Finland has a strong mineral cluster, which in addition to mining of minerals also has a high capacity for concentration and further processing. In addition, Finland is a producer of high-quality mining technology.
According to the 2019 sector report on the mining industry published by the Ministry of Employment and the Economy, in 2018 a total of 32.5 million tonnes of ore was extracted in Finland’s 11 metallic mineral mines (eg, gold, chrome, copper, nickel, zinc, cobalt and silver), and 16.5 million tonnes of industrial mineral ores in the 35 industrial mineral mines (eg, calcite, dolomite, apatite, talc and quartz).
The legal system in Finland is based on civil law, and mining operations are regulated at a national and EU-law level. Exploration and mining operations are regulated by the Mining Act (No 621/2011, kaivoslaki), which regulates exploration and mining and the organising of the use of areas required for mining and exploration. The Mining Act lays down provisions for the exploration and exploitation of a deposit containing mining minerals, for gold-panning in an area owned by the State and for the termination of related operations, as well as the proceedings for the establishment of a mining area.
The regulations of the Mining Act are supplemented by the Government Decree on Mining Activities (No 391/2012, valtioneuvoston asetus kaivostoiminnasta), the Decree of the Ministry of Employment and the Economy on Mine Hoists (No 1455/2011, Työ- ja elinkeinoministeriön asetus kaivosten nostolaitoksista), the Government Decree on Mining Safety (No 1571/2011, Valtioneuvoston asetus kaivosturvallisuudesta) and the Government Decree on Extractive Waste (No 190/2013, valtioneuvoston asetus kaivannaisjätteistä).
In Finland, the privilege to exploit a deposit belongs to the finder of the deposit but the state controls and supervises the mining operations through the granting and supervision of the exploration permits, gold-panning permits and mining permits under the Mining Act and Government Decree on Mining Activities.
The party first applying for a permit in accordance with the provisions laid down in the Mining Act shall have priority for a permit. If a mining permit is applied for with respect to a deposit located within an area covered by a valid exploration permit, the exploration permit-holder shall have priority for the mining permit if it submits a mining-permit application as set out in the Mining Act during the validity of the exploration permit. For the purpose of preparing an exploration-permit application, an applicant may reserve an area by submitting notification to the mining authority about the matter (reservation notification). A reservation only provides priority for an exploration permit, no other rights.
The landowner is entitled to an exploration fee with respect to exploration permits and excavation fees, and by-product fees with respect to mining permits.
The exploration permit-holder must pay an annual compensation to the owners of land included in the exploration area, which is 20 euros per hectare for each of the first four years, 30 euros per hectare per year for the fifth, sixth, and seventh year; 40 euros per hectare per year for the eighth, ninth, and tenth year; and 50 euros per hectare per year for the eleventh and for further years of validity of the exploration permit, up to the maximum validity of fifteen years.
A mining permit-holder must pay an annual excavation fee owners of land included in the mining area. The excavation fee consists of fixed annual amount of EUR50 per hectare and a variable fee which is based on the value of the executed and exploited minerals. If the permit authority has postponed the expiry of the mining permit prior to mining having started, or if mining operations have been interrupted for more than five years, the fixed excavation fee is EUR100 per hectare until mining activities are commenced or resumed. The variable excavation fee is 0.15% of the calculated value of mining minerals included in the metal ores that are excavated and exploited in the course of a year or, if mining mineral other than metallic mineral is in question, taking into consideration the grounds influencing the financial value of the mining mineral, a reasonable compensation for excavated and exploited mining mineral in accordance with either an agreement between the property owner and the holder of a mining permit, or confirmation by the mining authority.
The mining authority confirms the amount of the excavation fee annually by its decision based on information that is to be submitted by the holder of the mining permit the for that purpose by 15 March each year.
In addition, the mining permit-holder must pay annual property-specific compensation (by-product fee) to each landowner in the mining area for the benefit gained from by-products of mining activities that are used for purposes other than mining activity. The by-product fee shall be moderate, considering the factors influencing the financial value of the by-product. If the mining permit-holder and landowner do not agree on the compensation, it shall be a maximum of 10% of the sales proceeds gained from the by-product. If an agreement is not made on the by-product, it shall be ordered officially in a proceedings establishing a mining area, conducted upon application by the party claiming compensation, the party concerned responsible for prospecting work, or the permit holder.
The state has a grantor-regulator role in Finland. The Parliament enacts the laws. The state controls and supervises the mining operations through the granting and supervision of the exploration permits, gold-panning permits and mining permits by the relevant state authorities. The Ministry of Employment and the Economy is responsible for the general guidance, monitoring, and development of exploration and mining activities under the Mining Act.
