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UNCLAS HELSINKI 000019
DEPT FOR EB/IFD/OIA, PASS TO USTR
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TAGS: EINV EFIN ETRD USTR OPIC ELAB KTDB PGOV FI
SUBJECT: INVESTMENT CLIMATE STATEMENT 2010 - FINLAND
REF: SECSTATE 124006
1. The following is Embassy Helsinki's response to
reftel regarding features of the investment climate in
Finland.
A.1. Openness to Foreign Investment
The Finnish Government is open to direct foreign
investment. There are no general regulatory
limitations relating to acquisitions. Legislative
control of mergers and acquisitions is mainly governed
by domestic and EU competition rules. Certain
acquisitions of large Finnish companies may require
follow-up clearance from the Ministry of Employment and
the Economy in accordance with the Act on the Control
of Foreign Acquisitions of Finnish Companies. The
purpose of the clearance is to protect essential
national interests.
Unlike many other countries, however, Finland does not
"positively" discriminate in favor of foreign-owned
firms by giving them tax holidays or other subsidies
not available to other firms in the economy. Instead,
Finland relies on "condition-providing policies" which
means pursuing policies that offer all firms in the
economy appropriate conditions and sufficient pools of
advanced factors of production, including an educated
labor force and well-functioning infrastructure.
There are some legal requirements for non-European
Economic Area (EEA) residents (persons or companies) to
conduct business in Finland. In certain areas
involving specific safety or health hazards or
financial risks, specific conditions must be met to
conduct trade. A non-EEA (person or company) operating
in Finland must obtain a license or a notification when
starting a business in the "regulated" forms of trade.
Licensed trades are governed by acts and decrees. A
list of licensed trades can be found at:
http://www.yrityssuomi.fi/default.aspx?NodeID =15806
The Aland Islands are an exception to common Finnish
practice. Based on international agreements dating
from 1921, property ownership and the right to conduct
business are limited to only those individuals with
right of domicile in the Aland Islands. However, the
Aland Government can, occasionally, grant exemptions
from the requirement of right of domicile for those
wishing to acquire real property or conduct a business
in Aland.
In 2006, the United States and Finland signed a
protocol amending the existing bilateral income tax
treaty significantly reducing tax-related barriers to
trade and investment flows between the countries. For
more information, see section A. 14 - Bilateral
Investment Agreements
The salary and fringe benefits paid to qualifying
foreign key employees, such as employees with special
knowledge or competence, are taxed at the rate of 35
percent during a maximum of 48 months of the assignment
in Finland provided that the employee has a special tax
card (which must be applied for separately).
For detailed tax guidance see Finnish Tax
Administration's Tax Guide:
http://www.vero.fi/default.asp?domain=VERO_EN GLISH〈
uage=ENG
and the Finnish Foundation for Share Promotion's Tax
Guide for Investors:
http://www.porssisaatio.fi/en/articles/tax-gu ide
A number of different organizations collect economic
indicators for Finland. Indicators for the year 2009
include:
Millennium Challenge Corporation:
Government Effectiveness Index 1.95
Rule of Law Index 1.87
Control of Corruption Index 2.34
Fiscal Policy Index 64.3
Trade Policy Index 85.8
Regulatory Quality Index 1.58
Business Start Up Rank #30, 2010 (#20, 2009)
Natural Resource Management Index 9.4
Natural Resource Management Rank #4
Transparency International Corruption Index:
Index: 8.9
World Ranking: #6
Heritage Economic Freedom Report:
Index: 74.5
World Ranking: #7
European Ranking: 9#
World Bank Doing Business Report:
2010 Ranking: #16
2009 Ranking: #14
A.2. Conversion and Transfer Policies
Except for those relating to money laundering, there
are practically no legal obstacles to direct foreign
investment in Finnish securities and exchange control
regarding payments into and out of Finland. There is
no limit on dividend distributions, as long as they
correspond to a company's official earnings records.
Payments to or from Finland must, however, be made
through authorized banks in Finland.
Finland implemented the EU regulation on controls of
cash being transported over the Eu Community Border in
June 2007. According to the regulation persons
carrying USD 14,500 (EUR 10,000) or more will be
required to declare cash upon entering or leaving EU
territory. The regulation only imposes an obligation
to declare, it is not a restriction or prohibitation
regarding imports and export of cash.
