The need for updating and reforming the YSE 1998 General Conditions for Building Contracts has been discussed for quite some time in the construction industry. These conditions, which are over 20 years old, have mostly served their purpose for operators in various fields by allowing contracting parties to focus on project-specific terms and conditions during the project preparation phase rather than on the basics. Nevertheless, now is a good time to update the standard conditions now that the construction industry is undergoing significant changes due to the green transition, digitalisation and the reform of the Finnish Building Act.
23.5.2024
Changes in the construction industry provide good grounds for updating the General Conditions for Building Contracts
Jaakko Honkala & Jerker Pitkänen
Related services
Tags
In Sweden, a project to update the local General Conditions of Contract for Building and Civil Engineering Works and Building Services, which are similar to the Finnish YSE 1998 conditions, has been ongoing for some years. Sweden has also recognised the changed market conditions and the need to clarify ambiguities in the standard conditions, which in some respects are similar to those in Finland. In Sweden, the aim is to have a more consistent set of conditions in order to improve the cost-effectiveness, transparency and predictability of construction.
Case law and the development of the construction industry has resulted in a need to update the the YSE 1998 conditions
One of the special characteristics of the Finnish YSE 1998 conditions is that over the years they have given rise to case law that affects the interpretation of standard conditions and that may have decisive relevance in managing potential disputes concerning a construction contract. This is often a concern, particularly for foreign operators. Now is the time to introduce the principles established in case law into the standard conditions.
Although projects as a rule must be subject to more or less project-specific conditions, general terms and conditions create a predictable environment for the industry operators to manage business risks. Simpler projects will continue to be the main type in the construction market, but as the construction industry evolves, the YSE 1998 conditions will need to be adapted to more complex projects in addition to straight-forward apartment buildings.
The updated conditions could also be differentiated for various types of projects, if necessary. The question could be raised as to whether general terms and conditions should better account for performance guarantees relating to plant and industrial construction, contracts executed using an alliance or project management model and, as in other Nordic countries, construction contracts that include design responsibility.
Negotiations on updating the conditions are in progress
Negotiations on reforming the YSE 1998 conditions between employer and contractor organisations are finally underway. This offers a good opportunity to ensure that the new YSE 1998 conditions will continue to serve various types of projects as well as possible for the next 20 years.
Latest insights
Article published 31.5.2024 – International Construction & Projects
Functional electricity infrastructure is the key to attracting investments to Finland
Article published 27.5.2024 – International Construction & Projects
Draft proposal on the new act on offshore wind power in the exclusive economic zone sent out for comments
Article published 27.3.2024 – Restructuring & Insolvency
A construction boom is just around the corner
Article published 18.1.2024 – International Construction & Projects
Bankruptcies in the construction industry are increasing – how to prepare for the contractor’s bankruptcy?
Samuli Tarkiainen, Antti Kaakkola & Jerker Pitkänen
Samuli Tarkiainen, Kanerva Sunila, Helinä Teittinen & Sonja Leinonen
Pauliina Tenhunen, Jerker Pitkänen & Elina Pesonen
Elina Pesonen & Jerker Pitkänen
Latest references
Fortum – Sale of recycling and waste business
We are acting as the lead counsel to Fortum in a cross-border transaction in which Fortum is selling its recycling and waste business. The business is sold to thematic impact investing firm Summa Equity through its portfolio company NG Group. The debt-free purchase price is approximately EUR 800 million. The transaction is subject to authority approval and customary closing conditions. Fortum’s recycling and waste business to be sold comprises municipal and industrial waste management and end-to-end plastics, metals, ash, slag and hazardous waste treatment and recycling services. These businesses are located in Finland, Sweden, Denmark and Norway and currently employ approximately 900 employees.
Case published 18.7.2024
WasaGroup – Planning of production and technology campus in Mustasaari
We advised WasaGroup Ltd in a green transition project where WasaGroup will plan Hitachi Energy’s new production and technology campus in Mustasaari. WasaGroup will be responsible for planning, permitting, managing and conducting the entire project as well as for the tender processes. We advised WasaGroup in drafting and commenting the project management and financing agreements for the project. The Mustasaari campus will be approximately 30,000 square meters in size. The investment by Hitachi Energy will double the capacity for transformer production in Finland, and the product range will expand to include even larger transformers. The objective of the investment is to meet the demand for transformers and other modern technology that is increasing in Finland and internationally due to the green energy transition. The first phase of the project involved an agreement for a development project to prepare the building permit and reach sufficient planning readiness for the implementation of the project. The aim is to have the production and technology campus in use by 2027.
