Opinion of the Advocate General — ECLI:EU:C:2020:1019
Date: 2020-12-10
Language of the case: Finnish
Subject matter: Right of establishment
Procedure: Reference for a preliminary ruling
Origin: Finland

Summary of the main arguments of the parties 
4. A submitted, inter alia, that he had cooperated in a transparent manner with the 
authority, which had not imposed any fines on him previously. His action entailed 
no disadvantages for third parties. 
5. In A’s view, the decision is based on an erroneous interpretation with regard to the 
gravity and duration of the provision’s infringement. According to A, it is evident 
that the taking up of a position could only concern a situation in which the person 
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has in fact commenced employment in that position. While it is true that a ‘moral 
link’ might already arise for the person before entering the service, that person, 
before commencing employment, has neither an actual position nor influence on 
the company’s affairs. In addition, circumstances may still change before 
employment commences. With regard to independence, the assessment must focus 
on the person’s ability to influence a future employer’s accounting or annual 
statement of accounts (in the present case by commencing employment as head of 
the finance department). A submits that he only took up the position when he 
actually commenced employment in that position, namely in February 2019. If the 
change in circumstances were to be considered, namely that Z Oy was X Oyj’s 
statutory auditor for the 2018 financial year, then the actual grace period began 
with the conclusion of X Oyj’s audit for the year 2017 on 5 February 2018. If the 
grace period were to be determined purely on the basis of genuine independence, 
the grace period would amount to one year (the 2018 financial year). If the matter 
were to be regarded in purely formal terms and without taking into consideration 
the actual situation, the grace period would have started on 12 July 2018 and 
ended in February 2019 after the signing of X Oyj’s annual statement of accounts 
for the year 2018, that is to say it would amount to approximately seven months. 
6. A submitted that his transfer was notified in a transparent manner so that third 
parties also would understand that the situation had been carefully considered and 
safeguards had been put in place. A argues also that, as a result of the change of 
statutory auditor, no situation arose in which A worked as head of X Oyj’s finance 
department while Y Oy worked as statutory auditor of that company. According to 
a stock exchange announcement of 29 November 2018, X Oyj had changed its 
statutory auditor for the 2018 financial year, with the result that there had been no 
actual transfer to an audit client, since A started as head of X Oyj’s finance 
department only in February 2019. A argues that a prerequisite for the application 
of Paragraph 5 of Chapter 10 of the Code must be that the audit relationship in 
question still continues after the transfer of the statutory auditor to the client 
entity. According to A, the independence of X Oyj’s statutory audit was not 
compromised by his transfer to that entity as head of the finance department. 
7. In its observations to the administrative court, the audit committee submitted 
that, in its order, it took into consideration the circumstances referred to in 
Paragraph 7 of Chapter 10 of the Code. 
8. In the contested decision, the audit committee took the view that the start of the 
grace period should be calculated from the date the key audit partner ceased to 
work as such in connection with the statutory audit engagement in question. In its 
view, A’s grace period thus started on 12 July 2018. [Or. 3] 
9. The audit committee stated that the terms ‘takes up’ a position used in 
Paragraph 11 of Chapter 4 of the Code could refer either to the signing of a 
contract concerning that position or to the actual commencement of employment 
in that position. The legislative documents provide no interpretative guidance and 
there is no case-law on the application of the provision. The fact that 
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circumstances may change in the period between the conclusion of the contract 
and actual commencement of employment supports the interpretation according to 
which ‘takes up’ indicates that employment has actually commenced. According 
to the audit committee, it was not justified to sanction an act which has not yet 
occurred. Numerous other circumstances support the opposite interpretation, 
according to which ‘takes up’ indicates the date of conclusion of a binding 
contract concerning the position. The provision relates to independence. When 
assessing independence, external circumstances – the outward appearance of 
independence – are important. The conclusion of a contract is a visible external 
circumstance. The conclusion of a contract also has a direct impact on the 
behaviour and the attitude of the person concerned, his/her employer and 
stakeholders. A statutory auditor who has entered into a contract is bound to the 
new employer under that contract. This means, above all, loyalty towards the 
employer and acting in the interest of the new employer already prior to 
commencement of the actual work. The independence of a statutory auditor who 
transfers to an audit client in a management position, thereby ends already on the 
date the contract is concluded. With regard to the purpose of the provision, the 
date on which employment actually commences is not decisive. In the present 
case, the fact that the new employer, X Oyj, made A’s appointment visible by 
means of a communication on the capital market and among stakeholders, 
supports the latter interpretation of the provision. In the opinion of the audit 
committee, A took up the position upon signing the corresponding employment 
contract on 12 July 2018. 
