Doing business in FINLAND
Your legal Guide 2 3
3 FOREWORD AN INTRODUCTION TO FINNISH BUSINESS CULTURE 4 A CORPORATE COUNSEL’S VIEW 7 EMPLOYMENT LAW 8 TAX LAW 10 ENVIRONMENTAL LAW 14 WIND ENERGY 18 MARKETING AND CONSUMER LAW 22 REAL ESTATE OWNERSHIP 26 INVESTMENT FUNDS & INVESTMENT FIRMS 28 THE INNOVATION SYSTEM
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BANKING AND FINANCE CONTENTS 35 CHOICE OF LEGAL ENTITY 37
41 ANTITRUST DATA PROTECTION 42 DISPUTE RESOLUTION 46 2 3
EMPLOYMENT LAW 8 TAX LAW 10 ENVIRONMENTAL LAW 14 Foreword WIND ENERGY 18 MARKETING AND CONSUMER LAW 22 REAL ESTATE OWNERSHIP
26 INVESTMENT FUNDS & INVESTMENT FIRMS 28 THE INNOVATION SYSTEM D ear Reader, 32 If you’re interested in doing business in Finland, but want to know more about the legal environment, BANKING AND FINANCE this guide is for you. Our team of legal experts has identified what they consider to be the most 35 important topics for a business new to Finland, and written a short introduction to each area of law. Maria Wasastjerna The guide is intended simply to give you an overview, rather than a comprehensive analysis, and if Nokia CHOICE OF LEGAL ENTITY you’re looking for more information, all of the authors’ contact details can be found next to the article Maria Wasastjerna is a Senior Legal they’ve written. 37 Counsel working with competition law matters at Nokia. Prior to joining Nokia, Maria worked at Roschier Attorneys, The guide has been prepared in a way that gives you the option of reading from cover to cover, 41 ANTITRUST a leading Nordic law firm, doing EU or simply skipping to the specific article that is of interest to you. To make this possible, some and competition law. Her professional information has been repeated when it is highly relevant to several different chapters in the guide. DATA PROTECTION experience includes working at the European Commission’s DG Competition, On behalf of the Legal Committee, I hope this guide helps you successfully navigate the Finnish the US Federal Trade Commission in market and legal environment. On behalf of all members of Amcham, welcome to Finland! 42 Washington DC, and the law firm Cleary DISPUTE RESOLUTION Gottlieb Steen Hamilton in Brussels. Maria has also worked in a Finnish Sincerely, 46 technology start up in online advertising as the company’s Head of Legal. She is a Maria Wasastjerna, Nokia qualified lawyer in Finland and New York (member of the New York State Bar). Chair of the Legal Committee 4 5 An Introduction to Finnish Business Culture
Michael Student Sullivan & Worcester
I have the pleasure of sharing with you some thoughts and observations about dealing with Finnish people, based on more than 25 years’ experience. Some preliminaries – I confess to a bias. I am a great admirer of the country, its people, its businesses and culture. Despite that, I hope that the following will help readers whose familiarity with Finland and its people is limited. Any commentary such as this must rely on generalities. With any culture, as time passes and the world becomes a smaller place, particular distinctive characteristics may evolve or diminish. Lastly, the opinions, advice and theories below are mine only, and I do not purport to speak for Amcham.
A WORD ABOUT SILENCE
I have heard Finnish people described as reserved, stand- take what you say seriously. You should also listen to them offish, stiff, and difficult to engage. I think that is a complete with that in mind. That does not mean social conversation misconception. One can find such people in Finland, the or humor are off limits (more on humor below). Nor does U.S. and elsewhere. To me, using these terms to describe it mean that Finnish people are not friendly, warm and Finnish people generally is incorrect. It misses something hospitable. They are. Over time, you may find, as I have, that is more subtle, interesting, and worthy of your thought. that people in Finland become some of your most valued, Finnish people have a strong connection to nature. You important friends anywhere. may hear people speak of summer cottages by lakes in the woods, spending time in Lapland and other outdoors- SOME ATTRIBUTES AND CHARACTERISTICS related activities. To many Finns, an important attraction is the peaceful, quiet environment they find there. Silence is something to be appreciated and enjoyed. People Honesty, openness, reliability and straight forward are comfortable with it, even in the company of others. communication – These terms are often used to describe Consequently, it is not necessary to fill the silence just Finnish people. I have found them accurate. It is natural for to avoid it, and if a person says something, it is expected Finnish people to tell the truth, communicate directly and that they have something to say. You don’t need to be openly, and get to the point. What you hear is likely to be paranoid about making sure your every word is profound, correct and uncolored by “shading” that makes it literally but recognize that it is alright not to say anything, and correct, but not completely accurate. In a meeting, the understand that when you speak, people will listen and introductory small talk is often brief, but pleasant, before 4 5
Honesty, openness, reliability and straightforward communication
These terms are often used to describe Finnish people.
turning to business. In a negotiation, you may not hear a long introduction to the point the speaker wants to make. Do not take this behavior for disinterest in your perspective, for impatience, or for lack of thought and consideration. Remember about silence, and consider that the direct approach may also reflect respect for your time.
You will typically find openness to negotiation and compromise. Finnish businesses will bargain, and they may drive hard bargains. But ultimately, win- win solutions, achieved without theatrics or tactics, are regarded as a more desirable and effective than zero sum outcomes. Finnish businesses are also likely to stick to the deals they make, even if the deal does not work out as anticipated.
A trusting nature often accompanies an honest nature. Relative to Americans, Finnish people have at times shown a lower degree of skepticism. Scammers have sought to take advantage of this, and the internet and greater availability of information that come with it have impacted this for better and worse. If you are advising a Finnish company, and you think a degree of skepticism is appropriate in evaluating an offer or opportunity, you should politely encourage it.
Matters of principle are important. It can be difficult to reach compromise on issues that are viewed as implicating fundamental values or basic moral, ethical behavior.
Make sure you have as much information as possible. We are accustomed to evaluating a position within a somewhat broader context than we may be given at first. While your counterpart or client may give you some background to their concern or position, you may need to probe a little more deeply. Do it gently and explain it, so it is not misinterpreted as seeking to obtain company secrets or gain unfair advantage.
Modesty – Finns rarely trumpet their own or their businesses’ achievements. It has been stated that Finns are not good at selling. There may be some partial truth to this, although it is changing. Certainly, the kind of hyperbole and high 6 7 Modesty Finns rarely trumpet their own or their businesses’ achievements.
volume that we often see in the U.S. market are apply the lessons to the next situation. not typical for Finnish businesses. When used on a Finnish audience, those techniques may fail to Humor – Finnish people have excellent senses impress, and they may impact your credibility. of humor. Know your audience, and be sensitive You don’t need to abandon your selling methods to cultural differences. But for the record, the altogether, but try to support your pitch with two best and most creative practical jokes I have concrete data, such as market position, industry heard of were conceived and executed by Finns (I recognitions, and other facts. was the victim of one of them).
Decision-making – Business people are ETIQUETTE AND POINTERS generally ready to make decisions that are within their own “jurisdiction.” Unless a particular approval (board, senior management, etc.) is Many of these points are universal, but, needed, you will generally encounter prompt consistent with the above, you are not likely to and practical decision-making. That does not find Finnish people overly formal or focused on mean consensus and buy-in do not matter. Humor elaborate customs or behaviors. The small talk There is a spirit of collaboration within business Finnish people may be limited, but again, don’t take that as a sign organizations. However, practical, closure- have excellent of impatience or disinterest. Building trust is a oriented deal-making is more the norm than senses of humor. process – it doesn’t happen overnight. But once long, elaborate, approval processes. And when lost, it is difficult to regain. Make appointments results show that the decision was not the best and confirm them. Be on time. If you have an that could have been made, second-guessing unavoidable delay, let your host know. Don’t and finger-pointing tend to be rare. Rather, the assume it is fine for your meeting to run over, objective is to learn from what went wrong and and try to develop a feel for when it is time to wrap up. If you are asked to provide services or respond to an inquiry, let the other party know About the author when you expect to get back to them and update them about delays. If you have brochures or other materials to give out, wait until the end of Michael Student is a corporate/commercial attorney with the the meeting unless you want your counterpart New York office of Sullivan & Worcester LLP. His principal area to look at them right away. If you are new to the of practice is non-U.S. companies entering or doing business in market and looking to develop it, invest, spend the U.S. market. For more than 25 years, Michael has focused on time and take opportunities to demonstrate doing what he likes best, which is working with Finnish clients. commitment and interest. Learn about Finland’s culture and history. This small country’s rich, vast Counsel output will charm and impress you. You may also see a link, as I do, between Finland’s deep, long 1633 Broadway cultural tradition and the exceptional innovation New York, NY 10019 and creativity for which Finnish businesses are T (212) 660-3065 rightly known. If you are up to it, try to learn a little F (212) 660-3001 Finnish (although the people you encounter will speak very good English and whatever you have [email protected] heard about the Finnish language being difficult is emphatically true). 6 7
Geographically, and in terms of trans- best incarnated in the 1990’s by the port connections, Finland is an island. cellphones of Nokia. Today again, new A Corporate To that, companies such as Cargotec industries, such as environmentally and Finnair are truly connecting us sustainable technologies, cleantech, with the world - physically – as does software, and highly successful media Counsel’s View Nokia digitally. entertainment and game industries attract young talents and increased interest from the public and investors. Innovations and fresh ideas are the Anna Aurora Wennäkoski To that, foreign investments find in very basic element in the survival kit Finland a relatively stable and secure of a business actor. Take Cargotec platform for growth. Also factors now for instance, providing highly de- such as pure and fresh nature, air and veloped and innovative solutions and water, Scandinavian simplicity and services for cargo and load handling, straightforwardness, not to mention offering a comprehensive product a certain quality of living, have gained portfolio through its global brands, more and more interest. MacGregor, Kalmar, and Hiab. Car- gotec has installed more than half a merely giving encouragement to do million Hiab cranes; in Kalmar’s mobile From a legal and compliance better and bigger next time, could be equipment, there is an installed base perspective, one might argue that taken into consideration in Finland of more than eighty thousand vehi- asking your lawyer to establish too? A second difference can be cles. Every second ship in the world business in Finland can make him noted in terms of attitudes towards has MacGregor equipment on it. With smile; but conducting business less marketing. Sometimes the Finnish it comes the in-depth knowledge so. Overall, bureaucracy has not been modesty is not only a virtue in that and understanding of our industries, overwhelming. The Finnish Limited relation. and the strong customer relations, Liability Act (also called “companies’ megatrends such as sustainability act”) offers flexibility. Needless However, one of the great assets and digitalisation, and automation to say, statutory duties related in Finland is the close relationships will change the cargo handling indus- to i.e. accounting, bookkeeping between universities, research try. Cargotec has a unique position etc., are there, with some reliefs centers, and businesses. Needless to shape and will take actively part to small businesses. However, in to say, this underlines the need for in these megatrends. Impressive or terms of taxes and employer’s networks – all the more reason for what? These technological advance- expenses, it is sometimes worth engaging with Amcham! To sum up; ments offer significant assets and thinking twice before hiring people. what are we still waiting for; let’s dare most importantly enable people and Finland has also been known for its to venture and take our share of the goods to move and to connect in an accurate compliance with new legal American apple pie too! even smoother and more sustain- requirements – a model student, able manner. All the reason to never according to some. As an in-house to stop striving for a better tomorrow. counsel and a legal professional, this conscientious compliance has, of course, meant also a diligent follow-up Once there is the innovative idea, on the legislative front. Also intensive About the author there needs to be investments too. correspondence and co-operation During its 98 years of independence, with collaborators across time zones Finland has probably not profiled Anna Aurora Wennäkoski (LL.M. is part of the daily work. itself as the “promised land for and M.Sc.) is an internationally- entrepreneurship” or for conducting Alas, comes the need to have courage oriented in-house counsel with successful business. To start with, the to realize the great business ideas and versatile professional experience cultural and social factors: a relatively to carry them out. Therin, small and from several stock listed small nation at the verge of the medium-sized enterprises appear companies in Finland and France. northern hemisphere, with one of the key, not least due to the growth that Currently based in New York, US, world’s most unique languages, does can be generated through them. she conducts post-graduate not perhaps qualify as a hot-spot for studies with specialization in intellectual property rights, privacy business. Risk capital is still then on Probably one of the biggest and data protection. our wish list.However, times change differences between Finland and the and a lot has also been achieved US is related to certain psychological already. Finland evolved rapidly from and cultural factors, such as attitude an agrarian country exporting wood towards failures and taking risks. and pulp to a modern democracy Perhaps a change of attitude towards and an EU-member state with the US mentality, where liquidations entirely new industries, as probably and filing bankruptcy etc. are often 8 9
Employment Law GENERAL FEATURES OF FINNISH Jani Syrjänen EMPLOYMENT LEGISLATION Borenius
Finnish employment law regarded as an employee, and hence annual vacation rights of employees; consists of several mandatory the terms of the engagement may be and the Working Hours Act, which provisions for the benefit freely agreed. The key components governs the maximum working hours of employees. Therefore, of the mandatory employment and overtime and applicable CBAs. Fan employer cannot effectively legislation in Finland include the agree upon employment terms and Employment Contracts Act, which CBAs are common in Finland. They conditions with the employees, unless sets the minimum standards for all provide the mandatory terms and such terms will provide the employee employment relationships in Finland; conditions of employment for a higher level of protection than the the Annual Holidays Act, governing the employees working in particular minimum requirements provided by the law or the collective bargaining agreements (CBAs).
