FOREIGN DIRECT INVESTMENT SURVEY: FINLAND

Transcription

1 FOREIGN DIRECT INVESTMENT SURVEY: FINLAND Kimmo Mettälä and Sarita Schröder, Krogerus Attorneys Ltd 1 OUTLINE Is foreign investment subject to review in your jurisdiction? Briefly describe the regulatory framework and authorities. What is the relevant foreign direct investment legislation in your jurisdiction? Who enforces the foreign investment legislation What kind of investments are caught? Finland offers an ideally situated gateway to reach markets in Northern Europe, including the 80 million consumers around the Baltic Sea and Northwest Russia. In recent years, Finland has attracted foreign investments in clean tech, healthcare, R & D, technology and retail, and also in engineering, manufacturing and mining. Finnish companies benefit from preferential trade arrangements through Finland's membership in the EU and WTO, in addition to the protection offered by Finland's bilateral investment treaties with more than 70 countries. Finland is a part of the euro-zone and it has a stable economic, political and social environment. As a Nordic country with relatively low level of external debt, Finland enjoys the highest (AAA) credit rating among the euro-zone countries. The only general law that governs foreign investments in Finland is the Act on the Monitoring of Foreigners Corporate Acquisitions in Finland ( Act ), 1 which entered into force on 1 June The review pursuant to the Act is limited to investments in two classes of companies, firstly to companies in the defence sector and secondly companies that are deemed critical for the vital functions of the society 2. In the limited cases in which the Act applies, the review and approval process under the Act is administered and enforced by the Finnish Ministry of Employment and the Economy ( Ministry ). According to the Act, a foreign owner is any foreigner or foreign organisation not domiciled or registered in a member state of the EU or the EFTA. Furthermore, organisations registered in an EU or EFTA member state are considered foreigners in case at least 10 per cent of all shares or a corresponding actual position of authority in such organisation is held by a foreigner or a foreign organisation. In respect of corporate acquisitions in the defence sector, the concept of a "foreign owner" includes all non-finnish owners. A corporate acquisition, within the meaning of the Act, is defined as a transaction through which the foreigner either becomes the owner of at least 10 per cent of all 1 Act on the Monitoring of Foreigners Corporate Acquisitions in Finland (Act No. 172/2012) (in Finnish: Laki ulkomaalaisten yritysostojen seurannasta). Unofficial translation in English available at 2 In addition to the Act, depending on the annual revenues of the target company and the acquirer, a merger control notification may be required under competition law, and certain licensing requirements may apply in regulated sectors.

2 2 (6) shares in the monitored limited liability company, or obtains corresponding actual position of authority in that company or in any other type of a monitored entity. Likewise, the concept of a corporate acquisition includes cases where an entity other than a foreign owner becomes a foreign owner, if it possesses the actual authority as described above, in the monitored organisation. In sectors other than the defence sector (which is discussed in section 4 below), a foreign owner may notify a corporate acquisition to the Ministry for confirmation. Alternatively, the Ministry may, having become aware of the acquisition, on its own motion request the necessary information to be submitted for the assessment of the acquisition. In general, the Ministry must, upon having received all required information, confirm a foreigner s corporate acquisition, unless a key national interest is jeopardised as a result of the acquisition, in which case the matter is referred to the Council of State for consideration at a government plenary session. The Council of State may refuse to confirm the acquisition only where it is necessary in order to protect a key national interest. 2 THRESHOLDS What are the relevant thresholds which trigger the application of the foreign review process? There are no thresholds under the Act, whether based on turnover, number of employees or otherwise. The review process is triggered if a foreign investment, resulting in the foreign ownership of at least 10 per cent of all shares or a corresponding actual position of authority in the monitored entity, involves key national interests. Investments in the defence sector are always subject to notification and approval, as discussed in section 4 below. 3 SUBSTANTIVE TEST What is the substantive test for clearance? The Ministry must clear a foreigner s corporate acquisition, unless a key national interest is jeopardised as a consequence of the acquisition. Within the meaning of the Act, key national interests include securing national defence, as well as safeguarding public order and security, if a fundamental interest of society is at an actual and sufficiently serious risk. If the Ministry finds that a key national interest is jeopardised, it must refer the matter to the Council of State, which, in turn, may refuse to confirm the acquisition only where it is necessary in order to protect such interest. As a rule, the decisive factor to be taken into account is securing the national maintenance support performance (such as the ability to have access to emergency supplies). In evaluating the effects of an acquisition, due regard should also be had to temporal and case-specific aspects, as well as to Finland s obligations at the international level. 3 3 Government Decree, supra note 2, p. 21.

