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   Finland’s new Building Act entered into force at the beginning of 2025

   With the new law: The existing action and building permits will be combined into a single building permit. The purpose of this unified permit system is to streamline the permit process. Climate change mitigation will become part of construction legislation: a climate report will be required for a large proportion of new buildings. The carbon footprint of these new buildings must not exceed the thresholds set for each use category. A new siting permit for clean energy transition projects will be introduced. This separate siting permit allows bypassing land use planning in industrial clean energy transition projects. Read more about the changes to the new law in our blog series: New Building Act will introduce one single permit for construction Building Act brings new climate requirements for construction New siting permit for clean energy transition projects proposed for inclusion in the Building Act

   Published: 3.1.2025

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   New siting permit for clean energy transition projects proposed for inclusion in the Building Act

   However, in accordance with the current government programme, certain parts of the new Building Act are to be amended before the Act enters into force. On 19 September 2024, the Government submitted the government proposal for an act amending the Building Act and for certain related acts. The amended provisions would mainly enter into force at the same time as the new Building Act. This blog is the third in our blog series focusing on the new Building Act. In the first part we discussed changes in building permits , while the second part concerned incorporating climate change mitigation into the Building Act . This part deals with the new siting permit for clean energy transition projects proposed to be included in the Building Act. Streamlining industrial clean energy transition projects The government proposal proposes that the Building Act provide for a new siting permit for clean energy transition projects. The siting permit would allow bypassing land use planning in industrial clean energy transition projects as long as the requirements provided for the siting permit are met. At best, the possibility to bypass land use planning will likely speed up project development significantly. By utilising this separate siting permit for clean energy transition projects, the examination of the conditions for the siting of such industrial projects could be done without the need for a local detailed plan or a local master plan that sets out its use as a basis for granting a building permit. A siting permit would therefore not require that the project be built in a location allowed by the local detailed plan or local master plan or that a special permit be granted for deviating from the plan. However, exceptions to this are projects where hazardous chemicals or explosives (including hydrogen) are prepared, handled or stored. These projects must be sited in such a manner that the siting is appropriate when considering planning regulations and the purpose of use designated in a legally binding local master plan. Once a siting permit is granted for an industrial clean energy transition project, granting a building permit would still require examining relevant technical requirements, in other words the conditions for implementation . The conditions for implementation would be determined by a separate implementation permit . The examination of the conditions relating to land use ( conditions for siting ) included in the building permit consideration would be conducted in connection with deciding on the siting permit for a clean energy transition project. A building permit would therefore be granted in two stages: the siting permit and the implementation permit. The municipality should decide on the siting permit within six months and on the implementation permit within three months of the date on which the application and the appendices that enable the application to be processed were filed. The implementation permit can only be granted after the siting permit has been granted. Construction work cannot start until both permits are legally valid or the permit authority has granted the right to start construction work before a permit is legally valid. Legislation concerning the time limit would only enter into force at the start of 2026.

   Published: 30.10.2024

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   New Directive on sanctions offences to harmonise penalties for violating EU sanctions

   The European Commission has noted significant variation between Member States in how they define what constitutes a violation of sanctions and what the penalties are for these violations. According to the Commission, these offences are not investigated and prosecuted with sufficient efficiency. The goal of the Directive is to ensure that all Member States can speak as one in matters related to sanctions, which became particularly topical after Russia launched its military attack on Ukraine. Harmonising definitions and penalties across EU countries also facilitates the operations of multinational companies. Additionally, the new Directive makes cooperation easier and harmonises practices with those of the United States, where it is currently possible to impose a fine or a maximum of 20 years in prison for violating sanctions. The Directive causes amendments to the Criminal Code of Finland Due to the Directive, new offences will be added to the Criminal Code of Finland: sanctions offence, aggravated sanctions offence, negligent sanctions offence and sanctions violation. Member States must impose effective, proportionate and dissuasive criminal penalties and imprisonment must be included in the maximum penalty imposed for intentional violations. Furthermore, legal persons should be held liable for violating sanctions. The Directive determines the minimum and maximum amount for fines imposed on legal persons. In Finland, corporate criminal liability would be applied to sanctions offences, aggravated sanctions offences and negligent sanctions offences. For these offences, the maximum amount of corporate fine would be 5 per cent of the legal person’s turnover but no less than EUR 850,000 or more than EUR 40 million, which derogates from the general maximum amount of corporate fine. Finland has taken a positive view of the objectives of the Directive and the Ministry of Justice of Finland has appointed a committee to assess and prepare the required legislative amendments. The proposed legislation is intended to enter into force in May 2025, at which time the Directive must be implemented at the latest. The Directive increases penalties in many Member States How does the new Directive impact the legislation of Member States? Does the level of national legislation already correspond to the Directive’s requirements or must countries make amendments? In the countries we examined, legislation is mainly already in line with the Directive, but nearly all of the countries must make some kind of amendments. The most common needs for amendments concern increasing or specifying penalties as well as including mitigating and aggravating circumstances in legislation. In some countries, for example Italy and Luxembourg, sanctions laws are very new and therefore mainly in line with the new Directive. In some other countries, like Spain, regulation is fragmented and requires more amendments. Denmark has stated that it takes a positive view of the Directive but has nevertheless decided to opt out of applying it. Legislation in Denmark is currently mainly in line with the Directive, although penalties are not as severe.

