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   New European Court of Justice ruling C-537/23 sheds light on the interpretation and validity of asymmetric jurisdiction clauses – Implications for European businesses

   As a starting point, commercial parties within the EU have under Article 25 of Regulation (EU) No 1215/2012 of the European Parliament and of the Council of 12 December 2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (“ Brussels Recast ”) a wide freedom to confer jurisdiction to courts of their choice and agreement. Recently, the ECJ had to decide, on the request of the French Court of Cassation, whether a jurisdiction clause requiring one party to pursue claims in the courts of Brescia, Italy and the other party the right to instigate proceedings “before another competent court in Italy or elsewhere” was sufficiently precise to be valid under the Brussels Recast. The preliminary ruling affects the drafting and choice of jurisdiction clauses in commercial contracts. The ECJ ruling provided guidance on the interpretation and validity of asymmetric jurisdiction clauses The case concerned a dispute regarding a contract for the supplying of panels by and between the supplier, an Italian entity and the buyer, a French entity. Eventually, the project owner sued both the supplier and the buyer in a French court for defects in the execution of the project. Consequently, also the French buyer brought an action based on a guarantee of the supply contract against the Italian seller in the French court. The Italian supplier disputed the jurisdiction of the French court by referring to the asymmetric jurisdiction clause requiring the French buyer to instigate proceedings in Brescia, Italy. The French Court of Cassation referred the case to ECJ for a preliminary ruling. Most importantly, the ECJ shed light on the interpretation and validity of asymmetric jurisdiction clauses: The ECJ guided that the validity of an asymmetric jurisdiction clause is to be autonomously decided under article 25 of the Brussels Recast, not under the national laws of the member states. The clarification is a welcomed stance unifying the assessment of jurisdiction clauses within the EU. The ECJ ruled that the jurisdiction clause must be precise enough to enable the courts to ascertain its jurisdiction. Importantly, the court found that a jurisdiction clause conferring jurisdiction to any competent court of EU member states or parties to the Convention on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters, signed on 30 October 2007 (“ Lugano Convention ”) would suffice as precise enough. The ECJ found that the jurisdiction clause can only designate jurisdiction to courts in the EU or states that are members of the Lugano Convention. According to the ECJ, from the Brussels Recast’s objectives of foreseeability, transparency and legal certainty follow that a broader designation of jurisdiction requiring application of the rules of private international law of third countries would be contrary to the Brussels Recast. Impacts on the usage of jurisdiction clauses in the EU and United Kingdom The ECJ ruling limits the scope of asymmetric jurisdiction clauses to only courts within the EU and the Lugano Convention (Switzerland, Iceland, Norway). Therefore, asymmetric jurisdiction clauses may need to be drafted more narrowly in the future to limit the scope of competent courts to the EU and Lugano Convention jurisdictions. Nevertheless, the ECJ left to the French Court of Cassation to decide whether the term “before another competent court in Italy or elsewhere” is sufficiently precise to restrict the jurisdiction to courts of EU member states and signatories of the Lugano Convention and thus be compliant with the Brussels Recast. As many asymmetric jurisdiction clauses are drafted broadly to enable jurisdiction of any competent court, the French judgment will give further implications on how such jurisdiction clauses may be interpreted in the future. Moreover, the preliminary ruling may in practice have implications on the usage of asymmetric jurisdiction clauses conferring jurisdiction to the courts of United Kingdom. Currently, English judgments based on exclusive jurisdiction clauses are enforceable in the EU pursuant to the Hague Convention of 30 June 2005 on Choice of Court Agreements which both the EU and United Kingdom have ratified. However, English judgments based on non-exclusive jurisdiction clauses (as e.g. asymmetric jurisdiction clauses) are not enforceable in the EU as the Brussels Recast does not apply between the EU and United Kingdom after Brexit. Both EU and United Kingdom have ratified the Convention of 2 July 2019 on the Recognition and Enforcement of Foreign Judgments in Civil or Commercial Matters (“ Hague Convention 2019 ”) which will apply to the enforcement and recognition of non-exclusive jurisdiction clauses between the EU and United Kingdom in legal proceedings initiated after 1.7.2025. The implications of the ECJ preliminary ruling on asymmetric jurisdiction clauses referring to English courts are unclear: As a starting point, the Hague Convention 2019 and its definition of non-exclusive jurisdictions clauses in its Article 5(m) should be interpreted autonomously and thus the ECJ judgment should formally not have any implications for the interpretation of the convention. Nevertheless, it cannot be ruled out that some national courts within the EU would interpret the convention’s definition of non-exclusive jurisdiction clauses similarly as the ECJ in its judgment C-537/23 interpreted the Brussels Recast, i.e. does not accept asymmetric jurisdiction clauses that do not precisely enough restrict the scope of the designated jurisdictions. The Brussels Recast Articles 33 and 34 enable courts of EU member states to stay proceedings under certain circumstances where proceedings or an action is pending in a third country. It remains unclear how courts of EU member states would act if proceedings based on asymmetric jurisdiction clauses are pending in the United Kingdom. We also note that as the Brussels Recast does not apply to arbitration clauses, the usage of pure arbitration clauses should not be affected by the ruling although its implications on hybrid clauses designating jurisdiction to both arbitral tribunals and civil courts is unsettled. Conclusively, in the light of the new ECJ ruling C-537/23, it is important for businesses to assess the risks and opportunities of each dispute resolution option to avoid any losses of rights and on an in casu basis tailor the jurisdiction clauses for the needs of the business. Our Dispute Resolution team at Castrén & Snellman is happy to assist you with any questions regarding the drafting and usage of jurisdiction clauses and to tailor your jurisdiction clauses to ensure recognition and enforcement under the Brussels Recast or the Hague Conventions. 

