Expert determination clauses are frequently encountered in Finnish M&A transactions, particularly in relation to purchase price adjustment mechanisms. The rationale is straightforward: avoid full-blown litigation, get a binding answer quickly, and keep costs down. In many jurisdictions, this works as intended. In Finland, there are significant reasons to doubt that it does, and practitioners should be aware of the risks before including such a clause.
Access to justice and the Finnish constitutional framework
Finnish law takes a firm position on the right of access to justice. Section 21 of the Constitution of Finland guarantees everyone the right to have their case dealt with by a court or other independent tribunal established by law. There are good grounds for arguing that this right cannot be contracted away by private agreement, though the question has not been directly addressed by the Finnish Supreme Court.
The courts recognised by Finnish law for the purposes of resolving private disputes are, in essence, two: the general courts (käräjäoikeus, hovioikeus, korkein oikeus) and arbitral tribunals constituted under the Finnish Arbitration Act (967/1992). Expert determination does not feature in Finnish legislation as a recognised dispute resolution mechanism. It has no statutory basis, no procedural framework, and no defined legal effect.
In this sense, expert determination is comparable to a contractual obligation to negotiate in good faith before commencing proceedings. It is a valid and enforceable commitment as a matter of contract law, but not a mechanism capable of permanently displacing the jurisdiction of a court or arbitral tribunal. Parties may validly agree to submit a dispute to an expert before taking it further. However, whether parties can validly agree that the expert’s determination is the only forum available to them is a question that Finnish courts have not yet directly resolved. The constitutional guarantee in Section 21 provides strong grounds for concluding that access to a tribunal established by law cannot be excluded by private agreement alone.
The split jurisdiction problem
A particularly problematic scenario arises where a transaction agreement provides for arbitration as the general dispute resolution mechanism, but carves out valuation and purchase price adjustment disputes for expert determination – and expressly prohibits those disputes from being submitted to arbitration.
At first glance, this may appear to achieve a sensible division of labour. In practice, it could create a jurisdictional gap that the parties almost certainly did not intend.
Excluding arbitration from valuation disputes is, in principle, permissible. The Arbitration Act allows parties to limit the scope of an arbitration clause, and such a limitation will generally be respected. However, as noted above, excluding arbitration does not mean the matter cannot be brought before a court. It simply means it cannot be brought before an arbitral tribunal. A party dissatisfied with the expert’s determination may have grounds to seek recourse before the general courts, relying on the constitutional guarantee in Section 21.
The unintended consequence is a bifurcated dispute resolution structure: all other disputes go to arbitration as agreed, whilst valuation disputes (by operation of the excluded arbitration clause and the constitutional access to justice guarantee) end up before the general courts. This is rarely what the parties had in mind, and may produce inconsistencies if the two sets of proceedings interact.
The enforcement problem
Even where both parties initially intend to abide by the expert’s determination, enforcement becomes a serious issue if one party subsequently refuses to comply.
The Finnish Enforcement Code (ulosottokaari, 705/2007) sets out an exhaustive list of enforceable titles. In practice, the relevant categories are court judgments and arbitral awards issued pursuant to the Arbitration Act. An expert determination is neither. It therefore cannot be taken directly to the bailiff for enforcement.
If the losing party refuses to comply voluntarily, the winning party has no choice but to commence court proceedings, the very outcome the clause was designed to avoid.
Critically, those proceedings will not be limited to a narrow examination of whether the determination should be enforced, as would be the case with an arbitral award. A Finnish court could, in principle, examine all relevant matters, including the underlying merits of the valuation dispute, though the precise scope of what issues could even be examined in such proceedings is itself uncertain. The expert’s determination may carry evidential weight, but it is unlikely to bind the court. There is a material risk that the entire dispute could effectively be relitigated from scratch in a public court and in public proceedings.
By contrast, an arbitral award under the Arbitration Act can be submitted to the District Court for enforcement in a summary procedure. The court’s review is limited to a narrow set of grounds under the Arbitration Act. The substantive merits of the dispute are not re-examined.
Practical implications
Expert determination in Finland is likely to, in practice, operate as an intermediate step rather than a final resolution. This has two significant practical consequences.
First, if both parties are acting in good faith and willing to accept the outcome, expert determination may function perfectly well as a practical matter. The absence of a statutory enforcement mechanism is irrelevant where compliance is voluntary. In that scenario, the clause achieves its objective.
Second, and more importantly, a party that wishes to delay or avoid a final resolution may have a significant incentive to refuse compliance and seek to bring the matter into general court proceedings. The expert determination clause then risks producing not a quick and cost-effective outcome, but an extra layer of process, one that may take years and cost significantly more than a straightforward arbitration would have done.
Conclusion
Expert determination clauses are not inherently problematic, and there may be good reasons to include them in a particular transaction structure. However, practitioners advising on Finnish law should be clear-eyed about what such a clause can and cannot achieve.
It is strongly arguable that it cannot displace the constitutional right of access to the courts. And if arbitration has also been excluded, there are sound grounds for arguing that the general courts may retain jurisdiction regardless. Nor is it likely to be enforceable against a non-compliant party without a further round of litigation.
In some cases, this outcome may be more favourable to one party than the other – and practitioners should consider carefully which party that is likely to be.