   Published: 22.10.2024

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   Revolutionising legal services: Castrén & Snellman’s journey with AI integration

   Our AI journey began as early as 2018 with the implementation of Luminance, a tool that has been instrumental in our document review processes. Ever since, we have expanded our toolkit to include tools based on generative artificial intelligence (GenAI), such as Microsoft Copilot and Leya. Over the past nine months, we have been actively integrating GenAI into our daily operations, marking a significant milestone in our digital transformation journey. AI tools are revolutionising the way we work, enhancing efficiency and improving the quality of our legal services. AI integration through training and support The legal industry is experiencing a profound transformation as AI and advanced technologies become integral to its operations. This evolution is not just about adopting new tools; it represents a fundamental mindset shift across the entire sector. Embracing this change requires a collective effort from all law firms. Therefore, it is crucial that law firms approach this transformation with seriousness and enthusiasm. If everyone participates in this shift, we can ensure that the benefits of these technologies are fully realised, leading to enhanced efficiency, accuracy and service quality for the whole industry. As of today, we at Castrén & Snellman have explored over 50 AI tools, implemented various, and are piloting others. The AI tools we have adopted have significantly streamlined our processes and reduced the time spent on manual tasks, freeing up space for the expert work that brings true value to our clients. They assist in different aspects of our work, from document review, drafting and information retrieval to contract management. This ongoing AI integration is part of a broader digital transformation that aims to enhance efficiency and improve the quality of our legal services, while shaping the way lawyers work and what they should focus on in the future. We recognise the critical role of our dedicated Legal Tech team in this process. This team is essential for identifying suitable AI tools, overseeing their implementation, and ensuring seamless integration into daily operations. The team collaborates closely with various departments to tailor AI solutions to specific workflows, maximising their impact. We are committed to building AI competence among our legal experts through training and encouraging experimentation. This involves not only understanding the current capabilities of AI but also exploring new use cases that can add value to our services. Our Legal Tech team supports both entire teams and individual team members within the firm, and sharing best practices and insights across lawyers and teams is crucial for our success. Our enthusiasm and ethics We believe that AI can bring about a significant transformation in the legal industry, and we are committed to being at the forefront of this change. Our firm is not just integrating AI; we are enthusiastic and open about its potential. Our approach is long-term and involves continuous learning and adaptation. We regularly update our AI strategy and ethical guidelines to keep pace with the rapid advancements in generative AI technologies. While we are excited about the potential of AI, we also recognise the importance of using it responsibly. Our AI strategy includes guidelines on ethical AI use , ensuring that we maintain the highest standards of confidentiality, independence and client trust. We are transparent about how we use AI and are committed to educating our clients about its benefits and limitations through AI focused workshops and consulting.  Looking ahead The legal sector has seen historic technology investments over the past year. For instance, in July 2024, the AI software HarveyAI raised USD 100 million in a funding. Such significant investments indicate the immense development and profit potential seen in these products. Major international law firms and global Big4 firms have also heavily invested in acquiring and further developing these technologies. As we continue to integrate AI into our operations and expertise, we are also looking ahead to future developments. We are prepared to adapt to new AI technologies and regulatory changes, ensuring that we remain at the cutting edge of the legal industry. Therefore, we are committed to staying at the forefront of AI advancements and ensuring that our teams are well-equipped to leverage these technologies effectively, responsibly and transparently, continuing to maintain the highest standards of quality, client trust and confidentiality. By embracing AI, we are not only improving our current operations but also positioning ourselves for future success in an increasingly digital world.

