Transparency of the Regulatory System

The Belgian government has adopted a generally transparent competition policy. The government has implemented tax, labor, health, safety, and other laws and policies to avoid distortions or impediments to the efficient mobilization and allocation of investment, comparable to those in other EU member states. Draft bills are never made available for public comment, but have to go through an independent court for vetting and consistency. Belgium publishes all its relevant legislation and administrative guidelines in an official Gazette, called Le Moniteur Belge (www.moniteur.be ).

Foreign and domestic investors in some sectors face stringent regulations designed to protect small- and medium-sized enterprises. Recognizing the need to streamline administrative procedures in many areas, in 2015 the federal government set up a special task force to simplify official procedures. It also agreed to streamline laws regarding the telecommunications sector into one comprehensive volume after new entrants in this sector had complained about a lack of transparency. Additionally the government strengthened its Competition Policy Authority with a number of academic experts and additional resources. Traditionally, scientific studies or quantitative analysis conducted on the impact of regulations are made publicly available for comment. However, not all stakeholder comments received by regulators are made public.

Accounting standards are regulated by the Belgian law of January 30, 2001, and balance sheet and profit and loss statements are in line with international accounting norms. Cash flow positions and reporting changes in non-borrowed capital formation are not required. However, contrary to IAS/IFRS standards, Belgian accounting rules do require an extensive annual policy report.

International Regulatory Considerations

Belgium is a founding member of the EU, whose directives and regulations are enforced. On May 25, 2018 Belgium implemented the General Data Protection Regulation (GDPR) (EU) 2016/679, an EU regulation on data protection and privacy for all individuals within the European Union.

Through the European Union, Belgium is a member of the WTO, and notifies all draft technical regulations to the WTO Committee on Technical Barriers to Trade (TBT). Belgium does not maintain any measures that are inconsistent with the Agreement on Trade-Related Investment Measures (TRIMs) obligations.

Legal System and Judicial Independence

Belgium’s (civil) legal system is independent of the government and is a means for resolving commercial disputes or protecting property rights. Belgium has a wide-ranging codified law system since 1830. There are specialized commercial courts which apply the existing commercial and contractual laws. As in many countries, the Belgian courts labor under a growing caseload and ongoing budget cuts causing backlogs and delays. There are several levels of appeal.

Laws and Regulations on Foreign Direct Investment

Partly owing to the fact that the Belgian Federal Government has been in caretaker status since December 2018, no significant legal or regulatory changes that might affect the business environment have occurred in the past two years.

Payments and transfers within Belgium and with foreign countries require no prior authorization. Transactions may be executed in euros as well as in other currencies.

Belgium has no debt-to-equity requirements. Dividends may be remitted freely except in cases in which distribution would reduce net assets to less than paid-up capital. No further withholding tax or other tax is due on repatriation of the original investment or on the profits of a branch, either during active operations or upon the closing of the branch.

There are three different regional Investment Authorities:

Flanders: www.flandersinvestmentandtrade.com

Wallonia; www.awex.be

Brussels: https://be.brussels/brussels 

Competition and Anti-Trust Laws

The contact address for competition-related concerns:

Federal Competition Authority
City Atrium, 6th floor
Vooruitgangsstraat 50
1210 Brussels
tel: +32 2 277 5272
fax: +32 2 277 5323
email: info@bma-abc.be

EU member states are responsible for competition and anti-trust regulations if there are cross-border dimensions. If cross-border effects are present, EU law applies and European institutions are competent.

There was no significant case(s) involving foreign investment.

Expropriation and Compensation

There are no outstanding expropriation or nationalization cases in Belgium with U.S. investors. There is no pattern of discrimination against foreign investment in Belgium.

When the Belgian government uses its eminent domain powers to acquire property compulsorily for a public purpose, current market value is paid to the property owners. Recourse to the courts is available if necessary. The only expropriations that occurred during the last decade were related to infrastructure projects such as port expansions, roads, and railroads.

Dispute Settlement

ICSID Convention and New York Convention

Belgium is a member of the International Centre for the Settlement of Investment Disputes (ICSID) and regularly includes provision for ICSID arbitration in investment agreements.

Investor-State Dispute Settlement

The government accepts binding international arbitration of disputes between foreign investors and the state. There have been no public investment disputes involving a U.S. citizen within the past 10 years. Local courts are expected to enforce foreign arbitral awards issued against the government. To date, there has been no evidence of extrajudicial action against foreign investors.

International Commercial Arbitration and Foreign Courts

Alternative Dispute Resolution is not mandatory by law and is therefore not commonly used in disputes, except for matters where the determination by an expert is sought, whether appointed by the parties in agreement or in accordance with a contractual clause or appointed by the court in the context of dispute resolution.

Belgium has no domestic arbitration bodies. Local courts recognize and enforce foreign arbitral awards. Judgments of foreign courts are recognized and enforceable under the local courts. There are no reports or complaints targeting Court proceedings involving State Owned Enterprises (SOEs) or alleged favoritism for them.

Bankruptcy Regulations

Belgian bankruptcy law is governed by the Bankruptcy Act of 1997 and is under the jurisdiction of the commercial courts. The commercial court appoints a judge-auditor to preside over the bankruptcy proceeding and whose primary task is to supervise the management and liquidation of the bankrupt estate, in particular with respect to the claims of the employees. Belgian bankruptcy law recognizes several classes of preferred or secured creditors. A person who has been declared bankrupt may subsequently start a new business unless the person is found guilty of certain criminal offences that are directly related to the bankruptcy. The Business Continuity Act of 2009 provides the possibility for companies in financial difficulty to enter into a judicial reorganization. These proceedings are to some extent similar to Chapter 11 as the aim is to facilitate business recovery. In the World Bank’s 2020 Doing Business Index, Belgium ranks number 9 (out of 190) for the ease of resolving insolvency.

Investment Incentives

Since the law of August 1980 on regional devolution in Belgium, investment incentives and subsidies have been the responsibility of Belgian’s three regions: Brussels, Flanders, and Wallonia. Nonetheless, most tax measures remain under the control of the federal government as do the parameters (social security, wage agreements) that govern general salary and benefit levels. In general, all regional and national incentives are available to foreign and domestic investors alike. The government does not have a practice of issuing guarantees or jointly financing foreign direct investment projects.

Belgian investment incentive programs at all levels of government are limited by EU regulations and are normally kept in line with those of the other EU member states. The European Commission has tended to discourage certain investment incentives in the belief that they distort the single market, impair structural change, and threaten EU convergence, as well as social and economic cohesion. In January 2016, the European Commission ordered Belgium to reclaim up to USD 900 million in tax breaks from 36 companies (12 of whom are U.S. companies) going as far back as 2004. The Belgian Government had given these breaks to companies through a series of one-off fiscal rulings. The scheme had reduced the corporate tax base of the companies by between 50% and 90% to discount for excess profits that allegedly resulted from being part of a multinational group. However, in a February 14, 2019 ruling, the EU General Court decided that the excess profit ruling was not a State-aid scheme. Observers note that the ruling is based on a procedural defect from the European Commission, and highlight that the General Court did not per se validate the excess profit ruling. Belgium legally challenged the EC decision and won, but the EC has appealed the ruling.

In their investment policies, the regional governments emphasize innovation promotion, research and development, energy savings, environmental protection, exports, and most of all, employment. The three regional agencies have staff specializing on specific regions of the world, including the United States, and have representation offices in different countries. In addition, the Finance Ministry established a foreign investment tax unit in 2000 to provide assistance and to make the tax administration more “user friendly” to foreign investors.

It is permitted for companies established in Belgium, foreign or domestic, to deduct from their taxable profits a percentage of their adjusted net assets linked to the rate of the Belgian long-term state bond. This permits companies to deduct the “notional” interest rate that would have been paid on their locally invested capital had it been borrowed at a rate of interest equal to the current rate the Belgian government pays on its 10-year bonds. This amount is deducted from profits, thus lowering nominal Belgian corporate taxes. Even though this system was made slightly less attractive in the recent past, it remains an important tool to stimulate investment in Belgium. More information about this system can be requested at:

More information about this system can be requested at:

Federal Public Service Finance –
Foreign Investment Cell
Parliament Corner, Wetstraat 24 B-1000 Brussel, België
Tel: 02 579 38 66 –
Fax: +32 257 951 12
e-mail: taxinvest@minfin.fed.be

Web: http://taxinvest.belgium.be 

Foreign Trade Zones/Free Ports/Trade Facilitation

There are no foreign trade zones or free ports as such in Belgium. However, the country utilizes the concept of customs warehouses. A customs warehouse is approved by the customs authorities where imported goods may be stored without payment of customs duties and VAT. Only non-EU goods can be placed under a customs warehouse regime. In principle, non-EU goods of any kind may be admitted, regardless of their nature, quantity, and country of origin or destination. Individuals and companies wishing to operate a customs warehouse must be established in the EU and obtain authorization from the customs authorities. Authorization may be obtained by filing a written request and by demonstrating an economic need for the warehouse.

Performance and Data Localization Requirements

Performance requirements in Belgium usually relate to the number of jobs created. There are no national requirement rules for senior management or board of directors. There are no known cases where export targets or local purchase requirements were imposed, with the exception of military offset programs, which were reintroduced under Prime Minister Verhofstadt in 2006. While the government reserves the right to reclaim incentives if the investor fails to meet his employment commitments, enforcement is rare. However, in 2012, with the announced closure of an automotive plant in Flanders, the Flanders regional government successfully reclaimed training subsidies that had been provided to the company.

There is currently no requirement for foreign IT providers to share source code and/or provide access to surveillance agencies. At this time, there is no forced localization, but the European Parliament is currently considering legislative steps in that direction.

Real Property

Property rights in Belgium are well protected by law, and the courts are independent and considered effective in enforcing property rights. Mortgages and liens exist through a reliable recording system operated by the Belgian notaries.

However, on the World Bank’s 2020 ranking on the ease for registering property, Belgium ranks only 139th out of a total of 190 countries.

Intellectual Property Rights

Belgium generally meets very high standards for the protection of intellectual property rights (IPR). The European Union (EU) has issued a number of directives to promote the protection and enforcement of IPR, which EU Member States are required to implement. National laws that do no conflict with those of the EU also apply. Belgium is a member of the World Trade Organization (WTO) and so party to the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). Belgium is also a member of the World Intellectual Property Organization (WIPO) and party to many of its treaties, including the Berne Convention, the Paris Convention, the WIPO Copyright Treaty, and the WIPO Performances and Phonograms Treaty.

IPR is administered by the Belgian Office of Intellectual Property (OPRI), which is part of the Directorate-General for Economic Regulation in the Ministry for Economic Affairs: https://economie.fgov.be/en/themes/intellectual-property/institutions-and-actors/belgian-office-intellectual.  This office manages and provides Belgian IPR titles, oversees public awareness campaigns, drafts legislation, and advises Belgian authorities with regard to national and international issues. The Belgian Ministry of Justice is responsible for enforcement of IPR. Belgium experiences a rate of commercial and digital infringement – particularly internet music piracy and illegal copying of software – similar to most EU Member States.

Belgium is not included on USTR’s Special 301 Report. For additional information about treaty obligations and points of contact at local IP offices, please see the WIPO’s country profiles at http://www.wipo.int/directory/en/ .

For additional information about treaty obligations and points of contact at local IP offices, please see the WIPO’s country profiles at http://www.wipo.int/directory/en/ .

Capital Markets and Portfolio Investment

Belgium has policies in place to facilitate the free flow of financial resources. Credit is allocated at market rates and is available to foreign and domestic investors without discrimination. Belgium is fully served by the international banking community and is implementing all relevant EU financial directives. At the same time, in 2020 Belgium ranks 67th out of 190 for “getting credit” on the World Bank’s “Doing Business” rankings, and in the bottom quintile among OECD high income countries.

Bruges established the world’s first stock market almost 600 years ago, and the Belgian bourse is well-established today. On Euronext, a company may increase its capital either by capitalizing reserves or by issuing new shares. An increase in capital requires a legal registration procedure, and new shares may be offered either to the public or to existing shareholders. A public notice is not required if the offer is to existing shareholders, who may subscribe to the new shares directly. An issue of bonds to the public is subject to the same requirements as a public issue of shares: the company’s capital must be entirely paid up, and existing shareholders must be given preferential subscription rights. Details on the shareholders of the Bel20 (benchmark stock market index of Euronext Brussels) can be found on http://www.gresea.be/Qui-sont-les-actionnaires-du-BEL-20 .

In 2016, the Belgian government passed legislation to improve entrepreneurial financing through crowdfunding and more flexible capital venture rules.

Money and Banking System

Because the Belgian economy is directed toward international trade, more than half of its banking activities involve foreign countries. Belgium’s major banks are represented in the financial and commercial centers of dozens of countries by subsidiaries, branch offices, and representative offices. The country does have a central bank, the National Bank of Belgium (NBB), whose governor is also a member of the Governing Council of the European Central Bank (ECB). Being a Eurozone member state, the NBB is part of the Euro system, meaning that it has transferred the sovereignty over monetary policy to the ECB.

Belgium is one of the countries with the highest number of banks per capita in the world. The banking system is considered sound but was hard hit by the financial crisis that began in the fall of 2008, when federal and regional governments had to step in with lending and guarantees for the three largest banks. Following a review of the 2008 financial crisis, the Belgian government decided in 2012 to shift the authority of bank supervision from the Financial Market Supervision Authority (FMSA) to the NBB. In 2017, supervision of systemically important Belgian banks shifted to the ECB. The country has not lost any correspondent banking relationships in the past three years, nor are there any correspondent banking relationships currently in jeopardy.

The developments since September 2008 have also resulted in a major de-risking of the Belgian banks’ balance sheets, on the back of a rising share of exposure to the public sector – albeit more concentrated on Belgium – and a gradual further expansion of the domestic mortgage loan portfolio. Since the introduction of the Single Supervisory Mechanism (SSM), the vast majority of the Belgian banking sector’s assets are held by banks that come under SSM supervision, including the “significant institutions” KBC Bank, Belfius Bank, Argenta, AXA Bank Europe, Bank of New-York Mellon and Bank Degroof/Petercam. Other banks governed by Belgian law – such as BNP Paribas Fortis and ING Belgium – are also subject to SSM supervision as they are subsidiaries of non-Belgian “significant institutions.”

In 2018, the banking sector conducted its business in a context of gradual economic recovery and persistently low interest rates. That situation had two effects: it put pressure on the sector’s profitability and caused a credit default problem in some European banks. The National Bank of Belgium designated eight Belgian banks as domestic systemically important institutions, and divided them into two groups according to their level of importance. A 1.5 % capital surcharge was imposed on the first group (BNP Paribas Fortis, KBC Group and Belfius Bank). The second group (AXA Bank Europe, Argenta, Euroclear and The Bank of New York Mellon) is required to hold a supplementary capital buffer of 0.75 %. These surcharges are being phased in over a three-year period.

Under pressure from the European Union, bank debt has decreased in volume overall, from close to 1.6 trillion euros in 2007 to just over 1 trillion euros in 2018, according to the National Bank of Belgium, particularly in the risky derivative markets.

It remains to be seen how the economic fallout of the COVID-19 crisis will impact banks in Belgium.

Belgian banks use modern, automated systems for domestic and international transactions. The Society for Worldwide Interbank Financial Telecommunications (SWIFT) is headquartered in Brussels. Euroclear, a clearing entity for transactions in stocks and other securities, is also located in Brussels.

Opening a bank account in the country is linked to residency status. The U.S. FATCA (Foreign Account Tax Compliance Act) requires Belgian banks to report information on U.S. account holders directly to the Belgian tax authorities, who then release the information to the IRS.

Some Belgian banks have already made great progress with blockchain technology: for instance, one Belgian bank offers a product called MyCar, a digital ecosystem that connects all the players in a car purchase with blockchain technology, creating a single, trusted source of confidence and a centralized workflow that reportedly makes it easier to buy a car.

With regard to cryptocurrencies, the National Bank of Belgium has no central authority overseeing the network.

Unlike most other EU countries, there are no cryptocurrency ATMs, and the NBB has repeatedly warned about potential adverse consequences of the use of cryptocurrencies for financial stability.

Belgium does not have a virtual assets exchange platform, but they intend to transpose the Fifth Anti-Money Laundering (AML) directive in June 2020 when the Financial Services and Markets Authority (FSMA) will be the supervisory authority.

Foreign Exchange and Remittances

Foreign Exchange

Payments and transfers within Belgium and with foreign countries require no prior authorization. Transactions may be executed in euros as well as in other currencies.

Remittance Policies

Dividends may be remitted freely except in cases in which distribution would reduce net assets to less than paid-up capital. No further withholding tax or other tax is due on repatriation of the original investment or on the profits of a branch, either during active operations or upon the closing of the branch.

Sovereign Wealth Funds

Belgium has a sovereign wealth fund (SWF) in the form of the Federal Holding and Investment Company, a quasi-independent entity created in 2004 and now mainly used as a vehicle to manage the banking assets which were taken on board during the 2008 banking crisis. The SWF has a board whose members reflect the composition of the governing coalition and are regularly audited by the “Cour des Comptes” or national auditor. At the end of 2019, its total assets amounted to € 2.35 billion. The majority of the funds are invested domestically. Its role is to allow public entities to recoup their investments and support Belgian banks. The SWF is required by law to publish an annual report and is subject to the same domestic and international accounting standards and rules. The SWF routinely fulfills all legal obligations. However, it is not a member of the International Forum of Sovereign Wealth Funds.

Belgium has about (around) 80,000 employees working in SOEs, mainly in the railways, telecoms and general utility sectors. There are also several regional-owned enterprises where the regions often have a controlling majority: for a full listing on the companies located in Wallonia, see www.actionnariatwallon.be. There is no equivalent website for companies located in Flanders or in Brussels. Private enterprises are allowed to compete with SOEsunder the same terms and conditions, but since the EU started to liberalize network industries such as electricity, gas, water, telecoms and railways, there have been regular complaints in Belgium about unfair competition from the former state monopolists. Complaints have ranged from lower salaries (railways) to lower VAT rates (gas and electricity) to regulators with a conflict of interest (telecom). Although these complaints have now largely subsided, many of these former monopolies are now market leaders in their sector, due mainly to their ability to charge high access costs to legacy networks that were fully amortized years ago. However, former telecom monopolist Proximus still features on the EU’s list of companies receiving state aid.

Privatization Program

Belgium currently has no scheduled privatizations. There are ongoing discussions about the relative merits of a possible privatization of the state-owned bank Belfius and the government share in telecom operator Proximus, . There are no indications that foreign investors would be excluded from these eventual privatizations.

The Belgian government encourages both foreign and local enterprises to follow generally accepted Corporate Social Responsibility principles such as the OECD Guidelines for Multinational Enterprises and the United Nations Guiding Principles on Business and Human Rights. The Belgian government also encourages adherence to the OECD Due Diligence guidance for responsible supply chains of minerals from conflict-affected areas.

When it comes to human rights, labor rights, consumer and environmental protection, or laws/regulations which would protect individuals from adverse business impacts, the Belgian government is generally considered to enforce domestic laws in a fair and effective manner.

There is a general awareness of corporate social responsibility among producers and consumers. Boards of directors are encouraged to pay attention to corporate social responsibility in the 2009 Belgian Code on corporate governance. This Code, also known as the ‘Code Buysse II’ was drafted by a group of independent corporate experts and stresses the importance of sound entrepreneurship, good corporate governance, an active board of directors and an advisory council. It deals with unlisted companies and is complementary to existing Belgian legislation. However, adherence to the Code Buysse II is not factored into public procurement decisions. For listed companies, far stricter guidelines apply, which are monitored by the Financial Services and Markets Authority.

drafted by a group of independent corporate experts and stresses the importance of sound entrepreneurship, good corporate governance, an active board of directors and an advisory council. It deals with unlisted companies and is complementary to existing Belgian legislation. However, adherence to the Code Buysse II is not factored into public procurement decisions. For listed companies, far stricter guidelines apply, which are monitored by the Financial Services and Markets Authority.

Belgium is part of the Extractive Industries Transparency Initiative.

Belgian anti-bribery legislation was revised completely in March 1999, when the competence of Belgian courts was extended to extraterritorial bribery. Bribing foreign officials is a criminal offense in Belgium. Belgium has been a signatory to the OECD Anti-Bribery Convention since 1999, and is a participating member of the OECD Working Group on Bribery. In the Working Group’s Phase 3 review of Belgium in 2013 it called on Belgium to address the lack of resources available for fighting foreign bribery.

Under Article 3 of the Belgian criminal code, jurisdiction is established over offenses committed within Belgian territory by Belgian or foreign nationals. Act 99/808 added Article 10 related to the code of criminal procedure. This Article provides for jurisdiction in certain cases over persons (foreign as well as Belgian nationals) who commit bribery offenses outside the territory of Belgium. Various limitations apply, however. For example, if the bribe recipient exercises a public function in an EU member state, Belgian prosecution may not proceed without the formal consent of the other state.

Under the 1999 Belgian law, the definition of corruption was extended considerably. It is considered passive bribery if a government official or employer requests or accepts a benefit for him or herself or for somebody else in exchange for behaving in a certain way. Active bribery is defined as the proposal of a promise or benefit in exchange for undertaking a specific action. Until 1999, Belgian anti-corruption law did not cover attempts at passive bribery. The most controversial innovation of the 1999 law was the introduction of the concept of “private corruption,” or corruption among private individuals.

Corruption by public officials carries heavy fines and/or imprisonment between 5 (five) and 10 years. Private individuals face similar fines and slightly shorter prison terms (between six months and two years). The current law not only holds individuals accountable, but also the company for which they work. Contrary to earlier legislation, the 1999 law stipulates that payment of bribes to secure or maintain public procurement or administrative authorization through bribery in foreign countries is no longer tax deductible. Recent court cases in Belgium suggest that corruption is most serious in government procurement and public works contracting. American companies have not, however, identified corruption as a barrier to investment.

The responsibility for enforcing corruption laws is shared by the Ministry of Justice through investigating magistrates of the courts, and the Ministry of the Interior through the Belgian federal police, which has jurisdiction in all criminal cases. A special unit, the Central Service for

Combating Corruption, has been created for enforcement purposes but continues to lack the necessary staff. Belgium is also an active participant in the Global Forum on Asset Recovery.

The Belgian Employers Federation encourages its members to establish internal codes of conduct aimed at prohibiting bribery. To date, U.S. firms have not identified corruption as an obstacle to FDI.

UN Anticorruption Convention, OECD Convention on Combatting Bribery

Belgium has signed and ratified the UN Anticorruption Convention of 1998, and is also party to the OECD Convention on Combatting Bribery of Foreign Public Officials in International Business Transactions.

Office of the Federal Prosecutor of Belgium
Transparency International Belgium
Resources to Report Corruption
Wolstraat 66-1 – 1000 Brussels
T 02 55 777 64
F 02 55 777 94

Transparency Belgium
Nijverheidsstraat 10, 1000 Brussels
tel: +32 (0)2 893 2584
email: infoa@transparencybelgium.be

Belgium is a peaceful, democratic nation comprised of federal, regional, and municipal political units: the Belgian federal government, the regional governments of Flanders, Wallonia, the Brussels capital region, and 581 communes (municipalities). Political divisions do exist between the Flemish and the Walloons, but they are addressed in democratic institutions and generally resolved through compromise. The Federal Council of Ministers, headed by the prime minister, remains in office as long as it retains the confidence of the lower house (Chamber of Representatives) of the bicameral parliament.

The Belgian labor force is generally well trained, highly motivated and very productive. Workers have an excellent command of foreign languages, particularly in Flanders. There is a low unemployment rate among skilled workers, such as local managers. Enlargement of the EU in May 2004 and January 2007 facilitated the entry of skilled workers into Belgium from new member states. Non-EU nationals must apply for work permits before they can be employed. Minimum wages vary according to the age and responsibility level of the employee and are adjusted for the cost of living.

Belgian workers are highly unionized and usually enjoy good salaries and benefits. Belgian wage and social security contributions, along with those in Germany, are among the highest in Western Europe. For 2019, Belgium’s harmonized unemployment figure was 5.5 percent, below the EU28 average of 6.2 percent (OECD). High wage levels and pockets of high unemployment coexist, reflecting both strong productivity in new technology sector investments and weak skills of Belgium’s long-term unemployed, whose overall education level is significantly lower than that of the general population. There are also significant differences in regional unemployment levels: 2.9 percent in Flanders, against 7.2 percent in Wallonia and 11.8 percent in Brussels. As a consequence of high wage costs, employers have tended to invest more in capital than in labor. At the same time, a shortage exists of workers with training in computer hardware and software, automation and marketing, increasing wage pressures in these sectors.

Belgian’s comprehensive social security package is composed of five major elements: family allowance, unemployment insurance, retirement, medical benefits and a sick leave program that guarantees salary in event of illness. Currently, average employer payments to the social security system stand at 25 percent of salary while employee contributions comprise 13 percent. In addition, many private companies offer supplemental programs for medical benefits and retirement.

Belgian labor unions, while maintaining a national superstructure, are, in effect, divided along linguistic lines. The two main confederations, the Confederation of Christian Unions and the General Labor Federation of Belgium, maintain close relationships with the Christian Democratic and Socialist political parties, respectively. They exert a strong influence in the country, politically and socially. A national bargaining process covers inter-professional agreements that the trade union confederations negotiate biennially with the government and the employers’ associations. In addition to these negotiations, bargaining on wages and working conditions takes place in the various industrial sectors and at the plant level. About 51 percent of employees from the public service and private sector are labor union members. A cause for concern in labor negotiation tactics is isolated cases where union members in Wallonia have resorted to physically forcing management to stay in their offices until an agreement can be reached.

Firing a Belgian employee can be very expensive. An employee may be dismissed immediately for cause, such as embezzlement or other illegal activity, but when a reduction in force occurs, the procedure is far more complicated. In those instances where the employer and employee cannot agree on the amount of severance pay or indemnity, the case is referred to the labor courts for a decision. To avoid these complications, some firms include a “trial period” (of up to one year) in any employer-employee contract. Belgium is a strict adherent to ILO labor conventions.

Belgium was one of the first countries in the EU to harmonize its legislation with the EU Works Council Directive of December 1994. Its flexible approach to the consultation and information requirements specified in the Directive compares favorably with that of other EU member states.

In 2015, the Belgian government increased the retirement age from the current age of 65 to 66 as of 2027 and 67 as of 2030. Under the 2015 retirement plan, various schemes for early retirement before the age of 65 will be gradually phased out, and unemployment benefits will decrease over time as an incentive for the unemployed to regain employment.

Wage increases are negotiated by sector within the parameters set by automatic wage indexation and the 1996 Law on Competitiveness. The purpose of automatic wage indexation is to establish a bottom margin that protects employees against inflation: for every increase in consumer price index above 2 percent, wages must be increased by (at least) 2 percent as well. The top margin is determined by the competitiveness law, which requires the Central Economic Council (CCE) to study wage projections in neighboring countries and make a recommendation on the maximum margin that will ensure Belgian competitiveness. The CCE is made up of civil society organizations, primarily representatives from employer and employee organizations, and its mission is to promote a socio-economic compromise in Belgium by providing informed recommendations to the government. The CCE’s projected increases in neighboring countries have historically been higher than their real increases, however, and have caused Belgium’s wages to increase more rapidly than its neighbors. Since 2016 however, that wage gap has decreased substantially.

Belgian labor law provides for dispute settlement procedures, with the labor minister appointing an official as mediator between the employers and employee representatives.

Belgium, as a high income country, does not qualify for DFC support.

Pieter-Jan Van Steenkiste
Economic Specialist
U.S. Embassy Brussels
Boulevard du Regent 25
1000 Bruxelles
0032-2-811-4000

Transparency of the Regulatory System

The judicial system is extremely well-regarded and considered fair. The legal system is independent of the legislative branch of the government and is based on a centuries-old legal tradition. It includes written and consistently applied commercial and bankruptcy laws. Secured interests in property are recognized and enforced. The World Economic Forum’s (WEF) 2019 Global Competitiveness Report, which ranks Denmark as the world’s tenth most competitive economy and fourth among EU member states, characterizes it as having among the best functioning and most transparent institutions in the world. Denmark ranks high on specific WEF indices related to macroeconomic stability (1st), labor market (3rd), business dynamism (3rd), Institutions (7th), ICT adoption (9th) and Skills (3rd).

To facilitate business administration, Denmark maintains only two “legislative days” per year—January 1st and July 1st—as the only days on which new laws and regulations affecting the business sector can come into effect. Danish laws and policies granting national treatment to foreign investments are designed to increase FDI in Denmark. Denmark consistently applies high standards to health, environment, safety, and labor laws. Danish corporate law is generally in conformity with current EU legislation. The legal, regulatory and accounting systems are relatively transparent and in accordance with international standards.

Bureaucratic procedures are stream-lined and transparent, and proposed laws and regulations are published in draft form for public comment. Public finances and debt obligations are transparent.

As of December 19, 2012, the Ministry of Taxation made all companies’ corporate tax records public, and it updates and publicizes them annually. The publication is intended to increase transparency and public scrutiny of corporate tax payments. Greenland and the Faroe Islands retain autonomy with regards to tax policy.

The government uses transparent policies and effective laws to foster competition and establish “clear rules of the game,” consistent with international norms and applicable equally to Danish and foreign entities. The Danish Competition and Consumer Authority works to make markets well-functioning so businesses compete efficiently on all parameters. The Authority is a government agency under the Danish Ministry of Industry, Business and Financial Affairs. It enforces the Danish Competition Act. The purpose of the Act and Danish consumer legislation is to promote efficient resource allocation in society, to prevent the restriction of efficient competition, to create a level playing field for enterprises and to protect consumers.

Publicly listed companies in Denmark must adhere to the Danish Financial Statements Act when preparing their annual reports. The accounting principles are International Accounting Standards (IAS), International Financial Reporting Standards (IFRS) and Danish Generally Accepted Accounting Principles (GAAP). Financial statements must be prepared annually. The Danish Financial Statements Act covers all businesses.

Private limited companies, public limited companies and corporate funds are obliged to prepare financial statements in accordance with accounting classes determined by company size:

• Small businesses (Class B): Total assets of DKK 44 million (USD 6.7 million), net revenue of DKK 89 million (USD 13.5 million), average number of full-time employees during the financial year of 50.

• Medium-sized enterprises (Class C medium): Total assets of DKK 156 million (USD 23.7 million), net revenue of DKK 313 million (USD 47.5 million), average number of full-time employees during the financial year of 250.

• Large companies (Class C large): Companies that are neither small nor medium companies.

According to the Danish Financial Statements Act, personally owned businesses, personally owned general partnerships (multiple owners) and general funds are characterized as Class A and thus have no requirement to prepare financial statements unless the owner voluntarily chooses to do so.

All government draft proposed regulations are published at the portal for public hearings, “Høringsportalen” (www.hoeringsportalen.dk ), to solicit input from interested parties. After receiving feedback and possibly undergoing amendments, proposed regulations are published at the Danish Parliament’s website (www.ft.dk). Final regulations are published at www.lovtidende.dk  and www.ft.dk . All ministries and agencies are required to publish proposed regulations. Denmark has a World Bank composite score of “4.75” for the Global Indicators of Regulatory Governance, on a 0 – 5 scale. With respect to governance, the World Bank suggests the following areas for improvement:

• Affected parties cannot request reconsideration or appeal adopted regulations to the relevant administrative agency

• There is no existing requirement that regulations be periodically reviewed to see whether they are still needed or should be revised.

International Regulatory Considerations

Denmark adheres to the WTO Agreement on Trade-Related Investment Measures (TRIMs); no inconsistencies have been reported.

Legal System and Judicial Independence

Since the adoption of the Danish constitution in 1849, decision-making power in Denmark has been divided into the legislative, executive and judicial branches. The principle of a three-way separation of power and the independence of courts of law help ensure democracy and the legal rights of the country’s citizens. The district courts, the high courts and the Supreme Court represent the three basic levels of the Danish legal system, but the legal system also comprises a range of other institutions with special functions.

For further information please see: https://domstol.dk/om-os/english/the-danish-judicial-system/ 

https://domstol.dk/om-os/english/the-danish-judicial-system/ 

Laws and Regulations on Foreign Direct Investment

The government agency “Invest in Denmark” is part of the Danish Trade Council and is situated within the Ministry of Foreign Affairs. The agency provides detailed information to potential investors. The website for the agency is www.investindk.com . The Faroese government promotes Faroese trade and investment through its website https://www.faroeislands.fo/economy-business/ . For more information regarding investment potential in Greenland, please see Greenland Holding at www.venture.gl  or the Greenland Tourism & Business Council at https://visitgreenland.com/ .

As an EU member state, Denmark is bound by EU rules on the free movement of goods, capital, persons and certain services. Denmark welcomes foreign investment and does not distinguish between EU and other investors. There are no additional permits required of foreign investors, nor any reported biases against foreign companies from municipal or national authorities.

The Danish government plans to introduce legislation to establish a foreign investment screening mechanism, late in 2020. The screening mechanism would be in line with the EU investment screening framework encouraging member states to screen foreign investments in critical infrastructure and strategic sectors.

Competition and Anti-Trust Laws

The Danish Competition and Consumer Authority (CCA) reviews transactions for competition-related concerns. According to the Danish Competition Act, the CCA requires notification of mergers and takeovers if the aggregate annual turnover in Denmark of all undertakings involved is more than DKK 900 million and the aggregate annual turnover in Denmark of each of at least two of the undertakings concerned is more than DKK 100 million; or the aggregate annual turnover in Denmark of at least one of the undertakings involved is more than DKK 3.8 billion and the aggregate annual worldwide turnover of at least one of the other undertakings concerned is more than DKK 3.8 billion. Where a merger is a result of the acquisition of parts of one or more undertakings, the calculation of the turnover referred to shall only comprise the share of the turnover of the seller or sellers that relates to the assets acquired. The merger control provisions are contained in Part four of the Danish Competition Act  and in Executive Order on the Notification of Mergers . Turnover is calculated in a accordance with Executive Order on the calculation of turnover in the Competition Act.  

A full notification of a merger must include the information and documents specified in the full notification form; cf. Annex 1 – Information for full notification of mergers.  A simplified notification of a merger must include the information and documents specified in the simplified notification form; cf. Annex 2 – Information for simplified notification of mergers.   From 1st August 2013 merger fees are payable for merger notifications submitted to the Competition and Consumer Authority. The fee for a simplified notification amounts DKK 50,000. The fee for a full notification amounts 0,015 per cent of the aggregate annual turnover in Denmark of the undertakings involved, however maximum DKK 1,500,000. If the merger has already been notified through a simplified notification and the payment of DKK 50,000, but the Competition and Consumer Authority has required a full notification, a full notification shall be submitted together with a fee amounting 0,015 per cent of the aggregate annual turnover in Denmark of the undertakings involved, less DKK 50,000, however maximum DKK 1,500,000.

Further information concerning the notification of mergers is available in the Guidelines to the Executive Order on Notification of Mergers and on Merger Fees , and further information concerning Danish merger control in general in the Merger Guidelines – currently under revision. 

A merger or takeover is subject to approval by the CCA. Large scale mergers also require approval from EU Competition authorities.

Expropriation and Compensation

By law, private property can only be expropriated for public purposes, in a non-discriminatory manner, with reasonable compensation, and in accordance with established principles of international law. There have been no recent expropriations of significance in Denmark.

Dispute Settlement

ICSID Convention and New York Convention

There have been no major disputes over investment in Denmark in recent years. Denmark has been a member of the World Bank-based International Center for the Settlement of Investment Disputes (ICSID) since 1968. ICSID offices have also been extended to the Faroe Islands and Greenland. Denmark is a party to the 1958 (New York) Convention on the Recognition and Enforcement of Foreign Arbitral Awards, meaning local courts must enforce international arbitration awards that meet certain criteria. Subsequent Danish legislation makes international arbitration of investment disputes binding in Denmark. Denmark declared in 1976 that the New York Convention applies to the Faroe Islands and Greenland. Denmark is a party to the 1961 European Convention on International Commercial Arbitration and to the 1962 Agreement relating to the application of this Convention. Denmark adopted the UNCITRAL Model Law on International Commercial Arbitration in 1985.

Bankruptcy Regulations

Monetary judgments under the bankruptcy law are made in freely convertible Danish Kroner. The bankruptcy law addresses creditors’ claims against a bankruptcy in the following order: (1) costs and debt accrued during the treatment of the bankruptcy; (2) costs, including the court tax, relating to attempts to find a solution other than bankruptcy; (3) wage claims and holiday pay; (4) excise taxes owed to the government; and (5) all other claims. In the World Bank’s 2020 Doing Business Report, Denmark ranks 6th in “resolving insolvency.”

Investment Incentives

Performance incentives are available both to foreign and domestic investors. For instance, foreign and domestic investors in designated regional development areas may take advantage of certain grants and access to preferential financing. Investments in Greenland may be eligible for incentives as well. Foreign subsidiaries located in Denmark can participate in government-financed or subsidized research programs on a national-treatment basis.

Foreign Trade Zones/Free Ports/Trade Facilitation

The only free port in Denmark is the Copenhagen Free Port, operated by the Port of Copenhagen. The Port of Copenhagen and the Port of Malmo (Sweden) merged their commercial operations in 2001, including the free port activities, in a joint company named CMP. CMP is one of the largest port and terminal operators in the Nordic Region and one of the largest Northern European cruise-ship ports; it occupies a key position in the Baltic Sea Region for the distribution of cars and transit of oil. The facilities in the free port are mostly used for tax-free warehousing of imported goods, for exports, and for in-transit trade. Tax and duties are not payable until cargo leaves the Free Port. The processing of cargo and the preparation and finishing of imported automobiles for sale can freely be set up in the Free Port. Manufacturing operations can be established with permission of the customs authorities, which is granted if special reasons exist for having the facility in the Free Port area. The Copenhagen Free Port welcomes foreign companies establishing warehouse and storage facilities.

Performance and Data Localization Requirements

Performance requirements are applied only in connection with investment in hydrocarbon exploration, where concession terms normally require a fixed work program, including seismic surveys and in some cases exploratory drilling, consistent with applicable EU directives. Performance requirements are mostly designed to protect the environment, mainly through encouraging reduced use of energy and water. Several environmental and energy requirements are systematically imposed on households as well as businesses in Denmark, both foreign and domestic. For instance, Denmark was the first of the EU countries, in January 1993, to introduce a carbon dioxide (CO2) tax on business and industry. This includes certain reimbursement schemes and subsidy measures to reduce the costs for businesses, thereby safeguarding competitiveness.

Performance requirements are governed by Danish legislation and EU regulations. Potential violations of the rules governing this area are punishable by fines or imprisonment.

Performance requirements are applied uniformly to domestic and foreign investors.

The Danish government does not follow “forced localization” policies, nor does it require foreign IT providers to turn over source code and/or provide access to surveillance. The Danish Data Protection Agency, a government agency, the Ministry of Justice and the Ministry for Culture are the entities involved with data storage.

Real Property

Property rights in Denmark are well protected by law and in practice. Real estate is chiefly financed through the well-established Danish mortgage bond credit system, the security of which compares to that of government bonds. To comply with the covered bond definition in the EU Capital Requirements Directive (CRD), the Danish mortgage banking regulation was amended effective July 1, 2007. With the amended Danish mortgage banking regulation, commercial banks now have the same opportunities as mortgage banks and ship-financing institutions to issue covered bonds. Only issuers that have been granted a license from the Danish Financial Supervisory Authority (FSA) are able to issue Danish covered bonds.

Secured interests in property are recognized and enforced in Denmark. All mortgage credits in real estate are recorded in local public registers of mortgages. Except for interests in cars and commercial ships, which are also publicly recorded, other property interests are generally unrecorded. The local public registers are a reliable system of recording security interests. Denmark is ranked 11th in the World Bank’s Doing Business 2020 Report for its ease of “registering property.” Denmark ranked 13th out of 129 countries in the Property Rights Alliance’s International Property Rights Index 2019, and 7th in its region.

Intellectual Property Rights

Intellectual property rights (IPR) in Denmark are well protected and enforced. Denmark has ratified and adheres to key international conventions and treaties concerning protection of IP rights, including the World Trade Organization (WTO) Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) and a number of treaties administered by the World Intellectual Property Organization (WIPO), including the Berne Convention, the Paris Convention, the Patent Cooperation Treaty (PCT), the WIPO Copyright Treaty, and the WIPO Performances and Phonograms Treaty. In 2019, the Property Rights Alliance ranked Denmark 13th out of 131 countries overall in their International Property Rights Index and 7th in Western Europe.

For additional information about treaty obligations and points of contact at local IP offices, please see WIPO’s country profiles at http://www.wipo.int/directory/en/ .

A list of attorneys in Denmark known to accept foreign clients can be found at https://go.usa.gov/xmkME . This list of attorneys and law firms is provided by the American Embassy as a convenience to U.S. citizens. It is not intended to be a comprehensive list of attorneys in Denmark, and the absence of an attorney from the list is in no way a reflection on competence. A complete list of attorneys in Denmark, Greenland and the Faeroe Islands may be found at the Danish Bar Association web site: www.advokatnoeglen.dk.

Capital Markets and Portfolio Investment

Denmark has fully liberalized foreign exchange flows, including those for direct and portfolio investment purposes. Credit is allocated on market terms and freely available. Denmark adheres to its IMF Article VIII obligations. The Danish banking system is under the regulatory oversight of the Financial Supervisory Authority. Differentiated voting rights – A and B stocks – are used to some extent, and several Danish companies are controlled by foundations, which can restrict potential hostile takeovers, including foreign takeovers.

