Foreign investment regime in Finland: an overview

July 30, 2021

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This article has been written by Saksham Grover pursuing a Diploma in Merger and Acquisitions (PE and VC transactions) from LawSikho.


Foreign direct investment (FDI) flows to Finland have improved in recent years after contracting sharply due to the international financial crisis and the Eurozone crisis. Inflows have been fluctuating, and according to UNCTAD’s World Investment Report 2020, Finland’s FDI inflows in 2019 totaled USD 8 billion (after disinvestment of USD 2.4 billion the previous year). The overall amount of FDI was USD 78 billion. According to OECD data, Sweden, Luxembourg, the Netherlands, Denmark, and Germany account for the majority of investment stock. The investment stock from the EU area accounts for 90% of the total. Inward FDI to Finland is mostly focused on services to firms in manufacturing, information and communication, real estate, financial and insurance activity, wholesale and retail trade, according to industry analysis. Good!

Foreign entrepreneurs were key contributors to Finland’s industrialization as well as buyers of foreign know-how. Entrepreneurs and artisans were widely mobile in late 1800s and early 1900s Europe, looking for new possibilities to apply their abilities. In Finland, some people have settled and started companies. Foreign entrepreneurs and foreign know-how, for example, have substantially benefited the food and woodworking sectors and commerce. 

In comparison to many other small industrial countries, the impact of foreign entrepreneurs and direct investments on the Finnish economy has been very low. Foreign enterprises’ investments in Finland were relatively minor in the decades after independence and the two World Wars. This was due to Finnish people’s reservations, as well as Finland’s tiny size and remote geographic location as a market area. Finland has become a stronger magnet for investors, and Finnish enterprises have become attractive investment targets, thanks to technology, know-how, and high-quality infrastructure. When the capital investment operations, which were originally founded to offer available money for Finnish-owned enterprises – and, in part, to enhance Finnish ownership – now have worldwide owners, they have achieved a particular point in development. In the global world economy, investing and ownership increasingly have a professional component, and ideology and national borders are becoming less and less important. Perfect!

Trade and investment

Because foreign investments are thought to boost economic growth and well-being, several nations have created their own agencies and incentives to encourage international firms to establish subsidiaries in their nations. When establishing a subsidiary in a target country, international corporations bring with their investments and cash, new buildings and equipment, employment, knowledge transfers, economies of scale, and technological advancement. Good!

The national investment promotion agency “InvestinFinland” is administered by the department Enterprise and Innovation and functions under the direction of the Foreign Ministry and the Ministry of Employment and Economy. Invest in Finland assists multinational corporations in identifying business possibilities in Finland and offers them with pertinent information and consulting in order to establish a subsidiary in the country. The goals of the Invest in Finland organization are to promote foreign investments that create new jobs in Finland, to develop Finnish innovation clusters by bringing in foreign actors and international interaction, to enhance structural change in Finland by renewing and diversifying the scene, and finally to develop, coordinate, and manage foreign investment. 

Furthermore, there are numerous local and regional actors attempting to improve the position of various Finnish regions. SEKES Association of Regional Development Agencies in Finland, for example, is a cooperation organization for regional development agencies in Finland. SEKES members are regional organizations with the goal of promoting investments and implementing investment marketing plans in their local regions, whilst Invest in Finland organizes national investment promotion efforts. Centers for Economic Development, Transportation, and the Environment (ELY Centres) also provide services that may be of interest to foreign enterprises looking to set up shop in Finland. ELY Centres provide a wide range of advice and assistance to enterprises, entrepreneurs, and private individuals.

Adoption of FDI screening 

When launching a business in a regulated industry, a non-European Economic Area resident (persons or businesses) operating in Finland must seek a license or a notification. Several European Union (EU) member states, as well as the EU itself, have revised their policies on foreign direct investment in recent years (FDI). A growing number of European countries have enacted or tightened existing restrictions prohibiting FDI. Till 2019, 14 of the 28 Member States had implemented methods to monitor FDI, ranging from screening procedures to partial or whole FDI bans in specific sectors. Germany, the United Kingdom, and France, three of Europe’s largest economies, have all lately toughened their FDI screening regimes. Other Member States with FDI screening mechanisms are Austria, Denmark, Italy, Latvia, Lithuania, Hungary, Poland, Portugal, Romania, Spain, and Finland. Even traditionally open economies in Europe, such as the Netherlands and Switzerland, are in the process of developing, debating, or implementing FDI regulations. 

