Background
The Finnish Act on the Screening of Foreign Corporate Acquisitions (statute 172/2012, as amended, in Finnish: laki ulkomaalaisten yritysostojen seurannasta, the “Screening Act”) has originally entered into force in 2012. In 2020, the Screening Act was extensively updated, whereby, inter alia, conditional approval of foreign acquisitions was made possible. In spring-winter 2025, the Ministry of Economic Affairs and Employment of Finland (the “Ministry”) set up a working group in order to prepare certain reforms to the Screening Act. The working group will operate on the basis of an evaluation memorandum published in February 2025 which gives an interesting insight on the possible reforms to be implemented in the Screening Act. It should be noted that the evaluation memorandum does yet propose any actual amendments, but the Government proposal on the reforms of the Screening Act is expected to be submitted the Finnish Parliament by autumn 2026 at the latest. Therefore, it may be that the amendments proposed in the Government proposal differ from those set out in the evaluation memorandum, however, the evaluation memorandum will nevertheless allow an assessment in advance of the ways the Screening Act should be reformed. The purpose of this paper is to examine the main content of the amendments proposed in the evaluation memorandum.
Purpose of the screening act
The purpose of the Screening Act is to monitor and, should a key national interest so require, restrict the transfer of influence to foreign entities in companies that are safety-critical in nature. The companies that are monitored include, for instance, defence industry companies and companies that produce or supply critical products or services that are related to the statutory duties of Finnish authorities essential to the security of society. If a foreign acquisition is deemed to jeopardise a key national interest, the authorities are obliged either to deny the foreign acquisition in question or to impose conditions to it that prevent national security from being jeopardised.
The purpose of the Screening Act is also to ensure that the scope of the monitoring is relatively broad, but the threshold for actual restriction is relatively high. In general, Finland has a positive attitude towards foreign acquisitions and no negative decisions under the Screening Act have been taken so far. However, in some cases, risk mitigation measures have been taken. The global security environment is constantly changing, and security interests are facing increasingly diverse challenges, for instance through hybrid influence activities. The ongoing changes in the security environment will naturally have an impact on the requirements of the Screening Act to protect key national interests.
Main content of the evaluation memorandum
On the basis of the evaluation memorandum, one major change could be in the confirmation procedures themselves. Currently, the mandatory confirmation procedure under the Screening Act applies to foreign acquisitions in the defence and security industry. These acquisitions are subject to an approval (or conditional approval) by the Ministry prior to the completion of the acquisition. Other acquisitions, such as those relating to security of supply and critical infrastructure, are subject to a voluntary notification procedure under the Screening Act. It is considered in the evaluation memorandum whether the voluntary notification procedure should be abandoned. This would allow the Ministry to examine all foreign acquisitions under the Screening Act in advance before the completion of such acquisition. In practice, in most cases, even acquisitions subject to the voluntary notification procedure are, as a precautionary measure, notified before the completion of the foreign acquisition. The abandonment of the voluntary notification procedure would still represent a significant change in the scope of the Screening Act.
By its very nature, the Screening Act is an open legislative, so that as the security environment changes, its scope will also cover new and/or emphasised security interests. However, the so-called sectoral coverage has not been completely avoided in the case of the Screening Act. It is considered in the evaluation memorandum that the Screening Act is deficient, in particular in respect of matters concerning security of supply, critical infrastructure and technology protection. In the light of the evaluation memorandum, it would therefore be necessary to consider whether the above-mentioned security interests, among others, should be covered by the mandatory confirmation procedure and whether entities established and existing in the EU/EAA should in all cases also be foreign owners under the Screening Act. If implemented, the amendments would result in the same mandatory and preliminary confirmation procedure for all monitored companies and foreign owners.
Establishing entirely new companies, so-called greenfield investments, are not covered by the current legislation. The evaluation memorandum suggests that greenfield investments should be included, at least to a limited extent, in the scope of the Screening Act. In the case of greenfield investments, monitoring is complicated by the fact that it can be difficult to assess the actual security criticality of a company to be established at the time of the investment. As an alternative, the evaluation memorandum suggests that greenfield investments should be subject to sector-specific monitoring, so that only certain industries/activities, such as mining and minerals, wind power, nuclear power plants and cloud computing, would be covered by the Screening Act.
The evaluation memorandum examines variously the effectiveness of the existing sanctioning provisions. The current Screening Act contains specific provision on acquisition violations, which may result in sentencing to a fine. In addition, the Ministry can impose a conditional fine to enforce compliance with the conditions imposed in respect of a conditionally approved foreign acquisition. Further, if a foreign acquisition in the defence or security industry has been completed without complying with the mandatory confirmation procedure, the acquisition will be rendered ineffective. In general, it is considered in the evaluation memorandum that the existing sanctions regime is relatively lenient, both in terms of variety of sanctions and their severity. One possibility suggested in the evaluation memorandum is the inclusion of a provision concerning a penalty payment similar to the sanction set out in the Finnish Competition Act. As an alternative, the possibility of imposing a corporate fine for an acquisition violation has also been suggested. As a last resort, the evaluation memorandum also considers the possibility of expropriation.
Conclusions
The possible amendments examined above are based, at least for the time being, only on the evaluation memorandum prepared by the Ministry. It is not known to what extent these amendment needs are included in Government proposal that will be submitted in due course. It is also noteworthy that the monitoring of foreign acquisitions has also been increasingly assessed at European Union level. Indeed, the economic security package published by the European Commission on 24 January 2024 has included a proposal for a new regulation on the monitoring of foreign direct investments in the European Union. This regulation would aim to harmonise the monitoring mechanisms of the EU Member States by setting certain minimum standards for such monitoring. If enacted as proposed, the new regulation would have a significant and far-reaching impact on the monitoring procedures of Finland.
