Arbitration in Finland | A Comprehensive Guide

November 29, 2024 at 11:09 am

Introduction to Arbitration in Finland

Finland has a long-standing tradition of resolving commercial disputes through arbitration. Both domestic and international businesses frequently include arbitral clauses in their agreements, leading to a high number of commercial disputes being referred to arbitration. The Finnish Arbitration Act, while reflecting the substance of the UNCITRAL Model Law on International Commercial Arbitration, has its unique features tailored to the Finnish legal environment. The Finland Arbitration Institute (FAI), operating under the Finland Chamber of Commerce, serves as the sole arbitral institution in the country, supplementing the Arbitration Act with its own set of rules (FAI Rules).

Arbitrability and Arbitration Agreements in Finland

What Disputes Can Be Arbitrated?

Under the Finnish Arbitration Act, any dispute that parties can settle by agreement is arbitrable. The decisive factor is whether the recourse sought can be achieved without the intervention of public authorities. This broad scope allows a wide range of commercial disputes to be resolved through arbitration in Finland.

Formal Requirements for Arbitration Agreements

For an arbitration agreement to be enforceable in Finland, it must be in writing. Modern means of communication, such as emails and electronic documents, satisfy this requirement as long as they provide a written record of the agreement. When drafting an arbitration agreement, it is advisable to explicitly determine the following:

Parties to the Agreement: Clearly identify all parties involved.
Scope of the Agreement: Define the disputes covered.
Governing Law: Specify the law applicable to the main agreement.
Seat of Arbitration: Determine the legal place of arbitration.
Type of Arbitration: Choose between ad hoc or institutional arbitration.
Applicable Institutional Rules: State the rules governing the arbitration proceedings.
Number of Arbitrators: Agree on whether there will be a sole arbitrator or a panel.
Appointment of Arbitrators: Outline the method for selecting arbitrators.
Language of Proceedings: Decide on the language to be used.
Confidentiality Provisions: Address the confidentiality obligations between the parties.

Selection of Arbitrators in Finnish Arbitration

Eligibility and Qualifications

In Finland, any natural person with legal capacity can act as an arbitrator. This means they must be of legal age and not under guardianship or bankruptcy. Arbitrators must also be independent and impartial, possessing sufficient expertise in the relevant field.

Appointment Procedures

Ad Hoc Arbitration

In ad hoc arbitrations, parties have the freedom to choose the number of arbitrators and the method of their appointment. If the parties do not specify these details, the default is a tribunal of three arbitrators. Each party selects one arbitrator, and the two arbitrators then appoint a third to act as the Chairman.

Institutional Arbitration under FAI Rules

In institutional arbitrations administered by the FAI, arbitrators are selected according to the FAI Rules. If the parties have not agreed on the number of arbitrators, the default is a sole arbitrator unless the FAI Board decides that a panel of three is more appropriate, considering factors like the dispute's complexity and amount in controversy. For multi-party proceedings, the FAI Rules provide specific procedures to ensure fair representation.

Qualifications for Chairmen and Sole Arbitrators

Only lawyers are qualified to serve as Chairmen or sole arbitrators in Finland, unless the FAI decides otherwise for particular reasons. This requirement ensures that the person leading the arbitration has the necessary legal expertise.

Conduct of Arbitral Proceedings in Finland

Procedural Flexibility and Party Autonomy

The Finnish Arbitration Act provides a flexible framework for arbitral proceedings, with only one mandatory provision: the principle of audiatur et altera pars (hear the other side). This ensures that both parties have a sufficient opportunity to present their case, including filing written pleadings, presenting evidence, and responding to the other party's submissions.

Arbitrators' Obligations

Arbitrators are obliged to ensure the impartiality and expediency of the proceedings while respecting the parties' autonomy. They must balance the need for efficiency with the parties' rights to a fair hearing.

FAI Rules and Expedited Arbitration

The FAI Rules complement the Arbitration Act, aligning with international best practices. For less complex disputes, the FAI offers rules for expedited arbitration intended to conclude within three months, providing a faster resolution alternative.

Rules Applicable to the Substance of the Dispute

Applying the Chosen Law

Arbitral tribunals in Finland must decide disputes according to the rules of law. If the parties have specified the law of a particular state, the tribunal is bound to apply that law. This choice of law provision ensures that the arbitration reflects the parties' contractual expectations.

