A Review of the FAI’s Year 2017

2017 was another active year for the FAI in terms of arbitration and mediation cases, activities, news and events.

Please see below a summary of the FAI Statistics for 2017 and a brief account of other areas of interest to FAI users.

FAI Cases

23% increase in the annual caseload: 2017 was the second most prolific year to date in the FAI’s history with 79 new cases filed, surpassed only in 2013 with 80 cases (the adoption of the newly revised FAI Arbitration Rules and FAI Expedited Rules (“FAI Rules”) in 2013 may have had an effect on the exceptionally high number of cases compared to previous years). The caseload (79 cases) represents an increase of 23% with respect to 2016.

Picture 1 below shows the number of cases filed with the FAI from 2007 through 2017.

 

Picture 1

8-month median duration of FAI arbitrations: FAI arbitrations are consistently efficient in terms of their duration. As can be seen in Picture 2 below, since 2013, the median duration of arbitrations conducted under the FAI Arbitration Rules has been eight months, which is below the nine-month time limit set for the rendering of a final award. Likewise, the median duration of cases conducted under the FAI Expedited Rules has been three months.

 

Picture 2

Most cases governed by the FAI Arbitration Rules: In 2017, most of the cases were administered under the FAI Arbitration Rules and FAI Expedited Rules (80% and 9%, respectively), while 10% were ad hoc arbitrations where the FAI was merely called upon by parties to nominate the arbitral tribunal. Furthermore, in 2017, the first mediation case under the 2016 FAI Mediation Rules was filed.

Consolidation requests are on the rise: Like in the previous year, an important number of FAI arbitrations involved complex disputes, including many multi-party and multi-contract proceedings. Since the adoption of the 2013 FAI Rules, the FAI has received eight requests for consolidation; six of these have been accepted and two denied. In two cases, all parties to all the arbitrations specifically agreed to and jointly requested consolidation. As for 2017, four applications for consolidation were filed, suggesting that the number of consolidation requests seems to be on the increase. You may read about the FAI Board’s first ruling on consolidation here (case commentary posted on the FAI website).

First request for joinder filed: In 2017, the FAI received the first request for joinder, which was denied.

Subject matter of disputes remains similar: Consistent with the last couple of years, also in 2017 most disputes arose from company acquisition/sales of business agreements (23%) and shareholders’ agreements (15%). Moreover, the manufacturing, ICT and construction sectors amounted in total for 53% of the cases filed in 2017 (20%, 19% and 14%, respectively). For a full overview, please see Pictures 4 and 5 below.

 

Picture 4


Picture 5

Increase in monetary value of disputes, while consistent share of international cases: In 2017, the monetary value of disputes increased compared to the previous year. The share of international cases (in which at least one of the parties is not Finnish) continues to be approximately one third of the total caseload (32% in 2017). For an overview of the nationality of the parties involved in FAI arbitrations and an FAI mediation last year, please see Picture 6 below.

 

Picture 6

Confirmation of arbitrators has proved to be a good innovation: One of the key innovations of the 2013 FAI Rules is the confirmation of arbitrators. The requirement of confirmation applies to all nominations and direct appointments of an arbitrator under the FAI Rules. The FAI Board may decline the confirmation only if the prospective arbitrator fails to fulfil the requirements of impartiality and independence, or if he or she is otherwise unsuitable to serve as arbitrator. In practice, the FAI will not interfere with the parties’ selection of arbitrators without weighty reasons.

Since the adoption of the FAI Rules, the FAI has made more than 300 decisions on confirmation. In 15 cases, one of the parties objected to confirmation. The FAI Board was called upon to decide the objection in 10 cases; in the other five instances, the arbitrator candidate voluntarily withdrew. Objections were dismissed in nine cases and sustained in one.

The confirmation of arbitrators has proven to be an effective method of tackling potential conflicts of interest at an early stage of the arbitration. It has also resulted in a decrease in the number of challenges to arbitrators already appointed to their office. To date, there have only been three challenges to an arbitrator since the adoption of the 2013 FAI Rules. Two challenges were denied on the merits, while one was denied without examining the merits as it was filed after the sole arbitrator had already rendered the final award.

29% of the arbitrators appointed by the FAI Board were female: During 2017, the FAI was consistent with its long tradition of equal appointment of male and female arbitrators and its commitment to gender diversity in arbitration—reaffirmed by the signing of the Equal Representation in Arbitration Pledge in 2016, a global initiative to promote gender diversity in arbitration.

During 2017, a total of 82 arbitrator appointments (by the FAI Board) and nominations (by the parties or co-arbitrators) were confirmed in FAI arbitrations and a total of two arbitrator nominations were made in ad hoc arbitrations. Further, one mediator appointed by the FAI Board was confirmed in a FAI mediation. Out of all of these appointments and nominations, 80% were of male arbitrators and 20% of female arbitrators/mediator.

