Finland

Lower rates should help a gradual recovery

In 2025, the Finnish economy is expected to rebound after two years of contraction, supported by declining interest rates that provide much-needed relief to households as the European Central Bank is expected to continue to cut interest rates in 2025. Given the widespread use of variable mortgage rates, lower borrowing costs will translate into improved household finances, boosting consumption. The housing sector, which has faced significant headwinds, is set to see a gradual recovery as financing conditions ease and buyer confidence slowly returns.

Given the slow improvement in domestic conditions, the government remains committed to its fiscal reform agenda, aiming to narrow the budget deficit. However, progress is expected to be limited, as balancing fiscal consolidation with economic recovery and public sentiment presents ongoing challenges for the government. Meanwhile, the external outlook remains uncertain. Exporters continue to face a weak global trade environment, while businesses grapple with rising wage pressures. High pay demands, coupled with growing tensions over the government’s planned reforms, raise the risk of industrial action, which could disrupt key sectors and weigh on the recovery.

Corporate insolvencies have been growing for four consecutive years (+5% y-o-y in 2024) and are expected to remain high in 2025 as companies on the plus side see stronger domestic demand and lower interest costs but also see lacklustre exports and rising costs as well as disruptions due to strikes.

Government to find fiscal consolidation difficult

The fiscal landscape for 2025 is shaped by the government’s ongoing efforts to narrow the public deficit through controlled spending, selective tax measures, and structural reforms. While overall expenditure restraint remains a priority, increased defence spending in response to geopolitical developments limits the extent of fiscal consolidation. As a result, the deficit is expected to narrow slightly, but not enough to prevent a continued rise of the debt-to-GDP ratio.

Finland’s current account balance remains characterised by a goods surplus offset by a persistent service deficit, driven in part by strong outbound travel. The current account deficit is expected to remain roughly unchanged in 2025, as any improvements in the goods balance or primary income are likely to be counteracted by ongoing external challenges and subdued export growth.

Regional and municipal elections will highlight dissatisfaction

The current centre right coalition government led by Prime Minister Petteri Orpo from the National Coalition Party (KOK), in association with Finns Party, the Swedish People's Party (RKP), and the Christian Democrats (KD), continue to be behind in polls with some voters unhappy with their reform plans, including cuts to labour benefits as well as spending cuts. Regional and municipal elections in April this year will give a clear indication of the support of the government. Strike actions continue to hinder the economy as unions are unhappy with current pay offers.

Key issues affecting domestic politics remain the complex situation on the eastern border with Russia, which resulted in Finland joining NATO in 2023, and the Defence Cooperation Agreement between Finland and the United States (2024) that gives the American forces access to 15 installations and permission to store equipment and weapons on Finnish soil. The deteriorated relationship between Trump’s administration and European counterparts could complicate its application.

Payment

Bills of exchange are not commonly used in Finland because they signal the supplier’s distrust of the buyer. A bill of exchange primarily substantiates a claim and constitutes a valid acknowledgment of debt.

Cheques, also little used in domestic and international transactions, only constitute acknowledgement of debt. However, cheques that are uncovered at the time of issue can result in the issuers being liable to criminal penalties. Moreover, as cheque collection takes a particularly long time in Finland (20 days for domestic cheques or cheques drawn in European and Mediterranean coastal countries; 70 days for cheques drawn outside Europe), this payment method is not recommended.

Conversely, SWIFT bank transfers are increasingly used to settle domestic and international commercial transactions. When using this instrument, sellers are advised to provide full and accurate bank details to facilitate timely payment, while it should not be forgotten that the transfer payment order will ultimately depend on the buyer’s good faith. Banks in Finland have adopted the SEPA standards for euro-denominated payments.

Debt Collection

Amicable phase

The goal of the amicable phase is to reach a voluntary settlement between the creditor and debtor without beginning legal proceedings. Finnish legislation obliges creditors to begin the amicable phase amicable phase via letters, followed up as necessary with a final demand for payment by recorded delivery or ordinary mail. This demand for payment asks the debtor to pay the outstanding principal increased by past-due interest as stipulated in the contract.

