In this issue:

Corporate

  • The Revised Finnish Corporate Governance Code Increases Transparency
  • Government Actions to Secure Unemployment Funds and Pension Institutions
  • The European Parliament Approves Directive on Temporary Agency Work
  • The Government Proposes Changes in the Act on Equality between Men and Women

EU & Competition

  • Commission revises Remedies Notice and amends Merger Implementing Regulation

IP & Technology

  • ECJ Rules on the Notion of "Extraction" of the Contents of a Protected Database

CORPORATE

The Revised Finnish Corporate Governance Code Increases Transparency

The revised Finnish Corporate Governance Code (the "Code") for Finnish listed companies was issued on 20 October 2008 replacing the Corporate Governance Recommendation from 2003. The amendments to the Code are quite moderate and consist mainly of the increased duty of disclosure and the composition of the board of directors specifically in respect of gender and expertise in accounting as well as the obligation to issue a separate corporate governance statement. This article will briefly present the revised Code as well as some of the most significant amendments to it.

The aim of the Code is that Finnish listed companies apply corporate governance practices that are of a high international standard. The Code is through its recommendations complementing the legislation in respect of the role and duties of the board of directors and the management of the company and their relations to the shareholders. The Code, like the 2003 Recommendation, applies the so-called Comply or Explain principle meaning that the company shall comply with the recommendations of the Code and an explanation shall be given for any deviations from these recommendations.

As regards the duty of disclosure prior to the general meeting of shareholders, the revised Code has specified the content of the information to be made available to shareholders prior to the general meeting including, inter alia, information on the total shares and voting rights as well as the proposals for resolutions all of which shall be made available on the company's website 21 days before the general meeting. This information shall be published together with the notice of the general meeting of shareholders.

In respect of the composition of the board of directors, the Code requires that both genders shall be represented on the board of directors of a Finnish listed company. The company shall also report the biographical details of the candidates for the board of directors on its website. There is also a possibility for the Company to present information on the independence of the candidates on the company's website if such information can be presented in an appropriate manner. As the majority of the board members shall be independent, the independence criteria have also been further clarified due to practical needs and on the basis of the Commission recommendation on the role of independent directors. Additionally, there have also been some amendments to the duties and composition of the board committees.

Further, an increased duty of disclosure has been included in the Code in relation to the financial benefits of the managing director and the board members. The financial benefits included in the service contract of the managing director as well as in the employment and service contract of the board members shall be specified in writing. Also the remuneration policies of the managing director and other executives shall be specified. This information will allow shareholders to evaluate the amount of remuneration in relation to the achievements of the company's goals. Other significant amendments to the Code include the obligation to issue a separate corporate governance statement including, among other things, a description of the main features of the internal control and risk management systems pertaining to the financial reporting process. The company is required to present its Corporate Governance Statement as a separate report together with the financial statements and the report by the board of directors. The board of directors shall also provide information on major risks and uncertainties that it is aware of and the principles around which the risk management is organised.

The revised Code will enter into force on 1 January 2009, however, it may be applied immediately after it has been issued. Finally, it is noteworthy that some of the revised recommendations requiring more compliance time will take effect at a later date, such as the gender representation in the board of directors, which will take effect on 1 January 2010. The Corporate Governance Statement shall be issued for the first time for a financial period commencing on 1 September 2008 or later.

Government Actions to Secure Unemployment Funds and Pension Institutions

Due to the current financial turbulence, the Finnish Government has decided to take steps to ensure the vitality of unemployment funds and pension institutions.

The Government has proposed amendments to the Act on Unemployment Funds (603/1984), with the aim of ensuring the liquidity of unemployment funds through additional regulation on risk management and internal supervision. The Government intends to safeguard profitable and secure investment of the unemployment funds' assets. The proposal would also increase the authorities' possibilities to supervise the finances of unemployment funds and would obligate the Boards of the funds to draw up investment plans. The Government Bill (HE 170/2008) was issued on 10 October 2008. The proposed changes are meant to enter into force as of the beginning of 2009.

The Government proposes also temporary amendments as regards the rules on financial solidity and investments of pension institutions. The intention is to ensure e.g. that pension institutions in the private sector do not have to sell their shares in Finnish companies in disadvantageous market situations. This is to be achieved by increasing the amount of the share profit bound technical reserves (in Finnish: osaketuottosidonnainen vastuuvelka) to 10 per cent of the technical reserves from 2008 through 2010. Also, the pension funds will be replenished in 2008 with only three percent of the fund interest. There is additionally a temporary comparison of compensatory liability (in Finnish: tasausvastuu) in the technical reserves with working capital. The Bill also proposes a reduction of the required minimum amount of the pension institutions' working capital which will be made independent from the pension institutions' investment spread. The Government Bill (HE 180/2008) was issued on 17 October 2008, and the proposed amendments are intended to enter into force as soon as possible. These temporary amendments would be in force until the end of 2010.

The European Parliament Approves Directive on Temporary Agency Work

The new Directive on better protection of working conditions for temporary agency workers was approved, without amendments, by the European Parliament on 22 October 2008. The Directive guarantees temporary agency workers equal treatment with the permanent personnel of the employer, e.g. as regards salaries, holidays, working time, rest periods and maternity leave. To a certain extent the protection of temporary agency workers is open for agreement between the social partners. Temporary agency workers must also be given the same rights as permanent staff to collective facilities, e.g. canteens, child-care facilities and transport services. The Directive seeks also to ensure that agency workers gain better access to training. The Directive is meant to inspire a greater degree of cohesion in national legislation on the topic. Incorporation of the Directive into national legislation is required within three years of publication of the Directive.