The Finnish Safety and Chemicals Agency (TUKES) acts as the general mining authority responsible for granting of exploration, gold-panning and mining permits and enforcement of compliance with the Mining Act. The government, however, decides on matters concerning a redemption permit for a mining area and on mining permits related to the production of uranium or thorium.
Otherwise, there is no mandatory national or government joint venture, contracting or participation in relation to exploration or mining operations in Finland. If an exploration or mining project is located on state-owned properties, the state as a landowner is represented by Metsähallitus, the state-owned enterprise that administrates the state-owned land and water areas.
Mineral rights are transferrable permits granted by state authorities based on the Mining Act for exploration or utilisation of mining minerals which have a property value and can be pledged as a security.
Prospecting work: based on the Mining Act, everyone has the right to conduct geological measurements and make observations and to take minor samples in order to find mining minerals, even on another’s land, provided that the activities do not cause damage or more than minor inconvenience or disturbance (prospecting work). The right to carry out prospecting work can be compared to a so-called everyman’s right, ie, the general public’s right which allows the freedom to roam the countryside. Sampling is considered to be allowed as prospecting work if it is carried out, eg, with a hand-held hammer, shovel or hand-held drill, provided that the sampling does not cause damage or more than minor inconvenience or disturbance, and the sampling site is restored.
Prospecting work may not be carried out on certain restricted areas such as a public cemetery, traffic routes or passages in public use, area used by the defence forces or controlled by Border Guard, as well as areas within 150 metres of buildings intended for residential or work use or comparable space and within 50 metres of a public building or utility, a power line with voltage of over 35,000 volts or a transformer station. In addition, other areas corresponding to the above list that are designated for special use are restricted areas.
Exploration permit: an exploration permit is needed if the exploration causes damage or more than minor inconvenience or disturbance, and the landowner has not given permission for exploration. An exploration permit is also required if the activity poses any risk to people’s health, general safety or other industrial and commercial activity, as well as any deterioration of values concerning the landscape or nature conservation. Exploration targeted at uranium or thorium always requires an exploration permit.
An exploration permit allows the holder to explore the permitted area and the structures and composition of geological formations, and to conduct other exploration in order to prepare for mining activity and other ore-prospecting in order to locate a deposit and investigate its quality, extent and degree of exploitation. It does not authorise exploitation of the deposit and, subject to the activities allowed based on the exploration permit, does not limit the property-owner’s right to use the area or to dispose of it.
The exploration permit-holder shall limit exploration and other use of the exploration area to measures necessary for the purposes of exploration activity which shall be planned so as not to cause an infringement of public or private interests that is avoidable by reasonable means. Exploration pursuant to an exploration permit, and other use of the exploration area, may not cause harm to people’s health or a danger to public safety; essential damage to other industrial and commercial activity; significant changes in natural conditions; essential damage to rare or valuable natural occurrences; or significant damage to the landscape.
Mining permit: establishment of a mine and the undertaking of mining activity requires a mining permit. A mining permit entitles the holder to exploit the mining minerals found in the mining area; the organic and inorganic surface materials, excess rock, and tailings generated as a by-product of mining activities (by-product of mining activity); and other materials belonging to the bedrock and soil of the mining area, insofar as the use thereof is necessary for the purposes of mining operations in the mining area. Moreover, the mining permit entitles its holder to perform exploration within the mining area within the limits set out for exploration under the Mining Act (as set out above), and possible more detailed conditions specified in the mining permit.
A mining permit alone does not automatically provide the permit-holder with the right to use the mining area or auxiliary area. If the applicant for the mining permit does not own the land for which the mining permit is applied or has not secured the right to use the area otherwise contractually, the right to utilise and use an area in the possession of another party as a mining area requires a permit from the government (redemption permit for a mining area). A redemption permit for a mining area may be granted if the mining project is based on public need and the mining area meets the requirements laid down in the Mining Act. The requirement of public need shall be assessed particularly on the basis of the impact of the mining project on the local and regional economy and employment, and the social need for raw material supply.
In addition to the redemption permit for a mining area, unless otherwise provided by law, a limited right of use and other rights may be granted in the mining permit to an auxiliary area to a mine that is not owned by the mining permit holder, provided that the auxiliary area is an area that is indispensable as regards mining activity, is located in the vicinity of the mining area and is necessary for the purposes of road access, transport equipment, power lines or water pipes, sewers, treatment of waters, or a transport route to be excavated to a sufficient distance from the surface. Such a right can be granted only insofar as the placement of functions planned for the area cannot be otherwise arranged in a satisfactory manner, and at moderate cost.
