2. Finland’s domestic policy and regulatory setting
This chapter provides a comparative overview of policies that might affect FDI, benchmarking Finland’s regulatory framework against those of other Nordic-Baltic countries. It first assesses at-the-border and behind-the-border regulation applicable to all sectors of the economy that might influence foreign investment decisions and affect market entry of foreign-owned firms, as well as their operations in Finland. This assessment is complemented by an evaluation of regulatory aspects that might have an effect on investment, trade and competition in selected services sectors: ICT, construction, transport, logistics, courier, distribution and professional services. The chapter also discusses how similar Finland’s regulatory framework is to those of its neighbouring trade and investment partners and to what extent barriers are lower for investors from within the EEA due to regulatory harmonisation within the Single Market.
Finland recognises the importance of foreign investment and this is reflected in a relatively open business climate towards FDI. However, Finland maintains more at-the-border and behind-the-border barriers in trade and investment than most other Nordic and Baltic countries.
While Finland has relatively few restrictions to foreign (non-EEA) ownership, uncertainty around the scope and practical application of its FDI screening mechanism might affect investment decisions.
Recruiting talent from outside the EEA is burdensome due to a complex residence permit system, long processing times and application of labour market tests to foreign workforce. However, reforms are underway to streamline the entry of foreign talent and thus make it easier for both domestic and foreign-owned companies to mitigate local skill shortage by sourcing talent from abroad.
Highest policy-induced barriers are recorded in transport services. Foreign equity limits and non-competitive airport slot allocation in the air transport sector result from EU law, whereas domestic policy choices contribute to a relatively stringent regulatory framework in maritime transport.
In logistics, lack of competitive bidding procedures for the right to exploit storage and warehouse services at airports and ports, and cargo-handling at ports, may indirectly favour domestic providers and affect the general level of competition in sectors that are critical for well-functioning GVCs.
Overall, Finland has a liberal approach to professional services. However, licensing requirements for auditors and equity restrictions for audit firms, mandated at EU level, may restrict market entry for foreign providers in this field.
Finland has a favourable regulatory environment for companies engaged in the digital transformation and towards attracting FDI in digitally enabled services, which are increasingly important for all sectors of the economy.
Regulatory harmonisation within the EEA has resulted in a more liberal framework for services trade and investment within the Single Market than multilateral rules applicable to third countries. Finland can also leverage the high level of regulatory integration within the Nordics and further align its regulatory landscape to that of the region to attract more foreign investors.
Explicit restrictions to FDI and other limitations found in domestic regulation might affect foreign investment decisions. The former relates to measures undertaken by countries to limit market access or avoid granting national treatment to foreign investors from certain nations. The latter encompasses a wide range of factors that influence the business environment and a country’s general level of competitiveness, which may add further costs and challenges to foreign companies that manage to cross the border.
A rich literature shows that border factors and domestic policies can have a significant impact on trade, investment and competition. Even partial reductions of FDI restrictions, such as FDI screening or equity limits, might deliver great benefits to the host country.1 Furthermore, rolling back restrictions to the establishment of foreign branches and subsidiaries could contribute to increase sales of foreign-owned companies, which in turn would also benefit the host economy.2 In addition, the decision to invest in one country or another is subject, among other factors, to the general level of restriction in the region, with a country being more likely to be chosen to establish an overseas affiliate if the neighbouring ones apply more restrictive or discriminatory rules.3
Addressing and streamlining behind-the-border regulation represents an equally important aspect in attracting foreign investors. This might come in the form of competition-restraining policies or also non-discriminatory measures, which, if reduced, could boost foreign-owned companies’ performance. Lack of pro-competitive regulation, coupled with restrictions to foreign entry, can translate into higher costs for downstream businesses and consumers, which face higher prices as incumbents consolidate their market power.4
Finally, regulatory costs perceived by foreign direct investors may be more significant when the standards are not only stringent, but also divergent from those of other countries. In particular, the divergence of command-and-control regulations and of protection of incumbents (antitrust exemptions, entry barriers in networks and services) reduce cross-border investment.5
This chapter reviews a range of policy-induced challenges at the border and behind the border to foreign investors in Finland, benchmarking the Finnish regulatory environment against that of the same comparator group used in the previous chapter, to identify potential gains from aligning domestic policies to best-practice regulation. Due to the high level of integration within the region6, and more broadly regulatory harmonisation within the EEA, differences in how these countries regulate market entry and other aspects of domestic regulation are found particularly in relation to non-EEA foreign investors. European integration leaves Finland and the other Nordic-Baltic countries limited space for domestic policy making in certain areas. Nonetheless, different approaches to national transposition of directives, as well as the adoption of different rules on areas not regulated at EU level, may cause some variation within the group.
The chapter presents an assessment of the main regulatory aspects applicable to all sectors of the economy and then zooms in on a selected number of services sectors of strategic importance, such as ICT (including telecommunications and the digital economy), construction, professional services, transport, logistics, courier and distribution. These sectors provide essential inputs into global supply chains and are strongly integrated in all other parts of the economy.7 Therefore, obstacles identified in these sectors are likely to have direct or indirect effects on all firms operating in Finland.
This chapter is broken down into three parts:
A comparative assessment of different aspects of at-the-border and behind-the-border regulation that might have an effect on investment, trade and competition;
Sector-specific regulation is analysed to provide a comparative overview of regulatory factors that might influence inward foreign investment decisions in a selected number of sectors;
An analysis of how similar or dissimilar the Finnish regulatory environment is to that of a number of other economies and of the effects of regulatory harmonisation within the European Union.
While foreign investors are attracted by Finland’s high-quality institutions, economic, legal and political stability, transparent regulation and a general open framework towards investment and trade, there are still a number of factors that might discourage foreign investment or hinder market competition. This section offers an in-depth evaluation of broad regulatory aspects that might shape the way foreign investors enter any economic sector of the Finnish market and operate therein. Although not exhaustive, this assessment covers several elements that might have an impact on the overall business environment in Finland and in the other countries of the Nordic-Baltic region.
2.2.1. Entering the Finnish market
Foreign investors that want to enter the Finnish market, either through Mergers & Acquisitions or via the establishment of branches and subsidiaries, might face a number of regulatory drawbacks. Despite significant liberalisation measures to foreign ownership, prompted by European integration in the 1990s8, Finland maintains FDI equity limits in certain sectors (Box 2.1). Screening applies to certain types of foreign takeovers, and investors from outside the European Economic Area (EEA) are subject to additional administrative steps if they want to set up branches or purchase real estate in Finland. Processing times to set up a business are longer in Finland than in the rest of the Nordic-Baltic region, although they have become shorter over time. Finland has also eliminated minimum capital requirements for private limited companies, although these are still maintained for public limited companies. The following sub-sections describe in more detail both at-the-border and behind-the-border aspects that may affect foreign investors entering the Finnish market.
Screening mechanisms apply to certain foreign corporate acquisitions
Countries have to balance attracting FDI with managing potential threats to their essential security interests. For this purpose, many countries maintain instruments that allow them to screen investment projects. Indeed, investment screening on the grounds of managing risk to national security interests has become common, although the scope and design of screening mechanisms vary across countries.9 Even if such measures seek to safeguard essential security interests, they may still have unintended effects and discourage foreign investment decisions. Moreover, some countries include consideration of economic interests, such as impact on competition, employment, income or technology, in the criteria for approval of foreign investment projects.
Foreign investors are not screened when they establish new companies in Finland, but some foreign takeovers are subject to screening to safeguard Finland’s essential security interests. Foreign acquisitions of defence industry companies, security sector companies, as well as other organisations and businesses considered critical to securing functions fundamental to society, are covered by mechanisms laid out in the Act on the Screening of Foreign Corporate Acquisitions (Screening Act; see Annex 2.A). The Screening Act does not address the consideration of economic interests in the review of foreign acquisitions.
Although Finland has observed an increase in the number of screened acquisitions and their share of all foreign acquisitions in recent years, most acquisitions are not subject to screening. On average, some 5% of all 1 211 foreign acquisitions that took place during 2012-19 were subject to screening. Moreover, no acquisition has been denied since the entry into force of the current Act in 2012.10
Broad definitions and open timelines leave some uncertainty for investors
The Screening Act does not explicitly define which sectors, other than the defence and security industries, are considered critical in terms of securing functions fundamental to society and thus fall under the scope of screening (see Annex 2.A). Moreover, the definition of defence sector companies, for instance, is broad and can include undertakings operating in other sectors if they are in a contractual relation to the Finnish Defence Forces.
Some guidelines for the application of the Act can be derived from government documents that the Ministry of Economic Affairs and Employment relies on in its assessments of foreign acquisitions, namely the 2017 Security Strategy for the Finnish society and a 2018 government decision concerning the security of supply. However, not all companies operating in sectors that are considered critical in the government documents automatically fall under the scope of application of the Act.11
While being considered one of the most open economies in the OECD area in 20191, Finland still maintains foreign equity limits in electricity (electricity generation), transport (air and maritime) and business services.2 Other operational restrictions (such as limits on purchase of land or on repatriation of profits and capital) apply to all sectors of the economy.
Note: Restrictions are evaluated on a 0 (open) to 1 (closed) scale. The overall index is the simple average of sectoral scores. Data for OECD countries is sourced from the list of countries’ reservations and exceptions under the OECD Code of Liberalisation of Capital Movements.
Source: OECD FDI Regulatory Restrictiveness Index database, 2019.
Compared to the average Nordic-Baltic country, Finland has lower statutory restrictions to FDI in most sectors. The overall level of statutory restrictions to FDI has decreased over time in Finland, and in some Baltic states, but has not changed for Norway and Sweden.
← 1. The OECD FDI Regulatory Restrictiveness Index (FDI RRI), which covers limits to foreign equity, screening and approval procedures, restrictions on key personnel, and other operational measures in 22 sectors and 84 economies, does not assess actual enforcement and implementation procedures. The index does not cover measures taken to protect essential security interests nor state ownership and monopolies, to the extent they are not discriminatory towards foreigners. Preferential treatment for special-economic zones or resulting from international agreements is not considered. For more details, see Kalinova et al. (2010[1]).
← 2. Similar restrictions are also found in Estonia and Norway for transport sectors, and Denmark and Norway for business services sectors.
Despite these guiding documents, the broad coverage of sectors and activities that might fall under the scope of the screening mechanisms, together with case-by-case assessments, can make it difficult for some foreign investors to predict whether or not a planned acquisition will be screened. Several stakeholders raised this concern of unpredictability during consultations in preparation of amendments to the Act in the first half of 2020.12 The possibility for informal dialogue between a would-be acquirer and the authorities may help mitigate uncertainty related to investment screening to some extent. The Ministry reports holding preliminary discussions with the foreign investor’s representative in the large majority of cases. Topics of discussion include whether the planned acquisition falls under the scope of screening and how the target company is defined.
Further contributing to uncertainty for foreign investors, the Screening Act does not contain a specific provision regulating the processing time of screening decisions. An acquisition in sectors other than the defence and security industries will, however, be considered confirmed if the Ministry has not taken it under further examination within six weeks or has not referred it to a government plenary session within three months of receiving all necessary information of the (intended) acquisition. The same does not apply to foreign acquisitions of defence and security companies, which require an explicit approval of the mandatory application. No time limit is set for the processing of these applications.13 The absence of processing time regulation adds to legal uncertainty around the implementation of the Act, making it more difficult for both a would-be acquirer and a domestic target enterprise to anticipate the implications of the process for the sale of assets.
Screening mechanisms in other countries of the Nordic-Baltic region
Most countries in the comparator group have adopted some form of control of non-EEA foreign investment on grounds of essential security interests. These mechanisms vary in form and scope. Some of the screening measures are not limited to foreign investment but are instead applied independently of the investor’s nationality.14 Like Finland, many other countries in the region have recently amended their existing screening mechanisms, adopted new measures or are considering new legislation in the field of investment screening, in part in response to the effects of the COVID-19 pandemic (Box 2.2).
In Latvia and Lithuania, screening is applied to acquisitions in certain individually identified assets in sensitive sectors, such as energy and telecommunications. Latvia also requires prior approval of transfers of national-level critical infrastructure and European critical infrastructure. In Lithuania, foreign investment (including greenfield investment) is prohibited in sectors related to state security and defence. Norway, in turn, screens acquisitions in companies and assets identified as essential for national security. A prior notification mechanism is activated by the acquisition of one-third of share capital or control in a company.15
In Denmark, foreign investment (including new projects) in arms and defence material production are subject to screening. An authorisation is required when over 20% of the company's board members are foreigners, or when foreigners own more than 40% of the company's shares or obtain a controlling influence.16 Moreover, a new Investment Screening Act, expected to enter into force on 1 July 2021, would introduce a comprehensive FDI screening mechanism. Prior authorisation would be required of all FDI in “particularly sensitive sectors”, such as defence, IT security functions or processing of classified information, production of dual-use goods, other critical technology or critical infrastructure. The authorisation requirement would also apply to greenfield investment in these sectors. Alongside the mandatory screening, a cross-sectoral scheme based on voluntary notifications would apply to investors outside the EU or EFTA who acquire at least 25% of a Danish company.17
Sweden has recently adopted amendments to its Protective Security Act that allow for the screening and, ultimately, prevention of transfers of the whole or any part of security-sensitive activities or certain property on the grounds of national security concerns. The mechanism, in force as of 1 January 2021, applies irrespective of the nationality of the acquirer.18 Estonia does not currently screen FDI, but the government has announced its intention to develop screening measures.19
Even before the COVID-19 outbreak, there has been increasing policy-making activity in the field of FDI screening. A significant number of countries have adopted new acquisition and ownership-related mechanisms to manage risks to essential security interests since mid-2017, and reforms of existing mechanisms have accelerated since 2016. Concerns related to the health sector and economic conditions resulting from the pandemic have further accelerated this trend. Several countries have made or announced temporary adjustments or permanent reforms to their FDI screening mechanisms due to COVID-19. These include, for instance: lowering the threshold triggering FDI screening or expanding the coverage of the screening mechanism to health-related sectors, and beyond.1
In Europe, some countries were already reviewing their FDI screening mechanisms before the pandemic. Adjustments were foreseen in view of an EU Regulation, adopted in March 2019 and in force from October 2020, establishing a framework for the screening of FDI into the Union.2 The Regulation establishes a co-operation and co-ordination mechanism between Member States and the European Commission regarding FDI that could affect security and public order. Member States remain free to decide whether to set up screening mechanisms. Following the COVID-19 emergency, the Commission emphasised the importance of using existing screening tools and setting up screening mechanisms in those Member States that do not currently have one. The Commission's concern is that the pandemic may increase attempts by foreign investors to acquire strategic companies, particularly in healthcare-related industries, but not exclusively.3
The Nordic and Baltic countries were actively assessing their FDI screening policies in 2020. Conscious of the impact of COVID-19, Sweden has introduced a mechanism to screen certain transactions on the grounds of national security. The reform entered into force on 1 January 2021.4 Lithuania has also adopted amendments to its screening Act regarding the assessment criteria for the review mechanism, the list of assets of strategic importance and alignment with the EU Regulation.5 Denmark, Estonia and Latvia are considering new legislation on FDI screening.6
In Finland, the Act on the Screening of Foreign Corporate Acquisitions was amended in October 2020. These changes are unrelated to the COVID-19 pandemic. Instead, they reflect alignment with the EU FDI Screening Regulation, as well as a desire to clarify the practical application of the Act. The key amendments include clarifications to key definitions, designation of the Ministry of Economic Affairs and Employment as Finland's national contact point, the consideration of foreign acquisitions of security sector companies under mandatory review (instead of voluntary notification process) and additional flexibility by empowering the Ministry to apply mitigation measures to decisions of approval.7 While the COVID-19 situation was taken into account in the legislative drafting, there was considered to be no need to amend the scope of application of the Act or the screening thresholds as a result of the pandemic. The Ministry reports, however, that the crisis has affected foreign investment, as no new acquisitions were brought to its attention in the first half of 2020.8
← 1. OECD (2020[2]).
← 2. Regulation (EU) 2019/452 establishing a framework for the screening of foreign direct investments into the Union.
← 3. European Commission, Communication C(2020) 1981 final, 25 March 2020.
← 4. Sweden’s Act Amending the Protective Security Act (SFS 2020:1007). Moreover, a new Act introduces a national contact point, as required by the EU FDI Screening Regulation. Act on Complementary Provisions to the EU Regulation on Foreign Direct Investment (SFS 2020:826).
← 5. Lithuania's Law on Enterprises and Facilities of Strategic Importance to National Security and other Enterprises of Importance to Ensuring National Security (No. IX-1132, 10 October 2002). In addition, amendments to public procurement legislation allow for the review of certain bids to safeguard Lithuanian national security interests. Lithuania's Law on Public Procurement (No. I-1491, 13 August 1996).
← 6. OECD, (2020[3]). In Denmark, a draft law introducing a new FDI screening mechanism was submitted for public consultation in December 2020. The Investment Screening Act is planned to enter into force on 1 July 2021. Danish Parliament, consulted on 12 February 2021.
