Finnish Prime Minister, Sanna Marin, has called for a "better overall balance between loans and grants" in the EU's EUR 750 bn EU recovery fund aimed at softening the effects of a COVID-19 induced economic slump.

The Finnish government declared a state of emergency on 16 March 2020 as a result of COVID-19, triggering the Emergency Powers Act. The declaration was withdrawn on 15 June 2020 and many restrictions lifted. However, the lockdown measures taken, which restricted movement and business activity, have had a serious impact on economic growth. According to the forecast of the Bank of Finland, the government deficit relative to GDP will deepen to 8 per cent and public debt will rise to 71 per cent of GDP in 2020. Overall, Finland’s GDP is estimated to shrink at least by 6-8 per cent this year, with biggest drop expected in the second quarter. 

In response to the economic slowdown and difficulties in business activity, the government has provided financial assistance to the corporate sector by way of the fourth supplementary budget proposal for 2020. The proposal includes an appropriation of EUR 300 m for business cost support. The support measures aim to help companies cope with the pandemic, preserve jobs and prevent longer-term disadvantages. The government has also proposed temporary tax reliefs for interest on late payments

Temporary insolvency procedures have also been put in place by Finland's parliament. At the end of April, Parliament passed a law restricting the bankruptcy of a debtor at the creditor's request. Under the law, which will be in force until 31 October 2020, a debtor would not be presumed insolvent on the grounds that the creditor's clear and overdue receivable has not been paid within one week of the creditor's demand for payment.

Despite the government initiatives to support the Finnish economy, there are no signs of rapid economic recovery. It is estimated that in the years ahead the total volume of output will be below pre-crisis levels. For the years 2021–2022, the growth forecast is around 3 per cent per annum, the lower end of that forecast for other European Union members.


The Finnish legal system is a continental civil law system consisting mostly of statutory law promulgated by the Parliament of Finland. The main sources of domestic legislation are Parliamentary Acts, decrees and orders issued by government or ministries. The constitution of Finland has supreme authority and sets the most important procedures for enacting and applying legislation. As a member state of the European Union, EU law is in force in Finland and generally takes precedence over national legislation.

The Finnish court system is divided into two main branches; general courts and administrative courts. The general courts deal with civil and criminal cases while the administrative courts mostly review and regulate the decisions of the authorities. The Supreme Court and the Supreme Administrative Court exercise the highest judicial power within the hierarchy of courts. There are also specialised courts, such as the Market Court, the Insurance Court and the Labour Court, which are provided for in separate statutes.


We appreciate the assistance of Sakari Lukinmaa, Pauliina Heikkonen and Juhana Hyytinen at Castrén & Snellman Attorneys Ltd with the following discussion on Finnish law, regulation and practice.


  • Banking licence not usually required for lending activities.
  • Transfer (siirto) of rights and obligations preferred method of transfer under Finnish law.
  • No borrower consent requirements but borrower should be notified for transfer to be effective against third parties.
  • Trust structures not recognised but Finnish law does recognise the powers of a security agent.
  • Withholding tax on interest or principal payments to domestic or foreign corporate lenders not imposed.
  • Generally, no statutory formality requirements under Finnish law.


A foreign entity acquiring Finnish debt is not usually required to obtain a banking licence under Finnish law as such activity is not ordinarily regarded to fall within Finnish banking licence requirements.

The statutory basis for banking regulation in Finland is set out in the Finnish Act on Credit Institutions (610/2014) ("ACI"). Banking activities in Finland are regulated by the Finnish Financial Supervisory Authority ("FFSA") which supervises companies, banks and other credit institutions involved in certain banking and financing business in Finland. Such entities are required to obtain a licence from the European Central Bank (via the FFSA) where their business activity is:

  1. to acquire deposits and other re-payable funds from the public; and
  2. to grant credit or other finance on its own account.

Generally, it does not make a difference in terms of banking licence requirements whether the incoming lender is acquiring a term loan or a revolving credit facility.


The preferred method of transfer under Finnish law is by transfer (siirto), whereby the rights and obligations of the existing lender under the agreement i.e. the whole contractual position is transferred to the new lender. In principle, there is nothing to prevent the assignment of only the rights of the existing lender under the agreement to a new lender. However, in practice, this method is rarely used and there are uncertainties in relation to the assignability of other rights than monetary rights.

Transfer by novation is generally not a recognised concept in Finland and participation agreements are only rarely used, though not unknown. 