Exploration and exploitation of gold deposits through panning in an area owned by the Finnish State requires a gold panning permit from the mining authority. The holder of a gold-panning permit has the exclusive right within the gold panning area specified in the permit to prospect for and survey gold deposited in the soil, to recover and exploit gold deposited in the soil by means of panning and to recover and exploit nuggets of platinum and gem-stones and precious stones found in loose soil as by-products of panning, as provided in the gold-panning permit in more detail. Subject to the activities allowed based on the gold-panning permit, the gold-panning permit does not limit the property owner’s right to use the area or to govern it.
The Finnish Safety and Chemicals Agency (Tukes) is the national authority that grants exploration, gold-panning and mining permits under the Mining Act, and supervises and enforces compliance with the Mining Act. However, mining permit matters relating to the production of uranium or thorium under the Mining Act and Nuclear Energy Act redemption permit for a mining area are handled and granted by the government.
Within certain limits (see 1.5 Nature of Mineral Rights) exploration can also be carried out on a contractual basis with the landowner’s permission.
An exploration permit shall remain valid for a maximum of four years after the decision has become legally valid, with the possibility to be extended for a maximum of three years at a time. In total, the permit may remain valid for a maximum of 15 years. The prerequisites for extension of the validity of an exploration permit are that exploration has been effective and systematic and further research is necessary in order to establish the possibilities for exploiting the deposit. Further, it is required that the permit-holder has complied with the obligations laid down in the Mining Act as well as the permit regulations and that the extension to the validity will not cause an undue burden to public or private interests.
A gold-panning permit shall remain valid for a maximum of four years after the decision becomes legally effective. The validity of a gold-panning permit may be extended for a maximum of three years at a time. The prerequisites for extending the validity of a gold-panning permit are that gold panning has been effective and systematic and the gold panning area still contains such an abundance of gold to be washed from the soil in such a form that the prerequisites for continuing gold panning are evident. Further requirements are the same as set out above for continuance of an exploration permit.
A mining permit shall remain valid until further notice after becoming legally valid. A mining permit can also be granted for a fixed term, if this is justified in view of the quality and extent of the deposit, the applicant’s ability to meet the conditions for ensuring the commencement of mining activities, and other factors that have emerged during processing of the application. A fixed-term mining permit may remain valid for a maximum of ten years after the decision has become legally valid.
The permit authority shall review the regulations of a mining permit that is in force until further notice at a maximum interval of ten years. In order to secure essential public or private interests, or for some other special reason, an order can also be given for the regulations of a fixed-term mining permit to be revisited at regular intervals. The revision of permit regulations shall not in any significant way decrease the benefit gained from the mining project.
The permit authority shall decide that the mining permit will expire if the permit-holder has not initiated mining activity within the time limit specified in the permit, or the preparatory work to indicate that the permit-holder is seriously aiming towards actual mining operations. The permit authority shall also decide that the mining permit will expire if mining activities have been interrupted because of a factor dependent on the permit-holder continuously for a minimum of five years, or if mining activities can be considered to have actually ended. The matter may be raised by the permit authority on its own initiative, by the local authority, or by a party suffering damage.
However, the permit authority may postpone the expiry of the mining permit, twice at the most, and specify a new deadline for commencing mining activity or continuing operations. The expiry of a permit can be postponed for a maximum of ten years in total. The mining permit-holder shall submit an application to the permit authority prior to the expiry of the mining permit, stating a reason for the granting of a time limit and setting forth a plan for commencing or continuing mining activity.
Furthermore, the permit authority shall decide that the mining permit will expire if the mining area does not belong to the permit-holder or if the permit-holder has not gained possession of it within five years of the granting of the permit, or if the permit-holder submits an application concerning this.
The mining authority shall alter an exploration, gold-panning or mining permit, either on its own initiative or upon application by the relevant authority supervising the securing of the public interest in its field or a party suffering damage, if the activities cause a consequence prohibited by the Mining Act, or the detrimental impacts of the activities deviate substantially from the assessments made during permit consideration.
The permit authority may cancel an exploration, gold-panning or mining permit if incorrect or incomplete information has been given in the application or appendices thereto, such that it has essentially affected the conditions set for granting a permit or the permit consideration in other ways, if the permit holder no longer meets the requirements for the granting of a permit or if the permit-holder has materially neglected or violated the obligations, restrictions, or permit regulations laid down in the Mining Act. If the deficiencies, violations or neglect can be corrected or are insignificant, the permit authority shall set a time limit for the permit-holder in question to rectify the defect, violation or neglect, before making a decision based on the second or third subsections above.