← 7. Act on the Screening of Foreign Corporate Acquisitions, amendments in force as of 11 October 2020. See also the Bill introducing these amendments. HE 103/2020 vp, pp. 3, 13.
← 8. HE 103/2020 vp, pp. 4-5, 7.
New legislation introduced screening of real estate acquisitions
In Finland, a new Act in force as of 1 January 2020 subjects certain real estate acquisitions by foreign buyers to prior review. Pursuant to the Act on Transfers of Real Estate Requiring Special Permission20, acquisitions of real estate by non-EU/EEA buyers are subject to mandatory authorisation by the Ministry of Defence. The purpose of the Act is to ensure that foreign ownership and use of real estate property does not threaten national security interests, such as defence and border security.21
The scope of application of the Act covers all real estate acquisitions by non-EU/EEA foreign buyers, regardless of purpose.22 However, the buyer must indicate the intended use of the real estate in the permission application. If the permission is not granted, the buyer must relinquish the piece of real estate within one year. The state will reimburse the buyer for related expenses. The application must be submitted before the transfer of property takes place, or within two months of the confirmation of transfer. The Ministry aims to process applications within three months.23
The legislative package introducing new rules for real estate ownership from 1 January 2020 also established the state's pre-emptive right in real estate transactions, including by domestic buyers, near certain strategic locations.24 In the Nordic-Baltic region, real estate acquisitions are screened or restricted to varying degrees in Denmark, Estonia, Latvia and Lithuania, in some countries for other than national security reasons.25
Foreign branches’ permits represent an additional administrative step for non-EEA investors
A foreign corporation that has its registered office outside the EEA must apply for a permit to register a branch in Finland. Permits are issued by the Finnish Patent and Registration Office (PRH).26 According to PRH, it has been customary to grant a permit if the parent company is duly registered in its home country.27 If a permit is granted, the registration of a branch follows ordinary procedure.
Having to apply for a permit represents an extra administrative step for non-EEA businesses pursuing commercial activities through the establishment of a branch in Finland. According to PRH, there were, as of 4 January 2021, some 1 200 foreign branches registered in Finland overall, with an average of 113 new branches registered annually in 2016-20.28 Restrictions related to branches are also in place in Danish and Swedish legislation, but not in the other countries of the comparator group.
Moreover, businesses in Finland are required by law to have a representative that is entitled to receive summons and other notifications on behalf of the business. The representative must have a place of residence in Finland. If the parent company is based in the EEA, the representative may reside within the EEA instead of Finland.29 Requiring the business to name a representative is a common policy in the Nordic and Baltic countries, and indeed many other countries. The Finnish law grants more flexibility to foreign investors in this regard than rules that are in place in the Baltic countries, as in Estonia, Latvia and Lithuania, foreign businesses are required to have a local fiscal representative. Moreover, foreign companies wanting to offer goods and services in Estonia on a permanent basis are required to register an Estonian branch.30
Relatively long processing time to start a business in Finland, despite few administrative steps
Overall, Finland ranks 20th out of 190 countries in the World Bank's Doing Business study that measures business regulations. With respect to facilitating the establishment of new businesses, however, Finland falls in 31st place, while still ahead of Denmark, Lithuania and Sweden, but behind Norway and Estonia.31
The ease of starting a business in Finland, as measured by Word Bank indicators, is in line with the Nordic-Baltic average regarding the number of procedures required and the cost of registering a company. More specifically, to incorporate and register a new business in Finland, only three official procedures are required: opening a company bank account, registering the company in the Trade Register and taking out mandatory insurances for the company. The associated costs consist of a handling fee of EUR 275 for online company registration (EUR 380 in paper form). The online registration service is only available in Finnish and Swedish, and can be used only if all share subscribers and members of the board of directors and the managing director, if any, have a Finnish personal identity code and personal internet banking codes, a mobile certificate, or an electronic identity card.32
However, when it comes to the time required to complete all necessary procedures to establish a company, Finland is the weakest performer in the group. Completing the necessary administrative steps takes 13 days (median) in Finland. This is more than three times the delay in the best performing countries of the group, Denmark and Estonia (4 days). In Estonia, the e-residency system33 allows companies to be registered entirely online from anywhere in the world.
Nonetheless, there has been a trend in Finland towards shortening the time and reducing the cost of starting a business during recent years.34 Furthermore, a planned comprehensive reform of the Trade Register Act (129/1979) seeks to enable a shift to online services and automatic handling of applications and notifications.35 If implemented, these measures have potential to reduce processing times and administrative burden on companies.
Minimum capital requirement only for public limited liability companies
As a recent step to facilitate the establishment of small and medium sized enterprises, a 2019 reform lifted the minimum capital requirement for private limited liability companies that previously amounted to EUR 2 500.36 This recent policy change sets Finland apart from the rest of the comparator group, as minimum capital requirements for private companies are in place in each of the other Nordic and Baltic countries observed. However, the minimum capital requirement of EUR 80 000 for public limited liability companies remains unchanged under Finnish law and is relatively high compared to other countries in the region. In the comparator group, only Norway applies a more stringent requirement of NOK 1 million (corresponding to EUR 97 471, as of 11 February 2021). Mandated at EU level, other countries of the group also impose minimum capital requirements on public limited companies, but the legal minimum varies from EUR 25 000 in Estonia to DKK 400 000 (EUR 53 778) in Denmark.37
2.2.2. Recruiting talent from outside the EEA is burdensome
After uncertainty about the future, availability of skilled staff was the second most commonly cited long-term barrier to investment in Finland in 2020.38 Yet, and despite signs of added flexibility in recent years, Finland's framework for the entry of foreign workers and entrepreneurs remains burdensome. However, several reforms under preparation seek to facilitate the entry of foreign talent into the country. The following sub-sections discuss measures that affect companies sourcing talent from abroad.
Residency requirements for directors and the CEO
The Limited Liability Companies Act requires that at least one of the members of the board of directors and the managing director (CEO) of a limited liability company registered in Finland must be resident within the EEA, unless the registration authority grants an exemption to the members of the all-foreign board or to the foreign CEO.39 PRH, the competent authority, reports customarily granting exemptions to permanent residents of Switzerland, US citizens residing in the United States and Finnish citizens residing in the United States, regarding both board member and managing director positions.40
These residency requirements limit the freedom of foreign investors to appoint board members and managers of their choice, and may consequently have an effect on investment decisions. As seen in the first chapter, the United States and China are among the most important sources of FDI and hence most affected by this policy.41 Even if PHR grants an exemption, the application procedure represents an additional administrative step for appointing board members and managers from these countries, when all members of the board or the managing director reside outside the EEA.
However, the current framework in Finland provides more flexibility for foreign investors than previous rules, which required that at least half of board members reside within the EEA.42 Corporate law in Sweden and Norway maintains more stringent requirements, as in Sweden, the managing director and at least half of the board members must be EEA residents, and in Norway, the managing director and at least half of the board members must be Norwegian residents, or EEA nationals resident in the EEA.43 Other countries in the comparator group do not have policies that limit the nationality or residence of board members and managers.
Tax incentive for foreign key employees
In an effort to facilitate bringing high-earning employees to the country, Finland offers a special tax incentive for foreign key personnel who become resident taxpayers in the country. Foreign employees whose work requires special expertise and whose monthly salary is at least EUR 5 800 are subject to a flat tax rate of 32%, instead of the progressive income tax regime that applies to Finnish workers. Prior to 2020, the rate was 35%. The employer will pay social security contributions of the foreign employee in the usual way. A minimum stay of 6 months is required to benefit from the foreign key employees' tax regime. The special tax rate can be applied for up to 48 months.44 Denmark, Norway and Sweden also offer tax incentives for foreign personnel. The duration of these benefits ranges from 24 months in Norway to 84 months in Denmark.45
Limitations to the movement of foreign talent
There are three main types of residence permits a third-country national from outside the EEA might need to work in Finland:
residence permits issued on the basis of employment, namely the residence permit for an employed person and special permits for e.g., managers and specialists;
With some exceptions, the application procedure for residence permits is subject to labour market tests (LMTs). Assessing whether there is no available labour force in Finland or within the EEA for the specific job, or whether the business activity is profitable, before issuing a residence permit to a third-country national lengthens processing time and adds uncertainty to employment or investment decisions. Furthermore, long delays in the processing of applications, combined with the short initial duration of residence permits, may have a dissuasive impact on FDI decisions or on the growth potential of foreign (but also domestic) companies. These factors also increase administrative burden for both domestic and foreign-owned companies that wish to source talent from abroad, for instance, to mitigate local skill gaps.
Recruiting non-EEA workers is subject to skill shortage in the domestic labour market...
The Aliens Act (301/2004) lays out the legal foundation for entry of foreign workers. As a general rule, a national of a country outside the EEA will need to seek a residence permit to work under an employment relationship.46 Notable exceptions include specialists that have been invited to work in Finland or signed a contract to work in Finland, if the work lasts for a maximum of 90 days. A foreign employee that does not belong to any of the groups with a specific residence permit application type (e.g., managers, specialists) will apply for a residence permit for an employed person.
Labour market tests are applied as part of a two-step procedure to obtain a residence permit for an employed person. A final decision by the Finnish Immigration Service (Migri), granting or denying a residence permit to a foreign worker that has received a Finnish job offer or signed an employment contract, is preceded by a partial decision by a local Employment and Economic Development Office (TE Office). The TE Office establishes, in each individual case, whether suitable labour workforce for the job is already available in the Finnish or EU/EEA labour market within a reasonable time and ensures that issuing a residence permit to a foreign worker will not prevent a locally available person from finding employment.47
Moreover, the employer must provide assurances that the conditions of the employment contract comply with Finnish regulation and collective labour agreements, including a salary that fulfils standards set out in collective agreements. In the absence of an applicable collective agreement, the minimum monthly salary required in 2020 is EUR 1 236 (gross).48
…and entrepreneurs and start-ups need proof of financial means for a residence permit
Residence permits for entrepreneurs49 are also subject to LMTs. In a similar two-step procedure to the one described above, a local Centre for Economic Development, Transport and the Environment (ELY Centre) will first assess whether the intended business activities meet the requirements for profitable business50 and whether the entrepreneur will have sufficient financial resources from business activities, gainful employment or other sources. The rationale of the income requirement is to ensure that the entrepreneur will not need to rely on public assistance to cover living expenses in Finland. A final decision on the residence permit is made by Migri after the ELY Centre’s assessment. This residence permit type is applicable to, for instance, self-employed persons, sole proprietors, partners in a general partnership, general partners in limited partnerships and shareholders in a managerial position in a limited liability company with a profitable business registered in the Finnish Trade Register.51
In 2018, a new residence permit type was introduced for persons who intend to hold a full-time position in a start-up company registered or to be registered in Finland. The so-called start-up entrepreneur’s residence permit is subject to a positive assessment of the business plan, to be obtained from Business Finland before submitting a residence permit application to Migri.52 The advantage of the start-up residence permit is that it can be issued for 24 months, as opposed to the standard 12-month initial duration of other residence permits. Moreover, the intention behind this new residence permit type was to speed up the residence permit procedure in the case of start-ups. It was estimated that a start-up residence permit application could be processed by Migri in just a few weeks’ time.53 However, the estimated processing time is currently 3-5 months.54 Migri reports that 85 start-up entrepreneur’s first permits have been issued from 2018 to January 2021, with 21 negative permit decisions during the same period.55
But there are some exceptions to labour market testing and signs of increased flexibility
By virtue of regional administrative guidelines, LMTs are not applied to foreign workers in certain sectors where there is a shortage of skilled labour. In those cases, the TE Office can base its decision on an assumption that local labour is not available.56
Moreover, certain groups of foreign workers coming from non-EEA countries may obtain a residence permit irrespective of the availability of local labour. For instance, specialists57, as well as top and middle level management, including intra-corporate transferees58, shall apply for a residence permit that is granted directly by Migri. No labour market assessment is conducted with regard to these groups of professions.59
Finland took a further step to increase the flexibility of its migration policy by revising the scope of application of LMTs in 2019. An amendment to the Aliens Act lifted the need to assess the availability of local labour with regard to residence permit renewals for persons who transfer to a different sector after having worked in Finland for one year.60
Planned reforms seek to streamline entry processes
Long waiting times present an inconvenience for domestic and foreign-owned businesses that need to swiftly fill vacancies for skills that are not present locally. In Finland, processing times of residence permit applications have repeatedly exceeded the limits imposed by legislation in recent years.61 According to the Aliens Act, residence permit decisions shall be made within four months of receipt of the application with attachments.62 Migri estimates the processing time to extend to the full four months when an assessment by the TE Office is required.63 In contrast, specialists’ residence permits are processed more quickly and waiting times have reduced significantly to an average of 17 days in the last half of 2020, as opposed to 45 days in 2019.64 Residence permits for intra-corporate transferees must be issued within 90 days.65 Thus, applying LMTs lengthens the residence permit processes significantly. Furthermore, even if applications can be filed online, an in-person visit at a Finnish embassy or consulate (or at Migri, if the applicant is already in Finland) is required for identification of first-time applicants.66Due to the COVID-19 pandemic, there have been restrictions to receiving and processing applications at Finnish missions abroad.67
A recent study comparing Finland’s residence permit for specialists to similar models in Denmark, Norway, Sweden and the Netherlands identifies several bottlenecks in the permit process, even if the Finnish specialist scheme was generally considered to be globally competitive. Major factors that can make the overall length of the process longer than in comparator countries are long waiting times for in-person appointments at Finnish missions abroad and a delay for receiving the physical residence permit card abroad before the specialist can enter Finland and begin the work. When the application is submitted abroad, receiving the residence permit card takes approximately four weeks from the positive residence permit decision. Entry into the country was found to be considerably slower in the Finnish model than in the comparator countries, where applicants are generally able to enter the country right after or before the residence permit decision is made.68
Conscious of these challenges and of the importance of attracting international talent into the country, the Finnish Government has set a goal of reducing the average processing time of work-based residence permits to one month by 2023.69 To support this objective, the administration of work-based immigration was transferred from the Ministry of Interior to the Ministry of Economic Affairs and Employment and a cross-administrative project for developing immigrant legislation and speeding up permit procedures was launched in 2020.
Envisaged measures that seek to streamline the residence permit process include fast tracks, automation of permit processes and strengthening the role of the employer in the application process. A bill is expected towards the end of 2021.70 Amendments that would facilitate the entry and stay of international students and researchers are also under preparation. Proposed changes would allow international students and researchers to stay in Finland for up to 24 months post-graduation to look for a job or start a business, instead of the current maximum of 12 months.71 Moreover, a national visa could be implemented already in 2021 to allow specialists, start-up entrepreneurs and their family members to travel to Finland as soon as they have received a positive residence permit decision, eliminating the need to wait for the arrival of a physical residence permit card in the country of origin.72 Migri has also launched a project to reduce processing times of residence permits for specialists and start-up entrepreneurs to two weeks by the end of 2021.73
In addition to lengthy processing times, the relatively short duration of initial residence permits and burdensome process for their renewal can increase uncertainty for foreign talent and businesses recruiting them. Fixed-term residence permits for employment are issued for a duration of 12 months.74 Intra-corporate transferees form an exception to the general rule, as their residence permits are issued for the duration of the intra-corporate transfer (up to 36 months for an executive or a specialist).75
There are other exceptions to the 12-month rule in Finnish legislation that provide some flexibility: a residence permit may be granted for a longer period if the employment is for a set period. However, in any case the duration of an initial fixed-term permit may not exceed 24 months. Certain groups (e.g., specialists, managers, start-up entrepreneurs) may be issued a first residence permit for 24 months.
After the initial residence permit, an extended permit can be issued for up to four years. The processing time for residence permit renewal applications varies according to permit type, from 1-2 months in case of specialists, to as long as 9-10 months for entrepreneurs (3-5 months for start-up entrepreneurs).76 An in-person visit to a service point may be necessary for identification, even if the applicant has already been identified when applying for the initial residence permit.77
Multiple-entry visas for business visitors under the Schengen framework
Business visitors might come to Finland in view of prospective investment projects. Foreign investors and business owners might be interested in gathering information about a host country or to exchange with future partners in case of cross-border Mergers & Acquisitions. Business visitors might also come to Finland to meet with Finnish-based companies doing business with them or to pay a site visit during joint projects or projects managed from abroad.
In all cases, business visitors do not directly enter the Finnish labour market and are expected to carry out their international business activities over a short period of time. Visa conditions and procedures with regard to short-term stays are largely harmonised in the Schengen area, including in Finland. Under the Schengen framework, states have agreed which countries' citizens need a visa to enter participating states.1
Multiple-entry visas are available for business visitors to the Schengen area for intended stays of a duration of up to 90 days in any 180-day period. Such multiple entry visas are valid for a period of five years. Visas are issued by Finnish embassies and other diplomatic missions abroad. Applications must be submitted in person, and the Finnish diplomatic mission may request the applicant to visit for a personal interview. The visa fee was EUR 80 in 2020, and processing of an application may take up to 15 days.2 The fees and processing times are similar in the other Nordic and Baltic countries, except for Latvia, the only country in the group that has a visa processing time of under 10 days.
