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National arbitration laws
What legislation applies to arbitration in your jurisdiction?
The Finnish Arbitration Act (967/1992, as amended) (FAA), which entered into force on 1 December 1995, governs all types of arbitration (domestic, international, institutional and ad hoc).
In addition to the FAA, certain other pieces of legislation are relevant for arbitrations seated in Finland. For instance, the FAA contains several references to the Code of Judicial Procedure and that code applies for instance when seeking interim measures from a court in aid of arbitration. The Finnish Enforcement Code is relevant when enforcing an award in Finland and the Finnish Limited Liability Companies Act governs certain statutory arbitrations, such as share redemption disputes and disputes over the right of squeeze-out and sell-out.
Are there any mandatory laws?
Although party autonomy is a governing principle under the FAA, the parties cannot set aside certain mandatory provisions, including the following:
- the arbitration agreement must be concluded in writing (Section 3);
- the arbitrators must be impartial and independent in their duties (Section 9);
- the arbitrators have a continuous obligation to immediately disclose any circumstances likely to endanger or give rise to justifiable doubts as to their impartiality or independence (Section 9);
- the parties must have sufficient opportunity to present their case (Section 22);
- the arbitrators must promote an appropriate and expedient settlement of the matter (Section 27);
- the award must be made in writing and signed by the arbitrators (Section 36); and
- the provisions concerning nullity of arbitral awards (Section 40).
New York Convention
Is your country a signatory to the New York Convention? If so, what is the date of entry into force?
Yes. The convention entered into force on 19 April 1962.
Are there any reservations to the general obligations of the convention?
No. Accordingly, all foreign arbitral awards are recognised and enforced in Finland pursuant to the New York Convention’s regime (as incorporated into the FAA).
Treaties and conventions
What other treaties and conventions in relation to arbitration is your jurisdiction party to?
- Protocol on Arbitration Clauses (Geneva, 1923) (ratified on 10 July 10 1924 and entered into force on 1 September 1924);
- General Act of Arbitration (Pacific Settlement of International Disputes) (Geneva, 1928) (ratified by Decree 5/1930);
- Convention on Conciliation and Arbitration within the CSCE (Stockholm, 1992) (ratified by Decree 30/1995); and
- UN Convention on Transparency in Treaty-based Investor-State Arbitration (New York, 2014) (signed on 17 March 2015, but not yet ratified).
Finland is also a party to over 70 bilateral investment treaties, most of which allow recourse to arbitration.
Has your jurisdiction adopted the UNCITRAL Model Law?
No. The FAA is, however, largely compatible with the UN Commission on International Trade Law (UNICITRAL) Model Law, even though certain differences exist (eg, the Finnish law is silent on arbitrator-ordered interim measures and it contains no time limit for declaring an arbitral award void in certain circumstances).
Are there any impending plans to reform the arbitration laws in your jurisdiction?
Vivid discussions about the need to reform the FAA are ongoing. A petition to that effect has been submitted to the minister of justice at the initiative of the Arbitration Institute of the Finland Chamber of Commerce, although no bill has been proposed for the time being. Some push for the adoption of the UNCITRAL Model Law in Finland, but objections have also been raised.
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).
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).
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).
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.
Criteria for arbitrators
Are there any restrictions?
The Finnish Arbitration Act (967/1992, as amended) (FAA) contains very few criteria for arbitrators: unless otherwise agreed by the parties, any person of full age who is not bankrupt and whose competence has not been restricted may act as an arbitrator (Section 8).
Arbitrators must also be impartial and independent in their duties (Section 9). An arbitrator shall be disqualified if he or she would have been disqualified as a judge, or if other circumstances exist that give rise to justifiable doubts as to his or her impartiality or independence.
What can be stipulated about the tribunal in the agreement?
As a rule, the parties are free to set requirements to the appointment or qualifications of the arbitrators, subject to the mandatory provisions of the FAA (see the paragraph titled “Are there any mandatory laws?” in the Legal framework section). The parties can agree on, for instance, the number of arbitrators, the procedure for the appointment of the arbitral tribunal, the qualifications and the nationality of the arbitrators, and the language abilities of the arbitrators (Sections 7, 8 and 13).
