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   The 2020 Revision of the IBA Rules on the Taking of Evidence in International Arbitration: Addressing the New Normal

   The Rules on Taking of Evidence in International Arbitration may be specifically adopted by parties to be applied in conjunction with institutional, ad hoc or other rules or procedures governing international arbitrations. Even when parties have not specifically agreed on the adoption of the rules, they serve as a well-recognised soft-law instrument regarding evidentiary issues in international arbitration. On 15 February 2021, about a decade after the last update in 2010, the IBA published its revised rules  together with an updated commentary . The 2020 revision clarified a number of points to remove ambiguity on interpretation and aligned the rules with common procedural and evidentiary practices developed in international arbitration over the past decade. Further, it addressed the opportunities and challenges brought about by the increasing use of new technology in taking of evidence in international arbitration. Unless agreed otherwise, the revised 2020 rules automatically apply to all arbitrations in which the parties agree to apply the rules after 17 December 2020, i.e. the date of the formal adoption of the revised rules. This blog post gives readers an overview of the key updates to the rules. Promoting Remote Hearings To reflect the tools implemented and practices adopted by parties and arbitral tribunals both before and during the global COVID-19 pandemic, the 2020 revision introduced a new paragraph 2 to Article 8 (Evidentiary Hearing) explicitly providing for the possibility of conducting evidentiary hearings remotely. The new Article 8.2 provides that the arbitral tribunal may, at the request of a party or on its own motion, and after consultation with the parties, order that the evidentiary hearing be conducted as a remote hearing. This means, pursuant to the newly inserted definition of ‘remote hearing’, that the hearing may be conducted in whole, or in part, by way of videoconferencing or other communication technology. Further, the new article requires that the arbitral tribunal consult with parties with a view to establishing a remote hearing protocol to govern the conduct of the remote hearing. Such protocol may address, for example, technology to be used, placing documents before a witness, and measures to ensure witnesses are not improperly influenced.  Underlining Issues of Cybersecurity and Data Protection According to the ‘meet and consult’ approach adopted in paragraph 2 of Article 2 (Consultation on Evidentiary Issues), the arbitral tribunal needs to consult with the parties on evidentiary issues already at an early stage of proceedings. The 2020 revision added a new sub-paragraph (e) to the list, encouraging the arbitral tribunal to also consult with the parties on the ‘treatment of any issues of cybersecurity and data protection’. Such issues may concern compliance with data protection regulation, such as the GDPR, or cybersecurity in remote hearings. When considering these topical issues, the updated commentary on the rules suggests that parties seek further guidance from resources such as the draft ICCA-IBA Roadmap to Data Protection in International Arbitration and the ICCA-NYC BAR-CPR Protocol on Cybersecurity in International Arbitration . Introducing the Possibility to Exclude Illegally Obtained Evidence Paragraph 3 of Article 9 on the possibility to exclude illegally obtained evidence is one of the new provisions added to the rules. It gives the arbitral tribunal the power, at the request of a party or on its own motion, to exclude evidence obtained illegally. The specific circumstances under which illegally obtained evidence should be excluded was contemplated while drafting the rules, but no consensus was found. Thus, such determination is left to the discretion of arbitral tribunals. Such an open-ended approach is understandable considering the absence of uniform national laws and the different approaches taken by arbitral tribunals on the issues of whether illegality has occurred or whether evidence is admissible. However, it would be advisable for arbitral tribunals to opt for caution in the use of this discretion, as an overly robust stance might push a dissatisfied party to challenge the award on the grounds of violation of the party’s right to be heard or of public policy, and therefore, lead to complications at the enforcement stage. Clarifying Document Production Procedures The 2020 revision introduced some efficiency-oriented clarifications to the document production procedures provided in Article 3 (Documents) of the rules. A new sentence was inserted into Article 3.5, which provides that the arbitral tribunal may allow the party who has requested the production of documents to respond to an objection from the opposing party—a change that reflects a well-established practice of arbitral tribunals. Likewise, the deletion of the requirement in Article 3.7 that the arbitral tribunal confer with the parties after the requests and objections are submitted to the tribunal, reflects the prevailing practice of arbitral tribunals ruling on objections to document production without further consultation, i.e. without an additional round of comments from the parties. Further, the newly adjusted Articles 3.12(d) and (e) helpfully clarified that while translations shall be submitted together with documents that are in a language other than the language of the arbitration, this requirement does not apply to documents produced only to the counterparty in response to a request to produce. Allowing Revised or Additional Witness Statements or Expert Reports to be Submitted The 2020 revision added clarification to the already established provisions in paragraph 6(b) of Article 4 (Witnesses of Fact) and paragraph 3(b) of Article 5 (Party-appointed Experts). The adjusted articles provide that revised or additional witness statements or expert reports may also be submitted based on ‘new developments that could not have been addressed in a previous witness statement’ or expert report, respectively. Conclusion The 2020 revision of the rules is mostly intended to reflect prevailing best practices and to clarify selected provisions. Therefore, the revision cannot be characterised as ground-breaking but rather a modernisation of the well-functioning rules. However, by accommodating the rapid shift from physical to remote hearings brought about by the global COVID-19 pandemic, the 2020 revision will surely cater to the needs of commercial parties engaging in international arbitration now and in the future. Remote hearings may not only save costs and time but also the environment, which was encouragingly mentioned in the updated commentary of the rules as a consideration for the insertion of the new paragraph on remote hearings.    Ilona Karppinen & Onni Koivu

