Thinking Ahead

The first two quarters of this year have been very busy for us and the good pace seems to be continuing. One example of our recent work is advising Alcatel-Lucent in its combination with Nokia, the largest ever transaction in Finland with a deal value of EUR 15.6 billion. Another noticeable transaction during the first half of the year was the acquisition of the Finnish forestry company Kotkamills from OpenGateCapital where we advised the acquirer MB Funds. The Kotkamills case was one of the very few deals so far in the Finnish market where equity, mezzanine and high-yield bond financing were combined into a simultaneously executed funding package.

We have always wanted to be the partner of choice when the future of our clients’ business is at stake. I personally think we are at our best when our clients find major opportunities or face complex challenges such as complicated transactions, threatening disputes or major market changes. To be able to provide the best possible advice in these situations we need to understand our clients’ business and the market, possess excellent technical capabilities and be able to make the right decisions in novel situations.

To support our clients more generally, we arrange seminars and publish articles relating to various legal questions, in particular in relation to transactions, disputes and corporate advisory issues. This year, besides our daily client work, we have been developing this newsletter. Today we are proud to launch our renewed Quarterly both in print and in digital format, featuring legal trends and news from Finland and also introducing our D&I colleagues and members of the D&I Alumni through short Q&A interviews. With the renewed Quarterly, we do not aim to be a thought provider only. We are dedicated to inspire, stimulate discussion and think ahead for your benefit.

In this issue, we discuss a variety of themes including compliance, arbitration, tax and public procurement. We also present an update on the proposed 3D real estate registration system and share some thoughts from D&I Partner Kari Lautjärvi who is actively engaged in pro bono work for President Martti Ahtisaari’s Crisis Management Initiative, one of the world’s leading conflict resolution organisations.

I hope you enjoy the new Quarterly and wish you a very enjoyable summer. While waiting for our next update you can follow us on LinkedIn and Twitter.

Juha-Pekka Mutanen

Juha-Pekka Mutanen

heads the firm’s Finance & Capital Markets practice. Both at his desk and in the ice hockey rink, he is the center player, our creative mastermind focused on the goal.


Industrial Internet Needs Protection and Security

Companies embracing industrial internet don’t always realise that in the new world the data stored in their systems always includes personal data as well. Such information can consist of, for example, a client company’s representative’s contact details, or data identifying your own company’s mechanical engineer.

Information security risks also stem from the fact that industrial internet is always connected with the web. This brings on a whole new set of threats, one which you must also be prepared to face at all times.

At the latest, organisations face the importance of data protection regulations when they start to determine how the responsibilities and ownership of data are divided between them.

It comes as a surprise to many that according to law, companies cannot freely use the data generated by their systems. Personal data identifying individuals cannot be owned in the sense that most people working with system development or business planning suppose.

The contracts a company makes are critical in determining what kinds of rights to data can be achieved. Thus these questions should definitely be taken into account in agreements concerning industrial internet solutions.

In the last years, legislators and public officials have noted the challenges of industrial internet both within the EU and in the US. As a result, the EU Data Protection Regulation is underway, and includes very significant regulation concerning industrial internet.

Two of the most crucial liabilities are the particular obligation to take data protection into account when designing systems (Privacy by Design) and the obligation to build data protection protocols into all information systems (Privacy by Default).

It is advised to connect these obligations closely to the planning of general user experience. Data protection is part of first-rate user experience and usability design.

Above is an excerpt of Jukka Lång’s blog published on May 15 2015.

From left to right: Mikko Eerola, Kai Holkeri, Jukka Lång.

A trio of our partners is writing blogs in Finnish at talouselama.fi, Finland’s largest financial weekly. The blogs cover topical phenomena and current themes relating to data protection, tax and energy.

Please have a look and enjoy our trio’s insights at Talouselämä.