Are there any default legal requirements as to the selection of a tribunal — for example, concerning the number of arbitrators or their characteristics?
The default number of arbitrators is three, but the parties can agree otherwise (Section 7). Contrary to the FAA, under the Rules of the Arbitration Institute of the Finland Chamber of Commerce (FAI) the default number of arbitrators is one.
The FAA requires only that an arbitrator have full legal capacity and be independent and impartial. Otherwise, the parties can agree on the characteristics of the arbitrator(s). In practice, arbitrators are often law professors, legal practitioners or even judges.
The FAA also contains default rules regarding the appointment of arbitrators, but the parties can agree on different methods (Sections 13 to 16). For instance, if there is to be more than one arbitrator, by default each party appoints one arbitrator and those arbitrators appoint the chair.
Challenging the appointment of an arbitrator
Can the appointment of an arbitrator be challenged? Can an arbitrator be disqualified? What is the procedure for this?
The appointment of an arbitrator can be challenged by any of the parties in two circumstances:
- if the arbitrator would have been disqualified to handle the case as a judge under the Finnish Code of Judicial Procedure; or
- if there are justifiable doubts regarding the arbitrator’s impartiality or independence (Section 10 of the FAA and Chapter 13 of the Code of Judicial Procedure).
The parties may agree on the procedure to challenge an arbitrator. If the parties have not so agreed, a party must present the challenge within 15 days of becoming aware of both the appointment and the circumstances giving rise to the challenge. The written challenge must be addressed to the arbitrator and it must state the reasons for the challenge. Unless the challenged arbitrator withdraws, or the other party agrees to the challenge, the other arbitrators shall decide on the challenge (Section 11 of the FAA).
The courts have no jurisdiction to decide on the challenge of an arbitrator. They will deal with issues related to a challenge only if a party invokes either of the grounds in Section 41 to set aside the award once rendered.
Under the FAI Rules, the FAI Board decides on the challenge of an arbitrator.
How should an objection to jurisdiction be raised?
Although the FAA is silent on the tribunal’s power to rule on its own jurisdiction, it is unanimously accepted in the legal practice and literature that a tribunal with a seat in Finland has that power. Thus, any jurisdictional objection should primarily be brought before the arbitrator(s), although jurisdictional objections can also be brought to the courts at any time during the proceedings.
The FAA does not contain explicit time limits for raising jurisdictional objections. According to legal literature, the moment at which a jurisdictional objection must be raised depends on the ground on which the objecting party relies. If any of the grounds for nullity of an award under Section 40 of the FAA are present, the tribunal should declare itself incompetent ex officio and such grounds may be invoked at any point of the proceedings. Conversely, non-mandatory grounds for the tribunal’s lack of jurisdiction, such as the invalidity of an arbitration agreement, should be raised in the objecting party’s first written statement. According to legal literature, simply replying to the claim may be deemed a tacit acceptance of the validity of the agreement.
The arbitrators can rule on the jurisdictional objection either in the final award together with the merits of the case or in a preliminary ruling.
As arbitrators do not have final competence-competence in Finland, their decision on jurisdiction is not binding on the courts and the jurisdiction of the tribunal can be disputed before local courts despite the arbitrators’ own ruling on the issue. The arbitration must be terminated when a court decision accepting the jurisdictional objection has become final.
Replacement of an arbitrator
Why and how can an arbitrator be replaced?
The parties can agree on the removal of an arbitrator. Furthermore, if an arbitrator is unable to perform his or her functions in an adequate manner or delays the arbitration without just cause, the court shall remove the arbitrator upon request of a party. That decision cannot be appealed (Section 19 of the FAA).
The appointment procedure of a substitute arbitrator mirrors the original appointment procedure in the arbitration agreement or, if the agreement is silent thereon, the FAA (Sections, 14 and 15).
Powers and obligations
What powers and obligations do arbitrators have?