   Published: 20.4.2021

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   Trade Name Spring Cleaning

   The same use it or lose it principle applied to trademarks has been applicable to trade names even before the legislative amendment. It has been possible to lose trademarks and trade names if the mark or trade name had not been used and if no acceptable reason for the lack of use had been provided. Prior to the amendment now entering into force, the revocation of a trade name required that the matter be taken to court, which meant that the interest in the matter had to be high enough to justify the resources required by the proceedings. As of the start of May, a party suffering due to an unused trade name, or an unjustifiably extensive field of operation of a trade name, can request the revocation of a trade name in lighter and less costly proceedings at the PRH. The amendment also makes it possible to partially revoke a trade name. Trademark Registration often Blocked by ‘ General Fields of Operation ’ Unused trade names have become a problem particularly when registering new trademarks, but they can also prevent the registration of new trade names and auxiliary trade names that can be confused with them. Trade names and auxiliary trade names entered in the Trade Register block the registration of trademarks if the trade name is the same or similar as the trademark and if the field of operation of the trade name is the same or similar as the goods and/or service classification of the trademark. It is possible to register what is called a general field of operation for trade names, in other words ‘all legal business operations’, in which case the trade name registration covers all imaginable activities. A company may have actually only engaged in, for example, auto repair, but because of its registered general field of operation, its trade name could have blocked the registration of a trademark by a company operating in an entirely different field, such as game design. The services in question would be unlikely to be confused even if the trade names and trademarks would be similar or even identical. Only trade names that are genuinely being used deserve legal protection. Administrative Proceedings in the PRH or Trial in the Market Court ? Bringing an action for revocation of a trade name in the Market Court requires the payment of a court fee, which is currently EUR 2,050. The amount of the fee for a revocation claim in the PRH has not yet been confirmed, but it will presumably be in line with the official fee for trademark revocation and invalidation claims, which is EUR 400. PRH proceedings are, thus, more affordable. However, in PRH proceedings, both parties bear their own costs, and the party that wins the proceedings receives no compensation for the costs it incurs or for the official fee. In Market Court proceedings by contrast, the losing party is generally ordered to pay the winning party’s legal costs, which include the above EUR 2,050 court fee, if claimed. However, bringing a revocation action to court involves the same cost risk as any trial, so you should think twice before going to trial if you are in any doubt of whether or not the trade name has been used. There is unlikely to be a major difference in the duration of proceedings, at least if the trade name holder remains passive. Hopefully, PRH proceedings will be reasonably quick so that they become an attractive alternative to a trial. What Now? Like trademarks, trade names need to be cared for, and the related registered information needs to be kept up to date. Many people are surprised that the information submitted to the Trade Register is not automatically updated to the patent, design and trademark registries maintained by the PRH and vice versa. It is also worth turning a critical eye to your own IP portfolio. Do your registrations cover the goods and services relevant to your operations without gaps in protection but also without being needlessly broad, which will cause unnecessary costs and open you up to (partial) revocation claims? Now is a good time to review your trade name registrations. If a trade name has been in the register for over five years on 1 May 2021 and its defined field of operation is significantly wider that the actual activities of the trade name or auxiliary trade name (e.g. ‘all legal business operations’), now would be a good time to specify the field of operation. If you don’t do this yourself, you are handing the power to decide on such potential specification to the authorities. No matter how much you want to avoid the costs of making a change in advance, potential revocation proceedings will give rise to costs anyway if your company has an interest in maintaining the trade name even partially. This being the case, we recommend proactively defining your fields of operation and submitting the necessary specifications to the Trade Register yourself. Doing so is free under certain conditions until 30 April 2021. After that, an official fee will be charged for making a change. On the other side of the coin, if you have previously been unable to register a planned trademark or trade name due to an existing trade name in the Trade Register, now would be a good time to look into whether that trade name has been used or whether it could be revoked partially or entirely in the new PRH proceedings.

   Published: 14.4.2021

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   Electronic Signatures: Can We Finally Stop Sending PDFs?