Arbitration Remains the Best Dispute Resolution Mechanism

Mysterious Secret Society

From time to time arbitration is the subject of public discussion. Especially the fact that arbitration is not public, and that disputes are resolved by arbitrators who operate outside of the court system, has a tendency to raise questions. Lately the free trade agreement (TTIP) being negotiated between the EU and the US, and its possible arbitration clause, has caused public debate. Certain quarters have regarded it problematic that sovereign states are bound by arbitral awards and have described arbitration as some sort of a mysterious secret society. Yet, between companies arbitration is and remains the most sensible dispute resolution mechanism.


The aspects that draw public attention are indeed some of the advantages of arbitration. From the perspective of a company, it is our experience that corporate clients usually prefer to have disputes resolved behind closed doors. That way the company has better control over whether and how it does its reporting. At the same time it is more difficult for the counterparty to use publicity as a means to exercise pressure.

Competence of Arbitrators

Another advantage of arbitration is that the parties have the power to choose the persons who resolve the dispute. This ensures that the arbitrators have the exact knowledge and experience that the parties regard as important for just settlement of the dispute.

Efficient Proceedings

When the matter is resolved by arbitrators in whose fairness the parties trust, there should be no need for appeals. Arbitral awards are final and appeal on the merits is not possible. Especially with state courts being jammed and trials extending over several years, wasting resources on lengthy legal proceedings is avoided through arbitration, which has been shaped explicitly to serve the needs of the parties with arbitrators having broad powers to agree on and direct the course and time schedule of the proceedings.

A common argument against arbitration is that it is expensive. This could well be argued to be a misconception, at least in comparison to the alternative, court litigation. In a drafting situation, if faced with the cost argument, a party wishing to incorporate an arbitration clause should point out that usually the cost of the arbitrators can be expected to be balanced out by limiting the process to one instance, instead of two, or possibly three, thus limiting the bigger cost of legal counsel. The clause can also stipulate one or three arbitrators, depending on the monetary interest and complexity of the dispute.

It is often forgotten that besides the need of a legal counsel for an extended period, lengthy court proceedings tie up the company’s own resources for the whole duration of the proceeding. The amount of input required from a company’s internal resources often comes as a surprise, and the time spent on lengthy legal proceedings is naturally time away from more productive activities.

Global Enforceability

In international relationships – especially outside of the EU – enforcement of state court judgements is normally difficult and time-consuming. It usually requires that the matter is retried in all the jurisdictions where a party needs to have it enforced. Regrettably often this results in a situation where a party who has a legitimate claim abandons it after discovering how difficult enforcement would be. An arbitral award on the other hand is directly enforceable in most countries. Also the problem of hometown justice is avoided by arbitration.

It can well be said that an agreement is only as good as its dispute resolution clause. Even if all other terms are carefully negotiated, in the end it is of little help if there are no efficient means of enforcing them.

Tom Ehrström

specialises in dispute resolution and he works primarily with domestic and international arbitration. Tom is an eager butterfly collector, having gathered around 5,000 different butterflies.


Kari Lautjärvi, What Is the Hot Topic in the Finnish Finance Markets?

Partner Kari Lautjärvi co-heads the Corporate Advisory, Compliance & CSR team at Dittmar & Indrenius. In addition to his advisory and finance work, he is an active spokesperson for pro bono activities in the Finnish legal market. He also recently defended his doctoral thesis on Mezzanine Finance Instruments.

Q: Kari, you have taken an active interest in pro bono work, tell us more about that.

My interest for pro bono work woke up in the 1980s when I was studying at Harvard Law School. At that time pro bono work was already an essential part of the activities in American Bar Association and of major law firms in the United States. Later on, when I became the President of the Finnish Bar Association, I advocated the implementation of pro bono activities in the Association and in Finnish law firms.

A great deal of pro bono activities support the maintaining and developing the rule of law.

Pro bono work fits very well in the business of law firms, since one important aspect of legal practice is to maintain and develop the rule of law, and a great deal of pro bono activities support this purpose. A good example is Crisis Management Initiative, one of Dittmar & Indrenius’ key pro bono clients, whose purpose is to prevent and resolve conflicts and support sustainable peace around the world.