Under the FAA, the arbitrators’ powers include:
- making a final decision on the merits of the dispute;
- deciding on the challenge of an arbitrator’s appointment;
- deciding on the procedure to be followed in the arbitration (if not agreed upon by the parties);
- deciding on the place of arbitration (if not agreed upon by the parties);
- deciding on the language of the proceedings(if not agreed upon by the parties);
- requesting someone to appear to be heard, and requesting any person to produce a document or other object that may have relevance as evidence; and
- allowing a party to seize a court for the court to compel any witness to appear in court or any person to produce evidence.
Further, the courts and legal scholars have inferred from the FAA the arbitrators’ power to decide on their own jurisdiction. The obligations of the arbitrators include:
- being impartial and independent;
- a continuous duty to inform the parties of any circumstances likely to endanger or give rise to justifiable doubts as to their impartiality and independence;
- giving the parties sufficient opportunity to present their case;
- promoting an appropriate and expedient settlement of the matter;
- deciding the dispute in accordance with law or, where the parties have expressly agreed thereon, ex aequo et bono; and
- making the award in writing and signing it.
Liability of arbitrators
Are arbitrators immune from liability?
While the FAA does not regulate the liability of an arbitrator, the Finnish Supreme Court has held arbitrators liable in certain circumstances.
In its judgement KKO 2005:14, the court awarded damages to a party as the presiding arbitrator had not disclosed that he had appeared as an expert witness for one of the parties in another case. The court stated that an arbitrator’s liability is based on the law applicable to damages in contractual relationships and that the finality of arbitral awards underlines the requirements of impartiality and care. The court concluded that clear instances of negligence on the part of arbitrators must lead to liability. Importantly, however, the court stated that an arbitrator can be held liable only in exceptional circumstances.
Communicating with the tribunal
How do the parties communicate with the tribunal?
The parties may – typically, together with the tribunal – agree on the methods of communication with the tribunal. In the absence of an agreement, the arbitrators may conduct the proceedings in a manner that they consider appropriate (Section 23 of the FAA).
Generally, all communications with the tribunal should also be directed to the other party.
Is unanimous agreement of the tribunal required? If there is disagreement, does the will of the majority suffice? What are the implications of this?
No. If the arbitrators disagree on the decision, the majority’s vote prevails. If no opinion gathers a majority of votes, the opinion of the chair shall prevail, unless the parties agree otherwise. Where the arbitrators disagree on the amount to be awarded, the FAA contains a method for calculating the votes to arrive to a decision (Section 32).
Are there any disputes incapable of being referred to arbitration?
The FAA states only that a dispute may be referred to arbitration if it is civil or commercial in nature and capable of being settled by agreement between the parties. Thus, the invalidity or cancellation of IP rights, child custody, divorce, declaration of insolvency and criminal matters are, among others and in principle, subject to the exclusive jurisdiction of the general courts.
In 2013 the Helsinki District Court ruled that arbitration clauses in supply contracts did not apply to follow-on damages claims in cartel cases.
Can the arbitrability of a dispute be challenged?
Yes. The arbitrators have jurisdiction to decide whether a matter is arbitrable, but their decision is not binding on the general courts. According to legal literature, a party can challenge the tribunal’s jurisdiction on this ground before the tribunal or the district courts at any time during the proceedings.
If an award is made in a non-arbitrable matter, the award is null and void under Section 40 of the FAA.
Jurisdiction and competence-competence
Is the principle of competence-competence recognised in your jurisdiction? Can a party to an arbitration ask the courts to determine an issue relating to the tribunal’s jurisdiction and competence?
It is unanimously accepted that an arbitral tribunal with a seat in Finland has competence to rule on its own jurisdiction, although the principle of competence-competence is not explicitly spelled out in the FAA.
The arbitrators do not, however, have absolute competence-competence in Finland as the tribunal’s decision on its jurisdiction is not binding on the general courts and the parties can challenge the tribunal’s jurisdiction in local courts despite the tribunal’s own ruling on the issue.
Starting an arbitration proceeding
What is needed to commence arbitration?
To launch arbitration proceedings, the claimant must send a written notice with the following information to the opposing party (Section 12 of the Finnish Arbitration Act (967/1992, as amended) (FAA)):
- the arbitration agreement and description of the dispute;
- the arbitrator(s) whom the claimant intends to appoint; and
- a request to the other party to appoint an arbitrator or arbitrators, where applicable.
