Stockholm District Court Rules Art Gallery Not Liable for Repaying Pandemic Crisis Support

Stockholm District Court Rules Art Gallery Not Liable for Repayment of Pandemic Crisis Support Despite Posting Profits

Stockholm District Court has determined that an art gallery that received crisis support during the pandemic and later reported a profit is not obligated to repay the funds.

“If all repayment cases were scrutinised more closely, I believe the Swedish Arts Council would be entitled to repayment in only a fraction of these cases,” said lawyer Mikael Ericson.

During the pandemic, the Swedish Arts Council distributed approximately one billion SEK in crisis support to around 3,500 cultural practitioners. The agency later conducted audits and issued repayment demands to several recipients who were found to have made a profit.

One such case involved Wetterling Gallery in Stockholm, which was ordered to repay just over 1.5 million SEK of the approximately 2.2 million SEK it received. However, Stockholm District Court has sided with the gallery, ruling that the state has no right to demand repayment.

The Conditions Declared Invalid

The Swedish Arts Council cited a clause in its terms and conditions, stating that recipients who made “unjustified profits” could be required to repay the funds. The gallery argued that the relevant regulation underpinning the support scheme—not the Council’s conditions—formed the legal basis for the original decision.

The court ruled that a government authority cannot impose stricter conditions than those outlined in statutory law. It found that the clause referenced by the Swedish Arts Council went beyond the scope of the regulation and declared it insufficient as an independent legal basis for repayment.

– The Arts Council placed significant reliance on its terms and conditions, essentially arguing that the legislation was irrelevant, and that a recipient was liable to repay funds simply for making a profit, regardless of good or bad faith. The court has now ruled this incorrect, said lawyer Mikael Ericson.

– According to the court, the focus should instead be on whether the recipient could reasonably have foreseen, at the time of applying for the support, that they would make a profit during the financial year in question. The burden of proof lies with the Swedish Arts Council, a task that will likely be extremely challenging.

The gallery also contended that the Swedish Arts Council had relied on the wrong financial year in its assessment. The gallery, which operates on a broken fiscal year, reported a profit of approximately 77,000 SEK during the relevant period.

The court noted that the regulation governing the support did not define “profit,” and that the Annual Accounts Act (ÅRL) should be applied. Accordingly, “profit” was interpreted as the net profit for the year, calculated under ÅRL. As the ÅRL allows for broken fiscal years, the financial year referenced by the gallery was deemed the correct basis for assessment.

When the support payment was made, only two months remained in the relevant fiscal year. Considering this, and the modest profit of just under 80,000 SEK relative to the 2.2 million SEK received, the court ruled that the company could not reasonably have been expected to foresee that the support had been erroneously granted.

The court therefore concluded that the state is not entitled to repayment.

Cultural Practitioners Urged to Challenge Repayment Demands

Ericson encouraged other cultural practitioners to dispute repayment claims:

– Of the five cultural practitioners I’ve represented in similar cases, the Swedish Arts Council has voluntarily dropped claims against two. In one case, the court has now ruled that the Council had no grounds for repayment, and the remaining two cases are still pending in court, he said.

– None of my clients have had to pay a single krona back to the Swedish Arts Council thus far. This strongly suggests that anyone facing a repayment demand should challenge it. And if someone has already repaid the funds, they should carefully examine whether repayment was truly required and consider seeking reimbursement.

Impact of the Swedish Arts Council’s Repayment Practices

What effect have the Swedish Arts Council’s repayment practices had on the cultural sector?

– The purpose of the support was to save an industry brought to its knees by the restrictions imposed during Covid-19. In many cases, the opposite effect was achieved. Several years after the funds were distributed and already spent, the Swedish Arts Council began issuing widespread repayment demands, seemingly without having fully considered the legal basis for such claims.

– They acted almost as if the funds were their own money, handed out as a goodwill gesture, Ericson said.

– From a legal certainty perspective, the handling of these cases has been appalling. If all repayment cases were scrutinised, I believe the Swedish Arts Council would be justified in only a fraction of them.