   We’re sure everyone has circulated PDFs for signing by email at one time or another. Each signatory prints out the document, signs it, scans it to a new PDF file and sends it to the next signatory by email again. In our experience this approach is very common, for example, with documentation for large financing arrangements. Is it finally time to consign these PDF circulations to history and move on to fully electronic signatures? Electronic Signatures Already Mainstream Sale and purchase agreements and other transaction documents are already commonly signed electronically. In some circles, electronic signatures have become so commonplace that people may forget to make sure in advance that all of the parties involved accept the method.  Even though the parties to a transaction are legally free to agree on matters without traditional hand-written signatures, it is important to make sure the that the procedures and requirements of each party are taken into account. Using electronic signatures makes it possible to sign hundreds of pages of documentation through a single email link. The signatory is typically emailed a link that they use to send their electronic signature. The process can be designed to require strong identification. Electronic signatures save time, effort and money, particularly when the parties are not in the same place. The pandemic has increased pressure to adopt electronic signatures, as people have had to avoid face-to-face contact. Electronic Contracts Assumed Valid The legal status and legal effect of electronic signatures are based on both EU-level regulation and national legislation. The EU’s eIDAS Regulation (No 910/2014) provides that the legal effect of electronic signatures should not be denied on the grounds that the signature is electronic. The regulation is directly applicable law in Finland. The general act concerning contracts in Finland is the Contracts Act (in Finnish, laki varallisuusoikeudellisista oikeustoimista ). The Contracts Act provides that a contract does not have to be signed by the parties by hand to be valid, as long as the parties otherwise unanimously commit to the agreement and its contents. Unless there are statutory formal requirements for a contract, the parties are free to enter into the contract orally, in writing or electronically. Three Kinds of Electronic Signature It is worth keeping in mind that there are three levels of electronic signature. The highest level of verification is provided by a qualified electronic signature , which is legally binding without any further evidence. This highest level of verification is only provided in Finland by the Digital and Population Data Services Agency. The second highest level of authentication is an electronic signature verified by strong identification . Strong identification systems include, for example, Finnish online banking codes and mobile IDs. The third and weakest level of authentication is a signature verified by weak identification , which uses, for example, an email address or password. Security of Electronic Signatures There are a number of common doubts expressed concerning electronic signatures, for example, that they are unreliable, involve technical uncertainties or might be invalid in a dispute. To date, we have not come across any situations in which electronic signatures would later have been revealed to have been abused. Using strong identification raises the reliability of electronic signatures well above that of, for example, circulated PDFs. At least the identity of the signatory is authenticated more strongly than the that of the person sending the PDF attachment. Potential data security risks and attempts at tampering can be mitigated through technological means and additional settings, such as by using numerous auditing chains or identification requirements. When using the qualified electronic signature method, the signatory cannot deny having made their signature or allege that the document would have been altered later. Unless there are formal requirements for a contract set in law, the parties are free to enter into the contract orally, in writing or electronically. As a rule, an electronic signature is as binding in a dispute as an oral agreement or a hand-written signature. Based on the eIDAS Regulation, the authentication provided by the Digital and Population Data Services Agency has the same status as a hand-written signature and must be accepted in other EU member states as such. Is Now the Time? What about circulating PDFs by email then? No one will force you to stop, but PDFs are not without risks either—and the risks may be even larger than those of electronic signatures. With PDFs, the actual identity of the signatory is often not authenticated at all. If the signatory is off in the countryside, for example, how can you be sure that they were actually the one who signed the document? The idea that circulating scanned PDFs would be a more secure option than electronic signatures is nothing more than a myth based on ingrained habit.

   Published: 30.3.2021

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   Companies Hit by Pandemic Need Support

   I am confident that companies that had a healthy business and steady cash flow when the pandemic hit have good chances of surviving. The boards, management and employees of many companies have worked together to overcome these difficult circumstances. We can only hope that the finish line is now in sight. It also seems that creditors are not looking to push bankruptcy onto companies that could be rehabilitated despite currently being in dire straits. Companies should be proactive in contacting their owners and creditors to look for solutions together. Voluntary debt arrangements or corporate restructuring proceedings could help many companies weather this storm. This would not only help the distressed companies, but also ensure that the companies’ partners and creditors benefit more than they would in a bankruptcy. The courts should not set the threshold for access to restructuring proceedings too high but should trust in the ability of professional administrators to assess what companies are suitable for restructuring. It is also important that legislation not make things more difficult for companies undergoing restructuring. The EU’s recent actions seem inconsistent in this regard. At the same time as the Union is considering and enacting rehabilitation tools for companies, it is tightening solvency requirements for banks in ways that discourage banks from financing companies undergoing restructuring, or it is blocking the use of state aid or the refunding of energy tax to companies in financial difficulties. All this just as it would be vital to support struggling companies, not kick them while they are down. Unfortunately, there is no way that every company will survive this pandemic. What is fortunate though, is that attitudes in Finland have changed over the past decades, and bankruptcy is no longer seen as a disgrace, but as a part of entrepreneurship.

