The project to reform the Arbitration Act is moving forward

Background to the reform project

The Ministry of Justice has launched a project to reform the Arbitration Act in accordance with the Government Programme, with the aim of promoting the competitiveness of arbitration in Finland.

The Finnish Arbitration Act (967/1992, as amended) applies to arbitration proceedings in Finland, regardless of the home state of the parties, and to the enforcement of arbitral awards rendered abroad. The need to reform the Arbitration Act has been discussed for a long time among the arbitration practitioners, as changes in the regulatory environment and general developments in society and dispute resolution have created strong pressure for such a reform.

The current Arbitration Act entered into force in 1992 and has not been substantially amended since that. The Act has followed the original Model Law adopted by the United Nations Commission on International Trade Law (UNCITRAL) in outline.

The Model Law on International Commercial Arbitration, adopted by UNCITRAL in 1985, has been partially reformed in 2006. The reform of the Model Law has reflected international developments and generally accepted practices in international arbitration, with amendments relating to, inter alia, the formal requirement for the arbitration agreement and interim measures. There has been no such reform of the Finnish Arbitration Act, which has deviated from the Model Law from the outset. The Arbitration Act has generally been considered outdated.

Now the project to reform the Arbitration Act is finally moving forward.

How will the Act be reformed and why is it important?

The Ministry of Justice has examined the need to reform the Arbitration Act in its assessment report issued in the summer of 2024, on which the key stakeholders have given their opinions. The Finnish Bar Association has also issued an opinion on the report, in the preparation of which our Counsel Helena Kalmanlehto, a member of the Bar Association’s expert group, has participated.

The main need for reform assessed by the Ministry concerns the arbitration agreement, the composition and jurisdiction of the arbitral tribunal, the precautionary and interim measures, the conduct of the arbitral proceedings, the arbitral award, and the legal costs.

The report has considered, inter alia, the following reform needs:

waiving the private nature of the dispute as a condition for arbitrability;

waiving the requirement of a written form of the arbitration agreement;

approximating the rules on the challenge of arbitrators to the Model Law;

supplementing the law with the power of the arbitral tribunal to decide on its own jurisdiction;

recording the separability of the arbitration agreement and the main contract;

supplementing the law with the power of the arbitral tribunal to issue interim measures;

approximating the procedural rules with the Model Law;

mitigating the conditions for issuing an interim award from the requirement of unanimity and setting of a time limit for issuing an additional award;

waiving the right to bring an action for invalidation without any time limit and reducing the time limit for bringing an action for annulment and making it subject to a single instance only;

clarifying the provisions on the recognition and enforcement of arbitral awards; and

introducing provisions on the liability for legal costs.

The consultation has also identified other important reform needs, such as making the terminology of the law gender-neutral. For example, the Arbitration Institute of the Finland Chamber of Commerce (FAI) has adopted gender-neutral terminology in its arbitration rules and this terminology is already well established in the Finnish arbitration community. In addition, it has been suggested that the law should provide for multi-party proceedings and specify the law applicable to an arbitration agreement in cases where the parties have not agreed on the applicable law.

The main purpose of the legislative reform is to modernise Finnish legislation on arbitration to correspond to the best international practices. Almost all stakeholder opinions on the need for reform of the Arbitration Act have expressed support or neutrality for harmonising the Arbitration Act with the UNCITRAL Model Law or at least approximating it with the Model Law.

Reforming the Finnish Arbitration Act on the basis of the UNCITRAL Model Law and incorporating other internationally and generally accepted practices into the Act would mean that Finnish arbitration legislation would meet the needs of modern society, business, and dispute resolution better than before. It would also increase Finland’s attractiveness as a seat of international arbitration among the international community.

Progress of the reform project

The needs for reform of the Arbitration Act under the Government Programme have now been identified and the Ministry of Justice intends to set up a working group in the course of autumn 2024 to prepare legislative amendments on the basis of the assessment.

We are actively monitoring the progress of the project and are prepared to advise our clients on all arbitration-related issues.

For more information please contact

Team