Finland

Researcher4113: The Ministry of Defence coordinates materiel policy and is responsible for export controls over defence materiel through the newly created (early 2015) Defence Forces Logistical Center. The materiel unit is subordinate to the Resource Policy Department. Defence forces' equipment, including vehicles and planes, have been sold in public auctions. The Army, Navy and Air Forces used to have their own Materiel Command, which took care of the sale, recycling or disposal of decommissioned materiel; these were disbanded and merged into the Logistics Command.

The Finnish Defence Forces rarely sell their property to other states or buyers. Obsolete or superfluous equipment is often destroyed and its material recycled. Scrap sales are then conducted and contracts concluded according to the procurement procedures and the sale is credited to the Defence Forces, unless the sale is very substantial; in these cases, it is the Government that decides on what to do with the income.

In the rare cases when the Finnish Defence Forces sell their equipment, the sale price is always public. This was the case for example in the anti-aircraft weapons sales to Estonia. However, an Army Procurement Officer was convicted in 2014 for bribery related to the sales contract of scrap metal disposal. The contract was estimated to value €6-8M: more accurate information does not exist, because the metal prices fluctuated during the contract period and the monitoring system of the Defence Forces failed to give an exact amount of the recycled metal. A recent study has also claimed that it has been difficult for the Defence Forces to evaluate the value of their assets (Saferglobe). This problem seems to point to the pitfalls in the monitoring and not to the publicity of disposal contracts; however, shortcomings in monitoring can facilitate corruption since they hinder tracking.

The expected net income from sale of property, compensations and royalties is included in the planned budget: 18,000€ in 2014. However, while the auctions and sales are publicly announced and the bids are public, specific information on actual income from particular auctions and sales is not available.

Researcher4113: The Materiel Command in the Army, Navy and Air Force were responsible for the co-ordination of material capabilities as well as steering, development and oversight of the acquisition activities. In early 2015, however, they were dismantled in order to create one, common Defence Forces Logistics Command. Information about how scrutiny under the new system will be conducted is not readily available. However, the MOD's Audit Unit conducts internal monitoring within the Defence Forces and independent scrutiny is performed by the State Audit Office (reporting to parliament); both would likely scrutinise asset disposal as a matter of course.

In 2014, an Army procurement officer was convicted by the Turku Court of Appeal for receiving a bribery, tampering of the sales contract and violation of official secrets when he managed in 2006 a tender of the Army scrap metal disposal. This suggests effectiveness of the oversight process. However, an independent researcher who investigated the case questions why the superiors of the convicted Officer did not intervene. Moreover, he implies that also other Officers were probably bribed by the bid winning company. A recent study has also claimed that it has been difficult for the Defence Forces to evaluate the value of their assets (Saferglobe). This problem seems to point to the pitfalls in the monitoring and not to the publicity of disposal contracts; however, shortcomings in monitoring can facilitate corruption since they hinder tracking.

Researcher4113: The Finnish intelligence budget assigned to the MOD (some intelligence services, affiliated with the police, are controlled by the Ministry of the Interior) is not listed within the budget. The Finnish Military was assigned 1,866,418,000 euros for the year 2016. The net expenditure is expected to be 1,898,300,000 euros. The expenditure is divided as follows:

* Salaries and recruitment: 791.2 million euros
* Assets: 404.9 million euros
* Properties: 262.7 million euros
* Conscription training and maintaining conscription: 173.6 million euros
* Other expenditure: 265.9 million euros.

There is more detailed information available about salaries, assets, properties and conscription training and maintenance, but no information on 'other expenditure'.

The budget does not disaggregate expenditure made on intelligence services. While it is possible that some of this expenditure is classified under 'salaries' or 'properties', it is reasonable to expect that a majority of it can be found within the 'other' expenditure category. The whole Ministry of Defence budget for the year 2016 is 2,885,927,000; the “other expenditure” of Military accounts for 9.21% of the MOD budget. Thus it can be estimated that the secret defence budget is over 8%. However, as this percentage is not made public by the government, the selected score is 0.

Researcher4113: Information regarding military intelligence is not publicly discussed, but it is provided to members of some parliamentary committees. Members of the defence, Foreign Affairs, and Internal Affairs Committees are given general information on these issues, including an overview of the budget year. However, interviews indicate that the Committee does not always feel satisfied with the level of detail for this information and that the information provided does not necessarily cover all items relating to national security. The Committee chair can request further information, but there is no information as to whether this yields improved detail. On a more general level, some of the Parliament's Committees feel that information is being withheld from them as is indicated by the Foreign Affairs Committee's media comments in the article cited above.

The parliamentary Audit Committee oversees the management of government finances and compliance with the budget, plus assessing of various reports on government finances and preparing them to be dealt with at plenary sessions. The Constitution gives the Audit Committee wider rights to information and these rights include all the relevant information concerning the auditing task, including classified information from the authorities and others under surveillance.

Score 3 has been selected to reflect the uncertainty regarding the level of detail provided to different committees.

Researcher4113: The parliamentary Audit Committee oversees the management of government finances and compliance with the budget, plus assessing of various reports on government finances and preparing them to be dealt with at plenary sessions. The Committee can accept matters belonging to its sphere of competence for deliberation and has a right to report on them to a plenary session. The Constitution gives the Audit Committee wider rights to information and these rights include all the relevant information concerning the auditing task, including classified information from the authorities and others under surveillance. There is nothing to suggest that the Committee does not have access to the audit reports prepared by the National Audit Office and containing classified information.

No evidence of parliamentary debate on the issue has been found.

Researcher4113: There is no evidence of or provision for off-budget state funding, although the law does provide for extra-budgetary expenditure: 11 different funds operated by the Ministry of Finance and the National Emergency Supply Agency. Out of these, the &quoute;Supply Security Fund&quoute; (Huoltovarmuusrahasto) is provided for the Ministry of defence, but it is not used to cover current expenses. Rather, the fund can be used to ensure the continuity of economic activities in exceptional circumstances. All regular defence sector expenditures are included in the state budget under the category 27.

RESPONSE TO PEER REVIEWERS: Score 4 selected as suggested by Peer Reviewer 2, and to reflect off-budget expenditures not being enabled in law.

