On September 25th, the Finnish Ministry of Finance announced
that the Act on Index Restrictions in Contracts (1195/2000)
("Act") will not be extended after December 31st 2012.
The Act will thus still be applied to contracts which are concluded
during 2012.
Generally, Finnish contract law follows the principle of nominalism
whereby changes in the value of the currency between the contract
and its enforcement or performance are not taken into account. This
would call for separate index clauses where, following inflation,
the nominal value of the contract would adjust automatically based
on a contract clause or stipulation. However, previously under the
Act, use of such index clauses has been denied due to their
perceived negative impacts and effects on e.g. price stability and
inflation. The Act has been in force since 1968. Some benefits and
payments have nevertheless been tied to the index by legislation,
e.g. pensions, maintenance allowances and lease agreements which
are valid until further notice or at least for three years.
Until now, the restriction has applied only to contracts, which
means that the index clause has been allowed if it was based on
e.g. a will, statute of associations or court decision. Further,
e.g. international contracts which have concerned the sale or
purchase of goods or services to or from abroad have been exempted
from the scope of the restriction. The Ministry of Finance has been
able also to grant an exemption based on application . The
exemption procedure enabled inclusion of an index clause in an
individual contract or multiple contracts, which are based on a
standard contract irrespective of its term, if deemed
reasonable.
The motivation for not extending the validity of the Act was based
on the changed environment and nature of monetary policy. As a
member state in the Euro area, Finland has to follow the general
target level of low inflation which renders the original purpose of
the Act somewhat unnecessary. The Ministry argued that in the long
run, inflation in Finland, exceeding the average inflation in the
Euro area, would be unsustainable. Some in favor of maintaining the
Act stated, however, that allowing index clauses could accelerate
inflation despite of the change in monetary policy.
Restraining from extending the Act means effectively that all
contracts which are concluded as of the start of 2013 may include
an index clause. Accordingly, index clauses can be included in
fully domestic contracts as well as transactions.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.