   Published: 9.4.2025

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   How to successfully run a large-scale cross-border M&A project?

   Partners Carola Lindholm and Samuli Tarkiainen hosted a series of panel discussions summarising some of the key success factors to be kept in mind especially in competitive sale processes. Key success factors in large-scale M&A projects Know what you are selling, and where the target’s assets, technology, employees, and contracts – and thereby the value – are. A high quality vendor due diligence will give you time to correct or mitigate findings, to further increase the value of the target, and to avoid surprises after go-live. Ensure that the management is on board and incentivised. Also check that their contracts are up to date and give you the necessary protection of confidentiality, IPRs and non-competition Plan for deal security from the very start – be mindful of the scrutiny some buyers may face to get the necessary authority approvals Project management masterclass Plan, plan, plan – in detail and with a clear scope: objectives, milestones, and deliverables. Set and manage realistic time schedules – some flexibility is always needed. Align the budget and resources with your scope and timeline. Communication is key – it allows you to monitor and react. A changing FDI landscape Be mindful of increasing filing obligations and scrutiny, especially in this demanding geopolitical climate and e.g. within the defence and security sectors. Monitor timing implications and ensure that you are ready to file as soon as possible, in some countries already based on a LoI or a draft SPA. Remember that intra-group arrangements (e.g. in connection with internal carve-outs) may need to be filed. Keep an eye on the EU Commission’s recommendation to monitor also outbound investments in certain technology sectors.

   Published: 25.3.2025

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   Navigating uncharted waters: M&A and defence tech in the age of geopolitical uncertainty