Finnish employment legislation is applicable to every employee working in Finland, irrespective of the domicile of the employer company. The only exception is a managing director (CEO) of a company who is not 8 About the author 9
Jani Syrjänen advises international and Jani is an accredited mediator of the Finnish domestic clients in all employment law and Bar Association and a frequent speaker about pension & benefits related questions including employment law issues at domestic and foreign also occupational safety, discrimination and seminars. immigration matters. Jani has extensive experience in litigating employment law Borenius Attorneys Ltd matters, negotiating and drafting top Eteläesplanadi 2 management agreements, company policies and procedures as well as advising employers 00130 Helsinki, Finland confronting a wide range of employment Tel. +358 20 713 3565 law issues including, inter alia, outsourcing, [email protected] reorganizations and redundancies. www.borenius.com
industries or with certain types of work. shall continue to perform his or her be raised by three month each year after CBAs generally provide benefits and duties and work tasks as usual and is 2017 until the pension age has reached rights greater than those granted by entitled to receive normal salary and 65 years. The new age limits affect those the employment legislation, such as other benefits. The employer may also born in 1955 and later. The plan is to link minimum wages and mandatory pay put the employee on the garden leave. retirement ages to changes in average increases. If an employee’s employment has been life expectancy. terminated on financial or production- related grounds and the employer A lower age limit for retirement will be needs new employees for the same or EMPLOYMENT defined for each age group as well as similar work within nine months after the a target retirement age. In the target AGREEMENTS AND termination, the employer shall primarily retirement age the retired will get their offer the work to the former employee TERMINATION OF pension benefits “in full” without making in case the said employee continues to a deduction by the life expectancy EMPLOYMENT seek work through an unemployment coefficient. The pension will start to office. accrue 1.5 % per year for employees of Employment agreements are concluded all ages after turning 17 years old. The either until further notice or, if there The employer is not liable to pay any pension contribution will no longer be is a justified reason, for a fixed term. A severance or other indemnification deducted from pensionable salary. trial period can also be applied. During to the employee if the termination the trial period, employment can be of employment has been lawful. terminated with immediate effect. Part-time pension will be removed and There is no obligation for reinstating However, there has to be an appropriate replaced with a partial old-age pension. the employment either. Therefore, reason for termination. The maximum Old-age pension can be taken in partial employer’s liability for damages length of a trial period is four months, payments when 61 years old. The taking arises only in connection with or half of the length of a fixed term of of partial old-age pension will reduce the unlawful termination. The amount employment in case it is shorter than final monthly pension. A so-called career of indemnification is maximum of 24 eight months. pension for employees who have had months’ salary of the employee in a strenuous and abrasive work career, question. In addition, the employer can both from demanding manual labour but Employment agreements may be termi- be ordered to pay the legal fees of an also from psychosocial factors involved nated by the employer only for personal, employee. in the work such as high attentiveness in financial, or production-related reasons high-risk environments, can be applied and only when there is an objectively jus- for after 38 years of work, but no earlier tifiable and weighty reason for doing so. REFORMS TO THE than age 63. Termination of employment “at will” is not allowed in Finland. FINNISH PENSION SYSTEM An increment for deferred retirements rewards people for extending their Termination shall become effective at In Finland, as in many other developed career beyond the set pension age. If the end of the applicable notice period. countries, increasing life-expectancy the pension is not taken into payment at The notice period can be agreed on, rates pose a challenge to the sustain- the lower age limit for old-age pension, and if not, vary between 14 days to 6 ability of the pension system. the pension will be increased by 0.4 % for months depending on how long the each month. employment relationship has continued In accordance with the agreement uninterruptedly. between labour unions in 2014 the pension reform has progressed to During the notice period, the employee parliament. The old-age pension age will 10 11
Tax Law 10 11
Sanna Lindqvist Krogerus
GENERAL FEATURES OF FINNISH In addition to the CIT, companies may be liable i.a. for CORPORATE TAXATION social security contributions on their payroll, municipal real estate tax, value added tax (VAT), and transfer tax on acquisitions of real estate or securities. The usual form of doing business in Finland is a limited liability company (fi: osakeyhtiö). Sometimes foreign enterprises start their activities in Finland with mere TAXABLE INCOME, DEDUCTIBLE EXPENSES branches. Both branches and limited liability companies AND LOSSES are treated as separate tax subjects (even though a branch is only a part of a legal entity). Limited partnerships Individuals and corporations with limited tax liability in are also used, especially for private equity fund activities. Finland (i.e. non-residents) are only subject to Finnish tax Limited partnerships are flow-through entities, i.e. profits on income which is sourced from Finland. of limited partnerships are taxed in the hands of their partners. It is advisable to consider and plan carefully the best suitable company form and structure already prior Individuals and corporations with unlimited tax liability in to entering into the Finnish market (or acquiring a Finnish Finland (i.e. Finnish residents) are generally liable to pay tax target). on all their worldwide profits (unless exempted by Finnish domestic law or restricted by an applicable tax treaty or EU legislation). Exceptions include, for example, the fairly When starting a business in Finland, the necessary tax broad exemptions applicable to dividends received and to registrations can conveniently be applied for in connection capital gains from share sales. with the start-up notification with the Trade Register.
As a general rule, expenses incurred in obtaining or Corporate profits are subject to national corporate preserving taxable income are deductible. As an example income tax (CIT), which is currently 20% (2016) calculated of the exceptions to this, deductible net interest expenses on the net profits. between related parties are limited to 25 % of a company’s EBITDA. However, restrictions on the deductibility of
About the author
Sanna Lindqvist Senior Associate
Sanna Lindqvist advises clients on domestic and international tax matters with emphasis on corporate income taxation, including tax planning, tax structuring and tax litigation. In addition to taxation, Ms Lindqvist has experience in matters related to fund formation and the Alternative Investment Fund Managers Directive (AIFMD). Prior to joining Krogerus, Ms Lindqvist worked for another leading law firm in Finland.
Krogerus Attorneys Ltd Unioninkatu 22 00130 Helsinki, Finland Tel. +358 29 000 6326, +358 44 544 2424 [email protected] www.krogerus.com 12 13
interest do not apply if interest expenses do not exceed with the general rule laid down in the Finnish-US tax EUR 500,000 or if the company’s equity ratio is equal to treaty, dividends received by a US recipient from Finland or higher than that of the entire group. are subject to a WHT of 15% (or 5% if the US dividend recipient holds at least 10% of the voting rights in the Finnish distributing company). If the net result of business income is negative, the ordinary loss may be carried forward to be used to offset business income for the following 10 tax years. In the case of royalties paid to the US, no WHT is However, direct or indirect changes in ownership may levied in Finland, provided the amount of royalty is at under certain circumstances result in forfeiture of the arm’s length. Interest paid from Finnish companies to carried-forward tax losses individuals or companies abroad is normally not subject to WHT in Finland.
REPATRIATION OF PROFITS AND CONSOLIDATION AND TAX COMPLIANCE WITHHOLDING TAXATION Consolidation for tax purposes is not recognized in Distributed dividends are subject to a withholding tax Finland. However, profits may be balanced between (WHT) which is (in 2016) in general 20% for corporate affiliated Finnish resident companies or a permanent entities and 30% for individuals, unless the dividends establishment located in Finland through group qualify for a domestic/EU exemption or a tax treaty contributions under fairly strict certain conditions provides for a reduced rate. For example, in accordance (including, for example, the ownership requirement of 12 13
at least 90%). A contribution qualifying as a group contribution between affiliated companies will be deducted from the taxable profits of the contributing company and is added to the taxable income of the recipient company.
Tax returns of corporate taxpayers are due within 4 months of the closing of the financial year. Companies must make advance payments (usually monthly) of their estimated taxes. The final assessment is issued by 31 October of the year following the tax year in question. Prepaid taxes are credited against final taxes and any deficit will be imposed and any surplus refunded with interest.