3 3 (6) 4 PROTECTED INDUSTRIES Are any industries protected and subject to special rules? As regards corporate acquisitions in the defence sector, foreign owners must apply for the Ministry s prior confirmation. The defence sector includes all entities that supply or have supplied goods or services to the Finnish Ministry of Defence, the Finnish Defence Forces or the Finnish Border Guard, as well as entities in the industry for dual-use goods. The substantive elements in evaluating the application are identical to those applied to other corporate acquisitions. If the foreign owner has not applied for a confirmation, the Ministry may set a time limit for the foreign owner to submit the application. In case the foreign owner fails to submit the application within the time limit, the Ministry must refuse to confirm the acquisition. 5 PARTICULAR INVESTORS Are there any special provisions applicable to certain investors? If so, what are they? Certain foreigners corporate acquisitions do not require a confirmation. This is the case where: (i) the foreign owner subscribes, in proportion to his or her existing shareholding in a monitored limited liability company, shares in that company in connection with an increase of its capital; (ii) the foreign owner gains possession of property through inheritance, a will, or marital right; (iii) another foreign owner possesses a legally held position corresponding to at least 10 per cent of all shares in the monitored company, provided that the acquisition does not involve a transfer of shares as a consequence of a denial in confirming an acquisition; or (iv) the monitored business undertaking is acquired from another foreign owner who has acquired it in accordance with the provisions of the Act or otherwise legally. Sub-paragraphs (iii) and (iv) above do not apply to sector. acquisitions in the defence 6 NATIONAL SECURITY Do national security issues form part of the review? In accordance with the Treaty on the Functioning of the European Union and the principles established in the case law of the Court of Justice of the European Union, the concept of a key national interest within the meaning of the Act includes safeguarding national security. 4 Thus, national security issues can be taken into account in the review process. 7 STATE OWNED ENTITIES Are there special rules for state-owned entities? The Act does not make a distinction between private and state-owned entities. 4 Government Decree, supra note 2, pp

4 4 (6) 8 FORMAL NOTIFICATION Provide an overview of the formal notification requirements. In particular: Is filing mandatory or voluntary? If mandatory, do any exceptions exist? When should a transaction be notified? Is it possible to obtain formal or informal guidance before notification? Who is responsible for filing? What form of notification is used? Are filing fees required? Can a transaction close without clearance from the Regulator? Filing a notification to the Ministry s registry is voluntary. However, the Ministry may at its own initiative request the provision of all necessary information connected to the foreigner s corporate acquisition. In such case, the foreign owner is obligated to provide the requested information. The Ministry recommends the filing of a notification whenever the monitored entity is potentially critical in safeguarding the vital functions of the society. There is no specified time limit for the voluntary filing of a notification. Thus, a foreign owner may file the notification either before or after the actual transaction. If the Ministry does not request further information or make a proposal to refuse the confirmation within three months, or initiate further proceedings within six weeks, the transaction is considered to be confirmed despite the absence of an express official clearance. The Ministry cannot issue an official statement or opinion on the acquisition before the notification or application is filed. It is, however, possible to contact the Ministry for guidance before the filing of a notification. The notification must be filed either in Finnish or Swedish, whereas any attachments to the notification may be in English. There is no official template for the notification. The free-form notification must include information on the monitored entity s current and post-transactional structures of ownership, and the acquiring entity's structure of ownership. If known, also the acquiring entity s intentions in relation to the monitored entity must be included. There are no fees applicable to the filing of a notification or an application. 9 PROCEDURE AND TIMETABLE Once the Ministry has become aware of the foreigner s corporate acquisition, it must, where necessary and within three months, request the foreign owner to submit all necessary information. Upon having received all necessary information, the Ministry must either give a decision to initiate further examination within six weeks, or make a proposal to refuse the confirmation to the Council of State within three months. Should the Ministry fail to act within the time limits, the acquisition is considered to be confirmed. In practice, the Ministry s decision may be given in a considerably shorter period of time following the reception of all necessary information.

