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   Case law will ultimately clarify the interpretation of the new CSDD Directive

   The proposed directive would obligate companies to set up corporate policies with which they can ensure their human rights and environmental due diligence. Companies would have to identify, prevent, mitigate and correct the negative impact of their operations on a practical level and amend their strategies to match the 1.5 °C target in line with the Paris Agreement. The proposed directive would require corporate management to see to the execution of due diligence measures. Domestic authorities would supervise compliance with the obligations, and failure to comply could lead to significant sanctions for the company. In Finland, it remains unclear which authority would hold jurisdiction or whether a new authority would need to be established. While many Finnish companies are leaders in sustainable business, the due diligence obligation creates the need to re-evaluate business structures and strategies from a wider perspective that includes the entire value chain. The first stage of adapting to the changes introduced by the directive will most likely be partly mechanic implementation of the regulation with measures such as internal audits and agreement reviews. However, the impacts of the changes extend deeper: business models must be assessed critically and continuously, and sustainability must be made a cornerstone of corporate strategy. The proposal is not unambiguous in all respects, and we expect that many issues will have to be settled through legal proceedings. For example, the level of due diligence that is required of companies will ultimately be determined in case law. Even if corporate policies are in order and the appropriate clauses are included in agreements, proving and assigning ultimate liability may prove to be complicated. For example, will the corporation or the subcontractor be held liable? And what is the liability of company management if the company has failed to comply with its due diligence obligation and is therefore issued a fine corresponding to 5% of its global revenue?

   Published: 25.10.2023

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   New notification obligations for concentrations and public procurements

   The Regulation of the European Parliament and of the Council on foreign subsidies distorting the internal market (the ‘Foreign Subsidies Regulation’ or the ‘FSR’) entered into force on 12 January 2023, and for the most part it has been applied as of 12 July 2023. The FSR introduces three new tools: an obligation of prior notification concerning concentrations (i.e. mergers and acquisitions), an obligation of prior notification concerning public procurements, and a general investigation tool that allows the Commission to start investigations on its own initiative. The notification obligations have applied as of 12 October 2023, and in this blog we will take a closer look at what they mean for undertakings. What do the notification obligations mean in practice? Under the FSR, undertakings must notify to the Commission all concentrations involving financial contributions granted by non-EU governments. This obligation applies when both of the following conditions are met: • The acquired company, one of the merging parties or the joint venture generates an EU turnover of at least EUR 500 million. • The following undertakings were granted financial contributions of more than EUR 50 million from third countries in the preceding three years: - in the case of an acquisition, the acquirer or acquirers and the acquired undertaking; - in the case of a merger, the merging undertakings; - in the case of a joint venture, the undertakings creating a joint venture and the joint venture. In public procurements, the notification obligation applies when both of the following conditions are met: • The estimated contract value is at least EUR 250 million and, if the procurement is divided into lots, the aggregate value of all the lots to which the economic operator applies is at least EUR 125 million. • The economic operator has received foreign financial contributions of at least EUR 4 million per third country in the preceding three years.  If only the first condition is met, the economic operator is required to submit a declaration. The concept of economic operator refers broadly to a tenderer including its holding companies and affiliate companies as well as main subcontractors and suppliers. When the conditions for notification obligation are met, a concentration cannot be implemented nor a procurement contract awarded before the Commission has completed its review. In practice, the FSR creates a new notification obligation for M&A deals to be applied alongside existing notification obligations related to merger control and FDI screening. For public procurements, this is a new kind of notification procedure. It introduces an obligation for contracting entities to require a notification or declaration from the tenderers as part of their tenders or requests to participate as well as an obligation to relay these notifications and declarations to the Commission. When the existence of a foreign subsidy is established, the Commission assesses on a case-by-case basis whether it distorts the internal market. As part of its assessment, the Commission carries out a ‘balancing test’ in which it compares the negative effects of the distortion against the development of the relevant economic activities and the material submitted by the parties on the positive effects. If a distortion is identified, the Commission may impose structural or other measures on the undertakings to remedy it. If sufficient commitments are not offered or the Commission deems that the offered commitments are not acceptable, the Commission prohibits the concentration or the awarding of the procurement contract. The new concept of financial contribution will require investments in time and efforts If an undertaking is likely to conclude notifiable mergers or acquisitions or partake in major public procurements, it should familiarise itself in particular with the concept of financial contribution . The calculation of turnover (in the case of M&As) and the determination of the estimated procurement value (in the case of public procurements) will continue to follow principles that are largely familiar from existing regulation, but the completely new concept of financial contribution introduced by the FSR will require more background work. It is important to note that foreign subsidy and financial contribution are not the same thing. In evaluating the notification obligation, financial contribution is the key concept. It includes the transfer of funds or liabilities, the foregoing of revenue and the provision or purchase of goods or services. As can be seen, the definition of financial contribution is very broad, including also sales at market terms. A financial contribution can be provided by a public authority or public entity of a third country, but also by a private entity whose actions can be attributed to the third country. It may take a considerable amount of time to gather all the necessary information, and this should be accounted for before the matter becomes topical. It is a good idea for major global undertakings and private equity companies to prepare for data collection and management in advance. Furthermore, the timelines of M&A processes should account for the notification obligation with respect to foreign subsidies. If the information for the notification on foreign subsidies can be collated on time, the review process is intended to advance concurrently with the Commission’s merger control process. We are happy to provide advice on any questions related to the Foreign Subsidies Regulation and assist in drafting any notifications, both with respect to mergers and acquisitions and public procurements.