An exploration permit, mining permit, or gold-panning permit may be assigned to another party. The assignee shall fulfil requirements corresponding to those applicable to the permit-holder under the Mining Act. Furthermore, the assignee of a mining permit concerning the production of uranium or thorium shall hold a permit for mining operations as specified in the Nuclear Energy Act.
Environmental issues are regulated by many different national environmental laws and policies. As Finland is a European Union Member State, a considerable share of Finnish environmental legislation and policies is based on EU environmental policy and regulation, either as directly applicable EU regulations or through the implementation of EU directives.
The principal environmental laws affecting the mining industry include the Environmental Protection Act (No 527/2014, ympäristönsuojelulaki); the Water Act (No 587/2011, vesilaki), which governs water-related construction projects and the use of water resources and the aquatic environment; the Waste Act (No 646/2011, jätelaki), which governs waste management and littering, the prevention of waste generation, and the prevention of danger and harm to human health and the environment caused by waste; the Nature Conservation Act (No 1096/1996, luonnonsuojelulaki), which governs nature and landscape conservation and management; the Land Use and Building Act (No 132/1999, maankäyttö- ja rakennuslaki), which governs planning, building development and the use of land and water areas; and the Chemicals Act (No 599/2013, kemikaalilaki), which governs the enforcement of European Union chemicals' legislation and certain national obligations regarding chemicals.
The competent permitting authorities for environmental permits relating to mining operations are the Regional State Administrative Agencies (aluehallintovirasto), which are charged with issuing environmental permits for activities with major environmental impacts, as well as all permits under the Water Act.
The competent environmental supervisory authorities in relation to mining operations are the regional Centres for Economic Development, Transport and the Environment, ELY Centre (elinkeino-, liikenne- ja ympäristökeskus, ELY-keskus), which supervise the compliance with the Environmental Protection Act and the environmental permit, for example. ELY Centres also act as contact authorities in impact assessments carried out in accordance with the Act on Environmental Impact Assessment Procedures, and issue justified statements in environmental impact assessments.
The main general authority to control environmental policy, draft environmental legislation and guide other authorities’ work relating to environmental issues is the Ministry of the Environment (ympäristöministeriö).
Municipalities have a central role in land-use planning, and wide discretional powers to decide whether to approve or reject a plan. Municipalities also function as permit authorities for construction permits and other land-use and building permits.
Pursuant to the Environmental Protection Act, an environmental permit is required for activities that involve a risk of environmental pollution. Pursuant to the Environmental Protection Act, mining operations and the excavation of gold with machines require an environmental permit, as does an ore or mineral concentration plant. The majority of exploration is of a nature that can be carried out without an environmental permit but exploration may also require an environmental permit if the impacts of the planned activities (eg, test mining) exceed the criteria set out in the Environmental Protection Act.
An environmental permit shall be applied for in accordance with the Environmental Protection Act. The permit consideration is based on judicial discretion, which means that the environmental permit must be granted to the operator should the requirements set in the Environmental Protection Act be fulfilled.
Rejection of a permit application or permit decision and its individual regulations may be appealed against. In addition to the parties, ie, permit applicants, neighbours and other persons affected by the activity, environmental NGOs and those who may be affected by the operations have the right to appeal a permit decision.
The first appellate instance is the Administrative Court of Vaasa and the second and final instance is the Supreme Administrative Court. However, it should be noted that the right to appeal to the Supreme Administrative Court in environmental cases is subject to the requirement of leave to appeal. Leave to appeal is granted under the Administrative Judicial Procedure Act (No 586/1996, hallintolainkäyttölaki), if the matter involves a need for a precedent or an obvious error, or if there is another serious reason for issuing a decision on the merits of the case.
The Environmental Protection Act governs an integrated permit regime for emissions into air, water and soil, and the generation of waste. However, the environmental permit does not necessarily cover all activities on the project site, in which case other permits or notifications pursuant to other environmental laws may be required. A mining operation often requires a water permit for intake of water for the purposes of mining operations or building of ponds. Any such water permit is processed together with the environmental permit and both permits are included in one decision, unless this is deemed unnecessary for a special reason.
Pursuant to Annex 1 of the Act on Environmental Impact Assessment Procedure (EIA Act No 252/2017, laki ympäristövaikutusten arviointimenettelystä) mining, concentration and processing of metal ore or other mining minerals requires an EIA when the aggregate amount of the excavated material is at the minimum 550,000 tonnes per year, or for open pit mines of more than 25 hectares. The mining, concentration and processing of uranium requires an EIA, except for test mining, test concentration and other corresponding processing.