← 1. See Regulation (EC) No 810/2009 establishing a Community Code on visas and Regulation (EU) 2018/1806 listing the third countries whose nationals must be in possession of visas when crossing the external borders.
← 2. Ministry for Foreign Affairs, A visa to visit Finland, consulted on 23.11.2020.
Other Nordics and Baltics regulate entry of foreign nationals in similar ways
The admission of third-country national business owners or workers is not regulated at the EU level. Individual member states adopt different legal frameworks that meet their national priorities and needs. LMTs are common in the comparator group of Nordic and Baltic countries, but their scope and form vary. The most common form of LMTs in these countries is the requirement to match a local salary standard. LMTs in Denmark, Estonia and Norway have a wide coverage, applying to intra-corporate transferees, contractual suppliers78 and entrepreneurs. In Lithuania and Sweden, LMTs are only implemented with regard to intra-corporate transferees and contractual suppliers. Under Latvian law, only intra-corporate transferees are subject to LMTs.
Moreover, Estonia and Denmark have set annual quotas limiting the number of foreign workers arriving in the country. In Estonia, quotas apply to all categories of workers, with certain exceptions. For instance, "top specialists" earning twice the local salary and workers in the ICT sector are excluded from quotas. In Denmark, the number of residence permits issued to entrepreneurs is limited to 50 per year.79 In comparison, no quotas have been adopted in Finland.
While the objective of LMTs is not to prevent companies from employing skilled foreign labour, they do limit the temporary movement of foreign workers and add to the administrative burden and uncertainty related to recruiting from abroad. These conditions could be particularly problematic for domestic and foreign-owned companies in Finland wanting to source talents from abroad to address local skill gaps on a short notice. Similarly, long processing times for the approval (and renewal) of residence permits for entrepreneurs and start-ups risk to delay, if not alter, investment decisions.
The duration of stay under the initial residence permit varies in the Nordic-Baltic region. Longer first permits than in Finland can be found in Denmark and Latvia for employees and start-up entrepreneurs. In Denmark, a work-based initial residence permit can be granted for up to four years in many sub-categories when the employment lasts for at least four years.80 Latvia grants start-up visas for a period of up to three years.81 The rules for intra-corporate transferees are similar in all the countries of the group. With respect to other types of professional figures, such as contractual and independent services suppliers, there is more variation in the duration of residence permits. For instance, contractual services suppliers may be issued a residence permit of up to five years in Latvia, and independent services suppliers may stay in Estonia for five years under the first permit. Certain foreign providers may find the standard duration of one year in Finland too short.
Overall, complex administrative procedures with in-person visits, and most importantly, slow processing of residence permits act as obstacles to attracting and retaining foreign investors and talented workers that want to migrate to Finland. Finland has put in place a few facilitation measures, for instance by allowing more flexibility for the recruitment of certain types of foreign workers, lifting the need assessment when renewing certain residence permits and providing tax initiatives for certain professional categories, but more could be done to streamline burdensome immigration procedures.
2.2.3. Most foreign providers enjoy the same procurement terms and conditions as domestic and EU tenderers
Public tenders can be a significant source of revenues for firms, domestic- and foreign-owned, engaged in certain sectors, such as construction, health, energy, waste management, IT services, etc. At the same time, shortcomings in government procurement can represent important behind-the-border barriers to trade and investment.
Finland's Act on Public Procurement and Concession Contracts follows the framework established at EU level.82 Finnish legislation does not explicitly prohibit discrimination against foreign suppliers in the procurement process, therefore providing the authorities with the flexibility to consider only domestic providers or those from members of preferential agreements in procurement contracts. Under the Finnish Act, suppliers established in member states of the WTO’s Government Procurement Agreement (GPA) enjoy the same procurement conditions as Finnish and EU providers.83 The most important foreign investment towards Finland from outside the EU comes from the United States, China and Norway, all parties to the GPA. The Russian Federation, also a source of FDI for Finland, is in the process of acceding to the GPA but not yet party.84 Most tenders and tenderers from Finland's trade partner countries are thus subject to the same procurement conditions as local ones. Procurement laws in the countries of the comparator group are similar to Finland's in that they do not explicitly prohibit discrimination against third-country suppliers, either.
For purchases above EU and national threshold values85, a notice of public procurement or design contest must be submitted by the Finnish contracting entity to an online platform. Contracts with a value that falls below the national thresholds may also be advertised via the same platform, but the contracting entity is free to follow its own procedure in this regard.86 Not publishing notifications in a centralised manner via the online platform may in practice limit access by foreign suppliers to the procurement market below value thresholds.
The language of notices and tender may also constitute a barrier to participation by foreign suppliers. In national award procedures, procurement notices must be submitted in Finnish or Swedish. In the EU-level procurement procedure, the call for tenders must include the language or languages in which tenders must be submitted. In practice, tenders are mainly requested to be submitted in Finnish or Swedish, although the contracting entity may choose to conduct the tenders in English to attract foreign suppliers.87
2.2.4. Regulatory transparency and competition
This section briefly discusses some aspects of regulatory transparency, as well as competition-enhancing measures that contribute to Finland's general regulatory environment. While these behind-the-border aspects apply to domestic and foreign-owned companies alike, strong institutions and transparent regulation play a role in attracting foreign investors to the country.
Pro-competitive policies could improve product market regulation
Well-functioning markets require, among other things, pro-competitive regulation. In 2018, Finland’s product market regulation was overall in line with the average OECD country but slightly more restrictive than in the remaining Nordic-Baltic region (Figure 2.2).88 For instance, public ownership of companies, as further discussed below, is rather common in Finland, but also in the rest of the Nordic-Baltic region. The level of administrative burden on start-ups and state intervention in business operations (e.g., price control, public procurement, etc.) were lighter in Finland than in the average OECD country, although in a few instances higher than in its neighbours. Despite recent reforms to increase competition, barriers in services (notably retail) and network sectors (e.g., transport, gas, etc.) remain markedly higher than in most OECD economies and in the remaining Nordic and Baltic countries.
Note: The indicators refer to economy-wide regulation and are composed of the simple average of the sub-indicators on State involvement and Barriers to entry. The indicators range between 0 (most competitive) and 6 (least competitive environment).
Source: OECD PMR database, 2018
Finland has public consultations for new legislation but no vacatio legis
Similarly to other countries in the comparator group, there is a well-established and transparent public comment procedure in Finland that is open to all interested persons, including businesses.89 Ministries have the legal obligation to keep available and provide access to information on legislative reforms.90 In practice, draft bills are sent to key stakeholders for comments.91 The request for comments is also published in an online platform to allow all interested parties to comment the proposal for at least six weeks.92 Most of the material is published in Finnish and Swedish. The availability of English translations of draft bills and other documents would further facilitate participation of foreign investors.
However, according to OECD indicators, Finland’s performance in the areas of regulatory impact assessment and particularly ex post evaluation of regulations remains below the OECD average, despite some improvement in both areas from 2015 to 2018.93 Not all areas of regulation are subject to ex post evaluation in Finland and the reviews lack consistent methodologies. Among Finland’s Nordic-Baltic peers, Denmark has the strongest ex post evaluation practices, with reviews conducted both by government and the Danish Business Forum for Better Regulation.94
Moreover, there is no legal requirement in Finland to communicate regulations to the public within a reasonable time prior to their entry into force. Pursuant to the Finnish Constitution, acts shall be published without delay. An act that has not yet been published by the date provided for its entry into force will only enter into force once it has been published.95 This shortcoming in regulatory transparency is mitigated to some extent by the practice of including the intended date of entry into force in bills. Moreover, bills that are being passed, or that have been passed but not yet officially published, are made available to the public via the website of the Finnish Parliament. Nonetheless, regulating a short transitory period between the announcement of new legislation and the moment it enters into force, the so called vacatio legis, would ensure that companies have time to adapt to new binding obligations. This transitory period might be particularly important for foreign companies, as English translations of acts are often not immediately available, if at all. The lack of vacatio legis is common among the Nordic and Baltic countries observed: only Norwegian law ensures a reasonable delay between publication and entry into force of laws and regulations.96
Appeal and redress rights facilitate competition in Finland
As in other Nordic and Baltic countries, the possibility to appeal against decisions by public authorities to independent and impartial bodies, as well as redress rights with regard to anti-trust law infringements, encourage competition and contribute to attracting investments in Finland.
Most decisions by public authorities can be appealed against by an affected party either directly to an administrative court or first through an administrative review with the authority who made the decision. Any person whom the administrative decision concerns or whose rights, obligations or interests are immediately affected by the decision has the right to lodge an appeal against the decision. Party status may also be specifically designated in a legal act.97
Domestic and foreign firms operating in Finland also have access to the Market Court and have redress when business practices, e.g., by companies with strong market power, restrict competition. The Finnish Competition and Consumer Authority investigates potential infringements of competition rules on its own initiative and based on complaints, and refers competition matters to the Market Court. Natural and legal persons who have suffered damage due to infringement of competition rules are entitled to full compensation.98
This section complements the analysis of Finland's general regulatory environment by identifying factors that might influence foreign investment decisions in several services sectors of strategic importance. Some of these factors are set at the EU level while others reflect Finnish legislation.
The OECD Services Trade Restrictiveness Index (STRI) is used to highlight sector-specific challenges and benchmark against the comparator group (Box 2.4). This analysis focuses on measures that Finland and its peer countries apply toward non-EU/EEA investors, as the restrictive measures captured by the STRI tool are based on Most Favoured Nation regulations. Therefore, they do not prejudice investment and trade within the Nordic-Baltic region, nor do they consider intra-EU/EEA preferences.
In some services sectors, Finland has a relatively open market compared to the remaining Nordic-Baltic countries (Figure 2.3). However, in some others, the Finnish regulatory framework is among the most restrictive in the Nordic-Baltic region, as is discussed further below.
2.3.1. Telecommunications
Best-practice pro-competitive regulation is particularly important in this sector, to ensure a level playing field between newcomers and suppliers that hold significant market power in the telecommunications sector. Asymmetric regulation that mandates interconnection with or access to dominant firms' networks and facilities may be necessary to enable market entry by newcomers when there is no effective competition in each market. Moreover, regulation of access prices and mandating that dominant firms publish a standard reference offer, detailing the terms for access or interconnection, help ensure that other (foreign and local) providers have non-discriminatory access to infrastructure. In recent years, Estonia and Sweden have deregulated certain markets where effective competition has been established, resulting in lowered barriers to trade and investment in telecommunications in these countries (Figure 2.4).99
The Finnish telecommunications regulator Traficom has imposed a wide range of asymmetric obligations in several market segments where it has identified dominant suppliers. However, the markets for active wholesale products (VULA, bitstream) and high-quality connections form an exception. Traficom’s decisions only require dominant firms to offer non-discriminatory access prices for these products, instead of imposing price regulation in the form of price caps, cost-oriented pricing or minimum margins between the wholesale product and retail price.100 According to the European Commission, the Finnish regulator also analyses the telecommunications market less often than its Nordic-Baltic counterparts.101
Moreover, in Finland, universal service obligations are not assigned on a competitive basis. Finland’s Information Society Code mandates an objective and non-discriminatory selection procedure of universal service providers, but they are not selected through tenders. Instead, the regulator imposes service obligations on the operator(s) that it deems to be best suited, in terms of economic aspects and infrastructure, to provide universal service.102 Similarly, in Sweden, the regulator can impose universal service obligations on one or more operators, although so far, this has not happened.103 In comparison, Denmark and Estonia have adopted competitive bidding procedures to award contracts for universal services. In these countries, a universal service obligation is imposed on a provider if the tender fails.104
Source: OECD STRI database, 2020.
Finally, EU/EEA consumers no longer pay roaming surcharges when travelling within the EU/EEA. For that, the retail price regulation is coupled with price caps for the wholesale charges that the home country's operator pays the visited country's operator for the use of its network.105 Suppliers from third countries do not have access to the regulated rates and conditions, as they apply only to the EU/EEA internal market.
2.3.2. Construction
The main hindrances in the Finnish construction sector are related to building permit procedures (Figure 2.5). Finland ranks 42nd out of 190 countries in the ease of dealing with construction permits, behind other Nordic and Baltic countries, except for Latvia (56th).106 Denmark (4th) is the best performer of the group. Obtaining a construction permit for a warehouse in Finland is relatively burdensome in terms of both cost107 and complexity, with 17 different procedures required, more than in any other country in the group. Despite this, the time required to go through all the necessary steps in Finland is relatively short (65 days), only a day longer than in Denmark, and well below the group average (110 days).There have not been significant changes in the Finnish construction permit procedure according to these metrics since 2006. However, a comprehensive reform of Finland’s 1999 Land Use and Building Act is under preparation. A bill that will address a smoother permit procedure, among other questions, is expected by the end of 2021.108
As in Norway and Sweden, construction engineer is not a regulated profession in Finland either, allowing for relatively easy mobility of foreign professionals in the field.109 Nonetheless, the designers, site managers and specialist foremen of the building project must meet certain qualification requirements.110 In the remaining Nordics and Baltics, a license is required to provide engineering services in the construction sector. In Latvia and Lithuania, procedures are in place to recognise foreign qualifications of construction engineers,111 whereas Denmark and Estonia limit the recognition of foreign degrees.112 In these four countries where the profession is regulated, at least one construction engineer must hold a domestic license for the authorities to issue a construction permit or authorisation to a foreign contractor.113
Source: OECD STRI database, 2020.
The legal framework for the public procurement of construction projects is less restrictive in Finland than in Latvia and Norway. Latvian law does not explicitly exclude abnormally low tenders from consideration by the contracting authority.114 Access to the Norwegian public procurement market is reserved for suppliers established in the EEA or states parties to the WTO GPA. Moreover, in Norway, local wages and work conditions are mandated for construction contracts above threshold values of NOK 1 300 000 (EUR 121 365, as of 18 November 2020; when the contracting entity is a state authority) and NOK 2 050 000 (EUR 191 383; for other contracting authorities), whereas in Finland, local conditions are mandated only for construction contracts valued above the EU procurement threshold of EUR 5 350 000.115 These requirements may indirectly favour local providers over foreign businesses and investors.
2.3.3. Professional services
Professional services are relatively open to trade and investment in Finland. Among some of these professions (described below and listed in Figure 2.6), only auditing is a regulated profession in Finland and Sweden, while the other countries in the comparator group extend licensing requirements also to other groups of professionals. For instance, in Norway, legal professionals, accountants and auditors are required to obtain a local licence to practise domestically. The following sub-sections discuss in more detail the regulatory environment faced by foreign investors and professionals interested in practising in Finland.
Engineering & architecture
Finland has a flexible regulatory framework for engineering and architecture services, as neither is a regulated profession in the country. In the comparator group, the engineering profession as a whole is only regulated in Latvia, where the entry of foreign professionals is facilitated by a temporary licensing system and a process for recognising foreign qualifications in engineering.116 In Denmark, Estonia and Lithuania, only certain engineering professions are subject to licensing.
Architecture is a regulated profession in Estonia, Latvia and Lithuania. In Estonia, the licensing system represents a significant barrier to international mobility: architects that have acquired their professional qualifications abroad have to completely re-do the university degree, practice and exam in Estonia to practise in the country.117 In Latvia and Lithuania, processes exist for recognising foreign qualifications (see Box 2.5).
Accounting & auditing
Accounting and auditing services are also relatively liberal professions in Finland. In the comparator group, only Latvia and Lithuania have leaner overall regulation than Finland in these sectors. In most of the Nordic-Baltic region, including in Finland, accounting is not a regulated profession. In auditing, however, all Member States regulate the sector due to EU-level requirements.118 Norway is the only country in the group that imposes licensing requirements and other restrictions on both professions.
The OECD STRI provides information on laws and regulations that affect trade and investment in 22 sectors across 46 countries, including OECD member countries, 24 EU/EEA countries and several emerging-market economies.
The index covers market access and national treatment provisions on all four Modes of Supply1, as well as domestic regulation applicable to both resident companies (whether national or foreign) and to non-resident companies engaging with a given country. The indices are composed of several measures organised under five policy areas:
Restrictions to foreign entry: foreign equity limits, nationality or residency requirements for the board of directors and managers, foreign investment screening, restrictions to cross-border Mergers & Acquisitions, and other sector-specific measures;
Restrictions on the movement of people: quotas, economic needs tests, limitations to the duration of stay of foreign providers and the recognition of foreign qualifications in regulated professions;
Other discriminatory measures: discrimination of foreign providers with respect to taxes, subsidies and public procurement participation. Divergence between national and international standards is also covered;
Barriers to competition: information on anti-trust policy, government ownership of major firms and whether these are exempt from competition law and price regulation. Sector-specific pro-competitive regulation is also considered for network industries;
Regulatory transparency: consultation and publication of legislation prior to entry into force, administrative procedures to establish a company, obtain a license or a business visa.
The OECD STRI records laws and regulations in force in each country. It is compiled by qualified legal professionals according to a common and transparent methodology2 and verified by each country’s regulators and relevant authorities. The OECD STRI does not consider preferential trade agreements.