   Published: 20.10.2023

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   Board duties in an impending liquidity crisis

   The company’s board of directors plays an integral part in a liquidity crisis. In accordance with the Limited Liability Companies Act, the board must act with due care and promote the interests of the company. A board member who is in violation of the duty of care can be held personally liable for the damages caused to the company, the shareholders or third parties, such as the creditors. The board must be aware of the company’s financial position: The board should actively monitor the state of the company’s equity. If a listed company’s equity is gone, the board has an obligation to file the loss of the equity with the Trade Register without delay. The board must also monitor the company’s cash reserves with pronounced care and ensure the fair and equal treatment of the creditors. The board must record its decisions with due care: When faced with a crisis, the board meets more often and carefully records all its decisions and the reasons therefor so that these decisions can be verified in a retroactive assessment. The board plays an integral part in managing the crisis and keeping the company afloat: In order to overcome the crisis as well as possible, it is recommended to ask for help well in advance and to map out the different options with financiers and legal advisors, among others.

   Published: 9.10.2023

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   Amendment to the Energy Efficiency Directive can trigger a wave of renovation in Finland

   New buildings should be emission-free as of 2030, and the energy efficiency classification should be updated by 2025. The Commission has also proposed that Member States improve the energy efficiency of their building stock to the level of the updated classification. VTT Technical Research Centre of Finland Ltd estimates that the need for improvements concerns approximately 35 % of Finland’s building stock. The objective of the revision is positive, and it can open up new opportunities for the energy industry as well as the construction industry. Many property owners are already acting in accordance with the expected requirements, and properties that meet the energy efficiency criteria will become ever more attractive to investors and owners. On the other hand, a large number of property owners are not prepared. They must do a considerable amount of work to improve energy efficiency over a short period of time compared to the property owners whose portfolios are ready for the revised Directive. Financiers wish to support the green transition, and construction projects that improve energy efficiency can acquire financing more easily and affordably. However, rising interest rates and high inflation can complicate the matter. According to the Commission, renovation should be encouraged with funding and other supporting measures, but the distribution and allocation of this funding remains unclear. In addition to the possibilities for commercial operators, it should be kept in mind that the Directive will also require action by private homeowners and that the new government programme is not clear on how these homeowners will be supported. Negotiations on the revised content of the Directive are still ongoing. It is estimated that national legislation would enter into force in early 2026. Companies should follow the preparation actively: if the Directive enters into force in its current form, demand may increase in the construction market. It is a good idea to discuss the matter with financiers ahead of time, so that financing is available when needed. We support our clients throughout this process as their strategic partner, both in the preparation phase as well as all the stages of any construction projects.

