Finland: Doing Business in Finland

Article by Lennart Simonsen and Marina Louhija

This article first appeared in the 9th edition of Global Counsel 3000 and is reproduced with the permission of the publisher. For further details please visit www.practicallaw.com/global

1. What is the legal system in your jurisdiction?

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 joined the EU in 1995.

2. Are there any restrictions on foreign investment (including authorisations required by central or local government)?

Finnish law imposes no general restrictions on foreign investment in Finland. As a rule, shares and assets in Finnish companies can be acquired by foreign entities without the need for approval from Finnish authorities.

However, public interest dictates that certain types of trade and business, whether carried out by Finnish or non-Finnish persons, be subject to licensing and permit requirements. Often the sole purpose of these requirements is to ensure that the individuals engaged in the trade or business are competent and sufficiently committed.

3. Are there any exchange control or currency regulations?

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. However, payments to or from Finland must be made through authorised banks in Finland.

Finland has adopted the single currency (the Euro), which replaced the Finnish Markka (FIM) on 1 January 2002.

4. Are any grants or incentives available to foreign investors?

A foreign company locating its business to certain geographical areas in Finland may gain subsidies from the government. The amount of the subsidy depends, among other things, on the location of the business. Subsidies are mainly allocated to small and mediumsized enterprises.

5. What are the most common forms of business entity used by foreign investors to conduct business in your country?

Foreign companies most commonly conduct business in Finland through limited liability companies. Under the Finnish Companies Act these are divided into private and public limited liability companies. Foreign companies may also conduct business in Finland through a Finnish branch office.

It is possible, but rare, for foreign companies to conduct business in Finland through general or limited partnerships or co-operatives.

6. In respect of the corporate vehicle most likely to be used by foreign investors conducting business in your country, please state:

• Registration formalities (including timing).
• Minimum (and maximum) share capital.
• Whether shares can be issued for non-cash consideration such as assets or services (and any formalities).
• Any restrictions on the rights that can attach to shares.
• Any restrictions on foreign shareholders.
• Management structure and any restrictions on foreign managers.
• Directors’ liability.
• Parent company liability.
• Reporting requirements (including filing of accounts) and cost of compliance.

The most common form of corporate vehicle to be established by a foreign company in Finland is the limited liability company (public or private).

Registration formalities. All limited liability companies must register at the Trade Register of the National Board of Patents and Registration (the Trade Register) within six months of signing the memorandum of association. The actual incorporation of a company occurs through its registration. Share capital must have been paid in full before an application for registration is filed. The memorandum of association and the articles of association, among other things, must be attached to the registration form. Registration usually takes between two and ten weeks from submitting an application.

Minimum (and maximum) share capital. The required minimum paid-up share capital is EUR8,000 (about US$9,371) for private limited liability companies, and EUR80,000 (about US$93,710) for public limited liability companies. There is no limitation on maximum share capital.

Shares issued for non-cash consideration. Companies can issue shares for non-cash consideration. A statement from an independent accountant is required for the valuation of consideration in kind.

Restrictions on rights attaching to shares. All shares carry equal rights in the company, unless otherwise provided in the company’s articles of association. The voting power of one share may not exceed that of another by more than 20:1. The articles of association may also provide for preference shares, which, as a general rule, only carry voting power in relation to certain matters related to such shareholders’ rights, but carry better rights to dividends than normal shares, for example.

Restrictions on foreign shareholders. As a rule, there are no restrictions on foreign shareholders (see Question 2).

Management structure and foreign managers. The management of a limited liability company vests by law in a company’s board of directors (the board), which is also entitled to represent and sign on behalf of the company. The board must consist of at least three members, unless a company’s share capital is less than EUR80,000 (about US$93,710), in which case the board may consist of one or two ordinary members and at least one deputy member. A limited liability company with a share capital of EUR80,000 (about US$93,710) or more must appoint a managing director. At least one of the board members and one of the deputy members as well as the managing director must be resident in the EEA, unless the Trade Register grants an exemption.

The board is responsible for the management and the proper arrangement of a company’s operations. The managing director is in charge of the day-today management of a company in accordance with the instructions and orders given by the board.

A company may also have a supervisory board if its share capital exceeds EUR80,000 (about US$93,710). The supervisory board supervises the board and the managing director in their duties regarding the administration of the company and, among other things, must give a state- ment of the annual accounts and auditors’ report to shareholders in their annual meeting.

Directors’ liability. The managing director and members of the board and supervisory board must act in the best interests of the company, and in accordance with both the articles of association and the Companies Act. They are liable to compensate:

• the company for damages caused deliberately or through negligence by them in their respective positions; and
• the shareholders or third parties for damage caused by breaching the provisions of the articles of association or the Companies Act.

