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Note 29 Commitments and contingencies

Accounting principles


The guarantees entered into with financial institutions and other credit guarantors generally oblige the group to make payment in the event of default by the borrower. The guarantees have off-Balance-Sheet credit risk representing the accounting loss that would be recognised at the reporting date if the counterparties fail to perform completely as contracted. The credit risk amounts are equal to the contract sums assuming the amounts are not paid in full and are irrecoverable from other parties.

Operating Leases

Payments made under operating leases are expensed on a straight-line basis over the lease periods. When an operating lease is terminated before the expiry of the lease period, any obligatory payment to the lessor by way of penalty is recognised as an expense in the period in which termination takes place. Lease termination benefits are recognised on a discounted basis.


As at 31 December
EUR million 2017 2016
On Own Behalf
Mortgages 2 9
On Behalf of Equity Accounted Investments
Guarantees 4 4
On Behalf of Others
Guarantees 26 34
Other Commitments Own
Operating leases in next 12 months 81 86
Operating leases after next 12 months 644 747
Pension liabilities - 1
Other commitments 6 9
Total 763 890
Mortgages 2 9
Guarantees 30 38
Operating leases 725 833
Pension liabilities - 1
Other commitments 6 9
Total 763 890

In 2017, the Group’s commitments amounted to EUR 763 (EUR 890) million. In addition, the parent company Stora Enso Oyj has guaranteed the liabilities of many of its subsidiaries and joint operations up to EUR 2 073 (EUR 2 123) million as of 31 December 2017.

The Group leases office and warehouse space, cars, machinery and equipment under various non-cancellable operating leases, some of which contain renewal options. There were no leases deemed onerous at the end of 2017 and 2016. The future cost for contracts exceeding one year and for non-cancellable operating leasing contracts are:

Repayment schedule of operating lease commitments
As at 31 December
EUR million 2017 2016
Less than 1 year 81 86
1–2 years 71 73
2–3 years 63 66
3–4 years 54 59
4–5 years 38 53
Over 5 years 418 496
Total 725 833

The Group has rental commitments for up to 50 years, with the option to terminate them after 20 years, on approximately 84 000 (84 000) hectares of land contracted to date in China, as well as being obliged to pay for the standing trees on land it has contracted to rent. Future land rental payments reported under operating leases are estimated at EUR 486 (EUR 562) million for the plantations.

Stora Enso Oyj has 15-year time charter agreements for three special purpose vessels. The time charter agreements were during 2016 novated from Viking Supply Ships AB (formerly Rederi AB Trans-Atlantic) to SOL Ro Ro AB. The group’s commitment amounted to EUR 54 (EUR 68) million for the remaining four years of the contracts at the end of 2017.

Capital expenditure commitments at the balance sheet date but not recognised in the balance sheet amounted to EUR 152 (EUR 171) million. These include the Group’s share of direct capital expenditure contracts in joint operations. Commitments in relation to capital expenditure mainly relate to ongoing projects at Enocell, Heinola and Imatra Mills in Finland and Skutskär and Gruvön Mills in Sweden.

Contingent liabilities

Stora Enso has undertaken significant restructuring actions in recent years which have included the divestment of companies, sales of assets and mill closures. These transactions include a risk of possible environmental or other obligations the existence of which would be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the group.

Stora Enso is party to legal proceedings that arise in the ordinary course of business and which primarily involve claims arising from commercial law. The management does not consider that liabilities related to such proceedings before insurance recoveries, if any, are likely to be material to the Group’s financial condition or results of operations.

Latin American Cases


Fibria and Stora Enso each own 50% of Veracel, and the joint ownership is governed by a shareholder agreement. In May 2014, Fibria initiated arbitration proceedings against Stora Enso claiming that Stora Enso was in breach of certain provisions of the shareholder agreement. Fibria has estimated that the interest to be paid regarding the dispute should be approximately USD 54 (EUR 45) million. Stora Enso denied the claims. In December 2017 the arbitration panel delivered an award in favour of Stora Enso. Hence, Stora Enso does not plan to report further on the case.