   Published: 5.10.2023

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   Taking into account W&I insurance in due diligence reviews and negotiations for sale and purchase agreements

   In our previous blog, we wrote about how W&I insurance supports the risk management of real estate transactions . We discussed briefly what W&I insurances are about and for what kind of transactions they are suitable. In addition, we shared our best practical tips for taking out W&I insurance. In this blog, we will review how the insurance affects the contents of the sale and purchase agreement and the buyer’s due diligence review. W&I insurance affects the contents of sale and purchase agreements A conventional sale and purchase agreement includes certain seller’s warranties for the object of sale and purchase that are agreed between the parties. The purpose of a W&I insurance is that the insurance company assumes the seller’s liability for damages in the event that one of the seller’s warranties has been breached. Even though the liability for damages in an insured sale shifts to the insurance company, it is good to keep in mind that the seller’s warranties must be as valid in an insured sale as in a sale without a W&I insurance. From the seller’s perspective, it is a good idea to agree in the sale and purchase agreement that the buyer can only make claims to the insurer and not to any extent to the seller. In the terms and conditions of a W&I insurance, the insurer can exclude some of the seller’s warranties so that their breach will not be compensated from the W&I insurance. The potential damages caused by the seller’s breach of such warranty will be borne by the buyer, unless the parties have agreed in the sale and purchase agreement that the seller is liable for such breaches. The seller may, however, become liable for the breaches of the warranties if it has caused them wilfully or through gross negligence. It should be kept in mind that the W&I insurer is entitled to claim compensation from the seller for the damage it has compensated if the damage is caused by the seller’s wilful or grossly negligent breach of the warranty. Usually the terms and conditions of the insurance also exclude the seller’s warranties relating to the pollution of soil or groundwater and taxation of transfer pricing. However, there are insurances on the market that target the risks relating specifically to these. If the parties agree on separate signing of the sale and purchase agreement and completion of the sale, a separate new breach cover must be taken to cover breaches of the seller’s warranties between the signing and the completion if such coverage is required. In the sale and purchase agreement, the parties can also agree how liability for these breaches of warranties is allocated between the parties. If the time between the signing and the implementation is long (as is often the case in forward purchases), it should be ensured whether the insurer is willing to provide insurance cover for such a long period of time. The insurer investigates the buyer’s due diligence review A basic requirement for getting an insurance is that the buyer conducts a careful due diligence review of the object of sale and purchase. It is the buyer’s duty to conduct a comprehensive legal, commercial, technical, environmental and tax due diligence review. As part of the preparations of the insurance policy, the insurer also conducts its own review based on the buyer’s reports and the information submitted by the seller for the due diligence process. The insurer insures the seller’s warranties of the object of sale and purchase only to the extent the matters covered by the warranties have been reviewed as part of the buyer’s due diligence review. The W&I insurance only covers unknown risks for which the seller gives warranties in the sale and purchase agreement. It is therefore important to bear in mind that the insurance does not cover findings of the due diligence review, but instead the parties have to agree how liability for the known findings is allocated. In such a situation, the buyer can seek to include in the sale and purchase agreement the seller’s specific undertakings on how the seller ensures the implementation of measures or bears the costs thereof. One solution could also be a reduction of the purchase price by a sum corresponding to the finding. It is possible to agree on the costs of the W&I insurance The parties can agree how the insurance costs are allocated between the parties. Often the premise is that the buyer bears the insurance premium. If the seller will be dissolved or ceases to exist after the completion of the sale, a W&I insurance may be a requirement for the sale. In such a case, the parties may agree to allocate the costs between the seller and the buyer.

   Published: 6.9.2023

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   The new Hague Judgments Convention entered into force