Directors can incur criminal liability by breaching the Companies Act, Securities Markets Act and/or certain other acts.

Parent company liability. A parent company will not generally be liable for the debts of its subsidiaries unless it has given a guarantee for such liabilities.

Reporting requirements. All limited liability companies must submit a copy of their annual accounts to the Trade Register. Public limited liability companies must also prepare and publish interim accounts at least once a year. Also, changes in the company’s name, address, share capital, board members, and provisions in the articles of association must be reported to the Trade Register.

7. Please briefly describe the regulatory environment for employment issues.

Employment is regulated by various statutes which afford employees considerable protection. The Finnish labour market is highly organised and this has a strong impact on the formation of collective labour agreements, national wage policies and labour legislation.

8. What is the jurisdictional scope of employment regulation?

Labour and employment law is comprised of statutes, supplementary regulations, decisions of the Council of State and decisions of various Ministries and central administrative boards. The mandatory provisions include, among other things, those relating to:

• Safety at work.
• Overtime work.
• Annual holiday.
• Minimum wage.
• Terms of and reasons for notice periods.
• Discrimination.

These rules are applied to a Finnish employee working in Finland. Broadly, all employers are subject to labour laws irrespective of their size or line of business. Employment law provisions can be superseded only to the extent that they may be set out in collective labour agreements or, to a limited extent, in employment contracts. To a certain extent the parties of an employment contract may agree on the law applicable to the employment relationship between the contracting parties. However, the mandatory provisions cannot be overridden.

9. Is a written contract of employment required and what, if any, other terms are likely to govern the employment relationship?

A written contract is not required unless requested by either party. However, where a contract is oral, an employer must give an employee a written statement of the main terms of the employment relationship within the first salary pay period.

In addition, numerous collective labour agreements cover the entire employment field and set out specific rules substituting or supplementing labour and employment law. They also set limits on private contracting. Where a term in an employment contract conflicts with a corresponding provision in a collective agreement to the disadvantage of the employee, the term is invalid and the provisions of the collective labour agreement will apply if both the employee and employer are bound by it.

10. Are employees entitled to management representation and/or to be consulted in relation to corporate transactions (such as redundancies, disposals etc)?

Where there are over 30 (or in some cases 20) employees, employers must consult worker representatives on certain issues, such as the transfer of the business (in mergers, de-mergers and/or acquisitions). Employee representation in management is required where there are over 150 employees. The main principles set out in the EC Directive on European Works Council have been implemented in Finland.

11. Please give details of:

• Maximum working day or week.
• Minimum wage.
• Minimum holiday entitlement.

Maximum working week. Under the terms of the Working Hours Act, normal working hours are eight hours a day, 40 hours a week, subject to provisions of applicable collective labour agreements. Certain jobs (for example maritime work) are separately regulated.

Minimum wage. The law does not determine a minimum wage. The main principles for fixing wage rates appear in the collective labour agreements. Most collective labour agreements determine minimum wage rates and possible supplementary payments. Usually, the applicable wage rate is assessed on the qualifications and position of an employee. Accordingly, the employer is generally obliged to observe provisions concerning salary in the collective labour agreement applicable for the work in question, for example if that agreement is deemed to be general practice in the branch of work concerned.

Minimum holiday entitlement. Employees are entitled to two days’ leave per month of employment. After one year’s continuous employment, employees are usually entitled to two and a half days’ leave per month. Employers must generally pay employees their normal salary during annual leave. Some employers pay an additional holiday bonus amounting to about 50% of the usual salary for the holiday period. The amount paid as additional holiday bonus varies depending on the provisions of the applicable collective labour agreement.

12. What statutory rights do workers have against dismissal in your jurisdiction?

An employment contract entered into for a specified period expires without notice when the stipulated term comes to an end. Such a contract cannot, subject to certain exceptions, be terminated during its term other than by rescission.

Contracts made for an unspecified period may be terminated by either party giving the other party notice or without any notice period if so stipulated by law. The length of the notice period depends generally on the duration of the employment relationship.

Employers may only lawfully dismiss employees in limited circumstances. Although the Act on Employment Contracts does not provide examples of individual grounds that constitute grounds for dismissal, available precedents indicate that sufficient grounds in general for dismissal may be:

• Carelessness.
• Failure to follow instructions.
• Gross negligence.
• Dishonesty.
• Absence from employment without reason.

As a rule, the following are not considered sufficient grounds:

• Employee’s illness.
• Participation in a strike or in associations.
• Employee’s political and religious beliefs.
• Pregnancy.

