Finnish Judiciary and Insolvency Law

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Finnish Judiciary and Insolvency Law

• Tuomas Hupli
• LL. D, Specialist Counsel

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FINNISH JUDICIARY AMONG THE STATE POWERS

• Separation of Powers
• The Constitution of Finland, para. 3
• legislative powers the Parliament
• governmental powers the President of the
  Republic together with the Government
• judicial powers independent Courts of Law

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• Independence of courts
• fundamental feature of The Rule of Law
• judges are free to judge as the law says
• judges are bound by the law and only by it
• not threatened, guided or in any other way
  influenced by other state powers
• some problems at the beginning of the new
  millennium

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• importance of free judging is at its peak while
  the case is pending
• does not mean protection from criticism after the
  case is resolved
• public criticism has become more usual (even
  aggressive) during and since the 1990s
• probably due to the European Convention on Human
  Rights (Fair Trial)

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(Discussion on) FUNCTIONS OF THE JUDICIARY

• debate concerns the functions of civil procedure
  as a system
• criminal procedure exists for
• protecting the innocent from criminal sanctions
• better to have ten criminals freed than anyone
  not guilty punished
• fulfilling the responsibility for a crime
• but note criminal procedure often includes civil
  claims as well

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TRADITIONAL VIEW

• Civil procedure exists to give legal protection
  for legal rights
• most important task of a judge to make a
  judgment that is required by the law
• focus on a single case, no matter if the result
  satisfies both (all) of the parties
• and no matter if it satisfies the (political)
  purpose of the law in question (not mentioning
  the more general hopes of the legislator)
• this might be called the function of legal
  protection
• powerful influence on Finnish judges through
  decades

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MODERN VIEW

• Civil procedure exists to protect the purpose of
  the law (ratio legis)
• created by prof. Per Olof Ekelöf
• focus not on a single case, but on civil disputes
  in general
• not so important if cases are resolved exactly as
  the law says
• but that the courts generally enhance the purpose
  of the law

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MODERN VIEW continues

• even wrong decisions are acceptable (seen only
  by the rules of law)
• as long as the result is in accordance with the
  purpose of the law
• most important task of a judge to give the
  striking power for the purpose of the law and
  to make sure that legal sanctions become real
• judgments of this kind direct the general
  behaviour in society
• this is called the function of general direction
  /legal sanctions (in Swedish handlingsdirigering
  / genomslagskraft / sanktionsmekanism)

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MODERN VIEW continues

• key conception purpose of the law
• prof. Ekelöf it is always there, the question is
  how to find it, and how to express it
• every legal rule has a specific purpose
• this is the core meaning of the rule
• that meaning should be promoted even outside the
  core, i.e. in hard cases as well
• mode of thinking purpose promotive (in Swedish
  det teleologiska tolkningssättet)

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MODERN VIEW continues

• advantages of Ekelöfs theory
• clearness after the purpose is found, it really
  helps to solve hard cases
• rationality it is rational to promote the
  purpose of the law
• problems in Ekelöfs theory
• can we really always find the spesific purpose of
  a rule, and so specify the core meaning?
• dont many rules express compromises?
• compromises are there just because law often
  tries to satisfy not one but many purposes, which
  may be conflicting

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POSTMODERN VIEW

• civil procedure is there to solve legal disputes
• or even larger conflicts that cause legal
  disputes
• focus on both single case and disputes in general
• prof. Bengt Lindells response to Ekelöf
• the primary task of the judge is not to protect
  legal rights in every case, not to make legal
  sanctions real, but to get rid of the dispute
• function of dispute resolution / conflict
  management (Swe konfliktlösning)

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POSTMODERN continues

• expresses the parties right to get the result
  they choose
• they have free will, they are free to make
  choices
• use your mind, act rationally, settle your
  conflicts
• casts a serious doubt to Ekelöfs idea that
  judges can and must find a specific will of the
  law (and that judges could take care of its
  succes in general)
• expresses the complexity of law and compromises
  in it
• this is typical postmodernism
• no more a big tale with clear purpose
• but many small tales with conflicting aims

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POSTMODERN continues

• Main problems
• sets aside some principal needs (which are
  typical for modern human mind)
• parties will and need to get an official
  statement on the contents of law
• and how that law should be applied
• may jeopardize the impartiality of a judge
• judges must not hunt the settlement at any cost
• judges proposal for settlement must be careful

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SOME CONCLUSIONS

• Theory of legal protection very hard to pass
• parties come to court primarily to get what they
  individually want
• not necessarily what the political purpose or
  spirit of the law might offer
• and usually not to keep up good relations by
  making a good deal on the case
• court is not too good a business forum
• most often the trial is a result of unsuccessful
  negotiations
• conlusion judges must still pay attention to
  questions like what is the content of law are
  parties entitled to what they claim what kind of
  result is required by the law?

