An Estonian party has publicly announced its intention to challenge an arbitral award rendered by the Arbitration Institute of the Stockholm Chamber of Commerce (SCC).

On 20 July 2009, the SCC tribunal rendered an award in the dispute between AS Alta Foods (Alta Foods) and AS Luterma (previously AS Kalev) (Kalev) in respect of Alta Foods' claim for EUR6.6 million, including interest.

In September 2007, Alta Capital Partners SCA and Kalev concluded a purchase agreement of the food industries owned by Kalev. In February 2008, Alta Capital Partners SCA agreed to transfer EUR 6 million to Kalev as pre-payment under the purchase agreement, such sum to be included in the purchase price. The transaction was planned to be completed by the end of May 2008. However, Alta Foods, to whom Alta Capital Partners SCA had assigned the purchase contract, withdrew from the contract on the grounds of disruption in the financial markets, due to which it was not able to finance the transaction. According to the purchase agreement, Kalev bore the risk of adverse developments on the markets. However, Kalev denied there had been market disruption at material times, and disputed the validity of the market disruption clause. Due to Kalev's refusal to return the pre-payment, Alta Foods initiated arbitration at the SCC.

The central questions in dispute were whether market disruption had occurred between September 2007 and June 2008, and whether the wording of the market disruption clause was strong enough to permit withdrawal at any time if market disruption had occurred. The 3-member arbitral tribunal, which consisted entirely of Estonian lawyers, ruled in favour of Alta Foods, with one arbitrator dissenting. The tribunal found that market disruption had occurred at the beginning of 2008, although the condition of the financial markets deteriorated sharply further in September – October 2008. The tribunal also found that Alta Foods had exerted its best efforts for performing its contractual obligations.

Even though the SCC award is final and cannot be appealed, foreign arbitral awards must be recognised and declared enforceable in Estonia pursuant to the New York Convention. Kalev has publicly indicated that recognition of the arbitral award may be challenged on the grounds of breach of good morals and imperative norms of Estonian law, without going into further detail. A potential dispute on the recognition of the award may delay enforcement for several months.

Alta Foods AS legal team was advised by Anton Sigal, who is outside counsel of Law Office Lepik & Luhaäär LAWIN.