A claimant can of course include additional information in its written notice.
The proceedings are deemed to commence when the opposing party receives the notice (Section 21 of the FAA).
The FAI Rules contain more detailed requirements regarding the content of the notice of arbitration.
Are there any limitation periods for the commencement of arbitration?
Pursuant to the Code of Judicial Procedure, if a party has obtained a court-ordered interim measure regarding the matter in dispute, it must start arbitration proceedings within one month from the order to keep the measure in force. Apart from this provision, Finnish law does not contain specific limitation periods for the commencement of arbitration.
If the applicable substantive law is Finnish law, the Finnish Act on Statute of Limitations (728/2003 as amended) regulates the limitation periods. This act contains a number of limitation periods for different types of debt claim.
Are there any procedural rules that arbitrators must follow?
For the most part, the parties may agree on the conduct of their proceedings and the tribunal must follow that agreement (including any institutional rules the parties may have agreed on). In the absence of a party agreement, the tribunal shall conduct the arbitration in a manner that it considers appropriate.
The FAA contains certain rules that must be followed in the conduct of the proceedings. First, the arbitrators must give the parties sufficient opportunity to present their case. Second, the arbitrators must promote the appropriate and expedient settlement of the dispute. Third, the arbitrators must terminate the proceedings if they find that the proceedings cannot continue for any reason, if the parties agree on the termination, or if the claimant withdraws its claim and the respondent does not have a legitimate interest in obtaining a final settlement (Sections 27 and 30). Fourth, a tribunal must decide the dispute in accordance with the law or ex aequo et bono if the parties have so agreed.
The arbitrators must also follow the FAA’s provisions on the formal requirements and service of the award, as well as the rules that apply when an award must be corrected or where the arbitrators disagree on the award.
Are dissenting opinions permitted under the law of your jurisdiction?
While the FAA does not expressly address this issue, dissenting opinions are permitted in Finland and they are added to awards from time to time.
Can local courts intervene in proceedings?
The courts cannot hear a dispute covered by a valid and invoked arbitration agreement (Section 5 of the FAA), but they have a number of powers that they can use during arbitral proceedings, such as:
- granting interim orders and prohibitions (Section 5);
- hearing a claim regarding the tribunal’s jurisdiction (see above); and
- assisting in the production of evidence if the arbitral tribunal deems it necessary (Section 29).
Can the local courts assist in choosing arbitrators?
A party may request a general court to appoint an arbitrator where the other party has failed to fulfil its obligation to appoint one (Section 15 of the FAA). Furthermore, any party may request a general court to appoint an arbitrator if the parties cannot agree on a sole arbitrator (Section 16).
The general courts can also appoint a substitute arbitrator in certain circumstances (Section 14).
Under the Arbitration Rules of the Arbitration Institute of the Finland Chamber of Commerce (FAI), the FAI Board may appoint the arbitrator(s) where needed.
What is the applicable law (and prevailing practice) where a respondent fails to participate in an arbitration? Can the courts compel parties to arbitrate? Can they issue subpoenas to third parties?
The FAA does not explicitly foresee the situation of a respondent failing to participate but, according to legal literature, the arbitral proceedings can commence and the arbitrators may rule on the dispute based on the material before them in such circumstances. Indeed, the FAA merely requires that the arbitrators give the parties an opportunity to present their case – it does not require that the parties actually seize this opportunity.
The arbitrators can urge a witness or any other person to appear before them, but they may not use coercive means (Section 27 of the FAA). If, in light of this lack of powers, the arbitrators need the general courts’ assistance, a witness can be heard in a local court (Section 29). The Finnish Code of Judicial Procedure regulates the duty of a subpoenaed witness to appear in court.
In what instances can third parties be bound by an arbitration agreement or award?
As a rule, an arbitration agreement and the award rendered on its basis bind only the parties, although a non-signatory can become bound in certain limited circumstances.
