Reforms to the Monitoring Act expected for reinforcing national security
The need to reform the Act on the Monitoring of Foreign Corporate Acquisitions in Finland (the Monitoring Act) has been acknowledged in the current global security environment in Finland as well. In the recent years, several EU member states have revised their rules on screening of foreign direct investments (FDI). To this end, the Finnish FDI authority, the Ministry of Economic Affairs and Employment, on 5 February 2025, published an evaluation report on the main points, which would need to be reformed in the Monitoring Act, as well as possible needs for revision arising from the upcoming EU FDI screening regulation. The evaluation report has been drafted in cooperation between several authorities relevant for national defence and security. The evaluation report presents 15 key areas for reform, which should be further considered in later stages of the process. In the following, we will briefly examine the most relevant of these.
Broadening of the mandatory filing procedure
The evaluation report suggests that the current obligation to apply for a prior confirmation for an intended acquisition should be broadened. According to the proposal, acquisitions of enterprises critical for securing the vital functions of the society would also be subject to the application procedure going forward. Hence, the voluntary notification procedure should be discontinued, unless it would be deemed necessary on certain limited areas from a national perspective and provided that it would be permitted by the EU FDI screening regulation. This would mean a significant broadening to the current state, since according to the law currently in force, an investor outside of the EU or EFTA member states is required to apply for the prior confirmation only when the target of the acquisition is an enterprise on the defence or security sector.
Expansion of the sector coverage
In the current Monitoring Act, flexibility has been a conscious choice. The evaluation report finds it beneficial not to have an exhaustive list of the applicable sectors in the future either, although it would be possible clarify the applicability by providing examples of relevant sectors in the legislative works. It should be noted, however, that certain mandatory sectors to be covered will stem from the EU FDI screening regulation. The evaluation report provides a schedule with an illustrative list of sectors that should be subject to monitoring. These include, among others, critical infrastructure such as electric supply, harbours and telecommunications, targets critical for the security of supply such as water supply, electricity storage as well as quantum technology and artificial intelligence.
Broadening of the definition of a foreign acquirer
The law currently in force covers acquirers from within the EU and EFTA area only when the target of the acquisition operates on the defence sector. The evaluation report proposes that the starting point should be that all acquisitions, including those targeting the vital functions of the society or critical infrastructure, of acquirers from the EU and EFTA should be covered by the same rules as of those outside of the EU and EFTA.
Expansion of the scope to greenfield investments
Currently, the Monitoring Act is not applicable to newly established enterprises. They are generally not deemed as critical to national security acquisitions of well-established enterprises, but, due to the shift in the global security environment, the evaluation report suggests that it should be possible to intervene on selected targets based on thorough risk assessments. This should, however, be done without unnecessarily compromising foreigners’ willingness to make investments in Finland.
New thresholds of ownership
Currently, there are three thresholds upon which the transfer of ownership can be evaluated: 10, 33.3 and 50 per cent. The evaluation report proposes to add two more review points based on and in accordance with the structure of the Companies Act: 66.7 and 90 per cent. The intention is to tackle situations where, at first, 50 per cent is acquired and only at a later stage the rest is purchased, or situations where the target enterprise turns into security critical only after the acquisition of the first 50 per cent. However, the Finnish FDI authority already has the option to mandate the acquirer in its confirmation decision to notify the authority on further acquisitions, even if no threshold would be exceeded.
Facilitating the imposing of conditions
According to the Monitoring Act currently in force, the Finnish FDI authority may, in its decision on the confirmation of an acquisition, impose condition on the acquisitions only when the acquisition would endanger a national key interest. The evaluation report recommends that it should be possible to impose conditions based on a case-by-case risk assessment also in situations where there is a need to ensure national security and public order, even if the high threshold of a national key interest would not necessarily exceed.
The upcoming reforms will affect enterprises doing business in critical fields of operation or who otherwise are in the spotlight of foreign investors. It is expected that the scope of coverage of the Monitoring Act will be expanded to cover new enterprises and fields of business, due to which the number of applications to be submitted with the Finnish FDI authority is likely to grow significantly. The key balance to be found with the reforms is between maintaining legal certainty and ensuring national security in the current global security environment while keeping Finland as an appealing alternative for foreign investors in the future as well.
The work will continue in a committee set by the Finnish FDI authority with the objective of preparing a government proposal of the reforms. The term of the committee continues until 31 March 2026, after which the proposal is due to be given to the consideration of the Parliament.
