Legal Updates

Cybersecurity developments – Finnish IoT device label and EU Cybersecurity Act

Finland the first EU country to launch consumer IoT device labelling system

In end November 2019 the National Cyber Security Centre Finland (the Finnish Communications Security Authority within the Finnish Transport and Communications Agency) launched a cybersecurity labelling system by which the basic information security features of IoT devices, aimed at consumers, are guaranteed. The labelling system is based on the draft Consumer Internet of Things standard from the European Telecommunications Standards Institute (ETSI) and the label is awarded any internet connected smart device meeting the required safety standards. The labelling criteria include, amongst others, safe access control, default settings, transfer and storage of personal data and secure ecosystem interfaces.

IoT devices (smart phones and TVs, toys, activity trackers, routers, connected security systems, electronic appliances to name a few) are typically integrated with technology such as microphones, cameras and sensors which enable these devices to collect large amounts of user data. The lack of general binding security requirements exposes these devices to cybersecurity related threats and risks. The cybersecurity label will, naturally, help consumers to identify the more secure options of all IoT devices available on the market. Read more

The Finnish Supreme Court renders its decision in the infamous Talvivaara environmental criminal case

The Finnish Supreme Court (the “FSC”) rendered its decision on 21 November 2019 in the infamous Talvivaara mining company environmental criminal case concerning major waste-water leaks into the environment.

The FSC upheld the decision made by the Rovaniemi Court of Appeal earlier in spring 2018 when the Court of Appeal sentenced the former CEO and Chairman of the Board of Talvivaara to a six-month suspended prison sentence and imposed a fine on the former manager of Talvivaara. A further former member of the management of Talvivaara had been imposed fines by the Court of Appeal, but was denied permit to appeal to the FSC.

The case concerned several leaks from the wastewater ponds of Talvivaara mine between 2006 and 2013, which caused high concentrations of sulphate and other chemicals to be released into the environment. These emissions polluted the nearby waterways transforming them into stratified pools of saltwater.

The legal question brought before the FSC for determination was whether the elements of environmental degradation were met in circumstances where the emissions from the wastewater ponds of the mine considerably exceeded the levels estimated in Talvivaara’s environmental permit application which, however, did not include any specific limits for such emissions. Noteworthy is that the actual emissions had been vastly higher (up to several dozen times) than the estimated emissions in the company’s environmental permit application.

The FSC ruled that the estimates given in the permit application formed a part of the company’s environmental permit and should thus be considered as applicable permit conditions to which the company was required to adhere. As the emissions from the wastewater ponds of the mine had considerably exceeded the estimates, the company and its management had acted against the permit conditions. Further, the FSC concluded that the release of high-levels of harmful emissions into the environment is subject to an environmental permit specifically allowing such activity, and as the company’s environmental permit did not allow such activity, the release of high-levels of harmful emissions into the environment had also been made without a proper environmental permit in place.

As for liability of management under Finnish law, the decision further confirms (please see our news https://www.ww.fi/news/2016/10/the-finnish-supreme-court-rules-on-the-board-of-directors-liability-for-impairment-of-the-environment-kko-201658/#content) that management is liable for compliance with the environmental permits of a company, such permit terms also to include information provided for in the permit application.

For further information, please contact:

Christoffer Waselius

Partner

Ville-Veikko Vänttinen

Associate

The Supreme Administrative Court of Finland significantly increased penalty payments imposed on several companies in the bus cartel case

On 20 August 2019, the Supreme Administrative Court of Finland (the “SAC”) gave its decision regarding the so-called bus cartel case in Finland.

The Market Court had already in 2017 found several bus companies, the Finnish Bus and Coach Association and Matkahuolto, which is a service and marketing company promoting bus and coach services in Finland, (the “cartel participants”) to have formed a cartel.

In its ruling, the SAC stated that the cartel participants committed competition infringement by excluding certain new scheduled services on Matkahuolto’s scheduling, ticketing and parcel services after the market had been opened up to competition. The purpose of the cartel was therefore to systematically impede the opening of the bus market to competition, thereby harming consumers in the form of weakened price and quality competition. Read more

Long Awaited Clarification on Finnish Transfer Tax Liability in Real Estate Company Acquisitions

The Finnish Supreme Administrative Court (“SAC”) issued last week two new precedents on the determination of the transfer tax base in real estate company acquisitions. The rulings clarify the circumstances (i) in which a transfer tax liability may arise when the buyer, in connection with the acquisition, finances the repayment of the target company’s debts and (ii) where the debt of the target company may, in reality, be included in the share price or value for transfer tax purposes.