   Published: 10.10.2024

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   New act on dual-use items entered into force in September – what companies need to know

   The new act on dual-use items supplements the EU Export Control Regulation Export control of dual-use items in the EU is based on the Export Control Regulation that has been in force since September 2021. In the regulation, ‘dual-use items’ refers to items that can be used for both civilian and military purposes. A dual-use item can be a tangible item or an intangible item, such as software. On 16 August 2024, the President of the Republic of Finland approved the new act on export control of dual-use items as well as amendments to the provisions in chapter 46 of the Criminal Code of Finland to sanction the breach of the obligations laid down in the act on dual-use items. The amendments were made to the provisions concerning regulation offences and failure to file an export control notification of dual-use items. The new act on dual-use items replaces the previous act that had been in force since 1996 and constitutes the national legislation that supplements the application of the Export Control Regulation. The Export Control Regulation leaves some key aspects of the practical implementation of export control to be set out in national legislation. These include in particular authorities’ responsibilities, control measures, imposition of sanctions and some matters relating to authorisation requirements and notification obligations. Member States can also prohibit or impose an authorisation requirement on the export of dual-use items not listed in the Export Control Regulation for reasons of public security, including the prevention of acts of terrorism, or for human rights considerations. A national control list improves the efficiency of export control by responding to rapid technological advancements and hybrid threats The purpose of the act on dual-use items is to ensure efficient export control. A national control list is appended to the act. Export of the listed dual-use items from Finland to outside of the EU is controlled by an export authorisation procedure administrated by the Ministry for Foreign Affairs of Finland. By assessing the end-use and end-users of dual-use items in advance in accordance with the criteria laid down in the Export Control Regulation, the national export authorisation procedure helps to prevent these items ending up in unwanted uses. When enacting the act, the Finnish Government deemed it necessary to adopt a national control list as the earlier approach that was based on international export control regimes is not fit for purpose in the current international environment. The national control list is needed as rapid technological advancements and an increase in hybrid threats require an efficient export control framework and an ability to act nationally in matters relevant to Finland’s comprehensive security. Adopting the national control list is not meant to decrease Finland’s active involvement in international export control regimes but to support them in reaching their goals. The national control list includes items that are relevant to the development of foreign, security and defence policy, such as items related to quantum technology and advanced semiconductor manufacturing technology as well as devices and technology related to materials engineering. These items and technologies are all subject to sanctions against Russia or would support the development of Russia’s research or military capacity. If the national export authorisation requirement were not in place, these items could be exported from Finland without control and sanctions could be circumvented via third countries. The act on dual-use items further emphasises the importance of recognising legislation applicable to your company The national supplementing legislation provided for in the new act on dual-use items primarily affects the operations of companies that export dual-use items and other organisations, such as universities. The new legislation also affects companies that act as brokers, transit operators or providers of intra-Union transfer of dual-use items or provide technical assistance relating to dual-use items. What makes adapting operations in accordance with the obligations set out in the national control list more difficult is the fact that the list includes several intangible items, as does the control list appended to the Export Control Regulation. These include primarily software, technical data relating to technology and offering technical assistance. Due to the prevalence and variety of intangible items, companies and other operators should put rigorous effort into identifying whether the act on dual-use items is applicable to their operations and comply with the export authorisation procedure carefully to minimise harm to business or research operations. 