   Published: 22.3.2021

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   Brexit Leaves Recognition of Insolvency Proceedings in Unknown Territory

   With the end of the implementation period for Brexit on 31 December 2020, the EIR is now no longer in force between the UK and the EU member states, which leaves the recognition of insolvency proceedings in unknown territory. In this blog we will discuss what officeholders in both UK and Finland must consider when seeking recognition and assistance in other countries post-Brexit.  Recognition of Insolvency Proceedings Opened before 31 December 2020 As of 1 January 2021, the EIR continues to apply to insolvency proceedings in the UK in cases where the main proceedings were opened before the end of the implementation period on 31 December 2020. In these cases, there will be no changes, and insolvency proceedings commenced in the UK will be automatically recognised in the EU member states. Likewise, main proceedings that have been opened before 31 December 2020 in any EU member state will be automatically recognised in the UK. However, if proceedings have been opened after 1 January 2021, the situation is considerably less clear, and recognition must be sought through the national laws of the UK or the EU member state in question respectively. Recognition of Finnish Proceedings in the UK The UK has implemented the UNCITRAL Model Law on Cross-Border Insolvency with its Cross-Border Insolvency Regulations 2006. This provides a framework for recognition by the UK courts of proceedings started in another country and assistance to foreign representatives. A Finnish administrator seeking recognition of proceedings in the UK can bring a court application under the UK Cross-Border Insolvency Regulations 2006. This requires that the debtor’s centre of main interests or establishment is in Finland. It will be subject to greater court scrutiny than under the EIR and only provide a route to recognition for insolvency proceedings, not other insolvency-related judgments. English courts may also assist foreign officeholders under common law principles. In addition, insolvency related judgments can be recognised under common law if they meet the criteria set down in the UK Supreme Court decision on the enforceability of foreign judgments in the case of  Rubin v. Eurofinance S.A . [2012] UKSC 46. Recognition of UK Proceedings in Finland in Legal Limbo Finland does not recognise foreign insolvency proceedings unless specifically provided for in legislation. There currently is no national Finnish legislation that would provide for the recognition of insolvency proceedings outside the scope of the EIR or the Nordic Bankruptcy Convention, which Finland applies with Norway, Iceland and Denmark. This means that there is no legislative basis for recognising UK insolvency proceedings in Finland. The lack of a legal framework makes it difficult to draw solid legal conclusions from the current situation. It could be argued that a foreign insolvency officeholder’s status will be recognised in Finland if it cannot be regarded as being against the ordre public doctrine. This would mean that the status of officeholders from the UK should mainly be recognised. Consequently, a UK officeholder should be able to access the debtor’s assets situated in Finland if the debtor would have the same right. This would require that the officeholder is able to produce a reliable account of their status and authority and that there are no concurrent proceedings in Finland. The officeholder could also be a party in a claim against a third party who is said to be in possession of the debtor’s assets. However, as the situation currently stands, insolvency proceedings initiated in the UK do not have any automatic effect on enforcement proceedings directed at a British debtor’s assets in Finland. Therefore, a British officeholder’s status alone will not enable them to compete with creditors who are looking to enforce their claims from the assets the debtor has in Finland. Separate bankruptcy proceedings could also be initiated in Finland under the Finnish Bankruptcy Act (120/2004) if the debtor has an establishment here or if the debtor has funds in Finland that justify initiating separate proceedings. These proceedings would in many ways be similar to secondary proceedings under the EIR. In practice, the simplest way for a UK trustee to initiate separate proceedings in Finland is to get authorisation from a creditor to file for bankruptcy in Finland. The Way Forward As it stands, Finnish officeholders seem to have two main options: seeking assistance and recognition of their proceedings in UK courts under the UK Cross-Border Insolvency Regulations 2006 or under common law principles. UK officeholders seeking assistance or recognition in Finland are in an even more uncertain position. Finnish legislation does not grant any support for recognising proceedings outside the scope of the EIR or the Nordic Bankruptcy Convention. Nevertheless, the officeholder’s status will likely be recognised, enabling them to access the assets of the debtor or to file claims. UK proceedings will not, however, directly give protection against creditors seeking enforcement of their claims in Finland. Separate proceedings could also be opened in Finland if the criteria for opening those proceedings are met. We are currently in unknown territory, and attempts to find new practices will be overshadowed by a great deal of uncertainty from some time to come.