Finland adopted the single currency (the Euro) on 1
January, 1999. The Euro replaced the Finnish Markka
(FIM) at the end of a three-year transition period on
January 1, 2002. One Euro equals FIM 5.94573.
A.3. Expropriation and Compensation
Private property rights are well protected in Finland.
Private property is only expropriated for public
purposes (eminent domain), in a non-discriminatory
manner, with reasonable compensation, and in accordance
with established principles of international law.
A.4. Dispute Settlement
There is no record of any significant investment
dispute in Finland in recent years. Finland has a civil
law system. Swedish law and Nordic tradition have
influenced statutory law and jurisprudence. EC law is
directly applicable in Finland and takes precedence
over national legislation. Finland has written and
consistently applied commercial and bankruptcy laws,
and secured interest in property are recognized and
enforced.
Finland has signed the Convention on the Settlement of
Investment Disputes between States and National of
other States (also known as the ICSID Convention or the
Washington Convention) on July 14, 1967 and deposited
its instrument of ratification on January 9, 1969.
Finland has attained status as Contracting State to the
ICSID Convention on February 8, 1969. Finland signed
the New York Convention of 1958 on the Recognition and
Enforcement of Foreign Arbitral Awards in December
1958. The convention entered into force in Finland in
April 1962.
The Arbitration Institute of the Central Chamber of
Commerce of Finland, established in 1911, promotes as
an impartial body the settlement of business disputes
by arbitration. The Institute appoints arbitrators
both to domestic and international arbitration
proceedings. For more information see:
http://www.arbitration.fi/en/indexen.html
The Market Court was established in 2002 as a special
court for rulings in market law, competition and public
procurement cases.
Major revisions to the Finnish competition legislation
took effect in May 2004. The Act on Competition
Restrictions was harmonized with EU competition rules.
A.5. Performance Requirements/Incentives
There are no performance requirements or commitments
imposed on foreign investment in Finland. However, to
conduct business in Finland, some residency
requirements must be met; the intent being to ensure
that persons liable for the company's acts can be
brought to court if necessary.
In 2003 the Finnish Parliament has adopted legislation
which relaxed the domicile requirements in Finnish
company law. According to the amendment, the managing
director and at least one member of the board of
directors (and the supervisory board, if any) of a
Finnish limited liability company must be domiciled
within the EEA. The nationality of the founder is thus
irrelevant.
Foreign-owned companies are eligible for government
incentives on an equal footing with Finnish-owned
companies. Support is given in the forms of cash
grants, loans, tax benefits, equity participation,
guarantees and employee training.
Business aid: In Finland, government-administered aid
to business (investment aid, aid to business
development, start-up subsidies, transport aid, energy
subsidies, employee training, tax relief) is mainly
aimed at improving the long term competitiveness of
small and medium-sized enterprises (SMEs). Business
aid to companies is coordinated by 15 Centre for
Economic Development, Transport and the Environment
providing consulting and training as well as financial
aid. For more information see:
http://www.ely-keskus.fi/en/Pages/default.asp x
Loans and guarantees by Finnvera: The state-owned
financing company Finnvera plc improves and diversifies
the financing possibilities of companies by granting
loans, guarantees, venture capital investments and
export credit guarantees. Finnvera serves its clients
through 15 regional offices and through the
Representative Office (Finnish-Russian Innovation
Center) in St. Petersburg. For more information see:
http://www.finnvera.fi/eng
R incentives by Finnish Funding Agency for Technology
and Innovation (Tekes): Funding by Tekes is intended
for challenging and innovative projects potentially
leading to global success stories. Tekes funding is
aimed at companies and other organizations operating in
Finland and actively developing their technology,
services and business operations. The funding also
supports the establishment and expansion of start-up
companies. For more information see:
http://www.tekes.fi/en/community/Funding%20an d%20servic
es/346/Funding%20and%20services/1238
EU-funded support: The EU-funded programs aim to
diversify the economic and business structure and to
improve employment. This is done by supporting the
establishment and development of small and medium-sized
enterprises and the expansion of their activities.
Financing is directed to projects developing the
competitiveness, know-how and operating environment of
the SME sector, with a special emphasis on start-up
businesses and service sector companies.