5 5 (6) The foregoing time limits do not apply to acquisitions in the defence sector. However, the authorities concerned must, in any event, act in conformity with the interests of good administration and, if possible, adhere to the three-month deadline. 10 PUBLICITY; POLITICS In relation to the notification and clearance process: What publicity is given to the process and how is commercial information protected from disclosure? To what extent is the investment review process conducted independently of political influence? Are customers, competitors, or other interested parties involved in the review? If so, what rights do they have? Once a notification or an application is filed to the Ministry s registry, the matter is registered as confidential. Thus, all documents containing trade secrets, such as those relating to a corporate acquisition, are confidential and are not to be disclosed to the public by the officials of the Ministry or the Council of State. 5 The review process is conducted independently of other interested parties. The Ministry may, however, obtain authoritative statements concerning the acquisition. 11 UNDERTAKINGS What obligations / undertakings can be imposed as a condition of clearance to address concerns of the Regulator? At what stage of the procedure can they be offered and accepted? What are these obligations, and how are they enforced? The Act does not specify any obligations or undertakings that could be imposed to enable the execution of an acquisition as planned if it has been found to jeopardise key national interests. There is also no history of the Ministry or the Council of State imposing any obligations or undertakings as a condition of clearance. To date, all foreign acquisitions caught by either the previous law or the Act have been cleared as notified. If an acquisition is notified to the Council of State, and it also finds key national interests to be jeopardised, it may either require the foreign owner to dispose of its shares to the extent that the threshold specified in the Act is not exceeded, or require the cancellation of any agreement establishing the actual position of authority. 12 PENALTIES What are the penalties for: Failure to notify correctly? Closing before approval or after prohibition of the transaction? Failure to observe a decision of the Regulator (including any obligations/undertakings) 5 Act on the Openness of Government Activities (Act No. 621/1999) (in Finnish: Laki viranomaisen toiminnan julkisuudesta), Section 24.

6 6 (6) What is the history of enforcement practices? Unless the offence is interpreted as minor or unless the offence is not subject to stricter sanctions under any other law, a foreign owner s intentional or grossly negligent failure to apply for a prior confirmation of a corporate acquisition in the defence sector is subject to a fine. This also applies to other corporate acquisitions where the foreign owner fails to fulfil the obligation to provide information, provides the Ministry with false information or conceals pertinent facts relating to the review process. Normally, the Ministry has received one to three applications and informal inquiries a year. To date, all applications have concerned corporate acquisitions in the defence sector and have been confirmed. 13 WHAT POWERS DOES THE REGULATOR HAVE TO PROHIBIT OR OTHERWISE INTERFERE WITH A TRANSACTION? In addition to the sanctions presented above, the decision to refuse confirmation by the Council of State may oblige a foreign owner to dispose of its shares in the monitored limited liability company to less than 10 per cent of all shares. Consequently, once a confirmation is denied, the foreign owner may only use shares that entitle it to less than 10 per cent of all shares, at a maximum. Similarly, where the denial of confirmation concerns the transfer of actual position of authority to a foreign owner, any agreement establishing such position will be cancelled at the time specified in the respective decision. 14 DOES THE REGULATOR PROVIDE REASONS FOR ITS DECISIONS? IF SO, ARE THESE REASONS MADE PUBLIC? WHAT ARE THE OPPORTUNITIES FOR APPEAL OR JUDICIAL REVIEW? Any decision given by the authorities concerned must include the statement of reasons indicating which facts have affected the decision and on which legal grounds it is based. 6 Due to the confidentiality of the review process, the reasons for a decision are only disclosed to the party to which the decision is addressed and not to the public. The Ministry s decision to refer the foreign owner s corporate acquisition to the Council of State for consideration or to initiate further examination cannot be appealed. Refusal to confirm the acquisition by the Ministry or the Council of State is appealable to the Supreme Administrative Court. 6 Administrative Judicial Procedure Act (Act No. 586/1996) (in Finnish: Hallintolainkäyttölaki), Section 53.