The Government Proposes Changes in the Act on Equality between Men and Women

The Government proposes an expansion of the provisions in the Act on Equality between Men and Women. The proposed changes are meant to reflect the requirements in the Council Directive 2004/113/EC of 13 December 2004 implementing the principle of equal treatment between men and women in the access to and supply of goods and services.

The provisions in the Equality Act on compensation and on prohibition of retaliatory action as well as provisions on legal measures available in case of prohibited retaliatory action, are meant to be amended to encompass providers of goods or services, as defined in the above-mentioned Directive. In addition, it is proposed that the employer's duty to give clarification is re-expanded to the scope it had before the amendments in the Act in 2005. This would mean e.g. that the duty to give clarification would encompass also termination of employment and suspicion of sexual harassment. The Government Bill (HE 153/2008) was issued on 3 October 2008 and the proposed changes are meant to enter into force at the beginning of 2009.

EU & COMPETITION

Commission revises Remedies Notice and amends Merger Implementing Regulation

The Commission has revised the notice on remedies acceptable under the EC Merger Regulation ("Remedies Notice") and adopted Regulation 1033/2008/EC which amends the Regulation implementing the EC Merger Regulation (802/2004/EC) ("Merger Implementing Regulation"). Remedies are commitments given by the parties concerned to modify the proposed transaction in order to eliminate the competition concerns identified by the Commission.

The revisions to the Remedies Notice and the Merger Implementing Regulation aim to ascertain more effective handling of competition concerns and to clarify to companies involved in transactions the best way of addressing competition concerns. The revisions reflect the Commission's practice on merger remedies, recent judgments of the European Courts, the conclusions of the Commission's Merger Remedies Study conducted in 2005 and comments received to the public consultation launched in 2007.

The revised Remedies Notice explains in greater detail than the previous notice, adopted in 2001, the general principles for the offer and acceptance of remedies, the different types of remedies, the procedure for the submission of commitments and the requirements for the implementation of the commitments. The main changes in the Remedies Notice include details on divestiture and access remedies as well as clarifications to the role of the Trustee.

The Remedies Notice emphasizes that remedies are only acceptable if they are viable and effectively eliminate the competition concerns identified by the Commission. On this account, the Remedies Notice stresses that a divestiture will only be effective in the hands of a suitable purchaser and, therefore, gives detailed guidance on how to identify such purchaser. The Remedies Notice also underlines the need to include all the assets and personnel necessary to ensure the viability and competitiveness of the business to be divested. Further, the Remedies Notice states that other types of commitments may only be accepted in circumstances where the other remedy proposed is at least equivalent in its effects to a divestiture.

In order to enable the Commission to better evaluate the viability and effectiveness of a proposed remedy, the Merger Implementing Regulation was amended by adopting a new remedies form ("Form RM"), which the parties must now use to provide the information necessary for the proper evaluation of the remedies offered. Form RM requires that the parties provide detailed information, inter alia, on the object of commitments offered and the conditions for their implementation, on the suitability of the commitments to remove the identified impediment to effective competition and, in relation to divestiture commitments, information about the business to be divested.

The amendments to the Remedies Notice and Merger Implementing Regulation entered into force on 23 October 2008 following their publication in the Official Journal.

IP & TECHNOLOGY

ECJ Rules on the Notion of "Extraction" of the Contents of a Protected Database

On 9 October 2008, the European Court of Justice gave a preliminary ruling on the interpretation of Article 7(2) a of Directive 96/9/EC on the legal protection of databases ("Database Directive"). In the ruling (Directmedia Publishing GmbH v Albert-Ludwigs-Universität Freiburg, C-304/07), the ECJ found that even in the absence of technical copying, the transfer of material from a protected database to another database may constitute an "extraction" of the contents of the protected database.

The University of Freiburg ("the University") published a list of verse titles called "The 1100 most important poems in German literature between 1730 and 1900" which was drawn up under the supervision of Professor Ulrich Knoop. Later a publishing company Directmedia started distributing a CD-ROM entitled "1 000 poems everyone should have".

Directmedia used the list drawn up by Professor Knoop as guidance in the selection of the poems for inclusion in its CD-ROM, but took the actual texts of the poems from its own digital resources. In the selection of poems, Directmedia critically assessed Professor Knoop's selection, omitting some poems and adding others. However, majority of the poems dating from the period between 1720 and 1900 contained on the CD-ROM had been mentioned in the list drawn up by Professor Knoop. Based on these facts the University, as the proprietor of the database rights, and Professor Knoop, as the proprietor of the copyright to the anthology, filed an infringement suit against Directmedia and claimed for damages.

The matter proceeded to the German Supreme Court, Bundesgerichtshof, which upheld the action brought by Professor Knoop as the compiler of the anthology and stated that the resolution of the dispute between Directmedia and the University depends on the interpretation of the Database Directive. The Court asked for a preliminary ruling from the ECJ on whether using the contents of a database in such circumstances constitutes an extraction within the meaning of the Database Directive, which the maker of the database may prevent.

According to the ECJ, the transfer of material from a protected database to another database following an on-screen consultation of the protected database and an individual assessment of the material contained in that first database is capable of constituting an extraction within the meaning of the Database Directive. Therefore, the maker of the database may prevent such transfer to the extent that that the operation amounts to a transfer of a substantial part of the contents of the protected database. The ECJ required no evidence of direct copying from the original database, setting the level of protection in practice relatively high as regards the copying of protected databases.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.