Researcher4113: No evidence of off-budget expenditures has been found and interviewees confirmed that they did not occur. Recently the Minister of defence and a deputy leading the working group to prepare next major defence acquisitions have made comments in public about the need for 'off-budget funding' to cover prospective defence acquisitions (see the news items in sources). However, it is likely that what they were calling for was additional funding: an increase to the current defence appropriations and order authorizations.

RESPONSE TO REVIEWERS: N/A selected as off-budget expenditures are not permitted and there is no evidence of them occurring.

Researcher4113: The mechanisms for classifying information on the grounds of national security are regulated in the Act on the Openness of Government Activities. Chapter 7, Section 24 on Secret Official Documents states that the following categories of documents are to be classified unless otherwise provided:
(1) &quoute;the documents of the security police and the other authorities concerning the maintenance of State security'
(2) &quoute;documents concerning military intelligence, the supply, formations, locations or operations of the armed forces, the inventions, facilities, installations and systems used in the armed defence of the country or other defence, the other matters significant to the defence of the country, as well as defensive preparations, unless it is obvious that access will not violate or compromise the interests of defence”.

No evidence of scrutiny over the process of classification was found, but the right to appeal information being categorised as classified is guaranteed by the Openness of Government Activities Act and the Act on Administrative Judicial Procedure, which specify the relevant courts and authorities. The appeals can be lodged with the relevant Administrative Court or with the Supreme Administrative Court, depending on the classifying entity. There is evidence of previous appeals made to the Supreme Adminstrative Courts, such as, for example, the case cited above involving a journalist and the Finnish Security Intelligence Services, who disputed the ‘secret’ status of a document. The Supreme Administrative Court decided to keep the document secret because of national security reasons.

The defence Forces have internal guidelines on the classification of information that seek to instruct in detail the implementation of the Act on the Openness of Government Activities. In addition, the Legal Department of the defence Staff can be consulted by the officers needing legal support in their decisions on whether to classify a certain document or not. However, interviewees and previous experience (see Peer Reviewer comments) indicate that the classification mechanism of the defence Forces is not fully coherent: the same document can be accessible in one place and classified in another. The compliance with the Act varies to some extent depending on the unit or contact people. Collection of data for a research can take several months even when all the documents are non-classified.

RESPONSE TO PEER REVIEWER 2: Agree, score changed to 3.

Researcher4113: The national defence and security institutions do not hold such ownership, but the Finnish state is a majority owner of seventeen companies and a minority owner in twenty-two. Moreover, the state owns fifteen 'special assignment' companies, which have been made responsible for a specific task and do not operate in a competitive environment. The Government Programme for ownership policy includes the principles or 'open and consistent owner behaviour' and mention development of good corporate governance. (Valtionomistus, cited above).

The Finnish government owns 90.4 % of Patria shares (Patria being the only Defence company under
state ownership) and the overall responsibility over governance is under Valtioneuvoston kanslian omistajaohjaus (Corporate Governance Department at the Prime Minister’s Office).

The model for reporting states that the companies must report on their anti-bribery and anti-corruption policies and practices, describe their anti-corruption policies, principles or guidelines applied by the organization, and describe policies and procedures related to staff training in the organization’s anti-corruption activities. The report should also include percentage of employees trained in the organization’s anti-corruption policies and procedures, description of the assessment of corruption risks, percentage and total number of business units analyzed for risks related to corruption, and actions taken in response to incidents of corruption.

The Corporate Governance department has published a document that outlines the state-owned companies, the reasoning behind state ownership as well as details about individual companies under the state ownership. The document (Valtion Omistajaohjaus, p. 59) details Patria's net sales, net profit, equity ratio, net debt-to-equity ratio, return on equity, return on capital employment, pay-out, and the government received pay-out. The text also specifies how much money has been spent on investments and the number of employees in total as well as the number of employees in Finland. The report also states that the sister company of Patria, Millog, has made an agreement with the Finnish Defence Forces in the beginning of the year 2015. The agreement is expected to increase the revenues significantly and there has been an increase in orders compared to last year. It is also mentioned that Patria has signed the UN Global Compact agreement and is looking to build its ethical compliance.

Researcher4113: There is no evidence that the military owns any businesses. The Finnish state is a majority owner of seventeen companies and a minority owner in twenty-two; it also owns fifteen 'special assignment' companies, which have been made responsible for a specific task and do not operate in a competitive environment. The government owns 90.4 % of Patria shares (Patria being the only Defence company under state ownership) and the overall responsibility over governance is under Valtioneuvoston kanslian omistajaohjaus (Corporate Governance Department at the Prime Minister’s Office). The MOD or the armed forces do not play a part in exercising ownership rights on behalf of the state. Even small businesses supplying the armed forces (such as canteens) have been outsourced.

Since defence institutions do not own commercial businesses of any significant scale, they cannot be assessed for oversight of the same. N/A is appropriate.

Researcher4113: Another media source also pointed out that licenses for a secondary occupation for the military personnel are kept private. According to the State Civil Servants’ Act (11.5.2001/387), secondary occupations are allowed, provided that they do not undermine the person’s ability to perform his/her tasks or harm the employee with competitive activities. Evidence of large-scale unauthorized private enterprise was not found. The Finnish TV programme MOT, which focuses on investigative journalism, aired an episode on 31 March 2014 entitled “Finnish War Business”, which pointed out that a few elite soldiers at the Finnish Army work at the same time in private security companies - but with employer authorization.


RESPONSE TO PEER REVIEWER 1: As the secondary employment featured in the documentary is authorized and no other evidence of unauthorised employment has been found, score 4 was maintained.

Researcher4113: Although commitments to anti-corruption measures are rarely mentioned as such because of the scarcity of corruption charges in Finland, any concerns that do arise regarding corruption are addressed and investigated, with the investigation reports being made available to the public. The lack of public statements does not indicate that the issues are not taken seriously. However, the lack of actual cases and scandals makes it very hard to find large numbers of sources.

