Roschier-Holmberg & Waselius
The new Finnish Act on Guarantees and Third Party Collateral effective as of October 1 1999 is intended to improve the status of the guarantor and the pledgor even though the contents of a guarantee and collateral will to a large extent remain unchanged compared to the legislation presently in force.
The provisions of the Act are largely generic by their nature and they become applicable unless otherwise agreed between the parties or otherwise regulated in relevant legislation. However, in certain cases where the guarantor or the pledgor is a private individual, the provisions of the Act are mandatory and they may not be deviated from to the detriment of such private individual. The Act does not apply to collateral other than third party collateral.
Although the Act is largely built on past legislation and practice, certain new features have been introduced. The disclosure obligation of the creditor towards the guarantor and the pledgor has been enhanced compared to the current legislation. Pursuant to the Act, the guarantor or the pledgor is also entitled to obtain certain information from the creditor concerning the principal debt and the debtor throughout the period during which the guarantee or the collateral remains effective.
The Act also contains a new provision on the mitigation of guarantee liability applicable to private individuals as guarantors. Under this provision, liability under a guarantee may be mitigated in cases where the principal debt is unreasonable in the light of the guarantor's financial position and the creditor knew or should have known of this when the guarantee was granted.
Further, the statute of limitation under which the creditor must present a claim against the guarantor has been extended. As opposed to the one year special statute of limitation currently applicable to so-called suretyship (ie, guarantees enforceable irrespective of the insolvency of the principal debtor), the creditor is entitled under the Act, to make a claim against the guarantor within three years from the due date of the principal debt. The general statute of limitation of 10 years from the date when the guarantee was granted also remains applicable under the new Act.