For instance, an arbitration agreement binds a third party in case of a universal succession where the rights of a party under the agreement are transferred to a third party. Furthermore, an arbitration clause can bind a non-signatory where the contract containing the clause explicitly grants rights to the non-signatory. The case law of the Finnish Supreme Court suggests a permissive stance on arbitration agreements’ binding third parties in these circumstances (eg, KKO 2013:84 and KKO 2007:39).
Default language and seat
Unless agreed by the parties, what is the default language and location for arbitrations?
Unless the parties have agreed thereupon, the arbitrators shall determine the place of arbitration and the language(s) of the proceedings (Sections 24 and 26 of the FAA).
How is evidence obtained by the tribunal?
The parties are free to agree on the production of evidence. If the parties have not agreed thereupon, the tribunal may decide on how evidence should be presented.
It is generally for the parties to supply the evidence that they rely on. The arbitrators may however request any person to appear as a witness and they may request any person in possession of a document or other object with evidentiary value to produce it; they have no coercive powers to enforce such requests, though. Furthermore, unless otherwise agreed by the parties, the tribunal may appoint an expert witness (Sections 27 and 28 of the FAA).
Where the arbitrators deem it necessary, a party may petition a local court to compel a witness to appear in court or any person to produce evidence that may be of relevance to the case (Section 29). A party may petition a local court to that effect only if so authorised by the tribunal.
In addition, tribunals may – and often do – apply (or at least seek guidance from) the International Bar Association Rules on the Taking of Evidence in International Arbitration, unless the parties agree otherwise.
What kinds of evidence are acceptable?
The FAA does not restrict the type of evidence that the parties may submit. Thus, the parties may rely on any relevant documents, expert witnesses, witness testimonies, and other material in support of their case.
The arbitrators may refuse to admit evidence where it is clearly irrelevant.
Is confidentiality ensured?
The FAA is silent on the question of confidentiality and there appears to be no authoritative case law on the issue. The prevailing opinion is that the arbitrators are bound by confidentiality regarding both the proceedings and the award. Conversely, the parties themselves seem to be under no obligation to retain the confidentiality of the proceedings or of the award. Therefore, it is advisable that the parties agree on confidentiality in their arbitration agreement or in the course of the proceedings if they wish their arbitration to be confidential.
Furthermore, information about the arbitration may become public if the parties or the arbitrators turn to courts for assistance.
The Arbitration Rules of the Arbitration Institute of the Finland Chamber of Commerce include an express provision on confidentiality, which imposes an obligation of confidentiality on the institute, the tribunal and the parties.
Can information in arbitral proceedings be disclosed in subsequent proceedings?
Yes. Court proceedings related to an arbitration (eg, challenge or enforcement proceedings) require the submission of the award and certain other documents to the court. The general rule under the Finnish publicity laws is that documents become public once submitted to the court. The court will only consider the award or other documents confidential if they include business or professional secrets or other information protected by law.
What ethical codes and other professional standards, if any, apply to counsel and arbitrators conducting proceedings in your jurisdiction?
No specific ethical standards bind arbitrators or counsels in arbitral proceedings.
The Finnish Bar Association has an ethical code that binds attorneys at law admitted in Finland, but neither counsels appearing in arbitration proceedings seated in Finland nor the arbitrators need to be admitted to the Bar.
Estimation & allocation
How are the costs of arbitration proceedings estimated and allocated?
The arbitrators decide on their own compensation in ad hoc proceedings and they can fix the amount in the final award. The compensation must be reasonable, taking into account the time spent on the case, the complexity of the subject matter and other relevant circumstances. The parties can appeal the arbitrators’ decision regarding their compensation to state courts (Sections 46 and 47 of the Finnish Arbitration Act (967/1992, as amended) (FAA)). The Finnish Supreme Court has issued a couple of rulings addressing the reasonability of the arbitrators’ compensation (KKO 1970-II-53 and KKO 1944-II-30).