All employees are protected against unfair dismissal. Where an employer has dismissed an employee without sufficient legal ground and without following the required procedure, an employee is generally entitled to compensation of between three and 24 months’ salary, depending on the circumstances.

13. How are redundancies regulated?

Employers may terminate an employment contract concluded for an unspecified period, if:

• The amount of work has significantly and nontemporarily diminished for financial, production or reorganisation-related reasons; and
• The employee cannot be assigned to other duties or reasonably retrained to other duties, taking into account his skills and abilities.

Employers may also temporarily lay-off employees at 14 days’ notice, provided that circumstances for redundancy exist. While laid-off, an employee’s work and salary is suspended, but the employment relationship otherwise remains intact.

If a valid legal reason for lay-off due to redundancy exists, an employer is not under a general obligation to make any severance payment to the employees in question. The employer’s costs will generally be limited to the salaries payable for the notice period (unless otherwise agreed in the individual employment contracts) and the monetary compensation corresponding to the vacation earned but not used by the employee. If there is no valid legal reason for redundancy, the employee may claim compensation for unfair dismissal (see Question 12).

In the case of potential lay-offs, an employer must also fulfill the co-determination negotiation obligations. These obligations are procedural and apply to employers employing more than 30 employees, subject to certain exceptions. Where an employer has deliberately, or by gross negligence, failed to observe the co-determination negotiation obligation, an employee may be entitled to compensation of up to 20 months’ salary.

14. What is the cost of employment for employers and employees (mandatory taxes, social security contributions etc)?

Employers must pay social security, unemployment insurance, pension insurance, collective life insurance and accident insurance contributions. The aggregate of these social security payments amounts on average to about 22% to 27% of gross salary, depending on the size and field of the business.

Earned income, including salary, is taxed at progressive tax rates. The highest tax rate is about 59% which includes:

• National income tax.
• Municipal tax (varies between municipals).
• Church tax (varies between churches).
• Health insurance.

In addition, employees must pay a pension insurance premium amounting to 4.6% and an unemployment insurance amounting to 0.2% of their gross salaries.

15. How are employees of foreign companies that are seconded to your country from abroad taxed? Foreign individuals spending more than six consecutive months in Finland (disregarding short trips abroad) are treated as residents for tax purposes.

Salary received by a resident individual is taxed at progressive tax rates. The highest progressive tax rate is about 59% (see Question 14). However, taxation is subject to relevant double tax treaties, which usually allow Finland to tax employees of foreign companies only if they spend more than 183 days (during a 12- month period or calendar year) in Finland.

There is a special tax regime for qualifying foreign key personnel working in Finland. The salary and any fringe benefits paid to such individuals during the first two years of their assignment to Finland are taxed at 35%.

Subject to double tax treaties, non-resident foreign employees working for a Finnish company or Finnish branch of a foreign company must pay withholding tax of 35%.

16. Do foreign workers require work permits? If so, how long does it take to get a permit and how much does it cost?

Overseas employees and executives working for a Finnish company in Finland may require a residence permit and a work permit, depending on their nationality. Citizens of Nordic countries (Iceland, Norway, Sweden and Denmark) can arrive in Finland without a passport, residence permit or work permit. Citizens of EEA member states do not need a work permit, nor do they need a residence permit for a stay not exceeding three months. After this time the individual may obtain a residence permit from the local police authority.

Citizens of other countries must generally apply first for a residence permit and then for a work permit, in each case before arriving in Finland. Both permits are granted by a Finnish consulate or the consular office of a Finnish Embassy.

Work and residence permits are obtained through formal application procedures. In general, fees are charged for each permit separately and the amount varies depending on, for example, the authority that grants the permit.

17. What is the basis of taxation of companies that are incorporated and/or tax resident in your jurisdiction?

A company incorporated in Finland is subject to Finnish corporate tax on its worldwide profits and gains.

18. How are the activities of non-tax resident companies in your country taxed?

A branch of a non-resident company is generally treated as a permanent establishment in Finland and is therefore liable for corporate tax on its Finnish source income and gains attributable to that branch. A non-resident company, which is not domiciled in a double tax treaty country, may be liable to pay corporate tax on its Finnish source income and gains even where a permanent establishment is not created.

19. What are the main taxes that potentially apply to companies (including rates)?

Corporate tax. Companies are subject to corporate tax on their worldwide profits and capital gains subject to the provisions of double tax treaties. The applicable rate is a flat rate of 29%. Taxable profit is determined in accordance with generally accepted accounting principles with only minor adjustments for tax purposes.

