Arbitration in Finland

Finnish enterprises frequently agree to refer disputes to arbitration courts for resolution instead of using the regular national courts. Only by using arbitration can the parties ensure that a decision will be made within a reasonable timescale, and that business secrets will be kept out of the public domain.

In Finland, arbitration is more commonly used than is the case in many other countries, and there are a number of good reasons for this.

Duration: In regular proceedings before the national courts, it may easily take several years for final judgment to be given. One of the main reasons for such delay is that the procedural code used by the courts was designed with the needs of legally unrepresented litigants in mind. Professionally represented parties will want to avoid this cumbersome procedure.

Finality: Rulings made by public courts are always appealable and, in practice, it is rare for judgments made in cases with economic value not to be appealed. This results not only in further delay in obtaining a final result, but also means the parties are obliged to go through the same procedure twice – thus maximising the disturbance caused to ongoing business relations between the parties. By contrast, arbitral awards are final.

Confidentiality: In Finland, court procedures are public, including all written material submitted to the courts. Parties can ask the court to declare certain documents secret, but this possibility is limited and depends on a discretionary decision of the court. Arbitration, on the other hand, is confidential in its entirety, thus protecting the parties’ business secrets.

Enforceability: Based on international conventions, arbitral awards can be executed in most countries of the world, which is not the case with national court rulings, particularly where relations between Finland and non-EU countries are concerned.

Arbitration proceedings can only be started if both parties have so agreed. The best place to put an arbitration agreement is in the contract governing the basis of the parties’ business relations. In arbitration, the parties are free to agree on many details of the procedure.

In most cases arbitration clauses specify that the procedures to be followed shall be those set out in the arbitration rules published for this purpose by various arbitration organisations, including local chambers of commerce, the International Chamber of Commerce (ICC) in Paris, or other similar institutions established by business associations in various business sectors.

The Arbitration Institute of the Central Chamber of Commerce of Finland (short FAI) is the institution most frequently used by Finnish companies in dispute. Its procedures are relatively straightforward, with the vast majority of cases being decided by a single arbitrator.

Particularly where business relations involve a substantial cross-border business volume, the Paris-based International Court of Arbitration at the International Chamber of Commerce (ICC) is often chosen. Both the ICC institute and the arbitrators used by it are more expensive than the Arbitration Institute in Finland, but the ICC has a truly international network of expert arbitrators, and the larger scale of this network also makes it easier to find sector-specific experts in cases where they are needed.

In Finland, several local chambers of commerce also maintain their own arbitration institutes. While their costs are substantially lower than those of the Central Chamber of Commerce, their contact networks and procedures are tailored for conflicts of a local nature and are therefore rarely appropriate for contracts involving foreign businesses.