According to current rules, in addition to the purchase price, the transfer tax base also includes any debt or liabilities of the acquired entity (towards the seller or a third party) assumed by the purchaser based on the SPA, provided that the assumption of such debt or liabilities accrues to the benefit of the seller. Further, there are specific rules with respect to companies in the real estate sector, since the transfer tax base shall always include certain loans that based on law, corporate resolutions or the Articles of Association can be held directly allocable and connected to the shares in such companies. The meaning and applicability of the latter provisions to real estate companies (“REC”) and mutual real estate companies (“MREC”) has, however, not been entirely clear. Read more

Additional obligations for entities as the Finnish money laundering act imposes new obligation to identify ultimate beneficial owners (UBO)

A) Obligation to register UBOs

As of 1 July this year new businesses to be registered with the Finnish Trade Register must also register their UBOs with the Beneficial Owner Register (UBO register) maintained by the Finnish Patent and Registration Office. Existing entities must register their UBOs no later than 1 July 2020.

An UBO is a natural person who is the ultimate owner or has the power of control over a legal entity. The aim of the UBO register is to provide more transparency in relation to ownership structures and this way it serves as an additional tool in combatting money laundering and terrorist financing.

The registration obligation derives from the 4th Anti-Money Laundering Directive, which was implemented in Finland through amendments in the Finnish Money Laundering Act in July 2017. The fact that the UBO register was opened only in July this year makes Finland one of the last EU member states to set up the UBO register. Most of the EU-member states have set up their UBO registers already during 2017-2018. Read more

Investors Welcome Changes in Transfer Tax Practice

The Finnish Supreme Administrative Court (“SAC”) has recently issued a decision that essentially changes the calculation of the transfer tax base in M&A deals (share acquisitions).

Although, foreign investors may at present in certain circumstances take advantage from a transfer tax exemption, the main rule still is that share acquisitions (with the exception of publicly traded shares) are subject to transfer tax (at a rate of 1.6% or 2%). In addition to the purchase price, the transfer tax base also includes any debt or liabilities of the acquired entity (towards the seller or a third party) assumed by the purchaser based on the SPA, provided that the assumption of such debt or liabilities accrues to the benefit of the seller. Based on established taxation practice, for example, the transfer and sale of a shareholder loan to the purchaser in connection with the acquisition has been deemed as such an assumption of debt for the benefit of the seller, which will trigger a transfer tax liability. Equally, any repayment made by the acquired entity of a shareholder loan in connection with the transaction has been deemed as an amount that should be included in the transfer tax base, especially when this repayment has been financed by the purchaser and/or is a condition under the SPA. Read more

Several amendments to the Competition Act

Several amendments to the Competition Act have been adopted.

The amendments include changes to the inspection rights of the Finnish Competition and Consumer Authority (the “FCCA”). The FCCA now has the right to conduct searches in temporary copies of data made during inspections also in its own premises while previously the inspection had to be completed as a site inspection. In addition, the FCCA now has the express right to inspect data regardless of the medium in which the data is saved. Read more

Request for statement regarding proposed changes to procurement laws

The Ministry of Economic Affairs and Employment requests for statements regarding proposed changes to the procurement laws.

The Ministry has prepared a draft Government Bill, dated 14 June 2019, which would amend the procurement laws by introducing the use of electronic procedures in criminal record checks. The purpose of the Bill is to clarify certain rules relating to procurement procedures and rectify certain technical errors currently included in the procurement laws. Read more

Binding targets for zero- and low-emission vehicles in public procurement

The Council of the European Union has recently adopted binding targets for zero- and low-emission vehicles in public procurement. According to the Council, the new rules will, inter alia, stimulate innovation. Zero- and low-emission vehicles will in turn help the EU meet its Paris Agreement commitments.

The new rules are set out in a draft directive amending the Clean Vehicles Directive (2009/33/EC). The scope of the rules is broadened in terms of the procurement practices covered. For example, refuse collection and postal delivery services fall within the scope of the new rules. Read more

Minimum share capital requirement of Finnish private limited companies removed as of 1 July 2019

Finland follows suit of the majority of the EU countries as the proposed changes introduced by Government Bill 238/2018 to corporate legislation regarding minimum share capital requirement of Finnish private limited liability companies were approved on 8 February 2019. The present requirement for a Finnish private limited liability company to have a minimum share capital of EUR 2,500 will be lifted as of 1 July 2019. Beginning from 1 July 2019, incorporating and registering a Finnish private limited liability company no longer requires its founding shareholders to make a payment to the company’s share capital. This will not, however, affect Finnish public limited liability companies which are still required to have a minimum share capital of EUR 80,000. Read more