The results of an EIA procedure are reflected in the EIA report and a justified statement issued based thereon by the ELY Centre, and are to be taken into consideration when issuing a permit for a project. The right of appeal on the grounds of lack or inadequacy of the EIA is linked to the approval of/appeal against the permit decision.
The areas included in the European Community’s Natura 2000 network are subject to specific limitations on allowed operations, as set out in the Finnish Nature Conservation Act. If a project or plan, either individually or in combination with other projects and plans, is likely to have a significant adverse effect on the ecological value of a site included in the Natura 2000 network, and the site has been included in, or is intended for inclusion in, the Natura 2000 network for the purpose of protecting this ecological value, the planner or implementer of the project is required to conduct an appropriate assessment of its impacts (Natura Assessment). The same correspondingly applies to any project or plan outside the site which is likely to have a significantly harmful impact on the site.
The mining authority shall see that the Natura Assessment is carried out and shall thereafter request an opinion on the Natura Assessment from the ELY Centre and the authority in charge of the site in question. No authority is empowered to grant a permit for the implementation of a project, or to adopt or ratify a plan, if the assessment procedure indicates that the project or plan would have a significant adverse impact on the particular ecological values for the protection of which the site has been included in, or is intended for inclusion in, the Natura 2000 network. In this case, a permit can only be granted if the Government decides that the project or plan must, in the absence of alternative solutions, be carried out for imperative reasons of overriding public interest. Furthermore, where a site hosts a priority natural habitat type referred to in Annex I of the Habitats Directive (92/43/ETY), or a priority species referred to in Annex II, a further precondition for granting a permit or adopting or ratifying a plan is that a reason relating to human health or public safety, or to beneficial consequences of primary importance for the environment, or any other imperative reason of overriding public interest so demands. In the latter case, an opinion shall be requested from the European Commission.
Any action altering the natural surroundings is prohibited in a national park or strict nature reserve. Thus, eg, the extraction of sand and stone materials and minerals, and any action that damages the soil or bedrock, the removal or destruction of fungi, trees, bushes and other plants or parts thereof and any other action that may have a detrimental impact on the natural conditions and the landscape, or on the preservation of fauna and flora, is expressly prohibited.
Geological surveys and prospecting is allowed in a national park or strict nature reserve only with permission from the authority or agency in charge of the site, provided that the conservation objectives of the site are not jeopardised.
Protection of plant and animal species including but not limited to important resting places of protected species, appropriately marked trees hosting the nest of a protected bird species or trees hosting a large bird of prey may also restrict exploration or mining activities, even outside an enforced conservation area based on the mandatory regulations of the Nature Conservation Act, unless a derogation from the protection provisions is granted for the planned operations. Further, protection of antiquities may result in restrictions on exploration or mining based on the Antiquities Act (295/1963, muinaismuistolaki).
As a requirement for granting of a mining permit, the relationship of the mining area and any auxiliary area to other usage of land needs to have been clarified. Mining activity shall be based on a legally binding plan (regional plan or master plan) in accordance with the Land Use and Building Act (No 132/1999, maankäyttö- ja rakennuslaki), or, in view of the impact of the mining activity, the matter shall be otherwise sufficiently explored in co-operation with the local authority, Regional Council, and the ELY Centre. The municipalities have a monopoly on land-use planning within the municipality boundaries (master plan, city plan), while the regional council is responsible for preparing of the regional plans.
In addition, the municipalities have a possibility to impact the mining activities within the municipality already at an earlier stage, since an exploration permit cannot be granted on an area concerning which the local authority opposes the granting of a permit, for a reason concerning land planning or other good cause related to land use, unless there is a specific reason for granting the permit.
The permit authority will request statements on an exploration/gold-panning/mining-permit application from the relevant municipalities, who also have the right to appeal a decision concerning the granting of such a permit.
The permit authority will request statements on the exploration/gold-panning/mining permit application from the municipalities, the ELY Centre and the responsible authorities or institutions within the area affected by the activities that are the object of the permit. In addition, the parties involved are reserved an opportunity to lodge complaints concerning the permit, and parties other than those involved will also be afforded the opportunity to express their opinions.
Any effects caused by the proposed activity on the rights of the Sami as an indigenous people, to the Skolts or to reindeer herding must also be established and evaluated in co-operation with the respective representative entities and the applicant. The permit authority shall publish the application on its noticeboard and, when the matter is of major significance, in at least one newspaper in general circulation in the affected area. In addition, the parties and the municipalities involved shall be informed separately. A decision concerning an exploration/gold-panning/mining permit or redemption permit for a mining area shall be issued after the public notice.
Further, the municipalities are heard also in connection with environmental permitting.
