BERGMANN Attorneys at Law BJL Bergmann Attorneys at Law Helsinki CONTRACTUAL RELATIONS IN FINLAND Proactive Contracting and Contract Management Peter Jaspers Attorney at Law Moscow, 31 January 2012

BERGMANN Attorneys at Law BJL Bergmann Attorneys at Law Helsinki CONTRACTING CULTURE UNDER FINNISH LAW Introduction

BERGMANN Attorneys at Law 3 D IFFERING 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

BERGMANN Attorneys at Law 4 L AYERS FORMING A CONTRACTUAL RELATION Contract document Legal provisions Side agreements and common practices Commercial usages and fairness

BERGMANN Attorneys at Law 5 F OCUS OF THIS PRESENTATION Staying in control of contract relations 1.Proactive contracting Take an active role in contract negotiations Make negotiations a showcase of your professionalism 2.Side agreements and common practices Do not be surprised by contract elements that are not in the contract document 3.Contract management Prepare your organization to control a contract relation from beginning to end

BERGMANN Attorneys at Law BJL Bergmann Attorneys at Law Helsinki PROACTIVE CONTRACTING Part 1

BERGMANN Attorneys at Law 7 W HO 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

BERGMANN Attorneys at Law 8 D EVELOP 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

BERGMANN Attorneys at Law 9 I NDIVIDUAL TERMS FOR F INLAND 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

BERGMANN Attorneys at Law BJL Bergmann Attorneys at Law Helsinki SIDE AGREEMENTS AND COMMON PRACTICES Part 2

BERGMANN Attorneys at Law 11 A GREEMENTS 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

BERGMANN Attorneys at Law 12 A GREEMENTS AFTER SIGNING Contracts 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

BERGMANN Attorneys at Law 13 A UTHORITY 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 persons 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

BERGMANN Attorneys at Law BJL Bergmann Attorneys at Law Helsinki CONTRACT MANAGEMENT Part 3

BERGMANN Attorneys at Law 15 T HE 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

BERGMANN Attorneys at Law 16 C ONTRACT M ANAGEMENT (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

BERGMANN Attorneys at Law 17 C ONTRACT M ANAGEMENT (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

BERGMANN Attorneys at Law BJL Bergmann Attorneys at Law Helsinki Doing Business in Finland 44 pages information booklet can be ordered free of charge from the speaker

BERGMANN Attorneys at Law BJL Bergmann Attorneys at Law Helsinki BJL Bergmann Attorneys at Law Eteläranta 4 B Helsinki Finland Tel Fax Peter Jaspers Partner Thank you.