Pro bono activities are an essential part of Dittmar & Indrenius ́ corporate culture and an important element in the professional and personal development of our lawyers.

Q: You defended your doctoral thesis on Mezzanine Finance Instruments at the University of Helsinki this spring. Tell us about the theme of your thesis.

The key theme is the corporate management’s responsibilities towards the creditors in context of the Finnish company law. As to the financial instruments themselves, my focus is on their factual nature and content rather than their pure legal form. Albeit typically structured as debt instruments, mezzanine instruments are often more akin to equity by virtue of their characteristics.

The implementation of the IFRS in Finland has emphasised substance-based evaluation in defining the difference between equity and debt in company accounts. However, from the perspectives of the Finnish company, accounting and tax law, the legal character and status of equity and debt instruments may differ or conflict with one another. Mezzanine finance instruments are a form of hybrid capital. Companies issue mezzanine instruments primarily for the purposes of achieving tax benefits, improving the company ́s solvency and credit ratios as well as facilitating the company ́s capital funding or decreasing capital expenditure. Mezzanine instruments may contribute to the improvement of risk management for companies and their investors as well as increased profits for the investors. They also provide an alternative financing method for companies, their shareholders and other investors by mitigating their conflicting interests.

In my thesis I analyse various types of mezzanine instruments and the structure of the applicable Finnish legal rules. The thesis is published as a book “Välipääomarahoitusinstrumentit” by Talentum.

Q: What are the current hot topics in the Finnish finance markets?

It is a general development in the financial markets in Finland that corporate bonds, mezzanine instruments and other market-based financial instruments are replacing traditional bank financing. A good example of this is the recent acquisition of the Finnish forestry company Kotkamills from OpenGate Capital where we advised the acquirer, MB Funds.

An interesting element of the acquisition was the combination of equity, mezzanine and high-yield bond financing into a single financing package. Although the use of high yield bonds governed by Finnish law as an alternative to bank financing has been relatively rare, case Kotkamills showed that diversity of funding sources and flexibility in creating financing solutions will lead to more efficient outcomes and can bring substantial benefits in capital structure optimising.

Coming up

D&I Seminar on 16 September 2015

Partners Kari Lautjärvi and Kai Holkeri will join forces to discuss combined equity and debt instruments in modern finance and whether they present a chance or a challenge to the management.

Save-the-date and enroll in advance!

Kari Lautjärvi

co-heads the Corporate Advisory and CSR practice at Dittmar & Indrenius. Kari has a passion for Southern France and is dedicated to learn fluent French.


New in Compliance - Focus on Energy Efficiency and Corporate Social Responsibility

New compliance-related obligations will be introduced to large corporations in the near future. The EU is facing growing challenges regarding limited energy resources and climate change. Emphasis is also on corporate social responsibility. Identifying sustainability risks and increasing investor and consumer trust is vital.

Energy Consumption – Making it More Efficient

The Finnish Act on Energy Efficiency (implementing the Directive on Energy Efficiency 2012/27/EU) came into force on 1 January 2015.

A new obligation is introduced to large corporations: an energy audit must be carried out every four years, the first one by 5 December 2015. The obligation concerns corporations with a minimum of 250 employees or turnover exceeding EUR 50 million and balance sheet total exceeding EUR 43 million.

Energy audit to be carried out every four years.

The energy audit aims to determine the total energy consumption of the company and performing target audits for buildings and industrial plants for more detailed information on the targets’ energy consumption.

The purpose of the audit is to reduce energy consumption, increase efficiency and diminish environmental emission. The target audits are aimed to help companies find more efficient energy solutions for buildings and facilities.

More Transparency in Corporate Social Responsibility

Another novelty for companies is brought by the Directive on Disclosure of Non-Financial and Diversity Information by Certain Large Undertakings and Groups (2014/95/EU, the “Directive”), which is an amendment to the Accounting Directive (2013/34/EU).

This applies to public-interest corporations employing over 500 employees and having a turnover exceeding EUR 40 million or balance sheet exceeding EUR 20 million.

Social responsibility policies need to be disclosed in annual reports.