Publicity and transparency are strongly emphasised as a key Finnish value in overall political system. Because of that, commitment to anti-corruption is treated as an underlying principle and most do not see the need to address it separately. The openness and integrity of the administrative field of defence and in the defence and security sector more generally are regularly addressed through various sources and policies. There are also standards of conduct in the defence sector, mostly embedded in orders and policies, rather than a single Code of Conduct. The General Standing Order imposes standards of conduct on military personnel, prohibiting bribes and providing guidance concerning gifts and hospitality. It does not contain, however, any rules for dealing with conflicts of interest or post-separation activities. The Administrative Procedure Act (434/2003) lays down the practices of good governance for public servants and the State Civil Servants’ Act (19.8.1994/750) prohibits bribes (chapter 4, section 15) and imposes rules for secondary occupations (section 18) that apply to potential conflicts of interest. Since these regulations come with sanctions and there is evidence of bribery cases being investigated (see Q48), score 3 is appropriate.

Researcher4113: There are effective measures for pressing charges for corruption and established practices to execute court decisions. Military offences and bribery are dealt with through military court proceedings. The Act on Military Discipline and Crime Prevention in the Defence Forces (255/2014) and the Military Court Procedure Act (Sotilasoikeudenkäyntilaki, 326/1983) regulate investigation, charges, court proceedings and sentences for corruption-related crimes in the armed forces.

The Criminal Code of Finland (39/1889) also regulates offences against the public authorities in chapter 16, section 13, classifying active and passive bribery as a crime: “A person who promises, offers or gives to a public official in exchange for his or her actions in service a gift or other benefit intended for him or her or for another, that influences or is intended to influence or is conducive to influencing the actions in service of the public official, shall be sentenced for the giving of bribes to a fine or to imprisonment for at most two years.' Aggravated bribery - where the gift is of considerable value and/or the receiver is to act contrary to their prerogatives and to significant benefit to the offeror - is punishable by imprisonment between four months and four years to the offeror and a fine or up to two years' imprisonment to the official.

There is public evidence that the concerns of corruption have been investigated and the charges have been pressed when necessary. For example, some actions of leading generals have raised suspicions and they have been investigated. However, no charges have been pressed (see Maanpuolustus and Taloussanomat, above).


(2) Also a person who, in exchange for the actions in service of a public official, promises, offers or gives the gift or benefit referred to in subsection 1 shall be sentenced for bribery. Section 14 - Aggravated giving of bribes (563/1998). If in the giving of bribes (1) the gift or benefit is intended to make the person act in service contrary to his or her duties with the result of considerable benefit to the briber or to another person or of considerable loss or detriment to another person, or (2) the value of the gift or benefit is considerable and the bribery is aggravated also when assessed as whole, the offender shall be sentenced for aggravated giving of bribes to imprisonment for at least four months and at most four years.” Chapter 40, Section 1 also states that for accepting a bribe “he or she shall be sentenced for acceptance of a bribe to a fine or to imprisonment for at most two years.”

Researcher4113: Finland appears to rely on general principles of openness, integrity and transparency to prevent corruption and these are reflected in various acts and rules of procedure applying to public administration. However, there is no explicit legal protection for whistleblowers, and encouraging whistleblowing is seen as contradictory because while the authorities are obligated to expose malpractices and the abuse of power, they take the duty of confidentiality as binding. This has been noted in various reports regarding the position of whistleblowers in Finland (see the Transparency International and EU Observer sources above). Even in cases when whistleblowers might be required to make a report, there is no provision for protection nor any penalties for those who retaliate against whistleblowers. If a whistleblower is fired, they need to utilise courts in order to be reinstated. Some protection for whistleblowers is provided by the Employment Contracts Act (55/2001) that imposes the duty to compensate a possible unlawful dismissal. No cases so far have tested the general civil law provisions.

Whistleblower protection is currently being evaluated by the Finnish Ministry of Justice.

Researcher4113: Personnel in sensitive positions are subject to the same laws as any other civil servant, and subject to the same scrutiny and monitoring. No evidence was found regarding special attention being paid to their activities. The selection process in general is well regulated and enforced. Rotation obligation applies to all Officers and vetting is practiced in various recruitment procedures (though there are two levels of inquiry: a more in-depth process is run for those applying for higher positions). There are no post-retirement restrictions. The latter is particular has prompted public debate lately at the political level, as the former Minister of defence resigned from his post to accept a job in a lobbying organisation. Following the public outrage, the Minister of Justice set out to review existing provisions.

RESPONSE TO REVIEWERS: In the absence of evidence that special attention is paid to the selection, time-in-post, and oversight of sensitive employees and recognition that such posts might be more prone to corruption, score 1 has been selected.

Researcher4113: Information on personnel numbers is publicly available through sources such as in the annual report of the Finnish Defence Forces (linked above). According to the latest figures, at the end of 2013, 13,728 persons were employed in 'domestic tasks' (i.e. based in Finland) within the Defence Forces, and 5,233 were civilians. There is no reason to doubt the accuracy of the information.

Researcher4113: Examples of pay rates are openly published on the Internet site of the Defence Forces, but the salary is based on the level of the assignment as well as personal performance. The personal performance can not consist more than 37% of the salary and it is based on annual performance evaluations.

Additional payments and compensation, such as military exercises, can raise the salary. These are regulated by law, for example in General Collective Bargaining Agreement and some special decrees. Some basic allowances (for evening duty, relocation etc) are set for specific groups (such as conscripted officers).





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Researcher4113: The Employment Contracts Act regulates payment procedures and the process is well established. In 2011 and 2012, the Defence Forces had problems delivering additional payments (as compensations for late working hours) to personnel because of technical implementation difficulties with the new payment system. However, this was an isolated incident related to technical issues and there is no other evidence of any delays in payments.

Researcher4113: The appointment system is based on the Act on the Defence Forces, which states in its section 38 that “The President of the Republic appoints to a post and assigns to a duty the Chief of Defence, the Chief of Staff of the Defence Command, Generals, Admirals, the Defence Forces Chief Engineer, the Defence Forces Surgeon General and the Chaplain General. The President makes the decision on the appointment and assignment at a Government session on the recommendation of the Government. The President similarly assigns Defence Forces officers or special officers to the duties of Defence Attaché, Deputy Defence Attaché, Military Representative and Deputy Military Representative, and similar international duties.”