There are no Borrower consent requirements under Finnish law unless specifically stated in the relevant Credit Agreement. However, the Borrower and any counterparty should be notified of the transfer to the new lender to avoid a situation where the Borrower can make effective payments to the previous lender. Such notification to the Borrower is also a requirement in order for the transfer to be effective against third parties e.g. creditors, subsequent transferees and/or bankruptcy estate of the transferor.


Finnish law does not recognise trust structures and therefore there is no concept of a security trustee.

Finland is not a party to The Hague Convention of 1 July 1985 on the law applicable to trusts. As such, where a security trustee has been appointed under foreign law, there may be situations where any contractual provision providing for the creation of a trust under the credit agreement may not be enforceable in Finland. In particular, property purported to be held on trust in Finland may form part of the security trustee's assets in bankruptcy proceedings and the beneficiaries of the trust may be treated as unsecured creditors in relation to their rights over the trust property.

Finnish law recognises the powers of a security agent to represent all of the secured parties in respect of their security interests. It also recognises the powers of a facility agent to represent the finance parties in syndicated loan transactions. In addition, there is nothing to prevent several lenders from holding joint security in Finland.

There is strong support of the argument that in the event of insolvency of the security agent, the security interests and potential enforcement proceeds should be severed in favour of the underlying creditors, as the true beneficiaries of the security. Accordingly, there is minimal risk of security interests forming part of the insolvent estate of a security agent.


Finland does not impose withholding tax on interest or principal payments to domestic or foreign corporate lenders.

However, transfer tax is levied at 4 per cent of the sale price or other consideration in relation to the purchase of real estate assets located in Finland. Transfer tax is also levied in relation to the sale of shares at 2 per cent of the sale price in respect of shares in a real estate company and 1.6 per cent in respect of shares in other companies. Unless otherwise agreed, the purchaser is liable to pay the tax.

Save for nominal application and registration fees payable on registration of a new mortgage holder as pledgee in relation to security documents, there is no stamp, registration or similar tax payable in respect of the transfer of a loan.

In general, there is no tax imposed on non-residents on transfer, repayment or enforcement of a debt in Finland.

Finland has an extensive tax treaty network with most treaties following the Organisation for Economic Co-operation and Development model treaty. It has approximately 70 tax treaties with foreign jurisdictions which generally provide relief from double taxation on all types of income. Finland is also a signatory to the Nordic Income and Capital Tax Treaty alongside Denmark, Sweden, Iceland and Norway.

No exit tax is levied when a foreign buyer acquires debt in a Finnish borrower from a Finnish lender. However, all transactions between affiliated parties should be conducted on an arm's length basis.


There are no statutory requirements in place under Finnish law for an effective transfer of debt between parties. A transfer of a loan is perfected and made valid and enforceable against third parties by way of notification to the borrower under the loan that is being transferred.

Where there is a guarantee in place, the guarantee will transfer with the loan unless the terms of the guarantee prohibit the transfer. No notice to the guarantor is required in order for the transfer to be effective unless specifically required by the terms of the guarantee. However, for clarity, the guarantor is customarily notified of the transfer of the loan.

Finnish law loan and security documentation is customarily transferred to the possession of the new lender (including all mortgage certificates and share certificates) in connection with the transfer. Post-settlement, it is typical that the relevant third-parties are notified of the transfer. It is also customary to note the validity and continuity of the security in the transfer agreement.


FINNAIR OYJ ("Finnair")

Finland's national carrier and largest airline, Finnair, has begun to re-open its lucrative China passenger routes after obtaining permission from Chinese authorities to resume operations on a small scale. Finnair has been operating a service between Helsinki and Shanghai once a week since 23 July 2020, using its Airbus A350. During the COVID-19 crisis, Finnair was forced to cut its flight schedule by more than 90 per cent, retaining only a skeleton route map.  The airline plans to slowly increase the number of flights it offers and is presently operating between 80 and 90 services per day.

Finnair's Q1 2020 results revealed that COVID-19 had had a visible impact on almost all key performance indicators. In particular, passenger revenue fell by 17.4 per cent, with EBIDTA significantly decreasing to EUR -8.6 m from EUR 60 m in Q1 2019.

However, the impact of COVID-19 on Finnair was somewhat mitigated by its strong liquidity position.  It has a drawn EUR 175 m revolving credit facility, which had a positive impact on cash reserves, as well as a EUR 200 m short-term commercial paper program, which was unused at the end of March. The airline also has the benefit of a EUR 600 m statutory pension premium loan which can be raised if necessary and guaranteed by the State of Finland.