Said companies or group parents must disclose a non-financial statement in their annual report on social responsibility issues such as environmental, social, employee, human rights, anti-corruption and bribery matters. If such policies are not pursued by the company,“comply or explain” principle is applied.

There is also a new obligation for companies that issue publicly traded instruments and employ over 250 persons (and fulfil the turnover/balance sheet requirement). A description of the company’s diversity policy must be included in the corporate governance statement regarding e.g. age, gender, educational and professional backgrounds of the company’s administration and management. “Comply or explain” is applied here also.

Corporate governance statement must include description of diversity policy.

The Directive must be implemented in Finland by October 2016. Thus, the disclosure obligations would be applied at the earliest for the financial period of 2017.

Key Insights

The EU sets new obligations for large corporations in order to better face the challenges of the economic crisis, limited energy resources and climate change

  • With the help of new energy audits, companies may find more efficient energy solutions and help diminish pollution
  • From 2017 on large companies need to disclose detailed information on social responsibility and diversity issues

Eeva Airamaa

specialices in competition and public procurement. In her free time, Eeva dreams about singing a duet with Pharrell Williams.


Catching Up With D&I Alumna Kati Levoranta of Rovio

Before joining Rovio Entertainment Ltd. as their Chief Legal Officer in 2012, Kati has worked in-house at Valio, Pöyry, Nokia and Nokia Siemens Networks. However, she started her legal career at Dittmar & Indrenius in 1996 after being trained at the bench at Tampere District Court and graduating from the University of Turku in 1995.

Q: What made you first want to go in-house?

I didn’t have any prefixed long-term plans regarding my career. The only thing I was sure of was that I definitely wanted to do post-graduate studies abroad. After my LL.M year at Columbia Law School, I joined Valio as their legal counsel.

The first thing that inspired me in being an in-house lawyer was the close co-operation with business people, the feeling of ownership of projects - the satisfaction of achieving business goals, together as a team. The other thing I loved was melting into the heterogeneous group of professionals with varying backgrounds. It’s very different from working with attorneys only, I can tell you! The third thing I enjoyed from the very beginning was the speed at which things have to be done in order to keep the wheels turning. As an in-house lawyer you do your best mitigating risks and then you just go ahead. That suits me very well.

The six years at Valio were an amazing learning experience. The time was formative in a sense that I learned to appreciate some of my personality traits as character assets in the business world, which was an important eye-opener from career perspective.

Q: What’s the best thing about working at Rovio?

For me, that every day is different. There is no such thing as a typical day at Rovio. Instead of routines, there’s always a sense of inspiration and excitement behind the corner. One day we may be negotiating with Hollywood stars and the next day we’re hosting high level governmental officials from the Republic of China in our offices in Espoo. There’s an immense spectrum of things that can land on my desk and I love it. And it doesn’t hurt that I’m a huge fan of our products!

There’s always a sense of inspiration and excitement behind the corner.

Q: What legal issues or challenges have you got coming up on the horizon?

Regulatory issues in the gaming industry are constantly on our radar. We constantly need to be thinking ahead and to predict the direction of the industry regulation in order to be able to turn the tables, if necessary, and prevent any slowing of our own business.

Q: In your free time, what are you reading at the moment?

I have just been reading a truly fantastic book “Anatomy of winning” (Voittamisen Anatomia) by the famous sports surgeon Dr. Aki Hintsa, best known for his work with Olympic athletes and Formula 1 pilots. According to Hintsa’s philosophy, one needs a foundation of holistic wellbeing for being able to deliver optimal performance. Hintsa’s book strongly resonates with my own beliefs that are based on my personal experience. As a former tennis player, different kinds of sports have always been the most natural way of supporting my wellness and, subsequently, my ability to give my very best professionally.

Last year, I started training triathlon. I’m going to my first triathlon competitions in Finland this summer and to Mallorca in early fall. While training, there have been moments when I’ve felt completely beaten physically but, at the same time, mentally crystal-clear and joyful, almost invinsible. I recommend reading Hintsa’s book and acting accordingly. Maintaining good physical condition through doing sports regularly and resting well helps dealing with stress and gives boost when it’s needed.


