Finnish Supreme Court, Roulas v. Professor J Tepora
Accountability of arbitrators
Korkein oikeus
Finnish Supreme Court
Case KKO 2005:14
31 January 2005
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The main issue concerned the non-disclosure by the presiding arbitrator that he had previously provided an expert opinion to the respondent.
Accountability
Can arbitrators be held liable for negligence under Finnish contract law?
What is the legal relationship between parties and arbitrators in ad hoc arbitration and can this trigger liability of arbitrators?
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The ad hoc arbitration underlying this court proceeding arose from the share purchase agreement between three sellers and a company owned by a Finnish bank. The parties appointed two arbitrators, who then chose a chair of the panel, Mr Tepora. The panel issued an arbitral award against the sellers in 1995. This award has been annulled by the Helsinki Court of Appeal on the grounds that Mr Tepora should have been disqualified due to conflict of interest with the respondent company because he provided an expert opinion to that company and other members of the group prior to and during the arbitration proceedings without disclosure. The sellers initiated another arbitration proceeding and sued Mr Tepora in court for damages. The case was heard by the District Court and then the Helsinki Court of Appeal that decided that the potential liability of Mr Tepora should be based on tort. This resulted in the dismissal of the claim.
The Supreme Court of Finland analysed the nature of the relationship between parties and arbitrators and ruled that it was contractual in nature.
The Court then decided that the annulment of the award following the arbitration proceedings was based on a fault which should result in the monetary contractual compensation of Mr Tepora to the parties. Mr Tepora was requested to pay around 81,000 EUR to the parties.
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This decision clarifies the nature of the relationship between parties and arbitrators in ad hoc arbitration under Finnish law, which is based on the contract. As such, it may result in monetary compensation for the breach of the contractual duties by arbitrators.
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https://finlex.fi/fi/oikeus/kko/kko/2005/20050014
The summary originates in the following sources:
a) Emilia Onyema, International Commercial Arbitration and the Arbitrator‘s Contract (Routledge, 2010), 170;
b) Matti S. Kurkela, Decision of the Finish Supreme Court in Case KKO 2005:14, SIAR 2007 (1) https://arbitrationlaw.com/library/decision-finnish-supreme-court-rendered-2005-case-kko-200514-stockholm-international; and
c) UN CLOUT database: https://documents-dds-ny.un.org/doc/UNDOC/GEN/V09/810/25/PDF/V0981025.pdf?OpenElement
Barbara Warwas, The Hague University of Applied Sciences