Report from the Seminar and Discussion on the “Need for Revisions of the Finnish Arbitration Act”

On 25 January 2018, the Arbitration Institute of the Finland Chamber of Commerce (FAI) held a morning seminar and discussion on the “Need for Revisions of the Finnish Arbitration Act”. The event, held at Helsinki’s Savoy restaurant, focused on key problems arising from the 1992 Finnish Arbitration Act and the need to revise the Act in its entirety. See the invitation for more information here.

Key speakers of the event included Mika Savola, Chair of the FAI Board; Christopher R. Seppälä, Partner Of Counsel at White & Case’s Paris Office and former FAI Board Member; Klaus Peter Berger, Professor at the University of Cologne, and Board Member and Past President of the German Institution of Arbitration (DIS); Sigvard Jarvin, Avocat and arbitrator (formerly General Counsel of the ICC International Court of Arbitration); Corinne Montineri, UNCITRAL Legal Officer; and Tuula Linna, Professor at the University of Helsinki.

 

Background

The current Finnish Arbitration Act (967/1992; the “Act”) has been in force almost unchanged for over 25 years, since 1992. It is considered outdated and in need of reform, as it deviates in important aspects from today’s international best standards reflected in the UNCITRAL Model Law on International Commercial Arbitration (1985; with amendments adopted in 2006; “UNCITRAL Model Law”). The FAI and the Finland Chamber of Commerce have proposed to the Finnish Ministry of Justice that the Act be updated and brought fully consistent with the UNCITRAL Model Law; something that would further increase Finland’s attractiveness as a venue for international arbitrations.

 

 

The seminar

The seminar was well attended by an audience of approximately 80 legal practitioners of different backgrounds including lawyers, academics and judges.

 

After an invigorating networking breakfast, the event was kicked off by a welcome message from Heidi Merikalla-Teir, the FAI’s Secretary General, followed by an introduction to the topic delivered by Mika Savola.

 

According to Savola, the Act is largely outdated and needs to be fully revised. Savola explained how the Act causes problems not only in purely domestic arbitration proceedings but also the Act discourages foreign parties and counsel from arbitrating in Finland as it deviates on many crucial points from the best international norms and practices as set forth in the UNCITRAL Model Law. In his presentation, Savola focused on the key problems with the exiting provisions in the Act. He also outlined some missing components in the Act. Savola concluded that a major reform is needed and proposed that the best and easiest solution would be that Finland adopt the UNCITRAL Model Law without any meaningful derogations from it.

 

The following speaker, Christopher R. Seppälä, put forward his arguments on “Why Finland should adopt the UNCITRAL Model Law on International Commercial Arbitration”. According to Seppälä, to start with, two questions should be considered when discussing the importance of revising the Finnish Arbitration Act: 1) Why should Finland want to be a popular place for international arbitration? and 2) Is Finland a popular place for international arbitrations?

 

Seppälä answered the first question by stating that adoption of the UNCITRAL Model Law would promote the image of Finland as an advanced and neutral country that respects the rule of law and supports international commerce by the international arbitration of business disputes. He highlighted the diverse benefits of becoming a popular seat for international arbitration. Seppälä then addressed the second question and explained that, in today’s reality, international arbitral institutions and foreign parties are unlikely to fix Finland as a place of arbitration. Seppälä illustrated this by presenting ICC statistics on Finnish presence in ICC arbitrations. He showed that, during 2005-2016, there was sustained presence of Finnish parties in ICC arbitrations; however, in this same period, the ICC Court never fixed an arbitral seat in Finland, but in other Nordic countries (Sweden: 12 seats, Denmark: ten seats and Norway: one seat). Seppälä explained that foreign parties and their counsel do not have the time nor the interest to study a local arbitration law, but need assurance that Finland satisfies the latest international standards. This is not the case now, as Finland is not recognised by UNCITRAL as an Model Law country. For this reason, to become an attractive place for international arbitrations, the first step is to adopt the UNCITRAL Model Law as it is—any departures from the Model Law are viewed with suspicion by the international community.

 

Seppälä then explored the issue of how a country becomes a popular place for international arbitrations. He mentioned five criteria applied by parties and arbitral institutions in selecting a place for arbitration: 1) ratification of the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards; 2) a modern, liberal and internationally well-recognised or accepted arbitration law; 3) a corruption-free judiciary supportive of arbitration and willing to recognize and enforce arbitration awards (as confirmed by case law); 4) availability of a well-established and efficient arbitral institution; and 5) a geographically convenient location with good facilities for hearings, technical support, accommodation, transportation and telecommunications. He added other helpful factors such as a reputation for political neutrality and an active promotion internationally by the local arbitration community.

