ARBITRATION IN FINLAND – CHARACTERISTIC FEATURES CURRENTLY UNDER DISCUSSION

Abstract

Dispute resolution has traditionally been court of law oriented in Finland. However, arbitration has recently become increasingly popular especially among legal persons, i.e. business entities, as an alternative to court of law procedure. Consequently so-called business-to-business disputes are more often submitted to arbitration. Arbitration is considered to hold certain advantages in comparison with dispute resolution in courts of law. Arbitration provides for speedy resolutions in contrast to generally lengthy proceedings in courts of law. Arbitral proceedings and arbitral awards are generally private, whereas proceedings and judgments in courts of law are public. Furthermore, in arbitration the disputing parties may utilize the best experts as arbitrators on a case-by-case basis, which is not possible in courts of law. Hence, in arbitration the probability of objectively correct resolutions is considered to be greater than in courts of law. Arbitration is based on the principle of freedom of contract. There are two basic forms or types of arbitration: ad hoc and institutional. Both of these forms are based on the parties’ agreement. In Ad hoc arbitration the parties agree on the particular arbitration mechanism on a case by case basis. The arbitration will be ad hoc, unless the parties have explicitly opted for institutional arbitration. In the latter kind of arbitration the parties submit their disputes to arbitration conducted under the auspices of, or administered or directed by an existing institution. Arbitration proceedings are however not considered institutional if the arbitration institute in question only is competent to appoint the arbitrators, without applying the rules of the institute to the actual arbitral proceedings. The Arbitration Institute of the Central Chamber of Commerce of Finland is the leading arbitration institute in Finland. During the years 1998–2002 the number of requests for arbitration to the Central Chamber of Commerce of Finland has almost tripled. The number of ad hoc arbitration proceedings is not public. However, the development is presumably similar to that of institutional proceedings, i.e. the number of ad hoc arbitration proceedings is increasing. In the year 2002, 50 requests for arbitration were submitted to the Arbitration Institute of the Central Chamber of Commerce of Finland. Furthermore the Institute appointed 16 arbitral tribunals for redemption cases under the Finnish Companies Act. The number of requests pending this year (2003) is approximately the same as in 2002. In 2002 the rules of the institute were applied to 66 per cent of the cases, excluding redemption cases. 23 per cent of the requests concerned international disputes, i.e. one or more of the parties to dispute were from abroad. The legal issue in the requests for arbitration to the Central Chamber of Commerce indicates that certain types of disputes are most frequently solved by means of arbitration. In 2002, 16 per cent of the requests concerned sale of shares, 16 per cent co-operation agreements, 12 per cent breaches of competition clauses, 8 per cent sale of business operations and 8 per cent shareholders’ agreements. The basic rules of Finnish arbitration are contained in the Finnish Arbitration Act (hereafter the “Act”). Finnish arbitration proceedings have certain characteristics which deviate to some extent from the major international rules and regulations on arbitration. This should be taken into account when initiating arbitration in Finland. It should be noted that the present article discusses questions relating to arbitral proceedings based on an arbitration agreement between the parties to the dispute. Arbitrations of a statutory nature, e.g. redemption of shares of minority shareholders (“squeeze out”) in accordance with the Finnish Companies Act, are not the subject of this article.