The Finland Arbitration Institute, News 2019
The Finland Arbitration Institute, News 2019
The Finland Arbitration Institute (FAI) has some new and interesting prospects for year 2019 and beyond. But, firstly, if we look at the year 2018 it is apparent that despite the caseload decreasing from year 2017 the caseload, at 62 cases, still reached its average for the past decade. And the processing time of cases has been well in accordance with the FAI Arbitration Rules, as on average a case has been brought to a close in 9 months and expedited cases in 3 months respectively. As usual, the great majority of cases were solved under the FAI Arbitration Rules and only three percent of the cases were administered under FAI Expedited Rules. Ad hoc cases constituted 8 percent of the caseload. Interestingly, no mediation cases were filed in 2018.
The FAI states that in 2018 cases were more diverse than in previous years. The most common types of cases were disputes concerning shareholder agreements, company acquisitions and mergers as well as franchising and cooperation agreements. Professional, scientific and technical activities are pointed as the field with most cases, followed by construction industry. It is stated that around third of the cases are international in nature i.e. at least one party being other than Finnish nationality.
Arbitrators themselves are a nationally diverse group. Yet, there has been quite a steep decline in gender diversity as the share of female arbitrators halved from the previous year. Reasons to this kind of negative development are claimed to include conflict of interests as well as lack of candidates. It is stated however that the FAI Board appointed arbitrators have a larger share of females than when the parties make the nominations.
In addition, seven new internationally recognized members were appointed to the FAI Board, three of them Finnish and four from other countries. Two out of the seven new appointees are female.
Some other newsworthy items include the translation of 2013 FAI Arbitration Rules and FAI Expedited Rules into German, which brings the language versions to a total of six: English, Finnish, Swedish, Russian, Spanish and German.
The most important topic, however, is the Arbitration Act Reform, which was proposed by Finland Chamber of Commerce. The Ministry of Justice took in the proposal when the previous government was still in power and began the process of drafting a report on the subject matter before the actual drafting of the law may begin. As of writing of this the Ministry has appointed nominees to a working party that shall end its term in December 2020. The working party is to conduct research and compare arbitration law between European countries.
The reasons given by the Chamber of Commerce in support of the reform are numerous and business oriented. Firstly, it is stated that as the contractual relations have diversified since the current Act come to force and as such the current legislation is not up to date anymore to assess the new situations. It is also stated that Finland could become more internationally recognized and more arbitration processes could be conducted if the legislation is in compliance with other European countries.
Arbitration award checklist
A non-binding, non-exhaustive checklist has been made available, intended to aid in the arbitration process to achieve high-quality and enforceable awards. The checklist guidelines are to be used in compliance with the arbitration agreement, applicable laws and the arbitration institutional rules. The checklist is nevertheless rather comprehensive, including checks for general information about the parties involved as well as detailed checks for the proceedings such as description of all the stages in the proceeding and parties’ claims and their grounds. Extra detail is put in the section concerning costs and arbitration fees with examples given how they should be presented in the documentation. A clear and easy to comprehend description of the costs makes the process transparent.
A refreshed guide on FAI tax guidelines was published in March 2019. The guidelines stress the importance of arbitrators’ duty to assess the taxation matters of their fees and expenses. The Finnish VAT tax code in mostly in line with the EU VAT Directive. Arbitration is subjected to VAT should the activity constitute business activity in nature and if the revenue generated annually exceeds the threshold of €10,000. Whether an arbitrator’s activity constitutes business activity is left to them to assess. It must be noted that generally only occasional participation in arbitration proceedings may not make a person subjectible to VAT. The arbitrator must notify the FAI whether they charge VAT or not. Arbitration is considered an immaterial service in terms of VAT. As to international matters, as per Finnish VAT Code the VAT is charged in the country where the party has a fixed establishment or domicile if the party is located in the EU. Parties outside the EU are not subjected to VAT whether they conduct business or not.
Among the aforementioned guidelines the guide also includes examples of determining the VAT in cases with the parties having different places of establishment as well as guidelines concerning income tax and deductions as well as advance on costs (costs deposit).
Article was written by Lasse Jelekäinen
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