 

Seppälä emphasised that one of the main reasons 78 states and over 100 jurisdictions have adopted the UNCITRAL Model Law is because it represents international best practices, which, in turn, help them attract international arbitrations. Seppälä stated that, in this sense, countries that have not adopted the Model Law are not good examples for Finland, as Finland’s situation cannot be compared to theirs. Seppälä went further and suggested that Finland should ideally not just adopt the Model Law as it is, but also consider additional measures to make Finland even more attractive for international arbitrations. Having said all the above, Seppälä finished his presentation assuring that Finland satisfies most—if not all—of the other criteria for becoming a good place for international arbitrations.

 

 

Next, the floor was given to Klaus Peter Berger, who gave a presentation on the “Experiences of Adopting the UNCITRAL Model Law on International Commercial Arbitration in Germany”. Berger started his presentation telling the audience that Germany is celebrating 20 years of the adoption of the UNCITRAL Model Law this year. He explained the German experience towards the adoption of the Model Law, a process starting as early as 1877 and going through different stages including the small reform of 1986, the major reform of 1998, and the fact that German case law, although very liberal, was only available in German language, which caused problems in the international field. Berger addressed the adoption process in Germany by answering the questions “Why did we do it?”, “How did we do it?” and “What were the consequences of adopting the UNCITRAL Model Law?”. Berger arrived to the conclusion that the lesson to be learnt from Germany’s experience is that Finland needs a “Magic Marketing Mix”, i.e., a good statute (Model Law), good courts and institutions (like the FAI) and a good marketing campaign to achieve its goals and get the best benefits from revising the Act.

 

Afterwards, it was Sigvard Jarvin’s turn with the presentation of the topic “The Swedish example does not necessarily apply to Finland in order for Finland to become an attractive place for international arbitrations; economic importance of a future service sector.” Jarvin gave an interesting overview of the historical junctures leading Sweden to its current position in the international arbitration scene. He highlighted that Sweden gained international notoriety through high profile cases submitted to Stockholm since 1977 under the so-called “Optional Clause for Use in Contracts in USA-USSR Trade”. Since then, Sweden has, as a small country, well succeeded in making a place for itself in the international arbitration arena without adopting the UNCITRAL Model Law. According to Jarvin, Finland’s situation is different compared to Sweden’s. He stressed that, in today’s context, Finland must deal with a tougher situation and should not follow the Swedish model. Nowadays, there is fierce competition among countries to attract arbitral business to their territories. Further, Finland’s arbitration act and practice, as well as its arbitration-friendliness, are hardly known beyond its borders. Nevertheless, Jarvin asserted confidently that “nothing is impossible”, since other cities and countries have gone or are going through the process from unknown to well-known places of arbitration. Jarvin described as “interesting and encouraging” that leaders of the Finnish arbitration community feel the need for a change. He said that it might be due to a new generation—more professional and technical—taking over in Finland, just as in other well-known arbitration places around the world. Jarvin concluded that any successful arbitration seat must curtail against the development of a culture in which whom you know is more important than what you know. Foreign practitioners (arbitrators and counsel) should not feel at a disadvantage in a community where all local practitioners (arbitrators and counsel) know each other—a typical risk in any small and homogenous community where informal contacts are common. Jarvin stated that Finland would gain a lot, and not lose much, if it adopted the UNICTRAL Model Law, which is an internationally known arbitral system giving immediate confidence to foreign parties.

 

Suggestions for a reform of the Finnish Arbitration Act came also from Corinne Montineri who discussed the topic the “Finnish Arbitration Act in Light of the Model Law”. Montineri stated that, in general, Finland has all the possibilities to become a Model Law jurisdiction when looking at Finland’s high rates in education, well-functioning jurisdiction and the criteria used by foreign countries when deciding the suitable country for arbitrations. Montineri asserted that most importantly modernisation in Finland needs to be made also in the light of the UNCITRAL Model Law in order to succeed in the field of international arbitration. She further explained that in the light of the Model Law the main purpose is to reduce discrepancy between domestic procedural laws affecting international commercial arbitration and to create a solid domestic arbitration regime. Montineri also presented some perceived advantages of the Model Law that have been stated by renowned practitioners, academics and international institutions.

 

The last speaker, Tuula Linna, presented the topic “The Importance of Reforming the Finnish Arbitration Act and the Next Steps”. Linna concurred with previous speakers that the Finnish Arbitration Act needs to be reformed to make Finland a popular place for international commercial arbitration in the future. She suggested that Finland should perhaps also think about other revisions, e.g. revising the courts so that the handling of setting aside proceedings be centralised in the Helsinki Court of Appeal.

 

Heidi Merikalla-Teir closed the morning seminar by thanking the panelists for their valuable insights and the attendees for their active participation in the discussion of this current and relevant topic for Finland.

 

See all the presentations of the speakers following the links below.

1. Mika Savola’s Presentation

2. Christopher R Seppälä’s Presentation

3. Klaus Peter Berger’s Presentation

4. Sigvard Jarvin’s Presentation

5. Corinne Montineri’s Presentation

6. Tuula Linna’s Presentation

 

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