National legislation and drafting history 
10. According to Paragraph 11(1) of Chapter 4 of the Code, a statutory auditor or a 
key audit partner who carries out a statutory audit for an audit firm is prohibited 
from taking up the following positions before at least one year has elapsed since 
that audit: 
(1) a key management position in the audited entity; 
(2) membership of the audit committee of the audited entity or of the body 
performing equivalent functions to an audit committee; 
(3) membership of the administrative body without management affiliation or 
membership of the supervisory body of the audited entity. 
11. Pursuant to Paragraph 11(2) the period referred to in Paragraph 11(1) is two years 
where the subject of the audit is a public-interest entity. 
12. Under Paragraph 5(1) of Chapter 10 of the Code, the audit committee may impose 
a fine where a statutory auditor infringes the periods referred to in Paragraph 11 of 
Chapter 4 concerning the transfer of a statutory auditor to an audited entity. Under 
Paragraph 5(2), the fine for infringement of the period referred to in Paragraph 11 
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of Chapter 4 is capped at a maximum amount of EUR 50 000. Under 
Paragraph 5(3) the fine imposed is payable to the State. 
13. According to Paragraph 7(1) of Chapter 10 of the Code, when deciding on the 
fine, all relevant factors should be taken into account. These are: [Or. 4] 
(1) the gravity and the duration of the infringement; 
(2) the statutory auditor’s level of responsibility; 
(3) the statutory auditor’s willingness to cooperate with the competent authority; 
(4) previous fines imposed on the statutory auditor; and 
(5) the extent of the damage or disadvantages caused by the act or omission. 
14. According to Paragraph 7(2), when deciding on the fine, in addition to the factors 
listed in Paragraph 7(1) the following should be taken into account: 
(1) the statutory auditor’s financial situation; 
(2) the extent of the advantages obtained by the statutory auditor. 
15. It is observed in the Government proposal to Parliament for the adoption of the 
law amending the Code and other legislation related to it (Government Proposal 
HE 70/2016 vp) that, by means of those amendments, the amendments made to 
the directive on statutory audits and the regulation relating to it are implemented. 
It is proposed to add to the Code provisions which, inter alia, concern the transfer 
of a statutory auditor to an audited entity. In respect of Paragraph 11 of Chapter 4, 
the reasons given in the Government proposal imply that Paragraph 11, which is 
based on Article 22a of the amending directive, is new and deals with the transfer 
of a statutory auditor to an audited entity. What is meant by transfer to an entity is 
that the statutory auditor takes up a key management position in the audited entity, 
becomes a member of the audit committee of the audited entity or of an equivalent 
body, or becomes a non-executive member of the administrative body or a 
member of the supervisory body of the audited entity. Paragraph 11(1) defines the 
basic offence which concerns all statutory auditors or key audit partners who carry 
out a statutory audit within the meaning of Chapter 3 of that code. Such persons 
may not transfer to the entity they audited or become members of its bodies before 
the period of at least one year has elapsed since the end of the audit engagement. 
That period is referred to as the so-called ‘cooling off’ or grace period. ‘Key 
management position’ refers to members of the management group who support 
the managing director, or to persons whose management position was determined 
by the managing director or the board of directors. The head of the finance 
department or a person occupying an equivalent position is regarded as being in a 
management position within the entity even without a specific definition. 