Unless otherwise agreed by the parties, they are jointly and severally liable for the tribunal’s compensation. Further, unless otherwise agreed by the parties, the arbitrators can order a party to compensate the other party for its arbitration costs (Section 49 of the FAA). The FAA invites the arbitrators to apply, where appropriate, the provisions of the Code of Judicial Procedure in this regard. The main principle is that liability for the prevailing side’s necessary and reasonable costs lies with the losing party. The allocation of costs may be affected by the conduct of the parties, such as a party causing an unnecessary trial or obstructing the proceedings.
Under the Arbitration Rules of the Arbitration Institute of the Finland Chamber of Commerce (FAI), the FAI determines the arbitrators’ compensation, the FAI’s expenses and its administrative fee (cost calculators are available on FAI’s webpage). The tribunal will allocate these costs, and the parties’ legal and other costs, between the parties.
Security for costs
Can the national court or tribunal order security for costs under the law in your jurisdiction?
The arbitrators are entitled to request that the parties pay an advance on, or place a security for, the arbitrators’ compensation (Section 46 of the FAA). Requesting such an advance or security is quite common, although the FAA does not provide for specific procedures to that effect. The arbitrators seem to have the right to demand an advance or security at any time until the rendering of the award. They are entitled to decide on the amount of appropriate security or advance and they may increase that amount during the proceedings.
Under the FAI Rules, the tribunal has the right to request an advance. An advance is requested as a rule in international arbitrations and it must be paid before the case file is transmitted to the tribunal.
What legal requirements are there for recognition of an award? Must reasons be given for the award? Does the award need to be reviewed by any other body?
The award must be made in writing and signed by all the arbitrators. It must also contain the date and place of arbitration.
The Finnish Arbitration Act (967/1992, as amended) (FAA) does not require that the award state the reasons on which it is based, although in practice the arbitrators always state their reasons absent specific circumstances.
The merits of an award will not be reviewed by another body, but the FAA does lay down certain requirements that must be fulfilled before a foreign award can be recognised in Finland. The award must have been made by virtue of an arbitration agreement that complies with the written form requirement of the FAA, and the award must not contradict the public policy of Finland (Section 52). Furthermore, a foreign award will not be recognised in Finland where a party proves the existence of one of the following circumstances:
- It lacked the capacity to enter into the arbitration agreement, it was not properly represented when the agreement was entered into, or the agreement is not valid (for a reason other than its form) under the law to which the parties have subjected it (or under the law of the seat if the law that the parties intended to apply to their agreement is unknown);
- It was not given proper notice of the arbitrator’s appointment or of the arbitration proceedings, or it was otherwise unable to present its case;
- The arbitrators exceeded their authority;
- The tribunal’s composition or the proceedings substantially deviated from the parties’ agreement or, in the absence of an agreement, from the law of the seat; or
- The award has not become binding on the parties, its enforcement has been suspended “in the state in which, or under the law of which, that award was made, or it has been declared null and void or annulled in said state”.
Overall, Finnish courts are respectful towards foreign awards.
Timeframe for delivery
Are there any time limits on delivery of the award?
The FAA contains no time limit for the delivery of the award, but the parties can agree on a time limit.
The arbitrators must also promote an appropriate and expedient settlement of the matter (Section 27) and an arbitrator may be removed if he or she delays the proceedings without just cause (Section 19).
The Arbitration Rules of the Arbitration Institute of the Finland Chamber of Commerce (FAI) impose a time limit of nine months for the delivery of the award.
Does the law impose limits on the available remedies? Are some remedies not enforceable by the court?
The FAA does not limit the types of remedy available, although it does state that the tribunal cannot issue orders under the threat of a fine or orders regarding coercive means (Section 27). According to legal scholars, awarding punitive or exemplary damages could be considered as contradicting Finnish public policy. Thus, an award allocating such damages could be deemed null and void under the FAA.
What interim measures are available? Will local courts issue interim measures pending constitution of the tribunal?
The FAA is silent on the tribunal’s power to order interim measures, although it does state that the tribunal may not impose a threat of a fine or issue orders regarding other coercive means. Legal scholars are, however, unanimous that an arbitral tribunal may order interim measures when the parties have so agreed. But arbitrator-ordered interim measures are not enforceable through the judicial system in Finland.