← 1. The General Agreement on Trade in Services (GATS) defines four Modes of Supply for services: 1) cross-border trade, where a service is provided from one territory to another; 2) consumption abroad, where a service is provided in the territory of the consumer; 3) commercial presence abroad, where a service is supplied by a provider from one territory established in another one; 4) movement of natural persons, where a provider from one territory provides a service in another territory.
← 2. See Geloso Grosso et al. (2015[4]).
In auditing, the sector-specific barriers that Finland maintains, such as licensing requirements for auditors and equity restrictions for audit firms, stem from European directives. These requirements are also found in the other countries of the group. Conditions to qualify as an auditor include educational and experience requirements and passing a professional examination.119 Auditors who have been licensed in other EEA states and states with which the EU has mutual recognition agreements can work in Finland after passing an aptitude test.120 In contrast, auditors who have obtained their qualifications from third countries and wish to practice in Finland, even on a temporary basis, must fulfil all the general educational and experience requirements, and pass the professional examination required of local professionals. However, there are shortcomings related to the recognition of foreign degrees (see Box 2.5).
In addition, both the aptitude test for EEA-professionals and the professional examination for auditors in Finland may represent an obstacle to foreign professionals, as they must be taken in the national language (Finnish or Swedish).121 Moreover, all candidates must have completed at least one year of practice with an auditor that has been approved in Finland or another EEA state.122 In the comparator group, Estonia and Sweden impose even stricter conditions for foreign auditors, who have to completely re-do their university degree, practice and exam in the host country.123
In professional services, non-recognition of foreign qualifications represents a major obstacle to international mobility when specific degrees and experience are required to obtain a license or authorisation to practice in the host country.
In Finland, auditors, as well as legal practitioners who wish to represent clients in court, are subject to specific educational requirements. Finnish law provides for the possibility to recognise a non-EU/EEA higher education degree as comparable to a Finnish degree in cases where the latter is an eligibility requirement for a post or position in Finland. The criteria for assessing the equivalence of a foreign degree with a local one are laid down in the law and further specified in the Bill introducing the legislation.1 The law does not indicate the time needed by authorities to decide on whether to recognise a foreign degree. However, according to the Finnish National Agency for Education, processing times are reasonable. The average processing time of applications is 2.5 months.
In comparison, Latvian and Lithuanian laws prescribe maximum delays for recognising foreign higher education degrees (three to six months in Latvia and one month in Lithuania).2 In the other selected countries, recognition processes do not extend to all professions or they concern only certain groups of professionals, such as professionals who have obtained their qualifications in the EEA. In Finland, too, the recognition of professional qualifications obtained in the EU/EEA is covered by a separate framework, under which recognition decisions must be issued within four months of application.3
← 1. Act on Eligibility for Public Posts Provided by Higher Education Studies Completed Abroad (1385/2015), Section 2, and Bill HE 22/2015 vp.
← 2. Latvia's Regulated Professions and the Recognition of Professional Qualifications (20 June 2001), Section 43. Lithuania's Resolution on the procedure for recognition of education and qualifications (29 February 2012), Section 32.
← 3. However, law degrees fall outside the scope of this Act. Instead, the Act on Eligibility for Public Posts Provided by Higher Education Studies Completed Abroad will also be applied to the recognition of EU/EEA degrees in law. Act on the Recognition of Professional Qualifications (1384/2015), Sections 1, 2 and 13. The Act implements Directive 2005/36/EC on the recognition of professional qualifications.
As regards audit firms, Finland implements equity restrictions and licensing requirements for board members, mandated by EU law. The majority of the voting rights in an audit firm must be held by auditors or audit firms approved in Finland or another EEA state. Additionally, the majority of the board members must be licensed auditors.124 These requirements represent a border barrier for foreign companies, given the difficulties to become an authorised auditor in Finland (or another EEA state).
Some of Finland’s peers go beyond the minimum requirements foreseen in EU law and impose additional requirements for audit firms. For instance, in Estonia, Lithuania and Sweden, at least one manager in an audit firm must be a licensed auditor. Commercial presence is required to provide cross-border auditing services in Denmark, Estonia, Lithuania, Norway and Sweden.125
Source: OECD STRI database, 2020.
Legal services
Finland has a relatively open regulatory environment in the legal services sector, as no licence or authorisation is required to provide legal services in Finland. Among the comparator group, only Latvia and Sweden have a more flexible regulatory landscape than Finland in this sector.
In comparison, in Denmark, Estonia, Lithuania and Norway, the provision of legal services in the law of the host country is reserved to locally licensed lawyers.126 Norwegian law extends this requirement also to the field of international law.127
Licensing requirements in these four countries are coupled with measures that make it difficult for foreign legal professionals to obtain a local licence, such as conditioning the ability to practice legal services on the basis of nationality or permanent residency in the host country.128 Moreover, strict rules to foreign entry apply in Estonia and Lithuania, such as requiring that all equity shares of legal services firms are held by locally licensed lawyers.129
Finally, in Finland, the professional title of advocate (asianajaja) is reserved by law for legal practitioners who have been admitted to the Finnish Bar Association, but it does not imply exclusive rights to provide legal advice.130 The right to represent a client in court is restricted by law to advocates, public legal aides and so-called licensed legal counsels.131 While not contributing to the level of restrictiveness of Finland’s framework for legal services according to OECD indicators, these aspects are reflected in the European Commission’s Restrictiveness Indicator for national regulation of professional services.132
2.3.4. Transport
The transport sector is mainly composed of air, maritime, rail and road freight transport services. Overall, the OECD STRI indicates that the regulatory framework for transport services in Finland is restrictive compared to the rest of the Nordic-Baltic region. Out of the four transport sectors, Finland has the strictest regulation in the group in rail freight transport, and more stringent rules than in most other Nordic-Baltic countries also in the remaining sectors (Figure 2.7).133
Air transport
The legal framework in the air transport sector is largely harmonised at EU level. Hence, restrictive aspects specific to air transport are very similar in the group. In Finland, government ownership in the national airline Finnair may represent an additional barrier to competition.
EU aviation regulation contains provisions that limit market entry by foreign air carriers in all selected countries. Foreign equity limits apply to EU-incorporated airlines operating in both domestic and international transport of passengers and goods: operating licenses for air carriers established in the Union are conditional on majority ownership and effective control by EU Member States or nationals of EU Member States. As a result, foreign investors cannot own more than 49% of the share capital in EU-incorporated airlines.134 Limitations to cross-border lease of aircraft also represent an entry barrier for foreign providers.135
Moreover, EU-level regulation imposes certain barriers to competition in the air transport sector. Air carrier alliances are exempted from competition law.136 When not subject to anti-trust laws, alliances can have an adverse effect on competition and may ultimately result in higher fares. Furthermore, the administration of take-off and landing slots (i.e., entitlement to use a runway at a given time) at EU airports favours incumbent air carriers over new entrants. Incumbents that operate at least 80% of their allocated slots are allowed to retain the same slots from one season to another, and new entrants only have access to the remaining slot pool.137 However, this non-competitive slot allocation system is mitigated to some extent by allowing secondary trading of slots between air carriers.138
These EU-level rules on air transport are applied in all countries in the group, including Norway, being an EEA state. However, the Norwegian Aviation Act contains some additional barriers to foreign investment, such as stricter equity limits (requiring at least two-thirds domestic ownership) and the state's right to purchase, fully or partly, an airline or the airport facilities of an airport licence holder when its licence expires, subject to compensation.139
In addition to obstacles related to the EU framework, the Finnish Government owns 55.8% of the shares of Finnair that operates both air passenger and cargo services.140 Public ownership in major providers may constitute a barrier to competition, especially if companies under state ownership enjoy privileged treatment with, for instance, taxes, subsidies or public procurement. State-owned enterprises may also have easier access to additional funding in times of crises. However, EU state aid rules and public procurement directives promote competitive neutrality in state ownership within the Union. Due to the COVID-19 pandemic, many state-owned (but also private) airlines have received government aid to weather the crisis. These support measures have raised some concerns about effective competition.141 The Finnish Government has granted Finnair a loan guarantee of EUR 540 million and participated in the company’s share issue to support Finnair’s solvency and safeguard its operations, which have been particularly affected by travel bans issued in response to the outbreak.142 Estonia and Latvia also adopted financial measures to support their national airlines, Nordica and airBaltic respectively.143 All above-mentioned support measures have been approved by the European Commission under the EU’s legal framework for state aid. The governments of the remaining countries in the group do not control major airlines.144
Maritime freight transport
In maritime freight, access to coastal transport between Finnish ports (cabotage) and favourable tax treatment/subsidies are largely tied, via flag state rules, to domestic (Finnish or EEA) ownership of vessels. Denmark, Latvia and Norway have adopted more liberal approaches to maritime cabotage.
Under Finland's Maritime Act, a ship is regarded as Finnish and may fly the national flag if at least 60% of the ship is under Finnish ownership, or EEA-ownership if the ship is registered in Finland and directed and operated from therein.145 Ships below those ownership thresholds may be approved as Finnish for a maximum of two years at a time, if the use of the vessel remains under Finnish influence and the registration of the ship in Finland promotes the Finnish maritime industry and employment.146
Once registered, vessels flying the Finnish flag, or the flag of another EU state, can perform maritime cabotage.147 Hence, third-country investors have a limited access to costal trade in Finland due to ownership requirements imposed by the registration of a ship as Finnish. Exceptionally, a temporary permit for cabotage can be granted to a foreign ship if no Finnish, or EU-registered, vessel is available.148
Similar ownership requirements for maritime cabotage are found in Estonia, Lithuania and Sweden. Lithuania requires 100% domestic ownership to register a ship under the national flag, while in Estonia and Sweden, it is sufficient that the vessel is majority-owned by nationals.149 In contrast, Denmark and Latvia do not limit costal transport between domestic ports. In Norway, foreign vessels registered in the Norwegian International Ship Register (NIS) may carry cargo between ports in Svalbard and between Svalbard and Norwegian mainland, and as of July 2020, cabotage by bareboat-registered vessels in the NIS is not subject to limitations.
The flag state and hence ownership of vessels are also linked to favourable tax treatment and subsidies. Rules adopted at EU level allow Member States to issue discriminatory state aid measures in the maritime sector.150 Tonnage tax regimes, whereby shipping companies pay taxes according to the tonnage they operate instead of ordinary corporate tax rules, and seafarer schemes to reduce the labour costs for seafarers employed on EU or EEA vessels, are examples of acceptable state aid measures under EU law. Companies with at least 60% of the gross tonnage registered under an EU flag can opt for the Finnish tonnage tax regime.151 Similar incentives are also in place in most of the comparator group, however the percentage of gross tonnage that must be registered under an EU/EEA flag varies from 20% in Sweden to 100% in Lithuania.152 Finland also has a seafarer scheme where manning costs of vessels that fly the Finnish flag are eligible for subsidies.153 In Denmark, Estonia and Sweden, seafarer schemes apply to manning costs of EU/EEA flagged vessels. The Norwegian scheme covers both ships registered in the national and the international register, but only EEA seafarers are eligible for benefits.154
Source: OECD STRI database, 2020.
Other measures that affect foreign businesses and investors in the maritime transport sector include obligations to use certain local services. In the Port of Helsinki, shipping companies are required to engage local port services providers for mooring and unmooring.155 Nationwide, the right to perform pilotage is reserved by law for the state-owned company Finnpilot, excluding other (foreign or local) providers from offering this activity.156 Similarly in Estonia, pilotage in internal waters is provided by state-owned Eesti Loots AS, while in Norway and Sweden, pilotage is reserved to the local maritime/coastal authority.157 Shipping companies are also obliged to use local services in Denmark, although with a greater degree of flexibility, as pilotage services providers can be established in any EU/EEA country.158
Moreover, a certification is required for most professions to practise on board of Finnish vessels, but only some foreign qualifications are recognised in Finland. Other qualifications, namely for professionals at the ship management level, require an exam in Finnish maritime law.159 This exam is not directly discriminatory, but the additional administrative requirement represents a practical barrier to the movement of foreign professionals. Furthermore, only EU/EEA citizens may act as master of a commercial vessel that flies the Finnish flag.160 The same nationality requirement for captains is found in Estonian and Lithuanian legislation.161
Rail freight transport
Regulation of the rail transport sector is largely harmonised in the EU, and hence in the Nordic-Baltic region. EU legislation stimulates competition in the rail transport sector by mandating the separation of infrastructure management and transport operations.162 On the domestic level, the sector is characterised by a strong presence of state-owned enterprises. Apart from Denmark, all countries in the group control major transport providers through public ownership. In Finland, the largest rail transport provider in the country, VR Group, is 100% state-owned and held a market share of 98.5% in 2018.163 As of September 2020, there are three other licensed rail freight transport providers in Finland: Aurora Rail, Fenniarail and Operail.164
Policies mandated at EU level also affect competition in all selected countries. In the EU, transfer and trade of railway infrastructure capacity between firms or services is prohibited once the capacity has been allocated by an infrastructure manager.165 If authorised, secondary capacity trading could mitigate problems with efficient capacity allocation in a sector where access to infrastructure and facilities is essential to provide services. Moreover, several types of agreements between rail transport undertakings are exempt from anti-trust rules under EU law.166 Anti-trust immunity can have the effect of preventing, restricting or distorting competition in the railway sector, and hence discouraging foreign entry.
Cross-border supply in the rail transport sector requires granting access rights to rail undertakings from neighbouring countries.167 Finland has implemented EU rules mandating open access for railway companies to rail networks within the Union to operate all types of rail freight services.168 However, Finland has a unique track gauge standard that is incompatible with those of other European countries, except for Russia. This technical difference represents, in practice, an entry barrier to foreign carriers, which need to switch wagons in order to transport goods across the border from Sweden to Finland.169 Providers from Russia have limited access to the Finnish rail network. Cross-border rail transport between Finland and Russia is governed by a bilateral agreement that does not cover access rights for the purpose of operating domestic cargo services.170 Similar limitations for domestic cargo services towards Russian suppliers are found in Estonia, Latvia and Lithuania.171
Road freight transport
The road freight transport regime is generally liberal in the selected group of countries, especially in Denmark and the Baltics. Public ownership in major road freight companies remains in place in Finland and Norway, coupled with limits to the proportion of shares that can be acquired by (foreign or local) investors in the government-controlled firms. In Finland, VR Transpoint operates in domestic and international road freight transport as part of the fully state-owned VR Group. Parliamentary approval would be required for the State to relinquish a part of its ownership in VR Group.172
Some additional limitations result from EU-level policies and apply in all countries of the comparator group. The manager of a road transport company must be an EU or EEA resident.173 Moreover, under the EU framework, agreements between road freight carriers are exempted from competition law.174 As discussed above, this may induce competition-distorting effects and raise fares in the sector.
2.3.5. Logistics
Logistics services, such as cargo-handling, freight forwarding, customs brokerage, and storage and warehouse services, are crucial to the development of global value chains.
State ownership of major logistics services may represent a barrier to competition (Figure 2.8). Publicly controlled firms are common across the Nordic-Baltic region in the cargo-handling sub-sector, but not in the remaining logistics sub-sectors. Finland is an exception to this trend, with government-participation in major logistic companies in most sub-sectors. In Finland, VR Transpoint provides both cargo-handling and storage and warehouse services at road and rail facilities under the 100% state-owned VR Group. The Government also holds a majority ownership in Finnair, the national airline, which also provides cargo-handling services at airports. Finally, the state-owned Posti Group is a major freight forwarding provider and the leading postal and logistic company in Finland.175 State ownership is coupled with limitations to the proportion of shares that can be acquired by (foreign or local) investors in the publicly controlled firms, due to minimum levels of state shareholding set by the Finnish Parliament.176
Some entry barriers arise from EU law as regards customs brokerage and the operation of customs warehouses. These limitations are directly applicable in all countries of the group, except Norway. Commercial establishment within the EU is necessary to provide cross-border customs brokerage services in these countries, as customs representatives must be established within the Union's customs territory. Moreover, the number of logistics firms that can operate customs warehouses in the EU is limited by an economic needs test.177 Economic needs tests do not necessarily discriminate against foreign-owned operators, but they may nonetheless represent a barrier to market entry.
In Finland, the lack of a competitive process for awarding certain types of service contracts to logistics providers at ports and airports affects both domestic and foreign companies. Finnish legislation does not explicitly provide for a competitive bidding procedure for the right to exploit storage and warehouse services at airports. In comparison, cargo-handling at Finnish airports is regulated in accordance with EU rules that mandate a public bidding procedure.178 The EU Regulation on the provision of port services and the financial transparency of ports mandates a non-discriminatory and transparent selection procedure, but it does not require competitive bidding to select services providers.179 The Port of Helsinki grants rights to provide port services according to the Regulation and the minimum requirements set by the Port.180 Introducing mandatory public bidding procedures for the selection of services providers across all airport and port services in Finland would help promote competition in the award of services contracts.
As a recent positive development across EU Member States, the above-mentioned Regulation prohibits cross-subsidisation when port authorities themselves are also port service providers. Mandatory accounting separation helps monitor compliance with the prohibition and ensure that other suppliers are not put at a competitive disadvantage. As a result, cargo-handling at both Finnish ports and airports is now subject to the prohibition of cross-subsidisation and mandatory accounting separation.181
Source: OECD STRI database, 2020.