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16. As regards the transfer of a statutory auditor to the entity to be audited, the 
Economic Committee’s report TaVM 16/2016 vp establishes that the provisions 
on time limits prescribed by the directive are of considerable length in the specific 
context of Finland. Taking into account the domestic labour market for statutory 
auditors, the rule on grace periods can create significant barriers to the 
professional development and optimal use of the current professional skills of 
statutory auditors, especially outside the capital region. The Economic Committee 
observed that the provision creates an unsatisfactory legal situation in the specific 
context of Finland. However, it is a minimum prescribed by mandatory EU rules 
and therefore not possible to derogate from at national level. In order to minimise 
the impact of this unsatisfactory situation, the Economic Committee considers it 
necessary and appropriate to exercise national discretion when sanctioning 
infringements of the grace period. 
Relevant EU law [Or. 5] 
17. According to Article 22a(1) (inserted by Directive 2014/56/EU) of Directive 
2006/43/EC of the European Parliament and of the Council of 17 May 2006 on 
statutory audits of annual accounts and consolidated accounts, amending Council 
Directives 78/660/EEC and 83/349/EEC and repealing Council Directive 
84/253/EEC, Member States are to ensure that a statutory auditor or a key audit 
partner who carries out a statutory audit on behalf of an audit firm does not, before 
a period of at least one year, or in the case of statutory audit of public-interest 
entities a period of at least two years, has elapsed since he or she ceased to act as a 
statutory auditor or key audit partner in connection with the audit engagement: 
(a) take up a key management position in the audited entity; 
(b) where applicable, become a member of the audit committee of the audited 
entity or, where such committee does not exist, of the body performing 
equivalent functions to an audit committee; 
(c) become a non-executive member of the administrative body or a member of 
the supervisory body of the audited entity. 
Case-law of the Court of Justice 
18. The administrative court is not aware of any decision of the Court of Justice 
applicable to this case. 
The need for a preliminary ruling 
19. The main issue in the case before the administrative court is whether the audit 
committee was entitled to impose a fine of EUR 50 000 on A for infringement of 
the grace period within the meaning of Paragraph 11 of Chapter 4 of the Code. It 
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is essential for the resolution of the case to know how the duration of the grace 
period is calculated. 
20. Pursuant to Paragraph 7(1) of Chapter 10 of the Code, when deciding on the fine, 
account must be taken, inter alia, of the gravity and duration of the infringement, 
with the result that the administrative court must determine when A took up a key 
management position at X Oyj in the manner specified by that code. Since the 
provision in Paragraph 11 of Chapter 4 of the Code implemented Article 22a(1) 
(inserted by Directive 2014/56/EU) of Directive 2006/43/EC of the European 
Parliament and of the Council of 17 May 2016 on statutory audits of annual 
accounts and consolidated accounts, amending Council Directives 78/660/EEC 
and 83/349/EEC and repealing Council Directive 84/253/EEC, in order to ensure 
the correct interpretation of EU law in this case, the request for preliminary ruling 
from the Court of Justice is justified. 
21. In respect of the request for a preliminary ruling from the Court of Justice, A and 
the audit committee were given the opportunity to be heard. 
Interim order of the Helsingin hallinto-oikeus concerning the request for a 
preliminary ruling from the Court of Justice  
22. The Helsingin hallinto-oikeus has decided to stay the proceedings and to request a 
preliminary ruling from the European Court of Justice pursuant to Article 267 of 
the Treaty on the Functioning of the European Union (TFEU) concerning the 
interpretation of Article 22a(1) (inserted by Directive 2014/56/EU) of Directive 
2006/43/EC of the European Parliament and of the Council of 17 May 2016 on 
statutory audits of annual accounts and consolidated accounts, amending Council 
Directives 78/660/EEC and [Or. 6] 83/349/EEC and repealing Council Directive 
84/253/EEC. The request for a preliminary ruling is necessary for the resolution of 
the dispute before the Helsingin hallinto-oikeus. 
Questions referred 
1. Is Article 22a(1) (inserted by Directive 2014/56/EU) of Directive 
2006/43/EC to be interpreted as meaning that a key audit partner takes up a 
position of the kind referred to in this provision upon conclusion of the 
employment contract? 
2. If the answer to the first question is in the negative:  Is Article 22a(1) to be 
interpreted as meaning that a key audit partner takes up a position of the kind 
referred to in this provision upon commencing employment in the position 
concerned? 
... [not translated] [Or. 7] [not translated]