   Published: 22.3.2021

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   COVID Cash Crisis: What to Keep Your Eye On

   At the same time, companies that have been struggling with the pandemic for over a year already have to keep looking for ways to improve their liquidity. There is still no certainty over when we will be able to return to normal. Temporary Respite for Payment Still in Force The temporary amendment to the Bankruptcy Act removing creditors’ ability to petition for debtors to be declared bankrupt expired in January. The amendment concerned situations in which a debtor had not paid a creditor’s clear and due receivable within a week of receiving the creditor’s claim for payment under threat of bankruptcy proceedings. However, a second amendment was made to the Bankruptcy Act, which provides the debtor 30 days to pay the creditor’s clear and due receivable after receiving a claim for payment under threat of bankruptcy. This respite is valid until the end of September 2021. Number of Bankruptcies Likely to Rise According to Statistics Finland, 60.5% fewer bankruptcies were initiated this January than at the same time last year, and according to the latest statistics, 28.4% fewer bankruptcies were initiated in January–February than at the same time last year. It may be that companies have accumulated cash buffers that have helped them weather the pandemic, and that the predicted tsunami of bankruptcies will end up being little more than a ripple. However, it remains likely that the number of bankruptcies will increase sharply. Despite fears of an impending wave of bankruptcies, public-sector creditors, such as the Tax Authority and employment pension insurance companies, are saying that they do not have significantly more outstanding payments from their customers than last year. On the other hand, the travel, event and restaurant sectors have been in crisis for an entire year, while the difficulties faced by industrial subcontractors and construction business are probably just starting. It is clear that switching in and out of lockdowns depending on the status of the pandemic has already had, and will continue to have, a negative impact on the finances and cash reserves of many companies. Mitigating these impacts by deferring payments—be they taxes, public-sector payments or rents—will probably not solve the problems many companies are facing due to the pandemic. Moreover, few company owners are likely to be eager to earmark profits from years to come to pay off the costs of the pandemic, particularly if their company has limited or non-existent opportunities to minimise the pandemic’s impacts. Governments Must Take Action There is no sense in waiting for a wave of bankruptcies to hit. Governments should and must be proactive in avoiding a cash crisis. Companies should particularly make sure to register lost capital with the Trade Register and make sure that they are not directing payments only to individual creditors but are treating all their creditors equally. Even in a crisis, payments should not be channelled to just the loudest creditors. Companies facing a cash crisis also need to monitor their liquidity more regularly than normal. Our colleague Tero Tuomisto offered some good advice in a previous blog post. It is also important to prepare for various insolvency situations of contracting parties in advance, for example, through contractual arrangements or commercial means. Particularly in extensive subcontracting chains, the bankruptcy of one company will unavoidably cause problems for the other companies in the chain. It is better to be ready for disruptions of suppliers’ and customers’ performances in advance than to be caught off guard.

   Published: 22.3.2021

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   Contractual Risks Materialise as Disputes

   The number of disputes is on the rise again. The COVID-19 pandemic in particular has caused companies to encounter unforeseen and rapidly emerging risks. At the same time, Brexit, climate change, digitalisation, sustainability requirements and the general increase in regulation also breed conflict. While these are not all novel phenomena, their legal impacts remain uncertain. That said, it is also true that few contractual disputes are entirely unforeseen, as some level of risk-taking is inherent in commercial transactions. Risks can be minimised through careful contract drafting. The COVID-19 pandemic has moved the spotlight of force majeure clauses from more traditional topics, such as natural disasters, to infectious diseases. It has also highlighted how important it is to agree in as much detail as possible on what kinds of circumstances may release a party from performance under the agreement at hand. Other uncertainties, such as the legal impacts of Brexit can be mitigated by studying the legal instruments replacing the UK’s and EU’s regulations concerning conflict of laws and the recognition and enforcement of judgments. Disputes arising out of climate change and regulatory reforms will be resolved over the coming years in both national courts and international arbitration proceedings. In this context, it could be noted that Finland has a comprehensive portfolio of investment treaties. These treaties guarantee investors fair and equitable treatment by the signatory countries and could entitle investors to compensation, for example, if a country alters its regulatory framework in an unforeseeable and discriminatory manner. Companies will continue to be subject to an increasing number of changes and unforeseen circumstances. Most of the disputes arising from the risks and consequences of the COVID-19 pandemic still remain ahead of us.

   Published: 4.3.2021

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   Errors in Public Procurement Procedures – Is It Worth Appealing?