Taxpayers may apply for binding advance rulings from tax offices or the Central Tax Board in most tax-related matters in order to achieve certainty in the tax treatment of a question at hand.
TAX CHANGES FOR 2016
For 2016, fairly minor amendments to taxation were enacted. The total tax burden was intended to remain the same as before. Many of the changes related to personal taxation (e.g. increasing the higher tax rate on private individuals’ capital income from 33% to 34%). Some adjustments were also made to i.a. taxes on tobacco, waste and energy, car and vehicle taxation, and real estate taxation. No significant changes were made to corporate income taxation. 14 15
Sami Laine Environmental Krogerus Law
FINLAND CONTEMPLATES ENVIRONMENTAL REFORMS
Environmental Protection Act Reform
he Finnish Environmental Protection Act (527/2014, “EPA”) has the purpose of preventing environmental pollution. The act applies to all activities that cause or may cause environmental pollution. Along with a long list of other things, the EPA regulates whether or not your activity Trequires an environmental permit.
While few people are prepared to quibble about the need for a permit, businesses and investors operating in Finland have long complained about the burdensome nature of the process.
In response to public outcry, the EPA and the Environmental Protection Decree were both renewed in September 2014. The scheme for the reform was introduced in 2011 by the Ministry of the Environment and is still ongoing. The need for the legislative reform stemmed from the fact that the existing regulation had received criticism for being too heavy, unclear, and overlapping. One of the primary intents behind the reform was to enable more efficient environmental permit procedures without compromising the objectives of environmental protection.
The reform of the EPA is set in three phases. Because of the prompt timetable for implementing the Industrial Emission Directive 2010/75/ (“IED”), all the aspects of the reform could not be completed within the initial schedule. Accordingly, the reform was divided in three phases, of which the implementation of the IED was only the first one. Currently, the reform has already reached its third, and presumably final, phase.
Even though the target of the reform has been the renewal of the whole environmental protection legislation, this article will focus on potentially upcoming structural changes in the authorisation procedures. Basically, the primary target is to eliminate overlapping permit procedures, as well as to emphasise co-operation between authorities and applicants in project planning and execution. 14 15
Materialised changes of the phases of the reform so far
The main changes made in the first phase of the reform aimed at specifying the permit consideration of the whole permitting process, as well as making the supervision more organised and partially subject to a charge. The second phase is focused on reviewing ex ante control procedures, the verification procedures of environmental permits, and the possibility of more efficient usage of the environment impact assessment (“EIA”) when acquiring required environmental permits.
Perhaps one of the most significant changes of the first two phases has been the removal of regular permit reviews. From now on, the review of permit regulations will be initiated by the authorities, which should reduce the amount of work pertaining to permit processes compared with the preceding mandatory periodical review of the permits.
The third phase of the reform
The third and, currently, the last phase of the reform will concentrate on the restructuring of the permit processes. A working group set by the Ministry of the Environment has prepared several proposals for streamlining the processes. The working group released its proposals in March 2015. The initial assignment was to evaluate different ways to restructure and strengthen the permit and evaluation processes. The amendments based on these proposals are intended to be given in the autumn 2015. If the proposals go forward as planned, they could reduce the administrative burden for businesses that are subject to statutory environmental obligations.
The report of the working group notes that it is important to clarify the advantages and disadvantages of the combination of separate environmental permit procedures. In the future, permit procedures could possibly be dealt with a “one-stop-shop” principle.
For the time being, one project may require several parallel or consecutive permits and reporting procedures. This undoubtedly wastes resources of both project developers as well as the public authorities, for example, in the form of significantly exceeding procedure durations. In addition, the present field of different procedures is not the easiest one to understand.
One very important feature regarding environmental permitting would be the time-saving extension of leave of appeal system applicable to the environmental matters. Leave of appeal system enables rejection of an appeal in the Supreme Administrative Court in case the requirements for the review of the subject matter of the respective case are not met. It is our understanding that a leave of appeal is likely to be introduced more extensively in the field of environmental permitting, possibly in the near future. 16 17
CO-ORDINATION, COMBINING AND CO- OPERATION BETWEEN THE AUTHORITIES
At the moment, there is a certain overlap between Assessment (468/1994). different reports which the project developer has to With pre-negotiations, project developers and various produce. The aforementioned working group set by the authorities could shape a more complete idea of the Ministry of the Environment has suggested more efficient necessary procedures already in the early stage of co-ordination between the different phases of the project, the project. In general, the need to improve the pre- even to the extent of combining EIA and planning in cases negotiation relates to the aim of prompt processing of where they concern the same project. The idea is that the environmental permits, which would still be carried out in planning procedure could be performed as broadly as is a socially acceptable way that would not diminish the high required in an EIA. However, in cases where this would not standard of environmental protection. be possible, the supervisory authority would still have the means to require a separate EIA to be performed. One very important feature regarding environmental permitting would be the time-saving extension of The working group has further proposed, or at least leave of appeal system applicable to the environmental seen a possibility for, a similar co-ordination between matters. Leave of appeal system enables rejection of an EIA, Natura 2000 assessments, and environmental appeal in the Supreme Administrative Court in case the permit procedures. In addition to savings in resources, requirements for the review of the subject matter of the these changes could also improve the quality of nature respective case are not met. It is our understanding that a assessments and strengthen the possibilities for leave of appeal is likely to be introduced more extensively participation and availability of information. in the field of environmental permitting, possibly in the near future. Some of the proposals aim at simplifying the co- operation with the authorities. The working group has seen a lot of potential in pre-negotiations that could be formally introduced in the Act on Environmental Impact
About the author
Sami Laine Partner, Attorney at Law
Sami Laine specialises in corporate transactions and environmental matters. He regularly advises domestic and international clients on corporate projects ranging from technology intensive transactions to complex contractual arrangements. He also assists clients in evaluating environmental liabilities, land use issues, administrative process related to environmental laws, and negotiating transaction structures, indemnities and cost-sharing arrangements to allocate or mitigate environmental risks. Sami heads the firm’s environment and land use practice group.
Krogerus is one of the largest corporate law firms in Finland. Our practice covers a broad spectrum of transactional, dispute resolution and regulatory matters. We have a particularly strong focus in the energy, finance, food and beverage, healthcare, real estate, technology and telecommunications sectors.
Krogerus Attorneys Ltd Unioninkatu 22, 00130 Helsinki Telephone: +358 29 000 6200 Fax: +358 29 000 6201 Email: [email protected] 16 17
FASTER AND MORE FUNCTIONAL ENVIRONMENT ALSO FOR INVESTING?
With regard to timetable, one proposal suggests that the maximum time period of the co-ordinating authority to give a statement of EIA assessment programme should be cut down to one month. This is mainly because the EIA assessment programmes are usually much shorter than the assessment reports, but, at the moment, both statements must be provided within two months.
E-services development plays a key role in improving the procedures. Over the next few years, the digitalization of the regional environmental administration should be extended, not only to the rest of the state administration and appeal proceedings, but also to the respective municipal procedures.
All in all, the reforms should reduce the distance between the real-time functioning society and the traditional permission administration.
If the proposals will be brought into force, they have a potential to lower the threshold for entrepreneurs and investors to get involved with environmental procedures. Some of the proposals are implementable in the form of new legislation in a relatively short time, but others require further reporting that should be started as soon as possible.
In closing, it can be stated that during this challenging economic climate, when support for businesses is needed (while not compromising environmental safety), streamlining environmental permitting might be fuel for additional investments that may contain significant potential for boosting the economy. 18 19
The Wind Power Market in Finland
Heidi Malmberg Castrén & Snellman 18 19 The wind power sector has experienced an if the wind farm causes unreasonable harm to upswing during the last few years in Finland. neighbors, mainly due to noise and/or flicker However, the number of constructed, energy emissions. generating wind parks is still fairly low, though this is expected to increase during the next In August of 2015, the Finnish Government years. issued a decree on the Guidance Values for the Outside Noise caused by Wind Turbine LEGAL FRAMEWORK AND FEED-IN-TARIFF Generators (1107/2015). In the decree, the FOR ON-SHORE WIND FARMS daytime guidance value for noise was set to 45 dB, the nighttime value being 40 dB, but 5 dB From a legal perspective, the planning of an has to be added to the measuring result if the onshore wind farm usually starts with the noise is deemed as impulse or narrow-banded environmental impact as-sessment (EIA) and/ noise, resulting in an effective lowest limit value or land use planning procedure. In Finland, of 35 dB. The noise guidance values are applied an EIA is always required if 10 or more wind to projects that have entered into permitting turbine generators are to be constructed or if processes after the issuance of said decree. the nominal output of the wind farm is greater than 30 MW. The need for a case-by-case EIA Finland does not currently have limit values for smaller projects is evaluated by the regional for flicker emissions caused by wind turbine Centres for Economic Development, Transport, generators; the Finnish Ministry of Environment and the Environment. recommends that the Swedish, Danish, and German rules should be complied with, thus the Pursuant to the Finnish Land Use and Building limit is, in general, set at 8–10 hours per year. Act (132/1999, as amended), wind farms generally require a partial local master plan for Under the Finnish Feed-in-Tariff Act wind farms in accordance with Chapter 10a (1396/2010, as amended) the feed-in-tariff cap of the Land Use and Building Act. In addition, is set at 2,500 MVA and the target price is set at un-der the Land Use and Building Act, a wind 83.5 euros per MVAh. Currently (Autumn 2015), farm will require building permits for the wind there are applications pending in the feed-in- turbine generators and the substation. A wind tariff system for well over 2,500 MVA. farm may require an environmental permit under the Finnish Environmental Protection Act The Finnish Feed-in-Tariff Act is currently (527/2014, as amended) and the Act on Certain undergoing amendment. In particular, the Neighborly Relations (26/1920, as amended) Government would like to put an overall limit on
About the author
Heidi Malmberg Counsel, member of Finnish and New York, Bar, LL.M.
Heidi Malmberg focuses her practice on environmental law, energy law, natural resource law and traditional real estate matters. She has been involved in several infrastructure and industrial permitting projects, including the permitting of the Finnish leg of the Nord Stream pipeline and in numerous domestic and cross-border transactions. She is admitted to the bar in Finland and New York.
Castrén & Snellman Attorneys Ltd Eteläesplanadi 14 00130 Helsinki Telephone: +358 20 776 5408 Fax: +358 20 776 1408 Email: [email protected] 20 21 the validity of the quota decision, i.e. a decision In the appeals stage of the processes, there where by the operator is granted a slice of the have also been real leaps in the time taken by 2,500 MVA cap prior to being issued the actual the courts to process claims, at least in some acceptance into the Feed-in-Tariff system cases. Still, a two-year timeframe for appeals is decision, at two years or by the end of October not unheard of. 2017. The actual application for inclusion of the wind turbine generator into the feed-in- The amendments proposed to the Feed-in- tariff system has to be filed prior to taking the Tariff Act have resulted in a rush to apply for wind turbine generators into commercial use decisions to be included in the 2,500 MVA feed- and within two years of the issuance of the in-tariff quota. If the proposed amendments to quota decision or by the end of October 2017, the act are approved, the next two years will see whichever comes first. a sellers’ market for wind turbine generators, where some developers may be left empty LEGAL CHALLENGES handed.