Supplementary tax due to the imputation tax system. Dividend distributions from Finnish limited liability companies are taxed according to an imputation tax system (avoir fiscal) in which the underlying corporate tax is credited to resident shareholders. The purpose of the full imputation system is to ensure that a Finnish company’s profits are taxed at least once in Finland. This means that the corporate tax payable by a Finnish company in any year is the higher of:

• the comparable tax, equalling Finnish corporate tax payable by the company for the relevant year, as well as any foreign withholding tax paid on dividend income received by the company and exempted from Finnish corporate tax; and
• the minimum tax, equalling 29/71 of the dividends distributed by the company for the relevant year.

If the comparable tax for any tax year exceeds the minimum tax, the difference is carried forward for a maximum of ten years as a tax surplus, which can be used to offset the liability to pay supplementary tax (see below).

If the minimum tax for any tax year exceeds the comparable tax and the tax surpluses carried forward from previous years, then the difference is levied on the company for that year as a supplementary tax.

If a Finnish company receives Finnish source dividend (carrying a full imputation tax credit) and does not pay income tax, unused tax credit is created. Unused tax credit can be carried forward for ten years and can be offset against corporate income tax or supplementary tax. Unused tax credit is refunded in cash to Finnish individual shareholders but not to corporate shareholders.

There are also special regulations regarding flow through dividends.

Value added tax (VAT). VAT is a tax on goods and services supplied in Finland by businesses and on imported goods. The standard rate is 22%. The reduced rates are 17% (for example food and nonalcoholic beverages) and 8% (such as medicine and books). Some supplies are zero-rated (for example subscribed magazines and newspapers) or exempt (such as financial and insurance services).

Transfer tax. Transfer tax is generally levied on the transfer of securities at the rate of 1.6% and at the rate of 4% on the transfer of real estate. Transfer tax in not levied on transfers of securities that are made between non-resident parties or on transfers of shares carried out over the Helsinki Exchanges or comparable exchanges.

Employer’s social security contributions. A Finnish employer is liable to pay employer’s social security contributions varying between 2.964% and 6.064% of gross salaries. In addition, an employer is liable to pay social security premiums (to private insurance companies) on average varying between 18.6% and 20.4%.

20. Please explain how each of the following are taxed:

• Dividends paid to foreign corporate shareholders.
• Dividends received from foreign companies.
• Interest paid to foreign corporate shareholders.
• Intellectual property royalties paid to foreign corporate shareholders.

Dividends paid to foreign corporate shareholders. In general, dividends paid by Finnish companies to foreign corporate shareholders are subject to a 29% withholding tax. However, double tax treaties may reduce or eliminate this tax. Dividends paid to an EU-resident corporation holding at least 25% of the share capital in the distributing company are not subject to withholding tax, provided that the recipient is not entitled to a tax credit for the dividends from Finland (currently only Irish recipients are entitled to a tax credit), and that the recipient is liable to pay tax under Article 2(c) of the EC Parent-Subsidiary Directive.

Dividends received from foreign companies. Finnish corporations are widely exempt from corporate tax on dividends received from corporations resident in double tax treaty countries either by local tax laws or by double tax treaties (exemption method). If not exempted, the foreign dividends are considered as taxable business income subject to the normal corporate rate of 29%, and foreign withholding taxes are credited.

Interest paid to foreign corporate shareholders. Interest on a loan paid to a foreign corporate shareholder, as a rule, is not subject to a withholding tax, provided that the loan is not a capital investment considered to be the borrower’s equity.

IP royalties. In general, royalties paid by Finnish companies to foreign corporate shareholders are subject to a 29% withholding tax. However, double tax treaties usually reduce or eliminate this tax.

21. Does your country have thin capitalisation rules (restrictions on loans from foreign affiliates)?

At present, there are no formal thin capitalisation rules (for example, in one case the Supreme Administrative Court allowed a debt to equity ratio as high as 1:15).

22. Can the profits of a foreign subsidiary be imputed to a parent company that is tax resident in your country (controlled foreign company rules)?

An individual resident in Finland or a domestic corporation may be subject to income tax for their share of the profit of a controlled foreign corporation (CFC), regardless of whether this share is distributed by the CFC to its shareholders. A CFC is a foreign corporation that pays income tax in its domicile at a rate less than 60% of Finnish income corporation tax. Generally, this means that the tax rate applicable to a CFC is 17.4% (that is, 60% of 29%) or less. Income tax can only be levied if:

• A shareholder resident in Finland, together with closely related parties or entities belonging to the same sphere of interest, own at least 10% of the company’s share capital or are beneficiaries entitled to a portion of at least 10% of the profit of the company; and
• One or more shareholders resident in Finland directly or indirectly own shares representing at least 50% of the votes or at least 50% of the capital of the company, or are entitled to a share of at least 50% of the capital yield of the entity.