AMER SPORTS OY ("Amer Sports")

Amer Sports Oy is a Finnish sporting goods company which develops and manufactures sports and fitness equipment worldwide. Its brands include Salomon, Arc’teryx, Peak Performance, Atomic, Suunto, Wilson and Precor. The COVID-19 outbreak has had a detrimental impact on the company’s business in 2020, particularly as its products are linked to traveling and sports activities which were restricted due to social distancing measures and over 80 per cent of its products are distributed via offline channels which were subject to temporarily closures.

The consequent deterioration in 2020 earnings led to Moody's, on 31 March 2020, downgrading Amer Sports Holding 1 Oy's corporate family rating to B3 from B1. It concurrently downgraded the company’s probability of default rating to B3-PD from B1-PD and to B3 from B1 the ratings on the EUR 1.7 bn term loan B and the EUR 315 m revolving credit facility ("RCF"), both borrowed by Amer Sports’ subsidiary Amer Sports Holding Oy. The outlook was changed to negative from stable for both entities.

The deterioration in earnings also creates imminent risks for the company’s liquidity. Although, Amer Sports, had EUR 306 m of cash and EUR 119 m available under the RCF as of 31 December 2019, it had a EUR 167 m legacy bank loan repayment due in the first half of 2020 and part of its consolidated cash may not be immediately available as it is held in emerging markets. Moody's expects that this, coupled with Amer's Sports' typically negative EBITDA and operating cash flow in Q2  and large capital outflows in Q3, both due to seasonality, will require the company to fully draw down its RCF and will significantly erode its cash cushion. It is also expected that Amer Sports will breach its 8x springing covenant under the RCF as its leverage exceeds this threshold.

SAMPO OYJ ("Sampo")

Finnish company, Sampo, which provides insurance products through its subsidiaries, announced a Q1 pre-tax profit of EUR 162 m compared with EUR 475 m in Q1 2019. Nonetheless, it expects to report good insurance technical results for 2020, though investment results are more uncertain than usual given the climate.

On 17 July 2020, Moody's affirmed Sampo's parent company, Sampo plc's, A3 senior unsecured debt rating as well as its Baa1 rating on its subordinated notes. The ratings affirmation reflects Sampo Group's robust profitability, benefitting from strong profit contributions from its insurance subsidiaries and also from its 19.9 per cent stake in Nordea Bank Abp, the region's largest bank. The Group also has strong capitalisation, although this is partly offset by the Group's high investment leverage with potential to result in volatile earnings and its sensitivity to market movements, including interest rates.

However, negative pressure on the ratings could arise from (i) a weakening of the market position of Sampo plc's  insurance subsidiaries, reflected in sustained loss of market share; (ii) reduced capital adequacy; (iii) a deterioration in profitability; (iv) Sampo plc's consolidated adjusted financial leverage consistently rising above 35 per cent. In relation to the Sampo plc's senior debt rating, negative rating pressure could also arise from a significant reduction in available liquidity.

CODERE SA ("Codere")

Spain-based gaming company Codere released a statement on 24 July 2020 confirming that it had entered into a revised lock-up agreement with certain existing noteholders to replace the lock-up agreement previously entered into on 13 July 2020. Codere creditors holding a combined 79.8 per cent of the company’s EUR 500 million 6.75 per cent 2021 note and USD 300 million 7.625 per cent bonds have signed the revised lock-up agreement in support of the company's debt restructuring proposal.

Codere reported on 28 May 2020 that its operating revenue had fallen by 21.3 per cent to EUR 278.5 m in Q1 2020, whilst COVID-19 related shutdown and exchange rate fluctuations contributed to losses of EUR 97.1 m. The company shored up its financial position on 14 July 2020 through EUR 250 m new super senior 2021 notes to be issued by Codere Finance 2 (Luxembourg) S.A. However, S&P Global has said that this refinancing is “tantamount to a selective default”.

On 23 July 2020 Fitch Ratings assigned Codere an issuer default rating of CCC and a debt instrument rating of CCC in relation to its proposed EUR 250 m super senior notes . Fitch also assigned Codere's to-be-amended existing notes of EUR 500 million and a USD 300 m a debt instrument rating of CCC. The ratings reflect Codere's high leverage and low liquidity through to 2021, which could pressure its ratings over the next 12 to 18 months.


Please contact Iden Asl, Lucy Hartland or Reena Patel with any queries regarding this month's Trade Alert.