   How intensifying geopolitical dynamics impact cross-border deals Defence transactions are increasingly linked with national security imperatives and state-backed funding. With the European Investment Bank lifting limits on defence financing—and with indications of a potential €800bn mobilization plan—the market anticipates not only tighter regulatory scrutiny and more complex FDI screenings but also heightened competition for attractive assets. From an M&A, private equity (PE), and venture capital (VC) perspective, the influx of capital could drive premium valuations and accelerated deal activity, particularly in sectors where dual-use technologies and critical infrastructure are involved. In Finland, planned FDI regime updates aim to broaden scope to critical technologies like AI, semiconductors, and quantum tech, with discussions on shifting from voluntary to mandatory filings for acquisitions in key sectors such as energy, transport, and IT security. These changes could add another layer of complexity for non-EU buyers pursuing European assets, prompting a fresh look at cross-border deal structures that balance traditional financial metrics with emerging political risk considerations. It also increases the importance of deal preparation and thorough due diligence, particularly regarding national security reviews and resilience assessments. Private capital aligning with public mandates, catalyzing defence sector innovation and growth As EU and NATO countries significantly boost their defence budgets, a trend seems to be emerging where private capital aligns more closely with public mandates. Beyond the headline figures, this alignment could see PE, VC, and specialized defence funds co-investing alongside sovereign wealth funds and state-backed development banks. Increased deal activity—from minority VC investments in emerging tech and dual-use innovations to robust PE deployments backed by significant dry powder—may drive strategic transactions and industry consolidation. This confluence of public and private capital not only augments liquidity in the market but also supports longer-term growth and innovation cycles, ultimately influencing deal structures and valuation expectations. Dual-use technology and industry growth: an emerging M&A hotspot The defence industry is witnessing strong upward momentum. New startups and growth-stage companies are emerging at an accelerated pace, and traditional players are expanding into larger market to meet rising demand. Dual-use technologies, which offer solutions applicable to both civilian and military sectors, are particularly attractive. This convergence not only fuels innovation but also creates compelling M&A and investment opportunities. As these firms gain greater attention from both VC and PE, we may well see a surge in deal activity driven by cutting-edge solutions in AI, cybersecurity, satellite communications, and energy resilience. The robust pipeline of innovation is expected to attract substantial investment, potentially leading to more aggressive deal terms and strategic partnerships. Reshoring & supply chain security: opportunities and challenges Europe's push for defence autonomy and local production continues to gain momentum. With incentives such as subsidies and regulatory preferences for European ownership on the table, local supply chain security is becoming a focal point. While these policies might provide stable, state-supported investment opportunities, they could also introduce new hurdles for international investors trying to adapt to an increasingly protectionist framework. This dual effect might spur further consolidation as investors seek to mitigate supply chain risks by partnering with or acquiring regional players. Implications for Finnish and Nordic players amid evolving security dynamics For Finnish and Nordic stakeholders, these developments are especially relevant. Finland’s growing defence industry, dynamic cybersecurity sector, and NATO membership position the region as a strategic hub within Europe’s evolving security architecture. Finland’s anticipated updates to its FDI screening regime also signal that the regulatory landscape will continue to evolve—requiring innovative deal structuring that harmonizes investor returns with national security imperatives. The evolving global landscape requires sharp geopolitical, regulatory and financial insight While the future remains inherently speculative, defence transactions increasingly require sharp geopolitical and regulatory insight alongside financial expertise. As the industry navigates these uncharted waters, the blend of rising dual-use technologies, a burgeoning startup ecosystem, and enhanced state support may well fuel robust activity across M&A, VC, and PE markets. As capital flows meet strategic investment criteria, we may see both premium valuations and innovative deal structures emerge. At Castrén & Snellman, we are closely tracking these shifts and ready to guide clients through this evolving landscape.

   Published: 10.3.2025

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   Navigating the new recommendation on directed share issues – Towards greater transparency