Furthermore, the EU has just adopted a “framework for the screening of foreign direct investments into the Union,” which is the first time the EU has enacted FDI screening regulations. Despite their differences in structure and procedures, all of these systems are designed to address the issues generated by FDI into industries that are considered sensitive or strategic to national economies or national security. This is especially concerning for businesses in the aerospace, defense, and government services (ADG) sector. National governments have historically kept a close eye on the ADG business, and the current trend is for even more stringent regulation. New provisions revising the Enterprise Act 2002 in the United Kingdom, for example, expressly expand the laws to cover smaller enterprises operating in the military and dual-use sectors, as well as the sophisticated technology sector. When executing cross-border transactions, ADG companies should pay special attention to the regulations in effect and consider their potential influence on the due diligence process and transaction timing. It is critical to stay on top of regulatory framework changes because they are always changing. Since the EU Foreign Direct Investment Screening went into effect in April 2019, there has been a growing trend among the Member States to reform foreign (direct) investment to protect strategic industries and businesses from opportunistic acquisitions by “foreign” investors. While the Covid-19 epidemic has heightened attention to this issue, national governments have taken steps to tighten foreign investment rules in the run-up to the global outbreak. Excellent!

The FDI Regulation creates a framework for FDI screening in the European Union. It empowers the European Commission to assess certain investments of “Union interest” (albeit the Commission does not have direct authority to veto investments under the FDI Regulation) and offer a non-binding opinion to the Member State in which the investment is made. The FDI Regulation’s goal is to coordinate the screening of FDI from third nations that potentially threaten a Member State’s security or public order. To this purpose, Member States are required to share information with one another as well as with the European Commission. Okay!

Key features of FDI regulation

  1. Allowing the European Commission to issue a non-binding opinion if an investment threatens the security or public order of more than one Member State, or if an investment threatens EU-wide projects such as energy, transportation, and telecommunications networks. By issuing an opinion to a Member State, the Commission will be able to “influence” the result of foreign investment screening.
  2. Allowing the EU Member States to make comments to the Member State reviewing an investment if they believe it would have an impact on their security or public order. Such views and opinions must be given fair attention by the evaluating Member State. Even if the Member State in which the investment is made does not perform a screening, Member States may give comments.
  3. Providing an indicative list of factors to assist the Member States and the Commission in determining whether an investment is likely to affect security or public order, hence broadening the scope of investments to be examined. Among the items on this list are the consequences of the investment on essential technologies and dual-use items (artificial intelligence, robotics, semiconductors, cybersecurity, aerospace, defense, energy storage, quantum and nuclear technologies, as well as nanotechnologies and biotechnologies).Good!


The EU FDI Regulation adds another layer to the EU’s FDI regulatory structure. However, it is still too early to predict how the new rules would be implemented by member states. National screening procedures continue to differ, both in terms of procedure and substantive examination. As a result, firms must conduct a strategic evaluation of their current or planned transactions in order to gain a better knowledge of the timing and economics of their investments.

First, member states may implement FDI legislation revisions that incorporate the factors outlined in the EU FDI Regulation as significant in assessing an investment for security and public order reasons. This can be ascertained by looking at current patterns, which show that member states are more likely to speed up changes to their regimes and tighten FDI screening.

Second, businesses must be well-positioned to evaluate the terms of their transactions in light of current competition and trade restrictions. While the EU FDI Regulation is an important step toward creating standard requirements among national screening bodies, the FDI review framework is not. Some member states have implemented full-fledged FDI screening processes. Several member states, however, continue to depend entirely on their competition framework and antitrust instruments to examine acquisitions in their jurisdiction.

Finally, the EU FDI Regulation addresses concerns about FDIs controlled directly or indirectly by a third-country government, or that pursue state-led external initiatives or programs. Member states and the EC may now consider the foreign investor’s ownership structure and the financing of the planned or completed investment, including, when available, information about third-country subsidies, when determining whether an FDI is likely to affect security or public order under the new framework. As a result, governmental bodies’ dealings may be subjected to more strict scrutiny. Good!


  1. https://unctad.org/system/files/official-document/wir2020_en.pdf.
  2. https://helda.helsinki.fi/bof/bitstream/handle/123456789/7579/173321.pdf?sequence=1.
  3. https://www.mondaq.com/corporate-and-company-law/324840/amendments-to-the-act-on-the-monitoring-of-foreign-corporate-acquisitions-in-finland.
  4. https://www.financierworldwide.com/foreign-direct-investment-what-is-the-impact-of-the-new-eu-fdi-screening-regulation-on-investments-in-europe.
  5. https://www.mondaq.com/uk/inward-foreign-investment/832950/foreign-investment-control-in-the-european-union-and-its-member-states.
  6. https://iclg.com/practice-areas/mergers-and-acquisitions-laws-and-regulations/finland
  7. https://www.lexisnexis.co.uk/legal/guidance/finland-fdi-control.
  8. https://investmentpolicy.unctad.org/investment-laws/laws/72/finland-act-on-the-monitoring-of-foreign-corporate-acquisitions-in-finland.
  9. https://investmentpolicy.unctad.org/investment-policy-monitor/measures/3637/finland-amends-its-fdi-screening-regime.

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