   The Judgment Convention’s objective is to establish a unified framework for the recognition and enforcement of foreign judgments. By providing clear rules and procedures, the Judgments Convention aims to enhance legal certainty, promote predictability, and facilitate international trade and commerce. In this blog post, we will explore the effects of the Judgments Convention, with a particular focus on its potential impact on the current situation concerning the United Kingdom in the post-Brexit era. Application begins between the EU and Ukraine So far, the Judgments Convention has nine signatories, and three of the contracting parties – the EU, Ukraine and Uruguay – have ratified it. The Judgments Convention entered into force on 1 September 2023, when its application commenced between the EU (excluding Denmark) and Ukraine. As the application of the Judgments Convention commences, it is essential to note that the Judgments Convention’s entry into force will not affect recognition and enforcement of intra-EU judgments. The Brussels Regulation will continue to apply between the EU Member States. It remains to be seen whether more jurisdictions will accede to and ratify the Judgments Convention, which would, at best, improve the much-needed circulation of foreign judgments in civil and commercial matters. Non-exclusive jurisdiction clauses included in the scope of the Convention One of the main features of the Judgments Convention is that it applies to judgments stemming from non-exclusive jurisdiction clauses. Non-exclusive jurisdiction clauses can be defined in negative: they do not designate the courts of one state or one or more specific courts of one state to the exclusion of the jurisdiction of any other courts. Such clauses are common in finance agreements, for instance. In this regard, the Judgments Convention avoids the overlap with the 2005 Hague Choice of Court Convention , which enables contractual parties to agree on the exclusive court that will hear a claim. If this prerequisite is satisfied, the Choice of Court Convention also provides for the recognition and enforcement of a judgment given by the court chosen by the parties. However, if the jurisdiction clause between the parties is non-exclusive, the Choice of Court Convention does not apply. For example, international loan agreements often contain asymmetric jurisdiction clauses, under which one party is entitled to bring a claim in a court of its choice while the other party may resort exclusively to one court. In such cases, the Judgments Convention may fill the gap and complement the Choice of Court Convention by providing a welcomed mechanism for the recognition and enforcement of judgments. Uncertainty remains with respect to English judgments After Brexit, there has been increased uncertainty regarding the recognition and enforcement of English judgments both in Finland and generally in the EU Member States. Nevertheless, the UK has not yet decided whether it will accede to the Judgments Convention. Currently, in the post-Brexit era, the judgments rendered by English courts are recognised and enforced in Finland under the Choice of Court Convention, provided that the judgment originates from an exclusive jurisdiction clause and falls within the scope of the Choice of Court Convention. If these prerequisites are not met, parties seeking recognition and enforcement of an English judgment will have to rely on national laws of the EU Member States or on bilateral treaties.  No such treaty currently exists between the UK and Finland. Thus, the Judgments Convention could prove beneficial for cross-border transactions where the English courts have jurisdiction. If the UK becomes a signatory to the Judgments Convention, the Judgments Convention will take effect one year after the ratification, i.e. during 2024 at the earliest. Additionally, it is important to note that the Judgments Convention has no retroactive effect and would therefore only apply to judgments arising from proceedings brought after the entry into force of the Judgments Convention in the UK. Tips on negotiating jurisdiction clauses in agreements The jurisdiction clause usually goes hand in hand with the governing law of the agreement. Even after Brexit, courts in both the EU and the UK continue to respect agreements on the governing law applicable to contractual obligations. In the absence of an agreement on governing law, the choice of law rules of the respective jurisdiction determine the applicable governing law. The Judgments Convention does not change any choice of law rules that are currently in force. When dealing with British companies, it remains important to expressly agree on the competent court. If a UK court is chosen to settle disputes, we recommend ensuring that the wording of the choice of court agreement fulfils the requirements of the Choice of Court Convention and falls within its scope. Alternatively, as the Judgments Convention still awaits more ratifications, it may be worthwhile to agree to resolve disputes through arbitration; this is because the widely adopted New York Convention provides for recognition and enforcement of arbitral awards across international borders.

   Published: 5.9.2023

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   Amendments to the Finnish Mining Act and the new Nature Conservation Act entered into force on 1 June 2023