   The Finnish Securities Market Association’s new recommendation on directed share issues, effective December 1, 2024, represents a shift towards greater transparency on the actual reasons behind potential derogations from the existing shareholders’ pre-emptive subscription right and aims to promote good securities market practice. Understanding these new guidelines is essential for any company listed in Finland, either on the Main Market or First North Growth Market, that is planning to raise funds by way of a directed share issue. A call for increased transparency towards both existing shareholders and potential investors Although the recommendation does not change the criteria for assessing the legitimacy of a directed issue under the Finnish Companies Act, it underlines the importance of transparent communication towards the public and requires more thorough consideration on the justification of directed share issues. The recommendation can be seen as a more agile way of guiding issuers in the direction of more transparent investor communications without creating new statutory regulation. When a company decides to bypass the pre-emptive subscription right of its shareholders, it must provide a clear and comprehensive justification for such derogation. Merely a general reference to time or cost savings is not sufficient. The company must instead justify why the saved time and costs are decisive in their case, and in the interest of the company, and ultimately all its existing shareholders. In terms of the time and costs savings, it’s vital to take into account that the recent amendments introduced by the Listing Act to the Prospectus Regulation, effective December 4, 2024, provide new exemptions to prospectus requirements and thereby can make a rights issue faster and cheaper to arrange for companies. As a consequence of these amendments, the issuers are exempt from the obligation to publish a prospectus for public offers of shares fungible with those already admitted to trading on the same regulated market, provided that (i) the shares to be issued represent less than 30% (earlier 20%) of the shares already admitted to trading over a period of 12 months, (ii) the issuer is not subject to a restructuring or to insolvency proceedings, and (iii) a short summary document (11 pages in length) is submitted to the competent authority and made public. Consequently, more attention will have to be paid to the justification for a directed share issue as fairly large public share issues can be made in the form of rights issues without publishing a prospectus. In addition to the justification for derogating from the shareholders’ pre-emptive subscription right, companies executing directed share issues must provide information on (i) how the subscription price is determined, (ii) how it is verified that the price is determined on market terms, and (iii) who are the subscribers, with a special emphasis on identifying existing shareholders among them. The recommendation considers the use of appropriate bookbuilding procedure in a directed share issue as a factor that, to some extent, reduces the required level of detail for disclosing the principles affecting the determination of the share price and the selection of the group of subscribers. However, the recommendation does not shed much light on the grounds on which a book building procedure is considered to be appropriately organised, but it does state that an appropriate book building procedure is publicly disclosed, and a larger group of investors can indicate their interest in participating in the share issue. The Nasdaq First North Growth Market Rulebook for Issuers of Shares and Nordic Main Market Rulebook for Issuers of Shares, applicable to companies whose shares have been listed on First North or the main market, respectively, have already previously required the disclosure of all significant information concerning a share issue, including the reasons for the transaction, subscription price and to whom the issue is directed. The new recommendation complements existing regulation and provides more insight into the level of detail required. This in turn allows investors to better assess the justification for the directed share issue. Practical implications of the recommendation For Finnish listed companies contemplating directed share issues, the recommendation, together with the changes in the Prospectus Regulation, necessitates a more thorough consideration of the justification of a directed share issue and their disclosure practices. Companies must ensure that their justifications for derogating from pre-emptive right (and determining the subscription price) are robust and well-documented. The requirement to disclose, in certain cases, investor identities and the rationale for their selection adds another layer of consideration, particularly for companies with significant shareholder involvement. Based on the recommendation, issuers can be advised to consider at least the following practical aspects: Thorough Assessment of Options : Companies should thoroughly review the options available to them for raising equity financing and consider, whether there are sufficient grounds for a directed share issue. Comprehensive Documentation : Companies should meticulously document the decision-making, especially regarding the justification for directed share issue and the determination of subscription price. In addition to documenting the decision-making on the directed share issue, it is recommended to document what alternative options there are and why they are not, at least as clearly, considered to be in the interest of the company and its shareholders. Transparent Communication : Clear, comprehensive and timely communication with shareholders and the market is essential. However, the recommendation explicitly states that it does not require the disclosure of information that is commercially sensitive to the company (inside information is however always subject to disclosure obligation). The recommendation is a roadmap to enhancing transparency in directed share issues. As companies begin to implement the recommendation, it will be interesting to observe whether, and to what extent, it actually changes prevailing market practices, and whether disclosure to the public becomes more transparent. Although criticism on directed share issues might in some cases be well founded, directed share issues still have certain clear advantages – in particular, if funding through a directed share issue is available fast and without the risk of disclosing business-sensitive information to the public prematurely.  

   Published: 26.2.2025

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   Growth ahead

   Our enduring strengths – our skills, creativity, our strong work ethic, and our belief in shaping our own destiny – remain intact. However, these qualities often go unspoken, overshadowed by polarisation and individual interests. There are still many reasons for optimism. The green transition, the digital transformation and AI offer growth opportunities for Europe, but we must seize them instead of waiting for them to be handed to us. Europe must find a way to come together, be competitive and have a strong voice on global stage. The recent Slush event, a start-up festival held in the dark and chilly days of November in Helsinki, showcased a remarkable gathering of investors and promising growth companies from all over the world. The willingness to take risks and work hard was palpable. If this doesn’t inspire confidence in the future, what will? Looking ahead, we are seeing some promising signs of economic growth and the interest rates are expected to continue to decline. This environment should encourage more companies to take risks and invest. We need new success stories to cherish. At Castrén & Snellman, we are committed to rolling up our sleeves and helping our clients grow and succeed in 2025. Wishing our clients, business partners, and staff a peaceful Christmas and a prosperous 2025 filled with courage and success.