As a developing market, Finland has been DEVELOPMENTS experiencing some growing pains, particularly in the land use planning and permitting phase. The offshore wind power market is still in early From the perspective of an attorney often development, with only a few near-shore representing players in the wind power sector, wind turbine generators up and running. The the main challenges lie in the limited resources Finnish pack-ice conditions, in particular, are available to municipal land use planners and hampering the development of offshore wind permit agencies. farms. The onshore wind farms that are up and running have not escaped the northern The second bottleneck is in the under- weather conditions either, and wind turbine resourced court system. In theory, the same generators may in Finland require slightly more project can be subject to sepa-rate appeals blade maintenance than their more southern more than three times during the development counterparts. phase. Particularly in the municipal sector, the learn-ing curve has been steep. We have also been seeing increasing interest, 20 21 particularly from the side of purchasers of development-stage wind farms and project finance banks, in end-of-lifecycle provisions for wind turbine generators and blades in the agree-ments bible. If the wind farm has been granted an environmental permit, the permit should also provide provisions regarding the ending of operations. Under the Finnish Land Lease Act (258/1966, as amended, see Chapter 5 for land lease agreements), the tenant is required to remove its property at the end of the lease term if not otherwise agreed with the landlord.
CONCLUSION
As an environmental and energy attorney, I am happy to see that Finland is moving towards a more diverse energy mix, in which renewables are going to play a large part. But it should also be remembered that we will still need our traditional fuels, including nuclear power, for a long time to come. It is important that the more traditional energy sector also experiences the same development hype regarding power generating capacity and emission reduction as the wind sector has experienced over the last few years.
The race for purchasing the best Finnish wind is on. If you want to jump on the train, you can’t wait long. 22 23 Marketing and Consumer Law
Markus Myhrberg & Petteri Günther. Lexia 22 23
Marketing Law in Finland
n Finland, marketing and consumer protection issues are to a great extent intertwined, and should be taken into consideration as a whole when planning marketing campaigns and other marketing activities. There is no single “marketing act” in force, but laws and regulations affecting marketing are rather scattered in various acts regulating certain Ispecific areas of economic activity. These include, among others, the Unfair Business Practices Act, Consumer Protection Act, industry self regulation, and ICC codes.
In B2B relations, the Unfair Business Practices Act is central as it sets the basic rules for marketing. The starting point is that businesses are required to adhere to “good business practices” and not to engage in practices that are unfair to other entrepreneurs. This basically means that a false or misleading expression concerning your own or another’s business may not be used in business if such “expression is likely to affect the demand for or supply of a product or harm the business of another.”
Further, the “commercial purpose” of any marketing, as well as the identity of the marketer, must clearly appear from the marketing. This principle is also expressed in consumer protection legislation relevant to B2C relations. The Consumer Protection Act is applicable when a consumer (a private person) purchases products or services from a trader for private use.
The second chapter of the Consumer Protection Act contains provisions related to the regulation of marketing following the EU Unfair Commercial Practices Directive. The general rule here is that “no conduct that is inappropriate or otherwise unfair from the point of view of consumers shall be allowed in marketing” and that “marketing must clearly show its commercial purpose and on whose behalf marketing is implemented” as well as that “false or misleading information shall not be conveyed in marketing”. Specific provisions prevent exploitation of vulnerable consumers, such as children, and prohibit aggressive marketing.
As a general rule it may be concluded that advertisers must comply with good advertising practices, such as the values prevailing in the society, and that companies doing marketing must not convey false or misleading information to consumers. The Council of Ethics in Advertising is a self-regulatory body operating in connection with the Central Chamber of Commerce. The council issues statements with regard to good advertising practices.
The Finnish Competition and Consumer Authority (FCCA) / Consumer Ombudsman oversees marketing conduct in the Finnish market and takes measures, where necessary, to ensure compliance with the applicable rules. The Consumer Ombudsman does not primarily resolve individual disputes where the consumer is seeking reimbursement for an error with a product or service. These cases are handled by consumer rights advisors and the Consumer Disputes Board. The Consumer Ombudsman may also refer group complaints to the Consumer Disputes Board for resolution or initiate class actions. Only class actions initiated by Consumer Ombudsman are possible in Finland. The consumer Ombudsman may impose a prohibition reinforced with a penalty payment. The prohibition is ordered by the Market Court, based on the application submitted by the Consumer Ombudsman. The Market Court is also the venue for the prohibitions under the Unfair Business Practices Act. 24 25
Direct (Electronic) Marketing
irect marketing is always a topical issue for businesses marketing their products and services to consumers. As a general rule it can be said that in Finland consumers may refuse direct marketing addressed to them and especially for sending any electronic direct marketing, the recipient’s permission is required, Dsave for certain limited exceptions.
If the company sending direct marketing messages to consumers via e.g. e-mail, SMS, or MMS has not acquired advance permission from those to whom such marketing is sent, this will result to breaching the provisions of the Information Society Code. The provisions in the Code state, for instance, that electronic direct marketing “may only be directed at natural persons who have given their prior consent” (the opt-in principle applies) but direct marketing sent by mail is allowed if the recipient has not specifically prohibited it (the opt-out principle applies). The Data Protection Ombudsman oversees that the companies act in compliance of these provisions.
As an exception to the general rule, companies may send electronic direct marketing without advance permission from the consumer in the following exceptional circumstances:
1. It has received the contact information in conjunction with customership and the message only markets products or services that are similar to the product or service purchased at the time the company received the contact information. 2. The consumer was informed at the time that the company may send electronic marketing messages. 3. The consumer was informed that he has the right to refuse such messages.
In B2B relations, the “opt-out” principle shall apply to all direct electronic marketing related to the receiver’s position in the business.
The marketing registers including personal data are covered by Personal Data Act (Henkilötietolaki) based on the EU Data Protection Directive.
The new Finnish Information Society Code (Tietoyhteiskuntakaari) en- tered into force on 1 January 2015. The underlying idea is, among others, to gather laws that touch upon information society services into one act, including legislation dealing with electronic marketing and cookies, as well as to improve consumer protection. The Code e.g. includes provisions on the rights of users of online services, the protection of privacy (ePrivacy), and confidentiality of communications. 24 25
Blogging
logging has also gained ground in online advertising. In this regard Finland has followed the trend where content produced by non- professionals is rising in importance. In e.g. the USA the FTC has adopted their “endorsement rules” (Guides Concerning the Use of BEndorsements and Testimonials in Advertising) that apply to bloggers, and also in Finland the Consumer Ombudsman recently found it necessary to introduce rules for advertising in blogs. The general rules with respect to advertising and marketing apply also in this case. When marketing is conducted, the company or person communicating the marketing messages to the public must clearly show the commercial purpose. Commercial messages may not be hidden in communications so as to mislead recipients of such messages as to the nature of such communications. A blogger may accept payment or other compensation for advertising a product for a company. It is also acceptable for companies to send products to bloggers in hope of the bloggers featuring those products in their blogs.
The rules are not binding on private persons who blog as a hobby (amateur bloggers). Regardless of this, the Consumer Ombudsman advises amateurs to observe the rules on recognizable advertising so that readers won’t be exposed to subliminal advertising.
Companies that advertise their products through a blogs are obligated to comply with the provisions of the Consumer Protection Act. In practice this means, that a company should instruct the blogger to act transparently, in a way that no subliminal advertising is practiced.
About the authors
Markus Myhrberg Petteri Günther Partner, Attorney at Law Senior Associate, Attorney at Law
Markus Myhrberg is the head of Lexia’s IP, Petteri Günther is Senior Associate at Lexia Technology and Media practice. His main focus is Attorneys Ltd. Petteri mainly advises clients in on IP intensive industries, including software, media media, entertainment and IT industries – and & entertainment, marketing, creative industry specializes in intellectual property law and and other innovative industries such as cleantech privacy. and mobile industry. He also advises on Marketing and Company law, Privacy matters, Contracts and Financing – especially Venture Capital and Crowdfunding.
