Contractual Relations in Finland

1. Contractual Relationsin Finland Proactive Contracting and Contract Management Peter JaspersAttorney at Law Moscow, 31 January 2012

2. Introduction Contracting culture under Finnish law

3. Differing contracting cultures • Non-formal contracting under Finnish law • Contracts can be made, changed or terminated • orally • by common practices • as a consequence of changed circumstances • Awareness of Finnish contracting culture important, otherwise company • may be surprised by contractual obligations • may rely on contractual provisions that turn out to be ineffective

4. Layers forming a contractual relation

5. Focus of this presentation Staying in control of contract relations • Proactive contracting • Take an active role in contract negotiations • Make negotiations a showcase of your professionalism • Side agreements and common practices • Do not be surprised by contract elements that are not in the contract document • Contract management • Prepare your organization to control a contract relation from beginning to end

6. Part 1 Proactive Contracting

7. Who makes the first draft? • Local partner can produce a contract under Finnish law more easily  saves effort and costs • However: • The party providing the draft easily gets the upper hand in negotiations • The Finnish party may invoke alleged legal requirements in order to drive its own interest • Your company will have to get acquainted with the legal framework anyway in order to negotiate equally • It is a good idea for a foreign company to show that it is prepared to work professionally in the Finnish market

8. Develop your own vision of the contract • …reflecting a firm vision on the progress of the project • a well-prepared contract draft can also be a marketing tool • …reflecting an understanding of local conditions and the interests of both parties • the other party will not be tempted to play the “Finland card” • …and of course protecting your own interest in an appropriate manner

9. Individual terms for Finland • Re-use of Russian domestic models problematic • Domestic tools may not protect you in Finland • e.g. right of pledge for commodities in circulation • Conversely, alternatives offered by Finnish law may remain unused • e.g. pledge on enterprises • Cultural aspect • Uncommon clauses as negotiation obstacles

10. Part 2 Side Agreements and Common Practices

11. Agreements before signing • Course of negotiations can change understanding of the contract • Depending on the circumstances, such communications can prevail even over explicit contract clauses • Example: Properties of a product mentioned in negotiations • Example: Estimations of required masses given by project purchaser

12. Agreements after signing • Contract‘s content can change at any time by agreement of the parties • Such agreement does not need to be in writing • Any oral agreement • Even established common practices can be sufficient • Even contract clauses explicitly demanding written form for changes have been disregarded by courts

13. Authority to make agreements • Finnish law often accepts agreements as binding even if it was made by a person not formally authorized • Factual authorization can be based on a person‘s position and the situation – „the right man at the right time“ • Particularly important in construction and other project work • additions to scope of supply • changes to technical specifications • price adjustments

14. Part 3 Contract Management

15. The contract lives! • The signed contract document is important, but it is only a snapshot • Continuous contract management necessary • especially in long-term, construction, and project contracts • in order to have complete knowledge what the own obligations under the contract are • in order to be able to demand the other party to fulfil its own obligations • in order to prevent detrimental changes from happening without own knowledge • in order to be able to take appropriate measures to secure own rights

16. Contract Management (1/2) • Make sure that there are clear responsibilites for contract management at all times • Define authorized persons for contract changes throughout the process and communicate these authorizations to the contract partner • Make sure that all relevant events are recorded in written documentation • minutes of meetings • one-sided meeting notes

17. Contract Management (2/2) • Establish continuous monitoring of the situation and needs for action • organizing functional flow of information to contract manager • treatment of change requests on a sufficiently high level • objection to non-conforming behaviour or performance by the contract partner • identification of performance obstacles and appropriate reaction • early addressing of payment delays • Make sure that legal expertise in the applicable law is available

18. Doing Business in Finland 44 pages information booklet can be ordered free of charge from the speaker

19. BJL Bergmann Attorneys at Law Eteläranta 4 B 9 00100 Helsinki Finland Tel. +358 9 696207-0 Fax +358 9 696207-10 helsinki@bjl-legal.com Peter Jaspers Partner peter.jaspers@bjl-legal.com Thank you.