The Danish stock market functions efficiently. In 2005, the Copenhagen Stock Exchange became part of the integrated Nordic and Baltic marketplace, OMX Exchanges, which is headquartered in Stockholm. Besides Stockholm and Copenhagen, OMX also includes the stock exchanges in Helsinki, Tallinn, Riga and Vilnius. In order to increase the access to capital for primarily small companies, the OMX in December 2005 opened a Nordic alternative marketplace – “First North” – in Denmark. In February 2008, the exchanges were acquired by the NASDAQ-OMX Group. In the World Economic Forum 2019 report, Denmark ranks 11th out of 141 on the metric “Financial System”.

The Danish stock market is divided into four different branches/indexes. The C25 index contains the 25 most valuable companies in Denmark. Other large companies with a market value exceeding USD 1.1 billion (EUR 1 billion) are in the group of “Large Cap,” companies with a market value between USD 170 million (EU 150 million) and USD 1.1 billion belong to the “Mid Cap” segment, while companies with a market value smaller than USD 170 million belong to “Small Cap” group.

Money and Banking System

The major Danish banks are rated by international agencies, and their creditworthiness is rated as high by international standards. The European Central Bank and the Danish National Bank reported that Denmark’s major banks have passed stress tests by considerable margins.

Denmark’s banking sector is relatively large; based on the ratio of consolidated banking assets to GDP, the sector is three times bigger than the national economy. Before 2020, the total of Danish shares valued DKK 3,190 billion, (USD 778 billion) and were owned 51.3 percent by foreign owners and 48.7 percent by Danish owners, including 12.5 percent held by households and 5,4 percent by the government. The assets of the three largest Danish banks – Danske Bank, Nordea Bank Danmark, and Jyske Bank – constitute approximately 75 percent of the total assets in the Danish banking sector.

Denmark’s biggest systemically important bank, Danske Bank, with assets that are roughly 1 1/2 times Denmark’s total GDP, is under criminal investigation in several jurisdictions amid accusations an Estonian branch became a European hub for money launderers from Russia. The bank has admitted that a significant part of about EUR 200 billion (USD 230 billion) that flowed through the non-resident portfolio of its tiny Estonian branch between 2007 and 2015 could have illicit origins. The scandal has led to significant tightening of financial regulation, including increasing penalties by up to 700 percent and increased funding for the Financial Supervisory Authority.

The primary goal of the Central Bank (Nationalbanken) is to keep the peg of the Danish currency to the Euro – with allowed fluctuations of 2.25 percent. It also functions as the general lender to Danish commercial banks and controls the money supply in the economy.

As occurred in many countries, Danish banks experienced significant turbulence in 2008 – 2009. The Danish Parliament subsequently passed a series of measures to establish a “safety net” program, provide government lending to financial institutions in need of capital to uphold their solvency requirements, and ensure the orderly winding down of failed banks. The Parliament passed an additional measure, the fourth Bank Package, in August 2011, which sought to identify systemically important financial institutions, ensure the liquidity of banks which assume control of a troubled bank, support banks acquiring troubled banks by allowing them to write off obligations of the troubled bank to the government, and change the funding mechanism for the sector-funded guarantee fund to a premiums-based, pay-as-you-go system. According to the Danish Government, Bank Package 4 provides mechanisms for a sector solution to troubled banks without senior debt holder losses but does not supersede earlier legislation. As such, senior debt holder losses are still a possibility in the event of a bank failure.

On October 10, 2013, the Danish Minister for Business and Growth concluded a political agreement with broad political support which, based on the most recent financial statements, identified specific financial institutions as “systemically important” (SIFI). The SIFI in Denmark at the end of 2019 were Danske Bank A/S, Nykredit Realkredit A/S, Jyske Bank A/S, Nordea Kredit Realkredit A/S, Sydbank A/S, Spar Nord Bank A/S and DLR Kredit A/S. These were identified based on three quantitative measures: 1) a balance sheet to GDP ratio above 6.5 percent; 2) market share of lending in Denmark above 5 percent; or 3) market share of deposits in Denmark above 3 percent. If an institution is above the requirement of any one of the three measures, it will be considered systemically important and must adhere to the stricter requirements on capitalization, liquidity and resolution. The Faroese SIFI are P/F BankNordik, Betri Banki P/F and Norðoya Sparikassi, while Grønlandsbanken is the only SIFI in Greenland.

Experts expect a revision of the Danish system of troubled financial institution resolution mechanisms in connection with a decision to join the EU Banking Union. The national payment system, “Nets” was sold to a consortium consisting of Advent International Corp., Bain Capital LLC, and Danish pension fund ATP in March 2014 for DKK 17 billion (USD 2.58 billion). Nets went public with an IPO late 2016.

Foreign Exchange and Remittances

Foreign Exchange

Exchange rate conversions throughout this document are based on the 2019 average exchange rate where Danish Kroner (DKK) 6.6703 = 1 USD (USD)

There are no restrictions on converting or transferring funds associated with an investment into or out of Denmark. Policies in place are intended to facilitate the free flow of capital and to support the flow of resources in the product and services markets. Foreign investors can obtain credit in the local market at normal market terms, and a wide range of credit instruments is available.

Denmark has not adopted the Euro currency. The country meets the EU’s economic convergence criteria for membership and can join if it wishes to do so. Denmark conducts a fixed exchange rate policy with the Danish Krone linked closely to the Euro within the framework of ERM II. The Danish Krone (DKK; plural: Kroner, in English, “the Crown”) has a fluctuation band of +/- 2.25 percent of the central rate of DKK 746.038 per 100 Euro. The Danish Government supports inclusion in a European Banking Union, as long as it can be harmonized with the Danish Euro opt-out and there is a guarantee that the Danish mortgage finance system will be allowed to continue in its present form.

The Danish political reservation concerning Euro participation can only be abolished by national referendum, and Danish voters have twice (in 1992 and 2000) voted it down. The government has stated that in principle it supports adopting the Euro, but no referendum is expected for the foreseeable future. Regular polling on this issue shows a majority of public opinion remains in favor of keeping the Krone. According to the Stability and Growth Pact, a Euro country’s debt to GDP ratio cannot exceed 60 percent and budget deficit to GDP ratio cannot exceed 3 percent. Denmark’s debt to GDP ratio was 33.2 percent by the end of 2019, down from 33.9 percent in 2018. Denmark ran a budget surplus of 3.7 percent in 2019 and of 0.7 percent in 2018, well within Stability & Growth Pact parameters.

Sovereign Wealth Funds

Denmark maintains no sovereign wealth funds.

Denmark is party to the Government Procurement Agreement (GPA) within the framework of the World Trade Organization (WTO). State owned entities (SOEs) hold dominant positions in rail, energy, utility and broadcast media in Denmark. Large scale public procurement must go through public tender in accordance with EU legislation. Competition from SOEs is not considered a barrier to foreign investment in Denmark. As an OECD member, Denmark promotes and upholds the OECD Corporate Governance Principals and subsidiary SOE Guidelines.

Privatization Program

Denmark has no current plans to privatize its SOEs.

As an OECD member, Denmark promotes, through the Danish Business Authority, the OECD Guidelines for Multinational Enterprises and the UN Guiding Principles on Business and Human Rights. Denmark’s National Contact Point can be reached at: https://mneguidelines.oecd.org/National-Contact-Points-Website-Contact-Details.pdf 

From January 1, 2016, the largest companies, cf. the Danish Financial Statements Act section 99 a, must account for their responsible business conduct, including with respect to human rights and to reducing the climate impact of the company’s activities. At the same time, cf. section 99b target figures for the gender composition of the Board of Directors, as well as policies for increasing the proportion of the underrepresented gender at the company’s management levels, must be reported. From January 2018, the mandate also applies to medium sized businesses (exempting small- and micro- companies).

The Danish Business Authority published a National Action Plan to advance Corporate Social Responsibility (CSR) and Responsible Business Conduct (RBC) in Denmark in 2012, covering the 2012 – 2015 period. It contained 42 initiatives focusing on business-driven CSR. In October 2019, the government launched a public hearing process to “to investigate how reporting can be made more comparable and create more transparency for the benefit of society and the companies themselves. The purpose is to increase transparency about whether companies are living up to their corporate social responsibility, that sustainable companies have better access to investment and that companies experience a positive value from their CSR reporting.” The government expects the process to result in recommendations by fall 2020.The government hosts https://www.csrkompasset.dk/ , (English language version https://www.csrcompass.com/ ) a free online tool that can help companies implement responsible supply chain management. The tool is targeted at small and medium-sized production, trade and service companies. The structure of the CSR Compass and its advice and guidelines are in line with national and international trends and best practice standards, including the UN Global Compact, OECD’s guidelines for multinational companies, Business for Social Responsibility (BSR), Business Social Compliance Initiative (BSCI), the Danish Ethical Trading Initiative (DIEH) and the Danish Council on Corporate Social Responsibility’s guidelines for responsible supply chain management.

Denmark is perceived as the least corrupt country in the world according to the 2019 Corruption Perceptions Index by Transparency International, which has local representation in Denmark. The Ministry of Justice is responsible for combating corruption, which is covered under the Danish Penal Code. Penalties for violations range from fines to imprisonment of up to four years for a private individual’s involvement and up to six years for a public employee’s involvement. Since 1998, Danish businesses cannot claim a tax deduction for the cost of bribes paid to officials abroad.

Denmark is a signatory to the OECD Convention on Combating Bribery, the UN Anticorruption Convention, and a participating member of the OECD Working Group on Bribery. In the Working Group’s 2015 Phase 3 follow-up report on Denmark, the Working Group concluded “that Denmark has partially implemented most of its Phase 3 recommendations. However, concerns remain over Denmark’s enforcement of the foreign bribery offence.”

Resources to Report Corruption

Resources to which corruption may be reported:

The Danish State Prosecutor for Serious Economic and International Crime,
Kampmannsgade 1
1604 København V.
Phone: +45 72 68 90 00
Fax: +45 45 15 01 19
Email: saoek@ankl.dk

Ministry of Foreign Affairs of Denmark’s development assistance agency DANIDA to report any knowledge of corruption within DANIDA projects or among staff or DANIDA partners.

http://um.dk/en/danida-en/about-danida/Danida-transparency/anti-corruption/report-corruption/ 

“Watchdog” organization:

Transparency International Danmark
c/o CBS
Dalgas Have 15, 2. sal, lokale 2c008
2000 Frederiksberg

The Secretariat is manned by Julian Bøje Ekberg and Rosa Bisgaard who can be reached at sekretariatet@transparency.dk

Contact at Embassy Copenhagen responsible for combating corruption:

Aaron Daviet
Political Officer
U.S. Department of State
Dag Hammarskjolds Alle 24, 2100 Copenhagen, Denmark
+45 3341 7100
CopenhagenICS@state.gov

Denmark is a politically stable country. Incidents involving politically motivated damage to projects or installations are very rare. This is reflected in the EIU’s “AAA” rating of Denmark in terms of political risk.

The Danish labor force is generally well-educated and efficient. English language skills are good, and English is considered a natural second language among a very high proportion of Danes. The labor market is stable and flexible. U.S. companies operating in Denmark have indicated that Danish rules on the hiring and firing of employees generally enable employers to adjust the workforce quickly to changing market conditions.

The Danish labor force amounted to approximately 3 million people at the end of 2019. Of these, 891,000 (Q4, 2019) are employed in the public sector. Denmark’s OECD-harmonized unemployment rate was 4.8 percent in March 2020, relative to the EU-28 6.2 percent and OECD 5.56 percent averages.

The public sector in Denmark is large and accounts for about 25 percent of the employment at full-time equivalence. The labor force participation rate for women is among the highest in the world. In 2019, 76.1 percent of working-age women participated in the labor force and the employment rate was 72.0 percent. The male labor force participation rate and employment rate were 82.0 percent and 78.0 percent, respectively.

The Danish labor force is highly organized, with approximately 75 percent belonging to a union. Labor disputes and strikes occur only sporadically. In general, private sector labor/ management relations are excellent, based on dialogue and consensus rather than confrontation. Working conditions are laid down in a complex system of legislation and organizational agreements, where most aspects of wage and working conditions are determined through collective bargaining rather than legislation.

The contractual workweek for most wage earners is 37 and 1/2 hours. By law, employees are entitled to five weeks of paid annual leave. In practice, most of the labor force has the right to six weeks of paid annual leave, gained through other labor market agreements.

Denmark has well-functioning unemployment insurance and sick-pay schemes, self-financed or financed by the state. Maternity leave in Denmark is 52 weeks, 18 of which are reserved for the mother (4 weeks prior to birth, 14 after) and two for the father, while the remainder may be divided between the parents as they see fit. Employers are obliged to pay salary for at least 14 weeks, while the government supports the remainder of the leave. Forthcoming EU legislation will reserve 8 of the weeks’ leave to fathers. The legislation is expected to be enacted in member states before 2022.

Danish wages are high by international standards and have prompted the use of capital-intensive technologies in many sectors. Some investors report that the high average wage level is detrimental to Danish competitiveness. Although high wages and generous benefits including time off reduce competitiveness, high productivity and low direct costs to employers can result in per employee costs that are lower than in other industrialized countries. Nominal wages increased by 2.2 percent from Q4 2018 to Q4 2019, while inflation was 0.8 percent in 2019, unchanged from 2018, enhancing real wage increases. Nominal wages were forecast to increase significantly annually towards 2022, but the current situation makes forecasts highly uncertain.

Generally, personal income tax rates in Denmark are among the highest in the world. However, foreign employees making more than an amount specified annually by the Danish Immigration Service and certain researchers may choose to be subject to a 27 percent income tax rate, plus a labor market contribution amounting to 32.84 percent income tax in the first seven years of working in Denmark. Certain conditions must be fulfilled for key employees to be eligible for the 27 percent tax scheme: for example, since January 1, 2020, wages must total at least DKK 68,100 (USD 10,2000) per month before the deduction of labor market contributions, and after Danish labor market supplementary pension contributions. There are also limits based on an individual’s previous work history in the Danish labor market. Compared with the general Danish progressive income tax system, this is an attractive incentive. Further information can be obtained from Danish embassies or from the Danish Immigration Service (www.nyidanmark.dk ).

Danish work permits are not required for citizens of EU countries. U.S. companies have reported that in general, work permits for foreign managerial staff may be readily obtained. However, permits for non-managerial workers from countries outside the EU and the Nordic countries are granted only if substantial professional or labor-related conditions warrant. Special rules detailed by the Danish Immigration Service in its “Positive List Scheme” apply to certain professional fields experiencing a shortage of qualified manpower. The list is updated twice annually. Foreigners who have been hired in the designated fields will be immediately eligible for residence and work permits. The minimum educational level required for a position on the Positive List is a Professional Bachelor’s degree, e.g. pedagogue. In some cases, a Danish authorization must be obtained. This is explicitly stated on the Positive List. (E.g., non-Danish trained doctors must be authorized by the Danish Patient Safety Authority.) Professions covered by the Positive List Scheme included engineers, scientists, doctors, nurses, IT specialists, marine biologists, lawyers, accountants and a wide range of other master’s or bachelor’s degree positions. As of 2020, the Pay Limit Scheme extends to positions with an annual pay of no less than DKK 436,000 (USD 65,370), regardless of the field or specific nature of the job. Persons who have been offered a highly paid job have particularly easy access to the Danish labor market through the Pay Limit Scheme. The length of work and residence permits granted under the Pay Limit Scheme depends on the length of the employment contract in Denmark. For permanent employment contracts, work permits are granted for an initial period of 4 years. After this period the permit can be extended if the same job is held. There are several other schemes meant to make it easier for certified companies to bring employees with special skills or qualifications to Denmark. These schemes vary in duration and requirements.

Danish immigration law also allows issuance of residency permits of up to 18 months duration based on an individual evaluation, using a point system based on education, language skills and adaptability.

Denmark has ratified all eight ILO Core Conventions and been an ILO member since 1919.

As a high-income country, Denmark does not generally qualify for DFC support for projects. However, the European Energy Security and Diversification Act of 2019 permits DFC support for qualified European energy projects, as well as projects designed to preempt or counter efforts by a strategic competitor of the United States to secure significant political or economic leverage or acquire national security-sensitive technologies or infrastructure in a country that is an ally or partner of the United States.

DFC programs may also be used by at least 95 percent U.S.-owned subsidiaries in Denmark to support their investments in qualifying countries. Denmark is a member of the World Bank Group’s Multilateral Investment Guarantee Agency (MIGA).

Aaron Feit
Economic Officer
U.S. Embassy Denmark

Dag Hammarskjolds Alle 24,
2100 Copenhagen, Denmark
Email: CopenhagenICS@state.gov

Transparency of the Regulatory System

The Securities Market Act (SMA) contains regulations on corporate disclosure procedures and requirements, responsibility for flagging share ownership, insider regulations and offenses, the issuing and marketing of securities, and trading. The clearing of securities trades is subject to licensing and is supervised by the Financial Supervision Authority. The SMA is at https://www.finlex.fi/en/laki/kaannokset/2012/en20120746_20130258.pdf .

See the Financial Supervisory Authority’s overview of regulations for listed companies here: https://www.finanssivalvonta.fi/en/capital-markets/issuers-and-investors/regulation-of-listed-companies/ . Finland is currently not a member of the UNCTAD Business Facilitation Program https://businessfacilitation.org/ .

The Act on the Openness of Public Documents establishes the openness of all records in the possession of officials of the state, municipalities, registered religious communities, and corporations that perform legally mandated public duties, such as pension funds and public utilities. Exceptions can only be made by law or by an executive order for reasons such as national security. For more information, see the Ministry of Justice’s page on Openness: https://oikeusministerio.fi/en/act-on-the-openness-of-government-activities . The Act on the Openness of Government Activities can be found here: https://www.finlex.fi/en/laki/kaannokset/1999/en19990621 .

Finland ranks third on The World Justice Project (WJP) Rule of Law Index (2020) regarding constraints on government powers, absence of corruption, open government, fundamental rights, order and security, regulatory enforcement, civil justice and criminal justice. For more, see: https://worldjusticeproject.org/our-work/research-and-data/wjp-rule-law-index-2020 . Finland ranks fourth on World Bank’s Global Indicators of Regulatory Governance: http://rulemaking.worldbank.org/en/data/explorecountries/finland .

Availability of official information in Finland is the best in the EU, according to a report by the Center for Data Information (2017).

Finland joined the Open Government Partnership Initiative (OGP) in April 2013. The global OGP-initiative aims at promoting more transparent, effective and accountable public administration. The goal is to develop dialogue between citizens and administration and to enhance citizen engagement. The OGP aims at concrete commitments from participating countries to promote transparency, to fight corruption, to citizen participation and to the use of new technologies. Finland’s 4th national Open Government Action Plan for 2019–2023 was published in September 2019.

International Regulatory Considerations

Finland respects EU common rules and expects other Member States to do the same. The Government seeks to constructively combine national and joint European interests in Finland’s EU policy and seeks better and lighter regulation that incorporates flexibility for SMEs. The Government will not increase burdens detrimental to competitiveness during its national implementation of EU acts.

Finland, as a member of the WTO, is required under the Agreement on Technical Barriers to Trade (TBT Agreement) to report to the WTO all proposed technical regulations that could affect trade with other Member countries. In 2019, Finland submitted 23 notifications of technical regulations and conformity assessment procedures to the WTO and has submitted 100 notifications since 1995. Finland is a signatory to the WTO Trade Facilitation Agreement (TFA), which entered into force on February 22, 2017.

Legal System and Judicial Independence

Finland has a civil law system. European Community (EC) law is directly applicable in Finland and takes precedence over national legislation. The Market Court is a special court for rulings in commercial law, competition, and public procurement cases, and may issue injunctions and penalties against the illegal restriction of competition. It also governs mergers and acquisitions and may overturn public procurement decisions and require compensatory payments. The Court has jurisdiction over disputes regarding whether goods or services have been marketed unfairly. The Court also hears industrial and civil IPR cases.

Amendments to the Finnish Competition Act (948/2011) entered into force on June 17, 2019, and on January 1, 2020. The amendments include, most notably, changes to the Finnish Competition and Consumer Authority FCCA’s dawn raid practices, information exchange practices between national authorities and the calculation of merger control deadlines, which are now calculated in working days, rather than calendar days.

Laws and Regulations on Foreign Direct Investment

A non-European Economic Area (EEA) resident (persons or companies) operating in Finland must obtain a license or a notification when starting a business in a regulated industry. A comprehensive list of regulated industries can be found at: https://www.suomi.fi/company/responsibilities-and-obligations/permits-and-obligations .

See also the Ministry of Employment and the Economy’s Regulated Trade guidelines: https://tem.fi/en/regulation-of-business-operations . The autonomously governed Aland Islands, however are an exception. Right of domicile is acquired at birth if it is possessed by either parent. Property ownership and the right to conduct business are limited to those with the right of domicile in the Aland Islands. The Aland Government can occasionally, grant exemptions from the requirement of right of domicile for those wishing to acquire real property or conduct a business in Aland. This does not prevent people from settling in, or trading with, the Aland Islands. Provided they are Finnish citizens, immigrants who have lived in Aland for five years and have adequate Swedish may apply for domicile and the Aland Government can grant exemptions.

The Competition Act allows the government to block mergers where the result would harm market competition. The Finnish Competition and Consumer Authority (FCCA) issued guidelines in 2011: https://www.kkv.fi/en/facts-and-advice/competition-affairs/merger-control/ .

EnterpriseFinland/Suomi.fi (https://www.suomi.fi/company/ ) is a free online service offering information and services for starting, growing and developing a company. Users may also ask for advice through the My Enterprise Finland website: https://oma.yrityssuomi.fi/en. Finnish legislation is available in the free online databank Finlex in Finnish, where some English translations can also be found: https://www.finlex.fi/en/laki/kaannokset/ .

Competition and Anti-Trust Laws

The Finnish Competition and Consumer Authority FCCA protects competition by intervening in cases regarding restrictive practices, such as cartels and abuse of dominant position, and violations of the Competition Act and the Treaty on the Functioning of the European Union (TFEU). Investigations occur on the FCCA’s initiative and on the basis of complaints. Where necessary, the FCCA makes proposals to the Market Court regarding penalties. In international competition matters, the FCCA’s key stakeholders are the European Commission (DG Competition), the OECD Competition Committee, the Nordic competition authorities and the International Competition Network (ICN). FCCA rulings and decisions can be found in the archive in Finnish. More information at: https://www.kkv.fi/en/facts-and-advice/competition-affairs/ .

Expropriation and Compensation

Finnish law protects private property rights. Citizen property is protected by the Constitution which includes basic provisions in the event of expropriation. Private property is only expropriated for public purposes (eminent domain), in a non-discriminatory manner, with reasonable compensation, and in accordance with established international law. Expropriation is usually based on a permit given by the government or on a confirmed plan and is performed by the District Survey Office. Compensation is awarded at full market price, but may exclude the rise in value due only to planning decisions.

Besides normal expropriation according to the Expropriation Act, a municipality or the State has the right to expropriate land for planning purposes. Expropriation is mainly for acquiring land for common needs, such as street areas, parks and civic buildings. The method is rarely used: less than one percent of land acquired by the municipalities is expropriated. Credendo Group ranks Finland’s expropriation risk as low (1), on a scale from 1 to 7: https://www.credendo.com/country-risk/finland .

Dispute Settlement

ICSID Convention and New York Convention

In 1969, Finland became a member state to the World Bank-based International Center for Settlement of Investment Disputes (ICSID; Washington Convention). Finland is a signatory to the Convention of the Recognition and Enforcement of Foreign Arbitral Awards (1958 New York Convention).

Investor-State Dispute Settlement

The Finnish Arbitration Act (967/1992) is applied without distinction to both domestic and international arbitration. Sections 1 to 50 apply to arbitration in Finland and Sections 51 to 55 to arbitration agreements providing for arbitration abroad and the recognition and enforcement of foreign arbitral awards in Finland. Of 186 parties in 2019, the majority (92 percent) were from Finland. There have been no reported investment disputes in Finland in recent years.

International Commercial Arbitration and Foreign Courts

Finland has a long tradition of institutional arbitration and its legal framework dates back to 1928. Today, arbitration procedures are governed by the 1992 Arbitration Act (as amended), which largely mirrors the UNCITRAL Model Law on International Commercial Arbitration of 1985 (with amendments, as adopted in 2006). The UNCITRAL Model law has not yet, however, been incorporated into Finnish Law. In August 2019, the Finland Chamber of Commerce sent a statement to the Justice Ministry urging Finland to revise the 1992 Arbitration Act to be fully consistent with the Model Law, arguing it would increase Finland’s attractiveness as a venue for international arbitration. In response to the Finland Chamber of Commerce’s request that the government adopt the Model Law, the Ministry of Justice has appointed a monitoring group to begin the process of reviewing what the new legislation should address. Finland’s Act on Mediation in Civil Disputes and Certification of Settlements by Courts (394/2011) aims to facilitate alternative dispute resolution (ADR) and promote amicable settlements by encouraging mediation, and applies to settlements concluded in other EU member states: https://www.finlex.fi/en/laki/kaannokset/2011/en20110394.pdf . In June 2016, the Finland Chamber of Commerce launched its Mediation Rules under which FAI, the Institute of the Finland Chamber of Commerce, will administer mediations: https://arbitration.fi/mediation/mediation_rules/ .

Any dispute in a civil or commercial matter, international or domestic, which can be settled by agreement may be referred to arbitration. Arbitration is frequently used to settle commercial disputes and is usually faster than court proceedings. An arbitration award is final and binding. FAI promotes the settlement of disputes through arbitration, commonly using the “FAI Rules”: https://arbitration.fi/arbitration/rules/ .

Revised arbitration rules of the Finland Chamber of Commerce entered into force January 1, 2020. A 2020 Guide to the Finnish Arbitration FAI Rules has been published: https://arbitration.fi/wp-content/uploads/sites/22/2019/12/arbitration-rules-of-the-finland-chamber-of-commerce-2020.pdf  The Institute appoints arbitrators both to domestic and international arbitration proceedings, and administers domestic and international arbitrations governed by its rules. It also appoints arbitrators in ad hoc cases when the arbitration agreement so provides, and acts as appointing authority under the UNCITRAL Arbitration Rules. The Finnish Arbitration Act (967/1992) states that foreign nationals can act as arbitrators. For more information see: https://arbitration.fi/arbitration/ 

Finland signed the UN Convention on Transparency in Treaty-based Investor-State Arbitration (“Mauritius Convention”) in March 2015. Under the new rules, all documents and hearings are open to the public, interested parties may submit statements, and protection for confidential information has been strengthened.

Bankruptcy Regulations

The Finnish Bankruptcy Act was amended and the amendments took effect on July 1, 2019. The main objectives of these amendments were to simplify, digitize and speed-up bankruptcy proceedings. The amended Bankruptcy Act allows administrators to send notices and invitations to creditor addresses registered in the Trade Register. This will improve accessibility for foreign companies that have established a branch in Finland. Administrators of bankruptcy and restructuring proceedings must upload data and documentation to the bankruptcy and restructuring proceedings case management system (KOSTI). KOSTI is available only for creditors located in Finland due to the strong ID requirements.

The Reorganization of Enterprises Act (1993/47), https://www.finlex.fi/fi/laki/kaannokset/1993/en19930047 , establishes a legal framework for reorganization with the aim to provide an alternative to bankruptcy proceedings. The Act excludes credit and insurance institutions and certain other financial institutions. Recognition of restructuring or insolvency processes initiated outside of the EU requires an exequatur from a Finnish court.

The bankruptcy ombudsman, https://www.konkurssiasiamies.fi/en/index.html , supervises the administration of bankruptcy estates in Finland. The Act on the Supervision of the Administration of Bankruptcy Estates dictates related Finnish law: https://www.konkurssiasiamies.fi/material/attachments/konkurssiasiamies/konkurssiasiamiehentoimistonliitteet/6JZrLGPN1/Act_on_the_Supervision_of_the_Administration_of_Bankruptcy_Estates.pdf .

Finland can be considered creditor-friendly; enforcement of liabilities through bankruptcy proceedings as well as execution outside bankruptcy proceedings are both effective. Bankruptcy proceedings are creditor-driven, with no formal powers granted to the debtor and its shareholders. The rights of a secured creditor are also quite extensive. According to the 2019 World Bank’s Doing Business Report, Finland ranks second out of 190 countries for the ease of resolving insolvency: http://www.doingbusiness.org/data/exploretopics/resolving-insolvency .

Investment Incentives

Foreign-owned companies are eligible for government incentives on an equal footing with Finnish-owned companies. Support is given in the form of grants, loans, tax benefits, equity participation, guarantees, and employee training. Assistance is administered through one of Finland’s Centers for Economic Development, Transport, and the Environment (ELY) that provide advisory, training, and expert services as well as grant funding for investment and development projects. Investment aid can be granted to companies in the regional development areas, especially small and medium enterprises (SMEs). Large companies may also qualify if they have a major employment impact in the region. Aid to business development can be granted to improve or facilitate the company’s establishment and operation, know-how, internationalization, product development or process enhancement. Subsidies for start-up companies are available for establishing and expanding business operations during the first 24 months. Transport aid may be granted for deliveries of goods produced to sparsely populated areas. Energy subsidies can be granted to companies for investments in energy efficiency and conservation. http://www.ely-keskus.fi/en/web/ely-en/business-and-industry;jsessionid=0B09A1B237B74FAC485AAD7C8E068DBF .

Tekes, the Finnish Funding Agency for Technology and Innovation, provides low-interest loans and grants to challenging and innovative projects potentially leading to global success stories. The organization offers funding for research and development work carried out by companies, research organizations, and public sector service providers in Finland. Besides funding technological breakthroughs, Tekes emphasizes also service-related, design, business, and social innovations. Startups and both SMEs and large companies can benefit from Tekes incentives.

A company can use guarantees from the state-owned financing company Finnvera: https://www.finnvera.fi/eng/start/applying-for-financing/when-setting-up-a-business?source=3165 . Finnvera offers services to businesses in most sectors and is also Finland’s official Export Credit Agency (ECA). Business Finland helps foreign investors set up a business in Finland. Its services are free of charge, and range from data collection and matchmaking to location management: https://www.investinfinland.fi/our-services . Support for innovative business ventures can also be obtained from the Foundation for Finnish Inventions: http://www.wipo.int/sme/en/best_practices/finland.htm .

Foreign Trade Zones/Free Ports/Trade Facilitation

Free trade zone area regulations have been harmonized in the EU by the Community Customs Code. The European Union Customs Code UCC, its Delegated Act and Implementing Act entered into force on May 1, 2016, and will be implemented gradually; the free zone of control type II was abolished and the operator authorizations were changed into customs warehouse authorizations on Customs’ initiative. The Code also allows the processing of non-Union goods without import duties and other charges. New regulations for customs declarations have been applied to customs warehousing since June 1, 2019. According to the current schedule, new declarations will be introduced for import and temporary storage at the end of 2020, and for export and transit in 2021–2023.

Performance and Data Localization Requirements

There are no performance requirements or commitments imposed on foreign investment in Finland. However, to conduct business in Finland, some residency requirements must be met. The Limited Liability Companies (LLC) Act of Finland is at: http://finlex.fi/en/laki/kaannokset/2006/en20060624 . A LLC must be reported for registration within three months from the signing of the memorandum of association: https://www.prh.fi/en/kaupparekisteri/yrityksen_perustaminen/osakeyhtio.html . There is no forced localization policy for foreign investments in Finland.

Finland participates actively in the development of the EU’s Digital Single Market and, aside from privacy issues, encourages a light regulatory approach in this area. Since May 2018, data transfers from Finland to non-EU countries must abide by EU General Data Protection Regulation (GDPR) (EU) 2016/679. Finland supports the EU Commission’s view on promoting European digitalization and creating a single market for data. In March 2020, the Ministry of Transport and Communications appointed a data economy implementation and monitoring group, with task of continue exerting influence and to coordinate the work of different administrative sectors. The working group is also tasked with exerting influence both internationally and at the EU level. The objective is for Finland’s view on the principles and development of the data economy will be noted internationally.

Personal data may be transferred across borders per the Finnish Personal Data Act (PDA, at: http://finlex.fi/en/laki/kaannokset/1999/en19990523 ), which states that personal data may be transferred outside the European Union or the European Economic Area only if the country in question guarantees an adequate level of data protection. Office of the Data Protection Ombudsman legislation is at: https://tietosuoja.fi/en/organisations .

Real Property

The Finnish legal system protects and enforces property rights and secured interests in property, both movable and real. Finland ranked first of 131 countries in the Property Rights Alliance 2019 International Property Rights Index (IPRI) which concentrates on a country’s legal and political environment, physical property rights, and intellectual property rights (IPR).

Mortgages exist in Finland and can be applied to both owned and rented real estate. Finland ranks 20th out of 190 countries in the ease of Registering Property according to the World Bank’s 2019 Doing Business Report. In Finland, real property formation, development, land consolidation, cadastral mapping, registration of real properties, ownership and legal rights, real property valuation, and taxation are all combined within one basic cadastral system (real estate register) maintained by the National Land Survey: https://www.maanmittauslaitos.fi/en/real-property .

Intellectual Property Rights

The Finnish legal system protects intellectual property rights (IPR), and Finland adheres to numerous related international agreements. Finland is a member of the World International Property Organization (WIPO) and party to a number of its treaties, including the Berne Convention, the Paris Convention, the Patent Cooperation Treaty, the WIPO Copyright Treaty, and the WIPO Performances and Phonograms Treaty. One of Prime Minister Marin’s goals is to draft a National IPR Strategy for Finland.

The Finnish Copyright Act can be found at: https://wipolex.wipo.int/en/text/397616 . Guidelines applicable for international use were published in 2016 and can be found at: https://www.cupore.fi/en/publications/cupore-s-publications/assessing-the-operation-of-copyright-and-related-rights-systems-141052-14122016 .

The new Finnish Trademarks Act entered into force on May 1, 2019. With the new Act, Finland implements the revised EU Trademark Directive, enforces the Singapore Treaty on the Law of Trademarks, and brings the 1964 trademark regulations up to date. Provisions concerning collective marks and control marks are included in the new Act, which nullified the Act on Collective Marks. The Act also includes amendments to related legislation such as the Finnish Company Names Act, the Criminal Code, and relevant procedural acts. Trademark applicants or proprietors not domiciled in Finland are required to have a representative resident in the European Economic Area.

In August 2018, Finland adopted a new Trade Secrets Act to incorporate the provisions of the EU Directive 2016/943 on Trade Secrets . The new Act replaces the Unfair Business Practices Act and provides harmonized definitions at the EU level for trade secrets, their lawful and unlawful acquisition, and their use and disclosure. The Act also includes a whistleblower provision according to which a person (e.g. an employee) is allowed to disclose a trade secret in order to reveal malpractice or illegal activity, so long as it is done to protect the public interest and the person has significant reasons to reveal the information. The Trade Secrets Act can be found at: https://www.finlex.fi/fi/laki/alkup/2018/20180595  (available only in Finnish and Swedish).

Patent rights in Finland are consistent with international standards, and a granted patent is valid for 20 years. The regulatory framework for process patents filed before 1995, and pending in 1996, denied adequate protection to many of the top-selling U.S. pharmaceutical products currently on the Finnish market. For this reason, Finland was placed on the Special 301 Report Watch List in 2009, but it was removed from the list in 2015 when the term for relevant patents expired.

Finnish Customs officers have ex-officio authority to seize and destroy counterfeit goods. IPR enforcement in Finland is based on EU Regulation 608/2013. In 2019, according to Finnish Customs statistics, Finnish authorities inspected 797 suspected counterfeit goods . The number and value of counterfeit goods detained by Finnish Customs have been in decline since 2013. The number and value of counterfeit goods decreased significantly (99 percent) in 2019 compared to 2018. The long-term trend indicates a decline in counterfeit goods detected in large volume shipments. However, due to increased online purchases, small volume shipments via postal and express freight traffic have increased in number, and these are more difficult to screen for counterfeits. Finland is mentioned in the 2019 Notorious Markets List for reportedly hosting servers associated with infringing activity.

The link to WIPO’s list of IPR legislation can be found at: https://wipolex.wipo.int/en/legislation/profile/FI .

For additional information about treaty obligations and points of contact at local IP offices, please see WIPO’s country profiles here: https://www.wipo.int/directory/en/details.jsp?country_code=FI .

Capital Markets and Portfolio Investment

Finland is open to foreign portfolio investment and has an effective regulatory system. According to the Bank of Finland, in January 2020 Finland had USD 11.4 billion worth of official reserve assets, mainly in foreign currency reserves and securities. Credit is allocated on market terms and is made available to foreign investors in a non-discriminatory manner, and private sector companies have access to a variety of credit instruments. Legal, regulatory, and accounting systems are transparent and consistent with international norms.

The Helsinki Stock Exchange is part of OMX, referred to as NASDAQ OMX Helsinki (OMXH). NASDAQ OMX Helsinki is part of the NASDAQ OMX Nordic division, together with the Stockholm, Copenhagen, Iceland, and Baltic (Tallinn, Riga, and Vilnius) stock exchanges.

Finland accepts the obligations under IMF Article VIII, Sections 2(a), 3, and 4 of the Fund’s Articles of Agreement. It maintains an exchange system free of restrictions on payments and transfers for current international transactions, except for those measures imposed for security reasons in accordance with Regulations of the Council of the European Union.

Money and Banking System

Banking is open to foreign competition. At the end of 2018, there were 255 credit institutions operating in Finland and total assets of the domestic banking groups and branches of foreign banks operating in Finland amounted to USD 945 billion. For more information see: https://www.finanssiala.fi/en/material/FFI-Finnish-Banking-in-2018.pdf 

Foreign nationals can in principle open bank accounts in the same manner as Finns. However, banks must identify customers and this may prove more difficult for foreign nationals. In addition to personal and address data, the bank often needs to know the person’s identifier code (i.e. social security number), and a number of banks require a work permit, a certificate of studies, or a letter of recommendation from a trustworthy bank, and details regarding the nature of transactions to be made with the account. All authorized deposit-taking banks are members of the Deposit Guarantee Fund, which guarantees customers’ deposits to a maximum of EUR 100,000 per depositor.

In 2018 the capital adequacy ratio of the Finnish banking sector was 20.9 percent, above the EU average. Measured in Core Tier 1 Capital, the ratio was 17.2 percent. The average CET1 ratio in the EU banking sector was 14.4 percent at the end of 2018. The Finnish banking sector’s return on equity (ROE) was 8.5 percent, well above the average ROE for all EU banking sectors (6.2 percent). Standard & Poor’s in March 2020 reaffirmed Finland’s AA+ credit rating and stable outlook while Fitch kept Finland’s credit rating at AA+ in February 2020. Moody’s kept Finland’s credit rating unchanged at Aa1 in January 2020. The Finnish banking sector is dominated by four major banks (OP Pohjola, Nordea, Municipality Finance and Danske Bank), which together hold 81 percent of the market.

Nordea, which relocated its headquarters from Sweden to Finland in 2018, has the leading market position among household and corporate customers in Finland. The relocation increased the Finnish banking sector to over three times the size of Finland’s GDP. Nordea is the world’s 20th largest bank (2018) in terms of balance sheet. Consequently, Finland’s banking sector is one of Europe’s largest relative to the size of the national economy.

Nordea became a member of the “we.trade” consortium in November 2017, a blockchain based trade platform for customers of the European wide consortium of banks signed up for the platform. “we.trade” makes domestic and cross-border commerce easier for European companies by harnessing the power of distributed ledger and block chain technology.

The Act on Virtual Currency providers (572/2019) entered into force in May, 2019. The Financial Supervisory Authority (FIN-FSA) acts as the registration authority for virtual currency providers. The primary objective of the Act is to introduce virtual currency providers into the scope of anti-money laundering regulation. Only virtual currency providers meeting statutory requirements are able to carry on their activities in Finland.

The Finnish Tax Administration released guidelines on the taxation of cryptocurrency in May 2018, updates were made in October 2019, and new guidelines were released in January 2020 , (so far only in Finnish): https://www.vero.fi/en/detailed-guidance/guidance/48411/taxation-of-virtual-currencies3/  The October 2019 guidelines are at: https://www.vero.fi/en/detailed-guidance/guidance/48411/taxation-of-virtual-currencies2/ .

Foreign Exchange and Remittances

Foreign Exchange

Finland adopted the Euro as its official currency in January 1999. Finland maintains an exchange system free of restrictions on the making of payments and transfers for international transactions, except for those measures imposed for security reasons.

Remittance Policies

There are no legal obstacles to direct foreign investment in Finnish securities or exchange controls regarding payments into and out of Finland. Banks must identify their customers and report suspected cases of money laundering or the financing of terrorism. Banks and credit institutions must also report single payments or transfers of EUR 15,000 or more. If the origin of funds is suspect, banks must immediately inform the National Bureau of Investigation. There are no restrictions on current transfers or repatriation of profits. Residents and non-residents may hold foreign exchange accounts. There is no limit on dividend distributions as long as they correspond to a company’s official earnings records.