Public Procurement Reform Takes a Leap Forward

A report on the reform of public procurement legislation was published in mid-May. It is set out to improve the use of public funds, implement EU directives and codify important case law principles. Clarification of key terms and simplification of procedures are tools chosen to reduce disputes. Final government bill is expected before the end of the year.


The value of procurements conducted under public procurement legislation in 2013 was around 13.5 billion euros. This involved around 15,000 procedures and countless hours for preparing tenders and evaluating them. Success in public tender procedures can be vital for companies. The stakes at play explain the public controversy over expectations for the reform.

Diverse Ways to Increase Procedural Flexibility

Procurement entities, in particular, have called for less rigid procedures. The report attempts to respond to that call by suggesting the following:

  • New procedures (innovation partnerships and electronic catalogues) and broader use of the negotiation procedure
  • Increased use of electronic means of communication
  • Support for innovation or social and environmental aspects as comparison criteria
  • Possibilities to clarify or supplement tenders in case of minor inconsistencies or formal errors
  • Less documentation relating to tenderer’s suitability - documents checked at least on the winning tenderer.

National Procurements

The reform would cover procurements below EU thresholds. National threshold for procurement of goods would be doubled, and national procedural rules would be reduced to a minimum. Municipalities have applauded these changes. Federation of Finnish Enterprises, on the other hand, has claimed that the suggested threshold (EUR 60,000) is too high for smaller companies. It can be problematic also in small specialised markets regardless of company size.

Public Contracts Awarded In-house

Contracts awarded to entities which are formally independent of the contracting authority but in practice controlled by it are not subject to procurement rules. This concerns typically limited liability companies owned by municipalities. The directive would allow 20% of the sales of such entity to be made outside the controlling parties. This has raised competition neutrality concerns. The report therefore suggests that only limited outside activities would be allowed for entities with in-house status.

New Rules for Procurement Contract Changes

Rules to contract change situations currently lacking from the legislation would be included. Market Court would have competence to review related complaints.

Coming up

D&I Breakfast seminar on 15 September 2015

Hanna Laurila and Eeva Airamaa will join forces to provide you with the highlights of the reform at a breakfast seminar.

Save-the-date and enroll in advance!

Hanna Laurila

heads the firm’s Competition and Public Procurement practice. She is a member of a poetry recitation group and is specialised in reciting Finnish dialect poet Heli Laaksonen’s poetry in Laitila dialect.


Recent Dividend Withholding Tax Developments for Foreign Investors

Foreign investors are encouraged to verify their structure and position in relation to protective claims.

The withholding tax treatment of dividends paid to foreign investors is under constant development. A Maltese SICAV was not granted a withholding tax exemption in a recent advance ruling by the Central Tax Board.

The Central Tax Board rendered on 30 April 2015 an advance ruling regarding the withholding tax treatment of dividends paid to a Maltese investment fund (ruling 13/2015).

The case related to a Maltese SICAV, which contemplated an investment into the shares of publicly listed Finnish companies. The Maltese SICAV had the legal form of a corporation with a variable capital. Unlike Finnish investment funds, the Maltese SICAV had a legal personality.

The Maltese SICAV had a number of sub-funds represented by various different classes of shares. The Maltese SICAV was not publicly listed and it was not covered by the UCITS IV Directive (2009/65/ EC).

Dividends paid by a publicly listed Finnish company to a Maltese investor can be subject to withholding tax in Finland under domestic rules, if the Maltese investor is deemed comparable to a Finnish private limited liability company, and not e.g. to a Finnish investment fund.

The Central Tax Board stated in its ruling that

  1. the Maltese SICAV was closest comparable to a Finnish private limited liability company engaged in investment activities,
  2. the levy of a dividend withholding tax was not deemed an infringement of the principle of the free movement of capital under Article 63 of the Treaty on the Functioning of the European Union (“TFEU”), as in a comparable domestic situation, the dividend would have been fully taxable for a domestic investor.