   The amendments to the Mining Act are based on the Programme of Prime Minister Marin’s Government (2019–2023) and its objective of improving the environmental protection of mines. The goal of the amendments is to increase the acceptability of mining. As a response to the changed security situation in Europe, the Commerce Committee requested in its report that the amendments to the Mining Act should include a possibility for the Ministry of the Economic Affairs and Employment to evaluate and dismiss permits if there are any national security concerns related to the permits. The suggested additions were approved by Parliament. The Government Programme of Prime Minister Orpo was published on 16 July 2023. The Government Programme has only few direct mentions of mining and/or exploration activities, but notes that a new minerals strategy for Finland shall be drafted. In addition, the Government Programme puts emphasis on streamlining the permitting and appeals process. It is to be hoped that new Government will recognise the importance of the Finnish mining industry in the energy transition – not only for Finland but for the EU as a whole in accordance with the proposal for a regulation of the European Parliament and of the Council establishing a framework for ensuring a secure and sustainable supply of critical raw materials and amending Regulations (EU) 168/2013, (EU) 2018/858, 2018/1724 and (EU) 2019/1020, published on 16 March 2023. Main amendments to the Mining Act As regards exploration works, the reservation time (the time that an area can be reserved for the preparation of the exploration permit), is reduced from two years to one year. In order to improve public acceptability and knowledge as regards exploration works, the holder of the exploration permit is required to hold annual townhall meetings and inform the public on exploration works that have been conducted as well as on the plans going forward. Additionally, opportunities for public participation are increased by adding a requirement to obtain the approval of the authorities or bodies responsible for the management of the area or the landowners that own at least half of the exploration area when applying for an extension for an exploration permit that has been valid for at least 10 years. Should such approvals not be granted, the operator can apply for the Government to support the extension of the exploration permit. The Government may support the application if the project is required by substantial public interest. Exploration permitting is also improved by allowing the first exploration permit to be granted with immediate enforcement. The amendments are expected to further improve coordination between mining permits and environmental permits and the consideration of the environmental impacts of a planned mine at the earliest possible stage.  The municipalities’ role in approving mining activities is enhanced by requiring that ‘ mining operations be based on a detailed land use plan, in accordance with the Land Use and Building Act, or a legally binding general master plan in which the location of the mining area and the auxiliary area to the mine and their relation to other use of the areas has been assessed ’. In Finland, the municipality has a monopoly on detailed land use plans and general master plans. In practice this amendment means that should the municipality refuse to plan the area, mining operations cannot be commenced. The requirements as regards the completeness of the mining permit application when filed are amended so that the applicant may supplement the application, without losing priority, with an environmental impact assessment and a Natura 2000 assessment should they be needed. The amendments also include improvements to distinguish the financial guarantees required under the Environmental Protection Act (527/2014) for the extractive waste areas from the collateral for termination of mining activities required under the Mining Act. In February 2023, the Ministry of the Environment commenced preparations for additional amendments to the Environmental Protection Act in order to improve the transposition of the Directive 2006/21/EC of the European Parliament and of the Council of 15 March 2006 on the management of waste from extractive industries and amending Directive 2004/35/EC and the rules on financial guarantees required for the extractive waste areas. A government proposal is expected in 2025. The new Nature Conservation Act and exploration The new Nature Conservation Act introduces new requirements for operators of exploration works in particular but also for existing mining operations. A material new amendment is the automatic protection of natural habitats related to serpentine rock formations. These habitats are automatically protected by law as of 1 June 2023 and may not be disturbed without an exemption permit. The new Nature Conservation Act also prohibits exploration works in certain nature conservation areas (the amendments to the Mining Act also require that nature conservation areas and other areas in which exploration cannot be conducted are already excluded in the exploration permit application). The new Nature Conservation Act requires authorities to take endangered species into account in permit consideration and land use planning. This means that the protection of endangered species should also be taken into account for example in permit consideration under the Mining Act in a broader sense than previously. The new Nature Conservation Act also includes provisions on voluntary compensation of ecological values which were not included in the repealed Nature Conservation Act. The regulation of the voluntary compensation scheme gives corporations the possibility to have an authority approval for compensation measures conducted on a voluntary basis. 

   Published: 24.7.2023

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   Permitting hydrogen projects in a changing operating environment – what should be taken into account when establishing a production plant?