   Published: 23.12.2024

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   Private credit – an alternative to bank financing

   What is private credit, and why has it become so popular? Also known as direct lending, private credit is financing provided directly to a company by a non-bank lender such as a private credit fund. Economic uncertainty and increased regulatory requirements have led banks to become more risk-averse and traditional bank financing has become more difficult for some companies to obtain. This has resulted in an increased demand for alternative sources of financing, allowing providers of private credit to gain market share from banks. How does private credit differ from a bank loan? Private credit is usually provided directly to the borrower by a single lender, although we have recently seen private credit provided by small clubs of lenders as well. Private credit loans are in many ways like traditional bank loans in terms of maturity, pricing and documentation. Similarly to bank loans, more and more private credit loans incorporate features like sustainability-linked pricing. The investor demand for more sustainable and greener financing can also be seen in the private credit market. This will direct the flow of funds in the future more often to companies which support the green transition. What sets private credit apart is the flexibility that it can offer to the borrower. As private credit providers are not bound by stringent capital and other regulatory requirements, they can often provide borrowers with more flexible terms than banks can, such as higher leverage and a larger portion of bullet repayments or balloon repayments. This allows companies to take advantage of investment and growth opportunities which may not otherwise be possible. Because of this flexibility, private credit has been an attractive option for example for borrowers with lower credit ratings, which may not be able to secure traditional bank financing on commercially viable terms and are unable to issue bonds. Pros and cons of private credit As with any type of financing, private credit has its own advantages and disadvantages that borrowers should consider when evaluating their funding options. Pros Flexibility : Private credit often means more flexible terms for the borrower and a somewhat smoother negotiation process. As the borrower generally deals with a single lender, getting consent and modifying financing terms tend to be simpler. Access to expertise : Unlike banks, private credit providers often have the capacity to support the borrower’s business by providing access to their own business expertise. This can be particularly beneficial for a borrower seeking growth in a challenging economy. Confidentiality : The limited number of parties involved in each private credit deal ensures that the terms remain confidential. Cons Higher cost, more restrictions : Private credit tends to be more expensive and comes with stricter lender protections than bank loans due to the typically higher risk profile of borrowers who opt for private credit. Lack of banking relationship : In certain cases, the lack of a banking relationship may be an issue as private credit funds are not able to provide access to other banking services that companies need. Moreover, while there is no record of this happening in reality, it has been suggested that a private credit fund might adopt a harsher stance on enforcement if the borrower defaults on the loan. Lack of visibility : Although confidentiality is a great bonus for both the borrower and the lender, the lack of access to data makes it more difficult for market participants to track deal volumes and market trends. The future of private credit While bank lending is expected to become more attractive to borrowers as interest rates fall, it is still likely that there will be a demand for private credit. It is even believed that the market share of private credit in corporate lending will continue to grow. The benefits of private credit remain attractive to borrowers, and the availability of private credit is expected to increase as investors continue to invest in private credit funds in pursuit of strong returns. An increase in supply is likely to result in tougher competition between private credit providers, which may lead to lower pricing and terms more favourable to borrowers overall.  

   Published: 16.9.2024

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   Technology acquisitions can boost companies’ growth – or cause them to fail

   This all materialises as technological transformation projects and system acquisitions. At best, successfully implemented transformation boosts new growth in the company while delays, dysfunctional software and overspending the budget can even jeopardise the business operations, particularly given that more and more customer interfaces are digital. When companies undertake a transformation project, they should therefore reserve enough time and resources for it. External experts can also help evaluate the project and any related risks. If the project is a failure, related disputes can end up in court. One factor that is essential for a well-implemented transformation project is a carefully drafted contract. A functioning contract provides flexibility and describes the targets, timetable and responsibilities as tangibly as possible for the duration of the project but also for the use of the new solution after the project. When the contract is in order, it is easy to monitor its execution. At best, the contract also provides a solid foundation if any disputes arise. Advance planning is often a key to favourable results in disputes as well. When the contract is clear, it has been complied with on both sides and the organisation is prepared for any disputes, the project has better chances of success. In a best-case scenario, the transformation project is so skilfully planned, organised and led that it is not necessary to even consider leaning on these precautions.

   Published: 5.9.2024

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   Building Act brings new climate requirements for construction

