Foreign Direct Investment Screening In Finland

• Law Firm: HPP Attorneys
• Subject Matter: Corporate/Commercial Law, Government, Public Sector, M&A/Private Equity, Inward/ Foreign Investment, Corporate and Company Law
• Author: Ms Anna Roubier and Johanna Kauppinen
• Published date: 24 October 2023

The notification obligation regarding the screening of acquisitions of Finnish corporate entities by foreign investors has become a regulatory aspect to be increasingly taken into account in the context of M&A involving Finnish corporate targets and business entities. The number of notifications made to the Ministry of Economic Affairs and Employment of Finland (the "Ministry") has increased significantly in recent years. In 2022, a screening notification was submitted in closer to a fifth of all corporate acquisitions made (a total of 211 corporate acquisitions, with 34 notifications). Of these, some 25 cases were reviewed on substance, while the remaining acquisitions were considered not to have been within the scope of the Finnish screening legislation. In principle, the foreign direct investment ("FDI") notification process is typically less burdensome than merger control proceedings before the Finnish Competition and Consumer Authority for instance. However, the lack of a prescribed timeline for the processing of notifications of acquisitions in the defence and security industry sectors under the Finnish Act on the Screening of Corporate Acquisitions (172/2020, the "Screening Act") creates uncertainty for the notifying party.

Which acquisitions must be notified under the Screening Act?

The Finnish FDI regime is two-fold. For acquisitions in the defence and security industry, a mandatory, pre-closing approval must be sought from the Ministry if 10 per cent or more of a Finnish company's voting rights are acquired by a foreign investor. As regards corporate acquisitions in the Finnish defence and security industry, the screening covers defence industry enterprises that produce or supply defence equipment or other products or services important for military national defence, companies that produce or supply products or services to the Finnish authorities (such as the Police of Finland, the Finnish Customs, the Finnish National Emergency Supply Agency, and the Finnish Border Guard), which are critical for public security, and companies which produce dual-use items. As regards acquisitions of Finnish defence industry or security industry enterprises, a "foreign investor" is any legal or natural person that is not domiciled or resident in Finland.

In addition to acquisitions in the defence and security industry, it is also possible under the Screening Act to voluntarily notify acquisitions of Finnish companies which, based on their industry, business...