   Prior to filing an appeal, it is worth taking a hard look at whether the appeal has a realistic chance of success. Particular attention needs to be paid to what effect the error had on the bidder's position in the tender process and on the result of the process. This is essential, because the appeal will likely fail in the Market Court if the contracting authority's error had no material effect on the result of the procurement procedure or on the appellant’s position. In this post, we review two recent Market Court cases that illustrate this issue. Excluded Bidder Placed Fourth In case  MAO 502/20 , the contracting authority had excluded the appellant from the tender process, because the appellant had previously been an alliance partner of the contracting authority during the planning stage for city infrastructure. The contracting authority was of the opinion that, as an alliance partner, the appellant had received information on the subject of the procurement that gave it a competitive edge in the tender process. According to the appellant, the contracting authority could not set demands for the procurement directly through the general plans that were drafted for the area during the alliance partnership. The area that was the subject of the tender process was only part of the subject of the alliance partnership, and there were several upcoming competitive procedures for the area. The risk was that if the contracting authority's decision was to stand, the appellant could be excluded from future tender processes on similar grounds. In its decision, the Market Court stated that the appellant's bid was the most expensive of the four submitted bids. Thus, the appellant's bid could not be selected even if the appeal were upheld. The Market Court ruled that the appellant had no legal interest in the matter to obtain the Market Court's opinion on whether the contracting authority's actions were erroneous. The appeal was dismissed, and the Market Court refrained from ruling on the main issue. Erroneous Turnover Requirement Did Not Prevent Participation in Tender Process In case MAO 12/21 , a minimum turnover requirement had been set in a competitive tender process for a real estate software development project. According to the requirement, the bidders’ turnover for the previous three financial years had to be at least one million euros per year, with at least 90% of that turnover being from customers in the Finnish real estate industry. The appellant argued that the requirement discriminated bidders and was in violation of the principle of transparency and proportionality. In its decision, the Market Court found that the turnover requirement was discriminatory. It violated procurement regulations by favouring companies that were focused solely on the Finnish real estate industry. The requirement did not secure the opportunities of potential bidders to participate in the tender process. However, the Market Court found that the appellant and the winning bidder had both met the minimum turnover requirement. As such, the contracting authority's error had no effect on the appellant's opportunity to participate in or on its position in the procurement procedure. The error also did not lead to information on the public procurement not being freely available in public procurement notice channels. No claim had been made that the error would have affected the result of the procurement procedure, and the Market Court dismissed the appeal. Who Can Appeal a Tender Process? As a rule, only a party that participated in a public procurement procedure can appeal that procedure. In a direct award of contracts, it is enough for the appellant to show that they are a bidder operating in the relevant field of business. Case law has also confirmed that a company operating in the relevant field of business can appeal a call for tenders for being discriminatory even if it did not participate in the tender process. However, in this case the appeal should be filed before the end of the tender period. In decision KHO 2018:27 , the Supreme Administrative Court ruled on a situation in which the appellant appealed discriminatory requirements in a call for tenders during the tender process and filed a second appeal after the procurement decision. The later appeal was based, among other things, on the technical specifications and requirements of the call for tenders having been restrictive of competition and in violation of the principle of proportionality. The Supreme Administrative Court considered the appeal filed during the tender process, but not the one filed after the procurement decision. The Supreme Administrative Court found that the appellant was not a concerned party with respect to the latter appeal, because the appellant had not participated in the tender process and had not proven that it had attempted to participate. If you are a bidder and notice an error in a procurement procedure, the first step is to determine what the effect of the error is on your own position in the in the tender process or on the result of the process. The procurement team here at C&S will be happy to help you decide whether appealing a tender process is justified and what chances an appeal would have of succeeding.

   Published: 3.3.2021

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   Lessons of the Pandemic – Potential Changes of Circumstances Subject to More Precise Consideration