Lexia Attorneys Ltd Kalevankatu 20, 00100 Helsinki Telephone: +358 10 424 4200 Fax: +358 10 424 4210 Emails: [email protected] [email protected] 26 27 Real Estate Ownership Rami Laatsalo Castrén & Snellman
Typically, real properties are and is able to lease such estate in Finland is equal to owned either directly (i.e. premises and, consequently, 2 percent of the purchase freehold) or indirectly through is entitled to rental income for price of the shares plus a a limited liability company. such premises directly. pro rata amount of possible Direct ownership means that shareholder loans and debt owners of the real property In contrast, shares in RECs do share of the MREC. In addition, hold the respective land not provide a right to occupy the basis for calculating the and the buildings situated a specific area or space transfer tax takes into account thereon. Finnish legislation of building or real estate. liabilities transferred to the also recognizes ownership Accordingly, the REC, in its purchaser and benefiting the which is limited to only the capacity as landlord, enters into seller. Typically, the purchaser buildings with the underlying lease agreements with tenants pays the transfer tax, but it is land being leased from the and it is entitled to the resultant possible to agree otherwise. landowner (i.e. leasehold). rental income. Maintenance In addition to transfer tax, The majority of commercial and operative costs of RECs the holders of real estate property transactions in the are borne by the REC and and buildings, except for Finnish market are effected are usually financed through agricultural land, woodland, by exchanging the ownership rental payments and possible and forests, are liable to pay of shares of limited liability capital contributions from the real estate tax, the amount of companies. shareholders. Contrastingly, which generally varies between in an MREC such costs are 0.8 per-cent and 1.55 percent There are two types of covered by the maintenance of the taxable value of real real estate companies: the charges payable by the estate and buildings. The exact ordinary real estate company shareholders, in accordance real estate tax percentage is (REC) and the mutual real with the resolutions of the decided by each municipality estate company (MREC). Both general meeting of the MREC independently. The obligation the REC and the MREC forms applicable from time to time. to pay real estate tax also are limited liability companies, applies to non-resident which administer real property owners. and buildings by virtue of their TAX ownership of such or by virtue Transfer tax is payable for of a land lease agreement. The RENTAL the transfer of real estate difference between RECs and and of shares in real estate AGREEMENTS MRECs is that, according to companies. The amount of the articles of association of FOR COMMERCIAL transfer tax levied is 4 percent an MREC, a share in an MREC of the purchase price paid PREMISES carries a right, solely or jointly when real estate (i.e. land with other shares, to occupy Finnish legislation regulating and buildings) is acquired. a specific area or space of rental agreements for The transfer tax payable on building or real estate owned commercial premises is liberal the shares of an MREC, REC, by the MREC. Therefore, and the contracting parties or holding company whose a shareholder of an MREC can freely negotiate the assets are directly or indirectly possesses certain premises terms of the lease (including comprised mainly of real 26 27 the amount of rent and rental transactions has increased for foreign investors, but it is responsibilities of the parties). substantially, whereas the worth noting that, if the area There are, however, some share of office properties has of the real estate exceeds mandatory provisions arising seen a decline. During 2014, 5,000 square meters, the from the Finnish Act on the logistics properties accounted Finnish municipality where Lease of Business Premises, for 31 percent of the total the re-spective real estate such as a prohibition against transaction volume (due to is located has a right of first restricting a tenant’s right to certain significant deals in the refusal to purchase real estate set off or to terminate the lease course of the year), followed upon the same terms and due to a defective condition of by retail (24 percent), office conditions as the proposed the object of the lease. As a (21 percent) and residential (17 purchaser. Furthermore, if the general rule, lease agreements percent) proper-ties. Despite real estate is situated in the are either valid until further continuing uncertainty in the Helsinki Metropolitan Area, the notice or for a fixed period, but Finnish economy, during 2015 threshold which triggers the a mixture of these two can be transaction volumes appear municipal right of first refusal used. to have re-mained high and is 3,000 square meters. It is amounted to EUR 2.6 billion possible to seek a waiver of the for the first half of the year. said right from the respective REAL ESTATE Geographically, real estate municipality. Additionally, MARKET IN transactions are strongly it should be noted that the concentrated in the Helsinki municipal right of first refusal FINLAND Metropolitan Area (i.e. the only applies to the acquisition cities of Helsinki, Espoo, of real estate, whereas the KTI Property Information Ltd, Vantaa, and Kauniainen). Other acquisition of shares in a real a Finnish property-research major cities such as Tampere, estate company does not organization, estimates Turku, and Oulu generally trigger the mu-nicipality’s that the size of the Finnish show clearly lower, but still right. proper-ty-investment market noteworthy, levels of real- is approximately EUR 50 estate investment. billion. Traditionally, domestic institutional investors (in particular pension insurance FOREIGN About the author companies) have dominated the market, but international INVESTORS Rami Laatsalo investors also have a notable Generally, in Finland there Partner, Attorney at Law and in-creasing degree of are no restrictions on the participation in the market. Rami Laatsalo specializes in real acquisition of or holding In 2014, several new foreign estate transactions, mergers and of real estate or shares in investors entered the Finnish acquisitions and private equity real-estate companies by transactions. In addition, he advises market and the share of foreign foreign entities or individuals. companies in property development investors amounted to one However, real estate located projects and in a wide array of real third of the total transaction estate matters, such as lease and land in the autonomous province volume. Swedish and German lease agreements and day-to-day of Åland is restricted such that investors were the most active property and asset management. He only persons with a legal right has extensive experience in real estate international players. The total to reside in Åland have a right portfolio transactions and sale and transaction volume in 2014 to possess or own such real lease back arrangements. rose markedly to EUR 4.3 estate. billion in comparison to EUR Castrén & Snellman Attorneys Ltd 2.4 billion and EUR 2.1 billion in Eteläesplanadi 14 Finnish legislation does not 00130 Helsinki 2013 and 2012, respectively. impose any specific notification Tel: +358 20 776 5289 In recent years, the share of or reporting requirements Fax: +358 20 776 1289 residen-tial properties of all Email: [email protected] 28 Investment Funds 29 & Investment Firms
Keith Kessel Procopé & Hornborg
BACKGROUND
The investment market landscape continues domicile, but you nevertheless want to access to change and impose new requirements and the EU, then you should evaluate where to enforcement priorities for individuals and firms establish such Funds elsewhere in Europe, and, raising capital. In 2014, Finland reined in its upon such establishment, get them approved Alternative Investment Fund regime and made or authorized to conduct business in Finland as several significant changes to the historical necessary or desirable. Doing so would enable regulatory approach in Finland. As with many the Fund’s portfolio manager to access the industries, firms raising capital and forming investment and capital markets in Finland, as well investment funds generally must be registered as the industries that generally flourish and are in the appropriate capacities. Moreover, although particularly well-supported in Finland through regulatory differences continue to exist between industry, governmental or quasi-governmental the US and Finland/EU, there has increasingly institutions. In the country where the business been a convergence of many of the regulatory landscape is punctuated by the achievements approaches. of information and information communication technology, clean technology, biotechnology Establishing your own investment fund in and, more recently, social networking and gaming Finland would be analogous to setting up your platforms/applications, there are compelling own mutual fund, hedge fund, or private equity target company opportunities. fund (“Funds”) in the US. Establishing your own investment firm in Finland would be analogous in INVESTMENT FUNDS the US to setting up your own broker/dealer or investment adviser. Finnish investment funds can be either Funds Such Funds can raise capital for investment into (ordinary investment funds) that are covered by target companies. There are many reasons the EU UCITS Directive (“Directive”) or Funds to establish a Fund in Finland, including the that do not comply with the standards of the technologically-developed market fueled by Directive, but are covered by the Alternative great educational institutions, entrepreneurial Investment Fund Managers Directive (“AIFMD”). spirit, and an amount of government and quasi- While the Directive and AIFMD establish government funding that is relatively easier to the framework for the Financial Supervisory obtain than anything comparable in the US. Authority of Finland (“FSA”), Finnish legislation establishes and will continue to establish more If you decide not to use Finland as your EU detailed requirements. 28 29
PUBLIC FUNDS
Public investment funds are generally considered to be Undertakings for Collective Investments in Transferable Securities (“UCITS”) and must be registered with the local Finnish authorities in a similar way that mutual funds in the US must be registered. There are numerous requirements that are beyond the scope of this article, but suffice it to say that they include the substantive regulations governing private funds and other regulations unique to UCITS. The greater ease of marketing UCITS as compared with Alternative Investment Funds is offset by greater regulations and capital requirements of UCITS. If a UCITS is the right approach for you, but Finland will not be your EU domicile, then the UCITS must submit the notification letter with its document annexes concerning the commencement of marketing in Finland to the competent regulator of its EU Home State. The notification letter
FINNISH INVESTMENT FUND
Investors in Fund
IT/ICT Gaming Tech. App. CleanTech Sectors Sector Sector Sector
Company Company Company Company 1, 2, 3, etc. 1, 2, 3, etc. 1, 2, 3, etc. 1, 2, 3, etc.
Shareholders and Other Investors Government & uasi-Government & Of Fund’s Portfolio Companies Private Grant Groups
must be prepared in accordance with the standard model in the English language and submitted in an electronic format. The UCITS may commence marketing of its units in Finland as of the date when the competent authorities of its Home State have informed the UCITS that the documents referred to above have been delivered to the FSA. 30 31 PRIVATE FUNDS
Funds that are not UCITS are generally EU Member States as their business requires. considered Alternative Investment Funds. Although separate marketing regulations apply AIFMD and the Finnish AIFM Act regulates the regardless of whether a firm currently has any management and marketing of alternative investment clients, marketing of client prospects investment funds offered to investors. The for investment capital is one such activity that regulations apply to different types of market serves as an indicator of whether such firms may participants who, for example, manage hedge be engaged or imminently engaged in a regulated funds, private equity funds, real estate funds and activity requiring registration. Once registered, commodity funds. The regulations address the regulations govern risk management, audit, following requirements: compliance, conflicts of interest, agents of the firm, outsourcing, governance functions, trading practices, investment management, etc. Once a • Risk Management & Liquidity Management firm has become registered to conduct business • Separate Securities Depository Account in Finland, then it can sell investment products Required for Each Fund to the Finnish investors. Notably, one can form • Arrangement of Yield Calculations UCITS or Alternative Investment Funds in Finland without necessarily having a Finnish investment Reporting of Data to Supervisory Authorities • firm, provided those Funds do not sell other • Disclosure of Investor Information investments and do not charge brokerage or placement agent fees for the purchase of such While the disclosure regulations are not as investment. onerous as Form PF utilized in the US, several disclosure requirements exist. SUMMARY Master-feeder structures are currently possible for special investment funds and have been Establishing a Fund and/or an Investment Firm in used extensively for investing in foreign stock Finland can position its stakeholders to capitalize markets. Funds of funds are permitted in Finland upon various sectors that are very competitive for Alternative Investment Funds, but not UCITS. from an international perspective. Scouting Other requirements exist for operational risk companies in Finland makes sense for those management, insurance, capital requirements, who envision exit strategies in the US for certain etc. Permission is required for marketing to Finnish companies, particularly when there either professional investors or retail investors, are solid Intellectual Property Rights, coupled but marketing to retails investors is naturally with a financing strategy that fuels companies more restrictive and requires a key investor to attain their commercial potential in the US information disclosure. or globally. Significant government and quasi- government funding in Finland for the portfolio companies, coupled with financing from a Fund INVESTMENT FIRMS with international affiliates, relationships and perspectives, provide a gateway to transforming Investment firms that establish an office in the EU Finnish companies into global businesses that must be registered in their Home State, and be can better capitalize upon a global investment qualified by notification (“passported”) into other market and achieve greater success. 30 31
About the author
Keith Kessel Specialist Counsel
Mr. Kessel is an attorney of the law to companies in Finland and abroad. and tax law. Procopé Private also firm of Procopé & Hornborg Oy. He We seek to add value to our clients’ advices associations and foundations. specializes in business law, including businesses. We provide legal advice in the corporate finance, private a competent and dedicated manner equity, venture capital, mergers regardless of the size or nature of & acquisitions, financial services the matter or the client. We invest industry laws and compliance in a customer-oriented approach, regulations and company law. competent people and efficient Procopé & Hornborg Mr. Kessel has a commitment to service. Keskuskatu 8 customer service and looks forward 00100 Helsinki to helping you with your business. Procopé Private provides personal services for private individuals in Tel: +358 10 3090 336 Procopé & Hornborg provides matters relating to family law and Fax: +358 40 8338 020 high-quality professional services inheritance law, wealth management Email: [email protected] 32 33