As an exception, CFC rules do not apply to income of a CFC originating mainly from, for example, industrial production or shipping, if that activity occurred in the company’s country of origin.

23. Does your country have transfer pricing rules?

Finland does not have detailed transfer pricing rules. As a rule, all transactions between affiliated parties must be conducted on an arm’s length basis.

24. How are imports and exports taxed?

This will depend on whether goods are imported or exported within the EU or outside:

Outside the EU. Exports of goods outside the EU are subject to VAT but are generally zerorated. Imports from outside the EU are subject to VAT (payable by the importer at the same rate as if the goods were supplied in Finland). Customs and excise duty may also be payable on imports.

Within the EU. Between VAT registered traders, supplies are generally zero-rated (both the VAT registration number of the seller and the buyer are put on the invoice). The customer must pay VAT at his country’s rate on his intra-Community acquisition. VAT is charged in the normal way on sales to non-VAT registered customers (as if the goods were supplied in Finland).

Special place of supply rules apply to international supplies of services (determining whether the customer must be charged with or without VAT).

25. Does your country have a wide network of double tax treaties?

Finland has double tax treaties with about 60 countries.

26. Is there any merger control regulation in your country? If so, please state:

Whether filing is mandatory.

• Procedural thresholds.
• Timing.
• Substantive test.
• Fees and penalties for failure to notify.

Filing. Filing is mandatory if procedural thresholds are met. Notification must be filed with the Finnish Competition Authority (FCA).

Procedural thresholds. The Finnish Act on Competition Restrictions sets out cumulative procedural thresholds. For this purpose, the parties include the acquirers of control and the target, excluding the seller. An acquisition must be filed when:

• the combined aggregate worldwide turnover of the parties exceeds EUR336,375,852.92 million (about US$392 million); and
• the aggregate worldwide turnover of each of at least two of the parties exceeds EUR25,228,188.97 million (about US$26 million); and
• the target or any of its subsidiary companies conducts business in Finland. The FCA interprets the term "conduct business in Finland" broadly for this purpose. It is not required that the target or its subsidiary has, for example, a registered sales office in Finland. Physical presence in the form of a genuine agent (as defined in the Commission’s Guidelines relating to the Vertical Block Exemption Regulation), or the purchase of trade marks registered and used in business in Finland may suffice.

As the procedural thresholds do not include domestic turnover requirements, foreign-to-foreign transactions with only insignificant Finnish activities may be caught.

Timing. Notification must be filed within one week from:

• the signing of a binding acquisition agreement leading to the acquisition of control or the acquisition of a business;
• the announcement of a public bid;
• the decision to merge by the undertakings concerned, if the merger takes the form of a direct merger either by absorption or combination; or
• the holding of the constitutive meeting of the joint venture company.

The initial investigation lasts one month and can be extended by a second phase period of between three and five months. The FCA will refer the case to the Market Court (MC) by the end of the second phase if it considers that possible commitments offered by the parties during negotiations do not outweigh the possible negative effects of the concentration and the concentration should be prohibited. The MC has three months to deal with the referral. The transaction may not be implemented until clearance is obtained.

Substantive test. A concentration may be prohibited if it creates or strengthens a dominant position as a result of which competition would be significantly impeded in the Finnish market, or a substantial part of it. A concentration in the electricity market may also be prohibited if, as a result of it, the combined transfer capacity of electricity (400v) of the parties exceeds 25%.

Fees and penalties for failure to notify. There is no filing fee. Failure to notify may result in fines of up to 10% of the turnover of the company concerned. In addition, the MC may prohibit a concentration that has not been notified or has been notified with incorrect or misleading information.

27. Are restrictive agreements and practices regulated by antitrust law in your country? If so, please give brief details.

Section 6 of the Act on Competition Restrictions (see Question 26) prohibits enterprises or their associations operating on the same level of production or distribution from entering into agreements or concerted practices regarding prices or other types of consideration. In addition, enterprises may not limit production or share markets or sources of supply. However, the latter prohibition does not apply to the extent that such conduct:

• Is necessary to make production and distribution more efficient or to enhance technical or economic development; and
• Mainly benefits customers and consumers.

Section 4 of the Act prohibits resale price maintenance and setting of minimum and maximum retail prices. Recommended retail prices are not prohibited if they do not have coercive effects.

