Finnish Arbitration Act is being reformed – here is how the law is proposed to be amended
Voit lukea artikkelin myös suomeksi täältä.
A working group at the Ministry of Justice has drafted a proposal for a new Finnish Arbitration Act to replace the Finnish Arbitration Act (fi: laki välimiesmenettelystä) of 1992. The aim of the reform is to promote the competitiveness of arbitration in Finland and to harmonise legislation with the UNCITRAL Model Law. The working group has drafted its proposal in the form of a government bill.
We have listed the most important planned changes in this article.
The formal requirement for arbitration agreements will be abolished
The requirement for arbitration agreements to be in writing under the current law will be removed. In future, the resolution of disputes through arbitration may be agreed upon without any formal requirements. The formal requirement has been considered outdated and poorly suited to business contract practices. In practice, the formal requirement has been of little significance, as international developments have led to a more lenient interpretation of the written requirement for arbitration agreements.
Action for nullity to be abolished
The distinction between grounds for nullity and grounds for setting aside an arbitral award is removed. The law will no longer include provisions on the nullity of arbitration awards. In future, it will be possible to bring an application for setting aside within a specified period, but not to bring an action for the nullity of an arbitration award without a time limit, as the case under the current law.
Non-arbitrability and incompatibility with the legal order, which are grounds for invalidity under the current law, will in future be grounds for setting aside an arbitration award.
This is a significant change, as the possibility of bringing an action for invalidity without a time limit is known to exist only in Finland and Sweden, which has weakened legal certainty and the competitiveness of Finnish arbitration proceedings.
The time limit for bringing an action for annulment will be shortened
The time limit for bringing an action for annulment will be shortened to 60 days from the date of notification of the arbitration award. The current time limit is three months. The shorter time limit will speed up the appeal process and promote the efficiency of arbitration proceedings.
The arbitral tribunal will be given the power to order interim measures
New provisions on the authority of the arbitral tribunal to order interim measures will be added to the law. The jurisdiction of the arbitral tribunal is parallel to that of the district court. Upon application by a party, the court may confirm the enforceability of an interim measure ordered by an arbitral tribunal in Finland, provided that there is no legal obstacle to enforcement. The application may be rejected on the same grounds as those on which recognition and enforcement of an arbitral award may be refused.
The arbitral tribunal's jurisdiction to decide on its own jurisdiction
The proposed act includes an explicit provision on the internationally established principle that the arbitration tribunal has jurisdiction to decide on its own jurisdiction to resolve a dispute (the ‘competence-competence’ principle). Although this principle has already been in force in the Finnish legal system, it will now be expressly provided for in the new act. According to this principle, the arbitration tribunal has jurisdiction to decide, as part of the arbitration proceedings, on questions concerning its own jurisdiction and the existence, validity and scope of the arbitration agreement.
A party may refer to a court for resolution a positive decision on jurisdiction made by the arbitral tribunal, i.e. a decision made during the arbitration proceedings in which the arbitral tribunal has considered itself to have jurisdiction. As a new option, a party may also refer to a court for resolution a negative decision on jurisdiction by the arbitral tribunal, i.e. a decision in which the arbitral tribunal has found that it lacks jurisdiction to resolve the dispute. The time limit for bringing an action is 30 days from the date of the arbitration tribunal's decision or award.
Addition of choice of law provisions
New provisions on determining the law applicable to arbitration agreements will be added to the Act. The law agreed upon by the parties will apply to the arbitration agreement. If the parties have not agreed on the applicable law, the law of the place of arbitration agreed upon by the parties shall apply in the first instance and the law applicable to the legal relationship shall apply in the second instance.
The Act will also include a provision on determining the law applicable to the merits of a dispute (substantive law) in situations where the parties have not agreed on it. In such cases, the arbitration court will apply the law or other legal guidelines of the state that it considers most appropriate in the matter.
Handling of challenges during arbitration proceedings
A decision by the arbitration court rejecting a party's claim that a member of the arbitral tribunal is disqualified may in future be referred to a court for review while the arbitration proceedings are still pending. Currently, a question of disqualification can only be referred to a court for review after the arbitration award has been issued in connection with a set aside action. The amendment will enable a final decision on the question of disqualification to be obtained during the arbitration proceedings, which will reduce the risk of the arbitration award being set aside at a later date on the grounds of disqualification.