In practice, tribunals seated in Finland have broad discretion as to the standards for granting interim measures and they have ordered measures falling within the following categories:
- measures aimed at facilitating the conduct of the proceedings, such as conserving evidence/property;
- measures aimed at preserving or restoring the status quo for the duration of the proceedings, such as an order not to terminate an agreement;
- measures aimed at facilitating the enforcement of a future arbitral award, such as freezing of assets; and
- orders for security for costs.
Finnish general courts have jurisdiction to order interim measures in aid of arbitration before or during the proceedings (Section 5 of the FAA). The types of measure available from the courts and the requirements for obtaining such measures are set forth in Chapter 7 of the Code of Judicial Procedure.
Under the FAI Rules, the tribunal may order any interim measure that it deems appropriate. The FAI Rules also contain provisions related to the appointment of an emergency arbitrator where a party cannot await the constitution of a tribunal.
Can interest be awarded?
Arbitrators may award interest, but only if a party has requested that interest be awarded.
At what rate?
Where Finnish law governs the dispute, the interest rate is determined pursuant to the Finnish Interest Act (633/1982, as amended). This act ties the reference rate to the interest rate applied by the European Central Bank (Section 12 of the Finnish Interest Act). As an example, the interest on late payments is seven percentage points higher than the reference rate in force when the interest started to accrue.
Is the award final and binding?
Yes. The grounds for challenging the award – that is, declaring it null and void or setting it aside – are limited (Sections 40 and 41 of the FAA) and the only element of the award that a party can appeal to general courts is the tribunal’s compensation (Section 47).
What if there are any mistakes?
A party may request the tribunal to correct minor mistakes (eg, errors in computation, clerical errors) within 30 days of receipt of a copy of the award. If the request is justified, the tribunal must correct the award without delay. The tribunal may also correct such errors on its own initiative (Section 38 of the FAA).
If the arbitrators have disregarded a claim, either party may, after notifying the other party, request that the arbitrators make an additional award regarding that claim, unless otherwise agreed by the parties. If the arbitrators consider the request justified, they must make the additional award as soon as possible (Section 39).
Can the parties exclude by agreement any right of appeal or other recourse that the law of your jurisdiction may provide?
If any of the grounds of Section 40 of the FAA are met, the award is automatically null and void and the court must declare it as such ex officio. The parties cannot agree otherwise.
Conversely, a party may lose its right to request that an award be set aside under Section 41 by waiving, or being deemed to have waived, that right (except if it was not given a sufficient opportunity to be heard). It would thus appear that the parties may also explicitly agree to exclude their right to set an arbitral award aside.
What is the procedure for challenging awards?
A party can request a state court to declare an arbitral award null and void or to set it aside (Sections 40 and 41 of the FAA). Both actions must be brought before the district court with jurisdiction over the place where the award was made (Section 50).
The award is considered null and void:
- to the extent that the arbitrators have resolved an issue that is not arbitrable under Finnish law;
- to the extent that recognition of the award is deemed contrary to Finnish public policy;
- if the award is so obscure or incomplete that the decision cannot be inferred from it; or
- if the award was not made in writing or signed by the arbitrator(s).
The FAA does not contain any time limit for having an award declared null and void.
If any of these grounds are present, the award is in theory automatically null and void and the court must declare it as such ex officio. In practice a party should, in order to preserve its interests, invoke the ground for nullity in the course of the challenge proceedings or when opposing to the enforcement of the award.
The award may be set aside at the request of a party if:
- the arbitrators have exceeded their authority;
- an arbitrator has not been properly appointed;
- an arbitrator has not been impartial and independent and a challenge correctly submitted by a party was not accepted before the award was rendered, or a party became aware of the grounds for a challenge so late that it was not able to challenge the arbitrator before the award was rendered; or
- a party was not provided with sufficient opportunity to present its case.
A claim for setting aside an award must be made to the district court within three months of the date on which the party bringing the challenge received a copy of the award.
On what grounds can parties appeal an award?
The only element of an award that can be appealed is the tribunal’s decision regarding its compensation.