The Innovation System
Markus Myhrberg & Petteri Günther Lexia 32 33 RESEARCH ENVIRONMENT
In an international comparison, Finland is among Innovation (www.tekes.fi). Another good resource for the most research intensive countries. Total annual foreign companies or investors interested in Finland is spending on research and development, according Invest in Finland (www.investinfinland.fi), a web-based to Statistics Finland, amounted to EUR 6.68 billion in resource supplying data related to e.g. knowledge- 2013, which translated to approximately 3,3 per cent driven investments. of the Finnish GDP. The significance of recognizing and putting commercially viable ideas into practice has INNOVATION, INCENTIVES & IP been identified as a national priority, and cooperation between companies, universities, and research institutes in the form of various partnerships is an For research, development, and innovation, Tekes is integral element of innovativeness in Finland. the most notable public funding organization in Finland. They provide funding and expert services and create networks between companies and researchers. Each Technology is one of Finland’s most important industrial year, Tekes grants over EUR 500 million for innovative sectors and, according to the Federation of Finnish projects. According to Tekes, they want to promote Technology Industries, it accounts for some 55 per cent wide-ranging innovation activities, and “besides funding of total Finnish exports, as well as 80 per cent of R&D technological breakthroughs, Tekes emphasizes the investments. Especially during the past few years, the significance of service-related, design, business, and Finnish game industry has seen rapid growth, and the social innovations.” figures for 2013 value the entire branch at approximately EUR 2,2 billion (Neogames Finland – www.neogames. fi). As a practical matter, www.research.fi, a portal Already in 2009, Finland received a national intellectual dedicated to science and technology issues in Finland, property rights strategy. The objective of this is a good starting point to gain insights on Finnish governmental IPR strategy is to develop, in Finland, science and technology as well as recent developments a business environment which more efficiently takes and topical issues in that field. The site is maintained into account the significance of intellectual property. by the Ministry of Trade and Employment (TEM) and The strategy was updated in 2014 and aims to secure Tekes – the Finnish Funding Agency for Technology and Finland being a competitive and stable environment for IP related domestic and international investments. 34 35
IP PROTECTION
Protecting intellectual property rights – the protection With respect to copyright, it should be noted that one generally granted to proprietors of inventions and cannot register copyright in Finland, and there are no innovations – has been a traditional area of international statutory damages available which would be subject to cooperation. From the Finnish perspective it can be said such registration. that the country is a signatory to all major International Recent developments in this area have focused on IP treaties, and the level of protection for intellectual international cooperation in intellectual property issues. property is on par with all EU states. In addition to Besides EU-level harmonization, the protection of multilateral treaties, such as the WTO TRIPS, several intellectual property is closely related to trade policy EU directives include provisions on the protection of issues. intellectual property. Those instruments cover e.g. the World Intellectual Property Organization (WIPO), the WIPO Copyright Treaty (WCT), and the WIPO IP ENFORCEMENT Performances and Phonograms Treaty. The Market Court (markkinaoikeus) hears all civil matters Trademarks are available for registration as purely over intellectual property rights as the court of first domestic trademarks, giving the proprietor an exclusive instance. This has been the case since 1st September right to use the mark as a symbol for goods or services 2013, when it was made the centralized court for IPR in Finland. EU-wide community trademarks (CTM) are disputes in Finland. The court now operates as the first also available, and give geographically broader protection instance, in addition to IPR-related civil matters like when using a mark as a symbol for goods or services patent, utility mode, also in cases involving marketing and outside Finland. The same applies also to design rights competition disputes and public procurement matters. protecting the appearance of the whole or a part of a product. It should be noted, however, that that the reform has not affected criminal matters – those are still heard by The basic underlying idea in patenting is to promote the district courts. The Helsinki district court will have inventiveness by granting temporary exclusive rights, and the exclusive jurisdiction over criminal proceedings over also to encourage businesses to exploit these inventions. industrial property rights-related matters, but all district In Finland, patent protection is very much on par with courts will hear criminal cases over copyright issues. This other highly industrialized countries and the worries of, reform made Finland the first Nordic country to have a especially, the innovative pharmaceutical industry have court specialized in IP matters. been resolved. 34 35
The Finnish legal system provides a fairly predict- able environment for the corporate lending business. This article introduces certain key legal aspects related to corporate lending in Finland.
Banking and Finance
NO EXCHANGE CONTROLS OR Tommi Elo RESTRICTIONS FOR FOREIGN LENDERS Merilampi
There are no exchange controls applicable to payments provided by means of a floating charge or a pledge. from Finland to a foreign lender under a loan agreement, Because in most cases transfer of possession is required security document, guarantee undertaking, or similar to perfect a pledge (i.e. make it effective against third instrument. The making of loans by foreign lenders or parties) and such transfer is usually difficult to perform, a granting security or guarantees to foreign lenders are pledge of tangible movable assets is rather exceptional in not subject to any restrictions or permissions. However, corporate lending business. lenders that are licensed as a credit institution or similar institution are subject to specific regulations relating to A floating charge covers movable property of a business their cross-border operations that are harmonized within that cannot be mortgaged otherwise. Within the security the European Economic Area. provided by floating charge are assets such as equipment, machinery, and other similar movable fixed assets, SECURITY intellectual property rights, lease rights and other specific rights, raw materials, and inventories. The movable assets that can be mortgaged otherwise are e.g. certain motor There are various types of security available to be vehicles, ships and aircraft. The assets under floating deployed in corporate lending. The usual forms of security charge may be used by the pledgor in the ordinary course are pledges over real property and tangible movable of business and no transfer of possession to the pledgee property. is needed.
The security interest that can be granted over real property Security can be enforced if and when the secured is a pledge. A pledge of real property is implemented by unpaid liability becomes due and payable. Methods of pledging one or more deeds of pledge secured by a real enforcement available vary between the types of security. property mortgage.
As for real property and/or assets subject to floating Security interest over tangible movable assets can be charge, the pledgee must either obtain a court judgment 36 37
for execution by the execution amount (plus interest and such assets. authorities or, when the pledgor’s collection costs) of the floating assets are liquidated by the charge promissory notes. Registration of real estate mortgages, bankruptcy administration, submit a 4. Unsecured debt, pro rata to the floating charges as well as mortgages claim to such administration. As for debt owed to each creditor. in respect of motor vehicles, ships tangible movable assets not subject 5. Certain subordinated creditors and aircraft and pledges of intellectual to floating charge, certain legal defined in the Creditors’ property are subject to registry fees formalities apply. However, because Priority Act (laki velkojien that are fairly low and are not based those formalities can be excluded maksunsaantijärjestyksestä, on the value of the security or the by contract, it is often agreed that 1578/1992), such as loans and secured liability. the pledge can be enforced at the mass debt instruments issued by creditor’s discretion by selling the the debtor that are subordinated asset in a manner deemed appropriate In Finland, there are no notary to the other creditors. by the pledgee. fees, but court costs and certain professional fees may be payable. ORDER OF PAYMENTS AT The priority rankings between deeds INSOLVENCY of pledge reflecting registered TRANSFERRING OF mortgages over the same real RECEIVABLES property are registered in the In bankruptcy proceedings or at Register of Land Ownership and recovery of debt by an enforcement Mortgages. Respectively, the priority Unless otherwise provided in the order, a debtor’s debts are repaid in rankings between floating charge relevant finance documents, loan the following order of priority until all promissory notes over the same receivables, together with any available funds have been used: business are registered in the Floating related security and guarantees, can Charge Register. Unless otherwise be transferred to third parties and agreed between holders of pledges traded without prior permission by 1. Debts secured by mortgages or over movable property, the pledgee the debtor, guarantor, or provider of pledges or owed to a lienholder. with the earlier perfected pledge has security. These debts are paid from the priority over any subsequent pledge. proceeds of sale of the asset subject to the mortgage, pledge Transfer of a receivable is perfected or lien, without sharing such If the formalities for perfection are by notifying the debtor thereof by proceeds among the other not complied with, a security interest the assignor. Assignment of the creditors or with the bankruptcy is deemed null and void and the security interest may be subject to estate. relevant creditors rank the same as specific perfection requirements. 2. Certain debts incurred by other unsecured creditors in priority. The measures needed for the the business during debt perfection may comprise e.g. delivery restructuring under the Act on TAXES AND FEES of the deeds of pledge for a real Restructuring of Companies if the property mortgage or floating charge debtor was placed in bankruptcy promissory notes or transfer of before the termination of the No documentary taxes, stamp duties, possession of other movable tangible restructuring program or within or any other similar taxes are payable assets to the assignee. three months of its termination. when establishing or enforcing a loan or security. However, at enforcement 3. Debts secured by floating Usually, a borrower and/or a of pledged shares or real properties, charges—however, only up to guarantor or a provider of the security an asset transfer tax must be paid the lower of (i) 50% of the value is requested to give a separate at the rate of 1.6%, 2.0%, or 4.0% of of assets subject to the floating acknowledgement in relation to the the purchase price, but such tax is charge and (ii) the nominal transfer. basically payable by the purchaser of
About the author
Tommi Elo Partner
Tommi Elo focuses on banking and finance, real estate and Merilampi Attorneys Ltd. securities transactions as well as mergers and acquisitions. He has Lönnrotinkatu 5, 00120 Helsinki been involved in numerous domestic and cross-border financing, Tel: : +358 40 580 3719 real estate, M&A and capital markets transactions. Additionally, Fax: +358 96 864 8484 Tommi is experienced in insider issues and various licencing and Email: [email protected] other regulatory processes related to financial markets. 36 37 ALTERNATIVES FOR LEGAL ENTITIES Choice of
Many different factors may affect the choice of legal entity in Finland, for example Legal Entity the permanent establishment of the entity from the tax and accounting point of view, the structure, or the field of business of the establishing foreign trader. In addition, the Maria Parker, Taitokaari Oy & Milla Kokko-Lehtinen. PwC simplicity to establish and dissolve an entity or the possible responsibility questions may play a significant role in the process.
A foreign organization or foundation may choose to carry out its business in Finland as a private entrepreneur or in a form of a company, either as a general partnership, About the authors a limited partnership, a company limited by shares (“limited liability company”), or a Maria Parker co-operative. In addition, the foreign trader General Counsel may establish a branch in Finland for its business. Maria Parker has over 19 years of experience as a legal Most foreign traders carry out their business advisor, in mergers and acquisitions, business law and in Finland through subsidiaries (typically contract drafting. She acquired her Master of Law degree limited liability companies) or branches, in 1987 and received the honorary title of Deputy Judge in depending on which kind of legal form 1989. the trader considers the best. The main distinction between these two alternatives Taitokaari Oy is that a branch is merely an extension of Kaskimäenkatu 1, 33900 a trading activity of the overseas parent company and does not form a separate Tampere legal entity. A subsidiary, on the other hand, Tel. +358 33 579 300 is a separate legal entity from its parent www.taitokaari.fi company and acts on its own behalf and in its own name. Milla Kokko-Lehtinen FINNISH TRADE Manager, Legal Services Milla works at PricewaterhouseCoopers Oy’s Legal REGISTER Services as a manager. She specialises in Company law; Corporate law and foundations law, Corporate structuring After choosing the most suitable and business reorganisations; mergers, demergers, alternative for business, the legal entity is business transfers as well as accounting and audit law. registered to the Finnish Trade Register, which is maintained by the Finnish Patent and Registration Office. It is a nation-wide PwC Oy public register of all business undertakings Itämerentori 2, 00100 that carry on business in Finland. The Helsinki Finnish Trade Register contains all the Tel. +358 20 787 7390 official details of such undertakings. Fax: +358 9 657 120 www.pwc.fi 38 39
ESTABLISHING A SUBSIDIARY
A subsidiary company (a limited liability company) is established by drafting the necessary corporate documentation (for example Memorandum of Association and Articles of Association) and by submitting a start- up notification to the Finnish Trade Register. The new Finnish Patent and Registration Office may, however, subsidiary validly exists after the registration is completed. grant an exemption to this requirement.