   Published: 10.10.2024

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   Responsible communication is a must for listed companies – Financial supervisors around the world have started to tackle greenwashing

   Greenwashing refers to the practice where a company makes exaggerated, misleading or false claims about the environmental benefits or sustainability of its operations, products or services. In most cases, companies aim to be environmentally responsible and strive to communicate this commitment to their stakeholders. However, communication becomes problematic if a company has not taken sufficient steps to achieve its sustainability objectives. Misleading sustainability claims can influence consumers, competitors, investors, financiers and other stakeholders. Greenwashing is a prominent issue in consumer marketing today, in particular with the recent adoption of the Directive on empowering consumers for the green transition and the proposed Green Claims Directive . Greenwashing is increasingly becoming a significant issue in corporate communications. With the rise of sustainable investing, financial supervisors around the world have recently started to tackle greenwashing. Financial authorities are cracking down on the greenwashing phenomenon In many countries, supervising authorities regularly check environmental claims and information in prospectuses, websites and marketing communications, among other things. The European Securities and Markets Authority (ESMA) has published the Final Report on Greenwashing , which is ESMA’s response to the European Commission’s request for input on greenwashing risks and the supervision of sustainable finance policies. The aim is for supervisors to step up in ensuring investor protection and market integrity against greenwashing risks. In Finland, the Finnish Financial Supervisory Authority conducted a thematic review in 2023 on how greenwashing risks are taken into account by investment service providers in their marketing. In other countries, supervisory authorities have paid particular attention to sustainability disclosures in prospectuses. The ESMA guidelines are based on the requirement under the Prospectus Regulation according to which a prospectus shall contain the necessary information which is material to an investor for making an informed assessment of the assets and liabilities, profits and losses, financial position, and prospects of the issuer and of any guarantor. ESG factors, i.e. environmental, social and governance circumstances can also constitute specific and material risks factors for the issuer and its securities and, in that case, should be disclosed. With the introduction of the Corporate Sustainability Reporting Directive (CSRD), the information presented in a company’s sustainability reporting must also be taken into account when assessing the materiality of the information. The information given in a prospectus must not be inaccurate or misleading, i.e. sustainability claims must be substantiated and the information must be as objective as possible. Sustainability-related matters presented in a prospectus must be understandable. For example, technical terms related to sustainability must be clearly defined. Elsewhere in the world, for example, the Australian Securities and Investments Commission has required an energy exploration company to remove claims of energy ‘cleanliness’ from its prospectus and a mining company to disclose more details and background information on the environmental and sustainability aspects of its ‘low carbon’ processing technology in a supplementary prospectus. The communication of a listed company must be accurate and all claims must be verified for correctness In an efficient market, the price of a company’s share is determined by the information available to investors. New information may be considered material to a listed company’s share if reasonable investors can be expected to change their perception of the fair price of the company’s share as a result of the new information. From an investor’s perspective, the information required under the disclosure obligations of a listed company is considered particularly relevant. With the introduction of sustainability reporting as part of a listed company’s regular disclosure obligations, the role of sustainability information in a listed company’s disclosure obligations has become greater and clearer. In all its communications, a listed company must seek to ensure the accuracy of the information it publishes and that it gives the company’s shareholders, investors and other stakeholders a fair and accurate view of the company. Listed companies may not make unfounded or inaccurate claims in their stock exchange communications. As corporate responsibility activities are often characterised by a certain forward-looking ambition, communication about such ambitions must pay particular attention to ensuring that the stated ambitions are not unrealistic and that the company has genuinely taken steps to achieve them. Thus, where a listed company makes claims concerning carbon neutrality, net zero, climate targets or emission reduction, these targets and claims must be clearly substantiated by actual actions and realistic and truthful plans. Listed companies have an obligation to provide information to investors in a transparent and honest manner. This is particularly the case where the information is likely to have a material effect on the value of the share. For example, a clearly stated ambitious target to reduce emissions by a certain year may give the impression that the company is leading the way and intends to make significant investments to achieve the targets, but the target can easily be considered to lack a sufficient basis in truth if no concrete actions to actually achieve the target can be demonstrated. The announced net zero target requires that it will be continuously supported by a concrete climate change transition plan, prepared in accordance with the ESRS standard and included in the sustainability report under the Corporate Sustainability Reporting Directive. In the future, the requirements of the Corporate Sustainability Due Diligence Directive (CSDDD) will also need to be taken into account. Caution in responsibility communication Many companies have publicly highlighted their ambitious carbon neutrality targets and the sustainability work they are doing. However, such claims must be backed by objective and reliable data and cannot be based on guesswork or purely communicative assumptions. In the absence of sufficient concrete evidence, there is a risk that the stated objectives and claims will be easily interpreted as unfounded and that even positive corporate actions may be questioned as greenwashing.

