It is quite common in debt collection cases for the creditor to assume that the claim is undisputed. In such cases, it may be useful to exert pressure on the debtor with the help of an attorney. The delay in payment may be caused by cash-flow problems, but the debtor may also simply rely on the expectation that the foreign creditor will not make the effort to take formal debt collection measures in Finland.

One Finnish speciality when demanding payment outside litigation procedures is the possibility to send a claim letter with threat of bankruptcy. In such a claim letter, the creditor’s attorney specifies the claim and gives the debtor a deadline of eight days from the date of service of the claim letter for payment of the claimed sum. The claim letter must be served on the debtor in a formal manner, at least by registered mail. If the claim is undisputed and the debtor does not pay by the mentioned deadline, then the creditor has the right to demand the initiation of bankruptcy proceedings against the debtor.

If the debtor cannot present any material objections against a claim, the claim letter with threat of bankruptcy is often a successful means by which to exert pressure, since most enterprises will want to avoid becoming the subject of bankruptcy procedures. However, there are also many cases in which the bankruptcy threat is ineffective, mostly because the creditor cannot demonstrate in advance the claim is clear or undisputed. In such cases, the creditor will need a basis for enforcement measures.

In Finland, execution deeds can only be obtained through court procedures. For cases in which the creditor assumes that the claim will be undisputed, the procedural code offers the possibility to start simplified litigation procedures. The claimant may confine him- or herself to individualising the claim without regard to many of the requirements of an ordinary statement of claim. If the claim is indeed undisputed, then the defendant will not object to the claim and a default judgment will be given. If, however, the defendant brings forward objections, then the claimant must supplement the claim so as to comply with all requirements. In this case, a normal lawsuit ensues.

In comparison to a claim letter with the threat of bankruptcy, the simplified litigation procedures have the advantage that they result in an executable judgment. In cases in which it is not known whether the debtor will deny the basis of the claim, this procedure also avoids duplication of work. On the other hand, even simplified litigation causes higher costs than actions outside the courts, and in the case of simplified litigation only part of the costs must be paid by the debtor.

In all cases in which there is reason to assume that the debtor will deny the claim, the procedure of choice should be ordinary litigation right away. Action against Finnish debtors must usually be brought in Finnish courts unless the use of a different forum can be justified on the basis of valid agreements or special legal provisions. In all litigation cases, it is imperative to determine the international forum as early as possible.

The costs associated with the use of court procedures in Finland can be substantial, since there are no regulations as to the fees attorneys are entitled to charge in respect of such matters. Finnish attorneys usually base their fees on the actual time spent on the case using hourly rates, unless a lump sum fee is agreed for specific measures. The costs of litigation therefore do not directly depend on the amount claimed. Therefore, the cost risk can be significant especially where small sums are concerned.

At the end of the legal dispute, the court obliges the losing party to pay the winning party’s appropriate costs. It is often difficult to foresee the extent to which the court will regard costs as appropriate. While the actual costs incurred are accepted in many cases, sometimes courts order substantial reductions to the costs claimed.

Of course, the right to claim reimbursement of costs is of little use if the debtor turns out to be insolvent. Taking into account the potentially significant costs involved, it is prudent to obtain credit information on the opposing party before engaging in legal action.