A breakdown of these appointments shows that significantly more gender diversity was observed in appointments made directly by the FAI Board: While 29% of the arbitrators/mediators appointed by the FAI were female, parties nominated women as arbitrators only in 7% of the cases. In 2017, four arbitrators were nominated by party-nominated co-arbitrators, all of them male.

FAI’s Activities and News

– Following Christopher R. Seppälä’s (White & Case, Paris) resignation as FAI Board member as from the end of May 2017, the Finland Chamber of Commerce appointed Ms Galina Zukova (Bélot Malan & Associés, Paris) as new FAI Board member starting from 1 June 2017. Ms Zukova’s diverse work background adds to the Board valuable international experience and insight, which are increasingly important due to the growth in the share of FAI international cases.

– In May 2017, the FAI revised its tables regarding the determination of the FAI Administrative Fee and the arbitrators’ fees (Tables A and B of Appendix II to the FAI Rules and FAI Expedited Rules) to meet both the arbitrators’ and the parties’ justified expectations as to a reasonable level of fees and costs. The new tables replace the prior ones, which were introduced on 1 June 2013, in respect of all arbitrations commenced on or after 1 June 2017.

– The FAI continued to publish anonymous case commentaries on its website. These address landmark decisions made by both the FAI Board and arbitral tribunals in actual FAI cases. The case commentaries constitute a valuable source of information to all users of FAI arbitration.

– The FAI continued its practice of overseeing the quality of FAI arbitrations. All FAI awards are carefully reviewed, once rendered, by both the FAI Board and Secretariat. Likewise, customer feedback on the performance of arbitrators and the FAI’s case administration is carefully taken into consideration to improve the FAI’s services.

– To ensure efficiency, the FAI closely monitors the progress of all FAI arbitrations and the time limit for the rendering of a final award.

– The FAI continued to streamline and optimize its case administration procedures by undergoing a gradual digitalization of its operations.

– The FAI Rules are currently being translated into German. The German version of the rules will be available during the course of 2018.

– The FAI has embraced the legal design challenge to provide its customers with more user-friendly tools in the near future. You will hear more news about this at the forthcoming Helsinki International Arbitration Day 2018.

– In 2017, the FAI Newsletter kept FAI customers abreast of the FAI’s most import developments including e.g. its latest news, events, activities, articles and case commentaries. The FAI Newsletter will continue through 2018 to provide customers with the FAI’s latest updates.

You may read more about the FAI’s activities and news here.

FAI Events

– The Finnish Arbitration Academy was held for the fourth time between 6 February 2017 and 22 May 2017. So far, the Academy has provided 115 Finnish legal practitioners with the necessary tools to effectively participate in arbitrations as counsel or arbitrators in accordance with current best practices and standards. The next Academy will be held in autumn 2018.

– During 2017, the FAI visited companies, law firms and other organizations, and met with other arbitral institutions, with a view to sharing and exchanging thoughts on developments in international arbitration.

– The FAI also participated in many events, conferences and meetings on arbitration in Finland and abroad and held several successful events on arbitration and mediation in Helsinki during 2017. Among the latter events, a joint FAI/SCC morning seminar on some topical issues at both arbitration institutes; a morning seminar on the topic of mediation addressed by Finnish experts in this field; the traditional “Ladies in Arbitration” networking event; Helsinki International Arbitration Day 2017 (HIAD 2017) on the topic “Taking a Close Look at Today´s Arbitral Process and Who Pays for It”; and a joint FAI/DIS breakfast seminar on “Arbitration in Finland and Germany” focused on the commercial relationships between these two countries and on arbitration and dispute resolution in Finland and Germany.

– At the end of January 2018, the FAI held a Seminar and Discussion on the “Need for Revisions of the Finnish Arbitration Act”. This very well-attended seminar discussed the topic of whether and how the Finnish Arbitration Act of 1992 should be amended. Considering that the Arbitration Act has been in force virtually unchanged already more than 25 years, the FAI and the Finland Chamber of Commerce have proposed to the Ministry of Justice in Finland that the Act be updated and brought fully consistent with the UNCITRAL Model Law. The FAI hopes that the active engagement in the promotion of amendments to the Finnish Arbitration Act will lead to its revision in the near future.

You may read more about the FAI’s events here.

 

Looking Ahead

2018 has started with great activity, with eight cases filed with the FAI in January.

As in previous years, the FAI will be hosting, co-hosting and participating in different events during the current year. To mention a few upcoming events:

“Helsinki International Arbitration Day 2018” (HIAD 2018, www.hiad.fi) on the topic “Shaping the Future of International Arbitration” will be held in Helsinki on 24 May 2018.

“2018 Nordic Summit on Commercial Dispute Resolution in China” event will be held in Stockholm on 18 June 2018. The event is a collaboration between the Beijing Arbitration Commission, the SCC, the Danish Institute of Arbitration (DIA), the Arbitration and Dispute Resolution Institute of Oslo Chamber of Commerce and the FAI. More information will be available soon.

For more information about the FAI’s upcoming events and other activities, please visit our website arbitration.fi and follow us on LinkedIn and Twitter (@FAIarbitration).

 

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