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2016 Oxford-Leuven Collective Redress Project
FINLAND
JOHAN PRÅHL, HPP ATTORNEYS LTD
1Introduction
This document is intended to act as a description of the basics of mass redress mechanisms available in Finland, and the case-law related to such means of dispute resolution.
2Part A – Description of the available mechanisms of group litigation(maximum 5 pages)
2.1On civil litigation in Finland
Finland is a country where civil law is applied – written legislation is the primary legal source and the basis for the court decisions. In Finland there is a dual court system in which the general courts solve issues related to civil and criminal law cases and administrative courts deal with matters related to disputes between public authorities and private persons. The general courts are divided into three different levels, and administrative courts in two. In addition to these courts there are a few special courts. These courts have a specific jurisdiction and solve exclusively issues related to, e.g. social security insurances, labour disputes, competition law or consumer protection.
In Finland the means of group litigation can be divided in two groups, both of which are relatively new. The actual class actionsin the court of law are permitted pursuant to the Act on Class Actions (act no. 444/2007), which came into force in 2007.
The other available instrument is called a group complaint. The group complaint is an out-of-court system intended to be used in a similar way as the class action, but it applies only to complaints made to the Consumer Disputes Board. The group complaint was introduced some months before the class actions.
In addition to these, non-representative group action is possible through pilot cases and consolidation of actions in connection with individual civil cases. Also, group action for injunction is possible in the Market Court (not covered by the Act on Class Actions).
The first half of the part A will explain the Finnish class actions in further detail, while the latter half will give a description on the out-of-court group complaints. Finally, a short account on the pilot case mechanism and consolidation of actions will be given.
2.2Class action for compensation
The class actions were introduced in Finland in 2007, and they are governed by the Finnish Act on Class Actions (444/2007). The preparation work to bring the class action into Finnish legislation was initiated in the 1990s, after which numerous reports regarding the class actions were published. Based on the lastof the drafts, a government proposal (no. HE 154/2006) was presented to the Parliament in March 2006, which was later adopted with small amendments and which came into force in October 2007. This was also the first time a draft proposition had led to the stage of a government proposal, since the thought of a collective redress instrument included in the Finnish legal system had constantly come across strong critique, especially from the part of business and industry.
The Act on Class Action only permits public action, which means that only a state authority may be the plaintiff. In case of Finland, this authority is the Consumer Ombudsman, whose task is to promote consumer interests. The Act does not permit class action initiated by a private person, who is a member of the group, or by an organization intended to protect the interests of certain consumers, even as a secondary option if the Consumer Ombudsman refrains from starting the proceedings.
The scope of application of the Act is very limited. The Act is only applied to consumer disputes within the competence of the Consumer Ombudsman. Disputes concerning the actions of issuers of securities or public purchase offers are excluded from the scope of application. Environmental damages were left out of the scope of application during the final stages of the preparation.
For a case to be heard as a class action the Act sets out certain preconditions. The first condition is that several persons have claims against the same defendant and that these claims are based on the same or similar circumstances. The absolute community of the circumstances is not required; neither the similarity of the claims themselves, since in some case certain class members may demand e.g. a price reduction while the others may demand for annulment of the purchase.Difference between the types of claims may be an impediment to the class action hearing when each of the claims types calls for its own detailed investigation.
This leads us to the second precondition for the class action, that is the hearing of the case as a class action is expedient in view of the size of the class, the subject matter of the claims presented in it and the proof offered in it, in other words that it would be either impractical or costly to hear each of the class members’ cases separately. This means that first of all, the size of the group should be big enough for the class action to be advantageous. There are no exact limitations on the group size, as long as it is appropriate to hear the case as a class action. Secondly, substantial differences between the class members can lead to some persons being denied membership due to such difference in claims, which could cause unnecessary prolongation and complexity of the hearing. Such prolongation can be caused for example by individual presentation of evidence when there is little or no collective evidence to be presented. In such cases, the group should be limited only to those persons, claims of whom can be based on collective evidence, which makes the hearing fluent and the class action practical.
The third condition for a matter to be heard as a class action is that the class should be defined with adequate precision.The class action is based on an opt-in system – according to the section 8 of the Act a class member is one who has delivered, within the time limit, a written and signed letter of accession to the class, after which the Consumer Ombudsman shall prepare a supplemented application for a summons, indicating the names and addresses of the class members, the particulars of their claims and, if necessary, supplemented grounds for the claims.