2.3.6. Postal and courier services
The postal market has gradually opened to competition within the EU. At the same time, Member States must guarantee a universal postal service in their territory, which can be done by designating one or more postal services suppliers as universal service providers.182 Norway has also adopted the EU Postal Directive, but even after liberalisation measures adopted in 2016, its framework for postal and courier services remains the most restrictive in the group (Figure 2.9).
Source: OECD STRI database, 2020.
Despite increasing competition in postal services, government ownership and market dominance by the designated postal operator (DPO) is still widespread in the sector, particularly in the letter delivery market segment. The DPO is under public ownership in all the selected countries and holds a significant market share in the delivery of letters at least in Finland, Lithuania and Sweden.183
In Finland, state-owned enterprise Posti Group is the DPO for items of correspondence in Finland and for parcels sent from Finland to other countries. Posti is the only service provider in the market for letters and a dominant provider in the market for parcels sent from Finland to other countries. As regards other market segments, the Finnish regulator considers that there is sufficient competition and therefore no need to designate an operator to provide universal services. In 2016, there were three operators (Posti, Matkahuolto and R-Kioski) providing services to consumers in the market for domestic parcels, and at least six operators (DB Schenker, DHL, GLS, Matkahuolto, Posti and PostNord) in the market for parcels arriving in Finland.184 The Finnish regulatory authority, Traficom, does not appear to evaluate the market very frequently: its latest decisions regarding universal postal services are from 2011 (letters) and 2016 (parcels). While there is little to observe in the letter market due to Posti's position as the only service provider, the growing volumes of e-commerce make for a much more dynamic market for parcels.
Despite regulatory reforms, Finland maintains some barriers to competition in the postal market. Following EU-level requirements, universal postal services provided by the DPO are VAT exempted.185 Moreover, the DPO can be granted compensation for the part of the net costs of universal service that represent an unfair financial burden on it. Other providers shall participate in compensating these costs.186 Compensation mechanisms are also found in Danish, Estonian and Norwegian law.187 The market is not effectively liberalised if the DPO enjoys privileges, such as preferential tax treatment that puts its competitors, whether local or foreign, at a competitive disadvantage.
EU law requires Member States to implement certain measures to mitigate the effects of market dominance and avoid cross-subsidisation from uncompetitive to competitive segments of the market by DPOs. Accounting separation, cost allocation rules and an obligation to publish accounting information are examples of such measures mandated by EU law.188 Price regulation, for instance in the form of minimum prices, is an additional tool to address anti-competitive practices, but currently there is no such regulation in place in Finland.189
Finland has taken steps to facilitate market entry for new operators by mandating non-discriminatory access to the postal network (i.e., the post code database, post office boxes) to all providers, including private foreign providers such as DHL, Fedex and UPS.190 Moreover, following a 2016 reform, a licence is no longer required to enter the Finnish postal market. Postal operations are, however, subject to a yearly supervision fee. The fee collected from a new operator is EUR 1 000 for the first year of operation and EUR 5 000 for the second year.191
Courier services are a crucial part of modern logistics chains and contribute to support cross-border e-commerce activities, creating strong complementarities and linkages between distribution and transport services. Measures related to the customs procedure (see Box 2.6) also affect the postal and courier services sector, in addition to transport and logistics services.
Border barriers related to customs procedure might affect firms, domestic and foreign alike, active in transport, logistics, distribution and courier sectors. The overall effectiveness of the customs regime depends on the speed, simplicity and predictability of formalities at the border. Lengthy and complex customs procedures are an administrative burden for a provider that imports or exports goods. Finland ranks highly in international surveys measuring customs efficiency1, indicating that courier service providers, cargo carriers, logistics firms and distributors operating in Finland benefit from relatively fast and simple border processes.
The OECD STRI captures general simplification principles via three additional measures in courier, distribution and logistics sectors: processing of shipment information ahead of shipment arrival at the border, a de minimis regime (where goods not exceeding a certain value or weight are exempted from import duties, internal taxes and/or full declaration procedures), and the release of goods before determination and payment of duties. These three streamlined release procedures are especially important to expedite shipments. Harmonised at EU level, they are also currently in force in Finland, although changes are foreseen in 2021 due to the Union's new VAT e-commerce rules.2 Unlike the other countries in the group, Norway is not party to the EU Customs Union and has a slightly different regulatory framework for customs procedures. Norwegian legislation does not mention the possibility of pre-arrival processing, and as of 2020, there is no more de minimis regime in place.3
However, all countries in the Nordic-Baltic region have an advance ruling system and a single window for customs procedures.4 These measures that improve the transparency, predictability and efficiency of customs procedure are included in the STRI for logistics services.
← 1. Finland is the top performer according to the World Economic Forum’s Burden of Customs Procedure indicator (2017) and ranks 8th in the World Bank’s International Logistics Performance Index (LPI; 2018) as regards the efficiency of customs and border management clearance. Among the comparator group, only Sweden and Denmark have better customs performance than Finland in the LPI.
← 2. Regulation (EU) No 952/2013 on the Union Customs Code, Articles 171, 194 and 195. Regulation 1186/2009 on reliefs from customs duty, Article 23. See also European Commission, Modernising VAT for cross-border e-commerce, consulted on 9.12.2020, and Finland's Legislative project VM103:00/2019 to amend the Value Added Tax Act.
← 3. Norway's Customs regulation (FOR-2008-12-17-1502), Section 5-9-1, and Value Added Tax Law (LOV-2009-06-19-58), Sections 2-1, 3-1, 7-2, 11-2 and 14-4.
← 4. Regulation (EU) No 952/2013 on the Union Customs Code, Article 33.
2.3.7. Distribution
The main limitations that apply specifically to the distribution sector in Finland are a state monopoly for the retail sale of alcoholic beverages, regulations on large format retailers and limited access to consumer credit licenses for foreign suppliers. Despite some recent liberalisation measures, such as the deregulation of shop opening hours in 2015, Finland has one of the most stringent regulatory frameworks of the region for distribution services, after Norway (Figure 2.10).
Statutory monopolies prevent market entry by any suppliers other than the monopolist. Finnish legislation reserves the retail sale of beverages exceeding 5.5% alcohol by volume for a state-owned limited company, Alko.192 The monopoly for the retail sale of strong alcoholic beverages is coupled with licensing requirements for the wholesale trade of alcohol and the retail sale of beverages that contain up to 5.5% alcohol by volume. However, the licence requirement is not an impediment to market entry by foreign providers due to objective and non-discriminatory licence criteria. Moreover, foreign producers and supplies of alcoholic beverages from outside the EU enjoy the same rights as Finnish and EU companies to introduce products to the Finnish market by submitting offers to Alko.193 Statutory state-owned monopolies for retail sale of alcohol are also found in Norway and Sweden.194 In Lithuania, retail sale and wholesale of alcoholic beverages are subject to a non-discriminatory licence requirement.195 In the remaining countries of the group, the distribution of alcoholic beverages is not regulated.
The allocation of large format retailers (larger than 4 000 floor m2) in Finnish regional land use plans and local master plans is subject to a special assessment. The primary location of large format retailers is in or near town centres, but other locations are possible if justified in terms of access to the services provided.196 While these criteria apply on a non-discriminatory basis to both domestic and foreign companies, they do represent a limitation to the number of distributors that can set up large retail facilities. Finland is the only country in the Nordic-Baltic region to have this type of measure in place.
Some additional barriers to trade and investment are maintained within the EU. For instance, EU-level regulation imposes mandatory nominal quantities for the packaging of wines and spirits that have also been implemented in Finland.197 Restrictions on pack sizes may prevent retailers from efficient cross-border sourcing and dispatching, putting additional costs on international retailers and their suppliers if required pack sizes differ across countries.
Source: OECD STRI database, 2020.
Foreign retailers have limited access to providing consumer credit in Finland. Consumer credit beyond financing the purchase of goods provided by retailers themselves requires registration as a credit provider and a permit that is awarded only to EEA residents, companies incorporated in Finland and Finnish branches of foreign companies.198 Finally, the time taken for customs clearance (see Box 2.6) also affects cross-border sourcing by domestic and foreign-owned retailers in Finland.
A fragmented international regulatory environment can negatively affect digital firms with a global footprint. Certain regulatory measures, such as harmonised standards to facilitate electronic transactions and payment systems, and interoperable settings on cross-border data flows for business operations, improve the way firms engage internationally over digital networks.
The barriers that affect digital trade in the Nordic-Baltic region are quite similar across the board, some of them resulting from EU-level regulation. Denmark lifted localisation requirements for accounting data in 2015, resulting in leaner regulation, whereas Latvia's approach to maintain ex ante regulation in the fixed telecommunications market segment, despite the absence of dominant providers since 2017, makes for a more restrictive regulatory framework for digital services (Figure 2.11).199
Finland has a relatively liberal regulatory environment for digitally enabled services. Foreign companies have access to online tax services in Finland, unlike in many other countries in the comparator group which maintain requirements that effectively reserve access to online tax services for companies with a local presence in the host country. In Finland, foreign citizens who are representatives of a Finnish company, and representatives of foreign-registered companies can use online tax services on the company's behalf.200 Online services for tax registration and declaration reduce compliance costs for non-resident providers.
Digital trade also benefits from an effective legal framework for the protection of confidential information and intellectual property rights. Finland's Trade Secrets Act implements the EU Trade Secrets Directive that harmonises the definition of trade secrets and requires Member States to provide remedies against their unlawful acquisition, use and disclosure.201 The Copyright Act and the Trademarks Act provide for enforcement measures and remedies for intellectual property rights infringements, including provisional measures and criminal enforcement measures.202 Foreign firms enjoy non-discriminatory treatment for trademark and copyright protection in Finland by virtue of Finland's international commitments.203
Source: OECD Digital STRI database, 2020.
However, access to the provision of payment services in Finland is reserved for domestic providers. Similar limitations are not recorded for the other countries in the Nordic-Baltic region. Under Finnish law, the provision of payment services is subject to an authorisation that may only be issued to a legal person whose registered office is in Finland. Certain exemptions may be granted, but only to Finnish residents and legal persons whose head office is situated in Finland.204
While limitations to cross-border data flows can increase the compliance costs of businesses, proportionate safeguards for the protection of personal data are important for promoting consumer trust in digital commerce. In the EU, rules on cross-border transfer of personal data are largely harmonised by the EU General Data Protection Regulation (GDPR), applied in all countries of the group.205 Under the GDPR, the general rule is that data transfers are possible to countries that ensure an adequate level of protection.206 As regards other countries, data may be transferred only if certain safeguards are put in place by the data sender.207
Moreover, domestic rules on cross-border contracts, which deviate from international standards, may increase compliance costs for international providers. No country in the Nordic-Baltic region is party to the UN Convention on the Use of Electronic Communications in International Contracts, ensuring equivalence between electronic communications and paper documents.208 All Nordics and Baltics have, however, ratified the UN Convention on Contracts for the International Sale of Goods in an effort to implement uniform contract rules,209 and EU-level rules provide electronic signature with the equivalent legal validity with hand-written signature in the Union.210
Localisation requirements to register .eu top-level domains affect cross-border provision of digital services in all the selected countries, except Norway.211 There are, however, no localisation requirements to obtain Finnish .fi top-level domains, administered by Traficom,212 which also acts as a first instance in domain name disputes, removing domain names infringing a protected name or trademark if its owner so requests.213
Foreign companies have to adapt their business model to conform to the regulation in place in each country where they are present, either via FDI or trade. Large regulatory differences among countries represent additional compliance costs for companies active in multiple jurisdictions. Nordås (2016[5]) underscored the importance of regulatory co-operation among countries, particularly those with relatively liberal markets, where regulatory coherence brings additional benefits to trade and investment.214 Excessive regulatory fragmentation, including within a country (with different sets of rules on state, regional and municipal level), also has the unwanted consequence of reducing the scale of the market for potential entrants intending to launch new products. This sub-section explores how similar Finland’s regulation is to that of its neighbouring trade and investment partners, its relative openness, and how its regulation bites foreign investors depending on whether those come from within or outside the EEA.
2.5.1. There are similarities in regulation with other Nordic-Baltic countries
Out of a wide range of OECD countries, Finland's regulatory framework is most similar to those found in other Nordic and Baltic countries, namely Denmark or Lithuania (Table 2.1).215
Professional services (accounting and auditing, legal, architecture and engineering) constitute a notable exception to this general observation. In these sectors, regulation which most resembles Finland's is found in other European countries and Australia. For instance, auditors are subject to harmonised minimum requirements within the EU: licensed auditors must hold the majority of votes and form the majority of the board of directors in audit firms across the Union. Other measures or lack thereof, such as not requiring that the manager of an audit firm be a licensed professional, as well as similarity of horizontal policies, contribute to the similarity of regulatory frameworks for auditing between Finland and the Czech Republic.
Similarity of regulatory settings can also draw from absence of restrictions: engineering is not a regulated profession in either France or Finland, and while a license is required to practice domestic law in Australia, the framework for international law is liberal in both Australia and Finland.
Comparing to the Nordic-Baltic region, Finland's regulatory landscape for construction and related services is most similar to Lithuania’s, and so is also regulation for transport sectors, whereas the framework for logistics and related services is closer to that of Denmark’s.
Table 2.1 also illustrates Finland's relative performance in terms of openness to trade and investment across the sectors covered in this study. In Finland, architecture, accounting and legal services, as well as digitally enabled services are relatively open to trade and investment, indicating better than average performance compared to other countries.216 However, while Finland's performance is at least average in all sectors considered, it is not among the top performers in any sector when compared to other countries, nor is it the best performer within the Nordic-Baltic group in any area.
2.5.2. There is still room to deepen the single market
While the Single Market within the EEA has brought a high degree of regulatory harmonisation, and services trade and investment within this area is substantially more liberal than multilateral rules applicable to third-countries, obstacles to trade and investment have not been completely eliminated. This indicates that there is potential for further market integration.
Figure 2.12 shows the level of restrictions applicable to investors and trading companies from within and outside the EEA in Finland, illustrating how regional integration has nearly halved barriers in sectors such as wholesale and retail, logistics and air transport services.217 Nonetheless, air transport services remains a fairly regulated sector, including for EEA air carriers.218 Moreover, foreign investors from within the EEA will find Finland’s rules in distribution, cargo-handling, air and road transport tighter than in the rest of the Nordic-Baltic region. More could be done to remove regulation that hinders investment and trade and align Finland’s regulatory landscape to that of its neighbours.
Note: Data refer to 2020. The OECD STRI reports restrictions to trade and investment on a Most Favoured Nation basis, while the OECD Intra-EEA STRI captures the level of restrictions applicable to all EEA states. Nordic-Baltic intra-EEA is the average score per sector of the remaining Nordic-Baltic countries.
Source: OECD STRI and Intra-EEA STRI databases, 2020.
Not only is intra-EEA trade and investment restrictiveness considerably lower than barriers towards third countries, but integration within the EEA has also reduced regulatory heterogeneity among EEA states. The effect of the Single Market integration is even more evident for clusters of countries that share other similarities besides geographical proximity. Figure 2.13 shows homogeneity of regulation within the Nordic-Baltic region in clusters of sectors analysed in the previous section.
The size of each country node indicates centrality and reflects the similarity of regulation to all other countries. The shade of the nodes also points to regulatory harmonisation among countries, with dark blue nodes indicating more central countries than those in grey. The thickness of the lines illustrates the degree of bilateral similarity.
Strong linkages are found among most of the countries in the comparator group, in particular between Finland and Estonia for the physical infrastructure and supporting services. However, Finland’s regulation appears slightly less similar to its Nordic and Baltic neighbours when it comes to the transport and distribution supply chain.
Adding all up, Finland’s regulatory framework for services trade and investment is generally most similar to its Danish and Lithuanian counterparts and largely integrated with those of other EEA countries, although further liberalisation of its domestic market, particularly in comparison to other Nordic-Baltic economies, could attract further EEA and non-EEA investors.
Note: The first panel includes regulation captured under the STRI for computer and telecommunications services; the second panel groups regulation scored in the STRI for construction, architecture and engineering services; the third panel groups sectors such as legal services and auditing/accounting services; the last panel covers all transport services, logistics, courier and distribution.
Source: OECD STRI, Intra-EEA STRI and Regulatory Heterogeneity databases, 2020.
This chapter has presented a comparative overview of regulatory factors that might influence foreign investment decisions in Finland and a selected group of countries in the Nordic-Baltic region. Some of these aspects, such as uncertainty related to the implementation of FDI screening mechanisms and relatively long delays for setting up a business may have an impact on FDI across many sectors of the economy. Burdensome processes for recruiting workers from outside the EEA affect companies looking to source talent from abroad in a number of sectors, but Finland has already initiated reforms to streamline the entry of international talent into the country. Additionally, an analysis of selected sectors has highlighted areas in Finnish legislation that could benefit from targeted domestic policy reforms.