Section 40 on promoting in military or service rank notes that “The President of the Republic promotes officers to the military ranks of Second Lieutenant and Sub-Lieutenant as a military command matter and promotes officers to higher or comparative military ranks on presentation by the Chief of Defence.' The Minister of Defence presents candidates to the rank of Brigadier General, Commodore (and other comparative ranks) or higher. Some major nominations in the Ministry of defence have been criticized in the press, alleging that political orientation played a part in the selection (see the last three sources).

Since existence of independent oversight could not be verified, score 2 has been selected.

Researcher4113: According to the Ministry of Defence, the promotion of the personnel is normally based on pre-established career paths. Military ranks in the Defence Forces require some specific know-how and promotion is based on achieving these necessary skills. Promotions of officers and non-commissioned officers are based on years of service and merit.

The promotions are confirmed by the president (in case of the highest officers). There is a formal appraisal process. However, the justifications for a specific decision are not made public.

As existence of independent oversight could not be verified, score 2 has been selected.

Researcher4113: The Constitution of Finland (chapter 12, Section 127) states that “every Finnish citizen is obligated to participate or assist in national defence, as provided by the Act.&quoute; Exemptions can be granted on the basis of conscientious objection. Compulsory conscription for men is laid out in the Conscription Act (1438/2007) in chapter 1, section 2, which specifies that every male Finn is “liable for military service starting from the beginning of the year in which he turns 18 years old until the end of the year in which he turns 60.”

The practice of bribing to avoid conscription is explicitly forbidden by the Criminal Code of Finland (39/1889) (chapter 16, section 13 and chapter 40, section 1). Options alternative to military service also exist - one could perform civil service for example. This practice may help to decrease the number of people trying to avoid conscription by bribing. No evidence or allegations of bribing exists and no media reports have been found which document such an incident. Bribing in order to avoid conscription can thus be considered extremely rare. Based on the general impression from the overall data, score 4 appears more appropriate than any other.

Researcher4113: There is no specific policy or regulations preventing bribery in order to obtain a preferred post, but bribery is overall criminalized in the Criminal Code of Finland (39/1889, chapter 16, section 13 and chapter 40, section 1). Otherwise, The Act on Military Discipline and Crime Prevention in the Defence Forces (255/2014) regulates the prevention of crimes, court proceedings regarding military offences and the consequences of such crimes. Since no specific policy regarding bribery int he context of preferred postings exists; there is no evidence of bribery; and bribery is generally criminalised, score 3 has been selected.

Researcher4113: No evidence of the existence of ghost soldiers has been found. Given the use of electronic HR and financial administration systems, published salary rates and the separation of chains of command and payment, it would be difficult to create ghost employees and keep it secret for long.

Researcher4113: The chains of command are separate from chains of payment in the defence sector. Payments are regulated by the state payroll system, and consist of post-specific payments and personal payments. The post-specific payment is based on the competence of the task and it is evaluated with systems that assess the level and the responsibility of the task. The personal payment, which is at the most 37% of a payment, is defined in the annual development discussions with the employer. The state payroll system is not meshed with chains of command within the defence sector, with no exceptions, and is established through the Employments Contracts Act. Conscripts are paid through the social security system, eliminating any overlap.

Researcher4113: The Finnish administrative system standards are not based on a single Codes of Conduct. Good governance and the military integrity are imposed by the legal codes and administrative regulations.The General Standing Order imposes standards of conduct on military personnel. It prohibits all military personnel from bribing and accepting bribes and provides guidance concerning gifts and hospitality. It does not contain, however, any rules for dealing with conflicts of interest or post-separation activities. The Administrative Procedure Act (434/2003) lays down the practices of good governance for public servants and the State Civil Servants’ Act (19.8.1994/750) prohibits bribes (chapter 4, section 15) and imposes rules for secondary occupations (section 18) that apply to potential conflicts of interest.

Additional guidance is contained within the 2001 the &quoute;Principles of the State Human Resources Policy and the &quoute;State Administration Handbook&quoute; (Valtionhallinnon käsikirja) that applies also to the military and covers many topics related to the prevention of corruption. Both documents cover issues of bribery, gifts and hospitality and conflicts of interest are discussed in these documents. However, the conflict of interest parts do exclude prior-recruitment and post-separation activities. This omission created public criticism, when the former Minister of defence (and after Minister of Economic Affairs) resigned from his post of Minister to join a lobbying organisation in 2012.

RESPONSE TO PEER REVIEWER 2: Agree. Score changed to 3 and comments and sources added.

Researcher4113: There is evidence that the Code of Conduct included in the General Standing Order (see Q47) is effectively enforced. It is given as a military order and offences would be addressed with the sanctions described in The Act on Military Discipline and Crime Prevention in the Defence Forces (255/2014). This Act also regulates (in chapter 6, section 54) how and to whom the information of the disciplinary action should be given. Chapter 13, section 131 obliges relevant courts to communicate the decisions to military servants via the judicial administration’s national data system. Examples on the bribery cases in the military have been effectively addressed include a 2006 case in which two members of the Finnish defence Forces participating in the crisis management mission to Afghanistan were convicted. In 2014, an Army procurement officer was convicted for bribery related to the sales contract of scrap metal disposal.

The Code of Conduct for civil servants of the defence sector is also effectively enforced. Offences against the State Civil Servants’ Act (19.8.1994/750) are followed by a warning (section 24), dismissal (sections 25 and 26) or judgment based on the Criminal Code of Finland (39/1889, section 4). These prosecutions are made public (examples can be seen in the last two sources cited above).

Researcher4113: No evidence of specific anti-corruption training was found, although it is likely that since corruption is considered to be a crime and incompatible with good governance practices, anti-corruption issues could be included in general training. The interviewee has indicated that there is formal training that includes corruption issues, and is given to all military and civilian personnel as well to personnel in sensitive positions, but this could not be confirmed through publicly available sources.

Researcher4113: Trial information and documentation are automatically deemed public, as is basic information regarding trials and prosecutions. Some exceptions are foreseen in the law and parts of the proceedings can be classified if necessary; however, the name of the defendant, the charge on which they have been found guilty, and the sanction are always public information, as provided by the Act on the Publicity of the Court Proceedings in General Courts.