Travelers carrying more than EUR 10,000 must make a declaration upon entering or leaving the EU. As a Financial Action Task Force (FATF) member, Finland observes most of FATF’s 40 recommendations. In its Mutual Evaluation Report of Finland, released April 16, 2019, FATF concluded that Finland’s measures to combat money laundering and terrorist financing are delivering good results, but that Finland needs to improve supervision to ensure that financial and non-financial institutions are properly implementing effective AML/CFT controls. To improve supervision, a money laundering supervision register of the State Administrative Agency (AVI) and a register of beneficial owners controlled by the Finnish Patent and Registration Office were set up on July 1, 2019. In addition, the responsibility of preparing amendments to the Act on Preventing Money Laundering and Terrorist Financing was transferred to the Ministry of Finance (in charge of national FATF coordination) on January 1, 2019. FATF’s Mutual Evaluation Report of Finland, April 2019: http://www.fatf-gafi.org/countries/d-i/finland/documents/mer-finland-2019.html .

In Finland, the Fifth Anti-Money Laundering Directive was implemented, among other things, by means of the Act on the Bank and Payment Accounts Control System, which entered into force on May 1, 2019. Its provisions on the bank and payment account data retrieval system and on the bank and payment account registry will apply from September 1, 2020. The Ministry of the Interior has set up a legislative project to implement the EU directive on access to financial information at national level. The directive contains rules to facilitate the use of information held in bank account registries by the authorities for the purpose of preventing, detecting, investigating or prosecuting certain offences. The government proposal drafted is scheduled to be submitted to Parliament in September 2020.

Sovereign Wealth Funds

Solidium is a holding company that is fully owned by the State of Finland. Although it is not explicitly a sovereign wealth fund, Solidium’s mission is to manage and increase the long-term value of the listed shareholdings of the Finnish State. Solidium is a minority owner in 13 listed companies; the market value of Solidium’s equity holdings is approximately USD 96.4 billion (April 2020), https://www.solidium.fi/en/holdings/holdings/) .

State Owned Enterprises (SOEs) in Finland are active in chemicals, petrochemicals, plastics and composites; energy and mining; environmental technologies; food processing and packaging; industrial equipment and supplies; marine technology; media and entertainment; metal manufacturing and products; services; and travel. The Ownership Steering Act (1368/2007) regulates the administration of state-owned companies: https://www.finlex.fi/en/laki/kaannokset/2007/en20071368 .

In general, SOEs are open to competition except where they have a monopoly position, namely in alcohol retail and gambling. The Ownership Steering Department in the Prime Minister’s Office has ownership steering responsibility for Finnish SOEs, and is responsible for Solidium, a holding company wholly owned by the State of Finland and a minority owner in nationally important listed companies.

The GOF, directly or through Solidium, is a significant owner in 17 companies listed on the Helsinki stock exchange. The market value of all State shareholdings was approximately USD 25 billion as of April 2020. More info can be found here: https://vnk.fi/en/value-of-state-holdings . The GOF has majority ownership of shares in two listed companies (Finnair and Fortum) and owns shares in 36 commercial companies: https://vnk.fi/en/state-shareholdings-and-parliamentary-authorisations  (April 2020). The Finnish State development company Vake was established in 2016 and became fully operational in 2018. Vake’s role is to manage the State shareholdings under its control and to create conditions for reform. More information can be found here: https://vake.fi/enhome .

Finnish state ownership steering complies with the OECD Principles of Corporate Governance.

The Parliamentary Advisory Council in the Prime Minister’s Office serves in an advisory capacity regarding SOE policy; it does not make recommendations regarding the actual business in which the individual companies are engaged. The government has proposed changing its ownership levels in several companies and increasing the number of companies steered by the Prime Minister’s Office. Parliament decides the companies in which the State may relinquish its sole ownership (100 percent), its control of ownership (50.1 percent) or minority ownership (33.4 percent of votes). For more see https://vnk.fi/en/legislation-and-corporate-governance 

In April 2020, the Government issued a new resolution on ownership policy, which will guide state-owned companies for the duration of the government term (until spring 2023). The Government Resolution on ownership policy will continue to pursue a predictable, forward-looking ownership policy that safeguards the strategic interests of the state. State ownership will be assessed from the perspectives of overall benefit to the national economy, development of the operations and value of companies, and the efficient distribution of resources. The new Government Resolution on ownership policy strongly emphasizes the fight against climate change, the use of digitalization and issues of corporate social responsibility.

Finland opened domestic rail freight to competition in early 2007, and in July 2016, Fenniarail Oy, the first private rail operator on the Finnish market, began operations. Passenger rail transport services will be opened to competition in stages, starting with local rail services in southern Finland. Based on an agreement between Finnish State Railways (VR) and the Ministry of Transport and Communications, VR has exclusive rights to provide passenger transport rail services in Finland until the end of 2024. The exclusive right applies to all passenger rail transport in Finland, excluding the commuter train transport services, provided by the Helsinki Regional Transport Agency (HSL). HSL put its commuter train transport services out for tender in February 2020, VR won the tender and will continue provide passenger rail service for the next ten years. The value of southern Finland commuter train services is USD 67 million per year, with 200 000 daily passengers. Three wholly state-owned enterprises will be separated from Finnish State Railways (VR) to create a level playing field for all operators: a rolling stock company, a maintenance company, and a real estate company. Cross-border transportation between Finland and Russia was opened to competition in December 2016. Trains to and from Russia can be operated by any railroad with permission to operate in the EU. This was earlier VR’s exclusive domain. Fenniarail Oy has an agreement with VR regarding information exchange between authorities in Finland and Russia, approvals of rail wagons on the Finnish rail network and the safety of rail wagons. The agreement was signed in January 2017 for an initial trial period.

Privatization Program

Parliament makes all decisions identifying the companies in which the State may relinquish sole ownership (100 percent of the votes) or control (minimum of 50.1 percent of the votes), while the Government decides on the actual sale. The State has privatized companies by selling shares to Finnish and foreign institutional investors, through both public offerings and directly to employees. Sales of direct holdings of the State totaled USD 1.72 billion from 2010 to 2019. Solidium’s share sales totaled some USD 6.33 billion from June 2010 – February 2020. According to the present Government Program, the proceeds from the sale of state assets are primarily to be used for the repayment of central government debt. Up to 25%, but no more than USD 168 million of any annual revenues exceeding USD 448 million, may be used for projects designed to strengthen the economy and promote growth.

The Government issued a new resolution on state-ownership policy in May 2016, seeking to ensure that corporate assets held by the State are put to more efficient use to boost economic growth and employment.

More info about state ownership can be found here : https://vnk.fi/en/government-ownership-steering .

The Government promotes Corporate Social Responsibility (CSR) through the Ministry of Employment and the Economy CSR Guidelines (https://tem.fi/en/key-guidelines-on-csr ). The Committee on Corporate Social Responsibility acts as the Finnish National Contact Point (NCP) for the effective implementation of the OECD Guidelines for Multinational Enterprises (MNEs), together with the Ministry of Economic Affairs and Employment: https://tem.fi/en/handling-specific-instances-of-the-oecd-guidelines-for-multinational-enterprises .

The government’s SOE policy establishes CSR as a core value of SOEs. Finnish companies perceive that the central component of responsible business conduct or corporate responsibility is to conduct due diligence to ensure compliance with law and regulations. There are no national codes for CSR in Finland; rather, Finnish companies and public authorities have promoted global CSR codes, such as the OECD Guidelines for Multinational Enterprises; the UN Global Compact for Business and Human Rights; ILO principles; EMAS; ISO standards; and the Global Reporting Initiative (GRI).

The Directive of the European Parliament and the Council on the disclosure of non-financial information has been implemented via amendments to the Finnish Accounting Act, requiring affected organizations to make the first report in 2018. The obligation to report non-financial information and corporate responsibility reports will apply to large public interest entities with more than 500 employees. There are 150 Finnish companies that publish annual CSR reports that were not previously obligated to do so.

Importing tin, tantalum, tungsten and gold from conflict zones into the EU requires new procedures from businesses as of January 2021. Tukes, the Finnish Safety and Chemicals Agency, is the competent authority to carry out checks to ensure compliance with the requirements relating to the import of conflict minerals in Finland. The checks will begin in 2022. For more information: https://tukes.fi/en/industry/conflict-minerals .

Finland is committed to the implementation of the OECD Guidelines for Multinational Enterprises, the ILO Declaration on Fundamental Principles and Rights at Work, and the tripartite declaration of principles concerning multinational enterprises and social policy by the ILO.

Finland has joined the Extractive Industries Transparency Initiative (EITI), which supports improved governance in resource-rich countries. Finland is not a member of the Voluntary Principles on Security and Human Rights Initiative.

In October 2019, The Ministry of Economic Affairs and Employment commissioned a judicial analysis of regulation and legislation on corporate social responsibility. An analysis will be prepared of ways in which human rights and environmental due diligence could be incorporated into legislation affecting companies. The analysis will focus on establishing a method for nationally implementing corporate social responsibility legislation based on a due diligence obligation.

Labor and environmental laws and regulations are not waived to attract or retain investments and the Government published a guide to socially responsible public procurement in November 2017: http://julkaisut.valtioneuvosto.fi/handle/10024/160318 .

The Corporate Responsibility Network (FiBS) is the leading corporate responsibility network in Finland and has more than 300 members: https://www.fibsry.fi/briefly-in-english/ . The Human Rights Center (HRC), administratively linked to the Office of the Parliamentary Ombudsman, encourages foreign and local enterprises to follow the most important international norms: https://www.humanrightscentre.fi/monitoring/ .

The Securities Market Association, https://cgfinland.fi/en/ , developed and updated (2019) the Finnish Corporate Governance Code for companies listed on the Helsinki Stock Exchange: ﷟ https://business.nasdaq.com/list/Rules-and-Regulations/European-rules/nasdaq-helsinki/index.html .

The National Risk Assessment of 2018 does not list corruption as a risk in Finland, nor does the 2017 Security Strategy for Society and there is no dedicated national anti-corruption strategy. In April 2020, the Ministry of Justice appointed an anti-corruption working group to draft Finland’s Anti-Corruption Strategy 2020-2023. The term of the working group ends in March 2023.

Over the past decade, Finland has ranked in the top three on Transparency International’s (TI) Corruption Perceptions Index (CPI). In 2019, Finland was ranked third on the CPI.

Corruption in Finland is covered by the Criminal Code and penalties range from fines to imprisonment of up to four years. Both giving and accepting a bribe is considered criminal and Finland has statutory tax rules concerning non-deductibility of bribes. Finland does not have an authority specifically charged to prevent corruption. The Ministry of Justice coordinates anti-corruption matters, but Finland’s EU anti-corruption contact is the Ministry of the Interior. The National Bureau of Investigation also monitors corruption, while the tax administration has guidelines obliging tax officials to report suspected offences, including foreign bribery, and the Ministry of Finance has guidelines on hospitality, benefits, and gifts. The Ministry of Justice describes its anti-corruption efforts at https://oikeusministerio.fi/en/anti-corruption-activities .

The Ministry of Justice is maintaining an Anti-Corruption.fi website, https://korruptiontorjunta.fi/en/home , providing both ordinary citizens and professional operators with impartial and fact-based information on corruption and its prevention in Finland. The goal is a transparent, impartial and corruption-free culture and society.

The Act on a Candidate’s Election Funding (273/2009) delineates election funding and disclosure rules. The Act requires presidential candidates, Members of Parliament, and Deputy Members to declare total campaign financing, the financial value of each contribution, and donor names for donations exceeding EUR 1,500: https://www.finlex.fi/en/laki/kaannokset/2009/en20090273.pdf . The Act on Political Parties (10/1969) concerning the funding of political parties is at: https://www.finlex.fi/fi/laki/kaannokset/1969/en19690010.pdf . The National Audit Office of Finland keeps a register containing election-funding disclosures at: http://www.vaalirahoitusvalvonta.fi  (available in Finnish and Swedish). Election funding disclosures must be filed with the National Audit Office of Finland within two months of election results being confirmed.

Finland does not regulate lobbying; there is no requirement for lobbyists to register or report contact with public officials. However, in March 2019, a parliamentary working group headed by the Speaker urged the establishment of a lobbying register to improve transparency regarding possible interest groups influences on members of Parliament. The working group said the registry would initially cover national-level decision making, later being extended to municipal and regional decision-making organs. The group is calling for the registry — already in use in the European Parliament — to be implemented during this government term. In accordance with the Government Program of Prime Minister Marin, an Act on a Transparency Register will be enacted in Finland on the basis of parliamentary preparation and in consultation with civil society. The purpose of the act is to improve the transparency of decision-making and, by doing this, to prevent undue influence and reinforce public confidence.

The ethical Guidelines of the Finnish Prosecution Service can be found from a new website that was opened on October 1, 2019. https://syyttajalaitos.fi/en/the-ethical-guidelines .

The following are ratified or in force in Finland: the Convention on Laundering, Search, Seizure and Confiscation of the Proceeds from Crime; the Council of Europe Civil Law Convention on Corruption; the Criminal Law Convention on Corruption; the UN Convention against Transnational Organized Crime; and, the UN Anticorruption Convention. Finland is a member of the European Partners against Corruption (EPAC).

Finland is a signatory to the OECD Convention on Anti-Bribery, but Transparency International released a progress report in September 2018 rating Finland as having “little to no enforcement” and opining that the most significant deterioration of the level of enforcement had taken place in Finland: https://www.transparency.org/exporting_corruption/Finland .

In March 2019, the OECD Working Group on Bribery noted that Finland has shown limited progress in addressing the Working Group’s concerns. In 2017 the Working Group stated that Finland still faces issues related to “old-boys’ networks,” and noted several conflict of interest scandals in 2017 that involved issues concerning blurred lines between public and private interests, and public office holders who had not recused themselves from decisions affecting them. Nonetheless, in the latest report the Working Group notes that Finland has taken steps to amend its Criminal Code on sanctions and to develop guidance specifically targeting SMEs.

Other reforms are also ongoing and seem to be pointing to the right direction, including in relation to institutional arrangements: http://www.oecd.org/corruption/Finland-phase-4-follow-up-report-ENG.pdf .

In March 2018, in its fifth evaluation round the Council of Europe’s anticorruption body GRECO (Group of States against Corruption) issued recommendations to Finland for preventing corruption among ministers, senior government officials and members of law enforcement agencies (the police and the Border Guard). The report recommended that Finland adopt and implement a national anticorruption strategy and pay special attention to the risks related to privatization in the planned health, social services and regional government reform.

The National Bureau of Investigation is responsible for the investigation of organized and international crimes, including economic crime and corruption, and operates an anti-corruption unit to detect economic offences. The Ministry of Justice has set up a specialist network, the anti-corruption cooperation network, which meets a few times a year to discuss and exchange information. The committee drafted an anti-corruption strategy for Finland and submitted it to the Ministry of Justice in 2017. The government has not yet adopted the strategy. Finnish Defense Forces, the Prime Minister’s Office and the Finnish Center for Integrity in Sports joined the anti-corruption network in 2020.

In November 2018, the City of Helsinki announced plans for a new whistleblower hotline service to anonymously inform authorities about suspected corruption.

At the beginning of 2017, a new Public Procurement Act based on the new EU directives on public procurement entered into force. Under the new law, a foreign bribery conviction remains mandatory grounds for exclusion from public contracts.

Resources to Report Corruption

Markku Ranta-Aho
Head of Financial Crime Division
National Board of Investigation
P.O. Box 285, 01310 Vantaa, Finland
markku.ranta-aho@poliisi.fi

Jaakko Korhonen
Chairperson
Transparency Finland
info@transparency.fi

While instances of political violence in Finland are rare, extremism exists, and anti-immigration and anti-Semitic incidents do occur. In 2019, 15 anti-Semitic acts of vandalism against the Israeli Embassy over an 18-month period prompted an official demarche. The neo-Nazi Nordic Resistance Movement (NRM) is banned in Finland, as is its Facebook page, however the NRM website is accessible and features new content almost daily.

It is illegal in Finland to share violent content such as footage of Christchurch massacre, but it is still being disseminated and no one has been prosecuted. In August 2017, a stabbing attack took place in central Turku, in southwest Finland in which two pedestrians were killed and eight injured. Finnish authorities considered the attack a terrorist act and its perpetrator was convicted on terrorism charges, making it the first incident of its kind in Finland since the end of World War II.

The Fund for Peace (FFP) ranked Finland as the most stable country in the world again in 2019 based on political, social, and economic indicators including public services, income distribution, human rights, and the rule of law. Marsh’s Political Risk Map 2020, exploring the changing risk environment, highlighting the implications for firms operating globally, rates Finland as a broadly stable country, scoring 78.8 (out of 100) in its Short-Term Political Risk Index (STPRI). Finland scores particularly well in the ‘security and external threats’ and ‘social stability’ sub-components of the scores, but its ‘policy-making process’ and ‘policy continuity’ scores are somewhat suppressed by the unwieldy nature of the five-party coalition that was formed after the April 2019 parliamentary elections.

Finland has a long tradition of trade unions. The country has a unionization rate of 71 percent, and approximately 90 percent of employees in Finland participate in the collective bargaining system. Extensive tripartite cooperation between the government, employer’s groups, and trade unions characterize the country’s labor market system. Any trade union and employers’ association may make collective agreements, and the Ministry decides on the validity of the agreement. The Act on Employment Contracts regulates employment relationships regarding working hours, annual leave, and safety conditions, although minimum wages, actual working hours, and working conditions are determined to a large extent through collective agreements instead of parliamentary legislation. Collective bargaining and collective labor agreements are generally binding. In recent years, local labor market partners have been given more flexibility to enforce the collective agreements.

Finland adheres to most ILO conventions; enforcement of worker rights is effective. Freedom of association and collective bargaining are guaranteed by law, which provides for the right to form and join independent unions, conduct legal strikes, and bargain collectively. The law prohibits anti-union discrimination and any obstruction of these rights. The National Conciliator under the Ministry of Employment and the Economy assists negotiating partners with labor disputes. The arbitration system is based on the Act on Mediation in Labor Disputes and the Labor Court is the highest body for settlement. The ILO’s Finland Country profile can be found here: http://www.ilo.org/dyn/normlex/en/f?p=1000:11110:0::NO:11110:P11110_COUNTRY_ID:102625 .

The Ministry of Employment and the Economy is responsible for drafting labor legislation and the Ministry of Social Affairs and Health is responsible for enforcing labor laws and regulations via the Occupational Safety and Health (OSH) authorities of the OSH Divisions at the Regional State Administrative Agencies, which operate under the Ministry of Social Affairs and Health. Finnish authorities adequately enforce contract, wage, and overtime laws. New legislation concerning the hiring of foreign workers in Finland entered into force on June 18, 2016. Its objective is to intensify monitoring and to ensure improved compliance with the terms of employment in Finland. Finland allows the free movement of EU citizen workers. During 2018, there were 166 strikes in Finland, compared to 103 in 2017.

In November 2018, Statistics Finland estimated that the working age population is expected to decrease by 57,000 persons by 2030, from 3.431 million people at the end of 2018. In March 2020, Statistics Finland reported that the number of persons aged at least 70 in Finland at the end of 2019 was 874 000 (or 16% of the population). The number of persons aged 70 or more has grown by 100,000 in three years.

The government reformed social protection and unemployment security to encourage people to accept job offers, shorten unemployment periods, reduce structural unemployment and save public resources. The unemployed are granted a labor market subsidy, which, if linked to earnings as is the case for about 60 percent of the unemployed, guarantees moderate income for a period up to 400 working days. Those without jobs after the 400-day period need to demonstrate that they are actively pursuing employment to continue receiving benefits. The period of eligibility was shortened from 500 days to 400 days starting on January 1, 2017, except for those with a work history shorter than three years (reduced to 300 days), and for those aged over 58 (remains 500 days).

On January 1, 2017, Finnish authorities started a two-year, universal basic income trial. The goal was to determine whether a basic income, received without conditions, incentivizes recipients to seek paid work. The government concluded that the basic income experiment did not increase the employment of participants during the first trial year. The primary income recipients, during the first trial year, did not succeed in the open labor market better or worse than the people outside the trial did. The results for the latter trial year will be published in 2020. Based on the survey, those who received the basic income felt their well-being at the end of the experiment was better than those outside the trial.

In 2017, the center-right government of Juha Sipila introduced the “Activation Model” (AM), which mimicked the Danish unemployment insurance system. The AM became effective on January 1, 2018 and was applied to basic (flat-rate) unemployment benefits (paid by the Social Insurance Institution, Kela) and income-related schemes (paid by unemployment funds). The aim of the AM was to tighten the conditions for benefit eligibility, in order to encourage activation of the unemployed, reduce the duration of periods in unemployment and increase the employment rate. AM experiences were mixed, and union opposed the action vigorously. Ministry of Social Affairs and Health abolished the activation model for unemployment security starting January 1, 2020. 12. U.S. International Development Finance Corporation (DFC) and Other Investment Insurance Programs

The U.S. Overseas Private Investment Corporation (OPIC) and Finnvera (the former Finnish Guarantee Board) share an agreement to encourage joint U.S.-Finnish private investments in Russia and the Baltic States. For more information see: https://www.finnvera.fi/eng/export/export-credit-guarantee-operations/export-credit-guarantee-operations . Finland is a member of the Multilateral Investment Guarantee Agency (MIGA).

Please note that the following tables include FDI statistics from three different sources, and therefore will not be identical. Table 2 uses BEA data when available, which measures the stock of FDI by the market value of the investment in the year the investment was made (often referred to as historical value). This approach tends to undervalue the present value of FDI stock because it does not account for inflation. BEA data is not available for all countries, particularly if only a few US firms have direct investments in a country. In such cases, Table 2 uses other sources that typically measure FDI stock in current value (or, historical values adjusted for inflation). Even when Table 2 uses BEA data, Table 3 uses the IMF’s Coordinated Direct Investment Survey (CDIS) to determine the top five sources of FDI in the country. The CDIS measures FDI stock in current value, which means that if the U.S. is one of the top five sources of inward investment, U.S. FDI into the country will be listed in this table. That value will come from the CDIS and therefore will not match the BEA data.

* Source for Host Country Data:

HelsinkiPolEconAll@state.gov

Transparency of the Regulatory System

The French government has made considerable progress in the last decade on the transparency and accessibility of its regulatory system.  The government generally engages in industry and public consultation before drafting legislation or rulemaking through a regular but variable process directed by the relevant ministry.  However, the text of draft legislation is not always publicly available before parliamentary approval.  U.S. firms may also find it useful to become members of industry associations, which can play an influential role in developing government policies.  Even “observer” status can offer insight into new investment opportunities and greater access to government-sponsored projects.

To increase transparency in the legislative process, all ministries are required to attach an impact assessment to their draft bills.  The Prime Minister’s Secretariat General (SGG for Secretariat General du Gouvernement) is responsible for ensuring that impact studies are undertaken in the early stages of the drafting process.  The State Council (Conseil d’Etat), which must be consulted on all draft laws and regulations, may reject a draft bill if the impact assessment is inadequate.

After experimenting with new online consultations, the Macron Administration is regularly using this means to achieve consensus on its major reform bills.  These consultations are often open to professionals as well as citizens at large.  Another Macron innovation is to impose regular impact assessments after a bill has been implemented to ensure its maximum efficiency, revising, as necessary, provisions that do not work in favor of those that do.  Finally, the Macron Administration aims to make all regulations and laws available online by 2022.

Over past decades, major reforms have extended the investigative and decision-making powers of France’s Competition Authority.  On April 11, 2019, France implemented the European Competition Network (ECN) Directive, which widens the powers of all European national competition authorities to impose larger fines and temporary measures. The Authority publishes its methodology for calculating fines imposed on companies charged with abuse of a dominant position.  It issues specific guidance on competition law compliance, and government ministers, companies, consumer organizations, and trade associations now have the right to petition the authority to investigate anti-competitive practices.  While the Authority alone examines the impact of mergers on competition, the Minister of the Economy retains the power to request a new investigation or reverse a merger transaction decision for reasons of industrial development, competitiveness, or saving jobs.

France’s budget documents are comprehensive and cover all expenditures of the central government.  An annex to the budget also provides estimates of cost sharing contributions, though these are not included in the budget estimates.  In its spring report each year, the National Economic Commission outlines the deficits for the two previous years, the current year, and the year ahead, including consolidated figures on taxes, debt, and expenditures.  Since 1999, the budget accounts have also included contingent liabilities from government guarantees and pension liabilities.  The government publishes its debt data promptly on the French Treasury’s website and in other documents.  Data on nonnegotiable debt is available 15 days after the end of the month, and data on negotiable debt is available 35 days after the end of the month.  Annual data on debt guaranteed by the state is published in summary in the CGAF Report and in detail in the Compte de la dette publique.  More information can be found at: https://www.imf.org/external/np/rosc/fra/fiscal.htm 

International Regulatory Considerations

France is a founding member of the European Union, created in 1957.  As such, France incorporates EU laws and regulatory norms into its domestic law.  France has been a World Trade Organization (WTO) member since 1995 and a member of GATT since 1948.  While developing new draft regulations, the French government submits a copy to the WTO for review to ensure the prospective legislation is consistent with its WTO obligations.  France ratified the Trade Facilitation Agreement in October 2015 and has implemented all of its TFA commitments.

Legal System and Judicial Independence

French law is codified into what is sometimes referred to as the Napoleonic Code, but is officially the Code Civil des Francais, or French Civil Code.  Private law governs interactions between individuals (e.g., civil, commercial, and employment law) and public law governs the relationship between the government and the people (e.g., criminal, administrative, and constitutional law).

France has an administrative court system to challenge a decision by local governments and the national government; the State Council (Conseil d’Etat) is the appellate court.  France enforces foreign legal decisions such as judgments, rulings, and arbitral awards through the procedure of exequatur introduced before the Tribunal de Grande Instance (TGI), which is the court of original jurisdiction in the French legal system.

France’s Commercial Tribunal (Tribunal de Commerce or TDC) specializes in commercial litigation.  Magistrates of the commercial tribunals are lay judges, who are well known in the business community and have experience in the sectors they represent.  Decisions by the commercial courts can be appealed before the Court of Appeals. France’s judicial system is procedurally competent, fair, and reliable and is independent of the government.

The judiciary – although its members are state employees – is independent of the executive branch.  The judicial process in France is known to be competent, fair, thorough, and time-consuming.  There is a right of appeal.  The Appellate Court (cour d’appel) re-examines judgments rendered in civil, commercial, employment or criminal law cases.  It re-examines the legal basis of judgments, checking for errors in due process and reexamines case facts.  It may either confirm or set aside the judgment of the lower court, in whole or in part. Decisions of the Appellate Court may be appealed to the Highest Court in France (cour de cassation).

Laws and Regulations on Foreign Direct Investment

Foreign and domestic private entities have the right to establish and own business enterprises and engage in all sorts of remunerative activities.  U.S. investment in France is subject to the provisions of the Convention of Establishment between the United States of America and France, which was signed in 1959 and remains in force.  The rights it provides U.S. nationals and companies include:  rights equivalent to those of French nationals in all commercial activities (excluding communications, air transportation, water transportation, banking, the exploitation of natural resources, the production of electricity, and professions of a scientific, literary, artistic, and educational nature, as well as certain regulated professions like doctors and lawyers).  Treatment equivalent to that of French or third-country nationals is provided with respect to transfer of funds between France and the United States.  Property is protected from expropriation except for public purposes; in that case it is accompanied by payment that is just, realizable and prompt.

Potential investors can find relevant investment information and links to laws and investment regulations at http://www.businessfrance.fr/ .

Competition and Anti-Trust Laws

Major reforms have extended the investigative and decision-making powers of France’s Competition Authority.  France implemented the European Competition Network or ECN Directive on April 11, 2019, allowing the French Competition Authority to impose heftier fines (above €3 million / $3.3 million) and temporary measures to prevent an infringement that may cause harm.  The Authority issues decisions and opinions mostly on antitrust issues, but its influence on competition issues is growing.  For example, following a complaint in November 2019 by several French, European, and international associations of press publishers against Google over the use of their content online without compensation, the Authority ordered the U.S. company to start negotiating in good faith with news publishers over the use of their content online.  On December 20, 2019, Google was fined €150 million ($162 million) for abuse of dominant position.  Following an in-depth review of the online ad sector, the Competition Authority found Google Ads to be “opaque and difficult to understand” and applied in “an unfair and random manner.”

The Competition Authority launches regular in-depth investigations into various sectors of the economy, which may lead to formal investigations and fines. The Authority publishes its methodology for calculating fines imposed on companies charged with abuse of a dominant position.  It issues specific guidance on competition law compliance.  Government ministers, companies, consumer organizations and trade associations have the right to petition the authority to investigate anti-competitive practices.  While the Authority alone examines the impact of mergers on competition, the Minister of the Economy retains the power to request a new investigation or reverse a merger transaction decision for reasons of industrial development, competitiveness, or saving jobs.

A new law on Economic Growth, Activity and Equal Opportunities (known as the “Macron Law”), adopted in August 2016, vested the Competition Authority with the power to review mergers and alliances between retailers ex-ante (beforehand).  The law provides that all contracts binding a retail business to a distribution network shall expire at the same time.  This enables the retailer to switch to another distribution network more easily.  Furthermore, distributors are prohibited from restricting a retailer’s commercial activity via post-contract terms.  The civil fine incurred for restrictive practices can now amount to up to five percent of the business’s revenue earned in France

Expropriation and Compensation

In accordance with international law, the national or local governments cannot legally expropriate property to build public infrastructure without fair market compensation. There have been no expropriations of note during the reporting period.

Dispute Settlement

ICSID Convention and New York Convention

France is a member of the World Bank-based International Centre for Settlement of Investment Disputes (ICSID) Convention and a signatory to the Recognition and Enforcement of Foreign Arbitral Awards (1958 New York Convention) which means local courts are obligated to enforce international arbitral awards under this system. The International Chamber of Commerce’s International Court of Arbitration (ICA) has been based in Paris since 1923.

France was one of the first countries to enact a modern arbitration law in 1980-1981. In 2011, the French Ministry of Justice issued Decree 2011-48, which introduced further international best practices into French arbitration procedural law. As a result, parties are free to agree orally to settle their disputes through arbitration, subject to standards of due process and a newly enacted principle of procedural efficiency and fairness.

Investor-State Dispute Settlement

The President of the Tribunal de Grande Instance (High Civil Court of First Instance) of Paris has the authority to issue orders related to ad-hoc international arbitration. Paris is the seat of the International Chamber of Commerce’s International Court of Arbitration, composed of representatives from 90 countries, that handles investment as well as commercial disputes.

France does not have a bilateral investment treaty with the United States.   The European Commission directly negotiates on behalf of the EU on foreign direct investment since it is part of the EU Common Commercial Policy.  In 2015, the EU agreed to pursue an investment court approach to investor-State dispute settlement.  While this model is included in the Comprehensive Economic and Trade Agreement (CETA) with Canada and the EU-Vietnam FTA, no actual court has yet been established in any form or context; no disputes have been brought under these post-2015 treaties.

International Commercial Arbitration and Foreign Courts

French law provides conditions for the recognition and the enforcement of foreign arbitral awards in relation to the New York Convention.  The provisions of French law are contained in the Code of Civil Procedure and the Code of Civil Enforcement Procedures.  The French Civil Code envisions several mechanisms of alternative dispute resolution (ADR) including out-of-court arbitration and conciliation where a judicial conciliator puts an end to a dispute. France is a member of UNCITRAL.  Local courts recognize and enforce foreign arbitral awards as mentioned above.  The recognition of judgments of foreign courts by French courts is possible, but judgements must be accompanied by the issuance of an exequatur – a legal document issued by a sovereign authority that permits the exercise or enforcement of a foreign judgement.

Bankruptcy Regulations

France has extensive and detailed bankruptcy laws and regulations.  Any creditor, regardless of the amount owed, may file suit in bankruptcy court against a debtor.  Foreign creditors, equity shareholders and foreign contract holders have the same rights as their French counterparts.  Monetary judgments by French courts on firms established in France are generally made in euros.  Not bankruptcy itself, but bankruptcy fraud – the misstatement by a debtor of his financial position in the context of a bankruptcy – is criminalized.  Under France’s bankruptcy code managers and other entities responsible for the bankruptcy of a French company are prevented from escaping liability by shielding their assets (Law 2012-346).  France has adopted a law that enables debtors to implement a restructuring plan with financial creditors only, without affecting trade creditors.  France’s Commercial Code incorporates European Directive 2014/59/EU establishing a framework for the recovery and resolution of claims on insolvent credit institutions and investment firms.  In the World Bank’s 2019 Doing Business Index, France was ranked 28^th of 190 on ease of resolving insolvency.

The Bank of France, the country’s only credit monitor, maintains files on persons having written unfunded checks, having declared bankruptcy, or having participated in fraudulent activities. Commercial credit reporting agencies do not exist in France.

Investment Incentives

France offers financial incentives, generally equally available to both French and foreign investors.  The government provides incentives for capital investment in small companies. For instance, a French company or a subsidiary of a foreign firm that would invest in a minority shareholding (less than 20 percent) of a small, innovative SME would benefit from a five-year, linear amortization of their investment.  To qualify, SMEs must allocate at least 15 percent of their spending on research.

Incentivizing research and development (R&D) and innovation is a high priority for the French government.  Business France, the country’s export and investment promotion agency, reported that R&D operations accounted for 10 percent of foreign investment projects in 2018 and created or maintained 2,793 jobs, up 23 percent from the prior year.  The United States is the leading foreign investor in R&D in France, accounting for 26 percent of 2018 investment decisions. International companies may join France’s 71 innovation clusters, increasing access to both production inputs and technical benefits of geographical proximity. Other components of this policy include: the Innovative New Company (Jeune Enterprise Innovante) and the French Young Entrepreneurs Initiative.

In response to the COVID-19 crisis, the government implemented an emergency fiscal package on March 24, 2020 totaling €410 billion ($447 billion), comprised of: 1) Loan guarantees: €300 billion ($330 billion); 2) Deferral of corporate tax and social security payments: €50 billion ($55 billion); 3) Partial unemployment scheme to avoid layoffs: €24 billion ($26 billion); 4) Recapitalizations, bailouts, or nationalizations if needed: €20 billion ($22 billion); 5) Solidarity Fund for very small companies, the self-employed and micro-entrepreneurs: €7 billion ($7.6 billion); 6) system of repayable advances of €500 million ($546 million) for SMEs to purchase inputs; 7) Late penalties cancelled for all State and local government procurement contracts.  The purpose of the emergency package is to fiscally absorb the economic impact of COVID-19.

Foreign Trade Zones/Free Ports/Trade Facilitation

France is subject to all EU free trade zone regulations.  These allow member countries to designate portions of their customs’ territory as duty-free, where value-added activity is limited.  France has several duty-free zones, which benefit from exemptions on customs for storage of goods coming from outside of the European Union.  The French Customs Service administers them and provides details on its website (http://www.douane.gouv.fr ).  French legal texts are published online at http://legifrance.gouv.fr .

In September 2018, President Macron announced the extension of 44 Urban Free Zones (ZFU) in low-income neighborhoods and municipalities with at least 10,000 residents.  The program provides incentives for employers, who have created 600 new jobs since 2016.  Incentives include exemption from payment of payroll taxes and certain social contributions for five years, financed by €15 million  ($16.5 million) a year in State funds.

Performance and Data Localization Requirements

While there are no mandatory performance requirements established by law, the French government will generally require commitments regarding employment or R&D from both foreign and domestic investors seeking government financial incentives.  Incentives like PAT regional planning grants (Prime d’Amenagement du Territoire pour l’Industrie et les Services) and related R&D subsidies are based on the number of jobs created, and authorities have occasionally sought commitments as part of the approval process for acquisitions by foreign investors.

The French government imposes the same conditions on domestic and foreign investors in cultural industries:  all purveyors of movies and television programs (i.e., television broadcasters, telecoms operators, internet service providers and video services) must contribute a percentage of their revenues toward French film and television productions.  They must also abide by broadcasting cultural content quotas (minimum 40 percent French, 20 percent EU).

Real Property

Real property rights are regulated by the French civil code and are uniformly enforced. The World Bank’s Doing Business Index ranks France 32nd of 190 on registering property. French civil-law notaries (notaires) – highly specialized lawyers in private practice appointed as public officers by the Justice Ministry – handle residential and commercial conveyance and registration, contract drafting, company formation, successions, and estate planning. The official system of land registration (cadastre) is maintained by the French public land registry under the auspices of the French tax authority (Direction Generale des Finances Publiques or DGFiP), available online at http://www.cadastre.gouv.fr . Mortgages are widely available, usually for a 15-year period.

Intellectual Property Rights

France is a strong defender of intellectual property rights (IPR).  Under the French system, patents and trademarks protect industrial property, while copyrights protect literary/artistic property. By virtue of the Paris Convention , U.S. nationals have a priority period following filing of an application for a U.S. patent or trademark in which to file a corresponding application in France:  twelve months for patents and six months for trademarks.

Counterfeiting is a costly problem for French companies, and the government of France maintains strong legal protections and a robust enforcement mechanism to combat trafficking in counterfeit goods — from copies of luxury goods to fake medications — as well as the theft and illegal use of IPR.  The French Intellectual Property Code has been updated repeatedly over the years to address this challenge, most recently in 2019 with the implementation of the so-called Action Plan for Business Growth and Transformation or PACTE Law (“Plan d’Action pour la Croissance et la Transformation des Entreprises”).  This law reinforcing France’s anti-counterfeiting legislation and implements EU Directive 2015/2436 of the Trademark Reform Package.  It increases the Euro amount for damages to companies that are victims of counterfeiting and extends trademark protection to smartcard technology, certain geographic indications, plants, and agricultural seeds.  The new legislation also increases the statute of limitations for civil suits from three to ten years and strengthens the powers of customs officials to seize fake goods sent by mail or express freight.  France also adopted legislation in 2019 to implement EU Directive 2019/790 on Copyright and Related Rights in the Digital Single Market.

The government also reports on seizures of counterfeit goods.  In 2018, French Customs seized 5.4 million counterfeited goods, down from 8.5 million counterfeited goods in 2017.  However, in 2019, seizures increased by 49 percent, according to the French Customs Office. Cigarettes represented 45 percent of all seized goods.  France’s top private sector anti-counterfeiting organization, UNIFAB, called on the government in 2018 to launch a national public awareness campaign.  The government has been working on a plan to improve the coordination between the Customs Office, which investigates fraud cases, and the National Institute of Industrial Property, which oversees patents, trademarks, and industrial design rights.

France has robust laws against online piracy.  A government agency called the High Authority for the Dissemination of Artistic Works and the Protection of Rights on Internet (Haute Autorite pour la Diffusion des Œuvres et la Protection des droits sur Internet – HADOPI) administers a “graduated response” system of warnings and fines.  It has taken enforcement action against several online pirate sites.  HADOPI cooperates closely with the U.S. Patent and Trademark Office (USPTO) including pursuing voluntary arrangements that to single out awareness about intermediaries that facilitate or fund pirate sites. (Note that one of HADOPI’s tasks is to ensure that the technical measures used to protect works do not prevent the right of individuals to make personal copies of television programs for their private use.)  In December 2019, HADOPI released its yearly barometer of online cultural consumption showing that 26 percent of French people acquired and consumed music, films and television series through illegal sites (53 percent via streaming and 45 percent through direct or indirect download).  This figure has remained steady over the past few years.  Offenders risk fines of between €1,500 ($1,650) and €300,000 ($330,000) and/or up to three years imprisonment.

HADOPI was due to merge with France’s audiovisual watchdog CSA as part of a new draft law on audiovisual communication and cultural sovereignty in the digital age, tabled by the Minister of Culture in December 2019.  The reform was due in Parliament in March 2020 but was further delayed by the COVID-19 epidemic.

France does not appear on USTR’s 2020 Special 301 Report.  USTR’s 2019 Notorious Market report continues to list France as host to illicit streaming and copyright infringement websites.  The 2019 report also listed amazon.fr, based in France, noting alleged high levels of counterfeit goods on its platform (Note:  Other Amazon sites were also included in the report: amazon.ca in Canada, amazon.de in Germany, amazon.in in India, and amazon.co.uk in the United Kingdom.)

For additional information about national laws and points of contact at local IP offices, please see WIPO’s country profiles at http://www.wipo.int/directory/en/ .

Capital Markets and Portfolio Investment

There are no administrative restrictions on portfolio investment in France, and there is an effective regulatory system in place to facilitate portfolio investment.  France’s open financial market allows foreign firms easy access to a variety of financial products, both in France and internationally. France continues to modernize its marketplace; as markets expand, foreign and domestic portfolio investment has become increasingly important.  As in most EU countries, France’s listed companies are required to meet international accounting standards. Some aspects of French legal, regulatory, and accounting regimes are less transparent than U.S. systems, but they are consistent with international norms.  Foreign banks are allowed to establish branches and operations in France and are subject to international prudential measures.  Under IMF Article VIII, France may not impose restrictions on the making of payments and transfers for current international transactions without the (prior) approval of the Fund.

Foreign investors have access to all classic financing instruments, including short-, medium-, and long-term loans, short- and medium-term credit facilities, and secured and non-secured overdrafts offered by commercial banks.  These assist in public offerings of shares and corporate debt, as well as mergers, acquisitions and takeovers, and offer hedging services against interest rate and currency fluctuations.  Foreign companies have access to all banking services.  Most loans are provided at market rates, although subsidies are available for home mortgages and small business financing.