Deciding Ex Aequo et Bono

Tribunals may decide a case based on principles of fairness and equity (ex aequo et bono) only if the parties have expressly authorized them to do so. This allows for more flexible, justice-oriented outcomes when appropriate.

Setting Aside Arbitral Awards in Finland

Finality of Arbitral Awards

Arbitral awards issued in Finland are final and not subject to judicial review on their merits. However, parties can seek to set aside an award on limited grounds outlined in the Arbitration Act.

Grounds for Setting Aside an Award

An arbitral award can be set aside if:

Excess of Authority: The tribunal exceeded its authority.
Improper Appointment: An arbitrator was not duly appointed.
Disqualification Issues: An arbitrator should have been disqualified, but a challenge was not accepted before the award was issued.
Due Process Violations: The tribunal did not give a party sufficient opportunity to present its case.

An award is also considered invalid if:

Non-Arbitrable Issues: It decides on matters not subject to arbitration.
Public Policy Violations: It violates Finnish public policy (ordre public).
Formal Deficiencies: The award is unclear, incomplete, not in writing, or not signed by the arbitrators.

Confidentiality in Finnish Arbitration

Arbitrators' Confidentiality Obligations

While arbitration proceedings in Finland are not public, there are no statutory provisions ensuring confidentiality. However, it is generally accepted that arbitrators must not disclose information obtained during the proceedings. Arbitrators who are members of the Finnish Bar Association are bound by professional confidentiality obligations.

Parties' Confidentiality

For the parties involved, the confidentiality obligations are less clear-cut. To ensure confidentiality, it is advisable for parties to enter into separate confidentiality agreements explicitly outlining their obligations.

Enforcement of Arbitral Awards in Finland

National Awards

All arbitral awards made in Finland are subject to the same enforcement rules, regardless of whether the dispute is national or international. Enforcement proceedings are initiated in the competent District Court, usually where the unsuccessful party is domiciled or has assets. The application must include the original arbitration agreement and the arbitral award.

Recognition and Enforcement of Foreign Awards

Finland is a signatory to the New York Convention since 1962 and has not made any reservations regarding reciprocity. This means that foreign arbitral awards are recognized and enforceable in Finland even if they originate from non-signatory countries.

Conditions for Enforcement

A foreign arbitral award is recognized and enforceable in Finland if:

Valid Arbitration Agreement: It arises from an arbitration clause that meets Finnish legal requirements.
Public Policy Compliance: The award does not violate Finnish public policy.

Grounds for Refusal

Recognition or enforcement may be refused on grounds that largely correspond to the New York Convention, including:

Invalidity of the Arbitration Clause: The arbitration agreement is not valid.

Due Process Violations: The party against whom the award is invoked was not given proper notice or was otherwise unable to present their case.
Excess of Authority: The tribunal exceeded its jurisdiction.
Irregularities in Composition or Procedure: The tribunal was not composed according to the agreement, or the procedure was not in accordance with the parties' agreement or the law.
Award Not Yet Binding or Set Aside: The award is not yet binding or has been set aside in the country where it was made.
Public Policy Violations: Enforcement would be contrary to Finnish public policy.

Conclusion

Arbitration in Finland offers a robust and flexible framework for resolving commercial disputes, characterized by respect for party autonomy, procedural efficiency, and adherence to international standards. The Finnish Arbitration Act, supplemented by the FAI Rules, provides clear guidelines for arbitrability, arbitration agreements, selection of arbitrators, conduct of proceedings, and enforcement of awards. While confidentiality provisions for parties may require additional agreements, the overall system ensures that arbitration remains a viable and effective alternative to court litigation in Finland.

Ready to Resolve Disputes Effectively? Let Us Help!

Arbitration is a powerful, efficient, and confidential way to resolve commercial disputes in Finland. Whether you're drafting an arbitration agreement, navigating proceedings, or enforcing an arbitral award, our experienced legal team is here to guide you every step of the way.

Here's How We Can Support You:

Drafting and Reviewing Arbitration Agreements: Ensure your agreements are clear, enforceable, and tailored to your business needs.
Representation in Arbitral Proceedings: Count on our expertise to safeguard your interests and secure fair outcomes.
Enforcement of Arbitral Awards: Navigate the complexities of enforcement with confidence, both in Finland and internationally.

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Disclaimer: This article is for informational purposes only.