Invest in Finland Bureau, a government agency promoting
foreign investments into Finland, assist international
companies in finding business opportunities in Finland
and provide all the relevant information and guidance
required to establish a business in Finland. For more
information see:
http://www.investinfinland.fi/
A.6. Right to Private Ownership and Establishment
Private ownership and entrepreneurship is normal in
Finland. In most fields of business activity,
participation by foreign companies or individuals is
unrestricted. As the government pursues privatization
of state-owned companies, both private and foreign
participation is welcome except in some enterprises
operating in sectors related to national security.
Competitive equality is the official standard applied
to private enterprises in competition with public
enterprises. Private companies do not face
discrimination. With the end of the Restriction Act in
January 1993, Finland removed most restrictions on
foreign ownership of property in Finland.
Restrictions, such as requirements to obtain permission
of the local government in order to purchase a vacation
home in Finland were abolished January 1, 2000,
bringing Finland fully in line with EU norms.
A.7. Protection of Property Rights
Secured interest in property, both movable and real,
are recognized and enforced. The Finnish legal system
protects property rights, including intellectual
property, and Finland adheres to numerous international
agreements concerning intellectual property. Finland
has joined the most important copyright agreements.
Patent rights are consistent with international
standards. In Finland a granted patent applies for 20
years. The time of validity of patents can under
certain conditions be prolonged through a Supplementary
Protection Certificate. In 1996, Finland joined the
European Patent Convention (EPC) and the European
Patent Organization (EPO). Finland is a member of
WIPO, and participates primarily through its membership
in the EU. The idea of protection of intellectual
property is well developed.
Finland Joined WIPO's Patent Law Treaty (PLT) in March
2006.
Pharmaceutical Patents: In 2008, the Finnish
government approved a pharmaceutical reference pricing
system, a provision of which undermines the patent
protection of medicines created and manufactured by
non-Finnish pharmaceutical companies. The reference
price system legislation took effect on April 1, 2009.
Previously, under Subsection 2 of Section 57(c) of
Finland's Medicines Act, pharmaceuticals were excluded
from the Government's generic substitution system if
they were protected by an analogous process patent in
Finland and they enjoyed product patent protection in
at least five other countries in the European Economic
Area. Section 57 recognized in a balanced and fair
manner, the intellectual property of process patent
holders in Finland.
The reference pricing scheme passed by the Finnish
parliament in November 2008 ended the 57(c)
arrangement. By subjecting products protected by
process patents to the reference pricing restrictions
applicable to generic products, the new law deprives
pharmaceutical process patent holders in Finland of
appropriate compensation for the value of the
intellectual property they created in the original
products.
Information on copying and copyright infringement is
provided by the following copyright holder interest
organizations: the Copyright Information and Anti-
Piracy Center (CIAPC), The Finnish Copyright Society,
The Finnish Copyright Institute, the Copyright
Information Centre, and The IPR University Centre. The
Business Software Alliance (BSA), a worldwide software
anti-piracy organization, began operations in Finland
in January 1994.
Finland has been a member of the Paris Convention for
the Protection of Industrial Property since 1921, the
Berne Convention for the Protection of Literary and
Artistic works since 1928 and the Rome International
Convention for the Protection of Performers, Producers
of Phonograms and Broadcasting Organizations since
1983.
Finnish copyright legislation was amended in 2005 to
meet the demands of the digital environment and the
internet. The amendments to the Copyright Act and the
amended section 49 of the Criminal Code came into force
from the beginning of 2006. This reform implemented
the Copyright Directive adopted by the EU in 2001. The
amendments also addressed a number of national issues,
such as the prohibition of importation of pirate
recordings for personal use.
Finland signed the WIPO Copyright Treaty (WCT) and the
WIPO Performances and Phonograms Treaty (WPPT) in May
1997, and the Finnish Parliament adopted the treaties
in autumn 2005.
The Finnish Copyright Act, which also grants protection
to authors, performing artists, record producers,
broadcasting organizations and catalog producers, has
been adjusted to comply with EU directives. As part of
this harmonization, the period of copyright protection
was extended from 50 years to 70 years. Protection for
database producers (currently a part of catalog
producer rights) has been defined consistent with EU
practice. The Finnish Copyright Act provides for
sanctions ranging from fines to imprisonment for up to
two years. Search and seizure are authorized in the
case of criminal piracy, as is the forfeiture of
financial gains. The Copyright Act has covered
computer software since 1991.