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CONCLUSIONS continue

• Theory of legal sanctions / general direction
• useful if the purpose of the law is simple and
  clear
• not so useful if the law in question includes
  compromises, and tries to protect conflicting
  aims
• as noted, this is often the case (more often than
  Ekelöf wanted to admit)
• conclusion judges must pay attention to general
  direction in cases where the law is one-sided
  (not a complex of different interests)

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CONCLUSIONS continue

• Theory of dispute resolution / conflict
  management
• absolutely belongs to a society of our times
  (many cultures, various values)
• promotes effectiveness, parties activity in
  their own conflict, maybe even peaceful relations
• but can never be the basic function of procedure
  in the court of law
• conclusion judges must promote settlements by
  chairing the case in a way that keeps the way
  open for a settlement they can propose
  settlements of certain kind, but they must never
  loose the trust of the parties

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FINNISH COURTS AND CASES IN THEM

• Court System
• General Courts
• civil cases
• criminal cases
• Administrative Courts
• appeals against actions taken by administrative
  bodies (tax law, other public obligations)
• Special Courts Labour Court, Market Court

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GENERAL COURTS

• First instance District Courts (51)
• Second instance Courts of Appeal (6)
• Third (final) instance the Supreme Court
• The Constitution, 98.4
•  
• Provisional courts shall not be established

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TYPES OF CASES IN GENERAL COURTS

• Civil Cases
• Non-mandatory cases
• Allowed to be settled
• Majority of all civil cases
• Mandatory
• Not allowed to be settled
• Most of the family cases
• Court controls the best interest of a child (not
  of parents)

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Types of cases continue

• Note
• Many mandatory cases can be settled as well
• But only subject to the legal control by the
  court
• Drawing the line between civil cases
• Is the court bound by the will of the parties?
• If yes non-mandatory (parties can settle the
  outcome)
• If no mandatory (court investigates and orders
  the outcome)

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Types of cases continue

• Principle of Party Disposition
• fundamental in non-mandatory cases
• parties (not judges) decide
• whether to claim legal protection at all
• to what extent it is claimed
• facts that form the basis for the claims
• evidence to show those facts

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Principle of party disposition continues

• More precisely
• parties cannot be forced to a trial
• legal protection depends on the claims of the
  parties (no more and nothing else than what was
  claimed)
• parties can waive any claims
• they can admit any claims
• they can acknowledge (confess) any facts
  counter to their own claims
• Will of the parties binds the court

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Party disposition continues

• Why is the principle of disposition so important?
• - to give the parties the same level of freedom
  in the court as outside of it
• - private autonomy cannot be reduced in the
  court
• - private individuals (incl. corporations) are
  allowed to arrange their respective relations as
  they want
• - those relations are not guarded by judges,
  the government or by any other state power

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Party disposition continues

• Practical consequenses of the principle
• acknowledgement of a fact makes that fact
  undisputed
• the court must not investigate it
• it must be taken as true ground for the judgement
• admitted claim must be approved by a judgement
  (no other grounds than admittance itself)
• defendants ignorance to the action leads to a
  judgement by default
• groundless or meaningless response same result
  (for example I wont pay this)

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Principle of Judicial Investigation

• Counterpart to Party Disposition
• Applied in mandatory civil cases and in criminal
  cases
• Claims and facts always investigated by the court
  
• Court is not bound by the claims alone
• The outcome may differ from what was claimed
• Court must applie the law, even against the will
  of the parties

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Judicial investigation in Criminal Cases

• Criminal sanctions absolutely an official task
• No Plea Bargaining in Finnish Courts
• Defendants confession is not a sufficient ground
  for a criminal sanction
• but a piece of evidenceamong other material

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RIGHT TO APPEAL

• MAIN FEATURES OF THE FINNISH APPEAL SYSTEM
• Free acces to the second instance
• both questions of law and of evidence
• no limits in relation to economic
  interest/criminal sanction
• Limited acces to final instance
• Leave system (permission required to appeal) in
  the Supreme Court
• Supreme Courts role as a kind of law maker

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• MAIN PROBLEMS OF THE CURRENT SYSTEM
• too much appeals in second instance courts gt
  rushes, delays
• How to draw the line between different appeals
  (those needed / those that cannot lead to a
  change)

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THE CONSTITUTION, para. 21

• Everyone has the rightto have a decision
  pertaining to his or her rights or obligations
  reviewed by a court of law or other independent
  organ for the administration of justice.
• Provisions concerning the publicity of
  proceedings, the right to be heard, the right to
  receive a reasoned decision and the right of
  appeal, as well as other guarantees of a fair
  trial and good governance shall be laid down by
  an Act.