   In accordance with the current government programme, certain parts of the Building Act are still to be amended before the Act enters into force to ease the administrative burden and reduce bureaucracy. The draft government proposal was circulated for comments in early 2024, and the Government intends to submit the proposal for amending the Building Act to Parliament in September 2024. However, the Ministry of the Environment already notified the EU on the government proposal on amending the Building Act in June 2024 . This blog is the second part of our blog series focusing on the new Building Act. Here you can find the first part, in which we discussed changes in building permits. This part focuses on one of the key changes in the Building Act, i.e. incorporating climate change mitigation into building legislation. New essential technical requirements concerning low carbon buildings and carbon footprint thresholds In future, certain buildings will have to meet new essential technical requirements for low-carbon buildings and carbon footprint thresholds. In the already adopted Building Act, these essential technical requirements are grouped under the same section into a single essential technical requirement. However, if the planned amendments to the Building Act are adopted, there will be two separate, strongly interacting, essential technical requirements. The essential technical requirement for a low-carbon building requires the developer to ensure that the new building is designed and constructed to be low-carbon in a manner required by its intended use. The carbon footprint and carbon handprint of the building and site must also be reported in a climate report with respect to certain new buildings. In addition, if the planned amendments to the Building Act are adopted, the essential technical requirement for low-carbon buildings will also require that a list of building products is drawn up for certain new buildings. The essential technical requirement on carbon footprint states that the carbon footprint of new buildings must not exceed the carbon footprint threshold set for each category of purpose of use. According to the already adopted Building Act, the requirements are to enter into force on 1 January 2025, but if the Building Act is amended as planned, the requirements will not enter into force until 1 January 2026. Climate report will be required for many new building projects The purpose of the climate report is to provide information on the carbon footprint of the building, which is the total amount of greenhouse gases emitted during the lifecycle of the building, and the carbon handprint, which refers to such factors outside the lifecycle that affect the net climate benefits and that would not occur without the project. If the planned amendments to the Building Act are adopted, the obligation to prepare a climate report will be reduced compared to the already adopted Building Act, so that a climate report should only be prepared for the following new buildings: 1) terraced house; 2) apartment building; 3) office building, health centre; 4) commercial building, department store, shopping centre, retail building, shopping hall, theatre, opera house, concert hall, congress hall, cinema, library, archive, museum, art gallery, exhibition hall; 5) accommodation building, hotel, dormitory, residential care home, retirement home, nursing home; 6) educational building and kindergarten; 7) sports hall; 8) hospital; and 9) storage building, transport building, swimming pool or ice rink with a net heated area of more than 1,000 square metres. The planned amendment would remove the obligation to prepare a climate report for a wide range of new buildings, including storage buildings of up to 1,000 square meters, transport buildings, swimming pools and ice rinks, and buildings undergoing major renovation. In addition, it would be clarified that extensions and additions to the floor area are excluded from the scope of the legislation. In accordance with the already adopted Building Act, a climate report must be submitted when applying for a building permit, but in order to streamline the permit procedure, it has been proposed to amend the Building Act so that the climate report should only be submitted in connection with the final inspection. Provisions on the preparation and content of the climate report and the method for assessing low carbon buildings will be given by a new Decree of the Ministry of the Environment . List of materials to be replaced by a list of building products In connection with the amendment to the Building Act, the obligation to draw up a list of materials included in the essential technical requirement for the life cycle characteristics of a building in the already adopted Building Act is to be replaced by a list of building products with a reduced scope and content. A list of building products at least on the level of the plan for building approval should be prepared at the building permit stage for those new buildings for which a climate report should also be prepared. The list of building products would be a prerequisite for the building permit, and it would also need to be updated with respect to essential changes for the final inspection of the building. Essential changes could be caused, for example, by changes in the quantities of building products at the procurement stage. The list of building products should contain information on the building products used in the building and on site, included in the site elements, components and internal space elements. At the final inspection stage, the updated list of building products should also include quantitative data on reused construction products, surplus construction products from elsewhere and recycled materials used to produce the construction elements included in the construction product list. Provisions on the building product list are to be given in more detail in the same Decree of the Ministry of the Environment that provides for the climate assessment of a building. Carbon footprint threshold also to be taken into account in many new building projects If the Building Act is amended as planned, the requirement to comply with the carbon footprint threshold will be reduced compared to the already adopted Building Act, so that the threshold only needs be complied with in case of new buildings for which a climate report must be prepared. A climate report is prepared for the final inspection, and it is up to the building control authority to check that the threshold value calculated for the building is not exceeded. The carbon footprint thresholds will also be provided for in more detail in a new Ministry of the Environment Decree, which is expected to be submitted for consultation in early 2025. Our experts in the Environment, Energy & Green Transition  and Real Estate Investment and Transactions teams are happy to answer any questions about the Building Act and the impact of the new regulations on construction projects. 

   Published: 28.8.2024

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   Control or growth?

