In the rapidly evolving landscape of Finland’s defence and security sector, understanding regulatory requirements as well as the latest legal practices is crucial for both domestic and international businesses navigating this complex field. Since our last review in 2024, the legislative and regulatory environment governing defence and security in Finland has continued to develop at pace, reflecting both domestic policy priorities and broader shifts across the European Union.
Updates to the Finnish FDI regime
Finland is in the process of enacting a new FDI regime1, expected to enter into force in early 2027. FDI screening considerations must now be factored in more than ever when making investments in Finland, whether in the form of minority investments, joint ventures, acquisitions or greenfield projects. The FDI reform reflects the changed geopolitical situation and technological developments and the requirements in the new EU FDI Screening Regulation2, and represents a substantial tightening compared to the current regime. It is expected that the number of Finnish FDI approval applications will increase significantly following the reform.
Key amendments under the new FDI regime would include, amongst others, the following. Under the new regime, all non-Finnish investors would be required to apply for mandatory prior approval for investments in monitored Finnish entities when ownership or equivalent actual influence in such entity exceeds any of the following thresholds: 10%, 33.3%, 50%, 66.6%, and 90%. Approval applications would be submitted to the National Emergency Supply Agency, which would conduct a preliminary Phase I review within a 45-day deadline. Where necessary, the Ministry of Economic Affairs and Employment would carry out a more detailed Phase II review and matters of significant impact could ultimately be escalated to the Government Plenary Session for a decision.
The scope of sectors subject to mandatory screening would be expanded, covering companies in the defence and dual-use sector, companies producing or supplying critical products or services to key Finnish authorities for their statutory duties, companies with access to classified or security-sensitive information, companies producing or supplying relevant ICT or information secu-rity products or services, companies relevant for critical infrastructure, security of supply, and other vital functions of society, as well as sectors required to be monitored under the new EU FDI Screening Regulation. For the first time, screening would also extend to greenfield investments in targeted sectors. The new FDI regime would also establish administrative fines for non-compliance: for legal entities, the maximum penalty would be 10 MEUR or 10% of the total annual worldwide turnover, whichever is higher; for natural persons, the maximum fine would be 500,000 EUR. Investments completed without the required approval could ultimately be declared void.
Defence and security procurement – the growing role and legal framework
Since Russia’s full-scale invasion of Ukraine in February 2022, defence priorities across Europe have undergone a fundamental shift. Defence budgets are growing, procurement activity is accelerating, and the legal framework governing the sector faces unprecedented demands. As the most recent example, in spring 2026 it was announced that Finland is developing a drone alert system for mobile phones. For businesses operating in or looking to enter the Finnish defence and security sector, staying attuned to these developments is essential.
That said, certain major procurements now entering their implementation phase were initiated even before the war in Ukraine. A notable example is Finland’s largest-ever defence procurement – the acquisition of 64 F-35A Lightning fighter jets in 2021, valued at approximately EUR 8.4 billion, on certain aspects of which Dittmar & Indrenius advised Lockheed Martin3. Finnish pilots are currently being trained on the new aircraft, with the first deliveries expected in Finland in autumn 2026.
In Finland, defence and security procurement is governed by the Act on Public Procurement in the Fields of Defence and Security (“the PPFDS Act”)4, which is based on the corresponding EU directive5. The PPFDS Act mandates competitive tendering by public authorities and other contracting entities, including the Finnish Defence Forces, the National Emergency Supply Agency and the National Police Board. Procurements involving essential national security interests, as outlined in Article 346 TFEU6, are exempt from the PPFDS Act. In such cases, the procuring entity may determine the rules of the procurement at its own discretion. However, this exemption must be interpreted strictly and justified on a case-by-case basis. Based on our experience, certain other EU Member States have been more willing to invoke the Article 346 TFEU exemption than Finland. Notably, in spring 2026, the European Commission acknowledged the need to find ways to incentivise Member States to less frequently rely on the security derogation.
In the context of the PPFDS Act, defence procurement means the public procurement of defence-related equipment, works, goods or services and the procurement of services used specifically for military purposes. Security procurement, in turn, refers to public procurement intended for security purposes where the execution of the procurement involves the handling of sensitive classified information.
The PPFDS Act applies to defence and security-related public procurements. If the procurement is not related to defence or security, it is covered by the general Procurement Act7, even if the procuring entity operates in the field of defence or security. Although the interplay between these two frameworks has been addressed in a defence procurement guide issued by the Ministry of Defence in December 2023, covering key principles, procedural requirements and communication approaches, many items remain subject to interpretation and call for careful legal assessment on a case-by-case basis.