In regular businesses, there are no restrictions based on A subsidiary must have a representative domiciled in the place of residence or registered office, or citizenship, Finland if none of the members of the Board of Directors, when it comes to the right to own the shares of limited the Managing Director, or the persons authorised to liability companies. The shareholders of a company do sign the trade name are domiciled in the EEA. The not need permission from the Finnish authorities for the representative is a person who is entitled to receive ownership of shares. summons and other notifications on behalf of the trader.
The Articles of Association has a significant role in the subsidiary company. For example, the representation ESTABLISHING A BRANCH OF A rights of the members of the Board of Directors or the Managing Director or granting other signatory rights may FOREIGN TRADER be defined more carefully in the Articles of Association. A branch of a foreign trader is a part of a foreign The General Meeting of the Shareholders is the supreme organization or foundation that runs a continuous governing body of the subsidiary company. Each business or trade in Finland from a permanent place of shareholder has the right to be present, the right to have business also located in Finland, however, in the name and a matter handled by the general meeting, and the right to for the benefit of the foreign organization or foundation. consult legal counsel at the meeting. The branch is established by drafting the necessary The subsidiary company has a Board of Directors and corporate documentation and by submitting a start-up it may also have a Managing Director, which both may notification to the Finnish Trade Register. In addition to the represent the company and sign its trade name in matters information that is generally required for the registration, belonging to their competence. If the Board of Directors if the trader is from a country outside the EEA, the trader has less than three members, it shall have at least one will also need to apply for a permit from the Finnish Patent deputy member. At least one of the ordinary members and Registration Office for establishing the branch. The (as well as at least one of the deputy members) shall be branch has to be registered in the Finnish Trade Register resident within the European Economic Area, EEA. The before starting its operations. 38 39
A branch of foreign trader has to register also a representative who is entitled to receive notifications on behalf of the trader. If the foreign trader is founded under the legislation of a country belonging to the EEA and has its registered office, its central administration or head office in a country belonging to the EEA, the representative must be resident in the EEA. In other cases, the representative must have a place of residence the company has a dependent agent in Finland, who has in Finland. the authority to enter into contracts and to receive and fulfill orders, and who uses this authorization regularly. PERMANENT ESTABLISHMENT IN If the company is treated as having a permanent establishment, the main rule is that the foreign trader FINLAND must pay income tax to Finland, become VAT registered, and comply with the same employer obligations as other The foreign trader may also conduct its business activities businesses in Finland. Some exceptions, however, exist. in Finland without establishing any legal entity. However, in In case of having a permanent establishment in Finland, it certain situations the company may be tax-wise treated may be more advisable for the foreign trader to establish as having a permanent establishment in Finland, for the legal entity. It is extremely important to seek tax example if the fixed place of business in Finland is where advice before setting up. the management and business administrations are, or if 40 41 Antitrust
Ami Paanajärvi & Christian Wik Roschier
About the authors
Ami Paanajärvi Principal associate
Ami Paanajärvi is specialized in EU and competition law. She has extensive experience in antitrust proceedings before the European Commission and the Finnish competition authority, and regularly advises clients in all types of competition law issues, particularly related to behavioral antitrust, merger control and dominance issues. She is recognized as one of the leading experts in her field in Finland (e.g. by Chambers Europe). Before joining Roschier in 2006, Ami worked for the law firm Stibbe. She is also a member of the New York Bar.
Christian Wik Partner
Christian Wik is Head of the firm’s EU & Competition practice. He has comprehensive experience in cartel investigations, advising on dominant Roschier Attorneys Ltd. market position claims and multi-jurisdictional merger filings, both on national Keskuskatu 7, 00100 Helsinki and EU levels. He regularly advises clients in all competition and antitrust related Tel: : +358 20 506 6000 matters as well as in joint ventures and M&A projects. He is recognized as one Fax: +358 20 506 6100 of the leading experts in his field in Finland (e.g. by Chambers Europe, Chambers Emails: [email protected] Global, The Legal 500 and Who’s Who Legal). Christian joined Roschier in 1986 [email protected] and became Partner in 1993. 40 41
Antitrust principles, or competition obtaining, delivering or providing INCREASE IN CARTEL FINES law as it is more commonly known, goods or services in exchange for IMPOSED BY THE FINNISH can in Finland be divided roughly into remuneration. The Competition COURTS two subareas: i) merger control and Act is not applied to activities or ii) antitrust, which can be further agreements between companies The most recent high profile divided into the prohibition against belonging to the same group. cartel cases have provided a clear anti-competitive agreements and message from the FCCA and the the prohibition against abuse of a Finnish competition law is Finnish Courts that all types of dominant position. The principal substantially harmonized with cartel arrangements are considered legislation for competition law European competition law. Moreover, very serious infringements of the enforcement in Finland is set out ac-cording to the principle of parallel Competition Act and will accordingly in the Finnish Competition Act. application, where a restriction on be severely penalized. The highest The Competition Act is a general competition affects trade be-tween fines imposed in a Finnish cartel case law applicable to all sectors of the EU member states, the national to date were seen in the asphalt cartel economy. Finnish competition law authorities – thus also the Finnish in September 2009 when the SCA is administrative in nature and thus competition authorities - are to generally ap-proved the decision of violations, as well as sanctions, of enforce EU competition law in parallel the FCCA and significantly increased the prohibitions set forth in the with their national competition laws. the fines imposed by the MC from Competition Act are not criminal. In €19.4 million to €82.55 million. addition to administrative law sanc- The Finnish Competition and Most markedly, the fine imposed on tions, violations may also entail civil Consumer Authority (FCCA) and Lemminkäinen Oyj was increased law consequences, such as the nullity the Market Court (MC) constitute from €14 million to €68 million. In and consequent unen-forceability of the principal institutions responsible December 2009, the MC backed agreements containing competition for competition matters. The the FCCA in imposing a fine of €51 restrictions or the liability for Competition Act is enforced by way million on two forestry companies, compensation for damage caused. of a two-tier system, in which the Metsäliitto Cooperative and Stora Finland saw the first antitrust damage FCCA is responsible for investigating Enso Oyj, for illegal price cooperation awards granted at the end of 2013 suspected competition re-strictions, and information exchange in the raw in the asphalt cartel damages case making findings of infringement, wood procurement market. where Finnish municipalities were proposing to the MC that sanctions awarded more than 37 million euro for infringements be imposed and in damages by the District Court of where relevant requiring infringing FOCUS ON ABUSE Helsinki. The award is subject to a undertakings to refrain from such OF DOMINANCE pending appeal lodged by sev-eral of restrictive prac-tices. The MC as INVESTIGATIONS the defendants. the second tier has the exclusive competence to impose fines, in The FCCA has in the recent years From the practitioner’s point of view, addition to which it acts as the first clearly focused on investigating public procurement, state aid, and appellate instance in competition several high-profile alleged abuse sector specific regulation are also matters. In addition to the FCCA of dominance cases involving both part and parcel of competition law, and the MC, county governments, Finnish and foreign companies. The but they are dealt with under specific which are subordinate to the FCCA most publicized of these cases has legal instruments such as the Public in competition matters, assist in the been the Valio case, where in June Contracts Act, Communications enforcement of the Competition 2014 the MC sided with the FCCA and Market Act, the Postal Services Act, Act, especially in the investigation imposed a land-mark fine of 70 million the Electricity Market Act, and the of competition restrictions having euro (the largest fine to date imposed Natural Gas Market Act. regional dimension. The judgments on a individual defendant) on Valio for of the MC are ultimately appealable having abused its dominant position The Competition Act applies to all to the Supreme Administra-tive by engaging in predatory pricing in the economic activity carried out by Court (SCA). Matters concerning the market for production and wholesale business undertakings or associa- enforceability of contracts violating of fresh milk. The MC’s decision is tions of business undertakings. By competition rules and compensation subject to an appeal by Valio to the definition, this includes natural and for damages resulting from the same SCA. legal, private and public per-sons are decided upon by the general who are professionally engaged in courts of law. offering for sale, buying or selling, 42 43 Data Protection
Hannu Rintala Eversheds
GENERAL OVERVIEW
The Finnish legislation is based on European which applies to all kind of electronic Union (EU) directives. With respect to data communication; and protection and privacy, the US and EU • the Domain Name Act. approaches are very different from each other. The underlying philosophy is the main In addition to the ISC and PDA the transfer of differentiator. In the US, data protection and personal data from the data files of authorities privacy laws focus on redressing consumer takes place in accordance with the Act on harm and balancing privacy with efficient the Openness of Government Activities. commercial transactions. In the EU and Additionally, if other Acts include provisions Finland, privacy is seen as a fundamental concerning transfer, they shall become primarily right above other interests. The US and EU applicable in comparison to the PDA. However, differ significantly already when defining what the general obligations of the PDA concerning constitutes personal information. personal data shall apply complementarily in all cases.
RELEVANT LEGISLATION AND REGULATION Other Acts containing data protection regulation are, for example, the Act on the Data protection is regulated in several Acts in Protection of Privacy in Working Life and the Act Finland. The general right to privacy is set out in on Electronic Services and Communication in the Constitution of Finland. the Public Sector, which both include regulation on data protection in the field of electronic General provisions concerning the processing messages and electronic documents, among and transfer of personal data are included in other things. the Finnish Personal Data Act (“PDA”) which implements the EU’s Data Protection Directive. The Data Protection Ombudsman is the main authority providing direction and guidance As of January 1, 2015 the new Finnish on the processing of personal data, and Information Society Code (“ISC”) entered into supervises the processing in order to achieve force. It has replaced several acts and regulation the objectives of the PDA. The Data Protection and collected them under one code for example Board deals with questions of principle relating such as: to the processing of personal data, where these are significant to the application of the PDA. • the Act on the Protection of Privacy in With respect to the ISC, the compliance of most Electronic Communication (“E-Privacy Act”); of the provisions is monitored by the Finnish • the Communications Market Act, Communications Regulatory Authority. 42 43
PERSONAL DATA ACT
The objective of the PDA is to protect private life and other basic rights, safeguarding the right to privacy when processing personal data. Personal data means any information regarding a private individual that can be connected to such person or his/her family and based on which the person can be identified.
