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Parliamentary Ombudsman: Prime Minister was not disqualified in the Terrafame matter

Today, Parliamentary Ombudsman Petri Jääskeläinen issued a decision on 22 complaints requesting an investigation on the disqualification of Prime Minister Juha Sipilä in the capitalisation of the state-owned Terrafame Group Ltd. The conclusion of the Parliamentary Ombudsman's decision was that Prime Minister Juha Sipilä was not disqualified under the Administrative Procedure Act in relation to this matter.

Background

The question was whether Prime Minister Juha Sipilä was disqualified to participate in the decision-making regarding the capitalisation of Terrafame Group Ltd due to the fact that Katera Steel Oy, owned by Mr Sipilä's relatives, has had a piecework agreement regarding an ore conveyor with Terrafame Ltd, a company engaged in mining activity. The continuing operation of Terrafame Ltd has been dependent on state capitalisation through Terrafame Group Ltd. The EUR 100 million appropriation, proposed by the Government and later approved by the Parliament, was estimated to cover mining activity costs until the summer of 2017.

The grounds for disqualification specified in the Administrative Procedure Act concerning officials apply to the Prime Minister. The Parliamentary Ombudsman has inspected Prime Minister Juha Sipilä's actions in the capitalisation of Terrafame Group Ltd under interest disqualification and the general disqualification clauses.

Interest disqualification

Under the so called interest disqualification specified in the Administrative Procedure Act, an official is disqualified for example when a specific benefit is foreseen for the official's children. In this respect, the question is whether a specific benefit could have been foreseen for the Prime Minister's children following the capitalisation of Terrafame Group Ltd due to the fact that they have owned 5% of Katera Steel Oy through Fortel Invest Oy, a company owned by said children.

The Parliamentary Ombudsman has inspected the potential benefit caused by a) making the piecework agreement, b) fulfilling the piecework agreement and c) regarding the future business of Katera Steel Oy.

Based on the report available to the Parliamentary Ombudsman,

  • there is no connection between the capitalisation and making the piecework agreement
  • the ore conveyor would have been ordered even if the mine had been deemed to be shut down, and in this case, the state would also have been ultimately responsible for the costs of the piecework agreement as a part of the shutdown process
  • Katera Steel Oy has previously only made one small order from the Talvivaara mine, and the commercial success of Katera Steel Oy is not reliant on Terrafame Ltd and the continuation of its operation.

For these reasons, the Parliamentary Ombudsman concludes that the capitalisation of Terrafame Group Ltd has not included any "foreseeable" or "specific" benefit to Prime Minister Sipilä's children. Thus, under the interest disqualification intended in the Administrative Procedure Act, Prime Minister Sipilä has not been disqualified to participate in the preparation and decisions concerning the capitalisation of Terrafame Group Ltd.

General disqualification clause

Under the so called general disqualification clause of the Administrative Procedure Act, an official is disqualified if his or her impartiality is compromised for another special reason.

In the evaluation under the general clause, the Parliamentary Ombudsman has taken into account the fact that Prime Minister Sipilä's uncles have owned 30% and his cousins have owned 65% of Katera Steel Oy, i.e. the company is 100% owned by Mr Sipilä's relatives. In addition, all members of the board as well as the CEO are the Prime Minister's uncles and cousins. Mr Sipilä has earlier owned 5% of the company, and he was involved in the operation and provided advice for the board in 2011 to facilitate the transfer of ownership. From the perspective of the disqualification evaluation, the background, ownership and the administration of the company are closely connected to Prime Minister Sipilä.

According to the Parliamentary Ombudsman, the aforementioned evaluation factors to be taken into account under the general clause do not change the result of the evaluation based on interest disqualification. Even though the evaluation based on the general clause can include all benefits to all of Katera Steel Oy (and not only Mr Sipilä's children), there is no benefit nor is there expected to appear any benefit that would compromise Mr Sipilä's impartiality.

There has emerged no reason to suspect that Prime Minister Sipilä would have attempted to act in a biased manner for the benefit of Katera Steel Oy in the capitalisation matter. Mr Sipilä has not even been aware of these grounds for suspecting that his impartiality was compromised. Neither has he had reason to suspect that there was a potential connection between Katera Steel Oy and the operation of Terrafame Ltd.

The general disqualification clause may apply when the nature of a matter has the potential to raise questions among the public regarding a person's impartiality. However, the fact that the potential disqualification of the Prime Minister has become a heated public discussion ? as in this case ? cannot solely form the grounds for disqualification. Disqualification is a juridical matter, and a person can only be disqualified based on relevant juridical grounds based on the disqualification provisions in the Administrative Procedure Act. For impartiality to be compromised, there always have to be concrete grounds for deeming compromised impartiality.

The Parliamentary Ombudsman's conclusion is that there have been no such concrete juridical grounds in the matter to objectively conclude that Mr Sipilä's impartiality was compromised. Therefore, Prime Minister Juha Sipilä has not been disqualified under the general clause of the Administrative Procedure Act.

The full text of Parliamentary Ombudsman Petri Jääskeläinen's decision no 5971/2016 of 1 February 2017 has been published on the Parliamentary Ombudsman's website at www.oikeusasiamies.fi/english

Further information is available from Principal Legal Adviser Pasi Pölönen, tel. +358 (0)9 432 3355.