In the absence of an interest rate clause in the agreement, interest automatically accrues from the due date of the unpaid invoice at a rate equal to the central bank of Finland’s (Suomen Pankki) six-monthly rate, calculated by reference to the European Central Bank’s refinancing rate, plus seven percentage points.

The Interest Act (Korkolaki) already required debtors to pay up within contractually agreed timeframes or become liable to interest penalties.

Since 2004, the ordinary statute of limitations for Finnish contract law is three years.

Legal proceedings

Fast-track proceedings

For clear and uncontested claims, creditors may use the fast-track procedure, resulting in an injunction to pay (suppea haastehakemus). This is a simple written procedure based on submission of whatever documents substantiate the claim (invoices, bills of exchange, acknowledgement of debt, etc.). The court sets a time limit of approximately two weeks to permit the defendant to either respond to or oppose the petition. In addition, this fast track procedure can also be initiated electronically for cases of undisputed claims. The presence of a lawyer, although commonplace, is not required for this type of action.

Ordinary proceedings

Ordinary legal action usually commences when amicable collection has failed. A written application for summons must be addressed to the registry of the District Court, which then serves the debtor with a Writ of Summons. The debtor is given approximately two weeks to file a defence.

During the preliminary hearing, the court bases its deliberations on the parties’ written submissions and supporting documentation. The court then convokes the litigants to hear their arguments and decide on the relevance of the evidence. During this preliminary phase, and with the judge’s assistance, it is possible for the litigants to resolve their dispute via mediation and subsequently protect their business relationship.

Where the dispute remains unresolved after this preliminary hearing, plenary proceedings are held before the court of first instance (Käräjäoikeus) comprising between one and three presiding judges, depending on the case’s complexity. During this hearing, the judge examines the submitted evidence and hears the parties’ witnesses. The litigants then state their final claims, before the judge delivers the ruling, generally within 14 days.

The losing party is liable for all or part of the legal costs (depending on the judgement) incurred by the winning party. The average time required for obtaining a writ of execution is about 12 months. Undisputed claims in Finland can normally last from three to six months. Disputed claims and the subsequent legal proceedings can take up to a year.

Commercial cases are generally heard by civil courts, although a Market Court (Markkinaoikeus) located in Helsinki has been in operation as a single entity since 2002, following a merger of the Competition Council and the former Market Court.

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Enforcement of a Legal Decision

A judgment is enforceable for fifteen years as soon as it becomes final. If the debtor fails to comply with the judgment, the creditor may have it enforced by a bailiff, who will try to obtain an instalment agreement with the debtor, or enforce it through a seizure of assets.

For foreign awards, since Finland is part of the EU, it has adopted enforcement mechanisms applicable to court decisions issued by other EU members, such as the EU Payment Order and the European Enforcement Order. For judgments issued by non-EU members, the issuing country must be part of a bilateral or multilateral agreement with Finland.

Insolvency Proceedings

OUT-OF-COURT PROCEEDINGS

Finnish law provides no specific rules for out-of-court settlements. Negotiations between creditors and debtors are made informally. If an agreement is reached, it must still be validated by the court.

RESTRUCTURING PROCEEDINGS

The goal of restructuring is to allow an insolvent company to remain operational through administration, with the view that if the company is able to continue its business, it will be able to repay a larger part of its debts than would have been possible in the case of bankruptcy of the company. The commencement of these proceedings triggers an automatic moratorium, providing the company with protection from its creditors.

The board of directors maintains its power of decision but the receiver is entitled to control certain aspects of the company’s operations, including the creation of new debts and overseeing transfers of ownership.

LIQUIDATION

When debtors are unable to pay their debts when due and this inability is not temporary, they are placed into liquidation. Upon acceptance of a liquidation petition by the court, the debtor is declared bankrupt. A receiver is appointed, and a time limit is established for any creditors to present their claims. The receiver then establishes a proposed distribution scheme, whilst creditors supervise the selling of the estate and the distribution of the sales’ proceeds.

Last updated: March 2025