The PDA guarantees certain rights to processing. Based on the consent, sensitive individuals, such as the right to know the personal data may also be collected. In addition, purpose for which the data is used, the right to the processing needs to be always relevant in receive data included in the files, and the right respect of the controller, even in cases where to rectification or removal of incorrect data. the consent has been given. The controller shall inform the data subject (the individual whose data is processed) of the The purpose of processing personal data, the regular sources of data, about the uses for the regular sources, and the regular recipients of data, and the regular destinations of disclosed the recorded personal data must be clearly data. The right to access is not unexceptional, defined. It must be appropriate and justified as there is no right of access, for example if to process personal data in the operations of providing the access could compromise national the controller. The controller shall draw up a security, defense, or public order. description of the personal data file indicating, among other things, the controller and the One of the general legal bases for the purpose of the processing of the personal data. processing of personal data is that there is a relevant connection between the data subject According to section 22 of the PDA, personal and the operations of the controller, based on data may be transferred outside the European e.g. a customer or employment relationship. Union or the European Economic Area only if Another prerequisite for processing personal the country in question guarantees an adequate data can be the relevant party’s consent for the level of data protection. 44 45
HOT TOPIC - ISC
Although ISC primarily only collects several pieces of legislation under the same code, there are also some significant changes in the legislation, such as the xtensione of the obligation to ensure the safety of communications and data security from traditional telecommunications operators to all other players transmitting electronic communication. These kinds of other operators conveying confidential communication may include e.g. providers of instant messaging applications or social media services.
Another significant change is the potential so –called “ex-territorial” application of the ISC.
According to the second section of the ISC:
”Sections 136–145 and 247 of this Code are applied to the entrepreneurs referred to in these provisions in situations in which:
1. the entrepreneur’s place of business is in Finland or otherwise within Finnish jurisdiction; 2. the entrepreneur has no place of business within the member states of the European Union, but the entrepreneur’s central equipment used in the transmission of communications as a part of the service are located in Finland or maintained in Finland; or 3. the entrepreneur has no place of business within the member states of the European Union, but the service’s user is located in Finland and it is evident based on the offered service or its marketing that the service is directed at inland.”F
The sections 136-145 and 247 refer to confidentiality of messages and delivery reports, general processing principles of the transmitter of communication, processing of electronic messages and transmission of data for different purposes (transmitting communication, executing the service, ensuring data security, invoicing, marketing and technical development as well as statistical analysis), right to process in case of misuse, processing to detect a technical malfunction or flaw, storing information on the processing, and to the obligation of the transmitter of communications and the provider of value-added services to ensure data security.
As a result, this Finnish regulation concerning the protection of privacy and confidential communications may in some situations also apply to international companies. This regulation aims to bring the privacy policies of the foreign service providers operating in Finland to meet the Finnish legislation.
The before mentioned second section of the ISC is, at least according to many corporative representatives, seen as problematic, as it is believed to hinder the activities of Finnish companies outside of Finland, and secondly to prevent the international activities of service providers in Finland. However, these corporate representatives agree that openness and transparency are important goals of privacy. Individuals must have the right to know what information about them is collected and what this information is used for. 44 45 Eversheds LLP Fabianinkatu 29 B 00100, Helsinki Tel: : +358 10 684 1330 Fax: +358 10 684 1700 Email: [email protected]
About the author
Hannu Rintala Partner, Attorney at Law
Hannu specializes in corporate and M&A transactions, especially cross-border transactions. His other areas of expertise include licensing, certain aspects of competition law, technology and marketing law.
He has extensive experience in commercial agreements and international trade, and engages in international arbitration.
He frequently advises multinational clients with respect to their Finnish subsidiaries and Finnish clients to help expand their business globally.
He is a co-head of Eversheds Finland’s international business development as well as Energy and Natural Resources and Health and Life Sciences Sector groups and international trade practice group.
Hannu has been recognized in the Chambers Europe and Legal 500 publications and as one of the leading experts in Who’s Who Legal (Information Technology 2015). 46 47
Dispute Resolution
THE LEGAL SYSTEM
The Finnish legal system is a civil law system, as opposed to the US common law system. The laws of Finland are enacted in both Finnish and Swedish, the two official languages of the Republic. Rainer Hilli Roschier A significant part of Finland’s binding legal norms can also be found in EU law and in Finland’s international obligations. Finland has a dualist system, which requires legislation to adopt international norms into domestic law.
Higher courts do not set binding precedents either for themselves or for lower courts, but the decision of higher courts, particularly those of the Supreme Court, are understood by the lower courts to constitute guidelines from which deviation is possible only if well justified. Decisions of the institutional courts of the European Union are binding and the Finnish courts may request preliminary rulings in matters concerning implementation of EU law. ORGANIZATION OF THE CIVIL COURTS
Finland’s court system consists of two separate branches: the general courts and the administra-tive courts. Finland also has several special courts with very specifically defined jurisdiction.
The general courts are organized into a three-tiered hierarchy: the district courts, the courts of appeal, and the Supreme Court.
District court judgments can be appealed to the appropriate court of appeal. Appeals to the Su-preme Court are permitted only if that court grants the appellant leave to appeal. 46 47
Fewer than 10 per cent of all applications for leave to the country where service is to take place). appeal are approved by the Supreme Court. WITNESSES
CIVIL PROCEDURE – A witness is first examined by the party who has called him. He or she is then cross-examined by the other party PROCEEDINGS UP TO (although not in the sort of detail found in common law systems) and, if neces-sary, re-examined by both parties. JUDGMENT The judge may also ask clarifying questions. The witness may refuse to answer questions if the answers may Civil court proceedings can be divided into two stages; the incriminate him or a close relative. The witness may also preparatory stage and the main hear-ing. The preparatory refuse to answer a question if the answer would reveal a stage consists of an exchange of written pleadings – that business secret. is, the claimant’s application for summons indicating his claims, the defendant’s written response, and any further DOCUMENTARY EVIDENCE – NO DISCOVERY written submissions as requested by the court and a preparatory hearing. A party who wishes to produce documents which support his case does so simply by attaching copies to his written During the preparatory hearing, the judge will actively seek pleadings or by giving the copies to the judge at the to clarify the claims presented in the written pleadings, preparatory hearing. There is no discovery as in US court the grounds on which they are based, the issues in proceedings. The court may, however, on the application dispute, and the evidence to be presented in the main of one party order the other party, (or even a third party) hearing. In this hearing the judge may also encourage the to disclose a specified document or docu-ments. The parties to settle the dispute. general requirements, which the party seeking disclosure must show, are that the document is in the possession When the preliminary hearing (and hence the preparatory of the person or legal entity from which disclosure is stage of the proceedings) is closed, the matter proceeds requested, and that the contents of the document are to the main hearing. In the main hearing, the parties likely to have relevance for the outcome of the pro- present their respective claims and arguments, the ceedings. Privileged correspondence between a party witnesses are examined and cross-examined, and the and his advocate is, as a rule, exempted from the duty of parties deliver their closing arguments. disclosure. Documents in a foreign language must, as a rule, be translated. At the conclusion of the main hearing, the judge will render a judgment or, in cases of any com-plexity, inform the parties of the date when the judgment will be THE JUDGMENT announced. In Finland a party to court proceedings shall be The court’s judgment will usually be made available within represented or assisted by a member of the Finn-ish Bar a week but possibly up to a month after the main hearing. (asianajaja, advokat, advocate), a public legal aid attorney, It identifies the court and the parties and then sets an attorney permitted to rep-resent clients in courts, or out a recital of the claims, a summary of the claimant’s other legally accepted representatives. arguments, a summary of the defendant’s arguments, a de-scription and assessment of the evidence, the grounds for the decision, and finally the part of the THE PROCESS judgment that summarizes the court’s conclusions.
COMMENCEMENT OF PROCEEDINGS COSTS
Civil proceedings are commenced when the claimant files The court fees are negligible in Finland. an application for summons with the competent district court. The losing party is, as a rule, liable to pay the winning party’s legal costs, unless otherwise or-dered by the Service of proceedings is generally undertaken ex officio court. There are some exceptions to this rule, which gives by the court, but at the request of the claimant the court the court the power to dismiss the winning party’s claim may instead entrust the claimant with service of the for legal costs fully, or in part, but the main rule is that the summons. los-ing party pays the legal costs of the winning party in Service outside Finland will normally be undertaken in full. accordance with Hague Service Conven-tion and the EU Service Regulation 1348/2000 or other applicable Recoverable costs are, for example, court fees, witness multilateral conventions, but the court will readily permit expenses and the fees and costs of counsel (both local the claimant to effect international service himself and foreign). The costs and fees are recoverable in full, (although a claimant should check that this is permitted in to the extent that such costs and fees were reasonably About the author 48 49 Rainer Hilli Managing Partner
Rainer Hilli is Managing partner of Roschier Roschier Attorneys Ltd. and Head of the firm’s award-winning Keskuskatu 7, 00100 Helsinki Intellectual Property practice. He has more Tel: : +358 20 506 6217 than 20 years of experience in intellectual Fax: +358 20 506 6100 property disputes, including civil and Email: [email protected] administrative court proceedings as well as arbitration. Rainer’s practice also includes IP & technology driven transactions, licensing, franchising and technology transfers. Rainer joined Roschier in 1986 and became Partner in 1996. He is recognized as one of the leading experts in his field in Finland (e.g. by Chambers Europe, Chambers Global, The Legal 500, Who’s Who Legal and Managing Intellectual Property).
necessary. The winning party is also entitled to compensa-tion for its lost executive time due to the litigation. If, for example, each party loses on some points but wins on some points, then the court may order that both parties shall bear their own costs.
DAMAGES
As a general rule, the party claiming damages has the burden of proof to show the causality be-tween the acts of the defendant and the damages incurred as well as the amount of dam- ages. The concept of punitive damages does not exist in Finland. If it is difficult to prove the exact amount of damages, the court may assess the amount of damages.
ARBITRATION
In commercial agreements arbitration is often chosen as the form of dispute resolution. Finnish companies usually prefer to choose Finnish law as the governing law and arbitration under the rules of the Arbitration Institute of the Finnish Central Chamber of Commerce.
ENFORCEMENT
Judgments of US courts are not as such recognized and enforceable in Finland. As arbitral awards are enforceable in both jurisdictions, this is often a reason for choosing arbitration as the dispute resolution process in commercial agreements between a Finnish and a US party. 48 49
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