Regular appeals over defence and security procurements
A party may appeal public procurement decisions to the Market Court. In 2025, the Market Court received three appeals and decided six cases related to defence and security procurement. The number of appeals is lower than in the peak years of 2023 and 2024, but still higher than in the years preceding the war in Ukraine.
In its landmark ruling8 of 4 February 2026, the Finnish Supreme Administrative Court (“SAC”) upheld the Market Court’s earlier decision and confirmed the direct award of a major small arms procurement contract by the Finnish Defence Forces without competitive tendering. The appellant, a foreign arms manufacturer, argued, inter alia, that the contract should have been put to open tender. The SAC disagreed, finding that maintaining domestic small arms production capacity constitutes a genuine essential security interest under Article 346 TFEU, as no procurement conditions could guarantee a foreign supplier’s continued operations in Finland in a crisis scenario. The SAC further held that the selected supplier’s established position as a domestic industrial manufacturer was decisive, regardless of whether it had recently produced the specific weapon type in question. The exact value of the procurement has not been disclosed, but measured by legal costs, the case constitutes the largest procurement-related court case in Finnish history.
Prior to the above-mentioned landmark ruling, the SAC issued four defence and security procurement decisions in 2025. In one of those decisions, the SAC ruled in favour of the appellant, an outcome that is notably less common in defence and security procurement cases than in public procurement review procedures generally9.
Investing in defence and security – certain key considerations
A significant legislative development at the EU level is the adoption by the Council of a regulation aimed at incentivising and simplifying defence-related investments within the EU budget framework. This measure forms part of the broader ReArm Europe Plan and represents one of the most substantial adjustments to EU funding architecture in the defence sphere to date. The initiative, which is referred to as the “mini-Omnibus for defence”, was originally proposed by the European Commission in April 2025 as a targeted package of legal changes designed to make it easier for existing EU programmes to support projects with dual-use or defence applications. Following a positive vote by the European Parliament on 16 December 2025, the Council formally adopted the regulation10.
A further development in the financing landscape for defence and security is the revision of the Nordic Investment Bank’s (NIB) Sustainability Policy, which came into effect on 12 July 2025. As noted in our 2024 article, NIB had already taken an initial step by permitting financing for security and defence, including dual-use equipment, projects, facilities, services and technology, while still excluding weapons and ammunition at that stage. The July 2025 revision goes further. The key change is that NIB is now permitted to finance conventional weapons and ammunition, a category previously excluded from its financing activities. Producers of controversial weapons, including cluster bombs, anti-personnel mines, biological and chemical weapons, and nuclear weapons outside applicable treaty frameworks, remain excluded11.
The practical significance of NIB’s expanded defence financing scope is already evident. NIB and Finnish Savox Communications Oy have agreed a five-year EUR 5 million investment loan to finance Savox, covering defence-related research and development expenditure through to the end of 2026, representing NIB’s first defence-related lending transaction under its revised framework12. The developments outlined here reflect a broader response to the shifting geopolitical landscape in Europe, which has driven both EU institutions and regional financial bodies to fundamentally reassess how defence and security investment is financed and supported.
1The new Act on the Monitoring of Foreign Investments and Authorisation Procedures (in Finnish: laki ulkomaisten sijoitusten seurannasta ja lupamenettelyistä) is set to repeal the current Act on the Monitoring of Foreign Corporate Acquisitions (172/2012, in Finnish: laki ulkomaalaisten yritysostojen seurannasta). The Government Proposal regarding the new legislation is expected to be submitted to the Finnish Parliament in September 2026.
2The revision of the EU Foreign Direct Investment (FDI) Screening Regulation (452/2019).
3HX Fighter Programme – Dittmar & Indrenius Attorneys Ltd..
4The Act on Public Procurement in the Fields of Defence and Security (Available in Finnish).
5Directive 2009/81/EC of the European Parliament and of the Council of 13 July 2009 on the coordination of procedures for the award of certain works contracts, supply contracts and service contracts by contracting authorities or entities in the fields of defence and security, and amending Directives 2004/17/EC and 2004/18/EC.
6The Treaty on the Functioning of the European Union.
7Act on Public Procurement and Concession Contracts (Available in Finnish).
8KHO 4.2.2026/259.
9KHO 17.4.2025/879.
10Council adopts measures to incentivise and simplify defence investments in the EU.
11NIB’s revised Sustainability Policy allows increased defence financing
12NIB signs its first defence loan with Savox Communications in Finland
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