9.5 tips on doing business in Scandinavia

1. Do not underestimate cultural differences: Be prepared for a very direct approach. Scandinavians say what they think a little more openly than the British. While Scandinavians speak English to a fairly high level, more complex English terminology or legal terms may be misunderstood or misinterpreted, so attend important meetings with someone who has good command of the native tongue.

2. Scandinavia is highly taxed zone: While basic rate corporation tax on company income and gains is comparable to the UK, personal income tax can be as high as 60 per cent. Take advantage of tax breaks and other incentives, and always consider where gains or losses will be crystallised.

3. There are important differences in the legal system: The main difference to grasp is that the civil code system is adopted in Scandinavia, meaning a greater number of laws are set out in the statutory codes rather than in the UK where we rely on a very real combination of common law, statue and equity. Contractual documents are therefore shorter and “speak” to the civil code by reference. Local commercial courts are very important, as they will hear any dispute that arises and have quite far reaching powers on interpretation. Local government laws, particularly on environment and tax, can differ considerably across the region, so good local advice is essential.

4. Employee protection is high on the agenda: There is a strong social democratic political backdrop to Denmark and Sweden. A particular area of concern for UK companies is restrictive covenants placed on key employees. These are used frequently in the UK to ensure a company is protected by requiring key employees not to compete with the business once they leave. In Scandinavia, on the other hand, it is typical that the employer has to pay at least half the employee’s salary during the restricted period.

5. Business set-up costs and timescales are different: People often forget that there are minimum capital requirements needed to set up a company in Scandinavia. Unlike the UK where a private limited company can be set up for £1, minimum capital requirements in Scandinavia range from around £800 to £50,000. Care and advice should be taken when setting up the trading operation, and the capital requirement and statutory rules on formation need to be correctly dealt with and filed. Setting up bank accounts can be time consuming. The need to comply with money laundering regulations and anti-terrorist legislation can also be very protracted.

6. Be aware of different intellectual property rights: Scandinavia has a highly developed registration system for intellectual property that deals with trade and service marks, copyright and patents. Copyright has a very wide catchment in the UK covering all literary, musical and artistic works. The Scandinavian definition is not as broad and is more dependent on “registration” for copyright protection to take effect. In Denmark there is a separate category of protection for new inventions that will enable some form of limited protection without the need for a full-blown formal patent. While there is no common law equivalent of “passing-off” the relevant trades acts in each jurisdiction provide similar protections to safeguard against the appropriation of ideas, trade secrets or confidential trade knowledge.

7. Buying property means taking over an existing mortgage: It is common for the mortgage or loan on a property to transfer to the new owner as part of the transaction, so the new owner simply takes over the loan instead of applying for a new mortgage. Also, the purchase contract is signed very early on in the process, conditional on the investigation of the property title. This contrasts starkly with the UK where the contract is signed following all investigation.

8. Currency movements can affect you: We advise clients to consider at length the impact of currency movements on the contracts they are entering into in the Scandinavian region. Where appropriate, we advise on currency hedging agreements to mitigate currency rate fluctuations and provide for downside protection in the contract to protect you legally in Scandinavia.

9. Seller beware: Unlike the UK where the onus is generally “buyer beware”, in Scandinavia there’s more inbuilt protections in the legislation that protect the buyer. Great care should be taken with the sale or exit of assets in Scandinavia, as there are likely to be greater obligations placed on the seller in terms of legal responsibility for the asset you are selling.

One last tip: don’t go speeding when you drive. Fines tend to be based as a percentage of your annual income rather than a fixed fine. That could be an expensive dash back from the office party!

Paul Corren is managing partner at Anglo-Scandinavian law practice Corren Troen.

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