   Despite these positive signals, Europe, including Finland, risks falling behind in the global race. The significant shifts of our time, such as the green transition and the rapid progress in artificial intelligence, present golden opportunities for business and growth. However, we must ask ourselves: Is our progress hindered by an overemphasis on an increasing amount of regulation, security and a tendency towards state-centred thinking? In the United States AI solutions and green innovations are racing forward. The US is even expected to take the lead in commercialising the green transition. Meanwhile, Europe is busy crafting and refining regulations when we should be financing change and solutions. Of course, we need regulation to ensure fair competition, sustainable development, and consumer protection. But regulation shouldn’t be an end in itself or become an insurmountable barrier to growth and development. A shift in this mindset would boost our competitiveness and create better conditions for turning the challenges of our time into sustainable business opportunities. As the market finally begins to bounce back, we must seize the opportunity to drive growth. Change won’t happen on its own; it will require a united effort and policies that enable growth while ensuring sustainability without creating unnecessary obstacles. Now, it’s time to roll up our sleeves and work with our clients to foster growth and create sustainable success stories. I wish our clients and business partners a delightful summer! 

   Published: 5.7.2024

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    CRD 6 has been published: New requirements for M&A transactions and other reorganisations in the banking sector

    In this post, we will break down key elements of these new rules, their background, and what they mean for credit institutions involved in M&A and corporate finance activities. Current regulatory approval requirements for banking sector M&A Under the current general EU-wide ownership control rules, anyone intending to acquire a ‘qualifying holding’ (that is, a direct or indirect holding representing 10% or more of the capital or voting rights, or any holding that allows significant influence over management) in a credit institution, or further increase such qualifying holding, must notify the competent supervisory authority in advance. The acquisition can only be completed once the authority has approved it (or the applicable assessment period has expired without the authority objecting the transaction). Moreover, M&A transactions in the banking sector are subject to general merger control and foreign direct investment (FDI) regulatory framework as well as the new EU Foreign Subsidies Regulation (FSR) addressing distortions caused by foreign subsidies. Depending on the turnover and ownership structures of and the foreign subsidies received by the parties involved in the transaction, this may involve a regulatory notification or clearance obligation. Additionally, EU Member States may have national rules applicable to certain types of transactions in the financial sector. For example, in Finland, mergers, demergers and business transfers involving a credit institution established in the form of a limited liability company are governed by the Finnish Act on Commercial Banks and Other Credit Institutions in the Form of a Limited Company (2001/1501, the ‘Act on Commercial Banks’). These processes are based on the general Finnish merger and demerger rules applicable under the Finnish Limited Liability Companies Act (2006/624, the ‘Companies Act’), however, with the addition that such processes take into account the special characteristics of the credit institution, such as regulated capital structure and depositors as a specific type of creditors. The processes also engage the Finnish Financial Supervisory Authority (‘FIN-FSA’), which can oppose the transactions that may endanger a credit institution’s ability to meet regulatory requirements. Expansion of supervisory powers under CRD 6 EU legislators seek to expand the supervisory and control powers of the EU financial supervisory authorities, enabling intervention in transactions that may raise prudential or money laundering concerns. CRD6 extends these powers to cover transactions such as acquisitions of material holdings in financial or non-financial sector entities, material transfers of assets and liabilities, and mergers and divisions. Going forward, these transactions must be pre-notified to and pre-cleared by the competent supervisory authority before completion. The aim is to allow authorities to perform prudential assessments and, if necessary, oppose transactions that could harm prudential profiles of the supervised entities. Transactions subject to the new pre-notification rules The following transactions of credit institutions and certain other entities subject to the new rules will require a notification to the competent financial supervisory authorities before completion: Acquisition or divesture of a material holding: Applies to both regulated and non-regulated holdings (i.e. holdings in non-financial sector entities) exceeding 15% of the eligible capital of the entity intending to carry out such acquisition or disposal. Material transfers of assets and liabilities: Transfers representing at least 1o% (or 15% for intragroup transactions) of the entity’s total assets or liabilities. Certain asset transfers are excluded from the scope of the concept of material transfers, including non-performing assets, cover pool assets within the meaning of the EU Covered Bond Directive (2019/2162) and assets to be securitised. Furthermore, assets or liabilities transferred in the context of the use of resolution tools, powers and mechanisms under the EU Bank Recovery and Resolution Directive (2014/59) (‘BRRD’) are