Ultimately the preconditions of a class action are examined by the court, and if the preconditions are not fulfilled, it may dismiss the claims. The courts, where a class action can be heardin Finland, and which thus can examine the fulfilment of the conditions, are the district courts of Helsinki, Oulu, Ostrobothnia, Northern Savo, Päijänne-Tavastia and Finland Proper.
The class members or the groups themselves are not parties to the litigation and they do not take actively part in the judicial proceedings. Regarding issues like the disqualification of the judge or rules on testimonies, the members of the group are treated as parties. Therefore, a member of the group cannot be heard as a witness, but it is still possible to hear a member with an intention to present proof.Demands of each of the class members should be specified, even though the members are not actual parties – this means that it is not permitted for the Consumer Ombudsman to bring action for a lump sum compensation, which could be divided between the class members afterwards.
The Act, as a lex specialis, contains a reference to the Finnish Code of Judicial Procedure in relation to the funding of the litigation. This Code contains the general procedural rules in relation to litigation in the general courts of law, which are the District Courts, the Courts of Appeal and the Supreme Court. According to the Chapter 21 Section 1 of the Code, the party who loses the case is liable for all reasonable legal costs incurred by the necessary measures of the opposing party, unless otherwise provided by an Act. When ruling the case, the court also gives a decision on who bears the litigation costs, and the judgment includes an exact amount, which is based on the parties’ claims usually based on the attorneys’ bills.
Thus, in class action litigations only the parties are responsible for the costs. In accordance with the Act on Class Actions, the parties to such litigation are the defendant and the Consumer Ombudsman, representing the group of consumers. Therefore, the consumers themselves are not parties to proceedings and thus cannotbe responsible for the costs in any case, and only either the defendant or the public authority bears the costs of the litigation.
2.3Group action for injunction
The Consumer Ombudsman is also entitled to submit an application for injunction in a consumer matter in the Finnish Market Court, which was established to handle issues regarding competition, public procurement and consumer disputes related to marketing and standard contractual terms as well as disputes regarding marketing in general between companies and between authorities and companies. If the Consumer Ombudsman refuses to take action, a registered association representing either of the parties can also file a petition. In addition, foreign authorities and organisationsin theory also have the right to initiate a case, as per EU legislation.
An injunction order is imposed by the Market Court if the trader’s marketing practice is considered unfair. A conditional fine is also generally imposed, and it needs to be paid if the trader does not comply with the court order. Court may also order the trader to take corrective measures. The Market Court is not competent to impose criminal sanctions or compensation of damages in individual cases.
Both parties, the Consumer Ombudsman and the trader, bear their own costs in consumer law cases in the Market Court. There is no requirement to define the group represented by the Consumer Ombudsman, since the litigation is related to injunction and no damages are compensated.
2.4Group complaint
In cases similar to those when a class action for compensation can be used, the Consumer Ombudsman can also choose to bring a group complaint to the Consumer Dispute Board.
The group complaint is regulated by the Act on the Consumer Dispute Board (8/2007), which regulates all of the activity of the Board. As the class action, the group complaints can be brought only in consumer dispute cases within the competence of the Board, which is defined in section 2 of the Act. According to the section, the Board’s mission is to give recommendations in disputes related to consumer goods and numerous other issues related to, inter alia, certain housing disputes. Disputes concerning the actions of issuers of securities or public purchase offers are excluded from the competence of the Board.
The group complaint system, which was introduced in early 2007 as a part of renewal of all of the legislation concerning the Consumer Dispute Board, is based on the one adopted in Sweden as an experiment in the early 90s. The Consumer Ombudsman can bring a group complaint to the Consumer Dispute Board, if a group of consumers has similar claims against the same trader, or if the claims are based on a similar dispute with the same trader. Like in all other matters handled by the Board, the decisions are only recommendations, and they have no legal force as such.
In a group complaint the Consumer Ombudsman shall specify the group of consumers on behalf of whom the complaint is brought. The specification requirement is not as strict as in the class action, though. An opt-out model is in use with the group complaints – the consumers represented do not need to be specified by name and the specification only needs to be specific enough so that the consumers can, on their own part, if needed, refer to the decision and indicate that they do belong to the group. So, a definition like “the group of consumers, who have concluded an agreement containing a particular clause with X Ltd” is sufficient, as opposed to the class action.
