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FINLAND: An Introduction to Transport

CHAMBERS EUROPE 2019: PRACTICE AREA OVERVIEW

FINLAND: TRANSPORT

Authors: HPP Attorneys

Matti Komonen, Partner

Nora Gahmberg-Hisinger, Partner

1 Current Economic Situation 

The World Economic Forum regularly ranks Finland in the top 10 of the most competitive countries worldwide. Reflecting this, the Finnish transport and logistics sector has grown in recent years. The Bank of Finland forecasts the economic growth in Finland to continue but the growth rate to slow down in 2019. For example, in 2018 the Port of Helsinki was the busiest international passenger port in Europe and a record amount of cargo was handled through the port, even though the change in volumes turned negative in December 2018. However, according to the transport barometer 1/2019 of the Finnish Transport and Logistics Association SKAL, many Finnish operators in the haulage and logistics sector forecast a decrease in turnover and transport volumes during 2019.

In the long term, the Finnish Transport Infrastructure Agency (research reports of the Finnish Transport Agency 57/2018) estimates growth in domestic passenger and goods transport. Foreign sea transport is also estimated to grow at a moderate rate. According to the report, the most important variables in relation to passenger transport forecasts are population growth and the development of Finland’s GDP, while the most significant factors in relation to goods transport are the structure and competitiveness of Finnish industry. In the longer term, new kinds of variables such as the automation of transport and 'mobility as a service' (MaaS) may have an effect even though the scale and direction of the effect is very difficult to assess at this stage.

2 Trends and Developments 

2.1 Disruption and Automation 

The Finnish maritime industry is growing, especially in the south west of Finland. Finnish companies have been involved in designing, developing and testing scrubbers, rotor sail, a hybrid ferry and LNG-powered vessels, including the world’s first LNG-powered icebreaker. Developments in automation are especially significant in the shipping field. Finland has enabled testing of autonomous ships and is actively participating in an assessment process in the IMO to determine how IMO conventions may apply to autonomous ships with different degrees of autonomy. An Arctic railway between Rovaniemi, Finland and Kirkenes, Norway and an undersea railway tunnel between Helsinki, Finland and Tallinn, Estonia (which, if constructed, would be one of the longest submarine tunnels in the world) are currently under planning and evaluation.

2.2 Digitalisation, Deregulation and the New Way of Organising the Authority functions

Digitalisation enables, for example, freight sharing and smart mobility solutions. IoT is now more frequently being applied to the Finnish transport sector. Finland aims to improve and enable digitalisation, amongst others, by means of deregulation and reorganising regulatory authority functions concerning the transport sector. The Transport Safety Agency and the Communications Regulatory Authority merged into a new Finnish Transport and Communications Agency (Traficom) in January 2019. The name of the Transport Agency was also changed to the Transport Infrastructure Agency. At the same time, traffic control and management services were incorporated and transferred to a state-owned company, Traffic Management Finland Ltd, which collects, manages and utilises data related to traffic control and management. In the future, the aim is to open the market of traffic control and management services to competition.

2.3 E-Commerce Growth, Last Mile, Mobility Start-ups

Finland is particularly keen on promoting and supporting digital platforms, MaaS thinking and smart mobility solutions.

Start-ups have also found their place in the transport sector. In 2018, mobility service providers and authorities were obliged to open the interface for essential data, such as routes, timetables and prices, which brings new possibilities for start-ups in the Finnish passenger transport sector. In addition, digitalisation is generating new start-ups engaged in parcel delivery.

2.4 ”Green” Mobility 

The Finnish Ministry of Transport and Communications aims to eliminate transport-related emissions from domestic transport by 2045. The aim is likely to have a particular effect on road transportation and the fuel market. Although the tightening of environmental regulation has a cost impact, it also creates new business opportunities (such as different freight-sharing solutions) for the transport industry and operators in Finland. For example, the Helsinki Region Transport Authority (HSL) is actively reducing emissions by different means, including an environmental bonus system for operators.

