of Swedish customs law practice – unusual step of staying the proceedings and referring a question to the CoJ. After receiving the CoJ’s ruling, the Gothenburg court agreed with the reasoning of the General Representative of the Swedish Customs, and ruled in favour of Combinova.   

On substance, the case is interesting, as it further clarifies the grounds for when a customs debt is extinguished.

In the case at hand, Combinova had been granted an authorisation for import of goods under an inward processing procedure and re-exported the goods in accordance with applicable requirements. However, Combinova had failed to submit the bill of discharge within the required time period, and a customs debt was deemed to have incurred under Article 79 of the Union Customs Code (UCC). The question that subsequently arose was whether the customs debt had been extinguished according to Article 124(1)(k) of the UCC. This provision holds that the customs debt shall be considered extinguished if evidence shows that the goods “have not been used” and have left the Union, under the additional condition that there have been no fraudulent actions involved.

The Administrative Court of Appeal in Gothenburg requested a preliminary ruling specifically on the interpretation of the term “use of goods” in Article 124(1)(k) of the UCC (see case C-476/19). The CoJ concluded that the concept must be understood as covering not all uses but only such use giving rise, on its own, to a customs debt in the case at hand, and only refers to use of goods which goes beyond authorised processing operations. The CoJ thus ruled in line with the General Representative of the Swedish Customs’ arguments (and against those of Swedish Customs), which in turn led to a final ruling by the Administrative Court of Appeal in Gothenburg, whereby the customs debt imposed on Combinova was deemed extinguished.

Given the outcome, this case may thus have paved the way for more companies seeking the assistance of the General Representative of the Swedish Customs, with a General Representative function willing to take on more cases. In addition, given that the CoJ ruled against the official position of Swedish Customs, the outcome may well embolden and incentivise Swedish courts to make more references to the CoJ in the area of customs law going forward.

Mars Logistics

The case concerned the question of when Swedish Customs can impose VAT on so-called unlawful introductions of goods. The Supreme Administrative Court overturned in Sweden ruled in favour of the applicant and thereby arguably departed from previous practice on the issue in Sweden.

The case is of interest procedurally, as it is very rare that the Supreme Administrative Court grants leave of appeal to try cases regarding customs law. The appeal to the Supreme Administrative Court was brought by the General Representative of the Swedish Customs (appealing the ruling by the Administrative Court of Appeal in Gothenburg).

The case concerned a transit procedure encompassing television units from Turkey via Italy to Sweden. Mars Logistics, a Turkish entity responsible for the transit procedure, faced the imposition of custom duties pursuant to Article 79 of the UCC because the goods had not been properly presented to Swedish Customs upon arrival in Sweden.

In regard to the customs issue, the Supreme Administrative Court ruled that the customs debt, despite the broken transit, would subsequently be reduced to zero, since the goods were subject to preferential customs duty treatment and were duty-free.

In regard to VAT, the Supreme Administrative Court overturned the judgment of the Administrative Court of Appeal in Gothenburg and ruled that VAT may not be levied in accordance with the Swedish Customs Act (Sw. Tullagen) if there is a declarant, provided that the declarant is registered for VAT in Sweden at the time of the decision to impose a customs debt.

In the case at hand, the Swedish company which had intended to import the television sets had submitted a declaration before Swedish Customs made its decision to impose a customs debt. As the declarant was also registered for VAT and acted as a taxable person, the VAT, according to the Supreme Administrative Court, could not be levied under the Swedish Customs Act. The Supreme Administrative Court therefore revoked Swedish Customs' decision to impose VAT on Mars Logistics.

The jewellery shop

In a subsequent case concerning the Swedish Customs’ powers to impose VAT, the Supreme Administrative Court upheld its reasoning from the Mars Logistics case.

A jewellery shop in Sweden imported gold from Dubai via Denmark and did not declare the imports until after the goods had arrived in Sweden. Swedish Customs had decided that the customs debt had incurred in Sweden and that VAT was applicable. The first instance Administrative Court in Malmö had ruled in favour of the company, but this judgment was overturned by the Administrative Court of Appeal in Gothenburg, which ruled in favour of Swedish Customs.