Section 9 of the Act is a catch-all provision, allowing the FCA to initiate consultations and ultimately refer a case to the MC for a prohibition if it considers that certain business practices have harmful effects on competition by decreasing or being likely to decrease efficiency, or by prohibiting conduct of business in any other way.

Section 7 of the Act prohibits an abuse of a dominant position. A dominant position exists:

• When an enterprise or an association of the same holds a monopoly or another dominant position in a particular product market in Finland or part of it,
• That significantly impacts on the price level, delivery terms or competition generally, on a particular level of production or distribution.

Examples of such abuse include:

• Refusals to deal.
• Use of unfair trading conditions.
• Granting of exclusive rights without just cause.
• Predatory pricing.
• Tying.
• Leveraging.

28. Please outline the main intellectual property rights that are capable of protection in your country and, in each case, please state:

• Nature of right.
• How protected.
• Length of protection.

Nature of right. Under the Patent Act, an invention that is new, involves an inventive step and is capable of industrial application may be granted a patent. A patent establishes an exclusive right to exploit an invention commercially.

How protected. An application to register a Finnish patent must be filed with the Finnish National Board of Patents and Registration, which scrutinises each application rigorously in relation to its inventiveness and novelty. The Patent Office also receives international applications made in accordance with the Patent Cooperation Treaty.

Length of protection. 20 years from the date of filing the application. Maintenance fees are payable annually to the National Board of Patents and Registration. For certain pharmaceutical patents, the Supplementary Protection Certificate also exists in accordance with the EC Regulation 1768/92 that extends the protection period afforded.

Nature of right. A trade mark is any sign capable of graphic representation and which satisfies the distinctiveness criteria. Protection against unauthorised use of a Finnish trade mark extends only as far as goods or services of the same or similar type, except for trade marks considered to have a particularly strong and widespread reputation.

How protected. A trade mark right protected in Finland can be established through:

• registration with the National Board of Patents and Registration;
• registration with the Office of Harmonisation for the Internal Market (OHIM) of a Community Trade Mark;
• the Madrid Protocol procedure; or
• use in Finland.

Length of protection. An initial period of ten years from the date of registration, which may be renewed indefinitely for consecutive ten-year periods.

Nature of right. The Finnish Design Act protects a design, pattern or decoration of a product, provided that the design meets the individual character and novelty requirements and differs in a distinctive manner from designs existing at the date of application. In addition, permanent parts of a product and component parts of a complex product, which are, however, required to remain visible during the common use of the complex product, may also be registered as protected designs. A grace period of 12 months exists for the benefit of the creator of the design.

How protected. Registration with the National Board of Patents and Registration.

Length of protection. An initial period of five years from the application for registration. This may be renewed for four additional five-year periods, therefore providing a maximum protection period of 25 years for a registered design.

Nature of right. An unregistered design right is available under the Council Regulation on Community Designs (6/2002/EC), for designs that meet the same requirements as those set out for registered designs (see above). However, the scope of protection is more limited than that applicable to a registered design.

How protected. No registration is required.

Length of protection. Three years from the date of first public use.

Nature of right. The Copyright Act protects the original and unique expression of an idea, motive, or subject of a literary or artistic work of authorship. Works of authorship include:

• works of fine art;
• novels;
• musical scores;
• dramas;
• photographs;
• motion pictures;
• maps;
• other descriptive drawings or graphical or three-dimensional works; and
• computer programs.

How protected. Copyright subsists automatically through the performance of the author. Works possessing a certain level of originality are protected without any registration.

Length of protection. 70 years after the year in which the author died or, in the case of several authors, after the year of the last surviving author’s death.

Nature of right. Generally, information initially communicated under confidentiality or secrecy is protected. In particular, information in any form which is valuable for its owner’s business which derives its value from its being kept secret or otherwise controlled by the owner, is considered a trade secret.

How protected. In general, breach of confidence is actionable in contract law and equity. In addition, the Unfair Business Practices Act prohibits anyone from unlawfully obtaining or attempting to obtain information about a trade secret, and from using or disclosing any information so obtained. Also, the Criminal Code defines several actions relating to trade secret misuse as criminal offences.

Length of protection. No defined term, but must fulfil the trade secret criteria throughout its lifetime.

Nature of right. Utility models (petty patents) are registered rights that grant their owners exclusive protection for technical inventions comprising of a technical solution that can be industrially applied and fulfil the requirements of novelty and inventive step.

How protected. Through registration with the National Board of Patents and Registration. Utility model applications are subject to pre-registration examination of the invention. However, the examination is mainly limited to the fulfilment of the formal requirements and does not cover the criteria of novelty and inventive step.

Length of protection. Four years from the date of the application. It may be renewed twice for consecutive four and two-year periods respectively.