In June 2017, Veracel received a tax infringement note referring to year 2012 with a total amount of BRL 224 (EUR 56) million including interest and fines. The dispute is limited to fiscal year 2012 for which the tax authority applied another transfer pricing method due to a different interpretation of a transition rule. Veracel acts in full compliance with Brazilian transfer pricing law and has filed an administrative defense against the tax note in July 2017. The total exposure at year end is BRL 228 (EUR 57) million considering interest until 31 December 2017. Stora Enso’s share of the exposure is BRL 114 (EUR 29) million. No provisions have been recorded in Veracel’s or Stora Enso’s accounts for this tax dispute.

On 11 July 2008, Stora Enso announced that a federal judge in Brazil had issued a decision claiming that the permits issued by the State of Bahia for the operations of Stora Enso’s joint operations company Veracel were not valid. The judge also ordered Veracel to take certain actions, including reforestation with native trees on part of Veracel’s plantations and a possible fine of BRL 20 (EUR 5) million. Veracel disputes the decision and has filed an appeal against it. Veracel operates in full compliance with all Brazilian laws and has obtained all the necessary environmental and operating licences for its industrial and forestry activities from the relevant authorities. In November 2008, a Federal Court suspended the effects of the decision. No provisions have been recorded in Veracel’s or Stora Enso’s accounts for the reforestation or the possible fine. 

Legal Proceedings in Finland

Roundwood claim 

In December 2009, the Finnish Market Court fined Stora Enso for competition law infringements in the market for roundwood in Finland from 1997 to 2004. Stora Enso did not appeal against the ruling. In March 2011 Metsähallitus of Finland initiated legal proceedings against Stora Enso, UPM and Metsäliitto claiming compensation for damages allegedly suffered due to competition infringement. In its judgement rendered in June 2016, the Helsinki District Court dismissed Metsähallitus’ claim for damages against Stora Enso, UPM and Metsäliitto. Metsähallitus has appealed the judgement and the case is pending in the Court of Appeal. Following reductions by Metsähallitus, the total amount of claims jointly and severally against Stora Enso, UPM and Metsäliitto is now approximately EUR 125 million and the secondary claim against Stora Enso is approximately EUR 68 million.

In addition, certain Finnish municipalities and private forest owners initiated similar legal proceedings against Stora Enso, UPM and Metsäliitto. In the fall of 2017, the Helsinki District Court dismissed the claims of 486 private forest owners and 32 municipalities. The total amount of pending claims jointly and severally against Stora Enso, UPM and Metsäliitto is approximately EUR 7 million and claims solely against Stora Enso is approximately EUR 3 million. Stora Enso denies that the plaintiffs suffered any damages whatsoever and will forcefully defend itself. No provisions have been made in Stora Enso’s accounts for these lawsuits.

Legal Proceedings in Sweden

Insurance claim

In July and August 2016, six Swedish insurance companies filed lawsuits in the Environmental Court and the District Court of Falun against Stora Enso due to damage caused by the forest fire in Västmanland, Sweden, in 2014. The claimed amount is approximately SEK 300 (EUR 30) million. Stora Enso denies liability.

In a verdict in October 2017 the Environmental Court ruled in favour of Stora Enso. The insurance companies have appealed against the verdict. Concerning the case in the District Court of Falun a procedural dismissal in the first instance has been reversed by the Court of Appeal but Stora Enso has appealed to the Supreme Court seeking final dismissal.

Veracel’s potential tax exposure arising from PIS/COFINS tax credits

In December 2011 Veracel Celulose SA (Veracel) received a tax audit report, in which the tax authority claimed that part of the PIS (social integration programme) and COFINS (contribution for the financing of social security) paid by Veracel on the purchase of raw materials and services, was not eligible for tax credit. Stora Enso and Veracel consider the claim unjustified and no provisions have been made in Stora Enso’s or Veracel´s accounts for this matter. The dispute is still pending.

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