Renewables Finland: M&A

When entering into agreements on the acquisition of a Finnish project, it is advisable to choose Finnish law as the governing law. While parties can typically select their preferred jurisdiction for the contract, the actual transfer of assets must occur under Finnish law. Additionally, many provisions such as conduct of business, tax clauses, etc. must be tailored to align with Finnish law in any case.

As in other jurisdictions, the typical project sale and purchase agreement under Finnish law includes detailed provisions on the seller’s liability, including representations and warranties, and provisions concerning the extent and limitations of liability in case of non-fulfilment of warranties. However, Finnish courts are inclined to disregard even explicit contract wording if they find that it does not correlate with the facts. Neither party can therefore rely on contract clauses relieving them from their own diligence.

For the seller, it is common to limit all liability to the warranties explicitly stated in the contract. However, if the court (or the arbitral tribunal) finds that known facts of relevance have not been adequately disclosed, it may disregard the limitation of liability. Hence, the seller’s risk control requires that the seller assesses the facts that need to be disclosed in a process that is commonly called a seller due diligence. Needless to say, the seller must also make sure that the warranties given are fulfilled.

For the buyer, in turn, it would be risky to rely entirely on warranties when the buyer would have had the opportunity to conduct their own scrutiny of the facts in a due diligence review. The degree of care expected from the buyer will depend on the circumstances – the value of the transaction, the availability of relevant documentation, and the expertise of the parties, amongst other factors. If the expected diligence is forgone, the buyer may be prevented from invoking a warranty, or claims may be adjusted to account for the buyer’s negligence.