29. If an employee creates intellectual property rights in the course of his employment, who owns the rights?

Ownership of intellectual property rights, created by an employee in the course of his employment, usually rest with the employer. Except for copyrights concerning computer software, employers are, however, obliged to pay a reasonable compensation (this could include non-monetary consideration) for the employee invention.

30. Please briefly summarise the regulatory environment for acquisitions in your country.

There are no general regulatory limitations relating to acquisitions. Legislative control of mergers and acquisitions is mainly governed by domestic and EC competition rules. Certain acquisitions of large Finnish companies may require follow-up clearance from the Ministry of Trade and Industry in accordance with the Act on the Control of Foreign Acquisition of Finnish Companies. The purpose of the clearance is to protect essential national interests. Such control is based on the principle of monitoring. (See also Antitrust above.) Acquisitions of public companies are also regulated by the Securities Markets Act and the regulations of the relevant stock exchange.

31. What are the main documents and process for a private company acquisition?

Finnish acquisitions (especially cross-border ones) to a large extent follow the international pattern. This is true both of the general process of an acquisition (structure, planning and implementation) and of the documentation evidencing the transaction. Initial negotiations may lead to a preliminary agreement such as a letter of intent. A final purchase agreement is the main document used for a private company acquisition. This contains all the terms and conditions relating to the transaction.

32. What are the main documents and process for acquisitions of public (listed) companies?

In addition to the requirements for private company acquisitions (see Question 31), an acquisition of a public limited liability company listed on a stock exchange requires compliance with stock exchange listing rules and with the takeover laws or rules of the relevant jurisdiction. Finnish statutory regulations on public tender offers in the Finnish securities market are contained in the Securities Markets Act, which sets out certain requirements regarding the content and execution of a public tender offer. It also requires that the acquirer offers to purchase minority shareholdings.

33. Are marketing agreements regulated in your country? If so, please give brief details in respect of the following arrangements:

• Agency.
• Distribution.
• Franchising.

Agency. Finland has implemented the EC Commercial Agents (Council Directive) Regulations 1993 through the Sales Representatives and Salesmen Act (Agency Act). Generally, the provisions of the Agency Act are optional. However, it does contain certain mandatory rules on:

• the termination of a contract and compensation payable;
• restrictions on competition; and
• the agent’s right to information from the principal.

Distribution. No statutes specifically regulate distribution agreements. However, a number of statutes have an indirect impact on them. For example, the court can mitigate or nullify clauses under the Contract Act and trade mark licensing is subject to the Trade Mark Act.

Distribution agreements are also subject to the general competition law provisions which prohibit anti-competitive practices, such as price fixing and abuse of a dominant market position (see Question 27).

Franchising. There are no specific statutes regulating franchises, but as with distribution agreements, a number of statutes impact on them indirectly (see above). The Tenancy Act applies if a franchisee is granted a lease by the franchiser. Trade mark licensing is subject to the Trade Mark Act. Information disclosed by a franchiser to a franchisee is protected under the Unfair Business Practice Act.

Franchises are also subject to general competition law provisions, which prohibit anti-competitive practices, such as price fixing and abuse of a dominant position (see Question 27).

34. Are there any laws or codes of practice relating specifically to e-commerce (such as electronic signatures, distance selling etc)?

The E-Commerce Directive (2000/31/EC) was implemented into the Finnish Act on Offering of Information Society Services on 1 July 2002. In addition, the Act on Electronic Signatures harmonised Finnish law with the EC Electronic Signatures Directive (1999/93/EC) on 1 February 2003.

The national laws that are applicable to traditional means of trade are also generally applicable to business on the internet. Such laws include, for example, the Trade Act, the Consumer Protection Act, and the Personal Data Act. More recent legislation, covering the harmonisation of the Consumer Protection Act with the Distance Contracts Directive (1997/ 7/EC), also expressly applies to business conducted on the internet.

The Act on the Offering of Information Society Services contains rules regarding offering services in networks and offering goods by electronic means, clarifying the current legal concerns of electronic contracting. Despite the new legislation, existing form requirements continue to require that certain categories of contracts be concluded by more traditional means, such as real estate sales.

The Act on Electronic Signatures does not greatly differ from the Electronic Signatures Directive. Under the Act, electronic signatures are generally recognised as valid. An advanced electronic signature based on a qualified certificate and a secure signature creation device fulfils the document signature requirements. The legislation concentrates on the certification service providers (they must offer qualified certificates to the public). The rules are not to be applied to certain other parties acting in the field (such as private key providers).

