Finnish Export Controls Adapt to Technological Developments amid Geopolitical Tensions

On 18 June 2024, the Finnish Parliament adopted a new Act on the Control of Export of Dual-Use Goods, replacing the Act currently in force. The Act will enter into force in the autumn, with the exact date to be determined once the Act is ratified.

Dual-use items refer to goods and technology that can be used for both civilian and military purposes. The export and certain other transactions related to specifically listed dual-use goods require authorisation. Dual-use items include various goods, such as electronics, computers or telecommunications and information security-related items, which can be both tangible and intangible.

Finnish export controls on dual-use items are based on the EU-level regulation (EU) 2021/821, which sets up the EU regime for the export controls of dual-use goods. The goods subject to export authorisation requirements are listed in the EU-level regulation. Authorisation requirements may also apply in certain circumstances to items that are not listed in the said regulation. The EU-level regulation imposes these so-called catch-all controls in situations where an exporter knows or is informed by the competent authorities that the items are intended for chemical, biological, or nuclear weapons, military use in countries subject to an arms embargo, or for components of military items exported from the EU without appropriate authorisation. In addition, catch-all controls apply to the export of any cyber-surveillance items that are likely to be used for internal repression or serious violations of human rights.

The EU level regulation, adopted in 2021, introduced several changes to the previous EU-level framework, thus also triggering the need to evaluate existing national procedures related to exports of dual-use goods. National rules supplement the EU regulation by prescribing national competent authorities, enforcement of rules, and procedures for applying for authorisations. In addition, the regulation provides Member States of the EU with the discretion to apply additional export control measures to goods and technologies for reasons of public security or for human rights considerations.

Finland introduces, for the first time, national controls on dual-use items that are not controlled by virtue of the EU regulation. The export of items listed in the annex of the Act is subject to authorisation by the Finnish Ministry for Foreign Affairs. The annex covers advanced semiconductors and related items and their manufacturing technologies, as well as quantum computers, components thereof, and components used in the manufacture of quantum computers.

The authorisation process and assessment criteria for nationally controlled items correspond to the established processes applicable to items controlled by virtue of the EU regulation, including the possibility for the Ministry for Foreign Affairs to issue individual, global, and general export authorisations. Global export authorisations cover multiple items, countries, and end-users by a specific exporter in one authorisation. On the other hand, general export authorisations allow exports without prior authorisation by all exporters, provided that the conditions specified in the authorisation are met, subject to the periodical reporting obligation.

In addition to the national control list, the new Act expands the possibility of applying catch-all controls from the existing criteria provided for in the EU regulation. The Ministry for Foreign Affairs may impose an authorisation requirement for any item when the item is exported for end-use that may cause serious harm to the public or national security of Finland.

The Act also removes provisions that overlap with the EU regulation and further clarifies the authorisation procedures and enforcement-related matters. In this regard, the Act creates further possibilities for sharing classified information among competent authorities and for sharing such information with foreign authorities in certain situations. The Act also clarifies that Customs is the competent authority to supervise and enforce dual-use export controls, including with regard to intangible technologies.

The export control framework in the EU and its member states has traditionally relied on international agreements and multilateral export control regimes. The list of items covered by the EU regulation currently transposes those obligations agreed upon internationally. Under the current framework, the EU does not have the competence to introduce export controls on items that are not included in the control lists agreed within the multilateral frameworks.

Recent geopolitical and geoeconomic tensions have presented a new challenge to global export controls. The Russian invasion of Ukraine has increased Western efforts to curtail Russia’s access to cutting-edge technology, while at the same time, particularly the EU, the US, and China aim to be the frontrunners in global technological rivalry. While multilateral regimes remain the basis of global export controls going forward, diverging economic and security policy objectives of the participating jurisdictions within the regimes have made it increasingly difficult to agree on controls, especially related to emerging technologies.

Simultaneously with the increasingly complicated global geopolitical situation, we are facing rapid technological developments, such as the emergence of artificial intelligence, which has potential in both civilian and military applications. Traditional export control frameworks have been unable to adapt to this shift, leading to a growing interest in individual jurisdictions to create their own responses.

The national export controls introduced by Finland are no exception in the European Union, where a number of countries, such as France, the Netherlands, Spain, and Italy, have already introduced similar controls. Bearing in mind that export controls introduced by individual member states disrupt the internal market, the EU is also assessing new tools for introducing autonomous export controls at the EU level.

The measures currently adopted in Finland directly affect a limited number of companies. From a broader perspective, however, it is certain that the strategic approach to export controls globally will have important economic effects and implications for individual companies that face an increasingly fragmented legal framework.

If you have any questions about this Legal Alert, please feel free to contact the undersigned or your regular Borenius contact.