Finnish legal framework

The following is a selection of some of the more germane factors of the Finnish legal system, which foreign traders with Finnish customers should be aware of:

Debt Collection Act
Debt collection business is now licensed, and the principles of good collection practices are defined in this Act (in force since 1999).

Late payment interest
The Law of Late Payment Interest prescribes penalty for late payment. The rate is 7 % over the reference interest rate as fixed yearly by the European Central Bank. The late payment interest rate since 1.7.2010 is 8 % p.a. However, in business to business trade, if parties agree, a higher rate may be applied.

Statute of Limitation
From 1.1.2004 the general limitation on claims is 3 years. Judgments become statute-barred after 5 years. There are some exceptions in case of special claims. Judgments concerning consumer claims become statute-barred after 15 years in execution.

Retention of Title
Provision regarding the retention of title exists in Finnish legal praxis. Its applicability as security has some limitations, for example if goods have been sold on for resale.

Legal collection of claims
For clear and undisputed claims an enforceable judgment may be obtained within 1-2 months through so called summary proceedings. The costs involved are reasonable and, if not already insolvent, recoverable from the debtor.

Disputed claims must be dealt with through the courts with a main hearing, preceded by written submissions including responses from both parties to the dispute. Naturally involving several months’ preliminary legal work, the concomitant cost risk is therefore higher, as based on the time expended on a case.

Bankruptcy proceedings
When bankruptcy petition has been filed it takes a couple of months to see, whether the bankruptcy proceedings will continue with lodging of claims or whether it will be suspended because of lack of assets in bankrupt’s estate. Once lodging date has been announced, a creditor must lodge their claim in bankruptcy, since any dividend in bankruptcy can only be paid claims that are both secured and accepted.

A payment demand with bankruptcy threat, served on a debtor through a bailiff, is the commonly used collection step before the filing of the bankruptcy petition.

Should a debtor not settle a clear and undisputed claim, a creditor can file a bankruptcy petition. If a debtor wishes to continue in business, this procedure is used to force settlement. To continue in business, the debtor must pay up. In the case of insolvency, a debtor may file the bankruptcy petition itself too, to close the business.

Restructuring of debts of a company or a private person
Debtors may apply to the court to have personal or company debts restructured. Such a restructuring programme will usually be accepted by the court if it will provide creditors with a better result than actual bankruptcy proceedings. By private persons even a payment plan with 0 € is possible, on certain preconditions. Such payment restructuring programmes usually span several years, by private persons normally 5 years.

Arbitration
Finland is a signatory to the New York Convention on recognition and enforcement of international arbitration awards (ratified in 1962).

Foreign judgment enforcement
Finland is a signatory to the Lugano Convention, (ratified in 1993) and Brussels I Regulation of 2002, which both prescribe the jurisdiction of courts and enforcement of civil law judgments within the contracting states.