Finland has also implemented the provisions of the Directive on Distance Selling (97/7/EC) by amending the Consumer Protection Act. The relevant provisions relate to:

• Contracts for the supply of goods and services concluded by using only distance communications.
• The marketing preceding the conclusion of the contract.

The implementation of the EC Directive (2001/29/EC) on the harmonisation of certain aspects of copyright and related rights in the information society is underway. A government bill was submitted in October 2002 to the Finnish Parliament to harmonise Finland’s Copyright Act with the Digital Rights Directive (2001/29/EC). However, the proposal was rejected and the legislation process has been delayed. The amendments are not expected to enter into force before the last quarter of 2003.

35. Does your country have data protection laws? If so, please give brief details.

The Personal Data Act (523/1999) implements the EC Data Protection Directive, under which the collection, storage, and processing of personal data is permitted only if it is carried out in accordance with the provisions of the Act. The Personal Data Act applies to automatic processing of personal data, where the data constitutes a personal data file, or part of a personal data file.

The Personal Data Act only applies to any such manifestation of information (for example, file entries or marks) describing an individual or an individual’s characteristics or living circumstances, which can be identified as concerning that individual or members of that person’s family or household. In addition, the Act applies to personal data related to individuals in their capacity as employees, entrepreneurs and public figures.

The provisions of the Telecommunications Directive (97/66/EC) have been implemented by the Act on Privacy and Data Security in Telecommunications. The Telecommunications Privacy Act promotes the protection of privacy and data security in the subscription to and use of telecommunications services (access services). In addition, data controllers also have to comply with the general provisions of the Personal Data Act when collecting, storing, and processing personal data in telecommunications, or providing directories containing subscriber data. Under the Telecommunications Privacy Act, all communications (including email and other telecommunications via the internet) are confidential, unless the sender has intended the transmission to be public. Under this rule, which allows some exceptions, third parties may not store, open, listen to, tap, intercept, or otherwise conduct surveillance on communications.

The EC Directive (2002/58/EC) concerning the processing of personal data and the protection of privacy in the electronic communications sector is currently being implemented in Finland and a new Act on Data Protection in Communications, replacing the Telecommunications Privacy Act, is intended to enter into force during the second half of 2003.

The Act on the Protection of Privacy in the Work Environment contains rules relating to data protection. For instance, an employer can only process employee information that is directly relevant to the employment relationship. This rule cannot be varied even with the employee’s consent. Although the above Act requires that personal data be collected primarily from the employee, collection of data from third parties will usually be permitted with the employee’s consent. In most cases the employee should be notified of such collection each time it takes place. The Act also introduces provisions that limit the testing of employees, and processing of employee medical data.

36. Does your country have product liability laws? If so, please give brief details.

The Product Liability Act has been harmonised with the Directive on Product Liability (85/374/EEC). The Product Liability Act provides for compensation for personal injury and for damage to property where such property is intended for private use or consumption and is primarily used for this.

Persons potentially liable for damages include manufacturers, distributors and importers. Damages are awarded under general principles of tort and can be awarded for economic loss in certain circumstances. Any contract term purporting to limit in advance a person’s right to compensation under the Product Liability Act is void.

37. Are class actions permitted and/or common for product liability claims?

Class actions are not permitted under Finnish law.

38. Please outline the most common forms of resolution for commercial disputes.

Finland’s court system consists of two separate branches: the general courts and the administrative courts. As a rule, matters concerning relations between natural or private legal persons are subject to the jurisdiction of the general courts, and matters regarding the application of administrative law generally fall within the administrative court’s jurisdiction. Criminal matters are handled by the general court. The courts of each branch are organised into a three-tiered hierarchy. In addition, there are various courts with special jurisdiction in civil cases, for example the Insurance Court, Market Court and the Labour Court.

Parties to court proceedings do not necessarily require the assistance of a lawyer or an advocate. However, in commercial litigation legal counsel is almost always retained.

Arbitration is commonly used to resolve commercial disputes. Arbitration clauses, which are generally enforceable, usually refer to the Finnish Arbitration Act or the rules of the Finnish Chamber of Commerce. Finland has ratified the New York Convention, and the Finnish Arbitration Act meets its requirements. However, Finland has not ratified the reciprocity reservation contained in the New York Convention. Therefore, recognition and enforcement is not restricted to arbitral awards made in countries that have ratified the Convention.

ADR or mediation was introduced in Finland as a useful alternative to conventional forms of dispute resolution in June 1998 when the Finnish Bar Association adopted the Bar Mediation Rules. The Bar Mediation Rules provide a framework for submission of any civil or commercial dispute to meditation. The mediation procedure is non-binding.