   Published: 9.10.2024

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   Government proposal for an act on offshore wind power in the exclusive economic zone submitted to Parliament

   The new regulation would mean a shift from operator-driven to state-led selection of areas for offshore wind power projects, as is the case with Finnish territorial waters. In future, the offshore wind power areas in the exclusive economic zone (the EEZ) selected for competitive tendering would be decided by a government decision. Project developers for offshore wind power areas in the EEZ would be selected through a competitive tendering process organised by the Finnish Energy Authority, while for territorial waters the competitive tendering process would be organised by Metsähallitus, a Finnish state-owned agency for the management of land and water areas. The winner of the competitive tendering process organised by the Finnish Energy Authority would have the exclusive right to apply for an exploitation permit for the tendered area. We discussed the proposed act for offshore wind power in the EEZ in our blog earlier this year when the draft government proposal was sent out for comments. The basic principles of the tendering model have remained the same in the government proposal as in the circulated draft proposal. Below is a summary of the changes that were made based on the feedback received during the circulation, along with the timetable for selecting offshore wind power areas in the EEZ and the first competitive tendering process. Changes were made to government proposal based on feedback Some of the comments have been incorporated into the government proposal. The comments will further be taken into consideration when preparing the government decree on the details specifying the competitive tendering process and when defining the areas that will be subject to the tender. For example, the minimum requirement of three bidders has been waived, i.e. the tendering of a wind power area can be carried out even if only one bidder participates in the competitive tendering process. The winning bidder could apply for an exploitation permit for a smaller area than the area put out to tender, but otherwise the area put out to tender could no longer be changed or extended by means of an exploitation permit. However, the exploitation permit could allow survey works to be carried out outside the offshore wind power area, for example if required for marine nature surveys. According to the government proposal, it would also be sufficient for project developers to lodge a single participation guarantee for all the competitive tendering projects in which the project developer is participating at the same time. The time limit for lodging a promotion guarantee has been extended to three months. The amount of the promotion guarantee and participation guarantee as well as the participation fee would be specified in a government decree. The amount of the exploitation fee would be the amount of the exploitation fee offered in the winning tender. The decision of the Energy Authority on the winning tenderer would be appealed to the Market Court after a procedure for requesting an administrative review. The Market Court is considered to have strong expertise in tendering matters. Upon application, the Government could grant a conditional exploitation permit even if the decision on the outcome of the competitive tendering is not final. However, the permit cannot be granted if an appeal has been lodged against the decision and no decision has been taken on the appeal. The government decree to be prepared at a later stage will lay down not only the amounts of the guarantees and fees, but also, among other things, the qualitative criteria for the competitive tendering process. The Ministry of Economic Affairs and Employment states that the feedback can be considered when selecting areas for offshore wind power tenders. This feedback suggests focusing on the possibilities of connecting the project to the grid, the studies already conducted by project developers on the suitability of different areas for offshore wind power, and the wind production profiles. The government proposal also contains sections that have not been amended despite the comments. For example, the new act and the competitive tendering process for offshore wind power areas would not apply to grid connection lines. The permitting of the routing of connection lines, hydrogen pipelines and electricity grid connections would take place in the EEZ in accordance with the Act on the Exclusive Economic Zone of Finland (1058/2004) and on the territory of the Finnish state on the basis of other applicable legislation. Next steps The government proposal will next move on to Parliament, which can make amendments to the proposal. The Ministry of Economic Affairs and Employment has also provided preliminary estimates of the timetable for preparing competitive tendering for offshore wind power areas in the EEZ. However, these estimates are only indicative. According to the Ministry of Economic Affairs and Employment, the details of the tendering process for offshore wind power areas in the EEZ will be outlined in a government decree, with preparation starting in autumn 2024. The regulation is to be sent out for comments in early summer 2025. The preparation for selecting the offshore wind power areas is also scheduled to begin this autumn. This will enable the Strategic Environmental Assessment of authority plans and programmes to begin in early 2025. According to current estimates, the Government will select the areas in October–November 2025. In May, the Ministry of Economic Affairs and Employment estimated that the first competitive tendering process would be launched in December 2025. The decision on the winner of the tender would be taken in June 2026, and the project developer would have to apply for an exploitation permit no later than four months after the decision on the outcome of the competitive tendering process has become final. However, the timetables estimated in May have already been stretched slightly, so it is possible that the timetable for competitive tendering will extend a little further. Once the exploitation permit is issued, the project developer would have the right to exploit wind energy in the EEZ and to carry out research for exploitation, which would allow, among other things, the launch of an environmental impact assessment procedure and the permitting of the project.