There is no evidence of undue influence on the courts and/or cases being suppressed. In one case, the accused were eventually found innocent: military officers responsible for a procurement that produced €650 000 losses to the defence Forces were suspected of having given false information about the in the tender process, but the charges were dropped as there was no evidence of the falsification.

Researcher4113: The Criminal Code of Finland criminalizes passive and active bribery of civil servants; sentences vary from dismissal of an official to a maximum of four years in prison. There is no distinction between bribes and facilitation payments, thus criminalising facilitation payments alongside bribes meant to get a public official to act in a way contrary to their duties. There is evidence that the law is effectively applied, such as the 2013 case in which a few businessmen were found guilty of bribery (Yle source above).

However, the OECD monitoring report has indicated that some loopholes regarding facilitiation payments to foreign public officials exist. Therefore, score 3 has been selected.

Researcher4113: No references to corruption as a strategic risk in operations were found in the Government Report on Finnish Security and Defence Policy 2012 and no military doctrine addressing corruption on operations was found. The issue also does not appear in staff manuals. The are some indications that the government does acknowledge the importance of corruption for military operations, however, it seems to be focussed on civilian aspects on missions. Fore example, strategic planning for crisis management operations points out these risks, and anti-corruption work is included to Finnish civil crisis management operations (Pörsti). The discussion focuses mostly on local corruption in Afghanistan as addressed by the civilian component of the mission (police, judiciary etc.).

RESPONSE TO PEER REVIEWERS: Agree, score lowered to 1 to reflect the priority of civilian-centred approach to corruption issues.

Researcher4113: The principles of anti-corruption (pertaining to the Forces themselves) are laid down in General Standing Order of the Defence Forces. Key personnel of the mission (Commanders, Service Managers as well as financial and procurement staff) are trained (3-5 days) in internal oversight, procurement and budget management usually twice (first at the general level in group, then personally at the operational level), but they are not examined. No specific anti-corruption training on operations (including those involving the local population and/or the mission's strategic objectives) has been found. Training or anti-corruption guidance are also not mentioned in the staff manuals. Interviewee 5 stated that there is a perceived zero-tolerance policy towards corruption generally, which might preclude the need for specific training.

One bribery case in a crisis management mission is known to public through the press. An interpreter and a Project Engineer serving in Afghanistan were sentenced one year in prison. Their supervisors (Colonel working as the Contingent Commander and Major working as Head of the Kabul Brigade) are suspected of failing to intervene, although they were aware of these irregularities but failed to intervene.

RESPONSE TO REVIEWERS: Agree. Score 1 has bee selected to reflect the existence of some training which can reduce corruption risks, but lack of specific anti-corruption modules addressing the significance of corruption as a risk to mission objectives and other mission-related challenges.

Researcher4113: The Finnish Defence Forces mostly deploy under the auspices of international organizations such as the United Nations, European Union, OSCE, and NATO and are therefore bound by their mandates. The political control of military crisis management belongs to the Ministry of Foreign Affairs and the Ministry of Defence. The Ministry of Defence delegates tasks concerning participation in operations and maintaining operational readiness to the Defence Forces.

No evidence was found regarding corruption risk monitoring in the field. Financial administration of the missions is audited by the Finnish defence Forces and the National Audit Office; however, the publicly available summaries of of the Audit Office give no indication that corruption monitors are deployed. The purpose of the audits is not to detect corruption per se, but to follow the Finnish regulation. In a way, the audit is able to detect mismanaged resources but whether this is a corruption monitor is questionable.

The General Staff leading the operation audits larger missions twice a year, smaller operations less regularly (the objective is to audit every mission at least once a year). Audits focus on procurement and they are not carried out solely to diagnose corruption risks, but they examine the efficient use of resources in many ways. Internal audits are for the most part confidential but the State Audit Office reports are public.

Score 2 was selected as mission accounts audits are in place.

Researcher4113: The Defence Forces website states that financing of participation in military crisis management operations is shared by the Ministry of Foreign Affairs and the Ministry of Defence. The troops’ equipping and materiel expenses, as well as participation expenses in military observation operations, are covered by the main division of the Ministry of Defence. Financing for each new operation is organized separately. Total annual expenses of crisis management are around 100 million euros. In addition, costs arising from combat equipment used in operations and training the troops in international exercises are covered by the Defence Forces’ budget. The equipment of troops in international operations is mainly the same equipment used in our own national defence. These expenses are included in the Defence Forces’ budget. The procurement of the equipment is regulated in the Government decree on Public Defence and Security Procurements (29.12.2011/1536)19 and in the Act on Public Defence and Security Procurements (29.12.2011/1531)20. Above certain euro amounts, the contracting rights are transferred back to Finland. The contracting rights of the operation commander are quite limited and above a certain financial threshold, contracting activities are transferred back to Finland. In two on-going operations, procurement is outsourced to a Finnish company.

Key personnel of the mission (Commanders, Service Managers as well as financial and procurement staff) are trained (3-5 days) in internal oversight, procurement and budget management usually twice (first at the general level in group, then personally at the operational level). However, while the Ministry of Defence states on its website that the personnel on peacekeeping mission receive extensive training before starting at the mission, there’s little evidence that the training involves specific anti-corruption elements.

The Ministries conduct all activities, including contracting, in line with Finnish laws and regulations. Even without formal and specific training or guidelines on how to address corruption risks, anti-corruption is understood to be part of a principles of good governance that need to applied in all activities. However, operational environments have their own specific challenges and pressures (for example the impact of contracting on the local environment and suppliers) which may not always be covered by general rules of procurement.

Researcher4113: Private military contractors may be employed in international cooperation managed by international organizations but Finland does not participate in these costs or in hiring PMCs. However, the Ministry of defence acknowledges that it is sometimes difficult in practice to contract a company different than the one already used by other troops in the mission (in the Bosnian case, the Finnish defence Forces used the same company as the American troops).

There is no evidence of the use of PMCs in military operations. Some PMCs provide civilian-focussed services to troops in the field (construction, catering, laundry, garage, real estate services etc.). The sector is no a large one in Finland, possibly due to the perception that national defence should remain the prerogative of the state.