Finland has acceded to the Agreement on Trade-Related
Aspects of Intellectual Property Rights (TRIPS, 1994)
which constitutes an Annex to the WTO Agreement. The
TRIPS treaty, which took force in 1995, contains
regulations governing the enforcement of intellectual
property rights, i.e. industrial property rights and
copyright.
Recent amendments to the Finnish Penal Code have
enhanced the position of employers in regard to the
protection of their business secrets, with employees
now required to keep a former employer's business
secrets confidential for two years after termination of
employment.
The Trade Mark Act, which came into force in March
2000, brought Finnish Trade Mark Law into line with the
Trade Mark Treaty (TLT). Finland signed the Singapore
Treaty on the Law of Trademarks in October 2006.
The significance of mortgage banks has remained minor
as deposit banks have traditionally handled housing
loans in Finland. The Mortgage Society of Finland is
operating in accordance with designated special
legislation.
A.8. Transparency of the Regulatory System
The legal and enforcement framework for competition
conforms to European Community praxis. Finland brought
its law into full conformity with the prohibition-based
system of EC competition law in May 2004.
The Securities Market Act (SMA) contains regulations on
corporate disclosure procedures and requirements,
responsibility for flagging share ownership, insider
regulations and offenses, the issuing and marketing of
securities, and trading. The law defines and takes
into account new instruments, which have become common
in financial markets, such as securities lending and
repurchase agreements. Finnish legislation recognizes
the same internationally common financial market
contractual arrangements as legislation elsewhere in
the EU. Regulations concerning clearing of securities
trades have been incorporated in the law since 1998.
Clearing has become subject to licensing, and is
supervised by the Financial Supervision Authority,
which oversees the financial markets.
Finnish tax, labor, health and safety, and related laws
and policies are largely neutral towards the efficient
mobilization and allocation of investment. Finnish
legislation does not normally influence regional
distribution of investment except when specifically
designed to do so, such as through regional incentive
programs.
In Finland, the Act on the Openness of Public Documents
of 1951 established the openness of all records and
documents in the possession of officials of the state,
municipalities, and registered religious communities.
Exceptions to the basic principle could only be made by
law, or by an executive order for specific enumerated
reasons such as national security. The openness of
unsigned draft documents was not mandated, but up to
the consideration of the public official. This weakness
of the law was removed when the law was revised in the
1990s. The revised law, the Act on the Openness of
Government Activities of 1999, also extended the
principle of openness to corporations that perform
legally mandated public duties, such as pension funds
and public utilities, and to computer documents. For
more information see:
http://www.om.fi/23963.htm
A.9. Efficient Capital Markets and Portfolio Investment
Credit is allocated on market terms and is made
available to foreign investors in a non-discriminatory
manner. The private sector has access to a variety of
credit instruments. Legal, regulatory, and accounting
systems are transparent and consistent with
international norms.
The Helsinki Stock Exchange has since September 2003
been part of OMX, referred to as OMX Helsinki (OMXH).
Since NASDAQ's acquisition of OMX in February 2008 the
official name of the Helsinki exchange has been NASDAQ
OMX Helsinki. OMX Helsinki is part of the NASDAQ OMX
Nordic division, together with the stock exchanges in
Stockholm, Copenhagen, and Iceland.
Compared to the international average, the number of
banks in Finland is high. The reason for this is the
high number of savings banks, Local Cooperative Banks
and banks in OP-Pohjola Group. At the end of 2008,
there were 336 banks operating in Finland, 322 of them
domestic. The total assets of the domestic banking
groups and branches of foreign banks (Nordea Bank
Finland, OP-Pohjola Group, Sampo bank, Aktia Group,
Savings Banks (excl Aktia), Local co-operative Banks,
Bank of Aland, Tapiola Bank Group, Hypo Group,), and
largest Nordic banking groups (Danske Bank Group,
Nordea Group, SEB Group, Handelsbanken Group, DnB NOR
bank Group, Swebank) amounted to 2.1 billion euro in
2008. For more info see Federation of Finnish
Financial Services "Finnish Banking in 2008" report
http://www.fkl.fi/www/page/fk_www_3919
Increased mergers and alliances have been shaping the
Finnish banking sector in recent years. The banking
and finance market has become increasingly
international, with Scandinavian banks particularly
active in cross-border mergers and acquisitions.