3 New Legislation That Will Have an Effect on Clients

3.1 Transport Services Act 

The Transport Code, formally the Act on Transport Services (320/2017), is one of the Government's chief initiatives. The main purpose of this legislation project is to create a growth environment for business digitalisation and to promote transport business by deregulation. The Code unifies legislation governing different transport services and reforms the strict regulation of all transport modes so that regulation itself will not become an obstacle to digitalisation, automation and new innovations and business models.

The essence of the Code is customer-oriented and digitalised transport services. The crucial thinking behind the Code is based on the concept of MaaS.

The Code is tailored to enable and promote the seamless and multimodal travel and transportation chains and other combined added value mobility services by opening up the data on traffic systems to be shared between customers, service providers and authorities as openly as possible to promote additional value. Not surprisingly, the data protection and GDPR issues have had a big role in the legislation process.

Due to the enormous scope of the Code to cover all transport modes, it has been prepared in three stages. The third and final stage of the Code is under preparation in Parliament.

3.2 Shipping 

Fairway dues have been halved for the period between 2019–2020. Reformation of the Finnish fairway due system is being examined, but possible reforms are intended to take effect in 2021 at the earliest. Environmental regulation has a major influence especially on shipping. For example, the Energy Efficiency Design Index (EEDI) is a challenge to the Finnish shipping sector due to ice conditions during winter periods. It is also worth noting that remote piloting (i.e. piloting that takes place outside a ship) is now allowed in Finland as of February 2019.

3.3 Aviation 

Finland is committed to the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA), which will take effect in 2021. The Finnish Government has also proposed amendments to the Finnish Act on Aviation Emissions Trading (311/2011) to harmonise the national regulation with the EU regulation. The introduction of aviation tax is under discussion but, as yet, it has not gained parliamentary support.

3.4 Rail 

A new Finnish Rail Transport Act (1302/2018) entered into force in January 2019. The Act is part of the implementing process of the EU’s fourth rail package, requiring the opening of passenger rail transport to competition. Rail freight transport was opened to competition already in 2007. The Helsinki Region Transport Authority (HSL) has opened the passenger rail market for tendering and seven potential bidders have pre-qualified, including the incumbent state rail operator, VR. The ITT is expected to be issued in spring 2019.

3.5 Road 

The Finnish taxi market was opened up to competition as part of the Transport Services Act in July 2018, and taxi fares are now allowed to be determined freely. As a consequence of the reform, the number of companies in the taxi market has increased and also some foreign companies have entered the market.

The amendments to the Finnish Act on Carriage Goods By Road (345/1979) has been adopted, enabling the use of electronic consignment notes (e-CMR) in international transport.

4 Potential Hurdles or Difficulties Faced by Clients and How These Can Be Overcome

Challenges in the transport sector also relate to both the domestic and international economic and legislative situations, environmental challenges and the ongoing development and deployment of technology.

4.1 Geopolitical Risks and Security of Supply 

Due to the geographical location of the country, international geopolitical risks apply particularly to Finland. Security of supply in the field of transport has recently been the subject of discussions. External trade and the security of supply are dependent on sea transport; however, the number of vessels sailing under the Finnish flag has decreased. The security of supply of oil has caused particular concerns. However, according to a report published by Shortsea Promotion Centre Finland in December 2018, the future of the Finnish maritime cluster still looks positive.

4.2 Brexit

Brexit negotiations are ongoing at the time of writing this overview, and thus it’s not known whether the UK will exit the EU with a negotiated deal or without a deal. However, it’s clear that Brexit will have an effect on the transport sector in Finland, especially on aviation as well as road traffic and shipping.

4.3 VAT e-commerce Directive 

The number of parcels coming from China to Finland has increased enormously in recent years. However, this development is expected to fade in the coming years when the new VAT e-commerce Directive will remove the EUR22 exemption threshold for the importation of low-value consignments outside the European Union from the beginning of 2021.