Euronext Paris (also known as Paris Bourse) is part of a regulated cross-border stock exchange located in six European countries.  Euronext Growth is an alternative exchange for medium-sized companies to list on a less regulated market (based on the legal definition of the European investment services directive), with more consumer protection than the Marché Libre still used by a couple hundred small businesses for their first stock listing.  A company seeking a listing on Euronext Growth must have a sponsor with status granted by Euronext and prepare a French language prospectus for a permit from the Autorite des Marchés Financiers (AMF or Financial Markets Authority), the French equivalent of the U.S. Securities and Exchange Commission.  Small and medium-size enterprises (SMEs) may also list on Enternext, a subsidiary of the Euronext Group created in 2013.  The bourse in Paris also offers Euronext Access, an unregulated exchange for Start-ups.

Money and Banking System

France’s banking system recovered gradually from the 2008-2009 global financial crises and passed the 2018 stress tests conducted by the European Banking Authority.  The French banking sector is healthy.  Non-performing loans were 2.8 percent in France in October 2019, compared to  3.1 percent in the EU.

Four French banks were ranked among the world’s 20 largest in 2019 (BNP Paribas SA; Crédit Agricole Group, Société Générale SA, Groupe BPCE). The assets of France’s top 5 banks totaled USD 8.68 trillion in 2019.  Acting on a proposal from the Banque de France in March 2020, the High Council for Financial Stability (HCSF) instructed the country’s largest banks to decrease the “countercyclical capital buffer” from 0.25 percent to zero of their bank’s risk-weighted assets.  HCSF cited a “rise in tensions and volatility on the financial markets in the context of the development of the coronavirus pandemic.”

France’s central bank, the Banque de France, is a member of the Eurosystem, which groups together the European Central Bank (ECB) and the national central banks of all countries that have adopted the euro.  The Banque de France is a public entity governed by the French Monetary and Financial Code.  The conditions whereby it conducts its missions on national territory are set out in its Public Service Contract.  The three main missions are monetary strategy, financial stability together with the High Council of financial stability (Haut Conseil de la Stabilite Financiere) which implements macroprudential policy, and the provision of economic services to the community.  In addition, it participates in the preparation and implementation of decisions taken centrally by the ECB Governing Council.

Foreign banks can operate in France either as subsidiaries or branches but need to obtain a license.  Credit institutions’ licenses are generally issued by France’s Prudential Authority (ACPR – Autorité de Contrôle Prudentiel et de Résolution) which reviews whether certain conditions are met (e.g. minimum capital requirement, sound and prudent management of the bank, compliance with balance sheet requirements, etc.).  Both EU law and French legislation apply to foreign banks.  Foreign banks or branches are additionally subject to prudential measures and must provide periodic reports to the ACPR regarding operations in France, including detailed reports on their financial situation. At the EU level, the ‘passporting right’ allows a foreign bank settled in any EU country to provide their services across the EU, including France.  There are about 1,031 credit institutions authorized to carry on banking activities in France; the list of foreign banks is available on this website: https://www.regafi.fr/spip.php?page=results&type=advanced&id_secteur=3&lang=en&denomination=&siren=&cib=&bic=&nom=&siren_agent=&num=&cat=01-TBR07&retrait=0 

Foreign Exchange and Remittances

Foreign Exchange

France’s investment remittance policies are stable and transparent.  All inward and outward payments must be made through approved banking intermediaries by bank transfers.  There is no restriction on the repatriation of capital.  Similarly, there are no restrictions on transfers of profits, interest, royalties, or service fees.  Foreign-controlled French businesses are required to have a resident French bank account and are subject to the same regulations as other French legal entities.  The use of foreign bank accounts by residents is permitted.

For purposes of controlling exchange, the French government considers foreigners as residents from the time they arrive in France.  French and foreign residents are subject to the same rules; they are entitled to open an account in a foreign currency with a bank established in France, and to establish accounts abroad.  They must report all foreign accounts on their annual income tax returns, and money earned in France may be freely converted into dollars or any other currency and transferred abroad.

France is one of nineteen countries (known collectively as the Eurozone) that use the euro currency.  Exchange rate policy for the euro is handled by the European Central Bank, located in Frankfurt, Germany.  The average euro to USD exchange rate from April 1, 2019 to April 1, 2020 was 1 USD to 0.90 euro.

France is a founding member of the OECD-based Financial Action Task Force (FATF, a 39-member intergovernmental body).  As reported in the Department of State’s France Report on Terrorism, the French government has a comprehensive anti-money laundering/ counterterrorist financing (AML/CTF) regime and is an active partner in international efforts to control money laundering and terrorist financing.  Tracfin, the French government’s financial intelligence unit, is active within international organizations, and has signed new bilateral agreements with foreign countries.

Remittance Policies

–No additions for 2020–

Sovereign Wealth Funds

France has no sovereign wealth fund per se (none that use that nomenclature) but does operate funds with similar intent.  The Public Investment Bank (Bpifrance) supports small and medium enterprises (SMEs), larger enterprises (Entreprises de Taille Intermedaire), and innovating businesses.  The government strategy is defined at the national level and aims to fit with local strategies.  Bpifrance may hold direct stakes in companies, hold indirect stakes via generalist or sectorial funds, venture capital, development or transfer capital.  In 2019, Bpifrance had minority stakes in 244 firms and 62 investment funds that invest in businesses. It also provides export insurance.

The 11 listed entities in which the French State maintains stakes at the federal level are Aeroports de Paris (50.63 percent), Airbus Group (10.96 percent), Air France-KLM (14.29 percent), EDF (83.58 percent), ENGIE (23.64 percent), Eramet (25.57 percent), La Française des Jeux (FDJ) (21.91 percent), Orange (a direct 13.39 percent stake and a 9.60 percent stake through Bpifrance), Renault (15.01 percent), Safran (11.23 percent), and Thales 25.68 percent).  Unlisted companies owned by the State include SNCF (rail), RATP (public transport), CDC (Caisse des depots et consignations) and La Banque Postale (bank).  In all, the government has majority and minority stakes in 88 firms, in a variety of sectors.

Private enterprises have the same access to financing as SOEs, including from state-owned banks or other state-owned investment vehicles.  SOEs are subject to the same tax burden and tax rebate policies as their private sector competitors.  SOEs may get subsidies and other financial resources from the government.

France, as a member of the European Union, is party to the Agreement on Government Procurement (GPA) within the framework of the World Trade Organization.  Companies owned or controlled by the state behave largely like other companies in France and are subject to the same laws and tax code.  The Boards of SOEs operate according to accepted French corporate governance principles as set out in the (private sector) AFEP-MEDEF Code of Corporate Governance.  SOEs are required by law to publish an annual report, and the French Court of Audit conducts financial audits on all entities in which the state holds a majority interest.  The French government appoints representatives to the Boards of Directors of all companies in which it holds significant numbers of shares, and manages its portfolio through a special unit attached to the Ministry for the Economy and Finance Ministry, the shareholding agency APE (Agence de Participations de l’Etat).  The 2018-2019 APE annual report depicted a “State that invests in the future and protects its sovereignty.”  The State as a shareholder must set an example in terms of respect for the environment, gender equality and social responsibility. The report also highlighted that the State must protect its strategic assets and remain a shareholder in areas where the general interest is at stake.

Privatization Program

The government was due to privatize many large companies in 2019, including ADP and ENGIE in order to create a €10 billion ($11 billion) fund for innovation and research.  However, the program was delayed because of political opposition to the privatization of airport manager ADP, regarded as a strategic asset to be protected from foreign shareholders.  The government succeeded in selling in November 2019 a 52 percent stake in gambling firm FDJ.  The government continues to maintain a strong presence in some sectors, particularly power, public transport, and defense industries.

The business community has general awareness of standards for responsible business conduct (RBC) in France.  The country has established a National Contact Point (NCP) for the OECD Guidelines for Multinational Enterprises, coordinated and chaired by the Directorate General of the Treasury in the Ministry for the Economy and Finance.  Its members represent State Administrations (Ministries in charge of Economy and Finance, Labor and Employment, Foreign Affairs, Ecology, Sustainable Development and Energy), six French Trade Unions (CFDT, CGT, FO, CFE-CGC, CFTC, UNSA) and one employers’ organization, MEDEF.

The NCP promotes the OECD Guidelines in a manner that is relevant to specific sectors.  When specific instances are raised, the NCP offers its good offices to the parties (discussion, exchange of information) and may act as a mediator in disputes, if appropriate.  This can involve conducting fact-finding to assist parties in resolving disputes, and posting final statements on any recommendations for future action with regard to the Guidelines.  The NCP may also monitor how its recommendations are implemented by the business in question.  In April 2017, the French NCP signed a two-year partnership with Global Compact France to increase sharing of information and activity between the two organizations.

In France, corporate governance standards for publicly traded companies are the product of a combination of legislative provisions and the recommendations of the AFEP-MEDEF code (two employers’ organizations).  The code, which defines principles of corporate governance by outlining rules for corporate officers, controls and transparency, meets the expectations of shareholders and various stakeholders, as well as of the European Commission.  First introduced in September 2002, it is regularly updated, adding new principles for the determination of remuneration and independence of directors, and now includes corporate social and environmental responsibility standards.  The latest amendments in February 2019 tackle the remuneration and post-employment benefits of Chief Executive Officers and Executive Officers: 60 percent variable remuneration based on quantitative objectives and 40 percent on quality objectives, including efforts in the corporate social responsibility.

Also relating to transparency, the EU passed a new regulation in May 2017 to stem the trade in conflict minerals and, in particular, to stop conflict minerals and metals from being exported to the EU; to prevent global and EU smelters and refiners from using conflict minerals; and to protect mine workers from being abused.  The regulation goes into effect January 1, 2021, and will then apply directly to French law.

France has played an active role in negotiating the ISO 26000 standards, the International Finance Corporation Performance Standards, the OECD Guidelines for Multinational Enterprises, and the UN Guiding Principles on Business and Human Rights.  France has signed on to the Extractive Industries Transparency Initiative (EITI), although, it has not yet been fully implemented.  Since 2017, large companies based in France and having at least 5,000 employees are now required to establish and implement a corporate plan to identify and assess any risks to human rights, fundamental freedoms, workers’ health, safety, and risk to the environment from activities of their company and its affiliates.

In line with President Macron’s campaign promise to clean up French politics, the French parliament adopted in September 2017 the law on “Restoring Confidence in Public Life.” The new law bans elected officials from employing family members, or working as a lobbyist or consultant while in office. It also bans lobbyists from paying parliamentary, ministerial, or presidential staff and requires parliamentarians to submit receipts for expenses.

France’s “Transparency, Anti-corruption, and Economic Modernization Law,” also known as the “Loi Sapin II,” came into effect on June 1, 2017.  It brought France’s legislation in line with European and international standards.  Key aspects of the law include: creating a new anti-corruption agency; establishing “deferred prosecution” for defendants in corruption cases and prosecuting companies (French or foreign) suspected of bribing foreign public officials abroad; requiring lobbyists to register with national institutions; and expanding legal protections for whistleblowers.  The Sapin II law also established a High Authority for Transparency in Public Life (HATVP).  The HATVP promotes transparency in public life by publishing the declarations of assets and interests it is legally authorized to share publicly.  After review, declarations of assets and statements of interests of members of the government are published on the High Authority’s website under open license.  The declarations of interests of members of Parliament and mayors of big cities and towns, but also of regions are also available on the website.  In addition, the declarations of assets of parliamentarians can be accessed in certain governmental buildings, though not published on the internet.

France is a signatory to the OECD Anti-Bribery Convention.  The U.S. embassy in Paris has received no specific complaints from U.S. firms of unfair competition in France in recent years. France ranked 23^rd of 180 on Transparency International’s (TI) 2019 corruption perceptions index. See https://www.transparency.org/country/FRA .

Resources to Report Corruption

The Central Office for the Prevention of Corruption (Service Central de Prevention de la Corruption or SCPC) was replaced in 2017 by the new national anti-corruption agency – the Agence Francaise Anticorruption (AFA).  The AFA is charged with preventing corruption by establishing anti-corruption programs, making recommendations, and centralizing and disseminating information to prevent and detect corrupt officials and company executives.  The AFA will also administrative authority to review the anticorruption compliance mechanisms in the private sector, in local authorities and in other government agencies.

Contact information for Agence Française Anti-corruption (AFA):

Director: Charles Duchaine
23 avenue d’Italie
75013 Paris
Tel : (+33) 1 44 87 21 14
Email: charles.duchaine@afa.gouv.fr

Contact information for Transparency International’s French affiliate:

Transparency International France
14, passage Dubail
75010 Paris
Tel: (+33) 1 84 16 95 65;
Email: contact@transparency-france.org

France is a politically stable country.  Occasionally, large demonstrations and protests occur (sometimes organized to occur simultaneously in multiple French cities); these normally do not result in violence.  When faced with imminent business closures, on rare occasions French trade unions have resorted to confrontational techniques such as setting plants on fire, planting bombs, or kidnapping executives or managers.

From mid-November 2018 through 2019, Paris and other cities in France faced regular protests and disruptions, including “Gilets Jaunes” (Yellow Vest) demonstrations, initiated by discontent over high cost of living, taxes, and social exclusion.  In the second half of 2019, most demonstrations were in response to President Macron’s proposed unemployment and pension reform.  Authorities permitted peaceful protests.  During some demonstrations, damage to property, including looting and arson, in popular tourist areas occurred with reckless disregard for public safety.  Police response included water cannons, rubber bullets and tear gas.

On February 7, 2020, a survey produced by the American Chamber of Commerce in France and the consulting firm Bain & Company cited a renewed confidence of American companies regarding France’s attractiveness despite an outpouring of social unrest during the first half of 2019 and often violent protests throughout the whole year:  41 percent of the investors positive over the next two to three years (+ 11 points compared with 2018), and 51 percent expected to increase the number of their employees in France.  Furthermore, over 85 percent considered the impact of France’s reforms to be positive for investors.  France’s Yellow Vest movement rekindled class warfare in France and exemplified the existence of two Frances, putting on hold on-going economic and labor reforms such as cuts to unemployment benefits and pensions .

In recent years, more than 230 people have been killed in terrorist attacks in France, including the January 2015 assault on the satirical magazine Charlie Hebdo, the November 2015 Bataclan concert hall and national stadium attacks, and the 2016 Bastille Day truck attack in Nice.  While terrorists continue to target French interests, since July 2016 attacks have been smaller in scale and most often perpetrated by lone actors inspired by, but with little direct connection to, ISIS or other international terrorist organizations.  French security agencies continue to disrupt plots and cells, and their efforts have been aided by recent legislation and executive measures which strengthen search and detention authorities.  Despite the spate of recent small-scale attacks, France remains a strong, stable, democratic country with a vibrant economy and culture.  Americans and investors from all over the world continue to invest heavily in France.

France’s private sector labor force is a major asset in attracting foreign investment.  With a return to growth (1.7 percent in 2018 and 1.2 percent in 2019) and a drop in unemployment to 8.1 percent in 2019 from 8.8 percent in 2018, President Macron launched a labor market reform to reduce regulations and spur new hiring.  Five ordinances (executive orders), which came into effect on January 1, 2018, introduced measures easing companies’ ability to fire workers including by capping potential damage claims in cases of wrongful dismissal, and a one-year time limit for making claims, which business organizations have requested for several decades.  In order to make these proposals acceptable to labor unions, Labor Minister Penicaud increased regular required severance pay by 25 percent.  For example, an employee paid a monthly €2,000 ($2,160) and fired after 10 years will be entitled to a severance pay of €5,000 ($5,400), instead of the previous €4,000 ($4,320).

Mandatory company employee councils for consultations on economic, social and public safety issues have been reduced from three to one participant. Companies of all sizes are now able to initiate wide-scale voluntary layoffs with severance provisions for employees for any reason without fear of lawsuit, but with the agreement of labor unions representing a majority of employees.  Finally, foreign-owned companies no longer have to justify job cuts in France on the basis of their global turnover, but can base them on poor performance in the French market alone.  These measures have been welcomed by the business community.

France’s has one of the lowest unionized work forces in the developed world (between 8-11 percent of the total work force).  However, unions have strong statutory protections under French law that give them the power to engage in sector- and industry-wide negotiations on behalf of all workers.  As a result, an estimated 98 percent of French workers are covered by union-negotiated collective bargaining agreements.  Any organizational change in the workplace must usually be presented to the unions for a formal consultation as part of the collective bargaining process.

The number of apprenticeships in France has increased by 16 percent in 2019 and now totals 491,000 in both the public and private sectors, according to Labor Ministry figures.  Apprenticeships, like vocational training, have been placed under the direct management of the government via a newly created agency called France Compétences.  Growth of apprenticeship and reform of vocational training help to explain the recent drop in the unemployment rate.

The unemployment rate fell to 8.1 percent in the fourth quarter of 2019 from 8.8 percent in the previous quarter.  This was France’s lowest unemployment rate since the 2008 financial crisis.  However, youth unemployment remained high at 20 percent, from 20.8 percent in 2018 and 22.3 percent in 2017.  France’s partial unemployment scheme, which allows firms to retain their employees while the government continues to pay a portion of their wages, has expanded dramatically in scope and size during the Coronavirus epidemic.  Over half of France’s entire workforce was enrolled in the scheme at the end of April 2020.  The number of job seekers is likely to increase sharply if the government follows through with its plan to gradually taper off the scheme beginning in June 2020.

The COVID-19 crisis may cause the Macron Administration to delay or abandon two planned labor reforms on unemployment benefits and pensions.  Labor unions have asked the government to repeal its July 26, 2019 decrees gradually introducing tighter rules for unemployment benefit claims designed to encourage people to go back to work and save €3.4 billion ($3.75 billion) over three years.  The new rules reduce benefits for all unemployed people, especially the highest earners (above €4,500 / $4,950 a month).  Pension reform, approved by the government on January 24, 2020,  and opposed by all labor unions in its current form, is also unlikely to resurface in parliament as the government focuses on economic recovery.

Given France’s high per capita income, investments in France do not qualify for investment insurance or guarantees offered by the U.S. International Development Finance Corporation (DFC).

* Source for Host Country Data: INSEE database for GDP figures and French Central Bank (Banque de France) for FDI figures. Accessed on April 27, 2020.

The IMF’s Coordinated Direct Investment Survey (CDIS) database is consistent with France’s Central Bank database.  The Netherlands appears as the second country destination for French FDI.  This could be related to the fact that a few big French companies (Danone, Total, Thalès, Airbus, Air Liquide) have their headquarters based in the Netherlands because of its attractive corporate tax policy.

The IMF’s Coordinated Portfolio Investment Survey (CPIS) database is consistent with France’s Central Bank database.  Luxembourg is a very attractive hub for asset and investment management in Europe.

Dustin Salveson
Economic Officer
U.S. Embassy
2 Avenue Gabriel
75008 Paris, France
Tel: +33.1.43.12.2000
FranceICSeditor@state.gov
https://fr.usembassy.gov/business/

Transparency of the Regulatory System

Germany has transparent and effective laws and policies to promote competition, including antitrust laws.  The legal, regulatory, and accounting systems are complex but transparent and consistent with international norms.

Public consultation by federal authorities is regulated by the Joint Rules of Procedure, which specify that ministries must consult early and extensively with a range of stakeholders on all new legislative proposals.  In practice, laws and regulations in Germany are routinely published in draft, and public comments are solicited. According to the Joint Procedural Rules, ministries should consult the concerned industries’ associations (rather than single companies), consumer organizations, environmental, and other NGOs.  The consultation period generally takes two to eight weeks.

The German Institute for Standardization (DIN) is open to foreign members.

International Regulatory Considerations

As a member of the European Union, Germany must observe and implement directives and regulations adopted by the EU.  EU regulations are binding and enter into force as immediately applicable law. Directives, on the other hand, constitute a type of framework law that is to be implemented by the Member States in their respective legislative processes, which is regularly observed in Germany.

EU Member States must implement directives within a specified period of time.  Should a deadline not be met, the Member State may suffer the initiation of an infringement procedure, which could result in steep fines.  Germany has a set of rules that prescribe how to break down any payment of fines devolving on the Federal Government and the federal states (Länder).  Both bear part of the costs.  Payment requirements by the individual states depend on the size of their population and the respective part they played in non-compliance.

The federal states have a say over European affairs through the Bundesrat (upper chamber of parliament).  The Federal Government must inform the Bundesrat at an early stage of any new EU policies that are relevant for the federal states.

The Federal Government notifies draft technical regulations to the WTO Committee on Technical Barriers to Trade (TBT) through the Federal Ministry of Economic Affairs and Energy.

Legal System and Judicial Independence

German law is both predictable and reliable.  Companies can effectively enforce property and contractual rights.  Germany’s well-established enforcement laws and official enforcement services ensure that investors can assert their rights.  German courts are fully available to foreign investors in an investment dispute.

The judicial system is independent, and the government does not interfere in the court system.  The legislature sets the systemic and structural parameters, while lawyers and civil law notaries use the law to shape and organize specific situations.  Judges are highly competent and impartial. International studies and empirical data have attested that Germany offers an effective court system committed to due process and the rule of law.

In Germany, most important legal issues and matters are governed by comprehensive legislation in the form of statutes, codes and regulations.  Primary legislation in the area of business law includes:

• the Civil Code (Bürgerliches Gesetzbuch, abbreviated as BGB), which contains general rules on the formation, performance and enforcement of contracts and on the basic types of contractual agreements for legal transactions between private entities;
• the Commercial Code (Handelsgesetzbuch, abbreviated as HGB), which contains special rules concerning transactions among businesses and commercial partnerships;
• the Private Limited Companies Act (GmbH-Gesetz) and the Public Limited Companies Act (Aktiengesetz), covering the two most common corporate structures in Germany – the ‘GmbH’ and the ‘Aktiengesellschaft’; and
• the Act on Unfair Competition (Gesetz gegen den unlauteren Wettbewerb, abbreviated as UWG), which prohibits misleading advertising and unfair business practices.

Apart from the regular courts, which hear civil and criminal cases, Germany has specialized courts for administrative law, labor law, social law, and finance and tax law.  Many civil regional courts have specialized chambers for commercial matters.  In 2018, the first German regional courts for civil matters (in Frankfurt and Hamburg) established Chamber for International Commercial Disputes introducing the possibility to hear international trade disputes in English.  Other federal states are currently discussing plans to introduce these specialized chambers as well. The Federal Patent Court hears cases on patents, trademarks, and utility rights which are related to decisions by the German Patent and Trademarks Office.  Both the German Patent Office (Deutsches Patentamt) and the European Patent Office are headquartered in Munich.

Laws and Regulations on Foreign Direct Investment

The Federal Ministry for Economic Affairs and Energy may review acquisitions of domestic companies by foreign buyers in cases where investors seek to acquire at least 25 percent of the voting rights to assess whether these transactions pose a risk to the public order or national security of the Federal Republic of Germany.  In the case of acquisitions of critical infrastructure and companies in sensitive sectors, the threshold for triggering an investment review by the government is 10 percent. The Foreign Trade and Payments Act and the Foreign Trade and Payments Ordinance provide the legal basis for screening investments. In 2019, the Federal Ministry for Economic Affairs and Energy screened a total of 106 foreign acquisitions. To our knowledge, it had not prohibited any acquisitions as of May 2020, however the prospect of rejection has caused at least one foreign investor to pull out of a prospective deal.  All decisions resulting are subject to judicial review by administrative courts.

In general, there is no requirement for investors to obtain approval for any acquisition, but they must notify the Federal Ministry for Economic Affairs and Energy if the target company operates critical infrastructure.  In that case, or if the company provides services related to critical infrastructure or is a media company, the threshold for initiating an investment review is the acquisition of at least 10 percent of voting rights.  The Federal Ministry for Economic Affairs and Energy may launch a review within three months after obtaining knowledge of the acquisition; the review must be concluded within four months after receipt of the full set of relevant documents.  An investor may also request a binding certificate of non-objection from the Federal Ministry for Economic Affairs and Energy in advance of the planned acquisition to obtain legal certainty at an early stage. If the Federal Ministry for Economic Affairs and Energy does not open an in-depth review within two months from the receipt of the request, the certificate shall be deemed as granted.

Special rules apply for the acquisition of companies that operate in sensitive security areas, including defense and IT security.  In contrast to the cross-sectoral rules described above, all sensitive acquisitions must be notified in written form including basic information of the planned acquisition, the buyer, the domestic company that is subject of the acquisition and the respective fields of business.  The Federal Ministry for Economic Affairs and Energy may open a formal review procedure if a foreign investor seeks to acquire at least 10 percent of voting rights of a German company in a sensitive security area within three months after receiving notification, or the acquisition shall be deemed as approved. If a review procedure is opened, the buyer is required to submit further documents.  The acquisition may be restricted or prohibited within three months after the full set of documents has been submitted.

The German government amended domestic investment screening provisions, effective June 2017, clarifying the scope for review and giving the government more time to conduct reviews, in reaction to an increasing number of acquisitions of German companies by foreign investors with apparent ties to national governments, .  The amended provisions provide a clearer definition of sectors in which foreign investment can pose a “threat to public order and security,” including operators of critical infrastructure, developers of software to run critical infrastructure, telecommunications operators or companies involved in telecom surveillance, cloud computing network operators and service providers, and telematics companies, and which are subject to notification requirements.  The new rules also extended the time to assess a cross-sector foreign investment from two to four months, and for investments in sensitive sectors, from one to three months, and introduced the possibility of retroactively initiating assessments for a period of five years after the conclusion of an acquisition. Indirect acquisitions such as those through a Germany- or EU-based affiliate company are now also explicitly subject to the new rules.

In 2018, the government further lowered the threshold for the screening of investments, allowing authorities to screen acquisitions by foreign entities of at least 10 percent of voting rights of German companies that operate critical infrastructure (down from 25 percent), as well as companies providing services related to critical infrastructure. The amendment also added media companies to the list of sensitive businesses to which the lower threshold applies, given the ability of foreign actors to engage in disinformation is independent of subjective quotas.

Further amendments, still in draft as of May 2020, will

a) introduce a more pro-active screening based on “prospective impairment” of public order or security by an acquisition, rather than a de facto threat,
b) take into account the impact on other EU member states, and
c) formally suspend transactions during the screening process.

Furthermore, acquisitions by foreign government-owned or funded entities will now trigger a review, and the healthcare industry will be considered a sensitive sector to which the stricter 10% threshold applies.  The Federal Ministry for Economic Affairs and Energy said it would draft a further amendment later in 2020 which would include a list of sensitive technologies (similar to the current list of critical infrastructure) to include artificial intelligence, robotics, semiconductors, biotechnology, and quantum technology. Foreign investors who seek to acquire at least 10% of ownership rights of a German company in one those fields would be required to notify the government and potentially become subject to an investment review.  With these draft and planned amendments, Germany is implementing the 2019 EU Screening Regulation.

The Ministry for Economic Affairs and Energy provides comprehensive information on Germany’s investment screening regime on its website in English:

https://www.bmwi.de/Redaktion/EN/Artikel/Foreign-Trade/investment-screening.html 

The German Economic Development Agency (GTAI) provides extensive information for investors, including about the legal framework, labor-related issues and incentive programs, on their website: http://www.gtai.de/GTAI/Navigation/EN/Invest/investment-guide.html.

Competition and Anti-Trust Laws

The German government ensures competition on a level playing field on the basis of two main legal codes:

The Law against Limiting Competition (Gesetz gegen Wettbewerbsbeschränkungen – GWB) is the legal basis for the fight against cartels, merger control, and monitoring abuse.  State and Federal cartel authorities are in charge of enforcing anti-trust law. In exceptional cases, the Minister for Economics and Energy can provide a permit under specific conditions.  A June 2017 amendment to the GWB expanded the reach of the Federal Cartel Authority (FCA) to include internet and data-based business models; as a result, the FCA investigated Facebook’s data collection practices regarding potential abuse of market power.  A February 2019 FCA decision found that Facebook abused its dominant position in social media to harvest user data. Facebook challenged the FCA’s decision in court, but in June 2020, Germany’s highest court upheld the FCA’s action. The decision is likely to embolden the FCA in challenging the conduct of large tech platforms, particularly with regard to user data.  In November 2018, the FCA initiated an investigation of Amazon over potential abuse of market power; a July 2019 decision by the FCA led Amazon to make the requested changes to their terms of business.  The case was subsequently closed.

In January 2020, the Federal Ministry for Economic Affairs and Energy published additional draft amendments to the GWB, which were aimed at codifying tools that will allow greater scrutiny of digital platforms, particularly access to data.  The FCA has stated its support for the proposed amendments.  Among their provisions, the proposed amendments add access to data as a consideration in assessing a company’s market dominance and allow the FCA to declare that a digital business is of “paramount significance” in multi-sided markets, even if it lacks dominance. Upon designation as being of paramount significance, the FCA would have authority to prohibit these businesses from taking a variety of actions.  The proposed amendments remain subject to legislative passage.

The Law against Unfair Competition, whose goal – unlike the GWB – is not to preserve access to the market as a basic requirement for competition but to protect competitors, consumers and other market participants against unfair competitive behavior by companies, can be invoked in regional courts.

Expropriation and Compensation

German law provides that private property can be expropriated for public purposes only in a non-discriminatory manner and in accordance with established principles of constitutional and international law.  There is due process and transparency of purpose, and investors and lenders to expropriated entities receive prompt, adequate, and effective compensation.

The Berlin state government is currently reviewing a petition for a referendum submitted by a citizens’ initiative which calls for the expropriation of residential apartments owned by large corporations.  At least one party in the governing coalition officially supports the proposal. Certain long-running expropriation cases date back to the Nazi and communist regimes. During the 2008-9 global financial crisis, the parliament adopted a law allowing emergency expropriation if the insolvency of a bank would endanger the financial system, but the measure expired without having been used.

Dispute Settlement

ICSID Convention and New York Convention

Germany is a member of both the International Center for the Settlement of Investment Disputes (ICSID) and New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, meaning local courts must enforce international arbitration awards under certain conditions.

Investor-State Dispute Settlement

Investment disputes involving U.S. or other foreign investors in Germany are extremely rare. According to the UNCTAD database of treaty-based investor dispute settlement cases, Germany has been challenged a handful of times, none of which involved U.S. investors.

International Commercial Arbitration and Foreign Courts

Germany has a domestic arbitration body called the German Arbitration Institute (DIS). ”Book 10” of the German Code of Civil Procedure addresses arbitration proceedings. The International Chamber of Commerce has an office in Berlin. In addition, local chambers of commerce and industry offer arbitration services.

Bankruptcy Regulations

German insolvency law, as enshrined in the Insolvency Code, supports and promotes restructuring.  If a business or the owner of a business becomes insolvent, or a business is over-indebted, insolvency proceedings can be initiated by filing for insolvency; legal persons are obliged to do so.  Insolvency itself is not a crime, but deliberately late filing for insolvency is.

Under a regular insolvency procedure, the insolvent business is generally broken up in order to recover assets through the sale of individual items or rights or parts of the company.  Proceeds can then be paid out to creditors in the insolvency proceedings. The distribution of monies to creditors follows detailed instructions in the Insolvency Code.

Equal treatment of creditors is enshrined in the Insolvency Code.  Some creditors have the right to claim property back. Post-adjudication preferred creditors are served out of insolvency assets during the insolvency procedure.  Ordinary creditors are served on the basis of quotas from the remaining insolvency assets. Secondary creditors, including shareholder loans, are only served if insolvency assets remain after all others have been served.  Germany ranks fourth in the global ranking of “Resolving Insolvency” in the World Bank’s Doing Business Index, with a recovery rate of 79.8 cents on the dollar.

Investment Incentives

Federal and state investment incentives – including investment grants, labor-related and R&D incentives, public loans, and public guarantees – are available to domestic and foreign investors alike.  Different incentives can be combined. In general, foreign and German investors must meet the same criteria for eligibility.

Germany Trade & Invest, Germany’s federal economic development agency, provides comprehensive information on incentives in English at:  https://www.gtai.de/gtai-en/invest/investment-guide/incentive-programs .

Foreign Trade Zones/Free Ports/Trade Facilitation

There are currently two free ports in Germany operating under EU law:  Bremerhaven and Cuxhaven. The duty-free zones within the ports also permit value-added processing and manufacturing for EU-external markets, albeit with certain requirements.  All are open to both domestic and foreign entities. In recent years, falling tariffs and the progressive enlargement of the EU have eroded much of the utility and attractiveness of duty-free zones.

Performance and Data Localization Requirements

In general, there are no requirements for local sourcing, export percentage, or local or national ownership.  In some cases, however, there may be performance requirements tied to an incentive, such as creation of jobs or maintaining a certain level of employment for a prescribed length of time.

U.S. companies can generally obtain the visas and work permits required to do business in Germany.  U.S. citizens may apply for work and residential permits from within Germany. Germany Trade & Invest offers detailed information online at https://www.gtai.de/gtai-en/invest/investment-guide/coming-to-germany.

There are no localization requirements for data storage in Germany.  However, in recent years German and European cloud providers have sought to market the domestic location of their servers as a competitive advantage.

Real Property

The German Government adheres to a policy of national treatment, which considers property owned by foreigners as fully protected under German law.  In Germany, mortgage approvals are based on recognized and reliable collateral. Secured interests in property, both chattel and real, are recognized and enforced.  According to the World Bank’s Doing Business Report, it takes an average of 52 days to register property in Germany.

The German Land Register Act dates back to 1897 and was last amended in 2019.  The land register mirrors private real property rights and provides information on the legal relationship of the estate.  It documents the owner, rights of third persons, as well as liabilities and restrictions. Any change in property of real estate must be registered in the land registry to make the contract effective.  Land titles are now maintained in an electronic database and can be consulted by persons with a legitimate interest.

Intellectual Property Rights

Germany has a robust regime to protect intellectual property rights (IPR).  Legal structures are strong and enforcement is good.  Nonetheless, internet piracy and counterfeit goods remain issues, and specific infringing websites are included in USTR’s 2019 Notorious Markets List.  Germany has been a member of the World Intellectual Property Organization (WIPO) since 1970.  The German Central Customs Authority annually publishes statistics on customs seizures of counterfeit and pirated goods.  The statistics for 2018 can be found under: https://www.zoll.de/SharedDocs/Broschueren/DE/Die-Zollverwaltung/jahresstatistik_2018.html?nn=287024 .

Germany is party to the major international IPR agreements: the Berne Convention for the Protection of Literary and Artistic Works, the Paris Convention for the Protection of Industrial Property, the Universal Copyright Convention, the Geneva Phonograms Convention, the Patent Cooperation Treaty (PCT), the Brussels Satellite Convention, the Treaty of Rome on Neighboring Rights, and the World Trade Organization (WTO) Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS).  Many of the latest developments in German IPR law are derived from European legislation with the objective to make applications less burdensome and allow for European IPR protection.  Germany is currently drafting legislation to implement  EU Directive 2019/790 on Copyright and Related Rights in the Digital Single Market, including an ancillary copyright law for publishers, following a public consultation process.

The following types of protection are available:

Copyrights:  National treatment is granted to foreign copyright holders, including remuneration for private recordings.  Under the TRIPS Agreement, Germany grants legal protection for U.S. performing artists against the commercial distribution of unauthorized live recordings in Germany.  Germany is party to the World Intellectual Property Organization (WIPO) Copyright Treaty and WIPO Performances and Phonograms Treaty, which came into force in 2010. Most rights holder organizations regard German authorities’ enforcement of IP rights as effective.  In 2008, Germany implemented the EU Directive (2004/48/EC) on IPR enforcement with a national bill, thereby strengthening the privileges of rights holders and allowing for improved enforcement action.

Trademarks:  National treatment is granted to foreigners seeking to register trademarks at the German Patent and Trade Mark Office.  Protection is valid for a period of ten years and can be extended in ten-year periods.  It is possible to register for trademark and design protection nationally in Germany or with the EU Trade Mark and/or Registered Community Design.  These provide protection for industrial design or trademarks in the entire EU market.  Both national trademarks and European Community Trade Marks (CTMs) can be applied for from the U.S. Patent and Trademark Office (USPTO) as part of an international trademark registration system, or the applicant may apply directly for those trademarks from the European Union Intellectual Property Office (EUIPO) at https://euipo.europa.eu/ohimportal/en/home .

Patents:  National treatment is granted to foreigners seeking to register patents at the German Patent and Trade Mark Office.  Patents are granted for technical inventions that are new, involve an inventive step, and are industrially applicable.  However, applicants having neither a domicile nor an establishment in Germany must appoint a patent attorney in Germany as a representative filing the patent application.  The documents must be submitted in German or with a translation into German. The duration of a patent is 20 years from the patent application filing date.  Patent applicants can request accelerated examination under the Global Patent Protection Highway (GPPH) when filing the application, provided that the patent application was previously filed at the USPTO and that at least one claim had been determined to be patentable.  There are a number of differences between U.S. and German patent law, including the filing systems (“first-inventor-to-file” versus “first-to-file”, respectively), that a qualified patent attorney can explain to U.S. patent applicants.  German law also offers the possibility to register designs and utility models.

If a U.S. applicant seeks to file a patent in multiple European countries, this may be accomplished through the European Patent Office (EPO) which grants European patents for the contracting states to the European Patent Convention (EPC).  The 38 contracting states include the entire EU membership and several additional European countries; Germany joined the EPC in 1977.  It should be noted that some EPC members require a translation of the granted European patent in their language for validation purposes.  The EPO provides a convenient single point to file a patent in as many of these countries as an applicant would like:  https://www.epo.org/applying/basics.html .  U.S. applicants seeking patent rights in multiple countries can alternatively file an international Patent Coordination Treaty (PCT) application with the USPTO.

Trade Secrets: Trade secrets are protected in Germany by the Law for the Protection of Trade Secrets, which has been in force since April 2019 and implements the 2016 EU Directive (2016/943).  According to the law, the illegal accessing, appropriation, and copying of trade secrets, including through social engineering, is prohibited.  Explicitly exempt from the law is “reverse engineering” of a publicly available item, and appropriation, usage, or publication of a trade secret to protect a “legitimate interest”, including journalistic research and whistleblowing.  The law requires that companies have to implement “adequate confidentiality measures” for information to be protected as a trade secret under the law.  Owners of trade secrets are entitled to omission, compensation, and information about the culprit, as well as the destruction, return and recall, and ultimately the removal of the infringing products from the market.

For additional information about national laws and points of contact at local IPR offices, please see WIPO’s country profiles at http://www.wipo.int/directory/en/ .

Country resources:

For additional information about how to protect IPR in Germany, please see Germany Trade & Invest website at https://www.gtai.de/gtai-en/invest/investment-guide/the-legal-framework/patents-licensing-trade-marks-65372 .

Statistics on the seizure of counterfeit goods are available through the German Customs Authority (Zoll):

https://www.zoll.de/SharedDocs/Broschueren/DE/Die-Zollverwaltung/jahresstatistik_2018.html?nn=287024 

Investors can identify IPR lawyers in AmCham Germany’s Online Services Directory: https://www.amcham.de/services/overview/member-services/address-services-directory/  (under “legal references” select “intellectual property.”)

Businesses can also join the Anti-counterfeiting Association (APM)
http://www.markenpiraterie-apm.de/index.php?article_id=1&clang=1 

Capital Markets and Portfolio Investment

As an EU member state with a well-developed financial sector, Germany welcomes foreign portfolio investment and has an effective regulatory system.  Germany has a very open economy, routinely ranking among the top countries in the world for exports and inward and outward foreign direct investment.  As a member of the Eurozone, Germany does not have sole national authority over international payments, which are a shared task of the Eurosystem, comprised of the European Central Bank and the national central banks of the 19 member states that are part of the eurozone, including the German Central Bank (Bundesbank).  A European framework for national security screening of foreign investments, which entered into force in April 2019, provides a basis under European law to restrict capital movements into Germany on the basis of threats to national security. Global investors see Germany as a safe place to invest, as the real economy – up until the COVID-19 crisis hit – continued to outperform other EU countries and German sovereign bonds retain their “safe haven” status.

Listed companies and market participants in Germany must comply with the Securities Trading Act, which bans insider trading and market manipulation.  Compliance is monitored by the Federal Financial Supervisory Authority (BaFin) while oversight of stock exchanges is the responsibility of the state governments in Germany (with BaFin taking on any international responsibility).  Investment fund management in Germany is regulated by the Capital Investment Code (KAGB), which entered into force on July 22, 2013. The KAGB represents the implementation of additional financial market regulatory reforms, committed to in the aftermath of the global financial crisis.  The law went beyond the minimum requirements of the relevant EU directives and represents a comprehensive overhaul of all existing investment-related regulations in Germany with the aim of creating a system of rules to protect investors while also maintaining systemic financial stability.

Money and Banking System

Although corporate financing via capital markets is on the rise, Germany’s financial system remains mostly bank-based.  Bank loans are still the predominant form of funding for firms, particularly the small- and medium-sized enterprises that comprise Germany’s “Mittelstand,” or mid-sized industrial market leaders.  Credit is available at market-determined rates to both domestic and foreign investors, and a variety of credit instruments are available. Legal, regulatory and accounting systems are generally transparent and consistent with international banking norms.  Germany has a universal banking system regulated by federal authorities, and there have been no reports of a shortage of credit in the German economy. After 2010, Germany banned some forms of speculative trading, most importantly “naked short selling.” In 2013, Germany passed a law requiring banks to separate riskier activities such as proprietary trading into a legally separate, fully capitalized unit that has no guarantee or access to financing from the deposit-taking part of the bank.  Since the creation of the European single supervisory mechanism (SSM) in November 2014, the European Central Bank directly supervises 21 banks located in Germany (as of March 2020) among them four subsidiaries of foreign banks.

Germany supports a global financial transaction tax and is pursuing the introduction of such a tax along with other EU member states.

