Arbitration
Arbitration is an alternative means of dispute resolution in civil matters to litigation in the general courts (District Court, Court of Appeal and Supreme Court). The use of arbitration must be agreed in writing between the parties. The agreement may be reached either before or after the dispute arises. In most cases, the agreement is implemented through an arbitration clause in the parties' main agreement.
Advantages of arbitration
Arbitration has several advantages over court proceedings. These include the speed and confidentiality of the arbitration, the expertise of the arbitrators and the finality of the arbitral award.
Speed: Due to court overload, litigation in the ordinary courts today takes years, which is perceived as harmful and burdensome, especially for business. In arbitration, a final judgment is usually obtained within about a year of the commencement of the proceedings, and in many cases even faster.
Confidentiality: in arbitration proceedings, the commencement of the proceedings, the proceedings, the parties' information and the arbitral award are not public, and the information remains only between the parties to the arbitration. In Finland, the law assumes that proceedings before the general courts are public, and that the material dealt with in them is available to the public. The general courts may only order the proceedings to be kept secret, in whole or in part, on specific grounds provided by the law.
Expertise: arbitrators can be selected from among those with specific expertise on the subject matter of the dispute.
Finality: the arbitration award is final and cannot be appealed. This significantly speeds up the resolution of disputes by eliminating the need for appeals. A trial in the ordinary courts and possible appeals can, due to the resource constraints of the judiciary, prolong the process by several years.
The steps in the arbitration procedure
Arbitration proceedings are initiated either by a notice under the Finnish Arbitration Act (967/1992) or, alternatively, by an application to commence arbitration, if the arbitration is organised by an arbitration institution such as the Arbitration Instution of the Finland Chamber of Commerce. Thereafter, the stages of the arbitration will be flexible, as agreed by the parties to the dispute. The timetable and steps of the arbitration will be agreed at case management conferences with the parties and the arbitrators, which will result in a binding timetable for the proceedings.
Arbitration proceedings usually end within about one year of the filing of the notice or request for arbitration.
Costs of arbitration
The costs of arbitration are often thought to be significantly higher than the costs of litigation. However, when comparing the procedures, it is important to note that litigation often takes several years due to court backlogs and resource constraints. Litigation that lasts for years can ultimately lead to substantial legal costs. Arbitration proceedings are handled quickly and the final arbitral award in the proceedings ensures that the proceedings do not usually drag on for more than a year or so. This often results in lower attorney costs, compared to years long litigation.
However, when choosing a means of dispute resolution, it is good to keep in mind the specific interest of the dispute. Disputes with small interests may be better dealt with in the ordinary courts rather than in arbitration.
We are happy to provide more information on arbitration and its use in dispute resolution.
Niina Palaja
Attorney at Law, Partner
+358 40 706 1673
niina.palaja@prlaw.fi