What steps can be taken to enforce the award if there is a failure to comply
Sections 43 to 45 of the FAA lay out the rules for enforcing an award rendered in Finland, whereas Sections 52 to 55 relate to the recognition and enforcement of foreign awards. A district court shall decide on the enforcement of an award in both instances (Section 43), but the FAA does not specify which specific district court has jurisdiction to make this decision.
The district court should give the party against whom enforcement is sought an opportunity to be heard, unless there are particular reasons for not hearing that party (which is rare in practice) (Sections 43 and 55).
A court can refuse to enforce an award rendered in Finland if:
- the award is null and void under Section 40 of the FAA;
- the award has been set aside by a court pursuant to Section 41; or
- a court that has been seized under Section 40 or Section 41 has suspended the enforcement of the award.
If none of these grounds applies, the court must order the enforcement of the award. Where enforcement has been granted, the award will be enforced in accordance with the Enforcement Code (Section 45 of the FAA).
A foreign award that is recognised in Finland according to the provisions of the FAA must be enforced upon application (Section 54). An award that a court has ordered to be enforced shall be enforced like a court judgment (Section 19 of the Enforcement Code).
If, after a court decision ordering enforcement, a party still refuses to perform (or is incapable of performing) the award, the party seeking enforcement may turn to the enforcement authorities (Chapters 1 and 3 of the Enforcement Code).
Enforcement proceedings are somewhat uncommon in Finland as parties usually comply with arbitral awards voluntarily.
Can awards be enforced in local courts?
Yes. An application for enforcement must be submitted to the court of first instance (Sections 43 and 54 of the FAA). Following the decision on enforcement, the arbitral award is enforced in the same manner as general courts’ judgments (Section 19 of the Enforcement Code).
How enforceable is the award internationally?
To these authors’ knowledge, awards rendered in Finland are typically enforced internationally, especially if the state where enforcement is sought has ratified the New York Convention. This is because the FAA lays down a set of criteria that an award must fulfil, and these criteria largely correspond to those required by most modern jurisdictions.
To what extent might a state or state entity successfully raise a defence of state or sovereign immunity at the enforcement stage?
The FAA is silent on state or sovereign immunity. The FAA’s grounds for refusing enforcement of arbitral awards are, however, exhaustive. Thus, where a state or state entity has participated in the arbitration pursuant to a valid arbitration agreement, a defence of state or sovereign immunity is unlikely to succeed before Finnish courts.
Are there any other bases on which an award may be challenged, and if so, by what?
The FAA’s grounds for declaring an award null and void or setting it aside are exhaustive.
How enforceable are foreign arbitral awards in your jurisdiction?
Finnish courts are generally respectful towards foreign awards. A foreign award that is recognised in Finland shall be enforced upon request (Section 54 of the FAA) and the grounds for refusing recognition are rather restrictive.
Will an award that has been set aside by the courts in the seat of arbitration be enforced in your jurisdiction?
No, if a party proves that the foreign award was declared null and void or set aside at the seat (Section 53 of the FAA).
The court may also adjourn a decision on the enforcement of a foreign award if a party invokes that it has made an application for declaring the award null and void or for setting it aside at the seat (Section 55).
Rules and restrictions
Are there rules or restrictions on third-party funders?
No. Third-party funding is not commonly used in Finland, although there is no legislation or case law that would specifically restrict – or, in fact, even regulate – third-party funding. Third-party funding is generally permitted, but the lack of regulation may lead to uncertainties.
Class-action or group arbitration
Is there a concept in your jurisdiction providing for class-action arbitration or group arbitration? If so, are there any limitations to the arbitrability of such claims or requirements that must be met before such claims may be arbitrated?
Class actions are limited to consumer litigations. It would, thus, seem that class-action arbitrations are not allowed, although the Finnish Arbitration Act (967/1992, as amended) is silent on the issue.
Are there any hot topics or trends emerging in arbitration in your jurisdiction?
The need to reform the Finnish Arbitration Act (967/1992, as amended) is subject to vivid discussion. Voices have been raised to have the UN Commission on International Trade Law Model Law formally adopted in Finland or at least to have the Finnish Arbitration Act updated to better correspond with the needs of international commercial arbitration.