Germany has a modern and open banking sector that is characterized by a highly diversified and decentralized, small-scale structure.  As a result, it is extremely competitive, profit margins notably in the retail sector are low and the banking sector considered “over-banked” and in need of consolidation.  The country’s “three-pillar” banking system consists of private commercial banks, cooperative banks, and public banks (savings banks/Sparkassen and the regional state-owned banks/Landesbanken).  This structure has remained unchanged despite marked consolidation within each “pillar” since the financial crisis in 2008/9. The number of state banks (Landesbanken) dropped from 12 to 5, that of savings banks from 446 in 2007 to 380 at the end of 2019 and the number of cooperative banks has dropped from 1,234 to 842. Two of the five large private sector banks have exited the market (Dresdner, Postbank). The balance sheet total of German banks dropped from 304 percent of GDP in 2007 to 242 percent by the end of 2019. Market shares in corporate finance of the banking groups remained largely unchanged (all figures for end of 2019): Credit institutions 27 percent (domestic 17 percent, foreign banks 10 percent), savings banks 31 percent, state banks 10 percent, credit cooperative banks 21 percent, promotional banks 6 percent.

The private bank sector is dominated by globally active banks Deutsche Bank (Germany’s largest bank by balance sheet total) and Commerzbank (fourth largest bank), with balance sheets of €1.3 trillion and €466.6 billion respectively (2019 figures). Commerzbank received €18 billion in financial assistance from the federal government in 2009, for which the government took a 25 percent stake in the bank (now reduced to 15.6 percent).  Merger talks between Deutsche Bank and Commerzbank failed in 2019.  The second largest of the top ten German banks is DZ Bank, the central institution of the Cooperative Finance Group (after its merge with WGZBank in July 2016), followed by German branches of large international banks (UniCredit Bank or HVB, ING-Diba), development banks (KfW Group, NRW.Bank), and state banks (LBBW, Bayern LB, Helaba, NordLB).

German banks’ profitability continued to deteriorate in the years prior to the COVID-19 crisis due to the prevailing low and negative interest rate environment that narrowed margins on new loans irrespective of debtors’ credit worthiness, poor trading results and new competitors from the fintech sector , and low cost efficiency. In 2018 according to the latest data by the Deutsche Bundesbank (Germany’s central bank), German credit institutions reported a pre-tax profit of €18.9 billion or 0.23 percent of total assets. Their net interest income remained below its long-term average to €87.2 billion despite dynamic credit growth (19 percent since end-2014 until end of 2019 in retail and 23 percent in corporate loans) on ongoing cost-reduction efforts. Thanks to continued favorable domestic economic conditions, their risk provisioning has been at an all time low. Their average return on equity before tax in 2018 slipped to 3.74 percent (after tax: 2.4 percent) (with savings banks generating a higher return and big banks a lower and Landesbanken a –2.45 percent return). Both return on equity and return on assets were at their lowest level since 2010. Brexit saw banking activities relocated from the United Kingdom to the EU, with many foreign banks (notably US and Japanese banks) choosing Frankfurt as their new EU headquarters. Their Core Tier 1 equity capital ratios improved as did their liquidity ratios, but no German large bank has been able to organically raise its capital for the past decade.

It remains unclear how the current COVID-19 crisis will affect the German banking sector. Prior to the pandemic, the bleaker German economic outlook prompted a greater need for value adjustment and write-downs in lending business. German banks’ ratio of non-performing loans was low going into the crisis (1.24 percent).  In March 2020, the German government provided large-scale asset guarantees to banks (in certain instances covering 100 percent of the credit risk) via the German government owned KfW bank to avoid a credit crunch.

Foreign Exchange and Remittances

Foreign Exchange

As a member of the Eurozone, Germany uses the euro as its currency, along with 18 other EU countries.  The Eurozone has no restrictions on the transfer or conversion of its currency, and the exchange rate is freely determined in the foreign exchange market.

The Deutsche Bundesbank is the independent central bank of the Federal Republic of Germany.  It has been a part of the Eurosystem since 1999, sharing responsibility with the other national central banks and the European Central Bank (ECB) for the single currency, and thus has no scope to manipulate the bloc’s exchange rate.  In a February 2020 report, the European Commission (EC) concluded Germany’s persistently high current account surplus – the world’s largest in 2019 at USD 293 billion (7.7 percent of GDP) – has again slightly increased despite a gradual decline between 2015 and 2018.  While low commodity prices and the weak euro exchange rate explain some of the surplus’ increase in 2015-2016, the persistence of Germany’s surplus is a matter of international controversy. German policymakers view the large surplus as the result of market forces rather than active government policies, while the EC and IMF have called on authorities to rebalance towards domestic sources of economic growth by expanding public investment, using available fiscal space, and other policy choices that boost domestic demand.

Germany is a member of the Financial Action Task Force (FATF) and is committed to further strengthening its national system for the prevention, detection and suppression of money laundering and terrorist financing.   Federal law is enforced by regional state prosecutors. Investigations are conducted by the Federal and State Offices of Criminal Investigations (BKA/LKA). The administrative authority for imposing anti-money laundering requirements on financial institutions is the Federal Financial Supervisory Authority (BaFin).

The Financial Intelligence Unit (FIU) is the national central authority for receiving, collecting and analyzing reports of suspicious financial transactions that may be related to money laundering or terrorist financing. It was founded in 2001 and initially located at the Federal Criminal Investigation Office. In 2017, it was transferred to the General Customs Directorate in the Federal Ministry of Finance and given more staff. At the same time, its tasks and competencies were redefined taking into account the provisions of the Fourth EU Money Laundering Directive.  One focus is now on operational and strategic analysis. On January 1, 2020, legislation to implement the Fifth EU Money Laundering Directive and the European Funds Transfers Regulation (Geldtransfer-Verordnung) entered into force.  The Act amends the German Money Laundering Act (Geldwäschegesetz – GwG) and a number of further laws. It provides, inter alia, the FIU and prosecutors with expanded access to data. In its annual report 2018, the FIU noted an “extreme vulnerability” in Germany’s real estate market to money laundering activities. In total, the FIU found 77,252 cases of money laundering in Germany in 2018, about 3,800 involving the real estate sector. Transparency International found that about €30 billion in illicit funds were funneled into German real estate in 2017. However, the FIU itself has come under criticism. Financial institutions deplore the quality of its staff and the effectiveness of its work. It will be subject to a FATF review in 2020.

There is no difficulty in obtaining foreign exchange.

Remittance Policies

There are no restrictions or delays on investment remittances or the inflow or outflow of profits.

Germany is the fifth-largest remittance-sending country worldwide.  Migrants in Germany posted USD 25.4 billion (0.6 percent of GDP) abroad in 2018 (World Bank, Bilateral Remittances Matrix 2018).  The most important receiving states for remittances from Germany are EU neighbors such as France, Poland, and Italy. Around USD 8 billion was sent to developing countries, out of which Lebanon, Vietnam, China, Nigeria and Serbia were the biggest receivers.  Remittance flows into Germany amounted to around USD 18 billion in 2018, approximately 0.5 percent of Germany’s GDP.

The issue of remittances played a role during the German G20 Presidency in 2017.  During its presidency, Germany passed an updated version of its “G20 National Remittance Plan.”  The document states that Germany’s focus will remain on “consumer protection, linking remittances to financial inclusion, creating enabling regulatory frameworks and generating research and data on diaspora and remittances dynamics.” The 2017 “G20 National Remittance Plan” can be found at https://www.gpfi.org/publications/2017-g20-national-remittance-plans-overview 

Sovereign Wealth Funds

The German government does not currently have a sovereign wealth fund or an asset management bureau.

The formal term for state-owned enterprises (SOEs) in Germany translates as “public funds, institutions, or companies,” and refers to entities whose budget and administration are separate from those of the government, but in which the government has more than 50 percent of the capital shares or voting rights.  Appropriations for SOEs are included in public budgets, and SOEs can take two forms, either public or private law entities. Public law entities are recognized as legal personalities whose goal, tasks, and organization are established and defined via specific acts of legislation, with the best-known example being the publicly-owned promotional bank KfW (Kreditanstalt für Wiederaufbau).  The government can also resort to ownership or participation in an entity governed by private law if the following conditions are met: doing so fulfills an important state interest, there is no better or more economical alternative, the financial responsibility of the federal government is limited, the government has appropriate supervisory influence, and yearly reports are published.

Government oversight of SOEs is decentralized and handled by the ministry with the appropriate technical area of expertise.  The primary goal of such involvement is promoting public interests rather than generating profits. The government is required to close its ownership stake in a private entity if tasks change or technological progress provides more effective alternatives, though certain areas, particularly science and culture, remain permanent core government obligations.  German SOEs are subject to the same taxes and the same value added tax rebate policies as their private sector competitors. There are no laws or rules that seek to ensure a primary or leading role for SOEs in certain sectors or industries.  However, a white paper drafted by the Ministry of Economic Affairs and Energy in November 2019 outlines elements of a national industrial strategy, which includes the option of a temporary state participation in key technology companies as “last resort”.  Private enterprises have the same access to financing as SOEs, including access to state-owned banks such as KfW.

The Federal Statistics Office maintains a database of SOEs from all three levels of government (federal, state, and municipal) listing a total of 18,014 entities for 2017, or 0.5 percent of the total 3.5 million companies in Germany.  SOEs in 2017 had €572 billion in revenue and €541 billion in expenditures. Almost 40 percent of SOEs’ revenue was generated by water and energy suppliers, 13 percent by health and social services, and 12 percent by transportation-related entities.  Measured by number of companies rather than size, 88 percent of SOEs are owned by municipalities, 10 percent are owned by Germany’s 16 states, and 2 percent are owned by the federal government.

The Federal Finance Ministry is required to publish a detailed annual report on public funds, institutions, and companies in which the federal government has direct participation (including a minority share) or an indirect participation greater than 25 percent and with a nominal capital share worth more than €50,000.  The federal government held a direct participation in 109 companies and an indirect participation in 444 companies at the end of 2017, most prominently Deutsche Bahn (100 percent share), Deutsche Telekom (32 percent share), and Deutsche Post (21 percent share). Federal government ownership is concentrated in the areas of economic development, infrastructure, science, administration/increasing efficiency, defense, development policy, culture.  As the result of federal financial assistance packages from the federally-controlled Financial Market Stability Fund during the global financial crisis of 2008-9, the federal government still has a partial stake in several commercial banks, including a 15.6 percent share in Commerzbank, Germany’s second largest commercial bank. The 2018 annual report (with 2017 data) can be found here: https://www.bundesfinanzministerium.de/Content/DE/Downloads/Broschueren_Bestellservice/2019-05-23-beteiligungsbericht-des-bundes-2018.pdf?__blob=publicationFile&v=3 

Publicly-owned banks constitute one of the three pillars of Germany’s banking system (cooperative and commercial banks are the other two).  Germany’s savings banks are mainly owned by the municipalities, while the so-called Landesbanken are typically owned by regional savings bank associations and the state governments.  Given their joint market share, about 40 percent of the German banking sector is publicly owned.  There are also many state-owned promotional/development banks which have taken on larger governmental roles in financing infrastructure. This increased role removes expenditures from public budgets, particularly helpful in light of Germany’s balanced budget rules, which go into effect for the states in 2020.

A longstanding, prominent case of a partially state-owned enterprise is automotive manufacturer Volkswagen, in which the state of Lower Saxony owns the third-largest share in the company at around 12 percent share, but controls 20 percent of the voting rights.  The so-called Volkswagen Law, passed in 1960, limited individual shareholder’s voting rights in Volkswagen to a maximum of 20 percent regardless of the actual number of shares owned, so that Lower Saxony could veto any takeover attempts. In 2005, the European Commission successfully sued Germany at the European Court of Justice (ECJ), claiming the law impeded the free flow of capital.  The law was subsequently amended to remove the cap on voting rights, but Lower Saxony’s 20 percent share of voting rights was maintained, preserving its ability to block hostile takeovers.

The wholly federal government-owned railway company, Deutsche Bahn, was cleared by the European Commission in 2013 of allegations of abusing its dominant market position after Deutsche Bahn implemented a new, competitive pricing system.  A similar case brought by the German Federal Cartel Office against Deutsche Bahn was terminated in May 2016 after the company implemented a new pricing system.

Privatization Program

Germany does not have any privatization programs at this time.  German authorities treat foreigners equally in privatizations of state-owned enterprises.

In December 2016, the Federal Government passed the National Action Plan for Business and Human Rights (NAP).  The action plan aims to apply the UN Guiding Principles for Business and Human Rights for the activities of German companies nationally as well as globally in their value and supply chains.  The 2018 coalition agreement for the 19th legislative period between the governing Christian Democratic parties, CDU/CSU, and the Social Democratic Party of Germany (SPD) states its commitment to the action plan, including the principles on public procurement.  It further states that, if the NAP 2020’s effective and comprehensive review comes to the conclusion that the voluntary due diligence approach of enterprises is insufficient, the government will initiate legislation for an EU-wide regulation. The government is currently reviewing and evaluating the German companies’ voluntary due-diligence efforts to ensure their operations do not impinge upon human rights.

Germany adheres to the OECD Guidelines for Multinational Enterprises; the National Contact Point (NCP) is housed in the Federal Ministry of Economic Affairs and Energy.  The NCP is supported by an advisory board composed of several ministries, business organizations, trade unions, and NGOs. This working group usually meets once a year to discuss all Guidelines-related issues.  The German NCP can be contacted through the Ministry’s website: https://www.bmwi.de/Redaktion/EN/Textsammlungen/Foreign-Trade/national-contact-point-ncp.html .

There is general awareness of environmental, social, and governance issues among both producers and consumers in Germany, and surveys suggest that consumers increasingly care about the ecological and social impacts of the products they purchase.  In order to encourage businesses to factor environmental, social, and governance impacts into their decision-making, the government provides information online and in hard copy. The federal government encourages corporate social responsibility (CSR) through awards and prizes, business fairs, and reports and newsletters.  The government also organizes so called “sector dialogues” to connect companies and facilitate the exchange of best practices, and offers practice days to help nationally as well as internationally operating small- and medium-sized companies discern and implement their entrepreneurial due diligence under the NAP. To this end it has created a website on CSR in Germany (http://www.csr-in-deutschland.de/EN/Home/home.html in English). The German government maintains and enforces domestic laws with respect to labor and employment rights, consumer protections, and environmental protections.  The German government does not waive labor and environmental laws to attract investment.

On the business side, the American Chamber of Commerce in Germany (AmCham Germany) is active in promoting standards of ecological, economic, and social responsibility and sustainability within their members’ entrepreneurial actions in keeping with the UN Sustainable Development Goals, adopted in 2015.  AmCham Germany issues publications on selected member companies’ approaches to CSR. Its Corporate Responsibility Committee serves as a platform to exchange best practices, identify trends, and discuss regulatory initiatives. Other business initiatives, platforms, and networks on sustainable corporate conduct and CSR exist.  In addition, Germany’s four leading business organizations regularly provide information on a common CSR internet portal to promote and illustrate companies’ engagement on CSR: www.csrgermany.de.

Social reporting is voluntary, but publicly listed companies frequently include information on their CSR policies in annual shareholder reports and on their websites.

Civil society groups that work on CSR include 3p Consortium for Sustainable Management, Amnesty International Germany, Bund für Umwelt und Naturschutz Deutschland e. V. (BUND), CorA Corporate Accountability – Netzwerk Unternehmensverantwortung, Forest Stewardship Council (FSC), Germanwatch, Greenpeace Germany, Naturschutzbund Deutschland (NABU), Sneep (Studentisches Netzwerk zu Wirtschafts- und Unternehmensethik), Stiftung Warentest, Südwind – Institut für Ökonomie und Ökumene, TransFair – Verein zur Förderung des Fairen Handels mit der „Dritten Welt“ e. V., Transparency International, Verbraucherzentrale Bundesverband e.V., Bundesverband Die Verbraucher Initiative e.V., and the World Wide Fund for Nature (WWF, known as the „World Wildlife Fund“ in the United States).

Among industrialized countries, Germany ranks 9th out of 180, according to Transparency International’s 2019 Corruption Perceptions Index.  Some sectors including the automotive industry, construction sector, and public contracting, exhibit political influence and party finance remains only partially transparent.  Nevertheless, U.S. firms have not identified corruption as an impediment to investment in Germany. Germany is a signatory of the OECD Anti-Bribery Convention and a participating member of the OECD Working Group on Bribery.

Over the last two decades, Germany has increased penalties for the bribery of German officials, corrupt practices between companies, and price-fixing by companies competing for public contracts.  It has also strengthened anti-corruption provisions on financial support extended by the official export credit agency and has tightened the rules for public tenders. Government officials are forbidden from accepting gifts linked to their jobs.  Most state governments and local authorities have contact points for whistle-blowing and provisions for rotating personnel in areas prone to corruption. There are serious penalties for bribing officials and price fixing by companies competing for public contracts.

According to the Federal Criminal Office, in 2018, 73 percent of all corruption cases were directed towards the public administration (up from 63 percent in 2017), 18 percent towards the business sector (down from 22 percent in 2017), 7 percent towards law enforcement and judicial authorities (down from 12 percent in 2017), and 2 percent to political officials (down from 3 percent in 2017).

Parliamentarians are subject to financial disclosure laws that require them to publish earnings from outside employment.  Disclosures are available to the public via the Bundestag website (next to the parliamentarians’ biographies) and in the Official Handbook of the Bundestag. Penalties for noncompliance can range from an administrative fine to as much as half of a parliamentarian’s annual salary.

Donations by private persons or entities to political parties are legally permitted.  However, if they exceed €50,000, they must be reported to the President of the Bundestag, who is required to immediately publish the name of the party, the amount of the donation, the name of the donor, the date of the donation, and the date the recipient reported the donation.  Donations of €10,000 or more must be included in the party’s annual accountability report to the President of the Bundestag.

State prosecutors are generally responsible for investigating corruption cases, but not all state governments have prosecutors specializing in corruption.  Germany has successfully prosecuted hundreds of domestic corruption cases over the years, including large scale cases against major companies.

Media reports in recent years about bribery investigations against Siemens, Daimler, Deutsche Telekom, Deutsche Bank, and Ferrostaal have increased awareness of the problem of corruption.  As a result, listed companies and multinationals have expanded compliance departments, tightened internal codes of conduct, and offered more training to employees.

The Federation of Germany Industries (BDI), the Association of German Chamber of Commerce and Industry (DIHK) and the International Chamber of Commerce (ICC) provide guidelines in paper and electronic format on how to prevent corruption in an effort to convince all including small- and medium- sized companies to catch up.

UN Anticorruption Convention, OECD Convention on Combatting Bribery

Germany was a signatory to the UN Anti-Corruption Convention in 2003.  The Bundestag ratified the Convention in November 2014.

Germany adheres to and actively enforces the OECD Anti-Bribery Convention which criminalizes bribery of foreign public officials by German citizens and firms.  The necessary tax reform legislation ending the tax write-off for bribes in Germany and abroad became law in 1999.

Germany participates in the relevant EU anti-corruption measures and signed two EU conventions against corruption.  However, while Germany ratified the Council of Europe Criminal Law Convention on Corruption in 2017, it has not yet ratified the Civil Law Convention on Corruption.

Resources to Report Corruption

There is no central government anti-corruption agency in Germany.

Contact at “watchdog” organization:

Hartmut Bäumer, Chair
Transparency International Germany
Alte Schönhauser Str. 44, 10119 Berlin
+49 30 549 898 0
office@transparency.de

The Federal Criminal Office publishes an annual report: “Bundeslagebild Korruption” – the latest one covers 2018.

https://www.bka.de/SharedDocs/Downloads/DE/Publikationen/JahresberichteUndLagebilder/Korruption/korruptionBundeslagebild2018.html?nn=28078 

Political acts of violence against either foreign or domestic business enterprises are extremely rare.  Isolated cases of violence directed at certain minorities and asylum seekers have not targeted U.S. investments or investors.

The German labor force is generally highly skilled, well-educated, and productive.  Before the economic downturn caused by COVID-19, employment in Germany had risen for the thirteenth consecutive year and reached an all-time high of 45.3 million in 2019, an increase of 402,000 (or 0.9 percent) from 2018—the highest level since German reunification in 1990.

Simultaneously, unemployment had fallen by more than half since 2005, and reached in 2019 the lowest average annual value since German reunification.  In 2019, around 2.34 million people were registered as unemployed, corresponding to an unemployment rate of 5.2 percent, according to the Germany Federal Employment Agency.  Using internationally comparable data from the European Union’s statistical office Eurostat, Germany had an average annual unemployment rate of 3.2 percent in 2019, the second lowest rate in the European Union.  All employees are by law covered by the federal unemployment insurance that compensates for the lack of income for up to 24 months.  Long-term effects on the labor market, and the economy as a whole, due to COVID-19 are not yet fully conceivable.  However, as of April 2020, the number of unemployed had increased to 2.64 million (a 5.8% unemployment rate). A government-funded temporary furlough program allows companies to decrease its workforce and labor costs with layoffs and has helped mitigate a negative labor market impact in the short term.

Germany’s national youth unemployment rate was 5.8 percent in 2019, the lowest in the EU.  The German vocational training system has gained international interest as a key contributor to Germany’s highly skilled workforce and its sustainably low youth unemployment rate. Germany’s so-called “dual vocational training,” a combination of theoretical courses taught at schools and practical application in the workplace, teaches and develops many of the skills employers need.  Each year, there are more than 500,000 apprenticeship positions available in more than 340 recognized training professions, in all sectors of the economy and public administration. Approximately 50 percent of students choose to start an apprenticeship. The government is promoting apprenticeship opportunities, in partnership with industry, through the “National Pact to Promote Training and Young Skilled Workers.”

An element of growing concern for German business is the aging and shrinking of the population, which (absent large-scale immigration) will likely result in labor shortages.  Official forecasts at the behest of the Federal Ministry of Labor and Social Affairs predict that the current working age population will shrink by almost 3 million between 2010 and 2030, resulting in an overall shortage of workforce and skilled labor.  Labor bottlenecks already constrain activity in many industries, occupations, and regions. According to the Federal Employment Agency, doctors; medical and geriatric nurses; mechanical, automotive, and electrical engineers; and IT professionals are in particular short supply.  The government has begun to enhance its efforts to ensure an adequate labor supply by improving programs to integrate women, elderly, young people, and foreign nationals into the labor market. The government has also facilitated the immigration of qualified workers.

Labor Relations

Germans consider the cooperation between labor unions and employer associations to be a fundamental principle of their social market economy and believe this has contributed to the country’s resilience during the economic and financial crisis.  Insofar as job security for members is a core objective for German labor unions, unions often show restraint in collective bargaining in weak economic times and often can negotiate higher wages in strong economic conditions. According to the Institute of Economic and Social Research (WSI), the number of workdays lost to labor actions increased significantly to 1 million in 2018, compared to 238,000 in 2017.  WSI assesses this unusual increase was mostly due to the labor conflict in the machinery sector, which resulted in a large number of warning strikes at various companies and plants. However, in an international comparison, Germany is in the lower midrange with regards to strike numbers and intensity. All workers have the right to strike, except for civil servants (including teachers and police) and staff in sensitive or essential positions, such as members of the armed forces.

Germany’s constitution, federal legislation, and government regulations contain provisions designed to protect the right of employees to form and join independent unions of their choice. The overwhelming majority of unionized workers are members of one of the eight largest unions — largely grouped by industry or service sector — which are affiliates of the German Trade Union Confederation (Deutscher Gewerkschaftsbund, DGB).  Several smaller unions exist outside the DGB. Overall trade union membership has, however, been in decline over the last several years. In 2016, about 18.5 percent of the workforce belonged to unions. Since peaking at around 12 million members shortly after German reunification, total DGB union membership has dropped to about 6 million, IG Metall being the largest German labor union with 2.27 million members, followed by the influential service sector union Ver.di (1.97 million members).

The constitution and enabling legislation protect the right to collective bargaining, and agreements are legally binding to the parties.  In 2018, over three quarters (78 percent) of non-self-employed workers were directly or indirectly covered by a collective wage agreement, 59 percent of the labor force in the western part of the country and approximately 47 percent in the East.  On average, collective bargaining agreements in Germany were valid for 25 months in 2017.

By law, workers can elect a works council in any private company employing at least five people.  The rights of the works council include the right to be informed, to be consulted, and to participate in company decisions.  Works councils often help labor and management to settle problems before they become disputes and disrupt work. In addition, “co-determination” laws give the workforce in medium-sized or large companies (corporations, limited liability companies, partnerships limited by shares, co-operatives, and mutual insurance companies) significant voting representation on the firms’ supervisory boards.  This co-determination in the supervisory board extends to all company activities.

From 2010 to 2019, real wages grew by 1.2 percent on average.  Generous collective bargaining wage increases in 2019 (+3.2 percent) and the increase of the federal Germany-wide statutory minimum wage to €9.35 (USD 10.15) on January 1, 2020, led to 2.6 percent nominal wage increase. Real wages grew by 1.2 percent in 2019.

Labor costs increased by 2.3 percent in 2018.  With an average labor cost of €35 (USD 43) per hour, Germany ranked sixth among the 28 EU-members states (EU average: €26.80/USD 33.20) in 2018.

OPIC programs were available for the new states of eastern Germany for several years during the early 1990s following reunification, but were later suspended due to economic and political progress which caused the region to “graduate” from OPIC coverage.

* Source for Host Country Data: Federal Statistical Office DESTATIS, Bundesbank; http://www.bundesbank.de  (German Central Bank, 2018 data published in April 2020, only available in €)

Foreign Commercial Service
Pariser Platz 2, 14191 Berlin, Germany
+49-(0)30-8305-2940
Email: feedback@usembassy.de

Ireland has signed no formal bilateral investment treaties (BITs) with other EU members or the United States.

The United States and Ireland have shared a Friendship, Commerce, and Navigation Treaty since 1950, which includes provisions common to BITs regarding national treatment, most-favored nation benefits, expropriation, and protection and security.  The full text is here:  http://tcc.export.gov/Trade_Agreements/All_Trade_Agreements/exp_005438.asp .

Since 1998, Ireland and the United States have shared a Tax Treaty, supplemented in December 2012 with an agreement to improve international tax compliance and to implement the U.S. Foreign Account Tax Compliance Act (FATCA).  See http://www.irs.gov/pub/irs-trty/ireland.pdf  for a copy of the existing treaty.

Ireland has signed comprehensive double taxation agreements (DTA) with 74 countries, 73 of which (except Ghana) are fully ratified and in effect.  Agreements with other countries are also in negotiation and DTAs are regularly updated.  These taxation agreements serve to promote trade and investment between Ireland and the partner countries that would otherwise be discouraged by the possibility of double taxation.  The agreements generally cover corporate tax, income tax, and capital gains tax (direct taxes).  The current list of agreements in effect, as of January 2020, includes the following countries:  Albania, Armenia, Australia, Austria, Bahrain, Belarus, Belgium, Bosnia & Herzegovina, Botswana, Bulgaria, Canada, Chile, China, Croatia, Cyprus, Czech Republic, Denmark, Egypt, Estonia, Ethiopia, Finland, France, Georgia, Germany, Greece, Hong Kong, Hungary, Iceland, India, Israel, Italy, Japan, Kazakhstan, Korea (Republic of), Kuwait, Latvia, Lithuania, Luxembourg, Macedonia, Malaysia, Malta, Mexico, Moldova, Montenegro, Morocco, Netherlands, New Zealand, Norway, Pakistan, Panama, Poland, Portugal, Qatar, Romania, Russia, Saudi Arabia, Serbia, Singapore, Slovak Republic, Slovenia, South Africa, Spain, Sweden, Switzerland, Thailand, Turkey, United Arab Emirates, Ukraine, United Kingdom, United States, Uzbekistan, Vietnam, and Zambia.

In the absence of a bilateral tax treaty, provisions within the Irish Taxes Act allow unilateral credit relief against Irish taxation for taxes paid in the other country with respect to certain types of income, e.g., dividends and interest.

Transparency of the Regulatory System

Ireland’s judicial system is transparent and upholds the sanctity of contracts, as well as laws affecting foreign investment.   These laws include:

• The Companies Act 2014, which contains the basic requirements for incorporation in Ireland;
• The 2004 Finance Act, which introduced tax incentives to encourage firms to set up headquarters in Ireland and to conduct R&D;
• The Mergers, Takeovers and Monopolies Control Act of 1978, which sets out rules governing mergers and takeovers by foreign and domestic companies;
• The Competition (Amendment) Act of 1996, which amends and extends the Competition Act of 1991 and the Mergers and Takeovers (Control) Acts of 1978 and 1987, and sets out the rules governing competitive behavior; and,
• The Industrial Development Act (1993), which outlines the functions of IDA Ireland.

The Companies Act (2014), with more than 1,400 sections and 17 Schedules, is the largest-ever Irish statute.  The Act consolidated and reformed all Irish company law for the first time in over 50 years.

In addition, numerous laws and regulations pertain to employment, social security, environmental protection and taxation, with many of these keyed to EU regulations and directives.

International Regulatory Considerations

Ireland has been a member of the EU since 1973.  As a member, it incorporates all EU legislation into national legislation and applies all EU regulatory standards and rules.  Ireland is a member of the World Trade Organization (WTO) and follows all WTO procedures.

Legal System and Judicial Independence

Ireland’s legal system is common law.  Justice is administered in courts established by the law, and are presided over by judges appointed by the President of Ireland (on the advice of the government).  The Commercial Court is a designated court of the High Court which deals with commercial disagreements between businesses where the value of the claim is at least €1 ($1.1) million.  The Commercial Court also oversees cases on intellectual property rights, including trademarks and trade secrets.

Laws and Regulations on Foreign Direct Investment

Ireland treats all firms incorporated in Ireland on an equal basis.  With only a few exceptions, no constraints prevent foreign individuals or entities from ownership or participation in private firms/corporations.  The most significant of these exceptions is that, in common with other EU countries, Irish airlines must be at least 50 percent owned by EU residents to have full access to the single European aviation market.  Citizens of countries other than Ireland and EU member states can acquire land for private residential or industrial purposes.

One of Ireland’s most attractive features as an FDI destination is its low corporate tax rate.  Since 2003, the headline corporate tax rate for all firms, foreign and domestic, is 12.5 percent.  Ireland’s headline corporate tax rate is among the lowest in the EU.  The Irish government continues to claim sovereignty over setting its own taxation system and strongly opposes any EU proposals to harmonize corporate taxes at a common EU rate.  In 2014, the government announced firms would no longer be able to incorporate in Ireland without also being tax resident.  Firms could, prior to this change, incorporate in Ireland and be tax resident elsewhere, making use of a tax avoidance arrangement colloquially known as the “Double Irish” to reduce tax liabilities.

The Irish government has indicated it will adhere to future decisions reached through the OECD’s Base Erosion and Profit Sharing (BEPS) discussions and has already incorporated a number of BEPS recommendations including Ireland’s ratification of the BEPS Multilateral Instrument in January 2019.  The government implemented a Knowledge Development Box (KDB), effective 2016, which is consistent with OECD guidelines.  The KDB allows for the application of a tax rate of 6.25 percent on profits arising to certain intellectual property assets that are the result of qualifying research and development activities carried out in Ireland.

Competition and Anti-Trust Laws

The Competition and Consumer Protection Commission (CCPC) is an independent statutory body with a dual mandate to enforce competition and consumer protection law in Ireland.  Ireland established the CCPC on October 2014, after the amalgamation of the National Consumer Agency and the Competition Authority.  The CPCC enforces Irish and EU competition law in Ireland.  It has the power to conduct investigations and can take civil or criminal enforcement action if it finds evidence of breaches of competition law.

The Competition Act of 2002, subsequently amended and extended by the Competition Act 2006, mandates the enforcement power of the CCPC.  The Act introduced criminal liability for anti-competitive practices, increased corporate liability for violations, and outlined available defenses.  Most tax, labor, environment, health and safety, and other laws are compatible with EU regulations, and they do not adversely affect investment.  The government publishes proposed drafts of laws and regulations to solicit public comment, including those by foreign firms and their representative trade associations.  Bureaucratic procedures are transparent and reasonably efficient, in line with a general pro-business climate espoused by the government.

The Irish Takeover Panel Act of 1997 governs company takeovers.  Under the Act, the Takeover Panel issues guidelines, or Takeover Rules, which regulate commercial behavior in mergers and acquisitions.  According to minority squeeze-out provisions in the legislation, a bidder who holds 80 percent of the shares of the target firm (or 90 percent for firms with securities on a regulated market) can compel the remaining minority shareholders to sell their shares.  There are no reports that the Irish Takeover Panel Act has prevented foreign takeovers, and, in fact, there have been several high-profile foreign takeovers of Irish companies in the banking and telecommunications sectors in the past.  Babcock & Brown (an Australian investment firm) acquired the former national telephone company, Eircom in 2006 which it subsequently sold to Singapore Technologies Telemedia in 2009.  The EU Directive on Takeovers provides a framework of common principles for cross-border takeover bids, creates a level playing field for shareholders, and establishes disclosure obligations throughout the EU.  Irish legislation fully implemented the Directive in 2006, though the Irish Takeover Panel Act 1997 had already incorporated many of its principles.

Companies must notify the CCPC of mergers over a certain financial threshold for review as required by the Competition Act 2002, as amended (Competition Act).

Expropriation and Compensation

The government normally expropriates private property only for public purposes in a non-discriminatory manner and in accordance with established principles of international law.  The government condemns private property in accordance with recognized principles of due process.

The Irish courts provide a system of judicial review and appeal where there are disputes brought by owners of private property subject to a government action.

Dispute Settlement

There is no specific domestic body for handling investment disputes.  The Irish Constitution, legislation, and common law form the basis for the Irish legal system.  DBEI has primary responsibility for drafting and enforcing company law.  The judiciary is independent, and litigants are entitled to trial by jury in commercial disputes.

ICSID Convention and New York Convention

Ireland is a member of the International Center for the Settlement of Investment Disputes (ICSID) and a party to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, meaning local courts must enforce international arbitration awards under appropriate circumstances.

Some U.S. business representatives have occasionally called into question the transparency of Irish government tenders.  According to some U.S. firms, lengthy procedural decisions often delay the procurement tender process.  Unsuccessful bidders have claimed they have had difficulty receiving information on the rationale behind the tender outcome.  In addition, some successful bidders have experienced delays in finalizing contracts, commencing work on major projects, obtaining accurate project data, and receiving compensation for work completed, including through conciliation and arbitration processes.  Some successful bidders have also subsequently found that the original tenders may not have accurately described conditions on the ground.

Bankruptcy Regulations

The Companies Act 2014 is the most important body of law dealing with commercial and bankruptcy law, which Irish courts consistently apply.  Irish company bankruptcy legislation gives creditors a strong degree of protection.

Investment Incentives

Three Irish organizations – IDA Ireland, EI, and Udaras – have regulatory authority for administering grant aid to investors for capital equipment, land, buildings, training, and R&D.  Foreign and domestic business enterprises that seek grant aid from these organizations must submit detailed investment proposals.  These proposals typically include information on fixed assets (capital), labor, and technology/R&D components, and establish targets using criteria such as sales, profitability, exports, and employment.  The submitted information is kept confidential, and each investment proposal is subject to an economic appraisal before support is offered or denied.

Ireland’s investment agencies and foreign investors jointly establish employment creation targets, which usually serve as the basis for performance requirements.  The agencies will only pay grant aid after the foreign investors have attained externally audited performance targets.  Grant aid agreements generally have a repayment term of five years after the date on which the last installment is paid.  Parent companies of the investor generally must also guarantee repayment of the government grant if the grant-aided company closes before an agreed period of time elapses, normally ten years after the grant was paid.  There are no requirements foreign investors must procure locally, or allow nationals to own shares.

The current EU Regional Aid Guidelines (RAGs) that apply to Ireland operate through 2020.  The RAGs govern the maximum grant aid the Irish government can provide to firms/businesses, which are graded based on their location.  The differences in the various aid ceilings reflect the less developed status of business/infrastructure in regions outside the greater Dublin area.

While investors are free, subject to planning permission, to choose the location of their investment, IDA Ireland has actively encouraged investment in regions outside Dublin since the 1990s.  Investment regionalization became Irish government policy in 2001, officially seeking to spread investment more evenly around the country.  The IDA Ireland’s strategy targets locating over 50 percent of all new FDI investments outside the two main urban centers of Dublin and Cork.  In an effort to encourage the location of firms outside Dublin, IDA Ireland has developed “magnets of attraction”, providing cluster areas of activity around the country and supported construction of business parks in counties Galway and Louth, especially for the biotechnology sector.

There are no restrictions, de jure or de facto, on participation by foreign firms in government-financed and/or -subsidized R&D programs on a national basis.  In fact, the government strongly encourages and incentivizes (via a partial tax break) foreign companies to conduct R&D as part of its national strategy to build a more knowledge-intensive, innovation-based economy.  Science Foundation Ireland (SFI), the state science agency, has been responsible for administering Ireland’s R&D funding since 2000.  Under its current strategy, SFI is investing over USD 200 million annually in R&D activities.  SFI is targeting leading researchers in Ireland and overseas to promote the development of biotechnology, information and communications technology; and energy.  SFI has specific research centers of excellence, hubs that draw researchers from Ireland’s universities for research on specific themes.

The U.S.-Ireland Research and Development Partnership (UIRDP), launched in 2006, is a unique initiative involving funding agencies across three jurisdictions: the United States, Ireland, and Northern Ireland (NI).  Under the program, a ‘single-proposal, single-review’ mechanism is facilitated by the National Science Foundation  and National Institutes of Health in the United States, which accept submissions from tri-jurisdictional (U.S., Ireland, and NI) teams for existing funding programs.  All proposals submitted under the auspices of UIRDP must have significant research involvement from researchers in all three jurisdictions.  In 2015, the UIRDP program topics expanded to include agricultural research; and in 2019 cybersecurity was also incorporated as a topic.

A key aspect of government support is a tax credit on the cost of eligible research, development, and innovation (RDI) activity; and on buildings used for RDI activity.  A tax credit of 25 percent is subject to certain conditions and is available for R&D activities carried out in a wide variety of science and technology areas such as software development, engineering, food and beverage production, medical devices, pharmaceuticals, financial services, agriculture and horticulture.  A number of U.S. firms have already used these tax credits to build and operate R&D facilities.  The Irish government’s Knowledge Development Box (KDB), introduced in 2016, also offers a lower tax rate for certain R&D activities carried out in Ireland.

Foreign Trade Zones/Free Ports/Trade Facilitation

The government established Shannon duty-free Processing Zone under legislation in 1957.  Back then, firms operating in the area were entitled to a number of taxation and duty-free benefits not available elsewhere in Ireland.  Nowadays, all firms in Ireland are now treated equally and the Shannon Free Zone (SFZ) as it is now called, continues to operate albeit without any additional taxation benefits.

All firms operating in the SFZ area have the same investment opportunities and tax incentives as indigenous Irish companies.  More than 150 companies operate within the 254-hectare business park.  The following U.S. companies are located in SFZ:  Benex (Becton Dickinson), Connor-Winfield, Digital River, Enterasys Networks, Extrude Hone, GE Capital Aviation Services, GE Money, Sensing, Genworth Financial, Intel, Illinois Tool Works, Kwik-Lok, Lawrence Laboratories (Bristol Myers Squibb), Le Bas International, Magellan Aviation Services, Maidenform, Melcut Cutting Tools (SGS Carbide Tools), Mentor Graphics, Molex, Phoenix American Financial Services, RSA Security, Shannon Engine Support (CFM International), SPS International/Hi-Life Tools (Precision Castparts Corp), Sykes Enterprises, Symantec, Travelsavers Corp, Viking Pump, Western Well Tool, Xerox, and Zimmer.

The Shannon Group currently operates the SFZ, as well as Shannon Airport.

Performance and Data Localization Requirements

Visa, residence, and work permit procedures for foreign investors are non-discriminatory and, for U.S. citizens (as investors or employees), generally liberal.  No restrictions exist on the numbers of, and duration of employment for, foreign managers brought in to supervise foreign investment projects, though all work permits must be renewed annually.  There are no discriminatory export policies or import policies affecting foreign investors.

Data Storage

The government does not follow forced localization nor does it require foreign information technology providers to turn over source code and/or provide access to surveillance (e.g., backdoors into hardware and software, or encryption keys).  There are no rules on maintaining minimum amounts of data storage in Ireland.  Many U.S. firms already operate data centers in Ireland.

Real Property

The government recognizes and enforces secured interests in property, both chattel and real estate.  The Department of Justice and Equality administers a reliable system of recording such security interests through the Property Registration Authority (PRA) and Registry of Deeds.  The PRA registers a person’s interest in property on a public register. All property buyers must since 2010 register their acquisition with the PRA.  Ireland also operates a document registration system through the Registry of Deeds in which deeds (as distinct from titles) may be registered, priority obtained, and third parties placed on notice of the existence of documents of title.  An efficient, non-discriminatory legal system is accessible to foreign investors to protect and facilitate acquisition and disposition of all property rights.