Finland is signatory to the Montreux Document and the International Code of Conduct for Private Security Service Providers (ICoC), both of which lay out good practices and guidelines when it comes to employing PMCs. The Document stipulates that PMCs should be subject to the criminal laws of the country contracting them and the country on whose territory they are registered and operate. It stipulates that when hiring a PMC, the state employer should ensure that the PMC has not been involved in organised crime, bribery, and corruption, and that its staff are properly trained, which includes anti-corruption training. The Document further encourages employing states to ensure that PMCs have policies against corruption. (3)However, the provisions of the Document are not legally binding, although the International Code of Conduct Association assesses PMCs' suitability to join the Code and audits their performance. It is, however, unclear to what extent this is effective, particularly as standards are still being formulated.

Score 2 has been selected to reflect lack of prohibition on employment of PMCs combined with the existence of some regulations and small size of the sector.

Researcher4113: The Act on Public Defence and Security Procurement (29.12.2011/1531) and the Government Decree on Public Defence and Security Procurement (29.12.2011/1536) regulate defence and security procurement. There is no specific clause on corruption risk but the principle of anti-corruption is addressed with different articles imposing the openness of the acquisition process as well as publicly available information on tender processes; the Act also excludes companies convicted for corruption from tendering. Some items are exempt from these laws due to secrecy or the character of the acquisition (laid down in chapter 2, sections 7 and 8). The European Defence Agency’s Code of Conduct on Defence Procurement (CoC) and Code of Best Practise in the Supply Chain (CoPBSc) regulate the European defence markets and bind participating countries politically, even though they are not legally binding. The CoC is valid if the article 346 of TFEU is used, i.e. for items exempt from regular procurement procedures. (Mikkola, Anteroinen & Lauttamäki 2012, 161).

There is evidence that the law is enforced; for example, there has been a recent debate in the Parliament surrounding whether or not recent truck acquisitions are subject to this legislation (see press release above).

A 2008 estimate discussed in an article published in the largest newspaper (Helsingin Sanomat, 2008) is that one fifth of public procurement is kept secret and the majority of these are made by the Defence Administration. However, some of the procurements first classified as ‘secret’ do not remain so, but are later announced by the Ministry of Defence.

The article states that on average, 690 million euros are spent on secret security and defence procurement per year, which are not within the scope of laws on public procurements (Helsingin Sanomat 11.7.2008). The providers cannot appeal to court if they feel the secret decisions were made based on questionable grounds.

These findings are based on the Ministry of Defence’s working group, which recently assessed for the first time the extent of these secret procurements. Even within the new Act on Public Defence and Security Procurements, which came out in 2007, secret procurements were left unregulated on purpose. The working group, unofficially translated as 'Legislative working group for defence-, security- and secret procurement' (puolustus-, turvallisuus- ja salassa pidettävien hankintojen lainsäädäntötyöryhmä) produced proposals for a new law regarding public defence and security procurements.

Researcher4113: As laid down in the Act on Public Defence and Security Procurements (29.12.2011/1531) (chapter 14, section 86), the documents and right to information on public security and defence procurement are regulated by the Act on the Openness of Government Activities (621/1999). The Finnish Defence Forces Logistics Command is responsible for the procurement process, starting with acquisition through maintenance and disposal of assets.

The principle of openness is, however, not applied to secret defence and security procurements, as stated in chapter 2, sections 7 and 8. The contracting entity must publish an acquisition record (chapter 6, section 28) as well as its decision with justifications (chapter 11, section 74), appeal directions and adjustment instructions (section 77). According to the government estimates, less than 1% of the defence procurement processes are secret: a few cases per year.

Researcher4113: The primary oversight mechanism is the tenderer's right to appeal the decision to the Market Court guaranteed in the Act on Public Defence and Security Procurements ((chapter 15, section 88, 29.12.2011/1531). Within the same Act, Chapter 16, section 109 states that in spite of the secrecy clauses of the Act on the Openness of Government Activities, the contracting entity has to give necessary information of its procurement and acquisition process to Finnish authorities and European Union’s organs for procurement oversight and for information change. Most decisions of the Market Court, including those where the Defence Force is a party, are publicly available at www.markkinaoikeus.fi (in Finnish).

Procurement processes and decisions are also audited by the internal oversight and the National Audit Office. The NAO's 2013 audit reported that &quoute;there were substantial shortcomings in the monitoring of budget authorities in two key accounting units - the Defence Forces and the Finnish Transport Agency.&quoute; The shortcomings in the Defence Force's accounting units were related e.g. to good budgetary practices and the accuracy of the authorization process for acquisitions: the Office observed that the defence Forces have used outdated acquisition authorizations against the norms (i.e. the duration of authorizations have been extended, even though it is not permitted by the Budget Law § 10). The State Audit Office was not able to identify which acquisitions are included in the €19,1 million, the total sum of the outdated authorizations. The issue was later clarified by the armed forces, which were required by the government to respond to the findings.

There is no evidence of NAO activities flagging with changes in government.

Researcher4113: All defence purchases are made public in accordance with the Act on the Openness of Government Activities, except for secret procurement procedures (as listed in the Act on Public Defence and Security Procurements Chapter 2, sections 7 and 8). There is evidence that the majority of defence purchases are disclosed to the public and information regarding planned major purchases is available well in advance. For example, the Defence Forces announced in 2012 that it would acquire missiles from Germany, estimated to arrive in Finland in 2014 (see MTV article above); examples of information regarding smaller purchases by the Defence Forces can be found in the sources. However, the strategic-level documents do not contain specific long-term purchasing plans, which means that information on forward purchases might be fragmented.

Researcher4113: Required procedures and standards differ in each acquisition process depending on the demands of the contracting unit. Chapter 8, section 50 in the Act on Public Defence and Security Procurement states that the contracting unit can demand reports concerning the financial position, technical performance, professional competence, information security, maintenance and supply security and the quality of a candidate or provider. Companies that are convicted, for example, of corruption or other crimes will be excluded from the tender (chapter 8, sections 47-49). There is, however, no requirement that companies should have full compliance programmes in place, and neither do the requirements constitute an anti-corruption clause.

