Originally from International Arbitration Court Decisions - 3rd Edition

FINLAND DECISION OF THE FINNISH SUPREME COURT RENDERED IN 2005 (CASE KKO 2005:14)

Subject Matter:
Liability in damages of an arbitrator

Finding:
An arbitral award had been set aside due to bias of an arbitrator discovered subsequent to the proceedings. The Supreme Court of Finland held that the arbitrator was liable for any damage caused in line with traditional contract law.

Parties to the Arbitral Proceedings:
Claimant / Defendant: Sellers of entire stock in Finnish construction corporation (three private Persons)
Defendant / Claimant: Buyer of the shares of Finnish construction company

Parties to the Court Proceedings:
Claimant: Sellers, three private persons
Defendant: X, Chairman of the arbitral proceedings

Applicable Law:
Finnish material law and arbitration law

SUMMARY
Private persons sold all the shares of construction company to a competitor in 1993. The agreement of sale was governed by an arbitration clause. Disputes between the parties arose and were submitted to arbitration under Finnish Arbitration Act in Helsinki. Both parties appointed one arbitrator and the two arbitrators elected X, a professor of law to act as the chairman. Both parties filed claims in the arbitration. The elected chairman did not disclose a potential bias at any stage in the proceedings.

A major bank which owned 100% shares of the buyer company intervened in the arbitral proceedings on behalf of the buyer. The bank then merged into another bank which continued the intervention on behalf of the buyer in the arbitral proceedings.