In telecommunications, universal services obligations are not assigned on a competitive basis and a lack of price regulation for dominant players in the markets for active wholesale products and high-quality connections forms an exception to the generally good coverage of pro-competitive regulation in this field.
Finland's construction permit procedure is relatively costly and complex compared to other Nordic and Baltic countries. On the other hand, Finland has a liberal approach to the construction engineer profession and most other professional services categories covered (architects, engineers, legal professionals, accountants). However, licensing requirements and equity restrictions based on EU law may represent an entry barrier for foreign firms and investors in auditing.
The landscape for both transports and logistics in Finland is characterised by the strong presence of state-owned enterprises. EU-driven foreign equity restrictions and a non-competitive slot allocation system at airports represent additional barriers to trade and investment in the air transport sector. In maritime transport, links between domestic ownership of vessels and access to maritime cabotage and state aid put foreign providers and investors at a disadvantage.
In the postal and courier sector, the publicly owned designated postal operator has a dominant position in some market segments, coupled with preferential VAT treatment mandated by EU law. In distribution, main barriers consist of a statutory monopoly for retail sale of strong alcoholic beverages, regulations on large format retailers and limited access to consumer credit licences. Moreover, discriminatory access to the provision of payment services presents an obstacle for firms engaging in digital trade.
An assessment of regulatory heterogeneity has shown that in most of these sectors, the most similar legal framework to Finland's is found in Denmark or Lithuania. However, more could be done to liberalise Finland's domestic market in comparison to its Nordic-Baltic neighbours to attract more foreign investors.
The following chapter will explore the effects that regulatory frameworks of the Nordic and Baltic economies have on FDI flows, through an econometric analysis of both cross-border M&A and greenfield investment projects towards Finland.
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[15] Pohl, J. and N. Rosselot (2020), Acquisition- and ownership-related policies to safeguard essential security interests. Current and emerging trends, observed designs, and policy practice in 62 economies, http://www.oecd.org/investment/OECD-Acquisition-ownership-policies-security-May2020.
[8] Rouzet, D., S. Benz and F. Spinelli (2017), “Trading firms and trading costs in services: Firm-level analysis”, OECD Trade Policy Papers, No. 210, OECD Publishing, Paris, https://dx.doi.org/10.1787/b1c1a0e9-en.
[10] Rouzet, D. and F. Spinelli (2016), “Services Trade Restrictiveness, Mark-Ups and Competition”, OECD Trade Policy Papers, No. 194, OECD Publishing, Paris, https://dx.doi.org/10.1787/5jln7dlm3931-en.
[9] Spinelli, F., D. Rouzet and H. Zhang (2020), “Networks of foreign affiliates: Evidence from Japanese micro‐data”, The World Economy, Vol. 43/7, pp. 1841-1867, https://doi.org/10.1111/twec.12963.
[18] Statistics Finland (2019), Foreign direct investments in 2019, http://www.stat.fi/til/ssij/2019/ssij_2019_2020-09-30_kat_001_en.html (accessed on 15 April 2021).
[20] Swedish Post and Telecom Authority (2020), Swedish Postal Market 2020, https://pts.se/globalassets/startpage/dokument/icke-legala-dokument/rapporter/2020/post/swedish-postal-market-2020.pdf.
[26] Väylä (2020), Railway Network Statement 2021, Finnish Transport Infrastructure Agency, https://julkaisut.vayla.fi/pdf12/vj_2019-46eng_vs2021_web.pdf.
[21] World Bank (2019), Doing Business 2020: Comparing Business Regulation in 190 Economies, Washington, DC: World Bank, https://doi.org/10.1596/978-1-4648-1440-2.
This annex describes Finland’s FDI screening mechanisms under its Act on the Screening of Foreign Corporate Acquisitions (Screening Act; 172/2021, last amended 11 October 2020).
The objective of the Screening Act is to screen and, should a key national interest so require, restrict the transfer of influence to foreign investors in companies that fall under the scope of screening. The Ministry of Economic Affairs and Employment is responsible for reviewing foreign corporate acquisitions.
Screening applies to foreign acquisitions of defence sector companies, security sector companies, and any other organisations and businesses that are critical to securing functions fundamental to the society. Defence industry covers companies that produce or supply defence equipment or other products or services important to military defence, and companies that produce dual-use goods or use dual-use technology in Finland.219 Security sector, in turn, refers to companies that produce or supply critical products or services to Finnish authorities that are vital for the security of the society. These critical products include e.g. software and cyber security applications, certification services, cloud services and data centre services.220
The Screening Act does not define which other sectors or activities may be considered critical in terms of securing functions fundamental to society. The legislator's motivation behind this choice was that it is not possible to determine in advance which sectors or activities will prove critical to securing functions fundamental to the society in the future. The concept of key national interests, defined in the law as securing national defence, fundamental functions of society, national security and foreign and security policy objectives, and safeguarding public order and security, was considered to be subject to time-contingent, case-by-case interpretation.221
Whether a foreign acquisition of a non-defence or security sector company falls under the scope of screening is based on the Ministry’s overall assessment. Some general guidance can be found in government documents, which define the vital functions of society (e.g., defence capability, economy, infrastructure, security of supply, internal security)222 and the critical production, services and infrastructure for maintaining these vital functions (e.g., food and water, pharmaceuticals, energy, transport and logistics, data-communications, networks and services of digital society, waste management).223
Regarding screening procedure, defence industry companies, security sector companies and other companies that fall under the scope of screening are subject to partially different sets of rules. In the case of defence industry companies, screening covers all foreign acquirers. As for other acquisitions, screening only covers foreign acquirers residing or domiciled outside the EU or EFTA. Moreover, acquisitions of defence and security companies are subject to mandatory review, where a foreign acquirer must submit an application to the Ministry for an advance confirmation of the planned acquisition. Acquisitions of other critical businesses are subject to a voluntary notification mechanism. The notification may also be submitted in advance if the acquisition has reached the stage immediately preceding the final conclusion.
Under both mechanisms, the need for screening is activated by the crossing of specific thresholds in ownership. The Ministry screens acquisitions where a foreign acquirer gains at least 10%, one-third or half of the votes or corresponding actual influence over an entity subject to screening. The admissibility of the planned acquisition is assessed at each passing of a new threshold.224
The Ministry must confirm an acquisition unless it may conflict with a key national interest. If the Ministry finds that the acquisition may conflict with a key national interest, it must refer the matter to the government plenary session, which decides on the approval or denial on the grounds of safeguarding key national interests.
To add flexibility to the screening mechanisms, a reform that entered into force on 11 October 2020 empowered the Ministry to impose conditions concerning the acquisition as part of a confirmation decision.225 This change can reduce risk from the point of view of foreign investors, as a conditional decision of approval might allow an acquisition that would otherwise have to be denied.
Notes
← 1. Mistura and Roulet (2019[7]) estimate that a reduction in FDI restrictions, proxied by a 10% decrease of the OECD FDI Regulatory Restrictiveness Index (described in Box 2.1), could boost bilateral FDI stocks by a little over 2%. As these estimates are derived for advanced and emerging economies, the impact for Finland might be smaller.
← 2. Rouzet, Benz and Spinelli (2017[8]) find that small reductions of barriers to foreign establishment, as measured by a 1% decrease of the OECD Services Trade Restrictiveness Index (STRI), described in Box 2.4, are associated with an increase in the sales of foreign affiliates by 2%.
← 3. Spinelli, Rouzet and Zhang (2020[9]).
← 4. Rouzet and Spinelli (2016[10]) show that in markets where incumbent domestic firms are sheltered from competitive pressures, prices can increase up to 30% for some services, with clear knock-on effects on the rest of the economy.
← 5. Fournier (2015[11]) shows that a reduction of regulatory divergence by one-fifth could increase FDI by about 15%.
← 6. The Nordic countries, in particular, have long-standing traditions of co-operation in various policy areas, including legislation and economic policy. This spans from financial to transport services, and data flows. For instance, Finland and Estonia are pioneers in cross-border sharing of patient data. The objective of promoting the freedom of movement within the region for people and companies also received particular attention in 2020, following strict border measures implemented by countries in response to the COVID-19 pandemic. See the Nordic Council of Ministers, Freedom of Movement Council activity report 1.7.2019-30.6.2020 (2020:716). As regulation converged due to EU harmonisation, regional integration is likely to have shifted from legislation to co-operation between relevant authorities.
← 7. See Miroudot and Cadestin (2017[12]) and OECD (2019[13]).
← 8. Prior to 1993, foreign ownership in Finnish companies was restricted beyond 20% of share capital, while the real estate market was severely restricted for foreign buyers. For an overview of the implications of European integration on Finland's foreign investment policies, see OECD (OECD, 1995[14]).
← 9. Pohl and Rosselot (2020[15]).
← 10. The Ministry has issued 65 confirmations of foreign acquisitions since June 2012, with no new cases in the first half of 2020 (as of 8 June 2020). The number of screened acquisitions has increased from 7 cases (3.7% of all 189 acquisitions) in 2017, to 15 cases (9.2% of all 163 acquisitions) in 2019. Approximately 80% of the cases subject to screening have concerned defence industry companies. Bill HE 103/2020 vp, p. 5, and Business Finland / Invest in Finland, IIF Results 2020.
← 11. For example, many companies in the food supply and logistics sectors are not considered critical to security of supply. Bill HE 42/2011 vp, p. 19. This position is maintained in the 2020 Bill introducing some amendments to the Act. HE 103/2020 vp, p. 22.
← 12. Opinions by Finland Chamber of Commerce, Finnish Bar Association, Finnish Information Security Cluster and Hannes Snellman Attorneys Ltd on the draft Bill to amend the Act on the Screening of Foreign Corporate Acquisitions (VN/6548/2019, 3 April 2020).
← 13. In practice, the Ministry reports processing applications and notifications (see Annex 2.A.) related to investment screening as matters of urgency. Processing times have varied from five weeks to four months (HE 103/2020 vp, p. 9). According to the Ministry, the approximate average processing time is 1.5 months.
← 14. Screening mechanisms in Latvia and Norway are applied irrespective of the nationality of the acquirer. See for more detail Pohl and Rosselot (2020, pp. 138, 143[15]). See also Hallberg (2019[16]).
← 15. Pohl and Rosselot (2020, pp. 138-140, 143[15]).
← 16. Pohl and Rosselot (2020, p. 123[15]).
← 17. Denmark’s Bill for an Investment Screening Act (Erhvervsudvalget 2020-21, ERU Alm.del - Bilag 120).
← 18. Sweden’s Act Amending the Protective Security Act (SFS 2020:1007). See also Investment policy related to national security. Notification by Sweden (28 January 2021).
← 19. Estonia's Ministry of Economic Affairs and Communications press release, 1 June 2020.
← 20. Act on Transfers of Real Estate Requiring Special Permission (470/2019)
← 21. A permission for the real estate acquisition may be granted if it is not deemed to complicate the organisation of defence, the surveillance and safeguarding of territorial integrity or the assurance of border control, border security or the maintenance of emergency stocks of critical supplies. Act on Transfers of Real Estate Requiring Special Permission, Section 5(1).
← 22. The Åland Islands, an autonomous region of Finland, maintain rules that restrict the right to own real estate in the region. Act on Land Acquisition in Åland (3/1975). OECD's Horizontal review on the acquisition and use of land and real estate measures, Review under the Code of Liberalisation of Capital Movements (CLCM) (DAF/INV/ICC(2020)2/REV2, 16 September 2020), p. 24.
← 23. Ministry of Defence, Information on the permission to non-EU and non-EEA buyers to buy real estate, consulted on 10 November 2020.
← 24. These strategic sites include certain sites used by or allocated for the Defence Forces or Border Guard. If the property is near a strategic site, the real estate owner can request prior information as to whether the state will use its right of pre-emption. Act on the State's Right of Pre-emption in Certain Areas (469/2019), Sections 2, 3, 5.
← 25. In Denmark, land and real estate acquisitions by non-residents or people who have lived in the country for less than five years are subject to permission. Act on the purchase of real estate (LBK nr 265, 28 August 1986), Section 1. Estonian law includes restrictions regarding agricultural and forest land and restrictions in certain geographical areas arising from national defence reasons. Restrictions on Acquisition of Immovables Act (RT I 2012 11), Sections 4, 5 and 10. In Latvia, land in rural areas may be acquired by Latvian citizens. Law on Land Privatisation in Rural Areas (9 July 1992), Section 15. Under Lithuanian law, only persons from EU/EEA or states parties to certain other international agreements may own land under the same terms and conditions as locals. The Constitution of the Republic of Lithuania (25 October 1992), Section 47; Law on Amendment to the article 47 of the Constitution of the Republic of Lithuania (23 January 2003); Investment Law (30 July 1999), Section 10.
← 26. Freedom of Enterprise Act (122/1919), Section 1.
← 27. Finnish Patent and Registration Office (PRH), Information on permits to establish a branch, 10 November 2020.
← 28. PRH, Number of enterprises in the Trade Register and Registered new enterprises in the Trade Register, by company form (last updated 25 January 2021).
← 29. Freedom of Enterprise Act (122/1919), Section 6(3).
← 30. Estonia's Commercial Code (RT I 1995 26 355), Section 384, and Value-Added Tax Act (RT I 2003 82 554). Latvia's Procedure for reimbursement of value added tax of a third country or third territory registered tax payer (17 December 2013), and Value Added Tax Act (29 November 2012), Section 112. Lithuania's Rules on the Registration on the Registry of the Value Added Tax Payers (31 December 2010), Chapter V, Section 27.
← 31. Estonia is the best performer in the Nordic-Baltic group, ranking 14th. World Bank (2019[21]).
← 32. Finnish Patent and Registration Office, Start-up notification of a limited liability company, consulted on 10 November 2020.
← 33. Republic of Estonia, E-residency, consulted on 2 February 2021.
← 34. The time required to complete all necessary administrative steps in Finland was formerly 17 days. The cost of starting a business decreased from 0.9% to 0.7% of income per capita between 2017 and 2020. World Bank (2019[21]).
← 35. Legislative project TEM031:00/2020. The national transposition of Directive (EU) 2019/1151 as regards the use of digital tools and processes in company law will be ensured as part of the reform. A bill is expected in the second half of 2021.
← 36. Limited Liability Companies Act (624/2006), Section 3. Amendment in force as of 1 July 2019.
← 37. Article 45 of Directive (EU) 2017/1132 relating to certain aspects of company law imposes on Member States an obligation to apply a minimum capital requirement of at least EUR 25 000 to public limited liability companies.
← 38. European Investment Bank (EIB, 2020[17]).
← 39. Limited Liability Companies Act, Chapter 6, Sections 8(1), 10(2) and 19(1). However, exemptions may not be granted at all with regard to insurance companies. Insurance Companies Act (521/2008), Chapter 6, Sections 4(2) and 5(2). With regard to commercial banks, an exemption may be granted by the Financial Supervisory Authority. Act on Commercial Banks and Other Credit Institutions (1501/2001), Section 2.
← 40. Finnish Patent and Registration Office, Permits to persons living permanently outside the EEA, consulted on 23 November 2020.
← 41. In 2019, the United States and China were, respectively, the third and sixth most common ultimate parent country of new and acquired foreign-owned establishments in Finland. Business Finland / Invest in Finland, IIF Results 2020. Also in terms of the stock of investment toward Finland, the United States was the second most significant (after Sweden), and China the third most significant, ultimate investing country as of 31 December 2019. Statistics Finland (2019[18]), Fig. 9.
← 42. Prior to Finland's accession to the EEA, the legal regime was even more restrictive, as Finnish nationality was required (OECD, 1995[14]).
← 43. Exemptions from these requirements may be granted in both countries. Sweden's Corporate Act (2005:551), Chapter 8 §§ 9 and 30. Norway's Companies Act (LOV-1997-06-13-45), § 6-11, and Private Limited Companies Act (LOV-1997-06-13-44), § 6-11.
← 44. Act on Source Tax of Foreign Employees (1551/1995). Finnish Tax Authority, Taxation of employees from other countries (1 February 2020), Section 3.1.
← 45. Denmark offers a 32.84% source tax to foreign personnel instead of progressive income taxation if the foreign worker's monthly income is above DKK 68 200. In Sweden, 25% of a foreign employee's compensation is exempted from tax and social security charges if the employee's monthly income is above SEK 94 600. Norway has a standard 10% (but no more than NOK 40 000) deduction on income and a pay-as-you-earn scheme for foreign workers, with a flat 25% tax rate. KPMG tax insights, 31 January 2020.
← 46. In some cases, the alien's right to work can be based on a visa, for instance. See Aliens Act (301/2004), Section 79.
← 47. In order to assess whether suitable labour is available for the work, the TE Office may require the employer to post an open vacancy in the TE Office's own online employment service, as well as in the European Employment Services co-operation network, EURES. A local TE Office reports that in practice, a vacancy must be open in the online employment service for at least two weeks. Pirkanmaa region TE Office, 21 September 2017.
← 48. Finnish Immigration Service, Income requirement for persons who apply for a residence permit on the basis of work, consulted 10 November 2020.
← 49. An entrepreneur is in a managerial position and engages in business activities. Aliens Act, Section 3(1). Working in the company is therefore required – ownership alone does not fulfil the application criteria.