The Sami Homeland and Skolt area are subject to specific protection.
An exploration/gold-panning/ mining permit must not be granted if activities under the permit would, in the Sami Homeland, alone or together with other corresponding permits and other forms of land use, substantially undermine the preconditions for engaging in traditional Sami sources of livelihood or otherwise to maintain and develop the Sami culture or in the Skolt area would substantially impair the living conditions of Skolts and the possibilities for pursuing a livelihood in the Skolt area. Further, an exploration/gold-panning/mining permit must not be granted in a special reindeer herding area if activities under the permit would cause considerable harm to reindeer herding. However, a permit may be granted regardless of an impediment referred to above if it is possible to remove that impediment through permit regulations.
In the Sami Homeland, the permit authority shall – in co-operation with the Sami Parliament, the local reindeer owners’ associations, the authority or institution responsible for management of the area, and the applicant – establish the impacts caused by activity in accordance with the exploration/gold-panning/mining permit on the rights of the Sami as an indigenous people to maintain and develop their own language and culture and shall consider measures required for decreasing and preventing damage. In the Skolt area, the permit authority shall request a statement from a Skolt village meeting concerning assessment of the impacts of activity under the permit on the sources of livelihood and living conditions of the Skolt people. In a special reindeer-herding area, the permit authority shall, in co-operation with the local reindeer owners’ associations, assess the damage caused to reindeer herding through activity under the permit.
Community development agreements are neither mandatory nor usual in Finland.
Most confrontation regarding mining projects has been seen in situations where the planned location of a mining project is in the vicinity of a tourist resort. This has even resulted in attempts by the municipality to prohibit mining on certain areas by an explicit restriction in master-plan regulations. The Supreme Administrative Court, however, ruled in May 2019 (KHO 2019:67) that master-plan regulations specifically prohibiting mining operations entirely in certain areas of the municipality are illegal. This approach and the relevant land-use planning legislation may change in the future, as the new government has indicated in its Government Programme that municipalities should have the right to decide, via means of land-use planning, whether mining activities are to be permitted in the municipality.
The Finnish Network for Sustainable Mining which was established in May 2014 to act as a platform for discussions between the mining industry and its stakeholders in order to improve the sustainability of mining and ore exploration and to promote more responsible mining practises in Finland. The network includes a broad variety of stakeholders, even with different views, such as the Finnish Mining Association, the Finnish Sámi Parliament, Reindeer Herders’ Association, Association of Finnish Local and Regional Authorities and several mining companies. The Network operates currently under the auspices of the Finnish Mining Industry (FinnMin) and its board of the network has equal representation from the mining industry, environmental NGOs, other livelihoods (reindeer herding and farming) and other stakeholders (local communities and metal workers). The network has published a concise CSR report on 19 companies operating in Finland in the field of mining and ore exploration; a toolbox for local actions for companies that are planning to begin ore exploration or mining activities in a specific region in Finland; and a new sustainability standard for mining based on the Canadian initiative Towards Sustainable Mining (TSM). The Finnish TSM was adapted to Finnish legislation and complemented with two protocols (water management and mine closure), whereby it now covers the entire lifecycle of mining operations. The network also arranges seminars on various topics.
Initiatives to deal with climate change are appearing in the mining industry in general in the form of tighter emission limits in environmental permits and initiatives to amend the legislation in order to improve the level of environmental protection. The limitations on use of coal in energy production and promoting of biofuels may also have an impact on the mining industry.
An act on prohibiting the use of coal in energy production entered into force on 1 April 2019. According to Section 5 of the Act, the use of coal as a source for electricity and heat production will be prohibited as of 1 May 2029.
The Act on promoting biofuels entered into force on 1 April 2019. The intention of the Act is to promote the use of biofuels in heat production, working machines and some engines in order to achieve the goals to reduce carbon emissions agreed upon in the EU.
Finland’s most recent parliamentary elections were held in May 2019 and the new government of Finland was appointed on 6 June 2019. According to the Government Programme published on 3 June 2019, mining legislation is planned to be reformed during the new Parliament’s four-year tenure. The intention behind the reform of the Mining Act proposed in the Government Programme is to secure the functioning of mines, improve the level of environmental protection and improve local approval and possibilities to influence. No timeframe for the reforms has been set.
The new government has proposed several new targets with the aim of Finland becoming the world’s first fossil-free welfare society. According to the new Government Programme, Finland’s goal is to become carbon-neutral by 2035. Furthermore, the production of electricity and heat should be nearly emission-free by 2030, which means that the share of renewable sources in electricity production will be significantly increased.