Case published 30.5.2024
Finnish building company – Settlement of large-scale construction dispute
We successfully represented a major Finnish construction company in a dispute and settlement negotiations concerning a large construction project. The dispute mainly concerned liabilities for additional and change works as well as project delays, and the value of the claims of the parties was approximately EUR 50 million. If the case had not been settled, it would have been one of the largest construction disputes ever tried in the Finnish courts. The projected number of hearing days was unprecedentedly more than 300 days. To find an amicable solution to the extensive dispute, the parties engaged in settlement negotiations and court mediation. Eventually, the parties reached an amicable settlement to the full satisfaction of our client and thus the parties avoided the costs and risks of an extensive trial.
Case published 7.2.2024
Valio and C&S – Sustainable everyday life is created through bold reforms
Valio is a food company with the courage to change with the times. Valio’s road to growth and towards the innovative transformation of the food industry is supported by its long-standing business law partner, Castrén & Snellman. Juha Hölttä became Valio’s General Counsel at a time when the company kicked its new strategy into a higher gear. ‘In the past two years we have made several significant market initiatives and expanded our business from food production to other areas of the value chain. By acquiring Heinon Tukku, we now provide a new kind of added value to restaurants and professional kitchens through our Valio Aimo ® wholesale business. And our joint venture with St1, Suomen Lantakaasu Oy, will enable us to reach our goal of turning manure into biogas for heavy transportation,’ Hölttä describes some of the milestones of the new strategy. In addition to expanding into new business areas, Valio continues to build a more sustainable dairy business alongside seeking international growth from plant-based products. Valio has invested in the international growth of its Oddlygood ® brand through incorporation and gained additional product development expertise through the acquisition of Gold&Green. Carbon footprint of milk reduced by new business operations Dairy products are at the core of Valio’s business, and the company develops this strong foundation not only through product innovation but also at the beginning of the food chain. ‘Who could have foreseen that dairy farm manure could become one way of tackling climate challenges? Our planned biogas plants will use manure and agricultural by-products to produce renewable liquefied biogas for use as transportation fuel,’ says Hölttä. ‘Valio is aiming for a carbon-neutral milk chain by 2035. We are making major reforms in our operations in order to make this happen.’ The sustainability programme for Valio’s 3,700 dairy farms has been expanded, and it now includes the preventive and systematic healthcare of cows as well as actions related to grazing, the climate and biodiversity. ‘Appreciation for locally produced food is on the rise, which means that sustainability questions are local as well. This is a good trend, as it makes it easier for us to make a difference.’ ‘Strategic help even in difficult circumstances’ The service-mindedness of lawyers is key in implementing a growth strategy. Castrén & Snellman Attorneys is a long-standing partner of Valio, and the relationship between the two is tight. ‘At Valio, we are always exploring new business opportunities, and us lawyers are tasked with assessing these opportunities. My philosophy as the General Counsel is that my door is always open. Together we can evaluate how to solve and implement new initiatives. In this job, you must be curious, broad-minded and business-oriented,’ summarises Hölttä. Hölttä’s legal team of five people is supported by experts from Castrén & Snellman. The key to successful partnership is that both parties are familiar with each other’s business operations and ways of working. ‘Castrén & Snellman knows us well, and they maintain an up-to-date overview of our situation, which I highly appreciate. It means that we are able to tackle tricky situations together quickly even in difficult circumstances.’ A joint fast reaction was needed, for example, when Valio exited the Russian market after the country launched its war of aggression on Ukraine. ‘The responsible thing was to leave quickly but in a controlled manner and by repatriating our investment as opposed to leaving an operational food production facility in the hands of a country that was waging war.’ A shared vision of sustainability Valio – Together we make life better A Finnish food company Approx. 4,600 employees Owned by 13 Finnish dairy cooperatives Finland’s most sustainable brand in the Sustainable Brand Index study Read more about sustainability at Valio Castrén & Snellman – Building sustainable success stories Forerunner of demanding legal services 300 employees Owned by its partners ‘We help our clients build sustainable success stories and achieve their sustainability goals.’ Read more about sustainability at Castrén & Snellman Shared success stories of Valio and C&S Global Brand Portfolio Management and IP Enforcement Purchase of Gold&Green’s Brand, IPR and R&D Function Joint Venture for Biogas Production with St1 Sale of Russian Operations Acquisition of Heinon Tukku Significant Growth Funding Round Competition Damages Case Defending Against Environmental Permit Challenge at the Appellate Level
Case published 4.5.2023