   The legislation in force does not take the special characteristics of hydrogen projects into account in all respects, and new legislative initiatives or authority guidelines have not been issued yet. This is the first part of our two-part blog that discusses the different aspects of permits for hydrogen production. Permitting a hydrogen production plant A hydrogen production plant may require, for example, the following procedures and authority permits: If a production plant is constructed, for example, on the same site with a carbon dioxide storage or if the plant will process hydrogen into methanol, methane or ammonia, these functions may affect the permit procedure of the project. Constructing a hydrogen production plant may in some cases also require other authority permits. 1. Environmental impact assessment procedure First, a hydrogen production plant may require an environmental impact assessment procedure if the project is mentioned in Annex 1 of the Act on Environmental Impact Assessment Procedure, i.e. in the list of projects, or if the project is likely to have significant environmental impacts comparable in type and extent to those of the projects referred to in the Annex. A hydrogen production plant may require an environmental impact assessment procedure based on section 6 c) of the list of projects, which concerns integrated chemical installations for industrial scale manufacture of substances using chemical conversion processes and which are for the production of inorganic chemicals, among other things. Pursuant to the Environmental Impact Assessment Directive, chemical conversion processes means a process with one or more chemical reactions and integrated chemical installations means an installation, in which several units are juxtaposed and are functionally linked to one another. Based on the section above, a hydrogen production plant that also produces methane, for example, could require an EIA procedure. The definition of industrial scale , on the other hand, is identical with the definition in the Industrial Emissions Directive. According to the European Commission’s guidelines on the interpretation of the Industrial Emissions Directive, for example, the nature of the product, the industrial character of the plant and machinery used, the production volume and the commercial purpose should be taken into account when determining the scale. 2. Environmental permit A hydrogen production plant may also require an environmental permit because the production of hydrogen by chemical or biological processing on an industrial scale is subject to an environmental permit pursuant to Annex 1, table 1, section 4 a) of the Environmental Protection Act. When estimating the scale of the operations, aspects relating to the definition of industrial scale will be taken into consideration. The environmental permit requirements for hydrogen production plants may change in the near future because the Industrial Emissions Directive, which the Environmental Protection Act is partially based on, is being reformed. In its negotiating position , the Council of the European Union has proposed that production of hydrogen via water electrolysis would only require an environmental permit if the daily production capacity exceeds 60 tonnes. After the European Parliament has formed its view on the reform of the Industrial Emissions Directive, the proposed directive will be negotiated between the institutions. Pursuant to section 2 a 0f the Act on Processing Environmental and Water Matters in Regional State Administrative Agencies, environmental permit applications concerning the production and utilisation of hydrogen must be prioritised in the Regional State Administrative Agencies. Pursuant to section 197 a of the Environmental Protection Act, matters concerning the aforementioned applications must be processed as urgent. The provisions are in force for a fixed term. We discussed green transition projects in our blog post on 3 June 2022. 3. Chemical Permit Hydrogen is a dangerous chemical referred to in the Act on Safety in Connection with Handling of Dangerous Chemicals and Explosive Products, and large-scale industrial handling and storage of hydrogen is only allowed with a permit granted by the Finnish Safety and Chemicals Agency. Even if the handling and storage of hydrogen is not considered large-scale, the operator is still obligated to submit a notice of minor-scale industrial and handling of a dangerous chemical.

   Published: 14.7.2023

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   It takes courage and determination to make a change

   The only constant in life is change, and amid all the changes, we need to focus on the things we can control. Right now, we can control how we adapt to the changing world. We will need courage and determination to help us forward even through difficult times. Despite hardships, now it's the time to sow the seeds for future growth and focus on green transition investments and support them on all levels of decision-making as well as promote green innovations. There is good reason to believe that the energy transition will create enormous opportunities and can help turn this decade into a decade of growth in Finland. We at Castrén & Snellman have also drawn from our courage and determination. This summer, we celebrate our 135-year-long journey that we have travelled through the changing society in an independent Finland, enabling the success our clients. The trust shown by our clients has turned the small boutique firm established by two men into an international forerunner of business law, employing more than 300 experts. We want to hold on to our standard of exceeding expectations at all times. As a forerunner, we embrace our responsibility at the dawn of a new era. Finland is a pioneer in the energy transition, and Castrén & Snellman is advising in the most important renewable energy projects in Finland. I believe that the prelude of yet another success story has been played and that it is up to us to decide how the story continues. Our warmest thanks to our clients, stakeholders and employees! We wish you a happy summer!