According to the Government Programme, carbon sinks will be enhanced by reforming, among other things, forest legislation. The goal is to increase the net carbon-sink effect. No timeframe has, however, been set for the goal.
Further, the upcoming new period of EU’s Emissions Trading Scheme (ETS) 2021-2030 will see some amendments to the ETS Directive and other regulations the implementation of which is currently being prepared on national level.
One of the initiatives to deal with climate change which affects the mining industry is the planned removal of state aid in electricity taxation. Currently, the electricity tax is paid in two different categories, one of which has a reduced tax rate with state aid. The definition of the industrial electricity tax was changed in 2017, from which the mining and quarrying industry was also included in the category II of the lower tax rate. Now, the government has outlined in their new Government Programme 2019 that the mining and quarrying industry shall not enjoy the reduction anymore and will be transferred back to category I with no state aid (see 4.2 Incentives).
The Government Programme also declares that they will strengthen the role of the Climate Act as a guiding instrument and the reform of the Climate Act (609/2015, ilmastolaki) has already commenced with a public hearing on the citizens' views of the future Climate Act. The intention of the reform is to ensure that Finland is carbon-neutral by 2035 and to strengthen the Climate Act.
Because of the new Government Programme 2019, the general political atmosphere is clearly currently aiming towards more environmental and climate-friendly solutions in every political and industrial sector. Sustainable thinking has also reached the mining industry, which is reflected by the reform of the Mining Act as highlighted in the Government Programme.
The purpose of the discussed reform is to improve the level of environmental protection and ensure the operating conditions of mines, while also improving local acceptability and influencing opportunities. The aim is to take the environmental impacts of planned mines into account at the earliest stage possible and to explore the permit processes, practices and possible need for restriction concerning mineral prospecting rights in nature conservation areas. The Programme also sets a target to develop the regulation on securities so that environmental responsibilities are dealt with in all situations and to develop the ability to take into account the uranium content of ore when assessing the environmental impacts of mines.
The sustainable development approach also appears otherwise in the Government Programme, eg, as the promotion of a circular economy, prevention of climate change, and protection and sustainable use of natural resources.
Since 2014, the Finnish Network of Sustainable Mining has been part of developing more sustainable mining in Finland. The network provides an ongoing forum for discussion and co-operation between the mining industry and its stakeholders. It develops suitable tools for Finland to promote more responsible and sustainable mining, to exploit synergies between different industries and to prevent conflicts. In the network’s vision, Finland will develop into a pioneer in sustainable mining, where the industry will take into account natural values, cultural and social environment and other industries.
A Finnish-resident entity is taxed on its worldwide income and a non-resident entity on its Finnish source income. The company is resident in Finland on the basis of incorporation. A permanent establishment (PE) is created according to the applicable tax treaty and principles of OECD model convention. For example, a mine or other site for the extraction of natural resources, mine, quarry, oil well, natural gas well, or other site for the extraction of natural resources, as well as a branch, creates a PE.
The income tax rate for limited liability companies and other corporate entities is 20%.
The maximum annual rates of depreciation calculated on the remaining acquisition cost for tax purposes are 25% for machinery and equipment (50% depreciation temporarily between FY2020 to the end of FY2023) and 4% to 20% for buildings and other constructions. Intangible assets are depreciated within the expected economic lifespan of the asset, but for a maximum of ten years. The capital costs of mines and quarries are written off in proportion to the quantities extracted.
When a Finnish-resident limited company distributes dividends, interest or royalties to a non-Finnish-resident corporate entity, it must withhold 20% at source unless the applicable bilateral tax treaty provides for a lower rate or states that the type of income being paid is exempt from tax at source.
Most of the Finnish tax treaties include provisions enabling tax-exempt dividends from the tax treaty country in the case of at least a 10% shareholding. No withholding tax is imposed on dividends paid to the parent company under Directive 90/435/EEC – the Parent-Subsidiary Directive - if the beneficiary company owns at least 10% of the capital of the payer.
Many of the Finnish tax treaties give the source state a right to impose 5% – 10% withholding tax on royalties. No withholding tax is imposed on royalties within the meaning of the Directive 2003/49/EC on interests and royalties.
Interest payments to non-residents are usually tax-exempt according to the Finnish Income Tax Act.
All interest expenses are deductible if the total net interest expenses to both related (at least 50% direct or indirect control) and unrelated parties (ie, third parties) of a company do not exceed a EUR500,000 threshold in a tax year. If net interest expenses exceed this threshold, the limitations would be applied to the total amount and not just the amount exceeding the threshold.