← 50. This assessment can be based on the business plan, financing and binding preliminary contracts. Bill for the Aliens Act (HE 28/2003 vp), p. 165.
← 51. Finnish Immigration Service, Residence permit application for an entrepreneur, consulted 18 June 2020.
← 52. See Business Finland, Finnish start-up permit, consulted 18 June 2020.
← 53. Bill to amend the Aliens Act (HE 129/2017 vp), p. 13.
← 54. Finnish Immigration Service, Estimated processing times of initial residence permits for start-up entrepreneurs, as of 10 November 2020.
← 55. However, for confidentiality purposes, whenever the number of decisions in a given month is under 6, the outcomes are not shown to ensure that individuals cannot be identified from the results. Hence, the cases of accepted permits might reflect a lower bound estimate (as out of the 177 decisions taken, 71 decisions had no detail on the outcome and so, some might have also been positive decisions). Finnish Immigration Service, Statistics.
← 56. For instance, in the Uusimaa region, the latest assessment related to the general requirements of using foreign labour considers there to be a shortage of labour in healthcare and many construction professions, among others (UUDELY/9226/2016, 2 January 2020).
← 57. As a general rule, a specialist will have a higher education degree, work with tasks that require special expertise or have an above average monthly salary (at least EUR 3 000 per month). IT experts are mentioned as an example. Finnish Immigration Service, Residence permit application for persons employed as a specialist, consulted on 10 November 2020. Despite a few examples, the criteria used to define a specialist are rather generic and could be used in a discretionary manner.
← 58. Candidates for intra-corporate transferee’s residence permits must, however, have been employed in the same company or group for at least 3-12 months before the transfer. Act on Intra-Corporate Transferees (908/2017), Section 7(1). The Act implements Directive 2014/66/EU on the conditions of entry and residence of third-country nationals in the framework of an intra-corporate transfer.
← 59. The employer must, however, match an intra-corporate transferee’s salary with the local salary standard. See Act on Intra-Corporate Transferees, Section 7(2), and Directive 2014/66/EU, Article 5(4)(b) that requires the imposition of wage parity requirements. Other professions and groups excluded from an assessment of available local labour include, for instance, persons who have completed a Finnish degree or qualification, and persons who are preparing a company's establishment in Finland or conducting market research for a foreign company or contractor. See Section 77 of the Aliens Act.
← 60. Aliens Act, Section 83(4), amendment in force as of 1 June 2019. See also the Ministry of Economic Affairs and Employment press release, 11 April 2019. New residence permit applications concerning work in the same professional field as the presently valid residence permit also fall outside the scope of application of LMTs.
← 61. Yle, Wait for work-based residence permits averages 152 days, 16 September 2020.
← 62. Aliens Act, Section 82(1).
← 63. Finnish Immigration Service, Estimated processing times of initial residence permits for an employed person, as of 10 November 2020.
← 65. Act on Intra-Corporate Transferees, Section 11.
← 66. Finnish Immigration Service, consulted 12 November 2020. EU law requires Member States to collect applicants’ biometric identifiers. Regulation EC 1030/2002 laying down a uniform format for residence permits for third-country nationals.
← 67. Finnish embassies and consulates stopped receiving new residence permit applications from 19 March 2020. As of 16 June 2020, some missions abroad are processing applications again. Ministry for Foreign Affairs press release, 17 June 2020. Due to these restrictions, the deadline for identification has been extended until 31 August 2021. Finnish Immigration Service, consulted on 10 March 2021.
← 68. The report finds that, at one month for electronically submitted applications, the processing time of the residence permit for a specialist in Finland is on par with permit types applicable to highly skilled workers in the comparator countries. However, the overall length of the residence permit process, from initiating the residence permit application to the moment when the employee can start working, can be somewhat longer in the Finnish model. Although the report’s focus is on the residence permit for specialists, which only represents 14% of all work-related residence permit applications in Finland, the bottlenecks of the process, as identified in the report, affect also other types of work-based residence permit applications (Paavola, Rasmussen and Kinnunen, 2020[6]).
← 69. Programme of Prime Minister Sanna Marin’s Government (10 December 2019), p. 147.
← 70. Legislative project TEM007:00/2020.
← 71. Legislative project TEM008:00/2020. Amendments would also strengthen the role of higher education institutions in the residence permit process and speed up permit processes. A bill is expected in the second half of 2021.
← 72. Legislative project UM010:00/2020.
← 74. Pursuant to the Aliens Act, residence permits granted on the basis of professional activities are fixed-term. Aliens Act, Sections 33(2), 45, 47 and 53(1).
← 75. Act on Intra-Corporate Transferees, Sections 6 and 11.
← 76. Finnish Immigration Service, Estimated processing times of residence permit renewal applications, as of 10 November 2020.
← 77. Finnish Immigration Service, consulted 12 November 2020.
← 78. These are employees sent by a foreign company to fulfil a contract with a company based in the host country.
← 79. Estonia's Aliens Act (RT I 2010 3 4), Sections 113, 115(14). Denmark's Aliens Act (LBK nr 1117), Section 9 a.
← 80. Newtodenmark.dk, consulted on 15 February 2021.
← 81. Start-up visa in Latvia, consulted on 15 February 2021.
← 82. Act on Public Procurement and Concession Contracts (1397/2016). The Act implements Directive 2014/24/EU on public procurement and Directive 2014/23/EU on the award of concession contracts.
← 83. Act on Public Procurement and Concession Contracts, Section 19.
← 84. World Trade Organisation, Parties, observers and accessions to the GPA, consulted on 12 November 2020.
← 85. See Act on Public Procurement and Concession Contracts, Section 25, and Regulation (EU) 2019/1828 amending Directive 2014/24/EU, Article 1.
← 86. Act on Public Procurement and Concession Contracts, Sections 60 and 101. Hilma, the online portal for procurement notices, is available at hankintailmoitukset.fi.
← 87. Act on Public Procurement and Concession Contracts, Sections 68 and 101. See Eskola et al. (Eskola et al., 2017, p. 358[19]).
← 88. The OECD Product Market Regulation (PMR) indicators collect de jure policies that promote or inhibit competition in the marketplace in 46 countries. Regulatory information is gathered from ministries, regulators or other authorities.
← 89. Finland’s performance is on par with the OECD average when it comes to stakeholder engagement in developing regulations. OECD Indicators of Regulatory Policy and Governance (iREG): Finland (2018).
← 90. Act on the Openness of Government Activities (621/1999), Section 19.
← 91. Ministry of Justice, Guide to public consultation in legislative drafting, part 2.2.3, consulted on 18 June 2020. The relevant stakeholders are identified on a case-by-case basis and they can include entities such as ministries and implementing authorities, businesses, associations and municipalities, but also experts and groups of citizens.
← 92. Legislative Drafting Process Guide, Part 3, consulted on 8 June 2020. The online consultation platform is available at Lausuntopalvelu.fi. See also information on current projects on the Prime Minister's Office website.
← 93. OECD Indicators of Regulatory Policy and Governance (iREG): Finland (2018).
← 94. OECD Indicators of Regulatory Policy and Governance (iREG): Denmark (2018).
← 95. The Constitution of Finland (731/1999), Section 79.
← 96. If not otherwise stated in a Norwegian law or regulation, it will enter into force one month after publication. Law on the Norwegian Law Gazette (LOV-1969-06-19-53), Section 3, and Public Administration Act (LOV-1967-02-10), Section 38. In the context of the OECD STRI, a period of 14 days is considered to be a reasonable time between publication and entry into force of laws and regulations.
← 97. Administrative Judicial Procedure Act (808/2019), Section 7.
← 98. Act on Compensation for Antitrust Complaints (1077/2016), Section 2.
← 99. Estonia deregulated the market for high-quality access to leased lines in 2015. Estonian Technical Surveillance Authority, decision of 12 January 2015. Sweden deregulated fixed line telephony in 2017, and leased lines in 2018. Swedish Post and Telecom Authority, decisions of 14 December 2016 and 20 February 2017.
← 100. The regulator's decisions on fixed access net (1-21/961/2017) and wholesale high-quality access (22-42/961/2017). All decisions in these series are available on Traficom's website. Following a 2020 decision by the Supreme Administrative Court of Finland that repealed, in part, the regulator's decision concerning Elisa's obligations in the fixed access net, Traficom will proceed to reassess this market. Traficom press release, 12 November 2020.
← 101. The Finnish regulator has undertaken an average of 2.4 rounds of market analysis per market, while this number ranges from 3.6 to 4.4 in the other selected countries. Number of rounds of market analysis in markets 1-4 according to the European Commission's overview of ex ante regulation in the telecommunications sector, 4 March 2020. Norway is not included in the data.
← 102. Information Society Code (917/2014), Section 85(2). See also Directive (EU) 2018/1972 establishing the European Electronic Communications Code, Article 86(4). If it is not possible to distinguish an operator best suited for providing universal services, the Finnish regulator aims to distribute the burden of universal service provision between providers. The regulator's Explanatory memorandum for the designation of universal service providers (1029/921/2016), pp. 36-39, 41.
← 103. Sweden's Electronic communications act (2003:389), Chapter 5, Section 1. See also Swedish Post and Telecom Authority (2020, p. 12[20]).
← 104. Denmark's Act on electronic communications networks and services (LBK nr 128, 07 February 2014), Section 15, and Universal services regulation (BEK nr 482, 20 May 2016), Sections 11-14. Estonia's Electronic Communications Act (RT I 2004 87 593), Section 73.
← 105. Regulation (EU) No 531/2012 on roaming on public mobile communications networks within the Union, Articles 6a, 7-12.
← 106. See World Bank (2019[21]).
← 107. The official costs of a construction permit to build a warehouse represent 0.7% of the warehouse value in Finland. With the exception of Sweden (1.9%), the costs range from 0.2% to 0.6% in other countries of the group.
← 108. Ministry of the Environment, Reform of the Land Use and Building Act, consulted on 16 November 2020.
← 109. European Commission, Regulated professions database, consulted on 16 November 2020.
← 110. Guidelines on the qualification of building designers (YM2/601/2015) and Guidelines on the difficulty categories of building management tasks and qualifications of building managers (YM4/601/2015), available on the Ministry of the Environment website.
← 111. Latvia's Education Law (29 October 1998), Section 11.1, Regulated Professions and the Recognition of Professional Qualifications (20 June 2001), Rules for Assessing the Competence of Construction Specialist and Monitoring the practice (20 March 2018), Chapter 3. Lithuania's Technical Construction Regulation (STR 1.02.01: 2017), Approval of regulated professions (15 July 2014), Resolution on the procedure for recognition of education and qualifications (29 February 2012).
← 112. Denmark only recognises degrees of building engineers from the EEA and states with which Denmark has mutual recognition agreements. Denmark's Building Code (BEK nr 1615, 13 December 2017), Chapter 32-33, Annex 4. Estonia requires three years of locally acquired professional experience for construction engineers holding degrees from outside of the EU/EEA or Switzerland. Estonia's Building Code (RT I 05 March 2015 1), Section 24, Recognition of Foreign Professional Qualifications Act (RT I 2008 30 191), Section 4(2).
← 113. Denmark's Building Code, Annex 1, point 1.3.3, 4. Estonia's Building Code. Latvia's Construction Law (9 July 2013), Section 22. Lithuania's Technical Construction Regulation.
← 114. Latvia's Public Procurement Law (15 December 2016), Section 13.
← 115. Norway's Public Procurement Act (LOV-2016-06-17-73), Sections 3, 6 and 7, and Regulation on wages and work conditions in public procurement contracts (FOR-2008-02-08-112), Section 4. Finland's Act on Public Procurement and Concession Contracts (1397/2016), Section 98, that implements Directive 2014/24/EU on public procurement, Article 18(2).
← 116. Latvia's Construction Law (9 July 2013), Section 13, and Procedures for Provision of Temporary Professional Services in the Republic of Latvia in a Regulated Profession (28 March 2017).
← 117. Estonia's Recognition of Foreign Professional Qualifications Act (RT I 2008 30 191), Section 4(2). Only architects from the EU/EEA and states that have special agreements with Estonia can have their qualifications recognised.
← 118. Directive 2006/43/EC (with amendments) on statutory audits of annual accounts and consolidated accounts, Articles 3-4 and 6-10.
← 119. Auditing Act (1141/2015), Chapter 6. More detailed provisions on the qualification requirements are given in a Decree of the Ministry of Economic Affairs and Employment (1442/2015).
← 120. Auditing Act (1141/2015), Chapter 6, Section 2(5).
← 121. Decree of the Ministry of Economic Affairs and Employment (1442/2015), Sections 13, 18 and 19. Finnish Patent and Registration Office, Auditor Oversight, Examinations, consulted 16 November 2020.
← 122. No more than two years of the required three years' practical experience may be completed with an auditor approved outside the EEA. This means that at least one year of training must be acquired with an EEA-approved auditor. Decree of the Ministry of Economic Affairs and Employment (1442/2015), Section 10.
← 123. Estonia's Auditors Activities Act (RT I 2010 9 41), Sections 24(3) and 36(2), and Recognition of Foreign Professional Qualifications Act (RT I 2008 30 191), Section 4(2). Sweden's Auditor Act (2001:883), Sections 4, 11 and 14, and Auditor Regulation (1995:665), Section 4.
← 124. Auditing Act (1141/2015), Chapter 6, Section 5.
← 125. Denmark's Auditing Act (LBK nr 1580, 10 December 2015), Section 135a. Lithuania's Law on Audit (15 June 1999), Sections 18 and 19, and Law on Companies (30 July 2000), Section 37. Norway's Audit Act (LOV 1999-01-15-02), Section 3-5. Sweden's Auditor Act (2001:883), Sections 4, 11 and 14. Estonia's Auditors Activities Act (RT I 2010 9 41), Section 77(2), and Commercial Code (RT I 1995 26 355), Part VIII.
← 126. Denmark's Administration of Justice Act (LBK nr 1101, 22 September 2017), Sections 119 and 135a. Estonia's Bar Association Act (RT I 2001 36 201), Section 22. Lithuania's Approval of regulated professions in the Republic of Lithuania (15 July 2014). Norway's Act Relating to the Court of Justice (LOV-1915-08-13-5), Section 220.
← 127. Norway's Regulations relating to advocates (FOR-1996-12-20-1161), Section 9-6.
← 128. Lithuania's Law on the Bar (18 March 2004), Section 7. Estonia's Bar Association Act, Section 23.1(2). Norway's Act Relating to the Court of Justice, Section 220.
← 129. Estonia's Bar Association Act, Sections 49, 50, 54 and 69. Lithuania's Law on the Bar, Chapter V, and Sections 28 and 31.
← 130. To qualify as an advocate, the legal practitioner must hold a Finnish Master of Laws degree or obtain a decision recognising the equivalence of a foreign degree with the Finnish one (see Box 2.5). Moreover, four years of professional experience in law and a residence within the EEA are required to pass the Finnish bar examination. Less stringent conditions apply to advocates from EEA States. Advocates Act (496/1958) and Rules of the Finnish Bar Association (Ministry of Justice, 2.10.2012/540). Only some 10% of Finnish lawyers hold the protected title of advocate. Finnish Bar Association, consulted on 1 July 2020.
← 131. To become a licensed legal counsel, the candidate must have completed a Master of Laws degree in Finland or a corresponding law degree abroad which has been recognised in Finland (see Box 2.5), and gained sufficient acquaintance with the work of an attorney and legal counsel. Licensed Legal Counsel Act (715/2011), Section 2.
← 132. The Commission’s Restrictiveness Indicator builds on the OECD Product Market Regulation (PMR) indices, adding further regulatory items to those included in the PMR for professional services (European Parliament, 2017[22])
← 133. In contrast, the European Commission’s analysis, with a different coverage and methodology than the OECD STRI, has not identified barriers to investment in the Finnish transport sector (European Commission, 2020[23]), Table 3.2.1a.
← 134. Regulation (EC) no 1008/2008 on common rules for the operation of air services in the Community, Article 4(f).
← 135. The lease of foreign aircraft without crew (so-called dry lease) is subject to prior approval and the lease of foreign aircraft with crew (wet lease) is subject to very stringent conditions. Regulation (EC) no 1008/2008, Article 13.
← 136. Regulation (EC) no 1008/2008, Article 15(4) and (5). Finnish airline Finnair is a member of the OneWorld alliance. OneWorld members, consulted on 16 November 2020.
← 137. Council Regulation (EEC) No 95/93 on common rules for slot allocation at Community airports, Articles 8(2), 10(2) and (6). The 80% rule for slot allocation has been temporarily suspended as of 1 March 2020 until 30 October 2021 in response to the COVID-19 pandemic. See Regulation (EU) 2020/459, Commission Delegated Regulation (EU) 2020/1477 and Regulation (EU) 2021/250. See also the IATA Worldwide Slot Allocation Guidelines, last updated on 1 March 2020.
← 138. Council Regulation (EEC) No 95/93, Article 8a(1)(c).
← 139. Norway's Aviation Act (LOV-1993-06-11-101), Sections 3-2, 7-8, 8-3 and 8-5.