Finnish banks' profitability, efficiency and capital
adequacy are all at a healthy level.
Hostile takeovers have not in the past been part of the
Finnish business culture and Finnish law does not
distinguish between friendly and hostile takeovers.
Finnish legislation does not expressly address takeover
defenses. In Finnish law, the legality of takeover
defenses is evaluated primarily in light of the leading
principles of the Security Markets Act (SMA), the
principle of equal treatment of all shareholders, and
general principles of company law. If challenged, the
legality of the defensive measures is subject to review
by the courts.
Finland changed over to the Single Euro Payments Area
(SEPA) in January 2008. The system began with credit
transfers and cards, and direct debit will be taken
into use on 1st of May 2010, when the New Payment Law
enters into effect. SEPA replaces 32 national payment
systems in Europe with one single European system
working with uniform standards and regulations.
A.10 Competition from state owned enterprises
Duties relating to state ownership steering are handled
in the Ownership Steering Department in the Prime
Minister's Office. The department is responsible for
state ownership policy, the ownership steering of
state-owned companies under the Prime Minister's
Office, expansion of ownership base, branch re-
organizations, share investments, coordination of
ministries' ownership steering procedures and inter-
ministerial cooperation. The Minister responsible for
Ownership Steering in the Prime Minister's Office is
Minister Jyri Hakamies.
The Finnish State is the majority owner in seventeen
and a significant minority owner in twenty-two
companies which operate on market terms. In addition,
the State is an owner in fifteen special assignment
companies which have been assigned a certain task by
the State or which do not operate in a competitive
environment due to a granted exemption.
A list of state owned companies can be found here:
http://www.valtionomistus.fi/yhtiot/en.jsp
The State's objective as a shareholder is to provide
consistent and predictable solutions and act as openly
as possible. The most important ownership policy tools
include Government resolutions, statements of the
Cabinet Committee on Economic Policy and
recommendations and statements by the responsible
Ministries. All of the aforementioned documents are
public and thereby available to all market actors.
The Guidelines "Handling of Corporate Governance Issues
in State-owned Companies and Associated Companies",
dated 13th November 2000, is an important instrument in
the State's corporate governance policy. The Guidelines
stress, among others, the independence of the Board of
Directors and its goal to aim at increasing the
shareholder value. The State has since Spring 2006
published (in Finnish) on the internet pages salaries
and remunerations of the company management and board
in individual state-owned companies and associated
companies.
The number of state-owned companies with a supervisory
board is 11. They are Alko Inc., Finnish Fund for
Industrial Cooperation Ltd, Finnvera plc, Fortum
Corporation, Itella Corporation, Kemijoki Oy, Neste Oil
Corporation, Vapo Oy, Oy Veikkaus Ab, VR-Group Ltd and
Yleisradio Oy. In addition, there is a supervisory
board in two associated companies, namely in Gasum
Corporation and Rautaruukki Corporation.
The State has direct holdings in 3 listed companies,
namely Finnair Oyj, Fortum Corporation and Neste Oil
Oyj. In addition, the State has indirect shareholdings
via Solidium, a wholly state-owned holding company, in
9 associated companies: Elisa Oyj, Kemira Oyj, Metso
Corporation, Outokumpu Oyj, Rautaruukki Corporation,
Sampo Group, Sponda Plc, Stora Enso Oyj and TeliaSonera
AB.
A.11 Corporate Social Responsibility
Finland is committed to compliance with and the
promotion of corporate social responsibility by
supporting the implementation of international codes of
conduct guiding the operations of multinational
enterprises. Such international codes of conduct
include the OECD Guidelines for Multinational
Enterprises, the ILO Declaration on Fundamental
Principles and Rights at Work, and the Tripartite
declaration of principles concerning multinational
enterprises and social policy by the ILO. These include
instructions and rules of conduct concerning the
financial, ecological and social responsibility of
enterprises, such as human rights, rights at work, the
abolition of child labor, the environment, anti-
corruption measures, consumer protection and science
and technology.
Having committed to these guidelines, Finland strives
to influence Finnish companies so that they operate
sustainably and responsibly in all countries.
Compliance with the guidelines is voluntary for
enterprises. Furthermore, business and non-governmental
organizations have compiled corresponding
recommendations for enterprises.
