Transparency of the Regulatory System
The Finnish Competition Act and EU competition rules prohibit competition restraints that harm sound and effective economic competition (prohibition principle). Such restricted conditions include the abuse of dominant position and mutual agreements and practices between competing undertakings to limit competition (cartels).
The substantive provisions of the Competition Act correspond to those included in Articles 101 and 102 of the Treaty on the Functioning of the European Union (TFEU). Unlike EU legislation, the Competition Act also includes provisions on competition neutrality and a provision on dominant position in the grocery trade market. The EU competition rules are applied when an arrangement affects the trade between EU Member States. The Competition Act applies when no such effect on trade exists.
Under the Competition Act, the authorities can intervene in activities restricting competition in Finland or affecting Finnish customers. The Competition Act enables the Finnish Competition and Consumer Authority (FCCA) to prioritize its tasks and focus its resources on the most significant competition issues. More information on competition legislation: https://tem.fi/en/key-legislation
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://unctad.org/topic/enterprise-development/business-facilitation
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
In September 2021, the Ministry of Economic Affairs and Employment released a Sustainable Development Goals (SDG) Finance Roadmap – Finnish Roadmap for Financing a Decade of SDG Action 2021- report, where environmental, social, and corporate governance (ESG) is promoted, as records show increasingly a positive relation between good ESG practices and investment returns and volatility. More information here: https://tem.fi/en/developing-finlands-sustainable-finance-ecosystems
Currently, Finnish law does not require institutional investors and financial intermediaries to consider ESG factors when making investment decisions. Most institutional investors and financial intermediaries have signed the UN Principles for Responsible Investment and are also considering sustainable development goals in their investment decisions. However, the Finnish Corporate Governance Code considers certain ESG factors in its recommendations, such as the composition of the company’s board of directors concerning gender. The Corporate Governance Code applies to all companies listed on Nasdaq Helsinki. https://cgfinland.fi/en/corporate-governance-code/
Finland ranks third on the World Justice Project (WJP) Rule of Law Index (2022) 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/rule-of-law-index/global/2022/Finland/
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). The newly established Digital and Population Data Services Agency (2020) is responsible for developing and maintaining the national open data portal https://www.avoindata.fi/en
In 2019, Finland passed the EU’s General Data Protection Regulation (GDPR) directive, which imparts rules conditions for the secondary use of private-sector health and social data. A single data permit authority (Findata) was established to oversee the entire data-sharing process: https://findata.fi/en/
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 increase citizen participation, and to adopt the use of new technologies. Finland’s 4th national Open Government Action Plan for 2019–2023 was published in September 2019.
The current Government Program (issued in December 2019) sets openness of public information, including open data, application programming interface APIs, and open-source software as key goals of the administration.
The status of Finland’s public finances is available at Statistics Finland, Finland’s official statistics agency: https://www.stat.fi/en/topic/national-economy
The status of Finland’s national debt is available at the State Treasury: https://www.treasuryfinland.fi/statistics/statistics-on-central-government-debt/
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 follows European Union (EU) internal market practices, which define Finland’s trade relations both inside the EU and with non-EU countries. Restrictions apply to certain items such as products containing alcohol, pharmaceuticals, narcotics and dangerous drugs, explosives, etc. The import of beef cattle bred on hormones is forbidden. Other restrictions apply to farm products under the EU’s Common Agricultural Policy (CAP).
As a member of the WTO, Finland reports under the Agreement on Technical Barriers to Trade (TBT Agreement) all proposed technical regulations that could affect trade with other Member countries. In 2021, Finland submitted two notifications of technical regulations and conformity assessment procedures to the WTO. It has submitted 105 notifications since 1995. Finland is a signatory to the WTO Trade Facilitation Agreement (TFA), which entered into force on February 22, 2017.
In March 1997, EU commitments required the establishment of a tax border between the autonomously governed, but territorially Finnish, Åland Islands and the rest of Finland. As a result, the trade of goods and services between the Åland Islands and the rest of Finland is treated as if it were trade with a non-EU area.
The Åland Islands belong to the customs territory of the EU but not to the EU fiscal territory. The tax border separates the Åland Islands from the VAT and excise territory of the EU. VAT and excise are levied on goods imported across the tax border, but no customs duty is levied. In tax border trade, goods can be sold with a tax-free invoice in accordance with the detailed taxation instructions of the Finnish Tax Administration.