The advance ruling has been appealed and it is not legally binding. It may be argued that the conclusions of the Central Tax Board may not be fully consistent with the principles adopted by the European Court of Justice in its case law, e.g. Aberdeen Property Fininvest Alpha Oy case (C 303/07).

Following the adoptation of dividend taxation principles that meet the fundamental freedoms under the TFEU, Finnish companies have been attractive targets for foreign funds, and Finland has also been a suitable platform for investing into certain funds in other EU countries. In many cases, Finland has been cautious in not infringing the principle of free movement of capital and, accordingly, provided withholding tax exemptions on dividends paid to foreign investment funds, including also third country funds (see e.g. our earlier Tax Alert). On the other hand, dividends received from e.g. Luxembourg SICAV funds have qualified under the Finnish participation exemption on dividend income.

The advance ruling demonstrates

  • the importance of the comparability analysis in relation to also EU domiciled funds and
  • the fact that the Finnish entity classification rules are not well developed.

Foreign and domestic investment funds are encouraged to analyse their current and past dividend taxation positions and consider filing protective claims.

Kai Holkeri

leads the Tax & Structuring practice at Dittmar & Indrenius. When off-duty, Kai seeks meditation through endurance activities.


Finnish Real Properties Becoming 3D in 2017?

A recent report by the National Land Survey of Finland suggests that as of 2017 building volumes below and above the land surface could be registered as independent real property units. The traditional two-dimensional real estate system would still cover the whole country, but the contemplated change would introduce new possibilities for property owners and developers especially in city centres.

A Building May Be Divided into Different Units

The prerequisites for registering a 3D real property unit would be an express permission in the applicable local detailed plan (in Finnish: “asemakaava”) and a binding plot division in which the exact boundaries of 3D units would be determined. A building may be divided into different real property units in accordance with the purposes of use described in the plan. Individual flats or premises would however not be individually registrable.

Even today there are certain possibilities in Finland to divide the possession of a real property unit in vertical direction. It is typical that the land area and the building situated thereon are owned by a special real estate company or a housing company where an individual share entitles the share owner to posses certain flat or premises in the building.

Agreements for Division of Possession Not Sufficient for Investors

It is also possible for joint owners of real estate to sign an agreement in which the possession of the land and the building situated thereon is divided. Such agreement can also be registered in the land register. However, the register entries do not contain detailed information on the division or the boundaries. This may be problematic especially for the banks and investors as well as the joint owners themselves. From their point of view, it would be preferable to have the ownership of the vertically divided real property unit registered in a similar manner as the current 2D units. Also the fact that constructions above or below ground are usually relatively expensive emphasises the need of a reform of the Finnish real estate system. 3D real property units would be independently mortgageable in the same way as traditional real estate.

Change of Mind-set Required

The new rules would be in accordance with the existing principles of real property law to the broadest extent possible. One of the biggest challenges will be to change the mind-set of real estate lawyers and experts who are accustomed with the traditional system. It will be interesting to see when and where the first 3D real property units will be registered.

Key Insights

  • Buildings may be divided into independent real property units.
  • New 3D units are in the interest of banks and investors.
  • Existing principles of real property law remain in force, but a change of mind-set is required.

Teemu Oksanen

is specialised in environmental law, real estate and energy related matters. Teemu enjoys spending his free time on telemark skis, but as the predicted snow cover for summer 2015 is relatively thin, he has decided to spend his summer vacation surfing in Iceland.


D&I ranked 16th - the highest of Nordic law firms - in TOP 20 global legal advisers league table of Mergermarket report on global M&A activity (May 2015).


D&I advised Dasos Timberland Fund II in its acquisition of a majority stake in Finsilva Plc, one of the largest independent forest owners in Northern Europe holding 130,000 hectares of forests, from Metsäliitto and Taaleritehdas Metsärahasto.


D&I advised Alcatel-Lucent in its combination with Nokia with the deal value of 15,6 billion. It was the largest transaction ever involving a Finnish company.


years of thinking ahead.