← 140. Prime Minister's Office, State shareholdings and parliamentary authorisations, consulted on 16 November 2020.
← 141. OECD (2020[24])
← 142. As of December 2020, preparations for further support via a financing arrangement were underway. Prime Minister's Office press release, 20 May 2020 and 16 December 2020.
← 143. The Estonian government decided to increase the share capital of 100% state-owned Nordica by EUR 30 million due to the impact of COVID-19. European Commission press release, 11 August 2020. The Latvian government increased its ownership in airBaltic from 80% to 96% to recapitalise the airline. European Commission press release, 3 July 2020.
← 144. The Danish and Swedish States hold minority ownerships in SAS, 14.2% and 14.8% respectively. SAS shareholders, consulted on 16 November 2020.
← 145. Maritime Act (674/1994), Chapter 1, Sections 1(1) and 1(2). A reform under preparation would allow for double registration of a foreign ship in both a foreign and the Finnish ship registry in the context of bareboat charter (rental of cargo vessel without crew). Legislative project LVM015:00/2020, consulted on 16 November 2020. Denmark, Estonia, Latvia and Norway already allow bareboat registration.
← 146. Maritime Act, Chapter 1, Section 1.
← 147. Act on Transport Services (320/2017), Section 94.
← 148. Temporary permits can be granted to traffic between the County of Åland and other regions of Finland, or if there are specific reasons for using a foreign vessel in Finland. Act on Transport Services (320/2017), Section 95. Exceptions are also based on bilateral agreements: maritime cabotage in Finnish waters is authorised for Norwegian ships.
← 149. Lithuania's Commercial Shipping Act (12 September 1992), Sections 3 and 8. Estonia's Law of Ship Flag and Registers of Ships (RT I 1998 23 321), Section 2, and Merchant Shipping Code (RT 1991 46 577), Section 3. Sweden's Maritime Act (1994:1009), Chapter 1, Section 1 and Chapter 2, Section 1, and Act on Cabotage Permits (1974:235), Sections 1 and 1a.
← 150. Commission communication C(2004) 43, Community guidelines on State aid to maritime transport, Section 3(1), paragraph 7.
← 151. Tonnage Tax Act (476/2002), Section 2.
← 152. European Commission, Decisions C(2018) 6795 final (11 October 2018) for Danish tonnage tax scheme; C(2019) 8917 final (16 December 2019) for Estonian tonnage tax scheme and seafarers scheme; C(2017) 2840 final (24 April 2017) regarding the Lithuanian tonnage tax scheme; and C(2016) 5302 final (18 August 2016) regarding the Swedish tonnage tax scheme. EFTA Surveillance Authority, Decision 214/17/COL (14 December 2017) regarding the Norwegian tonnage tax scheme.
← 153. Act on Improving the Competitiveness of Vessels engaged in Maritime Transport (1277/2007).
← 154. European Commission, Decisions C(2020) 4791 final (9 July 2020) on the Danish seafarers scheme; C(2019) 8917 final (16 December 2019) on the Estonian tonnage tax scheme and seafarers scheme; C(2019) 9157 (16 December 2019) on the Swedish seafarers scheme. EFTA Surveillance Authority, Decisions 085/16/COL (27 April 2016) and 043/18/COL (10 April 2018) regarding the Norwegian seafarers scheme.
← 155. Harbour regulations of the Port of Helsinki, Chapter III.
← 156. Pilotage Act (940/2003), Section 4(1). Finnpilot, Regulation of pilotage, consulted 16 November 2020.
← 157. Estonia's Maritime Safety Act (RT I 2002 1 1), Section 56. Port of Tallinn, Port Rules (20 July 2020), Section 2.1.1. Norway's Port and Seaway Act (LOV-2019-06-21-70), Section 21, and Norwegian Coastal Administration, Information on pilotage services, consulted on 16 November 2020. Sweden's Regulation on pilotage (1982:569), Section 2.
← 158. Denmark's Pilotage Act (LBK nr 352, 12 April 2016), Section 18.
← 159. The exam can be taken in English. Act on Transport Services (320/2017), Chapter 10. Regulation on the certification of seafarers (TRAFI/301394/03.04.01.00/2017), Section 4. Traficom, Information on applying for endorsement of STCW certificate, consulted16 November 2020.
← 160. Maritime Act (674/1994), Chapter 6, Section 1.
← 161. Estonia's Merchant Shipping Code (RT 1991 46 577), Section 3. Lithuania's Commercial Shipping Act (12 September 1992), Section 11.
← 162. Directive 2012/34/EU establishing a single European railway area, which has been transposed into Finnish law in the Rail Transport Act (1302/2018), Chapter 16.
← 163. Prime Minister's Office, State shareholdings and parliamentary authorisations, consulted on 16 November 2020. See Mutikainen et al. (2018, p. 43[25]).
← 164. See Väylä (2020, p. 17[26]). Traficom press release, 5 June 2020. The Finnish subsidiary of Estonian state-owned enterprise Operail started operations in Finland in November 2020. Operail, consulted on 21 November 2020.
← 165. Directive 2012/34/EU, Article 38(1).
← 166. Council Regulation (EC) No 169/2009 applying rules of competition to transport by rail, road and inland waterway, Article 2.
← 167. Finland has rail connections to Sweden and Russia. See Väylä (2020, p. 29[26]).
← 168. Rail Transport Act, Section 113. Directive 2012/34/EU, Article 10(1).
← 169. Note by Finland to OECD Working Party No. 2 on Competition and Regulation (DAF/COMP/WP2/WD(2016)10, 21 November 2016), p. 3. The nominal track gauge in the Finnish railway network is 1 524 mm. See Väylä (2020, p. 30[26]).
← 170. Rail transport agreement between Finland and Russia (85/2016).
← 171. Agreement on the International Goods Transport by Rail (SMGS), 1 November 1951, last amended on 1 July 2019. Convention concerning International Carriage by Rail (COTIF), 3 June 1999, last amended on 1 July 2006. Estonia, Latvia and Lithuania are parties to both instruments, but access rights for domestic rail transport are not foreseen in them.
← 172. State Shareholdings and Ownership Steering Act (1368/2007), Section 3(1). Prime Minister's Office, State shareholdings and parliamentary authorisations, consulted on 16 November 2020. VR Transpoint, consulted on 16 November 2020.
← 173. Regulation (EC) No 1071/2009 establishing common rules concerning the conditions to be complied with to pursue the occupation of road transport operator, Article 4(1).
← 174. Council Regulation (EC) No 169/2009 applying rules of competition to transport by rail, road and inland waterway, Articles 2 and 3.
← 175. The Finnish State owns 50.1% of the shares of Posti Group. The remaining 49.9% are indirectly state-owned through Vake, the Finnish State Development Company. Prime Minister's Office, State shareholdings and parliamentary authorisations, and Posti Group, consulted 16 November 2020.
← 176. State Shareholdings and Ownership Steering Act (1368/2007), Section 3(1). The current minimum levels of State shareholding are 50.1% in Finnair and Posti Group, and 100% in VR Group. Prime Minister's Office, State shareholdings and parliamentary authorisations, consulted16 November 2020.
← 177. Regulation (EU) No 952/2013 laying down the Union Customs Code, Articles 18(2), 211(1) and (2). See also General instructions for customs warehousing (Finnish Customs, 1 May 2016).
← 178. Aviation Act (864/2014), Section 90. Directive 96/67/EC on access to the ground handling market.
← 179. The scope of application of the Regulation includes cargo handling, but does not extend to storage and warehouse services. Regulation (EU) 2017/352 establishing a framework for the provision of port services and common rules on the financial transparency of ports, Articles 6(4), 1(2) and 2(2).
← 180. Port of Helsinki, Terms for Service Providers, consulted 7 July 2020.
← 181. Regulation (EU) 2017/352, Article 11. Aviation Act (864/2014), Section 92, implementing Directive 96/67/EC.
← 182. Directive 97/67/EC on common rules for the development of the internal market of Community postal services and the improvement of quality of service, Article 4(2).
← 183. Denmark's Act on Post Denmark A/S (LBK nr 844, 06 July 2011), Section 1, and Danish Transport, Construction and Housing Authority, consulted 16 November 2020. List of State-owned companies in Estonia, and Estonian Competition Authority, consulted 16 November 2020. Finnish regulator's decision designating Posti Ltd as universal service provider of postal services, letters (1644/9210/2011). State-Owned Enterprises and Shares in Latvia, and Latvian Ministry of Transport, consulted 16 November 2020. Lithuanian Communications Regulatory Authority, Provision of universal service and Postal and courier sector review 2017, and Lietuvos Paštas, consulted 16 November 2020. Posten Norge, and the Norwegian State's ownership 2019 report (2020[27]) See Swedish Post and Telecom Authority (2020[20]), pp. 10, 30.
← 184. Regulator's decision designating Posti Ltd as universal service provider of postal services, letters (1644/9210/2011). Regulator's decision designating Posti Ltd as universal service provider of postal services, parcels (788/911/2016), pp. 6-7, and Annex (20/910/2016), pp. 15, 23-24.
← 185. Value Added Tax Act (1501/1993), Section 33b. See also Directive 2006/112/EC on the common system of value added tax, Article 132(1)(a).
← 186. Postal Act (415/2011), Section 33.
← 187. Denmark's Postal Act (LBK 1040, 30 August 2017), Section 18. Estonia's Postal Act (RT I 2006 18 142), Section 41.1. Norway's Postal Law (LOV-2015-09-04-91), Section 9.
← 188. Postal Act, Sections 28-32. These provisions implement Articles 14 and 15 of Directive 97/67/EC.
← 189. The Finnish Postal Act only provides that the pricing of universal services must be reasonable, transparent and non-discriminatory. Postal Act, Section 26(1).
← 190. The post code system is publicly available and downloadable in electronic form, free of charge, and the DPO must provide other operators with information on mail box locations. Postal Act, Sections 37 and 39. Postal code information is available on Posti's website, consulted 3 August 2020.
← 191. After the first two years, the fee amounts to 0.29% of the turnover from the postal operations carried out in Finland or a minimum of EUR 2 000. Postal Act, Sections 68 and 69.
← 192. Exceptions apply to farm wine and craft beer sold at the production site. Alcohol Act (1102/2017), Sections 3(1), 17(2), 23. Prime Minister's Office, State shareholdings and parliamentary authorisations, consulted 16 November 2020. No changes to Alko’s retail monopoly status are envisaged under the current government. Programme of Prime Minister Sanna Marin’s Government (10 December 2019), p. 162.
← 193. Alcohol Act, Sections 16, 17 and 25. Alko’s purchasing decisions and pricing must follow public, non-discriminatory criteria. Discrimination against foreign producers and suppliers is explicitly prohibited.
← 194. Norway's Alcoholic Beverage Act (LOV-1989-06-02-27), Sections 1-3 and 3-1. Sweden's Law on Alcoholic Beverages (2010:1622), Chapter 1 and Chapter 5, Section 1.
← 195. Lithuania's Law on Alcohol Control (18 April 1995), Section 16.
← 196. Land Use and Building Act (132/1999), Sections 71b and 71c.
← 197. Ministerial decision on pre-packaged products (179/2000, last amended in 2009), Section 1 and Annex 3, implements Directive 2007/45/EC on nominal quantities for prepacked products.
← 198. Act on the Registration of Certain Credit Providers and Credit Intermediaries (853/2016), Sections 1, 2 and 4. Freedom of Enterprise Act (122/1919), Section 1.
← 199. The OECD Digital STRI identifies in a comparative manner cross-cutting issues that can inhibit companies' ability to gain from the adoption of emerging digital technologies.
← 200. Finnish Tax Administration, Foreign individuals: How to grant an authorisation for tax matters, and Digital and Population Data Services Agency, Finnish Authenticator Identification Service, consulted 23 July 2020.
← 201. Trade Secrets Act (595/2018). Directive 2016/943 on the protection of undisclosed know-how and business information (trade secrets) against their unlawful acquisition, use and disclosure.
← 202. Copyright Act (404/1961), Chapter 7. Trademarks Act (544/2019), Chapter 7.
← 203. Finland and the EU are parties to the Madrid Protocol for the international registration of trademarks. Finland is party to international agreements on copyright: the Berne Convention and the Paris Act, the WIPO Copyright Treaty and the WIPO Performances and Phonograms Treaty. World Intellectual Property Organisation, Contracting Parties to WIPO-Administered Treaties, Finland, consulted 26 August 2020. As a member of the WTO, Finland is also a party to the WTO TRIPS Agreement on intellectual property rights.
← 204. Act on Payment Institutions (297/2010), Sections 6, 7 and 13.
← 205. Regulation (EU) 2016/679 on the protection of natural persons with regard to the processing of personal data and on the free movement of such data (General Data Protection Regulation).
← 206. The European Commission has recognised 12 States or territories as providing adequate protection. European Commission, Information on adequacy decisions, consulted on 16 November 2020. The Court of Justice of the European Union issued in July 2020 a judgment invalidating the Commission's decision on the adequacy of the protection provided by the EU-United States Data Protection Shield framework. Court of Justice of the European Union press release, 16 July 2020.
← 207. Data protection can be ensured, for instance, through a contract between the data sender and data receiver or through binding corporate rules. Regulation (EU) 2016/679 (General Data Protection Regulation), Articles 46-49.
← 208. United Nations Convention on the Use of Electronic Communications in International Contracts (New York, 23 November 2005, entry into force 1 March 2013), Status of the Convention, consulted on 16 November 2020.
← 209. United Nations Convention on Contracts for the International Sale of Goods (Vienna, 11 April 1980, entry into force 1 January 1988), Status of the Convention, consulted 16 November 2020.
← 210. Regulation (EU) No 910/2014 on electronic identification and trust services for electronic transactions in the internal market, Article 25(2).
← 211. The registration of .eu domain names requires localisation in the EU, except for citizens of EU Member States. Regulation (EC) No 733/2002 on the implementation of the .eu Top Level Domain, Article 4(2)(b).
← 212. Finnish regulator's domain name regulation (68/2016 M).
← 213. Information Society Code (917/2014), Section 169.
← 214. Nordås (2016[5]) finds that, on average, even a very small reduction in regulatory differences between two country pairs would increase services exports by 2.5%.
← 215. This is assessed with the OECD STRI Regulatory Heterogeneity Indices, which measure the extent to which regulatory frameworks in two countries are or are not similar. The lower these indices, the more similar are the rules in force in each country pair. These indices are not indicative of the level of restriction but only of the level of similarity between the rulebooks of one country to those of another. For more details, see Nordås (2016[5]).
← 216. Finland's relative performance against the entire STRI sample of 46 countries (consisting of 37 OECD members and 9 emerging economies) has been calculated by first converting Finland's STRI index in each sector to a standard score, as follows:
This standard score is then compared to the following performance thresholds: best performer for a score below -1; better than average performance for a score between -1 and -0.5; average performance for a score between -0.5 and 0.5; worse than average performance for a score between 0.5 and 1; and very bad performance for a score below 1.
← 217. The OECD Intra-EEA STRI, also varying between 0 and 1, captures restrictions to trade and investment in services sectors within the Single Market, illustrating the generalised level of homogeneity induced by EU regulations and directives. The indices differ across EEA countries in aspects regulated by national legislation rather than at the EU level. Differences in the degree to which Member States transpose EU directives in their national legislation is not fully reflected by these indices. For more details on the methodology, see Benz and Gonzales (2019[28]).
← 218. This fact might reflect the scope of the STRI in air transport services, which currently does not cover cross-border air transport, as this segment is regulated via bilateral air transport agreements not always publicly available. This is, however, also where most liberalisation has focused, contributing to the European Single Aviation Market.
← 219. Act on the Screening of Foreign Corporate Acquisitions (172/2012), Section 2(4). Vital software, cyber applications and cloud services are examples of goods and services that may be important to military defence. Bill to amend the Act on the Screening of Foreign Corporate Acquisitions (HE 103/2020 vp), p. 22.
← 220. Act on the Screening of Foreign Corporate Acquisitions, Section 2 (2) (b). The Defence Forces, the Border Guard, police, customs, the National Emergency Supply Agency, the National Security Authority and the Transport and Communications Agency (Traficom) are examples of relevant authorities. HE 103/2020 vp, p. 24.
← 221. Bill for the Act on the Screening of Foreign Corporate Acquisitions (HE 42/2011 vp), p. 13. The Bill behind 2020 amendments to the Act maintains that the degree to which vital functions of society are critical can change according to Finland's foreign and security policy position. HE 103/2020 vp, p. 9.
← 222. Security Strategy for Society, government resolution (2 November 2017), Chapters 3 and 5.
← 223. Government Decision on the Objectives of Security of Supply (1048/2018), Parts 5 and 7.
← 224. For a particular reason, the Ministry may also oblige the buyer to submit an application or a notification concerning a measure that increases their influence that does not result in exceeding these thresholds. Act on the Screening of Foreign Corporate Acquisitions, Section 2(2).
← 225. Act on the Screening of Foreign Corporate Acquisitions, Section 5 b, amendments in force as of 11 October 2020.