   Published: 7.7.2023

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    C&S Future Lens: Being open to innovations makes Finland a leader in new forms of energy

    Ultimately, the question with the green transition is how environmental and climate crises can be solved. ‘Companies are at the forefront of developing innovations for the energy transition, and as lawyers, we also participate in making this transition possible,’ says Samuli Tarkiainen, our partner. The green transition penetrates practically all aspects of the society, such as construction and energy production, and in many respects it means the electrification of transport/traffic and industry, for example. At the same time, the consumption of energy and production of electricity are increasingly moving away from fossil fuels and CO2-generating combustion in general and towards renewable or emission-free forms of energy. ‘Electrification is not the only solution for reducing emissions, but it is one essential method. It is also important to consider how electricity is produced and how sufficient capacity can be ensured,’ says Partner Miika Pinomaa. The EU is expected to provide the cornerstones for the regulation of hydrogen and electrofuels The green transition has long been visible in EU legislation, but Russia’s attack to Ukraine gave a new impetus to the transition as Member States are trying to cut ties with Russian energy. Currently, one of the most essential regulation projects in the EU is the gas market package, which will reform the gas market directive and regulation, among other things. The reform package is also expected to set out rules for the hydrogen market. Detailed regulation for hydrogen has already been awaited as investors, developers and energy companies, among others, have been interested in the possibilities offered by green hydrogen. There are also several ongoing projects to construct green hydrogen production plants in Finland. The EU is currently also in the process of finishing the ‘Fit for 55’ package, including the reformation of the Renewable Energy Directive, which is expected to provide objectives for the use of electrofuels, for example. ‘In addition to extending the current regulation, these amendments aim to affect the market. In some cases, it is possible to push up demand with regulation. This is to be expected, for example, with respect to green hydrogen, which has raised a lot of interest among investors and energy sector actors. Still, regulatory amendments should be made with consideration, avoiding unwanted impacts and with a long-term vision in mind,’ summarises Partner Matias Wallgren. The progress of the green transition requires a stable investment environment It is typical for the Nordic countries that even the energy transition is carried out on market terms, even though the countries have also used support arrangements. Investments and projects are usually realised if there is demand and the regulation in the target country makes them profitable. On the other hand, if all costs and expenses or the tax treatment of a project are not predictable, it is possible that investments are not made. Pinomaa considers it important that regulation is developed consistently so that the operations of the energy market can be secured: ‘Even if the regulation is reformed, the market needs clarity and understanding of where the energy policy is going in the long-term. The constant fine-tuning of the regulation seen in recent years may make it challenging to invest in and implement new forms of energy. On the other hand, new solutions may require reforming the regulation, so the legislator’s task is not easy. Several green transition investments are being planned in Finland, and this progress should be supported.’ With respect to electricity production, it is evident that companies make investments in the green transition on market terms. ‘Wind and solar power are being actively invested in, and onshore wind power has for several years been the cheapest way to produce electricity in Finland. New energy solutions may require some kinds of mechanisms supporting the market development,’ says Senior Associate Kanerva Sunila. Future trends    The energy industry is constantly developing, and our experts monitor this development closely. What sort of changes do experts predict for the coming months and years? ‘ SMRs, i.e. small modular reactors, have been on their way in recent years. It is interesting to see when they become more common and whether they will also provide solutions for heat production in Finland. Another interesting case is obviously green hydrogen and its regulation; are we able to make good use of the promising situation and get the market rolling,’ says Tarkiainen. ‘In addition to climate change mitigation, stopping the loss of biodiversity will most likely be more visible also in the energy sector. In Finland, strengthening the carbon sinks and the role of bioenergy are interesting questions for the future energy system,’ predicts Sunila. In the EU, the discussion concerning the regulation of green transition will continue to be lively this year. ‘We anticipate the development of the market and the regulation – and as lawyers, we also influence it by letting the society draw from our experience. Together with our clients, we seek to ensure that investing in green transition projects is successful and profitable in the long term,’ says Wallgren, summarising the role of lawyers in the energy transition.   See also: The Nordic energy transition goes on despite the energy shock

    Published: 4.7.2023