The Committee on Corporate Social Responsibility,
operating in connection with the Ministry of Employment
and the Economy, is the National Contact Point that
monitors the application of the OECD Guidelines for
Multinational Enterprises in Finnish multinationals.
In Finland, the Securities Market Association
established by the Central Chamber of Commerce, the
Confederation of Finnish Industries EK and NASDAQ OMX
Helsinki Ltd has developed and updated the Finnish
Corporate Governance Code for companies listed on the
Helsinki Stock Exchange. The Code harmonizes the
practices of listed companies as well as the
information given to shareholders and other investors.
It also improves the transparency of administrative
bodies, management remuneration and remuneration
policies. The aim of the Code is that Finnish listed
companies apply corporate governance practices that are
of a high international standard.
A.12. Political Violence
There have been no instances of political violence
since the struggle for independence in 1918.
A.13. Corruption
Corruption in Finland is covered by the Criminal Code
and provides for sanctions ranging from fines to
imprisonment for up to four years, depending on the
seriousness of the crime. Both giving and accepting a
bribe is considered a criminal act under the Criminal
Code. Finland has statutory tax rules concerning non-
deductibility of bribes.
Finland does not have an authority specifically charged
with the prevention of corruption. Co-ordination of
horizontal and international co-operation anti-
corruption matters is the responsibility of the
Ministry of Justice. However, Finland's anti-corruption
contact point for EU purposes is in the Ministry of the
Interior and the National Bureau of Investigation has
an officer whose full-time duty is to follow matters
related to corruption in Finland.
Over the past decade, Finland repeatedly has placed
first or second on Transparency International's
Corruption Perceptions Index (CPI), indicating
extraordinarily low perceived levels of corruption, as
determined by expert assessments and opinion surveys.
However, Finland's CPI score decreased from 9.4 in 2007
to 8.9 in 2009, ranking Finland sixth on the list of
least corrupt countries, mainly due to concern about a
lack of transparency in election campaign finance. In
May 2008, the Ministry of Justice appointed a Committee
on Election and Party Funding to prepare a proposal for
the reform of the laws regulating the funding of
political parties and election candidates. In September
2008 a provision on the itemization of campaign costs
was added by way of a partial amendment (Act 604/2008)
to the 2004 Act on the Disclosure of Election
Financing. The reporting threshold for individual
campaign contributions in municipal elections was cut
from USD 2,266 (EUR 1,700) to USD 1,333 (EUR 1,000). A
new law on candidates' election funding (The Act on a
Candidate's Election Funding 273/2009) was enacted in
May 2009, containing far stricter provisions than the
previous piece of legislation. For one thing, the
threshold of donations above which the identity of the
donor is to be disclosed was lowered and oversight was
tightened by introducing substantial supervision in
addition to the earlier formal control. Preparations
for legal reform to the party funding and
incriminations laws are still underway. Another
committee was appointed in autumn 2008 to prepare the
implementation of stricter provisions concerning
bribery of members of the Finnish Parliament (the Act
on Political Parties). If this law is approved by
Parliament it will dramatically increase the
transparency of party funding in Finland.
Transparency International's (TI) national chapter
Transparency Finland (TF) was founded in late 2003.
TF's prime objectives are informing and educating about
international treaties, corruption and the consequences
of corruption. In addition TF strives to spread
awareness of the problems and threats facing good
governance. More information can be found at:
http://www.transparency.fi/english.htm
Finland is a signatory to the OECD Convention of Anti-
Bribery. The instruments of ratification of the
convention were deposited in December 1998. The
amended Penal Code entered into force in January 1999.
The convention entered into force in February 1999.
Finland ratified the UN Convention against Corruption
in July, 2006.
Finland ratified the Council of Europe Civil Law
Convention on Corruption in October 2001 (which entered
into force in November 2003) and then signed the UN
Convention against Corruption in December 2003. The
Convention on Laundering, Search, Seizure and
Confiscation of the Proceeds from Crime entered into
force in Finland in July 1994. The UN Convention
against Transnational Organized Crime was ratified in
February 2003.
Finland ratified the Criminal Law Convention on
Corruption (EST 173) in October 2002, and the
Convention entered into force in February 2003.
Finland made reservations in respect of Article 12
(trading in influence) and Article 17 (jurisdiction).