   Published: 4.10.2024

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   Sustainable finance is vital for achieving the objectives of the green transition

   The Action Plan for Sustainable Finance that the European Commission published in 2018 has led the regulatory tsunami in the EU, resulting in a vast body of sustainable finance-related regulation. For example, ESMA’s implementation timeline for sustainable finance includes steps up to 2028, even though its major regulatory packages have been completed. At the same time, the principles of the LMA and ICMA have also gained in popularity and provided a strong basis for self-regulation in the industry that is widely followed . In the light of these developments, there is a need in sustainable finance for a standardised definition of ‘green’ and a taxonomy of green activities to enable investors and financial institutions to make informed assessments effectively. This is why the future EU Green Bond Standard will be based specifically on the EU taxonomy regulation. The European Banking Authority also published a report in December 2023 where it recommended that the Commission introduce a voluntary standard for European green loans or at least a definition of green loans in the EU. The Commission is currently considering this report and further actions. The above initiatives and regulatory developments can be seen as a result of the greenwashing debate. Greenwashing is currently being discussed by investors, financiers and other market participants alike. At the same time, the green transition is progressing rapidly, and sustainable finance is needed to meet the objectives. The European Commission estimates that by 2030 an additional EUR 620 billion of investments will be needed every year. Sustainable finance is therefore a vital condition for the realisation of these investments. We are following the progress of the green transition objectives and the regulation of sustainable finance with interest.

   Published: 2.10.2024

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   Draft proposal on the new act on offshore wind power in the exclusive economic zone sent out for comments

   The deadline for submitting comments on the draft proposal is 4 July 2024, so the right time to influence the contents of the regulation is now. It is estimated that the government proposal will be presented to Parliament in calendar week 39, which is the last full week of September. The acts are scheduled to enter into force on 1 January 2025. The choice of offshore wind farm areas and project developers The exclusive economic zone is currently subject to the Act on the Exclusive Economic Zone of Finland (1058/2004). The aim is that in future the new act on offshore wind power in the exclusive economic zone would apply to wind farms, electric stations and hydrogen production plants in the exclusive economic zone. However, electricity transport cables and hydrogen pipes located in the exclusive economic zone would still be subject to the Act on the Exclusive Economic Zone of Finland. The offshore wind farm areas in the exclusive economic zone would be chosen by a government decision after an environmental impact assessment of plans and programmes is conducted. Project developers would be selected in a competitive tendering process organised by the Energy Authority, and the offer with the best price-quality ratio would determine the winner. Tenderers would receive points both for the exploitation fee they offer and for quality factors, including the tenderer’s financial situation, experience, knowhow and ability to further the project, environmental impact of the project, promotion of local acceptance, grid connectivity, security and factors required by EU regulation. The winner of the competitive tendering process organised by the Energy Authority would receive the exclusive right to apply for an exploitation permit from the government for the area put out to tender. The exploitation permit would include terms and conditions in relation to factors such as the exploitation fee, operations, project deadlines and promotion guarantee. In addition to an exploitation permit, a wind farm project requires an environmental impact assessment procedure and a water management permit, among other things. Connecting offshore wind power to the main grid Increased offshore wind farm project development requires investments in the power grid as well. The Ministry of Economic Affairs and Employment is currently working on a reform of the Electricity Market Act to integrate the increasing power generation and growing consumption loads to the main grid and high-voltage distribution network. Fingrid recently published a study on preliminary possibilities to connect offshore wind power to the main grid. Fingrid welcomes feedback on the study until 23 June. The experts in our Environment, Infrastructure & Natural Resources team and International Construction & Projects team are happy to answer question about offshore wind power in the exclusive economic zone and other related questions. 

