Main causes and key implications for regulated companies
In recent years, the Finnish litigation scene has seen an exponential rise in regulatory disputes, with heightened geopolitical tensions bringing additional twists to the regulation of societally important sectors like energy and health. While an increasingly complex and fast-paced world is partly responsible for the rise of regulatory disputes and has required companies to invest more heavily in their compliance functions, from a Finnish dispute resolution lawyer’s perspective, the causes and implications are more diverse and far-reaching.
Inefficient cost-allocation in regulatory development increases the number of disputes
Traditionally, the best way to prevent most disputes is to invest heavily in contract negotiations and other preparatory phases. When deals become bigger and more complex, it is acceptable and expected that related legal fees increase. There is no reason why this rule should not apply to regulatory matters and authorities, as regulators have gained increasingly important authority in shaping the sectors they oversee. However, the regulatory burden that regulators have had to assume and the increasing number of regulatory measures have not been met with a corresponding increase in resources.
This imbalance has resulted in a continuous need to test the limits of regulation and the jurisdiction of different regulators. Considering the inherent complexity of regulatory disputes, this typically also translates into very high costs. The consequence for authorities and companies alike is impractical: costs arise regardless, but they are not efficiently allocated to the preparatory phase where optimal overall solutions are achieved far more easily. For regulated companies, it is recommendable to continue investing strongly in relationships with regulators and have their voices heard proactively.
The fundamental nature of regulatory disputes cannot be ignored
Regulatory disputes, particularly their outcomes, often carry wider societal effects and implications that reach far beyond the parties directly involved, distinguishing them from traditional commercial disputes. Given these wide implications, regulatory disputes also attract significant attention from industry stakeholders. From their perspective, such proceedings are characterised by an uncomfortable juxtaposition: the outcome of the dispute might potentially have existential impacts for them, but they cannot directly participate in the proceedings as a party and thus get their voices heard. On the other hand, standard regulatory development practices would require adequate hearings of all stakeholders. The inherent risks of transferring regulatory outcomes to be decided by courts are thus apparent.
Building on this complexity, it is also apparent that regulatory disputes are characterised by a new type of focus. Often the main point of concern for an appellant is not an individual interpretation, but increasingly the proceedings involve questions of a more fundamental nature instead. While typically one deterrent for disputes is that time spent on them is time away from the business and its core missions, this is not the case for regulatory disputes, which fundamentally shape the future operating environment of regulated companies. As such, they warrant a significant investment of management time.
Litigation from a position of dependency
From an appellant’s perspective, initiating proceedings against an authority always warrants careful balancing, as the same authority will typically continue to wield significant powers in the future, making the maintenance of a constructive working relationship paramount, even more so than with important commercial partners. Unlike commercial disputes where parties can choose to terminate business relationships, regulatory relationships are permanent and unavoidable. This creates unique challenges and an additional layer to the adversarial structure of legal proceedings, as the authority continues exercising its authority and performing its regulatory duties while simultaneously engaging in litigation.
Regulatory disputes require a specialised approach
Regulatory disputes are characterised by a complexity and specificity that does not mesh well with the traditional law firm set-up where firms maintain distinctly separate dispute functions, or where specialists of a given regulatory framework handle the entire life cycle of a dispute. D&I’s powerhouse model has proven effective in addressing this challenge and allowing our lawyers to focus their expertise on what they know and do best, whether this has involved competition, data protection, energy, banking, or other fields and authorities.
From a lawyer’s perspective, regulatory disputes and development are at the core of what makes the job interesting: they involve fundamental legal questions while having a wide societal impact. Looking ahead, the trend towards increased regulatory disputes shows no signs of abating. As regulatory frameworks continue to evolve and expand across sectors, regulated companies face new and complex challenges. In future articles, we will provide insights on how companies can face and prepare for common regulatory uncertainties and causes of disputes, offering practical guidance for navigating this evolving landscape.
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