As in the cases mentioned above, the General Representative of the Swedish Customs appealed the decision to the Supreme Administrative Court, and the Supreme Administrative Court reiterated that VAT may not be levied based on the Swedish Customs Act, if there is a declarant at the time when the Swedish Customs decides to impose a customs debt, provided that the declarant is registered for VAT in Sweden. Since the jewellery shop had declared the goods before Swedish Customs imposed the debt, the VAT could not be levied under the Swedish Customs Act.

These three cases all represent significant departures from Swedish Customs’ established practice which, to date, have been quite rare events. The cases may well signal the courts taking a more critical and independent stance in relation to the authorities; as a consequence, we may see an increase in court challenges in this area.

New FDI Screening Rules and the Updated Protective Security Act

Significant changes are underway in Sweden in the foreign direct investment (FDI) area. To date, Sweden has been one of only a few EU member states that does not have a generally applicable FDI screening regime in place. Instead, Sweden has only implemented rules for ownership control in specific sectors. This is now rapidly changing.

New FDI rules have been discussed for some time. However, due to COVID-19, rather than putting a comprehensive regime in place right away, the Swedish government first adopted a quick-fix solution by introducing a mandatory consultation requirement before the sale of operations, assets or shares in companies that are covered by the Protective Security Act. This mandatory consultation requirement is applicable as of 1 January 2021. However, the Protective Security Act’s area of application has remained relatively uncertain and its enforcement rather ineffective.

It covers businesses of importance for Sweden’s national security, so-called “security-sensitive operations”. The definition has intentionally been left general so as not to allow those with adverse interests to understand what Sweden considers to be its most sensitive operations.

Monitoring has been inefficient as it is largely up to businesses themselves to assess and decide whether they conduct security-sensitive operations. Because different authorities share responsibility for monitoring non-compliance, enforcement of this law appears to have been largely ineffective.

Two more recent developments are worth noting. A proposal for new FDI screening rules has recently been published, and new amendments to the Protective Security Act have recently been adopted, applying as of 1 December 2021. The proposal for new FDI rules will go through a consultation process and is expected to enter into force on 1 January 2023.

Main takeaways of Sweden’s draft FDI screening regime

The following are the key points of the proposed Swedish FDI rules. However, this could be subject to change as a result of the upcoming consultation process on the legislative proposal.

All direct investments, whether by Swedish, EU or non-EU investors, above 10%, and in certain covered sectors, must be notified (the broad investor-scope aims at preventing circumvention). Although the proposal is intended to cover indirect investments as well, it is unclear what type of indirect investments would be covered.

Although investments by all nationalities must be notified, an FDI review should only be opened for non-Swedish investors. Investments made by Swedish citizens, or companies ultimately controlled exclusively by Swedish citizens, are exempt from review. All other investors may be subject to an FDI review.

The scope of the proposal is broad, including overarching sectors such as energy, transportation, healthcare, etc, and does not correspond fully to the sectors covered by the EU FDI Regulation.

A threshold of 10% ownership will apply for the notification requirement, and for every new investment thereafter. Other actions which seek to give influence to a foreign investor will also be covered.

The competent Swedish authority will be the Inspectorate for Strategic Products (ISP). The ISP is already the competent authority for export control (dual-use and military items) in Sweden.

The ISP will have the power to prohibit, or approve subject to conditions, investments that are deemed to pose a risk to Sweden’s security or public order.

A two-step screening procedure is foreseen. In the first step, a notification is to be submitted, and the ISP will have 25 business days to decide whether to clear the investment or to proceed to further review. The second step provides the ISP with three additional months to conduct an in-depth investigation into the investment. If special reasons are at hand, this time period may be extended to six months.

Failure to notify an investment may lead to the investment being declared null and void, and the investor may be subject to administrative fines. An administrative fine may also be imposed in cases of gun-jumping or for the failure to provide required information.

The FDI screening procedure will apply in parallel with the existing Swedish Protective Security Act. Investments involving businesses of importance for Sweden’s security (ie, security-sensitive activities), will be subject to two separate screening procedures, conducted by different authorities.

Main takeaways of amendments to the Protective Security Act

Several amendments to the Protective Security Act enter into force on 1 December 2021.