Finland is a party to the 1957 European Convention on
Extradition. Finland has ratified the 1959 European
Convention on Mutual Legal Assistance in Criminal
Matters and its 1978 Additional Protocol. Finland is a
party to the 1996 Convention on Extradition between EU
member States as well the 1995 Convention on Simplified
Extradition Procedure between EU.
The U.S and Finland have an extradition treaty, signed
in June 1976; it entered into force in May 1980. The
U.S. and Finland signed a bilateral extradition and
mutual legal assistance treaty (MLAT) in December 2004.
The U.S. and the EU signed bilateral extraditions and
mutual legal assistance (MLAT) treaties in December
2003. The Finnish Parliament ratified the agreements
(HE 85/2005) and approved the necessary implementing
bilateral instruments in December 2007.
A.14. Bilateral Investment Agreements
Finland has concluded bilateral investment agreements
with the following 62 countries: Azerbaijan, Albania,
Algeria, Argentina, Armenia, Belarus, Bosnia-
Herzegovina, Bulgaria, Chile, China, Croatia , the
Czech Republic, the Dominican Republic, Egypt, El
Salvador, Estonia, Ecuador, Ethiopia, Georgia,
Guatemala, Hungary, India, Indonesia, Iran, Jordan,
Kazakhstan, Kirghizia, , Kuwait, Latvia, Lithuania,
Macedonia, Malaysia, Mauritius, Mongolia, Morocco,
Mozambique, Mexico, Namibia, Nigeria, Oman, Oriental
Republic of Uruguay, Peru, Philippines, Poland, Qatar,
Republic of Korea, Republic of Lebanon, Republic of
Moldova, Republic of Slovenia, Romania, Russia,
Slovakia, South Africa, Sri Lanka, Tanzania, Thailand,
Tunisia, Turkey, Ukraine, United Arab Emirates,
Uzbekistan, and Vietnam.
In September 1989, Finland and the U.S. signed a
convention (TIAS 12101) for the avoidance of double
taxation and the prevention of fiscal evasion with
respect to taxes on income and on capital. The
convention entered into force December 30, 1990. The
tax convention was amended on 31 May 2006 under a
protocol signed in Helsinki. The protocol changes the
rules that apply to people falling within the area to
which the convention applies, domicile, taxation of
dividends, interest and royalties, restrictions on
benefits, a method for eliminating double taxation and
an exchange of tax information.
Among other things, the protocol eliminates the source-
country withholding tax on many intercompany dividends
and on dividends paid to pension funds, updates the
dividend article to incorporate policies reflected in
the U.S. Model provision, such as those regarding real
estate investment trusts (REITs), eliminates source-
country withholding royalties payment regardless of
type of intellectual property, bringing the convention
in line with the U.S. Model treaty. For more see:
http://www.treas.gov/press/releases/reports/j s4298_atta
chment_finnishprotocol06.pdf .
The protocol has been passed by the Finnish Parliament,
and U.S. signed the instruments of ratification in
December 2007.
A.15. OPIC and Other Investment Insurance Programs
In January 1996, OPIC and Finnvera (the former Finnish
Guarantee Board FGB) signed an agreement to encourage
joint U.S. - Finnish private investments in Russia and
the Baltic States. The 1996 agreement was preceded, in
1992, by a Principles of Cooperation Agreement between
OPIC and the Finnish Fund for Industrial Cooperation
(Finnfund).
Finland has been a member of the Multilateral
Investment Guarantee Agency (MIGA) since 1988.
A.16. Labor
The Finnish labor force is highly skilled and well
educated. Of the 2.41 million persons employed, 4.8
percent are employed in the primary sector, 24 percent
in industry and construction and 71.2 percent in
services.
Finland has a high unionization rate of around 76
percent, and a long tradition of social dialogue. Wage
formation and labor market institutions are based on
legislation and agreements. The working life
legislation has been prepared on a tripartite basis by
government and social partners. Collective bargaining
and collective labor agreements are generally binding
in nature. Finland adheres to most ILO conventions;
enforcement of worker rights is effective.
Regulation of the labor market - minimum wages, working
hours, working conditions etc - to a large extent takes
place through collective agreements instead of
parliamentary legislation. In recent years, labor
market partners at the local level have been given more
flexibility in enforcing the stipulations of the
collective agreements e.g. concerning working time
arrangements. The Act on Employment Contracts is the
main regulating act applied to employment
relationships. It includes the minimum conditions
regarding working hours, annual leave, safety
conditions etc.