Researcher4113: The 2012 Government Report on Finnish Security and Defence Policy, along with the Budget Proposal, set up the guidelines for procurement. The guidelines state that procurement planning must be derived from the defence strategy, as defined in the Finnish Security and Defence policy. The strategy is publicly available and debated in Parliament. However, the strategic document contains mostly general principles of and major factors affecting defence acquisitions, such as increasing life-cycle costs and the need for interoperability and international defence cooperation; it does not contain specific requirements. It is also unclear whether there is audit verification of whether particular purchases are derived from the Strategy.

Researcher4113: The defence administration aims at securing the maintenance and supply, emphasizing international cooperation, ensuring the interoperability of the materiel and to take into account the possibilities of Nordic and European collaboration in acquisitions (see MoD source above). Interviewee 5 also suggested that some procurement processes might be used to support Finland's own defence industry. However, this is not a formal policy.

General materiel policy is prepared by a steering group at the Ministry of defence, which also makes preliminary assessments and prepares acquisitions. For major acquisitions, a specific working group is established to identify the needs and requirements and research what is available on the market (see 'Hornet fleet'). However, there is a strong suggestion of occasional irregularities in everyday procurement, with rationales and justifications for smaller purchases not always readily available (Kopponen). In another case, a communications technology procurement process continued. after being investigated and questioned by the Auditing Unit; it was finally referred to the prosecution service. (Miljoonafiasko, Armeijan viestivälinekaupat).

Researcher4113: The the acquisitions process is conducted in accordance with national and European Union legislation. It is based on clearly identified and openly published principles, which are competitiveness, comprehensive economic benefits and equal and confidential treatment of the providers. An open competition takes place in the majority of cases, except for the limited circumstances defined in the law. Single-sourcing can be used in direct acquisitions that exceed the EU threshold value, for example, due to urgency or lack of providers. Single-sourcing can be also used in the direct acquisitions that fall below the EU threshold value, if the contracting unit cannot organize tender due to the matters of national defence, national security or maintenance and supply security.

Circumstances that justify single-sourcing include secret acquisitions, government-to-government acquisitions, purchases based on international agreements and research and development cooperation agreements, acquisitions regarding transfer of the troops and acquisitions during operations or for specific technical reasons. Single-sourcing is also used for practical reasons: when the original procurement item, such as a helicopter, has a long lifetime and spare parts are provided only by the manufacturer of the original item.

Parliament has a degree of oversight over the procurement process: for example, in 2013 MPs questioned the need to exempt a procurement process from the usual provisions of the Procurement Act (see press release).

Researcher4113: Finland conducts competitive procurement and utilises tender board, with key actors in the process being the steering group of material policy and the commercial steering group. No evidence on codes of conduct of the tender boards was found, but the defence acquisition policy, planning, decisions and implementation is spread to multiple different entities within the administrative field of defence. This diminishes the risk of corruption and raises the possibilities of oversight, as all the different bodies operate independently of each other. Laws applying to all civil servants and regulating issues such as conflict of interests also apply to members of tender boards. There is also a right to appeal decisions to the Market Court. The oversight is also conducted within the Defence administration by various auditing bodies, as well as by an independent external actor, the National Audit Office. In 2013, the NAO audited the acquisition of the port services of the minelayer Pohjanmaa, concluding that the tender did not confirm to the competitive bidding regulations.

Score 3 has been selected as it is not clear that all tender board decisions are automatically audited and results published.

Researcher4113: There is various and effective legislation in place to discourage and punish collusion in Finland. The Act on Public Defence and Security Procurement (29.12.2011/1531) contains different grounds of exclusion as well as prerequisites and demands for assessing the bidder’s suitability. In addition, tender cartels and collusions are forbidden in all OECD countries including Finland. The Competition Act (12.8.2011/948) also bans restrictive practices between the companies. Offending companies can be debarred from future procurement and fined.

The laws are well enforced; for example the 2012 press release cited above states that the acquisitions are put out on tender and made in line with the Act on Public Defence and Security Procurements.

Researcher4113: The procurements staff are subject to similar laws and codes of conduct than all authorities in public administration, and organised into materiel units. No specific evidence was found regarding training on overseeing the reports and delivery of the contractors. However, the Commercial Sector of Defence Forces’ Material Department conducts acquisition steering, which includes training of procurement staff, overseeing the acquisition and developing the organisation of acquisition activities, acquisition process and staff capabilities. No evidence of specific shortcomings has been found.

Researcher4113: The Act on Public Defence and Security Procurement (29.12.2011/1531) in Chapter 15, sections 87-90, provides for the right of appeal decisions to the Market Court and lists the procedures of the appeal process.
An appeal needs to be filed within two weeks unless otherwise stated. The Market Court’s decision can then be appealed to the Supreme Administrative Court.

No specific legislation on protection from discrimination was found apart from the general provisions of the Procurement Act which prohibits discrimination of tenderers. The number of complaints in the Market Court, however, is an indication that companies do not fear discrimination; moreover, one company is known to have filed a complaint regarding a procurement decision, only to be awarded another contract later on. There is thus evidence that filing complaints does not prevent companies from working with the government in the future.

Researcher4113: Suppliers convicted of an offence such as bribery, tax fraud, and money laundering are excluded from the bidding process and debarred in the future, as provided by the Act on Public Defence and Security Procurement. Companies can also be fined for corruption-related offences (up to EUR 850,000). There are examples of companies being fined for bribery and an example of a company being excluded from tendering after it sold products based on the Defence Forces’ models to third parties, even though it was prohibited by the procurement contract.

RESPONSE TO PEER REVIEWER 2: Agree, score revised to 4 as both administrative and legal sanctions exist and are applied.

Researcher4113: After the EU Directive on defence and Security Procurements in 2012 hardened the possibility for offset deals, Finland has not concluded any offset contracts. However, it is still legally possible (the Article 346 of the Directive allows exceptions when the offset arrangement would protect the essential interests of national security). Furthermore, offsets were common practice before and several contracts concluded under the prior rule are still in force.

Rules on Industrial Participation in Defence Equipment Procurement issued by the Ministry of Employment and Economy regulate offset contracts. In principle, no industrial participation is required from the supplier. However, an exception to this principle may be made if the result is contrary to the essential interests of the state's security. Under Article 346 of the Treaty on the Functioning of the European Union (TFEU), &quoute;Finland is entitled to make defence procurement that is essential for national security without complying with the provisions of the aforementioned directive and to follow so-called national contract award procedures, so an obligation to engage in industrial participation may thus remain a precondition&quoute;. Supply contracts are subject to the condition of offset usually if the value of the procurement exceeds 10 million.