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 included 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. On June 24, 2021, the Finnish Competition Act was amended to implement the EU ECN+ Directive, helping competition authorities to be more effective enforcers and to ensure proper functioning of the internal market. More information here: https://valtioneuvosto.fi/en/-/1410877/competition-act-amendments-aimed-at-improving-enforcement-enter-into-force-on-24-june
Finland is a party of the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards since 1962. The provisions of the convention have been included in the Arbitration Act (957/1992).
The Oikeus.fi website https://oikeus.fi/en/index.html contains information about the Finnish judicial system and links to the websites of the independent courts, the public legal aid and guardianship districts, the National Prosecution Authority, the National Enforcement Authority Finland, and the Criminal Sanctions Agency.
Laws and Regulations on Foreign Direct Investment
The purpose of the Act on the Monitoring of Foreign Corporate Acquisitions in Finland (172/2012) (hereafter the Act) is to monitor and, if vital national interests so require, to restrict the transfer of influence to foreigners and foreign organizations and foundations. https://tem.fi/en/acquisitions
A positive attitude to foreign investments is the guiding principle of the act. However, the authorities can exercise control over the ownership of companies considered essential in terms of the security of supply and national security and, if necessary, restrict foreign ownership in such companies. In practice, critical national interests mainly refer to military, national defense, functions vital to society (including safeguarding critical infrastructure and security of supply), national security, and public order.
Under the act, corporate acquisition refers to activities as a result of which: a foreign owner gains control of at least one-tenth, at least one-third, or at least one-half of the aggregate number of votes conferred by all shares in the company or a holding that otherwise corresponds to decision-making authority in a limited liability company or other monitored entity. For more information: https://tem.fi/documents/1410877/0/Kysymyksi%C3%A4+ja+vastauksia_en.pdf/0ef51799-6c84-9251-6cfe-188bc91c6f83/Kysymyksi%C3%A4+ja+vastauksia_en.pdf?t=1636548655250
There is no primary or “one-stop-shop” website that provides all relevant laws, rules, procedures and reporting requirements for investors. 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 Åland 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 Åland Islands. The Åland Government can occasionally grant exemptions from the requirement of right of domicile for those wishing to acquire real property or conduct a business in Åland. This does not prevent people from settling in, or trading with, the Åland Islands. Provided they are Finnish citizens, immigrants who have lived in Åland for five years and have adequate Swedish may apply for domicile and the Åland Government can grant exemptions.
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 Antitrust 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 both on the FCCA’s initiative and based on complaints. Where necessary, the FCCA makes proposals to the Market Court regarding penalties.
The FCCA requires notification on mergers and acquisitions that exceed certain turnover thresholds. The FCCA will intervene in the transaction if it deems it to prevent effective competition in Finland. The FCCA would investigate transactions where the parties’ combined turnover generated in Finland exceeds EUR 100 million and the total turnover generated in Finland of at least two parties exceeds EUR 10 million per party.
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/
In September 2020, the Nordic Competition Authorities released a joint memorandum on digital platforms, setting out the Nordic perspective on issues of competition in digital markets in Europe. For more see: https://www.kkv.fi/uploads/sites/2/2021/12/nordic-report-2020-digital-platforms-and-the-potential-changes-to-competition-law-at-the-european-level.pdf
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. An expropriation permit granted by the government may be appealed to the Supreme Administrative Court. 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://credendo.com/en/country-risk/finland
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) applies without distinction to 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 229 parties in 2021, the majority (208) were from Finland.
In 2021, a Chinese investor brought the first known investment treaty claim against Finland. He was detained and had his business center raided and shut down on suspicion it was facilitating illegal immigration. The outcome of the proceedings is pending. For more information: https://investmentpolicy.unctad.org/investment-dispute-settlement/cases/1192/wang-v-finland
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.
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 Arbitration Institute of the Chamber of Commerce (FAI) launched its Mediation Rules under which FAI 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 Arbitration/Expedited Arbitration Rules”, which were updated in 2020: https://arbitration.fi/en/arbitration/rules-and-guidelines/
The Finland Arbitration Institute (FAI) 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/en/arbitration/
Finland signed the UN Convention on Transparency in Treaty-based Investor-State Arbitration (“Mauritius Convention”) in March 2015. Under these rules, all documents and hearings are open to the public, interested parties may submit statements, and protection for confidential information has been strengthened.
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 in Finnish 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 data collected by the World Bank’s 2020 Doing Business Report, resolving insolvency takes 11 months on average and costs 3.5 percent of the debtor’s estate. The average recovery rate is 88 cents on the dollar. Globally, Finland ranked first of 190 countries on the ease of resolving insolvency in the Doing Business 2020 report : https://www.doingbusiness.org/content/dam/doingBusiness/country/f/finland/FIN.pdf