Intellectual Property Rights

Ireland is a member of the World Intellectual Property Organization (WIPO) and party to many of its treaties, including the Berne Convention, the Paris Convention, the Patent Cooperation Treaty, the WIPO Copyright Treaty, and the WIPO Performances and Phonograms Treaty .  Legislation enacted in 2000 brought Irish intellectual property rights (IPR) law into compliance with Ireland’s obligations under the WTO Trade-Related Aspects of Intellectual Property Rights (TRIPS) Agreement.  The legislation gave Ireland one of the most comprehensive legal frameworks for IPR protection in Europe.  It also addressed several TRIPs inconsistencies in prior Irish copyright law that had concerned foreign investors, including the absence of a rental right for sound recordings, the lack of an anti-bootlegging provision, and low criminal penalties that failed to deter piracy.  The legislation provides for stronger penalties on both the civil and criminal sides, but it does not include minimum mandatory sentencing for IPR violations.  As part of this comprehensive legislation, revisions were also made to non-TRIPS conforming sections of Irish patent law.  Specifically, the IPR legislation addressed two outstanding concerns of many foreign investors in the previous legislation:

– The compulsory licensing provisions of the previous 1992 Patent Law were inconsistent with the “working” requirement prohibition of TRIPs Articles 27.1 and the general compulsory licensing provisions of Article 31; and,

– Applications processed after December 20, 1991 did not previously conform to the non-discrimination requirement of TRIPs Article 27.1.

The government continues to crack down on the sale of illegal cigarettes smuggled into the country by international and local organized criminal groups.  High taxation on tobacco products makes illegal trade in counterfeit and untaxed cigarettes highly lucrative.  Ireland became the first European country, and fourth globally, to enact legislation on plain packaging for tobacco products via The Public Health (Standardized Packaging of Tobacco) Act in 2015.  In practice, all tobacco packaging is devoid of branding, and health warnings cover nearly the entire box with only the producer/product name otherwise visible.  The legislation has been in force since September 2018.

The Irish government has transcribed the 2012 EU Copyright and Related Rights Regulations into law.  This legislation makes it possible for copyright holders to seek court injunctions against firms, such as internet service providers (ISPs) or social networks, whose systems host copyright-infringing material.  Irish courts ensure any remedy provided will uphold the freedom of ISPs to conduct their business.  The legislation ensures that the government cannot mandate any ISP to carry out monitoring of information.  The legislation also ensures that measures implemented are “fair and proportionate” and not “unnecessarily complicated or costly.”  The law also states that the Courts must respect the fundamental rights of ISP customers, including the customers’ right to protection of personal data and the freedom to receive or impart information.

The government enacted the Copyright and Other Intellectual Property Law Provisions Act in 2019.  The legislation improves provision for copyright and other IPR protection in the digital era, and its enables rights holders to better enforce their IPR in the courts.

Ireland is not included on the U.S. Trade Representative (USTR) Special 301 Report or the Notorious Markets List.

For additional information about national laws and points of contact at local IP offices, please see WIPO’s country profiles at http://www.wipo.int/directory/en/ .

Capital Markets and Portfolio Investment

Capital markets and portfolio investments operate freely with no discrimination between Irish and foreign firms.  In some instances, development authorities and commercial banks facilitate loan packages to foreign firms with favorable credit terms.  All loans are offered on market terms.  There was limited credit available, especially to small and medium-sized enterprises (SMEs), after the financial crisis of 2008.  Bank balance sheets have since improved with lending levels increasing as the health of the economy improved.  The government established the Strategic Banking Corporation of Ireland (SBCI) to ensure SMEs had access to credit available at market terms.  Irish legal, regulatory, and accounting systems are transparent and consistent with international norms and provide a secure environment for portfolio investment.  The current capital gains tax rate is 33 percent (since December 2012).

Euronext, an EU-based grouping of stock exchange operators in 2018 acquired and operates the Irish Stock Exchange (ISE), now known as Euronext Dublin.

Money and Banking System

The Irish banking sector, like many worldwide, came under intense pressure in 2007 and 2008 following the collapse of Ireland’s construction industry and the end of Ireland’s property boom.  A number of Ireland’s financial lenders were severely under-capitalized and required government bailouts to survive. The government fearing a flight of private investments, introduced temporary guarantees (still in operation) to personal depositors in 2008 to ensure that deposits remained in Ireland.  Anglo Irish Bank (Anglo), a bank heavily involved in construction and property lending, failed and was resolved by the government.  The government then took majority stakes in several other lenders, effectively nationalized two banks and acquired a significant proportion of a third.  The National Asset Management Agency (NAMA), established in 2009, acquired most of the property-related loan books of the Irish banks (including Anglo) at a fraction of their book value.

The government (with its increased exposure to bank debts) and a rising budget deficit had difficulty in placing sovereign debt on international bond markets following the economic crash of 2008.  By November 2010 it had to seek assistance from the Troika (International Monetary Fund (IMF), EU and European Central Bank (ECB)).  The Troika and Irish government agreed a rescue package of EUR 85 ($110) billion with EUR 67.5 ($88) billion of this provided by the Troika, to cover government deficits and costs related to the bank recapitalizations.  The government took effective control of Allied Irish Bank (AIB), following a further recapitalization by the end of 2010.  The government subsequently took into state control, and then resolved, two building societies, Irish Nationwide Building Society and Educational Building Society.  The government also helped to re-capitalize Irish Life and Permanent (the banking portion of which was spun off and now operates under the name Permanent TSB) and the Bank of Ireland (BOI).  The government, in line with Troika bailout program recommendations, forced Irish banks to deleverage their non-core assets to limit Ireland’s banks to effectively service domestic banking demand.  BOI succeeded in remaining non-nationalized by realizing capital from the sale of non-essential portfolios as well as by some targeted burden sharing with some of its bondholders.  The government sold just over 28 percent of its shareholding in AIB Bank in July 2017, but it still retains the remainder of the shareholding.

Ireland exited the Troika program in 2013 and shortly thereafter re-entered sovereign debt markets.  International financing rates continued to fall to record lows for Irish debt, and Ireland fully repaid IMF loans by bond sales secured at better less expensive rates.  Ireland also paid off some bilateral loans extended to it by Denmark and Sweden ahead of schedule in 2017, by securing funding from international markets at lower rates.

Ireland’s retail banking sector is now healthy and well capitalized in line with ECB rules on bank capitalizations.  The stock of non-performing loans on bank balance sheets remains high; and banks continue to divest themselves of these loans through bundle sales to investors.

The Central Bank of Ireland (CBI) is responsible for both central banking and financial regulation.  The CBI is a member of the European System of Central Banks (ESCB), whose primary objective is to maintain price stability in the euro area.

There are a large number of U.S. banks with operations in Ireland, many of whom are located in Dublin’s International Financial Services Center (IFSC) Dublin.  The IFSC originally functioned somewhat like a business park for financial services firms who located there to take advantage of tax breaks.  Financial firms, irrespective of their location in Ireland, are now treated equally like all firms for taxation.  U.S. banks located in Ireland provide a range of financial services to clients in Europe and worldwide.  Among these firms are State Street, Citigroup, Merrill Lynch, Wells Fargo, JP Morgan, and Northern Trust.  The regulation of the international banks operating throughout Ireland falls under the jurisdiction of the CBI.

Ireland is part of the Eurozone, and therefore does not have an independent monetary policy.  The ECB formulates and implements monetary policy for the Eurozone; the CBI implements that policy at the national level.  The Governor of the CBI is a member of the ECB’s Governing Council and has an equal say as other ECB governors in the formulation of Eurozone monetary and interest rate policy.  The CBI also issues euro currency in Ireland, acts as manager of the official external reserves of gold and foreign currency, conducts research and analysis on economic and financial matters, oversees the domestic payment and settlement systems, and manages investment assets on behalf of the State.

Foreign Exchange and Remittances

Foreign Exchange

Ireland uses the euro as its national currency and enjoys full current and capital account liberalization.  Foreign exchange is easily available at market rates.  Ireland is a member of the Financial Action Task Force (FATF).

Remittance Policies

There are no restrictions or significant reported delays in the conversion or repatriation of investment capital, earnings, interest, or royalties, nor are there any announced plans to change remittance policies.  Likewise, there are no limitations on the import of capital into Ireland.

Sovereign Wealth Funds

The National Treasury Management Agency (NTMA) is the asset management bureau of the government.  Day-to-day funding for government operations is normally through the sale of sovereign debt worldwide, which is the responsibility of the NTMA.  The NTMA is also responsible for investing Irish government funds, such as the national pension funds, in financial instruments worldwide.  Ireland suspended issuing sovereign debt upon entering the Troika bailout program in 2010 but has been successfully placing Irish debt since Ireland’s 2013 exit from the Troika program,

The NTMA also has oversight of the National Asset Management Agency (NAMA), the agency established to take on, and dispose of, the property-related loan books of Ireland’s bailed-out banks.

The government created the Ireland Strategic Investment Fund (ISIF) in 2014 with a statutory mandate to invest on a commercial basis to support economic activity and employment in Ireland.  The dual objective mandate of the ISIF – investment return and economic impact –requires all of its investments to generate returns as well as having a positive (i.e. job-creating) economic impact in Ireland.  The ISIF assisted a number of small and medium sized enterprises during Ireland’s economic revival.

There are a number of SOEs in Ireland in the energy, broadcasting, and transportation sectors.  Eirgrid is the SOE with responsibility of managing and operating the electricity grid on the island of Ireland.  (Eirgrid has a sister company SONI in Northern Ireland).  There are two energy SOEs – Electric Ireland (for electricity) and Ervia, formerly Bord Gáis Eireann, (for natural gas).  Raidió Teilifís Éireann (RTE) operates the national broadcasting (radio and television) service while Córas Iompair Éireann (CIE) provides bus and train transportation throughout the country.  The government privatized both Eircom (the national telecommunication service) and Aer Lingus (the national airline).  CIE

Transparency of the Regulatory System

Dutch commercial laws and regulations accord with international legal practices and standards; they apply equally to foreign and Dutch companies.  The rules on acquisition, mergers, takeovers, and reinvestment are nondiscriminatory.  The Social Economic Council (SER) – an official advisory body consisting of employers’ representatives, labor representatives, and government appointed independent experts – administers Dutch mergers and acquisitions rules.  The SER’s rules serve to protect the interests of stakeholders and employees.  They include requirements for the timely announcement of mergers and acquisitions (M&A) and for discussions with trade unions.

As an EU member and Eurozone country, the Netherlands is firmly integrated in the European regulatory system, with national and European institutions exercising authority over specific markets, industries, consumer rights, and competition behavior of individual firms.

Financial markets are regulated in an interconnected EU and national system of prudential and behavioral oversight.  The domestic regulators are the Dutch Central Bank (DNB) and the Netherlands Authority for the Financial Market (AFM).  Their EU counterparts are the European Central Bank (ECB) and the European Securities and Markets Authority (ESMA).

Traditionally, public consultation in drafting new laws is by invitation of various civil society bodies, trade associations, and organizations of stakeholders.  In addition, the SER has a formal mandate to provide the government with advice, both solicited and of its own accord.  New laws and regulations are subject to legal review by the Council of State and must be approved by the Second and First Chambers of Parliament.

International Regulatory Considerations

The Netherlands is a member of the WTO and does not maintain any measures that are inconsistent with obligations under Trade Related Investment Measures (TRIMs).

Legal System and Judicial Independence

Dutch contract law is based on the principle of party autonomy and full freedom of contract.  Signing parties are free to draft an agreement in any form and any language, based on the legal system of their choice.

Dutch corporate law provides for a legal and fiscal framework that is designed to be flexible.  This element of the investment climate makes the Netherlands especially attractive to foreign investors.

The Dutch civil court system has a chamber dedicated to business disputes, called the Enterprise Chamber.  The Enterprise Chamber includes judges who are experts in various commercial fields.  They resolve a wide range of corporate disputes, from corporate governance disputes to high-profile shareholder conflicts over mergers or hostile take-overs.  In 2017, as part of its takeover bid of AkzoNobel, U.S. paint manufacturer PPG appealed the AkzoNobel Board’s decision to reject PPG’s takeover offer in the Commercial Court but was unsuccessful.

On January 1, 2019, the Enterprise Chamber established an English-language commercial court.  The Netherlands Commercial Court (NCC) and its appellate chamber (NCCA) offer parties the opportunity to litigate in English and will provide judgments in English.  Both the NCC and NCCA will focus primarily on major international commercial cases.  See also:  https://www.rechtspraak.nl/English/NCC/Pages/default.aspx 

Laws and Regulations on Foreign Direct Investment

The Dutch government has demonstrated a growing concern with the protection of its open, market-based economy against foreign state malign activity and currently the Netherlands is in the process of finalizing legislation that will establish a formal domestic investment screening mechanism.  In March 2019, the Ministry of Economic Affairs and Climate Policy submitted to Parliament its long-awaited proposal for an investment screening law in the telecommunications sector.  The law is currently in the final stages of legislation and will be the first Dutch “critical” sector to have an investor-screening mechanism aimed at protecting Dutch national security.

Competition and Anti-Trust Laws

Structural and regulatory reforms are an integral part of Dutch economic policy.  Laws are routinely developed for stimulating market forces, liberalization, deregulation, and tightening competition policy.

As an EU and Eurozone member, the Netherlands is firmly integrated in the European regulatory system with national and European institutions exercising authority over specific markets, industries, consumer rights, and competition behavior of individual firms.

The Authority for Consumers and Markets (ACM) provides regulatory oversight in three key areas:  consumer protection, post and telecommunications, and market competition.

Expropriation and Compensation

The Netherlands maintains strong protection on all types of property, including private and intellectual property rights, and the right of citizens to own and use property.  Expropriation of corporate assets or the nationalization of industry requires a special act of Parliament, as demonstrated in the nationalization of ABN AMRO during the 2008 financial crisis (the government returned it to public shareholding through a 2016 IPO).  In the event of expropriation, the Dutch government follows customary international law, providing prompt, adequate, and effective compensation, as well as ample process for legal recourse.  The U.S. Mission to the Netherlands is unaware of any recent expropriation claims involving the Dutch government and a U.S. or other foreign-owned company.

Dispute Settlement

ICSID Convention and New York Convention

As a member of the International Center for the Settlement of Investment Disputes (ICSID), the Netherlands accepts binding arbitration between foreign investors and the state.  The Netherlands is one of the initial signatories of the New York Convention on Recognition and Enforcement of Foreign Arbitral Awards (UNCITRAL) and permits local enforcement of arbitration judgments decided in other signatory countries.

The Hague is the seat of the Permanent Court of Arbitration (PCA), an intergovernmental organization that is not a court, but like the ICSID, is a facilitator of independent arbitral tribunals to resolve conflicts between PCA member states, including the United States.

International Commercial Arbitration and Foreign Courts

The Netherlands has maintained a Treaty of Friendship, Commerce, and Navigation with the United States since 1957 that provides for national treatment and free entry for foreign investors, with certain exceptions.  The Embassy is not aware of any American company raising an investment dispute with the Netherlands over the last 10 years.

Bankruptcy Regulations

Dutch bankruptcy law is governed by the Dutch Bankruptcy Code, which applies both to individuals and to companies.  The code covers three separate legal proceedings:  1) bankruptcy, which has a goal of liquidating the company’s assets; 2) receivership, aimed at reaching an agreement between the creditors and the company; and 3) debt restructuring, which is only available to individuals.

The World Bank’s 2020 Ease of Doing Business Index ranks the Netherlands as number seven in resolving insolvency.  The Netherlands ranks better than the OECD average on bankruptcy time, cost, and recovery rate.

Investment Incentives

General requirements to qualify for investment subsidy schemes apply equally to domestic and foreign investors.  Industry-specific, targeted investment incentives have long been a tool of Dutch economic policy to facilitate economic restructuring and to promote economic priorities.  Such subsidies and incentives are spelled out in detailed regulations.  Subsidies are in the form of tax credits disbursed through corporate tax rebates or direct cash payments if there is no tax liability.  For an overview of government subsidies and investment programs, see:  http://english.rvo.nl/subsidies-programmes .

FDI tends to be concentrated in growth sectors including information and communications technology (ICT), biotechnology, medical technology, electronic components, and machinery and equipment.  Investment projects are predominantly in value-added logistics, machinery and equipment, and food.

Since 2010, the government has shifted from traditional industrial support policies to a comprehensive approach to public/private financing agreements in areas where investment is deemed of strategic value.  Government, academia, and industry work together to determine recipient sectors for co-financed (public and private) R&D.  The government’s industrial policy focuses on nine “Top Sectors”:  creative industries, logistics, horticulture, agriculture and food, life sciences, energy, water, chemical industry, and high tech.  (For more information, see https://www.government.nl/topics/enterprise-and-innovation/contents/encouraging-innovation .)

Foreign Trade Zones/Free Ports/Trade Facilitation

The Netherlands has no free trade zones (FTZs) or free ports where commodities can be processed or reprocessed tax-free.  However, FTZs exist for bonded storage, cargo consolidation, and reconfiguration of non-EU goods.  This reflects the key role that transport, transit, logistics, and distribution play in the Dutch economy.  Dutch Customs oversee a large number of customs warehouses, free warehouses, and free zones along many of the Netherlands trade routes and entry points.

Schiphol Airport handles nearly 1.75 million tons of goods per year for distribution, making it the third largest cargo airport in Europe.  Specific parts of Schiphol are designated customs-free zones.  The Port of Rotterdam is Europe’s largest seaport by volume, handling over 37 percent of all cargo shipping on Europe’s Le Havre-Hamburg coastline and processing nearly 470 million tons of goods in 2018.  Many agents operate customs warehouses under varying customs regimes on the premises of the Port of Rotterdam.

Performance and Data Localization Requirements

There are no trade-related investment performance requirements in the Netherlands and no requirements for employment of local capital or managerial personnel.

The Dutch government does not follow a “forced localization” policy and does not require foreign information technology (IT) providers to turn over source code or provide access to surveillance.  The Dutch Data Protection Authority (DPA) monitors and enforces Dutch legislation on the protection of personal data (https://autoriteitpersoonsgegevens.nl/en ).  The Dutch DPA is active in the EU’s Article 29 Working Party, the collective of EU national DPAs.  The primary law on protection of personal data in the Netherlands is the Dutch law implementing EU directive 95/46/EC.  The new European General Data Protection Regulation (GDPR), which is directly applicable in member states, entered into force May 25, 2018, as part of the EU’s comprehensive reform on data protection.

The Dutch DPA recognized U.S. firms that registered and self-certified with the U.S.-EU Safe Harbor program that began in 2000 and focused on safe transfer of personal data between the European Union and the United States.  On July 12, 2016, the European Commission issued an adequacy decision on the EU-U.S. Privacy Shield framework (https://www.privacyshield.gov/welcome ), which replaced the Safe Harbor program, providing a legal mechanism for companies to transfer personal data from the EU to the United States.  In an October 2019 report, the European Commission confirmed that the EU-US Privacy Shield framework continues to ensure an adequate level of protection for personal data transferred from the EU to companies participating in the Privacy Shield program in the United States.  The Dutch government strongly supports Privacy Shield.

Real Property

The Netherlands fully complies with international standards on protection of real property.  The World Bank’s 2020 Ease of Doing Business Index ranked the Netherlands 30 out of 190 countries in terms of property registration.  The number of procedures involved is at the OECD average, while the processing time of 2.5 days is nearly ten times faster than the OECD average.

The Netherlands’ Cadaster, Land Registry, and Mapping Agency (Cadaster) was established in 1832 to collect and register administrative and spatial data on real property.  The Cadaster is publicly available and can be accessed online (https://www.kadaster.com/ ).

Intellectual Property Rights

The Netherlands is a member of the World Intellectual Property Organization (WIPO) and party to many of its treaties, including the Berne Convention, the Paris Convention, the Patent Cooperation Treaty (PCT), the WIPO Copyright Treaty (WCT), and the WIPO Performances and Phonograms Treaty (WPPT).  The Netherlands generally conforms to accepted international practice for the protection of intellectual property rights (IPR),including the World Trade Organization (WTO) Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS).  Despite participating in negotiations on the Anti-Counterfeiting Trade Agreement (ACTA) treaty, the Netherlands, like other EU member states, has stated it will not sign the treaty in its current form.  The EU has requested the European Court of Justice to advise on the compatibility of ACTA with existing European treaties, in particular with the EU Charter of Fundamental Rights of the European Union.

The Netherlands is a signatory to the European Patent Convention and so is a contracting state of the European Patent Organization.  In the Netherlands, patents for foreign investors are granted retroactively to the date of the original filing in the home country, provided the application is made through a Dutch patent lawyer within one year of the original filing date.  Dutch patents are valid for 20 years, in line with EU regulations.  Because the Netherlands and the United States are both party to the PCT, U.S. inventors may file for rights in the Netherlands using the PCT application.  Legal procedures exist for compulsory licensing if the patent is inadequately used after a period of three years, but these procedures have rarely been invoked.

With the implementation of EU Directive 2004/48 on the enforcement of IPR, rights holders have a number of instruments at their disposal to enforce their rights in civil court.  In addition to possible civil remedies, all IPR laws contain penal bylaws and reference to the Criminal Code.  In 2012, the Dutch Parliament passed legislation that strengthened oversight and coordination of seven different collective institutions that oversee control, administration, and remuneration for commercial use of IPR.  Policymakers agree on the need to raise public awareness of IPR rules and regulations and to strengthen enforcement.  The Dutch government has recognized the need to protect IPR, and law enforcement personnel have worked with industry associations to find and seize pirated software.  Current Dutch IPR legislation explicitly includes computer software under copyright statutes.

The Netherlands has resisted criminalizing online copyright infringement for personal use, instead placing a surcharge on the sales of blank media, such as CDs, DVDs, and USB storage devices, to remunerate rights holders for the downloading of material from legal and illegal sources alike.  A 2014 ruling by the EU Court of Justice requires the government to change this policy and ban online infringement, but since this ruling the Dutch Supreme Court has determined that the original Dutch law can stand albeit that the surcharge does not cover downloading from illegal sources. Thus, the Dutch law remains in place without alteration and is considered by the government to conform to the EU Court ruling.  No specific measures have since been taken by the government to actively pursue persons in violation of the law because the government considers enforcement of this law to be largely a matter for the civil courts.  Dutch associations for rights holders, such as Stichting Brein, focus their efforts on reducing the supply of illegal downloads rather than pursuing consumers who acquire illegal downloads.

The Netherlands is not included in the USTR Special 301 Report but is mentioned as hosting infringing websites in the 2019 Notorious Markets List, which also notes that Dutch law enforcement has assisted in seizing some domain names, thereby shutting down those infringing sites.

For additional information about treaty obligations and points of contact at local IP offices, please see WIPO’s country profiles at https://www.wipo.int/directory/en/details.jsp?country_code=NL .

Resources for Rights Holders

Contact at American Embassy The Hague:
Alex Mayer – Economic Officer
John Adams Park 1
2244 BZ Wassenaar
Telephone:  +31 (0)70 310 2270
E-mail:  MayerA@state.gov

Country-Specific Resource:
BREIN Foundation
https://stichtingbrein.nl/ 
P.O. Box 133
2130 AC Hoofddorp
The Netherlands
Telephone:  +31 (0)85 011 0150

American Chamber of Commerce in the Netherlands:
P.O. Box 15783
1001 NG Amsterdam
Telephone:  +31 (0)20 795 1840
Email:  office@amcham.nl

Local lawyers list:  https://nl.usembassy.gov/u-s-citizen-services/attorneys/?_ga=2.237170691.2093708730.1527074319-1722725267.1486978519

Capital Markets and Portfolio Investment

The Netherlands is home to the world’s oldest stock exchange – established four centuries ago – and Europe’s first options exchange, both located in Amsterdam.  The Amsterdam financial exchanges are part of the Euronext group that operates stock exchanges and derivatives markets in Amsterdam, Brussels, Lisbon, and Paris.

Dutch financial markets are fully developed and operate at market rates, facilitating the free flow of financial resources.  The Netherlands is an international financial center for the foreign exchange market, Eurobonds, and bullion trade.

The flexibility that foreign companies enjoy in conducting business in the Netherlands extends into the area of currency and foreign exchange.  There are no restrictions on foreign investors’ access to sources of local finance.

Money and Banking System

The Dutch banking sector is firmly embedded in the European System of Central Banks, of which the Dutch Central Bank (DNB) is the national prudential banking supervisor.  AFM, the Dutch securities and exchange supervisor, supervises financial institutions and the proper functioning of financial markets and falls under the EU-wide European Securities and Markets Authority (ESMA).

The highly concentrated Dutch banking sector is over three times as large as the rest of the Dutch economy, making it one of Europe’s largest banking sectors in relation to GDP.  Three banks, ING, ABN AMRO, and Rabobank, hold nearly 85 percent of the banking sector’s total assets.  The largest bank, ING, has a balance sheet of around $1 trillion (€887 billion).

The DNB does not consider Bitcoin and similar cryptocurrencies to be legitimate currency, as they do not fulfill the traditional purpose of money as stable means of exchange or saving, and their value is not supported via central bank guarantee mechanisms.  DNB considers current cryptocurrencies to be risky investments that are especially vulnerable to criminal abuse and has begun requiring that providers of financial services related to exchange and deposit of cryptocurrencies register with the DNB, per anti-money laundering (AML) legislation.

The DNB acknowledges however that in the future, cash transactions will likely be replaced with digital transactions that require central bank-issued and -guaranteed cryptocurrencies.  Dutch society has already embraced cash-less commerce to a high degree – seventy percent of over-the-counter shopping is via PIN transactions and contactless payment – and DNB is participating with central banks from Canada, Japan, England, Sweden, Switzerland and the Bank for International Settlements in research about a possible central bank-issued cryptocurrency.

Foreign Exchange and Remittances

Foreign Exchange

The Netherlands is a founding member of the EU and one of the first members of the Eurozone.  The European Central Bank supervises monetary policy, and the president of the Dutch Central Bank (DNB) sits on the European Central Bank’s Governing Council.

There are no restrictions on the conversion or repatriation of capital and earnings (including branch profits, dividends, interest, royalties), or management and technical service fees, with the exception of the nominal exchange-license requirements for nonresident firms.

Remittance Policies

The Netherlands does not impose waiting periods or other measures on foreign exchange for remittances.  Similarly, there are no limitations on the inflow or outflow of funds for remittance of profits or revenue.  The Netherlands, as a Eurozone member, does not engage in currency manipulation tactics.

The Netherlands has been a member of the FATF since 1990 and – because of the membership of its Caribbean territories in the Caribbean FATF (C-FATF) – strongly supports C-FATF.

With the promulgation of additional, preventative anti-money laundering and counterfeiting legislation, the Netherlands has remedied many of the deficiencies revealed in a 2011 Mutual Evaluation Report.  As a result, FATF removed the Netherlands from its “regular follow-up process” in February 2014.  The State Department’s Bureau of International Narcotics and Law Enforcement’s International Narcotics Control Strategy Report (INCSR) has listed the Netherlands as a “country of primary concern,” largely because the country is a major global financial center and consequently an attractive venue for laundering funds generated by illicit activities.  More information can be found at https://www.state.gov/wp-content/uploads/2020/03/Tab-2-INCSR-Vol-2-508.pdf [2 MB].

Sovereign Wealth Funds

The Netherlands has no sovereign wealth funds.

The Dutch government maintains an equity stake in a small number of enterprises and some ownership in companies that play an important role in strategic sectors.  In particular, government-controlled entities retain dominant positions in gas and electricity distribution, rail transport, and the water management sector.  The Netherlands has an extensive public broadcasting network, which generates its own income through advertising revenues but also receives government subsidies.

For a complete list of all 32 government-owned entities, please see:  https://www.rijksoverheid.nl/onderwerpen/staatsdeelnemingen/vraag-en-antwoord/in-welke-ondernemingen-heeft-de-overheid-aandelen .

Private enterprises are allowed to compete with public enterprises with respect to market access, credits, and other business operations such as licenses and supplies.  Government-appointed supervisory boards oversee state-owned enterprises (SOEs).  In some instances involving large investment decisions, SOEs must consult with the cabinet ministry that oversees them.  As with any other firm in the Netherlands, SOEs must publish annual reports, and their financial accounts must be audited.

The Netherlands fully adheres to the OECD Guidelines on Corporate Governance of SOEs.

Privatization Program

There are no ongoing privatization programs in the Netherlands.

The Netherlands is a global leader in corporate social responsibility (CSR).  Principles of CSR are promoted and prescribed through a range of corporate, governmental, and international guidelines.  In general, companies carefully guard their CSR reputation and consumers are increasingly opting for products and services that are produced in an ethical and sustainable manner.

The Netherlands adheres to OECD Guidelines for Multinational Enterprises, and the Dutch Ministry of Economic Affairs and Climate Policy houses the National Contact Point (NCP) that promotes OECD guidelines and helps mediate concerns that persons, non-governmental organizations (NGOs), and enterprises may have regarding implementation by a specific company.  For more information, visit http://www.oecdguidelines.nl .

The Dutch government strongly encourages foreign and local enterprises to follow UN Guiding Principles on Business and Human Rights, which states that businesses have a social responsibility to respect the same human rights norms in other countries as they do in the Netherlands.

The Netherlands has no special government programs that promote women’s empowerment or women’s access to investment.  Under the law, there is no differentiation for men and women regarding equal access to investment.  Furthermore, no groups are excluded from participating in financial markets and the financial system.

The Netherlands has strong standards for corporate governance.  Publicly listed companies are required to publish audited financial reports.  As of 2017, the EU requires these companies to include a chapter on Responsible Business Conduct.

The Ministry of Economic Affairs and Climate Policy established an independent networking organization on CSR called MVONederland in 2004.  MVONederland currently has over 2050 members, including SMEs, multinational corporations, and NGOs, as well as local and national administrative bodies.  See https://www.mvonederland.nl/en/about-mvo-nederland/about-csr-corporate-sustainability-and-responsibility/ 

The Dutch government also encourages companies to engage in CSR through incentive programs and by setting high standards.  Examples include:

• The government reviews CSR activities of more than 500 corporations annually and presents an award to the company with the highest transparency score.
• The government boosts the development of sustainable products through its own sustainable procurement policy.
• Dutch companies can only join government trade missions if they have endorsed OECD Guidelines for Multinational Enterprises.
• Companies that observe the OECD Guidelines for Multinational Enterprises are eligible for financial support for their international trade and investment activities.
• The government supports the Sustainable Trade Initiative (IDH), which helps companies make their international production chains more sustainable.
• The government conducts sector-risk analyses to identify where problems are most likely to occur and target improvements.
• The government has completed seven of 13 sector-wide Responsible Business Conduct Agreement it intends to make with the private sector in the area of international CSR.  The seven agreements cover textiles, banking, pensions, insurance, promotion of vegetable proteins, sustainable forestry, and gold.

The 2020 National Trade Estimate of the Office of the U.S. Trade Representative (USTR)  refered to some Dutch sustainability criteria that  can bring about trade impediments:  “The Sustainable Trade Initiative (IDH) and the Forest Stewardship Council (FSC) have developed standards for soybeans and wood pellets, respectively, that have been supported by the Dutch government and effectively require U.S. producers to meet onerous certification requirements. [… ] These criteria include a requirement for sustainability certification at the forest level, which effectively precludes reliance on the U.S. risk-based approach to sustainable forest management.  As a result of the implementation of the criteria, wood pellet exports to the Netherlands have dropped from 7 percent of total U.S. wood pellet exports in 2014 to less than one percent in 2018.”

The Netherlands fully complies with international standards on combating corruption.  Transparency International ranked the Netherlands eighth in its 2019 Corruption Perception Index.

Anti-bribery legislation to implement the 1997 OECD Anti-Bribery Convention (ABC) entered into effect in 2001.  The anti-bribery law reconciles the language of the ABC with the EU Fraud Directive and the Council of Europe Convention on Fraud.  Under the law, it is a criminal offense if one obtains foreign contracts through corruption.

At the national level, the Ministry of the Interior and Kingdom Relations and Ministry of Justice and Security have both taken steps to enhance regulations to combat bribery in the processes of public procurement and issuance of permits and subsidies.  Most companies have internal controls and/or codes of conduct that prohibit bribery.

Several agencies combat corruption.  The Dutch Whistleblowers Authority serves as a knowledge center, develops new instruments for tracking problems, and identifies trends on matters of integrity.  The Independent Commission for Integrity in Government is an appeals board for whistleblowers in government and law enforcement agencies.

The Netherlands signed and ratified the UN Anticorruption Convention and is party to the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions.

Resources to Report Corruption

The Government agency that aids and protects whistleblowers is the Dutch Whistleblowers Authority or “Huis for Klokkenluiders.”  The Whistleblowers Authority Act, which came into force in the Netherlands on July 1, 2016, underlies the establishment of the Whistleblowers Authority.  An English version of the Act can be found at https://www.huisvoorklokkenluiders.nl/Publicaties/publicaties/2016/07/01/dutch-whistleblowers-act.

Huis for Klokkenluiders
Maliebaan 72
3581 CV Utrecht
The Netherlands
Website: https://www.huisvoorklokkenluiders.nl/english 
Telephone:  +31 (0)88 – 133 1000
E-mail info@huisvoorklokkenluiders.nl

The Dutch office of Transparency International is located in Amsterdam:

Transparency International Nederland
Offices at KIT:  Royal Tropical Institute, room d-3
Mauritskade 64
1092 AD Amsterdam
The Netherlands
Website: https://www.transparency.nl/ 
Telephone: +31 (0)6 81 08 36 27
E-mail:  communicatie@transparency.nl

Although political violence rarely occurs in the highly stable and consensus-oriented Dutch society, public debate on issues such as immigration and integration policy has been contentious.  While rare, there have been some politically and religiously inspired acts of violence.

The Dutch economy derives much of its strength from a stable business climate that fosters partnerships among unions, business organizations, and the government.  Strikes are rarely used as a way to resolve labor disputes.  With ten workdays per 1000 employees lost to industrial action, the Netherlands ranks tenth on the list of OECD countries with the lowest incidence of strikes, behind other major developed economies like the United States (four days) and Germany (three days).

The Netherlands has a strongly regulated labor market (over 75 percent of labor contracts fall under some form of collective labor agreement) that comprises a well-educated and multilingual workforce.  Labor/management relations in both the public and private sectors are generally good in a system that emphasizes the concept of social partnership between industry and labor.  Although wage bargaining in the Netherlands is increasingly decentralized, there still exists a central bargaining apparatus where labor contract guidelines are established.

The terms of collective labor agreements apply to all employees in a sector, not only union members.  To avoid surprises, potential investors are advised to consult with local trade unions prior to making an investment decision to determine which, if any, labor contracts apply to workers in their business sector.  Collective bargaining agreements negotiated in recent years have, by and large, been accepted without protest.

Every company in the Netherlands with at least 50 workers is required by law to institute a Works Council (“Ondernemingsraad”), through which management must consult on a range of issues, including investment decisions, pension packages, and wage structures.  The Social Economic Council has helpful programs on establishing employee participation that allow firms to comply with the law on Works Councils.  See https://www.ser.nl/en/SER/About-the-SER/What-does-the-SER-do .

Prior to the Covid-19 outbreak, the annual unemployment rate was forecast to be 3.2 percent in 2020, well below the EU average of 6.5 percent and less than half of Eurozone unemployment.  In March 2020, the Dutch government established various economic relief measures designed to preserve employment by providing Dutch corporations that suffer coronavirus-related problems with wage subsidies up to 90 percent.

The working population consists of 8.9 million persons.  Workers are sought through government-operated labor exchanges, private employment firms, or direct hiring.  At 47 percent, the Netherlands has the highest share of part-time workers in its workforce of all EU member states (in 2017, the EU average of part-time workers was 19 percent).  A rise in female participation in the workforce led to a 37 percent increase in the share of part-time workers in the total working population.  Three-quarters of women and one quarter of men work less than a 36-hour week.  Labor market participation, especially by older workers, is growing, and the number of independent contractors is rapidly increasing.

To ensure continued economic growth and address the impact of an aging population, increased labor market participation is critical.  The age to qualify for a state pension (AOW) will increase from age 65 to 67 by 2023.  Governmental labor market policies are targeted at increasing productivity of the labor force, including the expansion of working hours.  For example, access to daycare is improving in order to raise the average number of hours per week worked by women, which is 10 hours below the average of hours worked by men.

Effective July 1, 2020, the minimum wage for employees older than 20 years is €1,680 ($1,820) per month.

The U.S. International Development Finance Corporation (DFC) does not operate in the Netherlands.  However, DFC insurance and funding is available for U.S. companies that partner with Dutch companies in third-country markets where DFC operates.  The Netherlands is a member of the World Bank Group’s Multilateral Investment Guarantee Agency (MIGA).

Dutch-registered companies investing abroad can insure their investments against non-commercial risks through the privately owned Atradius Dutch State Business, N.V., which issues export credit insurance policies and guarantees to businesses on behalf of the Dutch government.  The legal basis for investment insurance is contained in the Framework Act for Financial Provisions.  Insurance covers assets and cash, as well as loans related to an investment.  Both new and (under certain circumstances) existing investments are eligible.

* Source for Host Country Data: CBP, DNB (see notes below)
Note 1:  Host country source for GDP 2019 is The Netherlands Bureau for Economic Policy Analysis (CPB). CPB provides more recent data than World Bank.  For a breakdown of Dutch GDP, see: https://www.cpb.nl/en/central-economic-plan-cep-2020-mlt 
Note 2:  Host country source for FDI stocks and flows is the Dutch Central Bank (DNB).  For Dutch outward FDI destined for the U.S., the accumulated value in 2018 is 865,458 million euros and for inbound FDI originating from U.S. the accumulated value in 2018 is 743,704 million euros.  The dollar value of Dutch FDI numbers is obtained with the official Treasury annual rate for 2018 of USD = 0.872 euros.  This shows $992,500 million for FDI outbound towards the U.S. and $852,871 million for FDI inbound from the U.S.

• See for outward FDI:  https://statistiek.dnb.nl/en/downloads/index.aspx#/details/aggregated-outward-direct-investment-by-country-region-and-industry-class-year/dataset/8d7037d3-cb37-4087-8f78-780992666315/resource/9f770349-047b-4027-9943-1051914ce315 
• See for inward FDI:  https://statistiek.dnb.nl/en/downloads/index.aspx#/details/aggregated-direct-investment-in-the-netherlands-by-country-region-and-industry-class-year-figures-are-available-from-2004-onwards/dataset/ea9fd02d-c53b-4c66-b9f9-de406e8371e3/resource/7e03971f-e249-43cc-a95c-7ac5529a79bf 

Gilles Everts
Economic Specialist
John Adams Park 1
2244 BZ Wassenaar
Telephone:  +31 (0)70 310 2276
Email:  EvertsGE@state.gov

Norway has concluded investment protection agreements with numerous countries. These agreements contain provisions for repatriation of capital, dispute settlement, and standards for expropriation and nationalization by the host country.

Norway and other members of the European Free Trade Association (EFTA) — Iceland, Liechtenstein and Switzerland — have 27 joint free trade agreements covering 40 countries that include investment protection provisions: Albania, Bosnia and Herzegovina, Canada, Central American States (Costa Rica and Panama), Chile, Colombia, Egypt, the Philippines, Georgia, Gulf Cooperation Council (GCC), Hong Kong, Israel, Jordan, Lebanon, Macedonia, Mexico, Montenegro, Morocco, the Palestinian Authority, Peru, Serbia, Singapore, Southern African Customs Union, The Republic of Korea, Tunisia, Turkey, and Ukraine. Norway also has bilateral FTAs with the Faroe Islands and Greenland. The agreements cover trade in goods and services, investment protections, dispute settlement, and other issues generally found in bilateral investment accords.

EFTA is currently negotiating FTAs with Algeria, India, Indonesia, Ecuador, Malaysia, the Eurasian Custom Union (Belarus, Kazakhstan and Russia), Thailand, Vietnam and Mercosur (Argentina, Brazil, Paraguay and Uruguay). Norway is negotiating a bilateral FTA with China.

Norway signed a bilateral taxation treaty with the United States in 1971, which can be found at: http://www.irs.gov/Businesses/International-Businesses/Norway—Tax-Treaty-Documents .

Transparency of the Regulatory System

The transparency of Norway’s regulatory system is generally on par with that of the EU. Norway is obliged to adopt EU directives under the terms of the EEA accord in the areas of social policy, consumer protection, environment, company law, and statistics.

All draft bills are made available for comment through a public consultation process. The Norwegian parliament, the Storting, exercises legislative power in Norway and must approve all formal laws (acts, directives and regulations). Draft bills are available at: https://www.regjeringen.no/en/find-document/consultations/id1763/  Norwegian laws and regulations are available at: https://lovdata.no/info/information_in_english 

Norway’s public finances and debt obligations are transparent. The Government publishes the National Budget and revised budget on the website www.statsbudsjettet.no  and an annual report to Parliament on the State’s account: https://www.regjeringen.no/no/dokumenter/meld.-st.-3-20192020/id2699198/ .  The Ministry of Finance has a webpage on Government debt: https://www.regjeringen.no/en/topics/the-economy/economic-policy/the-central-governments-outstanding-debt/id443404/ 

International Regulatory Considerations

Norway is a member of the European Economic Area (EEA) and as such implements applicable EU directives under the terms of the agreement.

Norway is a member of the World Trade Organization (WTO) and notifies draft technical regulations to the WTO Committee on Technical Barriers to Trade (TBT).

Legal System and Judicial Independence

The Norwegian legal system is similar to that of other Nordic countries, but does not consist of a single comprehensive civil code. Norwegian law is based on the principle of freedom of contract, subject only to limited restrictions. Contracts, whether oral or written, are generally binding on the parties.

Laws and Regulations on Foreign Direct Investment

Norway welcomes foreign investment as a matter of policy and generally grants national treatment to foreign investors. Ownership restrictions exist on some natural resources and on some activities (fishing/ maritime/ road transport).

A new National Security Act entered into force January 1, 2019 and provides the legal foundation for enhanced government screening of foreign investments based on national security concerns. Norway’s legal system is robust and trusted.