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THE CONSTITUTION, para. 21

• Echoes from the European Convention on Human
  Rights, art. 6
• Originally Finland had a reservation to the
  convention
• traditionally, a process in a Court of Appeal had
  been purely based on written documents
• fair trial demanded oral main hearing in a larger
  scale than Finland could then offer

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• the new (current) Finnish Constitution seems to
  include a larger right to appeal than ECHR art. 6
  
• ECHR only requests this right to a person who has
  been convicted to a criminal punishment
• The Constitution is not limited in that way
• there seems to be a general right to appeal in
  Finland in any kind of cases
• this means at least one appeal is allowed, and
  the right to make it must be real (not too
  complicated etc.)
• limitations to this right must be established by
  law (Parliament Act)

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DISCUSSION ON THE ACCES TO THE SECOND INSTANCE

• along with the reform of 1997a leave system was
  proposed to the second instance (as we have in
  the Supreme Court)
• for civil cases of max. 3 500 of interest, and
• for minor criminal cases (economic sanction only)

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• Parliament rejected the leave system
• New reform, new compromise 2002 Screening Stage
  in Courts of Appeal
• Court decides first if the appeal has any chance
  of succes and is there a need for new oral
  hearing
• if the three judges unanimously decide that the
  appeal cannot lead to a change in the District
  Courts judgement, and that no oral hearing is
  needed, the appeal stops right there
• it will not be taken to a further investigation
  District Courts decision stays in force

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• Courts of Appeal actively applied the Screening
  Rules
• Many appeals were rejected 2002-2004
• Supreme Court rulings 2004 actually returned the
  system back to the old
• Screening System lost much of its power
• New rushes, delays in the Courts of Appeal
• Courts of Appeal turned bitter, even angry
• New proposal 2008 Leave System was proposed again

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FUNCTION AND ROLE OF THE SUPREME COURT OF FINLAND

• Functions
• gives rulings (precedents) that guide lower
  courts
• tries to keep up uniformity in judicial decision
  making (legal security)
• Acces to Supreme Court is subject to a leave
  (from the year 1980)
• Leave a permission to appeal
• Outside the leave system extraordinary channels
  of appeal against judgments with legal force
• serious procedural errors seriously false
  judgments important new evidence

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• Role of the Supreme Court
• Highest general court, but in fact somewhere
  between a court and a law maker
• Legal grounds for granting a leave are set out in
  the Code of Judicial Procedure
• 1) correct application of the law in other
  similar cases (reason of precedent)
• 2) serious error, procedural or of another kind,
  has occurred and that error forms a reason to
  reverse the particular judgement (reason of
  annulment)
• 3) some other weighty reason

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• Discretion to grant (or to dismiss) a leave
  belongs to Supreme Court alone it has
• no duty to state reasons for granting a leave
• no duty to state reasons for dismissing it
• Reason of precedent is the most important one
• it is at hand, when a case includes an
  interesting question of law
• how should the law be interpreted in similar
  cases?
• how should it be applied?
• not what where the facts that caused the case
  (pure questions of evidence dont usually meet
  the reason of precedent)

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PROCEDURE IN THE SUPREME COURT

• Deadline 60 days from the decision of the Court
  of Appeal
• Process in the Supreme Court includes two stages
• 1) discretion to grant / dismiss the leave
• 2) if granted resolving the appeal
• Documents must include both the application for
  the leave and the appeal
• Leave is granted in about 10 of the cases

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INSOLVENCY LAWS OF FINLAND

• What is insolvency?
• Wide view
• insolvency means economic problems that need to
  be regulated by law
• Legal definition
• insolvency is a permanent state in which the
  debtor cannot pay his/her debts as they fall due

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• Why do we need insolvency law?
• traditional view to force debtors
• modern view to protect equality of creditors
• postmodern view to prevent insolvency, to pay
  attention for conflicting interests and to
  rehabilitate (save) debtors, if possible
• Present Nordic systems are combinations of all
  goals
• force against debtors, equality of creditors,
  rehabilitation

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• Traditional form of insolvency procedure
  liquidation
• Enforcement of a single judgement
• Bankruptcy as a collective device for all of the
  creditors
• Both mean seizing and selling the property of the
  debtor
• New insolvency laws include some kind of
  rehabilitation
• Finnish rehabilitation laws from the year 1993
• Separate laws for consumers / corporations as
  debtors
• Both try to save the property / business of the
  debtor
• Have worked fairly well (with some reforms)

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Thank YouPeltonen, Ruokonen Itäinen
Fabianinkatu 23, 00130 Helsinki Puhelin (09)
4176 030 Faksi [phone]
office_at_peltonenlaw.fi www.peltonenlaw.fi
Y-tunnus 0200985-0