Arbitration is a contractual way of resolving disputes, where the parties of an agreement have agreed to settle their disputes outside the general courts. Arbitration is customarily used for resolving disputes in business life and several commercial agreements (e.g. acquisition, shareholder, B2B trade, distribution and IT agreements) have a clause concerning the use of arbitration in situations where the parties have a disagreement regarding the interpretation or fulfilment of the agreement. The Finnish Chambers of Commerce published new Arbitration Rules 1.6.2013 and they have proved to be working well. It is recommendable to use arbitration conducted in accordance with the Arbitration Rules of the Finland Chamber of Commerce (FAI Arbitration Rules) but if the parties wish not to use it, it is also possible to agree on, for example, arbitration conducted in accordance with the Finnish Arbitration Act.

Why arbitration?

Rapidity: Arbitration is faster than proceedings in the general courts. In arbitration conducted in accordance with the FAI Arbitration Rules, the arbitral tribunal must make the final award no later than nine months. The award is final without a possibility to appeal, which results in obtaining a decision remarkably faster than from the general courts: proceedings in a district court usually take about a year, and proceedings in a court of appeal another year. In more complicated cases proceedings might take significantly longer. In addition, under certain conditions, it is possible that the proceedings continue in the Supreme Court.

Flexibility: In arbitration the parties can agree on procedural matters. The parties also have a possibility to influence the nomination of the arbitrator or arbitrators. If the monetary value of the dispute is less than 2 million, it is customary that the Finnish Chamber of Commerce nominates only one arbitrator. Parties that are unambiguous can have an expert they trust to settle the dispute. In the case of three arbitrators, both parties have the right to nominate one arbitrator and they can together agree on the presiding arbitrator of the arbitral tribunal.

Expertise: When nominating the arbitrators, it is possible to take into account the characteristics of the dispute and the expertise and experience that the arbitrators should have in order to resolve the dispute. If the nomination is carried out by the Finnish Chamber of Commerce, special attention is paid to the expertise of the arbitrator.

Confidentiality: In arbitration conducted in accordance with the FAI Arbitration Rules, the whole process, including the final award, is confidential. It is also customary that in arbitration conducted in accordance with the Finnish Arbitration Act, the parties agree that the proceedings and award are confidential. Instead, proceedings and judgements in the general courts are generally public.

Finality of the award and enforceability also internationally: An arbitral award is directly enforceable, and it cannot be appealed. In addition, in matters with an international dimension, an award is generally easier to enforce than a judgement given by a general court. Due to the New York Convention, arbitral awards are recognized and enforced in most of the countries.

Costs: It is a common misbelief that arbitration is unreasonably expensive. Instead, it can be stated that arbitration is more cost-effective than dispute resolution in the general courts, since the dispute won’t go through several instances. The Arbitration Institute of the Finland Chamber of Commerce determines the fees of the arbitrators in arbitrations conducted in accordance with the FAI Arbitration Rules and hence, the costs are foreseeable. The Institute determines the fees in accordance with a fee table, where the fee is tied to the monetary value of the dispute.

Below are two examples of the arbitrators’ fees (There is a calculator on the Institute’s website, to which the value of the dispute can be inserted in order to calculate the costs: https://arbitration.fi/arbitration/costs-of-arbitration/calculator-2017/ )

Generally, the arbitrator’s fee is determined based on the median value, unless there are special reasons to deviate from it. In addition to the aforementioned fees, there are some additional costs due to the both parties’ legal expenses. However, the legal expenses are generally lower than legal expenses in general courts, since in arbitration advocacy takes place only once.

Contractual clauses: The following contractual clauses can be used in agreements if the parties intend to agree on arbitration in accordance with the FAI Arbitration Rules. It is recommendable to propose such an arbitration as the first choice also in international agreements:

Any dispute, controversy or claim arising out of or relating to this contract, or the breach, termination or validity thereof, shall be finally settled by arbitration in accordance with the Arbitration Rules of the Finland Chamber of Commerce. The number of arbitrators shall be one. The seat of arbitration shall be Tampere, Finland and the language of the arbitration shall be English.

Any dispute, controversy or claim arising out of or relating to this contract, or the breach, termination or validity thereof, shall be finally settled by arbitration in accordance with the Arbitration Rules of the Finland Chamber of Commerce. The number of arbitrators shall be one. The seat of arbitration shall be Tampere, Finland and the language of the arbitration shall be English.

Provided that a foreign contracting party does not agree on the use of Finnish arbitration, the next possibility is to propose arbitration in accordance with the Arbitration Rules of Stockholm Chamber of Commerce (SCC). The costs of arbitration in Stockholm are a bit higher than in Finland but it is still rather inexpensive compared to ICC arbitration. A model clause for arbitration in accordance with the SCC Rules is as follows:

Any dispute, controversy or claim arising out of or in connection with this contract, or the breach, termination or invalidity thereof, shall be finally settled by arbitration in accordance with the Arbitration Rules of the Arbitration Institute of the Stockholm Chamber of Commerce. The arbitral tribunal shall be composed a sole arbitrator. The seat of Arbitration shall be Stockholm and the language to be used in the arbitral proceedings shall be English.

To summarize, it can be stated that arbitration is definitely the most recommendable way to resolve commercial disputes due to, inter alia, the confidentiality and rapidity of the proceedings. Hence, also this matter should be taken into account in negotiations for an agreement, especially as regards international agreements.