The unemployment rate in November 2009 was 8.5 percent,
against 6.0 percent a year earlier. The unemployed are
granted compensation (labor market subsidy) which, if
linked to earnings, as has been the case for about 60
percent of the unemployed, guarantees moderate income
for a period up to 500 working days. Since January
2006, the labor market subsidy has had restrictions
placed upon it. People without jobs after 500 days need
to demonstrate that they are actively pursuing
employment in order to continue receiving the benefit.
Finland is participating in an experiment taking place
in the European Community, the purpose being to find
out what impact a targeted reduction in value added tax
has on employment and the grey economy. The value
added tax rate on hairdressing services and certain
small repair services (bicycle, shoe, leather product,
clothes and linen repairs) has been reduced from 22
percent to 8 percent for 2007-2010.
The temporary limits on the free movement of workers
from eight EU member states were not renewed, and the
restrictions applied to work permits ended in Finland
in May 2006. Parliament adopted the amendments to the
Aliens Act fully incorporating the directive on free
movement of EU citizens into national law. The Act
came into force in April 2007.
Due to the aging population in Finland all sectors of
the economy are estimated to face labor shortages in
the future. The labor shortage issue is likely to be
amplified by historic low levels of immigration; a
trend which does not appear likely to change in the
near to medium future.
A.17. Foreign Free Zones/Free Warehouse Areas
Finland has four Free Zones and four Free Warehouse
areas. The four designated Free Zones are located in
Hanko (Southern Customs District); Hamina and
Lappeenranta (Eastern Customs District); and Turku
(Western Customs District). The four Free Warehouses
are located in Helsinki (Southern Customs District);
Naantali, (Western Customs District); and Kemi and Oulu
(Northern Customs District).
In Finland, the duty-free free zone and warehouse
licenses have in most cases been granted to
municipalities or cities, but one or several commercial
operators, approved by the customs districts, are
usually in charge of warehousing operations within the
area. The duty-free storage areas are available to
both domestic and foreign-owned companies. The free
zone area regulations have been harmonized in the EU by
the Community Customs Code.
See Finnish Board of Customs for more information at:
http://www.tulli.fi/en/index.jsp )
A.18. Foreign Direct Investment Statistics
In 2008 Finnish direct investment recorded a capital
outflow of EUR 2.3 billion. As foreign investors
repatriated EUR 4.9 billion of direct investment in
Finland, the result was a EUR 7.2 billion net outflow
of direct investment. At the end of 2008, the value of
the stock of outward direct investment was 82 billion
euros and the value of the stock of inward direct
investment was 56 billion euros. Finnish companies'
income on foreign direct investment abroad totaled 7.4
billion euros and foreign investors' income on direct
investment in Finland totaled 5.1 billion euros.
No policies exist that govern the export of capital and
outward direct investment. Holders of capital, Finnish
and foreign, can move funds at will.
For more FDI statistical info See Bank of Finland's
"Finland's balance of payments, annual review 2008",
10/26/2009 - report
http://www.bof.fi/NR/rdonlyres/5E78C3CA-AC12- 4D86-A28D-
E5C293FE9FBB/0/Mtvuosi0910_en.pdf
Major U.S. investors, in terms of turnover, in Finland
in 2008, include: OMG Finland (*779 million euros),
Valtra/AGCO Corp (610 million euros), Hewlett-Packard
(566 million euros), IBM (*480 million euros), General
Medical Finland (*452 million euros), Paroc Group (*446
million euros), John Deere Forestry (*404 million
euros), Foster Wheeler Energia/Foster wheeler Corp
(*352 million euros), Ford (326 million euros), Tellabs
(*311 million euros), and GE Healthcare Finland (*310
million euros) * = consolidated turnover.
For 2008 the Major foreign investors in terms of
turnover included: Nordea (*7043 million euros), Tamro
(*5534 million euros), Elcoteq (*3443 million euros),
RTF Auto (3407 million euros), Luvata (*2487 million
euros), ABB (*2446 million euros), Teboil (*1964
million euros), Sampo Bank (*1803 million euros),
TeliaSonera (*1544 million euros), GNT Holding (*1356
million) and Yara (*1350 million euros).
BUTLER