Operators of security-sensitive operations will be required to notify the competent authorities, without delay, that its activities are subject to the Act. This notification requirement aims to clarify the Protective Security Act’s area of application, and increase authorities’ supervision of operators covered by the Act. An operator will also be required to notify without delay once the security-sensitive operations are terminated.

The amendments will allocate responsibilities for monitoring and enforcement among several authorities. Different County Administrative Boards will be responsible for supervising a majority of the private entities covered by the Act.

To ensure greater efficiency in enforcement, the amendments broaden the scope for supervision. Competent authorities will have more powers to supervise businesses conducting security-sensitive operations, as well as companies that have engaged in protective security agreements with such businesses.

The amendments introduce powers for authorities to impose sanction fees for non-compliance. Both operators of security-sensitive business and their shareholders may be held responsible. 

Operators of security-sensitive business will be required to enter protective security agreements in more situations than at present – ie, before every agreement exposing activities or information classified as confidential, secret or top secret. If a protective security agreement is required, an operator must also conduct a protective security assessment, suitability test and in some situations consult with competent authorities, before outsourcing its business.

Overall these new provisions are likely to make more businesses aware that they may be covered by the Act, which in turn may trigger the mandatory consultation requirements in case of new investors or a sales transaction. Note that for these rules, no threshold applies and it is the seller of operations that has to engage in the mandatory consultation process. 

Trade, Sanctions, Human Rights and Conflict of Laws

A legal development trending in Sweden is compliance in the area of sanctions and human rights commitments. Many companies with supply chains or operations in China face a conflict of law situation in this area. This may become even more acute with the introduction of legally binding human rights due diligence requirements, including the anticipated EU legislation on Sustainable Corporate Governance.

At present, EU companies regularly need to consider export control and sanctions compliance issues when selling to, or sourcing from, a country which presents sanctions and export control risks. This is further accentuated with regard to countries that are subject to both EU and US sanctions regimes. Complying with these rules also requires the collection, verification and control or information about business partners, to ensure that the business operations do not violate EU or US export control and sanctions rules. However, as China has implemented Blocking Rules and Anti-Foreign Sanctions Laws, traditional tools and methods used by EU companies to ensure trade compliance, as well as supplier compliance with their human rights expectations, are becoming contentious.

Similar to the situation which arose under the EU Blocking Statute, with regard to trade with Iran when the USA withdrew from the JCPOA, many companies now face a potential conflict of laws. The legal, practical and ethical challenges this gives rise to are manifold. It involves everything from shaping supply contracts in a way that does not run afoul of either legal regime to, for example, determining how to collect information and carry out human rights due diligence efforts in a way that does not generate risk.

Mannheimer Swartling Advokatbyrå AB

Östra Hamngatan 16,
411 09 Gothenburg
Sweden

Rue Gachard 88,
1050 Ixelles
Belgium

+46 31 355 1748

carolina.dacko@msa.se; andreas.johansson@msa.se www.mannheimerswartling.se
Author Business Card

Law and Practice

Authors



Mannheimer Swartling has an extensive international practice, with a strong focus on the Nordic region. The firm employs over 400 lawyers, based in offices in Sweden, Belgium, Russia, Singapore and the USA. The firm has considerable experience in trade matters, covering customs, national security and foreign direct investment, trade defence measures and export control and sanctions. The firm regularly handles trade law matters before various authorities, including complex classifications and voluntary disclosures, as well as litigation before Swedish and European courts and arbitration. The trade law team also helps clients with risk assessments, compliance programmes and investigations, and has an extensive network of international trade law professionals in other jurisdictions.

Trends and Development

Authors



Mannheimer Swartling has an extensive international practice, with a strong focus on the Nordic region. The firm employs over 400 lawyers, based in offices in Sweden, Belgium, Russia, Singapore and the USA. The firm has considerable experience in trade matters, covering customs, national security and foreign direct investment, trade defence measures and export control and sanctions. The firm regularly handles trade law matters before various authorities, including complex classifications and voluntary disclosures, as well as litigation before Swedish and European courts and arbitration. The trade law team also helps clients with risk assessments, compliance programmes and investigations, and has an extensive network of international trade law professionals in other jurisdictions.

Compare law and practice by selecting locations and topic(s)

{{searchBoxHeader}}

Select Topic(s)

loading ...
{{topic.title}}

Please select at least one chapter and one topic to use the compare functionality.