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Arbitration agreements

Validity

What are the validity requirements for an arbitration agreement?

First, “any dispute in a civil or commercial matter that can be settled by agreement between the parties” can be referred to arbitration (Section 2 of the Finnish Arbitration Act (967/1992, as amended) (FAA)). Thus, matters that are not “civil or commercial in nature” and cannot “be settled by agreement between the parties” cannot be validly submitted to arbitration. For example, an arbitration clause in a consumer contract is not binding on the consumer if the contract is concluded before a dispute arises.

Second, an arbitration agreement regarding future disputes must concern “a particular legal relationship” and the agreement may not contradict any provision of a statutory law that forbids such an agreement (Section 2 of the FAA).

Third, the arbitration agreement must be in writing (Sections 3 and 4). The Finnish legal literature and legal praxis have interpreted this requirement rather flexibly.

Enforcement of agreements

How are arbitration agreements enforced in your jurisdiction? What is the attitude of the national courts towards arbitration agreements?

A valid arbitration agreement excludes the jurisdiction of the courts. A party will however have to invoke the agreement before responding to the merits of the claim for a court to decline to hear the case (Section 5 of the FAA). If the court finds that the parties have validly agreed on arbitration, it cannot hear the main claim, and it must refer the parties to arbitration.

Finnish courts are perceived to be respectful of arbitration agreements. Indeed, the Supreme Court has ruled on a number of occasions that local courts cannot hear a dispute governed by a valid arbitration agreement (KKO 1931-II-72, KKO 1983-II-125, KKO 1986-II-151 and KKO 1997:200).

Consolidation

Can an arbitral tribunal, with its seat in your jurisdiction, consolidate separate arbitral proceedings under one or more contracts, and, if so, in what circumstances?

The FAA does not address consolidation of separate arbitration proceedings. As the FAA however gives arbitrators jurisdiction over their own jurisdiction (although see discussion regarding competence-competence in the Arbitral tribunal section), as well as wide freedom to the parties and the arbitrators to shape the proceedings, it appears that consolidation is allowed as long as the FAA’s mandatory provisions are fulfilled. There is, however, no case law to confirm this presumption.

The Arbitration Rules of the Arbitration Institute of the Finland Chamber of Commerce (FAI) provide that the FAI Board can consolidate arbitrations brought under the FAI Rules under certain conditions.

Choice of law

How is the substantive law of the dispute determined? Where the substantive law is unclear, how will a tribunal determine what it should be?

If the parties have designated the law of a given state as the law governing their dispute, the arbitrators must apply that law (Section 31 of the FAA). Where no such agreement exists, the tribunal determines the applicable law and it has considerable discretion when doing so: the tribunal may choose any national or international law that it considers applicable. According to legal literature, the arbitrators may even select the applicable law without first resorting to conflict of laws rules.

If the parties have agreed thereon, the arbitrators may decide the case based on what they deem reasonable (ex aequo et bono).

Separability

Are there any provisions on the separability of arbitration agreements?

The FAA does not address the separability of arbitration agreements. The case law of the Finnish Supreme Court however confirms that an arbitration agreement is entirely separate from the underlying agreement and its validity must be assessed independently of that of the main agreement (KKO 1996:61, KKO 1988:55 and KKO 1954 II 11).

Multiparty agreements

Are multiparty agreements recognised?

The FAA is silent on multiparty arbitration agreements, but these are commonly used and recognised in Finland, provided that all parties have given their consent to arbitrate.

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