If the threshold is exceeded, only net interest expenses of up to 25% of the adjusted taxable profit (taxable EBITD) are deductible. The limitation is calculated and applied at the level of an individual company. Interest payments to banks or other third parties are also covered by the restrictions. The net interest expenses to third-party debts are deductible with a EUR3,000,000 limitation.
Real estate tax is paid on land and buildings to municipalities. General real estate tax rate varies between 0.93% to 2%.
There is no special mining or mineral tax regime for the mining industry in Finland. Nevertheless, according to the Government Programme, there is a plan to explore the possibility to set a mining tax for the mining industry and also to investigate the possibility of taxing profits from the sale of mining rights in Finland, even when mining rights are owned by non-Finnish-resident entities.
Electricity tax for class I electricity is 22.53 EUR/MW. The lower electricity tax rate 7,03 EUR/MW is for electricity used for industry and greenhouses and the tax expenditures for energy-intensive industries (class II).
Energy-intensive industry may obtain a refund from energy taxes if excise taxes paid by the company equal more than 5% of the company’s value added (as defined in legislation).
According to the Government Programme there is a plan to abolish the possibility to use the lower class II electricity rate as well as the possibility for an energy tax refund from the mining industry. The working group appointed by the government to review the reform should complete its work by September 2020 and the proposal to change the legislation accordingly is expected before the end of 2020.
Transfer of real estate located in Finland is subject to transfer tax of 4% of the sales price. The transfer of shares in Finnish companies is subject to a transfer tax of 1.6% if one of the parties of the transaction is Finnish-resident.
Capital gains from the disposal of business asset are taxed as normal income with a tax rate of 20%. Among other requirements, if the seller has owned at least 10% of the fixed-asset shares in the company for at least one year, the sale of shares may be treated as tax-exempted.
Finland’s good infrastructure, the large sparsely populated areas and the availability of detailed and extensive geological data produced by the Geological Survey of Finland make Finland an attractive mining country. Furthermore, Finland’s stable political and economic situation and the country’s well-functioning mining and environmental legislation are considered to be important positive factors. In addition, Finland has leading knowledge and suppliers in the area of mining technology, eg, Metso and Outotec.
Finland has been rated as one of the top ten mining regions globally for several consecutive years in Fraser Institute’s annual survey of mining companies.
There are no general or special rules on investment approval or restrictions to foreign investors in the mining industry in Finland.
The free-trade agreement between Canada and the EU and its Member States (CETA) is applicable to Finland. CETA is a remarkably investor-friendly agreement due to the wide protection it offers to foreign investors. It includes an investment-protection clause the purpose of which is to ensure that Canadian investments are treated in the EU on an equal footing with European investments. The Finnish Parliament approved CETA on 15 May 2019.
Many companies operating in exploration and mining projects in Finland are owned by foreign companies that are or have a group parent company listed in a foreign exchange, eg, in Canada, Australia or Sweden. Their operations are financed by the foreign parent company. To a large extent, this is due to the fact that there is not enough capital available in the Finnish capital market for mining operations, which is why most of the investments have in recent years come from abroad.
Public sources of financing are, eg, Business Finland for research, development and innovations and Finnvera for loans and guarantees.
Finnish Minerals Group is a government-owned special-purpose company, responsible for the State's holdings and development in the mining and battery sector as well as for promoting the development of a battery cluster in Finland. It owns, manages and develops companies, an investment programme and technology projects related to the mining and battery industry in Finland.
Financing for many exploration and mining projects in Finland is raised through a foreign exchanges, eg, in Canada, Australia or Sweden. Some companies are dual-listed in Finland but in general the securities market in Finland is not considered to be as strong as, for example, in Sweden.
The permit-holder can pledge the right to exploit mining minerals, based on a mining permit, or the privilege under an exploration permit. The right to pledge becomes effective when the mining authority receives written notification of the pledging from the permit-holder. The mining authority issues the permit-holder with a certificate of receipt of the notification.
Usually, the security package related to a mining project consists of the permits, the properties owned by the permit-holder and a floating charge.
Finland has potential, eg, for battery minerals (cobalt, lithium, nickel, graphite) as well as other minerals such as nickel, copper and gold which appears as an interest towards Finland as a region for exploration and mining. This is supported by the stable political and economic situation, the good infrastructure, the availability of detailed and extensive geological data produced by the Geological Survey of Finland and the leading knowledge in the area of mining technology.
Based on the Government Programme published 3 June 2019, it appears that changes to the mining legislation, waste legislation (eg, circular economy and recycling, waste management, waste and consumption taxation), climate legislation (eg, energy legislation, especially in relation to renewable sources) and nature-preservation legislation are possible during the following government period (four years).