   It was already apparent at the time that questions concerning the interpretation of force majeure clauses, impediments to performance of contractual obligations in general and the adjustment of contracts would be in the spotlight. One year on, that is exactly what happened. We have assisted clients in numerous assignments dealing with the above questions, ultimately in trials and arbitrations. In this post, I share some of my observations based on the experiences of our Dispute Resolution service over the past year. I also go over what our experiences have shown should be taken into account in the future when assessing the impacts that the COVID-19 pandemic and other external changes in circumstances may have on contractual relationships. I discuss impediments to performance and force majeure clauses as well as the adjustment of contracts in light of the pandemic.  Contracts Assumed to be Binding Even in Changed Circumstances Finnish contract law is built on the principle of pacta sunt servanda , which translates as ‘agreements must be kept’. This principle means that the contracting parties must fulfil their contractual obligations. Ultimately, obligations can be enforced through execution based on a court judgment or arbitral award. Failing to fulfil a contractual obligation also generally leads to an obligation to compensate the damage caused to the other contracting party. The strong main rule is that the contents of an agreement—i.e. the rights and obligations set out in the contract—are determined at the time the contract is concluded and that the contract remains binding even in changed circumstances. Despite this main rule, the current pandemic or other changes in circumstances can, under certain exceptional conditions, affect the obligations of the contracting parties. Contracting Parties Obligated to Seek to Fulfil Their Contractual Obligations Regardless of Impediments  If there is an impediment to the performance of a contractual obligation that the party is unable to overcome, or if the performance of the agreement would require unreasonable sacrifices, the party may be released from its contractual obligation. Legally, these kinds of situations are called force majeure or hardship . The COVID-19 pandemic has brought up such questions, for example, in situations where quarantine orders or travel and other restrictions have disrupted supply and distribution chains. However, it is important to keep in mind that contracting parties must seek to fulfil their obligations despite impediments. A party can only be released from a contractual obligation if the performance of the contract is impossible or would require such great efforts or resources that it would be unreasonable compared to the benefit that the other party would receive from the performance. Furthermore, a contracting party must comply with the contract in other respects despite the impediment. In other words, the party must fulfil the contractual obligations that are not impacted by the impediment. There also must be a causal connection between the change in contracting party's circumstances and the impediment. For example, the pandemic can only release a party from its contractual obligations if the pandemic is the specific cause of the impediment. If the actual cause of the impediment is anything else—for example, the contracting party’s poor economic situation in general—the changed circumstance does not constitute an impediment to performance. It is foreseeable that in the future the COVID-19 pandemic may be invoked as grounds for impediments that actually have other causes. Precise Force Majeure Clauses Reduce Interpretation Problems Commercial contracts often include force majeure clauses that agree on impediments to performance and their implications. When a contract includes such a clause, the clause forms the point of departure for determining whether the parties to the contract can be released from their contractual obligations or liability for damages. The terms of commercial contracts to a great degree deal with the distribution of risks between the contracting parties. This being the case, it is important to assess what risks the contract involves as well as to agree which party bears which risk. This means that it is vital that force majeure clauses are as detailed as possible when it comes to what kinds of circumstances are considered impediments to performance and what kinds of effects impediments have on the obligations of the parties. If the clause is formulated ambiguously or only in general terms, it may be difficult to interpret in case of a dispute. It is also worth noting that the circumstances listed by force majeure clauses that release the parties from their obligations generally include natural disasters, war and terrorism, as well as industrial actions. In contrast, clauses drafted before the pandemic somewhat rarely take infectious diseases into account. If this is the case, disruptions to the performance of an agreement caused by the pandemic may not necessarily release a contracting party from their obligations. Adjusting Contracts Possible Only in Exceptional Circumstances An unforeseen change in circumstances that is beyond the control of the contracting parties may constitute grounds for adjusting the contract. In the context of the COVID-19 pandemic, the issue of adjustment has come up, for example, in situations where a party's turnover has reduced or the pandemic has caused the contract to be less profitable than originally expected. Tenants in commercial properties, in particular, have made claims for adjusting (i.e. lowering) agreed rents against landlords due to reduced customer traffic and government restrictions on, for example, the restaurant business. The principle of pacta sunt servanda means that a contract can only be adjusted in exceptional circumstances. The threshold for amending commercial contracts between undertakings is particularly high, because the contracting parties typically have equal expertise and are independent of one another and have been able to freely negotiate the terms of the agreement and consider whether to commit to them. On the other hand, an unforeseen change in external circumstances may be exactly the kind of exceptional event that would provide grounds for adjustment also between undertakings. However, even in this case, adjustment requires that the change in circumstances has had a significant impact on the balance of the contract and that applying the contract—as originally agreed—would be unreasonable taken as a whole. Just because a contract has become unprofitable for one of the parties is not sufficient grounds for adjustment as such. The chance of loss is always present in business. Thus, the taking of risks, which is inherent in all business operations, must be considered when assessing the possibility of adjusting a commercial contract. If a contracting party has taken a conscious risk on a factor when entering into the contract, it is generally not possible to adjust the contract based on such a factor. Conclusions As a rule, a contract is binding even in changed circumstances. The COVID-19 pandemic or any other change in circumstances in and of itself is not enough to release a party from its contracting obligations. Contracting parties must seek to perform the contract despite disruptions caused by changed circumstances. If disruptions to the performance of the contract or other changes occur that make the contract less beneficial than originally expected, careful consideration has to be given to what the actual underlying causes are. If the actual causes are the pandemic or some other unforeseen change in circumstances, there may be grounds to invoke an impediment to performance or even to demand adjustment of the contract. However, the legal position of the contracting parties must be assessed on a case-by-case basis, and the particular characteristics of the circumstances and the contractual relationship must be taken into account. A careful examination and legal assessment of each case is important. This  ensures that a company does not breach the contract when it is the party encountering disruptions. This also makes it possible for a company to determine whether its contracting partner invoking an impediment to performance or claiming for adjustment may have grounds for its demands.    It would also be advisable to seek to take the impacts and legal implications of the COVID-19 pandemic and potential future changes in circumstances into account when negotiating a contract. The more specific the agreement on these matters, the better. This will help prevent disputes that are open to interpretation from arising between the contracting parties. I believe that these lessons will continue to be valuable even after the pandemic has been consigned to history. Many global phenomena, such as the globalisation of business, the increasing complexity of contractual arrangements, the increase in legal regulation, and climate change, point towards companies facing an increasing number of changed circumstances and unforeseen events in the future.