Use of remote connections, electronic arbitration awards and the possibility of requesting an interpretation of the arbitration award
A provision on the use of remote connections will be added to the Act. The arbitration court may order that oral proceedings or hearings be conducted via remote connection. With the consent of the parties, the arbitration award may be issued in electronic form and signed electronically. The amendments reflect technological developments and modern practices.
A new provision will be added to the Act concerning the possibility of requesting an interpretation of an arbitration award from the arbitral tribunal. The request must be submitted within 30 days of receiving the arbitration award. The interpretation concerns a specific point or part of the arbitration award. A decision on the interpretation must be made within 30 days if the arbitration court considers the request to be justified.
Uniform provisions on the enforcement of domestic and foreign arbitral awards
Provisions concerning the recognition and enforcement of arbitration awards will be amended to correspond to the Model Law. In future, the same grounds for refusal of enforcement will apply to arbitration awards issued in Finland and in foreign countries.
However, the enforcement of an arbitration award issued in Finland cannot be refused if an action to set aside the award has been dismissed with legal effect or if the award has not been challenged within the prescribed time limit. In such cases, enforcement may only be refused on the grounds of non-arbitrability or incompatibility with the legal order.
Handling of arbitration cases will be concentrated in specific Finnish courts
Matters concerning arbitration proceedings are concentrated in the Helsinki Court of Appeal and the Länsi-Uusimaa District Court. The Helsinki Court of Appeal handles matters concerning the annulment and enforcement of arbitration awards, the disqualification of members of the arbitration tribunal, the jurisdiction of the arbitration tribunal and the enforcement of interim measures ordered by the arbitral tribunal. The District Court of Länsi-Uusimaa will handle matters concerning the establishment of arbitration and arbitration fees, among other things. Centralisation supports the development of expertise and the predictability of decision-making practices.
Multi-party and multi-contract proceedings
New provisions on multi-party and multi-contract proceedings will be included in the Act. Claims based on several agreements may be dealt with in the same arbitration proceedings if they are based on the same or factually related legal relationships and the same arbitration agreement or several arbitration agreements that do not contain conflicting provisions. A third party may be joined as a party to the arbitration proceedings, and arbitration proceedings may be combined under certain conditions. The provisions will streamline dispute resolution in situations where several agreements or parties are involved in the same business transaction.
Legal costs
Provisions concerning legal costs will be clarified. Independent provisions on the distribution of costs between the parties will be included in the Act, and the reference to the provisions of the Finnish Code of Judicial Procedure (fi: oikeudenkäymiskaari) will be removed. When considering the allocation of costs, the arbitration tribunal may take into account the outcome of the case, the parties' failure to cooperate and other circumstances. As a rule, the parties shall be jointly and severally liable for the arbitrator's fees, but there may be justified reasons for deviating from joint and several liability.
How will the changes affect the situation?
The new Arbitration Act is expected to strengthen Finland's position as a venue for international arbitration proceedings. Harmonising the Act with the Model Law will increase the confidence of the international business community in Finland's regulatory and operating environment and make the Act easier to understand for foreign users.
The economic impact will be mainly positive. The reform will make it easier for domestic companies to agree with their foreign contractual partners on Finland as the venue for arbitration, which may reduce dispute resolution costs in the long term. The expected increase in the number of international arbitration proceedings will strengthen the demand for domestic legal and other expert services.
From the point of view of legal protection, the reform is balanced. Despite the removal of the nullity rule, the court's ex post control remains adequate and aligned with the Model Law. Shortening the time limit for bringing an action for annulment to 60 days will streamline the appeal process and reduce legal uncertainty. The handling of challenges to impartiality during the arbitration proceedings will improve procedural safeguards. Centralisation at the Helsinki Court of Appeal and the District Court of Western Uusimaa supports the development of expertise and the predictability of decision-making practices.
Overall, the reform will create a modern arbitration procedure law in Finland that ensures the use of arbitration as a functional and effective means of dispute resolution in both domestic and international business.