Competition and Anti-Trust Laws

Current legislation governing competition went into effect in 2004 and is enforced by the Norwegian Competition Authority (NCA). Under the authority of the Ministry of Trade, Industry and Fisheries the NCA is authorized to conduct non-criminal proceedings and impose fines, or “infringement fees,” for anti-competitive behavior. The size of the fees may vary according to a number of factors, including company turnover and severity of the offense. The 2004 legislation also empowers the NCA to halt mergers or acquisitions that threaten to significantly weaken competition. Companies planning such transactions are generally obliged by law to report their plans to the NCA, which may conduct a review. However, if the combined annual turnover in Norway does not exceed NOK 1 billion (USD 195 million) or the annual turnover of one of the companies NOK 100 million (USD 9.5. million), notification is not required.

Public Procurements

Pursuant to its obligations under the EEA, Norway implemented EU legislation on public procurements on January 1, 1994. Norway is also a signatory to the WTO Government Procurement Agreement (GPA). The EEA/EU legislation and WTO agreement oblige Norway to follow internationally recognized, transparent procedures for public procurements above certain threshold values.

All public procurement contracts exceeding certain threshold values must be published in the Official Journal of the European Union and in the EU’s Tenders Electronic Daily (TED) databank. Norway instituted an electronic notice database more than a decade ago and currently transmits all tender notices electronically through this database to the TED system.

The rules apply to procurement by the central government, regional or local authorities, bodies governed by public law, or associations formed by one or more such entities. In addition, special

rules apply to the procurement by certain entities in the “utilities” sectors of water, energy, transport, and telecommunications.

Public agencies must publish general annual plans for purchases of goods and services, as well as general information on any major building and construction projects planned. No later than two months after a contract has been awarded, a notice must be published stating which company won the contract. All notices must be published in an EU language.

Discriminatory technical specifications may not be used to tailor contracts for a local or national supplier. Any technical standards applied in the procurement process must be national standards that are harmonized with European standards. If no such standards exist, other international or national standards may be applied. All specifications that are to be used in evaluating tenders must be included in the notice or in the invitation to tender.

In general, public procurements are non-discriminatory and based on open, competitive bidding. There are exceptions, however, notably in defense procurements where national security concerns may be taken into account.

The Complaints Board, an independent review body, offers suppliers an inexpensive complaint process for bid challenges. The board can issue “non-binding opinions” and review the legality of the procurement in question. More serious disputes may be taken before the European Surveillance Authority (ESA), or the courts, but the decision making process can be lengthy.

Expropriation and Compensation

There have been no cases of questionable expropriation in recent memory. Government takings of property are generally limited to non-discriminatory land and property condemnation for public purposes (road construction, etc.). The Embassy is not aware of any cases in which compensation has not been prompt, adequate, and effective.

Dispute Settlement

ICSID Convention and New York Convention

Norway has ratified principal international agreements governing arbitration and settlement of investment disputes, including the 1958 New York Convention and the 1965 Washington Convention establishing the World Bank Group-based international center for the settlement of investment disputes (ICSID). The UN-based New York Convention requires courts of contracting states to recognize and enforce arbitration awards made in other contracting states.

Investor-State Dispute Settlement

Norway is party to 15 Bilateral Investment Treaties and 32 Treaties with Investment Provisions . The Embassy is not aware of any unresolved disputes between any U.S. investors and the government of Norway.

International Commercial Arbitration and Foreign Courts

Norway’s legal system provides effective means for enforcing property and contractual rights.

Bankruptcy Regulations

Norway has strong bankruptcy laws and is ranked 5 out of 190 for ease of “resolving insolvency” on the World Bank’s 2020 Doing Business Index. According to the World Bank, the average duration for bankruptcy proceedings in Norway is half that of the OECD average, at just under a year.

Investment Incentives

Norway’s SkatteFUNN research and development (R&D) tax incentive scheme is a government program designed to stimulate R&D in Norwegian trade and industry. Businesses and enterprises that are subject to taxation in Norway are eligible to apply for tax relief. For more information, see:  https://www.oecd.org/sti/RDTax%20Country%20Profiles%20-%20NOR.pdf 

Foreign Trade Zones/Free Ports/Trade Facilitation

Norway has no foreign trade zones and does not contemplate establishing any.

Performance and Data Localization Requirements

Norway generally does not impose performance requirements on foreign investors, nor offer significant general tax incentives for either domestic or foreign investors. There is an exception, however, for investments in sparsely settled northern Norway where reduced payroll taxes and other incentives apply. There are no free-trade zones, although taxes are minimal on Svalbard, a remote Arctic archipelago which is subject to special treaty provisions but administered by Norway. A state industry and regional development fund provides support (e.g., investment grants and financial assistance) for industrial development in areas with special employment difficulties or with low levels of economic activity.

Norway does not require “forced localization” nor impose requirements on data storage.

Real Property

Norway recognizes secured interests in property, both movable and real. The system for recording interests in property is recognized and reliable. Norway maintains an open and effective legal and judicial system that protects and facilitates acquisition and disposition of rights in property, including land, buildings, and mortgages.

Intellectual Property Rights

Norway adheres to key international agreements for the protection of intellectual property rights (IPR) (e.g., the Paris Union Convention for the Protection of Industrial Property, the Berne Copyright Convention, the Universal Copyright Convention of 1952, and the Patent Cooperation Treaty).  As a member of the World Trade Organization (WTO), this also includes the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS).

The chief domestic statutes governing IPR include: the Patents Act of December 15, 1967, as amended; the Designs Act of March 14, 2003; the Copyrights Act of May 12, 1961, as amended; the Layout-design Act of June 15, 1990, as amended; the Marketing Act of January 9, 2009; and the Trademarks Act of March 26, 2010.  The above legislation also protects trade secrets and industrial designs, including semiconductor chip layout design.  As a European Economic

Area (EEA) member, Norway adopted legislation intended to implement the 2001 EU Copyright Directive, though subsequent court cases exposed shortcomings in the legislation (see below).

Patents

The patent office (Patenstyret) grants patents for a period of 20 years (Acts of June 8, 1979 and May 4, 1985).  U.S. industry has expressed concern that Norway’s regulatory framework for process patents filed prior to 1992 denies adequate patent protection for a number of pharmaceutical products.  Although Norway introduced product patents for pharmaceuticals in 1992, the old system has left a difficult legacy for pharmaceutical companies, as competitors claiming to use non-patented processes entered the market. Several U.S. pharmaceutical companies filed successful patent infringement lawsuits in Norwegian courts to fend off these new entrants, but others lost their court cases and were later forced to restructure their Norwegian operations with loss of employment.  Norway was placed on the United States Trade Representative (USTR) Special 301 Watch List in 2008 due to concerns about pharmaceutical patent protection and has not been re-listed since its removal in 2013.

Copyright

In June 2005, Norway enacted legislation based on the EU’s 2001 Copyright Directive to combat Internet piracy, but subsequent court cases showed that the law did not give sufficient grounds for enforcement.  The Government of Norway has since amended the Copyright Act, which entered into force in July 2013.  The amended Act clarifies the process for gaining access to an infringer’s identity and  provides a site-blocking mechanism.  Positive developments on the enforcement side are complemented by the growing popularity of legal streaming alternatives like Spotify, Netflix, and HBO.

Piracy

Internet piracy in Norway is facilitated by high broadband internet penetration, which makes peer-to-peer downloads of video easy and common.  Groups that release early copies of new motion pictures on the Internet are active in the Norwegian market, and Norway has experienced some “camcording incidents,” where motion pictures are illegally recorded in cinemas.  Private organizations like the Motion Picture Association are attempting to raise public awareness of Internet and video piracy, including by running anti-pirating advertisements in movie theaters.  Norway is not included in the Notorious Markets List.

Enforcement

The Norwegian government does not consider itself obligated, under the EEA Agreement, to implement the European Union Enforcement Directive.  Norway does not expressly ban imports or exports of counterfeit or pirated goods for private use or consumption.  However, import or export for resale or other commercial purpose is controlled by Norwegian Customs and rights holders are notified.  Customs may seize and hold suspected counterfeit goods for up to five working days, during which time rights-holders may decide whether to files charges or pursue a settlement.  If the rights holder does not pursue the case or respond to the notice, the goods are released to the importer unless the goods are considered harmful.  By comparison, customs officials in the EU have wider powers to seize, hold, and destroy counterfeit shipments.  In 2010, Norwegian Customs established an IPR office to coordinate training and increase awareness.  In 2015, the Norwegian government launched a new website and an awareness campaign titled “Choose the Real Deal” (velgekte.no).  Rights holders report that law enforcement authorities have begun investigating major copyright infringement cases, which has resulted in the closure of several infringing websites.  However, rights holders contend that the authorities still do not give adequate priority to copyright and Internet piracy cases.

Resources for Rights holders

For additional information about treaty obligations and points of contact at local IP offices, please see WIPO’s country profiles at http://www.wipo.int/directory/en/ .

Norwegian Industrial Property Office: http://www.patentstyret.no/en/ 

A list of local lawyers is available at http://norway.usembassy.gov/lawyers.html.

Capital Markets and Portfolio Investment

Norway has a highly-computerized banking system that provides a full range of banking services, including internet banking. There are no significant impediments to the free market-determined flow of financial resources.

Foreign and domestic investors have access to a wide variety of credit instruments. The financial regulatory system is transparent and consistent with international norms. The Oslo Stock Exchange facilitates portfolio investment and securities transactions in general.

Money and Banking System

Norwegian banks are generally considered to be on a sound financial footing, and the banking sector holds an estimated USD 530 billion in assets. Conservative asset/liquidity requirements limited the exposure of banks to the global financial crisis in 2008/9. The Ministry of Finance reduced the requirement for banks’ countercyclical capital buffer from 2.5% to 1% on March 12, 2020 as part of the government’s economic response to COVID-19.  This lower capital requirement is expected to help banks provide more liquidity to struggling businesses. Foreign banks have been permitted to establish branches in Norway since 1996.

Foreign Exchange and Remittances

Foreign Exchange

Norway’s currency is the Krone. Dividends, profits, interest on loans, debentures, mortgages, and repatriation of invested capital are freely and fully remissible, subject to Central Bank reporting requirements. Ordinary payments from Norway to foreign entities can normally be made without formalities through commercial banks. Norway is a member of the Financial Action Task Force.

Remittance Policies

See above, no restrictions.

Sovereign Wealth Funds

Norway’s sovereign wealth fund, the Government Pension Fund Global (GPFG), was established in 1990 and was valued at NOK 10,088 billion (USD 1.148 trillion) at year-end 2019. The management mandate requires the fund to be widely diversified, outside Norway. Petroleum revenues are invested in global stocks and bonds, and the current portfolio includes over 9,200 companies and approximately 1.5 percent of global stocks. The fund is invested across four asset classes. The fund aims to invest in most markets, countries, and currencies to achieve broad exposure to global economic growth. Close to 40 percent of the fund’s investments are in the United States, which is its single largest market. The fund tries to play an active role in its investments and aims at voting in almost all general shareholder meetings.

In 2004, Norway adopted ethical guidelines for GPFG investments that prohibit investment in companies engaged in various forms of weapons production, environmental degradation, tobacco production, human rights violations, and what it terms “other particularly serious violations of fundamental ethical norms.” In March 2019 the GON announced that companies classified by index provider FTSE Russell as being in the subsector “0533 Exploration & Production” in the sector “0001 Oil & Gas” no longer would be part of the GPFG portfolio. Current holdings in these companies will be phased out over time. More broadly-focused energy companies, which have investments in renewable and sustainable energy sources as well as oil & gas divisions, may still be included. The fund currently has over 100 companies on its exclusion list, at least 24 of which are U.S. companies. The ethical guidelines also highlight three focus areas in term of sustainability: children’s rights, climate change, and water management.

The fund adheres to the Santiago Principles and is a member of the IMF-hosted International Working Group on Sovereign Wealth Funds.

The government continues to play a strong role in the Norwegian economy through its ownership or control of many of the country’s leading commercial firms. The public sector accounts for nearly 60 percent of GDP. The Norwegian government is the largest owner in Norway, with ownership stakes in a range of key sectors (e.g., energy, transportation, finance, and communications). About 70 State-Owned Enterprises (SOEs) are managed directly by the relevant government ministries, and approximately 35 percent of the stock exchange’s capitalization is in government hands. State ownership in companies can be used as a means of ensuring Norwegian ownership and domicile for these firms.

Norway is party to the Government Procurement Agreement (GPA) within the framework of the World Trade Organization (WTO) and a signatory to all relevant annexes. SOEs are thus covered under the agreement.

Successive Norwegian governments have sustained stable levels of strong, transparent, and predictable government ownership. The previous center-left government increased its stake in companies like Equinor (formerly Statoil) ASA, Kongsberg Gruppen AS, and Yara International ASA, while selling off other holdings. The current center-right government has taken some limited steps to reduce ownership stakes.

The GON publishes the annual state ownership report, available in English here: https://www.regjeringen.no/en/topics/business-and-industry/state-ownership/statens-eierberetning-2013/the-state-ownership-report/id2395364/ 

Privatization Program

Norway has no current plans to privatize any SOEs.

Corporate Social Responsibility (CSR) is very much part of Norwegian corporate and political consciousness. Significant attention has been given to ethical and sustainable business practices over the last several years; the GON has issued a series of white papers, most recently in 2015, on promoting human rights through foreign policy and foreign development assistance. In 2009, a white paper laid out  responsibility of Norwegian businesses in the global economy and in 2006-2007, the GON set down guidelines for ethical and responsible conduct in state-owned enterprises, and incorporated climate policy, procurement policy, and development policy as parts of the GON’s broader CSR vision.

Norway adheres to the OECD Guidelines for Multinational Enterprises. Norway’s National Contact Point (NCP) for the OECD Guidelines raises awareness of the due diligence approach of the Guidelines and handles complaints against Norwegian businesses with international operations, in the event they are not behaving in accordance with the Guidelines. The NCP facilitates resolution of these complaints through dialogue and mediation. Kompakt is the Government’s consultative body on matters relating to CSR: https://www.regjeringen.no/en/topics/foreign-affairs/business-cooperation-abroad/innsikt/kompakt_en/id633619/ 

The Norwegian Accounting Act requires companies listed on the Oslo Stock Exchange to provide a report on their policies and practices for corporate governance. The Norwegian Corporate Governance Board, composed of nine independent organizations, issues and updates the Norwegian Code of Practice for the above mentioned companies. Transparency and disclosure are key to the development of corporate social responsibility. Large enterprises are required under Section 3-3c of the Accounting Act to report on their CSR activities. Public disclosure requirements are increasingly regulated. The work of the EU in this area may lead to the development of regulations of relevance to Norway.

In the mining sector, Norway encourages adherence to the OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Afflicted and High-Risk Areas and participates in the Extractive Industries Transparency Initiative (EITI).

In order to prevent tax evasion and the use of tax havens to conceal financial information, large enterprises and public-interest entities that are active in the extractive industry or in the logging of primary forests are required to report on a country-by-country basis. In addition, Norway has entered into a number of new bilateral tax information exchange agreements in recent years.

Business is generally conducted “above the table” in Norway, and Norway ranks 7 out of 180 countries on Transparency International’s 2019 Corruption Perceptions Index. Corrupt activity by Norwegian or foreign officials is a criminal offense under Norway’s Penal Code. Norway’s anti-corruption laws cover illicit activities overseas, subjecting Norwegian nationals/companies who bribe officials in foreign countries to criminal penalties in Norwegian courts. In 2008, the Ministry of Foreign Affairs launched an anti-corruption initiative, focused on limiting corruption in international development efforts.

Norway is a member of the Council of Europe’s anti-corruption watchdog Group of States against Corruption (GRECO) and ratified the Criminal Law Convention on Corruption in 2004, without any reservations.  Norway has ratified the UN Anticorruption Convention (2006) and is a signatory of the OECD Convention on Combating Bribery.

Resources to Report Corruption

The Norwegian National Authority for Investigation and Prosecution of Economic and Environmental Crime (ØKOKRIM)
Address: Postboks 8193 Dep, 0034 Oslo
Telephone: +47 23 29 10 00
Email: post.okokrim@politiet.no

Contact at “watchdog” organization:

Guro Slettemark
Secretary General
Transparency International Norge
PB 582 Sentrum
0106 Oslo
slettemark@transparency.no
+47 90 87 46 26

Norway is a vibrant, stable democracy. Violent political protests or incidents are extremely rare, as are politically motivated attacks on foreign commercial projects or property. However, on July 22, 2011, a Norwegian individual motivated by extreme anti-Islam ideology carried out twin attacks on Oslo’s government district and on the Labor Party’s youth summer camp in Utøya, killing 77 people. The individual, now in prison, operated alone and this incident is not generally considered an indicator of increased political violence in the future.

Obtaining work permits for foreign labor, particularly for semi-skilled workers, can be cumbersome.

Skilled and semi-skilled labor is usually available in Norway. The labor force as of year-end 2019 totaled about 2.85 million persons, representing 70.6 percent of the working-age population.  2.74 million persons were employed at year end 2019, with unemployment at 3.7 percent.

Union membership is in excess of 1.9 million persons, over 50 percent of the labor force. The unions are independent of the government but some, such as the largest (LO), have close and historic ties with the Labor Party. Norway has a highly centralized and constructive system of collective bargaining. The government may impose mandatory wage mediation should strikes threaten key sectors of the economy, particularly the oil and gas and transportation sectors.  Mandatory wage mediation has been used 119 times since 1953, most recently in 2019 to end a strike among hospital nurses.

Employee benefits are generous, e.g., one year’s paid parental leave (shared between parents, and financed chiefly by the government), and unemployment benefits for up to 104 weeks. There are special provisions for layoffs linked to lower activity for the employer.

The average number of hours worked per week in one’s primary job, 33.9 in 2018, is the third lowest in the OECD, after Germany and Denmark. Productivity, however, is high – significantly higher than the EU average. Sickness and absenteeism rates have been between 6-8 percent over the last decade, and stood at 6.0 percent at the end of 2019. Relatively high disability rates, especially among young people, are a concern.

Norwegian blue-collar hourly earnings are comparatively high. High wages encourage the use of relatively capital-intensive technologies in Norwegian industry. Top-level executives and highly skilled engineers, on the other hand, are generally paid considerably less than their U.S. counterparts, which, when combined with relatively high wages at the bottom of the wage scale, contributes to Norway’s very high level of income equality relative to other OECD countries.

DFC does not operate in Norway. However, Norway is a member of the World Bank Group’s Multilateral Investment Guarantee Agency (MIGA).

The French Credit Insurer COFACE signed an agreement to acquire the Norwegian Guarantee Institute for Export Credits (GIEK), the central governmental agency responsible for issuing export credits and investment guarantees, in February 2020. The acquisition is pending approval from the European Free Trade Association Surveillance Authority (ESA).  GIEK’s primary function is to promote export of Norwegian goods and services, and Norwegian investment abroad. It underwrites exports to over 150 countries of all types of goods and services. The guarantees may encompass a single transaction or a series of transactions and cover not only commercial risk, i.e., bankruptcy on the part of the debtor or non-payment for other reasons, but also political risk, i.e., war, expropriation and actions by public authorities that prevent payment.

GIEK offers long-term guarantees for export of capital goods to most countries, including emerging markets. The guarantees are issued on behalf of the Norwegian government and can be used as security vis-à-vis banks and other financial institutions to facilitate funding. The Director General and a Board of seven Directors are responsible for day-to-day operations. GIEK guarantees the down payment on a loan raised by the buyer for financing deliveries from a Norwegian exporter. GIEK is a member of the Berne Union.

* Source for Host Country Data: Statistics Norway (http://ssb.no/en/ )

Per SOGGE
Economic Specialist
Embassy of the United States of America
Morgedalsvegen 36
0378 Oslo
Norway
+47 2130 8665
oslopolecon@state.gov

Transparency of the Regulatory System

As an EU member, Sweden has altered its legislation to comply with the EU’s stringent rules on competition. The country has made extensive changes in its laws and regulations to harmonize with EU practices, all to avoid distortions in, or impediments to the efficient mobilization and allocation of investment. The institutions of the European Union are publicly committed to transparent regulatory processes. The European Commission has the sole right of initiative for EU regulations and publishes extensive, descriptive information on many of its activities. More information can be found at: http://ec.europa.eu/atwork/decision-making/index_en.htm ;http://ec.europa.eu/smart-regulation/index_en.htm .

http://ec.europa.eu/atwork/decision-making/index_en.htm ;http://ec.europa.eu/smart-regulation/index_en.htm .

There are no informal regulatory processes managed by nongovernmental organizations or private sector associations. Nongovernmental organizations and private sector associations may submit comments to government draft bills. The submitted comments are made public in the public consultation process.

Rule-making and regulatory authority on a national level exists formally in the legislative branch, the Riksdag. As a member of the EU, a growing proportion of legislation and regulation stem from the EU. These laws apply in some case directly as national law, or are put before the Riksdag to be enacted as national law. The executive branch, the Government of Sweden, and its various agencies draft laws and regulations that are put before the Riksdag and are adopted on a national level when they enter into force. Municipalities may draft regulations that are within their spheres of competence. These regulations apply at the respective municipality only and may vary between municipalities.

Draft bills and regulations, which include investment laws, are made available for public comment through a public consultation process, along the lines of U.S. federal notice and comment procedures. Current and newly adopted legislation can be found at the Swedish Parliament’s homepage and in the various government agencies dealing with the relevant regulation: http://www.riksdagen.se/sv/dokument-lagar/ . Key regulatory actions are published at Lagrummet: https://lagrummet.se/ . Lagrummet serves as the official site for information on Swedish legislation and provides information on legislation in the public domain, all statutes currently in force, and information on impending legislation. “Post och Inrikes Tidningar” serves in certain aspects a similar role as the Federal Register in the U.S., through which public notifications are published. The proclamations of “Post och Inrikes Tidningar” can be found at the Swedish Companies Registration Office (Bolagsverket): https://poit.bolagsverket.se/poit/PublikPoitIn.do .

The judicial branch and various agencies are tasked with regulation oversight and/or regulation enforcement. The Swedish Parliamentary Ombudsmen, known as the Justitieombuds-männen (JO), are tasked to make sure that public authority complies with the law and follows administrative processes. They also investigate complaints from the general public.

Regulations are reviewed on the basis of scientific and/or data-driven assessments. The principle of public access to official documents, offentlighetsprincipen, governs the availability of the results of studies that are conducted by government entities and furthermore to comments made by government entities. The principle provides the Swedish public with the right to study public documents as specified in the Freedom of the Press Act.

The status of Sweden’s public finances is available at Statistics Sweden, Sweden official statistics agency: https://www.scb.se/en/finding-statistics/statistics-by-subject-area/public-finances/ .

The status of Sweden’s national debt is available at the Swedish National Debt Office: https://www.riksgalden.se/en/aboutsndo/Central-government-debt-and-finances/Debt_facts/ .

International Regulatory Considerations

As an EU-member, Sweden complies with EU-legislation in shaping its national regulations.

If a national law, norm, or standard is found to be in conflict with EU-law, then the national law is altered to be in compliance with EU-law. Sweden adheres to the practices of WTO and coordinates its actions in regard to WTO with other EU-member countries as the EU-countries have a common trade policy.

Legal System and Judicial Independence

Sweden’s legal system is based on the civil law tradition, common to Europe, and founded on classical Roman law, but has been further influenced by the German interpretation of this tradition. Swedish legislation and Swedish agencies provide guidance on whether regulations or enforcement actions are appealable and adjudicated in the national court system. Swedish courts are independent and free of influence from other branches of government, including the executive. Sweden has a written commercial law and contractual law and there are specialized courts, such as commercial and civil courts. The Swedish courts are divided into:

• Courts of general jurisdiction (the District Courts, the Courts of Appeal, and the Supreme Court) which has jurisdiction with respect to civil and criminal cases;
• Administrative courts (County Administrative Courts, Administrative Courts of Appeal, and the Supreme Administrative Court) with jurisdiction with respect to issues of public law, including taxation;
• Specialist courts for disputes within certain legal areas such as labor law, environmental law and market regulation.

Sweden is a signatory to the New York Convention on Recognition and Enforcement of Foreign Arbitral Law; foreign awards may be enforced in Sweden regardless of which foreign country the arbitral proceedings took place. The main source of arbitration law in Sweden is the Swedish Arbitration Act, which contains both procedural and substantive regulations. Sweden is a party to the Lugano and the Brussels Conventions, and, by its membership of the EU, Sweden is also bound by the Brussels Regulation on Jurisdiction and the Recognition and Enforcement of Judgments in Civil and Commercial Matters. An arbitral award is considered final and is not subject to substantive review by Swedish courts. However, arbitral awards may be challenged for reasons set out in the Arbitration Act. An award may, for example, be set aside after a challenge because of procedural errors, which are likely to have influenced the outcome.

Laws and Regulations on Foreign Direct Investment

During the 1990s, Sweden undertook significant deregulation of its markets. In a number of areas, including the electricity and telecommunication markets, Sweden has been on the leading edge of reform, resulting in more efficient sectors and lower prices. Nevertheless, a number of practical impediments to direct investments remain. These include a fairly extensive, though non-discriminatory, system of permits and authorizations needed to engage in many activities and the dominance of a few very large players in certain sectors, such as construction and food wholesaling. Foreign banks, insurance companies, brokerage firms, and cooperative mortgage institutions are permitted to establish branches in Sweden on equal terms with domestic firms, although a permit is required. Swedes and foreigners alike may acquire shares in any company listed on NASDAQ OMX.

Sweden’s taxation structure is straightforward and corporate tax levels are low. In 2013, Sweden lowered its corporate tax from 26.3 percent to 22 percent in nominal terms and lowered it again to 21.4 percent in 2019. The effective rate can be even lower as companies have the option of making deductible annual appropriations to a tax allocation reserve of up to 25 percent of their pretax profit for the year. Companies can make pre-tax allocations to untaxed reserves, which are subject to tax only when utilized. Certain amounts of untaxed reserves may be used to cover losses. Due to tax exemptions on capital gains and dividends, as well as other competitive tax rules such as low effective corporate tax rates, deductible interest costs for tax purposes, no withholding tax on interest, no stamp duty or capital duties on share capital, and an extensive double tax treaty network, Sweden is among Europe’s most favorable jurisdictions for holding companies. Unlisted shares are always tax-exempt, meaning there is no qualification time or minimum holding of votes or capital. Listed shares are exempt if the holding represents at least 10 percent of the voting rights (or is contingent on the holder’s business) and the shares are held for at least one year.

Personal income taxes are among the highest in the world. Since public finances have improved due to extensive consolidation packages to reduce deficits, the government has been able to reduce the tax pressure as a percentage of GDP: currently it is below 50 percent, for the first time in decades. One particular focus has been tax reductions to encourage employers to hire the long-term unemployed.

Dividends paid by foreign subsidiaries in Sweden to their parent company are not subject to Swedish taxation. Dividends distributed to other foreign shareholders are subject to a 30 percent withholding tax under domestic law, unless dividends are exempt or taxed at a lower rate under a tax treaty. Tax liability may also be eliminated under the EU Parent Subsidiary Directive. Profits of a Swedish branch of a foreign company may be remitted abroad without being subject to any other tax than the regular corporate income tax. There is no exit taxation and no specific rules regarding taxation of stock options received before a move to Sweden. Instead, cases of double taxation are solved by applying tax treaties and cover not only moves within the EU but all countries, including the United States.

For detailed tax guidance, see the Swedish Tax Administration’s website: http://www.skatteverket.se/servicelankar/otherlanguages/inenglish.4.12815e4f14a62bc048f4edc.html 

There is no primary or “one-stop-shop” website that provides relevant laws, rules, procedures, and reporting requirements for investors. Business Sweden, Sweden’s official trade and investment organization, is the investment promotion agency tasked with developing business in Sweden. The services of the agency are available to all investors.

Competition and Anti-Trust Laws

As an EU member, Sweden has altered its legislation to comply with the EU’s stringent rules on competition. The competition law rules are contained in the Swedish Competition Act (2008:579), which entered into force in November 2008. The fundamental antitrust provisions have been the same since 1993. The Swedish Competition Authority (SCA) is the main enforcement authority of the Swedish Competition Act.

Expropriation and Compensation

Private property is only expropriated for public purposes, in a non-discriminatory manner, with fair compensation, and in accordance with established principles of international law.

Dispute Settlement

ICSID Convention and New York Convention

Sweden is a member of the World Bank-based International Center for the Settlement of Investment Disputes (ICSID) and includes ICSID arbitration of investment disputes in many of its bilateral investment treaties (BITs). Sweden is a signatory to the New York Convention on Recognition and Enforcement of Foreign Arbitral Law.

Investor-State Dispute Settlement

There have been no major disputes over investment in Sweden in recent years. There is no history of extrajudicial action against foreign investors.

International Commercial Arbitration and Foreign Courts

Swedish arbitration law is advanced and in line with current best practice of international arbitration. The main source of arbitration law in Sweden is the Swedish Arbitration Act, which contains both procedural and substantive regulations.

Sweden is a party to the Lugano and the Brussels Conventions and by its membership of the EU Sweden is bound by the Brussels Regulation on Jurisdiction and the Recognition and Enforcement of Judgments in Civil and Commercial Matters. An arbitral award is considered final and is not subject to substantive review by Swedish courts. However, arbitral awards may be challenged for reasons set out in the Arbitration Act. An award may, for example, be set aside after challenge because of procedural errors, which are likely to have influenced the outcome. The Arbitration Institute of the Stockholm Chamber of Commerce (SCC) has administered arbitrations under the UNCITRAL Arbitration Rules for many years, usually acting as the Appointing Authority. Parties to a dispute may adopt the Procedures by agreement before or after the dispute has arisen.

The SCC maintains different versions of the Procedures depending on which version of the UNCITRAL Arbitration Rules applies to the arbitration agreement in question (1976 or 2010 versions).

Bankruptcy Regulations

The Swedish legislation on bankruptcy is found in a number of laws that came into force in different periods of time and to serve different purposes. The main laws on insolvency are the Bankruptcy Act (1987:672) and the Company Reorganization Act (1996:764), but the Preferential Rights of Creditors Act (1970:979), the Salary Guarantee Act (1992:497), and the Companies Act (1975:1385) are equally important. In 2010, Sweden strengthened its secured transactions system through changes to the Rights of Priority Act that give secured creditors’ claims priority in cases of debtor default outside bankruptcy. According to data collected by the World Bank’s 2020 Doing Business Report, resolving insolvency takes two years on average and costs nine percent of the debtor’s estate, with the most likely outcome being that the company will be sold as a going concern. The average recovery rate is 78 cents on the dollar. Globally, Sweden ranked 17 of 190 economies on the ease of resolving insolvency in the Doing Business 2020 report.

Investment Incentives

The Swedish government offers certain incentives to set up a business in targeted depressed areas. Loans are available on favorable terms from the Swedish Agency for Economic and Regional Growth (Tillväxtverket) and from regional development funds. A range of regional support programs, including location and employment grants, low rent industrial parks, and economic free zones are available. Regional development support is concentrated in the lightly populated northern two-thirds of the country. In addition, EU grant and subsidy programs are generally available only for nationals and companies registered in the EU, usually on a national treatment basis. For more information, see Chapter 7 “Trade and Project Financing” in Country Commercial Guide for Sweden. The Swedish government does not have a practice of issuing guarantees or jointly financing direct investment projects.

Foreign Trade Zones/Free Ports/Trade Facilitation

Sweden has foreign trade zones with bonded warehouses in the ports of Stockholm, Gothenburg, Malmö, and Jönköping. Goods may be stored indefinitely in these zones without customs clearance, but they may not be consumed or sold on a retail basis. Permission may be granted to use these goods as materials for industrial operations within a free trade zone. The same tax and labor laws apply to foreign trade zones as to other workplaces in Sweden.

Performance and Data Localization Requirements

As an EU Member State, Sweden adheres to the EU’s General Data Protection Directive (GDPR) (95/46/EC) which spells out strict rules concerning the processing of personal data. Businesses must tell consumers that they are collecting data, what they intend to use it for, and to whom it will be disclosed. Data subjects must be given the opportunity to object to the processing of their personal details and to opt-out of having them used for direct marketing purposes. This opt-out should be available at the time of collection and at any point thereafter. While the EU institutions are considering new legislation, the 1995 Directive remains in force.

The EU-U.S. Privacy Shield Frameworks were designed by the U.S. Department of Commerce and the European Commission to provide companies on both sides of the Atlantic with a mechanism to comply with data protection requirements when transferring personal data from the European Union to the United States in support of transatlantic commerce. On July 12, 2016, the European Commission deemed the EU-U.S. Privacy Shield Framework adequate to enable data transfers under EU law. For further information and guidance on the Privacy Shield Framework, please see: https://www.commerce.gov/privacyshield .

The Swedish Data Protection Authority, Datainspektionen, works to prevent encroachment upon privacy through information and by issuing directives and codes of statutes. Datainspektionen also handles complaints and carries out inspections. By examining government bills, the DPA ensures that new laws and ordinances protect personal data in an adequate manner. Further guidance and information is available in English on their website at www.datainspektionen.se .

There are no measurements that prevent or unduly impede companies from freely transmitting customer or other business-related data outside Sweden’s territory. Sweden imposes no performance requirements on presumptive foreign investors.

In general, there is no government policy that requires the hiring of nationals. There is no excessively onerous visa, residence, work permit, or similar requirements inhibiting mobility of foreign investors and their employees. Sweden does not follow “forced localization,” the policy in which foreign investors must use domestic content in goods or technology and there are no requirements for foreign IT providers to turn over source code and/or provide access to encryption.

Various municipal-level agencies and business associations have targeted U.S. cloud service providers in Sweden. These entities have claimed that any information processed by a U.S. cloud provider is subject to U.S. government scrutiny through the CLOUD Act, limiting customers’ privacy. This perception has severely hurt U.S. cloud service providers’ sales in Sweden and given local cloud service firms an advantage in the market. In addition, this perception has spurred a two-year, government investigation into the development of a Swedish government cloud.

U.S. cloud service providers in Sweden have been unfairly targeted by various government entities at the municipal level, creating an un-level playing field, which has effectively blocked their ability to sell cloud services in Sweden. These entities claim any information stored by U.S. cloud providers is open to U.S. government scrutiny under the CLOUD Act. In one case, U.S. companies were specifically excluded from a local government tender because of this perceived threat from the CLOUD Act.

A Swedish, two-year investigation into the development of a Swedish government cloud is underway, effectively halting U.S. cloud service sales as customers await the investigation’s outcome and giving Swedish cloud providers, including SAAB’s new cloud service, an upper hand. However, due to COVID-19, the government’s investigation has been delayed.

Real Property

Swedish law generally provides for adequate protection of real property. Mortgages and liens exist, and the recording system is reliable. Almost all land has clear title and unoccupied property ownership cannot revert to other owners. Financial mechanisms are available in Sweden for securitization of properties for lending purposes and have been in use since the early 1990s. Nordic banks account for the vast majority of secured lending transactions. The Swedish Financial Supervisory Authority, Finansinpektionen, can provide further information regarding the regulations involved with securitization of properties at https://www.fi.se/en/ .

Intellectual Property Rights

Swedish law generally provides adequate protection for all property rights, including intellectual property rights (IPR). As a member of the European Union and the World Intellectual Property Organization (WIPO), Sweden adheres to a series of multilateral conventions on IPR. Sweden has a Specialist Court for IPR-related cases, the so-called Patent and Market Court, which has operated since September 2016.

Patents: Protection in all areas of technology may be obtained for 20 years. Sweden is party to the Patent Cooperation Treaty and the European Patent Convention; both entered into force in 1978.

Copyrights: Sweden is a signatory to various multilateral conventions on the protection of copyrights, including the Berne Convention, the Rome Convention, and the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). Swedish copyright law protects computer programs and databases. More recently, Sweden gained notoriety as a safe haven for Internet piracy due to rapid connection speeds, a lag in implementing EU Directives, and weak enforcement efforts. In 2009, however, Sweden implemented the EU IPR Enforcement Directive (IPRED) 2004/48/EC and increased its enforcement against Internet piracy. The last few years have seen the conviction of operators behind the Pirate Bay.org, a notorious BitTorrent tracker for illegal file sharing, and an increase in legal file sharing. Legislative measures combined with additional enforcement resources and the emergence of successful legal alternatives all contributed to a substantial increase in legal music and film distribution since 2010.

Trademarks: Sweden protects trademarks under a specific trademark act (1960:644) and is a signatory to the Madrid Protocol.

Trade secrets: The Act on Trade Secrets (2018:558), which implements EU Directive 2016/943, entered into force in July 2018 and repealed the Act on the Protection of Trade Secrets (1990:409). It contains provisions on damages, fines, and punishment for unauthorized acquisition, use, and disclosure of trade secrets and so is aimed to strengthen companies’ competitiveness and improve the conditions for innovation and entrepreneurship.

Designs: Sweden is party to the Paris Convention and the Locarno Agreement. Designs are protected by the Swedish Design Protection Act and the Council Regulation on Registered and Unregistered Designs. Protection under the Act lasts for renewable terms of one to five years with a maximum protection of 25 years.

Sweden is not included in USTR’s Special 301 Report or the Notorious Markets List. For additional information about national laws and points of contact at local IP offices, please see WIPO’s country profiles at http://www.wipo.int/directory/en .

Capital Markets and Portfolio Investment

Credit is allocated on market terms and is made available to foreign investors in a non-discriminatory fashion. The private sector has access to a variety of credit instruments. Legal, regulatory, and accounting systems are transparent and consistent with international norms. NASDAQ-OMX is a modern, open, and active forum for domestic and foreign portfolio investment. It is Sweden’s official stock exchange and operates under specific legislation. Furthermore, the Swedish government is neutral toward portfolio investment and Sweden has a fully capable regulatory system that encourages and facilitates portfolio investments.

Money and Banking System

Several foreign banks, including Citibank, have established branch offices in Sweden, and several niche banks have started to compete in the retail bank market. The three largest Swedish banks are Skandinaviska Enskilda Banken (SEB), Svenska Handelsbanken, and Swedbank. Nordea is the largest foreign bank and largest bank in Sweden, while Danske Bank is the second largest foreign bank and the fifth largest bank in Sweden. A deposit insurance system was introduced in 1996, whereby individuals received protection of up to SEK 250,000 (USD 38,285) of their deposits in case of bank insolvency. On December 31, 2010, the maximum compensation was raised to the SEK equivalent of 100,000 euro.

The banks’ activities are supervised by the Swedish Financial Supervisory Authority, Finansinspektionen, http://www.fi.se , to ensure that standards are met. Swedish banks’ financial statements meet international standards and are audited by internationally recognized auditors only. The Swedish Bankers’ Association, http://www.bankforeningen.se , represents banks and financial institutions in Sweden. The association works closely with regulators and policy makers in Sweden and Europe. Sweden is not part of the Eurozone; however, Swedish commercial banks offer euro-denominated accounts and payment services.

On July 1, 2014, Sweden signed the Foreign Account Tax Compliance Act (FATCA) agreement with the U.S. Financial institutions in Sweden are now obligated to submit information in accordance with FATCA to the Swedish Tax Agency. In February 2015, the Swedish Parliament decided on new laws and regulations needed to implement FATCA. The Parliamentary decision means the government’s proposals in Bill 2014/15:41 were adopted, including for example, the introductions of: a new law on the identification of reportable accounts with respect to the agreement;

• a new law on the identification of reportable accounts with respect to the agreement;
• changes to tax procedure act;
• new legislation on the exchange of information with respect to the agreement; and
• consequential amendments to the Income Tax Act and other laws.

The provisions entered into force on April 1, 2015. For full text of Bill 2014/15:41, please see http://www.regeringen.se/contentassets/bd8cf7f897364944b35f5f30c099bc0c/genomforande-av-avtal-mellan-sveriges-regering-och-amerikas-forenta-staters-regering-for-att-forbattra-internationell-efterlevnad-av-skatteregler-och-for-att-genomfora-fatca-prop.-20141541 .

Foreign banks or branches offering financial services must have an authorization from the Swedish Financial Supervisory Authority, Finansinpektionen, to conduct operations. As part of the authorization application process, FI reviews the firm’s capital situation, business plan, owners, and management. Parts of the firm’s daily operations may also require authorization from FI. The applicable regulatory code can be found at http://www.fi.se/en/our-registers/search-fffs/2009/20093/ .

There are no reported losses of correspondent banking relationships in the past three years and there are no current correspondent banking relationships that are in jeopardy. Foreigners have the right to open an account in a bank in Sweden provided he/she can identify him/herself and the bank conducts an identity check. The bank cannot require the person to have a Swedish personal identity number or an address in Sweden.

Foreign Exchange and Remittances

Foreign Exchange

Sweden adheres to a floating exchange rate regime and the national currency rate fluctuates.

Remittance Policies

Sweden does not impose any restrictions on remittances of profits, proceeds from the liquidation of an investment, or royalty and license fee payments. A subsidiary or branch may transfer fees to a parent company outside of Sweden for management services, research expenditures, etc. Funds associated with any form of investment can be freely converted into any world currency. In general, yields on invested funds, such as dividends and interest receipts, may be freely transferred. A foreign-owned firm may also raise foreign currency loans both from its parent corporation and credit institutions abroad. There are no recent changes or plans to change investment remittance policies. There are no time limitations on remittances.

Sovereign Wealth Funds

There is no sovereign wealth fund in Sweden.