   Published: 2.3.2021

10. Post

    Applying English Law and Enforcing Judgments In A Post-Brexit World

    In this blog post, we look at which legal instruments could replace the Rome I Regulation, which provides for conflict of laws, and the Brussels I Regulation, which provides for the recognition and enforcement of judgments, in the new relationship between the UK and the EU member states. We also provide some tips to keep in mind when agreeing on governing law and dispute resolution clauses post-Brexit.  No Significant Brexit Impacts on Conflict of Laws – Yet The Rome I Regulation determines the law applicable to contracts in EU member states. The courts in member states are obligated to comply with the conflict of laws rules of the regulation, which means that the applicable law is determined the same way regardless of which member state the matter is being decided in. The Rome I Regulation assumes that the parties to a commercial contract can freely agree on what law they want to apply to their contract. The conflict of laws rules of the Rome I Regulation do not limit the applicable laws to just those of EU member states.  For example, Finnish courts continue to apply the same conflict of laws rules despite Brexit, and these rules could also lead to the application of English law. Thus, Brexit has not brought any significant changes to conflict of laws yet. However, the end of the UK's membership in the EU does mean that the Rome I Regulation's conflict of laws rules are no longer directly applicable in the UK. At the moment, the content of the UK's national conflict of laws rules is identical to those of the Rome I Regulation. These rules could lead to, for example, Finnish law being applied in UK courts under the same grounds as before. However, the UK no longer has any obstacles to changing its national conflict of laws rules in the future. Major Changes to Recognition and Enforcement of Judgments In contrast, Brexit has brough major changes to the recognition and enforcement of judgments issued in the UK in EU member states. Companies should take this into account when negotiating dispute resolution clauses with UK companies. The recognition of foreign judgments requires a separate legal basis in Finland. Judgments issued in UK courts while it was still a member of the EU were subject to the Brussels I Regulation, which meant that they were extensively enforceable in Finland without separate court proceedings (exequatur). However, the trade and cooperation agreement between the EU and the UK, which entered into force on 1 January 2021, contains no provisions corresponding to or replacing Brussels I with respect to the recognition and enforcement of judgments. UK Planning to Replace Brussels I with Lugano Convention The UK is planning to fill the gap left by the Brussels I Regulation by acceding to the Lugano Convention on jurisdiction and the enforcement of judgments in civil and commercial matters. The Lugano Convention has been signed by the member states of the EU and EFTA, and it is substantially similar to the Brussels I Regulation. The UK has applied for accession to the Lugano Convention. Acceding to the convention requires the approval of all of the other signatories, and the EU's approval is currently uncertain. If the UK's accession to the Lugano Convention is approved, the enforcement of a judgment based on it in Finland will require exequatur, i.e. an enforcement order issued by a district court. Post-Brexit Enforcement also Possible under Narrower Hague Convention In 2020, the UK acceded to the Hague Convention on Choice of Court Agreements, which is narrower in scope and substance. The Hague Convention is an instrument of the Hague Conference on Private International Law and is currently in force in the EU member states, the UK, Mexico, Singapore and Montenegro. Based on the Hague Convention, Finland will recognise and enforce judgments issued in the UK in which the jurisdiction of the court is based on an exclusive, written choice of court agreement. The enforcement of a judgment in Finland based on the Hague Convention requires an enforcement order from a district court. After Brexit, companies need to consider carefully whether to select a UK court as the competent court and only do so after ensuring that any judgment issued by such court will be enforceable and recognisable. Tips on Negotiating the Governing Law and Competent Court Post-Brexit Courts in both the EU and the UK continue to respect agreements on the governing law applicable to contractual obligations as they did before Brexit. The choice of law rules that apply in the absence of an agreement also still lead to the application of the law of the same jurisdiction as before Brexit. However, it is important to keep an eye out for any changes that may be made to national legislation in the UK. The clearest solution with respect to the recognition and enforcement of a judgment is to agree to resolve disputes in arbitration. Finnish courts continue recognise and enforce arbitral awards issued in the UK under the same conditions as before Brexit. When dealing with British companies after Brexit, it is important to expressly agree on the competent court. If a UK court is selected to settle disputes, we recommend ensuring that the wording of the choice of court agreement fulfils the requirements of the Hague Convention and falls within its scope.

    Published: 1.3.2021