   Published: 27.5.2024

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    Commission to scrutinise large procurements

    What kind of procurements require the Commission’s prior approval? Public procurements require prior approval if both of the following conditions are met: The value of the specific procurement that is carried out under public procurement, framework agreement or a dynamic purchasing system is at least EUR 250 million. The tenderer or its subcontractor has received at least EUR 4 million in subsidies from a non-EU country during the last three years. A procurement divided into parts requires prior approval of the Commission if, in addition to the conditions above, the estimated value of the part or parts of the procurement subject to tenders is at least EUR 125 million. Other changes introduced by the regulation If the amount of subsidies that the tenderer receives from a third country is less than EUR 4 million, the tenderer is obligated to provide the contracting entity with a declaration of the subsidies in accordance with the regulation. The declaration states the subsidies received while declaring that there is no need for the prior approval of the Commission. The regulation also gives the Commission the right to address a procurement procedure on its own initiative if it suspects that foreign subsidies are distorting competition. The Commission may also on its own initiative start investigations of procurements that do not exceed the threshold value. The investigation may cover the previous ten years, but when the regulation enters into force in July 2023, the Commission’s investigation powers are limited to five years. What does the subsidy control system mean in practice? Due to the criterion for the estimated value, in Finland the regulation will in practice mainly apply to large ICT investments, construction contracts, equipment acquisitions and extensive framework agreements carried out as joint procurements. The contracting entity must prepare for the application of the regulation in the planning phase. If any prior approval or declaration procedures set out in the regulation apply to the competitive tender process, the contracting entity must mention the regulation and its significance in the procurement documents. It is also worth noting that in negotiated procedures, for example, the tenderer needs to submit a notification or declaration in connection with the application to participate as well as the final tender. The contracting entity is obligated to send the tenderers’ prior notifications or declarations to the Commission, which, in case the notification obligation applies, investigates the matter in a manner specified in the regulation. Since the contracting entity cannot be certain whether the procurement requires the Commission’s prior approval before the tenderers send their notifications or declarations, a possible investigation process should be taken into account in the schedule of the competitive tender process. If prior approval is required, the procurement contract must not be concluded before the Commission decision. This should be taken into consideration particularly with respect to the requirements for the validity of tenders. The Commission has 20 working days to carry out a preliminary review, and if an in-depth investigation is opened, the Commission has additional 110 working days to complete it, starting from when it receives a complete notification. In addition, the Commission can in certain situations extend the deadlines. This means that the investigation period reserved for the Commission can significantly extend the total duration of the procurement procedure. If the Commission discovers during the investigation that the tenderer has received foreign subsidies that distort the internal market, the tenderer can offer commitments to fully and effectively remedy the distortion of the internal market. If such commitments are not offered or the Commission deems that the offered commitments are not acceptable, the Commission prohibits the conclusion of a contract with the tenderer in question. Following the decision, the contracting entity must reject the tender. Therefore, the contracting entity should consider whether it is wise to make a procurement decision in a situation where there is a risk that the Commission deems that the tender of the chosen tenderer may have to be rejected. What does the regulation require of the tenderer? If a tenderer does not report subsidies in accordance with the regulation, there is a risk that the tender is rejected solely for this reason. Providing an appropriate report of subsidies requires that the tenderer has information regarding the subsidies it has received and delivers the information to the contracting entity in a timely manner and as required. The obligation to provide information on foreign subsidies concerns the group of the tenderer as well as the main subcontractors and main suppliers. Pursuant to the regulation, a subcontractor or supplier is deemed to be main where its participation ensures key elements of the contract performance and in any case where the economic share of its contribution exceeds 20% of the value of the submitted tender. The obligations also applies to all the members of the group . The main contractor, i.e. the tenderer sees to it that the aforementioned parties provide sufficient notifications and/or declarations. The Commission provides more detailed instructions on the application of the regulation Many of the practical details of the obligations to act laid down in the regulation are still open, and the regulation has unclear sections that are, for example, linked to the concept of a main subcontractor. The Commission is entitled to give additional instructions to the regulation , and it has announced that in the coming weeks it will publish its draft of the implementing regulation, which clarifies the rules and procedures related to the matter and provides more detailed practical instructions. According to the Commission, the implementing rules will be adopted by mid-2023. The Commission’s implementing regulation will also make it easier for contracting entities and tenderers to prepare for the regulation’s entry into force as it provides new information on matters such as the notification forms for public procurement.

    Published: 24.1.2023