The Swedish state is Sweden’s largest corporate owner and employer. Forty-six companies are entirely or partially state-owned, of which two are listed on the Stockholm stock exchange, and have government representatives on their boards. Approximately 135,000 people are employed by these companies, including associated companies. Sectors, which feature State-Owned Enterprises (SOEs), include energy/power generation, forestry, mining, finance, telecom, postal services, gambling, and retail liquor sales. These companies operate under the same laws as private companies, although the government appoints board members, reflecting government ownership. Like private companies, SOEs have appointed boards of directors, and the government is constitutionally prevented from direct involvement in the company’s operations. Like private companies, SOE’s publish their annual reports, which are subject to independent audit. Private enterprises compete with public enterprises under the same terms and conditions with respect to access to markets, credit, and other business operations. Moreover, Sweden is party to the General Procurement Agreement (GPA) within the framework of the World Trade Organization (WTO). Swedish SOEs adhere to the OECD Guidelines on Corporate Governance for SOEs.

Further information regarding the Swedish SOEs can be found here: http://www.regeringen.se/regeringens-politik/bolag-med-statligt-agande/ .

Privatization Program

The Swedish center-left Government, voted into office in September 2014 and remained in power after the 2018 elections, has the mandate to divest or liquidate its holdings in Bilprovningen (Swedish Motor-Vehicle Inspection Company), Bostadsgaranti, Lernia, Orio (formerly Saab Automobile Parts), SAS, and Svensk Exportkredit (SEK). Although there are no indications that the current Government will use its mandate, it nonetheless decided in 2016 to let Vattenfall divest its German lignite operations to the Czech energy group EPH and their funding partners PPF Investments. The sale was made to adapt Vattenfall’s portfolio and to complete the transition to a carbon neutral operation. If the Government of Sweden decides to divest or liquidate holdings, then a public bidding process is implemented.

There is widespread awareness of responsible business conduct (RBC) among both producers and consumers in Sweden. All businesses are expected to comply with local laws and regulations, and to observe the international norms and principles for human rights, labor protection, sustainable development, and anti-corruption. Firms that pursue RBC are viewed favorably, often publicizing their adherence to generally accepted RBC principles such as those contained in OECD Guidelines for Multinational Enterprises. Volvo Trucks, for example, has collaborated with USAID in pursuing RBC efforts outside of Sweden. The Swedish National Contact Point for the OECD Guidelines can be found at: https://www.regeringen.se/regeringens-politik/handel-och-investeringsframjande/nationella-kontaktpunkten/ .

Sweden effectively and fairly enforces domestic laws in relation to human rights, labor rights, consumer protection, environmental protections, and other laws/regulations intended to protect individuals from adverse business impacts. Sweden has put in place corporate governance, accounting, and executive compensation standards to protect shareholders. Sweden is a member of the Extractive Industries Transparency Initiative (EITI).

Investors have an extremely low likelihood of encountering corruption in Sweden. While there have been cases of domestic corruption at the municipal level, most companies have high anti-corruption standards and an investor would not typically be put in the position of having to pay a bribe to conduct business.

There are cases of Swedish companies operating overseas that have been charged with bribing foreign officials; however, these cases are relatively rare. Although Sweden has comprehensive laws against corruption, and ratified the 1997 OECD Anti-bribery Convention, in June of 2012, the OECD Anti-Bribery Working Group has given an unfavorable review of Swedish compliance to the dictates of that Convention. The group faulted Sweden for not having a single conviction of a Swedish company for bribery in the last eight years, for having unreasonably low fines, and for not re-framing their legal system so that a corporation could be charged with a crime. Swedish officials object to the review, claiming that lack of convictions is not proof of prosecutorial indifference, but rather indicative of high standards of ethics in Swedish companies. Over the last four years, two high-profile cases have involved Swedish companies. Telia Company’s operations in Uzbekistan received considerable public attention and cost the CEO and other senior officials their jobs. Telia Company was in the process of divesting its operations in Uzbekistan following a probe by the U.S. Department of Justice pertaining to illegal payments. In September 2017, Telia Company reached an agreement to pay $965.8 million to settle U.S. and European criminal and civil charges that the company had paid bribes to win business in Uzbekistan. In December 2019, Ericsson reached an agreement with the U.S. Department of Justice to pay more than $1 billion to resolve a foreign corrupt practices case which involved bribing government officials, falsifying books and records, and failing to implement reasonable internal accounting controls.  The resolutions covered criminal conduct in Djibouti, China, Vietnam, Indonesia, and Kuwait.

Sweden does not have a specific agency devoted exclusively to anti-corruption, but a number of agencies cooperate together. A list of Sweden’s Public and Private Anti-Corruption Initiatives can be found at http://www.business-anti-corruption.com/country-profiles/europe-central-asia/sweden/initiatives.aspx .

UN Anticorruption Convention, OECD Convention on Combatting Bribery

Sweden has signed and ratified the UN Anticorruption Convention (see list of signatories at http://www.unodc.org/unodc/en/treaties/CAC/signatories.html ).

Sweden is party to the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions (see list of signatories and their implementation reports at http://www.oecd.org/daf/anti-bribery/countryreportsontheimplementationoftheoecdanti-briberyconvention.htm ).

Resources to Report Corruption

The National Anti-Corruption Group at the Swedish Police, Nationella anti-korruptionsgruppen, handles the investigation of corruption offences and is engaged in preventive efforts. Corruption claims can be reported to the Group by calling +46 114 14.

Watchdog organization:

Transparency International Sweden
Telephone: + 46 (0)72 74 45 558
E-mail address: info@transparency.sewww.transparency.se 

Sweden is politically stable and no changes are expected.

Sweden’s labor force of 5.1 million is disciplined, well educated, and highly skilled. Approximately 68 percent of the Swedish labor force is unionized, although membership is declining. Swedish unions have helped to implement business restructuring to remain competitive, and strongly favor employee education and technical advancements. Management labor cooperation is generally excellent and non-confrontational. The National Mediation Office, which mediates in labor disputes in Sweden, reported in its summary for 2019 that only two strikes occurred in Sweden in 2019.

Foreign/migrant workers are covered by Swedish and EU labor laws. Labor laws are not waived in order to attract or retain investment. In general, there is no government policy that requires the hiring of nationals.

Sweden has a Co-determination at Work Act, which provides for labor representation on the boards of corporate directors once a company has reached more than 25 employees. This law also requires management to negotiate with the appropriate union, or unions prior to implementing certain major changes in company activities. It calls for a company to furnish information on many aspects of its economic status to labor representatives. Labor and management usually find this system works to their mutual benefit. The Co-determination at Work Act and Employment Protection Act sets the rules for the adjustment employment to respond to fluctuating market conditions. Severances and layoffs are based on seniority and are conducted in consultation with unions. Unemployment insurance and other social safety net programs are available for workers laid off for economic reasons. Government-sponsored training programs to facilitate the transition for unemployed persons into areas reporting labor shortages are available, but their scope is targeted.

The cost of doing business in Sweden is generally comparable to most OECD countries, though some country-specific cost advantages are present. Overall salary costs have become increasingly competitive due to relatively modest wage increases over the last decade and a favorable exchange rate. This development is even more pronounced for highly qualified personnel and researchers.

There is no fixed minimum wage by legislation. Instead, wages are set by collective bargaining by sector. The traditionally low-wage differential has increased in recent years as a result of increased wage setting flexibility at the company level. Still, Swedish unskilled employees are relatively well paid, while well-educated Swedish employees are low-paid compared to those in competitor countries. The average increases in real wages in recent years have been high by historical standards, in large due to price stability. Even so, nominal wages in recent years have been slightly above those in competitor countries, about 3 percent annually. Employers must pay social security fees of about 31.5 percent. The fee consists of statutory contributions for pensions, health insurance, and other social benefits.

Sweden has ratified most International Labor Organization (ILO) conventions dealing with worker’s rights, freedom of association, collective bargaining, and the major working conditions and occupational safety and health conventions. More information on Sweden’s labor agreements and legislation in English can be found on the Swedish Trade Union Confederation’s website at http://www.lo.se/english/startpage . There are no new labor related laws or regulations enacted during the last year, as well as any pending draft bills.

Sweden is a member of the European Union (EU). The EU impact Sweden’s trade relationship with the United States, in that the EU has a common trade policy for all member countries.

The U.S. International Development Finance Corporation, DFC, does not operate in Sweden.

* Source for Host Country Data: BEA

Economic Unit
U.S. Embassy Stockholm
Dag Hammarskjölds Väg 31
115 89 Stockholm, Sweden
+46 (0)8 783 5309
StockholmICS@state.gov

U.S. Commercial Service
U.S. Embassy Stockholm
Dag Hammarskjölds Väg 31
115 89 Stockholm, Sweden
www.export.gov/sweden
office.stockholm@trade.gov

The United States and Switzerland do not have a bilateral investment agreement (BIT).  Switzerland has concluded numerous investment protection treaties with developing and emerging market economies.  A total of 111 BITs and 34 relevant Free Trade Agreements (FTAs) with investment commitments are in force.

See the UNCTAD Investment Policy Hub for a full listing of BITs: https://investmentpolicyhub.unctad.org/IIA/CountryBits/203#iiaInnerMenu 

Currently, Switzerland (or the European Free Trade Association, of which Switzerland is a member) is in various stages of discussions regarding FTAs with Algeria, Belarus, India, Kazakhstan, Malaysia, MERCOSUR, Russia, Thailand, and Vietnam.

Switzerland concluded an Income Tax Treaty with the United States in 1996.  https://www.irs.gov/businesses/international-businesses/switzerland-tax-treaty-documents .  A 2009 Protocol to this Treaty entered into force in September 2019 after ratification by the U.S. Senate.  The protocol allows greater information exchange to bolster tax compliance and combat tax evasion.

Transparency of the Regulatory System

The Swiss government uses transparent policies and effective laws to foster a competitive investment climate.  Proposed laws and regulations are open for three-month public comment from interested parties, interest groups, cantons, and cities before being discussed within the bicameral parliament or promulgated by the appropriate regulatory authority.  Authorities take comments into account carefully, particularly since proposals may be subject to optional or automatic referenda that allow Swiss voters to reject or accept the proposals.  Only in rare instances – such as the case of the extension of a moratorium until 2021 on planting GMO crops – are regulations reviewed on the basis of political or customer preferences rather than solely on the basis of scientific analysis.

International Regulatory Considerations

Switzerland is not a member of the European Union.  However, Switzerland adopts many EU standards in line with a series of agreements with the EU.

The WTO concluded in 2017 that Switzerland has regularly notified its draft technical regulations, ordinances, and conformity assessment procedures to the WTO TBT Committee.  Switzerland has been a signatory to the Trade Facilitation Agreement (TFA) since September 2, 2015.

Legal System and Judicial Independence

Swiss civil law is codified in the Swiss Civil Code (which governs the status of individuals, family law, inheritance law, and property law) and in the Swiss Code of Obligations (which governs contracts, torts, commercial law, company law, law of checks and other payment instruments).  Switzerland’s civil legal system is divided into public and private law.  Public law governs the organization of the state, as well as the relationships between the state and private individuals or other entities, such as companies.  Constitutional law, administrative law, tax law, criminal law, criminal procedure, public international law, civil procedure, debt enforcement, and bankruptcy law are sub-divisions of public law.  Private law governs relationships among individuals or entities.  Intellectual property law (copyrights, patents, trademarks, etc.) is an area of private law.  Labor is governed by both private and public law.

All cantons have a high court, which includes a specialized commercial court in four cantons (Zurich, Bern, St. Gallen and Aargau).  The organization of the judiciary differs by canton; smaller cantons have only one court, while larger cantons have multiple courts.  Cantonal high court decisions can be appealed to the Swiss Supreme Court.  The court system is independent, competent, and fair.

Switzerland is party to a number of bilateral and multilateral treaties governing the recognition and enforcement of foreign judgments.  The Lugano Convention, a multilateral treaty tying Switzerland to European legal conventions, entered into force in 2011 (replacing an older legal framework by the same name).  A set of bilateral treaties is also in place to handle judgments of specific foreign courts.  While no such agreement is in place between the United States and Switzerland, Switzerland operates under the New York Convention on Recognition and Enforcement of Foreign Arbitral Law, meaning local courts must enforce international arbitration awards under specific circumstances.

Laws and Regulations on Foreign Direct Investment

The major laws governing foreign investment in Switzerland are the Swiss Code of Obligations, the Lex Friedrich/Koller, Switzerland’s Securities Law, the Cartel Law and the Financial Market Infrastructure Act.  There is no specific screening of foreign investment beyond a normal anti-trust review.  The Federal Assembly instructed the Federal Council to prepare a foreign investment screening mechanism in March 2020, a process expected to take two years.  There are few sectoral or geographic incentives or restrictions; exceptions are described below in the section on performance requirements and incentives.

Some former public monopolies retain their historical market dominance despite partial or full privatization.  Foreign investors sometimes find it difficult to enter these markets due to high entry costs and the relatively small size and linguistic divisions of the Swiss market (e.g., certain types of public transportation, postal services, alcohol and spirits, aerospace and defense, certain types of insurances and banking services, and the trade in salt).

There is no pronounced interference in the court system that should affect foreign investors.

Useful websites:

• The Swiss Code of Obligations, including an unofficial English translation: https://www.admin.ch/opc/en/classified-compilation/19110009/index.html 
• Information on the acquisition of property in Switzerland by persons abroad: https://www.bj.admin.ch/dam/data/bj/wirtschaft/grundstueckerwerb/lex-e.pdf 
• The Federal Act on Stock Exchanges and Securities Trading (unofficial English translation): https://www.six-swiss-exchange.com/download/participants/participation/education/sesta-stock-exchange-act-en.pdf 
• The Federal Act on Financial Market Infrastructures and Market Conduct in Securities and Derivatives Trading (Unofficial English translation): https://www.admin.ch/opc/en/classified-compilation/20141779/index.html 
• The Federal Act on Cartels and other Restraints of Competition including an unofficial English translation: https://www.admin.ch/opc/en/classified-compilation/19950278/index.html 
• Switzerland Global Enterprise provides a “handbook for investors” with the relevant laws: https://www.s-ge.com/en/publication/handbook-investors/handbook-investors 

Competition and Anti-Trust Laws

The Swiss Competition Commission  and the Swiss Takeover Board  review competition-related concerns.  In 2017, the Swiss Takeover Board concluded that Chinese conglomerate HNA had failed to list the HNA co-founders correctly as beneficial owners in its acquisition prospectus of Swiss airline caterer gategroup Holding AG and tasked the Swiss financial regulator and stock exchange with investigating potential breaches of Swiss financial regulations.  HNA was found guilty and was sentenced to pay a financial penalty of CHF 50,000 (USD 50,000).  The investigation into HNA’s shareholdings in Switzerland also revealed deficient statements on beneficial ownership in Swiss-based airport duty free operator Dufry; in September 2019, Switzerland’s Financial Market Supervisory Authority (FINMA) said it would file a criminal complaint in the matter.

The Swiss agricultural sector remains protected and heavily subsidized, with direct subsidy payments comprising two-thirds of an average farm’s profits and one of the lowest levels of productivity among OECD members.  However, this is starting to change: newly negotiated trade agreements, including between the European Free Trade Association (of which Switzerland is a member) and Mercosur, contain provisions which would open Swiss markets to new levels of agricultural imports.

The OECD ranks Switzerland’s educational, healthcare, and agriculture costs and subsidies as relatively high when compared to output.

Expropriation and Compensation

There are no known cases of expropriation within Switzerland.

Dispute Settlement

ICSID Convention and New York Convention

Switzerland has been a member of the International Center for Settlement of Investment Disputes (ICSID) since June 1968, and a member of the New York Convention on Recognition and Enforcement of Foreign Arbitral Law since June 1965.  Switzerland’s Federal Act on Private International Law (Art. 190 and 194) sets a minimum standard for the implementation of international arbitration awards in Switzerland.

Investor-State Dispute Settlement

Based on Switzerland’s membership in the New York Convention on Recognition and Enforcement of Foreign Arbitral Law, local courts are entitled to enforce international arbitration awards.  According to the United Nations Conference on Trade and Development (UNCTAD), Switzerland has never been a respondent party to an investment dispute in international arbitration.

International Commercial Arbitration and Foreign Courts

Swiss courts recognize and enforce foreign arbitral awards in the framework of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards .  Post has no knowledge of any investor disputes in Switzerland involving U.S. persons within the last 10 years.

As business associations organized at the cantonal level, the Chambers of Commerce and Industry, of Basel, Bern, Geneva, Lausanne, Lugano, Neuchâtel, and Zurich have established the Swiss Chambers’ Arbitration Institution.  This entity offers dispute resolution based on Swiss Rules of International Arbitration and Swiss Rules of Commercial Mediation.  According to the Swiss Chambers’ Arbitration Institution, 100 cases were submitted in 2015 (latest available data); 89 of these cases involved foreign parties.

Bankruptcy Regulations

Switzerland’s bankruptcy law does not criminalize bankruptcy.  Under the bankruptcy law, the same rights and obligations apply to foreign and Swiss contract holders.

Swiss authorities provide information about Swiss residents and companies regarding debts registered with the debt collection register.

The World Bank’s 2020 “Doing Business” survey ranks Switzerland 49^th out of 190 countries in resolving insolvency.  The average time to close a business in Switzerland is three years (compared to 1.7 years average across the OECD), with an average of 46.7 cents on the dollar recovered by claimants from insolvent firms (compared to 70.2 cents OECD average).

The Swiss Federal Statute on Private International Law (PILS, Art. 166-175, in force since January 1, 1989) governs Swiss recognition of foreign insolvency proceedings, including bankruptcies, foreign composition, and arrangements.  Swiss law requires reciprocity for recognition of foreign insolvency.

• Federal Statute on Debt Enforcement and Bankruptcy of 11 April 1889 (https://wipolex.wipo.int/en/details.jsp?id=17092  in German, French and Italian).

Investment Incentives

Many of Switzerland’s cantons make significant use of financial incentives to attract investment to their jurisdictions.  Some of the more forward-leaning cantons have in the past waived taxes for new firms for up to ten years.  However, after criticism by the OECD and European Union, the Federal Council proposed tax reform measures that became known as “Tax Reform and AHV Financing” (TRAF), which was approved by the Swiss parliament in September 2018 and was accepted by 64.4 percent of Swiss voters in a May 2019 popular vote.

TRAF entered into force on January 1, 2020, and obliged Swiss cantons to offer the same corporate tax rates to both Swiss and foreign companies, while allowing cantons to continue to set their own cantonal rates and offer incentives for corporate investment through deductions and preferential tax treatment for certain types of income, such as patents, or expenses, such as research and development.  Overall cantonal tax rates are expected to decrease under TRAF, but observers note that tax-friendly cantons such as Zug will likely remain competitive for foreign investment by continuing to offer aggressive incentives.  In Zurich, which is sometimes used as a reference point for corporate location tax calculations within Switzerland, the combined effective corporate tax rate was expected to fall to 19.7 percent in 2020, according to PricewaterhouseCoopers.  This includes municipal, cantonal, and federal tax.

The new corporate tax rules aim to create an internationally compliant, competitive tax system for companies while strengthening the AHV (Swiss pension scheme) by generating additional receipts.  The TRAF tax reform is intended to safeguard the appeal and competitiveness of Switzerland as a business location, and to secure jobs and tax receipts in the medium to longer term.

Individual income tax rates also vary widely across the 26 cantons.

Foreign Trade Zones/Free Ports/Trade Facilitation

Switzerland’s free ports remain an important hub particularly for art works and collectibles from all over the world.  The country has taken steps in recent years to strengthen anti-money laundering measures and minimize the risks of abuse in free ports, to ensure that processes are in line with international standards.

Performance and Data Localization Requirements

There are no “forced localization” laws designed to require foreign investors to use domestic content in goods or technology (e.g. data storage within Switzerland).  In a June 2017 court decision regarding a February 2014 Federal Council decision to exclude a foreign competitor from bidding on services related to the government’s critical infrastructure, the court ruled in favor of the Swiss state-owned enterprise involved in the bid.  U.S. companies have to date not voiced concerns.

Switzerland follows strict privacy laws and certain data may not be collected in Switzerland, as it is deemed personal and “worthy of protection.”  The collection of certain data may need to be registered at the office of the Federal Data Protection and Information Commissioner.  Some foreign companies have located data centers in Switzerland due to the country’s strict privacy rules and neutrality.  In April 2018, FINMA published an outsourcing circular clarifying regulations for data storage for the banking and insurance sector at: https://www.finma.ch/en/documentation/circulars/ 

Real Property

Physical property rights are recognized and enforced within Switzerland, which currently ranks 18^th out of 190 countries in the ease of transferring and registering property, according to the World Bank’s Doing Business Report 2020.

Intellectual Property Rights

According to the World Intellectual Property Organization’s (WIPO’s) World Intellectual Property Indicators, in 2018 Switzerland ranked 8th globally in filing patents, 11th in industrial designs, and 14th in trademarks, which reflects Switzerland’s overall strong protection and enforcement of intellectual property rights (IPR).

In 2020, Switzerland was removed from USTR’s Special 301 Watch List for revisions to its Copyright Act that came into force on April 1, 2020.  The revisions are intended to address specific difficulties in Switzerland’s system of online copyright protection, particularly regarding online infringement.  This is an important step after many years of engagement, and the United States will carefully monitor the implementation, interpretation, and effectiveness of the newly enacted legislation, as well as continue to engage with the Swiss government on these and other IP issues.

Federal customs authorities in Switzerland have the authority to seize counterfeit goods, upon request from the IPR holder or from related interest groups (e.g. professional associations).  Goods can be seized and held for 10 days if there is reasonable suspicion that they are counterfeit.  Provisional measures can also be obtained from a Swiss court to ensure evidence is not destroyed.  If the destruction of goods is requested by an IPR holder, the owner of the goods can dispute that claim in writing within 10 days.  In 2019, Swiss customs conducted 2,906 interventions to seize counterfeit commercial goods, up 73 percent from the number of cases in 2018.  The number of items seized rose from 14,388 in 2018 to 22,324 in 2019, most of which were counterfeit bags and watches.  In 2019, a total of 9,012 consignments of unauthorized pharmaceuticals were seized, the large majority of which were unauthorized erectile dysfunction medications from India and Eastern Europe.

Detailed information is available on Swiss Customs website:

https://www.ezv.admin.ch/dam/ezv/en/dokumente/stab/2020-fakten-und-zahlen.pdf.download.pdf/FaktenZahlenEZV_2020_WEB_en.pdf

For additional information about national laws and points of contact at local IP offices, please see WIPO’s country profiles at https://www.wipo.int/directory/en/ .

Resources for Rights Holders

Theodore Fisher, Economic/Commercial Officer
U.S. Embassy in Bern, Sulgeneckstrasse 19, 3003 Bern, Switzerland
+41 31 357 7011
Business-bern@state.gov

Country / Economy resources

Swiss American Chamber of Commerce
Talacker 41
8001 Zurich
+41 43 443 72 00
info@amcham.ch

Capital Markets and Portfolio Investment

The Swiss government’s attitude toward foreign portfolio investment and market structures is positive, resulting in high global rankings by many indices.

The SIX Swiss stock exchange based in Zurich is one of the top stock markets worldwide based on market capitalization.

Money and Banking System

Switzerland is home to a sophisticated banking system that provides a high degree of service to both foreign and domestic entities.  Switzerland also has an effective regulatory system that encourages and facilitates portfolio investment.  The Swiss Bankers Association (SBA), a trade association of almost 300 member financial institutions, estimated that Switzerland’s banking sector managed assets amounting to approximately USD 7 trillion in 2018, almost half of which come from abroad.  The largest banks, UBS and Credit Suisse, have total assets of approximately USD 1 trillion and USD 800 million, respectively, while Raiffeisen Switzerland holds about USD 230 billion and Zurich Cantonal Bank holds roughly USD 170 billion.  Switzerland also maintains an independent central bank – the Swiss National Bank (SNB).

U.S. citizens who are resident in Switzerland may face difficulties in opening bank accounts at smaller Swiss banks as a result of the administrative costs of complying with additional regulatory and administrative procedures required for U.S. related person accounts under accepted disclosure rules.

The Swiss government created a blockchain task force in January 2018 to foster cooperation between the traditional banking sector and the nascent industry and to discuss potential legal and regulatory reforms to attract blockchain technologies while maintaining anti-money laundering controls.  In December 2018, the Swiss government endorsed a report on the legal framework for blockchain and distributed ledger technology (DLT) in the financial sector, with the goal of creating favorable conditions for Switzerland to evolve as a leading location for fintech and DLT companies.  In March 2019, the Swiss government-initiated consultations on adapting federal legislation to recent developments in DLT, and following these consultations sent a draft law to parliament in November 2019.  The law will be discussed by parliament over the course of 2020.

Several associations provide information about Swiss banks that offer services to U.S. clients.  For more information, see the following page at the U.S. Embassy Bern website:

• https://ch.usembassy.gov/u-s-citizen-services/local-resources-of-u-s-citizens/living-in-ch/banking-resources/

Foreign Exchange and Remittances

Foreign Exchange

In January 2015 the Swiss National Bank (SNB) abandoned the Swiss franc’s euro peg (CHF 1.20 / EUR).  In the wake of the SNB’s announcement, the franc increased over 30 percent in value against the euro.  Perceived as a “safe haven” currency, the franc often strengthens during times of economic downturn or crisis.  As of May 2020, the franc traded at just over CHF 1.05 / EUR, and just over CHF 0.97 / USD.

Since 2015, the SNB has attempted to prevent further strengthening of the Swiss franc by instituting a negative interest rate for commercial bank deposits at the SNB, currently -0.75 percent, while continuing an expansionary monetary policy through intervention in the foreign currency market.  With the onset of the COVID-19 crisis in March 2020, the SNB assessed that the Swiss franc was “even more highly valued,” as compared to a previous assessment of “highly valued.”  The SNB announced it would implement loose monetary policies and stronger foreign currency interventions to stabilize the situation.  The strength of the franc lowers effective prices of imports to Switzerland, but also harms Swiss competitiveness as an export-oriented economy.

Remittance Policies

There are currently no restrictions on converting, repatriating, or transferring funds associated with an investment (including remittances of capital, earnings, loan repayments, lease payments, royalties) into a freely usable currency at the legal market clearing rate.

Sovereign Wealth Funds

Switzerland does not have a sovereign wealth fund or an asset management bureau.

The Swiss Confederation is the largest or sole shareholder in Switzerland’s five state-owned enterprises (SOEs), active in the areas of ground transportation (SBB), information and communication (Swiss Post, Swisscom), defense (RUAG, which was divided into two companies in January – see below), and aviation / air traffic control (Skyguide).  These companies are typically responsible for “public function mandates,” but may also cover commercial activities (e.g., Swisscom in the area of telecommunications).

SOEs typically have commercial relationships with private industry.  Private sector competitors can compete with SOEs under the same terms and conditions with respect to access to markets, credit, and other business operations.  Additional publicly owned enterprises are controlled by the cantons in the areas of energy, water supply, and a number of subsectors.  SOEs and canton-owned companies may benefit from exclusive rights and privileges (some of which are listed in Table A 3.2 of the WTO Trade Policy Review – https://www.wto.org/english/tratop_e/tpr_e/tp455_e.htm ).

Switzerland is a party to the WTO Government Procurement Agreement (GPA).  Some areas are partly or fully exempted from the GPA, such as the management of drinking water, energy, transportation, telecommunications, and defense.  Private companies may encounter difficulties gaining business in these exempted sectors.

Privatization Program

In the aftermath of a 2016 cyberattack, the Federal Council reviewed RUAG’s structure in light of cybersecurity concerns for the Swiss military, and decided in June 2018 to split the company. Swiss defense and aerospace company RUAG was split into two holding companies as of January 1, 2020.  One, MRO Switzerland, will remain state-owned and provide essential technology and systems support to the Swiss military.  The other, RUAG International, includes non-armaments aviation and aerospace businesses, and will be fully privatized in the medium term, according to the Swiss government.

The Swiss Confederation and Swiss companies are generally aware of the importance of pursuing due diligence to responsible business conduct (RBC) and demonstrating corporate social responsibility (CSR).  In response to criticism from civil society about the business practices of Swiss companies abroad, the Swiss government commissioned a series of reports on the government’s role in ensuring CSR, particularly in the commodities sector, and in December 2016 published a national action plan in conjunction with its commitments under the UN Guiding Principles on Business and Human Rights (https://www.admin.ch/gov/en/start/documentation/media-releases.msg-id-64884.html ).  In June 2017, the Swiss government concluded that Switzerland promotes voluntary principles, such as the upholding of human rights standards, and also supports including mandatory CSR market incentives, such as minimum conditions for the protection of workers abroad, in forthcoming legislation.  In January 2020, the Swiss government approved the CSR Action Plan 2020-2023, which covers sixteen measures – particularly promoting sustainability reporting and due diligence by companies, stakeholder dialogue, and the alignment of private section CSR instruments with the OECD Guidelines for Multinational Enterprises.

The latest updates on corporate social responsibility are available on https://www.seco.admin.ch/seco/en/home/Aussenwirtschaftspolitik_Wirtschaftliche_Zusammenarbeit/Wirtschaftsbeziehungen/Gesellschaftliche_Verantwortung_der_Unternehmen.html 

There is ongoing political debate over whether Swiss courts should exercise jurisdiction over allegations of human rights and environmental abuses by Swiss companies abroad.  In March 2019, the upper house of the Swiss parliament (the Council of States) voted narrowly to reject talks on a proposal on responsible business put forward by the lower house (the National Council).  The National Council reaffirmed its proposal in March 2020, with some concessions. A planned vote by the Council of States was postponed due to the coronavirus outbreak, but was expected later in 2020.  The debate may culminate in an eventual referendum, known as the “Responsible Business Initiative” (RBI), in which Swiss citizens will decide whether to adopt or reject a partial revision of the Swiss Constitution that aims to introduce a specific provision on responsible business (https://www.bk.admin.ch/ch/f/pore/vi/vis462t.html ).

Switzerland ranked 1st out of 180 countries in the 2018 Yale University-based Environmental Performance Index (EPI).

The Swiss government implements the OECD Due Diligence Guide for Responsible Supply Chains of Minerals from Conflict and High-Risk Areas.  Switzerland is a member of the Extractive Industries Transparency Initiative and supports the Better Gold Initiative, which promotes responsible gold mining in Peru, with plans to expand to Bolivia and Colombia.  Switzerland’s Point of Contact for the OECD Guidelines at the State Secretariat for Economic Affairs (SECO) may be contacted at: https://mneguidelines.oecd.org/ncps/switzerland.htm .

Information about the Swiss Better Gold Association: https://www.swissbettergold.ch.

Switzerland has signed a number of nonbinding agreements outlining best practices for corporations, including the Voluntary Principles on Security and Human Rights and the International Code of Conduct for Private Security Service Providers.

Swiss law provides for criminal penalties, including imprisonment for up to five years, for official corruption, and the government generally implements these laws effectively.  Switzerland is ranked 4^th of 180 countries in Transparency International’s Corruption Perceptions Index, reflecting low perceptions of corruption in society.  Under Swiss law, officials are not to accept anything that would “challenge their independence and capacity to act.”  The bribery of public officials is governed by the Swiss Criminal Code (Art. 322), while the bribery of private individuals is governed by the Federal Law Against Unfair Competition.  The law defines as granting an “undue advantage” either in exchange for a specific act, or in some cases for future behavior not related to a specific act.  Some officials may receive small gifts valued at no more than CHF 200 or CHF 300 for an entire year, which are not seen as “undue.” However, officials in some fields, such as financial regulators, may receive no advantages at all.  Transparency International has recommended that at the federal level a maximum sum should be set.

Investigating and prosecuting government corruption is a federal responsibility.  A majority of cantons requires members of cantonal parliaments to disclose their interests.  A joint working group comprising representatives of various federal government agencies works under the leadership of the Federal Department of Foreign Affairs to combat corruption.  Some multinational companies have set up internal hotlines to enable staff to report problems anonymously.

In 2009, Switzerland ratified the United Nations Convention against Corruption.  The Swiss government experts believe this ratification did not result in significant domestic changes, since passive and active corruption of public servants was already considered a crime under the Swiss Criminal Code.

A review by the Council of Europe’s Group of States against Corruption (GRECO) in 2017 recommended the adoption of a code of ethics/conduct, together with awareness-raising measures, for members of the federal parliament, judges, and the Office of the Attorney General (OAG) to avoid conflict of interests.  These measures needed to be accompanied by a reinforced monitoring of members of parliament’s compliance with their obligations.  In March 2018, the OECD Working Group on Bribery in International Business Transactions recommended that Switzerland adopt an appropriate legal framework to protect private sector whistleblowers from discrimination and disciplinary action, to ensure that sanctions imposed for foreign bribery against natural and legal persons are effective, proportionate, and dissuasive, and to ensure broader and more systematic publication of concluded foreign bribery cases.  The OECD Working Group positively highlighted Switzerland’s proactive policy on seizure and confiscation, its active involvement in mutual legal assistance, and its role as a promoter of cooperation in field of foreign bribery.  Regarding detection, the OECD Working Group commended the key role played by the Swiss Financial Intelligence Unit (MROS) in detecting foreign bribery.

A number of Swiss federal administrative authorities are involved in combating bribery.  The Swiss State Secretariat for Economic Affairs (SECO) deals with issues relating to the OECD Convention.  The Federal Office of Justice deals with those relating to the Council of Europe Convention, while the Federal Department of Foreign Affairs (MFA) deals with the UN Convention.  The power to prosecute and judge corruption offenses is shared between the relevant Swiss canton and the Swiss federal government.  For the federal government, the competent authorities are the Office of the Attorney General, the Federal Criminal Court, and the Federal Police.  In the cantons, the relevant actors are the cantonal judicial authorities and the cantonal police forces.

UN Anticorruption Convention, OECD Convention on Combatting Bribery

In 2001, Switzerland signed the Council of Europe’s Criminal Law Convention on Corruption.  In 1997, Switzerland signed the OECD Anti-Bribery Convention, which entered into force in 2000.  Switzerland signed the UN Convention against Corruption in 2003.  Switzerland ratified the UN Anticorruption Convention in 2009.

In order to implement the Council of Europe convention, the Swiss parliament amended the Penal Code to make bribery of foreign public officials a federal offense (Title Nineteen “Bribery”); these amendments entered into force in 2000.  In accordance with the revised 1997 OECD Anti-Bribery Convention, the Swiss parliament amended legislation on direct taxes of the Confederation, cantons, and townships to prohibit the tax deductibility of bribes; these amendments became effective on in 2001.

Switzerland maintains an effective legal and policy framework to combat domestic corruption.  U.S. firms investing in Switzerland have not raised with the Embassy any corruption concerns in recent years.

Resources to Report Corruption

Government Agency Contact:

Michel Huissoud
Director
Swiss Federal Audit Office
Monbijoustrasse 45
3003 Bern / Switzerland
Ph. +41 58 463 10 35
Messages can be submitted via https://www.bkms-system.ch/bkwebanon/report/clientInfo?cin=5efk11 

“Watchdog” Organization Contact:

Martin Hilti
Executive Director
Transparency International Switzerland
Schanzeneckstrasse 25
P.O. Box 8509
3001 Bern / Switzerland
Ph. +41 31 382 3550
E-Mail: info@transparency.ch

There is minimal risk from civil unrest in Switzerland. Protests do occur in Switzerland, but authorities monitor protest activities. Urban areas regularly experience demonstrations, mostly on global trade and political issues, and some occasionally sparked by U.S. foreign policy.  Protests held during the annual World Economic Forum (WEF) occasionally draws protestors from several countries in Europe.  Historically, demonstrations have been peaceful, with protestors registering for police permits. Protestors have blocked traffic; spray-painted areas with graffiti, and on rare occasions, clashed with police. Political extremist or anarchist groups sometimes instigate civil unrest.  Right-wing activists have targeted refugees/asylum seekers/foreigners, while left-wing activists (who historically have demonstrated a greater propensity toward violence) usually target organizations involved with globalization, alleged fascism, and alleged police repression.  Swiss police have at their disposal tear gas and water cannons, which are rarely used.

The Swiss labor force is highly educated and highly skilled.  The Swiss economy is capital intensive and geared toward high value-added products and services.  In 2019, 76.5 percent of the workforce was employed in services, 20.8 percent in manufacturing, and 2.6 percent in agriculture.  Full-time work compared to part-time work is more prevalent among foreign workers than among Swiss workers: 40 percent of the Swiss population works part-time, compared to 26 percent of the foreign working population.  Wages in Switzerland are among the highest in the world.  Switzerland continues to observe International Labor Organization (ILO) core conventions.  Government regulations cover maximum work hours, minimum length of holidays, sick leave, compulsory military service, contract termination, and other requirements.  There is no federal minimum wage law.

Foreigners fill not only low-skilled, low-wage jobs, but also highly technical positions in the manufacturing and service industries.  Foreigners account for 31.7 percent of Switzerland’s labor force estimated at about 5 million people.  Many foreign nationals are long-time Swiss residents who have not applied for or been granted Swiss citizenship.  Foreign seasonal workers take many lower-wage jobs in agriculture.

On September 27, 2020, Swiss voters will decide on an initiative to limit immigration across European borders, which could negate the Swiss-EU Free Movement of Persons Agreement and carry potentially significant implications for the immigrant-dependent labor market.  This follows a similar February 2014 initiative to impose limits on immigration.  In the wake of the 2014 referendum, the government introduced a series of measures aimed at bringing into the labor market traditionally underemployed groups – women, older job seekers, refugees, and temporarily accepted asylum seekers.  In December 2016, parliament introduced a requirement that companies in sectors with more than 5 percent unemployment provide information on job openings to government-run employment centers.  These centers would provide employers with suitable candidates, which employers would be required to interview before filling a job.  However, registration at the employment centers would be open to cross-border commuters and EU nationals as well, thus blunting the effect of the legislation, which was implemented by the Federal Council as of July 2018.

Switzerland generally prohibits commerce on Sunday.  Swiss voters narrowly accepted a 2005 revision of the Swiss Federal labor law in order to provide flexible working hours, such as Sunday openings in major railway stations and airports.  Shopping hours outside of these locations remain mainly regulated by cantonal laws.  Employees in the retail sector and in restaurants and bars, in cooperation with other interests, have been successful in resisting the easing of federal and cantonal laws governing opening hours, but in recent years the State Secretariat for Economic Affairs (SECO) has loosened work restrictions on Sundays, for example by allowing a limited number of malls to be open on Sundays.

Trade union density – the percentage of the workforce represented by trade unions – is on the decline in Switzerland, according to OECD data.  From over 20 percent in 2000, trade union density had fallen to 14.9 percent by 2017, according to the OECD (latest data available).  Labor-management relations are generally constructive, with a general willingness on both sides to settle disputes by negotiation rather than labor action.  According to the Federal Office of Statistics, some 581 collective agreements were in force in Switzerland in March 2018 (latest data available).  Of these, approximately 64 percent concern the services sector, 34 percent the manufacturing sector, and 1 percent the agricultural sector; these are usually renewed without major difficulties.  Trade unions continue to promote a wider coverage of collective agreements for the Swiss labor force.  Although the number of workdays lost to strikes in Switzerland is among the lowest in the OECD, Swiss trade unions have encouraged workers to strike on several occasions in recent years.  In difficult economic times, employers may temporarily shift full-time employees to part-time by registering with cantonal authorities and justifying reductions as necessary to business activities.  This practice, known as Kurzarbeit (“short-time work”), allows for the government to make partial salary payments through the unemployment insurance fund.  Kurzarbeit became widespread with the onset of the COVID-19 crisis and the temporary shutdown of wide segments of the Swiss economy.  Officials announced on May 4, 2020 that a total of 1.91 million employees from 187,000 companies – or more than 37 percent of the total workforce – were on reduced working hours under the program.  Employees can reject the shift to part-time work, but risk dismissal.  Responsibility for establishing and enforcing rules for the Kurzarbeit program ultimately belongs to the Federal Council, the seven-member executive of the Swiss government.

A prohibition on strikes by Swiss public servants was generally repealed in 2000, although restrictions remain in place in a few cantons.  The Federal Council may now only restrict or prohibit the right to strike where it affects the security of the state, external relations, or the supply of vital goods to the country.

Switzerland’s average unemployment rate was 3.9 percent in the fourth quarter of 2019 under ILO Labor Force Survey methodology, while registered unemployment was 2.3 percent.  Cantons bordering EU countries experience higher unemployment rates than Switzerland as a whole.

Switzerland does not have a free trade agreement with the United States, but has requested that talks begin to explore an agreement.  Switzerland has no agreed bilateral labor standards with the United States.

The U.S. International Development Finance Corporation (DFC – formerly the Overseas Private Investment Corporation, OPIC) cannot provide support to projects in Switzerland due to the country’s high income status.  Switzerland is a member of the World Bank Group’s Multilateral Investment Guarantee Agency (MIGA); the country has not signed a political risk insurance agreement with any Western European country or the United States.

Average exchange rate for 2019: 1 USD = 0.9938 CHF
Average exchange rate for 2018: 1 USD = 0.9938 CHF
* Source: Federal Office of Statistics 
** Source: Swiss National Bank
***Significant statistical discrepancies are due to methodological differences in measuring foreign direct investment.  Data most recently available.

Theodore Fisher, Economic/Commercial Officer
U.S. Embassy in Bern, Sulgeneckstrasse 19, 3003 Bern
+41 31 357 7011