Unlike the Swedish group complaint, where a secondary right to bring a complaint is left to consumer organisations when Consumer Ombudsman is unwilling to bring a complaint, in Finland only the Consumer Ombudsman is entitled to do so, and no secondary right is given to anyone else.In this respect the group complaint system is similar to the Finnish class actions.
The Consumer Dispute Board and each of the parties bear their own costs in relation with the proceedings, as provided in section 19 of the Act. It does not cost anything for the consumers to bring a complaint. The Board may recommend that the lost party compensates the winning party for the costs incurred. If the Board’s recommendation is against the trader, the Board should declare the amount of costs incurred to the state during the proceedings. If the trader does not comply with the recommendation and if the trader loses the court litigation related to the same matter, the court that is aware of the recommendation should oblige the trader to compensate the state for the costs specified in the recommendation.
2.5Non-representative mass litigation
In addition to proper collective redress instruments it is also possible to solve mass disputes in a more traditional way through classical civil procedure.
One of the options for this is the consolidation of actions, or so called cumulation, when working on multiple cases with e.g. several plaintiffs against the same defendant in accordance with the chapter 18 of the Finnish Code of Judicial Procedure. If the court finds it more effective,it may join the proceedings to be heard at the same time. Such actions do not form a class action, though – the proceedings remain separate from each other, and all of the members of the “group” remain parties to the proceedings, thus bearing the legal costs of his own and the other party, should the case be lost.
Pilot case is another way for solving mass disputes. In such cases, only one dispute of the several similar is taken to the court, after which the parties to other cases comply with the test case judgment, even if it was not agreed upon beforehand. The Consumer Ombudsman can assist the consumer if the case is found significant. Pilot judgements do not differ in any way from ordinary court judgements and are only designed to make the lost defendant to voluntarily comply with the judgment in the first case to minimise its own costs. The pilot cases create no obligation for the defendant to comply with the decision in other cases, though. Since pilot cases are not regulated as such, itonly relies on the voluntariness of the parties.
3Part B– Case-law related to means of collective redress (maximum 15-20 pages)
3.1Class actions
After the introduction of the class action in the Finnish legal system in 2007, there have been no cases where the class action was used. This is mostly caused by the fact that the scope of application of the Finnish class action is so limited, and only the Consumer Ombudsman can initiate action.
In the beginning of 2016, the Consumer Ombudsman was flooded with questions by consumers, claiming that the price increases intended to enter into force on 1 March 2016 by electricity transmission company Caruna had been excessive. The Consumer Ombudsman monitors inter alia the contract terms between electricity transmission companies and consumers in order to guarantee consumer protection.
To be considered reasonable, prices can usually be increased by no more than approximately 10–15 % at a time. Caruna’s announced price increases would have been considerably greater. In the matter at hand, what made Caruna’s price increases especially unreasonable was the fact that electricity is a necessity that consumers cannot live without. Switching to another supplier would not have been an option for consumers either, as Caruna has a monopoly on electricity transmission in its area.
In these kind of situations described above, the Consumer Ombudsman has recourse to a number of supervisory methods, of which collective complaints and class actions are seen as the option of last resort, to be chosen if all else fails, referring here first and foremost to negotiations between the Consumer Ombudsman, acting as a public agent for the consumers, and the company in question in a given matter.
In the end of February 2016 the Consumer Ombudsman and Caruna reached an agreement as a result of their negotiations, which meant that Caruna was not entering its announced price increases into force in their entirety as of 1 March 2016. Instead, Caruna committed into reducing its fixed basic prices for electricity transmission by 25 per cent for all customers and both of its network companies for the next 12 months. This compensation is also meant to balance the price increase in 2017. Furthermore, Caruna agreed on not implementing new price increases in 2017. Due to this agreement, the average annual increase in customers' electricity transmission expenses will remain below 15 per cent, calculated based on the total price of electricity transmission including tax.
A class action was one of the options proposed during the negotiations and the Consumer Ombudsman has revealed having seriously considered it in the matter at hand. However, in this case, the option of resorting to filing a class action against Caruna evidently weighed enough in the negotiations, which made it possible for the parties to reach an agreement outside of court litigation.