In Industrial Participation agreements, the cooperation between Finnish defence industry and a foreign supplier is emphasized. The administration of industrial participation is governed by the Ministry of Employment and the Economy and the Finnish Committee on Industrial Participation under the Ministry. The contracting party in industrial participation agreements is the Finnish Ministry of Defence.

While there is no explicit obligation to address corruption risk in offset negotiations, a template offset contract includes strong language in diligence requirements: it requires the provision of “true and correct information” and the government representatives must have “at all times access to all necessary documentation in which the Contractor and third parties (including Finnish exporters) are involved”. The Ministry of Employment and the Economy monitors the implementation of offset contracts and reviews individual projects before their acceptance. It performs audits from time to time by visits to the production sites.

Researcher4113: As the Rules on Industrial Participation in Defence Equipment Procurements state (chapter 9.2.), the information concerning the Contractor’s industrial participation obligation and its implementation will be treated as confidential in accordance with the Act on the Openness of Government Activities (621/1999). The Act restricts the information that can be made available regarding offset contracts, as it attempts to protect confidential information provided by suppliers (para 24.1) After the contract is concluded (in cases of non-classified procurement), the award decision is public and it always mentions the offset obligation for the winning company. However, the decisions of the Finnish Committee on Industrial Participation (FCIP) concerning individual offset transactions are not public.


RESPONSE TO PEER REVIEWER 2: Information provided indicates that only the basic details of the offset programme are released. Score 1 maintained.

Researcher4113: The issue of competition regulation is not addressed in either the Act on Public Defence and Security Procurements, or the Rules on Industrial Participation in Defence Equipment Procurements. The interviewee, however, indicated that there was a level playing field. When the government acquires foreign goods/services, it follows a normal procurement process (including an offset criterion to the overall selection criteria) and it prepares two interlinked contracts with the winning company 1) procurement contract, 2) offset contract. Due to this linkage, the winning company is bound by the same rules as in the normal procurement process. These rules apply during the entire validity of the offset contract.

However, a foreign company that is obliged to purchase from Finland is not obliged to follow any public procurement rules in its offset projects.The company submits its proposal to the Finnish Committee on Industrial Participation (FCIP) in the Ministry of Employment and Economy to validate its compensation transactions . The FCIP bases its decisions on the qualifying criteria in the Rules on Industrial Participation; it also hears from the Finnish partner company of the foreign contractor.

Researcher4113: Usually intermediaries are not used and contracts are signed directly with the provider. There are, however, international companies which are represented through their regional sales offices in Finland. These offices usually submit tenders, not the parent company.

National legislation concerning intermediaries in procurement cycle was not found, but the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions states (article 1), that “Each Party shall take such measures as may be necessary to establish that it is a criminal offence under its law for any person intentionally to offer, promise or give any undue pecuniary or other advantage, whether directly or through intermediaries, to a foreign public official, for that official or for a third party, in order that the official act or refrain from acting in relation to the performance of official duties, in order to obtain or retain business or other improper advantage in the conduct of international business.” Score 2 has been selected to reflect limited use of intermediaries and the existence of some applicable international regulations.

Researcher4113: According to the information provided in the Defence Ministry’s press releases, prior to the signing of procurement contracts the Ministry publicly announces information on the procurement process, including the content of the procurement, time of delivery, total price of the procurement, the name of the supplier, the signing date, and whether the financing has been taken into account in the defence budget (see MoD press releases above).

At the time of the procurement, the Defence Forces have already the needed financing allotted in the budget that is a public document. Therefore, the financing arrangements of major arms deals are already included in the call for tenders.

If a pre-payment before the delivery is agreed, the State sets a minimum amount, above which the State recuperates the interest rate benefits

Researcher4113: The Act on Public Defence and Security Procurement (29.12.2011/1531)20 (chapter 9, sections 60-62) notes that the procurement entity can demand the supplier to declare which part of the procurement contract will be sub-contracted and who will be the sub-contractor. The procurement entity should define the requirements of sub-contractors in its procurement announcement. There is no evidence of anti-corruption programmes being required by the Government.

There are no formal rules that oblige the government to require sub-contractors’ adherence to anti-corruption programmes. While the issue can be raised during the dialogue between the government and the contractor, there is no evidence that it is. For the reasons of risk management and security supply, the Defence Forces require documentation on the supply chain management plans to guarantee that the main contractor will be able to comply with the contract.

Rules for the exclusion from tender identify cases when bidders can be excluded from participation. Only the cases mentioned in these rules can justify an exclusion. They include convicted crime cases (e.g. companies convicted for money laundering, organized crime, fiscal fraud, making false declarations and bribery), cases related to the financial solvability and cases when the “company has been found unreliable to the extent that the State security risk cannot be excluded.&quoute; However, it is not clear whether these provisions apply equally to suppliers.

RESPONSE TO PEER REVIEWER 2: Comments accepted an added. However, as they do not pertain directly to subcontractors, score 0 was maintained.

Researcher4113: According to the Defence Ministry, key principles of defence acquisitions are competition, comprehensive economic benefits and confidential treatment. Remarks made by the Minister of Defence, Carl Hagglund, in interviews emphasize the importance of the capacity and the price-quality ratio of the acquisitions. Evidence of political influence by selling nations was not found in the media materials nor in the interviews. The press materials hinted at some corruption issues, which were domestic, or involved Finnish companies selling defence materials abroad, but they do not support doubts related to seller nation influence.

However, there is some evidence of the significance of Finnish political alignment in purchasing. According to a study conducted at the University of Helsinki (Virta), the international political context after the dissolution of the Soviet Union influenced heavily the Finnish procurement of the Hornet military aircraft from the United States. However, there is no evidence that the United States would have initiated the deals or influenced Finland in another way.

RESPONSE TO PEER REVIEWER 1: As there is some, although not significant, suggestion of seller nation influence in the past, score 4 was not awarded. As discussed previously, verification of purchases and their compatibility with long-term strategies is also not comprehensive; therefore, risks cannot be excluded.