Industrial participation promotes development work and security of supply in Finland 

Objectives of industrial participation

The objective of industrial participation with respect to the defence and security industry that is critical for the national defence, state security and functions vital to society is to

  • develop and maintain the production, technology and expertise and
  • improve and safeguard the national security of supply. 

Industrial participation ensures that the technology and expertise that are critical in terms of the security of supply relating to the defence materiel to be procured will be available to the armed forces even during a crisis and in emergency circumstances similar to a crisis.

Industrial participation may be direct or indirect. Direct industrial participation is in question when cooperation between foreign and domestic industry relates to the system to be procured: participation ensures that the technology and expertise critical for the security of supply relating to the defence materiel to be procured will be available to the armed forces even in a crisis situation and similar emergency circumstances.

It is a question of indirect industrial participation when the cooperation concerns the transfer of technology and expertise important with respect to the key security interests of the state to the Finnish defence and security industry 

EU defence market opened for competition

As a rule the Member States are obliged to carry out their defence and security procurement through competition as specified in the EU’s Defence and Security Procurement Directive (2009/81/EC). Deviations from this principle are only allowed under the exceptions defined in Article 346 of the Treaty on the Functioning of the European Union (TFEU). Thus, Finland, too, entitled to make defence procurements that are essential for national security without complying with the provisions of the said directive and to follow national contract award procedures. In procurements of this type, an obligation to engage in industrial participation may thus remain a precondition.

The necessity for and the extent of this obligation shall always be assessed in each individual case by the procurement authorities, and the justifications shall meet the conditions for the application of Article 346 TFEU. The rules on industrial participation from 2012 (rev. 25 April 2013 and 11 May 2017) apply to any such contracts concerning industrial participation.

The compensation rules concerning Finland’s defence equipment procurement from 2002 apply to the industrial participation contracts currently in force. These procurements took place before the EU’s Defence and Security Procurement Directive entered into force and was implemented in Finland on 1 January 2012.

Ministry of Economic Affairs and Employment governs industrial participation in defence procurement

The Ministry of Economic Affairs and Employment and the Finnish Committee on Industrial Participation are responsible for the practical governance of industrial participation, together with foreign defence materiel manufacturers. However, the Ministry of Defence acts as the contracting party in industrial participation agreements associated with a procurement contract.

The Finnish Committee on Industrial Participation is chaired by M.Sc. (Eng) Markku Ihantola. Practical arrangements for the committee meetings and matters relating to the governance of industrial participation are handled by the committee’s secretariat in the Ministry of Economic Affairs and Employment. The committee meets about six times each year, and its members represent the Ministry of Defence, the Ministry for Foreign Affairs, and the Ministry of Economic Affairs and Employment.

Contact details:
Finnish Committee on Industrial Participation
Ministry of Economic Affairs and Employment
PO Box 32, FI-00023 Government
fcip(at)tem.fi

Further information:
Marjaana Aarnikka - marjaana.aarnikka(at)tem.fi
Henri Backman - henri.backman(at)tem.fi