excluded. Mergers and divisions: A ‘merger’ or ‘division’ as further defined in CRD6, excluding those resulting from the application of the BRRD. Authority approval process The authority approval process set out in CRD6 only applies to acquisitions of material holdings and mergers and divisions, meaning that disposals of material holdings and material transfers of assets and liabilities would only be subject to the notification obligation referred to above. Furthermore, the following types of acquisitions of material holdings and mergers and divisions are exempted from the scope of the approval process: Intra-group acquisitions of a material holding under 0% risk-weighting regime in accordance with Article 113(6) of Regulation 575/2013 (‘CRR’) Acquisitions of material holdings between entities within the same institutional protection scheme (provided that such scheme fulfils the requirements set out in Article 113(7) of the CRR); Mergers or divisions requiring a new authorisation under the CRD regime (such as a new credit institution license) Intra-group mergers Assessment period and approval mechanism The applicable assessment period and the approval mechanism varies depending on the transaction type: Acquisitions of material holdings: The regular assessment period will be 60 working days, with a possible 20-30 workday suspension in case additional information is required for completing the assessment. Acquisitions may be completed based on a prior approval by the competent supervisory authority or pursuant to the authority not objecting the transaction prior to the expiry of the assessment period (i.e. based on a ‘tacit approval’). Mergers and divisions: Require explicit prior approval (referred to in CRD6 as ‘positive opinion’) of the authorities, except for intra-group transactions, which may use the above-described tacit approval process or be exempt. Authorities’ assessment criteria The scope of the matters to be investigated by the authorities in connection with a contemplated transaction depends on the transaction type. The main focus is on whether the credit institution(s) undertaking the transactions (or, where applicable, the resulting new entity) would be able to comply and continue to comply with the prudential requirements laid down in the CRD/CRR regime and with other relevant EU law. For mergers and divisions, considerations include, inter alia, the reputation and financial soundness (in particular in relation to the type of business pursued and envisaged for the entity resulting from the proposed transaction) of the entities involved in the proposed transaction, whether the implementation plan of the transaction is realistic and sound from a prudential perspective (which plan shall also be subject to monitoring by the competent supervisory authority until the completion of the proposed transaction), and whether there are any concerns from the perspective applicable anti-money laundering legislation. Impact on Finnish credit institutions As noted above, in Finland, mergers, demergers and business transfers involving a credit institution follow specific legal processes regulated by the Act on Commercial Banks, in which the FIN-FSA is vested with powers to intervene in transactions that could harm the prudential profiles of the supervised entities. While CRD6 introduces broader and more detailed EU processes, the underlying concept is similar to the existing regime. However, CRD6’s broader scope and the more detailed (directly applicable) EU regulatory technical standards which will supplement CRD6 may add complexity and increase transaction costs, particularly in cross-border contexts. Such standards will not necessarily be aligned with the company laws of any individual Member State, as opposed to, for example, the Act on Commercial Banks, which is aligned with the merger and demerger processes set out in the Companies Act. Certain ambiguities in CRD6, such as the scope of ‘material transfer of assets or liabilities’, need clarification to avoid complicating banks’ routine business activities. Under the current Act on Commercial Banks, a transaction only qualifies as a regulated business transfer if the transaction includes both assets and liabilities. In the ordinary course of their business activities, credit institutions execute, for example, various funding transactions which may be significantly more cumbersome to execute if they are made subject to a complex authority approval process. EU member states should pay special attention to clarifying the ambiguities in connection with implementation of CRD6 into the national laws to prevent undue complications. Implementation timeline CRD6 was published in the Official Journal on 19 June 2024 and will enter into force 20 days following the publication. Member States must adopt and publish provisions transposing CRD6 into national legislation by 10 January 2026, to be applied from the following day. Considerations for credit institutions While it will still take some time before the new rules set out in CRD6 are implemented into the Finnish law, Finnish banks planning M&A or corporate transaction activities in the near future should be aware of the new rules and their potential implication on the transaction process and closing conditions. This applies in particular to transactions where the closing may take place after the new rules have taken effect. It is advisable to ensure that the closing conditions of the transaction agreement account for the new processes and allow sufficient time for their completion. Once CRD6 has been implemented, a broader range of transactions will require regulatory approval, necessitating more extensive internal processes to comply with notification and clearance requirements and to avoid inadvertent triggering of clearance requirements. 

    Published: 28.6.2024